U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
Commission file number 0-19721
SARATOGA BRANDS INC.
(Name of small business issuer in its charter)
New York 13-3413467
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification no.)
1835 Swarthmore Avenue, Lakewood, New Jersey 08701
(Address of principal executive offices) (Zip Code)
(732) 363-3800
(Issuer's telephone number)
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Securities registered under section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
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(Title of class)
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 |_|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is met contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. ( )
State issuer's revenues for its most recent fiscal year: Revenues for the fiscal
year ended December 31, 1997 were $13,712,800
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act).
Note; If determining whether a person is an affiliate will involve unreasonable
effort and expense, the issuer may calculate the aggregate market value of the
common equity held by non-affiliates on the basis of reasonable assumptions, if
the assumptions are stated.
The aggregate market value of the voting stock held by non-affiliates as of
February 25, 1998 was $7,034,975.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d)of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes .......No ....... N/A
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 4,776,967 (as of February 28, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X|.
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PART 1
Item 1. Business
Description of business
Saratoga Brands Inc. (the "Company") is a New York corporation,
headquartered in Lakewood, New Jersey. Saratoga has two principal business
lines: (i) producing and importing specialty cheeses and Italian foods (the
"cheese business") and (ii) producing and distributing delicatessen and snack
foods to mobile caterers (the "catering business") and convenience stores (the
"deli business"). In July 1996, the Board of Directors of Saratoga had
determined that due to the differences between the operations of the cheese
business and the deli business, shareholder value would be enhanced by
separating the two businesses. Saratoga therefore formed Mobile Caterers, Inc.
("Mobile") and contributed all of the stock of the two subsidiaries which
operate the deli business, Deli King, Inc. ("Deli King") and JR's Delis, Inc.
("JR's"), to Mobile. The Company filed a registration statement with the
Securities and Exchange Commission on March 14, 1997, with the intention that
upon approval of the filing the Company would distribute 100% of the stock in
Mobile to the current Company shareholders. The Board of Directors subsequently
determined (in July 1997) that the spin-off of Mobile Caterers, Inc. was not in
the best interest of the Company and its shareholders. Accordingly, the Company
has terminated the registration of Mobile Caterers, Inc.'s common stock by
filing Form-15-12G with the Securities and Exchange Commission.
The Company's cheese business, Cucina Classica Italiana, Inc. ("CCI"),
engaged in the production, importation and distribution of premium cheeses and
Italian foods, is located at the Company's headquarters in Lakewood, New Jersey.
Mobile operates in a 28,000 square foot facility located in West Warwick,
Rhode Island. From this facility, often referred to as a commissary, Mobile
produces "prepared foods" such as sandwiches, soups, salads, pasta, baked goods
and other entrees, and distribute these products along with delicatessen and
other food items such as snacks and beverages. Mobile sells these products to
mobile catering truck customers and provides support services to these customers
as well. Additionally, Mobile sells the same food products to more than 575
convenience stores and retail outlets in Rhode Island, Massachusetts and
Connecticut. The mobile catering and wholesale division's of Mobile generate
approximately 75% and 25%, respectively, of Mobile's revenues.
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Products.
The Cheese Business. CCI is a leading producer of specialty Italian
cheeses and Greek-style Feta and a major importer of Italian specialty cheeses,
and Prosciutto di Parma (Italian ham). CCI distributes its products nationally
with its heaviest areas of distribution located on the East and West Coasts of
the U.S. Its customers are other importers and large distributors who sell to
smaller distributors and retail accounts. Sixty five percent of sales are food
service; i.e., sales to restaurants, airlines, cruise ships.
CCI markets Italian specialty and Greek-style Feta cheeses. Bel Paese(R)
is a semi-soft natural cheese, manufactured in 5 lb. bulk wheels and 6 oz. mini
wheels, in several flavors such as Basil and Sun-dried Tomatoes. Greek-style
Feta cheese and Feta flavored with dill, oregano, sun-dried tomatoes and basil,
and with peppercorn are produced in random and in exact weight portions. Freshly
grated and shredded Romano and Parmesan cheeses are also produced by CCI and are
sold in consumer-sized cups. Dry grated Parmesan and Romano are available in
canisters under the Cucina Classica Italiana(R) brand. CCI produces annually
325,000 pounds of Bel Paese(R) and 110,000 pounds of Feta.
Galbani(R) Mascarpone and Bel Paese(R) Medallions are CCI's imported
products. 875,000 pounds of Galbani Mascarpone, a specialty dessert cheese was
imported in 1997. CCI controls more than 50% of the nation's imported Mascarpone
sales. In 1997 the company imported 250,000 pounds or approximately four and one
half million individual medallions of Bel Paese Process Medallions, a soft,
spreadable cheese.
Prosciutto di Parma and Gorgonzola Dolcelatte(R), the Italian blue-mold
cheese, round out the line with 1997 imports of 20,000 pounds and 32,000 pounds,
respectively.
From other Italian exporters, CCI also imports Parmigiano Reggiano, Grana
Padano, and Pecorino Romano (are sold in whole wheels, pre-cut portions or
freshly grated in deli cups).
The Mobile Catering and Convenience Store Business. Mobile produces
approximately seventy percent of the prepared foods sold by the Company, and
this production consists of approximately 60% sandwiches and 40% soup, pasta or
other entrees. Sandwiches are produced fresh daily based on previous day orders
from the mobile catering customers and weekly orders from the convenience store
customers. Each sandwich is produced individually as part of a production run by
sandwich type, using recipes developed by the Company, to ensure the consistency
of proper quantity and quality of ingredients.
Soups, pastas and other entrees are prepared in bulk and then packaged in
individual portion size containers. The in-house prepared food products provide
the largest profit margin of the Company's products. The bulk of the remaining
30% of the prepared foods are purchased from
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third parties and are frozen. These frozen items provide the Company's second
largest profit margin.
The Company's bakery produces 30% of the pastries and Danish sold, with
the remaining products originating from other local bakeries and larger local
and national suppliers.
The remaining products include beverages, snacks and candy. Beverage
products include such national brands as Coca-Cola, 7-Up, Dr. Pepper and various
others, including mineral waters, fruit juices, iced tea and hot tea and coffee.
Mobile Catering Business - This division of Mobile derives revenues from
three principal activities: the sale of prepared foods, snacks, beverages and
supplies (ice, containers, plastic utensils, etc.); to independent catering
operators; the operation of a mobile catering truck service facility and the
rental of catering routes and trucks.
The Company believes that approximately 70% of the area mobile catering
truck operators obtain their goods from Mobile's West Warwick, Rhode Island
facility. Mobile has operated in this area since 1985. Approximately 35% of Deli
King's sales consist of products produced under the one of the Company's brand
names at the Company's kitchen and bakery. The remaining sales consist of
approximately 15% third party prepared foods, 10% purchased snacks and 40%
beverages. As is customary in the business, the mobile catering operators place
orders at the end of each day to be picked up the following morning and paid
primarily in cash.
The mobile catering division's customers are all mobile catering
operators. These mobile caterers include persons operating their own vehicles on
their own routes; persons operating their own vehicles on routes rented from
Mobile; and persons renting one of the 27 catering trucks owned by Mobile for
use on their own routes or routes rented from Mobile. The mobile caterer must
pay a fixed amount per week for routes rented from the Company and a weekly
rental for the use of catering trucks owned by the Company. These operators are
independent from the Company. Mobile served approximately 60 mobile catering
trucks as of December 31, 1997.
Mobile controls 30 catering routes which it "rents" to operators for a
weekly fee. These controlled routes, which are also referred to as owned routes,
represent an established series of regular stops served by the same vehicle.
Each stop is usually a business where the employees depend on the caterer for
their snacks, beverages or meals. In some areas, where the business is located
some distance from any restaurant or market, the mobile caterer may be the only
source of food and drink items during the workday.
In addition to supplying the mobile caterers with food, drink and
the related supplies, Mobile has a full service facility staffed with mechanics
for the maintenance and repair of mobile catering vehicles and equipment. The
facility is able to service and repair equipment used for mobile refrigeration,
food warming and hot beverage brewing.
Convenience Store Business - This division of Mobile sells the same food
products as the mobile catering division to more than 575 convenience stores and
retail outlets in Rhode Island,
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Massachusetts, New Hampshire and Connecticut. These products include sandwiches
prepared in the commissary and other products supplied by third parties
including cold cuts, cheeses, muffins, cakes, cookies, candies, snacks such as
jerky, pretzels and nuts and bottled beverages. Mobile's products have shelf
lives from seven days to six months. Mobile's sales force includes driver-sales
people who deliver the products in refrigerated trucks. These driver-sales
people are employees who are paid a base salary plus a 5% commission.
Approximately 40% of the wholesale division's sales are made on open account
terms with payment due in 14 days. The remaining 60% of sales are made on a cash
basis. Each driver-sales person must cash out or balance his or her cash
receipts and open account sales to inventory changes on a daily basis. The
wholesale division operates five trucks.
New Products and Expansion.
CCI is continually seeking to expand its product line by either producing
or importing new products. Early in 1997 CCI introduced a six-ounce "mini-wheel"
of its popular Bel Paese(R) Italian Cheese into more than 575 retail stores
including major chains such as A&P, Stop `n Shop, Publix, and Kroger's. Until
the introduction of the "mini" the cheese was marketed in five-pound wheels,
primarily to Italian specialty stores and upscale supermarkets which either cut
it to order for the customer or precut it into 6 to 10 ounce wedges for
presentation in the dairy case. The new presentation of the product has
generated wider market acceptance.
Mobile is constantly seeking new food and beverage products. The
preponderance of advertising for such products, which is found in most types of
media, creates consumer awareness of new items. The Company is constantly being
approached by its suppliers with new products. As a member of the Mobile
Independent Catering Association, the Company receives publications and attends
trade shows, which present potential new products.
At the present time, the Company's kitchen and bakery operate at
capacities of approximately 35% and 20%, respectively. Management believes that
the Company will maintain its current competitive position and that the mobile
catering business can be expanded by opening additional distribution locations.
Such satellite operations would be located beyond a 30-mile radius from the
current facility. Any new locations would operate as distribution and service
facilities where third party products would be warehoused. Prepared foods
produced in the current kitchen and bakery would be shipped to any such new
location. Management estimates that the production capacity of the current
location can supply up to three satellite operations. While management believes
implementation of such growth plans is feasible, no assurance can be given as to
the success of any efforts to expand.
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Competitive Position.
The Cheese Business. CCI maintains a strong presence in the Italian
specialty food market. CCI offers trade promotions to its major customers,
provides point-of-sale materials to help product sell-through at the retail
level, offers consumers various incentives to buy its products and uses consumer
and trade media increase product awareness nationwide.
Mobile catering business - Management believes that Mobile has
approximately 70% of the mobile catering business in the geographic area it
serves. Maintenance of its customer base is dependent on the ability of Mobile
to provide superior service and reliability. The underlying relationship of the
mobile caterer with its customers is dependent on service, reliability
(customers expect the catering trucks to arrive within a few minutes of the same
time each day) and on product selection and quality. The Company employs route
managers whose function is to review the performance of the mobile caterers as
it relates to their service and reliability. The goal is to ensure that the
Company's quality standards are kept at high levels.
Management recognizes that some mobile caterers provide their own
sandwiches and other entree items by preparing them in their home kitchens, and
that they provide soft drinks, candy and other items by purchasing them from
large discount retail outlets. Management believes that these caterers make up
an insignificant percentage of the remaining 30% of the market. Management
believes that substantially all of the remaining 30% of the mobile catering
market are supplied by only one other commissary, Freeman's Catering in
Providence, Rhode Island.
Time is a valuable commodity to the mobile caterer. For that reason,
drivers are limited in the distance they can travel from their route area to
obtain their products. Management believes that for this reason the mobile
caterer must choose between Mobile and its one major competitor. Due to the high
cost of opening a new facility and the small number of persons with the
expertise necessary for such an undertaking, there is little likelihood that
another competitor will enter the market.
Convenience Store Business - Mobile is one of the three companies competing for
the convenience store business in the six New England states. While the two
competitors of Mobile, Stewart Foods, Inc. and On-a-Roll, Inc., are estimated to
be approximately the same size as Mobile's wholesale division, only Mobile
offers a full line of snacks, baked goods, beverages and other food items in
addition to fresh sandwiches. Management believes that convenience store
operators prefer the efficiency of dealing with Mobile rather than with its
sandwich-only competitors.
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Raw Materials.
The raw materials or ingredients used in Mobile's products are available
from many suppliers. The deli business has a core group of 50 vendors with which
it has developed good relationships. Because of the large number of potential
suppliers in the food and beverage industry, the Company is not dependent on any
one supplier. The prepared food ingredients include many well-known national
brands such as Oscar Meyer, Kayem, Boars Head, Dubuque and Louis Rich
(lunchmeats) and Heinz and Kraft dressings and spreads.
Product Line Exclusivity License & Trademark Agreements.
CCI is the exclusive U.S. importer of the Galbani line of Italian
specialty cheeses and pork products. Egidio Galbani, S.p.A. of Milan, Italy, is
a major force in the European Dairy Market with an annual sales volume of about
2 billion dollars and is a subsidiary of GROUPE DANONE, with an annual sales
volume of approximately 15 billion dollars.
CCI has the exclusive right to import Galbani products into the U.S., and
is the only company worldwide with the license to manufacture cheeses bearing
the Galbani trademarks. The Product Exclusivity and License to Manufacture
Agreements are granted in a contract which runs through the end of the year 2000
when it will be subject to renewal. CCI is currently negotiating with Galbani to
extend the agreement into the 21st century.
CCI's trademarks are Cucina Classica Italiana(R), Classika(R) and
Tal-Fino(R). CCI is currently applying for the trademark Classica and uses the
(TM) symbol to denote its application.
Except for prepared foods and baked goods produced by and unique to the
deli business, the deli business has no product line exclusivity or any
trademarks under its control. The products produced by the deli business may use
recipes slightly different than for those same products made elsewhere. However,
this is a benefit in that the deli business sells generic, traditional foods,
which must be prepared in a manner consistent with the common recipes for each
type of dish.
Government Regulations.
All of the Company's subsidiaries are subject to regulations of the U.S.
Department of Agriculture (USDA) and The U.S. Food and Drug Administration
(FDA).
The USDA establishes regulations for cheese identity and also oversees the
importation of meat products into the U.S. The FDA regulates cheese labeling and
has established strict guidelines regarding ingredients and nutritional
information. The State of Wisconsin has strict guidelines for its milk
production and cheese plant operations and the Wisconsin Department of Industry
and Consumer Protection reviews quarterly financial statements of the Wisconsin
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producers. The State of Rhode Island has jurisdiction over the activities of the
deli business Mobile is subject to federal, state and local health and food
regulations. These regulations generally provide standards for sanitation,
storage, food quality and grade, shelf lives and product labeling. Management
strives to keep the deli business in full compliance with these regulations.
On August 22, 1997 Mobile completed the purchase of a USDA certified
processing operation in Johnston, Rhode Island, just 10 minutes from its current
operation. The purchase was completely funded through operating cash flows. This
facility will produce meat products and "ready" meals for Mobile. It is
anticipated that the addition of these products will enhance Mobile's revenues,
as well as increase Mobile's customer base.
Research & Development.
Research and development costs relate to developing new cheeses (reduced
fat, spreadable versions of current semi-soft cheeses, new flavor extensions to
existing lines) for CCI. Research costs for both operations are minimal. In the
most recent two years, Mobile has not expended a material amount on research and
development. However, Mobile is continually looking to acquire new products from
third parties. In addition, the Company's kitchen and bakery work to develop new
products to follow industry trends although the monetary expenditure for such
efforts has been minimal to date.
Cost and Effects of Compliance with Environmental Laws.
The costs and effects of compliance with environmental laws are not
material to our operations.
Current Employees.
The company and its subsidiaries currently employ 56 persons of which 47
are full time.
Acquired businesses.
On April 26, 1996 the Company entered the mobile catering business with
the acquisition of Deli King. The acquisition of this business was effective
January 1, 1996 while the real estate and building were acquired on April 26,
1996.
On May 7, 1996, the Company acquired the assets of Dotties Caterers, Inc.
("Dotties"), a mobile catering business serving Rhode Island. Dotties was
integrated with Mobile and operates out of Mobile's facility.
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Item 2. Description of Property
CCI leases a 20,000 square foot facility at 1835 Swarthmore Avenue,
Lakewood, New Jersey 08701, of which approximately 3,000 square feet serves as
office space. This facility serves as Saratoga and CCI's headquarters as well as
a shredding and grating operation and warehouse. The facility is a fireproof
high bay warehouse located on 3.5 acres with ample expansion potential. The
warehouse contains 13,000 cubic feet of cooler space. This facility is leased
from Arthur Sommers at a basic rent of $6,642.68 per month or $79,712 annually.
The lease has a five year term, which began in 1994, with no rent escalation and
an option to renew for an additional five years at an annual rent of $91,975.
Mobile owns a 28,000 square foot building on 3.88 acres in West Warwick,
Rhode Island. The facility includes administrative and sales offices, warehouse,
frozen and cold storage space, food production areas and equipment service bays.
Mobile's leases its 2,000 square foot USDA facility at 269 Greenville
Avenue, Johnston, Rhode Island. This facility is leased from Giovanni and Lina
Conti at a basic rent of $950 per month or $11,400 annually. The lease has a
2-year term expiring on September 1, 1999, renewable for an additional 2 years
at a base rent of $975 per month or $11,700 annually.
Item 3. Legal Proceedings
The Company currently has no material legal proceedings by or against the
Company, or any of its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
None
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Shares are traded on the over-the-counter market
through the NASDAQ Small Cap Market Trading System under the symbol STGA. The
following table sets forth the range of high and low bid quotations for the
common stock for the period indicated, as reported on NASDAQ, after having given
effect to a reverse stock split of 1:3 which became
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effective November 24, 1997, as though the split had occurred prior to the
periods reported below.
The quotations are inter-dealer prices in the over-the-counter market
without retail mark-ups, markdowns or commissions, and may not represent actual
transactions.
1997 1996
Common Shares Common Shares
Period High Low High Low
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January 1 - March 31 3.9375 1.6875 13.5000 8.8125
April 1 - June 30 3.0000 0.8438 11.9064 6.7500
July 1 - September 30 1.5000 0.8906 6.9375 2.1564
October 1 - December 31 1.5638 0.8438 3.9375 1.9689
As of February 28, 1998, there were approximately 239 holders of record of
the Company's common stock.
The Company has not paid a cash dividend on its common stock since its
inception. The Company expects that for the foreseeable future, any earnings
will be retained for use in the business or other corporate purposes, and it is
not expected that cash or share dividends will be paid. However, there are no
restrictions on the payment of dividend, either by contract or regulation.
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Item 6. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Audited Consolidated Financial
Statements and related notes which are contained in Item 7 herein.
Results of Operations for the Years Ended December 31, 1997 and 1996
Net sales for the year ended December 31, 1997 were $13,712,800 compared
with $14,694,985 in 1996, a decrease of 6.7%. This decrease is primarily a
result of the elimination of unprofitable product lines. The Company generated
gross profit of $3,622,861 or 26.4% in 1997, verses 4,198,010 or 28.6% in 1996.
The decrease in gross profit margin was the a result of the reduction in product
lines which involve a unusually high amount of other operating costs, which is
reflected in the deep reduction in other operating costs.
Selling, general and administrative expenses were $2,347,337 and
$3,348,061 in 1997 and 1996, respectively. This represents a reduction of
$1,000,724 or 29.9%. This reduction is the result of a streamlining of the
operations at all levels of the Company, as well as the elimination of product
lines, which generate an excessive amount of operating costs.
Management expects gross margins to improve as the Company continues to
integrate its acquisitions and take advantage of the combined economies of scale
and to some degree the launching of new products. However, there can be no
assurance that any such improvements in the margins will be achieved. To this
end, the Company is consolidating the buying power and resources of its
subsidiaries. This consolidation was completed in fiscal 1997.
The Company reported no provision for income taxes for the years ended
December 31, 1997 as the Company's operating earnings were offset by Net
Operating Loss carryforwards.
The earnings from operations for the year ended December 31, 1997 was
$1,132,389, verses $113,842 in 1996. Additionally, the Company had earnings from
the forgiveness of a debt due five banks in the amount of $1,704,539 in 1997 and
a loss from discontinued operations of ($2,144) and ($973,469) in 1997 and 1996,
respectively. Net earnings were $2,834,784 in 1997 versus a loss of ($852,627)
in 1996. Earnings per common share were $0.72 in 1997 versus a loss of ($0.42)
in 1996 on diluted weighted average shares of 3,957,141 and 2,093,228 in 1997
and 1996, respectively.
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Liquidity and Capital Resources
The Company's sources of capital include, but are not limited to, the
issuance of public or private debt, bank borrowings and the issuance of equity
securities.
At December 31, 1997 the Company had a net worth of $3,709,377 compared
with $10,332,728 at December 31, 1996. The Company's reduction in net worth was
significantly impacted by its election to reduce its carrying value of goodwill,
and effect a Quasi Reorganization on April 1, 1997. As a more meaningful
comparison, tangible net worth (as defined by NASDAQ) at December 31, 1997 was
$3,431,877 verses a tangible net deficit of ($1,600,883) at December 31, 1996.
On April 11, 1997, 280,000 shares of Saratoga Brands Inc. common stock
were issued in payment of loans totaling $420,000. The Market Value of the
shares was $1.875 on the date of conversion. The loans converted were 8%
convertible loans; convertible to shares of common stock at 80% of market value
on the date that the conversion is requested. The shares were issued as
restricted shares in accordance with Regulation D.
The Company has a limited requirement for capital expenditures in the
immediate future. CCI's factoring arrangement with Bank of New York Financial
Corporation has adequate availability to provide working capital to support
sales growth in that division. Mobile owns real estate with a market value of
approximately $1,000,000 against which there are no loans or liens. This asset
provides adequate collateral to support borrowing for working capital needs in
that subsidiary.
In December of 1997, the Company entered into agreements to eliminate long
term loans with 5 Italian banks. See Exhibits 10(y), 10(z), 10(aa), 10(ab), and
10(ac) and Note 1 - FORGIVENESS OF DEBT to the attached financial statements for
a more detailed description of the agreements. To accomplish the above
transaction, the Company entered into a loan agreement with Summit bank to
borrow, unsecured, $300,000 at the prime rate plus 1 percent, to be repaid over
6 months out of cash flow from operations.
Management believes that the Company has sufficient working capital to
meet the needs of its current level of operations.
Anticipated Future Growth
Management believes that the future growth of the Company will be the
result of four efforts; (1) acquisition of other companies in the food and food
related industries, (2) increasing sales to existing customers by offering new
products and product lines, (3) obtaining new customers in the
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existing markets and developing new markets, and (4) controlling and containing
production, operating and administrative costs.
