FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the twelve weeks ended April 12, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to ____________
Commission file number 1-12340
GREEN MOUNTAIN COFFEE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 03-0339228
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
33 Coffee Lane, Waterbury, Vermont 05676
----------------------------------------------------
(Address of principal executive offices) (zip code)
(802) 244-5621
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(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant has (1) 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 [ ]
As of May 22, 1997, 3,417,306 shares of common stock of the registrant
were outstanding.
<PAGE>
Part I. Financial Information
Item I. Financial Statements
GREEN MOUNTAIN COFFEE, INC.
Consolidated Balance Sheet
(Dollars in thousands except share data)
<TABLE>
April 12, September 28,
1997 1996
------------ -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................... $ 941 $ 551
Receivables, less allowances of $90
at April 12, 1997 and $80
at September 28, 1996...................... 2,966 2,778
Inventories.................................. 3,640 3,276
Other current assets......................... 768 627
Deferred income taxes, net................... 875 516
__________ __________
Total current assets....................... 9,190 7,748
Fixed assets, net............................... 10,110 8,715
Other long-term assets, net..................... 516 394
Deferred income taxes, net...................... 488 386
__________ __________
Total assets.................................... $ 20,304 $ 17,243
__________ __________
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt............ $ 954 $ 947
Current portion of obligation
under capital lease........................ 123 114
Accounts payable............................. 3,045 3,002
Accrued payroll.............................. 469 480
Accrued expenses............................. 496 264
--------- ----------
Total current liabilities.................. 5,087 4,807
--------- ----------
Long-term debt.................................. 2,352 2,911
--------- ----------
Obligation under capital lease.................. 71 144
--------- ----------
Long-term line of credit........................ 2,620 508
--------- ----------
Commitments
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares;
issued and outstanding -
3,417,306 shares at April 12, 1997
and September 28, 1996...................... 342 342
Additional paid-in capital.................... 12,508 12,508
Accumulated deficit........................... (2,676) (3,977)
--------- ----------
Total stockholders' equity.................... 10,174 8,873
--------- ----------
Total liabilities and stockholders' equity.... $ 20,304 $ 17,243
--------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except share data)
Twelve weeks ended
April 12, 1997 April 13, 1996
-------------- --------------
(unaudited)
<S> <C> <C>
Net sales................................ $ 10,063 $ 8,119
Cost of sales............................ 5,881 4,874
----------- -----------
Gross profit.......................... 4,182 3,245
Selling & operating expenses............. 3,063 2,341
General and administrative expenses...... 765 673
Loss on disposal of fixed assets......... 218 -
----------- -----------
Income from operations................ 136 231
Other expense............................ (2) (10)
Interest expense......................... (107) (106)
----------- -----------
Income before income taxes............ 27 115
Income tax benefit (expense)............. 552 (17)
----------- -----------
Net income............................ 579 98
----------- -----------
Net income per share..................... $ .17 $ .03
----------- -----------
Weighted average shares.................. 3,447,999 3,428,588
----------- -----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except share data)
Twenty-eight weeks ended
April 12, 1997 April 13, 1996
-------------- --------------
(unaudited)
<S> <C> <C>
Net sales............................... $ 24,475 $ 20,263
Cost of sales........................... 14,526 12,108
------------ ------------
Gross profit......................... 9,949 8,155
Selling & operating expenses............ 6,846 5,385
General and administrative expenses..... 1,738 1,599
Loss on disposal of fixed assets........ 218 -
------------ ------------
Income from operations............... 1,147 1,171
Other expense........................... (2) (11)
Interest expense........................ (251) (246)
------------ ------------
Income before income taxes........... 894 914
Income tax benefit (expense)............ 407 (137)
------------ --------------
Net income........................... $ 1,301 $ 777
------------ --------------
Net income per share.................... $ .38 $ 0.23
------------ --------------
Weighted average shares................. 3,445,838 3,427,554
------------ --------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Cash Flows
(Dollars in thousands)
Twenty-eight weeks ended
April 12, 1997 April 13, 1996
-------------- --------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 1,301 $ 777
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 1,274 1,043
Loss on disposal of fixed assets... 254 31
Provision for doubtful accounts.... 72 59
Deferred income taxes.............. (461) 136
Changes in assets and liabilities:
Receivables.................. (260) 315
Inventories.................. (364) 300
Other current assets......... (141) 20
Other long-term assets, net.. (134) (134)
Accounts payable............. 43 (884)
Accrued payroll.............. (11) 161
Accrued expenses............. 232 (40)
--------- ---------
Net cash provided by
operating activities....... 1,805 1,784
--------- ---------
Cash flows from investing activities:
Expenditures for fixed assets........... (2,954) (977)
Proceeds from disposals of fixed assets. 43 33
--------- ---------
Net cash used for
investing activities....... (2,911) (944)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt. - 1,009
Repayment of long-term debt.............. (552) (369)
Principal payments under capital lease
obligation............................. (64) (39)
Net change in revolving line of credit... 2,112 (1,235)
--------- ---------
Net cash used for
financing activities........ 1,496 (634)
--------- ---------
Net increase (decrease) in
cash and cash equivalents................. 390 206
Cash and cash equivalents at
beginning of period....................... 551 310
--------- ---------
Cash and cash equivalents at end of period.. $ 941 $ 516
--------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
<PAGE>
Green Mountain Coffee, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q, and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
consolidated financial statements.
In the opinion of management, all adjustments considered necessary for a
fair statement of the interim financial data have been included. Results
from operations for the twenty-eight week period ended April 12, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 27, 1997.
For further information, refer to the consolidated financial statements
and the footnotes included in the annual report on Form 10-KSB for Green
Mountain Coffee, Inc. for the year ended September 28, 1996.
Net income per share is computed based upon the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
2. Inventories
Inventories consist of the following:
<TABLE>
<S> <C> <C>
April 12, September 28,
1997 1996
----------- -------------
Raw materials and supplies............. $ 1,399,000 $ 1,291,000
Finished goods......................... 2,241,000 1,985,000
----------- -------------
$ 3,640,000 $ 3,276,000
----------- -------------
</TABLE>
3. Abandonment of Equipment
The Company recently embarked on an expansion of its central plant and
distribution facility in order to increase capacity and streamline operations.
In connection with this program, certain equipment with a net book value of
$218,000 was abandoned for no proceeds.
4. Income Taxes
A deferred tax asset and related valuation allowance was established at
$4,405,000 and $3,503,000, respectively, at September 28, 1996 based upon
estimates of future taxable income through fiscal 1997. The valuation
allowance has been reduced by $1,111,000 during the first two quarters of
fiscal 1997 to $2,392,000 at April 12, 1997 based upon estimates of future
taxable income beyond fiscal 1997 and due to certain reductions in the gross
deferred tax asset.
5. Reclassification
On February 19, 1997, the Company amended its credit facility with Fleet
Bank - NH, thereby extending the term of its line of credit to February 28,
1999. Accordingly, the Company has reclassified and renamed its revolving
line of credit on the face of the balance sheet as a long-term liability
under the name "Long-term line of credit."
6. Net Income Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share."
SFAS 128 establishes new standards for computing and presenting earnings per
share and will be effective for the Company's interim and annual periods ending
after December 15, 1997. Early adoption of the Statement is not permitted.
SFAS 128 requires restatement of all previously reported earnings per share data
that are presented. SFAS 128 replaces primary and fully diluted earnings per
share with basic and diluted earnings per share. The Company has calculated
both the basic earnings per share and the diluted earnings per share to be $0.17
and $0.38 for the twelve weeks and 28 weeks ended April 12, 1997, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
General
Green Mountain Coffee, Inc., a leader in the specialty coffee industry, roasts
over 25 high quality arabica coffees to produce over 70 varieties of coffee
that it sells under the Green Mountain Coffee Roasters(R) and Green Mountain
Coffee(R) brands. For the twenty-eight weeks ended April 12, 1997, Green
Mountain Coffee, Inc. (the "Company" or "Green Mountain") derived approximately
81.3% of its net sales from its wholesale operation. Green Mountain's wholesale
operation sells coffee to retailers and food service concerns including
supermarkets, restaurants, convenience stores, specialty food stores, hotels,
universities and business offices. Green Mountain also operates twelve company-
owned retail stores in the Northeast and metropolitan Chicago, and has a
direct mail operation serving customers nationwide from its Waterbury, Vermont
headquarters, which accounted for approximately 11.6% and 7.1% of net sales,
respectively, during the same period.
Cost of sales consists of the cost of raw materials including coffee beans,
flavorings and packaging materials, a portion of the Company's rental expense,
the salaries and related expenses of production and distribution personnel,
depreciation on production equipment and freight and delivery expenses.
Selling and operating expenses consist of expenses that directly support the
sales of the Company's wholesale, retail or direct mail channels, including
media and advertising expenses, a portion of the Company's rental expense,
and the salaries and related expenses of employees directly supporting sales.
General and administrative expenses consist of expenses incurred for corporate
support and administration, including a portion of the Company's rental expense
and the salaries and related expenses of personnel not elsewhere categorized.
The Company's fiscal year ends on the last Saturday in September. The Company's
fiscal year normally consists of 13 four-week periods with the first, second
and third "quarters" ending the last Saturday of the 16th week, 28th week and
40th week, respectively, of the fiscal year.
Certain statements contained herein are not based on historical fact and are
"forward-looking statements" within the meaning of the applicable securities
laws and regulations. Forward-looking statements which are based on various
assumptions (some of which are beyond Green Mountain's control), may be
identified by reference to a future period, or periods, or by the use of
forward-looking terminology such as "may", "will", "believe", "expect",
"estimate, "anticipate", "continue", or similar terms or variations on those
terms, or the negative of those terms. Actual results could differ materially
from those set forth in forward-looking statements. Factors that could cause
actual results to differ materially from those in the forward-looking statements
include, but are not limited to, business conditions in the coffee industry and
food industry in general, fluctuations in availability and cost of green coffee,
economic conditions, competition, variances from budgeted sales mix and growth
rate, weather and special or unusual events.
