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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COFFEE PEOPLE, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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COFFEE PEOPLE, INC.
11480 COMMERCIAL PARKWAY
CASTROVILLE, CA 95012
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NOTICE OF ANNUAL MEETING
NOVEMBER 24, 1998
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To the Shareholders of Coffee People, Inc.:
An Annual Meeting of Shareholders (the "Annual Meeting") of Coffee People,
Inc. (the "Company") will be held on Tuesday, November 24, 1998 at 1:30 p.m.
local time at The Pines Room, Embassy Suites Hotel, 7900 N.E. 82nd Avenue,
Portland, Oregon, for the following purposes:
1. The election of six directors to serve until the next Annual Meeting and
until their respective successors have been duly elected and qualified.
2. To consider and vote upon a proposal to change the Company's state of
incorporation from Oregon to Delaware by a merger with and into a newly
formed, wholly owned Delaware subsidiary, Coffee People Worldwide.
3. To consider and vote upon a proposal to approve 564,597 shares of Common
Stock now available under the Company's previous stock option plans
being made available instead under the Company's 1998 Stock Incentive
Plan.
4. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Holders of the Company's common stock at the close of business on October
6, 1998, the record date fixed by the Company's board of directors (the "Board
of Directors"), are entitled to notice of and to vote at the Annual Meeting. The
Board of Directors urges all shareholders of record to exercise their right to
vote at the meeting personally or by proxy. Accordingly, we are sending you the
following Proxy Statement and the enclosed proxy card. Shareholders are entitled
to assert dissenters' rights in connection with the proposed reincorporation to
Delaware. The dissenters' rights are described in the accompanying Proxy
Statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SPECIFY YOUR
VOTE ON THE ACCOMPANYING PROXY CARD AND SIGN, DATE AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED SELF-ADDRESSED, POSTAGE-PAID ENVELOPE.
Your prompt response will be appreciated.
By Order of the Board of Directors
/s/ Mark J. Archer
Mark J. Archer
Executive Vice President, Chief
Financial Officer
and Secretary
Castroville, California
November 10, 1998
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COFFEE PEOPLE, INC.
11480 COMMERCIAL PARKWAY
CASTROVILLE, CA 95012
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PROXY STATEMENT
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The accompanying proxy is solicited by the board of directors (the "Board
of Directors") of Coffee People, Inc. (the "Company" or "Coffee People") to be
used at the Annual Meeting of Shareholders on November 24, 1998 (the "Annual
Meeting") to be held at 1:30 p.m. local time at The Pines Room, Embassy Suites
Hotel, 7900 N.E. 82nd Avenue, Portland, Oregon. This Proxy Statement, the
enclosed form of proxy and the Annual Report to Shareholders are being sent to
shareholders on or about November 10, 1998.
At the Annual Meeting, shareholders will be asked to consider and vote upon
the following matters:
ITEM I: The election of six directors to serve until the next Annual
Meeting and until their respective successors have been duly elected and
qualified.
ITEM II: The approval of a proposal to change the Company's state of
incorporation from Oregon to Delaware by a merger with and into a newly
formed, wholly owned Delaware subsidiary, Coffee People Worldwide, Inc.
ITEM III: The approval of a proposal to make 564,597 shares of Common
Stock now available under the Company's previous stock option plans instead
available under the Company's 1998 Stock Incentive Plan (the "1998 Stock
Incentive Plan").
Any shareholder giving a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by giving notice of such revocation either
personally or in writing to the Secretary of the Company at the Company's
executive offices, by subsequently executing and delivering another proxy or by
voting in person at the Annual Meeting.
The Annual Report to Shareholders that accompanies this Proxy Statement is
not to be regarded as proxy soliciting material.
THE COMPANY
On May 19, 1998, Coffee People combined with Gloria Jean's, Inc. ("Gloria
Jean's") in a transaction (the "Merger") in which Coffee People acquired all of
the outstanding common stock of Gloria Jean's in exchange for the issuance of
Common Stock to Second Cup USA Holdings Ltd. ("Second Cup"), giving Second Cup
69.5% ownership of the combined company. In connection with the transaction,
approval of the Company's shareholders was solicited pursuant to a joint proxy
statement of Coffee People and Gloria Jean's dated April 24, 1998. The
transaction has been accounted for as a reverse merger in which Gloria Jean's is
treated as the accounting acquiror. As a result of this accounting treatment,
the historical financial statements of Gloria Jean's became the historical
financial statements of the combined company. Also consistent with this
accounting treatment, the fiscal year end for Coffee People was changed from
December 31 to the last Saturday in June, to conform with the year end used by
Gloria Jean's.
VOTING
Only holders of record at the close of business on October 6, 1998 (the
"Record Date") of the Company's common stock, no par value (the "Common Stock"),
will be entitled to vote at the Annual Meeting. On the Record Date, there were
10,754,889 shares of Common Stock outstanding. Each share of Common Stock is
entitled to one vote on all matters presented at the Annual Meeting.
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The presence in person or by proxy of holders representing a majority of
the voting power of the Common Stock entitled to vote is necessary to constitute
a quorum for the transaction of business at the Annual Meeting. Shares of Common
Stock represented by duly executed and unrevoked proxies in the enclosed form
received by the Board of Directors will be voted at the Annual Meeting in
accordance with the specifications made therein by the shareholders, unless
authority to do so is withheld. If no specification is made, shares of Common
Stock represented by duly executed and unrevoked proxies in the enclosed form
will be voted FOR (i) the election of all of the nominees listed herein, (ii)
approval of the change of the Company's state of incorporation from Oregon to
Delaware and (iii) approval of an additional 564,597 shares of Common Stock to
be available under the 1998 Stock Incentive Plan. With respect to any other
matter that may properly come before the meeting, it will be voted in the
discretion of the persons voting the respective proxies.
The cost of preparing, assembling and mailing the proxy materials will be
borne by the Company.
VOTE REQUIRED
The affirmative vote of holders representing a majority of the Common Stock
present or represented by proxy at the Annual Meeting is required to approve the
change of the Company's state of incorporation from Oregon to Delaware and to
approve moving 564,597 shares of Common Stock that are now available under the
Company's previous stock option plans to the 1998 Stock Incentive Plan.
Directors shall be elected by a plurality of votes present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors.
Shares as to which a shareholder abstains or withholds from voting and
shares as to which a broker indicates that it does not have discretionary
authority to vote ("broker non-votes") on Items II and III will not be counted
as voting on, and therefore counted as voting not in favor of, these proposals.
Shares as to which a shareholder abstains or withholds from voting on the
election of directors and broker non-votes on the election of directors will not
be counted and therefore will not affect the election of the nominees receiving
a plurality of the votes cast.
The shareholders of the Company will have the right to dissent and obtain
fair value for their shares under the Oregon Business Corporation Act ("OBCA")
in connection with the proposal to change the Company's state of incorporation.
ITEM I.
NOMINEES FOR ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation (the "Articles") and
Bylaws provide that the number of directors on the Board of Directors may be not
less than three (3) or more than nine (9). The Board of Directors presently
comprises six directors consisting of the following persons: Michael Bregman,
Alton W. McEwen, Douglas L. Ayer, Robert M. Haft, Gary G. Talboy and Kathy A.
Welsh, all of whom are nominees for reelection at the Annual Meeting. The
directors hold office until the next annual meeting of shareholders or until
their successors are duly elected.
At the Annual Meeting, six directors are to be elected to serve until the
1999 Annual Meeting and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy card, it is the
intention of the persons named in the enclosed form of proxy to vote FOR the
election of the nominees listed below. The persons designated as proxies will
have discretion to cast votes for other persons in the event any nominee for
director is unable to serve. At present, it is not anticipated that any nominee
will be unable to serve.
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The names and certain information concerning the persons to be nominated as
directors by the Board of Directors at the annual meeting are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES LISTED BELOW.
Michael D. Bregman has been Chairman of the Board of Coffee People since
May 1998. Mr. Bregman was a director of Gloria Jean's Inc. ("Gloria Jean's"),
Gloria Jean's Gourmet Coffees Franchising Corp. ("Franchising Corp."), Gloria
Jean's Gourmet Coffees ("Gourmet Coffees") and Edglo Enterprises, Inc. ("Edglo")
from November 1995 through June 1998. Mr. Bregman has been a director of The
Second Cup Ltd. ("Second Cup Ltd.") since 1988. Between 1988 and 1989, he served
as President and Secretary of Second Cup Ltd. and has been Chairman and Chief
Executive Officer of Second Cup Ltd. since 1989. Mr. Bregman serves on the board
of directors of two public companies, Vincor International Inc., a producer and
marketer of wine and refreshment products, and Clairvest Group Inc., an
investment company.
Alton W. McEwen has been President and Chief Executive Officer of Coffee
People since May 1998. Mr. McEwen was President and Chief Operating Officer of
Gloria Jean's from 1996 to 1998. From 1988 to 1996, Mr. McEwen was President and
Chief Operating Officer of Second Cup Ltd. and has been a director of Second Cup
Ltd. since 1988. He has been a director of Gloria Jean's, Franchising Corp.,
Gourmet Coffees and Edglo since November 1995.
Douglas L. Ayer has been a director of Coffee People since January 1996,
when International Capital Partners, Inc. ("ICP"), of which he is President and
Managing Partner, represented investors in a private placement of Common Stock
of Coffee People. Mr. Ayer has been associated with ICP since 1989 when it was
founded. He serves on the board of directors of four private companies and two
additional public companies, BioPool International Inc., a medical diagnostic
test kit company, and Zila, Inc., a dental supply company. Prior to joining ICP,
Mr. Ayer was Chief Executive Officer and a principal shareholder of Cametrics,
Inc., a privately held manufacturer of custom fabricated engineered components.
Robert M. Haft has been a director of Coffee People since May 1998 and a
director of Second Cup Ltd. since October 1996. Since September 1997, Mr. Haft
has been Chairman of the Board and Chief Executive Officer of Vitamin
Superstore. From 1995 until September 1997, Mr. Haft was Chairman of the Board
and Chief Executive Officer of PharMor Drug Stores. He also served in various
positions, including Director, President and Chief Operations Officer, at
different times with Dart Group, a retailing, real estate and financial
management company from 1975 to 1993.
Gary G. Talboy has been a director of Coffee People since it started
corporate operations in 1992. Mr. Talboy was Secretary-Treasurer of Coffee
People from 1992 to August 1996. From 1985 until 1992, he was a 50 percent
partner in the partnership that was the predecessor of Coffee People. Currently,
Mr. Talboy is primarily active as a coffee industry consultant through his
company, Specialty Coffee Consultants.
Kathy A. Welsh has been a director of Coffee People since May 1998. Ms.
Welsh has served as Executive Vice President and Chief Financial Officer of
Second Cup Ltd. since 1996. From 1993 to 1996, she acted as Vice President and
Chief Financial Officer of Canada Bread Co. (fka Corporate Foods Limited),
Canada's largest bakery and a majority subsidiary of Maple Leaf Foods Inc.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors/director nominees and
executive officers of the Company as of October 15, 1998. The directors hold
office until the next annual meeting of shareholders or until their successors
are duly elected. Executive officers are elected by and serve at the discretion
of the Board of Directors until their successors are duly chosen and have
qualified.
HAS SERVED
NAME AGE OFFICE AS DIRECTOR
---- --- ------ -----------
Alton W. McEwen...................... 55 President, Chief Executive Officer and Since 1998
Director
Mark J. Archer....................... 41 Executive Vice President, Chief Financial
Officer and Secretary
Robert R. Rodriguez.................. 45 President, Gloria Jean's division
Taylor H. Devine..................... 57 President, Chief Operating Officer,
Coffee People Oregon division
Thomas M. Twitchel................... 41 Senior Vice President,
Coffee Plantation division
Matthew J. Kimble.................... 46 Vice President, Human Resources
Stephen L. King...................... 48 Vice President, Development
Julie A. Munger...................... 38 Vice President, Corporate Controller
Kenneth B. Ross...................... 49 Vice President, Finance
Lisa T. Steere....................... 35 Vice President, Marketing
Michael D. Bregman................... 44 Chairman of the Board Since 1998
Douglas L. Ayer(1)................... 61 Director Since 1996
Robert M. Haft(1).................... 45 Director Since 1998
Gary G. Talboy(2).................... 49 Director Since 1992
Kathy A. Welsh(2).................... 41 Director Since 1998
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(1) Member of Compensation Committee
(2) Member of Audit Committee
Set forth below are the executive officers of the Company who are not
directors, along with certain information regarding these individuals.
Mark J. Archer has been Executive Vice President, Chief Financial Officer
and Secretary of Coffee People since May 1998 and held the position of Executive
Vice President, Chief Financial Officer and Secretary of Gloria Jean's from
February 1998 to May 1998. In June 1998, he was appointed Chief Financial
Officer and director of Gloria Jean's, Franchising Corp., Gourmet Coffees, Inc.
and Edglo. He previously was Senior Vice President and Chief Financial Officer
of Jamba Juice Company from September 1995 through November 1997. Mr. Archer
served as Chief Financial Officer and a director of Del Taco, Inc. from 1993 to
1995 and as Chief Financial Officer of Canteen Corporation from 1989 to 1993.
Robert R. Rodriguez has been President of the Company's Gloria Jean's unit
since September 1998. Previously, he was with McDonald's Corporation from 1992
to September 1998, serving as Region Vice President of Operations and Division
Vice President of Strategic Planning. He worked with PepsiCo's Taco Bell
division from 1981 to 1992, serving as zone vice president from 1989 to December
1991.
Taylor H. Devine was named President and Chief Operating Officer of Coffee
People's Oregon division in May 1998. He was President and Chief Executive
Officer of Coffee People prior to the merger. He joined the Company in September
1995 as President, Chief Operating Officer and a director. Mr. Devine served as
President and a director of Takeout Taxi Holdings, Inc., a multi-restaurant
marketing and delivery company, from 1992 to September 1995. From 1987 through
1991, he held several positions with Blockbuster Entertainment Corporation,
including Vice President of International Operations. Previously, Mr. Devine was
founder, President and Chief Executive Officer of Inform, Inc. and served as
Executive Vice President and Chief Operating Officer for Mrs. Fields Cookies
from 1982 until 1985.
