Document:

ex10_1.htm

     

    Exhibit 10.1

     

    AMENDMENT
NO. 3 TO CREDIT AGREEMENT, dated as of April 9, 2008 (this “Amendment
Agreement”), among KRISPY KREME DOUGHNUT CORPORATION, a North Carolina
corporation (the “Borrower”), KRISPY
KREME DOUGHNUTS, INC., a North Carolina corporation (the “Parent Guarantor”),
the SUBSIDIARY GUARANTORS (as defined in the Credit Agreement referred to below)
signatory hereto and the LENDERS (as defined in the Credit Agreement referred to
below) signatory hereto.

     

    PRELIMINARY
STATEMENTS

     

    WHEREAS,
the Borrower is party to a Credit Agreement, dated as of February 16, 2007 (as
amended by Amendment No. 1 to Credit Agreement, dated as of June 21, 2007, and
as further amended by Amendment No. 2 to Credit Agreement, dated as of January
23, 2008, the “Credit
Agreement”), among the Borrower, the Parent Guarantor, the Subsidiary
Guarantors, the Lenders, and Credit Suisse, Cayman Islands Branch, as
Administrative Agent, Collateral Agent, Issuing Lender, and Swingline
Lender.

     

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

     

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

     

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

     

    SECTION 2.  Amendments.  As
of the Amendment Effective Date:

     

    (a) The
following definitions are added to Section 1.01 of the Credit
Agreement:

     

    “‘LIBOR Floor Rate’
means a rate equal to 3.25% per annum.”

     

    (b) The
definition of “Applicable Commitment Fee Rate” in Section 1.01 of the Credit
Agreement is deleted in its entirety and replaced with the
following:

     

    “‘Applicable Commitment Fee
Rate’ means 0.75% per annum.”

     

    (c) The
definition of “Applicable Margin” in Section 1.01 of the Credit Agreement is
deleted in its entirety and replaced with the following:

     

    “‘Applicable Margin’
means:  (a) with respect to any ABR Loan, 4.50% per annum;
and (b) with respect to any Eurodollar Loan, 5.50% per
annum.  The Applicable Margin for the Incremental Loans of any Series
shall be determined at the time such Series of Loans is established pursuant to
Section 2.01(c); and (a) if the Applicable Margin for Incremental Facility
Term Loans of any Series would otherwise be more than 25 basis points higher
than the Applicable Margin for Term Loans, then the Applicable Margin for Term
Loans shall be automatically increased to a rate per annum equal to 25 basis
points less than the Applicable Margin for such Series of Incremental Facility
Term Loans from and after the earlier of the initial date of borrowing of such
Incremental Facility Term Loans or the date that the related Incremental
Facility Term Loan Commitments are

     

    
      
         

      

      
         

        
          

        

      

      
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    established
and (b) if the Applicable Margin for Incremental Revolving Credit Loans of any
Series would otherwise be more than 25 basis points higher than the Applicable
Margin for Revolving Credit Loans, then the Applicable Margin for Revolving
Credit Loans shall be automatically increased to a rate per annum equal to 25
basis points less than the Applicable Margin for such Series of Incremental
Facility Revolving Credit Loans from and after the date that the related
Incremental Facility Revolving Credit Commitments are established.”

     

    (d) The
definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement is
amended as follows:

     

    (i) “and”
immediately preceding clause (h) in said definition is deleted and replaced with
“,” and a new clause (i) is added immediately following said clause (h) reading
as follows:

     

    “and (i)
without duplication of clause (g) above, the aggregate amount of cash or
non-cash charges reducing Consolidated Net Income for such period in respect of
Specified Contingent Obligations;” and

     

    (ii) “(a)” is
added after “less (ii)” in said definition and a new clause (b) is added at the
end of clause (ii) of said definition reading as follows:

     

    “and (b)
the aggregate amount of cash payments made by the Obligors during such period in
respect of Specified Contingent Obligations to the extent that such aggregate
amount during the relevant fiscal period (x) relates to charges that reduced
Consolidated Net Income for such period or any prior period and (y) exceeds
$3,000,000 for such period or $6,000,000 in the aggregate.”

     

    (e) The
definition of “Consolidated Net Income” in Section 1.01 of the Credit Agreement
is amended by deleting clause (vi) thereof in its entirety and replacing it with
the following:

     

    “(vi)
gains or losses on Dispositions or on disposals of leased property (in the case
of disposals of leased property, to the extent not exceeding $2,000,000 in any
relevant fiscal period or $5,000,000 in the aggregate).”

     

    (f) The
definition of “Excess Cash Flow” in Section 1.01 of the Credit Agreement is
amended by deleting clause (g) thereof in its entirety and replacing it with the
following:

     

    “(g) to
the extent added to determine Consolidated EBITDA, those items set forth in
clauses (d), (e), (f), (h) and (i) (with respect to clause (i), up to $3,000,000
for such period or $6,000,000 in the aggregate) of the definition of
“Consolidated EBITDA” to the extent such items were paid in cash by the Parent
Guarantor or any of its Subsidiaries on a consolidated basis during such period
(it being understood that non-cash charges that were added to determine
Consolidated EBITDA in a prior period pursuant to clause (i) of Consolidated
EBITDA shall be included in the calculation of the amount under this clause (g)
to the extent such items were paid in cash during the current period (subject to
the $3,000,000 and $6,000,000 limitations set forth above)).”

