FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 1997
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission File Number 0-13544
BEN & JERRY'S HOMEMADE, INC.
(Exact name of registrant as specified in its charter)
Vermont 03-0267543
(State of incorporation) (I.R.S. Employer Identification No.)
30 Community Drive
South Burlington, Vermont 05403-6828
- ------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 802-651-9600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.033 par value per share Class B Common
Stock, $.033 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (225.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Yes x No
The aggregate market value of the Company's Class A and Class B Common
Stock held by non-affiliates was approximately $99,666,648 and $4,436,040
respectively, at March 6, 1998.
At March 6, 1998, 6,381,217 shares of the Company's Class A Common Stock
and 862,274 shares of the Company's Class B Common Stock were outstanding.
Page 1 of 130 pages. Exhibit Index appears on page 37.
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BEN & JERRY'S HOMEMADE, INC.
1997 FORM 10-K ANNUAL REPORT
Table of Contents
Page
Item 1. Business...........................................................1
Item 2. Properties........................................................15
Item 3. Legal Proceedings.................................................15
Item 4. Submission of Matters to Vote of Security Holders.................16
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...............................................17
Item 6. Selected Financial Data...........................................18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................19
Item 8. Financial Statements and Supplementary Data.......................26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................26
Item 10. Directors and Executive Officers of the Company...................27
Item 11. Executive Compensation............................................30
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................................32
Item 13. Certain Relationships and Related Transactions....................34
Item 14. Exhibits, Financial Statements, and Financial
Statement Schedules, and Reports on Form 8-K......................37
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Item 1. Business
Introduction
Ben & Jerry's Homemade, Inc. ("Ben & Jerry's" or the "Company") is a leading
manufacturer of super premium ice cream, frozen yogurt and sorbet in unique and
regular flavors. The Company also manufactures ice cream novelty products. The
Company uses natural ingredients in its products. The Company embraces a
philosophy that manifests itself in these attributes: being real and "down to
earth", being humorous and having fun, being non-traditional and alternative
and, at times, activists around our progressive values.
The Company's products are currently distributed throughout the United States
primarily through independent distributors. However, the Company's marketing
resources are concentrated on certain "target markets" including New England,
New York, the Mid-Atlantic region, Florida, Texas, the West Coast and selected
other major markets, including the Midwest ( defined for this purpose as
Chicago, Illinois, Minnesota, Wisconsin and Michigan) and Denver areas. In 1997,
approximately 80% of the sales of the Company's packaged pints were attributable
to these target markets. The Company's products are also available in certain
"non-target" markets in the United States and in the United Kingdom, France,
Israel, Canada, the Netherlands and Belgium and commencing in 1998, Japan. The
Company currently markets flavors of its ice cream, frozen yogurt and sorbet in
packaged pints, for sale primarily in supermarkets, other grocery stores,
convenience stores and other retail food outlets and in bulk, primarily to
restaurants and Ben & Jerry's franchised "scoop shops."
The Company began active operations in May 1978, when Ben Cohen, now the
Company's Chairperson, and Jerry Greenfield, now the Company's Vice Chairperson,
opened a retail store in a renovated gas station in Burlington, Vermont. The
Company believes that it has maintained a reputation for producing
gourmet-quality, natural ice cream and for sponsoring or creating light-hearted
promotions that foster an image as an independent socially conscious Vermont
company.
The Board of Directors of the Company has since 1988 formalized its basic
business philosophy by adopting a three part "mission statement" for Ben &
Jerry's. The statement includes a "product mission," to "make, distribute and
sell the finest quality all-natural ice cream"; an "economic mission," to
"operate the Company on a sound financial basis...increasing value for our
shareholders and creating career opportunities and financial rewards for our
employees"; and a "social mission," to "operate the Company in a way that
actively recognizes the central role that business plays in the structure of
society by initiating
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innovative ways to improve the quality of life of a broad community: local,
national and international. Underlying the mission of Ben & Jerry's is the
determination to seek new and creative ways of addressing all three parts, while
holding a deep respect for individuals inside and outside the Company and for
the communities of which they are a part." Since 1988 the Company's Annual
Report to Stockholders has contained a "social report" on the Company's
performance during the year. The Company's social mission has always been about
more than philanthropy, product donations and community relations. Ben & Jerry's
has strived to integrate into its day to day business decisions a concern for
the community and to seek ways to lead with progressive values.
The Company makes cash contributions equal to 7 1/2% of its pretax profits to
philanthropy through The Ben & Jerry's Foundation (the "Foundation"), Community
Action Teams, which are employee led groups from each of its five Vermont sites,
and through corporate grants. Excluded from the 7 1/2% are contributions out of
a portion of the proceeds of incidental operations, not directly relating to Ben
& Jerry's core business of the manufacturing and selling of Ben & Jerry's frozen
desserts, such as a portion of the admission fees for plant tours, and excluding
corporate sponsorships that have as one of their purposes the furtherance of Ben
& Jerry's marketing goals. For 1997, the 7 1/2% amounted to approximately
$510,000. The amount of the Company's cash contribution is subject to review by
the Board of Directors from time to time in light of the Company's cash needs,
its operating results, existing conditions in the industry and other factors
deemed relevant by the Board. See "The Ben & Jerry's Foundation."
In some instances where the Company pays royalties for the licensed use of a
flavor name, the licensor donates all or a portion of these royalties to
charitable organizations. For example, in 1997, the Company launched Phish Food
(TM) ice cream and paid the Vermont-based band Phish $159,000 in royalties. The
band has established a Foundation to donate all of its royalties to
environmental causes in the Lake Champlain Region of Vermont.
Ben & Jerry's maintains a special tie to the Vermont community in which it had
its origins. The Company donates product to public events and community
celebrations in the Vermont area. Each county in Vermont is covered by a Ben &
Jerry's Community Action Team. Also, the Company, acting as an agent, transfers
funds to charitable organizations throughout Vermont derived from the sale of
product to participating Vermont retail grocers.
Ben & Jerry's has, through the years, taken actions intended to strengthen the
Company's ability to remain an independent, Vermont-based company focused on
carrying out its three part corporate mission. Ben & Jerry's believes these
actions are in the best interests of the Company, its stockholders,employees,
suppliers, customers and the Vermont community. See "Anti-Takeover Effects of
Class B Common Stock, Class A Preferred Stock and Classified Board of
Directors".
In 1991 the Company decided to pay not less than a certain minimum price for its
dairy ingredients, other than yogurt cultures, to bring the price up to an
amount based upon the average price for dairy products in certain prior periods.
This commitment is part of an effort to foster the supply of Vermont dairy
products and thereby also seek to maintain the long-term viability of the
Company's source of supply of its principal dairy ingredients, against the
marketplace background of a
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continuing trend of decreasing family dairy farms in Vermont. In early 1994 the
Company's agreement with the St. Albans Cooperative Creamery was amended to
include, as a condition for payment of the premium, an assurance from the St.
Albans Cooperative Creamery that the milk and cream purchased by the Company
will not come from cows that have been treated with Recombinant Bovine Growth
Hormone ("rBGH"), a synthetic growth hormone approved by the FDA.
In December 1997, the St. Albans' Cooperative Creamery's board of directors
approved a motion to allow for controlled use of rBGH by a limited amount of
member farms beginning July 1, 1998. The Co-op has assured us that it will
continue to provide Ben & Jerry's with an rBGH-free dairy supply. The Company
will continue to offer a premium to Co-op member farms that do not use rBGH.
In 1997 the Company settled its litigation against the State of Illinois, which
cleared the way for the Company and other dairy processors who so desire to
label their product as being from cows not treated with rBGH, an artificial
growth hormone.
In 1992, the Company became a signatory to the CERES Principals adopted by the
Community for Environmentally Responsible Economies. The CERES Principles
establish an environmental ethic with criteria by which investors and others can
assess the environmental performance of companies. Ben & Jerry's is also a
member of Businesses for Social Responsibility, Inc. ("BSR"), an organization in
San Francisco, California which promotes a concept of business profitability
that includes environmental responsibility and social equity. Ben & Jerry's is
also a member of the Social Venture Network and Vermont Businesses for Social
Responsibility.
The Super Premium Ice Cream, Frozen Yogurt and Sorbet Market
The packaged ice cream industry includes economy, regular, premium, premium plus
and super premium products. Super premium ice cream is generally characterized
by a greater richness and density than other kinds of ice cream.
This higher quality ice cream generally costs more than other kinds and is
usually marketed by emphasizing quality, flavor selection, texture and brand
image. Other types of ice cream are largely marketed on the basis of price.
Super premium ice cream, super premium frozen yogurt and, more recently, super
premium sorbet have become an important part of the frozen dessert industry. In
response to the demand for lower fat, lower cholesterol products, the Company
introduced its own super premium low fat frozen yogurt in 1992, and non-fat
frozen yogurt in 1995. In February 1996, the Company introduced
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lactose-free and cholesterol-free sorbet. In 1997, Ben & Jerry's introduced a
new line of low fat ice cream.
The Company believes, based on information provided by Information Resources,
Inc., a software and marketing information services company ("IRI"), that total
annual U.S. sales in supermarkets at retail prices (defined as grocery stores
with annual revenues of at least $2 million) of super premium ice cream, frozen
yogurt, and sorbet were approximately $428 million in 1997 compared with about
$438 million in 1996. All of the information in this paragraph is taken from IRI
data.
Ben & Jerry's Super Premium Ice Cream, Frozen Yogurt and Sorbet
Ben & Jerry's ice cream has a high level of butterfat and low level of air
incorporation during the freezing process. The approximate fat content is 15%
(excluding add-ins). The approximate overrun (a measurement of the volume of
air) is 20%. These physical attributes give the ice cream the rich taste and
dense, creamy texture that characterizes super premium ice creams. The fat
content of the ice cream is derived primarily from the butterfat in the cream,
and secondarily from egg yolks. The ice cream mix consists of cream, cane or
beet sugar, non-fat milk solids, egg yolks, and natural stabilizers.
Ben & Jerry's low fat frozen yogurt is a high quality frozen yogurt with
approximately 2% fat (excluding add-ins) and approximately 20% overrun. The fat
content of frozen yogurt comes from the cream used in the base mix. The
Company's non-fat frozen yogurt has approximately 0% fat and approximately 40%
overrun. All our frozen yogurt products are sweetened with pure cane or beet
sugar and corn syrup. The Company purchases cultured yogurt from yogurt
manufacturers who use Vermont dairy ingredients. Cultured yogurt is used in the
manufacturing of our frozen yogurt dessert products.
Ben & Jerry's fruit sorbets are a fat free frozen dessert with an overrun of
approximately 20%. The chocolate sorbet is a low fat product with approximately
2% fat (from the cocoa and chocolate liquor). All sorbets are sweetened with
pure cane or beet sugar and corn syrup. The water used to manufacture sorbet is
Vermont Pure(TM) Spring Water.
In 1997, Ben & Jerry's introduced a line of low fat ice cream flavors. These low
fat ice creams offer high quality, all natural ingredients with less than 3
grams of fat. The product line offers exciting flavor combinations, chunks of
candy, and swirls of variegates with extraordinary flavor.
All Ben & Jerry's frozen desserts are made of the finest quality ingredients.
Its ingredients contain no preservatives or artificial components (except the
flavoring component in one of the candies that we purchase). To date, the
Company has not
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experienced any difficulty in obtaining the dairy products used to make its
frozen desserts. The various flavorings, add-ins, and variegates are readily
available from multiple suppliers throughout the country.
All the Company's plants include mix batching facilities which allow Ben &
Jerry's to manufacture its own dessert mixes. Ben & Jerry's designed and
modified special machinery to mix large chunks of cookies, candies, fruits and
nuts into our frozen desserts. The Company has also designed proprietary
processes for swirling variegates (dessert sauces) into its finished products.
The Company also makes ice cream novelty products, including a variety of ice
cream bars such as Cherry Garcia(R), Cookie Dough, Phish Stick(TM) , Dilbert's
World(TM)-Totally Nuts(TM) and Peanut Butter & Jelly(TM).
In 1997, the Company entered into a license agreement with Paul Newman and
Newman's Own to manufacture and market a line of Premium Plus ice cream products
under the brand name "Newman's Own". These products will be manufactured at the
Company's manufacturing facilities in Vermont.
Ben & Jerry's other license agreements include licenses from the estate of Jerry
Garcia formerly of the Grateful Dead rock group with respect to the Company's
Cherry Garcia(R) flavor; political cartoonist Garry Trudeau and Universal Press
Syndicate with respect to the Company's Doonesberry(TM) flavor of the sorbet
line of products; Wavy Gravy for the flavor Wavy Gravy; with Phish
Merchandising, Inc. with respect to Phish Food(TM), a flavor launched in
February of 1997; and from United Feature Syndicate, Inc. for use of the
trademark Dilbert for the flavor Dilbert's World(TM)-Totally Nuts(TM) introduced
in 1998.
Manufacturing
The Company manufactures Ben & Jerry's super premium ice cream and frozen yogurt
pints at its Waterbury, Vermont plant. The Company generally operates its
Waterbury plant 2 shifts a day, five or six days per week depending on demand
requirements. In the fourth quarter of 1997, the Company temporarily stopped
production at this site to begin an upgrade of the production lines. This
project was completed in early 1998. In 1997, the Company manufactured
approximately 3.9 million gallons at this facility.
The Company's Springfield, Vermont plant is used for the production of ice cream
novelties, ice cream, frozen yogurt, low fat ice cream and sorbet packaged in
bulk, pints, quarts and half gallons. In 1997 the plant produced approximately
1.1 million
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dozen novelties, 2.2 million gallons of bulk ice cream, frozen yogurt and
sorbet, packaged pints and quarts. In 1997, the Company generally operated the
Springfield plant five to six days per week, with one or two production shifts
depending on the season.
The Company manufactures Ben & Jerry's super premium ice cream, frozen yogurt
and sorbet in packaged pints at its St. Albans, Vermont plant which in March
1995, started manufacturing ice cream on one line using a temporary nitrogen
tunnel hardening system. A second line began operation in December 1995. The
Company added a third manufacturing line to the plant and began using this line
for production in 1996. This line was also used in 1997 to meet peak pint
production requirements and is currently being outfitted to produce ice cream in
single serve packaging starting in 1998. In 1997, the plant produced 7.6 million
gallons of packaged pints. The Company generally operated St. Albans plant two
shifts a day for five to six days per week depending on demand requirements.
Markets and Customers
The Company markets packaged pints, quarts and novelty products primarily
through supermarkets, other grocery stores, convenience stores and other retail
food outlets. The Company markets ice cream, frozen yogurt and sorbet in 2
1/2-gallon bulk containers primarily through franchised (and 2 Company-owned)
Ben & Jerry's "scoop shops" and through restaurants.
Ben & Jerry's products are distributed primarily through Dreyer's Grand Ice
Cream, Inc. ("Dreyer's") and through other independent regional ice cream
distributors. With some exceptions, only one distributor is appointed for each
territory for supermarkets. In most areas, sub-distributors are used to
distribute to the smaller classes of trade. Company trucks and other
distributors distribute products that are sold in Vermont and upstate New York.
Ben & Jerry's has a distribution agreement with Dreyer's under which Dreyer's
acts as the master distributor (with exclusivity, in general, for sales to
supermarkets and similar accounts) of Ben & Jerry's products in most of the
Company's markets outside of New England, upstate New York and Pennsylvania.
Dreyer's markets its own premium ice cream under both the Dreyer's and Edy's
brand names, as well as, premium plus ice cream under the brand names of
Starbucks (a product produced under a joint venture between Starbucks and
Dreyer's Grand Ice Cream) and Portofino, and certain frozen dessert products of
other companies. Dreyer's does not produce or market any other super premium ice
cream or frozen yogurt (other than novelties), and in the event that Dreyer's
were to distribute another super premium ice cream, or frozen yogurt in any part
of its territory, Dreyer's would lose the contractual exclusivity granted to it
as
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a Ben & Jerry's distributor under the agreement. The agreement also contains
certain additional provisions specific to the greater metropolitan New York
market, including special limitations on the ability of either party to
terminate the agreement with respect to the New York market prior to December
31, 1998. Net sales to Dreyer's accounted for approximately 57% and 55% of the
Company's net sales for 1997 and 1996, respectively.
In the event that Dreyer's were to terminate the agreement without cause, the
agreement provides for a twelve month notice period (subject to reduction by the
Company) and specified minimum purchase requirements by Dreyer's during the
notice period. In addition, the agreement provides for termination by Ben &
Jerry's without cause for a twelve month notice period (subject to reduction by
the Company and Dreyer's under certain conditions) and specified minimum selling
obligations to Dreyer's during the notice period. The agreement provides for
termination by Ben & Jerry's or Dreyer's on short notice for cause. The
agreement also contains certain provisions for termination by one party (at its
election) upon a change in control (as defined) of the other, in which event the
terminated party experiencing the change in control has a minimum purchase or
sale obligation, as the case may be, for a specified additional period and also
must make a $20 million termination payment (adjusted by the CPI index) to the
other party. In addition, the agreement states that in the event that Dreyer's,
directly or indirectly introduces, acquires, or distributes in the United States
another super premium product (as defined), the Company may terminate the
agreement and Dreyer's must make a $20 million termination payment to the
Company. The common stock of Dreyer's is publicly traded. In April 1994, Nestle
USA, Inc. (a U.S. subsidiary of a large international conglomerate) acquired a
significant minority equity position in Dreyer's. Dreyer's reported net sales of
$970 Million in 1997. (See also "Competition")
The relationship between the Company and Dreyer's commenced in 1987, and the
distribution agreement has been amended several times since then. The Company
and Dreyer's regularly engage in discussions regarding ways to improve their
long-term relationship to their mutual benefit. Any changes which are made in
the arrangement may have certain beneficial or adverse consequences, the effects
of which cannot be foreseen by the Company.
While the Company believes that its relationships with Dreyer's and its other
distributors generally have been satisfactory and that these relationships have
been instrumental in the Company's growth, the Company has at times experienced
difficulties in maintaining these relationships to its satisfaction. Available
distribution alternatives are limited. Accordingly, there can be no assurance
that such difficulties, which may be related to actions by the Company's
competitors or by one or more of the
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distributors themselves (or their controlling persons), will not have a material
adverse effect on the Company's business. Loss of one or more of the Company's
principal distributors or termination of one or more of the related distribution
agreements could have a material adverse effect on the Company's business.
In early 1998 Dreyer's made overtures to Ben Cohen and Jerry Greenfield, the
Company's co-founders, to obtain their support for an offer that Dreyer's would
make to acquire the Company. These overtures were rejected by the co-founders
who stated: "As stockholders, each of us has always been firmly committed to the
view that Ben & Jerry's Homemade, Inc. should remain an independent company
headquartered in Vermont, in a position to carry out its three-part corporate
mission. Accordingly, neither of us will agree to support or vote for the
transaction with Dreyer's."
Marketing
Ben & Jerry's marketing strategy is characterized by its focus on innovative,
non-traditional methods of promotion. The Company emphasizes the high quality,
natural ingredients in its products, and the "down to earth and real", humorous
and non-traditional image of its products in its packaging, sales materials and
promotional campaigns. In 1997, the Company utilized additional marketing
tactics such as radio advertising in four large markets.
The founders of the Company, are "two real guys" still actively involved in the
Company. The founders continue to make personal appearances on TV, radio and at
select marketing events.
As the Company has become a significant force in the super premium frozen
dessert category, its marketing emphasis has shifted from portraying itself as
the small "underdog" firm to a Company-wide focus on community involvement, its
status as a socially responsible business, and continuing to introduce
innovative, high quality products. In the past, the Company has created
innovative products and business approaches that tend to generate unpaid
newspaper, magazine, radio and TV news coverage.
During 1997, the Company created and produced Ben & Jerry's "One World, One
Heart" Festival in Vermont. The Company also sponsored the Ben & Jerry's Folk
Festival in Newport, Rhode Island. These events, attended by over 50,000 people
in outdoor public areas and accompanied by ice cream sampling and social
activism, built customer loyalty and support for the Company's products in the
future.
Ben & Jerry's continues to conduct guided tours of its facility in Waterbury,
Vermont. In 1997, approximately 300,000 people visited the plant, making it (the
Company believes) the single most popular tourist attraction in the State.
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In 1997, the Company introduced a new flavor, Phish Food(TM), under a license
arrangement with the Vermont-based band Phish. The Phish Food(TM) launch
included a video news release and a benefit concert held in Burlington, Vermont.
The launch successfully garnered public relations exposure and generated
significant consumer interest in the flavor. The band Phish donates all of its
royalties to a Foundation whose mission is to promote environmental causes in
the Lake Champlain region.
The Company also introduced low fat ice cream in 1997 responding to consumers'
interest in high quality, low fat products. The low fat ice cream flavors
continue to incorporate chunks and swirls in the ice cream consistent with many
of the flavors for which Ben & Jerry's is known.
Franchise Program
As of December 27, 1997, there were 135 North American franchise scoop shops
compared to 137 scoop shops and satellites for the year ended December 28, 1996.
At December 27, 1997, there were 3 Company owned scoop shops in Vermont. The
franchise scoop shops are located throughout the United States. There are also 9
Ben & Jerry's franchise scoop shops in Israel, 2 in Canada, and 3 in the
Netherlands. In 1998, the Company plans to open 3 Company owned scoop shops in
Paris, France.
New scoop shops are opened under existing Development Agreements, and under new
Single Store Agreements. Development Agreements require a franchisee to develop
a particular number of units annually according to the terms of their Agreement.
Partnershops(R) are arrangements that permit non-profit organizations to own
scoop shops that serve as an employment resource and potentially a source of
revenue for the non-profit groups. The Company waives the normal franchise fee
of $30,000. In addition the Company provides expertise in the start-up and
operation of the Partnershops(R).
The Company has assorted franchise concepts that include traditional shops in a
variety of settings as well as five Partnershops(R) - shops operated by
non-profit organizations. Franchise Agreements generally have initial terms of
five to ten years. Ben & Jerry's Franchise scoop shops sell Ben & Jerry's
proprietary and non-proprietary approved items for resale to the public and
include Ben & Jerry's ice cream, frozen yogurt, sorbet, private label hot fudge,
baked goods and toppings. The menu items also include coffee beverages, fruit
smoothies, ice cream cakes, novelties and gift items.
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International
The Company regularly investigates the possibilities of entering new markets.
Ben & Jerry's ice cream products are now distributed nationally in the United
Kingdom and Israel and are available in parts of Ireland, France, Canada, the
Netherlands and Belgium.
In 1992, the Company repurchased the Canadian rights to Ben & Jerry's products
that it had previously licensed in 1987. In 1987, the Company granted an
exclusive license to manufacture and sell Ben & Jerry's ice cream in Israel.
In 1997, the Company signed an Importation and Marketing Agreement with one of
the largest food retailers in Japan for sale through Japanese retail stores of
Ben & Jerry's products manufactured in Vermont in a special size. The Company
plans a test market and product launch in 1998. In 1997, the Company signed a
letter of intent with Royal Sporting House PTE, Ltd., a significant distributor
and retailer headquartered in Singapore, for a license to distribute and sell in
all channels of distribution, including licensed Ben & Jerry's scoop shops and
products purchased from Ben & Jerry's for resale to retail outlets. The
agreement covers Singapore, Malaysia, Indonesia and the United Arab Emirates.
The parties intend that the arrangement will be finalized with respect to one or
more of these countries in 1998.
Competition
The super premium ice cream, frozen yogurt and sorbet business is highly
competitive, and with the distinction between the super premium category and the
"adjoining" premium and premium plus categories less marked than in the past.
The Company's principal competitor is The Haagen-Dazs Company, Inc. Other
significant frozen dessert competitors are Dannon, Columbo, Healthy Choice and
Starbucks. Haagen-Dazs, an industry leader in the super premium ice cream
market, is owned by The Pillsbury Company, which in turn is owned by Diageo
(previously known as Grand Metropolitan PLC), a British food and liquor
conglomerate. Diageo is a large, diversified company with resources
significantly greater than the Company's, and Haagen-Dazs has a significant
share of the markets that the Company has entered in recent years. Haagen-Dazs
has also entered substantially more foreign markets than the Company (including
certain markets in Europe and the Pacific Rim). Haagen-Dazs and certain other
competitors also market flavors using pieces of cookies and candies as
ingredients.
In the ice cream novelty segment, the Company competes with several well-known
brands, including Haagen-Dazs and Dove Bars, manufactured by a division of Mars,
Inc. Both of these other brands have achieved far larger shares of the novelty
market than the Company.
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During 1997, the premium category again experienced increased promotional
activity driven by the national competition between Dreyer's Grand Ice Cream,
Inc., the Company's principal distributor, and Breyer's Ice Cream (owned by
Unilever, a large international food company). In accordance with Dreyer's
strategic five year plan to accelerate the sales of their branded premium
products Dreyer's has increased its consumer marketing efforts and continued
expansion of its distribution system into additional U.S. markets. In addition,
Dreyer's has two premium plus products sold under the Starbuck's and Portofino
brands. In April 1998, Ben & Jerry's will be entering the premium plus category
for the first time with the introduction of "Newman's Own" line of ice cream
products.
As a result of the various developments noted in this section on "Competition",
Dreyer's and the Company are viewed as competitors.
There are a number of other super premium brands, including some regional ice
cream companies and some new entries. Increased competition and the increased
consumer demand for new lower fat, lower cholesterol products like low fat or
non-fat frozen yogurt, low fat ice cream and sorbet, combined with limited shelf
space within supermarkets, may have, in general, made market entry harder and
has already forced some brands out of some markets. The ability to introduce
innovative new flavors and low fat offerings on a periodic basis is also a
significant competitive factor. The Company expects strong competition to
continue, including price/promotional competition and competition for adequate
distribution and limited shelf space within the frozen dessert category in
supermarkets and other food retail outlets.
Seasonality
The ice cream, frozen yogurt and frozen dessert industry generally experiences
the highest volume during the spring and summer months and the lowest volume in
the winter months.
Regulation
The Company is subject to regulation by various governmental agencies, including
the United States Food and Drug Administration and the Vermont Department of
Agriculture. It must also obtain licenses from the states where Ben & Jerry's
products are sold. The criteria for labeling low-fat/low-cholesterol and other
health-oriented foods was revised in 1994, and in some respects made more
stringent, by the FDA. The Company, like other companies in the food industry,
made changes in its labeling in response to these regulations and is in
compliance. The Company cannot predict the impact of possible further changes
that it may be required to make in response to legislation, rules or inquiries
made from time to time by governmental agencies. FDA
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regulations may, in certain instances, affect the ability of the Company, as
well as others in the frozen desserts industry, to develop and market new
products. Nevertheless, the Company does not believe these legislative and
administrative rules and regulations will have a significant impact on its
operations.
In connection with the operation of all its plants, the Company must comply with
the Federal and Vermont environmental laws and regulations relating to air
quality, waste management, and other related land use matters. The Company
maintains wastewater discharge permits for all of its manufacturing locations.
The Waterbury plant pre-treats production effluent prior to discharge to the
municipal treatment facility. The Company believes that it is in compliance with
all of the required operational permits relating to environmental regulations.
Trademarks
The name Ben & Jerry's(R), Vermont's Finest(TM), Partnershops(R), Chunky
Monkey(R), Chubby Hubby(R), Dastardly Mash(R), New York Super Fudge Chunk(R),
Peace Pops(R), Hunka Hunka Burning Fudge(TM), Cool Britannia(TM), Totally
Nuts(TM), Coffee, Coffee BuzzBuzzBuzz!(TM) and World's Best(TM) are all
trademarks of the Company. Cherry Garcia(R), Phish Food(TM), Wavy Gravy,
Doonesberry(TM) and Holy Cannoli(R), which are also Ben & Jerry's proprietary
flavor names, and are licensed to the Company.
Employees
At December 28, 1997, Ben & Jerry's employed 736 people including full time,
part time and temporary employees. This represents a 4% increase from the 708
people employed by the Company at December 28, 1996.
The Ben & Jerry's Foundation
In 1985, Ben Cohen, Co-founder of the Company, contributed a portion of the
equity of the Company which he then owned to The Ben & Jerry's Foundation, Inc.,
a charitable organization under Section 501(c)(3) of the Internal Revenue Code,
in order to enable the Foundation to sell such equity in 1985 and invest the net
proceeds (approximately $598,000) in income-producing securities to generate
funds for future charitable grants. The Foundation, with its employee-led grant
making committee, under supervision of the Foundation's directors, provides the
principal means for carrying out the Company's charitable cash giving policy
across the nation. The Foundation continues to target its grants to small grass
roots social change organizations.
In October 1985, pursuant to stockholder authorization, the Company issued to
the Foundation all of the 900 authorized shares
<PAGE>
of Class A Preferred Stock. The Class A Preferred Stock gives the Foundation a
special class voting right to act with respect to certain mergers and other
Business Combinations (as defined in the Company's charter). The issuance of
Preferred Stock was designed to perpetuate the relationship between the
Foundation and the Company and to assist the Company in its determination to
remain an independent business headquartered in Vermont.
Anti-Takeover Effects of Class B Common Stock, Class A Preferred Stock and
Classified Board of Directors.
The holders of Class A Common Stock are entitled to one vote for each share held
on all matters voted on by stockholders, including the election of directors.
The holders of Class B Common Stock are entitled to ten votes for each share
held in the election of directors and on all other matters. The Class B Common
Stock is generally nontransferable, and there is no trading market for the Class
B Common Stock. The Class B Common Stock is freely convertible into Class A
Common Stock on a share-for-share basis and transferable thereafter. A
stockholder who does not wish to complete the prior conversion process may
effect a sale by simply delivering the certificate for such shares of Class B
Common Stock to a broker, properly endorsed. The broker may then present the
certificate to the Company's Transfer Agent which, if the transfer is otherwise
in good order, will issue to the purchaser a certificate for the number of
shares of Class A Common Stock thereby sold.
The Company has been advised that Mr. Ben Cohen (Chairperson and a director of
the Company), Mr. Jerry Greenfield (Vice Chairperson and a director of the
Company) and Mr. Jeff Furman (a director and formerly a consultant to the
Company) (collectively, the "Principal Stockholders") presently intend to retain
substantial numbers of shares of Class B Common Stock. As a result of
conversions by "public" stockholders of Class B Common Stock, in order to enable
their sales of such securities, the Class B Common Stock is now held
disproportionately by Company insiders, including the above-named three
directors who are Principal Stockholders. See "Security Ownership of Certain
Beneficial Owners and Management." As of March 6, 1998, these three principal
individual stockholders held shares representing 45% of the aggregate voting
power in elections of directors and various other matters and 17% of the
aggregate common equity outstanding, permitting them, as a practical matter,
generally to decide elections of directors and various other questions submitted
to a vote of the Company's stockholders even though they might sell substantial
portions of their Class A Common Stock.
The Board of Directors, without further stockholder approval, may authorize the
issuance of additional authorized but unissued shares of Class B Common Stock in
the future and sell shares of Class B Common Stock held in the Company's
treasury;
<PAGE>
In 1985, Ben Cohen, one of the Company's co-founders, contributed a portion of
the equity in the Company which he then owned to The Ben & Jerry's Foundation,
Inc. The current directors of the Foundation, Messrs. Greenfield and Furman and
Ms. Bankowski are also directors of the Company. The Class A Preferred Stock
gives the Foundation a class voting right to act with respect to certain
Business Combinations (as defined in the Company's charter). The 1985 issuance
of the Class A Preferred Stock to the Foundation effectively limits the voting
rights that holders of the Class A Common Stock and Class B Common Stock, the
owners of virtually all of the equity in the Company, would otherwise have with
respect to Business Combinations (as defined). This may have the effect of
limiting such common stockholders' participation in certain transactions such as
mergers, other Business Combinations (as defined) and tender offers, whether or
not such transactions might be favored by such common stockholders.
At the 1997 Annual Meeting the shareholders approved amendments to the Company's
Articles of Association to (a) classify the Board into three classes, as nearly
as equal as possible, so that each director (after a transitional period) will
serve for three years, with one class of directors being elected each year; (b)
provide that directors may be removed only for cause and with the approval of at
least two-thirds of the votes cast on the matter by all of the outstanding
shares of capital stock of the Company entitled to vote generally in the
election of directors; (c) provide that any vacancy resulting from such a
removal may be filled by two-thirds of the directors then in office; and (d)
increase the stockholder vote required to alter, amend, repeal or adopt any
provision inconsistent with these amendments approved by stockholders in 1997 to
at least two-thirds of the votes cast on the matter by all of the outstanding
shares of capital stock of the Company entitled to vote generally in the
elections of directors, voting together.
The Company believes the amendments reduce the possibility that a third party
could effect a change, including a tender offer or a sudden or surprise change
in the composition of the Company's Board of Directors, without the support of
the incumbent Board and accordingly that adoption of the amendments strengthened
Ben & Jerry's ability to remain an independent, Vermont-based company focused on
carrying out its three part corporate mission, which Ben & Jerry's believes is
in the best interest of the Company, its stockholders, employees, suppliers,
customers and the Vermont community.
