FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission File Number 0-13544
BEN & JERRY'S HOMEMADE, INC.
(Exact name of registrant as specified in its charter)
Vermont 03-0267543
(State of incorporation) (I.R.S. Employer Identification No.)
30 Community Drive
South Burlington, Vermont 05403-6828
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 802-651-9600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.033 par value per share
Class B Common Stock, $.033 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No__
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (225.405) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Yes x No
The aggregate market value of the Company's Class A and Class B Common
Stock held by non-affiliates was approximately $71,777,992 and $3,009,916
respectively, at March 7, 1997.
At March 7, 1997, 6,310,410 shares of the Company's Class A Common
Stock and 893,308 shares of the Company's Class B Common Stock were
outstanding.
Page 1 of 94 pages. Exhibit Index appears on page 40.
BEN & JERRY'S HOMEMADE, INC.
1996 FORM 10-K ANNUAL REPORT
Table of Contents
Page
----
Item 1. Business...................................................1
Item 2. Properties................................................15
Item 3. Legal Proceedings.........................................16
Item 4. Submission of Matters to Vote of Security Holders.........16
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................17
Item 6. Selected Financial Data...................................18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................19
Item 8. Financial Statements and Supplementary Data...............27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................27
Item 10. Directors and Executive Officers of the Company...........28
Item 11. Executive Compensation....................................31
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................33
Item 13. Certain Relationships and Related Transactions............35
Item 14. Exhibits, Financial Statements, and Financial
Statement Schedules, and Reports on Form 8-K..............40
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Item 1. Business
Introduction
Ben & Jerry's Homemade, Inc. ("Ben & Jerry's" or the "Company") is a leading
manufacturer of super premium ice cream, frozen yogurt and sorbet in unique and
regular flavors. The Company also manufactures ice cream novelty products,
including Peace Pops and Brownie Bars. The Company uses natural ingredients in
its products and believes that its gourmet-quality, "down home", and the "made
in Vermont" image is a key element of its marketing strategy.
The Company's products are currently distributed throughout the United States
primarily through independent distributors. However, the Company's marketing
resources are concentrated on certain target markets including New England, New
York, the Mid-Atlantic region, Florida, Texas, the West Coast and selected other
major markets, including the metropolitan Chicago and Denver areas. In 1996,
approximately 77% of the sales of the Company's packaged pints were attributable
to these target markets. The Company's products are also available in the United
Kingdom, France, Israel, Canada and the Netherlands.
The Company currently markets 39 flavors in packaged pints, for sale primarily
in supermarkets, grocery stores, convenience stores and other retail food
outlets and over 60 flavors of its ice cream, frozen yogurt and sorbet in bulk,
primarily to restaurants and Ben & Jerry's franchised "scoop shops."
History and Philosophy of the Company
The Company began active operations in May 1978, when Ben Cohen, now the
Company's Chairperson, and Jerry Greenfield, now the Company's Vice Chairperson,
opened a retail store in a renovated gas station in Burlington, Vermont. The
store featured homemade ice cream made in an antique rock salt ice cream
freezer. That ice cream parlor continues to make its own ice cream in a larger
location in Burlington.
The Company believes that, despite its growth, it has maintained a reputation
for producing gourmet-quality, natural ice cream and for sponsoring or creating
light-hearted promotions that foster an image as an independent socially
conscious Vermont company.
The Board of Directors of the Company has formalized its basic business
philosophy by adopting a three part "mission statement" for Ben & Jerry's. The
statement includes a "product mission," to "make, distribute and sell the finest
quality all-natural ice cream"; an "economic mission," to
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"operate the Company on a sound financial basis...increasing value for our
shareholders and creating career opportunities and financial rewards for our
employees"; and a "social mission," to "operate the Company...[to] improve the
quality of life of our employees and a broad community: local, national and
international." Since 1988 the Company's Annual Report to Stockholders has
contained a "social audit" on the Company's performance during the year.
The Company makes cash contributions equal to 7 1/2% of its pretax profits to
philanthropy through The Ben & Jerry's Foundation (the "Foundation"), Community
Action Teams, which are employee led groups from each of its five Vermont sites,
and through corporate grants. In 1996, the 7 1/2% amounted to $513,981. The
amount of the Company's cash contribution is subject to review by the Board of
Directors from time to time in light of the Company's cash needs, its operating
results, existing conditions in the industry and other factors deemed relevant
by the Board. See "The Ben & Jerry's Foundation."
Ben & Jerry's maintains a special tie to the Vermont community in which it had
its origins. The Company donates product to public events and community
celebrations in the Vermont area. Each county in Vermont is covered by a Ben &
Jerry's Community Action Team. Also, the Company, acting as an agent, transfers
funds to charitable organizations throughout Vermont derived from the sale of
product to participating Vermont retail grocers.
Ben & Jerry's has also taken actions intended to strengthen the Company's
ability to remain an independent, Vermont-based company. Ben & Jerry's believes
these actions are in the best interests of the Company, its stockholders, its
employees and the Vermont community. See "Anti-Takeover Effects of Class B
Common Stock and Preferred Stock".
In 1991 the Company decided to pay not less than a certain minimum price for its
dairy ingredients, other than yogurt cultures, to bring the price up to an
amount based upon the average price for dairy products in certain prior periods.
This commitment is part of an effort to foster the supply of Vermont dairy
products and thereby also seek to maintain the long-term viability of the
Company's source of supply of its principal dairy ingredients, against the
marketplace background of a continuing trend of decreasing family dairy farms in
Vermont. In early 1994 the Company's agreement with the St. Albans Cooperative
Creamery was amended to include, as a condition for payment of the premium, an
assurance from the St. Albans Cooperative Creamery that the milk and cream
purchased by the Company will not come from cows that have been treated with
rBST, a synthetic growth hormone approved by the FDA. The
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Company's premium policy has some adverse impact on its gross margin.
In 1992, the Company became a signatory to the CERES Principals adopted by the
Community for Environmentally Responsible Economies. The CERES Principles
establish an environmental ethic with criteria by which investors and others can
assess the environmental performance of companies. Ben & Jerry's is also a
founding member of Businesses for Social Responsibility, Inc. ("BSR"), an
organization in Washington, DC which promotes a concept of business
profitability that includes environmental responsibility and social equity. Ben
& Jerry's is also a member of the Vermont Business for Social Responsibility.
The Super Premium Ice Cream, Frozen Yogurt and Sorbet Market
The packaged ice cream industry includes economy, regular, premium and super
premium products. Super premium ice cream is generally characterized by a
greater richness and density than other kinds of ice cream.
This higher quality ice cream generally costs more than other kinds and is
usually marketed by emphasizing quality, flavor selection, texture and brand
image. Other types of ice cream are largely marketed on the basis of price.
Super premium ice cream and super premium frozen yogurt and, more recently,
super premium sorbet have become an important part of the frozen dessert
industry. In response to the demand for lower fat, lower cholesterol products,
the Company introduced its own super premium low fat frozen yogurt in 1992, and
non-fat frozen yogurt in 1995. In February 1996, the Company introduced six(6)
lactose-free and cholesterol-free sorbet flavors, five (5) flavors are fat free
and one(1) flavor is low fat. In 1997 Ben & Jerry's will continue to produce ice
cream, sorbet, frozen yogurt, and a new line of low fat ice cream which will be
introduced in April 1997.
The Company believes, based on information provided by Information Resources,
Inc., a software and marketing information services company ("IRI"), that total
annual U.S. sales in supermarkets at retail prices (defined as grocery stores
with annual revenues of at least $2 million) of super premium ice cream,
frozen yogurt, and sorbet were in excess of $445 million in 1996, compared with
about $444 million in 1995. All of the information in this paragraph is taken
from IRI data.
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Ben & Jerry's Super Premium Ice Cream, Frozen Yogurt and Sorbet
Ben & Jerry's ice cream has a high level of butterfat and low level of air
incorporation during the freezing process. The approximate fat content is 15%
(excluding add-ins). The approximate overrun (a measurement of the volume of
air) is 20%. These physical attributes give the ice cream the rich taste and
dense, creamy texture that characterizes super premium ice creams. The fat
content of the ice cream is derived primarily from the butterfat in the cream,
and secondarily from egg yolks. The mix used to produce all the Company's ice
creams follows the original formula developed by Ben Cohen and Jerry Greenfield.
It consists of cream, cane or beet sugar, non-fat milk solids, egg yolks, and
natural stabilizers.
Ben & Jerry's low fat frozen yogurt is a high quality frozen yogurt with
approximately 2% fat (excluding add-ins) and approximately 20% overrun. The fat
content of frozen yogurt comes from the cream used in the base mix. The
Company's non-fat frozen yogurt has approximately 0% fat and approximately 40%
overrun. All our frozen yogurt products are sweetened with pure cane or beet
sugar and corn syrup. In 1996, the Company produced ten(10)frozen yogurts.
Six(6)are labeled non-fat, two(2) are labeled low fat, and two(2) are not low
fat because of the add-ins. The Company purchases cultured yogurt from yogurt
manufacturers who use Vermont dairy ingredients. Cultured yogurt is used in the
manufacturing of our frozen yogurt dessert products.
Ben & Jerry's fruit sorbets are a fat free frozen dessert with an overrun of
approximately 20%. The chocolate sorbet is a low fat product with approximately
2% fat (from the cocoa and chocolate liquor). All sorbets are sweetened with
pure cane or beet sugar and corn syrup. The fruits used by the Company are both
organically and conventionally grown. The water used to manufacture sorbet is
Vermont Pure(TM) Spring Water.
All Ben & Jerry's frozen desserts are made of the finest quality ingredients.
Our ingredients contain no preservatives or artificial components (except the
flavoring component in one of the candies that we purchase). The dairy products
in Ben & Jerry's frozen desserts are readily available from dairy cooperatives
in Vermont. The various flavorings, add-ins, and variegates are readily
available from multiple suppliers throughout the country.
All the Company's plants include mix batching facilities which allow Ben &
Jerry's to manufacture its own dessert mixes. Ben & Jerry's also has designed
and modified special machinery to mix large chunks of cookies, candies, fruits
and nuts into our frozen desserts. The Company has also designed proprietary
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processes for swirling variegates (dessert sauces) into our finished products.
The Company also makes ice cream novelty products, including stick pops, which
Ben & Jerry's markets as Peace Pops(TM) and Brownie Bars (an ice cream sandwich
type novelty).
Ben & Jerry's license agreements include a license from the estate of Jerry
Garcia formerly of the Grateful Dead rock group with respect to the Company's
Cherry Garcia(R) flavor; political cartoonist Garry Trudeau and Universal Press
Syndicate with respect to the Company's Doonesberry(TM) flavor of the new sorbet
line of products; Wavy Gravy for the flavor Wavy Gravy; and with Phish
Merchandising, Inc. with respect to Phish Food(TM), a new flavor launched in
February of 1997.
Manufacturing
The Company manufactures Ben & Jerry's super premium ice cream and frozen yogurt
pints at its Waterbury, Vermont plant. The Company generally operates its
Waterbury plant 2 shifts a day, six days a week. The Company manufactured
approximately 4.4 million gallons at this facility in 1996.
The Company's Springfield, Vermont plant is used for the production of ice cream
novelties, bulk ice cream, frozen yogurt and sorbet, and packaged pints and
quarts. In 1996 the plant produced approximately 1.1 million dozen novelties,
2.6 million gallons of bulk ice cream and frozen yogurt, packaged pints and
quarts. In 1996, the Company generally operated the Springfield plant five to
six days per week, with one or two production shifts depending on the season.
In March 1995, the Company's new manufacturing plant in St. Albans started
manufacturing ice cream on one line using a temporary nitrogen tunnel hardening
system. A second line began operation in December 1995. In 1996, the plant
produced 7.8 million gallons of packaged pints. The Company added a third
manufacturing line at the plant during 1996. This third line could be converted
to a higher production rate, if needed, and once converted, the maximum
projected capacity at the St. Albans plant would be approximately 17 million
gallons. The Company started using the third line in the Fall of 1996, however,
the Company does not expect to utilize all three lines in the plant at the same
time in order to meet demand in 1997. Currently the St. Albans plant is
producing ice cream, frozen yogurt and sorbet in packaged pints.
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In order to meet demand for its pints from 1989 to 1995, the Company had a
manufacturing and warehouse agreement with Edy's Grand Ice Cream ("Edy's"), a
subsidiary of Dreyer's Grand Ice Cream, Inc. ("Dreyer's"). Under this agreement,
Edy's manufactured certain pint ice cream and frozen yogurt flavors at its plant
in Fort Wayne, Indiana with specifications and quality control provided by Ben &
Jerry's and using Vermont dairy products. This agreement expired in September
1995. Approximately 1.9 million gallons, or about 16% of the aggregate number of
packaged pints manufactured in 1995, were manufactured under this arrangement,
down from approximately 40% in 1994. Commencing in October of 1995 and to date,
all Ben & Jerry's products are manufactured by the Company in the state of
Vermont.
Markets and Customers
The Company markets packaged pints, quarts and novelty products primarily
through supermarkets, grocery stores, convenience stores and other retail food
outlets. The Company markets ice cream, frozen yogurt and sorbet in 2 1/2-gallon
bulk containers primarily through franchised (and Company-owned) Ben & Jerry's
"scoop shops" and through restaurants.
Ben & Jerry's products are distributed primarily through Dreyer's and other
independent regional ice cream distributors. With some exceptions, only one
distributor is appointed for each territory for supermarkets. In most areas,
sub-distributors are used. Company trucks also distribute some of the products
that are sold in Vermont and upstate New York.
Ben & Jerry's has a distribution agreement with Dreyer's under which Dreyer's
acts as the master distributor (with exclusivity, in general, for sales to
supermarkets and similar accounts) of Ben & Jerry's products in most of the
Company's markets outside of New England, upstate New York, and Pennsylvania.
Dreyer's markets its own premium ice cream under both the Dreyer's and Edy's
brand names, as well as, premium plus ice cream under the brand names of
Starbucks (a product produced under a joint venture between Starbucks and
Dreyer's Grand Ice Cream) and Portofino, and certain frozen dessert products of
other companies. Dreyer's does not produce or market any other super premium ice
cream, or frozen yogurt(other than novelties), and in the event that Dreyer's
were to distribute another super premium ice cream, or frozen yogurt in any part
of its territory, Dreyer's would lose the contractual exclusivity granted to it
as a Ben & Jerry's distributor under the agreement. The agreement also contains
certain additional provisions specific to the greater metropolitan New York
market, including special limitations on the ability of either party to
terminate the agreement with respect to the New York market. In early 1994, the
agreement was amended to provide for the Company to perform the sub-distribution
of Ben & Jerry's products to convenience stores
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and "mom and pops" in the New York City area. In October 1995, exclusive
distribution rights for the New York City area were transferred back to
Dreyer's. Net sales to Dreyer's (including sales where the Company acted as a
subdistributor in the New York City area) accounted for approximately 55% and
47% of the Company's net sales for 1996 and 1995, respectively.
In the event that Dreyer's were to terminate the agreement without cause, the
agreement provides for a twelve month notice period (subject to reduction by the
Company) and specified minimum purchase requirements by Dreyer's during the
notice period. In addition, the agreement provides for termination by Ben &
Jerry's without cause upon twelve months' notice and for termination by Ben &
Jerry's or Dreyer's on short notice for cause. The agreement also contains
certain provisions for termination by one party (at its election) upon a change
in control (as defined) of the other, in which event the terminated party
experiencing the change in control has a minimum purchase or sale obligation, as
the case may be, for a specified additional period and also must make a $20
million termination payment to the other party. In addition, the agreement
states that in the event that Dreyer's, directly or indirectly introduces,
acquires, or distributes in the United States another super premium product (as
defined), the Company may terminate the agreement and Dreyer's must make a $20
million termination payment to the Company. The common stock of Dreyer's is
publicly traded. In April 1994, Nestle USA, Inc. (a U.S. subsidiary of a large
international conglomerate) acquired a significant minority equity position in
Dreyer's.
(See also "Competition")
The relationship between the Company and Dreyer's commenced in 1987, and the
distribution agreement has been amended several times since then. The Company
and Dreyer's regularly engage in discussions regarding ways to improve their
long-term relationship to their mutual benefit, and it is contemplated that the
parties may revise and restate the distribution agreement. Any changes which are
then or thereafter adopted may have certain beneficial or adverse consequences,
the effects of which cannot be foreseen by the Company.
While the Company believes that its relationships with Dreyer's and its other
distributors generally have been satisfactory and that these relationships have
been instrumental in the Company's growth, the Company has at times experienced
difficulties in maintaining these relationships. Available distribution
alternatives are limited. Accordingly, there can be no assurance that such
difficulties, which may be related to actions by the Company's competitors or by
one or more of the distributors themselves (or their controlling persons), will
not have a material adverse effect on the Company's business. Loss of one or
more of the Company's principal distributors or
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termination of one or more of the related distribution agreements could have a
material adverse effect on the Company's business.
Marketing
Ben & Jerry's marketing strategy is characterized by its focus on innovative,
non-traditional methods of promotion. The Company emphasizes the high quality,
natural ingredients in its products, and the "down home Vermont" image of its
products in its packaging, sales materials and promotional campaigns.
Significant prominence has been given to Ben Cohen and Jerry Greenfield, the
founders of the Company, as "two real guys" still actively involved in the
Company. Pictures of Ben and Jerry appear on packaging, and they make personal
appearances on TV, radio and at select marketing events.
As the Company has become a significant force in the super premium frozen
dessert category, its marketing emphasis has shifted from portraying itself as
the small "underdog" firm to a Company-wide focus on community involvement and
its status as a socially responsible business. In the past, the Company has
focused its marketing efforts on communicating newsworthy, Company-wide unique
business approaches that tend to generate unpaid newspaper, magazine, radio and
TV news coverage.
During 1996, the Company created and produced Ben & Jerry's "One World, One
Heart" Festivals in Vermont and Minneapolis. The Company also sponsors the Ben &
Jerry's Newport Folk Festival in Newport, Rhode Island. These events, attended
by over 50,000 people in outdoor public areas generated lots of goodwill, ice
cream sampling and social activism, while building customer loyalty and support
for the Company's products in the future.
Ben & Jerry's continues to conduct guided tours of its facility in Waterbury,
Vermont. In 1996, approximately 300,000 people visited the plant, making it (the
Company believes) the single most popular tourist attraction in the State.
Franchise shops are an integral part of the Company's marketing efforts and
their activity on the local level contributes to the Company's three part
mission. A franchise is required to spend at least 4% of its gross sales on
community/self directed marketing, sampling, advertising and participation in
certain Ben & Jerry's selected promotions. The Company introduced its new line
of six innovative sorbet flavors made with all natural ingredients and Vermont
Pure(TM) Spring Water by offering consumers 1 million free samples during March
and April 1996. Samples were also offered at all franchised scoop shops and
given away during sampling sessions scheduled in target markets throughout the
country.
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Franchise Program
As of December 28, 1996, there were 137 North American franchise scoop shops
compared to 132 scoop shops and satellites for the year ended December 30, 1995.
These numbers do not include 3 Company owned stores in 1996. The franchise
scoop shops are located in 24 states. The Company also has 11 franchise scoop
shops in Israel and 3 in the Netherlands.
During 1996, the Company opened 21 additional franchise scoop shops and
satellites including one Partnershop, and closed 16 scoop shops and satellites
including 2 Partnershops. These scoop shops have been opened under existing
Development Agreements, and Single Store Agreements. Development Agreements
require a franchisee to develop a particular number of units annually according
to the terms of their Agreement. Partnershops are arrangements that permit
non-profit organizations to own scoop shops which serve as an employment
resource and potentially a source of revenue for the non-profit groups. The
Company waives the normal franchise fee of $25,000 in addition to providing
expertise in the start-up and operation of the Partnershops.
The Company has assorted franchise concepts which include traditional shops in a
variety of settings as well as Partnershops. Franchise Agreements generally have
initial terms of five to ten years. Ben & Jerry's Franchise scoop shops sell Ben
& Jerry's proprietary and non-proprietary approved items for resale to the
public and include Ben & Jerry's ice cream, frozen yogurt, sorbet, private label
hot fudge, baked goods and toppings. The menu items also include coffee
beverages, fruit smoothies, ice cream cakes, novelties and gift items.
International
The Company regularly investigates the possibilities of entering new markets. In
March 1994, the Company started shipping its products to smaller specialty
stores in the United Kingdom. Ben & Jerry's ice cream products are now
distributed nationally in the United Kingdom, and are available in parts of
Ireland, France, Canada and the Netherlands.