<PAGE>
Twelve weeks ended April 12, 1997 versus twelve weeks ended April 13, 1996
- --------------------------------------------------------------------------
Net sales increased by $1,944,000 or 23.9% from $8,119,000 for the twelve weeks
ended April 13, 1996 (the "1996 period") to $10,063,000 for the twelve weeks
ended April 12, 1997 (the "1997 period"). Coffee pounds sold, excluding coffee
pounds sold as beverages through the Company's 12 company-owned retail stores,
increased by approximately 282,000 pounds, or 25.3%, from approximately
1,116,000 pounds in the 1996 period to approximately 1,398,000 pounds in the
1997 period.
The net sales increase is attributable to the wholesale area in which net sales
increased by $2,017,000 or 31.5% from $6,407,000 for the 1996 period to
$8,424,000 for the 1997 period. This wholesale net sales increase resulted
primarily from the growth in the number of wholesale customer accounts.
A sales price increase of $0.45 per pound to wholesale customers effective March
10, 1997 in response to the dramatic increase in the cost of green coffee
during the 1997 period had an immaterial impact on sales in the 1997 period.
The Company believes that increases in the cost of green coffee can generally be
passed on to customers or absorbed through more efficient operations, although
there can be no assurance that the Company will be successful in doing so.
Gross profit increased by $937,000, or 28.9% from $3,245,000 for the 1996 period
to $4,182,000 for the 1997 period. As a percentage of net sales, gross profit
increased 1.6 percentage points from 40.0% for the 1996 period to 41.6% for
the 1997 period. The increase in gross profit as a percentage of sales was due
primarily to an increase in whole bean and ground coffee sales as a percentage
of total sales.
Selling and operating expenses increased by $722,000, or 30.8%, from $2,341,000
for the 1996 period to $3,063,000 for the 1997 period. Selling and operating
expenses increased 1.6 percentage points as a percentage of sales from 28.8%
for the 1996 period to 30.4% for the 1997 period. The increase in selling and
operating expense as a percentage of sales was primarily due to approximately
$310,000 in incremental expenses related to the hiring of a national
supermarket sales manager, a national office coffee service and food service
sales manager, and 14 people to the Company's direct sales force in the greater
Boston, Connecticut, Florida, New York and greater Philadelphia markets. During
the 1997 period, the Company also converted its half-pound and one pound
packaging to 12 oz. packaging to improve its overall competitive positioning.
General and administrative expenses increased by $92,000 or 13.7% from $673,000
for the 1996 period to $765,000 for the 1997 period, representing a decrease
of 0.7 percentage points as a percentage of sales from 8.3% for the 1996
period to 7.6% for the 1997 period.
In preparation for expected future growth and due to the approval during the
1997 period of a Federal Community Development Block Grant to the Town of
Waterbury, Vermont which is expected to indirectly benefit the Company through
reduced occupancy costs, Green Mountain has commenced the expansion of its
central production and distribution facility located in Waterbury. The 45,000
square-foot addition to its central facility is expected to be completed by
fiscal year end and will first be used for expanded warehousing and
distribution space with roasting and packaging machinery being added in future
fiscal years as needed. The increase in occupancy costs related to the
expansion is not expected to have a material impact on the Company in fiscal
1997. Due to the demolition of an old, adjacent office building occupied by
the Company, and the immediate redesign of the production flow to be used in the
expanded facility, the Company recorded a loss on abandonment of equipment of
$218,000 during the 1997 period.
As a result of the foregoing, income from operations decreased by $95,000 or
41.1%, from $231,000 for the 1996 period to $136,000 for the 1997 period.
However, if the Company had not recorded the $218,000 loss on disposal of
fixed assets, income from operations would have increased by $123,000 or 53.2%
from $231,000 for the 1996 period to $354,000 for the 1997 period.
The income tax expense recognized under SFAS 109 was $17,000 in the 1996 period
compared to an income tax benefit of $552,000 in the 1997 period. The Company
has been profitable for seven consecutive fiscal quarters and, based on the
weight of available evidence, as prescribed in SFAS 109, of the amount of
deferred tax assets which more likely than not will be realized, has reduced
its deferred tax asset valuation allowance by $562,000 during the 1997 period.
Net income increased by $481,000 or 490.8%, from $98,000, or $0.03 per share for
the 1996 period to $579,000, or $0.17 per share, in the 1997 period. The
increase in net income of $481,000 was primarily due to the effect of a
reduction in the deferred tax asset valuation allowance of $562,000 based upon
continuing profitable quarterly operating results and long-term projections in
accordance with SFAS 109, and was partially offset by a loss on abandonment
of equipment amounting to $218,000 related to a decision made by the Company
during the 1997 period to expand its central production and distribution
facility.
<PAGE>
Twenty-eight weeks ended April 12, 1997
versus twenty-eight weeks ended April 13, 1996
- -----------------------------------------------
Net sales increased by $4,212,000, or 20.8%, from $20,263,000 for the twenty-
eight weeks ended April 13, 1996 (the "1996 YTD period") to $24,475,000 for the
twenty-eight weeks ended April 12, 1997 (the "1997 YTD period"). Coffee pounds
sold, excluding coffee pounds sold as beverages through the Company's 12
company-owned retail stores, increased by approximately 692,000 pounds, or
25.6%, from approximately 2,706,000 pounds in the 1996 YTD period to
approximately 3,398,000 pounds in the 1997 YTD period.
The net sales increase is attributable to the wholesale area in which net sales
increased by $4,314,000, or 27.7%, from $15,577,000 for the 1996 YTD period to
$19,891,000 for the 1997 YTD period. The wholesale net sales increase resulted
primarily from growth in the number of wholesale accounts.
Gross profit increased by $1,794,000, or 22.0%, from $8,155,000 for the 1996 YTD
period to $9,949,000 for the 1997 YTD period. As a percentage of net sales,
gross profit increased 0.4 percentage points from 40.2% for the 1996 YTD
period to 40.6% for the 1997 YTD period.
Selling and operating expenses increased by $1,461,000, or 27.1%, from
$5,385,000 for the 1996 YTD period to $6,846,000 for the 1997 YTD period.
Selling and operating expenses increased 1.4 percentage points as a percentage
of sales from 26.6% for the 1996 YTD period to 28.0% for the 1997 YTD period.
The increase in selling and operating expense as a percentage of sales was
primarily due to approximately $675,000 in incremental expenses related to the
hiring of a national supermarket sales manager, a national office coffee
service and food service sales manager, and 14 people to the Company's direct
sales force in the greater Boston, Connecticut, Florida, New York and greater
Philadelphia markets.
General and administrative expenses increased by $139,000 or 8.7% from
$1,599,000 for the 1996 YTD period to $1,738,000 for the 1997 YTD period,
representing a decrease of 0.8 percentage points as a percentage of sales
from 7.9% for the 1996 YTD period to 7.1% for the 1997 YTD period.
Income from operations decreased by $24,000 or 2.0% from $1,171,000 for the 1996
YTD period to $1,147,000 for the 1997 YTD period. However, had the Company
not recorded the $218,000 loss on abandonment of equipment during the 1997
period as previously discussed above, income from operations would have
increased by $194,000 or 16.6% from $1,171,000 for the 1996 YTD period to
$1,365,000 for the 1997 YTD period.
The income tax expense recognized under SFAS 109 was $137,000 in the 1996 YTD
period compared to an income tax benefit of $407,000 in the 1997 YTD period.
The income tax benefit in the 1997 YTD period occurred due to the reduction
in the Company's deferred tax asset valuation allowance as discussed above.
Net income increased by $524,000 or 67.4% from $777,000, or $0.23 per share for
the 1996 YTD period to $1,301,000, or $0.38 per share, for the 1997 YTD period.
The increase was primarily due to the effect of the reduction in the deferred
tax asset valuation allowance, and was partially offset by the loss on
abandonment of equipment during the 1997 period.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Working capital increased $1,162,000 to $4,103,000 at April 12, 1997 from
$2,941,000 at September 28, 1996.
Cash used for capital expenditures aggregated $2,954,000 during the 1997 YTD
period, and included $557,000 for equipment loaned to wholesale customers,
$479,000 for production and distribution equipment and $1,517,000 for computer
hardware and software. During the 1996 YTD period, Green Mountain had capital
expenditures of $977,000 (net of $180,000 financed directly by a capital lease
and long-term debt), including $396,000 for equipment on loan to wholesale
customers, $121,000 for production equipment and $224,000 for computer hardware
and software. Cash used to fund the capital expenditures in the 1997 YTD
period was obtained primarily from the $1,805,000 of net cash provided by
operating activities.
The Company currently plans to make capital expenditures in fiscal 1997 of
approximately $5,300,000, primarily to fund the purchase of equipment for
loan to wholesale customers (approximately $1,400,000) and computer hardware
and software (approximately $2,400,000). Green Mountain is presently
implementing an enterprise information system which it expects to use to
facilitate growth and improve operations and customer service. Assuming a
stable mix in packaging types and sizes, management believes that it will
operate at approximately 60-70% of production capacity in fiscal 1997 and
expects to incur approximately $800,000 for production equipment expenditures
during the year primarily for new packaging equipment and tooling related to its
packaging size conversion. Overall capital expenditures for fiscal 1998 are
presently expected to be below fiscal 1997's expected level. Management
continuously reviews capital expenditure needs and actual amounts expended may
differ from these estimates.
On February 19, 1997, the Company amended its credit facility with Fleet
Bank - NH. Under the revised facility, the Company increased the limit of the
revolving line of credit from $3,000,000 to $5,000,000 and extended its term
to February 28, 1999. On May 19, 1997, Green Mountain received a commitment
letter from Fleet Bank - NH to amend its credit facility to increase its
revolving line of credit limit by another $1,000,000 to $6,000,000. Under the
commitment, the amount available under the revolving line of credit is fully
available and any previous working capital borrowing base formula is eliminated.
Management believes that cash flow from operations, existing cash and available
borrowings under its credit facility and other sources will provide sufficient
liquidity to fund currently planned growth, pay all liabilities incurred in
the normal course of business, fund capital expenditures and service debt
requirements in fiscal 1997.
