Krispy Kreme Doughnuts, Inc. (NYSE: KKD), a North Carolina-based retailer and wholesaler of doughnuts (including the famous Hot Original Glazed doughnut), has announced the preliminary settlement of the securities class action (and related derivative cases) pending against the company in the M.D. of North Carolina. The case was originally filed in 2004 and alleges various accounting misrepresentations.
The proposed class action settlement is for $75 million, of which $34,967,000 will be paid by the company’s insurers, $4,000,000 will be paid by the company’s auditor, and $35,853,000 will be derived from common stock and warrants to purchase common stock to be issued by the company. Two of Krispy Kreme’s former officers will contribute $100,000 each. The parties apparently were unable to come to an agreement, however, with a third former officer – the company’s fomer Chairman and CEO – and the settlement expressly preserves any claims against him that “may be asserted by the Company in the derivative action for contribution to the securities class action settlement or otherwise under applicable law.”