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EXHIBIT 10.56
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made and entered into as of the
31st day of May, 2000 (the "Effective Date"), by and among Mrs. Fields' Original
Cookies, Inc. ("Mrs. Fields"), a Delaware corporation, TCBY Holding Company,
Inc., a Delaware corporation ("Holding"), and TCBY Systems, LLC, a Delaware
limited liability company ("Systems" and, together with Holding, "TCBY"). Mrs.
Fields, on the one hand, and TCBY, on the other hand, shall each be considered a
"Party." Unless the context otherwise requires, references in this Agreement to
Systems shall be deemed to include the subsidiaries of Systems.
R E C I T A L S
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A. Mrs. Fields is engaged in the business of owning, operating and franchising
retail fast food stores, and possesses certain valuable management,
administrative and operational skills, experience and resources relating to such
business operations.
B. Systems, directly or through one or more affiliated or subsidiary entities,
is engaged in the business of distributing and selling yogurt, ice cream, frozen
novelty products, foodstuffs and other products through franchised retail fast
food stores, non-traditional locations and grocery stores, the business,
operations and affairs of which are hereinafter referred to as the "Business."
C. Upon the terms and subject to the conditions contained herein, TCBY desires
to engage Mrs. Fields to manage and operate the Business and Mrs. Fields desires
to accept such engagement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Definitions.
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1.1 "Acquisition Advisory Fee" has the meaning set forth in Section 5.1.
1.2 "Acquisition Transactions" means the transactions pursuant to which,
as of the Effective Date, Capricorn Investors III, L.P. acquired a
controlling
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interest in TCBY and CI Merger Co. merged with and into
TCBY Enterprises, Inc.
1.3 "Americana" means, collectively, Americana Foods Limited Partnership,
a Texas limited partnership, together with the general and limited
partners thereof.
1.4 "Americana Mortgage" has the meaning set forth in Exhibit B hereto.
1.5 "Americana Sale" has the meaning set forth in Section 5.5.
1.6 "Americana Sale Advisory Fee" has the meaning set forth in Section
5.5.
1.7 "Annual Plan" has the meaning set forth in Section 4.2.
1.8 "Auditors" has the meaning set forth in Section 2.2.19.
1.9 "Board" has the meaning set forth in Section 2.2.9.
1.10 "Business" has the meaning set forth in Recital B.
1.11 "Cost Savings" means any of the following attributable to the Parties'
joint purchasing of Ingredients, Supplies and Services: (i) any
reduction in the unit costs of the Ingredients, Supplies and Services,
excluding price fluctuations, (ii) any reduction in packaging,
handling, distribution, shipping or freight costs relating to the
Ingredients, Supplies and Services, and (iii) any rebates or
incentives, or any increases in rebates or incentives, received by any
Party relating to the Ingredients, Supplies and Services; provided,
that the foregoing shall be documented, including by seeking
alternative bid information, in a manner that is reasonable under the
circumstances.
1.12 "Effective Date" means June 1, 2000.
1.13 "Excluded Services" has the meaning set forth in Section 2.3.
1.14 "First Annual Plan" has the meaning set forth in Section 4.6.
1.15 "Ingredients, Supplies and Services" has the meaning set forth in
Section 2.5.
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1.16 "Indemnified Parties" has the meaning set forth in Section 10.
1.17 "Initial Period" has the meaning set forth in Section 3.
1.18 "Management Fee" means the management fee set forth in the applicable
Annual Plan, inclusive of SG&A Expenses and consideration for Services
to be performed by Mrs. Fields pursuant to this Agreement, all as set
forth in the applicable Annual Plan, subject to adjustment as required
by Section 5; provided, that (x) the Management Fee shall be
calculated in accordance with the guidelines set forth in Section 4.3
and (y) the annual Management Fee for a given fiscal year may not
exceed by more than 10% the annual Management Fee for the immediately
preceding fiscal year unless consented to in writing by Wells Fargo
Bank, N.A. as agent for and on behalf of the Senior Lenders.
1.19 "Senior Debt" means the indebtedness and other obligations outstanding
under the Credit Agreement, dated as of the date hereof, by and among
Systems, as borrower, Wells Fargo Bank, N.A., as agent and lender,
other lenders and certain other parties.
1.20 "Senior Lenders" means the lenders (together with their successors
and assigns) under the Senior Debt.
1.21 "Senior Loan Documents" means the Credit Agreement under which the
Senior Debt is outstanding, together with the Loan Documents (as
defined therein).
1.22 "Services" has the meaning set forth in Section 2.2.
1.23 "Severance Expenses" has the meaning set forth in Section 8.5.
1.24 "SG&A Expenses" means TCBY's selling, general and administrative
expenses incurred in connection with the operation of the Business as
defined by Generally Accepted Accounting Principles in the United
States. For purposes of this Agreement, SG&A Expenses shall not
include (A) any federal, state or other jurisdictional income tax,
interest or penalty assessed to or payable by TCBY, (B) any
indebtedness or interest, fees, premium, indemnification or other
amounts paid in respect of indebtedness, (C) any cost or expense
excluded as a part of SG&A Expenses pursuant to this Agreement or any
Annual Plan, (D) any capital
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expenditures to be made on behalf of TCBY pursuant to any Annual Plan,
(E) depreciation or amortization of any kind, (F) any management or
other fees payable to Mrs. Fields hereunder, (G) any cost or expense
for which direct payment by TCBY or reimbursement by TCBY to Mrs.
