SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended September 29, 1996 or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-20322
STARBUCKS CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1325671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2401 UTAH AVENUE SOUTH, SEATTLE, WASHINGTON 98134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(206) 447-1575
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- - ------------------------------------------------------------
None N/A
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
4 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant, based upon the closing sale price
of the registrant's Common Stock on December 1, 1996, as
reported on the NASDAQ National Market System, was
$2,598,426,062.
As of December 1, 1996, there were 77,786,819 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for
the fiscal year ended September 29, 1996 have been incorporated
by reference into Parts II and IV of this Form 10-K. Portions
of the definitive Proxy Statement for the registrant's Annual
Meeting of Shareholders to be held on March 6, 1997 have been
incorporated by reference into Part III of this report.
STARBUCKS CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Part I
PAGE
Item 1. Business . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . .6
Item 4. Submission of Matters
to a Vote of Security Holders . . . . . . . . .6
Part II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . .7
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . .7
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . 7
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosures . . . . . . . . . . .7
Part III
Item 10. Directors and Executive
Officers of the Registrant . . . . . . . . . .8
Item 11. Executive Compensation . . . . . . . . . . . .10
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . .10
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . .10
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K . . . . . . 11
<PAGE 1>
PART I
Item 1. Business
GENERAL. Starbucks Corporation and its subsidiaries
("Starbucks" or the "Company") purchases and roasts high-quality
whole bean coffees and sells them, along with fresh, rich-brewed
coffees and Italian-style espresso beverages, primarily through
Company-operated and licensed retail stores. The Company's
objective is to establish Starbucks as the most recognized and
respected brand of coffee in the world. To achieve this goal,
the Company plans to continue to rapidly expand its retail
operations, grow its direct response and specialty sales
operations, and selectively pursue other opportunities to
leverage and grow the Starbucks brand through the introduction
of new products and the development of new distribution
channels.
Starbucks is committed to selling only the finest whole bean
coffees and coffee beverages. To ensure compliance with its
rigorous standards, Starbucks is vertically integrated,
controlling its coffee sourcing, roasting, and distribution
through its Company-operated retail stores. The Company
purchases green coffee beans for its many blends and varietals
from coffee-producing regions throughout the world and custom
roasts them to its exacting standards.
Company-operated retail stores accounted for approximately 86%
of net revenues during the fiscal year ended September 29, 1996.
Starbucks retail objective is to become the leading retailer and
brand of coffee in each of its target markets by selling the
finest quality coffees and related products, and by providing a
superior level of customer service, thereby building a high
degree of customer loyalty. Of the 1,006 Starbucks stores open
on September 29, 1996, 929 were Company-operated retail stores
located in 21 states, the District of Columbia, British Columbia
and Ontario, Canada. Licensees operated 75 stores in North
America. In addition, the first two Starbucks stores outside
North America opened in Tokyo, Japan during the fourth quarter
of fiscal 1996.
In addition to its retail operations, the Company sells
primarily whole bean coffees through a specialty sales group and
a national direct response business. The Company has also
entered into joint ventures with the Pepsi-Cola Company, a
division of PepsiCo, Inc. ("Pepsi"), to develop ready-to-drink
coffee-based products and with Dreyer's Grand Ice Cream, Inc.
("Dreyer's") to develop premium coffee ice cream products.
RETAIL STORES. Starbucks stores are typically clustered in high-
traffic, high-visibility locations in each market. Because the
Company has the ability to vary the size of its stores,
Starbucks stores are located in a variety of settings, including
office buildings, downtown and suburban retail centers, and
kiosks located generally in building lobbies, airport terminals,
supermarket foyers, and university campuses. While the Company
selectively locates stores in suburban malls, its focus is on
stores that are convenient for pedestrian street traffic.
The Company combines its merchandising strategy with its
marketing programs to create and reinforce a distinctive brand
image for its coffees. The Company's merchandising strategy is
reflected in its product mix, product pricing, and sale and
educational materials.
All Starbucks stores offer a choice of regular or decaffeinated
coffee beverages, changing "coffees of the day," and a broad
selection of Italian-style espresso beverages, as well as
distinctively packaged, freshly roasted whole bean coffees, a
selection of fresh pastries and other food items, sodas, juices,
tea, and coffee-related hardware products and equipment. During
fiscal 1996, the Company's retail sales mix by product type was
approximately 61% coffee beverages, 15% whole bean coffees, 16%
food items, and 8% coffee-related hardware products and
equipment.
The product mix in each store varies and is dependent on the
size of the store and its location. Larger stores carry a
revolving selection that can include any of the Company's whole
bean coffees and a range of coffee-related products,
<PAGE 2>
including exclusive, high-quality coffee-making equipment as
well as accessories bearing various Company trademarks, such as
coffee mugs, coffee grinders, storage containers, coffee
filters, and finely packaged gourmet food products. The smaller
stores and kiosks typically sell a full line of coffee
beverages, a limited selection of whole bean coffees and a few
hardware items, most notably logo mugs and small equipment
items.
The Company and its licensees intend to open at least 325 new
stores in North America during fiscal 1997. The Company plans
to enter at least three major new markets in North America
during fiscal 1997, including Phoenix, Arizona, and Miami,
Florida. For information on expansion plans outside of
continental North America, see discussion below under
International.
OTHER DISTRIBUTION CHANNELS. Starbucks retail expansion
strategy is to increase its market share in existing markets and
to open stores in new markets where it believes it can become
the leading specialty coffee retailer. In addition, the Company
will continue to expand its specialty sales and direct response
operations, and will selectively pursue other distribution
channels.
Specialty Sales. Specialty Sales includes distribution to
restaurants and a wide range of institutional customers,
including airlines, hotels, wholesale warehouses, business
offices, multi-unit retailers, universities, hospitals, and
country clubs. Specialty sales revenues (which for financial
reporting purposes include royalties and fees from licensees as
well as sales of products to licensees and joint ventures)
accounted for approximately 11% of the Company's net revenues
during the fiscal year ended September 29, 1996. Starbucks is
committed to expanding its specialty sales operations. During
fiscal 1996, the Company entered into an alliance with U.S.
Office Products to serve Starbucks coffee in the workplace
environment.
Licensed Stores. Starbucks has entered into a development
agreement that allows Host International, Inc. ("Host") to
operate Starbucks retail stores in airport locations. Starbucks
receives a license fee and a royalty from Host and sells coffee
to Host for resale in the licensed airport stores. All licensed
airport stores operated by Host must follow Starbucks detailed
store operating procedures and all Host managers and employees
who work in the licensed airport stores must receive the same
core training given to Starbucks store managers and employees.
During fiscal 1996, the Company entered into a licensing
arrangement with ARAMARK Food and Services Group, Inc.
("ARAMARK") to put licensed Starbucks operations at various
locations operated by ARAMARK. During the fiscal year ended
September 29, 1996, sales to and royalties from licensees were
approximately one percent of the Company's net revenues.
Starbucks does not currently intend to turn over operational
control of Starbucks stores in North America in any environment
in which it can control retail space; however, in limited
situations where a master concessionaire controls the retail
space, Starbucks may consider licensing its operations.
Direct Response. The Company publishes a mail order catalog
that is distributed approximately six times a year and which
offers its coffees, certain food items, and select coffee-making
equipment and accessories. The Company ships products to
customers located in all 50 states and many foreign countries.
Direct Response also operates an electronic store on America
Online, allowing customers to order their favorite coffees and
products. During fiscal 1996, Direct Response accounted for
approximately three percent of the Company's net revenues.
Management believes its direct response operations will continue
to support its retail store expansion into new markets and
reinforce brand recognition in existing markets.
Joint Ventures. The Company has entered into a joint venture
agreement with Pepsi, to develop and distribute ready-to-drink
coffee-based products. The joint venture agreement contemplates
the distribution of products within the United States and Canada
by Pepsi-owned and independently licensed bottlers and other
distributors or retailers. In May 1996, the joint venture
introduced bottled Frappuccino (TM) coffee drink in supermarkets
and other retail points of distribution throughout the West
Coast. Frappuccino (TM) coffee drink is currently available in
two flavors - coffee and mocha. Based on trade and consumer
reception of this product, the joint venture is planning wider
distribution. The joint venture concluded test marketing of
<PAGE 3>
MAZAGRAN (TM), a lightly carbonated coffee drink, and currently
does not have plans to market this product nationwide.
On October 31, 1995, the Company announced an agreement to form
a joint venture with Dreyer's to develop and distribute
Starbucks premium coffee ice creams. During fiscal 1996, the
joint venture introduced five flavors of Starbucks Ice Cream,
available in grocery stores throughout the United States.
International. The Company considers locations outside of
continental North America to be part of its international
operations. On October 25, 1995, the Company signed an
agreement with SAZABY Inc., a Japanese retailer and
restaurateur, to form a joint venture which will primarily
develop Starbucks retail stores in Japan. The joint venture
opened its first two stores in Tokyo, Japan during fiscal 1996.
The joint venture currently anticipates opening ten to twelve
additional stores in Japan during fiscal 1997.
On August 3, 1996, the Company signed a joint venture
partnership agreement with a Hawaii-based management team formed
by the MacNaughton Group, to develop Starbucks locations in
Hawaii. The joint venture opened the first Starbucks retail
location in Hawaii during the first quarter of fiscal 1997.
The Company also signed an agreement with a subsidiary of
Bonvests Holding Limited ("Bonvests") on August 8, 1996, that
makes them a licensee for Starbucks retail locations in
Singapore. The first retail location in Singapore opened during
the first quarter of fiscal 1997. The Company and Bonvests
currently anticipate opening five additional stores in Singapore
in fiscal 1997.
PRODUCT SUPPLY. The Company depends upon both its outside
brokers and its direct contacts with exporters in countries of
origin for the supply of its primary raw material, green coffee.
Coffee is the world's second largest traded commodity and its
supply and price are subject to volatility. Although most
coffee trades in the commodity market, coffee of the quality
sought by the Company tends to trade on a negotiated basis at a
substantial premium above commodity coffee pricing, depending
upon the supply and demand at the time of purchase. Supply and
price can be affected by multiple factors in the producing
countries, including weather, political and economic conditions.
In addition, green coffee prices have been affected in the past,
and may be affected in the future, by the actions of certain
organizations and associations, such as the International Coffee
Organization and the Association of Coffee Producing Countries,
which have historically attempted to influence commodity prices
of green coffee through agreements establishing export quotas or
restricting coffee supplies worldwide.
Green coffee commodity prices are subject to substantial price
fluctuations, generally a result of reports of adverse growing
conditions in certain coffee-producing countries. Due to green
coffee commodity price increases, the Company effected sales
price increases during fiscal 1994 and 1995 to mitigate the
effects of anticipated increases in its cost of goods sold.
Because the Company had established fixed purchase prices for
some of its supply of green coffees, the Company's margins were
favorably impacted by such sales price increases during much of
fiscal 1995. During the latter part of fiscal 1995 and
throughout fiscal 1996, gross margins were negatively impacted
relative to the prior year by the sell-through of higher-cost
coffee inventories. The Company expects to have sold most of
these higher-cost coffees by the end of the first quarter of
fiscal 1997.
The Company enters into fixed price purchase commitments in
order to secure an adequate supply of quality green coffee and
fix costs for future periods. As of September 29, 1996, the
Company had approximately $47 million in fixed price purchase
commitments which, together with existing inventory, is expected
to provide an adequate supply of green coffee well into fiscal
1997. The Company believes, based on relationships established
with its suppliers in the past, that the risk of non-delivery on
such purchase commitments is remote.
In addition, the Company may from time to time purchase coffee
futures contracts to provide additional price protection when it
is not able to enter into fixed price purchase commitments.
There can be no assurance that these activities will
successfully protect the Company against the risks of increases
in coffee prices or that they will not
<PAGE 4>
result in the Company having to pay substantially more for its
supply than it would have been required to pay absent such
activities. The Company did not engage in any hedging
activities or futures contracts in fiscal 1996.
Specialty foods, such as pastries, are generally purchased from
local sources based on quality and price. Items bearing the
Company's logos and trademarks are purchased under contract.
Hardware items, such as coffee makers, are generally purchased
directly from manufacturers.
COMPETITION. The Company's whole bean coffees compete directly
against specialty coffees sold at retail through supermarkets,
specialty retailers, and a growing number of specialty coffee
stores. The Company's coffee beverages compete directly against
all restaurant and beverage outlets that serve coffee and a
growing number of espresso stands, carts, and stores. Both the
Company's whole bean coffees and its coffee beverages compete
indirectly against all other coffees on the market. The Company
believes that its customers choose among retailers primarily on
the basis of quality and convenience, and, to a lesser extent,
on price.
Management believes that supermarkets pose the greatest
competitive challenge in the whole bean coffee market, in part
because supermarkets offer customers the convenience of not
having to make a separate trip to the Company's stores. A
number of nationwide coffee manufacturers, such as Kraft General
Foods, Procter & Gamble, and Nestle, are distributing premium
coffee products in supermarkets, which products may serve as
substitutes for the Company's coffees. Regional specialty
coffee companies also sell whole bean coffees in supermarkets.
In addition, the Company competes for whole bean coffee sales
with franchise operators and independent specialty coffee stores
in both the United States and Canada. There are a number of
competing specialty coffee retailers, such as Second Cup, a
Canadian franchisor with stores primarily in Canada. Second Cup
also owns Gloria Jeans, a franchisor of specialty coffee stores,
with locations primarily in malls throughout the United States.
In addition, in virtually every major metropolitan area where
Starbucks operates and expects to expand, there are local or
regional competitors with substantial market presence in the
specialty coffee business.
The Company's primary competitors for beverage sales are
restaurants, shops, and street carts. In almost all markets in
which the Company does business there has been a significant
increase in competition in the specialty coffee beverage
business and management expects this trend to continue.
Although competition in the beverage market is currently
fragmented, a major competitor with substantially greater
financial, marketing and operating resources than the Company
could enter this market at any time and compete directly against
the Company.
In addition, the Company competes with established suppliers in
its specialty sales and direct response businesses, many of whom
have greater financial and marketing resources than the Company.
