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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
ANNIE'S HOMEGROWN, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
SEC 1913 (3-99)
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<PAGE>
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ANNIE'S HOMEGROWN INC.
395 MAIN STREET
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-1172
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 2000
Notice is hereby given that an Annual Meeting of Stockholders of
Annie's Homegrown Inc., a Delaware corporation ("Annie's"), will be held on
Monday, November 13, 2000, at 10:00 a.m. (Eastern Standard Time) at the offices
of Kirkpatrick & Lockhart LLP, 75 State Street, Sixth Floor, Boston,
Massachusetts 02109, for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected and
qualified; and
2. To approve the appointment of KPMG LLP as Annie's independent
public accountants for the fiscal year ending March 31, 2001.
The stockholders will also consider and act upon any other business
that may properly come before the Annual Meeting.
Reference is hereby made to the accompanying Proxy Statement for more
complete information concerning the matters to be acted upon at the Annual
Meeting.
Only holders of record of Annie's Series A Convertible Preferred Stock,
$2.00 par value per share, and Common Stock, $0.001 par value per share, at the
close of business on September 29, 2000 will be entitled to vote at the Annual
Meeting and any adjournments thereof.
Stockholders are requested to complete, sign, date, and return the
enclosed proxy card in the enclosed envelope. Alternatively, stockholders may
grant a proxy by following the telephone or Internet instructions set forth on
the face of the proxy card.
By Order of the Board of Directors
Paul B. Nardone, President and Chief Executive Officer
Wakefield, Massachusetts
October 10, 2000
<PAGE>
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ANNIE'S HOMEGROWN INC.
395 MAIN STREET
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-1172
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PROXY STATEMENT
---------------------------------
Proxies in the form enclosed with this Proxy Statement are being solicited
by the Board of Directors of Annie's Homegrown Inc., a Delaware corporation
("Annie's"), for use at a Annual Meeting of Stockholders of Annie's to be held
at 10:00 a.m. (Eastern Standard Time) on Monday, November 13, 2000, at the
offices of Kirkpatrick & Lockhart LLP, 75 State Street, Sixth Floor, Boston,
Massachusetts 02109, and any adjournments thereof (the "Meeting"). This proxy is
dated October 10, 2000.
Only holders of record as of the close of business on September 29, 2000
(the "Record Date"), of Annie's Common Stock, $0.001 par value per share (the
"Common Stock") and Series A Convertible Preferred Stock, $2.00 par value per
share (the "Preferred Stock"), will be entitled to notice of, and to vote at,
the Meeting. As of the Record Date, 4,709,768 shares of Common Stock and
1,000,000 shares of Preferred Stock were issued and outstanding. Holders of
Common Stock and Preferred Stock are entitled to one vote per share held by
them, and holders of Common Stock and Preferred Stock vote together as a class
on all matters. Stockholders may vote in person or by proxy. Granting a proxy
does not in any way affect a stockholder's right to attend the Meeting and vote
in person. Any stockholder giving a proxy has the right to revoke that proxy by
(i) filing a later-dated proxy or a written notice of revocation with Annie's
Secretary at the address set forth above at any time before the original proxy
is exercised, or (ii) voting in person at the Meeting.
The persons named as attorneys in the proxy are Mr. Paul B. Nardone and Mr.
Neil Raiff. Mr. Nardone is the President and Chief Executive Officer of Annie's
and is also a member of Annie's Board of Directors. Mr. Raiff is the Chief
Financial Officer, Treasurer and Secretary of Annie's. Mr. Nardone and/or Mr.
Raiff will vote all shares represented by properly executed proxies returned in
time to be counted at the Meeting, as described below under "Voting Procedures."
Any stockholder granting a proxy has the right to withhold authority to vote for
any individual nominee to the Board of Directors. Where a vote has been
specified in the proxy with respect to the matters identified in the Notice of
the Annual Meeting, including the election of directors, the shares represented
by the proxy will be voted in accordance with those voting specifications.
Shares represented by proxy will be voted FOR each proposal identified on the
Notice of the Annual Meeting if no voting instructions are indicated.
The stockholders will consider and vote upon proposals (i) to elect seven
directors to serve until the next Annual Meeting of Stockholders, and (ii) to
approve the appointment of KPMG LLP as Annie's independent public accountants
for fiscal year 2001. Stockholders will also consider and act upon such other
business as may properly come before the Meeting.
<PAGE>
Annie's Board of Directors knows of no other matters to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote may properly be taken, including any proposal to adjourn the Meeting, Mr.
Nardone and/or Mr. Raiff will vote shares represented by all proxies received by
the Board of Directors in accordance with their judgment.
An Annual Report to the Stockholders, containing financial statements for
the fiscal years ended March 31, 1999 and 2000, has been furnished to all
stockholders entitled to vote. This Proxy Statement and the form of proxy were
first mailed to stockholders on or about October 10, 2000.
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the issued
and outstanding shares of Common Stock and Preferred Stock entitled to vote at
the Meeting is necessary to establish a quorum for the transaction of business.
Shares represented by proxies pursuant to which votes have been withheld for any
nominee for director, or which contain one or more abstentions, are counted as
present for purposes of determining the presence or absence of a quorum for the
Meeting.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Meeting as specified in such proxies.
Directors will be elected by a plurality of the votes cast, in person or by
proxy, at the Meeting. The seven nominees receiving the highest number of
affirmative votes of the shares present or represented at the Meeting and voting
on the election of directors will be elected as directors. Only shares that are
voted in favor of a particular nominee will be counted toward that nominee's
achievement of a plurality. Shares present at the Meeting that are not voted for
a particular nominee or shares present by proxy where the stockholder properly
withheld authority to vote for such nominee will not be counted toward that
nominee's achievement of a plurality. Votes at the Meeting will be tabulated by
one or more independent inspectors of elections appointed by Annie's.
For all other matters being submitted to stockholders at the Meeting, the
affirmative vote of the majority of shares present (in person or represented by
proxy) and voting on that matter is required for approval. Shares voted to
abstain, since they are not affirmative votes for the matter, will have the same
effect as votes against those matters.
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of June 30, 2000, certain information
regarding the ownership of Annie's voting securities by (i) each person who, to
the knowledge of Annie's, beneficially owned more than 5% of Annie's voting
securities outstanding on such date, (ii) each director (or nominee for
director) of Annie's, (iii) each Named Executive Officer (as defined below under
"Compensation and Other Information Concerning Directors and Officers--Executive
Compensation"), and (iv) all directors (and nominees for director) and executive
officers as a group.
