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Proc-Type: 2001,MIC-CLEAR
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FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION (Mark One) ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the twelve weeks ended April 14, 2001 OR o
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. Delaware 03-0339228 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 33 Coffee Lane, Waterbury, Vermont 05676 (Address of principal executive offices) (zip code) (802) 244-5621 (Registrants' telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES [ Ö
] NO [ ] As of May 18, 2001, 6,442,795 shares of common stock of the registrant were outstanding. Part I. Financial Information GREEN MOUNTAIN COFFEE, INC. April 14, September 30, (unaudited) Assets Current assets: Cash and cash equivalents $ 1,258 $ 559 Receivables, less allowances of $436 at April 14, 2001 and $320 Inventories 4,974 5,350 Other current assets 1,300 510 Deferred income taxes, net 234 182 Total current assets 17,618 15,055 Fixed assets, net 11,831 11,274 Other long-term assets 292 348 Deferred income taxes, net 343 497 Total assets $ 30,084 $ 27,174 ====== ====== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 160 $ 135 Accounts payable 6,184 6,125 Accrued compensation costs 1,566 1,381 Accrued expenses 1,182 614 Accrued losses and other costs of discontinued operations, net 119 119 Total current liabilities 9,211 8,374 Long-term debt 272 283 Long-term line of credit 6,000 8,500 Commitments and contingencies Stockholders' equity: Common stock, $0.10 par value: Additional paid-in capital 15,186 13,534 Retained earnings 5,811 2,778 Other comprehensive loss, net of tax (121) - Treasury shares, at cost - 1,137,506 shares at April 14, 2001 and Total stockholders' equity 14,601 10,017 Total liabilities and stockholders' equity $ 30,084 $ 27,174 ====== ====== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial
Washington, D.C. 20549
(Exact name of registrant as specified in its charter)
Item 1. Financial Statements
Consolidated Balance Sheets
(Dollars in thousands)
2001
2000
at September 30, 2000
9,852
8,454
Authorized - 10,000,000 shares; Issued - 7,544,602 and 7,342,010 shares at April 14, 2001 and September 30, 2000, respectively
754
734
September 30, 2000
(7,029)
(7,029)
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statements of Operations
(Dollars in thousands except per share data)
Twelve weeks ended |
|||
April 14, 2001 |
April 8, 2000 |
||
(unaudited) |
|||
Net sales |
$ 22,741 |
$ 18,259 |
|
Cost of sales |
13,061 |
10,990 |
|
Gross profit |
9,680 |
7,269 |
|
Selling and operating expenses |
5,756 |
4,642 |
|
General and administrative expenses |
1,721 |
1,372 |
|
Loss on abandonment of fixed assets |
- |
135 |
|
Operating income |
2,203 |
1,120 |
|
Other income |
14 |
14 |
|
Interest expense |
(146) |
(107) |
|
Income before income taxes |
2,071 |
1,027 |
|
Income tax expense |
(858) |
(412) |
|
Net income |
$ 1,213 |
$ 615 |
|
====== |
====== |
||
Basic income per share: |
|||
Weighted average shares outstanding |
6,353,999 |
6,719,956 |
|
Net income |
$ 0.19 |
$ 0.09 |
|
Diluted income per share: |
|||
Weighted average shares outstanding |
7,178,428 |
7,093,768 |
|
Net income |
$ 0.17 |
$ 0.09 |
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statement of Operations
(Dollars in thousands except per share data)
Twenty-eight weeks ended |
|||
April 14, 2001 |
April 8, 2000 |
||
(unaudited) |
|||
Net sales |
$ 53,646 |
$ 43,001 |
|
Cost of sales |
31,445 |
25,686 |
|
Gross profit |
22,201 |
17,315 |
|
Selling and operating expenses |
13,152 |
10,691 |
|
General and administrative expenses |
3,608 |
3,056 |
|
Loss on abandonment of fixed assets |
- |
135 |
|
Operating income |
5,441 |
3,433 |
|
Other income |
27 |
10 |
|
Interest expense |
(344) |
(248) |
|
Income before income taxes |
5,124 |
3,195 |
|
Income tax expense |
(2,091) |
(1,280) |
|
Net income |
$ 3,033 |
$ 1,915 |
|
====== |
====== |
||
Basic income per share: |
|||
Weighted average shares outstanding |
6,302,420 |
6,838,890 |
|
Net income |
$ 0.48 |
$ 0.28 |
|
Diluted income per share: |
|||
Weighted average shares outstanding |
7,118,183 |
7,088,950 |
|
Net income |
$ 0.43 |
$ 0.27 |
Twelve weeks ended |
Twenty-eight weeks ended |
|||||||||
April 14, 2001 |
April 8, 2000 |
April 14, 2001 |
April 8, 2000 |
|||||||
Net income |
$ 1,213 |
$ 615 |
$ 3,033 |
$ 1,915 |
||||||
Other comprehensive income, net of tax: |
||||||||||
Deferred losses on derivatives designated as cash flow hedges |
(34) |
|
(121) |
|
||||||
Other comprehensive loss |
(34) |
- |
(121) |
- |
||||||
Comprehensive income |
$ 1,179 |
$ 615 |
$ 2,912 |
$ 1,915 |
||||||
===== |
===== |
===== |
===== |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
GREEN MOUNTAIN COFFEE, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Twenty-eight weeks ended |
|||
April 14, 2001 |
April 8, 2000 |
||
(unaudited) |
|||
Cash flows from operating activities: |
|||
Net income |
$ 3,033 |
$ 1,915 |
|
Adjustments to reconcile net income to net cash |
|||
Depreciation and amortization |
1,892 |
1,596 |
|
(Gain) loss on disposal and abandonment of fixed assets |
(9) |
194 |
|
Provision for doubtful accounts |
530 |
138 |
|
Deferred income taxes |
102 |
133 |
|
Tax benefit from exercise of non-qualified stock options |
801 |
- |
|
Changes in assets and liabilities: |
|||
Receivables |
(1,928) |
(1,709) |
|
Inventories |
376 |
30 |
|
Other current assets |
(911) |
(22) |
|
Other long-term assets, net |
56 |
12 |
|
Accounts payable |
59 |
559 |
|
Accrued compensation costs |
185 |
296 |
|
Accrued expenses |
568 |
818 |
|
Net cash provided by continuing operations |
4,754 |
3,960 |
|
Net cash used for discontinued operations |
- |
(12) |
|
Net cash provided by operating activities |
4,754 |
3,948 |
|
Cash flows from investing activities: |
|||
Capital expenditures for fixed assets |
(2,553) |
(2,070) |
|
Proceeds from disposals of fixed assets |
113 |
255 |
|
Net cash used for investing activities |
(2,440) |
(1,815) |
|
Cash flows from financing activities: |
|||
Purchase of treasury shares |
- |
(1,694) |
|
Proceeds from issuance of common stock |
871 |
136 |
|
Proceeds from issuance of long-term debt |
97 |
43 |
|
Repayment of long-term debt |
(83) |
(2,633) |
|
Net change in revolving line of credit |
(2,500) |
2,419 |
|
Net cash used for financing activities |
(1,615) |
(1,729) |
|
Net increase in cash and cash equivalents |
699 |
404 |
|
Cash and cash equivalents at beginning of period |
559 |
415 |
|
Cash and cash equivalents at end of period |
$ 1,258 |
$ 819 |
|
===== |
===== |
Green Mountain Coffee, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements.
In the opinion of management, all adjustments considered necessary for a fair statement of the interim financial data have been included. Results from operations for the twelve and twenty-eight week periods ended April 14, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending September 29, 2001.
For further information, refer to the consolidated financial statements and the footnotes included in the annual report on Form 10-K for Green Mountain Coffee, Inc. for the fiscal year ended September 30, 2000.
Certain reclassifications of prior year balances have been made to conform to the current presentation.
2. Inventories
Inventories consisted of the following:
April 14, |
September 30, |
||
Raw materials and supplies |
$ 2,454,000 |
$ 2,557,000 |
|
Finished goods |
2,520,000 |
2,793,000 |
|
$ 4,974,000 |
$ 5,350,000 |
||
====== |
====== |
Inventory values above are presented net of $143,000 and $127,000 of obsolescence reserves at April 14, 2001 and September 30, 2000, respectively.
