SCHEDULE 14A INFORMATION
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-I l(c) or 240.14a-12
GREEN MOUNTAIN COFFEE, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-1 1.
1) Title of each class of securities to which transaction applies:
..................................................................
2) Aggregate number of securities to which transaction applies:
..................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-1 1
(Set forth the amount on which the filing fee is calculated
and state how it was determined):
..................................................................
4) Proposed maximum aggregate value of transaction:
..................................................................
5) Total fee paid:
..................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-1 l(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
..................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................
3) Filing Party:
..................................................................
4) Date Filed:
..................................................................
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
___________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
Friday, April 4, 1997
____________________
To Our Stockholders:
The Annual Meeting of Stockholders of Green Mountain Coffee, Inc., a
Delaware corporation (the "Company"), will be held at Mona's Restaurant,
3 Main Street, Burlington, Vermont on Friday, April 4, 1997 at 3:00 p.m. to:
1. elect eight directors;
2. consider and act upon an amendment to the Company's 1993 Stock
Option Plan increasing from 75,000 to 275,000 the number of shares
of Common Stock for which options may be granted under the Plan;
3. ratify the appointment of Price Waterhouse LLP as the independent
accountants for the Company for the current fiscal year;
and
4. transact such other business as may properly be brought before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 3,
1997 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. A complete list of those
stockholders will be open to examination of any stockholder, for any purpose
germane to the Meeting, during ordinary business hours at the executive offices
of the Company for a period of 10 days before the Meeting.
All stockholders are cordially invited to attend the Meeting.
Sincerely,
/s/ Robert D. Britt
---------------------
Robert D. Britt
Secretary
February 28, 1997
All stockholders are urged to attend the Meeting in person or by proxy.
Whether or not you expect to be present at the Meeting, please mark, sign and
return the enclosed proxy card and return it promptly in the enclosed postage-
paid envelope.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
33 Coffee Lane
Waterbury, Vermont 05676
PROXY STATEMENT
Introduction
- ------------
The accompanying proxy is solicited by the Board of Directors (the
"Board") of Green Mountain Coffee, Inc., a Delaware corporation (the
"Company") for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"). The Annual Meeting will be held on Friday, April 4, 1997
at 3:00 p.m. at Mona's Restaurant, 3 Main Street, Burlington, Vermont. This
Proxy Statement and the enclosed form of proxy are first being mailed to
stockholders of record on or about February 28, 1997.
The Company is a Delaware holding company formed in July 1993, whose only
asset is the stock of Green Mountain Coffee Roasters, Inc., a Vermont
corporation ("Roasters") formed in 1981. As used herein, unless the context
otherwise requires, references to the "Company" or "Green Mountain" include
the Company, Roasters and Roasters' inactive subsidiary, Green Mountain Coffee
Roasters Franchising Corporation, a Delaware corporation formed in 1990.
Voting
- ------
To vote by proxy, please mark, sign and date the enclosed proxy card and
return it in the postage-paid envelope provided.
As of the close of business on February 3, 1997, the record date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting, 3,417,306 shares of the Company's common stock, par value $0.10 per
share, were outstanding. The presence in person or by proxy of a majority of
the total number of outstanding shares entitled to vote at the Annual Meeting
is necessary to constitute a quorum.
Each shareholder is entitled to one vote for each share of common stock
held as of the record date. Stockholders may not cumulate votes for the
election of directors or for any other matter. Directors are elected by
plurality vote. The other matters submitted for stockholder approval at this
Annual Meeting will be determined by the affirmative vote of a majority of the
shares represented in person or by proxy at the Annual Meeting. Abstentions
with respect to any matter are treated as shares present or represented and
entitled to vote on that matter and thus have the same effect as negative
votes. If shares are not voted by the broker who is the record holder of the
shares, or if shares are not voted in other circumstances in which proxy
authority is defective or has been withheld with respect to any matter, these
non-voted shares are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained,
but are counted for quorum purposes.
Solicitation and Revocation of Proxies
- --------------------------------------
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election
of the eight directors proposed by the Board and FOR Proposals 2 and 3
described below in this Proxy Statement. In addition, shares represented by
your proxy will be voted in the discretion of the Board on any matters that
may properly come before the Annual Meeting and any adjournments. Your proxy
will only be used at the Annual Meeting and any adjournments.
Once you execute and return your proxy to the Board, you may revoke or
change it at any time before it is voted at the Annual Meeting by: (i)
delivering a written notice of revocation to the Secretary of the Company at
the address above; (ii) delivering another signed proxy to the Secretary; or
(iii) attending the Annual Meeting and voting in person.
The Company will bear the entire cost of soliciting the proxies. In
addition to solicitation by mail, the directors, officers and other employees
of the Company may solicit proxies in person, by telephone or by other means
without additional compensation. The Company does not presently intend to
retain professional proxy solicitation assistance or to solicit proxies
otherwise than as described.
Proposals of Stockholders
- -------------------------
Proposals of stockholders intended to be included in the Company's proxy
materials for presentation at the 1998 Annual Meeting of Stockholders must be
received by the Secretary of the Company at 33 Coffee Lane, Waterbury,
Vermont 05401 by November 1, 1997.
PROPOSAL 1
Election of Directors
At the Annual Meeting, eight directors will be elected to serve until the
next Annual Meeting of Stockholders or until their successors are elected and
qualified. Each of the nominees is a director of the Company. Management
recommends that you vote FOR each of the nominees below. The Board knows of
no reason why any nominee might be unable or unwilling to serve.
The following sets forth the names and ages of the eight nominees for
election to the Board of Directors and the executive officers of the Company
and their respective positions with the Company.
<TABLE>
Year First
Name Age Elected Positions with the Company
- --------------------- --- --------- --------------------------
<S> <C> <C> <C>
Robert P. Stiller 53 1993 Chairman of Board of Directors,
President and Chief Executive Officer
Robert D. Britt 41 1993 Chief Financial Officer, Treasurer,
Secretary and Director
Stephen J. Sabol 35 1993 Vice President and Director
Jonathan C. Wettstein 48 1994 Vice President and Director
Paul Comey* 46 1993 Vice President
William D. Davis(1)(2) 47 1993 Director
Jules A. del Vecchio(1)(2) 53 1993 Director
David E. Moran(2) 43 1995 Director
Ian W. Murray(1)(2) 62 1993 Director
- ----------------------------------------------------
<FN>
(1) Member of Audit Committee of Board of Directors.
(2) Member of Compensation Committee of the Board of Directors, which was
established on October 17, 1996, subsequent to the end of fiscal 1996.
* Not a nominee for director.
</FN>
</TABLE>
<PAGE>
Certain biographical information regarding each director and executive
officer of the Company is set forth below:
Robert P. Stiller, founder of Roasters, has served as its President and
a director since its inception in July 1981. In September 1971, Mr. Stiller
co-founded Robert Burton Associates, a company engaged in the development and
sale of E-Z Wider cigarette papers and served as its President and director
until June 1980.
Robert D. Britt has served as Chief Financial Officer of Roasters since
May 1993. From July 1992 to April 1993, Mr. Britt served as Chief Financial
Officer for Engineered Coatings, Inc., a manufacturer engaged in the design
and application of high temperature metallic and ceramic coatings to metal
parts. From June 1990 to July 1992, Mr. Britt served in an executive capacity
with FCR, Inc., a recycling and beverage redemption company, having held the
positions of Vice President and Chief Financial Officer and Director of
Business Development. From June 1986 to May 1990, Mr. Britt was a Senior
Manager in the Entrepreneurial Services Group at Ernst & Young. Mr. Britt
holds a Master of Business Administration from the Wharton School at the
University of Pennsylvania.
