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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1995
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from ________________ to
_________________
Commission file number: 33-93982-LA
ANNIE'S HOMEGROWN, INC.
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 06-1258214
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 SECOND STREET, SUITE 202, CHELSEA, MA 02150
(Address of principal executive offices) (Zip code)
(617) 889-2822
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act: NONE
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Check whether the Issuer: (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 Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
the Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[X]
The Issuer's revenues for the fiscal year ended December 31, 1995 were
$4,546,211. As of September 1, 1996, the aggregate market value of the Issuer's
voting stock held by non-affiliates was approximately $6,721,602 based on the
public offering price of Common Stock of $6.00 per share.
As of September 1, 1996, there were 4,256,985 shares of the Issuer's Common
Stock, par value $.001 per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1 DESCRIPTION OF THE BUSINESS
GENERAL
Annie's Homegrown, Inc. ("Annie's" or the "Company"), which was founded by Ann
E. Withey and Andrew M. Martin, is engaged in the manufacture, marketing and
sale of premium natural macaroni and cheese dinners. The Company's products
include: Annie's Shells and Cheddar, Annie's Alfredo, Annie's Whole Wheat Shells
and Cheddar and Annie's Mild MexicanTM . The Company's products are manufactured
by a contract packer according to the specifications provided by the Company,
which include the recipe, ingredients, graphics and packaging for the product.
The Company's products are sold primarily through supermarkets and natural and
specialty food stores. The Company also private labels a house brand for a
specialty retailer, using its premium all natural white cheddar cheese formula
together with elbow macaroni. To date, the Company has focused its marketing and
distribution efforts on the Northeast and West Coast U.S. markets. The Company
has increased its case sales from 20,445 in 1989 to 252,168 in 1995. The
Company's strategy is to expand its supermarket distribution nationally in
addition to developing new and unique all natural food products to sell to its
existing customer base.
Annie's mission is to provide the highest quality, all natural food products to
its customers and to serve as an ethically, socially, and environmentally
conscious business model for customers, other companies and the food industry.
The Company promotes environmental efforts to minimize the consumption of
resources and encourages individuals to make personal commitments to social and
environmental causes.
The Company was founded in January 1989 as a Delaware corporation. Its principal
executive offices are located at 180 Second Street, Suite 202, Chelsea, MA 02150
and its telephone number is (617) 889-2822.
Statements in this Form 10-KSB which are not historical facts, so called
"forward looking statements", are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that all forward looking statements involve risks and uncertainties, including
those detailed herein and in the Company's other filings with the Securities and
Exchange Commission. See "Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Certain Factors That May Affect
Future Results."
PRODUCTS
The Company manufactures and sells a variety of macaroni and cheese dinners
under the Annie's name. The Company's products are made using all natural
ingredients including its premium all natural white cheddar cheese formula
together with petite pasta shells made from 100% durum semolina. The products
include:
Annie's Shells and Cheddar, introduced in January 1989, is made with petite
durum semolina pasta shells and premium all natural white Vermont cheddar
cheese.
Annie's Alfredo, introduced in August 1989, is made with petite durum semolina
pasta shells and premium all natural white Vermont cheddar cheese with garlic
and basil.
Annie's Whole Wheat Shells and Cheddar, introduced in February 1990, is made
with an organically grown whole wheat pasta shells and premium all natural white
Vermont cheddar cheese.
Annie's Mild MexicanTM , introduced in November 1994, is made with petite durum
semolina pasta shells and premium all natural white Vermont cheddar cheese and
Mexican spices.
The Company's products are typically priced between $0.99 and $1.25 for a 7.25
oz . package.
1
SALES, MARKETING AND DISTRIBUTION
The Company sells its products primarily through two classes of retailers: (i)
supermarket chains, also known as "mass markets;" and (ii) natural and specialty
food stores. Selection of new regional markets is based upon consumer profiles,
product opportunity and costs of introduction.
In the mass markets, the Company sells to large supermarket chains such as Stop
and Shop in New England and Safeway Stores in California. The Company currently
has penetrated all of the major supermarket chains in New England, and sells in
several major supermarket chains in New York and California. The Company is
currently expanding its sales area to include major supermarkets in the
Mid-Atlantic states as well as the Rocky Mountain region.
The Company's products are also sold to natural food markets and specialty food
stores , such as Whole Foods and Fresh Fields, and to selected natural and
specialty food distributors. Buying practices of natural and specialty food
stores are highly selective due to the nature of the retailers, which reflect
their customers demands for both natural and premium quality products.
In order to sell its products to a supermarket chain or wholesale distributor,
the Company retains regional food brokers on a commission basis. Regional food
brokers serve as the Company's sales representatives and assists the Company in
the sales process. The Company currently has retained 21 food brokers. Using the
Company's sales and marketing presentation, the food brokers presents the
Company's products to the supermarket or distributor buyer. The key competitive
factors in influencing a purchasing decision by the buyer include the product
quality, packaging, sales history, profitability and consumer demand. If a buyer
decides to accept the product, other issues such as the cost of acquiring shelf
space (introductory slotting) and the Company's specific commitments to
marketing programs are discussed. Introductory slotting fees and marketing
programs often vary from customer to customer. Emphasizing the selling features
of its products, the Company, through its brokers, attempts to negotiate the
lowest slotting cost. Slotting fees can take the form of cash payments and/or
free product allowances. Utilizing the brokers' knowledge of specific accounts,
the Company tailors its introductory marketing program to each new account.
The Company's growth strategy is to expand its supermarket distribution
nationally in addition to developing new and unique all-natural food products to
sell to its existing customer base. The Company expansion strategy prioritizes
certain expansion markets based on demographic information obtained from Nielsen
North America and Information Resources Inc., two consumer product market
research firms. In 1994, sales to one customer accounted for 13% of the
Company's net sales, and the Company's top ten accounts accounted for
approximately 60% of net sales. In 1995, no one customer accounted for more than
10% of the Company's net sales, and the Company's top ten accounts accounted for
approximately 56% of net sales.
The Company's products are shipped directly from the manufacturer via common
carrier to either of the Company's two public warehouses located in
Massachusetts and California. The Company does not rent the warehouses but is
charged based on the amount of use. The Company distributes its products by
shipping either directly to supermarket chains' central warehouses, where the
products are then redistributed to individual stores as needed, or to a
wholesale grocery distributor.
CUSTOMERS
The Company's products are marketed toward mothers, children and young adults.
These three groups are the primary purchasers in the macaroni and cheese dinner
category. Management believes its customers are people who prefer to buy a
natural, better-tasting product and are willing to pay a premium price.
Vegetarian Times and Money magazine estimate that Americans are willing to pay
as much as 20% more for natural foods.
The Company relies primarily on brand loyalty and word of mouth to promote its
products. The Company's marketing strategy is designed to get customers to try
its products for the first time and develop brand loyalty. The
2
Company accomplishes this through continually educating customers about the
differences between its all natural products and the competition's artificially
flavored products, as well as through product sampling, community giveaways,
promotional pricing and account specific marketing events such as buy-one
get-one free promotions. The Company's educational and public relations efforts
have led to feature articles in daily newspapers such as The Boston Globe and
The New York Times.
PRODUCT QUALITY AND DEVELOPMENT
Ann Withey, the Company's co-founder, Director, and Inspirational President,
maintains the final responsibility for the recipes for the products. The Company
takes great pride in producing high quality, all natural, easy to prepare meals.
Annie's petite pasta shells are made from 100% durum semolina flour. Management
believes the quality of its 100% durum semolina pasta is one of the more
important differences between Annie's and other competitive national brands.
Several of the lower priced brands are prepared from a lower grade, less
expensive blend of enriched flour. Durum semolina flour produces a golden,
translucent looking finished pasta product, while blended enriched flour
produces a faded, chalky looking finished product. In 1995, the Company retained
a product development consultant to increase the speed at which new products
were created and introduced to the market. The consultant will review all
recipes and flavors with Ms. Withey and are subject to Ms. Withey's final
approval. The Company intends to introduce new products in the later part of
1996.
MANUFACTURING
The Company's products are manufactured by two contract packers according to the
specifications provided by the Company, which include the recipe, ingredients,
graphics and packaging for the product. The Company has never experienced
material shortages or delays in the manufacture of its products. However, its
products are subject to the inherent risks in agriculture and all of its
products must be transported from its manufacturer and are therefore subject to
work stoppages and other risks. The Company believes that there are numerous
companies which could manufacture its products under its quality specifications
without a substantial increase in cost or delay in delivery.
COMPETITION
The industry in which the Company competes is highly competitive. The principal
methods of competition in the macaroni and cheese market include pricing,
product quality and taste, brand advertising, trade and consumer promotions,
packaging and the development of new products. The Company competes not only for
consumer acceptance but also for shelf space in supermarkets and natural food
stores and for the marketing focus by the Company's distributors, some of which
also distribute other competing products. The Company competes in two primary
classes of trade: (I) the mainstream supermarket trade, also known as the "mass
markets" and (ii) the natural food trade. The macaroni and cheese category in
the mass market trade is highly competitive. The leading brand in the category
is Kraft's Original Macaroni and Cheese Dinner (Kraft is owned by Philip Morris
Companies, Inc.) which accounted for over 40% of the total dollar sales in the
category in 1995 according to Information Resources Infoscan reports. In
addition to the Kraft brand, the category is comprised of other products such as
Golden Grain (The Quaker Oats Company), private label products (store brands),
and several regional brands. Store brands are usually sold at prices well under
the Company's products. Most of the companies that compete in the macaroni and
cheese category are larger than Annie's and have greater resources.
The Company believes that its products do not directly compete with these
"value-priced" lines. The Company's products are positioned as a "premium" brand
and viewed as a natural alternative to the low-priced, artificially-flavored
brands. Management believes its target customers are people who prefer to buy a
natural, better-tasting products and are willing to pay a premium for those
products. The Company uses unique, brightly colored packaging to differentiate
its products from competing brands, which tend to be very similar in graphical
design.
The macaroni and cheese category is less competitive in natural food stores,
which do not typically carry Kraft Macaroni and Cheese or Golden Grain. The
Company competes in that market with other products based on taste and all
natural ingredients. Several of these brands are also offered by companies
larger than the Company. There
3
is less pricing competition within this segment, as natural, specialty and
gourmet food stores typically sell products based on their quality and
ingredients, not price.
The Company believes that the principal bases of competition include price,
product quality, taste, reputation and brand loyalty. The Company believes that
it competes favorably with respect to these factors, although there can be no
assurance that it will be able to continue to do so. The ability of the Company
to compete successfully in the future will depend on factors both within and
outside the its control, including the Company's ability to respond to changing
market conditions and the activities of its competitors, to control costs, to
introduce successful new products, to grow its customer base, and general market
and economic conditions. There can be no assurance that the Company will be able
to compete successfully with respect to these factors in the future or that
present competitors or future entrants will not successfully compete with the
Company in the future, any of which could have a material adverse effect on the
Company's business, results of operations or financial condition.
PHILOSOPHY AND CORPORATE CULTURE
The Company understands that it has a responsibility to produce profits for its
shareholders. However, in addition to its corporate responsibilities, the
Company is committed to benefiting the community as a reward for its support.
Since its inception, the Company has supported hundreds of non-profit and school
groups that helped women, children and the environment. Currently, Annie's
Homegrown continues to support hundreds of non-profit groups through its
Community Enrichment Program.
COMMUNITY ENRICHMENT PROGRAM
Annie's mission is to provide the highest quality all natural food products to
its customers and to serve as an ethically, socially, and environmentally
conscious business model for customers, other companies and the food industry.
Annie's promotes environmental efforts to minimize the consumption of resources
and encourages individuals to make personal commitments to social and
environmental causes. The Company also actively supports a variety of non-profit
and school groups that help women, children and the environment.
The Company's Community Enrichment Program contributes cases of its products to
PTA groups, walkathons, book fairs, bake sales, daycare centers and other
non-profit groups and events. These groups can give away the cases or sell the
free cases as a fund-raiser to generate support for their organization. The
Community Enrichment Program helps society and the environment while
simultaneously increasing the public awareness for Annie's products.
The Company has also created and supports the Be Green(R) environmental
awareness program. Each package of Annie'S describes how individuals can help
the environment by increasing environmental awareness. Consumers can receive a
free Be Green(R) bumper sticker which helps consumers express their support for
the environment. The Company haS distributed over 40,000 of these bumper
stickers throughout the United States.
Be Green(R) Magazine is a publication by Annie's and is a forum whereby the
Company can communicate its philosophy, products and community programs. Be
Green(R) Magazine features inspiring articles and stories, facts about thE
environment, coloring pages, comic strips for kids, stories about groups that
are helping the environment and society.
The Company also sponsored and has contributed resources to the following
organizations, among others:
SAFE STREETS NOW! -- A successful community program started by Molly
Wetzel to close down illegal drug houses.
UNPLUG! -- A national program started by Marianne Manilov to help
parents and teachers to stop the spread of TV commercial advertising in
schools.
THE AUDUBON SOCIETY -- National environmental education and
conservation programs.
4
For the year ended December 31, 1994, the Company contributed $ 28,430 in cash,
resources and products to various organizations. The Company, adhering to its
philosophy, made contributions of approximately $ 38,600 in cash, resources and
products for the year ended December 31, 1995.
INTELLECTUAL PROPERTY RIGHTS
The Company regards its trademarks, its packaging, promotional material and
other art work and its trade secrets comprising of its processes, formulas,
ingredients, and recipes as critical to its success and attempts to protect such
property. The Company has registered the following trademarks in the United
States; "Rabbit of Approval", "Bernie," "Annie's Pasta," and "Be Green". The
Company also uses several other trademarks for which federal trademark
registrations are now pending. The Company also uses appropriate copyright
notices with its packaging, promotional materials and other art work. The
Company's suppliers, pursuant to confidentiality agreements with the Company,
have agreed to retain in confidence and not use the Company's trade secrets
except for the benefit of the Company. The Company intends to take all necessary
and appropriate action to protect against imitation of its products, packaging,
promotional materials and other art work and to defend such trademarks,
copyrights, and trade secrets. The Company does not have any patents.
REGULATION
The production and marketing of the Company's products are subject to the rules
and regulations of various federal, state, and local heath agencies, including
the United States Food and Drug Administration (the "FDA"). The FDA also
regulates the labeling of the Company's products.
EMPLOYEES
As of December 31, 1995, the Company had thirteen employees: two general
management, one salesperson, five sales and marketing support, and five
operations including financial management. The Company has never participated in
a collective bargaining agreement. Management believes its relationship with its
employees are good.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company leases 800 square feet of office space at 200 Gate Five Road, Suite
211, Sausalito, California and 1,500 square feet at 180 Second Street, Suite
202, Chelsea, Massachusetts. The Sausalito lease expires on September 30, 1997,
and has a monthly rent of $1,250. The Chelsea lease expires on December 31,
1996, and has a monthly rent of $1,150 for the term of the lease with an
additional amount due for its portion of building expenses over a base period of
1994. The Company believes that both properties are adequately covered by
insurance.
The Company believes that its facilities and equipment are in good condition and
are suitable for its operations as presently conducted and for its foreseeable
future operations. The Company currently believes that additional facilities and
equipment can be acquired if necessary, although there can be no assurance that
additional facilities and equipment will be available upon reasonable or
acceptable terms, if at all.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders in the
fourth quarter of 1995.
5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock, $.001 par value, is not listed on any public
securities exchange or market and there can be no assurances that the Company's
Common Stock will be listed on a stock exchange or market or that a trading
market will ever develop .
The approximate number of record holders of the Company's Common Stock as of
June 30, 1996 was 1,450. The Company has never paid a cash dividend with respect
to its shares of the Common Stock. The Company currently intends to retain
earnings, if any, for use in its business and does not anticipate paying cash
dividends on its shares of Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
The Company's net sales are generated by sales to supermarkets and natural and
specialty food stores. Net sales are net of product returns and allowances. The
Company sells most of its product to its customers on a credit basis with 2% 10
day, net 15 day terms. The Company has developed four premium macaroni and
cheese dinners: Annie's Shells and Cheddar, Annie's Alfredo, Annie's Whole Wheat
Shells and Cheddar, and Annie's Mild Mexican(TM) . The Company also has an
agreement with a specialty retailer to provide a private label house brand using
the Company's premium all natural white cheddar cheese formulae together with
elbow macaroni.
The Company's cost of sales consists of purchasing finished product from a pasta
manufacturer. The products are manufactured according to the specifications
provided by the Company, which include the recipe, ingredients, graphics and
packaging for the product. The Company products are shipped directly from the
manufacturer via common carrier to either of two public warehouses located in
Massachusetts and California. The Company distributes its products by either
shipping directly to the supermarket chains' central warehouses or to a
wholesale grocery distributor.
