<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
{X} Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 30, 1995
OR
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
0-15942
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(Commission File No.)
INTEGRATED BRANDS INC.
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(Exact name of registrant as specified in its charter)
New Jersey 11-2778439
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4175 Veterans Highway, Ronkonkoma, New York 11779
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(Address of principal executive offices including zip code)
Registrant's Telephone Number, including area code: (516) 737-9700
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, par value $0.01 per share
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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 _____
The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 15, 1996 was $8,052,000.
As of March 15, 1996, there were 10,203,288 shares of the registrant's Common
Stock outstanding.
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PART I
Item 1. BUSINESS.
INTEGRATED BRANDS INC., together with its subsidiaries
(collectively, "INTEGRATED" or the "Company") markets, sells and distributes a
variety of branded frozen dessert products to supermarkets, grocery stores, club
stores, gourmet shops, delicatessens and convenience stores. The Company
pursuant to long-term exclusive license agreements markets, sells and
distributes Yoplait(R) and Colombo(R) ready to eat frozen yogurt products,
individual and multipack Trix(R) frozen novelties, individual and multipack
YooHoo(R) frozen novelties and Sweet 'N Low(R) fat free ice cream. The Company's
products include prepackaged "Chilly Things"(R), "Great American", "Tropical"
and "Bullet" frozen novelties. The Company, directly and through subsidiaries,
also operates, franchises and licenses Steve's, Swensen's and triple trademark
frozen dessert stores throughout the United States and certain foreign
countries.
The Company was incorporated in New Jersey on September 27,
1985 and commenced operations on December 23, 1985 as Steve's Homemade Ice
Cream, Inc. In July 1995, the Company changed its name to INTEGRATED BRANDS INC.
to more appropriately reflect the breadth of the Company's business. Its
principal offices are located at 4175 Veterans Highway, Ronkonkoma, New York
11779 and its telephone number is (516) 737-9700.
In July 1992, the Company and General Mills, Inc. executed the
initial license for TRIX(R) frozen dessert novelties and a sublicense for
Yoplait(R) ready to eat frozen yogurt. A new long-term license agreement for
Trix frozen dessert products was executed in August 1995, which will terminate
on December 31, 2015 and is renewable by the Company for an additional five year
term if a cash payment is made. Also in August 1995, the Company and General
Mills agreed to extend the term of the Yoplait Sublicense to December 31, 2015,
with an option to renew by the Company for an additional five year term if a
cash payment is made. In August 1995, the Company and General Mills, Inc.
executed license agreements for Colombo(R) prepackaged frozen dessert products,
Betty Crocker(R) prepackaged frozen dessert products and Count Chocula(R) and
Lucky Charms(R) prepackaged frozen dessert products. These new agreements expire
December 31, 2015, 2010 and 2015, respectively and are renewable by the Company
for an additional five years if cash payments are made.
The Company owns, operates, develops and franchises Swensen's
restaurants and ice cream stores in four formats: full food service, limited
food service, ice cream only stores and specialty stores. Steve's franchises are
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operated primarily as dessert only stores. Steve's and Swensen's stores are also
offered as "triple trademark" franchises featuring independent sections of
Steve's or Swensen's ice cream, David's cookies and Heidi's frozen yogurt.
At December 30, 1995, there were 19 franchised Steve's stores,
260 franchised Swensen's stores and four Company-owned and operated Swensen's
stores. One Company-owned store was temporarily closed in November 1995 for
remodeling and reopened in March 1996, as Jerry Tucci's Pizza & Pasta
Restaurant, a new full service restaurant concept being developed by the
Company.
In February 1989, the Company, through a wholly-owned
subsidiary, acquired approximately 85% of the outstanding stock of Heidi's
Frogen Yozurt Shoppes, Inc. ("Heidi's"). At December 30, 1995, Heidi's has 22
franchised frozen yogurt stores predominately located in California with stores
also in Arizona and Texas. On April 9, 1993, Heidi's and its subsidiary filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code to
reorganize. The Company has entered into agreements with Heidi's pursuant to
which the Company has received a license from Heidi's to (i) use the Heidi's
trademark in the manufacture of frozen dessert products, (ii) offer Heidi's
products in its Steve's and Swensen's stores and (iii) sell Heidi's franchises.
The Ice Cream and Frozen Dessert Market
The packaged ice cream industry includes economy, regular,
premium and super premium categories. Super premium ice cream is generally
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 is generally characterized by a
greater richness and density than other kinds of ice cream. Super premium ice
cream sold in packaged pints generally has a fat content of at least 14% to 16%
and overrun, or air content, no greater than 20% to 30%.
Premium ice cream is generally characterized by 14% fat
content, and 80% overrun, or air content. Premium ice cream is generally
marketed on the basis of price, although recently greater emphasis has been
placed on quality, flavor selection and ingredients. Light premium products
generally have a fat content below 7% and overrun of no greater than 80%.
Super premium frozen yogurt is generally characterized by a
fat content of 3.5% to 5.5%, overrun of no greater than 60% and by greater
richness and density than other categories of frozen yogurt.
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Wholesale Products and Sales
The Company's products for wholesale sale include: Yoplait(R)
ready to eat frozen yogurt products; Colombo ready to eat frozen yogurt and
sorbet products, Trix(R) frozen novelties, and a variety of other novelties,
including those sold under the "Great American", "Tropical", "Chilly Things" and
"Bullet" trademarks, American Glace(R) no fat, no cholesterol low calorie frozen
dessert and Sweet 'N Low(R) fat free ice cream products. Yoplait(R), Colombo(R),
YooHoo(R), American Glace(R) and Sweet 'N Low(R) products appeal to the
healthier consumer lifestyle and eating trends toward lower and no fat and lower
and no cholesterol products. The Company is developing additional products to be
marketed under the Betty Crocker(R) and Colombo(R) trademarks.
The Company sells its variety of prepackaged products to
distributors and various retail establishments including supermarkets, grocery
stores, club stores, gourmet shops, delicatessens and convenience stores.
The Company purchases packaging and ingredients for its
products directly from unaffiliated suppliers. The Company then sells the
ingredients and cartons to unaffiliated manufacturers. Certain of these
manufacturers also manufacture other ice cream and related frozen dessert
products for other companies, including companies affiliated with Richard E.
Smith, who is a significant shareholder and Chairman of the Board of the
Company. The manufacturers produce the Company's products according to the
Company's specifications and formulas under quality control supervision by the
Company. The Company then purchases the finished products from the manufacturers
for distribution at a formula price based upon the manufacturers' actual cost of
ingredients and packaging plus an agreed upon processing fee which includes a
profit for the manufacturers. The Company believes there are many alternative
ice cream and novelty manufacturers available on comparable terms.
In November 1992, the Company entered into two distribution
agreements with Edy's Grand Ice Cream ("Edy's") and Dreyer's Grand Ice Cream,
Inc. ("Dreyer's") relating to the distribution of the Company's products.
Pursuant to one agreement (the "Local Distribution Agreement"), Edy's and
Dreyer's agreed to distribute essentially all of the Company's products to the
New York metropolitan area supermarkets. Pursuant to the second agreement (the
"National Distribution Agreement"), Edy's and Dreyer's agreed to distribute the
Company's TRIX(R) and Yoplait(R) prepackaged products and other novelty items
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nationwide. The National Distribution Agreement is exclusive with respect to
certain areas of the country and non-exclusive with respect to others. The term
of the National Distribution Agreement is five years with either party having
the right to terminate it upon twelve months notice during the initial five year
period. During 1995, several areas which were previously distributed exclusively
by Dreyer's and Edy's were handled by other distributors or chain store
warehouses. The Local Distribution Agreement is for a term of five years and
automatically renews unless terminated by one party on at least six months prior
notice.
The Company's products are distributed in the New York
Metropolitan region to customers primarily other than supermarket chains by
Calip Dairies, Inc. ("Calip") of which Richard E. Smith is Chairman of the Board
and Mr. Smith and his family are the sole stockholders. The distribution
agreement with Calip is terminable upon thirty (30) days notice by either party.
Markets and Customers
The Company's products are distributed nationwide. Sales to
Sunstreet Foods Corporation, a distributor of the Company's bulk and prepackaged
products, accounted for 10%, 14% and 16% of total revenues for 1995, 1994 and
1993, respectively. Sales to Dreyer's and Edy's accounted for 11%, 20% and 23%
of total revenues for 1995, 1994 and 1993, respectively.
Franchise and Licensing Program
As of December 30, 1995, the Company had 19 franchised Steve's
stores most of which are located in four states; and 260 franchised Swensen's
Stores in 20 states, the District of Columbia, and 12 foreign countries.
As of December 30, 1995 two additional franchisee-operated
stores were under construction.
Franchises
In late 1989, the Company began offering "triple-trademark"
franchises, featuring independent sections of Steve's or Swensen's ice cream,
David's cookies and Heidi's frozen yogurt. The Company, pursuant to an
arrangement with Specialty Foods Management, Inc. ("David's"), offers its
franchisees David's cookies as an approved product with David's retaining the
right to manufacture the cookie mix. The "triple-trademark" franchise is offered
under, at the franchisee's election, either a Steve's or Swensen's franchise
agreement, with David's cookies being deemed "approved products" which are
permitted to be sold by the franchise and Heidi's frozen yogurt being licensed
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to the franchisee. The initial franchise fee for a Swensen's or Steve's "triple
trademark store" is $25,000. The "triple-trademark" concept was developed in
response to the high real estate costs likely to be incurred by prospective
franchisees. The concept allows franchisees to offer a range of dessert products
while dividing the real estate costs and overhead between three synergistic
businesses.
Where conditions do not permit a triple trademark franchise
operation, the Company franchises one basic Steve's store type, an ice cream
only store, and four basic Swensen's store types in the following formats:
1. Full-Service Food Store, old fashioned ice cream
family-style restaurants with full service and food, featuring Swensen's ice
cream and fountain products.
2. Ice-Cream-Only Store, with the same decor and featuring
only Swensen's ice cream and ice cream related products.
3. Modified Full-Service Store, offering partial self-service
of a limited food menu, having approximately 1,800 to 2,000 square feet and
generally 50 to 60 seats.
4. Specialty Stores, which include kiosks or other approved
types of outlets of a special nature.
The Company also offers, where permitted, existing Steve's and
Swensen's franchises the right to sell Heidi's frozen yogurt and existing
Heidi's franchises the right to sell Steve's or Swensen's ice cream.
The current form of franchise agreement for Steve's stores is
for a ten-year term with an option to the franchisee to renew for a second
ten-year term, upon the payment of the then current franchise fee. The
agreements grant the franchisees an exclusive area and, since the commencement
of the Company's operations, require the franchisee to purchase ice cream and
certain other products exclusively from the Company. Franchisees pay an initial
franchise fee, currently $25,000 and a royalty fee equal to 6% of gross sales.
Earlier franchise agreements, which are still in effect, have different terms.
Some are continuously renewable without payment of a new franchise fee, have
royalty fees as low as 2% of gross sales and do not require the franchisee to
purchase ice cream from the Company. The current weighted average royalty rate
for Steve's franchises is approximately 4.9%. The Company currently does not
collect advertising fees from Steve's franchisees although it has the right to
do so pursuant to the existing franchise agreements.
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Swensen's standard franchise agreements provide for initial 20
and ten year terms for food menu and ice cream-only stores, respectively, and
options to renew for up to the same periods. The agreements grant the franchisee
the right to use the Swensen's name, goodwill and trade secrets, and to develop
and operate the store in accordance with the Swensen's system. Initial franchise
fees are $25,000. In addition, the current franchise agreement requires domestic
franchises to pay Swensen's a royalty of 6% of gross sales, and foreign
franchisees to pay 3% (in U.S. Dollars) of their gross sales as royalties. Since
franchise agreements entered into before 1980 called for a lower royalty, the
current weighted average royalty rate is 3.2% for domestic franchises and 2% for
foreign franchises. Swensen's current franchise agreement provides that domestic
franchisees must contribute, depending on store type, 1/2% to 1% of gross sales
to a fund which is used for national advertising.
The Company markets its franchises through magazine and
newspaper advertisements, by attending new business opportunity conventions and
through franchise brokers, as well as by responding to inquiries from potential
franchisees who have seen the Company's product or one of its franchise stores.
The Company has converted all of the Steve's franchised stores
and substantially all of its Swensen's franchised stores from the sale of
made-on-the-premises ice cream to the sale of prepackaged bulk ice cream, which
is sold directly to certain of the franchisees by the Company in bulk
containers. Previously, all franchised stores made ice cream on the premises
from ice cream mixes. Although the cost of the prepackaged product is higher
than the cost of the ice cream mixes used by the franchisees, the prepackaged
ice cream is of a higher quality, and involves lower labor, management and
energy costs than the made-on-the-premises product, reduces waste and is
available in a wider variety of flavors. In addition, the prepackaged bulk ice
cream promotes uniformity of product among the franchises and allows the
operators to focus on the service and hospitality aspects of their business.
All franchisees are required to purchase their ice cream and
yogurt products from the Company or approved affiliates or suppliers and to
purchase other proprietary products from Company-approved sources. The Steve's
bulk ice cream is offered in approximately 51 flavors, the Swensen's bulk ice
cream is offered in approximately 54 flavors, and the Heidi's yogurt mix is
offered in approximately 45 flavors (6 base mixes plus flavoring syrups). The
number of flavors actually available at any one time varies. The Company also
offers a variety of flavors of Swensen's no sugar added, low fat and no fat ice
creams and Swensen's frozen yogurt products to the Swensen's franchised stores.
American Glace frozen dessert soft serve mixes are offered to all of the
Company's franchises.
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Most Swensen's franchises purchase their ice cream through
local distributors who act as consignees of Swensen's or from Sunstreet Foods
Corporation, which purchases Swensen's ice cream for distribution. Three
original franchisees that do not purchase centrally manufactured ice cream
purchase ice cream mix from vendors approved by Swensen's.
Steve's franchisees purchase their ice cream from the Company
through local distributors, some of whom purchase directly from the Company and
some of whom act as consignees of the Company.
In 1995 three Steve's franchise stores were opened. In 1994
one Steve's franchise triple trademark store was opened and in 1993 four Steve's
franchise stores (including one triple trademark) were opened. In 1995 four
Steve's stores were closed. In 1994 no Steve's stores were closed and in 1993
five Steve's stores closed. The average sales for Steve's franchise stores
opened at least one year were $253,000 in 1995, $309,000 in 1994 and $289,000 in
1993. In 1995, 1994, and 1993 there were 60 (substantially all international),
21 and 8 Swensen's stores opened, respectively, and 38 (substantially all
domestic), 17 and 9 Swensen's stores closed, respectively. The average sales for
all Swensen's stores was $354,000, $308,000 and $295,000 in 1995, 1994 and 1993,
respectively. The above sales amounts have been supplied by the franchisees,
have not been verified by the Company, are average sales results and may not be
indicative of actual or future results.
Area Development Agreements
Steve's Ice Cream, Inc. ("SIC, Inc."), the predecessor of the
Company, had entered into area development agreements which the Company assumed
in the acquisition of the assets of SIC, Inc. Similarly, Swensen's, prior to its
acquisition by the Company had entered into area development agreements. While
the Company does not generally intend to enter into additional domestic area
development agreements, it intends to enter into international area development
agreements from time to time in the future.
The area development agreements generally provide that the
area developer is required to open and operate a specified number of franchises
in a designated territory within a certain time period and that the area
developer has the exclusive right to open Steve's or Swensen's franchises, as
the case may be, in that territory. Generally, if the specified number of
franchises are not opened within that period, the area developer loses his
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exclusive territory. Area developers generally pay a development fee based on
the number of franchises to be opened, which is credited against the initial
franchise fees payable for the opening of each store.
At December 30, 1995 there were two international Steve's area
development agreements and twelve international Swensen's area development
agreements in effect. The Company is currently negotiating several Steve's and
Swensen's international area development agreements. There can be no assurances
that these agreements will be entered into.
International
The Company received approximately $623,000 and $872,000 in
royalties and franchise fees from international franchisees for the years ended
December 30, 1995 and December 31, 1994, respectively.
The Company also had sales of products and supplies to
international franchisees and licensees of $477,000 in 1995 and $385,000 in
1994.
Company-owned Stores
As of December 30, 1995, the Company owned and operated four
Swensen's stores, of which two are located in Arizona, one in Las Vegas, Nevada
and one in California. In November 1995, the Company temporarily closed a store
located in Paradise Valley, Arizona for remodelling and conversion to Jerry
Tucci's Pizza & Pasta Restaurant, a prototype Italian restaurant concept being
developed by the Company. The restaurant was opened in March 1996.
Competition
The ice cream, frozen yogurt and frozen dessert and related
novelty market is highly competitive and the Company faces substantial
competition in connection with the marketing and sales of its products. Among
its competitors are Haagen-Dazs, Inc., owned by The Pillsbury Company, Klondike,
Popsicles, Breyer's and Sealtest, owned by Unilever PLC, Eskimo Pie, Nestle',
Ben & Jerry's Homemade Ice Cream, Inc., Dreyer's Ice Cream and other numerous
regional ice cream companies. Many of such competitors are well-established and
have substantially greater financial and other resources than the Company.
While the ice cream and frozen yogurt manufacturing and
distribution business is relatively easy to enter due to low entry cost,
achieving wide distribution may be more difficult because of the high cost of a
national marketing program and limitations on space available in retail freezer
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compartments. The Company's products may also be considered to be competing with
all ice cream and other frozen desserts for discretionary food dollars.
Steve's and Swensen's stores compete directly with local,
regional and national retail ice cream and frozen dessert establishments and
restaurants, including nationwide chains such as Friendly's, Baskin & Robbins,
TCBY and with other businesses catering to the food and dessert market. Many of
these businesses are much larger and have substantially greater capital and
resources than does the Company. The ability of the Company and its franchisees
to maintain and increase their share of the market will be dependent upon many
factors, among which are the quality and price of their products, location and
attractiveness of facilities, advertising, quality of service, and availability
of capital for expansion and remodeling.
Trademarks and Patents
The Company currently has registered trademarks and service
marks for Steve's, Swensen's and American Glace. It has also obtained trademarks
for the names of certain ice cream flavors. In addition, the Company has filed
applications for certain other trademarks and service marks in the United States
and certain foreign countries.
The Company also has proprietary rights in numerous items,
such as tradedress (store design, decors and layout), menu formats, advertising
designs, ice cream formulas and flavors and in recipes, know-how, processes,
products and other data, techniques and information.
Employees
As of December 30, 1995 the Company had 54 full-time employees
and 97 part-time employees. Of these, 14 full-time and 95 of the part-time
employees were employed in Company-owned stores. None of the Company's employees
are covered by collective bargaining agreements. The Company believes that its
employee relations are good.
Seasonality
The ice cream industry generally experiences its highest
volume during the spring and summer months and its lowest volume in the winter
months.
Governmental Regulations
The Company is subject to regulation by federal, state and
local governmental authorities regarding the distribution and sale of food
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products and the operation of retail food establishments. Although the Company
believes that it currently has all material governmental permits, licenses,
qualifications and approvals for its operations, there can be no assurance that
the Company will be able to maintain its existing licenses and permits or to
obtain any future licenses, permits, qualifications or approvals which may be
required for the operation of its business.
In addition, the Company's franchise programs are subject to
regulation by the Federal Trade Commission relating to the information required
to be disclosed to investors prior to their investment in a franchise, as well
as similar rules in a number of states in which the Company does offer or may
offer franchises, some of which involve substantive review of the Company's
franchise disclosure documents. To the extent that the Company is unable to
comply with the franchise regulations of a particular state, the Company will be
unable to offer and sell franchises in such state.
Item 2. PROPERTIES.
The Company's executive offices and Swensen's corporate
headquarters are located at 4175 Veterans Highway, Ronkonkoma, New York, 11779.
These offices are provided to the Company at no additional cost by Calip
pursuant to the terms of a Management Agreement between the Company and Calip.
One Company-owned Swensen's store is located in a building
owned by the Company located in Paradise Valley, Arizona. The building is
subject to a ground lease which expires on December 31, 2005 and contains four
five-year renewal options. The building has been remodeled and has reopened as
Jerry Tucci's Pizza & Pasta, a prototype Italian restaurant concept, in March
1996. The remaining four Company-owned stores are leased for terms ranging
through 2005.
Swensen's is also the lessee or guarantor of approximately 24
stores subleased from Swensen's or leased directly by franchisees from
landlords, which leases expire through 2002. As of December 30, 1995, these
leases had an aggregate future base rental liability, without regard to
percentage rentals or consumer price index increases, of approximately
$2,086,000.
The Company's current policy is not to lease or sublease
premises nor to provide guarantees on leases in any manner with respect to its
franchisees and it has not done so except for renewals and in special
circumstances.
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Item 3. LEGAL PROCEEDINGS.
In November 1995, S&G Corporation, a Swensen's franchisee
commenced an action against Swensen's Ice Cream, the Company and two of the
Company's officers and certain other defendants. The suit alleges, among other
things, violation of Racketeer Influenced and Corrupt Organization Act, fraud,
breach of contract and unjust enrichment in connection with allegations
surrounding the Company's violation of the restrictive covenant contained in the
plaintiff's franchise agreement. The Company believes that it is unlikely that
the outcome of this litigation will have a material adverse effect on the
Company's financial position. The Company is vigorously defending against this
action.
On April 9, 1993, Heidi's Frogen Yozurt Shoppes, Inc.
("Heidi's") and its subsidiary, and LaSalle/Silver Sleigh Distribution, Inc.,
the wholly-owned subsidiary of the Company which purchased the shares of Heidi's
from Heidi Miller and Brian Pallas, each filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code to reorganize. The Company
believes it is unlikely that these bankruptcy actions will have a material
adverse effect on the Company's financial position.
Swensen's is primarily liable on many of its franchisees'
leases, which, upon default by the franchisee, have resulted in litigation
between Swensen's and the lessors. Swensen's has been successful in defending
such cases in the past and management believes that current litigation will have
no material adverse effect on Swensen's financial position.
The Company and its subsidiaries are involved in other
disputes with certain of its and their franchisees and is a party to various
other lawsuits in the ordinary course of business, none of which it believes is
material to its business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter
market. The following table sets forth, for the periods indicated, the closing
high and low bid prices for the Company's Common Stock as reported by the NASDAQ
Stock Market. These amounts, which have been rounded to the nearest sixteenth,
represent quotations between dealers (not actual transactions) and do not
include retail markups, markdowns or commissions.
COMMON STOCK
1995 1994
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High Low High Low
First Quarter 1 11/16 1 1/8 1 3/8 1 1/4
Second Quarter 1 7/8 1 1/16 1 1/2 15/16
Third Quarter 1 15/16 1 1/8 1 3/8 3/4
Fourth Quarter 1 7/16 1 1 3/16 7/8
As of December 30, 1995 there were approximately 1,500 holders of
record of the Company's Common Stock.
The payment by the Company of dividends, if any, in the future
rests within the discretion of its Board of Directors and will depend upon the
Company's earnings, its capital requirements (including working capital needs)
and its financial condition, as well as other relevant factors. The Company has
not paid any dividends on its Common Stock since its inception. The Board of
Directors does not presently intend to declare any dividends on its Common Stock
in the foreseeable future.
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Item 6. SELECTED FINANCIAL DATA.
The following information has been summarized from the Company's
financial statements and should be read in conjunction with such financial
statements and the related notes thereto:
Summary of Consolidated Statements of Operation
<TABLE>
<CAPTION>
s
======================================================================================================
For the Year Ended
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December 30, December 31, January 1, January 2, December 28,
1995 1994 1994 1993 1991
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(in thousands, except per share data)
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<S> <C> <C> <C> <C> <C>
Revenues $37,969 $33,776 $36,231 $32,888 $ 35,213
====== ======= ======= ======= ========
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Net income ............ $ 713 $ 1,035 $ 437 $ 1,300 $ 1,824
======= ======= ======== ======= ========
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Earnings per Common
Share: $ .07 $ .09 $ .04 $ .11 $ .15
======== ======== ======== ======= =========
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Summary of Balance Sheets
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December, 30 December 31, January 1, January 2, December 28,
1995 1994 1994 1993 1991
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(in thousands)
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Working Capital........ $3,136 $2,155 $1,757 $4,463 $3,333
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Total assets........... 26,377 21,220 20,764 23,306 20,291
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Long-term liabilities.. 5,238 1,657 1,626 6,022 3,706
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Stockholders'
Equity............... 13,434 12,454 12,869 12,432 11,129
==================================================================================================
</TABLE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FOR THE YEAR ENDED DECEMBER 30, 1995 VERSUS THE YEAR
ENDED DECEMBER 31, 1994
Total revenues for the year ended December 30, 1995 increased
to $37,969,000 from $33,776,000 for the year ended December 31, 1994.
Prepackaged frozen dessert sales increased to $25,806,000 for the year ended
December 30, 1995 from $18,587,000 for the year ended December 31, 1994. The
increase in revenues and in prepackaged and frozen dessert sales was primarily
due to the increase in new product authorizations in retail outlets, an increase
in sales promotions and the acquisition of the Colombo hard pack rights in
August 1995. The reduction in bulk frozen dessert sales was a result of the
decline in the number of domestic franchise stores in operation, and the
expiration in late 1994 of an agreement with a licensee regarding bulk products.
The decrease in revenue from store operations of $1,184,000 was primarily due to
the closing of one Company-owned store.
The following table sets forth the sales of prepackaged frozen
desserts, the sales of bulk frozen desserts to franchised and licensed stores,
and other sales for the years ended December 30, 1995 and December 31, 1994,
respectively.
===============================================================================
Year Ended
===============================================================================
December 30, December 31,
1995 1994
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Prepackaged Frozen Dessert Sales $25,806,000 $18,587,000
Bulk Frozen Dessert Sales 5,521,000 7,099,000
Other sales 1,055,000 1,174,000
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Total sales $32,382,000 $26,860,000
=========== ===========
===============================================================================
The gross profit percentage was 37% for the years ended
December 30, 1995 and December 31, 1994.
Selling, general and administrative expenses increased to
$12,863,000 for the year ended December 30, 1995 as compared to $10,080,000 for
the year ended December 31, 1994. This increase is primarily attributable to the
increase in product support and selling expenses, including an increase of
product introductory expenses incurred in connection with new licensed and
sublicensed products introduced during 1995 in excess of such expenses for 1994,
and higher administrative expenses as a result of a litigation settlement. The
-16-
<PAGE>
Company anticipates increased spending in 1996 for product introductory expenses
in an effort to increase revenues and market share. Such an increase in spending
may adversely affect net income for the year ending December 29, 1996.
Net income for the year ended December 30, 1995 was $713,000
as compared to $1,035,000 for the year ended December 31, 1994. The decrease was
primarily attributable to the increase in product support and selling expenses
and a litigation settlement offset in part by the increased gross profit dollars
realized as a result of increased sales volume.
FOR THE YEAR ENDED DECEMBER 31, 1994 VERSUS THE YEAR ENDED
JANUARY 1, 1994.
Total revenues for the year ended December 31, 1994 decreased
to $33,776,000 from $36,231,000 for the year ended January 1, 1994. Prepackaged
ice cream and frozen dessert sales decreased to $18,587,000 for the year ended
December 31, 1994 from $20,061,000 for the year ended January 1, 1994. The
decrease in revenues from prepackaged and frozen dessert sales was primarily due
to the reduction of sales promotions. The decrease in revenues from bulk ice
cream and frozen desserts was primarily due to the expiration in 1994 of the
agreement with D'Angelos regarding bulk products and the decline in the number
of domestic franchise stores opened.
The following table sets forth the sales of prepackaged frozen
desserts, the sales of bulk frozen desserts to franchised and licensed stores
and other sales for the years ended December 31, 1994 and January 1, 1994,
respectively.
Year Ended
----------
Sales December 31, 1994 January 1, 1994
- ----- ----------------- ---------------
Prepackaged Ice Cream and
Frozen Desserts $18,587,000 $20,061,000
Bulk Ice Cream and Frozen
Desserts 7,099,000 7,569,000
Other 1,174,000 1,386,000
----------- -----------
$26,860,000 $29,016,000
=========== ===========
The gross profit percentage increased to 37% for the year
ended December 31, 1994 as compared to 35% for the year ended January 1, 1994.
This increase is due primarily to a reduction in sales promotions, the increased
-17-
<PAGE>
sales of higher margin products during the 1994 year and the write-off of
packaging inventory and related costs incurred in connection with the pending
effectiveness of the new Federal labeling laws relating to the Company's
products which adversely impacted the gross profit percentage for the year ended
January 1, 1994.
Selling, general and administrative expenses declined to
$10,080,000 for the year ended December 31, 1994 as compared to $11,710,000 for
the year ended January 1, 1994. This decrease is primarily attributable to the
decrease in product support and selling expenses, including a decrease of
product introductory expenses incurred in connection with new licensed and
sublicensed products incurred during the year 1993 in excess of such expenses
for the year 1994, partially offset by higher professional fees.
Income before taxes on income for the year ended December 31,
1994 was $2,081,000 as compared to $962,000 for the year ended January 1, 1994.
The improvement is primarily attributable to the lower selling, general and
administrative expenses which resulted from lower product introductory expenses
incurred in 1994 as compared to 1993.
Net income for the year ended December 31, 1994 was $1,035,000
as compared to $437,000 for the year ended January 1, 1994. The $1,119,000
improvement in income before taxes on income for the year ended December 31,
1994 as compared to the year ended January 1, 1994, was partially offset by the
increase of $521,000 in taxes on income.
Liquidity and Capital Resources
Net cash used by operating activities was $1,427,000 for the
year ended December 30, 1995, compared with net cash provided by operating
activities of $3,761,000 for the year ended December 31, 1994. The decrease in
net cash provided by operating activities resulted primarily from decreases in
net cash provided by operating income and decreases in cash flow from changes in
operating assets and liabilities in 1995 as compared to 1994.
Working capital on December 30, 1995 was $3,136,000. The
Company believes this working capital plus internally generated funds and the
funds available from its credit line will be sufficient to meet its cash and
working capital requirements for its established operations for the current
fiscal year. On December 23, 1994, the Company established a $7,500,000
revolving credit facility expiring December 31, 1997 to support anticipated
growth, the introduction of new products and the required higher levels of
working capital. On March 8, 1996, the Loan Agreement was amended and the
-18-
<PAGE>
Company refinanced $4,500,000 in existing revolving credit loans with a five
year term loan with the $7,500,000 revolving credit facility remaining in place.
At March 31, 1996, $6,775,000 remains available to the Company under such credit
line.
Payment Requirements
Pursuant to the terms of the amended term loan and revolving
credit facility, the Company is obligated to repay the outstanding principal
amount of the revolving credit facility at maturity and of the term loan in 19
quarterly principal installments beginning April 1, 1996 of $140,000 each and
the remaining principal amount of the term loan is due on January 1, 2001.
Interest on the term loan and revolving credit facility is payable monthly.
Impact of Inflation
Inflation can significantly impact ice cream and packaging
costs. In 1996, the Company believes that it will be able to pass on any price
increases in the normal course of business within a relatively short period of
time. However, the ability of the Company to pass on price increases will
depend, to some extent, on whether its competitors have also done so. The
Company believes that, in the past, its competitors have passed on price
increases in a relatively short period of time.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Exhibit I
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable
-19-
<PAGE>
PART III
Item 10, 11, 12 and 13.
The information called for by Item 10 (Directors and Executive
Officers), Item 11 (Executive Compensation), Item 12 (Security Ownership of
Certain Beneficial Owners and Management), and Item 13 (Certain Relationships
and Related Transactions) is incorporated herein by reference from the Company's
definitive proxy statement for the Annual Meeting of Shareholders to be filed
with the Securities and Exchange Commission not later than 120 days after the
close of the fiscal year ended December 30, 1995.
-20-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual
Report on Form 10-K:
The following Financial Statements and Schedule are included
in Item 8 of this Form 10-K:
1. Consolidated Financial Statements
- Report of Independent Certified Public
Accountants.
- Consolidated balance sheets:
December 30, 1995 and December 31, 1994
- Consolidated financial statements for the
years ended December 30, 1995, December
31, 1994 and January 1, 1994:
Statement of income
Statement of Stockholders' equity
Statements of cash flows
Notes to consolidated financial
statements
2. Consolidated Financial Statement Schedule
Schedule II - Valuation and Qualifying
Accounts and Reserves
3. The following documents are filed as exhibits to
this Annual Report on Form 10-K:
3.1 Amendment to Certificate of
Incorporation****
3.2 Amendment to By-laws of the Company****
4.3 Form of Common Stock Certificate*
10.7 Form of Steve's Homemade Ice Cream, Inc.
Franchise Agreement*
-21-
<PAGE>
10.8 1986 Incentive Stock Option Plan, as
amended**
10.21 Management Agreement between the Company
and Calip Dairies, Inc.++
10.22 Distribution Agreement among the Company
and Calip Dairies, Inc.*
10.24 Credit Agreement between Steve's Homemade
Ice Cream, Inc. and Chemical Bank+
10.28 Form of Swensen's Ice Cream Company
Franchise Agreement***
10.30 Sublicense Agreement, dated July 29, 1992
between General Mills, Inc. and the
Company+++
10.31 License Agreement, dated August 15, 1995
between General Mills, Inc. and the Company
10.32 License Agreement, dated August 15, 1995 between
General Mills, Inc. and the Company
10.33 License Agreement, dated August 15, 1995 between
General Mills, Inc. and the Company
10.34 License Agreement, dated August 15, 1995 between
General Mills, Inc. and the Company
10.35 Asset Purchase Agreement, dated August 15, 1995
by and between General Mills, Inc. and the
Company.
10.36 Second Amendment, dated March 8, 1996 to Credit
Agreement with Chemical Bank
22.1 List of the Company's subsidiaries
- ------------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-18, File No. 33-4957-NY, declared effective by the Securities and
Exchange Commission on July 22, 1986, and incorporated herein by reference.
+ Previously filed as an exhibit to the Company's Annual Report on Form 10K
for the year ended December 31, 1994 filed with the Securities and Exchange
Commission on April 15, 1995.
-22-
<PAGE>
++ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 29, 1990, filed with the Securities and
Exchange Commission on April 13, 1991.
+++ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended January 2, 1993, filed with the Securities and Exchange
Commission on April 17, 1994.
** Previously filed as an exhibit to the Company's Registration Statement on
Form S-4, File No. 33-20105, declared effective by the Securities and
Exchange Commission on July 20, 1988 and incorporated herein by reference.
*** Previously filed as an exhibit to Swensen's Registration Statement on Form
S-1, File No. 2-85983, declared effective by the Securities and Exchange
Commission on November 11, 1985, and incorporated herein by reference.
**** Previously filed as an exhibit to the Company's Current Report on Form 8-K,
File No. 0-15942, filed with the Securities and Exchange Commission on
March 6, 1989, and incorporated herein by reference.
(b) During the last quarter of the period covered by this report, the
Company did not file any reports on Form 8-K.
(c) See item 14(a)(3).
(d) See item 14(a)(2).
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
STEVE'S HOMEMADE ICE CREAM, INC.
April 12, 1996 By: /s/Richard E. Smith
-------------------
Richard E. Smith
Chairman of the Board,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons in the
capacities and on the date indicated:
/s/Richard E. Smith
- -------------------------
Richard E. Smith Chairman of the Board, April 12, 1996
(Principal Executive
Officer) Chief Executive
Officer and Director
/s/Gary P. Stevens
- -------------------------
Gary P. Stevens President, Treasurer April 12, 1996
(Principal Financial
Officer)
/s/Gerard M. Tucci
- -------------------------
Gerard M. Tucci Vice President, April 12, 1996
Secretary and
Director
- -------------------------
Karl Eller Director April 12, 1996
/s/Benjamin Raphan
- -------------------------
Benjamin Raphan Director April 12, 1996
/s/David M. Smith
- -------------------------
David M. Smith Vice President and April 12, 1996
Director
<PAGE>
INTEGRATED BRANDS INC.
Contents
- --------------------------------------------------------------------------------
Report of independent certified public accountants F-3
Consolidated balance sheets:
December 30, 1995 and December 31, 1994 F-4 - F-5
Consolidated financial statements for the
years ended December 30, 1995,
December 31, 1994 and January 1, 1994:
Statements of income F-6
Statements of stockholders' equity F-7
Statements of cash flows F-8 - F-9
Notes to consolidated financial statements F-10 - F-22
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders of
INTEGRATED BRANDS INC.
Ronkonkoma, New York
We have audited the consolidated balance sheets of INTEGRATED BRANDS INC. as of
December 30, 1995 and December 31, 1994 and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 presentation of the financial
statements. 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 financial position of INTEGRATED BRANDS
INC. at December 30, 1995 and December 31, 1994 and the results of its
operations and cash flows for each of the three years in the period ended
December 30, 1995 in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Mitchel Field, New York
April 2, 1996
F-2
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
December 30, December 31,
1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $2,086 $3,860
Receivables 4,416 3,258
Receivables - affiliates 1,043 515
Inventories 2,089 987
Prepaid expenses 982 446
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 10,616 9,066
Improvements and equipment, at cost - net of accumulated
depreciation and amortization 1,103 1,102
Other assets
License agreements - net of accumulated amortization of
$878,000 and $605,000 6,470 2,659
Intangible assets, at cost - net of accumulated amortization of
$2,967,000 and $2,814,000 6,077 6,588
Investment in Heidi's 1,590 1,356
Other 521 449
- ---------------------------------------------------------------------------------------------------------------------------
$26,377 $21,220
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
December 30, December 31,
1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Liabilities and Stockholders' Equity
Liabilities
Current maturities of long-term debt $576 $253
Trade accounts payable 4,244 4,026
Income taxes payable 465 527
Payables - affiliates 902 307
Accrued marketing expenses 162 882
Other accrued liabilities 1,021 806
Liability for lease terminations 110 110
- -------------------------------------------------------------------------------------------------------------------------------
Current liabilities 7,480 6,911
Long-term debt, less current maturities 4,996 1,339
Liability for lease terminations, net of current portion 242 318
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 12,718 8,568
- -------------------------------------------------------------------------------------------------------------------------------
Minority interest 225 198
- -------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity
Class A common stock, $.01 par value 20,000,000
shares authorized; 12,357,903 and 12,106,103
shares issued and outstanding, respectively 124 121
Paid-in capital 8,432 8,168
Retained earnings 6,543 5,830
Treasury stock, at cost, 2,154,615 shares (1,665) (1,665)
- -------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 13,434 12,454
- -------------------------------------------------------------------------------------------------------------------------------
$26,377 $21,220
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
December 30, December 31, January 1,
For the year ended 1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except for per share amounts)
<S> <C> <C> <C>
Revenues
Net sales $32,382 $26,860 $29,016
Store operations 3,493 4,677 4,908
Franchising revenues 1,863 2,046 2,038
Other 231 193 269
- ----------------------------------------------------------------------------------------------------------------------------------
37,969 33,776 36,231
- ----------------------------------------------------------------------------------------------------------------------------------
Operating costs and expenses
Cost of goods sold 20,273 16,867 18,967
Store operations 3,389 4,607 4,319
Selling, general and administrative expenses 12,863 10,080 11,710
Interest 252 141 273
- ----------------------------------------------------------------------------------------------------------------------------------
36,777 31,695 35,269
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes on Income 1,192 2,081 962
Taxes on Income 479 1,046 525
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 713 1,035 437
==================================================================================================================================
Earnings Per Common Share $.07 $.09 $.04
==================================================================================================================================
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 10,243 11,506 12,186
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------------
Class A Treasury Stock
---------------------- ----------------
For the three years ended Paid-in Retained
December 30, 1995 Shares Par value capital earnings Shares Amount Total
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 3, 1993 12,106 $121 $8,168 $4,358 155 $(215) $12,432
Net income 437 437
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1994 12,106 121 8,168 4,795 155 (215) 12,869
Purchase of treasury stock 2,000 (1,450) (1,450)
Net income 1,035 1,035
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 12,106 121 8,168 5,830 2,155 (1,665) 12,454
Shares issued for settlement 250 3 263 266
Shares issued for exercising of options 2 1 1
Net income -- 713 713
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 30, 1995 12,358 $124 $8,432 $6,543 2,155 $(1,665) $13,434
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 30, December 31, January 1,
For the year ended 1995 1994 1994
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $713 $1,035 $437
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 892 1,143 900
Minority interest in net income of subsidiary 27 19 15
Provision for allowance for doubtful accounts 161 540 963
Tax benefit of Swensen's preacquisition NOL 167 414 227
Increase (decrease) in cash flows from changes in operating assets and
liabilities, net of effects of acquisition of certain assets from DCA Food
Industries, Inc. in 1994:
Receivables (1,319) 94 (5)
Receivables - affiliates (528) (454) 444
Inventories (1,102) 105 983
Prepaid expenses (536) (7) 549
Other assets (72) 35 221
Trade accounts payable 218 863 1,248
Income taxes payable (62) 357 306
Payables - affiliates 595 109 11
Accrued marketing expenses and other
accrued liabilities (505) (375) 730
Liability for lease terminations (76) (117) (43)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities (1,427) 3,761 6,986
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
December 30, December 31, January 1,
For the year ended 1995 1994 1994
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from investing activities:
Acquisition of certain assets from General
Mills, Inc. (4,521)
Capital expenditures (247) (464) (260)
Investment in Heidi's 32 154 (256)
Purchase of franchise and territorial rights (4)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,736) (310) (520)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (250) (849) (5,094)
Proceeds from long-term debt 4,639 75
Purchase of treasury stock (1,450)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 4,389 (2,299) (5,019)
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (1,774) 1,152 1,447
Cash and cash equivalents, beginning of year 3,860 2,708 1,261
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $2,086 $3,860 $2,708
=================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Organization, Organization and business
Business and
Summary of
Accounting Policies The Company was incorporated in
September 1985 and commenced operations
on December 23, 1985 as Steve's Homemade
Ice Cream, Inc. In August 1988, the
Company completed the acquisition of
Swensen's Inc. ("Swensen's") and it's
wholly-owned subsidiaries. In August
1990, the Company acquired a sixty
percent interest in American Glace, Inc.