3. Earnings Per Share
The following table illustrates the reconciliation of the numerator and denominator of basic and diluted income per share computations as required by SFAS No. 128 (dollars in thousands, except per share data):
Twelve weeks ended |
Twenty-eight weeks ended |
||||||
April 14, 2001 |
April 8, 2000 |
April 14, 2001 |
April 8, 2000 |
||||
Numerator - basic and diluted earnings per share : |
$ 1,213 |
$ 615 |
$ 3,033 |
$ 1,915 |
|||
Denominator: |
===== |
===== |
===== |
===== |
|||
Basic earnings per share - weighted average shares outstanding |
6,353,999 |
6,719,956 |
6,302,420 |
|
6,838,890 |
||
Effect of dilutive securities - stock options |
824,429 |
373,812 |
815,763 |
250,060 |
|||
Diluted earnings per share - weighted average shares outstanding |
7,178,428 |
7,093,768 |
7,118,183 |
7,088,950 |
|||
===== |
===== |
===== |
===== |
||||
Basic earnings per share |
$ 0.19 |
$ 0.09 |
$ 0.48 |
$ 0.28 |
|||
Diluted earnings per share |
$ 0.17 |
$ 0.09 |
$ 0.43 |
$ 0.27 |
For the twelve weeks ended April 14, 2001, options to purchase 5,500 shares of common stock at exercise prices ranging from $20.281 to $20.938 per share were outstanding but were not included in the computation of diluted income per share because the options' exercise price was greater than the market price of the shares of common stock.
For the twelve weeks ended April 8, 2000, options to purchase 4,600 shares of common stock at an exercise price of $6.375 per share were outstanding but were not included in the computation of diluted income per share because the options' exercise price was greater than the market price of the common shares.
In prior fiscal years, the Company reported two distinct segments determined by distribution channel: a direct mail segment and a wholesale segment. Both segments of the Company sold similar products, although the entire Company's product range was not fully available to both segments. In fiscal 2000, direct mail sales accounted for $4,146,000 or 4.9% of total Company sales and this segment had been shrinking as a percent of total sales for the past three fiscal years. In addition, on October 1, 2000, in an effort to manage sales to small businesses more effectively, the Company transferred its "business to business" operations from direct mail to its wholesale sales organization, thereby further decreasing the size of the direct mail segment. Consequently, the Company is reporting a single segment in fiscal 2001.
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 requires the Company to recognize derivatives on its balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. 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. SFAS 137 deferred the effective date of SFAS 133 to fiscal years beginning after June 15, 2000.
The Company adopted SFAS 133/SFAS 137 on October 1, 2000, the first day of its fiscal 2001 year.
The Company regularly enters into coffee futures contracts to hedge forecasted purchases of green coffee and therefore designates these contracts as cash flow hedges. In addition to futures contracts, the Company occasionally purchases coffee options as a way to delay the impact on green coffee costs of a frost in Brazil, which can lead to significant price increases in all green coffee markets. Such options are not designated as hedges and are adjusted to fair market value at the end of each reporting period, with the corresponding gain or loss reflected in income. At April 14, 2001, the Company held outstanding futures contracts with a fair market value of $(67,000). These futures contracts are hedging coffee purchases forecasted to take place in the next twelve months and the related gain and losses will be reflected in cost of sales over the remaining fiscal quarters of 2001 as well as the first three fiscal quarters of 2002, when the related finished goods inventory is sold. No options were outstanding at April 14, 2001. At September 30, 2000, the Company held options and futures contracts with a total fair market value of $(70,000).
At April 14, 2001, deferred losses on futures contracts designated as cash flow hedges amounted to $204,000 ($121,000 net of taxes). These deferred losses are classified as accumulated other comprehensive losses.
In the second quarter of fiscal 2001, total losses on options and futures included in cost of sales amounted to $106,000.
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 was December 28, 2000, and the payment date was January 11, 2001. The par value of the common stock remained unchanged at $0.10 per share. All prior year share and per share data presented in this report were restated to reflect this stock split.
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, which is the fourth quarter of the current fiscal year for the Company.
The Company is currently evaluating the effect of the adoption of SAB 101 on the Company's financial position and results of operations, primarily the impact of recording sales upon shipment of goods versus customer receipt in the case of shipments made by the Company via common carrier.
On September 14, 2000, the Board of Directors of the Company adopted a resolution establishing the Green Mountain Coffee Inc. Employee Stock Ownership Plan (the "ESOP") and the related Green Mountain Coffee, Inc. Employee Stock Ownership Trust (the "Trust"). The ESOP is qualified under sections 401(a) and 4975(e)(7) of the Internal Revenue Code.
For the twenty-eight weeks ended April 14, 2001, the Company recorded compensation costs of $235,000 to accrue for anticipated stock distributions under the ESOP.
On April 16, 2001, the Company made a $2,000,000 loan to the Trust to provide funds for the open- market purchases of the Company's common stock. This loan bears interest at an annual rate of 8.5% and provides for annual repayments to the Company. The maturity date of the loan is the last business day of the Company's fiscal 2010 year. Between April 19, 2001 and May 11, 2001, the Trust purchased 25,800 shares of the Company's common stock at an average price of $25.15 per share.
During the second quarter of fiscal 2001, the Company recorded an impairment charge of $52,000 against its $104,000 minority ownership investment in ChefExpress.net, Inc. due to the fact that ChefExpress.net is experiencing a slower than expected sales ramp due to difficulties in raising adequate growth capital. ChefExpress.net features an e-procurement Web site for chefs in restaurants and the high-end sector of the food service channel. A board member of the Company is the Chief Executive Officer and President of ChefExpress.net.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Green Mountain Coffee, Inc. (the "Company" or "Green Mountain") sells coffee to retailers including supermarkets, convenience stores, specialty food stores; food service concerns including restaurants, hotels, universities and business offices; and directly to individual consumers.
Cost of sales consists of the cost of raw materials including coffee beans, flavorings and packaging materials, a portion of the Company's rental expense, the salaries and related expenses of production and distribution personnel, depreciation on production equipment and freight and delivery expenses. Selling and operating expenses consist of expenses that directly support the sales of the Company's wholesale or consumer direct 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, after the commencement of the fiscal year. Fiscal 2000, which began on September 26, 1999 and ended on September 30, 2000, consisted of 53 weeks, with the thirteenth fiscal period having 5 weeks, instead of the usual 52 weeks.
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 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 and 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.
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, fluctuations in availability and cost of green coffee, the impact of a weaker economy, competition and other business conditions in the coffee industry and more generally in the food and beverage industry, the impact of the loss of a major customer, delays in the timing of adding new locations with existing customers, the Company's level of success in continuing to attract new customers, variances from budgeted sales mix and growth rate, weather and special or unusual events, as well as 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.
Results of Operations
Twelve weeks ended |
Twenty-eight weeks ended |
||||||
April 14, 2001 |
April 8, 2000 |
April 14, 2001 |
April 8, 2000 |
||||
Net sales |
100.0 % |
100.0 % |
100.0 % |
100.0 % |
|||
Cost of sales |
57.4 % |
60.2 % |
58.6 % |
59.7 % |
|||
Gross profit |
42.6 % |
39.8 % |
41.4 % |
40.3 % |
|||
Selling and operating expenses |
25.3 % |
25.4 % |
24.5 % |
24.9 % |
|||
General and administrative expenses |
7.6 % |
7.5 % |
6.8 % |
7.1 % |
|||
Loss on abandonment of fixed assets |
- % |
0.8 % |
- % |
0.3 % |
|||
Operating income |
9.7 % |
6.1 % |
10.1 % |
8.0 % |
|||
Other income |
0.0 % |
0.1 % |
0.1 % |
0.0 % |
|||
Interest expense |
(0.6)% |
(0.6)% |
(0.6)% |
(0.6)% |
|||
Income from continuing operations |
|
|
9.6 % |
7.4 % |
|||
Income tax expense |
(3.8)% |
(2.2)% |
(3.9)% |
|
(2.9)% |
||
Net income |
5.3 % |
3.4 % |
5.7 % |
4.5 % |
|||
==== |
==== |
==== |
==== |
Total Company Coffee Pounds Sold by Sales Channel
(As a percentage of total coffee pounds sold)
Unaudited
Channel |
Q2 12 wks. ended 4/14/01 |
Q2 12 wks. ended 4/8/00 |
Q2 Y/Y lb. Increase |
Q2 % Y/Y lb. Increase |
Q2 YTD 28 wks. ended 4/14/01 |
Q2 YTD 28 wks. ended 4/8/00 |
Q2 YTD Y/Y lb. Increase |
Q2 YTD % Y/Y lb. Increase |
Supermarkets |
22.3% |
23.4% |
92,000 |
16.5 % |
24.0% |
24.3% |
241,000 |
17.6 % |
Convenience Stores |
30.7% |
27.4% |
242,000 |
37.1 % |
28.4% |
27.1% |
380,000 |
25.0 % |
Other Retail |
1.8% |
2.3% |
(4,000) |
(7.3)% |
2.0% |
2.5% |
(1,000) |
(0.7)% |
Restaurants |
8.7% |
11.6% |
(24,000) |
(8.7)% |
9.3% |
11.5% |
(26,000) |
(4.0)% |
Office Coffee Service Distributors |
26.0% |
25.2% |
160,000 |
26.8 % |
25.3% |
22.8% |
407,000 |
31.7 % |
Other Food Service |
8.5% |
8.4% |
46,000 |
22.9 % |
8.5% |
9.2% |
50,000 |
9.7 % |
Consumer Direct |
2.0% |
1.7% |
19,000 |
47.5 % |
2.5% |
2.6% |
22,000 |
15.3 % |
Totals |
2,913,000 |
2,382,000 |
531,000 |
22.3 % |
6,697,000 |
5,624,000 |
1,073,000 |
19.1 % |
Note 1: Certain prior year customer channel classifications were reclassified to conform to current year classifications.