Stephen J. Sabol has served as Vice President of Sales of Roasters since
September 1996. Mr. Sabol served as Vice President of Branded Sales of
Roasters from August 1992 to August 1996. From September 1986 to August 1992,
Mr. Sabol was the General Manager of Roasters and was responsible for overall
performance of the wholesale division in Maine and New Hampshire. Prior
thereto, Mr. Sabol was employed in a managerial capacity by Property Management
Consultants, a real estate management company.
Jonathan C. Wettstein has served as Vice President and Plant Manager of
Roasters since April 1993. From June 1974 to April 1993, Mr. Wettstein was
employed by Digital Equipment Corporation in a variety of positions including
Plant Manager, Order Administration Manager, Marketing Manager, Business and
Materials Manager and Product Line Controller. Mr. Wettstein holds a Master
of Business Administration from the Harvard Business School.
Paul Comey has served as Executive Director of Facilities and Process
Engineering of Roasters since June 1993. From March 1986 to May 1993, Mr.
Comey was the owner and principal consultant of Baseline Solutions, a company
engaged in providing consulting services to the coffee industry, including
the Company.
William D. Davis is currently the Chief Executive Officer, President and
Partner at Waterbury Holdings of Vermont, a specialty foods holding company.
Mr. Davis also currently holds the position of Partner and CEO of affiliates
of Waterbury Holdings of Vermont including McKenzie LLC, All Season's Kitchen
LLC, Franklin County Cheese Corporation, Frank Hahn Incorporated and Rondele
Foods LLC. From January 1985 to October 1994, Mr. Davis was President and
Chief Executive Officer of Cabot Creamery Cooperative, Inc., a dairy food
manufacturer.
Jules A. del Vecchio is currently a Vice President of New York Life
Insurance Company and is responsible for communications and agent management
and training. Mr. del Vecchio has been affiliated with New York Life
Insurance Company since 1970.
David E. Moran is currently a partner in the Cambridge Group, a
management consulting company focused on marketing. Before joining the
Cambridge Group, he was a partner at Marketing Corporation of America from
July 1984 to June 1992. Earlier in his career Mr. Moran spent ten years in
brand management at General Foods and International Playtex. While at
General Foods, he was Brand Manager of several of its Maxwell House coffee
brands.
Ian W. Murray is currently retired. From April 1983 to January 1992, Mr.
Murray was the Chairman of the Board, President and Chief Executive Officer
of Nestle Enterprises Limited, Canada. Prior thereto, Mr. Murray served as
the President and Chief Executive Officer of Libby, McNeill & Libby, Inc.
and Standard Brand Foods.
Officers are elected annually and serve at the discretion of the Board of
Directors. Directors are elected annually by the Company's stockholders.
<PAGE>
General Information Concerning the Board of Directors and its Committees
- ------------------------------------------------------------------------
The Board of Directors of the Company met 8 times in the fiscal year
ended September 28, 1996. During that year each of the directors attended at
least 75% of the aggregate of all meetings of the Board and of all committees
of which he was a member except Mr. del Vecchio who attended 70% of the
meetings of the Board and committee on which he serves. The Company does not
have a standing nominating committee.
Audit Committee. The Audit Committee reviews the engagement of the
independent accountants and their independence. It also reviews the audit
and non-audit fees of the independent accountants and the adequacy of the
Company's internal control procedures. The Audit Committee is composed of
Messrs. Davis, del Vecchio and Murray. The Committee met twice during the
fiscal year ended September 28, 1996.
Compensation Committee. In October 1996, the Board created a standing
Compensation Committee. Composed of non-employee directors, its purpose is
to establish, implement and monitor the strategy, policies and plans of the
Company and its subsidiaries for the compensation of all executive officers
of the Company and its subsidiaries. Its duties include reviewing and
determining the compensation of the executive officers of the Company and its
subsidiaries, including setting any Company, subsidiary or business unit
performance goals, and administering the Company's stock option and stock
purchase plans. Directors Davis, del Vecchio, Moran and Murray constitute
this Committee.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock as of December 13, 1996
for (1) each of the Company's directors, (2) all directors and executive
officers of the Company as a group, (3) each Named Executive Officer and (4)
each person known by the Company to own beneficially 5% or more of the
outstanding shares of its common stock:
<TABLE>
Number of Shares
of Common Stock Percent Ownership
Name and Address of Beneficially Owned of Common Stock
Beneficial Owner Outstanding
- ------------------------- ------------------ -----------------
<S> <C> <C>
Robert P. Stiller(1) 2,053,286 60.1%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
Robert D. Britt(2)(3) 50,000 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
Stephen J. Sabol(4) 48,071 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
Jonathan C. Wettstein(3)(5) 51,249 1.5%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
Paul Comey(6) 47,910 1.4%
c/o Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
William D. Davis(7) 4,700 0.1%
RD #2 Box 756
Waterbury, VT 05676
Jules A. del Vecchio(7)(8) 26,074 0.8%
c/o New York Life Insurance Co.
51 Madison Avenue
New York, NY 10010
David E. Moran(9) 1,250 (11)
16 Tamarack Place
Greenwich, CT 06831
Ian W. Murray(7) 2,500 0.1%
P.O. Box 23618
Hilton Head, SC 29925-3618
Hathaway & Associates 250,000 7.3%
119 Rowayton Avenue
Rowayton, CT 06853
All directors and officers 2,285,040 63.2%
as a group (9 persons)(10)
- ----------------------------
<FN>
(1) Includes an aggregate of 117,870 shares of common stock held by Trusts
for the benefit of Mr. Stiller's wife and children and excludes shares owned
by relatives of Mr. Stiller, if any, as to which Mr. Stiller disclaims
beneficial ownership.
(2) Includes 47,910 shares of common stock for Mr. Britt issuable upon
exercise of outstanding stock options and excludes 762 shares of common stock
issuable upon exercise of stock options under the Company's 1993 Stock Option
Plan which are not exercisable within 60 days.
(3) Excludes 500 shares of common stock for Mr. Britt and 2,014 shares for
Mr. Wettstein issuable upon exercise of fiscal 1997 stock options under the
Company's Employee Stock Purchase Plan (which options are not exercisable
until September 27, 1997).
(4) Includes 47,972 shares of common stock for Mr. Sabol issuable upon
exercise of stock options and excludes 824 shares of common stock issuable
upon exercise of stock option under the Company's 1993 Stock Option Plan
which are not exercisable within 60 days.
(5) Includes 47,956 shares of common stock for Mr. Wettstein issuable upon
exercise of outstanding stock options and excludes 808 shares of common stock
issuable upon exercise of stock options under the Company's 1993 Stock Option
Plan which are not exercisable within 60 days.
(6) Includes 47,910 shares of common stock for Mr. Comey issuable upon
exercise of outstanding stock options and excludes 762 shares of common stock
issuable upon exercise of stock options under the Company's 1993 Stock Option
Plan which are not exercisable within 60 days.
(7) Includes for each person 2,500 shares of common stock issuable upon
exercise of outstanding stock options and excludes for each person 2,500
shares of common stock issuable upon exercise of stock options under the
Company's 1993 Stock Option Plan which are not exercisable within 60 days.
(8) Includes 23,574 shares held of record by Phyllis Grennan Huffman,
Mr. del Vecchio's wife.
(9) Represents shares of common stock for Mr. Moran issuable upon the exercise
of stock options and excludes 3,750 shares of common stock issuable upon
exercise of stock options under the Company's 1993 Stock Option Plan which
are not exercisable within 60 days.
(10) Includes an aggregate of 200,498 shares of common stock issuable upon
exercise of stock options held by certain officers of the Company that are
exercisable within the next 60 days and excludes 2,514 shares of common stock
issuable upon exercise of fiscal 1996 stock options under the Company's
Employee Stock Purchase Plan (which options are not exercisable until
September 27, 1997) and excludes 14,406 shares of common stock issuable upon
exercise of stock options under the Company's 1993 Stock Option Plan which are
not exercisable within 60 days.
