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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 27, 1998
ANNIE'S HOMEGROWN, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 33-9382-LA 06-1258214
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(STATE OR OTHER JURISDICTION OF (COMMISSION (IRS EMPLOYER
INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
395 MAIN STREET
WAKEFIELD, MA 01880
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 781-224-1172
180 SECOND STREET, SUITE 202, CHELSEA, MA 02150
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OF ASSETS
On August 27, 1998, Annie's Homegrown, Inc. (the "Company") acquired
certain assets (the "Assets") of The Tamarind Tree Ltd. ("Tamarind Tree").
Tamarind Tree produces and markets a line of heat and serve Indian food entrees.
The Assets consist of the Tamarind Tree brand, including the registered
trademark, "The Taste of India," intellectual property relating to the brand and
other tangible and intangible assets which are used in Tamarind Tree's business.
The Company entered into a term loan of $300,000 and increased its
revolving credit agreement by $300,000 with Fremont Financial Corporation to
fund the cash portion of the acquisition and certain acquisition related
expenses. The new borrowings are secured by substantially all of the assets of
the Company, including a security interest in the Tamarind Tree brand.
Additional funds for the acquisition are expected to be provided by cash from
operations.
The Assets were utilized by Tamarind Tree for the purpose of producing and
marketing the Tamarind Tree line of food products. The Company intends to
continue such use.
The Purchase Agreement
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The following summary of the purchase agreement is qualified in its
entirety by reference to the applicable provisions of the Asset Purchase
Agreement by any among Tamarind Tree, the Company and Harshad M. Parekh dated as
of July 13, 1998 (the "Agreement").
The Agreement provided for the purchase by the Company of unfilled orders,
supplies and tools used to produce the brand, customer and supplier lists and
certain intellectual property. Tamarind Tree retained certain of its assets,
including without limitation its existing accounts receivables as well as all of
its liabilities.
The purchase price is comprised of cash in the amount of $200,000, an
advance against royalities in the amount of $75,000, and future royalities and
overrides. The royalties are payable by the Company to Tamarind Tree for five
years at the rate of 6% annually on "adjusted net sales." Additionally,
overrides are payable by the Company to Tamarind Tree for five years at the rate
of 2% of all sales of certain products and sales in excess of a certain minimum
amount of other products.
Employment Agreement
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The Company has entered into a five year employment agreement with Harshad
M. Parekh ("Parekh") pursuant to which Parekh will serve as the General Manager
of the Company's Tamarind Tree division. Parekh previously served as the
President of Tamarind Tree.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)-(b) No financial statements are required to be filed with this report.
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(c) Exhibits
EXHIBIT NO. Description
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2.2 Asset Purchase Agreement dated as of July 13, 1998
2.3 Amendment No. 1 to Asset Purchase Agreement
10.9 First Amendment to Loan Agreement with Fremont Financial
Corporation dated August 25, 1998
10.10 Secured Promissory Note
10.11 Trademark Security Agreement
10.12 Employment Agreement with Harshad M. Parekh
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Annie's Homegrown, Inc.
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(Registrant)
Dated: September 11, 1998 By: /s/ Neil Raiff
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Neil Raiff
Chief Financial Officer
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ASSET PURCHASE AGREEMENT
BY AND AMONG
ANNIE'S HOMEGROWN, INC.,
THE TAMARIND TREE LTD.,
AND
HARSHAD M. PAREKH
Dated as of July 13, 1998
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ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT ("Agreement"), is made as of this 13th day of
July, 1998, by and among THE TAMARIND TREE LTD., a New Jersey corporation
("Seller"), HARSHAD M. PAREKH ("Parekh") and ANNIE'S HOMEGROWN, INC., a Delaware
corporation ("Buyer") (individually, a "Party", and collectively, the
"Parties").
BACKGROUND
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A. Seller is a food products business located at 1037 State Street, Perth
Amboy, New Jersey, which produces and markets a line of heat and serve Indian
food entree products under the company name "Tamarind Tree" and registered
trademark "The Taste of India" (the "Brand").
B. Seller wishes to sell, transfer, assign and convey to Buyer, and Buyer
wishes to purchase from Seller, on the terms and subject to the conditions of
this Agreement, certain of the assets of Seller that comprise the Brand and
otherwise are used in or are related to Seller's business.
NOW, THEREFORE, in consideration of the mutual obligations herein
contained, the parties hereto, covenant and agree as follows:
ARTICLE 1
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PURCHASE AND SALE OF ASSETS
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1.1 Assets Included In Sale. Subject to the terms and conditions of this
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Agreement, at the Closing (as defined in Section 1.7 hereof), Seller shall sell,
assign, convey, transfer and deliver to Buyer, and Buyer shall purchase from
Seller, all of Seller's right, title and interest in and to the assets listed
below (collectively, the "Assets"), free and clear of any liens, claims,
liabilities, encumbrances or obligations:
(a) unfilled orders for the production and sale of the Brand (the
"Backlog Orders");
(b) supplies, tools, dies and jigs used in the production of the
Brand;
(c) lists of customers, suppliers and subcontractors;
(d) intellectual property, including without limitation, the name
"Tamarind Tree" and variants thereof, all corporate names, tradenames,
trademarks, trade designations, trade dress, service marks, copyrights, trade
secrets, recipes and formulations, whether registered or unregistered, goodwill
associated therewith, licenses and sublicenses granted and obtained with respect
thereto and rights thereunder, remedies against infringement thereof, and rights
to protection of interests therein under the laws of all jurisdictions
(collectively, the "Intellectual Property"); and
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(e) books, records, files, creative materials, advertising and
promotional materials, studies, reports, information and documentation regarding
the foregoing whether printed, written or stored in electronic media.
1.2 Payment of Purchase Price. The purchase price for the Assets (the
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"Purchase Price") shall be comprised of cash, royalties and sales overrides
payable in the following amounts and manner:
(a) Cash. Buyer shall deliver, by certified or cashier's check or
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wire transfer of immediatly available funds, on the Closing Date (as defined in
Section 1.7 hereto), the total amount of Two Hundred Thousand Dollars
($200,000). Of this amount, the sum of One Hundred Seventy Five Thousand
Dollars ($175,000) shall be wired directly to the State Bank of India, New York
Branch ("State Bank") in accordance with its payment instructions, in full
settlement and satisfaction of all claims of State Bank against Seller and
Parekh, including without limitation, the judgment obtained by State Bank
against Seller in the Superior Court of New Jersey, Law Division, Middlesex
County, Docket No. L699-97 (filed November 19, 1997).
(b) Royalties. Buyer shall pay, not later than the thirtieth day
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following the end of each calendar quarter, for the period commencing on the
Closing Date and ending on the fifth anniversary thereof, additional
consideration in the form of royalties (the "Royalties") in the amount of six
per cent (6%) of "adjusted net sales" (as defined below) of all products listed
on Exhibit 1.2(c) hereto ("Base Products"), less any amounts previously advanced
to Seller pursuant to Section 1.3 below. For purposes of this Agreement,
"adjusted net sales" means gross sales of all Base Products, less cash
discounts, damages, returns, off invoice allowances, billbacks, and the costs of
advertising, demonstrations, coupons and trade shows associated with the Base
Products.
(c) Overrides.
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(i) Buyer shall pay to Seller, at intervals and times that may be
agreed to by Buyer and Seller, but in no event less frequently than quarterly on
the thirtieth (30th) day following the end of each calendar quarter, for the
period commencing on the Closing Date and ending on the fifth anniversary
thereof, additional compensation in the amount of two per cent (2%) of the
amount by which "adjusted net sales" of Base Products exceeded Five Hundred
Thousand Dollars ($500,000) during the same fiscal year (the "Base Product
Override"), which amount shall be paid pro rata for any partial calendar
quarter.
(ii) Buyer shall pay to Seller, at intervals and times that may be
agreed to by Buyer and Seller, but in no event less frequently than quarterly on
the thirtieth (30th) day following the end of each calendar quarter, for the
period commencing on the Closing Date and ending on the fifth anniversary
thereof, additional compensation in the amount of two per cent (2%) of the
"adjusted net sales" of all products in the Tamarind Tree line of products
except Base Products during the same fiscal year (the "New Products Override"),
which amount shall be paid pro rata for any partial calendar quarter.
1.3 Royalty Advance. Buyer shall advance (the "Advance") to Seller in
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cash at the Closing Seventy Five Thousand Dollars ($75,000) against the
Royalties due to Seller pursuant to
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subsection 1.2(b) for (i) use by Seller to settle or repay all unsecured
liabilities of Seller as of the Closing Date; and, (ii) to the extent of any
remainder after Seller has repaid all such unsecured liabilities in full, or
entered into agreements providing for the full and final satisfaction of all
such liabilities, for any other legitimate purpose related to Seller's business.
Until the Advance shall have been repaid in full to Buyer, Buyer shall be
entitled to withhold 25% of the Royalties, plus 50% of the Base Product Override
and 50% of the New Product Override, if any, due to Seller. In the event that
the amounts withheld pursuant to this Section 1.3 are insufficient to repay in
full the Advance to Buyer prior to the fifth anniversary of the Closing Date,
the unpaid portion of the Advance shall be repaid to Buyer by Parekh in cash not
later than the sixth anniversary of the Closing Date, together with simple
interest on average monthly balance of the unpaid portion at the Mid-Term
Applicable Federal Rate then in effect for the period commencing on the day
following the fifth anniversary of the Closing Date until the Advance is repaid
in full to Buyer.
1.4 Excluded Assets. The Assets shall include only those assets listed in
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Section 1.1 and shall not include accounts receivable billed prior to the
Closing Date or other assets not listed in Section 1.1.
(a) Seller shall collect for its own account, consistent with
historical collection methods, using its own personnel and at its own expense,
all accounts receivable billed prior to the Closing Date and in conformance with
this Agreement. Seller shall not employ any collection technique that
interferes with Buyer's ongoing business (including without limitation
collection of the accounts receivable relating to the Backlog Orders that are
invoiced prior to the Closing). The Parties agree that all collections of
accounts receivable shall be applied to the invoices designated by the debtor.
In the event the Parties cannot determine which invoice is being paid, then
Buyer's Chief Financial Officer shall seek written confirmation from the debtor.
1.5 Assumed Liabilities.
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(a) Liabilities to be Assumed. As additional consideration for the
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purchase of the Assets, Buyer shall assume, perform and discharge the
obligations for the completion and performance of the Backlog Orders (the
"Assumed Liabilities").
(b) Liabilities Not Assumed. Buyer shall not assume or be bound by
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any duties, responsibilities, obligations or liabilities of any kind, direct or
indirect, known or unknown, absolute or contingent of Seller or Parekh, or
arising out of the operation of Seller for the period prior to the Closing Date,
whether existing on the Closing Date or arising thereafter ("Liabilities"),
other than the Assumed Liabilities, and takes the Assets free and clear of all
liens and encumbrances other than those liens and encumbrances, if any,
expressly set forth herein (the "Permitted Liens"). The provisions of this
Section 1.5 shall apply regardless of whether any Liabilities may be disclosed
to Buyer pursuant to Article 2 hereof or otherwise, or whether Buyer, Seller or
Parekh, or any of them, may have knowledge of the same. Without limiting the
foregoing in any way, it is understood and agreed that Buyer does not assume,
undertake or accept any liability of Seller or Parekh with respect to:
(1) any employee or former employee of Seller;
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(2) any income, sales, capital gains, franchise or other tax
arising out this transaction;
(3) product liability claims arising prior to the Closing from
the Brand or relating thereto;
(4) any accounts payable or indebtedness; or
(5) any other debt, liability, claim, judgment or obligation,
whether known or unknown to Buyer, and whether disclosed or undisclosed pursuant
to this Agreement, and whether or not contingent, that is outstanding on the
date of this Agreement, or that results or arises from events, circumstances, or
conditions that occurred or existed on or before the Closing Date.
1.6 Employment Agreement. Prior to or at the Closing, Buyer and Parekh
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will enter into an employment agreement (the "Employment Agreement")
substantially in the form attached hereto as Exhibit 1.6. The terms of Parekh's
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employment by Buyer shall be further in accordance with, and subject to, the
policies set forth in Buyer's Employee Manual, as it may be amended from time to
time.
1.7 Satisfactory Due Diligence; Closing.
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(a) Due Diligence. The Closing of the transactions contemplated
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hereby shall be subject to Buyer's due diligence review of Seller's business and
operations, and to Buyer's determination, in its sole discretion, that the
results of such review are satisfactory and do not reveal adverse information
regarding the Assets or the business prospects or operations of Seller.
(b) Closing. Subject to the completion of satisfactory due diligence
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as set forth in this Section 1.7 and the fulfillment or waiver of the conditions
set forth in Articles 6 and 7 hereof, the closing of the transactions
contemplated hereby (the "Closing") shall take place on [DATE] (the "Closing
Date") at the law offices of Jeffry L. Feldman, P.C., 67 Wall Street, New York,
New York, or at such other date or other place as the Parties may agree in
writing.