The average cost of the high quality arabica coffees the Company purchases
decreased slightly during the 1997 YTD period as compared to the 1996
YTD period. However, since December 1996, when the closing near-term "c"
price (the price per pound quoted by the Coffee, Sugar and Cocoa Exchange) was
as low as $1.036, the near-term "c" price has risen dramatically, closing on
May 16, 1997 at $2.765, a 167% increase from the low. Twenty-year lows in
reported domestic coffee supplies combined with forecasts of smaller crops in
Central America, labor actions in certain countries and the fear of frost in
Brazil as their winter approaches, among other factors, have caused this
dramatic increase in the "c" price. In addition to the "c" price, coffee of
the quality sought by Green Mountain also tends to trade on a negotiated basis
at a substantial premium or "differential" above the "c" price. Since December
1996, differentials have also been rising.
The Company believes that the cost of green coffee will continue to be volatile
in fiscal 1997. The Company believes that increases in the cost of green coffee
can generally be passed on to customers or absorbed through more efficient
operations, although there can be no assurance that the Company will be
successful in doing so. Similarly, rapid sharp decreases in the cost of green
coffee could also force the Company to lower sales prices before realizing cost
reductions in its green coffee inventory. Because Green Mountain roasts over 25
different types of green coffee beans to produce its more than 70 different
varieties of coffee, if one type of green coffee bean were to become
unavailable or prohibitively expensive, management believes Green Mountain could
substitute another type of coffee of equal or better quality meeting a similar
taste profile, in a blend or temporarily remove that particular coffee from its
product line. However, a worldwide supply shortage of the higher-quality
arabica coffees the Company purchases could have an adverse impact on the
Company.
<PAGE>
Deferred Income Taxes
- ---------------------
The Company had net deferred tax assets of $1,363,000 at April 12, 1997. These
assets are reported net of a deferred tax asset valuation allowance at that
date of $2,392,000 (related primarily to a Vermont investment tax credit).
The Company had income before taxes of $894,000 and $1,484,000 in the 1997
YTD period and for all of fiscal 1996, respectively, and has been profitable in
its last seven consecutive fiscal quarters. Presently, the Company believes
that the deferred tax assets, net of deferred tax liabilities and the
valuation allowance, are realizable and represent management's best estimate,
based on the weight of available evidence as prescribed in SFAS 109, of the
amount of deferred tax assets which most likely will be realized.
Factors Affecting Quarterly Performance
- ---------------------------------------
Historically, the Company has experienced significant variations in sales from
quarter to quarter due to the holiday season and a variety of other factors,
including, but not limited to, general economic trends, the cost of green
coffee, competition, marketing programs, weather and special or unusual events.
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.
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its 1997 Annual Meeting of Stockholders
on April 4, 1997 in Burlington, Vermont. The Board of
Directors of the Registrant solicited proxies for this meeting
pursuant to a proxy statement filed under Regulation 14A.
(b-c) At the Annual Meeting the shareholders voted as follows on the
following matters:
1. Election of Directors
<TABLE>
<S> <C> <C> <C>
Broker
Nominee For Withheld Nonvotes
----------- --------- ---------- ---------
Robert P. Stiller 3,122,674 8,119 0
Robert D. Britt 3,122,500 8,293 0
Stephen J. Sabol 3,120,074 10,719 0
Jonathan C. Wettstein 3,122,212 8,581 0
Jules A. del Vecchio 3,122,574 8,219 0
David F. Moran 3,122,012 8,419 0
Ian W. Murray 3,122,574 8,219 0
William D. Davis 3,122,674 8,119 0
</TABLE>
2. 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
<TABLE>
<S> <C> <C> <C>
For Against Abstaining Broker Nonvotes
--------- ------- ---------- ---------------
2,476,059 54,342 19,078 581,314
</TABLE>
3. Ratification of the appointment of Price-Waterhouse LLP as
the independent accountants for the Company for the
current fiscal year
[S] [C] [C] [C]
For Against Abstaining Broker Nonvotes
--------- ------- ---------- ---------------
3,120,294 1,202 9,297 0
(d) Not applicable
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation1
3.2 Bylaws1
10.71 Employment Agreement, as of November 19, 1996,
between the Company and Dean E. Haller
10.72 Employment Agreement, as of January 1, 1997,
between the Company and William L. Prost
10.73 Stock Option Agreement, dated November 19, 1996,
between the Company and Dean E. Haller
10.74 Stock Option Agreement, dated May 19, 1997,
between the Company and William L. Prost
10.2(dd)Financing Commitment from Fleet Bank,
dated May 19, 1997, to amend Commercial Loan Agreement
among Green Mountain Coffee Roasters, Inc. as borrower,
and Fleet Bank - NH, as lender
11 Computation of net income per share of common stock
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the twenty-eight
weeks ended April 12, 1997.
- --------------------------
1Incorporated by reference to the corresponding exhibit number in the
Registration Statement on Form SB-2 (Registration No. 33-66646) filed on
July 28, 1993, and declared effective on September 21, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
GREEN MOUNTAIN COFFEE, INC.
Date: 5/23/97 By: /s/ Robert P. Stiller
------------ --------------------------
Robert P. Stiller,
President and
Chief Executive Officer
Date: 5/23/97 By: /s/ Robert D. Britt
------------- --------------------------
Robert D. Britt,
Chief Financial Officer,
Treasurer and Secretary
<PAGE>
Excludes Exhibits Filed With This Form 10-Q
To obtain copies of exhibits, please contact:
Green Mountain Coffee, Inc.
Investor Relations Department
33 Coffee Lane
Waterbury, VT 05676
(802) 244-5621
EMPLOYMENT AGREEMENT, AS OF NOVEMBER 19, 1996,
BETWEEN THE COMPANY AND DEAN E. HALLER
EMPLOYMENT AGREEMENT ("Agreement") made as of November 19, 1996 between GREEN
MOUNTAIN COFFEE ROASTERS, INC., a Vermont corporation ("Employer"), and
DEAN E. HALLER, an individual residing in Underhill, Vermont ("Executive").
Employer desires to employ Executive and Executive desires to be employed by
Employer as Vice President of Administration. Employer and Employee agree as
follows:
1. Employment, Powers, Duties and Acceptance.
1.1 Employer employs Executive to render services to Employer as
Employer's Vice President of Administration, and Executive accepts
such employment.
1.2 As Vice President of Administration of Employer, Executive shall
be responsible for the general supervision and management of all
aspects of development and implementation of Employer's policies,
plans, and programs with respect to personnel of Employer and
management of the corporate administrative department, all under
the control and supervision of the President and Chief Executive
Officer of Employer.
1.3 Executive shall be a full-time employee of Employer and shall
devote all of his working time, best efforts and full skill and
attention to Employer's business, and will faithfully serve
Employer's interests. During the term of this Agreement,
Executive agrees to serve, without additional compensation, as an
officer and/or director of any parent, subsidiary or affiliate of
Employer, if elected as such.
1.4 Executive's principal place of employment shall be Waterbury,
Vermont and environs, subject to reasonable travel requirements on
behalf of Employer.
2. Term. This Agreement will commence on November 19, 1996, and will
continue until terminated by either party in accordance with the provisions
of Section 4, below.
3. Compensation.
3.1 In consideration of Executive's performance of his duties and
responsibilities under this Agreement, Employer agrees to pay and
Executive agrees to accept, the following compensation:
3.1.a Base Compensation. A salary of $110,000 per annum ("Base
Compensation"), payable in installments in accordance with
Employer's standard payroll practices;
3.1.b Bonus. Such bonuses ("Bonus"), if any, up to a maximum of
20% of Base Compensation, as may be determined in the sole and
absolute discretion of the Board of Directors of Employer;
3.1.c Benefits. At the option of Executive, and subject to
Executive's meeting the eligibility requirements of each respective
plan, Executive may participate in and be covered by each profit
sharing, bonus, pension, life insurance, accident insurance, health
insurance, hospitalization, and any other employee benefit plan of
Employer available generally to executives of Employer, on the same
basis as shall be available to other executives.
3.1.d Vacation. Employee shall be entitled to paid vacation of four
(4) weeks per annum accruing at the rate of 1.66 days per month.
3.1.e Reimbursement for Expenses. Employer shall reimburse Executive for
all reasonable expenses paid or incurred by him on behalf of Employer
in the course of his employment, but payment shall be made only
against a signed, itemized list of such expenditures, utilizing
procedures and general forms for that purpose established by
Employer.
3.2 Nothing in this Agreement shall prevent Employer from at any time
increasing Executive's Base Compensation, either permanently or
for a limited period, or from paying bonuses and other additional
compensation to Executive, in the event that Employer in its sole
discretion shall deem it advisable.
4. Termination.
4.1 Death. Executives's employment under this Agreement shall
terminate immediately upon the death of Executive; provided that
in the event of the death of Executive, his heirs or legal
representative shall be entitled to receive any payment pursuant
to Sections 3.1.a and 3.1.b, 3.1c, 3.1d, or 3.1 e, if any, accrued
as at the date of death, and upon such payment Employer shall have
no further obligation pursuant to this Agreement.
4.2 Termination Without Cause. Executive's employment under this
Agreement shall terminate immediately upon thirty days' prior
written notice from Executive to Employer of his voluntary
resignation or thirty days' prior written notice from Employer to
Executive of his termination without cause. In the event of
termination by either party without cause, Executive shall continue
to perform his duties pursuant to this Agreement until the
termination date, if requested by Employer, his compensation during
the termination period to be payable at his then current rate of
Base Compensation, provided however, that Employer shall have the
right to require Executive to cease performance of his duties and
resign from all offices any time on or after the date of notice of
termination, and Executive's performance obligations and offices
shall terminate as at that date.
4.3 Disability. If, after being reasonablely accommodated by Employer,
Executive is unable to perform his services due to illness, injury or
incapacity for a period of more than thirty (30) consecutive days,
Employer may terminate Executive's employment and this Agreement
immediately upon written notice, in which case Executive shall be
entitled to compensation as provided in Section 4.2, above, less
any payments to Executive pursuant to any policy of disability
maintained by Employer or its affiliates for the benefit of
Executive.
4.4 Termination by Employer for Cause. Executive's employment under
this Agreement shall terminate immediately upon written notice
from Employer to Executive of termination for cause, and Employer
shall have no further obligation pursuant to this Agreement.
