STEPHEN'S COFFEE HOLDING, INC.
6090 Activity Road, Suite A, San Diego, CA. 92126
CONFIDENTIAL DISCLOSURE AND CONSENT SOLICITATION STATEMENT
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ELECTION OF A NEW BOARD OF DIRECTORS AND
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RATIFICATION OF RECAPITALIZATION OF STEPHEN'S COFFEE HOLDING, INC.
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November 24, 1999
Stephen's Coffee Holding, Inc., a California corporation (the "Company"),
is furnishing this Confidential Disclosure and Consent Solicitation Statement
(the "Disclosure Statement") to the management holders of the shares of the
issued and outstanding Common Stock (the "Management's Shares") and the
non-management holders of the shares of the issued and outstanding Common Stock
(the "Investors' Common Shares" or the "Investors' Shares") in order to describe
the terms of a recapitalization, merger and its effect on the rights of all
Shareholders (the "Shareholders") and to obtain the ratification from the
Shareholders and New Board to such recapitalization and merger. This Disclosure
Statement and the enclosed form of Proxy and Consent (the "Proxy and Consent")
are first being mailed or delivered on or about November 24, 1999 to
Shareholders of record as of the close of business on November 23, 1999.
I. GENERAL STATEMENT AND BACKGROUND
The Chairman of the Company has adopted a Plan of Recapitalization and
Merger, a copy of which is attached hereto as Exhibit "A" (the "Plan of
Recapitalization and Merger" or "Recapitalization and Merger"), pursuant to
which the Company capital structure of the Company would be modified as
described herein. The Recapitalization and Merger, if ratified by the
Shareholders, as more fully described below, would have the effect of modifying
certain terms, rights and privileges of the Investors' Shares and result in
certain management changes and corporate restructuring. Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to such terms
in the Plan of Recapitalization and Merger.
The primary reasons for the Recapitalization and Merger, were to effective
June 23, 1999, are to (a) modify the Company's capital structure in a manner
which will enable the Company to proceed as a public company, (b) grow as a
viable business, (c) preserve shareholder value, and (d) eliminate potential
liabilities which could otherwise deter the interest of prospective underwriters
and investment banks in assisting the Company to raise additional private or
public equity financing. As you may have been previously advised, in its
continuing effort to take the Company's shares public on a national market
exchange such as the NASDAQ national market, the Company entered into
negotiations with several investment banking firms and advisors, pursuant to
which such firms or advisors have expressed their interest in (a) acting as
managerial and financial consultants to the Company in connection with an
initial public offering of the Company's Common Stock (an "IPO"), and (b)
sourcing private equity investment to be exchanged for newly-issued shares of
the Company to be used as a "bridge" financing for an IPO.
The Chairman of the Board believes that the rights and privileges
associated with the Investors' Shares should be modified as described herein in
order to facilitate an IPO. The Plan of Recapitalization requires that (a) 51%
of the holders of Investors' Shares shall agree in writing hereby to have
originally purchased their shares on the terms offered pursuant to the form of
amended Subscription Agreement attached hereto as
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
<PAGE>
Exhibit "B", and (b) 51 % of the holders of the Investors' Shares shall
expressly consent to the Plan of Recapitalization. The Chairman of the Board has
concluded that the Recapitalization and Merger are in the best interests of the
Company and its Shareholders. Please note that, except as described herein, none
of these changes materially adversely affect the rights or privileges of the
holders of the Investors' Shares.
II. RECOMMENDATION OF THE CHAIRMAN OF THE BOARD
The Chairman of the Board, having adopted the Plan of Recapitalization,
recommends and requests that the Shareholders ratify the restructuring of the
Company as detailed in this Disclosure Statement. Please note that the Company's
Recapitalization and Merger requires the consent of the holders of at least 51
percent of the Management's Shares and the holders of at least 51 percent of the
Investors' Shares.
The chairman of the Board believes that Recapitalization and Merger were in
the best interests of the Company and its Shareholders because, among other
things, they have enabled the Company to:
Capitalize upon the business expertise and contacts of investment
banking advisors and agents identified by management and thereby increase
the Company's access to capital, as well as its opportunities to fund
future growth, through future offerings of either equity or debt securities
originated by and through such investment advisors and agents.
Eliminate any Company liability for potential violations of securities
laws, although the Company does not believe that it has violated any
securities laws, and to obtain waivers from the holders of the Investors'
Shares of their rights and remedies arising from any potential violations
of securities laws committed by the Company in connection with previous
offers and sales of the Investors' Shares.
Please be advised that the decision to ratify the Plan of Recapitalization,
and the specific terms thereof, have been made and structured for the Company by
its Chairman of the Board, and that the holders of the Investors Shares will not
have any right to vote on or approve such decision, except as provided hereby.
There can be no assurance that the Company will succeed in its business even if
the Shareholders determine that it is in the best interests of the Company to
proceed with the Plan of Recapitalization. Market conditions and other factors
may prevent the Company from overcoming current financial and operational
challenges.
III. TERMS OF THE PROPOSED RECAPITALIZATION
Proposed Terms of Investors' Subscription Agreements
As part of the Plan of Recapitalization, the Chairman of the Board has
approved an Investors' Subscription Agreements (the "Amendment"). Each holder of
the Investors' Shares previously executed the Investors' Subscription
Agreements. A copy of the subscription agreement substantially as proposed to be
adopted, is attached to this Disclosure Statement as Exhibit "B." The Amendment
contains potentially significant changes in the rights of holders of the
Investors' Shares.
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
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The Chairman of the Board believes that the creation of the Amendment is
desirable in view of the waiver of potential violations of securities laws by
the holders of Investors' Shares, which would benefit the Company. Please note
that the proposed form of Amendment, if approved by a majority of the holders of
Investors' Shares, would be binding upon even those holders of Investors' Shares
who elected not to vote or who have voted against it.
Merger
The Chairman of the Board now requests a ratification of the merger of the
Company into La Jolla Fresh Squeezed Coffee(TM) Company Inc. (LJCC), formerly
North West Farms, Inc, organized in Washington.
The Merger Agreement and Plan of Merger (the "Merger Agreement") is
attached hereto as Exhibit "E". Under the terms of the Merger Agreement, the
Company merged with and into LJCC, a Washington corporation ("LJCC or "Surviving
Corporation") as of June 15, 1999. The Surviving Corporation assumed the name,
"La Jolla Fresh Squeezed Coffee(TM) Company, Inc.", and the shares of the
Company in the Surviving Corporation are retired, with the Company's present
Shareholders assuming ownership of the Surviving Corporation by converting each
share of Company capital stock into one-forth fully-paid and nonassessable share
of LJCC Common Stock pursuant to the Merger Agreement. A list of Shareholders,
and the amount of shares, which they own in LJCC, is attached hereto as Schedule
"A".
