Employment Agreement - Krispy Kreme Doughnuts Inc. and R. Frank Murphy
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (THE "AGREEMENT") is made effective the 22nd
day of April, 2002, by and between KRISPY KREME DOUGHNUTS, INC. a North Carolina
corporation (the "Company"), and R. FRANK MURPHY (the "Executive").
RECITAL
The Executive is being hired as Executive Vice President and General
Counsel, reporting to the CEO, and the parties have negotiated this Agreement in
consideration of the Executive's valuable services and leadership.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties do hereby agree as follow:
1. EFFECTIVE DATE. This Agreement shall be effective upon, and
from and after, the date set forth above.
2. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(a) "Disability" shall mean the Executive becoming
disabled and unable to continue his employment with the
Company as defined in the Company's then applicable disability
policy for the Senior Management of the Company.
(b) "Discharge" shall mean the termination by the Company
of the Executive's employment during the Period of Employment
for any reason other than (i) Good Cause, (ii) death of the
Executive, (iii) Disability of the Executive, or (iv)
Retirement of the Executive.
(c) "Expiration Date" means the date that the Period of
Employment (as it may have been extended) expires.
(d) "Good Cause" has its meaning as defined in Section 6
hereof.
(e) "Period of Employment" shall be for a term of three
years beginning April 22, 2002 and ending April 21, 2005;
provided, however, that commencing April 22, 2003, the
Executive's Period of Employment shall automatically be
extended for successive one-year periods each year as of April
22 of each year unless the Company gives Executive written
notice of nonextension on or before that date.
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(f) "Retirement" shall mean a time when the sum of the
Executive's age and employment with the Company equals or
exceeds 65.
(g) "Senior Management" shall mean the senior executive
management of the Company currently consisting of the chief
executive officer, the president, and the executive vice
presidents.
(h) "Stock Option Plan" shall mean the Krispy Kreme
Doughnut Corporation 1998 Stock Option Plan and/or the Krispy
Kreme Doughnuts, Inc. 2000 Stock Incentive Plan.
(i) "Termination Date" shall mean:
(i) If the Executive's employment is terminated
by reason of death, the Executive's date of death;
(ii) If the Executive's employment is terminated
by reason of Retirement, the date of his Retirement;
(iii) If the Executive's employment is terminated
by reason of Disability, the date of his Disability;
(iv) If the Executive's employment is terminated
for Good Cause, the date specified in the written
notice of termination given by the Company pursuant
to Section 6(a);
(v) If the Executive's employment is terminated
by reason of a Discharge, the effective date of
Discharge;
(vi) If the Executive's employment is terminated
by reason of non-extension of the Period of
Employment, the Expiration Date; and
(vii) If the Executive voluntarily terminates his
employment as permitted by Section 6(b), the
effective date of his termination of employment.
3. EMPLOYMENT; PERIOD OF EMPLOYMENT.
The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, for the Period of Employment, in the
position and with the duties and responsibilities set forth in Section 4, upon
the terms and subject to the conditions of this Agreement.
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4. POSITION, DUTIES AND RESPONSIBILITIES. During the Period of
Employment, the executive shall
(a) serve as Executive Vice President and General Counsel
of the Company, reporting to the CEO, and its subsidiaries or
in such other Senior Management position as may be assigned to
him by mutual agreement with the Board of Directors. The
Executive shall be employed hereunder in Forsyth County, North
Carolina and he shall not be required to relocate his
residence or principal office to any place outside Forsyth
County, North Carolina without his consent; and
(b) devote his best efforts to the furtherance of the
interest of the Company and the performance of his duties
hereunder and agrees not to engage in any competition
whatsoever, either directly or indirectly, with the Company or
any of its subsidiaries or affiliates. The Executive shall be
allowed holiday and vacation periods, leaves for periods of
illness or incapacity and personal leaves in accordance with
the Company's regular practices for members of Senior
Management.
5. COMPENSATION, COMPENSATION PLANS AND BENEFITS. During the
Period of Employment, the Executive shall be compensated as follows:
(a) He shall receive an annual base salary equal to
$300,000, with annual increases in accordance with the
Company's regular practices for members of Senior Management.
In addition, he shall receive non-incentive compensation
(including automobile allowance). Such compensation shall be
paid in accordance with the Company's regular schedule for
payment of salaried employees.
(b) He shall receive such other bonuses as are afforded
the Company's Senior Management and be eligible to participate
in all of the Company's executive compensation plans provided
to members of Senior Management of the Company from time to
time.
(c) He shall be entitled to participate in and receive
other employee benefits, which may include, but are not
limited to, benefits under any life, health, accident,
disability, medical, dental and hospitalization insurance
plans, use of a Company automobile or an automobile allowance,
and other perquisites and benefits, as are provided to members
of Senior Management of the Company from time to time.
