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 26, 1998
[ ]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: 802/846-1500
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
Class A Common Stock Purchase Right
Class B Common Stock Purchase Right
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 $130,577,185 and $4,886,336
respectively, at March 5, 1999.
At March 5, 1999, 6,250,209 shares of the Company's Class A Common Stock and
818,951 shares of the Company's Class B Common Stock were outstanding.
Page 1 of 146 pages. Exhibit Index appears on page 30.
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BEN & JERRY'S HOMEMADE, INC.
1998 FORM 10-K ANNUAL REPORT
Table of Contents
PAGE
Item 1. Business............................................................1
Item 2. Properties.........................................................11
Legal Proceedings..................................................12
Item 4. Submission of Matters to Vote of Security Holders..................12
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ...........................................................12
Item 6. Selected Financial Data............................................13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................14
Item 7A. Market Risk........................................................22
Item 8. Financial Statements and Supplementary Data........................22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................22
Item 10. Directors and Executive Officers of the Company....................22
Item 11. Executive Compensation.............................................25
Item 12. Security Ownership of Certain Beneficial Owners and Management.....26
Item 13. Certain Relationships and Related Transactions.....................28
Item 14. Exhibits, Financial Statements, Financial Statement Schedules, and
Reports on Form 8-K................................................31
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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 is committed to using milk and cream that have not been treated with the
synthetic hormone, rBGH. 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, being 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 1998,
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, the United Kingdom, France, Israel,
Canada, The Netherlands, Belgium, Japan and, commencing in 1999, Peru and
Lebanon. 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 Jerry Greenfield, now the
Company's Chairperson, and Ben Cohen, 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 frozen desserts, 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 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 its progressive values.
The Company makes cash contributions equal to 7.5% 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,
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and through corporate grants. Excluded from the 7.5% 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 1998, the 7.5% amounted to approximately
$792,600. 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 during 1998 paid the Vermont-based band Phish $200,482 in
royalties. The band established the Water Wheel Foundation to support the
protection and preservation of Lake Champlain.
Ben & Jerry's maintains a special tie to the Vermont community in which it has
its origins. The Company donates product to public events and community
celebrations in the Vermont area. As already noted, Community Action Teams at
each site make grants in Vermont. 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, Classified Board of Directors,
Vermont Legislation and Shareholders' Rights Plans."
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 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 a rBGH-free dairy supply. The Company
will continue to offer a premium to the Co-op for member farms that do not use
rBGH.
In 1992, the Company became a signatory to the CERES Principles 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
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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. In February
1996, the Company introduced lactose-free and cholesterol-free sorbet. In 1997,
Ben & Jerry's introduced a new line of low fat ice cream. In 1998 the Company
introduced nine new flavors and two new novelty products.
Based on information provided by Information Resources, Inc., a software and
marketing information services company ("IRI"), the Company believes 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 $446 million in 1998 compared with about
$428 million in 1997. 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 ("overrun") during the freezing process. The approximate fat
content is 15% (excluding add-ins). The approximate overrun 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, beet sugar, non-fat milk solids, egg
yolks and natural stabilizers.
Ben & Jerry's frozen yogurt is a high quality frozen yogurt with approximately
2% fat (excluding add-ins) and approximately 30% overrun. The fat content of
frozen yogurt comes from the cream used in the base mix. All frozen yogurt
products are sweetened with beet sugar and corn syrup. The Company uses cultured
yogurt in the manufacturing of our frozen yogurt dessert products, purchased
from yogurt manufacturers who use Vermont dairy ingredients.
Ben & Jerry's fruit sorbets are fat free frozen desserts with an overrun of
approximately 20%. The chocolate sorbet is a low fat product with approximately
2% fat (from cocoa and chocolate liquor). All sorbets are sweetened with beet
sugar and corn syrup. The water used to manufacture sorbet is Vermont Pure(TM)
Spring Water.
In 1997 and 1998, 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 three grams of fat and 40% overrun. The product line offers exciting flavor
combinations, chunks of candy, and swirls of variegates with extraordinary
flavor.
In 1999, the Company introduced a new line of frozen smoothies. Frozen
Smoothies(TM) is a four item line of innovative healthy treats that take
smoothies from the juice bar to the freezer.
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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 the Company purchases). To date,
the Company has not 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 allows 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 S'mores(TM) Bars.
In 1997, the Company entered into a license agreement with Paul Newman and
Newman's Own(TM) to manufacture and market a line of premium plus ice cream
products under the brand name "Newman's Own." These products are currently
manufactured at the Company's 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 Gary Trudeau and Andrews McMeel
Universal with respect to the Company's Doonesberry(R) flavor of the sorbet line
of products; Wavy Gravy for the flavor Wavy Gravy; with Phish Merchandising,
Inc. with respect to Phish Food(TM), and Phish Stick(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'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. The
Company manufactures Ben & Jerry's super premium ice cream, frozen yogurt and
sorbet in packaged pints and single serve containers at its St. Albans, Vermont
plant. The Company generally operates its plants two shifts a day, five or six
days per week, depending upon demand requirements.
Markets and Customers
The Company markets packaged pints, quarts, single-serve containers 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 6 Company-owned) Ben & Jerry's "scoop shops", through restaurants and food
service accounts (i.e. stadiums, airports, cafeterias, hotels, etc.).
Ben & Jerry's products are distributed through independent 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.
In late August 1998 - January 1999, Ben & Jerry's redesigned its distribution
network to create more Company control over sales and more efficiency in the
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distribution of its products. Under the redesign, Ben & Jerry's will increase
direct sales calls by its own sales force (as distinguished from calls by the
distributors' sales forces) to all grocery and chain convenience stores and will
have a network where no distributor of Ben & Jerry's products will have a
majority percentage of the Company's distribution. Under the distribution
network redesign which will commence in April-May 1999 and will be fully
effective September 1, 1999, The Pillsbury Company ("Pillsbury") will distribute
Ben & Jerry's products in specified territories; the balance of domestic
deliveries will be distributed primarily by Dreyer's Grand Ice Cream, Inc.
("Dreyer's"), with Dreyer's handling a smaller volume (than before) of Ben &
Jerry's distribution in other specified territories, and in part by other
independent regional distributors, most of whom are already acting as
distributors for Ben & Jerry's. The Company presently expects that, under the
redesign, no single distributor would handle over 40% of Ben & Jerry's
distribution, as compared with Dreyer's distribution activities accounting for
approximately 57% of the Company's net sales in 1998 and 1997.
Pursuant to the distribution network redesign Ben & Jerry's entered into an
agreement with Pillsbury which, as amended in January 1999, provides for
distribution on a non-exclusive basis by Pillsbury, the parent of Haagen-Daz, a
major competitor of Ben & Jerry's products in various areas of the United States
on September 1, 1999, including certain areas commencing April - May 1999. The
agreement with Pillsbury may not be terminated (except for cause) by Pillsbury
or Ben & Jerry's until an effective date in the year 2003. The agreement further
provides that Ben & Jerry's may earlier terminate without cause by making
certain specified payments and it contains additional provisions relating to any
termination upon a change in control of either party. The use of
sub-distributors by Pillsbury is limited under the Agreement.
In January 1999, the Company concluded a new distribution agreement, also on a
non-exclusive basis, with Dreyer's, effective for distribution commencing
September 1, 1999. This agreement pertains to a smaller geographic area than
that which is covered under the present distribution agreement and is on terms
and conditions different in some respects from those applicable under the
present distribution agreement. The terms as to the prices received by the
Company from Dreyer's purchases of the Company's ice cream products are in line
with the new Agreement the Company entered into with Pillsbury, and are expected
to be more favorable to the Company.
The new agreement with Dreyer's may be terminated by either party on not less
than six months' notice except that no such notice may be given during the
months of October - March in any year. The present agreement gives Dreyer's
certain territorial exclusivity, limits the sale by Dreyer's of competitive
products (Dreyer's brands and certain brands of other ice cream competitors),
and contains provisions for payment by the terminated party in the event of a
change in control of the terminated party, the present agreement, as amended in
January 1999, will remain in place until distribution under the new agreement
with Dreyer's becomes effective as to certain territories in April - May 1999
and as to most of the territories on September 1, 1999.
The litigation filed by Dreyer's against the Company in September 1998
challenging the effective date of the Company's August 31, 1998 notice of
termination of the present agreement with Dreyer's was resolved by stipulation
of dismissal, with prejudice, of that litigation, and without any payments, in
connection with the January 1999 amendment of the present agreement and the
signing of the new agreement with Dreyer's.
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.
The Company believes that the recent distribution network redesign will give it
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more control over the Company's distribution. However, due to the consolidations
in the distribution arena, available distribution alternatives are limited.
Accordingly, there can be no assurance that such difficulties with distributors,
which may be related to actions by the Company's distributors, which include
competitors of the Company in the marketplace (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." The new agreement with Dreyer's contains a
standstill provision whereby Dreyer's has agreed, subject to certain exceptions,
not to acquire or seek to acquire Ben & Jerry's or stock in Ben & Jerry's.
Marketing
Ben & Jerry's marketing is characterized by a strategic discipline that
continues to build brand equity, a solid reputation for the Company, and most
importantly, profitable customer relationships.
Ben & Jerry's marketing strategies remain consistent with the Company's
three-part mission. Building on Ben & Jerry's significant brand name
recognition, the Company continues to emphasize the high quality, natural
ingredients in its products while highlighting its non-traditional image in
innovative packaging, sales materials, promotional and radio campaigns.
Ben & Jerry's continues to facilitate brand awareness by focusing its marketing
efforts on communicating the Company's unique business approaches via Public
Relations Campaigns designed to generate unpaid newspaper, magazine, radio and
TV news coverage. Company founders, Ben Cohen and Jerry Greenfield, continue to
make personal appearances on TV, radio and at select marketing events covered by
the print and broadcast media.
The media played a significant role in the introduction of the Company's new
products in 1998. Ben & Jerry's April Fool's Day promotion for it's new flavor,
Dilbert's World(TM) Totally Nuts(TM) successfully garnered media exposure and
generated significant consumer interest in the flavor.
Additional media opportunities in 1998 include placement of the Company's
products in popular sitcoms and exclusive national sponsorship of the film, "Man
With A Plan," starring Fred Tuttle - the first independently produced movie from
Vermont ever distributed by the Public Broadcasting Service.
1998 marked the implementation of a new package design for Ben & Jerry's
flavors. The package was restyled to communicate the quality of Ben & Jerry's
products and make them easier to shop, while retaining a sense of fun and humor.
Ben & Jerry's conducts guided tours of its facility in Waterbury, Vermont to
approximately 300,000 visitors annually, making it the single most popular
tourist attraction in the State.
Company-sponsored annual events include the "One World, One Heart" Festival and
the Ben & Jerry's Folk Festival in Newport, Rhode Island. These events are
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accompanied by ice cream sampling and social activism, promoting customer
loyalty and support for the Company's future product introductions.
Franchise shops are an integral part of the Company's marketing effort and their
activity on the local level contributes to the Company's three-part mission. The
Company's 1998 reintroduction of the Ben & Jerry's Scoop Truck program in five
key markets provided an opportunity to distribute new product samples while
supporting customer interaction.
Franchise Program
As of December 26, 1998, there were 147 North American Franchise and Satellite
scoop shops compared to 135 Franchise and Satellite scoop shops as of December
27, 1997. In addition to our traditional Franchise and Satellite locations, the
Company has five PartnerShop(R) Franchises and 19 Featuring Franchises. A
PartnerShop(R) Franchise is a franchise scoop shop, which is awarded to a
not-for-profit organization. A Featuring Franchise is a business that has a
scoop shop within its location, much like a store within a store. These scoop
stations are often found in airports, stadiums, college campuses and similar
venues. In the beginning of 1999, the Company began offering another franchise
concept, Scoop Station Franchise. These locations will be located in businesses
and will be serviced from a pre-fabricated unit with a small product offering.
At year-end, there were six company-owned scoop shops: three in Vermont and
three new locations in Paris, France. Internationally, there are nine Ben &
Jerry's franchised scoop shops in Israel; four in Canada; four in the
Netherlands; and one in Lima, Peru.
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.
PartnerShop(R) franchises are arrangements that permit not-for-profit
organizations to own franchised scoop shops that serve as an employment resource
and potentially a source of revenue for the not-for-profit groups. The Company
waives the normal franchisee fee of $30,000. In addition the Company provides
expertise in the start-up and operation of the PartnerShop(R).
The Company has assorted franchise concepts that include traditional shops in a
variety of settings, five PartnerShop(R) Featuring Franchises and Scoop Station
Franchises. Franchise Agreements generally have initial terms of five to ten
years and renewal terms. Ben & Jerry's franchise scoop shops sell 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. The Scoop Station is a limited concept
with a smaller menu offering at a reduced term.
International
The Company regularly investigates the possibilities of entering new markets.
Ben & Jerry's ice cream products are now distributed internationally in the
United Kingdom and Israel and are available in parts of Japan, Ireland, France,
Canada, the Netherlands, Belgium, Peru and Lebanon.
In 1992, the Company repurchased the Canadian rights to Ben & Jerry's products
that it had previously licensed in 1987. In May 1998, the Company signed a
non-exclusive licensing agreement with Delicious Alternative Desserts, LTD, to
manufacture, sell and distribute Ben & Jerry's products through the wholesale
distribution channels in Canada for royalty payments based upon a percentage of
the licensee's sales. This agreement is for a five-year period with a renewal
option. In connection with this agreement, the Company received 4,000,000 Common
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Shares of Delicious Alternative Desserts, LTD. which represents approximately 8%
of total issued outstanding common shares on a fully diluted basis, and the
right to designate one director.
In 1987, the Company granted an exclusive license to manufacture and sell Ben &
Jerry's ice cream in Israel, and in March 1999, the Company made an investment
in the Israeli licensee, which gave the Company a 60% ownership interest.
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. Following a
test market, the product was launched in 1998.
Competition
The super premium ice cream, frozen yogurt and sorbet business is highly
competitive, 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-Daz Company, Inc. Other
significant frozen dessert competitors are Dannon, Columbo, Healthy Choice and
Starbucks (distributed by Dreyer's). Haagen-Daz, 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-Daz has a significant share
of the markets that the Company has entered in recent years. Haagen-Daz has also
entered substantially more foreign markets than the Company (including certain
markets in Europe and the Pacific Rim). Haagen-Daz and certain other competitors
also market flavors using pieces of cookies and candies as ingredients. As part
of Ben & Jerry's distribution network redesign, Pillsbury will become a
principal distributor for the Company's products.
In the ice cream novelty segment, the Company competes with several well-known
brands, including Haagen-Daz 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.
During 1998, the premium category again experienced increased promotional
activity driven by the national competition between Dreyer's Grand Ice Cream,
Inc., a principal distributor for the Company, and Breyer's Ice Cream (owned by
Unilever, a large international food company). In accordance with Dreyer's
strategic 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 Starbucks and Portofino brands. 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.
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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 certain 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 was 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 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.
All the plants pre-treat 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 marks Ben & Jerry's, Ben and Jerry's Portrait, Chubby Hubby, Chunky Monkey,
Cool Britannia, Dastardly Mash, Hunka Hunka Burnin' Fudge, New York Super Fudge
Chunk, One World One Heart, PartnerShop, Peace Pop and Vermont's Finest are
registered trademarks of the Company.
Cherry Garcia(R), Phish Food(TM), Wavy Gravy, Doonesberry(R), Heath(R), and
Dilbert's World(TM) are Ben & Jerry's proprietary flavor names and are licensed
to the Company.
Employees
At December 26, 1998, Ben & Jerry's employed 751 people including full-time,
part-time and temporary employees. This represents a 2% increase from the 736
people employed by the Company at December 27, 1997.
During 1998, a union organizing effort took place at the Company's St. Albans,
Vermont plant within the Maintenance Department. Nineteen hourly maintenance
employees, by a majority vote, agreed to be represented by the International
Brotherhood of Electrical Workers (IBEW). The Company is currently in contract
negotiations with IBEW.
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 grassroots social change organizations.
<PAGE>
In October 1985, pursuant to stockholder authorization, the Company issued to
the Foundation all of the 900 authorized shares 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,
Classified Board of Directors, Vermont Legislation and Shareholder Rights Plans.
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 as such, 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. Jerry Greenfield (Chairperson and a
director of the Company), Mr. Ben Cohen (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 5, 1999, these three principal
individual stockholders held shares representing 46% 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 issue
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. 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.
<PAGE>
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.
Also, in April, 1998 the Legislature of the State of Vermont amended a provision
of the Vermont Business Corporation Act to provide that the directors of a
Vermont corporation may also consider, in determining whether an acquisition
offer or other matter is in the best interests of the corporation, the interests
of the corporation's employees, suppliers, creditors and customers, the economy
of the state in which the corporation is located and including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation. Also, in August, 1998, following approval by
its Board of Directors, the Company put in place two Shareholder Rights Plans,
one pertaining to the Class A Common Stock and one pertaining to the Class B
Common Stock. These Plans are intended to protect stockholders by compelling
someone seeking to acquire the Company to negotiate with the Company's Board of
Directors in order to protect stockholders from unfair takeover tactics and to
assist in the maximization of stockholder value. These Rights Plans, which are
common for public companies in the United States, may also be deemed to be
"anti-takeover" provisions in that the Board of Directors believes that these
Plans will make it difficult for a third party to acquire control of the Company
on terms which are unfair or unfavorable to the stockholders.
The Class B Common Stock, the Class A Preferred Stock, the Classified Board of
Directors and the Shareholder Rights Plans 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 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.
The Company believes that these provisions of the Articles of Association, the
amendment to the Vermont Business Corporation Act and the Shareholder Rights
Plans, 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 these items 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.
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
<PAGE>
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 are subject to various liens securing a portion of the Company's
long-term debt.
The Company owns a 42-acre site in St. Albans, Vermont on which it operates a
92,000 square foot manufacturing facility.
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.
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 and Paris, France, and its corporate offices in the United
Kingdom, France and Japan. The Company owns three single-family houses, which
are situated on land adjacent to its manufacturing facility in Waterbury.
The Company believes that all of its facilities are well maintained and in good
repair.
ITEM 3. LEGAL PROCEEDINGS
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 1998.
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 29, 1996 through March 5, 1999, the high and low closing sales prices
of the Company's Class A Common Stock for the periods indicated.
High Low
1997
First Quarter $ 14 3/8 $ 10 7/8
Second Quarter 14 1/2 11
Third Quarter 14 1/2 12
Fourth Quarter 18 3/4 12 1/4
1998
First Quarter $ 19 $ 14
Second Quarter 21 1/8 17
Third Quarter 19 7/8 13 1/16
Fourth Quarter 23 7/8 14 7/8
1999
First Quarter through March 5, 1999 $ 24 5/16 $ 21 3/8
<PAGE>
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 Common Stock thereby sold.
As of March 5, 1999 there were 10,202 holders of record of the Company's Class A
Common Stock and 2,025 holders of record of the Company's Class B Common Stock.
Item 6. Selected Financial Data
The following table contains selected financial information for the Company's
fiscal years 1994 through 1998.
Summary of Operations (In thousands except per share data)
<TABLE>
<CAPTION>
Fiscal Year
1998 1997 1996 1995 1994
--------- --------- --------- --------- ------
<S> <C> <C> <C> <C>
Net sales $209,203 $ 174,206 $ 167,155 $ 155,333 $ 148,802
Cost of sales 136,225 114,284 115,212 109,125 109,760
Gross profit 72,978 59,922 51,943 46,208 39,042
Selling, general & administrative expenses 63,895 53,520 45,531 36,362 36,253
Asset write-down(1) 6,799
Other income (expense) - net 693 (118) (77) (441) 228
Income before income taxes 9,776 6,284 6,335 9,405 (3,762)
Income taxes 3,534 2,388 2,409 3,457 (1,893)
Net income 6,242 3,896 3,926 5,948 (1,869)
Net income (loss) per share -diluted $ 0.84 $ 0.53 $ 0.54 $ 0.82 $(0.26)
Shares outstanding -diluted 7,463 7,334 7,230 7,222 7,148
Balance Sheet Data:
Fiscal Year
1998 1997 1996 1995 1994
--------- --------- --------- --------- ------
Working capital $ 48,381 $ 51,412 $ 50,055 $ 51,023 $ 37,456
Total assets 149,501 146,471 136,665 131,074 120,296
Long-term debt and capital lease obligations 20,491 25,676 31,087 31,977 32,419
Stockholders' equity(2) 90,908 86,919 82,685 78,531 72,502
</TABLE>
1 Write-down of assets - In 1994, the Company replaced certain of the software
and equipment installed at the plant in St Albans, Vermont. The loss from the
write-down of the related assets included a portion of the previously
capitalized interest and project management costs.
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 1998 1997 1996
Fiscal Year Compared Compared Compared
1998 1997 1996 To 1997 To 1996 To 1995
---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 20.1% 4.2% 7.6%
Cost of sales 65.1 65.6 68.9 19.2 (0.8) 5.6
----- ------ ------ ------ ----- ---
Gross profit 34.9 34.4 31.1 21.8 15.4 12.4
Selling, general and
administrative expense 30.5 30.7 27.2 19.4 17.5 25.2
Other income(expense) 0.3 (0.1) 0.1 687.3 53.2 (82.5)
----- ------- ----- ----- ---- ------
Income before income taxes
4.7 3.6 3.8 55.6 (0.8) (32.6)
Income taxes 1.7 1.4 1.5 48.0 (0.9) (30.3)
----- ----- ----- ----- ----- ------
Net income 3.0% 2.2% 2.3% 60.2% (0.8)% (34.0)%
===== ===== ===== ====== ====== ======
</TABLE>
Net Sales
Net sales in 1998 increased 20.1% to $209 million from $174 million in 1997.
Domestic pint volume increased 10% compared to 1997, which was primarily
attributable to the Company's original line of products. This volume increase
was combined with a price increase of 3% on pints sold to distributors that went
into effect in July 1998. Unit volume of 2 1/2 gallon bulk container products
increased 17% compared to the same period in 1997. Also contributing to the
increase in sales for 1998 was the launch of the Company's new single serve
products in Japan and the introduction of a new line of premium plus ice cream,
Newman's Own(TM) All Natural Ice Cream, manufactured and sold under a license
agreement with Paul Newman and Newman's Own(TM).
Packaged sales (primarily pints) represented approximately 81% of total net
sales in 1998, 84% of total net sales in 1997 and 85% of total net sales in
1996. Net sales of 2 1/2 gallon bulk containers represented approximately 8% of
total net sales in 1998 and 1997 and 7% of total net sales in 1996. Net sales of
novelties accounted for approximately 9% of total net sales in 1998 and 6% of
total net sales in 1997 and 1996. Net sales from the Company's retail stores
represented 2% of total net sales in 1998, 1997 and 1996.
International sales were $17.4, $7.6, and $6.9 million in 1998, 1997 and 1996,
respectively, which represents 8% of net sales in 1998, 4% in 1997 and 4% in
1996. The increase in 1998 was primarily due to the introduction of single serve
products in Japan and higher sales to Canada.
Net sales in 1997 increased 4% 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.
<PAGE>
Cost of Sales
Cost of sales in 1998 increased approximately $22 million or 19% over the same
period in 1997 and overall gross profit as a percentage of net sales increased
from 34.4% in 1997 to 34.9% in 1998. The slightly higher gross profit margin
primarily resulted from increases in selling prices effective in January 1998
and July 1998, better plant utilization due to higher production volumes and a
decrease in reserves for potential product obsolescence, partially offset by
substantial increases in dairy commodity costs.
The Company experienced significant increases in dairy prices in 1998 compared
to 1997 levels. In response to higher dairy costs, the Company instituted a 3%
price increase effective in July 1998 for its packaged pint products and a
combined 10% price increase for its 2 1/2 gallon bulk containers effective in
January 1998 and July 1998 to offset these increased costs. If dairy commodity
prices begin to rise again to higher levels, there is the possibility that these
costs will not be passed on to customers, which will negatively impact future
gross profit margins. See Risk Factors in Item 7.
In 1997, cost of sales decreased approximately $900,000 or 0.8% over 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
was 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 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.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 19% to $64 million in
1998 from $54 million in 1997 and decreased slightly as a percentage of net
sales to 30.5% in 1998 from 30.7% in 1997. The $10 million increase in expenses
is attributable to increased sales and marketing expenses to support the launch
of a new line of premium plus ice cream under the name of Newman's Own(TM) All
Natural Ice Cream , increased international costs, increases in radio
advertising, in-store programs to drive product trial and brand awareness, scoop
truck marketing and the rollout of the new pint package design.
Selling, general and administrative expenses increased 17% to $54 million in
1997 from $46 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.
Other Income (Expense)
Interest income increased from $1.9 million in 1997 to $2.2 million in 1998. The
increase in interest income was due to higher average invested balance
throughout 1998. Interest expense in 1998 decreased $104,000 in 1998 as compared
to 1997 due to the $5 million Senior Notes principal installment payment. Other
income (expense) increased in 1998 from other expense of $118,000 in 1997 to
other income of $693,000 in 1998. This is primarily due to increased losses
associated with foreign currency exchange in comparison to 1997 combined with
income received from the Company's cost basis investment.
<PAGE>
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.
Income Taxes
The Company's effective income tax rate in 1998 decreased to 36% from 38% in
1997 and 1996. The decrease was a result of lower state income taxes, more
tax-exempt interest income, and the overall geographic mix of earnings.
Management expects 1999's effective income tax rate to decrease to approximately
35% based upon the expected geographic mix of earnings.
Net Income
Net income for 1998 increased to $6.2 million compared to $3.9 million in 1997.
Net income as a percentage of net sales was 2.9% in 1998 as compared to 2.2% in
1997 and 2.3% in 1996.
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 1998, 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 26, 1998 the Company had $47.2 million of cash, cash equivalents
and marketable securities ($25.1 million of cash and cash equivalents and $22.1
million of marketable securities), a $570,000 decrease since December 27, 1997.
Net cash provided by operations in 1998 was $16.1 million of which approximately
$8.8 million was used for net additions to property, plant and equipment,
primarily for improvements at the Company's manufacturing facilities, the build
out of three Company owned scoop shops in France and fit-up costs for a chain of
cinemas in the United Kingdom. In addition, $3.1 million cash was used to
repurchase shares of the Company's Class A Common Stock and $5.3 million was
used to pay down debt and capital leases.
From December 27, 1997 to December 26, 1998 inventories and the sum of accounts
payable and accrued expenses have increased $2 million and $5 million,
respectively. These increases reflect the growth in the Company's business and
increased sales and marketing expenses.
The Company anticipates capital expenditures in 1999 of approximately $9 million
plus $1 million for its acquisition of 60% of its licensee in Israel during
1999. Most of these projected capital expenditures relate to equipment upgrades
and enhancements at the Company's manufacturing facilities, research and
development equipment, computer related expenditures and corporate space
expansion.
During the year ended December 26, 1998 the Company repurchased a total of
166,500 shares of the Company's Class A Common Stock for approximately $3.1
million. Pursuant to the repurchase program announced May 8, 1997, 122,500
shares were purchased for use in connection with stock option awards under the
<PAGE>
1995 Equity Incentive Plan. These transactions, together with earlier
repurchases of 77,500 shares in 1997, complete the repurchase of the 200,000
shares authorized under this program. An additional 44,000 shares were purchased
through December 26, 1998 for approximately $733,000 under a repurchase program
announced in September 1998 authorizing the Company to purchase shares of the
Company's Class A Common Stock up to an aggregate cost of $5 million for use for
general corporate purposes. Subsequent to December 26, 1998 and through March 5,
1999 the Company repurchased an additional 68,000 shares under this program for
approximately $1.5 million.
The Company's short and long-term debt at December 26, 1998 includes $25 million
aggregate principal amount of Senior Notes issued in 1993 and 1994. The first
principal payment of $5 million was paid in September 1998 and the remainder of
principal is payable in annual installments through 2003.
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 LIBOR plus a margin based on a pre-determined
formula. No amounts were borrowed under these or any bank agreements during
1998. The working capital line of credit agreements expire December 23, 2001.
Management believes that internally generated funds, cash, cash equivalents and
marketable securities 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 Readiness Disclosure
Background of Year 2000 Issues. The "Year 2000" issue is the result of computer
systems and software programs using two rather than four digits to define a
year. As a result, computer systems that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. Unless
remedied, the Year 2000 issue could result in system failures, miscalculations,
and the inability to process necessary transactions or engage in similar normal
business activities. In addition to computer systems and software, equipment
using embedded chips, such as manufacturing and telephone equipment, could also
be at risk.
State of Readiness. The Company has developed, and is implementing a Year 2000
plan to address Year 2000 issues. The plan focuses on the following three broad
categories: (a) information technology systems; (b) manufacturing facilities
including embedded technology; and (c) external noncompliance by customers,
distributors, suppliers and other business partners.
The Company has substantially completed the inventory and assessment of the core
software applications and hardware infrastructure. The Company has identified
and is in various stages of remediating software and hardware deficiencies
caused by the Year 2000 issue. The financial, human resources, manufacturing and
distribution systems are currently being repaired; testing and validation of
these systems are scheduled during the second quarter of 1999. The Company's
networking equipment is not compliant and is scheduled to undergo renovation and
testing during the second quarter of 1999 as well.
While the Company is continuing detailed assessment of its manufacturing
facilities and embedded chip technology, it has not identified any problems thus
far that would have a material impact upon operations. The assessment phase for
the manufacturing facilities is expected to be completed in April 1999. At the
<PAGE>
same time, the Company is testing and remediating certain equipment and software
systems known to have possible Year 2000 issues and is expected to complete this
phase during the second quarter of 1999.
A critical step in this project is the coordination of Year 2000 readiness with
third parties. The Company is communicating with its significant suppliers,
distributors and customers to determine the extent to which the Company is
vulnerable if the third parties fail to resolve their Year 2000 issues. The
Company will continue to assess and work with all of its major partners to
understand the associated risks and plan for contingencies.
Risks Related to Year 2000 Issues. The Company presently believes that the Year
2000 issue will not pose significant operational problems and that the internal
Year 2000 issues will be resolved in a timely manner. However, the future
compliance of Year 2000 processing within the Company is dependent upon key
personnel, vendor software, vendor equipment and components. In the unlikely
event that no further progress is made on the Company's year 2000 project, the
Company may be unable to manufacture or ship product, invoice customers or
collect payments. As a result, Year 2000 issues could have a material adverse
impact on the Company's operations and its financial results. In addition, if
systems operated by third parties (including municipalities or utilities) are
not Year 2000 compliant, this could also have a material adverse affect on the
Company.
Costs to Address Year 2000 Issues. The Company does not separately track the
internal costs incurred for the Year 2000 project, which are primarily the
related payroll costs for its information systems ("IS") group. There have been
no incremental payroll costs related to the Year 2000 project, however
non-critical IS projects have been deferred due to concentration on Year 2000
efforts. The delay of these projects is not expected to have a material impact
on the operations of the Company.
The external costs for software; hardware, equipment and services related to the
Year 2000 project are expected to be approximately $1.2 million. The Company
will expense the costs of modifying existing systems and capitalize the
replacement cost of software or equipment that is not Year 2000 compliant. There
can be no guarantee, however, that the systems of other entities which the
Company relies upon 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 and operations.
Contingency Plans. Due to the general uncertainty inherent in the Year 2000
problem, including uncertainty regarding the Year 2000 readiness of suppliers,
distributors and other manufacturers, the Company is developing contingency
plans. This process includes, among others, developing backup procedures in case
of systems failures, identifying alternative production plans and developing
alternative plans to engage in business activities with customers, distributors
and suppliers that are not experiencing Year 2000 problems.
The above forward looking statements with regard to the timing and overall cost
estimates of the Company's efforts to address the Year 2000 problem are based
upon the Company's experience thus far in this effort. Should the Company
encounter unforeseen difficulties either in the continuing review of its
internal systems, the ultimate remediation, or the responses of its business
partners, the actual results could vary significantly from the estimates in
these forward-looking statements.
Forward-Looking Statements
This section, as well as other portions of this document, includes certain
forward-looking statements about the Company's business, new products, sales,
dairy prices, other expenditures and cost savings, Year 2000 program costs,
<PAGE>
effective tax rate, operating and capital requirements and refinancing. Any such
statements are subject to risks that could cause the actual results or needs to
vary materially. These risks are discussed below.
Risk Factors
Dependence on Independent Ice Cream Distributors. Historically, the Company has
been dependent on maintaining satisfactory relationships with Dreyer's Grand Ice
Cream, Inc. ("Dreyer's") and the other independent ice cream distributors that
have acted as the Company's exclusive or master distributor in their assigned
territories. In 1998, Dreyer's distributed significantly more than a majority of
the sales of Ben & Jerry's products. While the Company believes its
relationships with 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. In addition, 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. The co-founders rejected
these overtures.
In August 1998 - January 1999, the Company redesigned its distribution network,
entering into a distribution agreement with The Pillsbury Company ("Pillsbury")
and a new agreement with Dreyer's. These arrangements take effect September 1,
1999, except for certain territories, which are effective, in April - May 1999.
The Company believes the terms of the new arrangements will, on balance, be more
favorable to its Company and expects that, under the distribution network
redesign, no one distributor will account for more than 40% of the Company's net
sales. However, both Pillsbury, through its Haagen-Daz unit, and Dreyer's are
competitors of the Company.