The Class B Common Stock, the Class A Preferred Stock and the Classified Board
of Directors may be deemed to be "anti-takeover" provisions in that the Board of
Directors believes the existence of these securities and the 1997 amendments to
the Articles of Association will make it difficult for a third party to acquire
control of the Company on terms opposed by the holders of the
<PAGE>
Class B Common Stock, including primarily the Principal Stockholders, and the
Foundation or for incumbent management and the Board of Directors to be removed.
See also "Risk Factors" in Item 7 of this Report.
Item 2. Properties
The Company owns three production facilities. Ben & Jerry's owns a 42.5 acre
site in Waterbury, Vermont on which it operates a 46,000 square-foot plant
producing ice cream and frozen yogurt in packaged pints. The Company owns a 12
acre site in Springfield, Vermont on which it operates a 48,000 square-foot
production facility. The Springfield plant is used for the production of ice
cream novelties, bulk ice cream and frozen yogurt and at times packaged pints
and quarts.
The Company's property, plant and equipment at its production facilities in
Waterbury and Springfield are subject to various liens securing a portion of the
Company's long-term debt.
In 1991, the Company entered into a twenty-five year lease with an option to
purchase 17.1 acres of land in Rockingham, Vermont on which the Company
constructed and operates a 45,000 square-foot central distribution facility.
The Company owns a 42 acres site in St. Albans, Vermont on which it operates a
92,000 square foot manufacturing facility. In February 1996, the Company entered
into a ten year lease agreement for approximately 69,000 square-feet of office
and warehousing space in South Burlington, Vermont where the Company's executive
offices and administrative departments are located.
The Company also leases space for its retail ice cream parlors in Burlington and
Montpelier, Vermont. The Company owns three single-family houses, which are
situated on land adjacent to its manufacturing facility it Waterbury, used for a
day-care center, employee training and other purposes.
The Company believes that all of its facilities are well maintained and in good
repair.
Item 3. Legal Proceedings
On December 14, 1995, the Company was served with a class action complaint filed
in federal court in Burlington, Vermont. The complaint, captioned Henry G.
Jakobe, Jr. v. Ben & Jerry's Inc., et al., United States District Court (D.
Vermont) Case No. 1-95-CV-373, was filed by a Ben & Jerry's shareholder on
behalf of himself and purportedly on behalf of all other Ben & Jerry's
<PAGE>
shareholders who purchased the common stock of the Company during the period
from March 25, 1994 through December 19, 1994. Plaintiff alleges that the
Company violated the federal securities laws by making, in 1994, untrue
statements of material facts and omitting to state material facts primarily
concerning the Company's construction and start-up of its new manufacturing
facility in St. Albans, Vermont. Also named as defendants in the Complaint were
certain present and former officers and directors of the Company. On October 31,
1996 the Court dismissed all but one of Plaintiff's claims.
On July 1, 1997, the Company entered into a Stipulation and Agreement of
Settlement with the Plaintiff Class. On September 4, 1997, the Court entered an
Order approving the Stipulation and Agreement of Settlement. Despite
Management's continued belief that the remaining claim in Plaintiffs' suit was
without merit, it was determined that the costs associated with defending this
lawsuit through its conclusion at trial would be greater than the negotiated
settlement amount (a portion of which was reimbursed by the Company's insurance
carrier). Therefore, management concluded that settling this matter was in the
best interest of the Company and its shareholders.
The Company is subject to certain litigation and claims in the ordinary course
of business which management believes are not material to the Company's
business.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of 1997.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Class A Common Stock is traded on the NASDAQ National Market
System under the symbol BJICA. The following table sets forth for the period
December 31, 1995 through March 6, 1998 the high and low closing sales prices of
the Company's Class A Common Stock for the periods indicated.
High Low
---- ---
1996
- ----
First Quarter...................... $ 17 1/4 $ 13
Second Quarter..................... 19 1/2 14
Third Quarter...................... 17 3/4 12 1/4
Fourth Quarter..................... 14 3/4 10 7/8
1997
- ----
First Quarter...................... $ 14 3/8 $ 10 7/8
Second Quarter..................... 14 1/2 11
Third Quarter...................... 14 1/2 12
Fourth Quarter..................... 17 12 1/4
1998
- ----
First Quarter (through March 6,1998) $ 18 7/16 $ 14
The Class B Common Stock is generally non-transferable, and there is no trading
market for the Class B Common Stock. However, the Class B Common Stock is freely
convertible into Class A Common Stock on a share-for-share basis, and
transferable thereafter. A stockholder who does not wish to complete the prior
conversion process may effect a sale by simply delivering the certificate for
such shares of Class B Stock to a broker, properly endorsed. The broker may then
present the certificate to the Company's Transfer Agent which, if the transfer
is otherwise in good order, will issue to the purchaser a certificate for the
number of shares of Class A Stock thereby sold.
As of March 6, 1998 there were 10,612 holders of record of the Company's Class A
Common Stock and 2,135 holders of record of the Company's Class B Common Stock.
<PAGE>
Item 6. Selected Financial Data
The following table contains selected financial information for the Company's
fiscal years 1993 through 1997.
(In thousands except per share data)
Summary of Operations:
<TABLE>
<CAPTION>
Fiscal Year
-----------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 174,206 $ 167,155 $ 155,333 $ 148,802 $140,328
Cost of sales 114,284 115,212 109,125 109,760 100,210
Gross profit 59,922 51,943 46,208 39,042 40,118
Selling, general
and administrative
expenses 53,520 45,531 36,362 36,253 28,270
Asset write-down 6,779
Other income
(expense)--net (118) (77) (441) 228 197
Income(loss) before
Income taxes 6,284 6,335 9,405 (3,762) 12,045
Income taxes
(benefit) 2,388 2,409 3,457 (1,893) 4,844
Net income(loss) 3,896 3,926 5,948 (1,869) 7,201
Net income(loss) per
Share - diluted(1) $ 0.53 $ 0.54 $ 0.82 $ (0.26) $ 1.01
Shares outstanding
- diluted(1) 7,334 7,230 7,222 7,148 7,138
Balance Sheet Data:
Fiscal Year
-----------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Working capital $ 51,412 $ 50,055 $ 51,023 $ 37,456 $ 29,292
Total assets 146,471 136,665 131,074 120,296 106,361
Long-term debt 25,676 31,087 31,977 32,419 18,002
Stockholders'equity(2) 86,919 82,685 78,531 72,502 74,262
</TABLE>
(1) All earnings per share amounts have been restated to comply with Statement
of Financial Accounting Standards No. 128, Earnings per Share.
(2) No cash dividends have been declared or paid by the Company on its capital
stock since the Company's organization. The Company intends to reinvest earnings
for use in its business and to finance future growth. Accordingly, the Board of
Directors does not anticipate declaring any cash dividends in the foreseeable
future.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table shows certain items as a percentage of net sales which are
included in the Company's Statement of Operations.
<TABLE>
<CAPTION>
Annual Increase(Decrease)
Percentage of Net Sales 1997 1996 1995
Fiscal Year Compared Compared Compared
1997 1996 1995 to 1996 to 1995 to 1994
---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales............ 100.0% 100.0% 100.0% 4.2% 7.6% 4.4%
Cost of sales........ 65.6 68.9 70.2 (0.8) 5.6 (0.6)
---- ---- ---- --- --- ---
Gross profit......... 34.4 31.1 29.8 15.4 12.4 18.4
Selling, general
and administrative
expense........... 30.7 27.2 23.4 17.5 25.2 0.3
Other income
(expenses)........ (0.1) 0.1 (0.4) 53.2 (82.5) (293.4)
--- --- --- ---- ---- -----
Income(loss)before
income taxes...... 3.6 3.8 6.0 (0.8) (32.6) 350.0
Income taxes(benefit) 1.4 1.5 2.2 (0.9) (30.3) 282.6
--- --- --- --- ---- -----
Net income(loss)..... 2.2% 2.3% 3.8% (0.8)% (34.0)% 418.2%
=== === === ===== ====== =====
</TABLE>
Net Sales
Net sales in 1997 increased 4.2% to $174 million from $167 million in 1996
primarily due to price increases of approximately 3% for pints that went into
effect in August 1996 and April 1997. Pint volume increased 0.7% compared to
1996.Net sales of 2 1/2 gallon bulk containers had a modest increase in 1997.
Pint sales represented approximately 84% of total net sales in 1997 and 85% of
total net sales in 1996, and 1995. Net sales of 2 1/2 gallon bulk containers
represented approximately 8% of total net sales in 1997 and 7% of total net
sales in 1996 and 1995. Net sales of novelties accounted for approximately 6% of
total net sales in 1997, 1996, and 1995. Net sales from the Company's retail
stores represented 2% of total net sales in 1997 and 1996, and 1995.
Net sales in 1996 increased 7.6% to $167 million from $155 million in 1995. Pint
volume increased 2.6% compared to 1995. This volume increase was combined with a
3.6% price increase of pints that went into effect in August 1996. This volume
increase in pints was primarily due to the Company's introduction of its new
line of sorbets in February 1996. Net sales of both novelties and 21/2 gallon
bulk containers had increases of 10.9% and 8.3% respectively in 1996.
<PAGE>
Cost of Sales
Cost of sales in 1997 decreased approximately $900,000 or 0.8% over the same
period in 1996 and overall gross profit as a percentage of net sales increased
from 31.1% in 1996 to 34.4% in 1997. The higher gross profit as a percentage of
net sales in 1997 is a result of higher selling prices instituted in August 1996
and April 1997, improved operating efficiencies and decreases in certain raw
material commodity prices.
The Company experienced a modest decrease in dairy commodity prices during 1997
compared to 1996. Dairy costs started to increase in the summer and fall of 1996
and continued into the first half of 1997. In response to higher dairy commodity
costs, the Company instituted a price increase of approximately 3% for its
packaged pint products effective in April 1997. Though dairy commodity prices
were lower in the third quarter of 1997 as compared to the comparable quarter in
the prior year, they began to escalate in the latter half of the fourth quarter.
If dairy commodity prices remain at higher levels, there is the possibility that
these costs will not be passed on to consumers which will negatively impact
future gross profit margins. See the Risk Factors below.
Cost of sales in 1996 increased approximately $6.1 million or 5.6% over the same
period in 1995 and overall gross profit as a percentage of net sales increased
from 29.8% in 1995 to 31.1% in 1996. The higher gross profit as a percentage of
net sales in 1996 is due to the price increase effective in August 1996 combined
with improved inventory management and production efficiencies, as compared with
1995. The impact of increased dairy raw material costs was offset by improved
manufacturing expenses. In addition, the improved gross margin reflects the
impact of the termination of the manufacturing agreement between the Company and
Edy's Grand Ice Cream, a subsidiary of Dreyer's Grand Ice Cream. This production
was transferred to the Company's manufacturing facility in St. Albans, Vermont
in the third quarter of 1995. Approximately 16% of the packaged pints
manufactured by the Company in 1995 were produced by Edy's.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 17.5% to $53.5 million in
1997 from $45.5 million in 1996 and increased as a percentage of net sales to
30.7% in 1997 from 27.2% in 1996. This increase primarily reflects increased
marketing and sales expenses and includes national radio advertising and
increased trade promotions to support the Company's brand both domestically and
in Europe. This increase also reflects royalty expense of approximately $500,000
which was previously reflected in other income (expense) in the prior year.
<PAGE>
Selling, general and administrative expenses increased 25.2% to $45.5 million in
1996 from $36.4 million in 1995 and increased as a percentage of net sales to
27.2% in 1996 from 23.4% in 1995. This increase primarily reflects increased
marketing and sales spending for the launch of the new "Sorbet" line which was
introduced in February 1996, international market penetration costs and expenses
primarily in the production planning and inventory management areas.
Other Income (Expense)
Interest income increased from $1.7 million in 1996 to $1.9 million in 1997. The
increase in interest income was due to a higher average invested balance
throughout 1997. Interest expense in 1997 remained level with 1996. Other income
(expense) decreased in 1997 from other income of $243,000 in the prior year to
other expense of $64,000 in 1997. This is primarily due to the receipt of
insurance settlement proceeds of approximately $884,000 in 1996, offset by
reclassification of royalty expense to selling, general and administrative
expenses in 1997. This reclassification resulted in a decrease in other expense
of approximately $500,000
Interest income in 1996 remained level with 1995. Interest expense increased
$0.5 million in 1996 compared to 1995. This increase was due primarily to the
capitalization of a portion of interest in the prior year as part of the cost of
the plant in St. Albans, Vermont before the plant became operational. This
increase in interest expense was more than offset by net proceeds of $884,000
from an insurance claim settlement related to inventory damaged in 1995.
Income Taxes
The Company's effective income tax rate in 1997 remained level with 1996 at
38.0%. The Company's rate had increased from 36.8% in 1995, reflecting higher
state income taxes and lower income tax credits partially offset by increased
tax-exempt interest. Management expects 1998's effective income tax rate to
decrease to approximately 36.0% due to higher income tax credits and lower state
taxes.
Net Income
As a result of the foregoing, net income for the full year of 1997 remained
level with 1996 at $3.9 million, compared to $5.9 million in 1995. However, 1997
quarterly results for the third and fourth quarters were above the comparable
quarters in 1996. Net income as a percentage of net sales was 2.2% in 1997
compared to 2.3% in 1996 and 3.8% in 1995.
<PAGE>
Seasonality
The Company typically experiences more demand for its products during the summer
than during the winter.
Inflation
Inflation has not had a material effect on the Company's business to date, with
the exception of dairy raw material commodity costs. See the Risk Factors below.
Management believes that the effects of inflation and changing prices were
successfully managed in 1997, with both margins and earnings being protected
through a combination of pricing adjustments, cost control programs and
productivity gains.
Liquidity and Capital Resources
As of December 27, 1997 the Company had $47.3 million of cash and cash
equivalents, an increase of $11.2 million since December 28, 1996. Net cash
provided by operations in 1997 was approximately $17.6 million. Approximately
$5.2 million was used for net additions to property, plant and equipment,
primarily for equipment upgrades at all manufacturing facilities and computer
related expenditures.
Inventories decreased from $15.4 million at December 1996, to $11.1 million at
December 27, 1997. The decrease in inventories resulted from planned inventory
reductions in 1997. Accounts receivable increased $4.0 million since December
28, 1996 to $12.7 million from $8.7 million at December 28, 1996. This increase
in accounts receivable is due to the timing of sales in December of 1996
compared to December 1997.
The Company anticipates capital expenditures in 1998 of approximately $9.0
million. These projected capital expenditures relate to equipment upgrades and
enhancements at the Company's manufacturing facilities, research & development
equipment, computer related expenditures and acquisition and leasehold
improvement costs related to three scoop shop locations in Paris, France in
1998.
During 1997 the Company repurchased 77,500 shares of its Class A Common Stock
for approximately $988,000 pursuant to the repurchase program announced May 8,
1997 primarily for use in connection with stock option awards under the 1995
Equity Incentive Plan.
The Company's short and long-term debt includes $30 million aggregate principal
amount of Senior Notes issued in 1993 and 1994, which are held in cash
equivalents pending their use in the business. The first principal payment of $5
million is due in September 1998.
The Company has two line of credit agreements, for an aggregate of $20 million,
with The First National Bank of Boston and Key
<PAGE>
Bank of Vermont. These unsecured agreements provide for borrowings from time to
time, and unless further extended, expire September 29, 1998 and December 29,
1998, respectively. The agreements specify interest at either the banks' Base
Rate or the Eurodollar rate plus a maximum of 1.25%. As of March 27, 1998 there
have been no borrowings under these lines of credit. Management intends to renew
these line of credit agreements.
Management believes that internally generated funds,cash and cash equivalents,
and equipment lease financing and/or borrowings under the Company's two
unsecured bank lines of credit will be adequate to meet anticipated operating
and capital requirements.
Year 2000
The Company has instituted a Company-wide program to prepare its computer
systems for the year 2000. A comprehensive evaluation of the impact of the Year
2000 issue on both the Company's infrastructure and its interface with suppliers
and customers is expected to be completed in the latter part of fiscal year
1998. The Company expects the remediation program to be completed by the middle
of 1999. Based on a preliminary assessment, the Company expects that these
costs, which primarily include redeployment of existing internal resources, will
not be material. The Company will expense the costs of modifying existing
systems and capitalize the replacement of software that is not "Year 2000"
compliant. There can be no guarantee, however, that the systems of other
entities with which the Company's systems interface also will be converted on a
timely basis or that any failure to convert by another entity would not have an
adverse effect on the Company's systems.
Forward-Looking Statements
This section, as well as other portions of this document, includes certain
forward-looking statements about the Company's business and new products, sales
and expenses, effective tax rate and operating and capital requirements. In
addition, forward-looking statements may be included in various other Company
documents to be issued in the future and in various oral statements by Company
representatives to security analysts and investors from time to time. Any such
statements are subject to risks that could cause the actual results or needs to
vary materially. These risks are discussed below in "Risk Factors" in this
document.
Risk Factors
Dependence on Independent Ice Cream Distributors. The Company is dependent on
maintaining satisfactory relationships with independent ice cream distributors
that now generally act as the Company's exclusive or master distributor in their
assigned territories. While the Company believes its relationships with
<PAGE>
Dreyer's and its other distributors generally have been satisfactory and have
been instrumental in the Company's growth, the Company has at times experienced
difficulty in maintaining such relationships to its satisfaction. Available
distribution alternatives are limited. Accordingly, there can be no assurance
that difficulties in maintaining relationships with distributors, which may be
related to actions by the Company's competitors or by one or more of the
Company's distributors themselves (or their controlling persons), will not have
a material adverse effect on the Company's business. The loss of one or more of
the Company's principal distributors or termination of one or more of the
related distribution agreements could have a material adverse effect on the
Company's business. In early 1998 Dreyer's made overtures to Ben Cohen and Jerry
Greenfield, the Company's co-founders, to obtain their support for an offer that
Dreyer's would make to acquire the Company. These overtures were rejected by the
co-founders. See "Business - Markets and Customers."
Growth in sales and earnings. In 1997, net sales of the Company increased 4.2%
to $174 million from $167 million in 1996. Pint volume increased 0.7% compared
to 1996. The super premium ice cream, frozen yogurt and sorbet industry category
sales decreased 2.3% in 1997 as compared to 1996. Given these overall domestic
super premium industry trends, the successful introduction of innovative flavors
on a periodic basis has become increasingly important to any sales growth by the
Company. Accordingly, the future degree of market acceptance of any of the
Company's new products, which will be accompanied by promotional expenditures,
is likely to have an important impact on the Company's 1998 and future financial
results. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations."
Competitive Environment. The super premium frozen dessert market is highly
competitive with the distinctions between the super premium category, and the
"adjoining" premium and premium plus categories less marked than in the past.
And, as noted above, the ability to successfully introduce innovative flavors on
a periodic basis that are accepted by the marketplace is a significant
competitive factor. In addition, the Company's principal competitors are large,
diversified companies with resources significantly greater than the Company's.
The Company expects strong competition to continue, including competition for
adequate distribution and competition for the limited shelf space for the frozen
dessert category in supermarkets and other retail food outlets. See
"Business-Competition" and "Business-The Super Premium Frozen Dessert Market."
Increased Cost of Raw Materials: Management believes that the trend of increased
dairy ingredient commodity costs may continue and it is possible that at some
future date both gross margins and earnings may not be protected by pricing
adjustments, cost control programs and productivity gains.
<PAGE>
Reliance on a limited number of Key Personnel. The success of the Company is
significantly dependent on the services of Perry Odak, the Chief Executive
Officer and a limited number of executive managers working under Mr. Odak, as
well as certain continued services of Ben Cohen, the Chairperson of the Board
and co-founder of the Company; and Jerry Greenfield, Vice Chairperson and
co-founder of the Company. Loss of the services of any of these persons could
have a material adverse effect on the Company's business. See "Directors and
Executive Officers of the Company."
The Company's Social Mission. The Company's basic business philosophy is
embodied in a three-part "mission statement," which includes a "social mission"
to "operate the Company in a way that actively recognizes the central role that
business plays in the structure of society by initiating innovative ways to
improve the quality of life of a broad community: local, national and
international. Underlying the mission of Ben & Jerry's is the determination to
seek new and creative ways of addressing all three parts, while holding a deep
respect for individuals inside and outside the Company and for the communities
of which they are a part." The Company believes that implementation of its
social mission, which is integrated into the Company's business, has been
beneficial to the Company's overall financial performance. However, it is
possible that at some future date the amount of the Company's energies and
resources devoted to its social mission could have some material adverse
financial effect. See "Introduction" and "Business-Marketing."
International. The Company's principal competitors have substantial market
shares in various countries outside the United States, principally Europe and
Japan. The Company sells product in Canada, the United Kingdom, Ireland, France,
the Netherlands and Belgium and will start selling in Japan in 1998. The Company
also has licensing agreements in Israel, signed in 1987, and a licensing letter
of intent relating to Singapore, Malaysia, Indonesia and the United Arab
Emirates, signed in 1997. The Company is investigating the possibility of
further international expansion. However, there can be no assurance that the
Company will be successful in entering (directly or indirectly through
licensing), on a long-term profitable basis, such international markets as it
selects.
Control of the Company. The Company has two classes of common stock - the Class
A Common Stock, entitled to one vote per share, and the Class B Common Stock
(authorized in 1987), entitled, except to the extent otherwise provided by law,
to ten votes per share. Ben Cohen, Jerry Greenfield, and Jeffrey Furman
(collectively, the "Principal Stockholders") hold shares representing 45% of the
aggregate voting power in elections for directors, permitting them as a
practical matter to elect all members of the Board of Directors and thereby
effectively control the business, policies and management of the Company.
Because of their significant holdings of Class B Common Stock, the Principal
Stockholders may continue to exercise this control even if they were to sell
substantial portions of their Class A Common Stock.
<PAGE>
See "Security Ownership of Certain Beneficial Owners and Management."
In addition, the Company issued all of the authorized Class A Preferred Stock to
the Foundation in 1985. All current directors of the Foundation are directors of
the Company. The Class A Preferred Stock gives the Foundation a class voting
right to act with respect to certain Business Combinations (as defined in the
Company's charter) and significantly limits the voting rights that holders of
the Class A Common Stock and Class B Common Stock, the owners of virtually all
of the equity in the Company, would otherwise have with respect to such Business
Combinations. See "Business- The Ben & Jerry's Foundation."
While the Board of Directors believes that the Class B Common Stock and the
Class A Preferred Stock are important elements in keeping Ben & Jerry's an
independent, Vermont-based business focused on its three-part corporate mission,
the Class B Common Stock and the Class A Preferred Stock may be deemed to be
"anti-takeover" provisions in that the Board of Directors believes the existence
of these securities will make it difficult for a third party to acquire control
of the Company on terms opposed by the holders of the Class B Common Stock,
including primarily the Principal Stockholders, or The Foundation, or for
incumbent management and the Board of Directors to be removed. In addition, the
1997 amendments to the Company's Articles of Association to classify the Board
of Directors and to add certain other related provisions (see "Anti-Takeover
Effects of Class B Common Stock, Class A Common Stock, Class A Preferred Stock
and Classified Board of Directors" in Item 1) may be deemed to be
"anti-takeover" provisions in that the Board of Directors believes that these
amendments will make it difficult for a third party to acquire control of the
Company on terms opposed by the holders of the Class B Common Stock, including
primarily the Principal Stockholders and the Foundation, or for incumbent
management and the Board of Directors to be removed.
Item 8. Financial Statements and Supplementary Data
The response to this Item is in Item 14(a)of this Report.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Office
- ---- --- ------
Ben Cohen............ 46 Chairperson and Director
Perry Odak........... 52 Chief Executive Officer, President
and Director
Jerry Greenfield..... 46 Vice Chairperson and Director
Elizabeth Bankowski.. 50 Director and Director of Social
Mission
Pierre Ferrari....... 47 Director
Jeffrey Furman....... 54 Director
Jennifer Henderson... 44 Director
Frederick A. Miller.. 51 Director
Henry Morgan......... 72 Director
Andrew S. Patti...... 57 Director
Lawrence Benders..... 41 Chief Marketing Officer
Bruce Bowman.......... 45 Senior Director of Operations
Angelo Pezzani....... 56 Senior Director of Business Development
Frances Rathke....... 37 Chief Financial Officer
and Secretary
The Board of Directors has an Audit Committee on which Directors Ferrari, Morgan
and Patti (Chairperson) serve; a Compensation Committee on which Directors
Henderson, Miller, and Morgan (Chairperson) serve; a Social Mission/Worklife
Committee on which Directors Bankowski, Cohen, Ferrari, Furman, Greenfield,
Henderson and Miller (Chairperson) serve; an Executive Committee on which
Directors Cohen, Greenfield, Miller, Morgan, Odak and Patti (Chairperson) serve;
and a Nominating Committee on which Directors Bankowski, Cohen (Chairperson),
Ferrari, Greenfield and Odak serve.
Elizabeth Bankowski has served as Director of Social Mission Development since
December 1991. Ms. Bankowski has been a director of the Company since 1990.
Additionally, Ms. Bankowski is Secretary and director of The Ben & Jerry's
Foundation, Inc.
Ben Cohen, a founder of the Company, has served as Chairperson of the Board of
Directors since February 1989. From January 1, 1991 through January 29, 1995 he
was the Chief Executive Officer of the Company. Mr. Cohen has been a director of
the Company since 1977. Mr. Cohen is a director of Blue Fish Clothing, Inc.,
Community Products, Inc., Social Venture Network and GreenPeace International.
In 1997, Community Products Inc. filed for protection under Chapter 11 of the
United State Bankruptcy Code.
<PAGE>
Pierre Ferrari has served as a director of the Company since June 1997. In 1997
Mr. Ferrari became President of Lang International, a marketing consulting firm.
From 1994 to 1997 Mr. Ferrari was the Special Assistant to the President and CEO
of Care, the World's largest private relief and development agency. Prior to
1994, Mr. Ferrari held various senior level marketing positions at The Coca-Cola
Company.
Jeffrey Furman has served as a director of the Company since 1982. Mr. Furman is
Treasurer and director of The Ben & Jerry's Foundation, Inc. From March 1991
through December 1996, Mr. Furman was a consultant to the Company.
Jerry Greenfield, a founder of the Company, has served as director and Vice
Chairperson of the Board of Directors since 1990. Mr. Greenfield is also
President and director of The Ben & Jerry's Foundation, Inc.
Jennifer Henderson has served as a director of the Company since June 1996. Ms.
Henderson is director of Training at the Center for Community Change in
Washington DC and President of Strategic Interventions, Inc., a leadership and
management consulting firm.
Frederick A. Miller has served as a director of the Company since 1992. Since
1985 Mr. Miller has served as President of The Kaleel Jamison Consulting Group,
Inc., a strategic culture change and management consulting firm.
Henry Morgan has served as a director of the Company since 1987. Mr. Morgan is
retired Dean Emeritus of Boston University School of Management. Mr. Morgan
serves on the Board of Directors of Cambridge Bancorporation, Southern
Development Bancorporation and Cleveland Development Bancorporation.
Perry D. Odak has served as Chief Executive Officer of the Company since
December 31, 1996, as director of the Company since January 1997, and as Chief
Executive Officer and President since June 1997. From 1990 to 1996, Mr. Odak was
a principal in Odak, Pezzani & Company, a private management consulting firm.
From 1994 to 1995, Mr. Odak was Chief Executive Officer of Graham Packaging.
Andrew S. Patti has served as a director of the Company since June 1997. Mr.
Patti is the Senior Executive and Founder of Rianco, LLC, a venture capital
firm. Mr. Patti was Executive Vice-President of Ameritech, a telecommunications
Company from September 1996 to February 1997. From 1978 until 1995 Mr. Patti was
an executive with The Dial Corporation, including holding the position of
President.
<PAGE>
Other Key Executives
Lawrence E. Benders joined the Company in October 1997 as Chief Marketing
Officer. Prior to joining the Company, Mr. Benders was Vice President of
International Marketing at Coors Brewing Company. From 1994 until 1996 Mr.
Benders was a marketing executive with Nabisco Foods Group. From 1993 until
1994, Mr. Benders was a Division Manager for American Telephone and Telegraph.
Prior to 1993, Mr. Benders was a marketing executive with Johnson & Johnson.
Bruce Bowman has served as Senior Director of Operations since August 1995.
Prior to joining the Company, Mr. Bowman was Senior Vice President of Operations
at Tom's Foods, Inc., a food manufacturing company from April 1991 until August
1995.
Richard Doran joined the Company in 1997 as Senior Director of Human Resources.
From 1987 until joining the Company Mr. Doran was a management consultant and
Vice President for the Kaleel Jamison Consulting Group, a strategic culture
change and management consulting firm.
Charles Green joined the Company in October of 1996 as Senior Director of Sales
and Distribution. From 1993 to 1996 Mr. Green was General Manager of Dari-Farms,
the distributor of Ben & Jerry's products in the Massachusetts and Connecticut
areas. From 1991 to 1993, Mr. Green was Vice President of Sales for HP Hood.
Angelo Pezzani joined the Company in January 1998 as Senior Director of Business
Development. From 1995 to 1996, Mr. Pezzani was Executive Vice President of Sony
Interactive Entertainment. From 1989 to 1995, Mr. Pezzani was a principal of
Odak, Pezzani & Company, a private management consulting company.
Frances Rathke has served as Chief Financial Officer, Chief Accounting Officer
and Secretary of the Company since April 1990.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the cash compensation paid by the Company in
Fiscal Years 1995 - 1997 as well as certain other compensation paid, awarded or
accrued for those years to the Company's Chief Executive Officer and the
Company's other executive officers during the 1997 fiscal year whose total
salary and bonuses exceeded $100,000. Perry Odak became the Chief Executive
Officer on January 1, 1997.
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------
Other Securities All
Name and Annual Restricted Underlying LTIP Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary Bonus(2) sation Awards SARS sation(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ben Cohen(1) 1997 $183,333 -- $ 3,000
Chairperson 1996 $149,664 -- $ 3,017
and CEO 1995 $132,500 -- $ 2,195
Jerry Greenfield 1997 $183,333 -- $ 3,000
Vice Chairperson 1996 $149,664 -- $ 3,017
1995 $132,500 -- $ 2,195
Perry D. Odak 1997 $300,000 $100,000 360,000 $ 25,000
CEO, President and 1996 $ -- -- --
Director 1995 $ -- -- --
Bruce Bowman 1997 $200,000 $ 50,000 27,000 $ 4,131
Senior Director of 1996 $169,231 $ 20,000 10,000 $ 1,099
Operations 1995 $ 55,385 $ 40,000 25,000 $ 2,195
Frances Rathke 1997 $162,603 $ 45,000 30,000 $ 3,229
CFO and 1996 $145,385 -- -- $ 2,928
Secretary 1995 $125,000 $ 1,281 30,000 $ 2,260
Charles Green 1997 $162,596 $ 40,000 45,000 --
Senior Director of 1996 $ 24,231 -- 5,000 --
Sales & Distribution 1995 $ -- -- -- --
(1) Ben Cohen was CEO prior to January 31, 1995
(2) "Bonus" includes 1997 discretionary distributions under the Company's
Management Incentive Program. Bruce Bowman was awarded a bonus in accordance
with his employment contract of $40,000 in 1995 and $20,000 in 1996. Ms. Rathke
received $1,281 in 1995 under the Company's informal and discretionary profit
sharing plan, under which executive officers and senior executives are no longer
eligible.
(3) "All Other Compensation" includes Company contributions to 401(K) plans and relocation fees.
</TABLE>
<PAGE>
Option/SAR Grants in Fiscal 1997
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Percentage Assumed Annual
of Total Rates of
Options/ Stock Price
SARS Exercise Appreciation
Options/ Granted to or for Option Term
SARS Employees Base Price Expiration
Granted in 1997 (per share) Date 5% 10%
------- ------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen 0 0 0 0 0 0
Jerry Greenfield 0 0 0 0 0 0
Perry D. Odak 200,000 28.8% $10.88 12/31/06 $1,368,475 $3,467,984
160,000 23.1% $10.88 1/1/07 $1,094,780 $2,774,387
Bruce Bowman 27,000 3.9% $13.89 6/28/07 $235,854 $597,701
Charles Green 45,000 6.5% $13.89 6/28/07 $393,091 $996,169
Frances Rathke 30,000 4.3% $13.89 6/28/07 $262,060 $664,112
</TABLE>
Aggregated Option/SAR Exercises in 1997 and 1997 Year-End
Option/SAR Values
<TABLE>
<CAPTION>
Shares
Acquired Value of Unexercised
on Number of Unexercised In-The-Money Options/
Exercise Value Options/SARS at 12/27/97 SARS at 12/27/97
(#) Realized Exercisable Unexercisable Exercisable Unexercisable
--- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen 0 0 0 0 0 ---
Jerry Greenfield 0 0 0 0 0 ---
Perry Odak 0 0 90,000 270,000 $472,500 $1,417,500
Bruce Bowman 0 0 15,375 46,625 $15,060 $82,920
Charles Green 0 0 1,000 49,000 $3,750 $115,800
Frances Rathke 0 0 14,343 46,842 $46,550 $101,400
</TABLE>
Effective January 1, 1998 Directors who are not employees or full-time
consultants of the Company receive an annual retainer fee of $18,000, in
addition to a $1,000 per board meeting attendance fee, and reimbursement of
reasonable out-of-pocket expenses.