The Company also expects that competition for suitable sites for
new stores to support the Company's planned growth will be
intense. The Company competes against both restaurants and
other specialty retailers for these sites, and there can be no
assurance that management will be able to continue to secure
adequate sites at acceptable rent levels. The Company also
competes for qualified personnel to operate its retail stores.
PATENTS, TRADEMARKS AND COPYRIGHTS. The Company owns and/or has
applied to register numerous trademarks and service marks in the
United States, Canada and in some sixty countries throughout the
world. One of the Company's subsidiaries, The Coffee
Connection, Inc. ("The Coffee Connection"), also owns a number
of trademarks and service marks in the United States, Canada and
elsewhere, including registrations for "The Coffee Connection"
name and logo. Some of the Company's trademarks, including
"Starbucks," the Starbucks logo and "Frappuccino," are of
material importance to the Company. Trademarks are generally
valid as long as they are in use and/or their registrations are
properly maintained, and they have not been found to have become
generic. Trademark registrations can generally be renewed
indefinitely so long as the marks are in use.
<PAGE 5>
The Company owns numerous copyrights for its product packaging,
promotional materials, in-store graphics, and training
materials, among other things. The Company also holds patents
on certain products and systems. While valuable, individual
copyrights and patents currently held by the Company are not
viewed as material to the Company's business.
SEASONALITY AND QUARTERLY RESULTS. The Company's business is
subject to seasonal fluctuations. Significant portions of the
Company's net revenues and profits are realized during the first
quarter of the Company's fiscal year which includes the December
holiday season. In addition, quarterly results are affected by
the timing of the opening of new stores, and the Company's rapid
growth may conceal the impact of other seasonal influences.
Because of the seasonality of the Company's business, results
for any quarter are not necessarily indicative of the results
that may be achieved for the full fiscal year.
EMPLOYEES. As of September 29, 1996, the Company employed
approximately 16,600 individuals, including approximately 15,000
in retail stores and regional offices, and the remainder in the
Company's administrative, sales, real estate, direct response,
roasting, and warehousing operations. As of September 29, 1996,
five of the Company's stores (out of a total of 929 Company-
operated stores in North America), located in Vancouver, British
Columbia, were unionized. Starbucks has never experienced a
strike or work stoppage, and the Company believes that its
relations with its employees are excellent.
FORWARD-LOOKING STATEMENTS. Some of the information in this
Form 10-K, including anticipated store openings, planned capital
expenditures, and trends in the Company's operations, are
forward-looking statements which are subject to risks and
uncertainties. Actual future results and trends may differ
materially depending on a variety of factors, including, but not
limited to, coffee and other raw material prices and
availability, successful execution of internal performance and
expansion plans, impact of competition, availability of
financing, legal proceedings, and other risks detailed in the
Company's Securities and Exchange Commission filings and the
documents incorporated by reference therein.
Item 2. Properties
Starbucks currently operates three roasting and distribution
facilities: two in the Seattle area, and one in East Manchester
Township, York County, Pennsylvania. In the Seattle area, the
Company leases approximately 92,000 square feet in one building
located in Seattle, Washington, pursuant to a lease extendible
through 2009 (the "Seattle Plant"), and owns an additional
roasting plant and distribution facility of approximately
305,000 square feet located in Kent, Washington. The Company
has a lease agreement with York County Industrial Development
Corporation for a roasting and distribution facility (the "York
Plant"), providing for approximately 365,000 square feet
initially. The lease has a 15 year term and the Company has an
option to purchase the land and building within five years of
the date of occupancy. Such option to purchase also provides
that the Company may purchase, within seven years of occupancy,
additional land adjacent to the York Plant which would expand it
to 1,000,000 square feet. The Company is party to a letter of
intent and a commitment letter which provide that in the event
that the Company exercises its option to purchase the York
Plant, the Company will have the right to assume loans incurred
in connection with the development of it. The Company has
determined that it no longer needs its much-smaller roasting
plant located in Boston (which formerly operated as the roasting
plant for The Coffee Connection) and has sublet it to a third
party. The lease on this facility runs through 2002.
The Company leases approximately 302,000 square feet used for
administrative offices in Seattle, Washington, and has options
to lease approximately 298,000 additional square feet. The
Company owns 2.36 acres (102,800 square feet) of undeveloped
land adjacent to the Seattle Plant, which is currently used for
parking.
As of September 29, 1996, Starbucks operated a total of 929
retail stores. All Starbucks stores are located in leased
premises. The Company also leases office space for regional,
district and other administrative offices.
<PAGE 6>
Item 3. Legal Proceedings
The Company is a party to various legal proceedings arising in
the ordinary course of its business, but is not currently a
party to any legal proceeding which the Company believes will
have a material adverse effect on the financial position or
results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal year 1996.
<PAGE 7>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The information required by this item is incorporated herein by
reference to the Company's 1996 Annual Report to Shareholders.
Item 6. Selected Financial Data
The information required by this item is incorporated herein by
reference to the Company's 1996 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this item is incorporated herein by
reference to the Company's 1996 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by
reference to the Company's 1996 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
None.
<PAGE 8>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Company is
incorporated herein by reference to pages 3 through 5 of the
definitive Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on March 6, 1997. The required
information concerning compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, is incorporated
herein by reference to page 12 of the definitive Proxy Statement
for the Company's Annual Meeting of Shareholders to be held on
March 6, 1997, which will be filed within 120 days after the end
of the Company's fiscal year.
The executive officers of the Company, each of whom serves a one
year term and until his or her successor is elected and
qualified, are as follows:
<TABLE>
<S> <C> <C> <C>
Executive
Name Age Position Officer Since
- - -------------------------------------------------------------
Howard Schultz 43 chairman of the
board and chief
executive officer 1985
Orin Smith 54 director, president
and chief operating
officer 1990
Howard Behar 52 director and president,
Starbucks International 1989
Scott Bedbury 39 senior vice president,
marketing 1995
Michael Casey 51 senior vice president
and chief financial
officer 1995
Vincent Eades 37 senior vice president,
specialty sales and
marketing 1995
Carol Eastin 55 senior vice president,
management information
systems 1993
Sharon E. Elliott 45 senior vice president,
human resources 1994
E. R. (Ted) Garcia 49 senior vice president,
supply chain operations 1995
Wanda Herndon 44 senior vice president,
communications and
public affairs 1996
Shelley B. Lanza 40 senior vice president,
law & corporate affairs
and general counsel 1995
David M. Olsen 50 senior vice president,
coffee 1991
John A. Rodgers 65 senior vice president,
new business development 1991
Arthur I. Rubinfeld 43 senior vice president,
store development 1992
Deidra Wager 41 senior vice president,
retail operations 1993
</TABLE>
<PAGE 9>
There are no family relationships between any directors or
executive officers of the Company.
Howard Schultz is the founder of the Company and has been
chairman of the Board and chief executive officer since its
inception in 1985. From 1985 to June 1994, Mr. Schultz was also
the Company's president. From September 1982 to December 1985,
Mr. Schultz was the director of retail operations and marketing
for Starbucks Coffee Company, a predecessor to the Company; and
from January 1986 to July 1987, he was the chairman of the
Board, chief executive officer, and president of Il Giornale
Coffee Company, a predecessor to the Company.
Orin Smith joined the Company in 1990 and has served as
president and chief operating officer of the Company since June
1994. Prior to June 1994, Mr. Smith served as the Company's
vice president and chief financial officer and later, as its
executive vice president and chief financial officer.
Howard Behar joined the Company in 1989 and has served as
president of Starbucks International since June 1994. From
February 1993 to June 1994, Mr. Behar served as the Company's
executive vice president, sales and operations. From February
1991 to February 1993, Mr. Behar served as senior vice
president, retail operations of the Company and from August 1989
to January 1991, he served as the Company's vice president,
retail stores.
Scott Bedbury joined Starbucks in June 1995 as senior vice
president, marketing. From November 1987 to October 1994, Mr.
Bedbury held the position of worldwide director of advertising
for Nike, Inc. Prior to joining Nike, Inc., Mr. Bedbury was
vice president for Cole and Weber Advertising in Seattle,
Washington, which is an affiliate of Ogilvy and Mather.
Michael Casey joined Starbucks in 1995 as senior vice president
and chief financial officer. Prior to joining Starbucks, Mr.
Casey served as executive vice president and chief financial
officer of Family Restaurants, Inc. from its inception in 1986.
During his tenure there, he also served as a director from 1986
to 1993, and as president of its El Torito Restaurants, Inc.
division from 1988 to 1993.
Vincent Eades joined Starbucks in April 1995 as senior vice
president, specialty sales and marketing. From February 1993 to
April 1995, Mr. Eades served as a regional sales manager for
Hallmark Cards, Inc. From August 1989 to February 1993, Mr.
Eades was general manager of the Christmas Celebrations business
unit at Hallmark Cards, Inc.
Carol Eastin joined Starbucks in 1991 and has served as the
Company's senior vice president, management information systems
since June 1993. From November 1991 to June 1993, Ms. Eastin
served as the vice president, management information systems of
the Company. From September 1986 to September 1990, she served
as the director of corporate systems for McDonald's (R)
Corporation.
Sharon E. Elliott joined Starbucks in 1994 as senior vice
president, human resources. From September 1993 to June 1994,
Ms. Elliott served as the corporate director, staffing and
development of Allied Signal Corporation. From July 1987 to
August 1993, she held several human resources management
positions with Bristol-Myers Squibb, including serving as the
director of human resources--corporate staff.
E. R. (Ted) Garcia joined Starbucks in April 1995 as senior vice
president, supply chain operations. From May 1993 to April
1995, Mr. Garcia was an executive for Gemini Consulting. From
January 1990 until May 1993, he was the vice president of
operations strategy for Grand Metropolitan PLC, Food Sector.
Wanda Herndon joined Starbucks in July 1995 as vice president,
communications and public affairs and was promoted to senior
vice president, communications and public affairs in November
1996. From February 1990 to June 1995, Ms. Herndon held several
communications management positions at DuPont. Prior to that
time, Ms. Herndon held several public affairs and marketing
communications positions for Dow Chemical Company.
<PAGE 10>
Shelley B. Lanza joined Starbucks in June 1995 as senior vice
president and general counsel. From 1986 to 1995, Ms. Lanza
served as vice president and general counsel of Honda of America
Manufacturing, Inc. From 1982 to 1986, Ms. Lanza practiced law
at the law firm of Vorys, Sater, Seymour and Pease in Columbus,
Ohio.
David M. Olsen joined Starbucks in 1986 and has served as the
Company's senior vice president, coffee since September 1991.
From November 1987 to September 1991, Mr. Olsen served as its
vice president, coffee, and from February 1986 to November 1987,
he served as the Company's director of training.
John A. Rodgers joined Starbucks in 1989 and has served as
senior vice president, new business development since February
1993. From February 1991 to February 1993, he served as the
Company's senior vice president--special projects. Since
January 1982, Mr. Rodgers has also served as a general partner
of Western Franchise Development Corporation, an owner and
operator of several Red Robin Restaurants.
Arthur I. Rubinfeld joined the Company in 1992 as senior vice
president, real estate. From April 1986 to May 1992, Mr.
Rubinfeld served as a managing partner of Epsteen & Associates,
a commercial real estate company.
Deidra Wager joined Starbucks in 1992 and has served as the
Company's senior vice president, retail operations since August
1993. From September 1992 to August 1993, Ms. Wager served as
the Company's vice president, operation services. From March
1992 to September 1992, she was the Company's California
regional manager. From September 1988 to March 1992, Ms. Wager
held several operations positions with Taco Bell, Inc.,
including having served as its director of operations systems
development.
Item 11. Executive Compensation
The required information is incorporated by reference to pages 6
through 11 of the definitive Proxy Statement for the Company's
Annual Meeting of Shareholders to be held on March 6, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The required information is incorporated by reference to pages 2
through 3 of the definitive Proxy Statement for the Company's
Annual Meeting of Shareholders to be held on March 6, 1997.
Item 13. Certain Relationships and Related Transactions
The required information is incorporated by reference to page 12
of the definitive Proxy Statement for the Company's Annual
Meeting of Shareholders to be held on March 6, 1997.
<PAGE 11>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) The following documents are filed as a part of this
report on Form 10-K:
1. Financial Statements.
The Company's consolidated financial statements to be included
in Part II, Item 8, are incorporated herein by reference to the
Company's 1996 Annual Report to Shareholders, a copy of which
accompanies this report on Form 10-K.
2. Financial Statement Schedule.
The following financial statement schedule of Starbucks
Corporation for the fiscal years ended September 29, 1996,
October 1, 1995, and October 2, 1994 is filed as part of this
report on Form 10-K and should be read in conjunction with the
consolidated financial statements of the Company described in
Item 14(a)(1) above.
SCHEDULE PAGE
-------- ----
Schedule II Valuation and
Qualifying Accounts 17
Schedules other than the one listed above are omitted for the
reason that they are not required or are not applicable, or the
required information is shown in the financial statements or
notes thereto.
3. Exhibits.
The Exhibits listed below and on the accompanying Index to
Exhibits immediately following the financial statement schedule
are filed as part of, or incorporated by reference into, this
report.