     

    (g) The
definition of “LIBO Rate” in Section 1.01 of the Credit Agreement is amended by
adding the following at the end thereof:  “Notwithstanding the
foregoing, the LIBO Rate for

     

    
      
         

      

      
         

        
          

        

      

      
        3 

      

    

    any
Interest Period will not at any time be less than the LIBOR Floor
Rate.  As used in this Agreement, the ‘LIBO Rate’ shall in all cases
mean such rate subject to the LIBOR Floor Rate.”

     

    (h) The
definition of “Permitted Encumbrances” in Section 1.01 of the Credit Agreement
is amended as follows: (i) the “and” immediately following clause (k) in said
definition is deleted and replaced with “;”, (ii) the “.”immediately following
clause (l) in said definition is deleted and replaced with “; and” and a new
clause (m) is added immediately following said clause (l) reading as
follows:

     

    “(m)  in
the case of the leased stores listed as numbers 77, 78, and 79 on Schedule VIII,
options granted on arm’s length terms to Persons to acquire such stores (whether
through an assignment of lease or otherwise) and restrictions on the transfer of
such stores contained in any agreement governing any such option.”

     

     

    (i) Section
7.03(f) of the Credit Agreement is deleted in its entirety and replaced with the
following:

     

     

    “(f)           unless
a Default has occurred and is continuing, the Parent Guarantor or any of its
Included Subsidiaries may sell all or any portion of its equity interests or
other Investments in any Joint Venture for fair market value, subject to the
conditions that (a) if the fair market value thereof is greater than $500,000,
75% of the consideration therefor shall be received in cash (the cancellation or
reduction of a Guarantee by the Parent Guarantor or any of its Included
Subsidiaries in support of obligations of such Joint Venture being deemed to
constitute cash for the purposes of this clause (a)) (it being understood that
such cash consideration may be received in installments (and Guarantees may be
cancelled or reduced in installments) over a period not to exceed three years
from the consummation of the sale; provided that (i) the
unpaid portion of the purchase price (or the Guarantee to be cancelled or
reduced) is secured by a Lien in favor of the seller on the portion of the
equity interests or other Investments being sold corresponding to such unpaid
portion and (ii) such Lien shall not be sold, assigned or otherwise transferred
by the seller in any manner (other than to the Borrower or a Guarantor)), (b) if
the aggregate amount of such consideration exceeds $2,000,000, the amount of
consideration to be received by the Parent Guarantor or such Included Subsidiary
(including the amount of any Guarantee theretofore issued by the Parent
Guarantor or such Included Subsidiary to be cancelled in connection with such
sale) has been determined by the Board of Directors to be fair to the Parent
Guarantor or such Included Subsidiary, (c) if the aggregate amount of such
consideration exceeds $10,000,000, the Board of Directors shall have received a
fairness opinion in connection with such sale rendered by a recognized
institution with established expertise in valuing transactions of such type and
(d) in connection with such sale, all Guarantees theretofore issued by the
Parent Guarantor or any of its Included Subsidiaries in support of obligations
of such Joint Venture shall be cancelled or reduced at least in proportion to
the percentage of interests sold (it being understood that such Guarantees to be
cancelled or reduced may be cancelled or reduced in installments over a period
not to exceed three years from the consummation of the sale; provided that (i) the
Guarantee to be cancelled or reduced following the sale is secured by a Lien in
favor of the seller on the portion of the equity interests or other Investments
being sold corresponding to such uncancelled or unreduced portion and (ii) such
Lien shall not be sold, assigned or otherwise transferred by the seller in any
manner (other than to the Borrower or a Guarantor));”

     

    
      
         

      

      
         

        
          

        

      

      
        4 

      

    

     

    

     

     

    (j) Section
7.03(g) of the Credit Agreement is deleted in its entirety and replaced with the
following:

     

     

    “(g)           unless
a Default has occurred and is continuing, the Parent Guarantor and its Included
Subsidiaries may sell other property for cash for fair market value for
consideration not exceeding $20,000,000 in any Fiscal Year; provided that (i)
until such time as the Borrower has made voluntary or mandatory prepayments of
the Term Loans in an aggregate principal amount of at least $9,260,000 following
March 31, 2008 (including payments made pursuant to this clause or pursuant to
Section 2.10(a), (c)(i), (c)(ii), (c)(iii) or (c)(iv), but excluding payments
made pursuant to Section 2.09(a)(iii) or Section 2.10(c)(v)), the Net Available
Proceeds received under this clause (g) in excess of $500,000 in any Fiscal Year
shall be applied to prepay Term Loans without any right of reinvestment in
accordance with Section 2.10 hereof, (ii) without duplication of clause (i)
above, to the extent the aggregate Net Available Proceeds received under this
clause (g) in any Fiscal Year exceeds $10,000,000, then such excess Net
Available Proceeds shall be applied to prepay Term Loans without any right of
reinvestment in accordance with Section 2.10 hereof and (iii) in the case of the
sale of any owned Real Property, a portion of the consideration therefor (up to
$5,000,000 in any Fiscal Year) may be in the form of a note secured by such Real
Property (except that (x) no more than $10,000,000 in the aggregate may be
outstanding on any such note or notes at any one time and (y) at least 50% of
the consideration received for such sale of Real Property must be in the form of
cash);”

     

     

    (k) Section
7.03(h) of the Credit Agreement is deleted in its entirety and replaced with the
following:

     

     