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Thomas M. Twitchel became Senior Vice President of the Company's Coffee
Plantation division in May 1998. He was a management and real estate consultant
with TMT Partners from August 1997 to May 1998. From November 1996 to August
1997, he was Senior Vice President of Coffee Plantation, Inc., a wholly-owned
subsidiary of Second Cup. Ltd. Mr. Twitchel was Vice President of Operations
with Red Robin International, Inc. in Irvine, California from 1993 until 1996.
Matthew J. Kimble joined Coffee People in January 1997 as Vice President,
Human Resources. From February 1991 to January 1997, he served as Human
Resources Manager for Thrifty Payless, Inc.
Stephen L. King has been Vice President, Development since May 1998.
Previously he was Vice President, Development for Gloria Jean's from September
1997 to May 1998 and served as Vice President, Real Estate from January 1997
until September 1997. Prior to joining the Company, Mr. King was the director of
North American Leasing for the Sunglass Hut. From 1995 through 1996, Mr. King
was a self-employed real estate consultant in Texas. Mr. King was employed as
director of real estate by The Bombay Company of Fort Worth, Texas from 1982 to
1995.
Julie A. Munger joined Coffee People in August 1998 as Vice President &
Corporate Controller and Chief Financial Officer of the Gloria Jean's division.
She was previously Director of Business Analysis and Vice President & Controller
for Household Credit Services, Inc., a subsidiary of Household International,
from 1987 to 1998. A Certified Public Accountant in California, Ms. Munger
worked at Deloitte, Haskins and Sells from 1984 to 1987.
Kenneth B. Ross became Vice President, Finance in May 1998. He joined the
Company in November 1993 as Chief Financial Officer and was appointed Secretary
in August 1996. From 1979 to 1993, he engaged in the private practice of law in
Portland, Oregon and taught accounting and real estate classes at Portland State
University. Mr. Ross is an Attorney at Law and a Certified Public Accountant.
Lisa T. Steere was elected Vice President, Marketing in May 1998, having
held the same position with Gloria Jean's from August 1997 to May 1998. She was
Marketing Director for Fresh Express from October 1996 to August 1997. From 1991
to 1996, Ms. Steere held several positions with Nestle, including Consumer
Marketing Director in their Beverage Division. From 1989 to 1991, she was
Assistant Brand Manager of Coffee at Proctor & Gamble.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year 1998, the Board of Directors met on 14 occasions and
acted by consent resolution on two occasions. None of the members of the Board
of Directors attended less than 75% of the meetings of the Board of Directors
held during fiscal year 1998, or during the part of fiscal 1998 in which they
were members, or of the meetings of committees of the Board of Directors on
which such member served during fiscal year 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee's purposes are, among other things, to make recommendations
concerning the selection of Coffee People's independent auditors, to review the
independence of such auditors, to review the scope of services to be performed
by the independent auditors, and to review internal accounting procedures and
the implementation by Coffee People of recommendations made by the independent
auditors. Ms. Welsh and Mr. Talboy serve on the Audit Committee with Ms. Welsh
acting as Chairperson. The Audit Committee met twice in 1998.
The purposes of the Compensation Committee are to make recommendations to
the Board of Directors with respect to executive compensation and to oversee
administration of Coffee People's employee stock option plans. Mr. Ayer and Mr.
Haft serve on the Compensation Committee, with Mr. Ayer acting as Chairperson.
The Compensation Committee acted by consent resolution three times during 1998.
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The Board of Directors does not have a nominating committee and nominations
to the Board are, in accordance with the Bylaws, made by the Board as a whole.
COMPENSATION OF DIRECTORS
Prior to May 19, 1998, the effective date of the Merger, directors of the
Company received no compensation. After such time, directors who are not
employees of the Company or its affiliates received $2,000 for each Board
meeting attended and $1,000 for each telephonic Board meeting participated in
that required total preparation and participation time of more than two hours.
Additionally, non-employee committee members received $500 for each committee
meeting attended and non-employee committee chairs received $1,000 for each
meeting attended and chaired. Directors are reimbursed for expenses incurred in
connection with attending meetings of the Board and committees thereof.
Directors are also eligible to participate in the 1998 Stock Incentive
Plan. An annual grant of stock options to acquire 10,000 shares of Common Stock
is made to each director who is not an employee of the Company or its
affiliates. All options vest one-third ratably on the first, second and third
anniversary of the grant date. The exercise price is the fair market value of
the shares at the date of the grant measured by the closing price per share of
the Common Stock on The Nasdaq Stock Market ("Nasdaq") on the grant date.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than 10% of the Common Stock to file reports of ownership
on Forms 3, 4 and 5 with the Commission. Executive officers, directors and 10%
shareholders are required by the Securities and Exchange Commission to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all its executive officers, directors and
greater than 10% beneficial owners complied with all the filing requirements
applicable to them with respect to transactions during fiscal 1998.
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ITEM II.
CHANGE THE COMPANY'S STATE OF INCORPORATION FROM OREGON TO DELAWARE
At the meeting, the shareholders will be requested to approve a change in
the Company's state of incorporation from Oregon to Delaware (the
"Reincorporation"). The Board has approved the Reincorporation, which, if
approved by the shareholders, will be accomplished by merging the Company with
and into its newly formed, wholly-owned Delaware subsidiary, Coffee People
Worldwide, Inc. ("Coffee People Worldwide"). Upon effectiveness of the merger,
the Company's name will be changed to "Coffee People Worldwide." For the reasons
set forth below, the Board believes that the best interests of the Company and
its shareholders will be served by the Reincorporation.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
After the Merger, the Company's executive offices were relocated from
Oregon to Castroville, California, the site of Gloria Jean's corporate
headquarters. For reasons of practicality and convenience relating to this
relocation, together with the reasons given below, management believes it is
prudent to move the Company's domicile from Oregon to Delaware.
For many years, Delaware has followed a policy of encouraging incorporation
under its jurisdiction. In furtherance of that policy, Delaware has long been
the leading state in adopting, construing and implementing comprehensive and
flexible corporate laws responsive to the legal and business needs of
corporations. As a result, Delaware's General Corporation Law ("DGCL") has
become widely regarded as the most extensive and well-defined body of corporate
law in the United States. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. Moreover, the Delaware courts have
rendered a substantial number of decisions interpreting and explaining Delaware
law, including legal principles applicable to measures that may be taken by a
corporation and as to the conduct of its board of directors under the business
judgment rule. For these reasons, many United States corporations initially have
chosen Delaware as their state of incorporation or subsequently have changed
their corporate domicile to Delaware in a manner similar to the proposed
Reincorporation. Accordingly, the Board of Directors believes the
Reincorporation will be beneficial to the Company in that it will provide (i) a
greater degree of predictability and certainty regarding how the Company's
affairs should be conducted in order to comply with applicable laws and (ii) the
comfort and security resulting from the responsiveness of Delaware's legislature
and courts to the needs of corporations organized under Delaware's jurisdiction.
PLAN OF MERGER
The Company will be merged with and into Coffee People Worldwide (the
"Reincorporation Merger") pursuant to the terms of an Agreement and Plan of
Merger (the "Plan of Merger"), as described herein. Upon the completion of the
Reincorporation Merger, the owner of each outstanding share of Common Stock will
automatically own one share of common stock in Coffee People Worldwide.
Following the Reincorporation Merger, shares of the Company's common stock will
continue to be traded on Nasdaq under the symbol "MOKA."
Pursuant to the Plan of Merger, Coffee People Worldwide's Certificate of
Incorporation and Bylaws will be the Certificate of Incorporation and Bylaws of
the surviving corporation, and upon the effectiveness of the Reincorporation
Merger Coffee People Worldwide's Certificate of Incorporation will be amended to
change its name from "Coffee People Worldwide, Inc." to "Coffee People
Worldwide."
The Company reserves the right in the Plan of Merger to abandon the
Reincorporation Merger for any reason whatsoever by mutual consent of the Boards
of Directors of Coffee People and Coffee People Worldwide, at any time prior to
the effective time of the Reincorporation Merger, notwithstanding adoption of
the Plan of Merger by the Company's shareholders. The Company will take into
consideration the exercise, if any, of dissenters' rights by Company
shareholders in evaluating whether it is practicable or in the Company's best
interests to proceed with the Reincorporation Merger after receiving shareholder
approval.
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The Articles of Merger containing the Plan of Merger, and the Certificate
of Incorporation of Coffee People Worldwide, are set forth as Annex A and Annex
B, respectively, to this Proxy Statement. The description of the Plan of Merger
set forth herein is qualified in its entirety by the terms of the Plan of
Merger.
EFFECT OF REINCORPORATION AND REINCORPORATION MERGER
The Reincorporation and Reincorporation Merger will effect a change in the
legal domicile of the Company and other changes of a legal nature, the most
significant of which are described in this Proxy Statement. The Reincorporation
and Reincorporation Merger, however, will not result in any change in the
business, management, accounting practices, assets, liabilities or net worth of
the Company. Additionally, the location of the Company's principal executive
offices will not be changed.
As part of the Reincorporation and Reincorporation Merger, Coffee People
Worldwide will assume all of the liabilities and obligations of the Company,
including those obligations under all of its outstanding stock options, purchase
rights and all existing stock option and stock purchase plans. If the
Reincorporation is approved, options outstanding under the Company's stock
option plans, as well as outstanding options, convertible securities and
purchase rights issued outside of any plan, will be exercisable for shares of
Coffee People Worldwide. The Company expects to continue all other employee
benefit plans and arrangements without material change.
EFFECTIVE TIME
Subject to the terms and conditions of the Reincorporation, the Company
intends to file, as soon as practicable after the adoption and approval of the
Plan of Merger by the shareholders of the Company, appropriate merger documents
with the Secretary of State of Oregon and the Secretary of State of Delaware.
The Reincorporation will become effective at the time the last of such filings
is completed (the "Effective Time"). It is presently contemplated that such
filings will be made on or about December 1, 1998. The Plan of Merger, however,
provides that the Reincorporation Merger may be abandoned by the Company prior
to the Effective Time either before or after shareholder approval. In addition,
the Plan of Merger may be amended prior to the Effective Time, either before or
after shareholder approval. The Plan of Merger, however, may not be amended
after shareholder approval if such amendment would have a material adverse
effect on the rights of such shareholders or violate applicable law.
DISSENTERS' RIGHTS
The Company's shareholders have the right to dissent from the
Reincorporation Merger and, in certain circumstances, to receive payment for
their shares in accordance with the terms of Sections 60.551 through 60.594 of
the OBCA. The following discussion is not a complete statement of the law
pertaining to dissenters' rights under the OBCA and is qualified in its entirety
by the full text of Sections 60.551-60.594 of the OBCA, which is reprinted in
its entirety as Annex C to this Proxy Statement. Annex C should be reviewed
carefully by any shareholder who wishes to exercise dissenters' rights or who
wishes to preserve the right to do so, since failure to comply with the
procedures of the statute will result in the loss of dissenters' rights.
A holder of Coffee People Common Stock who wishes to dissent from the
Reincorporation Merger (a "Dissenting Holder") must satisfy the following
conditions, among others:
(i) Written objection. The shareholder must file a written objection
to the Reincorporation Merger with the Company at its offices at 11480
Commercial Parkway, Castroville, California 95012, Attention: Alton W.
McEwen, President or Mark J. Archer, Secretary, prior to the vote to be
taken at the Annual Meeting.
(ii) No vote in favor. The shareholder must not vote in favor of the
Reincorporation Merger.
If the Reincorporation Merger is approved by the shareholders, the Company
will send written notice along with a copy of Sections 60.551 to 60.594 of the
OBCA no later than 10 days after the corporate action is taken to each
Dissenting Holder (i) stating where such shareholder must send his or her
written payment demand, (ii) stating where and when certificates representing
Coffee People Common Stock must be
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deposited, (iii) containing a form for demanding payment, which requires the
Dissenting Holder to certify that he or she acquired beneficial ownership before
the first public announcement of the Reincorporation Merger, and (iv) setting a
date by which such written payment demand must be received (not fewer than 30
nor more than 60 days after the date the notice was delivered to the Dissenting
Holder). A shareholder who does not demand payment, certify that he or she
acquired the shares before the first public announcement, or deposit his or her
shares within the time provided by such notice will not be entitled to
dissenters' rights.
If the Reincorporation Merger is consummated, the Company will pay to each
Dissenting Holder who complies with the procedure described above, as soon as
the proposed corporate action is taken, or upon receipt of a payment demand, the
amount that the Company estimates to be the fair value of such Dissenting
Holder's shares. The term "fair value" means the value of the shares immediately
before the Reincorporation Merger, excluding any appreciation or depreciation in
anticipation of the Reincorporation Merger unless such exclusion would be
inequitable. The Company will provide, along with such payment, its balance
sheet, income statement and statement of changes in shareholders' equity for its
last fiscal year and any available interim financial statements since the end of
the last fiscal year, an explanation of how it estimates the fair value of the
shares and how the accrued interest was calculated and certain other
information.
The Company may elect to withhold payment from a Dissenting Holder if the
Dissenting Holder was not the beneficial owner of the shares before the date
that the Reincorporation Merger was publicly announced. In that event, the
Company may force the Dissenting Holder to pursue judicial determination of the
value of the share unless the Dissenting Holder agrees to accept the amount
specified by the Company as the fair value in full satisfaction of the
Dissenting Holder's rights.
Any Dissenting Holder who is dissatisfied with such payment or such offer
may, within 30 days of the payment or offer for payment, notify the Company in
writing of his or her estimate of fair value of his or her shares and the amount
of interest due, and demand payment therefor.
If any Dissenting Holder's demand for payment is not settled within 60 days
after receipt by the Company of such shareholder's payment demand, the OBCA
requires that the Company commence a proceeding in the Circuit Court of
Multnomah County, Oregon to determine the fair value of the shares, naming all
Dissenting Holders whose demands remain unsettled as parties to the proceeding.
The court may appoint one or more persons as appraisers to receive evidence and
recommend the fair value of the shares. Court costs and appraisal fees would be
assessed against the Company, except that the court may assess such costs
against some or all of the Dissenting Holders to the extent that the court finds
the Dissenting Holders acted arbitrarily, vexatiously or not in good faith in
demanding payment or to the extent the court finds equitable.
