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Executive Vice President and General Counsel Employment Agreement - Sandra K. Michel

This is an actual contract by Krispy Kreme Doughnuts.

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Sectors: Retail
Governing Law: North Carolina, View North Carolina State Laws
Effective Date: April 23, 2007
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Exhibit 10.1


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT ( Agreement ) dated as of April 23, 2007 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 Sandra K. Michel (the Executive ).


The parties hereto agree as follows:


ARTICLE 1


DEFINITIONS


SECTION 1.01. . For purposes of this Agreement, the following terms have the meanings set forth below


Base Salary has the meaning set forth in Section 4.01.


Board means the Board of Directors of the Company.


Cause shall mean (i) the Executive failure or refusal to perform the Executive lawful and proper duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness or a court or governmental order ), (ii) the Executive conviction of or plea of to any felony (other than a traffic infraction), (iii) an act or acts on the Executive part constituting fraud, theft or embezzlement or that otherwise constitutes a felony under the laws of the United States or any state thereof which results or was intended to result directly or indirectly in gain or personal enrichment by the Executive at the expense of the Companies, or (iv) the Executive insubordination to the Companies most senior executive officer or willful violation of any material provision of the code of ethics of the Companies applicable to the Executive. In the case of any item described in the previous sentence, the Executive shall be given written notice of the alleged act or omission constituting Cause, which notice shall set forth in reasonable detail the reason or reasons that the Board believes the Executive is to be terminated for Cause, including any act or omission that is the basis for the decision to terminate the Executive. In the case of an act or omission described in clause (i) or (iv) of the definition of Cause, (A) if reasonably capable of being cured, the Executive shall be given 30 days from the date of such notice to effect a cure of such alleged act or omission constituting which, upon such cure to the reasonable satisfaction of the Board, shall no longer constitute a basis for Cause, and (B) the Executive shall be given an opportunity to make a presentation to the Board (accompanied by counsel or other representative, if the Executive so desires) at a meeting of the Board held promptly following such 30-day cure period if the Board intends to determine that no cure has occurred. At or following such meeting, the Board shall determine whether or not to terminate the Executive for and shall notify the Executive in writing of its determination and the effective date of such termination (which date may be no earlier than the date of the aforementioned Board meeting).



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Change in Control means any of the following events:


(a) the acquisition by any Person of ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the combined voting power of the Company then outstanding voting securities; provided, however, that a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Company then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its Subsidiaries, or (ii) any Person, which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition;


(b) consummation of (i) a merger or consolidation involving the Company if the shareholders of the Company, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such merger or consolidation, or (ii) a sale or other disposition of all or substantially all of the assets of the Company other than to a Person which is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of stock in the Company;


(c) a change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board shall be hereinafter referred to as the Board) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Company shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; provided further, however, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, including any successor to such Rule), or other actual or threatened solicitation or proxies or consents by or on behalf of a Person other than the Board, shall not be so considered as a member of the Incumbent Board; or


(d) approval by shareholders of the Company of a complete liquidation or dissolution of the Company.


Code means the Internal Revenue Code of 1986, as amended.


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Confidential Information means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with the business of the Company and its Subsidiaries and which constitutes trade secrets or information which they have attempted to protect, which may include, but is not limited to, trade , customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and programs, computer programs and software and financial information. It shall not include information (a) required to be disclosed by court or administrative order; (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (c) the disclosure of which is consented to in writing by the Company.


Date of Termination has the meaning set forth in Section 5.07.


Effective Date has the meaning set forth in Section 2.01.


Employment Period has the meaning set forth in Section 2.01.


Exchange Act means the Securities Exchange Act of 1934, as amended.