<PAGE>
AMOUNT AND PERCENT OF
NATURE OF BENEFICIAL COMMON STOCK ON AN AS
NAME AND ADDRESS (1) OWNERSHIP (2)(3) CONVERTED BASIS (4)
-------------------- ---------------- -------------------
Homegrown Natural Foods, Inc. (5) 3,577,691 62.66%
854 "A" Street
Davis, CA 94952
Ann E. Withey (6)
c/o Annie's Homegrown Inc. 1,547,251 27.09%
395 Main Street
Wakefield, Massachusetts 01880
Paul Nardone (7) 21,473 *
Neil Raiff (8) 61,698 1.07%
Ronald L. Cheney (9) 62,238 1.09%
Ellen Ambrose (10) 7,500 *
Richard Lemon 0 -
Michael Moone 0 -
John Foraker (11) 3,577,691 62.66%
Andrew M. Martin (12) 1,536,400 26.90%
Tauroa Station, Matangi Rd
Havelock, North
New Zealand
All directors and executive officers 4,519,142 78.48%
as a group (8 persons) (13)
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* Less than 1% of total voting securities.
(1) Addresses are provided only for 5% or more beneficial owners.
(2) Except as otherwise noted in the footnotes to this table, each person or
entity named in the table has sole voting and investment power with respect
to all shares shown as owned, based on information provided to Annie's by
the persons or entities named in the table.
(3) Shares of Common Stock subject to stock options exercisable within 60 days
of June 30, 2000 are deemed outstanding for computing the percentage of the
person or group holding such securities.
(4) Percentage of beneficial ownership is calculated on the basis of the amount
of outstanding securities (Common and Preferred Stock) at June 30, 2000,
(5,709,768), plus, for each person or group, any securities that such
person or group has the right to acquire within 60 days pursuant to stock
options or other rights.
(5) Includes all stock subject to an Irrevocable Proxy Agreement that Mr.
Andrew Martin (1,536,400 shares) and Ms. Ann Withey (788,542 shares)
granted to Homegrown Holdings Corp., now known as Homegrown Natural Foods,
Inc., in conjunction with the Homegrown Natural Foods, Inc. Stock Collar
Agreement, dated December 2, 1999 (described below). Homegrown Natural
Foods, Inc. has full power and authority to vote the shares subject to the
Irrevocable Proxy on behalf of Mr. Martin and Ms. Withey. The Irrevocable
Proxy Agreement expires December 1, 2009. Mr. Foraker, chairman of Annie's
Board of Directors, is also the Chief Executive Officer of Homegrown
Natural Foods, Inc.
(6) All Ms. Withey's Common Stock is subject to Irrevocable Stock Transfer
Instructions, dated July 27, 1995, described below. Certain loans by
Annie's to Ms. Withey are secured by the Common Stock received upon
exercise of certain option grants (described below). 788,542 shares of Ms.
Withey's Common Stock are subject to a Stock Collar Agreement and
Irrevocable Proxy with Homegrown Natural Foods, Inc.
(7) Includes the vested portion (21,473 shares) of a non-qualified stock option
to purchase 107,366 shares of Annie's Common Stock under the 1996 Stock
Plan at an exercise price of $0.01. Since the option is not vested, this
number does not include an incentive stock option to purchase 237,500
shares of Annie's Common Stock under the 1999 Omnibus Stock Option Plan,
with accelerated vesting upon the achievement of certain performance
milestones, authorized by the Compensation Committee on July 7, 1999.
(8) Includes the vested portion (9,475 shares) of a non-qualified stock option
to purchase 47,368 shares of Annie's Common Stock under the 1996 Stock Plan
at an exercise price of $0.01 per share. Since the option is not vested,
this number does not include an incentive stock option to purchase 118,750
shares of Annie's Common Stock, under the 1999 Omnibus Stock Option Plan,
with accelerated vesting based upon the achievement of certain performance
milestones, authorized by the Compensation Committee on July 7, 1999.
(9) Includes 10,000 shares of Common Stock issuable upon exercise of certain
options granted pursuant to Annie's Non-Employees Directors' Stock Option
Plan.
(10) Includes 7,500 shares of Common Stock issuable upon exercise of certain
options granted pursuant to Annie's Non-Employees Directors' Stock Option
Plan.
(11) Includes 3,577,691 shares, which are either held by Homegrown Natural
Foods, Inc. or over which Homegrown Natural Foods, Inc. has voting control
pursuant to the Irrevocable Proxy Agreements described above. Mr. Foraker
is the Chief Executive Officer of Homegrown Natural Foods, Inc., and is a
member of Annie's Board of Directors.
(12) All of Mr. Martin's shares are subject to Irrevocable Stock Transfer
Instructions, dated July 27, 1995, described below. All of Mr. Martin's
shares are subject to a Stock Collar Agreement and Irrevocable Proxy with
Homegrown Natural Foods, Inc., dated December 2, 1999.
(13) Includes 48,448 shares of Common Stock issuable upon exercise of certain
options granted to directors and executive officers pursuant to Annie's
various Stock Option Plans.
<PAGE>
In July 1995, Annie's co-founders, Ms. Ann Withey and Mr. Andrew Martin,
each delivered to Annie's stock transfer agent certificates for 750,000 of their
shares of Annie's Common Stock. With those certificates, the co-founders also
delivered Irrevocable Stock Transfer Instructions which provide that no transfer
of those shares may be made until the sixth anniversary of the date of those
Irrevocable Stock Transfer Instructions, July 27, 1995. On the sixth, seventh,
eighth and ninth anniversaries of that date, 25% of each of their shares will
become freely transferable. All of the shares may also become transferable upon
certification by Annie's Chief Financial Officer that any of the following has
been achieved: (i) for two consecutive fiscal years Annie's has minimum annual
earnings equal to $0.30 per share; (ii) for five consecutive fiscal years,
Annie's has an average minimum annual earnings of $0.30 per share; or (iii)
Annie's shares have traded on a United States stock exchange at a price at least
equal to $10.50 (adjusted for stock splits, stock dividends and
recapitalizations) for at least 90 consecutive trading days. In addition,
pursuant to an addendum to the Irrevocable Stock Transfer Instructions, none of
the co-founders' other shares of Annie's Common Stock may be transferred until
any of the above conditions has been achieved, except that each co-founder may
transfer a number of those other shares that, within any three-month period,
would equal 1% of Annie's Common Stock then outstanding.
The shares subject to the Irrevocable Stock Transfer Instructions may be
transferred upon death or by gift to family members, provided that the shares
remain subject to the restrictions described above. The shares subject to the
Irrevocable Stock Transfer Instructions do not have any right, title, interest
or participation in the assets of Annie's in the event of a dissolution,
liquidation, reorganization or any other transaction or proceeding which results
in a distribution of the assets of Annie's until the holders of all shares not
covered by the Irrevocable Stock Transfer Instructions have received an amount
equal to the public offering price. The shares subject to the Irrevocable Stock
Transfer Instructions continue to have all voting rights to which those shares
are entitled. Annie's will withhold any dividends on Ms. Withey's and Mr.
Martin's shares and will pay those dividends to Ms. Withey and Mr. Martin only
as their shares become free for transfer.