Forward Looking Statements
The matters discussed in this Item 6 may contain forward looking statements that
involve risk and uncertainties. The forward-looking statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Actual results may differ materially due to a variety of factors,
including without limitation the presence of competitors with broader product
lines and greater financial resources; intellectual property rights and
litigation, needs of liquidity; and the other risks detailed from time to time
in the company's reports filed with the Securities and Exchange Commission.
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Item 7. Financial Statements
Response submitted as a separate section of this report commencing on page
F-1.
Item 8. Changes in and Disagreement With Accountants on Accounting and Financial
Disclosure
None
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons
Incorporated by reference from the proxy statement, which will be filed
within 30 days of the filing of this report.
Item 10. Executive Compensation
Incorporated by reference from the proxy statement, which will be filed
within 30 days of the filing of this report.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference from the proxy statement, which will be filed
within 30 days of the filing of this report.
Item 12. Certain Relationships and Related Transactions
Incorporated by reference from the proxy statement, which will be filed
within 30 days of the filing of this report.
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Item 13. Exhibits and Reports on Form 8-K
(a) (1) and (2) The response to this portion of Item 13 is submitted as
a separate report commencing on Page F-1.
(a) (3)
Exhibit No. Description of Exhibit Note
- ----------- ---------------------- ----
3. (a) - - Certificate of Incorporation 1
(b) - - By-Laws, as amended 1
4. (a) - - Form of Warrant Agency Agreement between 1
Registrant Thomas James Associates, Inc. and
American Stock Transfer & Trust Company with
attached form of Warrant
(b) - - Form of Private Placement I Warrant 1
(c) - - Form of Private Placement II Warrant 1
(d) - - Form of Private Placement Warrant 1
10. (a) - - Lease agreement between Saratoga Brands and Hoffman Investors 1
Corp. dated August 18, 1992
(b) - - Amended Employment Agreement between Registrant 1
and Daniel J. Feld dated January 26, 1994
(c) - - Option Agreement, as amended between Registrant 1
and Daniel J. Feld respecting 77,949 (as adjusted)
Common Shares
(d) - - Incentive Option Plan dated June 12, 1991 1
(e) - - Form of Incentive Stock Option contract 1
(f) - - Restricted Stock Purchase Agreement 1
(g) - - Factoring Agreement dated October 23, 1992 between 1
Saratoga Brands Inc. and Platinum Funding Corp.
(h) - - Form of Owner Operator distributor Agreement 1
(i) - - Form of Agreement between the Company and holder of the 11% 1
subordinated Notes and Warrants to purchase common shares
(j) - - Asset Purchase Agreement, dated as of January 5, 1994, between 1
Saratoga Brands Inc. and Mellons Limited
(k) - - Voting and Limitation of Transfer Agreement between Daniel J. 2
Feld, Registrant and Mellons, Limited.
(l) - - Amended and Restated Employment Agreement between Registrant 2
and Daniel J. Feld
15
<PAGE>
(m) - - Non-Compete Agreement between the Registrant and Agama, Inc. 2
(n) - - Non-Compete Agreement between Mellons Limited and the
Registrant. 2
(o) - - Lease Agreement between Cucina Classica Italiana, 3
Inc. and Arthur Sommers
(p) - - Lease Agreement between Cucina Classica Italiana, Inc. 3
and Angelo Dominioni.
(q) - - Lease Agreement between JR's Delis, Inc. 3
and Chicken by Chickadee Farms, Inc.
(r) - - Employment Agreement between the Registrant and 3
Scott G. Halperin, dated August 16, 1995
(s) - - Acquisition Agreement between the Registrant and Cucina 4
Classica Italiana, S.p.A.
(t) - - Acquisition Agreement between the Registrant and Goldberg, 5
Feinstein and Sons Company
(u) - - Amendment to the Acquisition Agreement between the 6
Registrant and Goldberg, Feinstein and Sons Company
(v) - - Credit Agreement between Cucina Classica Italiana, Inc. 7
Nazionale del Lavoro S.p.A. - New York Branch, Istituto
Bancario San Paolo di Torino - New York Branch, Banco di
Sicilia S.p.A. - New York Branch, Banca Populare di Milano -
New York Branch, and Banca Commerciale Italiana - New York
Branch
(w) - - Termination Agreement between the Registrant and Daniel J.
Feld 8
(x) - - Merger and Real Estate Purchase Agreement Between the 9
Company and Roy LaCroix for the purchase of Deli King, Inc.
(y) - - Credit Agreement between Cucina Classica Italiana, Inc. 10
and Banca Nazionale del Lavoro S.p.A. - New York Branch,
dated December 15, 1997
(z) - - Credit Agreement between Cucina Classica Italiana, Inc. 10
and Banca Commerciale Italiana - New York Branch,
dated December 15, 1997
(aa) - - Forgiveness Agreement between Cucina Classica Italiana, Inc. 10
and Istituto Bancario San Paolo di Torino - New York
Branch, dated December 29, 1997
(ab) - - Forgiveness Agreement between Cucina Classica Italiana, Inc. 10
and Banca Populare di Milano - New York Branch, dated
December 29, 1997
16
<PAGE>
(ac) - - Forgiveness Agreement between Cucina Classica Italiana, Inc. 10
and Banco di Sicilia S.p.A. - New York Branch, dated
December 31, 1997
(ad) - - Settlement Agreement between Saratoga Brands, Inc., Angelo M. 10
Dominioni, Valerie A. Dominioni, Silvana L. Dominioni,
Robert J. Castellano, and Cucina Classica Italiana, SpA, dated
December 31, 1997
(ae) - - Employment Agreement between the Registrant and Scott G. 10
Halperin, dated August 1, 1997
(af) - - Employment Agreement between the Registrant and Bernard F. 10
Lillis, Jr., dated August 1, 1997
(ag) - - Lease Agreement between Deli King, Inc. and Giovanni and Lina 10
Conti, dated September 1, 1997.
(ah) - - Investment Banking Agreement between the Company and M.H. 10
Meyerson and Co., Inc.
NOTES
1. Filed with the Company's registration statement on form S-1 (File
No. 33-36937), and incorporated herein.
2. Filed with the Company's Form 8-K filed on February 14, 1995, and
incorporated herein.
3. Filed with the Company's 1994 Form 10-KSB, and incorporated herein.
4. Filed with the Company's Form 8-K filed on November 4, 1994, and
incorporated herein.
5. Filed with the Company's Form 8-K filed on November 10, 1994, and
incorporated herein.
6. Filed with the Company's Form 8-K filed on March 28, 1995, and
incorporated herein.
7. Filed with the Company's Form 8-K filed on March 14, 1995, and
incorporated herein.
8. Filed with the Company's Form 8-K filed on August 18, 1994, and
incorporated herein.
9. Filed with the Company's Form 8-K dated Apil 29, 1996, and
incorporated herein.
10. Filed herein.
(b) Reports on Form 8-K.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SARATOGA BRANDS INC.
By: /s/ Scott G. Halperin Date: March 5, 1998
--------------------------------
Scott G. Halperin
Chairman of the Board
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Scott G. Halperin Date: March 5, 1998
--------------------------------
Scott G. Halperin
Chairman of the Board
Chief Executive Officer
By: /s/ Bernard F. Lillis, Jr. Date: March 5, 1998
--------------------------------
Bernard F. Lillis, Jr.
Chief Operating Officer
Chief Financial Officer
Principal Accounting Officer
Director
By: /s/ Joseph M. Greene Date: March 5, 1998
--------------------------------
Joseph M. Greene
Director
Audit Committee Member
18
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS
Included in Part II
Report of Independent Certified Public Accountants
Consolidated Balance Sheet at December 31, 1997
Consolidated Statements of Operations for the Years Ended December 31, 1997 and
1996
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997 and
1996
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1997 and 1996
Notes to Consolidated Financial Statements
Included in Part IV
Schedule VIII Valuation and Qualifying Accounts
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Saratoga Brands, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Saratoga Brands
Inc. and Subsidiaries as of December 31, 1997 and the related consolidated
statements of operations, cash flows and changes in stockholders' equity for
each of the two years in the period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audits 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 disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Saratoga Brands,
Inc. and Subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
We have also audited Schedule VIII, for the year ended December 31, 1997
included in the 1997 annual report of Saratoga Brands, Inc. and Subsidiaries on
Form 10KSB. In our opinion, the schedule presents fairly the information
required to be set forth therein.
BROZA, BLOCK & RUBINO
Certified Public Accountants
Asbury Park, New Jersey
February 28, 1998
F-2
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1997
ASSETS
------
Current Assets:
Cash $ 228,945
Accounts receivable net of allowance for doubtful accounts
of $78,000 (Note 2) 934,354
Current portion of mortgage note receivable (Note 2) 3,659
Investments (Note 2) 154,615
Inventories (Note 2) 444,234
Prepaid expenses and other current assets 69,624
----------
Total current assets 1,835,431
Long term mortgage note receivable (Note 2) 44,604
Property and equipment - net (Note 3) 3,072,325
Other assets (Note 2) 161,785
Intangible assets (Note 2) 1,256,012
Excess of cost over fair value of assets acquired (Notes 1 and 2) 277,500
----------
TOTAL ASSETS $6,647,657
==========
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-3
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheet (continued)
December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses (Note 2) $ 1,696,891
Loans Payable (Note 2) 364,550
Current portion of capital leases payable (Note 6) 63,761
Current portion of long-term debt (Note 5) 129,103
Current portion of long-term debt - related parties (Note 4) 264,812
-----------
Total current liabilities 2,519,117
Long-term debt (Note 5) 143,304
Long-term notes payable - related parties (Note 4) 213,656
Capital leases payable (Note 6) 62,203
-----------
Total liabilities 2,938,280
-----------
Contingencies (Note 9)
STOCKHOLDERS' EQUITY (Note 8)
Preferred stock 397,898
Class A participating convertible preferred shares, $1
par value, stated at liquidation value, authorized 200
shares of which 16.5 shares are issued and outstanding.
Common stock 4,777
Par value $.001 - 25,000,000 shares authorized,
4,776,967 shares issued and outstanding
Treasury Stock (645)
153 common shares stated at cost
Additional paid-in-capital (Note 1) 528,070
Retained Earnings Since April 1, 1997 (Note 1) 2,779,277
-----------
Total Stockholders' Equity 3,709,377
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,647,657
===========
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-4
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Year Ended
December 31,
1997 1996
===========================
Net sales $13,712,800 $ 14,694,985
Cost of sales 10,089,939 10,496,975
---------------------------
Gross profit 3,622,861 4,198,010
Selling, general and administrative
expenses (Note 12) 2,347,337 3,348,061
Amortization of excess of cost over fair
value of assets acquired 67,712 193,865
---------------------------
Income from operations before interest and
income taxes 1,207,812 656,084
Interest expense - net 74,823 541,642
Income taxes (Note 7) 600 600
---------------------------
Earnings from operations 1,132,389 113,842
Earnings (loss) from discontinued business (2,144) (973,469)
Extraordinary Item - Earnings From Forgiveness
of Debt, Net 1,704,539
---------------------------
Net Earnings (loss) $ 2,834,784 ($ 859,627)
===========================
EARNINGS (LOSS) PER COMMON SHARE
BASIC
Earnings from continuing operations $0.29 $0.05
(Loss) earnings from discontinued business 0.00 (0.47)
Extraordinary Item - Earnings From
Forgiveness of Debt, Net 0.43 0.00
---------------------------
Total Earnings (loss) per share $0.72 ($0.42)
===========================
Basic weighted average shares used in computation 3,956,925 2,093,228
DILUTED
Earnings from continuing operations $0.29 $0.05
(Loss) earnings from discontinued business 0.00 (0.47)
Extraordinary Item - Earnings From
Forgiveness of Debt, Net 0.43 0.00
---------------------------
Total Earnings (loss) per share $0.72 ($0.42)
===========================
Diluted weighted average shares used in computation 3,957,141 2,093,228
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-5
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1996
-------------------------
Cash Flows from operating activities:
Net income (loss) $ 2,834,784 ($ 852,009)
Adjustments to reconcile net operating profit
to net cashprovided by (used in)
operating activities:
Depreciation and amortization 381,160 313,800
Forgiveness of debt (1,954,539) 0
Provision for losses on accounts receivable 7,190 21,771
Gain on sale of unused equipment 0 95,977
Issuance of common stock for services 0 56,972
(Increase) decrease in accounts receivable (71,216) 466,942
Decrease in inventories 29,111 670,200
Decrease in prepaid expenses 278,597 378,794
Decrease (increase) in accounts
payable and accrued expenses 1,168,743 (1,173,823)
-------------------------
Net cash provided by (used in)
operating activities 2,673,830 (21,376)
-------------------------
Cash flows from investing activities:
Increase in mortgage notes receivable (48,263) 0
Decrease in note receivable related parties 167,863 0
Purchase of fixed assets (86,499) (2,179,017)
Decrease in other assets 80,232 107,751
Cash received in business acquisitons 0 7,381
Redemption of investment 1,209,800 0
Purchase of Investment (154,615) (1,209,800)
Purchase of Intangible Assets (routes) (228,195) (312,195)
-------------------------
Net cash provided by (used in)
investing activities 940,323 (3,585,880)
-------------------------
Cash flows from financing activities:
Increase in loans payable 364,550 (16,871)
Repayment of notes payable 0 (773,674)
Repayment of long term debt (3,121,677) 0
Proceeds from notes payable-related party 174,179 551,093
Repayment of notes payable-related party (112,500) (176,093)
Proceeds from stock transactions 0 4,130,000
Purchase of treasury stock (728,500) 0
Decrease in leases receivable 0 0
Proceeds from capital leasing transactions 16,000 264,403
Repayment of capital leases (59,454) (293,086)
-------------------------
Net cash provided by financing activities (3,467,402) 3,685,772
-------------------------
Increase (decrease) in cash 146,751 78,516
Cash at beginning of year 82,194 3,678
-------------------------
Cash at end of year $ 228,945 $ 82,194
=========================
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-6
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996 (continued)
1997 1996
----------------------
Supplemental disclosure of cash flows information:
Interest paid $ 299,248 $ 348,709
Income taxes paid $ 600 $ 600
Summary of non-cash and financing activities:
Fair value of assets received in acquisition of
businesses $ 0 $1,629,082
Liabilities assumed in acquisition of businesses $ 0 $ 581,678
Shares of common stock issued to
acquire Deli King, Inc. 0 504,202
Shares of common stock issued in
settlement of liabilities 480,000 634,756
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-7
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
CLASS "A" PARTICIPATING
CONVERTIBLE PREFERRED
SHARES
------------------------
TREASURY SHARES,
AMOUNT COMMON SHARES AT COST
STATED AT ---------------- ADDITIONAL ------------------
NUMBER OF LIQUIDATION NUMBER OF PAID-IN NUMBER OF
SHARES VALUE SHARES AMOUNT CAPITAL SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 23.5 $566,703 854,570 $855 $17,342,430 (153) ($645)
Issuance of common shares as
compensation for consulting services
and employee awards 596,964 597 56,376
Purchase of Treasury Shares (90,500) (106,568)
Conversion of Preferred Shares -7 (168,805) 131 0 168,802
Conversion of Convertible Debentures 953,854 954 4,093,497
Issuance of Common shares for conversion
of convertible loans and exercise
of warrants 205,667 206 616,794
Additional shares issued for acquisition
of Cucina Classica Italiana, Inc. 295,663 296 (296)
Issued for acquisition of DeliKing, Inc. 168,067 168 749,832
Net Loss for the year ended
December 31, 1996
----------------------------------------------------------------------------
Balance at December 31, 1996 16.5 $397,898 3,074,916 3,076 $23,027,435 (90,653) ($107,213)
============================================================================
Rounding on 1:3 reverse split 134
Shares issued in Italian Bank Settlement 200,000 200 123,238
Shares issued CCI SpA 224,000 224 (163,520)
Issuance of common shares as compensation
and awards 1,574,084 1,574 (363,189)
Share Buyback (485,667) (486) (728,014)
Revaluation of Deli King Acquisition (671,994)
Conversion of Loans 280,000 280 419,720
Cancel treasury Shares (90,500) (91) (159,184) 90,500 106,568
Write Down of Assets under Quasi
Reorganization (Note 1)
Net Income for the period 1/01-3/31/97
Quasi Reorganization (Note 1) (20,956,422)
Earnings after April 1 1997
----------------------------------------------------------------------------
Balance at December 31, 1997 16.5 $397,898 4,776,967 4,777 $528,070 (153) ($645)
============================================================================
<CAPTION>
RETAINED EARNINGS
(DEFICIT) TOTAL
-------------------------------
<S> <C> <C>
Balance at December 31, 1995 ($12,128,841) $5,780,502
Issuance of common shares as
compensation for consulting services
and employee awards 56,973
Purchase of Treasury Shares (106,568)
Conversion of Preferred Shares (3)
Conversion of Convertible Debentures 4,094,451
Issuance of Common shares for conversion
of convertible loans and exercise
of warrants 617,000
Additional shares issued for acquisition
of Cucina Classica Italiana, Inc. 0
Issued for acquisition of DeliKing, Inc. 750,000
Net Loss for the year ended
December 31, 1996 (859,627) (859,627)
---------------------------------
Balance at December 31, 1996 ($12,988,468) $10,332,728
================================
Rounding on 1:3 reverse split 0
Shares issued in Italian Bank Settlement 123,438
Shares issued CCI SpA (163,296)
Issuance of common shares as compensation
and awards (361,615)
Share Buyback (728,500)
Revaluation of Deli King Acquisition (671,994)
Conversion of Loans 420,000
Cancel treasury Shares (52,707)
Write Down of Assets under Quasi
Reorganization (Note 1) (8,023,460) (8,023,460)
Net Income for the period 1/01-3/31/97 55,506 55,506
Quasi Reorganization (Note 1) 20,956,422 0
Earnings after April 1 1997 2,779,277 2,779,277
--------------------------------
Balance at December 31, 1997 $2,779,277 $3,709,377
================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part hereof.
F-8
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND BUSINESSES
Saratoga Brands Inc., ("the Company") a New York corporation, was
incorporated on June 12, 1987. From approximately 1987 through September 30,
1993, the Company manufactured and distributed potato and vegetable chips and
distributed other snack food products. The Company incurred substantial losses
from inception and, in an effort to stem such losses, the Company decided on
September 30, 1994 to discontinue its snack food business.
On January 28, 1994, the Company acquired Saratoga Technology Inc.
("Tech"), a Company which was engaged in designing, marketing and selling a
variety of personal computers for the consumer and service oriented commercial
markets. A significant portion of Tech's revenues had been derived from the sale
of microcomputers through direct mail channels. During the year, Tech had been
incurred difficulties with its major contract supplier, and as a result has been
unable to secure continuing direct mail contracts. The business was damaged
severely and as a result Tech filed an action in the United States Federal Court
against its former supplier. (See exhibit 99) Due to the damages suffered
leading to the aforementioned lawsuit, the Company decided to discontinue the
operations of Tech effective December 30, 1994.
On August 26, 1994, the Company entered the specialty cheese industry,
through the acquisition of Cucina Classica Italiana, Inc. ("CCI"), a company
located in Lakewood, New Jersey engaged in the production, importation and
distribution of premium cheeses and Italian foods. CCI operates a Wisconsin
facility, which manufactures a variety of Italian and Greek cheeses including
the Bel Paese(R) brand which has had strong presence in the United states for
over 75 years.
On December 30, 1994, the company acquired JR's Delis, Inc. ("JR") a Rhode
Island based catering and distribution business. JR sells deli products to more
than 900 convenience stores and retail outlets in Rhode Island, Massachusetts
and Connecticut.
On April 29, 1996, (effective January 1, 1996), the Company acquired Deli
King, Inc. ("Deli"), a food processor, distributor and mobile catering business
serving Rhode Island, eastern Connecticut and southeastern Massachusetts. Deli
has been integrated with JR and both are operating out of Deli's modern
commissary facility in West Warwick, Rhode Island.
On May 7, 1996, the Company acquired the assets of Dotties Caterers, Inc.
("Dotties"), a mobile catering business serving Rhode Island. Dotties was
integrated with JR and Deli and operates out of Deli's facility. In July 1996,
the Board of Directors of Saratoga determined that due to the differences
between the operations of the cheese business and the deli business, shareholder
value would be enhanced by separating the two businesses. Saratoga therefore
formed Mobile Caterers, Inc. ("Mobile") and contributed all of the stock of the
two subsidiaries which operate the deli business, Deli King, Inc. ("Deli King")
and JR's Delis, Inc. ("JR's"), to Mobile. The Company filed a registration
statement filed with the Securities and Exchange Commission on March 14, 1997,
and upon approval the Company intended to distribute 100% of the stock in Mobile
to the current Company shareholders. In July, 1997 the Board of Directors of
Saratoga reconsidered the spin off and determined that it was not in the best
interest of the Company and its Shareholders. Accordingly, the Company filed
Form-15 on August 18, 1997 withdrawing the registration of Mobile Caterers, Inc.
ACQUISITION OF DELI KING, INC. BY SARATOGA BRANDS, INC.
On April 29, 1996 (the "closing date") Saratoga acquired Deli King, Inc.
for a purchase price of $1,500,000. The acquisition was accounted for by using
the purchase method of accounting. Under the terms of the Merger and Real Estate
Purchase Agreement dated February 14, 1996, the acquisition was effective
January 1, 1996. Accordingly, the results of operations of Deli King, Inc. are
included in the Statement of Operations for the entire year 1996.
On the closing date, Saratoga delivered 504,202 shares of common stock to
an escrow agent for the benefit of Roy A. LaCroix, Sr. (LaCroix) to be delivered
to LaCroix in eight equal quarterly installments commencing on the
F-9
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
one year anniversary of the closing date. The market price of the stock at the
closing date was $2.97 per share, while the market price on December 31, 1996
was $0.72 per share.
The Saratoga shares represented the entire payment of the purchase price
and there were no contingent payments, options, or other commitments related to
this transaction.
QUASI-REORGANIZATION
The Board of Directors of the Company has directed that, effective April
1, 1997, the Company undergo quasi-reorganization. A quasi reorganization is an
elective accounting procedure intended to restate assets and liabilities to
current values and eliminate any accumulated deficit in retained earnings.
Subsequent to the March 31, 1997 quarter end the Company reviewed its
financial position as well as the presentation of its balance sheet. The Company
further reviewed its future prospects for profitability, and determined that the
Company could reasonably anticipate profitability for the foreseeable future.
Additionally, the Company believes that a restatement balance sheet would
improve the Company's ability to raise capital through both debt and equity.
These and other reasons lead the Company to the decision that it would be
advantageous to restate its balance sheet, revalue its assets to fair value, and
eliminate its retained deficit. In revaluing the Company's assets the Company
reduced its carrying value of goodwill by reviewing the undiscounted future cash
flows of the Company. (See Note 2 - GOODWILL)
This procedure resulted in a reduction in the Company's carrying value of
its goodwill in the amount of $8,023,460, which has been accounted for as a
direct shareholders' equity transaction, rather than as a result of operations.