Note 2: Consumer direct is comprised of direct mail and e-commerce Web site sales to consumers.
Wholesale Coffee Pounds Sold, by Geographic Region
(As a percentage of total wholesale coffee pounds sold)
Unaudited
Region |
Q2 12 wks ended 4/14/01 |
Q2 12 wks ended 4/8/00 |
Q2 Y/Y lb. Increase |
Q2 %Y/Y lb. Increase |
Q2 YTD 28 wks ended 4/14/01 |
Q2 YTD 28 wks ended 4/8/00 |
Q2 YTD Y/Y lb. Increase |
Q2 YTD % Y/Y lb. Increase |
Northern New England |
29.3% |
32.1% |
84,000 |
11.2 % |
30.8 % |
33.5 % |
174,000 |
9.5 % |
Southern New England |
24.1% |
24.2% |
122,000 |
21.5 % |
24.8 % |
24.3 % |
286,000 |
21.5 % |
Mid-Atlantic |
21.5% |
21.6% |
106,000 |
20.9 % |
21.9 % |
21.3 % |
265,000 |
22.7 % |
South Atlantic |
8.7% |
7.4% |
75,000 |
43.4 % |
8.0 % |
6.5 % |
161,000 |
45.0 % |
Midwest |
2.2% |
2.8% |
(1,000) |
(1.5)% |
2.5 % |
2.5 % |
26,000 |
19.3 % |
South Central & West |
5.9% |
2.3% |
115,000 |
213.0 % |
4.1 % |
2.2 % |
153,000 |
130.8 % |
Multi-Regional |
7.2% |
8.4% |
8,000 |
4.1 % |
6.8 % |
8.7 % |
(35,000) |
(7.3)% |
International |
1.1% |
1.2% |
3,000 |
10.7 % |
1.1 % |
1.0 % |
21,000 |
38.9 % |
Totals |
2,854,000 |
2,342,000 |
512,000 |
21.9 % |
6,531,000 |
5,480,000 |
1,051,000 |
19.2 % |
Note 1: Excludes coffee pounds sold in the consumer direct channel.
Note 2: The allocation by region of coffee pounds sold to certain McLane Company, Inc. warehouses for distribution to ExxonMobil convenience stores has been estimated. This information will be adjusted in future quarters once the detailed sales data to ExxonMobil locations is made available to the Company.
Twelve weeks ended April 14, 2001 versus twelve weeks ended April 8, 2000
Net sales increased by $4,482,000, or 24.5%, from $18,259,000 for the twelve weeks ended April 8, 2000 (the "2000 period") to $22,741,000 for the twelve weeks ended April 14, 2001 (the "2001 period"). Coffee pounds sold increased by approximately 531,000 pounds, or 22.3%, from approximately 2,382,000 pounds in the 2000 period to approximately 2,913,000 pounds in the 2001 period. The pounds sold increase was strongest in the convenience store channel, which grew 37.1%, largely due to the initial ramp up of sales to McLane Company, Inc. which has started to purchase Green Mountain coffee for distribution to ExxonMobil convenience stores.
Gross profit increased by $2,411,000, or 33.2%, from $7,269,000 for the 2000 period to $9,680,000 for the 2001 period. As a percentage of net sales, gross profit increased 2.8 percentage points from 39.8% for the 2000 period to 42.6% for the 2001 period. The increase in gross profit as a percentage of sales was due primarily to lower green coffee costs and, to a lesser extent, reductions in other raw material prices and increased delivery charges to consumer direct customers.
Selling and operating expenses increased by $1,114,000, or 24.0%, from $4,642,000 for the 2000 period to $5,756,000 for the 2001 period. Selling and operating expenses decreased 0.1 percentage point as a percentage of sales from 25.4% for the 2000 period to 25.3% for the 2001 period. The dollar increase in selling and operating expense was due to varied factors, including increases in promotional materials expenditures and increased sales personnel expenses.
General and administrative expenses increased by $349,000, or 25.4%, from $1,372,000 for the 2000 period to $1,721,000 for the 2001 period. As a percentage of sales, general and administrative expenses increased 0.1 percentage point as a percentage of sales from 7.5% for the 2000 period to 7.6% for the 2001 period. The dollar increase in general and administrative expenses was primarily due to higher personnel expenses, recruiting costs of the Company's new Vice President of Human Resources and Organizational Development, and a reserve against a minority ownership investment in an e-commerce startup.
During the 2000 period, following a thorough review of its production fixed assets, the Company recorded a $135,000 loss on abandonment of production equipment and software. A large portion of the equipment and software written-off was the coffee roasters control system, which, following a series of upgrades and modifications, had been substantially replaced over time.
As a result of the foregoing, operating income increased by $1,083,000, or 96.7%, from $1,120,000 for the 2000 period to $2,203,000 for the 2001 period.
Interest expense increased by $39,000, or 36.4%, from $107,000 for the 2000 period to $146,000 for the 2001 period. The increase is due to the higher debt balance related to repurchases of treasury stock which occurred primarily in the third quarter of fiscal 2000.
Income tax expense increased $446,000, or 108.3%, from $412,000 for the 2000 period to $858,000 for the 2001 period. It is expected that the Company's effective tax rate will approximate 42.5% throughout the remainder of fiscal 2001.
Net income increased by $598,000, or 97.2%, from $615,000 for the 2000 period to $1,213,000 in the 2001 period.
Twenty-eight weeks ended April 14, 2001 versus twenty-eight weeks ended April 8, 2000
Net sales increased by $10,645,000, or 24.8%, from $43,001,000 for the twenty-eight weeks ended April 8, 2000 (the "2000 YTD period") to $53,646,000 for the twenty-eight weeks ended April 14, 2001 (the "2001 YTD period"). Coffee pounds sold increased by approximately 1,073,000 pounds, or 19.1%, from approximately 5,624,000 pounds in the 2000 YTD period to approximately 6,697,000 pounds in the 2001 YTD period. The difference between the percentage increase in net sales and the percentage increase in coffee pounds sold relates primarily to changes in Green Mountain's product sales mix. Sales are increasing fastest with products whose sales price per coffee pound is greater than the Company's traditional product line, such as single-cup Keurig Brewed TM line of coffees and with non-coffee products such as the Company's new Monté Verdé TM powdered hot cappuccino and frozen granita products.
Pounds sold increases were strongest with office coffee service distributors, which grew at a rate of 31.7%, followed by the convenience stores channel, which grew 25.0%.
Gross profit increased by $4,886,000, or 28.2%, from $17,315,000 for the 2000 YTD period to $22,201,000 for the 2001 YTD period. As a percentage of net sales, gross profit from continuing operations increased 1.1 percentage point from 40.3% for the 2000 YTD period to 41.4% for the 2001 YTD period. The increase in gross profit as a percentage of sales was due primarily to lower green coffee costs.