Any shareholder who fails to follow these procedures will lose the right to
dissent from the Reincorporation Merger. A negative vote, alone, will not
constitute the written objection required prior to the Annual Meeting.
CERTAIN DIFFERENCES IN CORPORATE LAW AND CORPORATE CHARTERS
Upon consummation of the Reincorporation, the shareholders of the Company
will become stockholders of Coffee People Worldwide. The rights of the Company's
shareholders will cease to be defined and governed by the OBCA, but instead will
be defined and governed by the DGCL. In addition, upon the consummation of the
Reincorporation, the rights of the Company's shareholders will no longer be
defined and governed by the Company's Articles and Bylaws. Instead, the rights
of such shareholders will be defined and governed by Coffee People Worldwide's
Certificate of Incorporation and Bylaws. Although the rights and privileges of
shareholders of an Oregon corporation in many instances are comparable to those
of stockholders of a Delaware corporation, there are certain differences. These
differences, described below, arise from differences between Delaware and Oregon
law, between the DGCL and the OBCA, and between the Company's Articles and
Bylaws and Coffee People Worldwide's Certificate of Incorporation and Bylaws.
The following is a brief summary of certain differences between the rights of
Coffee People Worldwide stockholders and the rights of Coffee People
shareholders, and is qualified in its entirety by reference to the relevant
provisions of the OBCA, the DGCL, and the charters of the respective
corporations.
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AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION
At the Effective Time of the Reincorporation Merger, the Company will be
governed by the Certificate of Incorporation and Bylaws of Coffee People
Worldwide. The Certificate of Incorporation and Bylaws of Coffee People
Worldwide will not significantly differ from the Articles and Bylaws of Coffee
People, except as may be required under Delaware law. Delaware law differs from
Oregon law with respect to certain matters, but permits, in practical effect,
conformity with the treatment of many such matters under Oregon law by
permitting the inclusion of provisions in Coffee People Worldwide's Certificate
of Incorporation and Bylaws which have the effect of modifying what would
otherwise be the impact of Delaware law. Except as described below, the rights
of the Company's shareholders will remain substantially the same as the rights
currently exist under Oregon law.
Under the OBCA, an amendment to a company's charter generally may be
approved if the votes cast within the voting group favoring the amendment exceed
the votes cast opposing the amendment. In circumstances where an amendment would
result in a voting group having dissenters' rights, the authorization of the
amendment would require the affirmative vote of a majority of the shares of such
voting group. In addition to the instances in which an amendment to a charter
would require a class vote under Delaware law, the Oregon statute would require,
among other things, a class vote if the charter is amended to create a new class
of shares having rights or preferences prior to or on a parity with the shares
of a class. The OBCA provides that directors may make certain amendments to the
articles of incorporation without shareholder approval, including making certain
changes to the corporation's name or extending the duration of the corporation.
Under the DGCL, an amendment to a company's charter must be approved by the
holders of a majority of the outstanding stock entitled to vote on the amendment
and a majority of the outstanding stock of each class entitled to vote on the
amendment. Generally, the DGCL requires a separate class vote on a charter
amendment if the amendment would increase or decrease the aggregate number of
authorized shares of such class, or alter or change the powers, preferences or
special rights of shares of such class so as to affect them adversely.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION WITHOUT MEETING
Under the OBCA, special meetings of shareholders may be called by the Board
of Directors, a person authorized by the Articles or Bylaws, or the holders of
at least 10 percent of all votes entitled to be cast on any issue proposed to be
considered at the meeting.
Shareholders may approve an action in lieu of a meeting by written consent
if the action is unanimously approved by the shareholders entitled to vote on
the action.
Under the DGCL, special meetings of stockholders may be called by the board
of directors or by such person as may be authorized in the Certificate of
Incorporation or in the Bylaws. The DGCL does not grant stockholders the power
to call a special meeting. Unless otherwise provided in a company's Certificate
of Incorporation, Delaware law allows stockholders to take action in lieu of a
meeting by written consent if the consent is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize the action at a meeting at which all shares entitled to
vote thereon were present and voted.
DISSENTERS' RIGHTS
Under the OBCA, a voting shareholder is generally entitled to dissent from,
and obtain payment of the fair value of the shareholder's shares in the event
of, a merger, stock exchange, sale or exchange of all or substantially all of
the property of the corporation other than in the usual course of business (with
certain exceptions), or certain specified charter amendments. Unless provided
for in a company's articles of incorporation, dissenters' rights do not apply to
holders of any class or series if the shares of the class or series were
registered on a national securities exchange or quoted on the Nasdaq National
Market on the record date.
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Under the DGCL, dissenting shareholders are generally entitled to appraisal
rights only with respect to mergers or consolidations. No appraisal rights
exist, however, if the stocks of the merging corporations are listed on a
national securities exchange or designated as a national market system security
by the National Association of Securities Dealers ("NASD"), or are held of
record by more than 2,000 stockholders, unless the holders are required to
accept cash or anything other than the stock of the surviving corporation or of
a company whose shares are listed on a national securities exchange or
designated as a national market system security by the NASD or held of record by
more than 2,000 holders.
SHAREHOLDER APPROVAL NOT REQUIRED FOR CERTAIN MERGERS
Under the OBCA, action by shareholders of a surviving corporation on a plan
of merger is not required if (i) the articles of incorporation of the survivor
will not differ from its articles before the merger (with certain limited
exceptions), (ii) each shareholder of the survivor will hold the same number of
shares with identical preferences and other rights as existed before the merger,
(iii) the number of voting shares outstanding immediately after the merger, plus
the number of voting shares issuable as a result of conversions or the exercise
of rights and warrants issued pursuant to the merger, will not exceed by more
than 20 percent the total number of voting shares of the survivor outstanding
immediately before the merger, and (iv) the number of participating shares
outstanding after the merger, plus the number of participating shares issuable
as a result of conversion or the exercise of rights and warrants issued
immediately pursuant to the merger, will not exceed by more than 20 percent the
total number of participating shares outstanding immediately before the merger.
Under the DGCL, a merger, consolidation, sale of all or substantially all
of a corporation's assets other than in the regular course of business or
dissolution of a corporation must be approved by a majority of the outstanding
shares entitled to vote. No vote of stockholders of a constituent corporation
surviving a merger, however, is required (unless the corporation provides
otherwise in its certificate of incorporation) if (i) the merger agreement does
not amend the certificate of incorporation of the surviving corporation, (ii)
each share of stock of the surviving corporation outstanding before the merger
is an identical outstanding or treasury share after the merger, and (iii) the
number of shares to be issued by the surviving corporation in the merger does
not exceed 20% of the shares outstanding immediately prior to the merger. The
Certificate of Incorporation of Coffee People Worldwide does not make any
provision with respect to such mergers.
DIVIDENDS AND STOCK REPURCHASES
The OBCA provides that, subject to any restrictions contained in the
articles of incorporation, a corporation may make a distribution to its
shareholders unless, after giving effect to the distribution, including a
repurchase of shares, (i) the corporation would not be able to pay its debts as
they become due in the normal course of business or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The board of directors may
base a decision that a distribution is not prohibited on (i) financial
statements prepared on the basis of accounting practices that are reasonable in
the circumstances, (ii) a fair valuation or (iii) any other method that is
reasonable in the circumstances.
The DGCL provides that a corporation may pay dividends from its surplus or
from its net profits during the current or immediately preceding year unless
capital is less than the liquidation preferences of outstanding shares. The
statute permits surplus to be determined by valuing the corporation's net assets
at fair market value rather than historical book value. A Delaware corporation
may not purchase or redeem its shares when the capital of the corporation is
impaired or such purchase or redemption would cause any impairment of its
capital (except that the corporation may redeem preferred stock and then reduce
the capital of the corporation in the manner permitted by statute) and may not
purchase shares that are subject to redemption at the option of the corporation
at a price greater than the applicable redemption price.
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PAYMENT FOR STOCK
Under the OBCA, shares may be issued for consideration consisting of any
tangible or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be performed or
other securities of the corporation.
The DGCL provides that the consideration for which capital stock is issued
must consist of cash, services rendered, personal property, real property,
leases of real property or a combination thereof.
LIMITATION OF DIRECTOR LIABILITY -- INDEMNIFICATION
Under the OBCA, a corporation may limit the personal liability of a
director to the corporation or its shareholders for monetary damages for conduct
as a director except in matters involving (i) any breach of the director's duty
of loyalty to the corporation or to its shareholders, (ii) acts or omissions not
in good faith, intentional misconduct or knowing violations of law, (iii)
unlawful distributions or (iv) any transaction from which the director obtained
an improper personal benefit. A corporation may indemnify a person who is or was
a director, officer or agent of the corporation for actions brought against that
person because of the position held with the corporation if the person acted in
good faith, in a manner reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to criminal matters, the
person had no reasonable cause to believe the person's conduct was unlawful.
Under the DGCL, a corporation's certificate may limit or eliminate the
personal liability of a director for breach of fiduciary as a director except in
matters involving (i) the breach of a director's duty of loyalty, (ii) actions
or omissions not in good faith, intentional misconduct or knowing violations of
law, (iii) the unlawful payment of dividends, stock purchases or redemptions or
(iv) any transaction from which a director derives an improper personal benefit.
The indemnification provisions for officers, directors and agents are
substantially similar to the Oregon statute provisions recited above.
OREGON CONTROL SHARE ACT
The Oregon Control Share Act is a statute under the OBCA which regulates
the process by which a person may acquire control of certain Oregon-based
corporations without the consent and cooperation of the board of directors. The
law restricts a shareholder's ability to vote shares of stock acquired in
certain transactions not approved by the board that causes the acquiring person
to gain control of a voting position exceeding one-fifth, one-third, or one-half
of the votes entitled to be cast in an election of directors. Shares acquired in
a control share acquisition have no voting rights except as authorized by a vote
of the shareholders. A corporation may opt out of the Control Share Act by
provision in the corporation's articles or bylaws. The Company has not opted to
take itself outside of the coverage of the Control Share Act.
The DGCL has no similar control share provision. To this extent, the
Reincorporation may have the effect of facilitating the acquisition of control
of the Company without the Board's consent.
PROVISIONS AFFECTING ACQUISITIONS AND BUSINESS COMBINATIONS
Except under certain circumstances, both Section 60.835 of the OBCA and
Section 203 of the DGCL prohibit a "business combination" between the
shareholder, the board of directors approves either the business combination or
corporation and an "interested shareholder" (in the case of the OBCA) or
"interested stockholder" (in the case of the DGCL) within three years of the
stockholder becoming an "interested shareholder." The provisions of the OBCA and
the DGCL dealing with business combinations with interested shareholders or
stockholders are substantially similar. Generally, an "interested shareholder"
is a person or group that directly or indirectly controls, or has the right to
acquire or control, the voting or disposition of 15% or more of the outstanding
voting stock or is an affiliate or associate of the corporation and was the
owner of 15% or more of such voting stock at any time within the previous three
years. A "business combination" is defined broadly to include, among others (i)
mergers and sales or other dispositions of 10% or more of the assets of a
corporation with or to an interested shareholder, (ii) certain transactions
resulting in the issuance or transfer to the interested shareholder of any stock
of the corporation or its subsidiaries, (iii) certain
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transactions which would result in increasing the proportionate share of the
stock of a corporation or its subsidiaries owned by the interested shareholder,
and (iv) receipt by the interested shareholder of the benefit (except
proportionately as a shareholder) of any loans, advances, guarantees, pledges,
or other financial benefits.
A business combination between a corporation and an interested shareholder
is prohibited unless (i) prior to the date the person became an interested the
transaction which results in the person becoming an interested shareholder, (ii)
upon consummation of the transaction that resulted in the person becoming an
interested shareholder, that person owns at least 85% of the corporate
transaction which results in the person becoming an interested shareholder, (ii)
upon consummation of the transaction that resulted in the person becoming an
interested shareholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the transaction is commenced (excluding
shares owned by persons who are both directors and officers and shares owned by
employee stock plans in which participants do not have the right to determine
confidentially whether shares will be tendered in a tender or exchange offer),
or (iii) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 66 2/3% of the outstanding voting stock not owned
by the interested shareholder.
These restrictions placed on interested shareholders by Section 60.835 of
the OBCA and Section 203 of the DGCL do not apply under certain circumstances,
including, but not limited to, the following: (i) if the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by such section; or (ii) if the corporation, by action of its
shareholders, adopts an amendment to its bylaws or certificate of incorporation
expressly electing not to be governed by such section, provided that such an
amendment is approved by the affirmative vote of not less than a majority of the
outstanding shares entitled to vote. Such an amendment, however, generally will
not be effective until 12 months after its adoption and will not apply to any
business combination with a person who became an interested shareholder at or
prior to such adoption. The Company has not elected to take itself outside the
coverage of Section 60.835, and Coffee People Worldwide has not elected to take
itself outside of the coverage of Section 203.
The Company is not aware of any specific effort by any party to assume
control of the Company. Because the OBCA business combination provisions are
substantially similar to the DGCL business combination provisions, Section 203
does not provide any additional impediments to the accomplishment of mergers
with, or the assumption of control of, the Company and is therefore not among
the principal reasons for the Reincorporation.
BOARD OF DIRECTORS' EVALUATION OF BUSINESS COMBINATIONS
Under the OBCA, members of the board of directors of a corporation are
authorized to consider certain factors in determining what they believe to be in
the best interests of the corporation when evaluating any offer of another party
to make a tender or exchange offer, any merger or consolidation proposal, or to
purchase all or substantially all of the assets of the corporation.
These factors include the social, legal and economic effects on employees,
customers and suppliers of the corporation and on the communities and
geographical areas in which the corporation operates, the economy and the state
of the nation, the long term and short term interests of the corporation and its
shareholders, including the possibility that these interests may be best served
by the continued independence of the corporation, and other relevant factors.
The DGCL does not contain a statutory provision outlining proper factors
for board consideration in evaluating a business transaction, although Delaware
courts have addressed such factors in case law.
OTHER DIFFERENCES IN THE CHARTER DOCUMENTS AND BYLAWS
Coffee People Worldwide's Certificate of Incorporation and Bylaws will
differ from the Company's Articles of Incorporation and Bylaws in other aspects.
