Document:

______________________________________________

                           KRISPY KREME PROFIT-SHARING

                              STOCK OWNERSHIP PLAN

                           EFFECTIVE FEBRUARY 1, 1999

                _____________________________________________

<PAGE>

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>

<S>                                                                                                          <C>
ARTICLE 1.....................................................................................................1
DEFINITIONS...................................................................................................1

ARTICLE 2.....................................................................................................9
ADMINISTRATION OF THE PLAN....................................................................................9
         2.1 Designation of Plan Administrator................................................................9
         2.2 Allocation of Responsibility Among Fiduciaries for Plan and Trust Administration.................9
         2.3 Authority........................................................................................10
         2.4 Funding..........................................................................................11
         2.5 Successor Fiduciary..............................................................................11
         2.6 Bond.............................................................................................11
         2.7 Delegation of Services...........................................................................11
         2.8 Availability of Plan.............................................................................12
         2.9 Signature Authority..............................................................................12
         2.10 Fiduciary Notice Requirements...................................................................12
         2.11 Reliance........................................................................................12
         2.12 Authorization of Benefit Distributions..........................................................12
         2.13 Application and Forms for Distributions.........................................................12
         2.14 Investments.....................................................................................12
         2.15 Election of Investment Fund.....................................................................13
         2.16 Uniform Application.............................................................................13

ARTICLE 3.....................................................................................................13
ELIGIBILITY AND PARTICIPATION.................................................................................13
         3.1 Eligibility......................................................................................13
         3.2 Omission of Eligible Employee....................................................................13
         3.3 Inclusion of Ineligible Employee.................................................................14
         3.4 Leave of Absence.................................................................................14
         3.5 Maternity or Paternity Leave.....................................................................14
         3.6 Status During Leave of Absence...................................................................15
         3.7 Determination as to Eligibility..................................................................15
         3.8 USERRA and Qualified Military Service............................................................16

ARTICLE 4.....................................................................................................16
EMPLOYER CONTRIBUTIONS........................................................................................16
         4.1 Employer Contributions...........................................................................16
         4.2  Adjustments.....................................................................................16
         4.3 Compensation Allocation..........................................................................16
         4.4 Maximum Employer Contribution....................................................................16
         4.5 Form of Contribution.............................................................................17
         4.6 Prohibition on Voluntary Contributions...........................................................17
         4.7 Time of Contribution.............................................................................17

<PAGE>

ARTICLE 5.....................................................................................................17
ALLOCATIONS AND LIMITATIONS ON ALLOCATION.....................................................................17
         5.1 Participant's Accounts...........................................................................17
         5.2 Allocation Formula...............................................................................18
         5.3 Specific Assets..................................................................................19
         5.4 Simultaneous Employment..........................................................................19
         5.5 Termination of Employment........................................................................20
         5.6 Determination of Maximum Annual Addition.........................................................20
         5.7 Excess Annual Additions..........................................................................21
         5.8 Rules Relating to Employer Which Maintains One or More Qualified Defined
                  Contribution Plans in Addition to this Plan.................................................22

ARTICLE 6.....................................................................................................22
ADMINISTRATION OF FUNDS.......................................................................................22
         6.1 Expenses of Trust................................................................................22
         6.2 Maintenance of Accounts..........................................................................22
         6.3 Investment in Employer Stock.....................................................................23
         6.4 Crediting of Accounts............................................................................23
         6.5 Voting of Employer Stock.........................................................................23
         6.6 Valuation........................................................................................23
         6.8 Diversification Election.........................................................................23
         6.9 Put Option.......................................................................................24

ARTICLE 7.....................................................................................................25
BENEFITS .....................................................................................................25
         7.1 Retirement.......................................................................................25
         7.2 Disability.......................................................................................26
         7.3 Termination of Employment........................................................................26
         7.4 Death............................................................................................28
         7.5 Method of Distribution of Benefits...............................................................29
         7.6 Form of Distribution.............................................................................29
         7.7 Commencement of Distribution of Benefits.........................................................30
         7.8 Limitation on the Distribution of Benefits.......................................................31
         7.9 Restrictions on Methods of Distribution..........................................................32
         7.10 Direct Rollovers................................................................................32
         7.11 Qualified Domestic Relations Orders.............................................................33
         7.12 Definitions.....................................................................................35

ARTICLE 8.....................................................................................................36
ACCOUNTING PROCEDURES.........................................................................................36
         8.1 Trust Accounts...................................................................................36

                                       ii
<PAGE>

ARTICLE 9.....................................................................................................37
ADOPTION, AMENDMENT, TERMINATION, MERGER, ....................................................................37
CONSOLIDATION OR TRANSFER OF ASSETS...........................................................................37
         9.1 Amendment of Plan................................................................................37
         9.2 Election of Prior Vesting........................................................................38
         9.3 Discontinuance of Contributions and Termination of Plan and Trust................................38
         9.4 Merger, Consolidation, or Transfer...............................................................39
         9.5 Adoption By Affiliated Employers.................................................................39
         9.6 Designation of Agent.............................................................................39

ARTICLE 10....................................................................................................39
MISCELLANEOUS PROVISIONS......................................................................................39
         10.1 No Guaranty of Employment.......................................................................39
         10.2 Provision of Benefits...........................................................................39
         10.3 Headings........................................................................................40
         10.4 Governing Law...................................................................................40
         10.5 Spendthrift Clause..............................................................................40
         10.6 Severability....................................................................................40
         10.7 Authority of Trustee............................................................................40
         10.8 Claims..........................................................................................41
         10.9 Number and Gender...............................................................................41
         10.10 Audit..........................................................................................41

ARTICLE 11....................................................................................................42
TOP-HEAVY PLAN RULES..........................................................................................42
         11.1 Effect of Article 11 on Plan....................................................................42
         11.2 Definitions.....................................................................................43
         11.3 Minimum Contribution............................................................................46
</TABLE>

                                      iii

<PAGE>

                           KRISPY KREME PROFIT-SHARING
                              STOCK OWNERSHIP PLAN

         THIS PLAN is executed as of the 30th day of January, 2000, effective as
of the 1st day of February, 1999, by Krispy Kreme Doughnut Corporation.

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS,  Krispy Kreme  Doughnut  Corporation  wishes to establish  and
adopt, for the benefit of its employees, a stock bonus plan and for such plan to
qualify pursuant to the requirements of section 401(a) of the Code; and

         WHEREAS,  the Board of Directors of Krispy Kreme  Doughnut  Corporation
has authorized the establishment and adoption of the Krispy Kreme Profit-Sharing
Stock Ownership Plan (the "Plan") that shall comply with the requirements of the
Internal Revenue Code of 1986 and other changes in the law,  including,  but not
limited to, the Omnibus  Budget  Reconciliation  Act of 1986, the Omnibus Budget
Reconciliation  Act of 1987,  the Technical and  Miscellaneous  Act of 1988, the
Omnibus Budget Reconciliation Act of 1989, the Omnibus Budget Reconciliation Act
of 1990, the  Unemployment  Compensation  Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, the Uniformed  Services  Employment and Reemployment
Rights  Act of 1994,  the  Small  Business  Job  Protection  Act of 1996 and the
Taxpayer Relief Act of 1997; and

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants herein contained,  the Plan is hereby  established and adopted to read
as follows effective February 1, 1999, except as otherwise provided herein:

                                    ARTICLE 1
                                   DEFINITIONS
                                   -----------

         When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:

         1.1 "ACCOUNT" shall mean those account(s) established and maintained on
behalf of a Participant,  including,  but not limited to the Participant's Stock
Account and Other Investments  Account,  as well as any other accounts which may
be established for a Participant from time to time by the Plan Administrator, in
its discretion.

         1.2 "ADJUSTMENT  DATE" shall mean the last day of the Plan Year,  which
is January 30 in each year.

         1.3 "ADJUSTMENT FACTOR" shall mean the cost of living adjustment factor
prescribed by the  Secretary of the Treasury  under section  415(d) of the Code,
as applied to such items and in such manner as the Secretary shall provide.

         1.4 "AFFILIATED  EMPLOYER" shall mean any corporation which is a member
of a controlled group of corporations (as defined in section 414(b) of the Code,
as modified by section  415(h) of the Code),  which  includes the Employer;  any
trade or business  (whether or not  incorporated)  which is under common control
(as defined in section  414(c) of the Code, as modified by section 415(h) of the
Code) with the Employer; any organization (whether or not incorporated) which is
a member of an  affiliated  service  group (as defined in section  414(m) of the
Code)  which  includes  the  Employer;  and  any  other  entity  required  to be
aggregated with the Employer pursuant to Regulations under section 414(o) of the
Code.

         1.5  "AGENT  FOR   SERVICE  OF  LEGAL   PROCESS"   shall  be  the  Plan
Administrator  or such other person as shall be so  designated in writing by the
Board of Directors.

         1.6  "Anniversary  Date" shall mean for each year of the Plan, the last
day of the Plan Year.

         1.7  "ANNUAL   ADDITION"   shall  mean  the  amount   allocated   to  a
Participant's Account during the Limitation Year that constitutes:

              (a) Employer contributions,

              (b) Employee  contributions  (although Employee  contributions are
not permitted under the Plan),

              (c) Amounts allocated to an individual medical account, as defined
in section 415(1)(2) of the Code, which is part of a  pension  or  annuity  plan
maintained by the Employer, and

              (d) Amounts derived from contributions paid or accrued,  which are
attributable  to  post-retirement  medical  benefits  allocated  to the separate
account of a Key Employee (as defined in section 419A(d)(3) of the Code),  under
a welfare  benefit plan (as  defined in section  419(e) of the Code)  maintained
by the Employer.

         1.8 "BENEFICIARY"  shall mean such person or persons or legal entity as
may be entitled as a matter of law to receive or designated by a Participant  to
receive  benefits  hereunder  after  the  Participant's  death,  all  as  herein
prescribed and provided. If a Participant is married on the applicable date, the
Participant's  spouse  shall be the  Beneficiary  unless such spouse  shall have
waived in writing all rights to receive the Participant's Account, by consenting
to the Participant's  selection of another Beneficiary as provided in subsection
7.4(b).   If  the  Participant  shall  have  no  surviving  spouse,  or  if  the
Participant's spouse has properly waived her rights to receive any or all of the
Account  of the  Participant,  Beneficiary  shall  mean the  person  or  persons
designated by the Participant as his Beneficiary.

                                       2

<PAGE>

         1.9 "BOARD OF  DIRECTORS"  shall mean the Board of  Directors of Krispy
Kreme  Doughnut  Corporation,  or its  successors.  To the  extent  the Board of
Directors has delegated any of its authority or responsibilities with respect to
the Plan,  references  to the Board of  Directors  shall  include  the entity or
individuals to whom such authority or responsibilities have been delegated.

         1.10  "BREAK IN  SERVICE"  shall  mean,  subject to the  provisions  of
Article 3, a Plan Year during  which the  Employee  has  completed  500 or fewer
Hours of Service with the Employer (excluding, however, any period covered by an
authorized leave of absence).

         1.11  "CODE"  shall mean the  Internal  Revenue  Code of 1986,  and any
amendments thereto.

         1.12  "COMPENSATION"  shall mean total  cash  compensation  paid by the
Employer  to the  Participant  during  the Plan  Year  which is  required  to be
reported  as  wages on the  Participant's  Form  W-2,  including  regular  bonus
compensation  payments,  overtime and the amount of any salary reduction elected
by a Participant pursuant to a plan maintained by the Employer under section 125
or section 401(k) of the Code. The maximum  amount of  compensation  that may be
taken into account pursuant to section 401(a)(17) of the Code, is limited to one
hundred  sixty  thousand  dollars  ($160,000),  which limit shall be adjusted to
reflect cost-of-living  increases pursuant to section 401(a)(17)(B) of the Code.
The  cost-of-living  adjustment  in effect  for a calendar  year  applies to any
period,  not  exceeding  12  months,   over  which  Compensation  is  determined
(determination  period)  beginning in such  calendar  year.  If a  determination
period consists of fewer than 12 months,  the compensation limit set forth under
the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93") will be multiplied by
a fraction,  the numerator of which is the number of months in the determination
period, and the denominator of which is 12.

         Any reference in this Plan to the limitation  under section  401(a)(17)
of the Code shall mean the OBRA '93 annual  compensation limit set forth in this
provision.

         If  Compensation  for any  prior  determination  period  is taken  into
account in  determining a  Participant's  benefits  accruing in the current Plan
Year, the  Compensation  for that prior  determination  period is subject to the
OBRA '93  annual  compensation  limit in  effect  for that  prior  determination
period. For this purpose,  for determination  periods beginning before the first
day of the first Plan Year  beginning on or after January 1, 1994,  the OBRA '93
annual compensation limit is $150,000.

         1.13 "CURRENT  OBLIGATIONS"  shall mean Trust obligations  arising from
extension  of credit to the Trust and  payable in cash  within one year from the
date an  Employer  contribution  is due.  Trust  obligations  shall  include the
liability  for  payment  of taxes  imposed by  section  2001 of the Code,  which
liability is incurred pursuant to section 2210(b) of the Code.

                                       3

<PAGE>

         1.14 "DEFINED  CONTRIBUTION DOLLAR LIMITATION" shall mean $30,000,  or,
if greater,  one-fourth of the defined  benefit  dollar  limitation  which is in
effect for the Limitation Year, pursuant to section 415(b)(1) of the Code.

         1.15  "DISABILITY"  shall mean the total and permanent  incapacity of a
Participant  to  engage  in any  occupation  for wage or  profit  for  which the
Participant  is  qualified  by  reason of  training,  education  or  experience.
Disability  shall be deemed to exist when  determined by the Plan  Administrator
upon the basis of the certificate of a qualified  physician approved by the Plan
Administrator  and  such  other  evidence  as  the  Plan   Administrator   deems
acceptable. The determination shall be applied uniformly to all Participants.

         1.16  "EFFECTIVE DATE" shall mean the 1st day of February, 1999.

         1.17  "ELIGIBILITY  YEAR" shall mean the  attainment  of age 18 and the
completion of at least 1,000 Hours of Service  during 12  consecutive  months of
service with the Employer.  The calculation of the initial 12 month period shall
begin on the Employee's  Employment  Commencement  Date, and each  successive 12
month  period  shall begin on the  Anniversary  Date of the Plan  following  the
Employee's Employment Commencement Date.

         1.18  "EMPLOYEE"  shall  mean any  individual  who is  employed  by the
Employer;  provided,  however,  the term "Employee" shall not include (a) leased
employees who are "Leased Employees" within the meaning of section 414(n) or (o)
of the Code; or (b)  individuals  who are treated as independent  contractors by
the Employer,  regardless of whether the Internal  Revenue Service requires that
such individuals be considered employees for any purpose.

         1.19  "EMPLOYER"  shall mean Krispy Kreme Doughnut  Corporation and any
entity with or into which they may be merged or  consolidated  or to which their
assets may be sold, and any entity which is or may become an Affiliated Employer
and adopts the Plan; provided, however, the inclusion of an entity within or the
removal of any entity from the meaning of the word  "Employer,"  for purposes of
participation  of such entity as an Employer  under the Plan,  shall be effected
only by action of its governing body and the Board of Directors.

         1.20 "EMPLOYER  STOCK" shall mean a "qualifying  employer  security" of
the Employer within the meaning of section  4975(e)(8) of the Code or Regulation
section  54.4975-12.  The term  "Employer  Stock" shall include Stock as defined
below.

         1.21  "EMPLOYMENT  COMMENCEMENT  DATE"  shall mean the date on which an
Employee first performs an Hour of Service for the Employer;  provided, however,
if an Employee shall have incurred a Break in Service as provided for in Section
1.10, and his prior service for purposes of Plan  eligibility is forfeited,  the
Employee's Employment Commencement Date shall be the date on which such Employee
first  performs  an Hour of Service  following  his  return  after such Break in
Service.

                                       4
<PAGE>

         1.22  "EMPLOYMENT  WITH THE EMPLOYER"  shall,  for all purposes of this
Plan,  include any period  that an Employee  was  employed  by an  Employer,  as
defined in Section 1.19, subject to the Break in Service rules set forth in this
Plan.

         1.23  "ENTRY  DATE"  shall  mean  the  first  day  of the  first  month
coinciding  with  or  immediately  following  an  Employee's  completion  of the
eligibility requirements set forth in Sections 1.17 and 3.1.

         1.24 "ERISA" shall mean the Employee  Retirement Income Security Act of
1974, and all amendments thereto.

         1.25 "FIDUCIARY" means the Plan Administrator and any fiduciary to whom
duties have been delegated pursuant to Article 2 of the Plan.

         1.26 "HIGHLY  COMPENSATED  EMPLOYEE" includes highly compensated active
Employees and highly compensated former Employees.

         A highly  compensated  active  Employee means any Employee who performs
service for the Employer during the determination year and who:

              (a)  was  a  5  percent  owner  at any time during the year or the
preceding year, or

              (b)  for the preceding year:

                   (i)  had compensation from the Employer  in excess of $80,000
(indexed  as such  time and in such manner as the Secretary of the  Treasury may
provide), and

                   (ii) if the Employer  elects the  application  of this clause
for such preceding year, was in the top-paid group of employees (i.e., was among
the top 20% of employees in compensation) for such preceding year.

         Compensation  is  compensation  within  the  meaning  of  Code  Section
415(c)(3),  but without regard to Code Sections 125, 402(e)(3),  402(h)(1)(B) or
403(b).

         The determination of who is a Highly  Compensated  Employee,  including
the determination of the number and identity of Employees in the top-paid group,
will be made in accordance  with the  provisions of Code Section  414(q) and the
regulations thereunder.

         A former employee shall be treated as a "Highly  Compensated  Employee"
if such employee was a Highly Compensated Employee when he or she separated from
service or who was a Highly Compensated Employee at any time after attaining age
fifty-five (55).

         For all purposes of this definition, Employers aggregated under Section
414(b), (c), (m) or (o) are treated as a single Employer.

                                       5

<PAGE>

         1.27 "HOUR OF SERVICE" shall mean:

              (a)  Each hour for which an  Employee  is  directly or  indirectly
paid, or entitled to payment,  for the  performance  of duties for the Employer.
These  hours  shall be  credited  to the  Employee as of the time the duties are
performed;

              (b)  Each  hour  for which  an  Employee  is paid,  or entitled to
payment,  by the  Employer on account of a period of time during which no duties
are  performed   (irrespective  of  whether  the  employment   relationship  has
terminated)   due  to  vacation,   holiday,   illness,   incapacity   (including
disability),  layoff,  jury duty,  military duty or leave of absence  (including
maternity  or  paternity  leave).  No more  than 501 Hours of  Service  shall be
credited under this subsection for any single  continuous period (whether or not
such period  occurs in a single Plan Year).  Hours under this  Section  shall be
calculated and  credited  pursuant  to section  2530.200b-2 of the Department of
Labor Regulations, the provisions of which are incorporated herein by reference;

              (c)  Each hour for which back pay,  irrespective  of mitigation of
damages,  is either  awarded  or agreed to by the  Employer.  The same  Hours of
Service shall not be credited both under subsection  1.27(a) or 1.27(b),  as the
case may be, and under this  subsection.  These  hours  shall be credited to the
Employee  for the time as of which the award or agreement  pertains  rather than
the time the award, agreement or payment is made;

              (d)  Where  the  Employer  maintains  the  plan  of a  predecessor
employer,  unless  specifically  stated otherwise,  service for such predecessor
employer shall be treated as service for the Employer.

         1.28 "INACTIVE  PARTICIPANT" shall mean any Employee or former Employee
who has ceased to be a Participant  and on whose behalf an Account is maintained
under the Plan.