Selling expenses include the costs of product marketing, sales commissions, cost
of product distribution and account management. The Company retains brokers who
present the Company's products to supermarket chains and distributors. The
brokers work on a commission basis, generally 5% of net cash received. The
Company negotiates, through the broker, the cost of acquiring shelf space
(introductory slotting) as well as the continuing support needed for the product
as indicated. Introductory slotting fees can take the form of cash payments
and/or free product allowances.
The Company's growth strategy is to continue to expand its supermarket and
natural food distribution nationally as well as to develop new and unique all
natural food products for sale to its existing customer base.
6
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, certain items
included in the Company's Statements of Operations (see Financial Statements and
related Notes) for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------- ------------
1994 1995
------ ------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.................................. 100.00% 100.00%
Cost of sales.............................. 59.16 57.33
Gross profit............................... 40.84 42.67
Selling expenses........................... 25.83 29.81
General and administrative expenses........ 13.11 14.01
Slotting fees.............................. 1.31 6.88
Compensation of outside directors.......... 0.00 0.99
Operating income (loss).................... 0.59 (9.02)
Interest expense and borrowing charges..... 1.28 1.08
Interest and other income.................. 1.55 0.24
Income tax expense......................... 0.08 0.06
Net income (loss).......................... 0.78 (9.92)
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1994
NET SALES. Net sales increased by $1,522,627 or 50.36% from $3,023.584 in 1994
to $4,546,211 in 1995. The net sales increase was primarily a result of growth
in the slotting of new accounts as well as slotting of the Company's new
product, Annie's Mild MexicanTM , into existing accounts. The Company believes
that it has penetrated all major supermarket chains in the New England states,
and sells in several major supermarket chains in New York and California. The
Company has expanded its supermarket business into the Mid-Atlantic states as
well as the Rocky Mountain region. In 1994, sales to one customer accounted for
13% of the Company's net sales, and the Company's top ten accounts sold
approximately 60% of net sales. In 1995, none of the Company's accounts sold
more than 10% of the Company's net sales, and the Company's top ten accounts
sold approximately 56% of net sales. Additionally, the Company was retained by a
specialty retailer to produce its private label brand macaroni and cheese dinner
using the Company's white cheddar cheese formula. The Company shipped the first
private label order in October, 1994.
GROSS PROFIT. As a percentage of net sales, gross profit increased from 40.84%
in 1994 to 42.67% in 1995. This increase was primarily a result of the decrease
in the purchase price of product from a previous supplier.
SELLING EXPENSES. Selling expenses increased by $574,215 or 73.53% from $780,914
in 1994 to $1,355,129 in 1995 and increased as a percentage of net sales from
25.83% in 1994 to 29.81% in 1995. The increase in selling expenses as a
percentage of net sales primarily reflected an increase in spending in three
primary areas. The Company hired additional personnel to sell and support its
products and customer base. Freight costs increased because the customer base is
getting further away from the Company's warehouses in Massachusetts and
California. Also, marketing costs, including price reductions and trade show
appearances, associated with the continued roll-out of the Company's new Mild
Mexican(TM) dinner flavor, were incurred in 1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $240,447 or 60.64% from $396,492 in 1994 to $636,939 in 1995 and
increased as a percentage of net sales from 13.11% in 1994 to 14.01% in 1995.
This increase was due primarily to expenditures related to increased personnel
cost due to the hiring of additional staff. The additional staff was needed to
handle the administration of the Company's initial public offering and the
increase in volume of work.
SLOTTING FEES. Slotting expenses increased by $273,098 or 690.29% from $39,563
in 1994 to $312,661 in 1995, and increased as a percentage of net sales from
1.31% in 1994 to 6.88% in 1995. The increase was due to the
7
Company's decision to expand by purchasing additional shelf space which requires
paying introductory slotting fees for the acquisition of shelf space at
supermarkets. These slotting fees are required by most supermarkets and are
expensed at the time of product introduction.
COMPENSATION OF OUTSIDE DIRECTORS. In 1995, $24,000 in compensation for Common
Stock issued and $21,000 in compensation for stock options granted was recorded
for the four outside directors of the Company. In 1994, the Company had no
outside directors nor compensation for its directors who also were employees of
the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date through the initial public
offering of Common Stock, private sale of equity and convertible debt
securities, a line of credit from a financial institution and cash generated
from operations. At December 31, 1995 and December 31, 1994, the Company had a
working capital (deficit) of $(193,412) and $126,615, respectively. The decrease
in working capital was primarily generated by the amount of working capital
spent for introductory slotting fees to fund the Company's expansion.
Net cash provided by operating activities was $40,621 in 1995 consisting
primarily of increases in collection on related party accounts, as well as
increases in accruals and trade payables and offset in part by increases in
slotting and accounts receivables. Net cash used in operating activities for the
year ended December 31, 1994 was $79,899, consisting primarily of a decrease in
net income along with a substantial increase in accounts receivable and
affiliate accounts, offset by a substantial increase in accounts payable and
accrued expenses.
Net cash used in investing activities consisted of capital expenditures totaling
$18,787 in 1995 and $20,792 in 1994 which related principally to the purchase of
office equipment.
The Company had net cash provided by financing activities of $11,187 and $98,411
for 1995 and 1994, respectively. Net cash used in financing activities was used
primarily to pay off the revolving line of credit. The Company has a revolving
line of credit with a financial institution in the amount of $150,000 which
bears interest at the prevailing prime rate plus 3%. In addition, each borrowing
incurs a service fee which varies from 0.5% to 8% (up to 90 days) depending on
the number of days the borrowing is outstanding. The line of credit is secured
by the Company's accounts receivable and inventory and guaranteed by an officer
and certain directors of the Company. In June 1996, the Company renegotiated its
line of credit with the financial institution. The Company increased its line of
credit from $150,000 to $300,000. In addition, the service fees charged were
reduced from 0.5% to 8% (up to 90 days) to 0.4% to 6.4% (up to 90 days). The
Company also has a $10,000 unsecured line of credit with a bank which bears
interest at the prime rate plus 8.9%. At December 31, 1995, the Company had
$32,129 of outstanding borrowings under the lines of credit.
In 1992, the Company issued $240,000 of convertible notes to fund continued
expansion of the products into different stores. The convertible debt was due on
June 30, 1994 and bore interest at 11%. On June 30, 1994, $232,400 of the notes
were converted into 193,667 shares of Common Stock and the balance of $7,600 was
repaid to the note holder. The Company also has a $7,500 demand note payable to
an Officer of the Company which bears interest at 11%. The Company used the
proceeds of the note for general working capital.
The Company's primary capital needs are for expansion into national supermarket
distribution and to develop new products. The Company intends to expand its
supermarket distribution throughout the United States by acquiring shelf space
or new "slots" (one product in one store equals one slot). The Company acquired
new slots of shelf space during 1995 by opening new accounts and slotting its
Alfredo and Mild Mexican products into selected existing accounts. Slotting
expenses for 1995 were $312,661. During 1994, the Company incurred slotting
expenses of $39,563. The Company's planned expenditures for slotting fees in
1996 are to be funded with a portion of the net proceeds of the initial public
offering.
On July 31, 1996, the Company closed its offering. In total, 256,490 shares were
sold resulting in gross proceeds of approximately $1,500,000. Expenses from the
inception of the offering totaled approximately $325,000. Some of the proceeds
were to fund operating losses, which include slotting fees, during the first six
months of fiscal 1996
8
amounting to approximately $440,000. The Company expects profitable operations
over the balance of the year. The Company believes that the net proceeds from
the public offering, together with the Company's increased line of credit and
funds that may be generated from operations, will be sufficient to fund the
Company's currently anticipated working capital requirement and expenditure
requirements through 1996.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-KSB) may contain statements which
are not historical facts, so called "forward looking statements", which involve
risks and uncertainties. Forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
In particular, statements made above in "Item 2. Description of Property"
relating to the suitability of the Company's facilities and equipment for future
operations and the availability of additional facilities and equipment in the
future and in "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to the sufficiency of funds for
the Company's working capital requirements during 1996 and the Company's
expectation that future cash flow will continue to be provided from operations
will have any significant impact on its business may be forward looking
statements. The Company's actual future results may differ significantly from
those stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to, the factors discussed below. Each
of these factors, and others, are discussed from time to time in the Company's
filings with the Securities and Exchange Commission.
The Company's future results are subject to substantial risks and uncertainties.
The Company has operated at a loss or a very small profit for its entire history
and there can be no assurance of it ever achieving consistent profitability. The
Company had a working capital deficit of approximately $193,000 at December 31,
1995. and has a revolving line of credit of $300,000 which expires June 1997. In
addition, the Company completed its initial public offering in July 1996. The
Company may still require additional working capital in the future and there can
be no assurance that such working capital will be available on acceptable terms,
if at all. The macaroni and cheese marketplace is highly competitive and many of
the Company's competitors have significantly greater financial and other
resources greater than the Company. The failure of the Company to compete
effectively with existing or new competitors could result in price erosion,
decreased margins and decreased revenues, any or all of which could have a
material adverse effect on the Company's business, results of operations, and
financial condition. The Company historically has relied on a relatively small
number of customers for a large percentage of its total revenues. Loss of, or a
decrease in orders from, any one or more of these customers could have a
material adverse effect on the Company's results of operations and financial
condition.
The Company's strategy is to expand its sales by purchasing shelf space
(slotting fees) at major supermarket chains. The inability of the Company to
execute this strategy may have a material adverse effect on the Company's
business, results of operations, and financial condition.
To date, the Company has relied significantly on the talents and abilities of
Ann E. Withey, the Company's co-founder and Inspirational President, and Andrew
M. Martin, the Company's co-founder and Chairman and CEO. The loss of either of
these people could have a material adverse effect on the Company's business,
results of operations, and financial condition.
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially affect revenues and profitability,
including: competitive pressure on selling prices and margins; cost of
ingredients; transportation and distribution costs; timing of customer orders;
timing and amount of slotting fees and capital expenditures, particularly if the
Company executes its plan for national expansion; and the introduction of new
products by the Company's competitors. As a result of the foregoing and other
factors, the Company may experience material fluctuations in future operating
results on a quarterly or annual basis which could materially and adversely
affect its business, operating results and stock price.
9
ITEM 7. FINANCIAL STATEMENTS
Please refer to pages F-1 through F-13
Independent Auditors' Report
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the Years ended December 31, 1995 and 1994
Statements of Stockholders' Equity (Deficit) at December 31, 1995 and 1994
Statements of Cash Flows for the Years ended December 31, 1995 and 1994 Notes to
Financial Statements at December 31, 1995 and 1994
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change of accountants nor has there been any disagreements
with the accountants on any matter of accounting principles or practices of
financial statement disclosure required to be reposted under this item.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS, KEY PERSONS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
---- --- --------
Ann E. Withey 33 Inspirational President and Director
Andrew Martin 41 Chairman and Chief Executive Officer
Deborah Churchill 33 President and Director
Neil Raiff 38 Chief Operating Officer and Treasurer
Paul Nardone 28 Executive Vice President of Sales
Celinda Shannon 29 Secretary
Brady Bevis 52 Director
Pam Monroe 45 Director
David Simpson 39 Director
Tom Van Dyck 38 Director
ANN E. WITHEY co-founded the Company in 1989 and is currently a director and the
Company's Inspirational President. Ms. Withey has served as a director of the
Company since 1989. Ms. Withey's responsibilities also include new product
development and consumer correspondence and relations. Approximately 95% of Ms.
Withey's time is devoted to the Company's matters. Ms. Withey is also a
co-founder and is currently a director of The Good Idea Foods Company, Inc. Ms.
Withey was co-founder of Smartfood, Inc. and creator of the original recipe for
Smartfood Popcorn. Smartfood Inc. was sold to Frito-Lay a division of PepsiCo in
1989. Ms. Withey and her husband own and operate a small organic produce farm in
Connecticut. Ms. Withey actively supports a variety of programs that benefit
women, children, education and the environment. Ms. Withey holds a B.A. degree
from the University of Connecticut.
ANDREW M. MARTIN co-founded the Company, and since 1989, has been the Company's
Chairman and Chief Executive Officer. Mr. Martin participates in all aspects of
the Company's development, including strategic planning, product development,
finance, management, sales and marketing. Mr. Martin was a co-founder, President
and Chairman of Smartfood, Inc. In 1989, Mr. Martin founded, and is currently
the
10
Chairman and Chief Executive Officer of Simple Packaging Solutions, Inc., an
international packaging technology corporation located in Sausalito, California.
In 1993, Mr. Martin also founded, and is currently the Chairman and Chief
Executive Officer of The Good Idea Foods Company, Inc., a regional snack food
company located in Chelsea, Massachusetts. Mr. Martin spends approximately 60%
of his time on matters relating to Annie's Homegrown, Inc. Mr. Martin holds
several international and national patents and awards for technology excellence.
He has also created several successful programs to benefit the homeless and the
environment.
DEBORAH CHURCHILL has served as the Company's President and a director since
1991. Her responsibilities include serving as a spokesperson for the Company,
its products and philosophy. She has been honored as a speaker by many groups on
behalf of issues relating to women, business and the environment. Ms. Churchill
works closely with the Company's Chief Operating Officer and Treasurer in
directing Company matters. She is also a director of Simple Packaging Solutions,
Inc. and the Good Idea Foods Company, Inc. Prior to joining the Company in May
1990, Ms. Churchill was a District Loan Officer, in charge of all loan
operations in Northern California, with Glendale Federal Bank of San Mateo
California. Ms. Churchill holds a B.A. in Economics from the University of
California at Santa Barbara.
NEIL RAIFF is a certified public accountant and currently serves as the
Company's Chief Operating Officer and Treasurer. From 1989 to September 1994,
Mr. Raiff served in this capacity on a contractual basis. On October 1, 1994,
Mr. Raiff was retained as a part-time employee, and in May 1995 his status was
changed to a full-time employee. Mr. Raiff is responsible for all financial and
administrative functions including financial forecasting and strategic planning,
expense control, accounting, purchasing and banking and insurance relationships.
From 1991 to May 1995, Mr. Raiff was self employed as a CPA in private practice.
From 1989 to 1991, Mr. Raiff was a Manager with Cohen and Havian, certified
public accountants in Boston, Massachusetts. Mr. Raiff holds a B.S. in
Accountancy from Bentley College in Waltham, Massachusetts.
PAUL NARDONE is currently the Company's Executive Vice President of Sales. Mr.
Nardone is responsible for managing the Company's strategic national sales plan.
In 1988, Mr. Nardone founded Olde Boston Snacks, a distributor of gourmet nuts
and natural snack mixes. Mr. Nardone continues to work in an advisory role with
Olde Boston Snacks. In 1990, Mr. Nardone founded New England Snacks, Inc., a
regional snack food distributorship. In March, 1992, New England Snacks, Inc.
was sold to Alternative Distributors where Mr. Nardone served as Vice President
of sales until joining the Company in 1993. Mr. Nardone also serves as President
of Good Idea Foods Company, Inc. Approximately 95% of his time is spent on
matters relating to Annie's Homegrown, Inc. Mr. Nardone holds a B.A. degree in
Political Science from Tufts University in Medford, Massachusetts.
CELINDA SHANNON currently serves as the Company's Secretary. Since joining the
Company in 1992, she has held a variety of roles including assistant to the
Chairman, New Product Development, Marketing and Sales Management and Package
Design. Currently, Ms. Shannon is managing shareholder relations. Prior to
joining the Company, Ms. Shannon was employed since 1989 as a Marketing
Specialist by Wood Logan Associates located in Old Greenwich, Connecticut. Ms.
Shannon successfully completed the Series 63 - Uniform State Securities Law and
Series 6 - Annuity and Mutual Funds, Life and Variable Insurance Examinations.
Ms. Shannon holds a B.A. degree in French from Trinity College in Hartford,
Connecticut.
BRADY BEVIS was elected a director in May, 1995. Ms. Bevis, a public interest
lawyer and businesswoman, is currently the Program Coordinator for the Bay Area
Multimedia Partnership. Ms. Bevis was formerly on the Board of Supervisors for
the County of Marin during which she ended the 17-year polarization over the
conversion of Hamilton Air Force Base and started a collaborative process for
planning its future. Prior to elected office, Ms. Bevis was Chair of the Marin
SANE/Freeze, active in the nation wide Lawyers Alliance on Nuclear Policy, and
the Marin County Peace Conversion Commission. Ms. Bevis was a founding member of
Marin Action, Exodus - establishing residential treatment facilities for
autistic children, and the Marin County Commission on Homelessness. In addition,
Ms. Bevis has served on the Boards of Directors
11
for numerous organizations including The California Council on Partnerships,
Marin Conservation League, and the California Elected Women's Association for
Education and Research.