1.8 Delivery And Payment. At the Closing (i) Seller and/or Parekh shall
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execute and deliver to Buyer, in form and substance reasonably satisfactory to
Buyer: the Employment Agreement; UCC-3 Termination Statement from State Bank;
Bill of Sale in form satisfactory to Buyer; copies of all Contracts (as defined
in Section 2.4); Officer's Certificate pursuant to Section 7.2; Secretary's
Certificate as to Directors' Resolutions and Incumbency; Legal Existence and
Good Standing Certificate for Seller from the State of New Jersey dated as of a
date as close as practicable to the Closing Date; complete and correct copies of
all patents, registrations, applications, licenses, agreements and permissions,
(as amended to date) and correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of such item
pursuant to Section 2.6.; evidence of the full satisfaction and release of all
judgments against Seller existing as of the Closing Date; opinion of counsel for
Seller pursuant to Section 7.8; evidence in form satisfactory to Buyer of a
valid assignment or novation of the Truitt Brothers Supply Contract as more
fully described in Subsection 7.6(a); and copies of all recipes,
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formulations and related information pursuant to Subsection 7.6(b); and (ii)
Buyer shall execute and deliver to Seller and/or Parekh, as the case may be: the
Employment Agreement; Officer's Certificate pursuant to Section 6.1; Secretary's
Certificate as to Directors' Resolutions and Incumbency; Legal Existence and
Good Standing Certificate for Buyer from the State of Delaware dated as of a
date as close as practicable to the Closing Date; the cash portion of the
Purchase Price; and, the Royalty Advance. In addition, the Parties shall
deliver all other documents that are necessary to consummate the transactions
contemplated by this Agreement, other than such action and documents as are to
be taken or delivered at another date, as specifically provided in this
Agreement.
1.9 Further Assurances. Seller and Parekh shall execute and deliver, or
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cause to be executed and delivered, to Buyer from time to time after the
Closing, as soon as practicable after the reasonable request of Buyer, such
additional instruments of conveyance and transfer and take such other action as
Buyer may reasonably request to vest in Buyer complete, valid and legal title
to, and to transfer to Buyer, all Assets free and clear of all Liens of any
nature whatsoever (other than Permitted Liens).
ARTICLE 2
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REPRESENTATIONS AND WARRANTIES BY SELLER AND PAREKH
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Seller and Parekh represent and warrant, jointly and severally, to Buyer
that the statements contained in this Article 2 are correct and complete as of
the date of the Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Article 2).
2.1 Organization and Authority. Seller is a corporation duly organized,
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validly existing and in good standing under the laws of the State of New Jersey.
Each of Seller and Parekh have all requisite power and authority to enter into
this Agreement and to perform their obligations hereunder. The execution,
delivery and performance of this Agreement by Seller has been (or upon execution
will be) duly authorized and approved by all necessary corporate action on its
part, including without limitation, stockholder approval. This Agreement has
been duly executed and delivered by, and constitutes the legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. This Agreement has been duly executed and delivered by Parekh, and
constitutes the legal, valid and binding obligation of Parekh, enforceable
against Parekh in accordance with its terms.
2.2 No Conflicts, Consents and Approvals. Except as set forth in Exhibit
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2.2, the execution, delivery or performance of this Agreement and the
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consummation of the transactions contemplated hereby will not (i) require Seller
or Parekh to obtain the consent, license, permit, waiver, approval,
authorization or other action of, by or with respect to, any governmental or
nongovernmental person or entity, the failure of which to be obtained could
materially affect Seller or the Assets, (ii) result in the breach of, violate or
conflict with any of the terms or provisions of the articles of incorporation or
bylaws of Seller, (iii) result in the breach of any of the terms or conditions
of, or constitute (with due notice or lapse of time or both) a default under, or
violate or conflict with any agreement, lease, note, contract, bond, indenture,
license or other
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document or undertaking, oral or written, to which Seller or Parekh is a party
or by which Seller or Parekh is bound and by which any of the Assets may be
affected, (iv) violate any rule, regulation, order, writ, injunction or decree
of any court, administrative agency or governmental body binding on Seller or on
any of the Assets, or (v) otherwise have a material adverse effect on the
Assets.
2.3 Title. Seller has good and marketable title to all of the Assets, in
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each case free and clear of all mortgages, pledges, security interests, liens,
claims, charges, encumbrances and defects (hereinafter individually referred to
as a "Lien" and, collectively as "Liens") except for Permitted Liens, if any.
The Assets listed in Exhibit 1.1 are owned by Seller and not any other party.
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2.4 Certain Contracts. Seller has provided Buyer with true and complete
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copies of all contracts, agreements, leases or commitments including amendments
thereto, whether in the ordinary course of business or not, to which Seller is a
party, which are binding upon any part of the Assets or which relate to the
production, distribution, sales or marketing of the Brand (collectively, the
"Contracts"). No Contract will require the consent of any other party to, or as
a result of, the consummation of the transactions contemplated by this
Agreement. None of the Contracts are with any officer, director or affiliate of
Seller.
2.5 Litigation. Except as set forth on Exhibit 2.5 hereto, to the best of
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Seller's knowledge after reasonable inquiry, there is no suit, action,
proceeding, arbitration or litigation pending against Seller.
2.6 Intellectual Property.
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(a) Seller owns or has the right to use pursuant to valid license,
sublicense, agreement, or permission all of the Intellectual Property. The
Intellectual Property owned or used by Seller immediately prior to the Closing
Date will be owned or available for use by the Buyer on identical terms and
conditions immediately subsequent to the Closing Date. Each of the Seller and
Parekh has taken all necessary and desirable action to maintain and protect the
Intellectual Property.
(b) Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any intellectual property rights of third
parties, and none of Seller's employees, officers or directors responsible for
the Intellectual Property has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Seller must license or
refrain from using any Intellectual Property or intellectual property rights of
any third party). To the knowledge of Seller, Parekh and any other employee,
officer or director of Seller with responsibility for the Intellectual Property,
no third party has infringed upon, interfered with, misappropriated, or
otherwise come into conflict with any intellectual property rights of Seller.
(c) Exhibit 2.6 identifies each patent or registration which has been
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issued to Seller with respect to the Intellectual Property, identifies each
pending patent, trademark or copyright application or application for
registration which Seller has made or caused to be made
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on its behalf with respect to the Intellectual Property, and identifies each
license, agreement, or other permission which Seller has granted to any third
party with respect to the Intellectual Property. Seller has delivered to Buyer
true, complete and correct copies of all patents, registrations, applications,
licenses, agreements, and permissions (as amended to date) and has made
available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item. Exhibit 2.6 also identifies all trade names or unregistered trademarks
used by Seller in connection with the Brand. With respect to each item of
Intellectual Property:
(1) Seller possesses all right, title, and interest in and to the
item, free and clear of any security interest, license, or other restriction,
other than a Permitted Lien;
(2) the Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which challenges the
legality, validity, enforceability, use, or ownership of any part of the
Intellectual Property; and
(4) none of the Seller, Parekh, or any other officer of director of
Seller has ever agreed to indemnify any person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
Intellectual Property.
2.7 Conduct of Business. To the best of Seller's knowledge, since August
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7, 1997 the affairs of Seller have been conducted only in the ordinary course of
business and neither Seller nor Parekh has done any act, or has knowledge that
any other person has done any act, to undermine the transfer of the Assets or
harm the commercial viability or business prospects of the Brand.
2.8 No Fraudulent Transfer. The consideration to be paid for the Assets
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represents their fair market value as determined by Seller after reasonable
investigation, and the execution, delivery of and performance by Seller of its
obligations under this Agreement will not constitute a fraudulent transfer nor
otherwise be contrary to any obligations owed to the creditors of Seller.
Notwithstanding any to the contrary herein, Seller shall use the Advance to
settle or repay all unsecured liabilities of Seller as of the Closing Date and
for no other purpose until all such unsecured liabilities have been paid in
full, or Seller shall have entered into agreements providing for the full and
final satisfaction of all such liabilities.
2.9 Confidential Information of Seller. Seller acknowledges that under
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the terms of the Employment Agreement, Parekh will be permitted to disclose to
Buyer all information relating to the Brand, including trade secrets and any and
all other confidential information of Seller relating to the Brand.
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ARTICLE 3
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REPRESENTATIONS AND WARRANTIES BY BUYER
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Buyer represents and warrants to Seller that the statements contained in
this Article 3 are correct and complete as of the date of the Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article 3).
3.1 Organization and Authority. Buyer is a Delaware corporation duly
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organized, validly existing and in good standing under the laws of the state of
Delaware. Buyer has all requisite power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this agreement by Buyer has been (or upon execution will be) duly
authorized and approved by all necessary action on its part. This Agreement has
been duly executed and delivered by, and constitutes the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
3.2 No Conflicts, Consents and Approvals. Except as set forth in Exhibit
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3.2, the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i) require Buyer
to obtain the consent, license, permit, waiver, approval, authorization or other
action of, by or with respect to, any governmental or nongovernmental person or
entity, (ii) result in the breach of, violate or conflict with any of the terms
or provisions of the Articles of Incorporation, as amended, or the Amended
Bylaws of Buyer, (iii) result in the acceleration or breach of any of the terms
or conditions of, or constitute (with due notice or lapse of time or both) a
default under, or violate or conflict with any agreement, lease, note, contract,
bond, indenture, license or other document or undertaking, oral or written, to
which Buyer is a party or by which it is bound and which could materially
adversely affect the consummation of the transactions contemplated hereby or
(iv) violate any rule, regulation, order, writ, injunction or decree of any
court, administrative agency or governmental body binding on Buyer.
ARTICLE 4
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COVENANTS OF SELLER AND PAREKH
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Each of Seller and Parekh covenant and agree as follows:
4.1 General. Seller will use its best efforts to take all action and do
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all things necessary or appropriate in order to consummate and make effective
the transactions contemplated by this Agreement (including satisfaction of the
closing conditions set forth in Article 6 hereto).
4.2 Guaranty of Seller. Seller and Parekh guarantee to Buyer the
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performance by Seller of each and every covenant, agreement or undertaking by
Seller and Parekh contained herein, and agrees that the guaranty herein shall be
absolute and unconditional, and without limiting the foregoing shall be further
secured by the Royalties, Base Product Override and New Product Override due to
Seller hereunder, with full right of offset.
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4.3 Conduct of Business. Seller shall operate Seller's business only in
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the normal and ordinary course consistent with past practices and, consistent
with such operations, will use its best efforts to perform all of its
contractual obligations and to preserve the value of the Assets and the
commercial prospects of the Brand through the Closing Date. Seller will
maintain itself as an ongoing entity and shall not take any action, or permit
itself to suffer any action that would result in a dissolution or winding up of
the business of Seller prior to, or for six (6) months after, the Closing Date,
including but not limited to the filing of a voluntary petition in bankruptcy,
or seeking reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Code, or under any state or
federal law granting relief to debtors, whether now or hereafter in effect; or
consent to any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors filed or commenced against the
Company; or the filing of an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition.
4.4 Noncompetition Agreement. For a period of three (3) years following
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the Closing Date, Seller will not, directly or indirectly, compete with Buyer in
the sale of heat and serve Indian food entree products in North America.
4.5 Access to Books and Records. Seller shall permit (and will cause
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Seller's employees to permit) Buyer and its agents to have full access at
reasonable times, to all premises, properties, personnel, books, records,
contracts and documents of, or pertaining to, Seller's business for the purpose
of conducting Buyer's due diligence in connection with this Agreement.
4.6 Notice of Developments. Seller and Parekh shall give prompt written
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notice to Buyer of any adverse development causing a breach of any of its or his
own representations and warranties in Article 2 hereof. No disclosure by
Seller, Parekh or any other party pursuant to this Section 4.6, however, shall
be deemed to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
4.7 Corporate Name. Unless Seller shall have changed its name sooner in
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compliance herewith, not later than ninety (90) days after the Closing Date,
Seller shall change its corporate name to a name which does not include its
present corporate name and which is not confusing with the corporate name or
other Intellectual Property being transferred hereunder.
4.8 Exclusivity. Seller will not (i) solicit, initiate, or encourage the
-----------
submission of any proposal or offer from any person relating to the acquisition
of the capital stock or other voting securities of Seller, or any substantial
portion of the Assets (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnishing any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
other person to do any of the foregoing. Seller will notify Buyer immediately
if any person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
10
<PAGE>
4.9 Publicity. Seller will not issue any press release or make any public
---------
announcement or disclosure relating to the subject matter of this Agreement
prior to the Closing Date without the prior written approval or Buyer.
ARTICLE 5
---------
COVENANTS OF BUYER
------------------
5.1 General. Buyer will use its best efforts to take all action and do
-------
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction of the closing conditions set forth in Article 7 hereto).
5.2 Guaranty of Buyer. Buyer guarantees to Seller the performance by
-----------------
Buyer of each and every covenant, agreement or undertaking by Buyer contained
herein, and agrees that the guaranty herein shall be absolute and unconditional.
ARTICLE 6
---------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER AND PAREKH
------------------------------------------------------------
The obligations of Seller and Parekh to close the transactions contemplated
by this Agreement at the Closing shall be subject to the fulfillment (or waiver
by Seller or Parekh as the case may be), prior to or at the Closing, of each of
the following conditions:
6.1 Buyer Compliance. Buyer shall have complied with and performed in all
----------------
material respects all the terms, covenants and conditions of this Agreement to
be complied with and performed by the Closing Date, and each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects on and as of the Closing Date and Seller shall
have received at the Closing a certificate to that effect dated as of the
Closing Date and executed on behalf of Buyer by a duly authorized officer of
Buyer.
6.2 Legal Constraints. There shall not have been issued and be in effect
-----------------
any injunction, order, decree or judgment of any court or tribunal of competent
jurisdiction, or enactment or promulgation of any applicable statute, rule or
regulation by any governmental or regulatory authority, prohibiting the
consummation of the transactions contemplated by this Agreement.
6.4 Payment of Purchase Price. The cash portion of the Purchase Price and
-------------------------
the Advance shall have been tendered in accordance with Sections 1.2 and 1.3,
respectively.
