Exhibit 10.1
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement") dated as of January 18, 2005 is
made by and between Krispy Kreme Doughnuts, Inc. ("KKDI") and its subsidiaries
(together, "Krispy Kreme" or the "Company") and Xxxxxxx X. Xxxxxx ("Xxxxxx"),
Xxxxxx X. Xxxxxxx ("Xxxxxxx") and Xxxxx Xxxxx Xxxxxx LLC ("KZC"), a New Jersey
limited liability company, relating to Krispy Kreme.
Recitals:
WHEREAS, the parties hereto desire to enter into this Agreement to set
forth the basis on which Xxxxxx, Xxxxxxx and KZC will perform management
services for the Company, all as set forth more fully in this Agreement.
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein, and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. Engagement. The Company hereby engages KZC, Xxxxxx and Xxxxxxx, and KZC,
Xxxxxx and Xxxxxxx hereby accept such engagement, on the terms and conditions
set forth in this Agreement. The Company is hereby obtaining from KZC the
services of Xxxxxx, Xxxxxxx and additional individuals to work for the Company
(the "Associate Directors of Operations") as set forth below. All compensation
for the services and actions of KZC, Xxxxxx, Xxxxxxx and the Associate Directors
of Operations under this Agreement will be paid to KZC.
2. Duties.
(a) The provisions of this Section 2 shall be subject to the Company's
Articles of Incorporation, Bylaws (including without limitation the provision
that the business and affairs of the Company shall be managed by its Board of
Directors (the "Board")) and other governing documents, including committee
charters, as well as applicable laws, regulations and requirements of The New
York Stock Exchange, Inc. and/or any other securities exchange on which the
Company's securities are listed or traded.
(b) KKDI represents to KZC, Xxxxxx and Xxxxxxx that its Board of Directors
(the "Board") has duly adopted resolutions (collectively, the "Resolution")
appended hereto and incorporated herein by reference relating to the
authorization of this Agreement and electing Xxxxxx as the Chief Executive
Officer and Xxxxxxx as the President and Chief Operating Officer of the KKDI.
KZC will assign Associate Directors of Operations to serve in various capacities
with the Company and to perform other services required of KZC hereunder.
(c) KZC, Xxxxxx and Xxxxxxx shall be authorized to make decisions with
respect to all aspects of the management and operation of the Company's
business, including without limitation organization and human resources,
marketing and sales, logistics, finance and administration and such other areas
as they may identify, in such manner as they deem necessary or
appropriate in their reasonable judgment in a manner consistent with the
business judgment rule and the provisions of applicable law. KZC, and Xxxxxx,
Xxxxxxx and Associate Directors of Operations (each such person, a
"Representative" and collectively, the "Representatives"), shall not have any
authority to make decisions with respect to hiring, appointing or terminating
officers, executing transactions or otherwise committing the Company or its
resources other than in the ordinary course of business unless set forth in the
Resolution or otherwise approved by the Board. All decisions of KZC, Xxxxxx and
Xxxxxxx shall be discussed to the extent KZC, Xxxxxx and Xxxxxxx xxxx reasonably
appropriate with the member or members of the Company's management that KZC,
Xxxxxx and Xxxxxxx, in the exercise of their reasonable judgment, determines to
be appropriate prior to the implementation of such decisions and shall be
implemented by the management of the Company (other than KZC or the
Representatives), and any dispute between such management and KZC, Xxxxxx and
Xxxxxxx regarding the implementation of such decisions shall be resolved
definitively by the Board.
(d) KZC, Xxxxxx and Xxxxxxx shall be obligated to furnish such hours of
service at such locations as they deem necessary in their reasonable discretion
to perform their respective duties hereunder. Consequently, it is hereby
understood and agreed that neither Xxxxxx nor Xxxxxxx shall devote his full time
to this engagement. KZC, Xxxxxx and Xxxxxxx shall cause Associate Directors of
Operations to devote such portion of their business time to the performance of
services for the Company hereunder on behalf of KZC as deemed reasonably
necessary.
(e) In undertaking to provide the services set forth herein, KZC, Xxxxxx
and Xxxxxxx do not guarantee or otherwise provide any assurances that they will
succeed in building the Company's operational and financial health and stability
and, except for the amount referenced in Section 4(b) hereof, the Company's
obligation to provide the compensation specified under Section 4 hereof shall
not be conditioned upon any particular results being obtained by KZC, Xxxxxx and
Xxxxxxx.