For purposes of this Section 4.4, the term "for cause" shall mean
and include any of the following events: fraud, misappropriation
or embezzlement by Executive involving Employer or any subsidiary
or affiliate thereof; the conviction in any jurisdiction of
Executive for any crime involving moral turpitude or which
constitutes a felony; Executive's demonstrated voluntary
unwillingness to perform his duties, including Executive's failure
or refusal to carry out or perform such actions or duties as he is
specifically directed to carry out or perform by the President and
Chief Executive Officer of Employer, provided that Executive shall
not be required to perform any illegal or unethical act; the
willful engaging by Executive in conduct which has or could
reasonably be expected to have a material adverse effect on
Employer or any of its subsidiaries or affiliates; or the material
breach by Executive of any representations, warranties, agreements
or covenants made by Executive in this Agreement or any other
agreement between Employer and Executive. In the event of
termination of this Agreement by Employer for cause, Executive
shall be entitled to no further compensation except compensation
pursuant to Sections 3.1.a or 3.1.b, 3.1c, 3.1d. Or 3.1e, which
may have accrued prior to such termination, and Employer shall
have no further obligation hereunder.
5. Confidentiality Agreement; Covenant Not to Compete or Hire Certain
Employees.
5.1 Confidentiality Agreement. Executive acknowledges that he will have
access to proprietary, confidential information of Employer and its
affiliates, which information Executive acknowledges constitutes a
special and unique asset of Employer. Executive agrees during the
term of this Agreement and thereafter:
5.1.a to keep secret and retain in the strictest confidence all
information about business and financial matters (such as costs,
profits, strategic and marketing plans, customer and supplier lists,
formulae and methods of operation and production) of Employer and
its affiliates; their employment policies and plans; and any other
proprietary information relating to Employer and its affiliates,
their operations, business and financial affairs (collectively, but
excluding information known to Executive prior to his employment
with Employer, the "confidential information") and not to disclose
the confidential information to anyone not then an officer, director
or authorized employee of Employer or any of its affiliates, nor
utilize such confidential information, either during or after the
termination of his employment with Employer, except in the course of
performing his duties pursuant to this Agreement or with Employer's
express written consent or except to the extent that such confidential
information can be shown to have been in the public domain through
no fault of Executive; and
5.1.b to deliver to Employer on demand, all memoranda, notes, records,
reports and other documents (in any medium whatsoever) relating to
Employer's or any of its affiliates' business, financial affairs or
operations and all property associated therewith, which he may then
possess or have under his control. Upon request of Employer,
Executive agrees to certify that such delivery is complete, and that
any and all copies made have been delivered or destroyed. Employer
agrees to give access to Executive to such facilities of Employer as
may be necessary for retrieval of Executive's personal files and
property after termination.
5.2 Non-Compete. During the term of this Agreement, and for a period
of six (6) months following termination of this Agreement, Executive
agrees that he will not, without Employer's prior written consent
(which may be withheld for any reason or for no reason in Employer's
sole discretion), do anything adverse to the interests of Employer,
and shall not, directly or indirectly himself or by or through a
family member or otherwise, alone or as a member of a partnership
or joint venture, or as a principal, officer, director, consultant,
employee or stockholder of any other entity, compete with Employer
or be engaged in or connected with any other business competitive
with that of Employer or any affiliate thereof; provided, however,
that Executive may own as a passive investment not more than one
percent (1%) of the securities of any publicly held corporation that
may engage in a business competitive with that of Employer or any
affiliate. For purposes of this Agreement, a "competitive business"
shall mean a business engaged in the wholesale, retail and/or catalog
sale of roasted coffee beans and related products.
5.3 Non-solicitation of Employees. Executive shall not at any time
during the one-year period following the termination of his employment
with Employer for any reason whatsoever: employ any individual who
was employed by Employer or any affiliate during the year immediately
preceding his termination; or in any material respect cause,
influence, or participate in the employment of any such individual
by any business that is competitive with any of the businesses
engaged in by Employer or any affiliate.
5.4 Non-solicitation of Customers and Suppliers. Executive shall not
at any time during the one-year period following the termination of
his employment directly or indirectly: solicit for himself or any
person the business of any individual or business which was a material
customer or material supplier of Employer or any affiliate at any
time during the one-year period immediately preceding such
termination; or persuade or attempt to persuade any such customer
or supplier to cease doing business or to reduce the amount of
business it does with Employer or any affiliate.
5.5 Equitable Remedies. It is agreed that Executive's obligations and
the rights of Employer pursuant to this Section 5 are unique and
that any breach or threatened breach by Executive of any of the
foregoing provisions of this Section 5 cannot be remedied solely by
damages at law. In the event of a breach or a threatened breach by
Executive of any of the provisions of this Section 5, Employer shall
be entitled to injunctive relief to enforce its rights and
restraining Executive and any business, firm, partnership,
individual, corporation or entity participating in such breach or
threatened breach. Nothing in this section shall be construed as
prohibiting Employer from pursuing any other remedies available at
law or in equity for such breach or threatened breach, including
the recovery of damages and the immediate termination of Executive.
In addition to any such remedies, Employer shall be entitled to
recover its costs, including reasonable attorneys' fees and costs,
to enforce its rights pursuant to this Section 5 or prevent a breach
or threatened breach.
6. Relationship to Parties.
Nothing in this Agreement shall be deemed to constitute a partnership
between or a joint venture by the parties, nor be deemed to constitute
either Executive or Employer the agent of the other except as specifically
provided. Neither Executive nor Employer shall be or become liable or bound
by any representation act or omission whatsoever of the other made contrary
to the provisions of this Agreement.
7. Assignment.
This Agreement shall be binding upon the successors and assigns of
Employer. Neither this Agreement nor any rights to any payments hereunder
shall be assignable by Executive.
8. Notices. All notices and communications hereunder shall be in writing
and be given by registered or certified mail, postage and registration or
certification fees prepaid, and shall be deemed given when so mailed as
follows:
If to Employer: Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
With a copy to: H. Kenneth Merritt, Jr., Esq.
Merritt & Merritt
112 Lake Street
P.O. Box 5839
Burlington, VT 05402
If to Executive: Mr. Dean E. Haller
At his address then current on the books and records of Employer
The foregoing addresses may be changed by notice given in the manner set forth
in this Section 10.
9. Miscellaneous.
9.1 Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the employment of Executive by
Employer during the term hereof, and the provisions hereof may not
be altered, amended, waived, terminated or discharged in any way
whatsoever except by subsequent written agreement executed by the
party charged therewith. This Agreement supersedes all prior
employment agreements, letters, understandings and arrangements
between Executive and Employer pertaining to the terms of the
employment of Executive by Employer, including, without limitation,
that certain letter from Employer to Executive dated October 4, 1996.
9.2 Waiver. A waiver by either of the parties of any of the terms or
conditions of this Agreement, or of any breach, shall not be deemed
a waiver of such terms or conditions for the future or of any other
term of condition, or of any subsequent breach.
9.3 Provision not Enforceable. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions. Without limiting the generality of the
foregoing sentence, if any of the covenants contained in Section 5
are construed to be invalid or unenforceable, the same shall not
affect the remainder of the covenant or covenants, which shall be
given full effect. If any provisions of Section 5 are held to be
unenforceable because of their scope or duration, the parties agree
that the court making such determination shall have the power to
reduce the duration and/or area of such provision and, in its reduced
form, said provision shall be enforceable.
9.4 Deductions and Set-Offs. Employer shall have the right to deduct and
withhold from Executive's compensation the amounts required to be
deducted and withheld by Employer pursuant to any present or future
law. In the event that Employer makes any payments or incurs any
charges for Executive's account or Executive incurs any personal
charges with Employer, Employer shall have the right and Executive
hereby authorizes Employer to recoup such payments or charges by
deducting and withholding the aggregate amount thereof from any
compensation otherwise payable to Executive hereunder.
9.5 Governing Law. This Agreement is made in and shall be construed and
interpreted under the laws of the State of Vermont, and Executive
consents to personal jurisdiction in Vermont.
9.6 Captions. The captions in this Agreement are not part of the
provisions hereof, are merely for the purpose of reference and shall
have no force or effect for any purpose whatsoever, including the
construction of the provisions of this Agreement.
9.7 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be an original, and which together shall constitute
one agreement.
9.8 Employee Handbook or Manual. In the event of any conflict between
this Agreement and any Employee Manual or Handbook circulated by
Employer now or in future, this Agreement shall control.
10. Arbitration. Except for the rights of Employer pursuant to Section 5,
above, any controversy or claim arising out of or relating to this
Agreement or its breach shall be settled by binding arbitration in the
city of Burlington, Vermont in accordance with the rules of the American
Arbitration Association. The decision of the arbitrator shall be final
and binding upon the parties and may be enforced in any court of
competent jurisdiction. The arbitrator is expressly permitted to award
reasonable attorneys' fees and costs to the prevailing party.
ACKNOWLEDGMENT OF ARBITRATION
EACH OF THE UNDERSIGNED UNDERSTANDS THAT THIS AGREEMENT CONTAINS AN AGREEMENT
TO ARBITRATE. AFTER SIGNING THIS DOCUMENT, EACH PARTY UNDERSTANDS THAT IT
WILL NOT BE ABLE TO BRING A LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE
WHICH IS COVERED BY THE ARBITRATION AGREEMENT, UNLESS IT INVOLVES A QUESTION
OF CONSTITUTIONAL OR CIVIL RIGHTS. INSTEAD EACH PARTY AGREES TO SUBMIT ANY
SUCH DISPUTE TO AN IMPARTIAL ARBITRATOR.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as
of the date first above written.
GREEN MOUNTAIN COFFEE ROASTERS, INC.
By: /s/ Robert P. Stiller
----------------------------
Robert P. Stiller, President
and Chief Executive Officer
/s/ Dean E. Haller
-----------------------------
Dean E. Haller
EMPLOYMENT AGREEMENT, AS OF JANUARY 1, 1997,
BETWEEN THE COMPANY AND WILLIAM L. PROST
EMPLOYMENT AGREEMENT ("Agreement") made as of January 1, 1997 between GREEN
MOUNTAIN COFFEE ROASTERS, INC., a Vermont corporation ("Employer"), and
BILL PROST, an individual residing in San Antonio, Texas ("Executive").