6.5 Documents; Employment Agreement. Buyer shall have executed and
-------------------------------
delivered to Seller the documents and instruments to be delivered by Buyer as
provided in Section 1.8, including without limitation the Employment Agreement,
and the same shall be in full force and effect.
11
<PAGE>
ARTICLE 7
---------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
------------------------------------------------
The obligations of Buyer to close the transactions contemplated by this
Agreement at the Closing shall be subject to the fulfillment (or waiver by
Buyer), prior to or at the Closing, of each of the following conditions:
7.1 No Liens. As of the Closing Date, each of the Assets shall be owned
--------
by Seller free and clear of all liens and encumbrances other than Permitted
Liens.
7.2 Seller and Parekh Compliance. Each of Seller and Parekh shall have
----------------------------
complied with and performed in all material respects all the terms, covenants
and conditions of this Agreement to be complied with and performed by them by
the Closing Date, and each of the representations and warranties made by Seller
and Parekh in this Agreement shall be true and correct in all material respects
on and as of the Closing Date and Buyer shall have received at the Closing a
certificate to that effect dated as of the Closing Date and executed on behalf
of Seller by a duly authorized officer of Seller.
7.3 Approval of the State Bank. Buyer shall have received, in form
--------------------------
reasonably satisfactory to Buyer in its sole discretion, an undertaking signed
by a duly authorized officer of State Bank to the effect that State Bank will
terminate the Security Interest at the Closing, and accept the cash sum of One
Hundred Seventy Five Thousand Dollars ($175,000) at the Closing, in full
settlement and satisfaction of the judgment referred to in Section 1.2(a) and
any and all other claims of State Bank against Seller, guarantors of the
obligations underlying such judgment, and Buyer, conditioned solely upon payment
by Buyer, on behalf of Seller, of the cash sum of One Hundred Seventy Five
Thousand Dollars ($175,000).
7.4 Satisfaction of Judgments. Buyer shall have received, in form
-------------------------
reasonably satisfactory to Buyer in its sole discretion, evidence of the
satisfaction and release of all judgment liens and pending litigation judgments
to which the Seller is a party.
7.5 Legal Constraints. There shall not have been issued and be in effect
-----------------
any injunction, order, decree or judgment of any court or tribunal of competent
jurisdiction, or enactment or promulgation of any applicable statute, rule or
regulation by any governmental or regulatory authority, prohibiting the
consummation of the transactions contemplated by this Agreement or which has the
potential to materially adversely affect the value of the Assets or the right of
Buyer to own and operate Sellers business or to own and operate Buyer's
businesses.
7.6 Truitt Brothers.
---------------
(a) That certain Supply Agreement dated April 20, 1993 by and between
Truitt Brothers, Inc., an Oregon corporation ("Truitt Brothers"), and Seller,
shall have been validly assigned or novated to Buyer on terms that are
acceptable to Buyer in its sole discretion and such assignment or novation shall
be in full force and effect as of the Closing Date.
12
<PAGE>
(b) Truitt Brothers shall have disclosed to Buyer all recipes,
formulations and related information in its possession for the manufacture of
all products comprising the Brand.
7.7 Documents. Seller shall have executed and delivered to Buyer the
---------
documents and instruments to be delivered by Seller as provided in Section 1.8,
and the same shall be in full force and effect.
7.8 Legal Opinion. Buyer shall have received from counsel for Seller an
-------------
opinion in form and substance as set forth in Exhibit 7.8 hereto, addressed to
------- ---
Buyer, and dated as of the Closing Date.
7.9 Consent of Fremont. Buyer shall have obtained the consent of its
------------------
lender, Fremont Financial Corporation ("Fremont") to the transaction.
ARTICLE 8
---------
REMEDIES AND INDEMNIFICATION
----------------------------
8.1 Survival of Representations, Warranties, Covenants and Obligations.
------------------------------------------------------------------
The respective covenants, representations and warranties of Buyer, Seller and
Parekh contained in this Agreement or in any certificates or other documents
delivered prior to or on the date of this Agreement shall not be deemed waived
or otherwise affected by any investigation made by the Parties hereto. Each and
every covenant, representation and warranty shall survive the Closing and remain
in full force indefinitely.
8.2 Indemnification of Buyer. Seller and Parekh, jointly and severally,
------------------------
shall indemnify, defend and hold harmless Buyer, and its officers, directors,
employees and agents (collectively, "the Buyer Indemnified Persons"), and will
pay to the Buyer Indemnified Persons, with the right of offset against the
Royalties, Base Product Override and New Product Override, the amount of any and
all losses, claims, damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees), to which the Buyer Indemnified Persons
may become subject related to or arising out of (i) any Liabilities other than
Assumed Liabilities, (ii) any failure on the part of Seller or Parekh to pay,
perform, satisfy or discharge any debt or other obligation of the Seller or
Parekh, (iii) any claim that this transaction constitutes a fraudulent
conveyance by Seller, (iv) any claim the this transaction violates any bulk
transfer laws in any jurisdiction, and (v) any breach of any representation,
warranty, covenant or agreement of Seller or Parekh contained in this Agreement
or in any other instrument or document delivered pursuant hereto.
8.3 Indemnification of Seller and Parekh. Buyer shall indemnify, defend
------------------------------------
and hold harmless Parekh and Seller, and its officers, directors and employees,
and each of their agents (collectively, the "Seller Indemnified Persons"), and
will pay to the Seller Indemnified Persons, the amount of any and all losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees) to which the Seller Indemnified Persons may become
subject related to or arising out of (i) any Assumed Liability, (ii) any breach
of any representation, warranty, covenant or agreement of Buyer contained in
this Agreement or in any other instrument or document delivered pursuant hereto.
13
<PAGE>
8.4 Notice.
------
(a) An indemnified party shall promptly give notice to the
indemnifying party within 15 business days after actual receipt of service or
summons to appear in any action begun in respect of which indemnity may be
sought hereunder, or actual notice of assertion of a claim with respect to which
the indemnified party seeks indemnification. Failure to so notify the
indemnifying party shall not cause the indemnified party to lose such party's
right to indemnification unless, and then only to the extent that, such failure
to so notify results in the loss of substantive rights or defenses or otherwise
prejudices the indemnifying party.
(b) If there be a final judgment for the plaintiff in any such action
or proceeding, then the indemnifying party shall indemnify and hold harmless the
indemnified party from and against any loss or liability (to the extent stated
above) by reason of such judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding without the written approval of the indemnified
party.
8.5 Remedies. The remedies provided in this Article 8 will not be
--------
exclusive of, or limit any other remedies, that may be available to any of the
Parties, the Seller Indemnified Persons or the Buyer Indemnified Persons.
ARTICLE 9
---------
MISCELLANEOUS MATTERS
---------------------
9.1 Expenses. Whether or not the transactions contemplated by this
--------
Agreement are consummated, the Parties agree to pay their own expenses incurred
in connection with the negotiation, execution and performance of this Agreement,
including, without limitation, fees of attorneys, consultants, accountants or
other agents, or other similar costs of Closing.
9.2 Notices. All notices, requests, demands and other communications to
-------
be given pursuant to this Agreement shall be in writing and will be delivered
personally, telecopied or sent by recognized overnight delivery service as
follows, and will be deemed given and effective when so delivered personally or
telecopied; provided, however, that in the case of such communications
delivered by an overnight delivery service, such shall be effective one day
following delivery.
If to Buyer:
Annie's Homegrown, Inc.
395 Main Street
Wakefield, MA 01880
Attn: Neil Raiff, Chief Financial Officer
Fax: 781/224-9728
14
<PAGE>
with a copy to:
Farella Braun & Martel LLP
235 Montgomery Street
San Francisco, CA 94104
Attn.: James E. Grand, Esq.
Fax: 415/954-4419
If to Seller:
Harshad M. Parekh
1037 State Street
Perth Amboy, New Jersey 08861
Fax: 732/293-1507
with a copy to:
Jeffry L. Feldman, P.C.
67 Wall Street
New York, NY 10005
Fax: 212/514-8902
Any party may change the address or facsimile telephone number to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this Section 9.2 for the giving of
notice.
9.3 Extensions, Waivers and Amendments. The Parties may by written
----------------------------------
agreement (i) extend the time for performance of any of the obligations or other
acts of the Parties hereto, (ii) waive any inaccuracies in the representations
contained in this Agreement or in any of the documents delivered pursuant to
this Agreement and (iii) waive compliance with or modify any of the agreements
contained in this Agreement and waive or modify performance of any of the
obligations of any of the Parties hereto; provided, however, that no failure or
delay on the part of any Party in exercising any of its respective rights
hereunder upon any failure by any other party to perform or observe any
condition, covenant or provision herein contained shall operate as a waiver
thereof, nor shall any single or partial exercise of any such rights preclude
any other or further exercise thereof or the exercise of any other right
hereunder.
9.4 Successors and Assigns. The Parties shall not have the right to
----------------------
assign all or any part of its interest in this Agreement without the prior
written consent of the other party. This Agreement shall be binding upon and
shall inure to the benefit of the Parties and their successors and permitted
assigns, if any.
15
<PAGE>
9.5 No Third-Party Benefits. Nothing in this Agreement shall be deemed to
-----------------------
create any right or obligation in anyone not a Party hereto, and this Agreement
shall not be construed in any respect to be a contract or agreement in whole or
in part for the benefit of or binding upon anyone not a Party hereto.
9.6 Entire Agreement. This Agreement and the Exhibits hereto constitute
----------------
the entire agreement among the Parties with respect to the transactions
contemplated herein and supersede all prior oral and written agreements
understandings and undertakings among the Parties relating to the subject matter
hereof.
9.7 Governing Law and Jurisdiction. This Agreement shall be governed by
------------------------------
and construed in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed entirely within New York.
9.8 Section Headings Construction. The section headings used herein are
-----------------------------
for convenience of reference only, are not a part of this Agreement and are not
to affect the construction of, or be taken into consideration in interpreting,
any provision of this Agreement.
9.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.10 Severability. In the event that any one or more of the provisions
------------
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality, and enforceability of any such
provision in every other respect and of the remaining provisions of this
Agreement shall net in any way be affected or impaired.
9.11 Covenant of Further Assurances. The Parties hereby agree to execute
------------------------------
such other documents and perform such other acts as may be necessary or
desirable to carry out the purposes of this Agreement.
[Signature Page Follows]
16
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SELLER: THE TAMARIND TREE, LTD.
a New Jersey corporation
By:
------------------------------
Harshad M. Parekh
Its: President
PAREKH:
---------------------------------
Harshad M. Parekh
Individually
BUYER: ANNIE'S HOMEGROWN, INC.
a Delaware corporation
By:
------------------------------
Paul A. Nardone
Its: President and Chief
Operating Officer
17
<PAGE>
JAMES E. GRAND
Direct Dial:
(415) 954-4419
E-mail: [email protected]
July 23, 1998
VIA FACSIMILE
- -------------
Mr. Paul Nardone Mr. Harshad Parekh
President 1037 State Street
Annie's Homegrown, Inc. Perth Amboy, NJ 08861
395 Main Street
Wakefield, MA 01880
Re: Amendment No. 1
Asset Purchase Agreement dated July 13, 1998
--------------------------------------------
That certain Asset Purchase Agreement by and among Tamarind Tree, Ltd.,
Annie's Homegrown, Inc. and Harchard M. Parekh, dated July 13, 1998 (the
"Agreement"), is hereby amended as follows:
1. The present subsection 1.2(a) is stricken in its entirety, and replaced
with the following:
"(a) Cash. Buyer shall deliver, by certified or cashier's check or
----
wire transfer of immediately available funds, on the Closing Date (as
defined in Section 1.7 hereto), the total amount of Two Hundred Thousand
Dollars ($200,000). Of this amount, the sum of One Hundred Seventy Five
Thousand Dollars ($175,000) shall be wired directly to the State Bank of
India, New York Branch ("State Bank") in accordance with its payment
instructions, in full settlement and satisfaction of all claims of State
Bank against Seller and Parekh, including without limitation, the judgment
obtained by State Bank against Seller in the Superior Court of New Jersey,
Law Division, Middlesex County, Docket No. L699-97 (filed November 19,
1997)."
<PAGE>
Mr. Paul Nardone
Mr. Harshad Parekh
July 23, 1998
Page 2
2. The present Section 7.3 is stricken in its entirety, and replaced with
the following:
"7.3 Approval of the State Bank. Buyer shall have received, in form
--------------------------
reasonably satisfactory to Buyer in its sole discretion, an undertaking signed
by a duly authorized officer of State Bank to the effect that State Bank will
terminate the Security Interest at the Closing, and accept the cash sum of One
Hundred Seventy Five Thousand Dollars ($175,000) at the Closing, in full
settlement and satisfaction of the judgment referred to in Section 1.2(a) and
any and all other claims of State Bank against Seller, guarantors of the
obligations underlying such judgment, and Buyer, conditioned solely upon payment
by Buyer, on behalf of Seller, of the cash sum of One Hundred Seventy Five
Thousand Dollars ($175,000)."
Pursuant to Section 9.3 of the Agreement, kindly indicate your assent to
the foregoing amendments by signing both copies of this letter in the space
below, and then return it to me in the self-addressed envelope which is provided
for your convenience.
Very truly yours,
James E. Grand, Esq.
Counsel for Annie's Homegrown, Inc.