Selling and operating expenses increased by $2,461,000, or 23.0%, from $10,691,000 for the 2000 YTD period to $13,152,000 for the 2001 YTD period, but decreased by 0.4 percentage point as a percentage of sales from 24.9% in the 2000 YTD period to 24.5% in the 2001 YTD period. The dollar increase in selling and operating expense was primarily due to increased sales personnel expenses, increased marketing and promotional expenses, and write-offs of receivables due to customer bankruptcies.
General and administrative expenses increased by $552,000, or 18.1%, from $3,056,000 for the 2000 YTD period to $3,608,000 for the 2001 YTD period, but decreased 0.3 percentage points as a percentage of sales from 7.1% for the 2000 YTD period to 6.8% for the 2001 YTD period.
After the loss on abandonment of fixed assets referenced to above, operating income increased by $2,008,000, or 58.5%, from $3,433,000 for the 2000 YTD period to $5,441,000 for the 2001 YTD period.
Interest expense increased by $96,000, or 38.7%, from $248,000 for the 2000 YTD period to $344,000 for the 2001 YTD period.
Income tax expense increased $811,000, or 63.4%, from $1,280,000 for the 2000 YTD period to $2,091,000 for the 2001 YTD period.
Net income increased $1,118,000, or 58.4%, from $1,915,000 in the 2000 YTD period to $3,033,000 in the 2001 YTD period.
Liquidity and Capital Resources
Working capital increased $1,726,000 to $8,407,000 at April 14, 2001 from $6,681,000 at September 30, 2000. This increase is primarily due to higher accounts receivable, cash and other current assets.
During the 2001 YTD period, Green Mountain had capital expenditures of $2,553,000, including $1,125,000 for equipment on loan to wholesale customers, $566,000 for production and distribution equipment, $484,000 for computer equipment and software, and $255,000 in leasehold improvements. During the 2000 YTD period, Green Mountain had capital expenditures of $2,070,000, including $929,000 for equipment on loan to wholesale customers, $823,000 for production equipment and $447,000 for computer equipment and software. Cash used to fund the capital expenditures in the 2001 period was obtained from net cash provided by operating activities.
The Company currently plans to make capital expenditures in fiscal 2001 in the range of $5,500,000 to $6,000,000. This includes the purchase of two new roasters at the beginning of the third quarter of 2001, which, when installed, are expected to increase the Company's annual roasting capacity in Waterbury, Vermont, from approximately 15 million pounds to 40 to 50 million pounds of roasted coffee. Management continuously reviews capital expenditure needs and actual amounts expended may differ from these estimates.
In the 2001 YTD period, cash flow from financing activities included $871,000 generated from the exercise of employee stock options and issuance of shares under the Employee Stock Purchase Plan. In addition, cash flow from operating activities included a $801,000 tax benefit from the exercise of non-qualified options and disqualifying dispositions of incentive stock options and Employee Stock Purchase Plan shares. As options granted under the Company's stock option plans are exercised, the Company will continue to receive proceeds and a tax deduction for disqualifying dispositions; however, neither the amounts nor the timing thereof can be predicted.
The Company maintains a $15,000,000 line of credit with Fleet Bank - NH. At January 20, 2001, the outstanding balance on the Fleet line of credit was $6,000,000 and the amount remaining available was $9,000,000. The Fleet credit facility is subject to certain quarterly covenants, and the Company was in compliance with these covenants at April 14, 2001.
Management believes that cash flow from operating activities, existing cash, the currently available credit facility and additional borrowings will provide sufficient liquidity to pay all liabilities in the normal course of business, fund capital expenditures and service debt requirements in fiscal 2001.
.
Deferred Income Taxes
The Company had net deferred tax assets of $657,000 at April 14, 2001. These assets are reported net of a deferred tax asset valuation allowance at that date of $1,821,000 (including $1,772,000 related to a Vermont investment tax credit). Presently, the Company believes that the deferred tax assets, net of deferred tax liabilities and the valuation allowance, are realizable and represent management's best estimate, based on the weight of available evidence as prescribed in SFAS 109, of the amount of deferred tax assets which most likely will be realized. However, management will continue to evaluate the amount of the valuation allowance based on near-term operating results and longer-term projections.
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 $534,000 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 included thirteen weeks instead of the usual twelve weeks.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in information relating to commodity price risks since the Company's disclosure included in Item 7A of Form 10-K as filed with the Securities and Exchange Commission on December 27, 2000.
At April 14, 2001, the Company had $6,000,000 of debt subject to variable interest rates (the lower of Fleet bank's prime rate, LIBOR rates for maturities up to one year or Bankers' Acceptance rates). A hypothetical 100 basis points increase in the
Bankers' Acceptance, LIBOR and prime rates would result in additional interest expense of $60,000 on an annualized basis.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its 2001 Annual Meeting of Stockholders on March 15, 2001 at the Holiday Inn in Waterbury, Vermont. The Board of Directors of the Registrant solicited proxies for this meeting pursuant to a proxy statement filed under regulation 14A.
(b-c) At the Annual Meeting the stockholders voted as follows on the following matter:
VOTES
Election of Directors
Nominee |
For |
Withheld |
Robert P. Stiller |
5,862,293 |
476,706 |
Robert D. Britt |
5,867,593 |
471,406 |
Stephen J. Sabol |
5,867,693 |
471,306 |
Jonathan C. Wettstein |
5,839,125 |
499,874 |
William D. Davis |
5,768,193 |
570,806 |
Jules A. del Vecchio |
5,543,639 |
795,360 |
Hinda Miller |
5,868,053 |
470,946 |
David E. Moran |
5,867,593 |
471,406 |
Approval of the Green Mountain Coffee, Inc. 2000 Stock Option Plan
For Against Abstain Not voted
4,327,371 613,551 964,271 433,806
Approval of Amendment to Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock from 10,000,000 to 20,000,000
For Against Abstain Not voted
5,775,053 118,954 11,186 433,806
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation, as Amended
3.2 Bylaws1
10.118 Loan Agreement by and between the Green Mountain Coffee, Inc. Employee Stock Ownership Trust and Green Mountain Coffee, Inc., made and entered into as of April 16, 2001
(b) No reports on Form 8-K were filed during the twelve weeks ended April 14, 2001.
1
Incorporated by reference to the corresponding exhibit number in theRegistration Statement on Form SB-2 (Registration No. 33-66646) filed on July
28, 1993, and declared effective on September 21, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREEN MOUNTAIN COFFEE, INC.
Date: |
5/29/2001 |
By: /s/ Robert P. Stiller |
|
Robert P. Stiller, |
|||
President and Chief Executive Officer |
|||
Date: |
5/29/2001 |
By: /s/ Robert D. Britt |
|
Robert D. Britt, |
|||
Chief Financial Officer, Treasurer and Secretary |
CERTIFICATE OF INCORPORATION, AS AMENDED
OF
GREEN MOUNTAIN COFFEE, INC.
FIRST: The name of the Corporation is GREEN MOUNTAIN COFFEE, INC.
SECOND: The address of the registered office of the Corporation in the State of Delaware in No. 15 East North Street, in the City of Dover, County of Kent. The name of its registered agent at such address is United Corporate Services, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of Capital Stock which the Corporation shall have authority to issue is Twenty One Million (21,000,000) shares, of which Twenty Million (20,000,000) shares shall be Common Stock of the par value of TEN CENTS ($0.10) per share, and One Million (1,000,000) shares shall be Preferred Stock of the par value of TEN CENTS ($0.10) per share.
The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the shares of each class of stock are as follows:
declared by the Board of Directors out of any funds legally available therefore.
provision of this Certificate, all rights to vote and all voting power shall be exclusively vested in the Common Stock and the holders thereof shall be entitled to one vote for each share for the election of directors and upon all other matters.
limitations prescribed by law and the provisions of the Article FOURTH, to provide for, from time to time, in one or more series of any number, the issuance of shares of Preferred Stock, and, by filing a certificate pursuant to the General Corporation Law of the State of Delaware, to establish the number of shares to be included in each such series and to fix the designation, relative rights, preferences, qualifications and limitations of the shares of each such series. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of each of the following:
the distinctive designation of that series;
whether dividends shall be cumulative and, if so, from which date or dates, and whether they shall be payable in preference to, or in another relation to, the dividends payable on any other class or classes or series of stock;
addition to the voting rights provided by law, and, if so, the terms of such voting rights;
exchange privileges, and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine;
redeemable, and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all such shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
a sinking fund to be applied to the purchase or redemption of shares of that series and, if so, the terms and amounts of such sinking fund;
upon the creation of indebtedness of the Corporation or any subsidiary;
any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and whether such rights shall be in preference to or in another relation to the comparable rights of any other class or classes or series of stock; and
special, rights, qualifications, limitations or restrictions of that series.
any share, right or option is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, whether or not the Corporation shall have notice thereof, save as may be expressly provided by the laws of the State of Delaware.