(d) He shall be entitled to be reimbursed for the
reasonable and necessary out-of-pocket expenses, including
entertainment, travel and similar items, and all expenses
necessary to maintain law license and professional
memberships, incurred by him in performing his duties
hereunder upon presentation of such documentation thereof as
the Company may normally and customarily require of the
members of Senior Management.
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(e) The Company agrees to pay the Executive's dues and
assessments for membership in Forsyth Country Club and in the
Piedmont Club.
6. TERMINATION OF EMPLOYMENT. During the Period of Employment:
(a) Termination for Good Cause.
(i) The Company may terminate the Executive's
employment for Good Cause. Termination of employment shall be
deemed to have been for Good Cause if (i) the Executive
habitually neglects or refuses to do his duties and fails to
cure such neglect within ten (10) days after having received
written notice of same from the Company or (ii) the Executive
commits (a) acts constituting a felony or (b) acts of gross
negligence or willful misconduct to the material detriment of
the Company.
(ii) Termination by the Company for Good Cause
may be made only by written notice of termination from the
Company to the Executive that has been specifically approved
in advance by the Board of Directors. Such notice shall set
forth all acts constituting such neglect or refusal to do
duties or gross negligence or willful misconduct as is
applicable.
(b) Voluntary Termination.
The Executive may voluntarily terminate his
employment with the Company upon 30 days' prior written
notice.
(c) Termination by Reason of Death, Disability, or
Retirement.
The employment of the Executive shall be terminated
by death, Disability or Retirement of the Executive.
7. EFFECT OF TERMINATION.
(a) If the Executive's employment is terminated by reason
of death, Retirement or voluntary termination of employment,
the Company shall pay the Executive (or his estate in the case
of his death) his base salary, non-incentive compensation
(including automobile allowance), bonuses and benefits as
provided in Section 5 through the Termination Date and (in the
case of his death) a death benefit of $5,000. Any payments and
benefits due to the Executive under employee benefit plans and
programs of the Company, including the Stock Option Plan,
shall be determined in accordance with the terms of such
benefit plans and programs; provided, however, that all
options held by the Executive under the Stock Option Plan
shall become 100% vested if the Executive's employment is
terminated by reason of death or Retirement.
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(b) If the Executive's employment is terminated by reason
of Disability, the Company shall pay the Executive his base
salary, non-incentive compensation, bonuses and benefits for a
period of six months following the date of Disability.
Thereafter, this Agreement terminates and the Executive shall
receive those benefits payable to him under the applicable
disability insurance plan provided by the Company. Any
payments and benefits due to the Executive under employee
benefit plans and programs of the Company, including the Stock
Option Plan, shall be determined in accordance with the terms
of such benefit plans and programs; provided, however, that
all options held by the Executive under the Stock Option Plan
shall become 100% vested as of the Executive's termination of
employment by reason of Disability.
(c) In the event of the Executive's Discharge by the
Company,
(i) the Company shall pay the Executive
A. his then current annual base salary
and non-incentive compensation (including
automobile allowance) and provide the
Executive with his then current benefits (as
provided in Section 5) through the
Expiration Date pursuant to Section 2(e) to
the extent permitted by law and unless
Executive elects a lump sum payment pursuant
to subparagraph (f); and
B. within thirty (30) days from the
Termination Date (1) a lump sum equal to
Executive's then current monthly base salary
amount multiplied by the number of months
between the month of Discharge and the
preceding February, and (2) a lump sum
amount equal to the sum of adding three
times the Executive's bonus calculated at
50% of his base salary for the then current
fiscal year, discounted at the rate of six
percent (6%) per annum. The latter payment
is full and final satisfaction of all the
Company's obligations for bonus and/or other
incentive payments.
(ii) Any payments and benefits due to executive
under the employee benefit plans and programs of the
Company, including the Stock Option Plan, shall be
determined in accordance with the terms of such
benefit plans and programs; provided, however, that
all options held by the Executive under the Stock
Option Plan shall become 100% vested as of the
Termination Date.
(d) In the event of the Company's nonextension of the
Employment Period, Executive shall continue to be employed by
the Company pursuant to this Agreement through the Expiration
Date, and his employment shall be terminated as of the
Expiration Date. Then, the following provisions shall apply:
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(i) within thirty (30) days from the Termination
Date, the company shall pay Executive (1) a lump sum
equal to Executive's then current annual base salary,
and (2) a lump sum amount equal to three times the
Executive's bonus calculated at 50% of his base
salary for the then current fiscal year discounted at
the rate of six percent (6%) per annum. The latter
payment is full and final satisfaction of all the
Company's obligations for bonus and/or other
incentive payments.