In July 1995, the Company changed its
name to INTEGRATED BRANDS INC. to more
appropriately reflect the breadth of the
Company's business. INTEGRATED BRANDS
INC. and its subsidiaries, are
collectively referred to herein as the
"Company".
The Company markets, distributes and
sells a variety of branded frozen
dessert products to supermarkets,
grocery stores, club stores, gourmet
shops, delicatessens and convenience
stores. The Company currently franchises
ice cream parlors, dip shoppes and
family style restaurants throughout the
United States and certain foreign
countries. Total revenues from foreign
sources are not material.
Principles of consolidation
The accompanying consolidated financial
statements include the accounts of the
Company and its subsidiaries except
Heidi's Frozen Yogurt Shoppes, Inc.
("Heidi's"). All material intercompany
balances and transactions have been
eliminated in consolidation. On April 9,
1993, Heidi's and its subsidiary filed
voluntary petitions under Chapter 11 of
the Bankruptcy Code with the United
States Bankruptcy Court. The Company's
investment in Heidi's is stated at cost
because of the uncertainty of the future
control of Heidi's. Prior to April 9,
1993, Heidi's was not consolidated
because control was considered likely to
be temporary.
Fiscal year
The Company utilizes a 52/53 week
financial year which ends on the
Saturday closest to December 31.
F-9
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Single Store Franchise Income
A portion of single store franchise fees
are paid upon application for a
franchise, which amount becomes
nonrefundable, and the balance is
payable sixty days prior to the opening
of the store. Single store franchise
fees are recorded as revenue when the
franchise application is approved, cash
payments are received, and substantially
all services required under the
agreement are performed.
Concentrations of Credit Risk
Financial instruments which potentially
subject the Company to considerations of
credit risk consist principally of cash
and accounts receivable. At times such
cash in banks are in excess of the FDIC
insurance limit. The Company attempts to
minimize credit risk with respect to
accounts receivable by reviewing
customers' credit history before
extending credit, and by monitoring
customers' credit exposure regularly.
The Company establishes an allowance for
accounts receivable based upon factors
surrounding the credit risk of specific
customers, historical trends and other
information.
Use of estimates
In preparing financial statements in
conformity with generally accepted
accounting principles, management is
required to make estimates and
assumptions that affect the reported
amounts of assets and liabilities and
the disclosure of contingent assets and
liabilities. Actual results could differ
from those estimates.
F-10
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Inventories
Inventories consist primarily of ice
cream and frozen dessert products, food
supplies and packaging. Inventories are
stated at the lower of average cost
(which approximates the first-in,
first-out method) or market.
Product Introductory Costs
The Company capitalizes certain
marketing and promotional costs incurred
to develop a market for new as well as
existing products throughout the United
States. These costs are amortized over a
twelve-month period. Amortization
expenses of product introductory cost
was $2,504,000, $1,008,000 and
$2,820,000 for fiscal 1995, 1994 and
1993, respectively.
Improvements and equipment
Depreciation of equipment and
amortization of leasehold improvements
are provided on a straight-line basis
over estimated useful lives of the
assets or the lease term, whichever is
shorter.
Intangible assets
The Company amortizes trademarks and
license, franchise and territorial
agreements on a straight-line basis over
periods ranging primarily from 8 to 40
years. Management evaluates the
continuing realizability of the
intangible assets by assessing future
value associated with these intangibles
based upon the projected future
revenues.
Per Share Data
Earnings per share of common stock were
computed by dividing net income by the
weighted average number of shares of
common stock outstanding during each of
the periods presented. Common equivalent
shares were included in the weighted
average number of shares outstanding for
1995, 1994 and 1993. The common
equivalent shares result from issuance
upon the assumed exercise of warrants
and options under the treasury stock
method.
F-11
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Cash Flows
The Company considers all highly liquid
instruments with a maturity of three
months or less when purchased to be cash
equivalents.
Prospective Accounting Changes
In March 1995, the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards Number
121 "Accounting for the Impairment of
long-lived assets and for long-lived
assets to be disposed of ("SFAS Number
121"). SFAS Number 121 is effective for
fiscal year beginning after December 15,
1995. SFAS Number 121 requires that
long-lived assets and certain
identifiable intangibles to be held and
used by an entity to be reviewed for
impairment whenever events or changes in
circumstances indicate that the carrying
amount of an asset may not be
recoverable. The impact of adopting SFAS
Number 121 is not expected to be
material.
The Financial Accounting Standards Board
Issued Statement of Financial Accounting
Standard Number 123 "Accounting for
Stock-Based Compensation" ("SFAS Number
123") in October 1995. Statement Number
123 encourages companies to recognize
expense for stock options and other
stock-based employee compensation plans
based on their fair value at the date of
grant. As permitted by Statement Number
123, the Company plans to continue to
apply its current accounting policy
under APB Opinion Number 25 "Accounting
for Stock Issued to Employees" in 1996
and future years, and will provide
disclosure of the pro forma impact on
net income and earnings per share as if
the fair value-based method had been
applied.
F-12
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. Acquisitions (a) In August 1995, the Company
purchased the rights to Colombo
brand hard packed prepackaged frozen
dessert product line from General
Mills for $4,500,000, plus certain
inventory. The Company also entered
into long-term exclusive license
agreements for the United States and
Canada for the use of the Colombo,
Trix, Count Chocula and Lucky Charms
trademarks which expire December 31,
2015 and for the Betty Crocker
trademark for frozen products
containing ice cream or frozen
yogurt for prepackaged goods for all
sizes, prepackaged novelties such as
pops, bars and sandwiches and
prepackaged frozen dessert
specialties such as ice cream cakes,
pies and brownie sundaes which
expires December 31, 2010. Each
agreement is renewable for an
additional five years if a cash
payment is made.
(b) In June 1994, the Company acquired
certain assets of DCA Food
Industries, Inc. for a total
consideration of up to $1,140,000.
The consideration is payable in
annual installments in each of the
six years ending May 31, 2000 based
upon annual sales of the products in
connection with the acquired assets.
The present value of this estimated
payable, $424,000 and $924,000, is
included in long-term debt at
December 30, 1995 and December 31,
1994, respectively.
F-13
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. Receivables Receivables consist of the following:
1995 1994
- ------------------------------------------------------------------------------
(In thousands)
Trade accounts receivable $4,681 $3,236
Notes receivable, current maturities 260 386
- ------------------------------------------------------------------------------
4,941 3,622
Less: allowance for doubtful accounts 525 364
- ------------------------------------------------------------------------------
$4,416 $3,258
==============================================================================
4. Improvements and Improvements and equipment consist of the following:
Equipment
Depreciable
life
1995 1994 in years
- --------------------------------------------------------------------------------
(in thousands)
Improvements $ 230 $ 230 25
Machinery and equipment 1,163 1,327 3 - 10
Leasehold improvements 684 709 3 - 10
Capitalized leases 145 145 2 - 28
- --------------------------------------------------------------------------------
2,222 2,411
Less: accumulated depreciation
and amortization 1,119 1,309
- --------------------------------------------------------------------------------
$1,103 $1,102
================================================================================
F-15
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. Intangible Assets Intangible assets consist of the following:
Estimated useful
1995 1994 lives in years
- --------------------------------------------------------------------------------
(in thousands)
Trademarks $6,800 $7,117 8 - 40
Franchise agreements 1,299 1,340 4 - 40
Territorial agreements 945 945 10 - 20
- --------------------------------------------------------------------------------
9,044 9,402
Less: Accumulated
amortization 2,967 2,814
- --------------------------------------------------------------------------------
$6,077 $6,588
================================================================================
6. Long-Term Debt Long-term debt consists of the following:
1995 1994
- -------------------------------------------------------------------------------
(in thousands)
Revolving credit/term loans, unsecured $4,825 $ 405
Present value of estimated acquisition debt,
unsecured (Note 2 (b)) 424 924
Other, unsecured 323 263
- -------------------------------------------------------------------------------
5,572 1,592
Less current maturities 576 253
- -------------------------------------------------------------------------------
$4,996 $1,339
===============================================================================
F-15
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Under a revolving credit facility
entered into December 1994, the Company
can borrow up to $7,500,000 through
December 31, 1997. As of December 30,
1995 the Company borrowed $4,825,000.
Interest is payable monthly on the
unpaid principal balance of borrowings
under this facility at the bank's prime
rate plus 1/2%. The Company has agreed
to pay a fee of 1/8% per annum on the
unused portion of the commitment.
On March 8, 1996, the loan agreement was
amended and the Company refinanced
$4,500,000 of the existing revolving
credit facility with a new five year
term loan. The term loan is payable in
19 quarterly principal installments of
$140,000 beginning April 1, 1996, and
the remaining principal balance is due
on January 1, 2001. Interest is payable
monthly on the unpaid principal balance
of this term loan at the banks prime
rate plus 1/2%. As of March 30, 1996,
the Company had available credit of
$6,775,000 under the revolving credit
facility.
All borrowings under the above amended
agreement are unsecured. The agreement
contains restrictions relating to the
payment of dividends, acquisition of the
Company's capital stock, rental
obligations, liens, mergers and
dispositions of properties, changes in
nature of business and indebtedness. In
addition, the Company must maintain
financial ratios and minimum amounts of
working capital, stockholders' equity
and investments in subsidiaries.
Current maturities of long-term
liabilities are $576,000 in 1996;
$777,000 in 1997; $679,000 in 1998;
$668,000 in 1999; $668,000 in 2000; and
$2,204,000 in later years.
7. Commitments and (a) Legal proceedings
Contingencies
The Company is a party to legal
proceedings and disputes with
franchisees, former franchisees
and others which arose in the
ordinary course of business. In
the opinion of the Company, it is
unlikely that the liabilities, if
any, arising from the legal
proceedings and disputes will have
a material adverse effect on the
Company or its operations.
F-16
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(b) Contingent lease liabilities
The Company holds master leases or
has guaranteed leases, expiring at
varying dates to 2002, covering
franchised locations. Where the
Company holds the master lease,
these premises have been subleased
to franchisees under terms and
rentals rates substantially the
same as those in master leases. In
a majority of these instances,
franchisees make all lease
payments directly to the
landlords. The Company provides an
estimated liability for lease
terminations in the event of a
default by a franchisee based on
the expected costs of releasing or
settlement with the landlord. The
liability was $352,000 and
$428,000 at December 30, 1995 and
December 31, 1994, respectively.
Aggregate minimum future rental
payments under these leases
approximated $2,086,000 at
December 30, 1995.
8. Stockholders' (a) Options outstanding at December
Equity 30, 1995 were:
Exercise price
---------------------------
Shares
Description Expiration Covered Per share Aggregate
- ----------- ---------- ------- --------- ---------
(in thousands) (in thousands)
Stock Option Plan 1996 544 $.69 - $1.25 $385
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-17
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Board of Directors of the
Company approved a Stock Option
Plan (the "Plan"), under which
non-transferrable options to
purchase up to 1,070,000 shares
of Class A common stock at a fair
market value as determined by the
Board of Directors may be granted
to employees of the Company,
including officers and directors,
consultants and others. As of
December 30, 1995, total of
552,000 options were granted, of
which 8,000 were exercised. At
December 30, 1995, 1,062,000
shares of the Company's
authorized and unissued common
stock were reserved for issuance
upon exercise of the options
above and for the 518,000 shares
available for grant. At December
30, 1995, options for 535,000
shares are exercisable.
(b) Purchase of treasury stock and
other
During the fiscal year ended
December 31, 1994, the Company
repurchased 2,000,000 shares of
stock for $1,450,000.
During fiscal 1995, the Company
settled certain litigation and
charged operations for the cost
of the settlement of
approximately $753,000. The
settlement included the issuance
of 250,000 shares of common
stock.
9. Related Party (a) Calip Dairies, Inc. ("Calip"), an
Transactions ice cream distributor owned by
the Chairman and principal
stockholder of the Company, has
entered into a management
agreement with the Company which
terminates on April 15, 1996.
Under the Agreement, Calip
provides office facilities,
management, administrative and
other personnel, as required, for
the operation of the Company's
business for an annual fee of 10%
of $5,000,000 in gross revenues
and 2% of gross revenues
thereafter. The management fees
were $891,000 in 1995, $751,000
in 1994 and $811,000 in 1993.
F-18
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company also has a
distribution agreement with Calip
for the distribution of the
Company's products in the New
York Metropolitan region to
customers primarily other than
supermarket chains. The
distribution agreement is
terminable by either party on 30
days' notice. Sales of ice cream
to Calip were $2,751,000 in 1995,
$1,695,000 in 1994 and $544,000
in 1993.
(b) The Company has acquired a
substantial portion of Heidi's
outstanding liabilities and
claims, including certain bank
notes payable by Heidi's,
subsequent to its 85% purchase of
the outstanding common stock of
Heidi's in 1989. From 1989 to
1994, the Company acquired
liabilities of and claims against
Heidi's of $2,452,000. These
claims against Heidi's are
carried at the Company's cost of
$627,000 at December 30, 1995.
The Company also paid or advanced
funds for legal fees, other
litigation expenses and certain
operating expenses on behalf of
Heidi's. The amounts owed to the
Company for expenses incurred are
payable under collateralized
notes receivable bearing interest
at 12%. At December 30, 1995, the
Company's net secured notes
receivable from Heidi's is
$753,000.
The Company files consolidated
tax returns with Heidi's. The tax
benefit of Heidi's loss to the
consolidated group is treated as
a reduction of the investment in
Heidi's.
The above net receivables and
investment in Heidi's totaled
$1,590,000 and $1,356,000 as of
December 30, 1995 and December
31, 1994, respectively. The
Company has a secured interest in
the Heidi's trademark and all
other assets. In management's
opinion, such interest and the
underlying revenues anticipated
to be generated from the
trademark provides sufficient
collateral to justify the
carrying amount of the Company's
receivables and its investment in
Heidi's at cost.
F-19
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. Concentrations of In November 1992, the Company entered
Sales to Major into two distribution agreements with
Customers Edy's Grand Ice Cream ("Edy's") and
Dreyer's Grand Ice Cream, Inc.
("Dreyers") relating to the distribution
of the Company's products. Pursuant to
one agreement (the "Local Distribution
Agreement"), Edy's and Dreyer's agreed
to distribute essentially all of the
Company's products to the New York
metropolitan area supermarkets. In
addition, pursuant to a national
distribution agreement (the "National
Distribution Agreement"), Edy's and
Dreyer's agreed to distribute the
Company's TRIX(R) and Yoplait(R)
products and other novelty items
nationwide. The National Distribution
Agreement is exclusive with respect to
certain areas of the country and
non-exclusive to others. The term of the
National Distribution Agreement is five
years with either party having the right
to terminate it upon twelve months
notice during the initial five year
period. During 1995, several areas which
were previously distributed exclusively
by Dreyer's and Edy's were handled by
other distributors or chain store
warehouses. The Local Distribution
Agreement is also for a term of five
years and automatically renews unless
terminated by one party on at least six
months prior notice. Sales to Edy's and
Dreyer's amounted to approximately
$4,231,000, $6,720,000 and $8,268,000
for the years 1995, 1994 and 1993.
Accounts receivable from this customer
were $472,000 and $354,000 at December
30, 1995 and December 31, 1994,
respectively.
Sales to one other major customer
accounted for approximately 10%, 14% and
16% of total revenues in 1995, 1994 and
1993, respectively. Accounts receivable
balances from this customer are
approximately $144,000 and $369,000 at
December 30, 1995 and December 31, 1994,
respectively.
F-20
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. Taxes on Income The components of taxes on income were:
1995 1994 1993
- -----------------------------------------------------------------------------
(in thousands)
Current provision:
Federal $339 $813 $236
State and local 73 125 135
Foreign 67 108 154
- -----------------------------------------------------------------------------
$479 $1,046 $525
=============================================================================
The Company has a deferred tax asset
resulting primarily from Swensen's
preacquisition net operating loss
carryforward. The deferred tax asset is
fully offset by a valuation allowance.
Swensen's preacquisition net operating
loss carryforward of $2,450,000 is
available to reduce Swensen's future
taxable income at a rate of
approximately $490,000 per year through
2001. The carrying amount of trademarks
and other non-current intangible assets
will be reduced when the benefit is
realized.
The following reconciles the federal
statutory rate with the actual effective
rate:
1995 1994 1993
- ---------------------------------------------------------------------------
(in thousands)
Statutory rate 34% 34% 34%
Expenses not deductible for tax
purposes 9% 8% 12%
Prior year under (over) accrual (4%) 3% (6%)
Unrealized net deferred tax asset 3% 3% 9%
State and local taxes, net of
federal benefit 4% 4% 11%
Tax benefits of foreign tax credit (6%) (2%) (5%)
- ----------------------------------------------------------------------------
40% 50% 55%
============================================================================
F-21
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. Supplemental Cash (a) Supplemental disclosures of
Flow Information cash flow information:
1995 1994 1993
- --------------------------------------------------------------------------------
(in thousands)
(1) Interest paid $223 $99 $296
(2) Income taxes paid 267 240 293
(b) Supplemental disclosures of
non-cash investing activities:
In 1994, the Company acquired
certain assets of DCA Food
Industries, Inc. for a total
consideration of up to
$1,140,000. The estimated present
value of this payable is recorded
as long-term liabilities (Note
2(b)).
F-22
<PAGE>
INTEGRATED BRANDS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
===============================================================================
Report of Independent Certified Public Accountants
on Financial Statement Schedule S-2
Schedule II - Valuation and qualifying accounts S-3
S-1
<PAGE>
Report of Independent Certified Public Accountants
On Financial Statement Schedule
To the Board of Directors and Shareholders of
INTEGRATED BRANDS INC.
Ronkonkoma, New York
The audits referred to in our report dated April 2, 1996 relating to the
consolidated financial statements of INTEGRATED BRANDS INC., which is contained
in Item 8 of this Form 10-K, included the audit of the accompanying Schedule of
Valuation and Qualifying Accounts. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
Mitchel Field, New York
April 2, 1996
S-2
<PAGE>
- --------------------------------------------------------------------------------
INTEGRATED BRANDS INC.
Schedule II - Valuation and Qualifying Accounts
================================================================================
<TABLE>
<CAPTION>
For the three years ended
December 30, 1995
- --------------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------------------
Charged to Charged to
Balance at Costs Other Balance at
Beginning of and Accounts End of
of Period Expenses (1) Deductions Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 30, 1995
allowance for doubtful
receivable - current $364 $175 $245 $259 $525
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994
Allowance for Doubtful
Receivables - current $322 $335 $13 $306 $364
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Year ended January 1, 1994
Allowance for Doubtful
Receivables - current $508 $758 $944 $322
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reclassification to allowance for doubtful accounts for current
receivables from allowance for doubtful accounts for noncurrent
receivables.
S-3
<PAGE>
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
10.31 License Agreement
dated August 15, 1995
between General Mills, Inc.
and the Company
10.32 License Agreement
dated August 15, 1995
between General Mills, Inc.
and the Company
10.33 License Agreement
dated August 15, 1995
between General Mills, Inc.
and the Company
10.34 License Agreement
dated August 15, 1995
between General Mills, Inc.
and the Company
10.35 Asset Purchase Agreement
dated August 15, 1995
between General Mills, Inc.
and the Company
10.36 Second Amendment
dated March 8, 1996
to Credit Agreement
with Chemical Bank
22.1 List of the Company's
Subsidiaries
23 Consent of BDO Seidman LLP
27 Schedule of Financial Data
<PAGE>
EXHIBIT 10.31
THE COLOMBO LICENSE AGREEMENT
THIS AGREEMENT made as of the 15th day of August, 1995 by and between
General Mills, Inc. and General Mills Products Corp., Delaware corporations,
having a place of business at Number One General Mills Boulevard, Minneapolis,
Minnesota 55426, hereinafter individually and collectively referred to as
"Licensor", and Integrated Brands Inc., a New Jersey corporation having a place
of business at 4175 Veterans Highway, Ronkonkoma, New York 11779, hereinafter
referred to as "Licensee."
WHEREAS, Licensor is the owner of the trademark COLOMBO alone and in
connection with a strawberry design and the words SHOPPE STYLE and SLENDER
SCOOPS (hereinafter collectively and/or individually referred to as "Trademark")
in connection with frozen yogurt and other items, and
WHEREAS, Licensor is the owner of certain manufacturing processes and
formulas for use in connection with the manufacture of prepackaged hard pack
frozen yogurt (hereinafter referred to as "Formula"); and
WHEREAS, Licensee desires a license from Licensor to use the Trademark
and the Formula solely in connection with the development, manufacture, contract
manufacture, marketing, sale and distribution of "Articles", defined to mean all
prepackaged frozen products containing at least thirty-five percent (35%) by
<PAGE>
volume frozen yogurt, ice cream, ice milk, sherbet, sorbet, frozen fruit, water
ice or other frozen items which would be considered substitutes for the
foregoing frozen items/ingredients, dairy or non-dairy, naturally or
artificially sweetened, sold in any prepackaged container size or form.
("Prepackaged" is defined to mean packaged by the manufacturer off the premises
from which finished goods are sold at retail to consumers). Examples of Articles
include, but are not limited to, (i) retail prepackaged goods, such as gallons,
half gallons, quarts, pints and half pints; (ii) bulk, such as three (3) gallon,
two and one half (2 1/2) gallon and one and one half (1 1/2) gallon prepackaged
containers; (iii) prepackaged novelties such as pops, bars, sandwiches, cups,
cones, parfaits, push-ups, nuggets and shakes; and (iv) prepackaged finished
prepared frozen dessert specialties such as ice cream cakes and pies, cake
rolls, jimmy rolls, nut rolls and brownie sundaes. "Articles" always excludes
all machine dispensed frozen yogurt, machine dispensed ice cream and other items
which are machine dispensed. ("Machine dispensed" is defined to mean unpackaged
food items dispensed from a machine into a cone, cup, container or other
package, edible or not, on the premises from which finished goods are sold
directly to the consumer, and would not include prepackaged items dispensed from
a vending machine).
NOW, THEREFORE, in consideration of the mutual promises
herein contained, it is hereby agreed as follows:
<PAGE>
1. Grant of License
a. Articles: Upon the terms and conditions hereinafter set forth,
Licensor hereby grants to Licensee and Licensee hereby accepts the exclusive
right, license and privilege of utilizing the Trademark and the Formula solely
in connection with the development, manufacture, contract manufacture,
marketing, sale and distribution of Articles; provided however, Licensee is not
authorized to use the Trademark in connection with any Articles distributed as
premiums or otherwise to be used as aids in the advertisement or promotion of
any products or business of others (other than the sale of Articles). Subject to
Licensor's prior written approval, not to be unreasonably withheld, Licensee
shall have the right to have third parties manufacture such Articles for
Licensee so long as such third Parties agree in writing to comply with the
quality control provisions and other provisions relevant to such third party set
forth in this Agreement. Any third party manufacturer not disapproved by
Licensor within fifteen (15) business days after receipt by Licensor of
Licensee's written request for such approval shall be deemed approved pursuant
to this paragraph. Licensor acknowledges that Licensee may elect to have
Articles manufactured by third parties who are also retailers of the Articles,
and that the Articles may be manufactured by and sold to some or all of such
third party manufacturer/retailer without Licensee taking actual physical
possession of such Articles.
b. Formula: The Formula licensed herein shall be limited to that
appearing in the attached Schedule A. Subject to the terms of this Agreement,
Licensee shall have the right to make adjustments to the Formula (which shall be
<PAGE>
the property of Licensor after expiration or termination of this Agreement) or
develop its own formulas (which shall remain the property of Licensee after
expiration or termination of this Agreement). The Formula may only be used in
connection with Articles using the Trademark.
c. Exclusivity: Subject to the terms of this Agreement, Licensor agrees
that it will not use or license to anyone else the right to use the Trademark
in the Territory, in connection with the Articles.
d. Reservation: Notwithstanding paragraphs (a) and (c) above:
(i) Licensor reserves to itself a non-exclusive right,
and it is understood that Licensee shall have a
non-exclusive right, to use the Trademark in
connection with the Articles solely for sale into
food service distribution channels. "Food service
distribution channels", in which it is understood
that Licensor shall have a right to use the
Trademark in connection with the Articles include,
but are not limited to, airport/train/bus snack
shops, restaurants (including luncheonettes),
vending, cafeterias, colleges and universities,
secondary and elementary schools, stadiums,
amusement parks, park and recreation areas,
airlines, cruise ships, health care facilities,
and hospitals. "Food service distribution
<PAGE>
channels" shall not include convenience stores,
delicatessens, stand alone carts, fruit stores,
bodegas, milk stores, dairy stores, gourmet shops,
health food stores, superettes, grocery stores, club
stores, box stores, candy stores, hypermarkets and
supermarkets, it being understood that such
identified businesses shall be included in the area
of exclusivity granted herein; provided, however,
that convenience stores, delicatessens and milk
stores shall be considered food service distribution
channels solely as to the sale of single serve cups
five (5) ounces or less in size and bulk tubs for
"hand-dipping," but only if these businesses also
sell machine dispensed items under one of Licensor's
Trademarks. Licensor shall purchase its requirements
of Articles using the Trademark for sale in food
service distribution channels from Licensee (x) at
Licensee's cost (including ingredients, packaging,
processing, warehousing, storage, handling and other
direct costs), plus ten percent (10%), plus freight,
for the first two million dollars ($2,000,000) in
sales by Licensee to Licensor of Articles using the
Trademark in any year of this Agreement, and (y) at
Licensee's lowest wholesale price after such sales
have reached two million dollars ($2,000,000) in any
<PAGE>
year of this Agreement. Licensor shall provide to
Licensee with reasonable advance notice its estimated
monthly and annual projected requirements of the
Articles. Should Licensee be unable to supply
Licensor with Licensor's requirements of the
Articles, Licensor shall be free to purchase such
quantities of the Articles as Licensee is unable to
supply from another supplier until such time as
Licensee is able to supply Licensor's requirements of
the Articles.
(ii) It is also understood Licensor reserves to itself
the exclusive right to use and license to others
the right to use the Trademark in connection with
any products and/or services not included within
the definition of Articles, including but not
limited to, (v) machine dispensed frozen yogurt,
(w) machine dispensed ice cream (x) other machine
dispensed items, (y) bulk mixes for making machine
dispensed frozen yogurt, machine dispensed ice
cream and other machine dispensed items, and (z)
any refrigerated products, including refrigerated
products of similar or same description as the
Articles (but not frozen). Also, Licensor reserves
the exclusive right to allow retailers (including
Licensor) to pack in retail premises excess
machine dispensed frozen yogurt, machine dispensed
ice cream and other items which are machine
<PAGE>
dispensed in appropriately labeled containers using
the Trademark for retail sale to consumers from the
premises on which such products were machine
dispensed.
(iii) In addition, Licensor reserves to itself the
right to use or license to others to use the
Trademark as the name of a retail business of
any type which sells frozen yogurt, ice cream
or frozen novelties including but not limited
to restaurants, ice cream counters and carts
and frozen yogurt counters and carts;
provided, however, this provision shall not
preclude Licensee from selling Articles using
the Trademark to such businesses should such
businesses desire to sell said Articles.
e. Territory: This Agreement is limited to the United
States, its territories and
possessions (including Puerto Rico) and Canada.
2. License Fee and Royalty
a. Rate: Licensee agrees to pay to Licensor a royalty of ________ on
Licensee's Gross Revenues of Articles sold by Licensee using the Trademark;
provided, however, no royalty shall be due on (i) Licensee's Gross Revenues of
Articles sold by Licensee using the Trademark during the first twelve (12)
months of this Agreement, and (ii) Articles sold to Licensor using the
Trademark so long as said Articles are sold to Licensor at Licensee's cost
(including ingredients, packaging, processing, warehousing, storage, handling
<PAGE>
and other direct costs), plus ten percent (10%), plus freight, or at Licensee's
lowest wholesale price. In connection with any Articles sold and/or distributed
by Licensee to a related company of Licensee at a price lower than the price
otherwise charged to the trade, the royalty payable herein shall be based on
what the Gross Revenues of the sales of the Articles would have been if the
company was not related to Licensee. As used herein "Gross Revenues" means the
gross sales price invoiced by Licensee to purchasers of the Articles minus any
credits or allowances given as a result of the return or destruction of such
Articles, any off-invoice allowances (but not promotional billback allowances),
and any applicable sales or use taxes. For all purposes of this Agreement, the
royalty shall accrue on the sale of the Articles and the Articles shall be
considered sold when shipped or billed out, whichever occurs earlier.
b. Royalty Payments and Records: Licensee agrees to keep full, accurate
and complete books of account, and other records in sufficient detail so that
the royalty payable hereunder may be ascertained properly. Within thirty (30)
days after the end of each of Licensor's fiscal quarters which commence June 1,
September 1, December 1 and March 1, Licensee shall furnish to Licensor complete
and accurate statements of sales of Articles using the Trademark during such
previous fiscal quarter certified to be accurate by the chief financial or
accounting officer of Licensee showing the number, description, Gross Revenues
of such Articles and permitted deductions therefrom. Such statements
<PAGE>
shall be furnished to Licensor whether or not any of the Articles utilizing the
Trademark have been sold during the proceeding quarter and whether or not a
royalty is due. Each such report shall be accompanied by a check for the amount
of the royalty payments due with respect to the period covered by such report.
The receipt or acceptance by Licensor of any of the statements furnished
pursuant to this Agreement or of any royalties paid hereunder (or the cashing of
any royalty checks paid hereunder) shall not preclude Licensor from questioning
the correctness thereof at any time, and in the event that inconsistencies or
mistakes are discovered in such statements or payments, they shall be rectified
and the appropriate payments made by Licensee upon demand by Licensor. Any
royalty payments, including accrued royalties, and audit findings, not paid when
due shall be paid immediately upon demand and shall bear interest at an annual
rate of two percent (2%) over the rate of interest publicly announced by
Citibank, N.A. in New York as its base rate in effect as of the date of which
such overdue royalty amount should have been paid to Licensor.
Licensee agrees, upon request by Licensor, to permit Licensor or its
authorized representative to have access to such books or records as may be
necessary to determine the royalty in respect to any accounting period covered
by this Agreement and obtain any information as to the amount payable in case of
failure to report. Such audits shall be at the expense of Licensor unless they
show that Licensee has understated the royalties by five percent (5%) or more or
Five Thousand Dollars ($5,000) (whichever is greater) for any quarter, in which
<PAGE>
case Licensee shall reimburse Licensor for its out-of-pocket expenses
incurred in connection with the audit as well as pay to Licensor
the required amount of additional royalties. All books of account
and records shall be kept available by Licensee for at least two
(2) years after the submission of the relevant statement.
3. Licensor's Authorized Representative
Wherever Licensee is directed to furnish or supply to or otherwise take
some action or perform some obligation in respect of Licensor in this Agreement,
the term "Licensor" shall be deemed to include "or Licensor's authorized
representative", unless written advice to the contrary is received from
Licensor.
4. Goodwill, etc.
a. Licensee recognizes the great value of the goodwill associated with
the Trademark and acknowledges that the Trademark and all rights therein and the
goodwill pertaining thereto belong exclusively to Licensor. Licensee agrees not
to contest Licensor's rights in the Trademark or perform any material act or
omission adverse to said rights.
b. Licensee hereby agrees that its every use of the Trademark shall
inure to the benefit of Licensor, and that Licensee shall not at any time
acquire any rights in the Trademark by virtue of any use it may make of the
Trademark, other than the licensed rights granted herein.
c. Subject to being reimbursed for its out-of-pocket
expenses, Licensee agrees to cooperate fully and in good faith
with Licensor for the purpose of securing, preserving and
<PAGE>
protecting Licensor's rights or any grantor of Licensor's rights
in and to the Trademark.
d. Licensee agrees that it will use the Trademark only on the specific
Articles herein licensed, and that it will not adopt or use as its own a
trademark the same or similar to the Trademark.
e. Licensor shall have the right, but shall not be under any
obligation, to use the Trademark and/or the name of Licensee so as to give the
Trademark, Licensee, Licensor and/or Licensor's products full and favorable
prominence and publicity. Licensor shall not be under any obligation whatsoever
to continue using the Trademark in connection with its products or services.
f. Licensee acknowledges that its failure (except as otherwise provided
herein) to cease the manufacture, sale or distribution of Articles utilizing the
Trademark covered by this Agreement on the termination or expiration of this
Agreement will result in immediate and irremediable damage to Licensor and to
the rights of any subsequent licensee. Licensee acknowledges and admits that
there is no adequate remedy at law for such failure to cease the manufacture,
sale or distribution, and Licensee agrees that in the event of such failure,
Licensor shall be entitled to equitable relief by way of temporary and permanent
injunctions and such other and further relief as any court with jurisdiction may
deem just and proper.
g. Licensee shall report to Licensor in writing any infringement or
imitation of the Trademark it becomes aware of on Articles. Licensor shall have
<PAGE>
the sole right to determine whether to institute litigation upon any such
infringements as well as the sole right to select counsel. In the event Licensor
decides to institute such litigation, Licensor shall offer Licensee an
opportunity to voluntarily join in any such action. In the event that Licensee
voluntarily joins in any such action, the expenses and any damages awarded as a
result of a lawsuit or settlement reached as a result of a lawsuit shall be
split fifty/fifty (50/50) by the parties after the out-of-pocket expenses have
been reimbursed. In the event that Licensee chooses not to voluntarily join in
any such action, Licensor shall be free to join Licensee as a party thereto and
Licensee agrees to cooperate with Licensor in any such suit subject to being
reimbursed for its out-of-pocket expenses. If Licensee does not join the suit
voluntarily, all expenses shall be borne by Licensor and, all recoveries and
awards shall be fully retained by Licensor. If Licensor decides not to institute
such litigation, it may authorize, within its sole discretion, Licensee to
institute such litigation in which event Licensee shall be solely responsible
for the costs of such litigation and shall be entitled to keep any recoveries
therefrom.
5. Indemnification and Product Liability Insurance
a. Except with respect to any Inventory purchased from Licensor as set
forth in the Asset Purchase Agreement between the parties of even date herewith,
Licensee hereby indemnifies Licensor and undertakes to defend Licensee and/or
Licensor against and hold Licensor harmless from any claims, suits, damages,
<PAGE>
out-of-pocket expenses (including legal fees and out-of-pocket expenses) and
losses arising from the activities of Licensee under this Agreement (other than
the use of the Trademark and Formula as authorized herein), including, but not
limited to, the unauthorized use of any patent, process, idea, method or device
by Licensee in connection with the Articles covered by this Agreement. Licensee
agrees that it will obtain and maintain throughout the term of this Agreement,
at its own expense, liability insurance including product liability with a broad
form vendors endorsement from an insurance company reasonably acceptable to
Licensor providing adequate protection (at least in the amount of Ten Million
Dollars ($10,000,000)) against any claims, suits, damages, expenses or losses
arising out of Licensee's operations pursuant to this Agreement. Such insurance
shall include coverage of Licensor and its directors, officers, agents,
employees, assignees and successors. As proof of such insurance, a certificate
of insurance naming Licensor as an additional insured party will be submitted to
Licensor by Licensee for prior approval before any Articles using the Trademark
are distributed or sold, and at the latest within thirty (30) days after the
date first written above. Licensor shall be entitled to a copy of the prevailing
certificate(s) of insurance which shall be furnished to Licensor by Licensee.
Licensee and its insurer shall provide Licensor with thirty (30) days advance
notice in the event of the cancellation of said insurance.
b. Licensor hereby indemnifies Licensee and undertakes to defend
Licensee and hold Licensee harmless from any trademark or patent infringement
<PAGE>
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and losses arising solely out of Licensee's use of the
COLOMBO Trademark or the Formula approved under the terms of this Agreement, but
only in connection with those Articles using the COLOMBO Trademark and the
Formula which Licensor was selling prior to the date of this Agreement.
6. Quality of Merchandise
a. Licensee agrees that the Articles covered by this Agreement shall be
of high standard and of such style, appearance and quality as to be adequate and
suited to their advantageous exploitation and to the protection and enhancement
of the Trademark and the goodwill pertaining thereto; that the Articles will be
manufactured, sold and distributed in accordance with all applicable Federal,
State and local laws, and that the policy of sale, distribution, and/or
exploitation by Licensee shall be advantageous and of high standard and that the
same shall in no manner reflect adversely upon the good name of Licensor or any
of its activities or the Trademark. To this end, Licensee shall, before selling
or distributing any Articles covered by this Agreement, furnish to Licensor,
free of cost for its written approval, a reasonable number of samples of each of
the Articles. The quality and style of such Articles shall be subject to the
approval of Licensor, which approval shall not be unreasonably withheld or
delayed. At the request of Licensor, Licensee shall supply to Licensor any
manufacturing information requested by Licensor to help Licensor in evaluating
<PAGE>
the quality and style of such Articles. Any Articles submitted to Licensor and
not disapproved by Licensor within fifteen (15) business days of its receipt by
Licensor shall be deemed to have been approved pursuant to this paragraph.