PAMELA MONROE became a director in May, 1995. Ms. Monroe is the Founder of
Monroe Associates, which is an executive search firm that offers retained
recruiting services for key positions in the money management , investing
management, and capital equipment leasing industries. Previously, Ms. Monroe was
a Vice President with Chase Manhattan Bank. Ms. Monroe also serves as the
Immediate Post President of the San Francisco Chapter of the National
Association for Women Business Owners (NAWBO). In addition, she is a mender of
the Board of Governors for the City Club of San Francisco and serves as a member
of the Junior League of San Francisco, Professional Business Women's Conference,
An Income of Her Own, and Alumnae Resources. Ms. Monroe earned a degree in
Business Administration and a specialization in business finance from Arizona
State University in 1973.
DAVID SIMPSON has served as a director of the Company since May, 1995. Mr.
Simpson is a senior partner in the San Francisco law firm of Young, Vogl,
Harlick & Wilson, where he practices regulatory and business law. Prior to
commencing his law practice in 1986, Mr. Simpson was an award-winning
investigative newspaper reporter, covering the environment and regulated
businesses. Mr. Simpson chairs the Community Service Committee of Temple
Emanu-El and is a tutor and fund raiser for Back-on-Track, a San Francisco
mentoring/literacy project for at-risk children. He received his B.A. from
Williams College, his M.A. in politics/philosophy from Oxford University and his
J.D. from Golden Gate University.
TOM VAN DYCK has been a director of the Company since May, 1995. Mr. Van Dyck is
a co-founder of Progressive Asset Management, a full resource securities
broker-dealer specializing in socially responsible investing, and President of
Progressive Portfolio Services, a consulting service which utilizes top
performing social money managers who are capable of applying social screens.
Prior to joining Progressive Asset Management, Mr. Van Dyck was a financial
consultant with Dean Witter, where he specialized in socially responsible
investing. Mr. Van Dyck is President of Safe Streets Now!, a non-profit
organization which sues landlords of crack houses to make distressed
neighborhoods safe for the community. Safe Streets Now! was a recipient of a
1993 Ford Foundation Award. Prior to his career in investments, Mr. Van Dyck
worked with the Fund for Secure Energy, where he served as a consultant to
assist grassroots organizations in raising money to close nuclear power plants
such as Indian Point and Three Mile Island. Mr. Van Dyck holds a B.A. in
Political Science from Duke University.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Not Applicable
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended December 31, 1995,
certain compensation paid by the Company, including salary, bonuses and certain
other compensation, to its Chief Executive Officer and all other executive
officers whose annual compensation for the year ended December 31,1995 exceeded
$100,000 (the "Named Executive Officers").
12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- ----------------------
NUMBER OF
SECURITIES
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ------ ----- --------- ------------
<S> <C> <C> <C> <C>
Andrew M. Martin..................... $84,000 -- 37,302 --
Chairman & Chief Executive Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the Named Executive
Officers concerning the grant of options during fiscal 1995, under the Company's
1990 Incentive Stock Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES FOR PRICE EXPIRATION
NAME GRANTED 1995 YEAR $/SHARE DATE
- ---- --------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Andrew M. Martin..................... 37,302 37.22% $5.90(1) 1/16/2000
Chairman & Chief Executive Officer
(1) The exercise price on the date of grant was equal to or exceeded 110% of the
fair market value of the Common Stock of the Company on the date of grant.
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named Executive
Officers concerning the exercise of options during fiscal 1995 and unexercised
options held as of the end of fiscal 1995.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FY- FY-END ($)(1)
SHARES ACQUIRED END EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE UNEXERCISABLE UNEXERCISABLE
--------------- --------------- --------------
<S> <C> <C> <C>
Andrew M. Martin...................... -- 268,874/0 $1,177,444/$0
Chairman & Chief Executive Officer
(1) Calculated based on the initial public offering price of the Company's
Common Stock ($6.00), minus the exercise price of the option.
</TABLE>
13
DIRECTOR COMPENSATION
Directors are not paid any salary, fees or other compensation for services as a
director, except for shares and options to non-employee members of the Board of
Directors. Directors may be reimbursed for certain expenses in connection with
attendance at Board and committee meetings. During its fiscal year ended
December 31, 1994, there were no non-employee directors on the Company's Board.
In May 1995, the Company's directors expanded the board and appointed Ms. Bevis,
Ms. Monroe, Mr. Simpson and Mr. Van Dyck to its Board of Directors. Each of the
non-employee directors were issued 1,000 shares of the Company's Common Stock,
as compensation for service as a director, and each was granted an option to
purchase 10,000 shares of the Company's Common Stock at an exercise price equal
to 85% of the initial public offering price in the Company's initial public
offering. These options became fully vested on May 31, 1996 and expire if not
exercised by May 31, 1999.
1990 INCENTIVE STOCK OPTIONS PLAN
In January 1990, the Company adopted an incentive stock option plan (the
"Plan"). The purpose of the plan is to encourage ownership of Common Stock of
the Company by officers, key employees, directors, consultants and other persons
not employed by the Company. Pursuant to the Plan, the Company may grant
incentive stock options and non-qualified stock options to the Company's
employees, officers, directors and consultants. A total of 969,854 shares of
Common Stock were reserved for issuance under the Plan. The Board of Directors
is authorized to determine the employees, officers, directors and consultants to
whom options are granted and the number of shares for each option. The Board
also interprets the Plan and the options granted thereunder and is authorized to
adopt, amend or rescind the rules and regulations and make all other
determinations necessary or advisable for the administration of the Plan.
The Board has the discretion to determine the extent to which an option may be
exercised in part and the extent to which any part may or may not be exercised
prior to expiration of specified periods of time after the grant. However, no
option shall be exercisable to any extent after the expiration of ten years
(five years in the case of an incentive stock option granted to a greater-than
10% shareholder). If the optionee terminates his or her services with the
Company, the optionee must exercise the option within the earlier of the
expiration date of such option or within 30 days of termination of services for
any reason other than death, retirement or disability. In the event of death or
retirement, the incentive stock option shall terminate at the earlier of such
date of expiration or within 180 days and 90 days respectively following such
event. The exercise price of incentive stock options granted under the Plan must
be at least equal to the fair market value of the Common Stock of the Company on
the date of grant. The exercise price of incentive stock options granted to an
optionee who owns stock possessing more than 10% of the Company's Common Stock
must equal at least 110% of the fair market value of the Common Stock on the
date of grant.
As of December 31, 1995, options to purchase an aggregate of 957,519 shares were
outstanding at exercise prices per share ranging from $0.007 to $5.90, and
12,338 shares of Common Stock were available for future grants under the Plan.
The Plan may be amended at any time by the Board, although certain amendments
would require shareholder approval. The Plan will terminate in January, 2000,
unless earlier terminated when the total amount of Common Stock with respect to
which options may be granted shall have been issued upon the exercise of options
or by action of the Board, whichever shall occur first.
14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of December
31, 1995, for (i) each shareholder known by the Company to own beneficially 5%
or more of the outstanding shares of its Common Stock; (ii) each director; and
(iii) all directors and executive officers as a group. The Company believes that
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
DIRECTORS, SHARES PERCENTAGE OF
EXECUTIVE OFFICERS BENEFICIALLY COMMON SHARES
AND 5% SHAREHOLDERS: OWNED OUTSTANDING (1)(2)
-------------------- ----- ------------------
<S> <C> <C>
Ann E. Withey (3)
c/o Annie's Homegrown, Inc.
180 Second Street, Suite 202
Chelsea, MA 02150..................... 1,704,209 39.18%
Andrew Martin (4)
c/o Annie's Homegrown, Inc.
200 Gate Five Road., Suite 211
Sausalito, CA 94965................... 1,785,679 40.15%
Deborah Churchill (5).................. 185,266 4.27%
Brady Bevis (6)........................ 11,000 *
Pam Monroe (6)......................... 11,000 *
David Simpson (6)...................... 11,000 *
Tom Van Dyck (6)....................... 11,000 *
All directors and executive officers
as a group (10 persons) (7)...... 3,965,619 79.12%
* Less than 1% of total voting securities
(1) Shares of Common Stock subject to options exercisable within 60 days of
December 31, 1995, are deemed outstanding for computing the percentage of
the person or group holding such securities.
(2) Percentage of beneficial ownership is calculated on the basis of the amount
of outstanding securities at December 31, 1995 (4,178,211) plus, for each
person or group, any securities that person or group has the right to
acquire within 60 days pursuant to options or other rights.
(3) Includes 171,839 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan.
(4) Includes 268,874 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan.
(5) Includes 59,155 shares of Common Stock issuable upon exercise of certain
options granted pursuant to the Company's 1990 Incentive Stock Option Plan.
(6) Includes 10,000 shares of Common Stock issuable upon exercise of certain
options granted pursuant to receiving outside directors compensation.
(7) Includes 834,110 shares of Common Stock issuable upon exercise of certain
options granted to directors and executive officers pursuant to the
Company's 1990 Incentive Stock Option Plan.
</TABLE>
15
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andrew Martin, Chairman and Chief Executive Officer and a Director of the
Company, is also the majority shareowner and holds similar offices with Simple
Packaging Solutions, Inc. ("Simpak") and Good Idea Foods Company, Inc. ("Good
Idea"). Ann Withey , Inspirational President and Director of the Company, is
also a Director of Good Idea. Deborah Churchill, President and Director of the
Company, is also a Director of Simpak and Good Idea. Ms. Withey and Ms.
Churchill each own less than 5% of the outstanding shares of Simpak. Ms. Withey
is a 25% shareowner of Good Idea. Paul Nardone, Executive Vice President of
Sales of Annie's Homegrown, Inc., is President of Good Idea and devotes
approximately 3% of his time to the Good Idea business.
Simpak has borrowed from the Company, for which it has been charged
interest at the rate of 11%. At December 31, 1995, there was no outstanding
balance. See Note 4 of Notes to Financial Statements. All future material
affiliated transactions and loans will be made or entered into on terms that are
no less favorable to Annie's than those that can be obtained from unaffiliated
third parties; and all future material affiliated transactions and loans, and
any forgiveness of loans, must be approved by a majority of the independent
outside members of the Company's Board of Directors who do not have an interest
in the transactions.
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit Number Description
-------------- -----------
* 3.1 Certificate of incorporation, as amended
* 3.2 By-Laws, as amended
**10.1 Lease agreement with Second Street Limited Partnership
dated December 19, 1994 for Chelsea, MA office
**10.2 Lease agreement with Marin Freeholders dated
August 31, 1995 for Sausalito, CA office
**10.3 1990 Incentive Stock Option Plan
*10.41 Loan Agreement and Security Agreement with Inventory
Addendum dated June 7, 1996 with Presidential
Financial Corporation of Massachusetts
*10.42 Demand and Secured Promisary Note dated June 7, 1996
payable to Presidential Financial Corporation of
Massachusetts
*10.5 Manufacturing Agreement with Pasta USA, Inc.
dated May 17, 1995
*11 Computation of Per Share Earnings
*24.1 Power of Attorney (included on Signature Page of this report)
*27.1 Financial Data Schedule
- -------------------
* Filed herewith
** Previously filed as an Exhibit to the Company Registration statement on Form
SB-2 (R6 No. 33-93982-L.A.) and incorporated herein by reference.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the Company's fiscal
quarter ended December 31, 1995.
16
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANNIE'S HOMEGROWN, INC.
Registrant
/s/ Andrew Martin
--------------------------
Andrew Martin, Chairman
Chairman, Chief Executive Officer
September 24, 1996
Date
Each person whose signature appears below appoints Andrew M. Martin, Deborah
Churchill, Neil Raiff, or his or her attorney-in-fact, with full power of
substitution and resubstitution to sign any and all amendments to this report on
Form 10-KSB of Annie's Homegrown, Inc. and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact and agent or his or her substitute or substitutes may lawfully
do or cause to be done by virtue hereof. In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Andrew M. Martin
- ------------------------------- Chairman, Chief Executive Officer Sept 24 , 1996
Andrew M. Martin and Director (Principal Executive Officer)
/s/ Ann E. Withey
- ------------------------------- Inspirational President & Director Sept 24 , 1996
Ann E. Withey
/s/ Deborah Churchill
- ------------------------------- President & Director Sept 24 , 1996
Deborah Churchill
/s/ Neil Raiff
- ------------------------------- Chief Operating Officer & Treasurer Sept 24 , 1996
Neil Raiff (Principal Financial and Accounting
Officer)
/s/ Brady Bevis
- ------------------------------- Director Sept 24 , 1996
Brady Bevis
</TABLE>
17
SUPPLEMENTAL INFORMATION TO BE
FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE EXCHANGE
ACT BY NON-REPORTING ISSUERS
No annual report or proxy material has been sent to the Issuer's security
holders with respect to the year ended December 31, 1995. A copy of the Issuer's
Annual Report to Shareholders for the fiscal year ended December 31, 1995 and
the Issuer's Proxy Statement for the 1996 Special Meeting in Lieu of Annual
Meeting of Shareholders will be furnished to shareholders and filed with the
Securities and Exchange Commission on or about September 30, 1996.
18
ANNIE'S HOMEGROWN, INC.
Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
LETTERHEAD OF KPMG PEAT MARWICK LLP
Independent Auditors' Report
The Board of Directors
Annie's Homegrown, Inc.:
We have audited the accompanying balance sheets of Annie's Homegrown, Inc. as of
December 31, 1995 and 1994, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Annie's Homegrown, Inc. at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
[GRAPHIC OMITTED]
Boston, Massachusetts
March 15, 1996, except as to the
second paragraph of note 8, which
is as of July 31, 1996.
ANNIE'S HOMEGROWN, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------
Assets 1994 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,442 35,463
Accounts receivable:
Trade (notes 5 and 9) 221,810 204,693
Related parties (note 4) 372,126 20,753
Inventory (note 5) 205,380 405,764
Other current assets 7,052 500
----------- -----------
Total current assets 808,810 667,173
----------- -----------
Office equipment 37,835 56,622
Accumulated depreciation (14,625) (24,291)
----------- -----------
Office equipment, net 23,210 32,331
----------- -----------
Due from officer (note 4) - 75,000
Other assets 1,291 19,153
----------- -----------
Total assets $ 833,311 793,657
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Notes payable (note 5) $ 126,408 39,629
Accounts payable, trade (note 10) 318,741 591,659
Accrued expenses (note 6) 115,098 179,583
Exercised options payable (note 8) 90,000 -
Due to employees 31,948 49,714
----------- -----------
Total current liabilities 682,195 860,585
----------- -----------
Commitments (note 7)
Stockholders' equity (deficit) (note 8):
Common stock, $.001 par value. Authorized 10,000,000
shares; issued 4,013,906 and 4,178,211
shares at December 31, 1994 and 1995, respectively 4,014 4,178
Additional paid-in capital 476,966 726,518
Accumulated deficit (239,864) (690,874)
Note receivable shareholder - (1,750)
Deferred compensation - (15,000)
Treasury stock, 111,906 common shares at cost (90,000) (90,000)
----------- -----------
Total stockholders' equity (deficit) 151,116 (66,928)
----------- -----------
Total liabilities and stockholders'
equity (deficit) $ 833,311 793,657
=========== ===========
</TABLE>
See accompanying notes to financial statements.
ANNIE'S HOMEGROWN, INC.
Statements of Operations
<TABLE>
<CAPTION>
Year ended
December 31,
------------
1994 1995
---- ----
<S> <C> <C>
Net sales (note 9) $ 3,023,584 4,546,211
Cost of sales 1,788,720 2,606,381
------------- -------------
Gross profit 1,234,864 1,939,830
------------- -------------
Operating expenses:
Selling 780,914 1,355,129
General and administrative (note 4) 396,492 636,939
Slotting fees (note 2e) 39,563 312,661
Compensation of outside directors (note 8) - 45,000
------------- -------------
Total operating expenses 1,216,969 2,349,729
------------- -------------
Operating income (loss) 17,895 (409,899)
Other income (expense):
Interest expense and borrowing charges (note 5) (38,712) (49,092)
Interest and other income (note 4) 46,968 10,846
------------- -------------
Income (loss) before income tax expense 26,151 (448,145)
Income tax expense (note 3) 2,275 2,865
------------- -------------
Net income (loss) $ 23,876 (451,010)
============= =============
Primary net income (loss) per share $ .01 (.11)
============= ============
Primary weighted average common shares outstanding 3,927,142 3,986,769
============= =============
</TABLE>
See accompanying notes to financial statements.
ANNIE'S HOMEGROWN, INC.