         1.29  "INVESTMENT  MANAGER"  shall mean the person or persons  (if any)
designated by the Board of Directors who shall be charged with the management of
all or a portion  of the  assets of the  Trust.  An  Investment  Manager  is any
person,  firm or  corporation  other than the  Trustee  who (a) has the power to
manage,  acquire, or dispose of any portion of the Trust Fund; (b) is registered
as an investment advisor under the Investment Advisors Act of 1940, is a bank as
defined  in that Act,  or is an  insurance  company  qualified  to  perform  the
services  described in (a) above; and (c) has acknowledged in writing that it is
a fiduciary with respect to the Plan.

         1.30 "LIMITATION  YEAR" as defined by section 415 of the Code, shall be
the period from February 1 to January 30, subject to any necessary  adjustments,
as  determined  by the Plan  Administrator,  on account of the date the Plan was
established. If the Limitation Year is amended to a different twelve consecutive
month period, the new Limitation Year must begin on a date within the Limitation
Year in which the amendment is made.

         1.31 "NAMED FIDUCIARY" shall mean the person or persons,  designated as
hereinafter provided, who shall be in charge of the operation and administration
of the Plan or  Trust.  "Fiduciary"  means  any  person  who (a)  exercises  any
discretionary  authority or discretionary  control respecting  management of the

                                       6

<PAGE>

Plan or exercises any authority or control respecting  management or disposition
of its assets,  (b) renders  investment advice for a fee or other  compensation,
direct or indirect,  with respect to any moneys or other property of the Plan or
Trust,  or has  any  authority  or  responsibility  to do so,  or  (c)  has  any
discretionary  authority or responsibility in the  administration of the Plan or
Trust, including,  but not limited to, the Trustee, the Board of Directors,  and
the Plan Administrator, as well as Participants or Beneficiaries, as applicable,
to the  extent  such  Participants  or  Beneficiaries  may  exercise  investment
direction or voting rights.

         1.32 "NORMAL RETIREMENT DATE" shall mean the Adjustment Date coinciding
with or following the 65th  birthday of a  Participant;  and "Normal  Retirement
Age" shall mean age 65.

         1.33 "OTHER  INVESTMENTS  ACCOUNT" shall mean an account which consists
of investments, other than Employer Stock, cash dividends on Employer Stock, and
earnings and losses on these amounts.

         1.34 "PARTICIPANT"  shall mean any Employee who has met the eligibility
requirements  of the Plan and who shall have  acquired  an interest in the Trust
Fund pursuant to the provisions of the Plan.

         1.35 "PLAN" shall mean the Krispy Kreme  Profit-Sharing Stock Ownership
Plan, as set forth in this document and all subsequent amendments thereto, which
Plan is a stock bonus plan under section 401(a) of the Code.

         1.36 "PLAN  ADMINISTRATOR," as that term is defined in section 3(16)(A)
of ERISA  and  section  414(g) of the Code,  shall be the named  fiduciary  with
authority to control and manage the  operation and  administration  of the Plan.
The Plan  Administrator  shall be  Krispy  Kreme  Doughnut  Corporation,  or its
successor,  unless Krispy Kreme Doughnut  Corporation,  or its successor,  shall
appoint a  committee  of three (3) or more  persons as Plan  Administrator.  The
Board of  Directors  may, in  accordance  with  Section  2.2 hereof,  replace an
administrative  committee by  appointing a successor  committee of three or more
persons as Plan Administrator.

         1.37 "PLAN YEAR" shall mean the 12 month period commencing  February 1,
1999, and ending January 30, 2000. Thereafter, Plan Year shall mean the 12 month
period ending with the last day of the Employer's Taxable Year.

         1.38 "QUALIFIED  ELECTION  PERIOD" shall mean the five Plan Year period
beginning with the later of:

              (a)  the  Plan Year  after the  Plan Year in which the Participant
attains age 55; or

              (b)  the  Plan  Year  after the Plan Year in which the Participant
first becomes a "Qualified Participant."

                                       7
<PAGE>

         1.39 "QUALIFIED  PARTICIPANT" shall mean a Participant who has attained
age 55, and who has been a Participant of the Plan for at least ten years.

         1.40 "REGULATION"  shall mean the income tax regulations as promulgated
by the  Secretary of the Treasury or his  delegate,  and as amended from time to
time.

         1.41  "STOCK"  shall  mean  common  stock  issued by the  Employer,  or
Affiliated  Employer,  which is readily  tradable on an  established  securities
market; provided, however, "Stock" shall also include common stock issued by the
Employer,  or  Affiliated  Employer,  having a  combination  of voting power and
dividend  rights  equal to or in excess of those  classes of common stock of the
Employer  or  Affiliated  Employer  having  the  greatest  voting  power and the
greatest dividend rights.

         1.42 "STOCK  ACCOUNT" shall mean an account which consists of whole and
fractional shares of Stock, and with stock dividends paid on such Stock.

         1.43  "TAXABLE  YEAR"  shall  mean the 12 month  period  adopted by the
Employer as its fiscal year for tax  purposes.  The Taxable Year of Krispy Kreme
Doughnut  Corporation  is the 12 month  period  ending on the Sunday  closest to
January 31 of each year. If, at any time, the term "Employer" shall include more
than one separate entity and all such separate  entities shall not have the same
fiscal year, the fiscal year of each separate entity shall be the "Taxable Year"
for each such separate entity.

         1.44 "TRUST" as used herein shall mean the legal entity  resulting from
the agreement between Krispy Kreme Doughnut Corporation and the Trustee by which
the Plan contributions shall be received,  held,  invested,  and disbursed to or
for the benefit of Participants  and/or  Beneficiaries.  Such agreement shall be
referred to herein as the "Trust Agreement."

         1.45  "TRUSTEE"   shall  mean  the  person,   persons  or  corporation,
association, or a combination thereof appointed under the agreement establishing
the Trust,  who may at any time possess any power or control over the management
or disposition of the funds or other  property  constituting  the assets of this
Plan.

         1.46 "TRUST FUND" shall mean all funds received by the Trustee together
with any increments or decrements thereon.

         1.47  "VALUATION  DATE"  shall  mean the date upon which  Accounts  are
valued and  allocations  made,  which shall be the Adjustment  Date of each Plan
Year and any other  dates  selected  by the Plan  Administrator.  If it  becomes
necessary  to sell,  exchange or  transfer  Plan assets on a date other than the
Valuation  Date,  the Plan  Administrator  may,  from time to time,  establish a
special  Valuation  Date, in a manner which it deems  appropriate  to assure the
equitable treatment of all Participants.

         1.48 "YEAR OF SERVICE"  shall mean a Plan Year during which an Employee
is  credited  with at least  1,000  Hours of Service or more with the  Employer.
Years of Service completed by an Employee with any corporation,  partnership, or
proprietorship  which is a member of a controlled  group of corporations  within
the  meaning  of  section  1563(a)  of the Code,  determined  without  regard to
sections  1563(a)(4)  and  1563(e)(3)(C)  of  the  Code,  or is a  member  of an
Affiliated  Service  Group  with the  Employer,  or has  adopted  the Plan as an
Employer shall be recognized as Years of Service with the Employer.

                                       8
<PAGE>

                                    ARTICLE 2
                           ADMINISTRATION OF THE PLAN
                           --------------------------

         2.1 DESIGNATION OF PLAN ADMINISTRATOR.  The Plan Administrator shall be
             ---------------------------------
in  charge  of the  operation  and the  administration  of the  Plan.  The  Plan
Administrator   shall   have  the   power   to   delegate   specific   fiduciary
responsibilities  (other  than the  fiduciary  responsibilities  of the  Trustee
relating  to the  control  of the Trust  Fund).  Such  delegation  of  fiduciary
responsibilities  may be to officers or Employees of the  Employer,  or to other
individuals,  all of whom shall serve at the pleasure of the Plan Administrator;
and any  individuals  who are  full-time  Employees of the Employer  shall serve
without  compensation.  Any person to whom fiduciary  duties have been delegated
may resign upon  reasonable  notice by delivering a written  resignation  to the
Plan Administrator;  however, the resignation shall not relieve such person from
any breach of fiduciary  duty that arose prior to the  resignation or because of
the resignation.  Vacancies created by resignation, death, or other cause may be
filled  by the  Plan  Administrator;  or the  assigned  responsibilities  may be
reabsorbed by or re-delegated by the Plan Administrator.

         2.2 ALLOCATION OF  RESPONSIBILITY  AMONG FIDUCIARIES FOR PLAN AND TRUST
             -------------------------------------------------------------------
ADMINISTRATION.  The Fiduciaries shall have only those specific powers,  duties,
--------------
responsibilities, and obligations as are specifically given or delegated to them
under  this Plan and the  Trust  Agreement.  The  Employer  shall  have the sole
responsibility  for  making the  contributions  under the Plan as  specified  in
Article 4. The Board of Directors  shall have the sole  authority to appoint and
remove the Plan Administrator,  any Trustee or Trustees,  any Investment Manager
which may be  appointed  pursuant to this Plan and the Trust  Agreement,  and to
amend or  terminate,  in whole or in part,  this  Plan or the  Trust  Agreement;
provided,  however, that the Board of Directors may delegate to the Compensation
Committee of the Board of Directors all such authority, other than the authority
to terminate the Plan. The Plan Administrator shall have the sole responsibility
for  the  administration  of the  Plan,  which  responsibility  is  specifically
described in this Plan. Subject to the rights of Qualified  Participants to make
a  diversification  election,  and  further  subject  to the  voting  rights  of
Participants and  Beneficiaries as Named  Fiduciaries  pursuant to this Plan and
the Trust  Agreement,  the Trustee  shall have the sole  responsibility  for the
administration  of the Trust and the  management  of the  assets  held under the
Trust,  except to the extent an Investment  Manager has been  appointed,  all as
specifically provided herein. Each Fiduciary warrants that any directions given,
information  furnished,  or action taken by it shall be in  accordance  with the
provisions of the Plan and the Trust Agreement authorizing or providing for such
direction,  information or action.  It is intended under this Plan and the Trust
Agreement that each Fiduciary  shall be responsible  for the proper  exercise of
its own powers,  duties,  responsibilities  and obligations  under this Plan and
shall not be responsible for any act or failure to act of another Fiduciary.  No

                                       9
<PAGE>

Fiduciary  guarantees the Trust or any  Participant or Beneficiary in any manner
against investment loss or depreciation in asset value.

         2.3  AUTHORITY.  The Plan  Administrator  shall  administer the Plan in
              ---------
accordance with its terms and shall have the power to exercise its discretion in
determining  all  questions  arising  in  connection  with  the  administration,
interpretation,  and  application  of the  Plan.  The Plan  Administrator  shall
interpret and construe the  provisions of this Plan,  decide any disputes  which
may arise with regard to the rights of Employees,  Participants, and their legal
representatives or Designated  Beneficiaries  under the terms of this Plan, and,
in general,  direct the  administration  of this Plan.  The decision of the Plan
Administrator in matters within its jurisdiction  shall be final,  binding,  and
conclusive  upon the Employer and upon all Employees,  Participants,  Designated
Beneficiaries,  and every other person or party  interested  or  concerned.  The
duties of the Plan Administrator shall include,  but shall not be limited to the
following:

              (a)      Determine all questions  relating  to the  eligibility of
Employees to participate or remain a Participant hereunder.

              (b) Compute,  certify,  and direct the Trustee with respect to the
amount and kind of benefits to which any Participant shall be entitled hereunder
and to prescribe  procedures to be followed by Participants or Beneficiaries for
filing applications for distributions.

              (c)   Authorize  and  direct  the  Trustee  with  respect  to  all
nondiscretionary   or  otherwise  directed disbursements from the Trust.

              (d)   Maintain all necessary records for the administration of the
Plan.

              (e)  Interpret  the   provision  of  the  Plan  and  to  make  and
publish such rules for regulation of the Plan as are  consistent  with the terms
thereof.

              (f)   Determine   the  size  and  type  of   any  contract  to  be
purchased from any insurer, if any, and to designate the insurer from which such
contract shall be purchased.

              (g)  Compute and certify to the Employer  and  to the Trustee from
time  to time the sums of money  necessary or desirable to be contributed to the
Trust.

              (h) Consult the Board of Directors  and the Trustee  regarding the
short and  long-term  liquidity  needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner  designed to  accomplish specific
objectives.

              (i)  Establish  and  communicate  to Participants  a procedure and
method to insure that each  Participant  will vote Employer  Stock  allocated to
such Participant's Stock Account pursuant to the Plan and the Trust Agreement.

              (j)  Enter into a written  agreement with regard to the payment of
federal estate tax pursuant to section 2210(b) of the Code.

                                       10

<PAGE>

              (k)   Assist  any  Participant  regarding his rights, benefits, or
elections available under the Plan.

         2.4  FUNDING.  The  Plan  Administrator  shall  establish  the  general
              -------
investment  policy and objectives for the Trust Fund,  consistent with the needs
of the Plan and the  requirements of ERISA,  and shall  communicate  same to the
Trustee  and to any  Investment  Manager  who may then be  serving  as such,  as
promptly as  practicable  after  establishing  or revising same. It shall be the
responsibility of any such Investment  Manager to advise the Plan  Administrator
and the  Trustee at  reasonable  intervals  and at such other  times as the Plan
Administrator or the Trustee shall request of all investments and  reinvestments
of the Trust Fund made in furtherance of such investment  policy and objectives.
The Plan Administrator  shall be charged with maintaining the funding method and
policy, with such duties and  responsibilities  including,  but not limited to a
periodic review, not less often than annually,  to determine whether the funding
policy and method are consistent with the current needs of the Plan.

         2.5  SUCCESSOR FIDUCIARY.  Upon the death, resignation, or inability to
              -------------------
serve  of  any  person  to  whom  the  Employer,  Board  of  Directors  or  Plan
Administrator  has delegated  fiduciary  duties, a successor  fiduciary shall be
appointed within 30 days. If the Employer shall cease to exist, or be dissolved,
voluntarily  or  involuntarily,  or have a receiver  or  trustee  in  bankruptcy
appointed,  a successor  fiduciary shall be appointed within 30 days by the then
remaining  persons (if any) to whom  fiduciary  duties have been  delegated.  If
there  are no  remaining  persons  to  whom  the  Board  of  Directors  or  Plan
Administrator has delegated  fiduciary duties, or in the event of the inability,
failure, or refusal of the then remaining  fiduciaries to make such appointment,
a successor  fiduciary shall be selected by a majority of the Participants under
the Plan who are Employees of the Employer at the time of the  occurrence of the
foregoing events.

         2.6 BOND. A fidelity bond or other surety shall be required of the Plan
             ----
Administrator,  as well as all  individuals to whom  fiduciary  duties have been
delegated or will be  delegated,  and such bond will be of the type  required by
the terms and provisions of ERISA and the regulations  issued pursuant  thereto,
and shall be in an amount equal to the greater of one thousand ($1,000) dollars,
or ten  percent  (10%) of the assets in the Plan,  but need not be greater  than
five  hundred  thousand  dollars  ($500,000)  unless  provided  otherwise by the
Secretary  of Labor or ERISA.  The  payment  of  premiums  of such bond or other
surety shall be paid by the  Employer  within a  reasonable  time,  or, upon its
failure to do so, by the Trustee from the Trust Fund.

         2.7 DELEGATION OF SERVICES. The Plan Administrator and those to whom it
             ----------------------
has  delegated  fiduciary  duties may employ such  counsel and agents and obtain
such clerical and other  services  (including  accounting,  legal  counsel,  and
investment  managers  and  advisors)  as may be  required  in  carrying  out the
provisions  of  the  Plan.  All  fees,  charges,   and  costs  relating  to  the
administration  of the Plan shall be paid by the  Employer,  or, if the  expense
specifically  relates to  administration of the Plan or the Trust, such expenses
may be paid by the Trustee from the Trust Fund, consistent with the requirements
of ERISA.

                                       11
<PAGE>

         2.8  AVAILABILITY  OF PLAN.  The  principal  terms of the Plan shall be
              ---------------------
communicated to the Employees by the Employer.  Copies of the Plan and the Trust
Agreement  shall be  available  to each  Participant  hereunder by having a copy
available at the principal offices of the Employer during business hours.

         2.9  SIGNATURE  AUTHORITY.  If the Plan  Administrator  shall  delegate
              --------------------
specific fiduciary responsibilities,  it may designate and authorize one or more
of the persons so delegated to sign  documents for it, and shall further  notify
the  Trustee  of such  action  and the name or names of the person or persons so
designated.  The  Trustee  shall  thereafter  accept and rely upon any  document
executed  by  such  person  or  persons  as  representing  action  by  the  Plan
Administrator  until  the Plan  Administrator  shall  deliver  to the  Trustee a
written revocation of such designation.

         2.10 FIDUCIARY NOTICE REQUIREMENTS. The Plan Administrator and those to
              -----------------------------
whom it has  delegated  fiduciary  duties shall notify the Trustee of any action
taken with  respect to the Plan and when  required  to do so,  shall  notify any
other  interested  party.  The  Plan  Administrator  and  those  to  whom it has
delegated  fiduciary  duties shall maintain all such books of account,  records,
and other data as shall be  necessary to properly  administer  the Plan and meet
the  disclosure  and  reporting  requirements  of ERISA and the  Code.  The Plan
Administrator  shall  ensure  that the Plan is in  compliance  with the  various
reporting  requirements  set  forth  in  ERISA,  the  Code  and the  regulations
thereunder.

         2.11  RELIANCE.  The  Plan  Administrator  shall  be  entitled  to rely
               --------
conclusively  upon,  and shall be fully  protected in any actions taken by it in
good  faith and in  reliance  upon,  any  opinions  or  reports  which  shall be
furnished to it by any accountant,  actuary,  counsel, or other specialist.  The
Plan  Administrator  shall not incur any  liability for its action or failure to
act,   excepting  only  liability  for  its  own  gross  negligence  or  willful
misconduct.   The  Employer  shall  indemnify  each  person  to  whom  the  Plan
Administrator  has  delegated  fiduciary  duties  against  all  claims,  losses,
damages,  expenses,  and liabilities  arising from any action or failure to act,
except when the same is judicially  determined to be due to the gross negligence
or willful misconduct of such person.

         2.12  AUTHORIZATION OF BENEFIT DISTRIBUTIONS. The Plan Administrator or
               --------------------------------------
its agent shall issue  directions to the Trustee  concerning  all  distributions
which are to be made from the Trust Fund pursuant to the provisions of the Plan,
and shall warrant that all such directions are in accordance with this Plan.

         2.13  APPLICATION AND FORMS FOR DISTRIBUTIONS.  The Plan  Administrator
               ---------------------------------------
may require a Participant  to complete and file with the Plan  Administrator  an
application  for a  distribution,  and all  other  forms  approved  by the  Plan
Administrator,  and to furnish all pertinent  information  requested by the Plan
Administrator.  The Plan  Administrator  may rely upon all such  information  so
furnished it, including the Participant's current mailing address.

         2.14  INVESTMENTS. The Committee shall have the power, but shall not be
               -----------
required,  to direct the  investments  and  reinvestments  of the  principal and
income of the Trust Fund,  subject to the limitations  provided in this Plan and
the Trust  Agreement  as to the  character  of the  investments  permitted,  and
further  subject to the  limitations  of ERISA as determined by the Trustee.  In

                                       12
<PAGE>

addition,  the Board of  Directors  shall have the  authority,  but shall not be
required, to select one or more Investment Managers to manage all or any portion
of the Trust Fund. The Board of Directors may delegate to the Investment Manager
the power to direct the  acquisition and disposition of assets held in the Trust
Fund. If the Board of Directors should appoint an Investment  Manager,  it shall
indemnify against liability for the acts or omissions of the Investment  Manager
all other  persons to whom it has  delegated  fiduciary  duties,  except if such
fiduciary  knows that by its act or failure to act it is  committing a breach of
fiduciary duty. Any Investment  Manager shall serve at the pleasure of the Board
of  Directors  but may  resign,  with  reasonable  notice,  by  filing a written
resignation with the Board of Directors.  The Investment Manager shall indemnify
each  person  to whom it has  delegated  fiduciary  duties  against  any and all
claims,  losses,  damages,  expenses, and liabilities arising from any action or
failure to act,  except when the same is judicially  determined to be due to the
gross negligence or willful misconduct.

