-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JT+JRY15Nhb+rNVESVKUte2A/ewLWI15ive/6w9Gs8krpAOyR8/738rzkObmzaYu EfSH8F/kzw9UGCl3zlwyUg== 0000909954-97-000010.txt : 19970528 0000909954-97-000010.hdr.sgml : 19970528 ACCESSION NUMBER: 0000909954-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970512 FILED AS OF DATE: 19970527 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREEN MOUNTAIN COFFEE INC CENTRAL INDEX KEY: 0000909954 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 030339228 STATE OF INCORPORATION: DE FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12340 FILM NUMBER: 97614077 BUSINESS ADDRESS: STREET 1: 33 COFFEE LANE CITY: WATERBURY STATE: VT ZIP: 05676 BUSINESS PHONE: 8022445621 MAIL ADDRESS: STREET 1: 33 COFFEE LANE CITY: WATERBURY STATE: VT ZIP: 05676 10-Q 1 FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the twelve weeks ended April 12, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to ____________ Commission file number 1-12340 GREEN MOUNTAIN COFFEE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 03-0339228 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 33 Coffee Lane, Waterbury, Vermont 05676 ---------------------------------------------------- (Address of principal executive offices) (zip code) (802) 244-5621 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ x ] NO [ ] As of May 22, 1997, 3,417,306 shares of common stock of the registrant were outstanding. Part I. Financial Information Item I. Financial Statements GREEN MOUNTAIN COFFEE, INC. Consolidated Balance Sheet (Dollars in thousands except share data) April 12, September 28, 1997 1996 ------------ ------------- (unaudited) Assets Current assets: Cash and cash equivalents.................... $ 941 $ 551 Receivables, less allowances of $90 at April 12, 1997 and $80 at September 28, 1996...................... 2,966 2,778 Inventories.................................. 3,640 3,276 Other current assets......................... 768 627 Deferred income taxes, net................... 875 516 __________ __________ Total current assets....................... 9,190 7,748 Fixed assets, net............................... 10,110 8,715 Other long-term assets, net..................... 516 394 Deferred income taxes, net...................... 488 386 __________ __________ Total assets.................................... $ 20,304 $ 17,243 __________ __________ Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt............ $ 954 $ 947 Current portion of obligation under capital lease........................ 123 114 Accounts payable............................. 3,045 3,002 Accrued payroll.............................. 469 480 Accrued expenses............................. 496 264 --------- ---------- Total current liabilities.................. 5,087 4,807 --------- ---------- Long-term debt.................................. 2,352 2,911 --------- ---------- Obligation under capital lease.................. 71 144 --------- ---------- Long-term line of credit........................ 2,620 508 --------- ---------- Commitments Stockholders' equity: Common stock, $0.10 par value: Authorized - 10,000,000 shares; issued and outstanding - 3,417,306 shares at April 12, 1997 and September 28, 1996...................... 342 342 Additional paid-in capital.................... 12,508 12,508 Accumulated deficit........................... (2,676) (3,977) --------- ---------- Total stockholders' equity.................... 10,174 8,873 --------- ---------- Total liabilities and stockholders' equity.... $ 20,304 $ 17,243 --------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. GREEN MOUNTAIN COFFEE, INC. Consolidated Statement of Operations (Dollars in thousands except share data) Twelve weeks ended April 12, 1997 April 13, 1996 -------------- -------------- (unaudited) Net sales................................ $ 10,063 $ 8,119 Cost of sales............................ 5,881 4,874 ----------- ----------- Gross profit.......................... 4,182 3,245 Selling & operating expenses............. 3,063 2,341 General and administrative expenses...... 765 673 Loss on disposal of fixed assets......... 218 - ----------- ----------- Income from operations................ 136 231 Other expense............................ (2) (10) Interest expense......................... (107) (106) ----------- ----------- Income before income taxes............ 27 115 Income tax benefit (expense)............. 552 (17) ----------- ----------- Net income............................ 579 98 ----------- ----------- Net income per share..................... $ .17 $ .03 ----------- ----------- Weighted average shares.................. 3,447,999 3,428,588 ----------- -----------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. GREEN MOUNTAIN COFFEE, INC. Consolidated Statement of Operations (Dollars in thousands except share data) Twenty-eight weeks ended April 12, 1997 April 13, 1996 -------------- -------------- (unaudited) Net sales............................... $ 24,475 $ 20,263 Cost of sales........................... 14,526 12,108 ------------ ------------ Gross profit......................... 9,949 8,155 Selling & operating expenses............ 6,846 5,385 General and administrative expenses..... 1,738 1,599 Loss on disposal of fixed assets........ 218 - ------------ ------------ Income from operations............... 1,147 1,171 Other expense........................... (2) (11) Interest expense........................ (251) (246) ------------ ------------ Income before income taxes........... 894 914 Income tax benefit (expense)............ 407 (137) ------------ -------------- Net income........................... $ 1,301 $ 777 ------------ -------------- Net income per share.................... $ .38 $ 0.23 ------------ -------------- Weighted average shares................. 3,445,838 3,427,554 ------------ --------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. GREEN MOUNTAIN COFFEE, INC. Consolidated Statement of Cash Flows (Dollars in thousands) Twenty-eight weeks ended April 12, 1997 April 13, 1996 -------------- -------------- (unaudited) Cash flows from operating activities: Net income.............................. $ 1,301 $ 777 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...... 1,274 1,043 Loss on disposal of fixed assets... 254 31 Provision for doubtful accounts.... 72 59 Deferred income taxes.............. (461) 136 Changes in assets and liabilities: Receivables.................. (260) 315 Inventories.................. (364) 300 Other current assets......... (141) 20 Other long-term assets, net.. (134) (134) Accounts payable............. 43 (884) Accrued payroll.............. (11) 161 Accrued expenses............. 232 (40) --------- --------- Net cash provided by operating activities....... 1,805 1,784 --------- --------- Cash flows from investing activities: Expenditures for fixed assets........... (2,954) (977) Proceeds from disposals of fixed assets. 43 33 --------- --------- Net cash used for investing activities....... (2,911) (944) --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt. - 1,009 Repayment of long-term debt.............. (552) (369) Principal payments under capital lease obligation............................. (64) (39) Net change in revolving line of credit... 2,112 (1,235) --------- --------- Net cash used for financing activities........ 1,496 (634) --------- --------- Net increase (decrease) in cash and cash equivalents................. 390 206 Cash and cash equivalents at beginning of period....................... 551 310 --------- --------- Cash and cash equivalents at end of period.. $ 941 $ 516 --------- ---------
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. Green Mountain Coffee, Inc. Notes to Consolidated Financial Statements 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the interim financial data have been included. Results from operations for the twenty-eight week period ended April 12, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending September 27, 1997. For further information, refer to the consolidated financial statements and the footnotes included in the annual report on Form 10-KSB for Green Mountain Coffee, Inc. for the year ended September 28, 1996. Net income per share is computed based upon the weighted average number of common and dilutive common equivalent shares outstanding during the period. 2. Inventories Inventories consist of the following: April 12, September 28, 1997 1996 ----------- ------------- Raw materials and supplies............. $ 1,399,000 $ 1,291,000 Finished goods......................... 2,241,000 1,985,000 ----------- ------------- $ 3,640,000 $ 3,276,000 ----------- -------------
3. Abandonment of Equipment The Company recently embarked on an expansion of its central plant and distribution facility in order to increase capacity and streamline operations. In connection with this program, certain equipment with a net book value of $218,000 was abandoned for no proceeds. 4. Income Taxes A deferred tax asset and related valuation allowance was established at $4,405,000 and $3,503,000, respectively, at September 28, 1996 based upon estimates of future taxable income through fiscal 1997. The valuation allowance has been reduced by $1,111,000 during the first two quarters of fiscal 1997 to $2,392,000 at April 12, 1997 based upon estimates of future taxable income beyond fiscal 1997 and due to certain reductions in the gross deferred tax asset. 5. Reclassification On February 19, 1997, the Company amended its credit facility with Fleet Bank - NH, thereby extending the term of its line of credit to February 28, 1999. Accordingly, the Company has reclassified and renamed its revolving line of credit on the face of the balance sheet as a long-term liability under the name "Long-term line of credit." 6. Net Income Per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." SFAS 128 establishes new standards for computing and presenting earnings per share and will be effective for the Company's interim and annual periods ending after December 15, 1997. Early adoption of the Statement is not permitted. SFAS 128 requires restatement of all previously reported earnings per share data that are presented. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Company has calculated both the basic earnings per share and the diluted earnings per share to be $0.17 and $0.38 for the twelve weeks and 28 weeks ended April 12, 1997, respectively. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- General Green Mountain Coffee, Inc., a leader in the specialty coffee industry, roasts over 25 high quality arabica coffees to produce over 70 varieties of coffee that it sells under the Green Mountain Coffee Roasters(R) and Green Mountain Coffee(R) brands. For the twenty-eight weeks ended April 12, 1997, Green Mountain Coffee, Inc. (the "Company" or "Green Mountain") derived approximately 81.3% of its net sales from its wholesale operation. Green Mountain's wholesale operation sells coffee to retailers and food service concerns including supermarkets, restaurants, convenience stores, specialty food stores, hotels, universities and business offices. Green Mountain also operates twelve company- owned retail stores in the Northeast and metropolitan Chicago, and has a direct mail operation serving customers nationwide from its Waterbury, Vermont headquarters, which accounted for approximately 11.6% and 7.1% of net sales, respectively, during the same period. Cost of sales consists of the cost of raw materials including coffee beans, flavorings and packaging materials, a portion of the Company's rental expense, the salaries and related expenses of production and distribution personnel, depreciation on production equipment and freight and delivery expenses. Selling and operating expenses consist of expenses that directly support the sales of the Company's wholesale, retail or direct mail channels, including media and advertising expenses, a portion of the Company's rental expense, and the salaries and related expenses of employees directly supporting sales. General and administrative expenses consist of expenses incurred for corporate support and administration, including a portion of the Company's rental expense and the salaries and related expenses of personnel not elsewhere categorized. The Company's fiscal year ends on the last Saturday in September. The Company's fiscal year normally consists of 13 four-week periods with the first, second and third "quarters" ending the last Saturday of the 16th week, 28th week and 40th week, respectively, of the fiscal year. Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. Forward-looking statements which are based on various assumptions (some of which are beyond Green Mountain's control), may be identified by reference to a future period, or periods, or by the use of forward-looking terminology such as "may", "will", "believe", "expect", "estimate, "anticipate", "continue", or similar terms or variations on those terms, or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, business conditions in the coffee industry and food industry in general, fluctuations in availability and cost of green coffee, economic conditions, competition, variances from budgeted sales mix and growth rate, weather and special or unusual events. Twelve weeks ended April 12, 1997 versus twelve weeks ended April 13, 1996 - -------------------------------------------------------------------------- Net sales increased by $1,944,000 or 23.9% from $8,119,000 for the twelve weeks ended April 13, 1996 (the "1996 period") to $10,063,000 for the twelve weeks ended April 12, 1997 (the "1997 period"). Coffee pounds sold, excluding coffee pounds sold as beverages through the Company's 12 company-owned retail stores, increased by approximately 282,000 pounds, or 25.3%, from approximately 1,116,000 pounds in the 1996 period to approximately 1,398,000 pounds in the 1997 period. The net sales increase is attributable to the wholesale area in which net sales increased by $2,017,000 or 31.5% from $6,407,000 for the 1996 period to $8,424,000 for the 1997 period. This wholesale net sales increase resulted primarily from the growth in the number of wholesale customer accounts. A sales price increase of $0.45 per pound to wholesale customers effective March 10, 1997 in response to the dramatic increase in the cost of green coffee during the 1997 period had an immaterial impact on sales in the 1997 period. The Company believes that increases in the cost of green coffee can generally be passed on to customers or absorbed through more efficient operations, although there can be no assurance that the Company will be successful in doing so. Gross profit increased by $937,000, or 28.9% from $3,245,000 for the 1996 period to $4,182,000 for the 1997 period. As a percentage of net sales, gross profit increased 1.6 percentage points from 40.0% for the 1996 period to 41.6% for the 1997 period. The increase in gross profit as a percentage of sales was due primarily to an increase in whole bean and ground coffee sales as a percentage of total sales. Selling and operating expenses increased by $722,000, or 30.8%, from $2,341,000 for the 1996 period to $3,063,000 for the 1997 period. Selling and operating expenses increased 1.6 percentage points as a percentage of sales from 28.8% for the 1996 period to 30.4% for the 1997 period. The increase in selling and operating expense as a percentage of sales was primarily due to approximately $310,000 in incremental expenses related to the hiring of a national supermarket sales manager, a national office coffee service and food service sales manager, and 14 people to the Company's direct sales force in the greater Boston, Connecticut, Florida, New York and greater Philadelphia markets. During the 1997 period, the Company also converted its half-pound and one pound packaging to 12 oz. packaging to improve its overall competitive positioning. General and administrative expenses increased by $92,000 or 13.7% from $673,000 for the 1996 period to $765,000 for the 1997 period, representing a decrease of 0.7 percentage points as a percentage of sales from 8.3% for the 1996 period to 7.6% for the 1997 period. In preparation for expected future growth and due to the approval during the 1997 period of a Federal Community Development Block Grant to the Town of Waterbury, Vermont which is expected to indirectly benefit the Company through reduced occupancy costs, Green Mountain has commenced the expansion of its central production and distribution facility located in Waterbury. The 45,000 square-foot addition to its central facility is expected to be completed by fiscal year end and will first be used for expanded warehousing and distribution space with roasting and packaging machinery being added in future fiscal years as needed. The increase in occupancy costs related to the expansion is not expected to have a material impact on the Company in fiscal 1997. Due to the demolition of an old, adjacent office building occupied by the Company, and the immediate redesign of the production flow to be used in the expanded facility, the Company recorded a loss on abandonment of equipment of $218,000 during the 1997 period. As a result of the foregoing, income from operations decreased by $95,000 or 41.1%, from $231,000 for the 1996 period to $136,000 for the 1997 period. However, if the Company had not recorded the $218,000 loss on disposal of fixed assets, income from operations would have increased by $123,000 or 53.2% from $231,000 for the 1996 period to $354,000 for the 1997 period. The income tax expense recognized under SFAS 109 was $17,000 in the 1996 period compared to an income tax benefit of $552,000 in the 1997 period. The Company has been profitable for seven consecutive fiscal quarters and, based on the weight of available evidence, as prescribed in SFAS 109, of the amount of deferred tax assets which more likely than not will be realized, has reduced its deferred tax asset valuation allowance by $562,000 during the 1997 period. Net income increased by $481,000 or 490.8%, from $98,000, or $0.03 per share for the 1996 period to $579,000, or $0.17 per share, in the 1997 period. The increase in net income of $481,000 was primarily due to the effect of a reduction in the deferred tax asset valuation allowance of $562,000 based upon continuing profitable quarterly operating results and long-term projections in accordance with SFAS 109, and was partially offset by a loss on abandonment of equipment amounting to $218,000 related to a decision made by the Company during the 1997 period to expand its central production and distribution facility. Twenty-eight weeks ended April 12, 1997 versus twenty-eight weeks ended April 13, 1996 - ----------------------------------------------- Net sales increased by $4,212,000, or 20.8%, from $20,263,000 for the twenty- eight weeks ended April 13, 1996 (the "1996 YTD period") to $24,475,000 for the twenty-eight weeks ended April 12, 1997 (the "1997 YTD period"). Coffee pounds sold, excluding coffee pounds sold as beverages through the Company's 12 company-owned retail stores, increased by approximately 692,000 pounds, or 25.6%, from approximately 2,706,000 pounds in the 1996 YTD period to approximately 3,398,000 pounds in the 1997 YTD period. The net sales increase is attributable to the wholesale area in which net sales increased by $4,314,000, or 27.7%, from $15,577,000 for the 1996 YTD period to $19,891,000 for the 1997 YTD period. The wholesale net sales increase resulted primarily from growth in the number of wholesale accounts. Gross profit increased by $1,794,000, or 22.0%, from $8,155,000 for the 1996 YTD period to $9,949,000 for the 1997 YTD period. As a percentage of net sales, gross profit increased 0.4 percentage points from 40.2% for the 1996 YTD period to 40.6% for the 1997 YTD period. Selling and operating expenses increased by $1,461,000, or 27.1%, from $5,385,000 for the 1996 YTD period to $6,846,000 for the 1997 YTD period. Selling and operating expenses increased 1.4 percentage points as a percentage of sales from 26.6% for the 1996 YTD period to 28.0% for the 1997 YTD period. The increase in selling and operating expense as a percentage of sales was primarily due to approximately $675,000 in incremental expenses related to the hiring of a national supermarket sales manager, a national office coffee service and food service sales manager, and 14 people to the Company's direct sales force in the greater Boston, Connecticut, Florida, New York and greater Philadelphia markets. General and administrative expenses increased by $139,000 or 8.7% from $1,599,000 for the 1996 YTD period to $1,738,000 for the 1997 YTD period, representing a decrease of 0.8 percentage points as a percentage of sales from 7.9% for the 1996 YTD period to 7.1% for the 1997 YTD period. Income from operations decreased by $24,000 or 2.0% from $1,171,000 for the 1996 YTD period to $1,147,000 for the 1997 YTD period. However, had the Company not recorded the $218,000 loss on abandonment of equipment during the 1997 period as previously discussed above, income from operations would have increased by $194,000 or 16.6% from $1,171,000 for the 1996 YTD period to $1,365,000 for the 1997 YTD period. The income tax expense recognized under SFAS 109 was $137,000 in the 1996 YTD period compared to an income tax benefit of $407,000 in the 1997 YTD period. The income tax benefit in the 1997 YTD period occurred due to the reduction in the Company's deferred tax asset valuation allowance as discussed above. Net income increased by $524,000 or 67.4% from $777,000, or $0.23 per share for the 1996 YTD period to $1,301,000, or $0.38 per share, for the 1997 YTD period. The increase was primarily due to the effect of the reduction in the deferred tax asset valuation allowance, and was partially offset by the loss on abandonment of equipment during the 1997 period. Liquidity and Capital Resources - ------------------------------- Working capital increased $1,162,000 to $4,103,000 at April 12, 1997 from $2,941,000 at September 28, 1996. Cash used for capital expenditures aggregated $2,954,000 during the 1997 YTD period, and included $557,000 for equipment loaned to wholesale customers, $479,000 for production and distribution equipment and $1,517,000 for computer hardware and software. During the 1996 YTD period, Green Mountain had capital expenditures of $977,000 (net of $180,000 financed directly by a capital lease and long-term debt), including $396,000 for equipment on loan to wholesale customers, $121,000 for production equipment and $224,000 for computer hardware and software. Cash used to fund the capital expenditures in the 1997 YTD period was obtained primarily from the $1,805,000 of net cash provided by operating activities. The Company currently plans to make capital expenditures in fiscal 1997 of approximately $5,300,000, primarily to fund the purchase of equipment for loan to wholesale customers (approximately $1,400,000) and computer hardware and software (approximately $2,400,000). Green Mountain is presently implementing an enterprise information system which it expects to use to facilitate growth and improve operations and customer service. Assuming a stable mix in packaging types and sizes, management believes that it will operate at approximately 60-70% of production capacity in fiscal 1997 and expects to incur approximately $800,000 for production equipment expenditures during the year primarily for new packaging equipment and tooling related to its packaging size conversion. Overall capital expenditures for fiscal 1998 are presently expected to be below fiscal 1997's expected level. Management continuously reviews capital expenditure needs and actual amounts expended may differ from these estimates. On February 19, 1997, the Company amended its credit facility with Fleet Bank - NH. Under the revised facility, the Company increased the limit of the revolving line of credit from $3,000,000 to $5,000,000 and extended its term to February 28, 1999. On May 19, 1997, Green Mountain received a commitment letter from Fleet Bank - NH to amend its credit facility to increase its revolving line of credit limit by another $1,000,000 to $6,000,000. Under the commitment, the amount available under the revolving line of credit is fully available and any previous working capital borrowing base formula is eliminated. Management believes that cash flow from operations, existing cash and available borrowings under its credit facility and other sources will provide sufficient liquidity to fund currently planned growth, pay all liabilities incurred in the normal course of business, fund capital expenditures and service debt requirements in fiscal 1997. The average cost of the high quality arabica coffees the Company purchases decreased slightly during the 1997 YTD period as compared to the 1996 YTD period. However, since December 1996, when the closing near-term "c" price (the price per pound quoted by the Coffee, Sugar and Cocoa Exchange) was as low as $1.036, the near-term "c" price has risen dramatically, closing on May 16, 1997 at $2.765, a 167% increase from the low. Twenty-year lows in reported domestic coffee supplies combined with forecasts of smaller crops in Central America, labor actions in certain countries and the fear of frost in Brazil as their winter approaches, among