In 1990, the Company entered into a joint venture agreement with certain
individuals in the former Soviet Union to establish a Ben & Jerry's
manufacturing facility and franchised "scoop shops" in the Russian state of
Karelia. The Company's goal was to provide a model of a small scale private
enterprise in the former Soviet Union and to foster international
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cooperation and global understanding. In February of 1997 Ben & Jerry's began
the process of transferring all of its stock in Ben & Jerry's (Iceverk), the ice
cream business it started, to the city of Petrosovosk. This enabled the business
to be 100% owned by the local community in the city of Petrosovosk within the
state of Karelia, the Sister State of Vermont. All rights to use of Ben &
Jerry's trademarks in the former Soviet Union will be terminated as of the date
of the stock transfer. At the date of this filing this transfer was not
complete.
In 1992, the Company repurchased the Canadian rights to Ben & Jerry's products
which it had previously licensed in 1987. In 1987, the Company granted an
exclusive license to manufacture and sell Ben & Jerry's ice cream in Israel.
Competition
The super premium ice cream, frozen yogurt and sorbet business is highly
competitive, and with the distinction between the super premium category and the
"adjoining" premium/premium plus category less marked than in the past. The
Company's principal competitor is The Haagen-Dazs Company, Inc. Other
significant competitors are Dannon, Columbo, and Healthy Choice. Haagen-Dazs, an
industry leader in the super premium ice cream market, is owned by The Pillsbury
Company, which in turn is owned by Grand Metropolitan PLC, a British food and
liquor conglomerate. Grand Metropolitan is a large, diversified company with
resources significantly greater than the Company's, and Haagen-Dazs has a
significant share of the markets which the Company has entered in recent years.
Haagen-Dazs has also entered substantially more foreign markets than the Company
(including certain markets in Europe and the Pacific Rim). Haagen-Dazs and
certain other competitors also market flavors using pieces of cookies and
candies as ingredients.
In the ice cream novelty segment, the Company competes with several well-known
brands, including Haagen-Dazs and Dove Bars, manufactured by a division of Mars,
Inc. Both of these other brands have achieved far larger shares of the novelty
market than the Company.
During 1996, the Company noted that the premium category again experienced
increased promotional activity driven by the national competition between
Dreyer's Grand Ice Cream, Inc., the Company's principal distributor, and
Breyer's Ice Cream (owned by Unilever, a large international food company). In
accordance with Dreyer's strategic five year plan to accelerate the sales of
their branded premium products Dreyer's has increased its consumer marketing
efforts and continued expansion of its distribution system into additional U.S.
markets. In addition, Dreyer's has introduced two premium plus brands under
the Starbuck's and Portofino brands.
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There are a number of other super premium brands, including some regional ice
cream companies and some new entries. Increased competition and the increased
consumer demand for new lower fat, lower cholesterol products like low fat or
non-fat frozen yogurt, low fat ice cream and sorbet, combined with limited shelf
space within supermarkets, may have, in general,
made market entry harder and has already forced some brands out of some
markets. The ability to introduce innovative new flavors and low fat offerings
on a periodic basis is also a significant competitive factor. The Company
expects strong competition to continue, including price/promotional competition,
competition for adequate distribution and limited shelf space within the frozen
dessert category in supermarkets and other food retail outlets.
Seasonality
The ice cream, frozen yogurt and frozen dessert industry generally experiences
the highest volume during the spring and summer months and the lowest volume in
the winter months.
Regulation
The Company is subject to regulation by various governmental agencies, including
the United States Food and Drug Administration and the Vermont Department of
Agriculture. It must also obtain licenses from the states where Ben & Jerry's
products are sold. The criteria for labeling low-fat/low-cholesterol and other
health-oriented foods was revised in 1994, and in some respects made more
stringent, by the FDA. The Company, like other companies in the food industry,
made changes in its labeling in response to these regulations and is in
compliance. The Company cannot predict the impact of possible further changes
that it may be required to make in response to legislation, rules or inquiries
made from time to time by any governmental agencies. FDA regulations may, in
certain instances, affect the ability of the Company, as well as others in the
frozen desserts industry, to develop and market new products. Nevertheless, the
Company does not believe these legislative and administrative rules and
regulations will have a significant impact on its operations.
In connection with the operation of all its plants, the Company must comply with
the Vermont environmental laws and regulations relating to air quality, waste
management, and other related land use matters. The Company maintains wastewater
discharge permits for all of its manufacturing locations. The Waterbury plant
pre-treats production effluent prior to discharge to the municipal treatment
facility. The Company believes that it is in compliance with
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all of the required operational permits relating to
environmental regulations.
The Company believes that it is in compliance in all material respects with the
other regulatory requirements applicable to its operations and that continuing
expenditures for compliance with environmental or other regulatory requirements
will not materially affect its results.
Trademarks
The name Ben & Jerry's(R) and the proprietary flavor names: Cherry Garcia(R);
Chunky Monkey(R); Chubby Hubby(R) and Dastardly Mash(R) are all registered
trademarks of the Company. Cherry Garcia(R), Phish Food(TM), Wavy Gravy and
Doonesberry(TM) are licensed to the Company. Some of the Company's other
trademarks include: New York Super Fudge Chunk(TM); Peace Pops(TM); Hunka Hunka
Burning Fudge(TM); Cool Britannia(TM); World's Best(TM); Vermont's Finest(TM)
and One World One Heart(TM).
Employees
At December 28, 1996, Ben & Jerry's employed 708 people including full time,
part time and temporary employees. This represents a .4% increase from the 703
people employed by the Company at December 30, 1995.
The Ben & Jerry's Foundation
In 1985, Ben Cohen, Chairperson of the Board, contributed a portion of the
equity of the Company which he then owned to The Ben & Jerry's Foundation, Inc.,
a charitable organization under Section 501(c)(3) of the Internal Revenue Code,
in order to enable the Foundation to sell such equity in 1985 and invest the net
proceeds (approximately $598,000) in income-producing securities to generate
funds for future charitable grants. Until March 1994, the Foundation was the
recipient of the bulk of the Company's charitable cash contributions and
provided the principal means for carrying out the Company's charitable cash
giving policy. In March 1994, the Board of Directors of the Company revised the
process to make philanthropic giving more meaningful for, and connected to, the
employees of the Company. Employees serving in Community Action Teams now
provide the principal means for carrying out the Company's charitable cash
giving policy in the State of Vermont. The Foundation, with its employee-led
grant making committee, provides the principal means for carrying out the
Company's charitable cash giving policy across the nation. The Foundation
continues to target its grants to small grass roots social change organizations.
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In October 1985, pursuant to stockholder authorization, the Company issued to
the Foundation all of the 900 authorized shares of Preferred Stock valued
at $10 per share. The Preferred Stock gives the Foundation a special class
voting right to act with respect to certain mergers and other Business
Combinations (as defined in the Company's charter). The issuance of
Preferred Stock was designed to perpetuate the relationship between the
Foundation and the Company and to assist the Company in its determination to
remain an independent business headquartered in Vermont.
Anti-Takeover Effects of Class B Common Stock and Preferred
Stock
The holders of Class A Common Stock are entitled to one vote for each share held
on all matters voted on by stockholders, including the election of directors.
The holders of Class B Common Stock are entitled to ten votes for each share
held in the election of directors and on all other matters. The Class B Common
Stock is generally nontransferable, and there is no trading market for the Class
B Common Stock. The Class B Common Stock is freely convertible into Class A
Common Stock on a share-for-share basis and transferable thereafter. A
stockholder who does not wish to complete the prior conversion process may
effect a sale by simply delivering the certificate for such shares of Class B
Stock to a broker, properly endorsed. The broker may then present the
certificate to the Company's Transfer Agent which, if the transfer is otherwise
in good order, will issue to the purchaser a certificate for the number of
shares of Class A Stock thereby sold.
The Company has been advised that Mr. Ben Cohen (Chairperson and a director of
the Company), Mr. Jerry Greenfield (Vice Chairperson and a director of the
Company), Mr. Fred Lager (a director and formerly a consultant to the Company)
and Mr. Jeff Furman (a director and formerly a consultant to the Company)
(collectively, the "Principal Stockholders") presently intend to retain
substantial numbers of shares of Class B Common Stock. As a result of
conversions by "public" stockholders of Class B Common Stock, in order to enable
their sales of such securities, the Class B Common Stock is now held
disproportionately by Company insiders, including the above-named four directors
who are Principal Stockholders. See "Security Ownership of Certain Beneficial
Owners and Management." As of March 7, 1997, these four principal individual
stockholders held shares representing 48.5% of the aggregate voting power in
elections of directors and various other matters but only 19.94% of the
aggregate common equity outstanding, permitting them, as a practical matter,
generally to decide elections of directors and various other questions submitted
to a vote of the Company's stockholders even though
<PAGE>
they might sell substantial portions of their Class A Common Stock.
The Board of Directors, without further stockholder approval, may authorize the
issuance of additional authorized but unissued shares of Class B Common Stock in
the future and sell shares of Class B Common Stock held in the Company's
treasury; however, issuance or sale of additional shares of Class B Common
Stock, which was not permitted under a rule of the NASDAQ-NMS until 1995, is now
permitted subject to approval under limited circumstances by the NASDAQ-NMS.
In 1985, Ben Cohen, Chairperson of the Board, contributed 900 shares of
Preferred Stock to The Ben & Jerry's Foundation, Inc. While the Foundation is a
charitable entity legally separate from the Company, it may be deemed to be an
affiliate of the Company because all of the current directors of the Foundation,
Messrs. Greenfield and Furman and Ms. Bankowski are also directors of the
Company. The Preferred Stock gives the Foundation a special class voting right
to act with respect to certain Business Combinations (as defined in the
Company's charter). The issuance of the Preferred Stock to the Foundation
effectively limits the voting rights that holders of the Class A Common Stock
and Class B Common Stock, the owners of virtually all of the equity in the
Company, would otherwise have with respect to Business Combinations (as
defined). This may have the effect of limiting such common stockholders'
participation in certain transactions such as mergers, other Business
Combinations (as defined) and tender offers, whether or not such transactions
might be favored by such common stockholders.
The Class B Common Stock and the Preferred Stock may be deemed to be
"anti-takeover" devices in that the Board of Directors believes the existence of
these securities will make it difficult for a third party to acquire control of
the Company on terms opposed by the holders of the Class B Common Stock,
including primarily the Principal Stockholders, and the Foundation or for
incumbent management and the Board of Directors to be removed. See also "Risk
Factors" in Item 7 of this Report.
<PAGE>
Item 2. Properties
Ben & Jerry's owns a 42.5 acre site in Waterbury, Vermont on which it operates a
46,000 square-foot plant producing ice cream and frozen yogurt in packaged
pints. The Company also owns a 48,000 square-foot production facility in
Springfield, Vermont. The Springfield plant is used for the production of ice
cream novelties, bulk ice cream and frozen yogurt and at times packaged pints
and quarts.
The Company's property, plant and equipment at its production facilities in
Waterbury and Springfield are subject to various liens securing a portion of the
Company's long-term debt.
In 1991, the Company entered into a twenty-five year lease with an option to
purchase 17.1 acres of land in Rockingham, Vermont on which the Company
constructed, and operates, a 45,000 square-foot central distribution facility.
In 1992, the Company entered into a five-year lease/purchase agreement for a
42-acre parcel of land in St. Albans, Vermont, the site of the Company's 92,000
square-foot production facility. The Company anticipates that this parcel will
be purchased in 1997.
In February 1996, the Company entered into a ten year lease agreement for
approximately 69,000 square-feet of office and warehousing space in South
Burlington, Vermont where the Company's executive offices and administrative
departments are now located, following the 1996 move from its Waterbury
headquarters.
The Company also leases space for its retail ice cream parlors in Burlington and
Montpelier, Vermont. The Company owns two single-family houses, both situated on
land adjacent to its manufacturing facility it Waterbury, used for a day-care
center, employee training and other purposes.
The Company believes that all of its facilities are well maintained and in good
repair.
<PAGE>
Item 3. Legal Proceedings
On December 14, 1995, the Company was served with a class action complaint filed
in federal court in Burlington, Vermont. The complaint, captioned Henry G.
Jakobe, Jr. v. Ben & Jerry's Inc., et al., United States District Court (D.
Vermont) Case No. 1-95-CV-373, was filed by a Ben & Jerry's shareholder on
behalf of himself and purportedly on behalf of all other Ben & Jerry's
shareholders who purchased the common stock of the Company during the period
from March 25, 1994 through December 19, 1994. Plaintiff alleges that the
Company violated the federal securities laws by making, in 1994, untrue
statements of material facts and omitting to state material facts primarily
concerning the Company's construction and start-up of its new manufacturing
facility in St. Albans, Vermont. Also named as defendants in the Complaint are
certain present and former officers and directors of the Company. Plaintiff is
seeking an unspecified amount of monetary damages.
On October 31, 1996 the Court dismissed all but one of Plaintiff's claims.
Pretrial discovery has commenced.
While this action is in its preliminary stages, management believes, based on an
initial review, the allegations made in the lawsuit are without merit and the
Company intends to defend the lawsuit vigorously.
The Company is subject to certain additional litigation and claims in the
ordinary course of business which management believes are not material to the
Company's business.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of 1996.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Class A Common Stock is traded on the NASDAQ National Market
System under the symbol BJICA. The following table sets forth for the period
January 1, 1995 through March 7, 1997 the high and low closing sales prices of
the Company's Class A Common Stock for the periods indicated.
High Low
1995
First Quarter...................... $14 $ 9 5/8
Second Quarter..................... 15 1/2 11 3/4
Third Quarter...................... 20 13 5/8
Fourth Quarter..................... 19 14 1/2
1996
First Quarter...................... $17 1/4 $13
Second Quarter..................... 19 1/2 14
Third Quarter...................... 17 3/4 12 1/4
Fourth Quarter..................... 14 3/4 10 7/8
1997
First Quarter(through March 7, 1997) $14 3/8 10 7/8
The Class B Common Stock is generally non-transferable, and there is no trading
market for the Class B Common Stock. However, the Class B Common Stock is freely
convertible into Class A Common Stock on a share-for-share basis, and
transferable thereafter. A stockholder who does not wish to complete the prior
conversion process may effect a sale by simply delivering the certificate for
such shares of Class B Stock to a broker, properly endorsed. The broker may then
present the certificate to the Company's Transfer Agent which, if the transfer
is otherwise in good order, will issue to the purchaser a certificate for the
number of shares of Class A Stock thereby sold.
As of March 7, 1997 there were 10,991 holders of record of the Company's Class A
Common Stock and 2,329 holders of record of the Company's Class B Common Stock.
<PAGE>
Item 6. Selected Financial Data
The following table contains selected financial information for the Company's
fiscal years 1992 through 1996.
(In thousands except per share data)
Summary of Operations:
<TABLE>
Fiscal Year
------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales ..................... $ 167,155 $ 155,333 $ 148,802 $ 140,328 $ 131,969
Cost of sales ................. 115,212 109,125 109,760 100,210 94,389
Gross profit .................. 51,943 46,208 39,042 40,118 37,580
Selling, general
and administrative
expenses ................... 45,531 36,362 36,253 28,270 26,243
Asset write-down .............. 6,779
Other income
...(expense)--net ............. (77) (441) 228 197 (23)
Income(loss) before
income taxes ............... 6,335 9,405 (3,762) 12,045 11,314
Income taxes
(benefit) ..................... 2,409 3,457 (1,893) 4,844 4,639
Net income(loss) .............. 3,926 5,948 (1,869) 7,201 6,675
Net income(loss) per
common share(1)................ $ 0.54 $ 0.83 $ (0.26) $ 1.01 $ 1.07
Weighted average
common and common
equivalent shares
outstanding(1).............. 7,230 7,222 7,148 7,138 6,254
Balance Sheet Data:
Fiscal Year
------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Working capital ............... $ 50,055 $ 51,023 $ 37,456 $ 29,292 $ 18,053
Total assets .................. 136,665 131,074 120,296 106,361 88,207
Long-term debt ................ 31,087 31,977 32,419 18,002 2,641
Stockholders' equity(2)........ 82,685 78,531 72,502 74,262 66,760
- --------
<FN>
(1) The per share amounts and average shares outstanding have been adjusted for
the effects of all stock splits, including stock splits in the form of stock
dividends.
(2) No cash dividends have been declared or paid by the Company on its capital
stock since the Company's organization. The Company intends to reinvest earnings
for use in its business and to finance future growth. Accordingly, the Board of
Directors does not anticipate declaring any cash dividends in the foreseeable
future.
</FN>
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table shows certain items as a percentage of net sales which are
included in the Company's Statement of Operations.
Percentage of Net Sales
-----------------------
Fiscal Year
-----------
1996 1995 1994
---- ---- ----
Net sales .................... 100.0 % 100.0 % 100.0 %
Cost of sales ................ 68.9 70.2 73.8
---- ---- ----
Gross profit ................. 31.1 29.8 26.2
Selling, general
and administrative
expense ................. 27.2 23.4 24.4
Asset write-down ............. (4.6)
Other income
(expenses) .............. 0.1 (0.4) 0.2
--- ---- ---
Income(loss)before
income taxes ............ 3.8 6.0 (2.6)
Income taxes(benefit) ........ 1.5 2.2 (1.3)
--- --- ----
Net income(loss) ............. 2.3 % 3.8 % (1.3) %
=== === ====
Sales
Net sales in 1996 overall increased 7.6% to $167 million from $155 million in
1995. Pint volume increased 2.6% compared to 1995. This volume increase was
combined with a 3.6% price increase of pints that went into effect in August
1996. This volume increase in pints was primarily due to the Company's
introduction of its new line of sorbets in February 1996. Net sales of both
novelties and 21/2 gallon bulk containers had increases of 10.9% and 8.3%
respectively in 1996.
Pint sales represented approximately 85% of total net sales in 1996, 1995 and
1994. Net sales of 2 1/2 gallon bulk containers represented approximately 7.0%
of total net sales in 1996, 1995 and 1994. Net sales of novelties accounted for
approximately 6.0% of total net sales in 1996 and 1995, and 5% in 1994. Net
sales from the Company's retail stores represented 2.0% of total net sales in
1996 and 1995 and 3% in 1994.
Net sales in 1995 overall increased 4.4% to $155 million from $149 million in
1994. Pint volume decreased 1.5% compared to 1994. This volume decrease was
offset by a 3.7% price increase of pints sold to distributors that went into
effect in March 1995. Net sales of both novelties and 21/2 gallon bulk
containers had modest increases in 1995.
<PAGE>
Cost of Sales
Cost of sales in 1996 increased approximately $6.1 million or 5.6% over the same
period in 1995 and overall gross profit as a percentage of net sales increased
from 29.8% in 1995 to 31.1% in 1996. The higher gross profit as a percentage of
sales in 1996 is due to the price increase effective in August 1996 combined
with improved inventory management and production efficiencies, as compared with
1995. The impact of increased dairy raw material costs was offset by improved
manufacturing expenses. If the trend of rising dairy prices continues, there is
the possibility that these costs will not be passed on to consumers which will
negatively impact future gross profit margins. See the Risk Factors in the
"Forward-Looking Statements" section. In addition, the improved gross margin
reflects the impact of the termination of the manufacturing agreement between
the Company and Edy's Grand Ice Cream, a subsidiary of Dreyer's Grand Ice Cream.
This production was
transferred to the Company's manufacturing facility in St. Albans, Vermont in
the third quarter of 1995. Approximately 16% of the packaged pints manufactured
by the Company in 1995 were produced by Edy's.
Cost of sales in 1995 decreased approximately $.6 million or 0.6% over the same
period in 1994 and overall gross profit as a percentage of net sales increased
from 26.2% in 1994 to 29.8% in 1995. The higher gross profit as a percentage of
sales in 1995 is due to the price increase effective in March 1995 combined with
improved inventory management and production efficiencies, as compared with
1994. In addition, the improved gross margin reflects less product manufactured
for the Company by Edy's Grand Ice Cream, a subsidiary of Dreyer's Grand Ice
Cream, resulting from the transfer of production to the Company's new
manufacturing facility in St. Albans, Vermont. During 1995 approximately 16% of
the packaged pints manufactured by the Company were produced by Edy's, compared
to 40% in 1994.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 25.2% to $45.5 million in
1996 from $36.4 million in 1995 and increased as a percentage of net sales to
27.2% in 1996 from 23.4% in 1995. This increase primarily reflects increased
marketing and sales spending for the launch of the new "Sorbet" line which was
introduced in February 1996, international market penetration costs and expenses
primarily in the production planning and inventory management areas.
Selling, general and administrative expenses increased 0.3% to $36.4 million in
1995 from $36.3 million in 1994 but decreased
<PAGE>
as a percentage of net sales to 23.4% in 1995 from 24.4% in 1994. This increase
in dollar spending primarily reflects strengthening of the Company's
infrastructure in order to prepare for increased growth, offset by the lower
level of marketing and sales spending compared to 1994, when the launch of the
new "Smooth, No Chunks" line occurred.
