UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the
Registrant
x
Filed by a
Party other than the Registrant
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Check the
appropriate box:
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x
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Peets Coffee & Tea, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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x
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
Common Stock, no par value per share, of Peets Coffee & Tea, Inc.
(Common Stock).
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(2)
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Aggregate number of securities to which transaction applies:
As of July 31, 2012, 13,165,869 shares of Common Stock issued and outstanding;
1,036,042 shares of Common Stock issuable pursuant to the exercise of outstanding options with exercise prices below $73.50; and 68,184 shares of Common Stock deliverable in connection with outstanding share units issued pursuant to the
Companys Amended and Restated 2010 Equity Incentive Plan.
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(3)
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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):
The filing fee
was determined based upon the sum of (A) 13,165,869 shares of Common Stock outstanding multiplied by $73.50 per share (B) 1,036,042 shares of Common Stock issuable pursuant to the exercise of outstanding options with exercise prices below
$73.50 multiplied by $35.74 per share (which is the difference between $73.50 and the weighted average exercise price per share for such options) and (C) and 68,184 shares of Common Stock deliverable in connection with outstanding share units
multiplied by $73.50 per share. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying $0.00011460 by the sum of the preceding sentence.
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(4)
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Proposed maximum aggregate value of transaction:
$1,009,731,036.58
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(5)
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Total fee paid:
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$115,715.18
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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PEETS COFFEE & TEA, INC.
1400 Park Avenue
Emeryville, California 94608
(510) 594-2100
D
EAR
S
HAREHOLDER
:
We cordially invite you to attend a special meeting of shareholders of Peets Coffee & Tea, Inc. (Peets or the Company) to be held at
[ ], at [ ] a.m., local time, on
[ ], 2012 (the Special Meeting). Holders of record of the Companys common stock, no par value per share, at the
close of business on [ ], 2012 (the record date), will be entitled to vote at the Special Meeting or any adjournment
or postponement of the Special Meeting.
At the Special Meeting, we will ask you to adopt and approve the Agreement and Plan
of Merger, dated as of July 21, 2012, among JAB Holdings BV, Panther Merger Co. and Peets (the Merger Agreement), under which Panther Merger Co. will merge with and into Peets, which will survive the merger and become an
affiliate of JAB Holdings BV (the Merger). JAB Holdings BV is a Dutch
Besloten Vennootschap met beperkte aansprakelijkheid
. Panther Merger Co. is a Washington corporation and an affiliate of JAB Holdings BV.
We are also asking you to (a) approve, on an advisory basis, the merger-related compensation for the Companys named executive
officers and (b) grant us the authority to vote your shares to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Special Meeting to approve the adoption and
approval of the Merger Agreement.
Upon the consummation of the Merger, you will be entitled to receive $73.50 in cash,
without interest and less any applicable withholding taxes, for each share of the Companys common stock that you own, and you will have no ongoing ownership interest in the continuing business of Peets. We cannot consummate the Merger
unless all of the conditions to closing are satisfied, including the adoption and approval of the Merger Agreement by the affirmative vote of the holders of a majority of all outstanding shares of our common stock as of the record date.
Our board of directors reviewed and considered the terms and conditions of the Merger and unanimously determined that the Merger is fair
to, and in the best interests of, Peets and its shareholders, unanimously approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement in accordance with Washington law, and
unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, to our shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT, FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE MERGER-RELATED
COMPENSATION FOR THE COMPANYS NAMED EXECUTIVE OFFICERS AND FOR THE PROPOSAL TO ADJOURN THE SPECIAL MEETING, IF NECESSARY, FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF ADOPTING AND APPROVING THE MERGER
AGREEMENT.
YOUR VOTE IS IMPORTANT.
In the materials accompanying this letter, you will find a Notice of Special Meeting of Shareholders, a proxy statement relating to the actions to be taken by our shareholders at the Special Meeting and a
proxy card. The proxy statement includes other important information about the Merger Agreement and the Merger. We encourage you to read the entire proxy statement and its annexes, including the Merger Agreement, carefully.
Your vote is very important. Whether or not you plan to attend the Special Meeting, please complete, sign, date and return your proxy
card in the enclosed envelope as promptly as possible or appoint a proxy over the Internet or by telephone as instructed in these materials. It is important that your shares be represented and voted
at the Special Meeting. If you are a shareholder of record, you may vote in person at the Special Meeting as you wish, even if you have previously returned your proxy card or appointed a proxy
over the Internet or by telephone. If your shares are held in the name of your bank, brokerage firm or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Special Meeting.
If your shares of the Companys common stock are held in street name by your bank, brokerage firm or other nominee, your
bank, brokerage firm or other nominee will be unable to vote your shares of common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee as to how to vote your shares of the Companys common stock,
following the procedures provided by your bank, brokerage firm or other nominee.
The failure to instruct your bank, brokerage firm or other nominee to vote your shares of the Companys common stock FOR approval of the proposal to
adopt and approve the Merger Agreement will have the same effect as voting against the proposal to adopt and approve the Merger Agreement.
If you have any questions or need assistance voting your shares of the Companys common stock, please call
[ ], our proxy solicitor, toll-free at
[ ].
On behalf of our board of directors, I thank you for your support and urge you to vote
FOR
the adoption and approval
of the Merger Agreement.
Sincerely,
Jean-Michel Valette
Chairman of the Board
This proxy statement is dated
[ ], 2012, and is first being mailed to our shareholders on
[ ], 2012.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE MERGER OR THE MERGER AGREEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE
MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
PEETS COFFEE & TEA, INC.
1400 Park Avenue
Emeryville, California 94608
(510) 594-2100
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ], 2012
D
EAR
S
HAREHOLDER
:
You are cordially invited to attend the Special Meeting of Shareholders of Peets Coffee & Tea, Inc., a Washington corporation (Peets or the Company), that will
be held at [ ], at [ ] a.m., local time, on
[ ], 2012 (the Special Meeting) for the following purposes:
1.
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to consider and vote upon a proposal to adopt and approve the Agreement and Plan of Merger, dated as of July 21, 2012, among JAB Holdings BV, Panther Merger Co.
and Peets (the Merger Agreement), under which Panther Merger Co. will merge with and into Peets, which will survive the merger and become an affiliate of JAB Holdings BV (the Merger);
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to consider and vote upon a proposal to approve, on an advisory basis, the merger-related compensation for the Companys named executive officers; and
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to consider and vote upon a proposal to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the adoption and
approval of the Merger Agreement.
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JAB Holdings BV is a Dutch
Besloten Vennootschap met beperkte
aansprakelijkheid
. Panther Merger Co. is a Washington corporation and an affiliate of JAB Holdings BV.
Shareholders of
record at the close of business on [ ], 2012 (the record date) are entitled to notice of and to vote at the Special
Meeting and any adjournment or postponement of the Special Meeting.
Our board of directors reviewed and considered the terms
and conditions of the Merger and unanimously determined that the Merger is fair to, and in the best interests of, Peets and its shareholders, unanimously approved and declared advisable the Merger Agreement, the Merger and the other
transactions contemplated by the Merger Agreement in accordance with Washington law, and unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, to our
shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION AND APPROVAL OF THE
MERGER AGREEMENT, FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE MERGER-RELATED COMPENSATION FOR THE COMPANYS NAMED EXECUTIVE OFFICERS AND FOR THE PROPOSAL TO ADJOURN THE SPECIAL MEETING, IF NECESSARY, FOR THE PURPOSE
OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF ADOPTING AND APPROVING THE MERGER AGREEMENT. YOUR VOTE IS IMPORTANT.
The Companys shareholders will have the right to demand appraisal of their shares of the Companys common stock and obtain
payment in cash for the fair value of such shares, but only if they perfect their dissenters rights and comply with the applicable provisions of Washington law. A copy of the Washington statutory provisions relating to dissenters rights
is attached as
Annex C
to the attached proxy statement, and a summary of these provisions can be found under The MergerDissenters Rights in the attached proxy statement.
You should not send any certificates representing shares of the Companys common stock with your proxy card. Upon the closing of the
Merger, you will be sent instructions regarding the procedure to exchange your share certificates for the cash Merger consideration.
Your vote is very important, regardless of the number of shares you own. Even if you plan
to attend the Special Meeting in person, we request that you complete, sign, date and return your proxy card in the enclosed envelope, or appoint a proxy over the Internet or by telephone as instructed in these materials, to ensure that your shares
will be represented at the Special Meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in favor of the adoption of the Merger Agreement, in
favor of the proposal to approve, on an advisory basis, the merger-related compensation of the Companys named executive officers, and in favor of the proposal to adjourn the Special Meeting, if necessary, for the purposes of soliciting
additional proxies to vote in favor of adopting and approving the Merger Agreement.
If you fail to return your proxy card or
if you fail to appoint a proxy over the Internet or by telephone and you do not attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect
as a vote against the adoption and approval of the Merger Agreement. If you do attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person. If your shares are held in the name of your bank, brokerage firm or
other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Special Meeting.
No person has been authorized to give any information or to make any representations other than those set forth in the proxy statement in connection with the solicitation of proxies made hereby, and, if
given or made, such information must not be relied upon as having been authorized by Peets or any other person.
By Order of the Board of Directors,
Isobel A. Jones
Secretary
[ ], 2012
Emeryville, California
I
N
A
DDITION
TO
D
ELIVERING
THE
P
ROXY
M
ATERIALS
FOR
THE
S
PECIAL
M
EETING
TO
B
E
H
ELD
ON
[ ], 2012
TO
S
HAREHOLDERS
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Y
M
AIL
,
THE
P
ROXY
S
TATEMENT
FOR
S
UCH
M
EETING
IS
ALSO
IS
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VAILABLE
AT
HTTP
://
INVESTOR
.
PEETS
.
COM
/
SPECIALMEETING
.
CFM
.
T
ABLE
OF
C
ONTENTS
S
UMMARY
T
ERM
S
HEET
This Summary Term Sheet, together with the Questions and Answers About the Special Meeting and Merger,
highlights selected information in the proxy statement and may not contain all the information that may be important to you. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers you for a
more complete understanding of the matters being considered at the Special Meeting. In addition, you may obtain additional business and financial information about Peets Coffee & Tea, Inc. without charge by following the instructions
in Other MattersWhere You Can Find More Information beginning on page 72. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary. The Agreement and
Plan of Merger, dated as of July 21, 2012, among JAB Holdings BV, Panther Merger Co. and Peets Coffee & Tea, Inc. (the Merger Agreement), is attached as
Annex A
to this proxy statement. We
encourage you to read the Merger Agreement, as it is the legal document that governs the merger of an affiliate of JAB Holdings BV with Peets, which is referred to in this proxy statement as the Merger. In this proxy statement,
we, us, our, Peets and the Company refer to Peets Coffee & Tea, Inc.
T
HE
M
ERGER
AND
THE
M
ERGER
A
GREEMENT
.
The Parties to the Merger (see page 14).
Peets Coffee & Tea, Inc., a Washington
corporation, is a specialty coffee roaster and marketer of fresh-roasted whole bean coffee and tea. JAB Holdings BV, a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (JAB), is a privately held company focused on making
long-term investments in companies with premium brands in the consumer goods category. Panther Merger Co., a Washington corporation (Merger Sub), is an affiliate of JAB and has not engaged in any material business activities except in
furtherance of the purpose of effecting the Merger.
The Merger (see page 15).
You are
being asked to vote to adopt and approve the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will merge with and into Peets with Peets continuing as the surviving corporation in the Merger. As a result of the Merger,
Peets will become an affiliate of JAB and will cease to be a publicly-traded company. Following consummation of the Merger, you will no longer have any interest in the Companys future earnings or growth, and the registration of the
Companys common stock and our reporting obligations with respect to our common stock under the Securities Exchange Act of 1934, as amended (the Exchange Act) will be terminated upon application to the Securities and Exchange
Commission (the SEC). In addition, following consummation of the Merger, shares of our common stock will no longer be listed on any stock exchange, including the NASDAQ Global Select Market (NASDAQ).
Merger Consideration (see page 49).
Upon the consummation of the Merger, you will be entitled to
receive $73.50 in cash, without interest and less any applicable withholding taxes, for each share of share of common stock, no par value, of the Company (Peets common stock) that you own (other than shares as to which
dissenters rights have been properly exercised).
Treatment of Outstanding Stock Options and Restricted Stock Unit
Awards (see page 35).
We will take all necessary action to accelerate the vesting of each outstanding stock option effective as of the effective time of the Merger. Each stock option outstanding immediately prior to
the effective time of the Merger (whether vested or unvested) will be cancelled and converted into the right to receive, with respect to each share of Peets common stock subject to such stock option, a cash payment equal to the excess, if any,
of $73.50 over the exercise price per share of such stock option, without interest and subject to applicable tax withholding. Each restricted stock unit award outstanding or payable immediately prior to the effective time of the Merger (whether
vested or unvested) will be cancelled and converted into the right to receive, with respect to each share of Peets common stock subject to such award, a cash payment equal to $73.50, without interest and subject to applicable tax withholding.
1
Conditions to the Merger (see page 60).
The consummation
of the Merger by JAB and Merger Sub depends on the satisfaction or waiver of a number of conditions, including, among others, the following:
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the Merger Agreement must have been adopted and approved by the affirmative vote of the holders of a majority of all outstanding shares of our common
stock;
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the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR
Act) must have expired or been earlier terminated;
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no law or injunction shall have been issued or enacted by any court or governmental entity that restrains, enjoins or otherwise prohibits consummation
of the Merger or the other transactions contemplated by the Merger Agreement;
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no governmental entity shall have instituted any action (which remains pending at what would otherwise be the closing date) before any court seeking to
restrain, enjoin or otherwise prohibit consummation of the Merger and the other transactions contemplated by the Merger Agreement;
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our representations and warranties relating to capital structure, absence of any Material Adverse Effect on the Company on or prior to
July 21, 2012 and brokers and finders must be true and correct in all respects (other than in de minimis and immaterial respects in the case of our capital structure or resulting from exercises of existing outstanding equity awards set forth in
the representation regarding capital structure following July 21, 2012) as of July 21, 2012 and as of the closing date of the Merger as though made on and as of such date (except to the extent made as of a specific date);
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our representations and warranties relating to corporate authority to enter into the Merger Agreement, the due execution, delivery and enforceability
of the Merger Agreement, and the board approval of the Merger Agreement and takeover statutes (in each case, disregarding all qualifications and exceptions contained therein regarding materiality or a material adverse effect or any similar standard
or qualification) must be true and correct in all material respects as of July 21, 2012 and as of the closing date of the Merger as though made on and as of such date (except to the extent made as of a specific date);
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our other representations and warranties in the Merger Agreement (disregarding all qualifications and exceptions contained therein regarding
materiality or a material adverse effect or any similar standard or qualification) must be true and correct as of July 21, 2012 and as of the closing date of the Merger as though made on and as of such date (except to the extent made as of a
specific date), except where the failure of any such representation or warranty to be so true and correct would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect;
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we must comply with or perform in all material respects all of our covenants and obligations in the Merger Agreement; and
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since July 21, 2012, there shall not have occurred any change, state of facts, circumstance, event or development (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise) that, individually or in the aggregate, has had, or is reasonably likely to have, a material adverse effect upon Peets financial condition, business or results of
operations.
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JAB and Merger Sub have made representations in the Merger Agreement that they will have
sufficient cash available to pay the aggregate Merger consideration at the effective time of the Merger. JABs and Merger Subs obligations to consummate the Merger are not conditioned upon obtaining financing.
Restrictions on Solicitations (see page 4).
Under the Merger Agreement, we have agreed that, except as
expressly permitted by the Merger Agreement, neither we nor any of our subsidiaries will, nor will we authorize or permit our respective representatives to, directly or indirectly:
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initiate, solicit, knowingly encourage, induce or assist any inquiries, proposals or offers that constitute, or could reasonably be expected to lead
to, an acquisition proposal;
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engage in discussions or negotiations regarding, or provide information relating to the Company or any of its subsidiaries, or provide any access to
the Companys and our subsidiaries properties, books, records or personnel that could reasonably be expected to solicit, induce or assist in the making of any proposals or offers that constitute, or could reasonably be expected to lead
to, an acquisition proposal;
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approve, recommend or enter into, any letter of intent or similar document, agreement or commitment, or agreement in principle with respect to an
acquisition proposal;
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approve any person as an acquiring person or any persons share acquisition as provided in Section 23B.19.040 of the
WBCA; or
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otherwise knowingly facilitate any effort or attempt to make an acquisition proposal.
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Notwithstanding these restrictions, prior to the time that our shareholders adopt and approve the Merger Agreement, if we have not
breached the solicitation restrictions summarized above, we may provide information requested by a person who has made an unsolicited bona fide written acquisition proposal and engage in discussions and negotiations with such person, if and only to
the extent that, prior to taking any action described above, our board of directors has determined in good faith, after consultation with our outside financial advisors and outside legal counsel, that:
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failure to take such action would reasonably be expected to violate the directors fiduciary duties under applicable law; and
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based on the information then available to our board of directors, such acquisition proposal either constitutes a superior proposal or is reasonably
likely to result in a superior proposal.
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Ability to Change Board Recommendation (see
page 56).