Good Reason shall mean (i) the failure of the Companies to pay any material amount of compensation to the Executive when due hereunder, (ii) the Executive is no longer the most senior legal officer and an executive vice president of (A) the Company or (B) in the event of a merger, consolidation or other business combination involving the Company, the successor to the Company business or assets or (C) if all or substantially all of the voting stock of the Company is held by another public company, such public company , (iii) the assignment to the Executive of any duties or responsibilities materially inconsistent with the Executive status under clause (ii) of this sentence or her failure at any time to report directly to the most senior executive officer of the applicable company described in such clause (ii), (iv) any failure by the Companies to maintain the Executive principal place of employment and the executive offices of the Companies within 25 miles of the Winston-Salem, North Carolina area, ( v ) any material breach by the Companies of this Agreement, or ( vi ) the term of the Employment Period ending as a result of the Companies giving the Executive notice of nonextension of the term of this Agreement in accordance with Section 5.01 solely at either the end of the initial term or the end of the first, second or third one year extensions of the term under Section 5.01 (but, for the avoidance of doubt, not at the end of any further extension of the term); provided, however, that for any of the foregoing to constitute Good Reason, the Executive must provide written notification of her intention to resign within 60 days after the Executive knows or has reason to know of the occurrence of any such event, and the Companies shall have 30 days (10 days in the case of a material breach related to payment of any amounts due hereunder) from the date of receipt of such notice to effect a cure of the condition constituting Good Reason, and, upon cure thereof by the Companies, such event shall no longer constitute Good Reason.


Notice of Termination has the meaning set forth in Section 5.06.


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Permanent Disability means the Executive becomes permanently disabled within the meaning of the long-term disability plan of the Companies applicable to the Executive, and the Executive commences to receive benefits under such plan.


Person means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.


Reimbursable Expenses has the meaning set forth in Section 4.04.


Securities Act means the Securities Act of 1933, as amended.


Subsidiary or Subsidiaries means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, 50 percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, 50 percent or more of the partnership or other similar ownership interests thereof are at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a 50 percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated 50 percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.


ARTICLE 2


EMPLOYMENT


SECTION 2.01. The Companies shall employ the Executive, and the Executive shall accept employment with the Companies, upon the terms and conditions set forth in this Agreement for the period beginning on the date set forth in the first paragraph of this Agreement (the Effective Date ) and ending as provided in Section 5.01 (the Employment Period ).


ARTICLE 3


POSITION AND DUTIES


SECTION 3.01. During the Employment Period, the Executive shall serve as Executive Vice President and General Counsel of the Company reporting directly to the most senior executive officer and shall be the Company most senior legal officer. During the Employment Period, the Executive also shall serve as Executive Vice President and General Counsel of KKDC and shall be KKDC most senior legal officer. The Executive shall have such responsibilities, powers and duties as may from time to time be prescribed by the Board or the most senior executive officer of the Companies; that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies or as may be reasonably required for the proper conduct of the business of the Companies. During the Employment Period, the Executive shall devote substantially all of her working time and efforts to the business and affairs of the Company and its Subsidiaries. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without the prior approval of the Board; provided, however, the Executive may serve on the board of directors of one for-profit corporation with the prior approval of the Board, which will not be unreasonably withheld , and the Executive may serve as a director of not-for-profit organizations or engage in other charitable, civic or educational activities, so long as the activities described in this proviso do not interfere with the Executive performance of her duties hereunder or result in any conflict of interest with the Companies. Executive shall be required to relocate her primary residence to Winston-Salem, North Carolina, or the surrounding area, within twelve (12) months of the execution of this Agreement, in order to be readily accessible to the Companies headquarters, but she shall not thereafter be required to relocate her residence or principal office to any place outside Forsyth County, North Carolina without her consent.


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ARTICLE 4


BASE SALARY AND BENEFITS


SECTION 4.01. During the Employment Period, the Executive will receive base salary from the Companies equal to $ 330,000 per annum (the Base Salary ). The Base Salary will be payable in accordance with the normal payroll practices of the Companies. Annually during the Employment Period the Board and/or its Compensation Committee shall review with the Executive her job performance and compensation, and if deemed appropriate by the Board, in its discretion, the Executive Base Salary may be increased but not decreased. After any such increase, the term Salary as used in this Agreement will thereafter refer to the increased amount.