         2.15  ELECTION OF INVESTMENT FUND. The Plan Administrator may authorize
               ---------------------------
the use of one or more  Investment  Funds with  respect  to the  diversification
election  of a  Qualified  Participant,  pursuant  to  Section  6.8 of the Plan.
"Investment Fund" shall mean the investment  alternatives within the Trust Fund,
selected by the Plan  Administrator  and  maintained by the Trustee to which the
Participants  are allowed to direct the investment of their  Accounts.  The Plan
Administrator   shall  notify  each  Qualified   Participant  of  the  available
Investment Funds prior to his Qualified  Election  Period,  and shall promulgate
written procedures for making a diversification election.

         2.16  UNIFORM APPLICATION.  The provisions of this Plan  shall apply to
               -------------------
all Participants uniformly.

                                    ARTICLE 3
                          ELIGIBILITY AND PARTICIPATION
                          -----------------------------

         3.1 ELIGIBILITY. Each Employee who is in the employ of the Employer and
             -----------
has attained age 18 shall be eligible to participate in the Plan upon completion
of one Eligibility Year. Such Employee shall commence  participation in the Plan
as of the  Entry  Date  coincident  with or next  following  completion  of such
Eligibility   Year.  If  an  Affiliated   Employer   which  has  not  previously
participated  in the Plan  shall  join the Plan,  Employees  of such  Affiliated
Employer who have  completed  the  equivalent  of an  Eligibility  Year with the
Affiliated  Employer at the time the Affiliated  Employer adopted the Plan shall
immediately be entitled to participate. The Employer shall give each prospective
eligible  Employee  written notice of his eligibility to participate in the Plan
prior to the date as of which he shall  complete  one  Eligibility  Year.  If an
Employee has a Break in Service  before  satisfying the Plan's  requirement  for
eligibility, service before such break will not be taken into account.

         3.2  OMISSION OF ELIGIBLE EMPLOYEE.  If, in any Plan Year, any Employee
              -----------------------------
who should be included as a Participant in the Plan is  erroneously  omitted and
discovery  of such  omission  is not  made  until  after a  contribution  by the
Employer  for the year has been  made,  the  Employer  shall  make a  subsequent

                                       13
<PAGE>

contribution  with  respect to the  omitted  Employee  in the  amount  which the
Employer  would have  contributed  with respect to such Employee had he not been
omitted.  Such  contribution  shall be made  regardless  of whether or not it is
deductible in whole or in part in any Taxable Year under  applicable  provisions
of the Code.

         3.3 INCLUSION OF INELIGIBLE EMPLOYEE.  If, in any Plan Year, any person
             --------------------------------
who should not have been  included as a Participant  in the Plan is  erroneously
included  and  discovery of such  incorrect  inclusion is not made until after a
contribution  for the year has been made,  the Employer shall not be entitled to
recover the contribution  made with respect to the ineligible  person regardless
of whether or not a deduction is allowable with respect to such contribution. In
such event, the amount  contributed with respect to the ineligible  person shall
constitute a forfeiture for the Plan Year in which the discovery is made.

         3.4  LEAVE OF  ABSENCE.  For  purposes  of  determining  the  period of
              -----------------
employment of any Employee,  an Employee shall be deemed to be actively employed
with the Employer during periods covered by an authorized leave of absence, with
or without pay,  provided,  however,  no more than 501 Hours of Service shall be
credited  on behalf of a  Participant  during a leave of  absence,  and shall be
credited solely to prevent a Break in Service, unless otherwise provided by law.
Absence from work for the following reasons shall constitute an authorized leave
of absence:

              (a)  Illness or accident.

              (b)  A  leave  of absence  authorized  by the Employer,  under the
Employer's standard personnel practices (as from time to time amended), provided
that the terms  thereof shall be applied  uniformly to all  Employees  similarly
situated,  and, provided further, that the Employee returns to service after the
end of the leave of absence.

              (c) During a period of  national  emergency  or as required by the
Selective  Service  Act of 1948 or a  subsequent  act of like  intent or purpose
requiring  service with the armed forces,  the  government of the United States,
the Coast Guard, or Public Health Service,  provided the Employee returns to the
service of the Employer within 90 days after  completion of service as described
above, or such longer period during which the Employee's  employment  rights are
protected by law.

         Notwithstanding  any of the above provisions,  an Employee who is not a
Participant  under  the  Plan at the  time  such  authorized  leave  of  absence
commences  shall not become eligible for membership in the Plan until he returns
to active employment with the Employer.

         3.5 MATERNITY OR PATERNITY LEAVE. During a maternity or paternity leave
             ----------------------------
of absence,  no more than 501 Hours of Service  shall be credited on behalf of a
Participant,  and shall be credited  solely to prevent a Break in Service.  With
regard to  maternity  or  paternity  leave of  absence,  the  following  special
provisions shall apply:

                                       14
<PAGE>

              (a)  An  Employee  shall  be  deemed  to  be  on  a  maternity  or
paternity  leave of absence if he is absent from work for any period  because of
the Employee's pregnancy, the birth of a child of the Employee, or the placement
of a child with the Employee in connection with the adoption of the child by the
Employee,  or for  purposes  of caring for the child for the period  immediately
following the child's birth or placement.

              (b)  An  Employee  shall  be  credited with the number of Hours of
Service which would otherwise  normally have been credited to him or her but for
such absence,  or, if such Hours of Service cannot be  determined,  the Employee
will be credited  with eight  Hours of Service  per day for the  duration of the
absence; provided, however, the total number of Hours of Service credited to the
Employee by reason of such  pregnancy,  birth or placement  shall not exceed 501
hours.

              (c)  Hours  of  Service  credited  as  a  result of  maternity  or
paternity leave shall be credited in the computation period in which the absence
from work  begins,  if solely  because such Hours of Service are  credited,  the
Employee would be prevented from incurring a Break in Service in such period. In
all other  cases such  Hours of Service  shall be  credited  in the  immediately
following computation period.

              (d)  No credit  will  be  given for a maternity or paternity leave
of absence unless the Employee furnishes the Plan Administrator  whatever timely
information it may require to establish that the absence from work is for one of
the reasons  described  in  subsection  (a) above,  as well as  whatever  timely
information is necessary to establish the number of days of the absence.

         3.6 STATUS DURING LEAVE OF ABSENCE.  If an Employee is on an authorized
             ------------------------------
leave of absence  after he has  become a  Participant  under the Plan,  he shall
continue to remain a Participant during such leave of absence.  However,  during
the  period  of such  leave  of  absence,  no  Employer  contributions  shall be
allocated  to  the  credit  of  his  Account  except  upon  the  basis  of  such
compensation as he may receive from the Employer during the leave of absence. If
the  Participant  does not return to the employ of the Employer upon or prior to
the expiration of the leave of absence,  it shall be conclusively  presumed that
his  employment  was  terminated on or as of the date of the  expiration of such
leave of absence.  However, if the death of such Participant occurs prior to the
expiration of such leave of absence,  the death benefit  provided in Section 7.4
shall be payable to the Participant's Beneficiary.

         3.7 DETERMINATION AS TO ELIGIBILITY. Any question as to the eligibility
of any Employee  hereunder  shall be  determined  by the Plan  Administrator  in
accordance with the terms hereof and in its sole discretion.  Such determination
shall be final and conclusive  for all purposes.  The Plan  Administrator  shall
determine the  eligibility of  Participants in accordance with the provisions of
this Plan  from the  books  and  records  of the  Employer,  or from such  other
information or evidence as it may deem  sufficient,  and shall provide notice to
each Employee when he has become eligible for membership hereunder.

                                       15
<PAGE>

         3.8  USERRA  AND  QUALIFIED  MILITARY  SERVICE.   Notwithstanding   any
              -----------------------------------------
provision  of this Plan to the  contrary,  contributions,  benefits  and service
credit with respect to qualified military service will be provided in accordance
with Code Section 414(u).

                                    ARTICLE 4
                             EMPLOYER CONTRIBUTIONS
                             ----------------------

         4.1  EMPLOYER  CONTRIBUTIONS.  For each  Taxable  Year of the  Employer
              -----------------------
during the  continuance  of this Plan,  and within the time permitted by section
412(c)(10) of the Code, the Employer  shall  contribute to the Trust such amount
as it may  determine to be  appropriate  and  reasonable  for such Taxable Year,
without  regard to current or  accumulated  earnings and  profits,  it being the
purpose and  intention of the  Employer  that the  contributions  under the Plan
shall be recurring and substantial.

         4.2 ADJUSTMENTS.  Although the Employer is not required to have current
             -----------
or  accumulated  profits  to make a  contribution  to the  Plan,  if the  annual
contribution of the Employer to the Trust for any Taxable Year, as authorized by
the terms and provisions of this Plan,  should be based upon a percentage of the
Employer's  annual net profit for such year, no adjustment  affecting the annual
net profit of the Employer  made  subsequent  to 90 days after the filing of the
Employer's  Federal income tax return for the particular year, whether resulting
from audit of the Employer's  tax returns or otherwise,  shall change the amount
of the contribution required to be made to the Trust Fund for such Taxable Year.

         4.3  COMPENSATION  ALLOCATION.  If the contribution by the Employer for
              ------------------------
any Plan Year should be based upon the  compensation  of  Participants  for such
Plan Year, then in the case of a Participant who is  simultaneously  employed by
two or more Employers participating in the Plan, or in the case of a Participant
who has  transferred  during the year from the  employment  of one  Employer  to
another Employer,  both of which Employers participate in the Plan, and there is
no unauthorized absence between the date employment ceases with one Employer and
the date employment  commences with the other Employer,  each Employer that said
Participant is employed by during the Taxable Year, whether simultaneously or as
a result of transfer,  which is making a contribution  for such Plan Year, shall
contribute to the Trust such amount (determined on the basis of the ratio of the
Participant's  total  compensation  earned  with  each  Employer  to  his  total
aggregate  compensation  earned with all  Employers  during the Taxable Year) as
will  provide  for  said  Participant's  account  the  sum  required  under  the
allocation provisions of the Plan.

         4.4  MAXIMUM EMPLOYER CONTRIBUTION. Notwithstanding any other provision
              -----------------------------
of this  Article,  no annual  contribution  of the  Employer  to the Trust shall
exceed an  amount  equal to the  maximum  deduction  allowable  in such year for
Federal income tax purposes under section 404 of the Code,  including the "carry
over"  provisions  (which relate to  contributions  in previous years of more or
less than the maximum amount deductible),  or the maximum amount permitted to be
contributed  pursuant to the  provisions  of section 415 of the Code,  whichever
shall be the smaller.  In this regard, if the Employer is a member of a group of
employers which constitutes either a controlled group of corporations, trades or
businesses under common control, or an "Affiliated Service Group" as that term

                                       16
<PAGE>

is  defined  by  section  414(m) of the  Code,  all of such  employers  shall be
considered a single Employer for purposes of applying the limitations of section
415 of the Code.

         4.5 FORM OF CONTRIBUTION. The amount of the Employer's contribution for
             --------------------
each  year  shall  be  paid  to the  Trust  either  in a  single  payment  or in
installments,  and  either in cash or  Employer  Stock,  or other  property,  as
determined by the Employer. Employer Stock and other property shall be valued as
of the time of the  contribution at its fair market value in accordance with the
requirements of the Code.

         4.6      PROHIBITION ON VOLUNTARY CONTRIBUTIONS.       This   Plan   is
                  --------------------------------------
noncontributory,  and no  articipant hereunder shall be required or permitted to
contribute to the Trust.

         4.7  TIME OF  CONTRIBUTION. The Employer shall pay its contribution for
              ---------------------
each  Taxable  Year to the  Trustee  within the time  prescribed  by law for the
filing of its Federal income tax return for such year,  including  extensions of
time.  Generally,  the Employer shall pay its contribution to the Trustee on the
business day closest to April 15th of each year.

                                    ARTICLE 5
                    ALLOCATIONS AND LIMITATIONS ON ALLOCATION
                    -----------------------------------------

         5.1  PARTICIPANT'S ACCOUNTS.  An Account or Accounts necessary to cause
              ----------------------
the  assets  of the  Plan to be  properly  allocated  shall be  established  and
maintained in the name of each  Participant.  The Plan  Administrator may add or
delete  Accounts  from  time  to  time,  and may  adopt  uniform  rules  for the
administration of accounts. A "Stock Account" and an "Other Investments Account"
may be  established  and  maintained  in  the  name  of  each  Participant  as a
sub-account  to  each  Participant's  Account.  Subject  to  the  provisions  of
subsection 5.1(e), allocations shall be made to the Accounts as follows:

              (a)  The Stock Account of each Participant shall be credited as of
the  Valuation  Date  with  the  Participant's  allocable  share  of  Stock,  as
determined under Section 5.2, including  fractional  shares,  purchased and paid
for by the Trust or  contributed  in kind by the Employer,  and stock  dividends
paid on Stock held in the Participant's Stock Account.

              (b)  The Other Investments  Account  of  each Participant shall be
credited as of the Valuation Date with the Participant's  allocable share of the
net income (or loss) of the Trust, cash dividends on Employer Stock allocated to
the Participant's  Stock Account and Employer  contributions which have not been
used to purchase  Employer Stock.  This Account will be debited for any payments
for purchases of Employer Stock.

                                       17

<PAGE>

         5.2  ALLOCATION FORMULA.
              ------------------
              (a)  For  each  Plan Year,  the Employer shall certify to the Plan
Administrator  and the Trustee the total  amount of  contributions  to the Plan,
setting forth  separately:  (i) the amount being  contributed for the benefit of
the  Participants;  (ii) each  Participant's  Compensation;  (iii) the aggregate
Compensation  of all  Participants  for the  Plan  Year;  and  (iv)  such  other
information  as may be required to enable the Trustee to properly  allocate  the
contributions and to file such tax and information returns as are necessary.

              (b)  As  soon as  administratively  possible  after receipt of the
information  set forth in subsection  (a) above,  the Plan  Administrator  shall
allocate the Employer's  contribution to all eligible Participants.  Any amounts
forfeited  by  Participants  pursuant to Section 7.3 shall be used to offset the
amount  contributed by the Employer.  The contribution  shall be allocated as of
each Adjustment Date in the same proportion that each Participant's Compensation
for the Plan Year bears to the total  Compensation of all  Participants for such
Plan Year; provided,  however, that Compensation earned prior to a Participant's
Entry Date shall not be  considered  for  purposes of  allocating  contributions
under the Plan. A Participant  must be employed on the last day of the Plan Year
to receive an allocation for such Plan Year,  unless the Participant  terminated
employment on account of (i) Disability;  (ii) death; or (iii)  retirement after
attainment of age 55 and completion of ten Years of Service.

                   (i)  Notwithstanding anything herein to the contrary,  if the
Plan  fails  to  meet  the  requirements  of  sections 401(a)(26),  410(b)(1) or
410(b)(2)(A)  of the  Code  and  the  Regulations  thereunder  because  Employer
contributions  have not been  allocated to a sufficient  number or percentage of
Employees for a Plan Year, then each Participant,  other than those Participants
who  terminate  employment  during the Plan Year prior to completion of at least
501  Hours of  Service,  shall be  entitled  to  receive  an  allocation  of the
Employer's contribution for that Plan Year.

                   (ii)  Nothing  in this  Section  shall  permit  the reduction
of a Participant's accrued benefit.  Therefore, any amounts that have previously
been  allocated  to   Participants   may  not  be  reallocated  to  satisfy  the
requirements  described in  subsection  (i) above.  In such event,  the Employer
shall make an  additional  contribution  equal to the amount those  Participants
entitled to receive an allocation  pursuant to subsection (i) above,  would have
received  had they been  included  in the  allocations,  even if it exceeds  the
amount which would be deductible  under section 404 of the Code.  Any adjustment
to the allocations pursuant to this subsection shall be considered a retroactive
amendment adopted by the last day of the Plan Year.

              (c)  The net income (or loss) of the Trust will be  determined not
less often than annually as of each Valuation Date, and a share thereof shall be
allocated  to each  Participant's  Account in the ratio to which the  balance of
such Participant's  Account on the preceding  Valuation Date bears to the sum of
the  Accounts of all  Participants  on that date.  Prior to such  allocation  of
income (or loss),  there shall be debited all distributions made during the Plan
Year from such Participant's Account, and all additions (other than allocations)
made during the Plan Year shall be credited to the  Participant's  Account.  The

                                       18
<PAGE>

net income (or loss)  includes  the  increase  (or  decrease) in the fair market
value of assets of the Trust,  interest,  dividends,  other  income and expenses
attributable to assets in the Accounts since the preceding  Valuation Date. Cash
dividends  on Employer  Stock  allocated  after the first month of the Plan Year
shall not share in any  earnings or losses of the Trust Fund for such Plan Year.
Earnings  or losses do not  include  the  interest  paid  under any  installment
contract for the purchase of the Employer Stock by the Trust.

              (d)    The   Plan   Administrator   shall   establish   accounting
procedures for the purpose of making the allocations, valuations and adjustments
to Participants'  Accounts  provided for in this Article.  Except as provided in
Regulation  section 54.4975-11(d),  Employer Stock acquired by the Plan shall be
accounted  for  as  provided  under  Regulation  section   1.402(a)-1(b)(2)(ii),
allocations of Employer Stock shall be made  separately for each class of stock,
and the Plan  Administrator  shall maintain adequate record of the cost basis of
all shares of Employer  Stock  allocated to each  Participant's  Stock  Account.
Should  the Plan  Administrator  determine  that the strict  application  of its
accounting  procedures  shall not result in an equitable  and  nondiscriminatory
allocation among  Participants,  it may modify its procedures for the purpose of
achieving an equitable and  nondiscriminatory  allocation in accordance with the
general concepts of the Plan.

         5.3  SPECIFIC  ASSETS.  The fact that an  allocation  shall be made and
              ----------------
credited to the Account of a Participant  shall not vest in such Participant any
right,  title,  or interest in and to any assets except at the time or times and
upon the terms and conditions expressly set forth in this Plan.

         5.4  SIMULTANEOUS EMPLOYMENT.
              -----------------------

              (a)   Notwithstanding   any   provision  of   this  Trust  to  the
contrary,  no provision herein shall be construed to mean that a contribution by
one  Employer  shall be allocated  to benefit a  Participant  of this Plan whose
membership arises by reason of his employment with another  Employer;  provided,
however,  an Employer making the  contribution may so provide at the time of the
contribution.  If a Participant is  simultaneously  employed by more than one of
the Employers  participating in this Plan and each Employer makes a contribution
on behalf of such  Participant,  his  benefits  arising  as a result of the dual
employment shall be separately computed for each Employer's contribution just as
though such Participant has a separate and distinct membership arising by reason
of his  employment  with each  Employer,  unless each Employer  shall specify an
alternate method of computing contributions at the time of the contributions.

              (b)   If  a   Participant  transfers  during  the  year  from  the
employment of one Employer to the employment of another Employer,  both of which
participate in the Plan, and there is no  unauthorized  absence between the date
employment  ceases with one  Employer  and the date  employment  commences  with
another Employer,  the amount to which such Participant is entitled hereunder on
account of his total  Compensation  for the year of transfer shall be determined
by including as part of his total compensation for such year all amounts paid to
such  Participant by each of the Employers  during the Taxable Year in which the
transfer occurred.

