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 25, 1999
[ ]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: 802/846-1500
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.
[X]
The aggregate market value of the Company's Class A and Class B Common Stock
held by non-affiliates was approximately $150,370,950 and $5,061,769
respectively, at February 25, 2000.
At February 25, 2000, 6,121,493 shares of the Company's Class A Common Stock and
794,539 shares of the Company's Class B Common Stock were outstanding.
Page 1 of 70 pages. Exhibit Index appears on page 33.
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BEN & JERRY'S HOMEMADE, INC.
1999 FORM 10-K ANNUAL REPORT
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Table of Contents
Page
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Item 1. Business.........................................................................1
Item 2. Properties......................................................................13
Item 3. Legal Proceedings...............................................................13
Item 4. Submission of Matters to Vote of Security Holders...............................13
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...........14
Item 6. Selected Financial Data.........................................................15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................16
Item 7A. Market Risk.....................................................................24
Item 8. Financial Statements and Supplementary Data.....................................24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure......................................................................25
Item 10. Directors and Executive Officers of the Company.................................25
Item 11. Executive Compensation..........................................................27
Item 12. Security Ownership of Certain Beneficial Owners and Management..................28
Item 13. Certain Relationships and Related Transactions..................................30
Item 14. Exhibits, Financial Statements, Financial Statement Schedules, and
Reports on Form 8-K.............................................................33
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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. The
Company is committed to using milk and cream that have not been treated with the
synthetic hormone, rBGH. The Company uses natural ingredients in its products.
The Company embraces a philosophy that manifests itself in these attributes:
being real and "down to earth," being humorous and having fun, being
non-traditional and alternative and, at times, being activists around
progressive values.
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 Midwest (defined for this purpose as Chicago,
Illinois, Minnesota, Wisconsin and Michigan) and Denver areas. In 1999,
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 certain
"non-target" markets in the United States, the United Kingdom, France, Israel,
Canada, The Netherlands, Belgium, Japan, Singapore, Peru and Lebanon. The
Company currently markets flavors of its ice cream, frozen yogurt and sorbet in
packaged pints, for sale primarily in supermarkets, other grocery stores,
convenience stores and other retail food outlets and in bulk, primarily to
restaurants and Ben & Jerry's company-owned franchised "scoop shops."
The Company began active operations in May 1978, when Jerry Greenfield, now the
Company's Chairperson, and Ben Cohen, now the Company's Vice Chairperson, opened
a retail store in a renovated gas station in Burlington, Vermont. The Company
believes that it has maintained a reputation for producing gourmet-quality
natural ice cream and frozen desserts, 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 since 1988 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
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 in a way that
actively recognizes the central role that business plays in the structure of
society by initiating innovative ways to improve the quality of life of a broad
community: local, national and international." This statement has been further
simplified by the Company's statement of "Leading with Progressive Values Across
our Business." "Underlying the mission of Ben & Jerry's is the determination to
seek new and creative ways of addressing all three parts, while holding a deep
respect for individuals inside and outside the Company and for the communities
of which they are a part." Since 1988, the Company's Annual Report to
Stockholders has contained a "social report" on the Company's performance during
the year. The Company's social mission has always been about more than
philanthropy, product donations and community relations. Ben & Jerry's has
strived to integrate into its day-to-day business decisions a concern for the
community and to seek ways to lead with its progressive values.
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The Company makes cash contributions equal to 7.5% 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. Excluded from the 7.5% are contributions out of a
portion of the proceeds of incidental operations, not directly relating to Ben &
Jerry's core business of the manufacturing and selling of Ben & Jerry's frozen
desserts, such as a portion of the admission fees for plant tours. Also excluded
from the 7.5% are corporate sponsorships that have as one of their purposes the
furtherance of Ben & Jerry's marketing goals. For 1999, the 7.5% amounted to
approximately $1,120,000. 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."
In some instances where the Company pays royalties for the licensed use of a
flavor name, the licensor donates all or a portion of these royalties to
charitable organizations. For example, in 1997, the Company launched Phish
Food(TM) ice cream and during 1999 paid the Vermont-based band Phish $244,918 in
royalties. The band established the Water Wheel Foundation to support the
protection and preservation of Lake Champlain.
Ben & Jerry's maintains a special tie to the Vermont community in which it has
its origins. The Company donates product to public events and community
celebrations in the Vermont area. As already noted, Community Action Teams at
each site make grants in Vermont. 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, through the years, taken actions intended to strengthen the
Company's ability to remain an independent Vermont-based company focused on
carrying out its three-part corporate mission. Ben & Jerry's believes these
actions have been in the best interests of the Company, its stockholders,
employees, suppliers, customers and the Vermont community. See "Anti-Takeover
Effects of Class B Common Stock, Class A Preferred Stock, Classified Board of
Directors, Vermont Legislation and Shareholders' Rights Plans."
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 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 recombinant
Bovine Growth Hormone ("rBGH"), a synthetic growth hormone approved by the FDA.
In December 1997, the St. Albans Cooperative Creamery's board of directors
approved a motion to allow for controlled use of rBGH by a limited number of
member farms beginning July 1, 1998. The Co-op assures that it will continue to
provide Ben & Jerry's with rBGH-free dairy supply. The Company pays a premium to
the Co-op for member farms that do not use rBGH.
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In 1992, the Company became a signatory to the CERES Principles adopted by the
Community for Environmentally Responsible Economies. The CERES Principles
established an environmental ethic with criteria by which investors and others
can assess the environmental performance of companies. Ben & Jerry's is also a
member of Business for Social Responsibility, Inc. ("BSR"), an organization in
San Francisco, California, which promotes a concept of business profitability
that includes environmental responsibility and social equity. Ben & Jerry's is
also a member of the Social Venture Network and Vermont Businesses for Social
Responsibility.
The Super Premium Ice Cream, Frozen Yogurt and Sorbet Market
The packaged ice cream industry includes economy, regular, premium, premium plus
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, 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. In February
1996, the Company introduced lactose-free and cholesterol-free sorbet. In 1997,
Ben & Jerry's introduced a new line of low fat ice cream. In 1999 the Company
introduced 14 new flavors and 3 new novelty products.
Based on information provided by Information Resources, Inc., a software and
marketing information services company ("IRI"), the Company believes 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 and premium plus
ice cream, frozen yogurt and sorbet were approximately $572 million in 1999
compared with about $518 million in 1998. All of the information in this
paragraph is taken from IRI data.
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 ("overrun") during the freezing process. The approximate fat
content is 15% (excluding add-ins). The approximate overrun 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 ice cream mix consists of cream, beet sugar, non-fat milk solids, egg
yolks and natural stabilizers.
Ben & Jerry's frozen yogurt is a high quality frozen yogurt with approximately
2% fat (excluding add-ins) and approximately 30% overrun. The fat content of
frozen yogurt comes from the cream used in the base mix. All our frozen yogurt
products are sweetened with beet sugar and corn syrup. The Company uses cultured
yogurt in the manufacturing of our frozen yogurt dessert products, purchased
from yogurt manufacturers who use Vermont dairy ingredients.
Ben & Jerry's fruit sorbets are fat free frozen desserts with an overrun of
approximately 20%. The chocolate sorbet is a low fat product with approximately
2% fat (from cocoa and chocolate liquor). All sorbets are sweetened with beet
sugar and corn syrup. The water used to manufacture sorbet is Vermont Pure(TM)
Spring Water.
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In 1997 and 1998, Ben & Jerry's introduced a line of low fat ice cream flavors.
These low fat ice creams offer high quality, all natural ingredients with less
than three grams of fat and 40% overrun. The product line offers exciting flavor
combinations, chunks of candy, and swirls of variegates with extraordinary
flavor.
All Ben & Jerry's frozen desserts are made of the finest quality ingredients.
Its ingredients contain no preservatives or artificial components (except the
flavoring component in one of the candies that the Company purchases). To date,
the Company has not experienced any difficulty in obtaining the dairy products
used to make its frozen desserts. 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 allows Ben &
Jerry's to manufacture its own dessert mixes. Ben & Jerry's 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
processes for swirling variegates (dessert sauces) into its finished products.
The Company also makes ice cream novelty products, including a variety of ice
cream bars such as Cherry Garcia(R), Cookie Dough, Phish Stick(TM), Dilbert's
World(TM)-Totally Nuts(TM) and S'mores(TM) Bars.
Ben & Jerry's other license agreements include licenses 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 Andrews McMeel
Universal with respect to the Company's Doonesberry(R) flavor of the sorbet line
of products; Wavy Gravy for the flavor Wavy Gravy; with Phish Merchandising,
Inc. with respect to Phish Food(TM) and Phish Stick(TM), a flavor launched in
February of 1997; and from United Feature Syndicate, Inc. for use of the
trademark Dilbert for the flavor Dilbert's World(TM)-Totally Nuts(TM) introduced
in 1998.
Manufacturing
The Company manufactures Ben & Jerry's super premium ice cream and frozen yogurt
pints at its Waterbury, Vermont, plant. The Company's Springfield, Vermont,
plant is used for the production of ice cream novelties, ice cream, frozen
yogurt, low fat ice cream and sorbet packaged in bulk, pints, quarts and half
gallons. The Company manufactures Ben & Jerry's super premium ice cream, frozen
yogurt, frozen smoothies and sorbet in packaged pints, 12 oz. and single serve
containers at its St. Albans, Vermont plant. The Company generally operates its
plants two shifts a day, five to seven days per week, depending upon demand
requirements.
On October 19, 1999, the Company announced a plan to shift manufacturing of its
frozen novelty line of business from a company-owned plant in Springfield,
Vermont, to third party co-packers to improve the Company's competitive
position, gross margins and profitability. This action resulted in the write-off
of assets associated with the ice cream novelty business, asset impairment
charges of other manufacturing assets and costs associated with severance for
those employees who do not accept the Company's offer of relocation. The
implementation of this manufacturing restructuring program resulted in a pre-tax
special charge to earnings of approximately $8.6 million in the fourth quarter
of 1999 that was primarily non-cash. This plan will be executed during 2000 and
is expected to result in improving the Company's profitability during the year
2000. Outsourcing its novelty business will enable the Company to introduce a
wider range of novelty products in future periods.
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Markets and Customers
The Company markets packaged pints, quarts, 1/2 gallons, single-serve containers
and novelty products primarily through supermarkets, other 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, through restaurants
and food service accounts (i.e. stadiums, airports, cafeterias, hotels, etc.).
Ben & Jerry's products are distributed through independent ice cream
distributors; with some exceptions, only one distributor is appointed for each
territory for supermarkets. In most areas, sub-distributors are used to
distribute to the smaller classes of trade. Company trucks and other
distributors distribute products that are sold in Vermont and upstate New York.
In late August 1998 - January 1999, Ben & Jerry's redesigned its distribution
network to create more Company control over sales and more efficiency in the
distribution of its products. Under the redesign, Ben & Jerry's increased direct
sales calls by its own sales force (as distinguished from calls by the
distributors' sales forces) to all grocery and chain convenience stores and has
a network where no distributor of Ben & Jerry's products has a majority
percentage of the Company's distribution. Under the distribution network
redesign which commenced in April-May 1999 and was fully effective September 1,
1999, Ice Cream Partners, a joint venture of the U.S. ice cream operations of
Nestle and The Pillsbury Company ("Pillsbury") distributes Ben & Jerry's
products in specified territories; the balance of domestic deliveries are
distributed primarily by Dreyer's Grand Ice Cream, Inc. ("Dreyer's"), with
Dreyer's handling a smaller volume (than before) of Ben & Jerry's distribution
in other specified territories, and in part by other independent regional
distributors, most of whom are already acting as distributors for Ben & Jerry's.
Under the redesign, no single distributor is expected to handle over 40% of Ben
& Jerry's distribution, as compared with Dreyer's distribution activities
accounting for approximately 57% of the Company's net sales in 1998 and 1997.
Pursuant to the distribution network redesign, Ben & Jerry's entered into an
agreement with Pillsbury which, as amended in January 1999, provides for
distribution of Ben & Jerry's products on a non-exclusive basis in various areas
of the United States beginning September 1, 1999, and in certain areas
commencing April - May 1999. This agreement was assigned to Ice Cream Partners
(a joint venture between Pillsbury and Nestle formed in October 1999), by the
Company and was amended in December 1999. The agreement with Ice Cream Partners
may not be terminated (except for cause) by Ice Cream Partners or Ben & Jerry's
until an effective date in the year 2003. The agreement further provides that
Ben & Jerry's may earlier terminate without cause by making certain specified
payments (except that such payments are not required under specified
circumstances) and it contains additional provisions relating to any termination
upon a change in control of either party. The use of sub-distributors by Ice
Cream Partners is limited under the Agreement.
In January 1999, the Company concluded a new distribution agreement, also on a
non-exclusive basis, with Dreyer's, effective for distribution which commenced
September 1, 1999. This agreement pertains to a smaller geographic
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area than that which was covered under the prior distribution agreement and is
on terms and conditions different in some respects from those applicable under
the prior distribution agreement. The terms as to the prices received by the
Company from Dreyer's purchases of the Company's ice cream products are in line
with the new Agreement the Company entered into with Pillsbury and assigned to
Ice Cream Partners, and are more favorable to the Company than in the past.
The new agreement with Dreyer's may be terminated by either party on not less
than six months' notice except that no such notice may be given during the
months of October - March in any year. The prior agreement had given Dreyer's
certain territorial exclusivity, limited the sale by Dreyer's of competitive
products (Dreyer's brands and certain brands of other ice cream competitors),
and had contained provisions for payment by the terminated party in the event of
a change in control of the terminated party.
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 to its satisfaction.
The Company believes that the distribution network redesign in August 1998 -
1999 gave it more control over the Company's distribution. However, due to the
consolidations in the distribution arena, including the combination of the
Nestle and Pillsbury domestic ice cream operations into Ice Cream Partners,
available distribution alternatives are limited. Accordingly, there can be no
assurance that such difficulties with distributors, which may be related to
actions by the Company's distributors (which include, as the Company's two
principal distributors, its two principal competitors in the marketplace, will
not have a material adverse effect on the Company's business. Loss of one or
more of the Company's principal distributors or termination of one or more of
the related distribution agreements or certain action by the
production/marketing units of these two principal distributors could have a
material adverse effect on the Company's business.
Marketing
Ben & Jerry's marketing is characterized by a strategic discipline that
continues to build brand equity, a solid reputation for the Company and, most
importantly, profitable customer relationships.
Ben & Jerry's marketing strategies remain consistent with the Company's
three-part mission. Building on Ben & Jerry's significant brand name
recognition, the Company continues to emphasize the high quality, natural
ingredients in its products while highlighting its commitment to social change
through innovative promotional and advertising campaigns. Ben & Jerry's
continues to facilitate brand awareness by focusing its marketing efforts on
communicating the Company's unique business approaches via Public Relations
campaigns designed to generate unpaid newspaper, magazine, radio and TV news
coverage. Company founders Ben Cohen and Jerry Greenfield continue to make
personal appearances on TV and radio.
A 1999 Harris Interactive Poll regarding public perceptions of corporate
reputability ranked Ben & Jerry's fifth overall, and first in the "social
responsibility" category. The survey, the results of which were published in the
Wall Street Journal, used an assessment tool developed at New York University's
Stern School of Business to measure a company's reputation, based upon several
key areas - social responsibility, emotional appeal, products and services.
In 1999, Ben & Jerry's became the first U.S. ice cream company to convert a
significant portion of its pint containers to a more environmentally-friendly
unbleached paperboard. The debut of the Company's "Eco-Pint" made headlines in
consumer and financial press nationwide.
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Additional media opportunities in 1999 included placement of the Company's
products in popular sitcoms and movies. Scenes from an upcoming feature film
starring Jim Carrey were filmed at the Company's Waterbury factory. Ben &
Jerry's conducts guided tours of its facility in Waterbury, Vermont to
approximately 300,000 visitors annually, making it the single most popular
tourist attraction in the state.
Ben & Jerry's increased internet presence was driven by several web-based
promotions, including a Halloween promotion in which consumers were invited to
trick or treat online, and a Yahoo!(R) Careers promotion in which consumers
could win a day as a Ben & Jerry's flavor developer.
Ben & Jerry's scoop shops, substantially all of which are franchised, also
contributed significantly to the growth of the brand. In April, Ben & Jerry's
marked its 21st Anniversary with a record-breaking Free Cone Day covered by
local and national media. Almost 200 Ben & Jerry's scoop shops served up more
than a half million free cones as a "thank you" to their customers in this
coast-to-coast event.
Franchise Program
As of December 25, 1999, there were 164 North American Franchise and Satellite
scoop shops compared to 147 as of December 26, 1998. In addition to our
traditional Franchise and Satellite locations, the Company has 8 PartnerShop(R)
Franchises, 19 Featuring Franchises and 12 Scoop Station Franchises.
Ben & Jerry's Franchise Scoop Shops sell 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.
A PartnerShop(R) Franchise is a scoop shop that is awarded to a not-for-profit
organization. PartnerShop(R) franchises are arrangements that permit
not-for-profit organizations to own franchised scoop shops that serve as an
employment resource and potentially a source of revenue for the not-for-profit
groups. The Company waives the normal franchisee fee of $30,000. In addition the
Company provides expertise in the start-up and operation of the PartnerShop(R).
A Featuring Franchise is a business that has a scoop shop within its location,
much like a store within a store. Featuring Franchises are often located in
airports, stadiums, college campuses and similar venues.
In the beginning of 1999, the Company began offering another franchise concept,
a Scoop Station franchise. As of December 25, 1999, there were 12 Scoop Station
franchises. These franchises are located within businesses; generally a smaller
product line is served from a pre-fabricated unit.
At year-end, there were nine company-owned scoop shops: four in Vermont, two in
Las Vegas, Nevada and three locations in Paris, France. Internationally, there
are nine Ben & Jerry's franchised scoop shops in Israel; four in Canada, three
in the Netherlands, one in Lebanon and one in Peru.
New scoop shops are opened under existing Development Agreements and under new
Single Store Agreements. Development Agreements require a franchisee to develop
a particular number of units annually according to the terms of their Agreement.
The Company has assorted franchise concepts that include traditional shops in a
variety of settings, five PartnerShop(R) Featuring Franchises and Scoop Station
Franchises. Franchise Agreements generally have initial terms of five to ten
years and renewal terms. The Scoop Station is a limited concept with a smaller
menu offering; the initial term is generally two years.
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International
The Company regularly investigates the possibilities of entering new markets.
Ben & Jerry's ice cream products are now distributed internationally in the
United Kingdom and Israel and are available in parts of Japan, Ireland, France,
Canada, the Netherlands, Belgium, Singapore, Peru and Lebanon.
In May 1998, the Company signed a non-exclusive licensing agreement with
Delicious Alternative Desserts, LTD, to manufacture, sell and distribute Ben &
Jerry's products through the wholesale distribution channels in Canada for
royalty payments based upon a percentage of the licensee's sales. This agreement
is for a five-year period with a renewal option. In connection with this
agreement, the Company received 4,000,000 Common Shares of Delicious Alternative
Desserts, LTD which represents less than 5% of total issued outstanding common
shares on a fully diluted basis, and the right to designate one director.
In 1987, the Company granted an exclusive license to manufacture and sell Ben &
Jerry's ice cream in Israel. Effective February 26, 1999, the Company acquired a
60% ownership interest in its Israeli licensee, The American Company for Ice
Cream Manufacturing E.I. Ltd, for $1 million. The acquisition was accounted for
using the purchase method of accounting and, accordingly, the costs of the
acquisition have been allocated to assets acquired. The excess of the
acquisition costs over the fair values of the net assets and liabilities
acquired was $1.7 million and has been recorded as goodwill, which is being
amortized on a straight-line basis over 15 years.
In 1997, the Company signed an Importation and Marketing Agreement with one of
the largest food retailers in Japan for sale through Japanese retail stores of
Ben & Jerry's products manufactured in Vermont in a special size. Following a
test market, the product was launched in 1998. In March 1999, the Company
established a wholly-owned subsidiary in Japan for purposes of importing,
marketing and selling its products in Japan. Beginning in January 2000, the
Company imports all products into the Japan market through an agreement with a
Japanese trading company.
Competition
The super premium ice cream, frozen yogurt and sorbet business is highly
competitive, with the distinction between the super premium category and the
"adjoining" premium and premium plus categories less marked than in the past.
The Company's two principal competitors are The Haagen-Dazs operation of Ice
Cream Partners and Dreyer's/Edys, which introduced its Dreamery(TM) super
premium line in the fall of 1999. Other significant frozen dessert competitors
are Columbo, Healthy Choice and Starbucks (distributed by Dreyer's). Haagen-Dazs
has a significant share of the markets that 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. As part of Ben & Jerry's distribution network redesign,
the Pillsbury U.S. ice cream operations (now part of the Ice Cream Partners
Joint Venture) became a principal distributor for the Company's products.
In January and September 1999, Dreyer's launched two lines of super-premium ice
cream, Godiva and Dreamery(TM), with significant marketing programs including
radio, outdoor and television advertising as well as heavy price discounting to
gain trial. The Godiva and Dreamery(TM) products are marketed primarily in
pints. Additional super premium products may be introduced by other ice cream
competition.
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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., Good Humor (owned by Unilever), Nestle products and many private label
brands. All of these other brands have achieved far larger shares of the novelty
market than the Company.