These differences generally are reflective of technical differences between
Delaware and Oregon law and a policy decision not to include provisions which
are
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adequately covered by statute or not required to be included in such charter
documents. None of these provisions, however, is expected to have a material
effect on the governance of the Company.
TAX CONSEQUENCES
It is expected that the Reincorporation will constitute a tax-free
reorganization under the Code. Accordingly, it is anticipated that no gain or
loss will be recognized for federal income tax purposes by the Company, Coffee
People Worldwide, or their shareholders as a result of the Reincorporation
Merger, and the tax basis and holding period for the shares of Coffee People
Worldwide deemed received by the shareholders of the Company in exchange for the
Company's shares will be the same as the tax basis and holding period of the
shares of the Company deemed to be exchanged therefor. In addition, Coffee
People Worldwide will succeed to the tax attributes of the Company.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote of a majority of the total number of votes
attributable to all shares of Common Stock is required to approve the
Reincorporation, Reincorporation Merger, and related Plan of Merger.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REINCORPORATION,
REINCORPORATION MERGER AND RELATED PLAN OF MERGER.
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ITEM III.
APPROVAL OF AMENDMENT TO 1998 STOCK INCENTIVE PLAN
The Board of Directors has approved, subject to shareholder ratification,
the increase of the number of shares reserved for issuance under the 1998 Stock
Incentive Plan. Pursuant to an amendment to the 1998 Stock Incentive Plan, the
number of shares reserved for issuance would be increased by 514,414 shares,
from 400,000 to 914,414 shares. Furthermore, this amount may be increased by as
much as 50,183 shares, as indicated below. The increase of 514,414 shares
represents the number of shares currently reserved for issuance under the
Company's 1993 Stock Option Plan, 1994 Stock Option Plan, 1995 Stock Option Plan
and 1996 Stock Option Plan (collectively, the "Previous Stock Option Plans" and
together with the 1998 Stock Incentive Plan, the "Stock Option Plans"). The
Previous Stock Option Plans will be amended concurrently with the amendment
increasing the shares available under the 1998 Stock Incentive Plan so as to
preclude the grant of any further options under the Previous Stock Option Plans.
While the terms of the Previous Stock Option Plans are substantially similar,
the options available for grant under the plans now have differing dates upon
which the shares available will expire, and differing numbers of shares reserved
for issuance. Amending the 1998 Stock Incentive Plan to include the shares now
reserved under the Previous Stock Option Plans will have the effect of bringing
all the shares currently reserved under the diverse plans into one pool, thereby
providing the Company with far greater ease of administration and providing
uniformity of the available options.
An increased number of shares of Common Stock may be issued under the 1998
Stock Incentive Plan to the extent that any options granted under the Previous
Stock Option Plans have expired, terminated, been canceled or been forfeited.
The maximum number of shares of Common Stock that may be so added to the number
of shares otherwise authorized is 50,183, so that the maximum number of shares
of Common Stock that may be issued under the 1998 Stock Incentive Plan will be
964,497 after the amendment is approved. The time periods in which options must
be granted under the Previous Stock Option Plans will all be "reset" to conform
with the period set forth in the 1998 Stock Incentive Plan, as described below.
The shares will also be available for outright or restricted stock grants under
the terms of the 1998 Stock Incentive Plan, as described below, and for all
other purposes will be subject to and administered under the terms of the 1998
Stock Incentive Plan.
For purposes of convenience, the Board has approved a further amendment to
the 1998 Stock Incentive Plan providing that the Board and/or the Compensation
Committee of the Board may delegate to the Company's Chief Executive Officer the
ability to grant options or awards to eligible employees in any calendar year.
As of June 27, 1998, options to purchase 579,189 shares of Common Stock
were granted and outstanding under the Stock Option Plans at a weighted average
exercise price of $6.39. The closing price of the Common Stock on Nasdaq on
October 15, 1998 was $1.50.
The essential features of the 1998 Stock Incentive Plan are set forth
below. The description set forth below is qualified in its entirety by the terms
of the 1998 Stock Incentive Plan, as amended. A copy of the First Amendment to
the Coffee People, Inc. 1998 Stock Incentive Plan is set forth as Annex D to
this Proxy Statement. A copy of the 1998 Stock Incentive Plan as currently in
effect is set forth as Annex D-1 to this Proxy Statement.
The 1998 Stock Incentive Plan provides for the grant of Common Stock, or
options for the purchase of Common Stock, up to a maximum of 400,000 shares. The
proposed amendment will increase this number to 914,414 shares of Common Stock
available for issuance under the 1998 Stock Incentive Plan. The 1998 Stock
Incentive Plan is administered indirectly by Board of Directors and directly
under the Compensation Committee of the Board of Directors. The Board may, from
time to time, take the following actions under the 1998 Stock Incentive Plan:
(i) grant Incentive Stock Options, within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("ISOs"); (ii) grant non-statutory
stock options ("NSOs"); (iii) grant stock awards; and (iv) sell Common Stock.
Any such awards may be made to employees, consultants, officers and directors of
Coffee People or of any parent or subsidiary of Coffee People.
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Options. Options granted under the 1998 Stock Incentive Plan may be either
ISOs or NSOs. The Board has the authority to determine in its discretion the
recipients of grants, the number of options to be granted and other terms and
provisions of each option.
ISOs may be issued to employees only. The exercise price for ISOs may not
be less than 100 percent of the fair market value of the Common Stock at the
time of the grant. The aggregate fair market value (as determined at the time of
the grant) of shares issuable upon exercise of ISOs by any employee for the
first time in any one calendar year under the 1998 Stock Incentive Plan, and
under any other incentive stock plan of Coffee People or any parent or
subsidiary, may not exceed $100,000. In the case of ISOs granted to holders of
more than 10 percent of the voting power of the Common Stock, the exercise price
may not be less than 110 percent of the fair market value and the option by its
terms may not be exercisable more than 5 years after the date or grant.
NSOs may be granted at not less than 85 percent of the fair market value of
the Common Stock at the date of the grant. Options granted under the 1998 Stock
Incentive Plan have a maximum term of 10 years from the date of the grant. The
fair market value of the Common Stock is determined under the 1998 Stock
Incentive Plan to be the weighted average trading price of the Common Stock, as
quoted on a securities exchange, automated quotation system, or
over-the-counter, as applicable (currently Nasdaq), or the five trading days
immediately preceding the date of the option grant.
Options granted under the 1998 Stock Incentive Plan become exercisable in
whole or in part from time to time as determined by the Board, or the
Compensation Committee, as applicable. Options are not transferable other than
by will or the laws of descent and distribution, and each option is exercisable
during the lifetime of the optionee only by such optionee. Upon the approval by
the shareholders of Coffee People of any consolidation, merger, plan of exchange
or other transaction in which Coffee People is not the surviving corporation, or
any sale or other transfer of all or substantially all the assets of Coffee
People, all options outstanding under the 1998 Stock Incentive Plan will become
immediately exercisable in full for the remainder of their terms; provided, that
the Board may, in its sole discretion, provide that all outstanding options
shall be exercisable for a 30-day period prior to such transaction, after which
all unexercised options shall immediately terminate.
Stock Grants and Sale. Under the 1998 Stock Incentive Plan, shares of
Common Stock may be granted to employees, consultants, officers and directors of
the Company. Grants may be made without payment of any cash consideration for
the shares (other than amounts required to satisfy any tax withholding
requirements). It is currently anticipated that shares will be granted to
non-management members of the Coffee People Board from time to time in lieu of,
or in addition to, cash compensation for service on the Board, pursuant to
criteria to be established by the Coffee People Board.
In addition, the Board may under the 1998 Stock Incentive Plan sell Common
Stock to employees, consultants, officers and directors for cash consideration
of not less than 85% of the fair market value of the shares at the time of
issuance. Consideration for shares of Common Stock sold under the plan to
persons holding more than 10 percent of the voting power of the Common Stock
shall be not less than 110 percent of the fair market value of the shares at the
time of issuance. Shares sold in this manner pursuant to the 1998 Stock
Incentive Plan are intended to qualify as shares issued pursuant to an employee
stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
Shares subject to options granted under the 1998 Stock Incentive Plan that
have lapsed or terminated, and shares granted under the plan that have been
forfeited to or repurchased by Coffee People, may again be awarded or sold at
any time before termination of the plan.
Coffee People has filed a registration statement on Form S-8 registering
under the Securities Act shares issuable under the 1998 Stock Incentive Plan.
Pursuant to such registration, shares acquired under the plan generally will be
eligible for sale without restriction in the public market by holders who are
not affiliates of Coffee People. If the amendment of the 1998 Stock Incentive
Plan is approved, an amendment to the current Form S-8 will be filed to include
the additional shares.
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Federal Income Tax Information
Incentive Stock Options. ISOs under the 1998 Stock Incentive Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code. If an option granted under the 1998
Stock Incentive Plan is treated as an ISO, the optionee will not recognize any
income upon either the grant or the exercise of the option, and the Company will
not be allowed a deduction for federal tax purposes upon such a grant or
exercise. Upon a sale of the shares, the tax treatment to the optionee and the
Company will depend primarily on whether the optionee has met certain holding
period requirements at the time he or she sells the shares. In addition the
exercise of an ISO may subject the optionee to alternative minimum tax
liability, if any.
If an optionee exercises an ISO and does not dispose of the shares received
within two years after the date of such option or within one year after the
transfer of shares to him or her, any gain realized upon the disposition will be
treated as a gain from the sale of stock and taxed at capital gain rates. The
capital gain rates are subject to change and vary depending on how long the
shares have been held.
If the optionee disposes of the shares either within two years after the
date the option is granted or within one year after the transfer of the shares
to him or her, such disposition will be treated as a disqualifying disposition
and an amount equal to the lesser of (i) the fair market value of the shares on
the date of exercise minus the purchase price, or (ii) the amount realized on
the disposition minus the purchase price, will be taxed as ordinary income to
the optionee in the taxable year in which the disposition occurs. However, in
the case of gifts, sales to related parties, and certain other transactions, the
full difference between the fair market value of the stock and the purchase
price will be treated as compensation income. The excess, if any, of the amount
realized upon disposition over the fair market value at the time of the exercise
of the option will be treated as gain from the sale of stock and taxed at
capital gain rates if the optionee has held the shares for more than one year
following the exercise of the option. The capital gain rates are subject to
change and vary depending on how long the shares have been held. In the event of
a disqualifying disposition, the Company may withhold income taxes from the
optionee's compensation with respect to the ordinary income realized by the
optionee as a result of the disqualifying disposition.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of an incentive stock option.
However, in the event an optionee sells or disposes of stock received on the
exercise of an incentive stock option in a disqualifying disposition, the
Company will be entitled to a deduction for federal income tax purposes in an
amount equal to the ordinary income, if any, recognized by the optionee upon
disposition of the shares, provided that the deduction is not otherwise
disallowed under the Code.
Nonqualified Stock Options. NSOs granted under the 1998 Stock Incentive
Plan do not qualify as "incentive stock options" and will not qualify for any
special tax benefits to the optionee. An optionee generally will not recognize
any taxable income at the time he or she is granted a nonqualified option.
However, upon its exercise, the optionee will recognize ordinary income for
federal tax purposes measured by the excess of the then fair market value of the
shares over the exercise price. The income realized by the optionee will be
subject to income and other employee withholding taxes.
The optionee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of an NSO will be the amount
paid for such shares plus any ordinary income recognized as a result of the
exercise of such option. Upon disposition of any shares acquired pursuant to the
exercise of an NSO, the difference between the sale price and the optionee's
basis in the shares will be treated as a gain or loss from the sale of stock and
taxed at capital gain or loss rates if the optionee has held the shares for more
than one year following the exercise of the option. The capital gain rates are
subject to change and vary depending on how long the shares have been held.
In general, there will be no federal income tax deduction allowed to the
Company upon the grant or termination of an NSO or a sale or disposition of the
shares acquired upon the exercise of a nonqualified stock option. However, upon
the exercise of an NSO, the Company will be entitled to a deduction for federal
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income tax purposes equal to the amount of ordinary income that an optionee is
required to recognize as a result of the exercise, provided that the deduction
is not otherwise disallowed under the Code.
For more information on the Previous Stock Option Plans, see "Stock Option
Plans" below.
Vote Required. Amendment of the 1998 Stock Incentive Plan requires the
affirmative vote of the holders of a majority of the Common Stock present in
person or represented by proxy at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" AMENDMENT OF THE
1998 STOCK INCENTIVE PLAN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of September 30, 1998, the number and
percentage of outstanding shares of the Common Stock beneficially owned by each
person known by Coffee People to beneficially own 5% or more of the Common
Stock, by each director, by each of the executive officers named in the Summary
Compensation Table, and by all directors and executive officers of Coffee People
as a group. To Coffee People's knowledge, each named beneficial owner has sole
voting and investment power with respect to the shares listed except as
indicated below.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) COMMON SHARES
--------------------------------------- ------------ -------------
Second Cup USA Holdings Ltd.(3)............................. 7,460,679 69.4%
175 Bloor Street East, Suite 801
South Tower
Toronto, Ontario M4W 3R8
Canada
Cara Operations Limited(4).................................. 7,460,679 69.4%
6303 Airport Road
Mississauga, Ontario L4V 1R8
Canada
Investors Group Trust Co Ltd.(5)............................ 7,460,679 69.4%
One Canada Center
447 Portage Avenue
Winnepeg, Manitoba R3C 3B6
Canada
Michael D. Bregman(6)....................................... 7,460,679 69.4%
Gary G. Talboy.............................................. 285,250 2.7%
Taylor H. Devine(7)......................................... 21,480 0.0%
Alton W. McEwen............................................. 10,000 0.0%
Mark J. Archer.............................................. 0 0.0%
Stephen L. King............................................. 0 0.0%
David G. Harrington......................................... 0 0.0%
Douglas L. Ayer............................................. 0 0.0%
Robert A. Haft.............................................. 0 0.0%
Kathy A. Welsh.............................................. 0 0.0%
All officers and directors as a group (15 persons)(8)(9).... 417,213 3.9%
- ---------------
(1) Unless otherwise indicated, the address for each person in this table is c/o
Coffee People Inc., 11480 Commercial Parkway, Castroville, California 95012
(2) Includes shares beneficially owned which includes shares that may be
acquired pursuant to options within 60 days of September 30, 1998.