On December 2, 1999, Homegrown Holdings Corp., now known as Homegrown
Natural Foods, Inc., purchased 1,000,000 of Annie's Series A Preferred Stock and
entered into stock collar agreements with Mr. Martin and Ms. Withey. Those
agreements provide Homegrown Natural Foods, Inc. with a stock collar on certain
shares of Annie's Common Stock owned by Ms. Withey and all of the Annie's Common
Stock owned by Mr. Martin. Specifically, Homegrown Natural Foods, Inc. was
granted an option to purchase 1,677,691 shares of Annie's Common Stock held by
Mr. Martin and 900,000 shares of Annie's Common Stock held by Ms. Withey, each
exercisable as quickly as those shares are released from the Irrevocable Stock
Transfer Instructions, and with an exercise price of $2.00 per share. In
addition, Mr. Martin was granted an option to sell that stock to Homegrown
Natural Foods, Inc. at $1.92 per share on 1,677,691 shares of Annie's Common
Stock held by him, exercisable fifteen days after Homegrown Natural Foods,
Inc.'s call option is exercisable. Ms. Withey was granted an option to sell
Annie's shares to Homegrown Natural Foods, Inc. for $1.92 per share on 900,000
shares of Annie's Common Stock held by her, exercisable fifteen days after
Homegrown Natural Foods Corp.'s call option is exercisable.
Mr. Martin's and Ms. Withey have provided Homegrown Natural Foods, Inc.
with an Irrevocable Proxy to vote their shares of Annie's Common Stock subject
to the Stock Collar Agreement. Pursuant to the Irrevocable Proxy Agreement,
Homegrown Natural Foods, Inc. has full power and authority to vote Mr. Martin's
shares of
<PAGE>
Annie's Common Stock and 852,903 of Ms. Withey's shares of Annie's Common Stock
for a 10-year period ending December 1, 2009. As a result of these transactions,
Homegrown Natural Foods, Inc. acquired control of Annie's on December 2, 1999.
ELECTION OF DIRECTORS
(PROXY ITEM 1)
Annie's bylaws provide that its Board of Directors will consist of not
fewer than three nor more than 10 members. The Board of Directors has fixed the
number of directors for Annie's at seven, currently. The Board of Directors may
appoint directors to fill vacancies in the event that one or more directors
leave the Board of Directors.
A plurality of the votes cast by the holders of Common Stock present or
represented by proxy and entitled to vote at the Meeting is required for the
election of a nominee. Proxies cannot be voted for a greater number of persons
than the number of nominees named or for persons other than the named nominees.
Annie's Board of Directors has nominated the following persons for election
as directors of Annie's at the Meeting. All nominees are currently members of
Annie's Board of Directors. The nominees and the year they first joined the
Board of Directors are:
YEAR FIRST
NOMINEE AGE JOINED BOARD CURRENT POSITION(S)
------- --- ------------ -------------------
JOHN FORAKER 37 1999 Chairman of the Board
ANN E. WITHEY 36 1989 Inspirational President
and Director
PAUL B. NARDONE 31 1999 President, Chief Executive
Officer and Director
RONALD L. CHENEY 63 1998 Director
ELLEN AMBROSE 46 1999 Director
RICHARD LEMON 52 1999 Director
MICHAEL MOONE 60 1999 Director
BACKGROUND OF NOMINEES FOR THE BOARD OF DIRECTORS AND CERTAIN KEY OFFICERS
JOHN FORAKER, 37, founded Homegrown Holdings Corp., now known as Homegrown
Natural Foods, Inc., in 1999 as an investment vehicle for the natural food
industry, and subsequently negotiated its first investment in Annie's. Mr.
Foraker is currently the Chairman of Annie's Board of Directors. Mr. Foraker has
served as President & CEO of Napa Valley Kitchens, marketer of CONSORZIO(R)brand
specialty food products, since 1995. In 1997, Mr. Foraker founded Clio Groves,
the leading domestic producer and marketer of California olive oil products.
From 1987 through 1991, Mr. Foraker was Vice President for Bank of America NT &
SA, in Santa Rosa, California, where he was responsible for a significant
portion of that Bank's wine industry portfolio. Mr. Foraker is on the board of
Napa Valley Kitchens, Spottswoods Winery, and Clio Groves.
<PAGE>
ANN E. WITHEY, 36, co-founded Annie's in 1989 and is currently a director and
Annie's Inspirational President. Ms. Withey has served as a director of Annie's
since 1989. Ms. Withey's responsibilities include new product development and
consumer correspondence and relations. Ms. Withey was a co-founder of Smartfood,
Inc. and creator of the original recipe for Smartfood(R)popcorn. Smartfood Inc.
was sold to Frito-Lay, Inc. in 1989. Ms. Withey and her husband currently own
and operate a small organic produce farm in Connecticut. Ms. Withey actively
supports a variety of programs that benefit women, children, education and the
environment. Ms. Withey holds a B.A. degree from the University of Connecticut.
PAUL B. NARDONE, 31, is currently Annie's President and Chief Executive Officer.
In July 1999, Mr. Nardone was elected to Annie's Board of Directors. Mr. Nardone
is responsible for managing Annie's strategic plan. In 1988, Mr. Nardone founded
the Olde Boston(R)brand. In 1990, Mr. Nardone founded New England Snacks, Inc.,
a regional snack food distributorship. In March, 1992, New England Snacks, Inc.
was sold to Alternative Distributors where Mr. Nardone served as Vice President
of sales until joining Annie's in 1993. Mr. Nardone holds a B.A. degree in
Political Science from Tufts University.
RONALD L. CHENEY, 63, has been a director of Annie's since 1998. He is a
co-principal of an unregistered investment fund. He retired from the practice of
law in 1996. Prior to his retirement, Mr. Cheney worked for the last ten years
as a sole practitioner in the area of securities law. Mr. Cheney has been a
panelist at discussions on securities litigation, lectured in law school and
published articles on securities law. Mr. Cheney holds a B.A. degree from Yale
University and his LL.B. from Harvard Law School.
ELLEN AMBROSE, 46, is a principal and consultant for Brand Insights, a marketing
consulting company for the packaged foods industry. Ms. Ambrose is also a
director of Napa Valley Kitchens. Ms. Ambrose was Vice President & General
Manager for Nestle Beverage Company, with responsibility for the ready-to-drink
coffee, ground coffee, and powdered beverages divisions. Before joining Nestle,
Ms. Ambrose was a principal in Marketing Corporation of America, a strategic
marketing firm handling clients such as Frito-Lay, Kraft, General Foods, and
Pepperidge Farms. She also served as a director for Beatrice/Hunt Wesson's
Fisher nuts division, and as Group Marketing Manager for the Orville Redenbacher
division.
RICHARD LEMON, 52, has practiced law for 30 years, the last 20 being with the
Napa, California law firm of Dickenson, Peatman, & Fogarty. He devotes his
practice primarily to the food and wine industries, including mergers and
acquisitions, financing and general corporate and real estate work. He founded
and is a board member of Napa National Bank. He is President of Temecula
Vineyards, Inc., and is a partner in Silverado Partners, a mergers and
acquisition consultant to the wine industry.