During 1999, the premium category again experienced increased promotional
activity driven by the national competition between Dreyer's Grand Ice Cream,
Inc., a principal distributor for the Company, and Breyer's Ice Cream (owned by
Unilever, a large international food company). In accordance with Dreyer's
strategic 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. 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 a
variety of frozen dessert products, combined with limited shelf space within
supermarkets, may have made market entry harder and has already forced some
brands out of some markets. The ability to introduce innovative new flavors on a
periodic basis is also a significant competitive factor. The Company expects
strong competition to increase, including price/promotional competition and
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 certain 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 was 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 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 Federal and 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.
All the plants pre-treat production effluent prior to discharge to the municipal
treatment facility. The Company believes that it is in compliance with all of
the required operational permits relating to environmental regulations.
Trademarks
The marks Ben & Jerry's, Ben & Jerry's Portrait, Ben & Jerry's Ice Cream on A
First Name Basis, Chubby Hubby, Chunky Monkey, Coffee, Coffee BuzzBuzzBuzz!,
Cool Britannia, Dastardly Mash, Hunka Hunka Burnin' Fudge, Lids for Kids, More
Chunks Less Bunk, New York Super Fudge Chunk, One World One Heart, PartnerShop,
<PAGE>
Peace Pop, Rainforest Chunk, Today's Euphoric Flavors, Totally Nuts, Vanilla
Like It Oughta' Be, Vermont's Finest and World's Best are registered trademarks
of the Company.
Cherry Garcia(R), Phish Food(R), Phish Stick(R), Wavy Gravy(TM), Doonesberry(R),
Heath(R) and Dilbert's World(R) are Ben & Jerry's proprietary flavor names and
are licensed to the Company.
Employees
At December 25, 1999, Ben & Jerry's employed 841 people including full-time,
part-time and temporary employees. This represents a 12% increase from the 751
people employed by the Company at December 26, 1998.
During 1998, a union organizing effort took place at the Company's St. Albans,
Vermont, plant within the Maintenance Department. By a majority vote all
full-time and regular part-time maintenance team members employed by the Company
agreed to be represented by the International Brotherhood of Electrical Workers
(IBEW). The Company signed an agreement in November 1999, with the Union. As of
December 25, 1999, 16 employees were members of IBEW.
The Ben & Jerry's Foundation
In 1985, Ben Cohen, co-founder of the Company, 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. The Foundation, with its employee-led
grant-making committee under supervision of the Foundation's directors, 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
grassroots social change organizations.
In October 1985, pursuant to stockholder authorization, the Company issued to
the Foundation all of the 900 authorized shares of Class A Preferred Stock. The
Class A 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, Class A Preferred Stock,
Classified Board of Directors, Vermont Legislation and Shareholder Rights Plans.
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 as such, 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
Common 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 Common Stock thereby sold.
The Company has been advised that Mr. Jerry Greenfield (Chairperson and a
director of the Company), Mr. Ben Cohen (Vice-Chairperson and a director of the
Company) and Mr. Jeff Furman (a director and formerly a consultant to the
<PAGE>
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 three
directors who are Principal Stockholders. See "Security Ownership of Certain
Beneficial Owners and Management." As of February 25, 2000, these three
principal individual stockholders held shares representing 47% of the aggregate
voting power in elections of directors and various other matters and 17% 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 they might sell substantial
portions of their Class A Common Stock.
The Board of Directors, without further stockholder approval, may issue
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. In 1985,
Ben Cohen, one of the Company's co-founders, contributed a portion of the equity
in the Company, which he then owned, to the Ben & Jerry's Foundation, Inc. Two
of the three current directors of the Foundation, Messrs. Greenfield and Furman,
are also directors of the Company. The Class A Preferred Stock gives the
Foundation a class voting right to act with respect to certain Business
Combinations (as defined in the Company's charter). The 1985 issuance of the
Class A 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.
At the 1997 Annual Meeting the shareholders approved amendments to the Company's
Articles of Association to (a) classify the Board into three classes, as nearly
equal as possible, so that each director (after a transitional period) will
serve for three years, with one class of directors being elected each year; (b)
provide that directors may be removed only for cause and with the approval of at
least two-thirds of the votes cast on the matter by all of the outstanding
shares of capital stock of the Company entitled to vote generally in the
election of directors; (c) provide that any vacancy resulting from such a
removal may be filled by two-thirds of the directors then in office; and (d)
increase the stockholder vote required to alter, amend, repeal or adopt any
provision inconsistent with these amendments approved by stockholders in 1997 to
at least two-thirds of the votes cast on the matter by all of the outstanding
shares of capital stock of the Company entitled to vote generally in the
elections of directors, voting together.
Also, in April 1998, the Legislature of the State of Vermont amended a provision
of the Vermont Business Corporation Act to provide that the directors of a
Vermont corporation may also consider, in determining whether an acquisition
offer or other matter is in the best interests of the corporation, the interests
of the corporation's employees, suppliers, creditors and customers, the economy
of the state in which the corporation is located and including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation. Also, in August 1998, following approval by its
Board of Directors, the Company put in place two Shareholder Rights Plans, one
pertaining to the Class A Common Stock and one pertaining to the Class B Common
Stock. These Plans are intended to protect stockholders by compelling someone
seeking to acquire the Company to negotiate with the Company's Board of
Directors in order to protect stockholders from unfair takeover tactics and to
assist in the maximization of stockholder value. These Rights Plans, which are
common for public companies in the United States, may also be deemed to be
<PAGE>
"anti-takeover" provisions in that the Board of Directors believes that these
Plans will make it difficult for a third party to acquire control of the Company
on terms which are unfair or unfavorable to the stockholders.
The Class B Common Stock, which may be converted into shares of Class A Common
Stock by a specified vote of the Board, the Class A Preferred Stock, which may
be redeemed by a specified vote of the Board, the Classified Board of Directors
and the Shareholder Rights Plans may be deemed to be "anti-takeover" provisions
in that the Board of Directors believes the existence of these securities and
the 1997 amendments to the Articles of Association 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.
The Company believes that these provisions of the Articles of Association, the
amendment to the Vermont Business Corporation Act and the Shareholder Rights
Plans, reduce the possibility that a third party could effect a change,
including a tender offer or a sudden or surprise change in the composition of
the Company's Board of Directors, without the support of the incumbent Board
and,accordingly, that adoption of these items strengthened Ben & Jerry's ability
to remain an independent, Vermont-based company focused on carrying out its
three-part corporate mission, which Ben & Jerry's believes is in the best
interest of the Company, its stockholders, employees, suppliers, customers and
the Vermont community.
Indications of Interest to Acquire the Company; Alternative Transactions
The Company announced on December 2, 1999 that it had received Indications of
Interest to acquire the Company at prices significantly above the closing price
on NASDAQ on the day before the December 2, 1999 press release ($21.00). These
Indications of Interest are subject to conditions and, together with Alternative
Transactions under which the Company would remain an independent company, are
being considered by the Board of Directors.
The Company's policy, as regularly disclosed in its filings with the Securities
and Exchange Commission, has been to remain an independent Vermont-based company
focused on its three-part corporate mission, emphasizing product quality,
economic reward and a commitment to the community, contributing 7 1/2% of its
profit before tax to charities, including donations to The Ben & Jerry's
Foundation, Inc.
No decision has been made by the Board with respect to any of these indications
of interest or as to any sale of the Company or Alternative Transactions under
which the Company would remain independent ("Alternative Transactions") (See
"Risk Factors Indications of Interest: to Acquire the Company; Alternative
Transactions"), and no implications should be drawn from this Report as to what
definitive decision will be reached by the Board after it has concluded its
deliberations or as to the timing of any decision.
<PAGE>
ITEM 2. PROPERTIES
The Company owns three production facilities. 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 owns a
12-acre site in Springfield, Vermont on which it operates a 48,000 square-foot
production facility. 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. Novelty production will be phased out and moved to a third party
co-packer in 2000.
The Company's property, plant and equipment at its production facilities in
Waterbury are subject to various liens securing a portion of the Company's
long-term debt.
The Company owns a 42-acre site in St. Albans, Vermont, on which it operates a
92,000 square-foot manufacturing facility.
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 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 located. In 1999 the Company expanded the office space to 97,780
square feet.
The Company also leases space for its retail ice cream parlors in Burlington,
Montpelier and Middlebury, Vermont, Las Vegas, Nevada and Paris, France, and its
corporate offices in the United Kingdom, France and Japan. The Company owns
three single-family houses, which are situated on land adjacent to its
manufacturing facility in Waterbury.
The Company believes that all of its facilities are well maintained and in good
repair.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to certain 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 1999.
<PAGE>
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
December 28, 1997 through February 25, 2000, the high and low closing sales
prices of the Company's Class A Common Stock for the periods indicated.
High Low
---- ---
1998
----
First Quarter $ 19 $ 14
Second Quarter 21 1/8 17
Third Quarter 19 7/8 13 1/16
Fourth Quarter 23 7/8 14 7/8
1999
----
First Quarter $ 27 $ 21 3/8
Second Quarter 30 24 3/8
Third Quarter 29 17 7/8
Fourth Quarter 28 1/4 15 13/16
2000
----
First Quarter through February 25, 2000 $ 29 1/4 $ 21 1/4
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 Common Stock thereby sold.
As of February 25, 2000 there were 9,979 holders of record of the Company's
Class A Common Stock and 1,922 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 1995 through 1999.
Summary of Operations (In thousands except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Fiscal Year
-----------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net sales $237,043 $209,203 $174,206 $167,155 $155,333
Cost of sales 145,291 136,225 114,284 115,212 109,125
-------- -------- -------- -------- --------
Gross profit 91,752 72,978 59,922 51,943 46,208
Selling, general & administrative expenses
78,623 63,895 53,520 45,531 36,362
Special charge1 8,602 -- -- -- --
Other income (expense) - net 681 693 (118) (77) (441)
-------- --------- -------- -------- --------
Income before income taxes 5,208 9,776 6,284 6,335 9,405
Income taxes 1,823 3,534 2,388 2,409 3,457
-------- -------- -------- -------- --------
Net income $ 3,385 $ 6,242 $ 3,896 $ 3,926 $ 5,948
======== ======== ======== ======== ========
Net income per share - diluted $0.46 $0.84 $0.53 $0.54 $0.82
Shares outstanding - diluted 7,405 7,463 7,334 7,230 7,222
Balance Sheet Data:
Fiscal Year
-----------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working capital $ 42,805 $ 48,381 $ 51,412 $ 50,055 $ 51,023
Total assets 150,602 149,501 146,471 136,665 131,074
Long-term debt and capital lease obligations
16,669 20,491 25,676 31,087 31,977
Stockholders' equity2 89,391 90,908 86,919 82,685 78,531
</TABLE>
1. In 1999 the Company finalized a plan to shift manufacturing of its
frozen novelty line of business from a Company-owned plant in Springfield,
Vermont to third party co-packers to improve the Company's competitive position,
gross margin and profitability. This action resulted in fourth quarter 1999
write-off of assets associated with the ice cream novelty and other
manufacturing assets and costs associated with severance for those employees who
do not accept the Company's offer of relocation.
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.
<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 Income.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Annual Increase (Decrease)
Percentage of Net Sales 1999 1998 1997
Fiscal Year Compared Compared Compared
1999 1998 1997 To 1998 To 1997 To 1996
---- ---- ---- ------- ------- -------
Net sales 100.0% 100.0% 100.0% 13.3% 20.1% 4.2%
Cost of sales 61.3 65.1 65.6 6.7 19.2 (0.8)
----- ----- ----- ----- ----- -----
Gross profit 38.7 34.9 34.4 25.7 21.8 15.4
Selling, general and
administrative expense 33.2 30.5 30.7 23.0 19.4 17.5
Special charge 3.6 -- -- -- -- --
Other income (expense) 0.3 0.3 (0.1) 0.2 687.3 53.2
----- ----- ----- ----- ----- -----
Income before income taxes
2.2 4.7 3.6 (46.7) 55.6 (0.8)
Income taxes 0.8 1.7 1.4 (48.4) 8.0 (0.9)
----- ----- ----- ----- ----- -----
Net income 1.4% 3.0% 2.2% (45.8)% 60.2% (0.8)%
===== ===== ===== ===== ===== =====
</TABLE>
Net Sales
Net sales in 1999 increased 13.3% to $237 million from $209 million in 1998
primarily due to growth in the U.S. marketplace as well as the United Kingdom.
Total worldwide pint volume increased 8.9% compared to 1998, which was primarily
attributable to the Company's original line of products. This volume increase
was combined with a price increase of 3.3% on pints sold to U.S. distributors
that went into effect in July 1998. Total worldwide unit volume of 2 1/2 gallon
bulk container products increased 16.7% compared to the same period in 1998.
Packaged sales (primarily pints) represented 83% of total net sales in 1999, 81%
of total net sales in 1998 and 84% of total net sales in 1997. Net sales of 2
1/2 gallon bulk containers represented approximately 9% of total net sales in
1999 and 8% of total net sales in 1998 and 1997. Net sales of novelty products
(including single servings) accounted for approximately 6% of total net sales in
1999, 9% of total net sales in 1998 and 6% of total net sales in 1997. This
decrease is due to a decline in sales of single serve containers to the Japanese
market in comparison to the prior year. Net sales from the Company's retail
stores represented 2% of total net sales in 1999, 1998 and 1997.
International sales were $25.3, $17.4, and $7.6 million in 1999, 1998 and 1997,
respectively, which represents 11% of total net sales in 1999, 8% in 1998 and 4%
in 1997. The increase in 1999 was primarily due to increased sales in the United
Kingdom partially offset by a decrease in net sales to the Japanese market.
Net sales in 1998 increased 20.1% to $209 million from $174 million in 1997.
Total worldwide pint volume increased 10% compared to 1997 which was primarily
attributable to the Company's original line of products. This volume increase
was combined with a price increase of 3% on pints sold to distributors that went
into effect in July 1998. Total worldwide unit volume of 2 1/2 gallon bulk
container products increased 17% compared to the same period in 1997.
<PAGE>
Cost of Sales
Cost of sales in 1999 increased approximately $9 million or 6.7% over the same
period in 1998 and overall gross profit as a percentage of net sales increased
from 34.9% in 1998 to 38.7% in 1999. The higher gross profit as a percentage of
net sales resulted from decreased dairy commodity costs, a 3.3% distributor
price increase effective in July 1998 and a price increase in connection with
the Company's distribution redesign in 1999, better plant utilization due to
higher production volumes and improved efficiencies in the plants.
Cost of sales in 1998 increased approximately $22 million or 19% over the same
period in 1997 and overall gross profit as a percentage of net sales increased
from 34.4% in 1997 to 34.9% in 1998. The slightly higher gross profit as a
percentage of net sales resulted from increases in selling prices effective in
January 1998 and July 1998, better plant utilization due to higher production
volumes and a decrease in reserves for potential product obsolescence, partially
offset by substantial increases in dairy commodity costs. In response to higher
dairy costs the Company instituted a 3% price increase effective in July 1998
for its packaged pint products and a combined 10% price increase for its 2 1/2
gallon bulk containers effective in January 1998 and July 1998 to offset these
increased costs. See Risk Factors, "Volatile Cost of Raw Materials."
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 23.0% to $78.6 million in
1999 from $63.9 million in 1998 and increased as a percentage of net sales to
33.2% in 1999 from 30.5% in 1998. The $14.7 million dollar increase primarily
reflects increased selling expenses related to the Company's earlier
restructuring of its distribution system and increased advertising and
promotions expenses. In addition the Company is investing more heavily in its
international operations, most notably in the United Kingdom, Japan and Israel
in order to capitalize on further opportunities to grow its ice cream sales
outside the United States. Selling, general and administrative expenses also
reflect increased salaries, recruiting and training expenses related to building
more infrastructure to manage its business, and in the fourth quarter of 1999
higher expenses for professional advisors, including its investment bankers,
consultants and legal counsel, related to the Company's review and consideration
of the Indications of Interest to Acquire the Company and Alternative
Transactions.
Selling, general and administrative expenses increased 19% to $64 million in
1998 from $54 million in 1997 and decreased slightly as a percentage of net
sales to 30.5% in 1998 from 30.7% in 1997. The $10 million increase in expenses
is attributable to increased sales and marketing expenses to support the launch
of a new line of premium plus ice cream under the name of Newman's Own(TM) All
Natural Ice Cream, increased international costs, increases in radio
advertising, in-store programs to drive product trial and brand awareness, scoop
truck marketing and the rollout of the new pint package design.
Special Charge
Following a comprehensive review of its manufacturing operations, the Company
finalized a plan to shift manufacturing of its frozen novelty line of business
from a company-owned plant in Springfield, Vermont to third party co-packers to
improve the Company's competitive position, gross margin and profitability. This
action resulted in a fourth quarter 1999 non-recurring pre-tax charge of $8.6
million ($.78 per common share, after tax)consisting of the write-off of assets
associated with the ice cream novelty and other manufacturing assets and costs
associated with severance for those employees who do not accept the Company's
offer of relocation. This plan to shift novelty manufacturing will be executed
during
<PAGE>
2000. The outsourcing of its ice cream novelty business will enable the Company
to introduce a wider range of novelty products in the future and increase its
flexibility.
Other Income (Expense)
Interest income decreased to $1.9 million in 1999 compared to $2.2 million in
1998. This decrease in interest income was due to a lower average invested
balance throughout the period. Interest expense decreased $254,000 compared to
1998. This decrease is due to the $5 million Senior Notes principal payment made
in September 1999 partially offset by increased interest expense for debt
acquired through the Company's 60% ownership interest in its Israeli licensee.
Interest income increased from $1.9 million in 1997 to $2.2 million in 1998. The
increase in interest income was due to higher average invested balance
throughout 1998. Interest expense in 1998 decreased $104,000 in 1998 as compared
to 1997 due to the $5 million Senior Notes principal installment payment. Other
income (expense) increased in 1998 from other expense of $118,000 in 1997 to
other income of $693,000 in 1998. This is primarily due to increased losses
associated with foreign currency exchange in comparison to 1997, combined with
income received from the Company's cost basis investment.
Income Taxes
The Company's effective income tax rate in 1999 decreased to 35% from 36% in
1998 and 38% in 1997. The decrease was a result of lower state income taxes,
more tax-exempt interest income, and the overall geographic mix of earnings.
Management expects 2000's effective income tax rate to remain at approximately
35% based upon the expected geographic mix of earnings.
Net Income
Net income for 1999, excluding the non-recurring special charge discussed above,
increased to $9.0 million from $6.2 million in 1998. Diluted net income per
share excluding the non-recurring special charge was $1.21 in 1999 compared to
$0.84 in 1998. Net income after reflecting the special charge was $3.4 million
in 1999. Net income as a percentage of net sales was 3.8% (excluding the
non-recurring special charge) and 1.4% (after reflecting the special charge) in
1999 as compared to 3.0% in 1998 and 2.2% in 1997.
During the fourth quarter of 1999 and continuing into the first quarter of 2000,
the Company incurred significant expenditures (classified within S,G&A) for
services of its investment banker, consultants and legal counsel, including
separate legal counsel for various directors, in connection with the
investigations and deliberations of the Board with respect to the various
Indications of Interest to acquire the Company and Alternative Transactions
under consideration by the Board. These expenditures are expected to continue
until the Board makes a definitive decision on this subject.
The Company expects to face increased domestic competition in the Year 2000,
which will require increased selling and marketing expenditures, and may result
in a slower rate of growth in net sales and may well have an adverse effect on
future results, as compared with results for the Year 1999. See "Risk Factors"
generally.
Seasonality
The Company typically experiences more demand for its products during the summer
than during the winter.
<PAGE>
Inflation
Inflation has not had a material effect on the Company's business to date, with
the exception of dairy raw material commodity costs. See the Risk Factors below.
Management believes that the effects of inflation and changing prices were
successfully managed in 1999, with both margins and earnings being protected
through a combination of pricing adjustments, cost control programs and
productivity gains.
Liquidity and Capital Resources
As of December 25, 1999 the Company had $46.6 million of cash, cash equivalents
and short term investments ($25.3 million of cash and cash equivalents and $21.3
million of marketable securities), a $638,000 decrease since December 26, 1998.
Net cash provided by operations in 1999 was $20.3 million. Uses of cash included
increases in accounts receivable and inventories of $7.5 million and $405,000
respectively, $5.3 million to pay down debt and capital lease obligations,
repurchase of company stock of $7.2 million, and additions to property, plant
and equipment, primarily for equipment upgrades at the Company's manufacturing
facilities, of $8.8 million. The increase in accounts receivable is due to a
contractual change in the Company's distribution agreement with Dreyer's Grand
Ice Cream effective in January 1999, which altered the payment terms from 14 to
28 days. Partially offsetting these uses of cash was an increase in accounts
payable and accrued expenses of $7 million. The increase in accounts payable and
accrued expenses reflects additional liabilities related to both the Japanese
and Israeli operations.
In addition the Company acquired a 60% interest in its Israeli licensee for $1
million in February, 1999. Cash acquired in the transaction was $858,000. In
June 1999, the Company acquired the assets of one of its franchisees, which
included Las Vegas, Nevada territory rights and two scoop shops, for
approximately $870,000 net of cash acquired.
In September 1999, the Company completed its previously announced repurchase
program commenced in September 1998, which authorized the Company to purchase
shares of the Company's Class A Common Stock up to an aggregate cost of $5
million for use for general corporate purposes. In September 1999 the Board of
Directors approved an additional $3 million for stock repurchases of its Class A
common shares. During the year ended December 25, 1999 the Company repurchased a
total of 364,100 shares of the Company's Class A Common Stock for approximately
$7.2 million.
