-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
MhEf844SbwDQ4nH9rMzxplpPsPnEByDHk7hwjNWXG9vSxcSiRUg1Mcz+ZO68ZD1w
40LSHsP5ClHlCba5Yi2R/A==
<SEC-DOCUMENT>0000909954-00-000011.txt : 20001228
<SEC-HEADER>0000909954-00-000011.hdr.sgml : 20001228
ACCESSION NUMBER: 0000909954-00-000011
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 14
CONFORMED PERIOD OF REPORT: 20000930
FILED AS OF DATE: 20001227
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GREEN MOUNTAIN COFFEE INC
CENTRAL INDEX KEY: 0000909954
STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090]
IRS NUMBER: 030339228
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0928
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-12340
FILM NUMBER: 796141
BUSINESS ADDRESS:
STREET 1: 33 COFFEE LANE
CITY: WATERBURY
STATE: VT
ZIP: 05676
BUSINESS PHONE: 8022445621
MAIL ADDRESS:
STREET 1: 33 COFFEE LANE
CITY: WATERBURY
STATE: VT
ZIP: 05676
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- --------------------------------------------------------------------------------
FORM 10-K
- --------------------------------------------------------------------------------
(Mark One)
[ X ] Annual Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended September 30, 2000
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 (IRS employer identification no.)
incorporation or organization)
33 Coffee Lane, Waterbury, Vermont 05676
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (802) 244-5621
--------------
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.10 par value per share
--------------------------------------
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the past 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. [ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on November 30, 2000 was approximately
$55,803,000 based upon the closing price of such stock on that date.
As of November 30, 2000, 3,147,480 shares of common stock of the registrant were
outstanding. See "Market for the Registrant's Common Equity and Related
Stockholder Matters."
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the registrant's Annual Meeting
of Shareholders to be held on March 15, 2001 have been incorporated by reference
into Part III of this report. The registrant will file the definitive Proxy
Statement by January 29, 2001.
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Annual Report on Form 10-K
Table of Contents
Page
Part I
Item 1. Business 4
Item 2. Properties 17
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Executive Officers of the Registrant 18
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 20
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 29
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 30
Part III
Item 10. Directors and Executive Officers of the Registrant 31
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners
and Management 31
Item 13. Certain Relationships and Related Transactions 31
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 32
<PAGE>
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. In addition, the Company's representatives may
from time to time make oral forward-looking statements. Forward-looking
statements provide current expectations of future events based on certain
assumptions and include any statements that do not directly relate to any
historical or current fact. Words such as "anticipates", "believes", "expects",
"will", "feels", "estimates", "intends", "plans", "projects", and similar
expressions, may identify such forward-looking statements. Owing to the
uncertainties inherent in forward-looking statements, 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, the impact of the loss of a
major customer, fluctuations in availability and cost of green coffee, economic
conditions, prevailing interest rates, competition, the management challenges of
rapid growth, variances from budgeted sales mix and growth rate, consumer
acceptance of the Company's new products, the impact of a tighter job market,
weather and special or unusual events, as well as other risk factors described
in Item 1 of this report on Form 10-K for the year ended September 30, 2000 and
other factors described from time to time in the Company's filings with the
Securities and Exchange Commission. Forward-looking statements reflect
management's analysis as of the date of this document. The Company does not
undertake to revise these statements to reflect subsequent developments.
<PAGE>
PART I
Item 1. Business
The Company
- -----------
Green Mountain Coffee, Inc. ("the Company" or "Green Mountain" or
"Green Mountain Coffee") roasts over 25 high-quality arabica coffees to produce
over 60 varieties of coffee which it sells through a coordinated multi-channel
distribution network in its wholesale and direct mail operations. This
distribution network is designed to maximize brand recognition and product
availability. The Company is one of the leading specialty coffee companies in
its established markets.
The majority of Green Mountain's revenue is derived from over 6,700
wholesale customer accounts located primarily in the northeastern United States.
The wholesale operation serves supermarket, specialty food store, convenience
store, food service, hotel, restaurant, university, travel and office coffee
service customers. Wholesale customers resell the coffee in whole bean or ground
form for home consumption and/or brew and sell coffee beverages at their place
of business.
The Company is a Delaware holding company formed in July 1993 whose
only asset is the stock of Green Mountain Coffee Roasters, Inc. ("Roasters"), a
Vermont corporation formed in 1981. As used herein, unless the context otherwise
requires, references to "the Company" or "Green Mountain" or "Green Mountain
Coffee" include the Company and Roasters.
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 16 weeks, 28 weeks and 40 weeks,
respectively, into the fiscal year. As used herein, unless the context otherwise
requires, references to "fiscal 1999" or "fiscal 1998" represent the 52-week
periods ended September 25, 1999 and September 26, 1998, respectively. Fiscal
2000 represents the 53-week period ended September 30, 2000, with its fourth
fiscal quarter consisting of 13 weeks instead of the usual 12.
The Company's corporate offices are located at 33 Coffee Lane,
Waterbury, Vermont 05676. The Company's telephone number is (802) 244-5621, its
fax number is (802) 244-5436, and its e-mail address for investor information is
investor.services@gmcr.com. The address of the Company's Internet Web site is
www.GreenMountainCoffee.com.
The Product
- -----------
Green Mountain is committed to providing the highest quality arabica
coffees available from around the world. To achieve this goal, Green Mountain
carefully selects its coffee beans and then "appropriate roasts(R)" the coffees
to maximize their taste and flavor differences. The Company's coffee offerings
include single-origin, estate, certified organic, Fair Trade, proprietary
blends, and flavored coffees that it sells under the Green Mountain Coffee
Roasters(R) brand.
The Company roasts its coffee in small batches to ensure consistency.
Green Mountain varies both the degree of roast and the roasting profile (i.e.,
roast time and temperature) to maximize a particular coffee's taste
characteristics. The Company utilizes state-of-the-art roasting software which
enables it to more exactly duplicate specific roasts, ensuring Green Mountain's
ability to offer consistent taste profiles.
Green Mountain's roasting process is designed to maximize the flavors
inherent in the coffee itself, without letting the flavor of roasting overshadow
a particular coffee's taste subtleties. The Company believes that its
distinctive roasting methods enable it to provide the same coffees at different
roasting degrees to maximize their flavors and thereby satisfy varying consumer
preferences.
The Company uses convection air roasters, which it believes offer a
higher degree of flexibility than other commercially available roasters. In
addition, the Company has developed specific roasting programs for each bean
type to establish a Green Mountain "signature" for that bean type, which the
Company calls its "appropriate roast". The Company believes that this roasting
process distinguishes it from other specialty coffee companies and has resulted
in strong customer brand loyalty.
Green Mountain, unlike some of its competitors, also offers flavored
coffees. The Company believes that flavoring its coffee during the production
process, rather than providing flavor additives after brewing, provides its
customers with taste consistency, convenience and economy.
The Company nitrogen flushes its packaged coffee and employs one-way
valve bag packaging technology that provides a minimum shelf life of six months
for the Company's coffees. This technology enables the Company to expand its
distribution while maintaining its high standards for quality and freshness.
Green Mountain coffee comes in a variety of packages including whole
beans, fractional packages, and one-cup Keurig(R) portions. The packaging
equipment for Keurig K-Cup(TM) portion packs is owned by Keurig, Inc. and
operated by Green Mountain Coffee. Green Mountain pays a royalty to Keurig, Inc.
for each K-Cup sold.
Growth Strategy
- ---------------
Green Mountain Coffee is focused on building the brand and profitably
growing its business. At present, management believes that it can continue to
grow sales over the next few years at a rate similar to its historical five-year
average growth rate (in the range of 18 to 25 percent), by increasing market
share in existing markets, expanding into new geographic markets, and
selectively pursuing other opportunities. At the same time, management is
working at growing earnings faster than revenue. These statements are
forward-looking, and subject to the risks and uncertainties outlined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and under the heading, "Forward-looking information," beginning on
page 21.
In recent years, the primary growth in the coffee industry has come
from the specialty coffee category, driven by the wider availability of high
quality coffee, the emergence of upscale coffee shops throughout the country,
and the general level of consumer education. Green Mountain has been benefiting
from the overall market trend plus some carefully developed and distinctive
advantages over its competitors.
Green Mountain coffee is available in many different distribution
channels and customer categories in its primary geographic market, the eastern
United States. This multi-channel strategy provides widespread exposure to the
brand in a variety of settings, ease of access to the products, and many tasting
opportunities for consumer trial. Green Mountain coffee is widely available
throughout the day: at home in the morning, in hotels, on airplanes and trains,
at convenience stores on the way to work, at the office, in restaurants, in
supermarkets, at the movie theatre, and at home again at the end of the day. The
Company also has a special events vehicle that can be seen at ski races,
festivals, customer locations, and other venues on the East Coast. The vehicle
along with many other special event activities provide great sampling
opportunities and visibility to the brand.
The Company believes that its coffee's convenient availability for
consumer trial through convenience stores, office coffee services and food
service establishments is a significant advantage and a key component of its
growth strategy. The Company believes that potential customers who sample its
products by the cup are likely to develop a taste for Green Mountain coffee and
seek it out through other available distribution channels. It has been the
Company's experience that consumer trial of Green Mountain coffee at one level
of distribution often leads to a subsequent purchase at another level of
distribution.
As brand awareness increases through trial by consumers of the
Company's coffee by the cup, demand for whole bean sales of the Company's coffee
for home consumption also increases. The National Coffee Association of USA,
Inc., in its National Coffee Drinking Trends through 2000 study, states that
"over 75% of coffee drinkers drink coffee at home." As brand equity is built,
wholesale expansion typically continues through customers such as supermarkets
and specialty food stores, who in turn, sell the Company's whole bean coffee to
consumers. This expansion process capitalizes upon this cup/whole bean
inter-relationship. The strategy is designed to further increase Green
Mountain's market share in geographic areas in which it already operates in
order to increase sales density and drive operational and brand-equity
efficiencies.
In addition to its efforts to boost sales in its core geographic
markets, the Company also seeks to introduce Green Mountain coffee in selected
new markets across the United States, principally utilizing the Company's office
coffee and convenience store channels. "Flagship" customers, such as General
Cinema, Delta Express, Delta Shuttle and American Skiing Company, are also key
to the Company's geographic expansion strategy, as they provide great visibility
and sampling opportunities.
In the direct mail area, the Company focuses solicitations on catalog
customers who buy regularly from the Company, bed-and-breakfasts and other small
businesses, and from members of the Company's "Coffee Club", a continuity
program with customized standing orders for automatic re-shipment. Recently, a
large portion of the Company's efforts in the direct mail segment have been
directed towards increasing traffic on its Web site
(www.GreenMountainCoffee.com), which is intended to build brand awareness
nationwide and boost direct sales to consumers in the Company's less mature
geographic markets.
Recent Developments
- -------------------
NEW PRODUCTS. The Company's partnership with Keurig, Inc. continued to develop
into an important growth driver in fiscal 2000, as the unique Keurig one-cup
brewing system gained significant momentum in the marketplace. Sales of K-Cups
made up 15.7% of total company sales in fiscal 2000. The success with the Keurig
system also helped Green Mountain develop relationships with a number of office
coffee distributors, providing it an opportunity to also sell its traditional
line of products through these distributors (primarily pre-ground fractional
coffee). In fiscal 2000, coffee pounds sold to distributors through the office
coffee service channel grew 63.4% over the previous year and Keurig coffee
pounds accounted for 76.4% of that growth. In June of 2000, the Company signed a
10-year manufacturing and distribution agreement with Keurig, Inc.
In November 2000, Green Mountain added two new coffees (Organic House
Blend(TM) and Southern Pecan) to its existing offering of 12 K-Cup coffees and
introduced its new Connoisseur line of Keurig K-Cups, which it expects will
reinforce its position as the premium provider of K-Cup portion packs. The
Connoisseur collection is made of 5 coffee varieties: Lake & Lodge(TM), Kenyan
AA, Organic Sumatran Reserve(TM), Guatemalan Finca Dos Marias, and, soon to be
available, La Esperanza(TM). The Company intends to continue expanding its K-Cup
and fractional package business nationwide through its office coffee products
distributors in fiscal 2001.
In September 1999, the Company introduced a new line of frozen granita
and hot cappuccino beverages, two high-growth areas of the specialty beverage
market. These products, which are marketed under the Monte Verde(TM) brand,
complement the traditional line of specialty coffees and make Green Mountain a
full-service provider to certain channels, such as convenience stores. In fiscal
2000, sales of Monte Verde products made up 1.5 % of total company sales.
In May of 2000, Green Mountain Coffee Roasters signed an agreement with
TransFair USA to promote Fair Trade coffee. Under the agreement, Green Mountain
Coffee Roasters has agreed to purchase coffee at a minimum floor price under
internationally accepted Fair Trade terms from the small farmer cooperatives in
Peru, Mexico, and Sumatra where the Company has long-standing relationships.
Coffee certified by TransFair USA provides an audit trail from the farm to the
cup, which insures that small-scale farmers are paid a Fair Trade price for
their coffee that provides them with a living wage. All of the Company's regular
certified organic coffees have been certified Fair Trade.
CUSTOMERS. In addition to the previously described strong gains in the office
coffee channel, the Company continued to focus on other key channels of its
wholesale business in fiscal 2000 and built stronger relationships with its
major customers.
Growth in the convenience store channel was very strong, with pounds
sold up 21.7% year-over-year. Exxon Mobil Corporation ("ExxonMobil") convenience
stores continue to be Green Mountain's largest customer in the convenience store
channel, with over 1,200 locations at September 30, 2000, including over 480
corporate-owned stores. In November 2000, the Company announced that it had
signed a new five-year exclusive agreement to provide Green Mountain coffee to
all corporate-owned ExxonMobil convenience stores (over 900 stores, including
the 480 existing locations) in the United States including On the Run(R), Mobil
Mart(R), Exxon Shop(R), Tiger Mart(SM), Tiger Express(SM), and
Tigermarket(SM) locations. In addition, Green Mountain coffee is now the
recommended coffee for all ExxonMobil dealer and franchise operators. ExxonMobil
reports a total of 13,680 retail facilities in the United States. It also has
projected new corporate-owned and dealer-owned On the Run stores that fall under
the agreement in excess of 600 locations by the end of 2002.
Under this new agreement, the Company will unbundle its pricing so that
ExxonMobil pays a lower price for purchases of Green Mountain coffee and in
turn, they will use a third party distributor to deliver the coffee to their
convenience stores thereby reducing Green Mountain's delivery cost. ExxonMobil
will pay for all services provided by the Company such as equipment maintenance
and training on a fee-for-service basis.
As this new five-year agreement is implemented, Green Mountain Coffee
Roasters will expand its geographic distribution to new markets. Under the terms
of the agreement, the coffee will be made available in the coming months to an
additional 500 corporate-owned units in the Mid-Atlantic States and in markets
including Memphis, Nashville, San Antonio, Dallas, Houston, and additional
locations in Florida and California.
The supermarket channel continued to show healthy year-over-year
pounds sold growth of 7.4% in fiscal 2000. Green Mountain coffee can now be
purchased at over 760 supermarket locations, up approximately 200 from last
year. The addition of Kash n'Karry, a chain of supermarkets located in Central
Florida, accounted for 135 of those new locations. Among existing supermarket
customers, the increase in coffee pounds sold was especially strong at Stop &
Shop Supermarkets, a supermarket chain in the Northeast, which started to sell
Green Mountain coffee in another 46 former Edwards stores in fiscal 2000.
<PAGE>
Coffee pounds sold in fiscal 2000 and fiscal 1999, broken down by sales channel,
are as follows:
<TABLE>.
- --------------------------------------- ------------ ------------ ------------- ----------------
53 wks ended 52 wks ended Full Year Y/Y Full Year %
Sales Channel 9/30/00 9/25/99 lb. Increase Y/Y lb. Increase
- --------------------------------------- ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Convenience Stores..................... 26.8% 26.6% 520,000 21.7%
Supermarkets........................... 24.9% 28.0% 186,000 7.4%
Office Coffee Service Distributors..... 23.8% 17.6% 1,003,000 63.4%
Restaurants............................ 11.2% 13.3% 20,000 1.7%
Other Food Service..................... 8.1% 8.7% 95,000 12.1%
Other Retail........................... 2.2% 2.6% 8,000 3.4%
Direct Mail, including Internet Sales.. 3.0% 3.2% 35,000 12.1%
------------ ------------ ------------- ----------------
Totals 10,871,000 9,004,000 1,867,000 20.7%
============ ============ ============= ================
</TABLE>
Corporate Objective and Philosophy
- ----------------------------------
Green Mountain's objective is to be the leading specialty coffee
company by providing the highest quality coffee and having the largest market
share in its targeted markets while maximizing Company value. The Company
intends to achieve this objective by differentiating and reinforcing the Green
Mountain brand and engendering a high degree of customer and consumer loyalty.
Essential elements of this unique approach include:
HIGH QUALITY COFFEE. Green Mountain buys some of the highest quality arabica
beans available from the world's coffee-producing regions and uses a roasting
process that maximizes each coffee's individual taste and aroma. Green Mountain
has a passion for coffee and believes that its coffees are among the highest
quality coffees sold in the world.
CUSTOMER SERVICE. Green Mountain seeks to create customers for life. The Company
believes that coffee is a convenience purchase and utilizes its multi-channel
distribution network to make its coffee widely and easily available to consumers
for home or away-from-home consumption.
To ensure a high level of customer contact, the Company has established
regional distribution centers to supply coffee to its wholesale customers and
from which customer service calls are dispatched. Green Mountain has also
established relationships with some of its vendors to drop ship items directly
from the vendor to the customer, thereby significantly decreasing shipping times
and costs.
The Company has an on-line inventory system for its central and
regional distribution centers which helps to better serve the Company's
customers and to improve the Company's direct-store-delivery process and
capability. Green Mountain attempts to maintain at all times adequate levels of
inventory to satisfy customer demand. At September 30, 2000, the Company had
$2,557,000 of raw materials and supplies inventory, as well as $2,793,000 worth
of finished goods inventory.
The Company's online ordering application on its Web site
(www.GreenMountainCoffee.com) is fully integrated with the Company's
PeopleSoft(R) Enterprise Resource Planning ("ERP") system and customers receive
instantaneous, electronic shipping confirmations for all online orders.
CUSTOMER COFFEE EDUCATION. The Company educates its wholesale customers and
employees and vendor partners about the origin and preparation of coffee through
a course comprised of a series of on-site training programs, tours, manuals, and
hands-on learning experiences known as "Coffee College." This intensive training
covers growing and harvesting; coffee tasting and cupping; grinding, filtering,
and brewing; roasting and packaging; and preparing coffee beverages. Over 1,200
of the employees of Green Mountain's customers attended Coffee College in fiscal
2000, primarily at the Company's Java University located in Waterbury, Vermont.
Since 1997, Green Mountain Coffee also has been hosting Specialty Coffee
Association of America ("SCAA") Espresso Lab training sessions for consumers and
employees of other coffee companies.
The Company's direct mail catalog and Web site provide an overview of
the differences between the various coffees from around the world and the
various degrees of roast. The Company believes that educational initiatives such
as these help to create advocates for its coffee and thereby engender a loyal
consumer base.
EMPLOYEE DEVELOPMENT. Green Mountain Coffee seeks to be a destination workplace
for its employees. The Company believes that dedication to employee training and
development is vital to attracting and retaining the most highly performing,
qualified, and motivated employees. The Company offers numerous educational
workshops, professional seminars, a leadership development program, a series of
coffee knowledge classes and many other personal and professional development
opportunities including Franklin-Covey time management, Dale Carnegie, and
personal financial planning just to name a few. The staff development plan
provides employees the motivation and ability to offer Green Mountain customers
the very best quality in service, fostering long-term relationships. In
addition, in fiscal 2000, Green Mountain adopted the Appreciative Inquiry method
of business analysis, which incorporates a highly positive, inclusive and
people-centered way of considering business development. The Company also offers
an Educational Assistance Plan providing financial support to employees seeking
to improve their skills through continuing education.
SOCIALLY RESPONSIBLE BUSINESS PRACTICES. Green Mountain is committed to
conducting its business in a socially responsible manner. The Company believes
that doing well financially can go hand in hand with giving back to the
community and protecting the environment. In fiscal 2000, the Company
contributed over 5% of its pre-tax income to various coffee farms, cooperatives
and non-profit organizations in the U.S. and in coffee-producing countries, in
the form of cash, products and paid employee time. Domestically based
organizations benefiting from cash or coffee product donations in 2000 included
Conservation International, Rainforest Alliance, Coffee Kids(TM), and the United
Way, as well as libraries, religious organizations, schools, counseling centers
and soup kitchens in markets where the Company operates. In addition to cash and
product donations, the Company encourages its employees to perform volunteer
work for non-profit and community-based organizations on company time for up to
2.5% of their total hours worked at the Company. In fiscal 2000, 99 employees
were reimbursed by the Company for a total of 1,529 hours of volunteer community
service time. Another 717 hours of unpaid community service were reported.
The Company is committed to improving the quality of life in
coffee-producing countries, and therefore supports projects that foster
self-sufficiency, which it believes yield the best results. For example, since
January of 1998, Green Mountain has been sponsoring a very successful Coffee
Kids micro-lending program in Huatusco, Mexico, to encourage the development of
small family businesses. The program now has over 600 participants. The Company
has also provided funding for computers and libraries in communities where its
Stewardship(R) coffees are produced.
In the Oaxaca region of Mexico, where the Company's Organic Mexican
Select(TM) coffee is grown, the Company funds a variety of projects, including a
Coffee Kids micro-lending project and a women's health care project for the
early detection of cervical cancer. In addition, the Company provides financial
assistance to the FomCafe S.C. cooperative's quality control training program
which helps farmers earn more for their coffee.
In the Aceh region of Indonesia, Green Mountain provided seed funding
to Gayo Organic Coffee Farmer's Association ("GOCFA"), which now produces the
Company's Organic Sumatran Reserve(TM) coffee. That project was started in
partnership with ForesTrade, a Vermont-based supplier of organic oils and
spices. In addition to local quality of life improvements, these programs help
insure that a stable supply of quality organic coffees will be available to
Green Mountain Coffee to satisfy growing consumer demand.
In May of 2000, Green Mountain Coffee Roasters signed an agreement with
TransFair USA to promote Fair Trade coffee. Under the agreement, Green Mountain
Coffee Roasters has agreed to purchase coffee at a minimum floor price under
internationally accepted Fair Trade terms from the small farmer cooperatives in
Peru, Mexico, and Sumatra where the Company has long-standing relationships.
Coffee certified by TransFair USA provides an audit trail from the farm to the
cup, which insures that small-scale farmers are paid a Fair Trade price for
their coffee that provides them with a living wage. All of the Company's regular
certified organic coffees have been certified Fair Trade. Much of the Company's
Stewardship coffees are purchased at prices well above this minimum floor price,
even though they are not certified Fair Trade.
Green Mountain is committed to being environmentally and socially
responsible in all aspects of its business operations. Consistent with this
commitment, the Company has created and supported a variety of innovative
environmental programs and incentives.
Green Mountain encourages sustainable farming practices through its
Stewardship Program. Stewardship coffees are purchased from farms and
cooperatives where herbicide and pesticide use is limited and soil erosion
controls are in place. Additionally, these farms demonstrate higher standards of
support for their workers by providing housing, medical assistance, and an
interest in the welfare of the individual worker. As a continuation and
expansion of the Stewardship Program, Green Mountain offers consumers a choice
of organic coffees, starting with one farm-direct coffee from Peru in 1997 and
growing into a line of seven organic coffees by the end of fiscal 2000. The
Company's roasting and packaging facility is certified as organic by Quality
Assurance International of San Diego, California.
Since 1990, Green Mountain has sold, under the licensed name
Earth-Friendly Coffee Filters(TM), a line of dioxin-free and chlorine-free paper
coffee filters, helping to raise consumer awareness of chlorine-free processing.
In another innovative approach to product design, in 1997, the Company won the
3M Scotchban(R) Innovation Award for the development of a biodegradable coffee
bag used by wholesale customers who bag Green Mountain bulk coffees on their
premises.
The Company's most recent new initiative, to reduce its use of
non-renewable energy sources and the impact on the environment, is the
installation of a 95-kilowatt cogeneration unit in its roasting facility that
started operating in December 1999. The unit is designed to capture heat from
the power generating process to heat and power the Company's building, reducing
its use of both propane and externally generated electricity. The unit is
designed to help reduce the Company's operating expenses as a percent of sales
over time. It has the added benefit of reducing the risk of fire, created by
power outages, that can occur when the roasters, which operate at very high
temperatures, suddenly lose power.
Through responsible operational practices, from purchasing to waste
management, Green Mountain strives to minimize its environmental impact. The
Company uses chemical-free, biodegradable, cornstarch-based foam peanuts and
100% recycled Kraft-style (Geoami) paper to protect products during shipping, as
well as recycled content chip-board containers and reusable containers to store
and ship coffee. In addition, Green Mountain makes every attempt to divert its
manufacturing waste from landfills. For example, the burlap bags which contain
green coffee beans are recycled or donated for use in gardens and crafts, and
pallets used in the production and distribution centers are routinely repaired
and re-used. The Company also has an on-site recycling program which
significantly reduces its landfill refuse volume and is available to employees
for their personal use.
Compliance with federal, state and local environmental laws and
regulations does not materially impact capital expenditures, earnings or the
competitive position of the Company.
Wholesale Operations
- --------------------
During fiscal 2000, 1999, and 1998, approximately 95%, 95%, and 94%,
respectively, of Green Mountain's sales from continuing operations were derived
from its wholesale operation which services accounts located primarily in the
northeastern United States. Wholesale customers resell the coffee in whole bean
or ground form for home consumption and/or brew and sell coffee beverages at
their place of business. Unlike most of its competitors, Green Mountain's
wholesale operation services a large variety of establishments, from individual
upscale restaurants to major supermarket chains. This strategy enables a deeper
penetration in a given geographic market, exposing consumers to the brand
throughout the day in a variety of contexts. This strategy also has the
advantage of limiting the dependency of the Company on a single distribution
channel.
Notable accounts include:
CONVENIENCE STORES RESTAURANTS
- -------------------------------- -------------------------------
ExxonMobil convenience stores Aureole Restaurant, NYC
Unimarts Culinary Institute of America
RL Vallee Inc. dba Maplefields New England Culinary Institute
Mirabito Fuel Group dba Quickway The Harvard Club, NYC
SUPERMARKETS OFFICE COFFEE SERVICES
- -------------------------------- -------------------------------
Hannaford Bros.- 132 stores Bostonbean Coffee Company
Kash `n Karry - 135 stores Coffee Pause Company
Price Chopper - 27 stores Corporate Coffee Systems
Roche Brothers - 13 stores Crystal Rock Water/Vermont Pure
Stop & Shop - 231 stores Springs Company
(primarily coffee by the cup) Perrier's Poland Springs
Shaw's - 107 stores Springtime
U.S. Coffee
OTHER FOOD SERVICE
- --------------------------------
Amtrak - Northeast corridor
American Skiing Company
Delta Express and Delta Shuttle
Columbia University
New Jersey State Aquarium
Stowe Mountain Resort
Wholesale operations are coordinated from the Company's headquarters in
Waterbury, Vermont and supplemented by regional distribution centers in
geographies in which the density of customer accounts so warrants. Regional
distribution centers are located in Biddeford, Maine; Latham, New York; Woburn,
Massachusetts; Southington, Connecticut; and Lakeland, Florida. Distribution
facilities are located within a two-hour radius of most customers to expedite
delivery. The Company uses third party carriers such as Federal Express and the
United States Postal Service for shipping to customers not supported by a
regional distribution center.
The wholesale operation primarily uses in-house sales people. However,
in certain sales channels, such as the office coffee service and food service
sectors, the Company utilizes the services of independent distributors who
purchase coffee from the Company for resale to wholesale customers. The Company
believes that the use of such distributors provides access to certain wholesale
customers whose size or geographic location makes it economically inefficient
for the Company to service directly.
The Company generally provides wholesale customers with brewing,
grinding and related equipment and product displays ("loaner equipment") at no
charge, which are usually installed on the customer's premises by the Company's
internal or contracted service personnel. A customer also is assigned a service
technician who services, repairs and provides preventive maintenance and
emergency service on such equipment. Additionally, for supermarket customers,
Green Mountain employs a team of stockers who ensure that supermarket displays
are clean, appropriately stocked, and have promotional items to maximize sales.
Most competitors of Green Mountain in the wholesale segment do not provide such
high levels of sales and equipment service support.
The wholesale operation has 34 area sales managers and regional sales
managers assigned to geographic territories, reporting to a national sales
manager. The wholesale area sales territories are concentrated in the eastern
United States, with an additional presence in Illinois, Michigan and Arizona. In
addition to geographic sales personnel, the Company has a national supermarket
sales manager, a national office coffee service sales manager, a national
convenience store sales manager, a national food service manager, and an
international sales and flagship accounts manager, along with account executives
for major customers, to help provide more focused customer support and service.
Wholesale coffee pounds by geographic region (as a percentage of total wholesale
coffee pounds sold) are as follows:
<TABLE>
- -------------------------------------- ------------- ------------ ------------- ----------------
53 wks ended 52 wks ended Full Year Y/Y Full Year %
Region 9/30/00 9/25/99 lb. Increase Y/Y lb. Increase
- -------------------------------------- ------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Northern New England (ME, NH & VT)... 33.2% 36.4% 338,000 10.7%
Southern New England (MA, CT & RI).... 24.5% 24.2% 478,000 22.7%
Mid-Atlantic (NY, NJ & PA)............ 21.8% 20.8% 488,000 27.0%
South Atlantic........................ 6.9% 5.3% 257,000 55.2%
Midwest............................... 2.5% 1.9% 101,000 60.5%
South Central & West.................. 2.1% 1.4% 102,000 81.6%
Multi-Regional........................ 7.9% 9.2% 29,000 3.6%
International......................... 1.1% 0.8% 39,000 54.2%
------------- ------------ ------------- ----------------
Totals................................ 10,546,000 8,714,000 1,832,000 21.0%
============= ============ ============= ================
</TABLE>
Direct Mail Operations
- ----------------------
The Company publishes catalogs and maintains an Internet Web site to
market over 60 coffees, coffee-related equipment and accessories, as well as
gift assortments and gourmet food items covering a wide range of price points.
Sales from direct mail accounted for approximately 5%, 5%, and 6% of total sales
from continuing operations in fiscal 2000, 1999, and 1998, respectively. Green
Mountain's telemarketing service representatives fulfill the individual coffee
needs of direct mail customers by not only taking orders, but also educating and
consulting with them about the various attributes of different coffee varieties.
In fiscal 2000, approximately 32% of the Company's direct mail revenue
was derived from over 4,700 members of its "Coffee Club", a continuity program
with customized standing orders for re-shipment. In the same period, catalog
sales from non-Coffee Club individual consumers accounted for approximately 38%
of direct mail revenue, and another 2% were derived from the Company's Corporate
Gifting program.
In addition to its direct mail program targeted at the individual
consumer, Green Mountain also uses its direct mail channel to cater to small
businesses, such as bed and breakfast establishments, small retail stores and
offices. These "business to business" sales contributed approximately 14% of
total direct mail revenues in fiscal 2000.
The Green Mountain Web site (www.GreenMountainCoffee.com) generated 14%
of total direct mail revenue in fiscal 2000, up from 4% in fiscal 1999. The
Company's Web site, which runs on PeopleSoft eStore software, allows Green
Mountain Coffee to leverage the Internet, phone, e-mail and mail to provide the
best possible customer fulfillment and service.
Green Coffee Cost and Supply
- ----------------------------
The Company utilizes a combination of outside brokers and direct
relationships with farms, estates, cooperatives and cooperative groups for its
supply of green coffees, with outside brokers providing the larger amount.
Coffee is the world's second largest traded commodity and its supply and price
are subject to high volatility. Although most coffee trades in the commodity
market, coffee of the quality sought by the Company tends to trade on a
negotiated basis at a substantial premium or "differential" above commodity
coffee pricing, depending upon the supply and demand at the time of purchase.
Supply and price can be affected by multiple factors, such as weather, politics
and economics in the producing countries.
Cyclical swings in commodity markets, based upon supply and demand, are
common and it is largely expected that coffee prices and differentials will
remain volatile in the coming years. In addition, a number of factors, such as
pest damage and weather-related crop failure could cause coffee prices to climb.
Furthermore, the Company believes that the low coffee price ranges generally
experienced during the early 1990s are not high enough to support proper farming
and processing practices, impacting the overall supply of the top grade coffees.