Employer desires to employ Executive and Executive desires to be employed by
Employer as Vice President of Marketing. Employer and Employee agree as
follows:
1. Employment, Powers, Duties and Acceptance.
1.1 Employer employs Executive to render services to Employer as
Employer's Vice President of Marketing, and Executive accepts
such employment.
1.2 As Vice President of Marketing of Employer, Executive shall be
responsible for the general supervision and management of all aspects
of development and implementation of Employer's marketing strategy,
plans and programs, all under the control and supervision of the
President and Chief Executive Officer of Employer.
1.3 Executive shall be a full-time employee of Employer and shall devote
all of his working time, best efforts and full skill and attention to
Employer's business, and will faithfully serve Employer's interests.
During the term of this Agreement, Executive agrees to serve,
without additional compensation, as an officer and/or director of any
parent, subsidiary or affiliate of Employer, if elected as such.
1.4 Executive's principal place of employment shall be Waterbury, Vermont
and environs, subject to reasonable travel requirements on behalf of
Employer.
1.5 Employer acknowledges that employee is currently and will remain an
owner of Prost Marketing, Inc. and Prost Communications, Inc. and that
this is not a conflict. Also, in the event of any termination,
employee shall not be restricted from working for these companies.
2. Term. This Agreement will commence on January 1, 1997, and will continue
until terminated by either party in accordance with the provisions of
Section 4, below.
3. Compensation.
3.1 In consideration of Executive's performance of his duties and
responsibilities under this Agreement, Employer agrees to pay and
Executive agrees to accept, the following compensation:
3.1.a Base Compensation. A salary of $110,000 per annum ("Base
Compensation"), payable in installments in accordance with Employer's
standard payroll practices;
3.1.b Bonus. Such bonuses ("Bonus"), if any, as may be determined in
the sole and absolute discretion of the Board of Directors of
Employer;
3.1.c Benefits. At the option of Executive, and subject to Executive's
meeting the eligibility requirements of each respective plan,
Executive may participate in and be covered by each profit sharing,
bonus, pension, life insurance, accident insurance, health insurance,
hospitalization, and any other employee benefit plan of Employer
available generally to executives of Employer, on the same basis as
shall be available to other executives.
3.1.d Vacation. Employee shall be entitled to paid vacation of three (3)
weeks per annum accruing at the rate of 1.25 days per month during
the initial two year term of this Agreement, subject to increase to
four weeks per annum when qualified in accordance with the then-
current policies as specified in the Employer's Employee Handbook
available generally to executive-level employees of Employer.
3.1.e Reimbursement for Expenses.
3.1.e.i Moving Expenses. Upon presentation of such receipts as Employer
shall reasonably require, Employer shall reimburse Executive
for such reasonable and customary moving costs and relocation
expenses, including any personal income tax liability resulting from
reimbursement, involved in the relocation of Executive and his
family from Texas to Vermont as shall have the prior written approval
of Employer. Rates of reimbursement shall be based on applicable
IRS rules and regulations.
3.1.e.ii Expenses. Employer shall reimburse Executive for
all reasonable expenses paid or incurred by him on behalf of Employer
in the course of his employment, but payment shall be made only
against a signed, itemized list of such expenditures, utilizing
procedures and general forms for that purpose established by Employer.
3.2 Nothing in this Agreement shall prevent Employer from at any time
increasing Executive's Base Compensation, either permanently or for a
limited period, or from paying bonuses and other additional compensation
to Executive, in the event that Employer in its sole discretion shall
deem it advisable.
4. Termination.
4.1 Death. Executives's employment under this Agreement shall terminate
immediately upon the death of Executive; provided that in the event of
the death of Executive, his heirs or legal representative shall be
entitled to receive any payment pursuant to Sections 3.1.a, 3.1.b,
3.1.c, 3.1.d and 3.1.e.ii, if any, accrued as at the date of death,
and upon such payment Employer shall have no further obligation
pursuant to this Agreement.
4.2 Termination Without Cause. Executives employment under this Agreement
shall terminate immediately upon thirty days' prior written notice from
Executive to Employer of his voluntary resignation or thirty days' prior
written notice from Employer to Executive of his termination without
cause. In the event of termination by either party without cause,
Executive shall continue to perform his duties pursuant to this
Agreement until the termination date, if requested by Employer, his
compensation during the termination period to be payable at his then
current rate of Base Compensation, provided however, that Employer
shall have the right to require Executive to cease performance of his
duties and resign from all offices any time on or after the date of
notice of termination, and Executive's performance obligations and
offices shall terminate as at that date. In the event that Executive
is terminated by Employer without cause:
4.2.a prior to the first anniversary date of this Agreement,
Executive shall be entitled to payment of five (5) months Base
Compensation, plus any Bonus accrued and remaining unpaid as at the date
of notice of termination, payable in installments in accordance with
Employer's then-current payroll practices; or
4.2.b after the first anniversary date of this Agreement, Executive shall be
entitled to payment of five months' Base Compensation at his then-
current rate of compensation, plus any Bonus accrued as at the date of
notice of termination, payable in installments in accordance with
Employer's then-current payroll practices. Upon payment by Employer in
accordance with 4.2.a or 4.2.b, as applicable, Employer shall have no
further obligation pursuant to this Agreement.
4.3 Disability. If Executive is unable to perform his services due to
illness, injury or incapacity for a period of more than ninety (90)
consecutive days, Employer may terminate Executive's employment and this
Agreement immediately upon written notice, in which case Executive shall
be entitled to compensation as provided in Section 4.2, above, less any
payments to Executive pursuant to any policy of disability maintained
by Employer or its affiliates for the benefit of Executive.
4.4 Termination by Employer for Cause. Executive's employment under
this Agreement shall terminate immediately upon written notice from
Employer to Executive of termination for cause, and Employer shall have
no further obligation pursuant to this Agreement. For purposes of this
Section 4.4, the term "for cause" shall mean and include any of the
following events: fraud, misappropriation or embezzlement by Executive
involving Employer or any subsidiary or affiliate thereof;
the conviction in any jurisdiction of Executive for any crime involving
moral turpitude or which constitutes a felony; Executive's demonstrated
voluntary unwillingness to perform his duties, including Executive's
failure or refusal to carry out or perform such actions or duties as
he is specifically directed to carry out or perform by the President
and Chief Executive Officer of Employer, provided that Executive shall
not be required to perform any illegal or unethical act; the willful
engaging by Executive in conduct which has or could reasonably be
expected to have a material adverse effect on Employer or any of its
subsidiaries or affiliates; or the material breach by Executive of any
representations, warranties, agreements or covenants made by Executive
in this Agreement or any other agreement between Employer and Executive.
In the event of termination of this Agreement by Employer for cause,
Executive shall be entitled to no further compensation except
compensation pursuant to Sections 3.1.a, 3.1.b, 3.1.c or 3.1.d or
3.1.e.ii which may have accrued prior to such termination, and Employer
shall have no further obligation hereunder.
5. Confidentiality Agreement; Covenant Not to Compete or Hire Certain
Employees.
5.1 Confidentiality Agreement. Executive acknowledges that he will have
access to proprietary, confidential information of Employer and its
affiliates, which information Executive acknowledges constitutes a
special and unique asset of Employer. Executive agrees during the term
of this Agreement and thereafter:
5.1.a to keep secret and retain in the strictest confidence all information
about business and financial matters (such as costs, profits, strategic
and marketing plans, customer and supplier lists, formulae and methods
of operation and production) of Employer and its affiliates; their
employment policies and plans; and any other proprietary information
relating to Employer and its affiliates, their operations, business
and financial affairs (collectively, but excluding information
known to Executive prior to his employment with Employer, the
"confidential information") and not to disclose the confidential
information to anyone not then an officer, director or authorized
employee of Employer or any of its affiliates, nor utilize such
confidential information, either during or after the termination of
his employment with Employer, except in the course of performing his
duties pursuant to this Agreement or with Employer's express written
consent or except to the extent that such confidential information
can be shown to have been in the public domain through no fault of
Executive; and
5.1.b to deliver to Employer on demand, all memoranda, notes, records,
reports and other documents relating to Employer's or any of its
affiliates' business, financial affairs or operations and all property
associated therewith, which he may then possess or have under his
control. Upon request of Employer, Executive agrees to certify that
such delivery is complete, and that any and all copies made have been
delivered or destroyed. Employer agrees to give access to Executive
to such facilities of Employer as may be necessary for retrieval of
Executive's personal files and property after termination.
5.2 Non-Compete. During the term of this Agreement, and for a period
of six (6) months following termination of this Agreement, Executive
agrees that he will not, without Employer's prior written consent
(which may be withheld for any reason or for no reason in Employer's
sole discretion), do anything adverse to the interests of Employer,
and shall not, directly or indirectly himself or by or through a
family member or otherwise, alone or as a member of a partnership or
joint venture, or as a principal, officer, director, consultant,
employee or stockholder of any other entity, compete with Employer or
be engaged in or connected with any other business competitive with that
of Employer or any affiliate thereof; provided, however, that Executive
may own as a passive investment not more than one percent (1%) of the
securities of any publicly held corporation that may engage in a
business; and competitive with that of Employer or any affiliate
provided, however, Executive may establish a wholesale distribution
business competitive with that of Employer if Executive owns a majority
of the outstanding equity of such business. For purposes of this
Agreement, a "competitive business" shall mean a business engaged in
the wholesale, retail and/or catalog sale of roasted coffee beans and
related products.
5.3 Non-solicitation of Employees. Executive shall not at any time during
the one-year period following the termination of his employment with
Employer for any reason whatsoever: employ any individual who was
employed by Employer or any affiliate during the year immediately
preceding his termination; or in any material respect cause,
influence, or participate in the employment of any such individual by
any business that is competitive with any of the businesses engaged in
by Employer or any affiliate.
5.4 Non-solicitation of Customers and Suppliers. Executive shall not
at any time during the one-year period following the termination of his
employment directly or indirectly: solicit for himself or any person
the business of any individual or business which was a material
customer or material supplier of Employer or any affiliate at any
time during the one-year period immediately preceding such termination;
or persuade or attempt to persuade any such customer or supplier to
cease doing business or to reduce the amount of business it does with
Employer or any affiliate.