In addition, the Merger Agreement provides that (subject to certain exceptions) our board of directors may not take or publicly propose to take any of the following actions:
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fail to include in this proxy statement, or withhold, withdraw, qualify or modify in a manner adverse to JAB our board of directors
recommendation to our shareholders that our shareholders vote to adopt and approve the Merger Agreement;
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publicly approve, recommend or otherwise declare advisable any other acquisition proposal; or
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authorize, approve, recommend, declare advisable or permit the Company to enter into any binding or non-binding agreement or arrangement that requires
the Company to abandon or terminate the Merger Agreement or the Merger, or that relates to any other acquisition proposal.
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However, prior to the time that our shareholders approve and adopt the Merger Agreement, our board of directors may, under specified circumstances, change its recommendation with respect to the Merger
and, with respect to a superior proposal, terminate the Merger Agreement if our board of directors has determined in good faith, after consultation with its outside financial advisors and outside legal counsel, that:
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failure to take such action would reasonably be expected to violate our board of directors fiduciary duties under applicable law; and
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if such action relates to any acquisition proposal, such acquisition proposal constitutes a superior proposal.
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However, our board of directors may change its recommendation or terminate the Merger Agreement in connection with a superior proposal
only if:
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the Company provides JAB with at least three business days notice of its intention to take such action and its basis for doing so, including in
the case of any acquisition proposal the name of the person making the acquisition proposal and the material terms and conditions of any proposals or offers (including copies of any written requests, proposals or offers, including proposed
agreements);
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the Company does not, and does not permit our subsidiaries to, enter into any alternative acquisition agreement during such notice period;
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the Company and its advisors negotiate with JAB in good faith during such notice period; and
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after considering any changes to the Merger Agreement proposed by, and other information provided by, JAB during the notice period, our board of
directors has determined, after consultation with its outside financial advisors and outside legal counsel, that if such changes were to be made that the boards failure to change its recommendation or terminate the Merger Agreement would
reasonably be expected to result in a violation of the directors fiduciary duties under applicable law and that any superior proposal continues to constitute a superior proposal.
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Any change to the financial or other material terms of any superior proposal made to the Company will be deemed a new acquisition
proposal that will require giving of new notice and the commencement of a new three business day notice period, during which the Company must comply with the requirements summarized above.
Termination of the Merger Agreement (see page 61).
The Merger Agreement may be terminated at any time
prior to the effective time of the Merger even if (except as described below) our shareholders have adopted and approved it at the Special Meeting, in the following circumstances:
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by mutual written consent of us and JAB;
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subject to certain limitations, by JAB or us if the Merger has not been consummated by March 31, 2013;
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subject to certain limitations, by JAB or us if at the Special Meeting (including any adjournments and postponements thereof) our shareholders have
failed to adopt and approve the Merger Agreement;
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subject to certain limitations, by JAB or us if any order permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger
becomes final and non-appealable;
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by us if JAB or Merger Sub has breached any of its covenants or obligations under the Merger Agreement, or if any of JABs or Merger Subs
representations or warranties are inaccurate, such that the conditions to closing relating to such covenants, obligations, representations and warranties would not be satisfied, in each case, subject to a right to cure;
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by us if, prior to the receipt of the required vote of our shareholders adopting and approving the Merger Agreement, we receive a superior
proposal and our board of directors authorizes us to enter into an alternative acquisition agreement for the superior proposal, subject to our compliance with certain provisions of the Merger Agreement (including provisions described under
Restrictions on Solicitations
and
Ability to Change Board Recommendation
above and payment of the termination fee);
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by JAB if certain triggering events relating to alternative acquisition proposals and/or a change in the recommendation of our board of directors have
occurred; or
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by JAB if we have breached any of our covenants or obligations under the Merger Agreement, or if any of our representations or warranties are
inaccurate, such that the conditions to closing relating to such covenants, obligations, representations and warranties would not be satisfied, in each case, subject to a right to cure.
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Termination Fee (see page 62).
If the Merger Agreement is terminated under certain circumstances,
generally involving competing acquisition proposals and a change in our board of directors recommendation with respect to the Merger, we may be required to pay to JAB a termination fee of $30,000,000.
T
HE
S
PECIAL
M
EETING
OF
P
EET
S
S
HAREHOLDERS
.
See Questions and Answers About the Special Meeting and Merger beginning on page
7 and The Special Meeting beginning on page 44.
4
O
THER
I
MPORTANT
C
ONSIDERATIONS
.
Board Recommendation.
Our board of directors recommends that Peets shareholders vote
FOR
the adoption and approval of the Merger Agreement,
FOR
the adoption of the resolution to approve, on an advisory basis, the merger-related compensation for our named executive officers, and
FOR
the adjournment of the Special Meeting, if necessary, to solicit additional proxies. See The MergerReasons for the Merger and Recommendation of the Board of Directors beginning on page 20.
Reasons for the Merger.
For a discussion of the material factors considered by our board of directors in
reaching their conclusions and the reasons why our board of directors determined that the Merger is advisable and fair to, and in the best interests of Peets and our shareholders, see The MergerReasons for the Merger and
Recommendation of the Board of Directors beginning on page 20.
Share Ownership of Directors and Executive
Officers.
See Security Ownership of Certain Beneficial Owners and Management beginning on page 68.
Interests of the Companys Directors and Executive Officers in the Merger.
In considering the recommendation of our board of directors in favor of the adoption and
approval of the Merger Agreement, you should be aware that there are provisions of the Merger Agreement that will result in certain benefits to our directors and executive officers, including the continuation of certain indemnification and insurance
arrangements and the acceleration of stock options. In addition, certain executives may have certain rights to enhanced severance and other payments in the event that their employment is terminated following the consummation of the Merger. See
The MergerInterests of Our Directors and Executive Officers in the Merger beginning on page 33.
As of
July 31, 2012, our directors and executive officers collectively beneficially held, including shares subject to stock options exercisable within 60 days of July 31, 2012, approximately 2.6% of the outstanding shares of Peets
common stock. See Security Ownership of Certain Beneficial Owners and Management beginning on page 68.
Opinion
of the Companys Advisor.
In connection with the Merger, our board of directors received an oral opinion on July 21, 2012, confirmed by a written opinion dated July 22, 2012, from Citigroup Global Markets
Inc. (Citigroup) as to the fairness, from a financial point of view and as of July 21, 2012 of the $73.50 per share consideration to be received in the Merger by holders of our common stock. The full text of Citigroups written
opinion is attached to this proxy statement as Annex B. Holders of our common stock are encouraged to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on
the review undertaken. Citigroups opinion was provided for the information of our board of directors in connection with its evaluation of the Merger consideration from a financial point of view and did not address any other aspects or
implications of the Merger. Citigroup was not requested to consider, and its opinion did not address, the relative merits of the Merger as compared to any alternative business strategies that might exist for Peets or the effect of any other
transaction in which Peets might engage. Citigroups opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the Merger or
otherwise. See The MergerOpinion of Citigroup Global Markets Inc. beginning on page 25.
Regulatory
Matters (see page 42).
The Merger Agreement requires us and JAB to cooperate with each other and use reasonable best efforts to consummate the transactions contemplated by the Merger Agreement as soon as practicable.
In furtherance of the foregoing, the Company and JAB have each agreed to (i) make a filing under the HSR Act as soon as practicable and in any event no later than August 17, 2012 (unless we or JAB otherwise agree), (ii) use reasonable
best efforts to supply as soon as practicable any additional information and documentary material reasonably requested pursuant to the HSR Act,, and (iii) use reasonable best efforts to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
5
The Merger Agreement also requires us and JAB to file as promptly as practicable all documentation to effect all necessary notices, reports or other filings and to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations necessary from any third party or any governmental entity in connection with the Merger and the transactions contemplated by the Merger Agreement.
Material U.S. Federal Income Tax Consequences of the Merger (see page 39).
The Merger
will be a taxable transaction for U.S. federal income tax purposes if you are a U.S. person, as defined under The MergerMaterial U.S. Federal Income Tax Consequences of the Merger. If you are a U.S. person, your
receipt of cash in exchange for your shares of Peets common stock in the Merger generally will cause you to recognize a capital gain or loss measured by the difference, if any, between the cash you receive in the Merger, determined before the
deduction of any applicable withholding taxes, and your adjusted tax basis in your shares of Peets common stock. Under U.S. federal income tax law, you will be subject to information reporting on cash received in the Merger unless an
exemption applies. Backup withholding may also apply with respect to cash you receive in the Merger, unless you provide proof of an applicable exemption or a correct taxpayer identification number and otherwise comply with the applicable
requirements of the backup withholding rules. You should consult your own tax advisor for a full understanding of how the Merger will affect your U.S. federal, state and local and/or foreign taxes and, if applicable, the tax consequences of the
receipt of cash in connection with the termination of, and full payment for, your stock options to purchase shares of Peets common stock, including the transactions described in this proxy statement relating to our other equity compensation
and benefit plans.
Dissenters Rights (see page 36).
Shares of Peets
common stock that are outstanding immediately prior to the Merger and held by any dissenting shareholder who properly perfects his, her or its dissenters rights will not be converted into the right to receive the Merger consideration. Instead,
the dissenting shareholder will be entitled to an appraisal and payment for his, her or its dissenting shares in accordance with and subject to Chapter 23B.13 of the Washington Business Corporation Act (the WBCA). A copy of
Chapter 23B.13 of the WBCA is attached as
Annex C
to this proxy statement.
Shareholder Litigation (see
page 60).
On July 24, 2012, a putative class action complaint was filed in Alameda County Superior Court in California by a purported shareholder of the Company on behalf of himself and all other shareholders
naming as defendants the Company, the members of its board of directors and JAB and alleging that the members of the Companys board of directors breached their fiduciary duties, and that the Company and JAB aided and abetted the alleged
breaches, in connection with the Companys agreement to be acquired by an affiliate of JAB. As of August 2, 2012, at least five other similar putative class actions have been filed, four in Alameda County Superior Court and one in King
County Superior Court in Washington, and more may be filed in the future. The lawsuits each assert that the Company and its board of directors engaged in a flawed process in negotiating the potential sale, obtained a price that was below the
Companys actual value and agreed to provisions that would allegedly preclude another interested buyer from making a financially superior proposal to acquire the Company. The lawsuits seek, among other things, declaratory and injunctive relief
or rescission to enjoin or rescind the proposed acquisition, rescissory damages, an accounting for damages, a constructive trust for any allegedly improper gains by defendants, pre- and post-judgment interest and attorneys fees.
The Company believes these lawsuits are meritless and intends to defend against them vigorously.
6
Q
UESTIONS
AND
A
NSWERS
A
BOUT
THE
S
PECIAL
M
EETING
AND
M
ERGER
The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not
address all questions that may be important to you as a shareholder of Peets. Please refer to the Summary Term Sheet and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement
and the documents referred to in this proxy statement, all of which you should read carefully. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under Where You Can
Find More Information beginning on page 72.
Q:
|
What will happen to Peets as a result of the Merger?
|
A:
|
As a result of the Merger, Peets will become an affiliate of JAB and will cease to be a publicly-traded company. Following consummation of the Merger, you will no
longer have any interest in the Companys future earnings or growth, and the registration of the Companys common stock and our reporting obligations with respect to our common stock under the Exchange Act will be terminated upon
application to the SEC. In addition, following consummation of the Merger, shares of our common stock will no longer be listed on any stock exchange, including NASDAQ.
|
Q:
|
What will happen to my shares of Peets common stock after the Merger?
|
A:
|
Upon the consummation of the Merger, each outstanding share of Peets common stock, other than shares held by (i) JAB, Merger Sub or any other affiliate of
JAB that is directly or indirectly wholly owned by the ultimate parent of JAB, (ii) Peets or any of our wholly-owned subsidiaries, and (iii) shareholders who properly perfect their dissenters rights under Washington law, will
automatically be converted into the right to receive $73.50 in cash, without interest and less any applicable withholding taxes.
|
Q:
|
Will I own any shares of Peets common stock or other equity interest in Peets or any equity interests of JAB after the Merger?
|
A:
|
No. You will be paid cash for your shares of Peets common stock. Our shareholders will not have the option to receive any equity interests of Peets or
JAB in exchange for their shares instead of cash.
|
Q.
|
What happens if the Merger is not consummated?
|
A.
|
If the Merger Agreement is not adopted and approved by our shareholders or if the Merger is not consummated for any other reason, shareholders will not receive any
payment for their shares of Peets common stock in connection with the Merger. Instead, Peets will remain a public company and Peets common stock will continue to be listed and traded on NASDAQ. Under specified circumstances, we may
be required to pay JAB a fee with respect to the termination of the Merger Agreement, as described under The Merger AgreementTermination Fee beginning on page 62.
|
Q:
|
Will the Merger be taxable to me?
|
A:
|
Generally, yes. For U.S. federal income tax purposes, generally Peets shareholders, other than Peets and JAB, that are U.S. persons (as defined under
The MergerMaterial U.S. Federal Income Tax Consequences of the Merger), will recognize a capital gain or loss as a result of the Merger measured by the difference, if any, between $73.50 per share of Peets common stock they
own and their adjusted tax basis in that share. This gain or loss will be a long-term capital gain or loss if the U.S. person has held its Peets shares more than one year as of the effective time of the Merger. For a discussion of tax-related
implications, see The MergerMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 39.
|
7
Q:
|
Does our board of directors recommend the adoption and approval of the Merger Agreement?
|
A:
|
Yes. Our board of directors reviewed and considered the terms and conditions of the Merger and:
|
|
|
|
has unanimously determined that the Merger is fair to, and in the best interests of, Peets and its shareholders;
|
|
|
|
has unanimously approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement in
accordance with Washington law; and
|
|
|
|
has unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the
Merger, to our shareholders.
|
Our board of directors recommends that Peets shareholders vote
FOR
the adoption and approval of the Merger Agreement.
Q:
|
What vote of the shareholders is required to approve the proposals?
|
A:
|
The voting requirements to approve the proposals are as follows:
|
|
|
|
The adoption and approval of the Merger Agreement requires that shareholders of record as of the close of business on
[ , 2012] holding a majority of all outstanding shares of our common stock must vote
FOR
the adoption and
approval of the Merger Agreement. There are [ ] outstanding shares of Peets common stock entitled to be voted at the Special Meeting.
|
|
|
|
The approval, on an advisory basis, of the merger-related compensation for the Companys named executive officers requires the affirmative vote of
the holders of a majority of the shares of Peets common stock present, in person or by proxy, at the Special Meeting and entitled to vote thereon, provided a quorum is present.
|
|
|
|
The approval of the adjournment of the Special Meeting requires the affirmative vote of the holders of a majority of the shares of Peets common
stock present, in person or by proxy, at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.
|
Q:
|
Who is soliciting my vote?
|
A:
|
This proxy solicitation is being made and paid for by Peets. In addition, we have retained
[ ], to assist in the solicitation. We will pay [ ]
approximately [ ] for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or by other means
of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of shares of
Peets common stock that the brokers and other custodians, nominees and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses.
|
Q:
|
Am I entitled to dissenters rights?
|
A:
|
Yes. Shareholders who do not vote
FOR
the adoption and approval of the Merger Agreement and follow certain procedural steps will be entitled to
dissenters rights under Chapter 23B.13 of the WBCA, provided they take the steps required to perfect their rights under Chapter 23B.13 of the WBCA. For more information regarding dissenters rights, see The
MergerDissenters Rights on page 36 of this proxy statement. In addition, a copy of Chapter 23B.13 of the WBCA is attached as
Annex C
to this proxy statement. For a discussion of tax-related implications of
exercising dissenters rights, see The MergerMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 39.
|
8
Q:
|
What is the date, time and location of the Special Meeting?
|
A:
|
The Special Meeting will be held at [ ], at
[ a.m.], local time, on [ ], 2012.
|
Q:
|
What do I need to do now?
|
A:
|
We urge you to read this proxy statement carefully, including its annexes, and consider how the Merger affects you. Then, if you are a shareholder of record, mail your
completed, dated and signed proxy card in the enclosed return envelope or appoint a proxy over the Internet or by telephone as soon as possible so that your shares can be voted at the Special Meeting. If your shares are held in street
name by a bank, brokerage firm or other nominee, instruct your bank, brokerage firm or other nominee to vote your shares following the procedure provided by your bank, brokerage firm or other nominee.
|
Q:
|
What happens if I do not vote?
|
A:
|
If you are a shareholder of record and do not vote by completing your proxy card, by telephone, through the internet, or in person at the Special Meeting, your shares
will not be voted. This will have the same effect as voting against the adoption and approval of the Merger Agreement. If your shares are held in street name by a bank, brokerage firm or other nominee, and you do not provide your bank,
brokerage firm or other nominee with instructions as to how to vote your shares, your shares will not be voted at the Special Meeting. This will have the same effect as voting against the adoption and approval of the Merger Agreement and will have
no effect on the outcome of the other two proposals.
|
Q:
|
How are votes counted?
|
A:
|
For the proposal relating to the adoption and approval of the Merger Agreement, you may vote for, against or abstain. Abstentions
will not count as votes cast on the proposal relating to the adoption and approval of the Merger Agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as if you vote
against the adoption and approval of the Merger Agreement.
|
For the proposal relating to the approval, on an
advisory basis, of the merger-related compensation for the Companys named executive officers, you may vote for, against or abstain. Abstentions will not count as votes cast on the proposal relating to the
merger-related compensation for the Companys named executive officers, but will count for the purpose of determining whether a quorum is present. As a result, if you abstain, it will have the same effect as if you vote against the proposal
relating to the merger-related compensation.