    “(h)           the
Parent Guarantor and its Included Subsidiaries may (i) lease or sublease
property in an arm’s length transaction in the ordinary course of business,
(ii) lease or sublease stores to franchisees on fair market value terms or
assign leases covering leased stores in an arm’s length transaction (provided that, in the
case of an assignment of a lease, the Parent Guarantor or such Included
Subsidiary may remain liable for payments under the lease following any such
assignment) and (iii) dispose of the other leased assets in an arm’s length
transaction (including by means of (x) a substantially simultaneous purchase and
sale of such asset or (y) a termination of the lease and payment of the
remaining obligations thereunder); provided that, in the
case of this clause (iii), the aggregate fair market value of leased assets so
disposed (excluding the Borrower’s corporate jet) shall not exceed $5,000,000 in any Fiscal Year;”

     

    (l) Section
7.05 of the Credit Agreement is amended as follows: (i) the “and” immediately
following clause (n) in Section 7.05 is deleted and replaced with “;”, (ii) the
“.”immediately following clause (o) in Section 7.05 is deleted and replaced with
“; and” and a new clause (p) is added immediately following said clause (o)
reading as follows:

     

     

    “(p)
Investments (i) received as consideration for a sale of property to the extent
permitted by Section 7.03 and (ii) deemed to have been made as a result of
remaining liable for payments under a lease assigned in accordance with Section
7.03(h).”

     

    (m) The table
in Section 7.09(a) of the Credit Agreement setting forth the Consolidated
Leverage Ratio levels is deleted in its entirety and replaced with the
following:

     

    
      
         

      

      
         

        
          

        

      

      
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                Period

              

            	 	
              
                Ratio

              

            
	 	 	 
	
              Fourth
      Fiscal Quarter of 2008 Fiscal Year

            	 	
              4.00
      to 1.00

            
	
              2009
      Fiscal Year

            	 	
              4.75
      to 1.00

            
	
              First
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              4.50
      to 1.00

            
	
              Second
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              4.50
      to 1.00

            
	
              Third
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              4.25
      to 1.00

            
	
              Fourth
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              4.00
      to 1.00

            
	
              2011
      and 2012 Fiscal Year

            	 	
              3.00
      to 1.00

            
	
              2013
      Fiscal Year and Thereafter

            	 	
              2.75
      to 1.00

            

    

     

    (n) The table
in Section 7.09(b) of the Credit Agreement setting forth the Consolidated
Interest Coverage Ratio levels is deleted in its entirety and replaced with the
following:

     

    
      	
              
                Period

              

            	 	
              
                Ratio

              

            
	 	 	 
	
              Fourth
      Fiscal Quarter of 2008 Fiscal Year

            	 	
              3.25
      to 1.00

            
	
              2009
      Fiscal Year

            	 	
              2.50
      to 1.00

            
	
              First
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              2.50
      to 1.00

            
	
              Second
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              2.75
      to 1.00

            
	
              Third
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              2.75
      to 1.00

            
	
              Fourth
      Fiscal Quarter of 2010 Fiscal Year

            	 	
              3.00
      to 1.00

            
	
              2011
      Fiscal Year and Thereafter

            	 	
              4.50
      to 1.00

            

    

     

    (o) Schedules
III, IV and X of the Credit Agreement are amended and restated in their entirety
by replacing such schedules with Schedules III, IV and X attached hereto, which
schedules have been revised as follows:

     

     

    (i) changes
to the “Amount Outstanding Subject to Guaranty as of 1/28/2007” in Rows (x),
(z), (aa) and (cc) of Part A - Section 3 of Schedule III;

     

     

    (ii) the
heading “2.  The Obligors are parties to the following intercompany
loans among themselves and their wholly-owned subsidiaries:” on page 5 of
Schedule III has been changed to read “4.  The Obligors are parties to
the following intercompany loans among themselves and their wholly-owned
subsidiaries:”;

     

     

    (iii) changes
to the “Amount Outstanding Subject to Guaranty as of 1/28/2007” in Rows (x),
(z), (aa) and (cc) of Section 4 of Schedule IV;

     

    
      
         

      

      
         

        
          

        

      

      
        6 

      

    

     

    

     

     

    (iv) changes
to the Rows entitled “KK of South Florida” and “Total” in Schedule
X;

     

     

    (v) in the
footnote in Schedule X, “(should be resolved by Q1)” has been
deleted;

     

     

    (vi) on the
first page of Part B of Schedule III, the heading has been changed to read “Part
B – Liens” instead of “Schedule IIB – Liens”; and

     

     

    (vii) “Schedule
VIII” previously attached to the end of Part B of Schedule III has been deleted
in its entirety.

     

    SECTION 3.  Waiver.  As
of the Amendment Effective Date, each of the Lenders that is a party hereto
hereby waives any Default that shall have occurred, before the date hereof as a
result of any breach of any representation or warranty made or deemed made
before the date hereof in respect of the amounts or other items set forth in
Schedules III, IV and X that are being amended hereby.

     

    SECTION 4.  Representations and
Warranties.  The Borrower hereby represents and warrants to the
undersigned Lenders that, after giving effect to the amendments and waivers
herein, (a) the representations and warranties of the Borrower and the Parent
Guarantor set forth in the Credit Agreement, and of each Obligor in each of the
other Loan Documents to which it is a party, are true and correct in all
material respects on and as of the date hereof (except to the extent that any
such representation or warranty expressly relates to an earlier date), with each
reference therein to the Credit Agreement being deemed for purposes hereof to be
a reference to the Credit Agreement as modified hereby and (b) no Default has
occurred and is continuing.