Fields is required by this Agreement, (H) any indemnifi cation
payments, or reimbursement for costs and attorneys' fees, which may be
required to be made by TCBY under Section 2.6.2, 10 or 11.4, (I) any
payments to be made by TCBY in connection with the Acquisi tion
Transactions as set forth in the Flow of Funds Memo attached as
Exhibit B hereto or pursuant to the financing or advisory agreements
or arrangements entered into by TCBY in connection therewith, (J) any
amount associated with Cost Savings required to be paid by TCBY to
Mrs. Fields and (K) without limiting the generality of the foregoing,
any cost or expense of Americana Foods Limited Partnership or its two
partners (including, without limitation, in connection with the
Americana Sale but not treating the Americana Sale Advisory Fee as
such a cost or expense), all such costs and expenses to be paid
directly or reimbursed by Americana Foods Limited Partnership or its
two partners.
1.25 "Store Matrix" has the meaning set forth in Section 4.2.1.
2 Manager's Engagement and Services.
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2.1 Engagement. Pursuant to the terms of this Agreement, as of the
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Effective Date, TCBY hereby engages Mrs. Fields as the sole and
exclusive agent to manage and operate the Business on a day-to-day
basis and to render the Services related thereto, and Mrs. Fields
hereby accepts such engagement and agrees to perform the Services.
During the term of this Agreement, provided that Mrs. Fields is
properly performing all of its obligations under this Agreement, TCBY
shall not engage, whether as an employee, officer or independent
contractor, any other person or entity to manage or operate the
Business or render such Services.
2.2 Services To Be Performed By Manager. In accordance with the
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objectives of any Annual Plan adopted pursuant to Section 4 below, and
subject to the limitations of any such Annual Plan and to the
provisions of this Agreement, Mrs. Fields shall have the duty to
perform on a continuous and on-going basis, and is hereby granted the
authority to perform or cause to be performed, the services listed
below for the day-
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to-day management, conduct and administration of the Business
(collectively, the "Services"), including without limitation those
listed in Sections 2.2.1 through 2.2.28 below. Mrs. Fields shall have
no obligation to perform any of the Excluded Services described in
Section 2.3 below.
2.2.1 The determination, establishment and maintenance of adminis
trative, operating, accounting, financial, legal, employment,
training, marketing and other standards, policies and
procedures;
2.2.2 The present and future licensing and management of TCBY's
franchises, subfranchises and development rights, including
without limitation, the termination of franchise, subfranchise
and development rights as determined by Mrs. Fields;
2.2.3 The negotiation, preparation, execution, administration and
performance of all contracts and agreements relating to the
day-to-day operations of the Business;
2.2.4 The preparation of all disclosure documents pertaining to the
conduct of TCBY's Business and affairs;
2.2.5 The development of domestic and international markets for TCBY
franchises and subfranchises, the opening of new TCBY-
franchised stores and the development of new products and
inventory related thereto;
2.2.6 The development and conduct of marketing and advertising
activities of TCBY;
2.2.7 Subject to the applicable Annual Plan, the purchase of or
entering into of contracts and agreements for any equipment,
supplies or services that Mrs. Fields deems required or
desirable for the operation of the Business, and, as
appropriate, any sale, disposal or termination thereof;
2.2.8 The establishment and maintenance of accurate books of
account, corporate records and business records reflecting the
results of the operations of the Business, and any records as
are required by statute or by any governmental agency with
jurisdic-
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tion over TCBY or its subsidiaries, all of which may be exam
ined by authorized representatives of TCBY at all reasonable
times;
2.2.9 Counseling TCBY in connection with policy decisions to be made
by the Board of Directors of TCBY (the "Board");
2.2.10 Customary efforts acting as TCBY's collection agent to collect
on behalf of TCBY all royalties, fees and income payable to
TCBY in connection with the operation of the Business, and the
deposit of the same in segregated accounts established and
maintained solely for TCBY in accordance with Section 2.7
below;
2.2.11 The payment of TCBY's SG&A Expenses, subject to the terms and
conditions of this Agreement;
2.2.12 The making of capital expenditures in accordance with an
Annual Plan provided that all such expenditures shall not
constitute SG&A Expenses under this Agreement and shall be
promptly reimbursed by TCBY to Mrs. Fields unless, at Mrs.
Fields' request, such expenditures are funded in advance by
TCBY;
2.2.13 The provision of notices to, and correspondence with, the
franchisees, subfranchises, area developers, vendors,
suppliers, officers, directors, employees and agents of TCBY;
2.2.14 The provision, or arrangements for the provision, of legal,
financial, tax and accounting services required by the Board ,
Mrs. Fields or third parties relating to the operation of the
Business;
2.2.15 The payment and discharge, when due, from TCBY's funds, but
not from any management or other fee payable to Mrs. Fields,
of any and all indebtedness and obligations owed by or
relating to TCBY, except such as TCBY or Mrs. Fields may in
good faith decide to contest or as to which a bona fide
dispute may arise and the payment, of any penalty or interest
due in connection therewith; provided that any such payments
made pursuant to
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this Section 2.2.15 shall not constitute SG&A Expenses for
purposes of this Agreement;
2.2.16 The maintenance and keeping in force of insurance of the types
and in amounts customarily carried in lines of business
similar to the TCBY's business and in accordance with the
provisions of the Senior Loan Documents, including but not
limited to fire, extended coverage, public liability, damage
and workers' compensation, carried in companies and in amounts
satisfactory to Mrs. Fields;
2.2.17 The provision of written notice to TCBY of: (a) any litigation
pending or threatened against TCBY; (b) the occurrence of any
breach or default in the payment or performance of any obliga
tion owing by TCBY to any person or entity; (c) any uninsured
or partially uninsured loss through fire, theft or liability
damage having a material affect on the conduct of the
Business; or (d) any termination or cancellation of any
insurance policy which TCBY maintains;
2.2.18 The preparation and delivery to TCBY of current monthly and
quarterly financial statements (prepared according to GAAP)
reflecting the results of the operations of the Business for
such periods and other statements and reports as required
under the Senior Loan Documents;
2.2.19 Promptly after the end of its fiscal year, the engagement of
the performance of an audit of TCBY's books and records
reflecting its operations, by a certified public accounting
firm selected by the Board (the "Auditors");
2.2.20 Except as provided in Section 2.3.2 below, the initiation
(deemed necessary by Mrs. Fields), defense, management or
compromise by Mrs. Fields of any third party legal actions or
proceedings against Mrs. Fields or TCBY asserted or arising in
the day to day conduct of the Business or arising in
connection with Mrs. Fields' performance of the Services;
provided that aggregate legal expenses (including without
limitation, settlements, judgments, damages, attorneys' fees
and court costs) in excess of $400,000.00 per year shall not
constitute SG&A Expenses and
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shall be paid directly or promptly reimbursed by TCBY to Mrs.