Statement of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional Note from Deferred
------------------- paid-in Accumulated receivable compensation
Shares Amount capital deficit shareholder directors
------ ------ ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 3,662,271 $ 3,662 $ 238,948 $ (263,740) $ - $ -
Issuance of common stock 4,477 5 3,595 - - -
Common stock issued upon
debenture conversion (note 8) 288,967 289 232,111 - - -
Exercise of stock options (note 8) 58,191 58 2,312 - - -
Exercise of put option (note 8) - - - - - -
Net income - - - 23,876 - -
---------- ----- -------- ---------- --------- ----------
Balance at December 31, 1994 4,013,906 4,014 476,966 (239,864) - -
Exercise of stock options (note 8) 94,000 94 3,686 - (1,750) -
Grant of common stock to
directors (note 8) 4,000 4 23,996 - - -
Issuance of common stock upon
public offering (note 8) 66,305 66 397,764 - - -
Public offering costs (note 8) - - (211,894) - - -
Deferred compensation relating to
directors stock options (note 8) - - 36,000 - - (15,000)
Net loss - - - (451,010) - -
---------- ----- -------- ---------- --------- ----------
Balance at December 31, 1995 4,178,211 $ 4,178 $ 726,518 $ (690,874) $ (1,750) $ (15,000)
========== ===== ======== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Stockholders'
--------------------- equity
Shares Amount (deficit)
------ ------ ---------
<S> <C> <C> <C>
Balance at December 31, 1993 - $ - $(21,130)
Issuance of common stock - - 3,600
Common stock issued upon
debenture conversion (note 8) - - 232,400
Exercise of stock options (note 8) - - 2,370
Exercise of put option (note 8) 111,906 (90,000) (90,000)
Net income - - 23,876
-------- ------- ---------
Balance at December 31, 1994 111,906 (90,000) 151,116
Exercise of stock options (note 8) - - 2,030
Grant of common stock to
directors (note 8) - - 24,000
Issuance of common stock upon
public offering (note 8) - - 397,830
Public offering costs (note 8) - - (211,894)
Deferred compensation relating to
directors stock options (note 8) - - 21,000
Net loss - - (451,010)
-------- ------- --------
Balance at December 31, 1995 111,906 $(90,000) $ (66,928)
======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
ANNIE'S HOMEGROWN, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
December 31,
------------
1994 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 23,876 (451,010)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 5,512 9,666
Outside directors compensation - 45,000
Changes in:
Accounts receivable - trade (114,565) 17,117
Affiliate accounts, net (189,898) 276,373
Inventory (74,238) (200,384)
Other assets (7,843) (11,310)
Accounts payable - trade 180,332 272,918
Accrued expenses 82,098 64,485
Due to employees 14,827 17,766
----------- -----------
Net cash (used in) provided by operating activities (79,899) 40,621
----------- -----------
Cash flows from investing activities:
Purchase of office equipment (20,792) (18,787)
----------- -----------
Net cash used in investing activities (20,792) (18,787)
----------- -----------
Cash flows from financing activities:
Repayment of notes payable (2,600) (176,779)
Net proceeds from note payable 95,041 -
Issuance of common stock and exercise of stock options, net 5,970 187,966
----------- -----------
Net cash provided by financing activities 98,411 11,187
----------- -----------
Net (decrease) increase in cash and cash equivalents (2,280) 33,021
Cash and cash equivalents at beginning of period 4,722 2,442
----------- -----------
Cash and cash equivalents at end of period $ 2,442 35,463
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 16,071 4,299
=========== ===========
Cash paid for income taxes $ 2,275 2,865
=========== ===========
Supplemental disclosure of noncash financing activities are as follows:
During 1995, $24,000 and $21,000 in compensation expense was
recorded for common stock issued and stock options granted to four
outside directors, respectively.
</TABLE>
See accompanying notes to financial statements.
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
December 31, 1994 and 1995
(1) DESCRIPTION OF BUSINESS
Annie's Homegrown, Inc. (the "Company"), incorporated in 1989, sells
premium macaroni and cheese food products to the natural food and
grocery business.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three
months or less to be cash equivalents.
(b) Inventories
Inventories are valued at the lower of average cost, using the first-in,
first-out method, or market.
(c) Office Equipment
Office equipment is recorded at cost. The cost of office equipment is
depreciated using accelerated depreciation methods over the estimated
useful lives of the related assets. The estimated useful lives are
5-7 years.
(d) Income Taxes
Amounts in the financial statements related to income taxes are
calculated using the principles of the Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes." Under
Statement No. 109, prepaid and deferred taxes reflect the impact of
temporary differences between the amounts of assets and liabilities
recognized for financial reporting purposes and the amounts
recognized for tax purposes. These deferred taxes are measured by
applying currently enacted tax rates. A valuation allowance reduces
deferred tax assets when it is "more likely than not" that some
portion or all of the deferred tax assets will not be recognized.
(e) Slotting Fees
Introductory slotting fees paid as required by most retailers for the
acquisition of shelf space at supermarkets are fully expensed at the
time of new product introduction.
(f) Initial Public Offering
In anticipation of its initial public offering (IPO) of common stock,
the Company effected a recapitalization which included a
1.4920836-for-1 stock split in June 1995. The common stock
outstanding and weighted average shares outstanding for all periods
presented have been adjusted for this stock split. After giving
effect to the recapitalization, the authorized capital stock of the
Company consists of 10,000,000 shares of common stock, $.001 par
value. The financial statements reflect the increase in the number of
authorized shares of common stock for all periods presented.
(Continued)
2
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
(g) Income (Loss) Per Share
Net income (loss) per share is computed based on the weighted average
number of common shares outstanding during each period after giving
effect to the dilutive effect of stock options, which are considered
common stock equivalents. For 1995, the (loss) per share, assuming
full dilution, is considered to be the same as primary since the
effect of the common stock equivalents would be antidilutive.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock issued for consideration below the assumed IPO
price of $6.00 per share and stock options issued with exercise
prices below the IPO price during the twelve-month period preceding
the date of the initial filing of the Registration Statement have
been included in the calculation of common equivalent shares, using
the treasury stock method, as if they were outstanding for all
periods presented.
(h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(i) Fair Value of Financial Instruments
Cashand cash equivalents, accounts receivable, accounts payable, accrued
expenses and notes payable carrying amounts approximate fair value
because of the short maturity of those instruments.
(3) INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
Years ended
December 31,
------------
1994 1995
---- ----
<S> <C> <C>
Federal $ - -
State 2,275 2,865
-------- --------
$ 2,275 2,865
======== ========
</TABLE>
As of December 31, 1995, the Company had the following net operating loss
carryforwards for tax purposes:
<TABLE>
<CAPTION>
<S> <C>
Federal $ 501,983
==========
State $ 577,711
==========
</TABLE>
(Continued)
3
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
These net operating loss carryforwards are available to offset future
federal/state taxable income through 2007. The Company also has
alternative minimum tax net operating loss carryforwards of $529,790
as of December 31, 1995, which are available to reduce future federal
alternative minimum taxable income through 2007. Pursuant to Section
382 of the Internal Revenue Code, if there is a change in stock
ownership of the Company exceeding 50% during a three-year period,
the utilization of the Company's net operating loss may be limited.
The provision for income taxes differs from the amounts computed by
applying the lowest federal statutory rate (15%) to pre-tax income
(loss) due to the following:
Years ended
December 31,
------------
1994 1995
---- ----
Federal income tax expense (benefit)
at the statutory rate $3,923 (67,222)
State income taxes, net of federal benefit 1,934 2,435
Change in federal valuation allowance (4,122) 69,986
Other 540 (2,334)
--------- ----------
$ 2,275 2,865
========= ==========
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are presented below:
December 31,
------------
1994 1995
---- ----
Deferred tax assets:
Net operating loss carryforward $ 28,072 126,136
Payroll expense, due to accrual for
financial reporting purposes 24,514 39,481
---------- -----------
52,586 165,617
Valuation allowance (52,586) (165,617)
---------- -----------
- -
Deferred tax liabilities - -
---------- -----------
Net deferred tax asset $ - -
========== ===========
The total federal and state valuation allowance was $52,586 and $165,617
at December 31, 1994 and 1995, respectively. (Continued)
(Continued)
4
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
(4) RELATED PARTY TRANSACTIONS
Amounts due from related parties consist of:
December 31,
------------
1994 1995
---- ----
Due from Simple Packaging Solutions, Inc. $ 350,989 -
Due from officer - 75,000
Other related parties 21,137 20,753
---------- ---------
$ 372,126 95,753
========== =========
The balance due from Simple Packaging Solutions, Inc. earned interest at
an annual rate of 11% beginning in 1994. The balance due at December
31, 1994 included $46,652 of interest receivable. The Company
received payments totaling $275,989. The remaining balance of $75,000
was assumed by an officer of the Company. The balance due from the
officer earns interest at an annual rate of 11%.
The Company shared office space with a related party in 1994. Costs at
the facility, including rent, utilities, telephone, and employee
wages, are shared by the companies. The Company's portion of such
costs, which is included in general and administrative expenses, was
$65,075 in 1994.
The balance due from a related party at December 31, 1995 represented
costs incurred by a related party on behalf of the Company.
(5) NOTES PAYABLE
Notes payable consist of:
December 31,
------------
1994 1995
---- ----
(a) Notes payable - financial institution $ 113,908 32,129
(b) Notes payable - officer 7,500 7,500
(c) Notes payable - other 5,000 -
---------- ---------
$ 126,408 39,629
========== =========
(a) The Company has a revolving line of credit with a financial
institution in the amount of $150,000 at December 31, 1994 and 1995,
which bears interest at the prevailing prime rate plus 3% (11.5% at
December 31, 1994 and 1995). In addition, each borrowing incurs a
service fee which varies from .5% to 8% (up to 90 days) depending on
the number of days the borrowing is outstanding. The line of credit
is secured by the Company's accounts receivable and inventory and
guaranteed by an officer and certain directors of the Company.
(Continued)
5
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
The Company obtained a $10,000 unsecured line of credit with a bank
in 1994 which bears interest at the prime rate plus 8.9% (17.4% at
December 31, 1994 and 1995). There were no amounts outstanding under
this agreement at December 31, 1994 or 1995.
(b) The Company has a $7,500 demand note payable to an officer of the
Company which bears interest at 11%.
(c) The Company entered into a $5,000 demand note payable in 1994 which
bears interest at 11%. This note was repaid in February, 1995.
(6) ACCRUED EXPENSES
Accrued expenses consist of:
December 31,
------------
1994 1995
---- ----
Compensation $ 103,000 162,946
Other 12,098 16,637
----------- ----------
$ 115,098 179,583
=========== ==========
(7) LEASES
The Company leases office space under operating leases expiring through
1997. The following is a schedule of future minimum lease payments
for significant operating leases with remaining terms in excess of
one year at December 31, 1995:
Year ending December 31:
1996 $28,680
1997 11,780
---------
Total minimum lease payments $ 40,460
=========
Total rent expense on operating leases amounted to $10,701 and $24,775
for the years ended December 31, 1994 and 1995, respectively.
(8) STOCKHOLDERS' EQUITY
On August 22, 1995, the Company filed an effective registration
statement offering for sale 600,000 shares of common stock. The
offering is being made directly by the Company and will be terminated
upon the earlier of: the sale of the maximum amount, twelve months
after the date of the Registration Statement, or the date on which
the Company decides to close the offering. As of December 31, 1995,
the Company has sold 66,305 shares of common stock under the offering
for gross proceeds of $397,830. Expenses relating to the offering
totaled $211,894.
(Continued)
6
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
On July 31, 1996, the Company closed its offering. In total
approximately 256,515 shares were sold resulting in gross proceeds of
approximately $1,500,000. Expenses from the inception of the offering
totaled approximately $325,000.
On June 30, 1994, the Company issued 288,967 shares of common stock upon
the conversion of $232,400 of convertible debentures. Of the 288,967
shares issued, 115,014 shares were subject to a put option at $0.80
per share. On December 18, 1994, a holder exercised his put option
and the Company purchased 111,906 shares for $90,000 which was paid
in April 1995. The remaining put option for 3,108 shares expired on
December 31, 1994.
The Company maintains a stock option plan which permits the Company to
grant stock options to key employees and certain non-employees. The
Board of Directors administers the plan, selects individuals to whom
options will be granted, and determines the number of shares and the
exercise price of each option. All options under the plan are
exercisable upon the date of grant, expire five years from the date
of grant, and have certain transfer restrictions.
Additionally, in May 1995, the Company's directors expanded the board and
appointed 4 new outside members. Each new member was issued 1,000
shares of the Company's common stock, as compensation for service as
a director, and each was granted an option to purchase 10,000 shares
of the Company's common stock at an exercise price equal to 85% of
the public offering price. These options become vested on the first
anniversary of the date of grant and expire if not exercised within
three years after becoming vested.
A summary of changes in common stock options is as follows:
Number Exercise price
of shares per share
--------- ---------
Outstanding at December 31, 1993 1,103,283 $.007-$1.01
Options exercised (58,191) $.007-$.07
-------------
Outstanding at December 31, 1994 1,045,092 $.007-$1.01
Options granted 140,231 $5.10-$5.90
Options exercised (94,000) $ .007-$.07
Options expired/cancelled (93,804) $.007-$.07
-------------
Outstanding at December 31, 1995 997,519 $.007-$5.90
=============
(9) CONCENTRATION OF CREDIT RISK
For the year ended December 31, 1994, sales to one customer accounted for
13% of the Company's net sales and the Company's top ten customers
accounted for approximately 60% of net sales. No one customer
accounted for more than 10% of net sales and the Company's top ten
customers accounted for approximately 56% of net sales in 1995.
(Continued)
7
ANNIE'S HOMEGROWN, INC.
Notes to Financial Statements
No one customer accounted for more than 10% of accounts receivable as of
December 31, 1994. Two customers accounted for 13% and 10% of
accounts receivable as of December 31, 1995.
(10) SUPPLIER/SOURCES OF SUPPLY
One vendor accounted for 80% and 60% of accounts payable as of December
31, 1994 and 1995, respectively.
The Company currently buys all of its macaroni and cheese products from a
sole supplier, under an agreement that requires the Company to
purchase a minimum of $25,000 cases a month. Management believes that
other suppliers could provide similar product on comparable terms. A
change in suppliers, however, could cause a delay in the flow of
product and a possible loss of sales, which could affect operating
results adversely.
(11) JOINT VENTURE
In May 1995, the Company and the sole supplier of its macaroni and
cheese products entered into a joint and equal venture to produce and
market a line of premium organic pasta products. The Company is
responsible for the marketing and sales of products, and the supplier
is responsible for the manufacture, packaging and distribution of the
products.
The Company and the supplier each own 50% of the issued and outstanding
shares of the corporation formed to carry out the joint venture. The
Company purchased its shares by paying $100 and signing a promissory
note for $49,900, which accrues interest at 10% per annum and was due
on August 17, 1995. The supplier paid for its shares of stock by
transferring all the plates, dies and trademarks relating to the
production, packaging and marketing of the products.
As of December 31, 1995, the Company has written off its $100 investment
and has not recorded the $49,900 promissory note since the parties
have verbally agreed to discontinue the venture with no further
liability to the Company.
(12) NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued SFAS No 123, "Accounting for Stock-Based Compensation," which
established financial accounting and reporting standards for
stock-based employee compensation plans. Companies are encouraged,
rather than required, to adopt a new method that accounts for stock
compensation awards based on their fair value using an option pricing
model. Companies that do not adopt this new method will be required
to make pro forma footnote disclosures of net income as if the fair
value-based method of accounting required by SFAS No. 123 has been
applied. The Company is required to adopt SFAS No. 123 beginning in
fiscal year 1996. Adoption of this pronouncement is not expected to
have a material impact on the Company's financial position or results
of operations because the Company intends to make pro forma footnote
disclosures instead of adopting the new accounting method.
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF SECRETARY OF STATE
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF ANNIE'S INC. FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF
JANUARY, A.D. 1989, AT 10 O'CLOCK A.M.
/s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 12036898
DATE: 01/23/1989
CERTIFICATE OF INCORPORATION
OF
ANNIE'S INC.
* * * * *
1 The name of the corporation is Annie's Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is:
To create, design, license, manufacture and market food and snack
products and to carry on any other lawful business permitted by law to a
corporation whether or not related to those purposes initially set forth above.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
To manufacture, purchase or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal
in and deal with goods, wares and merchandise and personal property of every
class and description.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights,
licenses and privileges, inventions, improvements and processes, copyrights,
trademarks and trade names, relating to or useful in connection with any
business of this corporation.
To acquire by purchase, subscription or otherwise, and to receive,
hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or
otherwise dispose of or deal in and with any of the shares of the capital stock,
or any voting trust certificates in respect of the shares of capital stock,
script, warrants, rights, bonds, debentures, notes, trust receipts, and other
securities, obligation, choses in action and evidence of indebtedness or
interest issued or crated by any corporations, joint stock companies,
syndicates, associations, firms, trusts or persons, public or private, or by the
government of the United States of America, or by any foreign government, or by
any state, territory, province, municipality or other political subdivision or
by any governmental agency, and as owner thereof to possess and exercise all the
rights, powers and privileges of ownership, including the right to execute
consents and vote thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement and enhancement in value
thereof.