IV. CONSIDERATIONS FOR SHAREHOLDERS
In considering whether or not to ratify the Recapitalization and Merger,
Shareholders are urged to give careful consideration to the following factors,
in addition to the information contained elsewhere in this Disclosure Statement
and its Exhibits.
New Shares Received By Investors Shall Be Restricted Securities
Although the Company hopes that it shall soon proceed with an IPO of its
Common Stock on a national market exchange for the trading of publicly-held
shares, holders of Investors' Shares should be aware that the shares of Common
Stock in the Surviving Corporation they receive pursuant to the Plan of
Recapitalization, if ratified, will be "restricted securities" from and after
June 15, 1999 within the meaning of Rule 144 under the Securities Act. In
general, under Rule 144, as currently in effect, a person (or persons who shares
are required to be aggregated) who is not deemed to be an "affiliate" of the
Company, as that term is defined under the Securities Act, and who beneficially
owns restricted securities for a period of at least one year since the later of
the date such restricted securities were acquired from the Company or from an
affiliate of the Company, is entitled to sell the "restricted securities" in an
amount calculated as follows. The holder of "restricted securities" is entitled
to sell, within a three month period, a number of shares that does not exceed
the greater of (a) 1 percent of the then-outstanding shares of the Common Stock
or (b) the average weekly reported trading volume during the four calendar weeks
preceding the date in which notice of the sale is filed with the Securities and
Exchange Commission. If the Company engages in an IPO within the next 12 months,
the Company believes, based on the advice of counsel, that shares of Common
Stock to be issued upon the Plan of Recapitalization to the holders of
Investors' Shares will be deemed to have been acquired from the Company pursuant
to Rule 144(d)(3)(i) on the date a Shareholder received his or her Investors'
Common Shares for purposes of Rule 144.
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
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Sales under Rule 144 are also subject to certain manner-of-sale and notice
requirements and to the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not and has
not been an affiliate of the Company at any time during the 3 months immediately
preceding the sale of the restricted securities is entitled to sell such
securities pursuant to Rule 144 (k) without regard to the limitations described
above, provided that one year has lapsed since the later of the date on which
such restricted securities were acquired from the Company or the date they were
acquired from an affiliate of the Company.
No Appraisal of Current Value of Common Shares
Management believes that the Plan of Recapitalization, as proposed, will
substantially increase the value of the issued and outstanding Investors' Shares
and Management's Shares. However, no appraisals, independent valuations, or
fairness opinions from a financial point of view of the Company or of the
Company's assets have been obtained in connection with the valuation of the
Company, either for purposes of the Recapitalization or potential negotiations
of an IPO by management. The Company has not obtained an independent appraisal
of the current value of its Common Stock. Therefore, the Company is not
providing you with any internal or external valuation report as to the fair
market value of your shares, or the expected value of the Common Stock of the
Surviving Corporation. There can be no assurance that upon the Recapitalization
and Merger that the new Common Stock would have a value equal to, less than, or
greater than the "old" Common Stock.
Federal Income Tax Consequences
The Company believes that the Plan of Recapitalization will not result in
any material adverse federal income tax consequences to a Shareholder. Each
Shareholder, however, is strongly urged to, and should, consult with his or her
own tax advisor and attorney regarding the federal income and other tax
implications and consequences to such Shareholder of the proposed Plan of
Recapitalization.
V. CERTAIN REPRESENTATIONS, WARRANTIES AND WAIVERS
As part of the Plan of Recapitalization, and although the Company does not
believe that it has engaged in any securities law violations, each Shareholder
is being asked, to the extent allowable by law, to waive any potential
securities violations by the Company arising from its previous private offers or
sales of the Common Stock, including the Investors' Shares, and to execute a
general release in favor of the Company relating to any such potential
securities law violations. To the extent that any such waiver of rights is
deemed to be unenforceable, each Shareholder is being asked to recontribute to
the Company all proceeds of such an action. Therefore, each Shareholder, by
execution of the Proxy and Consent, shall have agreed to such waiver and
recontribution as set forth in Exhibit "C" attached hereto and made a part
hereof.
The Chairman of the Board has also determined that in conjunction with the
Plan of Recapitalization, particularly in connection with the proposed Amendment
to the Investors' Subscription Agreements, it is appropriate that the
Shareholders affirm certain representations and warranties that were made by
each Investor in connection with the execution of the Subscription Agreement by
which such holder originally purchased Common Stock. Therefore, each holder of
Investors' Shares, by execution of the Proxy and Consent, will make the
representations and warranties as set forth in Exhibit "C" attached hereto and
made a part hereof. The form of Proxy and Consent is attached hereto as Exhibit
"D."
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
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<PAGE>
VI. CONSENT PROCEDURES
Vote Required
The Plan of Recapitalization will not be ratified without the approval of
holders of at least 51 percent in interest of the outstanding Investors' Shares
and of holders of at least 51 percent in interest of the outstanding
Management's Shares. To this end, the Company is holding an Annual Meeting of
Shareholders (the "Annual Meeting") on December 7, 1999, at 10:00 am pacific
standard time, to be held at 9060 Activity Road, Suite A, San Diego, CA. 92126.
As of the date hereof there are 8,004,000 shares of Common Stock
outstanding, of which 690,000 shares are Investors' Shares and 7,314,000 shares
are Management's Shares. Accordingly, the approval of holders of at least
351,900 shares of Investors' Shares and 3,730,140 shares of Management's Shares
are required to approve the Plan of Recapitalization. Because holders of
Management's Shares did not execute the Investors' Subscription Agreements, they
are not being asked to approve the form of Amendment thereto. Unless a Proxy and
Consent returned to the Company expressly specifies that not all of the shares
held by such Shareholder are to be voted in a particular manner, the Proxy and
Consent will be deemed to be valid with respect to all shares held by such
Shareholder.
Proxy and Consent Solicitation
Proxies and Consents will be solicited until the commencement of the Annual
Meeting, but may be requested by the Company subsequent thereto. The Proxy and
Consents are being solicited by the Board of Directors of the Company. Except as
otherwise described herein, all expenses of the Proxy and Consent Solicitation,
including the cost of preparing and mailing this Disclosure Statement, will be
borne by the Company. In addition to solicitation by the use of the mails, Proxy
and Consents may be solicited by directors, officers, employees and affiliates
of the Company in person or by telephone, telegram or other means of
communication. Such persons will not be additionally compensated for such
solicitation, but may be reimbursed for out-of-pocket expenses arising from such
solicitation. Arrangements will be made with custodians, nominees and
fiduciaries for forwarding the consent solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and the Company will reimburse such custodians, nominees and fiduciaries for
reasonable expenses thereby incurred.