With the growth of the specialty coffee segment, it is important that prices
remain high enough to support world consumption of the top grades of coffees.
The Company generally fixes the price of its coffee contracts two to
six months prior to delivery so that it can adjust its sales prices to the
market. Green Mountain believes this approach is the best way to provide its
customers with a fair price for its coffee. The Company believes there is
significant risk in fixing prices further in the future, since the true
available supply of green coffee from around the world is not readily known. At
September 30, 2000, the Company had approximately $9.0 million (for 8.1 million
pounds) in purchase commitments, of which approximately 60% had a fixed price.
These commitments represent approximately 57% of the Company's estimated coffee
requirements through September 29, 2001, the end of its 2001 fiscal year. In
addition, the Company does from time to time purchase coffee futures contracts
and coffee options to provide additional protection when it is not able to enter
into coffee purchase commitments or when the price of a significant portion of
committed contracts has not been fixed.
The Company generally tries to pass on coffee price increases and
decreases to its customers. Since coffee has come down from its 1997 highs, the
Company has decreased its prices several times. In general, there can be no
assurance that the Company will be successful in passing on green coffee price
increases to customers without losses in sales volume or gross margin.
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 and purchase commitments. Green Mountain roasts over 25
different types of green coffee beans to produce its more than 60 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. However, a worldwide supply shortage of the high-quality arabica
coffees the Company purchases could have an adverse impact on the Company.
Green Mountain purchased approximately 20% of its coffee from
specifically identified farms, estates, cooperatives and cooperative groups in
fiscal 2000, and expects to increase this amount to as much as 25% of its total
coffee purchases in fiscal 2001. The Company believes its "farm direct" strategy
will result in improved product quality, product differentiation, and long-term
supply and pricing stability. In addition, the Company believes that its efforts
will have a positive impact on the living and working environment of farm
workers and their families.
Significant Customers
- ---------------------
Convenience stores owned and operated by ExxonMobil, rather than by
franchisees, made up 7.2% of the Company's revenues in fiscal 2000. Sales to the
extensive network of ExxonMobil convenience stores, whether owned by Exxon Mobil
Corporation or by independent dealers and franchisees, accounted for
approximately 17.0% of sales (including the 7.2% referenced above) from
continuing operations in fiscal 2000, and is a key component of the Company's
growth strategy as it provides sampling opportunities for a large number of
potential new consumers throughout the country. As explained in the Recent
Developments section above, the Company signed a new five-year agreement with
Exxon Mobil Corporation in November 2000.
Competition
- -----------
The specialty coffee market is highly competitive, and Green Mountain
competes against all sellers of specialty coffee. Starbucks, a leading
independent specialty coffee retailer, is starting to have a significant
presence in supermarkets nationwide. Starbucks has a distribution agreement with
Phillip Morris/ Kraft Foods to place Starbucks coffee in supermarkets along with
Maxwell House coffee. Additionally, the Company also competes with "commercial"
coffee roasters, to the extent that it is also trying to "upsell" consumers to
the specialty coffee segment. A number of large consumer goods multinationals
have divisions or subsidiaries selling specialty coffees, a significant portion
of them having been developed through the acquisition of independent brands. For
example, Procter & Gamble distributes the premium coffee products Millstone and
Brothers in many supermarkets nationwide, which compete with Green Mountain
coffee.
In the office coffee, convenience store and food service arenas, General Foods,
Sara Lee and Procter & Gamble are large competitors. In fiscal 2000, Keurig,
Inc. signed agreements with three North American roasters other than Green
Mountain to secure a variety of K-Cup coffee providers. Coffee in K-Cup portions
can now be purchased from Diedrich Coffee, Procter & Gamble, and Timothy's. At
this time, Green Mountain continues to enjoy the dominant position in the K-Cup
market. The Company does not expect Keurig to add any additional roasters in
calendar 2001. In the direct mail area, the Company competes with established
suppliers such as Gevalia, a division of General Foods Corporation, as well as
with other direct mail companies.
The Company expects intense competition, both within its primary
geographic territory, the eastern United States, and in other regions of the
United States, as it expands from its current territories. The specialty coffee
market is expected to become even more competitive as regional companies expand
and attempt to build brand awareness in new markets.
The Company competes primarily by providing high quality coffee, easy
access to its products and superior customer service. The Company believes that
its ability to provide a convenient network of outlets from which to purchase
coffee is an important factor in its ability to compete. Through its
multi-channel distribution network of wholesale and direct mail operations and
its dual cup/whole bean strategy, the Company believes it differentiates itself
from many of its larger competitors, who specialize in only one of the
wholesale, retail and direct mail channels of distribution. The Company also
believes that one of the distinctive features of its business is that it is one
of the few coffee companies that roasts its coffees individually, varying both
the degree and timing of the roast to maximize a coffee's particular taste
characteristics. Finally, the Company believes that being an independent roaster
allows it to be better focused and in tune with its wholesale customers' needs
than its larger, diversified competitors. While the Company believes it
currently competes favorably with respect to these factors, there can be no
assurance that it will be able to compete successfully in the future.
Seasonality
- -----------
Historically, the Company has experienced variations in sales from
quarter-to-quarter due to the peak November-December 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.
Intellectual Property
- ---------------------
The Company is the owner of certain trademarks and service marks and
the United States trademark and service mark registrations thereon, including
Green Mountain Coffee(R), Green Mountain Filters(R), Green Mountain Coffee
Roasters(R), Nantucket Blend(R), Rainforest Nut(R), Stewardship(R), Green
Mountain Coffee Roasters and Design (R), Stewardship Coffee and Design(R),
Vermont Country Blend(R), Cafe Vermont(R), Mocha Almond Chiller(R), You're
Following the Leader(R), Tapestry Blend Dark(R), Appropriate Roast(R), Autumn
Harvest Blend(R), Fresh From the Roaster(R). The Company anticipates maintaining
the United States registrations appearing above with the United States Trademark
Office. The Company is also the owner of other trademarks and service marks,
including Lake & Lodge(TM), Organic Sumatran Reserve(TM), La Esperanza(TM),
Monte Verde(TM), Sip and Relax, You're on Green Mountain Time(TM), It's a Jungle
Out There... Let's Keep It That Way(TM), Farm Direct(TM), and The Ultimate
Office Coffee(TM).
The Company has applied for United States registration of certain of
the marks appearing above. In addition, the Company has registered the mark
"Green Mountain Coffee Roasters" in the United Kingdom. The Company has pending
Canadian applications for registration of the marks "Green Mountain Coffee" and
"Green Mountain Coffee Roasters." The Company has a pending European Union
application for registration of the mark "Green Mountain Coffee Roasters," and
pending Brazilian applications for registration of the marks "Green Mountain
Coffee Roasters and Design," and "Green Mountain Coffee." The Company has a
limited, royalty-free license to reproduce a painting by artist Corliss Blakely
on its labels and marketing materials.
The Company has an irrevocable, perpetual royalty-free license to use
the mark "Earth-Friendly Coffee Filters" in connection with coffee filters. The
Company also has a limited license to use the marks "Kona Mountain Coffee" and
"Kona Mountain Estate" in connection with its Kona coffee worldwide (excluding
Hawaii), all subject to the terms of the agreements under which these licenses
are granted. The Company does not hold any patents. The Company believes these
trademarks, service marks and licenses will continue to be important to its
success.
Employees
- ---------
As of September 30, 2000, the Company had 394 full-time employees and
50 part-time employees. The Company supplements its workforce with temporary
workers from time to time, especially in the first quarter of each fiscal year
to service increased customer and consumer demand during the peak
November-December Holiday Season. The Company believes that it maintains good
relations with its employees.
<PAGE>
Item 2. Properties
The Company leases one principal manufacturing, warehousing and
distribution facility located at Pilgrim Park in Waterbury, Vermont. The
facility has in total approximately 90,000 square feet of usable space which
includes a 30,000 square foot mezzanine area. The lease on this building expires
in 2007. The Company's other facilities, all of which are leased, are as
follows:
- -------------- ------------------------------- ----------- -------------------
Approximate
Type Location Square Feet Expiration of Lease
- -------------- ------------------------------ ----------- -------------------
Warehouse/ Woburn, MA 10,580 2001
Distribution/ Southington, CT 11,200 2001
Service Space Waterbury, VT 12,000 2003
Waterbury, VT 3,000 month-to-month
Waterbury, VT (Factory Outlet) 1,100 month-to-month
Biddeford, ME 10,000 2001
Latham, NY 7,500 2002
Lakeland, FL 7,200 2003
Administrative Coffee Lane, Waterbury, VT 4,000 2001
Offices Main Street, Waterbury, VT 8,680 2001
Pilgrim Park II, Waterbury, VT 3,000 month-to-month
Pilgrim Park II, Waterbury, VT 8,000 2001
Company-Owned Latham, NY(1) 2,300 2007
Retail Stores Portland, ME(1) 2,300 2002
(Discontinued So. Portland, ME(1) 1,270 2007
Operations)
- ----------
(1) The Company has this entire space subleased as of December 1, 2000.
The Company believes that its facilities are generally adequate for its
current needs and that suitable additional production and administrative space
will be available as needed for the remainder of fiscal 2001.
Item 3. Legal Proceedings
The Company is not currently party to any material pending legal
proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fiscal quarter ended September 30, 2000.
<PAGE>
Executive Officers of the Registrant
Certain biographical information regarding each executive officer of
the Company is set forth below:
- --------------------- --- ----------------------------------- -------------
Executive
Name Age Position Officer Since
- --------------------- --- ---------------------------------- -------------
Robert P. Stiller 57 Chairman of the Board, President 1993
and Chief Executive Officer
Robert D. Britt 45 Director, Chief Financial Officer, 1993
Vice President, Treasurer and
Secretary
Paul Comey 50 Vice President 1993
Agnes M. Cook 54 Vice President 1999
Kevin G. McBride 45 Vice President 1999
James K. Prevo 47 Vice President 1997
Stephen J. Sabol 39 Director and Vice President 1993
Jonathan C. Wettstein 52 Director and Vice President 1993
- --------------------- --- ---------------------------------- -------------
ROBERT P. STILLER, founder of Roasters, has served as its President and a
director since its inception in July 1981. In September 1971, Mr. Stiller
co-founded Robert Burton Associates, a company engaged in the development and
sale of E-Z Wider products and served as its President and director until June
1980, when Robert Burton Associates was sold.
ROBERT D. BRITT has served as Chief Financial Officer of Roasters since May
1993. Prior to May 1993, Mr. Britt held financial, managerial and/or consulting
positions at Engineered Coatings, Inc., FCR, Inc., Ernst & Young, CIGNA
Corporation, and KPMG Peat Marwick. Mr. Britt is a Certified Public Accountant
and holds a Master of Business Administration from the Wharton School at the
University of Pennsylvania.
PAUL COMEY has served as Vice President of Facilities and Process Engineering of
Roasters since June 1993. From March 1986 to May 1993, Mr. Comey was the owner
and principal consultant of Baseline Solutions, a company engaged in providing
consulting services to the coffee industry, including the Company.
AGNES M. COOK has served as Vice President of Human Resources of Roasters since
May 1999. From November 1992 to May 1999, Ms. Cook was Roasters' Director of
Human Resources. Prior to her employment with the Company, Ms. Cook was a
Training Consultant for Dale Carnegie and Associates.
KEVIN G. MCBRIDE has served as Vice President of Marketing for Roasters since
August 1999. Prior to this, from March 1998 until May 1999, Mr. McBride was
President of BGC Acquisition Corporation, a private investment company. From
January 1997 until December 1997, he was employed by Sunbeam Corporation as Vice
President of Marketing and Product Development. From January 1994 until June
1996, Mr. McBride was Vice President of Consumer Marketing of Circle K Stores,
Incorporated.
JAMES K. PREVO has served as Chief Information Officer of Roasters since March
1993. Mr. Prevo worked for Digital Equipment Corporation from November 1979
through March 1993. There he held positions as a Software Engineer, Project
Manager (New Product Introduction), Program Manager (Computer Products
Manufacturing and VAXcluster Systems Engineering) and Business Manager (Systems
Integration Services). On May 1, 2000 ComputerWorld magazine recognized Mr.
Prevo as one of the Premier 100 IT Leaders for the year 2000.
STEPHEN J. SABOL has served as Vice President of Sales of Roasters since
September 1996. Mr. Sabol served as Vice President of Branded Sales of Roasters
from August 1992 to September 1996. From September 1986 to August 1992, Mr.
Sabol was the General Manager of Roasters responsible for overall performance of
the wholesale division in Maine and New Hampshire.
JONATHAN C. WETTSTEIN has served as Vice President of Operations of Roasters
since April 1993. From June 1974 to April 1993, Mr. Wettstein was employed by
Digital Equipment Corporation in a variety of positions including Plant Manager,
Marketing Manager, Business and Materials Manager and Product Line Controller.
Mr. Wettstein holds a Master of Business Administration from the Harvard
Business School.
Officers are elected annually and serve at the discretion of the Board
of Directors. None of the Company's directors or officers has any family
relationship with any other director or officer, except for Robert P. Stiller
and one of the Company's outside directors, Jules A. del Vecchio, whose wives
are sisters.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Price Range of Securities
The Company's common stock trades on the NASDAQ National Market under
the symbol GMCR. The following table sets forth the high and low sales prices as
reported by NASDAQ for the periods indicated.
High Low
-------- -------
Fiscal 1999 16 weeks ended January 16, 1999........... $ 6.375 $ 3.875
12 weeks ended April 10, 1999............. $ 7.625 $ 5.875
12 weeks ended July 3, 1999............... $ 8.125 $ 5.875
12 weeks ended September 25, 1999......... $ 8.375 $ 6.469
Fiscal 2000 16 weeks ended January 15, 2000........... $ 9.500 $ 7.000
12 weeks ended April 8, 2000.............. $ 15.375 $ 9.250
12 weeks ended July 1, 2000............... $ 20.000 $ 14.375
13 weeks ended September 30, 2000......... $ 19.125 $ 12.875
Fiscal 2001 October 1, 2000 to November 30, 2000...... $ 42.250 $ 18.875
(b) Number of Equity Security Holders
As of November 30, 2000, the number of record holders of the Company's
common stock was 579.
(c) Dividends
The Company has never paid a cash dividend on its common stock and
anticipates that for the foreseeable future any earnings will be retained for
use in its business and, accordingly, does not anticipate the payment of cash
dividends.
On December 4, 2000, the Company announced that its Board of Directors
had approved a two-for-one Common Stock split effected in the form of a 100%
Common Stock dividend. The record date of the dividend is December 28, 2000, and
the payment date is January 11, 2001. The stock split is intended to benefit
stockholders by placing more shares in the market, thus helping to increase
trading activity and further improve the stock's liquidity.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
Fiscal Years Ended
--------- --------- --------- --------- ---------
Sept. 30, Sept. 25, Sept. 26, Sept. 27, Sept. 28,
2000(1) 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Coffee pounds sold(2)...... 10,871 9,004 7,739 6,239 5,108
Net sales from
continuing operations(2).. $ 84,001 $ 64,881 $ 55,825 $ 42,908 $ 33,377
Income from
continuing operations(2).. $ 4,153 $ 2,247 $ 340 $ 1,539 $ 1,429
Income per share from
continuing operations -
diluted(2)................ $ 1.19 $ 0.64 $ 0.10 $ 0.44 $ 0.42
Total Assets............... $ 27,174 $ 23,878 $ 24,563 $ 23,544 $ 17,243
Long-term obligations...... $ 8,783 $ 4,964 $ 10,191 $ 5,965 $ 3,563
</TABLE>
- ----------
(1) The fiscal year ended September 30, 2000 is a 53-week year. All other fiscal
years represented are 52-week years.
(2) Excludes results of the Company's discontinued company-owned retail stores
operation.
There were no cash dividends paid during the past five fiscal years.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking information
- ---------------------------
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. In addition, the Company's representatives may
from time to time make oral forward-looking statements. Forward-looking
statements provide current expectations of future events based on certain
assumptions and include any statements that do not directly relate to any
historical or current fact. Words such as "anticipates", "believes", "expects",
"will", "feels", "estimates", "intends", "plans", "projects", and similar
expressions, may identify such forward-looking statements. Owing to the
uncertainties inherent in forward-looking statements, 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, the impact of the loss of a major
customer, economic conditions, prevailing interest rates, the management
challenges of rapid growth, variances from budgeted sales mix and growth rate,
consumer acceptance of the Company's new products, the impact of a tighter job
market, weather and special or unusual events, as well as other risk factors
described in Item 1 of this report and other factors described from time to time
in the Company's filings with the Securities and Exchange Commission.
Forward-looking statements reflect management's analysis as of the date of this
document. The Company does not undertake to revise these statements to reflect
subsequent developments.
<PAGE>
Overview
- --------
Green Mountain Coffee, Inc., a leader in the specialty coffee industry,
roasts high quality arabica coffees to produce over 60 varieties of coffee that
it sells under the Green Mountain Coffee Roasters(R) brand. For the year ended
September 30, 2000, Green Mountain's wholesale operation contributed 95.1% of
its net sales from continuing operations. Green Mountain's wholesale operation
sells coffee to retailers and food service concerns including supermarkets,
restaurants, convenience stores, specialty food stores, office coffee
distributors, and other food service providers such as hotels, universities and
airlines. The Company also operates a direct mail operation serving customers
nationwide from its Waterbury, Vermont headquarters, which accounted for 4.9% of
net sales from continuing operations in fiscal 2000.
On May 29, 1998, Green Mountain announced that it had adopted a plan to
discontinue its company-owned retail store operations. The Company had sold or
closed all of its retail stores prior to the end of the Company's second fiscal
quarter of 1999.
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, freight and delivery expenses.
Selling and operating expenses consist of expenses that directly support the
sales of the Company's wholesale and 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 16 weeks, 28 weeks and 40 weeks,
respectively, into the fiscal year. Fiscal 2000 represents the 53 week-period
ended September 30, 2000, with the fourth fiscal quarter of fiscal 2000
consisting of 13 weeks instead of the usual 12 weeks. Fiscal 1999 and fiscal
1998 represent the 52 week-periods ended September 25, 1999 and September 26,
1998, respectively.
Coffee Prices, Availability and General Risk Factors
- ----------------------------------------------------
Green coffee commodity prices are subject to substantial price
fluctuations, generally caused by multiple factors including weather, political
and economic conditions in certain coffee-producing countries and other
supply-related concerns. The Company believes that the "C" price of coffee (the
price per pound quoted by the Coffee, Sugar and Cocoa Exchange) will remain
highly volatile in future fiscal years. In addition to the "C" price, coffee of
the quality sought by Green Mountain tends to trade on a negotiated basis at a
substantial premium or "differential" above the "C" price. These differentials
also are subject to significant variations. In the past, the Company generally
has been able to pass increases in green coffee costs to its customers. However,
there can be no assurance that the Company will be successful in passing such
fluctuations on to the customers without losses in sales volume or gross margin
in the future. 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 60 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. However, frequent substitutions could lead to cost increases and
fluctuations in gross margins. Furthermore, a worldwide supply shortage of the
high-quality arabica coffees the Company purchases could have an adverse impact
on the Company and its profitability.
The Company enters into fixed coffee purchase commitments in an attempt
to secure an adequate supply of quality coffees. To further reduce its exposure
to rising coffee costs, the Company, from time to time, enters into futures
contracts and buys options to hedge price-to-be-established coffee purchase
commitments. The specific risks associated with these activities are described
below in Item 7A "Quantitative and Qualitative Disclosures about Market Risk."
The Company expects to face increasing competition in all its markets,
as competitors improve the quality of their coffees to make them more comparable
to Green Mountain's. In addition, specialty coffee is now more widely available
and a number of competitors benefit from substantially larger promotional
budgets following, among other factors, the acquisition of specialty coffee
companies by large, consumer goods multinationals. The Company expects that the
continued high quality and wide availability of its coffee across a large array
of distribution channels, combined with the added-value of its customer service
processes will enable Green Mountain to successfully compete in this
environment, although there can be no assurance that it will be able to do so.
<PAGE>
Results from Operations
- -----------------------
The following table sets forth certain financial data of the Company
expressed as a percentage of net sales for the periods denoted below:
<TABLE>
Fiscal years ended
---------------------------------------------
September 30, September 25, September 26,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Net Sales:
Wholesale........................... 95.1 % 94.7 % 94.4 %
Direct mail......................... 4.9 % 5.3 % 5.6 %
------------- ------------- -------------
Net sales................................ 100.0 % 100.0 % 100.0 %
Cost of sales............................ 60.1 % 60.5 % 65.5 %
------------- ------------- -------------
Gross profit........................ 39.9 % 39.5 % 34.5 %
Selling and operating expenses........... 24.7 % 25.2 % 24.7 %
General and administrative expenses...... 7.0 % 7.2 % 7.5 %
Loss on abandonment of equipment......... 0.2 % 0.4 % -
------------- ------------- -------------
Operating income.................... 8.0 % 6.7 % 2.3 %
Other income............................. 0.1 % 0.0 % 0.1 %
Interest expense......................... (0.7)% (1.1)% (1.4)%
------------- ------------- -------------
Income from continuing operations
before income taxes................. 7.4 % 5.6 % 1.0 %
Income tax expense....................... (2.5)% (2.1)% (0.4)%
------------- -------------- -------------
Income from continuing operations... 4.9 % 3.5 % 0.6 %
------------- ------------- -------------
Discontinued operations:
Loss from discontinued operations, net
of tax benefits.......................... - - (0.5)%
Income (loss) on disposal, net of tax
benefits................................. 0.1 % 0.3 % (2.3)%
------------- ------------- -------------
Net income (loss)................... 5.0 % 3.8 % (2.2)%
============= ============= =============
</TABLE>
Fiscal 2000 versus Fiscal 1999
- ------------------------------
Net sales from continuing operations increased by $19,120,000, or
29.5%, from $64,881,000 in fiscal 1999 to $84,001,000 in fiscal 2000. Coffee
pounds sold increased by approximately 1,867,000 pounds, or 20.7%, from
9,004,000 pounds in fiscal 1999 to 10,871,000 pounds in fiscal 2000. The
percentage increase in net sales was higher than the percentage increase in
coffee pounds, due to increased sales of convenience coffee products (such as
the Keurig K-Cups) with higher sales prices per pound and increased sales of
non-coffee items, such as the new Monte Verde line of frozen granita and hot
cappuccino beverages. It is estimated that without the extra week in the 2000
fiscal year, the year-over-year increases in sales dollars and coffee pounds
sold would have been 26.9% and 18.4%, respectively.
The year-over-year increase in net sales from continuing operations
occurred primarily in the wholesale area in which net sales increased by
$18,437,000, or 30.0%, from $61,418,000 in fiscal 1999 to $79,855,000 in fiscal
2000. The wholesale net sales increase resulted primarily from sales growth in
the office coffee service and convenience store channels. Direct mail sales
increased $683,000, or 19.7%, from $3,463,000 in fiscal 1999 to $4,146,000 in
fiscal 2000.
Green Mountain's gross profit from continuing operations increased by
$7,916,000, or 30.9%, from $25,620,000 in fiscal 1999 to $33,536,000 in fiscal
2000. Gross profit as a percentage of net sales increased 0.4 percentage points
from 39.5% in fiscal 1999 to 39.9% in fiscal 2000. Gross profit as a percentage
of sales remained relatively unchanged as lower green coffee costs and improved
distribution costs were partially offset by increased sales of items in product
categories with lower gross margins, such as the single-cup Keurig line of
coffees. Due to continued product sales mix changes and anticipated competitive
pressures, full-year gross profit as a percentage of sales is expected to
decrease in fiscal 2001.
Selling and operating expenses from continuing operations increased by
$4,366,000, or 26.7%, from $16,381,000 in fiscal 1999 to $20,747,000 in fiscal
2000, and decreased 0.5 percentage points as a percentage of net sales from
25.2% in fiscal 1999 to 24.7% in fiscal 2000. The dollar increase was primarily
caused by increased wholesale sales and sales support personnel expenditures
($2,129,000) and advertising and promotional expenses ($1,038,000).
General and administrative expenses from continuing operations
increased by $1,226,000, or 26.3%, from $4,661,000 in fiscal 1999 to $5,887,000
in fiscal 2000. As a percentage of net sales, this change represents a 0.2
percentage point decrease from 7.2% in fiscal 1999 to 7.0% in fiscal 2000. The
dollar increase is primarily due to personnel expenses (including bonuses and a
contribution to the new Employee Stock Ownership Plan), as well as educational
and management consulting expenses.
In fiscal 2000, following a thorough review of its production fixed
assets, the Company recorded a $135,000 loss on abandonment of production
equipment and software. In fiscal 1999, the Company recorded a $229,000 loss on
abandonment of loaner equipment, when the Company identified a small portion of
its old equipment on loan to customers that would never be retrieved from
customers sites and was in effect given away to customers.
For the reasons outlined above, operating income increased by
$2,418,000, or 55.6%, from $4,349,000 in fiscal 1999 to $6,767,000 in fiscal
2000. As a percentage of sales, operating income increased 1.3 percentage points
from 6.7% in fiscal 1999 to 8.0% in fiscal 2000. It is anticipated that
operating expenses as a percentage of sales will continue to decrease in fiscal
2001, as the Company continues to grow sales and leverage expenses.
Interest expense from continuing operations decreased $153,000, or
20.8%, from $736,000 in fiscal 1999 to $583,000 in fiscal 2000 due to the
reduction in the Company's average long-term debt made possible by strong cash
flows from operations over the past two fiscal years. The Company expects
interest expense in fiscal 2001 to be approximately 50% higher than in fiscal
2000 due to higher interest rates and, more importantly, higher average debt
balances related to fiscal 2000 repurchases of its common stock described under
"Liquidity and Capital Resources".
Income tax expense from continuing operations increased $703,000, or
51.1%, from $1,376,000 in fiscal 1999 to $2,079,000 in fiscal 2000. The decrease
in the Company's effective tax rate, from 38% for fiscal 1999 to 33% for fiscal
2000, is due to a reduction during the fourth quarter of fiscal 2000 of the
deferred tax asset valuation allowance previously recorded on a manufacturer's
investment tax credit from the State of Vermont. The reduction was based upon
management's best estimate of future taxable income and that portion which is
expected to be allocable to Vermont on which the credit could be applied. It is
expected that the Company's effective tax rate in future periods will
approximate 40%.
For the reasons outlined above, income from continuing operations
increased $1,906,000, or 84.8%, from $2,247,000 in fiscal 1999 to $4,153,000 in
fiscal 2000.
During the third quarter of fiscal 1998, the Company recorded a loss of
$1,259,000 (net of a tax benefit of $834,000) on disposal of its company-owned
retail stores operation. During the second quarter of fiscal 1999, after having
sold or closed all of its stores, the Company revised its estimated pre-tax loss
on disposal and reversed $300,000 ($186,000 net of tax) of the original
estimate, primarily due to larger than expected proceeds from the sale of fixed
assets and lower lease termination costs. In the fourth quarter of fiscal 2000,
the Company reduced its estimate by another $100,000 ($60,000 net of tax), due
to lower than expected lease termination costs.
Net income increased $1,780,000, or 73.2%, from $2,433,000 in fiscal
1999 to $4,213,000 in fiscal 2000. The net income earned during the 2000 fiscal
year put the Company in a positive retained earnings position of $2,778,000 at
September 30, 2000, compared to an accumulated deficit of $1,435,000 at
September 25, 1999.
Fiscal 1999 versus Fiscal 1998
- ------------------------------
Net sales from continuing operations increased by $9,056,000, or 16.2%,
from $55,825,000 in fiscal 1998 to $64,881,000 in fiscal 1999. Coffee pounds
sold increased by approximately 1,265,000 pounds, or 16.3%, from 7,739,000
pounds in fiscal 1998 to 9,004,000 pounds in fiscal 1999. The percentage
increase in net sales and the percentage increase in coffee pounds sold were
very similar, as the decrease in average selling prices of Green Mountain's
coffee during fiscal 1999 was offset by increased sales of convenience coffee
products with higher sales prices per pound.
The year-over-year increase in net sales from continuing operations
occurred primarily in the wholesale area in which net sales increased by
$8,708,000, or 16.5%, from $52,710,000 in fiscal 1998 to $61,418,000 in fiscal
1999. The wholesale net sales increase resulted primarily from the growth of
certain accounts in the office coffee service, supermarket and convenience store
channels. Direct mail sales increased $348,000, or 11.2%, from $3,115,000 in
fiscal 1998 to $3,463,000 in fiscal 1999.
Green Mountain's gross profit from continuing operations increased by
$6,353,000, or 33.0%, from $19,267,000 in fiscal 1998 to $25,620,000 in fiscal
1999. Gross profit as a percentage of net sales increased 5.0 percentage points
from 34.5% in fiscal 1998 to 39.5% in fiscal 1999. Expressed in dollars per
coffee pound sold, gross profit increased 14.0% to $2.85 in fiscal 1999 from
$2.50 in fiscal 1998. The increase of gross profit as a percentage of sales was
primarily attributable to sharply lower green coffee costs, which was partially
offset by decreases in average sales prices.
Selling and operating expenses from continuing operations increased by
$2,576,000, or 18.7%, from $13,805,000 in fiscal 1998 to $16,381,000 in fiscal
1999, and increased 0.5 percentage points as a percentage of net sales from
24.7% in fiscal 1998 to 25.2% in fiscal 1999. This increased was primarily
caused by higher wholesale sales and sales support personnel expenditures
($1,086,000) and advertising and promotional expenses ($838,000).
General and administrative expenses from continuing operations
increased by $492,000, or 11.8%, from $4,169,000 in fiscal 1998 to $4,661,000 in
fiscal 1999. As a percentage of net sales, this change represents a 0.3
percentage point decrease from 7.5% in fiscal 1998 to 7.2% in fiscal 1999. The
dollar increase is primarily due to increased management consulting and
personnel expenses.
For the reasons outlined above, operating income increased by
$3,056,000, or 236.4%, from $1,293,000 in fiscal 1998 to $4,349,000 in fiscal
1999. As a percentage of sales, operating income increased 4.4 percentage points
from 2.3% in fiscal 1998 to 6.7% in fiscal 1999.
Interest expense from continuing operations decreased $85,000, or
10.4%, from $821,000 in fiscal 1998 to $736,000 in fiscal 1999 due to the
reduction in the Company's long-term debt made possible by strong cash flows
from operations in fiscal 1999.
Income tax expense from continuing operations increased from $198,000
in fiscal 1998 to $1,376,000 in fiscal 1999. The increase in the Company's
effective tax rate, to 38% for fiscal 1999 from 37% for fiscal 1998, is
attributable to changes in certain permanent differences.
For the reasons outlined above, income from continuing operations
increased $1,907,000, or 560.9%, from $340,000 in fiscal 1998 to $2,247,000 in
fiscal 1999.
During the third quarter of fiscal 1998, the Company recorded a loss of
$1,259,000 (net of a tax benefit of $834,000) on disposal of its company-owned
retail stores operation. During the second quarter of fiscal 1999, after having
sold or closed all of its stores, the Company revised its estimated pre-tax loss
on disposal and reversed $300,000 ($186,000 net of tax) of the original
estimate, primarily due to larger than expected proceeds from the sale of fixed
assets and lower lease termination costs.
Net income increased $3,649,000 from a net loss of $1,216,000 in fiscal
1998 to a net income of $2,433,000 in fiscal 1999.
Liquidity and Capital Resources
- -------------------------------
Working capital increased $629,000 to $6,681,000 at September 30, 2000
from $6,052,000 at September 25, 1999. This increase is primarily due to higher
accounts receivable and a decrease in the current portion of long-term debt, and
was partially offset by higher accounts payable and accrued expenses.
Net cash provided by operating activities from continuing operations
increased by $832,000, or 12.6%, from $6,587,000 in fiscal 1999 to $7,419,000 in
fiscal 2000. This increase is primarily due to the net income and accounts
payable increases, and was offset by increases in accounts receivable due to
high sales volumes near the end of the fiscal year. Cash flows from operations
were partially used to fund capital expenditures in fiscal 2000.
During the 2000 fiscal year, the Company made capital expenditures of
$4,597,000, including $2,025,000 for equipment on loan to wholesale customers;
$1,330,000 for computer equipment and software; $766,000 for production and
distribution equipment; $331,000 for leasehold improvements and fixtures; and
$145,000 for vehicles.
In fiscal 1999, Green Mountain Coffee made capital expenditures related
to continuing operations of $2,655,000, which included $1,605,000 for equipment
on loan to customers; $533,000 for leasehold improvements, production equipment
and fixtures; $389,000 for computer hardware and software; and $128,000 for
vehicles.