Fields;
2.2.21 Except as provided in Section 2.3.3 below, the preparation and
filing of tax returns required by any federal, state or local
governmental entity, and the payment from TCBY's funds, but
not from any management or other fee payable to Mrs. Fields,
of any tax (both real and personal), assessment, penalty or
interest due in connection therewith owed by or relating to
TCBY, except such as TCBY or Mrs. Fields may in good faith
decide to contest or as to which a bona fide dispute may
arise; provided that any such payments made pursuant to this
Section 2.2.21 shall not constitute SG&A Expenses for purposes
of this Agreement;
2.2.22 At the request of the Board, the engagement of outside quality
assurance services upon such terms and conditions as Mrs.
Fields and the Board shall mutually agree and as shall be
provided for in a separate line item in the relevant Annual
Plan or amendment thereto; provided that the expenses incurred
by Mrs. Fields in connection therewith shall not constitute
SG&A Expenses for purposes of this Agreement, and shall be
directly paid by TCBY or promptly reimbursed to Mrs. Fields by
TCBY;
2.2.23 The preparation of any disclosure or other documents for
filing with Securities and Exchange Commission or other
governmen tal body or for use in connection with the sale or
offering for sale of any securities of TCBY or its subsidiary
or affiliated entities; provided that the expenses incurred by
Mrs. Fields in connection therewith shall not constitute SG&A
Expenses payable from the management or other fees payable by
Mrs. Fields and shall be directly paid by TCBY or promptly
reimbursed to Mrs. Fields by TCBY;
2.2.24 Subject to the approval of the Board and as shall be provided
for in a separate line item in the relevant Annual Plan or
amendment thereto, the retention for and on behalf of TCBY,
and at TCBY's sole cost and expense and not constituting SG&A
Expenses, such services of accountants, legal counsel,
appraisers, insurers, brokers, transfer agents, registrars,
developers, investment banks, financial advisors, banks and
other lenders and others as Mrs.
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Fields deems necessary or advisable in connection with the
management and operations of TCBY. Notwithstanding anything
contained herein to the contrary, Mrs. Fields shall have the
right to cause any such services to be rendered by its employ
ees or affiliates or by outside professionals or consultants
employed by Mrs. Fields for services to Mrs. Fields. To the
extent as shall have been provided for in the relevant Annual
Plan or approved in writing by Wells Fargo Bank, N.A. as agent
for and on behalf of the Senior Lenders, TCBY shall directly
pay or promptly reimburse Mrs. Fields or its affiliates
performing such services for the cost thereof; provided that,
in the case of services provided by employees or affiliates of
Mrs. Fields, such costs and reimbursements are no greater than
those which would be payable to outside professionals or
consultants engaged to perform such services pursuant to
agreements negotiated on an arms-length basis;
2.2.25 The provision of any substantial services in connection with
the sale of all or substantially all of the assets of TCBY or
any subsidiary thereof (other than Americana), or the merger,
consolidation, or other corporate reorganization of TCBY or
any subsidiary thereof (other than Americana); provided that
the third party expenses incurred by Mrs. Fields in connection
therewith shall not constitute SG&A Expenses for purposes of
this Agreement and shall be directly paid by TCBY or promptly
reimbursed to Mrs. Fields by TCBY;
2.2.26 The provision of services in connection with the relocation of
the TCBY management function from Little Rock, Arkansas to
Salt Lake City, Utah and the termination and/or subleasing of
the office and computer leases and utilities contracts
relating to the Little Rock headquarters;
2.2.27 The provision of advisory services in connection with the
Acquisition Transactions and the Americana Sale provided for
in Sections 5.2 and 5.5, respectively; and
2.2.28 Such other services as are reasonably necessary for the
effective management of the Business and related to any of the
foregoing
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Services or such other services relating to the Business as
are reasonably requested in writing by the Board; provided,
that (x) Mrs. Fields shall not be required to perform such
services if, in the sole judgment of Mrs. Fields, it would
materially increase the cost to Mrs. Fields of providing the
Services and (y) in any case in which Mrs. Fields would
receive additional payment for providing such services, such
services shall have been provided for in a separate line item
in the relevant Annual Plan or amend ment thereto.
2.3 Excluded Services and Activities. Unless otherwise agreed to in
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writing by the Parties, the Services shall not include any of the
following services by Mrs. Fields or its subsidiary or affiliated
entities, officers, directors, employees, contractors or agents
(collectively, the "Excluded Services"):
2.3.1 The guaranteeing, or becoming liable in any way as a surety,
endorser or accommodation party or otherwise for, or pledging
or granting any security interest covering any of the assets
of Mrs. Fields or its subsidiary or affiliated entities in
connection with, any debts or obligations of TCBY;
2.3.2 The initiation, defense, management or compromise of any legal
action or proceeding against TCBY (A) reasonably deemed by
Mrs. Fields in its sole judgment not to arise out of the day-
to-day conduct of the Business, including without limitation
any action or proceeding arising out of or relating to the
Acquisition Transactions or for which TCBY asserts or is
entitled to assert indemnification rights in connection with
the Acquisition Transactions, or (B) which occurred (whether
known or un known) prior to the Effective Date; and
2.3.3 The preparation and filing of tax returns required by any
federal, state or local governmental entity, or the payment of
any tax, penalty or interest due in connection therewith.