The Company adopted the 1995 Non-Employee Directors Plan for Stock in lieu of
Directors Cash Retainer under which directors may elect to be paid, in lieu of
the annual cash retainer, shares of common stock having a fair market value (as
of the date of payment) equal to the amount of such annual retainer. Four
non-employee directors, Henry Morgan, Frederick A. Miller, Andrew Patti and
Pierre Ferrari each received 936 shares of stock for the period July 1, 1997
through June of 1998 under the Plan.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and management
The following table sets forth certain information as of March 6, 1998 with
respect to the beneficial ownership of the outstanding shares of Class A Common
Stock, Class B Common Stock and Class A Preferred Stock by (i) all persons
owning of record, or beneficially to the knowledge of the Company, more than
five percent of the outstanding shares of any class(ii) each director and
executive officer of the Company individually, (iii) all directors and officers
of the Company as a group and (iv) The Ben & Jerry's Foundation, Inc. The
mailing address of each of the persons shown and of the Foundation is c/o the
Company, 30 Community Drive, South Burlington, Vermont 05403-6828.
<PAGE>
<TABLE>
Amount of Amount of
Beneficial Beneficial Amount of
Ownership of Ownership of Beneficial
Class A Class B Ownership of
Common Stock Common Stock Preferred Stock
Percentage Percentage Percentage
Number of Number of Number of
of Outstanding of Outstanding of outstanding
Shares Shares (1) Shares Shares(2) Shares Shares
------ ---------- ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen (3) 508,173 8.0% 488,486 56.7% -- --
Jeffrey Furman (4) (5) 17,000 * 30,300 3.5% -- --
Jerry Greenfield (4) 130,000 2.0% 90,000 10.4% -- --
Perry Odak (6) 152,000 2.4% -- -- -- --
Elizabeth Bankowski (4) 16,732 * -- -- -- --
Pierre Ferrari 2,936 * -- -- -- --
Jennifer Henderson 524 * -- -- -- --
Frederick A. Miller 2,160 * -- -- -- --
Henry Morgan 4,160 * -- -- -- --
Andrew Patti 936 * -- -- -- --
Lawrence E. Benders 0 -- -- -- -- --
Bruce Bowman 18,764 * -- -- -- --
Charles Green 1,000 * -- -- -- --
Angelo Pezzani 13,000 * -- -- -- --
Frances Rathke 25,750 * -- -- -- --
The Capital Group 797,500 12.5% -- -- -- --
Companies, Inc. (7)
333 South Hope St.
Los Angeles, CA 90071
All Officers and directors
as a group (15 persons) 893,135 14.0% 608,786 70.6% -- --
The Ben & Jerry's
Foundation, Inc. (4) -- -- -- -- 900 100%
* Less than 1%
</TABLE>
(1) Based on the number of shares of Class A Common Stock outstanding as of
March 6, 1998. Each share of Class A Common Stock entitles the holder to one
vote per share.
(2) Based on the number of shares of Class B Common Stock outstanding as of
March 6, 1998. Each share of Class B Common Stock entitles the holder to ten
votes.
(3) Under the regulations and interpretations of the Securities and Exchange
Commission, Mr. Cohen may be deemed to be a parent of the Company.
(4)By virtue of their positions as directors of The Foundation, which has the
power to vote or dispose of the Class A Preferred Stock, each of Messrs.
Greenfield, a co-founder, Director and Vice Chairperson of the Company, and
Furman, a Director of and formerly a consultant to the Company, and Ms.
Bankowski, an officer and Director of the Company, may be deemed, under the
regulations and interpretations of the Securities and Exchange Commission, to
own beneficially the Class A Preferred Stock.
(5) Does not include 210 shares of Class A Common Stock and 105 shares of Class
B Common Stock owned by Mr. Furman's wife, as to which he disclaims beneficial
ownership under the securities laws. Includes 7,000 shares held by Mr. Furman as
trustee for others, which are deemed beneficially owned by Mr. Furman under
rules and regulations of the Securities and Exchange Commission.
(6) Does not include 15,080 shares of Class A Common Stock beneficially owned by
Mr. Odak's wife under the rules and regulations of the Securities and Exchange
Commission, as to which he disclaims beneficial ownership.
(7) The Capital Group Companies, Inc. is the parent company of Capital Research
and Management Company, SMALLCAP World Fund, Inc. and Capital Guardian Trust
Company. As a result of the investment power and in some cases the voting power
held by the subsidiary companies, The Capital Group Companies, Inc., is deemed
to "beneficially own" such securities by virtue of Rule 13d-3 under the
Securities Exchange Act of 1934.
<PAGE>
Item 13. Certain Relationships and Related Transactions
Under the terms of a Severance and Non-Competition Agreement between the Company
and Mr. Furman, dated December 31, 1990, the Company continues to provide, at no
cost to Mr. Furman, family health insurance coverage under the Company's regular
employee health insurance plan. This obligation will continue until March 2,
1999.
Mr. Cohen, a Co-founder of the Company, Chairperson and director of the Company,
has entered into an Employment Agreement with the Company for an employment term
expiring on December 31, 1998 (renewable automatically thereafter in successive
one year periods unless either Mr. Cohen or the Company gives notice to the
other of non-renewal). The Agreement provides for a base salary of $200,000 per
annum, subject to increases and bonuses at the discretion of the Board. The
Agreement provides for a covenant not to compete during the employment term of
the Agreement and for a three year period thereafter, in consideration of
payment by the Company (except as otherwise provided in the Agreement) of
severance equal to the then-current base salary during the three-year period.
The Agreement then provides for annual payments of $75,000 for life, commencing
with the end of the three year severance period, and for specified insurance
benefits and contains a provision for contemplated services to be provided to
the Company after the end of the term of employment and severance period.
Mr. Greenfield, a Co-founder of the Company, Vice Chairperson, and director of
the Company,, has entered into an Employment Agreement with the Company for a
term expiring on December 31, 1998 (renewable automatically thereafter in
successive one year periods unless either Mr. Greenfield or the Company gives
notice to the other of non-renewal). The Agreement provides for a base salary of
$200,000 per annum, subject to increases and bonuses at the discretion of the
Board. The Agreement also provides for a covenant not to compete during the
employment term of the Agreement and for a three year period thereafter, in
consideration of payment by the Company (except as otherwise provided in the
Agreement) of severance equal to the then-current base salary during the
three-year period . The Agreement then provides for annual payments of $75,000
for life, commencing with the end of the three year severance period, for
specified insurance benefits and contains a provisions for certain services
contemplated to be provided to the Company after the end of the term of
employment and severance period.
Mr. Bowman, Senior Director of Operations has an Employment Agreement dated
August 21, 1995, expiring August 20, 1998. The Agreement provides for an annual
base salary, which may be increased by the Board (the Board has currently fixed
such base
<PAGE>
salary at $200,000), and he is entitled to an incentive bonus, not exceeding 35%
of his base salary (payable in cash and shares of Class A Common Stock), as
determined by the Chief Executive Officer, subject to approval of the
Compensation Committee. The amount of the bonus award for 1997 was $50,000. The
Agreement provided for stock options of 25,000 shares of Class A Common Stock
which were granted in August, 1995. The Agreement also provides for medical,
life insurance, 401(k)plan and other employee benefits, a covenant not to
compete during the term of the Agreement and for a two-year period thereafter,
and for one year's continuation of then-current base salary and annual incentive
award at the rates in effect on the date of termination of his employment by the
Company without cause.
Mr. Odak, Chief Executive Officer, has a three year Employment Agreement with
the Company dated December 31, 1996. Under the terms of the Agreement, Mr. Odak
is entitled to a base salary of $300,000 per annum, subject to increases from
time to time by the Board of Directors, in its sole discretion. Mr. Odak
received, non-incentive stock options to purchase an aggregate of 360,000 shares
of Class A Common Stock of the Company exercisable at $10.88 per share, the fair
market value on the dates of grant by the Compensation Committee of the Board of
Directors under the 1995 Equity Incentive Plan. These options become exercisable
at various dates specified in the Employment Agreement, subject to acceleration
of vesting as to specified amounts in the event that certain financial goals are
achieved and the Compensation Committee makes certain findings with respect to
Mr. Odak's performance in the applicable prior year, all as specified in detail
in the Employment Agreement.
The Employment Agreement may be terminated at any time by the Company for cause,
as defined. If terminated for cause, the Company shall have no further
obligation to Mr. Odak, other than for base salary through the date of
termination, and any options that are vested shall continue to be exercisable
for thirty days (unless terminated by the vote of the Compensation Committee).
All other options terminate.
The Company may also terminate the Employment Agreement Other Than For Cause, in
which event the Company has a continuing obligation to pay Mr. Odak his base
amount at the rate in effect on the date of termination for the monthly periods
specified in the Agreement, which are dependent upon the date of such
termination. Additionally, the Company will continue to contribute, for the
period during which the base amount is continued, the cost of Mr. Odak's
participation (including his family) in the Company's group medical and
hospitalization insurance plans and group life insurance plan. Upon such
termination, unvested options shall become exercisable to the extent so provided
by the Agreement.
<PAGE>
Mr. Odak may terminate his employment with the Company for good reason, as
defined (in the absence of cause). In the event of such termination, base
amount, benefits and options (including acceleration, period of exercisablilty
and termination of options) shall be paid or provided in the same manner and
extent as for a termination by the Company Other Than For Cause.
Mr. Odak agrees not to compete with the Company during his period of employment
and, after termination, for the greater of one year or the period during which
severance payments are made.
Copies of the above described Agreements have been filed as exhibits to this
Report on Form 10-K and the above descriptions are qualified by the definitive
terms of the Agreements so filed as exhibits.
During the year ended December 27, 1997, the Company purchased Rain Forest
Crunch cashew-brazilnut buttercrunch candy to be included in Ben & Jerry's Rain
Forest Crunch flavor ice cream for an aggregate purchase price of approximately
$800,000 from Community Products, Inc., a company of which Messrs. Cohen and
Furman were the principal stockholders and directors. The candy was purchased
from Community Products, Inc. at competitive prices and on standard terms and
conditions. Community Products, Inc. filed for protection under Chapter 11 of
the US Bankruptcy Code in early 1997, its business was sold and the matter (and
related litigation) is pending in US Bankruptcy Court. Ben & Jerry's located an
alternative supplier for cashew-brazilnut buttercrunch. The termination of Ben &
Jerry's relationship with Community Products, Inc. had no material effect on the
Company's business.
In 1997, the Company paid a $60,000 fee to The Kaleel Jamison Consulting Group,
Inc. for its role in the Company's hiring of Mr. Richard Doran, Senior Director
of Human Resources. Mr. Frederick A. Miller, a director of the Company, is
President of Kaleel Jamison Consulting Group, Inc. Prior to joining the Company
Mr. Doran was an employee of Kaleel Jamison Consulting Group, Inc.
In December 1997, the Company advanced $140,000 to Mr. Lawrence E. Benders,
Chief Marketing Officer, under a non-interest bearing bridge loan for the
purchase of his home in Vermont. In January 1998 this bridge loan was paid in
full by Mr. Benders.
During 1997, the Company paid $20,000 to Mr. Andrew Patti for services as
Chairman of the Executive Committee.
<PAGE>
<TABLE>
Item 14. Exhibits, Financial Statements, and Financial Statement Schedule, and
Reports on Form 8-K
(a) List of financial statements and financial statement
schedule: Form 10-K
Page No.
<S> <C>
(1) The following consolidated financial statements are included in
Item 8:
Consolidated Balance Sheets as of December
27, 1997 and December 28, 1996 F-2
Consolidated Statements of
Operations for the years ended December 27, 1997, December 28,
1996, and December 30,1995 F-3
Consolidated Statements of Stockholders'
Equity for the years ended December 27, 1997,
December 28, 1996 and December 30, 1995 F-4
Consolidated Statements of Cash Flows for
the years ended December 27, 1997, December 28,
1996 and December 30, 1995 F-5
Notes to Consolidated Financial Statements F-6 to
F-15
(2) The following financial statement schedule
is included in Item 14 (d) F-16
SCHEDULE II - Valuation and Qualifying
Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) The following designated exhibits are, as indicated below, either
filed herewith or have heretofore been filed with the Securities
and Exchange Commission under the Securities Act of 1933
or the Securities Exchange Act of 1934 and are referred to
and incorporated herein by reference to
such filings.
</TABLE>
<PAGE>
Exhibit No.
3.1 Articles of Association, as amended, of the
Company (filed with the Securities and Commission
as Exhibit 3.1 and 3.1.1 to the Company's Registration
Statement on Form-1 (File No. 33-284) and incorporated
herein by reference).
3.1.1 Amendment to Articles of Association on June 27, 1987 (filed as
Exhibit 1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1987 and incorporated herein by
reference).
3.1.2 Amendment to Articles of Association on September 7, 1993 (filed
as Exhibit 1 to the Company's Quarterly Report on Form 10-Q for
the period ended June 26, 1993 and incorporated herein by
reference).
3.1.3 Amendment to Articles of Association on August 4, 1995 (filed as
Exhibit 3.1.3 to the Company's Quarterly Report on Form 10-Q for
the period ended July 1, 1995 and incorporated herein by
reference).
3.1.4 Amendment to Articles of Association approved June 28,
1997(filed herewith).
3.2 By-laws as amended through November 10, 1995 (filed as Exhibit
3.2.2 to the Company's Report on Form 10-Q for the period ended
September 30, 1995 and incorporated herein by reference).
3.2.1 Section 2 of Article 5 of the By-laws as amended on January 18,
1996 (filed as Exhibit 3.2.1 to the Company's Form 10-K for the
year ended December 30, 1995 and incorporated herein by
reference).
4.1 See Exhibit 3.1.
4.2 See Exhibit 3.2
4.3 Mortgage and Security Agreement among the State of Vermont, the
Company and the Howard Bank, N.A. (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (file no. 33-284)
and incorporated herein by reference).
4.4 Guaranty by the Company accepted by the Howard Bank, N.A.,
Trustee, and Marine Midland Bank, N.A., as amended (filed as
Exhibits 4.2 and 4.2.1 to the Company's Registration Statement
on Form S-1 (file no. 33-284) and incorporated herein by
reference), as amended November 20, 1987 (filed as Exhibit 4.4
to the
<PAGE>
Company's Registration Statement on Form S-1 (file no. 33-17516)
and incorporated by reference), as amended January 31 and March
10, 1989 (filed as Exhibit 4.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988 and incorporated
herein by reference).
4.4.1 Amendment to item 4.4 dated July 28, 1992 (filed an Exhibit to
the Company's Registration Statement on Form S-3 (file no.
33-51550) and incorporated herein
by reference).
4.5 Loan Agreement and Amendment between the Village of
Waterbury, Vermont and the Company (filed as Exhibit
4.4 to the Company's Registration Statement on Form
S-1(file no. 33-284) and incorporated herein by
reference).
4.6 Second Mortgage and Security Agreement dated December
11, 1984 between the Company and the Village of
Waterbury, Vermont (filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-1 (file no.
33-284)and incorporated herein by reference).
4.7 Grant Agreement between the Secretary of Housing and
Urban Development and the Village of Waterbury,
Vermont dated September 15, 1984 (filed as Exhibit 4.6 to the
Company's Registration Statement on Form S-1 (file no.33-284)
and incorporated herein by reference).
4.8 Form of Class A Common Stock Certificate (filed as
Exhibit 4.8 to the Company's Registration Statement on
Form S-1 (file no. 33-17516) and incorporated herein
by reference).
4.9 Form of Class B Common Stock Certificate (filed as
Exhibit 4.9 to the Company's Registration Statement on
Form S-1 (file no. 33-17516) and incorporated herein
by reference).
4.11 Senior Note Agreement dated as of October 13, 1993
between Ben & Jerry's Homemade, Inc. and The Travelers
Insurance Company and Principal Mutual Life Insurance
Company (filed as Exhibit 1 to the Company's Quarterly
Report on Form 10-Q for the period ended September 25,
1993 and incorporated herein by reference).
The registrant agrees to furnish a copy to the Commission upon
request of any other instrument with respect to long-term debt
(not filed as an exhibit), none of which relates to securities
exceeding 10% of the total assets of the registrants.
<PAGE>
10.1 Employment Agreement dated as of January 29, 1998 between
Bennett R. Cohen and the Company (filed herewith).
10.4 Employment Agreement dated as of January 29, 1998 between Jerry
Greenfield and the Company (filed herewith).
10.5 Settlement Agreement dated March 20, 1985 between the
Company and Haagen-Dazs, Inc. (filed as Exhibit 10.8
to the Company's Registration Statement on Form S-1
(file no. 33-284) and incorporated herein by
reference).
10.8 Distribution Agreement between the Company and
Dreyer's Grand Ice Cream, Inc. dated January 6, 1987
(filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K For the year ended December 31,
1986 and incorporated herein by reference), as amended as of
January 20, 1989 (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference).
10.8.1 Amendment to Item 10.8 dated August 31, 1992 (filed as Exhibit
28.1 to the Company's Registration Statement on Form S-3 (file
no. 33-51550) and incorporated here-in by reference).
10.8.2 Amendment to Item 10.8 dated April 18, 1994 filed as Exhibit 2
to the Company's Quarterly Report on Form 10-Q dated March 26,
1994 and incorporated here-in by reference).
10.9 License Agreement between the Company and Jerry Garcia and
Grateful Dead Productions, Inc. dated July 26, 1987(filed as
Exhibit 10.15 to the Company's Registration Statement on Form
S-1 (file no. 33-17516) and incorporated herein by reference).
10.15 Franchise Agreement between the Company and BJ O/R, a
California limited partnership, dated June 9, 1993
(filed as Exhibit 2 to the Company's Quarterly Report
on Form 10-Q for the period ended June 26, 1993 and
incorporated herein by reference).
10.19 1986 Restricted Stock Plan (filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
10.20 1986 Employee Stock Purchase Plan (filed as Exhibit 4
to the Company's Registration Statements on Form S-8
(file nos. 33-9420 and 33-17594) and incorporated
<PAGE>
herein by reference).
10.20.1 Amendment to Employee Stock Purchase Plan dated on August 4,
1995 (filed as Exhibit 10.20.1 on Form 10-Q for the period ended
July 1, 1995 and incorporated herein by reference).
10.21 1985 Stock Option Plan (filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
10.21.1 1994 Amendment to 1985 Stock Option Plan (filed as Exhibit
10.21.1 to the Company's Annual Report on Form 10-K for the year
ended December 30, 1994 and incorporated herein by reference).
10.22 Ben & Jerry's Homemade, Inc. Employees' Retirement
Plan as amended (filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
10.22.1 Amendment to Item 10.22 dated January 1, 1990 (filed as Exhibit
10.22.1 to the Company's Report on Form 10-K for the year ended
December 29, 1991 and incorporated herein by reference).
10.22.2 Amendment to Item 10.22 dated June 28, 1990 (filed as Exhibit
10.22.2 to the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by reference).
10.22.3 Amendment to Item 10.22 dated January 1, 1991 (filed as Exhibit
10.22.3 to the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by reference).
10.23 1991 Restricted Stock Plan (filed as Exhibit 10.23 to
the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by
reference).
10.24 Severance/Non-Competition Agreement dated as of
December 31,1990 between Jeffrey Furman and the
Company (filed as Exhibit 10.24 to the Company's
Report on Form 10-K for the year ended December 25,
1993 and incorporated herein by reference).
10.27 1992 Non-employee Directors' Restricted Stock Plan
(filed as Exhibit 10.27 to the Company's Annual Report
on Form 10-K for the year ended December 25, 1993 and
<PAGE>
incorporated herein by reference).
10.29 1995 Equity Incentive Plan (filed as Exhibit 10.29 to the
Company's Quarterly Report on Form 10-Q for the period ended
July 1, 1995 and incorporated herein by reference).
10.30 Non-Employee Director's Plan For Stock In Lieu of
Directors' Cash Retainer Dated August 4, 1995 (filed
as Exhibit 10.30 to Form 10-Q quarter ended July 1,
1995 and incorporated herein by reference).
10.31 Employment Agreement dated August 21, 1995 between the
Company and Bruce Bowman (filed as Exhibit 10.31 to
the Company's Form 10-K for the year ended December
30, 1995 and incorporated herein by reference).
10.32 Lease dated February 1, 1996 between the Company and
Technology Park Associates, Inc. (filed as Exhibit
10.31 to the Company's Form 10-K for the year ended
December 30, 1995 and incorporated herein by
reference).
10.33 Employment Agreement dated December 31, 1996 between
the Company and Perry D. Odak (filed as
Exhibit 10.33 to the Company's Form 10-K for the year
ended December 28, 1996 and incorporated herein by
Reference).
10.34 Employment Agreement dated January 1, 1998 between the Company
and Angelo M. Pezzani (filed herewith).
10.35 Employment Agreement dated October 20, 1997 between the Company
and Lawrence Benders (filed herewith).
10.36 Importation and Marketing Agreement between the Company,
Seven-Eleven Japan Co., Ltd.,Tower Enterprise Corporation and
ATF Co., Ltd. dated December 19, 1997 (filed herewith)
11.0 The Computation of Per Share Earnings is incorporated by
reference from Note 10 of the Company's consolidated financial
statements(filed herewith).
21.1 Subsidiaries of the registrant as of December 27,1997
(filed herewith).
23.0 Consent of Ernst & Young LLP (filed herewith).
27.0 Financial Data Schedule (filed herewith).
(b) No Current Reports on Form 8-K were filed during the fourth
quarter of 1997
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BEN & JERRY'S HOMEMADE, INC.
Dated: March 25, 1998 By: /s/ Frances Rathke
------------------
Frances Rathke
Chief Financial Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date indicated.
March 25, 1998 /s/ Elizabeth Bankowski
Elizabeth Bankowski
Director, Director of Social Mission
Development
March 25, 1998 /s/ Bennett R. Cohen
Bennett R. Cohen
Director and Chairperson
March 25, 1998 /s/Pierre Ferrari
Pierre Ferrari
Director
March 25, 1998 /s/ Jeffrey Furman
Jeffrey Furman
Director
March 25, 1998 /s/ Jerry Greenfield
Jerry Greenfield
Director and Vice Chairperson
March 25, 1998 /s/ Jennifer Henderson
Jennifer Henderson
Director
March 25, 1998 /s/ Frederick A. Miller
Frederick A. Miller
Director
March 25, 1998 /s/ Henry Morgan
Henry Morgan
Director
March 25, 1998 /s/Perry D. Odak
Director, Principal Executive Officer
And President
March 25, 1998 /s/Andrew S. Patti
Andrew S. Patti
Director
March 25, 1998 /s/ Frances Rathke
Frances Rathke
Principal Financial Officer and
Principal Accounting Officer
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 27, 1997
BEN & JERRY'S HOMEMADE INC.
SOUTH BURLINGTON, VERMONT
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C>
Report of Independent Auditors............................................................................F-1
Consolidated Balance Sheets as of December 27, 1997 and December 28, 1996.................................F-2
Consolidated Statements of Operations for the years ended December 27, 1997,
December 28, 1996, and December 30, 1995................................................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December 27, 1997,
December 28, 1996, and December 30, 1995................................................................F-4
Consolidated Statements of Cash Flows for the years ended December 27, 1997,
December 28, 1996, and December 30, 1995................................................................F-5
Notes to Consolidated Financial Statements................................................................F-6 to
F-15
Financial Schedule:
SCHEDULE II - Valuation and Qualifying Accounts...........................................................F-16
</TABLE>
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Ben & Jerry's Homemade, Inc.
We have audited the accompanying consolidated balance sheets of Ben & Jerry's
Homemade, Inc. as of December 27, 1997 and December 28, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 27, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ben &
Jerry's Homemade, Inc. at December 27, 1997 and December 28, 1996 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 27, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 23, 1998
F-1
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Balance Sheets
(In thousands except share data)
<TABLE>
<CAPTION>
December 27, December 28,
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 47,318 $ 36,104
Marketable securities 481 466
Trade accounts receivable
(less allowance of $1,066 in 1997
and $695 in 1996 for doubtful accounts) 12,710 8,684
Inventories, net 11,122 15,365
Deferred income taxes 6,071 4,099
Prepaid expenses and other current assets 2,378 3,395
----------- -----------
Total current assets 80,080 68,113
----------- -----------
Property, plant and equipment, net 62,724 65,104
Investments 1,061 1,000
Other assets 2,606 2,448
----------- -----------
$ 146,471 $ 136,665
=========== ===========
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 23,266 $ 17,398
Current portion of long-term debt and
capital lease obligations 5,402 660
----------- -----------
Total current liabilities 28,668 18,058
Long-term debt and capital lease obligations 25,676 31,087
Deferred income taxes 5,208 4,835
Commitments and contingencies
Stockholders' equity:
$1.20 noncumulative Class A preferred stock -
$1.00 par value, redeemable at the Company's option
at $12.00 per share; 900 shares authorized,
issued and outstanding, aggregate preference
on voluntary or involuntary liquidation - $9,000 1 1
Class A common stock - $.033 par value; authorized
20,000,000 shares; issued: 6,494,835 shares at
December 27, 1997 and 6,364,733 shares at
December 28, 1996 214 210
Class B common stock - $.033 par value; authorized
3,000,000 shares; issued: 866,235 shares at
December 27, 1997, and 897,664 shares at
December 28, 1996 29 29
Additional paid-in capital 49,681 48,753
Retained earnings 39,086 35,190
Cumulative translation adjustment (129) ( 118)
Treasury stock, at cost: 124,532 Class A and 1,092 Class B
shares at December 27, 1997 and 67,032 Class A and 1,092
Class B shares at December 28, 1996 (1,963) ( 1,380)
---------- ----------
Total stockholders' equity 86,919 82,685
----------- -----------
$ 146,471 $ 136,665
=========== ===========
See accompanying notes.
</TABLE>
F-2
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Operations
(In thousands except per share data)
<TABLE>
<CAPTION>
Years Ended
Dec. 27, 1997 Dec. 28, 1996 Dec.30, 1995
------------- ------------- ------------
<S> <C> <C> <C>
Net sales $ 174,206 $ 167,155 $ 155,333
Cost of sales 114,284 115,212 109,125
------------- ------------- -------------
Gross profit 59,922 51,943 46,208
Selling, general and administrative expenses 53,520 45,531 36,362
Other income (expense):
Interest income 1,938 1,676 1,681
Interest expense (1,992) (1,996) (1,525)
Other (64) 243 (597)
-------------- -------------- -------------
(118) (77) (441)
-------------- -------------- -------------
Income before income taxes 6,284 6,335 9,405
Income taxes 2,388 2,409 3,457
------------- -------------- -------------
Net income $ 3,896 $ 3,926 $ 5,948
============= ============= =============
Basic earnings per share $ 0.54 $ 0.55 $ 0.83
Diluted earnings per share $ 0.53 $ 0.54 $ 0.82
</TABLE>
See accompanying notes.
F-3
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands except share data)
<TABLE>
<CAPTION>
Preferred
Stock Common Stock
----- ------------
Class A Class B Additional Cumulative
Par Par Par Paid-in Retained Translation
Value Value Value Capital Earnings Adjustment
----- ----- ----- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 1 $ 208 $ 31 $48,366 $25,316 $ 0
Net income (loss) 5,948
Common stock issued under stock
purchase plan (21,599 Class A shares) 174
Conversion of Class B shares to Class A
shares (18,123 shares) 1 (1)
Common stock issued under restricted
stock plan (2,000 Class A shares) (19)
Foreign currency translation adjustment (114)
--- --- -- ------ ------ ----
Balance at December 30, 1995 1 209 30 48,521 31,264 (114)
Net income 3,926
Common stock issued under stock
purchase plan (15,674 Class A shares) 205
Conversion of Class B shares to Class A
shares (16,661 shares) 1 (1)
Common stock issued under restricted
stock plan (2,096 Class A shares) 27
Foreign currency translation adjustment (4)
- --- -- ------ ------ ----
Balance at December 28, 1996 1 210 29 48,753 35,190 (118)
Net income 3,896
Common stock issued under stock
purchase plan (15,406 Class A shares) 1 148
Conversion of Class B shares to Class A
shares (31,451 shares) 1
Common stock issued under stock and
option plans (83,267 Class A shares) 2 907
Repurchase of common stock
(77,500 Class A shares)
Issuance of treasury stock for compensation
(20,000 Class A shares) (127)
Foreign currency translation adjustment (11)
------- ------- ---- ------- ------- -----
Balance at December 27, 1997 $ 1 $ 214 $ 29 $49,681 $39,086 $(129)
======= ======= ==== ======= ======= =====
<PAGE>
Treasury Stock
-------------- Total
Class A Class B Stock-
holders'
Cost Cost Equity
---- ---- ------
Balance at December 31, 1994 $(1,415) $ (5) $ 72,502
Net income (loss) 5,948
Common stock issued under stock
purchase plan (21,599 Class A shares) 174
Conversion of Class B shares to Class A
shares (18,123 shares)
Common stock issued under restricted
stock plan (2,000 Class A shares) 40 21
Foreign currency translation adjustment (114)
-- -- ---
Balance at December 30, 1995 (1,375) (5) 78,531
Net income 3,926
Common stock issued under stock
purchase plan (15,674 Class A shares) 205
Conversion of Class B shares to Class A
shares (16,661 shares)
Common stock issued under restricted
stock plan (2,096 Class A shares) 27
Foreign currency translation adjustment (4)
------ -- ------
Balance at December 28, 1996 (1,375) (5) 82,685
Net income 3,896
Common stock issued under stock
purchase plan (15,406 Class A shares) 149
Conversion of Class B shares to Class A
shares (31,451 shares) 1
Common stock issued under stock and
option plans (83,267 Class A shares) 909
Repurchase of common stock
(77,500 Class A shares) (988) (988)
Issuance of treasury stock for compensation
(20,000 Class A shares) 405 278
Foreign currency translation adjustment (11)
------- ------- --------
Balance at December 27, 1997 $(1,958) $ (5) $ 86,919
======= ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years Ended
December 27, December 28, December 30,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,896 $ 3,926 $ 5,948
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation and amortization 7,711 7,091 5,928
Deferred income taxes (1,599) 809 2,166
Provision for doubtful accounts 630 408 400
Loss on disposition of assets 124 10 171
Stock compensation 405 21
Changes in assets and liabilities:
Accounts receivable (5,318) 3,146 ( 1,009)
Income taxes receivable/payable 1,743 ( 89) ( 733)
Inventories 4,243 ( 2,749) 847
Prepaid expenses (64) 897 ( 563)
Accounts payable and accrued expenses 5,868 806 2,677
----------- ------------ -----------
Net cash provided by operating activities 17,639 14,255 15,853
Cash flows from investing activities:
Additions to property, plant and equipment (5,236) ( 12,333) ( 7,532)
Proceeds from sale of property, plant
and equipment 48 168 96
(Increase) decrease in investments (76) ( 466) 7,000
Changes in other assets (425) ( 320) (303)
----------- ------------ ------------
Net cash used for investing activities (5,689) ( 12,951) (739)
Cash flows from financing activities:
Repayments of long-term debt and
capital leases (669) (678) (547)
Repurchase of common stock (988)
Net proceeds from issuance of common stock 932 232 174
----------- ------------ -----------
Net cash used for financing activities (725) ( 446) ( 373)
Effect of exchange rate changes on cash (11) (160) ( 113)
----------- ------------ ------------
Increase in cash and cash equivalents 11,214 698 14,628
Cash and cash equivalents at beginning of year 36,104 35,406 20,778
----------- ------------ ----------
Cash and cash equivalents at end of year $ 47,318 $ 36,104 $ 35,406
=========== ============ ===========
See accompanying notes.
</TABLE>
F-5
<PAGE>
Ben & Jerry's Homemade, Inc.
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
1. SIGNIFICANT ACCOUNTING POLICIES
Business
Ben & Jerry's Homemade, Inc. (the Company) makes and sells super premium ice
cream and other frozen dessert products through distributors and directly to
retail outlets primarily located in the United States and selected foreign
countries, including Company-owned and franchised ice cream parlors.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated.
Use of Estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Cash Equivalents
Cash equivalents represent highly liquid investments with maturities of three
months or less at date of purchase.