(f) In view of the Company's present circumstances, the Company
acknowledges that Representatives may be required to make decisions with respect
to extraordinary measures quickly and that the depth of their analyses of the
information on which their decisions will be based may be limited in some
respects due to the availability of information, time constraints and other
factors. Moreover, each Representative shall be entitled, in performing his or
her duties hereunder on behalf of KZC, to rely on information disclosed or
supplied to him or her by the Company's management without verification or
warranty of accuracy or validity.
(g) KZC, Xxxxxx and Xxxxxxx will keep the Board fully apprised of their
findings, plans and activities.
3. Term. The term of KZC's engagement hereunder shall continue on a month
to month basis until terminated by either party at the end of any such month
upon written notice to the other party given at least ten days prior to the end
of such month.
4. Compensation. KZC, Xxxxxx, Xxxxxxx and Associate Directors of Operations
compensation hereunder shall consist of the following:
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(a) The Company shall pay a monthly fee of $400,000 to KZC, payable on a
pro-rated basis in immediately available funds upon execution of this Agreement,
and on the first day of each month thereafter throughout the term hereof
(subject to adjustment as provided below). KZC will keep records of all actual
hours charged by its professionals and expenses incurred in connection with this
matter. At the end of each month, KZC shall provide to the Company a statement
of actual hourly charges and expenses relating to the prior full month, and the
payment for the upcoming month shall be increased or decreased accordingly to
compensate KZC or the Company, as the case may be, for the prior month based
upon actual hourly charges and expenses incurred At the conclusion, termination
or completion of this Agreement, any overage or underage shall be paid or
refunded, as the case may be, and each of the Company and KZC, as the case may
be, agree to make the true-up payment
(b) Success Fee - To be mutually agreed upon between KZC and the Company
within 60 days of the date hereof.
(c) Expenses - Reimbursement of KZC, Xxxxxx and Xxxxxxx and Associate
Directors of Operations reasonable out-of-pocket expenses including, but not
limited to, costs of travel, reproduction, typing, computer usage, legal counsel
(including legal counsel retained to draft and enforce this Agreement), any
applicable state sales or excise tax and other direct expenses.
(d) Retainer - It is our policy in these cases to receive a security
retainer prior to the commencement of our activities to be held by us throughout
this agreement. The retainer secures final payment of our invoices for services
rendered. Given the magnitude and scope of the services you have requested, KZC
requires a retainer of $200,000. This retainer will be returned to you upon
payment in full of our outstanding invoices or applied to any outstanding
invoices at the conclusion of our engagement.
The Company shall pay to KZC the compensation set forth in Sections 4(a) and
4(c) hereof based upon the submission of monthly invoices by KZC setting forth
the number of hours each day expended by the Representatives on behalf of the
Company, a general description of the services provided and a detailed listing
of the expenses sought to be reimbursed. Such payment shall constitute full
payment for the services provided under this Agreement.
The Company acknowledges and agrees that the hours worked, the results achieved
and the ultimate benefit to the Company of the work performed in connection with
this engagement may be variable and that Company, KZC, Xxxxxx and Xxxxxxx have
taken this into account in setting the fees hereunder. No fee payable to any
other person or entity by the Company or any other party shall affect any fee
payable to KZC, Xxxxxx, Xxxxxxx and Associate Directors of Operations hereunder.
5. Confidentiality.
(a) Except as specified in this Section 5(a), the Company, including the
Board, will not publish, distribute or otherwise disclose in any manner any
information which was not prepared in connection with Krispy Kreme, which was
not public, and which was identified as being confidential that is received from
KZC, Xxxxxx and Xxxxxxx or a Representative,
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without KZC, Xxxxxx and Xxxxxxx 's or such Representative's prior written
approval. Such approval shall not be required if (i) the information sought is
required to be disclosed by an order binding on Krispy Kreme, KZC, Xxxxxx and
Xxxxxxx or a Representative and issued by a court having competent jurisdiction
over Krispy Kreme, KZC, Xxxxxx and Xxxxxxx and such Representative and such
information is disclosed only pursuant to the terms of such order, (ii) the
information is otherwise publicly available other than through disclosure by a
party in breach of a confidentiality obligation with respect thereto, or (iii)
the information is required to be disclosed by applicable law or regulation or
stock exchange requirement.
(b) KZC, Xxxxxx, Xxxxxxx agrees to treat, and will cause each
Representative to treat, any information received from the Company or its
representatives with utmost confidentiality, and except as provided in this
letter, will not publish, distribute or disclose in any manner any information
developed by or received from the Company or its representatives without the
Company's prior approval. Such approval shall not be unreasonably withheld. The
Company's approval is not needed if either the information sought is required to
be disclosed by an order binding on Krispy Kreme, KZC, Xxxxxx or Xxxxxxx, issued
by a court having competent jurisdiction over Krispy Kreme, KZC, Xxxxxx or
Xxxxxxx and such information is disclosed only pursuant to the terms of such
order, or such information is otherwise publicly available other than through
disclosure in breach of a confidentiality obligation under this Agreement by
them with respect thereto; provided, where practical, advance written notice is
provided to Krispy Kreme in sufficient time to permit Krispy Kreme to seek a
protective order.