other factors, have caused this dramatic increase in the "c" price. In addition to the "c" price, coffee of the quality sought by Green Mountain also tends to trade on a negotiated basis at a substantial premium or "differential" above the "c" price. Since December 1996, differentials have also been rising. The Company believes that the cost of green coffee will continue to be volatile in fiscal 1997. The Company believes that increases in the cost of green coffee can generally be passed on to customers or absorbed through more efficient operations, although there can be no assurance that the Company will be successful in doing so. Similarly, rapid sharp decreases in the cost of green coffee could also force the Company to lower sales prices before realizing cost reductions in its green coffee inventory. Because Green Mountain roasts over 25 different types of green coffee beans to produce its more than 70 different varieties of coffee, if one type of green coffee bean were to become unavailable or prohibitively expensive, management believes Green Mountain could substitute another type of coffee of equal or better quality meeting a similar taste profile, in a blend or temporarily remove that particular coffee from its product line. However, a worldwide supply shortage of the higher-quality arabica coffees the Company purchases could have an adverse impact on the Company. Deferred Income Taxes - --------------------- The Company had net deferred tax assets of $1,363,000 at April 12, 1997. These assets are reported net of a deferred tax asset valuation allowance at that date of $2,392,000 (related primarily to a Vermont investment tax credit). The Company had income before taxes of $894,000 and $1,484,000 in the 1997 YTD period and for all of fiscal 1996, respectively, and has been profitable in its last seven consecutive fiscal quarters. Presently, the Company believes that the deferred tax assets, net of deferred tax liabilities and the valuation allowance, are realizable and represent management's best estimate, based on the weight of available evidence as prescribed in SFAS 109, of the amount of deferred tax assets which most likely will be realized. Factors Affecting Quarterly Performance - --------------------------------------- Historically, the Company has experienced significant variations in sales from quarter to quarter due to the holiday season and a variety of other factors, including, but not limited to, general economic trends, the cost of green coffee, competition, marketing programs, weather and special or unusual events. Because of the seasonality of the Company's business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders (a) The Registrant held its 1997 Annual Meeting of Stockholders on April 4, 1997 in Burlington, Vermont. The Board of Directors of the Registrant solicited proxies for this meeting pursuant to a proxy statement filed under Regulation 14A. (b-c) At the Annual Meeting the shareholders voted as follows on the following matters: 1. Election of Directors Broker Nominee For Withheld Nonvotes ----------- --------- ---------- --------- Robert P. Stiller 3,122,674 8,119 0 Robert D. Britt 3,122,500 8,293 0 Stephen J. Sabol 3,120,074 10,719 0 Jonathan C. Wettstein 3,122,212 8,581 0 Jules A. del Vecchio 3,122,574 8,219 0 David F. Moran 3,122,012 8,419 0 Ian W. Murray 3,122,574 8,219 0 William D. Davis 3,122,674 8,119 0
2. Amendment to the Company's 1993 Stock Option Plan increasing from 75,000 to 275,000 the number of shares of Common Stock for which options may be granted under the Plan For Against Abstaining Broker Nonvotes --------- ------- ---------- --------------- 2,476,059 54,342 19,078 581,314
3. Ratification of the appointment of Price-Waterhouse LLP as the independent accountants for the Company for the current fiscal year [S] [C] [C] [C] For Against Abstaining Broker Nonvotes --------- ------- ---------- --------------- 3,120,294 1,202 9,297 0 (d) Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Certificate of Incorporation1 3.2 Bylaws1 10.71 Employment Agreement, as of November 19, 1996, between the Company and Dean E. Haller 10.72 Employment Agreement, as of January 1, 1997, between the Company and William L. Prost 10.73 Stock Option Agreement, dated November 19, 1996, between the Company and Dean E. Haller 10.74 Stock Option Agreement, dated May 19, 1997, between the Company and William L. Prost 10.2(dd)Financing Commitment from Fleet Bank, dated May 19, 1997, to amend Commercial Loan Agreement among Green Mountain Coffee Roasters, Inc. as borrower, and Fleet Bank - NH, as lender 11 Computation of net income per share of common stock 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the twenty-eight weeks ended April 12, 1997. - -------------------------- 1Incorporated by reference to the corresponding exhibit number in the Registration Statement on Form SB-2 (Registration No. 33-66646) filed on July 28, 1993, and declared effective on September 21, 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREEN MOUNTAIN COFFEE, INC. Date: 5/23/97 By: /s/ Robert P. Stiller ------------ -------------------------- Robert P. Stiller, President and Chief Executive Officer Date: 5/23/97 By: /s/ Robert D. Britt ------------- -------------------------- Robert D. Britt, Chief Financial Officer, Treasurer and Secretary Excludes Exhibits Filed With This Form 10-Q To obtain copies of exhibits, please contact: Green Mountain Coffee, Inc. Investor Relations Department 33 Coffee Lane Waterbury, VT 05676 (802) 244-5621 EX-10.71 2 EMPLOYMENT AGREEMENT, AS OF NOVEMBER 19, 1996, BETWEEN THE COMPANY AND DEAN E. HALLER EMPLOYMENT AGREEMENT, AS OF NOVEMBER 19, 1996, BETWEEN THE COMPANY AND DEAN E. HALLER EMPLOYMENT AGREEMENT ("Agreement") made as of November 19, 1996 between GREEN MOUNTAIN COFFEE ROASTERS, INC., a Vermont corporation ("Employer"), and DEAN E. HALLER, an individual residing in Underhill, Vermont ("Executive"). Employer desires to employ Executive and Executive desires to be employed by Employer as Vice President of Administration. Employer and Employee agree as follows: 1. Employment, Powers, Duties and Acceptance. 1.1 Employer employs Executive to render services to Employer as Employer's Vice President of Administration, and Executive accepts such employment. 1.2 As Vice President of Administration of Employer, Executive shall be responsible for the general supervision and management of all aspects of development and implementation of Employer's policies, plans, and programs with respect to personnel of Employer and management of the corporate administrative department, all under the control and supervision of the President and Chief Executive Officer of Employer. 1.3 Executive shall be a full-time employee of Employer and shall devote all of his working time, best efforts and full skill and attention to Employer's business, and will faithfully serve Employer's interests. During the term of this Agreement, Executive agrees to serve, without additional compensation, as an officer and/or director of any parent, subsidiary or affiliate of Employer, if elected as such. 1.4 Executive's principal place of employment shall be Waterbury, Vermont and environs, subject to reasonable travel requirements on behalf of Employer. 2. Term. This Agreement will commence on November 19, 1996, and will continue until terminated by either party in accordance with the provisions of Section 4, below. 3. Compensation. 3.1 In consideration of Executive's performance of his duties and responsibilities under this Agreement, Employer agrees to pay and Executive agrees to accept, the following compensation: 3.1.a Base Compensation. A salary of $110,000 per annum ("Base Compensation"), payable in installments in accordance with Employer's standard payroll practices; 3.1.b Bonus. Such bonuses ("Bonus"), if any, up to a maximum of 20% of Base Compensation, as may be determined in the sole and absolute discretion of the Board of Directors of Employer; 3.1.c Benefits. At the option of Executive, and subject to Executive's meeting the eligibility requirements of each respective plan, Executive may participate in and be covered by each profit sharing, bonus, pension, life insurance, accident insurance, health insurance, hospitalization, and any other employee benefit plan of Employer available generally to executives of Employer, on the same basis as shall be available to other executives. 3.1.d Vacation. Employee shall be entitled to paid vacation of four (4) weeks per annum accruing at the rate of 1.66 days per month. 3.1.e Reimbursement for Expenses. Employer shall reimburse Executive for all reasonable expenses paid or incurred by him on behalf of Employer in the course of his employment, but payment shall be made only against a signed, itemized list of such expenditures, utilizing procedures and general forms for that purpose established by Employer. 3.2 Nothing in this Agreement shall prevent Employer from at any time increasing Executive's Base Compensation, either permanently or for a limited period, or from paying bonuses and other additional compensation to Executive, in the event that Employer in its sole discretion shall deem it advisable. 4. Termination. 4.1 Death. Executives's employment under this Agreement shall terminate immediately upon the death of Executive; provided that in the event of the death of Executive, his heirs or legal representative shall be entitled to receive any payment pursuant to Sections 3.1.a and 3.1.b, 3.1c, 3.1d, or 3.1 e, if any, accrued as at the date of death, and upon such payment Employer shall have no further obligation pursuant to this Agreement. 4.2 Termination Without Cause. Executive's employment under this Agreement shall terminate immediately upon thirty days' prior written notice from Executive to Employer of his voluntary resignation or thirty days' prior written notice from Employer to Executive of his termination without cause. In the event of termination by either party without cause, Executive shall continue to perform his duties pursuant to this Agreement until the termination date, if requested by Employer, his compensation during the termination period to be payable at his then current rate of Base Compensation, provided however, that Employer shall have the right to require Executive to cease performance of his duties and resign from all offices any time on or after the date of notice of termination, and Executive's performance obligations and offices shall terminate as at that date. 4.3 Disability. If, after being reasonablely accommodated by Employer, Executive is unable to perform his services due to illness, injury or incapacity for a period of more than thirty (30) consecutive days, Employer may terminate Executive's employment and this Agreement immediately upon written notice, in which case Executive shall be entitled to compensation as provided in Section 4.2, above, less any payments to Executive pursuant to any policy of disability maintained by Employer or its affiliates for the benefit of Executive. 4.4 Termination by Employer for Cause. Executive's employment under this Agreement shall terminate immediately upon written notice from Employer to Executive of termination for cause, and Employer shall have no further obligation pursuant to this Agreement. For purposes of this Section 4.4, the term "for cause" shall mean and include any of the following events: fraud, misappropriation or embezzlement by Executive involving Employer or any subsidiary or affiliate thereof; the conviction in any jurisdiction of Executive for any crime involving moral turpitude or which constitutes a felony; Executive's demonstrated voluntary unwillingness to perform his duties, including Executive's failure or refusal to carry out or perform such actions or duties as he is specifically directed to carry out or perform by the President and Chief Executive Officer of Employer, provided that Executive shall not be required to perform any illegal or unethical act; the willful engaging by Executive in conduct which has or could reasonably be expected to have a material adverse effect on Employer or any of its subsidiaries or affiliates; or the material breach by Executive of any representations, warranties, agreements or covenants made by Executive in this Agreement or any other agreement between Employer and Executive. In the event of termination of this Agreement by Employer for cause, Executive shall be entitled to no further compensation except compensation pursuant to Sections 3.1.a or 3.1.b, 3.1c, 3.1d. Or 3.1e, which may have accrued prior to such termination, and Employer shall have no further obligation hereunder. 5. Confidentiality Agreement; Covenant Not to Compete or Hire Certain Employees. 