AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 10.3
AMENDMENT
TO EMPLOYMENT AGREEMENT (“Amendment”) dated as of December 15, 2008 (“Amendment
Effective Date”) among Krispy Kreme Doughnut Corporation, a North Carolina
Corporation (“KKDC”), Krispy Kreme Doughnuts, Inc., a North Carolina Corporation
(the “Company” and together with KKDC, the “Companies”) and Xxxxxxx X. Xxxxxx
(the “Executive”).
WHEREAS,
the Companies and the Executive are parties to an Employment Agreement dated as
of November 7, 2007 (the “Agreement”);
WHEREAS,
the Companies and the Executive wish to amend the Agreement as set forth herein
in order to comply with Section 409A of the Internal Revenue Code of 1986, as
amended;
NOW,
THEREFORE, in consideration of the mutual covenants herein contained, the
Companies and the Executive hereby agree as follows:
1. The
definition of “Change in Control” in Section 1.01 of the Agreement is amended by
adding the following sentence to the end thereof:
“provided, however, that an
event will be treated as a “Change in Control” for purposes of this Agreement
only if it is also a “change in control event” (as defined in Treas. Reg.
Section 1.409A-3(i)(5)) with respect to the Company.”
2. Section
5.03 is amended to read in its entirety as follows:
“Termination for Good Reason or
Without Cause. Except as otherwise set forth in Section 5.09 below, if
the Employment Period shall be terminated (a) by the Executive for Good Reason,
or (b) by the Companies not for Cause, provided the Executive has executed, on
or before the date that is fifty (50) days following the date of his termination
of employment, an irrevocable (except to the extent required by law to be
revocable) general release of claims in the form attached hereto as Exhibit A,
and does not revoke such release prior to the end of the seven day statutory
revocation period, the Executive shall be entitled solely to the following: (i)
Base Salary through the Date of Termination, paid on the Companies’ normal
payroll payment date; (ii) an amount equal to one times the Base Salary,
provided that, the Executive shall be entitled to any unpaid amounts only if the
Executive has not breached and does not breach the provisions of Sections 6.01,
7.01, 8.01 or 9 below; (iii) a bonus for the year of termination of employment
equal to the Executive’s target annual bonus for such year pro rated for the
number of full months during the bonus year prior to such termination of
employment, to be paid, subject to Section 13.14 below, 60 days following such
termination of employment; and (iv) medical benefits as provided in Section 5.05
below. The Executive’s entitlements under any other benefit plan or program
shall be as determined thereunder, except that duplicative severance benefits
shall not be payable under any other plan or program. Amounts described in
clause (ii) above will be paid, subject to Section 13.14 below, in
twelve
(12) equal installments, the first two (2) of which shall be paid on the date
that is two (2) months following the Date of Termination and the next ten (10)
of which will be paid in ten (10) equal monthly installments commencing on the
date that is three (3) months following the Date of Termination and continuing
on each of the next nine (9) monthly anniversaries of the Date of
Termination. In addition, promptly following any such termination,
the Executive shall be reimbursed for all Reimbursable Expenses incurred by the
Executive prior to such termination.”
3. Section
5.07 is amended to read in its entirety as follows:
“Date of Termination. “Date of Termination” shall
mean (a) if the Employment Period is terminated as a result of a Permanent
Disability, five days after a Notice of Termination is given, (b) if the
Employment Period is terminated as a result of his death, on the date of his
death, (c) if the Employment Period terminates due to expiration of the term of
this Agreement, the date the term expires, and (d) if the Employment Period is
terminated for any other reason, the later of the date of the Notice of
Termination and the end of any applicable correction period.”