(ii) Any payments and benefits due to Executive
under employee benefit plans and programs of the
Company, including the Stock Option Plan, shall be
determined in accordance with the terms of such
benefit plans and programs; provided, however, that
all options held by the Executive under the Stock
Option Plan shall become 100% vested as of the
Expiration Date.
It is further provided, however, that within sixty (60) days
of the date of notification by the Company to the Executive of
its intention not to extend the Period of Employment, the
Executive may, at his option, elect to have the non-extension
treated as a Discharge with an effective date thirty (30) days
after the Executive's notification to the Company of his
election.
(e) In the event of the Executive's Termination For Cause
by the Company, the Company shall pay the Executive his then
current base salary and non-incentive compensation (including
automobile allowance) and provide the Executive with his then
current benefits (as provided in Section 5) through the
Termination Date. Any payments and benefits due the Executive
under employee benefit plans and programs of the Company,
including the Stock Option Plan, shall be determined in
accordance with the terms of such benefit plans and programs.
(f) In the event the Executive's employment is terminated
by reason of Discharge or nonextension of the Employment
Period, the Executive may, at his option, elect to receive a
lump sum amount equal to the base salary and non-incentive
compensation due, discounted at a rate of six percent (6%) per
annum.
(g) In the event the Executive's employment is terminated
by reason of Discharge, the Company shall furnish the
Executive, for a period of six (6) months subsequent to the
Termination Date, outplacement services, reasonable office
space, and secretarial assistance.
(h) If any of the payments provided for in this
Agreement, together with any other payments which the
Executive has the right to receive from the Company or any
corporation which is a member of an "affiliated group" as
defined in Section 1504(a) of the Code (without regard to
Section 1504(b) of the Code) of which the
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company is a member, would constitute an "excess parachute
payment" as defined in Section 280G(b)(1) of the Code as it
presently exists, such that any portion of such payments are
subject to the excise tax imposed by Section 4999 of the Code,
or any interest or penalty with respect to such excise tax
(such excise tax, together with any such interest or penalty,
are collectively referred to as the "Excise Tax"), then the
executive shall be entitled to receive an additional payment
(an "Excise Tax Restoration Payment"). The amount of the
Excise Tax Restoration Payment shall be the amount necessary
to fund the payment by the Executive of any Excise Tax on the
total payments, as well as all income taxes imposed on the
Excise Tax Restoration Payment, any excise tax imposed on the
Excise Tax Restoration Payment, and any interest or penalties
imposed with respect to taxes on the Excise Tax Restoration
Payment or any Excise Tax.
8. Termination for Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:
(a) a material change in the scope of the Executive's
assigned duties and responsibilities from those in effect immediately prior to a
Change in Control of the Company or the assignment of duties or responsibilities
that are inconsistent with the Executive's status in the Company;
(b) a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the date of a Change in
Control;
(c) the Company's requirement that the Executive be based
anywhere other than the Company's office in Forsyth County, North Carolina, at
which he was based prior to the Change in Control of the Company; or
(d) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those specified in Section 5 of
this Agreement.
For purposes of Section 8(c) above, the Company shall be deemed to have
required the Executive to be based somewhere other than the Company's office at
which he was based prior to the Change in Control if the Executive is required
to spend more than two days per week on a regular basis at a business location
not within 50 miles of the Executive's primary business location as of the
effective date of a Change in Control.
If the Executive terminates his employment for Good Reason, this shall
be treated as the Discharge of the Executive by the Company. Accordingly, the
Company shall pay the amounts and provide the benefits to the Executive
specified in Section 7 above, applicable in the event of Discharge. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under Section 8 and any amounts earned by the Executive
subsequent to his
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termination of employment shall not serve as an offset to the payments due him
by the Company under this section.
For purposes of this Agreement, a "Change in Control" means the date on
which the earlier of the following events occur:
(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 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;
(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 he
Voting Stock; or
(d) the election to the Board of Directors of the Company
of three or more directors during any twelve (12) month period without the
recommendation or approval of the incumbent Board of Directors of the Company.
Upon a Change in Control, as defined above in this Section 8, all
outstanding stock options shall become 100% vested and immediately exercisable,
regardless of whether the Executive terminates employment or not.
If the executive terminates employment with Good Reason within twelve
(12) months of a Change in Control, to the extent permitted by law, the Company
shall continue the medial, disability and life insurance benefits which
Executive was receiving at the time of termination for a period of 36 months
after termination of employment or, if earlier, until Executive has commenced
employment elsewhere and becomes eligible for participation in the medical,
disability and life insurance programs, if any, of his successor employer.