     

    SECTION 5.  Conditions to
Effectiveness.  The amendments set forth in Section 2 hereof
and the waiver set forth in Section 3 hereof shall become effective when, and
only when, and as of the date (the “Amendment Effective
Date”) on which the Administrative Agent shall have
received:

     

    (a)
counterparts of this Amendment Agreement executed by the Borrower, each of the
Guarantors, and the Required Lenders;

     

    (b) payment
of fees and expenses of the Administrative Agent set forth in the Fee Letter,
dated March 14, 2008 (the “Fee Letter”), between
the Administrative Agent and the Borrower (including the reasonable and accrued
fees of counsel to the Administrative Agent);

     

    (c)
payment of an amendment fee for the account of each Lender that has approved
this Amendment Agreement equal to 0.35% of such Lender’s aggregate outstanding
Revolving Credit Commitments and Term Loans as of the date hereof (prior to
giving effect to the Revolving Credit Commitment reduction described in Section
6 herein);

     

    (d) a
favorable opinion of Cahill Gordon & Reindel LLP, special New York counsel
to the Borrower and Kilpatrick Stockton, LLP, special North Carolina counsel to
the Borrower, in each case, dated the Amendment Effective Date and in form and
substance reasonably satisfactory to the Administrative Agent covering such
matters (including the enforceability of the Credit Agreement, the valid
organization, good standing and due authorization of the Borrower) as the
Administrative Agent shall reasonably request;

     

    (e) a
certificate, signed by the Secretary or Assistant Secretary of the
Borrower

     

    
      
         

      

      
         

        
          

        

      

      
        7 

      

    

    and dated
the Amendment Effective Date, evidencing the organization, existence and good
standing of the Borrower, the authorization of this Amendment Agreement and any
other legal matters relating to the Borrower or this Amendment Agreement as the
Administrative Agent may reasonably request, all in form and substance
reasonably satisfactory to the Administrative Agent; and

     

    (f) a
certificate, signed by a duly authorized officer of the Borrower and dated the
Amendment Effective Date, in respect of the matters set forth in Section 4
above, in form and substance reasonably satisfactory to the Administrative
Agent.

     

    SECTION
6.  Reduction of Revolving
Credit Commitment.  On the Amendment Effective Date, the
aggregate Revolving Credit Commitment under the Credit Agreement shall be
reduced to $30,000,000, such reduction to be made ratably among the Revolving
Credit Lenders.  This Section 6 shall constitute notice under Section
2.08 of the Credit Agreement to so reduce the Revolving Credit Commitment (it
being understood that the Administrative Agent and the Lenders party hereto
hereby waive the requirement thereunder that the Borrower provide three Business
Days prior notice of such reduction).

     

    
                                     
SECTION 7.  Reference to and Effect on
the Financing Documents.

    

     

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

     

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

     

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

     

    SECTION 8.  Affirmation of
Guarantors.  Each Guarantor signatory hereto hereby consents to
the amendments to the Credit Agreement effected hereby, and hereby confirms and
agrees that, notwithstanding the effectiveness of the amendments set forth in
Section 2 hereof, the obligations of such Guarantor contained in
Article III of the Credit Agreement or in any other Loan Documents to which
it is a party are, and shall remain, in full force and effect and are hereby
ratified and confirmed in all respects, except that, on and after the
effectiveness of such amendments, each reference in Article III of the
Credit Agreement and in each of the other Loan Documents to “the Credit
Agreement”, “thereunder”, “thereof” or words of like import shall mean and be a
reference to the Credit Agreement as modified by this Amendment
Agreement.

     

    SECTION 9.  GOVERNING
LAW.  THIS AMENDMENT AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

     

    SECTION 10.  Execution in
Counterparts.  This Amendment Agreement may be

     

    
      
         

      

      
         

        
          

        

      

      
        8 

      

    

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

     

    

     

    
      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    KRISPY
KREME DOUGHNUT CORPORATION

     

    By: /s/ Douglas R.
Muir

          Name:
Douglas R. Muir

          Title:  
Executive Vice President, Chief Financial Officer

                      and
Treasurer

     

    GUARANTORS:

     

    KRISPY
KREME DOUGHNUTS, INC.

    

    GOLDEN
GATE DOUGHNUTS, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Manager

            

    

    

    PANHANDLE
DOUGHNUTS, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME MANAGEMENT I, LLC,

            

    

    
      	
               
      

            	
              an
      authorized Manager

            

    

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME MANAGEMENT II, LLC,

            

    

    
      	
               
      

            	
              an
      authorized Manager

            

    

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    as
authorized Member of Krispy Kreme Management I, LLC 
and Krispy Kreme
Management II, LLC

    

    NORTH
TEXAS DOUGHNUTS, L.P.

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              its
      General Partner

            

    

    

    KK CANADA
HOLDINGS, INC.

    

    KRISPY
KREME MANAGEMENT I, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Member

            

    

    

    KRISPY
KREME MANAGEMENT II, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    as authorized Member

    

    KRISPY
KREME MANAGEMENT III, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Member

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    SOUTHERN
DOUGHNUTS, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME MANAGEMENT I, LLC,

            

    

    
      	
               
      

            	
              as
      authorized Manager

            

    

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Member

            

    

    

    SOUTHWEST
DOUGHNUTS, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME MANAGEMENT I, LLC,

            

    

    
      	
               
      

            	
              as
      authorized Manager

            

    

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Member

            

    

    

    NORTHEAST
DOUGHNUTS, LLC

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME MANAGEMENT I, LLC,

            

    

    
      	
               
      

            	
              as
      authorized Manager

            

    

    

    
      	
               
      

            	
              By:

            	
              KRISPY
      KREME DOUGHNUT CORPORATION,

            

    

    
      	
               
      

            	
              as
      authorized Member

            

    

    

    KRISPY
KREME MOBILE STORE COMPANY

     

    KRISPY
KREME CANADA, INC.