Further, the Company's accumulated deficit as of April 1, 1997 ($20,956,422) has
been eliminated against Paid-in Capital in Excess of Par Value. This procedure
effectively eliminated the retained deficit at each of the Company's business
segments. This Quasi-Reorganization is expected to be confirmed by shareholder
approval at the next annual meeting of the Company's shareholders in May of
1998.
FORGIVENESS OF DEBT
In late December of 1997 the Company entered into agreements with 5
Italian banks, thereby retiring all liability to these banks for a payment of
$500,000 and 200,000 unregistered shares of the Company's common stock. The
aforementioned payment and shares represented the entire payment to the banks
and there were no contingent payments, options, or other commitments related to
this transaction.
The foregoing does not purport to be a complete statement of all terms and
conditions contained in the Agreements. Reference is made to exhibits 10(y),
10(z), 10(aa), 10(ab), and 10(ac) for all terms and conditions of the
Agreements.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries: CCI, Mobile, and Snacks. The consolidated
balance sheets reflect the accounts of the Company and its three wholly owned
subsidiaries. The acquisitions were recorded as purchases. In consolidation all
inter company balances are eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market. The components of
inventories at December 31, 1997 were as follows:
Raw Finished Repair
Materials Goods Parts Total
- --------------------------------------------------------------------------------
$70,505 $327,165 $46,564 $444,234
================================================================================
F-10
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
DEPRECIATION AND AMORTIZATION
Depreciation of fixed assets is computed utilizing the straight-line
method over the estimated useful lives of the related assets, which range from 5
to 50 years. Amortization of leasehold improvements has been provided for on a
straight-line basis over the term of the related lease, including renewal
period, which is not in excess of the estimated useful lives of the
improvements.
REVENUE RECOGNITION
Revenues are recognized upon shipment of product.
DISCONTINUED OPERATIONS
On September 30, 1996, the Company discontinued operations of its Lensmire
Cheese Factory ("Lensmire") due to its inability to demonstrate profitable
operations. Accordingly, the activities for the periods presented relating to
the Lensmire Cheese Factory have been presented as discontinued operations.
Lensmire had net sales of $885,229 to CCI in 1996, which are not included in the
net sales of the Company. Lensmire had selling, general and administrative
expenses of $144,468 and interest expense of $3,121 in 1996. At December 31,
1996 Lensmire had current assets of $281, fixed assets of $150,000, and $630 in
other assets. Lensmire's liabilities at December 31, 1996 consisted of $18,391
in accounts payable and accrued expenses, and $5,619 in capital leases payable.
Snacks had income from its discontinued operation in 1996 totaling
$125,133. Snacks only remaining assets consisted of $10,000 in fixed assets,
which were transferred to the parent company in 1997.
PER SHARE DATA
The per share data has been calculated using the weighted average number
of Common Shares outstanding during each period presented on both a basic and
diluted basis in accordance with SFAS 128. Certain outstanding options and
warrants have been excluded from the computation due to their antidilutive
effect. In determining whether options and warrants were dilutive, the average
market value of the Company's common stock for the period from the date of grant
through the end of the year was compared to the exercise price most favorable to
the option or warrant holder. The financial statements reflect share amounts
after having given effect to a reverse stock split of 1:3, which became
effective November 24, 1997.
GOODWILL AND INTANGIBLE ASSETS
It is the Company's policy to periodically review the net realizable value
of its intangible assets, including goodwill through an assessment of the
estimated undiscounted future cash flows of the business unit. In the event that
assets are found to be carried at amounts which are in excess of estimated
undiscounted gross future cash flows, then the intangible assets will be
adjusted for impairment to a level commensurate with a discounted cash flow
analysis of the underlying assets. Based upon this analysis, the Company made an
adjustment of $8,023,460 to goodwill to provide for impairment and assume a
conservative position towards its valuation of goodwill. (See Note 1 - QUASI
REORGANIZATION)
Additionally, goodwill was adjusted to reflect a correction in the
accounting for the acquisition of Deli, which was acquired in April of 1996.
This change was due to an overstatement of the value to the shares issued by the
Company for the purchase. This correction eliminated goodwill attributable to
the Deli acquisition, and reduced overall goodwill by $679,612.
There was no impairment to intangible assets at December 31, 1997. The
intangible assets consist of $111,811 for trademark and proprietary technology
licenses, $60,000 for import license, and $1,084,201 for Deli's catering routes
which establish its rights to sell its products over an established series of
stops. Amortization expense on intangibles was $123,800 for the year ended
December 31, 1997, while accumulated amortization was $574,173. The trademark
and proprietary technology licenses are being amortized over 8 years while the
import licenses are being amortized over
F-11
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5 years and the cost of the routes are being amortized over their estimated
economic life of 15 years. The excess cost over the fair value of assets (less
liabilities) acquired is being amortized over 10 years. Goodwill at December 31,
1997, attributable entirely to CCI was $277,500.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
CONCENTRATIONS
The Company does not have any single customers who account for more than
10% of the Company's trade receivables or sales. The Company's products are
distributed nationally. Most of the Company customers are food retailers and
distributors.
Approximately 30% of the Company's sales volume relates to products which
are purchased from Edigo Galbani, S.p.A., for which the Company holds exclusive
License and Manufacture Agreements in a contract which runs through the year
2000 when it will come up for renewal, the loss would at this time have a
material adverse effect on the revenues of CCI.
MORTGAGE NOTES RECEIVABLE
The Company has a mortgage note receivable due from Robert J. Lukasavitz,
related to the sale of CCI's former Mayville, Wisconsin cheese plant in the
amount of $48,263, of which $3,659 is the current portion thereof. The mortgage
bears interest at 7%, and has equal monthly payments of $581 through April 5,
2000, and a balloon payment of $39,538 on May 5, 2000.
PROVISION FOR DOUBTFUL ACCOUNTS
The Company periodically reviews and adjusts its provision for bad debts
to reflect its experience.
INVESTMENTS
At December 31, 1997 the Company had 71,714 shares of Osicom Technologies,
Inc., traded on the NASDAQ Small Cap Market under the symbol FIBR. The market
value of these shares, which approximates cost, was $2.156 per share at December
31, 1997, resulting in no gain or loss on the investment for the year ended
December 31, 1997. As of February 28, 1998 30,000 of these shares have been sold
at prices ranging from $4.25 to $6.00. The Company anticipates liquidating the
balance of the shares in an orderly fashion within the next 90 days.
OTHER ASSETS
Other assets consists of:
Capitalized Financing Costs $ 38,297
Unamortized Slotting Fees 62,958
Deposits 26,291
Capitalized distribution Contract 25,000
Other 9,239
---------
Total $ 161,785
=========
F-12
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts Payable and Accrued Expenses consist of:
Trade Account Payable to E. Galbani $ 414,281
Other Trade Accounts Payables 778,187
Other Accrued Expenses 504,423
----------
Total $1,696,891
==========
No accrued expense exceeds 5% of total current liabilities.
LOANS PAYABLE
At December 31, 1997 the Company had a $300,000 loan payable to Summit
Bank. This loan is payable in 6 equal monthly principal installments plus
accrued interest beginning on February 1, 1998. The loan is unsecured and bears
interest at the prime rate plus 1 percent, which was 9.5% at December 31, 1997.
Additionally, the Company had miscellaneous loans of $64,550, of which
$25,000 is owned to Ike Suri, an unrelated party, which does not bear interest
and is payable on demand. These loans are unsecured. The imputed interest on the
above loans has not been reflected in the financial statements due its
immateriality.
FOREIGN CURRENCY TRANSACTIONS
The Company imports products from various countries, however, all material
transactions are denominated in United States currency.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 3 -- PROPERTY AND EQUIPMENT - NET
Property and equipment - net consisted of the following at December 31,
1997:
Useful Life
-----------
Land $ 611,007
Buildings 1,394,402 50 years
Furniture & Equipment 981,412 5 - 10 years
Vehicles 485,417 5 - 7 years
Leasehold Improvements 40,551 5 years
Equipment held for sale 10,000
----------
Total Cost 3,522,789
Less Accumulated Depreciation 450,464
----------
Net $3,072,325
==========
Depreciation and amortization on Property, Plant and Equipment is computed
on a straight-line basis. The Property, Plant and Equipment includes $120,804 in
fixed assets which were acquired using capital leases.
F-13
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 -- NOTES PAYABLE - RELATED PARTY
The Company has a note payable to Roy LaCroix related to the purchase of
Deli in the amount of $262,500, $112,500 being the current portion thereof,
which is being paid over four years and bears interest at the prime rate plus
one percent.
The Company has a note payable to Angelo Dominioni in the amount of
$190,968, of which $127,312 in the current portion thereof, in accordance with
the settlement agreement between the Company and Mr. Dominioni. (See Exhibit
10(ad)) This note is being paid in 18 equal monthly installments of $10,609, and
does not bear interest.
In addition, the Company has a note payable to Scott Halperin, the
Company's Chairman in the amount of $25,000, which is payable on demand and does
not currently bear interest. Both of the above notes are unsecured.
The imputed interest on the notes to Angelo Dominioni and Scott Halperin
has not been reflected in the financial statements due its immateriality.
NOTE 5 -- LONG-TERM DEBT
CCI has a term loan with BNY Financial Corporation of which the current
balance is $177,000 to be paid $70,800 in 1998, $70,800 in 1999, and $35,400 in
2000. This loan bears interest at the prime rate plus one percent. CCI has
pledged all of accounts receivable, inventories, real estate and equipment as
collateral for this term loan.
Deli has various long-term loans with varrying terms mainly for the
purchase of equipment. These loans total $95,407 to be paid $58,303 in 1998, and
$37,104 in 1999. These loans are secured by the underlying equipment.
The long-term debt related to the five Italian banks has been eliminated
in its entirety. (See Note 1 -FORGIVENESS OF DEBT)
NOTE 6 -- CAPITAL LEASES
The following is a schedule of future minimum lease payments under all
capitalized leases together with the present value of the net minimum lease
payments as of December 31, 1997:
Year Ended December 31, Amount
-------------------------------------------------------------------
1998 $ 80,760
1999 63,073
2000 4,118
-------------------------------------------------------------------
Total minimum lease payments 147,951
Less: amount representing interest (21,987)
-------------------------------------------------------------------
Present value of net minimum lease
payments including current
maturities of $63,761 $ 125,964
================
NOTE 7 -- INCOME TAXES:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement No.
109, deferred tax assets and liabilities are determined based upon differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Additionally, deferred tax balances are
adjusted in periods that include the enactment of tax rate changes. The adoption
of this statement, which
F-14
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
was made on a prospective basis, did not have a material impact on the Company's
financial condition or results of operations. Prior to 1993, the Company
followed the accounting for income taxes prescribed by Statement No. 96.
For the year ended December 31, 1997, the Company had no provision for
income taxes due to the utilization of net operating loss ("NOL") carryforwards.
The Company had NOL carryforwards of approximately $600,000 at December
31, 1997, which resulted in a Deferred Tax Asset of approximately $200,000.
After applying the valuation allowance the Deferred Tax Asset was recorded at
$-0- on the balance sheet at December 31, 1997.
NOTE 8 -- STOCKHOLDERS' EQUITY
The Preferred Stockholders have no voting rights but are entitled to a
priority of payment in the amount of the original subscription price paid for
each Preferred Share ($16,667 to $25,000), plus a proportionate amount, as
defined, on any remaining excess proceeds if there is, among other matters, a
sale of all or substantially all of the shares or assets of the Company. The
Preferred Stockholders are not entitled to specific dividends; however, should
the Company declare any dividends on the common shares, the Preferred
Stockholders will be entitled to receive dividends as if they had converted to
common shares immediately prior to the dividend declaration. The holders of the
Preferred Shares may convert, at their option, at any time, all or part of their
shares into common shares. Holders of 29 Preferred Shares and certain holders of
the Company's Debentures having had conversion rights with respect to an
aggregate of 11.75 additional Preferred Shares granted the Company the right to
require the conversion of their shares into common shares at any time on or
after the filing by the Company of a registration statement with the Securities
and Exchange Commission for the purpose of offering for sale any of the
Company's securities. Upon the closing of the Company's initial public offering
of its common shares in September 1991, the Company exercised its right and
converted said Preferred Shares and Debentures into common shares. Each
outstanding Preferred Share is convertible into approximately 19 common shares,
subject to certain adjustments as defined in the Amended Certificate of
Incorporation. Subsequent to the initial public offering of the Company's common
shares, holders of eight Preferred Shares converted into common shares.
The Company has reserved, in aggregate, 509 common shares for possible
future issuance to Preferred Stockholders in the event of conversion.
At December 31, 1997 their were 16.5 preferred shares outstanding all of
which are convertible into common shares at the holders option.
NOTE 9 -- CONTINGENCIES
At December 31, 1997 there was a tax lien of approximately $42,000 on the
Company's building in West Warwick, Rhode Island. This lien was removed
subsequent to the year end on February 8, 1998.
NOTE 10 -- COMMITMENTS
Leases
The Company and its subsidiaries maintain office, warehouse and processing
facilities pursuant to an operating leases as detailed below.
CCI leases a 20,000 square foot facility at 1835 Swarthmore Avenue,
Lakewood, New Jersey 08701, of which approximately 3,000 square feet serves as
office space. This facility serves as CCI's headquarters as well as a shredding
and grating operation and warehouse. The facility is a fireproof high bay
warehouse located on 3.5 acres with ample expansion potential. The warehouse
contains 13,000 cubic feet of cooler space. This facility is leased from Arthur
Sommers at a basic rent of $6,642.68 per month or $79,712 annually. The CCI
lease has a five-year term expiring on August 31 1999, with no rent escalation
and an option to renew for an additional five years at an annual rent of
$91,975.
Mobile's leases its 2,000 square foot USDA facility at 269 Greenville
Avenue, Johnston, Rhode Island. This facility is leased from Giovanni and Lina
Conti at a basic rent of $950 per month or $11,400 annually. The lease has a 2
year term expiring on September 1, 1999, renewable for an additional 2 years at
a basic rent of $975 or $11,700 annually.
The approximate minimum annual rental commitment is as follows:
F-15
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Year Ending December 31, Rental
------------------------------- Rental
Lakewood, NJ Johnston, RI
-------------------------------
1998 $ 79,712 $11,400
1999 53,141 7,600
-------------------------------
$132,853 $19,000
===============================
Rent expense for the years ended December 31, 1997 and 1996 were
approximately $106,494 and $97,249, respectively.
Factoring Agreement
On June 15, 1995, CCI entered into a factoring agreement with BNY
Financial Corporation ("BNYF") for three years that is renewable after the
initial period. The agreement states that CCI would be required to factor
substantially all of its trade receivables and would in return receive immediate
cash credit for a major portion of these factored receivables as well as a
portion of the finished goods inventory. The factoring fee is 1% of the invoice
amount and 1% over prime on the amount advance under the factoring agreement.
The factoring agreement provides CCI with an ability to receive advances
collateralized by invoices and inventory of $2.0 million and letters of credit
in favor of suppliers of an additional $1.0 million. CCI has pledged all of
accounts receivable, inventories, real estate and equipment as collateral for
this credit agreement.
This agreement has covenants in regards to minimum factoring of invoices,
minimum net worth, quick ratio and profitability on a standalone basis. The
agreement provides for covenant violation penalties, which include increased
interest. CCI is in full compliance with all of the above stated covenants.
Investment Banking Agreement
On October 28, 1997 the Company entered into an investment banking
agreement between the Company and M.H. Meyerson & Co., Inc. ("Meyerson") Under
the terms of the agreement Meyerson is to provide investment banking services to
the Company on a non-exclusive basis for a five year term. In connection with
the agreement the Company granted Meyerson warrants to purchase 83,334 shares of
the Company's common stock at a price of $1.50 per share, and 83,333 shares at a
price of $1.80 per share, a total of 166,667 shares of common stock of the
Company. The warrants vest one third at each purchase price on October 28 1997,
one-third at each purchase on April 28 1998, and one-third at each purchase
price on October 28, 1998. The warrants are cancelled upon termination of the
agreement; however, once vested the warrants shall remain in force until either
exercised or upon expiration thereof on October 28, 2002. Additionally, the
Company paid a one-time fee in the amount of $25,000, which is being amortized
over the life of the agreement.
The foregoing does not purport to be a complete statement of all terms and
conditions contained in the Agreement. Reference is made to exhibit 10(ad) for
all terms and conditions of the Agreement.
NOTE 11 -- STOCK PLANS
In March 1990, the Company adopted an Incentive Stock Option Plan
("Incentive Plan") and reserved an aggregate of 1,425 Common Shares for purchase
under the Incentive Plan. The Incentive Plan was designed to serve as an
incentive for attracting and retaining qualified and competent employees by
providing them with the ability to acquire a proprietary interest in the Company
through ownership of shares of Common Stock. Pursuant to the Incentive Plan,
options granted will be incentive stock options intended to comply with the
requirements of section 422 (A) of the Internal Revenue Code of 1986, as
amended.
F-16
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
All matters relating to the Incentive Plan are administered by the
Company's Board of Directors, including selection of participants, allotment of
shares, determination of price and other conditions of purchase. However, the
exercise price of options granted and the exercise periods under the Incentive
Plan may not be less than 100% of fair market value of the shares of Common
Stock on the date of grant nor more than ten years, respectively (110% of fair
market value and five years, respectively, in the options granted to employees
who own more than 10% of the outstanding shares of Common Stock of the Company.
The aggregate fair market value (determined as of the date the option is
granted) of the shares of Common Stock that any person may purchase in any
calendar year pursuant to the exercise of Incentive stock Options may not exceed
$100,000. Options granted under the Incentive Plan are not transferable other
than by will or by the laws of the descent or distribution.
In September 1992, the Board of Directors established a Non-Qualified
Stock Option Plan for officers, directors, employees, and consultants to the
Company and other persons expected to make a significant contribution to the
Company. 25,000 shares were reserved for issuance under this plan. The
Non-Qualified Stock Option Plan was terminated on May 24, 1994 and all
outstanding shares were replaced with shares issued under The 1994 Stock Option
Plan as described below.
The Board of Directors adopted the 1994 Stock Option Plan (the "Option
Plan") and the 1994 Restricted Stock Purchase Plan on February 16, 1994. Under
the Option Plan, the Company may grant options to purchase up to 140,000 shares
to employees or non-employee consultants of the Company and its subsidiaries.
The exercise price of options granted under the Option Plan may not be less than
100% (110% for holders of 10% or more of the Company's outstanding shares) of
the fair market value of the shares on the date of grant for incentive stock
options ("ISO's") as defined in the Internal Revenue Code, and 85% (100% for
"covered employees" as defined in the Internal Revenue Code) of the fair market
value of the shares on the date of grant for non-incentive stock options. In
addition, ISO's,, which become exercisable by any one optionee may not exceed a
fair market value of $100,000 in any calendar year. The Board of Directors
granted options to purchase an aggregate of 50,000 to two directors, one of whom
was an officer and an aggregate of 50,000 to two outside consultants. Such
options carry a ten year term and are not exercisable until nine years after the
date of grant, subject to acceleration based on the Company achieving certain
levels of gross revenues or market capitalization The exercise price of the
options is $25.00 per share. The Company has also granted options to purchase an
aggregate of 14,150 common shares to four former directors, two of whom had also
been officers, at an exercise price of $25.00 per share, which was later reduced
to $11.875 pursuant to the Termination Agreement of Daniel J. Feld (Exhibit
10(w). These options will replace a like number of options issued to these
individuals under the Non-Qualified Stock Option Plan, which was never submitted
for shareholder approval. Consequently, the Non-Qualified Stock Option Plan and
all options granted under it terminated with shareholder approval of the 1994
plans, which was obtained on May 24, 1994.
Under the terms of the 1994 Restricted Stock Purchase Plan, the Company
may award up to 45,000 common shares which will be subject to such restrictions
as the committee appointed by the Board of Directors may deem advisable.
Restricted shares may only be allocated to key executive and sales employees or
outside consultants of the Company. The committee has awarded an aggregate of
30,000 restricted shares to two former directors of the Company, one of whom was
also an officer, and 15,000 restricted shares to an outside consultant at a
purchase price $.10 per share. The restrictions places upon these shares were
removed upon the effectiveness of Daniel J. Feld's Termination Agreement.
The Company has registered all of the aforementioned shares issued under
the 1994 plans, with the Securities and Exchange Commission.
In addition, the Board of Directors granted options to purchase 50,000
shares of the Company's common stock at a price of $3.125 per share to one of
its directors.
In March of 1994, the Board of Director of the Company approved the 1994
Stock Award Plan. This plan was intended to attract, retain, motivate and reward
officers, directors, employees of and consultants to the Company, and
subsidiaries of the Company, who are and will be contributing to the success of
the business of the Company; to competitive incentive compensation
opportunities; and to further opportunities for stock ownership by such
employees and consultants in order to increase there proprietary interest in the
Company. 135,000 shares of the Company's common stock were registered with the
Securities and Exchange Commission under this plan on Form S-8. 113,559 shares
were issued under this plan in the 1994 fiscal year. Various options and
warrants were granted to employees and consultants to the company during 1996
and 1997. These options and warrants as well as options remaining outstanding
from 1995 are summarized as follows:
F-17
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Options Warrants
- --------------------------------------------------------------------------------
Balance at December 31, 1995 392,374 0
Issued in 1996 675,603
Cancelled in 1996 (110,337)
Exercised in 1996 (892,590)
---------------------------------------------
Balance at December 31, 1996 65,050 0
Issued in 1997 1,957,843 300,666
Cancelled in 1997 0 0
Exercised in 1997 (1,579,709) 0
---------------------------------------------
Balance at December 31, 1997 443,184 300,666
=============================================
The options outstanding at December 31, 1997 consisted of:
364,445 options at $1.125 per share
78,739 options issued on a cashless basis
-------
443,184 total options outstanding
=======
The warrants outstanding at December 31, 1997 consisted of:
Number of Exercise Expiration Vested
Warrants Price Date On
--------------------------------------------------------------------------
16,667 $1.50 August 1, 1999 August 1, 1997
27,778 $1.50 October 27, 2002 October 28, 1997
27,778 $1.50 October 27, 2002 April 28, 1998
27,777 $1.50 October 27, 2002 October 28, 1998
5,667 $1.50 December 1, 2002 December 1, 1997
5,667 $1.50 December 1, 2002 June 1, 1998
5,666 $1.50 December 1, 2002 December 1, 1998
27,778 $1.80 October 27, 2002 October 28, 1997
27,778 $1.80 October 27, 2002 April 28, 1998
27,777 $1.80 October 27, 2002 October 28, 1998
5,667 $1.80 December 1, 2002 December 1, 1997
5,667 $1.80 December 1, 2002 June 1, 1998
5,666 $1.80 December 1, 2002 December 1, 1998
16,667 $2.25 August 1, 1999 August 1, 1997
16,667 $3.00 August 1, 1999 August 1, 1997
16,667 $3.75 August 1, 1999 August 1, 1997
16,666 $4.50 August 1, 1999 August 1, 1997
16,666 $5.25 August 1, 1999 August 1, 1997
-------------
300,666 Total Warrants Outstanding
=============
The Company has not adopted the accounting requirements or the pro forma
disclosure requirements of SFAS 123.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock option and restricted stock plans. No compensation cost
has been recognized for its stock based compensation plans, since the employee
purchases the stock for an amount equal to or greater than the market price at
the measurement date.