To borrow or raise money for any of the purposes of the corporation
and, from time to time without limit as to amount, to draw, make, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof and of
the interest thereon by mortgage upon or pledge, conveyance or assignment in
trust of the whole or any part of the property of the cooperation, whether at
the time owned or thereafter acquired, and to sell, pledge or otherwise dispose
of such bonds or other obligations of the corporation for its corporate
purposes.
To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and
otherwise deal in and with real or personal property, or any interest therein,
wherever situated, and to sell, convey, lease, exchange, transfer or otherwise
dispose of, or mortgage or pledge, all or any of the corporation's property and
assets, or any interest therein, wherever situated.
In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of Delaware or by any other law of
Delaware or by this Certificate of Incorporation together with any powers
incidental thereof incorporation together with any powers incidental thereto, so
far as such powers and privileges are necessary or convenient to the conduct,
promotion of attainment of the business or purposes of the corporation.
The business and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in nowise limited or restricted by
references to, or inference from, the terms of any other business and purposes
specified in each of the foregoing clauses of this article shall be regarded as
independent business and purposes.
4. The total number of shares of stock which the corporations hall have
authority to issue is Two Hundred Thousand (200,000); all of such shares shall
be without par value.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
The number of the authorized shares of any class or classes of stock
may be increased or decreased by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote.
5A. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
D.A. Hampton Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
J.A. Grodzicki Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
M.A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
5B. The name and mailing address of each person, who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified, is as follows:
NAME MAILING ADDRESS
---- ---------------
Andrew McG. Martin 98 State Rd.
P.O. Box 128
Hampton, CT 06247
Ann Withey 98 State Rd.
P.O. Box 128
Hampton, CT 06247
Norman St. Germaine 98 State Rd.
P.O. Box 128
Hampton, CT 06247
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. T he books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
9. The corporation shall indemnify each person who is or was a
director or officer of this corporation against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement to the maximum extent
permitted form time to time under the General Corporation law of the State of
Delaware. Such indemnification rights arising under any by-law, agreement, vote
of directors or stockholders or otherwise and shall inure to the benefit of the
heirs and legal representatives of such person.
10. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purposes of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is our act and deed and the facts herein
stated are true, and accordingly have hereunto set our hands this 23rd day of
January, 1989
D.A. Hampton
----------------------------------
D.A. Hampton
J.A. Grodzicki
----------------------------------
J.A. Grodzicki
M.A. Brzoska
----------------------------------
M.A. Brzoska
STATE OF DELAWARE
OFFICE OF SECRETARY OF STATE
-----------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF ANNIE'S INC. FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF MAY,
A.D. 1989, AT 10 O'CLOCK A.M.
/s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Annie's Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify
that:
FIRST: That the Board of Directors of Annie's Inc., by the unanimous
written consent of its members, filed with the minutes of the board, duly
adopted resolutions setting forth a proposed Amendment to the Certificate of
Incorporation of said corporation, declaring said Amendment to be advisable and
calling a meeting of the stockholders of said corporation for consideration
thereof. The resolution setting forth the proposed Amendment is as follows:
RESOLVED: That the Certificate of Incorporation of this
corporation be amended by changing the FOURTH Article
thereof so that, as amended, said Article shall be and
read as follows:
"4. The total number of shares of stock which the
corporation shall have authority to issue is Two
Hundred Fifty Thousand (250,000); all of such shares
shall be without par value."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation was duly
called and held upon written waiver of notice signed by all stockholders at
which meeting the necessary number of shares as required by statute were voted
in favor of the Amendment.
THIRD: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Annie's Inc. has caused this certificate to be
signed by Andrew McG. Martin, its Chairman of the Board of Directors and
attested by Ann E. Withey, its Secretary, this 11th day of May, 1989.
ATTEST:
By: /s/ Ann E. Withey By: /s/ Andrew McG. Martin
-------------------- -------------------------
Name: Ann E. Withey Name: Andrew McG. Martin
------------------ -----------------------
Title: Secretary Title: Chairman of the Board of Directors
----------------- -----------------------------------
STATE OF DELAWARE
OFFICE OF SECRETARY OF STATE
----------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF ANNIE'S INC. FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF
OCTOBER, A.D., 1991, AT 9 O'CLOCK A.M.
*********************
/s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ANNIE'S INC.
ANNIE'S INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
VOTED: that the Certificate of Incorporation of this
Corporation be amended by striking Article 1 in its
entirety and replacing it with the following:
The name of the Corporation is "Annie's
Homegrown Inc."
VOTED: that the Certificate of Incorporation of this
Corporation be amended by striking Article 4 in its
entirety and replacing it with the following:
The total number of shares of stock which
the Corporation shall have authority to
issue is three million (3,000,000) shares of
common stock, $.001 par value per share.
SECOND: That, at a special meeting of stockholders, the stockholders
approved said amendment in accordance with the provisions of Section 141(a) of
the Delaware General Corporation Law.
THIRD: That the aforesaid amendment was fully adopted in accordance
with the applicable provisions of Sections 242 and 228 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, said ANNIE'S INC. has caused this Certificate to be
signed by its President and attested by its Assistant Secretary, this 18th day
of October, 1991.
ANNIE'S INC.
BY: /s/ Andrew McG. Martin
--------------------------
Andrew McG. Martin,
President
ATTEST:
BY: /s/ Ronald L. Cheney
------------------------
Ronald L. Cheney,
Assistant Secretary
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE. DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ANNIE'S HOMEGROWN INC." FILED IN THIS OFFICE ON THE SECOND DAY OF
MARCH A.D. 1993, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
******************
/s/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ANNIE'S HOMEGROWN INC.
ANNIE'S HOMEGROWN INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
VOTED: that the Certificate of Incorporation of this Corporation be
amended by striking Article 4 in its entirety and replacing
it with the following:
The total number of shares of stock with the
Corporation shall have authority to issue is
four million (4,000,000) shares of common
stock, $.001 par value per share.
SECOND: That, in lieu of a meeting and vote of stockholders,
stockholders holding outstanding stock having not less than the minimum number
of votes necessary, a majority, to amend the Certificate of Incorporation, have
given their written consent to said amendment in accordance with the provision
of Section 228 of the Delaware General Corporation Law.
THIRD: That the aforesaid amendment was fully adopted in accordance
with the applicable provisions of Sections 242 and 228 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, said ANNIE'S HOMEGROWN INC. has caused this
Certificate to be signed by its President and attested by its Assistant
Secretary, this 25th day of January, 1993.
ANNIE'S HOMEGROWN INC.
/s/ Deborah Churchill
------------------------------
By: Deborah Churchill, President
ATTEST:
/s/ Ronald L. Cheney
-------------------------------------
By: Ronald L. Cheney, Assistant Secretary
State of Delaware
Office of the Secretary of State
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "ANNIE'S HOMEGROWN INC.", FILED IN THIS OFFICE ON THE TWENTY-EIGHTH
DAY OF JUNE, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
EXHIBIT 3.2 /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2185203 8100 AUTHENTICATION: 7556051
950144726 DATE: 06-28-95
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ANNIE'S HOMEGROWN INC.
ANNIE'S HOMEGROWN INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
VOTED: that the Certificate of Incorporation of this Corporation be
amended by striking Article 4 in its entirety and replacing
it with the following:
The total number of shares of stock with the Corporation
shall have authority to issue is four million
(10,000,000) shares of common stock, $.001 par value per
share.
SECOND: That, in lieu of a meeting and vote of stockholders,
stockholders holding outstanding stock having not less than the minimum number
of votes necessary, a majority, to amend the Certificate of Incorporation, have
given their written consent to said amendment in accordance with the provision
of Section 228 of the Delaware General Corporation Law.
THIRD: That the aforesaid amendment was fully adopted in accordance
with the applicable provisions of Sections 242 and 228 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, said ANNIE'S HOMEGROWN INC. has caused this
Certificate to be signed by its President and attested by its Assistant
Secretary, this 21st day of June, 1995.
ANNIE'S HOMEGROWN INC.
/s/ Deborah Churchill
---------------------------------
By: Deborah Churchill, President
ATTEST:
/s/ Ronald L. Cheney
------------------------------------------
By: Ronald L. Cheney, Assistant Secretary
CERTIFICATE OF CORPORATE SECRETARY
Celinda Shannon certifies that she is the corporate secretary of
Annie's Homegrown, Inc. and that the following is a true copy of a resolution
duly adopted by the board of directors of Annie's Homegrown, Inc. at its meeting
of July 17, 1995:
Resolved, that Article II, Section 5 of the Bylaws of this corporation
be and hereby is, amended by striking from line seven of such section the words
"a majority" and inserting therein the words "not less than 10%."
Sausalito, California /s/ Celinda Shannon
-------------------------
July 24, 1995 Celinda Shannon
Exhibit 3.25
ANNIE'S HOMEGROWN INC.
BOARD OF DIRECTORS
ACTION BY WRITTEN CONSENT
JULY 17, 1995
The undersigned, being all of the Directors of ANNIE'S HOMEGROWN, INC.
(the "Corporation"), do hereby take the following votes, actions and consents to
the adoption of the following votes, pursuant tot section 141(f) of the Delaware
General Corporation Law, such actions and votes to have the same force and
effect as actions and votes duly taken and adopted at a meeting of the Board of
Directors of the Corporation, duly called and held on the date written above, at
which a quorum was present and acting throughout:
The Board, having considered (i) the comments of the
Securities Regulation Division of the Department of Corporations of the
State of California in connection with its consideration of the
Company's Registration Statement - Form SB-2 requesting the Company to
amend its By-Laws to provide that the holders of at least 10% of the
outstanding shares entitled to vote at special meetings have the
authority to call such meetings; (ii) having been informed that under
the Articles of Incorporation, paragraph 7, the Board is expressly
authorized: "To make, alter or repeal the by-laws of the corporation;"
and (iii) acting pursuant to Article VIII, Section 1 of the By-Laws
which also authorizes the Board to amend the by-laws:
VOTED: that Article II - MEETING OF STOCKHOLDERS -
Section 5 be, and hereby is amended by striking from line
seven of such section the words "a majority" and inserting
therein the words "not less than 10%."
The undersigned direct that their written action take in effect
immediately and that it be filed with the minutes of the meetings of the Board
of Directors of the Corporation.
- ----------------------------- ---------------------------------------
Deborah Churchill Pamela Monroe
- ----------------------------- ---------------------------------------
Ann Withey David Simpson
- ----------------------------- ---------------------------------------
Andrew Martin Thomas Van Dyck
- -----------------------------
Brady Bevis
a period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if no so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special meeting of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning NOT LESS THAN 10%
in amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than Ten (10) nor more than Sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Amended by Consent of Board of Directors - July 17, 1995
371EDF482/1.266162-1
EXHIBIT 3.2
Annie's Inc
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Hampton, State of Connecticut, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held. at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1989, shall be held on the 2nd Tuesday of March if not a legal holiday, and if a
legal holiday, then on the
next secular day following, at 10:00 A. M., or at such other date and time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a board
of directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than Ten (10) nor more than Sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than Ten (10) nor more than Sixty (10) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, presenting person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may, be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than Three (3) nor more than Seven (7). The first board
shall consist of Three (3) directors. Thereafter, within the limits above
specified, the number of directors shall be determined by resolution of the
board of directors or by the stockholders at the annual meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though lest. than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase) , the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. in the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on Two (2) days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action .required or permitted to be taken at
any meeting of the board. of directors or of, any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and. may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section. 14. Unless otherwise restricted by the certificate of
incorporation or by-law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person,, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary .and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, (or in .the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall have custody of the corporate seal
of the corporation and he, or an assistant secretary, shall have authority to
affix the seal to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such assistant secretary. The
board of directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and . the board of directors,
at its regular meetings, or when the board of directors so requires, an account
of all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14 The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 2. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as' a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 3. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books. Upon receipt of proper transfer
instructions from the registered owner of uncertificated shares such
uncertificated shares shall be cancelled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
corporation.
FIXING RECORD DATE
Section 4. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of. any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 5. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or. persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be December 31.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 7. The corporation shall, to the extent legally permissible,
indemnify each of its directors and officers including persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees, reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a director or officer, except with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation; provided, however, that as to any matter disposed
of by a compromise payment by such director or officer, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless such compromise shall be approved as in the
best interest of the corporation, after notice that it involves such
indemnification: (a) by a disinterested majority of the directors then in
office; or (b) by the holders of a majority of the outstanding stock at the time
entitled to vote for directors, voting as a single class, exclusive of any stock
owned by an interested director or officer. Expenses, including counsel fees,
reasonably incurred by any director or officer in connection with. the defense
or disposition of any such action, suit or other proceeding may be paid from
time to time by the corporation in advance of the final disposition thereof upon
receipt of an undertaking by such director or officer to repay the amounts so
paid to the corporation if it is ultimately determined that indemnification for
such expenses is not authorized under this section. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
any director or officer may be entitled. As used in this Section, the terms
"director" and "officer" include their respective heirs, executors and
administrators, and an "interested" director or officer is one against whom in
such capacity the proceedings in question or another proceeding on the same or
similar grounds is then pending. Nothing contained in this section shall affect
any rights to indemnification to which corporate personnel other than directors
and officers may be entitled by contract or otherwise under law.
ARTICLE VIII
AMENDMENTS
Section l. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by laws is conferred upon the board of directors by the
certificate of incorporation shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. 371EDF482/1.266195-1
EXHIBIT 10.41
LOAN AGREEMENT AND SECURITY AGREEMENT
Rockland, Massachusetts
Annie's Homegrown, Inc. f/k/a Annie's, Inc.
180 Second Street, Chelsea, Suffolk County, Massachusetts
The undersigned debtor (hereinafter referred to as "Borrower"), for good and
valuable consideration, and to induce Presidential Financial Corporation of
Massachusetts (hereinafter referred to as "Lender") to accept this agreement and
to make the loans and advances described hereunder, hereby agrees as follows:
1. Request for Loan. From time to time the Borrower may request, and
the Lender in its sole discretion may loan the Borrower up to seventy-seven and
four tenths Percent (77.4 %) of the amount of Approved Receivables (as
hereinafter defined) submitted by Borrower to Lender, provided, however, that
the total principal amount of such loans and advances to Borrower shall not
exceed Borrower's maximum line of credit extended from time to time by the
Lender and determined in Lender's sole discretion. All loans and advances made
by Lender hereunder shall be evidenced by a demand promissory note (the "Note")
executed by Borrower. Interest and service charges on such loans shall be
charged by Lender and paid by Borrower at such rates and at such times as are
provided in the Note or as may be agreed upon by the parties. "Approved
Receivables" as used herein shall mean only such accounts, contract rights,
chattel paper, instruments, drafts, or general intangibles as from time to time
shall be acceptable to Lender, in its sole judgment and discretion, in terms of
quality and current status.
2. Security Interest. To secure the performance by Borrower of all of
its obligations hereunder, and to secure all amounts due under the Note,
including any renewal or extension thereof, as well as payment of any and all
indebtedness which may now or hereafter be owing by Borrower to Lender, its
successors and assigns, however and whenever credited, arising or evidenced,
whether alone or together with another or others, whether direct, indirect, or
by way of assignment, whether joint or several, absolute or contingent, due or
to become due, and whether as principal, maker, endorser, surety, guarantor,
mortgagee or otherwise, or which the Lender may now or hereafter have, own or
hold (all of said debts, obligations and liabilities are herein collectively
called the "Liabilities") and whether such Liabilities are from time to time
reduced and thereafter increased or entirely extinguished and thereafter
reincurred, Borrower hereby grants to Lender a present and continuing lien upon,
and a security interest in all of Borrower's accounts, contract rights, chattel
paper, instruments, drafts and general intangibles, whether now existing or
hereafter arising or acquired (herein referred to as the "Receivables"), and in
any other property of any nature whatsoever of Borrower now or hereafter in the
possession of, assigned to or hypothecated to the Lender for any purpose,
including but not limited to balances, credits, items and monies of Borrower now
or hereafter with Lender and all dividends and distributions on or rights in
connection with any such property and all rights of Borrower earned or to be
earned under contracts to sell goods or render services. All of such
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property and Receivables are hereafter referred to as the "Collateral," and
shall also include all proceeds thereof.
3. Account Collection. The Lender may, at its option and at Borrower's
expense, effect the cash collection of the Receivables; however, until receiving
notice from the Lender to the contrary, the Borrower will, at its own expense,
endeavor to collect all amounts due under the Receivables, including the taking
of such action with respect to such collection including, but not limited to,
litigation, as the Lender may reasonably request or, in the absence of such
request, as Borrower may deem necessary or advisable. Borrower may in the
ordinary course of business, grant to any party obligated on Receivables, any
rebate or adjustment to which such party may be lawfully entitled, and, may
accept, in connection therewith, the return of goods, the sale or lease of which
have given rise to such Receivables. Borrower shall promptly notify Lender of
and shall settle all customer disputes; however, if Lender elects, it shall have
the right at all times to settle, compromise, adjust or litigate all customer
disputes directly with the customer or other complainant upon such terms and
conditions as Lender deems advisable including but not limited to the right to
surrender, release or exchange all or any part of any Receivable owed by a
customer to Borrower, and to compromise or extend or renew for any period any
such Receivable, all without incurring liability to Borrower for its performance
of any such acts and Lender hereby shall have the right to stop goods in transit
or to replevy or to reclaim such goods. All returned, replevied and reclaimed
goods (unless released by Lender) coming into Borrower's possession shall be
held by Borrower in trust for Lender. Borrower shall notify Lender promptly of
all such returned goods and shall promptly pay to Lender an amount equal to the
gross amount of the unpaid Receivables arising from the initial sale of such
goods.