EXHIBIT NO. DESCRIPTION
3.1 Restated Articles of Incorporation of Starbucks
Corporation (incorporated herein by reference to
Exhibit 3.1 to the Company's Form 10-Q for the
fiscal quarter ended March 31, 1996, filed with
the SEC on May 15, 1996)
3.1.1 Amendment dated November 22, 1995 to the Restated
Articles of Incorporation of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.1.1
to the Company's Form 10-Q for the fiscal quarter
ended March 31, 1996, filed with the SEC on May 15,
1996)
3.1.2 Amendment dated March 18, 1996 to the Restated
Articles of Incorporation of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.1.2
to the Company's Form 10-Q for the quarterly period
ended March 31, 1996, filed with the SEC on May 15,
1996)
3.2 Amended and Restated Bylaws of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.2 to
the Company's Form 10-Q for the fiscal quarter ended
March 31, 1996, filed with the SEC on May 15, 1996)
<PAGE 12>
4.1 Indenture, dated as of October 24, 1995, between
Starbucks Corporation and First Interstate Bank of
Washington, N.A., as Trustee (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-K
for the Fiscal Year ended October 1, 1995, filed with
the SEC on December 28, 1995)
4.2 Form of Debenture relating to the Indenture described
in Exhibit 4.3 (included in Exhibit 4.3)
(incorporated herein by reference to Exhibit 4.4 to
the Company's Form 10-K for the Fiscal Year ended
October 1, 1995, filed with the SEC on December 28,
1995)
10.1 Starbucks Corporation Key Employee Stock Option Plan-
-1994 (incorporated herein by reference to Appendix
A to the Company's 1994 Proxy Statement filed with
the SEC on December 23, 1994)*
10.1.1 Starbucks Corporation Key Employee Stock Option
Plan--1994, as amended*
10.2 Starbucks Corporation 1989 Stock Option Plan for
Non-Employee Directors, as amended (incorporated
herein by reference to Appendix B to the Company's
1994 Proxy Statement filed with the SEC on December
23, 1994)*
10.2.1 Starbucks Corporation 1989 Stock Option Plan for
Non-Employee Directors, as amended*
10.3 Starbucks Corporation 1991 Company-Wide Stock
Option Plan, as amended (incorporated herein by
reference to the Company's Registration Statement
No. 33-52528 on Form S-8, filed with the SEC on
September 28, 1992)*
10.3.1 Starbucks Corporation 1991 Company-Wide Stock
Option Plan, as amended*
10.4 Starbucks Corporation Employee Stock Purchase
Plan -- 1995 (incorporated herein by reference to
Appendix C to the Company's 1994 Proxy Statement
filed with the SEC on December 23, 1994)*
10.5 Industrial Lease, dated March 31, 1989, between
Starbucks Corporation, David A. Sabey and Sandra L.
Sabey (incorporated herein by reference to Exhibit
10.4 to the Company's Registration Statement No.
33-47951 on Form S-1, filed with the SEC on May 15,
1992)
10.6 Office Lease, dated as of July 15, 1993, between
First and Utah Street Associates, L.P. and Starbucks
Corporation (incorporated herein by reference to
Exhibit 10.17 to the Company's Form 10-K for the
Fiscal Year ended October 3, 1993, filed with the
SEC on December 30, 1993)
10.7 Development Agreement, dated as of February 11,
1994, between Starbucks Corporation and Host
International, Inc. (incorporated herein by
reference to Exhibit 10.18 to the Company's Form
10-K for the Fiscal Year ended October 2, 1994,
filed with the SEC on December 23, 1994)
10.8 Special Warranty Deed, dated March 7, 1994, between
Kent North Corporate Park, as grantor and Starbucks
Corporation, as grantee (incorporated herein by
reference to Exhibit 10.14 to the Company's Form
10-K for the Fiscal Year ended October 2, 1994,
filed with the SEC on December 23, 1994)
<PAGE 13>
10.9 Agreement and Plan of Merger, dated as of April 30,
1994, among Starbucks Corporation, TCC Acquisition
Corp., and The Coffee Connection, Inc. (incorporated
herein by reference to Exhibit 2 to the Company's
Form 10-Q for the Quarterly Period ended April 3,
1994, filed with the SEC on May 26, 1994)
10.10 Joint Venture and Partnership Agreement, dated
August 10, 1994, between Pepsi-Cola Company, a
division of PepsiCo, Inc., and Starbucks New
Venture Company (incorporated herein by reference
to Exhibit 10 to the Company's Form 10-Q for the
Quarterly Period ended July 3, 1994, filed with the
SEC on August 16, 1994)
10.11 Lease, dated August 22, 1994, between York County
Industrial Development Corporation and Starbucks
Corporation (incorporated herein by reference to
Exhibit 10 to the Company's Form 10-Q for the
Quarterly Period Ended July 2, 1995, filed with the
SEC on August 15, 1995)
10.12 Credit Agreement, dated October 24, 1994, between
Starbucks Corporation and Seattle-First National
Bank (incorporated herein by reference to Exhibit
10.1 to the Company's Registration Statement No.
33-85172 on Form S-3, filed with the SEC on October
14, 1994)
10.13 Second Amendment to Office Lease, dated as of
January 1, 1995, between First & Utah Street
Associates, L.P. and Starbucks Corporation
(incorporated herein by reference to the Company's
Registration Statement No. 33-93974 on Form S-3,
filed with the SEC on June 27, 1995)
10.14 Starbucks Corporation Amended and Restated
Consulting/Employment Agreement with Jeffrey H.
Brotman, dated as of January 14, 1995 (incorporated
herein by reference to Exhibit 10.14 to the
Company's Form 10-K for the Fiscal Year ended
October 1, 1995, filed with the SEC on December 28,
1995)
10.15 Series B Preferred Stock Purchase Agreement dated
March 31, 1995, among Starbucks Corporation, Noah's
New York Bagels, Inc. and certain shareholders of
Noah's New York Bagels, Inc. (incorporated herein
by reference to the Company's Registration Statement
No. 33-91780 on Form S-3, filed with the SEC on
April 28, 1995)
10.16 Amended and Restated Investor Rights Agreement
dated March 31, 1995, among Starbucks Corporation,
Noah's New York Bagels, Inc. and certain shareholders
of Noah's New York Bagels, Inc. (incorporated
herein by reference to the Company's Registration
Statement No. 33-91780 on Form S-3, filed with the
SEC on April 28, 1995)
10.17 Amended and Restated Voting Rights Agreement dated
March 31, 1995, among Starbucks Corporation, Noah's
New York Bagels, Inc. and certain shareholders of
Noah's New York Bagels, Inc. (incorporated herein
by reference to the Company's Registration Statement
No. 33-91780 on Form S-3, filed on April 28, 1995)
10.18 Protective Covenants Agreement dated March 31, 1995,
among Starbucks Corporation, Noah's New York Bagels,
Inc. and certain shareholders of Noah's New York
Bagels, Inc. (incorporated herein by reference to
the Company's Registration Statement No. 33-91780 on
Form S-3, filed with the SEC on April 28, 1995)
<PAGE 14>
10.19 Third Amendment to Office Lease, dated as of
September 30, 1995, between First and Utah Street
Associates, L.P. and Starbucks Corporation
(incorporated herein by reference to Exhibit 10.19
to the Company's Form 10-K for the Fiscal Year
ended October 1, 1995, filed with the SEC on
December 28, 1995)
10.20 Amendment to Credit Agreement and Note, dated
October 23, 1995 between Starbucks Corporation and
Seattle-First National Bank (incorporated herein
by reference to Exhibit 10.20 to the Company's
Form 10-K for the Fiscal Year ended October 1,
1995, filed with the SEC on December 28, 1995)
10.21 Merger Agreement among Noah's New York Bagels, Inc.
Shareholders and Certain Optionholders of Noah's
New York Bagels, Inc., Einstein Brothers Bagels,
Inc. and NNYB Acquisition Corporation, dated
January 22, 1996 (incorporated herein by reference
to Exhibit 10.21 to the Company's Form 10-Q for
the Quarterly Period Ended March 31, 1996, filed
with the SEC on May 15, 1996)
10.22 Amendment dated February 1, 1996, to Merger
Agreement among Noah's New York Bagels, Inc.,
Shareholders and Certain Optionholders of Noah's
New York Bagels, Inc., Einstein Brothers Bagels,
Inc. and NNYB Acquisition Corporation dated
January 22, 1996 (incorporated herein by reference
to Exhibit 10.22 to the Company's Form 10-Q for
the Quarterly Period Ended March 31, 1996, filed
with the SEC on May 15, 1996)
10.23 Master Licensing Agreement between the Company and
ARAMARK Food and Services Group, Inc. dated as of
January 30, 1996, as amended and restated May 7,
1996 (incorporated herein by reference to Exhibit
10.23 to the Company's Form 10-Q for the Quarterly
Period Ended March 31, 1996, filed with the SEC on
May 15, 1996)
11 Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
13 1996 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
- - -------------
* Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K No reports on Form 8-K were filed
by the Company during the fiscal quarter ended September 29,
1996.
<PAGE 15>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
STARBUCKS CORPORATION
By: /s/ Howard Schultz
------------------
Howard Schultz
chairman of the Board of Directors
and chief executive officer
December 24, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<S> <C>
Signature Title
Date
- - ----------------------------------------------------------------
/s/ Howard Schultz chairman of the Board
- - ------------------ of Directors and chief
Howard Schultz executive officer December 24, 1996
/s/ Orin C. Smith director, president and
- - ----------------- chief operating
Orin C. Smith officer December 13, 1996
/s/ Howard Behar director, president
- - ---------------- of Starbucks International December 24, 1996
Howard Behar
/s/ M. Michael Casey senior vice president
- - -------------------- and chief financial officer
M. Michael Casey (principal financial officer
and principal accounting
officer) December 24, 1996
/s/ Jeffrey H. Brotman Director December 13, 1996
- - ----------------------
Jeffrey H. Brotman
/s/ Craig J. Foley Director December 24, 1996
- - ------------------
Craig J. Foley
/s/ Arlen I. Prentice Director December 24, 1996
- - ---------------------
Arlen I. Prentice
/s/ James G. Shennan, Jr. Director December 24, 1996
- - -------------------------
James G. Shennan, Jr.
<PAGE 16>
/s/ Adrian D.P. Bellamy Director December 15, 1996
- - -----------------------
Adrian D.P. Bellamy
/s/ Barbara Bass Director December 12, 1996
- - ----------------
Barbara Bass
</TABLE>
<PAGE 17>
<TABLE>
<CAPTION>
STARBUCKS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<S> <C> <C>
Balance at Beginning Balance at End
Description of Year of Year
- - -------------------------------------------------------------
Allowance for Doubtful Accounts
- - -------------------------------
Fiscal Year Ended
September 29, 1996 $ 242,000 $ 116,000
Fiscal Year Ended
October 1, 1995 $ 126,000 $ 242,000
Fiscal Year Ended
October 2, 1994 $ 71,000 $ 126,000
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
EXHIBIT
NO. DESCRIPTION
PAGE NO.
- - ----------------------------------------------------------------
3.1 Restated Articles of Incorporation of Starbucks
Corporation (incorporated herein by reference to
Exhibit 3.1 to the Company's Form 10-Q for the
fiscal quarter ended March 31, 1996, filed with
the SEC on May 15, 1996)
3.1.1 Amendment dated November 22, 1995 to the Restated
Articles of Incorporation of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.1.1
to the Company's Form 10-Q for the fiscal quarter
ended March 31, 1996, filed with the SEC on May 15,
1996)
3.1.2 Amendment dated March 18, 1996 to the Restated
Articles of Incorporation of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.1.2
to the Company's Form 10-Q for the quarterly period
ended March 31, 1996, filed with the SEC on May 15,
1996)
3.2 Amended and Restated Bylaws of Starbucks Corporation
(incorporated herein by reference to Exhibit 3.2 to
the Company's Form 10-Q for the fiscal quarter ended
March 31, 1996, filed with the SEC on May 15, 1996)
4.1 Indenture, dated as of October 24, 1995, between
Starbucks Corporation and First Interstate Bank of
Washington, N.A., as Trustee (incorporated herein by
reference to Exhibit 4.3 to the Company's Form 10-K
for the Fiscal Year ended October 1, 1995, filed with
the SEC on December 28, 1995)
4.2 Form of Debenture relating to the Indenture described
in Exhibit 4.3 (included in Exhibit 4.3)
(incorporated herein by reference to Exhibit 4.4 to
the Company's Form 10-K for the Fiscal Year ended
October 1, 1995, filed with the SEC on December 28,
1995)
10.1 Starbucks Corporation Key Employee Stock Option Plan-
-1994 (incorporated herein by reference to Appendix
A to the Company's 1994 Proxy Statement filed with
the SEC on December 23, 1994)*
10.1.1 Starbucks Corporation Key Employee Stock Option
Plan--1994, as amended*
10.2 Starbucks Corporation 1989 Stock Option Plan for
Non-Employee Directors, as amended (incorporated
herein by reference to Appendix B to the Company's
1994 Proxy Statement filed with the SEC on December
23, 1994)*
10.2.1 Starbucks Corporation 1989 Stock Option Plan for
Non-Employee Directors, as amended*
10.3 Starbucks Corporation 1991 Company-Wide Stock
Option Plan, as amended (incorporated herein by
reference to the Company's Registration Statement
No. 33-52528 on Form S-8, filed with the SEC on
September 28, 1992)*
10.3.1 Starbucks Corporation 1991 Company-Wide Stock
Option Plan, as amended*
10.4 Starbucks Corporation Employee Stock Purchase
Plan -- 1995 (incorporated herein by reference to
Appendix C to the Company's 1994 Proxy Statement
filed with the SEC on December 23, 1994)*
10.5 Industrial Lease, dated March 31, 1989, between
Starbucks Corporation, David A. Sabey and Sandra L.
Sabey (incorporated herein by reference to Exhibit
10.4 to the Company's Registration Statement No.
33-47951 on Form S-1, filed with the SEC on May 15,
1992)
10.6 Office Lease, dated as of July 15, 1993, between
First and Utah Street Associates, L.P. and Starbucks
Corporation (incorporated herein by reference to
Exhibit 10.17 to the Company's Form 10-K for the
Fiscal Year ended October 3, 1993, filed with the
SEC on December 30, 1993)
10.7 Development Agreement, dated as of February 11,
1994, between Starbucks Corporation and Host
International, Inc. (incorporated herein by
reference to Exhibit 10.18 to the Company's Form
10-K for the Fiscal Year ended October 2, 1994,
filed with the SEC on December 23, 1994)
10.8 Special Warranty Deed, dated March 7, 1994, between
Kent North Corporate Park, as grantor and Starbucks
Corporation, as grantee (incorporated herein by
reference to Exhibit 10.14 to the Company's Form
10-K for the Fiscal Year ended October 2, 1994,
filed with the SEC on December 23, 1994)
10.9 Agreement and Plan of Merger, dated as of April 30,
1994, among Starbucks Corporation, TCC Acquisition
Corp., and The Coffee Connection, Inc. (incorporated
herein by reference to Exhibit 2 to the Company's
Form 10-Q for the Quarterly Period ended April 3,
1994, filed with the SEC on May 26, 1994)
10.10 Joint Venture and Partnership Agreement, dated
August 10, 1994, between Pepsi-Cola Company, a
division of PepsiCo, Inc., and Starbucks New
Venture Company (incorporated herein by reference
to Exhibit 10 to the Company's Form 10-Q for the
Quarterly Period ended July 3, 1994, filed with the
SEC on August 16, 1994)
10.11 Lease, dated August 22, 1994, between York County
Industrial Development Corporation and Starbucks
Corporation (incorporated herein by reference to
Exhibit 10 to the Company's Form 10-Q for the
Quarterly Period Ended July 2, 1995, filed with the
SEC on August 15, 1995)
10.12 Credit Agreement, dated October 24, 1994, between
Starbucks Corporation and Seattle-First National
Bank (incorporated herein by reference to Exhibit
10.1 to the Company's Registration Statement No.