Effectiveness, Acceptance and Revocation of Proxy and Consents
Shareholders who elect to approve or disapprove of the Plan of
Recapitalization should so indicate by marking the appropriate box on, and
signing and dating, the form of Proxy and Consent included herewith and either
(i) mailing it in the self-addressed, stamped envelope provided, to the Company
as follows: La Jolla Fresh Squeezed Coffee, 9060 Activity Road, Suite A, La
Jolla, California, Attention: Mr. Stephen Corey, or (ii) delivering it in person
at the Meeting. If no box on the Proxy and Consent is checked but the Proxy and
Consent is otherwise properly completed and signed, the Shareholder will be
deemed to have approved the Plan of Recapitalization. All questions as to the
validity and acceptance of returned Proxy and Consents, unless revoked as
provided below, shall be determined by the Board of Directors in its sole and
absolute discretion, which determination shall be final and binding.
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
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<PAGE>
All Proxy and Consents received by the Company shall be revocable until the
vote with respect to approval of the Plan of Recapitalization and the
transactions contemplated herein, are taken at the Annual Meeting. A Proxy and
Consent may be revoked by a Shareholder by the subsequent delivery of a new,
properly-completed and signed Proxy and Consent by the delivery to Mr. Stephen
Corey, as provided above, of a notice of revocation or by the Shareholder
attending the Annual Meeting and therein personally revoking a
previously-delivered Proxy and Consent. Any revocation of a previously-delivered
Proxy and Consent shall be effective only as to those shares identified in the
revocation.
VII ELECTION OF NEW BOARD OF DIRECTORS
The Chairman of the Board has approved, and now proposes to the
Shareholders, that the following persons serve on the Board of Directors until
the 1999-2000 Annual Meeting of Shareholders:
Stephen F. Corey Chairman of the Board
Gregory D. Writer, Jr. Director
Kurt B. Toneys Director
YOUR VOTE IS IMPORTANT. Each Shareholder's vote is important to the
Company. The Chairman of the Board requests that you carefully review this
Disclosure Statement and either return the enclosed Proxy and Consent to the
Company or attend the Annual Meeting.
* * *
Questions may be addressed to the Company's legal counsel, Robert Blair
Krueger II, Esq. at The Krueger Group, LLP, Los Angeles and San Diego, (619)
451-0200.
SCH, Inc.
Confidential Disclosure and Consent Solicitation Statement
1998-1999 Annual Meeting of Shareholders
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<PAGE>
EXHIBIT INDEX TO
CONFIDENTIAL DISCLOSURE AND CONSENT SOLICITATION STATEMENT
Exhibit "A" Plan of Recapitalization
Schedule "A-1" Definitions
Exhibit "B" Form of Proposed First Amendment to Investor Subscription
Agreement, substantially as proposed to be adopted
Exhibit "C" Representations, Warranties and Waivers of Shareholders
Exhibit "D" Form of Proxy and Consent
Exhibit "E" Form of Agreement and Plan of Merger
<PAGE>
Exhibit "A"
to
Confidential Disclosure and
Consent Solicitation Statement
STEPHEN'S COFFEE HOLDING, INC.
9060 Activity Road, Suite A.
San Diego, California 92126
PLAN OF RECAPITALIZATION AND MERGER
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November 24, 1999
I. SUMMARY
The Chairman of the Board of Directors (the "Chairman") of Stephen's Coffee
Company, Inc., a California corporation, in order to allow the Company to more
successfully compete and to facilitate a possible initial public offering of its
shares, has determined that it is the best interests of the Company and its
Shareholders to modify the capital structure of the Company as provided herein,
to make certain other changes in its corporate governance, and to pursue a
merger with La Jolla Fresh Squeezed Coffee Company, Inc., a Washington
corporation. To that end, the Chairman has adopted this Plan of Recapitalization
and Merger (the "Plan of Recapitalization and Merger" or the "Recapitalization
and Merger"). Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in Schedule "A-1" attached to this Plan of
Recapitalization and made a part hereof. The Chairman believes that the
Recapitalization and Merger are in the best interests of the Company and its
Shareholders because, among other things, they enabled the Company to:
Capitalize upon the business expertise and contacts of investment
banking advisors and agents identified by management and thereby increase
the Company's access to capital, as well as its opportunities to fund
future growth, through future offerings of either equity or debt securities
originated by and through such investment advisors and agents.
Eliminate any Company liability for potential violations of securities
laws, although the Company does not believe that it has violated any
securities laws, and to obtain waivers from the holders of the Investors'
Shares of their rights and remedies arising from any potential violations
of securities laws committed by the Company in connection with previous
private offers and sales of the Investors' Shares.
The decision to attempt to proceed with the Recapitalization, and the terms
thereof, has been made for the Company by its Chairman of the Board, and the
investors in the Company will not have any right to influence the terms of such
decision except as provided hereby.
<PAGE>
Exhibit "A"
to
Confidential Disclosure and
Consent Solicitation Statement
The Chairman believes the Recapitalization and Merger provided the
framework for the Company to satisfy its trade payables, raise additional
capital for the Company, eliminate possible liabilities, and to meet the other
goals described above. The proposed Amendment to the Investor Subscription
Agreement, substantially as proposed to be adopted, is attached to the
Disclosure Statement as Exhibit "B" and made a part thereof.
The Plan of Recapitalization is summarized as follows:
(1) The Chairman proposes to amend the Subscription Agreements previously
signed by each investor with the Company. Each investor's Common Stock in
the Company would be converted on a one to one half-share basis into Common
Stock in LJCC.
(2) The Merger of the Company into LJCC shall be ratified by the Company's
shareholders, with LJCC acting as the sole surviving entity.
The Recapitalization would be accomplished by the Amendment to the
Investors' Subscription Agreement, and such other actions as the Chairman of the
Board of Directors of the Company believes are necessary and advisable in
connection with the Recapitalization. The Recapitalization will be subject to
the approval of holders in interest of at least 51 percent of the Investors'
Shares and holders in interest of at least 51 percent of the outstanding
Management's Shares at the Annual Meeting of Shareholders, to be held at the
9060 Activity Road, Suite A, San Diego, CA. 92126, December 7, 1999 at 10:00 am
Pacific Standard Time, or at such date and time and at such place as the Board
of Directors may otherwise direct.
<PAGE>
Exhibit "A"
to
Confidential Disclosure and
II. ADDITIONAL MATTERS
Waiver of Certain Rights
The Chairman of the Board has determined, as part of the Recapitalization
and Merger, and although the Company does not believe that it has violated any
securities law, that it is appropriate to require each Shareholder, to the
extent allowable by law, to waive any potential securities laws violations by
the Company arising from its offer or sale of Common Stock and to execute a
general release in favor of the Company relating to any such potential
violations of securities laws. To the extent that any such waiver of rights is
deemed unenforceable, each Shareholder shall be required to recontribute to the
Company all proceeds of such an action. Each Shareholder will be required to
agree, by execution of the Proxy and Consent or such other means as determined
by the Chairman of the Board, to such waiver and recontribution substantially as
set forth in Exhibit "C" to the Disclosure Statement.