If any receivable is not paid within ninety-one days from the date of
the Lender's advance with respect thereto, or if any customer raises any claim
of non-conformity of goods, total or partial failure of delivery, setoff,
counterclaim, or breach of warranty or any other claim inconsistent with
Borrower's warranties as made below, Borrower will, upon demand, pay Lender an
amount equal to the gross amount of the Receivable so affected or unpaid,
together with any damages or loss sustained by Lender and any accrued but unpaid
interest, fees, or other charges due Lender, however, such payment may not be
deemed a reassignment of such receivable nor of the goods whose sale gave rise
to such receivable until and unless Lender executes a reassignment. Lender may,
at any time and from time to time, notify any parties obligated on any of the
Receivables to make payment to Lender of any amount due or to become due
thereunder, and enforce collection of any of the Receivables by suit or
otherwise, as hereinbefore provided. Upon request of Lender, Borrower will, at
its own expense, notify any parties obligated on any of the Receivables to make
payment to the Lender of any amounts due or to become due thereunder.
Borrower hereby appoints and constitutes Lender as its attorney-in-fact
to receive, open, and dispose of all mail addressed to Borrower pertaining to
any of the Collateral; to notify the postal authorities to change the address
and delivery of mail addressed to Borrower to such address as Lender may
designate; to endorse Borrower's name upon any notes, acceptances, checks,
drafts, money orders and other evidences of payment of collateral that may come
into Lender's possession and to deposit or otherwise collect the same; to sign
Borrower's name on
-3-
any bill of lading relating to any Collateral, on drafts against customers,
listings of Receivables, and notices to customers; to prepare and mail invoices
to Borrower's customers to send verification of accounts to customers; to
execute in Borrower's name any affidavits and notices with regard to any and all
lien rights, and to do all other acts and things necessary to carry out this
Agreement or to deal with the Collateral or proceeds thereof in its own name or
in the name of the Borrower. All acts of said attorney-in-fact are hereby
ratified. This power, being coupled with an interest, is irrevocable while
Borrower is indebted to Lender.
4. Remittance by Borrower. Unless the Lender shall otherwise consent in
writing, Borrower will forthwith upon receipt, transfer and delivery to Lender
in the form received, all cash, checks, chattel paper, drafts, items or other
instruments for the payment of money (properly endorsed where required, so that
such items may be collected by Lender) which may be received by Borrower at any
time in full or partial payment or otherwise as proceeds of any Collateral.
Unless Lender shall otherwise consent in writing, any such items which may be
thus received by Borrower shall not be commingled with any other of Borrower's
funds or property, but will be held separate and apart from its own funds or
property and upon express trust for the Lender until delivery is made to Lender.
Borrower shall comply with the terms and conditions of any consent given by
Lender pursuant to the provisions of this paragraph. Checks, drafts and any
other non-cash instrument for the payment of money shall be credited to the Note
on day of receipt by Lender, if a business day, or if not a business day, on the
first business day following receipt. All such collections shall be applied to
the Borrower's obligations under the Note and hereunder in such order of
application as the Lender may elect until all of the Liabilities are paid in
full. The excess of amounts actually collected by the Lender after all
Liabilities are paid in full shall be paid to the Borrower. Periodically, but in
no event less frequently than monthly, Lender shall deliver to Borrower a
statement of account and such statement shall be binding and conclusive upon
Borrower unless Borrower notifies Lender to the contrary within ten (10) days
after the date each statement is rendered.
5. Warranties of Borrower. Borrower hereby represents and warrants to
Lender that the Collateral is and will be free and clear of any and all liens,
security interests and encumbrances; that Borrower has and will have the right
to convey the Collateral as security for the Liabilities, free and clear of any
and all liens, security interests and encumbrances; that Borrower will keep the
Collateral free from any liens, encumbrances or security interests whatsoever,
other than the security interest hereunder, that Borrower will promptly pay or
discharge all taxes assessed against the Collateral and all liens which may
attach thereto; that any and all information set forth in any writing heretofore
or hereafter delivered to Lender by Borrower pertaining to the Collateral or
Liabilities is and will be true and correct as of the date thereof; that the
Receivables will be, at the time of their creation, bona fide and existing
obligations of Borrower's customers arising out of the sale of goods and/or
rendition of services by Borrower and are owned by and owed to Borrower without
defense, offset, or counterclaim; that Borrower is solvent; that with regard to
each Receivable as its arises Borrower will have made delivery of the goods or
will have rendered the services ordered, the customer will have accepted the
goods and/or services, no customer dispute will exist in any respect, including
without limitation, disputes as to price, terms, warranties, quality or
quantity, and claims of setoff, release from liability or defense based upon any
act of God or a public enemy or war or
-4-
because of the requirements of law or of rules, orders or regulations having the
force of law; that Borrower will have preserved and will continue to preserve
any liens and any rights to liens available by virtue of sales; that Borrower's
inventory is not subject to any security interest, lien or encumbrance; if a
corporation, that Borrower is duly organized and existing under the laws of the
State of its incorporation, and is duly qualified and in good standing in every
other State in which it is doing business as a corporation; that the execution,
delivery and performance hereof are within Borrower's corporate powers, have
been duly authorized, are not in contravention of law or the terms of Borrower's
charter, bylaws or other incorporation papers, or of any indenture, agreement or
undertaking to which Borrower is a party or by which it is bound; that without
prior written notice to Lender, Borrower will not obtain any loans, advances or
other financial accommodations or arrangements from any party other than Lender
and will not encumber any of its assets; that without prior written consent of
Lender, Borrower will not reorganize, merge or consolidate, or issue or sell or
redeem any of its common stock, or permit the transfer whether by operation of
law or otherwise, by the present shareholders of Borrower to any other person or
entity any or all of the common stock of Borrower outstanding or in treasury as
of the date hereof; that there is no pending order, notice, claim, litigation,
proceedings or investigation against or affecting the Borrower whether or not
covered by insurance, that would materially and adversely affect Borrower's
operations, financial condition, property or business; that Borrower will not
sell, transfer, lease or otherwise dispose of all or (except in the ordinary
course of business) any material part of its assets; that no account arises out
of a contract with, or order from, an account debtor that, by its terms, forbids
or makes the assignment of that account to the Lender void or unenforceable;
that the representations and warranties made hereunder by Borrower are true on
the date hereof and will be true on the date of each loan advance by Lender
hereunder, that Borrower's address as shown above is the location of Borrower's
principal place of business, that such place of business is Borrower's only
place of business, and that Borrower has not maintained any other place of
business or principal place of business or corporate or trade name during the
four (4) years immediately preceding the date of the execution of this
agreement, unless having notified Lender in writing of all previous addresses
and names;
6. Duties and Further Assurances of Borrower. Borrower covenants
and agrees that, so long as any of the Liabilities remain outstanding and
unpaid, it shall:
(a) Financing Statements - Execute upon request of Lender such
financing statements and other documents and pay the cost of
filing or recording the same, and do such other acts and
things as the Lender may from time to time request to
establish and maintain a valid security interest of Lender in
the Collateral.
(b) Inspection - Permit the Lender, its agents and employees, from
time to time, to inspect, audit and make copies of and extract
from all records and other papers in the possession of
Borrower, including but not limited to those pertaining to the
Collateral and Borrower's debtors, and upon request of Lender,
all such records and papers, including copies of customer
invoices and evidence of shipment and such other documents and
proof of delivery/rendition as Lender may at any time require.
-5-
(c) Financial Statements - Furnish to Lender on or before the 45th
day after the end of each month, financial statements in form
and substance satisfactory to Lender and certified by an
appropriate officer or representative of Borrower, upon
Borrower's Failure to provide the aforementioned financial
statements, Lender may request, and Borrower shall furnish to
Lender annually on or before the sixtieth (60th) day after the
end of Borrower's fiscal year, a financial statement in form
and substance satisfactory to Lender and reviewed by a
certified public accountant acceptable to Lender;
(d) Records Retention - Keep at its address shown herein its
records concerning the Collateral, which records shall be of
such character as will enable the Lender to determine at any
time the status of the Collateral;
(e) Information - Furnish such information and document concerning
Borrower, the Collateral and Borrower's debtors as Lender may
from time to time request;
(f) Borrower shall keep the Collateral fully insured against fire,
theft, and other casualty with loss payable to Lender, and
shall pay all premiums promptly when the same become due and
shall pay all taxes and other charges against said Collateral
promptly when the same become due. Should the undersigned fail
to pay any of said premiums or taxes or other charges, or
should the Collateral become encumbered, Lender may pay the
same and add them to the Liabilities hereby secured. Lender is
authorized to receive the proceeds of any insurance loss at
the option of Lender shall apply such proceeds toward either
the repair or replacement of said Collateral or the payment of
the Liabilities secured hereby.
(g) Closing Costs - Borrower will pay all costs of closing the
Loan Agreement and Security Agreement and will reimburse
Lender during the period of financing for out-of-pocket or
advanced expenses including but not limited to long distance
phone calls and travel.
7. Defaults. If Borrower fails to pay when due any amount payable under
any of the Liabilities; or if any assigned Receivable is not paid in full within
91 days from the date Lender had made an advance with respect thereto; or if
Borrower or any guarantor of Borrower's obligations hereunder fails to perform
or breaches any agreement or undertaking herein or is in default under any
writing relating to any of the Liabilities, Collateral or any other agreement
between Lender or Borrower; or if any guarantor of the Liabilities terminates or
attempts to terminate such guaranty, or if the Collateral declines in value or
for any reason becomes insufficient in Lender's sole and exclusive judgment to
secure the Liabilities an Borrower, after demand, fails or refuses to substitute
and/or made additions to Collateral satisfactory to Lender; of if any statement,
representation or warranty made or furnished to Lender by or in behalf of
Borrower with respect to Liabilities or Collateral be untrue or incomplete in
any material respect as to the date made or if Borrower becomes in solvent or
makes an assignment for the benefit of creditors; or if any proceeding be
instituted by or against Borrower alleging that it is insolvent or makes an
assignment for the benefit of creditors; or if any proceeding be instituted by
or against
-6-
Borrower alleging that it is insolvent or unable to pay debts as they mature; or
if any Receiver be appointed for Borrower; or if any litigation against Borrower
that might materially and adversely affect its operations, financial condition,
property or business, or if a creditor of the Borrower shall obtain or attempt
to obtain possession of the Collateral by any means; or if any other
circumstance or event occurs which shall cause Lender to deem itself insecure,
then Borrower shall be in default hereunder.
8. Rights of Lender on Default. In the event of a default hereunder, at
the option of the Lender, the Borrower's rights under this Agreement shall
terminate without prejudice; to Lender's rights hereunder, and, without notice
to Borrower of any kind, and any or all of the Liabilities shall be, at the
option of Lender and without notice of any kind be immediately due and payable,
and Lender shall have in addition to all other rights and remedies which Lender
may have under law, the following rights and remedies all of which may be
exercised with or without further notice to Borrower: to foreclose the liens and
security interests created under this Agreement or under any other agreements
relating to the Collateral by any available judicial or non-judicial procedure;
to enter any premises where Collateral may be located for the purpose of taking
possession or removing the same; to sell, assign, lease or otherwise dispose of
the Collateral, or any part thereof, either at public or private sale or at any
broker's board, in lots or in bulk for cash, on credit, or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Lender, all at Lender's sole option and as Lender in its sole
discretion may deem advisable, and Lender may bid upon or become purchaser at
any such sale, if public, free from any right of redemption, which is hereby
expressly waived by Borrower, and Lender shall have the right at its option to
apply or be credited with the amount of all or any part of the Liabilities owing
to Lender against the purchase price bid by the Lender at any such sale. the net
cash proceeds resulting from the collection, liquidations, sale, lease or other
disposition of the Collateral shall be applied first to the expenses (including
all attorney's frees) of retaking, h holding, storing, processing and
preparation for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Liabilities, with application as to particular
Liabilities or against principal or interest to be in Lender's sole and absolute
discretion. The Borrower shall be liable to Lender and shall pay to Lender on
demand any deficiency which may remain after such sale, disposition, collection
or liquidation of the Collateral and Lender in turn agrees to remit to Borrower
any surplus remaining after Liabilities have been paid in full. If any of the
Collateral shall require repairing, maintenance, preparation, or the like, or is
in process or other unfinished state, Lender shall have the right, but shall not
be obligated, to do such repairing, maintenance, preparation, processing or
completion of manufacturing for the purpose of putting the same in such saleable
form as Lender shall deem appropriate, but Lender shall have the right to sell
or dispose of such Collateral without such processing. The Borrower will, at
Lender's request, assemble all the Collateral and make it available to Lender at
places which Lender may select, whether at Borrower's premises or elsewhere, and
will make available to Lender all premises and facilities of the Borrower for
the purpose of Lender's taking possession of the Collateral or of removing or
putting the Collateral in saleable form. To facilitate the exercise by Lender of
the rights and remedies set forth in this paragraph, Borrower hereby constitutes
Lender, or its agents, or any other person whom Lender may designate, as
attorney-in-fact for Borrower, at Borrower's own cost and expense, to exercise
all or any of the following powers, which being coupled with an interest shall
be irrevocable, shall continue until all Liabilities have been paid in full and
shall
-7-
be in addition to any other rights and remedies that Lender any have (i) to
remove from any premises where the same may be located, any and all documents,
instruments, files, and records, and any receptacles and cabinets containing the
same, relating to Collateral, and Lender may at Borrower's cost and expense, use
such of personnel, supplies and space of Borrower at its place of business as
may be necessary to properly administer and control the Collateral or the
handling of collections and realizations thereon; and (ii) to take or bring in
Lender's name or in the name of the Borrower all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
to realize upon the Collateral. No delay or failure on the part of Lender in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof, or the exercise of any other right or remedy. the
Lender shall be under no duty to exercise any or all of the rights and remedies
given by this Agreement and no party to this Agreement shall be discharged from
his or its obligations or undertakings thereunder (a) should the Lender release
or agree not to sue any person against whom the party has a right or recourse or
(b) should the Lender agree to suspend the right to enforce the Note given to
Lender by Borrower or Lender's interest in the Collateral against such persons
or otherwise discharge such persons.
9. Business Use. Borrower represents and warrants that Lender's
loan or loans to Borrower will be used for nonconsumer purposes and not for
personal, family or household purposes.
10. (a) Applicable Law. The substantive Laws of the State of
Massachusetts shall govern the construction of this Agreement and the rights and
remedies of the parties hereto.
(b) Binding Effect, Assignment and Entire Agreement. This
Agreement shall insure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties hereto. The Borrower
has no right to assign any of its rights or obligations hereunder without prior
written consent of the Lender. This Agreement, and the documents executed and
delivered pursuant hereto, constitute the entire agreement between the parties,
and may be amended only by a writing signed on behalf of the party sought to be
charged.
(c) Severability. If any provision of this Agreement
shall be held invalid under any applicable Laws, such invalidity shall not
affect any other provision of this Agreement that can be given effect without
the invalid provision, and to this end, the provisions hereof are severable.
(d) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute but one and the same instrument.
(e) Seal. This Agreement is intended to take effect as an
instrument under seal.
The effective date of this Agreement shall be June 7, 1996.
-8-
Annie's Homegrown, Inc. f/k/a Annie's Inc.