(11) Less than 0.1%
</FN>
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation, cash and non-
cash, awarded to, earned by or paid by the Company to its President and Chief
Executive Officer and to executive officers whose annual compensation
(consisting solely of base salary and bonus, if any) exceeded $100,000 for the
year ended September 28, 1996 (the "Named Executive Officers"):
<TABLE>
Summary Compensation Table
Long Term
Compensation-
Annual Other Securities
Name and Compensation Compensation Underlying
Principal Position Year Salary($) Bonus($) $(1) Stock Options
- ------------------ ---- ------------ -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Robert P. Stiller 1994 157,000 - 600 -
Chairman of the 1995 189,000 - - -
Board of Directors, 1996 190,419 57,300 - -
President and Chief
Executive Officer
Robert D. Britt 1994 96,400(5) - 25,800 165(3)
Chief Financial 1995 108,800 - 2,000 2,449(3)(4)
Officer, Treasurer, 1996 109,126 10,000 2,100 1,000(3)(6)
Secretary and
Director
Stephen J. Sabol 1994 116,700 - - 99(3)
Vice President of 1995 122,500 - - 1,648(4)
Sales and Director 1996 126,622 5,000 2,000 -
Jonathan C. Wettstein 1994 110,400(5) - - 190(3)
Vice President and 1995 119,700 - - 2,465(3)(4)
Plant Manager 1996 121,682 6,000 1,400 2,254(3)(6)
and Director
Paul Comey 1994 94,900(5) - - -
Executive Director 1995 104,200 - 1,800 1,524(4)
of Facilities and 1996 109,340 5,000 2,700 -(6)
Process Engineering
- -------------------------
<FN>
(1) Except as noted, represents matching contributions to the Company's
401(k) Plan.
(2) Includes $25,700 for reimbursement of relocation expenses.
(3) Represents common stock shares issuable upon exercise of options granted
under the Company's Employee Stock Purchase Plan (includes 925 shares for Mr.
Britt and 849 shares for Mr. Wettstein in fiscal 1995).
(4) Represents common stock shares issuable upon exercise of options granted
under the Company's 1993 Stock Option Plan (includes 1,524 shares for Mr.
Britt and 1,616 shares for Mr. Wettstein in fiscal 1995).
(5) Executive agreed to a reduced base salary during a portion of fiscal
1994 as part of the Company's fiscal 1994 cost containment program.
(6) The term of outstanding options to purchase 47,148 shares held by Mr.
Britt, 47,148 shares held by Mr. Wettstein and 23,574 shares held by Mr.
Comey were extended in fiscal 1996 for an additional five years and now
expire in 2003. The exercise price of these options exceeded the fair market
value of the common stock at the date of the extension.
</FN>
</TABLE>
<PAGE>
Employment Agreements
On July 1, 1993, Roasters entered into a four-year employment agreement
with Robert Stiller, its President and Chief Executive Officer. The
employment agreement provides that Mr. Stiller will receive a minimum base
annual salary of $185,000, performance-based bonuses to be determined from
time to time by the Board of Directors of the Company and additional
compensation equal to a maximum of 75% of his then base compensation in
consideration for Mr. Stiller's agreement to remain employed with the Company
for a period of 90 days after the consummation of any sale of all or
substantially all of the stock or assets of the Company or a merger or
consolidation of the Company in which the Company is not the surviving entity.
In addition, Mr. Stiller is entitled to a severance payment consisting
of 100% of his then base compensation in the event that he is terminated for
any reason other than (i) for cause or (ii) his voluntary resignation.
Mr. Stiller is also entitled to certain benefits, including health insurance
coverage, life insurance and long-term disability coverage.
On March 26, 1993, Roasters entered into an employment agreement with
Robert D. Britt, its Chief Financial Officer, Treasurer and Secretary.
The employment agreement provides that Mr. Britt will receive a minimum base
annual salary of $100,000, subject to certain annual cost of living adjustments,
performance-based bonuses to be determined from time to time by the Board of
Directors and additional compensation up to a maximum of 200% of his then base
compensation payable over 24 months in the event of a sale of all or
substantially all of the stock or assets of the Company or a merger or
consolidation of the Company in which the Company is not the surviving entity
or any transaction or series of related transactions resulting in Mr. Stiller
owning less than 50% of the Company's issued and outstanding common stock.
In addition, Mr. Britt is entitled to a severance payment equal to 50% of his
then base compensation in the event that he is terminated for any reason
other than (i) for cause or (ii) his voluntary resignation. Mr. Britt is
also entitled to reimbursement of certain relocation expenses. The employment
agreement may be terminated at any time by Roasters or Mr. Britt.
On July 1, 1993, Roasters entered into an employment agreement with
Stephen J. Sabol, its Vice President of Sales. The employment agreement
provides that Mr. Sabol will receive a minimum base annual salary of $120,000
and performance based bonuses to be determined from time to time by the Board
of Directors. Mr. Sabol was also reimbursed for certain relocation expenses.
The employment agreement may be terminated at any time by Roasters or Mr.
Sabol.
On July 1, 1993, Roasters entered into an employment agreement with
Jonathan C. Wettstein, its Vice President and Plant Manager. The employment
agreement provides that Mr. Wettstein will receive a minimum base annual
salary of $115,000, performance based bonuses to be determined from time to
time by the Board of Directors and additional compensation up to a maximum of
100% of his then base compensation in the event of a sale of all or
substantially all of the stock or assets of the Company or a merger or
consolidation of the Company in which the Company is not the surviving
entity. In addition, Mr. Wettstein is entitled to a severance payment
consisting of 50% of his then base compensation in the event that he
is terminated for any reason other than (i) for cause or (ii) his voluntary
resignation. The employment agreement may be terminated at any time by
Roasters or Mr. Wettstein.
On July 1, 1993, Roasters entered into an employment agreement with Paul
Comey, its Executive Director of Facilities and Process Engineering. The
employment agreement provides that Mr. Comey will receive a minimum base
annual salary of $100,000 and performance-based bonuses to be determined from
time to time by the Board of Directors. The employment agreement may be
terminated at any time by Roasters or Mr. Comey.
Each of the above employment agreements also provides that the officer
shall not (i) disclose or use any confidential information of the Company
during or after the term of his agreement, (ii) compete with the Company or
any of its affiliates during the term of his agreement, or in certain
circumstances, for a period of six months thereafter or (iii) recruit any
employee of the Company for employment in any other business competitive with
the Company for a period of one year after the termination of his agreement.
<PAGE>
Stock Options Granted in Fiscal 1996
The following table sets forth information concerning individual grants
of stock options made by the Company during the fiscal year ended September
28, 1996, to each of the Named Executive Officers.
<TABLE>
OPTION GRANTS
IN THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
Individual Grants
Percent of
Total Options
Granted to
Employees in Exercise or
Fiscal Year Base Price Expiration
Name Granted 1996(1) (per share) Date(3)
- ----------------- ------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Robert P. Stiller - - - -
Robert D. Britt 1,000(2) 3.3% $5.10 09/28/96
Stephen J. Sabol - - - -
Jonathan C. Wettstein 2,254(2) 7.5 % $5.10 09/28/96
Paul Comey - - - -
- --------------------------
<FN>
(1) In fiscal 1996, the Company granted a total of 29,878 options (21,878
granted under the Company's Employee Stock Purchase Plan and 8,000 options
granted under the Company's 1993 Stock Option Plan) to employees and such
number was used in calculating the percentages above. Effective July 26,
1996, the term of 141,440 options under individual non-qualified option
agreements including 47,148 held by Mr. Britt, 47,148 held by Mr. Wettstein
and 23,574 held by Mr. Comey, was extended from five years to ten years and
are not stated as new option grants for purposes of this table.