    

    

    By:  /s/ Douglas R.
Muir

    Name:
Douglas R. Muir

    Title:
Authorized Officer

    

    HD
CAPITAL CORPORATION

    

    HDN
DEVELOPMENT CORPORATION

    

    

    By:  /s/ H. Clark Beeson,
III

    Name: H.
Clark Beeson, III

    Title:
President

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    LENDERS

    

    

    Consent
of Required Lenders ReceivedExhibit 10.1

EXHIBIT 10.1 

     CHEN YU HUA 

EMPLOYMENT CONTRACT 

The Employment Contract (hereinafter referred to as the “Agreement”) is made on October 31st, 2007. 

BETWEEN: 

Cardtrend International Inc. (Formerly known as Asia Payment Systems, Inc.), a corporation incorporated under the laws of the State of Nevada, U.S.A. which is a fully reporting company registered with the United States Securities and Exchange Commission and trades on the NASD OTC under the symbol CDTR and having a registered office address at 711 South Carson Street, Suite 4, Carson City, Nevada 89701, USA and a principal office located at Suite 7A, Carfield Commercial Building, 75, Wyndham Street, Central, Hong Kong, SAR China (hereinafter referred to as “The Company”) 

AND: 

Chen Yu Hua, a Chinese citizen holding a Chinese Identity Card No: 440106196810281231, residing at Room 1608 East Tower, No.13 of Xinchengnan Street Tianhedong Road, Guangzhou, China (hereinafter referred to as “Chen”). 

WHEREAS 

a) The Company is in the payments and loyalty rewards related businesses which includes Processing Business, Cards Business and Prepaid Business and wishes to expand its business to include the provision of payments and loyalty rewards related software, consultancy, technical and management services to operators of payments and loyalty rewards, as well as the provision of business processes out-sourcing and call centre (hereinafter collectively referred to as the “Business”) in the Asian countries. 

b) Chen is acknowledged as a successful business executive in China. 

c) The Company wishes to formalize its agreement with Chen for his provision of services to The Company by engaging his service as its Chief Officer - Greater China and Chen has agreed to be engaged by The Company upon the terms and conditions hereinafter set forth. 

NOW, THEREFORE, in consideration of the mutual covenants, promises, terms and conditions herein contained, the parties agree as follows: 

1.      EMPLOYMENT

The Company agrees to employ Chen as Chief Officer - Greater China, and Chen agrees to be employed in this capacity, upon the terms and conditions hereinafter set forth. 

2.      TERM 

This Agreement shall commence on November 1, 2007 (hereinafter referred to as the “Commencement Date”) and shall terminate as of the earlier of: 

a) Five (5) years from the Commencement Date (hereinafter referred to as the “Initial Term”) unless either Chen or The Company notifies the other that he or it elects to enter negotiations for a further agreement of an additional five (5) years (hereinafter referred to as “Renewal Term”), such Renewal Term to be concluded at least one hundred and eighty (180) days before the end of the Initial Term hereof; or 

b) election of either party to terminate the employment of Chen with The Company pursuant to the respectively rights as contained in subsection 6(a) or subsection 6(b) hereof. 

The Exercise of the right of The Company or Chen to terminate this Agreement pursuant to subsections 6(a) or 6(b) hereof shall not abrogate the rights and remedies of the terminating party in respect of the breach given rise to such termination.

3.      JOB TITLE AND DUTIES 

At all time during the term of this Agreement, Chen shall: 

a) be designated by The Company with the title “Chief Officer - Greater China”, unless in the reasonable judgment of the Board of Directors of The Company (hereinafter referred to as the “Board”) in the best interest of The Company, such title may be changed by The Company, provided however that the new title shall continue to reflect the position of Chen as the head of The Company’s Business in China, Taiwan, Hong Kong and Macau, “collectively referred to as the “China Market”). 

b) have duties and responsibilities commensurate with his title and position in The Company. 

c) perform and discharge well and faithfully the duties which may be assigned to him from time to time by The Company and/or its President & Chief Executive Officer in connection with the conduct of the Business in China Market, such duties shall include: 

(i) the formulation and development of the payments and loyalty rewards related technology required by The Company and its subsidiaries and related companies to conduct the Business in the China Market; 

(ii) presiding at all corporate meetings but shall be entitled to delegate such duty to his subordinate(s) should he not be available due to business reason or on leave; 

(iii) the general supervision of The Company’s subsidiaries which conduct The Company’ Business in China Market; 

(iv) set out the duties of subordinate officers in the China Market. 

(v) identifying new business opportunities related to the Business across the China Market; 

(vi) developing and updating from time to time the strategic plan and annual business plans for The Company’s Business in the China Market; 

(vii) executing the business plans and the strategic plan and annual business plans of The Company’ Business in the China Market as approved by the Board of The Company and/or the Board of The Company’ subsidiaries which conduct the Business in the China Market. 

d) be given the co-signing authority on the bank accounts of The Company’s subsidiaries which conduct the Business in the China Market as may be directed by the Board; 

e) be appointed as a Director of The Company and he shall be entitled to receive compensation and/or benefits and/or stock options in an amount and quantity not less than and on similar terms as other Directors of The Company, consistent with The Company’s Stock Option Plans and policies and SEC and NASD guidelines. 

f) be appointed as a director of The Company’s subsidiaries and related companies that conduct the Business in the China Market and any subsidiary and/or related company and/or strategic alliance partners of The Company in the China Market as and when required by The Company and Chen may, subject to the approval of the Board, receive and keep for his own account compensation and/or benefits from any such subsidiary and/or related company. It is hereby acknowledged by The Company that Chen is currently the Executive Director/General Manager of Global Uplink Ltd. of Hong Kong (referred to as “Uplink”) and that he is receiving and/or will receive compensation and/or benefits from Uplink. The Company further acknowledges and agrees that Chen may continue to be the Executive Director/General Manager of Uplink and the compensation and/or benefits received and/or to be received by Chen from Uplink and/or any related company of the Company shall be deemed part of the compensation and/or benefits as stipulated in subsection 4 hereof. 