For the proposal to adjourn the Special Meeting, if necessary, to solicit
additional proxies, you may vote for, against or abstain. Abstentions will not count as votes cast on the proposal to adjourn the Special Meeting, if necessary, to solicit additional proxies, but will count for
the purpose of determining whether a quorum is present. As a result, if you abstain, it will have the same effect as if you vote against an adjournment of the Special Meeting.
If you sign and return your proxy and do not indicate how you want to vote, your proxy will be voted
FOR
each of the
proposals identified above. If you hold your shares in street name, follow the instructions from your bank, brokerage firm or other nominee on how to vote your shares. Please note, however, that failing to provide your bank, brokerage
firm or other nominee with instructions on how to vote you shares will have the same effect as a vote against the proposal to adopt and approve the Merger Agreement and will have no effect on the outcome of the other two proposals. Please do NOT
send in your share certificates with your proxy card.
9
A:
|
A quorum will be present at the Special Meeting if a majority of the outstanding shares of Peets common stock entitled to vote on the record date are represented
in person or by proxy.
|
A:
|
Yes. You may vote in person at the Special Meeting, rather than signing and returning your proxy card, if you owned shares in your own name as of the record date.
However, we encourage you to return your signed proxy card to ensure that your shares are voted. You may also vote in person at the Special Meeting if your shares are held in street name through a bank, brokerage firm or other nominee
provided that you bring a legal proxy from your bank, brokerage firm or other nominee and present it at the Special Meeting.
|
Q:
|
How can I attend the Special Meeting?
|
A:
|
If you wish to attend the Special Meeting, you may be asked to present photo identification. The Special Meeting is for the shareholders of Peets as of the record
date. Accordingly, if you are a shareholder of record or hold a valid proxy from a shareholder of record, we may verify your name (or the name of such shareholder) against the list of shareholders of record on the record date prior to your admission
to the Special Meeting. If you are not a shareholder of record but your shares are held in street name by your bank, brokerage firm or other nominee, please bring and be prepared to provide upon request proof of beneficial ownership on the record
date, such as your most recent account statement prior to [ ], 2012, or other similar evidence of ownership.
We reserve the
right to refuse admittance to the Special Meeting to any person that we cannot verify, through the foregoing methods, is a shareholder (or a proxy of a shareholder) of Peets as of the record date
. The meeting will begin promptly at
[ ] a.m., local time. Check in will begin at [ ] a.m., local time. Please allow ample time for check in procedures.
|
Q:
|
May I appoint a proxy over the Internet or by telephone?
|
A:
|
Yes. You may appoint a proxy over the Internet or by telephone by following the instructions included in these materials. See The Special MeetingVoting over
the Internet or by Telephone beginning on page 46.
|
Q:
|
May I change my vote after I have mailed my signed proxy card?
|
A:
|
Yes. You can revoke your proxy. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:
|
|
|
|
You may submit another properly completed proxy card with a later date.
|
|
|
|
You may grant a subsequent proxy by telephone or through the internet.
|
|
|
|
You may send a timely written notice that you are revoking your proxy to the Corporate Secretary of Peets Coffee & Tea, Inc. at 1400
Park Avenue, Emeryville, California 94608-3520.
|
|
|
|
You may attend the annual meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy.
|
Your most current proxy card or telephone or internet proxy is the one that is counted. Please note that to
be effective, your new proxy card, internet or telephonic voting instructions or written notice of revocation must be received by the Corporate Secretary prior to the annual meeting and, in the case of internet or telephonic voting instructions,
must be received before 7:00 p.m., Eastern Time, on [ ].
If you have instructed a bank, brokerage firm or other nominee to vote your shares, you must follow directions received from your bank, brokerage firm or other nominee to change those instructions. You
cannot vote shares held in street name by returning a proxy card directly to us or by voting in person at the Special Meeting, unless you obtain a legal proxy card from your bank, brokerage firm or other nominee.
10
Q.
|
What is the difference between being a shareholder of record and a beneficial owner?
|
A.
|
If your shares of our common stock are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are
considered, with respect to those shares of common stock, the shareholder of record. In that case, this proxy statement, and your proxy card, has been sent directly to you by Peets.
|
If your shares of common stock are held through a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares
of our common stock held in street name. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee which may be, with respect to those shares of common stock, the shareholder of record. As the
beneficial owner, you have the right to direct your bank, brokerage firm or other nominee as to how to vote your shares of common stock by following their instructions for voting.
Q:
|
If my shares are held in street name by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares for me?
|
A:
|
Your bank, brokerage firm or other nominee may NOT and will NOT vote your shares without instructions from you. You should instruct your bank, brokerage firm or other
nominee to vote your shares, following the procedure provided by your bank, brokerage firm or other nominee. Without instructions, your shares will not be voted, which will have the same effect as voting against the adoption and approval of the
Merger Agreement and will have no effect on the outcome of the other two proposals.
|
A.
|
A proxy is your legal designation of another person, who is also referred to as a proxy, to vote your shares of Peets common stock. This written document
describing the matters to be considered and voted on at the Special Meeting is called a proxy statement. The document used to designate a proxy to vote your shares of stock is called a proxy card.
|
Q:
|
Should I send in my share certificates now?
|
A:
|
No. After the Merger is consummated, you will receive written instructions for exchanging your shares of Peets common stock for the Merger consideration of
$73.50 in cash, without interest and less any applicable withholding taxes, for each share of Peets common stock.
|
Q:
|
When do you expect the Merger to be completed?
|
A:
|
We are working toward consummating the Merger as quickly as possible, but we cannot predict the exact timing. We currently expect the Merger to be consummated in within
[ ] months following the date of this proxy statement. In addition to obtaining shareholder approval, all other closing conditions, including the expiration or termination of the
waiting period under the HSR Act, must be satisfied or waived. However, we cannot assure you that all conditions to the Merger will be satisfied or, if satisfied, the date by which they will be satisfied.
|
Q:
|
When will I receive the Merger consideration for my shares of Peets common stock?
|
A:
|
After the Merger is consummated, you will receive written instructions, including a letter of transmittal, that explain how to exchange your shares for the Merger
consideration of $73.50 in cash, without interest and less any applicable withholding taxes, for each share of Peets common stock. When you properly return and complete the required documentation described in the written instructions, you will
promptly receive from the paying agent a payment of the Merger consideration for your shares.
|
11
Q:
|
What happens if I sell my shares of Peets common stock before the Special Meeting?
|
A:
|
The record date of [ ], 2012 for shareholders
entitled to vote at the Special Meeting is earlier than the date of the Special Meeting and the expected closing date of the Merger. If you transfer your shares of Peets common stock after the record date but before the Special Meeting, you
will, unless special arrangements are made, retain your right to vote at the Special Meeting but will transfer the right to receive the Merger consideration to the person to whom you transfer your shares.
|
Q:
|
How will the Merger affect the Peets Employee Stock Purchase Plan?
|
A:
|
In accordance with the terms of the Merger Agreement, we will terminate our Amended and Restated 2000 Employee Stock Purchase Plan (the ESPP) prior to the
effective time of the Merger and will not permit any new offering period to begin after July 21, 2012 and prior to the effective time of the Merger. The current offering period ends on September 28, 2012. If the Merger closes on or before
September 28, 2012, the current offering period will terminate and accumulated employee contributions will be used to purchase common stock immediately prior to the closing at the lower of (1) $49.43 (which is 85% of the $58.15 closing
price on July 2, 2012) or (2) 85% of the fair market value of our common stock immediately prior to the closing. If the Merger closes after September 28, 2012, accumulated employee contributions will be used on that date to purchase
common stock at the lower of (1) $49.43 or (2) 85% of the fair market value of our stock on September 28, 2012.
|
Q:
|
What will happen to Peets stock options in the Merger?
|
A:
|
We will take all necessary action to accelerate the vesting of each outstanding stock option effective as of the effective time of the Merger. Each stock option
outstanding immediately prior to the effective time of the Merger (whether vested or unvested) will be cancelled and converted into the right to receive, with respect to each share of Peets common stock subject to such stock option, a cash
payment equal to the excess, if any, of $73.50 over the exercise price per share of such stock option, without interest and subject to applicable tax withholding.
|
Q:
|
What will happen to Peets restricted stock unit awards in the Merger?
|
A:
|
Each restricted stock unit award outstanding or payable immediately prior to the effective time of the Merger (whether vested or unvested) will be cancelled and
converted into the right to receive, with respect to each share of Peets common stock subject to such award, a cash payment equal to $73.50, without interest and subject to applicable tax withholding.
|
Q:
|
Who can help answer my questions?
|
A:
|
If you would like additional copies, without charge, of this proxy statement or if you have questions about the Merger, including the procedures for voting your shares,
you should contact us or our proxy solicitor, [ ], as follows:
|
|
|
|
Peets Coffee & Tea, Inc.
|
|
[ ]
|
Investor Relations
|
|
[ ]
|
1400 Park Avenue
|
|
[ ]
|
Emeryville, California 94608
|
|
[ ]
|
Telephone: (510) 594-2100
|
|
|
12
S
PECIAL
N
OTE
R
EGARDING
F
ORWARD
-
LOOKING
S
TATEMENTS
This proxy statement,
and the documents to which we refer you in this proxy statement, contain forward-looking statements. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings Summary Term
Sheet, The Merger, The Special Meeting, Certain Financial Projections, and Opinion of the Companys Advisor. Statements that are not historical facts, including statements about beliefs or
expectations, are forward-looking statements. These statements are based on plans, estimates and projections at the time the Company makes the statements, and readers should not place undue reliance on them. In some cases, readers can identify
forward-looking statements by the use of forward-looking terms such as may, will, should, expect, intend, plan, anticipate, believe, estimate,
predict, potential, or continue or the negative of these terms or other comparable terms. Forward-looking statements involve inherent risks and uncertainties, including, among others:
|
|
|
the effect of the announcement of the Merger on our business relationships, operating results and business generally;
|
|
|
|
the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or the payment of any
termination fee;
|
|
|
|
the outcome of legal proceedings that have been, and others that may be, instituted against us, JAB or others in connection with the Merger Agreement;
|
|
|
|
failure to obtain the required shareholder approval, to satisfy other conditions to the completion of the Merger, or to obtain the regulatory approvals
required for the Merger on the terms expected or on the anticipated schedule;
|
|
|
|
the amount of the costs, fees, expenses and charges related to the Merger; and
|
|
|
|
our and JABs ability to meet expectations regarding the timing and completion of the Merger.
|
In addition, we are subject to risks and uncertainties and other factors detailed in our filings with the SEC, including our Annual
Report on Form 10-K for the year ended January 1, 2012 and our most recent quarterly report on Form 10-Q and in subsequent filings with the SEC, which should be read in conjunction with this proxy statement. See Other
MattersWhere You Can Find More Information on page 72. Readers are cautioned not to place undue reliance on the forward-looking statements included in this proxy statement, which speak only as of the date hereof. Except as may be
required by applicable law, the Company does not undertake to update any of these statements in light of new information or future events.
13
T
HE
P
ARTIES
TO
THE
M
ERGER
P
EET
S
C
OFFEE
&
T
EA
, I
NC
.
Peets is a Washington corporation with headquarters in Emeryville,
California. We are a specialty coffee roaster and marketer of fresh-roasted whole bean coffee and tea. Our principal executive offices are located at 1400 Park Avenue, Emeryville, California 94608, and our telephone number is (510) 594-2100.
For more information about us, please visit our website at
www.peets.com
. Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not
incorporated herein by reference. Our common stock is publicly traded on NASDAQ under the ticker symbol PEET.
JAB
H
OLDINGS
BV
JAB Holdings BV is a Dutch
Besloten Vennootschap met beperkte aansprakelijkheid
with
headquarters in The Netherlands. JAB Holdings BV is a privately held company focused on long-term investments in companies with premium brands in the consumer goods category. The principal executive offices of JAB Holdings BV are located at Oude Weg
147, 2033 Haarlem CC, The Netherlands, and its telephone number is +31 23 2302 866.
P
ANTHER
M
ERGER
C
O
.
Panther Merger Co. is a Washington corporation and an affiliate of JAB Holdings BV and has not engaged
in any material business activities other than in connection with its formation and the Merger. The principal executive offices of Panther Merger Co. are located at 2200 Pennsylvania Avenue NW, Washington D.C., 20052, and its telephone number is
(202) 507-5835.
14
T
HE
M
ERGER
The discussion of the Merger contained in this section summarizes the material terms of the Merger. Although we believe that the
description covers the material terms of the Merger, this summary may not contain all of the information that is important to you. We urge you to read this proxy statement, the Merger Agreement, a copy of which is attached to this proxy statement as
Annex A
, and the other documents referred to herein (including the annexes) carefully for a more complete understanding of the Merger.
B
ACKGROUND
OF
THE
M
ERGER
Peets board and management have met regularly to discuss the long-term vision and strategy for Peets, since it has evolved from a small San Francisco Bay Area-based coffee retailer to a high
growth, premium-quality, premium-priced brand in the consumer packaged coffee business. An important component of Peets strategy has been to seek new consumer segments within the specialty coffee category that it can enter in a manner
consistent with its broader vision and ensure long-term growth.
One such segment is the rapidly growing market for
cartridge-based single serve coffee. Peets initial efforts to enter the single serve market were focused on developing a commercial relationship with Green Mountain Coffee Roasters, Inc. (Green Mountain), which had a well
established single serve brewer platform. Peets engaged in discussions with Green Mountain beginning in 2007 and continuing through 2010 but was unable to reach agreement on the terms of a relationship.
During this period, Peets also signed an agreement to acquire publicly traded Diedrich Coffee, Inc., which at the time was one of
four coffee companies licensed to produce single serve coffee cartridges in Green Mountains K-Cup format and would have provided Peets with a point of access to the single serve market. This acquisition attempt was ultimately
unsuccessful due to a higher price offered by Green Mountain.
Between December 2009 and October 2010, Peets had a
series of discussions with a global coffee company about the possibility of establishing a strategic commercial relationship. During this period, Peets financial advisor at that time, Morgan Stanley & Co. LLC (Morgan
Stanley), advised Peets with respect to the strategic discussions and also identified other companies that could potentially be strategic acquirers. In the fall of 2010, these discussions shifted to a potential acquisition of Peets
by the global coffee company. In October 2010, the global coffee company withdrew from its discussions with Peets, citing as reasons valuation and other business issues. The highest intraday sale price of the Companys common stock during
the month of October 2010 was $39.00.
Following the termination of these discussions, Peets board of directors reviewed
the Companys strategic position and determined that, in addition to focusing on its base business and aggressively pursuing the strategic business initiatives in its long-range plan, Peets should engage in a systematic program of
outreach to selected potential strategic partners to explore the possibility of a transformational transaction in the form of either a major strategic commercial relationship focused on the single serve market or some other aspect of the
Companys business, or a business combination. Based on this direction, over the ensuing year and a half, Peets initiated discussions with several of the companies that Morgan Stanley had identified, together with other large companies
that Morgan Stanley had not originally identified.
Specifically, between December 2010 and June 2012, Peets had
interactions with seven potential strategic partners, three of which (in addition to the two companies with which Peets had previously had discussions) signed confidentiality agreements and received confidential information from Peets.
The discussions with these companies ranged from potential single serve agreements, joint ventures, business alliances, distribution partnerships and licensing arrangements to complete business combinations. None of these discussions led to an
agreement to pursue a transformational commercial relationship or a strategic transaction. In several of these discussions occurring between December 2010 and September 2011, Peets was assisted by Morgan Stanley, and it also received informal
assistance from Citigroup beginning in the summer of 2011, although it had no formal engagement with Citigroup until July 2012.
15
In early June, 2012, at the request of Olivier Goudet, Chief Executive Officer of the group
of companies of which JAB is a member (the JAB group), Citigroup arranged a meeting for June 21, 2012 between Mr. Goudet and Jean-Michel Valette, Peets Chairman. This meeting request was part of the JAB groups
continuous search for premium brands in the consumer goods sector and more particularly in the coffee and tea industry. Mr. Goudet said that, subject to due diligence, the JAB group was interested in making a proposal to acquire Peets at
a price of $72.50 per share in cash. (The closing price of Peets common stock on the previous day was $65.54.) Mr. Goudet said this was a friendly overture and that, while the JAB group would not ask Peets to enter into an
exclusivity agreement during negotiations, it would withdraw if Peets was not interested in pursuing a possible transaction or wished to seek proposals from other potential acquirers. Mr. Goudet said that, if discussions progressed toward
a transaction, the JAB group intended to work with BDT Capital Partners LLC (BDT) and to engage Morgan Stanley, whose engagement with Peets had previously expired, as a financial advisor. Mr. Goudet said that the JAB group
might seek financing services from BDT and Morgan Stanley, although he also said the JAB group had ample cash on hand to complete an acquisition of Peets and would not require a financing contingency. Mr. Valette said he would convey the
JAB groups proposal to Peets board of directors.
On June 23, 2012, Peets board of directors met
telephonically. Also participating in this meeting were Tom Cawley, Peets Chief Financial Officer; Isobel Jones, its General Counsel; and Jon Weinberg, its Senior Director of Strategy and Business Development. Mr. Valette reported in
detail on his meeting with Mr. Goudet and the indication of interest delivered by Mr. Goudet in that meeting. The directors received advice from Ms. Jones regarding their responsibilities as directors and an update from Messrs.