FIFTH: The name and mailing address of the sole incorporator are as follows:
Name Mailing Address
Rachel Abarbanel 30 Rockefeller Plaza - 29th Floor
New York, New York, 10112
SIXTH: (a) The number of Directors of the Corporation which shall constitute the whole Board of Directions shall be such as from time to time shall be fixed by or in the manner provided in the By-Laws but in no case shall the number be less than one. Except as may otherwise be required by law, vacancies in the Board of Directors and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, though less than a quorum.
Board of Directors except as otherwise provided herein or by law. In furtherance and not in limitation of the powers conferred by statute and by law the Board of Directors is expressly authorized to make, amend, alter, change, add to or repeal By-Law of the Corporation, without any action on the part of the stockholders.
SEVENTH: (a) No contract or transaction between the Corporation and one or more of its Directors, or between a corporation and any other corporation, partnership, association or other organization in which one or more of its Directors or officers are Directors or officers, or have financial interest, shall be void or voidable solely for this reason, or solely because such Directors or officers are present at or participate in the meeting of the Board of Directors or the committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if:
(1) The material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of the disinterested directors, even thought the disinterested directors be less than a quorum; or
(2) The material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee there of, or the stockholders.
In any case described in this Section, any common or interested Director may be counted in determining the existence of a quorum at any meeting of the Board of Directors or any committee which shall authorize any such contract or transaction and may vote thereat to authorize any such contract or transaction. Any Director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a Director of such subsidiary or affiliate corporation.
(b) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, Director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director.
(c) Any contract, transaction or act the Corporation or of the Board of Directors which shall be ratified by a majority of a quorum of the stock holders entitled to vote at any annual meeting or at any special meeting call for that purpose shall be as valid and binding as though ratified by every stockholder of the Corporation; provided, however, that any failure of the stockholders to approve or ratify such contract, transaction, or act when and if submitted to them shall not be deemed in any way to invalidate the same or to deprive the Corporation, its Directors or officers of their right to proceed with such contract, transaction or act.
(d) Each Director, officer and employee, past or present of the Corporation, and each person who serves or may have served at the request of the Corporation as a Director, Trustee, officer or employee of another corporation, association, trust or other entity and their respective heirs, administrators and executors, shall be indemnified by the Corporation in accordance with, and to the fullest extent permitted by, the provisions of the General Corporation Law of the State of Delaware as it may be from time to time be amended. Each agent of the Corporation and each person who serves or may have served at the request of the Corporation as an agent of another corporation, or as an employee or agent of an partnership, joint venture, trust or other enterprise may, in the discretion of the Board of Directors, be indemnified by the Corporation to the same extent as provided herein with respect to the Directors, officers and employees of the Corporation. The provisions of this paragraph (d) shall apply to any member of any Committee appointed by the Board of Directors as fully as though such person shall have been an officer or Director of the Corporation.
(e) The provisions of this Article SEVETH shall be in addition to and not in limitation of any other rights, indemnities, or limitations of liability to which any Director or officer may be entitled, as a matter of law or under any By-Law, agreement, vote of stockholders or otherwise.
EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title B of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title B of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said Court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the Court to which the said application has been made, be binding on all the creditors or class of creditors, and/or all stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
NINTH: Meetings of stockholders maybe held within or without the State of Delaware, as the By-Law may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Elections of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.
TENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in the Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate or Incorporation, and all rights conferred upon officers, Directors and stockholders herein are granted subject to this reservation.
LOAN AGREEMENT by and between
THE GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
and GREEN MOUNTAIN COFFEE, INC.
Made and Entered Into as of April 16, 2001
LOAN AGREEMENT
This LOAN AGREEMENT ("Loan Agreement") is made and entered into as of the 16th day of April, 2001, by and between the GREEN MOUNTAIN COFFEE, INC. EMPLOYEE STOCK OWNERSHIP TRUST ("Borrower"), a trust forming part of the Green Mountain Coffee, Inc. Employee Stock Ownership Plan ("ESOP"), acting by and through its Trustee, HSBC Bank USA (the "Trustee"), a banking corporation existing under the laws of the State of New York and having an office at 126 State Street, Albany, NY 12207; and GREEN MOUNTAIN COFFEE, INC. ("Lender"), a corporation organized and existing under the laws of the State of Delaware and having an office at 33 Coffee Lane, Waterbury, VT 05676.
WITNESSETH:
WHEREAS, the Borrower has been authorized to purchase the number of shares of common stock of the Lender ("Common Stock") in open market purchases which can be purchased with $2,000,000; and
WHEREAS, the Borrower has also been authorized to borrow funds from the Lender for the purpose of financing the authorized purchases of Common Stock; and
WHEREAS, the Lender is willing to make a loan to the Borrower for such purpose, subject to the terms and conditions of this Loan Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly indicated by the context:
Section 1.1 Business Day means any day other than a Saturday, Sunday or other day on which banks are authorized or required to close under federal law or the laws of the State of New York.
Section 1.2 Code means the Internal Revenue Code of 1986 (including the corresponding provisions of any succeeding law).
Section 1.3 Default means an event or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirement of notice or lapse of time.
Section 1.4 ERISA means the Employee Retirement Income Security Act of 1974, as amended (including the corresponding provisions of any succeeding law).
Section 1.5 Event of Default means an event or condition described in Article 5.
Section 1.6 Fiscal Year means the fiscal year of the Lender.
Section 1.7 Independent Counsel means The Goldstein Law Firm, P.C., or other counsel mutually satisfactory to both the Lender and the Borrower.
Section 1.8 Loan means the loan described in section 2.1.
Section 1.9 Loan Documents means, collectively, this Loan Agreement, the Promissory Note and the Pledge Agreement and all other documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents.
Section 1.10 Plan Year means the fiscal year of the ESOP.
Section 1.11 Pledge Agreement means the agreement described in section 2.8(a).
Section 1.12 Principal Amount means the face amount of the Promissory Note, determined as set forth in section 2.1(c).
Section 1.13 Promissory Note means the promissory note described in section 2.3.
Section 1.14 Register means the register described in section 2.9.
ARTICLE II
The Loan; Principal Amount;
Interest; Security; Indemnification
Section 2.1 The Loan; Principal Amount.
(a) The Lender hereby agrees to lend to the Borrower such amounts, and at such times, as shall be determined under this section 2.1; provided, however, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed $2,000,000; and provided, further, that any amount once lent under this Agreement and repaid may not again be re-lent under this Agreement.
(b) Subject to the limitations of section 2.1(a), the Borrower shall determine the amounts borrowed under this Agreement, and the times at which such borrowings are effected. Each such determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be furnished to the Lender by notice from the Borrower. The Lender shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender's receipt of such notice; provided, however, that the Lender shall have no obligation to disburse funds pursuant to this Agreement following the occurrence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured.
(c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of:
(i) the aggregate amount disbursed by the Lender pursuant to section 2.1(b) on or before such date; over
(ii) the aggregate amount of any repayments of such amounts made before such date.
The Lender shall maintain on the Register a record of, and shall record on the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the Principal Amount.
(d) Notwithstanding the foregoing, no additional amounts shall be disbursed by the Lender pursuant to section 2.1(b) after July 1, 2001.
Section 2.2 Interest.
(a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing on the date of this Loan Agreement and continuing until the Principal Amount shall be paid in full, at a fixed rate per annum equal to eight and one-half percent (8.5%). Interest payable under this Agreement shall be computed on the basis of a year of 365 days and actual days elapsed (including the first day but excluding the last) occurring in the period to which the computation relates.
