<PAGE>
U. S. SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________
Commission file number: 33-93982-LA
ANNIE'S HOMEGROWN, INC.
________________________________________________________________________________
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 06-1258214
______________________________________________________________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
395 Main Street
Wakefield, MA 01880
____________________________________________________
(Address of Principal Executive Offices)
781-224-1172
________________________________________________________
(Issuer's Telephone Number, Including Area Code)
NONE
___________________________________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---- ----
As of December 31, 1998, there were issued and outstanding 4,734,768 shares of
the issuer's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format (check one): Yes No X
---- ----
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ANNIE'S HOMEGROWN, INC.
Index
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of
December 31, 1998 (unaudited) 3
Consolidated Statements of Operations for the Three and
Nine Months Ended December 31, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the
Nine Months Ended December 31, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 7-11
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ANNIE'S HOMEGROWN, INC.
Consolidated Balance Sheet
Unaudited
December 31, 1998
------------------------------------
Assets
Current assets
Cash and cash equivalents $ 31,358
Accounts receivable
Trade 100,175
Related parties 27,788
Inventory 1,330,421
Other current assets 38,406
----------
Total current assets 1,528,148
Office equipment 182,813
Accumulated depreciation (77,480)
----------
Office equipment, net 105,333
Due from officer 75,000
Goodwill, net of amortization 634,418
Other assets 169,406
----------
Total assets $2,512,305
==========
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 604,086
Current maturities of long term debt 180,000
Accounts payable, trade 997,340
Advances from distributor 209,753
Accrued expenses 27,078
Due to employees 17,560
-----------
Total current liabilities 2,035,817
Long term debt 75,000
Commitments
Stockholders' equity
Common stock, $.001 par value.
Authorized 10,000,000 shares
issued 4,876,674, shares 4,877
Additional paid in capital 2,524,126
Accumulated deficit (1,635,067)
Notes receivable stockholders (367,448)
Treasury stock, 141,906 common shares at cost (125,000)
-----------
Total stockholders equity 401,488
Total liabilities and stockholders' equity $ 2,512,305
===========
3
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ANNIE'S HOMEGROWN, INC.
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------------------- ---------------------------
1997 1998 1997 1998
------------------- ------------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $1,534,399 $2,291,719 $4,407,932 $5,488,844
Cost of sales 945,410, 1,299,578 2,651,729 3,139,103
---------- ---------- ---------- ----------
Gross profit 588,989 992,141 1,756,203 2,349,741
Operating expenses:
Selling 345,630 642,007 1,132,545 1,646,541
General and administrative 268,676 495,234 722,331 1,177,697
Directors' fees -- 21,000 -- 21,000
Slotting fees 12,197 27,395 53,790 90,710
---------- ---------- ---------- ----------
Total operating expenses 626,503 1,185,636 1,908,666 2,935,948
---------- ---------- ---------- ----------
Operating income (loss) (37,514) (193,495) (152,463) (586,207)
Other income (loss)
Interest expense and other charges (7,939) (44,458) (31,307) (112,292)
Interest and other income 2,637 6,343 7,428 10,631
---------- ---------- ---------- ----------
Income (loss) before income tax (42,816) (231,610) (176,342) (687,868)
Income tax expense 162 - 667 1,097
---------- ---------- ---------- ----------
Net income (loss) $ (42,978) $ (231,610) $ (177,009) $ (688,965)
========== ========== ========== ==========
Weighted average common
shares outstanding (in 000's):
Basic 4,548 4,540 4,326 4,546
Diluted 4,548 4,540 4,326 4,546
Net income (loss) per share:
Basic (.01) (.05) (.04) (.15)
Diluted (.01) (.05) (.04) (.15)
</TABLE>
4
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ANNIE'S HOMEGROWN, INC.
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Nine months ended
December 31,
-------------------------------
1997 1998
------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(177,009) $(688,965)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 16,835 28,502
Changes in
Accounts receivable, trade (90,510) (33,001)
Affiliate accounts, net 22,237 29,757
Inventory 143,217 (509,566)
Other assets (62,326) 64,740
Accounts payable, trade 175,669 565,798
Accrued expenses (61,108) (20,727)
Advances from distributor (315,753) 203,277
Due to employees (12,760) (16,558)
--------- ---------
Net cash (used in) provided by
operating activities (361,509) (376,743)
Cash flows from investing activities:
Acquisition of Tamarind Tree Brand - (332,572)
Acquisition of Raw Materials Food Co. (19,946) -
Purchases of equipment (21,484) (53,684)
--------- ---------
Net cash (used in) investing activities (41,430) (386,256)
Cash flows from financing activities:
Purchase of Treasury Stock -- (35,000)
Net borrowings on line of credit -- 324,688
Net Borrowing on term loan -- 255,000
--------- ---------
Net cash (used in) provided by
financing activities -- 544,688
Net (decrease) increase in cash and cash equivalents (402,939) (218,311)
Cash and cash equivalents, beginning of period 484,464 249,669
--------- ---------
Cash and cash equivalents, end of period $ 81,525 $ 31,358
========= =========
Supplemental disclosure of cash flow information
Cash paid for interest $ 31,307 $ 112,292
========= =========
Cash paid for income taxes $ 667 $ 1,097
========= =========
</TABLE>
Supplemental disclosure of noncash financing activities - See Note 2
5
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ANNIE'S HOMEGROWN, INC. NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position at
December 31, 1998, its results of operations for the three and nine month
periods ended December 31, 1998 and 1997, and its cash flows for the nine month
periods ended December 31, 1998 and 1997. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from the accompanying consolidated financial statements. For further
information, reference should be made to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 1998, on file with the Securities and Exchange
Commission.
NOTE 2-- SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES ARE AS FOLLOWS:
On July 31, 1997, the Company issued 60,000 shares of common stock ($6.00 per
share) in exchange for the outstanding common stock of Raw Materials Food
Company.
On October 1, 1997, three Officers of the Company exercised stock options for an
aggregate of 231,273 shares by issuing notes to the Company for $185,018.
On December 21, 1998 three Officers of the Company exercised stock options for
an aggregate of 216,600 shares by issuing notes to the Company for $217,683.
NOTE 3 - EARNINGS PER SHARE RECONCILIATION
The reconciliation of the numerators and denominators of the basic and diluted
income/(loss) per common share of the Company's reported net income/(loss) is as
follows (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended Dec 31,1997 Net Loss Weighted Average Shares Per Share Data
- - ------------------------------
<S> <C> <C> <C>
Basic loss per common share $(43) 4,548 $ (.01)
Stock options --- --- ---
Diluted loss per common share $(43) 4,548* $(.01)
</TABLE>
*For the quarter ended December 31, 1997, stock options for shares of common
stock totaling 466 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
<TABLE>
<CAPTION>
Three Months Ended Dec 31,1998 Net Loss Weighted Average Shares Per Share Data
- - ------------------------------
<S> <C> <C> <C>
Basic loss per common share $(232) 4,540 $ (.05)
Stock options --- --- ---
Diluted loss per common share $ (232) 4,540* $(.05)
</TABLE>
*For the quarter ended December 31, 1998, stock options for shares of common
stock totaling 120 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
<TABLE>
<CAPTION>
Nine Months Ended Dec 31,1997 Net Loss Weighted Average Shares Per Share Data
- - -----------------------------
<S> <C> <C> <C>
Basic loss per common share $(177) 4,326 $ (.04)
Stock options --- --- ---
Diluted loss per common share $ (177) 4,326* $(.04)
</TABLE>
6
<PAGE>
*For the nine months ended December 31, 1997, stock options for shares of common
stock totaling 669 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
<TABLE>
<CAPTION>
Nine Months Ended Dec 31,1998 Net Loss Weighted Average Shares Per Share Data
- - -----------------------------
<S> <C> <C> <C>
Basic loss per common share $(689) 4,546 $ (.15)
Stock options --- --- ---
Diluted loss per common share $ (689) 4,546* $(.15)
</TABLE>
*For the nine months ended December 31, 1998, stock options for shares of common
stock totaling 120 thousand were outstanding but were not included in the
calculation of diluted loss per common share because the effect was anti-
dilutive.
NOTE 4 - TAMARIND TREE ACQUISITION
On August 27, 1998, the Company acquired certain assets of The Tamarind Tree
Ltd. ("Tamarind Tree"). Tamarind Tree produces and markets an ethnic line of
heat and serve vegetarian food entrees. The assets acquired consisted 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 purchase price was comprised of cash in the amount of $200,000, an advance
against royalties in the amount of $75,000, and future royalties 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. The royalty payments will be accounted for as additional
consideration for the purchase of the assets and will be recorded as additional
goodwill as the future royalties are earned. The Company has capitalized the
$200,000 payment as goodwill. After a valuation of the assets acquired has been
completed, the Company will allocate the purchase price to the intangible assets
acquired.
The Company financed the acquisition of Tamarind Tree by entering into a
$300,000 term loan with Fremont Financial Corporation. The interest rate on the
loan is prime rate plus 3% (10.75% at December 31, 1998) and calls for 20
monthly principal payments of $15,000 commencing October 1, 1998. The loan is
secured by all of the assets of the Company including a security interest in the
Tamarind Tree Brand as well as guaranteed by the two largest stockholders of the
Company.
The operating results of Tamarind Tree have been included in the consolidated
statements of operations from the date of acquisition. Proforma combined results
of operations of the Company and Tamarind Tree on the basis that the acquisition
had taken place on March 1, 1997 are not presented since the effects are not
material.
NOTE 5 - LINE OF CREDIT
On August 27, 1998, the Company signed an amendment to its Line of Credit
agreement with Fremont Financial Corporation increasing its line of credit from
$600,000 to $900,000. Amounts available under this agreement are either 75% or
90% of certain categories of the Company's accounts receivable and 50% of a
certain category of inventory. The note is secured by all the assets of the
Company as well as guaranteed by the two largest stockholders of the Company.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview
Annie's Homegrown, Inc. sells premium totally natural products to the natural
food, specialty food and supermarket trades. The pasta products include ten
macaroni and cheese dinners under the Annie's brand name, two canned pasta meals
under the brand names Bernio's and All-Stars and five Annie's Pasta Meals which
7
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combine different pasta shapes with five sauce recipes. The Company also has an
agreement with a specialty retailer to provide a private label house brand using
the Company's all natural white cheddar cheese formula together with elbow
macaroni.
Most of the Company's products are distributed in the continental United States
by Liberty Richter, Inc. ("Liberty"). Pursuant to a master distribution
agreement, the Company sells its products to Liberty who in turn resells the
products to the natural and specialty food stores and supermarket chains via
distributors or directly to the supermarkets.
On July 31, 1997, the Company acquired Raw Materials Food Company ("RMFC"). The
consolidated financial statements reflect the results of operations and cash
flows of RMFC from the date of acquisition. All intercompany balances and
transactions have been eliminated. On November 13, 1998, the Company terminated
the employment contract with one of the founders of RMFC. On November 13, 1998,
the Company terminated the employment contract with one of the founders of RMFC
and repurchased all 30,000 shares of his Annie's Homegrown common stock. The
non-competition agreement with the founder continues.
On August 27, 1998, Annie's Homegrown, Inc. acquired certain assets of The
Tamarind Tree Ltd. Tamarind Tree produces and markets an ethnic line of heat
and serve vegetarian 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 is
used in Tamarind Tree's business. The consolidated financial statements reflect
the results of operations and cash flows of the Tamarind Tree brand from the
date of acquisition.
Forward Looking Statements
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-QSB) may contain statements which
are not historical facts, so called "forward looking statements", which involve
risks and uncertainties. Forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
When used in this Form 10-QSB, the terms "anticipates", "expects", "estimates",
"believes" and other similar terms as they relate to the Company or its
management are intended to identify such forward looking statements. In
particular, statements made in Item 2., Management's Discussion and Analysis or
Plan of Operation, relating to the sufficiency of funds for the Company's
working capital requirements during 1999 and the Company's expectation that
future cash flow will continue to be provided from operations are forward
looking statements. The Company's actual future results may differ significantly
from those stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to: (i) competitive factors in the
market place; (ii) reliance on the master distributor agreement with Liberty and
relative mix of sales through distributors and direct to supermarkets; (iii)
fluctuation in quarterly and annual operating results due to seasonality
(macaroni and cheese is consumed mostly during colder months of the year) and
based on the Company's promotional schedule; (iv) dependence on key personnel;
(v) availability and cost of capital; (vi) consumers' tastes and preferences on
current products as well as acceptance of new product introductions; and (vii)
general economic conditions, among others. These factors, and others, are
discussed from time to time in the Company's filings with the Securities and
Exchange Commission including the Company's annual report on Form 10-KSB for the
year ended March 31, 1998.