(3) Second Cup USA Holdings Ltd. is a wholly owned subsidiary of The Second Cup
Ltd., a corporation organized under the laws of Ontario, Canada.
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(4) Represents shares held by Second Cup USA Holdings Ltd., of which Cara
Operations Limited may be deemed to be a controlling person by virtue of its
ownership of 39.5% of the common stock of The Second Cup Ltd.
(5) Represents shares held by Second Cup USA Holdings Ltd., of which Investors
Trust Co. Ltd. may be deemed to be a controlling person by virtue of its
ownership of 18.8% of the common stock of The Second Cup Ltd.
(6) Represents shares held by Second Cup USA Holdings Ltd., of which Mr. Bregman
may be deemed to be a controlling person by virtue of his ownership,
directly and indirectly, of 12.9% of the common stock of The Second Cup Ltd.
Mr. Bregman is Chairman of the Board and Chief Executive Officer of The
Second Cup Ltd.
(7) Includes 20,280 shares issuable upon exercise of stock options.
(8) Includes 25,901 shares issuable upon exercise of stock options held by
certain executive officers.
(9) Does not include the 7,460,679 shares shown for Mr. Bregman for which he may
be deemed to be a beneficial owner.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to or earned by the
Company's Chief Executive Officer and former Chief Executive Officer and the
four other most highly compensated executive officers (collectively referred to
as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS/(#) ($)
--------------------------- ------ -------- ------- ------------ ------------ ------------
Alton W. McEwen........................ 1998 $225,000 $25,000 (*) 63,900(4) $ 363(2)
President, Chief Executive Officer(1) 1997 212,000 -- $45,000(3) 6,200(4) 363(2)
1996 N/A N/A N/A N/A N/A
Mark J. Archer......................... 1998 $ 58,346 -- $54,359(6) 50,000 --
Executive Vice President, Chief 1997 N/A N/A N/A N/A N/A
Financial Officer and Secretary(5) 1996 N/A N/A N/A N/A N/A
Taylor H. Devine....................... 1998 $150,000 -- (*) 10,500 $2,035(8)
President, Chief Operating Officer -- 1997 150,000 -- (*) 63,000 2,035(8)
Coffee People Oregon division(7) 1996 115,068 N/A $24,845(9) 150,000 920(8)
Stephen L. King........................ 1998 $140,000 $52,000 (*) 9,800 --
Vice President, Development(10) 1997 42,307 3,000 N/A N/A N/A
1996 N/A N/A N/A N/A N/A
David G. Harrington.................... 1998 $120,000 -- (*) 8,400 --
Vice President, Operations -- 1997 50,769 N/A N/A N/A N/A
Gloria Jean's division(11) 1996 N/A N/A N/A N/A N/A
- ---------------
* Benefits and perquisites received totaled less than 10% of combined salary
and bonus.
(1) Mr. McEwen became President and Chief Executive Officer of Coffee People,
Inc. on May 19, 1998 upon completion of the Merger. He was appointed as
President of Second Cup's U.S. operations (including Gloria Jean's) on July
22, 1996.
(2) Represents premium for term life insurance.
(3) Represents a housing subsidy paid to Mr. McEwen in conjunction with his
appointment as an officer of Gloria Jean's and his relocation to
Castroville, California.
(4) Reflects options to purchase 50,000 common shares of Coffee People, Inc.
granted in fiscal year 1998, 13,900 options to purchase shares of The
Second Cup Ltd. granted in fiscal 1998 and 6,200 options to purchase shares
of The Second Cup Ltd. granted in fiscal 1997.
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(5) Mr. Archer joined Gloria Jean's as Executive Vice President, Chief
Financial Officer and Secretary on February 19, 1998. Upon completion of
the Merger on May 19, 1998, he assumed these positions with Coffee People.
(6) Represents moving expenses and housing subsidies paid to Mr. Archer in
conjunction with his appointment as an officer of Gloria Jean's and his
relocation to Castroville, California.
(7) Mr. Devine was President and Chief Executive Officer of Coffee People from
May 21, 1997 until May 19, 1998. Upon completion of the merger, he became
President and Chief Operating Officer of the Coffee People Oregon division.
Mr. Devine started with Coffee People on September 11, 1995 and served as
President and Chief Operating Officer until May 21, 1997.
(8) Represents premium for term life insurance and employer contributions to
401(k) account.
(9) Represents moving expenses and housing subsidies paid to Mr. Devine in
conjunction with his appointment as President and Chief Operating Officer
of Coffee People, Inc. and his relocation to Portland, Oregon.
(10) Mr. King joined Gloria Jean's on January 2, 1997, and was appointed as Vice
President, Development of Coffee People upon completion of the Merger on
May 19, 1998.
(11) Mr. Harrington joined Gloria Jean's on December 9, 1996, and was appointed
as Vice President, Operations of the Gloria Jean's Division upon completion
of the Merger on May 19, 1998. He resigned from the Company on August 26,
1998.
STOCK OPTION INFORMATION
The following table sets forth information regarding stock options granted
to the Named Executive Officers during the fiscal year ended June 27, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- ---------- --------- ------------- --------- ---------
Alton W. McEwen............. 50,000 20.1% $3.20 June 23, 2008 $100,623 $254,999
Mark J. Archer.............. 50,000 20.1% 3.20 June 23, 2008 100,623 254,999
Taylor H. Devine............ 10,500 4.2% 3.20 June 23, 2008 21,131 53,550
Stephen L. King............. 9,800 4.0% 3.20 June 23, 2008 19,722 49,980
David G. Harrington......... 8,200 3.3% 3.20 June 23, 2008 16,502 41,820
- ---------------
(1) The potential realizable values listed are based on an assumption that the
market price of the Common Stock appreciates at the stated rate, compounded
annually, from the date of grant to the expiration date. The 5% and 10%
assumed rates of appreciation are determined by the rules of the Securities
and Exchange Commission and do not represent the Company's estimate of the
future market price of the Common Stock.
(2) All options granted vest one-third ratably on the first, second and third
anniversary of the grant date, June 23, 1998.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth the number of shares covered by exercisable
and unexercisable options held by the Named Executive Officers on June 27, 1998,
and the aggregate gains that would have been realized had these options been
exercised on June 27, 1998, even though these options were not exercised, and
the unexercisable options could not have been exercised, on that date. The Named
Executive Officers did not exercise any stock options during the 1998 fiscal
year.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- ----------- ---------------- ----------- ----------------
Alton W. McEwen....................... -- 50,000 -- --
Mark J. Archer........................ -- 50,000 -- --
Taylor H. Devine...................... 17,020 27,280 -- --
Stephen L. King....................... -- 9,800 -- --
David G. Harrington................... -- 8,200 -- --
- ---------------
(1) These amounts represent the difference between the exercise price of the
in-the-money options and the market price of the Company's Common Stock on
June 27, 1998. The closing price of the Company's Common Stock on that day
on the Nasdaq National Market System was $3.06. Options are in-the-money if
the market value of the shares covered thereby is greater than the option
exercise price.
(2) Future exercisability is subject to a number of factors, including, but not
limited to, the optionee remaining employed by the Company.
EMPLOYMENT AGREEMENTS
Mark J. Archer, Executive Vice President, Chief Financial Officer and
Secretary of the Company, has an employment agreement providing for the payment
of twelve months salary if terminated for reasons other than cause.
Taylor H. Devine serves as President and Chief Operating Officer of the
Coffee People Oregon division under an employment contract that provides for a
base salary of $150,000 per year, a $25,000 bonus payable for the successful
consummation of the Merger six months following the closing, and additional
bonuses of $18,750 payable both six months and twelve months after the closing.
The bonuses will be forfeited in the event Mr. Devine voluntarily resigns and is
no longer employed by Coffee People on the date scheduled for payment of the
bonus. The agreement with Mr. Devine also provides for severance payments upon
termination by the Company: if termination is for cause, he will receive his
salary through termination plus one month's salary; if termination is without
cause, he will receive his salary through termination plus salary for the later
of twelve months following the closing or six months following termination, paid
as a lump sum. The agreement further provides that Mr. Devine is required to
give 90 days written notice of resignation and upon his voluntary resignation,
he will receive wages paid through the last day of employment only. Finally, Mr.
Devine agrees not to engage in any business in competition with Coffee People in
the United States, meaning any retail operations for which 50% or more of total
sales are derived from coffee or coffee-related products, for a period of three
years following the cessation of his employment with Coffee People.
STOCK OPTION PLANS
In 1993, 1994, 1995, 1996 and 1998, the Board of Directors and the
shareholders adopted the 1993 Stock Option Plan, the 1994 Stock Option Plan, the
1995 Stock Option Plan, the 1996 Stock Option Plan, and the 1998 Stock Incentive
Plan, respectively (collectively, the "Stock Option Plans"). The Stock Option
Plans provide for the grant of options to purchase up to an aggregate of
1,046,575 shares of Common Stock to officers, key employees and consultants.
Options granted under the Stock Option Plans may be either ISOs or NSOs.
Pursuant to the Stock Option Plans, the plan administrator has the authority to
determine in its
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discretion the recipients of grants, the number of options to be granted and
other terms and provisions of each option.
ISOs may be issued only to employees of Coffee People. The exercise price
for ISOs granted under the Stock Option Plans may not be less than 100 percent
of the fair market value of the Common Stock at the time of the grant and the
aggregate fair market value (as determined at the time of the grant) of shares
issuable upon exercise of incentive stock options for the first time in any one
calendar year may not exceed $100,000. Options granted under the Stock Option
Plans have a maximum term of 10 years from the date of the grant. In the case of
ISOs granted to holders of more than 10 percent of the voting power of the
Company, the exercise price may not be less than 110 percent of the fair market
value and the option by its terms may not be exercisable more than 5 years after
the date or grant. NSOs may be granted at not less than 85 percent of the fair
market value of the Common Stock at the date of the grant. Options granted under
the Stock Option Plans become exercisable in whole or in part from time to time
as determined by the plan administrator. Options are not transferable other than
by will or the laws of descent and distribution, and each option is exercisable
during the lifetime of the optionee only by such optionee.
As of June 27, 1998, options to purchase 579,189 shares of Common Stock
were granted and outstanding under the Stock Option Plans, at a weighted average
exercise price of $6.39.
EMPLOYEE STOCK PURCHASE PLAN
On June 3, 1994, Coffee People adopted an Employee Stock Purchase Plan (the
"ESPP"). Under the ESPP, 150,000 shares of Common Stock have been reserved for
issuance to and purchase by employees of Coffee People. As of June 27, 1998,
16,860 shares of Common Stock have been sold under the ESPP.
All employees with over six months of service who work more than 20 hours
per week and who do not own stock or options for more than 5% of Coffee People's
stock are eligible to participate in the ESPP.
To date, Coffee People has implemented the ESPP through periodic issuances
of Common Stock. Coffee People also may implement the ESPP through open market
purchases of Common Stock. At the beginning of each applicable subscription
period, Coffee People offers to each participant in the ESPP an option to
purchase a maximum number of shares based upon a percentage of the participant's
base compensation for the period divided by 85% of the market value of the
Common Stock at that time. At the end of each period, each participant can
acquire such shares at the lower of 85% of the fair market value at the
beginning or at the end of the period. The ESPP allows participants to authorize
payroll deductions or to make cash payments to be applied toward the purchase of
shares of Common Stock. Unless a participant gives written notice to Coffee
People, the option to purchase Common Stock with the cash value of his or her
account is deemed to have been automatically exercised at the end of each
applicable period. Upon written notice at any time prior to the end of an
applicable period, a participant may elect to withdraw the value of his or her
account at such time.
The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. Under that Code section, employees may not be granted
options if immediately after the grant such employee would own stock or hold
options to purchase stock possessing 5% or more of the voting power or value of
all stock of Coffee People, nor may any participant purchase Common Stock having
a fair market value exceeding $25,000 in any calendar year.
The Board of Directors may at any time amend or terminate the ESPP, except
that the approval of Coffee People's shareholders is required within 12 months
of the adoption of any amendment increasing the number of shares authorized for
issuance under the ESPP. Unless extended by the Board of Directors, the ESPP
will terminate on the earlier of ten years from its effective date, or when all
of the shares reserved for issuance under the ESPP have been issued.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles contain, pursuant to Oregon law, provisions for
indemnification of officers and directors of the Company and in certain cases
employees and other persons. In addition, the Company's Bylaws require
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the Company to indemnify such persons to the full extent permitted by Oregon
law. Each such person will be indemnified in any proceeding if he or she acted
in good faith and in a manner which he or she reasonably believed to be in, or
not opposed to, the best interests of the Company. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement. The Company maintains directors' and officers' liability insurance.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHIES
It is the responsibility of the Compensation Committee (the "Committee") to
establish and review the Company's executive compensation programs and policies
to monitor performance and make recommendations concerning executive
compensation and benefits to the Board of Directors.
The Committee's philosophy and policies are to provide a total compensation
program that will enable the Company to attract, retain, and motivate an
outstanding management team. The Committee strongly believes that stock
ownership and incentive programs, based on above-average corporate performance,
will encourage management to best serve the interests of our shareholders.
EXECUTIVE COMPENSATION
Compensation paid to executive officers includes an industry competitive
salary, a management incentive cash bonus, which relates to the Company's annual
achievement of financial performance goals and individual performance, and stock
options which align management's interests with stockholders' interests.
In determining compensation levels, the Board of Directors and the
Compensation Committee consider, among other things, 1) the financial
performance of the Company during the past year; 2) recommendations of the
Company's Chief Executive Officer, based on his evaluation of the breadth of
duties of the executive officers and their contribution to the Company; 3)
extraordinary performance during the year; 4) levels at which the Company's
competitors compensate their executive officers; and 5) relative stock
performance vs. comparable specialty coffee retail companies. Executive Officers
also participate in benefit plans generally available to employees including a
medical plan, a 401(k) plan, and group life insurance.
Executive compensation is evaluated annually. Existing compensation levels
are compared with compensation levels of executives in similar capacities with
other publicly-held food & beverage industry and retail companies. The Company's
current financial position and performance for the past year is reviewed,
including growth in revenues, operating cash flow generated, and earnings per
share. In addition, plans for performance for the upcoming year and future
periods are reviewed as to revenue growth and earnings. An evaluation is made as
to the degree that the executive, including the Chief Executive Officer,
contributes to the achievement of the Company's results and other Company goals.