Certain Representations and Warranties by Shareholders
The Chairman of the Board has determined that in conjunction with the
Recapitalization, specifically the Amendment to the Investors' Subscription
Agreements, it is appropriate that the holders of the Investors' Shares reaffirm
certain representations and warranties made in connection with the Investors'
Subscription Agreements and the original purchase of the Common Stock by the
Investors. Each Shareholder will be required to verify to the Company, by
execution of the Proxy and Consent or such other means as determined by the
Chairman of the Board, the representations and warranties substantially as set
forth in Exhibit "C" to the Confidential Disclosure and Consent Solicitation
Statement.
<PAGE>
Exhibit "A"
to
Confidential Disclosure and
Consent Solicitation Statement
SCHEDULE "A-1" TO
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PLAN OF RECAPITALIZATION
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DEFINITIONS
"Amendment to the Investors' Subscription Agreements" shall mean the
proposed Amendment to the Investors' Subscription Agreements substantially in
the form attached as Exhibit "B" to the Disclosure Statement.
"Annual Meeting" shall mean the 1998-1999 Annual Meeting of the
Shareholders of the Company scheduled for December 7, 1999, or such other date,
time and place as the Board of Directors may determine is advisable.
"Board of Directors" or "Board" shall mean the Board of Directors of the
Company.
"Chairman of the Board" or "Chairman" shall mean the Chairman of the Board
of Directors of the Company.
"Charter" shall mean the Articles of Incorporation of the Company, as
amended or amended and restated.
"Common Stock" shall mean the common stock of the Company or its
successor-in-interest, the Surviving Corporation.
"Company" shall mean Stephen's Coffee Holding, Inc., a California
corporation.
"Disclosure Statement" shall mean that Confidential Disclosure and Consent
Solicitation Statement dated November 24, 1999 provided to the Shareholders.
"Investors'" shall mean the holders of the outstanding Common Stock who are
not officers, directors or employees of the Company.
"Investors' Shares or Investors' Common Shares" shall mean the outstanding
Common Stock owned by Investors.
"Investors' Subscription Agreements" shall mean the Investors' Subscription
Agreements pursuant to which the Investors acquired their Shares of Common
Stock.
"Management Shares" shall mean the outstanding Common Stock owned by
Management and Director of the Company.
<PAGE>
"Plan of Recapitalization" or "Recapitalization" shall mean this Plan of
Recapitalization as adopted by the Board of Directors of the Company.
"Proxy and Consent" shall mean that Form of Proxy and Consent attached as
Exhibit "D" to the Disclosure Statement.
"Securities Act" shall mean the federal Securities Act of 1933, as amended.
"Shareholders" shall mean all holders of shares of the Company's Common
Stock, including management and the Investors.
"Surviving Corporation" shall mean La Jolla Fresh Squeezed Coffee(TM),
Inc., a successor-in-interest to North West Farms, Inc., and which does business
and operates as "La Jolla Fresh Squeezed Coffee(TM), Inc."
<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
FORM OF PROPOSED FIRST AMENDMENT
TO INVESTOR SUBSCRIPTION AGREEMENT
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<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
STEPHEN'S COFFEE HOLDING, INC.
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FIRST AMENDMENT TO INVESTOR SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made as of June 15, 1999, by and among Stephen's Coffee
Holding, Inc., a California corporation (the "Company"), and La Jolla Fresh
Squeezed Coffee Co, Inc., a Washington corporation ("LJCC"), and the persons and
entities listed on the Schedule of Common Stock Purchasers (the "Purchasers") of
the Company (the "Disclosure Statement"). The parties hereby agree to amend and
modify, to the extent contrary, any and all previous subscription agreements of
the parties, as follows:
1. Authorization and Sale of Common Shares.
1.1 Subject to the terms and conditions hereof, the Company will issue
to each Purchaser, and each Purchaser will purchase the number of shares of
Common Stock of the Company and LJCC (collectively, the "Shares") set forth in
Exhibit "E" of the Disclosure statement.
2. Closing Date: Delivery.
2.1 Closing Date. The closing of the issuance of the Shares to the
Purchasers (the "Closing") shall be held at the offices of The Krueger Group,
LLP, 11423 West Bernardo Court, San Diego, California, 92127 (the "Law Offices
of The Krueger Group") at 1:00 p.m. on December 7, 1999 (the "Closing Date"), or
at such other time and place as the Company, LJCC and the Purchasers may agree
in writing, and shall be subject to the terms and conditions of this Agreement
and the Exhibits attached hereto.
2.2 Delivery. Subject to the terms of this Agreement, at the Closing
LJCC and the Company will deliver to each Purchaser the certificates
representing the Shares to be issued to the Purchasers by LJCC at the Closing.
3. Representations and Warranties of the Company and LJCC. The Company and
LJCC hereby represent and warrant to the Purchasers that:
3.1 Organization and Standing: Articles and By-Laws. LJCC is now, or
shall be as of the Closing Date, a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has all
requisite corporate power and authority to carry on its
<PAGE>
businesses as now conducted and as proposed to be conducted. LJCC is qualified
or licensed to do business as a foreign corporation in all jurisdictions where
such qualification or licensing is required, except where the failure to so
qualify would not have a material adverse effect upon LJCC.
3.2 Corporate Power. LJCC has now, or will have at the Closing Date,
all requisite corporate power to enter into this Agreement and to issue the
Shares. This Agreement is a valid and binding obligation of LJCC and the Company
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors' rights.
3.3 Offering. In reliance on the representations and warranties of the
Purchasers in Section 4 hereof, the issuance of the Shares in conformity with
the terms of this Agreement will not result in a violation of the requirements
of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"),
or the qualification or registration requirements of the Securities Act or other
applicable blue sky laws.
3.4 Registration Rights. Neither the Company nor LJCC has granted or
agreed to grant to any person or entity any rights to register, any of its
securities, including piggyback registration rights.
4. Representations and Warranties of Purchasers and Restrictions on
Transfer Imposed By the Securities Act.
4.1 Representations and Warranties By the Purchasers. Each of the
Purchasers represents and warrants to the Company and LJCC as of the date hereof
and as of the Closing Date as follows:
(a) Investment Intent. This Agreement is made with the Purchaser
in reliance upon such Purchaser's representations to the Company and LJCC,
evidenced by the Purchaser's execution of this Agreement or the majority vote of
the Purchasers at the Company's 1998-1999 Annual Meeting of Stockholders on
December 7, 1999 (the "Annual Meeting"), that Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act or, if
unaccredited, has substantial business and financial experience adequate to
evaluate and understand the merits and risks of this investment, is acquiring
the Common Stock (collectively the "Securities") for investment for each
Purchaser's own account, not as nominee or agent, and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act and the Law. Purchaser has the full right,
power and authority to enter into and perform this Agreement, and this Agreement
constitutes a valid and binding obligation on the Purchaser.