MICHAEL MOONE, 60, has been Chairman of Napa Valley Kitchens in Napa,
California, Chairman of Luna Vineyards in Napa, California and a managing
partner of Silverado Equity Partners, LP since 1995. From 1990 to 1992, Mr.
Moone served as President and CEO of Stouffer Foods Corporation, where he also
served as President of Nestle Frozen Food Company. From 1984 to 1990, Mr. Moone
served as President of Wine World Estates, a producer and importer of premium
wines. In 1995, Silverado Partners, led by Mr. Moone, completed the purchase of
Nestle's wine holdings, which was taken public in 1997 under the name Beringer
Wine Estates. Mr. Moone is currently a director of Ruiz Foods.
NEIL RAIFF, 43, is a Certified Public Accountant and has been Annie's Chief
Financial Officer and Treasurer since 1989 and our Secretary since December
1999. From 1989 to September 1994, Mr. Raiff
<PAGE>
served as Chief Financial Officer on a contractual basis. In October 1994, Mr.
Raiff became a part-time employee, and in May 1995 he joined Annie's as a
full-time employee. Mr. Raiff is responsible for all financial and
administrative functions including forecasting and strategic planning, expense
control, accounting, and banking and insurance relationships. From 1991 to May
1995, Mr. Raiff was self-employed as a Certified Public Accountant in private
practice. Mr. Raiff holds a B.S. in Accountancy from Bentley College in Waltham,
Massachusetts.
OLDE BOSTON(R) is a registered trademark of Olde Boston Snacks, Inc.
SMARTFOOD(R) is a registered trademark of Smartfood, Inc. CONSORZIO(R) is a
registered trademark of Napa Valley Kitchens, Inc.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met seventeen times during fiscal year 2000. Each of
the directors attended at least 75% of the aggregate of (i) the total number of
Board of Directors (held during the period for which he or she has been a
director); and (ii) the total number of meetings held by all committees of the
Board of Directors on which he or she served (during the period in which he or
she served).
The Executive Committee was created on July 1, 1999. It is charged with
assisting Annie's management with the formulation and implementation of various
cost reduction, employee incentive and other management programs and initiatives
and other duties as assigned from time to time by the Board of Directors.
Currently, the members of the Executive Committee are Ann E. Withey, Ronald L.
Cheney, Paul Nardone and John Foraker.
Annie's does not have a standing Audit or Compensation Committee, as those
committees were disbanded on or after December 2, 1999.
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The Board of Directors has the authority to fix the compensation of the
directors. The directors may be paid their expenses and a fixed sum for their
attendance at each meeting of the Board or a stated salary as a director, and
each may be reimbursed for his or her expenses. Annie's pays no compensation for
its directors who are also employees of Annie's. Annie's stock options were
granted to the non-employee directors for their services for fiscal year 2000.
The following table sets forth, for the fiscal years ended March 31, 2000,
1999 and 1998, a summary of compensation awarded to, earned by or paid to
Annie's Chief Executive Officer and each of its four other most highly
compensated executive officers (the "Named Executive Officers") at March 31,
2000.
<PAGE>
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
SECURITIES
NAME AND UNDERLYING
PRINCIPAL FISCAL SALARY(1) BONUS(2) OPTIONS ALL OTHER
POSITION YEAR ($) ($) (#) COMPENSATION
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PAUL NARDONE(3)(4) 2000 $104,000 $44,044 -- --
President, Chief 1999 109,000 33,852 -- --
Operating Officer 1998 69,500 19,288 -- --
ANN E. WITHEY 2000 $ 84,000 -- -- --
1999 94,500 -- -- 13,528 (5)
1998 73,500 -- -- --
NEIL RAIFF (6) 2000 $ 84,000 $25,962 -- --
Chief Financial 1999 100,500 -- -- --
Officer, Secretary 1998 61,500 -- -- --
and Treasurer
ANDREW M. MARTIN (3) 2000 $ 72,000 -- -- --
1999 121,500 -- -- 35,949 (7)
1998 82,500 -- -- 22,278 (7)
------------------
</TABLE>
(1) Amounts shown do not include the cost to Annie's of personal benefits, the
value of which did not exceed 10% of the aggregate salary and bonus
compensation for each Named Executive Officer.
(2) Bonuses for 2000 were earned pursuant to a bonus plan adopted by the Board
of Directors in 1999, which required Annie's to achieve certain financial
targets for the year ended March 31, 2000.
(3) Mr. Martin served as Annie's Chief Executive Officer until July 1999. The
Board of Directors appointed Mr. Nardone Annie's Chief Executive Officer on
December 2, 1999. Mr. Martin terminated his employment with Annie's in July
1999, and resigned his position as director on December 2, 1999.
(4) Pursuant to an Employment Agreement between Mr. Nardone and Annie's dated
November 26, 1996, Mr. Nardone received a quarterly cash bonus and a fixed
number of stock options based on the amount by which Annie's actual
performance exceeded budget during the preceding quarter. Mr. Nardone
earned, and was owed, stock options to purchase 37,500 shares of Common
Stock. On July 7, 1999, the Compensation Committee authorized the issuance
of an incentive stock option to Mr. Nardone to purchase 237,500 shares of
Annie's Common Stock under Annie's 1999 Omnibus Stock Option Plan, with
accelerated vesting based upon the achievement of certain performance
incentives. On August 26, 1999, the Compensation Committee authorized the
issuance of a non-qualified stock option to Mr. Nardone to purchase 107,366
shares of Annie's Common Stock under Annie's 1996 Stock Plan, at an
exercise price of $0.01 per share, in exchange for the following changes to
Mr. Nardone's Employment Agreement: (i) surrender of his entitlement to a
change of control bonus of 2%; (ii) surrender of his entitlement to
incentive stock options to purchase 37,500 shares of Common Stock described
above; (iii) reduction of his base salary from $120,000 to $96,000, (iv)
surrender of his entitlement to certain cash bonuses based on performance
in exchange for his participation in Annie's Bonus Pool Program, described
below, and (v) extension of the term of his Employment Agreement to March
31, 2000. In August 2000, Mr. Nardone's Employment Agreement was further
extended to March 31, 2001, and his base salary was increased to $125,000
per annum.
(5) Other compensation to Ms. Withey includes the forgiveness of the Stock
Option Loan from October 1997. For 2000, Ms. Withey waived her right to
forgiveness on her Stock Option Loan from October 1997 and December 1998.
(6) On July 7, 1999, the Compensation Committee authorized the issuance of an
incentive stock option to Mr. Raiff to purchase 118,750 shares of Annie's
Common Stock under Annie's 1999 Omnibus Stock Option Plan, with accelerated
vesting based upon the achievement of certain performance incentives. On
August 26, 1999, the Compensation Committee authorized the issuance of a
ten-year non-qualified stock option to Mr. Raiff to purchase 47,368 shares
of Annie's Common Stock under Annie's 1996 Stock Plan, with an exercise
price of $0.01 per share, in exchange for the surrender of his entitlement
to change a change of control bonus of 1% granted to him in Annie's Change
of Control and Severance Agreement, dated December 21, 1998.