2.4 Performance by Mrs. Fields.
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2.4.1 The Services shall be performed or arranged by the officers,
employees, agents and contractors of Mrs. Fields as determined
by Mrs. Fields in its sole discretion.
2.4.2 Mrs. Fields shall use its reasonable efforts, skill and
judgment in the performance of the Services. Mrs. Fields shall
perform or cause the Services to be performed in material
compliance with applicable laws, rules and regulations,
including without limitation those pertaining to labor,
employment and franchising, and in accordance with the
applicable Senior Loan Documents.
2.4.3 In providing the Services, Mrs. Fields shall have a duty to
act, and to cause its agents to act, in a reasonably prudent
manner, but neither Mrs. Fields nor any director, officer,
employee, or agent of Mrs. Fields shall be liable to any other
Party for any error in judgment or mistake of law or for any
loss incurred in connection with the matters to which this
Agreement relates, except that Mrs. Fields shall be
responsible for a loss resulting from malfeasance, bad faith
or gross negligence on the part of Mrs. Fields or its
directors, officers, employees or agents.
2.4.4 The relationship created between Mrs. Fields and the other
Parties pursuant to this Agreement shall be solely that of
independent contractors, and neither the execution nor perfor
mance of this Agreement shall create any partnership or joint
venture relationship between Mrs. Fields and the other
Parties.
2.5 Joint Purchasing. The Parties acknowledge that (A) in connection with
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their respective business operations each of them purchases
ingredients, goods, supplies, commodities, materials, and services
(collectively "Ingredients, Supplies and Services") that may be of a
similar type or nature or that may be purchased from the same vendor
or supplier, and (B) quantity or volume savings may be received by the
Parties if they jointly purchase such Ingredients, Supplies and
Services. In order to obtain such savings, Mrs. Fields from time to
time may enter into arrangements for the joint purchase of
Ingredients, Supplies and Services; provided, that, in connection with
any such joint purchase, each of TCBY and Mrs. Fields shall be solely
responsible for payment for the Ingredients, Supplies and Services to
be purchased by it. As to
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all purchases of Ingredients, Supplies and Services, Mrs. Fields is
authorized by TCBY and the Board to act as an agent for and on behalf
of TCBY. Nothing contained in this Agreement shall require the joint
purchase of Ingredients, Supplies and Services by or on behalf of any
of the Parties.
2.5.1 Allocation of Cost Savings. If Mrs. Fields jointly purchases
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any Ingredients, Supplies and Services, any Cost Savings
received by Mrs. Fields or TCBY relating to the Ingredients,
Supplies and Services shall be divided and shared equally with
the other Party. Any Cost Savings received by a Party on a
basis other than on a per unit basis as a result of the
Parties' joint purchasing of Ingredients, Supplies and
Services shall nevertheless be divided and shared equally by
them to the extent reasonably practicable as determined by
Mrs. Fields. The following examples are included to illustrate
the intention of the Parties respecting the allocation of Cost
Savings:
(x) Assume that as a result of a joint purchase arrangement
TCBY's per unit cost of a particular commodity is reduced by
$.10. The Cost Savings to TCBY would be $.10, of which Mrs.
Fields would receive $.05 for each unit of the commodity
purchased by or on behalf of TCBY pursuant to the joint
purchase arrangement.
(y) Assume that as a result of a joint purchase arrangement,
TCBY's per unit cost of a particular commodity is reduced by
$.10, and Mrs. Fields per unit cost of the commodity is
reduced by $.04. The Cost Savings to TCBY would be $.10, of
which Mrs. Fields would receive $.05 for each unit of the
commodity purchased by or on behalf of TCBY pursuant to the
joint purchase arrangement. The Cost Savings to Mrs. Fields
would be $.04, of which TCBY would receive $.02 for each unit
of the commodity purchased by Mrs. Fields pursuant to the
joint purchase arrangement.
(z) Assume that, Mrs. Fields purchases supplies for or on
behalf of TCBY under an existing supply agreement between Mrs.
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Fields and a third party vendor resulting in a $1.00 reduction
in TCBY's per unit cost for the supplies. The Cost Savings
would be $1.00, which would be allocated equally between TCBY
and Mrs. Fields.
2.5.2 Product Manufacturing Cost Savings. If Mrs. Fields is able
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through efficiencies to reduce the tolling charge which is
presently incurred in the manufacturing of TCBY's products,
then the tolling reduction shall be allocated as follows (i)
the first $0.11 per gallon of the tolling reduction shall be
entirely for TCBY's benefit; (ii) the next $0.11 per gallon of
the tolling reduction shall be entirely for Mrs. Fields'
benefit; and (iii) any further tolling reduction shall be
divided and shared equally with each Party. For purposes of
the foregoing, the "tolling charge" means the markup that is
charged by a manufacturer as its profit.
2.6 Service as Officers and Directors.
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2.6.1 Directors, officers, employees and agents of Mrs. Fields, as
may be selected from time to time by Mrs. Fields, may be
appointed by TCBY and serve as directors, officers, agents,
nominees and signatories of TCBY or any subsidiary thereof, to
the extent permitted by the articles and bylaws of TCBY (and
resolutions duly adopted by the Board pursuant thereto), this
Agreement, applicable law and the Senior Debt Documents and
such terms and conditions as Mrs. Fields may reasonably impose
in connec tion with such service or appointment where any such
person may serve concurrently as an officer or director of
Mrs. Fields and TCBY (or any subsidiary thereof); provided,
that TCBY shall not be required to make cash payments to such
individuals for so serving.