Investments
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported in a separate component of shareholders' equity. The amortized
cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Held-to-maturity securities are stated at amortized cost,
adjusted for amortization of premium and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in income. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities classified
as available-for-sale are included in interest income.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant
concentration of credit risk, consist of cash and cash equivalents, investments
and trade accounts receivable. The Company places its investments in highly
rated financial institutions, obligations of the United States Government and
investment grade short-term instruments. No more than 20% of the total
investment portfolio is invested in any one issuer or guarantor other than
United States Government instruments which limits the amount of credit exposure.
The Company sells its products primarily to well established frozen dessert
distribution or retailing companies throughout the United States and Europe. The
Company's most significant customer, Dreyer's Grand Ice Cream, Inc., accounted
for 57%, 55%, and 47% of net sales in 1997, 1996 and 1995 respectively. The
Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. Historically, the Company has not
experienced significant losses related to investments or trade receivables.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation, including
amortization of leasehold improvements, is computed using the straight-line
method over the estimated useful lives of the related assets. Amortization of
assets under capital leases is computed on the straight-line method over the
lease term and is included in depreciation expense.
Other Assets
Other assets include intangible and other noncurrent assets. Intangible assets
are reviewed for impairment based on an assessment of future operations to
ensure that they are appropriately valued. Intangible assets are amortized on a
straight-line basis over their estimated economic lives.
F-6
<PAGE>
Ben & Jerry's Homemade, Inc.
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Translation of Foreign Currencies
Assets and liabilities of the Company's foreign operations are translated into
United States dollars at exchange rates in effect on the balance sheet date.
Income and expense items are translated at average exchange rates prevailing
during the year. Translation adjustments are accumulated as a separate component
of stockholders' equity. Transaction gains or losses are recognized as other
income or expense in the period incurred. Translation and transaction gains or
losses have been immaterial for all periods presented.
Foreign Currency Hedging
The Company hedges foreign currency risks by entering into forward contracts at
the beginning of each month to hedge foreign currency denominated sales for that
month. Realized and unrealized gains or losses on contracts that hedge
anticipated cash flows are determined by comparison of contract values upon
execution (realized) and at each balance sheet for open contracts (unrealized).
Resulting gains and losses are recognized at the balance sheet date as other
income or expense for the period. Transaction gain or losses have been
immaterial for all periods presented.
Revenue Recognition
The Company recognizes revenue and the related costs when product is shipped.
The Company recognizes franchise fees as income for individual stores when
services required by the franchise agreement have been substantially performed
and the store opens for business. Franchise fees relating to area franchise
agreements are recognized in proportion to the number of stores for which the
required services have been substantially performed. Franchise fees recognized
as income and included in net sales were approximately $553,000, $301,000, and
$166,000 in 1997, 1996 and 1995, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense (excluding
cooperative advertising with distribution companies) amounted to approximately
$6.7 million, $3.4 million, and $1.1 million for the years ended December 27,
1997, December 28, 1996, and December 30, 1995, respectively.
Income Taxes
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under the liability method, deferred tax liabilities and assets are
recognized for the tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities.
Stock Based Compensation
The Company grants stock options for a fixed number of shares with an exercise
price equal to the fair value of the shares at the date of the grant. The
Company accounts for employee stock option grants in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees". Accordingly, no compensation
expense for stock option grants to employees is recognized.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share (FAS 128). FAS 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants or convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the FAS 128
requirements.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income (FAS 130) and Statement No. 131, Disclosure About
Segments of an Enterprise and Related Information (FAS 131). FAS 130 establishes
standards for reporting and displaying comprehensive income and its components.
FAS 131 establishes standards for public companies to report information about
operating segments in financial statements, and supercedes FAS 14, Financial
Reporting for Segments of a Business Enterprise, but retains the requirements to
report information about major customers. FAS 130 and FAS 131 are effective for
the Company in fiscal 1998. The Company does not believe the adoption of these
Statements will have a material effect on the Company's financial statements.
F-7
<PAGE>
2. CASH, MARKETABLE SECURITIES AND INVESTMENTS
The Company's cash and investments in debt securities are carried at fair value
which approximates cost, or amortized cost, as summarized below:
1997 1996
---- ----
Municipal bonds $ 45,568 $ 14,900
U.S. corporate securities 12,980
------- ------
Total debt securities available-for-sale 45,568 27,880
Cash, cash equivalents and other investments 3,292 9,690
--------- ---------
Total cash, cash equivalents and investments $ 48,860 $ 37,570
========= =========
All debt securities at December 27, 1997 and December 28, 1996 have maturities
of less than twelve months. At December 27, 1997 investments totaling $1,542,000
were classified as held-to-maturity and classified as investments.
Investments in debt securities mature at par in thirty to forty-five day
intervals, at which time the stated interest rates are reset at the then market
rate. Gross purchases and maturities aggregated $43,088,000 and $25,400,000 in
1997, $61,100,000 and $63,922,000 in 1996, and $94,500,000 and $83,525,000 in
1995, respectively.
3. INVENTORIES
1997 1996
---- ----
Ice cream and ingredients $ 10,294 $ 14,221
Paper goods 536 492
Food, beverages, and gift items 292 652
-------------- -------------
$ 11,122 $ 15,365
============== =============
The Company purchased certain ingredients from a company owned by the Company's
Chairperson and a member of the Board of Directors which amounted to
approximately $800,000 for 1997, $1,000,000 for 1996 and $1,500,000 for 1995.
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Estimated
Useful Lives/
1997 1996 Lease Term
---- ---- ----------
<S> <C> <C> <C>
Land and improvements $ 4,520 $ 4,481 15-25 years
Buildings 37,650 37,533 25 years
Equipment and furniture 44,609 47,978 3-20 years
Leasehold improvements 3,221 3,153 3-10 years
Construction in progress 2,676 758
-------------- --------------
92,676 93,903
Less accumulated depreciation 29,952 28,799
-------------- --------------
$ 62,724 $ 65,104
============== ==============
</TABLE>
Depreciation expense for the years ended December 27, 1997, December 28, 1996
and December 30, 1995 was $7,444,000, $6,650,000, and $5,578,000, respectively.
F-8
<PAGE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Trade accounts payable $ 3,832 $ 4,337
Accrued expenses 10,313 7,350
Accrued payroll and related costs 2,076 2,152
Accrued promotional costs 3,581 2,076
Accrued marketing costs 2,230 732
Accrued insurance expense 1,234 751
--------- ---------
$ 23,266 $ 17,398
========= =========
</TABLE>
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Senior Notes - Series A payable in annual installments beginning
in 1998 through 2003 with interest payable semiannually at 5.9% $ 20,000 $ 20,000
Senior Notes - Series B payable in annual installments beginning
in 1998 through 2003 with interest payable semiannually at 5.73% 10,000 10,000
Other long-term obligations 1,078 1,747
--------- ---------
31,078 31,747
Less current portion 5,402 660
--------- ---------
$ 25,676 $ 31,087
========= =========
</TABLE>
Property, plant and equipment having a net book value of approximately
$17,275,000 at December 27, 1997 are pledged as collateral under certain
long-term debt arrangements.
Long-term debt and capital lease obligations at December 27, 1997 maturing in
each of the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
Capital lease Long-term
obligations debt
<S> <C> <C>
1998 $ 15 $ 5,398
1999 15 5,281
2000 15 5,064
2001 248 5,040
2002 5,033
Thereafter 5,098
--------- ---------
Total minimum payments 293 30,914
Less amounts representing interest 129
--------- ---------
Present value of minimum payments $ 164 $ 30,914
========= =========
</TABLE>
The Company capitalized no interest in 1997 or 1996. Interest of approximately
$497,000 was capitalized in 1995 as part of the acquisition cost of property,
plant and equipment. Interest paid, including interest capitalized, amounted to
$1,975,000, $1,973,000, and $2,023,000 for 1997, 1996, and 1995, respectively.
The Company has available two $10,000,000 unsecured working capital line of
credit agreements with two banks. Interest on borrowings under the agreements is
set at the banks' Base Rate or at the Eurodollar Rate plus a maximum of up to
1.25%. The agreements expire September 29, 1998 and December 29, 1998,
respectively, and any outstanding borrowings are due at that time. No amounts
were borrowed under these or any bank agreements during 1997, 1996, and 1995.
F-9
<PAGE>
Certain of the debt agreements contain certain restrictive covenants requiring
maintenance of minimum levels of working capital, net worth and debt to
capitalization ratios. As of December 27, 1997 the Company was in compliance
with the provisions of these agreements. Under the most restrictive of these
covenants, distributions are limited to an amount of $5,000,000 plus 75% of
earnings and 100% of net losses since June 30, 1993; approximately $15,964,000
of retained earnings at December 27, 1997 was available for payment of
dividends.
The carrying amounts and fair values of the Company's financial instruments are
as follows:
1997 1996
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Long-term debt 31,078 29,734 31,747 29,862
7. STOCKHOLDERS' EQUITY
The Class A Preferred Stock has one vote per share on all matters on which it is
entitled to vote and is entitled to vote as a separate class in certain business
combinations, such that approval of two-thirds of the class is required for such
business combinations. The Class A Preferred Stock is redeemable by the Company,
by vote of the Continuing Directors (as defined in the Articles of Association).
The Class A Common Stock has one vote per share on all matters on which it is
entitled to vote. In June 1987, the Company's shareholders adopted an amendment
to the Company's Articles of Association that authorized 3,000,000 shares of a
new Class B Common Stock and redesignated the Company's existing Common Stock as
Class A Common Stock. The Class B Common Stock has ten votes per share on all
matters on which it is entitled to vote, except as may be otherwise provided by
law, is generally non-transferable and is convertible into Class A Common Stock
on a one-for-one basis. A stockholder who does not wish to complete the prior
conversion process may effect a sale by simply delivering the certificate for
such shares of Class B Stock to a broker, properly endorsed. The broker may then
present the certificate to the Company's Transfer Agent which, if the transfer
is otherwise in good order, will issue to the purchaser a certificate for the
number of shares of Class A Stock thereby sold.
8. STOCK BASED COMPENSATION PLANS The Company maintains two Stock Option Plans:
The 1985 Option Plan provides for the grant of incentive and non-incentive stock
options to employees or consultants. The 1985 Option Plan provides that options
granted are exercisable at the market value on the date of grant. The 1985
option plan expired in August 1995. While the Company grants options which may
become exercisable at different times or within different periods, the Company
has generally granted options to employees which vest over a period of four,
five, or eight years, and in some cases subject to acceleration of vesting. The
exercise period cannot exceed ten years from the date of grant. At December 27,
1997, no shares of Class A Common Stock were available for grant under the 1985
Option Plan for additional grants.
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price Option Price
A summary of the 1985 Option Plan activity is as follows : Options Per Share Per Share
------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994 162,308 $ 16.75 $ 16.75 - $ 16.75
Granted 215,000 11.17 10.63 - 14.00
Exercised - 0.00 0.00 - 0.00
Forfeited (19,871) 16.75 16.75 - 16.75
--------- --------- ----------------------
Outstanding at December 30, 1995 357,437 $ 13.40 $ 10.63 - $ 16.75
Granted - 0.00 0.00 - 0.00
Exercised - 0.00 0.00 - 0.00
Forfeited (109,819) 11.34 10.81 - 16.75
--------- --------- ----------------------
Outstanding at December 28, 1996 247,618 $ 14.31 10.63 - 16.75
Granted - 0.00 0.00 - 0.00
Exercised (80,000) 10.81 10.81 - 10.81
Forfeited (10,807) 16.75 16.75 - 16.75
--------- --------- ----------------------
Outstanding at December 27, 1997 156,811 $ 15.92 $ 10.63 - $ 16.75
========= ========= ========= ========
Options vested at December 27, 1997 76,510 $ 15.05 $ 10.63 - $ 16.75
========= ========= ========= ========
</TABLE>
F-10
<PAGE>
The 1995 Equity Incentive Plan provides for the grant to employees, and other
key persons or entities, including non-employee directors who are in the
position, in the opinion of the Compensation Committee, to make a significant
contribution to the success of the Company, of incentive and non-incentive stock
options, stock appreciation rights, restricted stock, unrestricted stock awards,
deferred stock awards, cash or stock performance awards, loans or supplemental
grants, or combinations thereof. While the Company grants options which may
become exercisable at different times or within different periods, the Company
has generally granted options to employees which vest over a period of four,
five, or six years, and in some cases subject to acceleration of vesting upon
specified terms. The exercise period cannot exceed ten years from the date of
grant. At December 27, 1997, 146,000 shares of Class A Common Stock were
available for grant under the 1995 Equity Incentive Plan for additional grants.
<TABLE>
<CAPTION>
A summary of the 1995 Equity Incentive Plan activity is as follows: Weighted Average
Number of Exercise Price Option Price
Options Per Share Per Share
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994 0 $ 0.00 $ 0.00 - 0.00
Granted 25,000 19.00 19.00 - 19.00
Exercised 0 0.00 0.00 - 0.00
Forfeited 0 0.00 0.00 - 0.00
-------- --------- ----------------------
Outstanding at December 30, 1995 25,000 $ 19.00 19.00 - 19.00
Granted 62,500 13.97 12.38 - 16.00
Exercised 0 0.00 0.00 - 0.00
Forfeited 0 0.00 0.00 - 0.00
-------- --------- ----------------------
Outstanding at December 28, 1996 87,500 $ 15.41 12.38 - 19.00
Granted 694,000 12.04 10.88 - 13.89
Exercised 0 0.00 0.00 - 0.00
Forfeited (27,500) 16.00 16.00 - 16.00
-------- --------- ----------------------
Outstanding at December 27, 1997 754,000 $ 12.28 $ 10.88 - $ 19.00
======= ========= ========= ========
Options vested at December 27, 1997 127,042 $ 11.78 $ 10.88 - $ 19.00
======= ========= ========= ========
</TABLE>
The Company maintains an Employee Stock Purchase Plan which authorizes the
issuance of up to 300,000 shares of common stock. All employees with six months
of continuous service are eligible to participate in this plan. Participants in
the plan are entitled to purchase Class A Common Stock during specified
semi-annual periods through the accumulation of payroll, at the lower of 85% of
market value of the stock at the beginning or end of the offering period. At
December 27, 1997, 127,744 shares had been issued under the plan and 172,256
shares were available for future issuance.
The Company has a Restricted Stock Plan (the 1992 Plan) which provides that
non-employee directors, on becoming eligible, may be awarded shares of Class A
Common Stock by the Compensation Committee of the Board of Directors. Shares
issued under the plan become vested over periods of up to five years. The
Company has also adopted the 1995 Plan, which provides that non-employee
directors can elect to receive stock in lieu of a Director's annual cash
retainer. In 1997, 2,612 shares were issued to non-employee directors. These
shares vest immediately. At December 27, 1997, a total of 7,363 shares had been
awarded under these plans, all of which were fully vested, and 27,637 shares
were available for future awards. Unearned compensation on unvested shares is
recorded as of the award date and is amortized over the vesting period.
As of December 27, 1997 a total of 345,893 shares are reserved for future grant
or issue under all of the Company's stock plans.
The Company has stock option plans that provide for the grant of options to
purchase shares of the Company's common stock to employees or consultants. The
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," (FAS 123), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
The Company has followed FAS 123 for its stock options granted to non-employees
as required.
Pro forma information regarding net income and earnings per share is required by
FAS 123, which also requires that the information be
F-11
<PAGE>
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions:
1997 1996 1995
---- ---- ----
Risk-free interest rates 5.53% 6.15% 6.01%
Dividend yield 0.00% 0.00% 0.00%
Expected volatility factor 0.34 0.39 0.35
Weighted average expected lives (in years) 3.6 3.3 3.3
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):
1997 1996 1995
---- ---- ----
Pro forma net income $ 3,600 $ 3,796 $ 5,849
Pro forma earnings per share - diluted $ 0.49 $ 0.53 $ 0.81
Weighted average fair value of
options at the date of grant $ 4.16 $ 4.26 $ 4.33
Exercise prices for options outstanding ranged from $10.63 - $19.00. The
weighted-average remaining contractual life of those options is 8.75 years.
Because FAS 123 is applicable only to options granted subsequent to December 31,
1994, its pro forma effect will not be fully reflected until 1998.
9. INCOME TAXES
The provision for income taxes consists of the following:
Federal: 1997 1996 1995
---- ---- ----
Current $ 3,300 $ 1,348 $ 873
Deferred (1,388) 681 1,695
-------- -------- -------
1,912 2,029 2,568
State:
Current 686 252 418
Deferred (210) 128 471
-------- -------- -------
476 380 889
-------- -------- -------
$ 2,388 $ 2,409 $ 3,457
======== ======== =======
Income taxes computed at the federal statutory rate differ from amounts provided
as follows:
1997 1996 1995
---- ---- ----
Tax at statutory rate 34.0 % 34.0 % 34.0 %
State tax, less federal tax effect 5.0 6.0 4.5
Income tax credits (1.0 ) ( 1.0 ) ( 2.9 )
Tax exempt interest (2.9 ) ( 2.4 ) ( 1.1 )
Other, net 2.9 1.4 2.3
------- ------ -----
Provision for income taxes 38.0 % 38.0 % 36.8 %
======= ====== ====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for
F-12
<PAGE>
financial reporting purposes and the amounts used for income tax purposes and
are attributable to the following:
1997 1996
---- ----
Deferred tax assets:
Accrued liabilities $ 3,872 $ 2,297
Inventories 1,503 944
Accounts receivable 475 526
Other 221 429
--- ---
Total deferred tax assets 6,071 4,196
-------- --------
Deferred tax liabilities:
Depreciation 5,193 4,923
Other 15 9
-------- --------
Total deferred tax liabilities 5,208 4,932
-------- --------
Net deferred tax asset (liabilities) $ 863 $ (736)
========= ========
Income taxes paid amounted to $2,244,000, $1,716,000 and $1,918,000 during 1997,
1996 and 1995, respectively.
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings
per share - income available to common stockholders $3,896 $ 3,926 $ 5,948
------ ------- -------
Denominator:
Denominator for basic earnings per share -
weighted-average shares 7,247 7,189 7,171
Effect of dilutive securities:
Dilutive potential common shares - Employee stock options 87 41 51
------ ------- -------
Denominator for diluted earnings per share-adjusted weighted-average
shares and assumed conversions 7,334 7,230 7,222
====== ======= =======
Basic earnings per share $0.54 $0.55 $0.83
====== ======= =======
Diluted earnings per share $0.53 $0.54 $0.82
====== ======= =======
</TABLE>
Options to purchase 146,811 shares of common stock at prices ranging from $16.75
to $19.00 were outstanding during 1997 but were not included in the computation
of diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares and, therefore, the effect
would be antidilutive.
Under an agreement with an outside consultant, if the average of the closing
market value of the stock is in excess of $22.00 per share over a ninety day
period, the consultant would be entitled to purchase 125,000 shares of common
stock at $14.00 per share. These 125,000 additional warrants, which expire on
July 1, 2004, are not included in the computation of diluted earnings per share
because the stock has not exceeded $22.00.
F-13
<PAGE>
11. THE BEN & JERRY'S FOUNDATION, INC.
In October 1985, the Company issued 900 shares Class A Preferred Stock to The
Ben & Jerry's Foundation, Inc. (the Foundation), a non-profit corporation
qualified under section 501(c)(3) of the Internal Revenue Code. The primary
purpose of the Foundation is to be the principal recipient of cash contributions
from the Company which are then donated to various community organizations and
other charitable institutions. Contributions to the Foundation and directly to
other charitable organizations, at the rate of approximately 7.5% of income
before income taxes, amounted to approximately $510,000, $514,000 and $768,000
for 1997, 1996 and 1995, respectively.
The Class A Preferred Stock is entitled to vote as a separate class in certain
business combinations, such that approval of two-thirds of the class is required
for such business combinations. The three directors of the Foundation, including
one of the founders of the Company, are members of the Board of Directors of the
Company.
12. EMPLOYEE BENEFIT PLANS
The Company maintains profit sharing and savings plans for all eligible
employees. The Company has also implemented a management incentive program which
provides for discretionary bonuses for management. Contributions to the profit
sharing plan are allocated among all current full-time and regular part-time
employees (other than the co-founders, Chief Executive Officer and Officers that
are Senior Directors of functions) and are allocated fifty percent based upon
length of service and fifty percent split evenly among all employees. The profit
sharing plan and the management incentive plan are informal and discretionary.
Recipients who participate in the management incentive program are not eligible
to participate in the profit sharing plan. The savings plan is maintained in
accordance with the provisions of Section 401(k) of the Internal Revenue Code
and allows all employees with at least twelve months of service to make annual
tax-deferred voluntary contributions up to fifteen percent of their salary. The
Company may match the contribution up to two percent of the employee's gross
annual salary. Total contributions by the Company to the profit sharing,
management incentive program and savings plans were approximately $1,150,000,
$670,000 and $769,000 for 1997, 1996 and 1995, respectively.
13. LEGAL MATTERS
On December 14, 1995, the Company was served with a class action complaint filed
in federal court in Burlington, Vermont. The complaint, captioned Henry G.
Jakobe, Jr. v. Ben & Jerry's Inc., et al., was filed by a Ben & Jerry's
shareholder on behalf of himself and purportedly on behalf of all other Ben &
Jerry's shareholders who purchased the common stock of the Company during the
period from March 25, 1994 through December 19, 1994. Plaintiff alleges that the
Company violated the federal securities laws by making untrue statements of
material facts and omitting to state material facts in 1994, primarily
concerning the Company's construction and start-up of its new manufacturing
facility in St. Albans, Vermont.
On July 1, 1997, the Company entered into a Stipulation and Agreement of
Settlement with the Plaintiff Class. Despite Management's continued belief that
the remaining claim in Plaintiffs' suit is without merit, it was determined that
the costs associated with defending this lawsuit through its conclusion at trial
would be greater than the negotiated settlement amount paid by the Company (of
which a portion was reimbursed by the Company's insurance carrier). Therefore,
it was concluded that settling this matter, was in the best interest of the
Company and its shareholders. The net settlement was immaterial to the financial
statements.
14. COMMITMENTS
The Company leases certain property and equipment under operating leases.
Minimum payments for operating leases having initial or remaining noncancellable
terms in excess of one year are as follows:
1998 $ 1,210
1999 900
2000 654
2001 550
2002 396
Thereafter 1,124
F-14
<PAGE>
Rent expense for operating leases amounted to approximately $1,234,000,
$1,051,000 and $1,059,000 in 1997, 1996 and 1995,
respectively.
15. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1997
Net sales $ 36,148 $ 50,701 $ 49,956 $ 37,401
Gross profit $ 10,003 $ 19,150 $ 19,118 $ 11,651
Net income (loss) $ (1,059) $ 1,741 $ 2,528 $ 686
Net income (loss) per
common share - basic1 $ (.15) $ .24 $ .35 $ .09
Net income (loss) per
common share - diluted1 $ (.15) $ .24 $ .34 $ .09
1996
Net sales $ 37,889 $ 48,043 $ 46,143 $ 35,080
Gross profit $ 11,965 $ 16,540 $ 14,354 $ 9,084
Net income (loss) $ 1,364 $ 1,943 $ 1,820 $ ( 1,201)
Net income (loss) per
common share - basic1 $ .19 $ .27 $ .25 $ (.17)
Net income (loss) per
common share - diluted1 $ .19 $ .27 $ .25 $ (.17)
</TABLE>
1 Earnings per share amounts have been restated to comply with Statement of
Financial Accounting Standards No. 128, Earnings per Share.
F-15
<PAGE>
BEN & JERRY'S HOMEMADE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Years ended December 27, 1997, December 28, 1996, and December 30, 1995
<TABLE>
Balance at Charged Charged to Balance
beginning to costs other at end
of year and expenses accounts Deductions (1) of year
------- ------------ -------- -------------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 27, 1997 $695 $630 $--- $259 $1,066
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 28, 1996 $802 $408 $--- $515 $ 695
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 30, 1995 $504 $400 $--- $102 $ 802
Allowance for doubtful accounts
(deducted from accounts receivable)
(1) Accounts deemed to be uncollectible.
F-16
</TABLE>
Exhibit 3.1.4
VERMONT SECRETARY OF STATE
Location: 81 River Street Mail: 109 State Street
Montpelier, VT 05609-1104
ARTICLES OF AMENDMENT
(Vermont domestic for-profit corporation)
Name of Corporation: Ben & Jerry's Homemade, Inc.
A corporation may amend its articles of incorporation at anytime to add or
change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required. If a corporation has not
yet issued shares, its incorporators or board of directors may adopt one or more
amendments to the corporation's articles of incorporation.
The text and date of each amendment adopted.
Additional Article
(A) Commencing with the election of directors at the 1997 Annual Meeting at
which this Article entitled "Classification of Directors" is adopted by
stockholders of the Corporation, the directors of the Corporation shall be
classified and divided into three classes, as nearly equal in number as
possible, one class ("Class A") whose term expires at the first annual
meeting of stockholders to be held after their election, another class
("Class B") whose term expires at the second annual meeting of
stockholders to be held after their election and another class ("Class C")
whose term expires at the third annual meeting of stockholders to be held
after their election, with each class to hold office until its successors
are elected and qualified. At each annual meeting of the stockholders of
the Corporation thereafter, the successors of the class of directors whose
term expires at such meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year
following the year of their election. Any director elected to fill a newly
created directorship or any vacancy on the Board of Directors resulting
from any death, resignation, removal or other reason shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
(B) Any director or directors may be removed from office at any time, but only
for cause and only upon the affirmative vote of two-thirds of the votes
cast by the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together.
Any vacancy in the Board of Directors resulting from any such removal may
be filled by vote of two-thirds of the directors then in office, although
less than a quorum, or by a sole remaining director, and any director so
chosen shall hold office until the next election of the class for which
such director shall have been chosen and until such director's successor
shall be elected and qualified or until such director's earlier death,
resignation or removal.
(C) In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from
such increase or decrease shall be
<PAGE>
apportioned by the Board of Directors among the three classes of directors
so as to maintain such classes as nearly equal as possible. No decrease in
the number of directors constituting the Board of Directors shall shorten
the term of any incumbent director.
(D) Notwithstanding any other provision of the Articles of Association or the
By-laws of the Corporation (and notwithstanding the fact that a lesser
vote may be specified by law), the affirmative vote of two-thirds of the
votes cast by the then-outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
voting together, shall be required to alter, amend or repeal, or to adopt
any provision inconsistent with the purpose or intent of the provision of
this Article, entitled "Classification of Directors", of the Articles of
Association of the Corporation.
Amendment adopted June 28, 1997.
If the amendment provides for an exchange, reclassification, or cancellation of
issued shares, state the provisions for implementing the amendment if not
contained in the amendment itself.
N/A
If the amendment was adopted by the incorporators or board of directors, without
shareholder action, make a statement to that effect and that shareholder action
was not required.
N/A
If the amendment was approved by shareholders.
(A) the designation, number of outstanding shares, number of votes entitled to
be cast by each voting group entitled to vote separately on the amendment,
the number of votes of each voting group represented at the meeting.
There were outstanding and entitled to vote on the Amendment the following
shares of capital stock, entitled to vote together as one voting group on the
Amendment:
6,392,646 shares of Class A Common Stock, $.033 par value, entitled to one vote
per share 891,072 shares of Class B Common Stock, $.033 par value, entitled to
ten votes per share 900 shares of Class A Preferred Stock, $1.00 par value,
entitled to one vote per share
Represented at the Annual Meeting of Stockholders held June 28, 1997 were an
aggregate of 12,339,686 votes of the voting group represented at the meeting.
(B) either the total number of votes cast for and against the amendment by each
voting group entitled to vote separately on the amendment or the total
number of undisputed votes cast for the amendment by each voting group and
a statement that the number cast for the amendment by each voting group was
sufficient for approval by the voting group.
The total number of votes cast for the Amendment by all of the shares of
the capital stock voting together as the voting group was 8,613,651.
<PAGE>
The number of votes cast for the Amendment by the voting group was sufficient
for approval of the Amendment.
Signatures:/s/Frances Rathke Title: Treasurer & Secretary Date: March 26, 1998
- --------------------------------------------------------------------------------
Exhibit 10.1
AGREEMENT
AGREEMENT made and entered into in South Burlington, Vermont as of the
29th day of January 1998, by and between BEN & JERRY'S HOMEMADE, INC., a Vermont
corporation with its headquarters at 30 Community Drive, South Burlington,
Vermont 05403 (the "Company") and BENNETT COHEN ("Cohen"), of 82 St. George
Lane, Williston, Vermont 05495.
WITNESSETH:
-----------
WHEREAS, Cohen is a Founder of the Company and wishes to maintain an
active relationship between the Founders and the Company on mutually agreeable
terms, both as an employee of the Company and thereafter; and
WHEREAS, the Company desires to continue to employ Cohen, and Cohen
desires to continue to be employed by the Company, all on the terms and
conditions hereinafter provided;
WHEREAS, the Company and Cohen wish to confirm certain agreements and
make certain additional agreements that remain in force after the end of the
Term of Employment, as defined below; and
WHEREAS, this Agreement supersedes all prior employment agreements
between the parties.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment and term of employment. The Company agrees to employ
Cohen, and Cohen hereby agrees to accept employment by the Company, under the
terms and conditions contained in this Agreement.
Subject to the termination provisions set forth in Paragraph 9 (and
6.2) hereof, the employment term (the "Term" or the "Term of Employment") shall
commence on the date hereof, and terminate on December 31, 1998, but shall
automatically renew for successive one year periods following December 31, 1998
unless either Cohen or the Company gives notice to the other of non-renewal at
least sixty days prior to the end of the Term then in effect.
2. Duties for the Company and Other Activities
2.1 Duties. Cohen shall use his best efforts to advance the best
interests of the Company under this Agreement. During the Term of Employment,
Cohen shall render services similar to the services he has performed since
January 1, 1997, and at a level similar to that performed since that date, as
requested from time to time by the Board of Directors of the Company (the
"Board") or by the Chief Executive Officer of the Company, and mutually agreed
<PAGE>
to by Cohen. It is understood that Cohen's obligation to provide services at a
level similar to that performed since January 1, 1997 shall not be required if,
in his reasonable judgment, there is a material change in the values of the
business mission of the Company, or in the implementation in practice of such
values, from that of January 1, 1997. Cohen may work from offices at his home or
at the headquarters of the Company in Vermont.
2.2 Other Activities. During the Term of Employment and thereafter,
Cohen may, to the extent not conflicting with his duties under Paragraph 2.1,
and so long as in compliance with Paragraph 6.1, and subject to the requirements
of Paragraph 11, engage in other businesses and activities, including for-profit
business and non-profit activities; provided, however, that Cohen (i) shall
provide written notice to such third party in the form attached hereto as
Exhibit A, and (ii) such third party duly executes and returns such notice to
Cohen, who shall promptly forward a copy to the Company. It is understood that
such businesses and activities are not to be undertaken by Cohen on behalf of
the Company. It is further understood that such written notice is not required
for the personal, non-business or non-commercial activities of Cohen in his
individual capacity.
3. Use of Name and Image, etc. During the Term of Employment and
Thereafter
3.1 Past Uses. Cohen hereby releases and discharges the Company from
any and all claims and demands arising out of or in connection with the use by
the Company of his name, image, likeness, portrait, photograph, audio or video
recordings, and facsimile signature, and all trademarks, copyrights, trade
names, and goodwill associated therewith prior to the effective date of this
Agreement. Cohen does not, by this Agreement, necessarily endorse or approve any
text or event with which his name, image, or facsimile signature has been used
by the Company prior to the effective date of this Agreement, and does not
consent to future use of his name, image, likeness, portrait, photograph, audio
or video recordings, and facsimile signature except as provided under paragraphs
3.2 and 3.3. The provisions of this Agreement do not enlarge or restrict the
Company's intellectual property rights except as expressly provided herein.
3.2.Confirmatory Grant of Name, Trademark, and Other Rights. Cohen
hereby irrevocably confirms the exclusive, perpetual, royalty-free, worldwide
right of the Company to use his first name in the name "Ben & Jerry's", and his
photograph in the form of the label reproduced on the "Consent" attached as
Exhibit B (used either together with the photograph of Jerry Greenfield included
on Exhibit B or separately), and his photograph in the form of the three labels
reproduced on the attached Exhibit C, in each case in connection with labels or
packaging of products sold by the Company from time to time and ancillary
promotional or image materials of the company (including materials such as, but
not limited to, signs, brochures, T shirts and giant pint lids).
Cohen further confirms that the tradename "Ben & Jerry's" and
associated goodwill are the exclusive property of the Company.
3.3.Additional Grant, Subject to Written Consent, Regarding Certain
Other Uses.
<PAGE>
Other than the uses specified in Paragraph 3.2, the Company may use, on uses not
within Paragraph 3.2 above, even if released and discharged under Paragraph 3.1
above, Cohen's first name, image, likeness, portrait, photograph, audio or video
recordings, and/or facsimile signature, only with his express written consent as
to each proposed use.
Within 30 days of the effective date of this Agreement, the Company
shall present to the Cohen a list and description of all uses for which it
requests consent at this time. Cohen shall respond to the request for such uses
within 30 days thereafter, and shall execute all appropriate documents
reasonably requested by the Company in aid of each consented use.