F-18
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 12 -- ADVERTISING COSTS
The Company generally expenses production costs of print, radio and
television advertisements as of the first date the advertisements take place.
Advertising expenses included in selling, administrative and general expenses
were $37,845 in 1997 and $141,454 in 1996. As of December 31, 1997 advertising
costs of approximately $25,436 were recorded primarily in prepaid expenses and
other assets in the accompanying balance sheet, will be amortized over two years
from the date the advertisements take place.
F-19
<PAGE>
SARATOGA BRANDS INC. AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Additions not
Balance at Beginning Costs and Charged to Deductions Balance at
Description of Period Expenses Costs or Expense (Describe) End of Period
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $70,810 $9,561 $0 ($2,371)(1) $78,000
</TABLE>
(1) Represents an amount written off during the period against fully
reserved accounts.
F-20
EXHIBIT 10(y)
<PAGE>
CREDIT AGREEMENT
among
SARATOGA BRANDS INC. and CUCINA CLASSICA
ITALIANA INC.
and
BANCA NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH
Dated as of December 15, 1997
<PAGE>
CREDIT AGREEMEBT DATED AS OF December 15, 1997 among SARATOGA BRANDS INC.
("SBI") and CUCINA CLASSICA ITALIANA INC. ("CCI") (SBI and CCI being referred to
herein together and as the context requires, singly as "Debtors") and BANCA
NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH ("Bank").
Preliminary Statement
A. Under arrangements heretofore contracted, SBI's indirect subsidiary
Nostrano, Inc ("Nostrano"), is indebted to the Bank in the principal amount of
$1,189,721 ("Debt") plus interest and charges.
B. Debtors and the Bank desire to restructuere and reschedule the Debt and
provide for the repayment of the Debt which Debtors will assume (without
prejudice to Debtors' position that CCI had never heretofore assumed) and agree
to pay on the terms and conditions hereinafter set forth.
NOW, THERFORE, for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Bank and Debtors hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, unless the context
shall otherwise require, the following terms shall have the following meaning
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means any person directly or indirectly owning or controlling
more than 5% of the voting stock of either of the Debtors or any of its
Subsidiaries and any Person who is an officer, director or employee of either
of the Debtors or any of its Subsidiaries and any spouse, child or trust
created by or for the benefit of any such Person.
"Agreement" means this agreement, as the same may hereafter be amended or
restated from time to time.
"Debt" is defined in the Preliminary Statement of this Agreement as
reduced pursuant to Section 2.01 hereof.
<PAGE>
"Other Banks" means Banca Commerciale Italiana, New York Branch, Istituto
Bancario San Paolo di Torino New York Branch, Banco di Sicilia S.p.A. New
York Branch and Banca Popolare di Milano New York Branch.
"CCI" is defined in paragraph A of this Agreement.
"GailCo" means GailCo, Inc., a New Jersey corporation.
"Lensmire" means Lensmire Cheese Factory Inc., a Wisconsin corporation.
"Loan Documents" means this Agreement and the Releases and UCC-3 forms
referred to in Section 5.01 of this Agreement.
"Maturity Date" means December 15, 2002.
"Person" means an individual, corporation, partnership, limited
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Prime" means the interest rate the Bank quotes from time to time as its
"prime" or "base" rate for unsecured loans to substantial borrowers it being
understood that this is not necessarily the lowest rate at which the Bank lends.
"Subsidiary" means a corporate or other entity the management of which is
controlled, directly or indirectly or both, by Debtors.
ARTICLE II
PAYMENT OF DEBT
2.01. Permanent Reduction. The principal amount of the Debt is reduced to
$426,000 and all the Bank's claims for principal in excess of such amount or for
interest or charges accrued to the date hereof are extinguished.
2.02. Assumption. In consideration of such reduction in the Debt which
benefits Debtors by reducing the indebtedness of its Subsidiaries, Debtors
hereby assume (without prejudice to Debtors' position that CCI had never
heretofore assumed) and agree to pay the Debt on the terms set forth in this
Agreement as if Debtors had been the original borrower so the obligations of CCI
and SBI with respect to the Debt are now joint and several.
2.03. Interest. Interest will accrue on the Debt at Prime starting on the
date hereof. Debtors will pay interest on December 15, 1998 (unless the Debt is
prepaid pursuant to Sections 2.05 (a) and (b) hereof) and monthly thereafter on
the first on the first of each month.
<PAGE>
2.04. Principal. Unless principal is prepaid as set forth in Section 2.05
below, Debtors will pay the principal of the Debt in 48 equal monthly
installments of $8,875 each commencing December 15, 1998 and ending on the
Maturity Date.
2.05. Prepayment and Possible Further Reduction.
(a) If Debtors pay the Bank $213,000 on or before June 15, 1998, the Bank
will accept that sum in satisfaction of the Debt and waive all accrued interest.
(b) If Debtors pay the Bank $255,600 on or after June 16, 1998 and on or
before December 15, 1998, the Bank will accept that sum in satisfaction of the
Debt and waive all accrued interest.
(c) If Debtors pay the Bank $298,200 on or after December 16, 1998 and on
or before June 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(d) If Debtors pay the Bank $340,800 on or after June 16, 1999 and on or
before December 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(e) If Debtors pay the Bank $383,400 on or after December 16, 1999 and on
or before June 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(f) Debtors may prepay the Debt in whole or in part at any time. All
prepayments and scheduled payments under Section 2.04 will be applied to reduce
the sums required under (a) through (e) above to allow prepayment in full in a
reduced amount.
ARTICLE III
COVENANTS OF THE BORROWER
Section 3.01. Negative Covenants of Debtors. So long as any of the
Debt remains outstanding, Debtors shall not:
(a) Mergers, Etc. Merge or consolidate with or into any
person, or assign, transfer or sell any of its Subsidiaries.
<PAGE>
(b) Dividends. Declare or pay any dividends or purchase or
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding or set aside any sum for such payment.
(c) Suits. Commence any suit or proceeding against any of the
Releasees as that term is used in any of the releases in Exhibit B hereto.
(d) Commitments to Other Banks. Commit to pay or pay or allow
any of its Subsidiaries or Affiliates to commit to pay or pay, after the date
hereof, to any of the other Banks listed below ("Other Banks") or their
respective successors or assigns a sum or sums in excess of any of the following
amounts (the "Excess Payment") without simultaneously paying in like terms or
like medium, as the case may be, 42.6% of each such Excess Payment to the Bank.
$138,500 to Banca Commerciale Italiana
$223,000 to Banco di Sicilia
$134,000 to Banca Popolare di Milano
$78,500 to Istituto Bancario San Paolo di Torino
The amounts set forth above are maxima which may be paid to the respective Other
Banks on any account and for any reason including future loans, except that
those maxima may accrue interest after the date hereof at the respective Other
bank's prime rate. Debtors may not pay principal to any of the Other Banks
disproportionately to the payments they make to the Bank all to the end that no
Other Bank is paid more rapidly than the payments the Debtors make to the Bank
hereunder. Without limiting this provision, the Other Banks can not be paid
advisory fees, legal fees or any other consideration for any reason which fees
or consideration in the aggregate exceed in value or amount the sums set forth
beside their respective names. The words "pay" and "paid" include any medium or
consideration whatsoever except it does not include Debtors common stock,
preferred stock or warrants or other options to purchase Debtors common stock or
preferred stock. The sole limitation on the scope of this section is this: If
one or more of the Other Banks commences suite against Debtors and/or one or
more of Debtors's Affiliates or Subsidiaries to recover claims alleged to have
accrued prior to the date hereof and the defendant in good faith settles that
claim or is ordered to pay a judgment in excess of the maximum for the plaintiff
set forth above, the bank will have no claim for matching compensation
hereunder.
<PAGE>
ARTICLE IV
EVENTS OF DEFAULT
Section 4.01. Events of Default. If any of the following events
(each, an "Event of Default") shall occur, that is to say:
(a) If Debtors shall default in the payment when due of any
principal of or interest on the Debt, and such default continues for ten (10)
business days after the holder notifies Debtors in writing of such default; or
(b) If Debtors shall materially fail to perform or observe any
material term, covenant or agreement contained in this Agreement, and any such
failure is not cured within 30 days after the Bank notifies Debtors thereof in
writing, then, in any such event, the Bank may declare the Debt due and payable
in full and Section 2.05 will be of no further force and effect and the Bank
shall be entitled to its remedies at law and in equity.
ARTICLE V
MISCELLANEOUS
Section 5.01. Releases. Simultaneously herewith the Bank has delivered to
Debtors the Releases respecting CCI, Nostrano, Lensmire, GailCo and Angelo M.
and Valerie A. Dominioni shown in Exhibit A hereto. The Debtors have delivered
to the Bank the releases respecting Violetta, Vecchi, Banca Nazionale del Lavoro
S.p.A., Gilmartin, Poster and Shafto and Berttocci shown in Exhibit B hereto.
The Bank has delivered to Debtors the UCC - 3 forms shown in Exhibit C hereto.
Section 5.02. Addresses for Notices, Etc. All notices, requests, demands,
directions and other communications provided for hereunder shall be sufficient
if delivered personally (including by Federal express or other recognized
courier for which receipt is given) or if mailed by certified mail, return
receipt requested, to the applicable party at its address indicated below:
If to Debtors:
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
If to Bank:
Banca Nazionale del Lavoro S.p.A.
New York Branch
25 West 51st Street
New York, New York 10019
<PAGE>
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered personally) be effective when delivered or
(if mailed) two days after having been deposited in the United States mail,
addressed as aforesaid.
Section 5.03. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
(without giving effect to principles if conflicts law).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CUCINA CLASSICA ITALIANA, INC. SARATOGA BRANDS INC.
By: By:
--------------------------- -------------------------------
BANCA NAZIONALE DEL LAVORO S.p.A.
NEW YORK BRANCH
By:
-------------------------------
EXHIBIT 10 (z)
<PAGE>
CREDIT AGREEMENT
among
SARATOGA BRANDS INC. and CUCINA CLASSICA
ITALIANA INC.
and
BANCA COMMERCIALE ITALIANA - NEW YORK BRANCH
Dated as of December 15, 1997
<PAGE>
CREDIT AGREEMEBT DATED AS OF December 15, 1997 among SARATOGA BRANDS INC.
("SBI") and CUCINA CLASSICA ITALIANA INC. ("CCI") (SBI and CCI being referred to
herein together and as the context requires, singly as "Debtors") and BANCA
COMMERCIALE ITALIANA - NEW YORK BRANCH ("Bank").
Preliminary Statement
B. Under arrangements heretofore contracted, SBI's indirect subsidiary
Nostrano, Inc ("Nostrano"), is indebted to the Bank in the principal amount of
$389,073.00 ("Debt") plus interest and charges.
B. Debtors and the Bank desire to restructuere and reschedule the Debt and
provide for the repayment of the Debt which Debtors will assume (without
prejudice to Debtors' position that CCI had never heretofore assumed) and agree
to pay on the terms and conditions hereinafter set forth.
NOW, THERFORE, for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Bank and Debtors hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, unless the context
shall otherwise require, the following terms shall have the following meaning
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means any person directly or indirectly owning or controlling
more than 5% of the voting stock of either of the Debtors or any of its
Subsidiaries and any Person who is an officer, director or employee of either
of the Debtors or any of its Subsidiaries and any spouse, child or trust
created by or for the benefit of any such Person.
"Agreement" means this agreement, as the same may hereafter be amended or
restated from time to time.
<PAGE>
"Debt" is defined in the Preliminary Statement of this Agreement as
reduced pursuant to Section 2.01 hereof.
"Other Banks" means Banca Nazioale del Lavoro S.p.A. New York Branch,
Istituto Bancario San Paolo di Torino New York Branch, Banco di Sicilia
S.p.A. New York Branch and Banca Popolare di Milano New York Branch.
"CCI" is defined in paragraph A of this Agreement.
"GailCo" means GailCo, Inc., a New Jersey corporation.
"Lensmire" means Lensmire Cheese Factory Inc., a Wisconsin corporation.
"Loan Documents" means this Agreement and the Releases and UCC-3 forms
referred to in Section 5.01 of this Agreement.
"Maturity Date" means December 15, 2002.
"Person" means an individual, corporation, partnership, limited
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Prime" means the interest rate the Bank quotes from time to time as its
"prime" or "base" rate for unsecured loans to substantial borrowers it being
understood that this is not necessarily the lowest rate at which the Bank lends.
"Subsidiary" means a corporate or other entity the management of which is
controlled, directly or indirectly or both, by Debtors.
ARTICLE II
PAYMENT OF DEBT
2.01. Permanent Reduction. The principal amount of the Debt is reduced to
$138,500 and all the Bank's claims for principal in excess of such
amount or for interest or charges accrued to the date hereof are
extinguished.
2.02. Assumption. In consideration of such reduction in the Debt which
benefits Debtors by reducing the indebtedness of its Subsidiaries, Debtors
hereby assume (without prejudice to Debtors' position that CCI had never
heretofore assumed) and agree to pay the Debt on the terms set forth in this
Agreement as if Debtors had been the original borrower so the obligations of CCI
and SBI with respect to the Debt are now joint and several.
2.03. Interest. Interest will accrue on the Debt at Prime starting on the
date hereof. Debtors will pay interest on December 15, 1998 (unless the Debt is
prepaid
<PAGE>
pursuant to Sections 2.05 (a) and (b) hereof) and monthly thereafter on the
first on the first of each month.
2.04. Principal. Unless principal is prepaid as set forth in Section 2.05
below, Debtors will pay the principal of the Debt in 48 equal monthly
installments of $2,885.42 each commencing December 15, 1998 and ending on the
Maturity Date.
2.05. Prepayment and Possible Further Reduction.
(a) If Debtors pay the Bank $69,250 on or before June 15, 1998, the Bank
will accept that sum in satisfaction of the Debt and waive all accrued interest.
(b) If Debtors pay the Bank $83,100 on or after June 16, 1998 and on or
before December 15, 1998, the Bank will accept that sum in satisfaction of the
Debt and waive all accrued interest.
(c) If Debtors pay the Bank $96,950 on or after December 16, 1998 and on
or before June 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(d) If Debtors pay the Bank 110,800 on or after June 16, 1999 and on or
before December 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(e) If Debtors pay the Bank $124,650 on or after December 16, 1999 and on
or before June 15, 1999 with all interest accrued to the date of payment, the
Bank will accept that sum in satisfaction of the Debt.
(f) Debtors may prepay the Debt in whole or in part at any time. All
prepayments and scheduled payments under Section 2.04 will be applied to reduce
the sums required under (a) through (e) above to allow prepayment in full in a
reduced amount.
ARTICLE III
COVENANTS OF THE BORROWER
Section 3.01. Negative Covenants of Debtors. So long as any of the
Debt remains outstanding, Debtors shall not:
<PAGE>
(a) Mergers, Etc. Merge or consolidate with or into any
person, or assign, transfer or sell any of its Subsidiaries.
(b) Dividends. Declare or pay any dividends or purchase or
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding or set aside any sum for such payment.
(c) Suits. Commence any suit or proceeding against any of the
Releasees as that term is used in any of the releases in Exhibit B hereto.
(d) Commitments to Other Banks. Commit to pay or pay or allow
any of its Subsidiaries or Affiliates to commit to pay or pay, after the date
hereof, to any of the other Banks listed below ("Other Banks") or their
respective successors or assigns a sum or sums in excess of any of the following
amounts (the "Excess Payment") without simultaneously paying in like terms or
like medium, as the case may be, 42.6% of each such Excess Payment to the Bank.
$426,000 to Banca Nazionale del Lavoro S.p.A.
$223,000 to Banco di Sicilia
$134,000 to Banca Popolare di Milano
$78,500 to Istituto Bancario San Paolo di Torino
The amounts set forth above are maxima which may be paid to the respective Other
Banks on any account and for any reason including future loans, except that
those maxima may accrue interest after the date hereof at the respective Other
bank's prime rate. Debtors may not pay principal to any of the Other Banks
disproportionately to the payments they make to the Bank all to the end that no
Other Bank is paid more rapidly than the payments the Debtors make to the Bank
hereunder. Without limiting this provision, the Other Banks can not be paid
advisory fees, legal fees or any other consideration for any reason which fees
or consideration in the aggregate exceed in value or amount the sums set forth
beside their respective names. The words "pay" and "paid" include any medium or
consideration whatsoever except it does not include Debtors common stock,
preferred stock or warrants or other options to purchase Debtors common stock or
preferred stock. The sole limitation on the scope of this section is this: If
one or more of the Other Banks commences suite against Debtors and/or one or
more of Debtors's Affiliates or Subsidiaries to recover claims alleged to have
accrued prior to the date hereof and the defendant in good faith settles that
claim or is ordered to pay a judgment
<PAGE>
in excess of the maximum for the plaintiff set forth above, the bank will have
no claim for matching compensation hereunder.
ARTICLE IV
EVENTS OF DEFAULT
Section 4.01. Events of Default. If any of the following events
(each, an "Event of Default") shall occur, that is to say:
(a) If Debtors shall default in the payment when due of any
principal of or interest on the Debt, and such default continues for ten (10)
business days after the holder notifies Debtors in writing of such default; or
(b) If Debtors shall materially fail to perform or observe any
material term, covenant or agreement contained in this Agreement, and any such
failure is not cured within 30 days after the Bank notifies Debtors thereof in
writing, then, in any such event, the Bank may declare the Debt due and payable
in full and Section 2.05 will be of no further force and effect and the Bank
shall be entitled to its remedies at law and in equity.
ARTICLE V
MISCELLANEOUS
Section 5.01. Releases. Simultaneously herewith the Bank has delivered to
Debtors the Releases respecting CCI, Nostrano, Lensmire, GailCo and Angelo M.
and Valerie A. Dominioni shown in Exhibit A hereto. The Debtors have delivered
to the Bank the releases respecting Tota-Perrino, Ambrogi, Banca Commerciale
Italiana, Gilmartin, Poster and Shafto and Berttocci shown in Exhibit B hereto.
The Bank has delivered to Debtors the UCC - 3 forms shown in Exhibit C hereto.
Section 5.02. Addresses for Notices, Etc. All notices, requests, demands,
directions and other communications provided for hereunder shall be sufficient
if delivered personally (including by Federal express or other recognized
courier for which receipt is given) or if mailed by certified mail, return
receipt requested, to the applicable party at its address indicated below:
If to Debtors:
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
<PAGE>
If to Bank:
Banca Commerciale Italiana - New York Branch
1 William Street
New York, New York 10004
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered personally) be effective when delivered or
(if mailed) two days after having been deposited in the United States mail,
addressed as aforesaid.
Section 5.03. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
(without giving effect to principles if conflicts law).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CUCINA CLASSICA ITALIANA, INC. SARATOGA BRANDS INC.
By: By:
--------------------------- -------------------------------
BANCA COMMERCIALE ITALIANA -
NEW YORK BRANCH
By:
-------------------------------
EXHIBIT 10 (aa)
<PAGE>
AGREEMENT dated as of December 29, 1997 among SARATOGA BRANDS INC. ("SBI")
and CUCINA CLASSICA ITALIANA, INC. ("CCI") (SBI and CCI being referred to herein
together and as the context requires, singly as "Debtors") and ISTITUTO BANCARIO
SAN PAOLO DI TORINO - NEW YORK BRANCH ("Bank").
Preliminary Statement
C. Under arrangements heretofore contracted, SBI's indirect subsidiary
Nostrano, Inc. ("Nostrano"), is indebted to the Bank in the principal amount of
$218,247 ("Debt") plus interest and charges.
B. Debtors and the Bank desire to provide for the repayment of the Debt at
a discounted rate as provided for herein.
NOW, THERFORE, for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Bank and Debtors hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, unless the context
shall otherwise require, the following terms shall have the following meaning
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Agreement" means this agreement, as the same may hereafter be amended or
restated from time to time.
"CCI" is defined in paragraph A of this Agreement.
"GailCo" means GailCo, Inc. a New Jersey corporation.
"Lensmire" means Lensmire Cheese Factory Inc., a Wisconsin corporation.
"Loan Documents" means this Agreement and the Releases and UCC-3 forms
referred to in Section 5.01 of this Agreement.
"Person" means an individual, corporation, partnership, limited
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Subsidiary" means a corporate or other entity the management of which is
controlled, directly or indirectly or both, by Debtors.
<PAGE>
ARTICLE II
PAYMENT OF DEBT
2.01. Permanent Reduction. The principal amount of the Debt is reduced to
$39,250 and all the Bank's claims for principal in excess of such amount or for
interest or charges accrued to the date hereof are extinguished. It is expressly
understood that full payment shall be made upon execution of this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.01. Releases. Simultaneously herewith the Bank has delivered to
Debtors the Releases respecting CCI, Nostrano, Lensmire, GailCo and Angelo M.
Dominioni and Valerie A. Dominioni; and each of their past and present officers,
shareholders, directors, agents, attorneys, employees, investors, lenders,
predecessors, successors, assigns, parent corporations, subsidiary corporations,
affiliates, representatives, devisees, legatees, trustees, and their heirs and
personal representatives of their estates shown in Exhibit A hereto. The Debtors
have delivered to the Bank the releases respecting Istituto Bancario San Paolo
di Torino shown in Exhibit B hereto. The Bank has delivered to Debtors the UCC -
3 forms shown in Exhibit C hereto.
Section 3.02. Addresses for Notices, Etc. All notices, requests, demands,
directions and other communications provided for hereunder and shall be
sufficient if delivered personally (including by Federal express or other
recognized courier for which receipt is given) or if mailed by certified mail,
return receipt requested, to the applicable party at the addresses indicated
below:
If to Debtors:
Saratoga Brands Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
If to Bank:
Istituto Bancario San Paolo di Torino
245 Park Avenue
New York, New York 10167
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered
<PAGE>
personally) be effective when delivered or (if mailed) two days after having
been deposited in the mail, addressed as aforesaid.
Section 3.03. Governing Law. This Agreement and the other Loan Documents
shall be governed by, and construed in accordance with, the internal laws of the
State of New York (without giving effect to principles if conflicts law).