(b) Shares Not Registered. Purchaser understands and acknowledges
that the offering of the Shares pursuant to this Agreement will not be
registered under the Securities
<PAGE>
Act or qualified under the law on the grounds that the offering and sale of
securities contemplated by this Agreement are exempt from registration under the
Securities Act pursuant to Section 4(2) thereof and exempt from registration
pursuant to Section 25102(f) of the California Corporations Code and other
applicable state securities or blue sky laws, and that the Company's and LJCC's
reliance upon such exemptions is predicated upon such Purchaser's
representations set forth in this Agreement. The Purchaser acknowledges and
understands that the Securities must be held indefinitely unless the Securities
are subsequently registered under the Securities Act and qualified under the Law
or an exemption from such registration and such qualification is available.
(c) No Transfer. Purchaser covenants that in no event will it
dispose of any of the Securities (other than in conjunction with an effective
registration statement for the Securities under the Securities Act or in
compliance with Rule 144 promulgated under the Securities Act) unless and until
(i) the Purchaser shall have notified the Company and LJCC of the proposed
disposition and shall have furnished the Company and LJCC with a statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company and LJCC, the Purchaser shall have furnished the
Company and LJCC with an opinion of counsel satisfactory in form and substance
to the Company and LJCC to the effect that (x) such disposition will not require
registration under the Securities Act and (y) appropriate action necessary for
compliance with the Securities Act, the Law and any other applicable state,
local or foreign law has been taken. It is agreed that the Company and LJCC will
not require opinions of counsel for transactions made pursuant to Rule 144.
(d) Knowledge and Experience. Purchaser (i) has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of the Purchaser's prospective investment in the
Securities; (ii) has the ability to bear the economic risks of the Purchaser's
prospective investment; (iii) has been furnished with and has had access to such
information as the Purchaser has considered necessary to make a determination as
to the purchase of the Securities together with such additional information as
is necessary to verify the accuracy of the information supplied; (iv) has had
all questions which have been asked by the Purchaser satisfactorily answered by
the Company and LJCC; and (v) has not been offered the Securities by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media,
except by means of a public announcement pursuant to Section 25102(n) of the
California Corporations Code.
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
<PAGE>
(e) Not Organized to Purchase. Purchaser has not been organized
for the purpose of purchasing the Securities.
(f) Holding Requirements. Purchaser understands that if the
Company or LJCC does not (i) register its Common Stock with the Securities and
Exchange Commission ("SEC") pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ii) become subject to Section
15(d) of the Exchange Act, (iii) supply information pursuant to Rule 1 5c2- 11
thereunder, or (iv) have a registration statement covering the Securities (or a
filing pursuant to the exemption from registration under Regulation A of the
Securities Act covering the Securities) under the Securities Act in effect when
it desires to sell the Securities, the Purchaser may be required to hold the
Securities for an indeterminate period. Purchaser also understands that any sale
of the Securities that might be made by the Purchaser in reliance upon Rule 144
under the Securities Act may be made only in limited amounts in accordance with
the terms and conditions of that rule.
4.2 Legends. Each certificate representing the Securities may be
endorsed with the following legends:
(a) Federal Legend. THE SECURITIES REPRESENTED BY THIS ARTICLE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER
THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE ACT OR (ii) IN COMPLIANCE WITH RULE 144, OR (iii)
PURSUANT TO AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
(b) Other Legends. Any other legends required by the Law or other
applicable state blue sky laws. The Company or LJCC need not register a transfer
of legended Securities, and may also instruct its transfer agent not to register
the transfer of the Securities, unless the conditions specified in each of the
foregoing legends are satisfied.
<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
4.3 Removal of Legend and Transfer Restrictions. Any legend endorsed
on a certificate pursuant to subsection 4.2 (a) and the stop transfer
instructions with respect to such legended Securities shall be removed, and the
Company or LJCC shall issue a certificate without such legend to the holder of
such Securities if such Securities are registered and sold under the Securities
Act and a prospectus meeting the requirements of Section 10 of the Securities
Act is available or if such holder satisfies the requirements of Rule 144(k)
and, where reasonably deemed necessary by the Company or LJCC, provides the
Company or LJCC with an opinion of counsel for such holder of the Securities,
reasonably satisfactory to the Company or LJCC, to the effect that (i) such
holder, meets the requirements of Rule 144(k) or (ii) a public sale, transfer or
assignment of such Securities may be made without registration.
4.4 Rule 144. Purchasers are aware of the adoption of Rule 144 by the
SEC promulgated under the Securities Act, which permits limited public resales
of securities acquired in a non-public offering, subject to the satisfaction of
certain conditions. Purchasers understand that under Rule 144, the conditions
include, among other things: the availability of certain current public
information about the issuer and the resale occurring not less than one year
after the party has purchased and paid for the securities to be sold.
5. Conditions to Purchasers' Obligations. The Company's and LJCC's
obligation to sell and issue the Shares at the Closing is subject to the
following conditions:
(a) Purchasers' Representations and Warranties True and Correct.
That the representations and warranties made by the Purchasers in Section 4
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of said date.
6. Affirmative Covenants of the Company. The Company and LJCC hereby
covenant and agree as follows:
6.1 Conflicts of Interests. The Company and LJCC shall use its best
efforts to ensure that the Company's or LJCC's employees, during the term
of their employment with the Company or LJCC, do not engage in activities
which would result in a conflict of interest with the Company or LJCC. The
Company's and LJCC's obligations hereunder include, but are not limited to,
requiring that the Company's and LJCC's employees devote their primary
productive time, ability and attention to the business of the Company or
LJCC provided; however, the Company's
<PAGE>
and LJCC's employees may engage in other business activity if such activity
does not materially interfere with their obligations to the Company or
LJCC, requiring that the Company's and LJCC's employees enter into
agreements regarding proprietary information and confidentiality and
preventing the Company's and LJCC's employees from engaging or
participating in any business that is in competition with the business of
the Company or LJCC.
6.2 Proprietary Agreements. The Company and LJCC will use reasonable
efforts to prevent any employee from violating the confidentiality and
proprietary information agreement entered into between the Company and LJCC
and each of their employees.
6.3 Rule 144. The Company and LJCC covenant that (i) at all times
after LJCC first is subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Company and LJCC will use
its best efforts to comply with the current public information requirements
of Rule 144(c)(l) under the Securities Act; and (ii) at all such times as
Rule 144 is available for use by the Purchasers, LJCC will furnish the
Purchasers upon request with all information within the possession of LJCC
required for the preparation and filing of Form 144.
<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
7. Miscellaneous.
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
7.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive the Closing of the transactions
contemplated hereby, notwithstanding any investigation made by the Purchasers.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company or LJCC pursuant hereto or
in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company or LJCC hereunder as of the date
of such certificate or instrument.
7.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
7.4 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the fill and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and or oral
understanding or agreement among or between the parties hereto.