Results of Operations
Nine Months Ended December 31, 1998 Compared to Nine Months Ended December 31,
1997
Net sales. Net sales increased by $1,080,912 or 24.52% from $4,407,932 in 1997
to $5,488,844 in 1998. The net sales increase was the result of new product
sales, RMFC sales, Tamarind Tree sales as well as continuing product sales. The
increase (decrease) in sales is as follows: same product sales are 13.10%; new
products are 8.32%; private label sales are (1.75)%; Tamarind Tree sales are
2.55%; and RMFC is 2.30%.
Gross profit. As a percentage of net sales, gross profit increased from 39.84%
in 1997 to 42.81% in 1998. This increase was a result of the product mix as
well as lower raw material costs than last year.
Selling expenses. Selling expenses increased by $513,996 or 45.38% from
$1,132,545 in 1997 to $1,646,541 in 1998 and increased as a percentage of net
8
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sales from 25.69% in 1997 to 30.00% in 1998. The increase in selling expenses
as a percentage of net sales reflected promotions on new product introductions;
promotions on the RMFC line of products; and a consumer awareness promotion in
the greater Boston area in the quarter ending September 30, 1998.
General and administrative expenses. General and administrative expenses
increased by $455,366 or 63.04% from $722,331 in 1997 to $1,177,697 in 1998 and
increased as a percentage of net sales from 16.39% in 1997 to 21.46% in 1998.
The increase in general and administrative expenses is primarily a result of
increased spending in four areas: (i) increase in expenses from RMFC that are
new this year; (ii) increased payroll costs and related benefits; (iii) increase
in professional fees due to a change of year end at March 31, 1997 which
required extra charges this year but not last year and hiring an investment
banker; and (iv) charges attributable to previously deferred organizational and
offering expenses incurred by the Company in connection with a planned secondary
offering of the Company's Common Stock.
Slotting fees. Slotting expenses increased by $36,920 or 68.64% from $53,790
in 1997 to $90,710 in 1998, and increased as a percentage of net sales from
1.22% in 1997 to 1.65% in 1998. According to the Company's plan, a modest amount
of slotting fees was spent to expand the Company's distribution into new
markets. These slotting fees are required by most supermarkets and are expensed
at the time of product introduction.
Interest expense and other charges. Interest expense and other charges increased
by $80,985 from $31,307 in 1997 to $112,292 in 1998 and increased as a
percentage of sales from 0.71% in 1997 to 2.05% in 1998. The increase in
interest expense and other charges is the result of higher borrowings under the
Line of Credit from a financial institution as well as borrowings from the term
loan entered into during August 1998.
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997
Net sales. Net sales increased by $757,320 or 49.36% from $1,534,399 in 1997 to
$2,291,719 in 1998. The net sales increase was the result of new product sales,
Tamarind Tree sales, and continuing product sales which increased due to running
a fall promotion in this quarter versus the previous quarter last year. The
increase (decrease) in sales is as follows: same product sales are 34.11%; new
products are 9.52%; Tamarind Tree sales are 6.84%; and RMFC is (1.11)%.
Gross profit. As a percentage of net sales, gross profit increased from 38.39%
in 1997 to 43.29% in 1998. This increase was a result of the product mix as
well as lower raw material costs than last year.
Selling expenses. Selling expenses increased by $296,377 or 85.75% from $345,630
in 1997 to $642,007 in 1998 and increased as a percentage of net sales from
22.53% in 1997 to 28.01% in 1998. The increase in selling expenses as a
percentage of net sales reflected promotions on new product introductions;
promotions on the RMFC line of products; and running a fall promotion in this
quarter versus the previous quarter last year
General and administrative expenses. General and administrative expenses
increased by $226,558 or 84.32% from $268,676 in 1997 to $495,234 in 1998 and
increased as a percentage of net sales from 17.51% in 1997 to 21.61% in 1998.
The increase in general and administrative expenses is primarily a result of
increased spending in three areas: (i) increase in expenses from RMFC that are
new this year; (ii) increased payroll costs and related benefits; and (iii) and
hiring an investment banker.
Slotting fees. Slotting expenses increased by $15,198 or 124.60% from $12,197
in 1997 to $27,395 in 1998, and increased as a percentage of net sales from
0.08% in 1997 to 1.20% in 1998. According to the Company's plan, a modest amount
of slotting fees was spent to expand the Company's distribution into new
markets. These slotting fees are required by most supermarkets and are expensed
at the time of product introduction.
Interest expense and other charges. Interest expense and other charges increased
by $36,519 from $7,939 in 1997 to $44,458 in 1998 and increased as a percentage
of sales from 0.52% in 1997 to 1.94% in 1998. The increase in interest expense
and other charges is the result of higher borrowings under the Line of Credit
from a financial institution as well as borrowings from the term loan entered
into during August 1998.
9
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Liquidity and Capital Resources
The Company has financed its operations to date through a public offering of
Common Stock, private sale of equity and convertible debt securities, a line of
credit and term loan from a financial institution and cash generated from
operations. At December 31, 1998, the Company had working capital deficit of
$473,919, which is a decrease of $917,715 from a working capital balance of
$443,796 at March 31, 1998. The net decrease in working capital was primarily
attributable to funding operating losses for the current period as well as the
acquisition of the Tamarind Tree Brand.
Most of the Company's sales are made to Liberty under contract terms allowing
certain rights of return on unsold product held by Liberty. The contract calls
for Liberty to pay the Company based on terms relating to the receipt of the
Company's products by Liberty. The Company defers recognition of such sales
until the product is sold by Liberty to distributors or supermarket chains. As a
result, if Liberty pays the Company before Liberty sells the products to a third
party, the Company has an advance from Liberty. If Liberty sells the products to
a third party before it pays the Company, the Company has a receivable from
Liberty.
Net cash used by operating activities for the nine months ended December 31,
1998 was $376,743 consisting primarily of funding operating losses for the
period and increasing inventory offset by an increase in accounts payable and
distributor advances.
Net cash used in investing activities consisted of capital expenditures totaling
$386,256 which related to the purchase of the Tamarind Tree Brand and the
purchase of plates and dies for the new products as well as office equipment.
The Company negotiated a line of credit with a financial institution for
$600,000, which closed on February 3, 1998 ("Line of Credit"). The Line of
Credit is for a term of two years and is secured by all of the assets of the
Company and guaranteed by the two largest stockholders of the Company. In August
1998, the Company increased the Line of Credit to $900,000 and signed a Term
Loan for an additional $300,000 to purchase the Tamarind Tree Brand.
The Company's primary capital needs are for promoting newly developed products
to sell to its existing consumer base, purchase existing all natural brands, or
expansion into national supermarket distribution.
The Company anticipates that the funds available from the Line of Credit,
together with funds generated from operations, will be sufficient to meet its
liquidity needs for the next twelve months. However, the Company needs
additional capital in the future to fully implement its business strategy as set
forth herein. If such capital is unavailable either because of general market
conditions or the results of the Company's operations, the Company will have to
continue to scale back either its investments in new products, or its national
supermarket expansion, or both.
In September 1998, the Company hired an investment banker to explore strategic
opportunities to maximize stockholder value.
On November 13, 1998, the Company terminated the employment contract with one of
the founders of RMFC and repurchased all 30,000 shares of his Annie's Homegrown
common stock. The Company is considering other strategic options for its RMFC
operations. Although the Company does not believe RMFC's net assets are
impaired, there can be no assurance that the Company could recover its
investment under certain of the options being considered.
Management is aware of the potential software anomalies associated with the year
2000 date change. The Company has been evaluating the potential issues that need
to be addressed in connection with its operations. An inventory of the Company's
computer systems and software has been made and assessment and testing of the
systems and software is largely complete. The Company is not aware at this time
of any significant year 2000 issues in its own systems. Formal communications
10
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have begun with Liberty, the Company's master distributor, to ensure that
Liberty has appropriate plans in place to properly address the year 2000 issue.
Based upon these communications, Liberty has informed the Company that its
systems are year 2000 compliant. The Company has also begun preliminary
communications with its principal suppliers to assess their year 2000
compliance. Based on the results of these communications, the Company will make
a decision on whether to seek alternative suppliers. Based on preliminary
information, costs of addressing the year 2000 issue are not expected to have a
material effect upon the Company's financial position, results of operations, or
cash flows in future periods. The Company believes it has adequate plans in
place to address the year 2000 issue. However, there can be no assurance that
the systems of other companies, on which the Company's systems and operations
rely, will be converted on a timely basis and will not have a material effect on
the Company.
In June 1997, the FASB issued Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" and No. 131, "Disclosure about Segments of an Enterprise
and Related Information", which are effective for fiscal years beginning after
December 15, 1997. The Company adopted the required presentation of SFAS No. 130
for the fiscal year beginning April 1, 1998. The Company has no other components
of comprehensive income other than its net loss.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed and Obtained for Internal Use". The statement is effective
for fiscal years beginning after December 15, 1998. Earlier application is
encouraged in fiscal years for which annual financial statements have not been
issued. The statement defines which costs of computer software developed or
obtained for internal use are capitalized and which costs are expensed. The
Company adopted SOP 98-1 effective April 1, 1998. The adoption of SOP 98-1 has
no impact on the consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up
Activities". The statement is effective for fiscal years beginning after
December 15, 1998. The statement requires costs of start-up activities and
organization costs to be expensed as incurred. The Company will adopt SOP 98-5
for the fiscal year beginning April 1, 1999. The adoption of SOP 98-5 will not
materially affect the consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The
statement requires companies to recognize all derivatives as either assets or
liabilities with the instruments measured at fair value. The accounting for
changes in fair value gains and losses depends on the intended use of the
derivative and its resulting designation. The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company will
adopt SFAS 133 by April 1, 2000. Adoption of SFAS 133 is not expected to have a
material impact on the consolidated financial statements.
11
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number
- - --------------
11 Statement re: computation of per share earnings
10.13 Stock Purchase and Loan Agreement with Andrew Martin
dated December 21, 1998
10.14 Stock Purchase and Loan Agreement with Ann Withey
dated December 21, 1998
10.15 Stock Purchase and Loan Agreement with Deborah Churchill
Luster dated December 21, 1998
10.16 Employment Agreement with Paul Nardone dated
December 21, 1998
10.17 Change of Control and Severance Agreement with Neil Raiff
dated December 21, 1998
10.18 Sample Change of Control and Severance Agreement with
Other Employees
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
for which this report is being filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ANNIE'S HOMEGROWN, INC.
-----------------------
(Registrant)
Date: February 10, 1999 /s/ Paul B. Nardone
---------------------------------
Paul B. Nardone
President and Chief Operating Officer
Date: February 10, 1999 /s/ Neil Raiff
----------------------------
Neil Raiff
Chief Financial Officer & Treasurer
12
<PAGE>
EXHIBIT 10.13
STOCK PURCHASE AND LOAN AGREEMENT
This Stock Purchase, Stock Pledge, and Loan Agreement ("Agreement") is
made as of December 21, 1998, by and between ANNIE'S HOMEGROWN, INC. ("Company")
and Andrew M. Martin ("Key Employee").
RECITALS
--------
WHEREAS, Key Employee has performed and is expected to continue to
perform valuable services for the Company;
WHEREAS, the Company granted to Key Employee certain incentive stock
options ("Options") pursuant to the Company's stockholder-approved 1990
Incentive Stock Option Plan;
WHEREAS, the Options expire on December 30, 1998; and
WHEREAS, to enable Key Employee to purchase up to One Hundred One
Thousand Nine Hundred Fifty-Nine (101,959) shares of the Company's common stock
($.001 par value) ("Shares") pursuant to the Options, the Company and Key
Employee desire the Company to make a personal loan ("Loan") to Key Employee
subject to the terms and conditions of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the covenants, duties, terms, and
conditions set forth in this Agreement, the parties agree as follows:
1. Share Purchase. Subject to the terms and conditions stated in this
--------------
Agreement, the Company hereby agrees to sell to Key Employee and Key Employee
agrees to purchase 101,959 Shares at the price of $1.005 per Share.