Section 3.04. Entire Agreement. This Agreement, its attachments and a side
letter dated December 29, 1997 regarding delivery of Saratoga stock is the
entire agreement between the parties and may only be changed or modified by an
agreement in writing signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CUCINA CLASSICA ITALIANA, INC. SARATOGA BRANDS INC.
- -------------------------------- --------------------------------
ISTITUTO BANCARIO SAN PAOLO DI TORINO - NEW YORK BRANCH
---------------------------------
<PAGE>
December 29, 1997
Mr. Ettore Viazzo
Vice President
Manager - European Corporate Group
Istituto Bancario San Paolo di Torino
245 Park Avenue
New York, New York 10167
Dear Mr. Viazzo,
This letter shall serve as an additional incentive to induce Istituto Bancario
San Paolo di Torino (the "Bank") to accept payment in full, at a discounted
rate, on its loan receivable from Nostrano, Inc.
In addition to, and not in lieu of any payment or terms of the Credit Agreement,
we will issue to the Bank 36,894 shares of the Common Stock of Saratoga Brands
Inc. and provide the Bank with restricted Certificates evidencing their
ownership thereof, copies of which are attached hereto.
The Bank recognizes and realizes that 18,447 shares shall be restricted from
sale, transfer, pledge or alienation until December 23, 1998, and that 18,447
shares shall be restricted from sale, transfer, pledge or alienation until
December 23, 1999.
If Saratoga, during the period from December 23, 1997 to December 23, 2000 files
a Registration Statement covering the sale of any of Saratoga's common stock,
then Saratoga shall include in any such Registration Statement, at Saratoga's
expense, the shares being issued herein. In any case, the shares being issued
above shall not be offered for sale, transfer, pledge or alienation until the
restriction dates stated above.
Saratoga agrees and covenants that the restriction period on the first 18,447
shares shall not be more than one year from the settlement date, provided that
the Securities and Exchange Commission does not amend or repeal Rule 144 of the
Securities Act of 1933. The Bank agrees to give Saratoga Brands Inc. the
opportunity to arrange for the sale of the shares for the Bank at a price at or
above market, prior to offering them for sale on the open market. Saratoga
Brands Inc. will have a period of 30 days to consummate such a sale and at the
end of said period the Bank will be free to offer them as it sees fit.
Yours very truly,
Scott G. Halperin
Chairman and Chief Executive Officer
This letter agreement is agreed to and accepted as above written.
- -------------------------------------
Istituto Bancario San Paolo di Torino
EXHIBIT 10 (ab)
<PAGE>
AGREEMENT dated as of December 29, 1997 among SARATOGA BRANDS INC. ("SBI")
and CUCINA CLASSICA ITALIANA, INC. ("CCI") (SBI and CCI being referred to herein
together and as the context requires, singly as "Debtors") and BANCA POPOLARE DI
MILANO - NEW YORK BRANCH ("Bank").
Preliminary Statement
D. Under arrangements heretofore contracted, SBI's indirect subsidiary
Nostrano, Inc. ("Nostrano"), is indebted to the Bank in the principal amount of
$373,313 ("Debt") plus interest and charges.
B. Debtors and the Bank desire to provide for the repayment of the Debt at
a discounted rate as provided for herein.
NOW, THERFORE, for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Bank and Debtors hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, unless the context
shall otherwise require, the following terms shall have the following meaning
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Agreement" means this agreement, as the same may hereafter be amended or
restated from time to time.
"CCI" is defined in paragraph A of this Agreement.
"GailCo" means GailCo, Inc. a New Jersey corporation.
"Lensmire" means Lensmire Cheese Factory Inc., a Wisconsin corporation.
"Loan Documents" means this Agreement and the Releases and UCC-3 forms
referred to in Section 5.01 of this Agreement.
"Person" means an individual, corporation, partnership, limited
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Subsidiary" means a corporate or other entity the management of which is
controlled, directly or indirectly or both, by Debtors.
<PAGE>
ARTICLE II
PAYMENT OF DEBT
2.01. Permanent Reduction. The principal amount of the Debt is reduced to
$67,000 and all the Bank's claims for principal in excess of such amount or for
interest or charges accrued to the date hereof are extinguished. It is expressly
understood that full payment shall be made upon execution of this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.01. Releases. Simultaneously herewith the Bank has delivered to
Debtors the Releases respecting CCI, Nostrano, Lensmire, GailCo and Angelo M.
Dominioni and Valerie A. Dominioni; and each of their past and present officers,
shareholders, directors, agents, attorneys, employees, investors, lenders,
predecessors, successors, assigns, parent corporations, subsidiary corporations,
affiliates, representatives, devisees, legatees, trustees, and their heirs and
personal representatives of their estates shown in Exhibit A hereto. The Debtors
have delivered to the Bank the releases respecting Banca Popolare di Milano
shown in Exhibit B hereto. The Bank has delivered to Debtors the UCC - 3 forms
shown in Exhibit C hereto.
Section 3.02. Addresses for Notices, Etc. All notices, requests,
demands, directions and other communications provided for hereunder and shall be
sufficient if delivered personally (including by Federal express or other
recognized courier for which receipt is given) or if mailed by certified mail,
return receipt requested, to the applicable party at the addresses indicated
below:
If to Debtors:
Saratoga Brands Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
If to Bank:
Banca Popolare di Milano
375 Park Avenue
New York, New York 10152
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered
<PAGE>
personally) be effective when delivered or (if mailed) two days after having
been deposited in the mail, addressed as aforesaid.
Section 3.03. Governing Law. This Agreement and the other Loan Documents
shall be governed by, and construed in accordance with, the internal laws of the
State of New York (without giving effect to principles if conflicts law).
Section 3.04. Entire Agreement. This Agreement, its attachments and a side
letter dated December 29, 1997 regarding delivery of Saratoga stock is the
entire agreement between the parties and may only be changed or modified by an
agreement in writing signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CUCINA CLASSICA ITALIANA, INC. SARATOGA BRANDS INC.
- -------------------------------- --------------------------------
BANCA POPOLARE DI MILANO - NEW YORK BRANCH
---------------------------------
<PAGE>
December 29, 1997
Mr. Partick Dillon
Vice President, Chief Credit Officer
Banca Popolare di Milano
375 Park Avenue
New York, New York 10152
Dear Mr. Dillon,
This letter shall serve as an additional incentive to induce Banca Popolare di
Milano (the "Bank") to accept payment in full, at a discounted rate, on its loan
receivable from Nostrano, Inc.
In addition to, and not in lieu of any payment or terms of the Credit Agreement,
we will issue to the Bank 63,106 shares of the Common Stock of Saratoga Brands
Inc. and provide the Bank with restricted Certificates evidencing their
ownership thereof, copies of which are attached hereto.
The Bank recognizes and realizes that 31,553 shares shall be restricted from
sale, transfer, pledge or alienation until December 23, 1998, and that 31,553
shares shall be restricted from sale, transfer, pledge or alienation until
December 23, 1999.
If Saratoga, during the period from December 23, 1997 to December 23, 2000 files
a Registration Statement covering the sale of any of Saratoga's common stock,
then Saratoga shall include in any such Registration Statement, at Saratoga's
expense, the shares being issued herein. In any case, the shares being issued
above shall not be offered for sale, transfer, pledge or alienation until the
restriction dates stated above.
Saratoga agrees and covenants that the restriction period on the first 31,553
shares shall not be more than one year from the settlement date, provided that
the Securities and Exchange Commission does not amend or repeal Rule 144 of the
Securities Act of 1933. The Bank agrees to give Saratoga Brands Inc. the
opportunity to arrange for the sale of the shares for the Bank at a price at or
above market, prior to offering them for sale on the open market. Saratoga
Brands Inc. will have a period of 30 days to consummate such a sale and at the
end of said period the Bank will be free to offer them as it sees fit.
Yours very truly,
Scott G. Halperin
Chairman and Chief Executive Officer
This letter agreement is agreed to and accepted as above written.
- ------------------------
Banca Popolare di Milano
EXHIBIT 10 (ac)
<PAGE>
AGREEMENT dated as of December 31, 1997 among SARATOGA BRANDS INC. ("SBI")
and CUCINA CLASSICA ITALIANA, INC. ("CCI") (SBI and CCI being referred to herein
together and, as the context requires, singly, as "Debtors") and BANCO DI
SICILIA - NEW YORK BRANCH ("Bank").
Preliminary Statement
E. Under arrangements heretofore contracted the Bank is owed the principal
amount of $622,776 ("Debt") plus interest and charges.
B. Debtors and the Bank desire to provide for the repayment of the Debt at
a discounted rate as provided for herein.
NOW, THERFORE, for valuable consideration (the receipt and sufficiency of
which are hereby acknowledged), the Bank and Debtors hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used herein, unless the context
shall otherwise require, the following terms shall have the following meaning
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means any person directly or indirectly owning or controlling
more than 5% of the voting stock of either of the Debtors or any of its
Subsidiaries and any Person who is an officer, director or employee of either
of the Debtors or any of its Subsidiaries and any spouse, child or trust
created by or for the benefit of any such Person.
"Agreement" means this agreement, as the same may hereafter be amended or
restated from time to time.
"CCI" is defined in paragraph A of this Agreement.
"GailCo" means GailCo, Inc., a New Jersey corporation.
"Lensmire" means Lensmire Cheese Factory Inc., a Wisconsin corporation.
"Nostrano" means Nostrano, Inc., a New York corporation.
"Person" means an individual, corporation, partnership, limited
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
<PAGE>
"SBI" is defined in paragraph A of this Agreement.
"Subsidiary" means a corporate or other entity the management of which is
controlled, directly or indirectly or both, by Debtors, or either of them.
ARTICLE II
PAYMENT OF DEBT
2.01. Permanent Reduction. The principal amount of the Debt is reduced to
$111,500 and all the Bank's claims for principal in excess of such amount or for
interest or charges accrued to the date hereof are extinguished. It is expressly
understood that full payment shall be made by Debtors to the Bank (by bank or
certified check or wire transfer of cleared funds, as directed by the Bank)
simultaneously with the execution of this Agreement.
2.02. Additional Payments. Anything in this Agreement to the contrary
notwithstanding, Debtors shall not commit to pay or pay or allow any of their
subsidiaries or Affiliates to commit to pay or pay, after the date hereof, to
any of the other banks listed below ("Other Banks") or their respective
successors or assigns, a sum or sums in excess of any of the following amounts
(the "Excess Payment") without simultaneously paying in like terms or like
medium, as the case may be, 22.3% of each such Excess Payment to the Bank.
$69,250 to Banca Commerciale Italiana
$39,250 to Istituto Bancario San Paolo di Torino
$213,000 to Banca Nazionale del Lavoro S.p.A.
$67,000 to Banca Popolare di Milano
The amounts set forth above are maxima which may be paid to the respective Other
Banks on any account and for any reason including future loans, except that
those maxima may accrue interest after the date hereof at the respective Other
Bank's prime rate. Debtors may not pay principal to any of the Other Banks
disproportionately to the payments they make to the Bank, all to the end that no
Other Bank is paid more rapidly than the payments the Debtors make to the Bank
hereunder. Without limiting this provision, the Other Banks can not be paid
advisory fees, legal fees or any other consideration for any reason which fees
or consideration in the aggregate exceed in value or amount the sums set forth
beside their respective names. The words "pay" and "paid" include any medium or
consideration whatsoever except it does not include Debtors' common stock,
preferred stock or warrants or other options to purchase Debtors' common stock
or preferred stock.
<PAGE>
ARTICLE III
DELIVERY OF SBI SHARES
Section 3.01. Shares. As an additional incentive to induce the Bank to
accept $111.500 in full payment of the Debt, SBI, in addition to, and not in
lieu of such payment, will, simultaneously with the execution of this Agreement,
deliver to the Bank, restricted certificates, as per copies attached to this
Agreement as Exhibit A, evidencing the ownership by the Bank of 300,000
pre-reverse split (effective November 24, 1997) shares of the Common Stock of
SBI issued by SBI to the Bank (the "Shares"). The Bank recognizes and realizes
that 200,000 of such shares shall be restricted from sale, transfer, pledge or
alienation until November 12, 1998, and that 100,000 of such shares shall be
restricted from sale, transfer, pledge or alienation until May 12, 1999.
Section 3.02. Restrictions. SBI agrees and covenants that the restriction
period on the first 200,000 Shares shall not be more than one year from December
31, 1997, unless such restriction period is increased by the Securities and
Exchange Commission by amendment to or repeal of Rule 144 of the Securities Act
of 1933. The Bank agrees to give SBI the opportunity to arrange for the sale of
the Shares for the Bank prior to the Bank offering the Shares for sale on the
open market. Simultaneously herewith Debtors have delivered to the Bank a copy
of SBI's present by-laws and a list of SBI's ten (10) largest shareholders as of
the date hereof. For as long as the Bank owns any of the Shares, SBI will
promptly advise the Bank in writing of all changes in such by-laws and or list.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Releases. Simultaneously herewith: (a) the Bank has
delivered to Debtors the General Releases by the Bank, Michelino Massarelli and
Pierpaolo Carrubba, respecting CCI, Nostrano, Lensmire, GailCo and Angelo M.
Dominioni and Valerie A. Dominioni and each of their past and present officers,
shareholders, directors, agents, attorneys, employees, investors, lenders,
predecessors, successors, assigns, parent corporations, subsidiary corporations,
affiliates, representatives, devisees, legatees, trustees, and their heirs and
personal representatives of their estates; (b) the Debtors have delivered to the
Bank the General Releases by CCI, Nostrano Lensmire, GailCo, Angelo M. Dominioni
and Valerie A. Dominioni of the Bank, Michelino Massarelli, Pierpaolo Carrubba,
Gilmartin, Poster and Shafto, Richard A. Berttocci Esq. and each of their past
and present officers, shareholders, directors, agents, attorneys, employees,
investors, lenders, predecessors, successors, assigns, parent corporations,
subsidiary corporations, affiliates, representatives, devisees legatees,
trustees, and their heirs and personal representatives of their estates (the
releases of Gilmartin, Poster and Shafto and Richard A. Bertocci, Esq. being
only with respect to matters and activities on behalf of the Bank and / or the
other parties released); and (c) the Bank has delivered to Debtors the UCC - 3
forms relating to the debt
<PAGE>
Section 4.02. Addresses for Notices, Etc. All notices, requests, demands,
directions and other communications provided for hereunder shall be sufficient
if delivered personally (including by Federal express or other recognized
courier for which receipt is given) or if mailed by certified mail, return
receipt requested, to the applicable party at its address indicated below:
If to Debtors:
Saratoga Brands Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
Attention: Scott G. Halperin, Chairman and Chief Executive Officer
If to Bank:
Banco di Sicilia
250 Park Avenue
New York, New York 10177
Attention: Carlo Cracolici, Senior Vice President and General Manager
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered personally) be effective when delivered or
(if mailed) two days after having been deposited in the United States mail,
addressed as aforesaid.
Section 4.03. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
(without giving effect to principles if conflicts law).
Section 4.04. Entire Agreement. This Agreement sets forth the entire
agreement between Debtors and the Bank and supersedes all prior agreements,
written or oral with respect to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CUCINA CLASSICA ITALIANA, INC. SARATOGA BRANDS INC.
- -------------------------------- --------------------------------
BANCO DI SICILIA - NEW YORK BRANCH
---------------------------------
EXHIBIT 10 (ad)
<PAGE>
AGREEMENT
This agreement ("Agreement"), effective as of December 31 1997, by and between:
SARATOGA BRANDS INC., ("SARATOGA") a New York Corporation with
offices
at 1835 Swarthmore Avenue, Lakewood, New Jersey 08701
Angelo M. Dominioni, Valerie A. Dominioni and Silvana L. Dominioni
residing at 45 Mizzen Road, Brick, New Jersey 08723
Robert J. Castellano residing at 584 Princess Court, Toms River, New
Jersey 08753
CUCINA CLASSICA ITALIANA, SpA ("SPA") a corporation organized under
the laws of the British Virgin Islands, with offices located at P.O.
Box 146 Road Town,Tortola, BVI
WHEREAS, Angelo M. Dominioni, Valerie A. Dominioni, Silvana L. Dominioni,
and Robert J. Castellano, (the "INDIVIDUALS") desire to assign each of their
rights against Cucina Classica Italiana, SpA ("SPA"), pursuant to the Stock
Purchase Agreement ("SPA AGREEMENT") for the purchase of Cucina Classica
Italiana, Inc. and subsidiaries ("CCI"), between the INDIVIDUALS and SPA, to
SARATOGA in accordance with the terms and conditions hereinafter set forth;
WHEREAS, the INDIVIDUALS wish to settle any and all claims against
Saratoga Brands Inc; each of its past and present officers, shareholders,
Directors, agents, attorneys, employees, investors, lenders, predecessors,
successors, assigns, parent corporations, subsidiary corporations, affiliates,
representatives, devisees, legatees, trustees, and their estates;
WHEREAS, SARATOGA wishes to settle any and all claims against the
INDIVIDUALS; each of their past and present agents, attorneys, employees,
lenders, predecessors, successors, assigns, representatives, devisees, legatees,
trustees, and their estates;
1. Terms of Assignment. Subject to the terms and conditions of this Agreement:
(i) The INDIVIDUALS shall sell, assign, transfer and convey to SARATOGA
all of their rights, both jointly and individually, under the SPA
AGREEMENT.
(ii) SARATOGA shall deliver to the INDIVIDUALS, or their designees, upon
execution of this Agreement, certificates representing 224,000
shares of SARATOGA's common stock, bearing a standard restrictive
legend in
<PAGE>
accordance with all applicable securities laws, to be issued in
accordance with Exhibit A attached hereto.
(i) SPA for good and valuable consideration hereby releases any and all
claims, including, but not limited to those relating to the SPA
Agreement, pledge agreements, or any other agreement related to CCI,
against Saratoga Brands Inc; each of their past and present
officers, shareholders, Directors, agents, attorneys, employees,
investors, lenders, predecessors, successors, assigns, parent
corporations, subsidiary corporations, affiliates, representatives,
devisees, legatees, trustees, and their estates.
2. Terms of Release. Subject to the terms and conditions of this Agreement:
(ii) SARATOGA agrees to pay the sum of $10,609.34 to Angelo M. Dominioni
on the 15 of each month beginning on the 15th of January, 1998 and
continuing for a total of 18 months ending with the payment on June
15, 1999.
(iii) SARATOGA releases any and all claims against the INDIVIDUALS; each
of their past and present agents, attorneys, employees, lenders,
predecessors, successors, assigns, representatives, devisees,
legatees, trustees, and their estates.
(iv) the INDIVIDUALS release any and all claims, including, but not
limited to those relating to the SPA Agreement, employment
agreements, or pledge agreements, against Saratoga Brands Inc; each
of their past and present officers, shareholders, Directors, agents,
attorneys, employees, investors, lenders, predecessors, successors,
assigns, parent corporations, subsidiary corporations, affiliates,
representatives, devisees, legatees, trustees, and their estates.
3. Health Insurance. SARATOGA shall maintain health insurance for Valerie A.
Dominioni, her spouse, and eligible dependents for a period ending no
sooner than June 30, 1999.
4. Release of Pledged CCI Shares. Each of the INDIVIDUALS and SPA by copy of
this agreement hereby instruct the escrow agent to release 100% of CCI's issued
and outstanding common stock (the "CCI Shares") to SARATOGA.
5. Addresses for Notices, Etc. All notices, requests, demands, directions and
other communications provided for hereunder shall be sufficient if delivered
personally (including by Federal express or other recognized courier for which
receipt is given) or if mailed by certified mail, return receipt requested, to
the applicable party at its address indicated below:
If to SARATOGA:
Saratoga Brands Inc.
1835 Swarthmore Avenue
<PAGE>
Lakewood, New Jersey 08701
Attention: Scott G. Halperin, Chairman and Chief Executive Officer
If to INDIVIDUALS:
Angelo M. Dominioni
45 Mizzen Road
Brick, New Jersey 08723, and
Robert J. Castellano
584 Princess Court
Toms River, New Jersey 08753
If to SPA:
Cucina Classica Italiana, SpA
P.O. Box 146 Road Town,
Tortola, BVI
or, as to either party, at such other address as shall be designated by such
party in a written notice to each other party complying as to delivery with the
terms of this Section. All notices, requests, demands directions and other
communications shall (if delivered personally) be effective when delivered or
(if mailed) two days after having been deposited in the United States mail,
addressed as aforesaid.
6. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey (without giving
effect to principles if conflicts law).
7. Entire Agreement. This Agreement sets forth the entire agreement between
SARATOGA, SPA, and the INDIVIDUALS and supersedes all prior agreements, written
or oral with respect to the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SARATOGA BRANDS INC. ATTEST:
- --------------------------- --------------------------------
Scott G. Halperin, Chairman Bernard F. Lillis, Jr. Secretary
- --------------------------- --------------------------------
Angelo M. Domionini Valerie A. Dominioni
- --------------------------- --------------------------------
Silvana L. Dominioni Robert J. Castellano
<PAGE>
CUCINA CLASSICA ITALIANA, SpA
- ---------------------------
EXHIBIT A
Angelo M. Dominioni 44.44% 99,546 shares
Valerie A. Dominioni 33.33% 74,659 shares
Silvana L. Dominioni 11.11% 24,886 shares
Robert J. Castellano 11.12% 24,909 shares
EXHIBIT 10 (ae)
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of the 1ST day of
August, 1997, by and between SARATOGA BRANDS INC. a New York corporation (The
"Company"), and SCOTT G. HALPERIN (the "Executive").
W I T N E S E T H :
WHEREAS, the Executive is currently the Company's Chairman, Chief
Executive Officer, and Treasurer; and
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel, opportunities and
problems; and
WHEREAS, the Company recognizes that the Executive's contribution to the
growth and success of the Company has been substantial and desires to assure
itself of the Executive's employment; and
WHEREAS, the Company desires to continue to employee the Executive as its
Chairman and Chief Executive Officer; and
WHEREAS, the Executive is desirous of committing himself to serve the
Company on the terms herein provided; and
WHEREAS, the Company and the Executive are parties to that certain
employment agreement, dated August 16, 1994,(the "Old Agreement"); and
WHEREAS, the Company and the Executive desire to terminate the Old
Agreement and replace it in its entirety with this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties contained in this Agreement, the parties
hereto hereby agree as follows:
<PAGE>
1. Employment.
The Company hereby agrees to continue to employ the Executive and the
Executive hereby agrees to continue to serve the Company, on the terms and
conditions set forth in this Agreement, for a period commencing on August 1,
1997 (the Effective Date") and terminating on July 31, 2005 (unless sooner
terminated as specifically provided by this Agreement); provided, however, that
this Agreement may be renewed pursuant to Section 16, herein. The Old Agreement
is hereby terminated as of the Effective Date, without any liability on the part
of the Company or the Executive to each other.