Since available distribution alternatives are limited, there can be no assurance
that difficulties in maintaining satisfactory relationships with Pillsbury,
Dreyer's and its other distributors, some of which are also competitors of the
Company, will not have a material adverse effect on the Company's business. (See
"Business-Markets and Customers")
Growth in Sales and Earnings. In 1998, net sales of the Company increased 20.1%
to $209 million from $174 million in 1997. Pint volume increased 10.2% compared
to 1997. The super premium ice cream, frozen yogurt and sorbet industry category
sales increased 4% in 1998 as compared to 1997. Given these overall domestic
super premium industry trends, the successful introduction of innovative flavors
on a periodic basis has become increasingly important to 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 significant promotional
expenditures, is likely to have an important impact on the Company's 1999 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. 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, two of which
are distributors for the Company. 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."
<PAGE>
Increased Cost of Raw Materials. Management believes that the general 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 adequately
protected by pricing adjustments, cost control programs and productivity gains.
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 Jerry Greenfield the Chairperson of the
Board and co-founder of the Company; and Ben Cohen, 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 being more 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 "Business-Introduction" and "Business-Marketing."
International. Total international net sales represented approximately 8% of
total consolidated net sales in 1998. 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 Japan, Canada, the
United Kingdom, Ireland, France, the Netherlands, Belgium and will start selling
in Peru and Lebanon in 1999. In 1987, the Company granted an exclusive license
to manufacture and sell Ben & Jerry's products in Israel. In February 1999, the
Company made an investment commitment in the Israeli licensee, which gave the
Company a 60% ownership interest. In May 1998, the Company signed a Licensing
Agreement with Delicious Alternative Desserts, LTD. to manufacture, sell and
distribute Ben & Jerry's products through the wholesale distribution channels in
Canada. 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 46% 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 sell substantial
portions of their Class A Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
<PAGE>
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."
Also, in April, 1998 the Legislature of the State of Vermont amended a provision
of the Vermont Business Corporation Act to provide that the directors of a
Vermont corporation may also consider, in determining whether an acquisition
offer or other matter is in the best interests of the corporation, the interests
of the corporation's employees, suppliers, creditors and customers, the economy
of the state in which the corporation is located and including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation. Also in August, 1998, following approval by its
Board of Directors, the Company put in place two Shareholder Rights Plans, one
pertaining to the Class A Common Stock and one pertaining to the Class B Common
Stock. These Plans are intended to protect stockholders by compelling someone
seeking to acquire the Company to negotiate with the Company's Board of
Directors in order to protect stockholders from unfair takeover tactics and to
assist in the maximization of stockholder value. These Rights Plans, which are
common for public companies in the United States, may also be deemed to be
"anti-takeover" provisions in that the Board of Directors believes that these
Plans will make it difficult for a third party to acquire control of the Company
on terms which are unfair or unfavorable to the stockholders.
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; the April 1998 Vermont
Legislative Amendment of the Vermont Business Corporation Act and the
Shareholder Rights Plans put in place in August, 1998 (see "Anti-Takeover
Effects of Class B Common Stock, Class A Common Stock, Class A Preferred Stock,
Classified Board of Directors, Vermont Legislation and Shareholder Rights Plans"
in Item 1) may be deemed to be "anti-takeover" provisions in that the Board of
Directors believes that these amendments and legislation 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 7A. Market Risk
The Company is exposed to a variety of market risks, including changes in
interest rates affecting the return on its investments and foreign currency
fluctuations. The Company's exposure to market risk for a change in interest
rates relates primarily to the Company's investment portfolio. The Company has
classified all of its short-term and long-term investments as "available for
sale" except for certificates of deposits which are held to maturity. The
majority of these investments are municipal bonds and fixed income preferred
<PAGE>
stock in which the market value approximates its cost at December 26, 1998. The
Company does not intend to hold such investments to maturity if there is an
underlying change in interest rates or the Company's cash flow requirements.
Certificates of deposits do not expose the consolidated statement of operations
or balance sheets to fluctuations in interest rates. The Company's exposure to
market risk for fluctuations in foreign currency relate primarily to the amounts
due from subsidiaries. Exchange gains and losses related to amounts due from
subsidiaries have not been material for each of the years presented.
Item 8. Financial Statements and Supplementary Data
The response to this is in Item 14(a) of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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
- ----------------------- ------ -------------------------
Jerry Greenfield 47 Chairperson and Director
Ben Cohen 47 Vice Chairperson and Director
Perry Odak 53 Chief Executive Officer, President and Director
Elizabeth Bankowski 51 Director and Director of Social Mission
Pierre Ferrari 48 Director
Jeffrey Furman 55 Director
Jennifer Henderson 45 Director
Frederick A. Miller 52 Director
Henry Morgan 73 Director
Lawrence Benders 42 Chief Marketing Officer
Bruce Bowman 46 Senior Director of Operations
Charles Green 44 Senior Director Sales and Distribution
Angelo Pezzani 57 Senior Director of Business Development
Frances Rathke 38 Chief Financial Officer and Secretary
The Board of Directors has an Audit Committee on which Directors Ferrari, Furman
and Morgan (Chairperson) serve; a Compensation Committee on which Directors
Miller, Morgan and Henderson, (Chairperson) serve; a Social Mission/Workculture
Committee on which Directors Bankowski, Furman, Henderson and Miller
(Chairperson) serve; an Executive Committee on which Directors Cohen, Miller,
Morgan, Odak and Ferrari serve; and a Nominating Committee on which Directors
Ferrari, Greenfield, Henderson, Odak and Cohen (Chairperson) 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 a director of The Ben & Jerry's
Foundation, Inc.
Ben Cohen, a founder of the Company, served as Chairperson of the Board of
Directors from February 1989 through November 1998. Mr. Cohen currently serves
as Vice Chairperson of the Board of Directors. From January 1, 1991 through
January 29, 1995 he was the Chief Executive Officer of the Company. Mr. Cohen
<PAGE>
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 States Bankruptcy Code.
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. Currently, Mr.
Furman is a self-employed consultant. From March 1991 through December 1996, Mr.
Furman was a consultant to the Company.
Jerry Greenfield, a founder of the Company, served as director and Vice
Chairperson of the Board of Directors from 1990 to November 1998 at which time
he was elected Chairperson of the Board of Directors. Mr. Greenfield is also
President and a 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.
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 (April 1991 to 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.
<PAGE>
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.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the cash compensation paid by the Company in
Fiscal Years 1996 - 1998 as well as certain other compensation paid, awarded or
accrued for those years to the Company's Chief Executive Officer and the other
four highest-paid executive officers during the 1998 fiscal year. Perry Odak
became the Chief Executive Officer on January 1, 1997.
<TABLE>
<CAPTION>
Annual Compensation Awards Long-Term Compensation Pay-outs
------------------- --------- -------------------------------
Other Securities
Annual Restricted Underlying All Other
Name and Bonus Compen- Stock Options/ LTIP Compensation
Principal Position Year Salary (1) sation Awards SARS Pay-outs (2)
- ------------------------------ ---- -------- --------- -------- ------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Perry D. Odak 1998 $305,769 $150,000 $ 7,750
CEO, President and 1997 $300,000 $100,000 360,000 $25,000
Director 1996 $ -- $ -- $ --
Bruce Bowman 1998 $211,692 $ 75,000 $ 6,964
Senior Director of 1997 $200,000 $ 50,000 27,000 $ 4,131
Operations 1996 $169,231 $ 20,000 10,000 $ 1,099
Lawrence E. Benders 1998 $229,327 $ 40,000 $ 52
Chief Marketing Officer 1997 $ 38,942 $ 5,000 52,000 $ --
1996 $ -- $ -- $ --
Charles Green 1998 $182,885 $ 75,000 $ 5,755
Senior Director of 1997 $162,596 $ 40,000 45,000 $ --
Sales & Distribution 1996 $ 24,231 $ -- 5,000 $ --
Angelo Pezzani 1998 $254,808 $ 75,000 30,000 $ 4,327
Senior Director of 1997 $208,332 $ -- 52,000 $ --
Business Development 1996 $ -- $ -- $ --
(1) "Bonus" includes 1998 discretionary distributions under the Company's Management Incentive Program.
(2) "All Other Compensation" includes Company contributions to 401(k) plans and relocation fees.
</TABLE>
<PAGE>
Option/SAR Grants in Fiscal 1998
<TABLE>
<CAPTION>
Percentage
of Total Potential Realizable Value
Options/SARS Exercise or at Assumed Annual Rates
Options/SARS Granted to Base Price Expiration of Stock Price Appreciation
Name Granted Employees in 1998 (per share) Date for Option Term
---- ------------ ----------------- ----------- ---------- --------------------------
<S> <C> <C> <C> <C>
5% 10%
-------- --------
Angelo Pezzani 30,000 70.6% $19.25 7/28/08 $363,187 $920,386
</TABLE>
Aggregated Option/SAR Exercises in 1998 and 1998 Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-money Options/SARS
Options/SARS at 12/26/98 at 12/26/98
Shares ------------------------ --------------------------
Acquired on
Name Exercise (#) Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Perry D. Odak 0 0 140,000 220,000 $1,626,800 $2,556,400
Bruce Bowman 0 0 24,125 37,875 $ 162,656 $ 258,514
Charles Green 0 0 19,375 30,625 $ 170,594 $ 267,456
Lawrence Benders 0 0 16,250 35,750 $ 160,388 $ 352,853
Angelo Pezzani 0 0 19,250 62,750 $ 132,243 $ 412,978
</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 each made an election under the Plan and received 941
shares of stock for the period July 1, 1998 through June of 1999 under the Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 5, 1999 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 Ben &
Jerry's Homemade, Inc., 30 Community Drive, South Burlington, Vermont
05403-6828.
<PAGE>
<TABLE>
<CAPTION>
Amount of Beneficial Ownership
Class A Common Stock Class B Common Stock Preferred Stock
-------------------- -------------------- ---------------
% Outstanding % Outstanding % Outstanding
Name # Shares shares (1) # Shares Shares (2) # Shares Shares
---- -------- ------------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen (3) 447,373 7.2% 488,486 59.6% -- --
Jeffrey Furman (4)(5) 17,000 * 30,300 3.7% -- --
Jerry Greenfield (4) 130,000 2.1% 90,000 11.0% -- --
Perry Odak (6) 213,250 3.4% -- -- -- --
Elizabeth Bankowski (4) 28,766 * -- -- -- --
Pierre Ferrari 6,377 * -- -- -- --
Jennifer Henderson 524 * -- -- -- --
Frederick A. Miller 3,101 * -- -- -- --
Henry Morgan 5,101 * -- -- -- --
Lawrence E. Benders 18,417 * -- -- -- --
Bruce Bowman 31,931 * -- -- -- --
Charles Green 21,250 * -- -- -- --
Angelo Pezzani 23,917 * -- -- -- --
Frances Rathke 38,091 * -- -- -- --
The Capital Group 587,500 9.4% -- -- -- --
Companies, Inc. (7)
333 South Hope St
Los Angeles, CA 90071
Warburg Pincus Asset 745,800 11.9% -- -- -- --
Management
466 Lexington Ave
New York, NY 10017
All Officers and Directors 1,008,535 16.1% 608,786 74.3% -- --
as a group of 15 persons
The Ben & Jerry's -- -- -- -- 900 100%
Foundation, Inc. (4)
</TABLE>
* Less than 1%
(1) Based on the number of shares of Class A Common Stock outstanding as of
March 5, 1999. 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 5, 1999. 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 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 and 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 provided at no cost to Mr.
Furman family health insurance coverage under the Company's regular employee
health insurance plan. This obligation terminated March 2, 1999.
Mr. Cohen, a Co-founder of the Company, Vice-Chairperson and Director of the
Company, has entered into an Employment Agreement with the Company for an
employment term expiring on December 31, 1999 (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
(adjusted for changes in the Consumer Price Index) 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, Chairperson, and Director of the
Company, has entered into an Employment Agreement with the Company for an
employment term expiring on December 31, 1999 (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 (adjusted for changes in the Consumer Price Index) for life, commencing
with the end of the three-year severance period, for specified insurance
benefits and contains a provision for certain services contemplated to be
provided to the Company after the end of the term of employment and severance
period.
Mr. Odak, Chief Executive Officer, has a three-year Employment Agreement with
the Company dated December 31, 1996, as amended. 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
($315,000 has been set by the Board as the 1999 base salary). 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 period, 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
<PAGE>
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.
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 exercisability
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.
Mr. Pezzani, Senior Director of Business Development has an Employment Agreement
dated January 1, 1998, expiring December 31, 2000 with an annual renewal
provision. The agreement provides for an annual base salary of $250,000 per
annum, subject to increases from time to time by the CEO with approval by the
Board of Directors. He is eligible for an annual bonus that is guaranteed to be
at least $75,000, as determined by the CEO and approved by the Board of
Directors. Mr. Pezzani received incentive stock options to purchase an aggregate
of 52,000 shares of Class A common stock of the Company exercisable at $13.89
per share, the fair market value on the date of grant by the Compensation
Committee of the Board of Directors under the 1995 Equity Incentive Plan. These
options become exercisable over a four year period with one-fourth being
exercisable on March 1, 1998 and up to an additional 1/48 of the shares covered
by this Option on the last day of each month in the next three years. 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.
The Agreement may be terminated at any time for by the Company for cause, as
defined. The Company may also terminate the Agreement other than for cause, in
which event the Company has a continuing obligation to pay Mr. Pezzani his base
salary, bonuses that are earned and unpaid, for the monthly periods, but for a
period not less than twelve months, specified in the Agreement. Additionally,
the Company will continue to contribute the cost of Mr. Pezzani's participation
in the Company's group medical and life insurance plans during the same period
as his base salary is continued. Upon such termination, unvested options shall
become exercisable to the extent so provided by the Agreement. Mr. Pezzani may
terminate his employment with the Company for good reason, as defined (in the
absence of cause). In the event of such termination, base salary, bonus,
benefits and options shall be paid or provided in the same manner and extent as
for termination by the Company Other Than For Cause.
Mr. Benders, Chief Marketing Officer, has an Employment Agreement dated October
20, 1997, expiring October 20, 2000. The agreement provides for an annual base
salary of $225,000 per annum, subject to increases from time to time by the CEO
with approval by the Board of Directors. He is eligible for an annual bonus as
determined by the CEO and approved by the Board of Directors. Mr. Benders
<PAGE>
received incentive stock options to purchase an aggregate of 52,000 shares of
Class A common stock of the Company exercisable at $12.63 per share, the fair
market value on the date of grant by the Compensation Committee of the Board of
Directors under the 1995 Equity Incentive Plan. These options become exercisable
over a four year period with one-fourth being exercisable on October 20, 1998
and up to an additional 1/48 of the shares covered by this Option on the last
day of each month in the next three years. 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.
The Agreement may be terminated at any time for by the Company for cause, as
defined. The Company may also terminate the Agreement other than for cause, in
which event the Company has a continuing obligation to pay Mr. Benders his base
salary for six months. Additionally, the Company will continue to contribute the
cost of Mr.Benders' participation in the Company's group medical and life
insurance plans during the same period as his base salary is continued.
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 RainForest Crunch
cashew-brazilnut butter crunch candy to be included in Ben & Jerry's RainForest
Crunch(R) 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 U.S. Bankruptcy Code in early 1997, its business was sold and the matter
(and related litigation) is pending in U.S. Bankruptcy Court. Ben & Jerry's
located an alternative supplier for cashew-brazilnut butter crunch and no
purchases were made in 1998 from Community Products, Inc. The termination of Ben
& Jerry's relationship with Community Products, Inc. had no material effect on
the Company's business.
In 1998, the Company paid $20,000 to Ms. Jennifer Henderson for services as a
consultant in connection with service as a member of the Board of Directors.
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, Mr. Benders paid the bridge
loan in full.
<PAGE>
Item 14. Exhibits, Financial Statements, Financial Statement Schedule and
Reports on Form 8-K
A. List of financial statements and financial statement schedule:
<TABLE>
<CAPTION>
Form 10-K
Page Number
-----------
<S> <C>
1. The following consolidated financial statements are included in Item 8:
Consolidated Balance Sheets as of December 26, 1998 and December 27, 1997 F-2
Consolidated Statements of Operations for the years ended
December 26, 1998, December 27, 1997 and December 28, 1996 F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 26, 1998, December 27, 1997 and December 28, 1996 F-4
Consolidated Statements of Cash Flows for the years ended
December 26, 1998, December 27, 1997 and December 28, 1996 F-5
Notes to Consolidated Financial Statements F-6 - F-21
2. The following financial statement schedule is included in Item 14(d)
Schedule II - Valuation and Qualifying Accounts F-22
</TABLE>
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.
<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 as Exhibit 3.1.4 to the Company's Annual Report on
Form 10-K for the period ended December 27, 1997 and
incorporated herein by reference).
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).
3.2.2 Amendment to By-laws dated March 31, 1998 (filed as Exhibits
1 and 2 to the Company's Form 8-K dated April 1, 1998 and
incorporated herein by reference).
3.2.3 Amendment to By-laws dated June 26, 1998 (filed as Exhibit A
to the Company's Form 8-K dated July 30, 1998 and
incorporated herein by reference).
4.1 See Exhibit 3.1.
4.2 See Exhibit 3.2.
4.3 Mortgage and Security Agreement between 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 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).
<PAGE>
4.4.1 Amendment to item 4.4 dated July 28, 1992 [filed as 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.
4.12 Class A Common Stock Stockholder Rights Agreement between
the Company and American Stock Transfer & Trust Company
dated as of July 30, 1998 (filed as Exhibit 1 to the Report
on Form 8-K, dated August 13,1998 and hereby incorporated by
reference).
4.13 Class B Common Stock Stockholder Rights Agreement dated July
30, 1998 (filed as Exhibit 4 to the Report on Form 8-K,
dated August 13,1998 and hereby incorporated by reference).
10.1* Employment Agreement dated as of January 29, 1998 between
Bennett R. Cohen and the Company (filed as Exhibit 10.1 to
the Company's Annual Report on Form 10-K for the period
ended December 26, 1997 and hereby incorporated by
reference).
* Indicates management contract or compensatory plan, contract or arrangement.
<PAGE>
10.4* Employment Agreement dated as of January 29, 1998 between
Jerry Greenfield and the Company (filed as Exhibit 10.1 to
the Company's Annual Report on Form 10-K for the period
ended December 26, 1997 and hereby incorporated by
reference).
10.5 Settlement Agreement dated March 29, 1985 between the
Company and Haagen-Daz, 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 30, 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 herein 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 herein by reference).
10.8.3** Amendment to Item 10.8 dated as of January 11, 1999 (filed
herewith).
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].
10.10** New Distribution Agreement with Dreyer's Grand Ice Cream,
Inc., dated as of January 11, 1999 (filed herewith).
10.10.1** Addendum to Item 10.10 (filed herewith).
10.11** Agreement with the Pillsbury Company dated as of August 26,
1998 (filed herewith).
10.11.1 Amendment to Item 10.11 (filed herewith).
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).
* Indicates management contract or compensatory plan, contract or
arrangement.
** Confidential treatment requested as to certain portions. The term
"confidential treatment" and the mark "*" as used throughout the
indicated Exhibits mean that material has been omitted and separately
filed with the Commission.
<PAGE>
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 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 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 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).
10.22.4 Amendment to Item 10.22 dated January 1, 1998 (filed
herewith).
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).
10.25 1999 Equity Incentive Plan (filed herewith)
10.27 1992 Non-employee Directors' Restricted Stock Plan (filed as
Exhibit 10.27 to the Company's Report on Form 10-K for the
year ended December 25, 1993 and incorporated herein by
reference).
* Indicates management contract or compensatory plan, contract or
arrangement.
** Confidential treatment requested as to certain portions. The term
"confidential treatment" and the mark "*" as used throughout the
indicated Exhibits mean that material has been omitted and separately
filed with the Commission.
<PAGE>
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).
10.29.1* Amendment to Item 10.29 (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).
10.29.2* Amendment to Item 10.29 (filed herewith).
10.30 Non-Employee Directors' Plan for Stock in Lieu of Directors'
Cash Retainer dated August 4, 1995 (filed as Exhibit 10.30
to the Company's Quarterly Report on Form 10-Q for the
period 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).
10.33.1* Amendment dated as of February 28, 1999 to Item 10.33 (filed
herewith.)
10.34* Employment Agreement dated January 1, 1998 between the
Company and Angelo M. Pezzani (filed as Exhibit 10.34 to the
Company's Form 10-K for the year ended December 27, 1997 and
incorporated herein by reference).
10.35* Employment Agreement dated October 20, 1997 between the
Company and Lawrence Benders (filed as Exhibit 10.34 to the
Company's Form 10-K for the year ended December 27, 1997 and
incorporated herein by reference).
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 as Exhibit
10.34 to the Company's Form 10-K for the year ended December
27, 1997 and incorporated herein by reference).
11.0 The computation of Per Share Earnings is incorporated by
reference from Note 11 of the Company's consolidated
financial statements (filed herewith).
21.1 Subsidiaries of the registrant as of December 26, 1998
(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
1998.
* Indicates management contract or compensatory plan, contract or
arrangement.
<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 26, 1999 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, 1999 /s/ Elizabeth Bankowski
-------------------------------------------------
Elizabeth Bankowski
Director, Director of Social Mission Development
March 25, 1999 /s/ Bennett R. Cohen
-------------------------------------------------
Bennett R. Cohen
Director and Vice-Chairperson
March 25, 1999 /s/ Pierre Ferrari
-------------------------------------------------
Pierre Ferrari
Director
March 25, 1999 /s/ Jeffrey Furman
-------------------------------------------------
Jeffrey Furman
Director
March 25, 1999 /s/ Jerry Greenfield
-------------------------------------------------
Jerry Greenfield
Director and Chairperson
March 25, 1999 /s/ Jennifer Henderson
-------------------------------------------------
Jennifer Henderson
Director
March 25, 1999 /s/ Frederick A. Miller
-------------------------------------------------
Frederick A. Miller
Director
March 25, 1999 /s/ Henry Morgan
-------------------------------------------------
Henry Morgan
Director
March 25, 1999 /s/ Perry Odak
-------------------------------------------------
Perry Odak
Director, Principal Executive Officer
and President
March 25, 1999 /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
YEAR ENDED DECEMBER 26, 1998
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 26, 1998 and December 27, 1997.......................................F-2
Consolidated Statements of Operations for the years ended December 26, 1998,
December 27, 1997 and December 28, 1996.........................................................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December 26, 1998,
December 27, 1997 and December 28, 1996.........................................................................F-4
Consolidated Statements of Cash Flows for the years ended December 26, 1998,
December 27, 1997 and December 28, 1996.........................................................................F-5
Notes to Consolidated Financial Statements.....................................................................F- 6
Financial Statement Schedule:
SCHEDULE II - Valuation and Qualifying Accounts................................................................F-22
</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 26, 1998 and December 27, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 26, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)(2).
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 26, 1998 and December 27, 1997 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 26, 1998, 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 22 1999, except for Note 17,
as to which the date is February 26, 1999
F-1
<PAGE>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,111 $ 47,318
Short term investments 22,118 481
Trade accounts receivable:
(less allowance of $979 in 1998
and $1,066 in 1997 for doubtful accounts) 11,338 12,710
Inventories 13,090 11,122
Deferred income taxes 7,547 6,071
Prepaid expenses and other current assets 3,105 2,378
------------------- ------------------
Total current assets 82,309 80,080
Property, plant and equipment, net 63,451 62,724
Investments 303 1,061
Other assets 3,438 2,606
------------------- ------------------
$ 149,501 $ 146,471
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 28,662 $ 23,266
Current portion of long-term debt and
obligations under capital leases 5,266 5,402
------------------- ------------------
Total current liabilities 33,928 28,668
Long-term debt and obligations under capital leases 20,491 25,676
Deferred income taxes 4,174 5,208
Stockholders' equity:
$1.20 noncumulative Class A preferred stock -
par value $1.00 per share, redeemable at
$12.00 per share; 900 shares authorized,
issued and outstanding; aggregated preference
on liquidation - $9,000 1 1
Class A common stock - $.033 par value; authorized
20,000,000 shares; issued: 6,592,392 at
December 26, 1998 and 6,494,835 at
December 27, 1997 218 214
Class B common stock - $.033 par value; authorized
3,000,000 shares; issued: 824,480 at
December 26, 1998 and 866,235 at
December 27, 1997 27 29
Additional paid-in-capital 50,556 49,681
Retained earnings 45,328 39,086
Accumulated other comprehensive income (151) (129)
Treasury stock, at cost: 291,032 Class A and 1,092 Class B
shares at December 26, 1998 and 124,532 Class A
and 1,092 Class B shares at December 27, 1997 (5,071) (1,963)
------------------- ------------------
Total stockholders' equity 90,908 86,919
------------------- ------------------
$ 149,501 $ 146,471
=================== ==================
See notes to consolidated financial statements.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share amounts)
Fiscal Year Ended
-------------------------------------------------------------
December 26, 1998 December 27, 1997 December 28, 1996
------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 209,203 $ 174,206 $ 167,155
Cost of sales 136,225 114,284 115,212
------------------- ------------------- -------------------
Gross profit 72,978 59,922 51,943
Selling, general and
administrative expenses 63,895 53,520 45,531
Other income (expense):
Interest income 2,248 1,938 1,676
Interest expense (1,888) (1,992) (1,996)
Other income (expense), net 333 (64) 243
------------------- ------------------- -------------------
693 (118) (77)
------------------- ------------------- -------------------
Income before income taxes 9,776 6,284 6,335
Income taxes 3,534 2,388 2,409
------------------- ------------------- -------------------
Net income $ 6,242 $ 3,896 $ 3,926
=================== =================== ===================
Shares used to compute net income per common share
Basic 7,197 7,247 7,189
Diluted 7,463 7,334 7,230
Net income per common share
Basic $ 0.87 $ 0.54 $ 0.55
Diluted $ 0.84 $ 0.53 $ 0.54
See notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
(In thousands except share data)
Accumulated
Common Stock Additional Other
---------------------
Preferred Class A Class B Paid-in Retained Comprehensive
Stock Par Value Par Value Capital Earnings Income
------ --------- --------- ------- -------- -------
Par Value
---------
<S> <C> <C> <C> <C> <C> <C>
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)
Net comprehensive income
------------------------------------------------------------------------------
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)
Net comprehensive income
-----------------------------------------------------------------------------
Balance at December 27, 1997 1 214 29 49,681 39,086 (129)
Net income 6,242
Common stock issued under stock
purchase plan (14,277 Class A shares) - 179
Conversion of Class B shares to Class A
shares (41,755 shares) 2 (2)
Common stock issued under stock and
option plans(41,525 Class A shares) 2 696
Repurchase of Common Stock (166,500
Class A shares)
Foreign currency translation adjustment (22)
Net comprehensive income
------------------------------------------------------------------------------
Balance at December 26, 1998
$1 $218 $27 $50,556 $45,328 $(151)
============ ========== ========== ============== =========== ================
Treasury Stock
-------------- Total
Class A Class B Stockholders' Comprehensive
Cost Cost Equity Income
---- ---- ------ ------
<S> <C> <C> <C> <C>
Balance at December 30, 1995 $(1,375) $(5) $78,531
Net income 3,926 $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)
(4)
Net comprehensive income -------------
$3,922
------------------------------------- =============
Balance at December 28, 1996 (1,375) (5) 82,685
Net income 3,896 $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)
(11)
Net comprehensive income -------------
$3,885
------------------------------------- =============
Balance at December 27, 1997 (1,958) (5) 86,919
Net income 6,242 $6,242
Common stock issued under stock
purchase plan (14,277 Class A shares) 179
Conversion of Class B shares to Class A
shares (41,755 shares)
Common stock issued under stock and
option plans(41,525 Class A shares) 698
Repurchase of Common Stock (166,500
Class A shares) (3,108) (3,108)
Foreign currency translation adjustment (22)
(22)
Net comprehensive income -------------
$6,220
------------------------------------- =============
Balance at December 26, 1998 $(5,066) $(5) $90,908
========== ========== ===============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Year Ended
---------------------------------------------------
December 26, December 27, December 28,
1998 1997 1996
-------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,242 $ 3,896 $ 3,926
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,181 7,711 7,091
Provision for bad debts 50 630 408
Deferred income taxes (2,510) (1,599) 809
Stock compensation 405 10
Loss on disposition of assets 112 124
Changes in operating assets and liabilities:
Accounts receivable 1,460 (5,318) 3,146
Inventories (1,968) 4,243 (89)
Prepaid expenses (501) (64) (2,749)
Accounts payable and accrued expenses 5,385 5,868 897
Income taxes payable/receivable (364) 1,743 806
-------------- --------------- --------------
Net cash provided by operating activities 16,087 17,639 14,255
Cash flows from investing activities:
Additions to property, plant and equipment (8,770) (5,236) (12,333)
Proceeds from sale of assets 0 48 168
Changes in other assets (1,082) (425) (466)
Increase in investments (20,879) (76) (320)
-------------- --------------- --------------
Net cash used for investing activities (30,731) (5,689) (12,951)
Cash flows from financing activities:
Repayments of long-term debt and capital leases (5,321) (669) (678)
Repurchase of common stock (3,108) (988)
Proceeds from issuance of common stock 877 932 232
-------------- --------------- --------------
Net cash used for financing activities (7,552) (725) (446)
Effect of exchange rate changes on cash (11) (11) (160)
-------------- --------------- --------------
(Decrease) increase in cash and cash equivalents (22,207) 11,214 698
Cash and cash equivalents at beginning of year 47,318 36,104 35,406
-------------- --------------- --------------
Cash and cash equivalents at end of year $ 25,111 $ 47,318 $ 36,104
============== =============== ==============
See notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
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. Inter-company accounts and transactions have
been eliminated.
Fiscal Year
The Company's fiscal year is the 52 or 53 weeks ending on the last Saturday in
December. Fiscal years 1998, 1997 and 1996 consisted of the 52 weeks ended
December 26, 1998, December 27, 1997 and December 28, 1996, respectively.
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 investments at the time
of purchase and reevaluates such designation as of each balance sheet date. At
December 26, 1998, the Company considers all its investments, except for
certificates of deposit, as available for sale. Available-for-sale securities
are carried at cost, which approximates fair value for the year ended December
26, 1998 and December 27, 1997. 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 and available-for-sale 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.
F-6
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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 in certain
countries outside the United States. 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.
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 included in accumulated other
comprehensive income. 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 risk by entering into future options based
on projected forecasts of a portion of the Company's International Business. In
addition, from time to time, the Company enters into forward contracts to hedge
foreign currency denominated sales. Realized and unrealized gains or losses on
contracts or options that hedge anticipated cash flows are determined by
comparison of contract or option value upon execution (realized) and at each
balance sheet for open contracts or options (unrealized). Realized gains and
losses are recognized at the balance sheet date as other income or expense for
the period. In the case of options entered into based on projected forecasts,
unrealized gains and losses are recognized upon the determination that
circumstances have changed which cause the hedged instrument to be speculative
in nature.
F-7
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Transaction gains 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 $708,000, $553,000 and
$301,000 in 1998, 1997 and 1996, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense (excluding
cooperative advertising with distribution companies) amounted to approximately
$10.6 million, $6.7 million, and $3.4 million in 1998, 1997 and 1996,
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 has adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (FAS 123). As permitted by FAS 123, the
Company continues to account for its stock-based plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
provides pro forma disclosures of the compensation expense determined under the
fair value provisions of FAS 123.
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.
Comprehensive Income
As of December 28, 1997 the Company adopted Statement No. 130, Reporting
Comprehensive Income (FAS 130). FAS 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included in other comprehensive income.
F-8
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Total comprehensive income amounted to $6.2 million for the year ended December
26, 1998 and $3.9 million for the years ended December 27, 1997 and December 28,
1996, respectively. Other comprehensive income consisted of adjustments for net
foreign currency translation losses in the amounts of $22,000, $11,000 and
$4,000 for 1998, 1997 and 1996, respectively.
Segment Information
As of December 28, 1997, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (Statement 131). Statement 131
superseded FASB Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. Statement 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The adoption of Statement 131 did not affect results of
operations or financial position, but did affect the disclosure of segment
information. See Note 15.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133
establishes standards for public companies regarding the recognition and
measurement of derivatives and hedging activities. The statement is effective
for the Company in fiscal year 2000. The Company does not believe the adoption
of this statement will have a material impact on the Company's financial
statements based on the nature and extent of the Company's use of derivative
instruments at the present time.
2. CASH AND INVESTMENTS
The following is a summary of cash, cash equivalents and investments as of
December 26, 1998 and December 27, 1997:
December 26, 1998
Cash and Cash Short-Term
Equivalents Investments Investments
----------- ----------- -----------
Cash $ 7,834
Commercial paper 3,277
Tax exempt floating
rate notes 800
Municipal bonds 13,200 $14,926
Convertible bonds 955
Preferred stock 5,649
------ ------- ----
25,111 21,530
Certificates of deposit 588 $303
------- ------- ----
$25,111 $22,118 $303
======= ======= ====
F-9
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
December 27, 1997
Cash and Cash Short-Term
Equivalents Investments Investments
----------- ----------- -----------
Cash $ 1,750
Municipal bonds 45,568
------ ---- ------
47,318
Certificates of deposit $481 $1,061
------- ---- ------
$47,318 $481 $1,061
======= ==== ======
The Company considers all of its investments, except for certificates of
deposit, as available for sale. Certificates of deposit are held to maturity.
Municipal bonds included in cash and cash equivalents mature at par in thirty to
forty-five days, at which time the interest rate is reset to the then market
rate, and the Company may convert the investment to cash. Municipal bonds and
convertible bonds recorded as short-term investments have varying maturities in
1999 and beyond, however, the Company does not intend to hold such investments
to maturity. During 1998, the Company also invested in fixed income preferred
stock of primarily financial institutions.
The costs of all short-term investments approximated the estimated fair value of
such investments. Gross unrealized gains and losses were not significant for all
short-term investments held at December 26, 1998 or December 27, 1997.