ODea, Cawley and Weinberg regarding the status of the Companys businessparticularly its past and expected 2012 financial results and its strategic initiative to enter the single serve market. The board then discussed the JAB
groups overture and determined that Peets response, for negotiating purposes, should be that $72.50 per share was not compelling, but, subject to the JAB group agreeing to an acceptable process and signing a confidentiality and
standstill agreement, Peets would allow the JAB group to engage in a due diligence review and would share confidential information with the JAB group in order to explore whether there were grounds for an acceptable transaction.
On June 26, 2012, Mr. Valette told Mr. Goudet by telephone that the proposed price of $72.50 per share was not compelling,
but that, in recognition of the fact that the board possessed significantly more information relevant to an evaluation of Peets than the JAB group, Peets would be willing to permit the JAB group to engage in a due diligence review and
would share confidential information with the JAB group for the purpose of enabling the JAB group to determine whether there were grounds for a transaction which would be acceptable to Peets. Mr. Valette stated that Peets
willingness to take these steps was conditioned on the JAB groups entering into an acceptable confidentiality and standstill agreement and agreeing with Peets on a target date of July 20, 2012 by which the parties would either sign
a definitive acquisition agreement or terminate discussions. Mr. Valette explained that Peets required this timetable in order to avoid excessive diversion of its management team and other resources from pursuit of several specific and
timely strategic business initiatives. Mr. Goudet agreed to Peets conditions and indicated a desire to proceed as outlined by Mr. Valette.
On July 2, 2012, Messrs. Valette and Goudet had a telephone conversation in which Mr. Goudet reaffirmed the agreed-upon timetable for considering a transaction.
On July 3, 2012, Peets board of directors met telephonically. Also participating in this meeting were Messrs. Cawley and
Weinberg, Ms. Jones and representatives of Cooley LLP, Peets outside legal counsel (Cooley). Ms. Jones reported on a review she had conducted, at the boards request, to identify any relationships between Citigroup,
on the one hand, and the JAB group and its affiliates, on the other, that might interfere with Citigroups service as Peets financial advisor with respect to the JAB groups indication of interest. After discussing
Ms. Joness report and the qualifications and expertise of Citigroup, the board of directors approved the engagement of Citigroup as its financial advisor and received legal advice from the Cooley representatives regarding their
responsibilities as directors. Representatives of Citigroup then joined the meeting and presented an overview of the JAB groups indication of interest and various preliminary valuation
16
and other financial analyses and discussed, in the context of the preliminary valuation information, whether Citigroup believed that other potential parties would be willing to acquire
Peets at a higher price than that proposed by the JAB group. Citigroup informed the board that it did not believe, based on its leveraged buy-out analysis and the trading multiple for Peets, that any private equity buyer would consider
purchasing Peets for the proposed price.
On July 5, 2012, Peets and an affiliate of JAB executed a
confidentiality and standstill agreement effective as of July 4, 2012.
On July 6, 2012, Peets board of
directors met telephonically. Also participating in this meeting were Messrs. Cawley and Weinberg, Ms. Jones and representatives of Citigroup and Cooley. Messrs. ODea, Cawley and Weinberg provided an update on the key strategic
initiatives being pursued by the Company consistent with its long-range plan, including a review of the current opportunities available to access the single serve coffee market. This was followed by a discussion about the potential implications,
including both risks and benefits, of these initiatives for the Companys future financial performance and value. Mr. ODea then reviewed with the board the Companys extensive discussions with potential strategic partners
between 2009 and 2012, and he and the Citigroup representatives provided updates regarding the businesses and strategic activities of some of those parties since Peets most recent discussions with them and Citigroups perspective on
whether these parties would consider acquiring Peets at the JAB groups proposed price. The Citigroup representatives then led a discussion and responded to questions from the directors concerning the preliminary valuation and other
financial analyses they had presented to the board at its meeting three days earlier. The board of directors discussed the fact that the JAB group had indicated that it would withdraw its acquisition proposal if Peets initiated discussions
with any other potential parties, the fact that private equity buyers would not likely be interested in pursuing a transaction at the proposed price, and Peets prior discussions with other potential strategic partners and the likelihood that
they would be interested in acquiring Peets at the proposed price, which was viewed to be low, and concluded that Peets should not reach out to any other potential parties at this time because the risks of losing the JAB groups
proposal outweighed the likelihood of obtaining a higher price from another potential party.
Beginning on July 9, 2012,
Peets provided various representatives of the JAB group, BDT, Morgan Stanley, the JAB groups outside legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP (Skadden, Arps), and the JAB groups accounting
advisor, Ernst & Young (EY), with access to an electronic data room populated with various documents containing confidential information of Peets. the JAB groups and its advisors review of
confidential information in this data room, as well as confidential information provided by Peets in person and through other means, continued through the time at which the definitive merger agreement was executed.
On July 10-12, 2012, Messrs. ODea, Cawley and Weinberg, Ms. Jones and Shawn Conway, Peets Chief Supply Chain
Officer, held multiple meetings with representatives of the JAB group, BDT, Skadden, Arps and EY in Cooleys San Francisco office in connection with the JAB groups due diligence review of Peets. Among other things, the Peets
representatives made a presentation regarding Peets, its business and its strategic initiatives and responded to questions from the other meeting participants.
On July 11, 2012, Skadden, Arps delivered to Cooley a draft merger agreement containing a comprehensive set of proposed terms and conditions, other than price-dependent terms. Between July 11,
2012 and July 21, 2012, Skadden, Arps and Cooley, in consultation with the JAB group and Peets and their respective financial advisors, engaged in several rounds of negotiation of the proposed terms and conditions. By the evening of
July 19, 2012, a significant number of issues in the merger agreement had been resolved to both parties satisfaction, but there remained several points of substantive disagreement with respect to the limitations to be included in the
merger agreement on the Companys ability to engage in discussions with other potential acquirers, the circumstances under which the parties could terminate the merger agreement, the circumstances under which a termination fee and/or a reverse
termination fee would be payable, the amounts of such termination fees and the availability of specific performance as a remedy for Peets upon JABs breach of the merger agreement.
17
On July 16, 2012, Peets board of directors met telephonically. Also
participating in this meeting were Messrs. Cawley and Weinberg, Ms. Jones and representatives of Citigroup and Cooley. Mr. ODea provided an update regarding Peets strategic initiative to enter the single serve market, and the
Citigroup and Cooley representatives provided an update regarding the JAB groups due diligence activities and negotiations regarding a potential definitive merger agreement. At the boards request, the Citigroup representatives reviewed
the companies with which Peets had had discussions about a potential strategic transaction between 2009 and 2012 and provided perspectives on those companies potential current interest in a business combination transaction with
Peets, including recently gathered current information. Peets board also considered the value proposed by the JAB group in the context of prior strategic discussions and financial analysis presented by Citigroup. The board of directors
also determined that any merger agreement with the JAB group would need to make it possible for a potential competing bidder to submit a superior proposal that Peets could accept by terminating the merger agreement and paying a reasonable
termination fee. At this point in time, Peets board, in consultation with its advisors, reaffirmed its decision not to approach additional potential acquirers and the reasons for that decision.
On July 19, 2012, Messrs. ODea, Cawley, Conway, Jones and Weinberg held a series of meetings with Mr. Goudet, Bart Becht,
Chairman of the JAB group, and other representatives of the JAB group and its advisors. Messrs. ODea and Conway conducted a tour of the Companys roast-to-order facility in Alameda, California, and Messrs. ODea, Cawley and Weinberg
made a presentation regarding Peets and its business and strategic initiatives. During these meetings, the Peets representatives shared confidential information of Peets and responded to questions from the other meeting
participants. On the evening of July 19, 2012, Messrs. Valette, ODea, Goudet and Becht and a representative of Citigroup met for dinner to continue their discussion of Peets, its business and the potential for the acquisition of
Peets by the JAB group. They did not discuss the potential price or other terms on which such an acquisition might occur.
On the morning of July 20, 2012, the Companys board of directors met telephonically. Also participating in this meeting were
Messrs. Cawley and Weinberg, Ms. Jones and representatives of Citigroup and Cooley. Mr. Valette provided an update on developments with the JAB group since the previous board meeting. At the boards request, the Citigroup
representatives reviewed certain companies that had previously been identified as potential strategic partners and provided their perspective on those companies potential interest in a business combination transaction with Peets at this
time. The board of directors reaffirmed its decision not to approach additional potential acquirers for the reasons it had previously discussed.
Later that morning, Messrs. Goudet and Becht met with Mr. Valette and a representative of Citigroup in Cooleys San Francisco office. Messrs, Goudet and Becht orally delivered the JAB
groups proposal to acquire all of Peets outstanding equity securities at a price of $72.50 per share in cash on terms and conditions that reflected the JAB groups position on the most important areas of substantive disagreement.
Mr. Valette reminded Messrs. Goudet and Becht of the Peets boards earlier statement that a price of $72.50 per share was not compelling and stated that the overall proposal, which included the JAB groups positions on the open
merger agreement provisions, did not represent an acceptable transaction. The open provisions related primarily to the certainty of closing a transaction based on the JAB groups proposal and Peets ability to consider an alternative
offer. Mr. Valette confirmed that he would communicate the JAB groups proposal to the Peets board in the form presented but that he would not personally support it and did not believe it would be accepted. He encouraged Messrs.
Goudet and Becht to consider increasing the price and revising the other terms of the JAB groups proposal so that it represented the JAB groups best and final proposal in advance of Peets board meeting scheduled for that evening.
On the afternoon of July 20, 2012, Messrs. Goudet and Becht met with Mr. Valette and a representative of Citigroup
and orally presented a revised acquisition proposal, which they stated represented the JAB groups best and final proposal. The JAB groups revised proposal was to acquire all of Peets outstanding equity securities at a price of
$73.25 per share on terms and conditions reflecting Peets position on the most important areas of substantive disagreement. Under the JAB groups revised proposal, the Company would be subject to customary limitations on its ability to
engage in discussions with other potential acquirers but would have the right to
18
engage in such discussions under certain circumstances in response to an unsolicited acquisition proposal and to terminate the merger agreement under certain circumstances in order to accept a
superior proposal (as defined in the merger agreement), the Company would be obligated to pay a termination fee equal to approximately 3% of total equity value in connection with such a termination of the merger agreement and in certain
other customary circumstances, JAB would not have the right to terminate the merger agreement other than upon the Companys material breach or in certain other customary circumstances, and the remedy of specific performance would be available
in the event of either partys material breach of the merger agreement. The revised terms presented by the JAB group represented a significant improvement in Peets favor.
That evening, the Peets board met telephonically to consider the JAB groups proposal and determine Peets response. Also
participating in this meeting were Messrs. Cawley and Weinberg, Ms. Jones and representatives of Citigroup and Cooley. After discussing the revised proposal and receiving advice from the representatives of Citigroup and Cooley, the board of
directors determined that it would consider the JAB groups proposal thoroughly at its meeting scheduled for the next afternoon.
Later that evening, Mr. Valette advised Mr. Goudet of the boards deliberations and suggested that the JAB group consider increasing its proposed price in order to make it more likely that
Peets board would accept their proposal.
On the morning of July 21, 2012, Mr. Goudet advised Mr. Valette
by telephone that the JAB group was revising its proposed price to $73.50 per share, that all other terms and conditions of the proposal remained unchanged and that this proposal had been fully approved by its board that morning. Mr. Goudet
further advised that this increased offer was a non-economically justified stretch and could not be improved upon. (The closing price of Peets common stock on the previous day was $57.16.) Mr. Valette advised Mr. Goudet
that he would communicate the revised proposal to Peets board at its meeting that afternoon.
That afternoon, the
Companys board of directors met telephonically to consider the JAB groups revised proposal and determine Peets response. Also participating in the meeting were Messrs. Cawley and Weinberg, Ms. Jones and representatives of
Citigroup and Cooley. Prior to the meeting, the directors had received a copy of a proposed form of merger agreement, a summary of the proposed agreement prepared by Cooley and a copy of the financial presentation to be made at the meeting by the
Citigroup representatives. Mr. Valette reported that the JAB group had increased its proposed price to $73.50 per share and that all other terms and conditions of the proposal remained unchanged and consistent with Peets negotiating
position. The Citigroup representatives then made a presentation that included an overview of the revised proposal and its background, valuation and other financial analyses with respect to the proposal, a review of Peets discussions since
2009 with potential strategic partners, a review of Peets recent stock price performance, a review of Peets preliminary financial results for the second quarter of 2012 and a comparison of those results to securities analysts
estimates and a review of Peets managements financial plan, including the potential financial impact of the Companys base strategic initiatives, the companys intention to enter the single serve market and coffee costs
projections for the next few years. The Citigroup representative also reviewed valuation analyses, including the selected company trading analysis, selected precedent transaction analysis, discounted cash flow analysis and leveraged buyout analysis
summarized under The MergerOpinion of Citigroup Global Markets Inc. After responding to questions from the directors on their presentation, the Citigroup representatives orally delivered their opinion that the $73.50 per share to
be received pursuant to the proposed merger agreement was fair, from a financial point of view, to the holders of Peets common stock. The Cooley representatives then reviewed the material terms of the proposed merger agreement and responded to
questions from the directors about the proposed agreement. The board of directors then engaged in a discussion of the JAB groups acquisition proposal and the financial and legal advice that had been provided with respect to the proposal.
At this point the board, in consultation with its advisors, reaffirmed its decision not to approach additional potential
acquirers for the reasons it had previously discussed. The board of directors then unanimously determined that the Merger Agreement and the Merger were advisable and in the best interests of the Company and its shareholders, approved the Merger
Agreement and authorized its execution and resolved to recommend that the Companys shareholders adopt the Merger Agreement.
19
The definitive Merger Agreement was executed by representatives of Peets, JAB and
Panther Merger Co. on the evening of July 21, 2012 and publicly announced on the morning of July 23, 2012.
R
EASONS
FOR
THE
M
ERGER
AND
R
ECOMMENDATION
OF
THE
B
OARD
OF
D
IRECTORS
On July 21, 2012, our board of
directors (i) unanimously determined that the Merger is fair to, and in the best interests of, Peets and its shareholders, unanimously approved and declared advisable the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement in accordance with Washington law, and unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, to our shareholders and
(ii) directed that the Merger Agreement and the Merger be submitted for consideration by our shareholders at the Special Meeting.
Our board of directors considered the following factors in reaching its conclusion to approve and adopt the Merger Agreement and approve the Merger and the other transactions contemplated by the Merger
Agreement and to recommend the adoption and approval of the Merger Agreement to our shareholders, all of which it viewed as generally supporting its decision to approve the business combination with the JAB group (which are not listed in any
relative order or importance):
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the principal terms of the Merger Agreement, including, among others, the consideration to be received by holders of Peets common stock and the
conditions to the parties obligations to consummate the Merger;
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the current and historical market price of Peets common stock, including the fact that the $73.50 price to be paid for each share represents a
28.6% premium to the closing price of $57.16 per share on July 20, 2012, the last full trading day before the Merger was approved by our board of directors and publicly announced, and a 26.3% premium to the 30-day weighted average stock price
of $57.98 per share;
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the fact that the JAB groups offer will be paid in cash, providing certainty, near-term value and liquidity to our shareholders, and is
anticipated to be completed in 2012, in advance of any potential tax rate increases that may take effect in 2013 or later;
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our board of directors belief that Peets, with the assistance of its financial advisors, had negotiated the highest price per share of
common stock that the JAB group was presently willing to pay for Peets, and that the process conducted by the Company had resulted in the highest price reasonably available to the Company under the circumstances;
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the board of directors belief that the Company is unlikely to achieve a sustainable trading price for its common stock in excess of the $73.50
per share Merger consideration within the foreseeable future given the Companys high trading multiple compared to other coffee and consumer companies, its projected near-term financial performance (including growth rates), and its long-term
business plan and prospects if it were to remain a public company, including its plans to enter the single serve market and dependence on the single serve strategy to sustain its high growth rates and trading multiple;
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the board of directors belief that the sale of the Company for the Merger consideration is a better alternative to remaining a public company and
pursuing the Companys strategic business plan, considering the risks relating to the Companys ability to sustain its high revenue growth rate in light of the Companys competitive position in its industry, its dependence on the
single serve strategy for new growth and the risks associated with executing on the single serve strategy, and other risks associated with the Companys business;
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the board of directors belief that remaining a public company and pursuing the Companys strategic business plan entailed additional
uncertainty and risk, particularly during the execution of the single serve initiative, in light of the potential for a CEO transition given Mr. ODeas request that the Board engage in succession planning;
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the fact that the Company had held strategic discussions with at least nine other large companies in its industry between 2009 and 2012 and none of the
discussions had led to a transformational commercial relationship or business combination transaction or any likely prospects therefor;
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the opinion of Citigroup that, as of July 21, 2012, and based upon and subject to the various assumptions made, matters considered and
qualifications and limitations on the scope of review undertaken as set forth in such opinion, the $73.50 per share expected to be received by the holders of Peets common stock pursuant to the Merger Agreement at the time the opinion was
rendered was fair from a financial point of view to holders of Peets common stock, and the related financial analyses;
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the requirement that the Merger Agreement be adopted and approved by the holders of a majority of the outstanding shares of our common stock;
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the availability of statutory dissenters rights to the Companys shareholders who comply with all required procedures of the WBCA, which
allow such shareholders to seek appraisal of the fair value of their shares of common stock; and
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the terms and conditions of the Merger Agreement, which were the product of arms-length negotiations between the parties, including the following
related factors:
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the JAB groups capacity to fund the Merger consideration with cash;
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the limited number and nature of the conditions to JABs obligation to consummate the Merger (including the absence of a financing condition) and
the limited risk of non-satisfaction of such conditions;
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the conclusion of our board of directors that the termination fee is, and the circumstances when such fee may be payable are, reasonable in light of
the benefits of the Merger;
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the board of directors ability under the Merger Agreement to withhold, withdraw, qualify or modify its recommendation in favor of the adoption
and approval of the Merger Agreement in certain circumstances, including in connection with a superior proposal, and its right to terminate the Merger Agreement in certain circumstances in order to accept a superior proposal, subject to the payment
of the termination fee;
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the right of our board of directors to approve selected actions by Peets under the Merger Agreement, including amendments to the Merger
Agreement, waivers of the Merger Agreement provisions and the termination of the Merger Agreement under selected circumstances; and
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the likelihood that the Merger will be consummated on a timely basis, including the likelihood that the Merger will receive all necessary regulatory
antitrust approvals.