The Company shall discontinue any use not within Paragraph 3.2 to which
Cohen does not consent as follows: For any such use in product packages,
coupons, certificates, and point of sale materials, the Company may consume its
stock, if any, existing as of the effective date of this Agreement. For all
other such uses, the Company shall have a commercially reasonably period of
time, not exceeding six months from the date of this Agreement, to discontinue
such use.
The Company shall thereafter afford a reasonable prior opportunity to
Cohen or his designee to review each matter as to which Cohen has the right to
consent under this paragraph, and in turn Cohen agrees, upon request of the
Company, to respond to any proposed use that requires consent under this
Paragraph, and shall execute all appropriate documents reasonably requested by
the Company in aid of each consented use.
3.4. Duty Not to Disparage. So long as he is receiving payments under
this Agreement, Cohen shall use his best efforts not to disparage publicly the
Company or its products or the Company's rights under Paragraph 3.
3.5. Specific Enforcement. The provisions of this Paragraph 3 are
material consideration to this Agreement, and the parties acknowledge that
damages caused by breach of these provisions will be difficult to quantify. The
parties therefore consent to the award of equitable relief, including
prohibitory and mandatory, preliminary or permanent, injunctions for material
breach of these provisions which is not reasonably cured within 30 days after
notice, as well as damages for any material breach, in a proceeding under
Paragraph 13.2.
3.6 Assignment, etc. The rights granted or confirmed to the Company
under this Paragraph 3 may not be assigned during the lifetime of Cohen except
in connection with a merger or consolidation of the Company or sale of transfer
of all or substantially all of the business or assets of the Company. The grant
or confirmation of rights to the Company under this Paragraph 3 shall be binding
upon Cohen and his heirs, legal representatives, and assigns.
Uses by the Company under Paragraph 3 shall encompass the Company, its
subsidiaries and any affiliates in a joint venture, franchise or license in
which the Company (or any subsidiary) has a significant economic interest. The
term "use" shall include, for any permitted use, re-use, publication, and
reproduction in whole or in part in any and all media.
4. Compensation and Benefits During the Term of Employment.
<PAGE>
4.1 Base Salary. During the Term of Employment, the Company shall pay
to Cohen a base salary ("Base Salary") of $200,000 per annum, payable monthly,
beginning as of May 1, 1997. Once a year the Board shall, in its discretion,
review Cohen's Base Salary with a view to an upward adjustment thereof.
4.2 Bonus. The Company may, if determined by the Board, pay Cohen for
each calendar year during the period of Cohen's employment hereunder, commencing
with the year ending December 31, 1998, a bonus ("Bonus") in an amount to be
determined by the Board in its discretion. Any Bonus shall be payable within 90
days after receipt by the Company of the annual financial statements of the
Company, certified by the independent certified public accountants of the
Company in accordance with generally accepted accounting principles uniformly
applied on a consistent basis.
4.3 Out-of-Pocket Expenses. The Company shall promptly pay or reimburse
Cohen for all reasonable expenses incurred or paid by him in the performance of
his duties during the Term of Employment, provided that Cohen properly accounts
therefor in accordance with the policies of the Company.
4.4 Medical Benefits. The Company shall provide Cohen and his
dependents with health and hospitalization insurance, and any other medical and
dental benefits generally available to employees during the Term of Employment.
4.5 Vacation. During the Term of Employment, Cohen shall be entitled to
four weeks paid vacation per annum at times to be mutually selected by Cohen and
the Company.
4.6 Car. During the Term of Employment, Cohen shall be entitled to a
"Company Car" for use while engaged in his duties under this Agreement. The
Company shall pay or reimburse Cohen for gas, maintenance, and repair, other
than personal use.
4.7 Life Insurance. The Company shall provide Cohen with the same life
insurance benefits as available to employees generally during the Term of
Employment.
4.8 Founders' Office. The Company shall provide Cohen with an office at
the Company's headquarters in Vermont, to be situated, furnished, equipped,
supported, and staffed in a manner substantially the same as the present
"Founders' Office," for use by Cohen in connection with Company business, or,
subject to the other provisions of this Agreement, personal affairs, or any
other matter.
5. Protection of Confidential Information During the Term of Employment
and Thereafter.
<PAGE>
5.1 Confidentiality Covenant. Cohen acknowledges that his employment by
the Company has and will continue to bring him into close contact with many
confidential affairs of the Company, including information about costs, profits,
markets, sales, products, key personnel, pricing policies, operational methods,
strategic and other business plans, manufacturing processes and other business
affairs, methods of information not readily available to the public, and plans
for future developments. Cohen further acknowledges that the services to be
performed by him under this Agreement are of special, unique and extraordinary
character. Cohen further acknowledges that the business of the Company is
conducted throughout the United States and in certain countries outside the
United States and that he is therefore capable of competing with the Company
from nearly any location in the United States and from certain foreign
locations. In recognition of the foregoing, Cohen covenants and agrees:
(a) That he will keep secret all confidential affairs of the Company
and not use them himself or disclose them to anyone outside of the
Company, either during or after the Term of Employment, except in
accordance with the performance of his duties or with the Company's
prior written consent; and
(b) That he will deliver promptly to the Company on termination of the
Term of Employment, or at any time the Company may so request, all
memoranda, notes, records, reports and other documents (and all copies
thereof) relating to the Company's business, which he may then possess
or have under his control, except for personal mementos and effects as
he may reasonably identify and retain.
5.2 Specific Remedies. If Cohen commits a breach, or threatens to
commit a breach, of any of the provisions of paragraph 5.1 (which is not
reasonably cured within 30 days after notice), then the Company shall have the
right and remedy (i) to have such provisions specifically enforced, and (ii) the
right and remedy to require Cohen to account for and pay over to the Company all
compensation, profits, monies, accruals, increments or other benefits
(collectively "Benefits") derived or received by Cohen as the result of any
transactions constituting a breach of any of the provisions of paragraph 5.1,
and Cohen hereby agrees to account for and pay over such Benefits to the
Company. Disputes arising under this Paragraph 5 shall be resolved as provided
for in Paragraph 13.2 of this Agreement.
6. Restriction on Competition During the Term of Employment and
Thereafter.. .
6.1 Covenant. Cohen covenants and agrees that:
(A) during the Term of Employment (as it may be extended) and for a
period of three (3) years (the "Severance Period') thereafter, he will
not (i) enter, directly or indirectly, into the employ of or render,
directly or indirectly, any services to any person, firm or corporation
engaged in any business competitive with any business of the Company or
any subsidiary at the time that he commences such employ or services;
(ii) engage, directly or indirectly, in any such business for his own
account; or (iii) become interested, directly or indirectly, in any
such business as an individual partner, shareholder, creditor,
<PAGE>
director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; and
(B) after the Severance Period, he will not (i) enter, directly or
indirectly, into the employ of or render, directly or indirectly, any
services to any person, firm or corporation engaged in the frozen
dessert business, or engaged in material competition with any other
business material to the Company or any subsidiary as of the end of the
Term of Employment; (ii) engage, directly or indirectly, in any such
business for his own account; or (iii) become interested, directly or
indirectly, in any such business as an individual partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other capacity;
6.2 Consideration. In consideration for Cohen's agreement not to
compete as set forth herein, in addition to the Compensation and Benefits
provided in Paragraph 4 of this Agreement, the Company agrees to pay Cohen
severance ("Severance"), on a monthly basis, equal to 100% of his then current
rate of annual Base Salary (measured at the date of the end of the Term of
Employment, as it may have been extended) during the Severance Period, provided,
however, that such payments shall terminate upon earlier termination of Cohen's
employment by the Company for "cause" as defined in Paragraph 9 (and 6.4) hereof
or termination of the Company's obligations to make payments under Paragraph 6.4
or 11.5 of this Agreement.
The Severance Payments during the three year Severance Period under
this Paragraph 6.2 shall, in the event of Cohen's death, be paid to his estate
or designated beneficiaries.
6.3 Limitations on the Covenant.
6.3.1 The provisions of Paragraph 6.1 shall not be deemed to preclude
Cohen from employment by or consulting for any person some of whose activities
are competitive with the business of the Company if Cohen's employment or
consulting does not relate, directly or indirectly, to such competitive
business.
6.3.2 Nothing contained in paragraph 6.1 shall be deemed to prohibit
Cohen (A) from acquiring or holding, solely for investment, publicly traded
securities of any corporation that competes with the Company so long as such
securities do not, in the aggregate, constitute more than 2% of any class or
series of outstanding securities of such corporation, or (B) from serving as a
director, officer, member of any committee, employee, or consultant for a person
other than the Company who does not engage in any business competitive with any
business of the Company.
6.3.3 The Company may at any time, upon Cohen's request to the Board,
waive in writing the covenants in Paragraph 6.1 as to one or more activities.
<PAGE>
6.3.4 It is understood that if Cohen engages in a business activity
which is permitted under Paragraph 6.1, and the Company subsequently begins to
compete in that business, then Cohen may continue to engage in such business
activity without restriction. In that case, the covenant of Paragraph 6.1 shall
not apply to such permitted activity, and the remedies for violation of the
covenant provided in Paragraphs 6.2, 9.2, and 11.5 shall not be available to the
Company.
6.3.5 After the Severance Period, Cohen may compete with the Company in
any line of business upon 90 days advance notice to the Company, provided,
however, that payments by the Company to Cohen under Paragraph 11.1, and
benefits under Paragraphs 11.3 and 11.4, shall thereupon terminate.
6.4 Remedies. In the event of the violation by Cohen of any of the
covenants of Paragraphs 2.2, 3, 5.1, 6.1 or 8, and unless such violation shall
be remedied within 30 days after receiving notice of it from the Company, such
violation shall be deemed to be "cause" within the meaning of Paragraph 9 for
termination of the Term of Employment and (to the extent therein provided) of
the Company's obligations to make any payments under this Agreement. The Company
shall have the right and remedy to have the provisions of Paragraphs 2.2, 3,
5.1, 6.1 or 8 specifically enforced, it being acknowledged and agreed that any
such violation or threatened violation will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company. Disputes arising under this Paragraph 6 shall be resolved as provided
for in Paragraph 13.2 of this Agreement.
7. Independence, Severability and Non-Exclusivity; Jurisdiction. Each
of the rights and remedies enumerated in Paragraphs 2.2, 3, 5.2, 6.4 and 8 shall
be independent of the other and shall be severally enforceable and all of such
rights and remedies shall be in addition to and not in lieu of any other rights
and remedies available to the Company under the law or in equity. If any of the
covenants contained in Paragraphs 2.2, 3, 5.1, 6.1 or 8 or if any of the rights
or remedies enumerated in Paragraphs 2.2, 3, 5.2, 6.4 or 8, or any part of any
of them, is hereafter construed to be invalid or unenforceable, then (i) the
same shall not affect the remainder of the covenants or rights or remedies which
shall be given full effect without regard to the invalid portions and (ii) in
addition if any of the covenants contained in Paragraphs 2.2, 3, 5.1, 6.1 or 8
is held to be unenforceable because of the duration of such provision or the
subject matter or area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and in its reduced form said provision shall then be enforceable.
8. Product Development. Cohen acknowledges that during the Term of
Employment he may conceive of, discover, invent or create new products or
product improvements whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Product Developments"), that
he may conceive of, discover, invent or create various business opportunities
relating to the business of the Company, and that various business opportunities
relating to the business of the Company may be presented to him by reason of his
relationship created by this Agreement. Cohen acknowledges that all of the
foregoing shall be owned by and
<PAGE>
belong exclusively to the Company and that he shall not have any personal
interest therein, provided that they are either related in any manner to the
business of the Company, or are conceived or made on or presented to Cohen
during the Company's time or with the use of the Company's facilities or
materials. Cohen shall (i) disclose promptly any such Product Developments and
business opportunities to the Company; (ii) assign to the Company, without
additional compensation, the entire rights to such Product Developments and
business opportunities; (iii) execute all documents and instruments necessary to
carry out the foregoing; and (iv) give testimony in support of its or his
developments or creation in any appropriate case.
Provided, however, that if the Company does not implement or act upon
any such Product Development or business opportunity during the Term of
Employment or the Severance Period, then Cohen's rights, title and interest in
any Product Development or business opportunity conceived of, discovered,
invented or created by Cohen shall revert to Cohen upon the termination of his
employment for any reason. In use of any such Product Development, Cohen shall
be subject to the covenant against competition specified in Paragraph 6.
Provided further, that if the Chief Executive Officer of the Company so
consents in writing, Cohen's rights, title and interest in any Product
Development or business opportunity conceived of, discovered, invented or
created by Cohen shall revert to Cohen at any time.
Disputes arising under this Paragraph 8 shall be resolved as provided
for in Paragraph 13.2 of this Agreement.
9. Termination of the Term of Employment. The Term of Employment under
this Agreement shall terminate under any of the following conditions:
9.1 (A) at the option of the Company (i) for cause, which shall be
defined as: (a) Cohen's willful failure to comply with any of
the material terms of this Agreement, including, without
limitation, Cohen's violation of any covenants in Paragraph
2.2, 3, 5.1, 6 and 8, unless such failure shall be remedied
within 30 days after receiving notice of it from the Company;
(b) Cohen's willful engagement, in his capacity as an employee
of the Company, in gross misconduct injurious to the Company,
and (c) Cohen's failure to carry out duties as agreed with the
Company under Paragraph 2.1 hereof; and (d) pursuant to
Paragraph 6.4 hereof. It is expressly understood and agreed by
the Company that expression by Cohen, whether public or
private, of his opinion as a private individual concerning
public issues, including endorsements of candidates or causes,
and participation in political, social, and environmental
organizations or events, shall not be cause for termination.
(B) upon the death of Cohen.
(C) at the option of Cohen upon not less than 60 days prior
notice to the Company given not earlier than July 30, 1998.
<PAGE>
9.2 In the event of termination of the Term of Employment at the option
of the Company for cause as defined in Paragraph 9, Cohen shall continue to be
subject to his obligations contained in Paragraphs 2.2, 3, 5, 6, 7, 8, and 11
hereof. The Company shall also be entitled, as a remedy awarded under Paragraph
13.2, to terminate its obligation to make payments and to provide benefits under
Paragraph 6.1 or under 11.1, 11.3, and 11.4 as the case may be, in the event of
a material breach, not remedied within 30 days after notice by Company, of the
provisions of Paragraph 2.2, 3, 5.1, 6.1, or 11.2.
9.3 In the event of termination of the Term of Employment at the option
of Cohen under subparagraph 9.1(C) above, all the provisions of this Agreement
(including those requiring the Company to make certain payments and to provide
benefits to Cohen) applicable to the period after the end of the Term of
Employment, including Paragraphs 2.2, 3, 5, 6, 7, 8, and 11, shall remain in
effect.
10. Services After Term of Employment. During the Severance Period and
afterwards, Cohen shall be available to serve as a consultant to the Company
regarding such matters and at such times requested by the Board or by the Chief
Executive Officer of the Company, and as agreed to by Cohen. Cohen may also make
public appearances on behalf of the Company, if any, upon such request and as
agreed in his discretion. The Company shall promptly pay or reimburse Cohen for
all reasonable expenses incurred or paid by him in the performance of such
services, provided that Cohen properly accounts therefor in accordance with the
policies of the Company.
11. Other Payments, Benefits and Duties.
11.1. Payments.
11.1.1 Annual Payment After the Severance Period. In consideration of
the services specified in Paragraph 10, and in consideration of the covenants in
Paragraph 6.1, beginning as of three years after termination of the Term of
Employment, the Company shall pay Cohen, during his lifetime, the annual sum of
$75,000 payable quarterly, and provide the benefits specified below in this
Paragraph 11. Such payments, and the benefits provided in Paragraphs 11.3 and
11.4, shall terminate upon Cohen's notice to the Company pursuant to Paragraph
6.3.5.
11.1.2 Annual Adjustment. The payment provided for in Paragraph 11.1.1
shall increased annually by the percentage increase, if any, in the Consumer
Price Index for Class C cities in the Northeast Region for the preceding year,
as promulgated by the Bureau of Labor Statistics of the U.S. Department of
Labor, or a successor index or comparable index for Chittenden County, Vermont,
if one shall be determined by the Bureau of Labor Statistics. This increase
shall begin effective upon the anniversary of the first year of payments under
Paragraph 11.1.1, and shall continue annually until the year that Cohen attains
age 65.
<PAGE>
11.2. Insurance.
11.2.1 Health Insurance. Cohen, his wife or significant other, and his
dependents, may remain persons covered by the Company's health
insurance plan after the Term of Employment and until such time as
both Cohen and his wife (or significant other) qualify for federal and
state Medicare benefits as they may then be available, by paying the
Company's normal COBRA rate then in effect from time to time, with the
deductible then in effect for a person with the salary rate that Cohen
had immediately before retirement, provided that the Company makes
such coverage generally available to its employees. Nothing in this
Agreement shall preclude the Company from selecting a different health
insurance plan.
11.2.2 Distribution Rights or Payment in Lieu Thereof. The Company
agrees in good faith to investigate the feasibility of granting Cohen
a ten year exclusive distributorship with respect to the Company's ice
cream products line to a certain jurisdiction in the Caribbean, and if
the Company determines that this is feasible, the Company and Cohen
agree to negotiate in good faith the terms of a mutually acceptable
distribution agreement. In the event that Company determines, by
written notice to Cohen, that this is not feasible or in the event the
parties fail, by March 15, 1998, to negotiate such a mutually
acceptable distribution agreement, then the Company shall pay to
Cohen, the sum of $135,000 payable in three annual payments of $45,000
each, the first on April 1, 1998, the second on April 1, 1999, and the
third on April 1, 2000. These annual payments under Paragraph 11.2.2
shall, in the event of Cohen's death, be paid to his estate or
designated beneficiaries.
11.3 Founder's Office. The Company shall provide a Founder's Office, of
similar functionality and expense to the Founders' Office described in Paragraph
4.8, in a place in Vermont to be designated by Cohen (subject to approval by of
the Company, which shall not be unreasonably withheld) for a period of two years
(but not after the death of Cohen) after expiration or termination of the Term
of Employment.
11.4 Free Products for Life. The Company shall provide to Cohen, and
after his death shall provide to two persons designated by Cohen in writing
before his death, reasonable amounts of free ice cream and other Company
products for their respective lives. Furthermore, when Cohen is a material
participant in or supporter of any public event, the interests of which are
aligned with the Company's statement of values, entitled "Leading with
Progressive Values Across our Business," adopted by the Board of Directors of
the Company on November 20, 1997, a copy of which is attached hereto as Exhibit
D, as amended by the Board from time to time, the Company will provide, free of
charge, a reasonable and adequate amount of Ben & Jerry's products for each
person reasonably expected to attend such events.
<PAGE>
11.5 Breach. Wilful breach by Cohen of the material provisions of
Paragraph 2.2, 3, 5.1, 6.1, 8, or 11.6, if not remedied within 30 days after
notice by the Company to Cohen, shall entitle the Company, as a remedy under
Paragraph 13.2, to terminate its obligation to make payments under Paragraph
11.1 or to provide benefits under Paragraphs 11.3 and 11.4 of this Agreement.
Payments by the Company that would, but for this Paragraph 11.5, have been made
to Cohen, shall be made by the Company to an escrow agent mutually agreeable to
the Company and to Cohen, and shall be distributed from escrow to the Company or
to Cohen upon final judgment or settlement pursuant to a proceeding under
Paragraph 13.2.
11.6 Non-Company Activities. In conducting non-Company activities
during the Term of Employment, during the Severance Period or thereafter, Cohen
agrees to comply with the following provisions:
11.6.1 No Agency. Cohen will not hold himself as acting on
behalf of the Company. Cohen has no authority to act
for or to bind the Company without the approval of
the Chief Executive Officer of the Company.
11.6.2 Letterhead. So long as he is a director of the
Company, and subject to Paragraph 2.2 (which if
applicable requires the Exhibit A procedure specified
in Paragraph 2.2), Cohen may use Company letterhead
imprinted with the legend set out on Exhibit E, or
such other legend as may be reasonably acceptable to
the Company, that he is acting in his personal
capacity and is not acting on behalf of the Company.
11.6.3 Company Resources. Other than the resources and
personnel of the Founders Office provided under
Paragraphs 4.8 and 11.3, Cohen will not use Company
personnel or resources except with the express
written consent of the Chief Executive Officer of the
Company.
11.7 Directorship. Service as a director of the Company or any
compensation therefor is not covered by this Agreement.
11.8 Services after the Term of Employment. After the Term of
Employment, Cohen may perform services for the Company, in addition to those in
Paragraph 10, as are mutually agreed from time to time by Cohen and the Board or
the Chief Executive Officer, provided that his reasonable out-of-pocket expenses
are advanced or reimbursed to him by the Company, and subject to agreement
regarding other terms and conditions, if any.
12. Notices. All notices, requests, consents and other communications,
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed first-class,
postage prepaid, by registered or certified mail, addressed as follows (or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith):
<PAGE>
If to the Company:
Ben & Jerry's Homemade, Inc.
30 Community Drive
South Burlington, Vermont 05403
Attention: President
If to Cohen:
82 St. George Lane
Williston, VT 05495
13. General.
13.1 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Vermont (other than its
rules for choice of law).
13.2 Dispute Resolution. All disputes concerning this Agreement shall
be resolved , and all remedies shall be available, only as provided in this
Paragraph 13.2.
13.2.1 In the event that one party believes the other party
to have committed a material breach of this
Agreement, for which the party wishes to pursue a
remedy, then the party shall give 30 days notice of
the breach.
13.2.2 Upon written notice by either party, the parties each
agree to select a mediator and to promptly mediate in
good faith any controversy, claim or dispute arising
between the parties arising out of or related to this
Agreement, its performance or any breach or claimed
breach thereof.
13.2.3 In the event that such non-binding mediation does
not resolve any such matter, then such matter, and
any other dispute arising under this Agreement, the
parties irrevocably submit to the jurisdiction and
venue of the United States District Court for the
District of Vermont at Burlington and the Vermont
Superior Court for Chittenden County for the purpose
of any suit or other proceeding arising out of or
based upon this Agreement or the subject matter
hereof, and agrees that any such proceeding will be
brought or maintained only in such court.
13.3 Captions. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
13.4 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter hereof, and
supersedes all prior arrangements, arrangements and understandings, written or
oral, between the parties relating to the subject matter hereof except as
provided in the last sentence of Paragraph 3.1 Certain
<PAGE>
provisions of this Agreement survive the Term of Employment and any termination
of payments by the Company, including Paragraphs 3, 5, 6, 8, 10, 11, and 13.
13.5 No Other Representations. No representation, promise or inducement
has been made by either party that is not embodied in this Agreement, and
neither party shall be bound or liable for any alleged representation, promise
or inducement not so set forth.
13.6 Assignability. Subject to Paragraph 3.6, this Agreement may not be
assigned by Cohen or the Company, except that Cohen may assign part or all of
payments from the Company for the benefit of his dependents, heirs, or
beneficiaries, and the Company may assign this Agreement in a merger,
consolidation, sale or transfer of all or substantially all of the business and
assets of the Company. Subject to the foregoing, this Agreement shall bind each
party and its successors, heirs, personal representatives and assigns.
13.7 Amendments; Waivers. This Agreement may be amended, modified,
superseded, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at the later time to enforce the same. No waiver in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other terms or covenant contained in
this Agreement.
13.8 No Presumption. This Agreement has been prepared by the parties'
lawyers to reflect the parties' mutual agreement. No presumption shall be
implied or asserted that the terms of this Agreement are to be construed against
either party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
BEN & JERRY'S HOMEMADE, INC.
/s/ Perry D. Odak
By: _________________________________
Perry Odak
Chief Executive Officer
Duly Authorized
/s/ Bennett Cohen
---------------------------------
Bennett Cohen
<PAGE>
Exhibit 10.4
AGREEMENT
AGREEMENT made and entered into in South Burlington, Vermont as of the
29th day of January 1998, by and between BEN & JERRY'S HOMEMADE, INC., a Vermont
corporation with its headquarters at 30 Community Drive, South Burlington,
Vermont 05403 (the "Company") and JERRY GREENFIELD ("Greenfield"), of 585 South
Road, Williston, Vermont 05495.
WITNESSETH:
WHEREAS, Greenfield is a Founder of the Company and wishes to maintain
an active relationship between the Founders and the Company on mutually
agreeable terms, both as an employee of the Company and thereafter; and
WHEREAS, the Company desires to continue to employ Greenfield, and
Greenfield desires to continue to be employed by the Company, all on the terms
and conditions hereinafter provided;
WHEREAS, the Company and Greenfield wish to confirm certain agreements
and make certain additional agreements that remain in force after the end of the
Term of Employment, as defined below; and
WHEREAS, this Agreement supersedes all prior employment agreements
between the parties.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment and Term of Employment. The Company agrees to employ
Greenfield, and Greenfield hereby agrees to accept employment by the Company,
under the terms and conditions contained in this Agreement.
Subject to the termination provisions set forth in Paragraph 9 (and
6.2) hereof, the employment term (the "Term" or the "Term of Employment") shall
commence on the date hereof, and terminate on December 31, 1998, but shall
automatically renew for successive one year periods following December 31, 1998
unless either Greenfield or the Company gives notice to the other of non-renewal
at least sixty days prior to the end of the Term then in effect.
2. Duties for the Company and Other Activities
2.1 Duties. Greenfield shall use his best efforts to advance the best
interests of the Company under this Agreement. During the Term of Employment,
Greenfield shall render services similar to the services he has performed since
January 1, 1997, and at a level similar to that performed since that date, as
requested from time to time by the Board of Directors of the
<PAGE>
Company (the "Board") or by the Chief Executive Officer of the Company, and
mutually agreed to by Greenfield. It is understood that Greenfield's obligation
to provide services at a level similar to that performed since January 1, 1997
shall not be required if, in his reasonable judgment, there is a material change
in the values of the business mission of the Company, or in the implementation
in practice of such values, from that of January 1, 1997. Greenfield may work
from offices at his home or at the headquarters of the Company in Vermont.
2.2 Other Activities. During the Term of Employment and thereafter,
Greenfield may, to the extent not conflicting with his duties under Paragraph
2.1, and so long as in compliance with Paragraph 6.1, and subject to the
requirements of Paragraph 11, engage in other businesses and activities,
including for-profit business and non-profit activities; provided, however, that
Greenfield (i) shall provide written notice to such third party in the form
attached hereto as Exhibit A, and (ii) such third party duly executes and
returns such notice to Greenfield, who shall promptly forward a copy to the
Company. It is understood that such businesses and activities are not to be
undertaken by Greenfield on behalf of the Company. It is further understood that
such written notice is not required for the personal, non-business or
non-commercial activities of Greenfield in his individual capacity.
3. Use of Name and Image, etc. During the Term of Employment and
Thereafter
3.1 Past Uses. Greenfield hereby releases and discharges the Company
from any and all claims and demands arising out of or in connection with the use
by the Company of his name, image, likeness, portrait, photograph, audio or
video recordings, and facsimile signature, and all trademarks, copyrights, trade
names, and goodwill associated therewith prior to the effective date of this
Agreement. Greenfield does not, by this Agreement, necessarily endorse or
approve any text or event with which his name, image, or facsimile signature has
been used by the Company prior to the effective date of this Agreement, and does
not consent to future use of his name, image, likeness, portrait, photograph,
audio or video recordings, and facsimile signature except as provided under
paragraphs 3.2 and 3.3. The provisions of this Agreement do not enlarge or
restrict the Company's intellectual property rights except as expressly provided
herein.
3.2. Confirmatory Grant of Name, Trademark, and Other Rights.
Greenfield hereby irrevocably confirms the exclusive, perpetual, royalty-free,
worldwide right of the Company to use his first name in the name "Ben &
Jerry's", and his photograph in the form of the label reproduced on the
"Consent" attached as Exhibit B (used either together with the photograph of Ben
Cohen included on Exhibit B or separately), and his photograph in the form of
the three labels reproduced on the attached Exhibit C, in each case in
connection with labels or packaging of products sold by the Company from time to
time and ancillary promotional or image materials of the company (including
materials such as, but not limited to, signs, brochures, T shirts and giant pint
lids).
Greenfield further confirms that the tradename "Ben & Jerry's" and
associated goodwill are the exclusive property of the Company.
<PAGE>
3.3. Additional Grant, Subject to Written Consent, Regarding Certain Other Uses.
Other than the uses specified in Paragraph 3.2, the Company may use, on uses not
within Paragraph 3.2 above, even if released and discharged under Paragraph 3.1
above, Greenfield's first name, image, likeness, portrait, photograph, audio or
video recordings, and/or facsimile signature, only with his express written
consent as to each proposed use.
Within 30 days of the effective date of this Agreement, the Company
shall present to the Greenfield a list and description of all uses for which it
requests consent at this time. Greenfield shall respond to the request for such
uses within 30 days thereafter, and shall execute all appropriate documents
reasonably requested by the Company in aid of each consented use.
The Company shall discontinue any use not within Paragraph 3.2 to which
Greenfield does not consent as follows: For any such use in product packages,
coupons, certificates, and point of sale materials, the Company may consume its
stock, if any, existing as of the effective date of this Agreement. For all
other such uses, the Company shall have a commercially reasonably period of
time, not exceeding six months from the date of this Agreement, to discontinue
such use.
The Company shall thereafter afford a reasonable prior opportunity to
Greenfield or his designee to review each matter as to which Greenfield has the
right to consent under this paragraph, and in turn Greenfield agrees, upon
request of the Company, to respond to any proposed use that requires consent
under this Paragraph, and shall execute all appropriate documents reasonably
requested by the Company in aid of each consented use.
3.4. Duty Not to Disparage. So long as he is receiving payments under
this Agreement, Greenfield shall use his best efforts not to disparage publicly
the Company or its products or the Company's rights under Paragraph 3.
3.5. Specific Enforcement. The provisions of this Paragraph 3 are
material consideration to this Agreement, and the parties acknowledge that
damages caused by breach of these provisions will be difficult to quantify. The
parties therefore consent to the award of equitable relief, including
prohibitory and mandatory, preliminary or permanent, injunctions for material
breach of these provisions which is not reasonably cured within 30 days after
notice, as well as damages for any material breach, in a proceeding under
Paragraph 13.2.
3.6 Assignment, etc. The rights granted or confirmed to the Company
under this Paragraph 3 may not be assigned during the lifetime of Greenfield
except in connection with a merger or consolidation of the Company or sale of
transfer of all or substantially all of the business or assets of the Company.
The grant or confirmation of rights to the Company under this Paragraph 3 shall
be binding upon Greenfield and his heirs, legal representatives, and assigns.
Uses by the Company under Paragraph 3 shall encompass the Company, its
subsidiaries and any affiliates in a joint venture, franchise or license in
which the Company (or any subsidiary) has a significant economic interest. The
term "use" shall include, for any permitted use, re-use, publication, and
reproduction in whole or in part in any and all media.
<PAGE>
4. Compensation and Benefits During the Term of Employment.
4.1 Base Salary. During the Term of Employment, the Company shall pay
to Greenfield a base salary ("Base Salary") of $200,000 per annum, payable
monthly, beginning as of May 1, 1997. Once a year the Board shall, in its
discretion, review Greenfield's Base Salary with a view to an upward adjustment
thereof.
4.2 Bonus. The Company may, if determined by the Board, pay Greenfield
for each calendar year during the period of Greenfield's employment hereunder,
commencing with the year ending December 31, 1998, a bonus ("Bonus") in an
amount to be determined by the Board in its discretion. Any Bonus shall be
payable within 90 days after receipt by the Company of the annual financial
statements of the Company, certified by the independent certified public
accountants of the Company in accordance with generally accepted accounting
principles uniformly applied on a consistent basis.
4.3 Out-of-Pocket Expenses. The Company shall promptly pay or reimburse
Greenfield for all reasonable expenses incurred or paid by him in the
performance of his duties during the Term of Employment, provided that
Greenfield properly accounts therefor in accordance with the policies of the
Company.
4.4 Medical Benefits. The Company shall provide Greenfield and his
dependents with health and hospitalization insurance, and any other medical and
dental benefits generally available to employees during the Term of Employment.
4.5 Vacation. During the Term of Employment, Greenfield shall be
entitled to four weeks paid vacation per annum at times to be mutually selected
by Greenfield and the Company.
4.6 Car. During the Term of Employment, Greenfield shall be entitled to
a "Company Car" for use while engaged in his duties under this Agreement. The
Company shall pay or reimburse Greenfield for gas, maintenance, and repair,
other than personal use.
4.7 Life Insurance. The Company shall provide Greenfield with the same
life insurance benefits as available to employees generally during the Term of
Employment.
4.8 Founders' Office. The Company shall provide Greenfield with an
office at the Company's headquarters in Vermont, to be situated, furnished,
equipped, supported, and staffed in a manner substantially the same as the
present "Founders' Office," for use by Greenfield in connection with Company
business, or, subject to the other provisions of this Agreement, personal
affairs, or any other matter.