Asset Write-Down
1994 results included a pretax charge of $6.8 million, representing a write-down
of certain assets of the Company's St. Albans, Vermont plant. Following
substantial delays with the implementation and completion of certain automated
handling processes and refrigeration hardening equipment of the new plant and
after receipt of a report from an outside engineering firm experienced in the
refrigerated food industry, the Company decided to replace certain of the
software and equipment installed at the new plant. The charge included a portion
of the previously incurred capitalized interest and project management costs.
The impact of this charge on both the 1994 fourth quarter and full year 1994
results was $4.1 million or $0.57 per share.
The Company began manufacturing at the St. Albans plant in March 1995, utilizing
a temporary set-up on one production line. Two manufacturing lines were fully
operational in December 1995.
Other Income(Expense)
Interest income in 1996 remained level with 1995. Interest expense increased
$0.5 million in 1996 compared to 1995. This increase was due primarily to the
capitalization of a portion of interest in the prior year as part of the cost of
the plant in St. Albans, Vermont before the plant became operational. This
increase in interest expense was more than offset by net proceeds of $884,000
from an insurance claim settlement related to inventory damaged in 1995.
Interest income increased $0.6 million during 1995 compared to 1994, primarily
due to higher interest rates on investments. Interest expense increased $1.2
million in 1995 compared to 1994. This increase was due primarily to the
capitalization of interest in the prior year as part of the cost of the new
plant in St. Albans, Vermont as compared with capitalization of only a small
amount of interest in 1995 before the plant became operational.
Income Taxes
The Company's effective income tax rate increased from 36.8% in 1995 to 38.0% in
1996 reflecting higher state income taxes and
<PAGE>
lower income tax credits partially offset by increased tax-exempt interest. The
Company's effective income tax rate increased from (50.3%) in 1994 to 36.8% in
1995 primarily reflecting the profit in 1995, as compared to the loss in 1994,
combined with lower income tax credits and tax-exempt interest income in 1995 as
compared to 1994. Management expects 1997's effective income tax rate to remain
at approximately 38.0%.
Net Income
As a result of the foregoing, net income decreased $2.0 million to $3.9 million
in 1996 compared to $5.9 million in 1995 and a net loss of $1.9 million in 1994.
Net income(loss) as a percentage of net sales was 2.3% in 1996 compared to 3.8%
in 1995 and (1.3%) in 1994.
The Company announced on March 20, 1997 that the Company expects a net loss for
the first quarter of 1997. The Company anticipates this lost to be in the range
of $.12 to $.15 per share.
The Company expects to report a decrease in net sales in the first quarter of
1997 of approximately 5-7% as compared to the first quarter of 1996. This sales
decline, coupled with planned reduced production levels designed to lower the
Company inventories, significantly reduced the Company's gross margins in the
first quarter of 1997. In addition, increased commodity costs continued to
negatively impact the Company's gross margin. Selling, general and
administrative expenses are expected to be higher than in the first quarter of
1996 due primarily to higher European marketing and selling expenses. Although
financial results are disappointing, the Company anticipates a return to
profitability for the remainder of 1997.
Seasonality
The Company typically experiences more demand for its products during the summer
than during the winter.
Inflation
Inflation has not had a material effect on the Company's business to date, with
the exception of dairy raw material costs. See the Risk Factors in the
"Forward-Looking Statements" section. Management believes that the effects of
inflation and changing prices were successfully managed in 1996, with both
margins and earnings being protected through a combination of pricing
adjustments, cost control programs and productivity gains.
<PAGE>
Liquidity and Capital Resources
As of December 28, 1996 the Company had $36.1 million of cash and cash
equivalents, an increase of $700,000 since December 30, 1995. Net cash provided
by operations in 1996 was approximately $14.3 million. Approximately $12.3
million was used for net additions to property, plant and equipment, primarily
for equipment upgrades in Waterbury, and Springfield, relocation to and
renovation of the new corporate headquarters in South Burlington, Vermont and
capital expenditures for the installation of a third production line at the
plant in St.
Albans, Vermont.
Inventories increased from $12.6 million at December 1995, to $15.4 million at
December 28, 1996. The increase in inventory resulted from lower than
anticipated sales in the second half of 1996. Management plans to reduce
inventories in 1997. Accounts receivable has decreased $3.0 million since
December 30, 1995 to $8.7 million from $11.7 million at December 30, 1995. This
decrease in accounts receivable is due to the timing of sales in the fourth
quarter of 1996 compared to 1995. The Company anticipates capital expenditures
in 1997 of approximately $8.0 million. Substantially all of these additional
projected capital expenditures relate to equipment upgrades and enhancements at
the Company's manufacturing plants in Waterbury, Springfield and St. Albans, as
well as additional research & development equipment and computer related
expenditures.
The Company's long-term debt includes $30 million aggregate principal amount of
Senior Notes issued in 1993 and 1994, which are held in cash equivalents pending
their use in the business.
On December 29, 1995, the Company extended two line of credit agreements, for an
aggregate of $20 million, with The First National Bank of Boston and Key Bank of
Vermont. These unsecured agreements provide for borrowings from time to time,
and unless further extended, expire September 29, 1998 and December 29, 1998,
respectively. The agreements specify interest at either the banks' Base Rate or
the Eurodollar rate plus a maximum of 1.25%. As of March 28, 1997 there have
been no borrowings under these lines of credit. Management intends to renew
these line of credit agreements.
Management believes that internally generated funds, cash and cash equivalents,
and equipment lease financing and/or borrowings under the Company's two
unsecured bank lines of credit will be adequate to meet anticipated operating
and capital requirements.
<PAGE>
Forward-Looking Statements
This section, as well as other portions of this document, includes certain
forward-looking statements about the Company's business and new products, sales
and expenses, effective tax rate and operating and capital requirements. In
addition, forward-looking statements may be included in various other Company
documents to be issued in the future and in various oral statements by Company
representatives to security analysts and investors from time to time. Any such
statements are subject to risks that could cause the actual results or needs to
vary materially. These risks are discussed below in "Risk Factors" in this
document.
Risk Factors
Dependence on Independent Ice Cream Distributors. The Company is dependent on
maintaining satisfactory relationships with independent ice cream distributors
that now generally act as the Company's exclusive or master distributor in their
assigned territories. While the Company believes its relationships with Dreyer's
and its other distributors generally have been satisfactory and have been
instrumental in the Company's growth, the Company has at times experienced
difficulty in maintaining such relationships. Available distribution
alternatives are limited. Accordingly, there can be no assurance that
difficulties in maintaining relationships with distributors, which may be
related to actions by the Company's competitors or by one or more of the
Company's distributors themselves (or their controlling persons), will not have
a material adverse effect on the Company's business. The loss of one or more of
the Company's principal distributors or termination of one or more of the
related distribution agreements could have a material adverse effect on the
Company's business. See "Business - Markets and Customers."
Growth in sales and earnings. In 1996, net sales of the Company increased 7.6%
to $167 million from $155 million in 1995. Pint volume increased 2.6% compared
to 1995. The super premium ice cream, frozen yogurt and sorbet category sales
remained flat in 1996 as compared to 1995. Given these overall domestic super
premium industry trends, the successful introduction of innovative flavors on a
periodic basis has become increasingly important to any sales growth by the
Company. Accordingly, the future degree of market acceptance of any of the
Company's new products, which will be accompanied by promotional expenditures,
is likely to have an important impact on the Company's 1997 and future financial
results. See "Management's
<PAGE>
Discussion and Analysis of Financial Conditions and Results of
Operations."
Competitive Environment. The super premium frozen dessert market is highly
competitive with the distinctions between the super premium category, and the
"adjoining" premium/premium plus category less marked than in the past. And, as
noted above, the ability to successfully introduce innovative flavors on a
periodic basis that are accepted by the marketplace is a significant competitive
factor. In addition, the Company's principal competitors are large, diversified
companies with resources significantly greater than the Company's. The Company
expects strong competition to continue, including competition for adequate
distribution and competition for the limited shelf space for the frozen dessert
category in supermarkets and other retail food outlets. See
"Business-Competition" and "Business-The Super Premium Frozen Dessert Market."
Increased Cost of Raw Materials: Management believes that the trend of increased
dairy ingredient costs may continue and it is possible that at some future date
both gross margins and earnings may not be protected by pricing adjustments,
cost control programs and productivity gains.
Reliance on a limited number of Key Personnel. The success of the Company is
significantly dependent on the services of Perry Odak, the Chief Executive
Officer and a limited number of executive managers working under Mr. Odak, as
well as certain continued services of Ben Cohen, the Chairperson of the Board
and co-founder of the Company; and Jerry Greenfield, Vice Chairperson and
co-founder of the Company. Loss of the services of any of these persons could
have a material adverse effect on the Company's business. See "Directors and
Executive Officers of the Company."
The Company's Social Mission. The Company's basic business philosophy is
embodied in a three-part "mission statement," which includes a "social mission"
to "operate the Company...[to] improve the quality of life of our employees and
a broad community: local, national and international." The Company believes that
implementation of its social mission, which is integrated into the Company's
business, has been beneficial to the Company's overall financial performance.
However, it is possible that at some future date the amount of the Company's
energies and resources devoted to its social mission could have a material
adverse financial effect on the Company's business. See "Business-History and
Philosophy of the Company" and "Business-Marketing."
<PAGE>
International. The Company's principal competitors have substantial market
shares in various countries outside the United States, principally Europe and
Japan. The Company sells product in Canada, the United Kingdom, Ireland, France
and the Netherlands, in addition to Israel under a licensing agreement but is
investigating the possibility of further international expansion. However, there
can be no assurance that the Company will be successful in entering, on a
long-term profitable basis, such international markets as it selects.
Control of the Company. The Company has two classes of common stock - the Class
A Common Stock, entitled to one vote per share, and the Class B Common Stock,
entitled, except to the extent otherwise provided by law, to ten votes per
share. Ben Cohen, Jerry Greenfield, Fred Lager and Jeffrey Furman (collectively,
the "Principal Stockholders") hold shares representing 48.5% of the aggregate
voting power in elections for directors, permitting them as a practical matter
to elect all members of the Board of Directors and thereby effectively control
the business, policies and management of the Company. Because of their
significant holdings of Class B Common Stock, the Principal Stockholders may
continue to exercise this control even if they were to sell substantial portions
of their Class A Common Stock. See "Security Ownership of Certain Beneficial
Owners and Management."
In addition, the Company has issued all of the authorized Class A Preferred
Stock to the Foundation. All current directors of the Foundation are directors
and/or employees of the Company. The Preferred Stock gives the Foundation a
special class voting right to act with respect to certain Business Combinations
(as defined in the Company's charter) and effectively limits the voting rights
that holders of the Class A Common Stock and Class B Common Stock, the owners of
virtually all of the equity in the Company, would otherwise have with respect to
such Business Combinations. See "Business- The Ben & Jerry's Foundation."
While the Board of Directors believes that the Class B Common Stock and the
Preferred Stock are important elements in keeping Ben & Jerry's an independent
Vermont-based business, the Class B Common Stock and the Preferred Stock may be
deemed to be "anti-takeover" devices (and thus may be deemed to have the
potential for adverse consequences on the business) in that the Board of
Directors believes the existence of these securities will make it difficult for
a third party to acquire control of the Company on terms opposed by the holders
of the Class B Common Stock, including primarily the Principal Stockholders, or
The Foundation, or for incumbent management and the Board of Directors to be
removed.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this Item is in Item 14(a)of this Report.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
Directors and Executive Officers
The directors and executive officers of the Company are as
follows:
Name Age Office
- ---- --- ------
Ben Cohen............ 45 Chairperson and Director
Perry Odak........... 51 Chief Executive Officer and Director
Jerry Greenfield..... 45 Vice Chairperson and Director
Elizabeth Bankowski.. 49 Director and Director of Social
Mission
Jeffrey Furman....... 53 Director
Fred Lager........... 42 Director
Frederick A. Miller.. 50 Director
Henry Morgan......... 71 Director
Jennifer Henderson... 43 Director
Robert Holland,Jr.... 56 Director
Bruce Bowman......... 44 Senior Director of Operations and
Chief Operating Officer
Frances Rathke....... 36 Chief Financial Officer
and Secretary
All directors hold office until the June 28, 1997 annual meeting of stockholders
of the Company and until their successors are elected and qualified. The Board
of Directors has an Audit Committee on which Messrs. Morgan, and Lager
(Chairperson) serve and a Workplace/Compensation Committee on which Messrs.
Morgan (Chairperson), Lager, Miller and Ms. Henderson serve. The Board also has
both a Nominating Committee on which Messrs. Cohen (Chairperson), Furman,
Holland, Greenfield and Ms. Bankowski serve, and a Social Mission Committee on
which Messrs. Miller (Chairperson), Furman, Cohen, Holland, Ms. Henderson and
Ms. Bankowski serve. Officers serve until their successors are elected and
qualified.
Ben Cohen, a founder of the Company, has served as Chairperson of the Board of
Directors since February 1989. From January 1, 1991 through January 29, 1995 he
was the Chief Executive Officer of the Company. Mr. Cohen has been a director of
the Company since 1977. Mr. Cohen is a director of Community Products, Inc., a
manufacturer of Rain Forest Crunch candy, Blue Fish Clothing, Inc., and Social
Venture Network.
Perry Odak, has served as the Chief Executive Officer since January 1997. Mr.
Odak started his career on the food side of Armour-Dial, Inc., was later part of
the start-up team at Jovan, Inc. and as President of the Consumer Group for
Atari, Inc. At Jovan he was General Manager of this $150 million
<PAGE>
company overseeing sales, marketing, operations and distribution. In 1983 Odak
became a partner at Catalyst Technologies where he started and launched ETAK,
Inc., the first vehicle navigation system. In 1990 Mr. Odak began his consulting
career which took him to several companies including Sudbury, Inc., Investcorp
International, Color Tile, Graham Packaging and U.S. Repeating Arms Co.. While
at Investcorp, Mr. Odak developed and executed a successful strategy for
Dellwood Foods, a large dairy that included a buy out and merger with Tuscan,
the largest dairy in metropolitan New York.
Jerry Greenfield, a founder of the Company, has served as director and Vice
Chairperson of the Board of Directors since 1990. Mr. Greenfield is also
President and director of The Ben & Jerry's Foundation, Inc.
Elizabeth Bankowski has served as Director of Social Mission Development since
December 1991. Ms. Bankowski has been a director of the Company since 1990.
Additionally, Ms. Bankowski is Secretary and director of The Ben & Jerry's
Foundation, Inc.
Jeffrey Furman has served as a director of the Company since 1982. Mr. Furman is
Treasurer and director of The Ben & Jerry's Foundation, Inc. From March 1991
through December 1996, Mr. Furman was a consultant to the Company.
Fred Lager has served as director of the Company since 1982. From 1989 to 1991,
Mr. Lager was President and Chief Executive Officer of the Company. Most
recently, from 1991 to July, 1996, Mr. Lager was a consultant for the Company.
Mr. Lager is a director of Working Assets Funding Service and Whole Foods
Market, Inc.
Frederick A. Miller has served as a director of the Company since 1992. Since
1985, Mr. Miller has served as President of The Kaleel Jamison Consulting Group,
Inc., a strategic culture change and management consulting firm.
Henry Morgan has served as a director of the Company since 1987. He is also a
director of Cambridge Bancorporation, Shorebank Development Bancorporation,
Southern Development Bancorporation and Cleveland Development Bancorporation.
Jennifer Henderson has served as a director of the Company since June, 1996. Ms.
Henderson is director of Training at the Center for Community Change in
Washington DC and President of Strategic Interventions, Inc., a leadership and
management consulting firm.
<PAGE>
Robert Holland, Jr. served as President and Chief Executive Officer from January
1995 to October 31, 1996. Mr. Holland has served as a director of the Company
since March 1995. Prior to this, Mr. Holland served as Chairperson and Chief
Executive Officer of ROHKER-J, a consulting firm for Fortune 500 companies since
1991. Mr. Holland is Chairperson of the Board of Trustees at Spelman College, a
trustee of Atlanta University Center and Mutual of New York and is a member of
the Board of Directors of Frontier Corporation, TrueMark Manufacturing Company,
the Harlem Junior Tennis Program and AC Nielsen Corporation.
Bruce Bowman has served as Senior Director of Operations since August 1995 and
Chief Operating Officer since October 31, 1996. Prior to this, Mr. Bowman was
Senior Vice President of Operations at Tom's Foods, Inc., a food manufacturing
company from April 1991 until August 1995.
Frances Rathke has served as Chief Financial Officer, Chief Accounting Officer
and Secretary of the Company since April, 1990.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the cash compensation paid by the Company in
Fiscal Years 1994 - 1996 as well as certain other compensation paid, awarded or
accrued for those years to the Company's Chief Executive Officer (Ben Cohen was
CEO prior to Robert Holland's election in January 1995) and the Company's other
executive officers during the 1996 fiscal year whose total salary and bonuses
exceeded $100,000. Perry Odak became the Chief Executive Officer on January 1,
1997.
<TABLE>
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus(2) sation(4) Awards(3) SARS(6) Payouts sation(5)
- -------- ---- ------ -------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ben Cohen(1)........... 1996 $149,664 -- $ 3,017
Chairperson ........... 1995 $132,500 -- $ 2,195
and CEO ............... 1994 $132,500 -- $ 2,650
Jerry Greenfield ...... 1996 $149,664 -- $ 3,017
Vice Chairperson ...... 1995 $132,500 -- $ 2,195
1994 $132,745 -- $ 2,655
Robert Holland, Jr .... 1996 $250,000 $100,000 $272,948
CEO, President and .... 1995 $225,962 $100,000 $80,000 --
Director
Bruce Bowman .......... 1996 $169,231 $ 20,000 $10,000 $ 1,099
Senior Director of .... 1995 $55,385 $40,000 $25,000 --
Operations and COO
Katherine Greenleaf ... 1996 $156,934 -- $25,000 --
Senior Director
of People
Frances Rathke ........ 1996 $145,385 -- $ 2,928
CFO and ............... 1995 $125,000 $ 1,281 $30,000 $ 2,260
Secretary ............. 1994 $121,398 $ 611 $ 2,440
Elizabeth Bankowski ... 1996 $125,000 -- $20,000 $ 2,267
Director of Social .... 1995 $125,000 $ 745 $ 14,341 $ 21,360 $ 5,000 $ 2,267
Mission Development ... 1994 $115,803 $ 328 $ 2,323
<FN>
(1) Ben Cohen was CEO prior to January 31, 1995.
(2) "Bonus" includes discretionary distributions under the Company's profit
sharing plan pursuant to which a cash bonus was awarded to all employees
(other than co-founders, Ben Cohen and Jerry Greenfield, CEO Robert
Holland, and Senior Director of Operations Bruce Bowman, and starting in
1996 Frances Rathke, Elizabeth Bankowski and Katherine Greenleaf). Robert
Holland was awarded a bonus in accordance with his employment contract of
$100,000 for the years 1995 and 1996. Bruce Bowman was awarded a bonus in
accordance with his employment contract of $40,000 in 1995 and $20,000 in
1996.
(3) "Restricted Stock Awards" includes restricted stock awards of 2,000 shares
made in 1995. No other restricted stock awards were made in 1994-1996, or
are outstanding. Award was vested at date of grant.
- --------
(4) "Other Annual Compensation" consists of gross-up payments for tax
liabilities incurred on the restricted stock award granted in 1995.
(5) "All Other Compensation" includes Company contributions to 401(K) plans and
in 1996 includes severance payments payable monthly through January 1998 to
Robert Holland, Jr. under the Amended Employment Agreement dated October
31, 1996 in the amount of $270,833. .
(6) "Securities Underlying Options/SAR" after giving effect to Mr. Holland's
Amended Employment Agreement dated October 31, 1996.