(b) Except as otherwise provided in this section 2.2(b), accrued interest on the Principal Amount shall be payable by the Borrower annually in arrears commencing on the last Business Day of the first Fiscal Year to end following the date of this Agreement and continuing on the last Business Day of each Fiscal Year thereafter and upon the payment or prepayment of such Loan. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds. The Lender shall remit to the Borrower, at least three (3) Business Days before the end of each Fiscal Year, a statement of the interest payment due under section 2.2(a) for such year; provided, however, that a delay or failure by the Lender in providing the Borrower with such statement shall not alter the Borrower's obligation to make such payment.
(c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.
Section 2.3 Promissory Note.
The Loan shall be evidenced by a Promissory Note of the Borrower in substantially the form of Exhibit A attached hereto, dated the date hereof, payable to the order of the Lender in the Principal Amount and otherwise duly completed.
Section 2.4 Payment of Trust Loan.
(a) The Principal Amount of the Loan shall be amortized in ten (10) equal annual installments, commencing on the last Business Day of the first Fiscal Year to end following the date of this Agreement and continuing on the last Business Day of each Fiscal Year thereafter; provided, however, that the Borrower shall not be required to make any payment of principal due to be made in any Fiscal Year to the extent that such payment would exceed, with respect to such Fiscal Year, the sum of all contributions made to the ESOP by the Lender in cash to enable the Borrower to meet its obligations under this Agreement, any earnings on such contributions and any cash dividends on shares initially held as "Collateral" (as defined in the Pledge Agreement) regardless of whether such shares are still held as "Pledged Shares" (as defined in the Pledge Agreement). Principal payments may be deferred to the extent that such payments would be in excess of the amount described above. Any payment not required to be made pursuant to the immediately preceding sentence shall be deferred to and be payable on the last day of the first Fiscal Year in which such payment may be made.
(b) Notwithstanding the foregoing, the entire outstanding Principal Amount, and all unpaid accrued interest, shall be due and payable on the last Business Day of Fiscal Year 2010.
Section 2.5 Prepayment.
The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; provided, however, that the Borrower shall give notice to the Lender of any such prepayment. Any such prepayment shall be: (a) permanent and irrevocable; (b) accompanied by all accrued interest through the date of such prepayment; (c) made without premium or penalty; and (d) applied in the inverse order of the maturity of the installments thereof unless the Lender and the Borrower agree to apply such prepayments in some other order.
Section 2.6 Method of Payments.
(a) All payments of principal, interest, other charges and other amounts payable by the Borrower hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified in or pursuant to this Loan Agreement for notices to the Lender, not later than 3:00 P.M., New York time, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which such payment is in fact made.
(b) Notwithstanding anything to the contrary contained in this Loan Agreement or the Promissory Note, neither the Borrower nor the Trustee shall be obligated to make any payment, or repayment or prepayment on the Promissory Note or take or refrain from taking any other action hereunder or under the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of section 4975(e)(7) of the Code or qualified under section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under section 501(a) of the Code or if such act or failure to act would cause the Borrower or Trustee to engage in any "prohibited transaction" as such term is defined in section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in section 406 of ERISA and the regulations promulgated thereunder which is not exempted by section 408(b) of ERISA and the regulations promulgated thereunder; provided, however, that in each case, the Borrower or the Trustee or both, as the case may be, may act or refrain from acting pursuant to this section 2.6(b) on the basis of an opinion of Independent Counsel. The Borrower and the Trustee may consult with Independent Counsel, and any opinion of such Independent Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of Independent Counsel. Nothing contained in this section 2.6(b) shall be construed as imposing a duty on either the Borrower or the Trustee to consult with Independent Counsel. Any obligation of the Borrower or the Trustee to make any payment, repayment or prepayment on the Promissory Note or to take or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this section 2.6(b) shall be considered a binding obligation of the Borrower or the Trustee, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this section 2.6(b) shall be construed as providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance).
Section 2.7 Use of Proceeds of Loan.
The entire proceeds of the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever.
Section 2.8 Security.
(a) In order to secure the due payment and performance by the Borrower of all of its obligations under this Loan Agreement, simultaneously with the execution and deliver of this Loan Agreement by the Borrower, the Borrower shall:
(i) pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock purchased with the Principal Amount, by the execution and delivery to the Lender of a Pledge Agreement in the form attached hereto as Exhibit B; and
(ii) execute and deliver, or cause to be executed and delivered, such other agreements, instruments and documents as the Lender may reasonably require in order to effect the purposes of the Pledge Agreement and this Loan Agreement.
(b) The Lender shall release from encumbrance under the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or prepayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral determined pursuant to section 7.4 of the ESOP.
Section 2.9 Registration of the Promissory Note.
(a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of the transfer and exchange of the Promissory Note. Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a new instrument to the new holder. The old Promissory Note so surrendered shall be cancelled by the Lender and returned to the Borrower after such cancellation.
(b) Any new Promissory Note issued pursuant to section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or exchanged so that there will not be any loss or gain of interest on the note surrendered. Such new Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and all other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest theretofore paid.
ARTICLE III
Representations and Warranties of the Borrower
To the actual knowledge of the Trustee, the Borrower hereby represents and warrants to the Lender as follows:
Section 3.1 Power, Authority, Consents.
The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and the Pledge Agreement, all of which have been duly authorized by all necessary and proper corporate or other action.
Section 3.2 Due Execution, Validity, Enforceability.
Each of the Loan Documents, including, without limitation, this Loan Agreement, the Promissory Note and the Pledge Agreement, have been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar other laws (including the laws of fraudulent conveyance) or judicial decisions affecting the enforcement of creditors' rights generally and (ii) the enforceability of the obligations hereunder are subject to the general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 3.3 Properties, Priority of Liens.
The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien.
Section 3.4 No Defaults, Compliance with Laws.
The Borrower is not in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected.
Section 3.5 Purchases of Common Stock.
Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire a valid, legal and marketable title to all of the Common Stock so purchased, free and clear of any liens, other than a pledge to the Lender of the Common Stock so purchased pursuant to the Pledge Agreement. Neither the execution and deliver of the Loan Documents nor the performance of any obligation thereunder violates any provision of law or conflicts with or results in a breach of or creates (with or without the giving of notice or lapse of time, or both) a default under any agreement to which the Borrower is a party or by which it is bound or any of its properties is affected. No consent of any federal, state or local governmental authority, agency or other regulatory body, the absence of which could have a materially adverse
effect on the Borrower or the Trustee, is or was required to be obtained in connection with the execution, deliver or performance of the Loan Documents and the transactions contemplated therein or in connection therewith, including, without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of the Loan pursuant thereto.
For purposes of this Article, "actual knowledge of the Trustee" means the actual knowledge of representatives of the Trustee who have worked on the transactions contemplated under the Loan Documents, specifically James R. McDonald, VP.
ARTICLE IV
Representations and Warranties of the Lender
The Lender hereby represents and warrants to the Borrower as follows:
Section 4.1 Power, Authority, Consents.
The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement.
Section 4.2 Due Execution, Validity, Enforceability.
This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender; and each constitutes a valid and legally binding obligation of the Lender, enforceable in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar other laws (including the laws of fraudulent conveyance) or judicial decisions affecting the enforcement of creditors' rights generally and (ii) the enforceability of the obligations hereunder are subject to the general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.3 ESOP; Contributions.
The ESOP and the Borrower have been duly created, organized and maintained by the Lender in compliance with all applicable laws, regulations and rulings. The ESOP qualifies as an "employee stock ownership plan" as defined in section 4975(e)(7) the Code. The ESOP provides that the Lender may make contributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note and this Loan Agreement, and the Lender shall make such contributions; provided, however, that no such contributions shall be required if they would adversely affect the qualification of the ESOP under section 401(a) of the Code.
Section 4.4 Trustee; Committee.
The Lender has taken such action as is required to be taken by it to duly appoint the Trustee, the members of the "Committee" defined and described in the trust agreement forming the Borrower and the "Administrator" defined and described in the ESOP. The Lender expressly acknowledges and agrees that this Loan Agreement, the Promissory Note and the Pledge Agreement are being executed by the Trustee not in its individual capacity but solely as trustee of and on behalf of the Borrower.
Section 4.5 Compliance with Laws; Actions.
Neither the execution and deliver by the Lender of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the Lender, constitutes a violation of any provision of any law or any regulation, order, writ, injunction or decree or any court or governmental instrumentality, or an event of default under any agreement, to which the Lender is a party or by which the Lender is bound or to which the Lender is subject, which violation or event of default would have a material adverse effect on the Lender. There is no action or proceeding pending or threatened against either of the ESOP or the Borrower before any court or administrative agency.