JEG:JM
09867\5YNV01!.DOC:278203
Accepted and agreed:
SELLER: THE TAMARIND TREE, LTD.
a New Jersey corporation
By:
---------------------------------------
Harshad M. Parekh
Its: President
Date: _________________
<PAGE>
Mr. Paul Nardone
Mr. Harshad Parekh
July 23, 1998
Page 3
PAREKH:
------------------------------------------
Harshad M. Parekh
Individually
Date: _________________
BUYER: ANNIE'S HOMEGROWN, INC.
a Delaware corporation
By:
---------------------------------------
Paul A. Nardone
Its: President And Chief Operating Officer
Date: _________________
<PAGE>
ANNIE'S HOMEGROWN, INC.
395 MAIN STREET
WAKEFIELD, MA 01880
August 25, 1998
Fremont Financial Corporation
666 Fifth Avenue, 21st Floor
New York, NY 10103
Re: First Amendment to Loan Agreement
---------------------------------
Gentlemen:
Reference is made to the Loan and Security Agreement, dated February 3,
1998, (the "Loan Agreement") and all supplements, agreements, documents and
instruments entered into by Annie's Homegrown, Inc. ("Borrower") pursuant
thereto, (collectively, as defined in the Loan Agreement, the "Loan Documents").
Capitalized terms used herein shall have the meanings given them in the Loan
Documents.
Borrower has determined that it would be in its best interest to acquire
certain assets (the "Purchased Assets") comprising the "Tamarind Tree" line of
food products from The Tamarind Tree Ltd. ("Seller") pursuant to an Asset
Purchase Agreement dated July 13, 1998, as amended (the "Purchase Agreement").
In connection with this acquisition, Borrower has requested that Fremont provide
additional financing through a $300,000 term loan and a $300,000 increase to the
Revolving Advance Limit to facilitate the acquisition of the Purchased Assets,
and modify certain provisions of the Loan Agreement in connection therewith.
Subject to the terms hereof, Fremont and Borrower agree as follows:
1. Consent and Waiver. Fremont hereby consents to Borrower's purchase of
------------------
the Purchased Assets pursuant to the terms of the Purchase Agreement and waives
any Event of Default under the Loan Agreement arising solely from the Borrower's
purchase of the Purchased Assets as provided herein.
2. Amendments to Loan Agreement.
----------------------------
(a) Section 1.1. Section 1.1 is amended to add the following definition at
-----------
the end thereof after the definition of "Reference Rate":
"Term Loan means the $300,000 term loan made by Fremont to Borrower
pursuant to the terms of the First Amendment, evidenced by and
repayable in accordance with the terms and conditions of the Secured
Promissory Note delivered by Borrower pursuant to the First Amendment.
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 2
(b) Section 2.1. Section 2.1 is deleted in its entirety and the following
-----------
is substituted in place thereof:
"A. REVOLVING ADVANCES; REVOLVING ADVANCE LIMIT. Upon the request of an
Authorized Representative, made at any time or from time to time during the
term hereof, and so long as no Event of Default has occurred and is
continuing, Fremont shall, in its sole and absolute discretion, make
advances (the Revolving Advances) to Borrower in an amount up to (a) the
lesser of Nine Hundred Thousand Dollars ($900,000.00) or ninety percent
(90%) of (i) the aggregate outstanding amount of Liberty Eligible Accounts
or (ii) the undrawn amount of the Letter of Credit, plus (b) the lesser of
(1) seventy-five (75%) of the aggregate outstanding amount of Eligible
Accounts owing from Account Debtors other than Liberty Richter or (2) One
Hundred Fifty Thousand Dollars ($150,000.00), plus, subject to Section 2.1C
hereof, (c) the lesser of (1) fifty percent (50%) of the aggregate value of
the Eligible Inventory or (2) Two Hundred Thousand Dollars ($200,000.00);
provided, however, that in no event shall the aggregate amount of the
outstanding Revolving Advances be greater than, at any time, the sum of
Nine Hundred Thousand Dollars ($900,000.00) (the Revolving Advance Limit).
Fremont may reduce its advance rates on Eligible Accounts or Eligible
Inventory, reduce the Revolving Advance Limit or establish reserves with
respect to borrowing availability if Fremont determines, in its sole
discretion, that there has occurred, or is likely to occur, an impairment
of the prospect of repayment of all or any portion of the Obligations, the
value of the Collateral or the validity or priority of Fremont's security
interests in the Collateral. Fremont will endeavor to promptly notify
Borrower of any such reduction in advance rates and/or additional reserves
against Eligible Accounts or Eligible Inventory provided that the failure
of Fremont to furnish any such notice shall not affect such action by
Fremont, any of its rights and remedies hereunder or give rise to a cause
of action or claim against Fremont by Borrower.
B. TERM LOAN. Concurrently with satisfaction of the conditions precedent
under the First Amendment, Fremont will make a Term Loan to Borrower in the
original principal amount of Three Hundred Thousand Dollars ($300,000.00)
to be evidenced by and repayable in accordance with the terms and
conditions of a Note dated August __, 1998. Such Term Loan and any other
Term Loan subsequently made by Fremont to Borrower shall constitute
Obligations and shall be secured by the Collateral. The occurrence of a
default under such Note or under any Note made in respect of any subsequent
Term Loan shall constitute an Event of Default hereunder.
C. ADVANCE LIMIT. The Revolving Advance Limit plus the principal amount of
all Term Loans outstanding from time to time is referred to herein as the
Advance Limit.
D. INVENTORY REVOLVING ADVANCES. The Borrower acknowledges and agrees that
until such time as VJI and each other Person that leases or controls the
premises where Borrower's inventory is located has entered into lien waiver
and access agreements
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 3
with Lender satisfactory to Lender in its sole discretion, relating to
inventory located on such Person's premises, no Revolving Advances shall be
made or available to Borrower pursuant to Section 2.1A(c) hereof."
(c) Section 2.8. Section 2.8 is amended to delete the first sentence
-----------
thereof and the following is substituted in place thereof:
"Borrower shall pay Fremont an annual fee (the Annual Facility Fee) in
the sum of Nine Thousand Dollars ($9,000) plus one percent (1%) of the
outstanding principal balance of the Term Loan."
(d) Section 5.4. Section 5.4 is amended to add the following location to
-----------
the locations listed therein: Truitt Bros., Inc., 1105 Front Street, N.E.,
Salem, Oregon 97303.
(e) Section 5.6. Section 5.6 is stricken in its entirety and replaced with
-----------
the following: "The chief executive offices of Borrower is located at 395 Main
Street, Wakefield, Massachusetts 01880".
(f) Section 5.8. Section 5.8 is amended to add the following fictitious
-----------
name: Tamarind Tree.
--------------
(g) Section 6.18. Section 6.18 is amended to delete the amount
------------
"$500,000.00" and to substitute in place thereof "$1,000,000.00".
(h) Section 12. Section 12 is hereby amended to change the address of
----------
Borrower to Annie's Homegrown, Inc., 395 Main Street, Wakefield, Massachusetts
01880.
3. Conditions Precedent. As conditions precedent to the effectiveness of
--------------------
this First Amendment, each of the following conditions shall be satisfied to the
satisfaction of Fremont unless waived by Fremont in writing:
(a) No Event of Default shall exist;
(b) Borrower shall have executed and delivered to Fremont this First
Amendment, the Term Note, the Trademark Security Agreement and all other
instruments, documents, agreements, waivers, financing statements, assignments
and subordination agreements as in the opinion of Fremont may be necessary to
give effect to the First Amendment, the transactions contemplated thereby or the
perfection of Fremont's security interest in the Purchased Assets;
(c) Borrower shall have delivered to Fremont and its counsel true and
complete certified copies of the Purchase Agreement and all instruments,
documents and agreements entered into pursuant or relating thereto and all
conditions precedent to the effectiveness of the Purchase Agreement shall have
been satisfied and not waived or, if waived Fremont shall have consented to such
waiver in writing;
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 4
(d) Borrower shall have delivered evidence satisfactory to Fremont that all
Purchased Assets will be, effective on the closing under the Purchase Agreement,
free and clear of all liens, security interest, encumbrances and claims of any
kind, except in favor of Fremont and as permitted under the Loan Documents.
(e) Borrower shall have executed, and Fremont shall have filed, all
financing statements and other instruments deemed necessary or desirable to
Fremont to perfect Fremont's security interest in the Purchase Assets, and
Fremont shall have received assurances satisfactory to it that such security
interests are duly perfected, first priority security interests;
(f) Borrower shall have delivered to Fremont evidence satisfactory to
Fremont that the Purchased Assets have been insured under the Borrower's
insurance policies;
(g) Borrower shall have delivered to Fremont a disbursement letter
authorizing Fremont to pay all or a portion of the advances under the Loan
Documents in connection with the Purchase Agreement to the persons and in the
amount set forth in such letter;
(h) The Letter of Credit shall be amended in a manner satisfactory to
Fremont to increase the amount thereof to $1,000,000.00; and
(i) Since March 31, 1998 there shall not have occurred any material adverse
change in the business, financial condition or results of operation of Borrower
or to the existence or value of the Collateral or Purchased Assets.
Borrower's failure to fulfill, or to cause to be fulfilled, each of the
foregoing conditions precedent to the satisfaction of Fremont on or before
August 31, 1998, shall relieve Fremont of any responsibility to consummate the
transactions contemplated by the First Amendment.
4. Borrower shall pay a $6,000 amendment fee in connection with this First
Amendment, which fee shall be fully earned and due and payable on the date
hereof.
5. Borrower confirms that all representations and warranties set forth in
the Loan Agreement are and remain on the date hereof, true, accurate and
complete in all respects, except as to those modifications thereto set forth
herein arising out of the transactions contemplated by the Purchase Agreement.
6. Borrower acknowledges that it is unconditionally liable for the
punctual and full payment of all Obligations, including, without limitation, all
charges, fees, expenses and costs (including attorneys' fees and expenses) under
the Loan Agreement and other Loan Documents, and that Borrower has no defenses,
counterclaims or setoffs with respect to full, complete and timely payment of
all Obligations.
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 5
7. Borrower acknowledges, confirms and agrees that under Section 4.1 of
the Loan Agreement and under certain of the other Loan Documents the Borrower
has granted to Lender security interests and liens in the Collateral described
therein and that Borrower has good and indefeasible title to all of the
Collateral, including without limitation all assets acquired pursuant to the
Purchase Agreement, free and clear of liens, security interests or encumbrances
except those permitted under Section 7.2 of the Loan Agreement. Borrower
further acknowledges and agrees that the security interests and liens granted by
Borrower in the Collateral secure the payment of all Obligations.
8. Each of the Guarantors consents to the terms and conditions of this
First Amendment and ratify and confirm the terms of their respective Continuing
Guaranties.
9. Except as set forth herein, the undersigned confirm that the Loan
Agreement and other Loan Documents remain in full force and effect without
amendment or modification of any kind. The undersigned further confirm that no
Event of Default or events which with notice or the passage of time or both
would constitute an Event of Default have occurred and are continuing except as
waived under paragraph 1 hereof. The execution and delivery of this Amendment
by Fremont shall not be construed as a waiver by Fremont of any Event of Default
existing on the date hereof under the Loan Agreement. This Amendment, together
with the Loan Documents, constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior dealings,
correspondence, conversations or communications between the parties with respect
to the subject matter hereof.
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 6
Executed under seal on the date set forth above.
ANNIE'S HOMEGROWN, INC.
By:
-------------------------------
Name: Paul B. Nardone
Title: President
Accepted in New York, New York
on August ___, 1998
FREMONT FINANCIAL CORPORATION
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF ____________________ August 25, 1998
Then personally appeared the above-named Paul B. Nardone and stated that he
is a duly authorized officer of Annie's Homegrown, Inc. (the "Corporation"), and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation, before me,
----------------------------------------
, Notary Public
My Commission Expires:
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 7
Acknowledged and Agreed:
Executed under seal on the date set forth above.
----------------------------------------
Ann E. Withey, Guarantor
STATE OF ______________________
COUNTY OF ____________________ August __, 1998
Then personally appeared the above-named Ann E. Withey and acknowledged the
foregoing to be her free act and deed and the free act before me,
----------------------------------------
, Notary Public
My Commission Expires:
<PAGE>
Fremont Financial Corporation
August 25, 1998
Page 8
Acknowledged and Agreed:
Executed under seal on the date set forth above.
----------------------------------------
Andrew Martin, Guarantor
STATE OF ______________________
COUNTY OF ____________________ August __, 1998
Then personally appeared the above-named Andrew Martin and acknowledged the
foregoing to be his free act and deed and the free act before me,
----------------------------------------
, Notary Public
My Commission Expires:
<PAGE>
SECURED PROMISSORY NOTE
$300,000.00 August 25, 1998
FOR VALUE RECEIVED, the undersigned, ANNIE'S HOMEGROWN, INC., a Delaware
corporation (Borrower), hereby promises to pay to FREMONT FINANCIAL CORPORATION,
a California corporation (Fremont), or order, at 666 Fifth Avenue, 21st Floor,
New York, New York 10103, or at such other address as the holder hereof may
specify in writing, the principal sum of THREE HUNDRED THOUSAND DOLLARS
($300,000.00) plus interest in the manner and upon the terms and conditions set
forth below.
1. DEFINED TERMS. Any and all initially capitalized terms used herein shall
have the meanings ascribed to them in that certain Loan and Security Agreement
dated as of February 3, 1998 between Fremont and Borrower (the Loan Agreement),
unless specifically defined herein.