33-85172 on Form S-3, filed with the SEC on October
14, 1994)
10.13 Second Amendment to Office Lease, dated as of
January 1, 1995, between First & Utah Street
Associates, L.P. and Starbucks Corporation
(incorporated herein by reference to the Company's
Registration Statement No. 33-93974 on Form S-3,
filed with the SEC on June 27, 1995)
10.14 Starbucks Corporation Amended and Restated
Consulting/Employment Agreement with Jeffrey H.
Brotman, dated as of January 14, 1995 (incorporated
herein by reference to Exhibit 10.14 to the
Company's Form 10-K for the Fiscal Year ended
October 1, 1995, filed with the SEC on December 28,
1995)
10.15 Series B Preferred Stock Purchase Agreement dated
March 31, 1995, among Starbucks Corporation, Noah's
New York Bagels, Inc. and certain shareholders of
Noah's New York Bagels, Inc. (incorporated herein
by reference to the Company's Registration Statement
No. 33-91780 on Form S-3, filed with the SEC on
April 28, 1995)
10.16 Amended and Restated Investor Rights Agreement
dated March 31, 1995, among Starbucks Corporation,
Noah's New York Bagels, Inc. and certain shareholders
of Noah's New York Bagels, Inc. (incorporated
herein by reference to the Company's Registration
Statement No. 33-91780 on Form S-3, filed with the
SEC on April 28, 1995)
10.17 Amended and Restated Voting Rights Agreement dated
March 31, 1995, among Starbucks Corporation, Noah's
New York Bagels, Inc. and certain shareholders of
Noah's New York Bagels, Inc. (incorporated herein
by reference to the Company's Registration Statement
No. 33-91780 on Form S-3, filed on April 28, 1995)
10.18 Protective Covenants Agreement dated March 31, 1995,
among Starbucks Corporation, Noah's New York Bagels,
Inc. and certain shareholders of Noah's New York
Bagels, Inc. (incorporated herein by reference to
the Company's Registration Statement No. 33-91780 on
Form S-3, filed with the SEC on April 28, 1995)
10.19 Third Amendment to Office Lease, dated as of
September 30, 1995, between First and Utah Street
Associates, L.P. and Starbucks Corporation
(incorporated herein by reference to Exhibit 10.19
to the Company's Form 10-K for the Fiscal Year
ended October 1, 1995, filed with the SEC on
December 28, 1995)
10.20 Amendment to Credit Agreement and Note, dated
October 23, 1995 between Starbucks Corporation and
Seattle-First National Bank (incorporated herein
by reference to Exhibit 10.20 to the Company's
Form 10-K for the Fiscal Year ended October 1,
1995, filed with the SEC on December 28, 1995)
10.21 Merger Agreement among Noah's New York Bagels, Inc.
Shareholders and Certain Optionholders of Noah's
New York Bagels, Inc., Einstein Brothers Bagels,
Inc. and NNYB Acquisition Corporation, dated
January 22, 1996 (incorporated herein by reference
to Exhibit 10.21 to the Company's Form 10-Q for
the Quarterly Period Ended March 31, 1996, filed
with the SEC on May 15, 1996)
10.22 Amendment dated February 1, 1996, to Merger
Agreement among Noah's New York Bagels, Inc.,
Shareholders and Certain Optionholders of Noah's
New York Bagels, Inc., Einstein Brothers Bagels,
Inc. and NNYB Acquisition Corporation dated
January 22, 1996 (incorporated herein by reference
to Exhibit 10.22 to the Company's Form 10-Q for
the Quarterly Period Ended March 31, 1996, filed
with the SEC on May 15, 1996)
10.23 Master Licensing Agreement between the Company and
ARAMARK Food and Services Group, Inc. dated as of
January 30, 1996, as amended and restated May 7,
1996 (incorporated herein by reference to Exhibit
10.23 to the Company's Form 10-Q for the Quarterly
Period Ended March 31, 1996, filed with the SEC on
May 15, 1996)
11 Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
13 1996 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
</TABLE>
- - -------------
* Management contract or compensatory plan or arrangement.
STARBUCKS CORPORATION
KEY EMPLOYEE STOCK OPTION PLAN - 1994
(Adopted 9/94, amended 9/96)
1. THE PLAN AND DEFINITIONS
1.1 PURPOSE OF PLAN.
This Plan is the "Starbucks Corporation Key Employee Stock
Option Plan, - 1994," and is also sometimes referred to as the
Company's "KEY EMPLOYEE PLAN." The Company's purposes in
adopting this Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to
encourage ownership of the Company's common stock by key
employees of the Company and any current or future Subsidiary,
and to promote the Company's business success. This Plan
provides for the granting of both Incentive Stock Options and
Nonqualified Stock Options. This Plan is adopted to be effective
for a ten year period commencing on September 27, 1994, and
ending on September 26, 2004.
1.2 DEFINITIONS:
Capitalized terms used in this Plan shall have the following
meanings:
"ACT." "Act" shall mean the Securities Act of 1933, as
amended from time to time, or any replacement act or legislation.
"BOARD." The "Board" shall mean the Board of Directors of
the Company.
"COMMITTEE." "Committee" shall mean the Board committee of
not less than two nonemployee directors appointed pursuant to
Section 2.3 herein.
"CODE." "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, or any replacement act or
legislation.
"COMMON STOCK." "Common Stock" shall mean the no par value
common stock of Starbucks Corporation.
"COMPANY." The "Company" shall mean Starbucks Corporation.
"CONSULTANT." "Consultant" shall mean any person engaged by
the Company as a non-Employee service provider pursuant to the
terms of a written contract.
"DISABILITY." "Disability" of an Employee shall mean
"permanent and total disability," within the meaning of Section
22(e)(3) of the Code.
"EMPLOYEE." The term "Employee" for purposes of this Plan
shall include all persons employed by the Company or any Parent
or Subsidiary, including officers, whether full-time or part-
time, and those individuals whose service as an Employee has been
temporarily interrupted due to any leave of absence that is
authorized by a Vice President of the Company.
"EXCHANGE ACT." "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time, or any
replacement act or legislation.
"FAIR MARKET VALUE." The "Fair Market Value" of the Common
Stock shall be the closing price per share of the Common Stock on
the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System. If the Common Stock
ceases to be listed on the NASDAQ National Market System, the
Board shall designate an alternative method of determining the
fair market value of the Common Stock.
"INCENTIVE STOCK OPTION." "Incentive Stock Option" shall
mean any stock option intended to qualify as an "incentive stock
option" within the meaning of Section 422 of the Code.
"NONQUALIFIED STOCK OPTION." "Nonqualified Stock Option"
shall mean any stock option not intended to qualify as an
Incentive Stock Option.
"OPTIONED SHARES." "Optioned Shares" shall mean Shares
subject to a stock option granted pursuant to this Plan.
"OPTIONEE." "Optionee" shall mean an individual who has
received a stock option pursuant to this Plan.
"PARENT." "Parent" shall mean a "parent corporation,"
whether now or hereafter existing, within the meaning of Section
424(e) of the Code.
"PLAN." This "Plan" shall mean the Starbucks Corporation Key
Employee Stock Option Plan - 1994, which also may be referred to
as the "Key Employee Plan."
"SHARE" AND "SHARES." A "Share" shall mean one share of the
Company's Common Stock, as adjusted in accordance with Section
2.9 of this Plan. The "Shares" shall mean the Company's
authorized and unissued Shares reserved for issuance under this
Plan as further defined in Section 2.2.
"SUBSIDIARY." "Subsidiary" shall mean a "subsidiary
corporation," whether now or hereafter existing, within the
meaning of Section 424(f) of the Code.
2. GENERAL PROVISIONS
THE PROVISIONS OF THIS SECTION 2 APPLY TO BOTH NONQUALIFIED
OPTIONS AND INCENTIVE STOCK OPTIONS GRANTED BY THE COMPANY.
2.1 OBJECTIVE AND USE OF PLAN.
The objective of this Plan is to provide an incentive for
maximum effort in the successful operation of the Company and is
expected to benefit the shareholders by enabling the Company to
attract and retain personnel of the best available talent through
the opportunity to share in the increased value of the Company's
Common Stock to which such personnel have contributed. The
benefits of this Plan are not a substitute for compensation
otherwise payable to Employees pursuant to the terms of their
employment. This Plan sets forth provisions applicable to
options that may be granted hereunder generally, to Incentive
Stock Options only, to Nonqualified Options only, and to the
procedures allowed for the conversion of Nonqualified Stock
Options into Incentive Stock Options. This Plan also allows for
and provides a means for the granting of stock options to
Consultants.
2.2 STOCK SUBJECT TO PLAN.
Subject to the provisions of Section 2.9 of this Plan, the
maximum aggregate number of Shares reserved for issuance upon the
exercise of options granted pursuant to this Plan is three
million. Shares subject to any option under this Plan which is
not exercised in full or Shares as to which the right to purchase
under an option is forfeited through expiration, default, or
otherwise, shall remain available for other options under this
Plan, provided that the aggregate number of Shares subject to
options under this Plan shall not exceed three million unless the
Board approves an increase in said number and such increase is
then duly approved by the Company's shareholders.
2.3 ADMINISTRATION OF PLAN.
This Plan shall be administered by the Board, provided that
at all times during which the Company is subject to the periodic
reporting requirements of the Exchange Act each member of the
Board who participates in administration must be a nonemployee
director as that term is defined in Rule 16b-3 promulgated by the
Securities and Exchange Commission. The Board may appoint a
Board committee (the "Committee") of not less than two
nonemployee directors to administer the Plan in the name of the
Board. The Board or the Committee shall have full power and
authority to administer and interpret this Plan and to adopt,
from time to time, such guidelines, rules, regulations,
agreements, and instruments for the administration of this Plan
as the Board or the Committee, as the case may be, deems
necessary or advisable. Such powers include, but are not limited
to (subject to the specific limitations described herein),
authority to determine the Employees to be granted options under
this Plan, to determine the size, type, and applicable terms and
conditions of grants to be made to such Employees, to determine a
time when options will be granted, and to authorize grants to
eligible Employees. In addition, the Board or the Committee may
engage a qualified brokerage or other financial services firm to
assist it in the administration of the Plan, including, without
limitation, the tracking of disqualifying dispositions under the
Code, whether through a separately established brokerage account
or otherwise, of Shares that are issued upon the exercise of
options granted under the Plan so that the Company may capture
any related tax benefit to which it may be entitled.
The Board's or the Committee's interpretations of this Plan,
and all actions taken and determinations made by the Board or the
Committee, as the case may be, concerning any matter arising
under or with respect to this Plan or any options granted
pursuant to this Plan, shall be final, binding, and conclusive on
all interested parties, including the Company, its shareholders,
and all former, present, and future Employees of the Company.
The Board or the Committee may, as to questions of accounting,
rely conclusively upon any determinations made by independent
public accountants of the Company.
2.4 ELIGIBILITY; FACTS TO BE CONSIDERED IN GRANTING
OPTIONS.
The Board or the Committee, as the case may be, shall have
the authority to determine the persons eligible to receive a
stock option grant, the time or times at which the Optioned
Shares may be purchased, and whether all of the options may be
exercised at one time or in increments.
2.5 RIGHTS OF OPTIONEE IN EVENT OF MERGER,
CONSOLIDATION, TENDER OFFER, TAKEOVER BID, SALE OF ASSETS OR
DISSOLUTION.
(a) Notwithstanding anything in this Plan to the contrary,
the Optionee may purchase the full amount of Optioned Shares for
which options have been granted to the Optionee and for which the
options have not been exercised under the following conditions:
(1) the Optionee may conditionally purchase any or all
Optioned Shares during the period commencing twenty-seven (27)
days and ending seven (7) days prior to the scheduled effective
date of a merger or consolidation (as such effective date may be
delayed from time to time) wherein the Company is not to be the
surviving corporation, which merger or consolidation is not
between or among the Company and other corporations related to or
affiliated with the Company;
(2) the Optionee may conditionally purchase any or all
Optioned Shares during the period commencing on the initial date
of a tender offer or takeover bid for the Shares (other than a
tender offer by the Company) subject to the Exchange Act and the
rules promulgated thereunder and ending on the day preceding the
scheduled termination date of acceptance of tenders of Shares by
the offeror under any such tender offer or takeover bid (as such
termination date may be extended by such offeror);
(3) the Optionee may conditionally purchase any or all
Optioned Shares during the period commencing the date the
shareholders of the Company approve a sale of substantially all
the assets of the Company and ending seven (7) days prior to the
scheduled closing date of such sale (as such closing date may be
delayed from time to time); and
(4) the Optionee may conditionally purchase any or all
Optioned Shares during the period commencing the date the
shareholders of the Company approve the dissolution of the
Company and ending seven (7) days prior to the date of filing its
Articles of Dissolution.
(b) If the merger, consolidation, tender offer, takeover
bid, sale of assets, or dissolution, as the case may be and as
described in Subsections (1) through (4) of Section 2.5(a), once
commenced, is canceled or revoked, the conditional purchase of
Shares for which the option to purchase would not have otherwise
been exercisable at the time of said cancellation or revocation,
but for the operation of this Section 2.5, shall be rescinded.
With respect to all other Shares conditionally purchased, the
Optionee may rescind such purchase at Optionee's option.