Licensee warrants that the Articles manufactured, distributed and sold by
Licensee, if applicable, and its contract packers and the manufacturing and
sanitation practices used by Licensee, if applicable, and its contract packers
to produce the Articles will comply with all applicable Federal, State and local
laws, including, but not limited to, manufacturing codes and that Licensee will
not manufacture the Articles from inherently dangerous materials or substances
and will not design the Articles so as to constitute any inherent danger. After
samples of the Articles have been approved pursuant to this paragraph, Licensee
shall not depart therefrom in any material respect without Licensor's prior
written consent, and Licensor shall not withdraw its approval of the approved
Articles or any approved plant except for good cause when Licensor may in good
faith have reason to believe that the approved Articles or manufacture of
Articles by the approved plant may be detrimental to the health or safety of the
public. Licensor acknowledges that (i) the plants operated as of the date of
this Agreement by __________________________________ are acceptable to Licensor
as of the date of this Agreement, and (ii) the Articles using the Trademark
being manufactured by __________________________________ as of the date of this
<PAGE>
Agreement meet the specified approved standards for quality and style set forth
herein. From time to time after Licensee has commenced selling the Articles and
upon Licensor's written request, Licensee shall furnish, without cost to
Licensor, the requested reasonable amount of samples of the Articles being
manufactured and sold by Licensee hereunder. Also, Licensor, through such agents
or representatives as it may designate, shall have access to Licensee's
facilities and the facilities of Licensee's contract manufacturers where the
Articles are manufactured, at reasonable times and with reasonable advance
notice given during normal business hours, for the purpose of inspecting the
Articles to the extent necessary to determine whether Licensor's quality
standards are being met.
b. Subject to the terms of this Agreement, Licensor acknowledges that
Licensee shall have the right to make adjustments to the formulas for the
Articles and to develop and market new Articles using the Trademark. Except as
set forth herein, Licensee's formulas for the Articles shall remain the property
of Licensee after expiration or termination of this Agreement.
c. Licensee shall have the sole responsibility with
respect to the Articles for taking action, maintaining records or
handling recalls and all costs associated therewith under the
Consumer Products Safety Act, the Federal Food, Drug and Cosmetic
Act or any other similar acts, orders or directives.
<PAGE>
7. Labeling, Promotion, Advertising and Use
a. Licensee shall submit to Licensor for its prior written approval,
all new proposed tags, labels, containers, packaging, advertising, promotional
or display materials or the like containing or referring to the Trademark which
approval shall not be unreasonably withheld or delayed. Any item submitted to
Licensor and not disapproved by Licensor within ten (10) business days of its
receipt by Licensor shall be deemed to have been approved pursuant to this
paragraph. Licensor acknowledges that the items referred to in this paragraph
above which Licensor currently uses with Articles using the Trademark are
acceptable to Licensor.
b. Licensee agrees that it will apply the proper reasonable notations,
as specified by Licensor, relating to the ownership of the Trademark on all
tags, labels, containers, packaging, advertising, promotional or display
materials or the like containing or referring to the Trademark.
c. Licensee warrants that all tags, labels, containers, packaging,
advertising, promotional or display materials or the like containing the
Trademark will comply with all applicable Federal, State and local laws.
d. Licensee may use another brand name or trademark on the
Articles in connection with the Trademark subject to the approval
of Licensor as set forth in paragraph 7 (a) hereof. Such other
brand names or trademarks shall remain the property of Licensee
after the expiration or termination of this Agreement, unless
previously owned by Licensor.
<PAGE>
8. Term and Termination
a. The term of this Agreement shall commence on the date first written
above and shall end on December 31, 2015, unless sooner terminated in accordance
herewith.
b. If this Agreement has not been otherwise terminated, Licensee shall
have an option to extend this Agreement until December 31, 2020 by giving
written notice thereof to Licensor by September 30, 2015, provided that Licensee
pays Licensor the sum of _________________ by December 31, 2001. This payment is
independent of any royalties which may be due Licensor hereunder. If, however,
the sublicense agreement between Licensor and Licensee relating to the YOPLAIT
trademark is terminated in year 2002, Licensee shall only be required to pay
Licensor __________________________________ independent of any royalties owed in
order to extend this Agreement. Should the YOPLAIT Trademark Sublicense
Agreement be terminated in year 2015, then Licensee shall be only required to
pay Licensor _________________________ independent of any royalties owed in
order to extend this Agreement. In the event Licensee does not furnish written
notice of extension to Licensor by September 30, 2015, Licensor shall notify
Licensee that this Agreement shall terminate on December 31, 2015, unless
Licensee provides Licensor with written notice of its intention to extend within
fifteen (15) business days after Licensee's receipt of such written notice. In
the event Licensor does not furnish such written notice to Licensee before
December 12, 2015, this Agreement shall continue in effect after December 31,
2015 until such time as Licensor shall notify Licensee that this Agreement shall
<PAGE>
terminate, unless Licensee provides Licensor with written notice of its
intention to extend within fifteen (15) business days after Licensee's receipt
of such notification, along with payment in full of the amount due, plus
interest on such amount at the rate specified in paragraph 2b in effect as of
December 31, 2015, with such interest accruing from and after that date.
c. [Redacted]
d. If for any twelve (12) month period Licensee is not engaged in
manufacturing or selling any Articles using the Trademark in either the United
States or Canada, Licensor shall have the right to terminate this Agreement as
to that part of the Territory (United States or Canada) by giving Licensee
written notice to that effect. Provided, as to Canada, Licensor shall not have
the right to terminate unless Licensor, directly or through a licensee, intends
to engage in the sale of Articles using the Trademark within six (6) months in
Canada. Licensee shall have two (2) months from the date of receipt of the
written notice to commence the manufacturing or selling of any Articles using
the Trademark, and in the absence of which, this Agreement shall automatically
terminate at the end of said two (2) month period as to that part of the
Territory, provided, however, as to Canada, this Agreement shall resume in full
force and effect if Licensor, or its licensee, does not commence selling
Articles using the Trademark in Canada, within six (6) months of such
termination. Licensee agrees to give Licensor prompt written notice of its
intention to discontinue marketing Articles under the Trademark.
<PAGE>
e. Licensor may terminate this Agreement if Licensee shall be in
material default of any obligation to Licensor hereunder, including, but not
limited to, obligations set forth in paragraphs 2, 4, 5, 6, 7, 9 or 13, by
giving written notice to Licensee calling attention to such default, specifying
the nature thereof and the action required to correct the default and stating
that this Agreement will terminate at the expiration of thirty (30) days, when
such default arises under paragraph 2 hereof, and forty-five (45) days for any
other default, from the date of the receipt by Licensee of such notice, unless
Licensee shall cure such default within said thirty (30) or forty-five (45) day
period, as applicable, after the receipt of such notice, or if such default
cannot be cured within said thirty (30) or forty-five (45) day period, as
applicable, of the receipt of such notice, Licensee, exercising due diligence,
has commenced taking the steps necessary to prevent the recurrence of such
default and is diligently pursuing such steps. Failure of Licensor to terminate
this Agreement for any such default or breach shall not be determined a waiver
of the right subsequently to do so under the same or any other such default or
breach, either of the same or different character.
f. The license hereby granted shall automatically terminate forthwith
without any notice whatsoever being necessary if Licensee discontinues its
business or Licensee voluntarily submits to, or is ordered by the bankruptcy
court to undergo, liquidation pursuant to Chapter 7 of the bankruptcy code. In
the event this license is so terminated, Licensee, its receivers,
<PAGE>
representatives, trustees, agents, administrators, successors and/or assigns
shall have no right to sell, exploit or in any way deal with or in any Articles
covered by this Agreement, or any carton, container, packaging or wrapping
material, advertising, promotional or display materials pertaining thereto,
except with and under the special consent and instruction of Licensor in
writing, which they shall be obligated to follow. Should Licensee file a
petition in bankruptcy or is otherwise adjudicated a bankrupt or if a petition
in bankruptcy is filed against Licensee and the Articles are attached and such
petition is not discharged or dismissed or if an involuntary receiver is
appointed for it or its business within ninety (90) days thereafter, this
Agreement shall automatically terminate, in each case, if and when, but only if,
a bankruptcy or other court of appropriate jurisdiction assigns, sells or
otherwise causes this Agreement to be transferred to 1) a business which is a
material competitor to any of General Mills' businesses or 2) a business which
derives a material portion of its revenues from tobacco, alcoholic beverages, or
from pornography or other explicit sexually related material, or which has been
convicted of a felony or whose chief executive, financial or operating officer
in his or her role as an officer of the company has been convicted of a felony,
or which does not comply with Licensor's advertising standards as set forth in
the attached Schedule.
g. Termination of this Agreement for any reason shall not
release either party from any part of any obligation accrued
<PAGE>
prior to the date of such termination, or obligations continuing beyond
termination of this Agreement.
h. Termination of this Agreement for any reason shall be
without prejudice to any rights which either party may otherwise
have against each other.
i. Upon expiration or termination of this Agreement for any reason
other than failure to comply with the requirements of paragraphs 8(f) hereof,
Licensee shall have a period of three hundred sixty five (365) days after the
date of termination in which to phase out its use of the Formula and the
Trademark provided all Articles to be sold, and all uses of the Trademark, by
Licensee during such three hundred sixty-five (365) day period are in compliance
with the requirements of paragraphs 6 and 7 hereof. Licensee shall report to
Licensor with respect to such sales and make the requisite royalty payment
within thirty (30) days after the end of each month during the aforesaid three
hundred sixty five (365) day period. All duties and obligations of the Licensee
under this Agreement shall remain in force during the sell-off period.
9. Distribution
a. Licensee agrees to exercise good faith reasonable
efforts in the performance of this Agreement.
b. Licensee agrees to sell and distribute the Articles
covered by this Agreement at a competitive price and not on an
approval or consignment basis to retail stores.
<PAGE>
c. Licensee agrees to keep Licensor informed on a regular
basis of Licensee's activities in manufacturing and marketing the
Articles covered by this Agreement.
10. Force Majeure
No failure or omission by Licensee in the performance of any
obligation of this Agreement shall be deemed a breach of this
Agreement nor create liability if the same shall arise from any
cause or causes beyond the reasonable control of Licensee.
11. Warranty and Consumer Response
Licensee will, at no cost to Licensor, handle all warrantee
(guarantee) satisfaction, response and compliance and all
consumer response relative to any of the Articles. Licensor
shall, at no cost to Licensee, promptly forward to Licensee, for
handling, any and all such consumer inquires that it receives.
Licensee shall use reasonable efforts to keep Licensor generally
informed of consumer complaints relative to the Articles.
12. No Joint Venture
Nothing herein contained shall be construed to place the
parties in the relationship of partners or joint venturers, and
neither party shall have the power to obligate or bind the other
in any manner whatsoever.
13. Assignment, Sublicense or Change of Control
a. This Agreement and all rights and duties hereunder are
personal to Licensee. Licensee may assign this Agreement to any
third party, provided such third party is not a major competitor
of Licensor.
<PAGE>
b. Licensor may assign this Agreement to any third party, provided that
such third party is also assigned all of Licensor's right, title and interest in
the Trademark as applied to Articles and Licensor shall furnish written notice
of such assignment to Licensee.
c. Except as provided below, any change in direct or indirect control
over Licensee or any assignee of rights of Licensee under this Agreement shall
not be subject to the prior written approval of Licensor. The term "assignee" in
the preceding sentence shall not include contract manufacturers. However, the
occurrence of any of the following events shall not be permitted:
(i) any major competitor of Licensor becomes the
beneficial owner, directly or indirectly, of a
majority of the issued and outstanding shares of
Licensee entitled to vote for the election of
directors;
(ii) the stockholders of Licensee approve an agreement
providing for a transaction in which Licensee will
cease to be an independent corporation and the
entity which will control it is a major competitor
of Licensor, or pursuant to which Licensee sells
or otherwise disposes of all or substantially all
of the assets of Licensee to a major competitor of
Licensor.
<PAGE>
14. Confidentiality
Both parties shall keep confidential and shall not cause or permit the
disclosure to any third party, other than those whose duties require possession
of such information, such as contract manufacturers and sublicensees, of any
confidential information disclosed by either party to the other pursuant to this
Agreement. Confidential information may include, but is not limited to,
formulas, production processes, research, marketing and sales information. Said
confidentiality requirement shall not apply to any information which (a) was in
the possession of a party on a non-confidential basis prior to the receipt of
any disclosure to it by the other party, or (b) is or becomes, without
disclosure by a party, part of the public knowledge or literature, or (c)
otherwise lawfully becomes available to a party, from sources other than the
other party, which sources did not acquire such information directly from the
party, or (d) counsel to the party advises must be disclosed pursuant to a court
order or by law or regulation.
15. Notices
All notices to be made hereunder shall be in writing sent via
certified, overnight or registered mail (return receipt requested). Any Articles
or materials submitted for approval under this Agreement shall not be governed
by the mailing type requirements of this Notice provision. Such notices and
statements shall be given to or made at the respective address of the parties as
set forth below unless notification of a change of address is given in writing,
and the date of receipt shall be deemed the date the notice or statement is
actually received:
<PAGE>
To Licensor: To Licensee:
General Mills Products Corp. Integrated Brands, Inc.
Number One General Mills 4175 Veterans Highway
Boulevard Ronkonkoma, NY 11779
Minneapolis, MN 55426 Attn: Gary P. Stevens,
Attn: Trademark Counsel President
cc: General Counsel cc: Benjamin Raphan, Esq.
General Mills, Inc. Tenzer Greenblatt LLP
Number One General 405 Lexington Avenue
Mills Boulevard New York, NY 10174
Minneapolis, MN 55426
16. No Waiver. Etc.
None of the terms of this Agreement can be waived or
modified except by an express agreement in writing signed by both
parties. There are no representations, promises, warranties,
covenants or undertakings other than those contained in this
Agreement and in the other agreements between the parties which
represent the entire understanding of the parties.
17. Choice of Law
This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts)
of the State of Minnesota. The parties hereto agree to submit to
jurisdiction in the State of Minnesota, and further agree that
any court proceeding relating to any controversy arising under
this Agreement shall be in the federal court located in Hennepin
County in the State of Minnesota.
18. Submission of Agreement
This Agreement shall become effective only upon its execution by
Licensor and Licensee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed as of the date and year first above written.
GENERAL MILLS, INC.
Dated: 8/15/95 By: /s/ Gary M. Rodkin
- --------------------- ----------------------------------
Senior Vice President
GENERAL MILLS PRODUCTS CORP.
Dated: 8/15/95 By: /s/ C.S. Bernhard
- --------------------- ----------------------------------
Corporate Secretary
INTEGRATED BRANDS INC.
Dated: 8/15/95 By: /s/ Richard E. Smith
- --------------------- ----------------------------------
Chairman & CEO
<PAGE>
EXHIBIT 10.32
THE BETTY CROCKER LICENSE AGREEMENT
THIS AGREEMENT made as of the 15th day of August, 1995 by and
between General Mills, Inc., a Delaware corporation, having a place of business
at Number One General Mills Boulevard, Minneapolis, Minnesota 55426, hereinafter
referred to as "Licensor," and Integrated Brands Inc., a New Jersey corporation,
having a place of business at 4175 Veterans Highway, Ronkonkoma, New York 11779,
hereinafter referred to as "Licensee."
WHEREAS, Licensor is the owner of the trademark rights for the
words BETTY CROCKER by themselves and in combination with a red spoon,
hereinafter collectively and/or individually referred to as "Trademark"; and
WHEREAS, Licensor has registered said trademark for a wide variety
of goods and services associated with food, food preparation and homemaking,
including United States Registration Nos. 1,465,527 and 1,467,385 which cover
frozen confections; and
WHEREAS, Licensee desires a license from Licensor to use the
Trademark solely in connection with the development, manufacture, contract
manufacture, marketing, sale and distribution of "Articles," defined to mean all
prepackaged frozen products containing at least thirty-five percent (35%) by
volume frozen yogurt, ice cream, ice milk, sherbet, sorbet, frozen fruit, water
ice or other frozen items which would be considered substitutes for the
<PAGE>
foregoing frozen items/ingredients, dairy or non-dairy, naturally or
artificially sweetened, sold in any prepackaged container size or form.
("Prepackaged" is defined to mean packaged by the manufacturer off the premises
from which finished goods are sold at retail to consumers). Examples of Articles
include, but are not limited to (i) retail prepackaged goods, such as gallons,
half gallons, quarts, pints and half pints; (ii) bulk, such as three (3) gallon,
two and one half (2 l/2) gallon and one and one half (l l/2) gallon prepackaged
containers; (iii) prepackaged novelties such as pops, bars, sandwiches, cups,
cones, parfaits, push-ups, nuggets and shakes, but not including novelty items
sold on a stick of any form unless specifically agreed to by Licensor; and (iv)
prepackaged finished prepared frozen dessert specialties such as ice cream cakes
and pies, cake rolls, jimmy rolls, nut rolls and brownie sundaes. "Articles"
always excludes all machine dispensed frozen yogurt, machine dispensed ice cream
and other items which are machine dispensed. ("Machine dispensed" is defined to
mean unpackaged food items dispensed from a machine on the premises from which
finished goods are sold directly to the consumer, and would not include
prepackaged items dispensed from a vending machine).
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is hereby agreed as follows:
<PAGE>
1. Grant of License
a. Articles: Upon the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee and Licensee hereby accepts the
exclusive right, license and privilege of utilizing the Trademark solely in
connection with the development, manufacture, contract manufacture, marketing,
sale and distribution of Articles; provided however, that Licensee is not
authorized to use the Trademark in connection with any Articles distributed as
premiums or otherwise to be used as aids in the advertisement or promotion of
any products or business of others (other than the sale of Articles). Subject to
Licensor's prior written approval, not to be unreasonably withheld, Licensee
shall have the right to have third parties manufacture such Articles for
Licensee so long as such third parties agree in writing to comply with the
quality control provisions and any other provisions relevant to such third party
set forth in this Agreement. Any third party manufacturer not disapproved by
Licensor within fifteen (15) business days after receipt by Licensor of
Licensee's written request for such approval shall be deemed approved pursuant
to this paragraph. Licensor acknowledges that Licensee may elect to have
Articles manufactured by third parties who are also retailers of the Articles,
and that the Articles may be manufactured by and sold to some or all of such
third party manufacturer/retailers without Licensee taking actual physical
possession of such Articles.
<PAGE>
b. Exclusivity: Subject to the terms of this Agreement,
Licensor agrees that it will not use or license to anyone else the right to use
the Trademark in the Territory, in connection with the Articles.
c. Reservation: Notwithstanding paragraphs (a) and
(b) above:
(i) It is understood Licensor reserves to itself
the right to use and license to others the
right to use the Trademark in connection with
any products and/or services not included
within the definition of Articles, including,
but not limited to, (v) machine dispensed
frozen yogurt, (w) machine dispensed ice
cream, (x) other machine dispensed items, (y)
bulk mixes for making machine dispensed
frozen yogurt, machine dispensed ice cream
and other machine dispensed items, and (z)
any refrigerated products, including
refrigerated products of similar or the same
description as the Articles (but not frozen).
Also, Licensor reserves the right to allow
retailers (including Licensor) to pack in
retail premises excess machine dispensed
frozen yogurt, machine dispensed ice cream
and other items which are machine dispensed
<PAGE>
in appropriately labeled containers using
the Trademark for retail sale to consumers
from the premises on which such products
were machine dispensed.
(ii) In addition, Licensor reserves to itself the
right to use or license to others to use the
Trademark as the name of a retail business of
any type which sells frozen yogurt, ice cream
or frozen novelties including but not limited
to restaurants, ice cream counters and carts
and frozen yogurt counters and carts;
provided, however, this provision shall not
preclude Licensee from selling Articles using
the Trademark to such businesses should such
businesses desire to sell said Articles.
d. Territory: This Agreement is limited to the United States,
its territories and possessions (including Puerto Rico) and Canada.
2. Royalty
a. Rate: Licensee agrees to pay to Licensor a royalty of
______ on Licensee's Gross Revenues of Articles sold by Licensee using the
Trademark; provided, however, no royalty shall be due on Articles sold to
Licensor using the Trademark so long as said Articles are sold to Licensor at
Licensee's lowest wholesale price. In connection with any Articles sold and/or
<PAGE>
distributed by Licensee to a related company of Licensee at a price lower than
the price otherwise charged to the trade, the royalty payable herein shall be
based on what the Gross Revenues of the sales of the Articles would have been if
the company was not related to Licensee. As used herein "Gross Revenues" means
the gross sales price invoiced by Licensee to purchasers of the Articles minus
any credits or allowances given as a result of the return or destruction of such
Articles, any off-invoice allowances (but not promotional billback allowances),
and any applicable sales or use taxes. For all purposes of this Agreement, the
royalty shall accrue on the sale of the Articles and the Articles shall be
considered sold when shipped or billed out, whichever occurs earlier.
b. Royalty Payments and Records: Licensee agrees to keep full,
accurate and complete books of account, and other records in sufficient detail
so that the royalty payable hereunder may be ascertained properly. Within thirty
(30) days after the end of each of Licensor's fiscal quarters which commence
June 1, September 1, December 1 and March 1, Licensee shall furnish to Licensor
complete and accurate statements of sales of Articles using the Trademark during
such previous fiscal quarter certified to be accurate by the chief financial or
accounting officer of Licensee showing the number, description, Gross Revenues
of such Articles and permitted deductions therefrom. Such statements shall be
<PAGE>
furnished to Licensor whether or not any of the Articles utilizing the Trademark
have been sold during the preceding quarter and whether or not a royalty is due.
Each such report shall be accompanied by a check for the amount of royalty
payments due with respect to the period covered by such report. The receipt or
acceptance by Licensor of any of the statements furnished pursuant to this
Agreement or of any royalties paid hereunder (or the cashing of any royalty
checks paid hereunder) shall not preclude Licensor from questioning the
correctness thereof at any time, and in the event that inconsistencies or
mistakes are discovered in such statements or payments, they shall be rectified
and the appropriate payments made by Licensee upon demand by Licensor. Any
royalty payments, including accrued royalties, and audit findings, not paid when
due shall be paid immediately upon demand and shall bear interest at an annual
rate of two percent (2%) over the rate of interest publicly announced by
Citibank, N.A. in New York as its base rate in effect as of the date on which
such overdue royalty amount should have been paid to Licensor.
Licensee agrees, upon request by Licensor, to permit Licensor
or its authorized representative to have access to such books or records as may
be necessary to determine the royalty in respect of any accounting period
covered by this Agreement and obtain any information as to the amount payable in
case of failure to report. Such audits shall be at the expense of Licensor
<PAGE>
unless they show that Licensee has understated the royalties by five percent
(5%) or more or Five Thousand Dollars ($5,000) (whichever is greater) for any
quarter, in which case Licensee shall reimburse Licensor for its out-of-pocket
expenses incurred in connection with the audit as well as pay to Licensor the
required amount of additional royalties. All books of account and records shall
be kept available by Licensee for at least two (2) years after the submission of
the relevant statement.
3. Licensor's Authorized Representative
Wherever Licensee is directed to furnish or supply to
or otherwise take some action or perform some obligation in respect of Licensor
in this Agreement, the term "Licensor" shall be deemed to include "or Licensor's
authorized representative" unless written advice to the contrary is received
from Licensor.
4. Goodwill. etc.
a. Licensee recognizes the great value of the goodwill
associated with the Trademark and acknowledges that the Trademark and all rights
therein and the goodwill pertaining thereto belong exclusively to Licensor.
Licensee agrees not to contest Licensor's rights in the Trademark or perform any
material act or omission adverse to said rights.
b. Licensee hereby agrees that its every use of the Trademark
shall inure to the benefit of Licensor and that Licensee shall not at any time
<PAGE>
acquire any rights in the Trademark by virtue of any use it may make of the
Trademark other than the licensed rights granted herein.
c. Subject to being reimbursed for its out-of-pocket expenses,
Licensee agrees to cooperate fully and in good faith with Licensor for the
purpose of securing, preserving and protecting Licensor's rights or any grantor
of Licensor's rights in and to the Trademark.
d. Licensee agrees that it will use the Trademark only on the
specific Articles herein licensed, and that it will not adopt or use as its own
a trademark the same or similar to the Trademark.
e. Licensor shall have the right, but shall not be under any
obligation, to use the Trademark and/or the name of Licensee so as to give the
Trademark, Licensee, Licensor and/or Licensor's products full and favorable
prominence and publicity. Licensor shall not be under any obligation whatsoever
to continue using the Trademark in connection with its products or services.
f. Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the manufacture, sale or distribution of Articles
utilizing the Trademark covered by this Agreement on the termination or
expiration of this Agreement will result in immediate and irremediable damage to
Licensor and to the rights of any subsequent licensee. Licensee acknowledges and
admits that there is no adequate remedy at law for such failure to cease the
<PAGE>
manufacture, sale or distribution, and Licensee agrees that in the event of such
failure, Licensor shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other and further relief as any court with
jurisdiction may deem just and proper.
g. Licensee shall report to Licensor in writing any
infringement or imitation of the Trademark it becomes aware of on Articles or
products similar to Articles. Licensor shall have the sole right to determine
whether to institute litigation upon any such infringements as well as the sole
right to select counsel. In the event Licensor decides to institute such
litigation, Licensor shall offer Licensee an opportunity to voluntarily join in
any such action. In the event that Licensee voluntarily joins in any such
action, the expenses and any damages awarded as the result of a lawsuit or
settlement reached as a result of a lawsuit shall be split fifty/fifty (50/50)
by the parties after the out-of-pocket expenses have been reimbursed. In the
event that Licensee chooses not to voluntarily join in any such action, Licensor
shall be free to join Licensee as a party thereto and Licensee agrees to
cooperate with Licensor in any such suit subject to being reimbursed for its
out-of-pocket expenses. If Licensee does not join the suit voluntarily, all
expenses shall be borne by Licensor, and all recoveries and awards shall be
fully retained by Licensor. If Licensor decides not to institute such
litigation, it may authorize, within its sole discretion, Licensee to institute
<PAGE>
such litigation, in which event Licensee shall be solely responsible for the
costs of such litigation and shall be entitled to keep any recoveries therefrom.
5. Indemnification and Product Liability Insurance
a. Licensee hereby indemnifies Licensor and undertakes
to defend Licensee and/or Licensor against and hold Licensor harmless from any
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and losses arising from the activities of Licensee under
this Agreement (other than the use of the Trademark as authorized herein)
including, but not limited to, the unauthorized use of any patent, process,
idea, method or device by Licensee in connection with the Articles covered by
this Agreement. Licensee agrees that it will obtain and maintain throughout the
term of this Agreement, at its own expense, liability insurance including
product liability with a broad form vendors endorsement from an insurance
company reasonably acceptable to Licensor providing adequate protection (at
least in the amount of Ten Million Dollars ($10,000,000)) against any claims,
suits, damages, expenses or losses arising out of Licensee's operations pursuant
to this Agreement. Such insurance shall include coverage of Licensor and its
directors, officers, agents, employees, assignees and successors. As proof of
such insurance, a certificate of insurance naming Licensor as an additional
insured party will be submitted to Licensor by Licensee for prior
<PAGE>
approval before any Articles using the Trademark are distributed or sold, and at
the latest within thirty (30) days after the date first written above. Licensor
shall be entitled to a copy of the prevailing certificate(s) of insurance which
shall be furnished to Licensor by Licensee. Licensee and its insurer shall
provide Licensor with thirty (30) days advance notice in the event of the
cancellation of said insurance.
b. Licensor hereby indemnifies Licensee and undertakes to
defend Licensee and hold Licensee harmless from any trademark infringement
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and losses arising solely out of Licensee's use of the
Trademark in connection with Articles approved under the terms of this
Agreement.
6. Quality of Merchandise
a. Licensee agrees that the Articles covered by this Agreement
shall be of high standard and of such style, appearance and quality as to be
adequate and suited to their advantageous exploitation and to the protection and
enhancement of the Trademark and the goodwill pertaining thereto, that Licensee
will manufacture, sell and distribute the Articles in accordance with all
applicable Federal, State and local laws and that the policy of sale,
distribution, and/or exploitation by Licensee shall be advantageous and of high
standard and that the same shall in no manner reflect adversely upon the good
<PAGE>
name of Licensor or any of its activities or the Trademark. To this end,
Licensee shall, before selling or distributing any Articles covered by this
Agreement, furnish to Licensor, free of cost for its written approval, a
reasonable number of each of the Articles. The quality, appearance and style of
such Articles shall be subject to the approval of Licensor which approval shall
not be unreasonably withheld or delayed. Licensor shall approve Articles, the
quality, style and appearance of which, at least equals the quality, style and
appearance of other products sold____________________________________________.
With respect to ice cream cakes and other related products within the
definition of Articles, for which there is currently no equivalent product sold
_________________________, the quality, style and appearance of such
Articles shall at least equal that of current products manufactured by or on
behalf of___________________________________________, if any. At the request of
Licensor, Licensee shall supply to Licensor any manufacturing information
requested by Licensor to help Licensor in evaluating the quality and style of
such Articles. Any Articles submitted to Licensor and not disapproved by
Licensor within fifteen (15) business days of its receipt by Licensor shall be
deemed to have been approved pursuant to this paragraph. Licensor acknowledges
<PAGE>
that it has already approved, conceptually, the Articles internally referred to
by Licensee as "___________________." However, Licensee has not yet received or
approved samples of such Articles. Licensee warrants that the Articles
manufactured, distributed and sold by Licensee, if applicable, and its contract
packers and the manufacturing and sanitation practices used by Licensee, if
applicable, and its contract packers to produce the Articles will comply with
all applicable Federal, State and local laws, including, but not limited to,
manufacturing codes, and that Licensee will not manufacture the Articles from
inherently dangerous materials or substances and will not design the Articles so
as to constitute any inherent danger. After samples of the Articles have been
approved pursuant to this paragraph, Licensee shall not depart therefrom in any
material respect without Licensor's prior written consent, and Licensor shall
not withdraw its approval of the approved Articles or any approved plant except
for good cause when Licensor may in good faith have reason to believe that the
approved Articles or the manufacture of Articles by the approved plant may be
detrimental to the health or safety of the public. Licensor acknowledges that
the plants operated as of the date of this Agreement by_______________________
______________________________________________________________________________
are acceptable to Licensor as of the date of this Agreement. From time to time
<PAGE>
after Licensee has commenced selling the Articles and upon Licensor's written
request, Licensee shall furnish, without cost to Licensor, the requested
reasonable amount of samples of the Articles being manufactured and sold by
Licensee hereunder. Also, Licensor, through such agents or representatives as it
may designate, shall have access to Licensee's facilities and the facilities of
Licensee's contract manufacturers where the Articles are manufactured, at
reasonable times and with reasonable advance notice given during normal business
hours, for the purpose of inspecting the Articles to the extent necessary to
determine whether Licensor's quality standards are being met.
b. Licensee shall have the sole responsibility with respect to
the Articles for taking action, maintaining records or handling recalls and all
costs associated therewith under the Consumer Products Safety Act, the Federal
Food, Drug and Cosmetic Act or any other similar acts, orders or directives.
c. Subject to the terms of this Agreement, Licensor
acknowledges that Licensee shall have the right to make adjustments to its
formulas for the Articles and to develop and market new Articles using the
Trademark. Licensee's formulas for the Articles shall remain the property of
Licensee after expiration or termination of this Agreement.
<PAGE>
7. Confidentiality
Both parties shall keep confidential and shall not cause or permit
the disclosure to any third party, other than those whose duties require
possession of such information, such as contract manufacturers and sublicensees,
of any confidential information disclosed by either party to the other pursuant
to this Agreement. Confidential information may include, but is not limited to,
formulas, production processes, research, marketing and sales information. Said
confidentiality requirement shall not apply to any information which (a) was in
the possession of a party on a nonconfidential basis prior to the receipt of any
disclosure to it by the other party, or (b) is or becomes, without disclosure by
a party, part of the public knowledge or literature, or (c) otherwise lawfully
becomes available to a party, from sources other than the other party, which
sources did not acquire such information directly from the party, or (d) counsel
to the party advises must be disclosed pursuant to a court order or by law or
regulation.
8. Labeling. Promotion Advertising and Use
a. Licensee shall submit to Licensor for its prior
written approval, all new proposed tags, labels, containers, packaging,
advertising, promotional or display materials or the like containing or
referring to the Trademark, which approval shall not be unreasonably withheld or
delayed. Any item submitted to Licensor and not disapproved by Licensor within
<PAGE>
ten (10) business days of its receipt by Licensor shall be deemed to have been
approved pursuant to this paragraph.
b. Licensee may use another brand name or trademark on the
Articles in connection with the Trademark subject to the approval of Licensor as
set forth above in paragraph 8 (a). While such approval shall not be
unreasonably withheld, Licensor may take into account (i) the importance and
value of the Trademark to Licensor and (ii) the image Licensor desires to
maintain for the Trademark, in each case as evidenced by other uses of the
Trademark by, or authorized by, Licensor. Licensor acknowledges that a name such
as _____________________ subject to an appropriate trademark search and
clearance, is an acceptable name hereunder. Likewise, the name _____________
____, subject to an appropriate trademark search and clearance, is an acceptable
name, but in this instance would become the property of Licensor (as would any
other name substantially similar to a trademark owned by Licensor). Such other
brand names or trademarks shall remain the property of Licensee after the
expiration or termination of this Agreement, unless previously owned by
Licensor.
c. Licensee agrees that it will apply the proper reasonable
notations, as specified by Licensor, indicating that the Trademark is owned by
General Mills, Inc. and used with its permission on all tags, labels,
<PAGE>
containers, packaging, advertising, promotional or display materials or the like
containing or referring to the Trademark.
d. Licensee warrants that all tags, labels, containers,
packaging, advertising, promotional or display materials or the like containing
the Trademark will comply with all applicable Federal, State and local laws.
9. Term and Termination
a. The term of this Agreement shall commence on the date first
written above and shall end on December 31, 2010, unless sooner terminated in
accordance herewith.
b. If this Agreement has not otherwise been terminated,
Licensee shall have an option to extend this Agreement until December 31, 2015
by giving written notice thereof to Licensor by September 30, 2010, provided
that Licensee pays Licensor the sum of ______________________________ by
December 31, 2010. This payment is independent of any royalties which may be due
Licensor hereunder. In the event Licensee does not furnish written notice of
extension to Licensor by September 30, 2010, Licensor shall notify Licensee that
this Agreement shall terminate on December 31, 2010, unless Licensee provides
Licensor with written notice of its intention to extend within fifteen (15)
business days after Licensee's receipt of such written notice. In the event
Licensor does not furnish such written notice to Licensee before December 12,
2010, this Agreement shall continue in effect after December 31, 2010 until
<PAGE>
such time as Licensor shall notify Licensee that this Agreement shall terminate,
unless Licensee provides Licensor with written notice of its intention to extend
within fifteen (15) business days after Licensee's receipt of such notification,
along with payment in full of the amount due, plus interest on such amount, at
the rate specified in paragraph 2 (b), in effect as of December 31, 2010, with
such interest accruing from and after that date.
c. [Redacted]
d. Licensor may terminate this Agreement if Licensee shall be
in material default of any obligation to Licensor hereunder, including, but not
limited to, obligations set forth in paragraphs 2, 4, 5, 6, 8, 10 or 14, by
giving written notice to Licensee calling attention to such default, specifying
the nature thereof and the action required to correct the default and stating
that this Agreement will terminate at the expiration of thirty (30) days from
the date of the receipt by Licensee of such notice unless Licensee shall cure
such default within thirty (30) days after the receipt of such notice, or if
such default cannot be cured within thirty (30) days of the receipt of such
notice, Licensee, exercising due diligence, has commenced taking the steps
necessary to prevent the recurrence of such default and is diligently pursuing
such steps. Failure of Licensor to terminate this Agreement for any such default
or breach shall not be determined a waiver of the right subsequently to do so
<PAGE>
under the same or any other such default or breach, either of the same or
different character.
e. If for any consecutive twelve (12) month period beginning
two (2) years from the date of this Agreement, Licensee is not engaged in
manufacturing or selling any Articles using the Trademark in either the United
States or Canada, Licensor shall have the right to terminate this Agreement as
to that part of the Territory (United States or Canada) by giving Licensee
written notice to that effect, provided, as to Canada, that Licensor shall not
have the right to terminate unless Licensor, directly or through a Licensee,
intends to engage in the sale of Articles using the Trademark within 12 months
in Canada. Licensee shall have two (2) months from the date of the receipt of
the written notice to commence the manufacturing or selling of Articles using
the Trademark and, in the absence of which, this Agreement shall automatically
terminate at the end of said two (2) month period as to that part of the
Territory, provided, however, as to Canada, this Agreement shall resume in full
force and effect if Licensor does not commence selling Articles using the
Trademark in Canada, within 12 months after such termination. Licensee agrees to
give Licensor prompt written notice of its intention to discontinue marketing
Articles under the Trademark.
f. The license hereby granted shall automatically terminate
forthwith without any notice whatsoever being necessary if Licensee discontinues
its business or Licensee voluntarily submits to, or is ordered by the
<PAGE>
bankruptcy court to undergo, liquidation pursuant to Chapter 7 of the bankruptcy
code. In the event this license is so terminated, Licensee, its receivers,
representatives, trustees, agents, administrators, successors and/or assigns
shall have no right to sell, exploit or in any way deal with or in any Articles
covered by this Agreement, or any carton, container, packaging or wrapping
material, advertising, promotional or display materials pertaining thereto,
except with and under the special consent and instruction of Licensor in
writing, which they shall be obligated to follow. Should Licensee file a
petition in bankruptcy or is otherwise adjudicated a bankrupt or if a petition
in bankruptcy is filed against Licensee and the Articles are attached and such
petition is not discharged or dismissed or if an involuntary receiver is
appointed for it or its business within ninety (90) days thereafter, this
Agreement shall automatically terminate, in each case, if and when, but only if,
a bankruptcy or other court of appropriate jurisdiction sells, assigns or
otherwise causes this Agreement to be transferred to (1) a business which is a
material competitor to any of General Mills' businesses or (2) a business whose
image is incompatible with the image of General Mills, such as a business which
derives a material portion of its revenues from tobacco or from alcoholic
beverages, or from pornography or other explicit sexually related material, or
which has been convicted of a felony or whose chief executive, financial or
<PAGE>
operating officer in his or her role as an officer of the company has been
convicted of a felony, or which does not meet Licensor's advertising standards
as set forth in the attached Schedule.
g. Termination of this Agreement for any reason shall not
release either party from any part of any obligation accrued prior to the date
of such termination, or obligations continuing beyond termination of the
Agreement.
h. Termination of this Agreement for any reason shall be
without prejudice to any rights which either party may otherwise have against
the other.
i. Upon expiration or termination of this Agreement for any
reason other than failure to comply with the requirements of paragraph 9 (f) of
this Agreement, Licensee shall have a period of three hundred sixty five (365)
days after the date of termination in which to phase out its use of the
Trademark, provided all Articles to be sold, and all uses of the Trademark by
Licensee during such 365 day period, comply with the requirements of paragraphs
6 and 8 hereof. Licensee shall report to Licensor with respect to such sales and
make the requisite royalty payment within thirty (30) days after the end of each
month during the aforesaid three hundred sixty five (365) day period. All duties
and obligations of the Licensee under this Agreement shall remain in force
during the sell-off period.