The Company currently plans to make capital expenditures in fiscal 2001
in the range of $5,500,000 to $6,000,000. The expected increase in capital
expenditures over fiscal 2000 is due to the planned purchase of a new coffee
roaster and the related green and roasted bean storage bin system, as well as a
new fractional ground coffee packager. However, management continuously reviews
capital expenditure needs and actual amounts expended may differ from these
estimates.
In the 2000 fiscal year, the Company used $1,852,000 of its cash flow
from operations to repurchase 189,486 of its outstanding shares in the open
market. In addition, on May 22, 2000, the Company concluded a Dutch Auction
self-tender offer and accepted for purchase all 278,658 shares tendered at a
purchase price of $16 per share. The total cost of this self-tender offer
amounted to approximately $4,523,000, including $64,000 of associated
transaction costs. At September 30, 2000, the Company held 568,753 shares of
treasury stock at an average per share cost of $12.36.
To finance the cost of the Dutch Auction self-tender offer referenced
above and other general corporate purposes, the Company amended its credit
facility with Fleet Bank -NH ("Fleet") on April 7, 2000. The amendment provides
for an expanded revolving line of credit of $15,000,000, which matures on March
31, 2003 and is not subject to a borrowing base formula. The interest paid on
the line of credit varies with the prime, LIBOR and Bankers Acceptance rates,
plus a margin based on a performance price structure. On September 30, 2000, a
total of $8,500,000 was outstanding under the new line of credit and the average
interest rate was 7.88%. The new facility is subject to certain quarterly
covenants, and the Company was in compliance with these covenants at September
30, 2000.
Management believes that cash flow from operations, existing cash, and
available borrowings under its credit facility will provide sufficient liquidity
to pay all liabilities in the normal course of business, fund capital
expenditures and service debt requirements for the next twelve months.
Factors Affecting Quarterly Performance
- ---------------------------------------
Historically, the Company has experienced 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. Year-over-year quarterly earnings comparisons will also show
significant variations due to the reduction in the allowance on the State of
Vermont manufacturer's investment tax credit in the fourth quarter of fiscal
2000. Another factor that will impact historical comparisons is the fact that
the fourth quarter of fiscal 2000 includes thirteen weeks instead of the usual
twelve weeks.
<PAGE>
Item 7A - Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to the Company's operations result primarily from
changes in interest rates and commodity prices (the "C" price of coffee). To
address these risks, the Company enters into hedging transactions as described
below. The Company does not use financial instruments for trading purposes.
For purposes of specific risk analysis, the Company uses sensitivity
analysis to determine the impacts that market risk exposures may have on the
Company's financial position or earnings.
Interest rate risks
- -------------------
At September 30, 2000, the Company had $8,508,000 of debt subject to
variable interest rates (Fleet Bank's prime rate, Banker's Acceptance or LIBOR
rates) plus a margin based on a performance price structure. A 100 basis point
increase in interest rates would increase annual interest expense by
approximately $85,000.
On May 29, 1998, the Company entered into a standard International Swap
Dealers Association Inc. interest rate swap agreement with Fleet National Bank
in order to limit the effect of increases in the interest rates on up to $6
million of its floating debt. The effect of this agreement was to convert
underlying variable-rate debt based on LIBOR to fixed rate debt with an interest
rate of 5.84% plus a margin based on a performance price structure (between 175
and 200 basis points at September 25, 1999). At September 25, 1999, this
agreement left the Company with no variable-rate debt and therefore no interest
rate risk. During the first quarter of fiscal 2000, the Company received $34,000
from Fleet National Bank for the termination of its interest rate swap
agreement. This payment was netted against interest expense for the fiscal
quarter. Due to the termination of this agreement, at September 30, 2000, the
Company had $8,508,000 of debt subject to variable interest rates as described
above.
Commodity price risks
- ---------------------
Green coffee prices are subject to substantial price fluctuations,
generally caused by multiple factors including weather, political and economic
conditions in certain coffee-producing countries and other supply-related
concerns. The Company's gross profit margins can be significantly impacted by
changes in the price of green coffee. The Company enters into fixed coffee
purchase commitments in an attempt to secure an adequate supply of coffee. These
agreements are tied to specific market prices (defined by both the origin of the
coffee and the time of delivery) but the Company has significant flexibility in
selecting the date of the market price to be used in each contract. The Company
generally fixes the price of its coffee contracts two to six months prior to
delivery so that it can adjust its sales prices to the market. At September 30,
2000, the Company had approximately $9.0 million (for 8.1 million pounds) in
purchase commitments, of which approximately 60% had a fixed price. These
commitments represent approximately 57% of the Company's estimated coffee
requirements through September 29, 2001, the end of its 2001 fiscal year.
In addition, from time to time, the Company uses commodity-based
financial instruments to hedge price-to-be-established coffee purchase
commitments with the objective of minimizing cost risk due to market
fluctuations. Gains and losses relating to qualifying hedges of anticipated
inventory transactions or firm commitments are deferred in current assets and
are included in the basis of the underlying transactions. At September 30, 2000,
the Company held call options covering an aggregate of 562,500 pounds of green
coffee beans which are exercisable in fiscal 2001 at prices ranging from $1.20
to $1.50 per pound. Additionally, the Company held a short position on put
options covering 187,500 pounds of green coffee exercisable in fiscal 2001 at a
price of $1.00. At September 30, 2000, the "C" price of coffee was $0.83. If the
price of coffee remains under $1.00 when these options come to term, the loss
incurred will be approximately $57,000. However, this loss, if realized, would
be offset by lower costs of coffee purchased during fiscal 2001. Additionally,
the Company had futures contracts outstanding of approximately $743,000 at
September 30, 2000. The fair market value of these futures at September 30, 2000
was $706,000. If the settlement price of these futures drops on average by 10%,
the additional loss incurred will be approximately $71,000.
Item 8. Financial Statements and Supplementary Data
See dated Financial Statements on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
================================================================================
PART III
================================================================================
Item 10. Directors and Executive Officers of the Registrant
Except for information regarding the Company's executive officers, the
information called for by this Item is incorporated in this report by reference
to the Company's definitive Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on March 15, 2001, which will be filed with the
Securities and Exchange Commission not later than 120 days after the close of
the Company's fiscal year ended September 30, 2000 (the "Definitive Proxy
Statement").
For information concerning the executive officers of the Company, see
"Executive Officers of the Registrant" under Part I of this report.
Item 11. Executive Compensation
The information required by this item is incorporated herein by
reference to the information contained in the Definitive Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by
reference to the information contained in the Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to the information contained in the Definitive Proxy Statement.
<PAGE>
================================================================================
PART IV
================================================================================
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements are filed as part of this
report:
Page
----
Index to Consolidated Financial Statements.......................... F-1
Report of Independent Accountants................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheet at September 30, 2000 and
September 25, 1999............................................... F-3
Consolidated Statement of Operations for each of the three
years in the period ended September 30, 2000..................... F-4
Consolidated Statement of Changes in Stockholders' Equity for
each of the three years in the period ended September 30, 2000... F-5
Consolidated Statement of Cash Flows for each of the three
years in the period ended September 30, 2000..................... F-6
Notes to Consolidated Financial Statments........................... F-7
(a) 2. Financial Statement Schedules
The following financial statement schedule is filed as part of this
report:
Report of Independent Accountants on Financial
Statement Schedules.......................................... F-25
Schedule II: Valuation and Qualifying Accounts.................. F-26
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes
thereto.
(a) 3. Exhibits
The exhibits listed below are filed as part of, or incorporated by
reference into, this report. The Company shall furnish copies of exhibits
for a reasonable fee (covering the expense of furnishing copies) upon
request in writing to: Green Mountain Coffee, Inc., Investor Services,
33 Coffee Lane, Waterbury, VT 05676.
<PAGE>
Exhibit No. Exhibit Title
- ----------- -------------
3.1 Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company(1)
10.2 (b) Term Loan Promissory Note, dated August 11, 1993,
from Green Mountain Coffee Roasters, Inc. to Fleet
Bank - NH(1)
(f) Collateral Assignment of Leasehold Interest, dated
August 11, 1993, between Green Mountain Coffee
Roasters, Inc. and Fleet Bank - NH(1)
(y) Seventh Amendment and First Restatement of Commercial
Loan Agreement, dated April 12, 1996, among Green
Mountain Coffee Roasters, Inc., as borrower, and Fleet
Bank - NH as lender(10)
(aa) Note Modification Agreement, dated April 12, 1996, to
modify Term Promissory Note dated August 11, 1993 from
Green Mountain Coffee Roasters, Inc. to Fleet
Bank - NH(10)
(bb) Eighth Amendment to Commercial Loan Agreement, dated
February 19, 1997, among Green Mountain Coffee
Roasters, Inc., as borrower, and Fleet Bank - NH as
lender(12)
(ee) Ninth Amendment to Commercial Loan Agreement, Fleet
Bank, dated June 9, 1997 among Green Mountain Coffee
Roasters, Inc. as borrower, and Fleet Bank - NH, as
lender(13)
(gg) Eleventh Amendment to Commercial Loan Agreement, dated
February 19, 1998, from Green Mountain Coffee Roasters,
Inc., to Fleet Bank - NH(14)
(hh) Replacement Revolving Line of Credit Promissory Note,
dated February 19, 1998, from Green Mountain Coffee
Roasters, Inc., to Fleet Bank - NH(14)
(ii) Revolving Line of Credit/Term Promissory Note, dated
February 19, 1998, from Green Mountain Coffee Roasters,
Inc., to Fleet Bank - NH(14)
(jj) Twelfth Amendment to Fleet Bank - NH Commercial Loan
Agreement and Loan Documents dated April 7, 2000(22)
10.10 (g) First Restatement of Security Agreement, dated April
12, 1996, between Green Mountain Coffee Roasters, Inc.
and Fleet Bank - NH(10)
10.15 Assignment of Trademarks from Green Mountain Coffee, Inc. in
connection with the Fleet Bank - NH financing(1)
10.22 U.S. Small Business Administration ("SBA") Authorization and
Debenture Guaranty relating to $766,000 loan to Green Mountain
Coffe, Inc. together with Letters dated 7/14/93 and 7/19/93
from SBA to Central Vermont Economic Development Corporation
relating thereto(1)
(a) Small Business Administration Guaranty dated September
30, 1993 from Robert P. Stiller to Central Vermont
Economic Development Corporation(4)
(b) Assignment, dated September 30, 1993, by Central
Vermont Economic Development Corporation to Small
Business Administration of Small Business
Administration Guaranty dated September 30, 1993 from
Robert P. Stiller to Central Vermont Economic
Development Corporation(4)
(c) Mortgage, dated September 30, 1993, between Green
Mountain Coffee Roasters, Inc. and Central Vermont
Economic Development Corporation(4)
(d) Assignment, dated September 30, 1993, by Central
Vermont Economic Development Corporation to Small
Business Administration of Mortgage, dated September
30, 1993, between Green Mountain Coffee Roasters, Inc.
and Central Vermont Economic Development Corporation(4)
(e) "504" Note, dated September 30, 1993, in the amount of
$766,000, from Green Mountain Coffee Roasters, Inc. to
Central Vermont Economic Development Corporation, as
amended, including Servicing Agent Agreement among
Green Mountain Coffee Roasters, Inc. and Colson
Services Corp.(5)
(f) Assignment, dated September 30, 1993, by Central
Vermont Economic Development Corporation to Small
Business Administration of "504" Note, dated September
30, 1993, in the amount of $766,000, from Green
Mountain Coffee Roasters, Inc. to Central Vermont
Economic Development Corporation(4)
(g) Security Agreement from Green Mountain Coffee Roasters,
Inc. to Central Vermont Economic Corporation(4)
(h) Assignment, dated September 30, 1993, by Central
Vermont Economic Development Corporation to Small
Business Administration of Security Agreement from
Green Mountain Coffee Roasters, Inc. to Central Vermont
Economic Development Corporation(4)
(i) Letter Agreement, dated October 1, 1993, among Central
Vermont Economic Development Corporation, Green
Mountain Coffee Roasters, Inc. and Small Business
Administration, amending the Authorization and
Debenture Guaranty among Small Business Administration.
Central Vermont Economic Development Corporation, and
Green Mountain Coffee Roasters, Inc.(4)
(j) Development Company 504 Debenture, issued October
14, 1993, for principal amount of as Trustee(4)
10.33 Lease Agreement, dated 4/28/93, between Pilgrim Partnership
and Green Mountain Coffee, Inc.(1)
(a) Addendum to Lease Agreement, dated 4/28/93(1)
(b) Lease Amendment dated August 16, 1993(4)
(c) Letter Agreement dated July 30, 1997(16)
10.36 1993 Stock Option Plan of the Company, as revised(15)*
10.37 1998 Employee Stock Purchase Plan with Form of Participation
Agreement(17)*
10.38 1999 Stock Option Plan of the Company(18)*
10.40 Employment Agreement of Robert D. Britt dated March 26,
1993(1)*
10.41 Employment Agreement of Stephen J. Sabol dated as of July 1,
1993(1)*
10.42 Employment Agreement of Paul Comey dated as of July 1,
1993(1)*
10.44 Employment Agreement of Jonathan C. Wettstein dated as of
July 1, 1993(1)*
10.45 Stock Option Agreement, dated July 21, 1993, between the
Company and Robert D. Britt(1)*
10.46 Stock Option Agreement, dated July 21, 1993, between the
Company and Agnes M. Cook(1)*
10.48 Stock Option Agreement, dated July 21, 1993, between the
Company and Paul Comey(1)*
10.50 Stock Option Agreement, dated July 21, 1993, between the
Company and James K. Prevo(1)*
10.51 Stock Option Agreement, dated July 21, 1993, between the
Company and Stephen J. Sabol(1)*
10.52 Stock Option Agreement, dated July 21, 1993, between the
Company and Jonathan C. Wettstein(1)*
10.59 Stock Option Agreement, dated July 22, 1994, between the
Company and William D. Davis(8)*
10.60 Stock Option Agreement, dated July 22, 1994, between the
Company and Jules A. del Vecchio(8)*
10.61 Stock Option Agreement, dated July 22, 1994, between the
Company and Ian W. Murray(8)*
10.62 Stock Option Agreement, dated December 30, 1994, between
the Company and Robert D. Britt(9)*
10.63 Stock Option Agreement, dated December 30, 1994, between
the Company and Stephen J. Sabo(l9)*
10.64 Stock Option Agreement, dated December 30, 1994, between
the Company and Jonathan C. Wettstein(9)*
10.65 Stock Option Agreement, dated December 30, 1994, between
the Company and Paul Comey(9)*
10.66 Stock Option Agreement, dated November 27, 1995, between
the Company and David E. Moran(11)*
10.68 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Robert D. Britt(11)*
10.69 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Paul Comey(11)*
10.70 First Amendment to Stock Option Agreement, dated July 21, 1993
between the Company and Jonathan C. Wettstein(11)*
10.75 Stock Option Agreement, dated July 31, 1997 between the
Company and James K. Prevo(16)*
10.76 Stock Option Agreement, dated October 21, 1997 between the
Company and Robert D. Britt(14)*
10.77 Stock Option Agreement, dated October 21, 1997 between the
Company and Paul Comey (14)*
10.78 Stock Option Agreement, dated October 21, 1997 between the
Company and Jonathan C. Wettstein(14)*
10.80 Stock Option Agreement, dated October 21, 1997 between the
Company and Stephen J. Sabol(14)*
10.81 Stock Option Agreement, dated January 8, 1999 between the
Company and Robert D. Britt(18)*
10.82 Stock Option Agreement, dated January 8, 1999 between the
Company and Paul Comey(18)*
10.83 Stock Option Agreement, dated January 8, 1999 between the
Company and Paul Comey(18)*
10.84 Stock Option Agreement, dated January 8, 1999 between the
Company and Jonathan C. Wettstein(18)*
10.85 Stock Option Agreement, dated January 8, 1999 between the
Company and Jonathan C. Wettstein(18)*
10.87 Stock Option Agreement, dated January 8, 1999 between the
Company and Stephen J. Sabol(18)*
10.89 Stock Option Agreement, dated January 8, 1999 between the
Company and James K. Prevo(18)*
10.90 Stock Option Agreement, dated January 8, 1999 between the
Company and James K. Prevo(18)*
10.91 Stock Option Agreement, dated April 13, 1999 between the
Company and David E. Moran(19)*
10.92 Stock Option Agreement, dated April 13, 1999 between the
Company and William D. Davis(19)*
10.93 Stock Option Agreement, dated April 13, 1999 between the
Company and Jules A. del Vecchio(19)*
10.94 Stock Option Agreement, dated April 13, 1999 between the
Company and Hinda Miller(19)*
10.95 Stock Option Agreement, dated September 13, 1999 between the
Company and Kevin G. McBride*(20)
10.96 Stock Option Agreement, dated November 1, 1999 between the
Company and Agnes M. Cook*(20)
10.97 Promissory note from Robert P. Stiller to the Company, dated
September 24, 1999(20)
10.98 Promissory note from Robert P. Stiller to the Company, dated
October 18, 1999(20)
10.99 Promissory note from Robert P. Stiller to the Company, dated
November 3, 1999(20)
10.100 Stock Option Agreement, dated as of December 21, 1999, by and
between Robert D. Britt and the Company*(21)
10.101 Stock Option Agreement, dated as of December 21, 1999, by and
between Agnes M. Cook and the Company*(21)
10.102 Stock Option Agreement, dated as of December 21, 1999, by and
between Jonathan C. Wettstein and the Company*(21)
10.103 Stock Option Agreement, dated as of December 21, 1999, by and
between James K. Prevo and the Company*(21)
10.104 Stock Option Agreement, dated as of December 21, 1999, by and
between Paul Comey and the Company*(21)
10.105 2000 Stock Option Plan of the Company
10.106 Stock Option Agreement, dated as of October 2, 2000, by and
between Robert D. Britt and the Company*
10.107 Stock Option Agreement, dated as of October 2, 2000, by and
between Agnes M. Cook and the Company*
10.108 Stock Option Agreement, dated as of October 2, 2000, by and
between Jonathan C. Wettstein and the Company*
10.109 Stock Option Agreement, dated as of October 2, 2000, by and
between Paul Comey and the Company*
10.110 Stock Option Agreement, dated as of October 2, 2000, by and
between James K. Prevo and the Company*
10.111 Stock Option Agreement, dated as of October 2, 2000, by and
between Stephen Sabol and the Company*
10.112 Stock Option Agreement, dated as of October 2, 2000, by and
between Kevin McBride and the Company*
10.113 Green Mountain Coffee, Inc. Employee Stock Ownership Plan
10.114 Green Mountain Coffee, Inc. Employee Stock Ownership Trust
10.115 Chef Express.net, Inc. Series A Convertible Preferred Stock
Purchase Agreement
10.116 Promissory note from Robert P. Stiller, dated April 12, 2000
21 List of Subsidiaries of the Company
23 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September
30, 2000.
<PAGE>
Notes to exhibits listed above
* Management contract or compensatory plan
1. Incorporated 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 September 21, 1993
2. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-QSB for the 12 weeks ended April 9, 1994,
filed on May 24, 1994
3. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-KSB for the fiscal year ended September 24,
1994, filed December 8, 1994
4. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-KSB for the fiscal year ended September 25,
1993, filed on December 23, 1993
5. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-QSB for the 16 weeks ended January 15,
1994, filed on February 25, 1994
6. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-QSB for the 16 weeks ended January 14, 1995,
filed on February 25, 1995
7. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-QSB for the 12 weeks ended April 8, 1995,
filed on May 23, 1995
8. Incorporated by reference to the corresponding exhibit number in
Amendment No. 1 to the Annual Report on Form 10-KSB/A for the fiscal
year ended September 24, 1994, filed on December 16, 1994
9. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-KSB for the fisca year ended September 30, 1995
10. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-QSB for the 12 weeks ended April 13, 1996
11. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-KSB for the fiscal year ended September 26,
1996
12. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 16 weeks ended January 18, 1997
13. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 12 weeks ended April 12, 1997
14. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 12 weeks ended July 5, 1997
15.. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-K for the fiscal year September 27, 1997
16. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 16 weeks January 17, 1998
17. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-K for the fiscal year September 26, 1998
18. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 16 weeks January 18, 1999
19. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 12 weeks July 3, 1999
20. Incorporated by reference to the corresponding exhibit number in the
Annual Report on Form 10-K for the year ended September 25, 1999
21. Incorporated by reference to the corresponding exhibit number in the
Quarterly Report on Form 10-Q for the 12 weeks ended January 15, 2000
22. Incorporated by reference to the corresponding exhibit number in the
Schedule TO filed on April 17, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GREEN MOUNTAIN COFFEE, INC.
By: /s/ Robert P. Stiller
-------------------------------------
ROBERT P. STILLER
Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert P. Stiller Chairman of the Board of Directors, December 27, 2000
- --------------------- President and Chief Executive Officer
(Principle Executive Officer)
/s/ Robert D. Britt Chief Financial Officer, Treasurer, December 27, 2000
- --------------------- Secretary and Director (Principal
Financial and Accounting Officer)
STEPHEN J. SABOL* Director December 27, 2000
JONATHAN C. WETTSTEIN* Director December 27, 2000
WILLIAM D. DAVIS* Director December 27, 2000
JULES A. DEL VECCHIO* Director December 27, 2000
HINDA MILLER* Director December 27, 2000
DAVID E. MORAN* Director December 27, 2000
*By: /s/ Robert P. Stiller
-----------------------------------
Robert P. Stiller, Attorney-in-fact
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Index to Consolidated Financial Statements
Page
----
Report of Independent Accountants........................................ F-2
Consolidated Financial Statements:
Consolidated Balance Sheet at September 30, 2000 and
September 25, 1999.................................................... F-3
Consolidated Statement of Operations for each of the
three years in the period ended September 30, 2000.................... F-4
Consolidated Statement of Changes in Stockholders'
Equity for each of the three years in the period
ended September 30, 2000.............................................. F-5
Consolidated Statement of Cash Flows for each of the
three years in the period ended September 30, 2000.................... F-6
Notes to Consolidated Financial Statements............................ F-7
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of Green Mountain Coffee, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Green
Mountain Coffee, Inc. at September 30, 2000 and September 25, 1999 and the
results of its operations and its cash flows for each of the three years in the
period ended September 30, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 10, 2000
<PAGE>
<TABLE>
Green Mountain Coffee, Inc.
Consolidated Balance Sheet
(Dollars in thousands)
September 30, September 25,
2000 1999
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................... $ 489 $ 415
Receivables, less allowances of $320 at
September 30, 2000 and $190 at September 25, 1999... 8,454 6,223
Inventories......................................... 5,350 5,409
Other current assets................................ 580 497
Loans to officers................................... - 250
Deferred income taxes, net.......................... 182 490
------------- -------------
Total current assets............................. 15,055 13,284
Fixed assets, net...................................... 11,274 10,183
Other long-term assets................................. 348 250
Deferred income taxes, net............................. 497 161
------------- --------------
$ 27,174 $ 23,878
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt................... $ 135 $ 1,127
Accounts payable.................................... 6,125 4,551
Accrued compensation costs.......................... 1,381 1,005
Accrued expenses.................................... 614 357
Accrued losses and other costs of discontinued
operations, net..................................... 119 192
------------- -------------
Total current liabilities..................... 8,374 7,232
------------- -------------
Long-term debt......................................... 283 1,908
------------- -------------
Long-term line of credit............................... 8,500 3,056
------------- -------------
Commitments and contingencies (Note 15)
Stockholders' equity:
Common stock, $0.10 par value:
Authorized - 10,000,000 shares; Issued -
3,671,005 and 3,615,404 shares at September
30, 2000 and September 25, respectively............. 367 362
Additional paid-in capital.......................... 13,901 13,409
Retained earnings (accumulated deficit)............. 2,778 (1,435)
Treasury shares, at cost - 568,753 and
100,609 shares at September 30, 2000 and
September 25, 1999, respectively.................... (7,029) (654)
------------- -------------
Total stockholders' equity.......................... 10,017 11,682
------------- -------------
$ 27,174 $ 23,878
============= =============
</TABLE>
[FN]
The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
</FN>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except per share data)
Year Ended
<TABLE>
September 30, September 25, September 26,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Net sales...................................... $ 84,001 $ 64,881 $ 55,825
Cost of sales.................................. 50,465 39,261 36,558
------------- ------------- -------------
Gross profit.............................. 33,536 25,620 19,267
Selling and operating expenses................. 20,747 16,381 13,805
General and administrative expenses............ 5,887 4,661 4,169
Loss on abandonment of equipment............... 135 229 -
------------- -------------- -------------
Operating income.......................... 6,767 4,349 1,293
Other income................................... 48 10 66
Interest expense............................... (583) (736) (821)
------------- ------------- -------------
Income from continuing operations
before income taxes....................... 6,232 3,623 538
Income tax expense............................. (2,079) (1,376) (198)
------------- ------------- -------------
Income from continuing operations......... 4,153 2,247 340
Discontinued operations:
Loss from discontinued retail stores operations,
net of income tax benefits of $196............. - - (297)
Income (loss) on disposal of retail stores,
net of income tax expense of $40 and $114 for
the years ended September 30, 2000 and September
25, 1999, respectively, and income tax benefit
of $834 for the year ended September 26, 1998.. 60 186 (1,259)
------------- ------------- -------------
Net income (loss).............................. $ 4,213 $ 2,433 $ (1,216)
============= ============= =============
Basic income (loss) per share:
Weighted average shares outstanding............ 3,293,422 3,503,412 3,530,657
Income from continuing operations.............. $ 1.26 $ 0.64 $ 0.10
Income (loss) from discontinued operations..... $ 0.02 $ 0.05 $ (0.44)
Net income (loss).............................. $ 1.28 $ 0.69 $ (0.34)
Diluted income (loss) per share:
Weighted average shares outstanding............ 3,489,622 3,547,155 3,539,231
Income from continuing operations.............. $ 1.19 $ 0.64 $ 0.10
Income (loss) from discontinued operations..... $ 0.02 $ 0.05 $ (0.44)
Net income (loss).............................. $ 1.21 $ 0.69 $ (0.34)
</TABLE>
[FN]
The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
</FN>
<PAGE>
<TABLE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended September 30, 2000, September 25, 1999, and September 26, 1998
(Dollars in thousands)
Retained
Additional earnings Total
Common stock paid-in (accumulated Treasury stock stockholders'
Shares Amount capital deficit) Shares Amount equity
---------- ------ ---------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 27, 1997..... 3,530,818 $ 353 $ 12,954 $ (2,652) - - $ 10,655
Issuance of common stock under
employee stock purchase plan... 15,023 2 64 - - - 66
Purchase of treasury shares....... - - - - (7,350) $ (37) (37)
Net loss.......................... - - - (1,216) - - (1,216)
---------- ------ ---------- ------------ -------- -------- -------------
Balance at September 26, 1998..... 3,545,841 355 13,018 (3,868) (7,350) (37) 9,468
Issuance of common stock under
employee stock purchase plan... 37,263 4 186 - - - 190
Options exercised................. 32,300 3 205 - - - 208
Purchase of treasury shares....... - - - - (93,259) (617) (617)
Net income........................ - - - 2,433 - - 2,433
---------- ------ ---------- ------------ -------- -------- -------------
Balance at September 25, 1999..... 3,615,404 362 13,409 (1,435) (100,609) (654) 11,682
Issuance of common stock under
employee stock purchase plan... 32,309 3 276 - - - 279
Options exercised................. 23,292 2 167 - - - 169
Purchase of treasury shares....... - - - - (468,144) (6,375) (6,375)
Non cash compensation expense..... - - 49 - - - 49
Net income........................ - - - 4,213 - - 4,213
---------- ------ ---------- ------------ -------- -------- -------------
Balance at September 30, 2000..... 3,671,005 $ 367 $ 13,901 $ 2,778 (568,753) $ (7,029) $ 10,017
========== ====== ========== ============ ======== ======== =============
</TABLE>
[FN]
The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
</FN>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
Year ended
---------------------------------------------
September 30, September 25, September 26,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ 4,213 $ 2,433 $ (1,216)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
(Income) loss from discontinued operations..... (60) (186) 1,556
Depreciation and amortization.................. 2,968 2,943 2,754
Loss on disposal and abandonment of
fixed assets................................ 173 240 63
Provision for doubtful accounts................ 361 241 577
Non-cash compensation.......................... 49 3 -
Deferred income taxes.......................... (28) 966 (70)
Changes in assets and liabilities:
Receivables.................................... (2,592) (1,675) (1,247)
Inventories.................................... 59 227 (565)
Other current assets........................... 167 (73) (325)
Other long-term assets......................... (98) 20 63
Accounts payable............................... 1,574 1,420 (1,823)
Accrued compensation costs..................... 376 178 211
Accrued expenses............................... 257 (150) 228
------------- ------------- -------------
Net cash provided by continuing operations............. 7,419 6,587 206
Net cash (used for) provided by discontinued
operations....................................... (13) 42 (406)
------------- ------------- -------------
Net cash provided by (used for) operating activities... 7,406 6,629 (200)
------------- ------------- -------------
Cash flows from investing activities:
Expenditures for fixed assets........................ (4,597) (2,655) (3,375)
Proceeds from disposals of fixed assets.............. 365 89 170
Capital expenditures for discontinued operations..... - - (208)
Proceeds from disposal of discontinued operations.... - 158 118
------------- ------------- -------------
Net cash used for investing activities (4,232) (2,408) (3,295)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock............... 448 395 66
Purchase of treasury shares.......................... (6,375) (617) (37)
Proceeds from issuance of long-term debt............. 123 - 4,500
Repayment of long-term debt.......................... (2,740) (2,255) (2,121)
Borrowings under (repayment of) revolving
line of credit................................... 5,444 (2,094) 1,165
Principal payments under capital lease obligation.... - (12) (132)
------------- ------------- -------------
Net cash (used for) provided by financing activities... (3,100) (4,583) 3,441
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents... 74 (362) (54)
Cash and cash equivalents at beginning of year......... 415 777 831
------------- ------------- -------------
Cash and cash equivalents at end of year............... $ 489 $ 415 $ 777
============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest.............................. $ 607 $ 719 $ 786
Cash paid for income taxes.......................... $ 1,896 $ 248 $ 56
</TABLE>
[FN]
The accompanying Notes to Consolidated Financial Statements are an integral part
of the financial statements.
</FN>
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
Notes to Consolidated Financial Statements
1. Nature of Business and Organization
The accompanying consolidated financial statements include the accounts of
Green Mountain Coffee, Inc. (the "Company") and its wholly-owned
subsidiary, Green Mountain Coffee Roasters, Inc. All significant
inter-company transactions and balances have been eliminated.
The Company purchases high-quality arabica coffee beans for roasting, then
packages and distributes the roasted coffee primarily in the northeastern
United States. The majority of the Company's revenue is derived from its
wholesale operation which serves supermarket, specialty food store,
convenience store, food service, hotel, restaurant, university, travel and
office coffee service customers. The Company also has a direct mail
operation serving customers nationwide.
The Company's fiscal year ends on the last Saturday in September. Fiscal
2000, fiscal 1999 and fiscal 1998 represent the years ended September 30,
2000, September 25, 1999, and September 26, 1998, respectively. Fiscal
2000 consists of 53 weeks, whereas fiscal 1999 and 1998 consist of 52
weeks each.
2. Significant Accounting Policies
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. Cash and cash
equivalents include money market funds which are carried at cost, plus
accrued interest, which approximates market. The Company does not believe
that it is subject to any unusual credit and market risk.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined by the first-in, first-out method. Inventories consist
primarily of green and roasted coffee, packaging materials and purchased
finished goods.
HEDGING
The Company uses futures and options contracts to hedge the effects of
fluctuations in the price of green coffee beans. These transactions meet
the requirements for hedge accounting, including designation and
correlation. To obtain a proper matching of revenue and expense, gains or
losses arising from open and closed hedging transactions are included in
inventory as a cost of the commodity and reflected in the statement of
operations when the hedged coffee purchase contract is fixed and the
hedging instrument is closed. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
the price of green coffee. The overall exposure to credit risk is
considered to be minimal.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This pronouncement will
require the Company to recognize derivatives on its balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities or firm
commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion
of a derivative's change in fair value will be immediately recognized in
earnings. In June 1999, Statement of Financial Accounting Standards No.