5.1 Confidentiality Agreement. Executive acknowledges that he will have access to proprietary, confidential information of Employer and its affiliates, which information Executive acknowledges constitutes a special and unique asset of Employer. Executive agrees during the term of this Agreement and thereafter: 5.1.a to keep secret and retain in the strictest confidence all information about business and financial matters (such as costs, profits, strategic and marketing plans, customer and supplier lists, formulae and methods of operation and production) of Employer and its affiliates; their employment policies and plans; and any other proprietary information relating to Employer and its affiliates, their operations, business and financial affairs (collectively, but excluding information known to Executive prior to his employment with Employer, the "confidential information") and not to disclose the confidential information to anyone not then an officer, director or authorized employee of Employer or any of its affiliates, nor utilize such confidential information, either during or after the termination of his employment with Employer, except in the course of performing his duties pursuant to this Agreement or with Employer's express written consent or except to the extent that such confidential information can be shown to have been in the public domain through no fault of Executive; and 5.1.b to deliver to Employer on demand, all memoranda, notes, records, reports and other documents (in any medium whatsoever) relating to Employer's or any of its affiliates' business, financial affairs or operations and all property associated therewith, which he may then possess or have under his control. Upon request of Employer, Executive agrees to certify that such delivery is complete, and that any and all copies made have been delivered or destroyed. Employer agrees to give access to Executive to such facilities of Employer as may be necessary for retrieval of Executive's personal files and property after termination. 5.2 Non-Compete. During the term of this Agreement, and for a period of six (6) months following termination of this Agreement, Executive agrees that he will not, without Employer's prior written consent (which may be withheld for any reason or for no reason in Employer's sole discretion), do anything adverse to the interests of Employer, and shall not, directly or indirectly himself or by or through a family member or otherwise, alone or as a member of a partnership or joint venture, or as a principal, officer, director, consultant, employee or stockholder of any other entity, compete with Employer or be engaged in or connected with any other business competitive with that of Employer or any affiliate thereof; provided, however, that Executive may own as a passive investment not more than one percent (1%) of the securities of any publicly held corporation that may engage in a business competitive with that of Employer or any affiliate. For purposes of this Agreement, a "competitive business" shall mean a business engaged in the wholesale, retail and/or catalog sale of roasted coffee beans and related products. 5.3 Non-solicitation of Employees. Executive shall not at any time during the one-year period following the termination of his employment with Employer for any reason whatsoever: employ any individual who was employed by Employer or any affiliate during the year immediately preceding his termination; or in any material respect cause, influence, or participate in the employment of any such individual by any business that is competitive with any of the businesses engaged in by Employer or any affiliate. 5.4 Non-solicitation of Customers and Suppliers. Executive shall not at any time during the one-year period following the termination of his employment directly or indirectly: solicit for himself or any person the business of any individual or business which was a material customer or material supplier of Employer or any affiliate at any time during the one-year period immediately preceding such termination; or persuade or attempt to persuade any such customer or supplier to cease doing business or to reduce the amount of business it does with Employer or any affiliate. 5.5 Equitable Remedies. It is agreed that Executive's obligations and the rights of Employer pursuant to this Section 5 are unique and that any breach or threatened breach by Executive of any of the foregoing provisions of this Section 5 cannot be remedied solely by damages at law. In the event of a breach or a threatened breach by Executive of any of the provisions of this Section 5, Employer shall be entitled to injunctive relief to enforce its rights and restraining Executive and any business, firm, partnership, individual, corporation or entity participating in such breach or threatened breach. Nothing in this section shall be construed as prohibiting Employer from pursuing any other remedies available at law or in equity for such breach or threatened breach, including the recovery of damages and the immediate termination of Executive. In addition to any such remedies, Employer shall be entitled to recover its costs, including reasonable attorneys' fees and costs, to enforce its rights pursuant to this Section 5 or prevent a breach or threatened breach. 6. Relationship to Parties. Nothing in this Agreement shall be deemed to constitute a partnership between or a joint venture by the parties, nor be deemed to constitute either Executive or Employer the agent of the other except as specifically provided. Neither Executive nor Employer shall be or become liable or bound by any representation act or omission whatsoever of the other made contrary to the provisions of this Agreement. 7. Assignment. This Agreement shall be binding upon the successors and assigns of Employer. Neither this Agreement nor any rights to any payments hereunder shall be assignable by Executive. 8. Notices. All notices and communications hereunder shall be in writing and be given by registered or certified mail, postage and registration or certification fees prepaid, and shall be deemed given when so mailed as follows: If to Employer: Green Mountain Coffee, Inc. 33 Coffee Lane Waterbury, VT 05676 With a copy to: H. Kenneth Merritt, Jr., Esq. Merritt & Merritt 112 Lake Street P.O. Box 5839 Burlington, VT 05402 If to Executive: Mr. Dean E. Haller At his address then current on the books and records of Employer The foregoing addresses may be changed by notice given in the manner set forth in this Section 10. 9. Miscellaneous. 9.1 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the employment of Executive by Employer during the term hereof, and the provisions hereof may not be altered, amended, waived, terminated or discharged in any way whatsoever except by subsequent written agreement executed by the party charged therewith. This Agreement supersedes all prior employment agreements, letters, understandings and arrangements between Executive and Employer pertaining to the terms of the employment of Executive by Employer, including, without limitation, that certain letter from Employer to Executive dated October 4, 1996. 9.2 Waiver. A waiver by either of the parties of any of the terms or conditions of this Agreement, or of any breach, shall not be deemed a waiver of such terms or conditions for the future or of any other term of condition, or of any subsequent breach. 9.3 Provision not Enforceable. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions. Without limiting the generality of the foregoing sentence, if any of the covenants contained in Section 5 are construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect. If any provisions of Section 5 are held to be unenforceable because of their scope or duration, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall be enforceable. 9.4 Deductions and Set-Offs. Employer shall have the right to deduct and withhold from Executive's compensation the amounts required to be deducted and withheld by Employer pursuant to any present or future law. In the event that Employer makes any payments or incurs any charges for Executive's account or Executive incurs any personal charges with Employer, Employer shall have the right and Executive hereby authorizes Employer to recoup such payments or charges by deducting and withholding the aggregate amount thereof from any compensation otherwise payable to Executive hereunder. 9.5 Governing Law. This Agreement is made in and shall be construed and interpreted under the laws of the State of Vermont, and Executive consents to personal jurisdiction in Vermont. 9.6 Captions. The captions in this Agreement are not part of the provisions hereof, are merely for the purpose of reference and shall have no force or effect for any purpose whatsoever, including the construction of the provisions of this Agreement. 9.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be an original, and which together shall constitute one agreement. 9.8 Employee Handbook or Manual. In the event of any conflict between this Agreement and any Employee Manual or Handbook circulated by Employer now or in future, this Agreement shall control. 10. Arbitration. Except for the rights of Employer pursuant to Section 5, above, any controversy or claim arising out of or relating to this Agreement or its breach shall be settled by binding arbitration in the city of Burlington, Vermont in accordance with the rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties and may be enforced in any court of competent jurisdiction. The arbitrator is expressly permitted to award reasonable attorneys' fees and costs to the prevailing party. ACKNOWLEDGMENT OF ARBITRATION EACH OF THE UNDERSIGNED UNDERSTANDS THAT THIS AGREEMENT CONTAINS AN AGREEMENT TO ARBITRATE. AFTER SIGNING THIS DOCUMENT, EACH PARTY UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE ARBITRATION AGREEMENT, UNLESS IT INVOLVES A QUESTION OF CONSTITUTIONAL OR CIVIL RIGHTS. INSTEAD EACH PARTY AGREES TO SUBMIT ANY SUCH DISPUTE TO AN IMPARTIAL ARBITRATOR. IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the date first above written. GREEN MOUNTAIN COFFEE ROASTERS, INC. By: /s/ Robert P. Stiller ---------------------------- Robert P. Stiller, President and Chief Executive Officer /s/ Dean E. Haller ----------------------------- Dean E. Haller EX-10.72 3 EMPLOYMENT AGREEMENT, AS OF JANUARY 1, 1997, BETWEEN THE COMPANY AND WILLIAM L. PROST EMPLOYMENT AGREEMENT, AS OF JANUARY 1, 1997, BETWEEN THE COMPANY AND WILLIAM L. PROST EMPLOYMENT AGREEMENT ("Agreement") made as of January 1, 1997 between GREEN MOUNTAIN COFFEE ROASTERS, INC., a Vermont corporation ("Employer"), and BILL PROST, an individual residing in San Antonio, Texas ("Executive"). Employer desires to employ Executive and Executive desires to be employed by Employer as Vice President of Marketing. Employer and Employee agree as follows: 1. Employment, Powers, Duties and Acceptance. 1.1 Employer employs Executive to render services to Employer as Employer's Vice President of Marketing, and Executive accepts such employment. 1.2 As Vice President of Marketing of Employer, Executive shall be responsible for the general supervision and management of all aspects of development and implementation of Employer's marketing strategy, plans and programs, all under the control and supervision of the President and Chief Executive Officer of Employer. 1.3 Executive shall be a full-time employee of Employer and shall devote all of his working time, best efforts and full skill and attention to Employer's business, and will faithfully serve Employer's interests. During the term of this Agreement, Executive agrees to serve, without additional compensation, as an officer and/or director of any parent, subsidiary or affiliate of Employer, if elected as such. 1.4 Executive's principal place of employment shall be Waterbury, Vermont and environs, subject to reasonable travel requirements on behalf of Employer. 1.5 Employer acknowledges that employee is currently and will remain an owner of Prost Marketing, Inc. and Prost Communications, Inc. and that this is not a conflict. Also, in the event of any termination, employee shall not be restricted from working for these companies. 2. Term. This Agreement will commence on January 1, 1997, and will continue until terminated by either party in accordance with the provisions of Section 4, below. 3. Compensation. 