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Our board of directors also considered the potential risks of the Merger and other
potentially negative factors, including the following:
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the inability of our shareholders to realize the potential long-term value of a successful execution of the Companys current strategy as a public
company;
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the fact that the $73.50 price to be paid for each share represents less than the all-time high intraday sale price of Peets common stock of
$77.60 per share in March 2012;
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the fact that receipt of the Merger consideration generally will be taxable to our shareholders for U.S. federal income tax purposes;
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the risk of diverting managements attention from other strategic priorities to focus on matters relevant to the Merger;
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the potential impact on the Companys business of any negative reaction by customers, suppliers or other constituencies after the announcement of
the Merger;
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the possible loss of key management or other personnel of Peets during the pendency of the Merger;
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21
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the risk that the Merger might not be consummated in a timely manner or at all and the trading price of Peets common stock may be adversely
affected;
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the risk to the Companys business, sales, operations and financial results in the event that the Merger is not consummated;
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the fact that, pursuant to the Merger Agreement, we must generally conduct our business in the ordinary course and we are subject to a variety of other
restrictions on the conduct of our business prior to the closing of the Merger or the termination of the Merger Agreement;
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the termination fee payable to JAB upon the occurrence of certain events, including the potential of such termination fee to deter other potential
acquirers from proposing an alternative transaction that may be more advantageous to the Companys shareholders;
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that certain terms of the Merger Agreement prohibit Peets and our representatives from soliciting third-party bids and from accepting, approving
or recommending third-party bids except in very limited circumstances, which terms could reduce the likelihood that other potential acquirers would propose an alternative transaction that may be more advantageous to our shareholders; and
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the requirement under the Merger Agreement that, unless the Merger Agreement is terminated by the Company in certain circumstances in order to accept a
superior proposal, the Companys obligation to hold the Special Meeting shall not be affected by any superior proposal, alternative proposal, change in circumstance or recommendation change (See The Merger AgreementAbility to Change
Board Recommendation/Termination in Connection with a Superior Proposal).
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The board of directors
concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the Merger were outweighed by the potential benefits of the Merger.
The foregoing discussion of the board of directors reasons for its recommendation to adopt and approve the Merger Agreement is not meant to be exhaustive, but addresses the material information and
factors considered by the board of directors in consideration of its recommendation. In view of the wide variety of factors considered by the board of directors in connection with the evaluation of the Merger and the complexity of these matters, the
board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, the directors made their determinations and
recommendations based on the totality of the information presented to them, and the judgments of individual members of the board of directors may have been influenced to a greater or lesser degree by different factors. In arriving at their
respective recommendations, the members of the board of directors were aware of the interests of executive officers and directors of Peets as described under The Merger Interests of Our Directors and Executive Officers in the
Merger.
Our board of directors unanimously recommends that you vote FOR the adoption and approval of the
Merger Agreement.
C
ERTAIN
F
INANCIAL
P
ROJECTIONS
Peets does not, as a matter of course, publicly disclose forecasts or internal projections as to future performance or results of
operations beyond the current or proximate fiscal year due to the inherent unpredictability of the underlying assumptions and estimates. However, in connection with the evaluation of the Merger, management prepared certain long-range, non-United
States generally accepted accounting principles (GAAP) financial projections for fiscal years 2012 through 2016. These projections were developed for use by the board of directors of Peets in connection with the evaluation of the
Merger and the Merger consideration in comparison to Peets strategic alternatives and were provided to Peets financial advisor. These projections were based on Peets most recent long-range plan, updated to reflect managements
most recent estimates for fiscal year 2012 and coffee costs, as well as the inclusion of annualized sales for new distribution. With respect to the single serve opportunity, the projections were based on managements most recent estimates.
22
The information set forth below is included solely to give the Companys shareholders
access to relevant portions of such financial projections and is not included in this proxy statement in order to influence any shareholder of Peets to vote in favor of the Merger or for any other purpose, including whether or not to seek
dissenters rights with respect to a shareholders shares of Peets common stock.
The financial projections
were not prepared with a view toward public disclosure or with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of
financial forecasts, or GAAP. Neither Peets independent registered public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to the financial projections included below, nor
have they expressed any opinion or any other form of assurance on such information or its achievability.
The financial
projections estimate EBITDA (earnings before interest, taxes, depreciation and amortization), income from operations (also referred to as EBIT) and free cash flow (calculated as EBITDA less interest, cash taxes, changes in net working capital and
capital expenditures) for fiscal years 2012 through 2016 under two alternative business scenarios:
|
|
|
the base case, which excluded the single serve opportunity, was based on Peets current financial plan without the benefit of entering the single
serve market; and
|
|
|
|
the second case, which reflected the base plan plus the single serve opportunity, assumed that Peets would execute its plan to enter the single
serve market beginning in 2013.
|
The financial projections reflect numerous estimates and assumptions made
by management with respect to general business, economic, competitive, market and financial conditions and other future events, as well as matters specific to the Companys business, all of which are difficult to predict and many of which are
beyond our control. In preparing the 2012 to 2016 financial projections for the base case, management assumed modest retail expansion and a slowdown in growth in the Specialty channel resulting in a compound annual sales growth of 5.4%. EBITDA
margin was forecasted to improve from 13.4% in 2012 to 15.0% by 2014 due largely to lower realized green coffee costs in 2013 and 2014 and improved operating leverage. EBITDA margin was forecasted to drop to 14.4% by 2016 as lower sales growth
slightly decreases operating leverage and coffee costs increase with inflation.
In preparing the financial projections for
the second case, management included the same assumptions as the base case but also assumed that Peets would be required to invest an incremental $33 million of capital expenditures between 2013 and 2016. The single serve business was
forecasted to generate incremental revenue and EBITDA of $45 million and $11 million, respectively, in 2013 and $158 million and $45 million, respectively, in 2016. The resulting 2012-2016 compound annual sales growth rate increases to 12.9%, and
EBITDA margin for 2016 increases to 17.8%. At the time the financial projections were provided to Citigroup, management indicated to Citigroup that the Companys successful entry into the single serve market was not a certainty due to various
factors.
With respect to both cases, management forecasted that Peets would experience coffee cost decreases in 2013
and 2014 as its current coffee inventory and fixed cost commitments (which reflect past purchases at higher prices than currently prevail) are fully used up and the benefit of todays lower coffee prices are fully realized. In 2013 and beyond,
commodity coffee costs were assumed to remain close to their current level, with nominal inflation resuming in 2015.
The
financial projections reflect managements subjective judgments in many respects and, therefore, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The financial projections
constitute forward-looking information and are subject to risks and uncertainties that could cause the actual results to differ materially from the projected results, including, but not limited to, the Companys performance and ability to
achieve strategic goals over the applicable period, industry
23
performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and other factors described under Risk
Factors in Peets Annual Report on Form 10-K for the year ended January 1, 2012 and the Quarterly Reports on Form 10-Q for the quarters ended April 1, 2012 and July 1, 2012. The financial projections cannot, therefore, be
considered a guaranty of future operating results, and the projections should not be relied upon as such.
The inclusion of
the financial projections in this proxy statement should not be regarded as an indication that Peets or its representatives then considered, or now consider, such financial projections to be necessarily predictive of actual future events, and
this information should not be relied upon as such. Neither Peets, the JAB group nor any of their affiliates or representatives intends to, and each of them disclaims any obligation to, update, revise or correct the projections if any of such
projections becomes inaccurate (even in the short term).
The financial projections should be evaluated, if at all, in
conjunction with the historical financial statements and other information regarding Peets contained in Peets public filings with the SEC.
The financial projections do not take into account any circumstances or events occurring after the date they were prepared, including the Merger. Further, the financial projections do not take into
account the effect of any failure of the Merger to be consummated and should not be viewed as accurate or continuing in that context. Shareholders are cautioned not to place undue, if any, reliance on the financial projections included in this proxy
statement.
The financial projections included the following estimates of the Companys future financial performance:
Base Plan (Excludes Single Serve) ($ in millions)
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
Total Sales
|
|
$
|
407.0
|
|
|
$
|
432.5
|
|
|
$
|
453.4
|
|
|
$
|
476.7
|
|
|
$
|
502.5
|
|
EBITDA
|
|
$
|
54.4
|
|
|
$
|
60.8
|
|
|
$
|
67.9
|
|
|
$
|
69.8
|
|
|
$
|
72.2
|
|
Less: Amortization and Depreciation
|
|
|
(18.0
|
)
|
|
|
(18.0
|
)
|
|
|
(17.8
|
)
|
|
|
(16.9
|
)
|
|
|
(16.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations (EBIT)
|
|
$
|
36.4
|
|
|
$
|
42.8
|
|
|
$
|
50.1
|
|
|
$
|
52.9
|
|
|
$
|
56.1
|
|
Cash Flow Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
EBITDA
|
|
$
|
54.4
|
|
|
$
|
60.8
|
|
|
$
|
67.9
|
|
|
$
|
69.8
|
|
|
$
|
72.2
|
|
Less: Interest
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Less: Cash taxes (1)
|
|
|
(13.3
|
)
|
|
|
(15.6
|
)
|
|
|
(18.3
|
)
|
|
|
(19.3
|
)
|
|
|
(20.5
|
)
|
Less: Changes in Net Working Capital
|
|
|
(0.6
|
)
|
|
|
(5.0
|
)
|
|
|
0.7
|
|
|
|
(4.8
|
)
|
|
|
(4.9
|
)
|
Less: Capital Expenditures
|
|
|
(12.0
|
)
|
|
|
(13.3
|
)
|
|
|
(13.6
|
)
|
|
|
(13.9
|
)
|
|
|
(14.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
$
|
28.5
|
|
|
$
|
26.9
|
|
|
$
|
36.8
|
|
|
$
|
31.9
|
|
|
$
|
32.7
|
|
(1)
|
Assumes a 36.5% tax rate.
|
24
Second Case (Includes Single Serve) ($ in millions)
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
Total Sales
|
|
$
|
407.0
|
|
|
$
|
477.5
|
|
|
$
|
544.0
|
|
|
$
|
618.1
|
|
|
$
|
661.0
|
|
EBITDA
|
|
$
|
54.4
|
|
|
$
|
71.3
|
|
|
$
|
94.3
|
|
|
$
|
111.4
|
|
|
$
|
117.4
|
|
Less: Amortization and Depreciation
|
|
|
(18.0
|
)
|
|
|
(20.0
|
)
|
|
|
(20.8
|
)
|
|
|
(20.9
|
)
|
|
|
(21.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Operations (EBIT)
|
|
$
|
36.4
|
|
|
$
|
51.3
|
|
|
$
|
73.5
|
|
|
$
|
90.5
|
|
|
$
|
95.9
|
|
Cash Flow Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2012E
|
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
EBITDA
|
|
$
|
54.4
|
|
|
$
|
71.3
|
|
|
$
|
94.3
|
|
|
$
|
111.4
|
|
|
$
|
117.4
|
|
Less: Interest
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Less: Cash taxes (1)
|
|
|
(13.3
|
)
|
|
|
(18.7
|
)
|
|
|
(26.8
|
)
|
|
|
(33.0
|
)
|
|
|
(35.0
|
)
|
Less: Changes in Net Working Capital
|
|
|
(0.6
|
)
|
|
|
(16.3
|
)
|
|
|
(10.5
|
)
|
|
|
(17.8
|
)
|
|
|
(9.6
|
)
|
Less: Capital Expenditures
|
|
|
(12.0
|
)
|
|
|
(23.8
|
)
|
|
|
(19.3
|
)
|
|
|
(19.6
|
)
|
|
|
(25.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
$
|
28.5
|
|
|
$
|
12.5
|
|
|
$
|
37.7
|
|
|
$
|
41.0
|
|
|
$
|
47.8
|
|
(1)
|
Assumes a 36.5% tax rate.
|
EBITDA and free cash flow are non-GAAP financial measures. These non-GAAP financial measures are not calculated in accordance with, or a
substitute for financial measures calculated in accordance with, GAAP and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, in that they exclude a
variety of charges and credits that are required to be included in a GAAP presentation.
O
PINION
OF
C
ITIGROUP
G
LOBAL
M
ARKETS
I
NC
.
Peets has retained
Citigroup as a financial advisor in connection with the Merger. In connection with this engagement, Peets requested that Citigroup evaluate the fairness, from a financial point of view, of the $73.50 in cash per share consideration to be
received in the Merger by holders of Peets common stock (other than JAB, Merger Sub and certain of their respective affiliates, the Company and its subsidiaries and dissenting shareholders). On July 21, 2012, at a meeting of our board of
directors at which the Merger was approved, Citigroup rendered to our board of directors an oral opinion, confirmed by delivery of a written opinion dated July 22, 2012, to the effect that, as of that date and based on and subject to the
matters described in its opinion, the $73.50 in cash per share consideration to be received in the Merger by holders of Peets common stock (other than JAB, Merger Sub and certain of their respective affiliates, the Company and its subsidiaries
and dissenting shareholders) was fair, from a financial point of view, to such holders.
The full text of Citigroups
written opinion, dated July 22, 2012, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex B and is incorporated into this proxy
statement by reference. The description of Citigroups opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Citigroups opinion.
Citigroups opinion was provided for the
information of our board of directors (in its capacity as such) in connection with its evaluation of the Merger consideration from a financial point of view and did not address any other aspects or implications of the Merger. Citigroup was not
requested to consider, and its opinion did not address, the underlying business decision of Peets to effect the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for Peets or
the
25
effect of any other transaction in which Peets might engage. Citigroups opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such
shareholder should vote or act on any matters relating to the Merger or otherwise.
In arriving at its opinion, Citigroup:
|
|
|
reviewed the Merger Agreement;
|
|
|
|
held discussions with certain senior officers, directors and other representatives and advisors of Peets concerning the business, operations and
prospects of Peets;
|
|
|
|
reviewed certain financial projections and other information and data relating to Peets provided to or discussed with Citigroup by Peets
management;
|
|
|
|
reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things, current and historical market
prices and trading volumes of Peets common stock, Peets historical and projected earnings and other operating data and Peets capitalization and financial condition;
|
|
|
|
analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations
Citigroup considered relevant in evaluating those of Peets;
|
|
|
|
analyzed, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in evaluating the
Merger; and
|
|
|
|
conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup deemed
appropriate in arriving at its opinion.
|
In rendering its opinion, Citigroup assumed and relied, without
independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citigroup and upon the assurances of Peets management
that it was not aware of any relevant information that was omitted or remained undisclosed to Citigroup. With respect to the financial projections and other information and data provided to or otherwise reviewed by or discussed with Citigroup
relating to Peets, Citigroup was advised by Peets management, and Citigroup assumed, with Peets consent, that such projections and other information and data were reasonably prepared on bases reflecting the best currently available
estimates and judgments of Peets management as to the future financial performance of Peets.
Citigroup did not
make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Peets, and Citigroup did not make any physical inspection of the properties or assets of Peets.
Citigroup assumed, with Peets consent, that the Merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary
regulatory or third-party approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Peets or the Merger.
Citigroups opinion did not address any terms (other than the Merger consideration to the extent expressly specified in its opinion)
or other aspects or implications of the Merger, including, without limitation, the form or structure of the Merger or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Merger or otherwise.
Citigroup was not requested to, and it did not, solicit third-party indications of interest in the possible acquisition of all or a part of Peets. Citigroup expressed no view as to, and its opinion did not address, the fairness (financial or
otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Merger consideration or otherwise. In addition, Citigroup
did not express any opinion as to the prices at which Peets common stock would trade at any time. Citigroups opinion was necessarily based on information available to Citigroup and financial, stock market and other conditions and
26
circumstances existing and disclosed to Citigroup as of the date of its opinion. As Peets was aware, the credit, financial and stock markets have been experiencing unusual volatility, and
Citigroup expressed no opinion or view as to any potential effects of such volatility on Peets or the Merger. Except as described in this summary, Peets imposed no other instructions or limitations on Citigroup with respect to the
investigations made or procedures followed by Citigroup in rendering its opinion.
In preparing its opinion, Citigroup
performed a variety of financial and comparative analyses, including those described below. This summary of the analyses is not a complete description of Citigroups opinion or the analyses underlying, and factors considered in connection with,
Citigroups opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citigroup arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not
draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citigroup believes that its analyses must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Citigroup considered industry performance; general business, economic, market and financial
conditions; and other matters existing as of the date of its opinion, many of which are beyond the control of Peets. No company, business or transaction reviewed is identical to Peets or the Merger. An evaluation of these analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, business segments or
transactions reviewed.