4)      COMPENSATION, BENEFITS AND EXPENSES 

For the services rendered by Chen under this agreement: 

a) The Company shall pay Chen a base salary of Hong Kong Dollars sixty Five Thousand (HK$65,000) or an equivalent in United States Dollars (US$) per month (“Initial Salary”). Such salary shall be reviewed and adjusted upwards annually, on the anniversary date of his employment with The Company during the period of the Initial Term with a view to bring his salary in line with the salary scale of a chief executive officer of a multinational mono-line payment card company for China or a head of a business unit of a multinational payments company in China by the second anniversary date of his employment with The Company, taking into considerations the revenues and earnings of The Company, the skills and experience required of the incumbent for the position and the performance of Chen as reviewed and judged reasonably by the Board. When making payment of such salary to Chen, The Company shall be entitled to deduct the amount of cash compensation received by Chen from Uplink and the subsidiaries and/or related companies of The Company as mentioned in subsection 3(f) above. In addition, it is agreed that salaries that may be owed by the Company shall be settled at the end of every calendar quarter with cash or free trading common shares of CARDTREND. 

b) Sign-on Fee 

On the Commencement Date, Chen shall be granted 6,000,000 restricted common shares of The Company, being the sign-on fee to entice Chen to enter into this Agreement (“Sign-on Fee”). Chen is entitled to piggy-back registration right for such shares.

c) Stock Option 

(i) During the period of the Initial term, Chen will be eligible to participate and be entitled to receive stock options from the Company’s Non-qualified Incentive Stock Plan 2007 (“Options”) to purchase One Million Eight Hundred And Fifty Thousand (1,850,000) common shares of The Company at an option price of United State Dollars zero and Cents Eight only (US$0.08) per share out of its Non-qualified Stock Incentive Plan 2007, such share options which are subject to rules and regulation applicable to the employees of The Company, shall be vested to Chen at an amount of Seventy Five Thousand (75,000) shares at the end of every three (3) months from the Commencement Date until the expiration of the Initial Term of this Agreement and Three Hundred And Fifty Thousand (350,000) shares upon the expiration of the Initial Term. 

(ii) During the period of the Initial Term, Chen will also be entitled to any stock options as may be authorized from time to time by the Board. 

d) Incentives 

Chen shall be entitled to participate in any performance incentive plan that The Company may implement from time to time. 

e) Benefits 

Chen will be eligible and entitled to the employment benefits as follows: 

(i) Holidays and Annual Vacation Leave 

Chen shall be entitled to all public holidays in the country/territories he is located at the time, in addition, to annual vacation leave which shall accrue on a pro rata basis during the term of this Agreement at the rate of twenty eight (28) working days per annum which vacation and/or personal day(s) shall be taken by him at such time or times as are consistent with the needs of the business of The Company and such vacation leave accrued but not taken by Chen due to the needs of the business of The Company shall be carried forward until the termination of this Agreement. 

(ii) Health Insurance 

Chen shall be entitled to be enrolled in a corporate health insurance program which may be implemented by The Company or one of its affiliates. The enrolment will be as executive status and will entitle Chen to the same coverage as provided to the other key executives of The Company. 

(iii) Indemnification 

Chen shall be indemnified by The Company to the fullest extend provided under the indemnification provisions of the By-laws and/or Certificate of Incorporation presently in existence, or, to the extend that the scope of such indemnification is greater, under any amendments to the By-laws and/or Certificate of Incorporation to the extend that The Company obtains indemnification insurance for its officers and/or directors, such insurance also cover Chen to the same extend. 

(iv) Other Benefits 

Chen will be eligible for such other employment and executive benefits as may be offered by The Company from time to time. 

f) Business Expenses 

The Company will reimburse Chen for all reasonable expenses properly incurred by Chen in the performance of his duties under this Agreement, upon presentation of properly itemized charges, receipts and/or similar documentation, and otherwise in accordance with policies established from time to time by the Board. The parties acknowledge that Chen may be required to travel extensively in connection with the performance of these duties under this Agreement and in this regard, Chen will be entitled to economy class or business class (with the prior approval of the President & Chief Executive Officer of The Company) air travel. 

5)      WORK LOCATION & RELOCATION 

i) During the term of this Agreement, Chen shall be based in Hong Kong and Guangzhou, to perform his obligation under this Agreement, unless otherwise determined and agreed by both parties from time to time depending on the needs of the Business, The Company shall pay for Chen’s hotel accommodation costs and traveling expenses to and from Guangzhou reasonably incurred by him while he is discharging his duties from Hong Kong, and in the event of Chen relocating to a work place outside of Hong Kong and Guangzhou, The Company shall pay all of the costs and expenses of Chen and his immediate family members connected with such relocation, including reasonable moving and travel expenses and reasonable dwelling costs and education costs (for children under eighteen (18) years of age) during the entire period in such relocated work place. Chen and his immediate family members shall be entitled to an economy class round trip return air-travel from the relocated work place to Guangzhou, China once a year from the time of such relocation for taking his home leave. In addition, if Chen is relocated outside of Hong Kong or Guangzhou, china, The Company will furnish Chen, without cost to him and during the entire period in such relocated work place, a company owned or leased automobile of the make and model befitting his position and status in the business community in such work place.

ii) In the event of termination of Chen’s employment due to whatever reason while he his performing his obligations under this Agreement: (a) in Hong Kong, The Company will pay for his airfare returning to Guangzhou, China; or (b) in location outside of Hong Kong or Guangzhou, China, The Company will pay all of the costs and expenses of Chen and his immediate family members connected with their returning to Guangzhou, China, including moving and travel expenses and reasonable temporary dwelling costs (for a period not exceeding 60 days). 