3.1 In consideration of Executive's performance of his duties and responsibilities under this Agreement, Employer agrees to pay and Executive agrees to accept, the following compensation: 3.1.a Base Compensation. A salary of $110,000 per annum ("Base Compensation"), payable in installments in accordance with Employer's standard payroll practices; 3.1.b Bonus. Such bonuses ("Bonus"), if any, as may be determined in the sole and absolute discretion of the Board of Directors of Employer; 3.1.c Benefits. At the option of Executive, and subject to Executive's meeting the eligibility requirements of each respective plan, Executive may participate in and be covered by each profit sharing, bonus, pension, life insurance, accident insurance, health insurance, hospitalization, and any other employee benefit plan of Employer available generally to executives of Employer, on the same basis as shall be available to other executives. 3.1.d Vacation. Employee shall be entitled to paid vacation of three (3) weeks per annum accruing at the rate of 1.25 days per month during the initial two year term of this Agreement, subject to increase to four weeks per annum when qualified in accordance with the then- current policies as specified in the Employer's Employee Handbook available generally to executive-level employees of Employer. 3.1.e Reimbursement for Expenses. 3.1.e.i Moving Expenses. Upon presentation of such receipts as Employer shall reasonably require, Employer shall reimburse Executive for such reasonable and customary moving costs and relocation expenses, including any personal income tax liability resulting from reimbursement, involved in the relocation of Executive and his family from Texas to Vermont as shall have the prior written approval of Employer. Rates of reimbursement shall be based on applicable IRS rules and regulations. 3.1.e.ii Expenses. Employer shall reimburse Executive for all reasonable expenses paid or incurred by him on behalf of Employer in the course of his employment, but payment shall be made only against a signed, itemized list of such expenditures, utilizing procedures and general forms for that purpose established by Employer. 3.2 Nothing in this Agreement shall prevent Employer from at any time increasing Executive's Base Compensation, either permanently or for a limited period, or from paying bonuses and other additional compensation to Executive, in the event that Employer in its sole discretion shall deem it advisable. 4. Termination. 4.1 Death. Executives's employment under this Agreement shall terminate immediately upon the death of Executive; provided that in the event of the death of Executive, his heirs or legal representative shall be entitled to receive any payment pursuant to Sections 3.1.a, 3.1.b, 3.1.c, 3.1.d and 3.1.e.ii, if any, accrued as at the date of death, and upon such payment Employer shall have no further obligation pursuant to this Agreement. 4.2 Termination Without Cause. Executives employment under this Agreement shall terminate immediately upon thirty days' prior written notice from Executive to Employer of his voluntary resignation or thirty days' prior written notice from Employer to Executive of his termination without cause. In the event of termination by either party without cause, Executive shall continue to perform his duties pursuant to this Agreement until the termination date, if requested by Employer, his compensation during the termination period to be payable at his then current rate of Base Compensation, provided however, that Employer shall have the right to require Executive to cease performance of his duties and resign from all offices any time on or after the date of notice of termination, and Executive's performance obligations and offices shall terminate as at that date. In the event that Executive is terminated by Employer without cause: 4.2.a prior to the first anniversary date of this Agreement, Executive shall be entitled to payment of five (5) months Base Compensation, plus any Bonus accrued and remaining unpaid as at the date of notice of termination, payable in installments in accordance with Employer's then-current payroll practices; or 4.2.b after the first anniversary date of this Agreement, Executive shall be entitled to payment of five months' Base Compensation at his then- current rate of compensation, plus any Bonus accrued as at the date of notice of termination, payable in installments in accordance with Employer's then-current payroll practices. Upon payment by Employer in accordance with 4.2.a or 4.2.b, as applicable, Employer shall have no further obligation pursuant to this Agreement. 4.3 Disability. If Executive is unable to perform his services due to illness, injury or incapacity for a period of more than ninety (90) consecutive days, Employer may terminate Executive's employment and this Agreement immediately upon written notice, in which case Executive shall be entitled to compensation as provided in Section 4.2, above, less any payments to Executive pursuant to any policy of disability maintained by Employer or its affiliates for the benefit of Executive. 4.4 Termination by Employer for Cause. Executive's employment under this Agreement shall terminate immediately upon written notice from Employer to Executive of termination for cause, and Employer shall have no further obligation pursuant to this Agreement. For purposes of this Section 4.4, the term "for cause" shall mean and include any of the following events: fraud, misappropriation or embezzlement by Executive involving Employer or any subsidiary or affiliate thereof; the conviction in any jurisdiction of Executive for any crime involving moral turpitude or which constitutes a felony; Executive's demonstrated voluntary unwillingness to perform his duties, including Executive's failure or refusal to carry out or perform such actions or duties as he is specifically directed to carry out or perform by the President and Chief Executive Officer of Employer, provided that Executive shall not be required to perform any illegal or unethical act; the willful engaging by Executive in conduct which has or could reasonably be expected to have a material adverse effect on Employer or any of its subsidiaries or affiliates; or the material breach by Executive of any representations, warranties, agreements or covenants made by Executive in this Agreement or any other agreement between Employer and Executive. In the event of termination of this Agreement by Employer for cause, Executive shall be entitled to no further compensation except compensation pursuant to Sections 3.1.a, 3.1.b, 3.1.c or 3.1.d or 3.1.e.ii which may have accrued prior to such termination, and Employer shall have no further obligation hereunder. 5. Confidentiality Agreement; Covenant Not to Compete or Hire Certain Employees. 5.1 Confidentiality Agreement. Executive acknowledges that he will have access to proprietary, confidential information of Employer and its affiliates, which information Executive acknowledges constitutes a special and unique asset of Employer. Executive agrees during the term of this Agreement and thereafter: 5.1.a to keep secret and retain in the strictest confidence all information about business and financial matters (such as costs, profits, strategic and marketing plans, customer and supplier lists, formulae and methods of operation and production) of Employer and its affiliates; their employment policies and plans; and any other proprietary information relating to Employer and its affiliates, their operations, business and financial affairs (collectively, but excluding information known to Executive prior to his employment with Employer, the "confidential information") and not to disclose the confidential information to anyone not then an officer, director or authorized employee of Employer or any of its affiliates, nor utilize such confidential information, either during or after the termination of his employment with Employer, except in the course of performing his duties pursuant to this Agreement or with Employer's express written consent or except to the extent that such confidential information can be shown to have been in the public domain through no fault of Executive; and 5.1.b to deliver to Employer on demand, all memoranda, notes, records, reports and other documents relating to Employer's or any of its affiliates' business, financial affairs or operations and all property associated therewith, which he may then possess or have under his control. Upon request of Employer, Executive agrees to certify that such delivery is complete, and that any and all copies made have been delivered or destroyed. Employer agrees to give access to Executive to such facilities of Employer as may be necessary for retrieval of Executive's personal files and property after termination. 5.2 Non-Compete. During the term of this Agreement, and for a period of six (6) months following termination of this Agreement, Executive agrees that he will not, without Employer's prior written consent (which may be withheld for any reason or for no reason in Employer's sole discretion), do anything adverse to the interests of Employer, and shall not, directly or indirectly himself or by or through a family member or otherwise, alone or as a member of a partnership or joint venture, or as a principal, officer, director, consultant, employee or stockholder of any other entity, compete with Employer or be engaged in or connected with any other business competitive with that of Employer or any affiliate thereof; provided, however, that Executive may own as a passive investment not more than one percent (1%) of the securities of any publicly held corporation that may engage in a business; and competitive with that of Employer or any affiliate provided, however, Executive may establish a wholesale distribution business competitive with that of Employer if Executive owns a majority of the outstanding equity of such business. For purposes of this Agreement, a "competitive business" shall mean a business engaged in the wholesale, retail and/or catalog sale of roasted coffee beans and related products. 5.3 Non-solicitation of Employees. Executive shall not at any time during the one-year period following the termination of his employment with Employer for any reason whatsoever: employ any individual who was employed by Employer or any affiliate during the year immediately preceding his termination; or in any material respect cause, influence, or participate in the employment of any such individual by any business that is competitive with any of the businesses engaged in by Employer or any affiliate. 5.4 Non-solicitation of Customers and Suppliers. Executive shall not at any time during the one-year period following the termination of his employment directly or indirectly: solicit for himself or any person the business of any individual or business which was a material customer or material supplier of Employer or any affiliate at any time during the one-year period immediately preceding such termination; or persuade or attempt to persuade any such customer or supplier to cease doing business or to reduce the amount of business it does with Employer or any affiliate. 5.5 Equitable Remedies. It is agreed that Executive's obligations and the rights of Employer pursuant to this Section 5 are unique and that any breach or threatened breach by Executive of any of the foregoing provisions of this Section 5 cannot be remedied solely by damages at law. In the event of a breach or a threatened breach by Executive of any of the provisions of this Section 5, Employer shall be entitled to injunctive relief to enforce its rights and restraining Executive and any business, firm, partnership, individual, corporation or entity participating in such breach or threatened breach. Nothing in this section shall be construed as prohibiting Employer from pursuing any other remedies available at law or in equity for such breach or threatened breach, including the recovery of damages and the immediate termination of Executive. In addition to any such remedies, Employer shall be entitled to recover its net costs, including reasonable attorneys' fees and costs, to enforce its rights pursuant to this Section 5 or prevent a breach or threatened breach. 6. Relationship to Parties. Nothing in this Agreement shall be deemed to constitute a partnership between or a joint venture by the parties, nor be deemed to constitute either Executive or Employer the agent of the other except as specifically provided. Neither Executive nor Employer shall be or become liable or bound by any representation act or omission whatsoever of the other made contrary to the provisions of this Agreement. 7. Assignment. This Agreement shall be binding upon the successors and assigns of Employer. Neither this Agreement nor any rights to any payments hereunder shall be assignable by Executive. 