The Company's short and long-term debt at December 25, 1999 includes $20 million
aggregate principal amount of Senior Notes issued in 1993 and 1994. The second
principal payment of $5 million was paid in October 1999 and the remainder of
principal is payable in annual installments through 2003.
The Company anticipates capital expenditures in 2000 of approximately $9.0
million. Most of these projected capital expenditures relate to equipment
upgrades and enhancements at the Company's manufacturing facilities,
computer-related expenditures and build out of Company-owned scoop shops.
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 LIBOR plus a margin based on a pre-determined
formula. No amounts were borrowed under these or any bank agreements during
1999. The working capital line of credit agreements expire December 23, 2001.
<PAGE>
Management believes that internally generated funds, cash, cash equivalents and
marketable securities 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.
Impact of Year 2000
The Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $620,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
Euro Conversion
On January 1, 1999 certain member countries of the European union established
fixed conversion rates between their existing currencies and the European
Union's common currency ("the euro"). The former currencies of the participating
countries are scheduled to remain legal tender as denominations of the euro
until January 1, 2002 when the euro will be adopted as the sole legal currency.
The Company has evaluated the potential impact on its business, including the
ability of its information systems to handle euro-denominated transactions and
the impact on exchange costs and currency exchange rate risks. The conversion to
the euro is not expected to have a material impact on the Company's operations
or financial position.
Forward-Looking Statements
This section, as well as other portions of this document, includes certain
forward-looking statements about the Company's business, new products, sales,
dairy ingredient commodity costs, other expenditures and cost savings, effective
tax rate, operating and capital requirements and financing. Any such statements
are subject to risks that could cause the actual results or needs to vary
materially and are also subject to changes in connection with any potential
Indications of Interest to acquire the Company or Alternative Transactions.
These risks are discussed below.
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.
Risk Factors
Dependence on Independent Ice Cream Distributors. Historically, the Company has
been dependent on maintaining satisfactory relationships with Dreyer's Grand Ice
Cream, Inc. ("Dreyer's") and the other independent ice cream distributors that
have acted as the Company's exclusive or master distributor in their assigned
territories. In 1998, Dreyer's distributed significantly more than a majority of
the sales of Ben & Jerry's products. 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 to its
satisfaction. In August 1998 - January 1999, the Company redesigned its
distribution network, entering into a distribution agreement with The Pillsbury
Company ("Pillsbury") and a new agreement with Dreyer's. These arrangements took
<PAGE>
effect in September 1999, except for certain territories which were effective in
April - May 1999. The Company believes the terms of the new arrangements will be
more favorable to the Company and expects that, under the distribution network
redesign, no one distributor will account for more than 40% of the Company's net
sales. The October 1999 transfer of the Haagen-Dazs unit to the recently formed
Pillsbury/Nestle ice cream joint venture has presented certain
opportunities/difficulties for the Company, which entered into an amendment with
the Ice Cream Partners joint venture in December 1999, in connection with the
assignment of that agreement from Pillsbury to the joint venture.
However, both the recently formed Pillsbury/Nestle ice cream joint venture
(through its Haagen-Dazs super premium ice cream unit), and Dreyer's with its
fall 1999 super premium ice cream market entry are direct competitors of the
Company.
Since available distribution alternatives are limited and continue to be
adversely impacted by consolidation in the industry, there can be no assurance
that difficulties in maintaining satisfactory relationships with its two
principal distributors (who are competitors) and its other distributors, some of
which are also competitors of the Company, will not have a material adverse
effect on the Company's business (See "Business - Markets and Customers").
Growth in Sales and Earnings. In 1999, net sales of the Company increased 13.3%
to $237 million from $209 million in 1998. Total worldwide pint volume increased
8.9% compared to 1998. Based on information provided by Information Resources,
Inc., a software and marketing information services company ("IRI"), the Company
believes that the U.S. super premium and premium plus ice cream, frozen yogurt
and sorbet industry category sales increased 10% in 1999 compared to 1998. Given
these overall domestic super premium industry trends, the successful
introduction of innovative flavors on a periodic basis has become increasingly
important to 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 significant promotional expenditures, is likely to have an
important impact on the Company's 2000 and future financial results. However,
the Company expects that, due to increased domestic competition, it will need to
increase its selling and marketing expenses and that its rate of growth in net
sales may be slower in the current Year 2000, which may be expected to adversely
affect earnings (See "Management's 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 and premium plus categories less marked than in the past. 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, two of which are
distributors for the Company, are large companies with resources significantly
greater than the Company's. In January and September 1999 Dreyer's launched two
lines of super premium ice cream, Godiva and Dreamery(TM), with significant
marketing programs including radio, outdoor and television advertising as well
as heavy price discounting to gain trial. The Godiva and Dreamery(TM) products
are marketed primarily in pints. Additional super premium products may be
introduced by other ice cream competitors. In October 1999, the U.S. ice cream
operations of Pillsbury (Haagen-Dazs) and Nestle were consolidated into a joint
venture, Ice Cream Partners. See "Business Competition" and "Business: The Super
Premium Frozen Dessert Market." The Company expects strong competition to
continue and increase, including competition for the limited shelf space for the
frozen dessert category in supermarkets and other retail food outlets, the
impact of consolidation in the retail food outlets and increased competition
from the Company's two principal distributors.
<PAGE>
Volatile Cost of Raw Materials. Management believes that the general trend of
volatility in dairy ingredient commodity costs may continue. While dairy
commodity costs for 1999, and especially for the second half of 1999, were lower
than in 1998, it is possible that at some future date both gross margins and
earnings may not be adequately 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 Jerry Greenfield, the Chairperson of the
Board and co-founder of the Company, and Ben Cohen, 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 in a way that actively recognizes the central role that
business plays in the structure of society by initiating innovative ways to
improve the quality of life of a broad community: local, national and
international. Underlying the mission of Ben & Jerry's is the determination to
seek new and creative ways of addressing all three parts, while holding a deep
respect for individuals inside and outside the Company and for the communities
of which they are a part." 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 some material adverse
financial effect. See "Business-Introduction" and "Business-Marketing."
International. Total international net sales represented approximately 11% of
total consolidated net sales in 1999. 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 the United Kingdom
and France, through license arrangements in the Netherlands and Belgium. Sales
were also made in Japan andSingapore and the Company started selling in Peru and
Lebanon in 1999 under license arrangements. In 1987, the Company granted an
exclusive license to manufacture and sell Ben & Jerry's products in Israel. In
1999, the Company made an investment of $1 million in its Israeli licensee,
which gave the Company a 60% ownership interest. In May 1998, the Company signed
a Licensing Agreement with Delicious Alternative Desserts, LTD to manufacture,
sell and distribute Ben & Jerry's products through the wholesale distribution
channels in Canada. The Company is investigating the possibility of further
international expansion. However, there can be no assurance that the Company
will be successful in all of its present international markets or in entering
(directly, or indirectly through licensing) on a long-term profitable basis,
such additional 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
(authorized in 1987), entitled, except to the extent otherwise provided by law,
to ten votes per share. Ben Cohen, Jerry Greenfield and Jeffrey Furman
(collectively the "Principal Stockholders") hold shares representing 47% 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
<PAGE>
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 sell substantial
portions of their Class A Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
In addition, the Company issued all of the authorized Class A Preferred Stock to
the Foundation in 1985. The Class A Preferred Stock gives the Foundation a class
voting right to act with respect to certain Business Combinations (as defined in
the Company's charter) and significantly 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."
Also, in April 1998, the Legislature of the State of Vermont amended a provision
of the Vermont Business Corporation Act to provide that the directors of a
Vermont corporation may also consider, in determining whether an acquisition
offer or other matter is in the best interests of the corporation, the interests
of the corporation's employees, suppliers, creditors and customers, the economy
of the state in which the corporation is located and including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation. Also, in August 1998, following approval by its
Board of Directors, the Company put in place two Shareholder Rights Plans, one
pertaining to the Class A Common Stock and one pertaining to the Class B Common
Stock. These Plans are intended to protect stockholders by compelling someone
seeking to acquire the Company to negotiate with the Company's Board of
Directors in order to protect stockholders from unfair takeover tactics and to
assist in the maximization of stockholder value. These Rights Plans, which are
common for public companies in the United States, may also be deemed to be
"anti-takeover" provisions in that the Board of Directors believes that these
Plans will make it difficult for a third party to acquire control of the Company
on terms which are unfair or unfavorable to the stockholders.
While the Board of Directors believes that the Class B Common Stock and the
Class A Preferred Stock are important elements in keeping Ben & Jerry's an
independent, Vermont-based business focused on its three-part corporate mission,
the Class B Common Stock and the Class A Preferred Stock (which may be converted
into Class A Common Stock or redeemed in the case of the Class A Preferred
Stock, as the case may be, by the specified votes of the Board of Directors) may
be deemed to be "anti-takeover" provisions 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.
In addition, the 1997 amendments to the Company's Articles of Association to
classify the Board of Directors and to add certain other related provisions and
the April 1998 Vermont Legislative Amendment of the Vermont Business Corporation
Act and the Shareholder Rights Plans put in place in August, 1998 (see
"Anti-Takeover Effects of Class B Common Stock, Class A Common Stock, Class A
Preferred Stock, Classified Board of Directors, Vermont Legislation and
Shareholder Rights Plans" in Item 1) may be deemed to be "anti-takeover"
<PAGE>
provisions in that the Board of Directors believes that these amendments and
legislation 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.
Indications of Interest to Acquire the Company; Alternative Transactions. The
Company announced on December 2, 1999 that it had received indications of
interest to acquire the Company and Alternative Transactions to acquire the
Company at prices significantly above the closing price on NASDAQ on the day
before the December 2, 1999 press release ($21.00). These Indications of
Interest are subject to conditions and, together with Alternative Transactions
under which the Company would remain an independent company, are being
considered by the Board of Directors.
The Company's policy, as regularly disclosed in its filings with the Securities
and Exchange Commission, has been to be an independent Vermont-based company
focused on its three-part corporate mission, emphasizing product quality,
economic reward and a commitment to the community, contributing 7 1/2% of its
profit before tax to charities, including donations to The Ben & Jerry's
Foundation, Inc.
No decision has been made by the Board with respect to any of these Indications
of Interest or as to any sale of the Company or as to any Alternative
Transaction under which the Company would remain an independent company, and no
implications should be drawn from this Report as to what definitive decision
will be reached by the Board after it has concluded its deliberations or as to
the timing of any decision. As noted under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Board has been receiving
advice from its investment banker, consultants hired in connection with this
matter and counsel, including separate counsel hired by various individual
directors. The matters relating to the Indications of Interest or Alternative
Transactions present a different set of risks and opportunities for the Company
and its continued independence, which could materially affect the future
operations and results of the Company.
ITEM 7A. MARKET RISK
The Company is exposed to a variety of market risks, including changes in
interest rates affecting the return on its investments and foreign currency
fluctuations. The Company's exposure to market risk for a change in interest
rates relates primarily to the Company's investment portfolio. The Company has
classified all of its short-term and long-term investments as "available for
sale" except for certificates of deposits which are held to maturity. Unrealized
gains and losses for available for sale securities are excluded from earnings
and are reported as a separate component of stockholder's equity until realized.
The majority of these investments are municipal bonds and fixed income preferred
stock. At December 25, 1999, unrealized losses amounted to $324,000. The Company
does not intend to hold such investments to maturity if there is an underlying
change in interest rates or the Company's cash flow requirements. Certificates
of deposits do not expose the consolidated statement of operations or balance
sheets to fluctuations in interest rates. The Company's exposure to market risk
for fluctuations in foreign currency relate primarily to the amounts due from
subsidiaries. Exchange gains and losses related to amounts due from subsidiaries
have not been material for each of the years presented.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this is in Item 14(a) of this Report.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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
- ----------------- ----- -----------------------------------------------
Jerry Greenfield 48 Chairperson and Director
Ben Cohen 48 Vice Chairperson and Director
Perry Odak 54 Chief Executive Officer, President and Director
Pierre Ferrari 49 Director
Jeffrey Furman 56 Director
Jennifer Henderson 46 Director
Frederick A. Miller 53 Director
Henry Morgan 74 Director
Bruce Bowman 47 Senior Director of Operations
Charles Green 45 Senior Director Sales and Distribution
Frances Rathke 39 Chief Financial Officer and Secretary
Michael Sands 35 Chief Marketing Officer
The Board of Directors has an Audit Committee on which Directors Ferrari, Furman
and Morgan (Chairperson) serve; a Compensation Committee on which Directors
Miller, Morgan and Henderson, (Chairperson) serve; a Social Mission/Workculture
Committee on which Directors Furman, Henderson and Miller (Chairperson) serve;
an Executive Committee on which Directors Cohen, Miller, Morgan, Odak and
Ferrari serve; and a Nominating Committee on which Directors Ferrari
(Chairperson), Greenfield, Henderson, Odak and Cohen serve. In December 1999 the
Board appointed a Special Committee consisting of two directors, Messrs. Ferrari
and Furman, to explore certain specific matters related to alternatives for the
Company's future, in light of the Indications of Interest to acquire the Company
and Alternative Transactions. This Committee concluded its work on January 27,
2000. In December 1999 the Board also appointed a Special Committee of four
directors -- namely Messrs. Furman, Greenfield, Morgan and Odak, to coordinate
generally for the Board its review of the Indications of Interest to acquire the
Company and Alternative Transactions and variations of the foregoing, subject to
the final determination by the Board of Directors.
Ben Cohen, a founder of the Company, served as Chairperson of the Board of
Directors from February 1989 through November 1998. Mr. Cohen currently serves
as Vice Chairperson of the Board of Directors. 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 has been President of
Business Leaders for Sensible Priorities, a nonprofit organization, since 1998.
Mr. Cohen is a director of Blue Fish Clothing, Inc. and Social Venture Network.
In 1997, Community Products Inc., of which Mr. Cohen was a director, filed for
protection under Chapter 11 and then Chapter 7 of the United States Bankruptcy
Code, and was liquidated in 1999.
<PAGE>
Pierre Ferrari has served as a director of the Company since June 1997.
Currently, Mr. Ferrari is a self-employed consultant. From 1997 through 1999,
Mr. Ferrari was President of Lang International, a marketing consulting firm.
From 1995 to 1997 Mr. Ferrari was the Special Assistant to the President and CEO
of Care, the world's largest private relief and development agency. Prior to
1994, Mr. Ferrari held various senior level marketing positions at the Coca-Cola
Company.
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. Currently, Mr.
Furman is a self-employed consultant. From March 1991 through December 1996, Mr.
Furman was a consultant to the Company.
Jerry Greenfield, a founder of the Company, served as director and Vice
Chairperson of the Board of Directors from 1990 to November 1998, at which time
he was elected Chairperson of the Board of Directors. Mr. Greenfield is also
President and a director of The Ben & Jerry's Foundation, Inc.
Jennifer Henderson has served as a director of the Company since June 1996. Ms.
Henderson is President of Strategic Interventions, Inc., a leadership and
management consulting firm.
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. Mr. Morgan is
retired Dean Emeritus of Boston University School of Management. Mr. Morgan
serves on the Board of Directors of Cambridge Bancorporation, Southern
Development Bancorporation and Cleveland Development Bancorporation.
Perry D. Odak has served as Chief Executive Officer of the Company since
December 31, 1996, as director of the Company since January 1997, and as Chief
Executive Officer and President since June 1997. From 1990 to 1996, Mr. Odak was
a principal in Odak, Pezzani & Company, a private management consulting firm.
From 1994 to 1995, Mr. Odak was Chief Executive Officer of Graham Packaging.
Bruce Bowman has served as Senior Director of Operations since August 1995.
Prior to joining the Company Mr. Bowman was Senior Vice President of Operations
at Tom's Foods, Inc., a food manufacturing company (April 1991 to August 1995).
Mr. Bowman serves on the Board of Governors of Bryce Corporation, a privately
held packaging company and was a director of Delicious Alternative Desserts,
LTD. (March 1999 to July 1999).
Charles Green has served as Senior Director of Sales and Distribution since
October 1996. From 1993 to 1996 Mr. Green was General Manager of Dari-Farms, the
distributor of Ben & Jerry's products in the Massachusetts and Connecticut
areas. From 1991 to 1993, Mr. Green was Vice President of Sales for HP Hood.
Frances Rathke has served as Chief Financial Officer, Chief Accounting Officer
and Secretary of the Company since April 1990.
Michael Sands joined the Company in July 1999 as Chief Marketing Officer. From
1997 to July 1999, Mr. Sands was Vice President of Marketing for Triarc Company,
Inc., the company that acquired Snapple Natural Beverage Company. From November
1992 to June 1997, Mr. Sands was Director of Marketing for Mexican Specialty
Brands and managed five Mexican Brands positioned throughout the imported beer
category with Labatt USA.
<PAGE>
Other Key Executives
Elizabeth Bankowski has served as the Director of Social Mission Development
since December 1991. Ms. Bankowski is also Secretary and a director of The Ben &
Jerry's Foundation, Inc. Ms. Bankowski served as a director of the Company from
1990 to June 1999.
Richard Doran joined the Company in 1997 as Senior Director of Human Resources.
From 1987 until joining the Company Mr. Doran was a management consultant and
Vice President for the Kaleel Jamison Consulting Group, a strategic culture
change and management consulting firm.
Douglas Fisher joined the Company in September 1998 as Director of Retail
Operations. From 1994 until joining the Company, Mr. Fisher was Director of
Franchising for Allied Domecq Retailing USA, owner of Dunkin Donuts,
Baskin-Robbins and Togos.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash compensation paid by the Company in
Fiscal Years 1997 - 1999 as well as certain other compensation paid, awarded or
accrued for those years to the Company's Chief Executive Officer and the other
four highest-paid executive officers during the 1999 fiscal year. Perry Odak
became the Chief Executive Officer on January 1, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Annual Compensation Awards Long-Term Compensation Pay-outs
Other Securities
Annual Restricted Underlying All Other
Name and Bonus Compen- Stock Options/ LTIP Compensation
Principal Position Year Salary (1) sation Awards SARS Pay-outs (2)
- ------------------ ---- --------- -------- ------ ---------- ---------- -------- -------------
Perry D. Odak 1999 $314,711 $176,800 67,000 $12,588
CEO, President and 1998 $305,769 $150,000 -- $ 7,750
Director 1997 $300,000 $100,000 360,000 $25,000
Bruce Bowman 1999 $219,923 $ 90,000 25,000 $ 8,797
Senior Director of 1998 $211,692 $ 75,000 -- $ 6,964
Operations 1997 $200,000 $ 50,000 27,000 $ 4,131
Charles Green 1999 $204,231 $ 90,000 25,000 $ 8,169
Senior Director of 1998 $182,885 $ 75,000 -- $ 5,755
Sales & Distribution 1997 $162,596 $ 40,000 45,000 $ --
Frances Rathke 1999 $183,339 $ 70,000 15,000 $ 7,334
Chief Financial Officer 1998 $178,406 $ 50,000 -- $ 5,461
1997 $162,603 $ 45,000 30,000 $ 3,229
Jerry Greenfield 1999 $230,000 -- -- $ 9,200
Chairperson and Director 1998 $237,179 -- -- $ 5,853
1997 $183,333 -- -- $ 3,000
(1) "Bonus" includes discretionary distributions under the Company's Management Incentive Program.
(2) "All Other Compensation" includes Company contributions to 401(k) plans and relocation fees.
</TABLE>
<PAGE>
Option/SAR Grants in Fiscal 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percentage Potential Realizable Value
of Total at Assumed Annual Rates
Options/SARS Exercise or of Stock Price Appreciation
Options/SARS Granted to Base Price Expiration for Option Term
Name Granted Employees in 1999 (per share) Date 5% 10%
- ------------- ------------ ----------------- ----------- ---------- ---------- ----------
Perry D. Odak 67,000 10.87% $24.625 3/24/09 $1,037,598 $2,629,476
Bruce Bowman 25,000 4.06% $21.000 7/29/09 $ 330,055 $ 836,359
Charles Green 25,000 4.06% $21.000 7/29/09 $ 330,055 $ 836,359
Frances Rathke 15,000 2.43% $21.000 7/29/09 $ 198,033 $ 501,816
Jerry Greenfield 0 0 0 0 0 0
</TABLE>
Aggregated Option/SAR Exercises in 1999 and 1999 Year-End Option/SAR Values
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Value of Unexercised Value of Unexercised
Number of Unexercised In-the-money Options/SARS
Options/SARS at 12/25/99 at 12/25/99
Shares
Acquired on
Name Exercise (#) Value Realized Exercisable Unexercisable Exercisable Unexercisable
Perry D. Odak 0 0 343,875 83,125 $4,812,531 $ 242,419
Bruce Bowman 0 0 37,871 49,129 $ 348,423 $ 316,872
Charles Green 0 0 15,935 44,065 $ 180,708 $ 308,192
Frances Rathke 0 0 39,934 36,251 $ 449,936 $ 290,467
Jerry Greenfield 0 0 0 0 0 0
</TABLE>
Effective January 1, 1998, Directors who are not employees or full-time
consultants of the Company receive an annual retainer fee of $20,000, in
addition to a $1,000 per board meeting attendance fee, and reimbursement of
reasonable out-of-pocket expenses.