<PAGE>
10. Distribution
a. Licensee agrees to exercise good faith reasonable efforts
in the performance of this Agreement.
b. Licensee agrees to sell and distribute the Articles covered
by this Agreement at a competitive price and not on an approval or consignment
basis to retail stores.
c. Licensee agrees to keep Licensor informed on a regular
basis of Licensee's activities in manufacturing and marketing the Articles
covered by this Agreement.
11. Force Majeure
No failure or omission by Licensee in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement nor
create any liability if the same shall arise from any cause or causes beyond the
reasonable control of Licensee.
12. Warranty and Consumer Response
Licensee will, at no cost to Licensor, handle all
warrantee (guarantee) satisfaction, response and compliance and all consumer
response relative to any of the Articles. Licensor shall promptly forward to
Licensee, for handling, any and all such consumer inquiries that it receives.
Licensee shall use reasonable efforts to keep Licensor generally informed of
consumer complaints relative to the Articles.
13. No Joint Venture
Nothing herein contained shall be construed to place the
parties in the relationship of partners or joint venturers, and
<PAGE>
neither party shall have the power to obligate or bind the other in any manner
whatsoever.
14. Assignment, Sublicense or Change of Control
a. This Agreement and all rights and duties hereunder
are personal to Licensee and shall not, without the written consent of Licensor,
be assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by
operation of law. Such consent shall not be unreasonably withheld. In making
this determination, Licensor shall solely take into account whether the
potential assignee, sublicensee or other acquirer is (1) a business which is a
material competitor to any of the BETTY CROCKER product lines of Licensor or to
Licensor's business when taken as a whole or (2) a business whose image is
incompatible with the image Licensor maintains for BETTY CROCKER, such as a
business which derives a material portion of its revenues from tobacco or from
alcoholic beverages or from pornography or other explicit sexually related
material or which has been convicted of a felony or whose chief executive,
financial, or operating officer in his or her role as an officer of the company,
has been convicted of a felony, or which does not meet Licensor's advertising
standards as set forth in the attached Schedule. For purposes of the foregoing,
this Agreement shall be deemed to be assigned if there is a "change in control"
in the Licensee. For purposes of the forgoing, "change in control" shall mean
the occurrence of any of the following events:
<PAGE>
(i) any person other than a current shareholder
of Licensee as originally constituted as of
the date hereof (including a group as defined
in Section 13 (d) (3) of the Securities
Exchange Act of 1934) become the beneficial
owner, directly or indirectly, of a majority
of the issued and outstanding shares of
Licensee entitle to vote for the election of
directors;
(ii) as a result of or in connection with any
cash tender offer, exchange offer, merger or
other business combination of the foregoing,
the persons who were directors of Licensee
just prior to such event shall cease to
constitute a majority of the Licensees Board
of Directors; or
(iii) the stockholders of Licensee approve an
agreement providing for a transaction in
which Licensee will cease to be an
independent corporation or pursuant to
which Licensee sells or otherwise
disposes of all or substantially all of
the assets of Licensee other than to
another entity "affiliated" (as that
term is defined in Rule 12b-2 of the
<PAGE>
Securities Exchange Act of 1934) with
Licensee
15. Notices
All notices to be made hereunder shall be in writing sent via
certified, overnight or registered mail (return receipt requested). Any Articles
or materials submitted for approval under this Agreement shall not be governed
by the mailing type requirements of this Notice provision. Such notices and
statements shall be given to or made at the respective addresses of the parties
as set forth below unless notification of a change of address is given in
writing, and the date of receipt shall be deemed the date the notice or
statement is received:
To Licensor: To Licensee:
General Mills, Inc. Integrated Brands Inc.
Number One General Mills Boulevard 4175 Veterans Highway
Minneapolis, MN 55426 Ronkonkoma, New York 11779
Attn: Trademark Counsel Attn: Gary P. Stevens, President
cc: General Counsel cc: Benjamin Raphan, Esq.
General Mills, Inc. Tenzer Greenblatt LLP
Number One General Mills 405 Lexington Avenue
Boulevard New York, New York 10174
Minneapolis, MN 55426
16. No Waiver. Etc.
None of the terms of this Agreement can be waived or modified
except by an express agreement in writing signed by both parties.
<PAGE>
There are no representations, promises, warranties, covenants or
undertakings other than those contained in this Agreement and in the other
agreements between the parties hereto dated as of even date herewith which
represent the entire understanding of the parties.
17. Choice of Law
This Agreement shall be governed by and construed in accordance
with the internal laws (and not the law of conflicts) of the State of Minnesota.
The parties hereto agree to submit to jurisdiction in the state of Minnesota,
and further agree that any court proceeding relating to any controversy arising
under this Agreement shall be in the federal court located in Hennepin County in
the state of Minnesota.
18. Submission of Agreement
This Agreement shall become effective only upon its execution by
Licensor and Licensee.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the date and year first above written.
GENERAL MILLS, INC.
Dated: August 15, 1995 By: /s/ Gary M. Rodkin
---------------------------------
Senior Vice President
INTEGRATED BRANDS INC.
Dated: August 15, 1995 By: /s/ Richard E. Smith
--------------------------------
Chairman and CEO
<PAGE>
EXHIBIT 10.33
THE LUCKY CHARMS LICENSE AGREEMENT
THIS AGREEMENT made as of the 15th day of August, 1995 by and
between General Mills, Inc., a Delaware corporation, having a place of business
at Number One General Mills Boulevard, Minneapolis, Minnesota 55426, hereinafter
referred to as "Licensor", and Integrated Brands Inc., a New Jersey corporation,
having a place of business at 4175 Veterans Highway, Ronkonkoma, New York 11779,
hereinafter referred to as "Licensee."
WHEREAS, Licensor is the owner of the trademark rights for the
words COUNT CHOCULA and LUCKY CHARMS and the vampire and leprechaun characters
associated therewith (hereinafter collectively and/or individually referred to
as "Trademarks") in connection with breakfast cereal products; and
WHEREAS, Licensee desires a license from Licensor to use the
Trademark solely in connection with the development, manufacture, contract
manufacture, marketing, sale and distribution of "Articles", defined to mean all
prepackaged frozen products containing at least thirty-five percent (35%) by
volume frozen yogurt, ice cream, ice milk, sherbet, sorbet, frozen fruit, water
ice or other frozen items which would be considered substitutes for the
foregoing frozen items/ingredients, dairy or non-dairy, naturally or
artificially sweetened, sold in any prepackaged container size or form.
<PAGE>
("Prepackaged" is defined to mean packaged by the manufacturer off the premises
from which finished goods are sold at retail to consumers). Examples of Articles
include, but are not limited to (i) retail prepackaged goods, such as gallons,
half gallons, quarts, pints and half pints; (ii) bulk, such as three (3) gallon,
two and one half (2 1/2) gallon and one and one half (1 1/2) gallon prepackaged
containers; (iii) prepackaged novelties such as pops, bars, sandwiches, cups,
cones, parfaits, push-ups, nuggets and shakes; and (iv) prepackaged finished
prepared frozen dessert specialties such as ice cream cakes and pies, cake
rolls, jimmy rolls, nut rolls and brownie sundaes. "Articles" always exclude all
machine dispensed frozen yogurt, machine dispensed ice cream and other items
which are machine dispensed. ("Machine dispensed" is defined to mean unpackaged
food items dispensed from a machine on the premises from which finished goods
are sold directly to the consumer, and would not include prepackaged items
dispensed from a vending machine).
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is hereby agreed as follows:
1. Grant of License
a. Articles: Upon the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee and Licensee hereby accepts the
exclusive right, license and privilege of utilizing the Trademarks solely in
connection with the development, manufacture, contract manufacture, marketing,
sale and distribution of Articles; provided however, that Licensee is not
<PAGE>
authorized to use the Trademarks in connection with any Articles distributed as
premiums or otherwise to be used as aids in the advertisement or promotion of
any products or business of others (other than the sale of Articles). Subject to
Licensor's prior written approval, which approval shall not be unreasonably
withheld, Licensee shall have the right to have third parties manufacture such
Articles for Licensee so long as such third parties agree in writing to comply
with the quality control provisions and any other provisions relevant to such
third party set forth in this Agreement. Any third party manufacturer not
disapproved by Licensor within fifteen (15) business days after receipt by
Licensor of Licensee's written request for such approval shall be deemed
approved pursuant to this paragraph. Licensor acknowledges that Licensee may
elect to have Articles manufactured by third parties who are also retailers of
the Articles, and that the Articles may be manufactured by and sold to some or
all of such third party manufacturer/retailers without Licensee taking actual
physical possession of such Articles
b. Exclusivity: Subject to the terms of this Agreement,
Licensor agrees that it will not use or license to anyone else the right to use
the Trademark in the Territory, in connection with the Articles.
c. Reservation: Notwithstanding paragraphs (a) and (b)
above:
(i) It is understood Licensor reserves to itself
the right to use and license to others the
<PAGE>
right to use the Trademark in connection
with any products and/or services not
included within the definition of Articles,
including but not limited to, (v) machine
dispensed frozen yogurt, (w) machine
dispensed ice cream, (x) other machine
dispensed items, (y) bulk mixes for making
machine dispensed frozen yogurt, machine
dispensed ice cream and other machine
dispensed items, and (z) any refrigerated
products, including refrigerated products of
similar or same description as the Articles
(but not frozen). Also, Licensor reserves
the right to allow retailers (including
Licensor) to pack in retail premises excess
machine dispensed frozen yogurt, machine
dispensed ice cream and other items which
are machine dispensed in appropriately
labeled containers using the Trademark for
retail sale to consumers from the premises
on which such products were machine
dispensed.
(ii) In addition, Licensor reserves to itself the
right to use or license to others to use the
Trademark as the name of a retail business
of any type which sells frozen yogurt, ice
<PAGE>
cream or frozen novelties including but not
limited to restaurants, ice cream counters
and carts and frozen yogurt counters and
carts; provided, however, this provision
shall not preclude Licensee from selling
Articles using the Trademark to such
businesses should such businesses desire to
sell said Articles.
d. Territory: This Agreement is limited to the United States,
its territories and possessions (including Puerto Rico) and Canada.
2. Royalty
a. Rate: Licensee agrees to pay to Licensor a royalty of
_____________ on the Licensee's Gross Revenues of Articles sold by Licensee
using the Trademarks; provided, however, no royalty shall be due on Articles
sold to Licensor using the Trademarks so long as said Articles are sold to
Licensor at Licensee's lowest wholesale price. In connection with any Articles
sold and/or distributed by Licensee to a related company of Licensee at a price
lower than the price otherwise charged to the trade, the royalty payable herein
shall be based on what the Gross Revenues of the sales of the Articles would
have been if the company was not related to Licensee. As used herein "Gross
Revenues" means the gross sales price invoiced by Licensee to purchasers of the
Articles minus any credits or allowances given as a result of the return or
<PAGE>
destruction of such Articles, any off-invoice allowances (but not promotional
billback allowances), and any applicable sales or use taxes. For all purposes of
this Agreement, the royalty shall accrue on the sale of the Articles and the
Articles shall be considered sold when shipped or billed out, whichever occurs
earlier.
b. Royalty Payments and Records: Licensee agrees to keep full,
accurate and complete books of account, and other records in sufficient detail
so that the royalty payable hereunder may be ascertained properly. Within thirty
(30) days after the end of each of Licensor's fiscal quarters which commence
June 1, September 1, December 1 and March 1, Licensee shall furnish to Licensor
complete and accurate statements of sales of Articles using the Trademarks
during such previous fiscal quarter certified to be accurate by the chief
financial or accounting officer of Licensee showing the number, description,
Gross Revenues of such Articles and permitted deductions therefrom. Such
statements shall be furnished to Licensor whether or not any of the Articles
utilizing the Trademarks have been sold during the preceding quarter and whether
or not a royalty is due. Each such report shall be accompanied by a check for
the amount of royalty payments due with respect to the period covered by such
report. The receipt or acceptance by Licensor of any of the statements furnished
pursuant to this Agreement or of any royalties paid hereunder (or the cashing of
any royalty checks paid hereunder) shall not preclude Licensor from questioning
<PAGE>
the correctness thereof at any time, and in the event that inconsistencies or
mistakes are discovered in such statements or payments, they shall be rectified
and the appropriate payments made by Licensee upon demand by Licensor. Any
royalty payments, including accrued royalties, and audit findings, not paid when
due shall be paid immediately upon demand and shall bear interest at an annual
rate of two percent (2%) over the rate of interest publicly announced by
Citibank, N.A. in New York as its base rate in effect as of the date on which
such overdue royalty amount should have been paid to Licensor.
Licensee agrees, upon request by Licensor to permit Licensor or
its authorized representative to have access to such books or records as may be
necessary to determine the royalty in respect to any accounting period covered
by this Agreement and obtain any information as to the amount payable in case of
failure to report. Such audits shall be at the expense of Licensor unless they
show that Licensee has understated the royalties by five percent (5%) or more or
Five Thousand Dollars ($5,000) (whichever is greater) for any quarter, in which
case Licensee shall reimburse Licensor for its out-of-pocket expenses incurred
in connection with the audit as well as pay to Licensor the required amount of
additional royalties. All books of account and records shall be kept available
by Licensee for at least two (2) years after the submission of the relevant
statement.
<PAGE>
3. Licensor's Authorized Representative
Wherever Licensee is directed to furnish or supply to or otherwise
take some action or perform some obligation in respect of Licensor in this
Agreement, the term "Licensor" shall be deemed to include "or Licensor's
authorized representative" unless written advice to the contrary is received
from Licensor.
4. Goodwill, etc.
a. Licensee recognizes the great value of the goodwill
associated with the Trademarks and acknowledges that the Trademarks and all
rights therein and the goodwill pertaining thereto belong exclusively to
Licensor. Licensee agrees not to contest Licensor's rights in the Trademarks or
perform any material act or omission adverse to said rights.
b. Licensee hereby agrees that its every use of the Trademarks
shall inure to the benefit of Licensor, and that Licensee shall not at any time
acquire any rights in the Trademarks by virtue of any use it may make of the
Trademarks other than the licensed rights granted herein.
c. Subject to being reimbursed for its out of pocket expenses,
Licensee agrees to cooperate fully and in good faith with Licensor for the
purpose of securing, preserving and protecting Licensor's rights or any grantor
of Licensor' s rights in and to the Trademarks.
d. Licensee agrees that it will use the Trademarks only
on the specific Articles herein licensed, and that it will not
<PAGE>
adopt or use as its own a trademark the same or similar to the
Trademarks.
e. Licensor shall have the right, but shall not be under any
obligation to use the Trademarks and/or the name of Licensee so as to give the
Trademarks, Licensee, Licensor and/or Licensor's products full and favorable
prominence and publicity. Licensor shall not be under any obligation whatsoever
to continue using the Trademarks in connection with its products or services.
f. Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the manufacture, sale or distribution of Articles
utilizing the Trademarks covered by this Agreement on the termination or
expiration of this Agreement will result in immediate and irremediable damage to
Licensor and to the rights of any subsequent licensee. Licensee acknowledges and
admits that there is no adequate remedy at law for such failure to cease the
manufacture, sale or distribution, and Licensee agrees that in the event of such
failure, Licensor shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other and further relief as any court with
jurisdiction may deem just and proper.
g. Licensee shall report to Licensor in writing any
infringement or imitation of the Trademarks it becomes aware of on
Articles or products similar to Articles. Licensor shall have the
sole right to determine whether to institute litigation upon any
such infringements as well as the sole right to select counsel. In
<PAGE>
the event Licensor decides to institute such litigation, Licensor shall offer
Licensee an opportunity to voluntarily join in any such action. In the event
that Licensee voluntarily joins in any such action, the expenses and any damages
awarded as the result of a lawsuit or settlement reached as a result of a
lawsuit shall be split fifty/fifty (50/50) by the parties after the
out-of-pocket expenses have been reimbursed. In the event that Licensee chooses
not to voluntarily join in any such action, Licensor shall be free to join
Licensee as a party thereto and Licensee agrees to cooperate with Licensor in
any such suit subject to being reimbursed for its out-of-pocket expenses. If
Licensee does not join the suit voluntarily, all expenses shall be borne by
Licensor, and all recoveries and awards shall be fully retained by Licensor. If
Licensor decides not to institute such litigation, it may authorize, within its
sole discretion, Licensee to institute such litigation in which event Licensee
shall be solely responsible for the costs of such litigation and shall be
entitled to keep any recoveries therefrom.
5. Indemnification and Product Liability Insurance
Licensee hereby indemnifies Licensor and undertakes to
defend Licensee and/or Licensor against and hold Licensor harmless from any
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and losses arising from the activities of Licensee under
this Agreement (other than the use of the Trademarks as authorized herein)
<PAGE>
including, but not limited to, the unauthorized use of any patent, process,
idea, method or device by Licensee in connection with the Articles covered by
this Agreement. Licensee agrees that it will obtain and maintain throughout the
term of this Agreement, at its own expense, liability insurance including
product liability with a broad form vendors endorsement from an insurance
company reasonably acceptable to Licensor providing adequate protection (at
least in the amount of Ten Million Dollars ($10,000,000)) against any claims,
suits, damages, expenses or losses arising out of Licensee's operations pursuant
to this Agreement. Such insurance shall include coverage of Licensor and its
directors, officers, agents, employees, assignees and successors. As proof of
such insurance, a certificate of insurance naming Licensor as an additional
insured party will be submitted to Licensor by Licensee for prior approval
before any Articles using the Trademarks are distributed or sold, and at the
latest within thirty (30) days after the date first written above. Licensor
shall be entitled to a copy of the prevailing certificate(s) of insurance which
shall be furnished to Licensor by Licensee. Licensee and its insurer shall
provide Licensor with thirty (30) days advance notice in the event of the
cancellation of said insurance.
6. Quality of Merchandise
a. Licensee agrees that the Articles covered by this Agreement
shall be of high standard and of such style, appearance and quality as to be
<PAGE>
adequate and suited to their advantageous exploitation and to the protection and
enhancement of the Trademarks and the goodwill pertaining thereto, that Licensee
will manufacture, sell and distribute the Articles in accordance with all
applicable Federal, State and local laws and that the policy of sale,
distribution, and/or exploitation by Licensee shall be of advantageous and high
standard and that the same shall in no manner reflect adversely upon the good
name of Licensor or any of its activities or the Trademarks. To this end,
Licensee shall, before selling or distributing any Articles covered by this
Agreement, furnish to Licensor, free of cost for its written approval, a
reasonable number of each of the Articles. The quality and style of such
Articles shall be subject to the approval of Licensor which approval shall not
be unreasonably withheld or delayed. At the request of Licensor, Licensee shall
supply to Licensor any manufacturing information requested by Licensor to help
Licensor in evaluating the quality and style of such Articles. Any Articles
submitted to Licensor and not disapproved by Licensor within fifteen (15)
business days of its receipt by Licensor shall be deemed to have been approved
pursuant to this paragraph. Licensor acknowledges that it has already approved
Licensee's COUNT CHOCULA sugar free double fudge twelve (12) pack item under
this paragraph. Licensee warrants that the Articles manufactured, distributed
and sold by Licensee, if applicable, and its contract packers and the
manufacturing and sanitation practices used by Licensee, if applicable, and its
<PAGE>
contract packers to produce the Articles will comply with all applicable
Federal, State and local laws, including, but not limited to, manufacturing
codes, and that Licensee will not manufacture the Articles from inherently
dangerous materials or substances and will not design the Articles so as to
constitute any inherent danger. After samples of the Articles have been approved
pursuant to this paragraph, Licensee shall not depart therefrom in any material
respect without Licensor's prior written consent, and Licensor shall not
withdraw its approval of the approved Articles or of any approved plant except
for good cause when Licensor may in good faith have reason to believe that the
approved Articles or the manufacture of Articles by the approved plant may be
detrimental to the health or safety of the public. Licensor acknowledges that
(i) the plants operated as of the date of this Agreement by____________________
_______________________________________________________________________________
are acceptable to Licensor as of the date of this Agreement, and (ii) the
Articles using the Trademarks being manufactured by the above mentioned plants
meet the specified approved standards for quality and style, as of the date of
this Agreement. From time to time after Licensee has commenced selling the
Articles and upon Licensor's written request, Licensee shall furnish, without
cost to Licensor, the requested reasonable amount of samples of the Articles
being manufactured and sold by Licensee hereunder. Also, Licensor,
<PAGE>
through such agents or representatives, as it may designate shall have access to
Licensee's facilities and the facilities of Licensee's contract manufacturers
where the Articles are manufactured, at reasonable times and with reasonable
advance notice given during normal business hours, for the purpose of inspecting
the Articles to the extent necessary to determine whether Licensor's quality
standards are being met.
b. Licensee shall have the sole responsibility with respect to
the Articles for taking action, maintaining records or handling recalls and all
costs associated therewith under the Consumer Products Safety Act, the Federal
Food, Drug and Cosmetic Act or any other similar acts, orders or directives.
c. Subject to the terms of this Agreement, Licensor
acknowledges that Licensee shall have the right to make adjustments to its
formulas for the Articles and to develop and market new Articles using the
Trademarks. Licensee's Formulas for the Articles shall remain the property of
Licensee after expiration or termination of this Agreement.
7. Confidentiality
Both parties shall keep confidential and shall not cause or
permit the disclosure to any third party, other than those whose duties require
possession of such information, such as contract manufacturers and sublicensees,
of any confidential information disclosed by either party to the other pursuant
to this Agreement. Confidential information may include, but is not limited to
<PAGE>
formulas, production processes, research, marketing, and sales information. Said
confidentiality requirement shall not apply to any information which (a) was in
the possession of a party on a non confidential basis prior to the receipt of
any disclosure to it by the other party, or (b) is or becomes,without disclosure
by a party, part of the public knowledge or literature, or (c) otherwise
lawfully becomes available to a party, from sources other than the other party,
which sources did not acquire such information directly from the party, or (d)
counsel to the party advises must be disclosed pursuant to a court order or by
law or regulation or appropriate governmental authority.
8. Labeling Promotion, Advertising and Use
a. Licensee shall submit to Licensor for its prior
written approval all new proposed tags, labels, containers, packaging,
advertising, promotional or display materials or the like containing or
referring to the Trademarks, which approval shall not be unreasonably withheld
or delayed. Any item submitted to Licensor and not disapproved by Licensor
within ten (10) business days of its receipt by Licensor shall be deemed to have
been approved pursuant to this paragraph. Licensor acknowledges that the items
referred to above which Licensee currently uses with Articles using the
Trademark are acceptable to Licensor.
b. Licensee agrees that it will apply the proper
reasonable notations, as specified by Licensor, indicating that the
Trademarks are owned by General Mills, Inc. and used with its
<PAGE>
permission on all tags, labels, containers, packaging, advertising, promotional
or display materials or the like containing or referring to the Trademarks.
c. Licensee warrants that all tags, labels, containers,
packaging, advertising, promotional or display materials or the like containing
the Trademarks will comply with all applicable Federal, State and local laws.
d. Licensee may use another brand name or trademark on the
Articles in connection with the Trademark subject to the approval of Licensor as
set forth in paragraph 8 (a) hereof. Such other brand names or trademarks shall
remain the property of Licensee after the expiration or termination of this
Agreement unless previously owned by Licensor.
9. Term and Termination
a. The term of this Agreement shall commence on the date first
written above and shall end on December 31, 2015, unless sooner terminated in
accordance herewith.
b. If this Agreement has not been otherwise terminated,
Licensee shall have the option of extending this Agreement until December 31,
2020 by giving written notice thereof to Licensor by September 30, 2015,
provided that Licensee pays Licensor ____________________ by December 31, 2015.
This payment is independent of any royalties which may be due Licensor
hereunder. If, however, the sublicense agreement between Licensor and Licensee
<PAGE>
relating to the YOPLAIT trademark is terminated in year 2002, Licensee shall
only be required to pay Licensor ________________________ independent of any
royalties owed in order to extend this Agreement. Should the YOPLAIT Trademark
Sublicense Agreement be terminated in year 2015, then Licensee shall only be
required to pay Licensor ____________________ independent of any royalties owed
in order to extend this Agreement. In the event Licensee does not furnish
written notice of extension to Licensor by September 30, 2015, Licensor shall
notify Licensee that this Agreement shall terminate on December 31, 2015, unless
Licensee provides Licensor with written notice of its intention to extend within
fifteen (15) business days after Licensee's receipt of such written notice. In
the event Licensor does not furnish such written notice to Licensee before
December 12, 2015, this Agreement shall continue in effect after December 31,
2015 until such time as Licensor shall notify Licensee that this Agreement shall
terminate unless Licensee provides Licensor with written notice of its intention
to extend within fifteen (15) business days after Licensee's receipt of such
notification, along with payment in full of the amount due, plus interest on
such amount at the rate specified in paragraph 2 (b) in effect as of December
31, 2015, with such interest accruing from and after that date.
c. Licensor may terminate this Agreement if Licensee shall be
in material default of any obligation to Licensor hereunder including, but not
limited to obligations set forth in paragraphs 2,4, 5, 6, 8, 10 and 14, by
<PAGE>
giving written notice to Licensee calling attention to such default, specifying
the nature thereof and the action required to correct the default and stating
that this Agreement will terminate at the expiration of thirty (30) days from
the date of the receipt by Licensee of such notice, if such default arises out
of paragraph 2 hereof, and forty five (45) days for any other default, unless
Licensee shall cure such default within said thirty (30) or forty five (45) day
period, as applicable, after the receipt of such notice, or if such default
cannot be cured within said thirty (30) or forty five (45) day period, as
applicable, of the receipt of such notice, Licensee, exercising due diligence,
has commenced taking the steps necessary to prevent the recurrence of such
default and is diligently pursuing such steps. Failure of Licensor to terminate
this Agreement for any such default or breach shall not be determined a waiver
of the right subsequently to do so under the same or any other such default or
breach, either of the same or different character.
d. If for any consecutive twelve (12) month period Licensee is
not engaged in manufacturing or selling any Articles using any one of the
Trademarks in the Territory, Licensor shall have the right to terminate this
Agreement with respect to the Trademark or portion of Territory (United States
and Canada) not in use (For example, if Licensee stops using the LUCKY CHARMS
trademark on any Articles for a one (1) year period, this Agreement may be
<PAGE>
terminated as to the LUCKY CHARMS trademark), by giving Licensee written notice
to that effect. Licensee shall have two (2) months from the date of the receipt
of the written notice to commence manufacturing or selling Articles using the
affected Trademark and in the absence of which this Agreement shall
automatically terminate at the end of said two (2) month period as to the
affected Trademark. Licensee agrees to give Licensor prompt written notice of
its intention to discontinue marketing Articles under the Trademark.
e. The license hereby granted shall automatically terminate
forthwith without any notice whatsoever being necessary if Licensee discontinues
its business or Licensee voluntarily submits to, or is ordered by the bankruptcy
court to undergo, liquidation pursuant to Chapter 7 of the bankruptcy code. In
the event this license is so terminated, Licensee, its receivers,
representatives, trustees, agents, administrators, successors and/or assigns
shall have no right to sell, exploit or in any way deal with or in any Articles
covered by this Agreement, or any carton, container, packaging or wrapping
material, advertising, promotional or display materials pertaining thereto,
except with and under the special consent and instruction of Licensor in
writing, which they shall be obligated to follow. Should Licensee file a
petition in bankruptcy or is otherwise adjudicated a bankrupt or if a petition
in bankruptcy is filed against Licensee and the Articles are attached and such
petition is not discharged or dismissed or if an involuntary receiver is
<PAGE>
appointed for it or its business within ninety (90) days thereafter, this
Agreement shall automatically terminate, in each case, if and when, but only if,
a bankruptcy or other court of appropriate jurisdiction sells, assigns or
otherwise causes this Agreement to be transferred to (1) a business which is a
material competitor to any of General Mills' businesses or (2) a business which
derives a material portion of its revenues from tobacco or from alcoholic
beverages, or from pornography or other explicit sexually related material, or
which has been convicted of a felony or whose chief executive, financial or
operating officer in his or her role as an officer of the company has been
convicted of a felony or which does not meet Licensor's advertising standards as
forth on the attached Schedule.
f. Termination of this Agreement for any reason shall not
release either party from any part of any obligation accrued prior to the date
of such termination, or obligations continuing beyond termination of the
Agreement.
g. Termination of this Agreement for any reason shall be
without prejudice to any rights which either party may otherwise have against
the other.
h. Upon expiration or termination of this Agreement for any
reason other than failure to comply with the requirements of paragraph 9 (e) of
this Agreement, Licensee shall have a period of three hundred sixty five (365)
days after the date of termination in which to phase out its use of the
Trademarks provided all Articles to be sold, and all uses of the Trademark, by
<PAGE>
Licensee during such three hundred sixty-five (365) day period shall comply with
the requirements of paragraphs 6 and 8 hereof. Licensee shall report to Licensor
with respect to such sales and make the requisite royalty payment within thirty
(30) days after the end of each month during the aforesaid three hundred sixty
five (365) day period. All duties and obligations of the Licensee under this
Agreement shall remain in force during the sell-off period.
10. Distribution
a. Licensee agrees to exercise good faith reasonable efforts
in the performance of this Agreement.
b. Licensee agrees to sell and distribute the Articles covered
by this Agreement at a competitive price and not on an approval or consignment
basis to retail stores.
c. Licensee agrees to keep Licensor informed on a regular
basis of Licensee's activities in manufacturing and marketing the Articles
covered by this Agreement.
11. Force Majeure
No failure or omission by Licensee in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement nor
create any liability if the same shall arise from any cause or causes beyond the
reasonable control of Licensee.
12. Warranty and Consumer Response
Licensee will, at no cost to Licensor, handle all warrantee
(guarantee) satisfaction, response and compliance and all consumer response
<PAGE>
relative to any of the Articles. Licensor shall promptly forward to Licensee,
for handling, any and all such consumer inquiries that it receives. Licensee
shall use reasonable efforts to keep Licensor generally informed of consumer
complaints relative to the Articles.
13. No Joint Venture
Nothing herein contained shall be construed to place the
parties in the relationship of partners or joint venturers, and neither party
shall have the power to obligate or bind the other in any manner whatsoever.
14. Assignment, Sublicense or Change of Control
a. This Agreement and all rights and duties hereunder
are personal to Licensee. Licensee may assign this Agreement to any third party,
provided such third party is not a major competitor of Licensor.
b. Licensor may assign this Agreement to any third party,
provided that such third party is also assigned all of Licensor's right, title
and interest in the Trademark as applied to Articles and Licensor shall furnish
written notice of such assignment to Licensee.
c. Except as provided below, any change in direct or indirect
control over Licensee or any assignee of rights of Licensee under this Agreement
shall not be subject to the prior written approval of Licensor. The term
"assignee" in the preceding sentence shall not include contract manufacturers.
However, the occurrence of any of the following events shall not be permitted:
<PAGE>
(i) any major competitor becomes the beneficial
owner, directly or indirectly, of a majority
of the issued and outstanding shares of
Licensee entitled to vote for the election of
directors;
(ii) the stockholders of Licensee approve an
agreement providing for a transaction in which
Licensee will cease to be an independent
corporation and the entity which will control
it is a major competitor of Licensor, or
pursuant to which Licensee sells or otherwise
disposes of all or substantially all of the
assets of Licensee to a major competitor of
Licensor.
15. Notices
All notices to be made hereunder shall be in writing sent via
certified, overnight or registered mail (return receipt requested). Any Articles
or materials submitted for approval under this Agreement shall not be governed
by the mailing type requirements of this Notice provision. Such notices and
statements shall be given to or made at the respective addresses of the parties
as set forth below unless notification of a change of address is given in
writing, and the date of receipt shall be deemed the date the notice or
statement is received:
<PAGE>
To Licensor: To Licensee:
General Mills, Inc. Integrated Brands Inc.
Number One General Mills Boulevard 4175 Veterans Highway
Minneapolis, MN 55426 Ronkonkoma, New York 11779
Attn: Trademark Counsel Attn: Gary P. Stevens, President
cc: General Counsel cc: Benjamin Raphan, Esq.
General Mills, Inc. Tenzer Greenblatt LLP
Number One General Mills 405 Lexington Avenue
Boulevard New York, New York 10174
Minneapolis, MN 55426
16. No Waiver, Etc.
None of the terms of this Agreement can be waived or modified
except by an express agreement in writing signed by both parties. There are no
representations, promises, warranties, covenants or undertakings other than
those contained in this Agreement and in the other agreements between the
parties hereto dated as of even date herewith which represent the entire
understanding of the parties.
17. Choice of Law
This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Minnesota. The parties hereto agree to submit to jurisdiction in the state of
Minnesota, and further agree that any court proceeding relating to any
controversy arising under this Agreement shall be in the federal court located
in Hennepin County in the state of Minnesota.
18. Submission of Agreement
This Agreement shall become effective only upon its execution
by Licensor and Licensee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the date and year first above written.
GENERAL MILLS, INC.
Dated: August 15, 1995 By: /s/ Gary M. Rodkin
--------------------------------
Senior Vice President
INTEGRATED BRANDS INC.
Dated: August 15, 1995 By: /s/ Richard E. Smith
--------------------------------
Chairman and CEO
<PAGE>
EXHIBIT 10.34
THE TRIX LICENSE AGREEMENT
THIS AGREEMENT made as of the 15th day of August, 1995 by and
between General Mills, Inc., a Delaware corporation, having a place of business
at Number One General Mills Boulevard, Minneapolis, Minnesota 55426, hereinafter
referred to as "Licensor," and Integrated Brands Inc., a New Jersey corporation,
having a place of business at 4175 Veterans Highway, Ronkonkoma, New York 11779,
hereinafter referred to as "Licensee."
WHEREAS, Licensor is the owner of the trademarks TRIX, the TRIX
Rabbit, and TRIX Fruit Logo (hereinafter collectively and/or individually
referred to as "Trademark") in connection with breakfast cereal products and
frozen confections; and
WHEREAS, Licensor and Licensee entered into an Agreement dated
July 29, 1992 entitled TRIX Agreement ("Previous Agreement") which they now wish
to terminate and substitute this Agreement therefore.
WHEREAS, Licensee desires a license from Licensor to use the
Trademark solely in connection with the development, manufacture, contract
manufacture, marketing, sale and distribution of "Articles," defined to mean all
prepackaged frozen products containing at least thirty-five percent (35%) by
volume frozen yogurt, ice cream, ice milk, sherbet, sorbet, frozen fruit, water
ice or other frozen items which would be considered substitutes for the
<PAGE>
foregoing frozen items/ingredients, dairy or non-dairy, naturally or
artificially sweetened, sold in any prepackaged container size or form.
("Prepackaged" is defined to mean packaged by the manufacturer off the premises
from which finished goods are sold at retail to consumers). Examples of Articles
include, but are not limited to (i) retail prepackaged goods, such as gallons,
half gallons, quarts, pints and half pints; (ii) bulk, such as three (3) gallon,
two and one half (2 1/2) gallon and one and one half (l 1/2) gallon prepackaged
containers; (iii) prepackaged novelties such as pops, bars, sandwiches, cups,
cones, parfaits, push-ups, nuggets and shakes; and (iv) prepackaged finished
prepared frozen dessert specialties such as ice cream cakes and pies, cake
rolls, jimmy rolls, nut rolls and brownie sundaes. "Articles" always exclude all
machine dispensed frozen yogurt, machine dispensed ice cream and other items
which are machine dispensed. ("Machine dispensed" is defined to mean unpackaged
food items dispensed from a machine on the premises from which finished goods
are sold directly to the consumer, and would not include prepackaged items
dispensed from a vending machine).
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is hereby agreed as follows:
1. Termination of Previous Agreement
The July 29, 1992 Previous Agreement between Licensor and
Licensee is hereby terminated. Any obligations of the parties under the Previous
Agreement which are meant to survive termination of the Previous Agreement,
<PAGE>
including the obligations to pay royalties due and indemnify for certain acts,
shall remain in full force notwithstanding termination.
2. Grant of License
a. Articles: Upon the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee and Licensee hereby accepts the
exclusive right, license and privilege of utilizing the Trademark solely in
connection with the development, manufacture, contract manufacture, marketing,
sale and distribution of Articles; provided however, that Licensee is not
authorized to use the Trademark in connection with any Articles distributed as
premiums or otherwise to be used as aids in the advertisement or promotion of
any products or business of others (other than the sale of Articles). Subject to
Licensor's prior written approval, which approval shall not be unreasonably
withheld, Licensee shall have the right to have third parties manufacture such
Articles for Licensee so long as such third parties agree in writing to comply
with the quality control provisions and any other provisions relevant to such
third party set forth in this Agreement. Any third party manufacturer not
disapproved by Licensor within fifteen (15) business days after receipt by
Licensor of Licensee's written request for such approval shall be deemed
approved pursuant to this paragraph. Licensor acknowledges that Licensee may
elect to have Articles manufactured by third parties who are also retailers of
the Articles, and that the Articles may be manufactured by and sold
<PAGE>
to some or all of such third party manufacturer/retailers without
Licensee taking actual physical possession of such Articles
b. Exclusivity: Subject to the terms of this Agreement,
Licensor agrees that it will not use or license to anyone else the right to use
the Trademark in the Territory, in connection with the Articles.
c. Reservation: Notwithstanding paragraphs (a) and (b)
above:
(i) It is understood Licensor reserves to itself
the right to use and license to others the
right to use the Trademark in connection with
any products and/or services not included
within the definition of Articles, including
but not limited to, (v) machine dispensed
frozen yogurt, (w) machine dispensed ice
cream, (x) other machine dispensed items, (y)
bulk mixes for making machine dispensed frozen
yogurt, machine dispensed ice cream and other
machine dispensed items, and (z) any
refrigerated products, including refrigerated
products of similar or same description as the
Articles (but not frozen). Also, Licensor
reserves the right to allow retailers
(including Licensor) to pack in retail
premises excess machine dispensed frozen
<PAGE>
yogurt, machine dispensed ice cream and
other items which are machine dispensed in
appropriately labeled containers using the
Trademark for retail sale to consumers from
the premises on which such products were
machine dispensed.
(ii) In addition, Licensor reserves to itself the
right to use or license to others to use the
Trademark as the name of a retail business of
any type which sells frozen yogurt, ice cream
or frozen novelties including but not limited
to restaurants, ice cream counters and carts
and frozen yogurt counters and carts;
provided, however, this provision shall not
preclude Licensee from selling Articles using
the Trademark to such businesses should such
businesses desire to sell said Articles.
d. Territory: This Agreement is limited to the United States,
its territories and possessions (including Puerto Rico) and Canada.