</FN>
</TABLE>
Option/SAR Grants in 1996
<TABLE>
Potential
Realizable
Value at
Percentage Assumed Annual
of Total Rates of
Options/ Stock Price
SARS Exercise Appreciation
Options/ Granted to or for Option Term
SARS Employees Base Price Expiration
Granted in 1996 (per share) Date 5% 10%
------- ------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen 0 0 0 0 0 0
Jerry Greenfield 0 0 0 0 0 0
Robert Holland, Jr. 0 0 0 0 0 0
Bruce Bowman 10,000 16.0% $12.38 10/22/06 $77,857 $197,305
Katherine Greenleaf 25,000 40.0% 14.75 4/14/06 231,905 587,693
Frances Rathke 0 0 0 0 0 0
Elizabeth Bankowski 20,000 32.0% 12.38 10/22/06 156,000 394,611
</TABLE>
Aggregated Option/SAR Exercises in 1996 and 1996 Year-End
Option/SAR Values
<TABLE>
Shares
Acquired Value of Unexercised
on Number of Unexercised In-The-Money Options/
Exercise Value Options/SARS at 12/28/96 SARS at 12/28/96
------------------------ ----------------
(#) Realized Exercisable Unexercisable Exercisable Unexercisable
--- -------- ----------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
Ben Cohen 0 0 0 0 0 ---
Jerry Greenfield 0 0 0 0 0 ---
Robert Holland, Jr. 0 0 80,000 0 $45,400 ---
Bruce Bowman 0 0 0 35,000 0 ---
Katherine Greenleaf 0 0 0 25,000 0 ---
Frances Rathke 0 0 5,593 25,592 $3,750 ---
Elizabeth Bankowski 0 0 5,485 20,485 $3,750 ---
</TABLE>
Directors who are not employees or full-time consultants of the Company receive
an annual retainer fee of $9,000, in addition to a $750 per board meeting
attendance fee, and reimbursement of reasonable out-of-pocket expenses.
The Company has also adopted the 1995 Non-Employee Directors Plan for Stock in
lieu of Directors Cash Retainer under which directors may elect to be paid
annually, in lieu of the cash retainer for Board services, shares of common
stock having a fair market value (as of the date of payment) equal to the amount
of such annual retainer. This plan was not implemented with respect to the year
1995. On September 19, 1996, four non-employee directors, Henry Morgan, Jon
Katzenbach, Frederick A. Miller, and Jennifer Henderson each received 524 shares
of stock in lieu of the cash retainer for the period October 1996
<PAGE>
through June of 1997 under the 1995 Non-Employee Directors'
Plan for Stock in Lieu of Directors' Cash Retainer Plan.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information as of March 7, 1997 with
respect to the beneficial ownership of the outstanding shares of Class A Common
Stock, Class B Common Stock and Preferred Stock by (i) all persons owning of
record, or beneficially to the knowledge of the Company, more than five percent
of the outstanding shares of Class A Common Stock, Class B Common Stock or
Preferred Stock, (ii) each director and executive officer of the Company
individually, (iii) all directors and officers of the Company as a group and
(iv) The Ben & Jerry's Foundation, Inc. The mailing address of each of the
persons shown and of the Foundation is c/o the Company, 30 Community Drive,
South Burlington, Vermont 05403-6828.
<TABLE>
Amount of Amount of
Beneficial Beneficial Amount of
Ownership of Ownership of Beneficial
Class A Class B Ownership of
Common Stock Common Stock Preferred Stock
------------ ------------ ---------------
Percentage Percentage Percentage
Number of Number of Number of
of Outstanding of Outstanding of outstanding
Shares Shares(a) Shares Share(b) Shares Shares
------ --------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Ben Cohen (c) 604,373 9.60% 487,876 52.24% -- --
Robert Holland, Jr. 1,596 * -- -- -- --
Fred Lager (d) 30,600 * 53,600 5.9% -- --
Jeffrey Furman 10,000 * 30,300 3.3% -- --
Henry Morgan 3,224 * *-- * -- --
Jerry Greenfield (e) 130,000 2.01% 90,000 9.9% -- --
Frederick A. Miller 1,124 * -- * -- --
Elizabeth Bankowski 3,134 * -- * -- --
Jon Katzenbach 524 * -- -- -- --
Jennifer Henderson 524 * -- -- -- --
Bruce Bowman 403 * -- * -- --
Frances Rathke 3,315 * -- * -- --
Putnam Investments, Inc.(1) 472,250 6.50% -- * -- --
One Post Office Square
Boston, MA 02109
The Capital Group(2) 755,500 11.90% -- ** -- --
Companies, Inc.
333 South Hope St.
Los Angeles, CA 90071
All Officers and directors
as a group (13 persons) 788,817 12.53% 661,776 72.6% -- --
The Ben & Jerry's
Foundation, Inc.(g) -- -- -- -- 900 100%
- ----------------------
* Less than 1%
- --------
<FN>
(1) Putnam Investments, Inc. is a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc., and wholly owns two registered investment advisers: Putnam
Investment Management, Inc., which is the investment adviser to the Putnam
family of mutual funds and The Putnam Advisory Company, Inc., which is the
investment adviser to Putnam's institutional clients. Both subsidiaries
have dispository power over the shares as investment managers, but each of
the mutual fund's trustees have voting power over the shares held by each
fund, and The Putnam Advisory Company, Inc. has shared voting power over
the shares held by the institutional clients.
(2) The Capital Group Companies, Inc. is the parent company of Capital Research
and Management Company, SMALLCAP World Fund, Inc. and Capital Guardian
Trust Company. As a result of the investment power and in some cases the
voting power held by the subsidiary companies, he Capital Group Companies,
Inc., may be deemed to "beneficially own" such securities by virtue of Rule
13d-3 under the Securities Exchange Act of 1934.
(a) Based on the number of shares of Class A Common Stock outstanding as of
March 7, 1997. Each share of Class A Common Stock entitles the holder to
one vote.
(b) Based on the number of shares of Class B Common Stock outstanding as of
March 7, 1997. Each share of Class B Common Stock entitles the holder to
ten votes.
(c) Under the regulations and interpretations of the Securities and Exchange
Commission, Mr. Cohen may be deemed to be a parent of the Company.
(d) Mr. Lager owns these shares jointly with his wife.
(e) By virtue of their positions as two of the three current directors of the
Foundation, which has the power to vote or dispose of the Preferred Stock,
each of Messrs. Greenfield, a co-founder, Director and Vice Chairperson of
the Company, and Furman, a Director of and formerly a consultant to the
Company, may be deemed, under the regulations and interpretations of the
Securities and Exchange Commission, to own beneficially the Preferred
Stock.
(f) Does not include 210 shares of Class A Common Stock and 105 shares of Class
B Common Stock owned by Mr. Furman's wife, as to which he disclaims
beneficial ownership.
(g) While the Ben & Jerry's Foundation, Inc. is an entity legally separate from
the Company, it may be deemed to be an affiliate of the Company under the
securities laws.
</FN>
</TABLE>
<PAGE>
Item 13. Certain Relationships and Related Transactions
Under the terms of an Amended Employment Agreement between the Company and Mr.
Lager, the Company is obligated to provide Mr. Lager with (i)family health
insurance coverage under the Company's regular employee health insurance plan
until February, 2003(ii) to continue payments of the premiums due on Mr. Lager's
life insurance policy (currently $12,335 per year) until the date when the
policy becomes "self-funding", which is estimated to be December 31, 2002, and
(iii) to extend the non-compete provisions for an additional three years
(without any additional payment) beyond the two-year post-employment
non-competition period provided for in the original Employment Agreement.
Pursuant to the terms of a Consulting Agreement dated January 17, 1991 (as
amended in 1994 and 1995) Mr. Lager agreed to furnish management consulting
services to the Company, upon the Company's request. Commencing in September
1995, Mr. Lager provided part-time consulting services to the Company at the
rate of $8,333 per month, plus reasonable out-of-pocket expenses. In 1995 and
1996, Mr. Lager was paid $235,902 and $57,917. Mr. Lager's obligation to provide
part-time consulting services to the Company under the terms of the Original
Consulting Agreement, as extended by the 1994-1995 amendment, terminated on July
31, 1996. In accordance with the Agreement, Mr. Lager has agreed not to compete
with the Company for a period of two years following the expiration of the
Consulting Agreement on July 31, 1996.
Under the terms of a Severance and Non-Competition Agreement between the Company
and Mr. Furman, dated December 31, 1990, the Company continues to provide, at no
cost to Mr. Furman, family health insurance coverage under the Company's regular
employee health insurance plan. This obligation will continue until March 2,
1999. In 1995 and 1996, Mr. Furman was paid $51,938 and $30,000 for consulting
services in connection with his work on the Company's Russian joint venture.
Mr. Holland was hired January 30, 1995 as President and Chief Executive Officer.
Under Mr. Holland's Employment Agreement which has a term of four years, Mr.
Holland is entitled to a base salary of $250,000 per year, subject to increases
from time to time by the Board of Directors, and an annual incentive award
payable in cash or vested shares of Class A Common Stock as determined by the
Compensation Committee of the Board of Directors in an amount up to but not
exceeding $125,000, with all or such portion thereof to be earned on a sliding
scale based upon the extent to which the Committee determines that Mr. Holland
has met in each fiscal year the objectives previously established for that year
by the Compensation
<PAGE>
Committee. For 1995, the Incentive Award Objectives were financial objectives
and for years 1996 and beyond the Objectives were financial and non-financial in
nature (i.e. Internal Culture and External Social Responsibility, etc.). Under
the Company's 1985 Stock Option Plan, Mr. Holland received non-incentive stock
options to purchase 180,000 shares of Class A Common Stock of the Company at an
exercise price equal to the fair market value at the date of grant. The options
have a term of eight years and become exercisable at the rate of 20,000 shares a
year for the first four years, and thereafter at the rate of 25,000 a year so
long as Mr. Holland is an employee of the Company under this Agreement, provided
that, in lieu of said "regular" annual vesting of options during the fifth
through eighth years, options for 25,000 shares which are at the time the latest
options to become "regularly" exercisable by the passage of time become
exercisable, by acceleration, upon the Committee's determination by March 15th
of each year, commencing March 15, 1996, that Mr. Holland has met the
Non-Financial Option Objectives previously established for that fiscal year by
the Committee. As of March 28, 1996 no options had been accelerated. The
agreement provides for termination of employment by the Company for cause (as
defined) and also provides for termination by the Company other than for cause
or by Mr. Holland for good reason (as defined), in each of which events Mr.
Holland is entitled to receive for the remaining period of the four year term
his base salary and an amount equal to the average Incentive Award that was
earned prior to termination under the Agreement times the period remaining and
all options which could have become exercisable upon "regular" annual vesting
prior to the end of the four year term shall be accelerated and become vested
upon such termination. The Agreement also provides that during the term and for
two years thereafter Mr. Holland will not compete with the Company.
Mr. Holland resigned as President and Chief Executive Officer of the Company on
October 31, 1996. On October 21, 1996, Mr. Holland and the Company entered into
an Agreement regarding the termination of Mr. Holland's employment which
modified the terms of his original Employment Agreement dated January 30, 1995.
Under the terms of this Agreement, Mr. Holland will continue to receive his
monthly salary, at the annual rate of $250,000 through January 30, 1998; receive
a bonus in 1996 of $100,000; Options for an aggregate of 80,000 shares, which
were granted in January 1995, and will be vested and exercisable up through
April 30, 1997; all other options terminated on October 31, 1996. Participation
in the Company's life insurance and health insurance plans shall continue on the
current basis for the shorter of one year from October 31, 1996 or the
commencement of new employment for Mr. Holland which provides him with
eligibility to participate in comparable plans. Mr. Holland will remain a
director of the Company until the 1997
<PAGE>
Annual Meeting and will provide consulting services to the Company on an as
needed basis. All other provisions in the Employment Agreement dated January 30,
1995, including the covenant not to compete, remain in effect.
Mr. Cohen, Chairperson and a director, has an Employment Agreement which has
been extended for a term ending April 30, 1997. The Agreement provided for a
base salary, which may be increased by the Board (the Board has currently fixed
such base salary at $150,000), and he is entitled to an incentive bonus at the
discretion of the Board (no bonus was paid in 1996). The Agreement also provides
for certain medical benefits and a covenant not to compete during the term of
the Agreement and for a two year period thereafter, in consideration of payment
by the Company (except as otherwise provided in the Agreement) of the
then-current base salary during the two-year period.
Mr. Greenfield, Vice Chairperson, and director and also a director and President
of The Ben & Jerry's Foundation, has an Employment Agreement which has been
extended for a term ending April 30, 1997. The Agreement provides for a base
salary, which may be increased by the Board (the Board has currently fixed such
base salary at $150,000), and he is entitled to an incentive bonus at the
discretion of the Board (no bonus was paid in 1996). The Agreement also provides
for certain medical benefits and a covenant not to compete during the term of
the Agreement and for a two-year period thereafter, in consideration of payment
by the Company (except as otherwise provided in the Agreement) of the
then-current base salary during the two-year period.
Mr. Bowman, Senior Director of Operations and Chief Operating Officer, has an
Employment Agreement dated August 21, 1995, which has a term of three years,
expiring August 20, 1998. The Agreement provides for an annual base salary,
which may be increased by the Board (the Board has currently fixed such base
salary at $200,000), and he is entitled to an incentive bonus, not exceeding 35%
of his base salary (payable in cash and shares of Class A Common Stock), as
determined by the Chief Executive Officer, subject to approval of the
Compensation Committee. The amount of the award for 1996 was $20,000. The
Agreement also provides for stock options on 25,000 shares of Class A Common
Stock which were granted in August, 1995, vesting over a period of six years,
commencing January 1, 1997. The Agreement also provides for medical, life
insurance, 401(k)plan and other employee benefits, a covenant not to compete
during the term of the Agreement and for a two-year period thereafter, and for
one year's continuation of then-current base salary and annual incentive award
at the rates in effect on the date of termination of his employment by the
Company without cause.
<PAGE>
Mr. Odak, Chief Executive Officer, has a three year Employment Agreement with
the Company dated December 31, 1996. Under the terms of the Agreement, Mr. Odak
is entitled to a base salary of $300,000 per annum, subject to increases from
time to time by the Board of Directors, in its sole discretion. Mr. Odak shall
receive options, which are non-statutory, non-incentive stock options, to
purchase an aggregate of 360,000 shares of Class A Common Stock of the Company
exercisable at $10.88 per share, the fair market value on the date of grant by
the Compensation Committee of the Board of Directors under the 1995 Equity
Incentive Plan. The options have a term of 10 years and will become exercisable
so long as Mr. Odak is employed.
The Employment Agreement may be terminated at any time by the Company for cause,
as defined, upon written notice to Mr. Odak. If terminated for cause, the
Company shall have no further obligation or liability to Mr. Odak, other than
for base salary earned and unpaid at the date of termination, any options that
are vested which shall continue to be exercisable for thirty days (unless such
options are terminated by the vote of the Compensation Committee of the Board of
Directors), and payments or reimbursement of business expenses accrued prior to
the date of termination. All other options shall terminate.
The Company may also terminate the Employment Agreement other than for cause. In
the event of such termination during the first year of the Agreement (or, upon
vote of two-thirds of the members of the Board of Directors, excluding Mr. Odak,
that a decision should not be made in the first year, then in the first 15
months of the Agreement), the Company shall have a continuing obligation to pay
Mr. Odak his base amount at the rate in effect on the date of termination. In
the event of such termination following the first year of the Agreement (or,
upon vote of two-thirds of the members of the Board of Directors, excluding Mr.
Odak, that a decision should not be made in the first year, then following the
first 15 months of the Agreement), the Company shall have a continuing
obligation to pay Mr. Odak his base amount at the rate in effect on the date of
termination for a period of twelve months. Additionally, the Company will
continue to contribute, for the period during which the base amount is
continued, the cost of Mr. Odak's participation (including his family) in the
Company's group medical and hospitalization insurance plans and group life
insurance plan, provided that Mr. Odak is entitled to continue such
participation under applicable law and plan terms. Upon such termination,
unvested options shall become exercisable to the extent so provided by the terms
of the Employment Agreement.
Mr. Odak may terminate his employment with the Company for good reason, as
defined (in the absence of cause), upon notice to the Company. In the event of
such termination, base amount,
<PAGE>
benefits and options (including acceleration, period of exercisablilty and
termination of options) shall be paid or provided in the same manner and extent
as for a termination Other Than for Cause as stated above.
Mr. Odak agrees not to compete with the Company during his period of employment
and, after his employment terminates, for the greater of one year or the period
during which severance payments are made.
During the year ended December 28, 1996, the Company purchased Rain Forest
Crunch cashew-brazilnut buttercrunch candy to be included in Ben & Jerry's Rain
Forest Crunch flavor ice cream for an aggregate purchase price of approximately
$1,000,000 from Community Products, Inc., a company of which Messrs. Cohen and
Furman are the principal stockholders and of which Mr. Cohen is also president.
Mr. Lager was a director until January 1994. The candy was purchased from
Community Products, Inc. at competitive prices and on standard terms and
conditions. Although the Company expects to purchase additional quantities of
candy from Community Products, Inc., termination of Ben & Jerry's relationship
with this supplier would not have a material effect on the Company's business.
<PAGE>
Item 14. Exhibits, Financial Statements, and Financial
Statement Schedule, and Reports on Form 8-K
(a) List of financial statements and financial statement
schedule:
Form 10-K
Page No.
--------
(1) The following consolidated financial
statements are included in Item 8:
Consolidated Balance Sheets as of December
28, 1996 and December 30, 1995 F-2
Consolidated Statements of Operations for
the years ended December 28, 1996, December
30, 1995, and December 31,1994 F-3
Consolidated Statements of Stockholders'
Equity for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 F-4
Consolidated Statements of Cash Flows for
the years ended December 28, 1996, December 30,
1995 and December 31, 1994 F-5
Notes to Consolidated Financial Statements F-6 to
F-15
(2) The following financial statement schedule
is included in Item 14 (d) F-16
SCHEDULE II - Valuation and Qualifying
Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) The following designated exhibits are, as
indicated below, either filed herewith or have
heretofore been filed with the Securities and
Exchange Commission under the Securities Act of 1933
or the Securities Exchange Act of 1934 and are
referred to and incorporated herein by reference to
such filings.
<PAGE>
Exhibit No.
3.1 Articles of Association, as amended, of the
Company (filed with the Securities and Commission
as Exhibit 3.1 and 3.1.1 to the Company's Registration
Statement on Form-1 (File No. 33-284) and incorporated
herein by reference).
3.1.1 Amendment to Articles of Association on June 27, 1987 (filed as
Exhibit 1 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1987 and incorporated herein by
reference).
3.1.2 Amendment to Articles of Association on September 7, 1993 (filed
as Exhibit 1 to the Company's Quarterly Report on Form 10-Q for
the period ended June 26, 1993 and incorporated herein by
reference).
3.1.3 Amendment to Articles of Association on August 4, 1995 (filed as
Exhibit 3.1.3 to the Company's Quarterly Report on Form 10-Q for
the period ended July 1, 1995 and incorporated herein by
reference).
3.2 By-laws as amended through November 10, 1995 (filed
as Exhibit 3.2.2 to the Company's Report on Form 10-Q
for the period ended September 30, 1995 and
incorporated herein by reference).
3.2.1 Section 2 of Article 5 of the By-laws as amended on January 18,
1996 (filed as Exhibit 3.2.1 to the Company's Form 10-K for the
year ended December 30, 1995 and incorporated herein by
reference).
4.1 See Exhibit 3.1.
4.2 See Exhibit 3.2
4.3 Mortgage and Security Agreement among the State of
Vermont, the Company and the Howard Bank, N.A. (filed
as Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (file no. 33-284) and
incorporated herein by reference).
4.4 Guaranty by the Company accepted by the Howard Bank,
N.A., Trustee, and Marine Midland Bank, N.A., as
amended (filed as Exhibits 4.2 and 4.2.1 to the
Company's Registration Statement on Form S-1 (file no.
33-284) and incorporated herein by reference), as
amended November 20, 1987 (filed as Exhibit 4.4 to the
Company's Registration Statement on Form S-1 (file no.
33-17516) and incorporated by reference), as amended
<PAGE>
January 31 and March 10, 1989 (filed as Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988 and incorporated herein by reference).
4.4.1 Amendment to item 4.4 dated July 28, 1992 (filed an
Exhibit to the Company's Registration Statement on
Form S-3 (file no. 33-51550) and incorporated herein
by reference).
4.5 Loan Agreement and Amendment between the Village of
Waterbury, Vermont and the Company (filed as Exhibit
4.4 to the Company's Registration Statement on Form
S-1(file no. 33-284) and incorporated herein by
reference).
4.6 Second Mortgage and Security Agreement dated December
11,1984 between the Company and the Village of
Waterbury, Vermont (filed as Exhibit 4.5 to the
Company's Registration Statement on Form S-1 (file no.
33-284)and incorporated herein by reference).
4.7 Grant Agreement between the Secretary of Housing and
Urban Development and the Village of Waterbury,
Vermont dated September 15, 1984 (filed as Exhibit 4.6
to the Company's Registration Statement on Form S-1
(file no.33-284) and incorporated herein by
reference).
4.8 Form of Class A Common Stock Certificate (filed as
Exhibit 4.8 to the Company's Registration Statement on
Form S-1 (file no. 33-17516) and incorporated herein
by reference).