2. Position and Duties.
The Executive shall serve as the Chairman and Chief Executive Officer of
the Company and shall have primary responsibility for the supervision and
control over, and responsibility for, the management and operation of the
Company, and shall have such other powers and duties as may from time to time be
delegated to him by the Board of Directors of the Company (the "Board"),
provided that such duties are consistent with his present duties and with the
Executive's position. It shall be a condition of the Executive's employment
hereunder, on the part of the Executive, that the Executive serve as a director
of the Company. The Company shall use its best efforts to nominate and cause the
Executive to be elected as a director, it being expressly understood that
failure by the Company to nominate the Executive (other than by reason of the
Executive's decision not to be so nominated) or use best efforts to cause his
election, shall be treated as grounds for termination of this Agreement by the
Executive, for "Good Reason" (as hereinafter defined).
3. Indemnification of Executive.
The Company will indemnify the Executive (and his legal representatives or other
successors) to the fullest extent permitted by the laws of the State of New York
in effect at the time of the subject act or omission, or such other state in
which the Company may be incorporated at such time, or the Certificate of
Incorporation and By-Laws of the Company as in effect at such time or on the
date of this Agreement, whichever affords or afforded greater protection to the
Executive, against all costs, charges and expenses, including, without
limitation, amounts paid in settlement or upon judgment, whatsoever incurred or
sustained by him or his legal representatives or other successors, in connection
with any action, suit or proceeding to which he (or his legal representative or
other successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company or any of its subsidiaries except
that his indemnity shall not extend to fraud, criminal misconduct, embezzlement
or gross negligence committed by the Executive. If the Company elects to
maintain liability insurance policies covering its directors and officers, the
Executive shall be entitled to the benefit thereof.
<PAGE>
4. Place of Performance.
If the Company shall relocate or transfer its principal executive offices
to a location more than thirty miles from the Company's current principal
executive offices, the Company will promptly pay (or reimburse the Executive
for) all reasonable moving expenses incurred by the Executive relating to a
change of his principal residence in connection with any such relocation of the
Company's principal executive offices, and will indemnify the Executive against
any reasonable loss realized in the sale of his principal residence in
connection with any such change of residence.
5. Compensation.
5.1. Salary. During the term of this Agreement, the Executive shall be
paid a salary (the "Salary")in the amounts set forth below, and in the same
manner as other key employees of the Company are paid:
Employment Period Annual Rate
----------------- -----------
January 1, 1998 through July 31, 1998 $220,000
August 1, 1998 through July 31, 2001 20% annual increase
August 1, 2001 through July 31, 2005 15% annual increase
5.2. Additional Compensation. In addition to the Salary, the Executive
shall receive additional incentive compensation during each fiscal year in an
amount not less than 2% of the increase in gross revenues of the Company during
each such year as compared to the prior fiscal year, commencing with the fiscal
year ended December 31, 1996, as set forth in a separate agreement between the
Company and the Executive, and any other bonus the Company's Board of Directors
may award to the Executive.
5.3 Option Grant. As an inducement to enter into this Agreement and
without further payment therefor Executive is hereby granted and the Company
agrees to issue, immediately upon execution of this Agreement, options to
purchase 586,666 shares of the common stock of the Company,$.001 par value at a
purchase price equal to the average of the closing bid prices of the stock for
the 5 days prior to the execution of this agreement. The options granted under
this Section 5.3 shall immediately be registered by the Company under the
Securities Act of 1933, as amended, on Form S-8 or such other form as shall then
be
<PAGE>
available for the registration of shares granted to employees as compensation
under an employment plan.
6. Expenses.
During the term of this Agreement, the Company shall reimburse the
Executive for such costs and expenses as the Executive may reasonably incur in
connection with the performance of his duties hereunder, including, but not
limited to, expenses for entertainment, travel and similar items. The Company
will reimburse the Executive for such expenses upon presentation of expense
statements or vouchers or such other supporting information as the Company may
require, in accordance with the policies and procedures of the Company for the
reimbursement of business expenses of its senior executive officers.
7. Participation In Employee Benefit Plans.
During the term of his employment hereunder, the Executive shall have the
right, but only to the extent provided in any such plan, to receive or
participate in any 401(k) plan adopted by the Company, and all other benefits
and plans which the Company may from time to time institute during such period
for its employees and for which the Executive is eligible. The Company shall
maintain a medical and dental plan for qualified employees that covers the
Executive, his spouse and his minor children and it shall bear the premiums
related to the Executive and his family.
8. Vacations, Holidays and Sick Leave.
The Executive will be entitled to the number of paid holidays, personal
days off, vacation days and sick leave days in each calendar year as are
determined by the Company from time to time for its senior excutive officers,
but not less than thirty calendar days in any calendar year (prorated, in any
calendar year during which the Executive is employed under this Agreement for
less than the entire such year, in accordance with the number of days in such
calendar year during which he is so employed). Such vacation may be taken in the
Executive's discretion at such time or times as he determines.
9. Automobile Expense Allowance. The Company shall pay the Executive an
automobile expense allowance in the amount of $12,000 per annum. The Company
shall pay all of the expenses of maintaining, insuring, operating and garaging
an automobile upon the presentation of appropriate vouchers and/or receipts to
the extent that the Company does not pay such expenses directly.
<PAGE>
10. Membership Dues and Expenses
The Company shall pay all of the Executive's dues and expenses for
membership in a health or social club payable during the term of this Agreement
upon the presentation of appropriate vouchers and/or receipts.
11. Insurance; Insurability; Right to Insure.
During the continuance of the Executive's employment hereunder, the
Company shall maintain life insurance in an amount no less than $2,000,000 on
the life of the Executive payable to the Executive's designee. In addition,
during the continuance of the Executor's employment hereunder, the Company shall
have the right to maintain term life insurance in its own name naming itself as
beneficiary covering the Executive's life ending on the termination date of this
Agreement. The Executive shall aid in the procuring of such insurance by
submitting to the required medical examinations, if any, and by filling out,
executing and delivering such applications and other instruments in writing as
may be reasonably required by an insurance company or companies to which
application or applications for insurance may be made by or for the Company.
12. Registration Rights
(a) The Executive shall have the right, exercisable by written notice to
the Company at any time from the date hereof and prior to the third anniversary
of the Date of Termination (as hereinafter defined), to have the Company prepare
and file with the Securities and Exchange Commission (the "Commission"), on one
occasion, at the sole expense of the Company, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Executive, in order to comply
with the provisions of the Securities Act of 1933, as amended (the "Act"), so as
to permit a public offering and sale for nine (9) consecutive months by the
Executive of his Registrable Securities (as hereinafter defined).
(b) If, at any time during the term of this Agreement and prior to the
third anniversary of the Date of Termination, the Company proposes to prepare
and file a registration statement covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders (in any
such case, other than in connection with a merger, acquisition or pursuant to
Form S-8 or successor form), it will give written notice of its intention to do
so by registered mail ("Notice"), at least thirty (30) business days prior to
the filing of each such registration statement, to the Executive. Upon the
written request of the Executive, made within twenty (20) business days after
receipt of the Notice, that the Company include any of the Executive's
Registrable Securities in the proposed registration statement, the Company
shall, as to the Executive, use its best efforts to effect the registration
under the Act of the
<PAGE>
Registrable Securities which it has been so requested to register ("Piggyback
Registration"), at the Company's sole cost and expense and at no cost or expense
to the Executive; provided, however, that if, in the written opinion of the
Company's managing underwriter, if any, for such offering, the inclusion of all
or a portion of the registrable securities requested to be registered, when
added to the securities being registered by the Company or the selling
shareholder(s), will exceed the maximum amount of the Company's securities which
can be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially adversely affecting the entire
offering, then the Company may exclude from such offering all or a portion of
the registrable securities which it has been requested to register.
Notwithstanding the provisions of this Section 12(b), the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section 12(b) (irrespective of whether any written request for inclusion of such
securities shall have already been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
(c) As used herein the term "Registrable Security" means all of the common
shares and the common shares issuable upon exercise or conversion of any other
security of the Company, now or hereinafter acquired by the Executive; provided,
however, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered under the Act and disposed of pursuant
thereto, (ii) registration under the Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the registration rights granted pursuant to this
Section 12.
(d) In connection with any registration under this Section 12, the Company
shall file the registration statement as expeditiously as possible, but in no
event later than thirty (30) business days following receipt of any demand
therefor, shall use its best efforts to have any such Registration Statements
declared effective at the earliest possible time, and shall furnish the
Executive such number of prospectuses as shall reasonably be requested.
(e) The Company shall pay all costs, fees and expenses in connection with
any such registration statements filed pursuant to this Section 12 including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses.
(f) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a Registration
Statement for offering and sale
<PAGE>
under the securities or blue sky laws of such states as are requested by the
Executive; provided that the Company shall not be obligated to execute or file
any general consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
(g) Nothing contained in this Agreement shall be construed as requiring
the Executive to exercise or convert any securities exercisable into or
convertible for common shares prior to the initial filing of any registration
statement or the effectiveness thereof.
(h) The Company may, at its option, satisfy its obligation with respect to
this Section 12, by including the Registrable Securities, to the extent
permissible, in a registration statement on Form S-8 (or a successor form
thereto) filed with the Commission; provided, however, that the Executive's
rights under this Section 10 shall continue with respect to any Registrable
Securities not included in such registration statement on Form S-8.
13. Termination.
The Executive's employment under this Agreement may be terminated without
any breach of this Agreement only on the following circumstances:
13.1. Death. The Executive's employment under this Agreement shall
terminate upon his death.
13.2. Disability. Subject to Section 13.4, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from his duties under this Agreement for 180 calendar days
during any calendar year, the Company may terminate the Executive's employment
under this Agreement.
13.3 Cause. The Company may terminate this Agreement at any time for
"cause", as hereinafter defined, upon written notice to the Executive, which
notice shall specify in reasonable detail the grounds for the proposed
termination. In addition to being given written notice of the grounds
constituting "cause" hereunder, the Executive shall be given thirty (30) days to
cure if the grounds arise under subsections (a) or (d) below. If Executive is
terminated for cause, all compensation and benefits paid or available herein
shall cease and shall not be paid except those earned prior to termination. The
term "cause" as used in this Agreement shall mean:
(a) Willfully damaging the Company's property;
(b) Conviction of a felony;
<PAGE>
(c) Willfully engaging in theft, fraud, embezzlement, or
securities law violation, with respect to the Company;
(d) Willful and substantial failure to perform his duties (other
than such failure resulting from the Executive's incapacity
due to physical or mental illness).
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution, duly adopted by the affirmative vote of
not less than a majority of the Board at a meeting of the Board called and held
for such purpose (after reasonable written notice to the Executive and an
opportunity for him, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Executive was guilty of
conduct set forth above in subsection (a), (b), (c) or (d) and specifying the
particulars thereof in reasonable detail.
13.4. Termination by the Executive for Good Reason or Because of Ill
Health. The Executive may terminate his employment under this Agreement (a) for
Good Reason (as hereinafter defined) or (b) if his health should become impaired
to any extent that makes the continued performance of his duties under this
Agreement hazardous to his physical or mental health or his life, provided that
in the case of subsection (b), the Executive shall have furnished the Company
with a written statement from a qualified doctor to such effect and provided,
further, that at the Company's request and expense the Executive shall submit to
an examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor. For purposes of this
Agreement, "Good Reason" shall mean (u) any assignment to the Executive of any
duties or reporting obligations other than these contemplated by or any
limitation of the powers of the Executive in any respect not contemplated by,
Section 2 of this Agreement, (v) failure of the Company to comply with the
Company's material obligations and agreements contained in this Agreement, (w)
failure of the Company to obtain the assumption by any successor to perform this
Agreement as contemplated in Section 17 of this Agreement, (x) any adverse
change in the emoluments associated with the Executive's employment, including,
without limitation, the size of the Executive's office and staff, (y) relocation
of the Company's corporate offices without the Executive's consent or (z) the
Company's failure to nominate the Executive as a director of the Company (other
than by reason of the Executive's decision not to be so nominated) or use its
best efforts to cause his election. with respect to the matters set forth in
subsection (a) of this Section, the Executive must give the Company 30 days
prior written notice of his intent to terminate this Agreement as a result of
any breach or alleged breach of the applicable clause and the Company shall have
the right to cure any such breach or alleged breach within such 30 day period.
<PAGE>
14. Notice of Termination.
Any termination of the Executive's employment by the Company or by the
Executive (other than termination by reason of the Executive's death) shall be
communicated by written Notice of Termination to the other party of his
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
15. Date of Termination.
The "Date of Termination" shall mean (a) if the Executive's employment is
terminated by his death, the date of this death, (b) if the Executive's
employment is terminated pursuant to Section 13.2 above, the date on which the
Notice of Termination is given, (c) if the Executive's employment is terminated
pursuant to Section 13.3 above, the date specified in the Notice of Termination
after the expiration of any cure periods and (d) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given after the expiration of any cure periods.
16. Compensation Upon Termination or During Disability.
(a) If the Executive's employment shall be terminated by reason of his
death, the Company shall pay to such person as he shall designate in notice
filed with the Company, or, if no such person shall be designated, to his estate
as a lump sum death benefit, his full Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) to the date of
his death in addition to any payments the Executive's spouse, beneficiaries or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy or similar plan or policy then maintained by the
Company for his benefit and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations with respect to Section 5 of this Agreement, but all other
obligations of the Company under this Agreement, including the obligations to
register Executive's Registrable Securities and to indemnify, defend and hold
harmless the Executive, shall remain in effect.
(b) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Executive shall continue to receive his Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) until the
Executive's employment is terminated pursuant to Section 13.2 or 13.4(b) of this
Agreement, except that the Salary shall be reduced by any amounts the Executive
shall receive in disability payments made pursuant to Company funded disability
<PAGE>
insurance. After termination, the Executive shall receive Severance Pay (as
hereinafter defined), reduced by any disability payments otherwise payable
pursuant to insurance funded by the Company. To the extent physically and
mentally capable of so doing without potentially impairing or damaging his
health, the Executive shall provide consulting services to the Company during
the period that he is receiving payments pursuant to this Section 16(b).
(c) If the Executive's employment shall be terminated for Cause, the
Company shall pay the Executive his full Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) through the
Date of Termination, at the rate in effect at the time Notice of Termination is
given, and the Company shall, assuming the Company is in compliance with the
provisions of this Agreement, have no further obligation with respect to Section
5 of this Agreement, but all other obligations of the Company under this
Agreement, including the obligations to register Executive's Registrable
Securities and to indemnify, defend and hold harmless the Executive, shall
remain in effect.
(d) If the Company shall terminate the Executive's employment other than
pursuant to Sections 13.1, 13.2 or 13.3 hereof, and/or the Executive shall
terminate his employment for Good Reason, then the Company shall pay to the
Executive:
(i) his full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given;
(ii) if the Executive's employment is terminated either by the
Executive for Good Reason or by the Company other than pursuant to the proper
exercise by the Company of its rights pursuant to sections 13.1, 13.2 or 13.3
hereof, for periods subsequent to the Date of Termination (A) a lump sum amount
payable on the first day following the Date of Termination, equal to the greater
of (1) the remaining compensation (including the incentive compensation set
forth in Section 5.2 of this Agreement) payable to the Executive as though the
Agreement had been performed through July 31, 2005 or such later date to which
the term of this Agreement has been extended (the "Extension Date") and (2) the
total compensation earned by the Executive during the one-year period prior to
such Date of Termination ("Severance Pay"); and (B) continuation of all employee
benefit plans and immediate vesting of all stock awards and options to the
fullest extent permitted by any applicable law and the continued right of the
Executive to receive all benefits under such plans until the latter of (1) July
31, 2005, or, if this Agreement has been extended, the Extension Date or (2) two
year from the Date of Termination; and
(iii) all legal fees and expenses incurred by Executive in
contesting or disputing any such termination or in successfully seeking to
obtain or enforce any right or benefit provided by this Agreement.
<PAGE>
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 16 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Section 16
be reduced by any compensation earned by the Executive as the result of
employment by another employer or business or by profits earned by the Executive
from any source at any time before or after the Date of Termination.
17. Renewal of Agreement.
This agreement may be renewed by the Company for successive three year
periods commencing on the termination date (each of which periods is hereinafter
referred to as a "Renewal Term"), by mutual agreement of the Company and the
Executive provided however that the Company may elect to terminate this
Agreement at the end of the term hereof, or the then current Renewal Term, as
the case may be, giving written notice of such non-renewal not less than 180
days prior to the then current Term or Renewal Term of this Agreement sent to
the Executive at his then address of record with the Company. All of the terms,
covenants and conditions of this Agreement shall govern Executive's employment
by the Company during each Renewal Term, provided that the Executive's annual
compensation shall increase by fifteen percent on the date of renewal and
annually thereafter.
18. Successors; Binding Agreement.
(a) The Company requires any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by Agreement to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place unless such successor otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If the Executive should die while any amounts would still
be payable to him under this Agreement, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, if there be no such
designee, the Executive's estate. The obligations of the Company to the
Executive or his estate with respect to any plan or stock option agreements
shall be governed by such plans and agreements and shall not be affected in any
way by the terms of this Agreement.
<PAGE>
19. Nondisclosure: Noncompete.
19.1. Disclosure of Trade Secrets. During the term of this Agreement and
for a period of 12 months thereafter (unless (i) terminated by the Company,
other than pursuant to Sections 13.2 or 13.3 of this Agreement or (ii) the
Executive terminates his employment for Good Reason), the Executive will not,
except as properly required in conducting the business of the Corporation,
disclose or utilize, or authorize or cause anyone else to disclose or utilize
for any purposes including the profit of anyone other than the Corporation, any
trade secret, confidential information, knowledge or data of the Corporation of
which he has knowledge, other than such information which can be shown by the
Executive to be in the public domain other than as the result of a breach of the
provisions of this Section 19.1, including, without limitation, any customer
lists not made public by the Corporation.
19.2. Noncompete Covenant. The Executive hereby agrees that he shall not,
during the period of his employment (unless (i) terminated by the Company other
than pursuant to Sections 13.2 or 13.3 of this Agreement or (ii) the Executive
terminates his employment for Good Reason) and other engagement by the Company
or any of its parent, subsidiary, successor, or affiliated corporations, and for
a period of 12 months following the termination of such employment and
engagement, directly or indirectly, within any county (or adjacent county) in
any State within the United States in which the Company is engaged in business
during the period of the Executive's employment engage in any business
competitive with the Company's or any of its parent or subsidiary's business
activities. At no time during the term of this Agreement, or thereafter shall
the Executive directly or indirectly, disparage the commercial, business or
financial reputation of the Company or any of its parent, subsidiary, successor
or affiliated corporations.
19.3. Certain Activities. For purposes of clarification, but not of
limitation, the Executive hereby acknowledges and agrees that the provisions of
Section 19.2 above shall serve as a prohibition against him, during the period
referred to herein, directly or indirectly, hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee, supplier,
customer, prospective customer who has been previously contacted by either a
representative of the Company (including the Executive), or any of its parent or
subsidiary (but only those suppliers existing during the time of the Executive's
employment by the Company or any of its parent or subsidiary, or at the
termination of his employment), to discontinue or alter his, her or its
relationship with the Company or any of its parent or subsidiary.
19.4. Injunctive Relief. etc. The parties hereto hereby acknowledge and
agree that (i) the Company would be irreparably injured in the event of a breach
by the Executive of any of his obligations under this Section 19, (ii) monetary
damages would not be an adequate
<PAGE>
remedy for any such breach, and (iii) the Company may be entitled to injunctive
relief, in addition to any other remedy which it may have, in the event of any
such breach.
19.5. Certain Provisions. The limitations of Sections 18.1, 19.2 and 19.3
shall lapse if the Company does not fulfill its obligations as required by
Section 16 of this Agreement; however, such lapse shall not affect the rights of
the Executive to receive all payments undiminished in any way, provided by such
Section 16. The provisions of this Section 19 shall also apply during the time
the Executive is receiving any payments form the Company as a result of a
termination resulting from disability.
19.6. Scope of Restriction. It is the intent of the parties hereto that
the covenants contained in this Section 19 shall be enforced to the fullest
extent permissible under the laws and public policies of each jurisdiction in
which enforcement is sought (the Executive hereby acknowledging that said
restrictions are reasonably necessary for the protection of the Company).
Accordingly, it is hereby agreed that if any of the provisions of this Section
19 shall be adjudicated to be invalid or unenforceable for any reason
whatsoever, said provision shall be (only with respect to the operation thereof
in the particular jurisdiction in which such adjudication is made) construed by
limiting and reducing it so as to be enforceable to the extent permissible,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of said provision in any other jurisdiction.
19.7. Nonexclusivity. The undertakings of Executive contained in this
Section 19 shall be in addition to, and not in lieu of, any obligations which he
may have with respect to the subject matter hereof, as a matter of law or
otherwise.
20. Miscellaneous Provisions.
20.1. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail, postage prepaid, return receipt requested, as
follows:
If to the Company, to: Saratoga Brands Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
Attention: Chief Financial Officer
If to Executive, to: Scott G. Halperin
10 Andrea Court
Manalapan, New Jersey 07726
<PAGE>
or to such other address as either party hereto shall have designated by like
notice to the other party hereto (except that a notice of change of address
shall only be effective upon receipt).
20.2. Amendments. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
20.3. Entire Agreement. 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 hereto, oral and written,
with respect to the subject matter hereof, including without limitation, the Old
Agreement.
20.4. Applicable Law. This Agreement shall be construed and regulated
under and by the laws of the State of New Jersey and shall inure to the benefit
of and be binding upon the parties hereto and their heirs, personal
representatives, successors, and assigns, as the case may be. Personal
jurisdiction for any proceeding brought pursuant to this Agreement shall be
vested exclusively in the New Jersey State Supreme Court, or in the United
States District Court for the District of New Jersey. Venue for any legal action
authorized hereunder shall be in New Jersey.
20.5. Binding Effect; Benefits. Executive may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
20.6. Waiver, etc. The failure of either 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 either 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 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.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
<PAGE>
SARATOGA BRANDS INC.
By:
---------------------------------
Bernard F. Lillis, Jr.
Director,
Chief Financial Officer
By:
---------------------------------
Scott G. Halperin
EXHIBIT 10 (af)
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of the 1ST day of
August, 1997, by and between SARATOGA BRANDS INC. a New York corporation (The
"Company"), and BERNARD F. LILLIS, JR. (the "Executive").
W I T N E S E T H :
WHEREAS, the Executive is currently the Company's Chief Financial Officer
and Chief Operating Officer; and
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel, opportunities and
problems; and
WHEREAS, the Company recognizes that the Executive's contribution to the
growth and success of the Company has been substantial and desires to assure
itself of the Executive's employment; and
WHEREAS, the Company desires to continue to employee the Executive as its
Chief Financial Officer, Chief Operating Officer, and Treasurer; and
WHEREAS, the Executive is desirous of committing himself to serve the
Company on the terms herein provided; and
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties contained in this Agreement, the parties
hereto hereby agree as follows:
1. Employment.
The Company hereby agrees to continue to employ the Executive and the
Executive hereby agrees to continue to serve the Company, on the terms and
conditions set forth in this Agreement, for a period commencing on August 1,
1997 (the Effective Date") and terminating on July 31, 2005 (unless sooner
terminated as specifically provided by this Agreement); provided, however, that
this Agreement may be renewed pursuant to Section 16, herein.