7.5 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
mailed by first class mail, postage prepaid, or delivered by courier or
overnight delivery, addressed (a) if to a Purchaser, at such Purchaser's address
set forth on the Schedule of Purchasers, or at such other address as such
Purchaser shall have furnished to the Company and LJCC in writing or (b) if to
the Company and LJCC, at its address set forth at the beginning of this
Agreement, or at such other address as the Company and LJCC shall have furnished
to the Purchasers in writing. Notices that are mailed shall be deemed received
five (5) days after deposit in the United States mail. Notices sent by courier
or overnight delivery shall be deemed received two (days) after they have been
so sent.
7.6 Severability. In case any provision of this Agreement shall be
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
7.7 Finder's Fees and Other Fees.
(a) The Company and LJCC each (i) represents and warrants that it
has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
Purchasers harmless from and against any liability for commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company or LJCC, or any of its employees or
representatives, is responsible.
(b) Each Purchaser (i) represents and warrants that the Purchaser
has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Company and LJCC harmless from and against any liability for any commission
or compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which such Purchaser, is responsible.
7.8 Expenses. The Company, LJCC and the Purchasers shall each bear
their own expenses and legal fees in connection with the consummation of this
transaction.
7.9 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.11 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or LJCC or to any holder of any
securities issued or to be issued hereunder shall impair any such right, power
or remedy of the Company or LJCC or such holder, nor shall it be construed to be
a waiver of any breach or default under this Agreement, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any delay or omission to exercise any right, power or remedy or any waiver
of any single breach or default be deemed a waiver of any other right, power or
remedy or breach or default theretofore or thereafter occurring. All remedies,
either under this Agreement, or by law otherwise afforded to the Company or LJCC
or any holder, shall be cumulative and not alternative.
<PAGE>
Exhibit "B"
to
Confidential Disclosure and
Consent Solicitation Statement
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above, with the execution and delivery of
this Agreement by each Purchaser evidenced either by the majority vote of all
Purchasers at the Annual Meeting or the Purchaser's signature below.
LA JOLLA FRESH SQUEEZED COFFE CO, INC.
a Washington corporation
--------------------------------------
Kurt B. Toneys, President
STEPHEN'S COFFEE HOLDING, INC.
a California corporation
--------------------------------------
Stephen F. Corey, President
<PAGE>
Exhibit "C"
to
Confidential Disclosure and
Consent Solicitation Statement
REPRESNTATIONS, WARRANTIES AND WAIVERS
Section 1. Each Shareholder, by the execution and delivery of his, her and
its Proxy and Consent or by his, her or its approval at the Annual Meeting of
Shareholders with respect to the Recapitalization and Merger and certain other
matter, hereby re presents and warrants as follows (capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in the
Confidential Disclosure and Consent Solicitation Statement):
A. Any shares of Common Stock of the Company were received for the
Shareholders's own account and not for the account of any person, and not with a
view toward distribution, assignment or resale to others, or to
franctionalization in whole or in part. No other person has a direct or indirect
beneficial interest in such Common Stock. The Shareholder will not sell,
hypothecate or otherwise transfer such shares unless (a) such shares are
registered under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities law, or (b) in the opinion of legal counsel,
with which legal counsel of the Company agrees, and exemption from the
registration requirements of the Securities Acts and such state laws in
available. Specifically, the Shareholder is ware that the Common Stock issued to
them may not be sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of such Rule are met. Among the conditions for use
of Rule 144 is the availability of current information to the public about the
Company. Such information is not available, there is no assurance that such
information will be available.
B.The Shareholder has been furnished and has carefully read the Disclosure
Statement and its attached Schedules and Exhibits and is familiar with and
understands the terms of the Plan of Recapitalization and Merger. In evaluating
the suitability of an investment in the Company and in making a determination of
whether or not to approve the Plan of Recapitalization, the Shareholder has not
relied upon any representations or other information (whether oral or written)
from the Company or any other person or entity whatsoever other than as set
forth in the materials described above and its Schedules and Exhibits. With
respect to tax and other economic considerations involved in this investment,
the Shareholder is not relying on the Company. The Shareholder carefully
considered and, to the extent the Shareholder believed such discussion
necessary, discussed with the Shareholder's professional legal, tax, accounting
and financial advisors the suitability of an investment in the Company and the
consequences of the Plan of Recapitalization for that Shareholder's particular
tax, financial and legal situation. The Shareholder has determined that the
Common Stock he, she or it has received is a suitable investment for the
Shareholder.
Exhibit "C"
to
<PAGE>
Confidential Disclosure and
Consent Solicitation Statement
C. The Company has always made available to the Shareholder all documents
and information that the Shareholder has requested relating to an investment in
the Company and to the Plan of Recapitalization.
D. The Shareholder has been fully informed to the Shareholder's complete
satisfaction concerning the organizational aspects, business, operations,
finances and all other matters with respect to the Company that the Shareholder
considered significant for the purpose of making an investment decision with
respect to the Company and in determining whether or not to approve the
Recapitalization. The Shareholder recognizes that an investment in the Company,
and the Recapitalization, involves substantial risks, including loss of the
entire amount of such investment, and has taken in to account and understands
all of these risk factors including, but not limited to, those set forth under
the caption "Considerations for Shareholders" in the Disclosure Statement.
E. If the Proxy and Consent is executed and delivered on behalf of a
partnership, corporation, trust or retirement plan: (I) such partnership,
corporation, trust of retirement plan has been duly authorized and is duly
qualified (a) to execute and deliver the Proxy and Consent and all other
instruments executed an delivered on behalf of such partnership, corporation,
trust or retirement plan or by use of a power of attorney in connection with the
approval of the Recapitalization, (b) to delegate authority pursuant to a power
of attorney, and (c) to purchase and hold such Common Stock; (ii) the signature
of the party signing on behalf of such partnership, corporation, trust or
retirement plan has not been formed for the specific purpose of acquiring the
Common Stock, unless each beneficial owner of such entity is an accredited
investor ("Accredited Investor") within the meaning of Rule 501(a) of Regulation
D promulgated under the Securities Act ("Regulation D") and has submitted
information substantiating such qualification.
F. The Shareholder is either an Accredited Investor or an investor who,
either alone or with the Shareholder's purchaser representative, has such
knowledge and experience in financial and business matters that the Shareholder
is sufficiently capable of evaluating the merits and risks of the investment in
the Company and the proposed Recapitalization. The Shareholder's net worth or
annual income is such that the loss of the Shareholder's entire investment, or
its unavailability, will not result in serious harm or detriment to the
Shareholder.
<PAGE>
G. The Shareholder shall indemnify and hold harmless the Company and any
officer, director, control person, advisor, attorney, accountant or other agent
of any such entity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or preceding, whether civic,
criminal, administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or omission to
represent or state facts made by the Shareholder to the Company concerning the
Shareholder or the Shareholder's financial position in connection with the
Recapitalization, including without limitation, any such misrepresentation,
misstatement or omission contained in the form of First Amendment to Investor
Subscription Agreement or in the Proxy and Consent, against losses, liabilities
and expense for which the Company or any officer, director or control person of
any such entity has not otherwise been reimbursed (including attorney's fees,
judgment, fines and amounts paid in settlement) actually and reasonably incurred
by such person or entity in connection with such action, suit or proceeding.