2.6.2 Any individual serving as a director, officer, agent, nominee
or signatory of TCBY pursuant to Section 2.6.1 shall be
entitled to indemnification from TCBY to the maximum extent
provided by the certificate of incorporation and by-laws of
TCBY (and resolutions duly adopted by the Board pursuant
thereto).
2.7 Bank Accounts.
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2.7.1 Establishment and Use. At the direction of the Board, on or
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before the Effective Date, Mrs. Fields shall establish and
maintain one or more bank accounts in the name of TCBY and any
subsidiary thereof, and may collect and deposit funds into any
such account, and disburse funds from such accounts
(including, without limitation, for reimbursement of payments
to which Mrs. Fields is entitled) subject to the terms and
conditions of this Agreement and such additional terms and
conditions as the Board may establish consistent with this
Agreement. Mrs. Fields shall from time to time render
appropriate accountings of such collections and payments to
the Board and, upon request of the Board, to the Auditors.
2.7.2 Fees and Expenses. From the TCBY bank accounts established
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pursuant to Section 2.7, Mrs. Fields shall be entitled to
disburse as and when due the Management Fee, the Acquisition
Advisory Fee, the Americana Advisory Fee and expenses
reimbursable to Mrs. Fields in accordance with Section 5 or as
otherwise provided in this Agreement.
3. Term. Unless terminated sooner in accordance with Section 8, the term of
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this Agreement shall commence on the Effective Date and shall run until
December 31, 2005 (the "Initial Period"). Thereafter, unless terminated
sooner in accordance with Section 8, this Agreement shall be automatically
renewed for successive one (1) year periods unless TCBY or Mrs. Fields
provides the other with no less than twelve (12) months' written notice
prior to the end of the Initial Period, or no less than six (6) months'
written notice prior to the end of any such renewal period, that it will
not renew this Agreement.
4. Annual Plan.
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4.1 Fiscal Year. The Parties acknowledge that, as of the Effective Date,
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TCBY has or will have a 52/53-week year ending near December 31 (to
correspond with Mrs. Fields' year end).
4.2 Preparation. For each of TCBY's partial or full fiscal years during
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the term of this Agreement, Mrs. Fields shall prepare and transmit to
the Board for its approval the following proposed budgets and plans
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(collectively, the "Annual Plan") for the Business within 30 days
prior to the end of each fiscal year:
4.2.1 Mrs. Fields' proposed operating, capital expenditure,
marketing and management plans for the Business for the
ensuing fiscal year, including a store matrix reflecting the
projected number of stores and other operations to be
operated, managed, opened, closed, acquired or disposed of by
or on behalf of TCBY or any subsidiary thereof, and the
respective capital and SG&A Expenses projected in connection
with each such store or operation during the ensuing fiscal
year (the "Store Matrix");
4.2.2 Estimated capital expenditures for the ensuing fiscal year;
and
4.2.3 A projected set of financial information for the ensuing
fiscal year, including the following:
4.2.3.1 Management Fee for the ensuing fiscal year;
4.2.3.2 SG&A Expenses for the ensuing fiscal year;
4.2.3.3 Earnings before interest, taxes, depreciation and
amortization for the ensuing fiscal year;
4.2.3.4 Net income for the ensuing fiscal year;
4.2.3.5 Cash flows for the ensuing fiscal year; and
4.2.3.6 Balance sheet as of the end of the ensuing fiscal
year.
4.3 Approval. The Board shall either approve or deny the Annual Plan
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within thirty (30) days following its receipt. If the Board shall
approve the Annual Plan, it shall promptly be submitted to the Senior
Lenders for their approval, which approval (x) shall be in writing
from Wells Fargo Bank, N.A. as agent for and on behalf of the Senior
Lenders and (y) may not be unreasonably withheld or delayed. Should
the Board or the Senior Lenders deny approval of the Annual Plan, Mrs.
Fields and the Board shall cooperate with each other in formulating a
mutually
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acceptable Annual Plan as quickly as possible. If, notwithstanding the
foregoing procedures, on the first day of any TCBY fiscal year, no
Annual Plan has been approved by the Board and the Senior Lenders for
such year, then the Annual Plan adopted for the fiscal year
immediately preceding the fiscal year for which such Annual Plan is
proposed by Mrs. Fields, adjusted (without duplication) to reflect
increases or decreases resulting from the following events (together
with appropriate adjustments if such prior fiscal period was a partial
fiscal year), shall govern until such time as the Board and the Senior
Lenders approve a new Annual Plan:
4.3.1 increases in the Management Fee in an amount equal to 80% of
the percentage increase for the prior year in the Consumer
Price Index multiplied by the Management Fee reflected in the
Annual Plan for the prior fiscal year;
4.3.2 increases or decreases in the Management Fee from (A) any
fundamental changes in the SG&A Expenses or the Business, (B)
changes in the Store Matrix, (C) changes in the operating
assets (including without the limitation the sale or disposal
thereof) or (D) other events or changes not contemplated at
the time of the preparation of the Annual Plan for such prior
fiscal year;
4.3.3 decreases in estimated revenues; and
4.3.4 the anticipated incidence of costs during such year for any
legal, accounting and other professional fees or disbursements
in connection with events or changes not contemplated at the
time of preparation of the Annual Plan for the prior year.