2. Loan. Subject to the terms and conditions stated in this Agreement,
----
the Company hereby agrees to loan Key Employee $102,468.80. The amount of the
Loan is equal to the purchase price of 101,959 Shares at $1.005 per Share.
3. Use of Proceeds. Key Employee agrees to use all of the proceeds from
---------------
the Loan to purchase from the Company 101,959 Shares at the price of $1.005
per Share.
4. Interest. The outstanding principal amount of the Loan shall bear
--------
interest ("Interest") at the rate of 4.51%, compounded annually, from the date
hereof to the date of payment. This interest rate is equal to the Mid-Term
Applicable Federal Rate as defined in Section 1274(d) of the Internal Revenue
Code of 1986, as amended.
5. Payment of Principal and Interest. For value received, Key Employee
---------------------------------
promises to pay to the Company, in lawful money of the United States of America,
and in immediately available funds, the principal sum of One Hundred Two
Thousand Four Hundred Sixty-Eight and 80/100 Dollars
<PAGE>
($102,468.80), or so much thereof as may be outstanding, with interest thereon,
on December 30, 2003 (the "Maturity Date"). Subject to Section 6.1, Interest
accrued on this Loan shall be payable annually on December 30th of each year,
commencing on December 30, 1999.
6. Payment of Interest: Reduction of Principal Amount.
--------------------------------------------------
6.1. Payment of Interest. If, as of December 29 of each year, Key
-------------------
Employee is still employed with the Company, the Company agrees to pay, on Key
Employee's behalf, all Interest associated with the Loan. Any Interest paid by
the Company on Key Employee's behalf will not be distributed to Key Employee
but, rather, will be automatically applied against Key Employee's Interest
payment obligations under this Agreement. Any Interest paid by the Company on
Key Employee's behalf will be deemed to be additional compensation income to Key
Employee.
6.2. Reduction of Principal Amount. The Company agrees to reduce the
-----------------------------
Principal Amount as follows:
(a) If, as of December 29, 1999, Key Employee is still employed
by the Company, the Company agrees to forgive $20,493.76 of the Principal
Amount;
(b) If, as of December 29, 2000, Key Employee is still employed
by the Company, the Company agrees to forgive an additional $20,493.76 of the
Principal Amount;
(c) If, as of December 29, 2001, Key Employee is still employed
by the Company, the Company agrees to forgive an additional $20,493.76 of the
Principal Amount;
(d) If, as of December 29, 2002, Key Employee is still employed
by the Company, the Company agrees to forgive an additional $20,493.76 of the
Principal Amount;
(e) If, as of December 29, 2003, Key Employee is still employed
by the Company, the Company agrees to forgive the remaining $20,493.76 of the
Principal Amount.
It is the parties intention that, if Key Employee continues to be
employed by the Company as of December 29, 2003, the Principal Amount will be
completely forgiven.
6.3. Change in Control. In the event that a single person or
-----------------
entity (other than the current shareholders of the Company) acquires more than
50% of the outstanding stock of the Company, then the full amount of the
Principal Amount not yet paid plus all accrued interest thereon, will be due and
payable in accordance with Section 5 and Section 8 shall not apply.
7. Pledge of Stock.
---------------
7.1. Pledged Shares. Key Employee's obligations under this Agreement
--------------
are secured by the Shares, and Key Employee hereby grants the Company a security
interest in the Shares (the "Pledged Shares"). The foregoing security interest
shall constitute a first priority interest to secure the payment of the
Principal Amount as such amount is reduced by Section 6 of this Agreement. All
2
<PAGE>
certificates representing the Shares, if any shall have been issued, shall be
fully endorsed in blank by Key Employee and delivered by Key Employee to the
Company.
7.2. Rights of the Company as Secured Party. The Company shall have
--------------------------------------
all rights and remedies set forth in this Agreement and all other rights of a
secured party at law or in equity.
7.3. Rights Regarding Pledged Shares. The Company has the right to
-------------------------------
deliver any or all of the Pledged Shares to any person, to have any or all of
the Pledged Shares registered in its name or in the name of any other person,
and Key Employee irrevocably appoints the Company its attorney-in-fact
authorized at any time during the term of this Agreement to take any actions or
exercise any rights available to the Company under this Agreement.
7.4. Voting Rights. Key Employee hereby grants the Company the right
-------------
to vote the Pledged Shares until either Key Employee makes full payment of the
Principal Amount and any applicable Interest or the Principal Amount is
completely forgiven pursuant to Section 6.2 of this Agreement.
7.5. Key Employee's Representations Regarding Shares. Key Employee
-----------------------------------------------
represents that, as of the date of this Agreement, Key Employee has not taken
any action that would result in the Pledged Shares being subject to any adverse
claims, liens, or encumbrances (other than the pled-e under this Agreement),
and, to his knowledge, there are no adverse claims, liens, or encumbrances on
the Pledged Shares as of the date of this Agreement.
7.6. Release of Security. As the Principal Amount is reduced
-------------------
pursuant to Section 6, Shares (at a value of $1.005/Share for this purpose) will
be released from the pledge to Key Employee, i.e., 20% of the Shares after one
(1) year, an additional 20% after two (2) years, an additional 20% after three
(3) years, an additional 20% after (4) years, and the balance after five (5)
years of employment. Upon full payment of the Principal Amount and any
applicable Interest or complete forgiveness of the Principal Amount pursuant to
Section 6.2 of this Agreement, the Company shall cause the Shares representing
the balance of the Pledged Shares to Key Employee to be registered on the books
of the Company's transfer agent.
7.7. Remedies Related to Collateral. Upon an Event of Default (as
------------------------------
defined in Section 11 of this Agreement), the Company may, in its sole
discretion and with or without further notice to Key Employee (in addition to
all rights or remedies available at law or equity or otherwise): (i) register
the Pledged Shares in the name of the Company or in any such name as the Company
may decide, and (ii) exercise any rights provided to a secured party under the
applicable commercial code.
8. Termination of Employment. Except in the event of a Change of
-------------------------
Control, in which case Section 6.3 shall apply, if Key Employee ceases to be
employed by the Company, the Company may purchase the Shares sold to Key
Employee as provided in this section.
8.1. Termination of Employment Before December 29, 2003. In the
--------------------------------------------------
event of termination of Key Employee's employment with the Company before
December 29, 2003, the Company shall be entitled to buy back from Key Employee,
Shares purchased pursuant to the terms of this Agreement,
3
<PAGE>
at a price equal to $1.005 per Share plus 140% of interest accrued and not yet
forgiven on the Loan, as follows:
(a) If Key Employee's employment is terminated before December 29,
1999, the Company will be entitled to buy back from key Employee all of the
Shares purchased pursuant to this Agreement;
(b) If Key Employee's employment is terminated on or after December
29, 1999 but before December 29, 2000, the Company will be entitled to buy back
from Key Employee 81,567 Shares purchased pursuant to this Agreement;
(c) If Key Employee's employment is terminated on or after December
29, 2000 but before December 29, 2001, the Company will be entitled to buy back
from Key Employee 61,175 Shares purchased pursuant to this Agreement;
(d) If Key Employee's employment is terminated on or after December
29, 2001 but before December 29, 2002, the Company will be entitled to buy back
from Key Employee 40,783 Shares purchased pursuant to this Agreement;
(e) If Key Employee's employment is terminated on or after December
29, 2002 but before December 29, 2003, the Company will be entitled to buy back
from Key Employee 20,391 Shares purchased pursuant to this Agreement.
8.2. Company's Election Not to Buy Back Shares. In the event that the
-----------------------------------------
Company elects not to buy back Key Employee's Shares pursuant to the terms
of Section 8.1 of this Agreement, Key Employee may either (i) obtain title to
the Pledged Shares and a release of the Company's security interest in the
Pledged Shares by making full payment of the Principal Amount and any applicable
Interest within 45 days of the termination date, or (ii) sell some or all of the
Shares to the Company for the price of $1.005 per Share (plus accrued interest)
in repayment of the Principal Amount and any applicable Interest. The Company
will be obligated to purchase the Shares from Key Employee pursuant to this
Section 8.2 if the Company elects not to purchase the Shares pursuant to Section
8.1 of this Agreement and Key Employee elects to sell the Shares back to the
Company pursuant to the terms of this Section 8.2.
8.3. Termination of Employment On or After December 29, 2003 or
----------------------------------------------------------
Before December 29, 2003 for Other Than Good Cause. In the event of termination
- - --------------------------------------------------
of Key Employee's employment with the Company on or after December 29, 2003 for
any reason whatsoever, or in the event that the Company terminates Key
Employee's employment before December 29, 2003 for other than Good Cause (as
defined below), the Company will not be entitled to buy back the Shares
purchased by Key Employee pursuant to this Agreement other than as provided in
Section 8.4 of this Agreement. Notwithstanding the foregoing, the parties may
enter into a subsequent agreement whereby the Company agrees to purchase Shares
held by Key Employee.
As used herein, the term "Good Cause" shall mean (i) any act or
omission of gross negligence, willful misconduct, dishonesty, or fraud by Key
Employee in the performance of his
4
<PAGE>
duties, (ii) the failure or refusal of Key Employee to perform the duties or to
render the services assigned to him from time to time, (iii) the charging or
indictment of Key Employee in connection with a felony or any misdemeanor
involving dishonesty or moral turpitude, (iv) the material breach by Key
Employee of his fiduciary duty or duty of trust to the Company, (v) death of Key
Employee, or (vi) voluntary termination of employment by Key Employee.
8.4. Principal Amount and Interest in the Event of Termination. In
---------------------------------------------------------
the event the Company exercises its right to buy back the Shares from Key
Employee pursuant to Section 8.1 of this Agreement, any outstanding Principal
Amount and any applicable Interest will be immediately due and payable and shall
be applied against amounts due to Key Employee for purchase of Shares. In the
event that the Company terminates Key Employee's employment before December 29,
2003 for other than Good Cause, Key Employee may either (i) obtain title to the
Pledged Shares and a release of the Company's security interest in the Pledged
Shares by making full payment of the Principal Amount and any applicable
interest within 45 days of the termination date, or (ii) sell Shares to the
Company (and the Company agrees to purchase the Shares) for the price of $1.005
per Share (plus accrued interest) in repayment of the Principal Amount and any
applicable Interest.
9. Arbitration. If a dispute arises between the Company and Key Employee
-----------
concerning this Agreement, the disputed matter shall be submitted to arbitration
in the City of San Francisco, California, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules"). Any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The arbitrators shall have the authority to grant
any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve the disputed matter. The arbitrators shall
apply the laws of the State of California in making any determination hereunder.
Notwithstanding anything to the contrary which may now or hereafter be contained
in the AAA Rules, the parties agree any such arbitration shall be conducted
before a panel of three arbitrators who shall be compensated for their services
at a rate to be determined by the American Arbitration Association in the event
the parties are not able to agree upon their rate of compensation. Each party
shall have the right to appoint one arbitrator (to be appointed within 20 days
of the notice of a dispute to be resolved by arbitration hereunder), and the two
arbitrators so chosen shall mutually agree upon the selection of the third,
impartial arbitrator. The majority decision of the arbitrators will be final
and conclusive upon the parties hereto.
10. Payments. Any payments due from Key Employee under this Agreement
--------
shall be made payable to Annie's Homegrown, Inc. and shall be sent to the
Company's offices at 395 Main Street, Wakefield, MA 02880, Attention: Neil
Raiff.
11. Event of Default. It shall be an event of default (an "Event of
----------------
Default") if Key Employee fails to pay the Company pursuant to Section 5.
12. Right of Employment. Nothing herein shall confer upon Key Employee
-------------------
the right to continue in the employment of the Company nor affect any right
which the Company may have to terminate the employment of Key Employee.
13. Miscellaneous.
-------------
5
<PAGE>
13.1. This Agreement contains the full and complete understanding of
the parties and supersedes all prior representations, promises, agreements, and
warranties, whether oral or written.
13.2. This Agreement shall be governed by and interpreted according
to the laws of the Commonwealth of Massachusetts, without regard to the choice
of law provisions thereunder.