Gross purchases and maturities aggregated $221.6 million and $228.4 million in
1998, $43.1 million and $25.4 million in 1997, and $61.1 million and $63.9
million in 1996. Realized gains and losses were not material for all periods
presented.
3. INVENTORIES
December 26, December 27,
1998 1997
----------- ------------
Ice cream and ingredients $12,025 $10,294
Paper goods 524 536
Food, beverages, and gift items 541 292
------- -------
$13,090 $11,122
======= =======
The Company purchased certain ingredients from a company owned by the Company's
Vice Chairperson and a member of the Board of Directors, which amounted to
approximately $800,000 in 1997. No such purchases were made in 1998 or 1996.
F-10
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 26, December 27, Estimated Useful
1998 1997 Lives/Lease Term
--------- --------- ----------------
<S> <C> <C> <C>
Land and improvements $ 4,520 $ 4,520 15-25 years
Buildings 37,940 37,650 25 years
Equipment and furniture 52,047 44,609 3-20 years
Leasehold improvements 3,727 3,221 3-10 years
Construction in progress 2,058 2,676
--------- ---------
100,292 92,676
Less accumulated depreciation 36,841 29,952
--------- ---------
$ 63,451 $ 62,724
========= =========
</TABLE>
Depreciation expense for the years ended December 26, 1998, December 27, 1997
and December 28, 1996 was $7.9 million, $7.4 million and $6.7 million,
respectively.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 26, December 27,
1998 1997
--------- ---------
Trade accounts payable $ 4,623 $ 3,832
Accrued expenses 12,552 10,313
Accrued payroll and related costs 3,272 2,076
Accrued promotional costs 4,297 3,581
Accrued marketing costs 2,837 2,230
Accrued insurance expense 1,081 1,234
--------- ---------
$ 28,662 $ 23,266
========= =========
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
December 26, December 27,
1998 1997
--------- ---------
Senior Notes - Series A payable
in annual installments beginning
in 1998 through 2003 with interest
payable semiannually at 5.9% $16,680 $20,000
Senior Notes - Series B payable
in annual installments beginning
in 1998 through 2003 with interest
payable semiannually at 5.73% 8,333 10,000
Other long-term obligations 744 1,078
--------- ---------
25,757 31,078
Less current portion 5,266 5,402
--------- ---------
$20,491 $25,676
========= =========
F-11
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Property, plant and equipment having a net book value of approximately $19.5
million at December 26, 1998 are pledged as collateral
under certain long-term debt arrangements.
Long-term debt and capital lease obligations at December 26, 1998 maturing in
each of the next five years and thereafter are as follows:
Capital Lease Long-term
Obligations Debt
----------- ---------
1999 $ 78 $ 5,219
2000 78 5,076
2001 57 5,039
2002 15 5,033
2003 15 5,098
Thereafter 199 -
--------- ---------
Total minimum payments 442 25,465
Less amounts representing interest 150 -
--------- ---------
$ 292 $ 25,465
========= =========
The Company capitalized no interest in 1998, 1997 or 1996. Interest paid
amounted to $1,832,000, $1,975,000 and $1,973,000 for 1998, 1997 and 1996,
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 LIBOR plus a margin based on a pre-determined
formula. No amounts were borrowed under these or any bank agreements during
1998. The working capital line of credit agreements expire December 23, 2001.
Certain of the debt agreements contain restrictive covenants requiring
maintenance of minimum levels of working capital, net worth and debt to
capitalization ratios. As of December 26, 1998, 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 million plus 75% of
earnings and 100% of net losses since June 30, 1993; approximately $20.6 million
of retained earnings at December 26, 1998 was available for payment of
dividends.
As of December 26, 1998, the carrying amount and fair value of the Company's
long-term debt were $25.8 million and $24.4 million, respectively, and as of
December 27, 1997, they were $31.1 million and $29.7 million, respectively.
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
F-12
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Company's Articles of Association that authorized 3 million 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 as such 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 Common Stock thereby sold.
8. SHAREHOLDER RIGHTS PLAN
In early August, 1998, following approval by its Board of Directors, the Company
put in place two Shareholder Rights Plans, one pertaining to the Class A Common
Stock and one pertaining to the Class B Common Stock. These Plans are intended
to protect stockholders by compelling someone seeking to acquire the Company to
negotiate with the Company's Board of Directors in order to protect stockholders
from unfair takeover tactics and to assist in the maximization of stockholder
value. These Rights Plans, which are common for public companies in the United
States, may also be deemed to be "anti-takeover" provisions in that the Board of
Directors believes that these Plans will make it difficult for a third party to
acquire control of the Company on terms which are unfair or unfavorable to the
stockholders. Also, in April, 1998 the Legislature of the State of Vermont
amended a provision of the Vermont Business Corporation Act to provide that the
directors of a Vermont corporation may also consider, in determining whether an
acquisition offer or other matter is in the best interests of the corporation,
the interests of the corporation's employees, suppliers, creditors and
customers, the economy of the state in which the corporation is located and
including the possibility that the best interests of the corporation may be
served by the continued independence of the corporation.
9. STOCK BASED COMPENSATION PLANS
The Company has 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
are granted with an exercise price equal to the market price of the Company's
common stock on the date of grant. The 1985 Option Plan expired in August 1995,
however, some options granted under this plan are outstanding as of December 26,
1998. 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 with provisions for acceleration of vesting upon the occurrence of certain
events. The exercise period cannot exceed ten years from the date of grant.
F-13
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
A summary of the 1985 Option Plan activity is as follows:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price Option Price
Options Per Share Per Share
------- --------------- ----------------------------
<S> <C> <C> <C> <C>
Outstanding at December 30, 1995 357,437 $13.40 $10.63 - $16.75
Granted - - - - -
Exercised - - - - -
Forfeited (109,819) 11.34 10.81 - 16.75
--------- ------
Outstanding at December 28, 1996 247,618 14.31 10.63 - 16.75
Granted - - - - -
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
Granted - - - - -
Exercised (34,859) 16.75 16.75 - 16.75
Forfeited (6,381) 16.75 16.75 - 16.75
---------- ------
Outstanding at December 26, 1998 115,571 $15.63 10.63 - 16.75
========== ======
Options vested at December 26, 1998 100,571 $15.87 10.63 - 16.75
========== ======
</TABLE>
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 events including a change in control (as defined). The exercise period
cannot exceed ten years from the date of grant. At December 26, 1998, 103,500
shares of Class A Common Stock were available under the 1995 Equity Incentive
Plan.
F-14
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
A summary of the 1995 Equity Incentive Plan activity is as follows:
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price Option Price
Options Per Share Per share
------- --------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at December 30, 1995 25,000 $19.00 $19.00 - $19.00
Granted 62,500 13.97 12.38 - 16.00
Exercised -- -- -- --
Forfeited -- -- -- --
------- -----
Outstanding at December 28, 1996 87,500 15.41 12.38 - 19.00
Granted 694,000 12.04 10.88 - 13.89
Exercised -- -- -- --
Forfeited (27,500) 16.00 16.00 - 16.00
-------- -----
Outstanding at December 27, 1997 754,000 12.28 10.88 - 19.00
Granted 42,500 18.19 14.75 - 19.25
Exercised (1,770) 12.63 12.63 - 12.63
Forfeited -- -- -- --
------- ------
Outstanding at December 26, 1998 794,730 $12.60 10.88 - 19.25
======= ======
Options vested at December 26, 1998 281,450 $12.37 10.88 - 19.25
======= ======
</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 26, 1998 142,021 shares had been issued under the plan and 157,979 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 1998, 4,896 shares were issued to non-employee directors. These
shares vest immediately. At December 26, 1998 a total of 12,259 shares had been
awarded under these plans, all of which were fully vested, and 22,741 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.
Exercise prices for options outstanding at December 26, 1998 under all of the
Company's stock plans ranged from $10.63 - $19.25. The weighted average
remaining contractual life of those options is 8.0 years.
As of December 26, 1998, a total of 284,220 shares are reserved for future grant
or issue under all of the Company's stock plans.
F-15
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
The Company's stock option plans provide for the grant of options to purchase
shares of the Company's common stock to both employees and 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 under APB 25, when 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 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 to be 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:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Risk-free interest rates 5.10% 5.53% 6.15%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor 0.32 0.34 0.39
Weighted average expected lives (in years) 2.4 3.6 3.3
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The impact on pro
forma net income may not be representative of compensation expense in future
years when the effect of the amortization of multiple awards would be reflected
in the pro forma disclosures. The Company's pro forma information follows (in
thousands except for earnings per share information):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Pro forma net income $5,935 $3,600 $3,796
Pro forma earnings per share - diluted $0.80 $0.49 $0.53
Weighted average fair value of options
at the date of grant $4.22 $4.16 $4.26
</TABLE>
10. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal 1998 1997 1996
- ------- ----- ----- ------
Current $5,041 $3,300 $1,348
Deferred (2,093) (1,388) 681
------- -------- ---------
2,948 1,912 2,029
------- ------- --------
State
- -----
Current 1,003 686 252
Deferred (417) (210) 128
------- -------- ---------
586 476 380
------- ------- ---------
$3,534 $2,388 $2,409
======= ======= ========
</TABLE>
F-16
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Income taxes computed at the federal statutory rate differ from amounts provided
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Tax at statutory rate 34.0 % 34.0 % 34.0 %
State tax, less federal tax effect 4.0 5.0 6.0
Income tax credits (1.0) (1.0) (1.0)
Tax exempt interest (3.0) (2.9) (2.4)
Other, net 2.1 2.9 1.4
----- ----- -----
Provision for income taxes 36.1 % 38.0 % 38.0 %
===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and are attributable to
the following:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $6,425 $3,872
Inventories 1,413 1,503
Accounts receivable 430 475
Other 475 221
------ ------
Total deferred tax assets 8,743 6,071
Deferred tax liabilities:
Depreciation 5,231 5,193
Other 139 15
------ -------
Total deferred tax liabilities 5,370 5,208
------ ------
Net deferred tax assets $3,373 $ 863
====== ======
</TABLE>
Income taxes paid amounted to $6.2 million, $2.2 million and $1.7 million during
1998, 1997 and 1996, respectively.
F-17
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Numerator:
Net income $6,242 $3,896 $3,926
------ ------ ------
Denominator:
Denominator for basic earnings per share-
weighted-average shares 7,197 7,247 7,189
Dilutive employee stock options 266 87 41
------ ------ -------
Denominator for diluted earnings per share-
adjusted weighted-average shares and
assumed conversions 7,463 7,334 7,230
======= ====== ======
Net income per common share
Basic $0.87 $0.54 $0.55
======= ====== ======
Diluted $0.84 $0.53 $0.54
======= ====== ======
</TABLE>
Options to purchase 32,500 shares of common stock at $19.25 were outstanding
during 1998 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.
Options to purchase 146,811 shares of common stock at prices ranging from $16.75
- - $19.00 and 194,033 shares of common stock at prices ranging from $12.38 -
$16.75 were outstanding in 1997 and 1996, respectively, 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 did not exceed $22.00 during 1998.
12. THE BEN & JERRY'S FOUNDATION, INC.
In October 1985, the Company issued 900 shares of Class A Preferred Stock to the
Ben & Jerry's Foundation, Inc. (the Foundation), a not-for-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 $793,000, $510,000 and $514,000
for 1998, 1997 and 1996 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 combination. The three directors of the Foundation, including
one of the founders of the Company, are members of the Board of Directors of the
Company.
F-18
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
13. 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 contributes one percent of eligible employees' gross annual
salary and may match the contribution up to an additional three percent of the
employee's gross annual salary. Effective January 1, 1998 the Company amended
its employees' retirement plan to permit contributions of shares of its stock to
the plan from time to time. In 1998, the Board of Directors approved the
contribution of $250,000 worth of Class A Common Stock to be allocated among all
eligible employees' accounts. Total contributions by the Company to the profit
sharing, management incentive program and savings plans were approximately $2.7
million, $1.2 million and $670,000 for 1998, 1997 and 1996, respectively.
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:
1999 $1,093
2000 889
2001 767
2002 598
2003 553
Thereafter 1,442
Rent expense for operating leases amounted to approximately $1.5 million, $1.2
million and $1.1 million in 1998, 1997 and 1996, respectively.
15. SEGMENT INFORMATION
Ben & Jerry's Homemade Inc. has one reportable segment: ice cream manufacturing
and distribution. The Company manufactures super premium ice cream, frozen
yogurt, sorbet and various ice cream novelty products. These products are
distributed throughout the United States primarily through independent
distributors and in certain countries outside the United States.
During 1998, 1997 and 1996 the Company's most significant customer, Dreyer's
Grand Ice Cream, Inc., accounted for 57%, 57% and 55% of net sales respectively.
Sales and cash receipts are recorded and received primarily in U.S. dollars.
Foreign exchange variations have little or no effect on the Company at this
time.
F-19
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Information concerning operations by geographic area are as follows:
<TABLE>
<CAPTION>
December 26, December 27, December 28,
1998 1997 1996
<S> <C> <C> <C>
Sales to Unaffiliated Customers
United States $191,777 $166,592 $160,263
Foreign 17,426 7,614 6,892
-------- -------- --------
$209,203 $174,206 $167,155
======== ======== ========
Profit or Loss
United States $ 6,444 $ 4,136 $ 3,662
Foreign (202) (240) 264
--------- --------- --------
$ 6,242 $ 3,896 $ 3,926
======== ======== ========
Assets
United States $143,308 $142,051 $132,481
Foreign 6,193 4,420 4,184
-------- -------- --------
$149,501 $146,471 $136,665
======== ======== ========
</TABLE>
All intersegment sales are made from the United States to the Company's foreign
locations and amounted to $14.6 million, $13.2 million and $12.3 million for
1998, 1997 and 1996, respectively.
Note: Foreign operations include the United Kingdom, France, Canada, The
Netherlands, Belgium and Japan.
16. SELECTED QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
1998 (1) (1) (1) (1)
- ---- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales $41,556 $58,749 $64,566 $44,332
Gross profit 13,964 21,153 24,227 13,634
Net income 380 2,130 2,892 840
Net income per common share
Basic .05 .29 .40 .12
Diluted
.05 .28 .39 .11
1997
Net sales $36,148 $50,701 $49,956 $37,401
Gross profit 10,003 19,150 19,118 11,651
Net (loss) income (1,059) 1,741 2,528 686
Net (loss) income per common share
Basic (.15) .24 .35 .09
Diluted
(.15) .24 .34 .09
</TABLE>
(1) Each quarter represents a thirteen week period for all periods presented
F-20
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
17. SUBSEQUENT EVENT
Effective February 26, 1999, the Company made an investment commitment of $1
million in its Israeli Licensee, which gave the Company a 60% ownership
interest. The Company will consolidate this majority owned subsidiary beginning
March 1999.
F-21
<PAGE>
BEN & JERRY'S HOMEMADE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 26, 1998, December 27, 1997 and December 28, 1996
(In 000's)
<TABLE>
<CAPTION>
Balance at Charged to Charged to
beginning costs and other Deductions Balance at
of year expenses accounts (1) end of year
--------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended December 26, 1998 $1,066 $ 50 $---- $137 $ 979
Allowance for doubtful accounts
(deducted from accounts receivable)
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)
</TABLE>
(1) Accounts deemed to be uncollectible.
F-22
<PAGE>
EXHIBIT 10.8.3
LETTER AMENDMENT AGREEMENT
Letter Amendment Agreement entered into as of January 11, 1999 to that
certain Distribution Agreement between Ben & Jerry's Homemade, Inc., a Vermont
corporation headquartered at 30 Community Drive, South Burlington, Vermont 05403
(the "Manufacturer") and Dreyer's Grand Ice Cream, Inc., a California
corporation located at 5929 College Avenue, Oakland, California 94618 and
certain of its subsidiaries (collectively, the "Distributor") dated as of
January 6, 1987 and as amended from time to time prior to the date hereof (such
Agreement as in effect immediately prior to this Letter Amendment Agreement
being sometimes referred to as the "Prior Agreement").
WHEREAS, the parties have agreed on certain amendments to the Prior
Agreement contained below, which shall be applicable to the distribution of the
Manufacturer's Products by Distributor during the period September 1, 1998
through August 31, 1999 (said period sometimes being referred to as the "Interim
Period").
WHEREAS, the parties have agreed that the Prior Agreement as further
amended hereby (the Prior Agreement as so further amended hereby being sometimes
referred to as the "Old Agreement") shall automatically expire, without any
further notice or actions, at the close of business on August 31, 1999 as more
fully set forth herein;
WHEREAS, the parties have simultaneously entered into a new distribution
agreement of even date (the "New Distribution Agreement") providing for the
purchase, commencing September 1, 1999, by Distributor of products of the
Manufacturer for resale and distribution in the territory specified in said New
Distribution Agreement (a copy of which is attached hereto); and
WHEREAS, the parties have simultaneously terminated, by stipulation of
dismissal, with prejudice, the litigation entitled Dreyer's Grand Ice Cream,
Inc. and Edy's Grand Ice Cream vs. Ben & Jerry's Homemade, Inc. pending in the
United States District Court for the northern District of California.
NOW THEREFORE, in consideration of these premises and the mutual promises
of the parties and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. Prior Notices. No effect shall be given to the termination notice dated
August 31, 1998 from Manufacturer to Distributor and the related notices of the
Distributor to Manufacturer dated September 22, 1998 and of the Manufacturer to
Distributor dated August 26, 1998 and October 12, 1998.
Definitions used in the Prior Agreement are used herein with such defined
meanings, except as otherwise expressly provided herein.
<PAGE>
2. Amendments to the Prior Agreement. The parties agree that the following
amendments (or confirmations in some cases) to the Prior Agreement are effective
from and after this date and shall control, notwithstanding any provisions of
the Prior Agreement.
(i) The area within which Distributor shall purchase and resell
Manufacturer's Products under the Old Agreement shall continue to be the
Territory set forth in the Prior Agreement, subject to the following provisions
of this Letter Amendment Agreement. Distributor's rights in all portions of the
Territory (other than the New York Territory) shall be exclusive to the extent
they were exclusive under the Prior Agreement on August 30, 1998 and shall be
non-exclusive to the extent they were non-exclusive under the Prior Agreement on
August 30, 1998.
Subject to the terms of the existing agreements with such parties,
including the Prior Agreement, as applicable, during the Interim Period,
Manufacturer agrees to maintain or cause to be maintained on essentially the
same terms and conditions, the current distribution relationships with Sunbelt
Distributors Inc. of Houston, Texas, and with Rainbo Distributors of San
Leandro, California, which serves the out-of-home markets in Northern
California.
(ii) Distributor's exclusive rights to purchase and distribute
Manufacturer's Products to the supermarket trade (three cash registers or more)
in the New York Territory (the New York City metropolitan area, including the
five boroughs of New York, Nassau County, Suffolk County, Westchester County and
Northern New Jersey) are hereby agreed to terminate automatically, without any
further notice or action, on April 15, 1999 and Distributor agrees that it will
not make any sales of Manufacturer's Products, directly or indirectly, in such
supermarket trade in the New York Territory or to any person for resale in such
supermarket trade in the New York Territory after April 15, 1999. The parties
understand that the remaining channels of distribution in the New York Territory
remain exclusive until April 15, 1999 and will then continue on a non-exclusive
basis until August 31, 1999. The parties confirm that, notwithstanding any
provision of the Old Agreement, the Manufacturer has no right to make
Distributor's distribution rights non-exclusive in any channel of distribution
in the New York Territory prior to April 15, 1999.
(iii) The parties confirm that, without limiting Distributor's best efforts
obligations under the Prior Agreement to distribute Manufacturer's Products,
Distributor shall, during the Interim Period, be required to purchase
Manufacturer's Products in at least an amount equal to the volume purchase
commitment set forth in Section 8 of the Prior Agreement (which commitment
became applicable as a result of Manufacturer's notice of August 31, 1998 and
Distributor's election of September 22, 1998 and which is hereby confirmed to
remain a commitment binding Distributor during the Interim Period; provided,
however, that this volume purchase commitment shall not be applicable with
respect to the Territory described in Schedule 2A to the New Distribution
<PAGE>
Agreement. The parties understand that such commitment shall be adjusted to
reflect changes in the Territory herein and the method of selling hereunder.
Distributor recognizes that this commitment forms part of the Prior Agreement
and is subject to the "for cause" termination provisions thereof.
(iv) In addition to the purchase prices payable by Distributor for
Manufacturer's Products specified in the Old Agreement, for the period beginning
January 5, 1999 Distributor shall pay a rebate to Manufacturer, payable every
month in arrears 28 days after the end of each month, equal to [ * ] of the
amount of the Distributor's monthly sales of all Products to all customers
including (without duplication) sales by subdistributors (but excluding sales to
or by those Non-affiliated subdistributors making purchases in smaller
quantities [i.e., 10 pallets or less on an occasional basis] up to an aggregate
of [ * ] of Distributor's total monthly sales). The term "Non-affiliated
subdistributors" shall mean subdistributors in which Distributor does not own
more than 20% of the equity interests. As used in this Section, Distributor's
monthly sales shall mean gross revenues less returns and allowances for damaged
goods. Distributor's failure to make rebate payments when due shall constitute a
failure to comply by Distributor which will permit termination of the Old
Agreement by Manufacturer under Section 8 of the Old Agreement unless cured
within 30 days after notice of such failure from Manufacturer to Distributor.
(v) The parties have previously agreed under the Prior Agreement that
Distributor will pay Manufacturer [ * ] of the cost of the trade promotions on
the Manufacturer's Products that have been mutually agreed for the remaining
months of the year 1998. With respect to the period January 1, 1999 through
August 31, 1999 Distributor agrees to pay Manufacturer [ * ] of the trade
promotion dollars in an amount equal to the cost for the same months in 1998
(which are hereby deemed to be mutually agreed in advance through August 31,
1999 and agreed through April 15, 1999 in the case of the supermarket channel in
the New York Territory) provided that Manufacturer pays the remaining [ * ] of
the cost of such promotions. The parties confirm that payments shall be made by
Distributor in the manner that has been the current practice under the Prior
Agreement in 1998, namely promptly by way of off-invoice credits and debits.
For these purposes, trade promotions on the Manufacturer's Products shall
not include print, radio, television or other media advertising placed by the
Manufacturer and all consumer promotions, i.e. scoop trucks, marketing agents
and community agents or slotting, but shall include off-invoice, retailer ads,
retailer display specials, bunker programs, etc. and other trade promotional
techniques which may be used in lieu of such conventional trade promotions. If
Manufacturer wishes to conduct additional trade promotions for the period
* This confidential portion has been omitted and filed separately with the
Commission.
<PAGE>
January 1, 1999 through August 31, 1999, Distributor shall not be required
to make any [ * ] payment of the cost of such additional trade promotions unless
Distributor has given its express consent. If the Distributor does not give its
consent, then Manufacturer may continue such additional trade promotions and
bear [ * ] of the cost thereof.
(vi) During the Interim Period, Distributor shall pay its portion of the
cost of all slotting on the Manufacturer's Products in accordance with Section
4(c) of the Prior Agreement.
(vii) With respect to "selling" activities pertaining to the Products of
the Manufacturer during the Interim Period, it is agreed that Manufacturer shall
take over on January 5, 1999, the "corporate selling", which means selling to
all chain accounts and headquarters selling; provided, however, that Distributor
will continue to provide such services so as to work with Manufacturer to
provide a smooth transition from Distributor to Manufacturer but in no event
shall this continued support last more than three to four weeks after the
execution of this Letter Amendment. Distributor will continue to do the selling
activities "up and down the street" trade at the store level through its route
salesmen and other personnel.
(viii) During the Interim Period, Distributor shall not, directly or
indirectly manufacture, test market, market, promote or sell super premium ice
cream or products as previously defined in the Prior Agreement (and for
convenience, set forth below) except as follows:
Manufacturer agrees that the provisions of the Old Agreement relating to
super premium ice cream or products, including, without limitation, the
provisions of Section 8A thereof, shall not apply to the following activities of
Distributor and that the following activities shall be permitted and shall not
be deemed inconsistent with the performance by Distributor of its best efforts
obligations under the Old Agreement:
1. The development of formulae, processes, marketing and sales plans and
other plans relating to super premium ice cream or products;
2. Test-marketing, promoting, selling and manufacturing (to the extent
appropriate to test-marketing) super premium ice cream or products within the
territory described in Schedule 2A to the New Distribution Agreement, within the
State of California or, beginning April 15, 1999, within the State of New York;
* This confidential portion has been omitted and filed separately with the
Commission.
<PAGE>
"ice cream, frozen yogurt, sorbets, ices or other frozen dessert products
whether dairy based or not (although not to include super premium novelties)
primarily sold in pint-size containers for a current retail price equal to or
greater than an average of $2.19 per pint over a 52 week period adjusted by the
CPI Index (December 1993 to equal 100 for this purpose), and including quart or
half-gallon sizes of such products."
(ix) The Old Agreement, including without limitation the provisions
relating to the New York Territory, shall automatically, without any further
notice or actions, expire at the close of business on August 31, 1999 unless
sooner terminated in accordance with its provisions. Notwithstanding this agreed
expiration of the Old Agreement, all claims arising prior to such expiration for
any breach of or for any amount due under the Old Agreement (excluding any such
claims that have been satisfied, waived or released prior to such expiration)
shall survive such expiration in each case.
(x) All sums payable to Manufacturer for Manufacturer's Products purchased
hereunder shall be paid in arrears 21 days from the date of Manufacturer's
invoice (which shall be the post-marked date of the invoice or any earlier date
of facsimile transmission or other delivery to Distributor) with a 7-day grace
period. As to all sums not paid within such 28 day period, Distributor shall in
addition pay a [ * ] late payment premium.
(xi) The amount of credit available under paragraph 9 of the Old Agreement
shall be changed to [ * ] and all other provisions of the line of credit and its
workings will remain as in the Old Agreement. Said credit line shall be
available unless Distributor is in breach of a material provision of the Old
Agreement or unless Manufacturer determines, pursuant to the exercise of its
regular credit policy, that Distributor's financial condition warrants a change
in the said credit line.
3. The Partiesd' Current Compliance; Best Efforts Standard. The parties
acknowledge and agree that as of the date of this Letter Amendment Agreement
each party is in full compliance with all of the terms of Prior Agreement,
including, without limitation, each party's best efforts obligations, and each
party hereby waives any non-compliance (to the extent the relevant party knows
or has reason to know of non-compliance) by the other under the Prior Agreement
prior to the date of this Letter Amendment Agreement. Notwithstanding any other
provision of the Old Agreement, Distributor shall not be in breach of any of its
best efforts obligations under the Old Agreement if Distributor is performing
under the Old Agreement in a manner substantially consistent with its
performance during the twelve (12) month period
* This confidential portion has been omitted and filed separately with the
Commission.
<PAGE>
immediately preceding the date of execution of this Letter Amendment Agreement
(the "Comparison Period"). Nothing herein shall be deemed to waive compliance
with the "best efforts" commitment under the Prior Agreement.
4. Negotiation of Agreement. Each party and its counsel have cooperated in
the drafting and preparation of this Letter Amendment Agreement and the
documents referred to herein, and any and all drafts relating thereto shall be
deemed the work product of the parties and may not be construed against any
party by reason of its preparation. Accordingly, any rule of law or any legal
decision that would require interpretation of any ambiguities in this Letter
Amendment Agreement against the party that drafted it is of no application and
is hereby expressly waived.
5. Representation and Covenant. Distributor hereby represents that as of
the date hereof it is not in default in any respect under, and will not be in
default in any respect but for the running of any applicable grace period under,
any loan agreement or other agreement for the borrowing of money or capitalized
leases (collectively referred to as the "Financing Agreements").
6. Entire Agreement; Amendments. The Prior Agreement as amended hereby and
the New Distribution Agreement constitute the entire agreement between the
parties, and there are no representations, warranties or conditions or
agreements (other than invoices, purchase orders and the like necessary to
implement said agreements) not contained herein (or in any document not referred
to herein) that constitutes any part hereof or that are being relied upon by any
party hereunder. If any provision of this Letter Agreement is held by a court of
competent judgment to be invalid, void or unenforceable, the other provisions
shall nevertheless be in full force and effect without being impaired or
invalidated in any way.
Except as expressly amended hereby, the Prior Agreement shall continue in
full force and effect.
No provisions of the Old Agreement may be modified or amended except by a
written instrument signed by each of Manufacturer and Distributor.
7. Governing Law. This Letter Amendment Agreement shall be binding on the
parties and successors and assigns, as provided in the Prior Agreement. This
Letter Amendment Agreement and all actions related hereto shall be governed by,
and any dispute relating to this Letter Amendment Agreement or the Prior
Agreement or the entering into of this Letter Amendment Agreement or the
expiration of the Old Agreement shall be resolved in accordance with, the
provisions of the Old Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed and delivered by its duly authorized representative as of the day
and year first above-written.
BEN & JERRY'S HOMEMADE, INC.
By:
Title:
DREYER'S GRAND ICE CREAM, INC.
By:
Title:
EDY'S GRAND ICE CREAM, INC.
By:
Title:
EXHIBIT 10.10
NEW DISTRIBUTION AGREEMENT
This Distribution Agreement (sometimes referred to as the "New Distribution
Agreement" or this "Agreement") is entered into as of this 11th day of January,
1999 by and between Dreyer's Grand Ice Cream, Inc., a Delaware corporation
headquartered at 5929 College Avenue, Oakland, California 94618 ("Distributor")
and Ben & Jerry's Homemade, Inc., a Vermont corporation headquartered at 30
Community Drive, South Burlington, Vermont 05403-6828 ("Manufacturer").
WHEREAS, the parties wish to confirm that a certain Distribution Agreement
dated as of January 6, 1987, as amended, including by a Letter Amendment
Agreement dated on the date hereof (the "Letter Amendment Agreement", and such
1987 Agreement as so amended by the Letter Amendment Agreement being sometimes
referred to as the "Old Agreement"), will automatically expire, without further
notice or actions, as of the close of business on August 31, 1999, and wish,
simultaneously with the entering into the Letter Amendment Agreement and the
filing of the Stipulation of dismissal with prejudice in the pending case of
Dreyer's Grand Ice Cream, Inc. and Edy's Grand Ice Cream vs. Ben & Jerry's
Homemade, Inc., to enter into this Agreement effective today, but providing for
the distribution upon the terms and conditions set forth below, commencing on
September 1, 1999, of the Manufacturer's Products by Distributor in the
Distributor Territory as defined below and for certain related matters set forth
below.
NOW THEREFORE, in consideration of these premises, the mutual promises of
the parties and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. PURPOSES OF AGREEMENT. Manufacturer is engaged in the manufacture, sale
and distribution of ice cream and frozen dessert products manufactured and sold
under the trade name "Ben & Jerry's" and in some cases other names. Distributor
is engaged in the manufacture, sale and distribution of ice cream products and
frozen desserts sold under several brand names including "Dreyer's" and "Edy's"
and including ice cream products manufactured by or for others. The use of the
term "Distributor" in this Agreement means Dreyer's Grand Ice Cream, Inc. and
any controlled subsidiaries thereof engaged in ice cream operations in the
United States (production or distribution). The term "Manufacturer" shall mean
Ben & Jerry's Homemade, Inc. and any controlled subsidiaries thereof engaged in
the United States.
Distributor and Manufacturer desire to enter into this Agreement setting
forth the mutual rights and responsibilities of the parties with respect to the
distribution, resale and promotion of Products (as defined) of the Manufacturer
through the distribution system of the Distributor, being the Distributor's
owned and operated distribution system and its authorized subdistributors.
It is understood that such distribution will commence September 1, 1999,
and that all of the provisions of this Agreement shall only be effective
commencing September 1, 1999, provided, however, that the provisions of Section
13 hereof shall be effective immediately.
<PAGE>
"Best efforts" as used in this Agreement means commercially reasonable use
of available resources to accomplish the specified objectives.
1.1 Representation. Distributor hereby represents that as of the date
hereof it is not in default in any respect under, and will not be in default in
any respect but for the running of any applicable grace period under, any loan
agreement or other agreement for the borrowing of money or capitalized leases.
2. Distribution.
2.1 Appointment of Distributor. Subject to all of the terms hereof,
Manufacturer hereby appoints Distributor, commencing September 1, 1999, as a
non-exclusive distributor for the Products (as defined below) in the Distributor
Territory within the United States as set out in Schedule 2A (the "Distributor
Territory"), which Distributor Territory may be changed by mutual written
consent of the parties.
The Products distributed by Distributor hereunder include (i) Ben & Jerry's
brand items which are pints, quarts, half gallons, single serve and including
bulk sizes of ice cream, frozen yogurt, sorbet, novelties and other frozen
desserts manufactured by the Manufacturer and (ii) subject to the effect of
distribution agreements between Distributor and third parties effective prior to
a designation by Manufacturer adding Products hereunder, such other brand ice
cream, frozen yogurt, sorbet, novelties and other frozen desserts of other
persons as are involved in a significant relationship with Manufacturer as may
be designated by Manufacturer from time to time, all as set forth in Schedule 2B
as supplemented or revised by Manufacturer from time to time with reasonable
notice to Distributor (collectively, the "Products").
Subject to all of the terms hereof, Distributor accepts such appointment
and agrees to use its best efforts to distribute, resell, and deliver the
Products in all flavors and sizes to all types of retail stores and all other
types of accounts in this Distributor Territory and to promote the Products in
accordance with the terms of this Agreement throughout the Distributor
Territory.
