| (b), (c) | On November 28, 2011, the Board of Directors (the “Board”) of Krispy Kreme Doughnuts, Inc. (the “Company”) appointed Kenneth A. May as President and Chief Operating Officer of the Company and of its wholly-owned subsidiary, Krispy Kreme Doughnut Corporation (“KKDC”), effective as of November 28, 2011. In connection with Mr. May’s appointment as President and Chief Operating Officer of the Company, Mr. May, the Company, and KKDC entered into an Employment Agreement, dated as of November 28, 2011 (the “Agreement”). The description that follows is a summary of the material terms and conditions of the Agreement. This summary is qualified in its entirety by reference to the Agreement included as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. The definition of capitalized terms, if not so defined herein, may be found in the Agreement. In connection with Mr. May’s appointment, on November 28, 2011, the Board accepted the resignation of James H. Morgan as President of the Company and of KKDC, effective as of November 28, 2011. Mr. Morgan will remain the Chief Executive Officer and Chairman of the Board of the Company and of KKDC. Pursuant to the provisions of Mr. May’s Agreement, the Company will pay Mr. May an annual base salary of $500,000 and a signing bonus of $200,000. A portion of Mr. May’s signing bonus is subject to repayment in the event that Mr. May’s employment is terminated prior to November 28, 2014, for reasons other than death, disability, Good Reason, or, under certain circumstances, in connection with a Change in Control. In addition, beginning during the fiscal year ending in January 2013, Mr. May will be considered for an annual bonus, with his target annual bonus being equal to 65% of his base salary, based upon performance metrics set by the Compensation Committee of the Board (the “Compensation Committee”) and the Board in accordance with the Company’s then-current incentive plans. The Agreement also provides Mr. May with certain customary benefits and perquisites, such as medical, life, and disability insurance, and relocation expenses. The Agreement has a three-year term, ending November 28, 2014. Under the Agreement, Mr. May may be entitled to certain severance benefits upon his termination of employment. If terminated by reason of his death or permanent disability, Mr. May shall be entitled to his base salary through the date of his termination, and Mr. May and his covered dependents shall continue to receive medical insurance coverage benefits (the “Termination Health Benefits”) from the Company for a period equal to the lesser of (a) eighteen months following the date of termination, or (b) until Mr. May is provided by another employer with benefits substantially similar to the benefits previously provided by the Company’s medical plan. In addition, upon termination as a result of permanent disability, insurance benefits will continue under the Company’s long-term disability plan. If Mr. May’s employment is terminated by the Company for Cause or by Mr. May without Good Reason, Mr. May shall be entitled to receive only his base salary accrued through the date of his termination, along with reimbursable expenses. If Mr. May terminates his employment for Good Reason, or if the Company terminates Mr. May’s employment without Cause, Mr. May shall be entitled to (a) his base salary through the date of his termination; (b) an amount equal to one times the sum of Mr. May’s annual base salary and his target annual bonus; (c) a bonus for the year of termination of employment equal to Mr. May’s target annual bonus, pro rated for the number of full months completed in the bonus year prior to such termination of employment; and (d) the Termination Health Benefits. If termination occurs within two years after a Change in Control and is initiated by Mr. May for Good Reason or by the Company without Cause, the amount described in clause (b) shall be subject to a multiplier of two, rather than one, and vesting of Mr. May’s Option (defined below) and RSUs (defined below) shall be accelerated, as described below. Mr. May’s entitlement to and retention of such benefits is contingent upon his execution of a release of claims against the Company, and such payments are subject to Mr. May’s continued compliance with the restrictive covenants and certain other provisions set forth in the Agreement, as described below. The Agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company, provisions requiring the assignment of certain intellectual property rights to the Company, and noncompetition and nonsolicitation restrictive covenants which remain in existence during and for one year (in the case of the noncompetition covenant) and two years (in the case of the nonsolicitation covenant) following Mr. May’s termination. In addition, pursuant to the terms of the Agreement, the Option Agreement (defined below), and the Restricted Stock Unit Agreement (defined below), Mr. May will be subject to the Company’s Equity Retention Policy, Compensation Recovery Policy and Stock Ownership Guidelines, each as in effect from time to time, with respect to annual or long-term incentive or other compensation paid to Mr. May pursuant to the Agreement or otherwise. |