Section 4.6 Exempt Loan Rules.
The Loan will be an "exempt loan", as that phrase is defined in Treasury Regulation section 54.4975-7 and Department of Labor Regulation section 2550.408b-3, and the transactions contemplated by the Loan Documents are not nonexempt "prohibited transactions" under section 4975 of the Code and section 406 of ERISA.
ARTICLE V
Events of Default
Section 5.1 Events of Default under Loan Agreement.
Each of the following events shall constitute an "Event of Default" hereunder:
(a) Failure to make any payment of principal of the Promissory Note, or failure to make any payment of interest on the Promissory Note, not later than five (5) Business Days after the date when due.
(b) Failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan Documents, including, without limitation, the Promissory Note and the Pledge Agreement, provided such failure is not cured by the Borrower within five (5) Business Days after notice is provided to the Borrower by the Lender.
(c) Any representation or warranty made in writing to the Lender in any of the Loan Documents or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered.
Section 5.2 Lender's Rights upon Event of Default.
If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower other than: (a) contributions (other than contributions of Common Stock) that are made by the Lender to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such contributions and (b) "Eligible Collateral" (as defined in the Pledge Agreement); provided, however, that: (i) the value of the Borrower's assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default (without regard to amounts owing solely as a result of any acceleration of the Loan); (ii) the Borrower's assets shall be transferred to the Lender following an Event of Default only to the extent of the failure of the Borrower to meet the payment schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement.
ARTICLE VI
Miscellaneous Provisions
Section 6.1 Payments Due to the Lender.
If any amount is payable by the Borrower to the Lender pursuant to any indemnity obligation contained herein, then the Borrower shall pay, at the time or times provided therefor, any such amount and shall indemnify the Lender against and hold it harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such amount. If any amounts as to which the Borrower has so indemnified the Lender hereunder shall be assessed or levied against the Lender, the Lender may notify the Borrower and make immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from the Borrower, together with interest on each such amount as provided in section 2.2(c). Notwithstanding any other provision contained in this Loan Agreement, the covenants and agreements of the Borrower contained in this section 6.1 shall survive: (a) payment of the Promissory Note and (b) termination of this Loan Agreement.
Section 6.2 Payments.
All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be
less than the amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note "Paid" and return it to the Borrower.
Section 6.3 Survival.
All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note.
Section 6.4 Modifications, Consents and Waivers; Entire Agreement.
No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof.
Section 6.5 Remedies Cumulative.
Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender or the holder of the Promissory Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the obligations under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or proceeding instituted by the Lender for payment or performance of such obligations.
Section 6.6 Further Assurances; Compliance with Consents.
At any time and from time to time, upon the request of the Lender, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably
request in order to fully effect the terms of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan.
Section 6.7 Notices.
Except as otherwise specifically provided for herein, all notices, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter (delivered by hand or commercial messenger service) or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex of telecopier, addressed as follows:
(a) If to the Borrower:
HSBC Bank USA
126 State Street
Albany, New York 12207
Attention: James R. McDonald,
Vice President
with a copy to:
The Goldstein Law Firm, P.C.
12 Corporate Woods Blvd.
Albany, New York 12211
Attention: Brian P. Goldstein, Esq.
(b) If to the Lender:
Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Attention: Robert Britt,
Vice President and Chief Financial Officer
with a copy to:
Gravel and Shea
P.O. Box 369
76 St. Paul Street, 7th Flr.
Burlington, VT 05401
Attention: Stephen Magowan, Esq.
Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or telecopier, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.
Section 6.8 Counterparts.
This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document.
Section 6.9 Construction; Governing Law.
The headings used in this Loan Agreement are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement to an Article or section shall be to an Article or section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.
Section 6.10 Severability.
Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Loan Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Loan Agreement is independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other.
Section 6.11 Binding Effect; No Assignment or Delegation.
This Loan Agreement shall be binding and inure to the benefit of the Borrower and its successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation without such consent shall be void.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have cause this Loan Agreement to be duly executed as of the date first above written.
THE BORROWER: GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: HSBC Bank USA, as Trustee
By: ___________________________________
James R. McDonald, VP
THE LENDER: GREEN MOUNTAIN COFFEE, INC.
By: Robert P. Stiller
Title: CEO and President
Gmcr loan docs.3
EXHIBIT A To Loan Agreement By and Between
Green Mountain Coffee, Inc. Employee Stock Ownership Trust
and Green Mountain Coffee, Inc.
FORM OF PROMISSORY NOTE
For the "Principal Amount", Albany, New York
as determined under Loan Agreement April 16, 2001
FOR VALUE RECEIVED, the undersigned, the Green Mountain Coffee, Inc. Employee Stock Ownership Trust ("Borrower"), acting by and through its Trustee, HSBC Bank USA ("Trustee"), hereby promises to pay to the order of Green Mountain Coffee, Inc. ("Lender") the "Principal Amount", as determined under the Loan Agreement made and entered into between the Borrower and the Lender as of the date hereof ("Loan Agreement") pursuant to which this Promissory Note is issued, together with interest as set forth herein. The Principal Amount shall be amortized in ten (10) consecutive equal annual installments, commencing on the last Business Day (as defined in the Loan Agreement) of the first Fiscal Year to end following the date of this Note and continuing on the last Business Day of each Fiscal Year thereafter; provided, however, that the Borrower shall not be required to make any payment of principal due to be made in any Fiscal Year to the extent that such payment would exceed, with respect to such Fiscal Year, the sum of all contributions made to the ESOP by the Lender in cash to enable the Borrower to meet its obligations under the Loan Agreement, any earnings on such contributions and any cash dividends on shares initially held as "Collateral" (as defined in the Pledge Agreement) regardless of whether such shares are still held as "Pledged Shares" (as defined in the Pledge Agreement). Principal payments may be deferred to the extent that such payments would be in excess of the amount described above. Any payment not required to be made pursuant to the immediately preceding sentence shall be deferred to and be payable on the last day of the first Fiscal Year in which such payment may be made.
This Promissory Note shall bear interest at the rate per annum set forth or established under the Loan Agreement, such interest to be payable annually in arrears, commencing on the last Business Day of Fiscal Year 2001 and thereafter on the last Business Day of each subsequent Fiscal Year and upon payment or prepayment of this Promissory Note.
Notwithstanding the foregoing, the entire outstanding Principal Amount, and all unpaid accrued interest, shall be due and payable on the last Business Day of Fiscal Year 2010.
Anything herein to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender's receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payments of interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.
Payments of both principal and interest on this Promissory Note are to be made at the principal office of the Lender indicated in the Loan Agreement, or such other place as the holder hereof shall designate to the Borrower in writing, in lawful money of the United States of America in immediately available funds.
Failure to make any payment of principal on this Promissory Note, or failure to make any payment of interest on this Promissory Note, not later than five (5) Business Days after the date when due, shall constitute a default hereunder, whereupon the principal amount of and accrued interest on this Promissory Note shall immediately become due and payable in accordance with the terms of the Loan Agreement.
This Promissory Note is subject, in all respects, to the terms and provisions of the Loan Agreement, which is incorporated herein by this reference, and is secured by a Pledge Agreement between the Borrower and the Lender of even date herewith and is entitled to the benefits thereof.
GREEN MOUNTAIN COFFE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: HSBC Bank USA, as Trustee
By: James R. McDonald
Title: Vice President
EXHIBIT B To Loan Agreement By and Between The Green Mountain Coffee, Inc. Employee Stock Ownership Trust
and Green Mountain Coffee, Inc.
FORM OF PLEDGE AGREEMENT
This PLEDGE AGREEMENT ("Pledge Agreement") is made as of the 16th day of April, 2001 by and between the GREEN MOUNTAIN COFFEE, INC. EMPLOYEE STOCK OWNERSHIP TRUST, acting by and through its Trustee, HSBC BANK USA, a banking corporation organized under the laws of the State of New York and having an office at 126 State Street, Albany, New York 12207 ("Pledgor"), and GREEN MOUNTAIN COFFEE, INC.., a corporation organized and existing under the laws of the State of Delaware and having an office at 33 Coffee Lane, Waterbury, Vermont 05676 ("Pledgee").