(c) If the merger, consolidation, tender offer, takeover
bid, or sale of assets does occur or Articles of Dissolution are
filed, as the case may be and as described in Subsections (1)
through (4) of Section 2.5(a), and the Optionee has not
conditionally purchased all Optioned Shares, all unexercised
options shall terminate on the effective, termination, closing,
or filing date, as the case may be.
(d) If the Company shall be the surviving corporation in
any merger or is a party to a merger or consolidation which is
between or among the Company and other corporations related to or
affiliated with the Company, any option granted hereunder shall
pertain and apply to the securities to which a holder of the
number of Shares subject to the option would have been entitled.
(e) Nothing herein shall allow the Optionee to purchase
Optioned Shares, the options for which have expired.
2.6 TERMS AND EXPIRATION OF OPTIONS.
Each option granted under this Plan shall be in writing,
shall be subject to such amendment or modification from time to
time as the Board shall deem necessary or appropriate to comply
with or take advantage of applicable laws or regulations, and
shall contain provisions as to the following effect, together
with such other provisions as the Board shall from time to time
approve:
(a) that, subject to the provisions of Section 2.6(b)
below, the option, as to the whole or any part thereof, may be
exercised only by the Optionee or Optionee's personal
representative;
(b) that neither the whole nor any part of the option
shall be transferable by the Optionee or by operation of law
otherwise than (i) by will of, or by the laws of descent and
distribution applicable to, a deceased Optionee, or (ii) in the
case of a Nonqualified Stock Option, by gift or, with the consent
of the Company, for value to immediate family members of the
Optionee, partnerships of which the only partners are members of
the Optionee's immediate family, and trusts established solely
for the benefit of such immediate family members; that the option
and any and all rights granted to the Optionee thereunder and not
theretofore effectively and completely exercised, or transferred
as expressly permitted by this Section 2.6(b), shall
automatically terminate and expire upon any other sale, transfer,
or hypothecation or any other attempted sale, transfer, or
hypothecation of such rights or upon the bankruptcy or insolvency
of the Optionee or Optionee's estate, and that solely as it
pertains to effecting an exercise of an option transferred in
accordance with this Section 2.6(b), the term Optionee shall
include a permitted transferee;
(c) that subject to the foregoing provisions, an option
may be exercised at different times for portions of the total
number of Optioned Shares for which the right to purchase shall
have vested, provided that an option may not be exercised for a
fraction of a Share;
(d) that no Optionee shall have the right to receive any
dividend on or to vote or exercise any right in respect to any
Shares unless and until the certificates for such Shares have
been issued to such Optionee;
(e) that the option shall expire at the earliest of the
following:
(1) the date specified in the option;
(2) with respect to any Employee;
(i) three (3) months after voluntary or
involuntary termination of Optionee's employment
other than termination as described in
subparagraphs (ii) or (iii) below;
(ii) upon the discharge of Optionee for
misconduct, willfully or wantonly harmful to the
Company or Subsidiary; or
(iii) twelve (12) months after Optionee's death
or Disability; or
(3) in the event of a merger, consolidation, tender
offer, takeover bid, sale of assets, or filing of Articles of
Dissolution, as the case may be and as described in subsections
(1) through (4) of Section 2.5(a), on the date specified in
Section 2.5(c): provided, however, that if the merger,
consolidation, tender offer, takeover bid, or sale of assets does
not occur or if Articles of Dissolution are not filed, as the
case may be and as described in Subsections (1) through (4) of
Section 2.5(a), all options which are terminated pursuant to this
Subsection (e)(3) shall be reinstated as if no action with
respect to any of said events had been contemplated or taken by
any party thereto and all Optionees shall be returned to their
respective positions on the date of termination;
(f) that, to the extent an option provides for the vesting
thereof in increments, such vesting shall cease as of the date of
the Optionee's death, Disability, or, in the case of any
Employee, voluntary or involuntary termination of Optionee's
employment with the Company or a Subsidiary;
(g) that, in the case of any Employee, the terms of the
option shall not be affected by any changes of duties or position
so long as the Optionee shall continue to be employed by the
Company or a Subsidiary.
2.7 EXERCISE OF OPTIONS.
The Optionee (or other person or persons, if any, entitled
thereto hereunder) desiring to exercise an option granted and
exercisable hereunder as to all or part of the Shares covered
thereby shall notify the Company or, if the Company requires, the
brokerage firm designated by the Company to facilitate exercises
and sales under this Plan, specifying the number of option Shares
to be purchased and, if required by the Company, representing in
form satisfactory to the Company that the Shares are being
purchased for investment and not with a view to resale or
distribution. The notification to the brokerage firm shall be
made in accordance with procedures of such brokerage firm
approved by the Company. With respect to any Shares
conditionally purchased pursuant to Section 2.5(a) above and for
which such purchase has not been voluntarily or otherwise
rescinded pursuant to Section 2.5(b), the Optionee shall be
deemed to have given the notice required by this Section 2.7 as
of ten (10) days prior to the closing or effective date of the
merger, consolidation, tender offer, takeover bid, or sale of
assets or as of the twentieth (20th) day after a Statement of
Intent to Dissolve is filed (or the tenth (10th) day before the
filing of Articles of Dissolution if it precedes said twentieth
(20th) day), as the case may be and as described in Subsections
(1) through (4) of Section 2.5(a).
2.8 METHOD OF EXERCISE OF OPTION.
The option shall be exercised as to the number of Shares
specified in the notice provided pursuant to Section 2.7 above by
payment to the Company of the amount specified below in Section
3.2. Payment of the option price shall be made in cash or in
accordance with procedures for a "cashless exercise" as the same
shall have been established from time to time by the Company and
the brokerage firm designated by the Company to facilitate
exercises and sales under this Plan. Payment in shares of the
Company's common stock shall be deemed to be the equivalent of
payment in cash at the Fair Market Value of those shares. No
such payment in shares of the Company's common stock shall be
allowed when the same may in the reasonable opinion of the
Company cause the Company to record a loss or expense as a result
thereof.
2.9 RECAPITALIZATION.
Subject to any required action by the shareholders of the
Company, the aggregate number of Shares for which options may be
granted hereunder, the number of Shares covered by each
outstanding option, and the price per Share thereof in each such
option shall be proportionately adjusted for an increase or
decrease in the number of outstanding shares of Common Stock
resulting from a stock split or reverse split of shares or any
other capital adjustment or the payment of a stock dividend or
other increase or decrease in such shares effected without
receipt of consideration by the Company excluding any decrease
resulting from a redemption of Common Stock by the Company. If
the adjustment would result in a fractional Share, the Optionee
shall be entitled to one (1) additional Share, provided that the
total number of Shares to be granted under this Plan shall not be
increased above the equivalent number of Shares initially
allocated or later increased by approved amendment to this Plan.
Any such adjustment made pursuant to this Section shall be made
by the Board, whose determination in that respect shall be final,
binding, and conclusive.
2.10 SUBSTITUTIONS AND ASSUMPTIONS.
The Board shall have the right to substitute or assume
options in connection with mergers, reorganizations, separations,
or other "corporate transactions" as that term is defined in and
said substitutions and assumptions are permitted by Section 424
of the Code and the regulations promulgated thereunder. The
number of Shares reserved pursuant to Section 2.2 may be
increased without further action by the shareholders by the
corresponding number of options assumed and, in the case of a
substitution, by the net increase in the number of Shares subject
to options before and after the substitution.
2.11 TERMINATION.
The Board may at any time modify, amend, or terminate this
Plan provided, however, that, without shareholder approval, no
amendment or modification shall increase the number of Shares as
to which options may be granted under this Plan. No amendment,
modification, or termination of the Plan may adversely affect
options granted prior to such action.
2.12 GRANTING OF OPTIONS.
The granting of any option pursuant to this Plan shall be
entirely in the discretion of the Board or the Committee, as the
case may be, and nothing herein contained shall be construed to
give any Employee any right to participate under this Plan or to
receive any option under it. The maximum number of Optioned
Shares that may be granted to any Employee in any one year
hereunder is 500,000.
The granting of an option pursuant to this Plan shall not
constitute any agreement or an understanding, express or implied
on the part of the Company or a Subsidiary to employ the Optionee
for any specified period.
2.13 WITHDRAWAL.
An Optionee may at any time elect in writing to abandon an
option with respect to the number of Shares as to which the
option shall not have been exercised.
2.14 GOVERNMENT REGULATIONS.
This Plan and the granting and exercise of any option
hereunder and the obligations of the Company to sell and deliver
Shares under any such option shall be subject to all applicable
laws, rules, and regulations and to such approvals by any
governmental agencies as may be required.
2.15 PROCEEDS FROM SALE OF STOCK.
Proceeds of the purchase of Optioned Shares by an Optionee
shall be used for the general business purposes of the Company.
2.16 SHAREHOLDER APPROVAL.
This Plan shall be submitted to the shareholders for their
approval no later than twelve (12) months from the date hereof.
2.17 COMPLIANCE WITH SECURITIES LAWS.
The Board shall have the right to:
(a) require an Optionee to execute, as a condition of
exercise of an option, a letter evidencing Optionee's intent to
acquire the Shares for investment and not with a view to the
resale or distribution thereof;
(b) place appropriate legends upon the certificate or
certificates for the Shares; and
(c) take such other acts as it deems necessary in order to
cause the issuance of Optioned Shares to comply with applicable
provisions of state and federal securities laws.
In furtherance of the foregoing, and not by way of limitation
thereof, no option shall be exercisable unless such option and
the Shares to be issued pursuant thereto shall be registered
under appropriate federal and state securities laws, or shall be
exempt therefrom, in the opinion of the Board upon advice of
counsel to the Company. Each option agreement shall contain
adequate provisions to assure that there will be no violation of
such laws. This provision shall in no way obligate the Company
to undertake registration of options or Shares hereunder. Issue,
transfer or delivery of certificates for Shares pursuant to the
exercise of options may be delayed, at the discretion of the
Board until the Board is satisfied that the applicable
requirements of the federal and state securities laws have been
met.
The dollar value and number of options granted under this
Plan may be limited pursuant to Rule 701 promulgated by the
Securities and Exchange Commission which provides an exemption
from the registration requirements under the Act. At any time
during which the Company is not subject to the periodic reporting
requirements of the Exchange Act, the guidelines adopted by the
Board pursuant to this Plan shall contain the current limitations
specified in said Rule 701.
2.18 TERMINAL DATE OF PLAN.
This Plan shall not extend beyond a date ten years from the
Effective Date hereof as established by the Board and approved by
the shareholders of the Company, provided that any termination
hereof shall not affect options already granted, and any option
to purchase shares duly granted hereunder prior to any
termination hereof shall be exercisable pursuant to its terms and
the terms hereof until expiration or earlier termination of such
option.
3. PROVISIONS APPLICABLE SOLELY TO NONQUALIFIED STOCK
OPTIONS
In addition to the provisions of Section 2 above, the
following paragraphs shall apply to any options granted under
this Plan which are not Incentive Stock Options.
3.1 OPTION PRICE.
The option or purchase price of each Share optioned as a
Nonqualified Stock Option under this Plan shall be determined by
the Board or the Committee, as the case may be, at the time of
the action for the granting of the option.
3.2 METHOD OF EXERCISE OF OPTION.
The amount to be paid by the Optionee upon exercise of a
Nonqualified Option shall be the full purchase price thereof
provided in the option, together with the amount of federal,
state, and local income and FICA taxes required to be withheld by
the Company. If allowed by the Board or the Committee at its
respective discretion, an Optionee may elect to pay Optionee's
federal, state, or local income and FICA withholding tax by
having the Company withhold Shares having a Fair Market Value at
the time of exercise equal to the amount required to be withheld.
An election by an Optionee to have shares withheld for this
purpose will be subject to the following restrictions:
(a) If an Optionee has received multiple option grants, a
separate election must be made for each grant;
(b) The election must be made prior to the day the option
is exercised;
(c) The election will be irrevocable;
(d) The election will be subject to the approval of the
Board or the Committee, as the case may be;
(e) If the Optionee is an "officer" of the Company within
the meaning of Section 16 of the Exchange Act ("Section 16") as
defined in Rule 16a-1 promulgated by the Securities Exchange
Commission, the election may not be made within six months
following the grant of the option; and
4. PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS
In addition to the provisions of Section 2 above, the
following paragraphs shall apply to any options granted under
this Plan which are Incentive Stock Options.
4.1 CONFORMANCE WITH INTERNAL REVENUE CODE.
Incentive Stock Options granted under this Plan shall conform
to, be governed by, and be interpreted in accordance with Section
422 of the Code and any regulations promulgated thereunder and
amendments to the Code and Regulations, including, without
limitation, those provisions of Section 422 of the Code that
prohibit an option by its terms to be exercisable after ten (10)
years from the date that it was granted. Only Employees may be
granted Incentive Stock Options hereunder. To the extent that
any option granted hereunder as an Incentive Stock Option fails
to conform to the foregoing requirements, it shall be treated as,
and honored by the Company as, a Nonqualified Stock Option.
4.2 OPTION PRICE.
The option or purchase price of each Share optioned under the
Incentive Stock Option provisions of this Plan shall be
determined by the Board or the Committee, as the case shall be,
at the time of the action for the granting of the option but
shall not, in any event, be less than the Fair Market Value of
the Common Stock on the date of grant.
4.3 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTION.
The aggregate Fair Market Value of the Optioned Shares
(determined on the date of grant) with respect to which an
Employee has the right to purchase vesting in any one calendar
year (under this Plan or any other plan of the Company which
authorizes Incentive Stock Options) shall not exceed the maximum
amount allowed in any one year by the Code in connection with the
grant of Incentive Stock Options.
4.4 LIMITATION ON GRANTS TO SUBSTANTIAL SHAREHOLDERS.
An Employee may not, immediately prior to the grant of an
Incentive Stock Option hereunder, own stock in the Company
representing more than ten percent (10%) of the voting power of
all classes of stock of the Company unless the per share option
price specified by the Board or the Committee, as the case may
be, for the Incentive Stock Options granted such an Employee is
at least one hundred ten percent (110%) of the Fair Market Value
of the Company's stock on the date of grant and such option, by
its terms, is not exercisable after the expiration of five (5)
years from the date such option is granted. For purposes of this
limitation, Section 424(d) of the Code governs the attributes of
stock ownership.