H. If the Shareholder is a person acting pursuant to discretionary or
similar authority with respect to an account beneficially owing its shares, such
Shareholder represents that to the best of such Shareholder's knowledge after
due inquiry each of the foregoing representations and warranties is true and
correct with respect to each individual or entity having any interest in such
account.
Section 2. Furthermore, each Shareholder, by the execution and delivery of its
Proxy and Consent or by its approval at the Annual Meeting of the Plan of
Recapitalization and Merger hereby agrees that, in the event that the Company is
deemed to have violated any applicable federal or stated securities law with
respect of he offer or sale of its shares, to the extent permitted by law, each
Shareholder hereby waives his, her or its right of rescission to recover the
consideration paid (or interest accrued thereon) for such shares including an ex
press waiver of rights or remedies, he, she or it may have under Section 25503
of the Corporate Securities Law of California. Each Shareholder, on behalf of
himself, herself, or itself, and each of his, her or its respective heirs,
personal representatives, successors and assigns, hereby forever releases and
discharges the Company, and its past and present officers, directors,
Shareholders, principals, joint ventures, partners, employees, agents, personal
representatives, successors and assigns, and all entities presently and formerly
related to or affiliated with the Company, of and from all and all claims,
demands, damages, actions, causes of actin of every kind, in law and equity, and
for the otherwise known and unknown, suspected or unsuspected, disclosed or
undisclosed for damages, actual, consequential or exemplary, past, present or
future, arising from the offer, sale of issuance of the shares, including
without limitation all claims and demands arising out of or in any way related
to a claim of a right of rescission to release consideration plus interest in
exchange for the shares. Each Shareholder expressly hereby waives all rights
under Section 1542 of the California Civil Code, which Section provides as
follows:
<PAGE>
Exhibit "C"
to
Confidential Disclosure and
Consent Solicitation Statement
SECTION 1542. (GENERAL RELEASE -- CLAIMS EXTINGUISHED). A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH HIS DEBTOR.
B. In the event that any of the Shareholders are entitled to a rescission
of the consideration paid for the shares arising from the offer, sale
or issuance of such shares, and the waiver provided for in the
immediately preceding section is deemed unenforceable by a court
competent jurisdiction or otherwise, each Shareholder hereby expressly
agrees to recontribute any and all proceeds which they may receive
arising from such rescission to the Company and hereby reaffirms their
subscription for the shares pursuant to the terms of the form of First
Amendment Investor Subscription.
<PAGE>
Exhibit "D"
to
Confidential Disclosure and
Consent Solicitation Statement
PROXY AND CONSENT
-----------------
STEPHEN'S COFFEE HOLDING, INC.
ANNUAL MEETING OF SHREHOLDERS - DECEMBER 7, 1999
The undersigned holder(s) of Common Stock (collectively, the "Shares") of
Stephen's Coffee Holding, Inc. (the "Company") hereby nominates, constitutes and
appoints Mr. Stephen Corey, a California resident, the attorney, agent and proxy
of the undersigned, with full power of substitution, to vote all Shares of the
Company which the undersigned is entitled to vote at the 1998-1999 Annual
Meeting of Shareholders of the Company (the "Meeting") to be held at 9060
Activity Road, Suite A., San Diego, California 92126, December 7, 1999, 10:00
a.m. Pacific Standard Time and any and all adjournments or postponements
thereof, with respect to the matters described in the accompanying Confidential
Disclosure and Consent Solicitation Statement, and in his discretion, on such
other matters which properly come before the meeting, as fully and with the same
force and effect as the undersigned might or could do if personally present
thereat, as follows:
1. To ratify the Plan of Recapitalization, including the Merger,
and Amendment to the Investor's Subscription Agreements
FOR AGAINST ABSTAIN
2. To vote Stephen F. Corey as Chairman of Board, and
Gregory D. Writer, Jr. and Kurt B. Toneys as members of
the Board of Directors until 2000 Annual Meeting of the Shareholders.
FOR AGAINST ABSTAIN
3. To transact such other business as may properly come before
the Meeting and any adjournment or adjournments or postponements
thereof. Management presently knows of no other business to be
presented by or on behalf of the Company or its Board of Directors
at the Meeting.
FOR AGAINST ABSTAIN
THIS PROXY AND CONSENT IS SOLICITED ON BEHALF OF THE CHAIRMAN OF THE BOARD
OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE. PLEASE SIGN AND DATE
BELOW.
THE CHAIRMAN RECOMMENDS A VOTE OF "FOR" THE ADOPTION OF THE PLAN OF
RECAPITALIZATION, INCLUDING THE MERGER, AND AMENDMENT. THIS PROXY AND CONSENT
COFERS AUTHORITY TO AND SHALL BE VOTED "FOR" THE ADOPTION OF THE PLAN OF
RECAPITALIZATION UNLESS OTHER INSTRUCTIONS ARE INDICATED, IN WHICH CASE THE
PROXY SHALL BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS.
<PAGE>
Exhibit "D"
to
Confidential Disclosure and
Consent Solicitation Statement
BY EXECUTION AND DELIVERY OF THIS PROXY AND CONSENT EACH SHAREHOLDER WHO
ACQUIRED SHARES FROM THE COMPANY IN A PRIVATE SECURITIES OFFERING HEREBY
EXPRESSLY AGREES WITH AND REAFFIRMS THE REPRESENTATIONS, WARRANTIES AND WAIVERS
CONTAINED IN THE CONFIENTIAL DISCLOSURE AND CONSENT SOLICITATION STATEMENT AND
HEREBY EXPRESSLY REPRESENTS, WARRANTS, AND WAIVES WITH RESPECT TO SUCH MATTERS
AS CONTAINED IN THE CONFIDENTIAL DISCLOLSURE AND CONSENT SOLICITATION STATEMENT
AS OF THE DATE HEREOF.
BY EXECUTION AND DELIVERY OF THIS PROXY AND CONSENT EACH SHAREHOLDER WHO
ACQUIRED SHARES FROM THE COMPANY IN A P RIVATE SECURITIES OFFERING EXPRESSLY
WAIVES ALL RIGHTS UNDER SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH SECTION
PROVIDES AS FOLLOWS:
SECTION 1542. (GENERAL RELEASE - EXTENT).
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOWOR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
-----------------------------
Initials of Undersigned
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
Dated: ------------------------------------
----------------------- (Please print name)
------------------------------------
(Signature of Shareholder)
Dated: ------------------------------------
----------------------- (Please print name)
------------------------------------
(Signature of Shareholder)
<PAGE>
Exhibit "D"
to
Confidential Disclosure and
Consent Solicitation Statement
(Please date this Proxy and Consent and sign you name as it appears on your
stock certificates. Executors, administrators, trustees, etc., should give their
full titles. All joints owner should sign).