137 "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133" ("SFAS 137") was
issued. SFAS 137 deferred the effective date of SFAS 133 until the first
quarter of fiscal 2001. The Company will adopt SFAS 133 as of October 1,
2000. The adoption of SFAS 133 is expected to have an immaterial impact on
the Company's financial position and results from operations. The Company
does not believe the adoption of SFAS 133 will significantly alter the
Company's hedging strategies or cause a significant change in normal
business practices.
OTHER LONG-TERM ASSETS
Other long-term assets consist of deposits, debt issuance costs and
minority investments in Keurig, Inc and ChefExpress.net, Inc. Debt
issuance costs represent those costs incurred in connection with the
issuance of debt. Amortization is calculated using the straight-line
method over the respective original lives of the applicable issue.
Amortization calculated using the straight-line method is not materially
different from amortization that would have resulted from using the
interest method. Debt issuance costs included in other long-term assets in
the accompanying consolidated balance sheet at September 30, 2000 and
September 25, were $22,000 and $32,000, respectively. The minority
investments, which represent less than 5% interests, are accounted for
under the cost method. The balance in the investment in Keurig, Inc.
included in other long-term assets in the accompanying consolidated
balance sheet at September 30, 2000 and September 25, 1999 is $151,000.
The balance in the investment in ChefExpress.net, Inc. (an entity whose
Chief Executive Officer and President is also a member of the Company's
Board of Directors- see note 18) included in other long-term assets in the
accompanying consolidated balance sheet at September 30, 2000 is $104,000.
ADVERTISING COSTS
The Company expenses the costs of advertising the first time the
advertising takes place. At September 30, 2000 and September 25, 1999
prepaid advertising costs of $83,000 and $81,000, respectively, were
recorded in other current assets in the accompanying consolidated balance
sheet. Advertising expense totaled $4,553,000, $3,499,000, and $2,791,000
for the years ended September 30, 2000, September 25, 1999, and September
26, 1998, respectively.
FIXED ASSETS
Fixed assets are carried at cost, net of accumulated depreciation.
Expenditures for maintenance, repairs and renewals of minor items are
charged to expense as incurred. Depreciation is calculated using the
straight-line method over the assets' estimated useful lives. The cost and
accumulated depreciation for fixed assets sold, retired, or otherwise
disposed of are relieved from the accounts, and the resultant gains and
losses are reflected in income.
In order to facilitate sales, the Company follows an industry-wide
practice of purchasing and loaning coffee brewing and related equipment to
wholesale customers. These assets are also carried at cost, net of
accumulated depreciation.
REVENUE RECOGNITION
Revenue from wholesale and direct mail sales is recognized upon product
shipment.
In December 1999, the Securities and Exchange Commission ("SEC"), released
Staff Accounting Bulletin No. 101 ("SAB 101"), which provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements filed with the SEC. In June 2000, the SEC released SAB
101B,which postponed the effective date of SAB 101 to the fourth quarter
of fiscal years beginning after December 15, 1999. Green Mountain Coffee
will be required to be in conformity with the provisions of SAB 101 in the
fourth quarter of fiscal 2001. The Company does not expect the adoption of
SAB 101 will have a material impact on the Company's financial position or
results of operations.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes, as set forth in Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled.
INCOME (LOSS) PER SHARE
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). This pronouncement supersedes the previous methodology for the
calculation of earnings per share as promulgated under APB Opinion No. 15.
SFAS 128 requires presentation of "basic" earnings per share and "diluted"
earnings per share. The Company adopted SFAS 128 in fiscal 1998.
FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the
normal course of business. Fair values are estimated based on assumptions
concerning the amount and timing of estimated future cash flows and
assumed discount rates reflecting varying degrees of perceived risk. The
fair values of cash, cash equivalents, accounts receivable, accounts
payable, accrued expenses and debt approximate their carrying value at
September 30, 2000. It was not practicable to estimate the fair value of
minority investments representing less than 5% of the preferred stock of
two untraded companies. The investment in Keurig, Inc. is carried at its
original cost of $151,000 at September 30, 2000 and September 25, 1999,
respectively. The investment in ChefExpress.net, Inc. is carried at its
original cost of $104,000 at September 30, 2000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the accompanying consolidated
financial statements. Actual results could differ from those estimates.
SIGNIFICANT CUSTOMER CREDIT RISK AND SUPPLY RISK
The extensive network of Exxon Mobil Corporation convenience stores,
corporate-owned or managed by independent franchisees, accounted for
approximately 17.0%, 18.6%, and 17.7% of net sales from continuing
operations in the years ended September 30, 2000, September 25, 1999, and
September 26, 1998, respectively. During the same periods,
corporate-owned Exxon Mobil convenience stores made up less than 10% of
the Company's revenues. Exxon Mobil Corporation is a customer of the
wholesale segment (see footnote 17 on Segment Reporting). The majority of
the Company's customers are located in the northeastern part of the
United States. Concentration of credit risk with respect to accounts
receivable is limited due to the large number of customers in various
channels comprising the Company's customer base. The Company does not
require collateral from customers as ongoing credit evaluations of
customers' payment history are performed. The Company maintains reserves
for potential credit losses and such losses, in the aggregate, have not
exceeded management's expectations.
SEGMENT REPORTING
In accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), the Company's business is comprised of two distinct business
segments determined by the distribution channel. The direct mail segment
is comprised of all consumer-direct sales and sales to small businesses
which are solicited via catalogs and the Company's online store -
www.GreenMountainCoffee.com. The wholesale segment is comprised of sales
to customers who resell Green Mountain coffee either as coffee beans or
brewed coffee by the cup, such as supermarkets, office coffee
distributors, convenience stores, restaurants, and others. Wholesale sales
are generated through the Company's direct sales force and a limited
number of distributors.
RECLASSIFICATIONS
Certain reclassifications of prior year balances have been made to conform
to the current presentation.
3. Inventories
Inventories consist of the following:
September 30, 2000 September 25, 1999
------------------ ------------------
Raw materials and supplies... $ 2,557,000 $ 2,809,000
Finished goods............... 2,793,000 2,600,000
------------------ ------------------
$ 5,350,000 $ 5,409,000
================== ==================
Inventory values above are presented net of $127,000 and $136,000 of
obsolescence reserves at September 30, 2000 and September 25, 1999,
respectively.
As of September 30, 2000, the Company had inventory purchase commitments
for green coffee totaling approximately $9.0 million, of which
approximately 60% had a fixed price. The value of the variable portion of
these commitments was calculated using the March 2001 C price of coffee at
September 30, 2000 or $0.8775. The Company believes, based on
relationships established with its suppliers, that the risk of
non-delivery on such purchase commitments is remote.
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
Useful
Life in September 30, September 25,
Years 2000 1999
------- ------------- -------------
<S> <C> <C> <C>
Leasehold improvements...................... 2 - 10 $ 2,339,000 $ 2,216,000
Production equipment........................ 2 - 10 5,323,000 5,539,000
Office equipment and software............... 2 - 10 7,050,000 5,581,000
Equipment on loan to wholesale customers.... 3 - 5 5,849,000 4,133,000
Vehicles.................................... 4 - 5 657,000 512,000
Construction-in-progress.................... 247,000 162,000
------------- -------------
Total fixed assets........................ 21,465,000 18,143,000
Accumulated depreciation...................... (10,191,000) (7,960,000)
------------- -------------
$ 11,274,000 $ 10,183,000
============= =============
</TABLE>
Total depreciation and amortization expense from continuing operations
relating to all fixed assets was $2,968,000, $2,943,000 and $2,754,000 for
fiscal 2000, 1999, and 1998, respectively.
During fiscal 2000, following a thorough review of its production fixed
assets, the Company recorded a $135,000 loss on disposal and abandonment
of production equipment and software. The original aggregate cost of this
equipment was $908,000 and its related accumulated depreciation was
$573,000.
During fiscal 1999, the Company disposed of assets with a cost of
$5,012,000 and related accumulated depreciation of $4,683,000 resulting in
a loss on disposal and abandonment of fixed assets of $240,000. As part of
this loss, the Company recorded a $229,000 loss on abandonment of loaner
equipment. This resulted from a thorough review of its brewing and other
equipment on loan to customers, through which it identified a small
portion of its old equipment that would not be retrieved.
<PAGE>
5. Income Taxes
The provision for income taxes from continuing operations for the years
ended September 30, 2000, September 25, 1999, and September 26, 1998
consists of the following:
<TABLE>
September 30, September 25, September 26,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Current tax expense:
Federal...................... $ 2,029,000 $ 862,000 -
State........................ 348,000 186,000 $ 17,000
Benefit of net operating
loss carryforwards........ (272,000) (948,000) -
------------- ------------- -------------
Total current................... 2,105,000 100,000 17,000
------------- ------------- -------------
Deferred tax expense:
Federal...................... 217,000 1,098,000 187,000
State........................ 291,000 178,000 30,000
------------- ------------- -------------
Total deferred.................. 508,000 1,276,000 217,000
Tax asset valuation allowance... (534,000) - (36,000)
------------- ------------- -------------
Total tax expense............... $ 2,079,000 $ 1,376,000 $ 198,000
============= ============= =============
</TABLE>
SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, SFAS 109 generally considers expected future events other
than enactments of changes in the tax law or rates.
Deferred tax assets (liabilities), including temporary differences related
to discontinued operations (see Note 6), consist of the following:
September 30, September 25,
2000 1999
------------- ------------
Deferred tax assets:
Net operating loss carryforwards......... - $ 272,000
Federal investment tax credits........... - 3,000
Vermont state manufacturers investment
tax credit............................ $ 2,440,000 2,627,000
Section 263A adjustment.................. 3,000 4,000
Other reserves and temporary differences. 277,000 467,000
------------- -------------
Gross deferred tax assets................ 2,720,000 3,373,000
Deferred tax asset valuation allowance... (1,821,000) (2,355,000)
Deferred tax liability:
Depreciation............................... (140,000) (239,000)
------------- -------------
Net deferred tax assets.................. $ 759,000 $ 779,000
============= =============
In November 1996, the Company received notification from the State of
Vermont that it had approved a $4,041,000 manufacturers investment tax
credit pertaining to certain fixed assets purchased between July 1, 1993
and June 30, 1996, which will expire in 2004. During fiscal 2000, the
Company utilized $185,000 of this credit. The resulting deferred tax
asset, which is substantially offset by a valuation allowance, is
reflected in the above table net of the federal tax effect.
During fiscal 2000, the deferred tax asset valuation allowance was reduced
by $534,000, based primarily upon estimates of future taxable income and
that portion which is expected to be allocable to Vermont on which the
credit could be applied. Although realization is not assured, management
believes that the net deferred tax asset represents management's best
estimate, based upon the weight of available evidence as prescribed in
SFAS 109, of the amount which is more likely than not to be realized. If
such evidence were to change, based upon near-term operating results and
longer-term projections, the amount of the valuation allowance recorded
against the gross deferred tax asset may be decreased or increased. Also,
if certain substantial changes in the Company's ownership should occur,
there would be an annual limitation on the amount of loss carryforwards
which could be utilized, and restrictions on the utilization of investment
tax credit carryforwards.
A reconciliation for continuing operations between the amount of reported
income tax expense and the amount computed using the U.S. Federal
Statutory rate of 34% is as follows:
<TABLE>
September 30, September 25, September 26,
2000 1999 1998
------------- ------------ -------------
<S> <C> <C> <C>
Tax at U.S. Federal Statutory rate.... $ 2,120,000 $ 1,231,000 $ 183,000
Increase (decrease) in rates
resulting from:
Other nondeductible items....... 42,000 28,000 22,000
State taxes, net of federa
benefit..................... 447,000 217,000 42,000
Deferred tax asset valuation
allowance and other......... (530,000) (100,000) (49,000)
------------- ------------- -------------
Tax at effective rates................ $ 2,079,000 $ 1,376,000 $ 198,000
============= ============= ============
</TABLE>
6. Discontinued Operations
During the third fiscal quarter of 1998, the Company announced that it was
discontinuing its company-owned retail store operations and estimated its
loss on disposal at $1,259,000 (net of a tax benefit of $834,000). The
pre-tax loss on disposal of $2,093,000 in 1998 consisted of an estimated
loss on disposal of the business of $1,692,000 and a provision of $401,000
for anticipated losses from May 29, 1998 (the measurement date) until
disposal. The loss on disposal included provisions for estimated lease
termination costs, write-off of leasehold improvements and other fixed
assets, severance and employee benefits. During the second quarter of
fiscal 1999, the Company revised its estimated pre-tax loss on disposal and
reversed $300,000 ($186,000 net of tax) of the original estimate, primarily
due to larger than expected proceeds from the sale of fixed assets and
lower lease termination costs. During the fourth quarter of fiscal 2000,
the Company further revised its estimated pre-tax loss on disposal and
reversed $100,000 ($60,000 net of tax) of the original estimate, due to
lower lease termination costs.
The assets and liabilities of the discontinued retail operations at
September 30, 2000 and September 25, 1999 are reflected as a net current
liability in the accompanying consolidated balance sheet. The net
liabilities of the discontinued operations in the September 30, 2000 and
September 25, 1999 consolidated balance sheet are summarized as follows:
September 30, September 25,
2000 1999
------------- -------------
Fixed assets, net......................... $ 36,000 $ 46,000
Deferred tax assets, net.................. 80,000 128,000
Estimated accrued losses and other costs
on disposal of discontinued operations... (235,000) (366,000)
------------- -------------
Net accrued losses and other costs of
discontinued operations.................. $ (119,000) $ (192,000)
============= =============
7. Credit Facility
The Company maintains a credit facility (the "Credit Facility") with Fleet
Bank -NH ("Fleet"). Borrowings are collateralized by substantially all of
the Company's assets. During fiscal 1999, the Credit Facility provided for
a $9,000,000 revolving line of credit maturing March 31, 2001 as well as
term debt with a limit of $4,500,000 maturing March 31, 2003. On April 7,
2000, the Company consolidated its credit facilities with Fleet. The
amended debt agreement provides for a revolving line of credit of
$15,000,000, which matures on March 31, 2003 and is not subject to a
borrowing base formula. The purpose of the new facility is to fund the
Company's ordinary working capital requirements, planned repurchases of
shares of stock and other general corporate purposes. The Fleet term debt
facility was extinguished on April 7, 2000 using new borrowings under the
line of credit. The terms of the Credit Facility also provide for the
maintenance of specified financial ratios and restrict certain transactions
without prior bank approval. The Company was in compliance with these
covenants at September 30, 2000.
The principal amounts outstanding on the revolving line of credit at
September 30, 2000 and September 25, 1999 were $8,500,000 and 3,056,000,
respectively. The outstanding balance on the term debt at September 25,
1999 was $2,500,000.
The interest paid on the credit facility varies with the prime, LIBOR and
Bankers Acceptance rates, plus a margin based on a performance price
structure. Interest rates on September 30, 2000 for each portion of the
line of credit were as follows: 6.56% plus 135 basis points on $2,200,000;
6.57% plus 110 basis points on $2,500,000; 6.56% plus 110 basis points on
$2,000,000; 6.53% plus 135 basis points on $1,000,000; 6.62% plus 150 basis
points on $400,000; and the prime rate or 9.5% on $400,000.
Interest on the Bankers Acceptance loans is paid in advance and amortized
over the duration of the loans. Interest on LIBOR loans and the variable
portion of the Credit Facility accrues daily and is paid monthly, in
arrears.
At September 25, 1999, the interest rate on $2,500,000 of the principal
amount outstanding on the revolving line of credit was at the one-month
LIBOR rate plus 175 basis points or 7.11% while the interest on the
remaining portion (equal to $556,000) was at the prime rate or 8.25%. At
September 25, 1999, the interest rate on the $2,500,000 term debt was equal
to LIBOR plus 200 basis points or 7.36%.
On May 29, 1998, the Company entered into a standard International Swap
Dealers Association Inc. interest rate swap agreement with Fleet National
Bank to manage the interest rate risk associated with its Credit Facility.
The swap agreement had a notional amount of $6,000,000 and maturity of May
2001. The effect of the swap agreement was to limit the interest rate
exposure to a fixed rate of 5.84% (versus the 30-day LIBOR rate). Under the
agreement, interest expense was calculated on a monthly basis. If interest
expense as calculated was greater based on the 30-day LIBOR rate, Fleet
National Bank paid the difference to the Company; if interest expense as
calculated was greater based on the fixed rate, the Company paid the
difference to Fleet National Bank. For the year ended September 25, 1999,
the Company paid $43,000 in additional interest expense pursuant to the
swap agreement. The fair value of the interest rate swap is the estimated
amount that the Company would receive or pay to terminate the agreement at
the reporting date. At September 25, 1999, the Company estimated that it
would have paid $14,000 to terminate the agreement. During the first
quarter of fiscal 2000, the Company received $34,000 from Fleet National
Bank for the termination of its interest rate swap agreement with a
$6,000,000 nominal amount. This payment was netted against interest expense
for the fiscal quarter. Due to the termination of this agreement, at
September 30, 2000, the Company had $8,500,000 of debt subject to variable
interest rates as described above.
8. Long-term Debt
September 30, September 25,
2000 1999
------------- -------------
Fleet line of credit (Note 7)......... $ 8,500,000 $ 3,056,000
Fleet term debt (Note 7).............. - 2,500,000
Facility and equipment term loans..... 8,000 101,000
Central Vermont Economic Development
Coporation Debenture............... 307,000 382,000
Vermont Economic Development Authority
Promissory Note.................... - 42,000
Service vehicle installment loans..... 103,000 10,000
------------- -------------
8,918,000 6,091,000
Less current portion.................. 135,000 1,127,000
------------- -------------
$ 8,783,000 $ 4,964,000
============= =============
<PAGE>
FACILITY AND EQUIPMENT TERM LOANS
This loan is expiring on October 15, 2000 and bears an interest rate equal
to the lesser of 25 basis points above Fleet's variable base rate or 275
basis points above the LIBOR rate for maturities of up to one year. At
September 30, 2000, this loan had an outstanding balance of $8,000 and
bore interest at 9.37%.
CENTRAL VERMONT ECONOMIC DEVELOPMENT CORPORATION DEBENTURE
The debenture from the Central Vermont Economic Development Corporation
(CVEDC) is guaranteed by the U.S. Small Business Administration. The
debenture matures on January 1, 2004 and requires equal monthly principal
and interest payments of approximately $8,500 and carries a fixed interest
rate of 5.812%. The debenture is secured by a secondary security interest
in the related fixed assets and is guaranteed by the majority stockholder
of the Company. Additional guarantees will be required of any stockholder
obtaining more than 20% ownership of the Company.
SERVICE VEHICLE INSTALLMENT LOANS
The service vehicle installment loans represent several loans to financing
institutions for the purchase of service vehicles. At September 30, 2000,
the notes bear interest at a rate of varying from 2.9% to 3.9% and require
monthly installments of principal and interest totaling approximately
$3,700. Maturities vary from January to March 2003.
MATURITIES
Maturities of long-term debt for years subsequent to September 30, 2000
are as follows:
Fiscal Year
-----------
2001...................... $ 135,000
2002...................... 133,000
2003...................... 8,616,000
2004...................... 34,000
2005...................... -
-------------
$ 8,918,000
=============
9. Dutch Auction Self-Tender Offer and Open-Market Stock Repurchases
On April 17, 2000, the Company commenced a Dutch Auction self-tender offer
for up to 300,000 shares of the Company's Common Stock at a price range of
$14.50 to $16 per share. Effective May 22, 2000, the Company accepted for
purchase all 278,658 shares tendered at a purchase price of $16 per share.
The costs associated with this transaction totaled $64,000.
In fiscal 2000, the Company also repurchased 189,486 shares of its common
stock in open-market transactions at a cost of $1,852,000, or an average of
$9.77 per share. In fiscal 1999, the Company repurchased 93,259 shares for
$617,000, or an average of $6.62 per share.
The stock repurchases were made because the Company deemed its stock
undervalued by the market at the time.
10. Hedging
The Company uses futures and options contracts to hedge the effects of
fluctuations in the price of green coffee beans. At September 30, 2000,
the Company held call options covering an aggregate of 562,500 pounds of
green coffee beans which are exercisable in fiscal 2001 at prices ranging
from $1.20 to $1.50 per pound. In addition, the Company held a short
position on put options covering 187,500 pounds of green coffee beans
which are exercisable in fiscal 2001 at a price of $1.00 per pound. At
September 25, 1999, the Company held call options covering an aggregate of
863,000 pounds of green coffee beans which were exercisable in fiscal 2000
at prices ranging from $1.80 to $2.00 per pound. The fair market value of
these options was approximately $(33,000) at September 30, 2000. The fair
market value of the options outstanding at September 25, 1999 was not
material. Additionally, the Company had futures contracts outstanding of
approximately $743,000 at September 30, 2000. The fair market value of
these futures at September 30, 2000 was $706,000. The fair market value
for the futures and options was obtained from a major financial
institution based on the market value of those financial instruments at
September 30, 2000 and September 25, 1999. At September 30, 2000 and
September 25, 1999, $70,000 and $48,000, respectively, of deferred hedging
losses were included in the value of the inventory in the accompanying
consolidated balance sheet.
11. Employee Compensation Plans
STOCK OPTION PLANS
Prior to the establishment on September 21, 1993 of the Company's first
employee stock option plan (the "1993 Plan"), the Company granted to
certain key management employees individual non-qualified stock option
agreements to purchase shares of the Company's common stock. These options
had a maximum life of 10 years and vested immediately. On December 21,
1999, all options outstanding under these individual agreements were
amended to extend the expiration date of these options from April 15, 2003
to April 15, 2008. At the time of this amendment, the exercise price of
the options exceeded the fair market value of the stock, and as such, no
compensation expense was recognized. At September 30, 2000, 140,444
options were outstanding under these individual agreements.
The 1993 Plan provides for the granting of both incentive and
non-qualified stock options, with an aggregate number of 75,000 shares of
common stock to be made available under the 1993 Plan. Effective July 26,
1996, the total number of shares of authorized common stock to be made
available under the 1993 Plan was increased to 275,000. Grants under the
1993 Plan expire 10 years after the grant date, or earlier if employment
terminates. At September 30, 2000 and September 25, 1999, options for
41,768 shares and 43,611 shares of common stock were available for grant
under the plan, respectively.
On May 20, 1999, the Company registered on Form S-8 the 1999 Stock Option
Plan (the "1999 Plan"). Under this plan, 250,000 shares of common stock
are available for grants of both incentive and non-qualified stock
options. Grants under the 1999 Plan expire 10 years after the grant date,
or earlier if employment terminates. At September 30, 2000 and September
25, 1999, options for 7,621 shares and 57,321 shares of common stock were
available for grant under the plan, respectively.
Under both the 1993 Plan and the 1999 Plan, the option price for each
incentive stock option shall not be less than the fair market value per
share of common stock on the date of grant, with certain provisions which
increase the option price to 110% of the fair market value of the common
stock if the grantee owns in excess of 10% of the Company's common stock
at the date of grant. The option price for each non-qualified stock option
shall not be less than 85% of the fair market value of the common stock at
the date of grant. Options under the 1993 Plan and the 1999 Plan become
exercisable over periods determined by the Board of Directors.
Option activity is summarized as follows:
<TABLE>
Weighted-
average
Number of Exercise
Shares Option Price Price
--------- ------------------ ---------
<S> <C> <C> <C>
Outstanding at September 27, 1997... 258,240 $ 6.00 - 9.625 $ 7.73
Granted.......................... 100,834 6.375 - 10.00 9.00
Exercised........................ - - -
Canceled......................... (9,261) 6.25 - 8.50 7.60
--------- ------------------ ---------
Outstanding at September 26, 1998... 349,813 6.00 - 10.00 8.10
Granted.......................... 290,212 4.375 - 7.625 5.95
Exercised........................ (32,300) 6.00 - 7.00 6.30
Canceled......................... (74,513) 4.375 - 10.00 7.14
--------- ------------------ ---------
Outstanding at September 25, 1999... 533,212 4.375 - 10.00 7.18
Granted.......................... 61,300 7.00 - 17.938 9.88
Exercised........................ (23,292) 4.375 - 8.50 7.25
Canceled......................... (9,757) 4.375 - 12.75 6.28
--------- ------------------ ---------
Outstanding at September 30, 2000... 561,463 $ 4.375 - 17.938 $ 7.48
========
Exercisable at September 30, 2000... 299,310 $ 4.375 - 10.00 $ 7.76
=========
</TABLE>
Options outstanding Options exercisable
--------------------- ------------------------
Weighted
average
Number remaining Weighted Number Weighted
outstanding at contractual average exercisable at average
Range of September 30, life exercise September 30, exercise
exercise price 2000 (in years) price 2000 price
- -------------- -------------- ----------- -------- -------------- --------
$ 4.38 - 6.00 163,660 8 $ 5.26 47,510 $ 5.41
6.25 - 7.00 64,005 8 6.82 21,703 6.65
7.44 - 7.63 80,000 9 7.61 26,250 7.62
8.02 140,444 8 8.02 140,444 8.02
8.13 - 8.50 28,754 5 8.44 25,570 8.48
9.13 - 10.00 65,600 7 9.84 37,833 9.96
10.25 - 13.31 9,000 10 12.51 - -
15.69 - 17.94 10,000 10 16.81 - -
-------------- --------------
561,463 299,310
============== ==============
EMPLOYEE STOCK PURCHASE PLAN
On October 5, 1998, the Company registered on Form S-8 the 1998 Employee
Stock Purchase Plan. Under this plan, eligible employees may purchase
shares of the Company's common stock, subject to certain limitations, at
not less than 85 percent of the lower of the beginning or ending
withholding period fair market value as defined in the plan. A total of
150,000 shares of common stock have been reserved for issuance under the
plan. There are two six-month withholding periods in each fiscal year.
The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees". Accordingly,
except for two grants to outside consultants in fiscal 1999 and fiscal
2000, no compensation expense has been recognized for its stock option
awards and its stock purchase plan because the exercise price of the
Company's stock options equals or exceeds the market price of the
underlying stock on the date of the grant. The Company has adopted the
disclosure-only provision of Statement of Accounting Standards No. 123
"Accounting for Stock Based Compensation" ("SFAS 123"). Had compensation
cost for the Company's stock option awards and the stock purchase plan
been determined based on the fair value at the grant dates for the awards
under those plans, consistent with the provisions of SFAS No. 123, the
Company's net income (loss) and net income (loss) per share for the years
ended September 30, 2000, September 25, 1999, and September 26, 1998 would
have decreased to the pro forma amounts indicated below:
Fiscal 2000 Fiscal 1999 Fiscal 1998
Net income (loss):
As reported $ 4,213 $ 2,433 $ (1,216)
Pro forma 3,812 2,160 (1,336)
Diluted net income
(loss) per share:
As reported 1.21 0.69 (0.34)
Pro forma 1.09 0.61 (0.38)
The fair value of each stock option under the 1993 and 1999 Plans are
estimated on the date of the grant using the Black-Scholes option-pricing
model with the following assumptions: an expected life of 6 years, 7
years, and 7 years in fiscal 2000, 1999, and 1998, respectively; an
average volatility of 59%, 70%, and 64% for fiscal 2000, 1999, and 1998
respectively; no dividend yield; and a risk-free interest rate of 6.32%,
6.35%, and 4.56% for fiscal 2000, 1999, and 1998 grants, respectively. The
weighted-average fair values of options granted during 2000, 1999, and
1998 are $6.05, $4.57, and $5.97, respectively.
The fair value of the employees' purchase rights under the Purchase Plan
was estimated using the Black-Scholes model with the following assumptions
for fiscal 2000, 1999, and 1998: an expected life of six months, six
months and one year respectively; expected volatility of 59%, 70%, and 64%
respectively; and a risk-free interest rate of 6.04%, 5.33%; and 4.59%,
respectively. The weighted average fair value of those purchase rights
granted in fiscal 2000, fiscal 1999, and fiscal 1998 was $3.71, $2.31, and
$1.98 respectively.
12. Defined Contribution Plan
The Company has a defined contribution plan which meets the requirements of
section 401(k) of the Internal Revenue Code. All employees of the Company
with one year or more of service who are at least twenty-one years of age
are eligible to participate in the plan. The plan allows employees to defer
a portion of their salary on a pre-tax basis and the Company contributes
50% of amounts contributed by employees up to 6% of their salary. Company
contributions to the plan amounted to $276,000, $204,000, and $160,000 for
the years ended September 30, 2000, September 25, 1999, and September 26,
1998, respectively.
13. Employee Stock Ownership Plan
On September 14, 2000, the Board of Directors of the Company adopted a
resolution establishing the Green Mountain Coffee Inc. Employee Stock
Ownership Plan ("ESOP"). The ESOP is qualified under sections 401(a) and
4975(e)(7) of the Internal Revenue Code. All employees of the Company with
one year or more of service who are at least twenty-one years of age are
eligible to participate in the Plan, in accordance with the terms of the
Plan. The Company may, at its discretion, contribute shares of Company
stock or cash that is used to purchase shares of Company stock. Company
contributions are credited to eligible participants' accounts pro-rata
based on their compensation. Plan participants become vested in their Plan
benefits ratably over five years from the date of hire of the employee. The
Company made a contribution of $200,000 to the ESOP for the fiscal year
ended on September 30, 2000. No shares had been purchased by the Plan at
September 30, 2000.
14. Loans to Officers
During fiscal 2000 and fiscal 1999, certain executive officers delivered
promissory notes to the Company in the principal amount of $430,000 and
$650,000, respectively. Interest accrued on the unpaid principal at the
prime rate as reported in the Wall Street Journal and was payable upon the
maturity of the note. During fiscal 2000, the prime rate ranged from 8.25%
to 9.50%. During fiscal 1999, the prime rate ranged from 7.75% to 8.50%.
The balance on loans to officers at September 25, 1999 was $250,000. All
principal and accrued interest amounts were paid to the Company and there
was no balance outstanding on September 30, 2000.
15. Commitments, Lease Contingencies and Contingent Liabilities
LEASES
The Company leases office and retail space, production, distribution and
service facilities and certain equipment under various non-cancelable
operating leases, with terms ranging from one to ten years. Property
leases normally require payment of a minimum annual rental plus a pro-rata
share of certain landlord operating expenses. Total rent expense under all
operating leases was $1,616,000, $1,628,000, and $1,599,000 in fiscal
2000, 1999, and 1998, respectively (net of sublease income of $137,000,
$196,000, and $67,000 in fiscal 2000, 1999, and 1998, respectively).
Minimum future lease payments (net of committed sublease agreements of
$135,000 for fiscal 2001, $80,000 for fiscal 2002, $53,000 for fiscal
2003, $54,000 for fiscal 2004, $55,000 for fiscal 2005 and $119,000
thereafter) under non-cancelable operating leases for years subsequent to
September 30, 2000 are as follows:
Fiscal Year Operating Leases
----------- ----------------
2001............................ $ 1,425,000
2002............................ 932,000
2003............................ 696,000
2004............................ 571,000
2005............................ 514,000
Thereafter...................... 778,000
----------------
Total minimum lease payments........ $ 4,916,000
================
In addition to the minimum operating future lease payments in the table
above, on November 3, 2000, the Company entered into a ten-year lease
commitment for 10,000 square feet of warehouse space with total minimum
annual lease payments of $70,000.
16. Earnings per share
The following table illustrates the reconciliation of the numerator and
denominator of basic and diluted income per share from continuing
operations computations as required by SFAS No. 128 (dollars in thousands,
except share and per share data):
<TABLE>
Year ended
---------------------------------------------
September 30, September 25, September 26,
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Numerator - basic and diluted
earnings per share:
Net income from continuing
operations.............................. $ 4,153 $ 2,247 $ 340
============= ============= =============
Denominator:
Basic earnings per share - weighted
average share outstanding............... 3,293,422 3,503,412 3,530,657
Effect of dilutive securities - stock
options................................. 196,200 43,743 8,574
------------- ------------- -------------
Diluted earnings per share - weighted
average shares outstanding.............. 3,489,622 3,547,155 3,539,231
============= ============= =============
Basic earnings per share................ $ 1.26 $ 0.64 $ 0.10
Diluted earnings per share.............. $ 1.19 $ 0.64 $ 0.10
</TABLE>
For the fiscal years ended September 30, 2000, September 25, 1999, and
September 26, 1998 anti-dilutive options of 5,000, 345,967, and 341,239
respectively, have been excluded from the calculation of EPS because the
options' exercise price was greater than the market price of the common
shares.
17. Segment Reporting
Business conducted by the Company can be segmented into two distinct areas
determined by the distribution channel. The direct mail segment is
comprised of all consumer-direct sales and sales to small businesses which
are solicited via catalogs and the Company's online store -
www.GreenMountainCoffee.com. The wholesale segment is comprised of all
sales to customers who resell Green Mountain coffee either as coffee beans
or brewed coffee by the cup, such as supermarkets, office coffee
distributors, convenience stores, restaurants, and others. Wholesale sales
are generated through the Company's direct sales force and a limited number
of distributors.