SECTION 4.02. In addition to Base Salary, the Executive shall be eligible to be considered for an annual bonus, and the Executive annual target bonus shall be equal to 60 % of Base Salary. The Executive annual target bonus for the fiscal year of the Company including the Effective Date will be $198,000 (the Executive bonus being based upon a full year of service), of which $99,000 is guaranteed provided Executive remains employed with the Companies as of February 3, 2008, which bonus shall be paid when the bonuses for the Companies other executives are paid. The Compensation Committee of the Board and the Board shall set targets with respect to and otherwise determine Executive bonus in accordance with the Company then current incentive plans.


SECTION 4.03. During the Employment Period, the Executive shall be entitled to participate in all employee benefit, perquisite and fringe benefit plans and arrangements made available by the Companies to their executives and key management employees upon the terms and subject to the conditions set forth in the applicable plan or arrangement. Such benefits shall include medical, life and disability insurance provided in accordance with the policies of the Companies. Executive shall be entitled to four weeks of paid vacation annually during the Employment Period.


SECTION 4.04. The Companies shall reimburse the Executive for all reasonable expenses incurred by her in the course of performing her duties under this Agreement which are consistent with the Companies policies in effect from time to time with respect to travel, entertainment and other business expenses ( Reimbursable Expenses ), subject to the Companies requirements with respect to reporting and documentation of expenses. The Company shall reimburse Executive for expenses necessary to maintain her license to practice law, including continuing legal education requirements (to be fulfilled in a reasonably cost effective manner) and reasonable professional association membership fees .


SECTION 4.05. The Company shall grant to the Executive options to purchase 100,000 shares of its common stock (the Option Shares ) at an exercise price per share equal to the fair market value per share on the date of grant (the Price) which is expected to be April 23, 2007. One half of the options (specifically, 50,000 shares) will vest and become exercisable in four equal installments, on the first , second , third and fourth anniversaries of the Effective Date, so long as, except as otherwise set forth in the applicable stock option plan, the Executive employment continues through such vesting dates . The other half of the options (specifically, 50,000 shares) will vest based upon the performance of the Companies, with (i) one half of these options (specifically 25,000 shares) to vest if and when the following two conditions have occurred: (a) two years have elapsed since the Effective Date and (b) following the Effective Date, the closing price per share of the Company stock on the principal securities exchange on which the Company shares are then traded has exceeded 120% of the Exercise Price for a period of ten consecutive trading days and (ii) the remaining one half of these options (specifically 25,000 shares) to vest if and when the following two conditions have occurred: (a) two years have elapsed since the Effective Date and (b) following the Effective Date, the closing price per share of the Company stock on the principal securities exchange on which the Company shares are then traded has exceeded 140% of the Exercise Price for a period of ten consecutive trading days. The term of the options will be ten years from the date of grant, subject to earlier termination in the event the Executive employment terminates. The Option Shares will be registered as soon as practicable on Form S-8 under the Securities Act , if not currently registered . The Executive agrees that, in the event of her resignation, she will not, without the prior written consent of the Board, sell or otherwise transfer the Option Shares or the economic benefit thereof prior to the first anniversary of her termination of employment with the Companies, except that this Agreement shall not prevent the Executive from selling a number of Option Shares required to fund the exercise price of the option and her tax liability resulting from such exercise. The Option Shares shall be subject to the terms of the Krispy Kreme Doughnuts, Inc. 2000 Stock Incentive Plan, and the option grant agreement for Executive Option Shares shall have terms similar to those of other executive vice presidents of the Companies. The Option Shares shall also be subject to, and Executive agrees to comply with, the ownership guidelines adopted by the Companies as may be applicable to the option shares of the Companies executive vice presidents.


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SECTION 4.06. The Company shall grant to the Executive 20,000 restricted shares of the Company common stock (the Restricted Shares ) . Except as otherwise provided below, the Restricted Shares will vest, provided that the Executive employment continues through the applicable vesting dates, in four equal installments, on the first, second, third and fourth anniversaries of the Effective Date . The Executive hereby agrees to appropriate legends and transfer restrictions on the Restricted Shares in order to reflect such vesting provisions. The Restri
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