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Krispy Kreme Settles Shareholder Suit

Krispy Kreme Doughnuts (KKD) filed its long-delayed annual report for fiscal 2006 and said it has settled a class-action shareholder lawsuit.

The company said its settlement with shareholders, as well as a settlement in the derivative suit, will call for Krispy Kreme to pay about $75 million, which will include a cash payment of about $35 million by insurers of the board and officers, a cash payment of $100,000 by former COO John W. Tate, a $100,000 cash payment by former Chief Financial Officer Randy Casstevens, a $4 million cash payment by the company's outside accounting firm, and stock and warrants to buy $35.8 million of stock to be issued by Krispy Kreme.

All claims against defendants will be dismissed with prejudice; however, claims that the company may have against Scott A. Livengood, the company's former chairman and CEO, that may be asserted in the derivative action for contribution to the securities class action settlement or otherwise under applicable law are "expressly preserved.

"The settlement of these legal matters represents a significant step in the turnaround of Krispy Kreme," said Daryl Brewster, president and CEO.

The company estimates that, based on the current market price of its common stock, it will issue approximately 1.88 million shares and warrants to buy about 4.4 million shares.

For fiscal 2006, Krispy Kreme posted revenue of $543 million and a loss of $136 million, which included non-cash impairment charges of $54 million and a non-cash charge of $36 million related to the settlement of litigation.

Shares of Krispy Kreme closed Tuesday up nearly 4% to $10.75.

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