5.5 Equitable Remedies. It is agreed that Executive's obligations and
the rights of Employer pursuant to this Section 5 are unique and that
any breach or threatened breach by Executive of any of the foregoing
provisions of this Section 5 cannot be remedied solely by damages at
law. In the event of a breach or a threatened breach by Executive of
any of the provisions of this Section 5, Employer shall be entitled to
injunctive relief to enforce its rights and restraining Executive and
any business, firm, partnership, individual, corporation or entity
participating in such breach or threatened breach. Nothing in this
section shall be construed as prohibiting Employer from pursuing any
other remedies available at law or in equity for such breach or
threatened breach, including the recovery of damages and the immediate
termination of Executive. In addition to any such remedies,
Employer shall be entitled to recover its net costs, including
reasonable attorneys' fees and costs, to enforce its rights pursuant to
this Section 5 or prevent a breach or threatened breach.
6. Relationship to Parties.
Nothing in this Agreement shall be deemed to constitute a partnership
between or a joint venture by the parties, nor be deemed to constitute either
Executive or Employer the agent of the other except as specifically provided.
Neither Executive nor Employer shall be or become liable or bound by any
representation act or omission whatsoever of the other made contrary to the
provisions of this Agreement.
7. Assignment.
This Agreement shall be binding upon the successors and assigns of
Employer. Neither this Agreement nor any rights to any payments hereunder
shall be assignable by Executive.
8. Notices. All notices and communications hereunder shall be in writing
and be given by registered or certified mail, postage and registration or
certification fees prepaid, and shall be deemed given when so mailed as follows:
If to Employer: Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, VT 05676
With a copy to: H. Kenneth Merritt, Jr., Esq.
Merritt & Merritt
112 Lake Street
P.O. Box 5839
Burlington, VT 05402
If to Executive: Mr. Bill Prost
At his address then current on the books and records of Employer
The foregoing addresses may be changed by notice given in the manner set
forth in this Section 10.
9. Miscellaneous.
9.1 Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to the employment of Executive by
Employer during the term hereof, and the provisions hereof may not be
altered, amended, waived, terminated or discharged in any way
whatsoever
except by subsequent written agreement executed by the party charged
therewith. This Agreement supersedes all prior employment agreements,
letters, understandings and arrangements between Executive and Employer
pertaining to the terms of the employment of Executive by Employer,
including, without limitation, that certain letter from Employer to
Executive dated July 11, 1996.
9.2 Waiver of Breach. A waiver by either of the parties of any of the
terms or conditions of this Agreement, or of any breach, shall not be
deemed a waiver of such terms or conditions for the future or of any
other term of condition, or of any subsequent breach.
9.3 Provision not Enforceable. Any provision of this Agreement which
is prohibited or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions. Without limiting the generality of the foregoing sentence,
if any of the covenants contained in Section 5 are construed to be
invalid or unenforceable, the same shall not affect the remainder of
the covenant or covenants, which shall be given full effect. If any
provisions of Section 5 are held to be unenforceable because of
their scope or duration, the parties agree that the court making such
determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision shall
be enforceable.
9.4 Deductions and Set-Offs. Employer shall have the right to deduct
and withhold from Executive's compensation the amounts required to be
deducted and withheld by Employer pursuant to any present or future law.
In the event that Employer makes any payments or incurs any charges
for Executive's account or Executive incurs any personal charges with
Employer, Employer shall have the right and Executive hereby
authorizes Employer to recoup such payments or charges by deducting
and withholding the aggregate amount thereof from any compensation
otherwise payable to Executive hereunder. These deductions must be made
within sixty (60) days from the date the charges were made.
9.5 Governing Law. This Agreement is made in and shall be construed
and interpreted under the laws of the State of Vermont.
9.6 Captions. The captions in this Agreement are not part of the
provisions hereof, are merely for the purpose of reference and shall
have no force or effect for any purpose whatsoever, including the
construction of the provisions of this Agreement.
9.7 Counterparts. This Agreement may be executed in three counterparts,
each of which shall be an original, and which together shall constitute
one agreement.
9.8 Employee Handbook or Manual. In the event of any conflict between
this Agreement and any Employee Manual or Handbook circulated by Employer
now or in future, this Agreement shall control.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or its breach shall be settled by binding arbitration in the
city of Burlington, Vermont in accordance with the rules of the American
Arbitration Association. The decision of the arbitrator shall be final
and binding upon the parties and may be enforced in any court of
competent jurisdiction. The arbitrator is expressly permitted to award
reasonable attorneys' fees and costs to the prevailing party.
ACKNOWLEDGMENT OF ARBITRATION
EACH OF THE UNDERSIGNED UNDERSTANDS THAT THIS AGREEMENT CONTAINS AN AGREEMENT
TO ARBITRATE. AFTER SIGNING THIS DOCUMENT, EACH PARTY UNDERSTANDS THAT IT
WILL NOT BE ABLE TO BRING A LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE
WHICH IS COVERED BY THE ARBITRATION AGREEMENT, UNLESS IT INVOLVES A QUESTION
OF CONSTITUTIONAL OR CIVIL RIGHTS. INSTEAD EACH PARTY AGREES TO SUBMIT ANY
SUCH DISPUTE TO AN IMPARTIAL ARBITRATOR.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as
of the date first above written.
GREEN MOUNTAIN COFFEE ROASTERS, INC.
By: /s/ Robert P. Stiller
--------------------------------
Robert P. Stiller, President
and Chief Executive Officer
/s/ Bill Prost
--------------------------------
Bill Prost
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1993 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
As of November 19, 1996
AGREEMENT entered into by and between Green Mountain Coffee, Inc., a
Delaware corporation with its principal place of business in Waterbury,
Vermont (together with its subsidiaries, the "Company"), and the undersigned
employee of the Company (the "Optionee").
1. The Company desires to grant, subject to stockholder approval as
set forth below, the Optionee an incentive stock option under the Company's
1993 Stock Option Plan, as amended (the "Plan") to acquire shares of the
Company's Common Stock, par value $.10 per share (the "Shares").
2. The Plan provides that each option is to be evidenced by an option
agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee hereby
agree as follows:
1. Grant of Option.
The Company hereby grants, subject to stockholder approval as set forth
below, to the Optionee an incentive stock option (the "Option") to purchase
all or any part of an aggregate of the number of Shares shown at the end of
this Agreement on the terms and conditions hereinafter set forth. This option
is intended to be treated as an incentive stock option under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price.
The purchase price ("Purchase Price") for the Shares covered by the
Option shall be the dollar amount per Share shown at the end of this
Agreement.
3. Time of Exercise of Option.
Subject to Section 12 below, the option shall be first exercisable as to
all of the Shares covered hereby on November 19, 1996. To the extent the
option is not exercised by the Optionee when it becomes exercisable, it shall
not expire, but shall be carried forward and shall be exercisable, on a
cumulative basis, until the Expiration Date, as hereinafter defined.
4. Term of Options; Exercisability.
(a) Term.
(i) Each Option shall expire on the date shown at the end of
this Agreement (the "Expiration Date"), as determined by
the Board of Directors of the Company (the "Board").
(ii) Except as otherwise provided in this Section 4, if the
Optionee's employment by the Company is terminated, the
option granted to the optionee hereunder shall terminate
on the earlier of ninety days after the date the
Optionee's employment by the Company is terminated, or
(ii) the date on which the Option expires by its terms.
(iii) If the Optionee's employment 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.
(iv) If the Optionee's employment 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 shall terminate on the earlier of (i) one year
after the date such Optionee's employment by the Company
is terminated, or (ii) the date on which the option
expires by its terms.
(v) In the event of the death of the optionee, the Option
granted to such Optionee shall terminate on the earlier of
(i) one year after the date such optionee's employment by
the Company is terminated; or (ii) the date on which the
option expires by its terms.
(b) Exercisability.
(i) Except as provided below, if the Optionee's employment by
the Company is terminated, the Option granted to the
Optionee hereunder 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 the Optionee's
employment by the Company is terminated.
(ii) If the Optionee's employment is terminated by the Company
because he or she has become permanently disabled, as
defined above, the option granted to the Optionee
hereunder shall be immediately exercisable as to the full
number of Shares covered by such Option, whether or not
under the provisions of Section 3 hereof such Option was
otherwise exercisable as of the date of disability.
(iii) In the event of the death of the Optionee, the Option
granted to such Optionee may be exercised to the full
number of Shares covered thereby, whether or not under the
provisions of Section 3 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.
5. Manner of Exercise of Option.
(a) To the extent that the right to exercise the Option has
accrued and is in effect, the option may be exercised in full or in part by
giving written notice to the Company stating the number of Shares exercised
and accompanied by payment in full for such Shares. No partial exercise may
be made for less than one hundred (100) full shares of Common Stock. Payment
may be either wholly in cash or in whole or in part in Shares already owned by
the person exercising the option, valued at fair market value as of the date
of exercise; provided, however, that payment of the exercise price by delivery
of Shares already owned by the person exercising the Option may be made only
if such payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board. 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 exercising the option, not less
than thirty (30) and not more than ninety (90) days from the date of receipt
of the notice by the Company.
(b) The Company shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient
to satisfy the requirements of the option.
6. Non-Transferability.
The right of the Optionee to exercise the option shall not be assignable
or transferable by the optionee otherwise than by will or the laws of descent
and distribution, and the Option may be exercised during the lifetime of the
Optionee only by him or her. The Option shall be null and void and without
effect upon the bankruptcy of the Optionee or upon any attempted assignment or
transfer, except as hereinabove provided, including without limitation any
purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy
of execution, attachment, trustee process or similar process, whether legal or
equitable, upon the Option.
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the
Securities Act of 1933, as amended (the "1933 Act"), upon any date on which
the option is exercised in whole or in part, the person exercising the Option
shall give a written representation to the Company in the form attached hereto
as Exhibit I and the Company shall place an "investment legend", so-called, as
described in Exhibit 1, upon any certificate for the Shares issued by reason
of such exercise.
(b) 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 purposes of covering the issue
of Shares.