4.5 METHOD OF EXERCISE OF OPTION.
The amount to be paid by the Optionee upon exercise of an
Incentive Stock Option shall be the full purchase price thereof
provided in the option.
5. EXCHANGE OF NONQUALIFIED OPTIONS FOR INCENTIVE STOCK
OPTIONS
At the Optionee's election and in accordance with the
procedures described below, an Employee may exchange a
Nonqualified Stock Option granted pursuant to this Plan for an
Incentive Stock Option for the identical number of Shares.
5.1 NOTICE OF INTENT TO EXCHANGE.
Not less than seven (7) days prior to the desired date of
exchange, the Optionee shall notify the Company in writing to
that effect specifying the number of Shares subject to grants as
Nonqualified Stock Options under this Plan which are to be
exchanged for Shares subject to grants as Incentive Stock Options
under this Plan and the desired date of exchange.
5.2 LIMITATIONS ON AMOUNT OF OPTIONS EXCHANGED.
Notwithstanding the number of Optioned Shares specified by
the Optionee as desired to be exchanged pursuant to this Section
5, the Company will allow exchanges for only so many options as
will not violate the aggregate dollar limitations specified in
Section 4.3 above with that limit being based on a calculation of
the fair market value on the date of exchange. If an Optionee
requests to exchange more Optioned Shares than would be allowed
by the preceding sentence, the Company shall deem the request to
apply only to the maximum number of Optioned Shares which would
be allowed and shall disregard the request as to the excess.
Exchanges may not occur after the terminal date of this Plan.
5.3 EFFECT OF EXCHANGE.
If an exchange does occur, the Optionee shall surrender the
Nonqualified Option for cancellation and shall execute a new
Incentive Stock Option for the number of Optioned Shares
exchanged and, if all of the Nonqualified Options have not been
exchanged, shall execute a new Nonqualified Option (or an
amendment to the existing option) to specify the remainder of
Shares under the Nonqualified Option. The new Incentive Stock
Option shall be deemed a new option granted on the date of
exchange with the exercise price established as of such date.
6. AMENDMENT
This Plan and all rules, guidelines, and regulations adopted
in respect hereof may be terminated, suspended, or amended at any
time by a majority vote of the Board, provided that no such
action shall adversely affect any rights of Optionees granted
under this Plan prior to such action, and further provided that
the following revisions or amendments require approval of or
ratification by the shareholders of the Company: (i) any
increase in the number of Shares subject to this Plan, other than
in connection with an adjustments under either or both of
Sections 2.9 and 2.10 of this Plan; and (ii) any change that
would require shareholder approval pursuant to Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to
its authority under the Exchange Act. The Board may amend the
terms and conditions of outstanding options, provided, however,
that (i) no such amendment would be adverse to the holders of
such options, (ii) no such amendment shall extend the period for
exercise of an option, and (iii) the amended terms of an option
would be permitted under this Plan.
7. FOREIGN EMPLOYEES OR CONSULTANTS
Without amending the Plan, the Board or the Committee may
grant options to eligible Employees or Consultants who are
foreign nationals on such terms and conditions different from
those specified in this Plan as may in the judgment of the Board
or the Committee, as the case may be, be necessary or desirable
to foster and promote achievement of the purposes of the plan,
and, in furtherance of such purposes the Board or the Committee
may make such modifications, amendments, procedures, subplans,
and the like as may be necessary or advisable to comply with the
provisions of the laws in other countries in which the Company
operates or has Employees or Consultants.
8. REGISTRATION, LISTING, AND QUALIFICATION OF SHARES
Each option shall be subject to the requirement that if at
any time the Board shall determine that the registration,
listing, or qualification of the Shares covered thereby upon any
securities exchange or under any foreign, federal, state, or
local law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such option or the purchase
of Shares thereunder, no such option may be exercised unless and
until such registration, listing, qualification, consent, or
approval shall have been effected or obtained free of any
condition not acceptable to the Board. Any person exercising an
option shall make such representations and agreements and furnish
such information as the Board may request to assure compliance
with the foregoing or any other applicable legal requirements.
9. NO RIGHTS TO OPTIONS OR EMPLOYMENT; NO RESTRICTIONS
No Employee or other person shall have any claim or right to
be granted an option under this Plan. Having received an option
under this Plan shall not give an Employee or Consultant any
right to receive any other grant or option under this Plan. An
Optionee shall have no rights to or interest in any option except
as set forth herein. Neither this Plan nor any action taken
hereunder shall be construed as giving any Employee or Consultant
any right to be retained in the employ of the Company. Nothing
in this Plan shall restrict the Company's rights to adopt other
option plans pertaining to any or all of the Employees covered
under this Plan or other Employees not covered under this Plan.
10. COSTS AND EXPENSES
Except as provided herein with respect to the payment of
taxes, all costs and expenses of administering the Plan shall be
borne by the Company and shall not be charged to any grant nor
any Employee or Consultant receiving a grant.
11. PLAN UNFUNDED
This Plan shall be unfunded. Except for the Board's
reservation of a sufficient number of authorized shares to the
extent required by law to meet the requirements of the Plan, the
Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to
assure payment of any grant under the Plan.
12. GOVERNING LAW
This Plan shall be governed by and construed in accordance
with the laws of the state of Washington.
STARBUCKS CORPORATION
1989 STOCK OPTION PLAN
FOR
NON-EMPLOYEE DIRECTORS
(Adopted 1/89, amended 4/89, 5/91, 9/94 and 9/96)
1. PURPOSE.
The purpose of the Starbucks Corporation 1989 Stock Option
Plan for Non-Employee Directors (the "Plan") is to attract and
retain the services of experienced and knowledgeable independent
directors of Starbucks Corporation (the "Corporation") for the
benefit of the Corporation and its stockholders and to provide an
additional incentive for such directors to continue to work for
the best interest of the Corporation and its stockholders through
continuing ownership of its common stock.
2. SHARES SUBJECT TO THE PLAN.
The total number of shares of common stock, no par value of
the Corporation ("Shares"), for which options may be granted
under the Plan shall not exceed 350,000 in the aggregate, subject
to adjustment hereafter in accordance with Section 11 hereof.
Within the foregoing limitations, Shares for which options have
been granted pursuant to the Plan but which options have lapsed
or otherwise terminated shall become available for the grant of
additional options. There will be reserved for issuance or
transfer from the Corporation's reserve of authorized but
unissued shares upon the exercise of options granted under the
Plan 350,000 Shares, subject to adjustment hereafter in
accordance with Section 11 hereof.
3. ADMINISTRATION OF PLAN.
The Plan shall be administered by the Board of Directors of
the Corporation (the "Board"). The Board shall have the power to
construe the Plan, to determine all questions arising thereunder,
and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable.
4. ELIGIBILITY; GRANT OF OPTION.
Each director of the Corporation who is not, and has not
during the immediately preceding 12 month period been, an
employee of the Corporation or any parent or subsidiary of the
Corporation (a "Participant") shall automatically be a
Participant in the Plan. Each Participant who is in office on
December 31 of any year beginning December 31, 1994, shall, on
the immediately succeeding January 15, automatically be granted
an option to acquire 10,000 shares under the Plan.
5. OPTION AGREEMENT.
Each option granted under the Plan shall be evidenced by an
option agreement (the "Agreement") duly executed on behalf of the
Corporation and by the Participant to whom such option is
granted, which Agreements may but need not be identical and which
shall (i) comply with and be subject to the terms and conditions
of the Plan and (ii) provide that the Participant agrees to
continue to serve as a director of the Corporation during the
term for which he or she was elected. Any Agreement may contain
such other terms, provisions, and conditions not inconsistent
with the Plan as may be determined by the Board. No option shall
be deemed granted within the meaning of the Plan and no purported
grant of any option shall be effective, until such Agreement
shall have been duly executed on behalf of the Corporation and
the Participant to whom the option is to be granted.
6. OPTION EXERCISE PRICE.
The option exercise price for an option granted under the
Plan shall be the fair market value of the Shares covered by the
option on the grant date (the "Pricing Date"). For purposes
hereof, the fair market value of the Shares covered by an option
shall be the average of the high and low sales prices of the
Shares on the applicable date as reported in the National Market
List of the National Association of Securities Dealers Inc.
Automated Quotation System or on the principal national
securities exchange on which the Shares are then listed for
trading, or if the Shares are not listed for trading on any such
system or exchange, the fair market value shall be as determined
by the Company's Board of Directors.
7. TIME AND MANNER OF EXERCISE OF OPTION.
a. Options granted under the Plan shall be immediately
exercisable.
b. The option may be exercised from time to time, by
giving notice to the Corporation or, if the Corporation requires,
the brokerage firm designated by the Corporation, stating the
number of Shares with respect to which the option is being
exercised. The option shall be exercised by payment in full for
such Shares, which payment may be in whole or in part in shares
of the common stock of the Corporation already owned by the
person or persons exercising the option, valued at fair market
value on the date of payment (as determined pursuant to Section 6
hereof). The notification to the brokerage firm shall be made in
accordance with procedures of such brokerage firm approved by the
Corporation.
c. Upon exercise of the option, delivery of a
certificate for fully paid and nonassessable Shares shall be made
at the principal office of the Corporation or the Corporation's
brokerage firm to the person or persons exercising the option as
soon as practicable (but in no event more than 30 days) after the
date of receipt of the notice of exercise by the Corporation, or
the Corporation's brokerage firm, or at such time, place, and
manner as may be agreed upon by the Corporation and the person or
persons exercising the option.
8. TERM OF OPTIONS.
Each option shall expire ten years from the date of the
granting thereof, but shall be subject to earlier termination as
follows:
a. In the event of the death of a Participant, the
option granted to such Participant may be exercised by the estate
of such Participant, or by any person or persons who acquired the
right to exercise such option by will or by the laws of descent
and distribution. Such option may be exercised at any time
within 180 days after the date of death of such Participant or
prior to the date on which the option expires by its terms,
whichever is earlier.
b. Except as stated in paragraph (c) below, in the
event that a Participant ceases to be a director of the
Corporation, other than by reason of his or her death, the
options granted to such Participant may be exercised, for a
period of thirty (30) days after such date, or prior to the date
on which the option expires by its terms, whichever is earlier.
c. In the event a Participant is removed from the
Board of Directors for cause as determined by the shareholders,
the options granted to such Participant must be exercised prior
to his removal.
9. TRANSFERABILITY OF OPTIONS.
The right of any Participant to exercise an option granted to
him or her under the Plan shall not be assignable or transferable
by such Participant otherwise than (i) by will or the laws of
descent and distribution, or (ii) by gift or, with the consent of
the Corporation, for value to immediate family members of the
Participant, partnerships of which the only partners are members
of the Participant's immediate family and trusts established
solely for the benefit of such family members; and solely as it
pertains to effecting an exercise of an option transferred in
accordance with this Section 9, the term Participant shall
include a permitted transferee.
10. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.
Neither the recipient of an option under the Plan nor his or
her successors in interest shall have any rights as a stockholder
the Corporation with respect to any Shares subject to an option
granted to such person until such person becomes a holder of
record of such Shares.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event that the outstanding shares of the common stock
of the Corporation are changed into or exchanged for a different
number or kind of shares or other securities of the Corporation
or of another corporation, by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividend payable in capital
stock, appropriate adjustment shall be made in the number and
kind of shares subject to and reserved for issuance or transfer
under the Plan and as to which outstanding options (or portions
thereof then unexercised) shall be exercisable, to the end that
the proportionate interest of Participants and prospective
Participants, with respect to options theretofore granted and to
be granted, shall be maintained as before the occurrence of such
event. Such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised
portion of such options, but with a corresponding adjustment in
the option price per share.
12. RESTRICTIONS ON ISSUE OF SHARES.
Anything in this Plan to the contrary notwithstanding, the
Corporation may delay the issuance of Shares covered by the
exercise of any option and the delivery of a certificate for such
Shares until on the following conditions shall be satisfied:
(i) the Shares with respect to which an option has
been exercised are at the time of the issue or transfer of such
Shares effectively registered under applicable federal securities
laws now in force or hereafter amended; or
(ii) counsel for the Corporation shall have given an
opinion, which opinion shall not be unreasonably conditioned or
withheld, that such Shares are exempt from registration under
applicable federal securities laws now in force or hereafter
amended.
It is intended that all exercises of options shall be effective.
Accordingly, the Corporation shall use its best efforts to bring
about compliance with the above conditions within a reasonable
time, except that the Corporation shall be under no obligation to
cause a registration statement or a posteffective amendment to
any registration statement to be prepared at its expense solely
for the purpose of covering the issuance or transfer from the
Corporation's reserve of authorized but unissued Shares in
respect of which any option may be exercised.
13. PURCHASE FOR INVESTMENT.
Unless the Shares to be issued upon exercise of an option
granted under the Plan have been effectively registered under the
Securities Act of 1933 as now in force or hereafter amended, the
Corporation shall be under no obligation to issue or transfer
any Shares covered by any option unless the person or persons who
exercise such option, in whole or in part, shall give a written
representation and undertaking to the Corporation, which is
satisfactory in form and scope to counsel to the Corporation and
upon which, in the opinion of such counsel, the Corporation may
reasonably rely, that he or she is acquiring the Shares issued or
transferred to him or her for his or her own account as an
investment and not with a view to, or for sale in connection
with, the distribution for any such Shares, and that he or she
will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under
the Securities Act of 1933, or any other applicable law, and that
if Shares are issued or transferred without such registration a
legend to this effect may be placed upon the certificates
representing the Shares.
14. EFFECTIVE DATE.
The effective date (the "Effective Date") of this Plan was
January 17, 1989.
15. EXPENSES OF THE PLAN.
All costs and expenses of the adoption and administration of
the Plan shall be borne by the Corporation and none of such
expenses shall be charged to any Participant.
16. TERMINATION AND AMENDMENT OF PLAN.
Unless sooner terminated as herein provided, the Plan shall
terminate ten years from the Effective Date. The Board may at
any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that,
except as provided in Section 11, the Board may not, without the
approval of the stockholders of the Corporation, increase the
maximum aggregate number of shares for which options may be
granted under the Plan or the number of Shares for which an
option may be granted to any Participant. Termination or any
modification or amendment of the Plan shall not, without the
consent of a Participant, affect his or her rights under an
option previously granted to him or her.