3. Royalty
a. Rate: Licensee agrees to pay to Licensor a royalty of
________________ on the Licensee's Gross Revenues of Articles sold by Licensee
using the Trademark; provided, however, no royalty shall be due on Articles sold
<PAGE>
to Licensor using the Trademark so long as said Articles are sold to Licensor at
Licensee's lowest wholesale price. In connection with any Articles sold and/or
distributed by Licensee to a related company of Licensee at a price lower than
the price otherwise charged to the trade, the royalty payable herein shall be
based on what the Gross Revenues of the sales of the Articles would have been if
the company was not related to Licensee. As used herein "Gross Revenues" means
the gross sales price invoiced by Licensee to purchasers of the Articles minus
any credits or allowances given as a result of the return or destruction of such
Articles, any off-invoice allowances (but not promotional billback allowances),
and any applicable sales or use taxes. For all purposes of this Agreement, the
royalty shall accrue on the sale of the Articles and the Articles shall be
considered sold when shipped or billed out, whichever occurs earlier.
b. Royalty Payments and Records: Licensee agrees to keep full,
accurate and complete books of account, and other records in sufficient detail
so that the royalty payable hereunder may be ascertained properly. Within thirty
(30) days after the end of each of Licensor's fiscal quarters which commence
June 1, September 1, December 1 and March 1, Licensee shall furnish to Licensor
complete and accurate statements of sales of Articles using the Trademark during
such previous fiscal quarter certified to be accurate by the chief financial or
accounting officer of Licensee showing the number, description, Gross Revenues
<PAGE>
of such Articles and permitted deductions therefrom. Such statements shall be
furnished to Licensor whether or not any of the Articles utilizing the Trademark
have been sold during the preceding quarter and whether or not a royalty is due.
Each such report shall be accompanied by a check for the amount of royalty
payments due with respect to the period covered by such report. The receipt or
acceptance by Licensor of any of the statements furnished pursuant to this
Agreement or of any royalties paid hereunder (or the cashing of any royalty
checks paid hereunder) shall not preclude Licensor from questioning the
correctness thereof at any time, and in the event that inconsistencies or
mistakes are discovered in such statements or payments, they shall be rectified
and the appropriate payments made by Licensee upon demand by Licensor. Any
royalty payments, including accrued royalties, and audit findings, not paid when
due shall be paid immediately upon demand and shall bear interest at an annual
rate of two percent (2%) over the rate of interest publicly announced by
Citibank, N.A. in New York as its base rate in effect as of the date on which
such overdue royalty amount should have been paid to Licensor.
Licensee agrees, upon request by Licensor, to permit Licensor or
its authorized representative to have access to such books or records as may be
necessary to determine the royalty in respect to any accounting period covered
by this Agreement and obtain any information as to the amount payable in case of
failure to report. Such audits shall be at the expense of Licensor unless
<PAGE>
they show that Licensee has understated the royalties by five percent (5%) or
more or Five Thousand Dollars ($5,000) (whichever is greater) for any quarter,
in which case Licensee shall reimburse Licensor for its out-of-pocket expenses
incurred in connection with the audit as well as pay to Licensor the required
amount of additional royalties. All books of account and records shall be kept
available by Licensee for at least two (2) years after the submission of the
relevant statement.
4. Licensor's Authorized Representative
Wherever Licensee is directed to furnish or supply to or
otherwise take some action or perform some obligation in respect of Licensor in
this Agreement, the term "Licensor" shall be deemed to include "or Licensor's
authorized representative" unless written advice to the contrary is received
from Licensor.
5. Goodwill. etc.
a. Licensee recognizes the great value of the goodwill
associated with the Trademark and acknowledges that the Trademark and all rights
therein and the goodwill pertaining thereto belong exclusively to Licensor.
Licensee agrees not to contest Licensor's rights in the Trademark or perform any
material act or omission adverse to said rights.
b. Licensee hereby agrees that its every use of the Trademark
shall inure to the benefit of Licensor, and that Licensee shall not at any time
<PAGE>
acquire any rights in the Trademark by virtue of any use it may make of the
Trademark other than the licensed rights granted herein.
c. Subject to being reimbursed for its out of pocket expenses,
Licensee agrees to cooperate fully and in good faith with Licensor for the
purpose of securing, preserving and protecting Licensor' s rights or any grantor
of Licensor's rights in and to the Trademark.
d. Licensee agrees that it will use the Trademark only on the
specific Articles herein licensed, and that it will not adopt or use as its own
a trademark the same or similar to the Trademark.
e. Licensor shall have the right, but shall not be under any
obligation to use the Trademark and/or the name of Licensee so as to give the
Trademark, Licensee, Licensor and/or Licensor's products full and favorable
prominence and publicity. Licensor shall not be under any obligation whatsoever
to continue using the Trademark in connection with its products or services.
f. Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the manufacture, sale or distribution of Articles
utilizing the Trademark covered by this Agreement on the termination or
expiration of this Agreement will result in immediate and irremediable damage to
Licensor and to the rights of any subsequent licensee. Licensee acknowledges and
admits that there is no adequate remedy at law for such failure to cease the
<PAGE>
manufacture, sale or distribution, and Licensee agrees that in the event of such
failure, Licensor shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other and further relief as any court with
jurisdiction may deem just and proper.
g. Licensee shall report to Licensor in writing any
infringement or imitation of the Trademark it becomes aware of on Articles or
products similar to Articles. Licensor shall have the sole right to determine
whether to institute litigation upon any such infringements as well as the sole
right to select counsel. In the event Licensor decides to institute such
litigation, Licensor shall offer Licensee an opportunity to voluntarily join in
any such action. In the event that Licensee voluntarily joins in any such
action, the expenses and any damages awarded as the result of a lawsuit or
settlement reached as a result of a lawsuit shall be split fifty/fifty (50/50)
by the parties after the out-of-pocket expenses have been reimbursed. In the
event that Licensee chooses not to voluntarily join in any such action, Licensor
shall be free to join Licensee as a party thereto and Licensee agrees to
cooperate with Licensor in any such suit subject to being reimbursed for its
out-of-pocket expenses. If Licensee does not join the suit voluntarily, all
expenses shall be borne by licensor, and all recoveries and awards shall be
fully retained by Licensor. If Licensor decides not to institute such
litigation, it may authorize, within its sole discretion, Licensee to institute
such litigation in which event Licensee shall be solely responsible for
<PAGE>
the costs of such litigation and shall be entitled to keep any recoveries
therefrom.
6. Indemnification and Product Liability Insurance
a. Licensee hereby indemnifies Licensor and undertakes
to defend Licensee and/or Licensor against and hold Licensor harmless from any
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and losses arising from the activities of Licensee under
this Agreement (other than the use of the Trademark as authorized herein)
including, but not limited to, the unauthorized use of any patent, process,
idea, method or device by Licensee in connection with the Articles covered by
this Agreement. Licensee agrees that it will obtain and maintain throughout the
term of this Agreement, at its own expense, liability insurance including
product liability with a broad form vendors endorsement from an insurance
company reasonably acceptable to Licensor providing adequate protection (at
least in the amount of Ten Million Dollars ($10,000,000)) against any claims,
suits, damages, expenses or losses arising out of Licensee's operations pursuant
to this Agreement. Such insurance shall include coverage of Licensor and its
directors, officers, agents, employees, assignees and successors. As proof of
such insurance, a certificate of insurance naming Licensor as an additional
insured party will be submitted to Licensor by Licensee for prior approval
before any Articles using the Trademark are distributed or sold, and at the
<PAGE>
latest within thirty (30) days after the date first written above. Licensor
shall be entitled to a copy of the prevailing certificate(s) of insurance which
shall be furnished to Licensor by Licensee. Licensee and its insurer shall
provide Licensor with thirty (30) days advance notice in the event of the
cancellation of said insurance.
b. Licensor hereby indemnifies Licensee and undertakes to
defend Licensee and hold Licensee harmless from any Trademark infringement
claims, suits, damages, out-of-pocket expenses (including legal fees and
out-of-pocket expenses) and loses arising solely out of Licensee's use of the
Trademark only in connection with Articles which have been approved under the
terms of this Agreement, but not in connection with Articles referred to as
"frozen dessert specialties" in the third WHEREAS clause of this Agreement.
7. Quality of Merchandise
a. Licensee agrees that the Articles covered by this Agreement
shall be of high standard and of such style, appearance and quality as to be
adequate and suited to their advantageous exploitation and to the protection and
enhancement of the Trademark and the goodwill pertaining thereto, that Licensee
will manufacture, sell and distribute the Articles in accordance with all
applicable Federal, State and local laws and that the policy of sale,
distribution, and/or exploitation by Licensee shall be advantageous and of high
standard and that the same shall in no manner reflect adversely upon the good
<PAGE>
name of Licensor or any of its activities or the Trademark. To this end,
Licensee shall, before selling or distributing any Articles covered by this
Agreement, furnish to Licensor, free of cost for its written approval, a
reasonable number of each of the Articles. The quality and style of such
Articles shall be subject to the approval of Licensor which approval shall not
be unreasonably withheld or delayed. At the request of Licensor, Licensee shall
supply to Licensor any manufacturing information requested by Licensor to help
Licensor in evaluating the quality and style of such Articles. Any Articles
submitted to Licensor and not disapproved by Licensor within fifteen (15)
business days of its receipt by Licensor shall be deemed to have been approved
pursuant to this paragraph. Licensee warrants that the Articles manufactured,
distributed and sold by Licensee, if applicable, and its contact packers and the
manufacturing and sanitation practices used by Licensee, if applicable, and its
contract packers to produce the Articles will comply with all applicable
Federal, State and local laws, including, but not limited to, manufacturing
codes, and that Licensee will not manufacture the Articles from inherently
dangerous materials or substances and will not design the Articles so as to
constitute any inherent danger. After samples of the Articles have been approved
pursuant to this paragraph, Licensee shall not depart therefrom in any material
way without Licensor's prior written consent, and Licensor shall not withdraw
its approval of the approved Articles or of any approved plant except for good
<PAGE>
cause when Licensor may in good faith have reason to believe that the approved
Articles or the manufacture of Articles by the approved plant may be detrimental
to the health or safety of the public. Licensor acknowledges that (i) the plants
operated as of the date of this Agreement by___________________________________
_______________________________________________________________________________
_______________________________________________________________________________
are acceptable to Licensor as of the date of this Agreement, and (ii) the
Articles using the Trademark being manufactured by the above mentioned plants
meet the specified approved standards for quality and style, as of the date of
this Agreement. From time to time after Licensee has commenced selling the
Articles and upon Licensor's written request, Licensee shall furnish, without
cost to Licensor, the requested reasonable amount of samples of the Articles
being manufactured and sold by Licensee hereunder. Also, Licensor, through such
agents or representatives, as it may designate shall have access to Licensee's
facilities and the facilities of Licensee's contract manufacturers where the
Articles are manufactured, at reasonable times and with reasonable advance
notice given during normal business hours, for the purpose of inspecting the
Articles to the extent necessary to determine whether Licensor's quality
standards are being met.
b. Licensee shall have the sole responsibility with
respect to the Articles for taking action, maintaining records or
<PAGE>
handling recalls and all costs associated therewith under the Consumer Products
Safety Act, the Federal Food, Drug and Cosmetic Act or any other similar acts,
orders or directives.
c. Subject to the terms of this Agreement, Licensor
acknowledges that Licensee shall have the right to make adjustments to its
formulas for the Articles and to develop and market new Articles using the
Trademark. Licensee's Formulas for the Articles shall remain the property of
Licensee after expiration or termination of this Agreement.
8. Confidentiality
Both parties shall keep confidential and shall not cause or permit
the disclosure to any third party, other than those whose duties require
possession of such information, such as contract manufacturers and sublicensees,
of any confidential information disclosed by either party to the other pursuant
to this Agreement. Confidential information may include, but is not limited to
formulas, production processes, search, marketing, and sales information. Said
confidentiality requirement shall not apply to any information which (a) was in
the possession of a party on a nonconfidential basis prior to the receipt of any
disclosure to it by the other party, or (b) is or becomes, without disclosure by
a party, part of the public knowledge or literature, or (c) otherwise lawfully
becomes available to a party, from sources other than the other party, which
sources did not acquire such information directly from the party, or (d) counsel
<PAGE>
to the party advises must be disclosed pursuant to a court order or by law or
regulation or appropriate governmental authority.
9. Labeling, Promotion, Advertising and Use
a. Licensee shall submit to Licensor for its prior
written approval all new proposed tags, labels, containers, packaging,
advertising, promotional or display materials or the like containing or
referring to the Trademark, which approval shall not be unreasonably withheld or
delayed. Any item submitted to Licensor and not disapproved by Licensor within
ten (10) business days of its receipt by Licensor shall be deemed to have been
approved pursuant to this paragraph. Licensor acknowledges that the items
referred to above which Licensee currently uses with Articles using the
Trademark are acceptable to Licensee.
b. Licensee agrees that it will apply the proper reasonable
notations, as specified by Licensor, indicating that the Trademark is owned by
General Mills, Inc. and used with its permission on all tags, labels,
containers, packaging, advertising, promotional or display materials or the like
containing or referring to the Trademark.
c. Licensee warrants that all tags, labels, containers,
packaging, advertising, promotional or display materials or the like containing
the Trademark will comply with all applicable Federal, State and local laws.
d. Licensee may use another brand name or trademark on
the Articles in connection with the Trademark subject to the approval of
<PAGE>
Licensor as set forth in paragraph 9 (a) hereof. Such other brand names or
trademarks shall remain the property of Licensee after the expiration or
termination of this Agreement unless previously owned by Licensor.
10. Term and Termination
a. The term of this Agreement shall commence on the date first
written above and shall end on December 31, 2015, unless sooner terminated in
accordance herewith.
b. If this Agreement has not been otherwise terminated,
Licensee shall have the option of extending this Agreement until December 31,
2020 by giving written notice thereof to Licensor by September 30, 2015,
provided that Licensee pays Licensor _________________ by December 31, 2015.
This payment is independent of any royalties which may be due Licensor
hereunder. If, however, the sublicense agreement between Licensor and Licensee
relating to the YOPLAIT trademark is terminated in year 2002, Licensee shall
only be required to pay Licensor __________________________ independent of any
royalties owed in order to extend this Agreement. Should the YOPLAIT Trademark
Sublicense Agreement be terminated in year 2015, then Licensee shall only be
required to pay Licensor _________________________ independent of any royalties
owed in order to extend this Agreement. In the event Licensee does not furnish
written notice of extension to Licensor by September 30, 2015, Licensor shall
<PAGE>
notify Licensee that this Agreement shall terminate on December 31, 2015, unless
Licensee provides Licensor with written notice of its intention to extend within
fifteen (15) business days after Licensee's receipt of such written notice. In
the event Licensor does not furnish such written notice to Licensee before
December 12, 2015, this Agreement shall continue in effect after December 31,
2015 until such time as Licensor shall notify Licensee that this Agreement shall
terminate unless Licensee provides Licensor with written notice of its intention
to extend within fifteen (15) business days after Licensee's receipt of such
notification, along with payment in full of the amount due, plus interest on
such amount at the rate specified in paragraph 3 (b) in effect as of December
31, 2015, with such interest accruing from and after that date.
c. Licensor may terminate this Agreement if Licensee shall be
in material default of any obligation to Licensor hereunder including, but not
limited to obligations set forth in paragraphs 2,4, 5, 6, 8, 10 and 14, by
giving written notice to Licensee calling attention to such default, specifying
the nature thereof and the action required to correct the default and stating
that this Agreement will terminate at the expiration of thirty (30) days from
the date of the receipt by Licensee of such notice, if such default arises out
of paragraph 3 hereof, and forty five (45) days for any other default, unless
Licensee shall cure such default within said thirty (30) or forty five (45) day
period, as applicable, after the receipt of such notice, or if such default
<PAGE>
cannot be cured within said thirty (30) or forty five (45) day period, as
applicable, of the receipt of such notice, Licensee, exercising due diligence,
has commenced taking the steps necessary to prevent the recurrence of such
default and is diligently pursuing such steps. Failure of Licensor to terminate
this Agreement for any such default or breach shall not be determined a waiver
of the right subsequently to do so under the same or any other such default or
breach, either of the same or different character.
d. If for any consecutive twelve (12) month period Licensee is
not engaged in manufacturing or selling any Articles using the Trademark in the
Territory, Licensor shall have the right to terminate this Agreement by giving
written notice to that effect. Licensee shall have two (2) months from the date
of the receipt of the written notice to commence manufacturing or selling
Articles using the Trademark and in the absence of which this Agreement shall
automatically terminate at the end of said two (2) month period. Licensee agrees
to give Licensor prompt written notice of its intention to discontinue marketing
Articles under the Trademark.
e. The license hereby granted shall automatically terminate
forthwith without any notice whatsoever being necessary if Licensee discontinues
its business or Licensee voluntarily submits to, or is ordered by the bankruptcy
court to undergo, liquidation pursuant to Chapter 7 of the bankruptcy code. In
<PAGE>
the event this license is so terminated, Licensee, its receivers,
representatives, trustees, agents, administrators, successors and/or assigns
shall have no right to sell, exploit or in any way deal with or in any Articles
covered by this Agreement, or any carton, container, packaging or wrapping
material, advertising, promotional or display materials pertaining thereto,
except with and under the special consent and instruction of Licensor in
writing, which they shall be obligated to follow. Should Licensee file a
petition in bankruptcy or is otherwise adjudicated a bankrupt or if a petition
in bankruptcy is filed against Licensee and the Articles are attached and such
petition is not discharged or dismissed or if an involuntary receiver is
appointed for it or its business within ninety (90) days thereafter, this
Agreement shall automatically terminate, in each case, if and when, but only if,
a bankruptcy or other court of appropriate jurisdiction sells, assigns or
otherwise causes this Agreement to be transferred to (1) a business which is a
material competitor to any of General Mills' businesses or (2) a business which
derives a material portion of its revenues from tobacco or from alcoholic
beverages, or from pornography or other explicit sexually related material, or
which has been convicted of a felony or whose chief executive, financial or
operating officer in his or her role as an officer of the company has been
convicted of a felony, or which does not meet Licensor's advertising standards
as set forth in the attached Schedule.
<PAGE>
f. Termination of this Agreement for any reason shall not
release either party from any part of any obligation accrued prior to the date
of such termination, or obligations continuing beyond termination of the
Agreement.
g. Termination of this Agreement for any reason shall be
without prejudice to any rights which either party may otherwise have against
the other.
h. Upon expiration or termination of this Agreement for any
reason other than failure to comply with the requirements of paragraph 10 (e) of
this Agreement, Licensee shall have a period of three hundred sixty five (365)
days after the date of termination in which to phase out its use of the
Trademark provided all Articles to be sold, and all uses of the Trademark, by
Licensee during such three hundred sixty-five (365) day period are in compliance
with the requirements of paragraphs 7 and 9 hereof. Licensee shall report to
Licensor with respect to such sales and make the requisite royalty payment
within thirty (30) days after the end of each month during the aforesaid three
hundred sixty five (365) day period. All duties and obligations of the Licensee
under this Agreement shall remain in force during the sell-off period.
11. Distribution
a. Licensee agrees to exercise good faith reasonable efforts
in the performance of this Agreement.
<PAGE>
b. Licensee agrees to sell and distribute the Articles covered
by this Agreement at a competitive price and not on an approval or consignment
basis to retail stores.
c. Licensee agrees to keep Licensor informed on a regular
basis of Licensee's activities in manufacturing and marketing the Articles
covered by this Agreement.
12. Force Majeure
No failure or omission by Licensee in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement nor
create any liability if the same shall arise from any cause or causes beyond the
reasonable control of Licensee.
13. Warranty and Consumer Response
Licensee will, at no cost to Licensor, handle all warrantee
(guarantee) satisfaction, response and compliance and all consumer response
relative to any of the Articles. Licensor shall promptly forward to Licensee,
for handling, any and all such consumer inquires that it receives. Licensee
shall use reasonable efforts to keep Licensor generally informed of consumer
complaints relative to the Articles.
14. No Joint Venture
Nothing herein contained shall be construed to place the parties
in the relationship of partners or joint venturers, and neither party shall have
the power to obligate or bind the other in any manner whatsoever.
<PAGE>
15. Assignment, Sublicense or Change of Control
a. This Agreement and all rights and duties hereunder are
personal to Licensee. Licensee may assign this Agreement to any third party,
provided such third party is not a major competitor of Licensor.
b. Licensor may assign this Agreement to any third party,
provided that such third party is also assigned all of Licensor's right, title
and interest in the Trademark as applied to Articles and Licensor shall furnish
written notice of such assignment to Licensee.
c. Except as provided below, any change in direct or indirect
control over Licensee or any assignee of rights of Licensee under this Agreement
shall not be subject to the prior written approval of Licensor. The term
"assignee" in the preceding sentence shall not include contract manufacturers.
However, the occurrence of any of the following events shall not be permitted:
(i) any major competitor becomes the beneficial
owner, directly or indirectly, of a majority
of the issued and outstanding shares of
Licensee entitled to vote for the election of
directors;
(ii) the stockholders of Licensee approve an
agreement providing for a transaction in
which Licensee will cease to be an
independent corporation and the entity which
will control it is a major competitor of
<PAGE>
Licensor, or pursuant to which Licensee sells or
otherwise disposes of all or substantially
all of the assets of Licensee to a major
competitor of Licensor.
16. Notices
All notices to be made hereunder shall be in writing sent via
certified, overnight or registered mail (return receipt requested). Any Articles
or materials submitted for approval under this Agreement shall not be governed
by the mailing type requirements of this Notice provision. Such notices and
statements shall be given to or made at the respective addresses of the parties
as set forth below unless notification of a change of address is given in
writing, and the date of receipt shall be deemed the date the notice or
statement is received:
To Licensor: To Licensee:
General Mills, Inc. Integrated Brands Inc.
Number One General Mills Boulevard 4175 Veterans Highway
Minneapolis, MN 55426 Ronkonkoma, New York 11779
Attn: Trademark Counsel Attn: Gary P. Stevens, President
cc: General Counsel cc: Benjamin Raphan, Esq.
General Mills, Inc. Tenzer Greenblatt LLP
Number One General Mills 405 Lexington avenue
Boulevard New York, New York 10174
Minneapolis, MN 55426
17. No Waiver. Etc.
None of the terms of this Agreement can be waived or modified
except by an express agreement in writing signed by both parties. There are
<PAGE>
no representations, promises, warranties, covenants or undertakings other than
those contained in this Agreement and in the other agreements between the
parties hereto dated as of even date herewith which represent the entire
understanding of the parties.
18. Choice of Law
This Agreement shall be governed by and construed in accordance
with the internal laws (and not the law of conflicts) of the State of Minnesota.
The parties hereto agee to submit to jurisdiction in the State of Minnesota, and
further agree that any court proceeding relating to any controversy arising
under this Agreement shall be in the federal court located in Hennepin County in
the State of Minnesota.
19. Submission of Agreement
This Agreement shall become effective only upon its execution by
Licensor and Licensee.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the date and year first above written.
GENERAL MILLS, INC.
Dated: August 15, 1995 By: /s/ Gary M. Rodkin
------------------------------
Senior Vice President
INTEGRATED BRANDS INC.
Dated: August 15, 1995 By: /s/ Richard E. Smith
------------------------------
Chairman and CEO
<PAGE>
EXHIBIT 10.35
ASSET PURCHASE AGREEMENT
AGREEMENT, made and entered into as of the 15th day of August,
1995, by and between GENERAL MILLS, INC., a Delaware corporation, ("Seller") and
INTEGRATED BRANDS INC., a New Jersey corporation ("Buyer").
W I T N E S S E T H
WHEREAS, Seller is engaged in the business of manufacturing
(including contract manufacturing), developing, marketing, selling, and
distributing prepackaged ("prepackaged" defined to mean packaged by the
manufacturer off the premises from which finished goods are sold at retail to
consumers) frozen yogurt products, including bulk and retail package goods in
any size, under the Colombo trademark (the "Products"), commercially
manufactured and distributed, but excluding all machine dispensed frozen yogurt
("machine dispensed" defined to mean unpackaged frozen yogurt dispensed from a
machine on the premises from which the finished goods are sold directly to the
consumer) and bulk mixes for machine dispensed frozen yogurt (the "Business");
and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to
purchase from Seller certain of the properties and assets of the Business, all
subject to the terms and conditions hereinafter set forth, and enter into a
license to use the Colombo, Shoppe Style, and Slender Scoops trademarks and
enter into certain other license agreements.
NOW, THEREFORE, in consideration of and in reliance upon the
mutual covenants, conditions, representations and warranties herein contained,
the parties hereto, intending to be bound legally, hereby agree as follows:
<PAGE>
1. Purchase and Sale Agreement.
1.1 Agreement of Purchase and Sale. Subject to
the terms and conditions set forth in this Agreement and in reliance upon the
representations, warranties, covenants and conditions herein contained, as of
the Closing Date (as defined in Section 2.1 hereof) Seller, or its appropriate
affiliate, shall (a) sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase from Seller, the Purchased Assets (as defined in Section
1.2 hereof), free and clear of any and all liens, claims, charges or
encumbrances of any nature whatsoever; (ii) enter into a license agreement for
the Colombo trademark (the "Colombo License Agreement") in the form annexed
hereto as Exhibit A; (iii) enter into a license agreement for the Betty Crocker
trademark in the form annexed hereto as Exhibit B; (iv) enter into a license
agreement for the Count Chocula and Lucky Charms trademarks in the form annexed
hereto as Exhibit C; and (v) enter into a new license agreement for the Trix
trademark in the form annexed hereto as Exhibit D.
1.2 Purchased Assets. As used in this Agreement, the
term "Purchased Assets" means the following properties and assets owned by
Seller and employed, used or available for use in the Business; (i) equipment
(located at Perry's Ice Cream Company, Inc. ("Perry's")), tools, molds, product
dies, packaging films and printing plates (in the possession of Seal-Right) and
all specialized equipment utilized in manufacturing the Products and packaging
-2-
<PAGE>
therefor, as listed in Schedule 1.2(i); (ii) the Perry's contract manufacturing
agreement, a copy of which is attached as Schedule 1.2(ii) (the "Perry's
Agreement"); (iii) all verbal brokerage agreements, the material terms of which
agreements and a list of all brokers and distributors are set forth on Schedule
1.2(iii); (iv) to the extent assignable, the contracts of the Business and the
Distribution Agreements of the Business identified on Schedule 1.2(iv); (v) the
retail chain account list set forth in Schedule 3.6; (vi) subject to the
provisions of Section 1.4 herein, all good and usable (as to raw materials and
packaging), and good and saleable (as to finished goods) inventory (including
raw materials, packaging, goods-in-process, and finished goods) on the Closing
Date located at Perry's and Merchants Terminal Corporation (the "Inventory"),
including Inventory on order, descriptions and quantities of all of such
Inventory by location, are set forth in the attached Schedule 1.2(vi); (vii) to
the extent transferable, all rights, if any, to supermarket freezer space and
warehouse and supermarket chain authorizations; (viii) to the extent
transferable, shelf commitments, and all related freezer space allocations as
set forth in Schedule 1.2(viii); (ix) a list of the customers of the Business,
Products sold to such customers by SKU, the prices at which they are sold and
the sales volume of Products sold during the twelve (12) months preceding the
Closing Date, all as set forth on Schedule 1.2 (ix); (x) all advertising,
promotional, sales, and market research materials; and (xi) all books and
records or extracts therefrom relating exclusively to the Purchased Assets;
provided that Seller shall be entitled to make and retain copies or extracts of
such books and records.
-3-
<PAGE>
1.3 Assumed Liabilities. Buyer is assuming no
liabilities with respect to the Purchased Assets other than the liability to
fulfill the obligations under the contracts identified in Schedules 1.2(ii),
(iii) and (iv), arising from and after the Closing Date, subject to the other
terms and conditions of this Agreement.
1.4 Purchase Price. The purchase price for the
Purchased Assets (excluding Inventory) and the consideration for the execution
of the License Agreements set forth as Exhibits A through D hereto shall be Four
Million Five Hundred Thousand Dollars (U.S. $4,500,000) (the "Purchase Price");
provided that if sales of Articles under the Colombo License Agreement aggregate
at least Thirteen Million Dollars (U.S. $13,000,000) for the twelve (12) month
period commencing on the Closing Date Buyer shall pay to Seller by September 30,
1996 an additional One Million Dollars (U.S. $1,000,000). For purposes of this
proviso only, "sales" shall mean gross revenues less trade discounts, not
including allowances related to shelf commitments and freezer space allocations.
Subject to the terms and conditions herein contained, the Purchase Price is
payable by Buyer to Seller by wire transfer in immediately available funds on
the Closing Date (as hereinafter defined). In addition, from time to time, Buyer
shall purchase the good, usable and saleable Inventory that Buyer may require in
the ordinary course of its business. Buyer shall purchase such Inventory when
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actually used or sold by Buyer, and Buyer shall advise Seller of Inventory used
or sold on a monthly basis and pay Seller for such Inventory within ten (10)
days after the end of each calendar month. Buyer shall pay for Inventory (i) at
Perry's invoiced price for finished goods, and (ii) at the supplier's invoiced
price for packaging and raw materials. Any amount not paid when due shall bear
interest at an annual rate of two percent (2%) over the rate of interest
publicly announced by Citibank, N.A. in New York as its base rate in effect as
of the date on which such overdue amount should have been paid to Seller. Buyer
agrees to use its reasonable efforts to buy from Seller any raw materials
reflected on Schedule 1.2 (vi) that conform to its cost and quality
specifications including for other lines of business of Buyer, prior to
purchasing any equivalent raw materials from third parties. Buyer will use its
best efforts, as long as the finished products in question are authorized in the
applicable supermarkets, to sell such finished products in Inventory as soon as
possible in the normal course of its businesses, provided that Buyer shall not
be required to purchase from Seller any finished product within ninety (90) days
of expiration of its code date. If Buyer believes that any of the Inventory is
not good, usable and saleable, Seller will not dispose of same without Buyer's
consent. Seller shall pay (i) all storage costs for the finished goods included
in the Inventory until sold or used by Buyer, and (ii) all freight costs for
moving Inventory from Perry's to the storage facility.
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2. Closing.
2.1 Closing. The closing of the sale and
purchase provided for herein shall take place at 10:00 a.m. at the offices of
Seller on August 15, 1995. The Closing shall be effective as of 11:59 p.m. on
Sunday, August 13, 1995 (the "Closing Date"); provided that the Purchase Price
is received by Seller by wire transfer on or before noon Central Daylight Time
on Tuesday, August 15, 1995, otherwise this Agreement and the License Agreements
referred to above are null and void and of no force and effect; and, in such
event, if, and to the extent, that Seller has received the Purchase Price,
Seller agrees to return the Purchase Price to Buyer by wire transfer, as soon as
reasonably possible thereafter in accordance with Buyer's written instructions.
If the Closing is effective, any sales of Product by Seller after the Closing
Date shall be for the account of Buyer.
2.2 Action by Seller. Subject to the terms and
conditions herein contained, at the Closing Seller shall deliver to Buyer: (i) a
duly executed Bill of Sale and Assignment in substantially the form of Exhibit E
attached hereto and made a part hereof, (ii) duly executed license agreements in
the forms annexed hereto as Exhibits A, B, C, and D; (iii) assignments of the
Perry's Agreement, and the other agreements listed in Schedule 1.2(iv); and (iv)
other instruments of transfer as may be reasonably requested by the Buyer to
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convey, transfer and assign to and vest in Buyer ownership of the Purchased
Assets free and clear of all liens, security interests, claims, charges or
encumbrances of any nature. Notwithstanding the foregoing, Seller makes no
representation or warranty regarding the ability of Seller to transfer any
freezer space allocations, related payments or warehouse or supermarket
allocations to Buyer. However, Seller will use reasonable efforts to assist
Buyer in obtaining the benefits of freezer space allocations, related payments
and warehouse or supermarket allocations of the Business. Seller shall advise
Buyer if it learns that any retail customer is requesting additional fees with
respect to such transfers or that any customers, distributors or brokers will
discontinue any products of the Business or cease to provide goods or services
related to the Business. As of the date of this Agreement, Seller knows of no
such matter. This shall not create any obligation on Seller to pay any
additional fees with respect to the transfer of these rights. The failure or
inability of Buyer to obtain the benefit of such rights shall not affect the
Purchase Price or any other obligation of Seller or Buyer under this Agreement.
3. Additional Covenants.
3.1 Further Assurances. Seller hereby agrees
that it shall from time to time after the Closing, at its sole cost and expense,
take any and all actions, and execute, acknowledge, deliver, file and/or record
any and all documents and instruments, as Buyer may reasonably request to more
fully perfect the rights which are intended to be granted to Buyer hereunder.
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3.2 Payment of Taxes Upon Transfer of Purchase
Assets. Seller shall be responsible for, and shall pay, any and all sales, use,
purchase, transfer and similar taxes, and any and all filing, recording,
registration and similar fees, arising out of the transactions contemplated by
this Agreement.
3.3 Survival of Representations and Warranties. Each
of the parties hereto hereby agrees that all representations and warranties made
by or on behalf of it in this Agreement or in any document or instrument
delivered pursuant hereto shall survive the Closing Date and the consummation of
the transactions contemplated hereby.
3.4 Books and Records. Seller shall, for a period of
at least three years after the Closing Date, maintain and make available to
Buyer and its representatives for inspection and reproduction for tax or other
legitimate business purposes, during regular business hours, any books and
records in its possession relating to the Purchased Assets and the operation of
the Business which are not included among the Purchased Assets. Buyer shall, for
a period of at least three years after the Closing Date, maintain and make
available to Seller and its representatives for inspection and reproduction for
tax or other legitimate business purposes, during regular business hours, all
books and records in its possession relating to the Purchased Assets and the
operation of the Business which are included among the Purchased Assets, but
only insofar as said books and records relate to periods ending prior to the
Closing Date.
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3.5 Returns; Inventory: Seller shall be responsible for
paying for all returns of inventory and related freight costs sold by Seller
prior to the Closing Date either directly to the customer, or to the Buyer in
the event the customer takes a credit relating to inventory of the Business sold
prior to the Closing Date against amounts it owes to Buyer. Seller retains the
right to contest any returns or credits taken by any customer. However, in the
event the customer deducts any contested amount with respect to inventory of the
Business sold prior to the Closing Date from bills owed to Buyer, Seller shall
promptly reimburse Buyer with respect thereto, subject to its receipt of
appropriate documentation regarding the claim.
3.6 Business Expenses and Related Obligations. Seller
shall pay on a timely basis all costs relating to advertising (including
television, radio and billboards), product sampling (including in connection
with the EMP Sampling Agreement) and consumer coupons for Products of the
Business committed for or issued on or before the Closing Date. With respect to
talent re-use, trade promotion agreements, co-op advertising charges,
off-invoice case off allowances and bill back allowances (i) which are for a
period on or subsequent to the Closing Date and are payable on or subsequent to
the Closing Date, all of such costs shall be the obligation of Buyer, and (ii)
which are for a period prior to the Closing Date but which may become due on or
after the Closing Date, all of such costs shall be the obligation of Seller. Any
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unpaid shelf or product introductory costs committed to or offered by Seller
shall be the obligation of Seller, unless, as of the Closing Date, no Products
have been shipped pursuant to such commitments or offers. Schedule 3.6 contains
a list of the retail chain accounts, and, to the extent available, by customer,
by product line, a list of all trade promotion agreements, unpaid shelf or
product introductory costs, co-op advertising charges, off invoice case off
allowances, bill back allowances, volume discounts and similar obligations
committed to or offered by Seller and known as of the date hereof; it is
acknowledged that there may be additional such expenses which are unknown as of
the date hereof and which Seller shall be obligated to pay. Seller shall also
pay (x) the fifteen cents per gallon of Product required by the second paragraph
of Section 10a. of the Perry's Agreement, (y) all storage costs for Products in
Inventory or manufactured for Buyer under the Perry's Agreement, and (z) all
freight charges for moving products from Perry's to Merchants Terminal
Corporation ("Merchants"), or, subject to Seller's approval, from Perry's or
Merchants to any alternative storage facility, provided moving to such
alternative storage facility results in a net savings to Seller, after freight
costs, in each case for the contract year ending June 1, 1996. Seller and Buyer
agree to mutually negotiate an early termination of the Perry's Agreement on
terms and conditions acceptable to both Buyer and Seller.
3.7 Cooperation. Seller and Buyer agree to cooperate
with each other after the Closing to attempt to effectuate a smooth transition
of the Business. To this end Seller shall from time to time, upon reasonable
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request from Buyer, make available, at no cost to Buyer for ninety (90) days,
Seller's employees, if any, who are familiar with the Business to answer
questions and otherwise assist Buyer with respect to the Business; Buyer shall
also reimburse Seller for any out-of-pocket travel and related expenses for such
employees if Buyer requires such employees to travel. For any such assistance
more than ninety (90) days after the Closing Date, Buyer shall reimburse Seller
at the rate of Five Hundred Dollars ($500) per employee per day plus expenses.
To the extent that either party receives any payment for account receivables of
the Business relating to Products sold by the other party, the receiving party
shall promptly (within five (5) business days) remit said check or payment to
the other party.
3.8 Employee of Business. Buyer agrees to use
its reasonable efforts to hire the national sales manager for Products of the
Business with substantially the same compensation arrangement for a two (2)
month period after the Closing Date. Schedule 3.8 sets forth the compensation
arrangement for the national sales manager and the other sales managers of the
Business.
4. Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
4.1 Organization, Standing and Power. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, with full corporate power and authority to carry
on the Business as presently conducted by it.
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4.2 Authority. The execution and delivery by
Seller of this Agreement and of all of the agreements and documents to be
executed and delivered by it pursuant hereto, the performance by it of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of Seller and Seller has all necessary
power with respect thereto. Seller has all requisite right, power and authority
to enter into this Agreement, the Colombo License Agreement and the other
License Agreements referred to in Section 1.1 hereof. This Agreement and such
License Agreements will be valid and binding agreements, enforceable by Buyer in
accordance with their terms.
4.3 Noncontravention. Neither the execution and
delivery by Seller of this Agreement, the Colombo License Agreement, the other
License Agreements referred to in Section 1.1 hereof or of any agreement and
document to be executed and delivered by it pursuant hereto and thereto, nor the
consummation of any of the transactions contemplated hereby or thereby, nor the
performance by it of its obligations hereunder or thereunder, will (nor with the
giving of notice or the lapse of time or both would) (A) conflict with or result
in a breach of any provision of the Certificate of Incorporation or By-laws of
Seller, or (B) violate any order, writ, injunction, decree, law, statute, rule
or regulation of any court or governmental authority which is applicable to it
or any of the Purchased Assets, or (C) result in the creation or imposition of
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any lien, claim, restriction, charge or encumbrance upon any of the Purchased
Assets, or (D) taking into account the limited assets being purchased and the
need of Buyer to obtain consent to the assignment of the Sunbelt Distribution
Agreement, materially interfere with or otherwise materially adversely affect
the ability of Buyer to carry on the Business after the Closing. Seller is not
making any representation with respect to any entity which desires to do
business with Seller but might not desire to do business with Buyer.
4.4 Properties. Seller has good and valid title to
all of the Purchased Assets, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever. ALL TANGIBLE ASSETS,
MACHINERY, AND EQUIPMENT INCLUDED IN THE PURCHASED ASSETS ARE BEING TRANSFERRED
ON AN "AS IS, WHERE IS" BASIS.