13.3. With respect to the Company, this Agreement shall inure to the
benefit of and be binding upon any successors or assigns of the Company. With
respect to Key Employee, this Agreement shall not be assignable but shall inure
to the benefit of estate of Key Employee or his legal successor upon death or
disability.
13.4. The captions of the various sections of this Agreement are
inserted only for convenience and shall not be considered in construing this
Agreement.
13.5. This Agreement can be modified, amended, or any of its terms
waived only by a writing signed by both parties.
13.6. If any provision of this Agreement shall be held invalid,
illegal, or unenforceable, the remaining provisions of the Agreement shall
remain in full force and effect and the invalid, illegal, or unenforceable
provision shall be limited or eliminated only to the extent necessary to remove
such invalidity, illegality or unenforceability in accordance with the
applicable law at that time.
13.7. No remedy made available to the Company by any of the
provisions of this Agreement is intended to be exclusive of any other remedy.
Each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder as well as those remedies existing at law, in
equity, by statute, or otherwise.
13.8. This Agreement may be executed in counterparts, each of which
will be considered an original and each of which will constitute one and the
same document.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
specified in the first paragraph.
ANNIE'S HOMEGROWN, INC.
By: __________________________
Neil Raiff
Its: Chief Financial Officer
KEY EMPLOYEE:
_________________________
Andrew M. Martin
7
<PAGE>
EXHIBIT 10.14
STOCK PURCHASE AND LOAN AGREEMENT
This Stock Purchase, Stock Pledge, and Loan Agreement ("Agreement") is made
as of December 21, 1998, by and between ANNIE'S HOMEGROWN, INC. ("Company") and
Ann E. Withey ("Key Employee").
RECITALS
--------
WHEREAS, Key Employee has performed and is expected to continue to perform
valuable services for the Company;
WHEREAS, the Company granted to Key Employee certain incentive stock
options ("Options") pursuant to the Company's stockholder-approved 1990
Incentive Stock Option Plan;
WHEREAS, the Options expire on December 30, 1998; and
WHEREAS, to enable Key Employee to purchase up to Seventy One Thousand Six
Hundred Twenty (71,620) shares of the Company's common stock ($.001 par value)
("Shares") pursuant to the Options, the Company and Key Employee desire the
Company to make a personal loan ("Loan") to Key Employee subject to the terms
and conditions of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the covenants, duties, terms, and
conditions set forth in this Agreement, the parties agree as follows:
1. Share Purchase. Subject to the terms and conditions stated in this
--------------
Agreement, the Company hereby agrees to sell to Key Employee and Key Employee
agrees to purchase 71,620 Shares at the price of $1.005 per Share.
2. Loan. Subject to the terms and conditions stated in this Agreement, the
----
Company hereby agrees to loan Key Employee $71,978.10. The amount of the Loan
is equal to the purchase price of 71,620 Shares at $1.005 per Share.
3. Use of Proceeds. Key Employee agrees to use all of the proceeds from the
---------------
Loan to purchase from the Company 71,620 Shares at the price of $1.005 per
Share.
4. Interest. The outstanding principal amount of the Loan shall bear interest
--------
("Interest") at the rate of 4.51%, compounded annually, from the date hereof to
the date of payment. This interest rate is equal to the Mid-Term Applicable
Federal Rate as defined in Section 1274(d) of the Internal Revenue Code of 1986,
as amended.
5. Payment of Principal and Interest. For value received, Key Employee
---------------------------------
promises to pay to the Company, in lawful money of the United States of America,
and in immediately available funds, the principal sum of Seventy One Thousand
Nine Hundred Seventy-Eight and 10/100 Dollars
<PAGE>
($71,978.10), or so much thereof as may be outstanding, with interest thereon,
on December 30, 2003 (the "Maturity Date"). Subject to Section 6.1, Interest
accrued on this Loan shall be payable annually on December 30th of each year,
commencing on December 30, 1999.
6. Payment of Interest: Reduction of Principal Amount.
--------------------------------------------------
6.1. Payment of Interest. If, as of December 29 of each year, Key Employee
-------------------
is still employed with the Company, the Company agrees to pay, on Key Employee's
behalf, all Interest associated with the Loan. Any Interest paid by the Company
on Key Employee's behalf will not be distributed to Key Employee but, rather,
will be automatically applied against Key Employee's Interest payment
obligations under this Agreement. Any Interest paid by the Company on Key
Employee's behalf will be deemed to be additional compensation income to Key
Employee.
6.2. Reduction of Principal Amount. The Company agrees to reduce the
-----------------------------
Principal Amount as follows:
(a) If, as of December 29, 1999, Key Employee is still employed by
the Company, the Company agrees to forgive $14,395.62 of the Principal Amount;
(b) If, as of December 29, 2000, Key Employee is still employed by
the Company, the Company agrees to forgive an additional $14,395.62 of the
Principal Amount;
(c) If, as of December 29, 2001, Key Employee is still employed by
the Company, the Company agrees to forgive an additional $14,395.62 of the
Principal Amount;
(d) If, as of December 29, 2002, Key Employee is still employed by
the Company, the Company agrees to forgive an additional $14,395.62 of the
Principal Amount;
(e) If, as of December 29, 2003, Key Employee is still employed by
the Company, the Company agrees to forgive the remaining $14,395.62 of the
Principal Amount.
It is the parties intention that, if Key Employee continues to be employed
by the Company as of December 29, 2003, the Principal Amount will be completely
forgiven.
6.3. Change in Control. In the event that a single person or entity (other
-----------------
than the current shareholders of the Company) acquires more than 50% of the
outstanding stock of the Company, then the full amount of the Principal Amount
not yet paid plus all accrued interest thereon, will be due and payable in
accordance with Section 5 and Section 8 shall not apply.
7. Pledge of Stock.
---------------
7.1. Pledged Shares. Key Employee's obligations under this Agreement are
--------------
secured by the Shares, and Key Employee hereby grants the Company a security
interest in the Shares (the "Pledged Shares"). The foregoing security interest
shall constitute a first priority interest to secure the payment of the
Principal Amount as such amount is reduced by Section 6 of this
2
<PAGE>
Agreement. All certificates representing the Shares, if any shall have been
issued, shall be fully endorsed in blank by Key Employee and delivered by Key
Employee to the Company.
7.2. Rights of the Company as Secured Party. The Company shall have all
--------------------------------------
rights and remedies set forth in this Agreement and all other rights of a
secured party at law or in equity.
7.3. Rights Regarding Pledged Shares. The Company has the right to deliver
-------------------------------
any or all of the Pledged Shares to any person, to have any or all of the
Pledged Shares registered in its name or in the name of any other person, and
Key Employee irrevocably appoints the Company its attorney-in-fact authorized at
any time during the term of this Agreement to take any actions or exercise any
rights available to the Company under this Agreement.
7.4. Voting Rights. Key Employee hereby grants the Company the right to
-------------
vote the Pledged Shares until either Key Employee makes full payment of the
Principal Amount and any applicable Interest or the Principal Amount is
completely forgiven pursuant to Section 6.2 of this Agreement.
7.5. Key Employee's Representations Regarding Shares. Key Employee
-----------------------------------------------
represents that, as of the date of this Agreement, Key Employee has not taken
any action that would result in the Pledged Shares being subject to any adverse
claims, liens, or encumbrances (other than the pled-e under this Agreement),
and, to his knowledge, there are no adverse claims, liens, or encumbrances on
the Pledged Shares as of the date of this Agreement.
7.6. Release of Security. As the Principal Amount is reduced pursuant to
-------------------
Section 6, Shares (at a value of $1.005/Share for this purpose) will be released
from the pledge to Key Employee, i.e., 20% of the Shares after one (1) year, an
additional 20% after two (2) years, an additional 20% after three (3) years, an
additional 20% after (4) years, and the balance after five (5) years of
employment. Upon full payment of the Principal Amount and any applicable
Interest or complete forgiveness of the Principal Amount pursuant to Section 6.2
of this Agreement, the Company shall cause the Shares representing the balance
of the Pledged Shares to Key Employee to be registered on the books of the
Company's transfer agent.
7.7. Remedies Related to Collateral. Upon an Event of Default (as defined
------------------------------
in Section 11 of this Agreement), the Company may, in its sole discretion and
with or without further notice to Key Employee (in addition to all rights or
remedies available at law or equity or otherwise): (i) register the Pledged
Shares in the name of the Company or in any such name as the Company may decide,
and (ii) exercise any rights provided to a secured party under the applicable
commercial code.
8. Termination of Employment. Except in the event of a Change of Control, in
-------------------------
which case Section 6.3 shall apply, if Key Employee ceases to be employed by
the Company, the Company may purchase the Shares sold to Key Employee as
provided in this section.
8.1. Termination of Employment Before December 29, 2003. In the event of
--------------------------------------------------
termination of Key Employee's employment with the Company before December 29,
2003, the Company shall be entitled to buy back from Key Employee, Shares
purchased pursuant to the terms of this Agreement,
3
<PAGE>
at a price equal to $1.005 per Share plus 140% of interest accrued and not yet
forgiven on the Loan, as follows:
(a) If Key Employee's employment is terminated before December 29,
1999, the Company will be entitled to buy back from key Employee all of the
Shares purchased pursuant to this Agreement;
(b) If Key Employee's employment is terminated on or after December
29, 1999 but before December 29, 2000, the Company will be entitled to buy back
from Key Employee 57,296 Shares purchased pursuant to this Agreement;
(c) If Key Employee's employment is terminated on or after December
29, 2000 but before December 29, 2001, the Company will be entitled to buy back
from Key Employee 42,972 Shares purchased pursuant to this Agreement;
(d) If Key Employee's employment is terminated on or after December
29, 2001 but before December 29, 2002, the Company will be entitled to buy back
from Key Employee 28,648 Shares purchased pursuant to this Agreement;
(e) If Key Employee's employment is terminated on or after December
29, 2002 but before December 29, 2003, the Company will be entitled to buy back
from Key Employee 14,324 Shares purchased pursuant to this Agreement.
8.2. Company's Election Not to Buy Back Shares. In the event that the
-----------------------------------------
Company elects not to buy back Key Employee's Shares pursuant to the terms of
Section 8.1 of this Agreement, Key Employee may either (i) obtain title to the
Pledged Shares and a release of the Company's security interest in the Pledged
Shares by making full payment of the Principal Amount and any applicable
Interest within 45 days of the termination date, or (ii) sell some or all of the
Shares to the Company for the price of $1.005 per Share (plus accrued interest)
in repayment of the Principal Amount and any applicable Interest. The Company
will be obligated to purchase the Shares from Key Employee pursuant to this
Section 8.2 if the Company elects not to purchase the Shares pursuant to Section
8.1 of this Agreement and Key Employee elects to sell the Shares back to the
Company pursuant to the terms of this Section 8.2.
8.3. Termination of Employment On or After December 29, 2003 or Before
-----------------------------------------------------------------
December 29, 2003 for Other Than Good Cause. In the event of termination of Key
- - -------------------------------------------
Employee's employment with the Company on or after December 29, 2003 for any
reason whatsoever, or in the event that the Company terminates Key Employee's
employment before December 29, 2003 for other than Good Cause (as defined
below), the Company will not be entitled to buy back the Shares purchased by Key
Employee pursuant to this Agreement other than as provided in Section 8.4 of
this Agreement. Notwithstanding the foregoing, the parties may enter into a
subsequent agreement whereby the Company agrees to purchase Shares held by Key
Employee.
As used herein, the term "Good Cause" shall mean (i) any act or
omission of gross negligence, willful misconduct, dishonesty, or fraud by Key
Employee in the performance of his
4
<PAGE>
duties, (ii) the failure or refusal of Key Employee to perform the duties or to
render the services assigned to him from time to time, (iii) the charging or
indictment of Key Employee in connection with a felony or any misdemeanor
involving dishonesty or moral turpitude, (iv) the material breach by Key
Employee of his fiduciary duty or duty of trust to the Company, (v) death of Key
Employee, or (vi) voluntary termination of employment by Key Employee.