8. Adjustments on Changes in Capitalization.
Adjustments on changes in capitalization and the like shall be made in
accordance with the Plan, as in effect on the date of this Agreement.
9. No Special Employment Rights.
Nothing contained in the Plan or this Agreement shall be construed or
deemed by any person under any circumstances to bind the Company to continue
the employment of the Optionee for the period within which this Option may be
exercised. However, during the period of the Optionee's employment, the
Optionee shall render diligently and faithfully the services which are
assigned to the Optionee from time to time by the Board or by the executive
officers of the Company and shall at no time take any action which directly or
indirectly would be inconsistent with the best interests of the Company.
10. Rights as a Shareholder.
The Optionee shall have no rights as a shareholder with respect to any
Shares which may be purchased by exercise of this option unless and until a
certificate or certificates representing such Shares are duly issued and
delivered to the Optionee. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of this Option, the
Company shall have the right to require the Optionee to remit to the Company
an amount sufficient to satisfy all Federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. The Company may agree to permit the Optionee to withhold Shares
purchased upon exercise of this Option to satisfy the above-mentioned
withholding requirement; 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 Securities Exchange Act of 1934, as amended, except pursuant to a standing
election to so withhold Shares purchased upon exercise of an Option, such
election to be made in the form set forth in Exhibit 2 hereto and to be made
not less than six (6) months prior to the date of such exercise. such election
may be revoked by the Optionee only upon six (6) months prior written notice
to the Company.
12. Stockholder Approval.
On July 26, 1996, the Board amended the Plan, subject to stockholder
approval, to increase the number of shares for which options are available for
grant under the Plan by 200,000 (the "Increased shares"). The shares
underlying the option are a portion of the increased Shares, and accordingly,
the grant of the Option is subject to approval of the stockholders of the
Company. No portion of the option may be exercised prior to obtaining such
approval. Should the stockholders of the company fail to approve the
amendment to the Plan within twelve (12) months of the date hereof, this
Agreement and the Option shall thereupon terminate immediately, and shall be
void ab initio and of no force or effect.
IN WITNESS HEREOF, the Company has caused this Agreement to be executed,
and the optionee has hereunto set his or her hand and seal, all as of the day
and year first above written.
GREEN MOUNTAIN COFFEE, INC.
OPTIONEE
By:
/s/ Robert P. Stiller
- ----------------------
Robert P. Stiller Signature
President
Name: Dean E. Haller
(Printed)
Address: P.O. Box 83
Underhill Center, VT 05490
###-##-####
----------------------
Social Security Number
20,000
----------------
Number of Shares
$7.00
------------------------
Purchase Price Per Share
November 19, 2006
-----------------
Expiration Date
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to shares of Common
Stock, $.10 per share par value, of Green Mountain Coffee, Inc. (the
"Company") under the incentive stock option agreement dated as of November 19,
1996, granted to me under the 1993 Stock Option Plan, as amended, I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933 (the "1933 Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the 1933
Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under
the 1933 Act can be made only after the holding period and in limited amounts
in accordance with the terms and conditions provided by that Rule, and in any
sale to which that Rule is not applicable, registration or compliance with
some other exemption under the 1933 Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the
time that I may desire to make a sale pursuant to the Rule, the Company may
neither wish nor be able to comply with such requirement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such
shares in the absence of an effective registration statement covering the
same, except as permitted by the provisions of Rule 144, if applicable, or
some other applicable exemption under the 1933 Act. In view of this
representation and warranty, I agree that there may be affixed to the
certificates for the shares to be issued to me, and to all certificates issued
hereafter representing such shares (until in the opinion of counsel, which
opinion must be reasonably satisfactory in form and substance to counsel for
the Company, it is no longer necessary or required) a legend as follows:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"), and were acquired by the registered holder, pursuant to a
representation and warranty that such holder was acquiring such shares
for his own account and for investment, with no intention to transfer or
dispose of the same, in violation of the registration requirements of
the Act. These shares may not be sold, pledged, or transferred in the
absence of an effective registration statement under the Act, or an
opinion of counsel, which opinion is reasonably satisfactory to counsel
to the Company, to the effect that registration is not required under
the Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
Dean E. Haller
EXHIBIT 2
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter be granted), the Company shall withhold from the shares issuable
upon such exercise such number of shares as is equal in value to the federal
and state withholding taxes due upon such exercise. The undersigned further
acknowledges and agrees that this election may not be revoked without six (6)
months prior written notice to the Company.
OPTIONEE:
Signature
Name: Dean E. Haller
--------------
Printed
###-##-####
---------------------
Social Security Number
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT
UNDER 1993 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
As of January 1, 1997
AGREEMENT entered into by and between Green Mountain Coffee, Inc., a
Delaware corporation with its principal place of business in Waterbury,
Vermont (together with its subsidiaries, the "Company"), and the undersigned
employee of the Company (the "Optionee").
1. The Company desires to grant, subject to stockholder approval as
set forth below, the Optionee an incentive stock option under the Company's
1993 Stock Option Plan, as amended (the "Plan") to acquire shares of the
Company's Common Stock, par value $.10 per share (the "Shares").
2. The Plan provides that each option is to be evidenced by an option
agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Optionee hereby
agree as follows:
1. Grant of Option.
The Company hereby grants, subject to stockholder approval as set forth
below, to the Optionee an incentive stock option (the "Option") to purchase
all or any part of an aggregate of the number of Shares shown at the end of
this Agreement on the terms and conditions hereinafter set forth. This option
is intended to be treated as an incentive stock option under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price.
The purchase price ("Purchase Price") for the Shares covered by the
Option shall be the dollar amount per Share shown at the end of this
Agreement.
3. Time of Exercise of Option.
Subject to Section 12 below, the option shall be first exercisable as
follows:
As to 3,000 of the Shares covered hereby, on January 1, 1997;
As to an additional 10,000 of the Shares covered hereby, on December 31, 1997;
As to an additional 7,000 of the Shares covered hereby, on December 31, 1998
provided that the Optionee shall be entitled to the exercise of the option on
a pro rata basis as of the end of the month preceding the effective date of
the Optionee's termination of employment with the Company in the event that
such termination should occur prior to the expiration of any vesting period.
To the extent the option is not exercised by the Optionee when it becomes
exercisable, it shall not expire, but shall be carried forward and shall be
exercisable, on a cumulative basis, until the Expiration Date, as hereinafter
defined.
4. Term of Options; Exercisability.
(a) Term.
(i) Each Option shall expire on the date shown at the end of
this Agreement (the "Expiration Date"), as determined by
the Board of Directors of the Company (the "Board").
(ii) Except as otherwise provided in this Section 4, if the
Optionee's employment by the Company is terminated, the
option granted to the optionee hereunder shall terminate
on the earlier of ninety days after the date the
Optionee's employment by the Company is terminated, or
(ii) the date on which the Option expires by its terms.
(iii) If the Optionee's employment 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.
(iv) If the Optionee's employment 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 shall terminate on the earlier of (i) one year
after the date such Optionee's employment by the Company
is terminated, or (ii) the date on which the option
expires by its terms.
(v) In the event of the death of the optionee, the Option
granted to such Optionee shall terminate on the earlier of
(i) one year after the date such optionee's employment by
the Company is terminated; or (ii) the date on which the
option expires by its terms.
(b) Exercisability.
(i) Except as provided below, if the Optionee's employment by
the Company is terminated, the Option granted to the
Optionee hereunder 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 the Optionee's
employment by the Company is terminated.
(ii) If the Optionee's employment is terminated by the Company
because he or she has become permanently disabled, as
defined above, the option granted to the Optionee
hereunder shall be immediately exercisable as to the full
number of Shares covered by such Option, whether or not
under the provisions of Section 3 hereof such Option was
otherwise exercisable as of the date of disability.
(iii) In the event of the death of the Optionee, the Option
granted to such Optionee may be exercised to the full
number of Shares covered thereby, whether or not under the
provisions of Section 3 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.
5. Manner of Exercise of Option.
(a) To the extent that the right to exercise the Option has
accrued and is in effect, the option may be exercised in full or in part by
giving written notice to the Company stating the number of Shares exercised
and accompanied by payment in full for such Shares. No partial exercise may
be made for less than one hundred (100) full shares of Common Stock. Payment
may be either wholly in cash or in whole or in part in Shares already owned by
the person exercising the option, valued at fair market value as of the date
of exercise; provided, however, that payment of the exercise price by delivery
of Shares already owned by the person exercising the Option may be made only
if such payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board. 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 exercising the option, not less
than thirty (30) and not more than ninety (90) days from the date of receipt
of the notice by the Company.
(b) The Company shall at all times during the term of the
0ption reserve and keep available such number of Shares as will be sufficient
to satisfy the requirements of the option.
6. Non-Transferability.
The right of the Optionee to exercise the option shall not be assignable
or transferable by the optionee otherwise than by will or the laws of descent
and distribution, and the Option may be exercised during the lifetime of the
Optionee only by him or her. The Option shall be null and void and without
effect upon the bankruptcy of the Optionee or upon any attempted assignment or
transfer, except as hereinabove provided, including without limitation any
purported assignment, whether voluntary or by operation of law, pledge,
hypothecation or other disposition contrary to the provisions hereof, or levy
of execution, attachment, trustee process or similar process, whether legal or
equitable, upon the Option.
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the
Securities Act of 1933, as amended (the "1933 Act"), upon any date on which
the option is exercised in whole or in part, the person exercising the Option
shall give a written representation to the Company in the form attached hereto
as Exhibit I and the Company shall place an "investment legend", so-called, as
described in Exhibit 1, upon any certificate for the Shares issued by reason
of such exercise.
(b) 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 purposes of covering the issue
of Shares.
8. Adjustments on Changes in Capitalization.
Adjustments on changes in capitalization and the like shall be made in
accordance with the Plan, as in effect on the date of this Agreement.
9. No Special Employment Rights.
Nothing contained in the Plan or this Agreement shall be construed or
deemed by any person under any circumstances to bind the Company to continue
the employment of the Optionee for the period within which this Option may be
exercised. However, during the period of the Optionee's employment, the
Optionee shall render diligently and faithfully the services which are
assigned to the Optionee from time to time by the Board or by the executive
officers of the Company and shall at no time take any action which directly or
indirectly would be inconsistent with the best interests of the Company.