4.9 Form of Class B Common Stock Certificate (filed as
Exhibit 4.9 to the Company's Registration Statement on
Form S-1 (file no. 33-17516) and incorporated herein
by reference).
4.10 Omitted.
4.11 Senior Note Agreement dated as of October 13, 1993
between Ben & Jerry's Homemade, Inc. and The Travelers
Insurance Company and Principal Mutual Life Insurance
Company (filed as Exhibit 1 to the Company's Quarterly
Report on Form 10-Q for the period ended September 25,
1993 and incorporated herein by reference).
<PAGE>
The registrant agrees to furnish a copy to the Commission upon
request of any other instrument with respect to long-term debt
(not filed as an exhibit), none of which relates to securities
exceeding 10% of the total assets of the registrants.
10.1 Employment Agreement between Bennett R. Cohen and
the Company (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (file no. 33-284)
and incorporated herein by reference).
10.1.1 Amendment to Employment Agreement dated as of March
27,1991 (filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (file no. 33-284)
and incorporated herein by reference).
10.1.2 Amendment to Employment Agreement dated as of May 1, 1995 (filed
as Exhibit 10.1.2 of the Company's Form 10-K for the year ended
December 30, 1995 and incorporated herein by reference).
10.2 Employment Agreement between Fred Lager and the
Company(filed as Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (file no. 33-284) and
incorporated herein by reference).
10.2.1 Amendment to Employment Agreement dated as of December 31, 1990
(filed as Exhibit 10.2.1 to the Company's Annual Report on Form
10-K for the year ended December 29, 1990 and incorporated
herein by reference).
10.2.2 Consulting Agreement between Fred Lager and the Company dated as
of January 17, 1991 (filed as Exhibit 10.2.2 to the Company's
Annual Report on Form 10-K for the year ended December 18, 1991
and incorporated herein by reference).
10.2.3 Amendment to Consulting Agreement between Fred Lager and the
Company dated as of July 1, 1994 (filed as Exhibit 10.2.3 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference).
10.2.4 Amendment to Consulting Agreement between Fred Lager and the
Company dated as of January 1, 1995 (filed as Exhibit 10.2.4 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference).
<PAGE>
10.3 Employment Agreement between Charles Lacy and the
Company dated August 18, 1994 (filed as
Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.4 Employment Agreement dated May 1, 1995 between
Jerry Greenfield and the Company (filed as
Exhibit 10.4 of the Company's Form 10-K for
the period ending December 30, 1995 and
incorporated herein by reference).
10.5 Settlement Agreement dated March 20, 1985 between the
Company and Haagen-Dazs, Inc. (filed as Exhibit 10.8
to the Company's Registration Statement on Form S-1
(file no. 33-284) and incorporated herein by
reference).
10.6 Omitted.
10.7 License Agreement between the Company and L.S. Heath &
Sons, Inc. (filed as Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1986 and incorporated herein by reference).
10.8 Distribution Agreement between the Company and
Dreyer's Grand Ice Cream, Inc. dated January 6, 1987
(filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K For the year ended December 31,
1986 and incorporated herein by reference), as amended
as of January 20, 1989 (filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1988 and incorporated herein by
reference).
10.8.1 Amendment to Item 10.8 dated August 31, 1992 (filed as
Exhibit 28.1 to the Company's Registration Statement
on Form S-3 (file no. 33-51550) and incorporated
here-in by reference).
10.8.2 Amendment to Item 10.8 dated April 18, 1994 filed as Exhibit 2
to the Company's Quarterly Report on Form 10-Q dated March 26,
1994 and incorporated here-in by reference).
10.8.3 Subdistribution Agreement between the Company and
Dreyer's Grand Ice Cream, Inc. dated February 7, 1994
(filed as Exhibit 1 to the Company's Quarterly Report
on Form 10-Q dated March 26, 1994 and incorporated
here-in by reference.)
<PAGE>
10.8.4 Amendment to Item 10.8.3 dated October 27, 1995 (filed as
Exhibit 10.8.4 to the Company's Form 10-K for the period ending
December 30, 1995 and incorporated herein by reference).
10.9 License Agreement between the Company and Jerry Garcia
and Grateful Dead Productions, Inc. dated July 26,
1987(filed as Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (file no. 33-17516)
and incorporated herein by reference).
10.10 Omitted.
10.11 Area Franchise Agreement between the Company and Ben &
Jerry's of Indiana Inc. dated November 18, 1987 (filed
as Exhibit 10.20 to the Company's Registration
Statement on Form S-1 (file no. 33-17516) and
incorporated herein by reference).
10.12 Omitted.
10.13 Franchise Agreement between the Company and Ben &
Jerry's of California, Inc. dated June 13, 1988 (filed
as Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference).
10.13.1 Amendment to 10.13 effective December 17, 1990 (filed as Exhibit
10.13.1 to the Company's Annual Report on Form 10-K for the year
ended December 25, 1993 and incorporated herein by reference).
10.13.2 Amendment to 10.13 dated as of March 20, 1992 (filed as Exhibit
10.13.2 to the Company's Annual Report on Form 10-K for the year
ended December 25, 1993 and incorporated herein by reference).
10.14 Area Franchise Amended and Restated Agreement between
the Company and Ben & Jerry's West Coast, Inc. dated
March 27, 1992 (filed as Exhibit 10.13.2 on Form 10-K
for the year ended December 25, 1993 and incorporated
herein by reference).
10.15 Franchise Agreement between the Company and BJ O/R, a
California limited partnership, dated June 9, 1993
(filed as Exhibit 2 to the Company's Quarterly Report
on Form 10-Q for the period ended June 26, 1993 and
incorporated herein by reference).
10.16 Omitted.
<PAGE>
10.18 Manufacturing and Warehouse Agreement between the
Company and Edy's Grand Ice Cream, a subsidiary of
Dreyer's Grand Ice Cream, Inc. dated April 5, 1989
(filed as Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended December 30, 1989 and
incorporated herein by reference).
10.18.1 Amendment to Item 10.18 dated September 18, 1992 (filed as
Exhibit 10.18.1 to the Company's Annual Report on Form 10-K for
the year ended December 25, 1993 and incorporated herein by
reference).
10.18.2 Amendment to Item 10.18 dated November 12, 1992(filed as Exhibit
10.18.2 to the Company's Annual Report on Form 10-K for the year
ended December 25, 1993 and incorporated herein by reference).
10.18.3 Amendment to Item 10.18 dated September 2, 1994 (filed as
Exhibit 1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 24, 1994 and incorporated herein by
reference).
10.19 1986 Restricted Stock Plan (filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
10.20 1986 Employee Stock Purchase Plan (filed as Exhibit 4
to the Company's Registration Statements on Form S-8
(file nos. 33-9420 and 33-17594) and incorporated
herein by reference).
10.20.1 Amendment to Employee Stock Purchase Plan dated on August 4,
1995 (filed as Exhibit 10.20.1 on Form 10-Q for the period ended
July 1, 1995 and incorporated herein by reference).
10.21 1985 Stock Option Plan (filed as Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
10.21.1 1994 Amendment to 1985 Stock Option Plan (filed as Exhibit
10.21.1 to the Company's Annual Report on Form 10-K for the year
ended December 30, 1994 and incorporated herein by reference).
10.22 Ben & Jerry's Homemade, Inc. Employees' Retirement
Plan as amended (filed as Exhibit 10.22 to the
Company's Annual Report on Form 10-K for the year
ended December 30, 1989 and incorporated herein by
reference).
<PAGE>
10.22.1 Amendment to Item 10.22 dated January 1, 1990 (filed as Exhibit
10.22.1 to the Company's Report on Form 10-K for the year ended
December 29, 1991 and incorporated herein by reference).
10.22.2 Amendment to Item 10.22 dated June 28, 1990 (filed as Exhibit
10.22.2 to the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by reference).
10.22.3 Amendment to Item 10.22 dated January 1, 1991 (filed as Exhibit
10.22.3 to the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by reference).
10.23 1991 Restricted Stock Plan (filed as Exhibit 10.23 to
the Company's Report on Form 10-K for the year ended
December 25, 1993 and incorporated herein by
reference).
10.24 Severance/Non-Competition Agreement dated as of
December 31,1990 between Jeffrey Furman and the
Company (filed as Exhibit 10.24 to the Company's
Report on Form 10-K for the year ended December 25,
1993 and incorporated herein by reference).
10.25 Omitted.
10.26 Directors and Officers Liability Insurance Policy, Binder dated
February 24, 1996 (filed herewith).
10.27 1992 Non-employee Directors' Restricted Stock Plan
(filed as Exhibit 10.27 to the Company's Annual Report
on Form 10-K for the year ended December 25, 1993 and
incorporated herein by reference).
10.28 Employment Agreement between Robert Holland Jr. and
the Company dated January 30, 1995, (filed as Exhibit
10.28 to the Company's Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein
by reference).
10.28.1 Amendment to Employment Agreement between Robert
Holland, Jr. and the Company (filed as Exhibit 10.28.1
to the Company's Form 10-Q for the period ended September 28,
1996 and incorporated herein by reference).
10.29 1995 Equity Incentive Plan (filed as Exhibit
10.29 to the Company's Quarterly Report on
Form 10-Q for the period ended July 1, 1995 and
incorporated herein by reference).
<PAGE>
10.30 Non-Employee Director's Plan For Stock In Lieu of
Directors' Cash Retainer Dated August 4, 1995 (filed
as Exhibit 10.30 to Form 10-Q quarter ended July 1,
1995 and incorporated herein by reference).
10.31 Employment Agreement dated August 21, 1995 between the
Company and Bruce Bowman (filed as Exhibit 10.31 to
the Company's Form 10-K for the year ended December
30, 1995 and incorporated herein by reference).
10.32 Lease dated February 1, 1996 between the Company and
Technology Park Associates, Inc. (filed as Exhibit
10.31 to the Company's Form 10-K for the year ended
December 30, 1995 and incorporated herein by
reference).
10.33 Employment Agreement dated December 31, 1996 between
the Company and Perry D. Odak (filed herewith).
11.0 Statement Re: Computation of Per Share Earnings (filed
herewith).
21.1 Subsidiaries of the registrant as of December 28,1996
(filed herewith).
23.0 Consent of Ernst & Young LLP (filed herewith).
27.0 Financial Data Schedule (filed herewith).
(b) No Current Reports on Form 8-K were filed during
the fourth quarter of 1996
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BEN & JERRY'S HOMEMADE, INC.
Dated: March 27, 1997
By: /s/ Frances Rathke
------------------
Frances Rathke
Chief Financial Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date indicated.
March 27, 1997 /s/ Elizabeth Bankowski
Elizabeth Bankowski
Director, Director of Social Mission
Development
March 27, 1997 /s/ Bennett R. Cohen
Bennett R. Cohen
Director and Chairperson
March 27, 1997 /s/ Jeffrey Furman
Jeffrey Furman
Director
March 27, 1997 /s/ Jerry Greenfield
Jerry Greenfield
Director and Vice Chairperson
March 27, 1997 /s/ Jennifer Henderson
Jennifer Henderson
Director
March 27, 1997
Robert Holland Jr.
Director
March 27, 1997 /s/ Fred E. Lager
Fred E. Lager
Director
March 27, 1997 /s/ Frederick A. Miller
Frederick A. Miller
Director
March 27, 1997 /s/ Henry Morgan
Henry Morgan
Director
March 27, 1997 /s/Perry D. Odak
Perry D. Odak
Principal Executive Officer
March 27, 1997 /s/ Frances Rathke
Frances Rathke
Principal Financial Officer and
Principal Accounting Officer
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2),(c)and(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 28, 1996
BEN & JERRY'S HOMEMADE INC.
SOUTH BURLINGTON, VERMONT
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Auditors...............................................F-1
Consolidated Balance Sheets as of December 28, 1996 and December
30, 1995................................................................F-2
Consolidated Statements of Operations for the years ended December 28, 1996,
December 30, 1995, and December 31, 1994................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December
28, 1996, December 30, 1995, and December 31, 1994......................F-4
Consolidated Statements of Cash Flows for the years ended December 28, 1996,
December 30, 1995, and December 31, 1994................................F-5
Notes to Consolidated Financial Statements...........................F-6 to F-15
Financial Schedule:
SCHEDULE II - Valuation and Qualifying Accounts.............................F-16
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Ben & Jerry's Homemade, Inc.
We have audited the accompanying consolidated balance sheets of Ben & Jerry's
Homemade, Inc. as of December 28, 1996 and December 30, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 28, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Ben &
Jerry's Homemade, Inc. at December 28, 1996 and December 30, 1995 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 28, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 27, 1997
F-1
<PAGE>
Consolidated Balance Sheets
(In thousands except share data)
<TABLE>
December 28, December 30,
Assets 1996 1995
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,104 $ 35,406
Investments 466
Accounts receivable
Trade (less allowance of $695 in 1996 and $802 in 1995
for doubtful accounts) 8,684 11,660
Other 275 854
Inventories 15,365 12,616
Deferred income taxes 4,099 3,599
Income taxes receivable 2,920 2,831
Prepaid expenses 200 1,097
--- -----
Total current assets 68,113 68,063
------ ------
Property, plant and equipment, net 65,104 59,600
Investments 1,000 1,000
Other assets 2,448 2,411
----- -----
$ 136,665 $ 131,074
=========== ===========
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 17,398 $ 16,592
Current portion of long-term debt and
capital lease obligations 660 448
--- ---
Total current liabilities 18,058 17,040
Long-term debt and capital lease obligations 31,087 31,977
Deferred income taxes 4,835 3,526
Commitments and contingencies
Stockholders' equity:
$1.20 noncumulative Class A preferred stock -
$1.00 par value, redeemable at the Company's option
at $12.00 per share; 900 shares authorized,
issued and outstanding, aggregate preference
on voluntary or involuntary liquidation - $9,000 1 1
Class A common stock - $.033 par value; authorized
20,000,000 shares; issued: 6,364,733 shares at
December 28, 1996 and 6,330,302 shares at
December 30, 1995 210 209
Class B common stock - $.033 par value; authorized
3,000,000 shares; issued: 897,664 shares at
December 28, 1996 and 914,325 shares at
December 30, 1995 29 30
Additional paid-in capital 48,753 48,521
Retained earnings 35,190 31,264
Cumulative translation adjustment (118) (114)
Treasury stock, at cost: 67,032 Class A and 1,092
Class B shares at December 28, 1996 and
December 30, 1995 (1380) (1380)
----- -----
Total stockholders' equity 82,685 78,531
------ ------
$ 136,665 $ 131,074
=========== ============
</TABLE>
See accompanying notes.
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Operations
(In thousands except per share data)
<TABLE>
Years Ended
-----------
Dec. 28, 1996 Dec. 30, 1995 Dec. 31, 1994
(52 weeks) (52 weeks) (53 weeks)
---------- ---------- ----------
<S> <C> <C> <C>
Net sales .......................................... $ 167,155 $ 155,333 $ 148,802
Cost of sales ...................................... 115,212 109,125 109,760
--------- --------- ---------
Gross profit ....................................... 51,943 46,208 39,042
Selling, general and administrative expenses ....... 45,531 36,362 36,253
Asset write-down ................................... 6,779
Other income (expense):
Interest income ............................... 1,676 1,681 1,034
Interest expense .............................. (1,996) (1,525) (295)
Other ......................................... 243 (597) (511)
--------- --------- ---------
(77) (441) 228
--------- --------- ---------
Income (loss) before income taxes .................. 6,335 9,405 (3,762
Income taxes (benefit) ............................. 2,409 3,457 (1,893)
--------- --------- ---------
Net income (loss) .................................. $ 3,926 $ 5,948 $ (1,869)
========= ========= =========
Net income (loss) per common share ................. $ 0.54 $ 0.83 $ (0.26)
Weighted average common and common
equivalent shares outstanding ................. 7,230 7,222 7,148
</TABLE>
See accompanying notes
F-3
<PAGE>
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands except share data)
<TABLE>
Preferred
Stock Common Stock Treasury Stock
Class A Class B Additional Cumulative Class A Class B
Par Par Par Paid-in Retained Unearned Translation
Value Value Value Capital Earnings Compensation Adjustment Cost Cost
----- ----- ----- ------- -------- ------------ ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 25, 1993 ............. $ 1 $207 $ 32 $48,222 $27,185 $ (20) $ 0 $(1,360) (5)
Net income (loss) ................... (1,869)
Common stock issued under stock
purchase plan (8,619 Class A shares) 139
Conversion of Class B shares to Class A
shares (15,189 shares) .............. 1 (1)
Termination of stock award (Class A
shares) ............................. 5 20 (55)
---------------------------------------------------------------------------------------
Balance at December 31, 1994 ............. 1 208 31 48,366 25,316 0 0 (1,415) (5)
Net income (loss) ........................ 5,948
Common stock issued under stock
purchase plan (21,599 Class A shares) 174
Conversion of Class B shares to Class A
shares (18,123 shares) .............. 1 (1)
Common stock issued under restricted
stock plan (2,000 Class A shares) ... (19) 40
Foreign currency translation adjustment .. (114)
-------------------------------------------------------------------------------------
Balance at December 30, 1995 ............. 1 209 30 48,521 31,264 0 (114) (1,375) (5)
Net income ............................... 3,926
Common stock issued under stock
purchase plan (15,674 Class A shares) 205
Conversion of Class B shares to Class A
shares (16,661 shares) .............. 1 (1)
Common stock issued under restricted
stock plan (2,096 Class A shares) .. 27
Foreign currency translation adjustment .. (4)
--------------------------------------------------------------------------------------
Balance at December 28, 1996 ............. $ 1 $210 $ 29 $48,753 $35,190 $ 0 $ (118) $ (1,375) $ (5)
==== ==== ==== ======= ======= ====== ====== ======== ======
</TABLE>
See accompanying notes.
F-4
Ben & Jerry's Homemade, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
Years Ended
-----------
December 28, December 30, December 31,
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) ........................................ $ 3,926 $ 5,948 $ (1,869)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization ........................ 7,091 5,928 4,707
Deferred income taxes ................................ 809 2,166 (1,564)
Provision for doubtful accounts ...................... 408 400 311
Loss on asset write-down ............................. 6,779
Loss on disposition of assets ........................ 10 171 69
Stock compensation ................................... 21
Changes in assets and liabilities:
Accounts receivable ............................. 3,146 (1,009) (536)
Income taxes receivable/payable ................. (89) (733) (2,442)
Inventories ..................................... (2,749) 847 (10)
Prepaid expenses ................................ 897 (563) 313
Accounts payable and accrued expenses ........... 806 2,677 (1,159)
--- ----- ------
Net cash provided by operating activities ..................... 14,255 15,853 4,599
Cash flows from investing activities:
Additions to property, plant and equipment ............... (12,333) (7,532) (26,213)
Proceeds from sale of property, plant
and equipment ........................................ 168 96 194
Increase (decrease) in investments ....................... (466) 7,000 14,000
Changes in other assets .................................. (320) (303) (882)
---- ---- ----
Net cash used for investing activities ........................ (12,951) (739) (12,901)
Cash flows from financing activities:
Net proceeds from long-term debt ......................... 14,936
Repayments of long-term debt and
capital leases ....................................... (678) (547) (700)
Net proceeds from issuance of common stock ............... 232 174 139
--- --- ---
Net cash (used for) provided by financing activities ......... (446) (373) 14,375
Effect of exchange rate changes on cash ....................... (160) (113)
---- ----
Increase in cash and cash equivalents ......................... 698 14,628 6,073
Cash and cash equivalents at beginning of year ................ 35,406 20,778 14,705
------ ------ ------
Cash and cash equivalents at end of year ...................... $ 36,104 $ 35,406 $ 20,778
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES
Business
- --------
Ben & Jerry's Homemade, Inc. (the Company) makes and sells super premium ice
cream and other frozen dessert products through distributors and directly to
retail outlets primarily located in the United States, including Company-owned
and franchised ice cream parlors.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
all its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated.
Use of Estimates
- ----------------
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
- -----------
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Cash Equivalents
- ----------------
Cash equivalents represent highly liquid investments with maturities of three
months or less at date of purchase.
Investments
- -----------
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported in a separate component of shareholders' equity. The amortized
cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Held-to-maturity securities are stated at amortized cost,
adjusted for amortization of premium and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in income. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities classified
as available-for-sale are included in investment income.
Concentration of Credit Risk
- ----------------------------
Financial instruments, which potentially subject the Company to significant
concentration of credit risk, consist of cash and cash equivalents, investments
and trade accounts receivable. The Company places its investments in highly
rated financial institutions around the country, obligations of the United
States Government and investment grade short-term instruments. No more than 20%
of the total investment portfolio is invested in any one issuer or guarantor
other than United States Government instruments which limits the amount of
credit exposure.