Based on these factors, the Committee makes recommendations to the Board of
Directors regarding changes to executive compensation.
1998 CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee followed the policies described above to
determine the compensation of the Company's President and Chief Executive
Officer, Alton W. McEwen. The Compensation Committee established Mr. McEwen's
annual base salary of $225,000.00 for the fiscal year 1999 based upon a review
of compensation by food & beverage companies having similar revenues and scopes
of operations, together with an evaluation of the Company's results in fiscal
year 1998, and the degree of progress made in implementing the Company's
strategic plans. Mr. McEwen also received a bonus of $25,000.00 paid in fiscal
year 1998.
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SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code disallows a deduction for
federal income tax purposes of most compensation exceeding $1,000,000 in any
year paid to the Company's Chief Executive Officer and the four other most
highly compensated executive officers of a publicly traded corporation. The
Company was not impacted by Section 162(m) in fiscal 1998. In future years, the
Compensation Committee intends to take into account the effect of Section 162(m)
if the compensation payable to any executive officer approaches $1,000,000.
Respectfully Submitted,
COFFEE PEOPLE, INC.
COMPENSATION COMMITTEE
Douglas L. Ayer [Chair]
Robert M. Haft
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return of the
Company, with the cumulative total return of the Nasdaq Retail Trade Index
("RTI") and the cumulative total return of a group of the Company's peers (the
"Peer Group"). The performance graph assumes that $100 was invested on September
25, 1996 in the Company's Common Stock and on August 31, 1998 for the RTI and
the Peer Group. The stock price performance shown in this graph is neither
necessarily indicative of, nor intended to suggest, future stock price
performance.
COMPARISON OF 21 MONTH CUMULATIVE TOTAL RETURN*
'COFFEE PEOPLE, NASDAQ RETAIL
INC.' PEER GROUP TRADE
9/25/96 100.00 100.00 100.00
12/31/96 83.33 90.42 98.65
12/31/97 33.33 90.47 115.89
6/27/98 37.12 84.34 141.62
- ---------------
* $100 invested on 9/25/96 in stock or on 8/31/96 in index -- including
reinvestment of dividends.
+ The Peer Group is composed of the following companies: Brothers Gourmet
Coffees Inc., Chock Full O Nuts Corp., Diedrich Coffee Inc., Green Mountain
Coffee Inc., New World Coffee & Bagel Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 4, 1993, Coffee People redeemed 141,047.25 shares of
Common Stock owned by Gary G. Talboy. The total purchase price was $250,375. As
part of the consideration for the redemption, Coffee People gave promissory
notes in the amount of $245,000 to Mr. Talboy. A monthly payment in the amount
of $2,975 is made to Mr. Talboy on his note, which bears interest at the rate of
2% over the prime rate of interest (10.5% at June 27, 1998). The principal
amount of the note at June 27, 1998 was $169,399. Mr. Talboy's note may be
prepaid in full at any time without penalty. His note is secured by
substantially all of Coffee People's assets, including accounts receivable,
inventories, trade fixtures and equipment, tangible and intangible personal
property, after acquired property and the proceeds thereof. Mr. Talboy's
security interest is subordinate to the security interest held by Coffee
People's bank. This loan was paid off on September 3, 1998.
On December 31, 1993, Kenneth B. Ross, Vice President -- Finance, exercised
incentive stock options for 37,500 shares of Common Stock and paid for such
shares by giving a promissory note to Coffee People in the amount of $83,333.
The note bears interest at the rate of 8.5% per annum and is due on December 31,
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1998. On January 17, 1995, Mr. Ross exercised incentive stock options for 26,250
shares of Common Stock and paid for such shares by giving promissory notes to
Coffee People in the aggregate amount of $58,333. These notes bear interest at
the rate of 8.5% per annum and are due December 31, 1999. On May 26, 1998, Mr.
Ross exercised incentive stock options for 11,250 shares of Common Stock and
paid for such shares by giving a promissory note to the Company in the amount of
$25,000. This note bears interest at the rate of 8.5% per annum and is due May
26, 2003. The notes provide that in the event any of the stock is sold before
the notes mature, all accrued interest and a pro rata portion of the principal
balance must be paid in full.
On July 1, 1994, Mr. Talboy purchased the land and building on which Coffee
People operates its Motor Moka drive-through espresso bar at 525 NE Grand
Avenue, Portland, Oregon. Immediately following the closing of Mr. Talboy's
purchase, Coffee People leased the property from Mr. Talboy under a 15-year
lease that requires Coffee People to pay Mr. Talboy base rent of $6,375 per
month. The lease provides for rent escalation in 2000 and annually thereafter
based upon the increase in the consumer price index in effect at the end of 1997
and also requires Coffee People to pay all utilities, insurance, property taxes,
and repairs and maintenance relating to the property. These lease terms may not
be as favorable to Coffee People as Coffee People might have been able to obtain
from an unrelated third party.
Coffee People pays Mr. Talboy consulting fees of $1,000 per month for
consulting services with respect to Coffee People's sourcing and supply of
coffee. This consulting contract terminated in September 1998. From time to time
Mr. Talboy provides other consulting services to Coffee People for a fee of $35
per hour.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the meeting. If any other matters should properly come before the meeting, the
persons named in the proxy will vote the proxies according to their best
judgment.
SHAREHOLDER PROPOSALS
Shareholder proposals, if any, which may be considered for inclusion in the
Company's proxy materials for the 1998 Annual Meeting must be received by the
Company at its offices at 11480 Commercial Parkway, Castroville, CA 95012 not
later than July 9, 1999.
ANNUAL REPORT
The Annual Report to Shareholders for fiscal 1998 accompanies this proxy
statement.
AVAILABILITY OF REPORTS ON FORM 10-K
The Company will furnish without charge to each person whose proxy is being
solicited, upon written request of any such person, a copy of the Annual Report
on Form 10-K of the Company for the year ended June 27, 1998, as filed with the
SEC, including the financial statements and schedules thereto. Requests for
copies of such Annual Report on Form 10-K should be directed to Coffee People,
Inc., Attn: Assistant Secretary, 11480 Commercial Parkway, Castroville, CA
95012.
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ANNEX A
ARTICLES OF MERGER
OF
COFFEE PEOPLE, INC., AN OREGON CORPORATION
INTO
COFFEE PEOPLE WORLDWIDE, INC. A DELAWARE CORPORATION
Pursuant to Section 60.494 of the Oregon Business Corporation Act, Coffee
People Worldwide, Inc. a Delaware corporation ("Coffee People Worldwide"),
hereby delivers for filing the Articles of Merger pertaining to the merger of
Coffee People, Inc., an Oregon corporation ("Coffee People") into Coffee People
Worldwide.
A. The Plan of Merger is as follows:
PARTIES TO THE MERGER
Coffee People Coffee People, Inc., an Oregon corporation
Coffee People Worldwide Coffee People Worldwide, Inc. a Delaware corporation
Surviving Corporation Coffee People Worldwide, a Delaware corporation
ARTICLE I
1.1 Merger. Coffee People Worldwide and Coffee People shall be merged into
a single corporation, in accordance with applicable provisions of the laws of
the State of Oregon and of the State of Delaware, by the merger of Coffee People
into Coffee People Worldwide. Coffee People Worldwide shall be the surviving
corporation.
1.2 Effective Date. The Plan of Merger shall become effective immediately
upon filing, in accordance with the laws of Delaware and Oregon. Such date and
time shall hereinafter be referred to as the "Effective Date of Merger."
1.3 Effect of Merger. Upon the Effective Date of Merger, Coffee People
Worldwide and Coffee People shall become a single corporation, which shall be
Coffee People Worldwide as the surviving corporation, and the separate existence
of Coffee People shall cease except to the extent provided by the laws of the
State of Oregon.
ARTICLE II
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Coffee People Worldwide, as existing at the
Effective Date of Merger, shall be the Certificate of Incorporation and Bylaws
of the surviving corporation until altered, amended or repealed in accordance
with such Certificate of Incorporation, Bylaws, and the laws of Delaware.
2.2 Directors and Officers. The directors and officers of Coffee People,
as existing at the Effective Date of Merger, shall be the directors and officers
of the surviving corporation, to hold office until their respective successors
have been duly elected.
ARTICLE III
3.1 Stock. Without any required action on the part of the holders thereof,
each outstanding share of Coffee People Common Stock will automatically be
converted into one share of Coffee People Worldwide Common Stock. The Common
Stock of Coffee People is quoted on The Nasdaq Stock Market, and after the
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Effective Date of Merger Coffee People Worldwide's Common Stock will continue to
be traded on The Nasdaq Stock Market under the symbol "MOKA."
3.2 Acquisition Rights. Upon the Effective Date of Merger, Coffee People
Worldwide will assume and continue all existing stock option plans of Coffee
People. Upon the Effective Date of Merger, all outstanding and unexercised
options, warrants, convertible debentures or other rights to acquire stock of
Coffee People (such options, warrants, debentures and other rights collectively,
"Acquisition Rights") shall become Acquisition Rights to acquire stock of Coffee
People Worldwide, with no changes in the terms or conditions of such Acquisition
Rights.
3.3 Stock Certificates. Upon the Effective Date of Merger, each stock
certificate representing issued and outstanding shares of Coffee People Common
Stock will continue to represent the same number of shares of, and shall be
deemed for all purposes to evidence ownership of, Coffee People Worldwide Common
Stock. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF COFFEE PEOPLE WORLDWIDE. However,
shareholders may exchange their certificates if they so choose. The registered
owners on the books and records of Coffee People of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to Coffee People Worldwide,
have and will be entitled to exercise any voting and other rights with respect
to, and to receive any dividend and other distributions upon, the shares of
Coffee People Worldwide evidenced by such outstanding certificates as above
provided.
ARTICLE IV
Name of Surviving Corporation. Upon the Effective Date of Merger, the name
of Coffee People Worldwide shall be changed from "Coffee People Worldwide, Inc."
to "Coffee People Worldwide."
ARTICLE V
Succession. At and after the Effective Date of Merger, Coffee People
Worldwide shall have all the rights, privileges, immunities, properties, powers,
franchise and authority, and shall be subject to all of the duties, liabilities
and other obligations of Coffee People.
ARTICLE VI
6.1 Abandonment. The Merger Agreement may be terminated and the Merger
abandoned for any reason whatsoever, by mutual consent of the Boards of
Directors of Coffee People Worldwide and Coffee People, at any time prior to the
Effective Date of Merger, notwithstanding adoption of the Merger Agreement by
the stockholder of Coffee People Worldwide and the shareholders of Coffee
People.
6.2 Amendment. The Merger Agreement constitutes the entire understanding
of the parties with respect to the subject matter hereof. The Merger Agreement
may be amended at any time prior to the Effective Date of Merger by mutual
consent of the Boards of Directors of Coffee People Worldwide and Coffee People;
provided, however, that no such amendment shall adversely affect the rights of
the shareholders of Coffee People subsequent to the adoption and approval of the
Merger Agreement by the shareholders of Coffee People or violate applicable law.
6.3 Counterparts. The Merger Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same instrument.
B. Approval of the shareholders of Coffee People and Coffee People
Worldwide was required to consummate the merger.
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(1) The following designated shares of Coffee People were outstanding and
entitled to vote on the plan of merger:
NO. OF NO. OF
OUTSTANDING VOTES ENTITLED
DESIGNATION SHARES TO BE CAST
----------- ----------- --------------
Common Stock, no par...............................
(2) The following designated shares of Coffee People Worldwide were
outstanding and entitled to vote on the plan of merger:
NO. OF NO. OF
OUTSTANDING VOTES ENTITLED
DESIGNATION SHARES TO BE CAST
----------- ----------- --------------
Common Stock, no par...............................
(3) The total number of votes cast for and against the plan by each voting
group entitled to vote separately on the plan for Coffee People were as follows:
DESIGNATION VOTES FOR PLAN VOTES AGAINST PLAN
----------- -------------- ------------------
Common Stock, no par..........................
(4) The total number of votes cast for and against the plan by each voting
group entitled to vote separately on the plan for Coffee People Worldwide were
as follows:
DESIGNATION VOTES FOR PLAN VOTES AGAINST PLAN
----------- -------------- ------------------
Common Stock, no par..........................
IN WITNESS WHEREOF, these Articles of Merger are signed and dated as of
this day of , 1998.
COFFEE PEOPLE WORLDWIDE
a Delaware corporation
By:
------------------------------------
Name:
Title:
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ANNEX B
CERTIFICATE OF INCORPORATION
OF
COFFEE PEOPLE WORLDWIDE
------------------------
FIRST. The name of this corporation shall be:
COFFEE PEOPLE WORLDWIDE, INC.
SECOND. Its registered office in the State of Delaware is 1013 Centre Road
in the City of Wilmington, County of New Castle. The name of its registered
agent at such address is Corporation Service Company.
THIRD. The purpose or purposes of this corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. SECTION 1. Authorized Capital Stock: The total number of shares
which this corporation is authorized to issue is Sixty Million (60,000,000),
consisting of Fifty Million (50,000,000) shares of Common Stock without par
value and Ten Million (10,000,000) shares of Preferred Stock without par value.
SECTION 2. Preferred Stock: The shares of Preferred Stock may be issued
from time to time in one or more series. The Board of Directors of this
corporation is expressly authorized to provide for the issue of all or any of
the shares of the Preferred Stock in one or more series, and to fix the number
of shares and to determine or alter for each such series, such voting powers,
full or limited, or no voting powers, and such designations, preferences, and
relative, participating, optional, or other rights and such qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such shares and as may be permitted by the General Corporation Law of
Delaware.
FIFTH. The name and address of the incorporator is as follows:
Mark J. Archer
11480 Commercial Parkway
Castroville, CA 95012
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the bylaws.
SEVENTH. No director shall be personally liable to this corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to this corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct of a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of this corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment.
IN WITNESS WHEREOF, The undersigned hereby acknowledges under penalty of
perjury that this certificate of incorporation is my act and deed and that the
facts stated herein are true. Dated this day of , A.D.,
1998.