The estimates contained in Citigroups analyses and the valuation ranges resulting from any
particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citigroups analyses are
inherently subject to substantial uncertainty.
Citigroup was not requested to, and it did not, recommend the specific
consideration payable in the Merger. The type and amount of consideration payable in the Merger was determined through negotiations between Peets and the JAB group, and the decision to enter into the Merger Agreement was solely that of our
board of directors. Citigroups opinion was only one of many factors considered by our board of directors in its evaluation of the Merger and should not be viewed as determinative of the views of our board of directors or management with
respect to the Merger or the Merger consideration.
The following is a summary of the material financial analyses provided to
our board of directors in connection with Citigroups opinion.
The financial analyses summarized below include information presented in tabular format. In order to fully understand Citigroups financial analyses, the tables must be read
together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Citigroups financial analyses.
Selected Publicly Traded Companies Analysis
. Citigroup reviewed financial and stock market information of Peets and seven selected publicly held companies in the coffee
and tea industry. In addition, Citigroup also reviewed financial and stock market information of four selected companies in the broader food and beverage industry with high-growth financial targets as estimated by research analysts. These companies
were selected
27
because, among other reasons, they possessed certain operational or business characteristics which in Citigroups view were similar to those of Peets (or a portion of Peets) or
otherwise relevant for purposes of comparison. Citigroup reviewed, among other things, equity values of the selected companies based on closing stock prices on July 20, 2012 as a multiple of calendar year 2012 estimated earnings per share
(commonly referred to as EPS). Citigroup also reviewed firm values of the selected companies, calculated as fully diluted equity value based on closing stock prices on July 20, 2012, plus total debt and minority interests, less investments in
unconsolidated affiliates, cash and marketable securities, as a multiple of calendar year 2012 estimated earnings before interest, taxes, depreciation and amortization (commonly referred to as EBITDA). These selected companies and their calendar
year 2012 estimated EPS multiples were as follows:
|
|
|
|
|
|
|
|
|
Coffee and Tea
|
|
Closing Stock Price
as
Multiple of
CY2012E EPS
|
|
|
Firm Value as
Multiple
of CY2012E EBITDA
|
|
Starbucks Corporation
|
|
|
26.7x
|
|
|
|
14.1x
|
|
Tim Hortons Inc.
|
|
|
19.3x
|
|
|
|
11.7x
|
|
D.E Master Blenders 1753 N.V.
|
|
|
20.2x
|
|
|
|
7.7x
|
|
Dunkin Brands Group, Inc.
|
|
|
26.6x
|
|
|
|
15.5x
|
|
Green Mountain Coffee Roasters, Inc.
|
|
|
6.9x
|
|
|
|
3.9x
|
|
Teavana Holdings, Inc.
|
|
|
19.9x
|
|
|
|
9.3x
|
|
Caribou Coffee Company, Inc.
|
|
|
22.8x
|
|
|
|
6.1x
|
|
|
|
|
|
|
|
|
|
|
High-Growth Consumer (1)
|
|
Closing Stock Price as
Multiple of
CY2012E EPS
|
|
|
Firm Value as
Multiple
of CY2012E EBITDA
|
|
Monster Beverage Corporation
|
|
|
31.6x
|
|
|
|
17.9x
|
|
SodaStream International Ltd.
|
|
|
18.3x
|
|
|
|
14.4x
|
|
Annies, Inc.
|
|
|
53.6x
|
|
|
|
32.0x
|
|
Smart Balance, Inc.
|
|
|
34.9x
|
|
|
|
16.3x
|
|
(1)
|
Includes selected consumer companies with 17% or greater long-term growth in EPS (typically defined over a five year period) per FactSet and a projected compound annual
growth rate in sales of 10% or greater for 2011 2013E, based on analysts estimates.
|
Using the
multiples above as a general guide and using its professional judgment, Citigroup then applied (i) a range of selected multiples of calendar year 2012 estimated EPS of 20x to 30x derived from the selected coffee and tea companies and
(ii) a range of selected multiples of calendar year 2012 estimated EPS of 30x to 40x derived from the selected high-growth consumer companies to Peets estimated EPS for calendar year 2012. Estimated financial data of the selected
companies was based on research analysts mean consensus estimates as compiled by Reuters, public filings and other publicly available information. Estimated calendar year 2012 EPS for Peets was based on internal estimates of Peets
management of $1.72. This analysis indicated the following implied per-share equity reference ranges for Peets, as compared to the per-share Merger consideration:
|
|
|
|
|
Implied Per-Share Equity
Reference Range for Peets:
|
|
Per-Share Merger Consideration:
|
Coffee and Tea Comparable Companies
|
|
High-Growth Comparable Companies
|
|
|
$34.40 $51.55
|
|
$51.55 $68.75
|
|
$73.50
|
Selected Precedent Transactions Analysis
. Using publicly available
information, Citigroup reviewed 11 selected transactions in the coffee and tea industry and 11 selected transactions in three other high-growth segments within the broader food and beverage industry, including four transactions in the health and
wellness segment, four transactions in the nutrition segment and three transactions in the confectionery segment. These transactions were selected because, among other reasons, they involved companies which operated in the segment of the industry in
which Peets (or a portion of Peets) operates or which, in Citigroups view, were otherwise relevant for purposes of comparison. Citigroup reviewed transaction values, calculated as the purchase
28
price paid for the target companys equity, plus total debt and minority interests, less investments in unconsolidated affiliates, cash and marketable securities, in the selected
transactions as a multiple of last 12 months EBITDA (commonly referred to as LTM EBITDA). These transactions and multiples were as follows (data for which information was not publicly available at the time of announcement of the relevant transaction
has been designated as NA):
|
|
|
|
|
|
|
|
|
|
|
|
|
Announcement Date
|
|
Acquirer
|
|
Target
|
|
Firm Value /
LTM EBITDA
|
|
|
Coffee and Tea Precedent Transactions
|
|
|
|
11/23/2009
|
|
Green Mountain Coffee Roasters, Inc.
|
|
Diedrich Coffee, Inc.
|
|
|
35.2x
|
(1)
|
|
|
|
|
|
|
|
11/13/2009
|
|
Green Mountain Coffee Roasters, Inc.
|
|
Timothys Coffees of the World, Inc.
|
|
|
19.4x
|
|
|
|
|
|
|
|
|
09/14/2010
|
|
Green Mountain Coffee Roasters, Inc.
|
|
Van Houtte, Inc.
|
|
|
13.2x
|
|
|
|
|
|
|
|
|
03/24/2008
|
|
Sun Capital Partners, Inc.
|
|
Timothys Coffees of the World, Inc.
|
|
|
11.1x
|
|
|
|
|
|
|
|
|
06/04/2008
|
|
The J.M. Smucker Company
|
|
The Folgers Coffee Company
|
|
|
8.5x
|
|
|
|
|
|
|
|
|
05/07/2007
|
|
Littlejohn & Co., LLC
|
|
Van Houtte, Inc.
|
|
|
8.4x
|
|
|
|
|
|
|
|
|
10/23/2005
|
|
Massimo Zanetti Beverage USA, Inc.
|
|
SLE Retail (Sara Lee Corp. business unit)
|
|
|
8.3x
|
|
|
|
|
|
|
|
|
06/25/2006
|
|
Tata Tea, Ltd.
|
|
Eight OClock Coffee Company
|
|
|
8.1x
|
|
|
|
|
|
|
|
|
04/23/2012
|
|
UCC Holdings Co., Ltd.
|
|
United Coffee
|
|
|
N/A
|
|
|
|
|
|
|
|
|
05/16/2011
|
|
The J.M. Smucker Company
|
|
Rowland Coffee Roasters, Inc.
|
|
|
N/A
|
|
|
|
|
|
|
|
|
10/24/2011
|
|
The J.M. Smucker Company
|
|
SLE Foodservice (Sara Lee Corp. business unit)
|
|
|
N/A
|
|
29
|
|
|
|
|
|
|
|
|
|
|
High-Growth Consumer Precedent Transactions
|
|
|
|
|
|
|
|
|
|
|
Health and Wellness
|
|
|
|
|
|
|
|
|
|
|
06/30/2003
|
|
Dean Foods Company
|
|
Horizon Organic Holding Corporation
|
|
|
27.3x
|
|
|
|
10/30/2001
|
|
The Coca-Cola Company
|
|
Odwalla, Inc.
|
|
|
22.3x
|
|
|
|
03/05/2000
|
|
The Hain Food Group, Inc.
|
|
Celestial Seasonings, Inc.
|
|
|
20.8x
|
|
|
|
03/18/2011
|
|
General Mills, Inc.
|
|
Yoplait, S.A.S.
|
|
|
13.2x
|
|
|
|
|
|
Nutrition
|
|
|
|
|
|
|
|
|
|
|
07/09/2007
|
|
Groupe Danone, SA
|
|
Royal Numico NV
|
|
|
26.0x
|
|
|
|
04/23/2012
|
|
Nestle, SA
|
|
Pfizer Nutrition (Pfizer business unit)
|
|
|
23.7x
|
|
|
|
12/14/2006
|
|
Nestle, SA
|
|
Novartis Medical Nutrition (Novartis business unit)
|
|
|
19.5x
|
|
|
|
04/12/2007
|
|
Nestle, SA
|
|
Gerber Products Co.
|
|
|
15.7x
|
|
|
|
|
|
Confectionery
|
|
|
|
|
|
|
|
|
|
|
04/28/2008
|
|
Mars, Inc.
|
|
Wm. Wrigley Jr. Company
|
|
|
18.3x
|
|
|
|
09/07/2009
|
|
Kraft Foods, Inc.
|
|
Cadbury PLC
|
|
|
13.7x
|
|
|
|
12/17/2002
|
|
Cadbury Schweppes PLC
|
|
Adams confectionery business (Pfizer business unit)(2)
|
|
|
12.8x
|
|
(1)
|
LTM EBITDA based on Diedrich Current Report on Form 10-Q filed for the period ended December 9, 2009.
|
(2)
|
Adjusted for the value of potential tax benefits resulting from the transaction.
|
Using the transactions above where multiples were available as a general guide and taking into account, among other things, differences in the proposed Merger of Peets, on the one hand, and the
selected transactions or companies involved in such transactions, on the other, Citigroup then applied a range of selected multiples of LTM EBITDA of 8.0x 13.0x derived from the selected coffee and tea industry transactions and a range of
selected multiples of LTM EBITDA of 17.0x 24.0x derived from the high-growth consumer industry transactions to Peets LTM EBITDA. Financial data for the selected transactions was based on public filings and publicly available financial
information at the time of announcement of the relevant transaction. Financial data for Peets was based on internal estimates of Peets LTM EBITDA through July 1, 2012 of $43.8 million as provided by Peets management. This
analysis indicated the following implied per-share equity reference range for Peets, as compared to the per-share Merger consideration:
|
|
|
|
|
Implied Per-Share Equity
Reference Range for Peets:
|
|
Per-Share Merger Consideration:
|
Coffee and Tea Selected
Transactions
|
|
High-Growth Selected Transactions
|
|
|
$29.15 $44.90
|
|
$57.35 $78.80
|
|
$73.50
|
Discounted Cash Flow Analysis
. Citigroup performed a discounted cash flow
analysis of Peets to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Peets could generate for the last half of fiscal year 2012 through the full fiscal year 2016 (and terminal value for
LTM EBITDA thereafter), based on internal estimates of Peets management under two cases reflecting alternative
30
business scenarios. One case, which we refer to as the base case, was based on Peets current financial plan without the benefit of entering the single serve market, and the other case,
which we refer to as the second case, assumed that Peets would execute its plan for the single serve opportunity.
Citigroup also evaluated managements internal estimates of the single serve opportunity after applying certain sensitivities to
take into account the possibility that only 50% of the sales projected in managements plan for the single serve opportunity are realized, while operating margins, capital expenditures and depreciation expense for the single serve opportunity
are similar to managements internal estimates, which is referred to as Citigroup Singe Serve Sensitivity. Estimated terminal values for Peets were calculated by applying a Firm Value / EBITDA multiple range of 10.0x 12.0x to
Peets calendar year 2016 estimated EBITDA. The cash flows and terminal values were then discounted to present value using discount rates ranging from 7.0% to 9.0% for the cash flows of the existing business and 12.0% 14.0% for the cash
flows projected from the single serve opportunity. These discount rate ranges were derived utilizing a weighted average cost of capital analysis based on certain financial metrics, and taking into account market volatility, for Peets and
selected companies in the coffee and tea industry and selected companies in the broader food and beverage industry with high-growth financial targets as estimated by research analysts. For the single serve opportunity cash flows, Citigroup employed
a higher discount rate to account for the lack of an existing single serve business and the uncertainties associated with executing managements plan for the single serve opportunity. The increase in the discount rate used for the single serve
opportunity was consistent with small capitalization premiums employed by Citigroup in analyzing small capitalization companies.
This analysis indicated the following implied per-share equity reference ranges for Peets, as compared to the per-share Merger consideration:
|
|
|
|
|
|
|
Implied Per-Share
Equity
Reference Range for Peets:
|
|
Per-Share Merger Consideration
|
|
|
|
|
$73.50
|
Base Case Excluding Single Serve
|
|
$48.40 $60.10
|
|
|
Second Case Including Single Serve Opportunity
|
|
$67.50 $84.95
|
|
|
Citigroup Single Serve Sensitivity
|
|
$57.25 $71.75
|
|
|
31
Leveraged Buyout Analysis
. Citigroup performed a leveraged
buyout analysis to estimate the theoretical purchase prices that could be paid by a hypothetical financial buyer in an acquisition of Peets taking into account the potential pro forma leverage structure of Peets that could result from
financing such acquisition under customary market terms and assuming that such financial buyer would attempt to realize a return on its investment in Peets fiscal year 2017 at customary rates of return for a financial buyer. Similar to the
discounted cash flow analysis discussed above, Citigroup examined two alternative scenarios for a potential acquisition by a hypothetical financial buyer. The first scenario was based on Peets current financial plan without the benefit of
entering the single serve market, and the second assumed that Peets management would execute its plan for the single serve opportunity. Estimated financial data of Peets was based on internal estimates of Peets management. For
the purposes of the leveraged buyout analysis, Citigroup assumed a pro forma funded leverage of 5x Peets calendar year 2012E EBITDA, while estimated exit values for Peets were calculated using an exit multiple of 11x Peets fiscal
year 2017 EBITDA. Citigroup then derived a range of theoretical purchase prices based on an assumed targeted internal rate of return for a financial buyer of approximately 20.0% to 25.0%. This analysis indicated the following approximate implied
per-share equity value reference range for Peets, as compared to the per-share Merger consideration:
|
|
|
|
|
|
|
Implied Per-Share
Equity
Reference Range for Peets:
|
|
Per-Share Merger Consideration
|
|
|
|
|
$73.50
|
Base Case Excluding Single Serve
|
|
$37.50 $41.00
|
|
|
Second Case Including Single Serve Opportunity
|
|
$51.20 $57.75
|
|
|
Other Information
. Citigroup also noted for our board of directors certain
additional factors that were not considered part of Citigroups financial analysis with respect to its opinion but were referenced for informational purposes, including, among other things, the following:
|
|
|
historical trading prices of Peets common shares during the 52-week period ended July 20, 2011, which reflected intraday low and high share
prices during such period of $51.16 to $77.60 per share;
|
|
|
|
Share price targets for Peets common shares in recently published, publicly available Wall Street research analyst reports, which indicated low
and high share price targets of $51.00 to $95.00 per share; and
|
|
|
|
premiums paid in selected transactions with firm values between $0.5 billion and $1.5 billion announced between January 1, 2006 to June 30,
2012 which, utilizing a selected range of premiums one trading day prior to public announcement of the selected transactions, indicated an implied per-share equity value reference range for Peets of a $70.35 to $76.10 per share.
|
Miscellaneous
. Under the terms of Citigroups engagement, Peets
has agreed to pay Citigroup an aggregate fee equal to approximately $8,600,000 for its financial advisory services in connection with the Merger, all of which is contingent upon completion of the Merger. Peets also has agreed to reimburse
Citigroup for reasonable expenses incurred by Citigroup in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Citigroup and related persons against liabilities, including liabilities under the
federal securities laws, arising out of its engagement. Citigroup and its affiliates in the past have provided services to Peets and the JAB group unrelated to the proposed Merger, for which services Citigroup and such affiliates have received
compensation, including, without limitation, (i) assisting Peets in the evaluation of potential value maximizing alternatives for its retail operations and (ii) providing cash equity trading services to the JAB group to allow an
affiliate of JAB to make open market purchases of shares in DE Master Blenders 1753 N.V., a Netherlands-based international coffee company. This affiliate paid Citigroup a fee of approximately $1,600,000 for these trading services.
32
In the ordinary course of our business, Citigroup and its affiliates may actively trade or
hold the securities of Peets and affiliates of JAB for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citigroup and its affiliates (including
Citigroup Inc. and its affiliates) may maintain relationships with Peets, the JAB group and their respective affiliates.
Peets selected Citigroup as its financial advisor in connection with the Merger based on Citigroups reputation, experience
and familiarity with its industry. Citigroup is an internationally recognized investment banking firm which regularly engages in the valuation of businesses and their securities in connection with Mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The issuance of Citigroups opinion was authorized by Citigroups fairness opinion
committee.