The Company sells its products primarily to well established frozen dessert
distribution or retailing companies throughout the United States and Europe. The
Company's most significant customer, Dreyer's Grand Ice Cream, Inc., accounted
for 55%, 47%, or 52% of net sales in 1996, 1995 and 1994 respectively. The
Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. Historically, the Company has not
experienced significant losses related to investments or trade receivables.
<PAGE>
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are carried at cost. Depreciation, including
amortization of leasehold improvements, is computed using the straight-line
method over the estimated useful lives of the related assets. Amortization of
assets under capital leases is computed on the straight-line method over the
lease term and is included in depreciation expense.
Translation of Foreign Currencies
- ---------------------------------
Assets and liabilities of the Company's foreign operations are translated into
United States dollars at exchange rates in effect on the balance sheet date.
Income and expense items are translated at average exchange rates prevailing
during the year. Translation adjustments are accumulated as a separate component
of stockholders' equity. Transaction gains or losses are recognized as other
income or expense in the period incurred. Transaction gains or losses have been
immaterial for all periods presented.
Revenue Recognition
- -------------------
The Company recognizes revenue and the related costs when product is shipped.
The Company recognizes franchise fees as income for individual stores when
services required by the franchise agreement have been substantially performed
and the store opens for business. Franchise fees relating to area franchise
agreements are recognized in proportion to the number of stores for which the
required services have been substantially performed. Franchise fees recognized
as income were approximately $301,000, $166,000 and $82,000 in 1996, 1995 and
1994, respectively. These amounts have been included in net sales.
Advertising
- -----------
Advertising costs are expensed as incurred. Advertising expense (excluding
cooperative advertising with distribution companies) amounted to approximately
$3.2 million , $1.3 million, and $5.3 million for the years ended December 28,
1996, December 30, 1995 and December 31, 1994.
Income Taxes
- ------------
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the liability method, deferred tax liabilities and
assets are recognized for the tax consequences of temporary differences between
the financial reporting and tax bases of assets and liabilities.
Stock Based Compensation
- ------------------------
The Company grants stock options for a fixed number of shares with an exercise
price equal to the fair value of the shares at the date of the grant. The
Company accounts for stock option grants in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and intends to continue to do so.
Accordingly, no compensation expense for stock option grants is recognized.
Earnings Per Share
- ------------------
Primary earnings per common share is computed based on the weighted average
number of shares of Class A and Class B Common Stock outstanding during the
period, and for incremental shares assumed issued for dilutive common stock
equivalents. Fully diluted earnings per share did not differ materially from
primary earnings per share.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
Effective December 31, 1995, the Company has adopted Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The adoption of SFAS 121 had no impact on the financial position or
results of operations of the Company as no indicators of impairment currently
exist.
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), Accounting and Disclosure of Stock
- -Based Compensation. The Company will continue to account for its stock based
compensation arrangements under the provisions of APB 25, Accounting for Stock
Issued to Employees.
F-7
<PAGE>
2. CASH AND INVESTMENTS
The Company's cash and investments in debt securities available-for-sale are
carried at fair value, which approximates cost, or amortized cost as summarized
below:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Municipal bonds $ 14,900 $ 16,507
U.S. corporate securities 12,980 14,139
------ ------
Total debt securities available-for-sale 27,880 30,646
Cash, cash equivalents and other investments 9,690 5,760
----- -----
Total cash, cash equivalents and investments $ 37,570 $ 36,406
======= ======
</TABLE>
All debt securities at December 28, 1996 have maturities of less than twelve
months. In 1995, certain debt securities have been classified as long-term to
reflect their intended use to finance capital projects. At December 28, 1996
investments totaling $1,466,000 were classified as held-to-maturity and
classified as investments.
Investments in debt securities mature at par in thirty to forty-five day
intervals, at which time the stated interest rates are reset at the then market
rate. Gross purchases and maturities aggregated $61,100,000 and $63,922,000 in
1996, $94,500,000 and $83,525,000 in 1995, and $81,400,000 and $91,960,000 in
1994, respectively.
3. INVENTORIES
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Ice cream and ingredients $ 14,221 $ 11,480
Paper goods 492 674
Food, beverages, and gift items 652 462
--- ----
$ 15,365 $ 12,616
====== ======
</TABLE>
The Company purchases certain ingredients from a company owned by the Company's
Chairperson and a member of the Board of Directors which amounted to
approximately $1,000,000 for 1996 and $1,500,000 for 1995 and 1994.
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
Estimated
Useful Lives/
1996 1995 Lease Term
---- ---- ----------
<S> <C> <C> <C>
Land and improvements $ 3,615 $ 3,575 15-25 years
Land under capital le 866 866
Buildings 37,533 35,644 25 years
Equipment and furniture 47,841 41,324 3-20 years
Equipment under capital lease 137 934 5 years
Leasehold improvements 3,153 1,277 3-10 years
Construction in progress 758 740
--- ---
93,903 84,360
Less accumulated depreciation 28,799 24,760
------- ------
$ 65,104 $ 59,600
====== ======
</TABLE>
Accumulated depreciation at December 28, 1996 and December 30, 1995, included
accumulated amortization of $133,000 and $902,000 respectively, related to
assets under capital lease.
F-8
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
1996 1995
---- ----
Trade accounts payable $ 4,337 $ 7,283
Accrued expenses 8,825 6,071
Accrued payroll and related costs 2,152 1,749
Accrued promotional costs 2,076 1,313
Other 8 176
----- -----
$ 17,398 $ 16,592
====== ======
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Senior Notes - Series A payable in annual installments beginning
in 1998 through 2003 with interest payable semiannually at 5.9% $ 20,000 $ 20,000
Senior Notes - Series B payable in annual installments beginning
in 1998 through 2003 with interest payable semiannually at 5.73% 10,000 10,000
Industrial Revenue Bonds (IRB), payable in monthly installments
of $12,500 plus interest at 75% of the prime rate (6.188% at December 28,
1996 and 6.375% at December 30, 1995) through
June 2000 468 613
Urban Development Action Grant, payable in quarterly installments
of $22,130 including interest at 9% through April 2000 247 310
Capital lease obligations 470 771
Other long-term obligations 562 731
------ ------
31,747 32,425
Less current portion 660 448
--- ---
$ 31,087 $ 31,977
====== ======
</TABLE>
Property, plant and equipment having a net book value of approximately
$18,864,000 at December 28, 1996 is pledged as collateral for certain long-term
debt.
Long-term debt and capital lease obligations at December 28, 1996 maturing in
each of the next five years and thereafter are as follows:
Capital lease Long-term
obligations debt
----------- ----
1997 $ 334 $ 343
1998 15 5,398
1999 15 5,281
2000 15 5,084
2001 248 5,040
Thereafter 10,131
------
Total minimum payments 627 31,277
Less amounts representing interest 157
--- ------
Present value of minimum payments $ 470 $ 31,277
=== ======
F-9
No interest was capitalized by the Company in 1996. Interest of approximately
$497,000 and $1,288,000 was capitalized in 1995 and 1994, respectively, as part
of the acquisition cost of property, plant and equipment. Interest paid,
including interest capitalized, amounted to $1,973,000, $2,023,000 and
$1,755,000 for 1996, 1995 and 1994, respectively.
The Company has available two $10,000,000 unsecured working capital line of
credit agreements with two banks. Interest on borrowings under the agreements is
set at the banks' Base Rate or at the Eurodollar Rate plus a maximum of up to
1.25%. The agreements expire December 29, 1998 and September 29, 1998,
respectively, and any outstanding borrowings are due at that time. No amounts
were borrowed under these or any prior bank agreements during 1996, 1995, and
1994.
Certain of the debt agreements contain certain restrictive covenants requiring
maintenance of minimum levels of working capital, net worth and debt to
capitalization ratios. As of December 28, 1996 the Company was in compliance
with the provisions of these agreements. Under the most restrictive of these
covenants limiting distributions to an amount of $5,000,000 plus 75% of earnings
and 100% of net losses since June 30, 1993 approximately $13 million of retained
earnings at December 28, 1996 was available for payment of dividends.
The fair values of the Company's long-term debt are estimated using discounted
cash flow analyses, based on the Company's current incremental borrowing rates
for similar types of borrowing arrangements.
The carrying amounts and fair values of the Company's financial instruments are
as follows:
1996 1995
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
Long-term debt $31,747 $29,862 $32,425 $29,815
7. STOCKHOLDER'S EQUITY
The Preferred Stock has one vote per share on all matters on which it is
entitled to vote and is entitled to vote as a separate class in certain business
combinations, such that approval of two-thirds of the class is required for such
business combinations. The Class A Common Stock has one vote per share on all
matters on which it is entitled to vote. In June 1987, the Company's
shareholders adopted an amendment to the Company's Articles of Association that
authorized 3,000,000 shares of a new Class B Common Stock and redesignated the
Company's existing Common Stock as Class A Common Stock. The Class B Common
Stock has ten votes per share on all matters on which it is entitled to vote,
except as may be otherwise provided by law, is generally non-transferable and is
convertible into Class A Common Stock on a one-for-one basis. A stockholder who
does not wish to complete the prior conversion process may effect a sale by
simply delivering the certificate for such shares of Class B Stock to a broker,
properly endorsed. The broker may then present the certificate to the Company's
Transfer Agent which, if the transfer is otherwise in good order, will issue to
the purchaser a certificate for the number of shares of Class A Stock thereby
sold.
8. STOCK BASED COMPENSATION PLANS
The Company has stock option plans which provide for the grant of options to
purchase shares of the Company's common stock to employees or consultants. The
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
F-10
Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1995
and 1996, respectively; risk-free interest rates ranging from 6.01% to 6.15%;
dividend yield of 0%; volatility factors of the expected market price of the
Company's common stock of .35 and .39; and a weighted-average expected life of
the option of 3.3 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information) and the following schedules summarize the changes in stock options
during the three years ended December 28, 1996:
1996 1995
---- ----
Pro forma net income $3,796 $5,849
Pro forma earnings per share $0.53 $0.81
Weighted average exercise price
of options granted $13.47 $12.83
Weighted average fair value of
options outstanding at the end of the period. $4.26 $4.33
Exercise prices for options outstanding ranged from $10.63 - $19.00. The
weighted-average remaining contractual life of those options is nine years.
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1998.
The 1985 Option Plan provides for the grant of incentive and non-incentive stock
options to employees or consultants. The 1985 Option Plan provides that options
granted are exercisable at the market value on the date of grant. The 1985
option plan expired in August 1995. While the Company grants options which may
become excercisable at different times or within different periods, the Company
has generally granted options to employees which vest over a period of five,
eight or ten years, and in some cases subject to acceleration of vesting. The
exercise period cannot exceed ten years from the date of grant. At December 28,
1996, no shares of Class A Common Stock were available under the 1985 Option
Plan for additional grants.
<TABLE>
Number of Option Price
A summary of the 1985 Option Plan activity is as follows: Options Per Share
------- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1994 162,308 $ 16.75 - $ 16.75
Granted 215,000 10.63 - 14.00
Exercised - 0.00 - 0.00
Forfeited (19,871) 16.75 - 16.75
------ ----- - -----
Outstanding at December 30, 1995 357,437 $ 10.63 - 16.75
Granted - 0.00 - 0.00
Exercised - 0.00 - 0.00
Forfeited (109,819) 10.63 - 16.75
------- ----- - -----
Outstanding at December 28, 1996 247,618 $ 10.63 - $ 16.75
=======
Options vested at December 28, 1996 160,444 $ 10.63 - $ 16.75
=======
</TABLE>
F-11
The 1995 Equity Incentive Plan provides for the grant to employees and
consultants of incentive and non-incentive stock options, stock appreciation
rights, restricted stock, unrestricted stock awards, deferred stock awards, cash
or stock performance awards, loans or supplemental grants, or combinations
thereof. While the Company grants options which may become excercisable at
different times or within different periods, the Company has generally granted
options to employees which vest over a period of five, eight or ten years, and
in some cases subject to acceleration of vesting. The exercise period cannot
exceed ten years from the date of grant. At December 28, 1996, 412,500 shares of
Class A Common Stock were available under the 1995 Equity Incentive Plan for
additional grants. However at March 7, 1997 55,000 shares were available for
additional grants.
<TABLE>
Number of Option Price
A summary of the 1995 Equity Incentive Plan activity is as follows: Options Per Share
------- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1994 0 $ 0.00 - $ 0.00
Granted 25,000 19.00 - 19.00
Exercised 0 0.00 - 0.00
Forfeited 0 0.00 - 0.00
- ---- - ----
Outstanding at December 30, 1995 25,000 $ 19.00 - $ 19.00
Granted 62,500 12.38 - 16.00
Exercised 0 0.00 - 0.00
Forfeited 0 0.00 - 0.00
- ---- - ----
Outstanding at December 28, 1996 87,500 $ 12.38 - $ 19.00
======
Options vested at December 28, 1996 625 $ 16.00 - $ 16.00
===
</TABLE>
The Company maintains an Employee Stock Purchase Plan which authorizes the
issuance of up to 300,000 shares of common stock. All employees with six months
of continuous service are eligible to participate in this plan. Participants in
the plan are entitled to purchase Class A Common Stock during specified
semi-annual periods through the accumulation of payroll, at the lower of 85% of
market value of the stock at the beginning or end of the offering period. At
December 28, 1996, 112,338 shares had been issued under the plan and 187,662
shares were available for future issuance.
The Company has a restricted stock plan (the 1992 Plan) which provides that
non-employee directors, on becoming eligible, may be awarded shares of Class A
Common Stock by the Compensation Committee of the Board of Directors. Shares
issued under the plan become vested over periods of up to five years. The
Company has also adopted the 1995 Plan, which provides that non-employee
directors can elect to receive stock in lieu of a Director's cash retainer. In
1996 2,096 shares were issued to non-employee directors. These shares vested
immediately. At December 28, 1996, a total of 2,096 shares had been awarded
under these plans, of which 2,096 were fully vested, and 30,904 shares were
available for future awards. Unearned compensation on unvested shares is
recorded as of the award date and is amortized over the vesting period.
As of December 28, 1996 a total of 443,404 shares are reserved for future grant
under all of the Company's stock plans. However at March 7, 1997 82,749 shares
were available for additional grants.
9. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
Federal: 1996 1995 1994
---- ---- ----
Current $ 1,348 $ 873 $ (314)
Deferred 681 1,695 (1,263)
--- ----- -------
2,029 2,568 (1,577)
State:
Current 252 418 (15)
Deferred 128 471 (301)
--- --- -----
380 889 (316)
--- --- -----
$ 2,409 $ 3,457 $(1,893)
======= ======= ========
F-12
Income taxes computed at the federal statutory rate differ from amounts provided
as follows:
1996 1995 1994
---- ---- ----
Tax at statutory rate 34.0 % 34.0 % (34.0)%
State tax, less federal tax effect 6.0 4.5 (5.6)
Income tax credits (1.0) (2.9) (6.7)
Tax exempt interest (2.4) (1.1) (5.0)
Other, et 1.4 2.3 1.0
------ ------ ------
Provision (benefit) for income taxes 38.0 % 36.8 % (50.3)%
====== ===== ======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and are attributable to
the following:
1996 1995
---- ----
Deferred tax assets:
Accrued liabilities $ 2,297 $ 1,514
Inventories 944 1,106
Accounts receivable 526 386
Other 429 695
--- ---
Total deferred tax assets 4,196 3,701
----- -----
Deferred tax liabilities:
Depreciation 4,923 3,628
Other 9
-
Total deferred tax liabilities 4,932 3,628
----- -----
Net deferred tax asset (liabilities) $ (736) $ 73
======= =======
Income taxes paid amounted to $1,716,000, $1,918,000 and $2,111,000 during 1996,
1995 and 1994, respectively.
10. THE BEN & JERRY'S FOUNDATION, INC.
In October 1985, the Company issued 900 shares Class A Preferred Stock to The
Ben & Jerry's Foundation, Inc. (the Foundation), a non-profit corporation
qualified under section 501(c)(3) of the Internal Revenue Code. The primary
purpose of the Foundation is to be the principal recipient of cash contributions
from the Company which are then donated to various community organizations and
other charitable institutions. Contributions to the Foundation and directly to
other charitable organizations, at the rate of approximately 7.5% of income
before income taxes, amounted to approximately $514,000 and $768,000 for 1996
and 1995 respectively. In 1994 there were no contributions to the foundation.
The Preferred Stock is entitled to vote as a separate class in certain business
combinations, such that approval of two-thirds of the class is required for such
business combinations. Two of the three directors, including one of the founders
of the Company, are members of the Board of Directors of the Foundation.
11. EMPLOYEE BENEFIT PLANS
The Company maintains profit sharing and savings plans for all eligible
employees. Contributions to the profit sharing plan are allocated among all
current full-time and regular part-time employees (other than the co-founders,
Chief Executive Officer and
F-13
Officers that are Senior Directors of functions) allocated fifty percent based
upon length of service and fifty percent split evenly among all employees. The
profit sharing plan is informal and discretionary. The savings plan is
maintained in accordance with the provisions of Section 401(k) of the Internal
Revenue Code and allows all employees with at least twelve months of service to
make annual tax-deferred voluntary contributions up to fifteen percent of their
salary. The Company may match the contribution up to two percent of the
employee's gross annual salary. Total contributions by the Company to the profit
sharing and savings plans were approximately $670,000, $769,000 and $508,000 for
1996, 1995 and 1994, respectively.
12. WRITE-DOWN OF ASSETS
In 1994, following substantial delays with the implementation and completion of
certain automated handling processes and refrigeration hardening equipment of
the Company's St. Albans, Vermont plant and after receipt of a report from an
outside engineering firm experienced in the refrigerated food industry, the
Company decided to replace certain of the software and equipment installed at
the new plant. The loss from the write-down of the related assets (including a
portion of the previously incurred capitalized interest and project management
costs), amounted to $6,779,000 (approximately $4.1 million after tax or $0.57
per share). Of this amount, $3,804,000 was offset against the balance in
construction in progress while $2,975,000 was accrued for additional anticipated
costs, which were paid during 1995.
13. LEGAL MATTERS
On December 14, 1995, the Company was served with a class action complaint filed
in federal court in Burlington, Vermont. The complaint, captioned Henry G.
Jakobe, Jr. v. Ben & Jerry's Inc., et al., , was filed by a Ben & Jerry's
shareholder on behalf of himself and purportedly on behalf of all other Ben &
Jerry's shareholders who purchased the common stock of the Company during the
period from March 25, 1994 through December 19, 1994. Plaintiff alleges that the
Company violated the federal securities laws by making untrue statements of
material facts and omitting to state material facts in 1994, primarily
concerning the Company's construction and start-up of its new manufacturing
facility in St. Albans, Vermont. Also named as defendants in the Complaint are
certain present and former officers and directors of the Company. Plaintiff is
seeking an unspecified amount of monetary damages. On October 31, 1996 the Court
dismissed all but one of Plaintiff's claims. Pretrial discovery has commenced.
Management believes the allegations made in the lawsuit are without merit and
the Company is defending the lawsuit vigorously.
14. COMMITMENTS
The Company leases certain property and equipment under operating leases.
Minimum payments for operating leases having initial or remaining noncancellable
terms in excess of one year are as follows:
1997 $ 559
1998 534
1999 375
2000 292
2001 297
Thereafter 1,171
Rent expense for operating leases amounted to approximately $643,000, $662,000
and $516,000 in 1996, 1995 and 1994, respectively.
F-14
15. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1996
- ----
<S> <C> <C> <C> <C>
Net sales $ 37,889 $ 48,043 $ 46,143 $ 35,080
Gross profit $ 11,965 $ 16,540 $ 14,354 $ 9,084
Net income $ 1,364 $ 1,943 $ 1,820 $ (1,201)'
Net income per
common share $ .19 $ .27 $ .25 $ (.17)
1995
- ----
Net sales $ 34,205 $ 42,936 $ 45,405 $ 32,787
Gross profit $ 9,702 $ 13,496 $ 14,076 $ 8,934
Net income $ 911 $ 1,653 $ 2,525 $ 859
Net income per
common share $ .13 $ .23 $ .35 $ .12
<FN>
' Losses in the fourth quarter are the result of significantly higher than
normal levels of promotional spending during that time to maintain the Company's
domestic market position. In addition, market entry costs in Europe contributed
to the loss.
</FN>
</TABLE>
F-15
<PAGE>
Exhibit 10.26.1
INSURANCE BINDER
This binder is a temporary insurance contract, subject to the conditions shown
on the reverse side of this form.
Producer:
Smith Bell & Thompson, Inc.
P.O. Box 730
102 S. Winooski Ave.
Burlington, VT 05402-0730
Company: Federal Insurance Co.