------------------------------------------
(Name of Company)
ATTEST:
By: /s/ , CFO
- ---------------------------------- ---------------------------------------
(Corporate Seal)
ACCEPTED:
Presidential Financial Corporation of
Massachusetts
By: /s/ , EVP
---------------------------------------
(title)
LOAN AGREEMENT AND SECURITY AGREEMENT
-------------------------------------
INVENTORY ADDENDUM
------------------
This Inventory Addendum (hereinafter referred to as the "Addendum")
dated this 7th day of June, 1996, is hereby made a part of and incorporated into
that certain Loan Agreement and Security Agreement (the "Agreement") dated
August 30, 1991 between Presidential Financial Corporation of Massachusetts
(hereinafter "Lender") and Annie's Homegrown, Inc. f/k/a Annie's, (hereinafter
referred to as "Borrower"):
WITNESSETH
For and in consideration of the entry by Lender into the Agreement and
the covenants contained therein and herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
Borrower and Lender, the parties agree as follows:
1. Request for Loan. From time to time the Borrower may request, and
the Lender in its sole discretion may loan the Borrower an amount not to exceed
three hundred thousand and no/100 ($300,000.00) DOLLARS, or such greater or
lesser amount as Lender may from time to time establish; provided, however, that
the total principal amount of such loan or advances hereunder and under the
Agreement shall not exceed Borrower's maximum line of credit under the Agreement
as determined in Lender's sole discretion. All loans and advances made by Lender
hereunder shall be evidenced by the demand Promissory Note (the "Note") executed
by Borrower pursuant to the Agreement. Interest and service charges on such
loans shall be charged by Lender and paid by Borrower at such rates and at such
times as provided in the Note or in the Agreement. All terms of the Agreement
and the Note, and all covenants, representations and warranties of Borrower
therein are hereby incorporated herein by express reference as if fully set
forth herein, and all definitions of terms in the Agreement shall apply to such
same terms or phrases used herein. The term "Control" used in the Agreement
shall include, without limitation, the Borrower's Inventory, as defined below.
In the event of any conflict between the terms herein and in the Agreement, the
terms of the Agreement shall control. Lender's rights and remedies, and
Borrower's covenants, warranties and representations under the Agreement, the
Note and this Addendum, shall be cumulative.
2. Security Interest. To secure the payment and performance by Borrower
of all of its obligations hereunder, under the Note and under the Agreement,
Borrower grants, assigns, pledges and gives to Lender a security interest in and
to all Borrower's presently owned and hereafter acquired: finished goods and
inventory, packing and shipping supplies, all goods intended for sale or used by
Borrower or to be furnished by Borrower under contracts of service,
-10-
including all raw materials, goods in process, materials and supplies of every
nature used or useable in connection with the manufacture, shipping,
advertising, selling, leasing or furnishing of such goods, all documents
evidencing or representing the same and all documents of title, all negotiable
and non-negotiable warehouse receipts representing the same and all products and
proceeds of the foregoing, and all other items customarily classified as
inventory (all of the foregoing hereinafter collectively referred to as
"Inventory"). Lender's security interest shall continue through all stages of
manufacture and, without further action, will attach to all monies, raw
materials, goods in process, finished goods, products, accounts and other
proceeds resulting from the sale or other disposition thereof and to all
inventory that may be rejected, returned, repossessed or stopped in transit.
3. Obligations of Borrower.
3.1 Loan. Until all obligations of Borrower under the
Agreement, the Note and hereunder are satisfied, Lender's security interest in
inventory will be and continue in full force and effect. Lender may from time to
time loan to Borrower, on Borrower's request, such amount as Lender, in its sole
discretion, may deem advisable, but in any event not more than the Loan Value
(as defined below) of Inventory. If at any time the aggregate amount of
outstanding loans under this Addendum exceeds the Loan Value of Inventory
whether as a result of the sale of any Inventory, the diminution of the value of
any Inventory, or any other cause, Borrower will repay sufficient of the loans
made to it by Lender hereunder. As used in this Addendum: (a) the term "Value"
means the cost or market value, whichever is lower, of Inventory deemed
acceptable by Lender, in its sole discretion and (b) the term "Loan Value" means
the lesser of (1) ________ percent (____%) of the Value of the Inventory or (2)
Borrower's maximum Inventory line of credit from time to time established by
Lender under paragraph 1 hereof.
3.2 Insurance. Borrower, at its sole expense, shall keep and
maintain the Inventory insured for its full insurable value against loss or
damage by fire, theft, explosion, sprinklers and all other hazards and risks
ordinarily insured against by other owners or users of such properties and
interest in properties in similar businesses. All policies shall be in form,
with companies and in amounts satisfactory to Lender. Borrower shall deliver to
Lender true and correct copies of the policies as well as such evidence of
insurance as Lender may from time to time require, and, on Lender's request,
evidence of payment of all premiums therefor. Each of the policies shall contain
an endorsement in a form satisfactory to Lender showing loss payable to Lender
and all proceeds payable under the policies shall be payable to Lender, upon
receipt of proceeds by Lender the same shall be applied on account of the
obligations hereunder and under the Agreement and the Note. To further secure
payment of such obligations, Borrower (a) grants Lender a security interest in
and to all the policies and the proceeds thereof; and (b) shall direct all
insurers under the policies to pay all proceeds directly to Lender. Each insurer
shall agree, by endorsement upon the policy issued by it or by independent
instruments furnished to Lender, that it will give Lender at least ten (10)
days' written notice before any policy shall be altered or cancelled and that no
act or default of Borrower or any other person shall affect the rights of Lender
to recover under the policies.
-11-
4. Additional Representations and Warranties. In addition to the
representations and warranties contained in the Agreement, Borrower represents
and warrants to and covenants and agrees with Lender that (except as otherwise
specified in the Agreement): (a) Inventory shall be kept only at the following
locations(s):___________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Borrower will promptly notify Lender in writing of any change in location of any
place of business or of the Inventory, or the establishment of any new place of
business; (b) immediately upon each demand by Lender therefor, Borrower shall
execute and deliver to lender designations of Inventory specifying Borrower's
cost of Inventory, the market value thereof and such other matters and
information relating to Inventory as Lender may from time to time request; (c)
Borrower now keeps and shall keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, Borrower's cost
therefor and the selling price thereof, the daily withdrawals therefrom and the
additions thereto; (d) all Inventory is and shall be new Inventory of goods and
shall be of merchantable quality, free from defects; (e) Inventory is not and
shall not be stored with a bailee, warehouseman or similar party without
Lender's prior written consent and in such event Borrower will, concurrently
with delivery to such party, cause any such party to issue and deliver to
Lender, in form acceptable to Lender, warehouse receipts in Lender's name
evidencing the storage of such Inventory; and (f) Lender and its agents and
representatives may, upon demand, during Borrower's usual business hours: (i)
inspect and examine Inventory and check and test the same as to quality,
quantity, value and condition; and (ii) inspect, audit, check and make extracts
from the books, records, journals, orders, receipts, correspondence and other
data relating to Borrower's Inventory or to any other transactions between the
parties hereto.
5. Revisions. Borrower agrees that the percentage of Value advanced,
the acceptability and Value of Inventory and the period during which such
advances are to remain outstanding are and shall be entirely in Lender's sole
discretion and that Lender shall have the right at any time to revise any limit
placed by Lender upon the amount of such advances or upon the valuation of
inventory or Lender may, in its sole discretion, refuse to make further
advances. If Inventory remains in stock for a period of time which Lender in its
sole judgment deems excessive, such Inventory may, at Lender's option, be
considered to be of no value for the purposes of loans or advances although the
same remains in stock and Lender retains its lien thereon according to the terms
and provisions of the Agreement, and this Addendum.
6. Sale of Inventory. Until a default by Borrower, Borrower may,
subject to the provisions of the Agreement and this Addendum, and not in a
manner inconsistent therewith or unlawful, sell finished Inventory, but only in
the ordinary course of Borrower's business; however, in no event shall borrower
make any sale of Inventory which would cause a breach of Borrower's warranties,
representations and covenants under Section 4 of this Addendum and in the
Agreement. A sale of Inventory in the ordinary course of Borrower's business
does not include a transfer in partial or total satisfaction of a debt owing by
Borrower. Borrower agrees to report the receipt or creation of all sales or
other dispositions of Inventory to lender and promptly deliver such proceeds to
Lender. Lender's security interest hereunder shall attach to all proceeds
-12-
(whether represented by cash, checks, drafts, notes, chattel paper, open
accounts or otherwise) of all sales or other dispositions of Borrower's
Inventory.
7. Notes. At Lender's sole discretion, Borrower's obligations in
respect of loans made under the Agreement, this Addendum, or in respect of the
Inventory shall be evidenced by promissory notes in form satisfactory to lender.
Such loans shall bear interest at the rate and shall be subject to the terms and
conditions (including adjustments and minimums) provided in the Agreement, Note
and promissory notes delivered by Borrower pursuant hereto.
8. Expenses. Borrower hereby authorizes Lender to pay charge to
Borrower any amounts Lender deems necessary for any processing or finishing of
Inventory in order to obtain a release of such Inventory from any processor,
mechanic, artisan or finisher. Borrower hereby agrees to pay Lender all of its
expenses of processing, finishing, selling and storing, handling, insuring and
shipping the Inventory and any and all other costs and expenses which Lender may
incur in protecting or enforcing its security interest in the Inventory or the
proceeds or products thereof. All sums payable by Borrower under this paragraph
shall be due on demand, deemed a part of the obligations and liabilities of
Borrower under the Agreement, the Note, and this Addendum, and secured by the
Receivables and the Inventory.
9. Default. In the event of a Default by Borrower, Lender may (in
addition to exercising rights under the Agreement and the Note), at its sole
election and without demand enter, with or without process of law, any premises
where Inventory might be and, without breach of the peace and without charge or
liability or Lender therefor: (a) take possession of the Inventory and
Collateral and use or store it in said premises or remove it to such other place
or places as Lender may deem convenient, all until completion of enforcement,
under the Uniform Commercial Code or other applicable law, or Lender's security
interest in Inventory and Collateral; (b) take possession of all or part of such
premises and the Inventory and Collateral and place a custodian in the exclusive
control thereof until completion of enforcement, under the Uniform Commercial
Code or other applicable law, or Lender's security interest in the inventory and
Collateral or until Lender's removal of the Inventory and Collateral to such
other place or places as Lender may deem convenient; (c) remain on such premises
and use the same, together with Borrower's materials, supplies, books and
records, for the purpose of liquidating or collecting such Inventory and
Collateral and conducting and preparing for disposition of such Inventory and
Collateral, or (d) remove the same to such place or places as Lender may deem
convenient for the purpose of Lender's using the same in connection with
Lender's liquidation and collection of such Inventory and Collateral and to
conduct and prepare for the disposition of such Inventory and Collateral (and
Borrower grants Lender a security interest in all Borrower's materials,
supplies, books and records for such purpose and those described above). In
connection with Lender's sale of such Inventory and Collateral the same may be
sold in its then condition or after further manufacturing, processing or
preparation thereof, utilizing in connection therewith, without charge or
liability to Lender therefor, any and all of Borrower's assets. The exercise by
Lender of one or more remedies specified herein or available under the law shall
not prevent Lender from exercising any other remedy thereafter or concurrently.
Lender shall have the right to exercise all remedies under law, whether or not
specified herein.
-13-
10. Release. Lender shall not be liable or responsible for and Borrower
hereby releases Lender from any and all causes of action or claims which
Borrower may now or hereafter have for any loss or damage to it claimed to be
caused by or arising from: (a) the safekeeping of Inventory; (b) any damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value of Inventory; or (d) any act of default of any carrier,
warehouseman, bailee or forwarding agency thereof or other person whomsoever.
All risk of loss, damage or destruction of Inventory shall be borne by Borrower.
The effective date of this Inventory Addendum shall be June 7, 1996.
BORROWER
Annie's Homegrown, Inc. f/k/a Annie's, Inc.
-------------------------------------------
(Name of Corporation)
(Corporate Seal) by: /s/
--------------------------------
ATTEST Title: CFO
-----------------------------
- ---------------------------------
ACCEPTED
PRESIDENTIAL FINANCIAL CORPORATION
OF MASSACHUSETTS
by: /s/
----------------------------------------
Title: EVP
-------------------------------------
371EDF482/2.265490-1
EXHIBIT 10.42
DEMAND SECURED PROMISSORY NOTE
------------------------------
ROCKLAND, MASSACHUSETTS
June 7, 1996 $300,000.00
FOR VALUE RECEIVED, the undersigned promises to pay on demand to the
order of Presidential Financial Corporation of Massachusetts, (hereinafter
referred to as "Lender") at the Lender's main office in Rockland, Massachusetts,
or at such other place as Lender may designate, the principal amount of three
hundred thousand and no/100 - - - Dollars ($300,000.00), together with interest
on said unpaid principal amount at the rate of three percent (3%) per annum
above the prime rate of interest quoted in The Wall Street Journal (the "Prime
Rate"). Interest shall be payable in arrears every fifteen (15) days commencing
on June 16, 1996. Any change in the Prime Rate shall be reflected in the
interest rate payable hereunder commencing on the interest payment date
immediately following such change. Borrower shall be liable to and shall
reimburse Lender for all costs and expenses, including reasonable attorney's
fees and costs, incurred by Lender in the collection of this Demand Secured
Promissory Note or the preservation of protection of the Lender's rights under
this Demand Secured Promissory Note or any other agreement with Borrower.
In addition to the interest provided for hereunder, the following
service charge shall be earned by Lender and shall be payable by the undersigned
to Lender, upon the making of any advance by Lender to the undersigned, the
Lender shall immediately earn and the undersigned shall pay a service charge
equal to 2.4 (2.4%) of the amount of the invoices pledged by the undersigned to
secure the amount advanced to the undersigned; however, with respect to any such
invoice paid to Lender within twenty (20) days from the date of such advance,
the service charge shall be equal to the applicable percentage shown below,
multiplied by the amount of such paid invoice and a corresponding rebate paid to
the undersigned. With respect to any such invoice which is not paid prior to the
thirtieth (30) day from the date of such advance, there shall be an additional
service charge payable by the undersigned to Lender immediately upon the earlier
to occur of (i) the actual receipt by Lender of the full payment of such
invoice, and (ii) the 90th (90) day from the date of such advance. If the Lender
actually receives full payment of such invoice prior to the ninetieth (90) day
from the date of such advance, such service charge shall be equal to the
applicable percentage shown below opposite the number of days elapsed from the
date of the advance to the date of actual payment of such invoice, less the 2.4%
initially earned and paid, multiplied by the amount of such invoice paid. If the
Lender does not receive full payment of any such invoice prior to the ninetieth
(90) day from the date of such advance, such service charge shall be equal to
6.4% multiplied by the amount of such invoice.
Number of days elapsed from date of advance to date
actual payment to Lender.
---------------------------------------------------
APPLICABLE %
1. .40% 1 - 5 days
2. .80% 6 - 10 days
3. 1.60% 11 - 20 days
4. 2.40% 21 - 30
5. 3.20% 31 - 45
6. 4.00% 46 - 60
7. 5.20% 61 - 75
8. 6.40% 76 - 90
9. ____%
10. ____%
In addition to the above service charges, any invoice not paid within
90 days from the date of the advance secured by such invoice will accrue
additional service charges of 1 1/2% for each 15 days beyond 90 days.
The undersigned has entered into a Loan Agreement and Security
Agreement ("Agreement") of even date herewith, pursuant to which this Demand
Secured Promissory Note has been made and delivered to Lender. Any Default by
the undersigned under said Agreement and any default by the undersigned under
its obligations under said Agreement shall constitute a default under this Note.
The undersigned hereby waives demand, presentment, notice, protest and
notice of dishonor. Lender shall not be deemed to waive or have waived any of
its rights hereunder unless such waiver be in writing and signed by Lender, and
no failure, delay or omission by Lender in exercising any of its rights shall
operate as a waiver of such rights. A waiver by Lender in writing on one
occasion shall not be construed as a consent to or a waiver of any right or
remedy on any future occasion.
This instrument shall be governed by and interpreted in accordance with
the laws of the State of Massachusetts. Time is of the essence of this Demand
Secured Promissory Note.
The word "undersigned" as used herein shall include the plural, should
more than one execute this Demand Secured Promissory Note; the masculine and
feminine gender, regardless of the sex of the undersigned or any of them;
partnership, corporations, and other legal entities, should such an entity
execute this Demand Secured Promissory Note; endorsers, guarantors and duties,
unless by the express terms of the endorsement or
guarantee, an obligation of the undersigned is limited or varied; and the heirs,
legal representatives, successors and assigns of the undersigned. The word
"Lender" as used herein shall when the circumstances or context requires,
include the plural and the successors and assigns of Lender.
IN WITNESS WHEREOF, the undersigned has caused this Demand Secured
Promissory Note to by duly executed and its seal to be affixed by its duly
authorized officers, or has signed and sealed this Note as the case may be, and
has delivered this Demand Secured Promissory Note to Lender, the day and year
first above written.
Annie's Homegrown, Inc. f/k/a Annie's Inc.
------------------------------------------
by:/s/ , CFO
------------------------------------------
ATTEST:
- -----------------------------
(Corporate Seal)
This Promissory Note evidences an extension, modification and renewal (
and not a notation) of an existing Promissory Note from the Borrower to Lender,
dated August 30, 1991 in the original amount of $150,000.00 (the "Prior Note").