10. Rights as a Shareholder.
The Optionee shall have no rights as a shareholder with respect to any
Shares which may be purchased by exercise of this option unless and until a
certificate or certificates representing such Shares are duly issued and
delivered to the Optionee. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
11. Withholding Taxes.
Whenever Shares are to be issued upon exercise of this Option, the
Company shall have the right to require the Optionee to remit to the Company
an amount sufficient to satisfy all Federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. The Company may agree to permit the Optionee to withhold Shares
purchased upon exercise of this Option to satisfy the above-mentioned
withholding requirement; 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 Securities Exchange Act of 1934, as amended, except pursuant to a standing
election to so withhold Shares purchased upon exercise of an Option, such
election to be made in the form set forth in Exhibit 2 hereto and to be made
not less than six (6) months prior to the date of such exercise. such election
may be revoked by the Optionee only upon six (6) months prior written notice
to the Company.
12. Stockholder Approval.
On July 26, 1996, the Board amended the Plan, subject to stockholder
approval, to increase the number of shares for which options are available for
grant under the Plan by 200,000 (the "Increased shares"). The shares
underlying the option are a portion of the increased Shares, and accordingly,
the grant of the Option is subject to approval of the stockholders of the
Company. No portion of the option may be exercised prior to obtaining such
approval. Should the stockholders of the company fail to approve the
amendment to the Plan within twelve (12) months of the date hereof, this
Agreement and the Option shall thereupon terminate immediately, and shall be
void ab initio and of no force or effect.
IN WITNESS HEREOF, the Company has caused this Agreement to be executed,
and the optionee has hereunto set his or her hand and seal, all as of the day
and year first above written.
GREEN MOUNTAIN COFFEE, INC. OPTIONEE
By: /s/ Robert P. Stiller
---------------------
Robert P. Stiller Signature
President
Name: Bill Prost
(Printed)
Address:
______________________
Social Security Number
20,000
-----------------
Number of Shares
$6
_________________
Purchase Price Per Share
January 1, 2007
_______________
Expiration Date
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Gentlemen:
In connection with the exercise by me as to shares of Common
Stock, $.10 per share par value, of Green Mountain Coffee, Inc. (the
"Company") under the incentive stock option agreement dated as of January 1,
1996, granted to me under the 1993 Stock Option Plan, as amended, I hereby
acknowledge that I have been informed as follows:
1. The shares of common stock of the Company to be issued to me
pursuant to the exercise of said option have not been registered under the
Securities Act of 1933 (the "1933 Act"), and accordingly, must be held
indefinitely unless such shares are subsequently registered under the 1933
Act, or an exemption from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 under
the 1933 Act can be made only after the holding period and in limited amounts
in accordance with the terms and conditions provided by that Rule, and in any
sale to which that Rule is not applicable, registration or compliance with
some other exemption under the 1933 Act will be required.
3. The Company is under no obligation to me to register the shares or
to comply with any such exemptions under the 1933 Act.
4. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the
time that I may desire to make a sale pursuant to the Rule, the Company may
neither wish nor be able to comply with such requirement.
In consideration of the issuance of certificates for the shares to me, I
hereby represent and warrant that I am acquiring such shares for my own
account for investment, and that I will not sell, pledge or transfer such
shares in the absence of an effective registration statement covering the
same, except as permitted by the provisions of Rule 144, if applicable, or
some other applicable exemption under the 1933 Act. In view of this
representation and warranty, I agree that there may be affixed to the
certificates for the shares to be issued to me, and to all certificates issued
hereafter representing such shares (until in the opinion of counsel, which
opinion must be reasonably satisfactory in form and substance to counsel for
the Company, it is no longer necessary or required) a legend as follows:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act"), and were acquired by the registered holder, pursuant to a
representation and warranty that such holder was acquiring such shares
for his own account and for investment, with no intention to transfer or
dispose of the same, in violation of the registration requirements of
the Act. These shares may not be sold, pledged, or transferred in the
absence of an effective registration statement under the Act, or an
opinion of counsel, which opinion is reasonably satisfactory to counsel
to the Company, to the effect that registration is not required under
the Act."
I further agree that the Company may place a stop order with its
Transfer Agent, prohibiting the transfer of such shares, so long as the legend
remains on the certificates representing the shares.
Very truly yours,
Bill Prost
EXHIBIT 2
TO STOCK OPTION AGREEMENT
Gentlemen:
The undersigned Optionee hereby elects and agrees that, whenever the
undersigned exercises a stock option (including any options which now or may
hereafter he granted) , the Company shall withhold from the shares issuable
upon such exercise, such number of shares as is equal in value to the federal
and state withholding taxes due upon such exercise, The undersigned further
acknowledges and agrees that this election may not be revoked without six (6)
months prior written notice to the Company.
OPTIONEE:
Signature
Name: Bill Prost
Printed
----------------------
Social Security Number
CONFIDENTIAL
May 19, 1997
Mr. Robert D. Britt
Chief Financial Officer
Green Mountain Coffee Roasters, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Dear Bob:
I am pleased to advise you that we have approved the following financing
commitment for your consideration. As discussed, I will initiate the
documentation for this financing and amendment in anticipation of a rapid
closing.
Revolving Line of Credit
Amount: $6,000,000 ($1,000,000 increase from $5,000,000)
Purpose: Working capital and general corporate purposes
Advances: Fully available
Maturity: February 28, 1999
Repayment: Due at maturity; interest monthly
Interest Rate: Fleet Base or Libor (30 day through 360 day Libor in 30 day
increments) plus spread based upon Performance Pricing. Spread is
set quarterly upon presentation of financial statements and covenant
compliance certificate.
Performance Pricing
Level Funded Debt/Cash Flow Base + Libor +
1 >= 1.80 25 bps 275 bps
2 >= 1.50 < 1.80 0 bps 250 bps
3 >= 1.25 < 1.50 0 bps 225 bps
4 >= 1.0 < 1.25 0 bps 200 bps
5 < 1.0 0 bps 180 bps
Collateral: Secured under existing security agreement terms and conditions.
FINANCIAL COVENANTS: [replacement of all prior financial covenants]
A. Maximum Funded Debt to Cash Flow - 2.0:1.0. Calculated by dividing total
funded debt at the quarter end (Fleet plus other providers) by a rolling
historical four quarter cash flow. Cash flow is defined as EBIDA plus or
minus non-cash items. EBIDA is defined as net income after cash taxes plus
depreciation, interest, and amortization.
B. Minimum Debt Service Coverage - 2.4:1.0. Calculated by dividing rolling
historical four quarter cash flow by rolling historical four quarter debt
service. Debt service is all scheduled principal and interest payments
related to funded debt (Fleet plus other providers).
C. Maximum Leverage - 1.40:1.0. Calculated by dividing Total Liabilities less
cash balances in excess of $400,000 by the Tangible Net Worth.
D. Minimum Profitability - $1,000,000 per annum. Measured quarterly on a
rolling four quarter basis.
E. Maximum Capital Expenditures - $5,700,000 in Fiscal 1997 and $5,000,000
thereafter.
COMMITMENT/AMENDMENT FEE & UNUSED FACILITY FEE:
A.) A $2,000 fee will be charged for the new credit facility and amendments to
the terms and conditions. The Borrower will be responsible for all costs,
including reasonable legal fees, associated with the underwriting and
documentation of these amendments.
B.) $3,500 annual facility fee (charged quarterly)
OTHER TERMS AND CONDITIONS:
All other terms and conditions as set forth in the existing documentation will
remain in full force and effect.
EXPIRATION:
This commitment will expire if not accepted by May 30, 1997 or if not closed
by June 20, 1997.
Sincerely,
/s/ Andre P. Pelletier
- ----------------------
Andre P. Pelletier
Vice President
Corporate Banking
Accepted and agreed to this 19th day of May 1997.
Green Mountain Coffee Roasters, Inc.
By: /s/ Robert D. Britt
-------------------
Robert D. Britt
Its duly authorized Chief Financial Officer
Green Mountain Coffee Roasters, Inc.
May 19, 1997
GREEN MOUNTAIN COFFEE, INC.
Exhibit 11
Computation of Net Income Per Share
(unaudited)
Twelve weeks Twenty-eighty weeks
ended ended
April 12, April 13, April 12, April 13,
1997 1996 1997 1996
---------- --------- ---------- ----------
Net income.................. $ 579,000 $ 98,000 $1,301,000 $ 777,000
---------- --------- ---------- ---------
Primary weighted common
shares outstanding:
Common stock............. 3,417,306 3,399,795 3,417,306 3,399,795
Dilutive effect of
outstanding common
stock options.......... 30,693 28,793 28,532 27,759
---------- --------- --------- ---------
Weighted average common
and common equivalent
shares.................... 3,447,999 3,428,588 3,445,838 3,427,554
---------- ---------- --------- ---------
Net income per share........ $ 0.17 $ 0.03 $ 0.38 $ 0.23
---------- ---------- --------- ---------
This Exhibit should be read in conjunction with the accompanying
unaudited interim consolidated financial statements and the notes thereto.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet dated 4/12/97 and the Statement of Operations for the
twelve weeks ended 4/12/97 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-START> JAN-19-1997
<PERIOD-END> APR-12-1997
<CASH> 941
<SECURITIES> 0
<RECEIVABLES> 3,056
<ALLOWANCES> 90
<INVENTORY> 3,640
<CURRENT-ASSETS> 9,190
<PP&E> 17,865
<DEPRECIATION> 7,755
<TOTAL-ASSETS> 20,304
<CURRENT-LIABILITIES> 5,087
<BONDS> 5,043
0
0
<COMMON> 342
<OTHER-SE> 9,832
<TOTAL-LIABILITY-AND-EQUITY> 20,304
<SALES> 10,063
<TOTAL-REVENUES> 10,063
<CGS> 5,881
<TOTAL-COSTS> 5,881
<OTHER-EXPENSES> 3,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107
<INCOME-PRETAX> 27
<INCOME-TAX> (552)
<INCOME-CONTINUING> 579
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<NET-INCOME> 579
<EPS-PRIMARY> .17
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