4. Section
5.09 of the Agreement shall be amended to read in its entirety as
follows:
“Termination for Good Reason or
Without Cause Following a Change in Control. If the Employment
Period shall be terminated within two years after a Change in Control (a) by the
Executive for Good Reason, or (b) by the Companies not for Cause, then
Executive’s compensation and benefits upon termination shall be governed by this
Section 5.09 instead of the provisions of Section 5.03 above, and, provided the
Executive has executed, on or before the date that is fifty (50) days following
the date of his termination of employment, an irrevocable (except to the extent
required by law to be revocable) general release of claims in the form attached
hereto as Exhibit A, and does not revoke such release prior to the end of the
seven day statutory revocation period, the Executive shall be entitled solely to
the following: (i) Base Salary through the Date of Termination, paid on the
Companies’ normal payroll payment date; (ii) an amount equal to 1.25 times the
sum of his Base Salary and his target annual bonus for the year of termination,
provided that, the Executive shall be entitled to any unpaid amounts only if the
Executive has not breached and does not breach the provisions of Sections 6.01,
7.01, 8.01 or 9 below; (iii) a bonus for the year of termination of employment
equal to the Executive’s target annual bonus for such year pro rated for the
number of full months during the bonus year prior to such termination of
employment; and (iv) medical benefits as provided in Section 5.05. The
Executive’s entitlements under any other benefit plan or program shall be as
determined thereunder, except that duplicative severance benefits shall not be
payable under any other plan or program. In addition, promptly
following any such termination, the Executive shall be reimbursed for all
Reimbursable Expenses incurred by the Executive prior to such
termination. The amounts due under clauses (ii) and (iii) of this
Section 5.09 shall be paid, subject to Section 13.14 below, 60 days following
such termination of employment.”
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5. The
fourth sentence of Section 9.01 shall be amended to read in its entirety as
follows:
“Notwithstanding
the foregoing, if the Executive’s termination of employment occurs at the end of
the Employment Period due to the Companies giving written notice after the fifth
anniversary of the Effective Date pursuant to Section 5.01 of its intention not
to extend the Employment Period, this Section 9.01 will only apply if the
Companies elect and agree in writing to pay the Executive his Base Salary and
his annual target bonus in effect for the year during which his employment is
terminated for an additional one-year period following the termination of
employment, such amount to be paid, subject to Section 13.14 below, in twelve
(12) equal installments, the first two (2) of which shall be paid on the date
that is two (2) months following the date of the Executive’s “separation from
service” with the Companies (as defined in Section 5.10 above) and the next ten
(10) of which will be paid in ten (10) equal monthly installments commencing on
the date that is three (3) months following such date and continuing on each of
the next nine (9) monthly anniversaries of such date; provided, however, that if such
termination of employment is within two years after a Change in Control, such
amount shall instead be paid, subject to Section 13.14 below, 60 days following
the Executive’s “separation from service” with the Companies.”
6. The
Agreement shall be amended by adding the following Section 12.05:
“SECTION
12.05. Anything in this Agreement to the contrary
notwithstanding, in no event shall any payment by the Company pursuant to this
Article 12 be made later than the end of the Executive’s taxable year next
following the Executive’s taxable year in which he remits the related
taxes.”
7. Section
13.01 shall be amended by adding the following to the end thereof:
“Following
the final determination of the dispute in which, based on the outcome of the
dispute, the Executive is, in accordance with this Section 13.01, entitled to
have his costs borne by the Companies, the Companies shall pay all such
reasonable costs within ten (10) days following written demand therefor
(supported by documentation of such costs) by the Executive, and the Executive
shall make such written demand within sixty (60) days following the final
determination of the dispute; provided, however, that such
payment shall be made no later than on or prior to the end of the calendar year
following the calendar year in which the costs are
incurred. Notwithstanding the foregoing, in the event a final
determination of the dispute has not been made by December 20 of the year
following the calendar year in which the costs are incurred, the Companies
shall, within ten (10) days after such December 20, reimburse such reasonable
costs (supported by documentation of such costs) incurred in the prior taxable
year; provided,
however, that
the Executive shall return such amounts to the Companies within ten (10)
business days following the final determination if (x) in the case of an
arbitration prior to a Change in Control, the Executive does not prevail on a
majority of the material issues in the dispute,
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or (y) in
the case of an arbitration after a Change in Control, the Executive does not
prevail on at least one material issue in the dispute. The amount of
any costs eligible for payment under this Section 13.01 during a calendar year
will not affect the amount of any costs eligible for payment under this Section
13.01 in any other taxable year.”