4.5 Litigation. There are no suits or actions, or
administrative, arbitration or other proceedings or governmental investigations,
pending or, to the best of the knowledge of Seller, threatened, against or
relating to the Business or any of the Purchased Assets. There are no judgments,
orders, stipulations, injunctions, decrees or awards in effect against Seller or
its affiliates or the Purchased Assets which relate to the Business or any of
the Purchased Assets, the effect of which would be (i) to materially limit,
restrict, regulate, enjoin or prohibit Buyer from any business practice in any
area, or the acquisition of any properties, assets or businesses, or
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(ii) to materially adversely affect the Business or any of the Purchased
Assets.
4.6 Trademarks. Schedule 4.6(a) is a complete
and correct list of all trademarks of the Business, and Schedule 4.6(b)
describes the other general intangibles of the Business. At Closing or
immediately subsequent thereto, Seller will provide to Buyer a complete and
correct list of all ingredient formulations, manufacturing specifications,
directions and cost sheet formats, pricing and all other trade secrets and know
how, which in each case are or have been utilized in the Business since December
19, 1993. Seller owns or has the right to use such trademarks and has the right
to license same to Buyer. Seller owns or has the exclusive right to use all of
the other intangible assets described in Schedule 4.6(b) and has the right to
license same to Buyer. No proceedings have been instituted, are pending or, to
the knowledge of Seller are threatened, which challenge the rights of Seller in
respect thereto or the validity thereof. To the knowledge of Seller, none of the
aforesaid violates any laws, statutes, ordinances or regulations, or infringes
upon or violates any rights of others, or is being infringed by others; and none
of the aforesaid is subject to any outstanding order, decree, judgment,
stipulation or charge.
4.7 Certain Contracts. Each of the contracts
listed in Schedule 1.2(ii), (iii) and (iv) relating to the Business is in full
force and effect, all amounts due from Seller under such contracts for the
periods ending on the Closing Date have been or will be paid in full in a timely
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fashion, Seller is not in material default thereunder, and, to Seller's
knowledge, no other person or entity that is a party thereto or otherwise bound
thereby is in material default thereunder, and, to Seller's knowledge, no event,
occurrence, condition or act exists which does (or which with the giving of
notice or the lapse of time or both would) give rise to a default or right of
cancellation, acceleration or loss of contractual benefits thereunder, except as
to the Sunbelt Distribution Agreement, as to which consent to transfer is
required; there has been no threatened cancellations thereof, and to Seller's
knowledge there are no outstanding material disputes thereunder. Seller is not
making any representation with respect to any entity that desires to do business
with Seller but might not desire to do business with Buyer.
4.8 Customers, Suppliers and Contract Manufacturers.
Set forth on Schedule 4.8(i), is a list of all current material suppliers of the
Business and the amount, description and price of goods and services purchased
from each such supplier not purchased by Perry's. Except as set forth in
Schedules 4.8(i), to the knowledge of Seller, there has been no material adverse
change in the business relationship between the Business and any such supplier
or contract manufacturer; and Seller knows of no reason that said suppliers and
contract manufacturer will not continue their respective relationships on all
items on the same terms with the Business after the Closing Date, except to the
extent that any such entity may desire to do business with Seller but might not
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desire to do business with Buyer. As of the date hereof, Seller knows of no such
intent. Schedule 4.8(ii) lists ingredients furnished by Perry's. Schedule
4.8(iii) is a complete list of all product SKU's of the Business which have been
discontinued or have been threatened to be discontinued by any customer since
January 1, 1995, by customer, to the extent available.
4.9 Business Practices and Commitments. Schedule 4.9
consists of a complete description of Seller's (i) price list and customer
pickup allowances; (ii) customer return practices and obligations; (iii) volume
discounts, rebates and coop advertising practices and obligations; and (iv)
warranty practices and obligations, including damages, in each case with respect
to the Business.
4.10 Product Liability Claims; Recalls. Since
December 19, 1993, there have been no product liability claims against the
Business and there have been no recalls of any Products of the Business.
4.11 Brokers. No agent, broker, person, or firm
acting on behalf of Seller, or under its authority, is or will be entitled to a
financial advisory fee, brokerage commission or other like payment in connection
with any of the transactions contemplated hereby.
4.12 No Violation of Law. With respect to the
Business and/or the Purchased Assets, Seller is not in material violation of any
law, rule, regulation or other ordinance, statute, order or decree, including
product labeling and packaging requirements.
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4.13 Open Orders. Schedule 4.13 lists the open
orders for the Business as of the Closing Date, by customer, by
Product SKU.
5. Representations and Warranties as to Buyer. Buyer
hereby represents and warrants to Seller as follows:
5.1 Organization, Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey, with full corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted by it.
5.2 Authority. The execution and delivery by
Buyer of this Agreement and of each agreement and document to be executed and
delivered by it pursuant hereto, the performance by Buyer of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action on the part of Buyer, and Buyer has all necessary power with
respect thereto. Buyer has all requisite right, power, and authority to enter
into this Agreement. This Agreement is, and when executed and delivered by
Buyer, each other agreement and document to be executed and delivered by it
pursuant hereto will be, the valid and binding obligation of Buyer enforceable
by Seller in accordance with its terms. Neither the execution and delivery by
Buyer of this Agreement or of any of the aforementioned other agreements and
documents, nor the consummation of the transactions contemplated hereby or
thereby, nor the performance by Buyer of its obligations hereunder, will
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(nor with the giving of notice or the lapse of time or both, would) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws of Buyer, or in the breach of any agreement to which
Buyer is a party or otherwise bound.
5.3 No Broker. No agent, broker, person, or firm
acting on behalf of Buyer, or under its authority, is or will be entitled to a
financial advisory fee, brokerage commission or other like payment in connection
with any of the transactions contemplated hereby.
6. Indemnification.
6.1 Indemnification by Seller. Seller agrees to
indemnify and hold Buyer harmless from and against any and all losses,
obligations, liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of any matter indemnified pursuant hereto)
which Buyer may sustain, suffer or incur and which arise out of, are caused by,
relate to, or result or occur from or in connection with (i) any liability of
the Business due and owing prior to the Closing Date or relating to products of
the Business sold prior to the Closing Date, including by way of illustration
and not limitation, customers' refusals to pay Buyer, or credits taken by
customers or distributors, or amounts which have been satisfied by brokers, in
any of which events relating to spoiled or return product claims, damaged goods,
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product demonstration charges, rebates, commitments, bill-backs or credits taken
for co-operative advertising or discounts made by or due from Seller, etc. for
Products of the Business sold by Seller prior to the Closing Date; (ii) any
claim by consumers for product liability based on the sale of Products by Seller
prior to the Closing Date or based on the sale or use (provided such use is in
accordance with all applicable law and regulation and complies with the quality
and other specifications for the product in which the raw materials are used) by
Buyer of any of Seller's Inventory; and (iii) the breach by Seller of any
representation, warranty or covenant made by it in this Agreement or in any
agreement, document or instrument executed and delivered pursuant hereto. Except
for Seller's indemnity under subclause (ii) of this Section 6.1 which indemnity
shall survive for the period of the applicable statute of limitations, Buyer may
make no claim for indemnification under this Agreement more than twelve months
after the Closing Date, but claims first asserted before the end of the
twelve-month period shall not be barred. The indemnification rights under this
Section 6.1 shall be Buyer's sole and exclusive remedy for any breach of
warranty or representation, or failure to comply with or perform any covenant,
agreement, or obligation under this Agreement.
6.2 Indemnification by Buyer. Buyer hereby
agrees to indemnify and hold Seller harmless from and against any and all
losses, obligations, liabilities, claims, damages, costs and expenses
(including, without limitation, the amount of any settlement entered into
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pursuant hereto, and all reasonable legal and other expenses incurred in
connection with the investigation, prosecution or defense of any matter
indemnified pursuant hereto), which it may sustain, suffer or incur and which
arise out of, are caused by, relate to, or result or occur from or in connection
with (i) the breach by Buyer of any representation, warranty or covenant made by
it in this Agreement or in any agreement, document or instrument executed and
delivered pursuant hereto; (ii) any liability of the Business arising on or
after the Closing Date and obligations of the Business from and after the
Closing Date assumed by Buyer hereunder; or (iii) any products liability claim
based on the sale of products of the Business by Buyer, except for the sale or
use (provided such use is in accordance with all applicable law and regulation
and complies with the quality and other specifications for the product in which
the raw materials are used) by Buyer of Seller's Inventory.
6.3 Third Party Claims. If a claim by a third
party is made against any party or parties hereto and the party against whom
said claim is made intends to seek indemnification with respect thereto under
this Section 6, the party seeking such indemnification shall promptly notify the
indemnifying party, in writing, of such claim; provided, however, that the
failure to give such notice shall not affect the rights of the indemnified party
hereunder except to the extent such failure adversely affects the indemnifying
party. The indemnifying party shall have fifteen (15) business days after said
notice is given to elect, by written notice given to the indemnified party, to
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undertake, conduct and control, through counsel of its own choosing (subject to
the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at its sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party shall cooperate
with the indemnifying party in connection therewith; provided: (i) in the case
of Seller as the indemnifying party, it shall not thereby permit to exist any
lien, encumbrance or other material adverse charge upon any of the Purchased
Assets, Buyer or the Business, and (ii) the indemnified party shall be entitled
to participate in such settlement or defense through counsel chosen by the
indemnified party, provided that the fees and expenses of such counsel shall be
borne by the indemnified party. Notwithstanding the foregoing, in the event the
indemnifying party's counsel advises that there is a conflict between the claims
of the indemnified party and the indemnifying party, the indemnified party may
choose its own counsel, the cost of which will be borne by the indemnifying
party. So long as the indemnifying party or parties are contesting any such
claim in good faith, the indemnified party shall not pay or settle any such
claim; provided, however, that notwithstanding the foregoing, the indemnified
party shall have the right to pay or settle any such claim at any time, provided
that in such event it shall waive any right of indemnification therefor by the
indemnifying party. If the indemnifying party does not make a timely election to
undertake the good faith defense of the claim as aforesaid, or if the
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indemnifying party fails to proceed with the good faith defense of the matter
after making such election, then, in either such event, the indemnified party
shall have the right to contest, settle or compromise the claim at its exclusive
discretion, at the risk and expense of the indemnifying party to the full extent
set forth in Section 6.1 or 6.2 hereof, as the case may be.
7. Miscellaneous Provisions.
7.1 Expenses. Except as otherwise provided in
this Agreement, each of the parties hereto shall pay its own costs and expenses
in connection with this Agreement and the transactions contemplated hereby.
7.2 Execution in Counterparts. This Agreement
may be executed in one or more counterparts, and by the parties hereto in
separate counterparts, each of which shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to the other party hereto.
7.3 Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be sent by personal
delivery, overnight express, or registered or certified mail, postage prepaid,
return receipt requested, as follows:
If to Buyer, to: Integrated Brands Inc.
4175 Veterans Highway
Ronkonkoma, New York 1 1779
Attn: Gary P. Stevens
President
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Copy to: Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Benjamin Raphan
If to Seller, to: General Mills, Inc.
Number One General Mills
Boulevard
Minneapolis, Minnesota 55426
Attn: General Counsel
or to such other address as any party shall have designated by like notice to
the other parties hereto. Notices shall only be effective upon receipt.
7.4 Amendment. This Agreement may only be
amended by a written instrument executed by the parties hereto.
7.5 Entire Agreement. This Agreement (together
with the other agreements and documents being delivered pursuant to or in
connection with this Agreement) constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings of the parties, oral and written, with respect to
the subject matter hereof.
7.6 Applicable Law. This Agreement shall be
governed by the laws of the State of Minnesota applicable to contracts made and
to be wholly performed therein.
7.7 Arbitration.
(a) Any controversy or claim arising out of
or relating to this Agreement, or the breach hereof, but expressly excluding any
matter arising under the Colombo License Agreement and the other License
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Agreements referred to above, shall be settled by arbitration in accordance with
such rules as may be agreed upon by Seller and Buyer, or, failing agreement, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") as such rules may be modified herein.
(b) An award rendered in connection with an
arbitration pursuant to this Section shall be final and binding and judgment
upon such an award may be entered and enforced in any court of competent
jurisdiction. The arbitrators shall have no power or authority to amend or
modify this Agreement in any respect. The arbitrators shall be bound to follow
the laws of the State of Minnesota.
(c) The forum for arbitration under this
Section shall be Minneapolis, Minnesota and the governing law for such
arbitration shall be laws of the State of Minnesota.
(d) Arbitration under this Section shall be
conducted by a single arbitrator selected jointly by Seller and Buyer. If within
thirty (30) days after a demand for arbitration is made, Seller and Buyer are
unable to agree on a single arbitrator, three arbitrators shall be appointed.
Seller and Buyer shall each select one arbitrator and those two arbitrators
shall then select within thirty (30) days a third neutral arbitrator. In
connection with the selection of the third arbitrator, consideration shall be
given to familiarity with merger and acquisition transactions and experience in
dispute resolution between parties, as a judge or otherwise. If the arbitrator
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selected by Seller and Buyer cannot agree on the third arbitrator, they shall
discuss the qualifications of such third arbitrator with the AAA prior to
selection of such arbitrator, which selection shall be in accordance with the
Commercial Arbitration Rules of AAA.
(e) If an arbitrator cannot continue to
serve, a successor to an arbitrator selected by Seller or Buyer shall be also
selected by the same party, and a successor to a neutral arbitrator shall be
selected as specified in subsection (d) of this Section. A full rehearing will
be held only if the neutral arbitrator is unable to continue to serve or if the
remaining arbitrators unanimously agree that such a rehearing is appropriate.
(f) The arbitrator or arbitrators shall be
guided, but not bound, by the Federal Rules of Evidence and by the procedural
rules, including discovery provisions, of the Federal Rules of Civil Procedure.
Any discovery shall be limited to information directly relevant to the
controversy or claim in arbitration
(g) The parties shall each be responsible
for their own costs and expenses, except for the fees and expenses of the
arbitrators, which shall be shared equally by Seller and Buyer.
7.8 Headings. The headings contained herein are
for the sole purpose of convenience of reference, and shall not in any way limit
or affect the meaning or interpretation of any of the terms or provisions of
this Agreement.
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<PAGE>
7.9 Binding Effect; Benefits. This Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns.
Nothing herein contained, express or implied, is intended to confer upon any
person other than the parties hereto and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
7.10 Waiver etc. The failure of any of the
parties hereto to at any time enforce any of the provisions of this Agreement
shall not be deemed or construed to be a waiver of any such provision, nor to in
any way affect the validity of this Agreement or any provision hereof or the
right of any of the parties hereto to thereafter enforce each and every
provision of this Agreement. No waiver of any breach of any of the provisions of
this Agreement shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach shall be construed or deemed
to be a waiver of any other or subsequent breach.
7.11 Severability. Any provision of this
Agreement which is held by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction(s) shall be, as to such jurisdiction(s),
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
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<PAGE>
7.12 Nondisclosure. Seller agrees not to, and
shall use its best efforts to cause its employees and agents not to, disclose
any Confidential Information except to, or as agreed by, Buyer. For purposes of
this Section 7.12, "Confidential Information" means all confidential or
proprietary information relating to the Business or Purchased Assets, other than
information that (i) is in the public domain; (ii) falls within the public
domain, except through a breach hereof by Seller; (iii) is used or available for
use by Seller in its businesses, provided that such information is not publicly
disclosed, it being understood and acknowledged by Buyer that Seller has and
maintains significant marketing and research and development capabilities for
its refrigerated and soft-serve yogurt businesses and its other consumer foods
businesses.
7.13 Schedules. The Exhibits and Schedules
delivered pursuant to this Agreement are an integral part hereof and are deemed
part of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto as of the date first above written.
INTEGRATED BRANDS INC.
By:_______________________________
Name:_____________________________
Title:____________________________
GENERAL MILLS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
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<PAGE>
Exhibit A - Colombo License Agreement
Exhibit B - Betty Crocker License Agreement
Exhibit C - Count Chocula and Lucky Charms License Agreement
Exhibit D - Trix License Agreement
Exhibit E - Assignment and Bill of Sale
Schedule 1.2(i) - Equipment, etc.
Schedule 1.2(ii) - Perry's Contract Packaging Agreement
Schedule 1.2(iii) - Brokerage Arrangements
Schedule 1.2(iv) - Distribution and Other Agreements
Schedule 1.2(vi) - Inventory
Schedule 1.2(viii) - Freezer Space Payments
Schedule 1.2(ix) - Retail Customer Information
Schedule 3.6 - Retail Account List and Unpaid Commitments and Obligations
Schedule 3.8 - Employee Compensation Arrangement
Schedule 4.6(a) - Trademarks and Service Marks
Schedule 4.6(b) - General Intangibles
Schedule 4.8(i) - Suppliers
Schedule 4.8(ii) - Perry's Items
Schedule 4.8(iii) - Discontinued Items
Schedule 4.9 - Business Practices and Commitments
Schedule 4.13 - Open Orders
<PAGE>
EXHIBIT 10.36
SECOND AMENDMENT TO CREDIT AGREEMENT
INTEGRATED BRANDS INC.
SWENSEN'S, INC.
SWENSEN'S ICE CREAM COMPANY
AND
CHEMICAL BANK
- --------------------------------------------------------------------------------
SECOND AMENDMENT
DATED AS OF MARCH 8, 1996,
TO LOAN AGREEMENT
DATED AS OF DECEMBER 23, 1994
- --------------------------------------------------------------------------------
<PAGE>
SECOND AMENDMENT
DATED AS OF MARCH 8, 1996,
TO LOAN AGREEMENT
DATED AS OF DECEMBER 23, 1994
This Second Amendment Agreement is dated as of March 8, 1996 and is by
and among INTEGRATED BRANDS INC. (formerly Steve's Homemade Ice Cream, Inc.), a
New Jersey corporation (the "Borrower"), SWENSEN'S, INC., a Delaware
corporation, having its principal place of business at 4175 Veterans Highway,
Ronkonkoma, New York 11779 and SWENSEN'S ICE CREAM COMPANY, a California
corporation, having its principal place of business at 4175 Veterans Highway,
Ronkonkoma, New York 11779 (individually, a "Guarantor" and collectively, the
"Guarantors"), and CHEMICAL BANK, a New York banking corporation, having an
office at One Pierrepont Plaza, Brooklyn, New York 11201 (the "Bank"):
W I T N E S S E T H :
WHEREAS, the Borrower, the Guarantors and the Bank entered into a Loan
Agreement dated as of December 23, 1994, and amended as of September 7, 1995 (as
amended, the "Agreement") pursuant to such Agreement the Bank has made available
to the Borrower certain Revolving Credit Loans, evidenced by a Revolving Credit
Note, which may, in part, be termed out upon its maturity, such term loan to be
evidenced by a Term Loan Note; and
WHEREAS, the Revolving Credit Note, the Term Loan Note and all other
obligations arising under the Agreement are guaranteed by the Guarantors
pursuant to guaranties given by each of them to the Bank dated December 23, 1994
(the "Guaranties"); and
WHEREAS, the Borrower has requested that the Bank consent to the
refinancing of $4,500,000.00 in existing Revolving Credit Loans and the Bank has
agreed to same provided, among other things, the Borrower and the Guarantors
enter into this Second Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Borrower, the Guarantors and the
Bank agree as follows:
(i) Definitions. As used in this Second Amendment Agreement,
capitalized terms, unless otherwise defined, shall have the meanings ascribed to
them in the Agreement, as amended.
(ii) Representations and Warranties. As an inducement for the Bank to
enter into this Second Amendment Agreement, the Borrower and the Guarantors each
represent and warrant as follows:
<PAGE>
That with respect to the Agreement and the Loan Documents:
(i) There are no defenses, offsets or counterclaims to the
respective obligations of the Borrower or either of the Guarantors
under the Agreement, the Loans, the Notes, the Guaranties or any of the
other Loan Documents, and if any such defenses, offsets or
counterclaims exist without the knowledge of one or more of the
Borrower or the Guarantors, the same are hereby waived.
(ii) All of the representations and warranties made by the
Borrower and the Guarantors in the Agreement or in the other Loan
Documents are true and correct in all material respects as if made on
the date hereof.
(iii) No Default or Event of Default is existing under the
Agreement or the other Loan Documents or will result from the extension
of credit contemplated hereby.
(iv) As of March 8, 1996, the outstanding principal balance of
Revolving Credit Loans is $4,825,000.00 and interest has been paid
through March 4, 1996.
(iii) Amendment. The Agreement is hereby amended and
restated to read in its entirety as follows:
LOAN AGREEMENT
Dated as of December 23, 1994
Amended and Restated as of March 8, 1996
INTEGRATED BRANDS INC. (formerly known as Steve's Homemade Ice Cream,
Inc.), a New Jersey corporation, having its principal place of business at 4175
Veterans Highway, Ronkonkoma, New York 11779 (the "Borrower"), SWENSEN'S, INC.,
a Delaware corporation, having its principal place of business at 4175 Veterans
Highway, Ronkonkoma, New York 11779 and SWENSEN'S ICE CREAM COMPANY, a
California corporation, having its principal place of business at 4175 Veterans
Highway, Ronkonkoma, New York 11779 (individually, a "Guarantor" and
collectively, the "Guarantors"), and CHEMICAL BANK, a New York banking
corporation, having an office at One Pierrepont Plaza, Brooklyn, New York 11201
(the "Bank") hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquisition Loan" means a Revolving Credit Loan, the proceeds of which
are to be used for a Permitted Acquisition or a Special Acquisition.
"Adjusted Net Worth" means, with respect to the Borrower, stockholder's
equity (in accordance with GAAP) minus loans, advances and investments in
Subsidiaries and Affiliates.
"Affiliate" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person; (ii) a Person which directly or indirectly beneficially owns or holds
five (5%) percent or more of any class of voting stock of, or five (5%) percent
or more of the equity interest in, such Person; or (iii) a Person five (5%)
percent or more of the voting stock of which, or five (5%) or more of the equity
interest of which, is directly or indirectly beneficially owned or held by such
Person. The term control means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Board of Governors" means the Board of Governors of the
Federal Reserve System of the United States of America.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City.
"Capital Lease" means a lease which has been or should be, in
accordance with GAAP, capitalized on the books of the lessee.
"Commitment" means the Bank's obligation to make Revolving Credit Loans
to the Borrower pursuant to the terms and conditions of this Agreement and,
subject to the terms and conditions of this Agreement, to convert the
outstanding balance of such Revolving Credit Loans to the Converted Term Loan on
the Conversion Date.
"Consolidated Capital Expenditures" means, as to any Person, the
aggregate amount of any expenditures (including the principal amount secured by
purchase money Liens but excluding packaging costs, product introduction costs
and costs related to a Permitted Acquisition or a Special Acquisition) by such
<PAGE>
Person and its Consolidated Subsidiaries for assets (including fixed assets
acquired under Capital Leases) which it is contemplated will be used or usable
in fiscal years subsequent to the year of acquisition.
"Consolidated Current Assets" means, as to any Person, at any date, the
aggregate amount of all assets of such Person and its Consolidated Subsidiaries
which would be properly classified as current assets at such date, but excluding
deferred assets, all computed and consolidated in accordance with GAAP.
"Consolidated Current Liabilities" means, as to any Person, the
aggregate amount of all liabilities of such Person and its Consolidated
Subsidiaries (including tax and other proper accruals) which would be properly
classified as current liabilities, all computed and consolidated in accordance
with GAAP.
"Consolidated Net Worth" means, as to any Person, the excess of (i)
such Person's Consolidated Total Assets over (ii) such Person's Consolidated
Total Liabilities.
"Consolidated Subordinated Debt" means, as to any Person, the aggregate
amount of the Subordinated Debt of such Person and its Consolidated
Subsidiaries, computed and consolidated in accordance with GAAP.
"Consolidated Subsidiaries" means, as to any Person, those Subsidiaries
of such Person which are consolidated with such Person in the financial
statements delivered pursuant to Section 5.01(b).
"Consolidated Tangible Net Worth" means, as to any Person, the excess
of (i) such Person's Consolidated Total Assets, less all intangible assets
properly classified as such in accordance with GAAP, including, but without
limitation, patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, permits and goodwill, over (ii) such Person's Consolidated
Total Liabilities.
"Consolidated Total Assets" means, as to any Person, the aggregate net
book value of the assets of such Person and its Consolidated Subsidiaries after
all appropriate adjustments in accordance with GAAP (including without
limitation, reserves for doubtful receivables, obsolescence, depreciation and
amortization and excluding the amount of any write-up or revaluation of any
asset).
"Consolidated Total Liabilities" means, as to any Person, the aggregate
amount of the liabilities of such Person and its Consolidated Subsidiaries,
including all items which, in accordance with GAAP would be included on the
<PAGE>
liability side of the balance sheet (other than capital stock, capital surplus
and retained earnings) computed and consolidated in accordance with GAAP.
"Consolidated Total Unsubordinated Liabilities" means, as to any
Person, the Consolidated Total Liabilities less Consolidated Subordinated Debt
of such Person and its Consolidated Subsidiaries, computed and consolidated in
accordance with GAAP.
"Conversion Date" means the earlier of (i) December 31, 1997, or (ii)
the Optional Conversion Date.
"Converted Term Loan" shall have the meaning assigned in Section 2.09
hereof.
"Converted Term Loan Maturity Date" means the first Business Day of the
twenty first (21st) calendar quarter following the Conversion Date, or the
twentieth (20th) calendar quarter following the Optional Conversation Date,
which ever may apply.
"Converted Term Loan Note" means a promissory note of the Borrower
payable to the order of the Bank, in substantially the form of Exhibit C annexed
hereto, evidencing the indebtedness of the Borrower to the Bank resulting from
the Converted Term Loan made by the Bank to the Borrower pursuant to this
Agreement.
"Debt" means, as to any Person, (i) all indebtedness or liability of
such Person for borrowed money; (ii) indebtedness of such Person for the
deferred purchase price of property or services (including trade obligations);
(iii) obligations of such Person as a lessee under Capital Leases; (iv) current
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (v) obligations of such Person under letters of credit issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; and (ix) all other liabilities recorded as such,
or which should be recorded as such, on such Person's financial statements in
accordance with GAAP.
"Default" means any of the events specified in Section 6.01 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with any other Person would be treated, with such
Person, as a single employer under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section 6.01 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
"Fixed Rate" means a rate offered by the Bank from time to time,
subject to availability, for Interest Periods of not less than fourteen (14)
days and, in the case of Revolving Credit Loans only, of not more than three
hundred sixty (360) days.
"Fixed Rate Loans" means a Loan bearing interest at the Fixed
Rate.
"Funds Flow Total Debt Ratio" means the ratio, determined for any
twelve (12) month period on a consolidated basis for the Borrower and its
Consolidated Subsidiaries, of (i) the sum of net income (excluding extraordinary
gains), depreciation expense, amortization of intangibles and other non-cash
charges for such period to (ii) the average outstanding Debt for borrowed money
during such period.
"GAAP" means Generally Accepted Accounting Principles.
"Generally Accepted Accounting Principles" means those generally
accepted accounting principles and practices which are recognized as such by the
American Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Borrower and the Bank relating to the
determination of Generally Accepted Accounting Principles shall, in the absence
of manifest error, be conclusively resolved for all purposes hereof by the
written opinion with respect thereto, delivered to the Bank, of the independent
accountants selected by the Borrower and approved by the Bank for the purpose of
auditing the periodic financial statements of the Borrower.
<PAGE>
"Guarantor" or Guarantors" means one or more of the Guarantors, and any
other Person required to guarantee the obligations of the Borrower in accordance
with Section 5.01(k) of this Agreement.
"Guaranty" or "Guaranties" means the guaranty or guaranties executed
and delivered by the Guarantors pursuant to Section 3.01(h) of this Agreement.
"Hazardous Materials" includes, without limit, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances, or related materials defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. Sections 9601 et. seq.), and in the regulations
adopted and publications promulgated pursuant thereto, or any other federal,
state or local environmental law, ordinance, rule or regulation.
"Highly Leverage Transaction" means a financing transaction where the
borrower extends credit to, or invests in, a business where such transaction
involves the buyout, acquisition, or recapitalization of an existing business
and one of the following criteria is met: (i) the transaction results in a
liabilities-to-assets leverage ratio higher than 75%, or (ii) the transaction at
least doubles the borrower's liabilities and results in liabilities-to-assets
leverage ratio higher than 50%, or (iii) the transaction is designated as a
"highly leveraged transaction" by a syndication agent or a federal bank
regulatory agency. The Bank reserves the right from time to time to modify its
policies regarding the definition of "highly leveraged transactions".
"Interest Coverage Ratio" means the ratio, determined for any twelve
(12) month period on a consolidated basis for the Borrower and its Consolidated
Subsidiaries, of (i) the sum of net income (excluding extraordinary gains),
interest expense (including interest due but not paid) and income taxes paid or
payable in each case for such period to (ii) interest expense (including
interest due but not paid) for such period.
"Interest Determination Date" means the date on which a Prime Rate Loan
is converted to a Fixed Rate Loan and, in the case of a Fixed Rate Loan, the
last day of the applicable Interest Period.
"Interest Payment Date" means (i) the first Business Day of each month
and (ii) each Interest Determination Date.
<PAGE>
"Interest Period" means as to any Fixed Rate Loan, the period
commencing on the date of such Fixed Rate Loan and ending on such date as the
Borrower may elect after being advised by the Bank as to what maturities are
available with respect to the Fixed Rate Loan being requested at that time;
provided, however, (i) with respect to a Revolving Credit Loan, no Interest
Period shall end later than the Conversion Date, (ii) with respect to the Term
Loan, no Interest Period shall end later than the Maturity Date, (iii) with
respect to the Converted Term Loan, no Interest Period shall end later than the
Converted Term Loan Maturity Date, (iv) if any Interest Period would end on a
day which shall not be a Business Day, such Interest Period shall be extended to
the next succeeding Business Day, (v) no Interest Period in respect of a Fixed
Rate Loan representing a portion of the principal required to be paid in
accordance with Section 2.04 or 2.12 may be selected unless the sum of the
outstanding (x) Prime Rate Loans and (y) Fixed Rate Loans for which the relevant
Interest Periods end on or prior to the date of such payment, is in an amount
which will be sufficient to make such payment, (vi) interest shall accrue from
and including the first day of such Interest Period to but excluding the date of
payment of such interest and (vii) the length of Interest Periods with respect
to Fixed Rate Loans, if such Loans are available, shall be solely in the
discretion of the Bank but shall be for a minimum of fourteen (14) days and with
respect to Revolving Credit Loans only, a maximum of three hundred sixty (360)
days, and the availability of a particular Interest Period at the time of a
particular request for a Fixed Rate Loan in no way obligates the Bank to offer a
similar Interest Period with respect to Fixed Rate Loans requested on a
different occasion.
"Investment" means any stock, evidence of Debt or other security of any
Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable in the
ordinary course of business and payable in accordance with customary trade terms
in the ordinary course of business) and any purchase of (i) any security of
another Person or (ii) any business or undertaking of any Person or any
commitment or option to make any such purchase, or any other investment.
"Leverage Ratio" means the ratio, determined on a consolidated basis
for the Borrower and its Consolidated Subsidiaries, of (i) Consolidated Total
Unsubordinated Liabilities to (ii) the sum of Consolidated Net Worth plus
Consolidated Subordinated Debt.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
<PAGE>
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"Loan" or Loans" means the Term Loan, the Revolving Credit Loans or the
Converted Term Loan or any or all of the same as the context may require and
includes Prime Rate Loans and Fixed Rate Loans as the context may require.
"Loan Documents" means this Agreement, the Notes, the Guaranties and
any other document executed or delivered pursuant to this Agreement.
"Material Adverse Change" means, as to any Person, (i) a material
adverse change in the financial condition, business, operations, properties or
results of operations of such Person or (ii) any event or occurrence which could
have a material adverse effect on the ability of such Person to perform its
obligations under the Loan Documents.
"Maturity Date" means December 31, 2000.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"Note" or "Notes" means the Term Loan Note, the Revolving Credit Note
or the Converted Term Loan Note or one or both as the context may require.
"Optional Conversion Date" shall have the meaning assigned in Section
2.09(b) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means a merger, consolidation, acquisition of
stock or assets, or other similar transaction where the Borrower acquires all or
part of the business of another Person, provided that (i) the Borrower is the
surviving corporate entity; (ii) the acquisition is of not less than fifty one
(51%) percent of the stock or assets of such Person; (iii) the transaction has
been approved by the board of directors or other similar governing body of such
Person; (iv) such Person, or the assets of such Person, to be acquired shall be
in a similar line of business of the Borrower or the food business; (v) the
amount of Revolving Credit Loans requested by the Borrower for such
<PAGE>
acquisition shall be not in excess of $5,000,000.00; (vi) the acquisition and
the financing of such transaction shall not result in the Commitment or the
Loans made hereunder becoming a Highly Leveraged Transaction; and (vii) the Bank
is provided with such information, documents, certificates or other evidence of
the foregoing as it may reasonably request.
"Permitted Investments" means, (i) direct obligations of the United
States of America or any governmental agency thereof, or obligations guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; (ii) time certificates of deposit
having a maturity of one year or less issued by any commercial bank organized
and existing under the laws of the United States or any state thereof provided
that not more than $500,000.00 shall be invested in such banks having aggregate
capital and surplus less than $100,000,000.00; (iii) money market mutual funds
having assets in excess of $2,500,000,000; (iv) commercial paper rated not less
than P-1 or A-1 or their equivalent by Moody's Investor Services, Inc. or
Standard & Poor's Corporation, respectively; (v) tax exempt securities rated
Prime 2 or better by Moody's Investor Services, Inc. or A-1 or better by
Standard & Poor's Corporation; (vi) loans or advances by the Borrower to a
Guarantor; (vii) investments by the Borrower in the stock of, any Subsidiary;
(viii) stock or obligations issued in settlement of claims of the Borrower or a
Guarantor against any other Person by reason of the bankruptcy, composition or
readjustment of Debt, or reorganization of such Person; (ix) loans or advances
to employees of the Borrower, its Subsidiaries and Affiliates in an aggregate
amount outstanding at any time of not more than $100,000.00; or (x) any other
Investments not exceeding $100,000.00 in the aggregate at any time.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity or a federal, state or local government, or a political
subdivision thereof or any agency of such government or subdivision.
"Plan" means any employee benefit plan established, maintained, or to
which contributions have been made by the Borrower or any ERISA Affiliate.
"Prime Rate" means the rate per annum announced by the Bank from time
to time as its prime rate in effect at its principal office on a 360-day basis;
each change in the Prime Rate shall be effective on the date such change is
announced to become effective.
"Prime Rate Loan" means a Loan bearing interest at the Prime
Rate.
<PAGE>
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time.
"Quick Asset Ratio" means the ratio, determined on a consolidated basis
for the Borrower and its Consolidated Subsidiaries, of (i) the sum of (x) cash
and Investments described in subdivisions (i), (ii), (iii), (iv) and (v) of the
definition of Permitted Investments and (y) accounts receivable to (ii)
Consolidated Current Liabilities.
"Regulation D" means Regulation D of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation G" means Regulation G of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation T" means Regulation T of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors, as the
same may be amended and in effect from time to time.
"Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
"Revolving Credit Loans" shall have the meaning assigned to such term
in Section 2.01 of this Agreement.
"Revolving Credit Note" means a promissory note of the Borrower payable
to the order of the Bank, in substantially the form of Exhibit B annexed hereto,
evidencing the aggregate indebtedness of the Borrower to the Bank resulting from
Revolving Credit Loans made by the Bank to the Borrower pursuant to this
Agreement.
"Special Acquisition" means a Permitted Acquisition for which the
amount of Revolving Credit Loans requested by the Borrower exceeds $5,000,000.00
or which results in the Commitment or the Loans made hereunder being classified
as a Highly Leveraged Transaction and which also meets each of the following
criteria:
(i) it shall have delivered to the Bank (x) a term sheet,
acquisition agreement or other document outlining the proposed terms and
conditions of the Special Acquisition and such other documents or agreements as
the Bank may reasonably request, (y) such financial information as the Bank may
<PAGE>
reasonably request, including, but not limited to: (1) financial statements for
the past three (3) fiscal years for the Person to be acquired (or if such Person
has not been in existence for three (3) years, for such period of existence but
not less than one (1) fiscal year) and (2) a pro forma balance sheet and income
statement for the Borrower for a period of one (1) year following such Special
Acquisition which shall demonstrate compliance with all of the covenants of this
Agreement, and (z) a certificate from the President or Chief Financial Officer
of the Borrower certifying that the Special Acquisition shall meet all of the
conditions of this Agreement and shall not result in the Borrower failing to
meet the covenants set forth in Section 5.03; and
(ii) the Bank shall have approved, in its sole discretion,
such approval not to be unreasonably withheld, such Special Acquisition. The
Bank shall have ten (10) Business Days to approve or disapprove such Special
Acquisition after all of the information required by (i) above shall have been
delivered to the Bank.
"Subordinated Debt" means Debt of any Person, the repayment of which
the obligee has agreed in writing, on terms which have been approved by the Bank
in advance in writing, shall be subordinate and junior to the rights of the Bank
with respect to Debt owing from such Person to the Bank.
"Subsidiary" means, as to any Person, any corporation, partnership or
joint venture whether now existing or hereafter organized or acquired: (i) in
the case of a corporation, of which a majority of the securities having ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) are at the time owned by
such Person and/or one or more Subsidiaries of such Person or (ii) in the case
of a partnership or joint venture of which a majority of the partnership or
other ownership interests are at the time owned by such Person and/or one or
more of its Subsidiaries.
"Term Loan" shall have the meaning assigned in Section 2.01
hereof.
"Term Loan Note" means a promissory note of the Borrower payable to the
order of the Bank, in substantially the form of Exhibit A annexed hereto,
evidencing the indebtedness of the Borrower to the Bank resulting from the Term
Loan to be made by the Bank to the Borrower pursuant to the Agreement.
"Total Unsubordinated Liabilities" means Total Liabilities
less Subordinated Debt.
<PAGE>
"Total Unsubordinated Liabilities to Adjusted Net Worth plus
Subordinated Debt Ratio" means the ratio, for the Borrower only, of (i) Total
Unsubordinated Liabilities to (ii) Adjusted Net Worth plus Subordinated Debt.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to and including".
SECTION 1.03. Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have
the meaning given to it under GAAP.
<PAGE>
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. The Term Loan. The Bank agrees, on the date of this
Agreement, on the terms and conditions of this Agreement and in reliance upon
the representations and warranties set forth in this Agreement, to lend to the
Borrower the principal amount of Four Million Five Hundred Thousand
($4,500,000.00) Dollars, and the Borrower agrees to borrow such amount from the
Bank by executing and delivering to the Bank the Term Loan Note. The Term Loan,
or portions thereof, shall be a Prime Rate Loan or a Fixed Rate Loan (or a
combination thereof) as the Borrower may request subject to and in accordance
with Section 2.02 hereof.
SECTION 2.02. Notice of Term Loan Designations. (a) The Borrower may
elect to designate the Term Loan (or a portion thereof) as a Prime Rate Loan or
a Fixed Rate Loan by so specifying in the irrevocable notice given pursuant to
this Section 2.02; provided, however, that each Fixed Rate Loan for any specific
Interest Period shall be in the minimum principal amount of $1,000,000.00 and in
minimum increased multiples of $500,000.00.