(7) Other compensation to Mr. Martin includes imputed interest on indebtedness
to Annie's, the personal portion of rent and telephone expenses paid by
Annie's on Mr. Martin's behalf and the forgiveness of the October 1997
Stock Option Loan, described below.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Stock options were granted to the Named Executive Officers during the 2000
fiscal year. Paul B. Nardone was granted an option to purchase 237,500 shares of
Common Stock at an exercise price of $2.00 per share, and an option to purchase
107,366 shares at an exercise price of $.01 per share. Neil Raiff was granted an
option to purchase 118,750 shares at an exercise price of $2.00 per share, and
an option to purchase 47,368 shares at an exercise price of $.01 per share.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during the fiscal
years ended March 31, 2000, 1999 and 1998 and unexercised stock options held as
of the end of such years.
<TABLE><CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
SHARES TO BE OPTIONS AT FY- FY-END ($) (1)
RECEIVED END EXERCISABLE/ EXERCISABLE/
NAME YEAR ON EXERCISE UNEXERCISABLE UNEXERCISABLE
---- ---- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Paul B. Nardone (2) 2000 -- 21,473/323,393 $42,731/$170,927
President and Chief 1999 -- -- --
Executive Officer 1998 -- -- --
Ann E. Withey 2000 -- -- --
Inspirational 1999 71,620 15,667/0 $0/$0
President 1998 84,552 87,287/0 $71,262/$0
Neil Raiff 2000 -- 9,475/156,643 $18,855/$75,407
Chief Financial 1999 -- -- --
Officer, Secretary 1998 -- -- --
and Treasurer
Andrew M. Martin(2) 2000 -- -- --
1999 101,959 37,302/0 $0/$0
1998 84,552 139,261/0 $101,449/$0
-----------------------
</TABLE>
(1) Calculated based on an assumed fair market value of $2.00, minus the
exercise price of the option. The $2.00 fair market value assigned to the
Common Stock is derived from the valuation used in the Homegrown Natural
Foods, Inc. financing, dated December 2, 1999.
(2) Mr. Martin served as Annie's Chief Executive Officer until July 1999. The
Board of Directors appointed Mr. Nardone Annie's Chief Executive Officer on
December 2, 1999.
BONUS POOL PROGRAM
On July 7, 1999, the Board of Directors adopted Annie's Bonus Pool Program.
In connection with the adoption of the Bonus Pool Program, Annie's reduced the
base salary of Paul B. Nardone, Annie's President and Chief Executive Officer,
and Mr. Raiff, Annie's Chief Financial Officer, Treasurer, and Secretary. Mr.
Nardone's annual base salary was reduced from $120,000 to $96,000. Mr. Raiff's
annual base salary was reduced from $108,000 to $86,400. The Bonus Pool Program
provides employees designated to participate with an opportunity to receive cash
bonus awards upon the achievement of certain financial targets. The financial
targets are tied directly to Annie's earnings before interest
<PAGE>
and taxes ("EBIT"). Annie's Executive Committee determines eligibility for
participation in the Bonus Pool Program and administers the Program. Ann E.
Withey, Annie's co-founder and Inspirational President, is not participating in
the Bonus Pool Program. Mr. Nardone and Mr. Raiff currently participate in the
bonus pool program in addition to the other employees of Annie's. In August
2000, Mr. Martin's base salary was increased to $125,000 per annum.
The Bonus Pool Program currently provides:
<TABLE><CAPTION>
% OF ANNIE'S BONUS TO EACH PLAN
FY 2001 EBIT ACHIEVED (1) TARGET ACHIEVED BENEFICIARY(2)(3)
------------------------- --------------- -----------------
<S> <C> <C> <C>
Level 1 $540,000(4) to $569,999 90%-94% 5%
Level 2 $570,000 to $599,999 95%-99% 10%
Level 3 $600,000 to $629,999 100%-104% 15%
Level 4 $630,000 to $659,999 105%-109% 17.5%
Level 5 $660,000 to $689,999 110%-114% 20%
Level 6 $690,000 to $719,999 115%-119% 22.5%
Level 7 $720,000 to $749,999 120%-124% 25%
Level 8 $750,000 to $779,999 125%-129% 27.5%
Level 9 $780,000 to $809,999 130%-134% 30%
Level 10 $810,000 to $839,999 135%-139% 35%
Level 11 $840,000 to $869,999 140%-144% 40%
Level 12 $870,000 to $899,999 145%-149% 45%
Level 13 $900,000 to $929,999 150%+ 50%
---------------
</TABLE>
(1) The FY 2001 EBIT target is $600,000. EBIT will be determined in accordance
with Generally Accepted Accounting Principles, consistently applied, with
certain adjustments for slotting fees and compensation charges in
connection with incentive programs.
(2) The participants in the Bonus Pool will be Mr. Paul B. Nardone, President
and Chief Executive Officer; Mr. Neil Raiff, Chief Financial Officer and
Treasurer; and such other employees as determined by Annie's Executive
Committee.
(3) Bonus to be granted under the Bonus Plan as a percentage of each eligible
beneficiary's annual salary.
(4) No bonus will be paid in the event that Annie's adjusted EBIT for fiscal
year 2001 is less than $540,000.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In July 1999, Annie's adopted a 1999 Non-Employee Directors' Stock Option
Plan (the "Non-Employee Directors' Plan"). The purpose of the Non-Employee
Directors' Plan is to compensate directors while simultaneously creating an
incentive to such directors to maximize stockholder value. The following is a
general summary of the plan, which is qualified in its entirety by reference to
the Non-Employee Directors' Plan.
The Non-Employee Directors' Plan provides for an annual non-discretionary
grant of stock options to each director who is not also an employee
(collectively, the "Non-Employee Directors"). This annual grant is in lieu of
all other compensation for service as a
<PAGE>
member of Annie's Board of Directors (although Non-Employee Directors may still
receive reimbursement for their expenses in attending meetings). A total of
100,000 shares of Common Stock is reserved for issuance under the Non-Employee
Directors' Plan.
Each Non-Employee Director will receive an annual option grant to purchase
7,500 shares of Annie's Common Stock on the anniversary of his or her election
or appointment to the Board of Directors for service on the Board of Directors
for the ensuing year and 2,500 shares for each committee on which the
Non-Employee Director serves, both with an exercise price equal to the fair
market value of the underlying Common Stock on the date the option is granted.
The exercise price will be 110% of the fair market value of the subject Common
Stock for any person who owns stock possessing more than 10% of the total
combined voting power or value of Annie's equity. Options will remain
exercisable for five years from the date granted.