8.4. Principal Amount and Interest in the Event of Termination. In the
---------------------------------------------------------
event the Company exercises its right to buy back the Shares from Key Employee
pursuant to Section 8.1 of this Agreement, any outstanding Principal Amount and
any applicable Interest will be immediately due and payable and shall be applied
against amounts due to Key Employee for purchase of Shares. In the event that
the Company terminates Key Employee's employment before December 29, 2003 for
other than Good Cause, Key Employee may either (i) obtain title to the Pledged
Shares and a release of the Company's security interest in the Pledged Shares by
making full payment of the Principal Amount and any applicable interest within
45 days of the termination date, or (ii) sell Shares to the Company (and the
Company agrees to purchase the Shares) for the price of $1.005 per Share (plus
accrued interest) in repayment of the Principal Amount and any applicable
Interest.
9. Arbitration. If a dispute arises between the Company and Key Employee
-----------
concerning this Agreement, the disputed matter shall be submitted to arbitration
in the City of San Francisco, California, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules"). Any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The arbitrators shall have the authority to grant
any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve the disputed matter. The arbitrators shall
apply the laws of the State of California in making any determination hereunder.
Notwithstanding anything to the contrary which may now or hereafter be contained
in the AAA Rules, the parties agree any such arbitration shall be conducted
before a panel of three arbitrators who shall be compensated for their services
at a rate to be determined by the American Arbitration Association in the event
the parties are not able to agree upon their rate of compensation. Each party
shall have the right to appoint one arbitrator (to be appointed within 20 days
of the notice of a dispute to be resolved by arbitration hereunder), and the two
arbitrators so chosen shall mutually agree upon the selection of the third,
impartial arbitrator. The majority decision of the arbitrators will be final
and conclusive upon the parties hereto.
10. Payments. Any payments due from Key Employee under this Agreement shall be
--------
made payable to Annie's Homegrown, Inc. and shall be sent to the Company's
offices at 395 Main Street, Wakefield, MA 02880, Attention: Neil Raiff.
11. Event of Default. It shall be an event of default (an "Event of Default")
----------------
if Key Employee fails to pay the Company pursuant to Section 5.
12. Right of Employment. Nothing herein shall confer upon Key Employee the
-------------------
right to continue in the employment of the Company nor affect any right which
the Company may have to terminate the employment of Key Employee.
13. Miscellaneous.
-------------
5
<PAGE>
13.1. This Agreement contains the full and complete understanding of the
parties and supersedes all prior representations, promises, agreements, and
warranties, whether oral or written.
13.2. This Agreement shall be governed by and interpreted according to the
laws of the Commonwealth of Massachusetts, without regard to the choice of law
provisions thereunder.
13.3. With respect to the Company, this Agreement shall inure to the
benefit of and be binding upon any successors or assigns of the Company. With
respect to Key Employee, this Agreement shall not be assignable but shall inure
to the benefit of estate of Key Employee or his legal successor upon death or
disability.
13.4. The captions of the various sections of this Agreement are inserted
only for convenience and shall not be considered in construing this Agreement.
13.5. This Agreement can be modified, amended, or any of its terms waived
only by a writing signed by both parties.
13.6. If any provision of this Agreement shall be held invalid, illegal,
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal, or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time.
13.7. No remedy made available to the Company by any of the provisions of
this Agreement is intended to be exclusive of any other remedy. Each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder as well as those remedies existing at law, in equity, by statute, or
otherwise.
13.8. This Agreement may be executed in counterparts, each of which will
be considered an original and each of which will constitute one and the same
document.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
specified in the first paragraph.
ANNIE'S HOMEGROWN, INC.
By: __________________________
Neil Raiff
Its: Chief Financial Officer
KEY EMPLOYEE:
_________________________
Ann E. Withey
7
<PAGE>
EXHIBIT 10.15
STOCK PURCHASE AND LOAN AGREEMENT
This Stock Purchase, Stock Pledge, and Loan Agreement ("Agreement") is made
as of December 21, 1998, by and between ANNIE'S HOMEGROWN, INC. ("Company") and
Deborah Churchill Luster ("Key Employee").
RECITALS
--------
WHEREAS, Key Employee has performed and is expected to continue to perform
valuable services for the Company;
WHEREAS, the Company granted to Key Employee certain incentive stock
options ("Options") pursuant to the Company's stockholder-approved 1990
Incentive Stock Option Plan;
WHEREAS, the Options expire on December 30, 1998; and
WHEREAS, to enable Key Employee to purchase up to Forty Three Thousand
Twenty-One (43,021) shares of the Company's common stock ($.001 par value)
("Shares") pursuant to the Options, the Company and Key Employee desire the
Company to make a personal loan ("Loan") to Key Employee subject to the terms
and conditions of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the covenants, duties, terms, and
conditions set forth in this Agreement, the parties agree as follows:
1. Share Purchase. Subject to the terms and conditions stated in this
--------------
Agreement, the Company hereby agrees to sell to Key Employee and Key Employee
agrees to purchase 43,021 Shares at the price of $1.005 per Share.
2. Loan. Subject to the terms and conditions stated in this Agreement, the
----
Company hereby agrees to loan Key Employee $43,236.11. The amount of the Loan is
equal to the purchase price of 43,021 Shares at $1.005 per Share.
3. Use of Proceeds. Key Employee agrees to use all of the proceeds from the
---------------
Loan to purchase from the Company 43,021 Shares at the price of $1.005 per
Share.
4. Interest. The outstanding principal amount of the Loan shall bear interest
--------
("Interest") at the rate of 4.51%, compounded annually, from the date hereof to
the date of payment. This interest rate is equal to the Mid-Term Applicable
Federal Rate as defined in Section 1274(d) of the Internal Revenue Code of 1986,
as amended.
5. Payment. Interest on any outstanding principal balance shall be payable
-------
annually on December 30th of each year commencing December 30, 1998, subject to
(i) acceleration of payment under the circumstances described below in Section 8
of this Agreement, and (ii) payment by the
<PAGE>
Company under Section 6 of this Agreement. The outstanding principal balance of
the Loan, ("Principal Amount"), shall be due and payable in full on December 30,
2003 (the "Maturity Date"), subject to (i) acceleration of payment on
termination of employment under the circumstances described below in Section 8
of this Agreement, and (ii) the reductions provided under Section 6 of this
Agreement.
6. Payment of Interest: Reduction of Principal Amount.
--------------------------------------------------
6.1. Payment of Interest. If, as of December 29 of each year, Key Employee
-------------------
is still employed with the Company, the Company agrees to pay, on Key Employee's
behalf, all Interest associated with the Loan. Any Interest paid by the Company
on Key Employee's behalf will not be distributed to Key Employee but, rather,
will be automatically applied against Key Employee's Interest payment
obligations under this Agreement. Any Interest paid by the Company on Key
Employee's behalf will be deemed to be additional compensation income to Key
Employee.
6.2. Reduction of Principal Amount. The Company agrees to reduce the
-----------------------------
Principal Amount as follows:
(a) If, as of December 29, 1999, Key Employee is still employed by the
Company, the Company agrees to forgive $8,647.22 of the Principal Amount;
(b) If, as of December 29, 2000, Key Employee is still employed by the
Company, the Company agrees to forgive an additional $8,647.22 of the Principal
Amount;
(c) If, as of December 29, 2001, Key Employee is still employed by the
Company, the Company agrees to forgive an additional $8,647.22 of the Principal
Amount;
(d) If, as of December 29, 2002, Key Employee is still employed by the
Company, the Company agrees to forgive an additional $8,647.22 of the Principal
Amount;
(e) If, as of December 29, 2003, Key Employee is still employed by the
Company, the Company agrees to forgive the remaining $8,647.22 of the Principal
Amount.
It is the parties intention that, if Key Employee continues to be employed by
the Company as of December 29, 2003, the Principal Amount will be completely
forgiven.
6.3. Change in Control. In the event that a single person or entity
-----------------
(other than the current shareholders of the Company) acquires more than 50% of
the outstanding stock of the Company, then the full amount of the Principal
Amount not yet paid plus all accrued interest thereon, will be due and payable
in accordance with Section 5 and Section 8 shall not apply.
7. Pledge of Stock.
---------------
7.1. Pledged Shares. Key Employee's obligations under this Agreement are
--------------
secured by the Shares, and Key Employee hereby grants the Company a security
interest in the Shares (the "Pledged
2
<PAGE>
Shares"). The foregoing security interest shall constitute a first priority
interest to secure the payment of the Principal Amount as such amount is reduced
by Section 6 of this Agreement. All certificates representing the Shares, if any
shall have been issued, shall be fully endorsed in blank by Key Employee and
delivered by Key Employee to the Company.
7.2. Rights of the Company as Secured Party. The Company shall have
--------------------------------------
all rights and remedies set forth in this Agreement and all other rights of a
secured party at law or in equity.
7.3. Rights Regarding Pledged Shares. The Company has the right to deliver
-------------------------------
any or all of the Pledged Shares to any person, to have any or all of the
Pledged Shares registered in its name or in the name of any other person, and
Key Employee irrevocably appoints the Company its attorney-in-fact authorized at
any time during the term of this Agreement to take any actions or exercise any
rights available to the Company under this Agreement.
7.4. Voting Rights. Key Employee hereby grants the Company the right to
-------------
vote the Pledged Shares until either Key Employee makes full payment of the
Principal Amount and any applicable Interest or the Principal Amount is
completely forgiven pursuant to Section 6.2 of this Agreement.
7.5. Key Employee's Representations Regarding Shares. Key Employee
-----------------------------------------------
represents that, as of the date of this Agreement, Key Employee has not taken
any action that would result in the Pledged Shares being subject to any adverse
claims, liens, or encumbrances (other than the pled-e under this Agreement),
and, to his knowledge, there are no adverse claims, liens, or encumbrances on
the Pledged Shares as of the date of this Agreement.
7.6. Release of Security. As the Principal Amount is reduced pursuant to
-------------------
Section 6, Shares (at a value of $1.005/Share for this purpose) will be released
from the pledge to Key Employee, i.e., 20% of the Shares after one (1) year, an
additional 20% after two (2) years, an additional 20% after three (3) years, an
additional 20% after (4) years, and the balance after five (5) years of
employment. Upon full payment of the Principal Amount and any applicable
Interest or complete forgiveness of the Principal Amount pursuant to Section 6.2
of this Agreement, the Company shall cause the Shares representing the balance
of the Pledged Shares to Key Employee to be registered on the books of the
Company's transfer agent.
7.7. Remedies Related to Collateral. Upon an Event of Default (as defined
------------------------------
in Section 11 of this Agreement), the Company may, in its sole discretion and
with or without further notice to Key Employee (in addition to all rights or
remedies available at law or equity or otherwise): (i) register the Pledged
Shares in the name of the Company or in any such name as the Company may decide,
and (ii) exercise any rights provided to a secured party under the applicable
commercial code.
8. Termination of Employment. Except in the event of a Change of Control, in
-------------------------
which case Section 6.3 shall apply, if Key Employee ceases to be employed by
the Company, the Company may purchase the Shares sold to Key Employee as
provided in this section.
3
<PAGE>
8.1. Termination of Employment Before December 29, 2003. In the event of
--------------------------------------------------
termination of Key Employee's employment with the Company before December 29,
2003, the Company shall be entitled to buy back from Key Employee, Shares
purchased pursuant to the terms of this Agreement, at a price equal to $1.005
per Share plus 140% of interest accrued and not yet forgiven on the Loan, as
follows:
(a) If Key Employee's employment is terminated before December 29,
1999, the Company will be entitled to buy back from key Employee all of the
Shares purchased pursuant to this Agreement;
(b) If Key Employee's employment is terminated on or after December
29, 1999 but before December 29, 2000, the Company will be entitled to buy back
from Key Employee 34,416 Shares purchased pursuant to this Agreement;
(c) If Key Employee's employment is terminated on or after December
29, 2000 but before December 29, 2001, the Company will be entitled to buy back
from Key Employee 25,812 Shares purchased pursuant to this Agreement;
(d) If Key Employee's employment is terminated on or after December
29, 2001 but before December 29, 2002, the Company will be entitled to buy back
from Key Employee 17,208 Shares purchased pursuant to this Agreement;
(e) If Key Employee's employment is terminated on or after December
29, 2002 but before December 29, 2003, the Company will be entitled to buy back
from Key Employee 8,604 Shares purchased pursuant to this Agreement.
