TRANSITION SERVICES AGREEMENT
-----------------------------
This Transition Services Agreement (this "Agreement") is entered into
as of December 23, 2005, by and between Integrated Brands, Inc. a New Jersey
corporation ("IB"), CoolBrands International Inc., a Nova Scotia corporation
("CB" and together with IB the "Sellers") and International Franchise Corp., an
Ontario corporation ("Buyer"). Capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Purchase Agreement (as
hereinafter defined).
WHEREAS, reference is made to that certain Stock Purchase and Sale
Agreement, dated as of the date hereof, by and among Buyer and Sellers (the
"Purchase Agreement");
WHEREAS, subject to the terms and conditions set forth in the Purchase
Agreement, Sellers are selling, and Buyer is acquiring, the Included Franchise
Business;
WHEREAS, the parties seek an orderly transition of the operations of
the Included Franchise Business following the consummation of the transactions
contemplated by the Purchase Agreement; and
WHEREAS, in connection with and as a condition precedent to the closing
of the transactions contemplated by the Purchase Agreement, Sellers have agreed
to provide to Buyer certain employees as set forth on Exhibit A (the "Loanout
Employees") who shall provide certain transitional services as further described
herein for so long as such Loanout Employees remain employed by Sellers.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
1. Services to be Performed.
(a) Provision of Employees. For a period of one (1) year
following the Closing (the "Transition Period"), Sellers shall use reasonable
commercial efforts to make available to Buyer the Loanout Employees for purposes
of providing the services to Buyer described on Exhibit A on a basis consistent
with how such services have been provided by the Loanout Employees to the
Included Franchise Business prior to the Closing, in accordance with and subject
to the terms and conditions of this Agreement, provided, however, that (i)
Sellers shall have no liability to the Buyer with respect to the services
provided by such Loanout Employees during the Transition Period, except as
expressly herein provided, and (ii) in the event that any such Loanout Employee
elects to terminate his or her employment with Sellers, dies or is disabled,
Sellers' obligation to provide the services of such particular Loanout Employee
shall cease upon such termination of employment, death or disability.
Notwithstanding the foregoing, Sellers agree that they will not voluntarily
terminate the employment of any such Loanout Employee without cause, during the
Transition Period without the consent of Buyer. For purposes of this Agreement,
such services as provided by the Loanout Employees shall be referred to as the
"Services".
(b) Extension of Term. The term of this Agreement may be
extended upon the mutual consent of the parties hereto.
(c) The Sellers and Buyer acknowledge and agree that the
Loanout Employees are not employees of Buyer and shall remain employees of
Sellers while employed thereby. The Sellers shall bear sole responsibility for
all obligations to, and liabilities with respect to the Loanout Employees
related to their status as employees of Sellers, including (without limitation),
the payment of compensation to the Loanout Employees; the provision of all
employment-related benefits to the Loanout Employees; the withholding of
federal, state and local income taxes, social security and Medicare
contributions and any other withholding associated with benefits provided to the
Loanout Employees ("Employee Deductions"); the contribution of Sellers' share of
social security and Medicare contributions and any other contributions
associated with benefits provided to the Loanout Employees ("Employer
Contributions"); the payment of Employee Deductions and Employer Contributions
in accordance with applicable laws and regulations to the governmental
authorities or other agencies designated to receive same; the payment of any
severance or other compensation to which any Loanout Employees may be entitled
under any applicable law, regulation or custom; and any Employment Claim (as
defined herein) brought by any Loanout Employee; in each case in accordance with
Sellers' employment policies and procedures as in effect from time to time.
"Employment Claim" shall refer to: any claims relating to the terms and
conditions of a Loanout Employee's employment with Sellers and/or the
termination of that employment; any claims arising out of any actions of Sellers
for discrimination on the basis of age, alienage, citizenship, creed,
disability, gender, handicap, marital status, national origin, race, religion,
sex, or sexual orientation; any claims arising under the WARN Act, Title VII of
the Civil Rights Act of 1964, the Equal Pay Act, the Rehabilitation Act, the
Americans with Disabilities Act, the National Labor Relations Act, the Civil
Rights Act of 1991, Sections 1981 through 1988 of Title 42 of the United States
Code, the Immigration Reform Control Act, the Fair Labor Standards Act, the
Occupational Safety and Health Act, the Family and Medical Leave Act, the
Employees Retirement Income Security Act of 1974, the New York State Labor Law,
the New York Minimum Wage and Hour Law, the New York Equal Pay Law, the New York
State Human Rights Law, and the New York City Human Rights Law (in each case as
they have been amended); any other claims arising out of any actions of Sellers
under any other federal, state or local statutes, ordinances, common law, rules,
regulations, decisions or orders relating to employment; or any claims arising
out of any actions of Sellers under any public policy, contract (whether express
written, oral or implied) or tort; and any claims for costs, fees or other
expenses (including, but not limited to, attorney's fees). Notwithstanding the
foregoing, in no event shall Sellers be liable for any claims of the Loanout
Employees to the extent arising out of or relating to any actions taken by or on
behalf of Buyer.