D
ELISTING
AND
D
EREGISTRATION
OF
P
EET
S
C
OMMON
STOCK
Following consummation of the Merger,
the registration of the Companys common stock and our reporting obligations with respect to our common stock under the Exchange Act will be terminated upon application to the SEC. In addition, following consummation of the Merger, shares of
our common stock will no longer be listed on any stock exchange, including the NASDAQ Global Select Market.
A
CCOUNTING
JAB will account for the Merger as a purchase business combination, as that term is used under
U.S. generally accepted accounting principles, for accounting and financial reporting purposes. Under purchase accounting, our assets (including identifiable intangible assets) and liabilities (including contracts and other commitments) as of
the effective time of the Merger will likely be recorded at their respective fair values. Any excess of purchase price over assets acquired and liabilities assumed will be recorded as goodwill. Financial statements issued after the Merger would
reflect these fair values and would not be restated retroactively to reflect our historical financial position or results of operations.
E
FFECTS
ON
P
EET
S
IF
THE
M
ERGER
IS
NOT
C
OMPLETED
If our shareholders do not adopt and approve the Merger
Agreement, or if the Merger is not consummated for any other reason, shareholders will not receive any payment for their shares of Peets common stock in connection with the Merger. Instead, Peets will remain a public company and our
common stock will continue to be listed and traded on NASDAQ. In addition, if the Merger is not consummated, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our
shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic, regulatory and market conditions. Accordingly, if the Merger is not consummated, there can
be no assurance as to the effect of these risks and opportunities on the future value of your shares of Peets common stock. From time to time, our board of directors will evaluate and review, among other things, our business operations,
properties, dividend policy and capitalization and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If our shareholders do not adopt and approve the Merger Agreement,
or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to Peets will be offered, or that the business, prospects or results of operations of Peets will not be adversely
impacted. We may also be required to pay the termination fee as described under The Merger AgreementTermination Fee.
I
NTERESTS
OF
O
UR
D
IRECTORS
AND
E
XECUTIVE
O
FFICERS
IN
THE
M
ERGER
In considering the recommendation of
our board of directors with respect to the Merger, you should be aware that some of our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. These
interests may present them with actual or potential
33
conflicts of interest, and these interests, to the extent material, are described below. Our board of directors was aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the Merger.
The following table and the related footnotes present information about the compensation
payable to the named executive officers of Peets in connection with the Merger. The compensation shown in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about
compensation for each named executive officer that is based on or otherwise relates to the Merger. Such compensation is subject to a nonbinding advisory vote of the shareholders of Peets at the Special Meeting, as described in this proxy
statement under Advisory Vote on Compensation. The cash and perquisites/benefits disclosure provided by this table is quantified assuming that the Merger closed, and that each individuals service was terminated without cause or
such individual resigned with good reason, on July 31, 2012, the latest practicable date prior to the filing of this proxy statement. The equity disclosure provided by this table is quantified assuming that the Merger closed on July 31,
2012. None of our executive officers are entitled to any pension or non-qualified deferred compensation benefits enhancements, tax reimbursement payments, or any other form of compensation that is based on or otherwise related to the Merger.
M
ERGER
-R
ELATED
C
OMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash (1)
|
|
|
Equity (2)
|
|
|
Perquisites/Benefits (3)
|
|
|
Total
|
|
Patrick J. ODea
|
|
$
|
1,638,624
|
(4)
|
|
$
|
3,571,642
|
|
|
$
|
63,467
|
(5)
|
|
$
|
5,273,733
|
|
Thomas P. Cawley
|
|
$
|
644,041
|
(6)
|
|
$
|
1,234,196
|
|
|
$
|
31,829
|
(7)
|
|
$
|
1,910,066
|
|
Kay L. Bogeajis
|
|
$
|
416,071
|
(8)
|
|
$
|
651,931
|
|
|
$
|
14,244
|
(9)
|
|
$
|
1,082,246
|
|
Shawn W. Conway
|
|
$
|
436,519
|
(10)
|
|
$
|
1,447,026
|
|
|
$
|
27,404
|
(11)
|
|
|
$1,910,949
|
|
(1)
|
Each executive is entitled to double-trigger cash severance pay if his or her employment is terminated by Peets or its successor without cause or by the executive
with good reason within one year after the Merger. These amounts are quantified assuming that the Merger closed, and that each individuals service was terminated without cause or such individual resigned with good reason, on July 31,
2012. The amounts attributable to base salaries would be paid over the applicable severance periods and the amounts attributable to pro-rated bonuses would be paid in lump sums.
|
(2)
|
These amounts represent the estimated intrinsic value of the Peets stock options that accelerate and vest in connection with the Merger. Intrinsic
value refers to the excess of the aggregate fair value of the per-share Merger consideration over the aggregate exercise price of the Peets stock options held by the executive that were unvested as of July 31, 2012. These amounts
are payable pursuant to the Merger Agreement on a single-trigger basis and the payments are not conditioned upon termination of employment. These payments will be made in a lump sum promptly following the closing of the Merger (less applicable
withholding taxes).
|
(3)
|
Each executive is entitled to double-trigger health care benefits, life and disability insurance and outplacement assistance if his or her employment is terminated by
Peets or its successor without cause or by the executive with good reason within one year after the Merger. These amounts are quantified assuming that the Merger closed, and that each individuals service was terminated without cause or
such individual resigned with good reason, on July 31, 2012. These amounts would be paid over the applicable severance periods.
|
(4)
|
Represents a payment equal to $1,297,920 for 24 months base salary in effect at July 31, 2012 and $340,704 based on Mr. ODeas current target bonus
opportunity prorated through July 31, 2012
|
(5)
|
Represents a payment equal to $40,225 for 24 months of continued health care benefits, $871 for 24 months of continued life insurance, $12,371 for 24 months of
continued disability insurance and $10,000 for outplacement assistance.
|
(6)
|
Represents a payment equal to $542,731 for 15 months base salary in effect at July 31, 2012 and $101,310 based on Mr. Cawleys current target bonus
opportunity prorated through July 31, 2012.
|
(7)
|
Represents a payment equal to $21,611 for 15 months of continued health care benefits, $218 for 6 months of continued life insurance and $10,000 for outplacement
assistance.
|
34
(8)
|
Represents a payment equal to $337,355 for 12 months base salary in effect at July 31, 2012 and $78,716 based on Ms. Bogeajis current target bonus
opportunity prorated through July 31, 2012.
|
(9)
|
Represents a payment equal to $3,840 for 12 months of continued health care benefits, $404 for 6 months of continued life insurance and $10,000 for outplacement
assistance.
|
(10)
|
Represents a payment equal to $353,934 for 12 months base salary in effect at July 31, 2012 and $82,585 based on Mr. Conways current target bonus
opportunity prorated through July 31, 2012.
|
(11)
|
Represents a payment equal to $17,289 for 12 months of continued health care benefits, $115 for 6 months of continued life insurance and $10,000 for outplacement
assistance.
|
As a condition of receiving the severance benefits set forth in the table above, all named
executive officers must execute a full waiver and release of all claims in our favor and abide by certain covenants regarding confidentiality and non-solicitation of our employees. In addition, Mr. ODea and Mr. Cawley must abide by
certain non-compete covenants for two years, unless waived. Certain of these amounts may also be subject to required six-month delays under Section 409A of the Code.
The payments set forth in the table above will be reduced in the event that such payments are subject to the excise tax under Section 280G of the Code and a reduction would result in a greater
payment to the named executive officer on an after-tax basis. We do not expect that any payments to our named executive officers will need to be reduced.
Treatment of Stock Options and Restricted Stock Unit Awards
We will
take all necessary action to accelerate the vesting of each outstanding stock option, including those held by our current executive officers and directors, effective as of the effective time of the Merger. As with our other employees generally, each
stock option outstanding immediately prior to the effective time of the Merger (whether vested or unvested) will be cancelled and converted into the right to receive, with respect to each share of Peets common stock subject to such stock
option, a cash payment equal to the excess, if any, of $73.50 over the exercise price per share of such stock option, without interest and less any applicable withholding taxes. If the exercise price of the option is equal to or exceeds $73.50, the
holder of such option will not be entitled to any Merger consideration.
Each outstanding restricted stock unit award (whether
vested or unvested) granted under our equity incentive plans and held by our employees will be cancelled and converted into the right to receive, with respect to each share of Peets common stock subject to such award, a cash payment equal to
$73.50, without interest and less any applicable withholding taxes. As of July 31, 2012, there were no restricted stock unit awards held by our current executive officers or directors.
Executive Officers
As of July 31, 2012, there were 289,999
shares of our common stock subject to outstanding stock options granted under our equity incentive plans to our current executive officers. Assuming no options are exercised between July 31, 2012 and the consummation of the Merger, our
executive officers will receive, in the aggregate, $10,661,111 pursuant to the Merger Agreement in connection with the cancellation of their options, of which $6,904,795 is attributable to options vested as of July 31, 2012 and $3,756,316 is
attributable to options that were not vested as of such date. Of the amounts set forth above, Patrick J. ODea, our Chief Executive Officer and President, will receive an aggregate amount of $5,841,371, of which $2,269,729 is attributable to
options vested as of July 31, 2012 and $3,571,642 is attributable to options that were not vested as of such date.
Non-Employee
Directors
As of July 31, 2012, there were 151,515 shares of our common stock subject to outstanding stock options
granted under our equity incentive plans to our non-employee directors. Assuming no options are exercised between July 31, 2012 and the consummation of the Merger, our non-employee directors will receive, in the
35
aggregate, $5,256,783 pursuant to the Merger Agreement in connection with the cancellation of their options, of which $5,044,000 is attributable to options vested as of July 31, 2012 and
$212,783 is attributable to options that were not vested as of such date.
Peets Director Compensation Arrangements and Other
Interests
The non-employee members of our board of directors are independent of and have no economic interest or
expectancy of an economic interest in JAB or its affiliates, and will not retain an economic interest in the surviving corporation or JAB following the Merger.
Other Interests
Prior to the effective time of the Merger, we
intend to amend our Key Employee Severance Benefit Plan to require prior written consent by a plan participant for any amendment made within twelve months following a change in control of the Company that adversely affects such participant. Each of
our executive officers with the title of vice president and above and certain other designated employees participates in the Key Employee Severance Benefit Plan.
Indemnification of Directors and Officers; Insurance
The Merger
Agreement provides that all existing rights to indemnification that the present and former directors and officers of the Company and our subsidiaries are entitled to that are contained in the organizational documents of the Company or any of its
subsidiaries as in effect as of July 21, 2012, or as provided in any indemnification agreements between the Company and any such person as in effect as of July 21, 2012, will survive the Merger and will be observed by the surviving
corporation to the fullest extent permitted by Washington law.
Prior to the effective time of the Merger, JAB or the
surviving corporation shall be required to purchase a tail policy to the Companys current policy of directors and officers liability insurance for a period of six years from the effective time of the Merger. Such policy will cover
claims arising from facts or events that occurred on or before the effective time of the Merger and will contain coverage and amounts at least as favorable to the indemnified parties as the coverage currently provided by the Companys current
directors and officers liability insurance policies in the aggregate. The cost of such tail policy will not exceed three times the annual premium currently paid by the Company for such insurance and, if the premium for tail insurance
coverage would exceed such amount, JAB or the surviving corporation shall be obligated to obtain a policy or policies with the greatest coverage available for a cost not exceeding such amount.
D
ISSENTERS
R
IGHTS
Under Washington law, you have the right to dissent from the Merger and to receive payment in cash for the fair value of your shares of Peets common stock, together with interest, if any, in lieu of
the consideration you would otherwise be entitled to receive pursuant to the Merger Agreement. These rights are known as dissenters rights. Shareholders may only exercise dissenters rights by strictly complying with the provisions of
Chapter 23B.13 of the WBCA, which is attached as
Annex C
to this proxy statement.
The following is intended as a brief
summary of the material provisions of the Washington statutory procedures required to be followed by a shareholder in order to dissent from the Merger and perfect dissenters rights. The following summary does not constitute any legal or other
advice, nor does it constitute a recommendation that shareholders exercise their dissenters rights under Chapter 23B.13. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by
reference to Chapter 23B.13 of the WBCA, the full text of which appears in
Annex C
to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Chapter 23B.13 of the WBCA may result in a
36
termination or waiver of your dissenters rights. All references in this summary to a shareholder are to the record holder of shares of Peets common stock unless otherwise
indicated.
Chapter 23B.13 requires that shareholders for whom dissenters rights are available be notified not less than
20 days before the shareholders meeting to vote on the Merger that dissenters rights will be available. A copy of Chapter 23B.13 must be included with such notice. This proxy statement constitutes our notice to our shareholders of the
availability of dissenters rights in connection with the Merger in compliance with the requirements of Chapter 23B.13. If you wish to consider exercising your dissenters rights, you should carefully review the text of Chapter 23B.13
contained in
Annex C
to this proxy statement since failure to timely and properly comply with the requirements of Chapter 23B.13 will result in the loss of your dissenters rights under Washington law.
A shareholder who wishes to assert dissenters rights must (i) deliver to Peets before the vote is taken by Peets
shareholders notice of the shareholders intent to demand payment for the shareholders shares if the Merger is effected, and (ii) not vote such shares in favor of the Merger and the Merger Agreement. Your notice to demand payment
should specify your name and mailing address, the number of shares of Peets common stock you own, and that you intend to demand cash payment for your shares of Peets common stock if the Merger and the Merger Agreement are approved. The
notice must be separate from your proxy. Your vote against the Merger Agreement, alone, will not constitute notice of your intent to exercise your dissenters rights. A shareholder wishing to deliver such notice should hand deliver or mail such
notice to Peets at the following address within the requisite time period:
Peets Coffee & Tea, Inc. 1400
Park Avenue Emeryville, California 94608 Attn: Corporate Secretary
A shareholder who wishes to exercise dissenters
rights generally must dissent with respect to all the shares the shareholder owns or over which the shareholder has power to direct the vote. However, if a record shareholder is a nominee for several beneficial shareholders some of whom wish to
dissent and some of whom do not, then the record holder may dissent with respect to all the shares beneficially owned by any one person by delivering to Peets a notice of the name and address of each person on whose behalf the record
shareholder asserts dissenters rights. A beneficial shareholder may assert dissenters rights directly by submitting to Peets the record shareholders written consent and by dissenting with respect to all the shares of which
such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote.
A shareholder who
does not deliver to Peets prior to the vote being taken by Peets shareholders a notice of the shareholders intent to demand payment for the fair value of the shares will lose the right to exercise dissenters
rights. In addition, your shares must either not be voted at the special meeting or must be voted against, or must abstain from voting on, the approval of the Merger and the Merger Agreement. Submitting a properly signed proxy card that is received
prior to the vote at the Special Meeting (and is not properly revoked) that does not direct how the shares of Peets common stock represented by proxy are to be voted will constitute a vote in favor of the Merger and the Merger Agreement and a
waiver of such shareholders statutory dissenters rights.
Within 10 days after the effective date of the Merger,
the surviving corporation must give written notice that the Merger has become effective to each shareholder who properly perfected his, her or its dissenters rights in accordance with Chapter 23B.13 of the WBCA. The notice must:
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State where the payment demand must be sent and where and when certificates for certificated shares must be deposited;
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Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received;
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Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the Merger and
requires that the person asserting dissenters rights certify whether or not the person acquired beneficial ownership of the shares before that date;
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Set a date by which the surviving corporation must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date
the notice is delivered; and
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Be accompanied by a copy of Chapter 23B.13 of the WBCA.
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If you wish to exercise dissenters rights, you must timely file the payment demand, certify whether you acquired beneficial ownership of the shares before the date set forth in the notice and
deliver share certificates as required in the notice. Failure to do so by the date set in the notice will cause you to lose your dissenters rights.
Within 30 days of the later of the effective date of the Merger or the date the payment demand is received, the surviving corporation must pay each dissenter with properly perfected dissenters
rights the amount the surviving corporation estimates to be the fair value of the shareholders shares, plus accrued interest. The payment must be accompanied by:
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The Companys 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, a statement of changes in shareholders equity for that year, and the latest available interim financial statements, if any;
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An explanation of how the surviving corporation estimated the fair value of the shares;
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An explanation of how the interest was calculated;
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A statement of the dissenters right to submit his, her or its own estimate of the fair value of the dissenters shares and demand payment
under Section 23B.13.280 of the WBCA; and
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A copy of Chapter 23B.13 of the WBCA.
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The fair value of the dissenters shares is the value of the shares immediately before the effective date of the Merger, excluding any appreciation or depreciation in anticipation of the Merger
unless such exclusion would be inequitable. Accrued interest means interest from the effective date of the Merger until the date of payment, at the rate at which we currently pay our principal bank loans.
The surviving corporation may elect to withhold payment 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 Merger. To the extent the surviving corporation elects to so withhold payment, after the effective
date of the Merger, the surviving corporation must estimate the fair value of the shares, plus accrued interest, and pay this amount to each dissenter who agrees to accept it in full satisfaction of the dissenters demand. The surviving
corporation must send with its offer an explanation of how it estimated the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenters right to demand payment under Section 23B.13.280 of
the WBCA.
Within 30 days of the surviving corporations payment or offer of payment, a dissenting shareholder may
deliver a notice of his, her or its own estimate of the fair value of such dissenters shares and amount of interest due, and demand payment of his, her or its estimate, less any payment made under Section 23B.13.250 of the WBCA, or reject
our offer under Section 23B.13.270 and demand payment of the dissenters estimate of the fair value of the dissenters shares and interest due, if:
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The dissenter believes that the amount paid under Section 23B.13.250 of the WBCA or offered under Section 23B.13.270 of the WBCA is less than
the fair value of the dissenters shares or that the interest due is incorrectly calculated;
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The surviving corporation failed to make payment under Section 23B.13.250 of the WBCA within 60 days after the date set for demanding payment; or
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We do not effect the Merger and do not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within
60 days after the date set for demanding payment.