                                       19
<PAGE>

         5.5  TERMINATION  OF  EMPLOYMENT.  The  Employer  shall  certify to the
              ---------------------------
Trustee and the Plan Administrator upon the termination of the employment of any
Participant for any reason (including Normal  Retirement,  death or Disability),
the date of such  termination of employment and the reason for such  termination
of  employment.  The  Trustee  and the Plan  Administrator  shall rely upon such
certification  in  determining  the  extent  to  which  such  Participant  shall
participate in contributions and earnings of the Trust, and receive payment from
the Plan.

         5.6  DETERMINATION OF MAXIMUM ANNUAL ADDITION.
              ----------------------------------------

              (a)  The  maximum  Annual  Addition  credited  to a  Participant's
Account for any Limitation  Year shall not exceed the lesser of: (i) the Defined
Contribution  Dollar  Limitation as defined in Section 1.14 of the Plan, or (ii)
twenty-five  percent  (25%) of the  Participant's  compensation  as  defined  by
section  415(c)(3)  of the Code  for  such  Limitation  Year.  The  compensation
limitation  referred  to in (ii)  shall not apply to: (i) any  contribution  for
medical  benefits after  separation from service,  within the meaning of section
401(h)  or  419A(f)(2)  of the Code,  which is  otherwise  treated  as an Annual
Addition under section 415(l)(1) or section 419A(d)(2) of the Code.

              (b)   Prior   to  the  determination  of  a  Participant's  actual
compensation  for  a  Limitation  Year,  the  maximum  Annual  Addition  may  be
determined on the basis of the Participant's  estimated annual  compensation for
such Limitation Year. Such estimated annual  compensation shall be determined on
a  reasonable  basis  and shall be  uniformly  determined  for all  Participants
similarly  situated.   Any  Employer   contribution   (including  allocation  of
forfeitures)  based on  estimated  annual  compensation  shall be reduced by any
excess amounts carried over from prior years.

              (c)   As  soon  as is  administratively  feasible after the end of
the Limitation  Year, the maximum Annual Addition for such Limitation Year shall
be determined on the basis of the  Participant's  actual  compensation  for such
Limitation Year.

              (d)   If  the  Participant  does not participate in, and has never
participated  in another  qualified plan maintained by the Employer or a welfare
benefit  fund,  as  defined  in section  419(e) of the Code,  maintained  by the
Employer,  or an individual medical account,  as defined in section 415(1)(2) of
the Code,  maintained  by the  Employer,  which  provides an Annual  Addition as
defined in Section 5.7, the amount of Annual  Additions which may be credited to
the Participant's  account for any Limitation Year will not exceed the lesser of
the maximum  permissible amount or any other limitation  contained in this Plan.
If the Employer contribution that would otherwise be contributed or allocated to
the  Participant's  account would cause the Annual  Additions for the Limitation
Year to exceed  the  maximum  permissible  amount,  the  amount  contributed  or
allocated will be reduced so that the Annual  Additions for the Limitation  Year
will equal the maximum permissible amount, as provided in Section 5.7.

              (e)  If  a  short  Limitation  Year  is  created  because   of  an
amendment  changing  the  Limitation  Year to a different 12  consecutive  month
period,  the maximum  Annual  Addition will not exceed the Defined  Contribution
Dollar Limitation multiplied by the following fraction:

                                       20

<PAGE>

                  Number of months in the short Limitation Year
                  ---------------------------------------------
                                       12

         5.7 EXCESS ANNUAL  ADDITIONS.  If, as a result of a reasonable error in
             ------------------------
estimating the annual  Compensation of a Participant,  or a reasonable  error in
determining  the amount of  elective  deferrals  (within  the meaning of section
402(g)(3)  of the Code) that may be made with respect to any  individual  within
the limits of section 415 of the Code, the Annual  Additions with respect to any
Participant  for any Plan Year  would  exceed the  limitations  set forth in any
provision of this Plan, the excess amount shall be treated as follows:

              (a) Any excess Annual  Addition  shall be reallocated to the other
Participants  proportionately  on the  basis  that  Employer  contributions  are
allocated to the Participants  under the provisions of Section 5.2 to the extent
that  such   allocations  do  not  cause  the  Annual  Additions  of  any  other
Participant's Account to exceed the limitations of this Article 5.

              (b) To the extent that such  allocation or  reallocation of excess
amounts causes the  limitations of this Article 5 to be exceeded with respect to
all  Plan  Participants  for the  Plan  Year,  then  such  amounts  will be held
unallocated  in  a  suspense  account  (hereinafter,  a  "Section  415  Suspense
Account") to be allocated in the next Plan Year(s)  prior to the  allocation  of
any amount that would constitute an Annual Addition,  on the basis that Employer
contributions would be allocated pursuant to Section 5.2 of the Plan.

              (c) If a Section 415 Suspense  Account is in existence at any time
during a Limitation  Year pursuant to this Section,  it will not  participate in
the  allocation  of the Trust's  investment  gains and losses.  If a Section 415
Suspense  Account is in  existence  at any time during a  particular  Limitation
Year,  all amounts in the Section 415 Suspense  Account  must be  allocated  and
reallocated to  Participants'  accounts before any Employer  contribution or any
Employee  contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants,  and upon
termination  of the Plan,  any amount  remaining  in the  Section  415  Suspense
Account which is unallocable shall revert to the Employer.

         5.8    RULES RELATING TO EMPLOYER WHICH MAINTAINS ONE OR MORE QUALIFIED
                ----------------------------------------------------------------
DEFINED  CONTRIBUTION  PLANS IN ADDITION TO THIS PLAN.
-----------------------------------------------------
              (a) This  Section  applies  if,  in  addition  to this  Plan,  the
Participant  is  covered  under  another  qualified  defined  contribution  plan
maintained by the Employer, a welfare benefit fund, as defined in section 419(e)
of the Code,  maintained by the Employer,  or an individual medical account,  as
defined in section  415(1)(2) of the Code,  maintained  by the  Employer,  which
provides an Annual  Addition as defined in Section  1.7,  during any  Limitation
Year.  The Annual  Additions  which may be credited to a  Participant's  Account
under  this  Plan for any such  Limitation  Year  will not  exceed  the  maximum
permissible  amount reduced by the Annual Additions  credited to a Participant's
Account under the other plans and welfare  benefit funds for the same Limitation
Year. To the extent allowed by the Code, if the Annual Additions with respect to
the Participant under such other defined  contribution plans and welfare benefit

                                       21
<PAGE>

funds in the aggregate when added to the contributions under this Plan are equal
to or greater than the maximum  permissible  amount,  the Annual  Additions with
respect to this Plan shall be reduced to the extent necessary to comply with the
limits of section 415 of the Code.

              (b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the maximum  permissible  amount
for a Participant in the manner described in subsection 5.6(b).

              (c) As soon as is  administratively  feasible after the end of the
Limitation Year, the maximum  permissible amount for the Limitation Year will be
determined  on the  basis  of the  Participant's  actual  Compensation  for  the
Limitation Year.

              (d) If, pursuant to subsection 5.8(c) above, or as a result of the
allocation of forfeitures,  a Participant's Annual Additions under this Plan and
such other plans would  result in an excess  amount for a Limitation  Year,  the
excess amount will be deemed to consist of the Annual  Additions last allocated,
except  that  Annual  Additions  attributable  to  a  welfare  benefit  fund  or
individual  medical  account  will  be  deemed  to  have  been  allocated  first
regardless of the actual allocation date.

              (e) If an excess  amount  was  allocated  to a  Participant  on an
allocation  date of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the product of:

                   (i)  the total excess amount allocated as of such date, times

                   (ii)  the  ratio  of  the Annual  Additions  allocated to the
Participant for the Limitation Year as of such date under this Plan to the total
Annual Additions allocated to the Participant for the Limitation Year as of such
date under this and all the other qualified defined contribution plans.

              (f) Any excess amount  attributed to this Plan will be disposed in
the manner described in Section 5.7.

                                    ARTICLE 6
                             ADMINISTRATION OF FUNDS
                             -----------------------

         6.1  EXPENSES OF TRUST. The Employer may provide the Trustee with funds
              -----------------
to pay all  reasonable  expenses  necessarily  incurred  by the  Trustee  or the
Investment Manager in the  administration of the Trust. Any reasonable  expenses
of the Trust or the Investment Manager not paid by the Employer shall be paid by
the Trust.

         6.2  MAINTENANCE OF ACCOUNTS. The Plan Administrator shall maintain all
              -----------------------
necessary  Accounts in the name of each Participant,  and an annual statement of

                                       22
<PAGE>

each Participant's Accounts as of each Adjustment Date shall be furnished to the
Participant, or if the Participant is deceased, to his Beneficiary.

         6.3  INVESTMENT  IN  EMPLOYER  STOCK.  Any cash,  including  dividends,
              -------------------------------
received by the Trustee for the Account of any  Participant  or credited to such
Account may be invested  primarily in Employer Stock, to the extent  practicable
and prudent,  subject to the  limitations of Section 6.8, and further subject to
the liquidity  needs of the Plan as established in its funding  policy.  Pending
such investment,  the Trustee may retain cash uninvested  without  liability for
interest or may invest all or any part thereof in accordance with the provisions
of the Plan and Trust  Agreement.  All sales of Employer Stock (except  Employer
Stock held in a Suspense Account) by the Trustee will be charged pro rata to the
Accounts of the Participants.

         6.4  CREDITING OF ACCOUNTS.  All dividends, income  and  other property
              ---------------------
received by the Trustee applicable  to a Participant's Account shall be credited
to that Account.

         6.5      VOTING OF EMPLOYER STOCK.  Employer  Stock  shall  be voted in
                  ------------------------
accordance with Article 9 of the Trust Agreement.

         6.6  VALUATION.  The Trust Fund shall be valued by the Trustee annually
              ---------
at fair market value as of the close of business on each Valuation Date. On such
date,  the  earnings  and  losses  of the  Trust  shall  be  allocated  to  each
Participant's Account in the ratio that such Account bears to all Accounts. Fair
market value of Employer Stock that is not traded on an  established  securities
market  shall  be  determined  by the  Plan  Administrator  in  accordance  with
Department  of  Labor  regulations  (if  any)  based  on  the  appraisal  of  an
independent appraiser,  who meets requirements similar to those contained in the
Regulations  under  section  170(a)(1) of the Code.  An  independent  appraisal,
however, will not in and of itself be a good faith determination of value in the
case of a transaction  between the Plan and a  disqualified  person.  Value in a
transaction  between a Plan and a  disqualified  person must be determined as of
the date of the transaction;  and in all other cases, value may be determined as
of the most recent Valuation Date.

         6.7  DIVIDENDS. Any dividends received which are attributable to shares
              ---------
held in the  Participant's  Stock Account  shall be allocated to the  respective
Accounts  of  Participants  in  accordance  with the  number  of shares in their
respective individual Accounts as of the record date of the dividend.

         6.8  DIVERSIFICATION ELECTION.
              ------------------------

              (a) Each Qualified Participant,  as defined in Section 1.39, shall
be  permitted  to  direct  the Plan as to the  investment  of up to  twenty-five
percent (25%) of the value of his Account.  The  investment  direction  shall be
made  within  90  days  after  the  last  day  of  each  Plan  Year  during  the
Participant's  Qualified  Election Period, as defined in Section 1.38. Within 90
days  after  the  close of the last  Plan  Year in the  Participant's  Qualified
Election  Period,  a  Qualified  Participant  may  direct  the  Plan  as to  the
investment  of up to fifty  percent  (50%) in the aggregate of the value of such
Account  derived  from  Employer  Stock.  In order to make this  diversification
election,  the fair market  value of shares of  Employer  Stock  allocated  to a

                                       23
<PAGE>

Qualified  Participant's Account must be at least five hundred dollars ($500) as
of the Adjustment Date immediately preceding the date such Qualified Participant
is eligible to make the diversification election.

              (b)  The Participant's  directions  shall be  provided to the Plan
Administrator   in  writing,   in  a  form  subject  to  approval  by  the  Plan
Administrator,  and shall be  effectuated no later than 180 days after the close
of the Plan Year to which the direction applies.  In the alternative to offering
a diversification  election as provided above, the Plan  Administrator may adopt
uniform and  nondiscriminatory  procedures such that a Participant may elect for
the Plan to distribute  notwithstanding  section 409(d) of the Code) the portion
of the  Participant's  account that is covered by the  diversification  election
within  90 days  after  the  last day of the  Qualified  Election  Period.  Such
distribution  shall be subject to such  requirements  of the Plan concerning put
options as would  otherwise  apply to a distribution  of Employer Stock from the
Plan. Pursuant to such a distribution,  the Qualified Participant may direct the
Plan to transfer the portion of the Participant's account that is covered by the
election to another qualified plan of the Employer which accepts such transfers,
provided that such plan permits employee-directed investment and does not invest
in Employer Stock to a substantial  degree. Such transfer shall be made no later
than 90 days after the last day of the Qualified Election Period.

         6.9  PUT OPTION.
              ----------

              (a) If Employer  Stock is  distributed  to a Participant  and such
Employer Stock is not readily  tradable on an established  securities  market, a
Participant has a right to require the Employer to repurchase the Employer Stock
distributed to such Participant under a fair valuation formula. Such stock shall
be subject to the provisions of subsection (c) below.

              (b) Employer Stock which is not publicly traded when  distributed,
or if it is subject to a trading limitation when distributed, must be subject to
a put  option.  For  purposes  of this  Section,  a "trading  limitation"  on an
Employer Stock is a restriction under any Federal or state securities law or any
regulation  thereunder,  or an agreement  (not  prohibited by the Code or ERISA)
affecting the Employer  Stock which would make the Employer  Stock not as freely
tradable as stock not subject to such restriction.

              (c) The put option must be exercisable  only by a Participant,  by
the  Participant's   donees,  or  by  a  person  (including  an  estate  or  its
distributee)  to whom the  Employer  Stock  passes by reason of a  Participant's
death. Under this Section, Participant means a Participant or former Participant
and the  Beneficiaries of the Participant or former  Participant under the Plan.
The put  option  must  permit a  Participant  to put the  Employer  Stock to the
Employer.  Under no  circumstances  may the put  option  bind the Plan or Trust.
However,  it shall  grant the Plan or Trust an option to assume  the  rights and
obligations of the Employer at the time that the put option is exercised.  If it
is known at the time a loan is made that  Federal or state law will be  violated
by the  Employer's  honoring  such put  option,  the put option  must permit the
Employer Stock to be put, in a manner consistent with such law, to a third party
(e.g.,  an  affiliate of the  Employer or a  shareholder  other than the Plan or
Trust) that has substantial net worth at the time the loan is made and whose net
worth is reasonably expected to remain substantial.

                                       24
<PAGE>

         The put option  shall  commence  as of the day  following  the date the
Employer  Stock  is  distributed  to the  former  Participant  and  end 60  days
thereafter, and if not exercised within such 60 day period, an additional 60 day
period shall commence in the subsequent Plan Year following the new valuation of
Employer  Stock,  but in no event shall such  additional 60 day period  commence
later than 15 months  following the date the stock was distributed to the former
Participant  (or  later  than  such  other  period as  provided  in  regulations
promulgated by the Secretary of the Treasury).

         The put option is  exercised  by the holder  notifying  the Employer in
writing that the put option is being exercised;  the notice shall state the name
and address of the holder and the number of shares to be sold. The period during
which a put option is  exercisable  does not include any time when a distributee
is unable to exercise it because the party bound by the put option is prohibited
from  honoring it by  applicable  Federal or state law. The price at which a put
option must be  exercisable  is the value of the Employer  Stock  determined  in
accordance  with Section 6.6.  Payment  under the put option  involving a "Total
Distribution"  shall  be  paid  in  substantially   equal  monthly,   quarterly,
semiannual or annual installments over a period certain beginning not later than
30 days  after the  exercise  of the put option and not  extending  beyond  five
years.  The  deferral  of payment  is  reasonable  if  adequate  security  and a
reasonable  interest rate on the unpaid  amounts are provided.  The amount to be
paid under the put option not involving  installment  distribution  must be paid
not later than 30 days after the exercise of the put option. Payment under a put
option  must  not  be  restricted  by the  provisions  of a  loan  or any  other
arrangement,  including the terms of the Employer's  articles of  incorporation,
unless so required by applicable state law.

         For purposes of this Section, "Total Distribution" means a distribution
to a  Participant  or former  Participant  within one taxable year of the entire
vested Account of the Participant.

              (d)  An arrangement  involving  the Plan that creates a put option
must not provide for the  issuance of put options  other than as provided  under
this Section.  The Plan (and the Trust Fund) must not otherwise  obligate itself
to acquire Employer Stock from a particular holder thereof at an indefinite time
determined upon the happening of an event such as the death of the holder.

                                    ARTICLE 7
                                    BENEFITS
                                    --------

         7.1  RETIREMENT.
              ----------

              (a)  Normal  Retirement.  As of the  Normal  Retirement  Date of a
                   ------------------
Participant,  he may retire from the employ of the  Employer.  If a  Participant
continues in the employment of the Employer after his Normal Retirement Date, he
shall  continue to be treated in all respects as a Participant  until his actual
retirement.

                                       25
<PAGE>

              (b) Distributions Upon Retirement. No retirement benefits shall be
                  -----------------------------
payable to a Participant  until his actual  termination of  employment,  and all
retirements  shall be effective as of the actual date of termination.  As of the
Adjustment  Date  coinciding  with or following a  Participant's  termination of
employment on account of retirement on or after his Normal  Retirement  Age, all
amounts  then  credited to such  Participant's  Account  shall be paid to him or
applied for his benefit as soon as administratively  possible in accordance with
Sections 7.5 and 7.6.

         7.2  DISABILITY.  Upon the  Disability  of a  Participant  while in the
              ----------
employment of the Employer, the total balance of the Participant's Account as of
the Adjustment Date coinciding with or immediately  following the  determination
of Disability  shall be  distributed  to said  Participant  in  accordance  with
Sections 7.5 and 7.6.

         7.3  TERMINATION OF EMPLOYMENT
              -------------------------

              (a) Subject to the provisions of subsections 7.3(b) and (c) below,
whenever a  Participant  ceases to be an  Employee of the  Employer  for reasons
other than  Disability,  retirement on or after Normal  Retirement Age, or death
(hereinafter  referred  to  as a  "Terminating  Participant"),  the  Terminating
Participant  shall  be  paid  his  vested  Account  as of  the  Adjustment  Date
coinciding with or immediately  following his  termination of employment,  or as
soon as administratively possible thereafter.  The Terminating Participant shall
be vested in all amounts  credited to his Account  based on his Years of Service
according to the following schedule:

               Years of Service               Vested Percentage
               ----------------               -----------------
                      1                              20%
                      2                              40%
                      3                              60%
                      4                              80%
                  5 or more                         100%

              (b) If the value of the Terminating  Participant's  Account at the
time of his termination of employment is not in excess of $5,000,  and has never
exceeded $5,000, the Plan Administrator shall cause to be paid out in a lump sum
the entire value of such  Participant's  vested Account in full discharge of the
Plan's   obligations  to  the  Participant   (hereinafter   referred  to  as  an
"involuntary  cash-out").  The distribution of any involuntary cash-out shall be
made as of the Adjustment  Date  coinciding  with or  immediately  following the
Terminating   Participant's   termination   of   employment,   or  as   soon  as
administratively possible thereafter. For purposes of this Section, if the value
of a  Participant's  Account is zero,  the  Participant  shall be deemed to have
received  a  distribution  of  such  vested  Account  upon  his  termination  of
employment.

              (c)  If the value of a Terminating Participant's vested Account at
the time of his termination of employment  exceeds $5,000,  the Participant must

                                       26
<PAGE>

consent to a distribution for it to be paid by the Plan  Administrator  prior to
the later of the Participant's attainment of Normal Retirement Age, or age 65.