<PAGE>
2. Position and Duties.
The Executive shall serve as the Chief Financial Officer, Treasurer, and
Chief Operating Officer of the Company and shall have primary responsibility for
the supervision and control over, and responsibility for, the management and
operation of the Company, and shall have such other powers and duties as may
from time to time be delegated to him by the Board of Directors of the Company
(the "Board"), provided that such duties are consistent with his present duties
and with the Executive's position. It shall be a condition of the Executive's
employment hereunder, on the part of the Executive, that the Executive serve as
a director of the Company. The Company shall use its best efforts to nominate
and cause the Executive to be elected as a director, it being expressly
understood that failure by the Company to nominate the Executive (other than by
reason of the Executive's decision not to be so nominated) or use best efforts
to cause his election, shall be treated as grounds for termination of this
Agreement by the Executive, for "Good Reason" (as hereinafter defined).
3. Indemnification of Executive.
The Company will indemnify the Executive (and his legal representatives or
other successors) to the fullest extent permitted by the laws of the State of
New York in effect at the time of the subject act or omission, or such other
state in which the Company may be incorporated at such time, or the Certificate
of Incorporation and By-Laws of the Company as in effect at such time or on the
date of this Agreement, whichever affords or afforded greater protection to the
Executive, against all costs, charges and expenses, including, without
limitation, amounts paid in settlement or upon judgment, whatsoever incurred or
sustained by him or his legal representatives or other successors, in connection
with any action, suit or proceeding to which he (or his legal representative or
other successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company or any of its subsidiaries except
that his indemnity shall not extend to fraud, criminal misconduct, embezzlement
or gross negligence committed by the Executive. If the Company elects to
maintain liability insurance policies covering its directors and officers, the
Executive shall be entitled to the benefit thereof.
4. Place of Performance.
If the Company shall relocate or transfer its principal executive offices
to a location more than thirty miles from the Company's current principal
executive offices, the Company will promptly pay (or reimburse the Executive
for) all reasonable moving expenses incurred by the Executive relating to a
change of his principal residence in connection with any such
<PAGE>
relocation of the Company's principal executive offices, and will indemnify the
Executive against any reasonable loss realized in the sale of his principal
residence in connection with any such change of residence.
5. Compensation.
5.2. Salary. During the term of this Agreement, the Executive shall be
paid a salary (the "Salary")in the amounts set forth below, and in the same
manner as other key employees of the Company are paid:
Employment Period Annual Rate
----------------- -----------
January 1, 1998 through July 31, 1998 $190,000
August 1, 1998 through July 31, 2001 20% annual increase
August 1, 2001 through July 31, 2005 15% annual increase
5.2. Additional Compensation. In addition to the Salary, the Executive
shall receive additional incentive compensation during each fiscal year in an
amount not less than 2% of the increase in gross revenues of the Company during
each such year as compared to the prior fiscal year, commencing with the fiscal
year ended December 31, 1996, as set forth in a separate agreement between the
Company and the Executive, and any other bonus the Company's Board of Directors
may award to the Executive.
5.3 Option Grant. As an inducement to enter into this Agreement and
without further payment therefor Executive is hereby granted and the Company
agrees to issue, immediately upon execution of this Agreement, options to
purchase 506,666 shares of the common stock of the Company,$.001 par value at a
purchase price equal to the average of the closing bid prices of the stock for
the 5 days prior to the execution of this agreement. The options granted under
this Section 5.3 shall immediately be registered by the Company under the
Securities Act of 1933, as amended, on Form S-8 or such other form as shall then
be available for the registration of shares granted to employees as compensation
under an employment plan.
6. Expenses.
During the term of this Agreement, the Company shall reimburse the
Executive for such costs and expenses as the Executive may reasonably incur in
connection with the performance of his duties hereunder, including, but not
limited to, expenses for entertainment, travel and similar items. The Company
will reimburse the Executive for such expenses upon presentation of expense
statements or vouchers or such other supporting
<PAGE>
information as the Company may require, in accordance with the policies and
procedures of the Company for the reimbursement of business expenses of its
senior executive officers.
7. Participation in Employee Benefit Plans.
During the term of his employment hereunder, the Executive shall have the
right, but only to the extent provided in any such plan, to receive or
participate in any 401(k) plan adopted by the Company, and all other benefits
and plans which the Company may from time to time institute during such period
for its employees and for which the Executive is eligible. The Company shall
maintain a medical and dental plan for qualified employees that covers the
Executive, his spouse and his minor children and it shall bear the premiums
related to the Executive and his family.
8. Vacations, Holidays and Sick Leave.
The Executive will be entitled to the number of paid holidays, personal
days off, vacation days and sick leave days in each calendar year as are
determined by the Company from time to time for its senior executive officers,
but not less than thirty calendar days in any calendar year (prorated, in any
calendar year during which the Executive is employed under this Agreement for
less than the entire such year, in accordance with the number of days in such
calendar year during which he is so employed). Such vacation may be taken in the
Executive's discretion at such time or times as he determines.
10. Automobile Expense Allowance. The Company shall pay the Executive an
automobile expense allowance in the amount of $12,000 per annum. The Company
shall pay all of the expenses of maintaining, insuring, operating and garaging
an automobile upon the presentation of appropriate vouchers and/or receipts to
the extent that the Company does not pay such expenses directly.
10. Membership Dues and Expenses
The Company shall pay all of the Executive's dues and expenses for
membership in a health or social club payable during the term of this Agreement
upon the presentation of appropriate vouchers and/or receipts.
11. Insurance; Insurability; Right to Insure.
During the continuance of the Executive's employment hereunder, the
Company shall maintain life insurance in an amount no less than $2,000,000 on
the life of the Executive payable to the Executive's designee. In addition,
during the continuance of the Executor's employment hereunder, the Company shall
have the right to maintain term life insurance in
<PAGE>
its own name naming itself as beneficiary covering the Executive's life ending
on the termination date of this Agreement. The Executive shall aid in the
procuring of such insurance by submitting to the required medical examinations,
if any, and by filling out, executing and delivering such applications and other
instruments in writing as may be reasonably required by an insurance company or
companies to which application or applications for insurance may be made by or
for the Company.
12. Registration Rights
(a) The Executive shall have the right, exercisable by written notice to
the Company at any time from the date hereof and prior to the third anniversary
of the Date of Termination (as hereinafter defined), to have the Company prepare
and file with the Securities and Exchange Commission (the "Commission"), on one
occasion, at the sole expense of the Company, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Executive, in order to comply
with the provisions of the Securities Act of 1933, as amended (the "Act"), so as
to permit a public offering and sale for nine (9) consecutive months by the
Executive of his Registrable Securities (as hereinafter defined).
(b) If, at any time during the term of this Agreement and prior to the
third anniversary of the Date of Termination, the Company proposes to prepare
and file a registration statement covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders (in any
such case, other than in connection with a merger, acquisition or pursuant to
Form S-8 or successor form), it will give written notice of its intention to do
so by registered mail ("Notice"), at least thirty (30) business days prior to
the filing of each such registration statement, to the Executive. Upon the
written request of the Executive, made within twenty (20) business days after
receipt of the Notice, that the Company include any of the Executive's
Registrable Securities in the proposed registration statement, the Company
shall, as to the Executive, use its best efforts to effect the registration
under the Act of the Registrable Securities which it has been so requested to
register ("Piggyback Registration"), at the Company's sole cost and expense and
at no cost or expense to the Executive; provided, however, that if, in the
written opinion of the Company's managing underwriter, if any, for such
offering, the inclusion of all or a portion of the registrable securities
requested to be registered, when added to the securities being registered by the
Company or the selling shareholder(s), will exceed the maximum amount of the
Company's securities which can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without otherwise materially adversely
affecting the entire offering, then the Company may exclude from such offering
all or a portion of the registrable securities which it has been requested to
register. Notwithstanding the provisions of this Section 12(b), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 12(b) (irrespective of whether any written request for
<PAGE>
inclusion of such securities shall have already been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
(c) As used herein the term "Registrable Security" means all of the common
shares and the common shares issuable upon exercise or conversion of any other
security of the Company, now or hereinafter acquired by the Executive; provided,
however, that with respect to any particular Registrable Security, such security
shall cease to be a Registrable Security when, as of the date of determination,
(i) it has been effectively registered under the Act and disposed of pursuant
thereto, (ii) registration under the Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the registration rights granted pursuant to this
Section 12.
(d) In connection with any registration under this Section 12, the Company
shall file the registration statement as expeditiously as possible, but in no
event later than thirty (30) business days following receipt of any demand
therefor, shall use its best efforts to have any such Registration Statements
declared effective at the earliest possible time, and shall furnish the
Executive such number of prospectuses as shall reasonably be requested.
(e) The Company shall pay all costs, fees and expenses in connection with
any such registration statements filed pursuant to this Section 12 including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses.
(f) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a Registration
Statement for offering and sale under the securities or blue sky laws of such
states as are requested by the Executive; provided that the Company shall not be
obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(g) Nothing contained in this Agreement shall be construed as requiring
the Executive to exercise or convert any securities exercisable into or
convertible for common shares prior to the initial filing of any registration
statement or the effectiveness thereof.
(h) The Company may, at its option, satisfy its obligation with respect to
this Section 12, by including the Registrable Securities, to the extent
permissible, in a registration
<PAGE>
statement on Form S-8 (or a successor form thereto) filed with the Commission;
provided, however, that the Executive's rights under this Section 10 shall
continue with respect to any Registrable Securities not included in such
registration statement on Form S-8.
13. Termination.
The Executive's employment under this Agreement may be terminated without
any breach of this Agreement only on the following circumstances:
13.1. Death. The Executive's employment under this Agreement shall
terminate upon his death.
13.2. Disability. Subject to Section 13.4, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from his duties under this Agreement for 180 calendar days
during any calendar year, the Company may terminate the Executive's employment
under this Agreement.
13.3 Cause. The Company may terminate this Agreement at any time for
"cause", as hereinafter defined, upon written notice to the Executive, which
notice shall specify in reasonable detail the grounds for the proposed
termination. In addition to being given written notice of the grounds
constituting "cause" hereunder, the Executive shall be given thirty (30) days to
cure if the grounds arise under subsections (a) or (d) below. If Executive is
terminated for cause, all compensation and benefits paid or available herein
shall cease and shall not be paid except those earned prior to termination. The
term "cause" as used in this Agreement shall mean:
(a) Willfully damaging the Company's property;
(b) Conviction of a felony;
(c) Willfully engaging in theft, fraud, embezzlement, or
securities law violation, with respect to the Company;
(d) Willful and substantial failure to perform his duties (other
than such failure resulting from the Executive's incapacity
due to physical or mental illness).
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution, duly adopted by the affirmative vote of
not less than a majority of the Board
<PAGE>
at a meeting of the Board called and held for such purpose (after reasonable
written notice to the Executive and an opportunity for him, together with his
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive was guilty of conduct set forth above in subsection
(a), (b), (c) or (d) and specifying the particulars thereof in reasonable
detail.
13.4. Termination by the Executive for Good Reason or Because of Ill
Health. The Executive may terminate his employment under this Agreement (a) for
Good Reason (as hereinafter defined) or (b) if his health should become impaired
to any extent that makes the continued performance of his duties under this
Agreement hazardous to his physical or mental health or his life, provided that
in the case of subsection (b), the Executive shall have furnished the Company
with a written statement from a qualified doctor to such effect and provided,
further, that at the Company's request and expense the Executive shall submit to
an examination by a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor. For purposes of this
Agreement, "Good Reason" shall mean (u) any assignment to the Executive of any
duties or reporting obligations other than these contemplated by or any
limitation of the powers of the Executive in any respect not contemplated by,
Section 2 of this Agreement, (v) failure of the Company to comply with the
Company's material obligations and agreements contained in this Agreement, (w)
failure of the Company to obtain the assumption by any successor to perform this
Agreement as contemplated in Section 17 of this Agreement, (x) any adverse
change in the emoluments associated with the Executive's employment, including,
without limitation, the size of the Executive's office and staff, (y) relocation
of the Company's corporate offices without the Executive's consent or (z) the
Company's failure to nominate the Executive as a director of the Company (other
than by reason of the Executive's decision not to be so nominated) or use its
best efforts to cause his election. with respect to the matters set forth in
subsection (a) of this Section, the Executive must give the Company 30 days
prior written notice of his intent to terminate this Agreement as a result of
any breach or alleged breach of the applicable clause and the Company shall have
the right to cure any such breach or alleged breach within such 30 day period.
14. Notice of Termination.
Any termination of the Executive's employment by the Company or by the
Executive (other than termination by reason of the Executive's death) shall be
communicated by written Notice of Termination to the other party of his
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
<PAGE>
15. Date of Termination.
The "Date of Termination" shall mean (a) if the Executive's employment is
terminated by his death, the date of this death, (b) if the Executive's
employment is terminated pursuant to Section 13.2 above, the date on which the
Notice of Termination is given, (c) if the Executive's employment is terminated
pursuant to Section 13.3 above, the date specified in the Notice of Termination
after the expiration of any cure periods and (d) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given after the expiration of any cure periods.
16. Compensation Upon Termination or During Disability.
(a) If the Executive's employment shall be terminated by reason of his
death, the Company shall pay to such person as he shall designate in notice
filed with the Company, or, if no such person shall be designated, to his estate
as a lump sum death benefit, his full Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) to the date of
his death in addition to any payments the Executive's spouse, beneficiaries or
estate may be entitled to receive pursuant to any pension or employee benefit
plan or life insurance policy or similar plan or policy then maintained by the
Company for his benefit and such payments shall, assuming the Company is in
compliance with the provisions of this Agreement, fully discharge the Company's
obligations with respect to Section 5 of this Agreement, but all other
obligations of the Company under this Agreement, including the obligations to
register Executive's Registrable Securities and to indemnify, defend and hold
harmless the Executive, shall remain in effect.
(b) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness, the
Executive shall continue to receive his Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) until the
Executive's employment is terminated pursuant to Section 13.2 or 13.4(b) of this
Agreement, except that the Salary shall be reduced by any amounts the Executive
shall receive in disability payments made pursuant to Company funded disability
insurance. After termination, the Executive shall receive Severance Pay (as
hereinafter defined), reduced by any disability payments otherwise payable
pursuant to insurance funded by the Company. To the extent physically and
mentally capable of so doing without potentially impairing or damaging his
health, the Executive shall provide consulting services to the Company during
the period that he is receiving payments pursuant to this Section 16(b).
(c) If the Executive's employment shall be terminated for Cause, the
Company shall pay the Executive his full Salary (plus the incentive compensation
set forth in Section 5.2 of this Agreement, on a pro rata basis) through the
Date of Termination, at the rate in effect at
<PAGE>
the time Notice of Termination is given, and the Company shall, assuming the
Company is in compliance with the provisions of this Agreement, have no further
obligation with respect to Section 5 of this Agreement, but all other
obligations of the Company under this Agreement, including the obligations to
register Executive's Registrable Securities and to indemnify, defend and hold
harmless the Executive, shall remain in effect.
(d) If the Company shall terminate the Executive's employment other than
pursuant to Sections 13.1, 13.2 or 13.3 hereof, and/or the Executive shall
terminate his employment for Good Reason, then the Company shall pay to the
Executive:
(i) his full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given;
(ii) if the Executive's employment is terminated either by the
Executive for Good Reason or by the Company other than pursuant to the proper
exercise by the Company of its rights pursuant to sections 13.1, 13.2 or 13.3
hereof, for periods subsequent to the Date of Termination (A) a lump sum amount
payable on the first day following the Date of Termination, equal to the greater
of (1) the remaining compensation (including the incentive compensation set
forth in Section 5.2 of this Agreement) payable to the Executive as though the
Agreement had been performed through July 31, 2005 or such later date to which
the term of this Agreement has been extended (the "Extension Date") and (2) the
total compensation earned by the Executive during the one-year period prior to
such Date of Termination ("Severance Pay"); and (B) continuation of all employee
benefit plans and immediate vesting of all stock awards and options to the
fullest extent permitted by any applicable law and the continued right of the
Executive to receive all benefits under such plans until the latter of (1) July
31, 2005, or, if this Agreement has been extended, the Extension Date or (2) two
year from the Date of Termination; and
(iii) all legal fees and expenses incurred by Executive in
contesting or disputing any such termination or in successfully seeking to
obtain or enforce any right or benefit provided by this Agreement.
(e) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 16 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Section 16
be reduced by any compensation earned by the Executive as the result of
employment by another employer or business or by profits earned by the Executive
from any source at any time before or after the Date of Termination.
<PAGE>
17. Renewal of Agreement.
This agreement may be renewed by the Company for successive three year
periods commencing on the termination date (each of which periods is hereinafter
referred to as a "Renewal Term"), by mutual agreement of the Company and the
Executive provided however that the Company may elect to terminate this
Agreement at the end of the term hereof, or the then current Renewal Term, as
the case may be, giving written notice of such non-renewal not less than 180
days prior to the then current Term or Renewal Term of this Agreement sent to
the Executive at his then address of record with the Company. All of the terms,
covenants and conditions of this Agreement shall govern Executive's employment
by the Company during each Renewal Term, provided that the Executive's annual
compensation shall increase by fifteen percent on the date of renewal and
annually thereafter.
18. Successors; Binding Agreement.
(a) The Company requires any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by Agreement to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place unless such successor otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If the Executive should die while any amounts would still
be payable to him under this Agreement, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, if there be no such
designee, the Executive's estate. The obligations of the Company to the
Executive or his estate with respect to any plan or stock option agreements
shall be governed by such plans and agreements and shall not be affected in any
way by the terms of this Agreement.
19. Nondisclosure: Noncompete.
19.1. Disclosure of Trade Secrets. During the term of this Agreement and
for a period of 12 months thereafter (unless (i) terminated by the Company,
other than pursuant to Sections 13.2 or 13.3 of this Agreement or (ii) the
Executive terminates his employment for Good Reason), the Executive will not,
except as properly required in conducting the business of the Corporation,
disclose or utilize, or authorize or cause anyone else to disclose or utilize
for any purposes including the profit of anyone other than the Corporation, any
trade secret, confidential information, knowledge or data of the Corporation of
which he has knowledge,
<PAGE>
other than such information which can be shown by the Executive to be in the
public domain other than as the result of a breach of the provisions of this
Section 19.1, including, without limitation, any customer lists not made public
by the Corporation.
19.2. Noncompete Covenant. The Executive hereby agrees that he shall not,
during the period of his employment (unless (i) terminated by the Company other
than pursuant to Sections 13.2 or 13.3 of this Agreement or (ii) the Executive
terminates his employment for Good Reason) and other engagement by the Company
or any of its parent, subsidiary, successor, or affiliated corporations, and for
a period of 12 months following the termination of such employment and
engagement, directly or indirectly, within any county (or adjacent county) in
any State within the United States in which the Company is engaged in business
during the period of the Executive's employment engage in any business
competitive with the Company's or any of its parent or subsidiary's business
activities. At no time during the term of this Agreement, or thereafter shall
the Executive directly or indirectly, disparage the commercial, business or
financial reputation of the Company or any of its parent, subsidiary, successor
or affiliated corporations.
19.3. Certain Activities. For purposes of clarification, but not of
limitation, the Executive hereby acknowledges and agrees that the provisions of
Section 19.2 above shall serve as a prohibition against him, during the period
referred to herein, directly or indirectly, hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor, licensee, supplier,
customer, prospective customer who has been previously contacted by either a
representative of the Company (including the Executive), or any of its parent or
subsidiary (but only those suppliers existing during the time of the Executive's
employment by the Company or any of its parent or subsidiary, or at the
termination of his employment), to discontinue or alter his, her or its
relationship with the Company or any of its parent or subsidiary.
19.4. Injunctive Relief. etc. The parties hereto hereby acknowledge and
agree that (i) the Company would be irreparably injured in the event of a breach
by the Executive of any of his obligations under this Section 19, (ii) monetary
damages would not be an adequate remedy for any such breach, and (iii) the
Company may be entitled to injunctive relief, in addition to any other remedy
which it may have, in the event of any such breach.
19.5. Certain Provisions. The limitations of Sections 19.1, 19.2 and 19.3
shall lapse if the Company does not fulfill its obligations as required by
Section 16 of this Agreement; however, such lapse shall not affect the rights of
the Executive to receive all payments undiminished in any way, provided by such
Section 16. The provisions of this Section 19 shall also apply during the time
the Executive is receiving any payments form the Company as a result of a
termination resulting from disability.
<PAGE>
19.6. Scope of Restriction. It is the intent of the parties hereto that
the covenants contained in this Section 19 shall be enforced to the fullest
extent permissible under the laws and public policies of each jurisdiction in
which enforcement is sought (the Executive hereby acknowledging that said
restrictions are reasonably necessary for the protection of the Company).
Accordingly, it is hereby agreed that if any of the provisions of this Section
19 shall be adjudicated to be invalid or unenforceable for any reason
whatsoever, said provision shall be (only with respect to the operation thereof
in the particular jurisdiction in which such adjudication is made) construed by
limiting and reducing it so as to be enforceable to the extent permissible,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of said provision in any other jurisdiction.
19.7. Nonexclusivity. The undertakings of Executive contained in this
Section 19 shall be in addition to, and not in lieu of, any obligations which he
may have with respect to the subject matter hereof, as a matter of law or
otherwise.
20. Miscellaneous Provisions.
20.1. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail, postage prepaid, return receipt requested, as
follows:
If to the Company, to: Saratoga Brands Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
Attention: Chief Executive Officer
If to Executive, to: Bernard F. Lillis, Jr.
14 Jeffrey Lane
East Windsor, New Jersey 08520
or to such other address as either party hereto shall have designated by like
notice to the other party hereto (except that a notice of change of address
shall only be effective upon receipt).
20.2. Amendments. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
<PAGE>
20.3. Entire Agreement. 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 hereto, oral and written,
with respect to the subject matter hereof.
20.4. Applicable Law. This Agreement shall be construed and regulated
under and by the laws of the State of New Jersey and shall inure to the benefit
of and be binding upon the parties hereto and their heirs, personal
representatives, successors, and assigns, as the case may be. Personal
jurisdiction for any proceeding brought pursuant to this Agreement shall be
vested exclusively in the New Jersey State Supreme Court, or in the United
States District Court for the District of New Jersey. Venue for any legal action
authorized hereunder shall be in New Jersey.
20.5. Binding Effect; Benefits. Executive may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
20.6. Waiver, etc. The failure of either 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 either 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 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.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
SARATOGA BRANDS INC.