(2) These options were granted under the Company's Employee Stock Purchase
Plan.
(3) The options granted under the Company's Employee Stock Purchase Plan
expire on the last day of the fiscal year in which such options are granted.
</FN>
</TABLE>
<PAGE>
Aggregated Options Exercises
- ----------------------------
The following table sets forth information (on an aggregated basis)
concerning each exercise of stock options during the fiscal year ended
September 28, 1996 by each of the Named Executive Officers and the final
year-end value of unexercised options.
<TABLE>
AGGREGATED OPTION EXERCISES
IN THE FISCAL YEAR ENDED SEPTEMBER 28, 1996
FISCAL YEAR END OPTION VALUES
Number of Value of Unexercised
Unexercised "In-the-Money"
Options at Options at
Shares Value Fiscal Year End Fiscal Year End(2)
Acquired Realized Exer- Unexer- Exer- Unexer-
Name on Exercise (1) cisable cisable cisable cisable
- ----------------- ----------- -------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Stiller - - - - - -
Robert D. Britt 1,000(3) $ 900 47,529 1,143 $ 0 $ 0
Stephen J. Sabol - - 47,560 1,236 $215,702 $ 0
Jonathan C.
Wettstein 2,254(3) $2,029 47,552 1,212 $0 $ 0
Paul Comey - - 47,529 1,143 $107,851 $ 0
- ---------------------------
<FN>
(1) The exercise price of the options granted under the Company's Employee
Stock Purchase Plan is the lower of 85% of the closing price of the Company's
common stock (i) on the first day of the fiscal year on which trading occurred
on NASDAQ or (ii) on the last day of the fiscal year on which trading occurred
on NASDAQ (the lower of the two closing prices shall be referred to herein as
the "Lower Closing Price"). The value realized upon exercise of these options
has been calculated to equal 15% of the Lower Closing Price.
(2) Options are "in-the-money" at the fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise or base price of
the option. The amounts set forth represent the difference between the fair
market value of the securities underlying the option on September 28, 1996,
assumed by the Company to have been $7.125 per share, and the exercise price
of the applicable options ($2.55 per share), multiplied by the applicable
number of options.
(3) Options exercised were those granted under the Employee Stock Purchase Plan.
</FN>
</TABLE>
<PAGE>
Board of Directors Compensation
- -------------------------------
Officers are elected annually and serve at the discretion of
the Board of Directors. Directors are elected annually by the
Company's stockholders. Each of the directors of the Company (other
than any of such persons who are also officers of the Company) is
paid a retainer and is reimbursed for ordinary and necessary travel
expenses incurred in connection with attendance at each Board
meeting. The annual retainer in fiscal 1996, fiscal 1995 and fiscal
1994 was $4,000. In fiscal 1997, the annual retainer will be
$8,000. In addition, Mr. Murray was paid $750 for additional
services in fiscal 1996.
The Company has granted five-year, non-statutory options to
purchase 5,000 shares of common stock to each non-employee director
under the Company's 1993 Stock Option Plan. Messrs. Davis, del
Vecchio and Murray's options were granted in fiscal 1994 at an
exercise price of $6.00 per share and vest ratably over a four-year
period from the date of grant. Mr. Moran's options were granted in
fiscal 1996 at an option price of $6.25 per share and vest ratably
over a four-year period from the date of grant.
CERTAIN TRANSACTIONS
From time to time since the Company's inception and prior to
fiscal 1991, Robert P. Stiller, the Company's President, Chief
Executive Officer and majority stockholder, had advanced funds to
the Company to meet its working capital needs. At September 24,
1994, the Company had outstanding a note payable to Mr. Stiller, the
Company's majority stockholder, totaling $416,000. The note was
payable in quarterly installments of $25,000 and bore interest at
7.91%, payable monthly. The note was paid in full in April 1995.
Interest paid by the Company to the majority stockholder for the
year ended September 30, 1995 was $15,000.
Mr. Stiller agreed to guarantee the repayment of the
indebtedness incurred by the Company to the Central Vermont Economic
Development Corporation. See Note 8 of "Notes to Consolidated
Financial Statements" for a description of the terms of such indebtedness.
Any future transactions between the Company and its officers,
directors, principal stockholders or other affiliates will be on
terms no less favorable to the Company than could be obtained from
unaffiliated third parties on an arms-length basis and will be
approved by a majority of the Company's independent and
disinterested directors. Any loans to officers, directors,
principal stockholders or affiliates of any of them will be made for
bona fide business purposes, will be on terms no less favorable than
could be obtained from unaffiliated third parties and will be
approved by a majority of the Company's independent and
disinterested directors.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors and persons
who own more than 10% of the Company's Common Stock to file reports
of ownership and changes in ownership with the Securities and
Exchange Commission, the Boston Stock Exchange and NASDAQ. SEC
rules require reporting persons to supply the Company with copies of
these reports.
Based solely on its review of the copies of such reports
received and written representations from reporting persons, the
Company believes that with respect to the fiscal year ended
September 28, 1996, all reporting persons timely filed the required
reports except Mr. Moran, whose November 1995 grant of stock options in
connection with his appointment to the Board of Directors, was
reported on Form 4 in February 1996 instead of December 1995.
The Board of Directors of the Company recommends a vote FOR the
election of each of the eight nominees to the Board of Directors
under Proposal 1.
PROPOSAL 2
Amendment of the 1993 Stock Option Plan
In July, 1996, the Board voted to amend the Company's 1993
Stock Option Plan (the "Plan") to increase to 275,000 the number of
shares of Common Stock for which options may be granted. Currently,
a total of 75,000 shares of Common Stock (subject to adjustment in
certain circumstances) have been reserved for issuance upon the
exercise of options granted under the Plan.
The purpose of the Plan is to advance the interests of the
Company by providing an opportunity for ownership of the Common
Stock by employees, agents and directors of the Company. By
providing an opportunity for such stock ownership, the Company seeks
to attract and retain qualified personnel, and otherwise to provide
additional incentive for optionees to promote the success of its
business. Options granted under the Plan may be either incentive
stock options ("ISOs") meeting the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or non-
qualified options which are not intended to meet the requirements of
Section 422 of the Code ("NSOs").
The Board of Directors has historically administered the Plan.
Beginning in October, 1996, the Compensation Committee of the Board
began administering the Plan. The Committee is empowered to
determine, among other things, recipients of grants, whether a grant
will consist of ISOs or NSOs or a combination thereof, the price
(within limits) at which the option is exercisable, the number of
shares of Common Stock to be subject to such options, when the
options are first exercisable and when they expire.
In determining the eligibility of an individual to be granted
an option as well as in determining the number of shares of Common
Stock to be optioned to any individual, the Committee may take into
account the position and responsibilities of the individual being
considered, the nature and value to the Company of his or her
service and accomplishments, his or her present and potential
contribution to the success of the Company, and such other factors
as the Committee may deem relevant.
The option price or prices of shares of the Common Stock for
options designated as NSOs will be as determined by the Committee;
provided, however, such option price will be not less than 85% of
the fair market value of the stock subject to such option determined
as of the date of grant of such option. Subject to the certain
conditions, the option price or prices of shares of the Common Stock
for ISOs will be at least the fair market value of such Common Stock
at the time the option is granted as determined by the Committee in
accordance with the regulations promulgated under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Regulations").
Each option granted under the Plan will be exercisable at such
time or times and during such period as set forth in the Option
Agreement; provided, however, that no option granted under the Plan
will have a term in excess of 10 years from the date of grant.