8.2. Company's Election Not to Buy Back Shares. In the event that the
-----------------------------------------
Company elects not to buy back Key Employee's Shares pursuant to the terms of
Section 8.1 of this Agreement, Key Employee may either (i) obtain title to the
Pledged Shares and a release of the Company's security interest in the Pledged
Shares by making full payment of the Principal Amount and any applicable
Interest within 45 days of the termination date, or (ii) sell some or all of the
Shares to the Company for the price of $1.005 per Share (plus accrued interest)
in repayment of the Principal Amount and any applicable Interest. The Company
will be obligated to purchase the Shares from Key Employee pursuant to this
Section 8.2 if the Company elects not to purchase the Shares pursuant to Section
8.1 of this Agreement and Key Employee elects to sell the Shares back to the
Company pursuant to the terms of this Section 8.2.
8.3. Termination of Employment On or After December 29, 2003 or Before
-----------------------------------------------------------------
December 29, 2003 for Other Than Good Cause. In the event of termination of
- - -------------------------------------------
Key Employee's employment with the Company on or after December 29, 2003 for any
reason whatsoever, or in the event that the Company terminates Key Employee's
employment before December 29, 2003 for other than Good Cause (as defined
below), the Company will not be entitled to buy back the Shares purchased by Key
Employee pursuant to this Agreement other than as provided in Section 8.4 of
this Agreement. Notwithstanding the foregoing, the parties may enter into a
subsequent agreement whereby the Company agrees to purchase Shares held by Key
Employee.
4
<PAGE>
As used herein, the term "Good Cause" shall mean (i) any act or
omission of gross negligence, willful misconduct, dishonesty, or fraud by Key
Employee in the performance of his duties, (ii) the failure or refusal of Key
Employee to perform the duties or to render the services assigned to him from
time to time, (iii) the charging or indictment of Key Employee in connection
with a felony or any misdemeanor involving dishonesty or moral turpitude, (iv)
the material breach by Key Employee of his fiduciary duty or duty of trust to
the Company, (v) death of Key Employee, or (vi) voluntary termination of
employment by Key Employee.
8.4. Principal Amount and Interest in the Event of Termination. In the
---------------------------------------------------------
event the Company exercises its right to buy back the Shares from Key Employee
pursuant to Section 8.1 of this Agreement, any outstanding Principal Amount and
any applicable Interest will be immediately due and payable and shall be applied
against amounts due to Key Employee for purchase of Shares. In the event that
the Company terminates Key Employee's employment before December 29, 2003 for
other than Good Cause, Key Employee may either (i) obtain title to the Pledged
Shares and a release of the Company's security interest in the Pledged Shares by
making full payment of the Principal Amount and any applicable interest within
45 days of the termination date, or (ii) sell Shares to the Company (and the
Company agrees to purchase the Shares) for the price of $1.005 per Share (plus
accrued interest) in repayment of the Principal Amount and any applicable
Interest.
9. Arbitration. If a dispute arises between the Company and Key Employee
-----------
concerning this Agreement, the disputed matter shall be submitted to arbitration
in the City of San Francisco, California, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules"). Any
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The arbitrators shall have the authority to grant
any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve the disputed matter. The arbitrators shall
apply the laws of the State of California in making any determination hereunder.
Notwithstanding anything to the contrary which may now or hereafter be contained
in the AAA Rules, the parties agree any such arbitration shall be conducted
before a panel of three arbitrators who shall be compensated for their services
at a rate to be determined by the American Arbitration Association in the event
the parties are not able to agree upon their rate of compensation. Each party
shall have the right to appoint one arbitrator (to be appointed within 20 days
of the notice of a dispute to be resolved by arbitration hereunder), and the two
arbitrators so chosen shall mutually agree upon the selection of the third,
impartial arbitrator. The majority decision of the arbitrators will be final
and conclusive upon the parties hereto.
10. Payments. Any payments due from Key Employee under this Agreement shall be
--------
made payable to Annie's Homegrown, Inc. and shall be sent to the Company's
offices at 395 Main Street, Wakefield, MA 02880, Attention: Neil Raiff.
11. Event of Default. It shall be an event of default (an "Event of Default")
----------------
if Key Employee fails to pay the Company pursuant to Section 5.
12. Right of Employment. Nothing herein shall confer upon Key Employee the
-------------------
5
<PAGE>
right to continue in the employment of the Company nor affect any right which
the Company may have to terminate the employment of Key Employee.
13. Miscellaneous.
-------------
13.1. This Agreement contains the full and complete understanding of the
parties and supersedes all prior representations, promises, agreements, and
warranties, whether oral or written.
13.2. This Agreement shall be governed by and interpreted according to the
laws of the Commonwealth of Massachusetts, without regard to the choice of law
provisions thereunder.
13.3. With respect to the Company, this Agreement shall inure to the
benefit of and be binding upon any successors or assigns of the Company. With
respect to Key Employee, this Agreement shall not be assignable but shall inure
to the benefit of estate of Key Employee or his legal successor upon death or
disability.
13.4. The captions of the various sections of this Agreement are inserted
only for convenience and shall not be considered in construing this Agreement.
13.5. This Agreement can be modified, amended, or any of its terms waived
only by a writing signed by both parties.
13.6. If any provision of this Agreement shall be held invalid, illegal,
or unenforceable, the remaining provisions of the Agreement shall remain in full
force and effect and the invalid, illegal, or unenforceable provision shall be
limited or eliminated only to the extent necessary to remove such invalidity,
illegality or unenforceability in accordance with the applicable law at that
time.
13.7. No remedy made available to the Company by any of the provisions of
this Agreement is intended to be exclusive of any other remedy. Each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder as well as those remedies existing at law, in equity, by statute, or
otherwise.
13.8. This Agreement may be executed in counterparts, each of which will
be considered an original and each of which will constitute one and the same
document.
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
specified in the first paragraph.
ANNIE'S HOMEGROWN, INC.
By:___________________________
Neil Raiff
Its: Chief Financial Officer
KEY EMPLOYEE:
_________________________
Deborah Churchill Luster
7
<PAGE>
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
--------------------
This Agreement made as of the 21st day of December, 1998 by and
between Annie's Homegrown, Inc., a Delaware corporation with its principal place
of business at 395 Main Street, Wakefield, Massachusetts 02880 (the "Company")
-------
and Paul B. Nardone, an individual whose mailing address is 190 Summer Street,
Lynnfield, Massachusetts 01940 (the "Employee").
--------
W I T N E S S E T H:
WHEREAS, Employee is President and Chief Operating Officer of the
Company and has made and is expected to continue to make major contributions to
the Company; and
WHEREAS, the Company desires Employee to continue to serve as
President and Chief Operating Officer and Employee is willing to provide such
services under mutually satisfactory terms and conditions as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Company and Employee
agree as follows:
1. TERM. Subject to the terms and conditions hereof, the term of this
----
Agreement will commence on the date hereof and expire on December 31, 1999,
unless earlier terminated as provided herein (the "Term"). The terms and
----
conditions hereof shall be reviewed by the parties at least ninety (90) days
prior to the expiration of the term and this Agreement shall be either extended
or amended upon mutual agreement of the parties, and if the parties fail to
agree, the Agreement shall be terminated upon the expiration of the Term.
2. BUDGET/PROJECTIONS. The Confidential 1998 Budget Projections ("1998
------------------ ----
Budget") and the Confidential 1999 Budget Projections ("1999 Budget") approved
-----------
by the Company's Board of Directors and the Employee shall serve as the
benchmark for performance for the periods ending December 31, 1998 and December
31, 1999, respectively. Confidential Budget Projections for any renewal period
will be mutually agreed to by the parties and will serve as the benchmark for
performance in the appropriate period. The 1998 Budget, 1999 Budget and the
Budget Projections for any such renewal period are collectively referred to
herein as the "Budget/Projections."
------------------
3. DUTIES AND RESPONSIBILITIES.
---------------------------
(a) During the Term, the Employee shall serve as the President and
Chief Operating Officer of the Company. In the performance of his
responsibilities as the President and Chief Operating Officer, the Employee
shall be subject to all of the Company's policies, rules and regulations
applicable to its Employees of comparable status and shall report directly to,
and shall be subject to the direction and control of, the Board of Directors of
the Company (the "Board"), and shall perform such duties as shall be assigned to
-----
him by the Board. In performing such duties, the Employee will be subject to,
and will substantially abide by, and will use reasonable efforts to cause
employees of the Company to be subject to, and substantially abide by, all
policies and procedures developed by the Company.
<PAGE>
(b) During the Term, the Employee shall devote substantially all of
his business time, energies, skills and attention to the affairs and activities
of the Company. The Employee shall provide the services to the Company
described in this Agreement in a professional and diligent manner and in a
manner consistent with the highest standards of performance in the retail food
industry. During the Term, the Employee shall not devote a material portion of
his business time, energies, skills or attention to the affairs or activities of
any other business or organization, without the prior approval of the Board
(which approval shall not be unreasonably withheld). The Employee shall provide
to the Board, on a quarterly basis, a description of any involvement with any
other business or organization, such description to include (i) the name of the
company or organization; (ii) type of involvement; and (iii) type of product;
provided, however, that no description is required for a quarter where there has
- - -------- -------
been no change from the description last provided to the Board.
(c) To induce the Company to enter into this Agreement, the Employee
represents and warrants to the Company that, except as set forth herein: (i) the
Employee is not a party or subject to any employment agreement or arrangement
with any other person, firm, company, corporation or other business entity and
the Employee is subject to no restraint, limitation or restriction by virtue of
any agreement or arrangement, or by virtue of any law or rule of law or
otherwise which would impair the Employee's right or ability (A) to enter the
employ of the Company, or (B) to perform fully his duties and obligations
pursuant to this Agreement, and (ii) to the Employee's knowledge, no material
litigation is pending or threatened against any business or business entity
owned or controlled or formerly owned by the Employee.
4. INSURANCE AND INDEMNIFICATION. The Company agrees that during the Term of
-----------------------------
this Agreement, without the consent of the Employee, it shall not amend the
provisions of Article VII, Section 7 (Indemnification) of its By-laws.
5. COMPENSATION.
------------
(a) Base Salary: So long as Employee remains employed, during the
-----------
Term of this Agreement, Employee shall receive a monthly gross salary (the "Base
----
Salary"), which shall be paid in equal installments on the 15th and final day of
- - ------
each month, equal to seven thousand five hundred dollars ($7,500) for each month
through December 31, 1998 and ten thousand dollars ($10,000) for each month
during the period January 1, 1999 through December 31, 1999. Compensation for
any renewal term shall be as mutually agreed by the parties.
(b) Bonuses:
-------
(i) So long as Employee remains employed, for each calendar
quarter beginning with the quarter starting January 1, 1997, in addition to any
and all other amounts payable to Employee hereunder, Employee shall receive a
bonus payment payable within forty-five (45) days of the end of quarter, as
follows:
(A) If the Company has achieved less than fifty percent
(50%) of the "net income before operating expenses" as described
in the Budget/Projections for such quarter, the employee shall
receive no bonus for such quarter.
(B) If the Company has achieved fifty percent (50%) or
more, but less than one hundred percent (100%) of the "net income
before operating
-2-
<PAGE>
expenses" as described in the Budget/Projections for such
quarter, the Employee shall receive a bonus payment for such
quarter equal to one and one-half percent (1 1/2%) of the gross
profit after "selling expenses" for such quarter;
(C) If the Company has achieved one hundred percent (100%)
or more of the "net income before operating expenses" as
described in the Budget/Projections of such quarter, the Employee
shall receive a bonus payment for such quarter equal to two and
one-half percent (2 1/2%) of the gross profit after "selling"
expenses for such quarter.
(ii) In addition to any bonus paid pursuant to Section 5(b)(i)
above, if the actual gross profit after selling expenses for any calendar year
during the Term exceeds one million dollars ($1,000,000), the Employee shall
receive a bonus payment equal to one percent (1%) of the gross profit after
"selling expenses." Such additional annual bonus shall be paid within forty-five
(45) days following the end of the calendar year.
(iii) For purposes of this Agreement, "selling expenses"
----------------
includes the costs outlined in the Budget/Projections and shall include, without
limitation, price reductions, account advertising, trade advertising, ordinary
consumer marketing expenses, trade show expenses, brokerage expenses and other
ordinary selling expenses.