              (d) As of the  Adjustment  Date  coinciding  with  or  immediately
following  the  earliest  to  occur  of  the  Terminating   Participant's  fifth
consecutive Break in Service,  or distribution of the Terminating  Participant's
vested Account,  the nonvested  Account of the  Participant  shall be forfeited.
Such amount shall be held in a forfeiture  suspense account until it is utilized
to offset Employer contributions to the Plan, pursuant to Section 5.2(b)

              (e) If a  Terminating  Participant  who has  received  a lump  sum
distribution  of his vested Account is  subsequently  reemployed by the Employer
after having  incurred  five  consecutive  Breaks in Service,  then the Employer
shall  disregard  all service  performed by such  Employee for which he received
such  lump sum  distribution.  If the  Terminating  Participant  returns  to the
employment of the Employer prior to incurring five consecutive Breaks in Service
and repays the amount of the lump sum  distribution  within  five years from the
date of subsequent reemployment, his nonvested Account shall be reestablished by
the Employer and the  Participant's  pre-break  service with respect to which he
received the distribution  shall be added to his post-break service for purposes
of determining  his vested  Account.  If a Terminating  Participant is deemed to
receive a  distribution  pursuant to subsection (b) above,  and the  Terminating
Participant  resumes  employment  covered under this Plan before  incurring five
consecutive  Breaks  in  Service,  upon  the  reemployment  of such  Terminating
Participant, his nonvested Account will be restored to the amount on the date of
such deemed distribution.

              (f) If a Terminating  Participant,  who did not receive a lump sum
distribution  returns to the  employment of the Employer  before  incurring five
consecutive  Breaks in Service  after  incurring a forfeiture  of his  nonvested
Account, then the nonvested portion of his Account shall be reestablished by the
Employer.

              (g) If a Terminating Participant whose Account was not distributed
in a lump sum shall return to the employ of the Employer prior to incurring five
consecutive Breaks in Service,  then the Participant's  vested percentage in his
pre-break Account shall be increased as a result of his post-break service,  and
only a single Account need be maintained.  If such Terminating Participant shall
return to the employ of the Employer after incurring five consecutive  Breaks in
Service, then the Participant's vested percentage in his pre-break Account shall
not be  increased  as a  result  of his  post-break  service,  however  for  his
post-break  Account both  pre-break and  post-break  service shall be counted if
either (i) the  Terminating  Participant  had a  nonforfeitable  interest in his
Account at the time of returning to service;  or (ii) upon  returning to service
the number of consecutive  Breaks in Service is less than the number of Years of
Service; and provided further that separate Accounts shall be maintained for the
Participant's pre-break and post-break Account.

              (h) If a Terminating  Participant  incurs a Break in Service,  and
thereafter  returns to the employ of the Employer,  Years of Service before such
Break in Service  shall be taken into  account for purposes of this Section 7.3,
as well as for any other  purposes  of the Plan only after the  Participant  has
completed  one Year of Service  following  his return to  service,  but once the

                                       27
<PAGE>

Participant  completes one Year of Service  following his return to  employment,
service shall be calculated  retroactively to the date the Participant  returned
to employment.

              (i) For purposes of participation  and vesting,  if an Employee or
Participant  does not have any vested right in his Account derived from Employer
contributions,  Years of Service  completed by the Participant or Employee prior
to  incurring  a  Break  in  Service  shall  be  disregarded  if the  number  of
consecutive Breaks in Service exceeds the greater of five years or the number of
Years of Service the  Participant  or Employee  completed  prior to  incurring a
Break in Service;  however,  the aggregate number of Years of Service  completed
before such Break in Service shall not be deemed to include any Years of Service
not required to be taken into account by reason of any prior Breaks in Service.

              (j)  Any  amounts  forfeited  by a  Participant  pursuant  to this
Section 7.3 shall be used to offset the Employer's contributions to the Plan.

         7.4  DEATH.
              -----

              (a) If a Participant dies prior to termination of employment,  the
Participant's   Beneficiary   shall   become   fully   vested  in  the  deceased
Participant's  Account.  If a Participant or former Participant should die after
distributions have begun, but prior to the complete distribution of his Account,
then  the  balance  of  the  Participant's  Account  as of the  Adjustment  Date
coinciding with or immediately following the date of death, shall be paid to the
deceased  Participant's   Beneficiary,   unless  an  alternate  Beneficiary  was
designated  pursuant to the original  distribution  election.  The death benefit
shall be distributed to the deceased Participant's  Beneficiary in a single lump
sum  payment  and shall be paid as of the  Adjustment  Date  coinciding  with or
immediately following the date of death.

              (b) At any time,  and from time to time,  within  the  limits  set
forth in Section 1.8,  each  Participant  shall have the right to designate  the
Beneficiary  to receive the death  benefit  and to revoke any such  designation,
provided,  that if the Participant  shall be married,  he can name someone other
than his spouse as the  recipient of his death  benefit only with the consent of
his  spouse.  The  spousal  consent  must be in the form of a waiver  which must
acknowledge  the  effect of the waiver  and must be either  witnessed  by a Plan
representative  or acknowledged  before a notary public.  If a Participant shall
die  without  leaving  a  Beneficiary  and no  designation  is on file  with the
Employer at the time of the death of the Participant,  or if such designation is
not effective for any reason, as determined by the Employer,  then the surviving
spouse of the  Participant  shall be  conclusively  deemed to be the Beneficiary
designated to receive such death benefit,  and the distribution shall be made in
the manner selected by the  Beneficiary,  and if the  Participant  shall have no
surviving  spouse,   the  executor  or  administrator  of  the  estate  of  such
Participant shall be designated to receive such death benefit.

              (c) The  Employer  shall  notify  the  Trustee  of the  death of a
Participant  or  former  Participant  and  shall  furnish  the  Trustee  with an
authenticated copy of the Beneficiary designation for such deceased Participant.
The Trustee  shall rely upon such  designation  for the purpose of  distributing
death benefits hereunder.

                                       28
<PAGE>

              (d) The Employer may require such proof of death and such evidence
of the right of any  person to  receive  distributions  of the  benefits  of the
deceased Participant as it may deem advisable.

         7.5   METHOD  OF   DISTRIBUTION  OF  BENEFITS.  The  benefits  provided
               ---------------------------------------
hereunder shall be distributed in a single lump sum payment.

         No earnings or losses  shall be credited or debited to a  Participant's
Account  between the end of the Plan Year date as of which his Account is valued
for payment and the date of actual payment in the following Plan Year.

         7.6  FORM OF DISTRIBUTION.
              --------------------

              (a) If the Employer's  charter or bylaws restrict the ownership of
substantially all of all outstanding  securities of the Employer to Employees or
to a trust described in section 401(a) of the Code, all distributions under this
Plan  shall  be  in  cash;  any  other  provisions  of  the  Plan  contemplating
distributions  in the form of stock,  including  the  remainder of this Section,
shall not apply.

              (b) Subject to the  restrictions in the Plan and if subsection (a)
above is not applicable,  the Plan Administrator may elect to make distributions
of such Participant's benefits in cash, in Stock, or in any combination thereof,
provided  any form of  distribution  shall be  selected  on a  nondiscriminatory
basis; and provided  further,  that, before making any distributions of benefits
to a  Participant  or his  Beneficiary  in  any  form  other  than  Stock,  such
Participant  or  Beneficiary  shall  be  given an  option  to  elect to  receive
distribution of such benefits in the form of Stock. The Plan Administrator shall
establish  procedures  for the  conversion  or redemption at the election of the
Participant.  Said  option to receive  Stock  shall be in  writing  and shall be
exercisable  for a period of 30 days  following the date of delivery  thereof to
said Participant or Beneficiary.

              If distribution of Stock is required and if Stock is not available
for purchase by the Trustee, then the Trustee shall hold such balance until such
Stock is acquired and then make the required distribution. The Trustee will make
distributions  from the Trust only on instructions from the Plan  Administrator.
The distribution of shares of Stock to Participants shall be deferred until five
days after the delivery by the Participant of a signed  statement,  in such form
as the Plan Administrator  shall require,  which statement,  if determined to be
necessary  by the Plan  Administrator,  may contain the  acknowledgment  of such
Participant that:

                   (i) The  Participant  is  acquiring  the  shares  for his own
Account and not with a view to or for sale in connection  with any  distribution
thereof;

                   (ii) The  shares  are being  acquired  in a  transaction  not
involving a public  offering and without being  registered  under the Securities
Act of 1933,  as amended  (the "'33 Act"),  and that such shares may not be sold

                                       29
<PAGE>

except in a transaction  that complies with the  requirements of the '33 Act and
the Rules and Regulations promulgated thereunder;

                   (iii) The  certificates  evidencing the shares will contain a
legend setting forth or referring to the restriction  against transfer set forth
in this Plan and such other restrictions to which the transfer of the shares may
be subject by the provisions of the Articles of  Incorporation or by-laws of the
Employer applicable to all other shares of the same class;

                   (iv) The shares are being  acquired in a private  transaction
without  being  registered  under the '33 Act and the  Employer  has neither the
obligation nor the intention to effect any such  registration and therefore such
shares  must be held by the  Participant  indefinitely  and  without  any market
therefor unless the shares are  subsequently  registered under the '33 Act or an
exemption from the registration provisions of the '33 Act is available;

                   (v) The  Participant has been advised that Rule 144 under the
'33 Act (which Rule permits sales of securities in limited amounts in accordance
with the terms and  conditions of such Rule) may not be applicable to resales of
such shares,  and that no assurance has been given the Participant as to whether
or when there may be any  registration  statement under the '33 Act covering the
shares being  distributed,  or whether or when such Rule or any other  exemption
from the requirements for registration under the '33 Act might be applicable.

              (c) The Plan Administrator  shall notify the Trustee in writing of
the  separation  from  service  of any  Participant  and the manner in which the
benefits of such  Participant  are to be paid.  The Trustee shall rely upon such
notice for the purpose of paying benefits hereunder.

         7.7  Commencement  of  Distribution  of Benefits.  Distribution  to any
Participant of his Account must commence  within sixty (60) days after the close
of the Plan Year in which the latest of the following events shall occur:

              (a) The Participant attains 65 years of age; or

              (b) The tenth  anniversary of such  Participant's  commencement of
participation in the Plan occurs; or

              (c) There is an actual termination of the Participant's employment
with the Employer.

         The purpose of this Section is to provide a limitation,  subject to the
incidental  death  benefit  rules,  on the  latest  date upon  which  payment of
benefits  under the Plan can  commence.  This Section  shall not pre-empt  other
provisions of the Plan which require or permit payment of benefits at an earlier
date.

                                       30
<PAGE>

         7.8  LIMITATION ON THE DISTRIBUTION OF BENEFITS.
              ------------------------------------------

              (a)  The   requirements   of  this  Section  shall  apply  to  any
distribution  of a  Participant's  interest  and will take  precedence  over any
inconsistent provisions of the Plan.

              (b) All  distributions  required  under  this  Article  7 shall be
determined and made in accordance  with the proposed  regulations  under section
401(a)(9) of the Code,  including the minimum  distribution  incidental  benefit
requirement of section 1.401(a)(9)-2 of the proposed regulations.

              (c) The entire  interest of a Participant  must be  distributed or
begin to be distributed no later than the Participant's Required Beginning Date,
as defined in subsection (e), below.

              (d) As of the first distribution calendar year, distributions,  if
not made in a single-sum, may only be made over one of the following periods (or
a combination thereof);

                   (i) the life of the Participant,

                   (ii) the life of the Participant and a Beneficiary,

                   (iii)  a  period  certain  not  extending   beyond  the  life
expectancy of the Participant, or

                   (iv) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Beneficiary.

              (e) The "Required  Beginning  Date" of a Participant  who is not a
five percent (5%) owner is the first day of April of the calendar year following
the calendar  year in which the later of  retirement or attainment of age 70 1/2
occurs.  The Required Beginning Date of a Participant who is a five percent (5%)
owner during any year  beginning  after  January 30,  1979,  is the first day of
April following the later of:

                   (i) the calendar year in which the Participant attains age 70
1/2, or

                   (ii) the earlier of the  calendar  year with or within  which
ends the Plan Year in which the  Participant  becomes a five percent (5%) owner,
or the calendar year in which the Participant retires.

              A Participant is treated as a five percent (5%) owner for purposes
of this subsection,  if such Participant is a five percent (5%) owner as defined
in section 416(i) of the Code  (determined in accordance with section 416(i) but
without  regard to whether  the Plan is  top-heavy)  at any time during the Plan
Year ending with or within the calendar  year in which such owner attains age 66
1/2 or any subsequent Plan Year.

                                       31
<PAGE>

              Once  distributions  have begun to a five percent (5%) owner under
this subsection,  they must continue to be distributed,  even if the Participant
ceases to be a five percent (5%) owner in a subsequent year.

         7.9  RESTRICTIONS ON METHODS OF DISTRIBUTION. Notwithstanding any other
              ---------------------------------------
provision  of the  Plan,  distribution  of  benefits  payable  to a  Participant
pursuant  to the  Plan  shall  be  subject  to  the  following  restrictions  in
accordance with section 401(a)(9) of the Code and the Regulations thereunder:

              (a) If a  Participant  dies  before  his entire  Account  has been
distributed,  then the undistributed  portion of his Account must be distributed
to the  Participant's  Beneficiary  using a method of  distribution  at least as
rapid as the method being used at the date of the Participant's death.

              (b) If a Participant  dies before the  distribution of any portion
of his Account begins,  the  distribution of the  Participant's  entire interest
shall be  completed  by January 30 of the  calendar  year  containing  the fifth
anniversary of the Participant's death.

              (c) For  purposes of this  Section,  any amount paid to a child of
the Participant  will be treated as if it had been paid to the surviving  spouse
if the amount become payable to the surviving  spouse when the child reaches the
age of majority.

              (d)  For  the  purposes  of  this  Section,   distribution   of  a
Participant's  interest is  considered  to begin on the  Participant's  Required
Beginning Date.

         7.10 DIRECT ROLLOVERS.
              ----------------

              (a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section, a Distributee
may elect, at the time and in the manner  prescribed by the Plan  Administrator,
to have any portion of an Eligible  Rollover  Distribution  paid  directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

              (b) The following definitions apply to this Section:

                   (i)  "Eligible Rollover Distribution."  An eligible  rollover
distribution  is any  distribution  of all or any  portion of the balance to the
credit of the distributee,  except that an eligible  rollover  distribution does
not  include any  distribution  that is one of a series of  substantially  equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the  distributee or the joint lives (or joint life  expectancies)
of the  distributee  and  the  distributee's  designated  beneficiary,  or for a
specified  period of ten years or more;  any  distribution  to the  extent  such
distribution is required under section 401(a)(9) of the Code; and the portion of
any  distribution  that is not  includible in gross income  (determined  without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).

                                       32
<PAGE>

                   (ii) "Eligible  Retirement Plan." An eligible retirement plan
is an individual  retirement account described in section 408(a) of the Code, an
individual  retirement  annuity  described  in  section  408(b) of the Code,  an
annuity  plan  described  in section  403(a) of the Code,  or a qualified  trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.

                   (iii)  "Distributee."  A distributee  includes an Employee or
former  Employee.  In addition,  the Employee's or former  Employee's  surviving
spouse and the  Employee's or former  Employee's  spouse or former spouse who is
the alternate payee under a qualified  domestic  relations  order, as defined in
section 414(p) of the Code, are distributees  with regard to the interest of the
spouse or former spouse.

                   (iv) "Direct Rollover." A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.

         7.11 QUALIFIED DOMESTIC RELATIONS ORDERS.
              -----------------------------------

              (a)  Notice.  Should the Plan  receive a judgment, decree or order
                   ------
entered or enforceable  pursuant to North Carolina  domestic  relations law, and
relating to the provision of child support, alimony payments or marital property
rights of a spouse, child or other dependent of the Participant, then:

                   (i)  The  Plan   Administrator   shall  promptly  notify  the
Participant  and any Alternate Payee of the receipt of such order and the Plan's
procedures for determining its qualified status, and

                   (ii) The Plan  Administrator  within a reasonable  time shall
determine the qualified status of such order as set forth in subsection (b), and
notify the Participant and each Alternate Payee upon such determination.

              (b) Requirements of Qualified Domestic Relations Order. Subject to
                  --------------------------------------------------
any regulations  promulgated by the Treasury Department,  the Plan Administrator
shall  determine  whether a domestic  relations  order  constitutes  a Qualified
Domestic  Relations  Order by  determining  whether the  following  requirements
prescribed in section 414(p) of the Code have been met. The order must:

                   (i) Create or recognize  the  existence  of, or assign to any
spouse,  former spouse,  child or other dependent of a Participant  (hereinafter
referred to as an "Alternate  Payee") the right to receive all or any portion of
the benefits payable with respect to a Participant under the Plan;

                   (ii) Clearly specify the following facts:

                                       33
<PAGE>

                    (A)  The  name  and  last  known  mailing  address  of  each
Participant and Alternate Payee covered by the order,

                    (B) The amount or  percentage,  or the manner of determining
same,  of the  Participant's  benefits  to be paid by the Plan to the  Alternate
Payee,

                    (C) The  number  of  payments  or  period to which the order
applies, and

                    (D) Each plan to which the order applies.

                   (iii)  Not require  the Plan to  provide  any type or form of
benefit not otherwise provided by its terms, or provide an increased benefit, or
be in conflict with the payment provisions of any order previously determined to
be a  Qualified  Domestic  Relations  Order.  An  order,  however,  shall not be
considered to provide any type or form of benefit not otherwise provided, merely
because the order requires payment be made to an Alternate Payee on or after the
date on which the Participant attains the earliest retirement age without regard
to whether the Participant  has separated from service;  such payments are to be
computed  as if the  Participant  retired  on the date on which  payments  begin
pursuant to the order, but shall take into account only the present value (using
a five-percent  (5%) interest rate) of the benefits accrued and not any Employer
subsidy for early retirement and, furthermore,  can be paid in any form except a
joint and survivor annuity.

              (c)  Treatment Pending  Determination.  During any period in which
                   --------------------------------
the  issue  of  whether  a  domestic  relations  order is a  Qualified  Domestic
Relations Order is being determined pursuant to this section, a separate account
in the Plan shall be  maintained  consisting of the amount which would have been
payable  to the  Alternate  Payee  during  such  period  if the  order  had been
determined to be qualified.  If within 18 months the order is determined to be a
Qualified  Domestic  Relations Order,  the segregated  amount (plus any interest
thereon) shall be paid to the Alternate  Payee. If within 18 months the issue is
not resolved,  or the order is determined not be a Qualified  Domestic Relations
Order,  then the segregated  amount (plus any interest thereon) shall be paid or
re-credited to the Account of the person or persons who would have been entitled
to such amounts if there had been no order. Any determination that an order is a
Qualified  Domestic  Relations  Order which is made  subsequent  to the 18 month
period shall be applied prospectively only.

              (d)  Application  to   Distribution.   All  rights  and  benefits,
                   ------------------------------
including elections,  provided to a Participant in this Plan shall be subject to
the rights  afforded to any Alternate  Payee  pursuant to the provisions of this
Section.

              (e)  Time and Form of Distribution.  Notwithstanding  anything  in
                   -----------------------------
this  Plan  to  the  contrary,  an  Alternate  Payee  shall  be  eligible for  a
distribution under the following terms:

                   (i)  The  Plan   Administrator,   at  the   election  of  the
Participant,  shall direct the Trustee to distribute  to an Alternate  Payee his

                                       34
<PAGE>

interest in the Participant's  Account as determined by the "Qualified  Domestic
Relations Order" within 18 months of the date said order is received.

                   (ii)  The  distribution  shall be made in a  lump-sum  if the
amount  required to be distributed is less than ten percent (10%) of liquid plan
assets, as determined by the Trustee.

                   (iii) If (ii) does not apply, the distribution  shall be made
in five substantially equal, annual installments.