6)      TERMINATION, SEVERANCE PAYMENT AND LIQUIDATED DAMAGES 

a) Elect To Terminate Employment By Chen 

Upon the occurrence of the material breach of this Agreement by The Company and such breach continues for at least ninety (90) days following written notification by Chen, Chen shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than thirty (30) days prior written notice given within a reasonable period of time not to exceed, except in case of continuing breach, four (4) calendar months after the event giving rise to said right to elect. 

b) Elect To Terminate Employment By The Company (Termination For Cause) 

Upon the occurrence of any of the following events during the period of Chen’s employment under this Agreement:

(i) Chen has been convicted of a felony; or 

(ii) material breach of this Agreement by Chen and such breach continues for at least thirty (30) days following written notification by The Company; or 

(iii) the Board has determined that Chen’s employment with The Company may be terminated with “cause” as defined hereunder, The Company shall have the right to elect to terminate Chen’s employment under this Agreement by giving seven (7) days prior written notice given within a reasonable period of time not to exceed, except in case of continuing breach four (4) calendar months after the event giving rise to said right to elect. 

For the purpose of the provision of subsection 6(b)(iii) hereof, termination of Chen’s employment with The Company under this Agreement, by The Company for “cause” shall mean Chen’s termination by action of the Board arising from their findings with evidence on Chen’s dishonesty and/or willful misconduct. 

c) Severance Payment 

(i) In the event of termination of Chen’s employment under this Agreement, which termination was either elected by Chen pursuant to subsection 6(a) hereof or actioned by the Board without “cause” as defined in the last paragraph of subsection 6(b) hereof, The Company will: 

(A) pay Chen a severance payment, within thirty (30) days from the date of such termination, equal to the product of Chen’s monthly base salary at the time of such termination, multiplied by the remaining months for Chen to provide his services to The Company under this Agreement as if such termination had not occurred plus a reasonable amount of ex-gratia payment as determined by the Board for Chen’s loss of office and his past length and performance of services rendered, such amount, however, shall not be less than Hong Kong Dollars Eight Hundred Thousand (HK$800,000); 

(B) take all necessary actions to ensure that all share options which Chen is entitled to pursuant to subsection 4(c) above and which would have been vested to Chen if such termination had not occurred, will become fully vested within thirty (30) days from the date of such termination. 

(ii) In the event of termination of Chen’s employment with The Company under this Agreement, which termination was elected by The Company pursuant to subsection 6(b) hereof (Termination for Cause), Chen will be entitled to a severance payment, within thirty (30) days from the date of such termination, of a reasonable amount of ex-gratia payment as determined by the Board for Chen’s loss of office and his past length and performance of services rendered. 

d) Liquidated Damages 

In the event of termination of Chen’s employment, which termination was elected by the Company pursuant to Section 6(b) above or by Chen not under any provision of this Agreement, The Company shall be entitled to seek liquidated damages from Chen. However, the parties hereto acknowledge that the damages that may be suffered by The Company from such termination of Chen’s employment with The Company, is not ascertainable. Accordingly, the liquidated damages, if it is sought by The Company, shall be as follows: 

(i) If such termination of Chen’s employment with the Company occurs during the first twelve (12) months from the Commencement Date, Chen shall refund to The Company all the Sign-on Fee (equal to 6,000,000 common shares of The Company or in cash equivalent to US$480,000, being the full fair value of the share given to Chen as Sign-on Fee on November 1, 2007) within thirty (30) days from the date of termination of Chen’s employment with the Company; or (ii) If such termination of Chen’s employment with the Company occurs anytime after twelve (12) months from the Commencement Date, Chen shall refund to the Company 10% of the Sign-on Fee (equal to 600,000 common shares of The Company or in cash equivalent to US$48,000, being 10% of the full fair value of the shares given to Chen as Sign-on Fee on November 1, 2007) within thirty (30) days from the date of termination of his employment with the Company. 

e) The severance payment provided for under subsection 6(c)(i) or subsection 6(c)(ii) above shall not reduce any amount of money that may be owed by The Company to Chen or due to him. The liquidated damages provided for under subsection 6(d) above shall not reduce any amount of money that may be owed by Chen to The Company or due to The Company. 

7)      EXTENT OF SERVICE 

a) Chen shall devote his full time and attention to, and extent his best efforts in the performance of his duties under this Agreement, so as to promote the Business of The Company and The Company’s subsidiaries, associated companies and affiliates. 

b) Both parties acknowledge and agree that subsection 7(a) above shall not be construed as preventing Chen from the following activities of Chen: 

(i) Chen, being an individual businessman, has made prior to the Commencement Date and may make after the Commencement Date, investments with his personal assets in businesses which do not compete with the Business of The Company and that he is and may continue to be or may become a non-executive director of those companies which conduct such non-competing businesses. 