5. Protection of Confidential Information During the Term of Employment
and Thereafter.
<PAGE>
5.1 Confidentiality Covenant. Greenfield acknowledges that his
employment by the Company has and will continue to bring him into close contact
with many confidential affairs of the Company, including information about
costs, profits, markets, sales, products, key personnel, pricing policies,
operational methods, strategic and other business plans, manufacturing processes
and other business affairs, methods of information not readily available to the
public, and plans for future developments. Greenfield further acknowledges that
the services to be performed by him under this Agreement are of special, unique
and extraordinary character. Greenfield further acknowledges that the business
of the Company is conducted throughout the United States and in certain
countries outside the United States and that he is therefore capable of
competing with the Company from nearly any location in the United States and
from certain foreign locations. In recognition of the foregoing, Greenfield
covenants and agrees:
(a) That he will keep secret all confidential affairs of the Company
and not use them himself or disclose them to anyone outside of the
Company, either during or after the Term of Employment, except in
accordance with the performance of his duties or with the Company's
prior written consent; and
(b) That he will deliver promptly to the Company on termination of the
Term of Employment, or at any time the Company may so request, all
memoranda, notes, records, reports and other documents (and all copies
thereof) relating to the Company's business, which he may then possess
or have under his control, except for personal mementos and effects as
he may reasonably identify and retain.
5.2 Specific Remedies. If Greenfield commits a breach, or threatens to
commit a breach, of any of the provisions of paragraph 5.1 (which is not
reasonably cured within 30 days after notice), then the Company shall have the
right and remedy (i) to have such provisions specifically enforced, and (ii) the
right and remedy to require Greenfield to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits (collectively "Benefits") derived or received by Greenfield as the
result of any transactions constituting a breach of any of the provisions of
paragraph 5.1, and Greenfield hereby agrees to account for and pay over such
Benefits to the Company. Disputes arising under this Paragraph 5 shall be
resolved as provided for in Paragraph 13.2 of this Agreement.
6. Restriction on Competition During the Term of Employment and
Thereafter.
6.1 Covenant. Greenfield covenants and agrees that:
(A) during the Term of Employment (as it may be extended) and for a
period of three (3) years (the "Severance Period') thereafter, he will
not (i) enter, directly or indirectly, into the employ of or render,
directly or indirectly, any services to any person, firm or corporation
engaged in any business competitive with any business of the Company or
any subsidiary at the time that he commences such employ or services;
(ii) engage, directly or indirectly, in any such business for his own
account; or (iii) become interested, directly or indirectly, in any
such business as an individual partner, shareholder, creditor,
<PAGE>
director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; and
(B) after the Severance Period, he will not (i) enter, directly or
indirectly, into the employ of or render, directly or indirectly, any
services to any person, firm or corporation engaged in the frozen
dessert business, or engaged in material competition with any other
business material to the Company or any subsidiary as of the end of the
Term of Employment; (ii) engage, directly or indirectly, in any such
business for his own account; or (iii) become interested, directly or
indirectly, in any such business as an individual partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other capacity;
6.2 Consideration. In consideration for Greenfield's agreement not to
compete as set forth herein, in addition to the Compensation and Benefits
provided in Paragraph 4 of this Agreement, the Company agrees to pay Greenfield
severance ("Severance"), on a monthly basis, equal to 100% of his then current
rate of annual Base Salary (measured at the date of the end of the Term of
Employment, as it may have been extended) during the Severance Period, provided,
however, that such payments shall terminate upon earlier termination of
Greenfield's employment by the Company for "cause" as defined in Paragraph 9
(and 6.4) hereof or termination of the Company's obligations to make payments
under Paragraph 6.4 or 11.5 of this Agreement.
The Severance Payments during the three year Severance Period under
this Paragraph 6.2 shall, in the event of Greenfield's death, be paid to his
estate or designated beneficiaries.
6.3 Limitations on the Covenant.
6.3.1 The provisions of Paragraph 6.1 shall not be deemed to preclude
Greenfield from employment by or consulting for any person some of whose
activities are competitive with the business of the Company if Greenfield's
employment or consulting does not relate, directly or indirectly, to such
competitive business.
6.3.2 Nothing contained in paragraph 6.1 shall be deemed to prohibit
Greenfield (A) from acquiring or holding, solely for investment, publicly traded
securities of any corporation that competes with the Company so long as such
securities do not, in the aggregate, constitute more than 2% of any class or
series of outstanding securities of such corporation, or (B) from serving as a
director, officer, member of any committee, employee, or consultant for a person
other than the Company who does not engage in any business competitive with any
business of the Company.
6.3.3 The Company may at any time, upon Greenfield's request to the
Board, waive in writing the covenants in Paragraph 6.1 as to one or more
activities.
<PAGE>
6.3.4 It is understood that if Greenfield engages in a business
activity which is permitted under Paragraph 6.1, and the Company subsequently
begins to compete in that business, then Greenfield may continue to engage is
such business activity without restriction. In that case, the covenant of
Paragraph 6.1 shall not apply to such permitted activity, and the remedies for
violation of the covenant provided in Paragraphs 6.2, 9.2, and 11.5 shall not be
available to the Company.
6.3.5 After the Severance Period, Greenfield may compete with the
Company in any line of business upon 90 days advance notice to the Company,
provided, however, that payments by the Company to Greenfield under Paragraph
11.1, and benefits under Paragraphs 11.3 and 11.4, shall thereupon terminate.
6.4 Remedies. In the event of the violation by Greenfield of any of the
covenants of Paragraphs 2.2, 3, 5.1, 6.1 or 8, and unless such violation shall
be remedied within 30 days after receiving notice of it from the Company, such
violation shall be deemed to be "cause" within the meaning of Paragraph 9 for
termination of the Term of Employment and (to the extent therein provided) of
the Company's obligations to make any payments under this Agreement. The Company
shall have the right and remedy to have the provisions of Paragraphs 2.2, 3,
5.1, 6.1 or 8 specifically enforced, it being acknowledged and agreed that any
such violation or threatened violation will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company. Disputes arising under this Paragraph 6 shall be resolved as provided
for in Paragraph 13.2 of this Agreement.
7. Independence, Severability and Non-Exclusivity; Jurisdiction. Each
of the rights and remedies enumerated in Paragraphs 2.2, 3, 5.2, 6.4 and 8 shall
be independent of the other and shall be severally enforceable and all of such
rights and remedies shall be in addition to and not in lieu of any other rights
and remedies available to the Company under the law or in equity. If any of the
covenants contained in Paragraphs 2.2, 3, 5.1, 6.1 or 8 or if any of the rights
or remedies enumerated in Paragraphs 2.2, 3, 5.2, 6.4 or 8, or any part of any
of them, is hereafter construed to be invalid or unenforceable, then (i) the
same shall not affect the remainder of the covenants or rights or remedies which
shall be given full effect without regard to the invalid portions and (ii) in
addition if any of the covenants contained in Paragraphs 2.2, 3, 5.1, 6.1 or 8
is held to be unenforceable because of the duration of such provision or the
subject matter or area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and in its reduced form said provision shall then be enforceable.
8. Product Development. Greenfield acknowledges that during the Term of
Employment he may conceive of, discover, invent or create new products or
product improvements whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Product Developments"), that
he may conceive of, discover, invent or create various business opportunities
relating to the business of the Company, and that various business opportunities
relating to the business of the Company may be presented to him by reason of his
relationship created by this Agreement. Greenfield acknowledges that all of the
foregoing shall be owned by
<PAGE>
and belong exclusively to the Company and that he shall not have any personal
interest therein, provided that they are either related in any manner to the
business of the Company, or are conceived or made on or presented to Greenfield
during the Company's time or with the use of the Company's facilities or
materials. Greenfield shall (i) disclose promptly any such Product Developments
and business opportunities to the Company; (ii) assign to the Company, without
additional compensation, the entire rights to such Product Developments and
business opportunities; (iii) execute all documents and instruments necessary to
carry out the foregoing; and (iv) give testimony in support of its or his
developments or creation in any appropriate case.
Provided, however, that if the Company does not implement or act upon
any such Product Development or business opportunity during the Term of
Employment or the Severance Period, then Greenfield's rights, title and interest
in any Product Development or business opportunity conceived of, discovered,
invented or created by Greenfield shall revert to Greenfield upon the
termination of his employment for any reason. In use of any such Product
Development, Greenfield shall be subject to the covenant against competition
specified in Paragraph 6.
Provided further, that if the Chief Executive Officer of the Company so
consents in writing, Greenfield's rights, title and interest in any Product
Development or business opportunity conceived of, discovered, invented or
created by Greenfield shall revert to Greenfield at any time.
Disputes arising under this Paragraph 8 shall be resolved as provided
for in Paragraph 13.2 of this Agreement.
9. Termination of the Term of Employment. The Term of Employment under
this Agreement shall terminate under any of the following conditions:
9.1 (A) at the option of the Company (i) for cause, which shall be
defined as: (a) Greenfield's willful failure to comply with
any of the material terms of this Agreement, including,
without limitation, Greenfield's violation of any covenants in
Paragraph 2.2, 3, 5.1, 6 and 8, unless such failure shall be
remedied within 30 days after receiving notice of it from the
Company; (b) Greenfield's willful engagement, in his capacity
as an employee of the Company, in gross misconduct injurious
to the Company, and (c) Greenfield's failure to carry out
duties as agreed with the Company under Paragraph 2.1 hereof;
and (d) pursuant to Paragraph 6.4 hereof. It is expressly
understood and agreed by the Company that expression by
Greenfield, whether public or private, of his opinion as a
private individual concerning public issues, including
endorsements of candidates or causes, and participation in
political, social, and environmental organizations or events,
shall not be cause for termination.
(B) upon the death of Greenfield.
(C) at the option of Greenfield upon not less than 60 days
prior notice to the Company given not earlier than July 30,
1998.
<PAGE>
9.2 In the event of termination of the Term of Employment at the option
of the Company for cause as defined in Paragraph 9, Greenfield shall continue to
be subject to his obligations contained in Paragraphs 2.2, 3, 5, 6, 7, 8, and 11
hereof. The Company shall also be entitled, as a remedy awarded under Paragraph
13.2, to terminate its obligation to make payments and to provide benefits under
Paragraph 6.1 or under 11.1, 11.3, and 11.4 as the case may be, in the event of
a material breach, not remedied within 30 days after notice by Company, of the
provisions of Paragraph 2.2, 3, 5.1, 6.1, or 11.2.
9.3 In the event of termination of the Term of Employment at the option
of Greenfield under subparagraph 9.1(C) above, all the provisions of this
Agreement (including those requiring the Company to make certain payments and to
provide benefits to Greenfield) applicable to the period after the end of the
Term of Employment, including Paragraphs 2.2, 3, 5, 6, 7, 8, and 11, shall
remain in effect.
10. Services After Term of Employment. During the Severance Period and
afterwards, Greenfield shall be available to serve as a consultant to the
Company regarding such matters and at such times requested by the Board or by
the Chief Executive Officer of the Company, and as agreed to by Greenfield.
Greenfield may also make public appearances on behalf of the Company, if any,
upon such request and as agreed in his discretion. The Company shall promptly
pay or reimburse Greenfield for all reasonable expenses incurred or paid by him
in the performance of such services, provided that Greenfield properly accounts
therefor in accordance with the policies of the Company.
11. Other Payments, Benefits and Duties.
11.1. Payments.
11.1.1 Annual Payment After the Severance Period. In consideration of
the services specified in Paragraph 10, and in consideration of the covenants in
Paragraph 6.1, beginning as of three years after termination of the Term of
Employment, the Company shall pay Greenfield, during his lifetime, the annual
sum of $75,000 payable quarterly, and provide the benefits specified below in
this Paragraph 11. Such payments, and the benefits provided in Paragraphs 11.3
and 11.4, shall terminate upon Greenfield's notice to the Company pursuant to
Paragraph 6.3.5.
11.1.2 Annual Adjustment. The payment provided for in Paragraph 11.1.1
shall increased annually by the percentage increase, if any, in the Consumer
Price Index for Class C cities in the Northeast Region for the preceding year,
as promulgated by the Bureau of Labor Statistics of the U.S. Department of
Labor, or a successor index or comparable index for Chittenden County, Vermont,
if one shall be determined by the Bureau of Labor Statistics. This increase
shall begin effective upon the anniversary of the first year of payments under
Paragraph 11.1.1, and shall continue annually until the year that Greenfield
attains age 65.
<PAGE>
11.2. Insurance.
11.2.1 Health Insurance. Greenfield, his wife or significant other, and
his dependents, may remain persons covered by the Company's health
insurance plan after the Term of Employment and until such time as both
Greenfield and his wife (or significant other) qualify for federal and
state Medicare benefits as they may then be available, by paying the
Company's normal COBRA rate then in effect from time to time, with the
deductible then in effect for a person with the salary rate that
Greenfield had immediately before retirement, provided that the Company
makes such coverage generally available to its employees. Nothing in
this Agreement shall preclude the Company from selecting a different
health insurance plan.
11.2.2 Life Insurance. The Company shall have in place, within 30 days
after the date of this Agreement, a "whole life" insurance policy on
Greenfield's life, with a death benefit of $1 million, with the present
insurance carrier of the Company's policy on Greenfield's life. The
policy shall be owned by the Company. Upon termination of the Term of
Employment, and upon notice by Greenfield effective not before January
1, 1999, the Company shall assign ownership of the policy to Greenfield
as sole owner of the policy with the right to redeem the net cash value
of the policy, to assign the policy, and to designate beneficiaries.
The Company shall pay the premiums due on the life insurance policy
until it becomes "self- funding."
11.3 Founder's Office. The Company shall provide a Founder's Office, of
similar functionality and expense to the Founders' Office described in Paragraph
4.8, in a place in Vermont to be designated by Greenfield (subject to approval
by of the Company, which shall not be unreasonably withheld) for a period of two
years (but not after the death of Greenfield) after expiration or termination of
the Term of Employment.
11.4 Free Products for Life. The Company shall provide to Greenfield,
and after his death shall provide to two persons designated by Greenfield in
writing before his death, reasonable amounts of free ice cream and other Company
products for their respective lives. Furthermore, when Greenfield is a material
participant in or supporter of any public event, the interests of which are
aligned with the Company's statement of values, entitled "Leading with
Progressive Values Across our Business," adopted by the Board of Directors of
the Company on November 20, 1997, a copy of which is attached hereto as Exhibit
D, as amended by the Board from time to time, the Company will provide, free of
charge, a reasonable and adequate amount of Ben & Jerry's products for each
person reasonably expected to attend such events.
11.5 Breach. Wilful breach by Greenfield of the material provisions of
Paragraph 2.2, 3, 5.1, 6.1, 8, or 11.6, if not remedied within 30 days after
notice by the Company to Greenfield, shall entitle the Company, as a remedy
under Paragraph 13.2, to terminate its obligation to make payments under
Paragraph 11.1 or to provide benefits under Paragraphs 11.3 and 11.4 of this
<PAGE>
Agreement. Payments by the Company that would, but for this Paragraph 11.5, have
been made to Greenfield, shall be made by the Company to an escrow agent
mutually agreeable to the Company and to Greenfield, and shall be distributed
from escrow to the Company or to Greenfield upon final judgment or settlement
pursuant to a proceeding under Paragraph 13.2.
11.6 Non-Company Activities. In conducting non-Company activities
during the Term of Employment, during the Severance Period or thereafter,
Greenfield agrees to comply with the following provisions:
11.6.1 No Agency. Greenfield will not hold himself as acting
on behalf of the Company. Greenfield has no authority
to act for or to bind the Company without the
approval of the Chief Executive Officer of the
Company.
11.6.2 Letterhead. So long as he is a director of the
Company, and subject to Paragraph 2.2 (which if
applicable requires the Exhibit A procedure specified
in Paragraph 2.2), Greenfield may use Company
letterhead imprinted with the legend set out on
Exhibit E, or such other legend as may be reasonably
acceptable to the Company, that he is acting in his
personal capacity and is not acting on behalf of the
Company.
11.6.3 Company Resources. Other than the resources and
personnel of the Founders Office provided under
Paragraphs 4.8 and 11.3, Greenfield will not use
Company personnel or resources except with the
express written consent of the Chief Executive
Officer of the Company.
11.7 Directorship. Service as a director of the Company or any
compensation therefor is not covered by this Agreement.
11.8 Services after the Term of Employment. After the Term of
Employment, Greenfield may perform services for the Company, in addition to
those in Paragraph 10, as are mutually agreed from time to time by Greenfield
and the Board or the Chief Executive Officer, provided that his reasonable
out-of-pocket expenses are advanced or reimbursed to him by the Company, and
subject to agreement regarding other terms and conditions, if any.
12. Notices. All notices, requests, consents and other communications,
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed first-class,
postage prepaid, by registered or certified mail, addressed as follows (or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith):
<PAGE>
If to the Company:
Ben & Jerry's Homemade, Inc.
30 Community Drive
South Burlington, Vermont 05403
Attention: President
If to Greenfield:
585 South Road
Williston, VT 05495
13. General.
13.1 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Vermont (other than its
rules for choice of law).
13.2 Dispute Resolution. All disputes concerning this Agreement shall
be resolved , and all remedies shall be available, only as provided in this
Paragraph 13.2.
13.2.1 In the event that one party believes the other party
to have committed a material breach of this
Agreement, for which the party wishes to pursue a
remedy, then the party shall give 30 days notice of
the breach.
13.2.2 Upon written notice by either party, the parties each
agree to select a mediator and to promptly mediate in
good faith any controversy, claim or dispute arising
between the parties arising out of or related to this
Agreement, its performance or any breach or claimed
breach thereof.
13.2.3 In the event that such non-binding mediation does not
resolve any such matter, then such matter, and any
other dispute arising under this Agreement, the
parties irrevocably submit to the jurisdiction and
venue of the United States District Court for the
District of Vermont at Burlington and the Vermont
Superior Court for Chittenden County for the purpose
of any suit or other proceeding arising out of or
based upon this Agreement or the subject matter
hereof, and agrees that any such proceeding will be
brought or maintained only is such court.
13.3 Captions. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
13.4 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties relating to the subject matter hereof, and
supersedes all prior arrangements, arrangements and understandings, written or
oral, between the parties relating to the subject matter hereof except as
provided in the last sentence of Paragraph 3.1 Certain
<PAGE>
provisions of this Agreement survive the Term of Employment and any termination
of payments by the Company, including Paragraphs 3, 5, 6, 8, 10, 11, and 13.
13.5 No Other Representations. No representation, promise or inducement
has been made by either party that is not embodied in this Agreement, and
neither party shall be bound or liable for any alleged representation, promise
or inducement not so set forth.
13.6 Assignability. Subject to Paragraph 3.6, this Agreement may not be
assigned by Greenfield or the Company, except that Greenfield may assign part or
all of payments from the Company for the benefit of his dependents, heirs, or
beneficiaries, and the Company may assign this Agreement in a merger,
consolidation, sale or transfer of all or substantially all of the business and
assets of the Company. Subject to the foregoing, this Agreement shall bind each
party and its successors, heirs, personal representatives and assigns.
13.7 Amendments; Waivers. This Agreement may be amended, modified,
superseded, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at the later time to enforce the same. No waiver in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other terms or covenant contained in
this Agreement.
13.8 No Presumption. This Agreement has been prepared by the parties'
lawyers to reflect the parties' mutual agreement. No presumption shall be
implied or asserted that the terms of this Agreement are to be construed against
either party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
BEN & JERRY'S HOMEMADE, INC.
/s/ Perry D. Odak
By: _________________________________
Perry Odak
Chief Executive Officer
Duly Authorized
/s/ Jerry Greenfield
---------------------------------
Jerry Greenfield
<PAGE>
Exhibit 10.34
EMPLOYMENT AGREEMENT
This Agreement is made in Burlington, Vermont by and between Ben &
Jerry's Homemade, inc. (the "Company"), a Vermont corporation, with its
principal place of business at 30 Community Drive, South Burlington, Vermont
05403-6828, and Angelo M. Pezzani, an individual, living at 950 Laurel Glen,
Palo Alto, CA 94304 (the "Executive"), is effective as of the 1st day of
January, 1998 (the "Effective Date").
WHEREAS, subject to the terms and considerations hereinafter set forth,
the Company wishes to employ the Executive as its Senior Director--Business
Development and Executive wishes to accept such employment;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions, and conditions set forth in this
Agreement, the parties hereby agree:
1. Employment.
a. Employment by the Company. Executive agrees to be employed by the
Company for the Term of this Agreement upon the terms and subject to the
conditions set forth in this Agreement. Executive shall serve as the Senior
Director--Business Development ("SDBD") of the Company and shall have such
duties as may be prescribed by the current Chief Executive Officer ("CEO") and
Executive shall serve in such other and/or additional position(s) as the current
CEO may determine from time to time. The SDBD will report directly to the CEO.
b. Performance of Duties. Throughout the Term of this Agreement,
Executive shall faithfully and diligently perform Executive's duties in
conformity with the reasonable directions of the CEO and in conformity with the
terms and conditions hereof and will serve the Company to the best of
Executive's ability. Executive shall devote Executive's entire working time,
attention and energies to the business and affairs of the Company, subject to
vacations and sick leave in accordance with Company's policy.
c. Place of Performance. During the Term of this Agreement, Executive
shall be based in the Company's offices in South Burlington, Vermont. Executive
will be at the Company's principal place of business in South Burlington,
Vermont and be ready, willing, and able to perform his Duties hereunder no later
than January 15, 1998. Executive shall maintain a residence in the Burlington,
Vermont area within reasonable access to Executive's place of employment.
2. Term. Subject to earlier termination as hereafter provided and subject to
renewal as provided below, the Executive's employment hereunder shall be for a
term of three (3) years, commencing on the Effective Date hereof and ending
thirty-six (36) months thereafter on December 31, 2000. The term of this
Agreement, as from time to time extended or renewed, is hereafter referred to as
"the Term of this Agreement" or "the Term hereof". This Agreement shall continue
on a year-to-year basis beyond the end of the third year (or a later year if
this Agreement has renewed), unless the Company notifies the Executive in
writing not less than six (6) months prior to the end of the third year (or
applicable later year) that the Company does not wish to renew the Agreement.
Failure by the Company to so notify Executive shall automatically renew this
Agreement for an additional one year.
3. Compensation and Benefits. As compensation for the services performed by
the Executive and subject to performance of the Executive's obligations:
a. Base Salary. The Company agrees to pay the Executive a base salary
("Base Salary") at the annual rate of Two Hundred and Fifty Thousand Dollars
($250,000.00) payable in installments consistent with the Company's payroll
practices. The Executive will be subject to annual merit salary reviews by the
CEO. Such base salary, as from time to time is then in effect, is hereafter
referred to as the "Base Salary".
b. Annual Bonus and Guarantees. The CEO is in the process of developing
a Senior Management Incentive Pool ("SMIP"). The SMIP is not presently finalized
but is in the process of being prepared for submission to and approval by the
Company's Board of Directors. When such plan is approved. Executive will
participate therein and will be treated in accordance with his position and the
terms of the SMIP and the provisions of this Section 3(b). Notwithstanding
anything to the contrary, Company shall pay to Executive, as a guaranteed bonus,
a minimum sum equal to $75,000.00 no later than January 31, 1999, for the
respective year ending December 31,1998. Bonuses for subsequent years will be
under the SMIP. and if there is no SMIP approved and in place, then the Annual
Bonus due Employee will be commensurate with the guaranteed bonus for fiscal
year ending 1998.
c. Other Benefits. The Executive shall be entitled to participate in
all of the employee benefit plans and programs of the Company, and receive the
benefits and perquisites, generally provided to executives of the same level and
responsibility as Executive. To the extent permitted by law and the provisions
of the specific plan, the eligibility date for the Executive, as the same
relates to any and all benefits, shall be March 1, 1997. Nothing in this
Agreement shall preclude the Company from terminating or amending from time to
time any employee benefit plan or program. Executive shall be entitled to four
(4) weeks of vacation per year plus the allowable personal days.
d. Business Expenses. Upon submission of itemized expense statements in
the manner specified by the Company, Executive shall be entitled to
reimbursement for reasonable travel and other reasonable business expenses duly
incurred by the Executive in the performance of Executive's duties under this
Agreement. Such reimbursement shall be in accordance with the policies and
procedures established by the Company from time to time and for executives of
the same level and responsibility as Executive.
e. Relocation Expenses. The Company will reimburse the Executive for
the following relocation expenses: (i) Closing costs on selling the existing
home, including sales commission and legal fees, (ii) Expenses to move all
household goods, (iii) Interim living expenses for ninety (90) days, (iv)
Expenses for up to two (2) house-hunting trips for the Executive and his wife
including air fare, lodging, meals and rental car, and (v) Customary closing
costs on any new purchase of the Executive's residence in Vermont, including
standard mortgage points (not buy down interest rate expenses) and legal fees.
All reimbursed amounts will be grossed up for tax purposes. To be eligible for
these expense reimbursements, the Executive must commence the relocation within
one (1) year from the Effective Date, Prior to Employees's relocation to
Vermont, the Company will reimburse Executive for twice a month commuting
expenses to California. If Executive's employment with the Company is terminated
within two (2) years from the date of Employees' relocation to Vermont for any
reason other than for Cause, then Company will pay all costs (on a grossed up
basis) of relocating the Executive back to Palo Alto, California.
f. Grant of Option and Terms Thereof. The Company hereby grant to
Executive, pursuant to the Company's 1997 Equity Incentive Plan (the "Plan"), an
option to purchase 52,000 shares of Class A common stock of the Company ("ISO
Option Shares") exercisable at the market price of $13.89. This ISO Option will
expire 10 years form the date of grant thereof. Provided that the Executive is
in full compliance with terms and conditions of the Plan, this ISO Option will
be exercisable over a four (4) year period of the time commencing from the
Effective Date of this Agreement, with one-fourth being exercisable on March 1,
1998 and up to additional 1/48 of the shares covered by this Option on the last
day of each month in the next three years after said anniversary of said
Effective Date. The full terms and conditions of this Option shall be set forth
in the form of the Option Certificate attached as Exhibit A.
4. Termination of Employment. Notwithstanding the provisions of Section
2 hereof, the Executive's employment hereunder shall terminate prior to the
expiration of the Term under the following circumstances.
a. Death. In the event of the Executive's death during the Term
thereof, the Company shall pay the Executive's designated
beneficiary or, if no beneficiary has been designated by the
Executive, to his estate, any earned and unpaid Base Salary;
bonuses and incentives that are earned and unpaid (pro-rated
through such termination); any accrued and unused vacation and/or
personal days; reimbursement of business expenses accrued prior to
the date of death; and continuation of the Base Salary payments
(plus continued participation in the Company's medical and
hospital employee insurance) for six (6) months after the
Executive's death. Options exercisable at date of death may be
exercised by the Executive's estate for 12 months (but not beyond
the stated term of the option).
b. Disability.
(i) The Company may terminate the Executive's employment hereunder,
upon thirty (30) days written notice to the executive, in the
event that the Executive becomes disabled during his employment
hereunder, through illness, injury, accident or condition of
either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and
responsibilities hereunder for one hundred eighty (180)
consecutive days during any period of three hundred and sixty-five
(365) consecutive calendar days.
(ii).The Board may designate another employee lo act in the
Executive's place during any period of the Executive's disability
prior lo termination as provided in Section 4.b.i above.
Notwithstanding any such designation, the Executive shall continue
to receive from the Company (or under a disability plan) the Base
Salary in accordance with Section 3.a. and benefits in accordance
with the other provisions of Article 3, to the extent permitted by
the then-current terms of the applicable benefit plans until the
termination of his employment.
(iii)The Executive shall be entitled to participate in the Company's
long-term disability plan, to the same extent as other employees.
No finding of disability under this Section 4.b. shall be made in
respect of any cause or condition which has not been approved as a
fully disability under the applicable plan.
(iv) If any question shall arise as to whether during any period the
Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be
unable to perform substantially all of his duties and
responsibilities hereunder, the Executive may, and at the request
of the Company shall, submit to a medical examination by a
physician selected by the Executive or his duly appointed
guardian, to whom the Company has no reasonable objection, to
determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination, the
Company's determination of the issue shall be binding on the
Executive.
(v) Options exercisable at dale of termination for disability may be
exercised for 12 months (but not beyond the stated term of the
option) thereafter.
c. By the Company for Cause. The Company may terminate the Executive's
employment hereunder for Cause ("Cause") any time upon written notice
to the Executive setting forth in reasonable detail the nature of such
Cause, and the Executive's failure to cure within thirty (30) days
after such notice. The following shall constitute Cause for
termination: the Executive's gross negligence in the performance of his
material duties and responsibilities to the Company; the commission by
the Executive of theft, embezzlement or other serious and substantial
crimes: or other deliberate willful action by the Executive that is
materially harmful to the business, interests or reputation of the
Company.
For purposes of this Section 4.c., no act, or failure to act, shall be
"willful" unless done, or omitted to be done, without reasonable belief
that the action or omission was in the best interests of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to him a notice of termination, and such termination shall
have been approved by the vole of two-thirds of the members of the
Board of Directors at a meeting of the Board (after reasonable notice
to the Executive and an opportunity for him, together with counsel, to
be heard before the Board of Directors) finding that, in the good faith
opinion of the Board of Directors, the above standard of termination
for Cause was met in such case and that such Cause was not cured.
Upon the giving of notice of termination of the Executive's employment
hereunder for Cause following the determination of the Board under the
preceding paragraph, the Company shall have no further obligation or
liability to the Executive, other than for any earned and unpaid Base
Salary; bonuses and incentives that are earned but unpaid (pro-rated
through any such termination); any accrued but unused vacation and/or
personal days: any options that are vested which shall continue for 30
days; and payments or reimbursement of business expenses accrued prior
to the termination under this Section 4.c.
d. Termination By Company Other Than For Cause. In the event that
Executive's employment hereunder is terminated by the Company during
the Agreement Term for any reason other than as provided in Sections
4.a.,4,b., or 4.c. hereof or if the Executive terminates for Good
Reason (as defined in Section 4.e. below), then the Company shall pay
to Executive, within thirty (30) days of the date of such termination,
any earned and unpaid Base Salary; bonuses and incentives that are
earned but unpaid (pro-rated through any such termination); any accrued
but unused vacation and/or personal days: and a lump sum equal to his
then current Base Salary plus any guaranteed bonus and/or SMIP bonus
until the end of the Term; provided, however, in no event will the "end
of the Term" be for more than twenty-four (24) months and for no less
than for twelve (12) months following the effective date of
termination. Subject to any employee contribution applicable to the
Executive on the date of termination, the Company shall continue lo
contribute, for the balance of the Term or twelve (12) months whichever
is greater, to the cost of the Executive's participation (including his
family) in the Company's group medical and hospitalization insurance
plans and group life insurance plan.
e. By the Executive for Good Reason in the Absence of Cause. Employment
with the Company may be regarded as having been constructively
terminated by the Company, and the Executive may therefor terminate his
employment for Good Reason and thereupon become entitled to the
benefits of Section 4.d. just as if he had been terminated Other Than
For Cause, if, before the end of the Term (or any renewal thereof), one
or more of the following events shall occur: (i) without the
Executive's express written consent, the assignment to the Executive of
any duties or the reduction of the Executive's duties, either of which
results in a diminution in the Executive's position or responsibilities
with the Company in effect immediately prior to such assignment, or the
removal of the Executive from such position and responsibilities: (ii)
without the Executive's express written consent, a reduction by the
Company in the then current Base Salary or Bonus opportunity of the
Executive immediately prior to such reduction; (iii) a reduction by the
Company in the kind or level of employee benefits to which the
Executive is entitled immediately prior to such reduction with the
result that the Executive's overall benefits package is significantly
reduced: (iv) any purported termination of the Executive's employment
by the Company which is not effected for Death, Disability or for
Cause, or any purported termination for which the grounds relied upon
are not valid: (v) any material breach by the Company of any provision
of this Agreement: (vi) the Company terminates Perry D. Odak for any
reason; and (vii) a Change in Control shall be deemed to have occurred.
For purposes of this Agreement, the term "Change in Control" shall mean
the occurrence of any of the following events: (1) any "person" (as
such term is used in Sections 13 (d) and 14 (d) of the Securities
Exchange Act of 1934 [the "Act]) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act)' directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities in the
election of directors: (2) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less
than a majority of the Board of Directors thereafter, or (3) during any
period of twelve consecutive months, individuals who at the beginning
of such period constituted the Board of Directors (including for this
purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors. Notwithstanding the
foregoing sentence, a "Change in Control" will not be deemed to have
occurred solely because of the acquisition of securities of the Company
(or any reporting requirement under the Act relating thereto) by an
employee benefit plan maintained by the Company for the benefit of
employees or an acquisition by Ben Cohen, Jerry Greenfield, Fred Lager,
Jeffrey Furman and Perry Odak or their "affiliates" or "associates" (as
such terms are defined in Rule 12b-2 under the Act) or members of their
families (or trusts for their benefit) or charitable trusts established
by any of them or other related management group.