                   (iv) Distributions  shall only be made to the extent that the
amounts to be distributed have been accumulated in the Participant's Account for
at least two years or the Participant has completed five years of  participation
in the Plan.

                   (v) If the amount payable to the Alternate Payee exceeds five
thousand  dollars  ($5,000),  no amount may be  distributed  without the written
consent of the "Alternate Payee."

                   (vi) If the Alternate Payee dies prior to the distribution of
his entire  interest in the Plan, any remainder  shall be paid to his estate not
later than 60 days following the end of the Plan Year in which he died.

                   (vii)  Balances  held in the  account of an  Alternate  Payee
shall be treated as a  segregated  account  charged  with its own  earnings  and
losses and subject to the investment direction of the Alternate Payee.

         7.12  DEFINITIONS.  For  purposes  of  this  Article  7 , the following
               -----------
definitions shall apply:

              (a) "Applicable  life  expectancy"  shall mean the life expectancy
(or joint and last survivor expectancy) calculated using the attained age of the
Participant (or Beneficiary) as of the Participant's (or Beneficiary's) birthday
in the applicable  calendar year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated.  If life expectancy
is  being  recalculated,  the  applicable  life  expectancy  shall  be the  life
expectancy as so recalculated.  The applicable  calendar year shall be the first
distribution  calendar year, and if life expectancy is being recalculated,  such
succeeding calendar year.

              (b)  "Beneficiary"  shall mean the individual who is designated as
the  Beneficiary  under  Section  1.8 of the  Plan in  accordance  with  section
401(a)(9) and the proposed regulations thereunder.

              (c)  "Distribution  calendar  year" shall mean a calendar year for
which a minimum distribution is required. For distributions beginning before the
Participant's  death, the first distribution  calendar year is the calendar year
immediately  preceding  the  calendar  year  which  contains  the  Participant's
Required  Beginning Date. For  distributions  beginning after the  Participant's

                                       35
<PAGE>

death,  the  first  distribution  calendar  year is the  calendar  year in which
distributions are required to begin pursuant to Section 7.7.

              (d) "Life  expectancy"  shall mean life expectancy,  and joint and
last survivor expectancy are computed by use of the expected return multiples in
Tables  V and  VI of  section  1.72-9  of the  income  tax  regulations.  Unless
otherwise  elected  by  the  Participant  (or  spouse,  in  the  case  of  death
distributions)   by  the  time   distributions   are  required  to  begin,  life
expectancies shall be recalculated annually.  Such election shall be irrevocable
as to the Participant (or spouse) and shall apply to all subsequent  years.  The
life expectancy of a nonspouse Beneficiary may not be recalculated.

              (e) "Participant's benefit" shall mean:

                   (i) The Account as of the last valuation date in the calendar
year immediately  preceding the distribution  calendar year (valuation  calendar
year) increased by the amount of any  contributions or forfeitures  allocated to
the Account as of dates in the valuation  calendar year after the valuation date
and decreased by  distributions  made in the  valuation  calendar year after the
valuation date.

                   (ii) For purposes of subsection (i) above,  if any portion of
the minimum distribution for the first distribution calendar year is made in the
second distribution  calendar year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second distribution calendar year
shall  be  treated  as  if  it  had  been  made  in  the  immediately  preceding
distribution calendar year.

                                    ARTICLE 8
                              ACCOUNTING PROCEDURES
                              ---------------------

         8.1  TRUST ACCOUNTS.
              --------------

              (a) The  Trustee  shall  establish  for each  Participant  a Stock
Account,  as provided in  subsection  5.1(a),  which shall be credited  with the
total  number  of  whole  and  fractional  shares  of  Stock  allocated  to such
Participant and stock dividends paid on such Stock.

              (b) The  Trustee  shall  establish  as part of the  Trust an Other
Investments  Account, as provided in subsection 5.1(c),  which shall be credited
with all cash and assets,  other than Employer Stock, and the net income and net
loss of the Trust, and which shall be debited with payments made by the Trust to
purchase Employer Stock.

              (c) The Trustee shall  establish  such other  Accounts as the Plan
Administrator shall require from time to time.

                                       36
<PAGE>

                                    ARTICLE 9
                    ADOPTION, AMENDMENT, TERMINATION, MERGER,
                    -----------------------------------------
                       CONSOLIDATION OR TRANSFER OF ASSETS
                       -----------------------------------

         9.1  AMENDMENT OF PLAN.
              -----------------

              (a) The Board of Directors shall have the right to amend the Plan,
including the agreement establishing the Trust, in whole or in part, at any time
and from time to time, by duly-adopted  resolution,  including amending the Plan
so  that it is no  longer  designed  to  invest  primarily  in  Employer  Stock;
provided, however, that the Plan Administrator shall have the right to amend the
Plan so long as such amendment does not materially  increase the Employer's cost
under the Plan or materially change the nature of the Plan.  However,  no change
may be made which  shall  vest in the  Employer,  directly  or  indirectly,  any
interest, ownership, or control of any of the present or subsequent funds of the
Trust or in any of the present or  subsequent  funds set aside for  Participants
pursuant to the Plan;  and no amendment  shall  increase or change the duties or
the liabilities of the Trustee without the Trustee's specific consent thereto in
writing. No portion of the funds of the Trust, by reason of any amendment, shall
be used for, or diverted to  purposes  other than for the  exclusive  benefit of
Participants and their Designated  Beneficiaries or for administration  expenses
of the Plan.

              (b) No amendment to the Plan shall be effective to the extent that
it has the effect of decreasing a Participant's accrued benefit. Notwithstanding
the preceding  sentence,  a  Participant's  Account may be reduced to the extent
permitted under section 412(c)(8) of the Code. For purposes of this Section 9.1,
a Plan amendment which has the effect of decreasing a  Participant's  Account or
eliminating an optional form of benefit,  with respect to benefits  attributable
to  service  before the  amendment,  shall be  treated  as  reducing  an accrued
benefit.  Furthermore,  if the vesting  schedule of the Plan is amended,  in the
case of an  Employee  who is a  Participant  as of the  later of the  date  such
amendment  is  adopted  or the date it  becomes  effective,  the  nonforfeitable
percentage  (determined  as of such  date)  of such  Participant's  right to his
Employer-derived  accrued benefit will not be less than his percentage  computed
under the Plan without regard to such amendment.

              (c) In  addition,  no such  amendment  shall  have the  effect  of
terminating  the  protections  and rights set forth in Section 6.9,  unless such
termination shall then be permitted under the applicable  provisions of the Code
and  Regulations.  For purposes of this Section,  a Plan amendment which has the
effect  of  (i)  eliminating  or  reducing  an  early  retirement  benefit  or a
retirement-type  subsidy,  (ii)  eliminating  an  optional  form of benefit  (as
provided in  Regulations)  or (iii)  restricting,  directly or  indirectly,  the
benefit  provided to any Participant  prior to the amendment shall be treated as
reducing  the amount  credited  to the account of a  Participant  except that an
amendment  described  in clause (ii) (other than an  amendment  having an effect
described in clause (i)) shall not be treated as reducing the amount credited to
the Account of a Participant to the extent so provided in Regulations.  Any Plan
amendment  which modified  distribution  options in a  nondiscriminatory  manner
shall not be  treated  as  reducing  the  amount  credited  to the  Account of a
Participant.

                                       37
<PAGE>

              (d) Subject to the foregoing  limitations,  the Board of Directors
shall have the power to amend the Plan and Trust  Agreement  in any manner which
is deemed to be desirable, including, but not by way of limitation, the right to
increase or diminish contributions  hereunder, to change or modify the method of
allocation  of such  contributions,  to change any  provisions  relating  to the
administration  of the  Plan,  and to  change  any  provisions  relating  to the
distribution or payment, or both, of any of the assets of the Trust.

         9.2 ELECTION OF PRIOR  VESTING.  No  amendment to the vesting  schedule
             --------------------------
shall be  permitted  to decrease  the vested  amount of the  benefits  which any
Participant  had accrued prior to such  amendment,  and a Participant who has at
least  three Years of Service  may elect to have his  nonforfeitable  percentage
computed without regard to the amended vesting schedule. For Participants who do
not have at least  one Hour of  Service  in any Plan  Year  beginning  after the
Effective Date, the preceding  sentence shall be applied by  substituting  "five
Years of Service"  for "three  Years of  Service."  Such  election  must be made
without  regard to the amended  vesting  schedule.  Such  election  must be made
within  60 days  after  the  latest  of the  following  dates:  (a) the date the
amendment is adopted,  (b) the date the amendment becomes effective,  or (c) the
date the Participant is notified in writing of the amendment.

         9.3  DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN AND TRUST.
              -----------------------------------------------------------------

              (a) If the Employer  decides it is  impossible or  inadvisable  to
make its contributions as herein provided,  the Employer shall have the power to
terminate its  participation in the Plan by appropriate  resolution of its Board
of  Directors,  subject to the approval of the Board of  Directors.  A certified
copy of such resolution or resolutions shall be delivered to the Trustee, and as
soon as possible  thereafter,  the Plan Administrator shall advise each affected
Participant of the termination. After the date specified in such resolutions the
terminating  Employer  shall  make no  further  contributions  under  the  Plan.
However, the Trust shall remain in existence and all of the remaining provisions
of the  Plan,  other  than the  provisions  for  contributions  by the  Employer
terminating its participation in the Plan shall remain in full force and effect.
All Accounts of  Participants  whose  membership in the Plan arises by reason of
their  employment  with such  terminating  Employer  shall  continue to be held,
administered and distributed by the Trustee in accordance with the provisions of
this Plan.

              (b) If an Employer shall terminate its  participation  in the Plan
as  heretofore  provided  or shall  suspend  contributions  in such manner as to
constitute  a  termination  of  its  participation  in  the  Plan  or a  partial
termination  of the Plan,  the  accounts of each  Participant  whose  membership
arises by reason of his employment with such  terminating  Employer shall remain
fully vested and  nonforfeitable;  and such Participant  shall have the right to
receive one hundred  percent (100%) of his Account in the manner provided in the
Plan.

              (c)  If  the  terminating  Employer  shall  decide  to  completely
terminate  its  participation  in the Plan and the  Trust  with  respect  to its
Employees,  such termination  shall be effective as of a date to be specified in
certified  copies of its  resolutions  to be  delivered to the Trustee and other
Employers,  and communicated to the Participants conditioned on the satisfaction
of all  applicable  regulatory  requirements.  Upon  termination of the Plan and

                                       38
<PAGE>

Trust  with  respect  to the  terminating  Employer,  and after  payment  of all
expenses  and  proportional  adjustment  of  accounts  of  Participants  of  the
terminating Employer to reflect such expenses,  Trust Fund profit or losses, and
reallocations to the date of termination,  each employed or retired  Participant
with  respect to the  terminating  Employer  shall be  entitled  to receive  his
Account.  The Trustee shall make payment of such amounts to such Participants in
accordance  with the  provisions  of  Article 7 above,  unless  the  terminating
Employer shall direct that payment be made in a  trustee-to-trustee  transfer to
another qualified plan.

         9.4  MERGER, CONSOLIDATION, OR TRANSFER. No merger, consolidation with,
              ----------------------------------
or  transfer of assets to any other plan,  shall occur  unless each  Participant
would receive a benefit  immediately  after such merger,  etc. (if the Plan then
terminated)  which is at least equal to the benefit the  Participant  would have
received immediately before such merger, etc. (if the Plan had terminated).

         9.5  ADOPTION BY AFFILIATED EMPLOYERS.  Notwithstanding anything herein
              --------------------------------
to the contrary,  with the consent of the Employer,  an Affiliated  Employer may
adopt this Plan and all of the provisions  hereof, and participate herein and be
known as an Employer, by a properly executed document evidencing said intent and
will of such Affiliated Employer.

         9.6 DESIGNATION OF AGENT. Each Employer shall be deemed to be a part of
             --------------------
this Plan; provided, however, that with respect to all of its relations with the
Trustee and Plan  Administrator  for the purpose of this Plan,  each  Affiliated
Employer  adopting the Plan shall  irrevocably  designate  Krispy Kreme Doughnut
Corporation as its agent, and action by Krispy Kreme Doughnut  Corporation shall
be binding on all Employers.

         Unless the context of the Plan clearly indicates the contrary, the word
"Employer"  shall be deemed to include each  Employer as related to its adoption
of the Plan.

                                   ARTICLE 10
                            MISCELLANEOUS PROVISIONS
                            ------------------------

         10.1  NO GUARANTY OF EMPLOYMENT.  The adoption and  maintenance  of the
               -------------------------
Plan shall not be deemed to  constitute a contract  between the Employer and any
Employee or to be a  consideration  for, or an  inducement  or condition of, the
employment of any person.  Nothing herein  contained shall be deemed to give any
Employee  the right to be retained in the employ of the Employer or to interfere
with the right of the Employer to discharge any Employee at any time,  nor shall
it be deemed to give the Employer the right to require the Employee to remain in
its employ,  nor shall it interfere with the  Employee's  right to terminate his
employment at any time.

         10.2  PROVISION OF BENEFITS.  All benefits payable under the Plan shall
               ---------------------
be paid or provided for solely from the Trust Fund, and the Employer  assumes no
liability or responsibility therefor.

                                       39
<PAGE>

         10.3  HEADINGS.  The  headings of articles  and  sections  are included
               --------
solely for convenience of reference,  and if there is any conflict  between such
headings  and the text of this  Plan and the  Trust  Agreement,  the text  shall
control.

         10.4 GOVERNING LAW. All legal questions pertaining to the Plan shall be
              -------------
determined in accordance with the laws of the State of North Carolina insofar as
the same shall be applicable and not superseded by ERISA.

         10.5 SPENDTHRIFT CLAUSE.
              ------------------

              (a) To the extent  permitted by law,  Participants  are prohibited
from  anticipating,  encumbering,  alienating  or assigning any of their rights,
claims  or  interest  in this  Trust  or in any of the  assets  thereof,  and no
undertaking or attempt to do so shall in any way bind the Plan  Administrator or
the Trustee or be of any force or effect  whatever.  Furthermore,  to the extent
permitted by law, no such rights,  claims or interest of a  Participant  in this
Trust  or in any of the  assets  thereof  shall  in any way be  subject  to such
Participant's debts, contracts or engagements,  nor to attachment,  garnishment,
levy or other legal or equitable procesection

              (b) Anything to the contrary herein notwithstanding, to the extent
permissible under applicable law, a Participant's  interest hereunder is subject
to all bona fide and  existing  debts owed by such  Participant  to the Plan and
Trust, if any, and upon such  Participant or the Beneficiary of such Participant
becoming entitled to receive a distribution hereunder,  the Trustee, if it shall
prior to disbursement  have received  certified notice or confirmation  from the
Plan  Administrator  in such form as it may  reasonably  require of the fact and
amount of such  indebtedness,  shall pay first from the  distribution as payable
the amount of such  indebtedness  to the Plan and Trust with the  remainder,  if
any,  being  payable as otherwise  provided  herein.  Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by the Plan
Administrator  that such indebtedness is to be so paid in whole or part from his
Participant's  vested Account.  If the Participant or Beneficiary does not agree
that the indebtedness is a valid claim against the Participant's vested Account,
he shall be entitled to a review of the validity of the claim in accordance with
procedures provided in Section 10.8.

              (c)  The  foregoing   provision   against  the   assignment  of  a
Participant's  right  in the Plan  shall  not  apply in the case of a  Qualified
Domestic  Relations Order which is determined by the Plan  Administrator to meet
the requirements of section 414(p) of the Code.

         10.6 SEVERABILITY. If any provisions of this Plan shall be held illegal
              ------------
or invalid for any reason,  said  illegality or invalidity  shall not affect the
remaining  provisions  of this  Plan but shall be fully  severable  and the Plan
shall be construed  and enforced as if said illegal and invalid  provisions  had
never been inserted herein.

         10.7  AUTHORITY  OF TRUSTEE.  All persons  dealing with the Trustee are
               ---------------------
hereby  released from any necessity for questioning the authority of the Trustee
hereunder  or to see to the  application  of any  moneys,  securities  or  other
property paid or delivered to the Trustee as a purchase price or otherwise.

                                       40
<PAGE>

         10.8  CLAIMS. A Participant or Beneficiary shall have the right to file
               ------
a claim,  inquire  if he has any right to  benefits,  or appeal  the denial of a
claim.  A claim will be  considered  as having been filed when a written or oral
communication  is made by the person (or his  authorized  representative)  which
brings his claim  request to the attention of the Plan  Administrator.  The Plan
Administrator  will notify the claimant in writing within a reasonable period of
time after the claim is filed if the claim is wholly or partially  denied.  This
notice  will be in  writing  in a  manner  calculated  to be  understood  by the
claimant and will include:

              (a) The reason or reasons for denial;

              (b)  Specific  reference  to the  provisions  of the Plan or Trust
Agreement that apply in the case;

              (c) A description of any additional  material or information  that
would be helpful to the Plan  Administrator  in further review of the claim, and
reason or reasons why it is necessary; and

              (d) An explanation of the Plan's claim appeal procedure.

         If a claim is denied,  the claimant may file an appeal  asking the Plan
Administrator  to conduct a full and fair review of his claim. An appeal must be
made in writing no more than 60 days after the claimant  receives written notice
of the denial.  The claimant may review any documents that apply to the case and
may also submit points of disagreement  and other comments in writing along with
the appeal. The decision of the Plan Administrator  regarding the appeal will be
given to the claimant in writing no later than 60 days following  receipt of the
appeal.  However,  if a  hearing  is held or  there  are  special  circumstances
involved,  the decision will be given no later than 120 days after receiving the
appeal.

         10.9  NUMBER AND GENDER.  Masculine  pronouns  shall  include  both the
               -----------------
masculine and feminine  gender (and vice versa),  and the singular shall include
the plural (and vice versa) unless the context indicates otherwise. The pronouns
"it" and "its" shall  refer to a natural  person (and vice versa) if the context
so requires.

         10.10 AUDIT.
               -----

              (a) If an audit of the Plan's  records  shall be required  for any
Plan Year, the Plan  Administrator  shall direct the Trustee to engage on behalf
of all Participants an independent qualified public accountant for that purpose.
Such  accountant  shall,  after an audit of the books and records of the Plan in
accordance  with  generally  accepted  auditing  standards,  within a reasonable
period after the close of the Plan Year,  furnish to the Plan  Administrator and
the Trustee a report of his audit  setting  forth his opinion as to whether each
of the following statements, schedules or lists, or any others that are required
by section  103 of ERISA or the  Secretary  of Labor to be filed with the Plan's
annual  report,  are presented  fairly in  conformity  with  generally  accepted
accounting principles applied consistently:

                                       41
<PAGE>

                   (i) statement of the assets and liabilities of the Plan;

                   (ii)  statement  of changes in net  assets  available  to the
Plan;

                   (iii) statement of receipts and disbursements,  a schedule of
all assets held for investment purposes, a schedule of all loans or fixed income
obligations in default at the close of the Plan Year;

                   (iv) a list of all leases in default or uncollectible  during
the Plan Year;

                   (v)  the  most  recent   annual   statement   of  assets  and
liabilities of any bank common or collective trust fund in which Plan assets are
invested or such information  regarding  separate accounts or trusts with a bank
or insurance company as the Trustee and Plan Administrator deem necessary; and

                   (vi) a schedule of each transaction or series of transactions
involving an amount in excess of five percent (5%) of Plan assets.

              All auditing and  accounting  fees shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund.

              (b) If some or all of the information necessary to enable the Plan
Administrator  to comply  with  section  103 of ERISA is  maintained  by a bank,
insurance company, or similar institution,  regulated and supervised and subject
to periodic  examination  by a state or federal  agency,  it shall  transmit and
certify the accuracy of that  information  to the  Administrator  as provided in
section  103(b) of ERISA  within  120 days  after the end of the Plan Year or by
such other date as may be  prescribed  under  regulations  of the  Secretary  of
Labor.