1999 OMNIBUS STOCK OPTION PLAN
In July 1999, Annie's adopted a 1999 Omnibus Stock Option Plan (the "1999
Plan"). The purpose of the 1999 Plan is to encourage ownership of Common Stock
of Annie's by officers, key employees, directors, consultants and other persons
not employed by Annie's. Pursuant to the 1999 Plan, Annie's may grant incentive
stock options and non-qualified stock options to Annie's employees, officers,
directors and consultants. A total of 475,000 shares of Common Stock were
reserved for issuance under the 1999 Plan. The Board of Directors will oversee
and administer the 1999 Plan, will have authority to select recipients eligible
to receive option grants, and will grant options under the 1999 Plan's terms.
The Board of Directors has the discretion to determine the exercise period
and vesting terms, if any, for each option grant, but the exercise period will
not be more than ten years after the date the option is granted. If the option
recipient terminates his or her service with Annie's for any reason other than
death or disability, the recipient must exercise the option within the earlier
of the expiration date of such option or within 30 days of his or her
termination of services. In the event of an option recipient's death or
disability, any option held by that recipient which was exercisable on the date
of his or her death may be exercised by the legal representative of the
recipient's estate for up to one year after his or her death or until the stated
expiration date of the option, which ever period is shorter. Any option not
exercisable on the date of the recipient's death is forfeited. In the event of
an option recipient is "Terminated for Cause", as defined under the 1999 Plan
(E.G., for violations of Annie's personnel policies), the terminated recipient's
options will immediately be forfeited.
In the event of a Change of Control, as defined in the 1999 Plan, unless
otherwise proscribed in the stock option grant, one-half of the unvested
portions of each grant under the 1999 Plan will become fully exercisable
immediately prior to such event.
The Board of Directors may amend, discontinue or terminate the 1999 Plan at
any time. The 1999 Plan will automatically terminate on the tenth anniversary of
its effective date.
On July 7, 1999 and August 26, 1999, pursuant to the 1999 Plan, the Board
of Directors approved the issuance of incentive stock options to purchase an
aggregate of 374,062 shares to four employees with an exercise price equal to
the fair market value of the Common Stock on the date of grant, subject to
accelerated vesting upon achievement of certain performance milestones. In
January 2000, the Board of Directors approved the issuance of nonqualified stock
options for 50,000 shares to a consultant, vesting over a two-year period.
<PAGE>
1996 STOCK PLAN
On October 28, 1996, Annie's adopted the 1996 Stock Plan (the "1996 Plan").
The purpose of the 1996 Plan is to encourage ownership of Common Stock of
Annie's by officers, key employees, directors, consultants and other persons not
employed by Annie's. Pursuant to the 1996 Plan, Annie's may grant incentive
stock options and non-qualified stock options to Annie's employees, officers,
directors and consultants. A total of 200,000 shares of Common Stock was
reserved for issuance under the 1996 Plan. The Board of Directors is authorized
to determine the employees, officers, directors and consultants to whom options
are granted and the number of shares for each option. The Board of Directors
also interprets the 1996 Plan and the options granted thereunder and is
authorized to adopt, amend or rescind the rules and regulations and make all
other determinations necessary or advisable for the administration of the 1996
Plan. Four options to purchase an aggregate of 164,734 shares have been issued
under the 1996 Plan. The Board may amend the 1996 Plan at any time, although
certain amendments would require stockholder approval.
The Board of Directors has the discretion to determine the extent to which
an option may be exercised in part and the extent to which any part may or may
not be exercised prior to expiration of specified periods of time after the
grant. However, no option will be exercisable to any extent after the expiration
of ten years (five years in the case of an incentive stock option granted to a
greater than 10% stockholder). If the option recipient terminates his or her
service with Annie's for any reason other than death or disability, the
recipient must exercise the option within the earlier of the expiration date of
such option or within 90 days of his or her termination of services. In the
event of an option recipient's death or disability, incentive stock options will
terminate at the earlier of such date of expiration or within 180 days and 90
days, respectively, following such event. The exercise price of incentive stock
options granted under the 1996 Plan must be at least equal to the fair market
value of the Common Stock of Annie's on the date of grant. The exercise price of
incentive stock options granted to an option recipient who is a 10% or greater
stockholder of Annie's must equal at least 110% of the fair market value of the
Common Stock on the date of grant.
1990 INCENTIVE STOCK OPTION PLAN
In January 1990, Annie's adopted an incentive stock option plan (the "1990
Plan"). The purpose of the 1990 Plan is to encourage ownership of Common Stock
of Annie's by officers, key employees, directors, consultants and other persons
not employed by Annie's. Pursuant to the 1990 Plan, Annie's may grant incentive
stock options and non-qualified stock options to Annie's employees, officers,
directors and consultants. The Board of Directors is authorized to determine the
employees, officers, directors and consultants to whom options are granted and
the number of shares for each option. The Board also interprets the 1990 Plan
and the options granted thereunder and is authorized to adopt, amend or rescind
the rules and regulations and make all other determinations necessary or
advisable for the administration of the 1990 Plan.
The Board has the discretion to determine the extent to which an option may
be exercised in part and the extent to which any part may or may not be
exercised prior to expiration of specified periods of time after the grant.
However, no option will be exercisable to any extent after the expiration of ten
years (five years in the case of an incentive stock option granted to a
greater-than 10% stockholder). If an option recipient terminates his or her
services with Annie's, the recipient must exercise the option within the earlier
of the expiration date of such option or within 30 days of termination of
services for any reason other than death, retirement or disability. In the event
of death or retirement, the incentive stock option will terminate at the
<PAGE>
earlier of such date of expiration or within 180 days and 90 days, respectively,
following such event. The exercise price of incentive stock options granted
under the 1990 Plan must be at least equal to the fair market value of the
Common Stock of Annie's on the date of grant. The exercise price of incentive
stock options granted to an option recipient who is a 10% or greater stockholder
of Annie's must equal at least 110% of the fair market value of the Common Stock
on the date of grant.
The 1990 Plan terminated in January 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NAPA VALLEY KITCHENS
In June 2000, Annie's retained Napa Valley Kitchens to provide certain
services such as order processing, invoicing, record management, sales coverage,
broker management, promotion execution, management of sales and allowances. For
the balance of the fiscal year ending March 31, 2001, Annie's will pay Napa
Valley Kitchens approximately 2.0% of net adjusted sales that are processed
through Napa Valley Kitchen. Napa Valley Kitchens is a subsidiary of Homegrown
Holdings Corp., now known as Homegrown Natural Foods, Inc., which acquired
control of Annie's pursuant to the terms of the Stock Collar Agreement that Ms.
Withey and Mr. Martin entered into with Homegrown Natural Foods, Inc. and
pursuant to a Stock Purchase Agreement dated December 2, 1999. Ms. Ambrose, a
director of Annie's, is currently a director of Napa Valley Kitchens.
HOMEGROWN NATURAL FOODS, CORP.
