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Kroll Zolfo Cooper Inc. said Monday, Aug. 1, it could pocket as many as 1.2 million shares of Krispy Kreme Doughnuts Inc. for its restructuring work at the scandal-ridden doughnut chain. The “success fee” comes in addition to the regular hourly wages earned by KZC executives now heading the Winston-Salem, N.C.-based company. KZC chairman Stephen Cooper takes home $760 per hour for his work as Krispy Kreme chief executive while a top lieutenant, Steven Panagos, earns $695 per hour as the company’s president and chief operating officer. According to terms, KZC will be issued a warrant, entitling the New York-based restructuring firm to purchase 1.2 million Krispy Kreme shares at $7.75 per share. KZC can exercise the warrant on Jan. 29, 2006, or 30 days after Krispy Kreme replaces Cooper as CEO, whichever comes later. On Monday afternoon, Krispy Kreme stock added 30 cents to $7.51. After going public in 2000, Krispy Kreme shares soared above $40, spurred on by the company’s rapid expansion and homespun marketing that gave the chain a cult-like status. The stock crashed amid charges that much of Krispy Kreme’s growth was due to fraudulent accounting. The company faces an SEC investigation as well as shareholder lawsuits for allegedly inflating sales figures and misrepresenting the earnings outlook. In mid-January, Krispy Kreme fired longtime CEO Scott Livengood, who oversaw the company’s expansion from the southern U.S. to the rest of the country and into Canada, Britain and even Australia. A seasoned restructuring executive, Cooper replaced Livengood and took steps to stem the losses at Krispy Kreme. Cooper has served as Enron Corp.’s CEO since early 2002, selling off billions of dollars in assets from the second-largest bankruptcy in U.S. history. Just three weeks after taking over Krispy Kreme, Cooper dismissed one-quarter of the company’s work force and sold the company’s jet. Last month, six unidentified executives from across the company’s ranks left. The moves have bought Krispy Kreme more time with the banks that have loaned it around $90 million, even though it has warned that its financial statements from the past three years are unreliable. The company hasn’t filed a quarterly report with the SEC since last September. The “success fee” that KZC stands to gain from Krispy Kreme is nowhere near as extravagant as its financial rewards for its work with Enron Corp. Altogether, KZC was paid $63.4 million for its two-and-a-half years of work on Enron. A bankruptcy judge is still considering the turnaround firm’s request for an additional $25 million “success fee.” Copyright �2005 TDD, LLC. All rights reserved.

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