Both segments of the Company sell similar products, although the entire
Company product range is not fully available to both segments, and direct
mail customers do not have access to the same range of equipment service,
delivery and merchandising support as wholesale customers.
Selling and operating costs directly attributable to the direct mail
segment are charged accordingly while all remaining selling, operating,
general and administrative expenses (including depreciation and
amortization) are charged to the wholesale segment. The Company's
management does not review assets by segment.
The table below discloses segment net sales and pre-tax income from
continuing operations for fiscal 2000, 1999, and 1998 (in thousands):
2000 1999 1998
------------ ------------ ------------
Net sales from continuing operations
Reportable segments:
Wholesale.............. $ 79,855 $ 61,418 $ 52,710
Direct mail............ 4,146 3,463 3,115
------------ ------------ ------------
Total net sales........ $ 84,001 $ 64,881 $ 55,825
============ ============ ============
Pre-tax income from continuing operations
Reportable segments:
Wholesale.............. $ 6,316 $ 4,084 $ 1,255
Direct mail............ 451 265 38
------------ ------------ ------------
Operating income....... 6,767 4,349 1,293
Reconciling items:
Other income........... 48 10 66
Interest expense....... (583) (736) (821)
------------ ------------ ------------
Pre-tax income......... $ 6,232 $ 3,623 $ 538
============ ============ ============
International sales make up less than one percent of wholesale sales in
all periods presented.
18. ChefExpress.net, Inc. Promissory Note
On March 21, 2000, ChefExpress.net, Inc. delivered a promissory note to
the Company in the principal amount of $100,000 bearing an annual
interest rate of 8%. In the fourth quarter of fiscal 2000, The Company
converted this loan into an equity investment. In addition to a
minority ownership interest, the investment in the ChefExpress.net
venture represents an opportunity for the Company to be prominently
featured in an e-procurement website that targets to chefs in
restaurants and the high-end sector of the food service channel. A
board member of Green Mountain Coffee is the Chief Executive Officer
and President of ChefExpress.net.
19. Subsequent Event - Stock Split (Unaudited)
On December 4, 2000, the Company announced that its Board of Directors
had approved a two-for-one Common Stock split effected in the form of a
100% Common Stock dividend. The record date of the dividend is December
28, 2000, and the payment date is January 11, 2001. The par value of
the Common Stock remains unchanged at $0.10 per share. The tables below
display the effect of the two-for-one stock split on a proforma basis
on the Company's stockholders' equity as of September 30, 2000 as well
as on earnings per share (dollars in thousands):
September 30, Proforma
2000 (unaudited)
------------- -----------
Common Stock, $0.10 par value: authorized -
10,000,000 shares, issued 3,671,005 at
September 30, 2000, proforma 7,342,010..... $ 367 $ 734
Additional paid-in capital................. 13,901 13,534
Retained earnings.......................... 2,778 2,778
Treasury stock............................. (7,029) (7,029)
------------- -----------
Total stockholders' equity................. $ 10,017 $ 10,017
============= ===========
Fiscal 2000 Fiscal 1999 Fiscal 1998
----------- ----------- -----------
Basic net income (loss) per share
As reported.......................... $ 1.28 $ 0.69 $ (0.34)
Proforma (unaudited)................. $ 0.64 $ 0.35 $ (0.17)
Diluted net income (loss) per share
As reported.......................... $ 1.21 $ 0.69 $ (0.34)
Proforma (unaudited)................. $ 0.60 $ 0.34 $ (0.17)
<PAGE>
20. Unaudited Quarterly Financial Data
The following table presents the quarterly information for fiscal 2000
and fiscal 1999 (dollars in thousands, except per share data). All
quarters presented are made of 12 weeks except for the first fiscal
quarters of fiscal 2000 and fiscal 1999 which comprise 16 weeks each,
and the fourth fiscal quarter of fiscal 2000 which includes 13 weeks.
<TABLE>
Fiscal quarters ended
------------------------------------------------
January 15, April 8, July 1, September 30,
Fiscal 2000 2000 2000 2000 2000
----------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C>
Net sales........................... $ 24,742 $ 18,259 $ 19,668 $ 21,332
Gross profit........................ $ 10,046 $ 7,269 $ 7,759 $ 8,462
Income from continuing operations... $ 1,300 $ 615 $ 802 $ 1,436
Net income.......................... $ 1,300 $ 615 $ 802 $ 1,496
Earnings per share
Basic.......................... $ 0.38 $ 0.18 $ 0.25 $ 0.49
Diluted........................ $ 0.37 $ 0.17 $ 0.23 $ 0.45
January 16, April 10, July 3, September 25,
Fiscal 1999 1999 1999 1999 1999
----------- ----------- --------- --------- -------------
Net sales........................... $ 20,068 $ 14,452 $ 14,973 $ 15,388
Gross profit........................ $ 7,528 $ 5,560 $ 6,152 $ 6,380
Income from continuing operations... $ 541 $ 358 $ 515 $ 833
Net income.......................... $ 541 $ 544 $ 515 $ 833
Earnings per share
Basic.......................... $ 0.15 $ 0.16 $ 0.15 $ 0.24
Diluted........................ $ 0.15 $ 0.15 $ 0.14 $ 0.23
</TABLE>
<PAGE>
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors of Green Mountain Coffee, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated November 10, 2000 appearing in this Form 10-K also included an audit of
the financial statement schedules listed in Item 14(a)(2) of this Form 10-K.
In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 10, 2000
<PAGE>
Schedule II - Valuation and Qualifying Accounts
for the fiscal years ended
September 30, 2000, September 25, 1999, and September 26, 1998
<TABLE>
Additions
----------------------------
Balance at Charged to
Beginning of Costs and Charged to Balance at
Description Period Expenses Other Accounts Deductions End of Period
- ----------- ------------ ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Fiscal 2000............................ $ 190,000 $ 361,000 - $ 231,000 $ 320,000
Fiscal 1999............................ $ 378,000 $ 241,000 - $ 429,000 $ 190,000
Fiscal 1998............................ $ 116,000 $ 577,000 - $ 315,000 $ 378,000
Obsolete inventory valuation allowance:
Fiscal 2000............................ $ 136,000 $ 77,000 - $ 86,000 $ 127,000
Fiscal 1999............................ $ 75,000 $ 151,000 - $ 90,000 $ 136,000
Fiscal 1998............................ $ 10,000 $ 101,000 - $ 36,000 $ 75,000
Deferred tax asset valuation allowance:
Fiscal 2000............................ $ 2,355,000 - - $ 534,000 $ 1,821,000
Fiscal 1999............................ $ 2,355,000 - - - $ 2,355,000
Fiscal 1998............................ $ 2,391,000 - - $ 36,000 $ 2,355,000
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.105
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>2000 STOCK OPTION PLAN
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
2000 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Green Mountain Coffee, Inc. 2000 Stock Option Plan
(the "Plan") is to advance the interests of Green Mountain Coffee, Inc., a
Delaware corporation (the "Company"), by providing an opportunity for ownership
of the stock of the Company by employees, agents and directors of, and
consultants to, the Company and its subsidiaries, as defined below. By providing
an opportunity for such stock ownership, the Company seeks to attract and retain
such qualified personnel, and otherwise to provide additional incentive for
optionees to promote the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued
or Treasury shares of the common stock, $0.10 par value per share, of the
Company (the "Common Stock") for which options may be granted under the Plan
(the "Options") shall be 400,000, subject to adjustment as provided in Section
13 hereof.
(b) If an Option granted or assumed hereunder shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for subsequent Option grants
under the Plan.
(c) Stock issuable upon exercise of an Option may be subject
to such restrictions on transfer, repurchase rights or other restrictions as
shall be determined by the Board of Directors of the Company (the "Board").
3. Administration of the Plan.
The Plan shall be administered by the Board. No member of the Board
shall act upon any matter exclusively affecting any Option granted or to be
granted to himself or herself under the Plan. A majority of the members of the
Board shall constitute a quorum, and any action may be taken by a majority of
those present and voting at any meeting. The decision of the Board as to all
questions of interpretation and application of the Plan shall be final, binding
and conclusive on all persons. The Board, in its sole discretion, may grant
Options to purchase shares of the Common Stock, and the Board shall issue shares
upon exercise of such Options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to construe the
respective Option agreements and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective Option agreements, which may but need not be identical, and to
make all other determinations in the judgment of the Board necessary or
desirable for the administration of the Plan. The Board may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Option agreement in the manner and to the extent it shall deem expedient to
implement the Plan and shall be the sole and final judge of such expediency. No
director shall be liable for any action or determination made in good faith. The
Board, in its discretion, may delegate its power, duties and responsibilities to
a committee, consisting of two or more members of the Board, all of whom are
"disinterested persons" (as hereinafter defined). If a committee is so
appointed, all references to the Board herein shall mean and relate to such
committee, unless the context otherwise requires.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Board. Options designated as incentive stock options that fail
to continue to meet the requirements of Section 422 of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted to any
employees of the Company or any subsidiary corporation (herein called
"subsidiary" or "subsidiaries"), as defined in Section 424(f) of the Code and
the Treasury regulations promulgated thereunder (the "Regulations"). Directors
who are not otherwise employees of the Company or a subsidiary shall not be
eligible to be granted incentive stock options pursuant to the Plan. Options
designated as non-qualified options may be granted to (i) officers and key
employees of the Company or of any of its subsidiaries, or (ii) agents,
directors of and consultants to the Company, whether or not otherwise employees
of the Company.
In determining the eligibility of an individual to be granted an
Option, as well as in determining the number of shares to be optioned to any
individual, the Board shall take into account the position and responsibilities
of the individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Board may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options) granted under
this Plan shall be subject to the following restrictions:
<PAGE>
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which
incentive stock options are granted (determined as of the date the
incentive stock options are granted), exercisable for the first time by
an individual during any calendar year shall not exceed $100,000. If an
incentive stock option is granted pursuant to which the aggregate fair
market value of shares with respect to which it first becomes
exercisable in any calendar year by an individual exceeds such $100,000
limitation, the portion of such option which is in excess of the
$100,000 limitation shall be treated as a non-qualified option pursuant
to Section 422(d)(1) of the Code. In the event that an individual is
eligible to participate in any other stock option plan of the Company
or any subsidiary of the Company which is also intended to comply with
the provisions of Section 422 of the Code, such $100,000 limitation
shall apply to the aggregate number of shares for which incentive stock
options may be granted under this Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an incentive
stock option is granted pursuant to the provisions of this Plan is on
the date of grant the owner of stock (as determined under Section
424(d) of the Code) possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary
of the Company, then the following special provisions shall be
applicable to the incentive stock options granted to such individual:
(i) The Option price per share subject to
such incentive stock options shall be not less than
110% of the fair market value of the stock determined
at the time such Option was granted. In determining
the fair market value under this clause (i), the
provisions of Section 8 hereof shall apply.
(ii) The incentive stock option by its terms
shall not be exercisable after the expiration of five
(5) years from the date such option is granted.
7. Option Agreement.
Each Option shall be evidenced by an Option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such Option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board; provided that Options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. No Option shall be granted within the meaning of the Plan and no
purported grant of any Option shall be effective until the Agreement shall have
been duly executed on behalf of the Company and the optionee. More than one
Option may be granted to an individual.
<PAGE>
8. Option Price.
(a) The Option price or prices of shares of the Common Stock for
Options designated as non-qualified stock options shall be as determined by the
Board as of the date of grant of such Option.
(b) Subject to the conditions set forth in Section 6(b) hereof, the
Option price or prices of shares of the Company's Common Stock for incentive
stock options shall be at least the fair market value of such Common Stock at
the time the Option is granted as determined by the Board in accordance with the
Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities exchange,
the fair market value shall be the last sales price on the largest such exchange
on the date of the grant of the Option or, if none, shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of grant.
If the shares are not then listed on any such exchange, the fair market value of
such shares shall be the last sales price as reported in the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for the
date of the grant of the Option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on the
nearest date before and the nearest date after the date of grant. If the shares
are not then either listed on any such exchange or quoted in NASDAQ, the fair
market value shall be the mean between the average of the "Bid" and "Ask" price
quotations on the National Daily Quotation Service for the date of the grant of
the Option, or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Board.
9. Manner of Payment: Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such Options, (ii) shares of
Common Stock owned by the optionee having a fair market value equal in amount to
the exercise price of the Options being exercised, or (iii) any combination of
(i) and (ii); provided, however, that payment of the exercise price by delivery
of shares of Common Stock owned by such optionee may be made only upon the
condition that such payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board, unless such condition
is waived by the Board. The fair market value of any shares of Common Stock
which may be delivered upon exercise of an Option shall be determined by the
Board in accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an Option has
accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option.
10. Exercise of Options.
Each Option granted under the Plan shall, subject to Section 11 (b) and
Section 13 hereof, be exercisable at such time or times and during such period
as shall be set forth in the Agreement; provided, however, that no Option
granted under the Plan shall have a term in excess of ten (10) years from the
date of grant. To the extent that an Option to purchase shares is not exercised
by an optionee when it becomes initially exercisable, it shall not expire but
shall be carried forward and shall be exercisable, on a cumulative basis, until
the expiration of the exercise period. No partial exercise may be made for less
than twenty five(25) full shares of Common Stock.
11. Term of Options: Exercisability.
(a) Term.
-----
(i) Each Option shall expire on a date
determined by the Board which is not more than ten
(10) years from the date of the granting thereof,
except (a) as otherwise provided pursuant to the
provisions of Section 6(b) hereof, and (b) for
earlier termination as herein provided.
(ii) Except as otherwise provided in this
Section 11, an Option granted to any optionee whose
employment, for the Company or any of its
subsidiaries, is terminated, shall terminate on the
earlier of ninety days after the date such optionee's
employment, for the Company or any such subsidiary,
is terminated, or (ii) the date on which the Option
expires by its terms.
(iii) If the employment of an optionee is
terminated by the Company or any of its subsidiaries
for cause or because the optionee is in breach of any
employment agreement, such Option will terminate on
the date the optionee's employment is terminated by
the Company or any such subsidiary.
(iv) If the employment of an optionee is
terminated by the Company or any of its subsidiaries
because the optionee has become permanently disabled
(within the meaning of Section 22(e)(3) of the Code),
such Option shall terminate on the earlier of (i) one
year after the date such optionee's employment, for
the Company or any such subsidiary, is terminated, or
(ii) the date on which the Option expires by its
terms.
(v) In the event of the death of any
optionee, any Option granted to such optionee shall
terminate one year after the date of death, or on the
date on which the Option expires by its terms,
whichever occurs first.
(b) Exercisability.
--------------
(i) Except as provided below, an Option
granted to an optionee whose employment, for the
Company or any of its subsidiaries, is terminated,
shall be exercisable only to the extent that the
right to purchase shares under such Option has
accrued and is in effect on the date such optionee's
employment, for the Company or any such subsidiary,
is terminated.
(ii) An Option granted to an optionee whose
employment is terminated by the Company or any of its
subsidiaries because he or she has become permanently
disabled, as defined above, shall be immediately
exercisable as to the full number of shares covered
by such Option, whether or not under the provisions
of Section 10 hereof such Option was otherwise
exercisable as of the date of disability.
(iii) In the event of the death of an
optionee, the Option granted to such optionee may be
exercised as to the full number of shares covered
thereby, whether or not under the provisions of
Section 10 hereof the optionee was entitled to do so
at the date of his or her death, by the executor,
administrator or personal representative of such
optionee, or by any person or persons who acquired
the right to exercise such Option by bequest or
inheritance or by reason of the death of such
optionee.
12. Options Not Transferable.
The right of any optionee to exercise any Option granted to him or her
shall not be assignable or transferable by such optionee other than by will or
the laws of descent and distribution, and any such Option shall be exercisable
during the lifetime of such optionee only by him or her. Any Option granted
under the Plan shall be null and void and without effect upon the bankruptcy of
the optionee to whom the Option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation, any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, trustee process or similar process, whether legal
or equitable, upon such Option.
13. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which Options may be granted under the Plan and as to which outstanding Options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding Options shall be made
without change in the total price applicable to the unexercised portion of such
Options and with a corresponding adjustment in the Option price per share.
In addition, in the case of any (i) sale or conveyance to another
entity of all or substantially all of the property and assets of the Company or
(ii) Change in Control (as hereinafter defined) of the Company, the purchaser(s)
of the Company's assets or stock, in his, her or its sole discretion, may
deliver to the optionee the same kind of consideration that is delivered to the
shareholders of the Company as a result of such sale, conveyance or Change in
Control, or the Board, in its sole discretion, may cancel all outstanding
Options in exchange for consideration in cash or in kind, which consideration in
both cases shall be equal in value to the value of those shares of stock or
other securities the optionee would have received had the Option been exercised
(whether or not then exercisable) and had no disposition of the shares acquired
upon such exercise been made prior to such sale, conveyance or Change in
Control, less the Option price therefor. Upon receipt of such consideration, all
Options (whether or not then exercisable) shall immediately terminate and be of
no further force or effect. The value of the stock or other securities the
optionee would have received if the Option had been exercised shall be
determined in good faith by the Board, and in the case of shares of Common
Stock, in accordance with the provisions of Section 8 hereof.
Any Options that are not yet exercisable, notwithstanding any
limitations in this Plan or in the Agreement shall become immediately
exercisable upon such a sale, conveyance or Change in Control. Upon such
acceleration, any Options or portion thereof originally designated as incentive
stock options that no longer qualify as incentive stock options under Section
422 of the Code as a result of such acceleration shall be redesignated as
non-qualified stock options.
A "Change in Control" shall be deemed to have occurred if any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned less than fifty percent (50%) of the
then outstanding Common Stock, shall acquire such additional shares of Common
Stock in one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own fifty percent (50%) or more of the Common Stock outstanding.
Upon dissolution or liquidation of the Company, all Options granted
under this Plan shall terminate, but each optionee (if at such time in the
employ of or otherwise associated with the Company or any of its subsidiaries as
a director, agent or consultant) shall have the right, immediately prior to such
dissolution or liquidation, to exercise his or her Option to the extent then
exercisable.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old Option, or substitution of a new option for the old
Option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option shall not reduce the number of
shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any Option, but in the event any adjustment hereunder in the number
of shares covered by the Option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
14. No Special Employment Rights.
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Option holder any right with respect to the continuation
of his or her employment by the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Option holder from
the rate in existence at the time of the grant of an Option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board at the
time of such occurrence.
15. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified Option granted under the Plan shall be subject to the Option
holder's satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements. The Company and optionee may agree to
withhold shares of Common Stock purchased upon exercise of an Option to satisfy
the above-mentioned withholding requirements.
<PAGE>
16. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9, the Company may delay
the issuance of shares covered by the exercise of an Option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such
Option has been exercised are at the time of the
issue of such shares effectively registered or
qualified under applicable Federal and state
securities acts now in force or as hereafter amended;
or
(ii) Counsel for the Company shall have
given an opinion, which opinion shall not be
unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification
under applicable Federal and state securities acts
now in force or as hereafter amended.
(b) It is intended that all exercises of Options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any Option may be
exercised, except as otherwise agreed to by the Company in writing in its sole
discretion.
17. Purchase for Investment: Rights of Holder on Subsequent
Registration.
Unless and until the shares to be issued upon exercise of an Option
granted under the Plan have been effectively registered under the 1933 Act, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any Option unless the person who exercises such
Option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the Option for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such shares,
and that he or she will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the 1933
Act, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each optionee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
18. Loans.
At the discretion of the Board, the Company may loan to the optionee
some or all of the purchase price of the shares acquired upon exercise of an
Option.
19. Modification of Outstanding Options.
Subject to any applicable limitations contained herein, the Board may
authorize the amendment of any outstanding Option with the consent of the
optionee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
20. Approval of Stockholders.
The Plan shall become effective upon adoption by the Board; provided,
however, that the Plan shall be submitted for approval by the stockholders of
the Company no later than twelve (12) months after the date of adoption of the
Plan by the Board. Should the stockholders of the Company fail to approve the
Plan within such twelve-month period, all Options granted thereunder shall be
and become null and void. Notwithstanding anything else to the contrary in this
Plan, no option may be exercised until the stockholders have approved this Plan.
21. Termination and Amendment of Plan.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of the Company. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, (i)
the Board may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 20, increase the maximum number of
shares for which Options may be granted or change the designation of the class
of persons eligible to receive Options under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority of the
stockholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act, applicable state law, or applicable
NASD or exchange listing requirements. Termination or any modification or
amendment of the Plan shall not, without the consent of an optionee, affect his
or her rights under an Option theretofore granted to him or her.
22. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the Options except to the extent that the
Option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
23. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the President at the
Company's principal place of business; and, if to an optionee, to his or her
address as it appears on the records of the Company.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.106
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
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 D. Britt
--------------------- ---------------
Robert P. Stiller Optionee
President
10,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.107
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
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 Agnes Cook
---------------------- ----------
Robert P. Stiller Optionee
President
5,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.108
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
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 Jonathan C. Wettstein
---------------------- ---------------------
Robert P. Stiller Optionee
President
10,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.109
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
<PAGE>
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 Paul Comey
--------------------- ----------
Robert P. Stiller Optionee
President
5,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.110
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
<PAGE>
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 James Prevo
--------------------- -----------
Robert P. Stiller Optionee
President
10,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.111
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
<PAGE>
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 Stephen Sabol
--------------------- -------------
Robert P. Stiller Optionee
President
10,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.112
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>STOCK OPTION AGREEMENT
<TEXT>
GREEN MOUNTAIN COFFEE, INC.
STOCK OPTION AGREEMENT UNDER 2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
October 2, 2000
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").
The Company desires to grant the Optionee an incentive stock option
under the Company's 2000 Stock Option Plan, as amended (the "Plan") to acquire
shares of the Company's Common Stock, par value $.10 per share (the "Shares").
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 to the Optionee incentive stock options
(collectively, the "Option") to purchase all or any part 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 set forth at the end of this
Agreement.
3. Time of Exercise of Option.
This Option shall be first exercisable as to 25% of the Shares on each
of the first four anniversary dates of this Agreement.
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
twenty-five (25) 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 1
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.
<PAGE>
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 Kevin McBride
--------------------- -------------
Robert P. Stiller Optionee
President
5,000
----------------
Number of Shares
$18.875
------------------------
Purchase Price Per Share
October 2, 2010
---------------
Expiration Date
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.113
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>STOCK OWNERSHIP PLAN
<TEXT>
Green Mountain Coffee, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
PAGE
----
SECTION 1.................................................................. 1
Background of Plan................................................ 1
1.1 History and Purpose............................. 1
1.2 Effective Date; Plan Year....................... 1
1.3 Trustee; Trust Agreement........................ 1
1.4 Plan Administration............................. 2
1.5 Employers....................................... 2
1.6 Predecessor Plans............................... 2
1.7 Plan Supplements................................ 3
SECTION 2.................................................................. 4
Eligibility and Participation..................................... 4
2.1 Eligibility to Participate...................... 4
2.2 Participation Not Guarantee of Employment....... 5
2.3 Leased Employees................................ 5
2.4 Military Service................................ 5
2.5 Omission of Eligible Employee................... 6
2.6 Inclusion of Ineligible Employee................ 6
SECTION 3.................................................................. 7
Service and Compensation.......................................... 7
3.1 Years of Service................................ 7
3.2 Hour of Service................................. 8
3.3 One Year Break in Service....................... 9
3.4 Compensation.................................... 9
SECTION 4.................................................................. 1
Employer Contributions............................................ 1
4.1 Employer Contributions.......................... 1
4.2 Due Date for Employer Contributions............. 1
4.3 Payment of Acquisition Loans; Employer
Loan Contributions.............................. 11
4.4 Individual Employer's Share of Employer
Contributions; Limitations on Employers'
Contributions................................... 12
SECTION 5.................................................................. 13
Company Stock; Acquisition Loans.................................. 13
5.1 Company Stock................................... 13
5.2 Acquisition Loans............................... 13
SECTION 6.................................................................. 14
Investment of Employer Contributions.............................. 14
6.1 ESOP Stock Account Investments in Company Stock. 14
6.2 Diversification of Investments in Company Stock. 14
SECTION 7.................................................................. 16
Accounting........................................................ 16
7.1 Participants' Accounts.......................... 16
7.2 Unreleased Share Account........................ 16
7.3 Accounting Dates; Special Accounting Dates;
Accounting Period............................... 17
7.4 Transfer of Shares From Unreleased Share
Account to Participants' ESOP Stock Accounts.... 17
7.5 Adjustment of Participants' Accounts............ 18
7.6 Dividends on Company Stock...................... 19
7.7 Investment of Cash in Trust..................... 21
7.8 Fair Market Value of Company Stock.............. 21
7.9 Stock Dividends, Stock Splits and Capital
Reorganizations Affecting ESOP Shares........... 21
7.10 ESOP Share Records.............................. 22
7.11 Statement of Accounts........................... 22
7.12 Multiple Acquisition Loans...................... 22
7.13 Allocation of Proceeds from Sale or Liquidation. 22
SECTION 8.................................................................. 24
Contribution and Benefit Limitations.............................. 24
8.1 Contribution Limitations........................ 24
8.2 Combining of Plans.............................. 25
8.3 Highly Compensated Participant.................. 25
SECTION 9.................................................................. 27
Period of Participation........................................... 27
9.1 Settlement Date................................. 27
9.2 Restricted Participation........................ 28
SECTION 10................................................................. 29
Vesting in Benefits; Forfeitures; Reinstatements.................. 29
10.1 Fully Vested Benefits........................... 29
10.2 Partially Vested Benefits....................... 29
10.3 Forfeiture Accounts and Forfeitures............. 30
10.4 Reinstatement................................... 30
SECTION 11................................................................. 31
Distributions Following Settlement Date........................... 31
11.1 Manner of Distribution.......................... 31
11.2 Determination of Account Balances............... 31
11.3 Reinvestment of ESOP Stock Account.............. 32
11.4 Timing of Distributions......................... 32
11.5 Direct Rollovers................................ 34
11.6 Immediate Distributions to Alternate Payees..... 36
11.7 Designation of Beneficiary...................... 36
11.8 Missing Participants or Beneficiaries........... 38
11.9 Facility of Payment............................. 39
11.10 In-Service Withdrawal........................... 39
SECTION 12................................................................. 40
Rights, Restrictions, and Options on Company Stock................ 40
12.1 Right of First Refusal.......................... 40
12.2 Put Option...................................... 41
12.3 Share Legend.................................... 42
12.4 Nonterminable Rights............................ 42
SECTION 13................................................................. 43
Voting and Tendering of Company Stock............................. 43
SECTION 14................................................................. 45
General Provisions................................................ 45
14.1 Interests Not Transferable...................... 45
14.2 Absence of Guaranty............................. 45
14.3 Employment Rights............................... 45
14.4 Litigation by Participants or other Persons..... 45
14.5 Evidence........................................ 46
14.6 Waiver of Notice................................ 46
14.7 Controlling Law................................. 46
14.8 Statutory References............................ 46
14.9 Severability.................................... 46
14.10 Additional Employers............................ 46
14.11 Action By Employers............................. 47
14.12 Gender and Number............................... 47
14.13 Examination of Documents........................ 47
14.14 Fiduciary Responsibilities...................... 47
14.15 Indemnification................................. 47
14.16 Automated Voice Response Systems, Computer
Systems......................................... 48
SECTION 15................................................................. 49
Restrictions as to Reversion of Trust Assets to the Employers..... 49
SECTION 16................................................................. 51
Amendment and Termination......................................... 51
16.1 Amendment....................................... 51
16.2 Termination..................................... 51
16.3 Nonforfeitability and Distribution on
Termination..................................... 52
16.4 Notice of Termination........................... 52
16.5 Plan Merger, Consolidation, Etc................. 53
SECTION 17................................................................. 54
Administration.................................................... 54
17.1 The Administrator............................... 54
17.2 The Administrator's General Powers,
Rights, and Duties.............................. 54
17.3 Interested Administrator Member................. 56
17.4 Administrator Expenses.......................... 56
17.5 Uniform Rules................................... 56
17.6 Information Required by the Administrator....... 56
17.7 Review of Benefit Determinations................ 56
17.8 Administrator's Decision Final.................. 57
17.9 Denial Procedure and Appeal Process............. 57
17.10 Powers and Responsibilities of the Company...... 58
SECTION 18................................................................. 59
Special Rules Applicable When Plan is Top-Heavy................... 59
18.1 Purpose and Effect.............................. 59
18.2 Top-Heavy Plan.................................. 59
18.3 Key Employee.................................... 60
18.4 Aggregated Plans................................ 61
18.5 Minimum Vesting................................. 61
18.6 Minimum Employer Contribution................... 62
18.7 Coordination of Benefits........................ 62
<PAGE>
GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1 Background of Plan
1.1 History and Purpose
Green Mountain Coffee, Inc., a Delaware corporation (the
"Company") established the Green Mountain Coffee, Inc. Employee Stock Ownership
Plan (the "Plan") effective as of January 1, 2000 to enable eligible employees
to acquire stock ownership interests in the Company by investing primarily in
Company Stock (as defined in subsection 5.1). The Plan is intended to be an
employee stock ownership plan within the meaning of section 4975(e)(7) of the
Internal Revenue Code of 1986, as amended (the "Code") and is intended to enable
eligible employees to acquire stock ownership interests in the Company, by
investing primarily in Company Stock. The Plan is specifically permitted and
designed to invest up to 100% of its assets in Company Stock.
1.2 Effective Date; Plan Year
The Effective Date of the Plan is January 1, 2000 (the
"Effective Date"). The Plan will be administered on the basis of a plan year
(the "Plan Year") which shall be the twelve-month period beginning each January
1 and ending the following December 31.
1.3 Trustee; Trust Agreement
Amounts contributed under the Plan are held and invested,
until distributed by the trustee (the "Trustee") appointed by the Company acting
by its Board of Directors. The Trustee acts in accordance with the terms of a
trust agreement between the Company and the Trustee, which trust agreement is
known as the Green Mountain Coffee, Inc. Employee Stock Ownership Trust (the
"Trust"). The Trust implements and forms a part of the Plan. The provisions of
and benefits under the Plan are subject to the terms and provisions of the
Trust.
1.4 Plan Administration
The Plan is administered by a plan committee consisting of
three or more persons appointed by the Company to perform administrative tasks
(the "Administrator") as described in Section 17. Any notice or document
required to be given to or filed with the Administrator will be properly given
or filed if delivered or mailed, by registered or certified mail, postage
prepaid, to the Administrator, in care of the Company at its corporate
headquarters. The Company shall designate an individual or entity to serve as
the Named Fiduciary (as defined in Section 402(a)(2) of ERISA) of the Plan,
subject to Section 13(b) of the Plan.
1.5 Employers
Any Controlled Group Member described in subparagraph (a), (b)
or (c) of this subsection with respect to the Company may adopt the Plan with
the Company's consent. The Company, Green Mountain Coffee Roasters, Inc., a
Vermont corporaiton, and any such other Controlled Group Members that adopt the
Plan are referred to below collectively as the "Employers" and sometimes
individually as an "Employer." A "Controlled Group Member" means:
(a) any corporation that is not an Employer but is a
member of a controlled group of corporations (within
the meaning of Section 1563(a) of the Code,
determined without regard to Sections 1563(a)(4) and
1563(e)(3)(C) thereof) that contains the Company;
(b) any trade or business (whether or not incorporated)
that is not an Employer but is under common control
with the Company (within the meaning of Section
414(c) of the Code); or
(c) any entity that is affiliated with the Company under
Section 414(m) of the Code.
1.6 Predecessor Plans
Any other qualified profit sharing, stock bonus, or money
purchase pension plan qualified under Section 401(a) of the Code and maintained
by an Employer may, with the consent of the Company, be merged into, and
continued in the form of, the Plan. Any such plan merged into, and continued in
the form of this Plan shall be referred to as a "Predecessor Plan." Special
provisions relating to Participants in the Plan who were Participants in a
Predecessor Plan shall be set forth in one or more supplements to the Plan.
1.7 Plan Supplements
The provisions of the Plan may be modified by supplements to
the Plan. The terms and provisions of each supplement are a part of the Plan and
supersede the provisions of the Plan to the extent necessary to eliminate
inconsistencies between the Plan and such supplement.