2. RATE OF INTEREST. The outstanding principal balance of this Secured
Promissory Note (this Note) shall bear interest at the rate of three percent
(3.0%) per annum above the Reference Rate. The Reference Rate as of the date of
this Note is eight and one half percent (8.1/2%) per annum, and, therefore, the
effective rate of interest hereunder as of the date of this Note is eleven and
one half percent (11 1/2%) per annum. The interest rate payable under the terms
of this Note shall be adjusted in accordance with any change in the Reference
Rate from time to time on the date of any such change. Any interest not paid
when due may be compounded by adding it to the principal and thereafter shall
bear interest at the rate provided herein. Upon the occurrence of an Event of
Default under the Loan Agreement, at Fremont's option, the rate of interest on
this Note, without constituting a waiver of any such Event of Default, shall be
increased to six percent (6.0%) per annum above the Reference Rate. All
interest payable under this Note shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed. Interest
shall continue to accrue until this Note is paid in full.
3. SCHEDULE OF PAYMENTS; COTERMINOUS WITH LOAN AGREEMENT. Principal and
interest shall be due and payable on the dates and in the manner set forth
below:
(a) Principal shall be payable in twenty (20) equal consecutive monthly
installments of Fifteen Thousand Dollars ($15,000.00) each, commencing October
1, 1998 and continuing thereafter on the first day of each subsequent month
until May 1, 2000 when the unpaid principal balance of this Note and all accrued
interest and other charges shall be due and payable in full.
(b) All interest payable by Borrower shall be due and payable on the first
day of each month commencing on September 1, 1998 and continuing thereafter
until this Note is paid in full.
(c) Notwithstanding anything to the contrary in this Note or any of the
other Loan Documents, all unpaid principal, accrued interest and other charges
owing under this Note shall be due and payable in full upon the termination of
the Loan Agreement for any reason whatsoever.
4. PREPAYMENT. Without the consent of Fremont, which may be granted or
withheld by Fremont in its sole discretion, Borrower shall not be entitled to
prepay this Note except in conjunction with a termination of the Loan Agreement
and concurrent repayment of all of the Obligations; provided, however, that in
the event that Borrower shall issue any equity securities whether issued as
convertible debt or otherwise (other than in connection with issuances under
Borrower's existing employee stock option plans) the proceeds thereof, after
payment of any reasonable and customary issuance costs, shall be paid to Fremont
to prepay this Note. If such a termination of the Loan Agreement constitutes an
early termination pursuant to Section 3.2 of the Loan Agreement, the unpaid
-----------
principal amount of this Note shall be subject to the Early Termination Fee
described in Section 3.2 of the Loan Agreement. Any such Early Termination Fee
-----------
in respect of the unpaid principal amount of this Note shall be presumed to be
the amount of damages sustained by Fremont as the result of the prepayment and
Borrower agrees that it is a reasonable fee under the circumstances currently
existing.
5. RIGHT OF ACCELERATION. Upon Borrower's failure to make any payment under
this Note when due or the occurrence of any other Event of Default under the
Loan Agreement, Fremont may, at its election and without notice to Borrower,
declare the
<PAGE>
entire balance hereof immediately due and payable in full.
6. LATE CHARGE. If any installment of principal or interest is not paid within
ten (10) days of the date on which it is due, Fremont may assess a late charge
equal to ten percent (10.0%) of the amount of such late payment. This charge is
a result of the reasonable endeavor by Borrower and Fremont to estimate
Fremont's added costs and damages resulting from Borrower's failure to make
timely payments under this Note; hence, Borrower agrees that the charge shall be
presumed to be the amount of damage sustained by Fremont since it is
impracticable to determine the actual amount necessary to reimburse Fremont for
its damages.
7. SECURITY. Borrower understands and agrees that this Note is secured by,
among other things, the security interests granted to Fremont under the Loan
Agreement and other Loan Documents, and that this Note is subject to all the
terms and conditions thereof including without limitation the remedies specified
therein.
8. WAIVERS. Borrower hereby waives presentment for payment, protest, demand,
notice of dishonor, notice of nonpayment, notice of maturity, notice of intent
to accelerate, notice of acceleration, presentment for the purpose of
accelerating maturity and diligence in collection.
9. SUCCESSORS AND ASSIGNS. This Note shall bind and inure to the benefit of
the respective successors and assigns of Borrower and Fremont; PROVIDED,
HOWEVER, that Borrower may not assign this Note or any rights or duties
hereunder without Fremont's prior written consent and any prohibited assignment
shall be void and of no effect as against Fremont. No consent to an assignment
by Fremont shall release Borrower from its obligations hereunder. Fremont and
its successors and assigns may assign this Note and its rights and duties
hereunder. Fremont reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in Fremont's rights
and benefits hereunder. In connection therewith, Fremont may disclose all
documents and information which Fremont now or hereafter may have relating to
Borrower or Borrower's business. Borrower expressly consents to any assignment
by Fremont to its wholly owned subsidiary, Fremont Funding Inc., of certain of
Fremont's rights hereunder, including the beneficial interest in loans made by
Fremont, and any subsequent assignment by Fremont Funding Inc. to LaSalle
National Bank (or any successor trustee), as trustee of the Fremont Small
Business Loan Master Trust, of such rights.
10. GENERAL PROVISIONS.
(a) If this Note is not paid when due, Borrower promises to pay all costs
of collection, foreclosure fees and reasonable attorneys fees incurred by
Fremont, whether or not suit is filed hereon.
(b) This Note may not be changed, modified, amended or terminated except
by a writing duly executed by Borrower and Fremont.
(c) No waiver of any rights under this Note is valid or effective unless
made in writing and signed by Fremont.
(d) No delay or omission on the part of Fremont in exercising any right
shall operate as a waiver thereof or of any other right.
(e) A waiver by Fremont upon any one occasion shall not be construed as a
bar or waiver of any right or remedy on any future occasion.
(f) Should any one or more of the provisions of this Note be determined
illegal or unenforceable, all other provisions shall nevertheless remain
effective.
(g) Section headings used in this Note are solely for convenience of
reference, shall not constitute a part of this Note for any other purpose and
shall not affect the construction of this Note.
11. CHOICE OF LAW AND VENUE.
THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
2
<PAGE>
BORROWER AND FREMONT AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, THE FEDERAL COURTS WHOSE
VENUE INCLUDES THE COUNTY OF NEW YORK, STATE OF NEW YORK, OR, AT THE SOLE OPTION
OF FREMONT, IN ANY OTHER COURT IN WHICH FREMONT SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. BORROWER AND FREMONT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT, AND
BORROWER AND FREMONT HEREBY WAIVE ANY OBJECTION WHICH THEY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. FURTHERMORE,
BORROWER AND FREMONT WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT THEY MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 11.
- ----------
12. WAIVER OF JURY TRIAL.
BORROWER AND FREMONT HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND
FREMONT REPRESENT TO EACH OTHER THAT THEY HAVE REVIEWED THIS WAIVER AND
KNOWINGLY AND VOLUNTARILY WAIVE THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS NOTE MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered
at Fremont's place of business in New York, New York.
BORROWER:
ANNIE'S HOMEGROWN, INC.,
a Delaware corporation
Signed By:
-----------------------------
Print Name: Paul B. Nardone
Title/Capacity: President
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF ____________________ August 25, 1998
Then personally appeared the above-named Paul B. Nardone and stated that he
is a duly authorized officer of Annie's Homegrown, Inc. (the "Corporation"), and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation, before me,
---------------------------------------
, Notary Public
My Commission Expires:
3
<PAGE>
TRADEMARK SECURITY AGREEMENT
----------------------------
AGREEMENT dated as of August 25, 1998 made by Annie's Homegrown, Inc., a
California corporation with chief executive office at 95 Main Street, Wakefield,
Massachusetts 01880 ("Borrower"), in favor of Fremont Financial Corporation, a
California corporation with a place of business at 666 Fifth Avenue, 21st Floor,
New York, New York 10103, and its successors, assigns, and other legal
representatives ("Secured Party").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Secured Party are parties to a Loan and Security
Agreement, dated as of February 3, 1998 as amended by a First Amendment dated as
of the date hereof (as further amended, modified or supplemented from time to
time, the "Loan Agreement"), and certain supplements, agreements and instruments
entered into pursuant thereto as such may be amended, modified or supplemented
from time to time (collectively, with the Loan Agreement, the "Loan Documents"),
pursuant to which Secured Party may make certain loans and credit accommodations
to Borrower; and
WHEREAS, Secured Party's willingness to enter into the First Amendment to
the Loan Agreement and make the loans and credit accommodations available
thereunder is subject to the condition, among others, that Borrower execute and
deliver this Trademark Collateral Assignment and Security Agreement;
NOW, THEREFORE, in consideration of the premises and for one dollar ($1.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and in addition to, and not in limitation of, any
rights of the Secured Party under the Loan Documents, Borrower hereby agrees for
the benefit of Secured Party as follows:
1. DEFINITIONS.
-----------
1.1 All capitalized terms used herein shall have the respective
meanings provided therefor in the Loan Documents. In addition, the following
terms shall have the meanings set forth in this Section 1 or elsewhere in this
Security Agreement referred to below:
"Associated Goodwill" shall mean all goodwill of the Borrower or its
-------------------
business, products and services appurtenant to, associated with or symbolized by
the Trademarks and/or the use thereof.
"Proceeds" shall mean any consideration received from the sale,
--------
exchange, license, lease or other transfer or disposition of any right,
interest, asset or property which constitutes Trademark Collateral, any value
received as a consequence of the ownership, possession, or use of any Trademark
Collateral, and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any right, interest, asset or property which constitutes
Trademark Collateral.
<PAGE>
"PTO" shall mean the United States Patent and Trademark Office.
---
"Related Assets" shall mean all assets, rights and interests of the
--------------
Borrower which uniquely reflect or embody the Associated Goodwill, including but
not limited to the following: all patents, inventions, copyrights, trade
secrets, confidential information, formulae, algorithms, methods, processes,
compounds, know-how, operating systems, drawings, descriptions, formulations,
manufacturing and production and delivery procedures, quality control
procedures, product and service specifications, catalogs, price lists, and
advertising materials, relating to the manufacture, production, delivery,
provision, licensing and sale of goods or services under or in association with
any of the Trademarks, and all books and records describing or used in
connection with any or all of the foregoing.
"Trademarks" shall mean all of the trademarks, service marks, designs,
----------
logos, indicia, trade names, corporate names, company names, business names,
fictitious business names, trade styles, elements of package or trade dress,
and/or other source and/or product or service identifiers, and general
intangibles of like nature, used or associated with or appurtenant to the
products, services and business of the Borrower, which (i) are set forth on
Schedule A attached hereto, or (ii) have been adopted, acquired, owned, held or
- -------- -
used by the Borrower and are now owned, held or used by the Borrower, in the
Borrower's business, or with the Borrower's products and services, or in which
the Borrower has any right, title or interest, or (iii) are in the future
adopted, acquired, owned, held and/or used by the Borrower in the Borrower's
business or with the Borrower's products and services, or in which the Borrower
in the future acquires any right, title or interest.
"Trademark Collateral" shall mean all of the Borrower's right, title
--------------------
and interest (to the extent Borrower has any such right, title or interest) in
and to all of the Trademarks, the Trademark Registrations, the Trademark Rights,
the Associated Goodwill, the Related Assets, and all additions, improvements and
accessions to, substitutions for, replacements of, and all products and Proceeds
(including insurance proceeds) of any and all of the foregoing.
"Trademark Registrations" shall mean all past, present or future
-----------------------
federal, state, local and foreign registrations of the Trademarks (and all
renewals and extensions of such registrations), all past, present and future
applications for any such registrations of the Trademarks (and any such
registrations thereof upon approval of such applications), together with the
right (but not the obligation) to apply for such registrations (and prosecute
such applications) in the name of the Borrower or the Secured Party, and to take
any and all actions necessary or appropriate to maintain such registrations in
effect and/or renew and extend such registrations.
"Trademark Rights" shall mean any and all past, present or future
----------------
rights in, to and associated with the Trademarks throughout the world, whether
arising under federal law, state law, common law, foreign law or otherwise,
including but not limited to the following: all such rights arising out of or
associated with the Trademark Registrations; the right (but not the obligation)
to register claims under any state, federal or foreign trademark law or
regulation; the right (but not the obligation) to sue or bring opposition or
cancellation proceedings in the name of
2
<PAGE>
the Borrower or the Secured Party for any and all past, present and future
infringements or dilution of or any other damages or injury to the Trademarks,
the Trademark Rights, or the Associated Goodwill, and the rights to damages or
profits due or accrued arising out of or in connection with any such past,
present or future infringement, dilution, damage or injury.
"Use" of any Trademark shall include all uses of such Trademark by,
---
for or in connection with the Borrower or its business or for the direct or
indirect benefit of the Borrower or its business, including but not limited to
all such uses by the Borrower itself, by any of the affiliates of the Borrower,
or by any licensee or contractor of the Borrower.
2. GRANT OF SECURITY; COLLATERAL ASSIGNMENT.
----------------------------------------
2.1 Grant of Security Interest. As collateral security for the
--------------------------
complete and timely payment, performance and satisfaction of all Obligations,
the Borrower hereby unconditionally grants to the Secured Party, a continuing
security interest in and first priority lien on the Trademark Collateral, and
pledges, mortgages and hypothecates (but does not transfer title to) the
Trademark Collateral to the Secured Party.
2.2 Collateral Assignment.
---------------------
(a) In addition to, and not by way of limitation of, the grant,
pledge, mortgage and hypothecation of the Trademark Collateral provided in
Section 2.1, the Borrower hereby grants, assigns, transfers, conveys and sets
over to the Secured Party, its entire right, title and interest in and to the
Trademark Collateral; provided, however, that such grant, assignment, transfer
-------- -------
and conveyance shall be and become of force and effect only at the election of
the Secured Party upon or following an Event of Default under the Loan
Documents. The foregoing grant, assignment, transfer and conveyance shall be
referred to from time to time herein as the "Section 2.2 Assignment."