STARBUCKS CORPORATION
1991 COMPANY-WIDE
STOCK OPTION
PLAN
(Adopted effective 10/90; Amended
9/92,2/93, 1/94, and 9/96)
1. INTRODUCTION AND DEFINITIONS
1.1 THE PLAN:
This 1991 Company-Wide Stock Option Plan (this "Plan")
establishes the right of and procedures for STARBUCKS CORPORATION
(the "Company") to grant stock options to its employees.
1.2 DEFINITIONS:
Capitalized terms used in this Plan shall have the following
meanings:
"ACT." "Act" shall mean the Securities Act of 1933.
"Board." The "Board" shall mean the Board of Directors of
Starbucks Corporation.
"BUY OUT NOTICE." "Buy Out Notice" shall have the meaning
set forth in Section 7 hereof.
"CODE." "Code" shall mean the Internal Revenue Code of 1986,
as amended.
"COMPANY." The "Company" shall mean Starbucks Corporation
d/b/a Starbucks Coffee Company.
"FAIR MARKET VALUE." The "Fair Market Value" of the
Company's equity securities shall be determined, as of any time,
based upon the prevailing bid price of the Company's common stock
as of such time on the national exchange, over-the-counter, or
other stock trading market on which the Company is listed, and in
the absence of which shall be determined by the Board.
"PLAN." "Plan" shall mean the Starbucks Corporation 1991
Company-Wide Stock Option Plan, as amended.
"SHARES." The "Shares" shall mean the Shares reserved for
issuance under this Plan as further defined in Section 2.2.
2. GENERAL PROVISIONS
2.1 OBJECTIVES OF THE PLAN:
The purpose of this Plan is to encourage ownership of common
stock of the Company by all employees of the Company and any
current or future subsidiary. This Plan is intended to provide
an incentive and bonus for maximum effort in the successful
operation of the Company and is expected to benefit the
shareholders by associating the interests of the Company's
employees with those of its shareholders and by enabling the
Company to attract and retain personnel of the best available
talent through the opportunity to share, by the proprietary
interests created by this Plan, in the increased value of the
Company's shares to which such personnel have contributed. The
benefits of this Plan are not a substitute for compensation
otherwise payable to Company employees pursuant to the terms of
their employment. This Plan provides for the granting of "Non-
Qualified Stock Options," which options are not to be construed
as "Incentive Stock Options" as defined and governed by Section
422A of the Code. This Plan sets forth provisions applicable to
Non-Qualified Options only.
2.2 STOCK RESERVED FOR THIS PLAN:
The Stock reserved for issue upon the exercise of options
granted under this Plan will not exceed 1,000,000 shares of the
no par value common stock of the Company (the "Shares") which may
be either authorized and unissued shares or issued shares held in
or hereafter acquired for the treasury of the Company. Shares
subject to any option under this Plan which are not exercised in
full or Shares as to which the right to purchase is forfeited
through default or otherwise, shall remain available for other
options under this Plan provided that the aggregate number of
Shares subject to options under this Plan shall not exceed
1,000,000 Shares of said stocks unless the Board approves an
increase in said number.
2.3 ADMINISTRATION OF THIS PLAN:
This Plan shall be administered by the Company's Board of
Directors (sometimes referred to herein as the "Board"), provided
that each member of the Board who participates in administration
must be a "disinterested person" as that term is defined in Rule
16b(3) of the Securities Exchange Act of 1934. The Board may
appoint a Board committee of not less than three such
disinterested persons to administer the Plan in the name of the
Board. Such committee shall have sole discretion to determine
the employees to be granted options under this Plan, to determine
the size and applicable terms and conditions of grants to be made
to such employees, to determine a time when options will be
granted, and to authorize grants to eligible employees. Such
committee shall have full power and authority to administer and
interpret this Plan and to adopt, from time to time, such
guidelines, rules, regulations, agreements, and instruments for
the administration of this plan as it deems necessary or
advisable.
The Board's interpretations of this Plan, and all actions
taken and determinations made by the Board concerning any matter
arising under or with respect to this Plan or any options granted
pursuant to this Plan, shall be final, binding, and conclusive on
all interest parties, including the Company, its shareholders,
and all former, present and future employees of the Company. The
Board may, as to all questions of accounting rely conclusively
upon any determinations made by independent public accounts of
the Company.
The guidelines for administration of this plan as adopted by
and amended by the Board shall be attached to this Plan for
reference.
2.4 ELIGIBILITY; FACTS TO BE CONSIDERED IN GRANTING
OPTIONS:
An option may be granted to any full-time or part-time
employee who, as of the date the option is granted, is then an
employee and had been an employee of the Company or of any
subsidiary for at least 180 consecutive days during the Company's
last fully-completed fiscal year, provided that employees who
hold any of the positions of President, Chief Executive Officer,
Chief Financial Officer, or Principal Accounting Officer may not
participate. In its determination of an employee to whom an
option shall be granted and the number of shares to be covered by
such option, the Board may also take into account any or all of
the following factors: the salary and/or wages of the employee;
the duties of the employee; the present and potential
contributions of the employee to the success of the Company; the
anticipated number of years of service remaining before the
attainment by the employee of the age of retirement; and other
factors deemed relevant by the Board in connection with
accomplishing the purpose of this Plan. An employee who has been
granted an option to purchase Shares of the Company, whether
under this Plan or otherwise, may, if the board shall so
determine, be granted additional options, provided that no
employee may be granted options under this Plan that in the
aggregate would result in such employee receiving more than 5% of
the maximum number of Shares available for issuance under this
Plan.
2.5 VESTING OF OPTIONS:
The Board shall have the authority to establish the time or
times at which the optioned Shares may be purchased and whether
all of the options may be exercised at one time or in increments.
2.6 RIGHTS OF OPTIONEE IN EVENT OF MERGER,
CONSOLIDATION, TENDER OFFER, TAKEOVER BID, SALE OF ASSETS OR
DISSOLUTION:
(a) Notwithstanding Section 2.5 above or anything
else in this Plan to the contrary, the Optionee may purchase the
full amount of optioned Shares for which options have been
granted to the Optionee and for which the options have not been
exercised under the following conditions:
(1) The Optionee may conditionally purchase
any or all optioned Shares during the period commencing twenty-
seven (27) days and ending (7) days prior to the scheduled
effective date of a merger or consolidation (as such effective
date may be delayed from time to time) wherein the Company is not
to be the surviving corporation, which merger or consolidation is
not between or among the Company and other corporations related
to or affiliated with the Company;
(2) The Optionee may conditionally purchase
any or all optioned Shares during the period commencing on the
initial date of a tender offer or takeover bid for the optioned
Shares (other than a tender offer by the Company) subject to the
Securities Exchange Act of 1934 and the rules promulgated
thereunder and ending on the day preceding the scheduled
termination date of acceptance of tenders of Shares by the
offeror under any such tender offer or takeover bid (as such
termination date may be extended by such offeror);
(3) The Optionee may conditionally purchase
any or all optioned Shares during the period commencing on the
date the shareholders of the Company approve a sale of
substantially all the assets of the Company and ending seven (7)
days prior to the scheduled closing date of such sale (as such
closing date may be delayed from time to time); and
(4) The Optionee may conditionally purchase
any or all optioned Shares during the period commencing on the
date the Company files its Statement of Intent to Dissolve and
ending thirty (30) days later but not in any event later than the
day before the Company files its Articles of Dissolution.
(b) If the merger, consolidation, tender offer,
takeover bid, sale of assets, or dissolution, as the case may be
and as described in Subsections (1) through (4) of Section
2.6(a), once commenced, is cancelled or revoked, the conditional
purchase of Shares for which the option to purchase would not
have otherwise been exercisable at the time of said cancellation
or revocation, but for the operation of this Section 2.6, shall
be rescinded. With respect to all other Shares conditionally
purchased, the Optionee may rescind such purchase at his or her
option.
(c) If the merger, consolidation, tender offer,
takeover bid, or sale of assets does occur or thirty (30) days
passes after a Statement of Intent to Dissolve is filed (or
Articles of Dissolution are filed), as the case may be and as
described in Subsections (1) through (4) of Section 2.6(a), and
the Optionee has not conditionally purchased all optioned Shares,
all unexercised options shall terminate on the effective,
termination, or closing date, or thirty (30) days after the date
of said filing date (but not later than the day before Articles
of Dissolution are filed), as the case may be.
(d) If the Company shall be the surviving
corporation in any merger or is a party to a merger or
consolidation which is between or among the Company and other
corporations related to or affiliated with the Company, any
option granted hereunder shall pertain and apply to the
securities to which a holder of the number of Shares of common
stock subject to the option would have been entitled.
(e) Nothing herein shall allow the Optionee to
purchase optioned Shares, the options for which have expired.
2.7 TERMS AND EXPIRATION OF OPTIONS:
Each option granted under this Plan shall be in writing,
shall be subject to such amendment or modification from time to
time as the Board shall deem necessary or appropriate to comply
with or take advantage of applicable laws or regulations and
shall contain provisions to the following effect, together with
such other provisions as the Board shall from time to time
approve:
(a) that, subject to the provisions of Section
2.7(b) below, the option, as to the whole or any part thereof,
may be exercised only by the Optionee or such Optionee's personal
representative;
(b) that neither the whole nor any part of the
option shall be transferable by the Optionee or by operation of
law otherwise than by the will of, or by the laws of descent and
distribution applicable to, a deceased Optionee and that the
option and any and all rights granted to the Optionee thereunder
and not theretofore effectively and completely exercised shall
automatically terminate and expire upon any sale, transfer, or
hypothecation or any attempted sale, transfer, or hypothecation
of such rights or upon the bankruptcy or insolvency of the
Optionee or his or her estate;
(c) that subject to the foregoing provisions, an
option may be exercised at different times for portions of the
total number of Shares for which the right to purchase shall have
vested provided that such portions are in multiples of 10 shares
if the Optionee holds vested options for 99 or fewer shares and
otherwise in multiples of 100 shares;
(d) that no Optionee shall have the right to
receive any dividend on or to vote or exercise any right in
respect of any Shares unless and until the certificates for such
Shares have been issued to such Optionee;
(e) that the option shall expire at the earliest
of the following:
(1) The date specified in the option;
(2) Ninety (90) days after voluntary or
involuntary termination of Optionee's employment other than
termination as described in Paragraphs (3) or (4) below:
(3) Upon the discharge of Optionee for
misconduct, willfully or wantonly harmful to the Company;
(4) Twelve (12) months after Optionee's death
or disability; or
(5) In the event of a merger, consolidation,
tender offer, takeover bid, sale of assets, or filing of a
Statement of Intent to Dissolve (or the filing of Articles of
Dissolution), as the case may be and as described in Subsections
(1) through (4) of Section 2.6(a), on the date specified in
Section 2.6(c). However, if the merger, consolidation, tender
offer, takeover bid, or sale of assets does not occur or if a
Statement of Intent to Dissolve is not filed, as the case may be
and as described in Subsections (1) through (4) of Section
2.6(a), all options which are terminated pursuant to this
Subsection (e)(5) shall be reinstated as if no action with
respect to any of said events had been contemplated or taken by
any party thereto and all Optionees shall be returned to their
respective positions on the date of termination;
(f) that, to the extent an option provides for the
vesting thereof in increments, such vesting shall cease as of the
date of the Optionee's death, disability, or voluntary or
involuntary termination of Optionee's employment with the
Company;
(g) that the terms of the option shall not be
affected by any change of duties or position so long as the
Optionee shall continue to be employed by the Company or a
subsidiary.
2.8 EXERCISE OF OPTIONS:
The Optionee (or other person or persons, if any, entitled
thereto hereunder) desiring to exercise an option granted and
exercisable hereunder as to all or part of the Shares covered
thereby shall notify the Company or, if required by the Company,
the brokerage firm designated by the Company to facilitate
exercises and sales under this Plan, specifying the number of
option Shares to be purchased and, if required by the Company,
representing in form satisfactory to the Company that the Shares
are being purchased for investment and not with a view to resale
or distribution. The notification to the brokerage firm shall be
made in accordance with procedures of such brokerage firm
approved by the Company. With respect to any Shares
conditionally purchased pursuant to Section 2.6(a) above and for
which such purchase has not been voluntarily or otherwise
rescinded pursuant to Section 2.6(b), the Optionee shall be
deemed to have given the notice required by this Section 2.8 as
of ten (10) days prior to the closing or effective date of the
merger, consolidation, tender offer, takeover bid, or sale of
assets or as of the twentieth (20th) day after a Statement of
Intent to Dissolve is filed (or the tenth (10th) day before the
filing of Articles of Dissolution if it precedes said twentieth
(20th) day), as the case may be and as described in Subsections
(1) through (4) of Section 2.6(a).
2.9 METHOD OF EXERCISE OF OPTION:
The option shall be exercised as to the number of Shares
specified in the notice provided pursuant to Section 2.8 above by
payment to the Company of the amount specified below in Section
3.2. Payment of the option price shall be made in cash or in
accordance with procedures for a "cashless exercise" as the same
shall have been established from time to time by the Company and
the brokerage firm designated by the Company to facilitate
exercises and sales under this Plan. Payment in shares of the
Company's common stock shall be deemed to be the equivalent of
payment in cash at the Fair Market Value of those shares. No
such payment in shares of the Company's common stock shall be
allowed when the same may in the reasonable opinion of the
Company cause the Company to record a loss or expense as a result
thereof.
2.10 RECAPITALIZATION:
The aggregate number of Shares for which options may be
granted hereunder, the number of Shares covered by each
outstanding option, and the price per Share thereof in each such
option shall be proportionately adjusted for an increase or
decrease in the number of outstanding shares of common stock of
the Company resulting from a stock split or reverse split of
shares or any other capital adjustment or the payment of a stock
dividend or other increase or decrease in such shares effected
without receipt of consideration by the Company excluding any
decrease resulting from the purchase of shares for the treasury.