SECTION 2 Eligibility and Participation
2.1 Eligibility to Participate
(a) Subject to the terms and conditions of subparagraphs
(a)(i), (ii) and (iii) below and subsection (b), each
employee who is employed by an Employer on the
Effective Date and has attained age 21, shall become
a "Participant" in the Plan on the Effective Date.
Each other employee will become a "Participant" in
the Plan on the "Entry Date," which is January 1,
April 1, July 1, and October 1 of each Plan Year,
coincident with or next following the date on which
the employee has attained age 21, provided he is not:
(i) a member of a group or class of employees of
an Employer whose terms and conditions of
employment are covered by a collective
bargaining agreement, provided that
retirement benefits were the subject of good
faith bargaining between an Employer and a
collective bargaining representative;
(ii) a Leased Employee (as defined in subsection
2.3);
(iii) an employee classified as a temporary
employee, as defined by the Employer and in
accordance with the Employer's payroll
practices; or
(iv) an employee who is a nonresident alien.
(b) For all purposes of the Plan, an individual shall be
an "employee" of or be "employed" by a Controlled
Group Member for any Plan Year only if such
individual is treated by the Controlled Group Member
as an employee for purposes of employment taxes and
wage withholding for federal income taxes. If an
individual is not considered to be an "employee" of a
Controlled Group Member in accordance with the
preceding sentence for a Plan Year, a subsequent
determination by the Controlled Group Member, any
governmental agency or court that the individual is a
common law employee of the Controlled Group Member,
even if such determination is applicable to prior
years, will not have a retroactive effect for
purposes of eligibility to participate in the Plan.
(c) Any Participant who terminates employment, but is
reemployed by an Employer before incurring a One Year
Break in Service (as defined in subsection 3.3),
shall continue to participate in the Plan in the same
manner as if such termination had not occurred,
effective as of the date of reemployment. Any
participant who terminates employment, but is
reemployed by an Employer after incurring a One Year
Break in Service shall become a participant in the
Plan on the Entry date succeeding his or her date of
rehire.
2.2 Participation Not Guarantee of Employment
Participation in the Plan does not constitute a guarantee or
contract of employment and will not give any employee the right to be retained
in the employ of the Employers or Related Companies nor any right or claim to
any benefit under the terms of the Plan unless such right or claim has
specifically accrued under the terms of the Plan.
2.3 Leased Employees
A "Leased Employee" means any person defined in Code Section
414(n), which includes any person who is not an employee of a Controlled Group
Member, but who has provided services to a Controlled Group Member, which
services are performed under the primary direction or control of the Controlled
Group Member, on a substantially full-time basis for a period of at least one
year, pursuant to an agreement between the Controlled Group Member and a leasing
organization. If a Leased Employee is subsequently employed by an Employer, the
period during which a Leased Employee performs services for a Controlled Group
Member shall be taken into account for purposes of subsection 3.1 of the Plan.
2.4 Military Service
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Code Section 414(u). A Participant
returning from employment after serving in the uniformed services is treated as
not having incurred a One Year Break In Service (as defined in subsection 3.3)
during the period of qualified military service, as defined herein. Each period
of qualified military service is considered under the Plan to be service with
the Employer for the purposes of:
(a) determining the nonforfeitability of the
Participant's Account balances, in accordance with
the provisions of Section 10 of the Plan; and
(b) determining the Participant's benefit allocations
under Section 4.
2.5 Omission of Eligible Employee
If, in any Plan Year, any employee who should be included as a
Participant in the Plan is erroneously omitted, and discovery of such omission
is not made until after a contribution by the Employer for the Plan Year has
been made, the Employer shall make a subsequent contribution with respect to the
omitted employee in the amount which the Company would have contributed if he or
she had not been omitted. Such contribution shall be made regardless of whether
or not it is deductible in whole or in part in any taxable year under applicable
provisions of the Code.
2.6 Inclusion of Ineligible Employee
If, in any Plan Year, any employee who should not have been
included as a Participant in the Plan is erroneously included, and discovery of
such incorrect inclusion is not made until after a contribution by the Company
for the year has been made, the Company shall not be entitled to recover the
contribution made with respect to the ineligible employee regardless of whether
a deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect to the ineligible employee shall constitute a
forfeiture for the Plan Year in which the discovery is made.
SECTION 3 Service and Compensation
3.1 Years of Service
The term "Years of Service" means an employee's or
Participant's period of service with the Controlled Group Members determined in
accordance with the following:
(a) An Employee or Participant shall be credited with one
"Year of Service" for each 12-month period of his
service with a Controlled Group Member beginning with
his or her Employment Date (as defined below) and
ending with the anniversary date of his or her
Employment Date (as defined below) (the "Vesting
Computation Period") during which the Employee or
Participant completes 1,000 Hours of Service.
(b) An Employee' or Participant's "Employment Date"
means the date he or she first completes an Hour of
Service.
(c) Years of Service shall include service performed for
an Employer prior to the effective date of the Plan
and shall include service regardless of age.
(d) For purposes of vesting under subsection 10.2, a
Participant will be credited with a Year of Service
immediately upon completing 1,000 Hours of Service
during his Vesting Computation Period.
(e) If any former Participant is reemployed after a One
Year Break in Service has occurred, Years of Service
shall include Years of Service prior to his One Year
Break in Service, subject to the following rules:
(i) If a former Participant has a One Year Break
in Service, his pre-break and post-break
service shall be used for computing Years of
Service for vesting purposes after he has
been employed for one (1) Year of Service
following the date of his reemployment with
an Employer;
(ii) Any former Participant who under the Plan
does not have a nonforfeitable right to any
interest in the Plan resulting from Employer
Contributions shall lose credits otherwise
allowable under (i) above if his consecutive
One Year Breaks in Service equal or exceed
the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of
Service; and
(iii) After five (5) consecutive One Year Breaks
in Service, a former Participant's vested
balance of his Accounts attributable to
pre-break service shall not be increased
based on his post-break service.
3.2 Hour of Service
Subject to the following provisions of this subsection 3.2,
the term "Hour of Service" means, with respect to any employee or Participant,
(1) each hour for which the employee or Participant is directly or indirectly
paid or entitled to payment by a Controlled Group Member for the performance of
duties; (2) each hour for which the employee or Participant is directly or
indirectly paid or entitled to payment by a Controlled Group Member for reasons
other than the performance of duties (such as vacation, holiday, sickness, jury
duty, disability, lay-off, military duty or leave of absence); and (3) each hour
for which back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by an Employer. These hours will be credited to the
employee or Participant for the computation period or periods to which the award
or agreement pertains rather than the computation period in which the award,
agreement or payment is made. The same Hours of Service shall not be credited
both under (1) or (2), as the case may be, and under (3). An employee or
Participant will be credited with 8 Hours of Service per day (to a maximum of 40
Hours of Service per week). All Hours of Service shall be determined and
credited in accordance with Department of Labor Reg. Sec. 2530.200b-2.
An employee or Participant shall not be credited with more
than 501 Hours of Service for any single continuous period during which he
performs no duties for an Employer or a Controlled Group Member. Payments
considered for purposes of the foregoing shall include payments unrelated to the
length of the period during which no duties are performed but shall not include
payments made solely as reimbursement for medically related expenses or solely
for the purpose of complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws.
3.3 One Year Break in Service
The term "One Year Break in Service" means any Vesting
Computation Period during which an employee or a Participant does not complete
more than 500 Hours of Service.
To the extent necessary to avoid a One Year Break in Service
and to the extent Hours of Service are not otherwise credited as provided in
subsection 3.2, an employee or Participant shall be credited with up to 501
Hours of Service during a Vesting Computation Period on account of an absence
during such Vesting Computation Period due to:
(a) the pregnancy of the employee or Participant;
(b) the birth of a child of the employee or Participant;
(c) the placement of a child with the employee or
Participant in connection with the adoption of such
child by such employee or Participant; and
(d) caring for such child for a period beginning
immediately following such birth or placement.
3.4 Compensation
Except as otherwise provided below, a Participant's
"Compensation" for a Plan Year means compensation as defined in Code Section
415, including the compensation paid to the Participant for services rendered to
an Employer as an employee as reported on the Participant's Federal wage and tax
statement (Form W-2), compensation for services paid on the basis of profits and
all of a Participant's salary reductions made pursuant to an arrangement
maintained by an Employer under Section 125 or 401(k) of the Code during the
Plan Year, but excluding, if applicable, amounts attributable to moving
expenses, amounts realized from the exercise of a non-qualified stock option or
the disposition of stock under a qualified stock option, and other amounts which
receive special tax benefits, or contributions made by the employee under a Code
Section 403(b) Plan.
For a Participant's initial year of participation,
Compensation shall be recognized for the entire Plan Year. In no event shall the
amount of a Participant's Compensation taken into account for purposes of the
Plan for any Plan Year exceed the dollar limitation in effect under Code Section
401(a)(17) (as that limitation is adjusted from time to time by the Secretary of
the Treasury pursuant to Code Section 401(a)(17) and which is $170,000 for the
2000 Plan Year).
SECTION 4 Employer Contributions
4.1 Employer Contributions
Subject to the conditions and limitations of the Plan, the
Company, in its sole discretion, may direct the Employers to make a contribution
(the "Employer Contribution") to the Plan for any Plan Year. Any such Employer
Contribution for a Plan Year shall be made in such amount, if any, as determined
by the Company prior to the end of the Plan Year or within a reasonable period
of time after the end of the Plan Year. Any Employer Contribution for a Plan
Year shall be allocated to the ESOP Stock Account or ESOP Cash Account, as
applicable, of any Eligible Participant (as defined in the next sentence) pro
rata on the basis of Participants' Compensation for such Plan Year. An "Eligible
Participant" for a Plan Year is any Participant who completes 1,000 Hours of
Service during the Plan Year and is actively employed by an Employer or on an
Employer's authorized leave of absence on the last day of the Plan Year (or who
terminated employment during the Plan Year due to death, permanent disability or
after attaining age 65).
Contributions under this subsection 4.1 shall be made in cash
or in Company Stock (in the discretion of the Company) as of the last day of the
Plan Year.
No contributions, including rollover contributions, will be
permitted by employees or Participants.
4.2 Due Date for Employer Contributions
Any Employer Contributions for a Plan Year shall be due on the
last day of the Plan Year and, if not paid by the end of that Plan Year, shall
be payable to the Trustee as soon as practicable thereafter, without interest,
but not later than the time prescribed by law for filing the Company's Federal
income tax return for such Plan Year, including extensions thereof.
4.3 Payment of Acquisition Loans; Employer Loan Contributions
For each Accounting Period during which an Acquisition Loan
(as defined in subsection 5.2) is outstanding, the Trustee shall use any
Employer Contributions made for such Accounting Period pursuant to subsection
4.1 to make principal and interest payments then due on the Acquisition Loan or
loans outstanding at the end of such Accounting Period. Each such payment by the
Trustee will release shares of Company Stock from the Unreleased Share Account
of the Trust (as defined in subsection 7.2). Company Stock that is so released
will be allocated to Participants' ESOP Stock Accounts as provided in subsection
4.1 as determined by the Administrator.
Subject to the conditions and limitations of the Plan, if, as
of any Accounting Date: (a) an Acquisition Loan remains outstanding and (b) the
contributions described above that are made for the Accounting Period, after
taking into account the use of dividends and earnings in accordance with
subsection 7.6, are insufficient to enable the Trustee to pay the principal and
interest due under such Acquisition Loan for such Accounting Period, then the
Employers shall make an additional "Employer Loan Contribution" to the Trustee
for that Accounting Period, in an aggregate amount equal to the amount of the
insufficiency described herein. Any such Employer Loan Contribution shall be
allocated in the manner described in subsection 4.1. Any Employer Loan
Contribution under the Plan for any Accounting Period shall be paid to the
Trustee in cash on the last day of the applicable Accounting Period or as soon
as practicable after the end of such Accounting Period.
If no Acquisition Loan is outstanding at the end of an
Accounting Period, the Trustee shall invest the contributions made for such
Accounting Period as directed by the Administrator, in accordance with the
provisions of Section 6.
4.4 Individual Employer's Share of Employer Contributions; Limitations on
Employers' Contributions
The Company shall determine each Employer's share of Employer
Contributions to be made pursuant to subsection 4.1. The certificate of an
independent certified public accountant selected by the Company as to the
correctness of any amounts or calculations relating to the Employers'
contributions under the Plan shall be conclusive on all persons. In no event
will an Employer's share of the Employers' contributions described in this
Section 4 for any Plan Year cause the Employer's share of the Employers'
contributions for that Plan Year to exceed an amount equal to the maximum amount
deductible on account thereof by that Employer for that year for purposes of
Federal taxes on income.
SECTION 5 Company Stock; Acquisition Loans
5.1 Company Stock
For purposes of the Plan, the term "Company Stock" shall mean
common stock issued by the Company that is readily tradable on an established
national securities market or exchange; provided, however, if the Company's
common stock is not readily tradable on an established national securities
market or exchange, the term "Company Stock" shall mean common stock issued by
the Company having a combination of voting power and dividend rates equal to or
in excess of: (a) that class of common stock of the Company having the greatest
voting power and (b) that class of common stock of the Company having the
greatest dividend rights. Non-callable preferred stock shall be treated as
Company Stock for purposes of the Plan if such stock is convertible at any time
into stock that is readily tradable on an established national securities market
or exchange (or, if applicable, that meets the requirements of (a) and (b) next
above) and if such conversion is at a conversion price that, as of the date of
the acquisition by the Plan, is reasonable. For purposes of the immediately
preceding sentence, preferred stock shall be treated as non-callable if, after
the call, there will be a reasonable opportunity for a conversion that meets the
requirements of the immediately preceding sentence. Company Stock shall be held
under the Trust only if such stock satisfies the requirements of Section
407(d)(5) of ERISA.
5.2 Acquisition Loans
An "Acquisition Loan" means the issuance of notes, a series of
notes or other installment obligations incurred by the Trustee, in accordance
with the Trust, in connection with the purchase of Company Stock. The term
"Financed Shares" means shares of Company Stock acquired by the Trustee with the
proceeds of an Acquisition Loan. The terms of each Acquisition Loan shall meet
the applicable requirements of Treasury Regulations Section 54.4975-7(b),
including the requirements: (a) that the loan bear a reasonable rate of
interest, be for a definite period (rather than payable on demand), and be
without recourse against the Plan, and (b) that the only assets of the Plan that
may be given as collateral are Financed Shares purchased with the proceeds of
that loan or with the proceeds of a prior Acquisition Loan. The release of
Financed Shares is described in subsection 4.3.
SECTION 6 Investment of Employer Contributions
6.1 ESOP Stock Account Investments in Company Stock
Employer Contributions under subsections 4.1 and 4.3 that are
used to repay an Acquisition Loan shall be invested in Company Stock through the
release of Financed Shares and the crediting of such shares to Participants'
Accounts (as described in subsections 7.4, 7.5 and 7.6). If an Acquisition Loan
is not outstanding, the Administrator may direct the Trustee to invest the
contributions made under subsection 4.1 in shares of Company Stock, in
accordance with the provisions of subsection 4.3.
6.2 Diversification of Investments in Company Stock
Pursuant to rules established by the Administrator, Active
Participants may elect to diversify portions of their ESOP Stock Accounts,
subject to the following:
(a) Each Participant who has attained age 55 years and
has at least ten years of participation in the Plan
(a "Qualified Participant") may elect during each of
the Participant's Qualified Election Periods (as
defined in subparagraph (c) below) to diversify up to
twenty-five percent (fifty percent in the case of the
Participant's last Qualified Election Period) of the
Qualified Participant's ESOP Stock Account balance
eligible for diversification (as described in
subparagraph (b) next below), by: (i) receiving a
cash distribution of the applicable amount, or (ii)
transferring the applicable amount to one or more
investment funds, as determined in the discretion of
the Administrator.
(b) The portion of a Qualified Participant's ESOP Stock
Account balance subject to diversification shall
equal twenty-five percent (fifty percent in the case
of the Qualified Participant's last year of the
Qualified Election Period) of the total number of
shares of Company Stock allocated to the
Participant's ESOP Stock Account (including shares
that the Participant previously elected to diversify
pursuant to this subsection), less the number of such
shares previously diversified pursuant to the
Qualified Participant's election under this
subsection. In any one election, a Qualified
Participant may diversify the entire remaining
portion of his ESOP Stock Account balance eligible
for diversification or a part of such diversifiable
portion equal to any whole percentage of five percent
or more of his ESOP Stock Account balance.
(c) For purposes of this subsection, a "Qualified
Election Period" means: (i) the ninety-day period
immediately following the last day of the first Plan
Year in which the Participant becomes a Qualified
Participant, and (ii) the ninety-day period
immediately following the last day of each of the
five Plan Years immediately following the first Plan
Year in which the Participant becomes a Qualified
Participant. Any election made in accordance with the
provisions of subparagraph (a) next above with
respect to any Qualified Election Period shall be
given effect as of the regular Accounting Date
occurring ninety days after the end of that Qualified
Election Period.
(d) The provisions of this subsection shall not apply to
any Participant if the value of the Participant's
ESOP Stock Account (determined as of the regular
Accounting Date immediately preceding the first day
on which the Participant would otherwise be entitled
to make an election under this subsection) is $500 or
less.
(e) Any amounts distributed in cash or transferred from
Company Stock to one or more of the investment funds
under this subsection shall not be available for
distribution in the form of Company Stock (as
otherwise allowed under subsection 11.1).
SECTION 7 Accounting
7.1 Participants' Accounts
The Administrator shall maintain or cause to be maintained
under the Plan the following accounts in the name of each Participant (to the
extent applicable):
(a) ESOP Stock Account. An "ESOP Stock Account" to
reflect (i) shares of Company Stock transferred from
the Unreleased Share Account as a result of repayment
of an Acquisition Loan and allocated in accordance
with subsection 4.1, (ii) any Employer Contributions
under subsection 4.1 made in the form of Company
Stock, (iii) any shares of Company Stock purchased
with cash in the ESOP Cash Account and (iv) any stock
dividends on Company Stock allocated and credited to
the Participant's ESOP Stock Account.
(b) ESOP Cash Account. An "ESOP Cash Account" to reflect
any Employer cash contributions under subsection 4.1
and any cash dividends on Company Stock allocated and
credited to the Participant's ESOP Stock Account, and
any income, losses, appreciation, or depreciation
attributable thereto.
In addition to the accounts described above, the Administrator
may maintain such other accounts and subaccounts in the names of Participants or
otherwise as the Administrator may consider necessary or advisable.
Collectively, all accounts and subaccounts maintained for a Participant are
referred to as the Participant's "Accounts."
The Administrator may establish such nondiscriminatory rules
and procedures relating to the maintenance, adjustment and liquidation of
Participants' Accounts as the Administrator may consider necessary or advisable.
7.2 Unreleased Share Account
The Administrator shall maintain or cause to be maintained in
the Trust an "Unreleased Share Account" to reflect the Financed Shares acquired
by the Trustee with the proceeds of an Acquisition Loan, if any, prior to the
transfer of such Financed Shares to the Participants' ESOP Stock Accounts, any
cash dividends attributable to such shares or transferred to the Unreleased
Share Account pursuant to subsection 7.5, and any Investment Income attributable
to such dividends.
7.3 Accounting Dates; Special Accounting Dates; Accounting Period
The last day of each Plan Year shall be the "Accounting Date."
Participants' Accounts shall be adjusted on the Accounting Date. A "Special
Accounting Date" is any date designated as such by the Administrator and a
Special Accounting Date occurring under subsection 16.3. The term "Accounting
Date" includes regular Accounting Dates and a Special Accounting Date. Any
references to an "Accounting Period" ending on an Accounting Date shall mean the
period since the next preceding regular Accounting Date.
7.4 Transfer of Shares From Unreleased Share Account to Participants' ESOP
Stock Accounts
At the direction of the Administrator, the Trustee shall use
the following to repay an Acquisition Loan:
(a) Employer Contributions under subsections 4.1 and 4.3
and any investment income attributable to such
contributions; and
(b) Cash dividends paid on shares of Company Stock, as
provided in subsections 7.5 and 7.6, and any
investment income attributable to such dividends.
The repayment of an Acquisition Loan shall cause a transfer of
shares of Company Stock from the Unreleased Share Account to the Participants'
ESOP Stock Accounts in accordance with subsections 7.5 and 7.6 as of each
applicable Accounting Date. The number of shares to be transferred shall be
determined by multiplying the number of shares in the Unreleased Share Account
by a fraction, the numerator of which is the principal and interest payments
during the applicable Accounting Period and the denominator of which is the sum
of the numerator plus the total projected principal and interest payments during
the remainder of the term of the Acquisition Loan. If the requirements of
Treasury Regulations Section 54.4975-7(b)(8)(ii) are satisfied, at the
discretion of the Administrator, the phrase "principal and interest" in the
preceding sentence shall be replaced by the word "principal."
7.5 Adjustment of Participants' Accounts
Participants' Accounts shall be adjusted as follows:
(a) Repayments of Acquisition Loans and Purchases of
Company Stock. For each Accounting Period, Employer
Contributions made in cash under subsections 4.1 and
4.3 that are used to repay an Acquisition Loan and
release shares of Company Stock from the Unreleased
Share Account in accordance with subsection 7.4 shall
be credited as of each Accounting Date to the
Participants' ESOP Stock Accounts in accordance with
the provisions of subsections 4.1 and 4.3. For each
Accounting Period, cash contributions under
subsection 4.1 that are designated to be invested in
shares of Company Stock shall be credited as of the
applicable Accounting Date to the Participants' ESOP
Cash Account as in accordance with the provisions of
subsection 4.1. Upon the purchase of Company Stock
with such cash, an appropriate number of shares of
Company Stock shall be credited to the Participants'
ESOP Stock Account, as appropriate, and the
Participants' ESOP Cash Accounts shall be charged by
the amount of the cash used to buy such Company
Stock. At all times, cash in Participants' ESOP Cash
Account may be used to purchase Company Stock from
any source.
(b) Dividends. Subject to the provisions of subsection
7.6, cash dividends on shares of Company Stock in the
Unreleased Share Account shall be used to repay the
outstanding Acquisition Loan and the released shares
shall be credited to the Participants' ESOP Stock
Accounts, in accordance with the provisions of
subsection 4.1. Subject to the provisions of
subsection 7.6, the Administrator shall credit to the
Participants' ESOP Cash Accounts any cash dividends
paid to the Trustee on shares of Company Stock held
in the Participants' ESOP Stock Accounts as of the
record date. Such cash dividends credited to the
Participants' ESOP Cash Accounts shall be applied as
soon as practicable first to the repayment of any
amount due during or prior to that Accounting Period
on an Acquisition Loan. If no amount is due on an
Acquisition Loan (or if no Acquisition Loan is
outstanding), such cash dividends may, as determined
in the discretion of the Administrator, be used to
either prepay the Acquisition Loan, if any, purchase
shares of Company Stock, or be paid to the
Participants as described in subparagraph 7.6(b). The
Administrator shall credit an appropriate number of
shares of Company Stock to the ESOP Stock Account of
such Participant, and the Participant's ESOP Cash
Account shall then be charged by the amount of cash
used to repay an Acquisition Loan, if any, or used to
purchase such Company Stock for the Participant's
ESOP Stock Account.
(c) Employer Contributions in Shares of Company Stock.
For any Accounting Period in which the Employer
Contributions under subsection 4.1 are made in the
form of shares of Company Stock, such stock shall be
credited to the Participants' ESOP Stock Account, as
of the applicable Accounting Date, in accordance with
the applicable provisions of subsection 4.1.
(d) Appreciation, Depreciation, Etc. As of each
Accounting Date, before the allocation of any
Employer Contributions under subsection 4.1 made in
cash, any appreciation, depreciation, income, gains
or losses in the fair market value of the
Participants' ESOP Cash Accounts shall be allocated
among and credited to the ESOP Cash Accounts of
Participants, pro rata, according to the balance of
each ESOP Cash Account as of the immediately
preceding Accounting Date, reduced in each case by
the amount of any charge to such ESOP Cash Account
since the next preceding Accounting Date. Any gain or
loss realized by the Trustee on the sale of Company
Stock credited the Participants' ESOP Stock Accounts
will be allocated to the Participants' ESOP Cash
Accounts, pro rata, according to the balance of
Participants' ESOP Stock Accounts, as of the next
preceding Accounting Date.
7.6 Dividends on Company Stock
The following shall apply with respect to dividends on Company
Stock:
(a) Dividends Credited to ESOP Cash Accounts. Any cash
dividends paid with respect to shares of Company
Stock allocated to Participants' ESOP Stock Accounts
or held in the Unreleased Share Account may, as
determined by the Administrator, be allocated among
and credited to Participants' ESOP Cash Accounts in
accordance with subparagraph 7.5(b).
(b) Dividends Used to Repay Acquisition Loan. To the
extent permitted by applicable law, any cash
dividends paid with respect to shares of Company
Stock allocated to Participants' ESOP Stock Account,
or held in the Unreleased Share Account may (as
required by applicable Acquisition Loan documentation
or, if not so required, as determined in the sole
discretion of the Administrator) be used to repay the
principal balance of an outstanding Acquisition Loan
or interest thereon in whole or in part, or to
purchase additional shares of Company Stock as
provided in subparagraph 7.5(b). Financed shares
released from the Unreleased Share Account by reason
of dividends paid with respect to such Company Stock
shall be allocated to Participants' ESOP Account as
follows:
(i) First, Financed Shares with a fair market
value (determined as of the valuation
coincident with or immediately preceding the
dividend declaration date) at least equal to
the dividends paid with respect to the
Company Stock allocated to Participants'
ESOP Stock Account shall be allocated among
and credited to the ESOP Stock Account of
such Participants, pro rata, according to
the number of shares of Company Stock held
in such accounts on the dividend declaration
date; and
(ii) Next, any remaining Financed Shares released
from the Unreleased Share Account shall be
allocated among and credited in accordance
with Sections 4.1 to the Participants' ESOP
Stock Accounts, as applicable.
(c) Dividends Paid to Participants. Any cash dividends
paid with respect to shares of Company Stock
allocated to Participants' ESOP Stock Accounts may,
as determined by the Administrator, be either paid by
the Company directly in cash to Participants on a
non-discriminatory basis or paid to the Trustee and
distributed by the Trustee to the Participants no
later than ninety days after the end of the Plan Year
in which paid to the Trustee. This provision is not
applicable during any period that the Company is
taxed as an "S corporation."
7.7 Investment of Cash in Trust
At the direction of the Administrator, cash held in the
Unreleased Share Account or Participants' ESOP Cash Accounts under the Trust
will be invested by the Trustee, to the extent practicable, in short term
securities or cash equivalents having ready marketability, mutual funds or in
any other investment vehicle permitted under the terms of the Trust agreement.
Investment Income resulting from such investments shall be credited to the
account to which it pertains. The term "Investment Income" means income
resulting from the temporary investment of, income deferral contributions,
Employer Contributions, cash dividends and any other amounts.
7.8 Fair Market Value of Company Stock
For purposes of the Plan and Trust, (i) the fair market value
of Company Stock that is readily tradable on an established securities market
shall be the prevailing market price as of the last day of the Plan Year, and
(ii) the fair market value of Company Stock that is not readily tradable on an
established securities market shall be determined, as of the last day of each
Plan Year, by an independent appraiser, as defined in Section 401(a)(28) of the
Code, in accordance with the terms of the Trust and the provisions of Section
3(18) of ERISA.
7.9 Stock Dividends, Stock Splits and Capital Reorganizations Affecting
ESOP Shares
Shares of Company Stock received by the Trustee that are
attributable to stock dividends, stock splits or to any reorganization or
recapitalization of the Company shall be credited to the Unreleased Share
Account, if attributable to shares held in that account, or shall be credited to
the released share account (including Participants' ESOP Stock Accounts) if
attributable to shares held in the released share account, so that the interests
of Participants immediately after any such stock dividend, split, reorganization
or recapitalization are the same as such interests immediately before such
event.
7.10 ESOP Share Records
The Administrator shall maintain, or cause to be maintained,
records as to the number and cost of shares of Company Stock acquired or
transferred by or within the Trust in accordance with the applicable provisions
of this Section 7.
7.11 Statement of Accounts
The Administrator will provide each Participant with a
statement reflecting the balances in the Participant's Accounts under the Plan
at such times as are established by the Administrator. No Participant, except a
person authorized by the Company or the Administrator, shall have the right to
inspect the records reflecting the Accounts of any other Participant.
7.12 Multiple Acquisition Loans
If more than one Acquisition Loan to the Trustee becomes
outstanding at any time, the foregoing provisions of this Section 7 and other
provisions of the Plan shall be modified by the Plan Administration to the
extent it deems necessary or appropriate to reflect such additional Acquisition
Loan or loans.
7.13 Allocation of Proceeds from Sale or Liquidation
(a) Proceeds with respect to Company Stock allocated to
Participants' ESOP Stock Accounts as a result of sale
or redemption of Company Stock or of distributions
from liquidation of the Company resulting from sale
or other disposition of substantially all of the
Company's assets shall be allocated in the Plan Year
in which such proceeds are received by the Trust.
(b) Proceeds with respect to Company Stock held in the
Unreleased Share Account as a result of sale or
redemption of Company Stock or of distributions from
liquidation of the Company resulting from sale or
other disposition of substantially all of the
Company's assets shall be first applied to repayment
of any outstanding Acquisition Loan with respect to
such Company Stock in the Plan Year in which such
proceeds are received by the Trust, any remaining
proceeds shall be allocated in the Plan Year received
by the Trust to the Participants' Accounts pro rata
based on the Participant's ESOP Stock Account
balances.
SECTION 8 Contribution and Benefit Limitations
8.1 Contribution Limitations
For each Limitation Year (as defined below), the Annual
Addition (as defined below) to a Participant's Accounts shall not exceed the
lesser of $30,000 (as adjusted from time to time by the Commissioner of Internal
Revenue) or twenty-five percent of the Participant's compensation for that
Limitation Year (with compensation defined for this purpose under Code Section
415, and including any amount which is not includible in the gross income of the
Participant by reason of Code Section 125 or 401(k)).
(a) Definitions
The term "Limitation Year" means the Plan Year.
The term "Annual Addition" for any Limitation Year means the
total amount of Employer Contributions, voluntary employee contributions and
forfeitures allocated to the Accounts of a Participant under this Plan and any
Related Defined Contribution Plan (as defined below) for a Plan Year, except
that if, during any Plan Year that the Company is not an "S corporation," no
more than one-third of the Employer Contributions which are deductible under
Code section 404(a)(9) are allocated to the Accounts of Highly Compensated
Participants (as defined in subsection 8.3) during the Plan Year, then any
Employer Contributions which are applied by the Trustee to pay interest on an
Acquisition Loan, and any Financed Shares which are allocated as Forfeitures,
shall not be included in computing Annual Additions. If the allocations to the
Accounts of Highly Compensated Participants will exceed one-third of the
Employer Contributions, the Plan Administrator may elect to reduce the
allocations to the Highly Compensated Participants on a pro rata basis in an
amount sufficient to meet the one-third standard. In the event that Employer
Contributions and dividends are applied to the repayment of an Acquisition Loan
and shares of Company Stock are released from the unreleased shares and
allocated to the Participants' ESOP Stock Accounts, each Participant's Annual
Addition for a Limitation Year based on the allocated shares of Company Stock
shall be calculated as the lesser of: (i) the amount of contributions credited
to the Participant's Accounts, or (ii) the fair market value of shares Company
Stock credited to the Participant's Accounts.
The term "Related Defined Contribution Plan" means any defined
contribution plan (as defined in section 414(i) of the Code) maintained by the
Company or a Related Company.
(b) Corrections. If it is anticipated that a Participant's
Annual Addition may exceed the limitations of this subsection, the Administrator
may reduce a Participant's Annual Addition to the extent necessary to meet the
above limitations. If any Employer Contributions cannot be allocated to a
Participant's Accounts, the Administrator, in its complete discretion, shall
first, to a Related Defined Contribution Plan, return salary reduction
contributions made by the Participant and reduce employer contributions made for
the Participant. If, after the return of all salary reduction contributions and
the reduction of employer contributions to a Related Defined Contribution Plan,
any Employer Contributions still cannot be allocated to a Participant's
Accounts, the Administrator may, in its complete discretion, choose to (i)
reallocate such Employer Contributions to other Participants pursuant to
subsection 4.1, (ii) apply such Employer Contributions to reduce the Employer
Contributions in succeeding Limitation Years in order of time, or (iii) credit
such Employer Contributions to a "suspense account" pursuant to the authority
and regulations of Treasury Regulation Section 1.415-6(b)(6).