An option granted to any optionee whose employment is
terminated will terminate on the earlier of (i) ninety days after
the date such optionee's employment is terminated or (ii) the date
on which the option expires by its terms, and will only be
exercisable to the extent such right has accrued and is in effect on
the date of termination. If the employment of an optionee is
terminated by the Company for cause or because the optionee is in
breach of any employment agreement, such option will terminate on
the date the optionee's employment is terminated by the Company.
If the employment of an optionee is terminated by the Company
because the optionee has become permanently disabled (within the
meaning of Section 22(e)(3) of the Code), such option will terminate
on the earlier of (i) one year after the date such optionee's
employment is terminated or (ii) the date on which the option
expires by its terms, and all such options will become immediately
exercisable.
In the event of the death of any optionee, any option granted
to such optionee will terminate one year after the date of death or
on the date on which the option expires by its terms, whichever
occurs first, and such options may be exercised as to the full
number of shares covered thereby, whether or not the optionee was
entitled to do so at the date of his or her death, by the executor,
administrator or personal representative of such optionee, or by any
person or persons who acquired the right to exercise such option by
bequest or inheritance or by reason of the death of such optionee.
Options granted under the Plan may provide for the payment of
the exercise price by delivery of cash or a check payable to the
order of the Company or, subject to certain conditions, Common
Stock, in an amount equal to the exercise price of such options. To
the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice to the
Company, accompanied by payment in full for such shares. No partial
exercise may be made for less than 100 full shares of Common Stock.
The right of any optionee to exercise any option granted to him
or her will not be assignable or transferable by such optionee other
than by will or the laws of descent and distribution, and any such
option will be exercisable during the lifetime of such optionee only
by him or her.
Unless sooner terminated as provided in the Plan, the Plan will
terminate in July 2003. The Committee may at any time terminate the
Plan or make such modification or amendment thereof as it deems
advisable; provided, however, (i) the Committee may not, without the
approval of the stockholders of the Company increase the maximum
number of shares for which options may be granted or change the
designation of the class of persons eligible to receive options
under the Plan and (ii) any such modification or amendment of the
Plan will be approved by a majority of the stockholders of the
Company to the extent that such stockholder approval is necessary to
comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act, applicable state law, or
applicable National Association of Securities Dealers, Inc. or
exchange listing requirements.
ISOs granted under the Plan are subject to certain
restrictions, including a limitation on the value of options to be
exercised in a calendar year and restriction on the exercise price
of ISOs held by owners of more than 10% of the voting power of all
classes of stock of the Company.
The approximate number of individuals eligible to receive ISOs
under the Plan, as amended, is 291 as of January 31, 1997.
As of January 31, 1997 options to purchase an aggregate of
133,084 shares had been granted under the Plan, of which 118,700
were outstanding at January 31, 1997. The outstanding options are
exercisable at prices ranging from $6.00 to $8.50 per share. The
last sales price of the Common Stock on January 31, 1997 as reported
by NASDAQ was $7.125.
The specific future benefits to be received by executive
officers, directors and employees of the Company under the Plan are
not determinable.
The following table sets forth for (i) all current executive
officers as group; (ii) all current directors who are not executive
officers as a group; (iii) each nominee for election as a director;
(iv) any individual who has received 5% or more of grants under the
Plan; and (v) all employees, including all current officers who are
not executive officers, as a group, the number of shares for which
options have been granted under the Plan as of January 31, 1997:
<TABLE>
Number of Shares for which
Name of Individual or Group Options Have Been Granted
------------------------------ ---------------------------
<S> <C>
Robert P. Stiller* 0
Robert D. Britt* 1,524
Stephen J. Sabol* 1,648
Jonathan C. Wettstein* 1,616
Paul Comey 1,524
William D. Davis* 5,000
Jules A. Del Vecchio* 5,000
Ian W. Murray* 5,000
David E. Moran* 5,000
All Current Executive Officers (5 persons) 6,312
All Current Non-Executive Directors (4 persons) 20,000
All Employees (1,154 persons) 93,300
- ----------------------------
<FN>
* Nominee for director.
</FN>
</TABLE>
<PAGE>
Federal Income Tax Consequences
- -------------------------------
The following summary is intended only as a general guide as to
the federal income tax consequences under current law with respect
to participation in the Plan and does not attempt to describe all
possible federal or other tax consequences of such participation.
Furthermore, the tax consequences of options are complex and subject
to change, and a taxpayer's particular situation may be such that
some variation of the described rules is applicable. Optionees
should consult their own tax advisors prior to the exercise of any
option and prior to the disposition of any shares of Common Stock
acquired upon the exercise of an option.
Generally, the grant of either ISOs or NSOs is not a taxable
event either for the Company or for the employee. In the unusual
case where an NSO has a readily ascertainable fair market value on
the date of grant, the employee will recognize such value as
compensation income and the Company will be entitled to a
corresponding deduction.
No income is recognized by the employee, and no deduction may
be taken by the Company, when an ISO is exercised, except for
alternative minimum tax purposes (see below). When an NSO is
exercised, the employee generally recognizes ordinary income equal
to the difference between the fair market value of the stock on the
date of exercise and the option price. If, however, stock received
upon exercise of an NSO is subject to substantial restrictions,
income recognition will be postponed until the restrictions lapse,
unless the employee elects to be taxed currently. The Company is
entitled to a concurrent deduction of the amount of income
recognized by the employee.
Because the value of stock received pursuant to the exercise of
an NSO has already been taxed to the employee, its further
disposition is not subject to any restrictions (other than those, if
any, imposed by applicable securities law). Upon disposition of
such stock, any difference between the sale price and the fair
market value of the stock on the date of exercise is a capital gain
or loss. When stock acquired pursuant to exercise of an ISO is
disposed of, the difference between its fair market value on the
date of disposition and the option price is a capital gain or loss;
provided, that the stock is not disposed of within either (i) two
years from the date the ISO was granted or (ii) one year from the
date the stock was acquired (a "disqualifying disposition"). No
deduction may be taken by the Company. These holding periods do not
apply in the event the employee dies and his or her estate exercises
the ISO. Furthermore, transfers (i) to a trustee, receiver or
fiduciary in connection with an insolvency proceeding or (ii) by
such trustee, receiver or fiduciary for the benefit of creditors,
are not disqualifying dispositions.
If stock acquired pursuant to exercise of an ISO is disposed of
in a disqualifying disposition, the difference between its fair
market value on the date of exercise and the option price is
ordinary income to the employee (and is deducted by the employer) in
the year of the disposition and any further gain on disposition is
treated as capital gain. If the value of the stock on the date of
disposition is less than its value on the date of exercise, only the
difference between the exercise price and the sale price is treated
as ordinary income.
An employee may be subject to an alternative minimum tax
("AMT") as a result of the exercise of an ISO. In general, the tax
base for the AMT is alternative minimum taxable income ("AMTI")
which is defined as the employee's adjusted gross income, as
modified by certain adjustments, plus tax preference items for the
year, reduced by certain deductions. This amount is then reduced by
an exemption amount and is subject to tax at a rate of 24%. The AMT
is imposed to the extent that it exceeds an employee's regular tax
liability.
For purposes of the AMT, the difference between the fair market
value of the acquired stock on the exercise date and the exercise
price of the ISO must be included in AMTI for the year in which it
would have been included in income if the ISO were an NSO. A
special rule applies, however, in the event that stock so acquired
is sold in a disqualifying disposition in the same year the ISO is
exercised and the amount realized on such sale is less than the
stock's fair market value on the date of exercise. In such event,
the amount includable in AMTI cannot exceed the difference between
the amount realized on the sale of such stock and the employee's tax
basis for such stock. The employee will then have a basis in the
stock for AMT purposes equal to the exercise price of the ISO plus
the amount of income recognized for AMT purposes.