If the adjustment would result in a fractional Share, the
Optionee shall be entitled to one (1) additional Share, provided
that the total number of Shares to be granted under this Plan
shall not be increased above the equivalent number of Shares
initially allocated or later increased by approved amendment to
this Plan.
2.11 SUBSTITUTIONS AND ASSUMPTIONS:
The Board shall have the right to substitute or assume
options in connection with mergers, reorganizations, separations,
or other "corporate transactions" as that term is defined in and
said substitutions and assumptions are permitted by Section 425
of the Code and the regulations promulgated thereunder. The
number of Shares reserved pursuant to Section 2.2 may be
increased by the corresponding number of options assumed and, in
the case of a substitution, by the net increase in the number of
Shares subject to options before and after the substitution.
2.12 TERMINATION:
The directors of the Company may at any time modify, amend,
or terminate this Plan. No amendment, modification, or
termination of the Plan may adversely affect options granted
prior to such action.
2.13 GRANTING OF OPTIONS:
The granting of any option pursuant to this Plan shall be
entirely in the discretion of the Board and nothing herein
contained shall be construed to give any employee any right to
participate under this Plan.
2.14 WITHDRAWAL:
An Optionee may at any time elect in writing to abandon an
option with respect to the number of Shares as to which the
option shall not have been exercised.
2.15 GOVERNMENT REGULATIONS:
This Plan and the granting and exercise of any option
hereunder and the obligations of the Company to sell and deliver
Shares under any such option shall be subject to all applicable
laws, rules, and regulations and to such approvals by any
governmental agencies as may be required.
2.16 PROCEEDS FROM SALE OF STOCK:
Proceeds of the purchase of optioned Shares by an Optionee
shall be for the general business purposes of the Company.
2.17 BOARD AUTHORIZATION:
This Plan has been adopted and authorized by the Board for a
period of ten years beginning as of the first day of the
Company's 1991 fiscal year.
2.18 COMPLIANCE WITH SECURITIES LAWS:
The Board shall have the right to:
(a) require an Optionee to execute, as a condition
of the exercise of an option, a letter evidencing Optionee's
intent to acquire the Shares for investment and not with a view
to the resale or distribution thereof;
(b) place appropriate legends upon the certificate
or certificates for the Shares; and
(c) take such other acts as it deems necessary in
order to cause the issuance of optioned Shares to comply with
applicable provisions of State and Federal Securities Laws.
In furtherance of the foregoing, and not by way of limitation
thereof, no option shall be exercisable unless such option and
the Shares to be issued pursuant thereto shall be registered
under appropriate Federal and State Securities Laws, or shall be
exempt therefrom, in the opinion of the Board upon advice of
counsel to the Company. Each option agreement shall contain
adequate provisions to assure that there will be no violation of
such Laws. This provision shall in no way obligate the Company
to undertake registration of options or Shares hereunder. Issue,
transfer or delivery of certificates for Shares pursuant to the
exercise of options may be delayed, at the discretion of the
board, until the Board is satisfied that the applicable
requirements of the Federal and State Securities Laws have been
met.
2.19 TERMINAL DATE OF PLAN:
This Plan shall not extend beyond October 1, 2000.
3. OPTION PRICE AND WITHHOLDING TAX
In addition to the provisions of Section 2 above, the
following paragraphs shall apply to any options granted under
this Plan:
3.1 OPTION PRICE:
The option or purchase price of each Share optioned under
this Plan shall be determined by the Board at the time of the
action for the granting of the option.
3.2 WITHHOLDING ON PAYMENT FOR OPTIONED SHARES:
The amount to be paid by the Optionee upon exercise of an
option shall be the full purchase price thereof provided in the
option, together with the amount of federal, state, and local
income and FICA taxes required to be withheld by the Company. An
Optionee may elect to pay his or her federal, state, or local
income and FICA withholding tax by having the Company withhold
shares of Company common stock having a value equal to the amount
required to be withheld. The value of the shares to be withheld
is deemed to equal the fair market value of the shares on the day
the option is exercised, as determined in accordance with Section
2.9. An election by an Optionee to have shares withheld for this
purpose will be subject to the following restrictions:
(a) If an Optionee has received multiple option
grants, a separate election must be made for each grant;
(b) The election must be made prior to the day the
option is exercised;
(c) The election will be irrevocable;
(d) The election will be subject to the
disapproval of the Board;
(e) If the Optionee is an officer of the Company
within the meaning of Section 16 of the Securities Exchange Act
of 1934 ("Section 16"), the election may not be made within six
months following the grant of the option; and
(f) If the Optionee is an officer of the Company
within the meaning of said Section 16, the election must be made
either six months prior to the day the option is exercised or the
ten day "window" beginning on the third day following the release
of the Company's quarterly or annual summary statement of sales
and earnings.
4. AMENDMENT
This Plan and all rules and regulations adopted in respect
hereof may be terminated, suspended, or amended at any time by a
majority vote of the Board, except as otherwise specifically set
forth in Section 2.12, provided that no such action shall
adversely affect any rights of Optionees granted under this Plan
prior to such action. The Board may amend the terms and
conditions of outstanding options, provided, however, that (i) no
such amendment would be adverse to the holders of such options,
(ii) no such amendment shall extend the period for exercise of an
option, and (iii) the amended terms of an option would be
permitted under this Plan.
5. FOREIGN EMPLOYEES
Without amending the Plan, the Board may grant options to
eligible employees who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in
the judgment of the Board be necessary or desirable to foster and
promote achievement of the purposes of the Plan, and, in
furtherance of such purposes the Board may make such
modifications, amendments, procedures, subplans, and the like as
may be necessary or advisable to comply with the provisions of
laws in other countries in which the Company operates or has
employees.
6. REGISTRATION, LISTING, AND QUALIFICATION OF SHARES
Each option shall be subject to the requirement that if at
any time the Board shall determine that the registration,
listing, or qualification of the shares covered thereby upon any
securities exchange or under any foreign, federal, state, or
local law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such option or the purchase
of shares thereunder, no such option may be exercised unless and
until such registration, listing, qualification, consent, or
approval shall have been effected or obtained free of any
condition not acceptable to the Board. Any person exercising an
option shall make such representations and agreements and furnish
such information as the Board may request to assure compliance
with the foregoing or any other applicable legal requirements.
7. BUY OUT OF OPTION GAINS
At any time after any option becomes exercisable, the Board
shall have the right to elect, in its sole discretion and without
the consent of the Optionee, to cancel such option and to pay
such Optionee the excess of the fair market value of the shares
of the Company's common stock covered by such option over the
option exercise price of such option at the date the Board
provides written notice (the "Buy Out Notice") of its intention
to exercise such right. Buy outs pursuant to this provision
shall be effected by the Company as promptly as possible after
the date of the Buy Out Notice. Payments of buy out amounts may
be made in cash, in shares of the Company's common stock, or
partly in cash and partly in common stock, as the Board deems
advisable. To the extent payment is made in shares of common
stock, the number of shares shall be determined by dividing the
amount of the payment to be made by the fair market value of a
share of common stock at the date of the Buy Out Notice. In no
event shall the Company be required to deliver a fractional share
of common stock in satisfaction of this buy out provision.
Payment of any such buy out amount shall be made net of any
applicable foreign, federal (including FICA), state, and local
withholding taxes.
8. NO RIGHTS TO OPTIONS OR EMPLOYMENT; NO RESTRICTIONS
No employee or other person shall have any claim or right to
be granted an option under this Plan. Having received an option
under this Plan shall not give an employee any right to receive
any other grant or option under this Plan. An Optionee shall
have no rights to or interest in any option except as set forth
herein. Neither this Plan nor any action taken hereunder shall
be construed as giving any employee any right to be retained in
the employ of the Company. Nothing in this Plan shall restrict
the Company's rights to adopt other option plans pertaining to
any or all of the employees covered under this Plan or other
employees not covered under this Plan.
9. COSTS AND EXPENSES
Except as provided herein with respect to the payment of
taxes, all costs and expenses of administering the Plan shall be
borne by the Company and shall not be charged to any grant nor
any employee receiving a grant.
10. PLAN UNFUNDED
This Plan shall be unfunded. Except for the Board's
reservation of a sufficient number of authorized shares to the
extent required by law to meet the requirements of the Plan, the
Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to
assure payment of any grant under the Plan.
11. GOVERNING LAW
This Plan shall be governed by and construed in accordance
with the laws of the state of Washington.
<TABLE>
<CAPTION>
STARBUCKS CORPORATION
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
(in thousands, except earnings per share)
<S> <C> <C> <C>
September 29, October 1, October 2,
1996 1995 1994
- - ----------------------------------------------------------------------
CALCULATION OF EARNINGS
PER COMMON AND COMMON
EQUIVALENT SHARE
- - - PRIMARY:
Net earnings $ 42,128 $ 26,102 $ 10,206
=====================================================================
Weighted average shares
outstanding calculation:
Weighted average number
of common shares
outstanding 73,849 68,898 56,936
Dilutive effect of
outstanding common stock
options and warrants 3,115 2,411 2,782
- - ---------------------------------------------------------------------
Weighted average shares
outstanding 76,964 71,309 59,718
=====================================================================
Earnings per share $ 0.55 $ 0.37 $ 0.17
=====================================================================
CALCULATION OF EARNINGS
PER COMMON AND COMMON
EQUIVALENT SHARE
- - - FULLY-DILUTED: (1)
Net earnings calculation:
Net earnings $ 42,128 $ 26,102 $ 10,206
Add after tax interest
expense on debentures 1,248 -- --
Add after tax
amortization of
issuance costs related
to the debentures 93 -- --
- - ---------------------------------------------------------------------
Adjusted net earnings $ 43,469 $ 28,449 $ 12,561
=====================================================================
Weighted average shares
outstanding calculation:
Weighted average number
of common shares
outstanding 73,849 68,898 56,936
Dilutive effect of
outstanding common
stock options and
warrants 3,956 3,011 2,821
Assuming conversion
of convertible
subordinated debentures 3,026 -- --
- - ---------------------------------------------------------------------
Weighted average shares
outstanding 80,831 71,909 59,757
=====================================================================
Earnings per common
and common equivalent
share - fully-diluted $ 0.54 $ 0.36 $ 0.17
=====================================================================
</TABLE>
- - ------------
(1) - Fully-diluted earnings per share assumes conversion of the Company's
convertible subordinated debentures using the "if converted" method, when such
securities are dilutive, with income adjusted for the after-tax interest
expense and amortization applicable to these debentures.
<TABLE>
<CAPTION>
STARBUCKS CORPORATION
EXHIBIT 12 - STATEMENT REGARDING COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES (1)
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C>
September 29, October 1, October 2, October 3, September 27,
1996 1995 1994 1993 1992
- - --------------------------------------------------------------------------------------
COMPUTATION OF EARNINGS:
Earnings before income
taxes $ 68,501 $ 43,143 $ 17,754 $ 13,526 $ 7,152
Interest expense 8,739 3,765 3,807 772 612
Amortization of debt
expense 682 260 260 43 192
Portion of rents
representative of
interest factor 20,612 14,713 7,144 3,892 2,300
Less: Capitalized interest (306) (160) (99) ---- ----
- - -----------------------------------------------------------------------------------
Total earnings
(as calculated) $ 98,228 $ 61,721 $ 28,866 $ 18,233 $10,256
===================================================================================
COMPUTATION OF FIXED CHARGES:
Interest expense $ 8,739 $ 3,765 $3,807 $ 772 $ 612
Amortization of debt
expense 682 260 260 43 192
Portion of rents
representative of
interest factor 20,612 14,713 7,144 3,892 2,300
- - -----------------------------------------------------------------------------------
Total fixed charges $ 30,033 $ 18,738 $11,211 $4,707 $3,104
===================================================================================
Ratio of earnings
to fixed charges 3.27x 3.29x 2.57x 3.87x 3.30x
====================================================================================
</TABLE>
- - --------------
(1) For purposes of computing the ratio of earnings to fixed
charges, earnings include earnings before income taxes,
amortization of debt expense, and interest expense,
including that portion of rental expense attributable to
interest costs. Fixed charges consist of interest
expense, including that portion of rental expense
attributable to interest costs, and interest capitalized
during the period.
STARBUCKS CORPORATION
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
The Coffee Connection, Inc.
Starbucks New Venture Company
Starbucks Coffee International, Inc.
Starship I, Inc.
Starbucks Holding Company
Starbucks Manufacturing Corporation
SBI Nevada, Inc. (a wholly-owned subsidiary of
Starbucks Coffee International, Inc.)
Circadia Corporation
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the incorporation by reference in Registration
Statements No. 33-52526, 33-52528, 33-92208 and 33-92184 of
Starbucks Corporation on Forms S-8 and Registration
Statement No. 33-95690 of Starbucks Corporation on Form S-3
of our reports dated November 22, 1996, appearing in and
incorporated by reference in the Annual Report on Form 10-K
of Starbucks Corporation for the year ended September 29,
1996.
Our audits of the financial statements referred to in our
aforementioned report also included the financial statement
schedule of Starbucks Corporation, listed in Item 14(a)2.
This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such
financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
/s/Deloitte & Touche LLP
- - ------------------------
DELOITTE & TOUCHE LLP
Seattle, Washington
December 23, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STARBUCKS CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END>
SEP-29-1996
<PERIOD START> OCT-02-1995
<PERIOD-END> SEP-29-1996
<CASH> 126,215
<SECURITIES> 103,221
<RECEIVABLES> 17,621
<ALLOWANCES> 116
<INVENTORY> 83,370
<CURRENT-ASSETS> 339,541
<PP&E> 457,480
<DEPRECIATION> 88,003
<TOTAL-ASSETS> 726,613
<CURRENT-LIABILITIES> 101,091
<BONDS> 165,020
0
0
<COMMON> 361,309
<OTHER-SE> 90,351
<TOTAL-LIABILITY-AND-EQUITY> 726,613
<SALES> 696,481
<TOTAL-REVENUES> 696,481
<CGS> 335,800
<TOTAL-COSTS> 335,800
<OTHER-EXPENSES> 303,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,739
<INCOME-PRETAX> 68,501
<INCOME-TAX> 26,373
<INCOME-CONTINUING> 42,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,128
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.54
</TABLE>