 

(ii) Chen being an individual investor, has purchased prior to the Commencement Date and may continue to purchase after the Commencement Date, securities in any corporation whose securities are regularly traded in any stock exchanges in the world PROVIDED THAT such purchase shall not result in his collectively owning beneficially at any time, five percent (5%) or more of the equity securities of any corporation engaged in a business competitive to that of The Company’ 

(iii) Chen, being appointed as the Chief Officer of Greater China of the Company, may participate after the Commencement Date, in conferences, seminars and the likes in which, he may be delivering articles, papers or materials which may or may not belong to him relating to the payment and loyalty business and/or industry PROVIDED THAT such disclosure of information and knowledge relating to the payment and loyalty related business are made in a general manner and that it may be for the purpose of promoting The Company and/or The Company’s Business. 

8)      CONFIDENTIAL INFORMATION 

Chen shall not, directly or indirectly, or at any time during the term of this Agreement hereunder or thereafter and without regard to when or for what reason, if any, use or permit the use of other information of or relating to The Company or any subsidiary or affiliate which is not in the public domain and shall not divulge such trade secrets, customers’ lists, and information to any person, firm, or corporation whatsoever except as may be required by any applicable law or determination of any duly constituted administration agency. For the avoidance of doubt, this Clause shall not be applicable to the disclosure of any information relating to The Company or its subsidiaries or affiliates by Chen or The Company’ officer authorized by him, to any third party during any business negotiations or discussions or delivering speeches in any conference or seminar as referred to in subsection 7(b)(iii) above. 

9)      NON-COMPETE 

In consideration of Chen’s promises of (a) not to compete, directly or indirectly, with The Company either (i) by the establishment of a new company engaged in the same business as The Company or (ii) to actively seek employment with other companies who directly compete with The Company; and/or (b) not to recruit any employee of The Company to work either (i) for a new company established to engage in the same business as The Company or (ii) with other companies who directly compete with The Company, for a period of one (1) year from the date of termination of his employment with The Company (hereinafter referred to as the “Restrain Period”), The Company shall pay to Chen a sum of Hong Kong Dollar Seven Hundred And Eighty Thousand (HK$780,000) or the equivalent in United States Dollars in two equal installments, first installment being made on the date of termination of his employment and the second installment to be made on the expiration of the Restrain Period. 

10)     INTELLECTUAL PROPERTY 

Any idea, invention, design, written material, manual, system, procedure, improvement, development or discovery conceived, developed, created or made by Chen alone or with others relating to the Business of The Company or any of its subsidiaries or affiliates during the contract period and whether or not patentable or registerable, shall become the sole and exclusive property of The Company. Chen shall disclose the same promptly and completely to The Company and shall, during the employment period (I) execute all documents required by The Company for vesting in The Company the entire right, title and interest in and to same, (ii) execute all documents required by The Company for filing and prosecuting such applications for patents, trademarks, service marks and/or copyrights as The Company, in its sole discretion, any desire to prosecute, and (iii) given The Company all assistance it reasonably requires, including the giving of testimony in any suit, action or proceeding, in order to obtain, maintain and protect The Company’ right therein and thereto. 

11)     ASSIGNMENT 

This Agreement and any rights (including Chen’s Compensation and except the shares of the common stocks which he is entitled to receive as part of the sign-on fee) hereunder shall not be assigned, pledged or transferred in any way by either party hereto except that The Company shall have, with Chen’s consent, the right to assign its rights hereunder to any third party successor in interest of The Company whether by merger, consolidation, purchase of assets or stock or otherwise. Any attempted assignment, pledge, transfer or other disposition of this Agreement or any rights, interests or benefits contrary to the foregoing provisions shall be null and void. 

12)     NOTICES 

All notices, request, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand, sent by facsimile, or mailed by first class, registered mail, return receipt requested, postage and registry fees prepaid to, the application party and addressed as follows: 

	(i)  	if to the The Company:  	Cardtrend International, Inc.  
	  	  	Suite 7A, Carfield Commercial Building,  
	  	  	75, Wyndham Street,  
	 	 	Central 
	  	  	Hong Kong  
	  	  	Facsimile: 852-2110-9983  
	  
	(ii)  	if to Chen:  	Room 1608 East Tower,  
	  	  	No.13 of Xinchengnan Street  
	  	  	Tianhedong Road,Guangzhou,  
	 	 	China.

SEVERABILITY

If any provision of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered.

13)    WAIVER

No course of dealing and no delay on the part of any party hereto in exercising any right, power, or remedy under or relating to this Agreement shall operate as a waiver thereof or otherwise prejudice such party’s rights, powers and remedies. No single or partial exercise of any rights, powers or remedies under or relating to this Agreement shall preclude any other or further exercise thereof or the exercise of any right, power or remedy.

14)     ENTIRE AGREEMENT/GOVERNING LAW

This Agreement embodies the entire understanding and supersedes all other oral or written contracts or understandings, between the parties regarding the subject matter hereof. No change, alteration, or modification hereof may be made except in writing signed by both parties hereto, This Agreement shall be construed and governed in all respect and shall at all times be determined in accordance with the laws of the State Of Nevada, USA..

15)     HEADINGS

The headings of Paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement consisting of eleven (11) pages, on this 31St day of October 31, 2007.

	For And On-behalf of 	   For And On-behalf of 
	Chen Yu Hua 	   Cardtrend International, Inc. 
	  
	  
	  
	  
	CHEN YU HUA	KING K. NG
	By : Chen Yu Hua 	By:  King K. Ng 
	Chinese I/C No.: 440106196810281231 	Director, President & CEO

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