TRUST AGREEMENT
THIS AGREEMENT made as of the 18th day of March, 1998 by and among
Richard E. Smith, David Smith, David Stein, each of the State of New York
(Smith, Smith and Stein are hereinafter collectively referred to as the
"Integrated Brands Principal Shareholders"), Michael Serruya and Aaron Serruya,
each of the Province of Ontario, 1082272 Ontario Inc., a corporation
incorporated under the laws of the Province of Ontario ("1082272"), The Serruya
Family Trust, a trust organized under the laws of the Province of Ontario (the
"Trust") (Michael and Aaron Serruya, 1082272 and the Trust are hereinafter
collectively referred to as the "Yogen Fruz Principal Shareholders" and,
together with the Integrated Brands Principal Shareholders, the "Principal
Shareholders"), Yogen Fruz World-Wide Incorporated, a corporation organized
under the laws of the Province of Nova Scotia (the "Company") and The Chase
Manhattan Bank, a bank chartered under the laws of the State of New York
(hereinafter called the "Trustee").
WHEREAS there are 7,464,949 multiple voting shares of the Company (the
"Multiple Voting Shares") outstanding;
AND WHEREAS the Principal Shareholders collectively own 6,486,042
Multiple Voting Shares and options to purchase 348,692 Multiple Voting Shares;
AND WHEREAS the Principal Shareholders and the Company are desirous of
entering into this Agreement to secure the listing of the subordinate voting
shares of the Company (the "Subordinate Voting Shares") on The Toronto Stock
Exchange and to derive the benefits of such listing, and for the purpose of
ensuring that the holders from time to time of the Subordinate Voting Shares
will not be deprived of any rights under applicable take-over bid legislation to
which they would have been entitled in the event of a take-over bid if the
Multiple Voting Shares and the Subordinate Voting Shares were of a single class
of shares;
AND WHEREAS the Principal Shareholders are all a party to a Board
Representation Agreement amended and restated as of January 15, 1998 (the "Board
Representation Agreement");
AND WHEREAS the Principal Shareholders and the Company desire to
constitute the Trustee as an escrow agent in connection with the deposit of the
Multiple Voting Shares owned by the Principal Shareholders and as a trustee for
the holders from time to time of the Subordinate Voting Shares to the intent
that such holders, through the Trustee, will receive the benefits of the
covenants of the Principal Shareholders and the Company contained in this
Agreement;
AND WHEREAS, unless otherwise specifically defined herein, all
capitalized terms shall have the same meanings ascribed to them in the Board
Representation Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
premises and agreements herein contained and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. On the effective date of the Merger (the "Effective Date"), the Principal
Shareholders shall deliver to the Trustee all of the Multiple Voting Shares held
by each of the
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Principal Shareholders, with stock powers, signatures guaranteed, and the
Trustee shall accept delivery of such shares and shall deposit such shares into
the Trust Account (the shares held in the Trust Account are sometimes
hereinafter referred to as the "Escrowed Shares"). In addition, so long as the
Board Representation Agreement is in effect, the Principal Shareholders shall
deliver all Multiple Voting Shares acquired by them after the date hereof, with
stock powers, signatures guaranteed, promptly to the Trustee. Promptly after the
date hereof, each of the Principal Shareholders shall notify the Company of the
obligation hereunder to deliver Multiple Voting Shares to the Trustee received
after the date of this Agreement.
2. The Trustee shall hold the Escrowed Shares for the period commencing as of
the Effective Date and ending on the date on which the Principal Shareholders
cease to have any obligations under the terms of the Board Representation
Agreement (as evidenced by a certificate of the Company to the Trustee), unless
the Escrowed Shares are released earlier pursuant to the terms of this
Agreement. The Board Representation Agreement shall not be amended, to the
extent that such amendment would affect the role of the Trustee under this
Agreement, without the prior written consent of the Trustee.