The Company adopted the 1995 Non-Employee Directors Plan for Stock in Lieu of
Directors Cash Retainer under which directors may elect to be paid, in lieu of
the annual cash retainer, shares of common stock having a fair market value (as
of the date of payment) equal to the amount of such annual retainer. Four
non-employee directors each made an election under the Plan; three received 744
shares of stock and one received 614 shares of stock for the period July 1, 1999
through June of 2000 under the Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 25, 2000 with
respect to the beneficial ownership of the outstanding shares of Class A Common
Stock, Class B Common Stock and Class A 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 any class, (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 Ben &
Jerry's Homemade, Inc., 30 Community Drive, South Burlington, Vermont
05403-6828.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Beneficial Ownership
Class A Common Stock Class B Common Stock Preferred Stock
-------------------- -------------------- ---------------
% Outstanding % Outstanding % Outstanding
Name # Shares shares (1) # Shares Shares # Shares Shares
- ---------------------------- -------- ------------- -------- ------------- -------- ------------
Ben Cohen (3) 413,173 6.7% 488,486 61.5% - -
Jeffrey Furman (4)(5) 17,000 * 30,300 3.8% - -
Jerry Greenfield (4) 130,000 2.1% 90,000 11.3% - -
Perry Odak (6) 368,521 6.0% - - - -
Pierre Ferrari 8,121 * - - - -
Jennifer Henderson 1,138 * - - - -
Frederick A. Miller 4,345 * - - - -
Henry Morgan 5,845 * - - - -
Bruce Bowman 46,064 * - - - -
Charles Green 17,809 * - - - -
Frances Rathke 51,459 * - - - -
Credit Suisse Asset
Management, LLC
153 East 53rd St
New York, NY 10022 860,500 14.06%
Dimensional Fund
Advisors, Inc.
1299 Ocean Ave, 11th floor
Santa Monica, CA 09401 359,000 5.9%
All Officers and Directors 1,115,554 18.2%
as a group of 15 608,786 76.6% - -
persons
The Ben & Jerry's
Foundation, Inc. (4) - - - - 900 100%
</TABLE>
* Less than 1%
(1) Based on the number of shares of Class A Common Stock outstanding as of
February 25, 2000. Each share of Class A Common Stock entitles the holder
to one vote per share.
(2) Based on the number of shares of Class B Common Stock outstanding as of
February 25, 2000. Each share of Class B Common Stock entitles the holder
to ten votes.
(3) Under the regulations and interpretations of the Securities and Exchange
Commission, Mr. Cohen may be deemed to be a parent of the Company.
(4) By virtue of their positions as directors of The Foundation, which has the
power to vote or dispose of the Class A Preferred Stock, each of Messrs.
Greenfield, a co-founder, Director and Chairperson of the Company, and
Furman, a Director of and formerly a consultant to the Company, and Ms.
Bankowski, an Officer and Director of the Company, may be deemed under the
regulations and interpretations of the Securities and Exchange Commission,
to own beneficially the Class A Preferred Stock.
(5) 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 under the securities laws. Includes 7,000 shares held
by Mr. Furman as trustee for others, which are deemed beneficially owned by
Mr. Furman under rules and regulations of the Securities and Exchange
Commission.
(6) Does not include 15,080 shares of Class A Common Stock beneficially owned
by Mr. Odak's wife under the rules and regulations of the Securities and
Exchange Commission, as to which he disclaims beneficial ownership.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Cohen, a co-founder of the Company, Vice-Chairperson and Director of the
Company, has entered into an Employment Agreement with the Company for an
employment term expiring on December 31, 1999 (renewable automatically
thereafter in successive one year periods unless either Mr. Cohen or the Company
gives notice to the other of non-renewal). The Agreement provides for a base
salary of $200,000 per annum, subject to increases and bonuses at the discretion
of the Board. The Agreement provides for a covenant not to compete during the
employment term of the Agreement and for a three-year period thereafter, in
consideration of payment by the Company (except as otherwise provided in the
Agreement) of severance equal to the then-current base salary during the
three-year period. The Agreement then provides for annual payments of $75,000
(adjusted for changes in the Consumer Price Index) for life, commencing with the
end of the three-year severance period, and for specified insurance benefits and
contains a provision for contemplated services to be provided to the Company
after the end of the term of employment and severance period.
Mr. Greenfield, a co-founder of the Company, Chairperson, and Director of the
Company, has entered into an Employment Agreement with the Company for a term
expiring on December 31, 1999 (renewable automatically thereafter in successive
one year periods unless either Mr. Greenfield or the Company gives notice to the
other of non-renewal). The Agreement provides for a base salary of $200,000 per
annum, subject to increases and bonuses at the discretion of the Board. The
Agreement also provides for a covenant not to compete during the employment term
of the Agreement and for a three-year period thereafter, in consideration of
payment by the company (except as otherwise provided in the Agreement) of
severance equal to the then-current base salary during the three-year period.
The Agreement then provides for annual payments of $75,000 (adjusted for changes
in the Consumer Price Index) for life, commencing with the end of the three-year
severance period, for specified insurance benefits and contains a provision for
certain services contemplated to be provided to the Company after the end of the
term of employment and severance period.
Mr. Odak, Chief Executive Officer, signed a new restated Employment Agreement
for a term of 27 months with the Company effective March 31, 1999. In
conjunction with this agreement, Mr. Odak was granted non-incentive stock
options to purchase an aggregate of 67,000 shares of Class A Common Stock of the
Company exercisable at $24.625 per share, the fair market value on the date of
grant. Under the terms of the Agreement, Mr. Odak is entitled to a base salary
of $315,000 per annum, subject to increases from time to time by the Board of
Directors, in its sole discretion ($315,000 has been set by the Board as the
2000 base salary). In December 1996, Mr. Odak received 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 dates
of grant by the Compensation Committee of the Board of Directors under the 1995
Equity Incentive Plan. These options become exercisable at various dates
specified in the Employment Agreement, subject to acceleration of vesting as to
specified amounts in the event that certain financial goals are achieved and the
Compensation Committee makes certain findings with respect to Mr. Odak's
performance in the applicable prior period, all as specified in detail in the
Employment Agreement.
The Employment Agreement may be terminated at any time by the Company for cause,
as defined. If terminated for cause, the Company shall have no further
obligation to Mr. Odak, other than for base salary through the date of
termination, and any options that are vested shall continue to be exercisable
for 30 days (unless terminated by the vote of the Compensation Committee). All
other options terminate.
<PAGE>
The Company may also terminate the Employment Agreement other than for cause, in
which event the Company has a continuing obligation to pay Mr. Odak his base
amount at the rate in effect on the date of termination for the monthly periods
specified in the Agreement, which are dependent upon the date of such
termination. 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. Upon such
termination, unvested options shall become exercisable to the extent so provided
by the Agreement.
Mr. Odak may terminate his employment with the Company for good reason, as
defined (in the absence of cause). 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 by the Company other than for cause.
Mr. Odak agrees not to compete with the Company during his period of employment
and, after termination, for the greater of one year or the period during which
severance payments are made.
Michael Sands, Chief Marketing Officer, has an employment agreement dated June
25, 1999, expiring June 30, 2002. The agreement provides for an annual base
salary of $205,000 per annum, subject to increases from time to time by the CEO
with approval by the Board of Directors. He is eligible for an annual bonus as
determined by the CEO and approved by the Board of Directors. Mr. Sands received
non-incentive stock options to purchase an aggregate of 35,000 shares of Class A
common stock of the Company exercisable at $24.25 per share, the fair market
value on the date of grant by the Compensation Committee of the Board of
Directors. These options become exercisable over a four year period with
one-fourth being exercisable on June 25, 2000 and up to an additional 1/48 of
the shares covered by this option on the last day of each month in the next
three years commencing with the month of July 2000. 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 one-year period
thereafter.
The Agreement may be terminated at any time by the Company for cause, as
defined. The Company may also terminate the Agreement other than for cause, in
which event the Company has a continuing obligation to pay Mr. Sands his base
salary for six months. Additionally, the Company's group medical and life
insurance plans during the same period as his base salary is continued.
Severance Agreements
The Company entered into Severance Agreements dated July 30, 1999 with the
following members of the Office of the CEO (OCEO), Elizabeth Bankowski, Bruce
Bowman, Richard Doran, Charles Green and Frances Rathke. In addition, in January
2000 the Company entered into similar Severance Agreements with its other
members of the OCEO, Douglas Fisher and Michael Sands. Under the terms of these
Severance Agreements, the above-mentioned Officers are entitled to severance
payments on termination by the Company other than for cause, death or
disability; or after a change in control of the Company (as defined). The
severance payments include an obligation to pay the Officer his/her then current
base salary payable for six months, plus a second period of up to an additional
six months in the event that the employee has not found other comparable
employment; continuation of health, life and other welfare insurance benefits;
outplacement services; and payment of the appropriate pro rata percentage of the
next annual cash bonus. For officers with three or more years of service at the
date of termination, unvested options that would have vested in the first six
month period after date of termination shall accelerate and become vested, and
<PAGE>
then all vested options may continue to be exercised for six months thereafter.
For all other officers, all vested options at the date of termination may
continue to be exercised for six months thereafter.
In the event of a termination by the Company other than for cause, death or
disability within the first two years after a change of control (as defined) or
termination by the officer within the first two years after a change of control
for good reason (as defined), severance shall be payable or provided to the
officer as follows: (i) a single lump sum equal to the sum of (a) one and a half
times annual base salary for the officer in effect immediately prior to the date
of the change of control or immediately prior to the date of termination
(whichever is greater) and (b) an amount equal to one and a half times the last
year's annual cash bonus paid to the officer; (ii) health, life and other
welfare benefits shall continue for one year on the same terms available to
employees generally; and (iii) the Company's contribution to the 401(k) account
of the officer shall continue for one year at the same rate as applicable to
employees generally. All unvested options held by the officer shall accelerate
and become vested immediately prior to the change of control and shall be
exercisable for six months. The officer(s) agree not to compete with the Company
during his/her employment and, after termination, for the greater of one year or
the period during which severance payments are made.
Mr. Furman, a director of the Company since 1982 and Treasurer and Director of
the Ben & Jerry's Foundation entered into a Severance and Non-competition
Agreement with the Company dated December 31, 1990. As part of this agreement
the Company provided, at no cost to Mr. Furman, family health insurance coverage
under the Company's regular employee health insurance plan. This obligation
terminated March 2, 1999.
Related Party Transactions
During the year ended December 27, 1997, the Company purchased Rainforest Crunch
cashew-brazilnut butter crunch candy to be included in Ben & Jerry's Rainforest
Crunch(R) flavor ice cream for an aggregate purchase price of approximately
$800,000 from Community Products, Inc., a company of which Messrs. Cohen and
Furman were the principal stockholders and directors. The candy was purchased
from Community Products, Inc. at competitive prices and on standard terms and
conditions. Community Products, Inc. filed for protection under Chapter 11 of
the U.S. Bankruptcy Code in early 1997, its business was sold and the matter
(and related litigation) has been settled in U.S. Bankruptcy Court. Ben &
Jerry's located an alternative supplier for cashew-brazilnut butter crunch and
no purchases were made in 1998 from Community Products, Inc. The termination of
Ben & Jerry's relationship with Community Products, Inc. had no material effect
on the Company's business.
In 1997, the Company paid a $60,000 fee to the Kaleel Jamison Consulting Group,
Inc. for its role in the Company's hiring of Mr. Richard Doran, Senior Director
of Human Resources. Mr. Frederick A. Miller, a Director of the Company is
President of Kaleel Jamison Consulting Group, Inc. Prior to joining the Company,
Mr. Doran was an employee of Kaleel Jamison Consulting Group, Inc.
In 1999, the Company paid $92,000 to Ms. Jennifer Henderson for services as a
consultant in connection with service as a member of the Board of Directors.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
A. List of financial statements and financial statement schedule:
Form 10-K
Page Number
<S> -----------
1. The following consolidated financial statements are included in Item 8: <C>
Consolidated Balance Sheets as of December 25, 1999 and December 26, 1998 F-2
Consolidated Statements of Income for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997 F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997 F-4
Consolidated Statements of Cash Flows for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997 F-5
Notes to Consolidated Financial Statements F-6 - F-21
2. The following financial statement schedule is included in Item 14(d)
Schedule II - Valuation and Qualifying Accounts F-22
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.
</TABLE>
<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).
3.1.4 Amendment to Articles of Association approved June 28, 1997 (filed as
Exhibit 3.1.4 to the Company's Annual Report on Form 10-K for the
period ended December 27, 1997 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).
3.2.2 Amendment to By-laws dated March 31, 1998 (filed as Exhibits 1 and 2 to
the Company's Form 8-K dated April 1, 1998 and incorporated herein by
reference).
3.2.3 Amendment to By-laws dated June 26, 1998 (filed as Exhibit A to the
Company's Form 8-K dated July 30, 1998 and incorporated herein by
reference).
4.1 See Exhibit 3.1.
4.2 See Exhibit 3.2.
4.3 Mortgage and Security Agreement between 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
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).
<PAGE>
4.4.1 Amendment to item 4.4 dated July 28, 1992 [filed as 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].
4.11 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).
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.
4.12 Class A Common Stock Stockholder Rights Agreement between the Company
and American Stock Transfer & Trust Company dated as of July 30, 1998
(filed as Exhibit 1 to the Report on Form 8-K, dated August 13,1998 and
hereby incorporated by reference).
4.13 Class B Common Stock Stockholder Rights Agreement dated July 30, 1998
(filed as Exhibit 4 to the Report on Form 8-K, dated August 13, 1998
and hereby incorporated by reference).
10.1* Employment Agreement dated as of January 29, 1998 between Bennett R.
Cohen and the Company (filed as Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the period ended December 26, 1997 and hereby
incorporated by reference).
* Indicates management contract or compensatory plan, contract or
arrangement.
10.4* Employment Agreement dated as of January 29, 1998 between Jerry
Greenfield and the Company (filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the period ended December 26, 1997 and
hereby incorporated by reference).
<PAGE>
10.5 Settlement Agreement dated March 29, 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].
10.8 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
30, 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 herein 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 herein by reference).
10.8.3** Amendment to Item 10.8 dated as of January 11, 1999 (filed as Exhibit
10.8.3 to the Company's Annual Report on Form 10-K for the year ended
December 26, 1998 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** New Distribution Agreement with Dreyer's Grand Ice Cream, Inc. dated as
of January 11, 1999 (filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the year ended December 26, 1998 and
incorporated herein by reference).
10.10.1**Addendum to Item 10.10 (filed as Exhibit 10.10.1 to the Company's
Annual Report on Form 10-K for the year ended December 26, 1998 and
incorporated herein by reference.).
10.11** Agreement with the Pillsbury Company dated as of August 26, 1998 (filed
as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
year ended December 26, 1998 and incorporated herein by reference).
* Indicates management contract or compensatory plan, contract or
arrangement.
** Confidential treatment granted as to certain portions. The term
"confidential treatment" and the mark "*" as used throughout the
indicated Exhibits means that material has been omitted and separately
filed with the Commission.
<PAGE>
10.11.1 Amendment to Item 10.11 (filed as Exhibit 10.11.1 to the Company's
Annual Report on Form 10-K for the year ended December 26, 1998 and
incorporated herein by reference).
10.11.2***Amendment to Item 10.11 dated December 2, 1999 (filed herewith).
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).
10.19* 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 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 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).
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 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).
* Indicates management contract or compensatory plan, contract or
arrangement.
*** Confidential treatment requested as to certain portions. The term
"confidential treatment" and the mark "*" as used throughout the
indicated Exhibits means that material has been omitted and separately
filed with the Commission.
<PAGE>
10.22.4 Amendment to Item 10.22 dated January 1, 1998 (filed as Exhibit 10.22.4
to the Company's Annual Report on Form 10-K for the year ended December
26, 1998 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 1999 Equity Incentive Plan (filed as Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 26, 1998 and
incorporated herein by reference).
10.27 1992 Non-Employee Directors' Restricted Stock Plan (filed as Exhibit
10.27 to the Company's Report on Form 10-K for the year ended December
25, 1993 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).
10.29.1* Amendment to Item 10.29 (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).
10.29.2* Amendment to Item 10.29 (filed as Exhibit 10.29.2 to the Company's Form
10-K for the year ended December 25, 1998, and incorporated herein by
reference).
10.30 Non-Employee Directors' Plan for Stock in Lieu of Directors' Cash
Retainer dated August 4, 1995 (filed as Exhibit 10.30 to the Company's
Quarterly Report on Form 10-Q for the period 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).
* Indicates management contract or compensatory plan, contract or
arrangement.
<PAGE>
10.33* Employment Agreement dated December 31, 1996 between the Company and
Perry D. Odak (filed as Exhibit 10.33 to the Company's Form 10-K for
the year ended December 28, 1996 and incorporated herein by reference).
10.33.1* Amendment dated as of February 28, 1999 to Item 10.33 (filed as Exhibit
10.33.1 to the Company's Form 10-K for the year ended December 26, 1998
and incorporated herein by reference).
10.33.2 Employment Agreement dated March 31, 1999 between the Company and Perry
D. Odak (filed as Exhibit 10.33.2 to the Company's Quarterly Report on
Form 10-Q for the period ended June 26, 1999 and incorporated herein by
reference).
10.34* Employment Agreement dated January 1, 1998 between the Company and
Angelo M. Pezzani (filed as Exhibit 10.34 to the Company's Form 10-K
for the year ended December 27, 1997 and incorporated herein by
reference).
10.35* Employment Agreement dated October 20, 1997 between the Company and
Lawrence Benders (filed as Exhibit 10.34 to the Company's Form 10-K for
the year ended December 27, 1997 and incorporated herein by reference).
10.36 Importation and Marketing Agreement between the Company, Seven-Eleven
Japan Co., Ltd., Tower Enterprise Corporation and ATF Co., Ltd. dated
December 19, 1997 (filed as Exhibit 10.34 to the Company's Form 10-K
for the year ended December 27, 1997 and incorporated herein by
reference).
10.37 Stock Option Contract dated June 25, 1999 between the Company and
Michael Sands (filed as Exhibit 10.37 to the Company's Form 10-Q for
the period ended September 25, 1999, and incorporated herein by
reference).
10.38 Severance Agreement dated July 30, 1999 between the Company and
Elizabeth Bankowski (filed as Exhibit 10.38 to the Company's Form 10-Q
for the period ended September 25, 1999, and incorporated herein by
reference).
10.39 Severance Agreement dated July 30, 1999 between the Company and Bruce
Bowman (filed as Exhibit 10.38 to the Company's Form 10-Q for the
period ended September 25, 1999, and incorporated herein by reference).
10.40 Severance Agreement dated November 15, 1999 between the Company and
Richard Doran (filed as Exhibit 10.38 to the Company's Form 10-Q for
the period ended September 25, 1999, and incorporated herein by
reference).
10.41 Severance Agreement dated July 30, 1999 between the Company and Charles
Green (filed as Exhibit 10.38 to the Company's Form 10-Q for the period
ended September 25, 1999, and incorporated herein by reference).
10.42 Severance Agreement dated July 30, 1999 between the Company and Frances
Rathke (filed as Exhibit 10.38 to the Company's Form 10-Q for the
period ended September 25, 1999, and incorporated herein by reference).
10.43 Employment Agreement dated June 25, 1999 between the Company and
Michael Sands (filed as Exhibit 10.43 to the Company's Form 10-Q for
the period ended September 25, 1999 and incorporated herein by
reference).
* Indicates management contract or compensatory plan, contract or
arrangement.
<PAGE>
10.43.1 Amendment to Employment Agreement dated June 25, 1999 between the
Company and Michael Sands (filed herewith).
10.45 Severance Agreement dated January 19, 2000 between the Company and
Douglas Fisher (filed herewith).
11.0 The computation of Per Share Earnings is incorporated by reference from
Note 11 of the Company's consolidated financial statements (filed
herewith).
21.1 Subsidiaries of the registrant as of December 25, 1999 (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 1999.
<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 22, 2000 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 22, 2000 /s/ Bennett R. Cohen
---------------------------------------------------------
Bennett R. Cohen
Director and Vice-Chairperson
March 22, 2000 /s/ Pierre Ferrari
---------------------------------------------------------
Pierre Ferrari
Director
March 22, 2000 /s/ Jeffrey Furman
---------------------------------------------------------
Jeffrey Furman
Director
March 22, 2000 /s/ Jerry Greenfield
---------------------------------------------------------
Jerry Greenfield
Director and Chairperson
March 22, 2000 /s/ Jennifer Henderson
---------------------------------------------------------
Jennifer Henderson
Director
March 22, 2000 /s/ Frederick A. Miller
---------------------------------------------------------
Frederick A. Miller
Director
March 22, 2000 /s/ Henry Morgan
---------------------------------------------------------
Henry Morgan
Director
March 22, 2000 /s/ Perry Odak
---------------------------------------------------------
Perry Odak
Director, Principal Executive Officer
and President
March 22, 2000 /s/ Frances Rathke
---------------------------------------------------------
Frances Rathke
Chief Financial Officer and
Principal Accounting Officer
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a) (1) AND (2), (c) and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 25, 1999
BEN & JERRY'S HOMEMADE, INC.