(b) The Borrower shall give the Bank irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) prior to
10:00 a.m. on the day of such Loan of each election to designate the Term Loan
(or a portion thereof) as a Fixed Rate Loan (subject to availability) and (ii)
prior to 11:00 a.m. on the day of such Loan of each election to designate the
Term Loan (or a portion thereof) as a Prime Rate Loan, in each case specifying
the date (which shall be a Business Day) and the aggregate principal amount of
such Loan and, if any portion thereof is to consist of one or more Fixed Rate
Loans, the respective principal amounts and Interest Periods for each such Fixed
Rate Loan; provided that if the Borrower shall request a Fixed Rate Loan when
such Loans are not available, fail to specify the duration of the Interest
Period with regard to a requested Fixed Rate Loan or fail to specify the type of
Loan requested, the request shall be deemed to be a request for a Prime Rate
Loan.
(c) The Borrower may elect to continue Fixed Rate Loans constituting
the Term Loan from one Interest Period into a subsequent Interest Period or
convert a Prime Rate Loan into a Fixed Rate Loan (subject to availability) by
giving the Bank prior written, telex, telephonic (immediately confirmed in
writing) or facsimile irrevocable notice of its intention to do so in accordance
with the provisions of subsection (b) above. If no such election is made, or if
an election is made to continue a Fixed Rate Loan at the end of its Interest
<PAGE>
Period when such Loans are not available, such Fixed Rate Loan shall
automatically convert into a Prime Rate Loan upon the expiration of such
Interest Period.
SECTION 2.03. Term Loan Note. The Term Loan shall be evidenced by the
Term Loan Note of the Borrower. The Term Loan Note shall be dated the date
hereof and shall mature on the Maturity Date at which time the entire
outstanding principal balance and all interest thereon shall be due and payable.
The Term Loan Note shall be entitled to the benefits and subject to the
provisions of this Agreement.
SECTION 2.04. Repayment of Term Loan Note. The principal balance of the
Term Loan Note shall be payable in twenty (20) quarterly installments, each due
on the first Business Day of each quarter beginning on April 1, 1996 and
continuing on the first Business Day of each calendar quarter thereafter. Each
of the first nineteen (19) such quarterly principal installments shall be in the
amount of $140,000.00 and the twentieth (20th) such quarterly principal
installment shall be in an amount equal to the then outstanding principal
balance of the Term Loan Note.
SECTION 2.05. Payment of Interest on the Term Loan Note. (a)
In the case of a Prime Rate Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days) equal at all times to the Prime
Rate plus one half of one (1/2%) percent. Such interest shall be
payable on each Interest Payment Date, commencing with the first
Interest Payment Date after the date of such Prime Rate Loan, on
each Interest Determination Date and on the Maturity Date. Any
change in the rate of interest on the Term Loan Note due to a
change in the Prime Rate shall take effect as of the date of such
change in the Prime Rate.
(b) In the case of a Fixed Rate Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the Fixed Rate. Such interest shall be payable on
each Interest Payment Date, commencing with the first Interest Payment Date
after the date of such Fixed Rate Loan, on each Interest Determination Date and
on the Maturity Date.
SECTION 2.05. Use of Proceeds. The proceeds of the Term Loan shall be
used by the Borrower to refinance existing Revolving Credit Loans. No part of
the proceeds of the Term Loan may be used for any purpose that directly or
indirectly violates or is inconsistent with, the provisions of Regulation G, T,
U or X.
SECTION 2.06. The Revolving Credit Loans. The Bank agrees,
on the date of this Agreement, and on the terms and conditions and
<PAGE>
in reliance upon the representations and warranties hereinafter set forth in
this Agreement, to lend to the Borrower prior to the Maturity Date such amounts
as the Borrower may request from time to time (individually, a "Revolving Credit
Loan" or collectively, the "Revolving Credit Loans"), which amounts may be
borrowed, repaid and reborrowed, provided, however, that the aggregate amount of
such Revolving Credit Loans outstanding at any one time shall not exceed Seven
Million Five Hundred Thousand ($7,500,000.00) Dollars (the "Commitment"), or
such lesser amount of the Commitment as may be reduced pursuant to Section 2.6
hereof.
Each Revolving Credit Loan shall be a Prime Rate Loan or a Fixed Rate
Loan (or a combination thereof) as the Borrower may request subject to and in
accordance with Section 2.07. Subject to the other provisions of this Agreement,
Revolving Credit Loans of more than one type may be outstanding at the same
time.
SECTION 2.07. Notice of Revolving Credit Loans.
The Borrower shall give the Bank irrevocable written, telex, telephonic
(immediately confirmed in writing) or facsimile notice (i) prior to 10:00 a.m.
on the day of each Revolving Credit Loan comprised in whole or in part of one or
more Fixed Rate Loans, and (ii) prior to 11:00 a.m. on the day of each Revolving
Credit Loan consisting solely of a Prime Rate Loan. Nothing herein shall require
the Bank to approve an Acquisition Loan for a Special Acquisition earlier than
within the time period set forth in the definition of "Special Acquisition".
Such notice shall specify the date of such borrowing, the amount thereof and
whether such Loan is to be (or what portion or portions thereof are to be) a
Prime Rate Loan or a Fixed Rate Loan and, if such Loan or any portion therefore
is to consist of one or more Fixed Rate Loans, the principal amounts thereof and
Interest Period or Interest Periods with respect thereto. If no election as to a
type of Loan is specified in such notice, or if no election as to the Interest
Period is specified in such notice with respect to any Fixed Rate Loan, or if a
Fixed Rate Loan is requested when such Loans are not available, then in each
such case the Borrower shall be deemed to have requested a Prime Rate Loan.
(b) The Borrower may elect, subject to the provisions of this
Agreement, to continue a Fixed Rate Loan or a portion thereof from one Interest
Period into a subsequent Interest Period by giving the Bank such notice as the
Bank may, in its sole discretion require from time to time, which notice shall
be written, telex, telephonic (immediately confirmed in writing) or facsimile
irrevocable notice, of its intention to do so (subject to availability). If no
such election is made, or if an election is made to continue a Fixed Rate Loan
at the end of its Interest Period when such Loans are not available, such Fixed
<PAGE>
Rate Loan shall automatically be converted to a Prime Rate Loan on the
expiration of such Interest Period. Such election shall be otherwise subject to
the provisions of Section 2.07(a) hereof.
SECTION 2.08. Revolving Credit Note. Each Revolving Credit Loan shall
be (i) in the case of each Prime Rate Loan in the minimum principal amount of
$100,000.00, and in minimum multiples of $100,000.00 thereafter and (ii) in the
case of each Fixed Rate Loan in the minimum principal amount of $500,000.00
Dollars and in minimum multiples of $100,000.00 thereafter (except that, if any
such Prime Rate Loan so requested shall exhaust the remaining available
Commitment, such Prime Rate Loan may be in an amount equal to the amount of the
remaining available Commitment), and shall be evidenced by the Revolving Credit
Note of the Borrower. The Revolving Credit Note shall be dated the date hereof
and be in the principal amount of $7,500,000.00, and shall mature on the
Conversion Date, at which time the entire outstanding principal balance and all
interest thereon shall be due and payable. The Revolving Credit Note shall be
entitled to the benefits and subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the time
of each payment of principal thereon, the holder of the Revolving Credit Note is
hereby authorized by the Borrower to make a notation on the schedule annexed to
the Revolving Credit Note of the date and amount, and the type and Interest
Period of the Revolving Credit Loan or payment, as the case may be. Failure to
make a notation with respect to any Revolving Credit Loan shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Revolving
Credit Note with respect to such Revolving Credit Loan, and any payment of
principal on the Revolving Credit Note by the Borrower shall not be affected by
the failure to make a notation thereof on said schedule.
SECTION 2.09. Conversion Date; Making of the Converted Term Loan.
(a) The Borrower shall be obligated to pay to the Bank on the
Conversion Date the then outstanding principal amount of the Revolving Credit
Loans and all accrued but unpaid interest thereon. The Bank agrees, upon the
terms and subject to the conditions hereof, including, but without limitation,
the conditions of Section 3.03 hereof, and provided that no Default or Event of
Default shall have occurred and be continuing, to make a term loan (the
"Converted Term Loan") to the Borrower, on the Conversion Date in a maximum
amount equal to the aggregate principal amount of Acquisition Loans then
outstanding under the Revolving Credit Note. All other amounts outstanding under
the Revolving Credit Note shall be paid in full on the Conversion Date.
<PAGE>
(b) Upon three (3) Business Days prior written notice to the Bank, the
Borrower may request the Bank to make the Converted Term Loan prior to the
Converted Term Loan Maturity Date and the Bank agrees, upon the terms and
subject to the conditions hereof, including, but without limitation, the
conditions of Section 3.03 hereof, and provided that no Default or Event of
Default shall have occurred and be continuing, to make the Converted Term Loan
on the date so requested (the "Optional Conversion Date").
(c) The Bank shall make the Converted Term Loan by crediting the amount
thereof towards the repayment of the principal amount of Acquisition Loans
outstanding under the Revolving Credit Note.
(d) The Converted Term Loan shall be a Prime Rate Loan or a Fixed Rate
Loan (or a combination thereof) as the Borrower may request subject to and in
accordance with Section 2.10 hereof. Subject to the provisions of this
Agreement, the Converted Term Loan may consist of Loans of more than one type
outstanding at the same time.
SECTION 2.10. Notice of Converted Term Loan Designations.
(a) The Borrower may elect to designate the Converted Term Loan (or a
portion thereof) as a Prime Rate Loan or a Fixed Rate Loan by so specifying in
the irrevocable notice given pursuant to this Section 2.10; provided, however,
that each Fixed Rate Loan for any specific Interest Period shall be in the
minimum principal amount of $500,000.00 and in minimum multiples of $100,000.00
thereafter.
(b) The Borrower shall give the Bank irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) prior to
10:00 a.m. on the day of such Loan of each election to designate the Converted
Term Loan (or a portion thereof) as a Fixed Rate Loan (subject to availability)
and (ii) prior to 11:00 a.m. on the day of such Loan of each election to
designate the Converted Term Loan (or a portion thereof) as a Prime Rate Loan,
in each case specifying the date (which shall be a Business Day) thereof and the
aggregate principal amount and, if any portion thereof is to consist of one or
more Fixed Rate Loans, the respective principal amounts and Interest Periods for
each such Fixed Rate Loan; provided that if the Borrower shall request a Fixed
Rate Loan when such Loans are not available, fail to specify the duration of the
Interest Period with regard to a requested Fixed Rate Loan or fail to specify
the type of Loan requested, the request shall be deemed to be a request for a
Prime Rate Loan.
(c) The Borrower may elect to continue Fixed Rate Loans constituting
the Converted Term Loan from one Interest Period into a subsequent Interest
<PAGE>
Period or convert a Prime Rate Loan to a Fixed Rate Loan (subject to
availability) by giving the Bank prior written, telex, telephonic (immediately
confirmed in writing) or facsimile irrevocable notice of its intention to do so
in accordance with the provisions of subsection (b) above. If no such election
is made, or if an election is made to continue a Fixed Rate Loan at the end of
its Interest Period when such Loans are not available, such Fixed Rate Loan
shall automatically convert into a Prime Rate Loan upon the expiration of such
Interest Period.
SECTION 2.11. Converted Term Loan Note. The Converted Term Loan shall
be evidenced by the Converted Term Loan Note of the Borrower. The Converted Term
Loan Note shall be dated the Conversion Date or the Optional Conversion Date, as
appropriate, and shall mature on the Converted Term Loan Maturity Date at which
time the entire outstanding principal balance and all interest thereon shall be
due and payable. The Converted Term Loan Note shall be entitled to the benefits
and subject to the provisions of this Agreement.
SECTION 2.12. Repayment of Converted Term Loan Note. The principal
balance of the Converted Term Loan Note shall be payable in twenty (20)
quarterly installments, due on the first Business Day of each calendar quarter
beginning on the second such day after the Conversion Date (or the first such
day after the Optional Conversion Date, as applicable), and continuing on the
first Business Day of each calendar quarter thereafter, each such installment
being in an amount equal to 1/20th of the principal amount of the Converted Term
Loan.
SECTION 2.13. Payment of Interest on the Revolving Credit
Note and the Converted Term Loan Note.
(a) In the case of a Prime Rate Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal at all times to the Prime Rate plus one half of one
(1/2%) percent. Such interest shall be payable on each Interest Payment Date,
commencing with the first Interest Payment Date after the date of such Prime
Rate Loan, on each Interest Determination Date, on the Conversion Date and on
the Converted Term Loan Maturity Date. Any change in the rate of interest on the
Revolving Credit Note or the Converted Term Loan Note due to a change in the
Prime Rate shall take effect as of the date of such change in the Prime Rate.
(b) In the case of a Fixed Rate Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the Fixed Rate. Such interest shall be payable on
each Interest Payment Date, commencing with the first Interest Payment Date
after the date of such Fixed Rate Loan, on each Interest Determination Date,
on the Conversion Date and on the Converted Term Loan Maturity Date.
<PAGE>
SECTION 2.14. Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used by the Borrower (i) to refinance existing Debt owing from
the Borrower to the Bank under that certain Credit Agreement between the
Borrower and Manufacturers Hanover Trust Company dated as of March 27, 1990, as
amended, (ii) to finance Permitted Acquisitions and Special Acquisitions and
(iii) for working capital. The proceeds of the Converted Term Loan shall be used
by the Borrower exclusively to refinance the outstanding principal balance of
Acquisition Loans. No part of the proceeds of any Loan may be used for any
purpose that directly or indirectly violates or is inconsistent with, the
provisions of Regulations G, T, U or X.
SECTION 2.15. Commitment Fee. The Borrower agrees to pay to the Bank
from the date of this Agreement and for so long as the Commitment remains
outstanding, on the first Business Day of each calendar quarter a commitment fee
computed at the rate of one-eighth of one (1/8%) percent per annum (computed on
the basis of the actual number of days elapsed over 360 days) on the average
daily unused amount of the Commitment, such commitment fee being payable for the
calendar quarter, or part thereof, preceding the payment date.
SECTION 2.16. Reduction of Commitment. Upon at least three (3) Business
Days' written notice, the Borrower may irrevocably elect to have the unused
Commitment terminated in whole or reduced in part provided, however, that any
such partial reduction shall be in a minimum amount of $500,000.00, or whole
multiples thereof. The Commitment, once terminated or reduced, shall not be
reinstated without the express written approval of the Bank.
SECTION 2.17. Prepayment. (a) The Borrower shall have the right at any
time and from time to time to prepay any Prime Rate Loan, in whole or in part,
without premium or penalty on the same day on which telephonic notice is given
to the Bank (immediately confirmed in writing) of such prepayment provided,
however, that each such prepayment shall be on a Business Day and shall be in an
aggregate principal amount which is an integral multiple of $100,000.00.
(b) The Borrower shall have the right at any time and from time to
time, subject to the provisions hereof and of Section 2.18, to prepay any Fixed
Rate Loan, in whole or in part upon at least one (1) Business Day prior
irrevocable written notice to the Bank; provided, however, that each such
prepayment shall be on a Business Day and shall be in an aggregate principal
amount which is an integral multiple of $250,000.00.
<PAGE>
(c) The notice of prepayment under this Section 2.17 shall set forth
the prepayment date and the principal amount of the Loan being prepaid and shall
be irrevocable and shall commit the Borrower to prepay such Loan by the amount
and on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment. Each
prepayment under this Section 2.17 shall be applied first towards unpaid
interest on the amount being prepaid and then towards the principal in whole or
partial prepayment of Loans by the Borrower. In the absence of such
specification, amounts being prepaid shall be applied first to any Prime Rate
Loan then outstanding and then to Fixed Rate Loans in the order of the
expiration of their respective Interest Periods. In the case of the Term Loan
and the Converted Term Loan, all partial prepayments of Loans shall be applied
to installments of principal of the Term Loan or the Converted Term Loan, as the
case may be, in the inverse order of maturity.
SECTION 2.18. Reimbursement by Borrower. (a) The Borrower shall
reimburse the Bank upon the Bank's demand for any loss incurred or to be
incurred by it in the reemployment of the funds released by any prepayment or
conversion of any Fixed Rate Loan required or permitted by this Agreement, if
such Loan is prepaid or converted (whether voluntarily or by acceleration) other
than on the last day of the Interest Period for such Loan, or if the Borrower
fails to borrow the Fixed Rate Loan (or is not able to borrow because of an
Event of Default or for any other reason hereunder) after having given the
irrevocable notice provided by Sections 2.02, 2.07 or 2.10 of this Agreement.
Such loss shall be the product of (i) the difference as determined by the Bank
between (x) the rate of interest applicable to such Fixed Rate Loan being
prepaid or converted for the remainder of the Interest Period and (y) the rate
of interest payable on United States Treasury obligations in an amount and with
a maturity similar to such Loan or Loans times (ii) the aggregate amount of
principal so prepaid or converted times (iii) the number of days remaining in
the applicable Interest Period divided by 360.
SECTION 2.19. Increased Costs. If, after the date of this Agreement,
the adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
(i) subjects the Bank to any tax with respect to its
Commitment, the Notes or on any amount paid or to be paid under or pursuant to
this Agreement or the Notes (other than any tax measured by or based upon the
overall net income of the Bank);
<PAGE>
(ii) changes the basis of taxation of payments to the Bank of
any amounts payable hereunder (other than any tax measured by or based upon the
overall net income of the Bank);
(iii) imposes, modifies or deems applicable any reserve,
capital adequacy or deposit requirements against any assets held by, deposits
with or for the account of, or loans made by, the Bank; or
(iv) imposes on the Bank any other condition affecting its
Commitment, the Notes or this Agreement; and the result of any of the foregoing
is to increase the cost to the Bank of maintaining this Agreement or the
Commitment or making the Loans, or to reduce the amount of any payment (whether
of principal, interest or otherwise) receivable by the Bank or to require the
Bank to make any payment on or calculated by reference to the gross amount of
any sum received by it, in each case by an amount which the Bank in its sole
judgment deems material, then and in any such case:
(a) the Bank shall promptly advise the Borrower of such event,
together with the date thereof, the amount of such increased cost or
reduction or payment and the way in which such amount has been
calculated; and
(b) the Borrower shall pay to the Bank, within ten (10) days
after the advice referred to in subsection (a) hereinabove, such an
amount or amounts as will compensate the Bank for such additional cost,
reduction or payment for so long as the same shall remain in effect.
The determination of the Bank as to additional amounts payable
pursuant to this Section 2.19 shall be conclusive evidence of such amounts
absent manifest error.
SECTION 2.20. Capital Adequacy. If the Bank shall have determined that
the applicability of any law, rule, regulation or guideline, or the adoption
after the date hereof of any other law, rule, regulation or guideline regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or any lending office of the Bank) or the
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital or on the capital of the Bank's holding company, if any,
as a consequence of its obligations hereunder to a level below that which the
Bank or the Bank's holding company could have achieved but for such adoption,
<PAGE>
change or compliance (taking into consideration the Bank's policies and the
policies of the Bank's holding company with respect to capital adequacy) by an
amount deemed by the Bank to be material, then from time to time the Borrower
shall pay to the Bank such additional amount or amounts as will compensate the
Bank or the Bank's holding company for any such reduction suffered.
SECTION 2.21. Change in Legality. (a) Notwithstanding anything to the
contrary contained elsewhere in this Agreement, if any change after the date
hereof in law, rule, regulation, guideline or order, or in the interpretation
thereof by any governmental authority charged with the administration thereof,
shall make it unlawful for the Bank to make or maintain any Fixed Rate Loan or
to give effect to its obligations as contemplated hereby with respect to a Fixed
Rate Loan, then, by written notice to the Borrower, the Bank may:
(i) declare that Fixed Rate Loans will not thereafter
be made hereunder, whereupon the Borrower shall be prohibited from
requesting such Fixed Rate Loans hereunder unless such declaration is
subsequently withdrawn; and
(ii) require that, subject to the provisions of Section 2.18,
all outstanding Fixed Rate Loans made by it be converted to a Prime
Rate Loan, whereupon all of such Fixed Rate Loans shall be
automatically converted to a Prime Rate Loan as of the effective date
of such notice as provided in paragraph (b) below.
(b) For purposes of this Section 2.21, a notice to the
Borrower by the Bank pursuant to paragraph (a) above shall be effective, for the
purposes of paragraph (a) above, if lawful, and if any Fixed Rate Loans shall
then be outstanding, on the last day of the then current Interest Period;
otherwise, such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.22. Indemnity. The Borrower will indemnify the Bank against
any loss or expense which the Bank may sustain or incur as a consequence of any
default in payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, by notice of prepayment or otherwise), or the occurrence of any
Event of Default, including but not limited to any loss or expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
affect or maintain such Loan or any part thereof. When claiming under this
Section 2.22, the Bank shall provide to the Borrower a statement, signed by an
officer of the Bank, explaining the amount of any such loss or expense
<PAGE>
(including the calculation of such amount), which statement shall, in the
absence of manifest error, be conclusive with respect to the parties hereto.
SECTION 2.23. Change in LIBOR; Availability of Rates. In the event, and
on each occasion, that, on the day the interest rate for any Fixed Rate Loan is
to be determined, the Bank shall have determined (which determination, absent
manifest error, shall be conclusive and binding upon the Borrower) that
reasonable means do not exist for ascertaining the rate of interest to be
applied to such Fixed Rate Loan, Loans based on such rate (or rates) shall be
unavailable. The Bank shall, as soon as practicable thereafter, given written,
telex or telephonic notice of such determination of unavailability to the
Borrower. Any request by the Borrower for an unavailable Fixed Rate Loan shall
be deemed to be a request for a Prime Rate Loan.
SECTION 2.24. Authorization to Debit Borrower's Account. The Bank is
hereby authorized to debit the Borrower's account maintained with the Bank for
(i) all scheduled payments of principal and/or interest under the Notes, and
(ii) the commitment fee and all other amounts due hereunder; all such debits to
be made on the days such payments are due in accordance with the terms hereof.
SECTION 2.25. Late Charges, Default Interest. (a) If the Borrower shall
default in the payment of any principal installment of or interest on any Loan
or any other amount becoming due hereunder, the Borrower shall pay interest, to
the extent permitted by law, on such defaulted amount up to the date of actual
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to two
(2%) percent in excess of the interest rate otherwise in effect with respect to
the type of Loan in connection with which the required payments have not been
made.
(b) Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on all amounts owing under the Notes
and this Agreement (after as well as before judgment) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to two (2%) percent in excess of the interest rate otherwise in
effect hereunder.
SECTION 2.26. Payments. All payments by the Borrower hereunder or under
the Notes shall be made in U.S. dollars in immediately available funds at the
office of the Bank by 12:00 noon, New York City time on the date on which such
payment shall be due. Interest on the Notes shall accrue from and including the
<PAGE>
date of each Loan to but excluding the date on which such Loan is paid in full
or refinanced with a Loan of a different type.
SECTION 2.27. Interest Adjustments. (a) If the provisions of this
Agreement or the Notes would at any time otherwise require payment by the
Borrower to the Bank of any amount of interest in excess of the maximum amount
then permitted by applicable law the interest payments shall be reduced to the
extent necessary so that the Bank shall not receive interest in excess of such
maximum amount. To the extent that, pursuant to the foregoing sentence, the Bank
shall receive interest payments hereunder or under the Notes in an amount less
than the amount otherwise provided, such deficit (hereinafter called the
"Interest Deficit") will cumulate and will be carried forward (without interest)
until the termination of this Agreement. Interest otherwise payable to the Bank
hereunder and under the Notes for any subsequent period shall be increased by
such maximum amount of the Interest Deficit that may be so added without causing
the Bank to receive interest in excess of the maximum amount then permitted by
applicable law.
(b) The amount of the Interest Deficit shall be treated as a prepayment
penalty and paid in full at the time of any optional prepayment by the Borrower
to the Bank of the Term Loan or the Converted Term Loan. The amount of the
Interest Deficit relating to the Term Loan Note or the Converted Term Loan Note
at the time of any complete payment of such Notes at that time outstanding
(other than an optional prepayment thereof) shall be cancelled and not paid.
SECTION 2.28. Participations, Etc. The Bank shall have the right at any
time, with or without notice to the Borrower, to sell, assign, transfer or
negotiate all or any part of the Term Loan Note, Revolving Credit Note or the
Converted Term Loan Note or the Commitment or grant participations therein to
one or more banks (foreign or domestic, including an affiliate of the Bank),
insurance companies or other financial institutions, pension funds or mutual
funds. The Borrower and the Guarantors agree and consent to the Bank providing
financial and other information regarding their business and operations to
prospective purchasers or participants and further agree that to the extent that
the Bank should sell, assign, transfer or negotiate all or any part of the Notes
or the Commitment, the Bank shall be forever released and discharged from its
obligations under the Notes, the Commitment and this Agreement to the extent
same is sold, assigned, transferred or negotiated.
<PAGE>
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Making of the Term Loan and
the Initial Revolving Credit Loan. The obligation of the Bank to make the Term
Loan and the initial Revolving Credit Loan contemplated by this Agreement is
subject to the condition precedent that the Bank shall have received from the
Borrower and the Guarantors on or before the date of this Agreement the
following, each dated such day, in form and substance satisfactory to the Bank
and its counsel:
(a) The Term Loan Note and the Revolving Credit Note, each duly
executed and payable to the order of the Bank.
(b) Certified (as of the date of this Agreement) copies of the
resolutions of the Board of Directors of the Borrower authorizing the Loans and
authorizing and approving this Agreement and the other Loan Documents and the
execution, delivery and performance thereof and certified copies of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the other Loan Documents.
(c) Certified (as of the date of this Agreement) copies of the
resolutions of the Boards of Directors and the shareholders of each of the
Guarantors, authorizing and approving this Agreement, their Guaranties and any
other Loan Document applicable to the Guarantors, and the execution, delivery
and performance thereof and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Agreement, their Guaranties and the other Loan Documents.
(d) A certificate of the Secretary or an Assistant Secretary (attested
to by another officer) of the Borrower certifying: (i) the names and true
signatures of the officer or officers of the Borrower authorized to sign this
Agreement, the Notes and the other Loan Documents to be delivered hereunder on
behalf of the Borrower; and (ii) a copy of the Borrower's by-laws as complete
and correct on the date of this Agreement.
(e) A Certificate of the Secretary or an Assistant Secretary (attested
to by another officer) of each of the Guarantors certifying (i) the names and
true signatures of the officer or officers of the Guarantors authorized to sign
this Agreement, their Guaranties and any other Loan Documents to be delivered
hereunder on behalf of the Guarantors; (ii) a copy of each of the Guarantors'
by-laws as complete and correct on the date of this Agreement; and (iii) the
stock ownership of each Guarantor.
<PAGE>
(f) Copies of the certificate of incorporation and all amendments
thereto of the Borrower and the Guarantors certified in each case by the
Secretary of State (or equivalent officer) of the state of incorporation of each
of the Borrower and the Guarantors and a certificate of existence and good
standing with respect to the Borrower and the Guarantors from the Secretary of
State (or equivalent officer) of the state of incorporation of the Borrower and
the Guarantors) and from the Secretary of State (or equivalent officer) of any
state in which the Borrower or the Guarantors are authorized to do business.
(g) An opinion of Tenzer, Greenblatt, Fallon & Kaplan, Esqs., counsel
for the Borrower and the Guarantors as to certain matters referred to in Article
IV hereof and as to such other matters as the Bank or its counsel may reasonably
request.
(h) From each of the Guarantors, an executed Guaranty.
(i) From the Borrower, a copy of the consolidated balance sheet and
income statement for the Borrower and its Consolidated Affiliates for the six
month period ended July 1, 1995, together with all supporting schedules and
certified by the Borrower's Chief Financial Officer, the review of which shall
be satisfactory to the Bank in all respects.
(j) From the Borrower, a copy of the balance sheet and income statement
for the Borrower only for the six month period ended July 1, 1995, together with
all supporting schedules and certified by the Borrower's Chief Financial
Officer, the review of which shall be satisfactory to the Bank in all respects.
(k) From the Borrower, written notice to terminate the Credit
Agreement between the Borrower and Manufacturers Hanover Trust
Company dated as of March 27, 1990, as amended.
(l) The following statements shall be true and the Bank shall have
received a certificate signed by the President or Chief Financial Officer of the
Borrower and each Guarantor dated the date hereof, stating that:
(a) The representations and warranties contained in
Article IV of this Agreement and in the Guaranties are true and
correct on and as of such date; and
(b) No Default or Event of Default has occurred and is
continuing, or would result from the making of the Term Loan or the initial
Revolving Credit Loan.
<PAGE>
(m) All legal matters incident to this Agreement and the Loan
transactions contemplated hereby shall be satisfactory to Cullen and Dykman,
counsel to the Bank.
(n) Receipt by the Bank of such other approvals, opinions or documents
as may be required or as the Bank or its counsel may reasonably request.
(o) Receipt by the Bank of its facility fee for the Term Loan in the
amount of $15,000.00 and receipt of all other fees and expenses of the Bank
incurred in connection with this Agreement, including, without limitation, the
reasonable fees and expenses of the Bank's counsel.
SECTION 3.02. Conditions Precedent to All Revolving Credit Loans. The
obligations of the Bank to make each Revolving Credit Loan (including the
initial Revolving Credit Loan) shall be subject to the further condition
precedent that on the date of such Revolving Credit Loan:
(1) The following statements shall be true and correct and, if
requested, the Bank shall have received a certificate signed by the President or
the Chief Financial Officer of the Borrower and each Guarantor dated the date of
such Revolving Credit Loan, stating that:
(a) The representations and warranties contained in Article IV
of this Agreement and in the Guaranties are true and correct on and as of such
date as though made on and as of such date; and
(b) No Default or Event of Default has occurred and is
continuing, or would result from such Revolving Credit Loan. Each request for a
Revolving Credit Loan shall be deemed a certification by the Borrower that the
statements in (a) and (b) are true and correct on the date of such Loan.
(2) The Bank shall have received such other approvals, opinions or
documents as may be required or as the Bank may reasonably request.
(3) If the requested Revolving Credit Loan is an Acquisition Loan for a
Permitted Acquisition or a Special Acquisition, the Bank shall have received the
information set forth in the definitions of "Permitted Acquisition" or "Special
Acquisition" as applicable.
SECTION 3.03. Conditions Precedent to the Converted Term Loan. The
obligation of the Bank to make the Converted Term Loan shall be subject to the
condition precedent that the Bank shall have received on or before the
Conversion Date or the Optional Conversion Date, as applicable, all of the
<PAGE>
documents required by Sections 3.01 and 3.02 and each of the following, in form
and substance satisfactory to the Bank and its counsel:
(1) The Converted Term Loan Note duly executed by the
Borrower.
(2) The following statements shall be true and the Bank shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower and each Guarantor dated the date of the Converted Term Loan
stating that
(a) The representations and warranties contained in
Article IV of this Agreement and the Guaranties are true and correct on and as
of such date as though made on and as of such date; and
(b) No Default or Event of Default has occurred and
is continuing, or would result from the making of the Converted
Term Loan.
(3) The Bank shall have received such other approvals, opinions, or
documents as may be required or as the Bank or its counsel may reasonably
request.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. On the date hereof, on
each date that the Borrower requests a Revolving Credit Loan and on the date of
the Converted Term Loan the Borrower and each of the Guarantors represent and
warrant as follows:
(a) On the date hereof, the only Subsidiaries of the Borrower or a
Guarantor are those set forth on Schedule 4.01(a) annexed hereto, which Schedule
accurately sets forth with respect to each such Subsidiary, its name and
address, any other addresses at which it conducts business, its state of
incorporation and each other jurisdiction in which it is qualified to do
business and the identity and share holdings of its stockholders. Schedule
4.01(a) may be amended by the Borrower from time to time. Except as set forth on
Schedule 4.01(a), all of the issued and outstanding shares of each Subsidiary
which are owned by the Borrower or a Guarantor are owned by the Borrower or such
Guarantor free and clear of any mortgage, pledge, lien or encumbrance. Except as
set forth on Schedule 4.01(a) or in the Borrower's 10-K Report for the year
ended December 31, 1994, there are not outstanding any warrants, options,
contracts or commitments of any kind entitling any Person to redeem, purchase or
otherwise acquire any shares of common or capital stock or other equity interest
of the Borrower, any Guarantor or any Subsidiary of the Borrower or a Guarantor,
nor are there outstanding any securities which are convertible into or
exchangeable for any shares of the common or capital stock of the Borrower, any
Guarantor or any Subsidiary of the Borrower or a Guarantor.
(b) The Borrower and each Guarantor are each a corporation duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has the corporate power to
own its assets and to transact the business in which it is presently engaged and
is duly qualified and is in good standing in all other jurisdictions where the
failure to so qualify or remain in good standing could result in a Material
Adverse Change in the Borrower or a Guarantor.
(c) The execution, delivery and performance by the Borrower and each
Guarantor of the Loan Documents to which they are a party are within the
Borrower's and the Guarantors' corporate power and have been duly authorized by
all necessary corporate action and do not and will not (i) require any consent
or approval of the stockholders of the Borrower or Guarantors other than those
which have been obtained; (ii) do not contravene the Borrower's or any of the
Guarantors' certificates of incorporation, charters or by-laws; (iii) violate
<PAGE>
any provision of or any law, rule, regulation, contractual restriction, order,
writ, judgment, injunction, or decree, determination or award binding on or
affecting the Borrower or any Guarantor; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement, or any
other agreement, lease or instrument to which the Borrower or any Guarantor is a
party or by which it or its properties may be bound or affected; and (v) result
in, or require, the creation or imposition of any Lien upon or with respect to
any of the properties now owned or hereafter acquired by the Borrower or any
Guarantor.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower or any Guarantor of
any Loan Document to which it is a party, except authorizations, approvals,
actions, notices or filings which have been obtained, taken or made, as the case
may be.
(e) The Loan Documents when delivered hereunder will have been duly
executed and delivered on behalf of the Borrower and each Guarantor, as the case
may be, and will be legal, valid and binding obligations of the Borrower and
each Guarantor, as the case may be, enforceable against the Borrower or such
Guarantor in accordance with their respective terms.
(f) The consolidated financial statements of the Borrower and its
Consolidated Subsidiaries for the fiscal year ended December 31, 1994, copies of
which have been furnished to the Bank, fairly present the financial condition of
the Borrower and its Consolidated Subsidiaries as at such date and the results
of operations of the Borrower and its Consolidated Subsidiaries for the period
ended on such date, all in accordance with GAAP, and since such date there has
been (i) no material increase in the liabilities of the Borrower or any
Guarantor other than as disclosed in the Borrower's 10-Q Report for October 1,
1995 and (ii) no Material Adverse Change in the Borrower or any Guarantor.
(g) The consolidated financial statements of the Borrower and its
Consolidated Subsidiaries and the financial statements of the Borrower only, in
each case for the six month period ended October 1, 1995, copies of which have
been furnished to the Bank, fairly present the financial condition of the
Borrower and its Consolidated Subsidiaries and the Borrower only, as the case
may be, as at such date and the results of the Borrower and its Consolidated
Subsidiaries and the Borrower only, as the case may be, for the period ended on
such date, all in accordance with GAAP (subject to normal year-end adjustments),
and since such date there has been (i) no material increase in the liabilities
<PAGE>
of the Borrower or any Guarantor and (ii) no Material Adverse Change in the
Borrower or any Guarantor.
(h) Except as set forth in Schedule 4.01(h) or in the Borrower's 10-K
Report for December 1, 1994, there is no pending or threatened action,
proceeding or investigation affecting the Borrower, any Guarantor or any
Subsidiary of the Borrower or a Guarantor, before any court, governmental agency
or arbitrator, which may either in one case or in the aggregate, result in a
Material Adverse Change in the Borrower, any Guarantor or any such Subsidiary.
(i) The Borrower and each Guarantor have filed all federal, state and
local tax returns required to be filed and have paid all taxes, assessments and
governmental charges and levies that are due, including interest and penalties.
(j) The Borrower, each Guarantor and each Subsidiary of the Borrower or
a Guarantor own, or are taking appropriate actions to secure the ownership of
(and believe in good faith that, prior to obtaining such ownership, they are
entitled to use) or are licensed to use all trademarks, tradenames, copyrights,
technology, know-how and processes (the "Intellectual Property") necessary for
the conduct of their business as currently conducted except for those of which
the failure to own or license could not have a Material Adverse Effect on the
Borrower, such Guarantor or such Subsidiary. To the best of the Borrower's and
the Guarantors' knowledge, no claim is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower or the
Guarantors know of any valid basis for any such claim other than claims which,
if adversely determined, would not have a Material Adverse Effect on the
Borrower, a Guarantor or such Subsidiary. The use of such Intellectual Property
does not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, do not have a Material Adverse Effect on
the Borrower, a Guarantor or such Subsidiary.
(k) Neither the Borrower nor any Guarantor is a party to any indenture,
loan or credit agreement or any other agreement, lease or instrument or subject
to any charter or corporate restriction which could result in a Material Adverse
Change in the Borrower or any Guarantor and neither the Borrower nor any
Guarantor is in default of any such agreement.
(l) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation G, T, U or X), and no proceeds of any Loan will be used to purchase
<PAGE>
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or in any other way which will cause the
Borrower to violate the provisions of Regulations G, T, U or X.
(m) No proceeds of any Loan will be used to acquire any security in any
transaction which is subject to Sections 13 or 14 of the Securities Exchange Act
of 1934.
(n) The Borrower, each Guarantor and each Subsidiary of the Borrower or
a Guarantor are in all material respects in compliance with all federal and
state laws and regulations in all jurisdictions where the failure to comply with
such laws or regulations could result in a Material Adverse Change in the
Borrower, any of the Guarantors or any such Subsidiary.
(o) The Borrower, each Guarantor, each Subsidiary of the Borrower or a
Guarantor and each ERISA Affiliate are in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstances exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower, any Guarantor, any Subsidiary of the Borrower
or a Guarantor, nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the Borrower,
each Guarantor, each Subsidiary of the Borrower or a Guarantor and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans and the present fair market value of all Plan assets
exceeds the present value of all vested benefits under each Plan, as determined
on the most recent valuation date of the Plan in accordance with the provisions
of ERISA for calculating the potential liability of the Borrower, any Guarantor,
any such Subsidiary or any ERISA Affiliate to PBGC or the Plan under Title IV of
ERISA; and neither the Borrower, any Guarantor, any such Subsidiary nor any
ERISA Affiliate has incurred any liability to the PBGC under ERISA.
(p) The Borrower, each Guarantor and each Subsidiary of the Borrower or
a Guarantor are in compliance with all federal, state or local laws, ordinances,
rules, regulations or policies governing Hazardous Materials and neither the
Borrower, any Guarantor nor any such Subsidiary has used Hazardous Materials on,
from, or affecting any property now owned or occupied or hereafter owned or
occupied by the Borrower, any Guarantor or any such Subsidiary in any manner
which violates federal, state or local laws, ordinances, rules, regulations or
policies governing the use, storage, treatment, transportation, manufacture,
<PAGE>
refinement, handling, production or disposal of Hazardous Materials, and that to
the best of the Borrower's, Guarantors' and such Subsidiaries' knowledge, no
prior owner of any such property or any tenant, subtenant, prior tenant or prior
subtenant have used Hazardous Materials on, from or affecting such property in
any manner which violates federal, state or local laws, ordinances, rules,
regulations, or policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials.