3. Subject to Section 4, the Principal Shareholders shall not sell any Multiple
Voting Shares, directly or indirectly, pursuant to a take-over bid, as defined
by applicable securities legislation, under circumstances in which securities
legislation would have required the same offer or a follow-up offer to be made
to holders of Subordinate Voting Shares if the sale had been of Subordinate
Voting Shares rather than Multiple Voting Shares, but otherwise on the same
terms. For this purpose, it shall be assumed that the offer that would have
resulted in such sale of Subordinate Voting Shares would have constituted a
take-over bid under applicable securities legislation, regardless of whether
this actually would have been the case.
4. Section 3 shall not apply to prevent a sale by the undersigned of Multiple
Voting Shares pursuant to a take-over bid if:
(a) such sale is made pursuant to an offer to purchase Multiple Voting Shares
made to all holders of Multiple Voting Shares, and an identical offer (in
terms of price per share, percentage of outstanding shares to be taken up
exclusive of shares owned immediately prior to the offer by the offeror, or
associates or affiliates of the offeror, and in all other material
respects) concurrently is made to purchase Subordinate Voting Shares, which
identical offer has no condition attached other than the right not to take
up and pay for shares tendered if no shares are purchased pursuant to the
offer for Multiple Voting Shares; or
(b) there is a concurrent unconditional offer to purchase all of the
Subordinate Voting Shares at a price per share at least as high as the
highest price per share paid pursuant to the take-over bid for the Multiple
Voting Shares,
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and for the purpose of this Section 4 the varying of any term of an offer shall
be deemed to constitute the making of a new offer.
5. If the conditions attaching to the shares of the Company include a provision
that would have the effect of changing the voting rights attaching to shares of
the Company under certain circumstances, through an automatic conversion of
shares of one class into shares of another class or otherwise, and if there is
an offer that would have been a take-over bid if not for the existence of such
provision, such offer shall be deemed to be a "take-over bid" for the purposes
of this Agreement.
6. For greater certainty, any sale which would result in the direct or indirect
acquisition of ownership of Multiple Voting Shares or Subordinate Voting Shares,
or in the direct or indirect acquisition of control or direction over such
shares, shall be construed to be a sale of such Multiple Voting Shares or
Subordinate Voting Shares, as the case may be, for the purposes of Section 3.
7. The Principal Shareholders shall use their best efforts to prevent any person
or company from carrying out a sale (including an indirect sale) described in
Section 3 in respect of any Multiple Voting Shares owned from time to time by
the Principal Shareholders, regardless of whether such person or company is a
party to this Agreement, unless Clause 4(a) or 4(b) applies in respect of such
sale.
8. If any person or company, other than the Principal Shareholders, carries out
a sale (including an indirect sale) described in Section 3 in respect of any
Multiple Voting Shares owned from time to time by the Principal Shareholders,
and if neither Clause 4(a) or 4(b) applies in respect of such sale, the
Principal Shareholders shall not at the time such sale becomes effective or
thereafter do any of the following with respect to any of the Multiple Voting
Shares so sold: (a) dispose of them without the prior written consent of the
Trustee; (b) convert them into Subordinate Voting Shares without the prior
written consent of the Trustee; or (c) exercise any voting rights attaching to
them except in accordance with the written instructions of the Trustee, and the
Principal Shareholders shall comply with such instructions. The Trustee may
attach conditions to any consent the Trustee gives in exercising its rights
hereunder. The Trustee shall exercise such rights in a manner that the Trustee
considers to be: (i) in the best interests of the holders of the Subordinate
Voting Shares, other than the Principal Shareholders and holders who, in the
opinion of the Trustee, participated directly or indirectly in the transaction
that triggered the operation of this Section 8; and (ii) consistent with the
intentions of the Principal Shareholders and the Company in entering into this
Agreement as such intentions are set out in the preamble to this Agreement.
9. (a) Sale to Related Person; Multiple Voting Shares to Remain with Escrow
Agent. The Principal Shareholders shall ensure that any Multiple Voting Shares
disposed of to a Related Person shall be deposited with the Trustee and that
prior to such disposition such Related Person shall have agreed in writing to be
bound by the terms of this Trust Agreement.