SOUTH BURLINGTON, VERMONT
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
Report of Ernst & Young LLP Independent Auditors........................... F-1
Consolidated Balance Sheets as of December 25, 1999 and December 26, 1998. .F-2
Consolidated Statements of Income for the years ended December 25, 1999,
December 26, 1998 and December 27, 1997.....................................F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997..................F-4
Consolidated Statements of Cash Flows for the years ended
December 25, 1999, December 26, 1998 and December 27, 1997..................F-5
Notes to Consolidated Financial Statements................................. F-6
Financial Statement Schedule:
SCHEDULE II - Valuation and Qualifying Accounts.............................F-23
<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 25, 1999 and December 26, 1998, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 25, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)(2).
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 auditing standards generally accepted
in the United States. 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 25, 1999 and December 26, 1998 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 25, 1999, in conformity with accounting
principles generally accepted in the United States. 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.
/s/ERNST & YOUNG LLP
Boston, Massachusetts
January 21, 2000
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except per share amounts)
December 25, December 26,
1999 1998
------------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,260 $ 25,111
Short-term investments 21,331 22,118
Trade accounts receivable
(less allowance of $966 in 1999
and $979 in 1998 for doubtful accounts) 18,833 11,338
Inventories 13,937 13,090
Deferred income taxes 5,609 7,547
Prepaid expenses and other current assets 2,377 3,105
------------------- -------------------
Total current assets 87,347 82,309
Property, plant and equipment, net 56,557 63,451
Investments 200 303
Deferred income taxes 656
Other assets 5,842 3,438
------------------- -------------------
$ 150,602 $ 149,501
=================== ===================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 38,915 $ 28,662
Current portion of long-term debt and
obligations under capital leases 5,627 5,266
------------------- -------------------
Total current liabilities 44,542 33,928
Long-term debt and obligations under capital leases 16,669 20,491
Deferred income taxes 4,174
Stockholders' equity:
$1.20 noncumulative Class A preferred stock - par value
$1.00 per share, redeemable at $12.00 per share;
900 shares authorized, issued and outstanding;
aggregated preference on liquidation - $9,000 1 1
Class A common stock - $.033 par value; authorized
20,000,000 shares; issued: 6,759,276 at December 25,
1999 and 6,592,392 at December 26, 1998 223 218
Class B common stock - $.033 par value; authorized
3,000,000 shares; issued: 801,813 at December 25, 1999
and 824,480 at December 26, 1998 27 27
Additional paid-in-capital 52,961 50,556
Retained earnings 48,713 45,328
Accumulated other comprehensive loss (460) (151)
Treasury stock, at cost: 644,606 Class A and 1,092 Class B
shares at December 25, 1999 and 291,032 Class A
and 1,092 Class B shares at December 26, 1998 (12,074) (5,071)
------------------- -------------------
Total stockholders' equity 89,391 90,908
------------------- -------------------
$ 150,602 $ 149,501
=================== ===================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Fiscal Year Ended
---------------------------------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $ 237,043 $ 209,203 $ 174,206
Cost of sales 145,291 136,225 114,284
------------------- ------------------- -------------------
Gross profit 91,752 72,978 59,922
Selling, general and
administrative expenses 78,623 63,895 53,520
Special charge 8,602
Other income (expense):
Interest income 1,924 2,248 1,938
Interest expense (1,634) (1,888) (1,992)
Other income (expense), net 391 333 (64)
------------------- ------------------- -------------------
681 693 (118)
------------------- ------------------- -------------------
Income before income taxes 5,208 9,776 6,284
Income taxes 1,823 3,534 2,388
------------------- ------------------- -------------------
Net income $ 3,385 $ 6,242 $ 3,896
=================== =================== ===================
Shares used to compute net income per common share
Basic 7,077 7,197 7,247
Diluted 7,405 7,463 7,334
Net income per common share
Basic $ 0.48 $ 0.87 $ 0.54
Diluted $ 0.46 $ 0.84 $ 0.53
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
(In thousands except share data)
Common Stock Accumulated
Preferred --------------------- Additional Other
Stock Class A Class B Paid-in Retained Comprehensive
Par Value Par Value Par Value Capital Earnings Loss
--------- --------- --------- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996 $1 $210 $29 $48,753 $35,190 $(118)
Net income 3,896
Common stock issued under stock
purchase plan (15,406 Class A shares) 1 148
Conversion of Class B shares to Class A
shares (31,451 shares) 1
Common stock issued under stock and
option plans (83,267 Class A shares) 2 907
Repurchase of common stock (77,500
Class A shares)
Issuance of treasury stock for
compensation (20,000 Class A shares) (127)
Foreign currency translation adjustment (11)
Net comprehensive income
------------ ---------- ---------- -------------- ----------- ----------------
Balance at December 27, 1997 1 214 29 49,681 39,086 (129)
Net income 6,242
Common stock issued under stock
purchase plan (14,277 Class A shares) 179
Conversion of Class B shares to Class A
shares (41,755 shares) 2 (2)
Common stock issued under stock and option
plans (41,525 Class A shares) 2 696
Repurchase of Treasury Stock (166,500
Class A shares)
Foreign currency translation adjustment (22)
Net comprehensive income
------------ ---------- ---------- -------------- ----------- ----------------
Balance at December 26, 1998 1 218 27 50,556 45,328 (151)
Net Income 3,385
Common stock issued under stock purchase
plan (9,995 Class A shares) 175
Conversion of Class B shares to Class A
shares (22,667 shares)
Common stock issued under stock and
option plans (134,222 Class A shares) 5 2,164
Repurchase of common stock (364,100 Class A
shares)
Issuance of treasury stock contributed to
401(K) Savings Plan (10,526 Class A Shares) 66
Foreign currency translation adjustment 15
Unrealized losses on available for sale (324)
securities
Net comprehensive income
------------ ---------- ---------- -------------- ----------- ----------------
Balance at December 25, 1999 $1 $223 $27 $52,961 $48,713 $(460)
============ ========== ========== ============== =========== ================
<PAGE>
Treasury Stock
------------------- Total
Class A Class B Stockholders' Comprehensive
Cost Cost Equity Income
---- ---- ------ ------
<S> <C> <C> <C> <C>
Balance at December 28, 1996 $(1,375) $(5) $82,685
Net income 3,896 $3,896
Common stock issued under stock
purchase plan (15,406 Class A shares) 149
Conversion of Class B shares to Class A
shares (31,451 shares) 1
Common stock issued under stock and
option plans (83,267 Class A shares) 909
Repurchase of common stock (77,500
Class A shares) (988) (988)
Issuance of treasury stock for
compensation (20,000 Class A shares) 405 278
Foreign currency translation adjustment (11) (11)
Net comprehensive income $3,885
---------- ---------- --------------- ======
Balance at December 27, 1997 (1,958) (5) 86,919
Net income 6,242 $6,242
Common stock issued under stock
purchase plan (14,277 Class A shares) 179
Conversion of Class B shares to Class A
shares (41,755 shares)
Common stock issued under stock and option
plans (41,525 Class A shares) 698
Repurchase of Treasury Stock (166,500
Class A shares) (3,108) (3,108)
Foreign currency translation adjustment (22) (22)
Net comprehensive income $6,220
---------- ---------- --------------- ======
Balance at December 26, 1998 (5,066) (5) 90,908
Net Income 3,385 $3,385
Common stock issued under stock purchase
plan (9,995 Class A shares) 175
Conversion of Class B shares to Class A
shares (22,667 shares)
Common stock issued under stock and
option plans (134,222 Class A shares) 2,169
Repurchase of common stock (364,100 Class
shares) (7,187) (7,187)
Issuance of treasury stock contributed to
401(K) Savings Plan(10,526 Class A shares) 184 250
Foreign currency translation adjustment 15 15
Unrealized losses on available for sale
securities (324) (324)
-----
Net comprehensive income $3,076
---------- ---------- --------------- ======
Balance at December 25, 1999 $(12,069) $(5) $89,391
========== ========== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Year Ended
---------------------------------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------------- ------------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,385 $ 6,242 $ 3,896
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,202 8,181 7,711
Provision for bad debts 349 50 630
Deferred income taxes (2,674) (2,510) (1,599)
Stock compensation 250 405
Special charge 8,602
Loss on disposition of assets 76 112 124
Changes in operating assets and liabilities:
Accounts receivable (7,926) 1,460 (5,318)
Inventories (405) (1,968) 4,243
Prepaid expenses (121) (501) (64)
Accounts payable and accrued expenses 6,810 5,385 5,868
Income taxes payable(receivable) 2,756 (364) 1,743
------------------- ------------------- -------------------
Net cash provided by operating activities 20,304 16,087 17,639
Cash flows from investing activities:
Additions to property, plant and equipment (8,825) (8,770) (5,236)
Proceeds from sale of assets 48 48
Changes in other assets (764) (1,082) (425)
Decrease (increase) in investments 566 (20,879) (76)
Acquisitions, net of cash acquired (1,012)
------------------- ------------------- -------------------
Net cash used for investing activities (9,987) (30,731) (5,689)
Cash flows from financing activities:
Repayments of long-term debt and capital leases (5,328) (5,321) (669)
Repurchase of common stock (7,187) (3,108) (988)
Proceeds from issuance of common stock 2,343 877 932
------------------- ------------------- -------------------
Net cash used for financing activities (10,172) (7,552) (725)
Effect of exchange rate changes on cash 4 (11) (11)
------------------- ------------------- --------------------
Increase (decrease) in cash and cash equivalents 149 (22,207) 11,214
Cash and cash equivalents at beginning of year 25,111 47,318 36,104
------------------- ------------------- -------------------
Cash and cash equivalents at end of year $ 25,260 $ 25,111 $ 47,318
=================== =================== ===================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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 and selected foreign
countries, including Company-owned and franchised ice cream parlors.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all its majority owned subsidiaries. Intercompany accounts and transactions have
been eliminated.
Fiscal Year
The Company's fiscal year is the 52 or 53 weeks ending on the last Saturday in
December. Fiscal years 1999, 1998 and 1997 consisted of the 52 weeks ended
December 25, 1999, December 26, 1998 and December 27, 1997, respectively.
Use of Estimates
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States 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 investments at the time
of purchase and reevaluates such designation as of each balance sheet date. At
December 25, 1999 and December 26, 1998, the Company considers all its
investments, except for certificates of deposit, as available for sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported as a separate component of stockholders' equity.
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 investments are
included in interest income.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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, 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 in certain
foreign countries. 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.
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.
Other Assets
Other assets include intangible and other noncurrent assets. Intangible assets
are reviewed for impairment based on an assessment of future operations to
ensure that they are appropriately valued. Intangible assets are amortized on a
straight-line basis over their estimated economic lives.
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 included in accumulated other
comprehensive income. Transaction gains or losses are recognized as other income
or expense in the period incurred. Translation and transaction gains or losses
have been immaterial for all periods presented.
Foreign Currency Hedging
The Company hedges foreign currency risk by entering into future options based
on projected forecasts of a portion of the Company's foreign operations. In
addition, from time to time, the Company enters into forward contracts to hedge
foreign currency denominated sales. Realized and unrealized gains or losses on
contracts or options that hedge anticipated cash flows are determined by
comparison of contract or option value upon execution (realized) and at each
balance sheet for open contracts or options (unrealized). Realized gains and
losses are recognized at the balance sheet date as other income or expense for
the period. In the case of options entered into based on projected forecasts,
unrealized gains and losses are recognized upon the determination that
circumstances have changed which cause the hedged instrument to be speculative
in nature.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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 and included in net sales were approximately $520,000, $708,000 and
$553,000 in 1999, 1998 and 1997, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense (excluding
cooperative advertising with distribution companies) amounted to approximately
$17.5 million, $10.6 million and $6.7 million in 1999, 1998 and 1997,
respectively.
Income Taxes
The Company accounts for income taxes under the liability method. 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's stock option plans provide for the grant of options to purchase
shares of the Company's common stock to both employees and consultants. The
Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related interpretations
and provides pro forma disclosures of the compensation expense determined under
the fair value provisions of Finanical Accounting Standards Board Statement No.
123 (FAS 123), Accounting for Stock-Based Compensation. In accounting for its
employee stock options under APB 25, when 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. No compensation expense
was recognized for any of the years presented. The Company has followed FAS 123
for stock options granted to non-employees as required.
Earnings Per Share
Effective December 28, 1997, the Company adopted Statement No. 128, Earnings per
Share. Basic earnings per share have been computed based on the weighted-average
number of common shares outstanding during the period. Diluted earnings per
share have been computed based upon the weighted-average number of common shares
outstanding during the year, adjusted for the dilutive effect of shares issuable
upon the exercise of stock options and warrants determined based upon the
average market price for the period.
Comprehensive Income
As of December 28, 1997, the Company adopted Statement No. 130, Reporting
Comprehensive Income (FAS 130). FAS 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption of
this statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included in other comprehensive income.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Segment Information
As of December 28, 1997, the Company adopted Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information (FAS 131). FAS 131
superseded Statement No. 14, Financial Reporting for Segments of a Business
Enterprise. FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. FAS 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. The adoption of FAS 131 did not affect results of
operations or financial position, but did affect the disclosure of segment
information. See Note 17.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). Statement 133 will require the Company to
record all derivatives on the balance sheet at fair value. For derivatives that
are hedges, changes in the fair value of derivatives will be offset by changes
in the underlying hedged item in earnings in the same period. In June 1999, the
Financial Accounting Standards Board delayed the effective date of FAS 133 to
the first quarter of fiscal years beginning after June 15, 2000. The Company
expects to adopt FAS 133 in the First quarter of fiscal year 2001.
2. BUSINESS ACQUISITIONS
Effective February 26, 1999, the Company acquired a 60% interest in its Israeli
licensee for $1 million. The acquisition was accounted for under the purchase
method, and the results of operations of the acquired business have been
included in the consolidated financial statements since the date of acquisition.
The purchase price was allocated based on estimated fair values at the date of
acquisition. The excess of the acquisition costs over the fair values of the net
assets and liabilities acquired was $1.7 million and has been recorded as
goodwill, which is being amortized on a straight-line basis over 15 years.
Effective June 16, 1999, the Company purchased the assets of one of its
franchisees for approximately $875,000. The acquisition was accounted for using
the purchase method of accounting. The acquisition included two scoop shops
located in Las Vegas, Nevada, and territory rights. The excess of the
acquisition costs over the fair values of the net assets and liabilities
acquired was $266,000 and has been recorded as goodwill, which is being
amortized on a straight-line basis over ten years.
The assets acquired and liabilities assumed from the acquisitions included
property, plant and equipment of approximately $1.2 million and long-term debt
of approximately $1.9 million. These amounts, as well as current assets and
liabilities of the acquired companies as of the acquisition dates, have been
excluded from the consolidated statements of cash flows as non-cash items.
3. SPECIAL CHARGE
In the fourth quarter of 1999, the Company recorded a special charge of $8.6
million dollars ($5.6 million after tax, or $0.78 per diluted share) in
connection with the Company's plan to shift manufacturing of its frozen novelty
line of business from a Company owned plant in Springfield, Vermont to third
party co-packers to improve the Company's competitive position, gross margin and
profitability. This action resulted in the fourth quarter 1999 write-off of
assets associated with the ice cream novelty and other manufacturing assets and
costs associated with severance for those employees who do not accept the
Company's offer of relocation. This plan to shift novelty manufacturing will be
executed during 2000. The outsourcing of its ice cream novelty business will
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
enable the Company to introduce a wider range of novelty products in the future
and increase its flexibility. The charge consists of certain one-time expenses,
substantially all of which are non-cash. The special charge of $8.6 million
consisted of $8.0 million for the write off or write down of fixed assets with
the balance for employee severance.
4. CASH AND INVESTMENTS
The following is a summary of cash, cash equivalents and investments as of
December 25, 1999 and December 26, 1998:
December 25, 1999
Cash and Cash Short-Term
Equivalents Investments Investments
----------- ----------- -----------
Cash $10,762
Commercial paper 198
Tax exempt floating
rate notes 900
Municipal bonds 13,400 $11,474
Preferred stock 9,094
----------- -----------
25,260 20,568
Certificates of deposit 763 $200
----------- ----------- -----------
$25,260 $21,331 $200
=========== =========== ===========
December 26, 1998
Cash and Cash Short-Term
Equivalents Investments Investments
----------- ----------- -----------
Cash $ 7,834
Commercial paper 3,277
Tax exempt floating
rate notes 800
Municipal bonds 13,200 $14,926
Convertible bonds 955
Preferred Stock 5,649
----------- -----------
25,111 21,530
Certificates of deposit 588 $303
----------- ----------- -----------
$25,111 $22,118 $303
=========== =========== ===========
The Company considers all of its investments, except for certificates of
deposit, as available for sale. Certificates of deposit are held to maturity.
Municipal bonds included in cash and cash equivalents mature at par in 30 to 45
days, at which time the interest rate is reset to the then market rate, and the
Company may convert the investment to cash. Municipal bonds and convertible
bonds recorded as short-term investments have varying maturities in 2000 and
beyond, however, the Company does not intend to hold such investments to
maturity. During 1999 and 1998, the Company also invested in fixed income
preferred stock of primarily financial institutions.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
The Company determines the fair value of its short-term investments based on
quoted market prices. Unrealized gains and losses on available for sale
securities are excluded from earnings and are reported as a separate component
of stockholders' equity until realized. At December 25, 1999, unrealized losses
amounted to $324,000. At December 26, 1998, unrealized gains and losses on
short-term investments were not significant.
Gross purchases and maturities aggregated $74.4 million and $77.9 million in
1999, $221.6 million and $228.4 million in 1998, and $43.1 million and $25.4
million in 1997. Realized gains and losses were not material for all periods
presented.
5. INVENTORIES
Inventories consist of the following:
December 25, December 26,
1999 1998
---- ----
Ice cream and ingredients $12,245 $12,025
Paper goods 659 524
Food, beverages and gift items 1,033 541
------- -------
$13,937 $13,090
======= =======
6. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 25, December 26, Estimated Useful
1999 1998 Lives/Lease Term
---- ---- ----------------
<S> <C> <C> <C>
Land and improvements $ 3,622 $ 4,520 15-25 years
Buildings 33,376 37,940 25 years
Equipment and furniture 48,517 52,047 3-20 years
Leasehold improvements 4,180 3,727 3-10 years
Construction in progress 4,265 2,058
------ -------
93,960 100,292
Less accumulated depreciation 37,403 36,841
-------- ---------
$ 56,557 $ 63,451
======== =========
</TABLE>
Depreciation expense for the years ended December 25, 1999, December 26, 1998
and December 27, 1997 was $8.8 million, $7.9 million and $7.4 million,
respectively.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 25, December 26,
1999 1998
---- ----
Trade accounts payable $10,079 $ 4,623
Accrued expenses 13,838 12,157
Accrued payroll and related costs 3,392 3,272
Accrued promotional costs 5,467 4,297
Accrued marketing costs 1,322 2,837
Accrued insurance expense 537 1,081
Income taxes payable 1,215 -
Deferred revenue 3,065 395
------- -------
$38,915 $28,662
======= =======
8. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
December 25, December 26,
1999 1998
---- ----
Senior Notes - Series A payable
in annual Installments beginning
in 1998 through 2003 with interest
payable semiannually at 5.9% $13,357 $16,680
Senior Notes - Series B payable
in annual installments beginning
in 1998 through 2003 with interest
payable semiannually at 5.73% 6,667 8,333
Other long-term obligations 2,272 744
------- -------
22,296 25,757
Less current portion 5,627 5,266
------- -------
$16,669 $20,491
======= =======
Property, plant and equipment having a net book value of approximately $11.2
million at December 25, 1999 are pledged as collateral under certain long-term
debt arrangements.
Long-term debt and capital lease obligations at December 25, 1999 maturing in
each of the next five years and thereafter are as follows:
Capital Lease Long-term
Obligations Debt
----------- ----
2000 $ 89 $ 5,561
2001 73 5,190
2002 21 6,047
2003 19 5,156
2004 16 62
Thereafter 184 --
---- ------
Total minimum payments 402 22,016
Less amounts representing interest 122 --
---- -------
$280 $22,016
==== =======
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
The Company capitalized no interest in 1999, 1998 or 1997. Interest paid
amounted to $1,698,000 $1,832,000 and $1,975,000 for 1999, 1998 and 1997,
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 LIBOR plus a margin based on a pre-determined
formula. No amounts were borrowed under these or any bank agreements during any
of the years presented. The working capital line of credit agreements expire
December 23, 2001.
Certain of the debt agreements contain restrictive covenants requiring
maintenance of minimum levels of working capital, net worth, debt to
capitalization ratios and earnings before interest, taxes, depreciation and
amortization (EBITDA). Furthermore, distributions are limited to an amount of $5
million plus 75% of earnings and 100% of net losses since June 30, 1993;
approximately $23.2 million of retained earnings at December 25, 1999 was
available for payment of dividends. As of December 25, 1999, the Company
received a waiver of compliance related to its working capital requirements.
As of December 25, 1999, the carrying amount and fair value of the Company's
long-term debt were $22.3 million and $21.3 million, respectively, and as of
December 26, 1998, they were $25.8 million and $24.4 million, respectively.
9. STOCKHOLDERS' EQUITY
Preferred and Common Stock
The Class A 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 Preferred Stock is redeemable by the Company,
by the specified vote of the Continuing Directors (as defined in the Articles of
Association). 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 million
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, may be converted into shares of Class A Common Stock by the
specified vote of the continuing Directors is generally non-transferable as such
and is convertible upon transfer 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 Common Stock thereby sold.