--------------------------------------
Incorporator
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ANNEX C
DISSENTERS' RIGHTS STATUTE
OREGON BUSINESS CORPORATION ACT SS.SS.60.551-60.594
1997 OREGON REVISED STATUTES
TITLE 7. CORPORATIONS AND PARTNERSHIPS
CHAPTER 60. PRIVATE CORPORATIONS
DISSENTERS' RIGHTS
(RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES)
COPYRIGHT (C)1997 BY STATE OF OREGON LEGISLATIVE COUNSEL COMMITTEE
CURRENT THROUGH END OF 1997 REG. SESS.
60.551. DEFINITIONS FOR 60.551 TO 60.594.
As used in ORS 60.551 to 60.594:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ORS 60.554 and who exercises that right when and in the
manner required by ORS 60.561 to 60.587.
(4) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
60.554. RIGHT TO DISSENT.
(1) Subject to subsection (2) of this section, a shareholder is entitled to
dissent from, and obtain payment of the fair value of the shareholder's shares
in the event of, any of the following corporate acts:
(a) Consummation of a plan of merger to which the corporation is a
party if shareholder approval is required for the merger by ORS 60.487 or
the articles of incorporation and the shareholder is entitled to vote on
the merger or if the corporation is a subsidiary that is merged with its
parent under ORS 60.491;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all or substantially all of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
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(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities; or
(B) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under ORS 60.141; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under ORS 60.551 to 60.594 may not challenge the corporate
action creating the shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(3) Dissenters' rights shall not apply to the holders of shares of any
class or series if the shares of the class or series were registered on a
national securities exchange or quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System as a National Market System issue on
the record date for the meeting of shareholders at which the corporate action
described in subsection (1) of this section is to be approved or on the date a
copy or summary of the plan of merger is mailed to shareholders under ORS
60.491, unless the articles of incorporation otherwise provide.
60.557. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the shareholder's name only if the shareholder dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares regarding which the
shareholder dissents and the shareholder's other shares were registered in the
names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
60.561. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under ORS
60.554 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under ORS 60.551 to 60.594 and be accompanied by a copy of ORS 60.551 to 60.594.
(2) If corporate action creating dissenters' rights under ORS 60.554 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send the shareholders entitled to assert dissenters' rights the dissenters'
notice described in ORS 60.567.
60.564. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under ORS
60.554 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights shall deliver to the corporation before the
vote is taken written notice of the shareholder's intent to demand payment for
the shareholder's shares if the proposed action is effectuated and shall not
vote such shares in favor of the proposed action.
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(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
60.567. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under ORS
60.554 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
ORS 60.564.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action was taken, and shall:
(a) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement of the terms of the proposed corporate action to news
media or to shareholders and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of
the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand. This date may not be fewer than 30 nor more than 60 days after the
date the subsection (1) of this section notice is delivered; and
(e) Be accompanied by a copy of ORS 60.551 to 60.594.
60.571. DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in ORS 60.567 must
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters' notice
pursuant to ORS 60.567 (2)(c), and deposit the shareholder's certificates in
accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
shares under subsection (1) of this section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
60.574. SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under ORS 60.581.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
60.577. PAYMENT.
(1) Except as provided in ORS 60.584, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with ORS 60.571, the amount the corporation
estimates to be the fair value of the shareholder's shares, plus accrued
interest.
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(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year and the latest available interim financial
statements, if any;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under ORS
60.587; and
(e) A copy of ORS 60.551 to 60.594.
60.581. FAILURE TO TAKE ACTION.
(1) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under ORS 60.567 and repeat the payment demand procedure.
60.584. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by ORS 60.577 from
a dissenter unless the dissenter was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
such demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under ORS
60.587.
60.587. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under ORS
60.577 or reject the corporation's offer under ORS 60.584 and demand payment of
the dissenter's estimate of the fair value of the dissenter's shares and
interest due, if:
(a) The dissenter believes that the amount paid under ORS 60.577 or
offered under ORS 60.584 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under ORS 60.577 within 60
days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within 30 days after the
corporation made or offered payment for the dissenter's shares.
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60.591. COURT ACTION.
(1) If a demand for payment under ORS 60.587 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand under ORS 60.587 and petition the court under subsection (2) of
this section to determine the fair value of the shares and accrued interest. If
the corporation does not commence the proceeding within the 60-day period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office is located, or if the
principal office is not in this state, where the corporation's registered office
is located. If the corporation is a foreign corporation without a registered
office in this state, it shall commence the proceeding in the county in this
state where the registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the circuit court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the powers
described in the court order appointing them, or in any amendment to the order.
The dissenters are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment
for:
(a) The amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the
corporation; or
(b) The fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under ORS 60.584.
60.594. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under ORS 60.591 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under ORS 60.587.
(2) The court may also assess the fees and expenses of counsel and experts
of the respective parties in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of ORS 60.561 to 60.587; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to counsel reasonable fees to be paid out of the amount awarded the
dissenters who were benefited.
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ANNEX D
FIRST AMENDMENT TO
THE COFFEE PEOPLE, INC.
1998 STOCK INCENTIVE PLAN
WHEREAS, the Company has previously adopted the "Coffee People, Inc. 1998
Stock Incentive Plan" (the "Plan") and the adoption of the Plan has been duly
approved by the Company's shareholders; and
WHEREAS, the Board wishes to amend the Plan so as to increase the number of
authorized shares under the Plan and to provide for a limited delegation of the
authority to grant stock options or stock awards under the Plan;
NOW, THEREFORE, the Plan is hereby amended, effective as of the date of the
approval of the amendment by the Company's shareholders, as follows:
1. By DELETING Section 2 of the Plan and SUBSTITUTING therefore the
following:
2. Shares Subject to the Plan. Subject to adjustment as provided
below and in paragraph 9, up to 914,414 shares of Common Stock of the
Company (the "Shares") may be offered and issued under the Plan. In
addition, an increased number of Shares may be offered and issued under
the Plan equal to the number of Shares granted under the Company's 1993
Stock Option Plan, 1994 Stock Option Plan, 1995 Stock Option Plan and
1996 Stock Option Plan (collectively the "Previous Stock Option Plans")
to the extent that such Shares are subject to any option granted under
the Previous Stock Option Plans that has expired, terminated, been
canceled or been forfeited, in whole or in part. The maximum number of
Shares that may be so added to the number of Shares otherwise authorized
pursuant to this Section is 50,183 Shares so that the maximum total
number of Shares that may be offered and issued under the Plan is
964,597 Shares. If an option granted under the Plan expires, terminates,
is forfeited or is canceled, the unissued Shares subject to such option
shall again be available under the Plan. If Shares sold or granted as an
award under the Plan are forfeited to the Company or repurchased by the
Company, the number of Shares forfeited or repurchased shall again be
available under the Plan.
2. By ADDING a Section 4.3 to the Plan to read as follows:
4.3 Delegation of Authority to the Chief Executive
Officer. Notwithstanding any other provision of the Plan to the
contrary, the Board and/or the Committee may delegate to the Chief
Executive Officer of the Company the ability to grant options or awards
under the Plan to any eligible employee provided, however, that the
Chief Executive Officer shall not have the authority to grant an option
or award with respect to more than 7,500 Shares to any eligible employee
in any calendar year.
IN WITNESS WHEREOF, this Amendment has been adopted this day of
, 1998 subject to approval by the Company's shareholders.
COFFEE PEOPLE, INC.
By
--------------------------------------
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ANNEX D-1
COFFEE PEOPLE, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this 1998 Stock Incentive Plan (the "Plan") is
to enable Coffee People, Inc. (the "Company") to attract and retain the services
of selected employees, consultants, officers and directors of the Company or of
any parent or subsidiary corporation of the Company by offering a performance
incentive for continued and improved service with the Company, or any parent or
subsidiary thereof.
2. Shares Subject to the Plan. Subject to adjustment as provided below and
in paragraph 9, up to 400,000 shares of Common Stock of the Company (the
"Shares") may be offered and issued under the Plan. If an option granted under
the Plan expires, terminates or is canceled, the unissued Shares subject to such
option shall again be available under the Plan. If Shares sold or granted as an
award under the Plan are forfeited to the Company or repurchased by the Company,
the number of Shares forfeited or repurchased shall again be available under the
Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall become effective when adopted by the
Board of Directors of the Company (the "Board"). However, no option granted
under the Plan shall become exercisable until the Plan is approved by the
affirmative vote of the holders of a majority of the Common Stock of the Company
represented at a shareholder meeting at which a quorum is present, and any such
awards under the Plan prior to such approval shall be conditioned on and subject
to such approval. Subject to this limitation, options may be granted and Shares
may be awarded as bonuses or sold under the Plan at any time after the effective
date and before termination of the Plan.
3.2 Duration. No options or stock awards may be granted under the Plan,
and no Shares may be sold pursuant to paragraph 8 of the Plan, on or after the
10th anniversary of the effective date of the Plan. However, the Plan shall
continue in effect until all Shares available for issuance under the Plan have
been issued and all restrictions on such Shares have lapsed. The Board of
Directors may suspend or terminate the Plan at any time, except with respect to
options and Shares subject to restrictions then outstanding under the Plan.
Termination shall not affect any outstanding options, any right of the Company
to repurchase Shares or the forfeitability of Shares issued under the Plan.
4. Administration.
4.1 Board. The Plan shall be administered by the Board, which shall
determine and designate from time to time the individuals to whom awards shall
be made, the amount of the awards and the other terms and conditions of the
awards. Subject to the provisions of the Plan, the Board may from time to time
adopt and amend rules and regulations relating to administration of the Plan,
advance the lapse of any waiting period, accelerate any exercise date, waive or
modify any restriction applicable to Shares (except those restrictions imposed
by law) and make all other determinations in the judgment of the Board necessary
or desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
shall be final and conclusive. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any related agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
4.2 Committee. The Board, if it so determines, may delegate to a committee
of the Board consisting of one or more members (the "Committee") any or all
authority for administration of the Plan; provided, however, that only the Board
may amend or terminate the Plan as provided in paragraphs 3 and 12. If a
Committee is appointed, all references to the Board in the Plan shall mean and
relate to such Committee, except as limited by the immediately preceding
sentence and unless the context requires otherwise.
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40
5. Types of Awards; Eligibility. The Board may, from time to time, take the
following actions under the Plan: (i) grant Incentive Stock Options, as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
provided in paragraph 6.2; (ii) grant options other than Incentive Stock Options
("Nonstatutory Stock Options") as provided in paragraph 6.3; (iii) grant stock
awards as provided in paragraph 7; and (iv) sell shares as provided in paragraph
8. Any such options or awards may be made to employees (including employees who
are officers or directors) of the Company or of any parent or subsidiary
corporation of the Company, and to other individuals described in paragraph 1
who the Board believes have made or will make an important contribution to the
Company or its parent or subsidiaries; provided however, that only employees of
the Company or a parent or subsidiary shall be eligible to receive Incentive
Stock Options under the Plan. The Board shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to each
individual to whom an award is made under the Plan. At the discretion of the
Board, an individual may be given an election to surrender an award in exchange
for the grant of a new award.
6. Option Grants
6.1 Grant. Each option granted under the Plan shall be evidenced by a
stock option or stock award agreement in such form as the Board shall prescribe
from time to time in accordance with the Plan. With respect to each option
grant, the Board shall determine the number of Shares subject to the option, the
option price, the term of the option and the time or times at which the option
may be exercised and whether the option is an Incentive Stock Option or a
Nonstatutory Stock Option.
6.2 Incentive Stock Options. Incentive Stock Options granted under the
Plan shall be subject to the following terms and conditions:
(i) No employee may be granted Incentive Stock Options under the Plan
such that the aggregate fair market value (as determined under
paragraph (iv) below), on the date of grant, of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by that
employee during any calendar year under the Plan and under any other
incentive stock option plan (within the meaning of Section 422 of the Code)
of the Company or of any parent or subsidiary corporation of the Company
exceeds $100,000.
(ii) An Incentive Stock Option may be granted under the Plan to an
employee possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any parent or subsidiary corporation
of the Company only if the option price is at least 110% of the fair market
value, as determined pursuant to paragraph 6.2(iv), of the Shares subject
to the option on the date it is granted, and the option by its terms is not
exercisable more than five years from the date of grant.
(iii) Subject to paragraphs 6.2(ii) and 6.4, Incentive Stock Options
granted under the Plan shall continue in effect for the period fixed by the
Board, except that no Incentive Stock Option shall be exercisable more than
10 years from the date of grant.
(iv) The option price per Share for Incentive Stock Options shall be
determined by the Board at the time of grant. Subject to paragraph 6.2(ii),
the option price shall not be less than 100% of the per share fair market
value of the Shares subject to the Incentive Stock Option on the date the
option is granted.
(v) Fair market value of the Shares subject to the Incentive Stock
Option shall be that amount determined by the Board on the day on which the
Incentive Stock Option is granted. In determining fair market value, the
Board may refer to all information which it determines to be relevant. At
any time the Company's Shares are listed on a securities exchange, traded
in the over-the-counter market or quoted as to price on an automated
securities quotation system, per share fair market value shall mean the
weighted average trading price per share of the Shares for the five trading
days during which the Shares were traded immediately preceding the date on
which the option is granted.
(vi) The Board may at any time without the consent of the optionee
convert an Incentive Stock Option into a Nonstatutory Stock Option.
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41
6.3 Nonstatutory Stock Options. Nonstatutory Stock Options shall be
subject to the following additional terms and conditions:
(i) The option price for Nonstatutory Stock Options shall be
determined by the Board at the time of grant. The option price may not be
less than 85% of the fair market value of the Shares subject to the
Nonstatutory Stock Option on the date of grant, except that, with respect
to options granted to a person possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
parent, or subsidiary corporation of the Company, the option price may not
be less than 110% of the fair market value of the Shares subject to the
option on the date of grant. The fair market value of such Shares shall be
determined pursuant to paragraph 6.2(v).
(ii) Nonstatutory Stock Options granted under the Plan shall continue
in effect for the period fixed by the Board, except that no Nonstatutory
Option shall be exercisable more than 10 years from the date of grant.