The Prior Note is replaced and superseded in its entirety with this note. The
Prior Note was executed and delivered in connection with a Loan Agreement and
Security Agreement between Borrower and Lender dated August 30, 1991 (the
"Agreement"). If Borrower has executed a new Loan Agreement and Security
Agreement with the Lender dated of even date reflecting the terms and conditions
of this Note, such new Loan Agreement and Security Agreement shall amend and
replace the Agreement and shall constitute the Agreement hereunder. By execution
hereof, Borrower and Lender do hereby amend the Agreement and each of every
other agreement, document and instrument executed and delivered by Borrower to
Lender in connection with the indebtedness evidenced by the Prior Note
(collectively, the "Loan Documents") to reflect all of the changes to the terms
and conditions of the Prior Note evidenced by this Note, including, without
limitation, an increase in the amount of the indebtedness owed by Borrower to
Lender and secured by any and all collateral described in any of the Loan
Documents.
INITIAL:________
371EDF482/2.265477-1
EXHIBIT 10.5
MANUFACTURING AGREEMENT
This Manufacturing Agreement ("Agreement"), made as of the date
appearing below by and between ANNIE'S HOMEGROWN, INC., a Delaware corporation
with a place of business at 180 Second Street, Suite 202, Chelsea, Massachusetts
02150 ("Annie's") and PASTA USA, INC., a Washington corporation with a place of
business at East 3405 Bismark Court, Spokane, WA 99207 ("Pasta USA").
W I T N E S S E T H
WHEREAS, Pasta USA wishes to supply to Annie's macaroni and cheese
products according to specifications by and for sale by Annie's under "Annie's
and "Annie's Homegrown" and in packaging that has a distinctive trade dress and
according to future specifications under other brand names in other packaging;
WHEREAS, Pasta USA represents (I) that it now is selling boxed macaroni
and cheese products only under the "Pasta USA Italian Chef" brand name and (ii)
that it now sells macaroni and cheese and other products as private label brands
for certain third parties and (iii) that it may in the future wish to supply
macaroni and cheese and other products as private label brands for third
parties; and
WHEREAS, Pasta USA and Annie's have formed, with equal ownership, a new
corporation in the State of Washington known as PASTA PRODUCTS, INC. ("Pasta
Products") for the purpose of marketing products, under the "Earth and Life"
brand name;
NOW THEREFORE, Annie's and Pasta USA agree as follows:
1. PURCHASE OF PRODUCT.
1.1 Minimum Purchase. Annie's agrees to purchase from Pasta
USA and Pasta USA agrees to manufacture and provide to the order of
Annie's a minimum of twenty-five thousand (25,000) cases of product,
including orders for Annie's and any other entity on whose behalf
Annie's may act (except PASTA PRODUCTS, INC.), per calendar month
beginning with the month of August 1, 1995, averaged per month on the
basis of the most recent ninety (90) day period, and maintaining such
minimum purchase level for as long as this Agreement is in effect.
1.2. Price. The prices for such pasta products shall be as set
forth on Schedule "A" attached hereto. Such prices shall be at the cost
of raw materials to Pasta USA and includes a portion of Pasta USA's
fixed costs with initial disclosure of such cost to Annie's and
subsequent disclosure upon any decrease or increase of such costs.
Pasta USA may increase such Schedule of prices from time to time, upon
at least thirty (30)
-2-
days prior written notice to Annie's, provided that prices shall remain
firm for at least thirty (30) days after the date hereof and after the
date of any such price increase.
Payment terms require payment in full within thirty (30) days
from the date of shipping by Pasta USA from its plant to Annie's.
"Shipping" is defined to be the date upon which the products leave
Pasta USA's plant. In the event that Annie's does not receive any
shipment within seven (7) days (West coast) or fifteen (15) days (East
coast), the period for payment shall increase by the number of days the
shipping period exceeds seven (7) days (West coast) or fifteen (15)
days (East coast).
1.3 Product Specifications. Pasta USA agrees to manufacture
and package the Annie's products in accordance with the specifications
set forth on Schedule "A" and subject to the terms and conditions of
this Agreement. The term "product specification" means a written
description of the product of Annie's to be manufactured containing a
description of the ingredients and seasoning formula or recipe, if any,
the desired shape, size, texture, flavor, appearance and other
pertinent characteristics of the product, the type of packaging,
applicable quality assurance testing procedures and criteria and other
information necessary for the manufacture of the product. Said
specifications shall be deemed to be confidential information as
defined in Section 4 below.
2. INSURANCE. Pasta USA shall, at its own expense, procure and maintain
in force during the term of this Agreement comprehensive general liability
insurance, including broad form vendors endorsement and other product liability
and contractual liability insurance in form appropriate to insure performance of
Past USA's obligations hereunder, in the amount of not less than Two Million
Dollars($2,000,000). The foregoing policy of insurance shall name Annie's as an
additional insured and shall be cancelable only upon at least thirty (30) days
notice to Annie's. Pasta USA shall furnish to Annie's such certificate of the
insurance or other evidence of the effectiveness of the policy of insurance as
may be requested from time to time.
3. NON-COMPETITION.
3.1 Pasta USA agrees that it will not compete in the United
States, Mexico and Canada with Annie's by specifically developing
additional boxed macaroni and cheese products, except for the presently
existing Pasta USA products and formulations, namely Italian Chef and
Prestige Brand, and the Earth and Life Macaroni & Cheese throughout the
period this Agreement is in effect and for a period of twelve (12)
months after the effective date of the termination of the Agreement.
3.2 Nothing herein shall prohibit or restrict Pasta USA from
developing or manufacturing macaroni and cheese products to be sold
under private store labels by third parties, provided that Pasta USA
does not incorporate any of the package designs, or formulations of
Annie's or Pasta Products.
-3-
4. TRADE SECRETS AND PROPRIETARY INFORMATION.
4.1 In connection with this Agreement, Annie's has and will
from time to time provide information about its business and disclose
to Pasta USA and to Pasta Products, either orally or in writing or by
inspection, confidential information as to Annie's business. Such
"confidential information" which will be or has been disclosed or
provided, as the case may be, may include financial information,
business and trade secrets regarding processes, formulae and recipes,
Annie's Alfredo, Annie's Wholewheat, Annie's Mild Mexican and such
other recipes as may be developed in the future, marketing strategies
and customer data, and such other information as may be supplied by
Annie's that is not generally ascertainable from public or published
information or trade sources. Pasta USA and Pasta Products agrees to
retain in confidence, and to require its employees, consultants,
professional representatives and agents to retain in confidence, all
such confidential information transmitted to it by Annie's, and,
further, not to use such confidential information obtained from or
provided by Annie's.
4.2 In the event that either Past USA or Annie's terminates
the Agreement for any reason, Pasta USA shall immediately deliver to
Annie's (without retaining copies thereof) any and all documents or
other written information obtained from Annie's which Annie's has
deemed or deems at the time of termination to be confidential
information. The obligations under this Section 4 shall not be effected
by the termination of the Agreement.
4.3 Pasta USA and Annie's hereby confirm that any information
disclosed by Annie's to Pasta USA prior to the execution of this
Agreement shall be subject to the terms of this Agreement.
5. TRADE DRESS.
5.1 Past USA further agrees not to market or distribute any
pasta food product under any trade or brand name which incorporates
either the word "Annie's or the word "Homegrown" or which otherwise
utilized any of the copyright or trademarked material contained on the
Annie's packaging.
5.2 Pasta USA further agrees not to market or distribute any
pasta food product in packaging which contains coloration, lettering,
or other graphic design which is similar to that of the packaging
materials of the pasta products currently being sold under the trade
name "Annie's Homegrown".
6. MODIFICATION AGREEMENT. Any modification or waiver of any
provision of this Agreement must be agreed to in writing signed by both parties.
-4-
7. TERM; TERMINATION.
7.1 Term. The initial term of this Agreement shall commence on
April 15, 1995, and shall continue until December 31, 1999 ("Initial
Term"). On the expiration of the Initial Term, this Agreement may be
renewed by written agreement of the parties. The parties shall, not
less than one hundred twenty (120) days before the expiration date of
this Agreement, negotiate in good faith concerning the renewal of this
Agreement and the terms upon which such renewal might be effected.
7.2 Termination by Either Party. Either Annie's or Pasta USA
may terminate their relationship without case upon not less than one
hundred twenty (120) days written notice to the other.
7.3 Termination for Cause. This Agreement may be terminated by
either party, effective immediately upon written notice to the other
party, in the event that:
(i) The other party shall breach any material
provision of this Agreement, including Annie's
obligations to purchase product and to promptly pay
for said product as set forth in Section 1 above,
which breach shall be cured within ten (10) days of
receipt of the written notice of such breach by the
terminating party; or
(ii) The other party shall fail to pay any amount due
hereunder and such failure shall be cured within ten
(10) days of receipt of written notice of such
failure from the terminating party; or the other
party shall become insolvent, file any bankruptcy
petition or proceeding under any federal bankruptcy
or insolvency law or otherwise avail itself of any
remedy or procedure under federal or state law for
relief of debtors, have filed against it any petition
under such law which petition is not dismissed within
sixty (60) days, adjudicated, a bankrupt, make an
assignment for the benefit of its creditors or have a
receiver appointed for all or any substantial part of
its property.
7.4 Annie's Obligations Upon Termination. In the event of a
termination hereunder Annie's shall within forty-five (45) days after
the effective date of such termination pay for and cause to be shipped
at its sole cost all finished goods, raw materials and packaging either
manufactured and/or purchased by Pasta USA for Annie's which is
sellable by Annie's. Payment to Pasta USA shall be by cashiers check
upon receipt of such finished goods, raw materials and packaging.
8. NOTICES. All notice required hereby or given under this Agreement
shall be in writing and shall be served either personally or by certified mail,
return receipt requested, postage prepaid, at the address of the parties
appearing at the beginning of this Agreement, or at such other address as the
parties may from time to time designate to one another in writing, and in the
case of Annie's, also to its general counsel, Ronald L. Cheney, Esq. located at
50 Milk
-5-
Street, Boston, Massachusetts 02109, or such other attorney as Annie's may from
time to time designate to Past USA in writing. In the case of Pasta USA also to
its legal counselor, Dennis M. McLaughlin, Suite 1015, Washington Mutual
Building, West 601 Main, Spokane, Washington 99201, or such other attorney as
Pasta USA may from time to time designate to Annie's in writing.
9. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof, shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times.
10. BINDING EFFECT. Except as otherwise herein expressly provided, this
Agreement shall inure to the benefit of and be binding upon Annie's, its
successors and assigns including, without limitation, any entity which may
acquire all or substantially all of Annie's assets or business, or with or into
which Annie's may be merged or consolidated and to the benefit of, and be
binding upon, Pasta USA, its successors as assigns.
11. ASSIGNMENT. The rights and obligations of either party hereunder
may not be transferred or assigned without the prior written consent of the
other party.
12. REMEDY FOR BREACH. Both parties recognize that the relationship of
Pasta USA and Annie's hereunder is special, unique and of an extraordinary
character, and that, in the event of the breach or violation by either party of
any term or condition of this Agreement to be performed by it, then, without in
any way limiting any other rights, defenses, powers or privileges which the
non-defaulting party may then have, the non-defaulting party shall be entitled,
if it so elects, to institute and prosecute proceedings in any court of
competent jurisdiction, either in law or in equity, to enforce the specific
performances thereof and/or to enjoin the defaulting party from acting in breach
or violation of this Agreement.
13. ARBITRATION OF DISPUTES. Any dispute or controversy arising out of
or in connection with this Agreement shall be finally determined and settled by
arbitration in accordance with the rules of the American Arbitration Association
then in effect. The arbitration award shall be final and binding and judgment of
the award may be entered by any court having competent jurisdiction.
14. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties hereto, supersedes any and all
prior discussions, agreements and correspondence with regard to the subject
matter hereof, and may not be amended, modified or supplemented in any respect,
except by a subsequent writing executed by both parties hereto.
-6-
16. GOVERNING LAW AND VENUE. This Agreement shall be considered and
interpreted by the laws of the State of Washington. Venue shall lie in a
jurisdiction that is mutually agreeable to both parties hereto.
17. CAPTIONS AND HEADINGS. The captions and headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect,
or be used as an aid in construing, any of the terms or provisions of this
Agreement.
18. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which taken together will constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by setting
their hand and seal hereto as of the 17th day of May, 1995.
ANNIE'S HOMEGROWN, INC. PASTA USA, INC.
By: /s/ H. Martin By: /s/ R. Clemson
----------------------- ----------------------
Name: H. Martin Name: R. Clemson
---------------------- --------------------
Title: Chairman Title: President
-------------------- -------------------
-7-
SCHEDULE "A"
PRODUCTS SPECIFICATION
1. PRODUCT NAME:
2. PASTA INGREDIENTS/FORMULA:
3. SEASONING INGREDIENTS/FORMULA:
4. DESCRIPTION OF PRODUCT (Shape, size, texture, etc.):
5. PACKAGING TYPE:
6. PRICING (With breakdown of costs of ingredients):
SCHEDULE "A"
MACARONI & CHEESE PACKAGING LINE
ANNIE'S SHELLS & CHEDDAR ANNIE'S ALFREDO
Original Cost Original Cost
------------- -------------
Carton 0.0400 Carton 0.0400
Shipper 0.0113 Shipper 0.0113
Cheese 0.1570 Cheese 0.1850
Pasta 0.1031 Pasta 0.1031
Shrink 0.0100 Shrink 0.0100
Labor 0.0550 Labor 0.0550
------ ------
Total per carton 0.3764 Total per carton 0.4044
Total per case 9.0336 Total per case 9.7056
ANNIE'S MILD MEXICAN NNIE'S W. WHEAT & CHEDDAR
Original Cost Original Cost
------------- -------------
Carton 0.0400 Carton 0.0400
Shipper 0.0113 Shipper 0.0113
Cheese 0.1570 Cheese 0.1570
Pasta 0.1031 Pasta 0.1850
Shrink 0.0100 Shrink 0.0100
Labor 0.0550 Labor 0.0550
------ ------
Total per carton 0.3764 Total per carton 0.4583
Total per case 9.0336 Total per case 10.9992
Index
Carton - Small 7.25 oz Macaroni & Cheese Box
Shipper - Corrugated box for
shipping, 24 cartons per box
Cheese - 1.25 oz packet of cheese powder
Pouch - paper packet for pouching cheese (when applicable)
Pasta - Cost of finished pasta product for carton
Shrink - Amount of waste experienced during packaging
Pallets - Cost of pallets, slip sheet, shrink wrap
Handling Fee - .22 per casefor warehousing and handling
Labor - Cost of labor force to run packaging line.
Not included in original costs was freight for Mid-Amer. cheese
costs are .0056 per unit for full truckload or .0112 for LTL
This adds either .1344(cent) per cast Truckload or .2688(cent) per case LTL
371EDF482/2.265478-1
Exhibit 11
Statement Re: Computation of Per Share Earnings
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share
(in 000's, Except for per share data)
Twelve months ended December 31, 1994
Primary Computation
Net income per statement of operations $24
======
Weighted average number of common
shares outstanding 3,805
Weighted average number of common
stock equivalents 123
-----
Weighted average number of common
shares as adjusted $3,928
======
Net income per common share $.01
====
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share (Continued)
(in 000's, Except for per share data)
Twelve months ended December 31, 1994
Primary Diluted Computation
Net loss per statement of operations $(451)
======
Weighted average number of common
shares outstanding 3,986
Weighted average number of common
stock equivalents _
-----
Weighted average number of common
shares as adjusted 3,986
======
Primary loss per common share $(.11)
====
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share (Continued)
(in 000's, Except for per share data)
Twelve months ended December 31, 1994
Primary Computation
Net loss per statement of operations $(451)
======
Weighted average number of common
shares outstanding used for primary
computation 3,986
Weighted average number of common
stock equivalents 742
-----
Weighted average number of common
shares as adjusted 4,728
======
Fully diluted loss per common share $(.10)(A)
====
(A) This computation is submitted as an exhibit to the Company's Form 10-K
in accordance with Regulation S-K Item 601(b)(11), although presenting
the computation is not in accordance with paragraph 40 of APB Opinion
15 because the computation produces an intidilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 35,463
<SECURITIES> 0
<RECEIVABLES> 225,446
<ALLOWANCES> 0
<INVENTORY> 405,764
<CURRENT-ASSETS> 667,173
<PP&E> 56,622
<DEPRECIATION> 24,291
<TOTAL-ASSETS> 793,657
<CURRENT-LIABILITIES> 860,585
<BONDS> 0
4,178
0
<COMMON> 0
<OTHER-SE> (71,106)
<TOTAL-LIABILITY-AND-EQUITY> 793,657
<SALES> 4,546,211
<TOTAL-REVENUES> 4,546,211
<CGS> 2,606,381
<TOTAL-COSTS> 2,349,729
<OTHER-EXPENSES> (10,846)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,092
<INCOME-PRETAX> (448,145)
<INCOME-TAX> 2,865
<INCOME-CONTINUING> (448,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (451,010)
<EPS-PRIMARY> (10.48)
<EPS-DILUTED> 0
</TABLE>