Accumulated Other Comprehensive Income (Loss)
Total comprehensive income amounted to $3.1 million for the year ended December
25, 1999 and $6.2 million and $3.9 million for the years ended December 26, 1998
and December 27, 1997, respectively. Other comprehensive income consisted of
adjustments for net foreign currency translation gains (losses) in the amounts
of $15,000, ($22,000) and ($11,000) for 1999, 1998 and 1997, respectively and
unrealized losses on available for sale securities in the amount of $324,000
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
beginning in 1999. The accumulated balance for foreign currency translation were
$136,000, $151,000 and $129,000 for 1999, 1998 and 1997, respectively.
Accumulated balances for unrealized losses on available for sale securities was
$324,000 for the year ended December 25, 1999.
10. Shareholder Rights Plan
In August 1998, following approval by its Board of Directors, the Company put in
place two Shareholder Rights Plans, one pertaining to the Class A Common Stock
and one pertaining to the Class B Common Stock. These Plans are intended to
protect stockholders by compelling someone seeking to acquire the Company to
negotiate with the Company's Board of Directors in order to protect stockholders
from unfair takeover tactics and to assist in the maximization of stockholder
value. These Rights Plans, which are common for public companies in the United
States, may also be deemed to be "anti-takeover" provisions in that the Board of
Directors believes that these Plans will make it difficult for a third party to
acquire control of the Company on terms which are unfair or unfavorable to the
stockholders. Also, in April 1998, the Legislature of the State of Vermont
amended a provision of the Vermont Business Corporation Act to provide that the
directors of a Vermont corporation may also consider, in determining whether an
acquisition offer or other matter is in the best interests of the corporation,
the interests of the corporation's employees, suppliers, creditors and
customers, the economy of the state in which the corporation is located and
including the possibility that the best interests of the corporation may be
served by the continued independence of the corporation.
11. STOCK BASED COMPENSATION PLANS
The Company has various stock option plans:
The 1995 and 1999 Equity Incentive Plans were established to provide grants to
employees, and other key persons or entities, including non-employee directors
who are in the position, in the opinion of the Compensation Committee, to make a
significant contribution to the success of the Company, 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 exercisable at different times or within
different periods, the Company has generally granted options to employees which
vest over a period of four, five, or six years, and in some cases subject to
acceleration of vesting upon specified events including a change in control (as
defined). The exercise period cannot exceed ten years from the date of grant.
At December 25, 1999, 15,401 shares of Class A Common Stock were available for
grant under the 1995 Equity Incentive Plan and 10,084 shares of Class A Common
Stock were available for grant under the 1999 Equity Incentive Plan.
In addition, during 1999, the Company granted a total of 250,000 options to key
employees under individual stock option agreements. The terms of these grants
are similar to the terms of options granted under the 1995 Equity Incentive
Plan.
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
are granted with an exercise price equal to the market price of the Company's
common stock on the date of grant. The 1985 Option Plan expired in August 1995,
however, some options granted under this plan are outstanding as of December 25,
<PAGE>
Notes to consolidated Financial Statements
Dollars in tables in thousands except share data
1999. While the Company grants options which may become exercisable at different
times or within different periods, the Company has generally granted options to
employees which vest over a period of four, five, or eight years, and in some
cases with provisions for acceleration of vesting upon the occurrence of certain
events. The exercise period cannot exceed ten years from the date of grant.
A summary of the Company's stock option activity and related information for
the years ended December 25, 1999, December 26, 1998 and December 27, 1997
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 910,301 $12.97 910,811 $12.90 335,118 $14.49
Granted 616,396 22.60 42,500 17.79 694,000 12.04
Exercised (131,376) 14.73 (36,629) 16.55 (80,000) 10.81
Forfeited (91,771) 15.43 (6,381) 14.76 (38,307) 15.42
--------- ------- -------
Outstanding at end
of year 1,303,550 $17.18 910,301 $12.97 910,811 $12.90
========= ======= =======
Exercisable at end
of year 561,243 382,021 203,552
======= ======= =======
Available for
future grants 25,485 284,220 345,893
====== ======= =======
</TABLE>
The following table presents weighted-average price and life information about
significant option groups outstanding at December 25, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- ----------------------------------
Weighted
Average Weighted
Remaining Average Weighted
Range of Exercise Number Contractual Exercise Number Average
Prices Outstanding Life Price Exercisable Exercise Price
- ----------------- ----------- ------------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$10.63 -$10.88 370,000 6.96 $10.87 353,875 $10.87
12.38 - 16.75 302,834 6.77 13.92 191,837 14.29
19.00 - 19.25 26,500 5.82 19.01 15,531 19.01
21.00 - 28.06 604,216 9.39 22.60 0 0.00
--------- -------
$10.63 -$28.06 1,303,550 8.02 $17.18 561,243 $12.26
========= =======
</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 deductions, at the lower
of 85% of market value of the stock at the beginning or end of the offering
period. At December 25, 1999, 152,016 shares had been issued under the plan and
147,984 were available for future issuance.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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 annual cash
retainer. In 1999, 2,846 shares were issued to non-employee directors. These
shares vest immediately. At December 25, 1999 a total of 15,105 shares had been
awarded under these plans, all of which were fully vested, and 19,895 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 25, 1999, a total of 193,364 shares are reserved for future grant
or issue under all of the Company's stock plans.
Pro forma information regarding net income and earnings per share is required by
FAS 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 assumptions:
1999 1998 1997
----- ----- ----
Risk-free interest rates 6.67% 5.10% 5.53%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor 0.50 0.32 0.34
Weighted average expected lives (in years) 4.4 2.4 3.6
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The impact on pro
forma net income may not be representative of compensation expense in future
years when the effect of the amortization of multiple awards would be reflected
in the pro forma disclosures. The Company's pro forma information follows (in
thousands except for earnings per share information):
1999 1998 1997
----- ----- ----
Pro forma net income $1,113 $5,935 $3,600
Pro forma earnings per share - diluted $ 0.15 $ 0.80 $ 0.49
Weighted average fair value of options
at the date of grant $11.03 $ 4.22 $ 4.16
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
12. INCOME TAXES
The provision for income taxes consists of the following:
Federal 1999 1998 1997
- ------- ----- ----- ----
Current $4,082 $5,041 $ 3,300
Deferred (2,443) (2,093) (1,388
------ ------ ------
1,639 2,948 1,912
------ ------ ------
State
- -----
Current 391 1,003 686
Deferred (305) (417) (210)
------ ------ ------
86 586 476
------ ------ ------
Foreign
- -------
Current 24 - -
Deferred 74 - -
------ ------ ------
98 - -
------ ------ ------
$1,823 $3,534 $2,388
====== ====== ======
Income taxes computed at the federal statutory rate differ from amounts provided
as follows:
1999 1998 1997
----- ----- -----
Tax at statutory rate 34.0 % 34.0 % 34.0 %
State tax, less federal tax effect 1.1 4.0 5.0
Income tax credits 0.0 (1.0) (1.0)
Tax exempt interest (8.7) (3.0) (2.9)
Valuation allowance 13.6 0.0 0.0
Foreign sales corporation (8.3) (1.0) 0.0
Other, net 3.3 3.1 2.9
----- ----- -----
Provision for income taxes 35.0 % 36.1 % 38.0 %
====== ====== ======
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
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:
1999 1998
----- ----
Deferred tax assets:
Accrued liabilities $4,383 $6,425
Inventories 1,651 1,413
Accounts receivable 434 430
Accrued special charge 1,779 -
Net operating losses 707 -
Other - 475
------ ------
8,954 8,743
Valuation allowance (707) -
------ ------
Total deferred tax assets 8,247 8,743
Deferred tax liabilities:
Depreciation/property, plant and equipment 1,849 5,231
Other 351 139
------ ------
Total deferred tax liabilities 2,200 5,370
------ ------
Net deferred tax assets $6,047 $3,373
====== ======
The Company established a valuation allowance related to net operating loss
carryforwards in certain foreign jurisdictions. Income taxes paid amounted to
$2.2 million, $6.2 million and $2.2 million during 1999, 1998 and 1997,
respectively.
13. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net income $3,385 $6,242 $3,896
------ ------ ------
Denominator:
Denominator for basic earnings per share -
weighted-average shares 7,077 7,197 7,247
Dilutive stock options and warrants 328 266 87
------ ------ ------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions 7,405 7,463 7,334
====== ===== ======
Net income per common share
Basic $ 0.48 $ 0.87 $ 0.54
====== ====== ======
Diluted $ 0.46 $ 0.84 $ 0.53
====== ====== ======
</TABLE>
Options to purchase 254,247 shares of common stock at prices ranging from $23.63
to $28.06 were outstanding during 1999 but were not included in the computation
of diluted earnings per share because the options' exercise prices were greater
than the average market price of the common shares and, therefore, the effect
would be antidilutive. Options to purchase 32,500 shares of common stock at
$19.25, and 146,811 shares of common stock at prices ranging from $16.75 to
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
$19.00 were outstanding in 1998 and 1997, respectively, but were not included in
the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.
Included in the computation of diluted earnings per share are warrants to
acquire 125,000 shares, which are part of an agreement with an outside
consultant. Under this agreement, when the average of the closing market value
of the stock exceeds $22.00 per share over a 90 day period, the consultant would
be entitled to purchase 125,000 shares of common stock at $14.00 per share. The
125,000 additional warrants became exercisable in March, 1999 and expire on July
1, 2004.
14. THE BEN & JERRY'S FOUNDATION, INC.
In October 1985, the Company issued 900 shares of Class A Preferred Stock to the
Ben & Jerry's Foundation, Inc. (the Foundation), a not-for-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 and special charges amounted to approximately $1,100,000,
$793,000 and $510,000 for 1999, 1998 and 1997 respectively.
The Class A 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 combination. The three directors of the Foundation, including
one of the founders of the Company, are members of the Board of Directors of the
Company.
15. EMPLOYEE BENEFIT PLANS
The Company maintains profit sharing and savings plans for all eligible
employees. The Company has also implemented a management incentive program,
which provides for discretionary bonuses for management. 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
Officers that are Senior Directors of functions) and are allocated fifty percent
based upon length of service and fifty percent split evenly among all employees.
The profit sharing plan and the management incentive plan are informal and
discretionary. Recipients who participate in the management incentive program
are not eligible to participate in the profit sharing plan. 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 contributes one percent of eligible employees' gross annual
salary and may match the contribution up to an additional three percent of the
employee's gross annual salary. Effective January 1, 1998, the Company amended
its employees' retirement plan to permit contributions of shares of its stock to
the plan from time to time. In 1998, the Board of Directors approved the
contribution of $250,000 worth of Class A Common Stock to be allocated among all
eligible employees' accounts. Total contributions by the Company to the profit
sharing, management incentive program and savings plans were approximately $3.2
million, $2.7 million and $1.2 million for 1999, 1998 and 1997, respectively.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
16. 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:
2000 $1,402
2001 1,153
2002 940
2003 758
2004 417
Thereafter 383
Rent expense for operating leases amounted to approximately $1.6 million, $1.5
million and $1.2 million in 1999, 1998 and 1997, respectively.
17. SEGMENT INFORMATION
Ben & Jerry's Homemade, Inc. has one reportable segment: ice cream manufacturing
and distribution. The Company manufactures super premium ice cream, frozen
yogurt, sorbet and various ice cream novelty products. These products are
distributed throughout the United States primarily through independent
distributors and in certain foreign countries.
During 1999, 1998 and 1997 the Company's most significant customer, Dreyer's
Grand Ice Cream, Inc. accounted for net sales of 40% in 1999 and 57% in 1998 and
1997. Sales and cash receipts are recorded and received primarily in U.S.
dollars. Foreign currency exchange variations have little or no effect on the
Company at this time. During 1999, the Company began doing business with
Haagen-Dazs under a new distribution arrangement which accounted for 11% of net
sales during the year.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
Information concerning operations by geographic area are as follows:
<TABLE>
<CAPTION>
December 25, December 26, December 27,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Sales to Unaffiliated Customers
United States $211,509 $191,777 $166,592
Foreign 25,534 17,426 7,614
-------- -------- --------
$237,043 $209,203 $174,206
======== ======== ========
Net Income (Loss)
United States $ 4,094 $ 6,444 $ 4,136
Foreign (709) (202) (240)
-------- -------- --------
$ 3,385 $ 6,242 $ 3,896
======== ======== ========
Long-Lived Assets
United States $ 58,147 $ 64,722 $ 66,128
Foreign 5,108 2,470 263
-------- -------- --------
$ 63,255 $ 67,192 $ 66,391
======== ======== ========
</TABLE>
Note: Foreign operations include the United Kingdom, France, Canada, The
Netherlands, Belgium, Israel and Japan.
<PAGE>
Notes to Consolidated Financial Statements
Dollars in tables in thousands except share data
18. SELECTED QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
First Quarter1 Second Quarter1 Third Quarter1 Fourth Quarter1
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
1999
Net sales $50,066 $68,172 $67,129 $51,676
Gross profit 18,089 27,617 27,814 18,232
Net income (loss) 1,197 3,214 3,535 (4,561)2
Net income (loss) per common share
Basic .17 .45 .50 (.66)
Diluted .16 .42 .47 (.66)
1998
Net sales $41,556 $58,749 $64,566 $44,332
Gross profit 13,964 21,153 24,227 13,634
Net income 380 2,130 2,892 840
Net income per common share
Basic .05 .29 .40 .12
Diluted .05 .28 .39 .11
</TABLE>
1 Each quarter represents a thirteen week period for all periods
presented.
2 Fourth quarter reflects a non-recurring pre-tax special charge of
$8,602 ($5.6 million after tax or $0.78 per diluted share). Net income,
excluding the special charge was $1 million and diluted net income per
common share was $0.14.
<PAGE>
<TABLE>
<CAPTION>
BEN & JERRY'S HOMEMADE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 25, 1999, December 26, 1998 and December 27, 1997 (In 000's)
<S> <C> <C> <C> <C> <C>
Balance at Charged to Charged to
beginning costs and other Deductions Balance at end
of year expenses accounts (1) of year
---------- ---------- ---------- ---------- ---------------
Year ended December 25, 1999 $ 979 $349 $ - $362 $ 966
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 26, 1998 $1,066 $ 50 $ - $137 $ 979
Allowance for doubtful accounts
(deducted from accounts receivable)
Year ended December 27, 1997 $ 695 $630 $ - $259 $1,066
Allowance for doubtful accounts
(deducted from accounts receivable)
</TABLE>
(1) Accounts deemed to be uncollectible.
EXHIBIT 21.1
BEN & JERRY'S HOMEMADE, INC.
Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
Ben & Jerry's Homemade Holdings, Inc. Vermont
Ben & Jerry's of New York New York
Ben & Jerry's Homemade, Ltd. England
Ben & Jerry's Canada, Inc. Quebec, Canada
Ben & Jerry's (FSC), Inc. Barbados
Ben & Jerry's France SARL France
Ben & Jerry's International, Inc. Delaware
Ben & Jerry's Franchising, Inc. Vermont
Ben & Jerry's Japan, Ltd. Japan
Ben & Jerry's Homemade BV The Netherlands
Ben & Jerry's Netherlands BV The Netherlands
The American Company for Ice Cream Manufacturing E.I., Ltd. Israel
EXHIBIT 23.0
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, 33-64421, 333-95773, 333-92547 and 333-92537)
of Ben & Jerry's Homemade, Inc. of our report dated January 21, 2000, 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 25, 1999.
ERNST & YOUNG LLP
Boston, Massachusetts
March 20, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
See accompanying notes
$ in thousands, except per share amounts
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-25-1999
<PERIOD-START> Dec-27-1998
<PERIOD-END> Dec-25-1999
<EXCHANGE-RATE> 1.000
<CASH> 25260
<SECURITIES> 0
<RECEIVABLES> 18833
<ALLOWANCES> 0
<INVENTORY> 13937
<CURRENT-ASSETS> 87347
<PP&E> 56557
<DEPRECIATION> 0
<TOTAL-ASSETS> 150602
<CURRENT-LIABILITIES> 44542
<BONDS> 0
0
1
<COMMON> 223
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 150602
<SALES> 237043
<TOTAL-REVENUES> 0
<CGS> 145291
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (681)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1634
<INCOME-PRETAX> 5208
<INCOME-TAX> 1823
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3385
<EPS-BASIC> .48
<EPS-DILUTED> .46
</TABLE>
EXHIBIT 10.11.2
AMENDMENT AGREEMENT
Amendment Agreement dated as of December 2, 1999 to Distribution Agreement dated
as of August 26, 1998, as amended prior to the date hereof (the "Distribution
Agreement") between The Pillsbury Company ("Pillsbury") and Ben & Jerry's
Homemade, Inc. ("Ben & Jerry's" or the "Manufacturer").
WHEREAS, Pillsbury and Nestle USA -- Food Group, Inc. ("Nestle USA") have
formed a United States ice cream joint venture, Ice Cream Partners USA, LLC (the
"Joint Venture"), which has commenced operations;
WHEREAS, the Distribution Agreement may not be assigned to and assumed by
the Joint Venture without the consent of the Manufacturer;
WHEREAS, the parties to the Distribution Agreement wish to confirm their
agreement as follows:
NOW THEREFORE, in consideration of these premises, the mutual promises of
the parties and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereby each agree to amend/supplement the
Distribution Agreement as follows:
1. Distributor and Defined Terms. All capitalized terms not defined herein shall
have the meanings given them in the Distribution Agreement. References to the
"Distributor" shall mean the Joint Venture, which shall include all of the
Nestle ice cream operations in the United State (except the Nestle minority
interest in Dreyer's Grand Ice Cream, Inc.) upon the execution of this Amendment
Agreement.
2. Standstill. Reference is made to the Standstill Agreement dated August 17,
1999 (the "Standstill Agreement") between Ben & Jerry's and Pillsbury (and
Diageo), a copy of which is attached hereto, which shall remain in effect, as
modified in this Section, notwithstanding the assignment hereby made of said
Standstill Agreement to the Joint Venture. Pillsbury agrees to an aggregate
limitation on the shares of Ben & Jerry's that may be beneficially owned by the
Joint Venture and Pillsbury (and Diageo) on a combined basis for all
signatories, namely 4.9% in Clause (i) in the third paragraph of Section 1
thereof and in the next to last paragraph of Section 1 thereof, and 14.9% in
Clause (iii) in the third paragraph of Section 1 thereof. As assignee of the
Standstill Agreement from Pillsbury, which the Joint Venture hereby assumes, the
Joint Venture shall be liable as if it were Pillsbury under the Standstill
Agreement, as so modified.
3. Performance Requirements and Performance Goals. The last paragraph page
3 and the first full paragraph on page 4 of the Distribution Agreement (Section
2.1) is deleted and replaced with the following:
"The Performance Requirements and Performance Goals for each calendar
year for each market in the Distributor Territory commencing with
Performance Requirements and Performance Goals for the calendar year 2001
shall be agreed upon on or before October 15 of the prior year. In the
event no agreement has been reached on the Performance Requirements
and/or Performance Goals by October 15 of any year (the "Present Year"),
then the CEOs
<PAGE>
of Manufacturer and Distributor shall attempt to agree on such
Performance Requirements and/or Performance Goals on or before November
15 of the Present Year. If they are unable to agree, the matter will be
submitted for mediation. The parties shall have until December 15 of the
Present Year to mutually agree upon a qualified mediator, who shall be a
person familiar with the economics and practices of the food distribution
industry and have experience serving as a mediator in commercial
disputes; if they are unable to agree upon a single mediator, each party
shall designate its own similarly qualified mediator by January 15 of the
following year (the "Next Year") and the mediators so designated shall
choose a third mediator by February 15 of the Next Year. If the mediation
process has not resulted in agreement by March 15 of the Next Year, the
issues shall be subject to binding arbitration before a single
arbitrator, who shall be chosen by the majority of the mediators, and who
shall be charged with making a decision on Performance Requirements
and/or Performance Goals to be in effect. The determination of the
arbitrator as to Performance Requirements and/or Performance Goals for
that current year shall be final and binding upon both the parties. The
cost of any mediation or arbitration shall be borne equally by the
parties."
Performance Requirements may be revised and updated by mutual agreement
of Manufacturer and Distributor, in line with industry improvements in
distribution.
Failure by the Distributor to achieve the Performance Requirements shall
not entitle the Manufacturer to a claim for damages against the Distributor, but
may entitle the Manufacturer to terminate for cause and receive the Termination
Fee according to the terms set forth in Section 8.3."
4. Co-packing. The Joint Venture on the one hand and Manufacturer on the other
hand agree that any co-packing agreements that may subsequently be entered into
between them, upon any later mutual agreement, shall be on a "most-favored
nations" basis. Products produced by the Joint Venture for Pillsbury, Nestle USA
or their affiliates will be excluded when determining "most-favored nations"
treatment.
5. Most Favored Nation Treatment. The parties agree that Section 9.8 of the
Distribution Agreement was not intended to apply to and does not apply to
products owned by or licensed to the Distributor or any of its affiliates.
6. Expansion of the Distributor's "Company-Owned System". Section 2.6 is
amended by adding at the end of the first paragraph the following:
"In the event that the Distributor's directly owned and operated
distribution system is expanded beyond its size as of August 26, 1998,
the Manufacturer will be offered the opportunity, on not less than two
months notice, but will not be required, to participate in all or any
part of such expansion with respect to having the Joint Venture
distribute the Products (as defined in Section 2.1 of the Distribution
Agreement) of the Manufacturer in any such expanded areas. Any such
additional areas selected by Manufacturer shall be automatically added
to Amended Schedule 2A."