(b) The Borrower acknowledges and agrees that, upon the effectiveness
of the Section 2.2 Assignment, the Secured Party shall have the cumulative
rights in and to the Trademark Collateral as are provided in this Security
Agreement and in the other Loan Documents.
2.3 Supplemental to Loan Documents. The parties expressly
------------------------------
acknowledge to the Secured Party and agree that on the date of this Security
Agreement the Borrower delivered the Loan Documents pursuant to which the
Borrower unconditionally granted to the Secured Party, a continuing security
interest in and first priority lien on the Collateral (including the Trademark
Collateral). In no event shall this Security Agreement, the Section 2.2
Assignment of the Trademark Collateral hereunder, or the recordation of this
Security Agreement (or any document hereunder) with the PTO, adversely affect or
impair, in any way or to any extent, the Loan Documents, the security interest
of the Secured Party in the Collateral (including the Trademark Collateral)
pursuant to the Loan Documents, the attachment and perfection of such security
interest under the Code, or the present or future rights and interests of the
Secured Party in and to the Collateral under or in connection with the Loan
Documents, this Security Agreement
3
<PAGE>
and/or the Code. Any and all rights and interests of the Secured Party in and
to the Trademark Collateral (and any and all obligations of the Borrower with
respect to the Trademark Collateral) provided herein, or arising hereunder or in
connection herewith, shall only supplement and be cumulative and in addition to
the rights and interests of the Secured Party (and the obligations of the
Borrower) in, to or with respect to the Collateral (including the Trademark
Collateral) provided in or arising under or in connection with the other Loan
Documents.
2.4 Effect of Section 2.2 Assignment. Upon the effectiveness of the
--------------------------------
Section 2.2 Assignment, the Secured Party shall own the entire right, title and
interest in and to the Trademark Collateral, free and clear of any lien, charge,
encumbrance or claim of the Borrower or any other party (other than ownership
and other rights reserved by owners of Licensed Trademarks or other Trademark
Collateral licensed to the Borrower). Upon such effectiveness, in addition to
all other rights and remedies of the Secured Party, whether under law, the Loan
Documents or otherwise (all such rights and remedies being cumulative, not
exclusive, and enforceable alternatively, successively or concurrently, without
notice to or consent by the Borrower except as expressly provided otherwise
herein), the Secured Party's rights and remedies with respect to the Trademark
Collateral, shall include but not be limited to the following, without payment
of royalty or compensation of any kind to the Borrower except as expressly
provided otherwise herein:
(a) The Secured Party may exercise, in respect of the Trademark
Collateral, all the rights and remedies of a secured party upon default under
the Uniform Commercial Code (whether or not such Code applies to the affected
Trademark Collateral) or other law applicable to any part of the Trademark
Collateral.
(b) The Secured Party may operate the business of the Borrower using
the Trademark Collateral.
(c) The Secured Party may, to the same extent that the Borrower has
the right to do so immediately prior to the effectiveness of the Section 2.2
Assignment, license or sublicense, whether general, special or otherwise and
whether on an exclusive or nonexclusive basis, any of the Trademark Collateral,
throughout the world for such term or terms, on such conditions, and in such
manner, as the Secured Party shall in its sole discretion determine.
(d) In general, the Secured Party may exercise, in respect of the
Trademark Collateral, all rights and remedies provided under the other Loan
Documents, or otherwise including, without limitation, all rights and remedies
of a secured party on default under the Code (whether or not the Code applies to
the Trademark Collateral).
(e) In addition to the foregoing, in order to implement the
assignment, sale, transfer or other disposition of any of the Trademark
Collateral, the Secured Party may, pursuant to the authority granted in the
power of attorney provided in Section 5 hereof (such authority becoming
effective upon the occurrence and during the continuation of an Event of
Default), execute and deliver on behalf of the Borrower one or more instruments
of assignment of
4
<PAGE>
the Trademark Collateral, in form suitable for filing, recording or registration
in any jurisdiction or country.
2.4 Effect of Section 2.2 Assignment - Borrower's Obligations.
---------------------------------------------------------
(a) Upon the effectiveness of the Section 2.2 Assignment provided
herein, the Borrower shall have no right, title or interest in or to any of the
Trademark Collateral, and the Borrower shall immediately cease and desist in the
use of the Trademarks or any colorable imitation thereof, and shall, upon
written demand of the Secured Party, deliver to the Secured Party (or the
Secured Party's designee) all unused or unsold goods bearing the Trademarks.
(b) In addition, upon the effectiveness of the Section 2.2 Assignment
provided herein, upon the written demand of the Secured Party, the Borrower
shall execute and deliver to the Secured Party an assignment or assignments of
the Trademark Collateral and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Security Agreement;
provided that the failure of the Borrower to comply with such demand will not
- --------
impair or affect the validity of the Section 2.2 Assignment. The Borrower
agrees that any such assignment (including a Section 2.2 Assignment) and/or any
recording thereof shall be applied to reduce the Obligations outstanding only to
the extent that the Secured Party actually receives cash proceeds in respect of
the assignment, sale, license, transfer or disposition of, or other realization
upon, the Trademark Collateral.
(c) In the event of any such license, assignment, sale, transfer or
other disposition of the Trademark Collateral, or any of it, after the
occurrence and during the continuation of an Event of Default, whether to or by
the Secured Party, the Borrower shall supply to the Secured Party (or the
Secured Party's designee) the Borrower's know-how and expertise relating to the
products and services sold and provided under the Trademarks, and other records
relating to the Trademark Collateral and to the production, marketing, delivery
and sale of said products and services.
2.5 No Obligations of Secured Party. Nothing herein contained shall
-------------------------------
be construed as obligating the Secured Party to take any of the foregoing
actions at any time.
2.6 Costs and Application of Proceeds. The Borrower agrees to pay
---------------------------------
when due all costs incurred in any license, assignment, sale, transfer or other
disposition of all or any portion of the Trademark Collateral to or by the
Secured Party, including any taxes, fees and reasonable attorneys' fees, and all
such costs shall be added to the Obligations. The Secured Party may apply the
Proceeds actually received from any such license, assignment, sale, transfer,
other disposition or other collection or realization, to the out-of-pocket costs
and expenses thereof, including, without limitation, attorneys' fees and all
legal, travel and other expenses which may be incurred or paid by the Secured
Party in protecting or enforcing its rights upon or under this Security
Agreement, the Trademark Collateral, the Collateral or the Obligations, and any
proceeds remaining shall be held by the Secured Party as collateral for, and/or
then or at any time thereafter applied to the Obligations, in accordance with
the Loan Documents; and the Borrower shall remain liable and will pay the
Secured Party on demand any deficiency remaining, together with
5
<PAGE>
interest thereon at a rate equal to the highest rate then payable on the
Obligations and the balance of any expenses unpaid.
2.7 License. In addition to, and not by way of limitation of, all
-------
other rights of the Secured Party and obligations of the Borrower pursuant to
this Security Agreement and the other Loan Documents, upon the effectuation of a
Section 2.2 Assignment, the Secured Party shall hold an exclusive fully paid-up,
irrevocable and perpetual, worldwide right and license to make use, practice and
sell (or license or otherwise transfer to third persons) the Trademark
Collateral, for the exclusive purpose of (and to the extent necessary and
sufficient for) the full and complete enjoyment and exercise of and realization
upon the rights, remedies and interests of the Secured Party pursuant to this
Security Agreement and the other Loan Documents.
3. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
------------------------------
to, and covenants and agrees with, Secured Party, as follows:
3.1 Schedules of Trademarks. Set forth on Schedule A hereto is a
----------------------- -------- -
true and complete list of all present Trademarks and Trademark Registrations of
the Borrower. All licenses and other agreements applicable to the Trademarks
are the valid and binding obligations of all of the parties thereto, enforceable
against each of such parties in accordance with their respective terms (provided
--------
that, with respect to any such parties other than the Borrower and its
- ----
affiliates, such representation and warranty is made to the best of the
Borrower's knowledge and belief).
3.2 Title. The Borrower is and will continue to be the sole and
-----
exclusive owner of the entire legal and beneficial right, title and interest in
and to the Trademarks (except for licenses and rights granted in the ordinary
course of business) and sufficient Trademark Collateral to preserve the
Borrower's rights in its Trademarks, free and clear of any lien, charge,
security interest or other encumbrance, except for the security interest and
conditional assignment created by this Security Agreement and the other Loan
Documents, and except for liens and encumbrances explicitly permitted pursuant
to the Loan Documents. The Borrower will defend its right, title and interests
in and to the Trademarks and the Trademark Collateral against any and all claims
of any third parties.
3.3 Validity and Enforceability. The Trademarks and the Trademark
---------------------------
Registrations and Trademark Rights related thereto are subsisting, and have not
been adjudged invalid or unenforceable; all of the Trademarks and the Trademark
Registrations and Trademark Rights related thereto are valid and enforceable;
the Borrower has not received any written claim by any third party that any of
the Trademarks and the Trademark Registrations and Trademark Rights related
thereto are invalid or unenforceable.
3.4 Exclusive Right to Use. To the best of the Borrower's knowledge
----------------------
and belief except as otherwise disclosed on Schedule A, the Borrower has, and
----------
shall continue to have, the exclusive right to use all the Trademarks in the
manner in which they are now used, with the goods and services with which they
are now used (and, in the case of registered Trademarks, for which they are
registered), and throughout the geographic areas in which they are now used
(and,
6
<PAGE>
in the case of registered Trademarks, throughout the jurisdictions in which they
are registered), free and clear of any liens, charges, encumbrances, claims or
rights of any third party, or restrictions on the rights of the Borrower to
protect or enforce any of its Trademark Rights against any third party.
3.5 After-Acquired Trademark Collateral. The Borrower agrees that,
-----------------------------------
upon its commencement of use of or acquisition of any right, title or interest
in or to any Trademark, Trademark Registration or Trademark Right other than the
Trademarks, Trademark Registrations and Trademark Rights set forth on Schedule A
----------
hereto (including any variations or new versions of such scheduled Trademarks,
Trademark Registrations and Trademark Rights), or upon commencement of use of
any Trademark with (or the addition to any Trademark Registration of) any new
class of goods or services, the provisions of this Security Agreement shall
automatically apply thereto. The Secured Party shall be authorized to amend
Schedule A, as appropriate, to include such additional Trademarks, Trademark
- ----------
Registrations and Trademark Rights, without the necessity for the Borrower's
approval of or signature to such amendment, and the Borrower shall do all such
other acts (at its own expense) deemed necessary or appropriate by the Secured
Party to implement and preserve the Secured Party's interest therein (including
but not limited to executing and delivering, and recording in all places where
this Security Agreement or notice hereof is recorded, an appropriate counterpart
of this Security Agreement). Such additional Trademarks, Trademark
Registrations and Trademark Rights shall be automatically included in the
"Trademarks," "Trademark Registrations" and "Trademark Rights" as defined
herein. Upon the use of a new mark, the Borrower shall provide to the Secured
Party a new Schedule A which shall amend, supplement or otherwise modify and
----------
update the prior Schedule to the then current date, and such updated Schedule A
----------
shall automatically be deemed to be a part of this Security Agreement.
3.6 Maintenance of Trademark Collateral. The Borrower shall take
-----------------------------------
any and all such actions (including but not limited to institution and
maintenance of suits, proceedings or actions) as may be necessary or appropriate
to properly maintain, protect, preserve, care properly for and enforce the
Trademarks and the Trademark Registrations, Trademark Rights and Associated
Goodwill relating thereto and sufficient Related Assets to preserve the
Borrower's rights in the Trademarks. Without limiting the generality of the
foregoing, the Borrower shall pay when due all fees, taxes and other expenses
which shall be incurred or which shall accrue with respect to any of such
Trademark Collateral.
3.7 Manner of Use of Trademarks. The Borrower shall continue to use
---------------------------
the Trademarks in its business in the same or similar manner as it has in the
past, for registered Trademarks shall continue to use each Trademark in each
jurisdiction of registration (and in interstate commerce for federally
registered Trademarks in each and every class of goods or services for which it
is registered), and in general shall continue to use the Trademarks in each and
every class of goods and services applicable to the Borrower's current use of
the Trademarks in its business as reflected in its current catalogs, brochures,
advertising and price lists, all in order to maintain the Trademarks in full
force, free from any claim or risk of abandonment for non-use.
7
<PAGE>
3.8 Trademark Symbols and Notices; No Abandonment. The Borrower has
---------------------------------------------
in the past used, and shall in the future use, the Trademarks with the statutory
and other appropriate symbols, notices or legends of the registrations and
ownership thereof consistent with past practice or as deemed necessary or
appropriate by the Borrower in its reasonable judgment. The Borrower shall not
abandon any of the Trademarks, Trademark Registrations or Trademark Rights, nor
do any act nor omit to do any act if such act or omission is of a character that
tends to cause or contribute to the abandonment of any Trademark, Trademark
Registration or Trademark Right or loss of or adverse effect on any rights in
any Trademark, Trademark Registration or Trademark Right, provided, however,
that if Borrower determines, in its reasonable business judgment, that a
Trademark or Trademark Registration is no longer used or useful in the
Borrower's business, the Borrower may, on prior written notice to Lender, act to
abandon such Trademark or Trademark Registration. Prohibited acts of the
Borrower shall include but not be limited to "assignments in gross" of any
Trademark or the license of any Trademark without both appropriate contractual
use and quality control provisions and proper monitoring, supervision and
enforcement by the Borrower of the quality of the licensed goods or services.