6.4 Exercise of Options. Except as provided in paragraph 6.6 or as
determined by the Board no option granted under the Plan may be exercised unless
at the time of such exercise the optionee is employed by the Company, or any
parent or subsidiary corporation of the Company, and shall have been so employed
continuously since the date such option was granted. Absence on leave or on
account of illness or disability under rules established by the Board shall not,
however, be deemed an interruption of employment for purposes of the Plan. For
purposes of this paragraph 6.4 (and for no other purpose) service to the Company
as a consultant or director shall be considered "employment." Unless otherwise
determined by the Board, vesting of options shall not continue during an absence
on leave (including an extended illness) or on account of disability. No option
may be exercised by an officer or director of the Company within six months of
the date of grant. Except as provided in paragraphs 6.6, 9 and 10, options
granted under the Plan may be exercised from time to time over the period stated
in each option in such amounts and at such times as shall be prescribed by the
Board, provided, that options shall not be exercised for fractional shares.
Unless otherwise determined by the Board, if the optionee does not exercise an
option in any one year with respect to the full number of Shares to which the
optionee is entitled in that year, the optionee's rights shall be cumulative,
and the optionee may purchase those Shares in any subsequent year during the
term of the option.
6.5 Nontransferability. Each option granted under the Plan by its terms
shall be nonassignable and nontransferable by the optionee, either voluntarily
or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death, and each option by its terms shall be exercisable during the optionee's
lifetime only by the optionee.
6.6 Termination of Employment.
(i) In the event the employment of the optionee by the Company or a
parent or subsidiary corporation of the Company terminates for any reason
other than because of death or physical disability, the option may be
exercised at any time prior to the expiration date of the option or the
expiration of three months after the date of such termination, whichever is
the shorter period, but only if and to the extent the optionee was entitled
to exercise the option at the date of such termination.
(ii) In the event of the termination of the optionee's employment with
the Company, or a parent or subsidiary corporation of the Company, because
the optionee becomes disabled (within the meaning of Section 22(e)(3) of
the Code), the option may be exercised at any time prior to the expiration
date of the option or the expiration of one year after the date of such
termination, whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option at the date of such
termination.
(iii) In the event of the death of an optionee while employed by to
the Company or a parent or subsidiary corporation of the Company, the
option may be exercised at any time prior to the expiration date of the
option or the expiration of one year after the date of such death,
whichever is the shorter period, but only if and to the extent the optionee
was entitled to exercise the option on the date of death, and only by the
person or persons to whom such optionee's rights under the option shall
pass by the
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42
optionee's will or by the laws of descent and distribution of the state or
country of domicile at the time of death.
(iv) The Board, at the time of grant or at any time thereafter, may
extend the three-month and one-year expiration periods any length of time
not later than the original expiration date of the option, and may increase
the portion of an option that is exercisable, subject to such terms and
conditions as the Board may determine.
(v) To the extent that the option of any deceased optionee or of any
optionee whose employment terminates is not exercised within the applicable
period, all further rights to purchase Shares pursuant to such option shall
cease and terminate.
6.7 Purchase of Shares. Unless the Board determines otherwise, Shares may
be acquired pursuant to an option only upon receipt by the Company of notice in
writing from the optionee of the optionee's intention to exercise, specifying
the number of Shares as to which the optionee desires to exercise the option and
the date on which the optionee desires to complete the transaction. The notice
shall also include such information as is required to comply with the Securities
Act of 1933, as, amended, or state securities laws, including, if required, a
representation that it is the optionee's present intention to acquire the Shares
for investment and not with a view to distribution. Unless the Board determines
otherwise, on or before the date specified for completion of the purchase of
Shares pursuant to an option, the optionee must have paid the Company the full
purchase price of such Shares in cash (including, with the consent of the Board,
cash that may be the proceeds of a loan from the Company), or, with the consent
of the Board, in whole or in part, in Shares valued at fair market value, as
determined pursuant to paragraph 6.2(iv). No Shares shall be issued until full
payment therefor has been made. With the consent of the Board, an optionee may
request the Company to apply automatically the Shares to be received upon the
exercise of a portion of a stock option (even though stock certificates have not
yet been issued) to satisfy the purchase price for additional portions of the
option. Each optionee who has exercised an option shall immediately, upon
notification of the amount due, if any, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements. If additional withholding is or becomes required beyond any amount
deposited before delivery of the certificates, the optionee shall pay such
amount to the Company on demand. If the optionee fails to pay the amount
demanded, the Company or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts payable to the optionee by the Company
or the parent or subsidiary corporation, including salary, subject to applicable
law. With the consent of the Board, an optionee may deliver Shares to the
Company to satisfy the withholding obligation. The number of shares to be
delivered to satisfy such withholding obligation shall be calculated on the
basis of the fair market value of the Shares (determined in accordance with
paragraph 6.2(v)) on the date the Shares are tendered.
7. Stock Awards. The Board may award Shares under the Plan as stock awards.
Shares granted as a stock award shall be subject to such terms, conditions and
restrictions as shall be determined by the Board, all of which shall be
evidenced in a writing signed by the recipient prior to receiving the Shares.
The Board may elect not to require the recipient to pay any monetary
consideration other than amounts necessary to satisfy tax withholding
requirements. The certificates representing the Shares awarded shall bear any
legends required by the Board. The Company may require any recipient of a stock
award to pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
recipient fails to pay the amount demanded, the Company or any parent or
subsidiary corporation of the Company may withhold that amount from other
amounts payable to the recipient by the Company or the parent or subsidiary
corporation, including salary, subject to applicable law. With the consent of
the Board, a recipient may deliver Shares to the Company to satisfy the
withholding obligation. The number of shares to be delivered to satisfy such
withholding obligation shall be calculated on the basis of the fair market value
of the Shares (determined in accordance with paragraph 6.2(v)) on the date the
Shares are tendered.
8. Sale of Stock. The Board may issue Shares under the Plan for such
consideration (including promissory notes and services) as determined by the
Board, provided, that in no event shall the consideration be less than 85% of
the fair market value of the Shares at the time of issuance, determined pursuant
to paragraph 6.2(v). The consideration to be paid for shares sold under this
paragraph 8 to persons possessing
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43
more than 10% of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary corporation of the Company shall be no
less than 110% of the fair market value of the Shares at the time of issuance.
Shares issued under this paragraph 8 shall be subject to the terms, conditions
and restrictions determined by the Board. The certificates representing the
Shares shall bear any legends required by the Board. The Company may require any
purchaser of restricted stock to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company or
any parent or subsidiary corporation of the Company, may withhold that amount
from other amounts payable to the purchaser by the Company or any parent or
subsidiary corporation, including salary, subject to applicable law. With the
consent of the Board, a purchaser may deliver Shares to the Company to satisfy
the withholding obligation.
9. Changes in Capital Structure. If the outstanding Shares of the Company
are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any recapitalization, reclassification, stock
split (including a reverse stock split), combination of shares or dividend
payable in shares, the Board shall make appropriate adjustments (i) in the
number and kind of shares available for awards under the Plan; and (ii) in the
number, kind and price of shares as to which outstanding options, or portions
thereof then unexercised, shall be exercisable, so that the optionee's
proportionate interest before and after the occurrence of, the event is
maintained, provided, that this paragraph 9 shall not apply with respect to
transactions referred to in paragraph 10. The Board may also require that any
securities issued in respect of or exchanged for Shares issued hereunder that
are subject to restrictions be subject to similar restrictions. Notwithstanding
the foregoing, the Board shall have no obligation to effect any adjustment that
would or might result in the issuance of fractional shares, and any fractional
shares resulting from any adjustment may be disregarded or provided for in any
manner determined by the Board. Any such adjustment made by the Board shall be
conclusive. In the event of the dissolution of the Company or a merger,
consolidation or plan of exchange affecting the Company to which paragraph 10
does not apply, in lieu of providing for options as provided above in this
paragraph 9, the Board may, in its sole discretion, provide a 30-day period
prior to such event during which optionees shall have the right to exercise
options, in whole or in part, without any limitation on exercisability and, upon
the expiration of such 30-day period, all unexercised options shall immediately
terminate.
10. Special Acceleration in Certain Events.
10.1 Special Acceleration. Notwithstanding any other provisions of the
Plan, a special acceleration ("Special Acceleration") of options outstanding
under the Plan shall occur with the effect set forth in paragraph 10.2 at any
time when the shareholders of the Company approve one of the following
("Approved Transactions"):
(i) Any consolidation, merger, plan of exchange or transaction
involving the Company (a "Merger") in which the Company is not the
continuing or surviving corporation, or pursuant to which Shares of the
Company would be converted into cash, securities or other property, other
than a Merger involving the Company in which the holders of Shares of the
Company immediately prior to the Merger have the same proportionate
ownership of Shares of the surviving corporation after the Merger; or
(ii) Any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all the assets
of the Company or the adoption of any plan or proposal for the liquidation
or dissolution of the Company.
10.2 Effect on Outstanding Options. Except as provided below in this
paragraph 10.2, upon a Special Acceleration pursuant to paragraph 10.1, all
options then outstanding under the Plan shall immediately become exercisable in
full during the remainder of their terms; provided, that the Board may, in its
sole discretion, provide a 30-day period prior to an Approved Transaction during
which optionees shall have the right to exercise options, in whole or in part,
without any limitation on exercisability, and upon the expiration of such 30-day
period, all unexercised options shall immediately terminate.
11. Corporate Mergers, Acquisitions, etc. The Board may also grant options,
award stock bonuses and sell stock under the Plan having terms, conditions and
provisions that vary from those specified in this Plan;
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44
provided, that any such awards are granted in substitution for, or in connection
with the assumption of, existing options, stock bonuses and stock sold or
awarded by another corporation and assumed or otherwise agreed to be provided
for by the Company pursuant to or by reason of a transaction involving a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a parent or subsidiary
corporation of the Company is a party.
12. Amendment of Plan. The Board may, at any time, and from time to time,
modify or amend the Plan in such respects as it shall deem advisable because of
changes in the law while the Plan is in effect or for any other reason. Except
as provided in paragraphs 6.2(vi), 9 and 10, however, no change in an award
already granted shall be made without the written consent of the holder of such
award.
13. Approvals. The obligations of the Company under the Plan are subject to
the approval of state and federal authorities or agencies with jurisdiction in
the matter. The Company shall not be obligated to issue or deliver Shares under
the Plan if such issuance or delivery would violate applicable state or federal
securities laws, or if compliance with such laws would, in the opinion of the
Company, be unduly burdensome or require the disclosure of information which
would not be in the Company's best interests.
14. Employment Rights. Nothing in the Plan or any award pursuant to the
Plan shall (i) confer upon any employee any right to be continued in the
employment of the Company or any parent or subsidiary corporation of the Company
or shall interfere in any way with the right of the Company or any parent or
subsidiary corporation of the Company by whom such employee is employed to
terminate such employee's employment at any time, for any reason, with or
without cause, or to increase or decrease such employee's compensation or
benefits; or (ii) confer upon any person engaged by the Company, or any parent
or subsidiary corporation of the Company, any right to be retained or employed
by the Company or the parent or subsidiary or to the continuation, extension,
renewal or modification of any compensation, contract or arrangement with or by
the Company or the parent or subsidiary.
15. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Shares until the date
of issue to the recipient of a stock certificate for such Shares. 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.
16. Information Provided to Shareholders. At least annually, the Company
shall provide to shareholders financial statements and management's discussion
and analysis of the Company's financial condition and results of operations.
The foregoing 1998 Stock Incentive Plan was approved by the Board of
Directors of the Company on April 24, 1998 and was approved by the shareholders
on May 19, 1998.
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45
PROXY
COFFEE PEOPLE, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 24, 1998
The undersigned hereby appoints Robert R. Rodriguez and Thomas M.
Twitchel, and each of them, the proxies and attorneys-in-fact of the
undersigned, with full power of substitution in each, for and in the name of the
undersigned to attend the Annual Meeting of Shareholders of Coffee People, Inc.
to be held November 24, 1998 at 1:30 p.m. local time at The Pines Room, Embassy
Suites Hotel, 7900 N.E. 82nd Avenue, Portland, Oregon, and any and all
adjournments thereof, and to vote thereat the number of shares of Common Stock
which the undersigned would be entitled to vote if then personally present as
follows:
(Continued and to be signed on the reverse side)
Please mark your votes as [X]
indicated in this example.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES NAMED IN ITEM 1, IN FAVOR OF THE MATTERS
DESCRIBED IN ITEMS 2 AND 3, AND, AS SAID PROXIES DEEM ADVISABLE, ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD authority to
listed below (except as indicated) vote for all nominees listed below
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name.)
Michael Bregman, Alton W. McEwen, Douglas L. Ayer, Robert M. Haft, Gary
G. Talboy and Kathy A. Welsh
2. TO APPROVE A CHANGE IN THE STATE OF INCORPORATION FROM OREGON TO DELAWARE.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. TO APPROVE THE AMENDMENT OF THE 1998 STOCK INCENTIVE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
_________________________________ Dated: __________________, 1998
Signature(s)
(Please sign exactly as your name appears hereon indicating your
official title when signing in a representative capacity.)
46
COFFEE PEOPLE, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
THE PINES ROOM
EMBASSY SUITES HOTEL
7900 N.E. 82ND AVENUE
PORTLAND, OREGON
NOVEMBER 24, 1998 1:30 P.M.
ADMITTANCE TICKET
This ticket entitles you and one guest to attend the Annual Meeting.
CAMERAS AND RECORDING DEVICES WILL NOT BE ALLOWED AT THE MEETING.
Dear Shareholder:
The 1998 Annual Meeting of Shareholders of Coffee People, Inc. (the "Company")
will be held at The Pines Room, Embassy Suites Hotel, 7900 N.E. 82nd Avenue,
Portland, Oregon, on November 24, 1998 at 1:30 p.m., Local Time. At the meeting,
shareholders will act to elect six (6) directors, approve the change of the
Company's state of incorporation from Oregon to Delaware, approve an amendment
to the Company's Stock Option Plan and ratify the appointment of the Company's
independent public accountants.
Your vote is important. Whether or not you plan to attend the meeting, please
review the enclosed proxy statement, complete the proxy form and return it
promptly in the envelope provided.
If you plan to attend the annual meeting in person, please note that attendance
at the meeting will be limited to you and one guest.
Sincerely,
Mark J. Archer
Executive Vice President, Chief Financial Officer
and Secretary