6.1 Distributor Territory. Schedule 2A is deleted and replaced
with Amended Schedule 2A, attached hereto, provided that at the
date hereof the information relating to Connecticut and Virginia
counties listed in the boxed area on the second page of said
Amended Schedule 2A (listing counties) remains to be agreed
between the parties.
<PAGE>
References in the Distribution Agreement, as amended to
Schedules 2A and 2C shall hereafter mean Amended Schedules 2A
and 2C respectively.
7. Guarantee. Pillsbury shall unconditionally guarantee the payment obligations
from time to time of the Joint Venture to Ben & Jerry's (notwithstanding the
assumption by the Joint Venture of the obligations of Pillsbury). The Pillsbury
guarantee hereunder shall be a "guarantee of performance" with respect to the
obligations guaranteed and shall not be a "guarantee of collection"; the
Pillsbury guarantee hereunder shall be effective with respect to all obligations
incurred by the Joint Venture up through October 1, 2004 and shall be limited to
the guaranty of payment of all amounts owed to Manufacturer for Product or
promotions or rebates and any fees or amounts owed under Section 8 of the
Distribution Agreement as amended. When and if Nestle USA executes a guarantee
on the same terms as the guarantee by Pillsbury hereunder, each of the
guarantees of Pillsbury and Nestle USA shall be joint and several obligations of
such companies.
8. Social Mission. Section 4.1 of the Distribution Agreement is hereby amended
by adding at the end thereof the following: "The parties agree that the Social
Mission activities of Pillsbury as of the date hereof satisfied the requirements
set forth for Distributor in Sections 4 and 4.1 of the Distribution Agreement
and that Joint Venture is not expected to perform the same activities as
Pillsbury. The Manufacturer acknowledges that the Joint Venture has no prior
experience as a separate operating company. Within eight months after the date
of this Amendment Agreement the Joint Venture shall submit to the Manufacturer
its plans for compliance with this Section and Section 4 and shall commence to
comply within 30 days thereafter. Prior to such commencement pursuant to the
submitted plans, any Social Mission activities of the Pillsbury and Nestle USA
businesses which are conducted in part by the Joint Venture or which relate to
the operation of the Joint Venture shall be counted toward compliance of the
Distributor's obligations under Sections 4 and 4.1."
9. Termination Without Cause. The first paragraph of Section 8.2 of the
Distribution Agreement is hereby deleted and replaced with the following: "This
Agreement may be terminated by Distributor without cause on not less than twelve
months prior written notice given after October 1, 2003. If Manufacturer
terminates this Agreement without cause or gives notice of termination without
cause prior to January 1, 2001, then Manufacturer shall pay the amount of
undepreciated tax book value of the Distributor for assets invested in the
distribution system under this Agreement, all as set forth on Amended Schedule
8.2 attached hereto, except that Manufacturer may give notice of termination
without cause not later than November 1, 2000 for a termination effective
February 28, 2001 without any requirement to make any such payment per Amended
Schedule 8.2.
Beginning January 2, 2001, Manufacturer may terminate this Agreement
without cause at any time and without paying the amounts set forth on Amended
Schedule 8.2 attached hereto by giving no less than five months prior written
notice to Distributor. Distributor may terminate this Agreement without cause at
any time after October 1, 2004 by giving on or after October 1, 2003 no less
than 12 months prior written notice to Manufacturer.
In the event at any time after January 1, 2001 there is a Change of
Control of Manufacturer in a manner deemed to be "hostile" by the Board of
Directors of Manufacturer prior to said Change in Control (it being understood
that said Board of Directors shall have sole and conclusive authority to make
such determination as to whether the change is "hostile" for purposes of this
Agreement), then Manufacturer shall be required to give not less than 24 months
written notice instead of five
<PAGE>
months written notice in order to terminate this Agreement without cause under
Section 8.2 after January 1, 2001."
10. Termination for Cause. Section 8.3 of the Distribution Agreement is amended
by deleting paragraph 8.3 and replacing it with the following paragraph and
subparagraphs, and by renumbering subparagraphs 8.3.1 to 8.3.5:
"8.3 Termination for Cause. Except as otherwise provided for in
Sections 8.3.2 through 8.3.5, either party may at any time terminate
this Agreement, either entirely or as to a particular affected portion
of the Distributor Territory only, as provided below, upon sixty (60)
days' written notice to the other for failure of the other party to
comply with any of the terms set forth herein in any material respect,
which shall also have a material adverse effect on Distributor's
distribution performance or the Manufacturer's performance in the
Distributor Territory, or in the affected area(s) within the
Distributor Territory as the case may be ("Cause"), unless such
default shall have been reasonably cured to the satisfaction of the
other party within sixty (60) days after receipt of such written
notice specifying the failure in reasonable detail. An "affected
portion" of the Distributor Territory shall be any of the markets
within the Distributor Territory that are specified in Schedule 2A.
8.3.1 Termination Fee. Termination pursuant to subparagraph 8.3.2 or
Termination for Cause pursuant to subparagraph 8.3.4, if such
termination occurs prior to October 1, 2004, entitles Manufacturer to
a termination fee of [*] (the "Termination Fee") as set forth in such
subparagraphs. If Manufacturer is entitled to the Termination Fee
according to the terms of subparagraphs 8.3.2 or 8.3.4, Distributor
will pay the Termination Fee within 30 days of the date of
Manufacturer's notice of such termination of the Agreement and upon
such payment to Manufacturer, the Manufacturer shall have no other
remedies or claims against Distributor upon such termination pursuant
to the provisions of subparagraphs 8.3.2 and 8.3.4 of this Agreement.
In the event that there is litigation over whether the Distributor is
obligated to pay the Manufacturer the Termination Fee as specified in
subparagraphs 8.3.2 and 8.3.4 and the Manufacturer prevails on the
issue in such litigation and the Distributor is ordered to pay the
Termination Fee, the Manufacturer shall be entitled to recover its
reasonable costs and expenses of counsel in connection with such
litigation and, in the event that the Distributor is ordered to pay
the Termination Fee pursuant to Section 8.3.2, an additional fee of
[*] from the Distributor. If the Distributor prevails in such
litigation and payment of the Termination Fee is not ordered, then
Distributor shall be entitled to recover two times its reasonable
costs and expenses of counsel in connection with such litigation.
8.3.2 Termination for DSD Exit. Subject to the Provisions of Section
8.3.3, Distributor agrees to give Manufacturer not less than one year
written notice before any system wide grocery or substantially
system-wide grocery or complete system-wide exit of the use of DSD
*This confidential portion has been omitted and filed separately with the
Commission.
<PAGE>
as its principal mode of distribution of Manufacturer's Products. Any
such system-wide grocery or substantially system-wide grocery exit of
DSD, except as specifically set forth in the following subparagraph
8.3.3, shall entitle Manufacturer to terminate the Agreement in its
entirety or with respect to any affected portion of the Distributor
Territory upon 60 days written notice to Distributor and shall also
entitle Manufacturer to the Termination Fee if the Agreement is
terminated in its entirety. Any exit of the use of DSD for any market
described in Schedule 2A, except for any system-wide grocery or
substantially system-wide grocery exit or complete system-wide exit of
the use of DSD or as specifically set forth in the following
subparagraph 8.3.3, shall entitled Manufacturer to terminate the
Agreement upon 60 days written notice to Distributor with respect to
the affected portion but shall not entitle Manufacturer to the
Termination Fee.
8.3.3 DSD Exits That Do Not Entitle the Manufacture to Terminate This
Agreement. Manufacturer acknowledges that Distributor may exit DSD on a
customer specific basis (any channel) at the demand-request of a
customer, and the Manufacturer further acknowledges that Distributor
may thereafter exit DSD on a specific geographic market basis (any or
all channels) or on a system-wide grocery basis if prior or current
customer demand-requested exit(s) result in Distributor's sole
determination in good faith in its reasonable business judgment, as
reviewed in reasonable detail with the Manufacturer, that, as a result
of the foregoing, conditions are economically unfavorable for the
Distributor to continue DSD in that specific geographic market or in
the grocery channel. Distributor agrees promptly to inform Manufacturer
in writing of a customer request or demand-request which Distributor
plans to implement. Distributor agrees to provide Manufacturer as much
notice as possible prior to exiting DSD on any customer-specific basis,
but Manufacturer acknowledges that the notice period for such exits may
be dependent upon the customer. Distributor agrees to provide
Manufacturer written notice of at least 90 days prior to exiting DSD on
any specific geographic market basis or any system-wide channel basis.
Manufacturer will not be entitled to the Termination Fee or other
remedy for such customer specific demand-requested DSD exit or for any
subsequent specific geographic market based exit (any or all channels)
or a subsequent system-wide grocery DSD based exit occurring in
accordance with Distributor's determination made in compliance with
this subsection. In the event that Distributor uses the warehouse mode
for shipment to a specific customer or geographic portion of the
Territory, Manufacturer shall have the right, upon 60 days written
notice to the Distributor, to elect to ship the Products directly to
the applicable warehouse, in which event the Distributor will not do
so.
8.3.4 Failure of Distributor to Comply with Performance Requirements.
Beginning September 1, 2000, Distributor's failure to materially
satisfy the Performance Requirements after all notice and cure periods
set forth in this subparagraph, which failure has a material adverse
effect on Distributor's distribution performance in (i) the Distributor
Territory as a whole, shall be cause for Manufacturer to terminate the
Agreement and collect the Termination Fee or in (ii) any market
described in Schedule 2A, shall be cause for Manufacturer to terminate
the Agreement with respect to the affected portion but shall not
entitle Manufacturer to the Termination Fee. Manufacturer shall provide
written notice to Distributor specifying in reasonable detail and
failure of Distributor to materially comply with the Performance
Requirements and the material adverse effect on Distributor's
performance. If Distributor has not cured any such failure within 45
days, Manufacturer shall provide written notice with accompanying
details to Distributor of Distributor's continuing
<PAGE>
failure. Within 15 days of receipt of this notice, Distributor will
meet with Manufacturer to discuss the noncompliance and to present a
plan for achieving compliance. If Distributor fails to cure its
non-performance of the Performance Requirements in Amended Schedule 2C
and such non-performance constitutes a material breach thereof, taking
into account the cumulative effect of such non-compliance in
performance of the Performance Requirements, within 60 days of the
meeting and such noncompliance is within the control of the Distributor
and the Manufacturer is not a material contributor to such
noncompliance, then Distributor has failed to materially satisfy the
Performance Requirements and the Manufacturer may terminate the
Agreement on 60 days written notice. By way of example but not
limitation, Manufacturer must have a sufficient product supply
available and, except in respects not material, shipped on time to
Distributor at all times, must fully provide in all material respect
its planned marketing support, provide adequate notice and
communication for promotions (at least 12 weeks notice), ensure that
all material POS materials are available. Upon Manufacturer's
termination of the Agreement for Distributor's failure to satisfy the
Performance Requirements (as provided in this subsection), Manufacturer
shall be entitled to the Termination Fee unless Distributor achieved
the Performance Goals for the applicable period despite its failure to
satisfy the Performance Requirements."
8.3.5. Particular Account or Group of Accounts. If Manufacturer
notifies Distributor with reasonable specificity that a particular
account or group of accounts in a specific market in the Distributor
Territory is not, in the reasonable judgment of Manufacturer, receiving
appropriate distribution (i.e. in accordance with the Performance
Requirements, as in effect for the applicable period); Distributor
shall endeavor to correct the problem. If following sixty (60) days
from such notice, Manufacturer is not, in its reasonable judgment,
satisfied that the problem has been corrected, Manufacturer may propose
a solution. If within a reasonable period (generally thirty (30) days),
Distributor agrees to implement such solution and if Distributor in
fact implements such solution, such notice shall be of no further
effect. If Distributor does not so agree to implement such solution or
does not in fact implement such solution, Manufacturer shall have the
right to terminate Distributor's distribution rights to such account or
group of accounts. No Termination Fee shall be payable pursuant to
Section 8.3.5."
11. Termination for Change of Control. The first sentence of Section 8.4 is
deleted and replaced with the following: "Upon a Change in Control (as defined
below) of the Distributor, the Manufacturer may terminate this Agreement upon 12
months notice, and upon a Change in Control (as defined) of Manufacturer,
Distributor may terminate this Agreement upon 12 months notice, in each case
given at any time within the 180 day period following the Change in Control of
the other party."
Section 8.4 is further amended by deleting the words "announcement" and
substituting the word "consummation" in the second line of the second paragraph
of Section 8.4.
Section 8.4 is further amended to add at the end of the second paragraph,
following the words constitute a "Change in Control" the following:
"With respect to a Change in Control of the Distributor in the form of
the Joint Venture, the acquisition by either of Nestle USA or
Pillsbury, or any of their parents or affiliates, of more of the voting
securities (or LLC or other interests equivalent thereto) than held by
the other
<PAGE>
"member (and its affiliates)" in the Joint Venture shall constitute a
Change in Control of the Joint Venture, and the references to "voting
securities" shall include LLC interests (and other equivalent
interests), and the references to "shareholders" shall include LLC
members (and other equivalent interests), and the sale of all or
substantially all of the assets of the Joint Venture or a sale of all
or substantially all of the distribution business of the Joint Venture
shall each constitute a Change in Control of the Distributor."
The first sentence of Section 8.4.1 of the Agreement is deleted and replaced
with the following:
"In the event of termination hereunder by Distributor for Change in
Control of the Manufacturer under Section 8.4, Distributor shall be
obligated, during the 12 months notice period, to continue to purchase
Products from Manufacturer for resale and use its best efforts to
distribute in each market in the Distributor Territory listed in
Amended Schedule 2A where Distributor was a distributor hereunder
immediately prior to the termination notice."
12. New Section 20 is added to the Distribution Agreement, reading as follows:
"20. Distributor Advisory Council. Distributor has used, and intends to
use from time to time in the future, an informal "Distributor Advisory
Council" ("DAC") as a forum for manufacturers and subdistributors to
present their lawful distribution concerns under various agreements,
including the Distribution Agreement as in effect from time to time, and
proposed best practices solutions to Distributor. Manufacturer agrees to
provide a representative to serve on the DAC. Distributor shall pay the
reasonable costs and expenses of Manufacturer's representative to attend
the meetings of the Distributor Advisory Council. Manufacturer
acknowledges the nonbinding advisory purpose of the DAC meetings and
agrees that its participation is not intended to provide any contractual
rights to Manufacturer."
13. Miscellaneous. Section 1 of the Distribution Agreement is hereby
amended by adding the following at the end thereof:
"After assignment of the Distribution Agreement to the Joint Venture, the
term "Distributor" shall include all of the Nestle ice cream operations in the
United States (excluding Nestle's minority interest in Dreyer's Grand Ice Cream,
Inc.)."
Section 2.6 of the Distribution Agreement is hereby amended by adding at
the end thereof the following:
"Nestle (excluding Nestle's minority interest in Dreyer's Grand Ice Cream,
Inc.) does not bring to the Joint Venture any directly owned and operated
DSD distribution".
Section 14 of the Distribution Agreement is hereby amended by adding at the
end thereof the following:
"Each of Pillsbury and Nestle USA shall be bound by the obligations in
the Distribution Agreement relating to Confidential Information and the
obligations set forth in Section 14.".
<PAGE>
Section 14.1 of the Distribution Agreement is hereby amended by deleting
the words "Pillsbury (or Haagen-Dazs)" and inserting in its place "the Joint
Venture".
Section 17 of the Distribution Agreement is hereby amended by changing the
reference in the second paragraph to "Vice President, Haagen-Dazs North America"
to read "Chief Executive Officer, Joint Venture".
Section 19 of the Distribution Agreement is hereby amended to provide that
notice to Distributor shall be addressed to Chief Executive Officer, Joint
Venture at
Ice Cream Partners, LLC
c/o Nestle Frozen Food Company
30003 Bainbridge Road
Solon, OH 44139-2290
Attention: James L. Dintaman
Telephone: (440) 498-7700
Telecopier: (440) 248-7847
with a copy to:
The Pillsbury Company
200 South Sixth Street
Minneapolis, MN 55402
Attention: Richard M. Paschal
Telephone: (612) 330-4282
Telecopier: (612) 330-7201
14. Adjustment Under Section 3.2. Section 3.2 of the Distribution Agreement
provides that "It is understood that the provision of [*] per gallon on pints,
quarts and half gallons per year will be subject to appropriate adjustment in
the event of a meaningful change in market conditions for promotion of
Manufacturer's Products". The parties to this Amendment Agreement agree that
recent developments relating to a third party ice cream competitor constitute
such a "meaningful change in market conditions" and agree that all references to
[*] in Section 3.2 are hereby changed to [*].
15. Assignment of the Agreement. Manufacturer hereby consents to the assignment
of the Distribution Agreement, as previously amended, and as amended by this
Agreement, to the Joint Venture effective as of October 8, 1999. Manufacturer
agrees that Pillsbury is released from all obligations and liabilities under the
Distribution Agreement except for those obligations and liabilities that came
into existence prior to the date hereof or related to the period prior to the
date hereof and except as specifically set forth herein, including the
obligations under Sections 2 and 7 hereof.
*This confidential portion has been omitted and filed separately with the
Commission.
<PAGE>
IN WITNESS WHEREOF, each of the parties has duly executed and delivered
this Amendment Agreement as of the date set forth above.
BEN & JERRY'S HOMEMADE, INC.
By:_____________________________
THE PILLSBURY COMPANY
By:_____________________________
Accepted:
ICE CREAM PARTNERS USA, LLC
By:_____________________________
Exhibit 10.43.1
AMENDMENT TO EMPLOYMENT AGREEMENT
Severance Agreement dated as of January 19, 2000 between Michael Sands (the
"Executive") residing at Vermont House, 131 Main Street, No.210, Burlington, VT
05401 and Ben & Jerry's Homemade, Inc. (the "Company"), a Vermont corporation
headquartered at 30 Community Drive, South Burlington, VT 05403.
WHEREAS, the parties wish to confirm certain severance understandings.
NOW THEREFORE, in consideration of these premises and the mutual promises set
forth below and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Severance Payable on Termination by the Company Other Than For Cause, Death
or Disability
1.1 In the event of termination of the Executive by the Company for other
than Cause, Death or Disability, the Executive will be entitled to:
(i) Severance at the Executive's monthly base salary rate immediately
preceding date of notice of termination, payable for six months, plus (if
so approved by the Compensation Committee of the Board of Directors of the
Company or an officer delegated by the Committee) a second period of up to
an additional six months in the event that the employee has not found other
comparable employment, but with payments in this additional period
terminating on the date the Executive obtains comparable employment;
provided that, for officers with three or more years of employment service
at date of termination, severance at the monthly base salary rate
immediately preceding the date of notice of termination, payable for 12
months;
(ii) Continuation of health, life and other "welfare" insurance
benefits on the same terms as available to employees generally during the
period of severance payments. Other benefits (such as 401(k) or ESPP or
ESOP, which are keyed to employee status) do not continue;
(iii) The severance payments required to be made under (i) above are
not reduced by any other job earnings, i.e. no mitigation;
(iv) For officers with three or more years of service at the date of
termination, payment of the appropriate pro rata percentage (based on the
date of termination in the year) of the next annual cash bonus (if approved
by the Compensation Committee in January/February of the year following the
year of termination) provided that, in addition (if so approved and if the
Company's bottom line financial results for the year in which termination
occurs are not lower than the financial results for the preceding year),
the pro rata percentage, as determined above, shall be figured on the
"base" of a full year's bonus (which shall in no event be less than the
full year's bonus paid for the prior year) and, for other officers with
less than three years of service at date of termination, payment of the
<PAGE>
appropriate pro rata percentage of an amount equal to the next annual cash
bonus (if approved by the Compensation Committee in January/February of the
year following the year of termination).
(v) $15,000 of outplacement services.
1.2 Cause "Cause", for the purposes of Section 1, is defined as conviction
of any crime, whether or not involving the Company, constituting a
felony; gross neglect or misconduct in the conduct of the Executive's
duties; willful or repeated failure or refusal to perform such duties
may be delegated to the Executive by the CEO.
1.3 Options. Unless provisions in some other agreement between the
Executive and the Company or provisions in the option plan under
which options held by the Executive at the date of termination were
granted are more favorable to the Executive, (i) for Executives with
three or more years of service at date of termination, unvested
options that would have vested in the first six month period after
date of termination shall accelerate and become vested, and then all
vested options may continue to be exercised for six months thereafter
and (ii) for all other Executives all vested options at the date of
termination may continue to be exercised for six months thereafter.
In each case all unvested options remaining unvested at date of
termination shall terminate.
1.4 Confidential Information
a. The Executive agrees to 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 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 CEO or his designee may specify, all
Documents then in the Executive's possession or control.
1.5 Covenant Not To Compete
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:
<PAGE>
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 country 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 1.5, the
business of the Company and its Subsidiaries shall mean the
manufacture or sale of the Products. "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.
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.
c. The provisions of this Section 1.5 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 1.5 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
<PAGE>
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.
d. Without limiting the foregoing, it is understood that the
Company shall not be obligated to continue to make the payments
specified in this Agreement in the event of a material breach by the
Executive of the provisions of Sections 1.4 or 1.5 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.
1.6 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 1.4 and 1.5 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 1.4 and 1.5
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 1.4 or 1.5 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.
1.7 This Section 1 shall not be applicable while the Executive has an
Employment Agreement providing for severance that would be applicable
to a termination other than for cause on the applicable date of such
termination.