8. Notices. All notices and communications hereunder shall be in writing and be given by registered or certified mail, postage and registration or certification fees prepaid, and shall be deemed given when so mailed as follows: If to Employer: Green Mountain Coffee, Inc. 33 Coffee Lane Waterbury, VT 05676 With a copy to: H. Kenneth Merritt, Jr., Esq. Merritt & Merritt 112 Lake Street P.O. Box 5839 Burlington, VT 05402 If to Executive: Mr. Bill Prost At his address then current on the books and records of Employer The foregoing addresses may be changed by notice given in the manner set forth in this Section 10. 9. Miscellaneous. 9.1 Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the employment of Executive by Employer during the term hereof, and the provisions hereof may not be altered, amended, waived, terminated or discharged in any way whatsoever except by subsequent written agreement executed by the party charged therewith. This Agreement supersedes all prior employment agreements, letters, understandings and arrangements between Executive and Employer pertaining to the terms of the employment of Executive by Employer, including, without limitation, that certain letter from Employer to Executive dated July 11, 1996. 9.2 Waiver of Breach. A waiver by either of the parties of any of the terms or conditions of this Agreement, or of any breach, shall not be deemed a waiver of such terms or conditions for the future or of any other term of condition, or of any subsequent breach. 9.3 Provision not Enforceable. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions. Without limiting the generality of the foregoing sentence, if any of the covenants contained in Section 5 are construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect. If any provisions of Section 5 are held to be unenforceable because of their scope or duration, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall be enforceable. 9.4 Deductions and Set-Offs. Employer shall have the right to deduct and withhold from Executive's compensation the amounts required to be deducted and withheld by Employer pursuant to any present or future law. In the event that Employer makes any payments or incurs any charges for Executive's account or Executive incurs any personal charges with Employer, Employer shall have the right and Executive hereby authorizes Employer to recoup such payments or charges by deducting and withholding the aggregate amount thereof from any compensation otherwise payable to Executive hereunder. These deductions must be made within sixty (60) days from the date the charges were made. 9.5 Governing Law. This Agreement is made in and shall be construed and interpreted under the laws of the State of Vermont. 9.6 Captions. The captions in this Agreement are not part of the provisions hereof, are merely for the purpose of reference and shall have no force or effect for any purpose whatsoever, including the construction of the provisions of this Agreement. 9.7 Counterparts. This Agreement may be executed in three counterparts, each of which shall be an original, and which together shall constitute one agreement. 9.8 Employee Handbook or Manual. In the event of any conflict between this Agreement and any Employee Manual or Handbook circulated by Employer now or in future, this Agreement shall control. 10. Arbitration. Any controversy or claim arising out of or relating to this Agreement or its breach shall be settled by binding arbitration in the city of Burlington, Vermont in accordance with the rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties and may be enforced in any court of competent jurisdiction. The arbitrator is expressly permitted to award reasonable attorneys' fees and costs to the prevailing party. ACKNOWLEDGMENT OF ARBITRATION EACH OF THE UNDERSIGNED UNDERSTANDS THAT THIS AGREEMENT CONTAINS AN AGREEMENT TO ARBITRATE. AFTER SIGNING THIS DOCUMENT, EACH PARTY UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE ARBITRATION AGREEMENT, UNLESS IT INVOLVES A QUESTION OF CONSTITUTIONAL OR CIVIL RIGHTS. INSTEAD EACH PARTY AGREES TO SUBMIT ANY SUCH DISPUTE TO AN IMPARTIAL ARBITRATOR. IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the date first above written. GREEN MOUNTAIN COFFEE ROASTERS, INC. By: /s/ Robert P. Stiller -------------------------------- Robert P. Stiller, President and Chief Executive Officer /s/ Bill Prost -------------------------------- Bill Prost EX-10.73 4 STOCK OPTION AGREEMENT, DATED NOVEMBER 19, 1996, BETWEEN THE COMPANY AND DEAN E. HALLER GREEN MOUNTAIN COFFEE, INC. STOCK OPTION AGREEMENT UNDER 1993 STOCK OPTION PLAN INCENTIVE STOCK OPTION As of November 19, 1996 AGREEMENT entered into by and between Green Mountain Coffee, Inc., a Delaware corporation with its principal place of business in Waterbury, Vermont (together with its subsidiaries, the "Company"), and the undersigned employee of the Company (the "Optionee"). 1. The Company desires to grant, subject to stockholder approval as set forth below, the Optionee an incentive stock option under the Company's 1993 Stock Option Plan, as amended (the "Plan") to acquire shares of the Company's Common Stock, par value $.10 per share (the "Shares"). 2. The Plan provides that each option is to be evidenced by an option agreement, setting forth the terms and conditions of the option. ACCORDINGLY, in consideration of the premises and of the mutual covenants and agreements contained herein, the Company and the Optionee hereby agree as follows: 1. Grant of Option. The Company hereby grants, subject to stockholder approval as set forth below, to the Optionee an incentive stock option (the "Option") to purchase all or any part of an aggregate of the number of Shares shown at the end of this Agreement on the terms and conditions hereinafter set forth. This option is intended to be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Purchase Price. The purchase price ("Purchase Price") for the Shares covered by the Option shall be the dollar amount per Share shown at the end of this Agreement. 3. Time of Exercise of Option. Subject to Section 12 below, the option shall be first exercisable as to all of the Shares covered hereby on November 19, 1996. To the extent the option is not exercised by the Optionee when it becomes exercisable, it shall not expire, but shall be carried forward and shall be exercisable, on a cumulative basis, until the Expiration Date, as hereinafter defined. 4. Term of Options; Exercisability. (a) Term. (i) Each Option shall expire on the date shown at the end of this Agreement (the "Expiration Date"), as determined by the Board of Directors of the Company (the "Board"). (ii) Except as otherwise provided in this Section 4, if the Optionee's employment by the Company is terminated, the option granted to the optionee hereunder shall terminate on the earlier of ninety days after the date the Optionee's employment by the Company is terminated, or (ii) the date on which the Option expires by its terms. (iii) If the Optionee's employment is terminated by the Company for cause or because the Optionee is in breach of any employment agreement, such Option will terminate on the date the Optionee's employment is terminated by the Company. (iv) If the Optionee's employment is terminated by the Company because the Optionee has become permanently disabled (within the meaning of Section 22(e)(3) of the Code), such Option shall terminate on the earlier of (i) one year after the date such Optionee's employment by the Company is terminated, or (ii) the date on which the option expires by its terms. (v) In the event of the death of the optionee, the Option granted to such Optionee shall terminate on the earlier of (i) one year after the date such optionee's employment by the Company is terminated; or (ii) the date on which the option expires by its terms. (b) Exercisability. (i) Except as provided below, if the Optionee's employment by the Company is terminated, the Option granted to the Optionee hereunder shall be exercisable only to the extent that the right to purchase shares under such Option has accrued and is in effect on the date the Optionee's employment by the Company is terminated. (ii) If the Optionee's employment is terminated by the Company because he or she has become permanently disabled, as defined above, the option granted to the Optionee hereunder shall be immediately exercisable as to the full number of Shares covered by such Option, whether or not under the provisions of Section 3 hereof such Option was otherwise exercisable as of the date of disability. (iii) In the event of the death of the Optionee, the Option granted to such Optionee may be exercised to the full number of Shares covered thereby, whether or not under the provisions of Section 3 hereof the Optionee was entitled to do so at the date of his or her death, by the executor, administrator or personal representative of such Optionee, or by any person or persons who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of such Optionee. 5. Manner of Exercise of Option. (a) To the extent that the right to exercise the Option has accrued and is in effect, the option may be exercised in full or in part by giving written notice to the Company stating the number of Shares exercised and accompanied by payment in full for such Shares. No partial exercise may be made for less than one hundred (100) full shares of Common Stock. Payment may be either wholly in cash or in whole or in part in Shares already owned by the person exercising the option, valued at fair market value as of the date of exercise; provided, however, that payment of the exercise price by delivery of Shares already owned by the person exercising the Option may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board. Upon such exercise, delivery of a certificate for paid-up, non-assessable Shares shall be made at the principal office of the Company to the person exercising the option, not less than thirty (30) and not more than ninety (90) days from the date of receipt of the notice by the Company. (b) The Company shall at all times during the term of the Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the option. 6. Non-Transferability. The right of the Optionee to exercise the option shall not be assignable or transferable by the optionee otherwise than by will or the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by him or her. The Option shall be null and void and without effect upon the bankruptcy of the Optionee or upon any attempted assignment or transfer, except as hereinabove provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition contrary to the provisions hereof, or levy of execution, attachment, trustee process or similar process, whether legal or equitable, upon the Option. 7. Representation Letter and Investment Legend. (a) In the event that for any reason the Shares to be issued upon exercise of the Option shall not be effectively registered under the Securities Act of 1933, as amended (the "1933 Act"), upon any date on which the option is exercised in whole or in part, the person exercising the Option shall give a written representation to the Company in the form attached hereto as Exhibit I and the Company shall place an "investment legend", so-called, as described in Exhibit 1, upon any certificate for the Shares issued by reason of such exercise. (b) The Company shall be under no obligation to qualify Shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purposes of covering the issue of Shares. 8. Adjustments on Changes in Capitalization. Adjustments on changes in capitalization and the like shall be made in accordance with the Plan, as in effect on the date of this Agreement. 9. No Special Employment Rights. Nothing contained in the Plan or this Agreement shall be construed or deemed by any person under any circumstances to bind the Company to continue the employment of the Optionee for the period within which this Option may be exercised. However, during the period of the Optionee's employment, the Optionee shall render diligently and faithfully the services which are assigned to the Optionee from time to time by the Board or by the executive officers of the Company and shall at no time take any action which directly or indirectly would be inconsistent with the best interests of the Company. 10. Rights as a Shareholder. The Optionee shall have no rights as a shareholder with respect to any Shares which may be purchased by exercise of this option unless and until a certificate or certificates representing such Shares are duly issued and delivered to the Optionee. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 11. Withholding Taxes. Whenever Shares are to be issued upon exercise of this Option, the Company shall have the right to require the Optionee to remit to the Company an amount sufficient to satisfy all Federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. The Company may agree to permit the Optionee to withhold Shares purchased upon exercise of this Option to satisfy the above-mentioned withholding requirement; provided, however, no such agreement may be made by an Optionee who is an officer or director within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, except pursuant to a standing election to so withhold Shares purchased upon exercise of an Option, such election to be made in the form set forth in Exhibit 2 hereto and to be made not less than six (6) months prior to the date of such exercise. such election may be revoked by the Optionee only upon six (6) months prior written notice to the Company. 12. Stockholder Approval. On July 26, 1996, the Board amended the Plan, subject to stockholder approval, to increase the number of shares for which options are available for grant under the Plan by 200,000 (the "Increased shares"). The shares underlying the option are a portion of the increased Shares, and accordingly, the grant of the Option is subject to approval of the stockholders of the Company. No portion of the option may be exercised prior to obtaining such approval. Should the stockholders of the company fail to approve the amendment to the Plan within twelve (12) months of the date hereof, this Agreement and the Option shall thereupon terminate immediately, and shall be void ab initio and of no force or effect. IN WITNESS HEREOF, the Company has caused this Agreement to be executed, and the optionee has hereunto set his or her hand and seal, all as of the day and year first above written. GREEN MOUNTAIN COFFEE, INC. OPTIONEE By: /s/ Robert P. Stiller - ---------------------- Robert P. Stiller Signature President Name: Dean E. Haller (Printed) Address: P.O. Box 83 Underhill Center, VT 05490 ###-##-#### ---------------------- Social Security Number 20,000 ---------------- Number of Shares $7.00 ------------------------ Purchase Price Per Share November 19, 2006 ----------------- Expiration Date EXHIBIT 1 TO STOCK OPTION AGREEMENT Gentlemen: In connection with the exercise by me as to shares of Common Stock, $.10 per share par value, of Green Mountain Coffee, Inc. (the "Company") under the incentive stock option agreement dated as of November 19, 1996, granted to me under the 1993 Stock Option Plan, as amended, I hereby acknowledge that I have been informed as follows: 1. The shares of common stock of the Company to be issued to me pursuant to the exercise of said option have not been registered under the Securities Act of 1933 (the "1933 Act"), and accordingly, must be held indefinitely unless such shares are subsequently registered under the 1933 Act, or an exemption from such registration is available. 2. Routine sales of securities made in reliance upon Rule 144 under the 1933 Act can be made only after the holding period and in limited amounts in accordance with the terms and conditions provided by that Rule, and in any sale to which that Rule is not applicable, registration or compliance with some other exemption under the 1933 Act will be required. 3. The Company is under no obligation to me to register the shares or to comply with any such exemptions under the 1933 Act. 4. The availability of Rule 144 is dependent upon adequate current public information with respect to the Company being available and, at the time that I may desire to make a sale pursuant to the Rule, the Company may neither wish nor be able to comply with such requirement. In consideration of the issuance of certificates for the shares to me, I hereby represent and warrant that I am acquiring such shares for my own account for investment, and that I will not sell, pledge or transfer such shares in the absence of an effective registration statement covering the same, except as permitted by the provisions of Rule 144, if applicable, or some other applicable exemption under the 1933 Act. In view of this representation and warranty, I agree that there may be affixed to the certificates for the shares to be issued to me, and to all certificates issued hereafter representing such shares (until in the opinion of counsel, which opinion must be reasonably satisfactory in form and substance to counsel for the Company, it is no longer necessary or required) a legend as follows: "The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and were acquired by the registered holder, pursuant to a representation and warranty that such holder was acquiring such shares for his own account and for investment, with no intention to transfer or dispose of the same, in violation of the registration requirements of the Act. These shares may not be sold, pledged, or transferred in the absence of an effective registration statement under the Act, or an opinion of counsel, which opinion is reasonably satisfactory to counsel to the Company, to the effect that registration is not required under the Act." I further agree that the Company may place a stop order with its Transfer Agent, prohibiting the transfer of such shares, so long as the legend remains on the certificates representing the shares. Very truly yours, Dean E. Haller EXHIBIT 2 TO STOCK OPTION AGREEMENT Gentlemen: The undersigned Optionee hereby elects and agrees that, whenever the undersigned exercises a stock option (including any options which now or may hereafter be granted), the Company shall withhold from the shares issuable upon such exercise such number of shares as is equal in value to the federal and state withholding taxes due upon such exercise. The undersigned further acknowledges and agrees that this election may not be revoked without six (6) months prior written notice to the Company. OPTIONEE: Signature Name: Dean E. Haller -------------- Printed ###-##-#### --------------------- Social Security Number EX-10.74 5 STOCK OPTION AGREEMENT, DATED MAY 19, 1997 BETWEEN THE COMPANY AND WILLIAM L. PROST GREEN MOUNTAIN COFFEE, INC. STOCK OPTION AGREEMENT UNDER 1993 STOCK OPTION PLAN INCENTIVE STOCK OPTION As of January 1, 1997 AGREEMENT entered into by and between Green Mountain Coffee, Inc., a Delaware corporation with its principal place of business in Waterbury, Vermont (together with its subsidiaries, the "Company"), and the undersigned employee of the Company (the "Optionee"). 1. The Company desires to grant, subject to stockholder approval as set forth below, the Optionee an incentive stock option under the Company's 1993 Stock Option Plan, as amended (the "Plan") to acquire shares of the Company's Common Stock, par value $.10 per share (the "Shares"). 2. The Plan provides that each option is to be evidenced by an option agreement, setting forth the terms and conditions of the option. ACCORDINGLY, in consideration of the premises and of the mutual covenants and agreements contained herein, the Company and the Optionee hereby agree as follows: 1. Grant of Option. The Company hereby grants, subject to stockholder approval as set forth below, to the Optionee an incentive stock option (the "Option") to purchase all or any part of an aggregate of the number of Shares shown at the end of this Agreement on the terms and conditions hereinafter set forth. This option is intended to be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Purchase Price. The purchase price ("Purchase Price") for the Shares covered by the Option shall be the dollar amount per Share shown at the end of this Agreement. 3. Time of Exercise of Option. Subject to Section 12 below, the option shall be first exercisable as follows: As to 3,000 of the Shares covered hereby, on January 1, 1997; As to an additional 10,000 of the Shares covered hereby, on December 31, 1997; As to an additional 7,000 of the Shares covered hereby, on December 31, 1998 provided that the Optionee shall be entitled to the exercise of the option on a pro rata basis as of the end of the month preceding the effective date of the Optionee's termination of employment with the Company in the event that such termination should occur prior to the expiration of any vesting period. To the extent the option is not exercised by the Optionee when it becomes exercisable, it shall not expire, but shall be carried forward and shall be exercisable, on a cumulative basis, until the Expiration Date, as hereinafter defined. 4. Term of Options; Exercisability. (a) Term. (i) Each Option shall expire on the date shown at the end of this Agreement (the "Expiration Date"), as determined by the Board of Directors of the Company (the "Board"). (ii) Except as otherwise provided in this Section 4, if the Optionee's employment by the Company is terminated, the option granted to the optionee hereunder shall terminate on the earlier of ninety days after the date the Optionee's employment by the Company is terminated, or (ii) the date on which the Option expires by its terms. (iii) If the Optionee's employment is terminated by the Company for cause or because the Optionee is in breach of any employment agreement, such Option will terminate on the date the Optionee's employment is terminated by the Company. (iv) If the Optionee's employment is terminated by the Company because the Optionee has become permanently disabled (within the meaning of Section 22(e)(3) of the Code), such Option shall terminate on the earlier of (i) one year after the date such Optionee's employment by the Company is terminated, or (ii) the date on which the option expires by its terms. (v) In the event of the death of the optionee, the Option granted to such Optionee shall terminate on the earlier of (i) one year after the date such optionee's employment by the Company is terminated; or (ii) the date on which the option expires by its terms. (b) Exercisability. (i) Except as provided below, if the Optionee's employment by the Company is terminated, the Option granted to the Optionee hereunder shall be exercisable only to the extent that the right to purchase shares under such Option has accrued and is in effect on the date the Optionee's employment by the Company is terminated. (ii) If the Optionee's employment is terminated by the Company because he or she has become permanently disabled, as defined above, the option granted to the Optionee hereunder shall be immediately exercisable as to the full number of Shares covered by such Option, whether or not under the provisions of Section 3 hereof such Option was otherwise exercisable as of the date of disability. (iii) In the event of the death of the Optionee, the Option granted to such Optionee may be exercised to the full number of Shares covered thereby, whether or not under the provisions of Section 3 hereof the Optionee was entitled to do so at the date of his or her death, by the executor, administrator or personal representative of such Optionee, or by any person or persons who acquired the right to exercise such Option by bequest or inheritance or by reason of the death of such Optionee. 5. Manner of Exercise of Option. (a) To the extent that the right to exercise the Option has accrued and is in effect, the option may be exercised in full or in part by giving written notice to the Company stating the number of Shares exercised and accompanied by payment in full for such Shares. No partial exercise may be made for less than one hundred (100) full shares of Common Stock. Payment may be either wholly in cash or in whole or in part in Shares already owned by the person exercising the option, valued at fair market value as of the date of exercise; provided, however, that payment of the exercise price by delivery of Shares already owned by the person exercising the Option may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board. Upon such exercise, delivery of a certificate for paid-up, non-assessable Shares shall be made at the principal office of the Company to the person exercising the option, not less than thirty (30) and not more than ninety (90) days from the date of receipt of the notice by the Company. (b) The Company shall at all times during the term of the 0ption reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the option. 6. Non-Transferability. The right of the Optionee to exercise the option shall not be assignable or transferable by the optionee otherwise than by will or the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by him or her. The Option shall be null and void and without effect upon the bankruptcy of the Optionee or upon any attempted assignment or transfer, except as hereinabove provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition contrary to the provisions hereof, or levy of execution, attachment, trustee process or similar process, whether legal or equitable, upon the Option. 