By:
---------------------------------
Scott G. Halperin
Chairman and
Chief Executive Officer
By:
---------------------------------
Bernard F. Lillis, Jr.
EXHIBIT 10 (ag)
<PAGE>
LEASE
AGREEMENT made this 1st day of August, 1997, to be effective as of
September 1, 1997, between GIOVANNI CONTI and wife, LINA CONTI, both of the Town
of Johnston, County of Providence, State of Rhode Island (hereinafter called the
"Lessors") and Deli King, Inc., of 1 LaCroix Drive in the Town of West Warwick,
County of Kent, State of Rhode Island (hereinafter called the "Lessee").
W I T N E S S E T H:
1. The Lessors hereby lease to Lessee and Lessee hires from
Lessors, upon and subject to the terms, covenants, conditions
and provisions hereinafter set forth, the premises at:
That certain business premises known as 269 Rear Greenfield
Avenue, in the Town of Johnston, County of Providence, State
of Rhode Island presently occupied by Conti's Gourmet Sausage.
2. The date of the commencement of the term of this Lease is to
be September 1, 1997.
3. The term of this Lease shall be two (2) years terminating on
September 1, 1999, unless this Lease has been renewed.
4. Lessors hereby warrant that they and no other person or
corporation have the right to lease the premises hereby
demised. Lessee shall have peaceful and quiet use and
possession of the premises without hindrance on the part of
the Lessors and Lessors shall warrant and defend such peaceful
and quite use and possession against the claims of all persons
claiming by, through or under the Lessors.
5. Lessee shall pay to Lessors as rental for the premises the sum
of EIGHT HUNDRED FIFTY AND 00/100 ($850.00) DOLLARS per month
payable on the first (1st) day of each month during the
continuance of this Lease. Lessors hereby acknowledge receipt
from Lessee the sum of EIGHT HUNDRED FIFTY and 00/100
($850.00) DOLLARS to be held as collateral security for the
payment of any rentals and other sums of money for which
Lessee shall become liable to Lessors under this Lease, and
for faithful performance by Lessee of all other covenants and
agreements made therein. At the termination of this Lease, or
any renewal thereof, the Lessors shall return to Lessee the
full amount of said security deposit less any sums required to
be paid by Lessee to Lessors for the payment of rent or for a
any sum which Lessors may expend or incur by reason of the
Lessee's default of any terms of this Lease.
6. Lessee shall keep in good order and condition and shall be
responsible for repairs and maintenance of the interior
portion of the demised premises and shall make such repairs as
are necessary to keep same in good working order. Lessee shall
also be obligated to maintain and repair the hot water heater
and hanging air-cooling system, which shall remain the
property of the Lessors. Lessee shall also be responsible for
the maintenance and replacement of all glass windows.
<PAGE>
All repairs made on the interior of the demised premises are
to be at the sole expense of the Lessee.
7. Lessee shall use the demised premises only for the purpose of
the manufacture and distribution of meat and poultry products
at wholesale. Lessee agrees not to compete with the deli
presently on the premises by selling at retail.
8. All trade fixtures, appliances and equipment owned by Lessee
and installed in the demised premises shall remain the
property of the Lessee and shall be removable from time to
time and also at the expiration of the term of this Lease, any
extended period or other termination thereof.
9. Lessee shall place all trash in the trash container that is
presently on the property. In the event that a larger trash
container is needed or more frequent removal of the trash is
needed because of the volume generated by Lessee, Lessee
agrees to pay the additional cost of said larger container or
additional removals.
10. Lessee shall pay for snow removal for ingress and egress to
his portion of the demised premises.
11. Lessee will not alter the premises without first obtaining
Lessors' written approval of such alterations. Permanent
improvements made by Lessee shall become the property of the
Lessors and shall remain upon the premises.
12. Lessors shall have the exclusive right to use all or any part
of the roof, cellar and the exterior walls of the premises for
any purpose.
13. Lessors will provide and maintain the necessary mains and
conduits to bring water, gas and electricity to the premises
by the Lessee, whether supplied by Lessors, public utility or
public authority, or any other person, firm or corporation.
14. Lessee will not do or suffer to be done or keep or suffer to
be kept anything in, upon or about the premises that will
contravene Lessor's policies insuring against loss or damage
by fire or other hazards. If anything done, omitted to be done
or suffered to be done by Lessee kept or suffered by Lessee to
be kept in, about or upon the premises shall cause the rate of
fire or other insurance on the premises to be increased beyond
the minimum rate from time to time applicable to the premises
for the use and purposes permitted under this Lease or to such
other property for the use and uses made thereof, Lessee shall
pay the amount of such increase promptly upon Lessors' demand.
15. If the premises shall be damaged by fire, the elements,
unavoidable accident or other cause but are not thereby
rendered untenantable in whole or in part, Lessors shall
promptly, at their own expense, cause such damage to be
repaired and the rent to be abated until the repairs by
completed. If, by reason of such occurrence, the premises
shall be rendered wholly untenantable, this Lease, and the
tenancy hereby creased, shall cease as of the date of such
occurrence.
16. Lessee shall, at their own expense, during the term hereof
maintain and deliver to the Lessors public liability and
property damage insurance policies with respect to the demised
premises in which both Lessors and Lessee shall be named as
insured with a combined single
<PAGE>
limit of FIVE HUNDRED THOUSAND AND 00/100 DOLLARS for
injuries, death and/or property damage.
17. Lessee has the option to renew this Lease under the same terms
and conditions except as to rent for an additional two (2)
year period commencing September 1, 1999 and terminating on
September 1, 2001.
18. In the event that Lessee exercises the option to renew this
Lease for an additional two (2) year period commencing
September 1, 1999, Lessee shall pay to Lessors, as rental for
the premises, the sum of EIGHT HUNDRED SEVENTY-FIVE and 00/100
($875.00) DOLLARS per month, payable on the first (1st) day of
each month during the continuance of this Lease. Lessee shall
pay to Lessors an additional TWENTY-FIVE and 00/100 ($25.00)
DOLLARS to increase the security deposit to EIGHT HUNDRED
SEVENTY-FIVE and 00/100 ($875.00) DOLLARS to be held as
collateral security for the payment of any rentals or other
sums of money for which Lessee might become liable to Lessors
under this Lease and for the faithful performance by Lessee of
all other covenants and agreements made herein. At the
termination of this renewal period, Lessors shall return to
Lessee the full amount of said security deposit less any sums
required to be paid by Lessee to Lessors for the payment of
rent for any sum which Lessors may expend or incur by reason
of the Lessee" default of any terms of this Lease.
19. Lessors and Lessee agree that in the event the United States
Department of Agriculture determines that the physical
structure of the leased premises is not in compliance with the
rules and regulations of the United States Department of
Agriculture, so that the rights, privileges and benefits as
granted by the United States Department of Agriculture in
License NO. 19141 are terminated, then and in that event,
Lessors may terminate this Lease upon furnishing proof of said
termination or cancellation because the physical structure of
the building is not in compliance with the rules and
regulations of the United States Department of Agriculture.
20. All notices from Lessee to Lessors required or permitted by
the provisions of this Lease shall be in writing and sent by
certified mail to lessors at 106 Brown Avenue, Johnston, Rhode
Island 02919.
All notices from Lessors to Lessee so required or permitted
shall be in writing and sent certified mail to Lessee at 1
LaCroix Drive, West Warwick, Rhode Island 02893.
21. This Lease shall be construed under the laws of the State of
Rhode Island.
Lease to be executed as of the date and year first above written.
/s/ Giovanni Conti.
- --------------------------- ------------------------------
Witness GIOVANNI CONTI
/s/ Lina Conti
- --------------------------- ------------------------------
Witness LINA CONTI
DELI KING, INC.
BY: /s/ Ronald M. Gagnon
- --------------------------- ------------------------------
WITNESS Name: RONALD M. GAGNON
Title: President
<PAGE>
STATE OF RHODE ISLAND
COUTY OF PROVIDENCE
In that on the 2nd day of September, 1997, before me personally appeared
Giovanni Conti and Lina Conti to me known and known by me to be the parties
executing the foregoing; and they acknowledged said instrument, by them
executed, to be their free act and deed.
----------------------------------------------
Notary Public
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In that on the 2nd day of September, 1997, before me personally appeared Ronald
M. Gagon, the President of Deli King, Inc., to me known and known by me to be
the party executing the foregoing instrument and he acknowledged said
instrument, by him executed, to be his free act and deed and the free act and
deed of Deli King. Inc.
----------------------------------------------
Notary Public
<PAGE>
MODIFICATION OF LEASE
AGREEMENT made this 1st day of November, 1997, to be effective as of
January 1, 1998, between GIOVANNI CONTI and wife, LINA CONTI, both of the Town
of Johnston, County of Providence, State of Rhode Island (hereinafter called the
"Lessors") and Deli King, Inc., of 1 LaCroix Drive in the Town of West Warwick,
County of Kent, State of Rhode Island (hereinafter called the "Lessee").
W I T N E S S E T H:
WHEREAS, Lessors have leased to Lessee a certain business premises
Known as 269 Rear Greenville Avenue in the Town of Johnston, County of
Providence, State of Rhode Island, formerly occupied by Conti's Gourmet Sausage;
and
WHEREAS, Lessee has expressed a desire to lease additional space
adjacent to that premises formerly occupied by Conti's Gourmet Sausage; and
WHEREAS, Lessors own and control the additional space that Lessee
desires to lease; and
WHEREAS, said additional space contains a walk-in freezer,
so-called; and
WHEREAS, partitions have been installed providing security of the
business premises presently occupied by Lessee and other partitions have been
removed allowing access to said additional space, the parties agree to
modification of the lease as follows:
1. Paragraph 1 shall include the additional premises as part of
the property being leased, Paragraph 2 and 3 shall remain
unchanged.
2. Paragraph 5 shall provide for an additional rental of ONE
HUNDRED and 00/100 ($100.00) DOLLARS increasing the rent from
EIGHT HUNDRED FIFTY and 00/100 ($850.00) DOLLARS per month to
NINE HUNDRED FIFTY and 00/100 ($950.00) DOLLARS per month
commencing on January 1, 1998 and continuing until September
1, 1999.
<PAGE>
All other terms of the lease shall remain the same except for
Paragraph 18. In the event the Lessee exercises the option to
renew the lease for an additional two (2) year period
commencing September 1, 1999, the rent shall be NINE HUNDRED
SEVENTY-FIVE and 00/100 DOLLARS per month and Lessee shall pay
to Lessors ONE HUNDRED TWENTY-FIVE and 00/100 ($125.00)
DOLLARS to increase the security deposit to NINE HUNDRED
SEVENTY-FIVE and 00/100 ($975.00) DOLLARS.
IN WITNESS WHEREOF, Lessors and Lessee have
executed this Modification of Lease this ________day of
November 1997.
/s/Giovanni Conti
-------------------------------------
GIOVANNI CONTI
/s/ Lina Conti
-------------------------------------
LINA CONTI
DELI KING, INC.
By: /s/Ronald M. Gagnon
-------------------------------------
RONALD M. GAGNON
PRESIDENT
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In Johnston on the 1st day of November, 1997, before me personally appeared the
above named to me known and known by me to be the parties executing the
foregoing instrument and they acknowledged said instrument, by them executed, to
be their free act and deed.
/s/
-------------------------------------
NOTARY PUBLIC
EXHIBIT 10 (ah)
<PAGE>
October 28, 1997
Mr. Scott G. Halperin
Chairman of the Board
Saratoga Brands, Inc.
1835 Swarthmore Avenue
Lakewood, New Jersey 08701
Dear Mr. Halperin:
THIS AGREEMENT (the "AGREEMENT") is made as of October 28, 1997 between
Saratoga Brands Inc. ("SARATOGA") and M.H. Meyerson & Co., Inc. ("MEYERSON").
In consideration of the mutual covenants contained herein and intending to
be legally bound thereby, SARATOGA and MEYERSON hereby agree as follows:
1. MEYERSON will perform investment banking services on a non-exclusive basis
for SARATOGA on the terms set forth below for a period of five years from the
date hereof. Such services will be performed on a best efforts basis and will
include, without limitation, assistance to SARATOGA in mergers, acquisitions and
internal capital structuring and the placement of new debt and equity issues of
SARATOGA, all with the objective of accomplishing SARATOGA's business and
financial goals. In each instance, MEYERSON shall endeavor, subject to market
conditions, to assist SARATOGA in identifying corporate candidates for mergers
and acquisitions and sources of private and institutional funds; to provide
planning, structuring, strategic and other advisory services to SARATOGA; and to
assist in negotiations on behalf of SARATOGA. In each instance, MEYERSON will
render such services as to which SARATOGA and MEYERSON mutually agree, and
MEYERSON will exert its best efforts to accomplish the goals agreed to by
MEYERSON and SARATOGA.
2. In connection with the performance of this AGREEMENT, MEYERSON and SARATOGA
shall comply with all applicable laws and regulations, including, without
limitation, those of the National Association of Securities Dealers, Inc. and
the Securities and Exchange Commission.
<PAGE>
3. In consideration of services to be rendered by MEYERSON hereunder, MEYERSON
is hereby granted Warrants to purchase 250,000 shares of Common Stock of
SARATOGA at a price of $0.50 per share, and 250,000 shares of Common Stock of
SARATOGA at a price of $0.60 per share, a total of 500,000 shares of Common
Stock of SARATOGA, with demand and piggy back registration of rights as set
forth in paragraph 6 below. Such Warrants ("MEYERSON Warrants") may be exercised
at any time from October 28, 1997 to and including October 28, 2002, provided
that they have vested. The MEYERSON Warrants shall vest and become irrevocable
as follows: one third at each purchase price upon the effectiveness of this
agreement, one third on April 28, 1998, and the balance on October 28, 1998.
4. In the event that the Company fails to honor the exercise by MEYERSON of any
vested warrants as set forth herein, by failing to deliver the certificate(s)
for the underlying shares of common stock to MEYERSON within 10 days after such
exercise, MEYERSON may take legal action, without further notice to the Company,
to obtain such underlying shares, and the Company agrees to pay all damages
costs and expenses incurred by MEYERSON, including reasonable attorneys' fees.
In addition to any other damages sustained by MEYERSON as a result of the
Company's failure to honor such exercise, including any diminution in the value
of the underlying shares over time, the Company agrees that it will pay MEYERSON
interest, at the average prime rate based on New York City banking levels for
the prior six months, on the market value of the underlying shares as of the
10th day after the exercise, for the period beginning on the 10th day after the
exercise and ending on the day the certificates for the underlying shares are
received by MEYERSON.
5. If SARATOGA should, at any time, or from time to time hereafter, effect a
stock split, a reverse stock split or a recapitalization, the terms of the
MEYERSON Warrants shall be proportionately adjusted to prevent the dilution or
enlargement of the rights of the holders.
56. During the period from October 28, 1998 to April 28, 2002, the holders of at
least 51% of: (i) the MEYERSON Warrants not then exercised; and (ii) the shares
previously issued upon exercise of any of the MEYERSON Warrants (hereinafter,
collectively, the "MEYERSON EQUITY") may demand, on one occasion only, that
SARATOGA, at SARATOGA's expense, promptly file a Registration Statement under
the Securities Act of 1933, as amended ("ACT"), to permit a public offering of
the shares of Common Stock issued and issuable pursuant to exercise of the
MEYERSON Warrants (the "MEYERSON SHARES"). Additionally, if SARATOGA, during the
period from October 28, 1997 to October 28, 2002 files a Registration Statement
covering the sale of any of SARATOGA's common stock, then SARATOGA, on each such
occasion, at the request of the holders of at least 51% of the shares and
warrants constituting the MEYERSON EQUITY, shall include in any such
Registration Statement, at SARATOGA's expense, the MEYERSON SHARES, provided
that, if the sale of securities by SARATOGA is being made through an underwriter
and the underwriter objects to inclusion of the MEYERSON SHARES in the
Registration Statement, the MEYERSON SHARES shall not
<PAGE>
be so included in the Registration Statement or in any registration statement
filed within 90 days after the effective date of the underwritten Registration
Statement.
7. The obligation of SARATOGA to register the MEYERSON SHARES, including the
shares issuable upon exercise of the MEYERSON Warrants, pursuant to the demand
or the piggy back registration rights set forth in paragraph 5, above, shall be
without regard to whether the MEYERSON Warrants have been or will be exercised.
8. SARATOGA agrees that, per a period of three (3) years from the date of this
AGREEMENT, SARATOGA will not utilize the registration exemption set forth in
Regulation S under the ACT without the consent of MEYERSON, which consent will
not be unreasonably withheld. SARATOGA further agrees that SARATOGA will not
issue in excess of 10% per year of SARATOGA's outstanding shares under an S-8.
9. This AGREEMENT constitutes the entire Warrant Agreement between the parties
and when a copy hereof is presented to SARATOGA's transfer agent, together with
a certified check in the proper amount and a request that all or part of the
MEYERSON Warrant be exercised, the certificates for the appropriate number of
shares of Common Stock shall be promptly issued.
10. Upon execution of this AGREEMENT, SARATOGA shall include in their next
annual report and filings, the highlights and terms of this investment banking
AGREEMENT.
11. Upon signing of this AGREEMENT, SARATOGA shall pay MEYERSON $5,000.00 as a
non-accountable and non-refundable expense allowance for due diligence and
general compliance review. Further, SARATOGA shall pay an additional $20,000 to
MEYERSON within 90 days. MEYERSON, shall be entitled to additional compensation,
to be negotiated between MEYERSON and SARATOGA, arising out of any transactions
that are proposed or executed by MEYERSON and consummated by SARATOGA, or are
executed by MEYERSON at SARATOGA's request, during the term of this AGREEMENT to
the extent that such compensation is normal and ordinary for such transactions.
In addition, MEYERSON shall be reimbursed by SARATOGA for any reasonable
out-of-pocket expenses that MEYERSON may incur in connection with rendering any
service to or on behalf of SARATOGA that is approved, in writing, in advance by
SARATOGA's Chief Executive Officer.
12. SARATOGA agrees to indemnify and hold MEYERSON and its directors, officers
and employees harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses arising out of any action or cause of action
brought against MEYERSON in connection with its rendering services under this
AGREEMENT except for any losses, claims, damages, liabilities, costs or expenses
resulting from any violation by MEYERSON of applicable laws and regulations
including, without limitation, those of the National Association of Securities
Dealers, Inc. and the Securities and Exchange Commission or any state securities
commission or
<PAGE>
from any act of MEYERSON involving willful misconduct and except that SARATOGA
shall not be liable for any amount paid in settlement of any claim that is
settled without its prior written consent.
13. MEYERSON agrees to indemnify and hold SARATOGA and its directors, officers
and employees harmless from and against any and all losses claims, damages,
liabilities, costs or expenses resulting from any violation by MEYERSON of
applicable laws and regulations including, without limitation, those of the
National Association of Securities Dealers, Inc., the Securities and Exchange
Commission, any state securities commission or from any act of MEYERSON
involving willful misconduct.
14. Within 90 days of the date of this AGREEMENT, a representative of MEYERSON
will visit the corporate headquarters of SARATOGA. SARATOGA will submit to
MEYERSON a current business plan setting forth how SARATOGA plans to proceed
over the next two (2) years.
15. Nothing contained in this AGREEMENT shall be construed to constitute
MEYERSON as a partner, employee or agent of SARATOGA, nor shall either party
have any authority to bind the other in any respect, it being intended that
MEYERSON is, and shall remain an independent contractor.
16. This AGREEMENT may not be assigned by either party hereto, shall be
interpreted in accordance with the laws of the State of New Jersey, and shall be
binding upon the successors of the parties. Either party may terminate this
investment banking contract at any time, however, legally vested Warrants will
remain with MEYERSON.
17. If any paragraph, sentence, clause or phrase of this AGREEMENT is for any
reason declared to be illegal, invalid, unconstitutional, void or unenforceable,
all other paragraphs, sentences, clauses or phrases hereof not so held shall be
and remain in full force and effect.
18. None of the terms of this AGREEMENT shall be deemed to be waived or modified
except by an express agreement in writing signed by the party against whom
enforcement of such waiver or modification is sought. The failure of either
party at any time to require performance by the other party of any provision
hereof shall, in no way, affect the full right to require such performance at
any time thereafter. Nor shall the waiver by either party of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or as a waiver of the provision itself.
19. Any dispute, claim or controversy arising out of or relating to this
AGREEMENT, or the breach thereof, shall be settled by arbitration in Jersey
City, New Jersey, in accordance with
<PAGE>
the Commercial Arbitration Rules of the American Arbitration Association. The
parties hereto agree that they will abide by and perform any award rendered by
the arbitrator(s) and that judgment upon any such award may be entered in any
Court, state or federal, having jurisdiction over the party against whom the
judgment is being entered. Any arbitration demand, summons, complaint, other
process, notice of motion or other application to an arbitration panel, Court or
Judge, and any arbitration award or judgment may be served upon any party hereto
by registered or certified mail, or by personal service, provided a reasonable
time for appearance or answer is allowed.
20. For purposes of compliance with laws pertaining to potential inside
information being distributed unauthorized to anyone, all communications
regarding SARATOGA's confidential information should only be directed to Martin
H. Meyerson, Chairman, Michael Silvestri, President or Joseph Messina, Vice
President, Compliance. If information is being faxed, MEYERSON's confidential
compliance fax number is (201) 459-9534 for communication use.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of
the day and year set forth above.
M.H. Meyerson & Co., Inc. Saratoga Brands Inc.
By: By:
-------------------------------- ------------------------------
Michael Silvestri Scott G. Halperin
President Chairman of the Board
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This shedule contains summary financial information extracted from Consolidated
Audited Financial Statements contained in Form 10KSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 228,945
<SECURITIES> 154,615
<RECEIVABLES> 1,012,354
<ALLOWANCES> (72,000)
<INVENTORY> 444,234
<CURRENT-ASSETS> 1,835,431
<PP&E> 3,552,789
<DEPRECIATION> (450,464)
<TOTAL-ASSETS> 6,647,657
<CURRENT-LIABILITIES> 2,519,117
<BONDS> 0
0
397,898
<COMMON> 4,777
<OTHER-SE> 3,306,702
<TOTAL-LIABILITY-AND-EQUITY> 6,647,657
<SALES> 13,712,800
<TOTAL-REVENUES> 13,712,800
<CGS> 10,089,939
<TOTAL-COSTS> 12,352,292
<OTHER-EXPENSES> 143,135
<LOSS-PROVISION> 9,561
<INTEREST-EXPENSE> 74,823
<INCOME-PRETAX> 1,132,389
<INCOME-TAX> 600
<INCOME-CONTINUING> 1,132,389
<DISCONTINUED> (2,144)
<EXTRAORDINARY> 1,704,539
<CHANGES> 0
<NET-INCOME> 2,834,784
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