The Board of Directors of the Company recommends a vote FOR the
approval of the amendment to the Company's 1993 Stock Option Plan
under this Proposal 2.
<PAGE>
PROPOSAL 3
Ratification of Appointment
of the Independent Accountants
Price Waterhouse LLP has served as the Company's independent
accountants since 1986. The Company expects that a representative
of Price Waterhouse LLP will attend the Annual Meeting. This
representative will have an opportunity to make a statement, if he
or she desires, and will be available to respond to appropriate
questions from stockholders.
The Board of Directors of the Company recommends a vote FOR the
ratification of Price Waterhouse LLP as the independent accountants
for the Company under Proposal 3.
OTHER MATTERS
The Board of Directors is not aware of any matters not set
forth herein that may come before the Annual Meeting. However, if
other matters are properly brought before the Annual Meeting, it is
intended that the persons named in the accompanying proxy will vote
as the Board of Directors directs.
By order of the Board of Directors,
/s/ Robert D. Britt
-------------------
Robert D. Britt
Secretary
Dated: February 28, 1997
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 4, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Robert P.
Stiller and Robert D. Britt, and each of them, as proxies with
full power of substitution, to represent and vote all of the
shares which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of Green Mountain Coffee, Inc. (the
"Company") to be held Friday, April 4, 1997, at 3:00 p.m. at
Mona's Restaurant, 3 Main Street, Burlington, Vermont, and at any
and all adjournments thereof. The undersigned hereby revokes any
proxies previously given.
1. PROPOSAL 1 - To elect eight directors.
Nominees: Robert P. Stiller, Robert D. Britt, Stephen J. Sabol,
Jonathan C. Wettstein, William D. Davis, Jules A. del Vecchio,
David E. Moran and Ian W. Murray
[__] FOR all nominees [__] WITHHELD from all nominees
[__] FOR, except vote withheld from the following nominees:
_____________________________________________________________
2. PROPOSAL 2 - Amendment of the 1993 Stock Option Plan.
[__] FOR [__] AGAINST [__] ABSTAIN
3. PROPOSAL 3 - Ratification of Price Waterhouse LLP as auditors
[__] FOR [__] AGAINST [__] ABSTAIN
4. In their discretion on any other business that may properly
come before the Meeting and any adjournments.
(Please sign on reverse.)
This proxy will be voted as directed or, if no direction is given,
will be voted FOR the nominees under Proposal 1, FOR Proposals 2 and 3,
and in the proxies' discretion on all other matters that may properly
come before the Meeting. If this proxy is not marked to withhold
authority to vote for any nominee it will be voted FOR all nominees.
If you receive more than one proxy card, please sign and return all cards in
the accompanying envelope. Please check your mailing address as it appears
on this card. If it is inaccurate please include your correct address below.
Dated: _______________________________, 1997
______________________________________
(Signature)
______________________________________
(Signature)
Note: Please sign exactly as your name or
names appear on this card. Joint owners
should each sign personally. If signing as
a fiduciary or attorney, please give your
name and exact title.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
1993 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Green Mountain Coffee, Inc. 1993 Stock
Option Plan (the "Plan") is to advance the interests of Green
Mountain Coffee, Inc., a Delaware corporation (the "Company"), by
providing an opportunity for ownership of the stock of the
Company by employees, agents and directors of, and consultants
to, the Company and its subsidiaries, as defined below. By
providing an opportunity for such stock ownership, the Company
seeks to attract and retain such qualified personnel, and
otherwise to provide additional incentive for optionees to
promote the success of its business. This Plan and the grant of
any option hereunder shall be effective only upon, and
concurrently with, the completion of the Company's "initial
public offering". "Initial public offering" means an
underwritten public offering on a firm commitment basis pursuant
to an effective registration statement under the Securities Act
of 1933, as amended (the "1933 Act"), covering the offer and sale
of Common Stock, as defined below, for the account of the
Company, and the completion thereof shall mean the delivery of
and payment for the shares of Common Stock pursuant to such
offering.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but
unissued or Treasury shares of the common stock, $.10 par value
per share, of the Company (the "Common Stock") for which options
may be granted under the Plan (the "Options") shall be 275,000,
subject to adjustment as provided in Section 13 hereof.
(b) If an Option granted or assumed hereunder shall expire
or terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for subsequent Option grants under the Plan.
(c) Stock issuable upon exercise of an Option may be
subject to such restrictions on transfer, repurchase rights or
other restrictions as shall be determined by the Board of
Directors of the Company (the "Board").
3. Administration of the Plan.
The Plan shall be administered by the Board. No member of
the Board shall act upon any matter exclusively affecting any
Option granted or to be granted to himself or herself under the
Plan. A majority of the members of the Board shall constitute a
quorum, and any action may be taken by a majority of those
present and voting at any meeting. The decision of the Board as
to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The
Board, in its sole discretion, may grant Options to purchase
shares of the Common Stock, and the Board shall issue shares upon
exercise of such Options as provided in the Plan. The Board
shall have authority, subject to the express provisions of the
Plan, to construe the respective Option agreements and the Plan,
to prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and provisions of the respective
Option agreements, which may but need not be identical, and to
make all other determinations in the judgment of the Board
necessary or desirable for the administration of the Plan. The
Board may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Option agreement in the
manner and to the extent it shall deem expedient to implement the
Plan and shall be the sole and final judge of such expediency.
No director shall be liable for any action or determination made
in good faith. The Board, in its discretion, may delegate its
power, duties and responsibilities to a committee, consisting of
two or more members of the Board, all of whom are "disinterested
persons" (as hereinafter defined). If a committee is so
appointed, all references to the Board herein shall mean and
relate to such committee, unless the context otherwise requires.
For the purposes of the Plan, a director or member of such
committee shall be deemed to be "disinterested" only if such
person qualified as a "disinterested person" within the meaning
of paragraph (c)(2) of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as such term is interpreted from time to time.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by
action of the Board and may be designated as either incentive
stock options meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or non-
qualified options which are not intended to meet the requirements
of such Section 422 of the Code, the designation to be in the
sole discretion of the Board. Options designated as incentive
stock options that fail to continue to meet the requirements of
Section 422 of the Code shall be redesignated as non-qualified
options automatically without further action by the Board on the
date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted
to any full-time employees of the Company or any subsidiary
corporation (herein called "subsidiary" or "subsidiaries"), as
defined in Section 424(f) of the Code and the Treasury
regulations promulgated thereunder (the "Regulations").
Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock
options pursuant to the Plan. Options designated as non-
qualified options may be granted to (i) officers and key
employees of the Company or of any of its subsidiaries, or (ii)
agents, directors of and consultants to the Company, whether or
not otherwise employees of the Company.
In determining the eligibility of an individual to be
granted an Option, as well as in determining the number of shares
to be optioned to any individual, the Board shall take into
account the position and responsibilities of the individual being
considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the
Company or its subsidiaries, and such other factors as the Board
may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options)
granted under this Plan shall be subject to the following
restrictions:
(a) Limitation on Number of Shares. Ordinarily, the
aggregate fair market value of the shares of Common Stock
with respect to which incentive stock options are granted
(determined as of the date the incentive stock options are
granted), exercisable for the first time by an individual
during any calendar year shall not exceed $100,000. If an
incentive stock option is granted pursuant to which the
aggregate fair market value of shares with respect to which
it first becomes exercisable in any calendar year by an
individual exceeds such $100,000 limitation, the portion of
such option which is in excess of the $100,000 limitation
shall be treated as a non-qualified option pursuant to
Section 422(d)(1) of the Code. In the event that an indi
vidual is eligible to participate in any other stock option
plan of the Company or any subsidiary of the Company which
is also intended to comply with the provisions of Section
422 of the Code, such $100,000 limitation shall apply to the
aggregate number of shares for which incentive stock options
may be granted under this Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom
an incentive stock option is granted pursuant to the
provisions of this Plan is on the date of grant the owner of
stock (as determined under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any subsidiary of
the Company, then the following special provisions shall be
applicable to the incentive stock options granted to such
individual:
(i) The Option price per share subject to
such incentive stock options shall be not less
than 110% of the fair market value of the stock
determined at the time such Option was granted.