Moreover, notwithstanding the foregoing provision, if such transaction
takes place after June 30, 1998 and follows a decision by Cohen (or his
estate or heirs) or by the Board of Directors, in the event that Ben
Cohen (his estate or heirs) is no longer a controlling stockholder as
determined by the board of Directors in the exercise of its reasonable
judgment) to change the present policy of independence for the Company,
in order to thereby continue to realize its potential, lo a policy of
favorable considering the prospect of a sale of all or substantially
all assets or a merger or other business combination or sale of
outstanding stock in which a change pursuant to the preceding paragraph
is made as a result of performance of the Company which is not
satisfactory in his or their judgment, then such transaction shall not
constitute a Change in Control fit being understood that a change in
the policy of independence of the Company as a result of a hostile or
unsolicited bid for control of the company shall not constitute a
Change in Control for this purpose)
f. No Duty to Mitigate. Following a termination of employment, the
Executive shall not be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
5. Confidential Information.
a. The Executive will comply with the policies and procedures of the
Company and its Subsidiaries for protecting Confidential Information and shall
never disclose to any Person (except as required by applicable law) or use for
his own benefit or gain, any Confidential Information obtained by the Executive
incident to his employment or other association with the Company or any of its
Subsidiaries. The Executive understands that this restriction shall continue to
apply after his employment terminates, regardless of the reason for such
termination.
b. All documents, records, tapes and other media of every kind and
description relating to the business, present or otherwise, of the Company or
its Subsidiaries and any copies, in whole or in part, thereof (the "Documents"),
whether or not prepared by the Executive, shall be the sole and exclusive
property of the Company and its Subsidiaries. The Executive shall safeguard all
Documents and shall surrender to the Company at the time his employment
terminates, or at such earlier time or times as the CE 0 or his designee may
specify, all Documents that are then in the Executive's possession or control.
6. Assignment of Rights to Intellectual Property. The Executive shall
promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns and agrees to assign to the Company (or as otherwise
directed by the Company) the Executive's full right, title and interest in and
to all Intellectual Property. All copyrightable works that the Executive creates
shall be considered "work made for hire".
7. Restricted Activities. The Executive agrees that some restrictions on
his activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Subsidiaries, and that the agreed restrictions set forth below will not
deprive the Executive of the ability to earn a livelihood:
a. While the Executive is employed by the Company and for two years
after his employment terminates (the "Non-Competition Period"), the Executive
shall not, directly or indirectly, whether as owner, partner, investor,
consultant, agent, employee, co-venturer or otherwise, compete with the Company
or any of its Subsidiaries within the United States, or within any foreign
country in which the Products are sold at the date of termination of employment,
or undertake any planning for any business competitive with the Company or any
of its Subsidiaries.
b. The Executive further agrees that white he is employed by the
Company and during the Non-Competition Period, the Executive will not hire or
attempt to hire any employee of the Company or any of its Subsidiaries, assist
in such hiring by any Person, encourage any such employee to terminate his or
her relationship with the Company or any of its Subsidiaries, or solicit or
encourage any customer or vendor of the Company or any of its Subsidiaries to
terminate its relationship with them, or, in the case of a customer, to conduct
with any Person any business activity which such customer conducts or could
conduct with the Company or any of its Subsidiaries.
c. The provisions of this Section 7 shall not be deemed to preclude the
Executive from employment during the Non-Competition Period following
termination of employment hereunder by a corporation, some of the activities of
which are competitive with the business of the Company, if the Executive's
employment does not relate, directly or indirectly, to such competitive
business, and nothing contained in this Section 7 shall be deemed to prohibit
the Executive, during the Non-Competition Period following termination of
employment hereunder, from acquiring or holding, solely as an investment,
publicly traded securities of any competitor corporation so long as such
securities do not, in the aggregate, constitute more than five percent (5%) of
the outstanding voting securities of such corporation.
8. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 5, 6, and 7
hereof. The Executive agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Subsidiaries and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. The Executive further acknowledges that,
were he to breach any of the covenants contained in Sections 5, 6, and 7 hereof,
the damage to the Company would be irreparable. The Executive therefore agrees
that the Company, in addition to any other remedies available to it, shall be
entitled to preliminary and permanent injunctive relief against any breach or
threatened breach by the Executive of any of said covenants. The parties further
agree that, in the event that any provision of Sections 5, 6, 7 and 8 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its being extended over too great a time, too large a geographical
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.
9. Indemnification. The Company shall indemnify the Executive to the extent
provided for the Company executive officers in its then current Articles of
Incorporation or By-laws and the laws of the state of the Company's
incorporation. The Executive agrees to promptly notify the Company of any actual
or threatened claim arising out of or as a result of his employment with the
Company.
10. Definitions. Words or phrases, which are initially capitalized or are
within quotation marks shall have the meanings provided in this Section 10 and
as provided elsewhere herein. For purposes of this Agreement the following
definitions apply:
a. "Confidential Information" means any and all information of the
Company and its Subsidiaries that is not generally known by others with whom
they compete or do business, or with whom they plan to compete or do business
and any and all information not readily available to the public, which, if
disclosed by the Company or its Subsidiaries would assist in competition against
them. Confidential Information includes without limitation such information
relating to (i) the development, research, testing, manufacturing, plant
operational processes, marketing and financial activities, including costs,
profits and sales, of the Company and its Subsidiaries, (iiJ the Products and
all formulas thereof, (iii) the costs, source of supply, financial performance
and strategic plans of the Company and its Subsidiaries, (iv) the identity and
special needs of the customers and suppliers of the Company and its Subsidiaries
and (v) the people and organizations with whom the Company and its Subsidiaries
have business relationships and those relationships. Confidential Information
also includes comparable information that the Company or any of its Subsidiaries
have received belonging to others or which was received by the Company or any of
its Subsidiaries with any understanding that it would not be disclosed.
b. "Intellectual Property" means inventions, discoveries, developments,
methods, processes, formulas, compositions, works, concepts and ideas (whether
or not patentable or copyrightable or constituting trade secrets) conceived,
made, created, developed, or reduced to practice by the Executive (whether alone
or with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate lo either the Products
or any prospective activity of the Company and its Subsidiaries.
c. "Products" mean all products planned, researched, developed, tested,
manufactured, sold, licensed, leased or otherwise distributed or put into use by
the Company or any of its Subsidiaries, together will all services provided or
planned by the Company or any of its Subsidiaries, during the Executive's
employment.
11. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
12. Assignment. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that in the event that the Company shall hereafter effect a reorganization,
consolidate with, or merge into, any other Person or transfer all or
substantially all of its properties or assets to any other Person, the Company
shall require such Person or the resulting entity to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it.
13. Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party lo
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement, shall be in writing, and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at its principal place of business, attention CEO.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements, communications,
representations and understandings, written or oral, with respect to the terms
and conditions of the Executive's employment.
17. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by an expressly authorized officer of the
Company.
18. Governing Law. Arbitration and Consent to Jurisdiction. This is a
Vermont contract and shall be construed and enforced under and be governed in
all respects by the laws of the State of Vermont, without regard to the conflict
of laws principles thereof. The parties each agree to promptly select a mediator
and promptly mediate in good faith any controversy, claim or dispute arising
between the parties hereto arising out of or related to this Agreement and its
performance or any breach or claimed breach thereof. In the event that mediation
does not resolve any such matter, then such matter other than any matter in
which injunctive relief or other equitable relief is sought shall be
definitively resolved through binding arbitration conducted in the City of
Burlington, Vermont, by a panel of three (3) arbitrators in accordance with the
then current Commercial Arbitration Rules of the American Arbitration
Association, provided, however, that notwithstanding anything to the contrary in
such Commercial Arbitration Rules, the parties shall be entitled in the course
of any arbitration conducted pursuant to this Section to seek and obtain
discovery from one another to the same extent and by means of the same
mechanisms authorized by Rules 27 through 37 of the Federal Rules of Civil
Procedure. The power and office of the arbitrators shall arise wholly and solely
from this Agreement and the then current Commercial Arbitration Rules of the
American Arbitration Association. The award of the panel or a majority of them
so rendered shall be final and binding, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereto.
To the extent a dispute is not to be arbitrated in accordance with the
foregoing, each of the Company and the Executive (i) irrevocably submits to the
jurisdiction of the United States District Court of Vermont and to the
jurisdiction of the state courts of Vermont (Washington County superior.
District of Vermont) for the purpose of any suit or other proceeding arising out
of or based upon the Agreement or the subject matter hereof and agrees that any
such proceeding shall be brought or maintained only in such court, and (ii)
waives, to the extent not prohibited by applicable law, and agrees not to assert
in any such proceedings, any claim that it is not subject to the jurisdiction of
the above-named courts, that he or it is immune from extraterritorial injunctive
relief or other injunctive relief, that any such proceeding brought or
maintained in a court provided for above may not be properly brought or
maintained in such court, should be transferred to some other court or should be
stayed or dismissed by reason of the pendency of some other proceeding in some
other court, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
19. Other Obligations. Executive represents and warrants that neither
Executive's employment with the Company nor Executive's performance of his
obligations hereunder will conflict with or violate or otherwise are
inconsistent with any other obligations, legal or otherwise, which Executive may
have.
20. Cooperation. Following termination of employment with the Company,
Executive shall cooperate with the Company, as reasonably requested by the
Company, to affect a transition of Executive's responsibilities and to ensure
that the Company is aware of all matters being handled by Executive.
21. Remedies For Breach. The parties hereto agree that Executive is
obligated under this Agreement to render personal services during the Agreement
Term of a special, unique, unusual, extraordinary and intellectual character,
thereby giving this Agreement peculiar value, and, in the event of a breach of
any covenant of Executive herein, the injury or imminent injury to the value and
the goodwill of the Company's business could not be reasonable or adequately
compensated in damages in an action at law. Accordingly, Executive expressly
acknowledges that the Company shall be entitled to specific performance,
injunctive relief or any other equitable remedy against Executive, without the
posting of a bond, in the event of any breach or threatened breach of any
provision of this Agreement by Executive (including Sections 5, 6 and 7 hereof).
Without limiting the generality of the foregoing, if Executive breaches Sections
5 or 6 or 7 hereof, such breach will entitle the Company to enjoin Executive
from disclosing any Confidential Information to any competing business, to
enjoin such competing business from receiving Executive or using any such
Confidential Information and/or to enjoin Executive from rendering personal
services to or in connection with such competing business. The rights and
remedies of the parties hereto are cumulative and shall not be exclusive, and
each such party shall be entitled to pursue all legal and equitable rights and
remedies and to secure performance of the obligations and duties of the other
under this Agreement, and the enforcement of one or more of such rights remedies
by a party shall in no way preclude such party from pursuing, at the same time
or subsequently, any and all other rights and remedies available to it.
22. Assistance in Proceedings. Etc. Executive shall, during and after
expiration of the Agreement Term, upon reasonable notice, furnish such
information and proper assistance to the Company as may reasonably be required
by the Company in connection with any legal or quasi-legal proceeding, including
any external or internal investigation, involving the Company or any of its
affiliates or in which any of them is, or may become, a party.
23. Survival. Cessation or termination of Executive's employment with the
Company shall not result in termination of this Agreement. The respective
obligations of each of the parties and their respective rights and benefits
afforded to each other, all as provided in Agreement, shall survive cessation or
termination of Executive's employment hereunder. This Agreement shall not
terminate upon, and shall remain in full force and effect following, expiration
of the Agreement Term and all rights and obligations of the parties hereto as
and to the extent provided herein shall survive such expiration.
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized officer, and by the Executive, as of the date first above
mentioned.
BEN & JERRY'S HOMEMADE. INC.
/s/ Angelo M. Pezzani /s/ Perry D. Odak
- ------------------------------ By: ----------------------------------------
Angelo M. Pezzani, Executive Perry D. Odak, Chief Executive Officer
Exhibit 10.35
EMPLOYMENT AGREEMENT
This Agreement (together with all exhibits hereto, the
"Agreement") made in Burlington, Vermont by and between Ben & Jerry's Homemade,
Inc. (the "Company"), a Vermont corporation with its principal place of business
at 30 Community Drive, South Burlington, Vermont 05403-6828, and Lawrence E.
Benders of Boulder, Colorado (the "Executive"), effective as of the 16th day of
September, 1997 as to Section 3b and effective as to 20th day of October, 1997
to all other provisions (which is referred to herein as the "Effective Date").
WHEREAS, subject to the terms and considerations hereinafter set forth,
the Company wishes to employ the Executive as its Chief Marketing Officer and
Executive wishes to accept such employment;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions, and conditions set forth in this Agreement,
the parties hereby agree:
1. Employment.
a. Employment by the Company. Executive agrees to be employed by the
Company for the Term of this Agreement upon the terms and subject to the
conditions set forth in this Agreement. Executive shall serve as the Chief
Marketing Officer ("CMO") of the Company and shall have such duties as may be
prescribed by the Chief Executive Officer ("CEO") and Executive shall serve in
such other and/or additional position(s) as the CEO may determine from time to
time. The CMO will report directly to the CEO.
b. Performance of Duties. Throughout the Term of this Agreement,
Executive shall faithfully and diligently perform Executive's duties in
conformity with the directions of the CEO and will serve the Company to the best
of Executive's ability. Executive shall devote Executive's entire working time,
attention and energies to the business and affairs of the Company, subject to
vacations and sick leave in accordance with Company's policy.
c. Place of Performance. During the Term of this Agreement, Executive
shall be based in the Company's offices in Burlington, Vermont. Executive will
be at the Company's principal place of business in South Burlington, Vermont and
be ready, willing, and able to perform his duties hereunder no later than
November 1, 1997. Executive shall maintain Executives personal residence in the
Burlington, Vermont area within reasonable access to Executive's place of
employment.
2. Term. Subject to earlier termination as hereafter provided, the
Executive's employment hereunder shall be for a term of three (3) years,
commencing on the Effective Date hereof and ending thirty-six (36) months
thereafter on October 26, 2000. The Company shall have the right to renew this
Agreement by notifying Executive six (6) months before the end of the Term of
Company's intention to do so.
<PAGE>
3. Compensation and Benefits. As full and complete compensation for all
services performed by the Executive and subject to performance of the
Executive's obligations:
a. Base Salary. The Company agrees to pay the Executive a base salary
("Base Salary") at the rate Eighteen Thousand Seven Hundred and Fifty Dollars
($18,750) per month payable in installments consistent with the Company's
payroll practices. The Executive will be subject to annual merit salary reviews
by the CEO.
b. Consulting and Sign Up Payment. In consideration of the Executive
signing up and agreeing to be available to consult for the Company, at such
times as shall be mutually agreed, in the area of marketing during the period
commencing September 16, 1997 and ending October 20, 1997, the Company agrees to
pay the Executive $25,000. Payment of this one-time payment shall be made in
arrears once the Executive reports to work for the Company at the Place of
Employment (as stated above).
c. One Time Guaranteed Award. On January 2, 1998, Company agrees to pay
to the Executive, provided the Executive is then in the active employ of the
Company the sum of $78,750 (less all applicable deductions and withholdings).
This sum will be made to Executive as a payment to "make whole" the Executive
for certain sums of money he is forfeiting with his present employer. This is a
one time payment obligation of the Company.
d. Annual Bonus. The CEO is in the process of developing an Elective
Management Incentive Pool ("EMIP"). The EMIP is not presently finalized but is
in the process of being prepared for submission and approval of the Company's
Board of Directors. If Executive is employed hereunder when such plan is
adopted, Executive will participate therein and will be treated in accordance
with his position and the terms of the EMIP.
e. Other Benefits. The Executive shall be entitled to participate in,
to the extent Executive is otherwise eligible under the terms thereof, the
employee benefit plans and programs of the Company, and receive the benefits and
perquisites, generally provided to executives of the same level and
responsibility as Executive. Nothing in this Agreement shall preclude the
Company from terminating or amending from time to time any employee benefit plan
or program. Executive shall earn vacation time at the rate of one and a half
days per month and this paid vacation time may be used following six months of
continuous employment at the Company.
f. Business Expenses. Upon submission of itemized expense statements in
the manner specified by the Company, Executive shall be entitled to
reimbursement for reasonable travel and other reasonable business expenses duly
incurred by the Executive in the performance of Executive's duties under this
Agreement. Such reimbursement shall be in accordance with the policies and
procedures established by the Company from time to time and for executives of
the same level and responsibility as Executive.
g. Relocation Expenses. The Company will reimburse the Executive for
the following relocation expenses: (i) Closing costs on selling the existing
home, including sales commission and legal fees, not to exceed $30,000 dollars,
(ii) Expenses to move all household goods, not to exceed
<PAGE>
$15,000 dollars, (iii)Interim living expenses for ninety (90) days, not to
exceed $4,000 dollars, (iv) Expenses for up to two (2) house-hunting trips for
the Executive and his wife including air fare, lodging, meals and rental car,
and (v) Closing costs on any new purchase of the Executive's primary residence,
including standard mortgage points (not buy down interest rate expenses) and
legal fees, not to exceed $10,000 dollars. The Company is willing to consider
reimbursement for any expenses which exceed the limitations listed above, should
the cost of relocation increase substantially for unforeseen reasons, provided
that the CEO agrees in writing to the unforeseen costs in advance of the
Executive incurring such costs. All reimbursed amounts will be grossed up for
tax purposes.
h. Grant of Option and Terms Thereof. The Company hereby agrees that it
will grant to Executive, pursuant to the Company's 1997 Equity Incentive Plan
(the "Plan"), an option to purchase 52,000 shares of Class A common stock of the
Company ("Option Shares") exercisable at the market price of $ 12.63. The Option
will expire 10 years from the date of grant thereof. Provided that the Executive
is in full compliance with terms and conditions of the Plan, the Option will be
exercisable over a four (4) year period of time commencing from the date of
grant, with one-fourth being exercisable on the first anniversary of the date of
grant and up to additional 1/48 of the shares covered by this Option on the last
day of each month in the next three years after said anniversary. The full terms
and conditions of the Option shall be set forth in the form of the Option
Certificate attached as Exhibit A.
i. No Other Compensation or Benefits; Payment. The compensation and
benefits specified in Sections 3 and 4 of this Agreement shall be in lieu of any
and all other compensation and benefits. Payment of all compensation and
benefits to Executive hereunder shall be made in accordance with the relevant
Company policies in effect from time to time, including normal payroll
practices, and shall be subject to all applicable employment and withholding
taxes.
j. Cessation of Employment. In the event Executive shall cease to be
employed by the Company for any reason, then Executive's compensation and
benefits shall cease on the date of such event, except as otherwise provided
herein or in any applicable employee benefit plan or program.
4. Termination of Employment.
a. Termination. The Company may terminate Executive's employment for
Cause (as defined below) or for any breach of this Agreement, in which case the
provisions of Section 4(b) shall apply. The Company may also terminate
Executive's employment in the event of Executive's Disability (as defined
below), in which case the provisions of Section 4(c) shall apply. The Company
may also terminate the Executive's employment for any other reason by written
notice to Executive, in which case of the provisions of Section 4(d) shall
apply. If Executive's employment is terminated by reason of Executive's death,
retirement or voluntary resignation, then the provisions of Section 4(b) shall
apply.
b. Termination for Cause; Termination by Reason of Death or Retirement
or Voluntary Resignation. In the event that the Executive's employment hereunder
is terminated
<PAGE>
during the Agreement Term (x) by the Company for Cause (as defined below) or (y)
by reason of Executive's death or retirement or (z) by reason of Executive's
voluntary resignation, then the Company shall pay to the Executive or the
Executive's designated beneficiary or if no beneficiary has been designated by
the Executive, to his estate (all as the specific case may be), any Base Salary,
bonuses and incentives that are earned but unpaid, pro-rated through any such
termination under the Section 4(b) and payment or reimbursement of business
expenses accrued prior to any act of termination under this Section 4(b). For
purposes of this Agreement, "Cause" shall mean (i) conviction of any crime
(whether or not involving the Company) constituting a felony in the jurisdiction
involved; (ii) engaging in any substantiated act involving moral turpitude;
(iii) engaging in any act which, in each case, subjects, or if generally known
would subject, the Company to public ridicule or embarrassment; (iv) gross
neglect or misconduct in the performance of Executive's duties hereunder; (v)
willful or repeated failure or refusal to perform such duties as may be
delegated to Executive by the CEO; or (vi) breach of any provision of this
Agreement by Executive.
c. Disability. If as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from Executive's duties
hereunder on a full time basis for either (i) one hundred and twenty (120) days
within any three hundred and sixty-five (365) day period, or (ii) ninety (90)
consecutive days, and if within thirty (30) days after written notice of
termination is given Executive shall not have returned to the performance of
Executive's duties hereunder on a full time basis, the Company may terminate the
Executive's employment hereunder for "Disability". In that event, the Company
shall pay to Executive, within thirty (30) days of the date of such termination,
only the Base Salary through such date of termination. During any time period
that Executive fails to perform Executive's duties hereunder as a result of
incapacity due to physical or mental illness (a "Disability Period"), Executive
shall continue to receive the compensation and benefits provided by Section 3
hereof until Executive's employment hereunder is terminated; provided, however,
that the amount of compensation and benefits received by Executive during the
Disability Period shall be reduced by the aggregate amounts, if any, payable to
Executive under disability benefit plans and programs of the Company or under
the Social Security disability insurance program.
d. Termination By Company For Any Other Reason. In the event that
Executive's employment hereunder is terminated by the Company during the
Agreement Term for any reason other than as provided in Sections 4(b) or 4(c)
hereof, then the Company shall pay to Executive, within thirty (30) days of the
date of such termination, the Base Salary through such date of termination and,
in lieu of any further compensation and benefits for the balance of the
Agreement Term, severance pay equal to one of the following circumstances: if
Executive is terminated within: (t) the first month of the Term, then eleven
(11) months of Base Salary; (u) the second month of the Term, then ten (10)
months of the Base Salary; (v) the third month of the Term, then nine (9) months
of the Base Salary; (w) the fourth month of the Term, then eight (8) months of
the Base Salary; (x) the fifth month of the Terms, then seven (7) months of the
Base Salary; (y) the sixth month of the Terms, then six (6) months of the Base
Salary; and (z) any time after the sixth month of the commencement of the Term
but before the last six (6) months of the Term, then six (6) of the Base Salary
(for purposes of convenience only, the respective time period for severance will
be referred to as "Severance Period"). The respective severance payments will be
paid at the
<PAGE>
times and in the amounts such Base Salary would have been paid. Under such
circumstances, except as set forth below, for the balance of the respective
Severance Period, Executive shall also continue to participate in and receive
the benefits and perquisites provided for above (but not including any bonus or
stock options) to the same extent as if the Executive's employment had not been
terminated; provided, however, that in the event that Executive shall breach any
of the duties, obligations, and/or promises hereunder including but not limited
to Sections 5 and 7, in addition to any other remedies the Company may have in
the event Executive breaches this Agreement, the Company's obligation pursuant
to this Section 4(d) to continue such salary, benefits and perquisites shall
cease and Executive's right thereto shall terminate and shall be forfeited.
Executive agrees and understands that should Company terminate Executive for any
reason, Executive still is under an immediate duty to mitigate and in the event
that Executive finds and accepts suitable replacement employment before the end
of the respective Severance Period, then the Company's obligation pursuant to
this Section 4(d) to continue such salary, benefits and perquisites shall cease
and Executive's rights thereto shall terminate and shall be forfeited.
e. No Further Liability; Release. Payment made and performance by the
Company in accordance with this Section 4 shall operate to fully discharge and
release the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives from
any further obligation or liability with respect to Executive's employment and
termination of employment. Other than paying Executive's Base Salary through the
date of termination of Executive's employment and making any severance payment
and continuing benefits and perquisites pursuant to and in accordance with this
Section 4 (as applicable), the Company and its directors, officers, employees,
subsidiaries, affiliates, stockholders, successors, assigns, agents and
representatives shall have no further obligation or liability to Executive or
any other person under this Agreement. The Company shall have the right to
condition the payment of any severance or other amounts pursuant to Sections
4(c) or 4(d) hereof upon delivery by Executive to the Company of a release in
form and substance satisfactory to the Company of any and all claims Executive
may have against the Company and its directors, officers, employees, agents and
representatives arising out of or related to Executive's employment by the
Company and termination of such employment.
5. Confidential Information.
a. The Executive will comply with the policies and procedures of the
Company and its Subsidiaries for protecting Confidential Information and shall
never disclose to any Person (except as required by applicable law) or use for
his own benefit or gain, any Confidential Information obtained by the Executive
incident to his employment or other association with the Company or any of its
Subsidiaries. The Executive understands that this restriction shall continue to
apply after his employment terminates, regardless of the reason for such
termination.
b. All documents, records, tapes and other media of every kind and
description relating to the business, present or otherwise, of the Company or
its Subsidiaries and any copies, in whole or in part, thereof (the "Documents"),
whether or not prepared by the Executive, shall be the sole and exclusive
property of the Company and its Subsidiaries. The Executive shall safeguard all
Documents and shall surrender to the Company at the time his employment
terminates or at such
<PAGE>
earlier time or times as the CEO or his designee may specify, all Documents that
are then in the Executive's possession or control.
6. Assignment of Rights to Intellectual Property. The Executive shall
promptly and fully disclose all Intellectual Property to the Company. The
Executive hereby assigns and agrees to assign to the Company (or as otherwise
directed by the Company) the Executive's full right, title and interest in and
to all Intellectual Property. All copyrightable works that the Executive creates
shall be considered "work made for hire".
7. Restricted Activities. The Executive agrees that some restrictions
on his activities during and after his employment are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the Company
and its Subsidiaries, and that the agreed restrictions set forth below will not
deprive the Executive of the ability to earn a livelihood:
a. While the Executive is employed by the Company and for two years
after his employment terminates (the "Non-Competition Period"), the Executive
shall not, directly or indirectly, whether as owner, partner, investor,
consultant, agent, employee, co-venturer or otherwise, compete with the Company
or any of its Subsidiaries within the United States, or within any foreign
country in which the Products are sold at the date of termination of employment,
or undertake any planning for any business competitive with the Company or any
of its Subsidiaries.
b. The Executive further agrees that while he is employed by the
Company and during the Non-Competition Period, the Executive will not hire or
attempt to hire any employee of the Company or any of its Subsidiaries, assist
in such hiring by any Person, encourage any such employee to terminate his or
her relationship with the Company or any of its Subsidiaries, or solicit or
encourage any customer or vendor of the Company or any of its Subsidiaries to
terminate its relationship with them, or, in the case of a customer, to conduct
with any Person any business activity which such customer conducts or could
conduct with the Company or any of its Subsidiaries.
c. The provisions of this Section 7 shall not be deemed to preclude the
Executive from employment during the Non-Competition Period following
termination of employment hereunder by a corporation, some of the activities of
which are competitive with the business of the Company, if the Executive's
employment does not relate, directly or indirectly, to such competitive
business, and nothing contained in this Section 7 shall be deemed to prohibit
the Executive, during the Non-Competition Period following termination of
employment hereunder, from acquiring or holding, solely as an investment,
publicly traded securities of any competitor corporation so long as such
securities do not, in the aggregate, constitute one-half of 1% of the
outstanding voting securities of such corporation.
8. Enforcement of Covenants. The Executive acknowledges that he has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 5, 6, and 7
hereof. The Executive agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its
<PAGE>
Subsidiaries and that each and every one of the restraints is reasonable in
respect to subject matter, length of time and geographic area. The parties
further agree that, in the event that any provision of Sections 5, 6, 7 and 22
hereof shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large a
geographical area or too great a range of activities, such provision shall be
deemed to be modified to permit its enforcement to the maximum extent permitted
by law.
9. Indemnification. The Company shall indemnify the Executive to the
extent provided for the Company executive officers in its then current Articles
of Incorporation or Bylaws. The Executive agrees to promptly notify the Company
of any actual or threatened claim arising out of or as a result of his
employment with the Company.
10. Definitions. Words or phrases which are initially capitalized or
are within quotation marks shall have the meanings provided in this Section 10
and as provided elsewhere herein. For purposes of this Agreement the following
definitions apply:
a. "Confidential Information" means any and all information of the
Company and its Subsidiaries that is not generally known by others with whom
they compete or do business, or with whom they plan to compete or do business
and any and all information not readily available to the public, which, if
disclosed by the Company or its Subsidiaries would assist in competition against
them. Confidential Information includes without limitation such information
relating to (i) the development, research, testing, manufacturing, plant
operation processes, marketing and financial activities, including costs,
profits and sales, of the Company and its Subsidiaries, (ii) the Products and
all formulas thereof, (iii) the costs, source of supply, financial performance
and strategic plans of the Company and its Subsidiaries, (iv) the identity and
special needs of the customers and suppliers of the Company and its Subsidiaries
and (v) the people and organizations with whom the Company and its Subsidiaries
have business relationships and those relationships. Confidential Information
also includes comparable information that the Company or any of its Subsidiaries
have received belonging to others or which was received by the Company or any of
its Subsidiaries with any understanding that it would not be disclosed.
b. "Intellectual Property" means inventions, discoveries, developments,
methods, processes, formulas, compositions, works, concepts and ideas (whether
or not patentable or copyrightable or constituting trade secrets) conceived,
made, created, developed, or reduced to practice by the Executive (whether alone
or with others, whether or not during normal business hours or on or off Company
premises) during the Executive's employment that relate to either the Products
or any prospective activity of the Company and its Subsidiaries.
c. "Products" mean all products planned, researched, developed, tested,
manufactured, sold, licensed, leased or otherwise distributed or put into use by
the Company or any of its Subsidiaries, together will all services provided or
planned by the Company or any of its Subsidiaries, during the Executive's
employment.
<PAGE>
11. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
12. Assignment. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that in the event that the Company shall hereafter effect a reorganization,
consolidate with, or merge into, any other Person or transfer all or
substantially all of its properties or assets to any other Person, the Company
shall require such Person or the resulting entity to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it.
13. Severability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement, shall be in writing, and shall be
effective when delivered in person or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at its principal place of business, attention Chief Executive Officer and
President.
16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior and contemporaneous communications,
representations and understandings, written or oral, with respect to the terms
and conditions of the Executive's employment.
17. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by an expressly authorized
officer of the Company.
18. Governing Law, Arbitration and Consent to Jurisdiction. This is a
Vermont contract and shall be construed and enforced under and be governed in
all respects by the laws of the State of Vermont, without regard to the conflict
of laws principles thereof. The parties each agree to promptly and mutually
select a mediator and promptly mediate in good faith any controversy, claim or
dispute arising between the parties hereto arising out of or related to this
Agreement and its performance or any breach or claimed breach thereof. In the
event that mediation does not resolve any such matter, then such matter other
than any matter in which injunctive relief or other equitable relief is sought
shall be definitively resolved through binding
<PAGE>
arbitration conducted in the City of Burlington, Vermont, by a panel of three
(3) arbitrators in accordance with the then current Commercial Arbitration Rules
of the American Arbitration Association; provided, however, that notwithstanding
anything to the contrary in such Commercial Arbitration Rules, the parties shall
be entitled in the course of any arbitration conducted pursuant to this Section
to seek and obtain discovery from one another to the same extent and by means of
the same mechanisms authorized by Rules 27 through 37 of the Federal Rules of
Civil Procedure. The power and office of the arbitrators shall arise wholly and
solely from this Agreement and the then current Commercial Arbitration Rules of
the American Arbitration Association. The award of the panel or a majority of
them so rendered shall be final and binding, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereto.
To the extent a dispute is not to be arbitrated in accordance with the
foregoing, each of the Company and the Executive (i) irrevocably submits to the
jurisdiction of the United States District Court of Vermont and to the
jurisdiction of the state courts of Vermont (Washington Country superior,
district of Vermont) for the purpose of any suit or other proceeding arising out
of or based upon the Agreement or the subject matter hereof and agrees that any
such proceeding shall be brought or maintained only in such court, and (ii)
waives, to the extent not prohibited by applicable law, and agrees not to assert
in any such proceedings, any claim that it is not subject to the jurisdiction of
the above-named courts, that he or it is immune from extraterritorial injunctive
relief or other injunctive relief, that any such proceeding brought or
maintained in a court provided for above may not be properly brought or
maintained in such court, should be transferred to some other court or should be
stayed or dismissed by reason of the pendency of some other proceeding in some
other court, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
19. Other Obligations. Executive represents and warrants that neither
Executive's employment with the Company nor Executive's performance of his
obligations hereunder will conflict with or violate or otherwise are
inconsistent with any other obligations, legal or otherwise, which Executive may
have.
20. Cooperation. Following termination of employment with the Company,
Executive shall cooperate with the Company, as requested by the Company, to
affect a transition of Executive's responsibilities and to ensure that the
Company is aware of all matters being handled by the Executive.
