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.



<PAGE>



                  (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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<PAGE>



         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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<PAGE>



                  (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.

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