6. Representations and Warranties.
As an inducement to KZC, Xxxxxx and Xxxxxxx and to enter into this
Agreement, the Company represents and warrants to KZC, Xxxxxx and Xxxxxxx as
follows:
(a) The Company is a corporation duly organized and validly existing under
the laws of the jurisdiction in which it was organized and has all requisite
corporate power to enter into this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein nor compliance by the
Company with any of the provisions hereof will: (i) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to it or (ii)
require the consent, approval, permission or other authorization of, or
qualification or filing with or notice to, any court, arbitrator or other
tribunal or any governmental, administrative, regulatory or self-regulatory
agency or any other third party.
(c) This Agreement has been duly authorized, executed and delivered by the
Company and constitutes the legal, valid and binding agreement of the Company.
7. Indemnification.
(a) The Company shall indemnify and hold harmless Cooper, Panagos, the
Associate Directors of Operations, KZC and its principals, and other KZC
employees, representatives or agents (including counsel) (collectively, the "KZC
Indemnitees") from and against any and all losses, claims, damages, liabilities,
penalties, judgments, awards, costs, fees, expenses and dis-
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bursements, including without limitation the reasonable costs, fees, expenses
and disbursements, as and when incurred, from the first dollar, of
investigating, preparing or defending any action, suit, proceeding or
investigation (whether or not in connection with proceedings or litigation in
which any KZC Indemnitee is a party) (any such amount being hereinafter
sometimes referred to as an "Indemnifiable Loss"), directly or indirectly caused
by, relating to, based upon, arising out of or in connection with this
engagement of KZC, Xxxxxx and Xxxxxxx by the Company or the performance by KZC,
Xxxxxx and Xxxxxxx of any services rendered pursuant to such engagement, unless
there is a final non-appealable order of a court of competent jurisdiction
finding KZC Indemnitiees directly liable for gross negligence or willful
misconduct. KZC shall provide Krispy Kreme with prompt notice of any claim under
this paragraph. Krispy Kreme and KZC shall jointly control any settlement on any
action for which any KZC Indemnitee seeks indemnity; provided, however, that
Krispy Kreme shall be entitled on its own to effect the settlement of any
pending or threatened proceeding so long as such settlement (i) includes an
unconditional release of KZC, in form and substance reasonably satisfactory to
KZC, from all liability on claims that are the subject matter of such proceeding
and (ii) does not include any statement as to or any admission of fault,
culpability or failure to act by or on behalf of KZC.
(b) If KZC, Xxxxxx and Xxxxxxx, any Representative or any principal or
agent of KZC is required to testify, prepare for and/or appear at a deposition
or produce documents at any time after the expiration or termination of this
Agreement at any administrative or judicial proceeding relating to any services
provided by KZC, Xxxxxx and Xxxxxxx hereunder, then KZC shall be entitled to be
compensated by the Company for KZC, Xxxxxx, Xxxxxxx and the Associate Directors
of Operations' associated time charges at the regular hourly rates in effect at
the time and to be reimbursed for reasonable out-of-pocket expenses, including
reasonable counsel fees, unless KZC is found directly liable for gross
negligence or willful misconduct.
(c) The Company has furnished to KZC, Xxxxxx and Xxxxxxx a true, correct
and complete copy of the following: Executive Liability and Entity Securities
Liability Policy No. 8165-4665 and Fiduciary Liability Policy No. 8122-4811,
both issued to the Company by the Chubb Group of Insurance Companies, Punitive
Damage Liability Insurance Policy No. 5373477 issued by Starr Excess Liability
Insurance International Limited, Employment Practices Liability Policy No.
000-00-00 issued by American International Specialty Lines Insuance Company, and
the underlying Excess Policies, including American International Specialty Lines
Insuance Company Policy No. 000-00-00 and 000-00-00, RLI Insurance Company
Policy No. EPG00030424, Ace American Insurance Policy No. DOCG21649843002, St.
Xxxx Mercury Insurance Policy No. 512CM0939, Allied World Assurance Policy No.