In accordance with the foregoing, Distributor will use its best efforts to
meet the distribution performance standards set out in Schedule 2C, and with
such updates and revisions as shall be agreed at least annually with respect to
each ADI or other market area listed on Schedule 2A (the "Performance
Requirements"). It is understood that the Distributor is responsible for meeting
the Performance Requirements on an annual basis on a market by market basis
within the Distributor Territory for the Distributor Territory served directly
(and if expressly applicable under Section 2 of this Agreement, geographic areas
within the Distributor Territory served indirectly, by using authorized
subdistributors). It is understood that, in the event that the Manufacturer adds
an additional distributor in part of the Distributor Territory, the volume
levels contained in the Performance Requirements shall be appropriately reduced
to reflect such appointment.
<PAGE>
The performance goals, i.e. annual business plan volume, etc. (the
"Performance Goals") for any given calendar year, determined as provided below,
shall include the performance matters referred to in the immediately preceding
paragraph that the Distributor reasonably should be expected to achieve in the
Distributor Territory for such year and shall be determined by taking into
account (a) the Performance Goals for the immediately preceding year, (b) actual
performance of the Distributor during the immediately preceding year, (c) any
events or situations out of the ordinary that have occurred in the immediately
preceding year or are reasonably expected to occur in the marketplace in the
following year, which affected or would reasonably be expected to affect
Distributor's performance, and (d) any reasonably reliable market performance
data for the various markets in which the Distributor and other distributors
distribute substantially the same products of the Manufacturer.
The Performance Requirements and the Performance Goals for each calendar
year commencing 2000 shall be proposed no later than October 1 of the preceding
year by Manufacturer, after prior consultation with Distributor, and thereafter
shall be the subject of good faith negotiations by the parties. In the event the
parties fail to reach agreement by October 15 in any year on the Performance
Requirements and Performance Goals for the next calendar year, then the
Performance Requirements and Performance Goals for the next calendar year shall
be determined by the averaging of the Performance Requirements and Performance
Goals (where applicable) for the top four (other than those to be applicable
under this Agreement) of the major national markets used by the Manufacturer for
distribution, planning and operational purposes, provided that, as to 1999
(which consists of the months of September - December), the parties commit to
reach agreement on the 1999 Performance Requirements and Performance Goals by no
later than March 31, 1999.
Distributor confirms that it will, except as otherwise specified in this
Agreement, use its best efforts to follow Manufacturer's general distribution
policies (the "Distribution Policies") as now in effect and as reasonably
amended for application to Manufacturer's distributors generally upon reasonable
written notice to Distributor (see Schedule 2D for the Distribution Policies as
in effect on the date hereof).
2.2 Accounts. It is agreed that Distributor Territory will include, for all
Products except bulk, any and all channels and all retail outlets, including,
but not limited to, supermarkets, A and B stores/supermarkets, military bases,
food service accounts and concession areas, Distributor owned push carts and
bunker promotions in supermarkets, convenience stores, Mom and Pops and
specialty food stores and club stores (including those served on a consignment
basis as provided below). Except for mutually agreed authorized subdistributors
(whether or not Distributor owns a minority interest therein), Distributor will
establish, maintain and operate company-owned and operated trucks, warehouse and
related assets as necessary to obtain the distribution coverage needed to carry
out Distributor's obligations to distribute the Products. Distributor will sell
the Products to accounts whether or not the account wishes to purchase any other
products distributed by Distributor.
<PAGE>
Distributor agrees that it will not knowingly, directly or indirectly,
through independent distributors or otherwise, sell, market or distribute the
Products to any person outside the Distributor Territory or for sale outside the
Distributor Territory.
2.3 Sales in Distributor Territory and Authorized Accounts. Food Service
Accounts. With respect to distribution of Food Service (which shall include
novelties that are also distributed as provided in Section 2.2. above and bulk)
which shall consist of sales to non-grocery channels, including, but not limited
to, concessionaires, captive accounts, institutional accounts, restaurants and
the like and shall also include such scooping venues (other than franchises) as
may be established from time to time by the Manufacturer, the Distributor shall
sell to such Food Service accounts as the Manufacturer may reasonably designate
from time to time. It is understood that there may be changes in the
Manufacturer's designation of Food Service accounts which are to be handled by
the Distributor, and the parties agree to reach reasonable accommodations in
order to realize the potential for sales of the Products to Food Service
accounts.
Distributor agrees to distribute only to the authorized types of accounts
in the Distributor Territory in accordance with this Agreement, including
Sections 2.2 - 2.4. In order to carry out the provisions of this Agreement,
Distributor will abide by and, where applicable, impose these contractual
restrictions on all the persons distributing Products under this Agreement who
are not presently bound by an agreement with Distributor, except when otherwise
authorized in writing by the Manufacturer. Notwithstanding the foregoing,
nothing herein shall permit enlargement of the Distributor Territory.
Nonetheless, in the event that the Products are made available to a
non-permitted account, Distributor agrees to use its best efforts to remedy the
situation. Distributor, consistent with applicable law, will use its best
efforts to terminate any distributor or other person who continues to sell
unauthorized accounts. It is understood that the best efforts obligations of
Distributor with respect to the customer/territorial limitations are to use best
efforts, consistent with law, in enforcing such customer/territorial
restrictions under this Agreement and that Distributor shall not be liable to
the Manufacturer for any unauthorized sales or resales by the other distributors
as long as Distributor has not authorized any sales by other distributors in
derogation of the rights retained by the Manufacturer.
2.4 Distribution to Franchisees, etc. To the extent Manufacturer supplies
the Products to Distributor, Distributor agrees to supply the Products,
including bulk, to Manufacturer's franchised, licensed and company-owned scoop
shops in the Distributor Territory on a drayage basis. Distributor understands
that Manufacturer's franchise agreements require it to serve franchise customers
first in the event of product shortage. Distributor will receive a handling fee
per item delivered as established by Manufacturer, that fee currently being [ *
] per 2 1/2 gallon bulk tub and [ * ] per sleeve of pints and miscellaneous
boxed goods, with [ * ] of the freight to the Distributor to be the
responsibility of Distributor.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
2.5 No Exclusive Rights. As of the date of this Agreement, Manufacturer has
no other distributors in the Distributor Territory for the supermarket channels
of distribution. Before Manufacturer grants any other person a right to
distribute the Products in the Distributor Territory, Manufacturer shall first
give not less than 30 days prior written notice to Distributor and shall consult
with Distributor. Before Distributor commences the distribution of any ice cream
products of another person not being distributed by Distributor on the date
hereof, Distributor will give Manufacturer not less than 30 days prior written
notice and shall consult with Manufacturer.
2.6 Distributor's directly Owned and Operated Distribution System. It is
understood that in the Distributor Territory Manufacturer shall sell the
Products to Distributor for distribution through Distributor's distribution
system (as more specifically described in Section 5.2 hereof ("DSD")) and with a
small percentage distributed by authorized subdistributors of the Distributor.
Distributor agrees that its maximum resale prices on Products resold to
subdistributors will not exceed [ * ] above the prices paid by Distributor for
such Products to the Manufacturer, including freight, under Section 9.
Distributor agrees that all subdistributors shall be subject to the
approval of the Manufacturer, which may not be unreasonably denied. All current
subdistributors are hereby approved by Manufacturer and will be listed on a
Schedule 2.6 to be delivered by Distributor to Manufacturer as soon as
practicable after execution of this Agreement by the parties. Manufacturer shall
have the right to suggest subdistributors subject to the approval of
Distributor, which may not be unreasonably denied. Without limiting any other
provision of this Agreement, the Manufacturer shall also have the right to
appoint an additional subdistributor or, if Distributor does not accept a
designated subdistributor, a co-distributor in an area if Distributor is unable
to sell any Products into a particular class of trade (such as Mom & Pops) or a
particular account of significance (an account with at least six stores) and,
provided that this right shall be limited to sales to such account(s) or class
of trade.
2.7 SUPPLY OF PRODUCTS FOR DISTRIBUTION. Manufacturer agrees to use its
best efforts to make the Products available to Distributor hereunder F.O.B.
Manufacturer's plants in Vermont, in such quantities and flavor assortments as
Distributor may reasonably require, subject only to Manufacturer's right, if
reasonably required by force majeure or other unforeseen circumstances affecting
production delays (subject to any priority contractually required by the
franchise agreements referred to above) to allocate Products between all
distributors and franchisees, including Distributor and Manufacturer's other
distributors (independent or company-owned) in this country or those buying for
distribution in foreign countries. Distributor shall purchase on full pallet
basis (or on a split pallet basis with a picking charge), one flavor per pallet
and on half-trailer load minimum basis.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
2.8 No Discrimination. In order to ensure that competition for the Products
and products of the Distributor is vigorous, Distributor agrees that all
incentive, commission or other compensation programs or benefits for its route
salesmen or other sales and sales-type employees and other employees directly
involved in the distribution function shall have
incentive/commission/compensation/benefit terms relating to distribution of the
Products of the Manufacturer that are at least equal to those relating to
distribution of products manufactured by Distributor or other products
distributed by Distributor and that the instructions to and conduct of the
Distributor's personnel in the Distributor Territory shall be implemented so as
not to discriminate, directly or indirectly, against distribution of the
Products of the Manufacturer.
2.9 Co-Distribution, Etc. As to all ADI's within the Distributor Territory
where Distributor distributes products directly (or through independent
distributors and subdistributors, if and where so permitted by the express terms
of this Agreement) and where Manufacturer may be selling to other distributors,
Distributor will be co-distributors with Manufacturer's other distributors, and,
as between the Manufacturer and Distributor, Distributor will not commit any
material unfair trade practices as to such other distributors or attempt to
unlawfully interfere with their customers, and Manufacturer, when acting as a
distributor, will not commit any material unfair trade practices as to
Distributor or attempt to unlawfully interfere with Distributor's customers, it
being understood that neither Distributor nor Manufacturer shall be responsible
for actions taken or not taken by any of the other distributors or
subdistributors used by them.
3. Marketing and Sales. Manufacturer shall be responsible for marketing of
the Products in accordance with the provisions of this Agreement, subject to the
following:
3.1 Manufacturer and Distributor shall regularly exchange by electronic
means any information necessary to the performance of their respective
responsibilities and roles hereunder. Manufacturer will receive from Distributor
data provided through the standard UCS 867 product transfer/resale set. The
data, provided weekly, will be of the same quality and coverage as has been
supplied by Distributor in 1998 under the Old Agreement. Each party will
cooperate with the other to be able to receive and transmit data through the
standard UCS 867 protocol as soon as practicable.
3.2 Manufacturer will be responsible for the generation and [ * ] of the
cost of the following: all print, radio, tv or other media advertising placed by
the Manufacturer and all consumer promotions, i.e., scoop trucks, marketing
events and community events. Each party shall promptly pay, subject to the
following provisions, [ * ] of the cost of all slotting and trade promotions on
the Manufacturer's Products in the Distributor Territory, which shall not
include the foregoing items in the previous sentence, but shall include
off-invoice, retailer ads, retailer display specials, bunker programs, etc.,
other trade promotional techniques which may be used in lieu of such
conventional trade promotions. So long as each party's cost of trade promotions
and
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
slotting as so defined herein on the Manufacturer's Products does not in the
aggregate exceed for all markets in the Distributor Territory [ * ] per
Equivalent Unit (as such term is defined in Schedule 3.2) per year, the
Distributor shall pay its [ * ] share of such trade promotions and slotting,
without any requirement for consent by Distributor.
With respect to the second category of trade promotions that would in the
aggregate exceed for all markets [ * ] per EU per year [ * ] share of trade
promotions, the parties must mutually agree on the promotion, in the event of
which agreement the cost of the trade promotion shall be shared on a [ * ]
basis, provided that, in the event the parties do not mutually agree on a trade
promotion in this second category, then the Manufacturer may require such trade
promotion to be carried out as directed, but with [ * ] of the cost of such
trade promotion being the responsibility of Manufacturer, it being understood
that Manufacturer shall first be required to send a notice to Distributor
committing to such [ * ] cost responsibility. It is understood that the
provision of [ * ] per EU per year will be subject to appropriate adjustment in
the event of a meaningful change in market conditions for promotion of
Manufacturer's Products (for example, if a retailer materially changes its way
of doing business). All credits or other payments necessary to carry out the
provisions of this Section 3.2 shall be made by the parties on a monthly basis,
and any adjustment necessary to "true up" the amounts shall be made on a
quarterly basis, with the final adjustment promptly after the end of each
calendar year.
3.3 It is understood that, unless otherwise agreed, Manufacturer's sales
representatives shall make presentations and sales calls to Supermarket Channel
(three cash registers or more), convenience store chains, national accounts,
restaurants, and any other accounts designated by Manufacturer following
reasonable notice to Distributor as to presentations and sales calls in the
Distributor Territory, provided that Distributor personnel in the distribution
system may accompany Manufacturer's personnel, unless inappropriate in
Manufacturer's judgment, to assist in the effective promotion of the Products
through the distribution system. With respect to other accounts which are to be
sold by Distributor under this Agreement, including convenience stores (other
than convenience store chains) and Mom & Pops, Manufacturer has determined that
it would be most efficient for sales calls to be made by Distributor personnel
at the direction of the Manufacturer. In addition, all promotions on the
Products must be only those authorized by the Manufacturer, prior to offering
these to accounts.
4. Social Mission Activities. Distributor recognizes the benefit of the
image and reputation of the Products and of the Manufacturer that has been
previously created in the Distributor Territory, including that part of the
image and reputation related to the Manufacturer's approach to marketing
activities, community oriented events, promotions or benefits and the
Manufacturer's Social Mission, as set forth in Schedule 4.1. Distributor
acknowledges its responsibility to maintain and sustain that image and
reputation in Distributor activities as a distributor of the Manufacturer in the
Distributor Territory, including the obligations set forth in Section 4.1
hereof.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
4.1 Distributor shall use its best efforts to integrate into its business
of distributing the Products of Manufacturer hereunder a reasonable number
(given the size of Distributor's operation) of socially responsible activities
which are not inconsistent with those activities and programs which Manufacturer
conducts to implement its social mission, as described in Manufacturer's Annual
Report for 1997 and other Manufacturer's materials attached as Schedule 4.1 and
as reasonably updated from year to year by Manufacturer upon reasonable notice
to Distributor. The Manufacturer acknowledges that the activities of the
Distributor set forth in Schedule 4.2 are examples of such socially responsible
activities and that activities of the Distributor in the "socially responsible"
arena have been acceptable overall through the date of execution of this
Agreement. However, Distributor as is its custom, will strive to make
improvements to the same as may be reasonable in the circumstances. It is also
understood that, in completing the Questionnaire furnished under Schedule 4.1 on
an annual basis, Distributor shall be entitled not to respond to the extent that
the response would include confidential business information of Distributor.
Material failure by Distributor to identify and implement such socially
responsible activity from time to time, after notice of such failure, in
reasonable detail, from Manufacturer and 90 days cure period, shall, unless
reasonably cured by Distributor in said cure period, constitute Cause under
Section 8.3.
5. Delivery; Other Services. Distributor shall be responsible for delivery
of the Products and shall provide the same delivery service and care it provides
for its own products, including service (such intervals in the week as is
necessary, given the retail outlet, to exploit the market potential) for all
types of accounts, products rotation, correct flavor assortment, proper display
and pricing of product, removal of damaged product (provided that in the event
that Product is required to be removed pursuant to a decision of the
Manufacturer, such as discontinuance of a slow moving item, the Distributor
shall be solely entitled to credit for the purchase price previously paid for
such Product), assurance of adequate back stock where allowed and display of
merchandising materials in and around the freezer case. Distributor also agrees
to comply with Manufacturer's general service standards for distributors as set
forth in the Distribution Policies referred to above and including those in
Section 5.2 below.
These services will be provided by Distributor where Distributor delivers
its own products. To the extent that the Products are expressly permitted by
this Agreement to be delivered by independent distributors (or subdistributors)
used by Distributor, Distributor will exercise best efforts to cause such
independent distributors (or subdistributors) to provide delivery service and
care of the Products as aforesaid but shall in no event be liable to
Manufacturer for any act or omission in respect thereof by any such distributor.
However, in the event that such independent distributors (or subdistributors) do
not provide such delivery and care of the Products, Distributor will take action
to correct the deficiency or appoint other distributors (or subdistributors) to
provide the required delivery and care of the Products.
5.2 Temperature/Handling. All Products of the Manufacturer must be stored
at -15 degrees F. The Products may at no time in the channel of distribution go
above -10 degrees F under this Section 5.2 and as provided in the Distribution
<PAGE>
Policies of Manufacturer. In the event Manufacturer determines that Products are
being handled at improper temperatures, Manufacturer reserves the right to
insist that Product be destroyed if quality of such Product is affected at any
time and Distributor will remain responsible for payment for the destroyed
Products.
It is agreed that the required form of market delivery by Distributor under
this Agreement is direct store delivery ("DSD"). DSD is the process by which
consumer demand is fulfilled and delivered at the store level. As part of this
process, Distributor's personnel are directly responsible for developing store
specific orders, schematics, and replenishment schedules. Product delivery to
the store (non involving a retailer's warehouse) and merchandising may be
performed by Distributor or a contracted third party.
6. Other Distribution by the distributor. Notwithstanding any other
provision of this Agreement, the parties acknowledge that Distributor intends to
continue its existing business which may be deemed to compete with
Manufacturer's Products, and may manufacture, sell and/or distribute additional
ice cream products and other products which may compete directly with
Manufacturer's Products, in all parts of the United States and abroad, to all
classes of trade. Manufacturer agrees that nothing in this Agreement is intended
to, or shall limit or affect in any way such activities by Distributor. Nothing
herein shall be deemed to waive compliance with the "best efforts" commitment of
Section 2 hereof.
7. Relationship of Distributor and Manufacturer. The relationship of
Distributor and Manufacturer with respect to sale and purchase of Products is
that of distributor (purchaser) and manufacturer (seller), and nothing in this
Agreement shall be construed to create any agency or partnership or any other
relationship, except as set forth herein.
Neither Distributor nor Manufacturer shall have, nor shall either represent
itself as having, any right, power or authority to create any contract or
obligations, either express or implied, on behalf of, in the name of, or binding
upon the other party, or to pledge the other's credit or to extend credit in the
other's name unless the other party shall consent thereto in advance in writing.
Without limitation of the foregoing, Manufacturer shall not make any
representation concerning Distributor or use of Distributor name in
Manufacturer's marketing and sales effort without Distributor's advance written
approval. Manufacturer does have the right without prior approval of Distributor
to inform the trade that the Products are being distributed through the
Distributor's system, and as is necessary to carry out the purposes of this
Agreement. Without limitation to the foregoing, Distributor shall not make any
representation concerning Manufacturer or use of Manufacturer's name in
Distributor's marketing and sales effort without Manufacturer's advance written
approval. Distributor does have the right without prior approval of Manufacturer
to inform the trade that the Products are being distributed through the
Distributor's system, and as is necessary to carry out the purposes of this
Agreement.
8. Term; Termination.
8.1 Term. The term of this Agreement shall start as of September 1, 1999
and shall continue for an indefinite period, unless in any case sooner
<PAGE>
terminated pursuant to the terms of this Agreement or by mutual agreement;
provided, however, that the provisions of Section 13 hereof shall be effective
immediately.
8.2 Termination Withoug Cause. This Agreement may be terminated after
September 1, 1999 by either Distributor or Manufacturer without cause on not
less than six months prior written notice given to the other party; provided
that no such notice may be given during the months of October, November,
December, January, February or March in any year.
During the termination notice period under Section 8.2, the following
additional obligations set forth in this Section shall apply.
Manufacturer shall not be obligated to appoint additional distributors in
any market area during any termination notice period. The below obligations upon
termination shall only apply to the market area or areas in which the
termination is effective and shall be interpreted accordingly. A "market" or
"market areas" shall be any of the areas listed on Schedule 2A.
In the event that Distributor fails to comply in a material respect in a
market (as defined above) with its best effort obligation during the termination
notice period, this failure shall constitute Cause justifying termination by the
Manufacturer under Section 8.3 of this Agreement, effective immediately upon
written notice to Distributor (notwithstanding any contrary provision in Section
8.3, including any cure period in which to cure such default that would
otherwise be applicable under Section 8.3), or, alternatively, Manufacturer
shall have the right, by written notice to Distributor, to shorten the
termination notice period to a shorter period (but not less than 30 additional
days following the date of the Manufacturer's notice to shorten under this
paragraph). In the event of a termination by Distributor without cause,
Manufacturer may, by written notice to Distributor, shorten the termination
notice period to a shorter period (but not less than 30 additional days
following the date of Manufacturer's notice to shorten under this paragraph).
8.3 Termination for Cause. Either party may at any time terminate this
Agreement, either entirely or as to a particular affected portion of the
Distributor Territory only (as elected in any case by the terminating party, by
written notice to the other party), upon sixty (60) days' written notice to the
other for failure of the other party to comply with any of the terms set forth
herein (which terms shall include the Distributor's failure to satisfy the
Performance Requirements or Performance Goals for Products to be purchased by
Distributor for any year), in any material respect, which shall also have a
material adverse effect on Distributor's distribution performance in either the
Distributor Territory or in the affected area(s) within the Distributor
Territory ("Cause"), unless such default shall have been reasonably cured to the
satisfaction of the other party within sixty (60) days after receipt of such
written notice specifying the failure in reasonable detail. The failure of
Distributor to continue DSD as the method of distribution hereunder shall be
deemed to be "Cause", entitling Manufacturer to give Distributor the 60 day
written notice as specified in this Section. An "affected portion" of the
Distributor Territory shall be any of the markets within the Distributor
Territory that are specified in Schedule 2A.
<PAGE>
8.3.1 Without limiting any of the foregoing provisions of this
Agreement, if Manufacturer notifies Distributor with reasonable specificity that
a particular account or group of accounts in a specific market in the
Distributor Territory is not, in the reasonable judgment of Manufacturer,
receiving appropriate distribution (i.e. in accordance with the Performance
Requirements or the Performance Goals, as in effect for the applicable period);
Distributor shall endeavor to correct the problem. If following sixty (60) days
from such notice, Manufacturer is not, in its reasonable judgment, satisfied
that the problem has been corrected, Manufacturer may propose a solution. If
within a reasonable period (generally thirty (30) days), Distributor agrees to
implement such solution and if Distributor in fact implements such solution,
such notice shall be of no further effect. If Distributor does not so agree to
implement such solution or does not in fact implement such solution,
Manufacturer shall have the right to terminate Distributor's distribution rights
to such account or group of accounts.
8.4 Termination Upon Change in Control. Upon a Change in Control (as
defined below) of the Distributor, the Manufacturer may terminate this Agreement
upon 180 days notice, and upon a Change in Control (as defined) of Manufacturer,
Distributor may terminate this Agreement upon 180 days notice, in each case
given at any time within the nine-month period following the Change in Control
of the other party, provided, further, that if notice of termination for Change
in Control is given more than six months (but not more than nine months) after
the Change in Control, the period of the six month purchase or sales obligation
set forth below shall be shortened by the number of days equal to the number of
days by which the date of the giving of such notice of termination is later than
six months after the date of the Change in Control and the purchase or sale
obligation shall be correspondingly adjusted.
A "Change in Control" of a party means a change in control of that party of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not that party is then subject to such reporting
requirements; provided, however, that, without limitation, such a Change in
Control of that party shall be deemed to have occurred if (a) any "person" (as
such term is used in Section 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of that party representing 50% or more of the combined
voting power of that party's then outstanding securities eligible to vote in the
election of directors; provided, however, that in the event, with respect to a
Change in Control of Distributor, that person (or any entity controlled by or
controlling that person) is a manufacturer or distributor of frozen desserts
which is a significant competitive factor in the United States or, with respect
to a Change in Control of Manufacturer, that person (or any entity controlled by
or controlling that person) is a manufacturer or distributor of frozen desserts
which is a significant competitive factor in the United States, the "50%" figure
shall be "35%" in each case (calculated on a "fully-diluted basis", i.e.
assuming issuance of all shares issuable upon exercise or conversion of any
outstanding options, warrants or other securities or rights irrespective of the
exercise, conversion or exchange price thereof or any term limiting the current
exercisability);
<PAGE>
(b) that party is a party to a merger, consolidation, sale of assets or other
reorganization, an issuance of securities or other transaction, or a proxy
contest, as a consequence of which members of the Board of Directors of that
party in office immediately prior to such transaction or event constitute less
than a majority of the Board of Directors thereafter; or (c) 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 that party'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 of that party.
Notwithstanding the foregoing provisions of the definition, a "Change of
Control" of Distributor will not be deemed to have occurred solely because of
(i) the acquisition of securities of Distributor (or any reporting requirement
under the Act relating thereto) by an employee benefit plan maintained by
Distributor for the benefit of employees or by William F. Cronk or T. Gary
Rogers or their "affiliates" or "associates" (as such terms are defined in Rule
12b-2 under the Act) or members of their family (or trusts for their benefit) or
(ii) any merger, consolidation or reorganization involving Distributor in which
the holders of voting stock having power to cast 80% of the votes in elections
of directors of Distributor immediately prior to such merger, consolidation or
reorganization hold immediately after such transaction voting stock having power
to cast 80% of the votes in elections of directors of the surviving entity in
such transaction, and notwithstanding the foregoing provisions of the
definition, a "Change in Control" of Manufacturer will not be deemed to have
occurred solely because of (i) the acquisition of securities of Manufacturer (or
any reporting requirement under the Act relating thereto) by an employee benefit
plan maintained by Manufacturer for the benefit of employees or by Ben Cohen,
Jerry Greenfield or Perry Odak or other members of the executive management or
Board of Directors or their "affiliates" or "associates" (as such terms are
defined in Rule 12b-2 under the Act) or members of their family (or trusts for
their benefit) or (ii) any merger, consolidation or reorganization involving
Manufacturer in which the holders of voting stock having power to cast 80% of
the votes in elections of directors of the Manufacturer immediately prior to
such merger, consolidation or reorganization hold immediately after such
transaction voting stock having power to cast 80% of the votes in elections of
directors of the surviving entity in such transaction.
8.4.1 In the event of termination by Manufacturer for Change in Control of
Distributor hereunder, Distributor shall be obligated, during the 180 day period
following the date of the giving of notice of termination for Change in Control,
to purchase from Manufacturer for resale and resell and, in the event of
termination by Distributor for Change in Control of Manufacturer hereunder,
Manufacturer shall be obligated, during the 180 day period following the date of
giving of such notice, to sell to Distributor, in each case in each market area
in the Distributor Territory, where Distributor was a distributor hereunder
immediately prior to the termination notice on a quarterly basis, not less than
the same amount of the Products as were purchased hereunder for resale and
<PAGE>
resold in such market area during the comparable calendar quarter of the prior
year, provided that the amount required to be purchased and resold by
Distributor, during such period shall be reduced by the amount of any increased
purchases and resales during the period by such other person (or the
Manufacturer) previously distributing in such market area and by the amount of
any sales of such other person (or the Manufacturer) making distribution for the
first time in such market area of such termination notice period. A "market" or
"market area" shall be any of the areas listed on Schedule 2A. It is understood
that the amount required to be purchased and resold by Distributor pursuant to
this paragraph shall be reduced for adverse changes in market conditions beyond
the reasonable control of Distributor, including, for example, failure of the
Manufacturer to deliver Product or novelties of the Manufacturer or loss of a
chain due to the Manufacturer's action or inaction (and not by Distributor
action or inaction), or decline in consumer preference for super premium ice
cream or novelties on a market-wide basis, so long as Distributor is fulfilling
its applicable best efforts obligations during the applicable period under this
paragraph of Section 8.4.1 of this Agreement and that the amount required to be
sold by Manufacturer pursuant to this paragraph shall be reduced for adverse
changes in market conditions beyond the reasonable control of Manufacturer.
In the event that Distributor fails to comply in a material respect in a
market (as defined above) with the purchase obligations set forth above during
the termination notice period, this failure shall constitute Cause justifying
termination by the Manufacturer under Section 8.3 of this Agreement, effective
immediately upon written notice to Distributor (notwithstanding any contrary
provision in Section 8.3, including any cure period in which to cure such
default that would otherwise be applicable under Section 8.3), or,
alternatively, Manufacturer shall have the right, by written notice to the
Distributor, to shorten the termination notice period to a shorter period (but
not less than 30 additional days following the date of the Manufacturer's notice
to shorten under this paragraph).
The provisions of this Section 8.4 shall be in addition to the provisions
of Sections 8.2 and 8.3.
8.5 In addition to the applicable provisions of Sections 8.2 and 8.4 above
with respect to certain termination notice periods, Distributor agrees to
continue to use its best efforts hereunder during all applicable termination
notice periods under this Agreement to distribute the Products of the
Manufacturer and to preserve Manufacturer's shelf position for the replacement
distributor(s) selected by the Manufacturer upon any termination of this
Agreement in each market in the Distributor Territory listed in Schedule 2A
where Distributor was a distributor hereunder immediately prior to the
applicable termination notice.
Upon any termination of this Agreement, all materials and other data
submitted to Distributor by Manufacturer and still in Distributor possession
shall be returned to Manufacturer and Distributor shall not use the contents
thereof.
<PAGE>
8.6 Post Termination Obligations. Upon the termination of this Agreement by
Manufacturer or by Distributor, Distributor shall return, and Manufacturer
agrees to repurchase all Products (other than unsalable Products) at
Distributor's original purchase price or in the event of Products close to
out-of-code (i.e. less than 60 days before the out of code date) at the
appropriate discount from such original purchase price, all in accordance with
the industry standards, or, at Manufacturer's option (exercisable by written
notice to Distributor), Distributor shall have the right to sell or liquidate in
the Distributor Territory in a manner approved by Manufacturer its then-current
inventory of Products, but not including unsalables in accordance with the
provisions of this Agreement. In the event of any return of Products hereunder,
the terminating party shall pay [ * ] of the applicable reasonable return
shipping charges; provided; however, that if either party terminates for cause,
then in such incident, the breaching party shall pay [ * ] of the applicable
reasonable return shipping charges. For the purposes of this provision,
"unsalables" means damaged or out-of-code Products which shall be destroyed. All
amounts due for Products sold to Distributor and all other amounts due under
Sections 3.2 and 9 and any other provisions of this Agreement shall be
immediately due and payable. Nothing in this Section should affect either
party's obligations to the other upon termination, including any claims for
damages.
9. Prices For Products; Payment Terms; Resale Prices; Related Matters.
9.1 Prices Payable by distributor. Manufacturer agrees to sell the Products
at the prices determined by Manufacturer from time to time (Manufacturer's
regular Distributor Prices), which shall initially be as set forth on Schedule
9.1 attached, F.O.B. Manufacturer's plants in Vermont, with freight arranged by
Manufacturer (or as requested by Distributor) using its reasonable efforts to
obtain the best possible freight charge available and reimbursed by Distributor.
Freight shall be split [ * ] between the parties, payable within 28 days after
receipt of invoice for freight services by the party obligated by this Section
to make such [ * ] reimbursement to the other party. Manufacturer may change
prices to the Distributor when it changes price to its other distributors
(absent unusual geographic market conditions), upon not less than reasonable
notice to Distributor which shall normally be not less than 30 days.
9.1.1 Rebate. Distributor will pay a rebate to Manufacturer in an amount
equal to [ * ] of the Distributor's monthly sales of all Products to all
customers, including (without duplication) sales by subdistributors (but
excluding sales to or by Non-affiliated subdistributors making purchases in
smaller quantities [i.e., 10 pallets or less on an occasional basis] up to an
aggregate of [ * ] of Distributor's total monthly sales), payable monthly in
arrears 28 days after the end of the month via Electronic Funds Transfer (EFT)
[EDI transaction type 820]. The term "Non-affiliated subdistributors" shall mean
subdistributors in which Distributor does not own more than 20% of the equity
interests.
As used in this Section 9.1.1, Distributor's monthly sales shall mean gross
revenues less returns and allowances for damaged goods.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
The parties acknowledge that the pricing method they have, for convenience,
selected to reflect the sharing of the efficiencies or savings may erroneously
be viewed by others as a discriminatory net price charged by Manufacturer to
Distributor, when such view is not consistent with the economics of the matter.
Accordingly, to eliminate any uncertainty Distributor hereby agrees and confirms
that its submission from time to time of any purchase order for Products from
Manufacturer shall irrevocably (i) confirm the release of, and constitute a
covenant not to sue in respect of, any claim of any kind whatsoever that its
payment of such net higher price for the Products covered by such invoice may be
in violation of the price discrimination provisions of the Robinson-Patman Act
and any state price discrimination or unfair competition law and (ii) confirm
the release of, and constitute a covenant not to sue in respect of, any claim of
any kind whatsoever that its payment of such higher price in respect of any
previously submitted purchase order for Products of the Manufacturer may be in
violation of the Robinson-Patman Act or any state price discrimination or unfair
competition law. Each release and covenant not to sue by Distributor shall
remain in effect notwithstanding any inconsistent or contradictory provision in
any purchase order or other instrument unless the provisions of this Section 9.1
are expressly terminated by a written amendment to this Agreement.
9.2 Payment Terms. Payment terms shall be 21 days with a 7-day grace period
from the date of Manufacturer's invoice (which shall be the post-marked date of
the invoice or any earlier date of facsimile transmission or other delivery to
Distributor). Distributor agrees to maintain its internal bill receipt and
payment procedures so that it will be able to meet the payment terms in the
Agreement, and the parties agree that all payments shall be EFT. It is agreed
that these are material terms of this Agreement and that failure of Distributor
to make timely payments shall constitute "Cause" under Section 8.3 (unless cured
or provided therein). Manufacturer also agrees to notify Distributor of any
substantial increase in freight charges before shipment is authorized.