8.2 Combining of Plans
In applying the limitations set forth in subsection 8.1,
reference to this Plan shall mean this Plan and all other defined contribution
plans (whether or not terminated) ever maintained by the Employers and the
Controlled Group Members, and reference to a defined benefit plan maintained by
an Employer shall include all defined benefit plans (whether or not terminated)
ever maintained by the Employers and the Controlled Group Members. It is
intended that in complying with the requirements of subsection 8.2, a
Participant's benefits under this Plan shall be limited after the Participant's
benefits under any other defined contribution plan maintained by the Employers
are limited and after the Participant's benefits under any defined benefit plan
maintained by the Employers are limited, unless such other plan provides
otherwise.
8.3 Highly Compensated Participant
With respect to any Plan Year, A "Highly Compensated
Participant" means an eligible employee who is a highly compensated employee as
defined in Section 414(q) of the Code, which includes any employee who:
(a) was at any time a 5 percent owner (as defined in
Section 416(i) of the Code) of any Employer or any
Controlled Group Member during the Plan Year or the
preceding Plan Year, or;
(b) for the preceding Plan Year:
(i) received compensation from an Employer or
any Controlled Group Member in excess of
$80,000 (which amount may be adjusted
annually by the Secretary of Treasury), and
(ii) if the Administrator elects, was in the top-
paid 20% group of employees for such
preceding year.
A former employee will be considered a Highly
Compensated Participant if such former employee was a
Highly Compensated Participant either when he
separated from service with the Employers, or at any
time after he attained age 55. The determination of
whether an employee is a Highly Compensated
Participant will be made with reference to the
definitions provided in Section 414(q) of the Code
and any regulations issued by the Secretary of the
Treasury thereunder (including any cost-of-living
adjustments to the dollar figure above). For purposes
of this subsection, an employee's compensation for a
Plan Year shall be the employee's compensation for
such Plan Year for services rendered to the Employers
and the Controlled Group Members as reported on the
employee's Federal wage and tax statement (Form W-2),
but including the employee's elective deferral
contributions made pursuant to Sections 125 and
401(k) of the Code (including income deferral
contributions made under this Plan).
SECTION 9 Period of Participation
9.1 Settlement Date
A Participant's "Settlement Date" will be the date on which
his employment with the Employers and all Controlled Group Members is terminated
because of the first to occur of the following events:
(a) Normal Retirement. The Participant retires or is
retired from the employ of the Employers and the
related companies on or after the date on which he
attains age 65 years. A Participant's right to the
balances in his Accounts shall be nonforfeitable on
or after the date he attains age 65 ("Normal
Retirement Age").
(b) Disability Retirement. The Participant is retired on
account of a total and permanent disability when the
Administrator determines that a physical or mental
condition of a Participant, resulting from bodily
injury, disease or mental disorder, renders the
Participant incapable of continuing any gainful
occupation for which the Participant is qualified for
a period of at least 12 months and which condition
constitutes a potentially permanent illness or injury
as certified by a physician who has been approved by
the Employer. This determination will be made in a
nondiscriminatory manner to all Participants. A
Participant's right to the balances in his Accounts
shall be nonforfeitable on or after the date he
retires due to disability.
(c) Death. The Participant's death.
(d) Resignation or Dismissal. The Participant resigns or
is dismissed from the employ of the Employers and the
related companies before retirement in accordance
with subparagraph (a) or (b) next above.
If a Participant is transferred from employment with an Employer to employment
with a Controlled Group Member that is not an Employer, then for purposes of
determining when the Participant's Settlement Date occurs under this subsection,
the Participant's employment with such Controlled Group Member (or any
Controlled Group Member to which the Participant is subsequently transferred)
shall be considered as employment with the Employers.
9.2 Restricted Participation
If: (i) a Participant's Settlement Date has occurred but full
payment of all of the Participant's Account balances has not yet been made, or
(ii) a Participant transfers to a Controlled Group Member that is not an
Employer under the Plan, the Participant or the Participant's Beneficiary will
be treated as a Participant for purposes of the Plan, except as follows:
(a) The Participant (or Beneficiary) may not receive an
allocation of any Employer Contributions or Financed
Shares.
(b) The Participant's Beneficiary cannot designate a
beneficiary under subsection 12.7.
If a Participant subsequently again satisfies the requirements for participation
in the Plan, the Participant will become an Active Participant in the Plan on
the date the Participant satisfies such requirements.
SECTION 10 Vesting in Benefits; Forfeitures; Reinstatements
10.1 Fully Vested Benefits
If a Participant's employment with an Employer or a Controlled
Group Member is terminated because the Participant retires, becomes disabled, or
dies, under subparagraphs 9.1(a), (b) or (c), respectively, or if a Participant
resigns or is dismissed from the employ of an Employer or a Controlled Group
Member after completing five Years of Service, the balances in all of his
Accounts as at the Accounting Date coincident with or next preceding his
Settlement Date (after all adjustments required under the Plan as of that date
have been made) shall be non-forfeitable and shall be distributable to him, or
in the event of his death to his Beneficiary, under subsection 11.1.
10.2 Partially Vested Benefits
If a Participant resigns or is dismissed from the employ of an
Employer or a Related Company under subparagraph 9(d) before completing five
Years of Service, the balances in his ESOP Cash Account and ESOP Stock Account
as of the Accounting Date coincident with or next following his Settlement Date
(after all adjustments required under the Plan as of that date have been made)
will each be reduced to an amount computed in accordance with the following
schedule:
If the Participant's
Number of Years of The Percentage of His
Service Is: Account Will Be:
Less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
The resulting balances in his ESOP Cash Account and ESOP Stock Account will be
distributable to the Participant in the time and manner provided in subsections
7.4 and 7.5. If a Participant is completely unvested in his Accounts upon his
Settlement Date, he will be deemed to have received a distribution and been
cashed out as of the Accounting Date following his Settlement Date.
10.3 Forfeiture Accounts and Forfeitures
The portion of a Participant's Accounts that are not
distributable to him on his Settlement Date by reason of the provisions of
subsection 10.2 shall be a "Forfeiture" on the earlier of the date the
Participant receives a distribution of the entire vested portion of the
Participant's Account, or the last day of the Plan Year in which the Participant
terminates employment with the Employer. The amount deemed as Forfeitures will
be allocated and credited as of the last day of the Plan Year in which the
Participant terminates employment with the Employer in accordance with the
provisions of subsection 4.1 based upon each Participant's Compensation for such
Plan Year. Cash in the Participant's Accounts will be forfeited before Company
Stock is forfeited.
10.4 Reinstatement
If the Participant returns to employment with an Employer or a
Controlled Group Member prior to incurring five consecutive One Year Breaks in
Service, and such Participant had received, or was deemed to have received, a
distribution of his entire vested Accounts prior to his reemployment, his
forfeited amounts shall be reinstated only if he repays the full amount
distributed to him before the earlier of (i) five years after the first date on
which the Participant is rehired by an Employer or a Controlled Group Member or
(ii) the close of the first period of five consecutive One Year Breaks in
Service commencing after the distribution or, in the event of a deemed
distribution, upon the reemployment of such Participant. In the event the
Participant does repay the full amount distributed to him or, in the event of a
deemed distribution, the undistributed portion of the Participant's Accounts
must be restored in full.
If a former Participant returns to employment with an Employer
or Controlled Group Member prior to incurring five consecutive One Year Breaks
in Service but did not receive or was not deemed to have received a distribution
of his vested Accounts, the entire unvested portion of his Accounts shall be
restored to his Accounts to the extent this unvested amount had become a
Forfeiture under the Plan.
The source of the restored amount shall be first from any
Forfeitures occurring during the Plan Year. If such source is insufficient, then
the Employer shall contribute an amount which is sufficient to restore the
Forfeiture; provided, however, that if an Employer Contribution is made for such
Plan Year, such contribution shall first be applied to restore any such amounts
and the remainder shall be allocated in accordance with subsection 4.1.
SECTION 11 Distributions Following Settlement Date
11.1 Manner of Distribution
Subject to the conditions set forth below, distribution of the
balances in a Participant's ESOP Cash Account and ESOP Stock Account will be
made to, or for the benefit of, the Participant or, in the case of the
Participant's death, to or for the benefit of the Participant's Beneficiary, in
the form, as elected by the Participant or the Participant's Beneficiary, as
applicable, with the consent of the Administrator, of:
(a) a lump sum;
(b) installments over a period not to exceed five years;
or
(c) installments over a period not exceeding the life
expectancy of the Participant or the joint life
expectancy of the Participant and his designated
beneficiary; provided that, if such beneficiary is
not the Participant's spouse and is more than 10
years younger than the Participant, the installments
shall be paid over a period not exceeding the joint
life expectancy of the Participant and a beneficiary
10 years younger than the Participant.
In the event distribution is made in the form of installments, the balance in
the Participant's Accounts shall continue to be subject to appreciation,
depreciation, income, gains and/or losses pursuant to subsection 7.5(d), until
the final installment is paid. Distributions of the Participant's ESOP Cash
Account shall be made in cash and distributions of the Participant's ESOP Stock
Accounts shall be made in-kind in the form of shares of Company Stock, except
for fractional shares which shall be paid in cash.
11.2 Determination of Account Balances
After a Participant's Settlement Date has occurred and pending
complete distribution of the Participant's Account balances, the Participant's
Accounts will be held under the Plan and will be subject to adjustment under
Section 7. For purposes of subsection 11.1, a Participant's Account balances
will be determined as of the regular Accounting Date coincident with or
immediately preceding the date of distribution of the Participant's Accounts.
11.3 Reinvestment of ESOP Stock Account
In any year that a Participant who has terminated employment
with the Employers ("Inactive Participant") has shares of Company Stock in his
ESOP Stock Account, the Administrator may, in its discretion, use any cash or
other liquid assets held in the ESOP Cash Accounts of Participants who are
actively employed by the Employers ("Active Participants") to purchase the
shares of Company Stock held in the Inactive Participant's ESOP Stock Account,
based on the most recent fair market value. Such purchase shall be made pro rata
based on the Active Participants' ESOP Cash Account balances. In the event that
there is not sufficient cash or other liquid assets in the Active Participants'
ESOP Cash Account to purchase all of the shares of Company Stock in the Inactive
Participants' ESOP Stock Accounts, the purchase shall be pro rata based upon the
Inactive Participants' ESOP Stock Accounts. The proceeds of the shares of
Company Stock purchased from an Inactive Participant's ESOP Stock Account shall
be held in a special "Liquidated ESOP Stock Account" on behalf of the Inactive
Participant and invested in the same manner as the Participants' ESOP Cash
Accounts. The provisions of this subsection 11.3 apply only during such period
that the Company Stock held in the Trust is not readily tradeable on an
established securities market.
11.4 Timing of Distributions
Distribution of the balance of a Participant's Accounts shall
be made or shall commence as follows:
(a) Distribution of Accounts. Distribution of a
Participant's ESOP Stock Account and ESOP Cash
Account balances will be made or shall commence as
follows, unless an earlier date is required by
subparagraph (b) or (c) below.
(i) Distributions Upon Retirement, Death or
Disability. If a Participant retires,
becomes disabled, or dies (as described in
subparagraphs 9.1(a), (b) or (c)) while in
the employ of an Employer or a Controlled
Group Member, distributions will be made or
will commence as soon as practicable
following the Participant's Settlement Date.
(ii) Distributions Upon Resignation or Dismissal.
If a Participant's Settlement Date occurs
under subparagraph 9.1(d), distribution of
the Participant's Accounts will be made or
will commence as soon as is practicable
after the close of the Plan Year following
the Plan Year in which the Participant's
Settlement Date occurs, unless the
Participant elects a later date.
(b) Mandatory Cash-Outs; Consent. Notwithstanding any
other provision of this Section 11, if a
Participant's vested Account balances total $5,000 or
less at any time at or after his Settlement Date, the
Participant (or the Participant's Beneficiary) shall
receive an immediate lump sum payment of such amount.
Such distribution shall be made as soon as
practicable after the Participant's Settlement Date.
If the present value of a Participant's entire vested
benefit under the Plan is zero, the Participant shall
be deemed to have received a distribution of such
vested benefit. If a Participant's vested Account
balances exceed $5,000 at any time, distributions may
not be made to the Participant before age 65 without
the Participant's consent.
(c) Required Commencement Date. Irrespective of any
contrary provision of the Plan, distribution of the
Account balance of a Participant shall be made or
shall commence by April 1 of the calendar year next
following the later of: (i) the calendar year on
which the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant's Settlement
Date occurs ("Required Commencement Date"); provided,
however, that the Required Commencement Date of a
Participant who is a five-percent owner (as defined
in Code Section 416) of an Employer or Controlled
Group Member in the calendar year in which the
Participant attains age 70 1/2shall be April 1 of the
calendar year next following the calendar year in
which the Participant attains age 70 1/2.
If a Participant dies before the Participant's Required
Commencement Date, the Participant's benefits must be distributed over a period
not exceeding the greater of: (A) five years from the death of the Participant;
(B) in the case of payments to a Designated Beneficiary other than the
Participant's Spouse, the life expectancy of such Beneficiary, provided payments
begin within one year of the Participant's death (or such later date as may be
prescribed under Treasury Regulations); or (C) in the case of payments to the
Participant's Spouse, the life expectancy of such Spouse, provided payments
begin by the date the Participant would have attained age 70 1/2. If a
Participant dies after the Participant's Required Commencement Date, the
remaining portion of the Participant's benefits will be distributed at least as
rapidly as under the method of distribution in effect at the Participant's
death.
A Participant who is not a 5 percent owner and who attains age
70 1/2 while still employed by an Employer or a Controlled Group Member may
elect to receive a distribution commencing April 1 of the calendar year next
following the calendar year in which he attains age 70 1/2.
11.5 Direct Rollovers
Certain individuals who are to receive distributions under the
Plan may elect that such distributions be paid in the form of a direct rollover
(as described in Section 401(a)(31) of the Code and the regulations thereunder)
to the Trustee or custodian of a plan eligible to accept direct rollovers,
subject to the following:
(a) Eligible Rollover Distribution. A distribution may be
paid in a direct rollover under this subsection only
if the distribution constitutes an Eligible Rollover
Distribution. An "Eligible Rollover Distribution"
means a distribution under the Plan to an Eligible
Distributee (as defined below) other than: (i) a
distribution that is one of a series of substantially
equal payments made annually or more frequently
either over the life (or life expectancy) of the
Participant or the joint lives (or life expectancies)
of the Participant and his Designated Beneficiary or
over a specified period of ten years or more, (ii) a
distribution required under subsection 11.4(d) to
meet the minimum distribution requirements of Section
401(a)(9) of the Code, or (iii) a distribution
excluded from the definition of an Eligible Rollover
Distribution under applicable Treasury Regulations.
Notwithstanding the immediately preceding sentence,
an Eligible Rollover Distribution includes only those
amounts that would be includible in the gross income
of the Eligible Distributee if such amounts were not
rolled over to another plan as provided under Section
402(c) of the Code.
During any period that the Company is taxed as an "S
corporation," an Eligible Rollover shall mean only
cash distributions. Distributions in the form of
shares of Company Stock will not be eligible to be
rolled over directly, however, Participants may roll
over the cash proceeds from the sale of the shares in
accordance with Section 12.2.
(b) Eligible Distributee. An "Eligible Distributee" is:
(i) a Participant, (ii) a Participant's surviving
Spouse who is entitled to receive payment of the
Participant's Account balances after the
Participant's death, or (iii) the Spouse or former
spouse of a Participant who is an alternate payee
under a qualified domestic relations order (as
defined in Section 414(p) of the Code).
(c) Eligible Retirement Plan. A direct rollover of an
Eligible Rollover Distribution may be made to no more
than one Eligible Retirement Plan. Except as
otherwise provided below, an "Eligible Retirement
Plan" is: (i) an individual retirement account
described in Section 408(a) of the Code, (ii) an
individual retirement annuity described in Section
408(b) of the Code (other than an endowment
contract), (iii) an annuity plan described in Section
403(a) of the Code, or (iv) a plan qualified under
Section 401(a) of the Code that by its terms permits
the acceptance of rollover contributions. With
respect to the surviving Spouse of a deceased
Participant who is entitled to receive a distribution
of the Participant's Accounts, an "Eligible
Retirement Plan" shall mean only an individual
retirement account described in Section 408(a) of the
Code or an individual retirement annuity described in
Section 408(b) of the Code (other than an endowment
contract).
(d) Minimum Amounts. An Eligible Distributee may elect a
direct rollover of all or a portion of an Eligible
Rollover Distribution only if the total amount of the
Eligible Rollover Distributions expected to be
received by the Eligible Distributee during the Plan
Year is $200 or more (or such lesser amount as the
Administrator may establish). An Eligible Distributee
may elect payment of a portion of an Eligible
Rollover Distribution as a direct rollover and may
receive directly the remainder of such distribution,
provided that the amount paid by direct rollover is
at least $500 (or such lesser amount as the
Administrator may establish).
(e) Elections. An Eligible Distributee's election of a
direct rollover pursuant to this subsection must be
in writing on a form designated by the Administrator
and must be filed with the Administrator at such time
and in such manner as the Administrator shall
determine. The Administrator shall establish such
rules and procedures as it deems necessary to provide
for distributions by means of direct rollover.
11.6 Immediate Distributions to Alternate Payees
The Administrator shall direct distribution of the amount of a
Participant's Account balances assigned to an alternate payee under a qualified
domestic relations order (as defined in Section 414(p) of the Code) on the
earliest date specified in such qualified domestic relations order, without
regard to whether such payments commence prior to the Participant's earliest
retirement age (as defined in Section 414(p)(4)(B) of the Code).
11.7 Designation of Beneficiary
Each Participant may designate any person or persons (who may
be designated concurrently, contingently or successively) to whom the
Participant's benefits are to be paid if the Participant dies before the
Participant receives all of Participant's benefits. A beneficiary designation
must be made on a form furnished by the Administrator for this purpose, and the
Participant must sign such form. A beneficiary designation form will be
effective only when the form is filed with the Administrator while the
Participant is alive and will cancel all the Participant's beneficiary
designation forms previously filed with the Administrator.
Notwithstanding the foregoing provisions of this subsection
and any beneficiary designation filed with the Administrator in accordance with
this subsection, if a Participant dies and has a surviving Spouse at the
Participant's date of death, the Account balances described in the preceding
sentence shall be payable in full to the Participant's surviving Spouse in
accordance with this Section 11 (treating such surviving Spouse as the
Participant's Beneficiary), unless prior to the Participant's death, the
following requirements were met:
(a) The Participant elected that the Participant's
benefits under the Plan be paid to a person other
than the Participant's surviving Spouse;
(b) The Participant's Spouse consented in writing to such
election;
(c) The Spouse's consent acknowledged the effect of such
election and was witnessed by a notary public; and
(d) Such election designates a beneficiary that may not
be changed without further spousal consent, unless
the Spouse executed a general written consent
expressly permitting changes of the beneficiary
without any requirement of further consent of the
Spouse.
For purposes of the Plan, and subject to the provisions of any
qualified domestic relations order (as defined in Section 414(p) of the Code), a
Participant's "Spouse" means the person to whom the Participant is legally
married at the earlier of the date of the Participant's death or the date
payment of the Participant's benefits commenced and who is living at the date of
the Participant's death.
If a deceased Participant failed to designate a beneficiary as
provided above, or if the designated beneficiary dies before the Participant or
before complete payment of the Participant's benefits, the Participant's
benefits shall be distributed to the Participant's Spouse, or if there is none,
the Administrator, in its discretion, may direct the Trustee to pay the
Participant's benefits as follows:
(e) To or for the benefit of any one or more of the
Participant's relatives by blood, adoption or
marriage and in such proportions as the Administrator
determines; or
(f) To the legal representative or representatives of the
estate of the last to die of the Participant and the
Participant's Designated Beneficiary.
The term "Designated Beneficiary" or "Beneficiary" as used in the Plan means the
natural or legal person or persons designated by a Participant as the
Participant's beneficiary under the last effective beneficiary designation form
filed with the Administrator under this subsection and to whom the Participant's
benefits would be payable under this subsection.
11.8 Missing Participants or Beneficiaries
Each Participant and each Designated Beneficiary must file
with the Administrator from time to time in writing his post office address and
each change of post office address. If a Participant dies before the Participant
receives all of the Participant's vested Account balances, the Participant's
Beneficiary must file any change in his post office address with the
Administrator. Any communication, statement or notice addressed to a Participant
or Beneficiary at the last post office address filed with the Administrator, or
if no address is filed with the Administrator then, in the case of a
Participant, at the Participant's last post office address as shown on the
Employers' records, will be binding on the Participant and the Participant's
Beneficiary for all purposes of the Plan. The Employers, the Trustee, and the
Administrator shall not be required to search for or locate a Participant or
Beneficiary. If the Administrator notifies a Participant or Beneficiary that the
Participant or Beneficiary is entitled to a payment and also notifies the
Participant or Beneficiary of the provisions of this subsection, and the
Participant or Beneficiary fails to claim his benefits or make his whereabouts
known to the Administrator within three years after the notification, the
benefits of the Participant or Beneficiary may be disposed of, to the extent
permitted by applicable law, as follows:
(a) If the whereabouts of the Participant then are
unknown to the Administrator but the whereabouts of
the Participant's Spouse then are known to the
Administrator, payment may be made to the Spouse;
(b) If the whereabouts of the Participant and the
Participant's Spouse, if any, then are unknown to the
Administrator but the whereabouts of the
Participant's Designated Beneficiary then are known
to the Administrator, payment may be made to the
Designated Beneficiary;
(c) If the whereabouts of the Participant, the
Participant's Spouse and the Participant's Designated
Beneficiary then are unknown to the Administrator but
the whereabouts of one or more relatives by blood,
adoption or marriage of the Participant are known to
the Administrator, the Administrator may direct the
Trustee to pay the Participant's benefits to one or
more of such relatives and in such proportions as the
Administrator decides; or
(d) If the whereabouts of such relatives and the
Participant's Designated Beneficiary then are unknown
to the Administrator, the benefits of such
Participant or Beneficiary may be disposed of in an
equitable manner permitted by law under rules adopted
by the Administrator.
11.9 Facility of Payment
When a person entitled to benefits under the Plan is under
legal disability, or, in the Administrator's opinion, is in any way
incapacitated so as to be unable to manage the person's financial affairs, the
Administrator may direct the Trustee to pay the benefits to such person's legal
representative. Any payment made in accordance with the preceding sentence shall
be a full and complete discharge of any liability for such payment under the
Plan.
11.10 In-Service Withdrawal
A Participant who has completed five (5) Years of Service with
an Employer may withdraw ten percent (10%) of his or her vested account balances
by submitting a request for such withdrawal in such form and in such manner as
the Administrator may determine. A Participant may only request one such
withdrawal in any twelve-month period. The Administrator may promulgate such
additional rules and regulations governing in-service withdrawals as it deems
appropriate from time to time.
<PAGE>
SECTION 12 Rights, Restrictions, and Options on Company Stock
12.1 Right of First Refusal
Subject to the provisions of the last sentence of this
subsection, shares of Company Stock distributed to Participants shall be subject
to a "Right of First Refusal." The Right of First Refusal shall provide that,
prior to any subsequent transfer, the Participant (or the Participant's
Beneficiary) must first make a written offer of such Company Stock to the Trust
and to the Company at the then fair market value of such Company Stock. The
Trust shall have the first priority to exercise the right to purchase the
Company Stock, and then the Company shall have second priority to exercise the
right. A bona fide written offer from an independent prospective buyer shall be
deemed to be the fair market value of such Company Stock for this purpose,
unless the value per share, as determined by the independent appraiser as of the
December 31 Accounting Date of the preceding Plan Year, is greater. The Company
and the Trust shall have a total of 14 days (from the date the offer is first
received by the Company or the Trust) to exercise the Right of First Refusal on
the same terms offered by the prospective buyer. A Participant (or the
Participant's Beneficiary) entitled to a distribution of Company Stock may be
required to execute an appropriate stock transfer agreement (evidencing the
Right of First Refusal) prior to receiving a certificate for Company Stock.
No Right of First Refusal shall be exercisable by reason of
any of the following transfers:
(a) The transfer upon disposition of any such shares by
any legal representative, heir or legatee, but the
shares shall remain subject to the Right of First
Refusal;
(b) The transfer by a Participant or a Participant's
Beneficiary in accordance with the Put Option
pursuant to subsection 12.2; or
(c) The transfer while Company Stock is listed on a
national securities exchange registered under Section
6 of the Securities Exchange Act of 1934 or quoted on
a system sponsored by a national securities
association registered under Section 15A(b) of the
Securities Exchange Act of 1934.
12.2 Put Option
The Company shall issue a "Put Option" to each Participant (or
each Participant's Beneficiary) who receives a distribution of Company Stock if,
at the time of such distribution, Company Stock is not then readily tradable on
an established market, as defined in Section 409(h) of the Code and the
regulations thereunder. The Put Option shall permit the Participant (or the
Participant's Beneficiary) to sell such Company Stock at its then fair market
value, as determined by an independent appraiser, in accordance with the
provisions of Section 401(a)(28)(C) of the Code, to the Company at any time
during the sixty-day period commencing on the date the Company Stock was
distributed to the Participant (or the Participant's Beneficiary), and, if not
exercised within that period, the Put Option will temporarily lapse. The
Administrator, in its sole discretion, may extend the sixty-day period referred
to in the immediately preceding sentence if such an extension is necessary in
order for the Company Stock to be valued by an independent appraiser as of the
applicable Accounting Date coincident with or immediately preceding the date the
Company Stock was distributed to the recipient. As of the quarterly Accounting
Date coincident with or immediately preceding the Plan Year in which such
temporary lapse of the Put Option occurs, the independent appraiser shall
determine the value of the Company Stock in accordance with the provisions of
Section 401(a)(28)(C) of the Code, and the Administrator shall notify each
distributee who did not exercise the initial Put Option prior to its temporary
lapse in the preceding Plan Year of the revised value of the Company Stock. The
time during which the Put Option may be exercised shall recommence on the date
such notice or revaluation is given and shall permanently terminate sixty days
thereafter. The Trustee may be permitted by the Company to purchase Company
Stock put to the Company under a Put Option. At the option of the Administrator
or the Trustee, as the case may be, the payment for Company Stock sold pursuant
to a Put Option shall be made, as determined in the discretion of the
Administrator or the Trustee, as the case may be, in the following forms:
(a) If a Participant's ESOP Stock Account is distributed
in a total distribution (that is, a distribution
within one taxable year of the balance to the credit
of the Participant's ESOP Stock Account), then
payment for such Company Stock may be made with a
promissory note that provides for substantially equal
annual installments commencing within thirty days
from the date of the exercise of the Put Option and
over a period not exceeding five years, with interest
payable at a reasonable rate (as determined by the
Administrator) on any unpaid installment balance,
with adequate security provided, and without penalty
for any prepayment of such installments; or
(b) In a lump sum no later than thirty days after such
Participant exercises the Put Option.
At the direction of the Administrator, the Trustee on behalf
of the Trust may offer to purchase any shares of Company Stock (which are not
sold pursuant to a Put Option) from any former Participant or Beneficiary at any
time in the future, at their then fair market value.
If the Company's charter or by-laws restrict ownership of
substantially all of the outstanding Company Stock to employees and the Trust or
the Company has elected to be taxed as an "S corporation" under Code Section
1361, then shares of Company Stock distributed to a Participant (or his
Beneficiary) must be immediately sold to the Company in accordance with
subsection 11.1 and the Participant will not be entitled to the two 60-day put
periods.
12.3 Share Legend
Shares of Company Stock held or distributed by the Trustee may
include such legend restrictions on transferability as the Company may
reasonably require in order to assure compliance with applicable Federal and
state securities laws.
12.4 Nonterminable Rights
The provisions of this Section 12 shall continue to be
applicable to shares of Company Stock even if the applicable portion of the Plan
ceases to be an employee stock ownership plan within the meaning of Section
4975(e)(7) of the Code.
<PAGE>
SECTION 13 Voting and Tendering of Company Stock
The voting of Company Stock held in the Trust, and if a tender
offer is made for Company Stock, the tendering of such shares, shall be subject
to the provisions of ERISA and the following provisions, to the extent such
provisions are not inconsistent with ERISA:
(a) Allocated Shares. For purposes of this Section,
shares of Company Stock shall be deemed to be
allocated and credited to a Participant's ESOP Stock
Account in an amount to be determined based on the
balance in such account on the Accounting Date
coincident with or next preceding the record date of
any vote or tender offer.
(b) Voting of Company Stock. If the shares of Company
Stock are a registration-type class of securities,
as defined in Section 409(e)(4) of the Code, each
Participant (or, in the event of the Participant's
death, the Participant's Beneficiary) shall have the
right to direct the Trustee as to the manner in which
whole and partial shares of Company Stock allocated
to the Participant's ESOP Stock Account are to be
voted on each matter brought before an annual or
special stockholders' meeting. Before each such
meeting of stockholders, the Trustee shall furnish to
each Participant (or Beneficiary) a copy of the proxy
solicitation material, together with a form
requesting directions on how such shares of Company
Stock allocated to such Participant's Account shall
be voted on each such matter. Upon timely receipt of
such directions, the Trustee shall, on each such
matter, vote as directed the number of shares
(including fractional shares) of Company Stock
allocated to such Participant's Account, and the
Trustee shall have no discretion in such matter. The
directions received by the Trustee from Participants
shall be held by the Trustee in confidence and shall
not be divulged or released to any person, including
officers or employees of Company or any Affiliate.
The Trustee shall vote allocated shares for which it
has not received direction and unallocated shares of
Company Stock in the same proportion as directed
shares are voted, and shall have no discretion in
such matter except as otherwise provided in
accordance with ERISA.
(c) Tendering of Company Stock. In the event of a tender
offer for shares of Company Stock held by the Trust,
the Trustee shall tender the shares in its sole
discretion, subject to the fiduciary duties under
ERISA.
In carrying out its responsibilities under this Section, the Trustee may rely on
information furnished to it by the Administrator, including the names and
current addresses of Participants, the number of shares of Company Stock
allocated to their Accounts, and the number of shares of Company Stock held by
the Trustee that have not yet been allocated.
SECTION 14 General Provisions
14.1 Interests Not Transferable
The interests of Participants and their beneficiaries under
the Plan are not in any way subject to their debts or other obligations and,
except as may be required by the tax withholding provisions of the Code or any
state's income tax act, may not be voluntarily or involuntarily sold,
transferred, alienated or assigned. Notwithstanding the foregoing, the Plan
shall comply with any domestic relations order that, in accordance with
procedures established by the Administrator, is determined to be a qualified
domestic relations order (as defined in Section 414(p)(1)(A) of the Code).
14.2 Absence of Guaranty
The Administrator, the Employers, and the Trustee do not in
any way guarantee the Trust from loss or depreciation. The liability of the
Administrator or the Trustee to make any payment under the Plan will be limited
to the assets held by the Trustee that are available for that purpose.
14.3 Employment Rights
The Plan does not constitute a contract of employment, and
participation in the Plan will not give any employee the right to be retained in
the employ of an Employer, nor any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of the Plan.
14.4 Litigation by Participants or other Persons
To the extent permitted by law, if a legal action against the
Trustee, an Employer, or the Administrator by or on behalf of any person results
adversely to that person, or if a legal action arises because of conflicting
claims to a Participant's or Beneficiary's benefits, the cost to the Trustee, an
Employer, or the Administrator of defending the action will be charged, to the
extent possible, to the sums, if any, that were involved in the action or were
payable to the Participant or Beneficiary concerned.
14.5 Evidence
Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information that the person acting on
it considers pertinent and reliable, and shall be signed, made or presented by
the proper party or parties.
14.6 Waiver of Notice
Any notice required under the Plan may be waived by the person
entitled to such notice.
14.7 Controlling Law
To the extent not superseded by the laws of the United States,
the laws of Vermong shall be controlling in all matters relating to the Plan.
14.8 Statutory References
Any reference in the Plan to the "Code" means the Internal
Revenue Code of 1986, as amended. Any reference in the Plan to "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended. Any reference in
the Plan to a section of the Code or ERISA, or to a section of any other Federal
law, shall include any comparable section or sections of any future legislation
that amends, supplements or supersedes that section.
14.9 Severability
In case any provisions of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and enforced
as if such illegal and invalid provisions had never been set forth in the Plan.
14.10 Additional Employers
With the consent of the Company, any Controlled Group Member
described in subsection 1.5 may, by filing with the Company a written instrument
to that effect, become an Employer hereunder by adopting the Plan and becoming a
party to the Trust agreement.