7249603, Philadelphia Insurance Policy PHSD084531, Landmark American Insurance
Policy No. LHS615551 and Liberty Mutual Insurance Policy No. 190369-014
(collectively, the "Policies" or individually refered to as a "Policy") issued
to the Company by various insurers as set forth herein (collectively, the
"Insurer"). The Company represents that, to the best of the Company's knowledge,
the Policies are in full force and effect and that no event has occurred that
constitutes or, with the passage of time or giving of notice would constitute,
an event of default thereunder or that would otherwise give the Insurer any
right to cancel such Policies. Promptly, the Company shall notify the Insurer of
the election of Xxxxxx as the Chief Executive Officer, Xxxxxxx as the President
and Chief Operating Officer and of the appointment of any Associate Directors of
Operations who become an officer of the Company. The Company shall cause its
insurance broker to send copies of all documentation and other communications
regarding the Policies, including without limitation any renewal or cancellation
thereof, to the attention of KZC, in the manner set forth
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herein, and KZC, Xxxxxx, Xxxxxxx and any Associate Directors of Operations who
become officers of the Company shall have all indemnities available to the
officers of the Company pursuant to the Company's Articles of Incorporation and
Bylaws. As long as the same can be done at a commercially reasonable cost,
during the term of this Agreement, the Company shall maintain directors and
officers liability insurance coverage, employment practices insurance coverage
and fiduciary liability insurance coverage comparable as to terms (including
without limitation the provisions or any similar provision regarding extension
of the discovery period thereunder) and amounts as that provided under the
Policies, with any such replacement coverage being obtained from an insurer with
a rating from a nationally recognized rating agency not lower than that of the
Insurer presently providing such coverage. Upon any cancellation or nonrenewal
of any Policies by any Insurer, as long as the same can be done at a
commercially reasonable cost, the Company shall exercise its rights under the
applicable clause of the relevant Policy to extend the claim period for a
one-year "discovery period" and shall exercise such rights and pay the premium
required thereunder within the 30-day period specified therein. The Company
shall use commercially reasonable efforts, in connection with the next renewal
of each Policy, to negotiate to obtain an option to extend the discovery period
set forth in such Policies from one to three years, as long as the same can be
obtained at a commercially reasonable cost.
8. Limitations on Liability. The Company agrees that Xxxxxx and Xxxxxxx,
KZC and its personnel will not be liable to the Company for any claims,
liabilities, or expenses relating to this engagement in excess of the fees paid
by them to KZC pursuant to this Agreement, unless there is a final
non-appealable order of a Court of competent jurisdiction finding KZC, Xxxxxx
and Xxxxxxx directly liable for gross negligence or willful misconduct. In no
event will KZC, Xxxxxx, Xxxxxxx and Associate Directors of Operations, or their
personnel be liable for consequential, special, indirect, incidental, punitive
or exemplary loss, damages or expenses relating to this engagement. These
limitations on liability provisions extend to the employees, representatives,
agents and counsel of KZC. The limitation on liability and indemnification
contained in this Agreement shall survive the completion or termination of this
Agreement.
9. Independent Contractor / Benefits; Taxes. The parties intend that KZC,
Xxxxxx and Xxxxxxx and any Associate Director of Operations shall render
services hereunder as an independent contractor, and nothing herein shall be
construed to be inconsistent with this relationship or status. KZC, Xxxxxx and
Xxxxxxx and any Associate Director of Operations shall not be entitled to any
benefits paid by the Company to its employees. KZC, Xxxxxx and Xxxxxxx and any
Associate Director of Operations shall be solely responsible for any tax
consequences applicable to KZC, Xxxxxx and Xxxxxxx and any Associate Director of
Operations by reason of this Agreement and the relationship established
hereunder, and the Company shall not be responsible for the payment of any
federal, state or local taxes or contributions imposed under any employment
insurance, social security, income tax or other tax law or regulation with
respect to KZC, Xxxxxx or Xxxxxxx and/or any Associate Director of Operations'
performance of management services hereunder. Notwithstanding anything in this
Agreement to the contrary, the Company shall be entitled to effect any
withholding from any amount payable by it pursuant to this Agreement to the
extent required by law.
10. Offer of Employment. The Company agrees to promptly notify KZC if it
extends (or solicits the possible interest in receiving) an offer of employment
to an employee or principal of KZC and agrees that it will pay KZC a cash fee,
upon hiring, equal to 150% of the
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aggregate first year's annualized compensation, including any guaranteed or
target bonus, to be paid to KZC's former principal or employee that the Company
hires, at any time up to one year subsequent to the date of the final invoice
rendered by KZC, Xxxxxx and Xxxxxxx with respect to this Agreement.