4.4 Implementation; Adjustment. Upon approval of the Annual Plan (or, if
--------------------------
the Annual Plan is not so approved by the Board and the Senior
Lenders, upon the implementation of the Annual Plan established
pursuant to Section 4.3 above), such Annual Plan shall become TCBY's
Annual Plan for the next succeeding fiscal year and Mrs. Fields shall
take such steps as are necessary or appropriate to implement the
Annual Plan. Subject to the following procedures and requirements, the
Annual Plan
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shall be updated and revised by Mrs. Fields from time to time during
the period covered thereby to reflect variables and events not
foreseeable at the time of preparation of the Annual Plan and not
reasonably within Mrs. Fields' control:
4.4.1 Mrs. Fields shall provide written notice to TCBY of any
proposed changes in the Annual Plan, including without limita
tion, any changes in or arising from any of the matters in the
Annual Plan described in Sections 4.2.1 through 4.2.3 above;
4.4.2 The Board shall promptly notify Mrs. Fields of the Board's
approval or disapproval of such changes proposed by Mrs.
Fields, in reasonable detail, including any conditions of
approval or reasons for disapproval;
4.4.3 Mrs. Fields and the Board shall act promptly and in good faith
to reach mutual agreement concerning such proposed changes,
whereupon they shall approve in writing all such changes as
modifications of such Annual Plan; and
4.4.4 Such changes shall be subject to the written approval of Wells
Fargo Bank, N.A. as agent for and on behalf of the Senior
Lenders, which approval may not be unreasonably withheld.
4.5 Compliance With Plan. Mrs. Fields shall comply in all material
--------------------
respects with the applicable Annual Plan, provided however that
notwithstanding the foregoing Mrs. Fields shall be entitled to make
expenditures not authorized under the then applicable Annual Plan in
case of emergencies or any unexpected casualties, or in order to
comply with any applicable legal or insurance requirements, all of
which shall constitute adjustments to the applicable Annual Plan.
4.6 Annual Plan For Fiscal Year 2000. The Annual Plan for the fiscal year
--------------------------------
commencing on the Effective Date and ending on December 31, 2000, is
attached hereto as Exhibit A and by reference made a part hereof (the
"First Annual Plan"). TCBY hereby approves, and represents and
warrants to Mrs. Fields that the Board has approved, the First Annual
Plan.
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5. Compensation. For services (including the Services to be provided
------------
hereunder), TCBY shall pay to Mrs. Fields fees determined as follows:
5.1 Acquisition Advisory Services. For services rendered in connection
-----------------------------
with the Acquisition Transactions, TCBY shall
5.1.1 pay to Mrs. Fields an advisory fee (the "Acquisition Advisory
Fee") in the amount of $250,000, such fee to be payable on or
before the Effective Date; and
5.1.2 reimburse Mrs. Fields for $50,000 of the out-of-pocket costs
and expenses incurred by Mrs. Fields in connection with its
perfor mance of such services with respect to the Acquisition
Transac tions, such costs and expenses to be reimbursed at the
Effective Date.
5.2 Management Fee During Period Covered By First Annual Plan. For the
---------------------------------------------------------
partial year covered by the First Annual Plan (the Effective Date
through December 31, 2000), Mrs. Fields, as compensation for Services
rendered during such period, shall receive a Management Fee calculated
on a pro rated basis for such period based on a Management Fee of
$12.4 million for a full year, subject to adjustment in accordance
with this Agreement. In addition to such Management Fee, the Board
shall cause TCBY to pay directly or promptly reimburse Mrs. Fields for
capital and other expenditures for which reimbursement or payment (as
the case may be) is required by this Agreement, including without
limitation all items that are excluded from SGA Expenses in the
definition thereof.
5.3 Management Fee and Reimbursements For Subsequent Periods. For each
--------------------------------------------------------
fiscal year after the partial fiscal year covered by the First Annual
Plan, Mrs. Fields, as compensation for Services rendered during each
such subsequent period, shall receive a Management Fee from TCBY in
the amounts set forth in the Annual Plan applicable to each such
respective period, subject to adjustment in accordance with this
Agreement. In addition to such Management Fee, TCBY shall pay directly
or promptly reimburse Mrs. Fields for capital and other expenditures
for which reimbursement or payment (as the case may be) is required by
this Agreement, including without limitation all items that are
excluded from SGA Expenses in the definition thereof.
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<PAGE>
5.4 Payment of Management Fees. Except as otherwise set forth in the
--------------------------
applicable Annual Plan:
5.4.1 The Management Fees required under Section 5.2 or 5.3 shall be
paid in advance on a semi monthly basis to Mrs. Fields no
later than the 3rd day and the 18th day of each month.
5.4.2 Each such semi monthly payment of Management Fees shall be an
amount equal to 1/24th (or proportionately for any partial
fiscal year) of the annual Management Fee for the applicable
period determined in accordance with this Section 5 and the
applicable Annual Plan, adjusted as required by this
Agreement.
5.5 Americana Sale Advisory Fee. For services rendered and to be rendered
---------------------------
to TCBY in connection with the planned sale of the stock or assets of
Americana (the "Americana Sale"), in the event that the Americana Sale
occurs, Holding agrees to promptly pay to Mrs. Fields a transaction
advisory fee (the "Americana Sale Advisory Fee") of $1.5 million;
provided, that if, at the time payment of the Americana Sale Advisory
Fee is required, Holding shall have insufficient cash remaining
available to it from the proceeds of the Americana Sale after the
payment of the Americana Mortgage, the portion of the Americana Sale
Advisory Fee that can then be so paid shall be paid and the balance
shall be paid only at such time as Holding shall have cash available
to it to make such payment. Until such time as the Senior Debt shall
be retired, the Americana Sale Advisory Fee is a non-recourse
obligation of Holding other than to the proceeds of the Americana Sale
and the failure by Holding to pay it when due shall not give Mrs.