7. Representation Letter and Investment Legend. (a) In the event that for any reason the Shares to be issued upon exercise of the Option shall not be effectively registered under the Securities Act of 1933, as amended (the "1933 Act"), upon any date on which the option is exercised in whole or in part, the person exercising the Option shall give a written representation to the Company in the form attached hereto as Exhibit I and the Company shall place an "investment legend", so-called, as described in Exhibit 1, upon any certificate for the Shares issued by reason of such exercise. (b) The Company shall be under no obligation to qualify Shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purposes of covering the issue of Shares. 8. Adjustments on Changes in Capitalization. Adjustments on changes in capitalization and the like shall be made in accordance with the Plan, as in effect on the date of this Agreement. 9. No Special Employment Rights. Nothing contained in the Plan or this Agreement shall be construed or deemed by any person under any circumstances to bind the Company to continue the employment of the Optionee for the period within which this Option may be exercised. However, during the period of the Optionee's employment, the Optionee shall render diligently and faithfully the services which are assigned to the Optionee from time to time by the Board or by the executive officers of the Company and shall at no time take any action which directly or indirectly would be inconsistent with the best interests of the Company. 10. Rights as a Shareholder. The Optionee shall have no rights as a shareholder with respect to any Shares which may be purchased by exercise of this option unless and until a certificate or certificates representing such Shares are duly issued and delivered to the Optionee. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 11. Withholding Taxes. Whenever Shares are to be issued upon exercise of this Option, the Company shall have the right to require the Optionee to remit to the Company an amount sufficient to satisfy all Federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. The Company may agree to permit the Optionee to withhold Shares purchased upon exercise of this Option to satisfy the above-mentioned withholding requirement; provided, however, no such agreement may be made by an Optionee who is an officer or director within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, except pursuant to a standing election to so withhold Shares purchased upon exercise of an Option, such election to be made in the form set forth in Exhibit 2 hereto and to be made not less than six (6) months prior to the date of such exercise. such election may be revoked by the Optionee only upon six (6) months prior written notice to the Company. 12. Stockholder Approval. On July 26, 1996, the Board amended the Plan, subject to stockholder approval, to increase the number of shares for which options are available for grant under the Plan by 200,000 (the "Increased shares"). The shares underlying the option are a portion of the increased Shares, and accordingly, the grant of the Option is subject to approval of the stockholders of the Company. No portion of the option may be exercised prior to obtaining such approval. Should the stockholders of the company fail to approve the amendment to the Plan within twelve (12) months of the date hereof, this Agreement and the Option shall thereupon terminate immediately, and shall be void ab initio and of no force or effect. IN WITNESS HEREOF, the Company has caused this Agreement to be executed, and the optionee has hereunto set his or her hand and seal, all as of the day and year first above written. GREEN MOUNTAIN COFFEE, INC. OPTIONEE By: /s/ Robert P. Stiller --------------------- Robert P. Stiller Signature President Name: Bill Prost (Printed) Address: ______________________ Social Security Number 20,000 ----------------- Number of Shares $6 _________________ Purchase Price Per Share January 1, 2007 _______________ Expiration Date EXHIBIT 1 TO STOCK OPTION AGREEMENT Gentlemen: In connection with the exercise by me as to shares of Common Stock, $.10 per share par value, of Green Mountain Coffee, Inc. (the "Company") under the incentive stock option agreement dated as of January 1, 1996, granted to me under the 1993 Stock Option Plan, as amended, I hereby acknowledge that I have been informed as follows: 1. The shares of common stock of the Company to be issued to me pursuant to the exercise of said option have not been registered under the Securities Act of 1933 (the "1933 Act"), and accordingly, must be held indefinitely unless such shares are subsequently registered under the 1933 Act, or an exemption from such registration is available. 2. Routine sales of securities made in reliance upon Rule 144 under the 1933 Act can be made only after the holding period and in limited amounts in accordance with the terms and conditions provided by that Rule, and in any sale to which that Rule is not applicable, registration or compliance with some other exemption under the 1933 Act will be required. 3. The Company is under no obligation to me to register the shares or to comply with any such exemptions under the 1933 Act. 4. The availability of Rule 144 is dependent upon adequate current public information with respect to the Company being available and, at the time that I may desire to make a sale pursuant to the Rule, the Company may neither wish nor be able to comply with such requirement. In consideration of the issuance of certificates for the shares to me, I hereby represent and warrant that I am acquiring such shares for my own account for investment, and that I will not sell, pledge or transfer such shares in the absence of an effective registration statement covering the same, except as permitted by the provisions of Rule 144, if applicable, or some other applicable exemption under the 1933 Act. In view of this representation and warranty, I agree that there may be affixed to the certificates for the shares to be issued to me, and to all certificates issued hereafter representing such shares (until in the opinion of counsel, which opinion must be reasonably satisfactory in form and substance to counsel for the Company, it is no longer necessary or required) a legend as follows: "The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), and were acquired by the registered holder, pursuant to a representation and warranty that such holder was acquiring such shares for his own account and for investment, with no intention to transfer or dispose of the same, in violation of the registration requirements of the Act. These shares may not be sold, pledged, or transferred in the absence of an effective registration statement under the Act, or an opinion of counsel, which opinion is reasonably satisfactory to counsel to the Company, to the effect that registration is not required under the Act." I further agree that the Company may place a stop order with its Transfer Agent, prohibiting the transfer of such shares, so long as the legend remains on the certificates representing the shares. Very truly yours, Bill Prost EXHIBIT 2 TO STOCK OPTION AGREEMENT Gentlemen: The undersigned Optionee hereby elects and agrees that, whenever the undersigned exercises a stock option (including any options which now or may hereafter he granted) , the Company shall withhold from the shares issuable upon such exercise, such number of shares as is equal in value to the federal and state withholding taxes due upon such exercise, The undersigned further acknowledges and agrees that this election may not be revoked without six (6) months prior written notice to the Company. OPTIONEE: Signature Name: Bill Prost Printed ---------------------- Social Security Number EX-10.2(DD) 6 FINANCING COMITMENT FROM FLEET BANK, DATED MAY 19, 1997, TO AMEND COMMERCIAL LOAN AGREEMENT AMONG GREEN MOUNTAIN COFFEE ROASTERS, INC. AS BORROWER, AND FLEET BANK - NH, AS LENDER CONFIDENTIAL May 19, 1997 Mr. Robert D. Britt Chief Financial Officer Green Mountain Coffee Roasters, Inc. 33 Coffee Lane Waterbury, Vermont 05676 Dear Bob: I am pleased to advise you that we have approved the following financing commitment for your consideration. As discussed, I will initiate the documentation for this financing and amendment in anticipation of a rapid closing. Revolving Line of Credit Amount: $6,000,000 ($1,000,000 increase from $5,000,000) Purpose: Working capital and general corporate purposes Advances: Fully available Maturity: February 28, 1999 Repayment: Due at maturity; interest monthly Interest Rate: Fleet Base or Libor (30 day through 360 day Libor in 30 day increments) plus spread based upon Performance Pricing. Spread is set quarterly upon presentation of financial statements and covenant compliance certificate. Performance Pricing Level Funded Debt/Cash Flow Base + Libor + 1 >= 1.80 25 bps 275 bps 2 >= 1.50 < 1.80 0 bps 250 bps 3 >= 1.25 < 1.50 0 bps 225 bps 4 >= 1.0 < 1.25 0 bps 200 bps 5 < 1.0 0 bps 180 bps Collateral: Secured under existing security agreement terms and conditions. FINANCIAL COVENANTS: [replacement of all prior financial covenants] A. Maximum Funded Debt to Cash Flow - 2.0:1.0. Calculated by dividing total funded debt at the quarter end (Fleet plus other providers) by a rolling historical four quarter cash flow. Cash flow is defined as EBIDA plus or minus non-cash items. EBIDA is defined as net income after cash taxes plus depreciation, interest, and amortization. B. Minimum Debt Service Coverage - 2.4:1.0. Calculated by dividing rolling historical four quarter cash flow by rolling historical four quarter debt service. Debt service is all scheduled principal and interest payments related to funded debt (Fleet plus other providers). C. Maximum Leverage - 1.40:1.0. Calculated by dividing Total Liabilities less cash balances in excess of $400,000 by the Tangible Net Worth. D. Minimum Profitability - $1,000,000 per annum. Measured quarterly on a rolling four quarter basis. E. Maximum Capital Expenditures - $5,700,000 in Fiscal 1997 and $5,000,000 thereafter. COMMITMENT/AMENDMENT FEE & UNUSED FACILITY FEE: A.) A $2,000 fee will be charged for the new credit facility and amendments to the terms and conditions. The Borrower will be responsible for all costs, including reasonable legal fees, associated with the underwriting and documentation of these amendments. B.) $3,500 annual facility fee (charged quarterly) OTHER TERMS AND CONDITIONS: All other terms and conditions as set forth in the existing documentation will remain in full force and effect. EXPIRATION: This commitment will expire if not accepted by May 30, 1997 or if not closed by June 20, 1997. Sincerely, /s/ Andre P. Pelletier - ---------------------- Andre P. Pelletier Vice President Corporate Banking Accepted and agreed to this 19th day of May 1997. Green Mountain Coffee Roasters, Inc. By: /s/ Robert D. Britt ------------------- Robert D. Britt Its duly authorized Chief Financial Officer Green Mountain Coffee Roasters, Inc. May 19, 1997 EX-11 7 COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK GREEN MOUNTAIN COFFEE, INC. Exhibit 11 Computation of Net Income Per Share (unaudited) Twelve weeks Twenty-eighty weeks ended ended April 12, April 13, April 12, April 13, 1997 1996 1997 1996 ---------- --------- ---------- ---------- Net income.................. $ 579,000 $ 98,000 $1,301,000 $ 777,000 ---------- --------- ---------- --------- Primary weighted common shares outstanding: Common stock............. 3,417,306 3,399,795 3,417,306 3,399,795 Dilutive effect of outstanding common stock options.......... 30,693 28,793 28,532 27,759 ---------- --------- --------- --------- Weighted average common and common equivalent shares.................... 3,447,999 3,428,588 3,445,838 3,427,554 ---------- ---------- --------- --------- Net income per share........ $ 0.17 $ 0.03 $ 0.38 $ 0.23 ---------- ---------- --------- --------- This Exhibit should be read in conjunction with the accompanying unaudited interim consolidated financial statements and the notes thereto. EX-27 8
5 This schedule contains summary financial information extracted from the balance sheet dated 4/12/97 and the Statement of Operations for the twelve weeks ended 4/12/97 and is qualified in its entirety by reference to such financial statements. 1,000 OTHER SEP-27-1997 JAN-19-1997 APR-12-1997 941 0 3,056 90 3,640 9,190 17,865 7,755 20,304 5,087 5,043 0 0 342 9,832 20,304 10,063 10,063 5,881 5,881 3,063 0 107 27 (552) 579 0 0 0 579 .17 .17
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