                                   ARTICLE 11
                              TOP-HEAVY PLAN RULES
                              --------------------

         11.1  EFFECT  OF  ARTICLE  11 ON  PLAN.  Notwithstanding  any  contrary
               --------------------------------
provisions  contained in any other  Article of the Plan,  if the Plan shall be a
Top-Heavy  Plan (as  hereinafter  defined) this Article shall  control;  and any
contrary  terms of the Plan shall be deemed  replaced by the  provisions of this
Article.  However,  this Article  shall not become  effective  until the Plan is
determined to be a Top-Heavy Plan; thereafter,  it shall continue in effect only
during  those Plan Years in which the Plan is a Top-Heavy  Plan or as  otherwise
required by law. In addition,  the  requirements of Sections 11.2 and 11.3 shall
not apply with respect to any Employee  included in a unit of employees  covered
by an agreement which the Secretary of Labor finds to be a collective bargaining
agreement between Employee representatives and one or more Employers if there is
evidence  that  retirement  benefits  were the subject of good faith  bargaining
between  the  parties.  Further,  the  Account  of any  individual  who  has not

                                       42
<PAGE>

performed  any  service  for the  Employer  at any time for the five year period
ending on the Determination Date shall not be considered in determining  whether
the Plan is a Top-Heavy Plan.

         11.2  DEFINITIONS.  For purposes of this Article 11, and Articles 5 and
               -----------
7, the following words and terms shall have the following meanings:

              (a) "Key Employee" shall mean:

                   (i) Any Employee or former Employee (and the surviving spouse
or other  Beneficiary of such Employee) who at any time during the Determination
Period  was an  officer  of the  Employer  having an annual  "415  Compensation"
greater  than one hundred  fifty  percent  (150%) of the amount in effect  under
section  415(b)(1)(A)  of the Code for the calendar year in which such Plan Year
ends. No more than 50 employees (or, if the Employer shall have fewer than fifty
(50)  Employees,  the greater of three  percent (3%) or ten percent (10%) of the
Employees) shall be considered officers.

                   (ii)  An  Employee  who  owns  (or  is   considered   to  own
undersection  318 of the Code) one of the ten largest  interests in the Employer
providing  such interest is greater than one-half  percent  (1/2%),  and further
providing  that  such  individual's  "415   Compensation"   exceeds  the  dollar
limitation under section 415(c)(1)(A) of the Code for the calendar year in which
such Plan Year ends [if two  Employees  have the same  interest in the Employer,
the Employee having greater annual "415 Compensation" shall be treated as having
a larger interest]; or

                   (iii) A five  percent  (5%) owner of the  Employer,  or a one
percent (1%) owner of the Employer who has an annual "415  Compensation" of more
than one hundred fifty thousand dollars ($150,000).

         The Determination  Period is the Plan Year containing the Determination
Date  and the four  preceding  Plan  Years.  The  determination  of who is a Key
Employee will be made in accordance  with section  416(i)(1) of the Code and the
regulations  thereunder.  For purposes of determining  whether an individual has
"415  Compensation"  of one hundred and fifty thousand  dollars  ($150,000),  or
whether an  individual  is a Key Employee by reason of being an officer or a top
ten  owner,  compensation  from each  entity  required  to be  aggregated  under
sections 414(b), (c) and (m) is to be taken into account.

              (b) "415  Compensation"  shall  mean  compensation  as  defined in
section 415(c)(3) of the Code, but including amounts contributed by the Employer
pursuant  to  a  salary  reduction  agreement  which  are  excludable  from  the
Employee's  gross income under section 125,  402(a)(8),  402(h) or 403(b) of the
code.

              (c)  "Top-Heavy  Plan":  shall mean a Plan for which the following
conditions exist:

                                       43
<PAGE>

                   (i) If the  Top-Heavy  Ratio  for  this  Plan  exceeds  sixty
percent  (60%) and this Plan is not part of any  Required  Aggregation  Group or
Permissive Aggregation Group of plans.

                   (ii) If this Plan is a part of a Required  Aggregation  Group
of plans but not part of a Permissive  Aggregation Group and the Top-Heavy Ratio
for the group of plans exceeds sixty percent (60%).

                   (iii) If this Plan is a part of a Required  Aggregation Group
and part of a Permissive  Aggregation Group of plans and the Top-Heavy Ratio for
the Permissive Aggregation Group exceeds sixty percent (60%).

              (d)  "Top-Heavy Ratio" shall mean:

                   (i)  If  the   Employer   maintains   one  or  more   defined
contribution  plans  (including  any Simplified  Employee  Pension Plan) and the
Employer  has never  maintained  any defined  benefit  plan which has covered or
could cover a Participant in this Plan, the Top-Heavy  Ratio is a fraction,  the
numerator of which is the sum of the account balances of all Key Employees as of
the  Determination  Date, and the denominator of which is the sum of all account
balances of all  Participants as of the  Determination  Date. Both the numerator
and  the  denominator  of the  Top-Heavy  Ratio  are  adjusted  to  reflect  any
Contribution  which  is  due  but  unpaid  as  of  the  Determination  Date.  In
determining  the above  account  balances,  such amount must be increased by the
aggregate  distributions  made  within  the  five  year  period  ending  on  the
Determination Date as well as distributions under a terminated plan for the same
five year period which if it had not been terminated would have been required to
be included in an aggregation group.

                   (ii)  If  the   Employer   maintains   one  or  more  defined
contribution  plans  (including  any Simplified  Employee  Pension Plan) and the
Employer  maintains or has  maintained  one or more defined  benefit plans which
have covered or could cover a Participant in this Plan, the Top-Heavy Ratio is a
fraction,  the  numerator  of which is the sum of  account  balances  under  the
defined  contribution  plans  for all Key  Employees  and the  Present  Value of
accrued benefits under the defined benefit plans for all Key Employees,  and the
denominator  of which  is the sum of the  account  balances  under  the  defined
contribution  plans  for all  Participants  and the  Present  Value  of  accrued
benefits  under  the  defined  benefit  plans  for all  Participants.  Both  the
numerator  and   denominator  of  the  Top-Heavy  Ratio  are  adjusted  for  any
distribution  of an account  balance or an accrued benefit made in the five year
period ending on the Determination Date, as well as any distributions during the
same  five  year  period  under a  terminated  plan  which  if it had  not  been
terminated would have been required to be included in an aggregation  group, and
any contribution due but unpaid as of the Determination Date.

                   (iii)  For  purposes  of (i) and  (ii)  above,  the  value of
account balances and the Present Value of accrued benefits will be determined as
of the most recent  valuation  date that falls  within or ends with the 12 month
period  ending on the  Determination  Date.  The  account  balances  and accrued
benefits of the Participant who is not a Key Employee but who was a Key Employee

                                       44
<PAGE>

in a prior year will be disregarded. The calculation of the Top-Heavy Ratio, and
the  extent to which  distributions,  rollovers,  and  transfers  are taken into
account  will  be made in  accordance  with  section  416 of the  Code,  and the
regulations thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio.  When  aggregating  plans
the value of account  balances and the Present Value of accrued benefits will be
calculated with reference to the  Determination  Dates that fall within the same
calendar year.

              (e)  "Permissive   Aggregation  Group"  shall  mean  the  Required
Aggregation  Group of plans plus any other plan or plans of the Employer  which,
when considered as a group with the Required  Aggregation  Group, would continue
to satisfy the requirements of sections 401(a)(4) and 410 of the Code. Plans not
within the  Required  Aggregation  Group may only be included in the  Permissive
Aggregation  Group if the  contributions and benefits under the plans not within
the Required  Aggregation Group are comparable to the contributions and benefits
provided under any plan included within the Required Aggregation Group.

              (f)  "Required  Aggregation  Group" shall mean (i) Each  qualified
plan of the Employer in which at least one Key Employee participates in the Plan
Year  containing the  Determination  Date, or any of the four (4) preceding Plan
Years,  and (ii) any other  qualified  plan of the Employer which enables a plan
described in (i) to meet the  requirements of sections  401(a)(4) and 410 of the
Code.

              (g)  "Determination  Date" shall mean for any Plan Year subsequent
to the first Plan Year,  the last day of the  preceding  Plan Year;  and for the
first Plan Year of the Plan, the last day of that year.

              (h)  "Valuation  Date" shall mean the last day of the Plan Year on
which  account   balances  or  accrued  benefits  are  valued  for  purposes  of
calculating  the Top-Heavy  Ratio.  The  valuation  date must be the most recent
valuation date within a 12 month period ending on the determination date.

              (i)  "Present  Value"  shall  be  based  on the  annual  effective
interest rate of five percent (5%) unless specifically  designated  otherwise in
this Plan, and actuarial  assumptions shall be based on the following  mortality
tables: (i) PBGC-I for males, and (ii) PBGC-II for females.

              (j)  "Non-Key  Employee"  shall mean any Employee who is not a Key
Employee.

              (k) "Five  Percent (5%) Owner and One Percent (1%) Owner" shall be
defined as follows:

                   (i) "Five  Percent  (5%) Owner shall mean any person who owns
(or is considered as owning  pursuant to section 318 of the Code) more than five

                                       45
<PAGE>

percent (5%) of the outstanding stock of the corporation,  or  stock  possessing
more than five percent (5%) of the total  combined  voting power of all stock of
the corporation.

                   (ii) "One Percent (1%) Owner" shall mean any person who would
be described in subsection  (i) above if one percent (1%) were  substituted  for
five percent (5%).

                   (iii) For purposes of this subsection  11.2(j) the provisions
of section  318(a)(2)(C)  of the Code  shall be  applied  by  substituting "five
percent (5%)" for "fifty percent (50%)."

                   (iv) The aggregation  rules of subsections  (b), (c), and (m)
of section 414 of the Code shall not apply for purposes of determining ownership
in the Employer.

              (l) The Maximum  Annual  Compensation  taken into account  under a
Top-Heavy Plan may not exceed the first two hundred thousand dollars  ($200,000)
of  any  Employee's  annual  compensation  (or  such  greater  amount  as may be
subsequently  allowed  as a cost  of  living  adjustment  by law or  regulations
prescribed thereunder).

         11.3  MINIMUM CONTRIBUTION.
               --------------------

              (a) If the Plan  shall  be a  Top-Heavy  Plan  for any Plan  Year,
except  as  otherwise  provided  in (c)  and  (d)  below,  the  sum of  Employer
Contributions and forfeitures  allocated on behalf of any Participant who is not
a Key Employee  shall not be less than the lesser of three  percent (3%) of such
Participant's  compensation  or, in the case where the  Employer  has no defined
benefit plan which  designates this Plan as satisfying  section 401 of the Code,
the  largest  percentage  of  Employer  contributions  and  forfeitures,   as  a
percentage  of the first two  hundred  thousand  dollars  ($200,000)  of the Key
Employee's Compensation,  allocated on behalf of any Key Employee for that year.
For purpose of this Section,  if the highest  percentage rate allocated to a Key
Employee  for a Plan Year in which  the Plan is  Top-Heavy  is less  than  three
percent  (3%),  all  amounts  contributed  as a  result  of a  salary  reduction
agreement are included in determining the Employer  contributions made on behalf
of a Key Employee.  The minimum contribution is determined without regard to any
Social  Security  contribution.  Such  minimum  contribution  shall  be made and
allocated  to the  account of the  Participant  even  though,  under  other Plan
provisions,  the  Participant  would not  otherwise  be  entitled  to receive an
allocation,  or would have received a smaller allocation for the year because of
(i) the  Participant's  failure  to  complete  1,000  Hours of  Service  (or any
equivalent  provided  in the Plan),  or (ii) the  Participant's  failure to make
mandatory  Employee  contributions  to the  Plan,  or  (iii)  the  Participant's
compensation was less than a stated amount.

              (b)  Subsection (a) above shall not apply to any  Participant  who
terminated employment during the year for a reason other than death, Disability,
or  Retirement,  and who was not employed by the Employer on the last day of the
year.

              (c) If this Plan is  Top-Heavy  and the  Employer  has one or more
additional  plans  which are also  Top-Heavy,  the  minimum  contribution  for a

                                       46
<PAGE>

Non-Key Employee who is a Participant of this Plan as well as another  Top-Heavy
Plan shall be  provided  by the other  plan,  unless  otherwise  provided by the
Employer.

              (d) The minimum  contribution  required (to the extent required to
be  nonforfeitable  under section  416(b)) may not be forfeited  under  sections
411(a)(3)(B) or 411(a)(3)(D) of the Code.

              (e) For any Plan Year in which the Plan is  Top-Heavy,  the amount
of a  Participant's  annual  compensation  taken into  account  for  purposes of
determining  Employer  Contributions  under the Plan  shall not exceed the limit
established by section 401(a)(17) of the Code.

         IN WITNESS WHEREOF,  Krispy Kreme Doughnut Corporation has caused these
presents to be executed by its duly  authorized  officers and its corporate seal
to be hereunto  affixed,  and the  individuals  comprising  the Trustee have set
their hands and seals hereto, all as of the day and year first above written.

                                         KRISPY KREME DOUGHNUT CORPORATION
[CORPORATE SEAL]

                                         By: /s/ J. Paul Breitbach
                                            ----------------------
                                         Executive Vice President

ATTEST:

/s/ Randy S. Casstevens
-----------------------
Secretary

                                       47______________________________________________

                        KRISPY KREME DOUGHNUT CORPORATION

                        NONQUALIFIED STOCK OWNERSHIP PLAN

                           EFFECTIVE FEBRUARY 1, 1999

                  ______________________________________________

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

ARTICLE 1 -- PURPOSE; EFFECTIVE DATE..........................................1

ARTICLE 2 -- DEFINITIONS......................................................1
   2.1  Account...............................................................1
   2.2. Beneficiary...........................................................1
   2.3. Board.................................................................1
   2.4  Change in Control.....................................................1
   2.5  Code..................................................................2
   2.6  Committee.............................................................2
   2.7  Company...............................................................2
   2.8  Compensation..........................................................2
   2.9  Determination Date....................................................2
   2.10 Disability (or Disabled)..............................................2
   2.11 Distribution Election.................................................2
   2.12 Earnings..............................................................2
   2.13 Effective Date........................................................2
   2.14 Employee..............................................................3
   2.15 ERISA.................................................................3
   2.16 Krispy Kreme Stock Index..............................................3
   2.17 KSOP.=................................................................3
   2.18 Participant...........................................................3
   2.19 Plan..................................................................3
   2.20 Plan Year.............................................................3
   2.21 Stock Contributions...................................................3
   2.22 Year of Service.......................................................3

ARTICLE 3 -- PARTICIPATION AND DEFERRALS......................................4
   3.1  Eligibility and Participation.........................................4

ARTICLE 4 -- STOCK CONTRIBUTIONS..............................................4
   4.1 Stock Contributions....................................................4

ARTICLE 5 -- ACCOUNTS.........................................................4
   5.1  Account...............................................................4
   5.2  Determination of Accounts.............................................5
   5.3  Investment of Account.................................................5
   5.4  Vesting of Accounts...................................................5
   5.5  Statement of Accounts.................................................5

                                       i

<PAGE>

ARTICLE 6 -- BENEFIT PAYMENTS.................................................5
   6.1  Time of Benefit Payments..............................................5
   6.2  Manner of Benefit Payments............................................6
   6.3  Withholding; Payroll Taxes............................................6
   6.4  Code ss. 162(m) Restriction...........................................6
   6.5  Payment to Guardian...................................................6

ARTICLE 7. -- BENEFICIARY DESIGNATION.........................................7
   7.1  Beneficiary Designation...............................................7

ARTICLE 8 --ADMINISTRATION....................................................7
   8.1  Committee.............................................................7

ARTICLE 9. -- AMENDMENT AND TERMINATION OF PLAN...............................8
   9.1  Amendment.............................................................8
   9.2  Company's Right to Terminate..........................................8

ARTICLE 10 -- MISCELLANEOUS...................................................8
   10.1  Unfunded Plan........................................................8
   10.2  Unsecured General Creditor...........................................9
   10.3  Trust Fund...........................................................9
   10.4  Nonassignability.....................................................9
   10.5  Not a Contract of Employment.........................................9
   10.6  Governing Law........................................................9
   10.7  Validity............................................................10
   10.8  Successors..........................................................10
   10.9  Captions............................................................10
   10.10 Arbitration of Disputes.............................................10
   10.11 Unclaimed Benefit...................................................10
   10.12 Discharge of Obligations............................................10
   10.13 Limitations on Liability............................................10
   10.14 Entire Agreement....................................................11

                                       ii
<PAGE>

                        KRISPY KREME DOUGHNUT CORPORATION

                        NONQUALIFIED STOCK OWNERSHIP PLAN

                                    ARTICLE 1
                             PURPOSE; EFFECTIVE DATE

         The purpose of this Nonqualified  Stock Ownership Plan is to enable the
Company's  executives to receive the same retirement plan contributions from the
Company as is available to other  employees of the Company under the KSOP. It is
intended  that the Plan  will  aid in  attracting  and  retaining  employees  of
exceptional  ability  by  providing  them  with  these  benefits.  The Plan is a
nonqualified  deferred  compensation  plan  intended to be an  unfunded  plan as
described in Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement
Income Security Act of 1974. The Plan shall be effective as of February 1, 1999.

                                    ARTICLE 2
                                   DEFINITIONS

         Whenever  used in this  document,  the  following  terms shall have the
meanings  set forth in this Article  unless a contrary or  different  meaning is
expressly provided:

         2.1  "ACCOUNT"   means  the  separate   account   established   and
maintained for each Participant  which represents his or her vested and unvested
interest in the Plan as of any date,  as adjusted for  allocations  of Earnings,
distributions, and other factors that may affect the value of such Account.

         2.2.  "BENEFICIARY" means the person,  persons or entity entitled under
Section 7 to receive any Plan benefits payable after a Participant's death.

         2.3  "BOARD" means the Board of Directors of the Company.

         2.4  "CHANGE  IN  CONTROL"  means the date on which the  earlier of the
following Events occurs:

               (a) The  acquisition by any entity, person or group of beneficial
ownership,  as that term is defined in Rule 13d-3 under the Securities  Exchange
Act of 1934,  of more than 30% of the  outstanding  capital stock of the Company
entitled to vote for the election of directors ("Voting Stock");

               (b) The merger or  consolidation  of the Company with one or more
corporations as a result of which the holders of the outstanding Voting Stock of
the Company  immediately prior to such a merger or consolidation  hold less than
60% of the Voting Stock of the surviving or resulting corporation;

<PAGE>

               (c)  The  transfer of substantially  all of the  property  of the
Company  other than to an entity of which the  Company  owns at least 80% of the
Voting Stock; or

               (d) The  election to the Board of Directors  of the Company of
three directors without the recommendation or approval of the incumbent Board of
Directors of the Company.

         2.5 "CODE" means the Internal Revenue Code of 1986, as amended,  or any
other  provision  of law of similar  purpose  as may at any time be  substituted
therefor.

         2.6 "COMMITTEE"  means the Compensation  Committee of the Board or such
other  committee  appointed  by the Board to  administer  the Plan  pursuant  to
Section 8.

         2.7.  "COMPANY"  generally means Krispy Kreme Doughnut  Corporation,  a
North  Carolina  corporation,  and  any  successor  thereto  which  assumes  its
obligations under this Plan. For purposes of Sections 2.3 and 2.4, Company means
Krispy Kreme Doughnuts,  Inc., a North Carolina  corporation,  and any successor
thereto which assumes its obligations under this Plan.

         2.8 "COMPENSATION"  means, with respect to a Participant for the period
specified, base salary, plus bonuses paid to the Participant under the Company's
incentive plans. The amount considered "Compensation"  specifically includes any
amounts that would be paid to the Participant,  but for a compensation reduction
agreement  pursuant to Code Section 125, the  Retirement  Savings  Plan,  or the
Deferred Compensation Plan.