Date Effective: 2/24/97
Time: 12:01 AM
Date Expiration: 2/24/98
Time: 12:01 AM
Description of Operations: Manufacturer of Premium Ice Cream and Frozen
Yogurt
Insured: Ben & Jerry's Homemade, Inc.
30 Community Drive
South Burlington, VT 05403-6828
This binder is issued to extend coverage in the above named Company per expiring
policy No.: 8121-24-97F
Coverages:
Executive Liability & Defense Coverage: $7,500,000; $500,000 Ded./Org.
Fiduciary liability & Defense Coverage: $1,000,000; Nil Deductible
Commercial Crime Coverage: $ 500,000; $ 10,000 Deductible
Kidnap/Ransom & Extortion Coverage: $1,000,000; Nil Deductible
75%/100% Securities Entity Coverage
<PAGE>
CONDITIONS
This Company binds the kinds of insurance stipulated on the preceding page. The
Insurance is subject to the terms, conditions and limitations of the policies in
current use by the Company.
This binder may be cancelled by the Insured by surrender of this binder or by
written notice to the Company stating when cancellation will be effective. This
binder may be cancelled by the Company by notice to the Insured in accordance
with the policy conditions. This binder is cancelled when replace by a policy.
If this binder is not replaced by a policy, the Company is entitled to charge a
premium for the binder according to the Rules and Rates in use by the Company.
APPLICABLE IN CALIFORNIA
When this form is used to provide insurance in the amount of one million dollars
($1,000,000) or more, the title of the form is changed from "Insurance Binder"
to "Cover Note".
APPLICABLE IN DELAWARE
The mortgage of Obligee of any mortgage or other instrument given for the
purpose of creating a lien on real property shall accept as evidence of
insurance a written binder issued by an authorized insurer or its agent if the
binder includes or is accompanied by: the name and address of the borrower; the
name and address of the lender as loss payee; a description of the insured real
property; a provision that the binder may not be canceled within the term of the
binder unless the lender and the insured borrower receive written notice of the
cancellation at least ten (10) days prior to the cancellation; except in the
case of a renewal of a policy subsequent to the closing of the loan, a paid
receipt of the full amount of the applicable premium, and the amount of
insurance coverage.
Chapter 21 Title 25 Paragraph 2119
APPLICABLE IN NEVADA
Any person who refuses to accept a binder which provides coverage of less than
$1,000,000.00 when proof is required: (a) Shall be fined not more than $500.00,
and (B) is liable to the party presenting the binder as proof of insurance for
actual damages sustained therefrom.
Exhibit 10.1
AGREEMENT
AGREEMENT by and between Ben & Jerry's Homemade, Inc. (the "Company"),
a Vermont corporation with its principal place of business at 30 Community
Drive, South Burlington, VT 05403, and Perry D. Odak of Brockie Mansion, 900
Brockie Lane, York, Pennsylvania 17403 (the "Executive"), effective the 31st day
of December, 1996.
WHEREAS, the Executive is possessed of certain experience and
expertise that qualify him to provide the direction and leadership required by
the Company; and
WHEREAS, subject to the terms and conditions hereinafter set forth,
the Company wishes to employ the Executive as its Chief Executive Officer and
the Executive wishes to accept such employment;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth in this Agreement,
the parties hereby agree:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and the Executive hereby accepts employment
as an independent contractor and, commencing July 1, 1997, as an employee.
2. Term. Subject to earlier termination as hereafter provided and subject
to renewal as provided below, the Executive's employment under this Agreement
shall be for a term of three years commencing on the effective date hereof. The
term of this Agreement, as from time to time extended or renewed, is hereafter
referred to as "the Term of this Agreement" or "the Term hereof". This Agreement
shall continue on a year-to-year basis beyond the end of the third year (or a
later year if this Agreement has renewed), unless the Company notifies the
Executive in writing not less than 90 days prior to the end of the third year
(or applicable later year) that the Company does not wish to renew the
Agreement. The Company's decision not to renew this Agreement shall be treated
as a termination of the Executive constituting Other Than For Cause; provided,
however, that the Company, with the Executive's prior written consent, may elect
not to renew this Agreement without also terminating the employment status of
the Executive.
-1-
ODAK.WPD
<PAGE>
3. Capacity and Performance.
a. During the term hereof, the Executive shall serve the Company as
its Chief Executive Officer. Effective July 1, 1997 the Executive shall
also become the President.
b. During the term hereof, the Executive shall be employed by the
Company on a full-time basis and shall have the leadership of and be
responsible to the Board of Directors for all operations of the Company and
shall have all powers and duties consistent with such position, in
accordance with the Bylaws of the Company, provided that it is understood
that the Executive has been delegated certain authority for the Term by the
Board of Directors of the Company as provided in an instrument dated
December 31, 1996, previously delivered, which delegation (the "Delegation
Agreement") is incorporated herein by reference and shall remain in effect
unless modified or terminated by mutual written agreement during the Term
hereof.
c. During the Term, the Executive shall devote his full business time
(other than vacations) and his best efforts, business judgment, skill and
knowledge exclusively (except as provided below) to the advancement of the
business and interests of the Company and to the discharge of his duties
and responsibilities hereunder. The Executive shall not engage in any other
business activity or serve in any industry, trade, governmental position or
as a director of any other business or organization during the term of this
Agreement, except as may be approved by a committee of the Board consisting
of three outside directors. The Company encourages participation by the
Executive in community and charitable activities, but said Committee shall
have the right to approve or disapprove the Executive's participation in
such activities if, in the judgment of said Committee, such participation
may conflict with the Company's interests or with the Executive's duties or
responsibilities or the time required for the discharge of those duties and
responsibilities. The Executive has previously delivered a letter
containing a true and correct list of all directorships or other
participation in committees, consulting or other business activities which
the Executive has or intends to maintain during the Term, which have been
approved by said Committee.
d. The Executive shall be elected to the Board of Directors by the
present Board of Directors as soon as practicable. The Company agrees to
propose and recommend to the shareholders of the Company at each
appropriate Annual Meeting of such shareholders during the term hereof the
election or re-election of the Executive as a member of the Board.
e. On work days the Executive shall perform his duties hereunder from
the Company's executive offices in Vermont, except when at other locations
on business travel for the Company or for other activities approved by the
Board. The Executive is relocating to a home in Vermont and shall be
reimbursed $25,000 for relocation expenses.
Prior to purchase or lease of a residence in Vermont, the Executive
shall be entitled to reimbursement by the Company for reasonable lodging
expense and reasonable weekend commuting expenses to Pennsylvania.
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ODAK.WPD
<PAGE>
f. In the event the Executive is terminated by the Company Other Than
For Cause or has terminated this Agreement with Good Reason in the first
three years of the Term, the Company will be obligated to purchase the
Executive's Vermont residence on a marketable title basis, free of any
liens, and on reasonable customary terms at his original purchase cost plus
initial improvements (but not exceeding $500,000 Company purchase
obligation in the aggregate), and the Company will then proceed to resell
the residence.
4. Payments and Benefits. As payment for all services performed by the
Executive under and during the term hereof and subject to performance of the
Executive's duties and the obligations pursuant to this Agreement:
a. Base Amount. During the term hereof, the Company shall pay the
Executive a base amount at the rate of Three Hundred Thousand Dollars
($300,000) per annum, payable in appropriate installments, subject to
increase from time to time by the Board, in its sole discretion. Such base
amount, as from time to time in effect is hereafter referred to as the
"Base Amount".
b. Stock Options.
(i) The Executive shall receive options, which are non-statutory,
non-incentive stock options, to purchase an aggregate of 360,000
shares of Class A Common Stock of the Company exercisable at the
closing market price on NASDAQ on the effective date of the
grants thereof by the Compensation Committee of the Board of
Directors (the "Committee") under the Company's Equity Incentive
Plan (the "Plan");
(ii) the options have a term of ten years, will become exercisable, so
long as the Executive is an employee of the Company (prior to
July 1, 1997 a consultant to the Company) under this Agreement as
it may be renewed (or under some other agreement or as otherwise
provided in Section 5), as follows:
First Year
90,000 options become exercisable six months after the
effective date of this Agreement, namely June 30, 1997.
Second Year
None
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<PAGE>
Third - Sixth Years
5,625 options become exercisable at the end of each month,
commencing at the start of the third year of the Term
(January 1999) and monthly thereafter through the end of the
sixth year.
(iii) provided, however, that the initial exercisability date of all
the 270,000 options that would otherwise vest during the third -
sixth years under clause (b) (ii) above shall automatically be
accelerated in accordance with the following:
When the fair market value of the Company's Class A Common Stock
(the "Stock"), as measured by the average of the daily closing
stock prices on NASDAQ for a period of 90 consecutive days, shall
have satisfied the Per Share Fair Market Value Threshold
specified below and the Committee shall have determined that the
Executive has substantially met the Non-Financial Objectives (as
defined below) for 1997 or the preceding calendar year, as the
case may be, then such options for 270,000 shares (after the
90,000 options that vest six months after the date hereof) shall
become exercisable as follows:
Defined Per Share Fair Number of Options
Market Value Threshold Becoming Vested
$16 Options for 50,000 shares
$20 Options for 50,000 shares
$23 Options for 50,000 shares
$27 Options for 60,000 shares
$30.50 Options for 60,000 shares
In each case the aggregate number of then unvested options
entitled to accelerated vesting (50,000 or 60,000 as the case may
be) shall be the options that would regularly vest the latest
under (b)(ii) above following the date when such acceleration has
become effective. The Committee shall be required to make a
determination during the first year of the Term, favorable or
unfavorable, within 30 days after the date such Per Share Fair
Market Value Threshold has been met for 90 days and thereafter
shall make one determination each year, by the end of February in
each year. The Non-Financial Objectives for each year, commencing
with the second year of the Term, shall be agreed between the
Committee and the Executive prior to the beginning of each such
year and for the first year of the Term shall be agreed between
the Committee and the Executive by June 30, 1997.
(iv) Options for 200,000 shares have been granted by the Committee,
effective December 31, 1996 and the balance of options for
160,000 Shares shall be granted by the Committee effective
January 1, 1997.
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<PAGE>
The full terms of the Options shall be consistent with this
Section 4b and shall be set forth in Option Certificates, subject to
the provisions of the Plan. Matters set forth herein shall control in
the event of any ambiguity between the Option Certificate or the Plan
and this Agreement.
c. Medical and Hospitalization Insurance. The Executive (and his
family) shall be entitled to participate in the Medical and Hospitalization
Insurance benefit plan for Company employees on the terms applied to an
employee joining the Company July 1, 1997.
d. Life Insurance. The Executive shall be entitled to participate in
the Life Insurance benefit plan for Company employees on the terms applied
to an employee joining the Company July 1, 1997.
e. Other Benefits. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to participate in the 401(k) plan and in any
other employee benefit plans from time to time in effect for executives of
the Company generally (in each case on terms applicable to an employee
joining the Company on July 1, 1997), except to the extent such other plans
are profit sharing or bonus plans or stock plans or are in a category of
benefit otherwise provided to the Executive under this Agreement. The
Company agrees to use its best efforts to obtain a waiver from the
insurance carrier for the benefit of the Executive of a 13 month waiting
period under the disability insurance policy of the Company unless the cost
of obtaining the waiver is unreasonable in the opinion of the Board of
Directors.
The Company may alter, modify, add to or delete its employee benefit
plans (including its medical and hospitalization and life insurance plans)
at any time as it, in its sole judgment, determines to be appropriate.
g. Business Expenses. The Company shall pay or reimburse the Executive
for all reasonable business expenses of the Executive in the performance of
his duties and responsibilities hereunder, subject to such reasonable
substantiation and documentation as may be specified by the Company from
time to time. The Executive shall be entitled to a leased car, as specified
by agreement between the parties, during the Term, which lease payments and
all car operating expenses shall be paid for by the Company.
5. Termination of Employment and Severance Benefits. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the Term under the following circumstances:
a. Death. In the event of the Executive's death during the term
hereof, the Company shall pay to the Executive's designated beneficiary or,
if no beneficiary has been designated by the Executive, to his estate, any
earned and unpaid Base Amount that is earned but unpaid, reimbursement of
business expenses accrued prior to the date of death, and
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<PAGE>
continuation of Base Amount payments (plus continued participation in the
Company's medical and hospital employee insurance) for six-months after the
Executive's death. Options exercisable at date of death may be exercised by
the Executive's estate for 12 months (but not beyond the stated term of the
option), and unvested options are terminated.
b. Disability.
i. The Company may terminate the Executive's employment
hereunder, upon thirty (30) days written notice to the Executive, in
the event that the Executive becomes disabled during his employment
hereunder through any illness, injury, accident or condition of either
a physical or psychological nature and, as a result, is unable to
perform substantially all of his duties and responsibilities hereunder
for one hundred eighty (180) consecutive days during any period of
three hundred and sixty-five (365) consecutive calendar days.
ii. The Board may designate another employee to act in the
Executive's place during any period of the Executive's disability
prior to termination as provided in b.i above. Notwithstanding any
such designation, the Executive shall continue to receive from the
Company (or under a disability plan) the Base Amount in accordance
with Section 4.a and benefits in accordance with the other provisions
of Section 4, to the extent permitted by the then-current terms of the
applicable benefit plans until the termination of his employment.
iii. The Executive shall be entitled to participate in the
Company's long-term disability plan, to the same extent as other
employees. No finding of disability under this Section 5b shall be
made in respect of any cause or condition which has not been approved
as a full disability under the applicable plan.
iv. If any question shall arise as to whether during any period
the Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as to be
unable to perform substantially all of his duties and responsibilities
hereunder, the Executive may, and at the request of the Company shall,
submit to a medical examination by a physician selected by the
Executive or his duly appointed guardian, to whom the Company has no
reasonable objection, to determine whether the Executive is so
disabled and such determination shall for the purposes of this
Agreement be conclusive of the issue. If such question shall arise and
the Executive shall fail to submit to such medical examination, the
Company's determination of the issue shall be binding on the
Executive.
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<PAGE>
v. Options exercisable at date of termination for disability may
be exercised for 12 months (but not beyond the stated term of the
option) thereafter, and unvested options are terminated.
c. By the Company for Cause. The Company may terminate the Executive's
employment hereunder for Cause ("Cause") any time upon written notice to
the Executive setting forth in reasonable detail the nature of such Cause,
and the Executive's failure to cure within thirty (30) days after such
notice. The following, as determined by the Board in its reasonable
judgment, shall constitute Cause for termination: the Executive's gross
negligence in the performance of his material duties and responsibilities
to the Company; the commission by the Executive of theft, embezzlement or
other serious and substantial crimes or intentional wrongful engagement in
competitive activity in violation of Section 9 below; or other deliberate
willful action by the Executive that is materially harmful to the business,
interests or reputation of the Company.
For purposes of Section 5c, no act, or failure to act, shall be
"willful" unless done, or omitted to be done, without reasonable belief
that the action or omission was in the best interests of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been
delivered to him a notice of termination, and such termination shall have
been approved by the vote of two-thirds of the members of the Board of
Directors (excluding the Executive) at a meeting of the Board (after
reasonable notice to the Executive and an opportunity for him, together
with counsel, to be heard before the Board of Directors) finding that, in
the good faith opinion of the Board of Directors, the above standard of
termination for Cause was met in such case and that such Cause was not
cured.
Upon the giving of notice of termination of the Executive's employment
hereunder for Cause following the determination of the Board under the
preceding paragraph, the Company shall have no further obligation or
liability to the Executive, other than for Base Amount earned and unpaid at
the date of termination, any options that are vested which shall continue
to be exercisable for 30 days (unless such options are terminated by vote
of the Committee as provided in the Plan), and payments or reimbursement of
business expenses accrued prior to the date of termination. All other
options shall terminate.
d. By the Company Other than for Cause. The Company may terminate the
Executive's employment hereunder other than for Cause ("Other Than For
Cause") at any time upon notice to the Executive, provided that the Board
of Directors determines, after consultation with the Executive and after
setting forth the reasons for the Board's actions, that retention of the
Executive as the Chief Executive Officer would no longer be in the best
interests of the Company. In the event of such termination during the first
year of the Term (or, upon vote of two-thirds of the members of the Board,
excluding the Executive, that a
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<PAGE>
decision should not be made in the first year, then in the first 15 months
of the Term), the Company shall continue to pay the Executive the Base
Amount at the rate in effect on the date of termination for twenty-four
months. In the event of such termination following the first year of the
Term (or, upon vote of two-thirds of the members of the Board, excluding
the Executive, that a decision should not be made in the first year, then
following the first 15 months of the Term), the Company shall continue to
pay the Executive the Base Amount at the rate in effect on the date of
termination for twelve months. Subject to any employee contribution
applicable to the Executive on the date of termination, the Company shall
continue to contribute, for the period during which the Base Amount is
continued hereunder, to the cost of the Executive's participation
(including his family) in the Company's group medical and hospitalization
insurance plans and group life insurance plan, provided that the Executive
is entitled to continue such participation under applicable law and plan
terms. Upon any such termination, unvested options shall become exercisable
to the extent provided immediately below:
If terminated in the first year, i.e. 1997 (or, upon vote of
two-thirds of the members of the Board of Directors, excluding the
Executive, that a decision should not be made in the first year, then in
the first 15 months of the Term), 30,000 options if:
(i) the Earnings per share of Class A and Class B Common Stock
("EPS") for 1997 shall have increased 5% or more over EPS for
1995; or
(ii) the Consolidated Net Sales for 1997 have increased 12% or more
over Consolidated Net Sales for 1996; or
(iii)the Defined Per Share Fair Market Threshold of $16 (as defined
in Section 4b(iii) has been satisfied by the date of any such
termination and options have accelerated with respect to such
Threshold under Section 4b(iii).
In the event that results for the year 1997 are not available because
the year 1997 has not ended when the termination occurs, the above
thresholds shall be determined on a proportional basis on the basis of the
three months, six months or nine months results that are available.
If terminated in the second year (or only commencing within the fourth
month of the second year, upon vote of two-thirds of the members of the
Board of Directors, excluding the Executive), 50% of the unvested options
if
(i) EPS for 1998 shall have increased 10% over EPS for 1997 and 15%
over EPS for 1995; or
(ii) the Consolidated Net Sales for 1998 shall have increased 15% over
1997 (or, if higher, Consolidated Net Sales for 1996); or
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<PAGE>
(iii)the Defined Per Share Fair Market Threshold of $23 (as defined
in Section 4b(iii) has been satisfied in 1998 and options have
accelerated with respect to such Threshold under Section 4b(iii).
If terminated in the third year, i.e., 1999, 50% of the then unvested
options if
(i) EPS for 1999 shall have increased 12% over EPS for 1998 (or, if
higher, EPS for 1997 or 1995); or
(ii) the Consolidated Net Sales for 1999 shall have increased 15% over
Consolidated Net Sales for 1998 (or, if higher, Consolidated Net
Sales for 1997 or 1996); or
(iii)the Defined Per Share Fair Market Value of $27 (as defined in
Section 4b(iii)) has been satisfied in 1999 and options have been
accelerated with respect to such Threshold under Section 4b(iii).
If terminated in the fourth year, or later, 50% of the then unvested
options.
All other unvested options shall terminate.
Vested options (after giving effect to the above paragraphs) shall be
exercisable for the following periods (but not beyond the stated
termination date of the options) after any such termination, as provided
immediately below:
If terminated in the first year (or upon vote of two-thirds of the
members of the Board of Directors, excluding the Executive, in the first 15
months of the Term), for three months after termination.
If terminated in the second year (or only commencing with the fourth
month of the second year, upon vote of two-thirds of the members of the
Board of Directors, excluding the Executive that a decision should not be
made in the first year) for nine months after termination.
If terminated in the third year, for nine months after termination.
If terminated in the fourth year, for 12 months after termination.
If terminated in the fifth year, for 18 months after termination.
If terminated thereafter, for 24 months after termination.
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<PAGE>
In the event that certain provisions pertaining to the first year of
his Term are extended to the first 15 months of the Term by 2/3 vote of the
Board of Directors, excluding the Executive, the Company shall give the
Executive certain notice of at least 30 days prior to the end of the First
Year.
e. By the Executive for Good Reason in the Absence of Cause. The
Executive may terminate his employment hereunder for Good Reason ("Good
Reason"), upon notice to the Company setting forth in reasonable detail the
nature of such Good Reason, and the Company's failure to remedy such matter
within thirty (30) days after receipt of such notice. The following shall
constitute Good Reason for termination by the Executive:
i. Failure of the Company to continue the Executive in the position
of Chief Executive Officer;
ii. Diminution in the nature or scope of the Executive's
responsibilities, duties or authority;
iii. Failure of the Company to provide the Executive the Base Amounts
and benefits in accordance with the terms of Section 4 or to
observe any other material provision of this Agreement; or
iv. Failure of the shareholders of the Company to elect or re-elect
the Executive as a director of the Company at each annual meeting
during the term of this Agreement, commencing with the 1997
annual meeting to be held in June, 1997.