Fields the right to collect (by set off or otherwise) or otherwise
proceed against TCBY, or to terminate this Agreement, until such time
as the Senior Debt shall have been retired.
6. Actions Requiring Consent.
-------------------------
6.1 Consent of Board. The following actions shall not occur without
----------------
prior notice to Mrs. Fields or without the prior consent of the Board:
6.1.1 TCBY or any subsidiary thereof obtaining or permitting to
exist, any loan, advance, or other borrowing, whether secured
or
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unsecured or in the ordinary course of business, other than
intercompany borrowings permitted under the Senior Loan
Documents;
6.1.2 TCBY or any subsidiary thereof creating any security interest
or lien against itself or any of its assets to secure a
borrowing;
6.1.3 The issuance or sale of any security of TCBY or any subsidiary
thereof, including, without limitation, any share of TCBY or
warrant, bond, note, debenture, or other instrument
convertible into any of the foregoing;
6.1.4 The sale or transfer of any of the assets of TCBY that would
materially affect the Business or its operations;
6.1.5 TCBY or any subsidiary thereof guaranteeing or becoming liable
in any way as a surety, endorser, or accommodation endorser or
other-wise for debts or obligations of any other person or
entity, other than in the ordinary course of business;
6.1.6 The commencement of voluntary bankruptcy or insolvency
proceedings by TCBY or any subsidiary thereof; or
6.1.7 The dissolution, liquidation, cessation of business, or
winding up of TCBY or any subsidiary thereof.
6.2 Notice to Mrs. Fields. The Board will not permit or cause TCBY to
---------------------
take any action that during any full or partial fiscal year will
increase the SG&A Expenses applicable to Mrs. Fields without prior
notice to Mrs. Fields.
7. Principal Office. No later than 180 days after the Effective Date, the
----------------
principal office of TCBY shall be relocated to the location of the
principal office of Mrs. Fields, which is currently situated at 2855 East
Cottonwood Parkway, Suite 400, Salt Lake City, Utah, 84121-7050, and the
present office of TCBY in Little Rock, Arkansas shall be closed.
Thereafter, during the term of this Agreement, the principal office shall
be maintained at the location of the principal office of Mrs. Fields.
20
<PAGE>
8. Termination. This Agreement may be terminated by the Parties only upon the
-----------
occurrence of any of the following events:
8.1 By TCBY in the event of (A) a material breach of the Agreement by Mrs.
Fields which is not cured by Mrs. Fields within sixty (60) days after
written notice thereof from the Board (with a copy to the Senior
Lenders) and (B) and thereafter a vote of the Board to terminate the
Agreement;
8.2 By Mrs. Fields, in the event TCBY shall fail to make any payments or
reimbursements to Mrs. Fields as required by this Agreement within
sixty (60) days following their due date for Management Fee payments
or Mrs. Fields' written demand therefor for reimbursements; or
8.3 By the express written agreement of the Parties.
8.4 Rights Upon Termination. In the event of a termination of this
-----------------------
Agreement pursuant to Section 8.1, Mrs. Fields shall bear all expenses
incurred by Mrs. Fields in connection with the severance of any
persons employed by it to render the Services (the "Severance
Expenses"). In the event of a termination of this Agreement pursuant
to Section 8.2, TCBY shall be liable for and pay the Severance
Expenses to Mrs. Fields within 10 days of any such termination. Upon
termination of this Agreement, Mrs. Fields shall provide to TCBY all
of the documentation, materials, and records (in whatever form the
foregoing may exist) it possesses relating to TCBY, and shall
otherwise act in good faith to allow for the continued, uninterrupted
operation of TCBY.
9. Dispute Resolution.
------------------
9.1 Initial Dispute Resolution. If a dispute arises out of or relates to
--------------------------
this Agreement or its breach, the Parties shall endeavor to settle the
dispute first through direct discussions. If the dispute cannot be
settled through direct discussions, and if both Parties agree, the
Parties shall endeavor to settle the dispute by mediation with a
third-party mediator before recourse to arbitration. The location of
the mediation shall be Salt Lake City, Utah.
21
<PAGE>
9.2 Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or its breach not resolved by mediation, except for
claims which have been waived by the making or acceptance of final
payment, shall be decided by binding arbitration in accordance with
the applicable rules of the American Arbitration Association then in
effect unless the Parties mutually agree otherwise. Any such
arbitration shall be held in Salt Lake City, Utah. Judgment on the
award or decision rendered in arbitration may be entered in any court
having jurisdiction thereof.
9.3 Work Continuance and Payment. Unless otherwise agreed by the Parties
----------------------------
in writing, Mrs. Fields shall continue to provide the Services covered
hereby during any mediation or arbitration proceedings provided that
it continues to receive the payments and reimbursements required under
this Agreement.
10. Indemnification. Systems shall indemnify and hold Mrs. Fields (including
---------------
its directors, officers, employees and agents (together with Mrs. Fields
the "Indemnified Parties"), whether acting in such capacity on behalf of
Mrs. Fields or TCBY or both) harmless from and against any and all losses,
liabilities, claims, damages, costs, and expenses (including reasonable
attorneys' fees and other expenses of litigation) to which the Indemnified
Parties may become subject arising out of the Services provided under this
Agreement, provided that such agreement by Systems shall not protect the
Indemnified Parties against any liability of which the Indemnified Parties
would otherwise be subject by reason of malfeasance, bad faith or gross
negligence.
11. General Provisions.
------------------
11.1 Assignment. The obligations of Mrs. Fields under this Agreement are
----------
personal to Mrs. Fields, and TCBY is entering into this Agreement in
reliance upon Mrs. Fields' expertise and knowledge in performing Mrs.