(q) The proceeds of the Term Loan, the Revolving Credit Loans and the
Converted Term Loan shall be used exclusively for the purposes set forth in
Sections 2.05 and 2.14 hereof.
(r) The Borrower and the Guarantors have good title to the properties
and assets used in connection with their respective business and such properties
and assets are not subject to any Lien other than those described in Section
5.02(a) hereof.
(s) Neither the business nor the properties of the Borrower, any
Guarantor or any Subsidiary of the Borrower or a Guarantor are affected by any
fire, explosion, accident, strike, hail, earthquake, embargo, act of God or of
the public enemy, or other casualty (whether or not covered by insurance), which
could result in a Material Adverse Change in the Borrower, any Guarantor or any
such Subsidiary.
(t) Intentionally omitted.
(u) The Guarantors acknowledge they have derived or expect to derive a
financial or other advantage from the Loans obtained by the Borrower from the
Bank.
(v) Schedule 4.01(v) is a complete and correct list of all credit
agreements,indentures, purchase agreements, guaranties, Capital Leases, and
other investments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements for
the issuance of letters of credit or for acceptance financing) in respect of
which the Borrower or any Guarantor is in any manner directly or contingently
obligated, and the maximum principal or face amounts of the credit in question,
outstanding or to be outstanding, are correctly stated, and all Liens of any
nature given or agreed to be given as security therefor are correctly described
or indicated in such Schedule.
<PAGE>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any amount shall remain
outstanding under the Term Loan Note, the Revolving Credit Note or the Converted
Term Loan Note, or so long as the Commitment shall remain in effect, the
Borrower and the Guarantors will, unless the Bank shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. Comply, and cause each Subsidiary of the
Borrower or a Guarantor to comply, in all material respects with all applicable
laws, rules, regulations and orders, where the failure to so comply could result
in a Material Adverse Change in the Borrower, a Guarantor or any such
Subsidiary.
(b) Reporting Requirements. Furnish to the Bank: (i) Annual Financial
Statements. As soon as available and in any event not later than two (2) weeks
after submission to the Securities and Exchange Commission ("SEC"), a copy of
the audited consolidated, and management prepared consolidating, financial
statements of the Borrower and its Consolidated Subsidiaries for each fiscal
year, including balance sheets with related statements of income and retained
earnings and statements of cash flows, all in reasonable detail and setting
forth in comparative form the figures for the previous fiscal year, together
with an unqualified opinion, prepared by independent certified public
accountants selected by the Borrower and satisfactory to the Bank, all such
financial statements to be prepared in accordance with GAAP. Heidi's Frogen
Yozurt Shoppes, Inc. is reported as an investment rather than as a consolidated
Subsidiary.
(ii) Quarterly Financial Statements. As soon as available and in any
event not later than two (2) weeks after submission to the SEC, a copy of the
consolidated and consolidating financial statements of the Borrower and its
Consolidated Subsidiaries for each of the first three fiscal quarters of each
fiscal year, including a balance sheet with related statements of income and
retained earnings and a statement of cash flows, all in reasonable detail and
setting forth in comparative form the figures for the comparable quarter for the
previous fiscal year, certified by the Chief Financial Officer of the Borrower,
all such financial statements to be prepared in accordance with GAAP. Heidi's
Frogen Yozurt Shoppes, Inc. is reported as an investment rather than as a
consolidated Subsidiary.
(iii) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Guarantor by independent certified
<PAGE>
public accountants in connection with examination of the financial statements of
the Borrower and each Guarantor made by such accountants.
(iv) Certificate of No Default. Simultaneously with the delivery of the
financial statements referred to in Section 5.01(b)(i) and (ii), a certificate
of the President or the Chief Financial Officer of the Borrower, (1) certifying
that no Default or Event of Default has occurred and is continuing, or if a
Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action which is proposed to be taken with respect
thereto; and (2) with computations demonstrating compliance with the covenants
contained in Section 5.03.
(v) Intentionally Omitted.
(vi) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor which seeks recovery against the Borrower, a Guarantor or a
Subsidiary (i) in an amount in excess of $250,000.00 or (ii) if determined
adversely to the Borrower, any Guarantor or any such Subsidiary could result in
a Material Adverse Change in the Borrower, any Guarantor or any such Subsidiary
and notice of any material changes in any such proceedings previously reported
to the Bank.
(vii) Notice of Defaults and Events of Default. As soon as possible and
in any event within five (5) days after the occurrence of each Default or Event
of Default, a written notice setting forth the details of such Default or Event
of Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(viii) ERISA Reports. Promptly after the filing or receiving thereof,
copies of all reports, including annual reports, and notices which the Borrower
or any Guarantor, files with or receives from the PBGC or the U.S. Department of
Labor under ERISA; and as soon as possible after the Borrower or any Guarantor
knows or has reason to know that any Reportable Event or Prohibited Transaction
has occurred with respect to any Plan or that the PBGC or the Borrower, any
Guarantor or any such Subsidiary has instituted or will institute proceedings
under Title IV of ERISA to terminate any Plan, the Borrower or such Guarantor
will deliver to the Bank a certificate of the President or the Chief Financial
Officer of the Borrower or such Guarantor setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrower or such Guarantor proposes to take with respect thereto.
<PAGE>
(ix) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other party pursuant to the
terms of any indenture, loan, or credit or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause of this
Section 5.01(b).
(x) Proxy Statements, Etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports which
the Borrower or any Guarantor sends to its stockholders, and copies of all
regular, periodic, and special reports, and all registration statements which
the Borrower or any Guarantor files with the SEC or any governmental authority
which may be substituted therefor, or with any national securities exchange.
(xi) Material Adverse Change. Promptly upon the occurrence
thereof, notify the Bank of any Material Adverse Change in the
Borrower, any Guarantor or any Subsidiary of the Borrower or any
Subsidiary.
(xii) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower, any Guarantor
or any Subsidiary of the Borrower or a Guarantor as the Bank may from time to
time reasonably request.
(c) Taxes; Claims. Pay and discharge, and cause its
Subsidiaries to pay and discharge, all taxes, assessments and governmental
charges and all other charges and claims by other Persons upon it or them, its
or their income and its or their properties prior to the dates on which such
amounts are due or on which penalties are attached thereto, unless and only to
the extent that (i) such taxes or other claims shall be contested in good faith
and by appropriate proceedings by the Borrower, any Guarantor or any such
Subsidiary, as the case may be, and (ii) there be adequate reserves therefor in
accordance with GAAP entered on the books of the Borrower, any Guarantor or any
such Subsidiary.
(d) Corporate Existence. Preserve and maintain, and cause its
Subsidiaries to preserve and maintain, their corporate existence and good
standing in the jurisdiction of their incorporation and the rights, privileges
and franchises of the Borrower, each Guarantor and each such Subsidiary in each
case where failure to so preserve or maintain could result in a Material Adverse
Change in the Borrower, such Guarantor or such Subsidiary.
(e) Maintenance of Properties and Insurance. (i) Keep, and cause any
Subsidiaries to keep, the respective properties and assets (tangible or
intangible) that are useful and necessary in its business, in good working order
<PAGE>
and condition, reasonable wear and tear excepted; and (ii) maintain, and cause
any Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
properties doing business in the same general areas in which the Borrower, any
Guarantors and any such Subsidiaries operate.
(f) Books of Record and Account. Keep and cause any Subsidiaries to
keep, adequate records and proper books of record and account in which complete
entries will be made in a manner to enable the preparation of financial
statements in accordance with GAAP, reflecting all financial transactions of the
Borrower, the Guarantors, and any such Subsidiaries.
(g) Visitation. At any reasonable time, and from time to time, permit
the Bank or any agents or representatives thereof, to examine and make copies of
and abstracts from the books and records of, and visit the properties of, the
Borrower or any Guarantor and to discuss the affairs, finances and accounts of
the Borrower or any Guarantor with any of the respective officers or directors
of the Borrower or such Guarantor or the Borrower's or such Guarantor's
independent accountants.
(h) Performance and Compliance with Other Agreements. Perform and
comply with each of the provisions of each and every agreement the failure to
perform or comply with which could result in a Material Adverse Change in the
Borrower, any Guarantor or any Subsidiary.
(i) Pension Funding. Comply with the following and cause each ERISA
Affiliate of the Borrower, any Guarantor or any Subsidiary of the Borrower or a
Guarantor to comply with the following:
(i) engage solely in transactions which would not subject any
of such entities to either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Internal
Revenue Code in either case in an amount in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under
the provisions of any Plan or ERISA, the Borrower, any Guarantor, any
such Subsidiary or any ERISA Affiliate of any of same is required to
pay as contributions thereto;
(iii) all applicable provisions of the Internal Revenue Code
and the regulations promulgated thereunder, including but not limited
to Section 412 thereof, and all applicable rules, regulations and
interpretations of the Accounting Principles Board and the Financial
Accounting Standards Board;
<PAGE>
(iv) not fail to make any payments in an aggregate amount
greater than $25,000.00 to any Multiemployer Plan that the Borrower,
any Guarantor, any such Subsidiary or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto; or
(v) not take any action regarding any Plan which could result
in the occurrence of a Prohibited Transaction.
(j) Licenses. Maintain at all times, and cause each Subsidiary to
maintain at all times, all licenses or permits necessary to the conduct of its
business or as may be required by any governmental agency or instrumentality
thereof where the failure to obtain or maintain such licenses or permits could
result in a Material Adverse Change in the Borrower, a Guarantor or such
Subsidiary.
(k) Subsidiaries. Notify the Bank of the formation, acquisition, merger
or dissolution of any Subsidiary and cause any direct, wholly owned Subsidiary
of the Borrower formed after the date of this Agreement to become a Guarantor of
all Debts and other obligations of the Borrower under this Agreement and become
a party to this Agreement.
SECTION 5.02. Negative Covenants. So long as any amount shall remain
outstanding under the Term Loan Note, the Revolving Credit Note or the Converted
Term Loan Note, or so long as the Commitment shall remain in effect, neither the
Borrower nor the Guarantors will, without the written consent of the Bank:
(a) Liens, Etc. Create, incur, assume or suffer to exist, any
Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(i) Liens in favor of the Bank;
(ii) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due, or which are removed within twenty (20) days from the attachment of
such Lien, or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
<PAGE>
(iv) Liens under workers' compensation, unemployment
insurance, Social Security, or similar legislation;
(v) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(vi) Liens described in Schedule 5.02(a), provided that
no such Liens shall be renewed, extended or refinanced;
(vii) Judgment and other similar Liens arising in connection
with court proceedings (other than those described in Section 6.01(f)), provided
the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings;
(viii) Easements, rights-of-way, restrictions, and other
similar encumbrances which, in the aggregate, do not materially interfere with
the Borrower's or a Guarantor's occupation, use and enjoyment of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(ix) Purchase money Liens on any property hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease, provided that:
(1) Any property subject to any of the foregoing is acquired
by the Borrower or any Guarantor in the ordinary course of its respective
business and the Lien on any such property is created contemporaneously with, or
is in existence at the time of, such acquisition;
(2) The obligation secured by any Lien so created, assumed,
or existing shall not exceed 100% of lesser of cost or fair market value of the
property acquired as of the time of the Borrower or any Guarantor acquiring the
same;
(3) Each such Lien shall attach only to the property so
acquired and fixed improvements thereon; and
(4) The obligation secured by such Lien is permitted by the
provisions of Section 5.02(b) and the related expenditure is permitted by the
provisions of Section 5.03(c).
<PAGE>
(b) Debt. Create, incur, assume, or suffer to exist, any Debt,
except:
(i) Debt of the Borrower under this Agreement or the Notes or
any other Debt owing from the Borrower or a Guarantor to the Bank;
(ii) Debt described in Schedule 5.02(b), provided that no
such Debt shall be renewed, extended or refinanced;
(iii) Subordinated Debt;
(iv) Accounts payable to trade creditors for goods or
services and current operating liabilities (other than for borrowed money), in
each case incurred in the ordinary course of business and paid within the
specified time, unless contested in good faith and by appropriate proceedings;
(v) Debt incurred in connection with Permitted Acquisitions
or Special Acquisition, provided such Debt does not cause the Borrower to
violate any covenant in Section 5.03 or otherwise result in a Default or Event
of Default;
(vi) Debt between the Borrower and a Guarantor or between
Guarantors; and
(vii) Debt of the Borrower or any Guarantor secured by
purchase money Liens permitted by Section 5.02(a)(ix) or otherwise to finance
Capital Expenditures permitted by Section 5.03(c).
(c) Intentionally omitted.
(d) Merger. Merge into, or consolidate with or into, or have merged
into it, any Person; and, for the purpose of this subsection (d), the
acquisition or sale by the Borrower or any Guarantor by lease, purchase or
otherwise, of all, or substantially all, of the common stock or the assets of
any Person or of it shall be deemed a merger of such Person with the Borrower or
any Guarantor, except for (i) Permitted Acquisitions; (ii) Special Acquisitions;
(iii) mergers or consolidations of the Borrower and any Guarantor or any
Subsidiary of the Borrower or any Guarantor, provided the Borrower is the
surviving entity and (iv) mergers or consolidations of Subsidiaries and other
Subsidiaries or Subsidiaries and Guarantors.
(e) Sale of Assets, Etc. Sell, assign, transfer, lease or otherwise
dispose of (i) more than fifty (50%) percent of the Borrower's Consolidated
Total Assets or (ii) any assets acquired with the proceeds of Revolving Credit
Loans, (including a saleleaseback transaction) with or without recourse, except
<PAGE>
for (i) inventory disposed of in the ordinary course of business, (ii) the sale
or other disposition of assets no longer used or useful in the conduct of its
business, and (iii) such assets the proceeds of such sale are used to repay
Revolving Credit Loans.
(f) Investments, Etc. Make any Investment other than Permitted
Investments.
(g) Transactions With Affiliates. Except for those transactions set
forth on the Borrower's 10-K Report for December 31, 1994 and except for
transactions in the ordinary course of business and pursuant to the reasonable
requirements of the Borrower's, a Guarantor's or a Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower, or the
Guarantor or the Subsidiary than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate, enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate.
(h) Prepayment of Outstanding Debt. Pay, in whole or in part, any
outstanding Debt having a maturity of one year or more (other than Debt owing to
the Bank) of the Borrower or any Guarantor, which by its terms is not then due
and payable.
(i) Guarantees. Guaranty, or in any other way become directly or
contingently obligated for any Debt of any other Person (including any
agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; (ii) guarantees existing on the
date hereof and set forth in Schedule 5.02(i) annexed hereto; (iii) guarantees
by the Borrower of Debt of a Guarantor if such Debt is permitted by Section
5.02(b); (iv) guarantees given in favor of the Bank.
(j) Change of Business. Materially alter the nature of its business.
(k) Fiscal Year. Change the ending date of its fiscal year from the
Saturday nearest to each December 31.
(l) Accounting Policies. Change any accounting policies, except as
permitted by GAAP.
(m) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of the Borrower or any Guarantor; or
allocate or otherwise set apart any sum for the payment of any dividend or
<PAGE>
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock, other than (i) repurchases of stock at prices not exceeding
$1,000,000.00 in the aggregate during the term of this Agreement, or (ii)
dividends paid during any fiscal year in an amount not in excess of the lesser
of (x) $1,000,000.00 or (y) fifty (50%) percent of the Borrower's net income for
such fiscal year.
(n) Change in Ownership/Management. At any time from the date hereof,
both of the following shall have occurred (i) Richard Smith, his estate, Susan
Smith and David Smith shall, in the aggregate, fail or cease to maintain the
ownership of twenty (20%) percent of the voting stock of the Borrower and (ii)
Richard Smith fails to remain in a reasonably active full time capacity in the
management of the Borrower.
(o) Intentionally Omitted.
(p) Hazardous Material. The Borrower, each Guarantor and each
Subsidiary of the Borrower or a Guarantor shall not cause any property owned or
occupied by the Borrower, any Guarantor or any such Subsidiary to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance with all
applicable federal, state and local laws or regulations nor shall the Borrower,
any Guarantor or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Borrower, any
Guarantor or any such Subsidiary or any tenant or subtenant, a release of
Hazardous Materials onto any property owned or occupied by the Borrower, any
Guarantor or any such Subsidiary or onto any other property. The Borrower, each
Guarantor and each such Subsidiary shall not fail to comply with all applicable
federal, state and local laws, ordinances, rules and regulations, whenever and
by whomever triggered, and shall not fail to obtain and comply with, any and all
approvals, registrations or permits required thereunder. The Borrower and the
Guarantors shall execute any documentation required by the Bank in connection
with the representations, warranties and covenants contained in this paragraph
and Section 4.01 of this Agreement.
SECTION 5.03. Financial Requirements. So long as any amount shall
remain outstanding under the Term Loan Note, the Revolving Credit Note or the
Converted Term Loan Note or so long as the Commitment shall remain in effect:
(a) Funds Flow to Total Debt Ratio. The Borrower will
maintain at all times a Funds Flow to Total Debt Ratio of not less
than 0.20 to 1.00.
<PAGE>
(b) Minimum Consolidated Tangible Net Worth plus Consolidated
Subordinated Debt. The Borrower will maintain at all times a Consolidated
Tangible Net Worth plus Consolidated Subordinated Debt of not less than
$1,000,000.00.
(c) Consolidated Capital Expenditures. The Borrower will not make
Consolidated Capital Expenditures in excess of $2,000,000.00 in the aggregate
during any fiscal year.
(d) Total Unsubordinated Liabilities to Adjusted Net Worth plus
Subordinated Debt Ratio. The Borrower will maintain at all times a Total
Unsubordinated Liabilities to Adjusted Net Worth plus Subordinated Debt Ratio of
not greater than 3.00 to 1.00.
(e) Quick Asset Ratio. The Borrower will at all times maintain a Quick
Asset Ratio of not less than 0.50 to 1.00.
(f) Leverage Ratio. The Borrower will maintain a Leverage Ratio of not
greater than 1.25 to 1.00 from the date of this Agreement until December 30,
1997; and 1.00 to 1.00 from December 31, 1997 and thereafter.
(g) Interest Coverage Ratio. The Borrower will maintain at all times an
Interest Coverage Ratio of not less than 3.00 to 1.00.
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of
principal of, or interest on, the Term Loan Note, the Revolving Credit Note or
the Converted Term Loan Note, or any fees or other amounts owed in connection
with this Agreement within five (5) days of the date when due; or
(b) Any representation or warranty made by the Borrower or any
Guarantor herein or in the Loan Documents or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower or any Guarantor shall fail to perform (i)
any term, covenant or agreement contained in Section 5.01 of this Agreement
within fifteen (15) days after notice of such failure has been given to the
Borrower by the Bank or (ii) any other term, covenant, or agreement contained in
this Agreement in any other Loan Document (other than the Notes); or
(d) The Borrower, any Guarantor, or any Subsidiary of the
Borrower or a Guarantor shall fail to pay (i) any other Debt owing to the Bank
or (ii) one or more other Debts in excess of $50,000.00 in principal amount in
the aggregate (excluding Debt evidenced by the Notes) of the Borrower, any
Guarantor or any such Subsidiary (as the case may be), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(e) The Borrower, any Guarantor or any Subsidiary of the
Borrower or a Guarantor shall generally not pay its Debts as such Debts become
<PAGE>
due, or shall admit in writing its inability to pay its Debts generally, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Borrower, any Guarantor or any such
Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its Debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property and if instituted
against the Borrower, any Guarantor or any such Subsidiary shall remain
undismissed for a period of 90 days; or the Borrower, any Guarantor or any such
Subsidiary shall take any action to authorize any of the actions set forth above
in this subsection (e); or
(f) Any judgment or order or combination of judgments or
orders for the payment of money, in excess of $500,000.00 in the aggregate,
which sum shall not be subject to full, complete and effective insurance
coverage, shall be rendered against the Borrower, any Guarantor or any
Subsidiary of the Borrower or a Guarantor and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) Any Guarantor shall fail to perform or observe any term or
provision of its Guaranty or any representation or warranty made by any
Guarantor in connection with such Guarantor's Guaranty shall prove to have been
incorrect in any material respect when made; or
(h) Any of the following events occur or exist with respect to
the Borrower, any Guarantor, any Subsidiary of the Borrower or a Guarantor, or
any ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any
Reportable Event with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution of the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization insolvency, or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Bank subject the Borrower, any
Guarantor, any such Subsidiary or any ERISA Affiliate to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise
<PAGE>
(or any combination thereof) which in the aggregate exceeds or may exceed
$500,000.00.
(i) This Agreement or any other Loan Document, at any time
after its execution and delivery and for any reason, ceases to be in full force
and effect or shall be declared to be null and void, or the validity or
enforceability of any document or instrument delivered pursuant to this
Agreement shall be contested by the Borrower, any Guarantor or any party to such
document or instrument or the Borrower, any Guarantor or any party to such
document or instrument shall deny that it has any or further liability or
obligation under any such document or instrument; or
(j) An event of default specified in any Loan Document other
than this Agreement shall have occurred and be continuing.
SECTION 6.02. Remedies on Default. Upon the occurrence and continuance
of an Event of Default the Bank may by notice to the Borrower, (i) terminate the
Commitment, (ii) declare the Term Loan Note, the Revolving Credit Note, the
Converted Term Loan Note, all interest thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Commitment
shall be terminated, the Term Loan Note, the Revolving Credit Note, the
Converted Term Loan Note, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower and (ii) proceed to enforce its rights whether by suit in equity or by
action at law, whether for specific performance of any covenant or agreement
contained in this Agreement or any Loan Document, or in aid of the exercise of
any power granted in either this Agreement or any Loan Document or proceed to
obtain judgment or any other relief whatsoever appropriate to the enforcement of
its rights, or proceed to enforce any other legal or equitable right which the
Bank may have by reason of the occurrence of any Event of Default hereunder or
under any Loan Document, provided, however, upon the occurrence of an Event of
Default referred to in Section 6.01(e), the Commitment shall be immediately
terminated, the Term Loan Note, the Revolving Credit Note and the Converted Term
Loan Note, all interest thereon and all other amounts payable under this
Agreement shall be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower. Any amounts collected pursuant to action taken under this
Section 6.02 shall be applied to the payment of, first, any costs incurred by
the Bank in taking such action, including but without limitation attorneys fees
and expenses, second, to payment of the accrued interest on the Term Loan Note,
<PAGE>
the Revolving Credit Note and the Converted Term Loan Note, and third, to
payment of the unpaid principal of the Term Loan Note, the Revolving Credit Note
and the Converted Term Loan Note.
SECTION 6.03. Remedies Cumulative. No remedy conferred upon or reserved
to the Bank hereunder or in any Loan Document is intended to be exclusive of any
other available remedy, but each and every such remedy shall be cumulative and
in addition to every other remedy given under this Agreement or any Loan
Document or now or hereafter existing at law or in equity. No delay or omission
to exercise any right or power accruing upon any Event of Default shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Bank to exercise any remedy reserved
to it in this Article VI, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required in this Agreement or in any
Loan Document.
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments. Etc. No amendment, modification, termination
or waiver of any provision of any Loan Document to which the Borrower or any
Guarantor is a party, nor consent to any departure by the Borrower or any
Guarantor from any Loan Document to which it is a party, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed, telegraphed, sent by facsimile or delivered, if to the Borrower or
any Guarantor, at the address of the Borrower set forth at the beginning of this
Agreement to the attention of Gary P. Stevens, President and Chief Financial
Officer, with a copy to (i) Richard Smith, 6 Turtle Cove Lane, Kings Point, New
York 11024 and (ii) Benjamin Raphan, Esq., Tenzer, Greenblatt, Fallon and
Kaplan, 405 Lexington Avenue, New York, New York 10174 and if to the Bank, at
the address of the Bank set forth at the beginning of this Agreement to the
attention of Integrated Brands Inc. Relationship Manager, or, as to each party,
at such other address as shall be designated by such party in a written notice
complying as to delivery with the terms of this Section 7.02 to the other
parties. All such notices and communications shall be effective when mailed,
telegraphed or delivered, except that notices shall not be effective until
received.
SECTION 7.03. No Waiver, Remedies. No failure on the part of the Bank
to exercise, and no delay in exercising, any right, power or remedy under any
Loan Document, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 7.04. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the preparation,
execution, delivery and administration of this Agreement, the Term Loan Note,
the Revolving Credit Note, the Converted Term Loan Note and any other Loan
Documents, including, without limitation, the fees and expenses of counsel for
the Bank with respect thereto and with respect to advising the Bank as to its
rights and responsibilities under this Agreement, and all costs and expenses, if
<PAGE>
any (including counsel fees and expenses), in connection with the enforcement of
this Agreement, the Term Loan Note, the Revolving Credit Note, the Converted
Term Loan Note and any other Loan Documents. The Borrower shall at all times
protect, indemnify, defend and save harmless the Bank from and against any and
all claims, actions, suits and other legal proceedings, and liabilities,
obligations, losses, damages, penalties, judgments, costs, expenses or
disbursements which the Bank may, at any time, sustain or incur by reason of or
in consequence of or arising out of the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. The Borrower
acknowledges that it is the intention of the parties hereto that this Agreement
shall be construed and applied to protect and indemnify the Bank against any and
all risks involved in the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, all of which risks are
hereby assumed by the Borrower, including, without limitation, any and all risks
of the acts or omissions, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority, provided that the
Borrower shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Bank's gross negligence or willful misconduct.
The provisions of this Section 7.04 shall survive the payment of the Notes and
the termination of this Agreement.
SECTION 7.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower or any Guarantor against any
and all of the obligations of the Borrower or any Guarantor now or hereafter
existing under this Agreement and the Term Loan Note, the Revolving Credit Note
and the Converted Term Loan Note, irrespective of whether or not the Bank shall
have made any demand under this Agreement or the Revolving Credit Note or the
Term Loan Note. The rights of the Bank under this Section are in addition to all
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
SECTION 7.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, the Guarantors and the Bank
and thereafter it shall be binding upon and inure to the benefit of the
Borrower, the Guarantors and the Bank and their respective successors and
assigns, except that neither the Borrower nor any Guarantor shall have any right
to assign its rights hereunder or any interest herein without the prior written
consent of the Bank.
<PAGE>
SECTION 7.07. Further Assurances. The Borrower and each Guarantor agree
at any time and from time to time at its expense, upon request of the Bank or
its counsel, to promptly execute, deliver, or obtain or cause to be executed,
delivered or obtained any and all further instruments and documents and to take
or cause to be taken all such other action the Bank may deem desirable in
obtaining the full benefits of this Agreement.
SECTION 7.08. Section Headings, Severability, Entire Agreement. Section
and subsection headings have been inserted herein for convenience only and shall
not be construed as part of this Agreement. Every provision of this Agreement
and each Loan Document is intended to be severable; if any term or provision of
this Agreement, any Loan Document, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All exhibits and
schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement and the exhibits and schedules attached
hereto embody the entire Agreement and understanding between the Borrower, the
Guarantors and the Bank and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 7.09. Governing Law. This Agreement, the Term Loan Note, the
Revolving Credit Note and the Converted Term Loan Note and all other Loan
Documents shall be governed by, and construed in accordance with, the laws of
the State of New York.
SECTION 7.10. Waiver of Jury Trial. The Borrower, each Guarantor and
the Bank waive all rights to trial by jury on any cause of action directly or
indirectly involving the terms, covenants or conditions of this Agreement or any
Loan Document.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Second Amendment Agreement as of the year and date first above written.
INTEGRATED BRANDS INC.
By_____________________________
Name: Gary P. Stevens
Title: President
SWENSEN'S, INC.
By______________________________
Name: Gary P. Stevens
Title: Vice President
SWENSEN'S ICE CREAM COMPANY
By_______________________________
Name: Gary P. Stevens
Title: Vice President
CHEMICAL BANK
By______________________________
Name: Frederick Gatto
Title: Vice President
<PAGE>
EXHIBIT A
TERM LOAN NOTE
Garden City, New York
$4,500,000.00 March 8, 1996
FOR VALUE RECEIVED, INTEGRATED BRANDS INC., a New Jersey corporation,
having its principal place of business at 4175 Veteran's Memorial Highway,
Ronkonkoma, New York 11779 (the "Borrower") promises to pay to the order of
CHEMICAL BANK ("Bank") at its office located at 1 Pierrepont Plaza, Brooklyn,
New York 11201, the principal amount of FOUR MILLION FIVE HUNDRED THOUSAND
($4,500,000.00) DOLLARS, or, if less, the unpaid principal amount of the Term
Loan (as defined in the Agreement, as defined below) made by the Bank to the
Borrower pursuant to the Agreement.
The principal balance of this Note shall be payable in twenty (20)
quarterly principal installments, due on the first Business Day of each calendar
quarter, commencing on April 1, 1996, the first nineteen (19) of such
installments being in the principal amount of $140,000.00 and the twentieth
(20th) such installment being in the remaining principal amount of this Note.
Borrower shall pay interest on the unpaid principal balance of this
Note from time to time outstanding, at said office at the rates of interest, at
the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made in lawful
money of the United States of America in immediately available funds. Except as
otherwise provided in the Agreement, if a payment becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and interest shall be payable thereon at the rate
herein specified during such extension.
This Note is the Term Loan Note referred to in that certain Loan
Agreement among Borrower, certain Guarantors and Bank dated as of December 23,
1994 as amended and restated as of March 8, 1996 (the "Agreement"), as such
Agreement may be further amended from time to time, and is subject to prepayment
and its maturity is subject to acceleration upon the terms contained in said
Agreement. All capitalized terms used in this Note and not defined herein shall
have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note or
enforce any of its provisions, Borrower further agrees to pay all costs and
<PAGE>
expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim
(other than mandatory counterclaims) in any such action or proceeding. Borrower
hereby submits to the jurisdiction of the Supreme Court of the State of New York
and agrees with Bank that personal jurisdiction over Borrower shall rest with
the Supreme Court of the State of New York for purposes of any action on or
related to this Note, the liabilities, or the enforcement of either or all of
the same. Borrower hereby waives personal service by manual delivery and agrees
that service of process may be made by postpaid certified mail directed to
Borrower at Borrower's address designated in the Agreement or at such other
address as may be designated in writing by Borrower to Bank in accordance with
Section 7.02 of the Agreement, and that upon mailing of such process such
service be effective with the same effect as though personally served. Borrower
hereby expressly waives any and every right to a trial by jury in any action on
or related to this Note, the liabilities or the enforcement of either or all of
the same.
Bank may transfer this Note and may deliver the security or any part
thereof to the transferee or transferees, who shall thereupon become vested with
all the powers and rights above given to Bank in respect thereto, and Bank shall
thereafter be forever relieved and fully discharged from any liability or
responsibility in the matter. The failure of any holder of this Note to insist
upon strict performance of each and/or all of the terms and conditions hereof
shall not be construed or deemed to be a waiver of any such term or condition.
Borrower authorizes Bank to complete this Note as to any terms not set
forth herein at the time of delivery hereof.
Borrower and all endorsers and guarantors hereof waive presentment and
demand for payment, notice of non-payment, protest, and notice of protest.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
INTEGRATED BRANDS INC.
By_____________________________
Name: Gary P. Stevens
Title: President
<PAGE>
EXHIBIT B
REVOLVING CREDIT NOTE
$7,500,000.00 Garden City, New York
March 8, 1996
FOR VALUE RECEIVED, on December 31, 1997, INTEGRATED BRANDS INC., a New
Jersey corporation, having its principal place of business at 4175 Veteran's
Memorial Highway, Ronkonkoma, New York 11779 (the "Borrower"), promises to pay
to the order of CHEMICAL BANK ("Bank") at its office located at 1 Pierrepont
Plaza, Brooklyn, New York 11201, the principal sum of the lesser of: (a) Seven
Million Five Hundred Thousand ($7,500,000.00) Dollars; or (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by Bank to Borrower
pursuant to the Agreement (as defined below).
Borrower shall pay interest on the unpaid principal balance of this
Note from time to time outstanding, at said office, at the rates of interest, at
the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made in lawful
money of the United States of America in immediately available funds. Except as
otherwise provided in the Agreement, if a payment becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and interest shall be payable thereon at the rate
herein specified during such extension.
Borrower hereby authorizes Bank to enter from time to time the amount
of each Loan to Borrower and the amount of each payment on a Loan on the
schedule annexed hereto and made a part hereof. Failure of Bank to record such
information on such schedule shall not in any way effect the obligation of
Borrower to pay any amount due under this Note.
This Note is the Revolving Credit Note referred to in that certain Loan
Agreement among Borrower, certain Guarantors, and Bank dated December 23, 1994,
as amended and restated as of March 8, 1996 (the "Agreement"), as such Agreement
may be further amended from time to time, and is subject to prepayment and its
maturity is subject to acceleration upon the terms contained in said Agreement.
All capitalized terms used in this Note and not defined herein shall have the
meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note or
enforce any of its provisions, Borrower further agrees to pay all costs and
<PAGE>
expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim
(other than mandatory counterclaims) in any such action or proceeding. Borrower
hereby submits to the jurisdiction of the Supreme Court of the State of New York
and agrees with Bank that personal jurisdiction over Borrower shall rest with
the Supreme Court of the State of New York for purposes of any action on or
related to this Note, the liabilities, or the enforcement of either or all of
the same. Borrower hereby waives personal service by manual delivery and agrees
that service of process may be made by post-paid certified mail directed to the
Borrower at the Borrower's address set forth above or at such other address as
may be designated in writing by the Borrower to Bank in accordance with Section
7.02 of the Agreement, and that upon mailing of such process such service be
effective with the same effect as though personally served. Borrower hereby
expressly waives any and every right to a trial by jury in any action on or
related to this Note, the liabilities or the enforcement of either or all of the
same. Bank may transfer this Note and may deliver the security or any part
thereof to the transferee or transferees, who shall thereupon become vested with
all the powers and rights above given to Bank in respect thereto, and Bank shall
thereafter be forever relieved and fully discharged from any liability or
responsibility in the matter. The failure of any holder of this Note to insist
upon strict performance of each and/or all of the terms and conditions hereof
shall not be construed or deemed to be a waiver of any such term or condition.
Borrower and all endorsers and guarantors hereof waive presentment and
demand for payment, notice of non-payment, protest, and notice of protest.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
INTEGRATED BRANDS INC.
By___________________________
Name: Gary P. Stevens
Title: President
<PAGE>
Schedule of Revolving Credit Loans
----------------------------------
Amount of
Principal Unpaid Name of
Making Amount of Paid or Principal Person Making
Date Loan Prepaid Balance Notation
---- ---- ------- ------- --------
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
<PAGE>
EXHIBIT C
CONVERTED TERM LOAN NOTE
Brooklyn, New York
$__________________ ______________, 199_
FOR VALUE RECEIVED, INTEGRATED BRANDS INC., az New Jersey
corporation, having its principal place of business at 4175 Veteran's Memorial
Highway, Ronkonkoma, New York 11779 (the "Borrower") promises to pay to the
order of CHEMICAL BANK ("Bank") at its office located at 1 Pierrepont Plaza,
Brooklyn, New York 11201, the principal amount of _____________________________
($_________________ ) DOLLARS, or, if less, the unpaid principal amount of the
Converted Term Loan (as defined in the Agreement, as defined below) made by the
Bank to the Borrower pursuant to the Agreement.
The principal balance of this Note shall be payable in twenty
(20) equal quarterly principal installments, due on the first Business Day of
each calendar quarter, commencing on the first Business Day of the first quarter
which begins after the date hereof, each such installment being in an amount
equal to one-twentieth (1/20th) of the original principal amount of this Note.
Borrower shall pay interest on the unpaid principal balance of
this Note from time to time outstanding, at said office at the rates of
interest, at the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made
in lawful money of the United States of America in immediately available funds.
Except as otherwise provided in the Agreement, if a payment becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be payable
thereon at the rate herein specified during such extension.
This Note is the Converted Term Loan Note referred to in that
certain Loan Agreement among Borrower, certain Guarantors and Bank dated as of
December 23, 1994 and amended and restated as of March 8, 1996 (the
"Agreement"), as such Agreement may be further amended from time to time, and is
subject to prepayment and its maturity is subject to acceleration upon the terms
contained in said Agreement. All capitalized terms used in this Note and not
defined herein shall have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note
or enforce any of its provisions, Borrower further agrees to pay all costs and
<PAGE>
expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim
(other than mandatory counterclaims) in any such action or proceeding. Borrower
hereby submits to the jurisdiction of the Supreme Court of the State of New York
and agrees with Bank that personal jurisdiction over Borrower shall rest with
the Supreme Court of the State of New York for purposes of any action on or
related to this Note, the liabilities, or the enforcement of either or all of
the same. Borrower hereby waives personal service by manual delivery and agrees
that service of process may be made by postpaid certified mail directed to
Borrower at Borrower's address designated in the Agreement or at such other
address as may be designated in writing by Borrower to Bank in accordance with
Section 7.02 of the Agreement, and that upon mailing of such process such
service be effective with the same effect as though personally served. Borrower
hereby expressly waives any and every right to a trial by jury in any action on
or related to this Note, the liabilities or the enforcement of either or all of
the same.
Bank may transfer this Note and may deliver the security or
any part thereof to the transferee or transferees, who shall thereupon become
vested with all the powers and rights above given to Bank in respect thereto,
and Bank shall thereafter be forever relieved and fully discharged from any
liability or responsibility in the matter. The failure of any holder of this
Note to insist upon strict performance of each and/or all of the terms and
conditions hereof shall not be construed or deemed to be a waiver of any such
term or condition.
Borrower authorizes Bank to complete this Note as to any terms
not set forth herein at the time of delivery hereof.
Borrower and all endorsers and guarantors hereof waive
presentment and demand for payment, notice of non-payment, protest, and notice
of protest.
This Note shall be construed in accordance with and governed
by the laws of the State of New York.
INTEGRATED BRANDS INC.
By_____________________________
Name:
Title:
<PAGE>
EXHIBIT 22.1
LIST OF THE COMPANY'S SUBSIDIARIES
Swensen's Inc.
Swensen's Ice Cream Company
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
INTEGRATED BRANDS INC.
Ronkonkoma, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-98194) of
our reports dated April 2, relating to the consolidated financial statements
and schedule of Integrated Brands Inc. appearing in the Company's Annual
Report on Form 10-K for the year ended December 30, 1995.
We also consent to the references to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Mitchel Field, New York
April 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Form 10-K
for December 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 2,086,000
<SECURITIES> 0
<RECEIVABLES> 4,416,000
<ALLOWANCES> 0
<INVENTORY> 2,089,000
<CURRENT-ASSETS> 10,616,000
<PP&E> 1,103,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,377,000
<CURRENT-LIABILITIES> 7,480,000
<BONDS> 0
0
0
<COMMON> 124,000
<OTHER-SE> 13,310,000
<TOTAL-LIABILITY-AND-EQUITY> 26,377,000
<SALES> 32,382,000
<TOTAL-REVENUES> 37,969,000
<CGS> 20,273,000
<TOTAL-COSTS> 36,777,000
<OTHER-EXPENSES> 252,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252,000
<INCOME-PRETAX> 1,192,000
<INCOME-TAX> 479,000
<INCOME-CONTINUING> 713,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 713,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .00
</TABLE>