9.3 National Pricing. Notwithstanding the foregoing provisions of Section 2
or this Section 9, it is understood that Manufacturer may, as is common in the
food industry, negotiate "national" or "regional" pricing agreements with
certain accounts (such as airlines or Wal-Mart, to take two examples) where the
Manufacturer's distributors, including the Distributor hereunder, continue to
sell to such accounts, but this Agreement is modified to the extent necessary to
accommodate such national pricing agreements, subject to reaching mutual
agreement between the parties in each case. The parties agree to make such
necessary amendments to implement agreements reached under this Section 9.3. In
the event that the Distributor does not agree to any such national pricing
arrangement within 14 days after a reasonably specific presentation of the
arrangement to the Distributor, then the Manufacturer shall have the right to
arrange for other distribution for such national pricing arrangement.
9.3.1 Consignment Sales. Notwithstanding the provisions of Section 2 and
this Section 9, it is understood that Manufacturer may, as is common in the food
industry, negotiate certain consignment arrangements for sales to club stores or
Food Service accounts and Distributor will use its best efforts to distribute
the Products to such outlets on a consignment basis, provided that consignment
<PAGE>
sales shall require the mutual agreement of the parties. In the event that the
Distributor does not agree to any such consignment arrangement within 14 days
after a reasonably specific presentation of the arrangement to the Distributor,
then the Manufacturer shall have the right to arrange for other distribution for
such consignment arrangement.
9.4 Resake Prices. Distributor shall resell at such prices as it may
determine, and Manufacturer retains no control over such resale prices.
9.5 Trade Shows. The parties confirm that the arrangements and practices
with respect to trade shows attended by Manufacturer that are currently in
effect under the Prior Agreement shall continue under this Agreement, namely
that Distributor agrees to provide delivery of Products to Trade Shows in the
areas in which Distributor is distributing hereunder at no charge, provided that
Manufacturer provides the Products and necessary freezers for such shows.
9.6 Credit Line. Distributor shall have a line of credit under this
Agreement which shall be reasonably established by Manufacturer consistent with
the payment terms defined herein, and Manufacturer shall have the right, from
time to time at its election, to require C.O.D. payment for any Products at any
time when outstanding receivables under this Agreement and any that arose under
the Old Agreement, for purchase of the Products of the Manufacturer thereunder
(whether or not due) exceed the amount of such credit line or at any time when
the circumstances of Distributor's financial condition are such that
Manufacturer would be entitled under its regular credit policies to reduce this
amount of the credit line. Said credit line shall be available unless
Distributor is in breach of a material provision of this Agreement or unless
Manufacturer determines, pursuant to the exercise of its regular credit
policies, that Distributor's financial condition warrants a change in said
credit line. Distributor agrees to pay interest on overdue accounts at an annual
rate equal to the base rate charged to best commercial customers at BankBoston
(or its successor) from time to time plus [ * ]. Interest shall be payable to
Manufacturer on the last day of each month.
10. Compliance With Laws: Quality Control. Each party covenants and agrees
during the term hereof, that it will fully comply with all applicable laws,
ordinances, regulations, licenses and permits of or issued by any federal, state
or local government entity, agency or instrumentality applicable to its
responsibilities hereunder.
Manufacturer shall be responsible for the quality, including proof of
quality and quality control, labeling requirements and truth of labeling, and
fitness for human consumption of the Products delivered hereunder. Manufacturer
warrants and represents that the Products delivered hereunder (1) are not
adulterated or misbranded under the Federal Food Drug and Cosmetic Act, as
amended (the "Act"); and (2) are not articles which may not be shipped pursuant
to Sections 404 or 505 of the Act. Title shall pass upon delivery, F.O.B.
Manufacturer's plants in Vermont. Notwithstanding any other provision hereof,
the parties understand that loss or damage to the Products during shipment,
after delivery F.O.B. Manufacturer's Plant, shall be the responsibility of
Distributor.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
10.1 Recall Possibility. In the event the Manufacturer determines to recall
or withdraw any of its Products (the "Recalled Products"), Distributor will use
its personnel (or a third party retrieval service if Distributor reasonably
believes the recall or withdrawal will be achieved faster, at less expense or
more efficient) to remove any Recalled Products from accounts to which it had
delivered the Recalled Products (and, where it uses any other distributors or
subdistributors, will use its best efforts to cause such other persons to do
likewise) and shall return (or cause to be returned) to Manufacturer or dispose
of Recalled Products as directed by Manufacturer. Distributor shall be
reimbursed by Manufacturer for all Recalled Products in the amount of the net
purchase price previously paid by Distributor for such Recalled Products
including freight costs and for its reasonable out-of-pocket expenses for using
its personnel or third party service to accomplish such recall or withdrawal,
including disposal costs, with payments by Manufacturer for Recalled Products
being in cash or replacement Products, at Manufacturer's option. In the event
that any recall or withdrawal of either party's products significantly disrupts
Distributor's ability to distribute the Manufacturer's Products or
Manufacturer's ability to have such distribution occur, then Manufacturer and
Distributor agree to discuss in good faith compensation for losses incurred by
either party by such disruption.
11. Hold Harmless.
11.1 It is expressly understood and agreed that Distributor shall not be
liable for and Manufacturer shall hold Distributor harmless from any
obligations, claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities of any kind or nature to a person not a
party to this Agreement ("Third Party") arising directly or indirectly out of or
in connection with this Agreement caused by Manufacturer's negligence, willful
misconduct or contractual breach, including but not limited to any costs,
expenses, court costs and reasonable attorneys' fees incurred by Distributor by
reason of any defense to any claims or lawsuits to which Distributor has been
named a party.
11.2 It is expressly understood and agreed that Manufacturer shall not be
liable for and Distributor shall hold Manufacturer harmless from any
obligations, claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities of any kind or nature to a Third Party
arising directly or indirectly out of or in connection with this Agreement
caused by Distributor's negligence, willful misconduct or contractual breach,
including but not limited to any costs, expenses, court costs and reasonable
attorneys' fees incurred by the Manufacturer by reason of any defense to any
claims or lawsuits to which Manufacturer has been named a party.
11.3 Third Person Claims. Promptly after a party has received notice of or
has knowledge of any claim against it covered by Section 11 by a Third Party or
the commencement of any action or proceeding by a Third Person with respect to
any such claim, such party (sometimes referred to as the "Indemnitee") shall
give the other party (sometimes referred to as the "Indemnitor") written notice
of such claim or commencement of such action or proceeding; provided, however,
that the failure to give such notice will not affect the right to
indemnification hereunder with respect to such claim, action or proceeding,
except to the extent that the other party has been actually prejudiced as a
result of such failure. If the Indemnitor has notified the Indemnitee within
thirty (30) days from the receipt of the foregoing notice that it wishes to
<PAGE>
defend against the claim by the Third Person, then the Indemnitor shall have the
right to assume and control the defense of the claim by appropriate proceedings
with counsel reasonably acceptable to Indemnitee, provided that the assumption
of such defense by the Indemnitor shall constitute an acknowledgment of the
obligation to indemnify the Indemnitee hereunder. The Indemnitee may participate
in the defense, at its sole expense, of any such claim for which the Indemnitor
shall have assumed the defense pursuant to the preceding sentence, provided,
however, that counsel for the Indemnitor shall act as lead counsel in all
matters pertaining to the defense or settlement of such claims, suit or
proceeding other than claims that in Indemnitee's reasonable judgment could have
a material and adverse effect on Indemnitee's business apart from the payment of
money damages. The Indemnitee shall be entitled to indemnification for the
reasonable fees and expenses of its counsel for any period during which the
Indemnitor has not assumed the defense of any claim.
12. Trademarks. Distributor understands and agrees that it has received no
right or license, express or implied, to use in any manner the name "Ben &
Jerry's" or any other trade name or trademark used or owned by Manufacturer now
or in the future with the express written consent of Manufacturer except as set
forth herein. Subject to the terms and conditions of this Agreement and to the
continuing performance by Distributor of its obligations hereunder, Manufacturer
hereby grants Distributor a non-exclusive, non-transferable and personal license
to use Manufacturer's trademarks and logos ("Marks") solely in connection with
the distribution, display and sale of the Products pursuant to this Agreement.
Distributor agrees that such Marks shall be used only in the forms and manners
specified and approved in writing in advance by Manufacturer. All rights granted
to Distributor under this Agreement with respect to the Marks shall immediately
cease and terminate upon the termination of this Agreement. The provisions of
this Section shall survive termination.
13. Standstill. Distributor acknowledges that this Agreement is extremely
important to Manufacturer and will involve dependence of Manufacturer upon
Distributor's distribution of a significant amount of the total revenues of
Manufacturer, and accordingly, the Distributor agrees that until termination of
this Agreement, the Distributor and its affiliates (as such term is defined
under the Securities Exchange Act of 1934, as amended) ("Affiliates" for
purposes of this Agreement) shall not without the consent of Manufacturer (a) in
any manner acquire, agree to acquire or make any proposal to acquire, directly
or indirectly, any securities or property of the Manufacturer or any of its
subsidiaries or divisions, or any rights or options to acquire any such
securities or property (other than purchases of products or other properties in
the ordinary course of business), (b) propose publicly or otherwise to enter
into, directly or indirectly, any merger or business combination,
recapitalization, restructuring or other extraordinary transactions involving
the Manufacturer or any of its subsidiaries or divisions or stockholders, (c)
otherwise act, alone or in concert with others, to seek to control or influence
the executive management (except with respect to the distribution relationship
created hereby) or Board of Directors of the Manufacturer, (d) enter into any
contract, arrangement or understanding with any person with respect to any
securities of the Manufacturer (or any subsidiary of the Manufacturer),
including but not limited to any joint venture (other than relating to
distribution), loan or option agreement, put or call, guarantee of loans,
guarantee of profits or division of losses or profits, (e) make, or in any way
<PAGE>
participate, directly or indirectly, in any "solicitation" of "proxies" (as such
terms are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote, or seek to advise or influence any person with respect to the
voting of, any voting securities of the Manufacturer, (f) form, join or in any
way participate in a "group" (as defined under the Securities Exchange Act of
1934, as amended) with respect to any acquisition of or other action relating to
securities or properties (other than purchase and sale of products or properties
in the ordinary course) of the Manufacturer, (g) advise, assist or encourage any
other person or group in connection with any of the foregoing, (h) disclose any
intention, plan or arrangement inconsistent with the foregoing, (i) request the
Manufacturer (or its directors, officers, affiliates, stockholders, employees or
agents), directly or indirectly, to amend or waive any provision of this
paragraph (including this provision), or (j) take any action which might require
either party to make a public announcement regarding the possibility of a
business combination, merger or joint venture (other than relating to
distribution) involving the Manufacturer or any of its subsidiaries or
divisions.
The foregoing provisions shall not be applicable to proposals initiated by
or on behalf of Manufacturer.
13.1 The provisions of Section 13 shall not be applicable upon the
earlier of:
(a) the date on which Manufacturer determines to initiate, solicit or
pursue (1) a sale or transfer of all or substantially all of its assets
or common shares representing 50% or more of the then outstanding
common shares or (2) a merger, reorganization, consolidation or similar
transaction between Manufacturer and any other person in which such
person would obtain ownership of 50% or more of the then outstanding
common shares;
(b) the date on which the Board of Directors of Manufacturer approves of
(or approves in principle, by letter of intent, memorandum of
understanding or similar instrument) any transaction referred to
subparagraph (a) hereof; or
(c) the date on which any person not a member of Manufacturer's Board of
Directors at the date hereof acquires common shares if the effect of
such acquisition would be to cause such person to become the Beneficial
Owner of 40% or more of the then outstanding common shares.
Notwithstanding the foregoing, counsel or other advisors for Distributor
shall be entitled to contact Ropes & Gray, outside counsel for Manufacturer, to
consider whether a proposal by Distributor that is prohibited by this Section 13
would, if it were actually made by Distributor to Manufacturer, require public
disclosure by Manufacturer to Distributor. It is understood that if, in the
judgment of Ropes & Gray as outside counsel for Manufacturer, such a proposal
would require such public disclosure, then such proposal shall continue to be
prohibited by this Section 13 and cannot be made. If the judgment is that such
proposal would not require such public disclosure, then such proposal may be
made, but no further proposal (without complying again with this provision)
otherwise prohibited by this Section 13 may be made by Distributor.
<PAGE>
The same procedure for advisors for Distributor to contact outside counsel
for Manufacturer may be used in the circumstances in which Distributor believes
that, as a result of prior action taken by the Manufacturer or by a third party
unaffiliated with Distributor, Manufacturer may be considered to be "in play" in
the securities market. The parties also recognize under such circumstances the
Manufacturer may, without being requested to do so, invite a proposal from the
Distributor.
Manufacturer will give Distributor immediate notice of the occurrence of
any of these three events.
The Distributor acknowledges that money damages would not be an adequate
remedy for breach of this Section 13, and accordingly, the Manufacturer shall be
entitled to preliminary and permanent injunctive relief without the need to post
a bond to enforce these provisions.
14. Stipulation of Dismissal With Prejudice. The parties shall deliver a
stipulation of dismissal with prejudice to terminate the case entitled Dreyer's
Grand Ice Cream, Inc. and Edy's Grand Ice Cream v. Ben & Jerry's Homemade, Inc.
pending in the United States District Court, Northern District of California,
Case No. C-98-3357 FMS, in the form of Exhibit I attached hereto. Each party
shall be responsible for their own attorney's fees, costs and expenses relating
to said litigation. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the other
provisions shall nevertheless be in full force and effect without being impaired
or invalidated in any way.
15. Confidential Information. Confidential Information about a party
learned under this Agreement shall not be used during or after the term of this
Agreement except for the purpose of this Agreement and, without limiting the
foregoing, such information as to the Manufacturer may not be used by the
Distributor in connection with the production, marketing, distribution or sale
of Distributor's products. Confidential Information shall, for purposes of this
Agreement, include all information relating to a party, its business and
prospect, disclosed by such party from time to time to the other party in any
manner, whether orally, visually or in tangible form (including, without
limitation, documents, devices and computer readable media) and all copies
thereof, created by either party. The term "Confidential Information" shall be
deemed to include all notes, analyses, compilations, studies, interpretations or
other documents prepared by a party which contain, reflect or are based upon the
information furnished to such party by the other party pursuant hereto.
Confidential Information shall not include any information that:
(a) was in a party's possession prior to disclosure by the other party
hereunder, provided such information is not known by such party to be
subject to another confidentiality agreement with or secrecy obligation
to the other party;
(b) was generally known in the ice cream industry at the time of disclosure
to a party hereunder, or becomes so generally known after such
disclosure, through no act of such party;
(c) has come into the possession of a party from a third party who is not
<PAGE>
known by such party to be under any obligation to the other party to
maintain the confidentiality of such information; or
(d) was independently developed by a party without the use of any
Confidential Information of the other party, to the extent that such
independent development is reasonably established by such first party
to the other party.
16. Entire Agreement; Survival. This Agreement and the Addendum of even
date herewith (and any documents referred to herein) represents the entire
agreement and understanding of the parties with respect to the distribution,
commencing September 1, 1999, of Products of the Manufacturer by the
Distributor, the standstill provisions of Section 13, and the stipulation of
dismissal with prejudice provided for above, and there are no representations,
warranties or conditions or agreements (other than implementing invoices,
purchase orders and the like necessary to implement this Agreement) not
contained herein (or in any documents not referred to herein) that constitute
any part hereof or that are being relied upon by any party hereunder.
Notwithstanding any termination of this Agreement, all claims arising prior to
such termination for any breach of or for any amount due under this Agreement
(excluding any such claims that have been satisfied, waived or released prior to
such termination) under this Agreement shall survive such termination, and in
addition, the following sections of this Agreement shall survive any termination
of the Agreement: 3.2 (as to Distributor's obligations to pay sums owing for the
period through termination), 8.6, 9 (as to Distributor's obligations to pay sums
owing for the period through termination), 11, 12, 14, 16 and 19.
17. Negotiation of Agreement. Each party and its counsel have cooperated in
the drafting and preparation of this Agreement and the documents referred to
herein, and any and all drafts relating thereto shall be deemed the work product
of the parties and may not be construed against any party by reason of its
preparation. Accordingly, any rule of law or any legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that drafted it is of no application and is hereby expressly waived.
18. Amendment and Non-Assignability of Agreement. This Agreement may not be
amended or modified except by an instrument in writing signed by an authorized
officer of each party. It is agreed that neither party shall transfer or assign
this Agreement or any part hereof or any right arising hereunder, by operation
of law or otherwise, without the prior written consent of the other. Any
purported assignment without consent shall be void and of no force or effect or,
at the other party's option, shall terminate this Agreement. Subject to the
foregoing, this Agreement shall be binding on the respective parties and their
successors and assigns.
No waiver by either party of any default or breach of any covenant
hereunder shall be implied from any omission by either party to take action on
account of such default if such default persists or is repeated. No express
waiver shall affect any default other than the default specified in the waiver,
and then said waiver shall be operative only for the time and to the extent
therein stated. Waivers by either party of any covenant, term or condition
contained herein shall not be construed as a waiver of any subsequent breach of
the same covenant term or condition. The consent or approval by either party to
<PAGE>
or of any act by either party requiring further consent or approval shall not be
deemed to waive or render unnecessary consent or approval to or of any
subsequent similar acts. If any provision of this Amendment is held by a court
of competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way.
No provision of any other instrument, including purchase orders, invoices,
bills of sale or like instrument which is inconsistent or conflicts with this
Agreement shall control or override any provision of this Agreement.
19. Waiver of Jury Rights; Governing Law; Jurisdiction. Each of the parties
hereto irrevocably waives all rights to a trial by jury with respect to any
dispute relating to this Agreement, the subject matter hereof or the entering
into or termination of this Agreement (a "Dispute"). This Agreement and all
actions related hereto shall be governed by, and any dispute shall be resolved
in accordance with, the laws of the State of New York, excluding its internal
choice of law principles.
In the event of any Dispute, such Dispute, if not resolved in the ordinary
course between representatives of the parties, shall be submitted for settlement
negotiation between the Chief Executive Officer of Manufacturer and Chief
Executive Officer of Distributor, and if such procedure does not resolve such
Dispute within 30 days after a request for such settlement negotiation to the
other party, then and only then shall all such Disputes be resolved exclusively
by the process of litigation in accordance with this Section. If such litigation
is brought by Manufacturer or by Distributor, it shall be brought in the State
of New York, New York City (Manhattan), provided that, if such dispute relates
to Section 13 of this Agreement, it may be brought without resort to the
settlement mechanics described above and it may also be brought by Manufacturer
in the State of Vermont and will be resolved under the laws of the State of
Vermont.
With respect to any litigation relative to any Dispute (other than disputes
arising out of Section 13) that has been commenced in accordance with the
foregoing provisions as to where and when such litigation may be brought, the
parties each hereby: (i) agree that each party has sufficient contacts with New
York City (Manhattan) and Vermont (with respect to disputes relating to Section
13) to subject it to the personal jurisdiction of the state and federal courts
located in New York City (Manhattan) and Vermont (with respect to disputes
relating to Section 13) for purposes of any such Proper Action (a "Proper
Action"); (ii) agree that venue of any Proper Action properly lies in New York
City (Manhattan)and Vermont (with respect to disputes relating to Section 13);
(iii) waives and agrees not to assert in any Proper Action any claim that it is
not subject personally to the jurisdiction of the above-named courts, such
action should be dismissed on grounds of lack of venue or forum non convenien;
should be transferred to any court other than the above-named courts or should
be stayed by reason of the pendency of some other proceeding in any court other
than the above-named courts; (iv) consents and agrees that service of process in
any Proper Action may be made in any manner permitted by law or by registered or
certified mail, return receipt requested, at its principal place of business,
and that service made in accordance with the foregoing is reasonably calculated
to give actual notice of any such action; and (v) waives and agrees not to
assert in any Proper Action any claim that service of process made in accordance
with the foregoing does not constitute good and sufficient service of process,
<PAGE>
including upon written notice. Notwithstanding the foregoing, any proceeding for
temporary restraining order or preliminary injunction may be brought without
resort to the settlement mechanics described but shall only be brought in
accordance with the foregoing provisions as to where litigation with respect to
any Dispute may be brought.
20. Publicity. Both parties shall agree on a joint initial press release on
the entering into of this Agreement, the entering into of the Letter Amendment
Agreement and on the settlement in full, without any payment, of the litigation
referred to in Section 14.
21. Notices. Any notices to be given by either party to the other shall be
in writing by personal delivery or by mail, registered or certified, postage
prepaid with return receipt requested, or by facsimile (only with receipt
confirmed). Notices shall be addressed to the parties at the addresses set forth
on page one or to said other address as shall have been so notified to the other
party in accordance with this Section 21. Notices to Distributor shall be
addressed to Chief Executive Officer, with a copy to Manwell & Milton, 20
California Street, Third Floor, San Francisco, CA 94111, Attention: Edmund R.
Manwell, Esq. Notices to Manufacturer shall be addressed to Chief Executive
Officer, Ben & Jerry's Homemade, Inc., with a copy to Ropes & Gray, One
International Place, Boston, MA 02110, Attention: Howard K. Fuguet, Esq.
IN WITNESS WHEREOF, Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc., have each executed and delivered this Agreement as of the day
and year first above written.
WITNESSED: DREYER'S GRAND ICE CREAM, INC.
By:
Title:
WITNESSED: BEN & JERRY'S HOMEMADE, INC.
By:
Title:
EXHIBIT 10.10.1
ADDENDUM TO NEW DISTRIBUTION AGREEMENT
Addendum dated as of January 11, 1999 to New Distribution Agreement dated
as of January 11, 1999 by and between Dreyer's Grand Ice Cream, Inc.
("Distributor") and Ben & Jerry's Homemade, Inc. ("Manufacturer").
WHEREAS, the parties wish to confirm that the Distributor shall make an
additional payment or payments to Manufacturer if additional volume is added to
the business carried on by the Distributor under the New Distribution Agreement
by not later than September 30, 2000.
NOW, THEREFORE, in consideration of these premises, the mutual promises
of the parties and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. To the extent that Manufacturer adds volume to the business conducted by the
Distributor under said New Distribution Agreement by adding sales of
Manufacturer's products in areas not presently included within the term
"Distributor Territory" as set forth in Schedule 2A to said New Distribution
Agreement, or by adding volume for the Distributor by the addition of
Haagen-Dazs products for distribution within Texas and Los Angeles market by
Distributor (pursuant to agreement with Haagen-Dazs or otherwise), Distributor
will pay Manufacturer the amount required by the formula set forth below in
Paragraph 2. For purposes of this Agreement the additional volume of
Manufacturer's products and Haagen-Dazs products are collectively referred to as
"Replacement Equivalent Units" as the term "Equivalent Unit" ("EU") is defined
in Section 3.2 of the New Distribution Agreement.
2. Multiply by [ * ] the total sales (in dollars) for the time period September
1, 1998 through January 4, 1999 ("Said Time Period") of all Manufacturer's
Products sold by Distributor to all customers including (without duplication)
sales by subdistributors (but excluding sales to or by non-affiliated
subdistributors making purchases in smaller quantities (i.e., 10 pallets or less
on an occasional basis) up to an aggregate of [ * ] of Distributors total sales
during Said Time Period). The term "non-affiliated subdistributors" shall mean
subdistributors in which Distributor does not own more than 20% of the equity
interests.
Minus [ * ]
The remainder dollar amount is divided by the total number of
gallons (EU) of Manufacturer's Products sold to Sunbelt and to ICCI for the
calendar year 1998.
The result of this division is the dollar value for each
Replacement Equivalent Unit which Distributor shall pay to Manufacturer for each
Replacement Equivalent Unit that Manufacturer adds as provided in Paragraph 1
above.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
By way of illustration only: [ * ]
3. Once aggregate payment of an amount equal to the "remainder dollar
amount" (as determined in accordance with Paragraph 2 above) is made by
Distributor, there shall be no further obligation by Distributor to make any
payments under this Addendum. No payments shall be required with respect to any
volume that is added on and after October 1, 2000.
4. Payments due under this Addendum shall be made within 30 days after the
end of a calendar quarter in which an addition of Manufacturer's or Haagen-Dazs
products has first been made.
5. Manufacturer also agrees to provide [ * ] free goods to Distributor
prior to December 31, 1999.
6. This Addendum shall be in addition to the obligations and duties of the
parties under the New Distribution Agreement. No provision of this Addendum may
be modified or amended except by a written instrument signed by each of
Manufacturer and Distributor.
7. This Addendum shall be binding on the parties and their respective
successors and assigns. This Addendum and all actions related hereto shall be
governed by the laws of the State of New York, excluding its internal choice of
law principles. Any dispute or claim relating to this Addendum or the entering
into of this Addendum shall be submitted to arbitration in Manhattan in the City
of New York, New York conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrator(s) may be entered in any court having jurisdiction
thereof. The prevailing party in the arbitration proceeding shall be entitled to
recover from the losing party reasonable attorney's fees and other costs
incurred in the arbitration proceeding.
IN WITNESS WHEREOF, Dreyer's Grand Ice Cream, Inc. and Ben & Jerry's
Homemade, Inc. have each executed and delivered this Addendum as of the day and
year first above written.
DREYER'S GRAND ICE CREAM, INC.
By:
Name:
Title:
BEN & JERRY'S HOMEMADE, INC.
By:
Name:
Title:
* This confidential portion has been omitted and filed separately with the
Commission
EXHIBIT 10.11
THE PILLSBURY COMPANY DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Distribution Agreement") is entered
into as of this 26th day of August, 1998 by and between The Pillsbury Company, a
Delaware corporation headquartered at 200 South Sixth Street, Minneapolis,
Minnesota 55402-1465 ("Distributor"), and Ben & Jerry's Homemade, Inc., a
Vermont corporation headquartered at 30 Community Drive, South Burlington,
Vermont 05403-6828 ("Manufacturer").
WHEREAS, Manufacturer wishes to reduce its dependence on Dreyer's Grand
Ice Cream, Inc. ("Dreyer's"), a leading ice cream company in the market and the
leading ice cream distributor in the market, as a distributor of more than 50%
of the sales of ice cream products of the Manufacturer, and whereas Dreyer's is
the only "national" (more or less) distributor of ice cream in the domestic
market;
WHEREAS Distributor wishes to obtain additional volume of ice cream to
put through its distribution system, in order to realize efficiencies/economies
of scale; and
WHEREAS, Manufacturer wishes to achieve efficiencies in the
distribution of its products and wishes to use Distributor as a distributor in
certain areas and whereas Distributor wishes to act as distributor for ice cream
products of Manufacturer in certain areas.
NOW THEREFORE, in consideration of these premises, the mutual promises
of the parties and other good and valuable consideration receipt of which is
hereby acknowledged, the parties agree as follows
1. Purposes of Agreement. Manufacturer is engaged in the manufacture,
sale and distribution of ice cream products manufactured and sold under the
trade name "Ben & Jerry's" and in some cases other names. Distributor is engaged
in the manufacture, sale and distribution of various food products including,
through its Haagen-Dazs unit, ice cream products sold under the name
"Haagen-Dazs" and including ice cream products manufactured by or for others.
The use of the term "Distributor" in this Agreement means The Pillsbury Company,
including its Haagen-Dazs ice cream operations and any subsidiaries engaged in
ice cream operations in the United States (but not including Haagen-Dazs
operations as a franchisor). The term "Manufacturer" shall mean Ben & Jerry's
Homemade, Inc. and any subsidiaries thereof. At the present time more than half
of Manufacturer's products are distributed by Dreyer's, a leading ice cream
company in the market and the leading ice cream distribution company in the
market, and Manufacturer wishes to diversify the distribution of its Products.
<PAGE>
It is acknowledged by the parties that distribution by Distributor
cannot commence in certain respects and areas until and unless a certain
distribution agreement between Manufacturer and Dreyer's dated as of January 20,
1987 as amended (the "Dreyer's Agreement") has been either terminated by
Manufacturer in accordance with the provisions thereof or appropriately modified
so as to permit the distribution by Distributor contemplated hereunder.
Distributor and Manufacturer desire to enter into this Agreement setting forth
the mutual rights and responsibilities of the parties with respect to the
distribution, resale and promotion of Products (as defined) of the Manufacturer
through the distribution system of the Distributor, being the Distributor's
owned and operated distribution system except where otherwise expressly
provided. The parties agree that such distribution will thereby achieve
efficiencies in the distribution of Products of the Manufacturer, without
causing an increase in the resale prices of such Products to retailers, and will
achieve efficiencies/economics of scale in the distribution of products of the
Distributor, through economies of scale that result from putting the additional
volume of Products of the Manufacturer through the Distributor's distribution
system. The parties further agree that such efficiencies and economies are,
through the pricing and rebate provisions of this Agreement, being economically
shared by the parties, all to the mutual best interest of the parties. Reference
is made to an Exhibit dated the date hereof outlining in summary form the annual
profit improvement for the Manufacturer which, is expected to be achieved, such
Exhibit being a non-binding Exhibit referenced solely to show the contemplation
of the Manufacturer. It is expressly understood that such Exhibit does not
constitute any warranty or representation or promises by the Distributor. The
parties also intend that the implementation of the efficiencies contemplated by
this Agreement should expand the ice cream products available in the marketplace
and will thereby assist consumers in selecting ice cream products from time to
time at retailers, all of which products, including Manufacturer's Products and
Distributor's products, will be in competition with one another.
"Best efforts" as used in this Agreement means commercially reasonable
use of available resources to accomplish the specified objectives or, in some
cases, the overall objective, of this Agreement.
2. Distribution.
2.1. Appointment of Distributor. Subject to all of the terms hereof,
Manufacturer hereby appoints Distributor as a non-exclusive distributor for the
Products in the Distributor Territory within the United States as set out in
Schedule 2A (the "Distributor Territory"), which Distributor Territory may be
changed by mutual written consent of the parties.
The Products distributed by Distributor hereunder include (i) Ben &
Jerry's brand items which are pints, quarts, half gallons, single serve and
including bulk sizes of ice cream, frozen yogurt, sorbet, novelties and other
sub-zero frozen desserts manufactured by the Manufacturer and (ii) such other
brand ice cream, frozen yogurt, sorbet, novelties and other sub-zero frozen
desserts of other persons as are involved in a significant relationship with
Manufacturer (other than simply a distribution relationship) as may be
designated by Manufacturer from time to time, all as set forth in Schedule 2B as
supplemented or revised by Manufacturer from time to time with reasonable
written notice to Distributor (collectively, the "Products").
<PAGE>
Subject to all of the terms hereof, Distributor accepts such
appointment and agrees to use its best efforts to distribute, resell, and
deliver the Products (and with a minimum drop amount of no greater than 3?
gallons) in all flavors and sizes to all types of retail stores and all other
types of accounts in this Distributor Territory (except with respect to certain
channel limitations set forth in Section 2.3) and to promote the Products in
accordance with the terms of this Agreement throughout the Distributor
Territory.
In accordance with the foregoing, Distributor will use its best efforts
to meet the distribution performance standards set out in Schedule 2C, and with
such updates and revisions as shall be agreed at least annually with respect to
each ADI or other market area (the "Performance Requirements"). It is understood
that the Distributor is responsible for meeting the Performance Requirements on
an annual basis on a market by market basis within the Distributor Territory for
the Distributor Territory served directly (and if expressly applicable under
Section 2 of this Agreement, geographic areas within the Distributor Territory
served indirectly, by using subdistributors which are commonly referred to by
Distributor as "internal subdistributors").
The performance goals, i.e. annual business plan volume, etc. (the
"Performance Goals") for any given calendar year, determined as provided below,
shall include the performance matters referred to in the immediately preceding
paragraph that the Distributor reasonably should be expected to achieve in the
Distributor Territory for such year and shall be determined by taking into
account (a) the Performance Goals for the immediately preceding year, (b) actual
performance of the Distributor during the immediately preceding year, (c) any
events or situations out of the ordinary that have occurred in the immediately
preceding year or are reasonably expected to occur in the marketplace in the
following year, which affected or would reasonably be expected to affect
Distributor's performance, and (d) any reasonably reliable market performance
data for the various markets in which the Distributor and such other
distributors distribute substantially the same products of the Manufacturer.
The Performance Requirements and the Performance Goals for each
calendar year commencing 2000 shall be proposed no later than October 1 of the
preceding year by Manufacturer, after prior consultation with Distributor, and
thereafter shall be the subject of good faith negotiations by the parties. In
the event the parties fail to reach agreement by October 15 in any year on the
Performance Requirements and Performance Goals for the next calendar year, then
the Performance Requirements and Performance Goals for the next calendar year
shall be determined by the averaging of the Performance Requirements and
Performance Goals for the top four (other than those to be applicable under this
Agreement) of the major national markets used by the Manufacturer for
distribution, planning and operational purposes provided that, as to 1999, the
parties commit to reach agreement on the 1999 Performance Requirements and
Performance Goals (which may not cover a full 12 months) by no later than
October 15, 1998, and failure of the parties to reach agreement on the 1999
Performance Requirements and Performance Goals by said date shall constitute
"Cause" under Section 8.3.
<PAGE>
Failure by the Distributor to achieve the Performance Requirements
shall not entitle the Manufacturer to a claim for damages against the
Distributor, but may entitle the Manufacturer to terminate for Cause under
Section 8.3. Failure to achieve the Performance Goals shall not constitute Cause
except as provided in the preceding sentence with respect to reaching an
agreement by October 15, 1998.
Within ten days prior to the commencement of resale of the Products,
pursuant to the Transition Period provisions of Section 2.10, the parties agree
that the Products will be available in appropriate quantities in Distributor's
warehouses.
Distributor confirms that it will, except as otherwise specified in
this Agreement, use its best efforts to follow Manufacturer's general
distribution policies (the "Distribution Policies") as now in effect and as
reasonably amended for application to Manufacturer's distributors generally upon
reasonable written notice to Distributor (See Schedule 2D for the Distribution
Policies as in effect for the Distributor on the date hereof.)