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(b) Sale to Non-Related Person; Trustee to Disburse Multiple Voting
Shares. Subject to Sections 3 through 8, upon (i) written request by either an
Integrated Brands Principal Shareholder or a Yogen Fruz Principal Shareholder,
(ii) proof that the Principal Shareholder who seeks to sell his or her Multiple
Voting Shares has received the prior written consent to such sale of the
remaining Principal Shareholders and (iii) affirmation that the remaining
Principal Shareholders have elected not to purchase all of the Voting Securities
the Principal Shareholder seeks to sell to the non-Related Person, the Trustee
shall release such Multiple Voting Shares that the remaining Principal
Shareholders have elected not to purchase to the non-Related Person; provided,
however, that such Multiple Voting Shares are first converted to Subordinate
Voting Shares which Subordinate Voting Shares may then be delivered by the
Trustee.
Notwithstanding the foregoing sentence, (i) the consent of the
Integrated Brands Principal Shareholders shall not be required with respect to
the disposition of Voting Securities by the Yogen Fruz Principal Shareholders to
a non-Related Person if, after giving effect to such disposition, the Yogen Fruz
Principal Shareholders will own, in the aggregate, more than 3,733,332 Voting
Securities and (ii) the consent of the Yogen Fruz Principal Shareholders shall
not be required with respect to the disposition of Voting Securities by the
Integrated Brands Principal Shareholders to a non-Related Person if, after
giving effect to such disposition, the Integrated Brands Principal Shareholders
will own, in the aggregate, more than 1,800,000 Voting Securities (including
Convertible Securities). Nonetheless, the remaining Principal Shareholders shall
maintain their right of first refusal set forth in the Board Representation
Agreement with respect to the dispositions described in the foregoing sentence
and provided that if the Multiple Voting Shares are sold to a non-Related
Person, such shares shall first be converted to Subordinate Voting Shares which
Subordinate Voting Shares may then be delivered by the Trustee.
(c) Enforcement Provisions. Upon receipt by the Trustee of a Breach
Notice (as defined in the Board Representation Agreement), the Trustee shall
transmit a copy of the Breach Notice to the breaching group of Principal
Shareholders. In the event that the breaching group of Principal Shareholders
does not contest the Breach Notice within five (5) Business Days, then the
Trustee shall sell the Voting Securities identified in the Breach Notice in
accordance with the terms of the Board Representation Agreement and in
accordance with applicable securities laws. In the event the breaching group of
Principal Shareholders disputes the Breach Notice, the Trustee shall continue to
hold the shares identified in the Breach Notice until the Trustee receives a
joint written instruction from each group of Principal Shareholders or until it
receives an order from a court of competent jurisdiction specifying the manner
of disposition of such shares.
10. In the event of any dispute or conflict between the Integrated Brands
Principal Shareholders and the Yogen Fruz Principal Shareholders as to the
release and transfer of the Escrowed Shares to either a Related or non-Related
Person; such dispute or conflict shall be determined as set forth in the Board
Representation Agreement. During the pendency of any dispute and until final
adjudication of such dispute, the Trustee shall retain such disputed shares in
its Trust Account.
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11. If and whenever the Trustee has reasonable cause to believe that the
Principal Shareholders or the Company may have breached, or may intend to
breach, any provision of sections 3 through 8, the Trustee shall make reasonable
enquiry to determine whether such a breach has occurred or is intended, and if
the Trustee thereupon determines that such is the case the Trustee shall
forthwith deliver to the Company a certificate stating that the Trustee has made
such determination. The Trustee shall thereupon be entitled to take and, subject
to Section 13, shall take such action as the Trustee considers necessary to
enforce its rights under this Agreement on behalf of the holders of the
Subordinate Voting Shares.
12. Subject to Section 13, if and whenever holders of not less than 10% of the
then outstanding Subordinate Voting Shares determine that the Principal
Shareholders or the Company has breached, or intends to breach, any provision of
sections 3 through 8, such holders may require the Trustee to take any action
set out in this Agreement in connection therewith by delivering to the Trustee a
requisition in writing signed in one or more counterparts by such holders and
setting forth the action to be taken by the Trustee, and upon receipt by the
Trustee of such a requisition the Trustee shall forthwith take such action set
out in this Agreement as is specified in the requisition and any other action
that the Trustee considers necessary to enforce its rights under this Agreement
on behalf of the holders of the Subordinate Voting Shares.