2. Standard of Care. Sellers shall provide the Services on a basis
consistent with the provision of Services which the Loanout Employees have been
providing to the Included Franchise Business on the date hereof. The parties
will consult with each other in good faith, as required, with respect to the
furnishing of the Services.
2
3. Cost and Payment.
(a) Buyer shall pay for the Services provided by Sellers to
Buyer in the amounts and at the rates set forth on Exhibit A hereto. In addition
to such amounts, Buyer shall reimburse Sellers for any reasonable third-party
expenses incurred by Sellers in rendering Services hereunder, provided that any
non-ordinary course third-party expenses are approved by the Buyer prior to such
expense being incurred.
(b) Sellers shall submit monthly invoices to Buyer for
Services rendered hereunder, which invoices shall be payable within thirty (30)
days of receipt of such invoices.
(c) Buyer shall have the right to notify Sellers of any
dispute with respect to any monthly invoice solely within ten days of receipt
thereof; it being understood that Buyer may not dispute the cost to Sellers of
the Loanout Employees as set forth on Exhibit A, which shall be due and payable
within such period. After such date the invoice shall be deemed conclusive and
final. If Buyer disputes any amount set forth on such invoice (other than the
cost of the Loanout Employees), the parties shall attempt to negotiate in good
faith to resolve any such dispute for a period of ten business days. If such
dispute cannot be resolved and if requested by either party, such dispute shall
be submitted to BDO Seidman or another party agreed upon by the parties for
resolution, whose decision shall be final and binding on the parties hereto.
4. Relationship of the Parties. The parties hereto are independent
contractors, and neither party nor its employees or representatives will be
deemed to be employees or representatives of the other for any purpose or under
any circumstances. No partnership, joint venture, alliance, fiduciary, agency or
other relationship, except that of independent contractors, is created hereby,
either expressly or by implication.
5. Warranty Disclaimer; Limitation of Liability. Sellers make no
representation or warranty, express or implied, concerning the Services, and
Sellers expressly disclaim any applicable implied warranty of merchantability or
fitness for a particular purpose with respect thereto. Except in the case of
Sellers' willful misconduct, bad faith or willful failure to perform its
obligations hereunder, the amount of any damages that may be due Buyer or its
Affiliates hereunder shall be limited to the amount actually paid by Buyer to
Sellers under this Agreement, regardless of whether such damages arise or result
from Sellers' breach of this Agreement, or negligence, gross negligence or any
other cause. Sellers shall in no event be liable to Buyer or its Affiliates for
any other damages, including, without limitation, consequential, incidental,
special, punitive or indirect damages in connection with Sellers' performance or
nonperformance of the Services.
6. Indemnification. Buyer hereby agrees to defend and indemnify Sellers
and the Loanout Employees and to hold them harmless from any and all claims,
liabilities, damages or expenses (including reasonable attorneys' fees) of third
parties arising out of any act or omission to act by Sellers or the Loanout
Employees with respect to performance of Services under this Agreement, except
in the case of the gross negligence or willful misconduct of the Loanout
Employees.
3
7. Termination. This Agreement may be terminated at any time by Buyer
upon 10 days prior written notice to Sellers. Further, Buyer may terminate any
particular Service (for example, the Services in respect of either the Canadian
or U.S. franchise operations) upon 10 days prior written notice to Sellers.
Either party may terminate this Agreement on five days prior written notice to
the other in the event of a material breach of this Agreement by the other
party. Notwithstanding the above, the Buyer shall have the right to terminate
the services performed in respect of Canadian franchise operations only and the
Seller shall continue to provide the Loanout Employees and Other Services in
respect of U.S. franchise operations, for the remaining term hereof.