Fields' obligations hereunder. For the foregoing reasons, Mrs. Fields
shall not voluntarily or involuntarily, directly or indirectly, sell,
assign, hypothecate, pledge or otherwise transfer or dispose of all or
any portion of its interest in this Agreement to any third party
without the prior written consent of TCBY; provided, however, Mrs.
-------- -------
Fields may assign this Agreement to any of its wholly-owned
subsidiaries having the expertise and resources necessary to perform
the Mrs. Fields' duties hereunder.
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<PAGE>
11.2 Amendment. This Agreement may be amended from time to time only by a
---------
writing executed by Mrs. Fields and TCBY (subject to the prior written
approval of the Board).
11.3 Notices. All notices, requests, demands, and other communications
-------
hereunder by which either party is to be legally bound shall be in
writing and shall be given (i) by Federal Express (or other
established express delivery service which maintains delivery
records), (ii) by hand delivery, (iii) or by facsimile transmission,
to the Parties at their last known addresses. Notices shall be deemed
effective upon dispatch.
11.4 Costs and Attorneys' Fees. In the event either party commences an
-------------------------
arbitral or legal proceeding or mediation to enforce any of the terms
of this Agreement, the prevailing party in such action shall have the
right to recover reasonable attorneys' fees and costs from the other
party, to be fixed by the arbitral panel in the same action.
11.5 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the Parties with respect to the subject matter hereof, and
supersedes all prior agreements and negotiations between the Parties
with respect thereto.
11.6 Governing Law. This Agreement shall be enforced, governed by and
-------------
construed in accordance with the laws of the State of New York without
application of choice of law principles.
11.7 No Waiver. No failure or delay of a party in the exercise of any
---------
right given to such party hereunder or by law shall constitute a
waiver thereof, nor shall any single or partial exercise of any such
right preclude the other or further exercise thereof or any other
right. The waiver by a party of any breach of any provision shall not
be deemed to be a waiver of any subsequent breach thereof, or of any
breach of any other provision hereof.
11.8 Additional Documents. Each party shall, whenever and as often as
--------------------
reasonably requested by the other party, execute or cause to be
executed all such instruments or agreements as may be reasonably
necessary in order to carry out the purpose of this Agreement, and
each party shall do
23
<PAGE>
all other acts reasonably necessary or requested by the other party to
carry out the intent and purpose of this Agreement.
11.9 Ownership of Documents. All documents related to TCBY shall be and
----------------------
remain the sole and exclusive property of TCBY, and Mrs. Fields shall
acquire no rights in or to such documents.
11.10 Rights of Senior Lenders. The Parties acknowledge and agree that
------------------------
the Senior Lenders have financed the Acquisition Transactions in
reliance upon the undertakings set forth in this Agreement, and
further agree as follows:
11.10.1 No termination of this Agreement shall occur under Section
8.2 unless the Senior Lenders shall have been given at least
15 days' prior written notice;
11.10.2 The Senior Lenders shall be entitled (but shall have no
obligation) to cure any payment default by TCBY hereunder
within the cure period provided for in Section 8.2;
11.10.3 No termination of this Agreement shall occur under Section
8.3 without the written consent of Wells Fargo Bank, N.A. as
agent for and on behalf of the Senior Lenders; and
11.10.4 This Agreement shall not be amended or modified, or any right
of TCBY waived, without the written consent of Wells Fargo
Bank, N.A. as agent for and on behalf of the Senior Lenders.
Notwithstanding the foregoing, the Senior Lenders shall have no obligations
hereunder nor shall any term or provision hereof be deemed to impair or
modify any rights of the Senior Lenders under any Senior Loan Documents.
11.11 No Third Party Beneficiary. Nothing set forth in this Agreement is
--------------------------
intended to create in or confer upon any person, firm or entity not a
party to this Agreement any rights under this Agreement, other than
the Senior Lenders.
24
<PAGE>
11.12 No Setoff Rights for Franchise Payments. Notwithstanding anything in
---------------------------------------
the Agreement to the contrary, for valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Mrs. Fields hereby
waives any right Mrs. Fields may have to set off or otherwise apply
any amount payable to TCBY on account of any franchise relationship
between Mrs. Fields and its subsidiaries, as franchisees, and TCBY, as
franchisors, against any amount payable by TCBY to Mrs. Fields in
accordance with the terms and conditions of this Agreement.
11.13 Miscellaneous. The terms, covenants, conditions, and benefits
-------------
contained herein shall be binding upon and inure to the benefit of the
successors, transferees and permitted assigns of the Parties. Time is
expressly made of the essence of each and every provision of this
Agreement. This Agreement shall be interpreted and construed only by
the contents hereof, and there shall be no presumption or standard of
construction in favor of or against either party. The individuals
executing this Agree ment represent and warrant that they have the
power and authority to do so, and to bind the entities for whom they
are executing this Agreement. If any term or provision of this
Agreement or the application of it to any person or circumstance shall
to any extent be held by a court to be invalid or unenforceable, the
remainder of this Agreement or the application of such term or
provision to persons or circumstances other than those to which it is
invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and shall be enforced
to the extent permitted by law.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
MRS. FIELDS' ORIGINAL COOKIES, INC.
By: /s/ LARRY HODGES
------------------------------------
Name: Larry Hodges
------------------------------------
Title: President and CEO
------------------------------------
TCBY HOLDING COMPANY, INC.
25
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By: /s/ MICHAEL WARD
-----------------------------------------
Name: Michael Ward
-----------------------------------------
Title: Vice President
-----------------------------------------
TCBY SYSTEMS, LLC
By: /s/ MICHAEL WARD
-----------------------------------------
Name: Michael Ward
-----------------------------------------
Title: Vice President
-----------------------------------------
26