2. Severance Payable After a Change in Control
2.1 In the event of a termination by the Company other than for Cause,
Death or Disability within the first two years after a Change in
Control (as defined) or termination by the Executive within the first
two years after a Change in Control for Good Reason (as defined),
severance shall be payable or provided to the Executive as follows
(and subject to the provisions of the additional subsections of
Section 2):
(i) A single lump sum equal to the sum of (a) one and a half
times (i.e. 18 months) annual base salary for the Executive in effect
immediately prior to the date of the Change in Control or immediately
prior to the date of termination (whichever is greater) and (b) an
amount equal to one and a half times the last year's annual cash bonus
paid to the Executive.
<PAGE>
(ii)Health, life and other welfare benefits shall continue for
one year on the same terms available to employees generally.
(iii) The Company's contribution to the 401(k) account of the
Executive shall continue for one year at the same rate (but in no
event lower than the rate in effect prior to the Change in Control) as
applicable to employees generally or, if such continuation is not
permitted by the Company's 401(k) plan, then the amount of the
Company's contribution shall be made by a lump sum payment and/or
distribution of Company stock made to the Executive at the time said
payment/distribution is made to employees generally.
2.2 "Cause" shall have the meaning set forth in Section 1.2 above.
2.3 "Change in Control" shall be defined as follows:
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding
securities; or
(b) during any period of not more than two consecutive years (not
including any period prior to October 26, 1994), individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in Clause
(a), (c) or (d) of this Section 2.3) whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the
surviving entity) 60% or more of the combined voting power
of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no person acquires 35% or more of the combined voting
power of the Company's then outstanding securities; or
<PAGE>
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing provisions of this Section 2.3, a "Change in
Control" will not be deemed to have occurred solely because of (i) the ownership
or acquisition of securities of the Company (or any reporting requirement under
the Securities Exchange Act of 1934) relating thereto by an employee benefit
plan maintained by the Company for the benefit of employees or by ownership of
securities of the Company that were beneficially owned as of December 31,1998 by
any of Ben Cohen, Jerry Greenfield, Jeffrey Furman and Perry Odak; provided,
however, that a "Change of Control" under Section 2.3 shall be deemed to have
occurred in the event any of Ben Cohen, Jerry Greenfield or Jeffrey Furman
becomes the Beneficial Owner, directly or indirectly, of Common Stock or other
voting securities of the Company representing an amount of beneficial ownership
which is (i) greater than 35% of the combined voting power of the Company's then
outstanding voting securities (the threshold under Section 2.3(a)) and (ii)
greater than the amount beneficially owned by any such Person as of December 31,
1998, by at least 22% of the number of outstanding shares of Common Stock of the
Company as of December 31, 1998 (adjusted for stock splits and the like).
In addition, a Change in Control shall not be deemed to have occurred for
purposes of this Section 2.3 if the Executive is the person obtaining control or
a member of any group obtaining control in the defined Change of Control.
In the foregoing provisions of this definition of "Change in Control", the
following terms shall have the meanings set forth below:
"Person" in Section 2.3 shall have the meaning given in Section 3 (a) (9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13 9d and 14
(d) thereof; however, a Person shall not include
(1) the Company or any controlled subsidiary of the Company,
(2) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or
(3) a corporation or other entity owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
"Beneficial Owner" in Section 2.3 shall have the meaning defined in Rule 13d-3
under the Securities Exchange Act of 1934 as amended from time to time.
<PAGE>
2.4 "Good Reason" shall be defined as follows:
(i) Failure of the Company to continue the Executive in the
position the Executive had twelve months prior to the date of a Change
in Control or any portion of greater responsibility the Executive may
have held immediately prior to the Change in Control;
(ii)Diminution in the nature or scope of the Executive's
responsibilities, duties or authority; or
(iii) Failure of the Company to provide the Executive the base
amounts, bonus and benefits in accordance with the terms of any
employment agreement in effect immediately prior to the Change in
Control between the Executive and the Company or, if there is no such
employment agreement, the levels of base salary, bonus or aggregate
benefits taken together that were in effect immediately prior to the
Change in Control.
2.5 Options. Unless provisions in some other agreement (including an
option grant) between the Executive and the Company or applicable
provisions in the option plan under which options held by the
Executive were granted are more favorable to the Executive, and
except as may be provided on terms more favorable to the Executive in
Section 1 of this Agreement, with respect to a termination of the
Executive Other Than For Cause, all unvested options held by the
Executive shall accelerate and become vested immediately prior to the
Change in Control and shall continue to be exercisable for six
months.
2.6 Excise Tax Limitation. Notwithstanding Section 2.1 of this Agreement,
in the event that any Payment (as hereinafter defined) would be
subject in whole or in part to the excise tax (the "Excise Tax")
under Section 4999 of the Internal Revenue Code (the "Code"), then
the severance payments payable under Section 2.1 of this Agreement
shall be reduced to the extent, but only to the extent, necessary so
that no portion of any Payment is subject to the Excise Tax (the
"Severance Reduction"). However, no Severance Reduction shall be made
unless the net amount of the Total Payments (as hereinafter defined)
after such Severance Reduction and after deduction of the net amount
of federal, state and local income taxes on such reduced Total
Payments would be greater than the net amount of the Total Payments
without the Severance Reduction but after deduction of the Excise Tax
and the net amount of federal, state and local income taxes on such
unreduced Total Payments. The determination as to whether a Severance
Reduction is to be made and, if so, the amount of any such reduction
shall be made by the firm of certified public accountants that had
been acting as the Company's auditors prior to the Change in Control
or by such other firm of certified public accountants, benefits
consulting firm or legal counsel as the Board may designate for such
purpose, with the approval of the Executive, prior to the Change in
Control.
<PAGE>
The Company shall provide the Executive with the auditor's
calculations of the amounts referred to in this Section 2.6 and such
supporting materials as are reasonably necessary for the Executive to
evaluate the Company's calculation.
For purposes of this Section 2.6, the term "Payment" means any
"payment in the nature of compensation" (as that term is used in
Section 280G of the Code") to or for the benefit of the Executive,
whether or not paid pursuant to this Agreement, that is contingent or
under Section 280G of the Code would be presumed to be contingent on
a Change in Control; and the term "Total Payments" means the
aggregate of all Payments.
2.7 Additional Provisions. The provisions of Section 1.4 shall continue
to be applicable after a termination of employment under Subsection
2.1. The provisions of Section 1.5 shall remain applicable.
3. Other Provisions
3.1 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 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 and provided that nothing in this
Section shall limit the provisions of Section 2.
3.2 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
be not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
3.3 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.
3.4 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 and, in the case of the Company, at its principal place
<PAGE>
of business, attention Chief Executive Officer, with a copy to Ropes &
Gray, Attention Howard K. Fuguet, Esq., One International Place,
Boston, MA 02110.
3.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to severance upon a termination by
the Company other than for cause and with respect to severance upon a
termination by the Company other than for cause or by the Executive
for Good Reason after a Change in Control and with respect to Options
upon a Change in Control and supersedes all prior and contemporaneous
communications, representations and understandings, written or oral,
with respect thereto, except (i) as otherwise expressly provided
herein and (ii) as otherwise provided in any other written agreement
or benefit plan that is more favorable to the Executive with respect
to severance or options, it being understood that, as to matters
relating to severance or options pursuant to Section 1 of this
Agreement, that the provisions of this Agreement shall be applicable
only after the Executive's present Employment Agreement with the
Company is no longer in effect, and that the provisions of Section 2
of this Agreement relating to options and payments after a Change in
Control shall be immediately in effect.
3.6 Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
officer of the Company.
3.7 Governing Law, Arbitration and Consent to Jurisdiction. This is a
Vermont contract and shall be construed and enforced under and be
governed in all respects by the laws of the State of Vermont, without
regard to the Vermont internal conflict of laws principles thereof.
The parties each agree to promptly and mutually 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 and its performance or any breach or claimed breach
thereof. In the event that 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
Burlington, Vermont, 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
discovery 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 of
Vermont and to the jurisdiction of the state courts of Vermont for
the purpose of any suit or other proceeding arising out of or based
<PAGE>
upon the 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 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.
3.8 Protection of Reputation. During the period of employment and during
any period in which severance payments or benefits are paid or
provided under this Agreement, the Executive agrees that he will take
no action which is intended to, or would reasonably be expected to,
harm the Company or its reputation or which would reasonably be
expected to lead to unwanted or unfavorable publicity to the Company
(it being understood that competition which does not breach Section
1.5 shall not be deemed to be a breach of this Section).
3.9 Survival. Cessation or termination of Executive's employment with the
Company shall not result in termination of this Agreement. The
respective obligations of Executive and the rights and benefits
afforded to the Company as provided in this Agreement after
termination of employment shall survive cessation or termination of
Executive's employment hereunder.
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.
BEN & JERRY'S HOMEMADE, INC.
/s/Michael Sands By:/s/Perry D. Odak
- ---------------- -------------------
Executive Perry D. Odak
Chief Executive Officer
Exhibit 10.45
SEVERANCE AGREEMENT
Severance Agreement dated as of January 19, 2000 between Doug Fisher (the
"Executive") residing at 22 Grassy Pond Drive, Smithtown, NY 11787 and Ben &
Jerry's Homemade, Inc. (the "Company"), a Vermont corporation headquartered at
30 Community Drive, South Burlington, VT 05403.
WHEREAS, the parties wish to confirm certain severance understandings.
NOW THEREFORE, in consideration of these premises and the mutual promises set
forth below and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Severance Payable on Termination by the Company Other Than For Cause,
Death or Disability
1.1 In the event of termination of the Executive by the Company for other
than Cause, Death or Disability, the Executive will be entitled to:
(i)Severance at the Executive's monthly base salary rate immediately
preceding date of notice of termination, payable for six months, plus (if
so approved by the Compensation Committee of the Board of Directors of the
Company or an officer delegated by the Committee) a second period of up to
an additional six months in the event that the employee has not found other
comparable employment, but with payments in this additional period
terminating on the date the Executive obtains comparable employment;
provided that, for officers with three or more years of employment service
at date of termination, severance at the monthly base salary rate
immediately preceding the date of notice of termination, payable for 12
months;
(ii)Continuation of health, life and other "welfare" insurance
benefits on the same terms as available to employees generally during the
period of severance payments. Other benefits (such as 401(k) or ESPP or
ESOP, which are keyed to employee status) do not continue;
(iii) The severance payments required to be made under (i) above are
not reduced by any other job earnings, i.e. no mitigation;
(iv) For officers with three or more years of service at the date of
termination, payment of the appropriate pro rata percentage (based on the
date of termination in the year) of the next annual cash bonus (if approved
by the Compensation Committee in January/February of the year following the
year of termination) provided that, in addition (if so approved and if the
Company's bottom line financial results for the year in which termination
occurs are not lower than the financial results for the preceding year),
the pro rata percentage, as determined above, shall be figured on the
"base" of a full year's bonus (which shall in no event be less than the
full year's bonus paid for the prior year) and, for other officers with
less than three years of service at date of termination, payment of the
<PAGE>
appropriate pro rata percentage of an amount equal to the next annual cash
bonus (if approved by the Compensation Committee in January/February of the
year following the year of termination). (v) $15,000 of outplacement
services.
1.2 Cause. "Cause", for the purposes of Section 1, is defined as
conviction of any crime, whether or not involving the Company,
constituting a felony; gross neglect or misconduct in the conduct of
the Executive's duties; willful or repeated failure or refusal to
perform such duties may be delegated to the Executive by the CEO.
1.3 Options. Unless provisions in some other agreement between the
Executive and the Company or provisions in the option plan under which
options held by the Executive at the date of termination were granted
are more favorable to the Executive, (i) for Executives with three or
more years of service at date of termination, unvested options that
would have vested in the first six month period after date of
termination shall accelerate and become vested, and then all vested
options may continue to be exercised for six months thereafter and
(ii) for all other Executives all vested options at the date of
termination may continue to be exercised for six months thereafter. In
each case all unvested options remaining unvested at date of
termination shall terminate.
1.4 Confidential Information
a. The Executive agrees to 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 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 CEO or his designee may specify, all
Documents then in the Executive's possession or control.
1.5 Covenant Not To Compete
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:
<PAGE>
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 country 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 1.5, the
business of the Company and its Subsidiaries shall mean the
manufacture or sale of the Products. "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.
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.
c. The provisions of this Section 1.5 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 1.5 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
<PAGE>
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.
d. Without limiting the foregoing, it is understood that the
Company shall not be obligated to continue to make the payments
specified in this Agreement in the event of a material breach by the
Executive of the provisions of Sections 1.4 or 1.5 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.
1.6 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 1.4 and 1.5 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 1.4 and 1.5 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 1.4 or 1.5 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.
1.7 This Section 1 shall not be applicable while the Executive has an
Employment Agreement providing for severance that would be applicable
to a termination other than for cause on the applicable date of such
termination.
2. Severance Payable After a Change in Control
2.1 In the event of a termination by the Company other than for Cause,
Death or Disability within the first two years after a Change in
Control (as defined) or termination by the Executive within the first
two years after a Change in Control for Good Reason (as defined),
severance shall be payable or provided to the Executive as follows
(and subject to the provisions of the additional subsections of
Section 2):
(i) A single lump sum equal to the sum of (a) one and a half
times (i.e. 18 months) annual base salary for the Executive in effect
immediately prior to the date of the Change in Control or immediately
prior to the date of termination (whichever is greater) and (b) an
amount equal to one and a half times the last year's annual cash bonus
paid to the Executive.
<PAGE>
(ii) Health, life and other welfare benefits shall continue for
one year on the same terms available to employees generally.
(iii) The Company's contribution to the 401(k) account of the
Executive shall continue for one year at the same rate (but in no
event lower than the rate in effect prior to the Change in Control) as
applicable to employees generally or, if such continuation is not
permitted by the Company's 401(k) plan, then the amount of the
Company's contribution shall be made by a lump sum payment and/or
distribution of Company stock made to the Executive at the time said
payment/distribution is made to employees generally.
2.2 "Cause" shall have the meaning set forth in Section 1.2 above.
2.3 "Change in Control" shall be defined as follows:
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 35% or more of
the combined voting power of the Company's then outstanding
securities; or
(b) during any period of not more than two consecutive years (not
including any period prior to October 26, 1994), individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in Clause
(a), (c) or (d) of this Section 2.3) whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the
surviving entity) 60% or more of the combined voting power
of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no person acquires 35% or more of the combined voting
power of the Company's then outstanding securities; or
<PAGE>
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing provisions of this Section 2.3, a "Change in
Control" will not be deemed to have occurred solely because of (i) the ownership
or acquisition of securities of the Company (or any reporting requirement under
the Securities Exchange Act of 1934) relating thereto by an employee benefit
plan maintained by the Company for the benefit of employees or by ownership of
securities of the Company that were beneficially owned as of December 31,1998 by
any of Ben Cohen, Jerry Greenfield, Jeffrey Furman and Perry Odak; provided,
however, that a "Change of Control" under Section 2.3 shall be deemed to have
occurred in the event any of Ben Cohen, Jerry Greenfield or Jeffrey Furman
becomes the Beneficial Owner, directly or indirectly, of Common Stock or other
voting securities of the Company representing an amount of beneficial ownership
which is (i) greater than 35% of the combined voting power of the Company's then
outstanding voting securities (the threshold under Section 2.3(a)) and (ii)
greater than the amount beneficially owned by any such Person as of December 31,
1998, by at least 2?% of the number of outstanding shares of Common Stock of the
Company as of December 31, 1998 (adjusted for stock splits and the like).
In addition, a Change in Control shall not be deemed to have occurred for
purposes of this Section 2.3 if the Executive is the person obtaining control or
a member of any group obtaining control in the defined Change of Control. [
In the foregoing provisions of this definition of "Change in Control", the
following terms shall have the meanings set forth below:
"Person" in Section 2.3 shall have the meaning given in Section 3 (a) (9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13 9d and 14
(d) thereof; however, a Person shall not include
(1) the Company or any controlled subsidiary of the Company,
(2) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or
(3) a corporation or other entity owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
"Beneficial Owner" in Section 2.3 shall have the meaning defined in Rule 13d-3
under the Securities Exchange Act of 1934 as amended from time to time.
<PAGE>
2.4 "Good Reason" shall be defined as follows:
(i) Failure of the Company to continue the Executive in the
position the Executive had twelve months prior to the date of a Change
in Control or any portion of greater responsibility the Executive may
have held immediately prior to the Change in Control;
(ii) Diminution in the nature or scope of the Executive's
responsibilities, duties or authority; or
(iii)Failure of the Company to provide the Executive the base
amounts, bonus and benefits in accordance with the terms of any
employment agreement in effect immediately prior to the Change in
Control between the Executive and the Company or, if there is no such
employment agreement, the levels of base salary, bonus or aggregate
benefits taken together that were in effect immediately prior to the
Change in Control.
2.5 Options. Unless provisions in some other agreement (including an
option grant) between the Executive and the Company or applicable
provisions in the option plan under which options held by the
Executive were granted are more favorable to the Executive, and
except as may be provided on terms more favorable to the Executive in
Section 1 of this Agreement, with respect to a termination of the
Executive Other Than For Cause, all unvested options held by the
Executive shall accelerate and become vested immediately prior to the
Change in Control and shall continue to be exercisable for six
months.
2.6 Excise Tax Limitation. Notwithstanding Section 2.1 of this Agreement,
in the event that any Payment (as hereinafter defined) would be
subject in whole or in part to the excise tax (the "Excise Tax")
under Section 4999 of the Internal Revenue Code (the "Code"), then
the severance payments payable under Section 2.1 of this Agreement
shall be reduced to the extent, but only to the extent, necessary so
that no portion of any Payment is subject to the Excise Tax (the
"Severance Reduction"). However, no Severance Reduction shall be made
unless the net amount of the Total Payments (as hereinafter defined)
after such Severance Reduction and after deduction of the net amount
of federal, state and local income taxes on such reduced Total
Payments would be greater than the net amount of the Total Payments
without the Severance Reduction but after deduction of the Excise Tax
and the net amount of federal, state and local income taxes on such
unreduced Total Payments. The determination as to whether a Severance
Reduction is to be made and, if so, the amount of any such reduction
shall be made by the firm of certified public accountants that had
been acting as the Company's auditors prior to the Change in Control
or by such other firm of certified public accountants, benefits
consulting firm or legal counsel as the Board may designate for such
purpose, with the approval of the Executive, prior to the Change in
Control.
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The Company shall provide the Executive with the auditor's
calculations of the amounts referred to in this Section 2.6 and such
supporting materials as are reasonably necessary for the Executive to
evaluate the Company's calculation.
For purposes of this Section 2.6, the term "Payment" means any
"payment in the nature of compensation" (as that term is used in
Section 280G of the Code") to or for the benefit of the Executive,
whether or not paid pursuant to this Agreement, that is contingent or
under Section 280G of the Code would be presumed to be contingent on
a Change in Control; and the term "Total Payments" means the
aggregate of all Payments.
2.7 Additional Provisions. The provisions of Section 1.4 shall continue
to be applicable after a termination of employment under Subsection
2.1. The provisions of Section 1.5 shall remain applicable.
3 Other Provisions
3.1 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 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 and provided that nothing in this
Section shall limit the provisions of Section 2.
3.2 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
be not be affected thereby, and each portion and provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
3.3 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.
3.4 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
and, in the case of the Company, at its principal place of business,
<PAGE>
attention Chief Executive Officer, with a copy to Ropes & Gray,
Attention Howard K. Fuguet, Esq., One International Place, Boston, MA
02110.
3.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to severance upon a termination by
the Company other than for cause and with respect to severance upon a
termination by the Company other than for cause or by the Executive
for Good Reason after a Change in Control and with respect to Options
upon a Change in Control and supersedes all prior and contemporaneous
communications, representations and understandings, written or oral,
with respect thereto, except (i) as otherwise expressly provided
herein and (ii) as otherwise provided in any other written agreement
or benefit plan that is more favorable to the Executive with respect
to severance or options.
3.6 Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
officer of the Company.
3.7 Governing Law, Arbitration and Consent to Jurisdiction. This is a
Vermont contract and shall be construed and enforced under and be
governed in all respects by the laws of the State of Vermont, without
regard to the Vermont internal conflict of laws principles thereof.
The parties each agree to promptly and mutually 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 and its performance or any breach or claimed breach
thereof. In the event that 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
Burlington, Vermont, 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
discovery 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 of
Vermont and to the jurisdiction of the state courts of Vermont for
the purpose of any suit or other proceeding arising out of or based
<PAGE>
upon the 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 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.
3.8 Protection of Reputation. During the period of employment and during
any period in which severance payments or benefits are paid or
provided under this Agreement, the Executive agrees that he will take
no action which is intended to, or would reasonably be expected to,
harm the Company or its reputation or which would reasonably be
expected to lead to unwanted or unfavorable publicity to the Company
(it being understood that competition which does not breach Section
1.5 shall not be deemed to be a breach of this Section).
3.9 Survival. Cessation or termination of Executive's employment with the
Company shall not result in termination of this Agreement. The
respective obligations of Executive and the rights and benefits
afforded to the Company as provided in this Agreement after
termination of employment shall survive cessation or termination of
Executive's employment hereunder.
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.
BEN & JERRY'S HOMEMADE, INC.
/s/ Doug Fisher By: /s/Perry D. Odak
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Executive Perry D. Odak
Chief Executive Officer