8. Compliance with Laws. Each party will, with respect to its
obligations and performance hereunder, comply with all applicable requirements
of federal, state, local and foreign laws, rules and regulations.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be deemed to be a
contract made under, and shall be construed in accordance with, the laws of the
Province of Ontario, without giving effect to conflict of laws principles
thereof.
(b) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assignable or transferable by any
party without the prior written consent of the other parties hereto, and any
such unauthorized assignment or transfer will be void; provided, however, that
Sellers may assign or otherwise transfer its rights, interests or obligations
hereunder to any Affiliate of Sellers without the prior written consent of
Buyer. This Agreement and all the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(c) Entire Agreement; Modification; Waivers. This Agreement
(including Exhibit A hereto) and the Purchase Agreement constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiation, commitments and writings with respect
to the Services. This Agreement (including Exhibit A hereto) may not be altered,
modified or amended except by a written instrument signed by each of the parties
hereto.
(d) Severability. The provisions of this Agreement are
severable, and in the event that any one or more provisions are deemed illegal
or unenforceable the remaining provisions shall remain in full force and effect
unless the deletion of such provision shall cause this Agreement to become
materially adverse to either party, in which event the parties shall use
reasonable commercial efforts to arrive at an accommodation that best preserves
for the parties the benefits and obligations of the offending provision.
(e) Title and Headings. Titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
4
(f) Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) No Third-Party Beneficiaries. Nothing in this Agreement,
expressed or implied, is intended to or shall (a) confer on any person other
than the parties hereto and their respective successors or assigns any rights
(including third-party beneficiary rights), remedies, obligations or liabilities
under or by reason of this Agreement, or (b) constitute the parties hereto as
partners or as participants in a joint venture. This Agreement shall not provide
any third parties with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to the terms
of this Agreement. No third party shall have any right under or granted by this
Agreement, to bring any suit at law or equity for any matter governed by or
subject to the provisions of this Agreement.
(h) Taxes. Buyer shall be responsible for all sales, use and
other taxes, levies and charges imposed by applicable taxing authorities on the
supply of the Services to Buyer or attributable to any payment hereunder (other
than income taxes).
(i) Confidentiality. Each party agrees that any information
with respect to the other and its operations that it receives in connection with
the provision of Services is confidential and proprietary to the other. A party
and its Affiliates will not use (except in the performance of this Agreement) or
disclose any such information to any third party without the prior written
consent of the other party.
(j) Force Majeure. Sellers shall not be liable to Buyer or its
Affiliates by reason of the failure of Sellers to provide any Service as a
result of injunction, court order, strike, riot, act of terrorism, riot,
invasion, fire, flood, explosion, breakdown, acts of God or the public enemy,
war or insurrection, or any other cause beyond the reasonable control of
Sellers.
[SIGNATURE PAGE FOLLOWS]
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized representatives
as of the date first set forth above.
SELLERS:
COOLBRANDS INTERNATIONAL INC.
By: ("Signed" David J. Stein)
-------------------------------
Name: David J. Stein
Title: President
INTEGRATED BRANDS INC.:
By: ("Signed" Gary P. Stevens)
-------------------------------
Name: Gary P. Stevens
Title: President
BUYER:
INTERNATIONAL FRANCHISE CORP.
By: ("Signed" Aaron Serruya)
-------------------------------
Name: Aaron Serruya
Title: President
Signature Page to Transition Services Agreement
Exhibit A
LOANOUT EMPLOYEES AND SERVICES
Services - All accounting processes and procedures provided by the Loanout
Employees, and such purchasing, distribution and franchisee services provided by
[REDACTED], in each case in respect of the Included Franchise Business
consistent with past practice.
Loanout Employees- Loanout Employees shall mean the following persons (schedule
also lists the employees' estimate of the percentage of his or her work hours
spent on the Included Franchise Business):
- ------------------------- -----------------
% of time spent
on
Employee Franchise
- ------------------------- -----------------
[REDACTED] [REDACTED]
Cost of Services - the cost of services provided by the Loanout Employees shall
be $22,500 per month, which is the fully loaded cost to the Sellers of such
persons to the Included Franchise Business taking into account the percentages
expressed above. If Buyer requests a reduction in the scope of Services to be
provided hereunder, Sellers agree to use their reasonable best efforts to
reallocate responsibilities among the Loanout Employees so as to reduce the
aggregate cost of services provided. To the extent that the parties mutually
agree to provide additional services or to use the services of any employees
other than the Loanout Employees, the parties will negotiate in good faith a
reasonable fee for the provision of such additional services.