In conjunction with the Homegrown Natural Foods, Corp. transaction, on
December 2, 1999, Mr. Martin and Ms. Withey entered into a Stock Collar
Agreement with Homegrown Holdings Corp., now known as Homegrown Natural Foods,
Inc., that provides Homegrown Natural Foods, Inc. with a stock collar on certain
shares of Annie's Common Stock owned by Ms. Withey and all of the shares of
Annie's Common Stock owned by Mr. Martin. Under the terms of the Stock Collar
Agreement, Homegrown Natural Foods, Inc. was granted a call option to purchase
1,677,691 shares of Annie's Common Stock held by Mr. Martin and 900,000 shares
of Annie's Common Stock held by Ms. Withey, each exercisable as quickly as those
shares are released from the Irrevocable Stock Transfer Instructions, described
above under the heading "Security Ownership" by Management and Principal
Stockholders. In addition, Mr. Martin was granted a put option at $1.92 per
share with regard to 1,677,691 shares of Annie's Common Stock held by him,
exercisable fifteen days after Homegrown Natural Foods, Inc.'s call option is
exercisable. Ms. Withey was granted a put option on the same terms with respect
to 900,000 shares of Common Stock owned by her. The call and put options are
exercisable quarterly over a five-year period following the closing of the
Homegrown Natural Foods, Inc. transaction. Mr. Martin and Ms. Withey have
provided Homegrown Natural Foods, Inc. with an Irrevocable Proxy to vote their
shares subject to the Stock Collar Agreement.
LOANS TO OFFICER
Mr. Martin, a director of Annie's, borrowed $75,000 from Annie's on June
30, 1995 pursuant to an unsecured demand note accruing interest at 11% per
annum. As of June 30, 1999, the full principal balance of the loan was
outstanding. Annie's called the demand note and Mr. Martin executed a secured
promissory note, dated December 31, 1997, in the principal amount of $75,000
providing for interest payable quarterly at 6.02%, secured by 25,000 shares of
Annie's Common Stock owned by Mr. Martin, which
<PAGE>
stock was deposited in an escrow account established for this purpose, together
with stock powers in blank authorizing the resale of such shares under the
applicable rules and regulations of the Securities and Exchange Commission, and
restricting the resale of other shares of Annie's Common Stock owned by Mr.
Martin under certain circumstances. The loan was rescheduled into an Omnibus
Secured Promissory Note in accordance with Mr. Martin's separation agreement.
AMOUNTS DUE FROM OFFICER
Annie's periodically paid certain of Mr. Martin's personal expenses, which
were accounted for on Annie's books as "Due From Officer." The total amount of
such advances outstanding on March 31, 1999 was $24,759. The loan was
rescheduled into an Omnibus Secured Promissory Note in accordance with Mr.
Martin's separation agreement.
STOCK OPTION LOANS
Pursuant to Section 8 of Annie's 1990 Stock Option Plan, on December 21,
1998, Annie's made loans to Mr. Martin, Ms. Withey and to Ms. Churchill Luster
in the amounts of $102,468.80, $71,978.10 and $43,236.11, respectively, to
enable each of them to purchase shares of Common Stock upon exercise of certain
options which previously were granted to them. In each case, the options were
granted on December 30, 1993 for a term of five years with an exercise price of
$1.005 per share. The terms of the Stock Purchase and Loan Agreements ("1998
Stock Loans") provide for annual interest at the rate of 4.51%, the mid-term
Applicable Federal Rate in effect for December 1998. Interest is payable
annually on December 30. The entire outstanding principal is due on December 30,
2003. The terms of the 1998 Stock Loans further provide for Annie's to pay all
interest due on the foregoing loan on each borrower's behalf, plus one-fifth of
the original principal amount of such loans, providing that each such borrower
is still employed by Annie's on December 29 of each year during the life of the
obligation. Payments of principal and interest are deemed compensation income to
each borrower. The 1998 Stock Loans are secured by the Common Stock (the "1998
Stock Loan Pledged Shares") issuable upon exercise of the options. In the event
that a borrower is terminated by Annie's for good cause, the 1998 Stock Loan
Pledged Shares are subject to repurchase by Annie's at $1.005 per share. In the
event that a borrower is terminated for other than good cause, such a borrower
may obtain title to the 1998 Stock Loan Pledged Shares by payment of all
outstanding principal and interest due on his or her stock loan, or may resell
the 1998 Stock Loan Pledged Shares to Annie's at $1.005 per share.
On October 1, 1997 and pursuant to Section 8 of the 1990 Option Plan,
Annie's also made loans to Ms. Churchill Luster, Mr. Martin and Ms. Withey in
the amounts of $49,735.20, $67,641.60 and $67,641.60, respectively, to enable
each of them to purchase shares of Common Stock upon exercise of certain options
which previously were granted to them (the "1997 Stock Loans"). In each case,
the options were granted on October 1, 1992 for a term of five years with an
exercise price of $0.80 per share. The terms of the 1997 Stock Loans provide for
annual interest at the rate of 6.34%, the mid-term Applicable Federal Rate in
effect for October 1997. Interest is payable annually on October 1. The entire
outstanding principal is due on October 1, 2002. The terms of the 1997 Stock
Loans further provide for Annie's to pay all interest due on the foregoing loan
on each borrower's behalf, plus one-fifth of the original principal amount of
such loans, providing that each such borrower is still employed by Annie's on
September 30 of each year during the life of the obligation. Payments of
principal and interest are deemed compensation income to each borrower. The 1997
Stock Loans are secured by the Common Stock (the "1997 Stock Loan Pledged
Shares") issuable upon exercise of the options. In the event that a borrower is
terminated by Annie's for good cause, the 1997 Stock Loan Pledged Shares are
subject to repurchase by Annie's at
<PAGE>
$0.80 per share. In the event that a borrower is terminated other than for good
cause, the borrower may obtain title to the 1997 Stock Loan Pledged Shares by
payment of all outstanding principal and interest due on his or may her stock
loan, or resell the 1997 Stock Loan Pledged Shares to Annie's at $0.80 per
share.
Pursuant to the terms of the 1998 Stock Loans and the 1997 Stock Loans, Mr.
Martin's and Ms. Churchill Luster's stock loans became due and payable 45 days
after the date of their respective terminations. That maturity date was extended
to the closing date of the Homegrown Natural Foods, Inc.. financing. In
conjunction with that financing, Mr. Martin and Ms. Churchill Luster each
entered into Separation Agreements, dated December 2, 1999, with Annie's.
Under the terms of Mr. Martin's Separation Agreement, he executed a
five-year Omnibus Secured Promissory Note, pursuant to which he agreed to pay
$274,630.18 to Annie's, with interest accruing on the principal balance at the
rate of 9% per annum, and payable in 20 quarterly installments equal to 5% of
the original principal amount of the debt, with the balance due and payable of
the fifth anniversary of the date of the note. The note was secured by all of
his interest in his Stock Collar Agreement with Homegrown Natural Foods, Inc.
pursuant to a Security Agreement and Collateral Assignment, dated December 2,
1999. As part of the Separation Agreement, Annie's released its security
interest on the shares of Common Stock owned by Mr. Martin that it held pursuant
to the 1998 Stock Loan Agreement and the 1997 Stock Loan Agreement. The Omnibus
Secured Promissory Note was given in satisfaction of his obligations to Annie's
under the 1997 Stock Loan Agreement, 1998 Stock Loan Agreement, another
promissory note and other certain personal advances and loans by Annie's to Mr.