WITNESSETH:
WHEREAS, this Pledge Agreement is being executed and delivered to the Pledgee pursuant to the terms of a Loan Agreement of even date herewith ("Loan Agreement"), by and between the Pledgor and the Pledgee;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree as follows:
Section 1. Definitions. The following definitions shall apply for purposes of this Pledge Agreement, except to the extent that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement:
(a) Collateral shall mean the Pledged Shares and, subject to section 5 hereof, and to the extent permitted by applicable law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights.
(b) Event of Default shall mean an event so defined in the Loan Agreement.
(c) Liabilities shall mean all the obligations of the Pledgor to the Pledgee, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under the Loan Agreement and the Promissory Note.
(d) Pledged Shares shall means all the shares of Common Stock of the Company purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but excluding any such shares previously released pursuant to section 4.
Section 2. Pledge. To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the Pledgee a security interest in and lien upon, the Collateral.
Section 3. Representations and Warranties of the Pledgor. To the actual knowledge of the Trustee, the Pledgor represents, warrants, and covenants to the Pledgee as follows:
(a) the execution, delivery and performance of this Pledge Agreement and the pledging of the Collateral hereunder do not and will not conflict with, result in a violation of, or constitute a default under any agreement binding upon the Pledgor;
(b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the right of all others;
(c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms;
(d) the Pledgor shall, from time to time, upon the request of the Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar documents, satisfactory in form and substance to the Pledgee with respect to the Collateral as the Pledgee may reasonably request; and
(e) subject to the first sentence of section 4(b), the Pledgor shall not, so long as any Liabilities are outstanding, sell, assign, exchange, pledge or otherwise transfer or encumber any of its rights in and to any of the Collateral.
For purposes of this Section, "actual knowledge of the Trustee" means the actual knowledge of representatives of the Trustee who have worked on the transactions contemplated under the Loan Documents, specifically James R. McDonald, VP.
Section 4. Eligible Collateral.
(a) As used herein the term "Eligible Collateral" shall mean that amount of Collateral which has an aggregate fair market value equal to the amount by which the Pledgor is in default (without regard to any amounts owing solely as the result of an acceleration of the Loan Agreement) or such lesser amount of Collateral as may be required pursuant to section 2 of this Pledge Agreement.
(b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations Section 54.4975-7(b)(8), as the same may be from time to time amended or supplemented, and the "principal and interest" method of release described in 7.4 of the ESOP. Subject to such Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of the Eligible Collateral into the name of the Pledgee or its nominee, with or without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or to become due thereunder, (ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (iii) take control of any proceeds of the Eligible Collateral.
Section 5. Delivery.
(a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) either (A) certificates for the Pledged Shares, each certificate duly signed in blank by the Pledgor or accompanied by a stock transfer power duly signed in blank by the Pledgor and each such certificate accompanied by all required documentary or stock transfer tax stamps or (B) if the Trustee does not yet have possession of the Pledged Shares, an assignment by the Pledgor of all the Pledgor's rights to and interest in the Pledged Shares and (ii) an irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by the Pledgor with respect to the Pledged Shares.
(b) So long as no Default or Event of Default shall have occurred and be continuing, (i) the Pledgor shall be entitled to exercise any and all voting and other rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and (ii) the Pledgor shall be entitled to receive any and all cash dividends or other distributions paid in respect of the Collateral.
Section 6. Events of Default.
(a) If a Default or an Event of Default shall be existing, in addition to the rights it may have under the Loan Agreement, the Promissory Note, and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Collateral, from time to time any rights and remedies available to it under the Uniform Commercial Code as in effect from time to time in the State of New York or otherwise available to it and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposition of any of the Eligible Collateral shall be given by the Pledgee to the Pledgor at least three (3) Business Days before such disposition. Subject to section 13 below, any proceeds of any disposition of Eligible Collateral may be applied by the Pledgee to the payment of expenses in connection with the Eligible Collateral, including, without limitation, reasonable attorneys' fees and legal expenses, and any balance of such proceeds may be applied by the Pledgee toward the payment of such of the Liabilities as are in Default, and in such order of application, as the Pledgee may from time to time elect. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in section 1 hereof.
(b) In any sale of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale's being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor for any discount allowed by reason of the fact that such Eligible Collateral is sold in compliance with any such limitation or restriction.
Section 7. Payment in Full. Upon the payment in full of all outstanding Liabilities, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to this Pledge Agreement.
Section 8. No Waiver. No failure or delay on the part of the Pledgee in exercising any right or remedy hereunder or under any other document which confers or grants any rights in the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy of the Pledgee.
Section 9. Binding Effect; No Assignment or Delegation. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective successors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee.
Section 10. Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements to be performed wholly within the State of New York.
Section 11. Notices. All notices, requests, instructions or documents hereunder shall be in writing and delivered personally or sent by United States mail, registered or certified, return receipt requested, with proper postage prepaid, as follows:
(a) If to the Pledgee:
Green Mountain Coffee, Inc.
33 Coffee Lane
Waterbury, Vermont 05676
Attention: Robert Britt,
Vice President and Chief Financial Office
with a copy to:
Gravel and Shea
P.O. Box 369
76 St. Paul Street, 7th Flr.
Burlington, VT 05401
Attention: Stephen Magowan, Esq.
(b) If to the Pledgor:
HSBC Bank USA
126 State Street
Albany, New York 12207
Attention: James R. McDonald,
Vice President
with a copy to:
The Goldstein Law Firm, P.C.
12 Corporate Woods Blvd.
Albany, New York 12211
Attention: Brian P. Goldstein, Esq.
Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex or telecopier, to
such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.
Section 12. Interpretation. Wherever possible, each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under such law, such provisions shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.
Section 13. Construction. Notwithstanding any provision contained herein to the contrary, all provisions hereof shall be construed so as to maintain (a) the ESOP as a qualified leverage employee stock ownership plan under section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986 (the "Code"), (b) the Trust as exempt from taxation under section 501(a) of the Code and (c) the Loan as an exempt loan under section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation section 2550.408b-3.
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IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the parties hereto as of the day and year first above written.
GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: HSBC Bank USA, as Trustee
and not in any other capacity
By: James R. McDonald
Title: Vice President
GREEN MOUNTAIN COFFEE, INC.
By: Robert P. Stiller
Title: CEO and President
EXHIBIT C To Loan Agreement By and Between Green Mountain Coffee, Inc. Employee Stock Ownership Trust
And Green Mountain Coffee, Inc.
FORM OF ASSIGNMENT
In consideration of the loan made by Green Mountain Coffee, Inc. ("Lender") to the Green Mountain Coffee, Inc. Employee Stock Ownership Trust with HSBC Bank USA ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and pursuant to the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, and subject to the terms and conditions of the Loan Agreement, the undersigned Borrower hereby transfers, assigns and conveys to the Lender all its right, title and interest in and to those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement, and agrees to transfer and endorse to the Lender the certificates representing such shares promptly upon its receipt thereof.
GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: HSBC Bank USA, as its Trustee
By: James R. McDonald
Title: Vice President
April 16, 2001
EXHIBIT D To Loan Agreement By and Between Green Mountain Coffee, Inc. Employee Stock Ownership Trust
And Green Mountain Coffee, Inc.
FORM OF IRREVOCABLE PROXY
In consideration of the loan made by Green Mountain Coffee, Inc. ("Lender") to the Green Mountain Coffee, Inc. Employee Stock Ownership Trust ("Borrower") pursuant to the Loan Agreement of even date herewith between the Lender and the Borrower ("Loan Agreement") and the Pledge Agreement between the Lender and the Borrower of even date herewith pertaining thereto, and subject to the terms and conditions of the Loan Agreement, the undersigned Borrower hereby appoints the Lender as its proxy, with power of substitution, to represent and to vote those certain shares of common stock of the Lender which it shall purchase with the proceeds of the loan made pursuant to the Loan Agreement. This proxy, when properly executed, shall be irrevocable and shall give the Lender full power and authority to vote on any and all matters for which the other holders of shares of common stock of the Lender are entitled to vote.
GREEN MOUNTAIN COFFEE, INC.
EMPLOYEE STOCK OWNERSHIP TRUST
By: HSBC Bank USA, as its Trustee
By: James R. McDonald
Title: Vice President
April 16, 2001