21. Protection of Reputation. During the Agreement Term and thereafter,
Executive agrees that he will take no action which is intended, or would
reasonably be expected, to harm the Company or its reputation or which would
reasonably be expected to lead to unwanted or unfavorable publicity to the
Company.
22. Remedies For Breach. The parties hereto agree that Executive is
obligated under this Agreement to render personal services during the Agreement
Term of a special, unique, unusual, extraordinary and intellectual character,
thereby giving this Agreement peculiar value, and, in the event of a breach of
any covenant of Executive herein, the injury or imminent injury to
<PAGE>
the value and the goodwill of the Company's business could not be reasonably or
adequately compensated in damages in an action at law. Accordingly, Executive
expressly acknowledges that the Company shall be entitled to specific
performance, injunctive relief or any other equitable remedy against Executive,
without the posting of a bond, in the event of any breach or threatened breach
of any provision of this Agreement by Executive (including Sections 5, 6, and 7
hereof). Without limiting the generality of the foregoing, if Executive breaches
Section 5 or 6 or 7 hereof, such breach will entitle the Company to enjoin
Executive from disclosing any Confidential Information to any competing
business, to enjoin such competing business from receiving Executive or using
any such Confidential Information and/or to enjoin Executive from rendering
personal services to or in connection with such competing business. The rights
and remedies of the parties hereto are cumulative and shall not be exclusive,
and each such party shall be entitled to pursue all legal and equitable rights
and remedies and to secure performance of the obligations and duties of the
other under this Agreement, and the enforcement of one or more of such rights
and remedies by a party shall in no way preclude such party from pursuing, at
the same time or subsequently, any and all other rights and remedies available
to it.
23. Assistance in Proceedings, Etc. Executive shall, without additional
compensation, during and after expiration of the Agreement Term, upon reasonable
notice, furnish such information and proper assistance to the Company as may
reasonably be required by the Company in connection with any legal or
quasi-legal proceeding, including any external or internal investigation,
involving the Company or any of its affiliates or in which any of them is, or
may become, a party.
24. Survival. Cessation or termination of Executive's employment with
the Company shall not result in termination of this Agreement. The respective
obligations of Executive and the rights and benefits afforded to the Company as
provided in this Agreement shall survive cessation or termination of Executive's
employment hereunder. This Agreement shall not terminate upon, and shall remain
in full force and effect following, expiration of the Agreement Term and all
rights and obligations of the parties hereto as and to the extent provided
herein shall survive such expiration.
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by
its duly authorized officer, and by the Executive, as of the date first above
mentioned.
BEN & JERRY'S HOMEMADE, INC.
/s/Lawrence E. Benders /s/ Perry D. Odak
_______________________________ By: ____________________________
Lawrence E. Benders, Executive Perry D. Odak
Chief Executive Officer
IMPORTATION AND MARKETING AGREEMENT
This Agreement is made this December 19, 1997 by and among SEVEN-ELEVEN JAPAN
Co., Ltd., a Japanese corporation with its office at 1-4 Shibakoen 4-chome,
Minato-ku, Tokyo 105 Japan (hereinafter called "SEVEN-ELEVEN"), TOWER ENTERPRISE
Corporation, a Japanese corporation with its office at 6F Aoyama Sun Crest
Bldg., 13-5 Kita-Aoyama 2-chome, Minatoku, Tokyo 107 Japan (hereinafter called
"TOWER"), ATF Co., Ltd., a Japanese corporation with its office at 6F Aoyama Sun
Crest Bldg., 13-5 Kita-Aoyama 2-chome, Minato-ku, Tokyo 107 Japan (hereinafter
called "ATF") on the one hand, and BEN & JERRY'S HOMEMADE, Inc., a Vermont
corporation with its office at 30 Community Drive, South Burlington, Vermont
05403-6828 U.S.A. and BEN & JERRY'S HOMEMADE HOLDINGS, Inc., a Vermont
corporation with its office at #7 Burlington Square, Burlington, Vermont 05401
U.S.A.(hereinafter collectively called "B&J") on the other hand.
WHEREAS, SEVEN-ELEVEN, acting on behalf of the Ito-Yokado Group Companies (as
described in Annex 1 and hereinafter called "IY GROUP"), has appointed TOWER as
importer into Japan (hereinafter called the "TERRITORY") of certain ice cream
products (as defined in Article 2 of this Agreement and hereinafter called the
"PRODUCTS") manufactured by B&J in the United States; and
WHEREAS, TOWER, ATF and SEVEN-ELEVEN are affiliated companies: and
WHEREAS, TOWER, acting on behalf of IY GROUP, has agreed to import the PRODUCTS
and sell the PRODUCTS to ATF, which has been appointed by SEVEN-ELEVEN as the
vendor of the PRODUCTS; and
WHEREAS, ATF has agreed to act on behalf of IY GROUP in Japan to sell and
distribute the PRODUCTS for resale only in the convenience stores owned or
operated by SEVEN-ELEVEN and the outlets of IY GROUP in the TERRITORY; and
WHEREAS, B&J has agreed to produce and supply the PRODUCTS to be sold in the
TERRITORY by IY GROUP for resale only in the convenience stores owned or
operated by SEVEN-ELEVEN and the outlets of IY GROUP in the TERRITORY;
NOW THEREFORE, it is mutually agreed as follows:
Article 1. (Appointment and Status)
(1) B&J hereby agrees to produce and supply the PRODUCTS which will be
imported by TOWER and sold to ATF.
(2) SEVEN-ELEVEN hereby appoints TOWER as the importer of PRODUCTS on
behalf of IY GROUP in the TERRITORY for the purpose to sell the
PRODUCTS to ATF as the vendor appointed by SEVEN-ELEVEN. TOWER hereby
agrees to act as such importer.
(3) SEVEN-ELEVEN hereby appoints ATF as the vendor of the PRODUCTS on
behalf of IY GROUP in the TERRITORY for the sole purpose of sale and
distribution of the PRODUCTS for resale only in the convenience stores
owned or operated by SEVEN-ELEVEN and the stores of the IY GROUP in the
TERRITORY. ATF hereby agrees to act as such vendor.
<PAGE>
(4) B&J hereby agrees that all transactions with SEVEN-ELEVEN and the
stores of the IY GROUP will be executed through TOWER and ATF; however,
SEVEN-ELEVEN will be ultimately responsible for TOWER'S and ATF'S
actions and/or nonactions hereunder.
Article 2. (PRODUCTS)
In this Agreement, PRODUCTS means ice cream in 120ml cups and ice cream
novelties (as described in Article 4, sub paragraph 4 and such other products as
may be mutually agreed to), including their packaging bearing the trademarks of
B&J (as defined in Article 12), manufactured by B&J in compliance with quality
and technical specifications agreed upon between SEVEN-ELEVEN and B&J, and
further within the range of reasonable allowances. All parties will not
unreasonably withhold their approvals to any modifications of the specifications
proposed or requested by the other party(ies). Under no circumstances will
TOWER, IY GROUP, SEVEN-ELEVEN or ATF modify the PRODUCTS in any way, or modify
the packaging of the PRODUCTS in any way, without the prior written consent of
B&J.
Article 3. (Term)
(1) The term of this Agreement shall begin on and from the date of this
Agreement and end on March 31, 1999, unless sooner terminated pursuant
to Article 13 hereof. SEVEN_ELEVEN agrees to use its best efforts to
purchase 10,000,000 units or more during the first year for resale in
convenience stores in the TERRITORY. Either party may terminate this
Agreement effective at the end of the term or any renewal term by
giving notice to the other of its intention not to continue this
Agreement three (3) months prior to the expiration the term or any
renewal thereof; failure to so timely notify by either party will
constitute an extension of the term for another one (1) year term.
(2) In the event of termination of this Agreement at the end of the
term or any renewal term, or any sooner termination for any reason, B&J
will be freed and discharged, and the other parties to this Agreement
hereby expressly release and discharge B&J of and from any and all
obligations or liability whatsoever, arising hereunder or in connection
with any manner or thing relating to, or in any manner connected with,
the subject matter of this Agreement. The foregoing right of
termination and the additional right of non-renewal at the end of the
stated term are absolute, and neither B&J nor the other parties to this
Agreement will be liable to the other because of termination or
non-renewal hereof (whether with or without cause) for compensation,
reimbursement, or damages on account of the loss of prospective profits
on anticipated sales, or on account of expenditures, investments,
leases or commitments in connection with the business or good will of
B&J or the Japanese parties to this Agreement, or for any other reason
whatsoever. Nothing herein is intended to relieve any party from any
obligation to pay any unpaid balances for PRODUCTS ordered or shipped
hereunder prior to termination or expiration, unless such termination
or expiration is not caused by B&J.
<PAGE>
(3) Pursuant to the provisions of Article 3 Paragraph 1, the
termination of this Agreement will operate as a cancellation, as of the
date thereof, of all orders that have not been prepared by B&J for
shipment, and thereafter B&J will have no obligation with respect to
orders so cancelled.
Article 4. (Test Market)
(1) The parties intend to launch the sale of the PRODUCTS in Japan in
April 1998. Such launch date may be adjusted by mutual agreement of the
parties, but the parties agree to use their respective best efforts to
insure that the launch date is not unduly delayed.
(2) The parties will commence a Test Market study on or about January
5, 1998. The Test Market will consist of five different product items
or stock keeping units, with 2,000 units of PRODUCTS for each product
item, or 10,000 total units of PRODUCTS. The parties will jointly
decide which of SEVEN-ELEVEN's convenience stores will participate in
the Test Market and the appropriate retail price points for the
PRODUCTS in the Test Market.
(3) All Test Market data will be shared by SEVEN-ELEVEN with B&J.
(4) The Test Market flavors mutually agreed upon by the parties are (i)
Banana Chocolate Walnut, (ii) Vanilla & Nuts, (iii) Chocolate Brownie
Walnut, (iv) Coffee Chocolate Chunk and (v) Vanilla & Peaches.
(5) B&J has supplied SEVEN-ELEVEN with thirty (30) units of each of the
listed five flavors for internal testing.
(6) SEVEN-ELEVEN will conduct the Test Market in an efficient manner so
as to maximize the amount of useful information obtained from the Test
Market.
Article 5. (Purchase Transactions)
(1) After the Test Market, SEVEN-ELEVEN will give B&J and TOWER its
(SEVEN-ELEVEN'S) sales-plan of PRODUCTS by items. By no later than
February 6, 1998 SEVEN-ELEVEN will give B&J the first 90 day rolling
forecast for the 3 months beginning March 1, 1998. B&J will supply the
form and requirements for the rolling forecast. The first 60 days of
the forecast are non-cancelable and nonrescheduleable and the last 30
days of the forecast are non-cancelable but are rescheduleable. The
forecast will be updated each month beginning on April l, 1998 and will
be provided to B&J by the first Monday of each month. However, in the
event SEVEN-ELEVEN and/or ATF request for the increase of the ordered
quantity, B&J will use its best efforts to provide these quantities.
TOWER will place corresponding firm orders for the PRODUCTS in
individual purchase orders between B&J and TOWER.
<PAGE>
(2) The individual contracts of sale will become effective when the
written acceptance from B&J of the purchase order is issued by B&J.
(3) Delivery of all PRODUCTS to TOWER by B&J will be made on ex.
factory and / or ex distribution center basis at B&J's factory(ies) in
Vermont in the United States. Upon delivery to the shipper at B&J's
factory(ies) in Vermont, title to and all risks of loss or damage to
the PRODUCTS will pass to TOWER from B&J. Heat damage or other damage
caused by the shippers or occurring during shipment will be the sole
responsibility of TOWER and SEVEN-ELEVEN, and B&J will have no
responsibility therefor. SEVEN-ELEVEN has notified B&J that
SEVEN-ELEVEN has selected the firm of Itochu International Inc. of Los
Angeles, California to be SEVEN-ELEVEN's exclusive agent to ship the
PRODUCTS from Vermont to Japan.
(4) All costs of transporting, shipping and importing the PRODUCTS into
Japan, including any taxes, insurance premiums or costs, customs
duties, tariffs or other impositions, will be borne solely by TOWER and
SEVEN-ELEVEN.
(5) The items, prices and other specifications of each transaction
between B&J and TOWER will be as agreed upon by B&J and TOWER, subject
to the terms and conditions of this Agreement. SEVEN-ELEVEN may provide
information and suggestions to TOWER or B&J regarding items, prices and
other specifications relating to the sale of PRODUCTS under this
Agreement.
Article 6. (Price and Payment)
(1) Prices applicable to any orders for PRODUCTS to be placed by TOWER
to B&J will be quoted in U.S. dollars. Payments for the PRODUCTS will
be in U.S. dollars. The parties mutually agree that the purchase price
of the PRODUCTS is US$0.61 per unit. This purchase price is predicated
on the Japanese Yen / US $ exchange rate being Y120 / US$1. The price
of $0.61 per unit will remain fixed up to Y126 and down to Y114. In the
event the Japanese Yen / US$ exchange rate fluctuates 10% above Y126 or
10% below Y114 then the parties agree to share (50%/50%) the said 10%.
Said purchase price will be subject to adjustment as provided for
below. If the fluctuation is more than 10% in either direction then the
parties agree to meet to discuss a mutually acceptable purchase price.
The US$0.61 constitutes the initial price.
(2) The price will be subject to review by the parties every six
months beginning September 1, 1998. If the parties cannot agree upon an
amendment to the price, then B&J will have no obligation to ship any
orders until the parties have mutually agreed upon the price for the
items in that order or upon renewing or amending the existing price.
(3) Payment by TOWER to B&J will be made by means of irrevocable
commercial letter of credit established by TOWER in a form reasonably
acceptable to B&J. This irrevocable commercial
<PAGE>
letter of credit will be payable at sight and be from a bank reasonably
acceptable to B&J. The letter of credit shall be in United States
dollars and in an amount equal to the purchase price of the PRODUCTS
ordered by SEVEN-ELEVEN and accepted by B&J. All associated charges are
for TOWER'S account. Each letter of credit will be opened and delivered
to B&J at the time the corresponding purchase order is placed with B&J.
(4) The parties have agreed that the Test Market purchase price for the
PRODUCTS will be sixty-one cents (US$0.61) per unit. The parties agreed
to equally (50%/50%) share the cost of the Test Market PRODUCTS
(US$0.61) and, air fares to ship the Test Market PRODUCTS to Japan.
Article 7. (Restrictions on Sale of PRODUCTS)
(1) If the Test Market is successful (as mutually agreed to by both
parties) and the launch date is in April, 1998, B&J agrees that it will
not sell the originally selected PRODUCTS items to any other
convenience store operator in the TERRITORY for a period of six (6)
months from the launch date.
(2) SEVEN-ELEVEN will have the right to ask B&J to extend the
exclusivity on the originally selected PRODUCTS in the convenience
store channel of distribution for an additional six (6) months only
provided that: (i) SEVEN-ELEVEN gives B&J notice of such intent no
later than sixty (60) days before the end of the first six (6) months'
period following the launch date, and (ii) the parties agree to a
minimum quantity guarantee of the purchase of specific units by
SEVEN-ELEVEN.
(3) SEVEN-ELEVEN agrees that all of IY GROUPS's requirements for the
PRODUCTS will be bought directly from B&J.
(4) TOWER will not sell the PRODUCTS to any third party or vendor other
than ATF, and ATF will act as the vendor of the PRODUCTS for IY GROUP
pursuant to Article 1, and shall not sell the PRODUCTS to any third
party except as specifically provided in this Agreement. SEVEN-ELEVEN
and IY GROUP will purchase the PRODUCTS only through ATF. Neither
SEVEN- ELEVEN nor TOWER nor ATF will export PRODUCTS outside of the
TERRITORY and said parties are expressly prohibited from soliciting
sales for the PRODUCTS outside of the TERRITORY. Said parties agree
that they will not distribute any PRODUCTS to any party or in any
manner dispose of any PRODUCT under circumstances where they know, or
in the exercise of prudent business judgment should know, that such
activity ultimately will result in the exporting of such PRODUCTS
outside the TERRITORY. This Agreement permits SEVEN-ELEVEN to
distribute the PRODUCTS only through its convenience stores, which are
owned by SEVEN-ELEVEN and/or operated by third parties under license
from SEVEN-ELEVEN and the outlets of the IY GROUP. This Agreement does
not permit any other distribution under any other channel of
distribution in the TERRITORY.
(5) SEVEN-ELEVEN will sell and distribute the PRODUCTS only for resale
through the SEVEN-ELEVEN convenience stores and IY GROUP oulets in the
TERRITORY.
<PAGE>
Article 8. (Business Secrecy)
(1) Each of the parties will not divulge or disclose to a third party
or parties any and all matters and information of a confidential nature
related to the terms of this Agreement, the Test Market, the business
transactions and the PRODUCTS, which have come to its knowledge through
transactions under this Agreement, including those which were known to
the respective parties at the time of the signing of this Agreement.
The provisions of this paragraph do not apply to matters or information
which are in the public domain and which any party otherwise procures
lawfully from other sources and has the right to disclose to other
parties.
(2) The obligations undertaken by the parties hereto pursuant to
Article 8(1) will survive termination of this Agreement and will remain
in effect and be binding on the parties hereto indefinitely after
termination of this Agreement.
Article 9. (Marketing)
(1) TOWER, SEVEN-ELEVEN and ATF agree to use their respective best
efforts to vigorously promote and achieve maximum sales of the PRODUCTS
in the TERRITORY and will use their best efforts to exploit and
service, and sell the maximum amount of PRODUCTS through SEVEN-ELEVEN's
convenience store and IY GROUP outlets in the TERRITORY.
(2) TOWER, SEVEN-ELEVEN and ATF will be responsible, at their own sole
expense and cost, to design, manufacture and place all point of
purchase displays and advertising materials for promotion of the
PRODUCTS in the SEVEN-ELEVEN convenience stores and IY GROUP outlets
located in the TERRITORY. All advertising, brochures, displays and
other marketing literature in any way relating to the PRODUCTS or using
the B&J MARKS will be subject to the prior written approval of B&J,
both with respect to copy and mode of use.
(3) SEVEN-ELEVEN and B&J will review annually the selection of PRODUCT
items and may mutually agree on substituting one or more new PRODUCT
items for the PRODUCT items designated in this Agreement.
(4) B&J will use its best efforts, subject to force majeure, to
manufacture sufficient quantities of the PRODUCTS, in accordance with
the mutually agreed specifications, to satisfy the market demands and
purchase requirements of the SEVEN-ELEVEN convenience stores and IY
GROUP outlets in the TERRITORY, as indicated to TOWER and B&J by
SEVEN-ELEVEN and ATF.
(5) B&J will be responsible for building of the B&J brand image and
awareness of PRODUCTS in the TERRITORY, either directly or through an
agent of B&J's choice.
(6) The parties acknowledge that B&J intends to distribute or license
for distribution its products, bearing or using the
<PAGE>
B&J MARKS, in the TERRITORY through third parties. TOWER, IY GROUP,
SEVEN-ELEVEN and ATF acknowledge that they have no exclusivity of any
kind, other than as specifically described in Article 7 of this
Agreement.
Articie 10. (Notices)
(1) Any notice between B&J and other Japanese parties in reference to
this Agreement shall be in writing in the English language.
(2) All notices, requests or other communications required or permitted
to be given hereunder shall be in writing and shall be sent by mail,
facsimile or e-mail to the other parties at their addresses set forth
below or to such other addresses as may from time to time be notified
by one party to the others. Any such notice, agreement or consent
dispatched by facsimile or e-mail shall be confirmed by registered mail
or any reliable courier service return receipt required.
To: SEVEN-ELEVEN
SEVEN-ELEVEN JAPAN Co., Ltd.
1-4 Shibakoen 4-chome, Minato-ku, Tokyo 105 Japan
Phone: 3-3459-6609
Facsimile: 3-3459-3766
E-mail:
To: TOWER
TOWER ENTERPRISE Corporation
6F AOYAMA SUN CREST Bldg.
13-5 Kita-Aoyama 2-chome, Minato-ku, Tokyo 107 Japan
Phone: 3-3497-5381
Facsimile: 3-3497-5383
E-mail:
To: ATF
ATF Corporation 6F AOYAMA SUN CREST Bldg.
13-5 Kita-Aoyama 2-chome, Minato-ku, Tokyo 107 Japan
Phone: 3-3497-1811
Facsimile: 3-3497-1825
E-mail:
To:B&J
BEN & JERRY'S HOMEMADE, Inc.
30 Community Drive
South Burlington, Vermont 05403-6828 U.S.A.
Phone: 802-651-9600
Facsimile: 802-651-9618
E-mail:
(3) All notices shall be deemed to have been given when duly
transmitted by facsimile or e-mail, or delivered by mail.
Article 11. (Warranty)
<PAGE>
(1) B&J warrants that the PRODUCTS will comply with quality and
technical specifications agreed upon among the parties to this
Agreement at the time such PRODUCTS are delivered to the shipper
ex-works of B&J in Vermont. If TOWER discovers a failure of the
PRODUCTS to meet such specifications and notifies B&J within sixty (60)
days after arrival of the PRODUCTS in Japan, then B&J, after confirming
such defect or failure was a result of a manufacturing defect, shall at
its own expense reimburse TOWER for the cost of the defective PRODUCTS,
or deliver replacement PRODUCTS, according to the request of TOWER,
unless such failure to meet such specifications was caused by the
negligence or other act of TOWER, IY GROUP, ATF, SEVEN-ELEVEN or any
transporter and/or other third party after delivery to the shipper in
Vermont. Notwithstanding the foregoing, TOWER retains the right to ask
B&J to replace PRODUCTS at cost, which contain foreign articles even
after the above 60 days.
(2) If any claim is made or any suit or action is instituted against
TOWER and/or IY GROUP in regard with the Product Liability or the
"Imperfection-based Liability" described in the Japanese Civil Code
No.570, B&J shall cooperate in the defense and the settlement of such
claim, suit or action. B&J will at its own expense indemnify and hold
harmless TOWER and IY GROUP from and against any and all losses,
damages, claims and related cost (including reasonable attorney's fees)
arising out of the defective manufacture of the PRODUCT unless such
claim, suit or action arises from the negligence or other act of TOWER,
IY GROUP, ATF, SEVEN-ELEVEN or any transporter and/or other third party
after delivery to the shipper in Vermont, in which case TOWER and IY
GROUP will at their own expense indemnify and hold harmless B&J from
and against any and all losses, damages, claims and related cost
(including reasonable attorney's fees).
(3) The obligations of the parties in this Article 11 will survive
cancellation, termination, rescission or expiration of this Agreement.
Article 12. (Trademarks and Other Rights)
(1) B&J represents and warrants that its current and future trademarks,
designs, logo-marks and other industrial property rights (as described
in Annex 3 and hereinafter collectively called "B&J MARKS") are and
will be legal for TOWER to use in the TERRITORY in connection with the
sale and distribution of the PRODUCTS during the term of this
Agreement, and TOWER, to the best of B&J's knowledge and belief, is
free from any infringement of patent, design, trademark, copyright or
other industrial property right of any third party. Annex 3 will be
modified from time to time by B&J upon the creation and/or registration
of new or current B&J MARKS. Notwithstanding the foregoing, nothing
herein shall be construed as granting to the Japanese parties to this
Agreement a license to use the B&J MARKS or any other trademarks or
trade names of B&J.
(2) B&J will at its own expense register and hold all legal rights of
and to the B&J MARKS. TOWER and SEVEN-ELEVEN will
<PAGE>
cooperate with B&J to protect and defend the B&J MARKS in accordance
with any request from B&J. TOWER, IY GROUP, SEVEN-ELEVEN and ATF
acknowledge that B&J is the sole owner of the B&J MARKS, that they will
not use or claim any rights in the B&J MARKS, except for the purpose of
the sale, promotion and distribution of the PRODUCTS as permitted in
this Agreement, and that they will not license, sublicense or register
the B&J MARKS in the TERRITORY or any other location or jurisdiction.
(3) The B&J MARKS will not be used by TOWER, IY GROUP, SEVEN-ELEVEN
and/or ATF in any manner with any products of any nature manufactured
or sold by or on behalf of TOWER, IY GROUP, SEVEN-ELEVEN and/or ATF,
except for the PRODUCTS manufactured by B&J and sold to TOWER and
SEVEN-ELEVEN under this Agreement.
(4) Whether or not B&J succeeds in obtaining registrations of any or
all of the B&J MARKS in the TERRITORY, all of the other parties to this
Agreement acknowledge B&J's proprietary rights therein and undertake
not to do anything, during or after the term of this Agreement, which
could adversely affect such proprietary rights or the distinctiveness
of the aforesaid trademarks. TOWER, IY GROUP, SEVEN-ELEVEN and ATF
agree that they will not use or display the B&J MARKS in product
literature, or in connection with the sale, promotion or distribution
of the PRODUCTS at trade shows or elsewhere, or in any other manner,
which has not received the prior written approval of B&J.
(5) If TOWER and/or SEVEN-ELEVEN discover any infringement or improper
use of the B&J MARKS, TOWER and SEVEN-ELEVEN will give prompt notice to
B&J of such infringement or improper use.
(6) The right of TOWER, ATF and/or IY GROUP to sell, promote and
distribute the PRODUCTS under this Agreement, using the B&J MARKS as
permitted under this Agreement, will survive the cancellation,
termination, rescission or expiration of this Agreement for a period of
time not to exceed one hundred eighty (180) days after such
cancellation, termination, rescission or expiration until the PRODUCTS
purchased from B&J and remaining in stock of TOWER, ATF and/or IY GROUP
are sold out.
Article 13. (Termination)
(1) B&J may terminate this Agreement by giving a written notice to
TOWER in the event:
i) if TOWER, IY GROUP, ATF or SEVEN-ELEVEN becomes
insolvent or any voluntary or involuntary petition
in bankruptcy or for corporate reorganization is
filed by or against any such party, or a receiver
is appointed with respect to any of the assets of
any such party, or liquidation proceedings are
commenced by or against any such party; or
ii) if any such party defaults in any of the
provisions of this Agreement and does not remedy
the default within thirty (30) days after a
written notice is given requesting that the
<PAGE>
default be remedied.
(2) TOWER or SEVEN-ELEVEN may terminate this Agreement by giving a
written notice to B&J in the event:
i)if B&J becomes insolvent or any voluntary or
involuntary petition in bankruptcy or for
corporate reorganization is filed by or against
B&J, or a receiver is appointed with respect to
any of the assets of B&J, or liquidation
proceedings are commenced by or against B&J; or
ii) if B&J defaults in any of the provisions of
this Agreement and does not remedy the default
within thirty (30) days after a written notice is
given requesting that the default be remedied.
Article 14. (Assignment)
No party to this Agreement will assign, pledge or otherwise dispose of its
rights, or delegate its duties, under this Agreement without the prior written
consent of the other parties to this Agreement.
Article 15. (Other provisions)
(1) This Agreement constitutes the entire agreement in respect of the
business hereby contemplated by and among the parties hereto, and
supersedes all previous agreements, negotiations and commitments in
respect thereto. This Agreement will be binding on affiliates of TOWER,
SEVEN-ELEVEN and ATF.
(2) The failure of any party hereto to enforce any of the provisions of
this Agreement or to exercise any right hereunder shall not constitute
a waiver of the same or prejudice its right to enforce the same
thereafter.
(3) No party will be in default under this Agreement by reason of its
delay in the performance of or failure to perform any of its
obligations hereunder if the delay or failure is caused by strikes,
acts of God or the public enemy, riots, incendiaries, interference by
civil or military authorities, compliance with governmental laws, rules
or regulations, delays in transit or delivery, inability to secure
governmental priorities for materials, or any fault beyond its control
or without its fault or negligence.
(4) The relationship between B&J and the other parties to this
Agreement is that of Licensor/vendor and Licensee/vendee. Under no
circumstances will TOWER, SEVEN-ELEVEN or ATF be deemed to be agents or
representatives of B&J, nor will any of them have the right to enter
into any contracts or commitments in the name of B&J or otherwise to
bind or commit B&J.
<PAGE>
(5) This Agreement will be modified only by mutual consent in writing
of subsequent date signed by the duly authorized representatives of
each party to this Agreement.
(6) TOWER and SEVEN-ELEVEN will obtain any and all approvals, licenses,
FTC (Japan) approvals or consents, and satisfy any and all other legal
requirements to enter into this Agreement, import and transport the
PRODUCTS into the TERRITORY, and sell, promote and distribute the
PRODUCTS in the TERRITORY as provided for or contemplated in this
Agreement.
(7) The English language shall govern this Agreement, and will be used
in any legal or dispute resolution proceedings among the parties
relating to this Agreement.
(8) All disputes arising from the signing of or in connection with this
Agreement will be settled by negotiations of the parties during a
period of thirty (30) days after such dispute arises. If the parties
cannot reach a negotiated settlement within such thirty-day period,
then all disputes, differences, or questions between any of the parties
concerning the construction, interpretation and effect of this
Agreement or any clause in this Agreement, or the rights and
liabilities of the parties, will be settled by binding arbitration.
Either party may send to the other party a notice asking for
arbitration and appointing its arbitrator. Within one (1) month, the
other party or parties will indicate the name of its own arbitrator,
failing which, an arbitrator will be appointed by the President of the
respective arbitration associations. The two arbitrators so appointed
will meet within one (1) month after the appointment of the last
arbitrator. If they do not agree as to their decision, they will choose
a third arbitrator, and if they do not agree within one (1) month on
the choice of that arbitrator, the third arbitrator will be appointed
by the President of the respective arbitration associations. The
decision will be made by a majority of the arbitrators. The arbitration
will take place in New York, New York (U.S.A.), in cases where such
disputes are initiated against B&J and in Tokyo, Japan when such
disputes are initiated against those parties in Japan. If the
arbitration takes place in New York, the American Arbitration
Association rules and procedures will be used and if the arbitration
takes place in Tokyo, the Japan Commercial Arbitration Association
rules and procedures will be used. In either case the laws of the Sate
of Vermont and/or the United States will be used in reaching a
decision. The decision of the arbitrators will be final. The
arbitrators will attempt to avoid a general hearing. The parties agree
that each party shall bear the expense of its own arbitrator, and that
the parties will split the expense of any third arbitrator. Legal
expenses of each party will be borne by that party, but the arbitrators
will have the discretion (but not the obligation) to award legal fees
to the prevailing party in the arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
quadruplicate on the day and year first above written.
BEN & JERRY'S HOMEMADE, INC. SEVEN-ELEVEN JAPAN CO., LTD.
/s/ Perry D. Odak /s/ Katsuhiko Ikeda
CEO Senior Managing Director
- ---------------------------- ----------------------------
TOWER ENTERPRISE CORPORATION ATF CO. LTD.
/s/ Hideo Takai /s/ Masao Kono
President General Manager
- ---------------------------- ----------------------------
<PAGE>
ANNEX 1
As ANNEX I to the "Importation and Marketing Agreement" dated December 19, 1997,
wherein the Parties describe the "IY GROUP" as follows:
Seven-Eleven Japan Co., Ltd. (Convenience Store)
Ito-Yokado Co., Ltd. (Superstore)
Robinson's Japan Co., Ltd. (Department Store)
York Mart Co., Ltd. (Supermarket)
York-Benimaru Co., Ltd. (Supermarket)
Denny's Japan Co., Ltd. (Restaurant)
York Bussan Co., Ltd. (Quick Serve Restaurant)
This Annex 1 is executed this day of December 19, 1997.
BEN & JERRY'S HOMEMADE, INC. SEVEN-ELEVEN JAPAN CO., LTD.
/s/ Perry D. Odak /s/ Katsuhiko Ikeda
CEO Senior Managing Director
- ---------------------------- ----------------------------
TOWER ENTERPRISE CORPORATION ATF CO. LTD.
/s/ Hideo Takai /s/ Masao Kono
President General Manager
- ---------------------------- ----------------------------
Exhibit 21.1
Ben & Jerry's Homemade, Inc.
Subsidiaries
Percentage of
Jursidiction Voting Stock Owned
Name of Subsidiary of Incorporation by Registration
Ben & Jerry's Canada (1992), Inc. Canada 100%
Ben & Jerry's Children's Center, Inc. Vermont 100%
Ben & Jerry's Homemade, Ltd. United Kingdom 100%
Ben & Jerry's Homemade (FSC), Inc. Barbados 100%
Ben & Jerry's Homemade Holdings, Inc. Vermont 100%
Ben & Jerry=s of New York New York 100%
Ben & Jerry's France SARL France 100%
Ben & Jerry=s International, Inc. Delaware 100%
Ben & Jerry's Franchising, Inc. Vermont 100%
Exhibit 23.0
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-9420, 33-17594 and 33-64421) of Ben & Jerry's Homemade, Inc.
of our report dated January 23, 1998, with respect to the consolidated financial
statements and schedule of Ben & Jerry's Homemade, Inc. included in this Annual
Report (Form 10-K) for the year ended December 27, 1997.
ERNST & YOUNG LLP
Boston, Massachusetts
March 24, 1998
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