6. EXPENSE REIMBURSEMENT. The Employee is authorized to incur reasonable
---------------------
expenses in the performance of his duties hereunder during the Term. The
Company shall reimburse the Employee for all such expenses upon the presentation
by the Employee of signed, itemized accounts of such expenditures and vouchers,
all in accordance with the Company's procedures and policies as adopted and in
effect from time to time and applicable to its employees of comparable status.
7. VACATION TIME. The Employee shall be entitled to paid vacation, personal
-------------
and sick leave during the Term in accordance with the Company's policies
regarding such vacation and leaves. Accrued vacation from prior employment
periods or hereunder may be carried forward, and will be paid if employment with
the Company shall cease.
8. GRANT OF STOCK OPTIONS. The Company shall grant Employee a stock option,
----------------------
which option shall be fully vested on the date of grant, to purchase twelve
thousand five hundred (12,500) shares of the Company's Common Stock (such number
of shares to be adjusted based on changes in capitalization) for each calendar
quarter during the Term, beginning with the quarter October 1, 1998 through
December 31, 1998, that the Company has achieved one hundred percent (100%) or
more of the "net income before operating expenses" as defined in the
Budget/Projections, provided, however, that the aggregate number of shares of
-------- -------
the Company's Common Stock granted to Employee pursuant to this Section 8 shall
not exceed 100,000 shares. Each option shall be granted pursuant to a stock
option plan maintained by the Company in compliance with Section 16b-3 under the
Securities Exchange Act of 1934, if applicable. The options shall be granted at
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant and such options shall be subject to the other terms and
conditions provided in the Company's stock option plan, provided, however, that
-------- -------
unless canceled pursuant to Section 10, such options granted pursuant to this
Section 8 shall remain exercisable for a period of five (5) years, subject to
the terms and conditions of this Agreement, regardless of whether Employee
remains employed with the Company. Employee acknowledges that options exercised
more than
-3-
<PAGE>
ninety (90) days after termination of employment will automatically become non-
qualified stock options, with attendant tax consequences.
9. LISTING ON AN EXCHANGE.
----------------------
(a) In the event the Common Stock of the Company is listed on a national
or regional exchange, or on the NASDAQ Small Cap or NASDAQ National Market, then
the Company shall, at the request of the Employee, agree to lend the Employee,
for the sole purpose of exercising vested stock options, an amount not to exceed
$100,000, such loan to be evidenced by a five-year nonrecourse promissory note
(the "Note") bearing interest at a rate equal to the prime rate as published by
BankBoston, N.A. on the date the loan is made, with interest only payable during
the term of the Note and the entire principal payable upon maturity. The Note
shall be secured by all of the capital stock of the Company issued to the
Employee in exercise of such stock options, and any proceeds from the sale
thereof.
(b) The Employee agrees to execute and deliver, upon the request of the
Company, such instruments, including, but not limited to a pledge agreement, and
take such further actions as may be necessary or desirable to evidence the
security interest being granted to the Company pursuant to this Section 9.
10. PAYMENT IN CONNECTION WITH A MERGER OR SALE OF THE COMPANY. If, during the
----------------------------------------------------------
Term or any renewal period, or within six (6) months of an Involuntary
Termination without Cause (as hereinafter defined) of Employee's employment with
the Company or a related entity, there shall be a Change of Control (as
hereinafter defined), Employee shall be entitled to receive from the Company an
amount equal to two percent (2%) of the Consideration (as hereinafter defined)
paid in connection with the Change in Control less (i) the amount due, including
all accrued interest, on all notes due to the Company from the Employee, and
(ii) any gain received by Employee upon the exercise and sale of the Company's
Common Stock underlying stock options issued to the Employee by the Company
since January 1, 1996 (the "Change in Control Payment"). In order to receive
-------------------------
the Change in Control Payment, Employee must agree to terminate or otherwise
cancel all stock options to purchase shares of the Company's Common Stock issued
to the Employee by the Company since January 1, 1996 or that Employee is
entitled to receive pursuant to this Agreement or any renewal hereof. For
purposes hereof, "Change in Control" means the occurrence of any of the
-----------------
following events during the Term: (a) the Company is merged or consolidated or
reorganized into or with another corporation or other legal person (including a
purchase or exchange of the Company's stock), and as a result of such merger,
consolidation or any other reorganization or change of ownership of the
Company's stock less than a majority of the combined voting power of the then-
outstanding securities of such surviving, resulting or reorganized corporation
or person immediately after such transaction is held in the aggregate by the
holders of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock") immediately prior to such
------------
transaction; or (b) the Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer, less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the holders
of Voting Stock in the Company immediately prior to such sale or transfer. For
purposes hereof, "Consideration" shall mean cash and securities paid to the
-------------
Company and/or its shareholders upon consummation of the Change in Control and
shall
-4-
<PAGE>
exclude (a) any amount to be paid after the consummation of the Change in
Control and (b) any debt assumed by the acquirer.
11. TERMINATION OF EMPLOYMENT.
-------------------------
(a) Voluntary Termination. The Employee may voluntarily terminate his
---------------------
employment with the Company upon sixty (60) days written notice to the Company.
In the event that Employee voluntarily terminates his employment with the
Company, any and all of Employee's right to payment under this Agreement will
terminate as of the effective date of such termination; provided, however, that
-------- -------
the Company will pay Employee any sums which accrued to Employee prior to the
effective date of termination, including any accrued bonus earned but not yet
paid, and the Company will grant to the Employee options pursuant to Section 8
that have accrued, but have not yet been issued.
(b) Involuntary Termination. Employee may be terminated by the Company
-----------------------
before the expiration of this Agreement with or without cause by a majority vote
of the Board of Directors ("Involuntary Termination"). "Cause" shall be defined
-----------------------
as: (a) the Employee's conviction of any crime (whether or not involving the
Company) which constitutes a felony in the jurisdiction involved; (b) any
intentional act of theft, fraud or embezzlement by the Employee in connection
with his work with the Company; or (c) the Employee's continuing, repeated and
willful failure or refusal to perform his duties and services under this
Agreement (other than due to his incapacity due to illness or injury). In the
event of an Involuntary Termination for any reason other than Cause as defined
herein, the Company shall, within thirty (30) days, pay Employee a sum equal to
twelve (12) times the monthly Base Salary, as then in effect, and the Company
shall maintain health insurance and other fringe benefits, if any, for twelve
(12) months following such termination. If Employee shall leave employment
within thirty (30) days of any material involuntary reduction in Employee's Base
Salary, bonus opportunity or responsibilities, any such cessation of employment
shall be deemed to be an Involuntary Termination for any reason other than
Cause, with Employee entitled to the severance payment and continuation of
benefits described above.
(c) Nonrenewal. If the Company does not extend or amend this Agreement
----------
following December 31, 1999, the Company shall pay to the Employee severance
equal to six (6) months of Base Salary then in effect, payable in the Company's
normal pay periods, unless a Change of Control occurred during the Term, in
which case the Company shall pay the Employee, in a lump sum, severance equal to
twelve (12) months of Base Salary.
12. NON-COMPETITION.
---------------
(a) During the Term and for a period of one (1) year following an
Involuntary Termination for Cause pursuant to Section 11(b) or voluntary
termination pursuant to Section 11(a) above, the Employee shall not directly or
indirectly, perform any services in the United States for any person or entity
other than the Company that is primarily in the business, directly or
indirectly, of selling dinner entree and pasta products of the type the Company
is selling or developing at the time of the Employee's termination; or, without
limiting the generality of the foregoing, be or become or agree to be or become,
interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, employee, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm,
-5-
<PAGE>
association, partnership, joint venture or other business entity that competes
with the Company as to dinner entree or pasta products; provided, however, that
-------- -------
the Employee may own, solely as an investment, not more than one percent (1%) of
any class of securities of any corporation that is publicly traded on any
national securities exchange in the United States of America or reported on the
National Association of Securities Dealers, Inc.'s Automated Quotation System.
(b) During the Term and for a period of one (1) year following any
termination, the Employee shall not, directly or indirectly, (i) induce or
attempt to influence any other employee of the Company to leave its employ, (ii)
aid or agree to aid any competitor, customer or supplier of the Company in any
attempt to hire any person who shall have been employed by the Company within
the one-year period preceding such requested aid, or (iii) induce or attempt to
influence any person or business entity who was a customer of the Company during
any portion of the Term of this Agreement and for a period of one (1) year
following any termination, to transact business with a competitor of the Company
in the Company's dinner entree or pasta products business. Notwithstanding the
previous sentence, this Section 12(b) shall not apply if Employee is terminated
without Cause during the Term.
13. NON-DISCLOSURE. During the Term and thereafter, except pursuant to his
--------------
duties to the Company hereunder, the Employee shall not disclose to anyone any
material or confidential information about the affairs of the Company, including
trade secrets, recipes, trade "know-how," inventions, customer lists, business
plans, operational methods, pricing policies, marketing plans, sales plans,
identity of customers, sales, profits or other financial information which is
confidential to the Company or is not generally known in the relevant trade.
14. NOTICES. Notices will be hand delivered or sent by registered or certified
-------
mail, postage prepaid, return receipt requested, or by a recognized expedited
delivery service with signature required for delivery, to the address set forth
on page one hereof, unless specifically changed by either party by written
notice to the other.
15. MISCELLANEOUS.
-------------
(a) This Agreement is a personal contract, and the rights and interests of
the Employee hereunder may not be sold, transferred, assigned, pledged or
hypothecated, except as otherwise expressly permitted by the provisions of this
Agreement. Except as otherwise expressly provided herein, the Employee shall
not have any power of anticipation, alienation or assignment of payments
contemplated hereunder, and all rights and benefits of the Employee shall be for
the sole personal benefit of the Employee, and no other person shall acquire any
right, title or interest hereunder by reason of any sale, assignment, transfer,
claim or judgment or bankruptcy proceedings against the Employee, provided,
--------
however, that in the event of the Employee's death, the Employee's estate, legal
- - -------
representative or beneficiaries (as the case may be) shall have the right to
receive all of the benefits that accrued to the Employee pursuant to and in
accordance with the terms of this Agreement prior to the date of the Employee's
death.
(b) The Company shall assign this Agreement to any successor of
substantially all of its business or assets, and any such successor shall be
bound by all of the provisions hereof.
(c) This Agreement may not be changed, amended, terminated, or superseded
orally, but only by an agreement in writing, nor may any of the provisions
hereof be waived orally,
-6-
<PAGE>
but only by an instrument in writing, in any such case signed by the party
against whom enforcement of any change, amendment, termination, waiver,
modification, extension or discharge is sought.
(d) Except as otherwise provided herein, this Agreement shall be governed
by and construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflict of laws
thereof.
(e) All descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(f) If any provision of this Agreement, or part thereof, is held to be
unenforceable, the remainder of this Agreement and provision, as the case may
be, shall nevertheless remain in full force and effect.
(g) Each of the parties hereto shall, at any time and from time to time
hereafter, upon the reasonable request of the other, take such further action
and execute, acknowledge and deliver all such instruments of further assurance
as necessary to carry out the provisions of this Agreement.
(h) This Agreement contains the entire agreement and understanding between
the Company and the Employee with respect to the subject matter hereof and
supersedes all prior agreements on this subject matter including, without
limitation, the Employment Agreement between the Company and the Employee dated
November 26, 1996. No representations or warranties of any kind or nature
relating to the Company or its affiliates or their respective businesses,
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of the Company to the Employee; nor have any representations or
warranties of any kind or nature been made by the Employee to the Company,
except as expressly set forth in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
ANNIE'S HOMEGROWN, INC.