13. The obligation of the Trustee to take any action on behalf of the holders of
the Subordinate Voting Shares shall be conditional upon the Trustee receiving
from the Company or from one or more holders of Subordinate Voting Shares such
funds and indemnity as the Trustee may reasonably require in respect of any
costs or expenses which it may incur in connection with any such action. The
Company shall provide such funds and indemnity to the Trustee if the Trustee has
delivered to the Company the certificate referred to in Section 11.
14. No holder of Subordinate Voting Shares shall have the right, other than
through the Trustee, to institute any action or proceeding or to exercise any
other remedy for the purpose of enforcing any rights arising from this Agreement
unless holders of Subordinate Voting Shares shall have requested in the manner
specified in Section 12 that the Trustee act and shall have provided reasonable
funds and indemnity to the Trustee and the Trustee shall have failed to so act
within 30 days after the provision of such funds and indemnity. In such case any
holder of Subordinate Voting Shares acting on behalf of such holder and all
other holders of Subordinate Voting Shares shall be entitled to take proceedings
in any court of competent jurisdiction such as the Trustee might have taken.
15. The Company shall do all things necessary to facilitate the due performance
of this Agreement including the fulfilment by the Principal Shareholders of
their obligations hereunder.
16. The Trustee may resign and be discharged from all further duties and
liabilities hereunder, subject to this Section 16, after giving 30 days' written
notice to the Company or such shorter notice as the Company may accept as
sufficient. In the event that the office of trustee becomes vacant, the Company
shall forthwith appoint a new trustee which shall be a corporation
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authorized to carry on business of a trust company in Ontario; failing such
appointment, the Principal Shareholders, the Trustee or any holder of
Subordinate Voting Shares may apply to a judge of the Ontario Court of Justice
(General Division) for the appointment of a new trustee. Upon any new
appointment the new trustee shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named herein as the trustee,
but there shall be immediately executed, at the expense of the Company, all such
instruments and may be, in the opinion of counsel to the Company, necessary or
desirable to assure such vesting. Any resignation of the Trustee shall not
become effective until the successor party shall have executed an appropriate
instrument accepting the appointment as the new trustee.
17. The Trustee shall incur no liability in respect of any permitted action
taken or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other paper or document believed by it to be genuine and
duly authorized nor for anything except its own wilful misconduct or gross
negligence. The Trustee shall not be responsible for the validity or sufficiency
of this Trust Agreement. The Trustee shall be under no duty to inquire into or
investigate the validity, accuracy or content of this Agreement. The Trustee
shall have no duty to solicit any payments which may be due it hereunder. In all
questions arising under this Trust Agreement and in the administration thereof,
the Trustee may rely on the advice of counsel and may execute any of its powers
and perform its duties hereunder directly or through agents or attorneys and may
consult with counsel, accountants and other skilled persons to be selected and
retained by it. The Trustee shall not be liable for anything done, omitted or
suffered in good faith by it in accordance with the advice or opinion of such
counsel, accountants or other skilled persons. The Trustee shall not be required
to take any action hereunder involving any expense unless the payment of such
expense shall be made or provided for in a manner satisfactory to it. The
Trustee shall have no responsibility for the performance or interpretation of
the Board Representation Agreement. The Company, the Integrated Brands Principal
Shareholders and the Yogen Fruz Principal Shareholders, in equal proportions,
agree to hold harmless and indemnify the Trustee from and against any liability,
damage, claim, cause of action or costs or expenses of any kind, including
reasonable fees incurred to employ outside counsel or attorneys at their regular
billing rates, as to any person, Integrated Brands Principal Shareholders or
Yogen Fruz Principal Shareholders, arising out of or in connection with the
Trustee's actions performed in accordance with this Trust Agreement, except the
Trustee's own wilful misconduct or gross negligence. Without limiting the
generality of the foregoing, each party hereto warrants its authority in
executing this Trust Agreement. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Trustee be liable for a special, indirect
or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Trustee has been advised of the likelihood
of such loss or damage and regardless of the form of action.