8. Section
13.14 of the Agreement shall be amended to read in its entirety as
follows:
“(a) It
is intended that this Agreement will comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and any regulations and guidelines
promulgated thereunder (collectively, “Section 409A”), to the extent the
Agreement is subject thereto, and the Agreement shall be interpreted on a basis
consistent with such intent. If an amendment of the Agreement is
necessary in order for it to comply with Section 409A, the parties hereto will
negotiate in good faith to amend the Agreement in a manner that preserves the
original intent of the parties to the extent reasonably possible. No
action or failure to act pursuant to this Section 13.14 shall subject the
Companies to any claim, liability, or expense, and the Companies shall not have
any obligation to indemnify or otherwise protect the Executive from the
obligation to pay any taxes, interest or penalties pursuant to Section 409A of
the Code.
(b) Notwithstanding
any provision to the contrary in this Agreement, if the Executive is deemed on
the date of his “separation from service” (within the meaning of Treas. Reg.
Section 1.409A-1(h)) with the Companies to be a “specified employee”
(within the meaning of Treas. Reg. Section 1.409A-1(i)), then with regard
to any payment or benefit that is considered deferred compensation under Section
409A payable on account of a “separation from service” that is required to be
delayed pursuant to Section 409A(a)(2)(B) of the Code (after taking into account
any applicable exceptions to such requirement), such payment or benefit shall be
made or provided on the date that is the earlier of (i) the expiration of the
six (6)-month period measured from the date of the Executive’s “separation from
service,” or (ii) the date of the Executive’s death (the “Delay
Period”). Upon the expiration of the Delay Period, all payments and
benefits delayed pursuant to this Section 13.14 (whether they would have
otherwise been payable in a single sum or in installments in the absence of such
delay) shall be paid or reimbursed to the Executive in a lump sum and any
remaining payments and benefits due under this Agreement shall be paid or
provided in accordance with the normal payment dates specified for them
herein. Notwithstanding any provision of this Agreement to the
contrary, for purposes of any provision of this Agreement providing for the
payment of any amounts or benefits upon or following a termination of
employment, references to Executive’s “termination of employment” (and corollary
terms, including end of the Employment Period) with the Companies shall be
construed to refer to Executive’s “separation from service” (within the meaning
of Treas. Reg. Section 1.409A-1(h)) with the Companies.
(c) With
respect to any reimbursement or in-kind benefit arrangements of the Companies
and its subsidiaries that constitute deferred compensation for purposes of
Section 409A, except as otherwise permitted by Section 409A, the following
conditions shall be applicable: (i) the amount eligible for reimbursement,
or in-kind benefits
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provided,
under any such arrangement in one calendar year may not affect the amount
eligible for reimbursement, or in-kind benefits to be provided, under such
arrangement in any other calendar year (except that the health and dental plans
may impose a limit on the amount that may be reimbursed or paid), (ii) any
reimbursement must be made on or before the last day of the calendar year
following the calendar year in which the expense was incurred, and (iii) the
right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit. Whenever a payment under this Agreement
specifies a payment period with reference to a number of days (e.g., “payment shall
be made within thirty (30) days after termination of employment”), the actual
date of payment within the specified period shall be within the sole discretion
of the Companies. Whenever payments under this Agreement are to be
made in installments, each such installment shall be deemed to be a separate
payment for purposes of Section 409A.”
9. Except as
set forth herein, the Agreement shall continue in full force and effect in
accordance with its terms.
10. All
questions concerning the construction, validity and interpretation of this
Amendment and the Agreement shall be construed and governed in accordance with
the laws of the state of North Carolina, without regard to principles of
conflict of laws.
11. This
Amendment may be executed simultaneously in two or more counterparts, any one of
which need not contain the signatures of more than one party, but all of which
counterparts taken together will constitute one and the same
agreement.
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IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
and year first above written.
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KRISPY
KREME DOUGHNUT CORPORATION
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By: /s/ Xxxxxxx X.
Xxxx
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Printed Name: Xxxxxxx X. Xxxx
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Title: Chief Financial Officer
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KRISPY
KREME DOUGHNUTS, INC.
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By: /s/ Xxxxx X.
Xxxxxx
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Printed
Name: Xxxxx X. Xxxxxx
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Title: Chief Executive Officer
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/s/ Xxxxxx X.
Xxxxxx
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Xxxxxxx
X. Xxxxxx
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