In determining the fair market value under this
clause (i), the provisions of Section 8 hereof
shall apply.
(ii) The incentive stock option by its terms
shall not be exercisable after the expiration of
five (5) years from the date such option is
granted.
7. Option Agreement.
Each Option shall be evidenced by an Option agreement (the
"Agreement") duly executed on behalf of the Company and by the
optionee to whom such Option is granted, which Agreement shall
comply with and be subject to the terms and conditions of the
Plan. The Agreement may contain such other terms, provisions and
conditions which are not inconsistent with the Plan as may be
determined by the Board; provided that Options designated as
incentive stock options shall meet all of the conditions for
incentive stock options as defined in Section 422 of the Code.
No Option shall be granted within the meaning of the Plan and no
purported grant of any Option shall be effective until the
Agreement shall have been duly executed on behalf of the Company
and the optionee. More than one Option may be granted to an
individual.
8. Option Price.
(a) The Option price or prices of shares of the Common
Stock for Options designated as non-qualified stock options shall
be as determined by the Board; provided, however, such Option
price shall be not less than 85% of the fair market value of the
stock subject to such Option, determined as of the date of grant
of such Option.
(b) Subject to the conditions set forth in Section 6(b)
hereof, the Option price or prices of shares of the Company's
Common Stock for incentive stock options shall be at least the
fair market value of such Common Stock at the time the Option is
granted as determined by the Board in accordance with the
Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national
securities exchange, the fair market value shall be the mean
between the high and low sales prices, if any, on the largest
such exchange on the date of the grant of the Option or, if none,
shall be determined by taking a weighted average of the means
between the highest and lowest sales prices on the nearest date
before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the shares are not
then listed on any such exchange, the fair market value of such
shares shall be the mean between the closing "Bid" and the
closing "Ask" prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") for the date of the grant of the Option, or, if none,
shall be determined by taking a weighted average of the means
between the highest and lowest sales prices on the nearest date
before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the shares are not
then either listed on any such exchange or quoted in NASDAQ, the
fair market value shall be the mean between the average of the
"Bid" and "Ask" price quotations on the National Daily Quotation
Service for the date of the grant of the Option, or, if none,
shall be determined by taking a weighted average of the means
between the highest and lowest sales prices on the nearest date
before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the fair market
value cannot be determined under the preceding three sentences,
it shall be determined in good faith by the Board.
9. Manner of Payment: Manner of Exercise.
(a) Options granted under the Plan may provide for the
payment of the exercise price by delivery of (i) cash or a check
payable to the order of the Company in an amount equal to the
exercise price of such Options, (ii) shares of Common Stock owned
by the optionee having a fair market value equal in amount to the
exercise price of the Options being exercised, or (iii) any
combination of (i) and (ii); provided, however, that payment of
the exercise price by delivery of shares of Common Stock owned by
such optionee may be made only upon the condition that such
payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board, unless such
condition is waived by the Board. The fair market value of any
shares of Common Stock which may be delivered upon exercise of an
Option shall be determined by the Board in accordance with
Section 8 hereof.
(b) To the extent that the right to purchase shares under
an Option has accrued and is in effect, Options may be exercised
in full at one time or in part from time to time, by giving
written notice, signed by the person or persons exercising the
Option, to the Company, stating the number of shares with respect
to which the Option is being exercised, accompanied by payment in
full for such shares as provided in subparagraph (a) above. Upon
such exercise, delivery of a certificate for paid-up non-
assessable shares shall be made at the principal office of the
Company to the person or persons exercising the Option at such
time, during ordinary business hours, after thirty (30) days but
not more than ninety (90) days from the date of receipt of the
notice by the Company, as shall be designated in such notice, or
at such time, place and manner as may be agreed upon by the
Company and the person or persons exercising the Option.
10. Exercise of Options.
Each Option granted under the Plan shall, subject to Section
11 (b) and Section 13 hereof, be exercisable at such time or
times and during such period as shall be set forth in the
Agreement; provided, however, that no Option granted under the
Plan shall have a term in excess of ten (10) years from the date
of grant. To the extent that an Option to purchase shares is not
exercised by an optionee when it becomes initially exercisable,
it shall not expire but shall be carried forward and shall be
exercisable, on a cumulative basis, until the expiration of the
exercise period. No partial exercise may be made for less than
one hundred (100) full shares of Common Stock.
11. Term of Options: Exercisability.
(a) Term.
(i) Each Option shall expire on a date
determined by the Board which is not more than ten
(10) years from the date of the granting thereof,
except (a) as otherwise provided pursuant to the
provisions of Section 6(b) hereof, and (b) for
earlier termination as herein provided.
(ii) Except as otherwise provided in this
Section 11, an Option granted to any optionee
whose employment, for the Company or any of its
subsidiaries, is terminated, shall terminate on
the earlier of ninety days after the date such
optionee's employment, for the Company or any such
subsidiary, is terminated, or (ii) the date on
which the Option expires by its terms.
(iii) If the employment of an optionee is
terminated by the Company or any of its
subsidiaries for cause or because the optionee is
in breach of any employment agreement, such Option
will terminate on the date the optionee's
employment is terminated by the Company or any
such subsidiary.
(iv) If the employment of an optionee is
terminated by the Company or any of its
subsidiaries because the optionee has become
permanently disabled (within the meaning of Section
22(e)(3) of the Code), such Option shall terminate
on the earlier of (i) one year after the date such
optionee's employment, for the Company or any such
subsidiary, is terminated, or (ii) the date on
which the Option expires by its terms.
(v) In the event of the death of any
optionee, any Option granted to such optionee
shall terminate one year after the date of death,
or on the date on which the Option expires by its
terms, whichever occurs first.
(b) Exercisability.
(i) Except as provided below, an Option
granted to an optionee whose employment, for the
Company or any of its subsidiaries, is terminated,
shall be exercisable only to the extent that the
right to purchase shares under such Option has
accrued and is in effect on the date such
optionee's employment, for the Company or any such
subsidiary, is terminated.
(ii) An Option granted to an optionee whose
employment is terminated by the Company or any of
its subsidiaries because he or she has become
permanently disabled, as defined above, shall be
immediately exercisable as to the full number of
shares covered by such Option, whether or not
under the provisions of Section 10 hereof such
Option was otherwise exercisable as of the date of
disability.
(iii) In the event of the death of an
optionee, the Option granted to such optionee may
be exercised as to the full number of shares
covered thereby, whether or not under the
provisions of Section 10 hereof the optionee was
entitled to do so at the date of his or her death,
by the executor, administrator or personal
representative of such optionee, or by any person
or persons who acquired the right to exercise such
Option by bequest or inheritance or by reason of
the death of such optionee.
12. Options Not Transferable.
The right of any optionee to exercise any Option granted to
him or her shall not be assignable or transferable by such
optionee other than by will or the laws of descent and
distribution, and any such Option shall be exercisable during the
lifetime of such optionee only by him or her. Any Option
granted under the Plan shall be null and void and without effect
upon the bankruptcy of the optionee to whom the Option is
granted, or upon any attempted assignment or transfer, except as
herein provided, including without limitation, any purported
assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition, attachment, trustee process
or similar process, whether legal or equitable, upon such Option.
13. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock
are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another
corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, stock split-
up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of
shares as to which Options may be granted 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 the optionee 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 and with a corresponding adjustment in
the Option price per share.
In addition, unless otherwise determined by the Board in its
sole discretion, in the case of any (i) sale or conveyance to
another entity of all or substantially all of the property and
assets of the Company or (ii) Change in Control (as hereinafter
defined) of the Company, the purchaser(s) of the Company's assets
or stock, in his, her or its sole discretion, may deliver to the
optionee the same kind of consideration that is delivered to the
shareholders of the Company as a result of such sale, conveyance
or Change in Control, or the Board may cancel all outstanding
Options in exchange for consideration in cash or in kind, which
consideration in both cases shall be equal in value to the value
of those shares of stock or other securities the optionee would
have received had the Option been exercised (but only to the
extent then exercisable) and had no disposition of the shares
acquired upon such exercise been made prior to such sale,
conveyance or Change in Control, less the Option price therefor.
Upon receipt of such consideration, all Options (whether or not
then exercisable) shall immediately terminate and be of no
further force or effect. The value of the stock or other
securities the optionee would have received if the Option had
been exercised shall be determined in good faith by the Board,
and in the case of shares of Common Stock, in accordance with the
provisions of Section 8 hereof.
The Board shall also have the power and right to accelerate
the exercisability of any Options, notwithstanding any
limitations in this Plan or in the Agreement upon such a sale,
conveyance or Change in Control. Upon such acceleration, any
Options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options
under Section 422 of the Code as a result of such acceleration
shall be redesignated as non-qualified stock options.
A "Change in Control" shall be deemed to have occurred if
any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, who prior to such time
owned less than fifty percent (50%) of the then outstanding
Common Stock, shall acquire such additional shares of Common
Stock in one or more transactions, or series of transactions,
such that following such transaction or transactions, such person
or group and affiliates beneficially own fifty percent (50%) or
more of the Common Stock outstanding.
Upon dissolution or liquidation of the Company, all Options
granted under this Plan shall terminate, but each optionee (if at
such time in the employ of or otherwise associated with the
Company or any of its subsidiaries as a director, agent or
consultant) shall have the right, immediately prior to such
dissolution or liquidation, to exercise his or her Option to the
extent then exercisable.
If by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization, or
liquidation, the Board shall authorize the issuance or assumption
of a stock option or stock options in a transaction to which
Section 424(a) of the Code applies, then, notwithstanding any
other provision of the Plan, the Board may grant an option or
options upon such terms and conditions as it may deem appropriate
for the purpose of assumption of the old Option, or substitution
of a new option for the old Option, in conformity with the
provisions of such Section 424(a) of the Code and the Regulations
thereunder, and any such option shall not reduce the number of
shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable
upon the exercise of any Option, but in the event any adjustment
hereunder in the number of shares covered by the Option shall
cause such number to include a fraction of a share, such fraction
shall be adjusted to the nearest smaller whole number of shares.
14. No Special Employment Rights.
Nothing contained in the Plan or in any Option granted under
the Plan shall confer upon any Option holder any right with
respect to the continuation of his or her employment by the
Company or any subsidiary or interfere in any way with the right
of the Company or any subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the
compensation of the Option holder from the rate in existence at
the time of the grant of an Option. Whether an authorized leave
of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the
Board at the time of such occurrence.
15. Withholding.
The Company's obligation to deliver shares upon the exercise
of any non-qualified Option granted under the Plan shall be
subject to the Option holder's satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements. The Company and optionee may agree to withhold
shares of Common Stock purchased upon exercise of an Option to
satisfy the above-mentioned withholding requirements; provided,
however, no such agreement may be made by an optionee who is an
"officer" or "director" within the meaning of Section 16 of the
Exchange Act, except pursuant to a standing election to so
withhold shares of Common Stock purchased upon exercise of an
Option, such election to be made not less than six months prior
to such exercise and which election may be revoked only upon six
months prior written notice.
16. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9, the
Company may delay the issuance of shares covered by the exercise of
an Option and the delivery of a certificate for such shares until
one of the following conditions shall be satisfied:
(i) The shares with respect to which such
Option has been exercised are at the time of the
issue of such shares effectively registered or
qualified under applicable Federal and state
securities acts now in force or as hereafter
amended; or
(ii) Counsel for the Company shall have given
an opinion, which opinion shall not be
unreasonably conditioned or withheld, that such
shares are exempt from registration and
qualification under applicable Federal and state
securities acts now in force or as hereafter
amended.
(b) It is intended that all exercises of Options shall be
effective, and the Company shall use its best efforts to bring
about compliance with the above conditions within a reasonable
time, except that the Company shall be under no obligation to
qualify shares or to cause a registration statement or a post-
effective amendment to any registration statement to be prepared
for the purpose of covering the issue of shares in respect of
which any Option may be exercised, except as otherwise agreed to
by the Company in writing in its sole discretion.
17. Purchase for Investment: Rights of Holder on Subsequent
Registration.
Unless and until the shares to be issued upon exercise of an
Option granted under the Plan have been effectively registered
under the 1933 Act, as now in force or hereafter amended, the
Company shall be under no obligation to issue any shares covered
by any Option unless the person who exercises such Option, in
whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and
scope to counsel for the Company and upon which, in the opinion
of such counsel, the Company may reasonably rely, that he or she
is acquiring the shares issued pursuant to such exercise of the
Option for his or her own account as an investment and not with a
view to, or for sale in connection with, the distribution of 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 1933 Act, or any other
applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the
securities so issued.
In the event that the Company shall, nevertheless, deem it
necessary or desirable to register under the 1933 Act or other
applicable statutes any shares with respect to which an Option
shall have been exercised, or to qualify any such shares for
exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each
optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably
necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder
against all losses, claims, damages and liabilities arising from
such use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made.
18. Loans.
At the discretion of the Board, the Company may loan to the
optionee some or all of the purchase price of the shares acquired
upon exercise of an Option.
19. Modification of Outstanding Options.
Subject to any applicable limitations contained herein, the
Board may authorize the amendment of any outstanding Option with
the consent of the optionee when and subject to such conditions
as are deemed to be in the best interests of the Company and in
accordance with the purposes of the Plan.
20. Approval of Stockholders.
The Plan shall become effective upon adoption by the Board;
provided, however, that the Plan shall be submitted for approval
by the stockholders of the Company no later than twelve (12)
months after the date of adoption of the Plan by the Board.
Should the stockholders of the Company fail to approve the Plan
within such twelve-month period, all Options granted thereunder
shall be and become null and void.
21. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall
terminate ten (10) years from the date upon which the Plan was
duly adopted by the Board of the Company. The Board may at any
time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, (i) the Board
may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 20, increase the maximum
number of shares for which Options may be granted or change the
designation of the class of persons eligible to receive Options
under the Plan, and (ii) any such modification or amendment of
the Plan shall be approved by a majority of the stockholders of
the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules
promulgated pursuant to Section 16 of the Exchange Act,
applicable state law, or applicable NASD or exchange listing
requirements. Termination or any modification or amendment of
the Plan shall not, without the consent of an optionee, affect
his or her rights under an Option theretofore granted to him or
her.
22. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a
stockholder of the Company with respect to any of the Options
except to the extent that the Option shall have been exercised
with respect thereto and, in addition, a certificate shall have
been issued theretofore and delivered to the optionee.
23. Notices.
Any communication or notice required or permitted to be
given under the Plan shall be in writing, and mailed by
registered or certified mail or delivered by hand, if to the
Company, to the attention of the President at the Company's
principal place of business; and, if to an optionee, to his or
her address as it appears on the records of the Company.