2.2. Accounts. Subject to Section 2.3, it is agreed that Distributor
Territory will include, for all Products except bulk, any and all channels and
all retail outlets, including, but not limited to, supermarkets, A and B
stores/supermarkets, military bases, food service accounts and concession areas,
Distributor owned push carts and bunker promotions in supermarkets, convenience
stores, Mom and Pops and specialty food stores and club stores (on a consignment
basis as provided below). Distributor will establish, maintain and operate
company-owned and operated trucks, warehouse and related assets as necessary to
obtain the distribution coverage needed to carry out Distributor's obligations
to distribute the Products. Distributor will sell the Products to accounts
whether or not the account wishes to purchase any other products distributed by
Distributor.
Distributor agrees that it will not knowingly, directly or indirectly,
through independent distributors or otherwise, sell, market or distribute the
Products to any person outside the Distributor Territory or for sale outside the
Distributor Territory.
2.3. Sales in Distributor Territory and Authorized Accounts; Smaller
Class of Trade Channel; Food Service Accounts. In the geographic markets within
the Distributor Territory set forth on Schedule 2.3, Distributor shall
distribute to the "Supermarket Channel" (which shall mean A and B supermarkets
and stores with three cash registers or more) and not to the "Smaller Class of
Trade" (meaning convenience stores, Mom & Pops and the like, other than
convenience store chains), which Smaller Class of Trade channel in such
geographic markets are being handled by other distributors of the Manufacturer
pursuant to Manufacturer's decision that such arrangement is in the best
interest of its marketing program.
With respect to distribution of Food Service (which shall include
novelties that are also distributed as provided in Section 2.2 above and bulk)
which shall consist of sales to non-grocery channels, including, but not limited
to, concessionaires, captive accounts, institutional accounts, restaurants and
the like and shall also include such scooping venues (other than franchises) as
may be established from time to time by the Manufacturer, the Distributor shall
sell to such Food Service accounts as the Manufacturer may reasonably designate
from time to time. It is understood that there may be changes in the
Manufacturer's designation of Food Service accounts which are to be handled by
the Distributor, and the parties agree to reach reasonable accommodations in
order to realize the potential for sales of the Products to Food Service
accounts.
<PAGE>
Distributor agrees to distribute only to the authorized types of
accounts in the Distributor Territory in accordance with this Agreement,
including Sections 2.3 and 2.4. In order to carry out the provisions of this
Agreement, Distributor will abide by and, where applicable, impose these
"account" or "channel" contractual restrictions on all the persons distributing
Products under this Agreement except when otherwise authorized in writing by the
Manufacturer. Nonetheless, in the event that the Products are made available to
a non-permitted account, Distributor agrees to use its best efforts to remedy
the situation. Distributor, consistent with applicable law, will use its best
efforts to terminate any distributor or other person who continues to sell
unauthorized accounts. It is understood that the best efforts obligations of
Distributor with respect to the channel/customer limitations under this Section
2.3 are to use best efforts, consistent with law, in enforcing such customer
restrictions under this Section 2.3 and Section 2.2 and that Distributor shall
not be liable to the Manufacturer for any unauthorized sales or resales by the
other distributors as long as Distributor has not authorized any sales by other
distributors in derogation of the rights retained by the Manufacturer.
2.4. Distribution to Franchisees, etc. Distributor agrees to supply the
Products, including bulk, to Manufacturer's franchised, licensed and
company-owned scoop shops in the Distributor Territory on a drayage basis.
Distributor understands that Manufacturer's franchise agreements require it to
serve franchise customers first in the event of product shortage. Distributor
will receive a handling fee per item delivered as established by Manufacturer,
that fee currently being [ * ] per 2-1/2 gallon bulk tub and [ * ] per sleeve of
pints and miscellaneous boxed goods, with [ * ] of the freight to the
Distributor to be the responsibility of Distributor. The parties agree to meet
and review the appropriateness of these fees at least annually.
2.5. No Exclusive Rights. Before Manufacturer grants any other person a
right to distribute the Products in the Distributor Territory, Manufacturer
shall first give not less than 90 days prior written notice to Distributor and
shall consult with Distributor. Before Distributor commences the distribution of
any ice cream products of another person not being distributed by Distributor on
the date hereof, Distributor will give Manufacturer not less than 90 days prior
written notice and will consult with Manufacturer.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
2.6. Distributor's Directly Owned and Operated Distribution System. It
is understood that in the Distributor Territory Manufacturer shall sell the
Products to Distributor for distribution through Distributor's directly owned
and operated distribution system, including trucks and personnel, and with a
small percentage distributed by subdistributors of the Distributor (referred to
by Distributor as "internal distributors"). Distributor agrees that its maximum
resale prices on Products resold to the "internals" will not exceed [ * ]
(weighted average) above the prices paid by Distributor for such Products to the
Manufacturer under the first paragraph of Section 9.1. The parties agree that,
if the size of Distributor's owned and operated distribution system increases,
the parties will discuss whether Manufacturer shall sell its Products to
Distributor's owned and operated distribution system in additional areas not now
included in Distributor Territory.
2.6.1. Distributor acknowledges that it has been informed that in the
geographic area listed on Schedule 2.6.1 Manufacturer shall sell or may sell the
Products to independent distributors who may be the same persons who are
purchasing products of Distributor from Distributor as distributors taking
delivery from the Distributor at such distributor's warehouse (referred to by
Distributor as "external distributors"). Distributor agrees that in any such
market area Manufacturer may use other direct distributors or, subject to
reaching mutual agreement between the parties, may sell Products to Distributor
which shall then use its best efforts to resell to such persons who act as such
"external distributors" for Distributor. In this connection it is understood
that Distributor will use its best efforts to assist Manufacturer in concluding
distribution agreements with such externals and during the Transition Period
shall provide distributor management without a fee and, if requested by
Manufacturer thereafter, for a fee of [ * ] of the purchase prices of such
Products by such externals, or as otherwise mutually agreed between the parties.
In the event that the Manufacturer is not able to conclude distribution
agreements with one or more of the external distributors on Schedule 2.6.1 with
respect to areas outside the Distributor Territory, as a result of Dreyer's not
distributing Products of the Manufacturer in such areas, then Distributor agrees
to use its best efforts to purchase Products for resale to such "external
distributors" for distribution by such external distributors in the specified
areas.
2.7. Supply of Products for Distribution. Manufacturer agrees to use
its best efforts to make the Products available to Distributor hereunder F.O.B.
Manufacturer's plants in Vermont, in such quantities and flavor assortments as
Distributor may reasonably require, subject only to Manufacturer's right, if
reasonably required by force majeure or other unforeseen circumstances affecting
production delays (subject to any priority contractually required by the
franchise agreements referred to above) to allocate Products between all
distributors and franchisees, including Distributor and Manufacturer's other
distributors (independent or company-owned) in this country or those buying for
distribution in foreign countries. Distributor shall purchase on full pallet
basis (or on a split pallet basis with a picking charge), one flavor per pallet
and on half-trailer load minimum basis.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
2.8. No Discrimination. In order to ensure that competition for the
Products and products of the Distributor is vigorous, Distributor agrees that
all incentive, commission or other compensation programs or benefits for its
route salesmen or other sales and sales-type employees and other employees
involved in the distribution function up through the level of Regional Vice
Presidents of Distributor shall have incentive/commission/compensation/benefit
terms relating to distribution of the Products of the Manufacturer that are at
least equal to those relating to distribution of products manufactured by
Distributor or other products distributed by Distributor and that the
instructions to and conduct of the Distributor's personnel in the Distributor
Territory shall be implemented so as not to discriminate, directly or
indirectly, against distribution of the Products of the Manufacturer.
Notwithstanding the foregoing, in the event that Manufacturer, Distributor or
another manufacturer of frozen dessert products carried by the Distributor has a
time-limited special incentive program on certain items, there can be special
incentive commission on similar arrangements for Distributor's personnel for the
limited duration of such programs, with 30 days written notice to the Regional
Vice Presidents of Distributor, that will not be considered to be a violation of
this Section 2.8.
2.9. Co-distribution, etc. As to all ADI's within the Distributor
Territory where Distributor distributes products directly (or through
independent distributors and subdistributors, if and where so permitted by the
express terms of this Agreement) and where Manufacturer may be selling to other
distributors, Distributor will be co-distributors with Manufacturer's other
distributors, and, as between the Manufacturer and Distributor, Distributor will
not commit any material unfair trade practices as to such other distributors or
attempt to unlawfully interfere with their customers, and Manufacturer, when
acting as a distributor, will not commit any material unfair trade practices as
to Distributor or attempt to unlawfully interfere with Distributor's customers,
it being understood that neither Distributor nor Manufacturer shall be
responsible for actions taken or not taken by any of the other distributors or
subdistributors used by them.
2.10 Transition Period. Distributor acknowledges that Manufacturer's
ability to sell certain products within the definition of Products to
Distributor, and therefore the effective implementation of the transactions
contemplated by this Agreement, is, to the extent Dreyer's has exclusive rights,
conditioned upon and subject to either or a combination of (i) Manufacturer's
termination of the Dreyer's Agreement without cause by notice given not later
than September 1, 1998 (except as to the New York Territory as defined in the
Dreyer's Agreement) or (ii) a modification thereto consistent with Section 2 of
this Agreement as to the Distributor Territory (or portions thereof) so as to
permit the distribution contemplated by this Agreement. In other areas or with
respect to certain products within the defined Products, Dreyer's has only
non-exclusive rights under the Dreyer's Agreement and Manufacturer may appoint
Distributor as an additional distributor, pursuant to the provisions of the
Dreyer's Agreement.
<PAGE>
In this connection, the parties acknowledge that it is not certain
under the Dreyer's Agreement whether notice of termination without cause as to
the New York Territory (as defined therein) may be given prior to December 31,
1998 but that Manufacturer has the right to make Dreyer's rights in said New
York Territory non-exclusive upon not less than 90 days notice. Accordingly,
this Agreement does not provide for sales of Products to Distributor for resale
in said New York Territory prior to the effective date of termination as to the
New York Territory, except following 90 days written notice given by the
Manufacturer to Dreyer's making Dreyer's rights in the said New York Territory
non-exclusive.
Upon the giving of notice of termination by Manufacturer without cause
under the Dreyer's Agreement (not including the New York Territory), Dreyer's
rights under the Dreyer's Agreement are or become non-exclusive, unless Dreyer's
elects to give notice to retain its exclusivity (in which event Manufacturer
plans to give notice to Dreyer's to shorten such exclusivity to a period of not
more than 90 days, as permitted under the Dreyer's Agreement). Accordingly,
Distributor agrees to use its best efforts to commence distribution of the
Products on such date not later than the date or dates in the various areas
within the Distributor Territory that Dreyer's rights are or have become
non-exclusive in such areas, it being understood that the parties will
reasonably cooperate to select a date or dates which are appropriate to carry
out the objectives of this Agreement. In any event, Distributor agrees that it
shall fully implement distribution of the Products in the Distributor Territory
by March 1, 1999, provided that it has received six months prior written notice
or such lesser notice which is reasonable in the judgment of the Distributor in
terms of the time needed for Distributor to gear up with respect to any market
in question.
The parties each agree to use best efforts to take all planning and
action in the Transition Period in order to carry out the purposes of this
Agreement, and in particular to avoid any hiatus or dislocation in the
marketplace for the availability of the Products as a result of Manufacturer's
election to shift certain distribution of its Products from existing
distributors to the Distributor as provided in this Agreement.
2.11. Regular Performance Meetings. The parties agree that executives
of the parties who are not involved in the day-to-day distribution operations
hereunder shall meet at least four times a year to discuss operations under this
Agreement with the intent to resolve issues of performance before they become
potentially major items and consider changes to meet changing market conditions.
Such meetings will be at a place selected by one party for the first meeting and
then at a place selected by the other party for the second meeting, etc., or at
such other places as shall be mutually agreed. The parties agree that these
meetings are an important part of this Agreement.
3. Marketing and Sales. Manufacturer shall be responsible for marketing
of the Products in accordance with the provisions of this Agreement, subject to
the following:
3.1. Manufacturer and Distributor shall regularly exchange by
electronic means any information necessary to the performance of their
respective responsibilities and roles hereunder.
<PAGE>
Manufacturer will receive from Distributor data provided through the standard
UCS 867 product transfer/resale set. The data, provided weekly, will include
customer name and general location (but without an actual address), delivery
date, quantity, item code/description, price and allowance. Each party will
cooperate and Ben & Jerry's will use its best efforts to be able to receive and
transmit data through the standard UCS 867 protocol as soon as practicable.
3.2. Manufacturer will be responsible for the generation and [ * ] of
the cost of the following: all print, radio, tv or other media advertising
placed by the Manufacturer and all consumer promotions, i.e., scoop trucks,
marketing events, community events and slotting. Each party shall promptly pay,
subject to the following provisions, [ * ] of the cost of all trade promotions
on the Manufacturer's Products, which shall not include the foregoing items in
the previous sentence, but shall include off-invoice, retailer ads, retailer
display specials, bunker programs, etc. and other trade promotional techniques
which may be used in lieu of such conventional trade promotions. So long as each
party's cost of trade promotions on the Manufacturer's Products does not in the
aggregate exceed for all markets in the Distributor Territory [ * ] on pints,
quarts and half gallons per gallon per year, the Distributor shall pay its [ * ]
share of such trade promotions, without any requirement for consent by
Distributor. With respect to the second category of trade promotions that would
in the aggregate exceed for all markets [ * ] per gallon per year for each
party's [ * ] share of trade promotions, the parties must mutually agree on the
promotion, in the event of which agreement the cost of the trade promotion shall
be shared on a [ * ] basis, provided that, in the event the parties do not
mutually agree on a trade program in this second category, then the Manufacturer
may require such trade promotion to be carried out as directed, but with [ * ]
of the cost of such trade promotion being the responsibility of Manufacturer, it
being understood that Manufacturer shall first be required to send a notice to
Distributor committing to such [ * ] cost responsibility. It is understood that
the provision of [ * ] per gallon on pints, quarts and half gallons per year
will be subject to appropriate adjustment in the event of a meaningful change in
market conditions for promotion of Manufacturer's Products. All credits or other
payments necessary to carry out the provisions of this Section 3.2 shall be made
by the parties on a monthly basis, and any adjustment necessary to "true up" the
amounts shall be made on a quarterly basis, with the final adjustment promptly
after the end of each calendar year.
3.3. It is understood that, unless otherwise agreed, Manufacturer's
sales representatives shall make presentations and sales calls to Supermarket
Channel (three cash registers or more), convenience store chains, national
accounts, restaurants, and any other accounts designated by Manufacturer
following reasonable notice to Distributor as to presentations and sales calls
in the Distributor Territory, provided that Distributor personnel in the
distribution system may accompany Manufacturer's personnel, unless inappropriate
in Manufacturer's judgment, to assist in the effective promotion of the Products
through the distribution system. With respect to other accounts which are to be
sold by Distributor under this Agreement, including convenience stores (other
than convenience store chains) and Mom & Pops, Manufacturer has determined that
it would be most efficient for sales calls to be made by Distributor personnel
at the direction of the Manufacturer. In addition, all promotions on the
Products must be only those authorized by the Manufacturer, prior to offering
these to accounts.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
4. Social Mission Activities. Distributor recognizes that in taking
over the distribution of the Products of the Manufacturer in the Distributor
Territory it is succeeding to the benefit of the image and reputation of the
Products and the Manufacturer that has been created in the Distributor
Territory, including that part of the image and reputation related to the
Manufacturer's approach to marketing activities, including among other things,
community oriented events, promotions or benefits and Manufacturer's Social
Mission, as set forth in Schedule 4. Distributor acknowledges its responsibility
to maintain and sustain that image and reputation in Distributor activities as a
distributor of the Manufacturer in the Distributor Territory, including the
obligations set forth in Section 4.1 hereof.
4.1. Distributor shall use its best efforts to integrate into its
business of distributing the Products of Manufacturer hereunder a reasonable
number (given the size of Distributor's operation) of socially responsible
activities which are not inconsistent with those activities and programs which
Manufacturer conducts to implement its social mission, as described in
Manufacturer's Annual Report for 1997 and other Manufacturer's materials
attached as Schedule 4.1 and as reasonably updated from year to year by
Manufacturer upon reasonable notice to Distributor. The Manufacturer
acknowledges that the activities of the Distributor set forth in Schedule 4.2
are examples of such socially responsible activities. It is understood that, in
completing the Questionnaire furnished under Schedule 4.1 on an annual basis,
Distributor shall be entitled not to respond to the extent that the response
would include confidential business information of Distributor. Material failure
by Distributor to identify and implement such socially responsible activity from
time to time, after notice of such failure, in reasonable detail, from
Manufacturer and 90 days cure period, shall, unless reasonably cured by
Distributor in said cure period, constitute Cause under Section 8.3. It is
understood that such socially responsible activity will be part of the annual
Performance Goals under Section 2.1 which shall then become part of the
Performance Requirements.
5. Delivery; Other Services.
5.1. Distributor shall be responsible for delivery of the Products and
shall provide the same delivery service and care it provides for its own
products, including service (such intervals in the week as is necessary, given
the retail outlet, to exploit the market potential) for all types of accounts,
products rotation, correct flavor assortment, proper display and pricing of
product, removal of damaged product (provided that in the event that Product is
required to be removed pursuant to a decision of the Manufacturer, such as
discontinuance of a slow moving item, the Distributor shall be solely entitled
to credit for the purchase price previously paid for such Product), assurance of
adequate back stock where allowed and display of merchandizing materials in and
around the freezer case. Distributor also agrees to comply with Manufacturer's
general service standards for distributors as set forth in the Distribution
Policies referred to above and including those in Section 5.2 below.
<PAGE>
These services will be provided by Distributor where Distributor
delivers its own products. To the extent that the Products are expressly
permitted by this Agreement to be delivered by independent distributors (or
subdistributors) used by Distributor, Distributor will exercise best efforts to
cause such independent distributors (or subdistributors) to provide delivery
service and care of the Products as aforesaid but shall in no event be liable to
Manufacturer for any act or omission in respect thereof by any such distributor.
However, in the event that such independent distributors (or subdistributors) do
not provide such delivery and care of the Products, Distributor will take action
to correct the deficiency or appoint other distributors (or subdistributors) to
provide the required delivery and care of the Products.
5.2. Temperature/Handling. All Products of the Manufacturer must be
stored at -15 degrees F. The Products may at no time in the channel of
distribution go above -10 degrees F under this Section 5.2 and as provided in
the Distribution Policies of Manufacturer. In the event Manufacturer determines
that Products is being handled at improper temperatures, Manufacturer reserves
the right to insist that Product be destroyed if quality of such Product is
affected and at any time and Distributor will remain responsible for payment for
the destroyed Products.
Manufacturer understands and requires that Distributor's form of market
delivery is direct store delivery, and each of the Manufacturer and Distributor
agrees to use its best efforts to convert the warehouse distribution to Giant
stores to DSD.
6. Other Distribution by the Distributor. Subject to the foregoing,
Distributor reserves the unrestricted right to sell products (other than the
Products purchased from the Manufacturer) to anyone within or without the
Distributor Territory; however, in accepting appointment as Manufacturer's
distributor hereunder, Distributor agrees to use its best efforts in
enthusiastically expanding the sales volume of the Products and their position
in the case throughout the entire Distributor Territory.
7. Relationship of Distributor and Manufacturer. The relationship of
Distributor and Manufacturer with respect to sale and purchase of Products is
that of distributor (purchaser) and manufacturer (seller), and nothing in this
Agreement shall be construed to create any agency or partnership or any other
relationship, except as set forth herein.
Neither Distributor nor Manufacturer shall have, nor shall either
represent itself as having, any right, power or authority to create any contract
or obligations, either express or implied, on behalf of, in the name of, or
binding upon the other party, or to pledge the other's credit or to extend
credit in the other's name unless the other party shall consent thereto in
advance in writing. Without limitation of the foregoing, Manufacturer shall not
make any representation concerning Distributor or use of Distributor name in
Manufacturer's marketing and sales effort without Distributor's advance written
approval. Manufacturer does have the right without prior approval of Distributor
to inform the trade that the Products are being distributed through the
Distributor's system, and as is necessary to carry out the purposes of this
Agreement. Without limitation of the foregoing, Distributor shall not make any
representation concerning Manufacturer or use of Manufacturer's name in
Distributor's marketing and sales effort without Manufacturer's advance written
approval. Distributor does have the right without prior approval of Manufacturer
to inform the trade that the Products are being distributed through the
Distributor's system, and as is necessary to carry out the purposes of this
Agreement.
<PAGE>
8. Term; Termination.
8.1 Term. The term of this Agreement shall start as of the date hereof,
subject to the provisions of Section 2.10 pertaining to the Transition Period,
and shall continue until October 1, 2002, and thereafter for an indefinite
period, unless in any case sooner terminated pursuant to the terms of this
Agreement or by mutual agreement.
8.2. Termination Without Cause. This Agreement may be terminated by
Distributor without cause on not less than 12 months prior written notice to
Manufacturer given to Manufacturer after October 1, 2002, and may be terminated
by Manufacturer without cause at any time on not less than five months prior
written notice to Distributor provided that, in the event that such termination
by Manufacturer occurs prior to October 1, 2002, Manufacturer shall pay the
amount of undepreciated tax book value of the Distributor for assets invested in
the distribution system under this Agreement, all as set forth on Schedule 8.2.
In the event that there is a Change of Control of Manufacturer in a manner
deemed to be "hostile" by the Board of Directors of Manufacturer prior to said
Change in Control (it being understood that said Board of Directors shall have
sole and conclusive authority to make such determination as to whether the
change is "hostile" for purposes of this Agreement), then Manufacturer shall be
required to give not less than 24 months written notice instead of five months
written notice in order to terminate this Agreement without cause under the
Section 8.2.
During the termination notice period under Section 8.2, the following
additional obligations set forth in this Section shall apply.
In the event of termination hereunder by Distributor without cause,
Distributor shall be obligated, during the twelve (12) months' notice period, to
continue to purchase Products from Manufacturer for resale and use its best
efforts to distribute in each market in the Distributor Territory listed in
Schedule 2A where Distributor was a distributor hereunder immediately prior to
the termination notice. In connection therewith, Distributor shall distribute
suchProducts in compliance with the Performance Requirements in each such market
area, which if not agreed specifically shall be the Performance Requirements in
effect during the comparable period in the prior year.
Provided, however, that the Manufacturer may, upon 30 days' written
notice to Distributor after Distributor has given notice of termination without
cause, elect to shorten the 12-month notice period to a shorter period (but not
less than five months), in which event Distributor's performance obligation for
the 12-month notice period set forth above shall be prorated to such shortened
notice period.
Manufacturer shall not be obligated to appoint additional distributors
in any area during any termination notice period. The above obligations upon
termination shall only apply to the market area or areas in which the
termination is effective and shall be interpreted accordingly.
<PAGE>
In the event that Distributor fails to comply in a material respect in
a market (as defined above) with the Performance Requirements during the
termination notice period, this failure shall constitute Cause justifying
termination by the Manufacturer under Section 8.3 of this Agreement, effective
immediately upon written notice to Distributor (notwithstanding any contrary
provision in Section 8.3, including any cure period in which to cure such
default that would otherwise be applicable under Section 8.3), or,
alternatively, Manufacturer shall have the right to shorten the termination
notice period to a shorter period (but not less than 30 additional days
following the date of the Manufacturer's notice to shorten under this
paragraph).
8.3. Termination for Cause. Either party may at any time terminate this
Agreement, either entirely or as to a particular affected portion of the
Distributor Territory only, upon sixty (60) days' written notice to the other
for failure of the other party to comply with any of the terms set forth herein
(which terms shall include the Distributor's failure to satisfy the Performance
Requirements for Products to be purchased by Distributor for any year, after the
first year ending September 30, 1999) in any material respect, which shall also
have a material adverse effect on Distributor's distribution performance in the
Distributor Territory or on the affected area(s) within the Distributor
Territory as the case may be ("Cause"), unless such default shall have been
reasonably cured to the satisfaction of the other party within sixty (60) days
after receipt of such written notice specifying the failure in reasonable
detail. The failure of Distributor to continue DSD as the method of distribution
hereunder shall be deemed to be "Cause", entitling Manufacturer to give
Distributor the 60 day written notice as specified in this Section. An "affected
portion" of the Distributor Territory shall be any of the markets within the
Distributor Territory that are specified in Schedule 2A.
8.3.1. If Manufacturer notifies Distributor with reasonable specificity
that a particular account or group of accounts in a specific market in the
Distributor Territory is not, in the reasonable judgment of Manufacturer,
receiving appropriate distribution (i.e. in accordance with the Performance
Requirements, as in effect for the applicable period); Distributor shall
endeavor to correct the problem. If following sixty (60) days from such notice,
Manufacturer is not, in its reasonable judgment, satisfied that the problem has
been corrected, Manufacturer may propose a solution. If within a reasonable
period (generally thirty (30) days), Distributor agrees to implement such
solution and if Distributor in fact implements such solution, such notice shall
be of no further effect. If Distributor does not so agree to implement such
solution or does not in fact implement such solution, Manufacturer shall have
the right to terminate Defendant's distribution rights to such account or group
of accounts.
8.4. Termination Upon Change in Control. Upon a Change in Control (as
defined below) of the Distributor, the Manufacturer may terminate this Agreement
upon 90 days notice, and upon a Change in Control (as defined) of Manufacturer,
Distributor may terminate this Agreement upon 180 days notice, in each case
given at any time within the 90 day period following the Change in Control of
the other party. The provisions of this Section 8.4 shall be in addition to the
provisions of Sections 8.2 and 8.3.
<PAGE>
A "Change of Control" of a party for purposes of this Agreement shall
mean the earlier to occur of: (i) an announcement by any person of an
acquisition of a party's securities or other transaction with respect to
beneficial ownership of a party with respect to either, (x) the acquisition of
50% or more of a party's voting securities or (y) the merger or consolidation of
a party with another entity in which the shareholders of such party would not,
immediately after the merger or consolidation, own at least 50% of the voting
securities of the entity issuing the cash or securities in the merger or
consolidation, or (ii) the sale of all or substantially all of the assets of a
party, including with respect to Distributor, a sale of all or substantially all
of the Haagen-Dazs business (other than the Haagen-Dazs franchise business);
provided, however, that an internal corporate restructuring of the Distributor
or Diageo PLC in which the Haagen-Dazs business becomes a different division or
entity within the Distributor or Diageo PLC, without a Change of Control of the
Distributor (or Haagen-Dazs or Diageo PLC) otherwise taking place, shall not by
itself constitute a Change of Control.
Notwithstanding the foregoing provisions of the definition of "Change
in Control", a Change in Control of Manufacturer will not be deemed to have
occurred solely because of the acquisition of securities of Manufacturer by
members of executive management or the Board of Directors of Manufacturer or by
an employee benefit plan maintained by Manufacturer for the benefit of employees
or by officers or directors or their "affiliates" or "associates" (as such terms
are defined in Rule 12b-2 under the Act) or members of their family (or trusts
for their benefit).
8.4.1. In the event of termination hereunder by Distributor for Change
in Control of the Manufacturer under Section 8.4, Distributor shall be
obligated, during the 90 days' notice period, to continue to purchase Products
from Manufacturer for resale and use its best efforts to distribute in each
market in the Distributor Territory listed in Schedule 2A where Distributor was
a distributor hereunder immediately prior to the termination notice. In
connection therewith, Distributor shall distribute such Products in compliance
with the Performance Requirements in each such market area, which if not agreed
specifically shall be the Performance Requirements in effect during the
comparable period in the prior year.
In the event that Distributor fails to comply in a material respect in
a market (as defined above) with the Performance Requirements during the
termination notice period, this failure shall constitute Cause justifying
termination by the Manufacturer under Section 8.3 of this Agreement, effective
immediately upon written notice to Distributor (notwithstanding any contrary
provision in Section 8.3, including any cure period in which to cure such
default that would otherwise be applicable under Section 8.3), or,
alternatively, Manufacturer shall have the right to shorten the termination
notice period to a shorter period (but not less than 30 additional days
following the date of the Manufacturer's notice to shorten under this
paragraph).
8.5. In addition to the applicable provisions of Sections 8.2 and 8.4
above with respect to certain termination notice periods, Distributor agrees to
continue to use its best efforts hereunder during all applicable termination
notice periods under this Agreement to distribute the Products of the
Manufacturer and to preserve Manufacturer's shelf position for the replacement
distributor(s) selected by the Manufacturer upon any termination of this
Agreement in each market in the Distributor Territory listed in Schedule 2A
where Distributor was a distributor hereunder immediately prior to the
termination notice. In connection therewith, Distributor shall continue to
distribute such Products in compliance with the Performance Requirements in each
such market area (as defined above) during the applicable termination notice
periods, which, if not agreed specifically, shall be the Performance
Requirements in effect during the comparable period in the prior year. In the
<PAGE>
event that Distributor fails to comply in a material respect in a market (as
defined above) with the Performance Requirements during the termination notice
period in effect under the applicable section of this Agreement, this failure
shall constitute Cause justifying termination by the Manufacturer under Section
8.3 of this Agreement, effective immediately upon written notice to Distributor
(notwithstanding any contrary provision in Section 8.3, including any cure
period in which to cure such default that would otherwise be applicable under
Section 8.3), or, alternatively, Manufacturer shall have the right to shorten
the termination notice period to a shorter period (but not less than 30
additional days following the date of the Manufacturer's notice to shorten under
this paragraph). Upon any termination of this Agreement, all materials and other
data submitted to Distributor by Manufacturer and still in Distributor
possession shall be returned to Manufacturer and Distributor shall not use the
contents thereof.
8.6. Post Termination Obligations. Upon the termination of this
Agreement by Manufacturer or by Distributor, Distributor shall return, and
Manufacturer agrees to repurchase all Products (other than unsaleable Products)
at Distributor's original purchase price or in the event of Products close to
out-of-code at the appropriate discount from such original purchase price, all
in accordance with the industry standards, plus [ * ] of the applicable
reasonable return shipping charges or, at Manufacturer's option (exercisable by
written notice to Distributor), Distributor shall have the right to sell or
liquidate in the Distributor Territory in a manner reasonably acceptable to the
Manufacturer its then-current inventory of Products, but not including
unsalables in accordance with the provisions of this Agreement. For the purposes
of this provision, "unsalables" means damaged or out-of-code Products which
shall be destroyed. All amounts due for Products sold to Distributor and all
other amounts due under Sections 3.2 and 9 and any other provisions of this
Agreement shall be immediately due and payable. Nothing in this Section shall
affect either party's obligations to the other upon termination, including any
claims for damages.
9. Prices for Products; Payment Terms; Resale Prices; Related Matters.
9.1. Prices Payable By Distributor. Manufacturer agrees to sell the
Products at the prices determined by Manufacturer from time to time
(Manufacturer's regular Distributor Prices), which shall initially be as set
forth on Schedule 9.1 attached, F.O.B. Manufacturer's plants in Vermont, with
freight arranged by Manufacturer (or as requested by Distributor) using its
reasonable efforts to obtain the best possible freight charge available and
reimbursed by Distributor. Freight shall be split [ * ] between the parties,
payable within 21 days after receipt of the freight bill by the party obligated
by this Section to make such [ * ] reimbursement to the other party.
Manufacturer may change prices to the Distributor when it changes price to its
other distributors (absent unusual geographic market conditions), upon not less
than reasonable notice to Distributor which shall normally be not less than 30
days.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
9.1.1. Rebate. Distributor will pay a rebate to Manufacturer based upon
the volume of Products sold by Distributor in the Distributor Territory per the
Rebate Schedule defined in Section 9.1.2. The basic rebate rate of [ * ] based
on the Distributor's monthly sales of all Products to all customers will be paid
monthly in arrears 18 days after the end of the month via Electronic Funds
Transfer (EFT) [EDI transaction type 820]. Adjustments for a greater or lesser
rebate based upon volume will be made at the end of the fourth calendar quarter.
The adjustment will be made based upon the cumulative volume of Products sold
and the rebate schedule in Section 9.1.2. Distributor and Manufacturer will
mutually agree upon the applicable seasonality percentages. Distributor will
make required adjustment payments within 18 days after the end of the month via
Electronic Funds Transfer (EFT).
9.1.2. Rebate Schedule. The rebate relates to the volume of sales in
Equivalent Units (gallons adjusted to a common base taking into account varying
package sizes). The Manufacturer and Distributor have agreed upon the Equivalent
Units ("EU's") calculation as set forth in Schedule 9.1.2. The cumulative volume
will be calculated on a calendar year basis, starting at zero at the beginning
of each year. The rebate will be as set forth below:
1. If the total volume of Products sold by Distributor is greater than or equal
to [ * ] EU's and less than [ * ] EU's, Distributor will pay a rebate to
Manufacturer equal to [ * ] of the total aggregate Net Revenues of Products sold
by the Distributor in the Distributor Territory to all customers during that
calendar year.
2. If the total volume of Products sold by Distributor is greater than or equal
to [ * ] EU's and less than [ * ] EU's, Distributor will pay a rebate to
Manufacturer equal to [ * ] of the total aggregate Net Revenues of Products sold
by the Distributor in the Distributor Territory to all customers during that
calendar year.
3. If the total volume of Products sold by Distributor is greater than or equal
to [ * ] EU's and less than [ * ] EU's, Distributor will pay a rebate to
Manufacturer equal to [ * ] of the total aggregate Net Revenues of Products sold
by the Distributor in the Distributor Territory to all customers during that
calendar year.
4. If the total volume of Products sold by Distributor is greater than or equal
to [ * ] EU's and less than [ * ] EU's, Distributor will pay a rebate to
Manufacturer equal to [ * ] of the total aggregate Net Revenues of Products sold
by the Distributor in the Distributor Territory to all customers during that
calendar year.