14.11 Action By Employers
Any action authorized or required to be taken by the Company
or an Employer under the Plan shall be by resolution of its board of directors,
by resolution of a duly authorized committee of its board of directors, or by a
person or persons authorized by resolution of its board of directors or such
committee.
14.12 Gender and Number
Where the context admits, words in the masculine gender
include the feminine and neuter genders, the plural includes the singular, and
the singular includes the plural.
14.13 Examination of Documents
Copies of the Plan and Trust agreement, and any amendments
thereto, are on file at the Human Resources office of the Company where they may
be examined by any Participant or other person entitled to benefits under the
Plan during normal business hours.
14.14 Fiduciary Responsibilities
It is specifically intended that all provisions of the Plan
shall be applied so that all fiduciaries with respect to the Plan shall be
required to meet the prudence and other requirements and responsibilities of
applicable law to the extent such requirements or responsibilities apply to
them. In general, a fiduciary shall discharge the fiduciary's duties with
respect to the Plan and the Trust solely in the interests of Participants and
beneficiaries and with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims.
14.15 Indemnification
To the extent permitted by law, any member or former member of
the Administrator, any person who was, is or becomes an officer or director of
the Company, an Employer, or a Controlled Group Member or any employee of an
Employer to whom the Administrator or any Employer has delegated any portion of
its responsibilities under the Plan, and each of them, shall be indemnified and
saved harmless by the Employers (to the extent not indemnified or saved harmless
under any liability insurance contract or other indemnification arrangement with
respect to the Plan) from and against any and all liability to which the
Administrator and such other persons may be subject by reason of any act done or
omitted to be done in good faith with respect to the administration of the Plan
and the Trust, including all expenses reasonably incurred in their defense in
the event that the Employers failed to provide such defense after having been
requested in writing to do so.
14.16 Automated Voice Response Systems, Computer Systems
The Administrator, in its discretion, may authorize
Participants to make various requests for information, elections and other
transactions under the Plan through the use of one or more of the following
methods: (a) written communications, (b) telephonic, automated voice response
system, (c) computer network, or (d) any other method designated by the
Administrator.
<PAGE>
SECTION 15 Restrictions as to Reversion of Trust Assets to the
Employers
The Employers shall have no right, title or interest in the
assets of the Trust, except as may be provided in a pledge agreement entered
into between an Employer and the Trustee in connection with an Acquisition Loan
(a "Pledge Agreement"). No part of the assets of the Trust at any time will
revert or will be repaid to the Employers, directly or indirectly, except as
follows:
(a) If the Internal Revenue Service initially determines
that the Plan, as applied to an Employer, does not
meet the requirements of a qualified plan under
Section 401(a) of the Code, the assets of the Trust
attributable to contributions made by the Employer
under the Plan shall be returned to the Employer
within one year of the date of denial of
qualification of the Plan as applied to the Employer.
(b) If a contribution or a portion of a contribution is
made by an Employer as a result of a mistake of fact,
such contribution or portion of a contribution shall
not be considered to have been contributed to the
Trust by the Employer and, after having been reduced
by any losses of the Trust allocable thereto, shall
be returned to the Employer within one year of the
date the amount is paid to the Trust.
(c) If a contribution made by an Employer is conditioned
upon the deductibility of such contribution as an
expense for Federal income tax purposes, to the
extent the deduction for the contribution made by the
Employer is disallowed, such contribution, or portion
of such contribution, after having been reduced by
any losses of the Trust allocable thereto, shall be
returned to the Employer within one year of the date
of disallowance of the deduction.
(d) If there is a default on an Acquisition Loan, an
Employer may exercise its rights under the Pledge
Agreement with respect to the shares of Company Stock
subject to the Pledge Agreement (including, but not
limited to, the sale of pledged shares, the transfer
of pledged shares to the Employer, and the
registration of pledged shares in the Employer's
name).
Contributions may be returned to an Employer pursuant to subparagraph (a) above
only if they are conditioned upon initial qualification of the Plan as applied
to that Employer and an application for determination was made by the time
prescribed by law for filing the Employer's Federal income tax return for the
taxable year in which the Plan was adopted (or such later date as the Secretary
of the Treasury may prescribe). In no event may the return of a contribution
pursuant to subparagraph (b) or (c) above cause any Participant's Account
balances to be less than the amount of such balances had the contribution not
been made under the Plan.
<PAGE>
SECTION 16 Amendment and Termination
16.1 Amendment
While the Company expects and intends to continue the Plan,
the Company reserves the right to amend the Plan from time to time by action of
the Board of Directors. Notwithstanding the foregoing:
(a) An amendment may not change the duties and
liabilities of the Administrator or the Trustee
without the consent of the Administrator or the
Trustee, whichever is applicable;
(b) An amendment shall not reduce the value of a
Participant's nonforfeitable benefits accrued prior
to the later of the adoption or the effective date of
the amendment; and
(c) Except as provided in Section 15, under no condition
shall any amendment result in the return or repayment
to the Employers of any part of the Trust or the
income therefrom or result in the distribution of the
Trust for the benefit of anyone other than employees
and former employees of the Employers and any other
persons entitled to benefits under the Plan.
The Administrator shall notify the Trustee of any amendment of the Plan within a
reasonable period of time.
16.2 Termination
The Plan will terminate as to all Employers on any date
specified by the Company if thirty days advance written notice of the
termination is given to the Administrator, the Trustee and the other Employers.
The Plan will terminate as to an individual Employer on the first to occur of
the following:
(a) The date it is terminated by that Employer if thirty
days advance written notice of the termination is
given to the Administrator, the Trustee and the other
Employers.
(b) The date that Employer is judicially declared
bankrupt or insolvent.
(c) The date that Employer completely discontinues its
contributions under the Plan.
(d) The dissolution, merger, consolidation or
reorganization of that Employer or the sale by that
Employer of all or substantially all of its assets,
except that:
(i) in any such event, arrangements may be made
with the consent of the Company whereby the
Plan will be continued by any purchaser of
all or substantially all of its assets, in
which case the successor or purchaser will
be substituted for that Employer under the
Plan and the Trust agreement; and
(ii) if an Employer is merged, dissolved or in
any other way reorganized into, or
consolidated with, any other Employer, the
Plan as applied to the former Employer will
automatically continue in effect without a
termination thereof.
16.3 Nonforfeitability and Distribution on Termination
On termination or partial termination of the Plan, the rights
of all affected Participants to benefits accrued to the date of such
termination, after all adjustments then required have been made, shall be
nonforfeitable. The Administrator shall specify the date of such termination or
partial termination as a Special Accounting Date. If an ESOP is terminated,
affected employees become 100% vested in their account balances, regardless of
their years of service. As soon as practicable after all adjustments required as
of that date have been made to the Account balances of Participants, the
Administrator shall direct the Trustee to distribute to each such affected
Participant his benefits under the Plan in one lump sum provided the Participant
is no longer employed by an Employer or a Controlled Group Member. All
appropriate provisions of the Plan will continue to apply until the Account
balances of all such Participants have been distributed under the Plan.
16.4 Notice of Termination
Participants will be notified of the termination of the Plan
within a reasonable time.
16.5 Plan Merger, Consolidation, Etc.
In the case of any merger or consolidation with, or transfer
of assets or liabilities to, any other plan, each Participant's benefits (if the
Plan terminated immediately after such merger, consolidation or transfer) shall
be equal to or greater than the benefits the Participant would have been
entitled to receive if the Plan had terminated immediately before the merger,
consolidation or transfer.
<PAGE>
SECTION 17 Administration
17.1 The Administrator
As provided in subsection 1.4, the Plan is administered by a
committee consisting of three or more persons (who may but need not be employees
of the employers) appointed by the Company. The Secretary of the Company shall
certify to the trustee from time to time the appointment to (and termination of)
office of the committee and the person who is selected as secretary of the
committee.
17.2 The Administrator's General Powers, Rights, and Duties
The Administrator shall have all the powers necessary and
appropriate to discharge its duties under the Plan, which powers shall be
exercised in the sole and absolute discretion of the Administrator, including,
but not limited to, the following:
(a) To construe and interpret the provisions of the Plan
and to make factual determinations thereunder,
including the power to determine the rights or
eligibility under the Plan of employees,
Participants, or any other persons, and the amounts
of their benefits (if any) under the Plan, and to
remedy ambiguities, inconsistencies or omissions, and
such determinations by the Administrator shall be
binding on all parties.
(b) To adopt such rules of procedure and regulations as
in its opinion may be necessary for the proper and
efficient administration of the Plan and as are
consistent with the Plan and Trust agreement.
(c) To enforce the Plan in accordance with the terms of
the Plan and the Trust and in accordance with the
rules and regulations the Administrator has adopted.
(d) To direct the Trustee as respects payments or
distributions from the Trust in accordance with the
provisions of the Plan.
(e) To furnish the Employers with such information as may
be required by them for tax or other purposes in
connection with the Plan.
(f) As directed by the Trustee, to employ agents,
attorneys, accountants, actuaries or other persons
(who also may be employed by the Employers) and to
allocate or delegate to them such powers, rights and
duties as the Administrator may consider necessary or
advisable to properly carry out administration of the
Plan, provided that such allocation or delegation and
the acceptance thereof by such agents, attorneys,
accountants, actuaries or other persons, shall be in
writing.
(g) As directed by the Trustee, to appoint an investment
manager as defined in section 3(38) of ERISA to
manage (with power to acquire and dispose of) the
assets of the Plan, which investment manager may or
may not be a subsidiary of the Company, and to
delegate to any such investment manager all of the
powers, authorities and discretions granted to the
Administrator hereunder or under the Trust agreement
(including the power to delegate and the power, with
prior notice to the Administrator, to appoint an
investment manager), in which event, any direction to
the Trustee from any duly appointed investment
manager with respect to the acquisition, retention or
disposition of Plan assets shall have the same force
and effect as if such direction had been given by the
Administrator, and to remove any investment manager;
provided, however, that the power and authority to
manage, acquire, or dispose of any asset of the Plan
shall not be delegated except to an investment
manager, and provided further that the acceptance by
any investment manager of such appointment and
delegation shall be in writing, and the Administrator
shall give notice to the Trustee, in writing, of any
appointment of, delegation to or removal of an
investment manager.
17.3 Interested Administrator Member
If a member of the Administrator is also a Participant in the
Plan, the Administrator member may not decide or determine any matter or
question concerning distributions of any kind to be made to the Administrator
member or the nature or mode of settlement of the Administrator member's
benefits, unless such decision or determination could be made by the
Administrator member under the Plan if the Administrator member were not serving
on the Administrator.
17.4 Administrator Expenses
All costs, charges and expenses reasonably incurred by the
Administrator will be paid by the Company to the extent not paid from the assets
of the Trust. No compensation will be paid to a member of the Administrator as
such.
17.5 Uniform Rules
The Administrator shall administer the Plan on a reasonable
and nondiscriminatory basis and shall apply uniform rules to all persons
similarly situated.
17.6 Information Required by the Administrator
Each person entitled to benefits under the Plan shall furnish
the Administrator with such documents, evidence, data or information as the
Administrator considers necessary or desirable for the purpose of administering
the Plan. The Employers shall furnish the Administrator with such data and
information as the Administrator may deem necessary or desirable in order to
administer the Plan. The records of the Employers as to an employee's or a
Participant's period of employment, Hours of Service, termination of employment
and the reason therefore, leave of absence, reemployment and Compensation will
be conclusive on all persons unless determined to the Administrator's
satisfaction to be incorrect.
17.7 Review of Benefit Determinations
The Administrator will provide notice in writing to any
Participant or Beneficiary whose claim for benefits under the Plan is denied,
and the Administrator shall afford such Participant or Beneficiary a full and
fair review of its decision if so requested.
17.8 Administrator's Decision Final
Subject to applicable law, any interpretation of the
provisions of the Plan and any decisions on any matter within the discretion of
the Administrator made by the Administrator in good faith shall be binding on
all persons. A misstatement or other mistake of fact shall be corrected when it
becomes known, and the Administrator shall make such adjustment on account
thereof as it considers equitable and practicable.
17.9 Denial Procedure and Appeal Process
If a Participant, Beneficiary or any other person who believes
he may be entitled to benefits under the Plan (a "Claimant") has an unresolved
question about eligibility for benefits, the form of benefits, or the amount of
benefits to be received or being received under the Plan after consulting with
the Administrator or its representatives, a formal review of the situation may
be requested in writing of the Administrator within sixty days after receiving
notification of the Claimant's Plan benefits or an estimate of the Claimant's
Plan benefits. A review decision will be made within sixty days after receipt of
such request (one hundred twenty days in special circumstances) and the Claimant
will be informed of the decision within ninety days after receipt of such
request (one hundred eighty days in special circumstances). However, if the
Claimant is not informed of the decision within the period described above, the
Claimant may request a further review by the Administrator as described below as
if the Claimant had received notice of an adverse decision at the end of that
period. The decision will be written in a manner calculated to be understood by
the Claimant, setting forth the specific reasons for any denial of a benefit or
benefit option, specific reference to pertinent Plan provisions on which such
denial is based, a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary, and an explanation of the Plan's claim
review procedure. The Claimant also shall be advised that the Claimant or the
Claimant's duly authorized representative may request a further review by the
Administrator of the decision denying the claim by filing with the Administrator
within sixty days after such notice has been received by the Claimant a written
request for such review and that Claimant may review pertinent documents, and
submit issues and comments in writing, within the same sixty-day period. If such
request is so filed, such review shall be made by the Administrator within sixty
days after receipt of such request, unless special circumstances require an
extension of time for processing in which case the review will be completed and
decision rendered within one hundred twenty days. The Claimant shall be given
written notice of the decision which shall include specific reasons for the
decision, and specific references to the pertinent Plan provisions on which the
decision is based, and such decision by the Administrator shall be final and
shall terminate the review process.
17.10 Powers and Responsibilities of the Company
(a) The Company shall be empowered to appoint and remove
the Trustee and the Administrator from time to time.
(b) The Company shall establish a "funding policy and
method," consistent with the objectives of this Plan
and with the requirements of Title I of the Act and
the purpose of the Plan which is to invest primarily
in Company Stock.
(c) The Company shall periodically review the performance
of any Fiduciary or other person to whom duties have
been delegated or allocated by it under the
provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be
satisfied by formal periodic review by the Company or
by a qualified person specifically designated by the
Company, through day-to-day conduct and evaluation,
or through other appropriate ways.
(d) The Company will furnish Plan Fiduciaries and
Participants with notices and information statements
when voting rights must be exercised pursuant to
Section 13.
(e) The Company will have authority to amend or terminate
the Plan, or to merge or consolidate the Plan with,
or transfer all or part of the assets or liabilities
to, any other Plan.
SECTION 18 Special Rules Applicable When Plan is Top-Heavy
18.1 Purpose and Effect
The purpose of this Section 18 is to comply with the
requirements of Section 416 of the Code. The provisions of this Section 18 are
effective for each Plan Year beginning on or after the Effective Date in which
the Plan is a "Top-Heavy Plan" within the meaning of Section 416(g) of the Code.
18.2 Top-Heavy Plan
In general, the Plan will be a Top-Heavy Plan for any Plan
Year if, as of the "Determination Date" (that is, the last day of the preceding
Plan Year), the sum of the amounts in subparagraphs (a), (b) and (c) below for
Key Employees (as defined generally below and in Section 416(i)(1) of the Code)
exceeds sixty percent of the sum of such amounts for all employees who are
covered by this Plan or by a defined contribution plan or defined benefit plan
that is aggregated with this Plan in accordance with subsection 18.4:
(a) The aggregate account balances of Participants under
this Plan.
(b) The aggregate account balances of Participants under
any other defined contribution plan included under
subsection 18.4.
(c) The present value of the cumulative accrued benefits
of Participants calculated under any defined benefit
plan included in subsection 18.4.
In making the foregoing determination: (i) a Participant's account balances or
cumulative accrued benefits shall be increased by the aggregate distributions,
if any, made with respect to the Participant during the 5-year period ending on
the Determination Date, including distributions under a terminated plan that, if
it had not been terminated, would have been required to be included in the
aggregation group, (ii) the account balances or cumulative accrued benefits of a
Participant who was previously a Key Employee, but who is no longer a Key
Employee, shall be disregarded, (iii) the account balances or cumulative accrued
benefits of a Beneficiary of a Participant shall be considered Accounts or
accrued benefits of the Participant, (iv) the account balances or cumulative
accrued benefits of a Participant who has not performed services for an Employer
or a Controlled Group Member at any time during the 5-year period ending on the
Determination Date shall be disregarded and (v) any rollover contribution (or
similar transfer) from a plan maintained by a corporation other than an Employer
under this Plan initiated by a Participant shall not be taken into account as
part of the Participant's aggregate account balances under this Plan.
18.3 Key Employee
In general, a "Key Employee" is an employee (or a former or
deceased employee) who, at any time during the Plan Year or any of the 4
preceding Plan Years, is or was:
(a) an officer of an Employer having annual
compensation greater than fifty percent of
the amount in effect under Code Section
415(b)(1)(A) (the defined benefit maximum)
for any such Plan Year; provided that, for
purposes of this subparagraph, no more than
fifty employees of the Employer (or, if
lesser, the greater of three employees or
ten percent of the employees) shall be
treated as officers;
(b) one of the ten employees who have annual
compensation from an Employer of more than
the limitation in effect under Code Section
415(c)(1)(A) (the defined contribution
maximum) for that year and owning or
considered as owning, within the meaning of
Section 318 of the Code, the largest
interests in the Employer; provided that, if
two employees have the same interest in the
Employer, the employee having greater annual
compensation from the Employer shall be
treated as having a larger interest;
(c) a five percent or greater owner of an
Employer; or
(d) a one percent or greater owner of an
Employer having annual compensation from
the Employer of more than $150,000.
For purposes of this subsection the term "compensation" means compensation as
defined by Code Section 414(q)(7).
18.4 Aggregated Plans
Each other defined contribution plan and defined benefit plan
maintained by an Employer that covers a Key Employee as a Participant or that is
maintained by an Employer in order for a plan covering a Key Employee to satisfy
Section 401(a)(4) or 410 of the Code shall be aggregated with this Plan in
determining whether this Plan is top-heavy. In addition, any other defined
contribution or defined benefit plan of an Employer may be included if all such
plans that are included, when aggregated, will not discriminate in favor of
officers, shareholders or Highly Compensated Participants and will satisfy all
of the applicable requirements of Sections 401(a)(4) and 410 of the Code.
18.5 Minimum Vesting
For any Plan Year in which the Plan is a Top-Heavy Plan, a
Participant's vested percentage in his Stock Account shall not be less than the
percentage determined under the following table:
Vested
Years of Service Percentage
Less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
If the foregoing provisions of this subsection 18.5 become effective, and the
Plan subsequently ceases to be a Top-Heavy Plan, no Participant shall have his
vested percentage reduced, and each Participant who has then completed three or
more Years of Service may elect to continue to have the vested percentage of his
Employer Contribution Account determined under the provisions of this subsection
18.5.
18.6 Minimum Employer Contribution
Subject to the following provisions of this subsection and
subsection 18.7, for any Plan Year in which the Plan is a Top-Heavy Plan, the
Employer contribution credited to each Participant who is not a Key Employee
shall not be less than 3 percent of such Participant's total compensation (as
defined in subsection 8.1) from the Employers for that year. In no event,
however, shall the total Employer contribution credited in any year to a
Participant who is not a Key Employee (expressed as a percentage of such
Participant's total compensation from the Employer) exceed the maximum total
Employer contribution credited in that year to a Key Employee (expressed as a
percentage of such Key Employee's total compensation from an Employer).
Contributions made by an Employer under the Plan pursuant to Participants'
income deferral authorizations shall not be deemed Employer Contributions for
purposes of this subsection. The amount of minimum Employer contribution
otherwise required to be allocated to any Participant for any Plan Year under
this subsection shall be reduced by the amount of Employer Contributions
allocated to him for a Plan Year ending with or within that Plan Year under any
other tax-qualified defined contribution plan maintained by an Employer.
18.7 Coordination of Benefits
For any Plan Year in which the Plan is top-heavy, in the case
of a Participant who is a non-Key Employee and who is a Participant in a
top-heavy tax-qualified defined benefit plan that is maintained by an Employer
and that is subject to Section 416 of the Code, subsection 18.5 shall not apply,
and the minimum benefit to be provided to each such Participant in accordance
with this Section 18 and Section 416(c) of the Code shall be the minimum annual
retirement benefit to which he is entitled under such defined benefit plan in
accordance with such Section 416(c), reduced by the amount of annual retirement
benefit purchasable with his Plan Accounts (or portions thereof) attributable to
Employer contributions (as defined in subsection 18.6) under this Plan and any
other tax-qualified defined contribution plan maintained by an Employer.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.114
<SEQUENCE>11
<FILENAME>0011.txt
<DESCRIPTION>EMPLOYEE STOCK OWNERSHIP TRUST
<TEXT>
Green Mountain Coffee, Inc.
EMPLOYEE STOCK OWNERSHIP TRUST
TABLE OF CONTENTS
PAGE
----
ARTICLE 1.................................................................. 2
Name.............................................................. 2
ARTICLE 2.................................................................. 2
Management and Control of Trust Fund Assets....................... 2
2.1 The Trust Fund.................................. 2
2.2 Collective Investment........................... 2
2.3 Allocation and Segregation of Funds Among
Employers....................................... 2
2.4 Withdrawals..................................... 3
2.5 Responsibility of Trustee....................... 3
2.6 General Powers.................................. 4
2.7 Compensation and Expenses....................... 9
2.8 Exercise of Trustee's Duties.................... 9
2.9 Plan Administration............................. 10
2.10 Continuation of Powers Upon Trust Termination... 10
ARTICLE 3.................................................................. 10
Provisions Related to Investment in Company Stock................. 10
3.1 Investment of Cash.............................. 10
3.2 Stock Dividends, Splits and Other Capital
Reorganizations................................. 11
3.3 Voting of Shares and Tender or Exchange Offers.. 11
3.4 Put Option...................................... 11
ARTICLE 4.................................................................. 12
Miscellaneous..................................................... 12
4.1 Disagreement as to Acts......................... 12
4.2 Persons Dealing with Trustee.................... 12
4.3 Benefits May Not Be Assigned or Alienated....... 12
4.4 Evidence........................................ 12
4.5 Waiver of Notice................................ 12
4.6 Counterparts.................................... 13
4.7 Governing Laws and Severability................. 13
4.8 Successors...................................... 13
4.9 Action.......................................... 13
4.10 Conformance with Plan........................... 13
4.11 Indemnification................................. 14
4.12 Gender and Number............................... 14
4.13 Headings........................................ 14
ARTICLE 5.................................................................. 14
No Reversion to Company........................................... 14
ARTICLE 6.................................................................. 15
Change of Trustee................................................. 15
6.1 Resignation..................................... 15
6.2 Removal of the Trustee.......................... 16
6.3 Duties of Resigning or Removed Trustee and
of Successor Trustee........................... 16
6.4 Filling Trustee Vacancy......................... 16
6.5 Successor Trustee............................... 16
ARTICLE 7.................................................................. 17
Additional Employers.............................................. 17
ARTICLE 8.................................................................. 17
Amendment and Termination......................................... 17
8.1 Amendment....................................... 17
8.2 Termination..................................... 18
<PAGE>
GREEN MOUNTAIN COFFEE, Inc.
EMPLOYEE STOCK OWNERSHIP TRUST
THIS AGREEMENT, made effective as of the 1st day of January,
2000, by and between Green Mountain Coffee, Inc., a Delaware corporation (the
"Company"), and Robert D. Britt, and his successor or successors and assigns in
the trust hereby evidenced, as Trustee (the "Trustee").
WITNESSETH THAT:
---------------
WHEREAS, the Company desires to establish the Green Mountain
Coffee, Inc. Employee Stock Ownership Plan (the "Plan") as a tax-qualified
employee stock ownership plan that is intended to satisfy the requirements of
Sections 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the Company intends to establish the Plan for the
exclusive benefit of eligible employees of the Company and those of any
Controlled Group Member (as defined in Article 7) which adopt the Plan and
become a party to this Trust Agreement as provided in Article 7 (the Company and
the Controlled Group Members that are parties hereto are sometimes referred to
below collectively as the "Employers" and individually as an "Employer"); and
WHEREAS, the Company intends to fund the Plan through a trust
arrangement the provisions of which are contained in this document;
WHEREAS, Robert D. Britt was appointed the sole trustee of the
trust arrangement of the Plan as of January 1, 2000.
NOW THEREFORE, pursuant to the authority delegated to the
undersigned officers of the Company by resolution of its Board of Directors
adopted on September 14, 2000, IT IS AGREED, by and between the parties hereto,
that the trust provisions contained herein shall constitute the Trust, effective
as of January 1, 2000, and the sole agreement between the Company and the
Trustee in connection with the Plan; and
IT IS FURTHER AGREED, that the Trustee hereby accepts his
appointment as such under this Trust Agreement, effective as of January 1, 2000.
IT IS FURTHER AGREED, by and between the parties hereto as
follows:
ARTICLE 1 Name
This Trust Agreement and Trust hereby evidenced shall be known
as the "GREEN MOUNTAIN COFFEE, INC. EMPLOYEE STOCK OWNERSHIP TRUST."
ARTICLE 2 Management and Control of Trust Fund Assets
2.1 The Trust Fund
The "Trust Fund" as at any date means all property of every
kind then held by the Trustee pursuant to this Agreement.
2.2 Collective Investment
Except as is necessary to comply with the requirements of
subsection 2.6, the Trustee may manage, invest and account for all contributions
made by the several Employers under the Plan as one Trust Fund.
2.3 Allocation and Segregation of Funds Among Employers
The Trustee is directed to maintain at all times such records
as will enable it to effect, as of any time, an equitable allocation and
segregation of the assets of the Trust Fund into one or more separate funds held
for the exclusive benefit of each Employer. If the Administrator notifies the
Trustee (in writing) to effect such allocation and segregation, the Trustee
shall do so as soon thereafter as practicable. Thereafter, the Trustee shall
administer such separate fund in accordance with the otherwise-applicable
provisions of this Trust, or, if so directed by the Administrator, shall deliver
the assets of such separate fund to such successor trustee as shall be
designated by the Administrator.
If, for any reason, it becomes necessary to determine the
portion of the Trust Fund allocable to each of the employees and former
employees of any Employer as of any date, the Administrator shall specify such
date as an Accounting Date, and after all adjustments required under the Plan as
of that Accounting Date have been made, the portion of the Trust Fund
attributable to each of the employees and former employees shall be determined
by the Trustee with the assistance and cooperation of the Administrator and
shall consist of an amount equal to the aggregate of the account balances of
each employee and former employee of that Employer plus an amount equal to any
allocable contributions made by that Employer since the close of the immediately
preceding Plan Year.
2.4 Withdrawals
For the purpose of making payment or distribution of benefits
or expenses that become payable or distributable in the ordinary course of
administering the Plan, the Plan may withdraw any part or all of the account
balance in any Fund at any time. Such a withdrawal will be deemed to have been
made whenever the Trustee makes a distribution at the direction of the
Administrator to a person or persons designated to receive such distribution by
the Administrator. The Trustee may distribute the Plan's entire account balances
in the Trust Fund as of any Accounting Date if directed to do so by the
Administrator and shall do so if it is notified that:
(a) The Plan is no longer a qualified plan; or
(b) The Plan either no longer contains provisions
permitting deposits to be made to this Trust or no
longer incorporates the provisions of this agreement
by reference.
Any distribution may be made in cash or in property, or partly in each, as
determined by the Administrator, except that any property included in any
distribution shall be valued at its fair market value as of the date of
distribution, as determined by the Trustee. Whenever a distribution is made as
of a date other than the Accounting Date, the Plan's account balance will be
charged no later than the Accounting Date next following the date the withdrawal
is made by the dollar amount of the withdrawal.
2.5 Responsibility of Trustee
The Trustee shall not be responsible in any way for the
adequacy of the Trust Fund to meet and discharge any or all liabilities under
the Plan or for the proper application of distributions made or other action
taken upon the written direction of the Administrator. The powers, duties and
responsibilities of the Trustee shall be limited to those set forth in this
Trust Agreement, and nothing contained in the Plan, either expressly or by
implication, shall be deemed to impose any additional powers, duties or
responsibilities on the Trustee.
2.6 General Powers
Subject to the provisions of paragraphs 2.8 and 2.9 and
Article 3, with respect to the Trust Fund, the Trustee shall have the following
powers, rights and duties in addition to those provided elsewhere in this Trust
Agreement or by law:
(a) to receive and to hold all contributions paid to it
under the Plan; provided, however, that the Trustee
shall have no duty to require any contributions to be
made to it, to determine that the contributions
received by it comply with the provisions of the Plan
or with any resolution of the Board providing
therefor;
(b) as directed by the Administrator, to retain in cash
(pending investment, reinvestment or the distribution
of dividends) such reasonable amount as may be
required for the proper administration of the Trust
and to invest such cash as provided in paragraph 3.1;
(c) as directed by the Administrator, to make
distributions from the Trust Fund to such persons, in
such manner, at such times and in such forms (stock
of the Company ("Company Stock"), cash or a
combination of both) as directed without inquiring as
to whether a payee is entitled to the payment, or as
to whether a payment is proper, and without liability
for a payment made in good faith without actual
notice or knowledge of the changed condition or
status of the payee. If any payment of benefits
directed to be made from the Trust Fund by the
Trustee is not claimed, the Trustee shall notify the
Administrator of that fact promptly. The
Administrator shall make a diligent effort to
ascertain the whereabouts of the payee or distributee
of benefits returned unclaimed. The Trustee shall
dispose of such payments as the Administrator shall
direct. The Trustee shall have no obligation to
search for or ascertain the whereabouts of any payee
or distributee of benefits from the Trust Fund;
(d) to vote any stocks (including Company Stock, which
shall be voted as provided in Section 13(b) of the
Plan, as that Section may be amended from time to
time), bonds or other securities held in the Trust,
or otherwise consent to or request any action on the
part of the issuer in person, by proxy or power of
attorney;
(e) to contract or otherwise enter into transactions
between itself, as Trustee, and the Company or any
Company shareholder, for the purpose of acquiring or
selling Company Stock and, subject to the provisions
of paragraph 2.8, to retain such Company Stock;
(f) to compromise, contest, arbitrate, settle or abandon
claims and demands by or against the Trust Fund;
(g) to begin, maintain or defend any litigation necessary
in connection with the investment, reinvestment and
administration of the Trust, and, to the extent not
paid from the Trust Fund, the Company shall indemnify
the Trustee against all expenses and liabilities
reasonably sustained or anticipated by it by reason
thereof (including reasonable attorneys' fees);
(h) to retain any funds or property subject to any
dispute without liability for the payment of
interest, or to decline to make payment or delivery
thereof until final adjudication is made by a court
of competent jurisdiction;
(i) to report to the Company as of the last day of each
Plan Year of the Plan (which shall be the same as the
Trust's fiscal year), as of any Accounting Date (or
as soon thereafter as practicable), or at such other
times as may be required under the Plan, the then
"Net Worth" of the Trust Fund, that is, the fair
market value of all property held in the Trust Fund,
reduced by any liabilities other than liabilities to
Participants in the Plan and their Beneficiaries, as
determined by the Trustee;
(j) to furnish to the Company an annual written account
and accounts for such other periods as may be
required under the Plan, showing the Net Worth of the
Trust Fund at the end of the period, all investments,
receipts, disbursements and other transactions made
by the Trustee during the accounting period, and such
other information as the Trustee may possess which
the Company requires in order to comply with Section
103 of ERISA. The Trustee shall keep accurate
accounts of all investments, earnings thereon, and
all accounts, books and records related to such
investments shall be open to inspection by any person
designated by the Company or the Administrator. All
accounts of the Trustee shall be kept on an accrual
basis. If, during the term of this Trust Agreement,
the Department of Labor issues regulations under
ERISA regarding the valuation of securities or other
assets for purposes of the reports required by ERISA,
the Trustee shall use such valuation methods for
purposes of the accounts described by this
subparagraph. If shares of Company Stock are not
traded with sufficient volume or frequency, as
determined by the Administrator, to be considered as
being readily tradable on a national securities
market or exchange, all valuations of shares of
Company Stock shall originally be made by an
independent appraiser (as described in Section 401(a)
(28)(C) of the Code) retained by the Trustee, and
reviewed and finalized by the Trustee in accordance
with Section 3(18)(B) of ERISA. The Company may
may approve such accounting by written notice of
approval del