_____________________________________________
By:
Title:
EMPLOYEE:
_____________________________________________
Paul B. Nardone
-7-
<PAGE>
EXHIBIT 10.17
CHANGE OF CONTROL AND
SEVERANCE AGREEMENT
-------------------
This Agreement made as of the 21st day of December 1998 by and between
Annie's Homegrown, Inc., a Delaware corporation with its principal place of
business at 395 Main Street, Wakefield, Massachusetts 02880 (the "Company") and
Neil Raiff, an individual whose mailing address is 11 David Road, Unit B-11,
Acton, Massachusetts 01720 (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee is Treasurer and Chief Financial Officer of the Company
and has made and is expected to continue to make major contributions to the
Company; and
WHEREAS, the Company desires to provide Employee with certain benefits in
the event of a change in control of the Company as hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Company and Employee
agree as follows:
Payment in Connection with a Merger or Sale of the Company. If, during the term
of Employee's employment, or within six (6) months of an Involuntary Termination
without Cause (as hereinafter defined) of Employee's employment with the Company
or a related entity, there shall be a Change of Control (as hereinafter
defined), Employee shall be entitled to receive from the Company an amount equal
to one percent (1%) of the Consideration (as hereinafter defined) paid in
connection with the Change in Control less the amount due, including all accrued
interest, on all notes due to the Company from Employee. For purposes hereof,
"Change in Control" means the occurrence of any of the following events during
the term of Employee's employment: (a) the Company is merged or consolidated or
reorganized into or with another corporation or other legal person (including a
purchase or exchange of the Company's stock), and as a result of such merger,
consolidation or any other reorganization or change of ownership of the
Company's stock less than a majority of the combined voting power of the then-
outstanding securities of such surviving, resulting or reorganized corporation
or person immediately after such transaction is held in the aggregate by the
holders of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock") immediately prior to such
transaction; or (b) the Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer, less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the aggregate by the holders
of Voting Stock in the Company immediately prior to such sale or transfer. For
purposes hereof, "Consideration" shall mean cash and securities paid to the
Company and/or its shareholders upon consummation of the Change in Control and
shall exclude (a) any amount to be paid after the consummation of the Change in
Control and (b) any debt assumed by the acquirer.
<PAGE>
Termination of Employment.
Voluntary Termination. Employee may voluntarily terminate his employment
with the Company upon sixty (60) days written notice to the Company. In the
event that Employee voluntarily terminates his employment with the Company, the
Company will pay Employee any sums which accrued to Employee prior to the
effective date of termination, including any accrued bonus earned but not yet
paid, and any stock options granted by the Company that have accrued, but have
not yet been issued.
Involuntary Termination. Employee may be terminated by the Company at any
time with or without cause by a majority vote of the Board of Directors
("Involuntary Termination"). "Cause" shall be defined as: (a) Employee's
conviction of any crime (whether or not involving the Company) which constitutes
a felony in the jurisdiction involved; (b) any intentional act of theft, fraud
or embezzlement by Employee in connection with his work with the Company; or (c)
Employee's continuing, repeated and willful failure or refusal to perform his
duties and services (other than due to his incapacity due to illness or injury).
In the event of an Involuntary Termination for any reason other than Cause as
defined herein or Employee's own voluntary termination, the Company shall
continue to pay Employee's monthly Base Salary, as then in effect, in the
Company's normal payroll periods for six (6) months, and the Company shall
maintain health insurance and other fringe benefits, if any, for a period of six
(6) months following such termination. If Employee shall leave employment
within thirty (30) days of any material involuntary reduction in Employee's Base
Salary, bonus opportunity or responsibilities, any such cessation of employment
shall be deemed to be an Involuntary Termination for any reason other than Cause
or Employee's own voluntary termination, and Employee shall be entitled to the
severance payment and continuation of benefits described in this Section 2(b).
For the purposes of this Agreement, "Base Salary" shall mean Employee's basic
compensation exclusive of bonuses, stock options and any other forms of
compensation or benefits.
Involuntary Termination - Change in Control. If after the effective date
of a Change in Control Employee's employment is terminated other than for Cause
or pursuant to Employee's own voluntary termination, the Company shall within
thirty (30) days pay to Employee, in one lump sum, severance equal to twelve
(12) months of Base Salary, as then in effect, and the Company shall maintain
for Employee health insurance and other fringe benefits, if any, for a period of
twelve (12) months following such termination. If after the effective date of a
Change in Control Employee shall leave employment within thirty (30) days of any
material involuntary reduction in Employee's Base Salary, bonus opportunity or
responsibilities, any such cessation of employment shall be deemed to be an
Involuntary Termination for any reason other than Cause or Employee's own
voluntary termination, and Employee shall be entitled to the severance payment
and continuation of benefits described in this Section 2(c).
Non-Disclosure. During the term of Employee's employment and thereafter, except
pursuant to his duties to the Company hereunder, Employee shall not disclose to
anyone any material or confidential information about the affairs of the
Company, including trade secrets, recipes, trade "know-how," inventions,
customer lists, business plans, operational methods, pricing policies, marketing
plans, sales plans, identity of customers, sales, profits or other financial
information which is confidential to the Company or is not generally known in
the relevant trade.
<PAGE>
Notices. Notices will be hand delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, or by a recognized expedited
delivery service with signature required for delivery, to the address set forth
on page one hereof, unless specifically changed by either party by written
notice to the other.
Miscellaneous.
This Agreement is a personal contract, and the rights and interests of Employee
hereunder may not be sold, transferred, assigned, pledged or hypothecated,
except as otherwise expressly permitted by the provisions of this Agreement.
Except as otherwise expressly provided herein, Employee shall not have any power
of anticipation, alienation or assignment of payments contemplated hereunder,
and all rights and benefits of Employee shall be for the sole personal benefit
of Employee, and no other person shall acquire any right, title or interest
hereunder by reason of any sale, assignment, transfer, claim or judgment or
bankruptcy proceedings against Employee, provided, however, that in the event of
Employee's death, Employee's estate, legal representative or beneficiaries (as
the case may be) shall have the right to receive all of the benefits that
accrued to Employee pursuant to and in accordance with the terms of this
Agreement prior to the date of Employee's death.
The Company shall assign this Agreement to any successor of substantially all of
its business or assets, and any such successor shall be bound by all of the
provisions hereof.
This Agreement may not be changed, amended, terminated, or superseded orally,
but only by an agreement in writing, nor may any of the provisions hereof be
waived orally, but only by an instrument in writing, in any such case signed by
the party against whom enforcement of any change, amendment, termination,
waiver, modification, extension or discharge is sought.
Except as otherwise provided herein, this Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflict of laws
thereof.
All descriptive headings of the several Sections of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
If any provision of this Agreement, or part thereof, is held to be
unenforceable, the remainder of this Agreement and provision, as the case may
be, shall nevertheless remain in full force and effect.
Each of the parties hereto shall, at any time and from time to time hereafter,
upon the reasonable request of the other, take such further action and execute,
acknowledge and deliver all such instruments of further assurance as necessary
to carry out the provisions of this Agreement.
<PAGE>
This Agreement contains the entire agreement and understanding between the
Company and Employee with respect to the subject matter hereof. No
representations or warranties of any kind or nature relating to the Company or
its affiliates or their respective businesses, assets, liabilities, operations,
future plans or prospects have been made by or on behalf of the Company to
Employee; nor have any representations or warranties of any kind or nature been
made by Employee to the Company, except as expressly set forth in this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
ANNIE'S HOMEGROWN, INC.
By:
Title:
EMPLOYEE:
Neil Raiff
<PAGE>
EXHIBIT 10.18
December 21, 1998
Employee Name
Employee Address
Employee Address
City, State Zip Code
Dear Employee:
This letter sets forth the Company's policy in the event of a Change in
Control (as that term is defined below) of the Company during the term of your
employment.
If during the term of your employment there shall be a Change in Control of
the Company, you shall be entitled to receive from the Company an amount equal
to one month's pay for your first year of employment plus one month's pay for
each year of service thereafter (or portion thereof) up to a maximum of 4
additional month's pay (the "Change of Control Payment") on the effective date
of any such Change in Control. If after the effective date of a Change in
Control your employment is terminated other than for Cause (as that term is
defined below) or your own voluntary termination, you shall be entitled to
receive from the Company an additional amount equal to the Change of Control
Payment in one lump sum within thirty (30) days of your termination.
For the purposes hereof, "Change in Control" shall mean the occurrence of
the following events during the term of your employment: (a) the Company is
merged or consolidated or reorganized into or with another corporation or other
legal person (including a purchase or exchange of the Company's stock), and as a
result of such merger, consolidation or any other reorganization or change of
ownership of the Company's stock less than a majority of the combined voting
power of the then-outstanding securities of such surviving, resulting or
reorganized corporation or person immediately prior to such transaction; or (b)
the Company sells or otherwise transfers all or substantially all of its assets
to any other corporation or other legal person and as a result of such sale or
transfer less than a majority of the combined voting power of the then-
outstanding securities of such corporation or person immediately after such sale
or transfer is held in the aggregate by the holders of Voting Stock in the
Company immediately prior to such sale or transfer.
For the purposes hereof, "Cause" shall mean: (a) your conviction of any
crime (whether or not involving the Company) which constitutes a felony in the
jurisdiction involved; (b) any intentional act of theft, fraud or embezzlement
by you in connection with your work with the Company; or (c) your continuing,
repeated and willful failure or refusal to perform your duties and services
(other than due to your incapacity due to illness or injury).
<PAGE>
If after the effective date of a Change in Control your employment is
terminated other than for Cause or your own voluntary termination, the Company
shall continue your health insurance (your "Health Insurance") for a period of
six (6) months after such termination.
As consideration for your receipt of the Severance Payment and the Health
Insurance, you agree that if your employment is terminated other than for Cause
or your own voluntary termination after the effective date of a Change in
Control, you shall release the Company from any and all claims and suits of any
nature which are directly or indirectly related to your employment or the
termination of your employment, with the Company. You also agree to execute and
deliver to the Company a form of release prescribed by the Company, and any
other documents or instruments that the Company shall reasonably require in
connection with any such termination.
ANNIE'S HOMEGROWN, INC.
By:
ACKNOWLEDGED AND AGREED:
Employee Name
<PAGE>
Exhibit 11
Statement re: computation of per share earnings
Annie's Homegrown, Inc.
Computation of Earnings Per Common Share
(in 000s except for per share data)
Three months ended December 31, 1997
Basic Computation
- - -----------------
Net loss per statement of operations $ (43)
=========
Weighted average number of common
shares outstanding 4,548
=========
Basic loss per common share $ (.01)
=========
Diluted Computation
- - -------------------
Net loss per statement of operations $ (43)
=========
Weighted average number of common
shares outstanding 4,548
Stock options 466
---------
Weighted average number of common
shares as adjusted 5,014
=========
Diluted loss per common share $ (.01)
=========
Three months ended December 31, 1998
Basic Computation
- - -----------------
Net loss per statement of operations $ (232)
=========
Weighted average number of common
shares outstanding 4,540
=========
Basic loss per common share $ (.05)
=========
Diluted Computation
- - -------------------
Net loss per statement of operations $ (232)
=========
Weighted average number of common
shares outstanding 4,540
Stock options 120
---------
Weighted average number of common
shares as adjusted 4,660
=========
Diluted loss per common share $ (.05)
=========
Nine months ended December 31, 1997
Basic Computation
- - -----------------
Net loss per statement of operations $ (177)
=========
Weighted average number of common
shares outstanding 4,326
=========
Basic loss per common share $ (.04)
=========
Diluted Computation
- - -------------------
Net loss per statement of operations $ (177)
=========
Weighted average number of common
shares outstanding 4,326
Stock options 669
---------
Weighted average number of common
shares as adjusted 4,995
=========
Diluted loss per common share $ (.04)
=========
Nine months ended December 31, 1998
Basic Computation
- - -----------------
Net loss per statement of operations $ (689)
=========
Weighted average number of common
shares outstanding 4,546
=========
Basic loss per common share $ (.15)
=========
Diluted Computation
- - -------------------
Net loss per statement of operations $ (690)
=========
Weighted average number of common
shares outstanding 4,546
Stock options 120
---------
Weighted average number of common
shares as adjusted 4,666
==========
Diluted loss per common share $ (.15)
==========
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 31,358
<SECURITIES> 0
<RECEIVABLES> 127,963
<ALLOWANCES> 0
<INVENTORY> 1,330,421
<CURRENT-ASSETS> 1,528,148
<PP&E> 182,813
<DEPRECIATION> 77,480
<TOTAL-ASSETS> 2,512,305
<CURRENT-LIABILITIES> 2,035,817
<BONDS> 75,000
0
0
<COMMON> 4,877
<OTHER-SE> 396,611
<TOTAL-LIABILITY-AND-EQUITY> 2,512,305
<SALES> 5,488,844
<TOTAL-REVENUES> 5,488,844
<CGS> 3,139,103
<TOTAL-COSTS> 2,935,948
<OTHER-EXPENSES> (10,631)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,292
<INCOME-PRETAX> (687,868)
<INCOME-TAX> 1,097
<INCOME-CONTINUING> (688,965)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (688,965)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