The Borrower shall take all necessary and appropriate actions to insure that
none of the Trademarks shall become generic or merely descriptive.
3.9 Enforcement of Licenses. The Borrower shall do all things which
-----------------------
are necessary or appropriate to insure that each licensee of any Trademark, in
its use of the Trademarks in its business, shall (i) comply fully with all
applicable license agreements and (ii) satisfy and perform all the same
standards and obligations set forth herein (with respect to the Borrower's use
of the Trademarks) as fully as though such standards and obligations were set
forth with respect to such licensee's use of the Trademarks.
3.10 No Infringements. To the best of the Borrower's knowledge and
----------------
belief, there is at present no material infringement or unauthorized or improper
use of the Trademarks or the Trademark Registrations or the Trademark Rights
related thereto. In the event any such infringement or unauthorized or improper
use by any third party has been reasonably established by the Borrower, the
Borrower shall promptly notify the Secured Party and shall have the right to sue
and recover therefor and to retain any and all damage so recovered or obtained.
3.11 Further Assurances. Without limiting the obligations of
------------------
Borrower under the Loan Documents, Borrower shall take such actions as are
necessary to preserve and maintain its rights in and to the Trademark
Collateral. Upon the request of Secured Party, Borrower shall execute,
acknowledge and deliver all documents and instruments and take such other
actions, including without limitation testifying in any legal or administrative
proceedings, as may be necessary or desirable to preserve or enforce Borrower's
rights in and to the Trademark Collateral or to accomplish the purposes of this
Security Agreement or the Loan Documents.
4. RIGHTS OF AND LIMITATIONS ON SECURED PARTY.
------------------------------------------
4.1 Borrower to Remain Liable. It is expressly agreed by Borrower
-------------------------
that Borrower shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by it relating to the Trademark.
Secured Party shall not have any
8
<PAGE>
obligation or liability under or in relation to the Trademark Collateral by
reason of, or arising out of, this Security Agreement and Secured Party's rights
hereunder, or the assignment by Borrower to Secured Party of, or the receipt by
Secured Party of, any payment relating to any Trademarks, nor shall Secured
Party be required or obligated in any manner to perform or fulfill any of the
obligations of Borrower relating to the Trademark Collateral or be liable to any
party on account of Borrower's use of the Trademark Collateral, and Borrower
will save, indemnify and keep Secured Party harmless from and against all
expense, loss or damage (including reasonable attorneys fees and expenses)
suffered in connection with such obligations or use or suffered in connection
with any suit, proceeding or action brought by Secured Party in connection with
any Trademark Collateral.
4.2 Secured Party's Actions. If Borrower fails to perform or comply
-----------------------
with any of its agreements contained herein and Secured Party, as provided for
by the terms of this Security Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the expenses of
Secured Party incurred in connection with such performance or compliance shall
be paid by Borrower on demand and until so paid shall be added to the principal
amount of the Obligations and shall bear interest at the same rate as the
Obligations under the Loan Documents.
4.3 Indemnification. The Borrower shall indemnify and hold harmless
---------------
the Secured Party from and against, and shall pay to the Secured Party on
demand, any and all claims, actions, suits, judgments, penalties, losses,
damages, costs, disbursements, expenses, obligations or liabilities of any kind
or nature (except those resulting from the Secured Party's gross negligence or
willful misconduct) arising in any way out of or in connection with this
Security Agreement, the Trademark Collateral, custody, preservation, use,
operation, sale, license (or other transfer or disposition) of the Trademark
Collateral, any alleged infringement of the intellectual property rights of any
third party, the production, marketing, delivery and sale of the goods and
services provided under or in connection with any of the Trademarks or the
Trademark Collateral, the sale of, collection from or other realization upon any
of the Trademark Collateral, the failure of the Borrower to perform or observe
any of the provisions hereof, or matters relating to any of the foregoing. The
Borrower shall also indemnify and hold harmless the Secured Party from and
against any and all claims, actions, suits, judgments, penalties, losses,
damages, costs, disbursements, expenses, obligations or liabilities arising out
of or in connection with any fault, negligence, act or omission of the Borrower
(regardless of whether such fault, negligence, act or omission occurred or
occurs prior to or after such effectiveness). The Borrower shall make no claim
against the Secured Party for or in connection with the exercise or enforcement
by the Secured Party of any right or remedy granted to it hereunder, or any
action taken or omitted to be taken by the Secured Party hereunder (except for
the gross negligence or willful misconduct of the Secured Party).
4.4 Specific Enforcement. Due to the unique nature of the Trademark
--------------------
Collateral, and in order to preserve its value, the Borrower agrees that the
Borrower's agreements, duties and obligations under this Security Agreement
shall be subject to specific enforcement and other appropriate equitable orders
and remedies.
9
<PAGE>
5. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
-----------------------------------------------
5.1 Appointment of Secured Party. Borrower hereby irrevocably
----------------------------
constitutes and appoints Secured Party and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Borrower and in the
name of Borrower or in its own name, from time to time in Secured Party's
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments that may be necessary or desirable to accomplish the
purposes of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives Secured Party the power and right, on behalf of Borrower
without notice to or assent by Borrower to do the following:
(a) to apply for and prosecute any applications for recording or
registrations of any Trademark Collateral, and to file any affidavits or other
documents necessary or desirable to preserve, maintain or renew any such
registrations;
(b) at any time that an Event of Default has occurred and is
continuing, to assign, sell or otherwise dispose of all or any part of
Borrower's right, title and interest in and to the Trademark Collateral,
including without limitation the Trademarks listed on Schedule A, and all
-------- -
registrations and recordings thereof and pending applications therefor;
(c) at any time that an Event of Default has occurred and is
continuing, to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to enforce any right in
respect of any Trademark; to defend any suit, action or proceeding brought
against Borrower with respect to any Trademark Collateral; to settle, compromise
or adjust any suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as Secured Party may deem
appropriate;
(d) at any time that an Event of Default has occurred and is
continuing, to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Trademarks as fully and completely as though
Secured Party were the absolute owner thereof for all purposes;
(e) to do, at Secured Party's option and Borrower's expense, at any
time or from time to time, all acts and things that Secured Party deems
necessary to protect, preserve or realize upon the Trademark Collateral and
Secured Party's security interests therein, in order to effect the intent of
this Security Agreement; and
(f) to execute any and all documents, statements, certificates or
other writings necessary or advisable in order to effect the purposes described
above as Secured Party may in its sole discretion determine.
Borrower hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
10
<PAGE>
5.2 No Duty or Obligation. The powers conferred on Secured Party
---------------------
hereunder are solely to protect the interests of Secured Party in the Trademark
Collateral and shall not impose any duty upon Secured Party to exercise any such
powers. Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any of
its officers, directors, employees or agents shall be responsible to Borrower
for any act or failure to act, except for its own willful misconduct taken or
omitted in bad faith.
6. GENERAL PROVISIONS. This Security Agreement is supplemental to the
------------------
Loan Agreement, the terms of which, including, without limitation, the notice
and governing law provisions, the waiver of jury trial, consent to service of
process and jurisdiction and prohibitions on non-written waivers, the Borrower
expressly accepts, confirms and acknowledges are incorporated herein by
reference. In the event of any irreconcilable conflict between the provisions
of this Security Agreement and the Loan Agreement, the provisions of the Loan
Agreement shall govern.
IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be
executed by its duly authorized officer as of the date first written above.
WITNESS: ANNIE'S HOMEGROWN, INC.
By:
- ------------------------------ -----------------------------------
Name: Paul B. Nardone
Title: President
FREMONT FINANCIAL CORPORATION
By:
- ------------------------------ -----------------------------------
Name:
------------------------------
Title:
-----------------------------
11
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY: August 25, 1998
Then personally appeared the above-named Paul B. Nardone and stated
that he is the duly authorized President of Annie's Homegrown, Inc. (the
"Corporation") and acknowledged the foregoing instrument to be his free act and
deed, and the free act and deed of said Corporation, before me,
-------------------------------
Notary Public
My Commission Expires:
STATE:
COUNTY: August __, 1998
Then personally appeared the above-named ______________ and stated that
he is a duly authorized _______________ of Fremont Financial Corporation (the
"Secured Party") and acknowledged the foregoing instrument to be his free act
and deed, and the free act and deed of said Secured Party, before me,
-------------------------------
Notary Public
My Commission Expires:
12
<PAGE>
SCHEDULE A TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
TRADEMARKS, TRADEMARK REGISTRATION,
-----------------------------------
SERVICE MARKS
-------------
MARK: ANNIE'S PASTA
APPLICATION: 73,689,890 October 13, 1987
REGISTRATION: 1,511,969 November 8, 1998
MARK: BE GREEN
APPLICATION: 74/333,862 November 23, 1992
REGISTRATION: 1,787,220 August 10, 1993
MARK: BERNIE RABBIT OF APPROVAL
APPLICATION: 74,353,496 January 28, 1993
REGISTRATION: 1,874,043 January 17, 1995
MARK: ANNIE'S
APPLICATION: 74,694,935 June 29, 1995
REGISTRATION: 2,020,364 December 3, 1996
MARK: ANNIE'S HOMEGROWN
APPLICATION: 74,694,936 June 29, 1995
REGISTRATION: 2,023,195 December 17, 1996
MARK: MOTHER NATURE'S
APPLICATION: 75,479,545 May 5, 1998
REGISTRATION:
MARK: DESIGN OF RABBIT
APPLICATION: 74/696,398 June 30, 1995
REGISTRATION: PENDING
MARK: ANNIE'S PIZZA PASTA
13
<PAGE>
APPLICATION: 74/617,822 January 4, 1995
REGISTRATION: ALLOWED
MARK: ANNIE'S
APPLICATION: 74/713,126 August 9, 1995
REGISTRATION: ALLOWED
14
<PAGE>
EMPLOYMENT AGREEMENT
BY AND BETWEEN
ANNIE'S HOMEGROWN, INC.,
AND
HARSHAD M. PAREKH
Dated as of August 27, 1998
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into as of August 27, 1998
(the "Agreement") by and between Annie's Homegrown, Inc., a Delaware corporation
(the "Company") and Harshad M. Parekh (the "Manager"). Capitalized terms not
defined herein shall have the meaning given to them in that certain Asset
Purchase Agreement of even date herewith.
BACKGROUND
----------
A. The Company has entered into an Asset Purchase Agreement with The
Tamarind Tree Ltd. ("Seller"), a New Jersey corporation of which Manager is the
Chief Executive Officer, to purchase certain assets of Seller. The asset
acquisition to occur under the Asset Purchase Agreement is referred to herein as
the Brand Acquisition.
B. It is a condition to the closing of the Brand Acquisition that the
Company and the Manager enter into this Agreement whereby Manager agrees to
serve as General Manager of the Company's Tamarind Tree division (the
"Division") and agrees that Manager shall not devalue the goodwill of the
Company is purchasing under the Brand Acquisition by competing with the Company.
NOW, THEREFORE, in consideration of the mutual obligations herein
contained, the parties hereto, covenant and agree as follows:
1. Employment.
----------
The Company hereby employs the Manager to render services to the Company in
the initial capacity of General Manager of the Division reporting to the
Company's Chief Operating Officer and shall perform such duties as the Company
shall from time to time designate. Manager shall initially be based in the
Company's offices in New Jersey.
The Manager shall devote his full business time and undivided attention to
the business and affairs of the Company and its subsidiaries/affiliates, except
for vacation, sick leave and disability leave in accordance with the Company's
policies. Nothing in this Agreement shall preclude the Manager, with the
consent of the Chief Operating Officer, from engaging in charitable and public
service activities provided such service or activities do not interfere with the
performance of his duties and responsibilities under this Agreement.
2. Term.
----
This Agreement shall commence effective August 27, 1998 and shall continue
until the earlier of (i) August 27, 2003, or (ii) the date terminated pursuant
to Section 4 (Termination) of this Agreement. the obligations of the Company
and the Manager set forth in Sections 4 (Termination), 5 (Confidentiality and
Restrictive Covenant), 6 (Proprietary Information and
2
<PAGE>
Inventions), 7 (Withholding) and 8 (Miscellaneous), shall survive the
termination of this Agreement.
3. Compensation.
------------
For services rendered by the Manager during the term of this Agreement, and
for his performance of all additional obligations of employment, the Company
agrees to pay the Manager and the Manager agrees to accept the following salary,
other compensation and benefits:
(a) Base Salary. The Company shall pay the Manager a base salary in
-----------
equal semi-monthly installments, at the annual rate of Forty Two Thousand
Dollars ($42,000). Commencing on January 1 of the calendar year following the
calendar year in which annual net sales by the Company of the "Base Products"
(as that term is defined in that certain Asset Purchase Agreement by and between
the parties) exceeds $1,000,000, the Manager's base salary shall increase to a
rate of Fifty Thousand Dollars ($50,000) per annum.
(b) Benefits. The Manager shall be entitled to participate, as long
--------
as he remains an employee of the Company, in any and all of the Company's
present or future employee benefit plans, which are generally applicable to the
Company's similarly situated employees; provided, however, that the accrual
and/or receipt by the Manager of benefits under and pursuant to any such present
or future employee benefit plan shall be determined by the provisions of such
plan.
(c) Reimbursable Expenses. The Manager will be reimbursed for all
---------------------
reasonable expenses incurred by him in connection with the conduct of the
Company's business upon presentation of evidence and approval by the Chief
Operating Officer of such expenditures.