         2.9 "DETERMINATION DATE" means the last business day of each Plan Year.

         2.10  "DISABILITY (OR DISABLED)" means a disability as determined under
the Company's long-term disability plan.

         2.11  "DISTRIBUTION  ELECTION"  means  the  election  by a  Participant
regarding the manner in which his Account will be distributed to him.

         2.12  "EARNINGS" for each Account means the growth  credited or debited
to the  Account  on each  Determination  Date in a Plan  Year,  which  shall  be
credited or debited at the rates  described  in the  definition  of Krispy Kreme
Stock Index in Section 2.16, plus any dividends credited to the Account.

         2.13  "EFFECTIVE DATE" means February 1, 1999.

         2.14 "EMPLOYEE" means a person classified by the Company as an employee
of the Company or its subsidiaries, regardless of the person's classification by
any federal, state or local government, or any of their agencies.

         2.15 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time or any successor statute.

                                       2

<PAGE>

         2.16 "KRISPY  KREME STOCK INDEX" means the current  value of a share of
Krispy Kreme Doughnut, Inc. common stock, as reported in the Wall Street Journal
or other  reliable  public  source,  for that day.  If  dividends  are  declared
additional stock units representing dividend shares shall be credited, as if the
stock units were actually shares of Krispy Kreme Doughnuts, Inc. common stock.

         2.17 "KSOP" means the Krispy Kreme Profit-Sharing Stock Ownership Plan,
as it may be amended from time to time.

         2.18  "PARTICIPANT" means a person for whom an Account is maintained.

         2.19.  "PLAN"  means  this  Nonqualified  Stock  Ownership  Plan,  as
amended from time to time.

         2.20 "PLAN YEAR" means the 12 month period ending on the Sunday closest
to January 31.

         2.21  "STOCK  CONTRIBUTIONS"  means  the  contributions  in the form of
Krispy Kreme stock credited to a Participant's Account, pursuant to Section 5.1.

         2.22 "YEAR OF SERVICE" means a 12 consecutive month period during which
an Employee is credited  with at least 1,000  "hours of service"  (as defined in
the KSOP) with the  Employer  or any related  entity.  The first Year of Service
shall be measured from the Employee's date of hire;  thereafter Years of Service
shall be calculated based on the Plan Year.

                                    ARTICLE 3
                           PARTICIPATION AND DEFERRALS

         3.1  ELIGIBILITY AND PARTICIPATION.

              (a)  ELIGIBILITY.  Eligibility to participate in the Plan shall be
limited  to  those  Employees  who are  selected  by the  Committee  and who are
management or highly-compensated employees.

              (b) EFFECTIVE DATE OF  PARTICIPATION.  An eligible  Employee shall
become a Participant  as of the first day of the month  following his completion
of a Year of Service.

              (c) Part-Year  Participation.  Employees who become newly eligible
to  participate  in the Plan may begin their  participation  in the Plan as of a
date or dates determined under rules to be established by the Committee.

                                       3

<PAGE>

              (d) Change in Employment  Status.  If a  Participant  ceases to be
eligible to  participate in the Plan, his Account shall remain in the Plan until
it is distributed under the terms of Section 6.

                                    ARTICLE 4
                               STOCK CONTRIBUTIONS

         4.1  STOCK   CONTRIBUTIONS.     The   Company   shall    credit   Stock
              ---------------------
Contributions to the Participant's  Account in an amount equal to the percentage
of compensation  contributed on behalf of  Participants  under the KSOP, if any,
times the Participant's  Compensation in excess of the Compensation  limit under
Code section  401(a)(17).  A Participant must be employed on the last day of the
Plan Year in order to be credited with a Stock  Contribution for such Plan Year,
unless the Participant died, became Disabled,  or retired after attaining age 55
and completing ten Years of Service  during the Plan Year.  Compensation  earned
prior to the date the  Participant  entered the Plan pursuant to Section  3.1(b)
shall not be taken into  account  for  purposes  of  determining  the  Company's
contribution.

                                    ARTICLE 5
                                    ACCOUNTS

         5.1   ACCOUNT.   For  record-keeping purposes only, Stock Contributions
               -------
and Earnings thereon shall be credited to the Participant's Account. The Account
shall be bookkeeping  devices  utilized for the sole purpose of determining  the
benefits  payable  under the Plan and shall not  constitute  a separate  fund of
assets.

         5.2  DETERMINATION  OF  ACCOUNTS.  Each  Participant's  Account  as  of
              ---------------------------
each  Determination  Date shall  consist of the balance of the Account as of the
immediately preceding Determination Date, adjusted as follows:

              (a)  STOCK CONTRIBUTIONS.  The Account  shall be  increased by any
Stock  Contributions,  if any, credited since such Determination Date.

              (b)  DISTRIBUTIONS. The Account shall be reduced by  any  benefits
distributed to the Participant since such Determination Date.

              (c)  EARNINGS.  The Account shall be increased or decreased by the
Earnings credited to the Account since such Determination Date.

         5.3  INVESTMENT  OF ACCOUNT.  Each  Participant's  Account   shall   be
              ----------------------
deemed to be  invested  in the  Krispy  Kreme  Stock  Index  and shall  have its
earnings  credited or debited in  accordance  with the Krispy Kreme Stock Index.
The Participant may not elect to change such index.

                                       4

<PAGE>

         5.4  VESTING  OF  ACCOUNTS.  Each  Participant  shall  be vested in his
              ---------------------
Account  based on his Years of Service in accordance with the  following vesting
schedule:

                    YEARS OF SERVICE               VESTED PERCENTAGE
                    ----------------               -----------------
                           1                              20%
                           2                              40%
                           3                              60%
                           4                              80%
                       5 or more                         100%

Notwithstanding  the above  schedule,  a Participant  who terminates  employment
after  attaining  age 65 or on  account  of  death or  Disability  shall be 100%
vested.

         5.5 STATEMENT OF ACCOUNTS. The Committee shall give to each Participant
             ---------------------
a statement showing the balances in the Participant's Account on an annual basis
and at such other times as may be determined by the Committee.

                                    ARTICLE 6
                                BENEFIT PAYMENTS

         6.1  TIME OF BENEFIT PAYMENTS. When a Participant terminates employment
              ------------------------
with the Company  for any reason,  including  death or  Disability,  the Company
shall  pay to the  Participant  (or the  Participant's  Beneficiary,  in case of
death) benefits equal to the vested portion of the Participant's  Account on the
Determination Date next following the Participant's termination date.

         6.2 MANNER OF BENEFIT PAYMENTS. The Participant's Account shall be paid
             --------------------------
in kind as a distribution  of Krispy Kreme  Doughnuts,  Inc. common stock and as
elected in his  Distribution  Elections or as elected pursuant to subsection (d)
below. If the Participant fails to complete a Distribution Election, his Account
shall be paid in the form of a lump sum  distribution.  The alternative forms of
benefit payment are:

              (a) A lump-sum distribution which is equal to the Account balance.

              (b) Quarterly installments of the Account balance amortized over a
period of up to ten years.  Earnings on the unpaid  balance shall continue to be
credited to  Accounts  at the  appropriate  Krispy  Kreme Stock Index rate.  The
Account  balance  shall be  reamortized  each  year,  so that the amount of each
installment  payment  will  depend on the  Earnings  credited  or debited to the
Account during the prior year.

              (c)  SMALL  AMOUNTS.  Notwithstanding  the  form  elected,  if the
Participant's  total  Account  has a  value  of  one  hundred  thousand  dollars
($100,000) or less on the applicable Determination Date, the Company may, in its
sole discretion, pay such benefit in a lump sum.

                                       5

<PAGE>

              (d) CHANGE IN FORM OF BENEFITS.  A Participant may elect to change
the  manner  of  benefit  payment  at any time up to 12 months  before  the date
benefit  payments  commence.  Any  changes  made to the form of benefit  payment
within 12 months of the date benefit payments commence will not be valid.

         6.3  WITHHOLDING;  PAYROLL  TAXES.  The  Company  shall  withhold  from
              ----------------------------
payments  hereunder any taxes  required to be withheld from such payments  under
federal,  state or local  law.  A  Beneficiary,  however,  may elect not to have
withholding  of federal  income tax  pursuant  to Section  3405 of the  Internal
Revenue Code, or any successor provision thereto.

         6.4  CODE  SECTION  162(M)   RESTRICTION.   Notwithstanding  any  other
              -----------------------------------
provision of this Plan,  if any portion of a payment in a calendar year would be
disallowed as a deduction to the Company  because the Participant is an employee
for that calendar year subject to Section 162(m) (the  $1,000,000  limitation on
compensation deduction) of the Code, or any successor provision to such Section,
that portion shall instead be paid in the first  following  calendar year during
which  the  Participant  is not  subject  to  Section  162(m) of the Code or any
successor provision, by February 28th of such year.

         6.5 PAYMENT TO GUARDIAN.  If a distribution  is payable to a minor or a
             -------------------
person declared incompetent or to a person incapable of handling the disposition
of  property,   the  Committee  may  direct  payment  to  the  guardian,   legal
representative,   or  person   having  the  care  and  custody  of  such  minor,
incompetent,  or  person.  The  Committee  may  require  proof of  incompetency,
minority,  incapacity  or  guardianship,  as it may  deem  appropriate  prior to
distribution.  The Company may withhold payment under the Plan upon a dispute as
to the proper  payee(s) or in any other  situation in which the proper  payee(s)
may be in question,  until the proper payee(s) are finally determined in a court
of law.  Distribution of any benefit under the Plan shall  completely  discharge
the Committee from all liability with respect to such benefit.

                                    ARTICLE 7
                             BENEFICIARY DESIGNATION

         7.1  BENEFICIARY DESIGNATION. Each Participant shall have the right, at
              -----------------------
any time,  to designate  one or more persons or an entity as  Beneficiary  (both
primary as well as secondary) to whom benefits  under this Plan shall be paid in
the  event of a  Participant's  death  prior  to  complete  distribution  of the
Participant's Account. In the event that no separate Beneficiary  designation is
made under this Plan, the Participant's  Beneficiary  designation made under the
KSOP shall determine to whom benefits under this Plan shall be paid in the event
of a  Participant's  death.  If no election is made under either Plan,  then the
default provisions of the KSOP shall determine the payment of benefits.

                                       6

<PAGE>

                                    ARTICLE 8
                                 ADMINISTRATION

         8.1  COMMITTEE.
              ---------

              (a)  The Committee shall administer this Plan.

              (b)  The  Committee shall  be  the  Compensation  Committee of the
Board or such other committee as may be appointed by the Board.

              (c)   The Committee shall  have  the  authority  to  make,  amend,
interpret,   and  enforce  all   appropriate   rules  and  regulations  for  the
administration  of this  Plan and to  decide or  resolve  any and all  questions
including  interpretations of this Plan, in its sole discretion, as may arise in
connection with the Plan.

                                    ARTICLE 9
                        AMENDMENT AND TERMINATION OF PLAN

         9.1  AMENDMENT.
              ---------

              (a) The Board may, at any time, amend the Plan in whole or in part
by  written  instrument,  provided  that no  amendment  shall  reduce the amount
credited  to any  Account  maintained  under  the  Plan  as of the  date  of the
amendment.

              (b)  Generally,  the Company shall amend the Plan by action of the
Board.  However, the Committee may approve amendments to the Plan, without prior
approval or subsequent ratification by the Board, if the amendment: (i) does not
significantly change the benefits provided under the Plan (except as required by
a change in applicable law); (ii) does not  significantly  increase the costs of
the Plan;  and (iii) the  amendment  is  intended  either to enable  the Plan to
remain  in  compliance  with  the  requirements  of the  Code,  ERISA,  or other
applicable  law, to  facilitate  administration  of the Plan,  or to improve the
operation of the Plan. A duly  authorized  officer of the Company  shall execute
the amendment, evidencing the Company's adoption of the amendment.

         9.2 COMPANY'S RIGHT TO TERMINATE. The Board may, at any time, partially
             ----------------------------
or completely, terminate the Plan.

              (a) PARTIAL  TERMINATION.  The Board may  partially  terminate the
Plan by instructing the Committee not to accept any additional  contributions to
the Plan.  If such a partial  termination  occurs,  the Plan shall  continue  to
operate  and be  effective  with  regard  to  contributions  made  prior  to the
effective date of such partial termination.

              (b) COMPLETE  TERMINATION.  The Board may completely terminate the
Plan by instructing the Committee not to accept any additional  contributions to

                                       7

<PAGE>

the Plan,  and by  distributing  all Accounts under the Plan. If such a complete
termination  occurs,  the Plan shall cease to operate and the Company  shall pay
out to each  Participant the balance in his Account.  If termination of the Plan
occurs after a Change of Control, payment shall be made in a lump sum; otherwise
payment shall be made in a lump sum, unless the Committee determines otherwise.

                                   ARTICLE 10
                                  MISCELLANEOUS

         10.1 UNFUNDED PLAN. This Plan is an unfunded plan maintained  primarily
              -------------
to provide deferred  compensation  benefits for a select group of "management or
highly-compensated employees" within the meaning of Sections 201, 301 and 401 of
the Employee  Retirement Income Security Act of 1974, as amended ("ERISA"),  and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly,  the  Board  may  terminate  the Plan and make no  further  benefit
payments or remove certain  employees as Participants if it is determined by the
United States  Department  of Labor,  a court of competent  jurisdiction,  or an
opinion of counsel that the Plan  constitutes an employee  pension  benefit plan
within the meaning of Section 3(2) of ERISA (as currently in effect or hereafter
amended) which is not so exempt.

         10.2 UNSECURED GENERAL CREDITOR.  Participants and their Beneficiaries,
              --------------------------
heirs, successors,  and assigns shall have no secured legal or equitable rights,
interest or claims in any property or assets of the  Company,  nor shall they be
Beneficiaries  of, or have any rights,  claims or  interests  in any property or
asset which may be acquired by the Company.  Except as provided in Section 10.3,
assets of the  Company  shall not be held  under  any trust for the  benefit  of
Participants, their Beneficiaries,  heirs, successors or assigns, or held in any
way as collateral  security for the fulfilling of the obligations of the Company
under this Plan. Any and all of the Company's  assets and policies shall be, and
remain,  the  general,  unpledged,  unrestricted  assets  of  the  Company.  The
Company's  obligation  under the Plan shall be that of an unfunded and unsecured
promise to pay money in the future.

         10.3 TRUST FUND. At its sole discretion,  the Company may establish one
              ----------
or more trusts, with such trustees as the Committee may approve, for the purpose
of providing  for the payment of benefits  owed under the Plan.  Although such a
trust  may be  irrevocable,  its  assets  shall be held for  payment  of all the
Company's  general  creditors  in the event of  insolvency.  To the  extent  any
benefits provided under the Plan are paid from any such trust, the Company shall
have no  further  obligation  to pay  them.  If not paid  from any  trust,  such
benefits  shall  remain  the  obligation  of the  Company.  Notwithstanding  the
existence  of such a trust,  it is intended  that the Plan be  unfunded  for tax
purposes and for purposes of Title I of ERISA.

         10.4 NONASSIGNABILITY. Neither a Participant nor any other person shall
              ================
have any right to commute, sell, assign, transfer, pledge, anticipate,  mortgage
or  otherwise  encumber,  transfer,  hypothecate  or convey in advance of actual
receipt the amounts, if any, payable hereunder,  or any part thereof, which are,
and  all  rights  to  which  are,  expressly  declared  to be  unassignable  and
nontransferable.  Except as may otherwise be required by law or order of a court
of competent jurisdiction, no part of the amounts payable shall, prior to actual

                                       8

<PAGE>

payment,  be subject to seizure or  sequestration  for the payment of any debts,
judgments,  alimony or separate  maintenance  owed by a Participant or any other
person,  nor be transferable by operation of law in the event of a Participant's
or any other person's bankruptcy or insolvency.

         10.5  NOT A CONTRACT OF EMPLOYMENT.  This Plan shall not  constitute  a
               ----------------------------
contract of employment between the Company and the Participant.  Nothing in this
Plan shall give a  Participant  the right to be  retained  in the service of the
Company or to interfere with the right of the Company to discipline or discharge
a Participant at any time.

         10.6  GOVERNING LAW. The provisions of this Plan shall be construed and
               -------------
interpreted  according  to the laws of the  State of North  Carolina,  except as
preempted by federal law.

         10.7 VALIDITY. In case any provision of this Plan shall be held illegal
              --------
or invalid for any reason,  said  illegality or invalidity  shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.

         10.8  SUCCESSORS.  The  provisions of this Plan shall bind and inure to
               ----------
the benefit of the Company, its Subsidiaries,  and their successors and assigns.
The term successors as used herein shall include any corporate or other business
entity,  which shall,  whether by merger,  consolidation,  purchase or otherwise
acquire all or substantially all of the business and assets of the Company,  and
successors of any such corporation or other business entity.

         10.9 CAPTIONS.  The captions of the articles,  Sections, and paragraphs
              --------
of this  Plan are for  convenience  only and  shall not  control  or affect  the
meaning or construction of any of its provisions.

         10.10 ARBITRATION OF DISPUTES. Any controversy or claim arising out of,
               -----------------------
or in any way relating to this Plan shall be settled by  arbitration in the city
of Greensboro, North Carolina, in accordance with the rules then in force of the
American Arbitration Association.

         10.11  UNCLAIMED  BENEFIT.  Each  Participant  shall  keep the  Company
                ------------------
informed of his  current  address  and the  current  address of his spouse.  The
Company shall not be obligated to search for the  whereabouts of any person.  If
the  location of a  Participant  is not made known to the Company  within  three
years after the date on which  payment of the  Participant's  benefit  under the
Plan may first be made,  payment may be made as though the  Participant had died
at the end of the three-year  period.  If, within one additional year after such
three-year period has elapsed,  or, within three years after the actual death of
a  Participant,  the  Company  is unable to locate any  surviving  spouse of the
Participant,  then the  Company  shall  have no  further  obligation  to pay any
benefit  hereunder to such  Participant or surviving  spouse or any other person
and such benefit shall be irrevocably forfeited.

         10.12  DISCHARGE  OF  OBLIGATIONS.  Any payment made under this Plan in
                --------------------------
good  faith  by the  Company  shall  completely  discharge  the  Company  of any
liability to any other individual who asserts a claim to such payment.

                                       9

<PAGE>

         10.13  LIMITATIONS ON LIABILITY.  Notwithstanding  any of the preceding
                ------------------------
provisions  of the Plan,  neither the Company  nor any  individual  acting as an
employee  or agent of the  Company  shall be liable to any  Participant,  former
Participant, surviving spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.

         10.14  ENTIRE  AGREEMENT.  This Plan  document  represents  the  entire
                -----------------
agreement  between the Company and any  Participant in this Plan. This agreement
supersedes any and all prior agreements between the Company and any Participant,
whether such  agreement or  agreements  were written or oral.  Any  amendment or
modification  to the  terms of this  Plan must be in  writing  and  signed by an
authorized  officer of the Company.  No Participation  Election shall in any way
amend,  modify,  alter or  revise  this  Plan.  In the  event  the  terms of the
Participation  Election  conflict  with the terms of the Plan,  the terms of the
Plan shall be controlling.

         IN WITNESS WHEREOF,  the authorized officers of the Company have signed
this  document and have affixed the  corporate  seal on _, 2000, to be effective
upon the Effective Date.

                                            KRISPY KREME DOUGHNUT CORPORATION

                                            By: /s/ Scott A. Livengood
                                                ----------------------
                                            Its: President
                                                 ---------
ATTEST:

By: Stephen A. Johnson
    ------------------
Its Assistant Secretary
    ------------------

[Corporate Seal]

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