Martin. Also, as part of this transaction, Mr. Martin agreed to amend Annie's
right to repurchase shares of Annie's stock acquired using proceeds from the
1998 Stock Loan Agreement and 1997 Stock Loan Agreement to change the purchase
price for each stock to $2.00 per share.
Under the terms of Ms. Churchill Luster's Separation Agreement, she agreed
to execute a five year Omnibus Secured Promissory Note, pursuant to which she
agreed to pay $87,793.93 to Annie's, with interest accruing on the principal
balance at the rate of 9% per annum, and payable in 20 quarterly installments
equal to 5% of the original principal amount of the debt, with the balance due
and payable of the fifth anniversary of the date of the note. Ms. Churchill
Luster's Omnibus Secured Promissory Note was secured by a Pledge Agreement with
Annie's, which gave Annie's a security interest on shares of Annie's stock held
by Ms. Churchill Luster. This Omnibus Secured Promissory Note was given in
satisfaction of her obligations to Annie's under the 1997 Stock Loan Agreement
and the 1998 Stock Loan Agreement. Also, as part of this transaction, Ms.
Churchill Luster agreed to amend Annie's right to repurchase shares of the
Annie's stock acquired using proceeds from the 1998 Stock Loan Agreement and
1997 Stock Loan Agreement to change the purchase price for such stock to $2.00
per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF THE
NOMINEES AS DIRECTORS OF ANNIE'S.
<PAGE>
PROPOSAL TO RATIFY SELECTION OF AUDITORS
(PROXY ITEM 2)
The Board of Directors has selected the firm of KPMG LLP, independent
certified public accountants, to serve as auditors for the fiscal year ending
March 31, 2001. KPMG LLP has served as Annie's auditors for the past five fiscal
years. Representatives of KPMG LLP are not expected to be in attendance at the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
KPMG LLP AS ANNIE'S AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2001.
STOCKHOLDER PROPOSALS
It is contemplated that the next Annual Meeting of Stockholders will be
held on or about November 13, 2001. To be eligible for inclusion in the proxy
statement to be furnished to all stockholders entitled to vote at the next
Annual Meeting, proposals must be addressed to the Secretary of Annie's and must
be received at Annie's principal executive offices not later than July 16, 2001.
In order to avoid controversy as to the date on which a proposal was received by
Annie's, it is suggested that any stockholder who wishes to submit a proposal
submit such proposal by Certified Mail, Return Receipt Requested.
EXPENSES AND SOLICITATION
The costs of printing and mailing proxies will be borne by Annie's. In
addition to soliciting stockholders by mail through its regular employees,
Annie's may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of Annie's registered in
the names of a nominee and, if so, will reimburse such banks, brokers and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket costs.
Solicitation by officers and employees of Annie's may also be made of some
stockholders following the original solicitation.
OTHER BUSINESS
The Board of Directors knows of no other items that are likely to be
brought before the Meeting except those that are set forth in the foregoing
Notice of Annual Meeting of Stockholders. If any other matters properly come
before the Meeting, the persons designated on the enclosed proxy will vote in
accordance with their judgment on such matters.
By Order of the Board of Directors
October 10, 2000 Paul B. Nardone,
President and Chief Executive Officer
<PAGE>
[COMPANY LOGO]
TO ANNIE'S STOCKHOLDERS:
ANNIE'S HOMEGROWN INC. IS YOUR COMPANY!
AS ANNIE'S STOCKHOLDERS, YOU HAVE AN OPPORTUNITY TO VOTE ON ISSUES THAT AFFECT
YOUR COMPANY. PLEASE RETURN YOUR PROXY CARD IN THE ADDRESSED STAMPED ENVELOPE AS
SOON AS POSSIBLE WITH YOUR VOTE OR FOLLOW THE SIMPLE INSTRUCTIONS FOR VOTING BY
TELEPHONE OR INTERNET. THANK YOU FOR SHARING IN THE FUTURE OF ANNIE'S.
ZANN2B DETACH HERE
PROXY
ANNIE'S HOMEGROWN INC.
395 Main Street
Wakefield, Massachusetts 01880
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
November 13, 2000
THIS PROXY IS SOLICITED ON BEHALF OF ANNIE'S HOMEGROWN INC.'S BOARD OF DIRECTORS
The undersigned hereby appoints Paul Nardone and Neil Raiff, and each of them
singly, true and lawful agents and proxies for the undersigned, with full power
of attorney and power of substitution, to represent the undersigned and vote all
shares of capital stock of any class that the undersigned is entitled to vote at
the Annual Meeting of Stockholders (the "Meeting") of Annie's Homegrown Inc.
(the "Company") to be held on Monday, November 13, 2000, at 10:00 a.m., at the
offices of Kirkpatrick & Lockhart LLP, 75 State Street, Sixth Floor, Boston,
Massachusetts 02109, or at any adjournment thereof, upon the matters set forth
in the Notice of Annual Meeting of Stockholders and accompanying Proxy
Statement, each dated October 10, 2000, receipt of which is hereby acknowledged.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
<TABLE><CAPTION>
----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
----------------- ----------------
<S> <C>
It's fast, convenient, and immediate! It's fast, convenient, and your vote
Call Toll-Free on a Touch-Tone Phone is immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
====================================== ====================================
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/eqsah
3. Enter your 14-digit Voter Control 3. Enter your 14-digit Voter Control
Number located on your Proxy Card Number located on your Proxy Card
above your name. above your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
====================================== ====================================
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/eqsah anytime!
</TABLE>
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
ZANN2A DETACH HERE
Please mark
[X] votes as in
this example.
1. To elect a Board of Directors for the ensuing year.
NOMINEES: (01) John Foraker, (02) Ann E. Withey, (03) Paul B. Nardone,
(04) Ronald L. Cheney, (05) Ellen Ambrose, (06) Richard Lemon,
(07) Michael Moone
FOR WITHHELD
ALL FROM ALL
NOMINEES [ ] NOMINEES [ ]
[ ] ______________________________________
For all nominees except as noted above
2. To ratify the selection of the firm of KPMG LLP as independent public
accountants of the Company for the fiscal year ending March 31, 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
IMPORTANT: Please date this Proxy and sign exactly as your name(s) appear(s)
hereon. If stock is held jointly, each owner should sign. If signing as
attorney, executor, administrator, trustee, guardian or other fiduciary, please
give your full title as such.
Signature:_______________ Date:_______ Signature:_______________ Date:_______