I do do not expect to attend the Meeting. Number of Persons:____
The undersigned's Purchaser Representative, if any, represents as follows:
I have reviewed and discussed the plan of Recapitalization and Merger, including
the Merger, Recapitalization, and Amendment to the Investor's Subscription
Agreements, with the undersigned whose signature appears above with a view
toward determining whether the undersigned's approval of the Plan of
Recapitalization is appropriate in light of the undersigned's circumstances, as
such circumstances have been disclosed to me by the undersigned.
----------------------------------------------
Signature of Purchaser Representative (if any)
----------------------------------------------
Signature of Purchaser Representative (if any)
<PAGE>
Exhibit "E"
to
Confidential Disclosure and
Consent Solicitation Statement
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated as of June 15, 1999 (this "Merger
Agreement"), by and between LA JOLLA FRESH SQUEEZED COFFE CO., INC., a
Washington corporation (the "Surviving Corporation"), and STEPHEN'S COFFEE
HOLDING CORP., a California corporation ("SCH"; SCH and the Surviving
Corporation being hereinafter collectively referred to as the "Constituent
Corporations").
INTENTING TO BE LEGALLY BOUND, and in consideration of the premises and
material covenants and agreements contained herein, the Constituent Corporations
hereby agree as follow:
ARTICLE 1
The Merger
1.1 Merger of SCH With and Into the Surviving Corporation.
(a) Agreement to Merge. Subject to the terms of this Merger Agreement, SCH
shall be merged with and into the Surviving Corporation (the "Merger").
(b) Effective Time of the Merger. The Merger shall become effective upon
June 15, 1999. The date that the Merger becomes effective is hereinafter
referred to as the "Effective Date of Merger," and the time that the Merger
becomes effective is hereinafter referred to as the "Effective Time of the
Merger".
(c) Surviving Corporation. At the Effective Time of the Merger, SCH shall
be merged with and into the Surviving Corporation and the separate corporate
existence of SCH shall there upon cease. The Surviving Corporation shall be the
surviving corporation in the Merger and the separate corporate existence of the
Surviving Corporation, with all its purposes, objects, rights, privileges,
powers, immunities and franchises, shall continue unaffected and unimpaired by
the Merger.
1.2 Effect of the Merger; Additional Actions.
(a) Effects. The Merger shall have the effects set forth in Section 1107 of
the California Code.
<PAGE>
Exhibit "E"
to
Confidential Disclosure and
Consent Solicitation Statement
(b) Additional Actions. If, at any time after the Effective Time of the
Merger, the Surviving Corporation shall consider or be advised that any deeds,
bills, of sale, assignments, assurances or any other actions or things are
necessary or desirable, (I) to best, perfect or confirm of record or otherwise
in the Surviving Corporation it right, title or interest in, to or under any of
the rights, properties or assets of either Constituent Corporation acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or (ii) to otherwise carry our the purposes of this Merger
Agreement, each Constituent Corporation and its officers and directors shall be
deemed to have granted to the Surviving Corporation and irrevocable power of
attorney of execute and deliver all such deeds, bill of sale, assignments and
assurances and to take and do all such other actions and things as may be
necessary or desirable to best, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the purposes of this Merger Agreement;
and the officers and directors of the Surviving Corporation are fully authorized
in the name of each Constituent Corporation or otherwise to take any and all
such actions.
ARTICLE 2
The Constituent Corporations
2.1 Incorporation of the Surviving Corporation. The Surviving Corporation
was originally incorporated under the laws of the State of Washington on
February 9, 1987.
2.2 Incorporation of SCH. SCH was incorporated under the laws of the State
of California on April 17, 1997.
ARTICLE 3
Articles of Incorporation, Bylaws and
Directors and Officers of the Surviving Corporation
3.1 Articles of Incorporation of Surviving Corporation. The Articles of
Incorporation of the Surviving Corporation in effect on the Effective Date shall
continue to be the Articles of the Surviving Corporation without change or
amendment until further amended, if ever, in accordance with the provisions
hereof and applicable laws.
Exhibit "E"
to
<PAGE>
Confidential Disclosure and
Consent Solicitation Statement
3.2 Bylaws of Surviving Corporation. The bylaws of the Surviving
Corporation in effect on the Effective Date shall continue to be the bylaws of
the Surviving Corporation without change or amendment until further amended, if
ever, in accordance with the provisions hereof and applicable laws.
3.3 Directors and Officers of Surviving Corporation. The directors and
officers of the Surviving Corporation shall continue and remain as such after
the effective date for the full unexpired terms of their respective offices, or
until their successors shall have been elected or qualified our until otherwise
provided by law.
ARTICLE 4
Effective of the Merger on the Securities of the
Constituent Corporations
4.1 Stock of SCH. Upon the Effective Date, by virtue of the Merger and
without any action on the part of the holder thereof, each share of SCH capital
stock, including all Common Stock outstanding immediately prior thereto shall be
changed and converted into 1/4 full-paid and nonassessable shares of Common
Stock of the Surviving Corporation.
4.2 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented share of SCH's
Common Stock shall be deemed for all purposes to evidence ownership of and to
represent the shares of the Surviving Corporation stock into which the shares of
SCH Common Stock represented by such certificates have been converted as herein
provided. The registered owner on the books and records of the Surviving
Corporation or its transfer agent of any such outstanding stock certificates
shall, until such certificate shall have been surrendered for transfer or
otherwise accounted for to the Surviving Corporation or its transfer agent, have
and be entitled toe exercise any voting and other rights with respect to and to
receive any dividend an other distributions upon the shares of the Surviving
Corporation Common Stock evidenced by such outstanding certificate as above
described.
4.3 Other Employee Benefit Plans. As of the Effective Date, Surviving
Corporation hereby assumes all obligations of SCH under any and all employee
benefit plans in effect as of said date or with respect to which employee rights
or accrued benefits are outstanding as of said date.
<PAGE>
Exhibit "E"
to
Confidential Disclosure and
Consent Solicitation Statement
ARTICLE 5
General Provisions
5.1 Amendment. This Merger Agreement may be deemed by the parties hereto
any time before or after approval hereof by the shareholders of SCH and the
Surviving Corporation but, after such approval, no amendment shall be made which
by law requires the further approval of shareholders without obtaining such
approval. This Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
5.2 Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either SCH or the Surviving Corporation or both, notwithstanding
approval of this Merger Agreement by the sole stockholder of the Surviving
Corporation and the stockholders of SCH.
5.3 Counterparts. This Merger Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
5.4 Governing Law. This Merger Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California without reference to principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement as
of the date first written above.
La Jolla Fresh Squeezed Coffee Co., Inc.
A Washington corporation
--------------------------------------------
Kurt B. Toneys, President
SCH CORPORATION
A California corporation
--------------------------------------------
Mr. Stephen F. Corey, President