In the event of such termination, Base Amount, benefits and options
(including acceleration, period of exercisability and termination of
options) shall be paid or provided in the same manner and extent as for a
termination Other Than For Cause under 5d above.
f. Notwithstanding the foregoing, in the event of a termination under
5d or 5e prior to six months after the date hereof, the options for 90,000
shares that vest six months after the date hereof shall be accelerated and
become exercisable for 90 days upon any such termination.
6. Effect of Termination. The provisions of this Section 6 shall apply to
termination due to the expiration of the term, termination pursuant to Section
5, non-renewal or otherwise.
a. Except for benefits expressly continued pursuant to Section 5,
benefits shall terminate pursuant to the terms of the applicable
benefit plans based on the date of termination of the Executive's
employment without regard to any continuation of Base Amounts to the
Executive following such date of termination.
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<PAGE>
b. The provisions of this Agreement shall survive any termination
if so provided herein or if necessary or desirable fully to accomplish
the purposes of such provision, including without limitation the
obligations of the Executive under Sections 7, 8 and 9 hereof and all
indemnifications provided for in this Agreement (including Sections 12
and 15). The obligation of the Company to make payments to or on
behalf of the Executive under Section 5d and 5e hereof is expressly
conditioned upon the Executive's continued full performance of
obligations under Sections 7, 8 and 9 hereof. The Executive agrees
that, except as expressly provided in Section 5 with respect to
continuation of Base Amount and stock options as expressly provided,
no compensation is earned after termination of this Agreement, its
non-renewal or termination of employment or as a result of the
non-renewal of this Agreement or other termination of employment.
6A. Change in Control.
In the event of Termination Other than for Cause or Termination for Good
Reason, after a Change in Control (as defined below) all unvested options at the
date of any such termination shall accelerate and become immediately exercisable
at the date of such termination.
A Change in Control shall be deemed to have occurred if (a) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities in the election of directors; (b) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter, or (c) during any period of twelve consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors. Notwithstanding the foregoing provisions of
this Section 6A, a "Change in Control" will not be deemed to have occurred
solely because of (i) the acquisition of securities of the Company (or any
reporting requirement under the Act relating thereto) by an employee benefit
plan maintained by the Company for the benefit of employees or an acquisition by
Ben Cohen, Jerry Greenfield, Fred Lager, Jeffrey Furman and Perry Odak or their
"affiliates" or "associates" (as such terms are defined in Rule 12b-2 under the
Act) or members of their families (or trusts for their benefit) or charitable
trusts established by any of them or other related management group.
Moreover, notwithstanding the foregoing provision, if such transaction
takes place after June 30, 1998 and follows a decision by Ben Cohen or his
estate or heirs) (and the Board of
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<PAGE>
Directors in the event that Ben Cohen (his estate or heirs) is no long a
controlling stockholder in the reasonable judgment of the Board of Directors) to
change the present policy of independence for the Company, in order to thereby
continue to realize its potential, to a policy of favorably considering the
prospect of a sale of all or substantially all assets or a merger or other
business combination or sale of outstanding stock in which a change pursuant to
the preceding paragraph is made as a result of performance of the Company which
is not satisfactory in his or their judgment, then such transaction shall not
constitute a Change in Control (it being understood that a change in the policy
of independence of the Company as a result of a hostile or an unsolicited bid
for control of the Company shall not constitute a Change in Control for this
purpose).
Notwithstanding the provisions of Section 5d or e, the vested options
(including those accelerated hereunder) may be exercised for 30 months
thereafter in the event of a termination under Sections 5d or 5e after a Change
in Control has occurred.
7. Confidential Information.
a. The Executive acknowledges that the Company and its Subsidiaries
continually develop Confidential Information, as defined in Section 14
hereof, that the Executive may develop Confidential Information for the
Company or its Subsidiaries and that the Executive may learn of
Confidential Information during the course of employment. The Executive
will comply with the policies and procedures of the Company and its
Subsidiaries for protecting Confidential Information and shall never
disclose to any Person (except as required by applicable law or legal
process or for the proper performance of his duties and responsibilities to
the Company and its Subsidiaries, or in connection with any litigation
between the Company and the Executive (provided that the Company shall be
afforded a reasonable opportunity in each case to obtain a protective
order), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association
with the Company or any of its Subsidiaries. The Executive understands that
this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
b. All documents, records, tapes and other media of every kind and
description relating to the business, present or otherwise, of the Company
or its Subsidiaries and any copies, in whole or in part, thereof (the
"Documents"), whether or not prepared by the Executive, shall be the sole
and exclusive property of the Company and its Subsidiaries. The Executive
shall safeguard all Documents and shall surrender to the Company at the
time his employment terminates, or at such earlier time or times as the
Board or its designee may specify, all Documents then in the Executive's
possession or control.
8. Assignment of Rights to Intellectual Property.
The Executive shall promptly and fully disclose all Intellectual Property
to the Company. The Executive hereby assigns and agrees to assign to the Company
(or as otherwise directed by the Company) the Executive's
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<PAGE>
full right, title and interest in and to all Intellectual Property which can be
registered or which is capable of being protected by the Company as a trade
secret. The Executive agrees to execute any and all applications for domestic
and foreign patents, copyrights or other proprietary rights and to do such other
acts (including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company to assign such
Intellectual Property to the Company and to permit the Company to enforce any
patents, copyrights or other proprietary rights to such Intellectual Property.
The Executive will not charge the Company for time spent in complying with these
obligations. All copyrightable works that the Executive creates shall be
considered "work made for hire".
9. Restricted Activities.
The Executive agrees that some restrictions on his activities during and
after his employment are necessary to protect the goodwill, Confidential
Information and other legitimate interests of the Company and its Subsidiaries,
and that the agreed restrictions set forth below will not deprive the Executive
of the ability to earn a livelihood:
a. While the Executive is employed by the Company and, after his
employment terminates, for the greater of one year or the period during
which severance payments of Base Amount are being made (the
"Non-Competition Period"), the Executive shall not, directly or indirectly,
whether as owner, partner, investor, consultant, agent, employee,
co-venturer or otherwise, compete with the business of the Company or any
of its Subsidiaries within the United States, or within any foreign county
in which the Products are sold at the date of termination of employment, or
undertake any planning for any business competitive with the Company or any
of its Subsidiaries. Specifically, but without limiting the foregoing, the
Executive agrees not to engage in any manner in any activity that is
directly or indirectly competitive with the business of the Company or any
of its Subsidiaries as conducted or which has been proposed by management
to the Board within six months prior to termination of the Executive's
employment. Restricted activity also includes without limitation accepting
employment or a consulting position with any Person who is, or at any time
within twelve (12) months prior to termination of the Executive's
employment has been, a distributor of the Company or any of its
Subsidiaries. For the purposes of this Section 9, the business of the
Company and its Subsidiaries shall mean the manufacture or sale of the
Products.
b. The Executive further agrees that during the Non-Competition Period
or in connection with the Executive's termination of employment, the
Executive will not hire or attempt to hire any employee of the Company or
any of its Subsidiaries, assist in such hiring by any Person, encourage any
such employee to terminate his or her relationship with the Company or any
of its Subsidiaries, or solicit or encourage any customer or vendor of the
Company or any of its Subsidiaries to terminate its relationship with them,
or, in the case of a customer, to conduct with any Person any business or
activity which such customer conducts or could conduct with the Company or
any of its Subsidiaries.
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<PAGE>
c. The provisions of this Section 9 shall not be deemed to preclude
the Executive from employment or engagement during the Non-Competition
Period following termination of employment hereunder by a corporation, some
of the activities of which are competitive with the business of the
Company, if the Executive's activities do not relate, to such competitive
business, and nothing contained in this Section 9 shall be deemed to
prohibit the Executive, during the Non-Competition Period following
termination of employment hereunder, from acquiring or holding, solely as
an investment, publicly traded securities of any competitor corporation so
long as such securities do not, in the aggregate, constitute one-half of 1%
of the outstanding voting securities of such corporation.
Without limiting the foregoing, it is understood that the Company
shall not be obligated to continue to make the payments specified in
Section 5d and 5e in the event of a material breach by the Executive of the
provisions of Sections 7, 8 or 9 of this Agreement, which breach continues
without having been cured within 30 days after written notice to the
Executive specifying the breach in reasonable detail.
10. Enforcement of Covenants.
The Executive acknowledges that he has carefully read and considered all
the terms and conditions of this Agreement, including the restraints imposed
upon him pursuant to Sections 7, 8 and 9 hereof. The Executive agrees that said
restraints are necessary for the reasonable and proper protection of the Company
and its Subsidiaries and that each and every one of the restraints is reasonable
in respect to subject matter, length of time and geographic area. The Executive
further acknowledges that, were he to breach any of the covenants contained in
Sections 7, 8 or 9 hereof, the damage to the Company would be irreparable. The
Executive therefore agrees that the Company, in addition to any other remedies
available to it, shall be entitled to seek preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond. The parties further agree that, in the
event that any provision of Section 7, 8 or 9 hereof shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
11. Conflicting Agreements.
The Executive hereby represents and warrants that the execution of this
Agreement and the performance of his obligations hereunder will not breach or be
in conflict with any other agreement to which the Executive is a party or is
bound and that the Executive is not now subject to any covenants against
competition or similar covenants that would affect the performance of his
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company any proprietary information of a third party without such party's
consent.
12. Indemnification.
The Company shall indemnify the Executive to the extent provided for
Company executive officers in its then current Articles of Incorporation or By-
Laws, and in any event shall indemnify the Executive to the fullest extent
permitted under the
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<PAGE>
Vermont Corporation Law, including an undertaking to advance litigation
expenses. The Executive agrees to promptly notify the Company of any actual or
threatened claim arising out of or as a result of his employment with the
Company. The Company agrees to maintain Directors and Officers Liability
Insurance for the benefit of Executive during the Term of this Agreement and for
any other period during which Executive shall be employed having coverage and
policy limits no less favorable to directors and officers than those in effect
at the date of this Agreement.
13. No Duty to Mitigate.
Following a termination of employment, the Executive shall not be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
14. Definitions.
Words or phrases which are initially capitalized or are within quotation
marks shall have the meanings provided in Section 14 and as provided elsewhere
herein. For purposes of this Agreement, the following definitions apply:
a. "Confidential Information" means any and all information of the
Company and its Subsidiaries that is not generally known by others with
whom they compete or do business, or with whom they plan to compete or do
business and any and all information not readily available to the public,
which, if disclosed by the Company or its Subsidiaries could reasonably be
of benefit to such person or business in competing with or doing business
with the Company. Confidential Information includes without limitation such
information relating to (i) the development, research, testing,
manufacturing, plant operational processes, marketing and financial
activities, including costs, profits and sales, of the Company and its
Subsidiaries, (ii) the Products and all formulas therefor, (iii) the costs,
sources of supply, financial performance and strategic plans of the Company
and its Subsidiaries, (iv) the identity and special needs of the customers
and suppliers of the Company and its Subsidiaries and (v) the people and
organizations with whom the Company and its Subsidiaries have business
relationships and those relationships. Confidential Information also
includes comparable information that the Company or any of its Subsidiaries
have received belonging to others or which was received by the Company or
any of its Subsidiaries with an agreement by the Company that it would not
be disclosed. Confidential Information does not include information which
(a) is or becomes available to the public generally (other than as a result
of a disclosure by the Executive), (b) was within the Executive's
possession prior to the date hereof or prior to its being furnished to the
Executive by or on behalf of the Company, provided that the source of such
information was not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information, (c) becomes
available to the Executive on a non-confidential basis from a source other
than the Company, provided that such sources is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with
respect to such information, or (d) was independently developed by you
without reference to the Confidential Information.
-15-
ODAK.WPD
<PAGE>
b. "Intellectual Property" means inventions, discoveries,
developments, methods, processes, formulas, compositions, works, concepts
and ideas (whether or not patentable or copyrightable or constituting trade
secrets) conceived, made, created, developed or reduced to practice by the
Executive (whether alone or with others, whether or not during normal
business hours or on or off Company premises) during the Executive's
employment that relate to the Products of the Company or any of its
Subsidiaries.
c. "Products" mean all products planned, researched, developed,
tested, manufactured, sold, licensed, leased or otherwise distributed or
put into use by the Company or any of its Subsidiaries, together with all
services provided to third parties or planned by the Company or any of its
Subsidiaries, during the Executive's employment; as used herein, "planned"
refers to a Product or service which the Company has decided to introduce
within six-months from the date as of which such term is applied.
d. "Employment" shall mean employment of the Executive as an
independent contractor prior to July 1, 1997 and as an employee commencing
July 1, 1997.
e. "Termination of Employment" prior to July 1, 1997 shall mean
termination of the Executive's status as an independent contractor.
15. Withholding.
The Company acknowledges that the Executive presently has a consulting
engagement and as a result is unable to become an employee prior to July 1,
1997, although he will start under the Agreement on the date hereof, at the
request of the Company. Commencing July 1, 1997 the Executive shall be
designated President in addition to being the Chief Executive Officer and shall
be an employee of the Company. Accordingly, prior to July 1, 1997, the Executive
shall be the Chief Executive Officer but shall act as an independent contractor
to the Company as provided above. For services in any period in which the
Executive is an independent contractor, the Executive agrees to pay all FICA tax
due on payments to him and all other taxes due thereon and further agrees to
indemnify the Company from and against any and all withholding taxes, and from
any interest and penalties arising from the Company's failure to withhold on
amounts paid by the Company to the Executive. It is understood, notwithstanding
any of the foregoing provisions of this Agreement, that the Executive shall not
be entitled to participate in benefit and welfare plans and policies of the
Company that are applicable to employees while the Executive is an independent
contractor, and the Executive shall indemnify the Company from any liabilities,
penalties and interest or disqualification of any qualified plans from the
related decision (hereby consented to by the Executive) not to include the
Executive in any such plans except as a person becoming an employee on July 1,
1997. The Executive agrees that all payments made by the Company under this
Agreement shall be reduced by any tax or other amounts required to be withheld
by the Company under applicable law.
16. Assignment.
Neither the Company nor the Executive may make any assignment of this
Agreement or any interest herein, by operation of law or otherwise, without the
prior
-16-
ODAK.WPD
<PAGE>
written consent of the other; provided, however, that, in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any other Person or transfer all or substantially all of its properties or
assets to any other Person, the Company shall require such Person or the
resulting entity to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it. This Agreement shall inure to the benefit of and be binding upon the Company
and the Executive, their respective successors, executors, administrators, heirs
and permitted assigns.
17. Severability.
If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
18. Waiver.
No waiver of any provision hereof shall be effective unless made in writing
and signed by the waiving party. The failure of either party to require the
performance of any term or obligation of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
19. Notices.
Any and all notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be effective when delivered
in person or deposited in the United States mail, postage prepaid, registered or
certified, and addressed to the Executive at his last known address on the books
of the Company or, in the case of the Company, at its principal place of
business, attention Chief Financial Officer, with a copy to Ropes & Gray, One
International Place, Boston, MA 02110, Attention: Howard K. Fuguet, Esq., or to
such other address as either party may specify by notice to the other.
20. Entire Agreement.
This Agreement (and any letters referred to herein and including a letter
on Non-Financial Objectives) constitutes the entire agreement between the
parties and supersedes all prior communications, representations and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
21. Amendment.
This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a expressly authorized officer of the Company.
22. Governing Law, Arbitration and Consent to Jurisdiction.
This contract and shall be construed and enforced under and be governed in
all respects by the laws of the State of New York, without regard to the
conflict of laws principles thereof. The parties each agree to promptly select a
mediator and promptly mediate in good faith any controversy, claim or dispute
arising between the parties hereto arising out of or related to this Agreement,
its
-17-
ODAK.WPD
<PAGE>
performance or any breach or claimed breach thereof. In the event that such
mediation does not resolve any such matter, then such matter other than any
matter in which injunctive relief or other equitable relief is sought. shall be
definitively resolved through binding arbitration conducted in the City of New
York, by a panel of three (3) arbitrators in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association, provided,
however, that notwithstanding anything to the contrary in such Commercial
Arbitration Rules, the parties shall be entitled in the course of any
arbitration conducted pursuant to this Section to seek and obtain discover from
one another to the same extent and by means of the same mechanisms authorized by
Rules 27 through 37 of the Federal Rules of Civil Procedure. The power and
office of the arbitrators shall arise wholly and solely from this Agreement and
the then current Commercial Arbitration Rules of the American Arbitration
Association. The award of the panel or a majority of them so rendered shall be
final and binding, and judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereto.
To the extent a dispute is not to be arbitrated in accordance with the
foregoing, each of the Company and the Executive (i) irrevocably submits to the
jurisdiction of the United States District Court for the Southern District of
New York and to the jurisdiction of the state courts of the State of New York
for the purpose of any suit or other proceeding arising out of or based upon
this Agreement or the subject matter hereof and agrees that any such proceeding
shall be brought or maintained only in such court, and (ii) waives, to the
extent not prohibited by applicable law and agrees not to assert in any such
proceedings, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that he or it is immune from extraterritorial injunctive
relief or other injunctive relief, that any such proceeding brought or
maintained in a court provided for above may not be properly brought or
maintained in such court, should be transferred to some other court or should be
stayed or dismissed by reason of the pendency of some other proceeding in some
other court, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
-18-
ODAK.WPD
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized officer, and by the Executive, as of the date first above
written.
THE EXECUTIVE: BEN & JERRY'S HOMEMADE, INC.
/s/Perry D. Odak /s/Jerry Greenfield
- ---------------- -------------------
Perry Odak Jerry Greenfield
Vice Chairperson of the
Board of Directors
-19-
ODAK.WPD
<TABLE>
BEN & JERRY'S HOMEMADE, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands except per share amounts)
Thirteen weeks ended Fifty-two weeks ended
12/28/96 12/30/95 12/28/96 12/30/95
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 7,194 7,200 7,189 7,171
Net effect of dilutive stock options -
based on the treasury stock
method using average
market price 11 70 41 51
--------------- -------------- --------------- --------------
7,205 7,270 7,230 7,222
=============== ============== =============== ==============
Net Income (loss) ($1,201) $859 $3,926 $5,948
=============== ============== =============== ==============
Per share amount ($0.17) $0.12 $0.54 $0.82
=============== ============== =============== ==============
Fully diluted:
Average shares outstanding 7,194 7,200 7,189 7,171
Net effect of dilutive stock options -
based on the treasury stock
method using average
market price which is greater
than quarter-end price 11 70 46 57
--------------- -------------- --------------- --------------
7,205 7,270 7,235 7,228
=============== ============== =============== ==============
Net Income (loss) ($1,201) $859 $3,926 $5,948
=============== ============== =============== ==============
Per share amount ($0.17) $0.12 $0.54 $0.82
=============== ============== =============== ==============
</TABLE>
Ben & Jerry's Homemade, Inc.
Subsidiaries
Percentage of
Jursidiction Voting Stock Owned
Name of Subsidiary of Incorporation by Registration
- ------------------ ---------------- ---------------
Ben & Jerry's Canada (1992), Inc. Canada 100%
Ben & Jerry's Children's Center, Inc. Vermont 100%
Ben & Jerry's Homemade, Ltd. United Kingdom 100%
Ben & Jerry's Homemade (FSC), Inc. Barbados 100%
Ben & Jerry's Homemade Holdings, Inc. Vermont 100%
Ben & Jerry's of New York New York 100%
Ben & Jerry's International, Inc. Delaware 100%
Ben & Jerry's France SARL France 100%
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-9420, 33- 17594 and 33-64421) of Ben & Jerry's Homemade, Inc.
of our report dated January 27, 1997, with respect to the consolidated financial
statements and schedule of Ben & Jerry's Homemade, Inc. included in this Annual
Report (Form 10-K) for the year ended December 28, 1996.
ERNST & YOUNG LLP
Boston, Massachusetts
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
See accompanying notes.
$ in thousands, except per share amounts
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 36104
<SECURITIES> 0
<RECEIVABLES> 8959
<ALLOWANCES> 0
<INVENTORY> 15365
<CURRENT-ASSETS> 68113
<PP&E> 65104
<DEPRECIATION> 0
<TOTAL-ASSETS> 136665
<CURRENT-LIABILITIES> 18058
<BONDS> 0
0
1
<COMMON> 239
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 136665
<SALES> 167155
<TOTAL-REVENUES> 0
<CGS> 115212
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (243)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1996
<INCOME-PRETAX> 6335
<INCOME-TAX> 2409
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3926
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