5. If the total volume of Products sold by Distributor is greater than or equal
to [ * ] EU's, Distributor will pay a rebate to Manufacturer equal to [ * ] of
the total aggregate Net Revenues of Products sold by the Distributor in the
Distributor Territory to all customers during that calendar year.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
6. Notwithstanding the foregoing items in the Rebate Schedule, the minimum
rebate on all sales by Distributor in the Distributor Territory prior to January
1, 2000 will be [ * ].
7. If the total volume of Products sold by Distributor in the Distributor
Territory in any calendar year after 1999 and prior to January 1, 2003 is less
than [ * ] EU's, other than a short fall below [ * ] EU's attributable to
Distributor's failure to satisfy the Performance Requirements and comply with
its other obligations under this Agreement or force majeure or other cause not
reasonably within the control of either party to this Agreement, the
Manufacturer shall be required to transfer new distribution business, in an
amount clearly above the shortfall amount, with respect to the Products to be
distributed outside the Distributor Territory or with respect to additional
Products for distribution within the Distributor Territory. In connection
therewith Manufacturer must notify Distributor within 20 days after the end of
the calendar year, setting forth in reasonable detail the volumes to be so
transferred and the areas to which such volumes relate and must substantially
complete the transfer of such additional distribution business of an aggregate
amount clearly greater in EU's as the amount of shortfall below [ * ] EU's
within not more than 90 days after the end of such calendar year (or such
greater period of days as may be necessary solely to comply with any applicable
termination notice requirements of contracts between Manufacturer and other
distributors that must be terminated or modified to permit such transfers).
Failure to so notify and to so transfer the required amount of new distribution
business shall constitute Cause for termination under Section 8.3.
As used in this Section 9.1.2 Net Revenues shall mean Gross Revenues
minus returns and allowances for damaged Products.
9.2. Pricing Economies. Distributor confirms that it is agreeing to pay
Manufacturer a portion of the efficiencies or savings to its directly owned and
operated distribution system that result from adding the volume of
Manufacturer's products through that system. For convenience, the parties have
agreed to reflect this payment by Distributor to Manufacturer in this Agreement
by an increase in the net prices for the Products payable by Distributor under
Section 9.1 (and its subsections) above Manufacturer's regular net prices to its
other distributors and by inclusion in Section 9.5 of a provision for maximum
resale prices established by Manufacturer.
The parties acknowledge that the method they have, for convenience,
selected to reflect the sharing of the efficiencies or savings may erroneously
be viewed by others as a discriminatory net price charged by Manufacturer to
Distributor, when such view is not consistent with the economics of the matter
or the intentions of the parties. Accordingly, to eliminate any uncertainty
Distributor hereby agrees and confirms that its submission from time to time of
any purchase order for Products from Manufacturer shall irrevocably (i) confirm
the release of, and constitute a covenant not to sue in respect of, any claim of
any kind whatsoever that its payment of such net higher price for the Products
covered by such invoice may be in violation of the price discrimination
provisions of the Robinson Patman Act and any state price
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
discrimination or unfair competition law and (ii) confirm the release of, and
constitute a covenant not to sue in respect of, any claim of any kind whatsoever
that its payment of such higher price in respect of any previously submitted
purchase order for Products of the Manufacturer may be in violation of the
Robinson-Patman Act or any state price discrimination or unfair competition law.
Each release and covenant not to sue by Distributor shall remain in effect
notwithstanding any inconsistent or contradictory provision in any purchase
order or other instrument unless the provisions of this Section 9.2 are
expressly terminated by a written amendment to this Agreement.
9.3. Payment Terms. Payment terms shall be 18 days from the date of
Manufacturer's invoice (which shall be the post-marked date of the invoice or
any earlier date of facsimile transmission or other delivery to Distributor).
Distributor agrees to maintain its internal bill receipt and payment procedures
so that it will be able to meet the payment terms in the Agreement, and the
parties agree that all payments shall be EFT. It is agreed that these are
material terms of the Distribution Agreement. Manufacturer also agrees to notify
Distributor of any substantial increase in freight charges before shipment is
authorized.
9.4. National Pricing. Notwithstanding the foregoing provisions of
Section 2 or this Section 9, it is understood that Manufacturer may, as is
common in the food industry, negotiate "national" or "regional" pricing
agreements with certain accounts (such as airlines or Wal-Mart, to take two
examples) where the Manufacturer's distributors, including the Distributor
hereunder, continue to sell to such accounts, but this Agreement is modified to
the extent necessary to accommodate such national pricing agreements, subject to
reaching mutual agreement between the parties in each case. The parties agree to
make such necessary amendments to implement agreements reached under this
Section 9.4. In the event that the Distributor does not agree to any such
national pricing arrangement within 14 days after a reasonably specific
presentation of the arrangement to the Distributor, then the Manufacturer shall
have the right to arrange for other distribution for such national pricing
arrangement.
9.4.1. Consignment Sales. Notwithstanding the provisions of Section 2
and this Section 9, it is understood that Manufacturer may, as is common in the
food industry, negotiate certain consignment arrangements for sales to club
stores or Food Service accounts and Distributor will use its best efforts to
distribute the Products to such outlets on a consignment basis, provided that
consignment sales shall require the mutual agreement of the parties. In the
event that the Distributor does not agree to any such consignment arrangement
within 14 days after a reasonably specific presentation of the arrangement to
the Distributor, then the Manufacturer shall have the right to arrange for other
distribution for such consignment arrangement.
9.5. Resale Prices. Distributor shall resell at such prices as it may
determine, and Manufacturer retains no control over such resale prices provided,
however, that such resale prices by Distributor shall not exceed the maximum
resale price specified in the formula attached as Schedules 9.5.1 and 9.5.2. It
is understood that on the date hereof the maximum resale price specified by
Manufacturer does not exceed the resale price at which Manufacturer believes its
Products are generally being resold by its largest distributor, it being
acknowledged that Manufacturer does not control the resale prices and that,
therefore, this belief on the Manufacturer's part is only an estimate.
9.6. Trade Shows. In addition, Distributor agrees to provide delivery
of Products to Trade Shows in the areas in which Distributor is distributing
hereunder at no charge, provided that Manufacturer provides the Products and
<PAGE>
necessary freezers for such shows. Attached is Schedule 9.6, indicating trade
shows in which the Distributor participated in 1997 and 1998 (including
projected trade shows for the rest of 1998).
9.7. Credit Line. Distributor shall have a line of credit under this
Agreement which shall be established by Manufacturer, and Manufacturer shall
have the right, from time to time at its election, to require C.O.D. payment for
any Product at any time when outstanding receivables under this Agreement for
purchase of the Products (whether or not due) exceed the amount of such credit
line. Said credit line shall be available unless Distributor is in breach of a
material provision of this Agreement or unless there is a termination of this
Agreement or unless Manufacturer determines, pursuant to the exercise of its
regular credit policies, that Distributor's financial condition warrants a
change in said credit line. Distributor agrees to pay interest on overdue
amounts at an annual rate equal to the base rate charged to best commercial
customers at Bank Boston (or its successor) from time to time plus [ * ].
Interest shall be payable to Manufacturer on the last day of each month.
9.8. Most Favored Nation Treatment. In the event that the net margin
percentage generated by the Distributor with respect to the distribution of ice
cream or other frozen desserts of persons other than the Manufacturer is less
than the margin percentage generated by the Distributor with respect to
distribution of the Products hereunder, calculated with respect to comparable
volumes and term of purchase/distribution agreement and other relevant factors
of the distribution purchases, then Manufacturer shall be entitled to an
additional rebate in the appropriate amount so that the Manufacturer shall have
the benefit of such most favored nation treatment during the period of this
Agreement. Manufacturer shall be entitled to an audit, not more than once a
year, performed by an independent public accounting firm of nationally
recognized reputation of such books and records, including contract terms, of
the Distributor, but only to the extent necessary in such firm's professional
judgment to perform such audit to determine whether an additional rebate is
payable to Manufacturer under this Section with respect to Products purchased by
Distributor during not more than the two preceding years before the year in
which the audit is commenced (it being understood that pricing/rebate with
respect to any given year may not be audited more than once). The expenses of
such audit shall be paid by Manufacturer if no additional rebate is due after
the audit and shall be paid by the Distributor if an additional rebate is due.
The parties agree that the judgment of such firm as to whether an additional
rebate is due shall be conclusive.
10. Compliance with Laws; Quality Control. Each party covenants and
agrees, during the term hereof, that it will fully comply with all applicable
laws, ordinances, regulations, licenses and permits of or issued by any federal,
state or local government entity, agency or instrumentality applicable to its
responsibilities hereunder.
* This confidential portion has been omitted and filed separately with the
Commission
<PAGE>
Manufacturer shall be responsible for the quality, including proof of
quality and quality control, labeling requirements and truth of labeling, and
fitness for human consumption of the Products delivered hereunder. Manufacturer
warrants and represents that the Products delivered hereunder (1) are not
adulterated or misbranded under the Federal Food Drug and Cosmetic Act, as
amended (the "Act"); (2) are not articles which may not be shipped pursuant to
Sections 404 or 505 of the Act; and (3) have the shelflives set forth from time
to time on Schedule 10, which may be supplemented by Manufacturer with respect
to additional items that are added to the Products. Title shall pass upon
delivery, F.O.B. Manufacturer's plants in Vermont. Notwithstanding any other
provision hereof, the parties understand that loss or damage to the Products
during shipment, after delivery F.O.B. Manufacturer's Plant, shall be the
responsibility of Distributor.
10.1. Recall Possibility. In the event the Manufacturer determines to
recall or withdraw any of its Products (the "Recalled Products"), Distributor
will use its personnel (or a third party retrieval service if Distributor
reasonably believes the recall or withdrawal will be achieved faster, at less
expense or more efficient) to remove any Recalled Products from accounts to
which it had delivered the Recalled Products (and, where it uses any other
distributors or subdistributors, will use its best efforts to cause such other
persons to do likewise) and shall return (or cause to be returned) to
Manufacturer or dispose of Recalled Products as directed by Manufacturer.
Distributor shall be reimbursed by Manufacturer for all Recalled Products in the
amount of the net purchase price previously paid by Distributor for such
Recalled Products and for its reasonable out-of-pocket expenses for using its
personnel or third party service to accomplish such recall or withdrawal,
including disposal costs, with payments by Manufacturer for Recalled Products
being in cash or replacement Products, at Manufacturer's option. In the event of
any recall or withdrawal of either party's products, then Manufacturer and
Distributor agree to discuss in good faith compensation for losses incurred by
the non-recalling party by such disruption.
11. Hold Harmless.
11.1. It is expressly understood and agreed that Distributor shall not
be liable for and Manufacturer shall hold Distributor harmless from any
obligations, claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities of any kind or nature to a person not a
party to this Agreement ("Third Party") arising directly or indirectly out of or
in connection with this Agreement caused by Manufacturer's alleged or actual
negligence, willful misconduct or contractual breach, including but not limited
to any costs, expenses, court costs and reasonable attorneys' fees incurred by
Distributor by reason of any defense to any claims or lawsuits to which
Distributor has been named a party.
<PAGE>
11.2. It is expressly understood and agreed that Manufacturer shall not
be liable for and Distributor shall hold Manufacturer harmless from any
obligations, claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities of any kind or nature to a Third Party
arising directly or indirectly out of or in connection with this Agreement
caused by Distributor's alleged or actual negligence, willful misconduct or
contractual breach, including but not limited to any costs, expenses, court
costs and reasonable attorneys' fees incurred by the Manufacturer by reason of
any defense to any claims or lawsuits to which Manufacturer has been named a
party.
11.3. Indemnification Regarding Distributors.
11.3.1. It is expressly understood and agreed that Distributor shall
not be liable for and Manufacturer shall hold Distributor harmless from any
obligations, claims, demands, losses, costs, damages, suits, judgments,
penalties, expenses and liabilities of any kind or nature (collectively,
"Losses") to a person not a party to this Agreement ("Third Party") arising
directly or indirectly out of or in connection with Manufacturer's termination,
in whole or in part, of its relationship with Dreyer's (to select Distributor as
a replacement for some or all of the distribution presently handled by
Dreyer's), excluding (a) attorneys fees incurred by Distributor (it being
understood that Manufacturer shall select counsel to defend the Distributor with
respect to such matters covered by this Section 11.3.1, as provided in 11.3.3
below and that Manufacturer has, in any matter covered by this Section 11.3.1,
no option not to defend Distributor in such matter) by reason of any defense to
any claims or lawsuits to which Distributor has been named a party and (b) any
such Losses caused by the actions or non-actions of the Distributor or of some
other person which is not the Manufacturer. It is understood that negotiation
and/or signing by Distributor of this Agreement shall not be construed to be an
action by Distributor within the meaning of clause (b) of the preceding sentence
with respect to any claim by Dreyer's that such signing and/or negotiation
constitutes a breach by the Manufacturer of, or tortious interference by
Distributor with, the Dreyer's Agreement.
11.3.2. The provisions of Section 11.3.1 shall apply to any claim within
the ambit of said section, and the provisions of 11.1 or 11.2 shall not apply to
such claim.
11.3.3. Third Person Claims. Promptly after a party has received notice
of or has knowledge of any claim against it covered by Section 11 by a Third
Party or the commencement of any action or proceeding by a Third Person with
respect to any such claim, such party (sometimes referred to as the
"Indemnitee") shall give the other party (sometimes referred to as the
"Indemnitor") written notice of such claim or commencement of such action or
proceeding; provided, however, that the failure to give such notice will not
affect the right to indemnification hereunder with respect to such claim, action
or proceeding, except to the extent that the other party has been actually
prejudiced as a result of such failure. If the Indemnitor has notified the
Indemnitee within (30) days from the receipt of the foregoing notice that it
wishes to defend against the claim by the Third Person, then the Indemnitor
shall have the right to assume and control the defense of the claim by
appropriate proceedings with counsel reasonably acceptable to Indemnitee,
provided that the assumption of such defense by the Indemnitor shall constitute
an acknowledgment of the obligation to indemnify the Indemnitee hereunder. The
Indemnitee may participate in the defense, at its sole expense, of any such
claim for which the Indemnitor shall have assumed the defense pursuant to the
preceding sentence, provided, however, that counsel for the Indemnitor shall act
<PAGE>
as lead counsel in all matters pertaining to the defense or settlement of such
claims, suit or proceeding other than claims that in Indemnitee's reasonable
judgment could have a material and adverse effect on Indemnitee's business apart
from the payment of money damages. The Indemnitee shall be entitled to
indemnification for the reasonable fees and expenses of its counsel for any
period during which the Indemnitor has not assumed the defense of any claim.
12. Trademarks. Distributor understands and agrees that it has received
no right or license, express or implied, to use in any manner the name "Ben &
Jerry's" or any other trade name or trademark used or owned by Manufacturer now
or in the future without the express written consent of Manufacturer except as
set forth herein. Subject to the terms and conditions of this Agreement and to
the continuing performance by Distributor of its obligations hereunder,
Manufacturer hereby grants Distributor a non-exclusive, non-transferable and
personal license to use Manufacturer's trademarks and logos ("Marks") solely in
connection with the distribution, display and sale of the Products pursuant to
this Agreement. Distributor agrees that such Marks shall be used only in the
forms and manners specified and approved in writing in advance by Manufacturer.
All rights granted to Distributor under this Agreement with respect to the Marks
shall immediately cease and terminate upon the termination of this Agreement.
The provisions of this Section shall survive termination.
13. [This Section intentionally left blank.]
14. Scope of Agreement. This Agreement relates only to the distribution
of the Products by Distributor. The parties confirm their understanding that no
subject, other than sales by Distributor of the Products and the effect of a
change in control of each party and the standstill provisions relating to the
acquisition of securities or property of a party by the other party and its
Affiliates is the subject of this Agreement. No other matters, including without
limitation matters relating to pricing of products of the Distributor,
production, flavors, timing of products or sales/marketing (except as pertaining
to this Agreement) of either party, are covered by this Agreement.
Confidential Information about a party learned under this Agreement
shall not be used during or after the term of this Agreement except for the
purpose of this Agreement and, without limiting the foregoing, such information
as to the Manufacturer may not be used by the Distributor in connection with the
production, marketing, distribution or sale of Distributor's products. Nothing
in this paragraph shall be construed to prevent or inhibit Distributor's ability
to respond competitively to information as to the Manufacturer provided that the
information was not at the time it was disclosed to Distributor "Confidential
Information" as defined below or was subsequently disclosed to or learned by
Distributor from the marketplace or from a third party not known to be under any
obligation to Manufacturer to maintain the confidentiality of such information
and provided further that, while Distributor agrees to take such measures (as
are reasonable without materially interfering with Distributor's management) to
minimize the number of its employees (who are involved in the sale of
Distributor's own ice cream products) who obtain knowledge of Confidential
Information, Manufacturer acknowledges that such measures may be imperfect, and
in this regard, Distributor agrees to use its best efforts so that such of its
employees learning such Confidential Information prior to the time Distributor
otherwise learns such information from the marketplace will not materially
change Distributor's decisions with respect to production and marketing of
Distributor's own products as a result of such Confidential Information gained
solely under this Agreement. In addition, in the event that there is a
<PAGE>
particular item of Confidential Information which is regarded by Manufacturer as
having a very high degree of confidentiality, the parties will discuss the
design and implementation of such special procedures as can be designed to
enable the Distributor to carry out its obligations under this Agreement without
such item actually being used by Distributor in connection with its own products
at a time when such item remains Confidential Information. Confidential
Information shall, for purposes of this Agreement, include all information
relating to a party, its business and prospect, disclosed by such party from
time to time to the other party in any manner, whether orally, visually or in
tangible form (including, without limitation, documents, devices and computer
readable media) and all copies thereof, created by either party. The term
"Confidential Information" shall be deemed to include all notes, analyses,
compilations, studies, interpretations or other documents prepared by a party
which contain, reflect or are based upon the information furnished to such party
by the other party pursuant hereto. Confidential Information shall not include
any information that:
(a) was in a party's possession prior to disclosure by the other party
hereunder, provided such information is not known by such party to be
subject to another confidentiality agreement with or secrecy obligation
to the other party;
(b) was generally known in the ice cream industry at the time of
disclosure to a party hereunder, or becomes so generally known after
such disclosure, through no act of such party;
(c) has come into the possession of a party from a third party who is
not known by such party to be under any obligation to the other party
to maintain the confidentiality of such information; or
(d) was independently developed by a party without the use of any
Confidential Information of the other party, to the extent that such
independent development is reasonably established by such first party
to the other party.
This Agreement (and any documents referred to herein) represents the
entire agreement and understanding of the parties with respect to the
distribution of products of the Manufacturer by the Distributor and the
ancillary standstill provisions of Section 13, and there are no representations,
warranties or conditions or agreements (other than implementing invoices,
purchase orders and the like necessary to implement the Agreement) not contained
herein (or in any documents not referred to herein). The following sections of
this Agreement shall survive any termination of the Agreement: 8.6, 9.2, 11, 12,
13, 14, 16.1 and 17.
<PAGE>
14.1. Employees. Except as otherwise agreed between the parties, in
view of the Confidential Information being transmitted by and to employees of a
party under this Agreement, each party agrees not to solicit the employment of
employees, working in the frozen dessert business, of Pillsbury (or Haagen-Dazs)
or the Manufacturer, as the case may be, during the duration of this Agreement,
it being understood that a party is not in breach of this Section if, without
solicitation by such party, any such employee determines to leave the employment
of the other party and seek employment with such first party.
15. Negotiation of Agreement. Each party and its counsel have
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein, and any and all drafts relating thereto shall be deemed the
work product of the parties and may not be construed against any party by reason
of its preparation. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that drafted it is of no application and is hereby expressly waived.
16. Amendment and Non-assignability of Agreement. This Agreement may
not be amended or modified except by an instrument in writing signed by an
authorized officer of each party. It is agreed that neither party shall transfer
or assign this Agreement or any part hereof or any right arising hereunder, by
operation of law or otherwise, without the prior written consent of the other.
Any purported assignment without consent shall be void and of no force or effect
or, at the other party's option, shall terminate this Agreement. Subject to the
foregoing, this Agreement shall be binding on the respective parties and their
successors and assigns, and, with respect to Section 13, their Affiliates (and
their successors and assigns).
No waiver by either party of any default or breach of any covenant
hereunder shall be implied from any omission by either party to take action on
account of such default if such default persists or is repeated. No express
waiver shall affect any default other than the default specified in the waiver,
and then said waiver shall be operative only for the time and to the extent
therein stated. Waivers by either party of any covenant, term or condition
contained herein shall not be construed as a waiver of any subsequent breach of
the same covenant term or condition. The consent or approval by either party to
or of any act by either party requiring further consent or approval shall not be
deemed to waive or render unnecessary consent or approval to or of any
subsequent similar acts. If any provision of this Amendment is held by a court
of competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force without being impaired or
invalidated in any way.
No provision of any other instrument, including purchase orders,
invoices, bills of sale or like instrument which is inconsistent or conflicts
with this Agreement shall control or override any provision of this Agreement.
<PAGE>
17. Waiver of Jury Rights; Governing Law; Jurisdiction. Each of the
parties hereto irrevocably waives all rights to a trial by jury with respect to
any dispute relating to this Agreement, the subject matter hereof or the
entering into or termination of this Agreement (a "Dispute"). This Agreement and
all actions related hereto shall be governed by the laws of the State of
Delaware, excluding its choice of law principles.
In the event of any Dispute, such Dispute, if not resolved in the
ordinary course between representatives of the parties, shall be submitted for
settlement negotiation between the Chief Executive Officer of Manufacturer and
the Vice President, Haagen-Dazs North America, of Distributor, and if such
procedure does not resolve such Dispute within 30 days after a request for such
settlement negotiation to the other party, then and only then shall all such
Disputes be resolved exclusively by the process of litigation in accordance with
this Section. If such litigation is brought by Manufacturer, it shall be brought
in the State of Minnesota, or if brought by Distributor it shall be brought in
the State of Vermont, provided that if such dispute relates to Section 13 of
this Agreement, it may be brought without resort to the settlement mechanics
described above and it may also be brought by Manufacturer in Vermont or by
Distributor in Minnesota.
With respect to any litigation relative to any Dispute that has been
commenced in accordance with the foregoing provisions as to where and when such
litigation may be brought, the parties each hereby: (i) agree that each party
has sufficient contacts with New York City (Manhattan) to subject it to the
personal jurisdiction of the state and federal courts located in New York City
(Manhattan) for purposes of any such Proper Action (a "Proper Action"); (ii)
agree that venue of any Proper Action properly lies in New York City
(Manhattan); (iii) waives and agrees not to assert in any Proper Action any
claim that it is not subject personally to the jurisdiction of the above-named
courts, such action should be dismissed on grounds of lack of venue or forum non
convenien; should be transferred to any court other than the above-named courts
or should be stayed by reason of the pendency of some other proceeding in any
court other than the above-named courts; (iv) consents and agrees that service
of process in any Proper Action may be made in any manner permitted by law or by
registered or certified mail, return receipt requested, at its principal place
of business, and that service made in accordance with the foregoing is
reasonably calculated to give actual notice of any such action; and (v) waives
and agrees not to assert in any Proper Action any claim that service of process
made in accordance with the foregoing does not constitute good and sufficient
service of process, including upon written notice. Notwithstanding the
foregoing, any proceeding for temporary restraining order or preliminary
injunction may be brought without resort to the settlement mechanics described
but shall only be brought in accordance with the foregoing provisions as to
where litigation with respect to any Dispute may be brought.
18. Publicity. Until announced by a press release by Manufacturer,
neither party shall made any disclosure except a disclosure to another
distributor of Manufacturer necessary to implement certain provisions of this
Agreement (except a disclosure consented to by the other party) and except as
may be advisable to comply with the securities laws in the opinion of securities
law counsel to such party. It is agreed that the Distributor shall have an
opportunity to review and comment on the initial press release of Manufacturer
on this Agreement and that the parties shall use their best efforts to agree on
the wording of such initial press release of the Manufacturer.
<PAGE>
19. Notices. Any notices to be given by either party to the other shall
be in writing by personal delivery or by mail, registered or certified, postage
prepaid with return receipt requested, or by facsimile (only with receipt
confirmed). Notices shall be addressed to the parties at the addresses set forth
on page one or to said other address as shall have been so notified to the other
party in accordance with this Section 19. Notices to Distributor shall be
addressed to Vice President, Haagen-Dazs North America, with a copy to the Vice
President and General Counsel, Pillsbury North America. Notices to Manufacturer
shall be addressed to Chief Executive Officer, Ben & Jerry's Homemade, Inc.,
with a copy to Ropes & Gray, One International Place, Boston, MA 02110,
Attention Howard K. Fuguet, Esq.
IN WITNESS WHEREOF, Diageo PLC only as to the obligations in Section 13,
Distributor for itself (and its Haagen-Dazs business unit) and, with respect to
Section 13 for its Affiliates, including Diageo PLC, and Manufacturer for itself
and, with respect to Section 13 its Affiliates, have each executed and delivered
this Agreement as of the day and year first above written.
WITNESSED: THE PILLSBURY COMPANY
By:
Title:
WITNESSED: BEN & JERRY'S HOMEMADE, INC.
By:
Title:
WITNESSED: DIAGEO PLC (only as to Section 13)
By:
Title:
The Pillsbury Company Amendment Agreement
Amendment Agreement dated as of January 15, 1999 between Ben & Jerry's
Homemade, Inc. (the "Manufacturer") and The Pillsbury Company (the
"Distributor") to the Distribution Agreement dated as of August 26, 1998 (the
"Agreement").
WHEREAS, the parties wish to supplement certain provisions of the
Agreement.
NOW THEREFORE, in consideration of these premises, the mutual promises set
forth below and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows.
1. Reference is made to the last sentence of the third paragraph of Section
2.10 of the Agreement which reads as follows:
"In any event, Distributor agrees that it shall fully implement distribution of
the Products in the Distributor Territory by March 1, 1999, provided that it has
received six months prior written notice or such lesser notice which is
reasonable in the judgment of the Distributor in terms of the time needed for
Distributor to gear up with respect to any market in question."
Reference is also made to notice from Manufacturer to Distributor dated October
15, 1998 specifying a starting date of April 15, 1999. The parties agree to void
the notice dated October 15, 1998 and to delete the last sentence of the third
paragraph of Section 2.10 and to add the following:
"In any event, Distributor agrees that it shall fully implement distribution of
the Products in the Distributor Territory by September 1, 1999 (or such earlier
date with respect to any portion of the Distributor Territory as shall be
mutually agreed); provided that Distributor agrees that it shall fully
implement, by April 15, 1999(1), distribution in the supermarket channel (three
or more cash registers) of the Products in that portion of the Distribution
Territory that is defined as the New York Territory under the Dreyer's Agreement
(as defined in the Agreement) and distribution in the supermarket channel of the
Products in the area surrounding Albany, New York presently handled by Vermont's
Finest and also distribution of the Products, as soon as practicable after May
1, 1999 (pursuant to detailed arrangements to be mutually agreed between the
Manufacturer and the Distributor), in those portions of New Jersey and
Pennsylvania presently handled by Jack & Jill provided further that nothing
herein shall grant any distribution rights to Distributor except for the
Distributor's owned and operated distribution system (including internals) for
the areas as set out in Schedule 2A to the Agreement on the date the Agreement
was signed.
1 It is understood that the business week starts Monday, April 19, 1999.
<PAGE>
The Manufacturer also confirms the inclusion of Texas in Schedule 2A of the
Agreement, effective September 1, 1999, and confirms that, effective April 15,
1999, it has no exclusive distributor for the non-supermarket channels in the
New York Territory as defined above. The Manufacturer further confirms that its
distribution agreement with Dreyer's, as in effect on the date hereof, and its
new distribution agreement with Dreyer's, effective for distribution commencing
on or after September 1, 1999, as in effect on the date hereof, do not grant
distribution rights to Dreyer's which conflict with the distribution rights,
effective September 1, 1999 of the Distributor for its owned and operated
distribution system (including internals) for the areas as set out in Schedule
2A to the Agreement on the date the Agreement was signed, and the rights granted
to the Distributor under Section 1 of this Amendment Agreement.
2. The parties further agree that Section 8.1 is hereby amended by adding
the following sentence at the end thereof:
"The October 1, 2002 date in this Section 8.1 and in Section 8.2 of this
Agreement shall in each case be changed to October 1, 2003."
3. The Manufacturer agrees to pay the Distributor $150,000, payable within
five days of the date hereof.
4. The Manufacturer hereby confirms that Dreyer's has agreed to a dismissal
with prejudice of the litigation filed by Dreyer's in 1998 against the
Manufacturer.
5. Except as expressly amended hereby, the Agreement shall remain in full
force and effect. Without limiting to the foregoing the Manufacturer confirms
its indemnification obligations to the Distributor contained in Sections 11 and
11.3 of the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
Agreement to be duly executed and delivered by its duly authorized
representative.
BEN & JERRY'S HOMEMADE, INC.
By:
THE PILLSBURY COMPANY
By:
EXHIBIT 10.22.4
Amendment To The
Ben & Jerry's Homemade, Inc. Employees' Retirement Plan
The Ben & Jerry's Homemade, Inc. Employees' Retirement Plan ("Plan") is
hereby amended in the following particulars pursuant to the authority vested in
Ben & Jerry's Homemade, Inc. ("Company") effective as of January 1, 1998.
1. Article I shall be amended by the insertion of the following new Section
1.63:
"Ben & Jerry's Homemade, Inc. Stock" shall mean shares of common stock
(Class A or B) in Ben & Jerry's Homemade, Inc.
2. Section 4.1(d) is amended by the deletion of the phrase "Notwithstanding
the foregoing, however" and the insertion of the phrase "Notwithstanding any
provision of this Section 4.1 to the contrary and except as provided by Section
4.1(e)," in place of the deleted phrase.
3. Article 4.1 shall be amended by the insertion of the following at the
end of such section:
(f) A discretionary amount of Ben & Jerry's Homemade, Inc. Stock, which
amount shall be deemed an Employer's Non-Elective Contribution.
4. Article 4.4(b) shall be amended by the insertion of the following at the
end of such subsection:
(4) With respect to the Employer's Non-Elective Contribution made
pursuant to Section 4.1(f), such contribution shall be allocated as
follows: (i) one-half of such contribution shall be allocated such that
each Participant receives the same allocation; and (ii) the other half of
such contribution shall be allocated such that each Participants's
allocation is equal to the ratio that his Years of Service bears to the
Years of Service of all Participants. Notwithstanding any provision of this
section 4.4(b)(4) to the contrary, a Participant shall only share in the
allocation of contributions pursuant to this section 4.4(b)(4) if the
Participant is actively employed on the last day of the Plan Year and
completed 1,000 Hours of Service during such Plan Year.
5. Section 4.4(c) shall be amended by the insertion of the following after
the third sentence of such section:
(3) Forfeitures attributable to Employer Non-Elective Contributions
made pursuant to Section 4.1(f) shall be used to reduce the Employer's
Non-Elective Contributions pursuant to Section 4.1(f) for the Plan Year in
which such Forfeiture occurs.
<PAGE>
6. Section 4.12 shall be amended by the insertion of the following at the
end of such section:
(h)(1) Notwithstanding any provision of this section 4.12 to the
contrary, Participants may not direct the investment of the portion of
their Aggregate Accounts which is invested in Ben & Jerry's Homemade, Inc.
Stock.
(2) To the extent that a Participant's Aggregate Account includes Ben
& Jerry's Homemade, Inc. Stock, all voting, tender, and similar rights
shall be passed through to the Participant and the Participant shall direct
the Trustee as to how said rights shall be exercised. With respect to the
portion of the Participant's account balance which has been invested in the
other investment options offered under the Plan, the Trustee shall vote all
interests held by the Trust as directed by the Employer.
(3) Procedures shall be established and maintained to ensure the
confidentiality of all information regarding Participants' holding of Ben &
Jerry's Homemade, Inc. Stock as well as Participants' exercise of
appurtenant rights under this Section 4.12(h), except to the extent
necessary to comply with federal law or state law not preempted by ERISA.
The Administrator is hereby designated as the fiduciary responsible for
ensuring that these confidentiality procedures are adequate and are
followed. In the event that the Administrator determines that a particular
transaction relating to Ben & Jerry's Homemade, Inc. Stock may involve the
potential for undue Employer influence, the Administrator shall designate
an independent fiduciary, who shall not be an affiliate of the Employer, to
assume responsibility for all activities relating to said transaction.
7. Article VI, Section 6.5 shall be amended by the insertion of the
following at the end of such section:
(j) Notwithstanding any provision of the Plan to the contrary, if a
Participant elects a lump-sum distribution of his Aggregate Account, the
distribution of any portion of the Participant's Aggregate Account which is
invested in Ben & Jerry's Homemade, Inc. Stock shall be distributed to the
Participant in-kind. However, if a Participant is to receive a distribution
in the form of an installment or annuity payment, the portion of the
Participant's Aggregate Account which is invested in Ben & Jerry's
Homemade, Inc. Stock shall be converted to cash before such installment or
annuity payment commences.