18. The Company shall pay the reasonable fees and expenses of the Trustee in
connection with the performance of the Trustee's obligations hereunder,
including the reasonable fees and disbursements of counsel, but this Section 18
shall not require the Company to pay any fees or expenses in connection with any
action taken by the Trustee pursuant to Section 12 if the
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Trustee has not delivered to the Company the certificate referred to in Section
11 in respect of such action.
19. The Trustee hereby accepts the appointment as trustee for the holders from
time to time of the Subordinate Voting Shares upon the terms and conditions
herein set forth.
20. This Agreement shall not be amended, and no provision thereof shall be
waived, except with the approval of the parties hereto and at least two-thirds
of the votes cast by the holders of Subordinate Voting Shares present or
represented at a meeting duly called for the purpose of considering such
amendment or waiver.
21. The duties and responsibilities of the Trustee hereunder shall be determined
solely by the express provisions of this Agreement and no other or further
duties or responsibilities shall be implied. The Trustee shall not have any
liability under, nor duty to inquire into, the terms and provisions of any
agreement or instructions, other than outlined in this Agreement.
22. Neither this Agreement nor any right or interest hereunder may be assigned
in whole or in part by any party without the prior written consent of the other
parties.
23. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
24. In the event that the Trustee shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands from any party hereto
which, in its opinion, conflict with any of the provisions of this Agreement, it
shall be entitled to refrain from taking any action and its sole obligation
shall be to keep safely all property held in escrow until it shall be directed
otherwise in writing by all of the other parties hereto or by a final order or
judgment of a court of competent jurisdiction.
25. Any notice or other communication made pursuant to or in connection with
this Agreement shall be sufficiently given if it is in writing and delivered or
sent by registered mail, or by facsimile or other form of recorded communication
with return receipt requested:
if to any of the Yogen Fruz
Principal Shareholders: Mr. Michael Serruya
c/o Yogen Fruz World-Wide Inc.
8300 Woodbine Avenue
Markham, Ontario
L3R 9Y7
Facsimile: (905) 479-3275
if to any of the Integrated
Brands Principal Shareholders: Richard E. Smith
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c/o Integrated Brands
4175 Veterans Highway
Ronkonkoma, New York 11779
Facsimile: (516) 283-0593
if to the Company: Yogen Fruz World-Wide Inc.
8300 Woodbine Avenue
Markham, Ontario
L3R 9Y7
Facsimile: (905) 479-3275
Attention: Michael Serruya, President
if to the Trustee: The Chase Manhattan Bank
Corporate Trust Group
450 West 33rd Street
New York, New York 10001
Facsimile: (212) 946-8156
Attention: Escrow Administration,
15th Floor
or to such other address as the party to whom such notice or communication is to
be given shall have last designated to the party giving the same in the manner
specified in this Section.
26. Any such notice or communication shall be deemed to have been given and
received on the day it is so delivered or sent.
27. This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario.
28. This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, legal representatives, successors and
assigns, as applicable.
IN WITNESS WHEREOF, the parties have duly executed this Trust
Agreement as of the date first above written.
"Richard Smith"
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Richard E. Smith
"David Smith"
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David Smith
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"David Stein"
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David Stein
"Michael Serruya"
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Michael Serruya
"Aaron Serruya"
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Aaron Serruya
1082272 ONTARIO INC.
By: "Michael Serruya"
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Name:
Title:
THE SERRUYA FAMILY TRUST
By: "Sam Serruya"
------------------------------------
Name: S. Serruya
By: "Steven Troster"
------------------------------------
Name: Steven F. Troster
YOGEN FRUZ WORLD-WIDE
INCORPORATED
By: "Michael Serruya"
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Name:
Title:
THE CHASE MANHATTAN BANK
By: "John Sciacchitano"
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Name: John Sciacchitano
Title: Vice President