Coverage under Employer's medical, disability and life insurance programs shall
cease with respect to each such program as Executive becomes eligible for the
medical, disability, and life insurance programs, if any, of his successor
employer.
9. CONFIDENTIALITY. During the Period of Employment and following
termination for any reason, the Executive covenants and agrees that he will not
divulge any trade secrets or other confidential information pertaining to the
business of the Company. It is understood that the term "trade secrets" as used
in this Agreement is deemed to include any information which gives the Company a
material and substantial advantage over its competitors but that such term does
not include knowledge, skills or information which is otherwise publicly
disclosed.
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10. NON-COMPETITION. In the event of Termination For Good Cause,
or Voluntary Termination of the Executive, the Executive agrees that for a
period of two years following the Termination Date, Executive shall not directly
or indirectly, personally or with other employees, agents or otherwise, or on
behalf of any other person, firm, or corporation, engage in the business of
making and selling doughnuts and complementary products
(a) within a 100 mile radius of any place of business of
the Company (including franchised operations) or of any place
where the Company (or one of its franchised operations) has
done business since the Effective Date of this Agreement,
(b) in any county where the Company is doing business or
has done business since the Effective Date, or
(c) in any state where the Company is doing business or
has done business since the Effective Date.
Notwithstanding the above, ownership by Executive of an interest in any
licensed franchisee of the Company shall not be deemed to be in violation of
this Section 10. In the event of an actual or threatened breach of this
provision, the Company shall be entitled to an injunction restraining Executive
from such action and the Company shall not be prohibited in obtaining such
equitable relief or from pursuing any other available remedies for such breach
or threatened breach, including recovery of damages from Executive.
11. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto, their heirs, personal
representatives, successors and assigns.
(b) The Company shall require any successor (whether
direct or indirect and whether by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if
no such succession had taken place. As used herein, "Company"
shall mean the Company as defined in the preamble to this
Agreement and any successor to its business or assets which
executes and delivers (or is required to execute and deliver)
the agreement provided for in this Section 10(b), or which
otherwise becomes bound by the terms and provisions of this
Agreement or by operation of law.
12. ARBITRATION. Except as hereinafter provided, any controversy
or claim arising out of or relating to this Agreement of any alleged breach
thereof shall be settled by arbitration in the City of Winston-Salem, North
Carolina in accordance with the rules then obtaining of the American Arbitration
Association and any judgment upon any award, which may include an award of
damages, may be entered in the highest State or Federal court having
jurisdiction.
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Nothing contained herein shall in any way deprive the Company of its claim to
obtain an injunction or other equitable relief arising out of the Executive's
breach of the provisions of Paragraphs 8 and 9 of this Agreement. In the event
of the termination of Executive's employment, Executive's sole remedy shall be
arbitration as herein provided and any award of damages shall be limited to
recovery of lost compensation and benefits provided for in this Agreement.
13. NOTICES. For the purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE: R. Frank Murphy
445 North Westview Drive
Winston-Salem, NC 27104
IF TO THE COMPANY: Krispy Kreme Doughnut Corporation
P.O. Box 83
Winston-Salem, NC 27102-0083
(for mail)
370 Knollwood Street
Suite 500
Winston-Salem, NC 27103
(for delivery)
Attn: Randy S. Casstevens,
Corporate Secretary
14. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
North Carolina.
15. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of other provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
16. SEPARABILITY. The invalidity or lack of enforceability of a
provision of this Agreement shall not affect the validity of any other provision
hereof, which shall remain in full force and effect.
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17. WITHHOLDING OF TAXES. The Company may withhold from any
benefits payable under this Agreement all federal, state and other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
18. SURVIVAL. The provisions of Sections 8 and 9 of the Agreement
shall survive the termination of this Agreement and shall continue for the terms
set forth in Sections 8 and 9.
19. CAPTIONS. Captions to the sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope hereof or
the intent of any of the provisions.
20. NON-ASSIGNABILITY. This Agreement is personal in nature and
neither and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations hereunder.
Without limiting the foregoing, the Executive's right to receive payments
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by will or by the
laws of descent or distribution. In the event of any attempted assignment or
transfer contrary to this section, the Company shall have no liability to pay
any amount so attempted to be assigned or transferred.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered under its seal pursuant to the specific authorization of
its board of directors and the Executive has hereunto set his hand and seal on
the day and year first above written.
KRISPY KREME DOUGHNUT CORPORATION
By: /s/ Scott A. Livengood
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Scott A. Livengood, CEO and President
[CORPORATE SEAL]
EXECUTIVE
/s/ R. Frank Murphy (Seal)
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R. Frank Murphy
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