8. Section 6.4(b) is amended by the insertion of the following at the end
of such section:
Notwithstanding anything in the previous sentence to the contrary, the
Vested portion of any Participant's Account which is attributable to
Employer Non-Elective Contributions made pursuant to Section 4.1(f) shall
be a percentage of the total amount credited to the Participant's Account
which is attributable to Employer Non-Elective Contributions made pursuant
to Section 4.1(f) determined on the basis of the Participant's number of
Years of Service according to the following schedule:
<PAGE>
Vesting Schedule
Years of Service Percentage
0 0 %
1 0 %
2 0 %
3 0 %
4 0 %
5 100 %
Notwithstanding anything in this Section 6.4(b) to the contrary, for each
Plan Year for which the Plan is a Top-Heavy Plan, the following vesting schedule
shall apply with respect to amounts credited to the Participant's Account which
is attributable to Employer Non-Elective Contributions made pursuant to Section
4.1(f):
Vesting Schedule
Years of Service Percentage
0 0 %
1 0 %
2 0 %
3 100 %
9. Sections 6.4(c) and 6.4(d) are amended by the deletion of the word
"schedule" each place that such word appears in such sections and the insertion
of the word "schedules" in place of the deleted words.
8. Section 7.4(b) is amended by the insertion of the following at the end
of such section:
Furthermore, for purposes of this limit, amounts accrued in a Participant's
Aggregate Account which are invested in Ben & Jerry's Homemade, Inc. Stock shall
not be taken into consideration.
IN WITNESS WHEREOF, the Company caused this amendment to be executed
this ______ day of __________________, 1998.
By: __________________________________
EXHIBIT 10.25
BEN & JERRY'S HOMEMADE, INC.
1999 EQUITY INCENTIVE PLAN (Excluding Officers and Directors)
1. PURPOSE
The purpose of this 1999 Equity Incentive Plan (the "Plan") is to advance
the interests of Ben & Jerry's Homemade, Inc. (the "Company") by enhancing its
ability to attract and retain key employees (other than officers or directors of
the Company) who are in a position to make significant contributions to the
success of the Company and its subsidiaries through ownership of shares of the
Company's Class A Common Stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Cash or Stock Performance
Awards, Loans or Supplemental Grants, or combinations thereof, all as more fully
described below.
2. ADMINISTRATION
The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee, shall consist of at least two directors. A
majority of the members of the committee shall constitute a quorum, and all
determinations of the committee shall be made by a majority of its members. Any
determination of the committee under the Plan may be made without notice or
meeting of the committee by a writing signed by a majority of the committee
members.
The Board of Directors has determined that the Plan will be administered by
the Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee will have authority, not inconsistent with the
express provisions of the Plan and in addition to other authority granted under
the Plan, to (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award, including without limitation,
any required holding period (without regard to requirements under the Securities
Act of 1933) on stock acquired upon exercise of options granted under the plan;
(e) waive compliance by a Participant (as defined below) with any obligations to
be performed by the Participant under an Award and waive any term or condition
of an Award; (f) amend or cancel an existing Award in whole or in part (and if
an Award is cancelled, grant another Award in its place on such terms as the
Committee shall specify), or settle any award by paying the cash value of the
Stock otherwise issuable, except that the Committee may not, without the consent
of the holder of an Award, take any action under this clause with respect to
such Award if such action would adversely affect the rights of such holder; (g)
prescribe the form or forms of instruments that are required or deemed
appropriate under the Plan, including any written notices and elections required
of Participants, and change such forms from time to time; (h) adopt, amend and
rescind rules and regulations for the administration of the Plan; and (i)
interpret the Plan and decide any questions and settle all controversies and
<PAGE>
disputes that may arise in connection with the Plan. Such determinations and
actions of the Committee, and all other determinations and actions of the
Committee made or taken under authority granted by any provision of the Plan,
will be conclusive and will bind all parties. Nothing in this paragraph shall be
construed as limiting the power of the Board or the Committee to make
adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan, having been adopted by the Board of Directors on January 21, 1999
is effective on said date.
No Award may be granted under the Plan after January 20, 2009, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be 200,000.
If any Award requiring exercise by the Participant for delivery of Stock
terminates without having been exercised in full, or if any Award payable in
Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Shares of Restricted Stock that have been forfeited in accordance with the
terms of the applicable Award and shares held back, in satisfaction of the
exercise price or tax withholding requirements, from shares that would otherwise
have been delivered pursuant to an Award shall also be available for future
grants. The number of shares of Stock delivered under an Award shall be
determined net of any previously acquired Shares tendered by the Participant in
payment of the exercise price or of withholding taxes.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to be selected to receive Awards under the Plan
("Participants") will be key persons in the employ of the Company or any of its
subsidiaries ("Employees") excluding all employees who are officers or directors
of the Company. A "subsidiary" for purposes of the Plan will be a corporation in
which the Company owns, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock. Eligibility for ISO's
is further limited to those individuals whose employment status would qualify
them for the tax treatment described in Section 421 and 422 of the Internal
Revenue Code.
Options for no more than 10,000 shares can be granted to any individual in
any one year under the Plan.
<PAGE>
6. TYPES OF AWARDS
6.1. Options
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price. Options that
are not incentive stock options, may be granted under the Plan. Incentive stock
options may not be granted under the Plan.
(b) Exercise Price. The exercise price of an Option will be determined by
the Committee, subject to the following:
(1) In no case may the exercise price paid for Stock be less than the
par value per share of the Stock.
(2) The Committee may reduce the exercise price of an Option at any
time after the time of grant.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Board at the time the Option was granted.
(d) Exercise of Options. An Option will become exercisable at such time or
times, and on such conditions, as the Committee may specify. The Committee may
at any time and from time to time accelerate the time at which all or any part
of the Option may be exercised. If desired, the Committee may provide for
vesting prior to the date the option becomes exercisable.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company, or (2) through the delivery of shares
of Stock (which in the case of Shares acquired from the Company, have been
outstanding for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the purchase price, or (3)
by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(4) if so permitted by the instrument evidencing the Option (or by the Committee
on or after grant of the Option), by delivery of a promissory note of the Option
holder to the Company, payable on such terms as are specified by the Committee,
provided that if the stock delivered in exercise of the Option is an original
issue of authorized stock, then so much of the purchase price as represents par
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value of the stock shall be paid in cash, or (5) by any combination of the
permissible forms of payment; provided, that if the Stock delivered upon
exercise of the Option is an original issue of authorized Stock, at least so
much of the exercise price as represents the par value of such Stock must be
paid in cash. In the event that payment of the Option price is made under (2)
above, the Committee may provide that the Option holder be granted an additional
Option covering the numbers of shares surrendered, at an exercise price equal to
the fair market value of a share of Stock on the date of surrender.
(f) Discretionary Payments. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock Appreciation
Right as described in Section 6.2 below) exceeds the exercise price of the
Option at the time of its exercise, the Committee may cancel the Option and
cause the Company to pay in cash or in shares of Common Stock (at a price per
share equal to the fair market value per share) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is cancelled) and the aggregate exercise price which would
have been paid. The Committee may exercise its discretion to take such action
only if it has received a written request from the person exercising the Option,
but such a request will not be binding on the Committee.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Committee), determined in whole or in part by reference to appreciation in Stock
value.
Except as provided below, a Stock Appreciation Right entitles the
Participant to receive, with respect to each share of Stock as to which the
Right is exercised, the excess of the share's fair market value on the date of
exercise over its fair market value on the date the Right was granted. The
Committee may provide at the time of grant that the amount the recipient is
entitled to receive will be adjusted upward or downward under rules established
by the Committee to take into account the performance of the Stock in comparison
with the performance of other stocks or an index or indices of other stocks. The
Committee may also grant Stock Appreciation Rights providing that following a
Change in Control of the Company, as defined in Exhibit A, the holder of such
Right will be entitled to receive, with respect to each share of Stock subject
to the Right, an amount equal to the excess of a specified value (which may
include an average of values) for a share of Stock during a period preceding
such Change in Control over the fair market value of a share of Stock on the
date the Right was granted.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
<PAGE>
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the
recipient to acquire, for a purchase price to be specified by the Committee, but
in no event less than par value, shares of Stock subject to the restrictions
described in paragraph (d) below ("Restricted Stock").
(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts within 60 days or such other period specified by the Committee, the
Award by written instrument delivered or mailed to the Company accompanied by
payment in full of the specified purchase price, if any, of the shares covered
by the Award. Payment may be by certified or bank check or other instrument
acceptable to the Committee.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock,
<PAGE>
including voting and dividend rights, subject to the restrictions described in
paragraph (d) below and any other conditions imposed by the Committee at the
time of grant. Unless the Committee otherwise determines, certificates
evidencing shares of Restricted Stock will remain in the possession of the
Company until such shares are free of all restrictions under the Plan.
(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2 below) for any
reason, must be offered to the Company for purchase for the amount of cash paid
for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify. Upon lapse of all restrictions, Stock will cease to be
Restricted Stock for purposes of the Plan. The Committee may at any time
accelerate the time at which the restrictions on all or any part of the shares
will lapse.
(e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Committee may, in its sole discretion, approve
the sale to any Participant of shares of Stock free of restrictions under the
Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock Awards.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may specify that a Deferred Stock Award may be forfeited if certain conditions
are or are not satisfied. The Committee may at any time accelerate the time at
which delivery of all or any part of the Stock will take place. At the time any
Award described in this Section 6 is granted, the Committee may provide that, at
the time Stock would otherwise be delivered pursuant to the Award, the
Participant will instead receive an instrument evidencing the Participant's
right to future delivery of Stock.
6.5. Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals. "Performance Goals" are goals which may be
related to personal performance, corporate performance, departmental performance
or any other category of performance deemed by the Committee to be important to
the success of the Company. The Committee will determine the Performance Goals,
<PAGE>
the period or periods during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) Supplemental Grants. In connection with any Award, the Committee may at
the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death and Total or Permanent Disability.
Except as otherwise provided by the Committee, if a Participant dies or is
totally or permanently disabled as determined by the Committee, the following
will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death or total or permanent disability, as the case may be,
shall, if not then exercisable, be accelerated and become exercisable at such
time and then all options so held by the Participant. may be exercised by the
Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution or the Participant's guardian, at any time within the one year
period ending with the first anniversary of the Participant's death, or total or
permanent disability, as the case may be (or such longer period as the Committee
may determine), and shall thereupon
<PAGE>
terminate. In no event, however, shall an Option or Stock Appreciation Right
remain exercisable beyond the latest date on which it could have been exercised
without regard to this Section 7.
(b) Except as otherwise determined by the Committee, all Restricted Stock,
as to which the forfeiture restrictions have not lapsed, held by the Participant
must be transferred to the Company (and, in the event the certificates
representing such Restricted Stock are held by the Company, such Restricted
Stock will be so transferred without any further action by the Participant) in
accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to death or total or permanent disability, as the case may be, will be
forfeited and the Award canceled as of the time of death, or total or permanent
disability, as the case may be, unless otherwise determined by the Committee.
7.2. Termination of Service (Other Than By Death or Disability).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death or total or permanent disability, as the case may be, or if
there is a termination (other than by reason of death or total or permanent
disability, as the case maybe) of the consulting, service or similar
relationship in respect of which a non-Employee Participant was granted an Award
hereunder (such termination of the employment or other relationship being herein
referred to as a "Status Change"), the following will apply:
(a) Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change provided that options that are not then exercisable on such date which
are held by a Participant who retires and who is at least 60 years of age and
has completed at least ten or more years of service (as determined by the
Committee) shall continue to vest. Any Options or Rights that were exercisable
immediately prior to the Status Change will continue to be exercisable for a
period of one year (or such longer period as the Committee may determine), and
shall thereupon terminate, unless the Award provides by its terms for immediate
termination in the event of a Status Change. Any Options or Rights that were not
exercisable immediately prior to the Status Change but which continued to vest
thereafter pursuant to the proviso above in this Section 7.2(a) will be
exercisable for a period of one year (or such longer period as the Committee may
determine) after the date such Option or Right vests, and shall thereafter
terminate unless the Award provides by its terms for immediate termination in
the event of a Status Change. If the Status Change results from a discharge for
cause (gross negligence or acts done with a malicious intent, as determined by
the Committee), all Awards will terminate if the Committee so determines in its
discretion either before or after such termination of employment. In no event,
however, shall an Option or Stock Appreciation Right remain exercisable beyond
the latest date on which it could have been exercised without regard to this
Section 7. For purposes of this paragraph, in the case of a Participant who is
an Employee, a Status Change shall not be deemed to have resulted by reason of
(i) a sick leave or other bona fide leave of absence approved for purposes of
the Plan by the Committee, so long as the Employee's right to reemployment is
<PAGE>
guaranteed either by statute or by contract, or (ii) a transfer of employment
between the Company and a subsidiary or between subsidiaries, or to the
employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which section
424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock,
as to which the forfeiture restrictions have not lapsed, held by the Participant
at the time of the Status Change must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the
Company, such Restricted Stock will be so transferred without any further action
by the Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to the Status Change will be forfeited and the Award cancelled as of the
date of such Status Change unless otherwise determined by the Committee.
Unless the Committee expressly provides otherwise, a Participant's
"employment or other service relationship with the Company and its Subsidiaries"
will be deemed to have ceased, in the case of an employee Participant, upon
termination of the Participant's employment with the Company and its
Subsidiaries (whether or not the Participant continues in the service of the
Company or its Subsidiaries in some capacity other than that of an employee of
the Company or its Subsidiaries), and in the case of any other Participant, when
the service relationship in respect of which the Award was granted terminates
(whether or not the Participant continues in the service of the Company or its
Subsidiaries in some other capacity).
7.3 A Change in Control Provision
As used herein, a Change in Control and related definitions shall have the
meanings as set forth in Section 7.3 C below.
Immediately prior to the occurrence of a Change in Control:
(a) Each Option and Stock Appreciation Right shall automatically become
fully exercisable unless the Committee shall otherwise expressly provide at the
time of grant.
(b) Restrictions and conditions on Restricted Stock, Deferred Stock,
Performance Units and Other Stock-based Awards shall automatically be deemed
waived to the extent, if any, specified (whether at or after time of grant) by
the Committee.
In addition to the foregoing and Sections 6.1(d), 6.2(d), 6.3(d) and 6.4,
the Committee may at any time prior to or after a Change in Control accelerate
the exercisability of any Options and Stock Appreciation Rights and may waive
restrictions, limitations and conditions on Restricted Stock, Deferred Stock,
Performance Units and Other Stock-based Awards to the extent it shall in its
sole discretion determine.
<PAGE>
7.3 B Certain Corporate Transactions
(a) In the event of a consolidation or merger in which the Company is not
the surviving corporation or which results in the acquisition of substantially
all the Company's outstanding Stock by a single person or entity or by a group
of persons and/or entities acting in concert, or in the event of the complete
liquidation of the Company or the sale or transfer of substantially all of the
company's assets (a "Covered Transaction"), all outstanding options will
terminate as of the effective date of the Covered Transaction, provided that at
least twenty (20) days prior to the effective date of any such merger,
consolidation, liquidation or sale of assets, but subject to Paragraphs (c) and
(d) below, the Committee shall make all outstanding Options exercisable
immediately prior to consummation of such Covered Transaction (to the extent
that such Options are not exercisable immediately prior to the consummation of
the Covered Transaction pursuant to Section 7.3A).
(b) Subject to Paragraphs (c) and (d) below, the Committee may, in its sole
discretion, prior to the effective date of the Covered Transaction, (1) remove
the restrictions from each outstanding share of Restricted Stock, (2) cause the
Company to make any payment and provide any benefit under each outstanding
Deferred Stock Award, Performance Award, and Supplemental Grant which would have
been made or provided with the passage of time had the transaction not occurred
and the Participant remained an employee, and (3) forgive all or any portion of
the principal of or interest on a loan.
(c) If an outstanding option or Other Award is subject to performance or
other conditions (other than conditions relating the mere passage of time and
continued employment) which will not have been satisfied at the time of the
Covered Transaction the Committee may, in its sole discretion, remove such
conditions. If it does not do so however, such Option or Other Award will
terminate, because the conditions have not been satisfied, as of the date of the
Covered Transaction notwithstanding Paragraph (a) and (b) above.
(d) With respect to an outstanding Option or Other Award held by the
participant who, following the Covered Transaction, will be employed by a
corporation which is a surviving or acquiring corporation in such transaction or
an affiliate of such a corporation, the committee may, in lieu of the action of
the Committee described in Paragraphs (a) or (b) above or in addition to any
Option being exercisable immediately prior to consummation of the Covered
Transaction pursuant to Section 7.3A above, arrange to have such surviving or
acquiring corporation or affiliate assume the Option or Other Award or grant to
the Participant a replacement or substitute Option or other Award on such terms
as the Committee approves. In the case of an assumed or substitute Option
intended to be an Incentive Stock Option, the requirements of Section 424 (a) of
the code shall be satisfied except as otherwise provided by the Committee.
7.3 C Change in Control and Related Definitions
A "Change in Control" shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been satisfied:
<PAGE>
(a) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 35% or more of the combined voting
power of the Company's then outstanding securities; or
(b) during any period of not more than two consecutive years (not including
any period prior to December 31, 1996), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a Person who has entered into an agreement with the Company to
effect a transaction described in Clause (a), (b), or (c) of Section 7.3 C)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than:
(1) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) 60% or more of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or
(2) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no person acquires 35% or
more of the combined voting power of the Company's then outstanding
securities;
(d) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets.
Notwithstanding the foregoing provisions of this Section 7.3C, a "Change in
Control" will not be deemed to have occurred solely because of (i) the ownership
or acquisition of securities of the Company (or any reporting requirement under
the Securities Exchange Act of 1934) relating thereto) by an employee benefit
plan maintained by the Company for the benefit of employees or by ownership or
acquisition (whether accomplished by merger, consolidation, purchase or
otherwise) by any of Ben Cohen, Jerry Greenfield, 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 and/or other related Company
management group.
In the foregoing provisions of this Section 7.3, the following terms shall
have the meanings set forth below:
<PAGE>
"Person" shall have the meaning given in Section 3 (a) (9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13 9D and 14
(d) thereof; however, a Person shall not include:
(1) the Company or any controlled subsidiary of the Company;
(2) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company; or,
(3) a corporation or other entity owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
"Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the
Securities Exchange Act of 1934 as amended from time to time.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Board from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (d) until all other legal
<PAGE>
matters in connection with the issuance and delivery of such shares have been
approved by the Company's counsel. If the sale of Stock has not been registered
under the Securities Act of 1933, as amended, the Company may require, as a
condition to exercise of the Award, such representations or agreements as
counsel for the Company may consider appropriate to avoid violation of such Act
and may require that the certificates evidencing such Stock bear an appropriate
legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
8.5. Nontransferability of Awards.
No Award (other than an Award in the form of an outright transfer of cash
or Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during a Participant's lifetime an Award requiring
exercise may be exercised only by him or her (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on the
Participant's behalf).
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
<PAGE>
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. Deferral of Payments.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
8.10. Fair Market Value.
For purposes of the Plan, fair market value of a share of Stock on any date
will be the closing price in the over-the-counter market with respect to such
Stock, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other similar system then in use; or, if on
any such date such Stock is not quoted by any such organization, the average of
the closing bid and asked prices with respect to such Stock, as furnished by a
professional market maker making a market in such Stock selected by the
Committee; or if such prices are not available, the fair market value of such
Stock as of such date as determined in good faith by the Committee; or, where
necessary, in order to achieve the intended Federal income tax result, the value
of a share of Stock as determined by the Committee in accordance with the
applicable provisions of the Code.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant cash or Stock awards
that are not subject to the Plan, to issue to such Participant Stock as a bonus
or otherwise, or to adopt other plans or arrangements under which Stock be
issued to Employees. The Committee may at any time discontinue granting Awards
under the Plan.
<PAGE>
The Board may at any time or times amend the Plan (and the Committee may
amend any outstanding Award) for any purpose which may at the time be permitted
by law, or may at any time terminate the Plan as to any further grants of
Awards, provided that no amendment or termination of the Plan may adversely
affect the rights of any Participant (without the Participant's consent) under
any Award previously granted.
EXHIBIT 10.29.2
Amendment to Equity Incentive Plan (1995)
7.3 A Change in Control Provision
As used herein, a Change in Control and related definitions shall have
the meanings as set forth in Section 7.3 C below.
Immediately prior to the occurrence of a Change in Control:
(a) Each Option and Stock Appreciation Right shall automatically become
fully exercisable unless the Committee shall otherwise expressly
provide at the time of grant.
(b) Restrictions and conditions on Restricted Stock, Deferred Stock,
Performance Units and Other Stock-based Awards shall automatically be
deemed waived to the extent, if any, specified (whether at or after
time of grant) by the Committee.
In addition to the foregoing and Sections 6.1(d), 6.2(d), 6.3(d) and
6.4, the Committee may at any time prior to or after a Change in
Control accelerate the exercisability of any Options and Stock
Appreciation Rights and may waive restrictions, limitations and
conditions on Restricted Stock, Deferred Stock, Performance Units and
Other Stock-based Awards to the extent it shall in its sole discretion
determine.
7.3 B Certain Corporate Transactions.
(a) In the event of a consolidation or merger in which the Company is
not the surviving corporation or which results in the acquisition of
substantially all the Company's outstanding Stock by a single person or
entity or by a group of persons and/or entities acting in concert, or
in the event of the complete liquidation of the Company or the sale or
transfer of substantially all of the Company's assets (a "Covered
Transaction"), all outstanding Options will terminate as of the
effective date of the Covered Transaction, provided that at least
twenty (20) days prior to the effective date of any such merger,
consolidation, liquidation or sale of assets, but subject to Paragraphs
(c) and (d) below, the Committee shall make all outstanding Options
exercisable immediately prior to consummation of such Covered
Transaction (to the extent that such Options are not exercisable
immediately prior to the consummation of the Covered Transaction
pursuant to Section 7.3 A).
(b) Subject to Paragraphs (c) and (d) below, the Committee may, in its
sole discretion, prior to the effective date of the Covered
Transaction, (1) remove the restrictions from each outstanding share of
Restricted Stock, (2) cause the Company to make any payment and provide
any benefit under each outstanding Deferred Stock Award, Performance
Award, and Supplemental Grant which would have been made or provided
with the passage of time had the transaction not occurred and the
Participant remained an employee, and (3) forgive all or any portion of
the principal of or interest on a loan.
<PAGE>
(c) If an outstanding Option or Other Award is subject to performance
or other conditions (other than conditions relating the mere passage of
time and continued employment) which will not have been satisfied at
the time of the Covered Transaction, the Committee may, in its sole
discretion, remove such conditions. If it does not do so however, such
Option or Other Award will terminate, because the conditions have not
been satisfied, as of the date of the Covered Transaction
notwithstanding Paragraph (a) and (b) above.
(d) With respect to an outstanding Option or Other Award held by the
participant who, following the Covered Transaction, will be employed by
a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, the Committee may,
in lieu of the action of the Committee described in Paragraphs (a) or
(b) above or in addition to any Option being exercisable immediately
prior to consummation of the Covered Transaction pursuant to Section
7.3A above, arrange to have such surviving or acquiring corporation or
affiliate assume the Option or Other Award or grant to the Participant
a replacement Option or other Award which, in the judgment of the
Committee, is substantially equivalent to the Option or Other Award. In
the case of an assumed or substitute Option intended to be an Incentive
Stock Option, the requirements of Section 424 (a) of the Code shall be
satisfied except as otherwise provided by the Committee.
7.3 C Change in Control and Related Definitions.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding securities;
or
(b) during any period of not more than two consecutive years (not
including any period prior to October 26, 1994), individuals who at the
beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in Clause
(a), (c) or (d) of Section 7.3 C) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof; or
<PAGE>
(c) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than
(1) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the
surviving entity) 60% or more of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no person acquires 35% or more of the combined voting
power of the Company's then outstanding securities; or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing provisions of this Section 7.3C, a
"Change in Control" will not be deemed to have occurred solely because
of (i) the ownership or acquisition of securities of the Company (or
any reporting requirement under the Securities Exchange Act of 1934)
relating thereto) by an employee benefit plan maintained by the Company
for the benefit of employees or by ownership or acquisition (whether
accomplished by merger, consolidation, purchase or otherwise) by any of
Ben Cohen, Jerry Greenfield, 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 and/or other
related management group.
In the foregoing provisions of this Section 7.2, the following terms
shall have the meanings set forth below:
"Person" shall have the meaning given in Section 3 (a) (9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13 9d
and 14 (d) thereof; however, a Person shall not include
(1) the Company or any controlled subsidiary of the Company,
(2) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or
(3) a corporation or other entity owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock
of the Company.
<PAGE>
"Beneficial Owner" shall have the meaning defined in Rule 13d-3 under
the Securities Exchange Act of 1934 as amended from time to time.
EXHIBIT 10.33.1
Amendment to Employment Agreement
Amendment dated as of February 28, 1999 to Employment Agreement (the
Employment Agreement) dated December 31, 1996 between Ben & Jerry's Homemade,
Inc. (the "Company") (and Perry D. Odak (the "Executive").
Whereas the parties wish to make certain amendments to the Employment
Agreement.
Now therefore, in consideration of these premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree to amend the Employment Agreement as follows:
1. Section 4(b)(iii) if the Employment Agreement is hereby amended to read
as follows
4(b)(iii), notwithstanding any other provision of the Employment Agreement
and notwithstanding any determination or lack of determination by the
Compensation Committee on substantial performance of the Non-Financial
Objectives in the year 1998:
(1) provided, however, that the initial exercisability date of all the
270,000 options that would otherwise vest during the third - sixth years
under clause (b)(ii) above shall automatically be accelerated in accordance
with the following:
When the fair market value of the Company's Class A Common Stock (the
"Stock"), as measured by the average of the daily closing stock prices on
NASDAQ for a period of 90 consecutive days, shall have satisfied the Per
Share Fair Market Value Threshold specified below and the Committee shall
have determined that the Executive has substantially met the Non-Financial
Objectives (as defined below) for 1997 or the preceding calendar year, as
the case may be, or for the first seven months of 1999 as set forth below,
then such options for 270,000 shares (after the 90,000 options that vested
six months after the date of the original Agreement but including the
accelerated vesting of options for the first two tranches of 50,000 shares
under this Section 4(b)(iii) as set forth in the table and in the second
paragraph following the table below) shall become exercisable as follows:
Defined Per
Share Fair
Market Value
Threshold Number of Options
("Threshold") Becoming Vested
$16 Options for 50,000 shares--became vested in 1998
(see below)
$20 Options for 50,000 shares--become vested in
February 1999 (see below)
$23 Options for 35,000 shares and Options for 15,000
shares
$27 Options for 42,000 shares and Options for 18,000
shares
$30.50 Options for 42,000 shares and Options for 18,000
shares
<PAGE>
In each case the aggregate number of then unvested options entitled to
accelerated vesting pursuant to this Section 4(b)(iii) (50,000; 50,000; 35,000;
15,000; 42,000, 18,000; and 42,000, 18,000 as the case may be) shall be the
options that would regularly vest the latest under (b)(ii) above following the
date when such acceleration under this Section 4(b)(iii) has become effective.
$16 and $20 Thresholds. The $16 Threshold was satisfied in 1998 and the
first 50,000 shares in the table above accelerated and became vested. The $20
Threshold was satisfied in early 1999, prior to the date of this Amendment, and
the second tranche of 50,000 options in the table accelerated and vested,
thereby making a total on that date of vested options for 190,000 shares plus
such number as may have become vested on a monthly basis, since January 1, 1999,
pursuant to the provisions of Section 4(b)(ii).
$23, $27 and $30.50 Thresholds Satisfied in 1999 or early 2000. If and when
the $23 Threshold or the $27 Threshold or the $30.50 Threshold is satisfied in
1999 or in 2000 (prior to the Committee's determination by the end of February,
2000 with respect to the Executive's performance of the 1999 Non-Financial
Objectives), then options for 35,000 shares pertaining to the $23 Threshold,
options for 42,000 shares pertaining to the $27 Threshold and options for 42,000
shares pertaining to the $30.50 Threshold shall accelerate and vest on the date
such Threshold is satisfied, as the case may be.
15,000 Options Pertaining to $23 Threshold. In the event of a favorable
additional determination by the Compensation Committee (such determination to be
made during August-September, 1999) that the Executive has substantially met the
Additional Non-Financial Objectives for the first seven months in 1999, these
options for 15,000 shares pertaining to the $23 Threshold set forth in the above
table will accelerate and vest if and when the $23 Threshold has been satisfied.
If the Committee's August-September, 1999 additional determination is that
the Executive has not substantially met the Additional Non-Financial Objectives,
then the vesting of the said 15,000 options will not accelerate if and when $23
Threshold has been satisfied and, accordingly, in that event, said options for
15,000 shares shall accelerate and vest only when and if the $30.50 Threshold
has been met at some subsequent date and if options for 60,000 shares pertaining
to the $30.50 Threshold shall have vested directly as a result thereof (which
requires that there be in effect at or after said subsequent date a favorable
determination by the Committee with respect to substantial performance of the
Non-Financial Objectives for the applicable prior year made by the Committee in
2000 or in a later year).
$27 and $30.50 Thresholds and Options for 18,000 Shares and Options for
18,000 Shares. In the event the $27 Threshold has been met or the $30.50
Threshold has been met in 1999 or in 2000 (prior to the date of the Committee's
determination on 1999 performance), the remaining 18,000 options pertaining to
the $27 Threshold (if said Threshold has been satisfied) and the remaining
18,000 options pertaining to the $30.50 Threshold (if said $30.50 Threshold has
been satisfied) shall not accelerate and vest at that time but shall accelerate
and vest only when there is in effect a determination by the Committee made in
the year 2000 (or in a later year) that the Executive has substantially met the
Non-Financial Objectives for the Year 1999 or for the applicable prior year, as
the case may be. When the remaining 18,000 options pertaining to the $30.50
Threshold have accelerated and vested, then the second tranche of 15,000 options
pertaining to the $23.00 Threshold shall accelerate and vest, pursuant to the
provisions of the immediately preceding paragraph.
<PAGE>
$23, $27 and $30.50 Thresholds Met Later Than 1999 or early 2000. If any of
the $23, $27 or $30.50 Price Thresholds are not met in 1999 or in 2000 (prior to
the date of the Committee's determination on performance for the Year 1999), but
instead are first met after the date in 2000 of the Committee's said
determination, then the specified accelerated vesting of 35,000 options
pertaining to the $23 Threshold, the 42,000 options and the 18,000 options
pertaining to the $27 Threshold and the 42,000 options and the 18,000 options
pertaining to the $30.50 Threshold shall occur if (a) the Executive is, on the
date such applicable Threshold is met, an employee of the Company and (b) the
Committee's determination in effect at or subsequent to the date such applicable
Threshold is met is favorable that the Executive has substantially met the
Non-Financial Objectives for the Year 1999 or for the applicable prior year, as
the case may be. Accelerated vesting of the 15,000 options pertaining to the $23
Threshold shall occur only as provided above under the heading "15,000 Options
Pertaining to $23 Threshold".
(2) The Committee shall be required to make a determination during the
first year of the Term, favorable or unfavorable, within 30 days after the date
such Per Share Fair Market Value Threshold has been met for 90 days and
thereafter shall make one determination each year, by the end of February in
each year except that the Committee shall make an additional determination in
August-September 1999 with respect to performance of the Additional
Non-Financial Objectives for the first six months of 1999 set forth on Schedule
I. The Non-Financial Objectives for each year, commencing with the second year
of the Term, shall be agreed between the Committee and the Executive prior to
the beginning of each such year and for the first year of the Term shall be
agreed between the Committee and the Executive by June 30, 1997. Furthermore,
the Additional Non-Financial Objectives for the first half of 1999 are agreed
between the Committee and the Executive to be as set forth in Schedule I.
(3) The Company acknowledges the obligations of its Compensation Committee
to make its "additional determination", favorable or unfavorable, on substantial
performance of the Additional Non-Financial Objectives by September 30, 1999 and
its yearly determination, favorable or unfavorable, with respect to substantial
performance of the Non-Financial Objectives for the Year 1999 or a subsequent
year by not later than February in each year, and accordingly (in order to give
full effect to the provisions of this Amendment which make certain acceleration
of vesting of options contingent on a subsequent favorable Committee
determination in early 2000), the Term of the Agreement is extended from
December 31, 1999 to the date which is fifteen days after the date of the
Committee's determination in 2000 as to whether or not the Executive has
substantially met the 1999 Non-Financial Objectives.
<PAGE>
2. Except as expressly amended hereby, the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF the parties have executed and delivered this Amendment
as of the day set forth above.
/s/Perry D. Odak
Ben & Jerry's Homemade, Inc.
By /s/Frances Rathke
Chief Financial Officer
EXHIBIT 21.1
BEN & JERRY'S HOMEMADE, INC.
Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
Ben & Jerry's Homemade Holdings, Inc. Vermont
Ben & Jerry's of New York New York
Ben & Jerry's Homemade, Ltd. England
Ben & Jerry's Canada, Inc. Quebec, Canada
Ben & Jerry's (FSC), Inc. Barbados
Ben & Jerry's France SARL France
Ben & Jerry's International, Inc. Delaware
Ben & Jerry's Franchising, Inc. Vermont
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 22, 1999, except for Note 17, as to which the date
is February 26, 1999, 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 26, 1998.
ERNST & YOUNG LLP
Boston, Massachusetts
March 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
See accompanying notes
$ in thousands, except per share data
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<EXCHANGE-RATE> 1
<CASH> 25111
<SECURITIES> 0
<RECEIVABLES> 11338
<ALLOWANCES> 0
<INVENTORY> 13090
<CURRENT-ASSETS> 82309
<PP&E> 63451
<DEPRECIATION> 0
<TOTAL-ASSETS> 149501
<CURRENT-LIABILITIES> 33928
<BONDS> 0
0
1
<COMMON> 245
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 149501
<SALES> 209203
<TOTAL-REVENUES> 0
<CGS> 136225
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (693)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1888
<INCOME-PRETAX> 9776
<INCOME-TAX> 3534
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6242
<EPS-PRIMARY> .87
<EPS-DILUTED> .84
</TABLE>