11. Trial. The Company agrees that neither it nor any of its assignees or
successors shall (a) seek a jury trial in any lawsuit, proceeding, counterclaim
or any other action based upon, or arising out of or in connection with, the
engagement of KZC, Xxxxxx and Xxxxxxx by the Company or any services rendered
pursuant to such engagement, or (b) seek to consolidate any such action with any
other action in which a jury trial cannot be or has not been waived, unless such
consolidation is mandatory. The provisions of this paragraph have been fully
discussed by the Company, KZC, Xxxxxx and Xxxxxxx and these provisions shall be
subject to no exceptions. No party has agreed with or represented to any other
party that the provisions of this section will not be fully enforced in all
instances.
12. Jurisdiction. The Company hereby irrevocably and unconditionally (a)
submits for itself and its property in any legal action or proceeding relating
to the engagement of KZC, Xxxxxx and Xxxxxxx by the Company or any services
rendered pursuant to such engagement, to the non-exclusive general jurisdiction
of the State of New York, the Courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof; (b)
consents that any such action or proceeding may be brought in such courts and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same; (c)
agrees that service of process in any such action or proceeding may be effected
in any manner permitted by law and agrees that nothing herein shall affect the
right to effect service of process in any manner permitted by law or shall limit
the right to xxx in any other jurisdiction; and (d) waives, to the maximum
extent not prohibited by law, any right it may have to claim or recover in any
legal action or proceeding referred to in this subsection any special, exemplary
or punitive or consequential damages.
13. Survival of Agreement. Except as provided in this Agreement, the
obligations set forth under the above captioned Confidentiality,
Indemnification, Limitation on Liability, Compensation, Offer of Employment,
Trial and Jurisdiction sections shall survive the expiration, termination, or
supersession of this Agreement.
14. Conflicts. KZC, Xxxxxx and Xxxxxxx confirm that no employee of KZC has
any financial interest or business connection with the Company. Additionally,
KZC has run an initial conflict check through Xxxxx, Inc.'s database, which is
an internal computer database containing names of individuals and entities that
are present or recent former clients of Xxxxx, Inc. and its subsidiaries,
including KZC. Xxxxx and McLennan Companies ("MMC"), KZC's indirect parent, and
its subsidiaries and affiliates do not maintain a conflict checking system. The
client names of certain of MMC's subsidiaries and affiliates were loaded into
Xxxxx, Inc.'s conflict checking database for purposes of clearing conflicts.
However, due to MMC's size, at this time it is not possible to identify all of
MMC's relationships to clients. Based upon the information presently available,
we are aware of no conflicts in connection with this engagement. It is
understood and agreed that KZC may accept the representation of other persons
whose general
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business interests may compete with Company's interests or be adverse to
Company's interests, so long as there is no actual or direct conflict of
interest.
15. Personnel. The Company hereby understands and agrees that from time to
time KZC utilizes employees of our parent, Xxxxx, Inc. and its other
subsidiaries. In that event, their rates will be consistent with the rates
charged by KZC personnel.
16. Amendments. Any amendment to this Agreement shall be made in writing
and signed by the parties hereto.
17. Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, then such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted or as if such provision had not
been originally incorporated herein, as the case may be.
18. Construction. This Agreement shall be construed and interpreted in
accordance with the internal laws of the State of New York.
19. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by certified mail, postage
prepaid or by an overnight delivery service, charges prepaid; addressed to such
party at the address set forth below or such other address as may hereafter be
designated in writing by the addressee to the addressor:
If to the Company:
KRISPY KREME DOUGHNUTS, INC.
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx-Xxxxx, XX 00000
Attention: General Counsel
If to KZC:
XXXXX XXXXX XXXXXX LLC
000 Xxxxxxxxxx Xxxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx
General Counsel
If to XXXXXX:
XXXXX XXXXX XXXXXX LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxxxx X. Xxxxxx
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If to XXXXXXX:
XXXXX XXXXX XXXXXX LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxxx X. Xxxxxxx
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.
20. Waivers. No claim or right arising out of a breach or default under
this Agreement shall be discharged in whole or in part by a waiver of that claim
or right unless the waiver is supported by consideration and is in writing and
executed by the aggrieved party hereto or his or its duly authorized agent. A
waiver by any party hereto of a breach or default by the other party hereto of
any provision of this Agreement shall not be deemed a waiver of future
compliance therewith, and such provisions shall remain in full force and effect.
21. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of which shall together
constitute one and the same instrument.
22. Entire Agreement. This Agreement and the other documents delivered
pursuant hereto, if any, constitute the full and entire understanding and
agreement among the parties hereto with regard to the subjects hereof and
thereof and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of
the date first above written.
KRISPY KREME DOUGHNUTS, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Title: Chairman
XXXXX ZOLFO XXXXXX LLC
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Title: Chairman
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
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