4. Termination of Employment.
-------------------------
(a) Resignation. This Agreement may be terminated by the Manager at
-----------
any time on thirty (30) days written notice of resignation by the Manager to the
Company. If the Manager voluntarily terminates his employment then he shall
have no further right to receive any payments under this Agreement, except that
with respect to resignation and any other termination pursuant to Section 4, the
Manager shall be entitled to all base or incentive compensation earned and
unpaid as of the date of termination.
(b) Termination by the Company Other Than for Cause. The Company may
-----------------------------------------------
terminate this Agreement and the Manager's employment for any reason by giving
the Manager thirty (30) days prior written notice. Upon the termination of the
Manager by the Company other than for death, disability or cause as defined in
Section 4(c) below, the Manager shall receive as his sole remedy the right to
continue to receive from the Company his base salary payable on a semi-monthly
basis until the [NUMBER] month anniversary of his termination together with all
base or incentive compensation accrued and unpaid as of the date of termination.
3
<PAGE>
(c) Termination by the Company for Cause. The Company may terminate
------------------------------------
the Manager's employment at any time for Cause (defined below) by giving the
Manager written notice of such termination as defined below. in the event of
termination of the Manager by the Company for Cause, Manager will be entitled to
the rights set forth in Subsection 4(a) above.
As used in this Agreement, the term "Cause" means: (1) any act or omission
of gross negligence, willful misconduct, dishonesty, or fraud by the Manager in
the performance of his duties hereunder; (2) any willful and persistent failure
by the Manager to attend to his duties hereunder; (3) any other material breach
of this Agreement; (4) the Manager's conviction of or pleading guilty or nolo
----
contendere to a felony or any misdemeanor involving dishonesty or moral
- ----------
turpitude; (5) fraud or embezzlement including assets of the Company, its
customers, suppliers or affiliates; (6) a physical or mental disability that
prevents Manager from working for 90 days or more in any 365 day period; or (7)
any other act or omission by the Manager in disregard of the Company's policies.
if as a result of mediation or if a court of competent jurisdiction later
determines that termination by the Company of the Manager's employment
purportedly for Cause was without Cause, the termination will be deemed a
termination by the Company other for Cause, and Manager will be entitled to the
benefits set forth in Subsection 4(b) above.
(d) Death. In the event of the death of the Manager during the term
-----
of this Agreement, the rights and benefits under employee benefit plans and
programs of the Company will be determined in accordance with the terms and
conditions of such plans and programs as in effect on his date of death, and the
Company shall thereafter have no obligation to make any payments to the Manager
pursuant to Section 3 of this Agreement except any already earned or vested up
to the date of death.
5. Confidentiality and Restrictive Covenants.
-----------------------------------------
(a) In consideration of the compensation and other benefits payable
hereunder, Manager agrees that during such time that he is employed by or
rendering services to the Company and for the period that ends on the earlier of
(i) the fifth anniversary the Closing Date, or (ii) the third anniversary of the
termination of this Agreement for any reason, he will not directly or
indirectly, alone or jointly with or on behalf of any other person, firm or
company:
(1) compete with the Company in the sale of heat and serve Indian
entree products in North America; or
(2) recruit, solicit or knowingly induce, or attempt to induce, any
employee or consultant of the Company to terminate his/her employment or
consulting relationship with, or otherwise cease his/her relationship with, the
Company.
(b) Manager further agrees that he will not solicit, divert or take
away, or attempt to divert or to take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients, or interfere with
customers or accounts, of the Company in North America during
4
<PAGE>
the three (3) years prior to the termination of his employment with, or the
rendering of services to, the Company or the persons or entities supplying
components, materials, or services to the Company in North America during such
three (3) year period. For purposes of this Agreement, a prospective client,
customer or account is any individual or entity whose business is actively being
solicited by the Company, or, to Manager's knowledge based on written notice or
reports provided to Manager by the Company, is proposed to be solicited by the
Company within six (6) months from the termination of this Agreement, or who has
approached the Company with respect to possibly becoming a client, customer, or
account during the period of time during which Manager actively renders services
to the Company.
The restrictions against competition set forth in Subsections 5(a) and 5(b)
are considered by the parties to be reasonable for the purposes of protecting
the business of the Company. If any restriction set forth therein is found by
any court of competent jurisdiction to be unenforceable because its extends for
too long a period of time, over too great a range of activities or over too
broad a geographic area, it shall be interpreted to extend to the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
Manager acknowledges and agrees that his services to the Company are
unique, which gives his services a special value to the Company and for the loss
of which the Company cannot be reasonably or adequately compensated in damages.
The restrictions contained in this Agreement are necessary for the protection of
the business and goodwill of the Company and are considered by Manager to be
reasonable for such purpose. Manager agrees that any breach of this Agreement
will cause the Company substantial and irreparable damage and therefore, in the
event of any such breach, in addition to such other remedies which may be
available, the Company shall have the right to seek specific performance and
injunctive relief.
(c) The Manager will not at any time, whether while employed by the
Company or after voluntary or involuntary termination or after retirement,
reveal to any person, firm or entity any trade or business secrets or
confidential, secret or privileged information about the business of the Company
or its subsidiaries or affiliates or its suppliers, distributors, customers,
officers, directors or stockholders except as shall be required in the proper
conduct of the Company's business.
6. Proprietary Information and Inventions.
--------------------------------------
6.1 Manager agrees to keep confidential and, except in performance of
Manager's duties hereunder or as the Company may otherwise consent in writing,
not to disclose or make any use of at any time either during or subsequent to
the termination of this Agreement, any Inventions (as hereinafter defined) or
Confidential Information. For purposes of this Agreement, "Confidential
Information" shall mean all information and know-how, whether or not in writing,
of a private, secret or confidential nature concerning the Company's business or
financial affairs, including, without limitation, any and all trade secrets,
confidential information (including, without limitation, any information in
respect of which the Company is bound by an obligation of confidence to any
third party), knowledge, data or other information relating to the Company's
inventions, products,
5
<PAGE>
processes, know-how, designs, formulas, test data, customer and supplier lists
and details of contracts with or requirements of customers, business plans,
advertising, marketing or public relations plans, methods, techniques and
strategies, prices and pricing strategies, personnel or technical data,
unpublished and price-sensitive information relating to securities listed on any
recognized stock exchange, the movements and whereabouts and all personal or
private matters concerning senior employees, officers and directors of the
Company, or other subject matter pertaining to any business of the Company which
he may produce, obtain or otherwise acquire during the course of his employment,
whether or not copyrightable, trademarkable or licensable. Manager hereby
acknowledges and agrees that all Confidential Information is and will be the
exclusive property of the Company.
6.2 Upon the request of the Company's Chief Operating Officer made at
any time during the course of Manager's employment or the event Manager's
employment with the Company terminates for any reason whatsoever, Manager agrees
to promptly surrender and deliver to the Company all Confidential Information in
his possession, along with any and all files, letters, memoranda, reports,
records, data, sketches, drawings, notebooks, notes, specifications, programs,
computer program listings, or other written, photographic, or other tangible
material containing Confidential Information, whether created by Manager or
others, which comes into his custody or possession containing or pertaining to
any Confidential Information.
6.3 For purposes of this Agreement, "Inventions" shall mean all
inventions, discoveries, approaches, processes, designs, software, technologies,
devices, methods, works of authorship or improvements in any of the foregoing or
other ideas or concepts, whether or not patentable and whether or not reduced to
practice, made or conceived by Manager (whether solely or jointly with others)
during the period of Manager's employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to Manager or any work performed by Manager for or on behalf of the Company,
whether or not during normal working hours or on the premises of the Company.
6.4 Manager hereby acknowledges and agrees that the Company is the
owner of all Inventions and that Manager irrevocably assigns to the Company all
his rights, title and interest in and to all Inventions to the Company. Manager
hereby irrevocably appoints the Company to be his attorney in his name and on
his behalf to sign, execute or do any instrument or thing and generally to use
Manager's name for the purpose of giving to the Company or its nominee the full
benefit of the provisions of this Section 6 and in favor of any third party a
certificate in writing signed by any director or the secretary of the Company
that any instrument or act falls within the authority conferred by this Section
shall be conclusive evidence that such is the case. All rights and obligations
in respect of Inventions made or discovered by Manager during Manager's
employment shall continue in full force and effect after the termination of
Manager's employment and shall be binding upon Manager's legal personal
representatives after Manager's death.
6.5 Manager agrees that Schedule A hereto and made a part hereof
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constitutes a full, complete and accurate disclosure to the Company of all Prior
Inventions. For purposes of this Agreement, "Prior Inventions" shall mean all
inventions, discoveries, approaches, processes, designs,
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software, technologies, devices, methods, works of authorship or improvements in
any of the foregoing or other ideas or concepts, whether or not patentable and
whether or not reduced to practice, made or conceived by Manager (whether solely
or jointly with others) during the period of Manager's employment with any prior
employer which relate in any manner to the actual or demonstrably anticipated
business, work, or research and development of such employer, or result from or
are suggested by any task assigned to Manager or any work performed by Manager
for or on behalf of such employer, whether or not during normal working hours or
on the premises of such employer.
6.6 Manager will immediately disclose to the Company any Inventions
Manager may create during the term of this Agreement and will execute all
necessary documents to properly assign all rights, title and interest in such
Inventions to the Company.
6.7 Manager agrees to assist the Company or its nominee (at the
Company's expense) in every reasonable way to obtain for the Company's or its
nominee's own benefit patents, trademarks or copyrights for Inventions in any
and all countries. Such patents, trademarks and copyrights shall be and remain
the sole and exclusive property of the Company or its nominee. Manager agrees
to perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents, trademarks or
copyrights. Manager agrees to execute, acknowledge and deliver to the Company
or its nominee upon request and at its expense all documents, including
assignments of title, patent, trademark or copyright applications, assignments
of such applications and assignments of patents, trademarks or copyrights upon
issuance, as the Company may determine necessary or desirable to protect the
Company's or its nominee's interest in Inventions, and/or to use in obtaining
patents, trademarks or copyrights in any and all countries and to vest title
thereto in the Company or its nominee to any of the foregoing.
6.8 Manager represents that Manager's performance of all the terms of
this Agreement and as an employee of the Company does not and will not breach
any agreement to keep confidential proprietary information, knowledge or data
acquired by Manager in confidence or in trust prior to Manager's employment with
the Company, and that Manager will not disclose to the Company, or induce the
Company to use, any confidential or proprietary information or material
belonging to any previous employer or others. Manager agrees not to enter into
any agreement, written or oral, in conflict herewith.
6.9 The Company's rights as set forth in this Section 6 shall not
apply to any Invention about which Manager can prove that (i) it was developed
(so long as the same does not contain Confidential Information), entirely on
Manager's own time and by Manager's own effort; (ii) no equipment, supplies,
facility, trade secrets or Confidential Information of the Company was used in
the development thereof; (iii) it does not relate to the business of the Company
or to the Company's actual or anticipated research and development activities;
and (iv) it does not result from any work performed by Manager for the Company.
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7. Withholding.
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all amounts payable hereunder which are or may become subject to
withholding under pertinent provisions of law or regulation shall be reduced for
applicable income and/or employment taxes required to be withheld.
8. Miscellaneous.
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(a) This Agreement supersedes any prior agreements or understandings,
oral or written, with respect to employment of Manager and constitutes the
entire Agreement with respect thereto. It cannot be altered or terminated
orally and may be modified only by a subsequent written agreement executed by
both of the parties hereto.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its successors and assigns. In that this Agreement
constitutes a non-delegable personal services agreement, it may not be assigned
by the Manager and any attempted assignment by the Manager in violation of this
covenant shall be null and void.
(d) The failure of either party to insist on strict compliance with
any of the terms of this Agreement will not be deemed to be a waiver of any
terms of this Agreement or of the part's right to require strict compliance of
the terms of this Agreement in any other instance.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions, which shall remain in full force and effect.
(f) No party to this Agreement may initiate litigation with regard to
any dispute with respect to this Agreement until after all remedies set forth in
this Subsection 8(f) have been exhausted. In the event of any dispute arising
under or relating to this Agreement, either party shall have the right by giving
written notice to the other party (the "Mediation Notice") to initiate non-
binding mediation to be conducted by a mediator mutually agreed to by the
parties or, in the event the parties are unable to reach such agreement within
thirty (30) days of the giving of the Mediation Notice, by a mediator appointed
by the American Arbitration Association ("AAA") in accordance with the rules and
regulations of the AAA, or by any other body mutually agreed upon by the
parties. Mediation shall take place at Boston, Massachusetts or any other
location mutually agreeable to the parties. In the event the parties resolve
their dispute in mediation, they shall enter into a mutual written agreement,
which shall be binding on both parties. In the event such agreement has not
been entered into by the parties within ninety (90) days after the selection of
the mediator pursuant to this Subsection 8(f), either party may initiate civil
litigation provided that any such litigation shall take place only in the
Superior Court for Suffolk County, Massachusetts.
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(g) Attorney's Fees. In the event of any breach of this Agreement
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that results in litigation between the parties, the prevailing party shall be
entitled to its reasonable attorney's fees, expert witness fees and costs of
suit. The prevailing party shall be determined by the court, based upon an
assessment of which party's major arguments or positions taken in the
proceedings could fairly be said to have prevailed over the other party's major
arguments or positions on major disputed issues in the court's decision.
(h) Counterparts. This Agreement may be executed in one or more
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counterparts. Any copy of this Agreement with the original signatures of all
parties appended shall constitute an original.
(The signature page follows)
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
ANNIE'S HOMEGROWN, INC.
By:
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Its:
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MANAGER
By:
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Harshad M. Parekh
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