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If a dissenter wishes to submit his, her or its own
estimate of the fair value of such dissenters shares, such dissenter must timely deliver the notice and demand payment. Failure to do so will cause such dissenter to waive this right to demand payment.
If the surviving corporation does not accept the dissenters estimate and the parties do not otherwise settle on a fair value, the
surviving corporation must commence a proceeding within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the surviving corporation fails to petition an appropriate
court within 60 days, it will be required to pay the dissenting shareholders estimated fair value of Peets common stock. The surviving corporation must commence the proceeding in the superior court of the county where its principal
office, or, if none in the state of Washington, its registered office, is located. The surviving corporation must make all dissenters whose demands remain unsettled parties to the proceeding. The surviving corporation may join as a party to the
proceeding any shareholder who claims to be a dissenter but who has not, in the opinion of the surviving corporation, complied with the provisions of Chapter 23B.13 of the WBCA. The court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. Each dissenter made a party to such proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of the dissenters shares, plus interest,
exceeds the amount paid by the surviving corporation, or the fair value, plus accrued interest, of the dissenters after-acquired shares for which the surviving corporation elected to withhold payment. The court will determine all costs of such
proceeding and will asses such costs against the surviving corporation, except to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Chapter 23B.13. The court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable.
Failure to comply
with all of the procedures set forth in Chapter 23B.13 of the WBCA will result in the loss of a shareholders statutory dissenters rights. In view of the complexity of Chapter 23B.13, shareholders who may wish to dissent from the Merger
and pursue dissenters rights should consult their legal advisors.
M
ATERIAL
U.S. F
EDERAL
I
NCOME
T
AX
C
ONSEQUENCES
OF
THE
M
ERGER
The following summary is a general discussion of the material U.S. federal income tax consequences to our shareholders, whose common stock is converted into cash in the Merger. This summary is based on
the current provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable Treasury Regulations, judicial authority and administrative rulings, all of which are subject to change, possibly with retroactive effect or different
interpretations. Any such change could alter the tax consequences to our shareholders as described herein. As a result, we cannot assure you that the tax consequences described herein will not be challenged by the Internal Revenue Service, or the
IRS, or will be sustained by a court if challenged by the IRS. No ruling from the IRS has been or will be sought with respect to any aspect of the transactions described herein. This summary is for the general information of our shareholders only
and does not purport to be a complete analysis of all potential tax effects of the Merger. For example, it does not consider the effect of any applicable state, local, foreign, estate or gift tax laws, or of any non-income tax laws. In addition,
this discussion does not address the tax consequences of transactions effectuated prior to or after the Merger (whether or not such transactions occur in connection with the Merger), including, without limitation, any exercise of a Peets stock
option or the acquisition or disposition of Peets shares other than pursuant to the Merger. In addition, it does not address all aspects of U.S. federal income taxation that may affect particular Peets shareholders in light of their
particular circumstances, including shareholders:
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that are insurance companies;
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that are tax-exempt organizations;
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that are financial institutions, regulated investment companies, or brokers or dealers in securities;
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who hold their common stock as part of a hedge, straddle or conversion transaction;
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that hold common stock which constitutes qualified small business stock for purposes of Section 1202 of the Code or section 1244 stock
for purposes of Section 1244 of the Code;
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who are liable for the U.S. federal alternative minimum tax;
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who are partnerships or any other entity classified as a partnership for U.S. federal income tax purposes, S corporations or other pass-through
entities;
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who acquired their common stock pursuant to the exercise of a stock option or otherwise as compensation;
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whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
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who do not hold their common stock as a capital asset for federal income tax purposes; or
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who are U.S. expatriates.
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The following summary also does not address the tax consequences for the holders of stock options. The following summary assumes that the Companys shareholders hold their common stock as a
capital asset (generally, property held for investment). For purposes of this discussion, a U.S. person is a beneficial owner of Peets common stock that is:
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an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;
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a corporation, including any entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust, if its administration is subject to the primary supervision of a U.S. court and one or more U.S. persons have the authority to control all
substantial decisions of the trust, or if it has made a valid election under applicable Treasury Regulations to be treated as a U.S. person.
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For purposes of this discussion, a non-U.S. person is a beneficial owner of Peets common stock that is not a U.S. person or a partnership (or an entity treated as a partnership for U.S.
federal income tax purposes). If a partnership holds Peets common stock, the U.S. federal income tax treatment of the partners will generally depend on the partners status and the activities of the partnership. Partners of partnerships
or other pass-through entities holding our capital stock are encouraged to consult their own tax advisors.
PEETS
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES, AND AS TO ANY TAX REPORTING REQUIREMENTS OF THE
MERGER AND RELATED TRANSACTIONS IN LIGHT OF THEIR OWN RESPECTIVE TAX SITUATIONS.
Treatment of Holders of Common Stock who are U.S.
Persons
The conversion of Peets common stock into the right to receive cash in the Merger will be a taxable
transaction to U.S. persons. Generally, this means that a Peets shareholder that is a U.S. person will recognize a capital gain or loss equal to the difference between (1) the amount of cash the shareholder receives in the Merger and
(2) the shareholders adjusted tax basis in the common stock surrendered therefor. This gain or loss will be long-term if the holder has held Peets common stock for more than one year as of the date of the Merger. Under current law,
any long-term capital gain recognized by a non-corporate Peets shareholder that is a U.S. person will be subject to U.S. federal income tax at a maximum rate of 15%. Generally, capital losses are deductible only against capital gains and are
not available to offset ordinary income; however, individuals are allowed to offset a limited amount of net capital losses against ordinary income.
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Dissenters rights
Under specified circumstances, a Peets shareholder may be entitled to dissenters rights in connection with the Merger. If a
Peets shareholder that is a U.S. person receives cash pursuant to the exercise of dissenters rights, such shareholder generally will recognize capital gain or loss, measured by the difference between the cash received and such
shareholders tax basis in such Peets common stock, which gain or loss will be long-term if the holder has held the Peets common stock for more than one year as of the date of the Merger. Interest, if any, awarded in an appraisal
proceeding by a court would be included in such shareholders income as ordinary income for U.S. federal income tax purposes. Such gain or loss and interest income will be subject to the capital gain tax rates (in the case of any gain) and the
loss allowance rules (in the case of any loss) and the ordinary income tax rates (in the case of interest awarded) under the tax law in effect at the time of the recognition of such payments for tax purposes, and may be subject to any additional
taxes then in effect, such as the Medicare tax of 3.8% on net investment income applicable to investment income recognized after December 31, 2012. Shareholders of Peets common stock who may exercise dissenters rights are urged to
consult their own tax advisors.
Non-U.S. Persons
Any gain realized by a non-U.S. person that is a Peets shareholder upon the receipt of cash in the Merger or pursuant to the exercise of dissenters rights generally will not be subject to U.S.
federal income tax unless: (i) the gain is effectively connected with a trade or business of the non-U.S. person in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the
non-U.S. person); (ii) the non-U.S. person is an individual who is present in the United States for 183 days or more in the taxable year of the Merger, and certain other conditions are met; or (iii) the non-U.S. person owned (actually or
constructively) more than 5% of Peets common stock at any time during the five-year period preceding the Merger, and Peets is or has been a U.S. real property holding corporation for U.S. federal income tax purposes at any
time during the five-year period preceding the Merger. Peets does not believe that it is currently a United States real property holding corporation and does not believe that it has been a United States real property holding corporation at any
time during the past five years.
An individual non-U.S. person whose gain is effectively connected with the conduct of a
trade or business in the United States (as described above in clause (i)) will be subject to tax on such gain in the same manner as a U.S. person, as described above, unless a specific treaty exemption applies. In addition, a non-U.S. person that is
a corporation may be subject to a U.S. corporate income tax at regular graduated rates, as well as a branch profits tax equal to 30% (or lesser rate under an applicable income tax treaty) on such effectively connected gain. An individual non-U.S.
person described in clause (ii) above generally will be subject to a flat 30% tax on any gain, which may be offset by U.S.-source capital losses.
In the case of cash received by a Peets shareholder who is a non-U.S. person pursuant to the exercise of dissenters rights, such cash will be subject to the tax and withholding rules in effect
at the time of the receipt of such payments for tax purposes, which may include Medicare taxes applicable to foreign estates and trusts for passive investment income recognized after December 31, 2012 and a 30% withholding on payments to
foreign financial institutions and non-financial foreign entities that fail to comply with additional certification, information reporting and other specified requirements on payments made after December 31, 2012 (which
effective date is currently proposed to be extended to December 31, 2013 for interest payments and to December 31, 2014 for proceeds from sales of stock). Shareholders of Peets common stock who may exercise dissenters rights
are urged to consult their own tax advisers.
Backup Withholding and Information Reporting
A Peets shareholder may be subject to backup withholding with respect to certain reportable payments
including taxable proceeds received in exchange for the shareholders Peets common stock in the Merger. The current backup withholding rate for 2012 is 28%, but this rate could change at any time. Backup withholding will generally not
apply, however, to a Peets shareholder who is a U.S. person and who furnishes the paying agent
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with a correct taxpayer identification number on IRS Form W-9 (and who does not subsequently become subject to backup withholding) or who is otherwise exempt from backup withholding, such as a
corporation. Peets shareholders who fail to provide their correct taxpayer identification numbers may be subject to penalties imposed by the IRS. In addition, certain non-U.S. persons such as certain nonresident aliens may establish an
exemption from backup withholding by delivering the proper version of IRS Form W-8 certifying their non-U.S. status. Each Peets shareholder and, if applicable, each other payee, should complete and sign the IRS Form W-9 included with the
letter of transmittal (or other applicable form such as an IRS Form W-8 in the case of non-U.S. persons) in order to provide the information and certification necessary to avoid the imposition of backup withholding, unless an exemption applies and
is established in a manner satisfactory to the paying agent. Any amounts withheld from payments to a Peets shareholder under the backup withholding rules are generally not an additional tax and may be refunded or allowed as a credit against
Peets shareholders U.S. federal income tax liability, provided that the shareholder furnishes the required information to the IRS in a timely manner.
THE FOREGOING DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IS FOR OUR SHAREHOLDERS GENERAL INFORMATION ONLY. ACCORDINGLY, OUR SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
R
EGULATORY
M
ATTERS
Under the HSR Act and the
rules that have been promulgated thereunder, certain acquisitions of voting securities or assets may not be consummated unless Premerger Notification and Report Forms have been filed with the Antitrust Division of the Department of Justice (the
Antitrust Division) and the Federal Trade Commission (the FTC) and all waiting periods required by the HSR Act have expired or been terminated. Pursuant to the Merger Agreement, the Company and JAB have each agreed to
(i) make a filing under the HSR Act as soon as practicable and in any event no later than August 17, 2012, unless the Company and JAB agree otherwise, (ii) use reasonable best efforts to supply as soon as practicable any additional
information and documentary material reasonably requested pursuant to the HSR Act and (iii) use reasonable best efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. The
Merger Agreement also requires us and JAB to file as promptly as practicable all documentation to effect all necessary notices, reports or other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and
authorizations necessary from any third party or any governmental entity in connection with the Merger and the transactions contemplated by the Merger Agreement.
In accordance with the Merger Agreement, JAB and Peets intend to file required notifications under the HSR Act no later than August 17, 2012. The waiting period under the HSR Act will expire at
11:59 p.m., Eastern time, 30 days after complete filings are submitted, unless earlier terminated by the Antitrust Division and the FTC. The Antitrust Division or the FTC may extend the waiting period by requesting additional information or
documentary material. If such a request is made, the waiting period will be extended until 11:59 p.m., Eastern time, 30 calendar days after compliance with such requests, unless earlier terminated by the Antitrust Division and the FTC. If either
waiting period expires on a Saturday, Sunday or legal public holiday, then the period is extended until 11:59 p.m., Eastern time, the next day that is not a Saturday, Sunday or legal public holiday. Expiration or termination of the HSR Act waiting
period is a condition to closing for both us and JAB.
The Antitrust Division and the FTC routinely evaluate the legality
under the antitrust laws of proposed mergers and acquisitions. At any time before or after the consummation of any such transaction, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable
in the public interest, such as seeking to enjoin the Merger, seeking the divestiture of assets or imposing other conditions. State attorneys generals and certain private parties may also bring legal actions under the antitrust laws seeking similar
remedies. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, what the result will be.
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C
ERTAIN
R
ELATIONSHIPS
B
ETWEEN
JAB
AND
P
EET
S
There are no material
relationships between JAB and Merger Sub or any of their respective affiliates, on the one hand, and Peets or any of our affiliates, on the other hand, other than in respect of the Merger Agreement and those arrangements described above under
The MergerInterests of our Directors and Executive Officers in the Merger and the confidentiality agreement described below.
On July 5, 2012, we entered into a confidentiality agreement with an affiliate of JAB, effective as of July 4, 2012 and amended on July 15, 2012, pursuant to which both companies are
required (and have agreed to cause their affiliates) to hold and treat confidential information of the other party in confidence and are precluded from disclosing such information except in limited circumstances. These non-disclosure obligations
will continue until January 4, 2016.
L
ITIGATION
R
ELATED
TO
THE
M
ERGER
On July 24, 2012, a putative class action complaint was
filed in Alameda County Superior Court in California by a purported shareholder of the Company on behalf of himself and all other shareholders naming as defendants the Company, the members of its board of directors and the JAB group and alleging
that the members of the Companys board of directors breached their fiduciary duties, and that the Company and the JAB group aided and abetted the alleged breaches, in connection with the Companys agreement to be acquired by an affiliate
of JAB. As of August 2, 2012, at least five other similar putative class actions have been filed, four in Alameda County Superior Court and one in King County Superior Court in Washington, and more may be filed in the future. The lawsuits each
assert that the Company and its board of directors engaged in a flawed process in negotiating the potential sale, obtained a price that was below the Companys actual value and agreed to provisions that would allegedly preclude another
interested buyer from making a financially superior proposal to acquire the Company. The lawsuits seek, among other things, declaratory and injunctive relief or rescission to enjoin or rescind the proposed acquisition, rescissory
damages, an accounting for damages, a constructive trust for any allegedly improper gains by defendants, pre- and post-judgment interest and attorneys fees. The Company believes these lawsuits are meritless and intends to defend against
them vigorously.
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T
HE
S
PECIAL
M
EETING
We are furnishing this proxy statement to you as part of the solicitation of proxies by our board of directors for use at
the Special Meeting.
D
ATE
, T
IME
AND
P
LACE
The Special Meeting will be held at
[ ], at [ a.m.], local time, on
[ ], 2012.
P
URPOSE
OF
THE
S
PECIAL
M
EETING
You will be asked at the Special Meeting to adopt and approve the Merger Agreement. Our board of directors reviewed and considered the
terms and conditions of the Merger and unanimously determined that the Merger is fair to, and in the best interests of, Peets and its shareholders, unanimously approved and declared advisable the Merger Agreement, the Merger and the other
transactions contemplated by the Merger Agreement in accordance with Washington law, and unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, to our
shareholders. You will also be asked to approve, on an advisory basis, the merger-related compensation for the Companys named executive officers. If necessary, you will also be asked to vote on a proposal to adjourn the Special Meeting for the
purpose of soliciting proxies to vote in favor of the adoption and approval of the Merger Agreement.
R
ECORD
D
ATE
; S
TOCK
E
NTITLED
TO
V
OTE
; Q
UORUM
Only holders of record of Peets common stock at the close of business on [ ],
2012 (the record date), are entitled to notice of and to vote at the Special Meeting. Each share of Peets common stock issued and outstanding on the record date is entitled to one vote at the Special Meeting. On the record date,
[ ] shares of Peets common stock were issued and outstanding and held by [ ] holders of record. A
quorum will be present at the Special Meeting if a majority of the outstanding shares of Peets common stock entitled to vote on the record date are represented in person or by proxy. In the event that a quorum is not present at the Special
Meeting, or there are not sufficient votes at the time of the Special Meeting to adopt and approve the Merger Agreement, it is expected that the meeting may be adjourned, if so requested by the JAB group, to solicit additional proxies if the holders
of a majority of the shares of Peets common stock present, in person or by proxy, and entitled to vote at the Special Meeting approve an adjournment. Holders of record of Peets common stock on the record date are entitled to one vote per
share at the Special Meeting on each proposal presented.
V
OTE
R
EQUIRED
The adoption and approval of the Merger Agreement requires the affirmative vote of the holders of a majority of all outstanding shares of
Peets common stock as of the record date. If you abstain from voting or do not vote, either in person or by proxy, it will have the same effect as a vote AGAINST the adoption and approval of the Merger Agreement.
The approval, on an advisory basis, of the merger-related compensation for the Companys named executive officers requires the
affirmative vote of the holders of a majority of the shares present, in person or by proxy, at the Special Meeting and entitled to vote thereon, provided a quorum is present. If you abstain from voting, it will have the same effect as a vote
AGAINST the approval, on an advisory basis, of the merger-related compensation for Peets named executive officers.
The approval of the adjournment of the Special Meeting requires the affirmative vote of the holders of a majority of the shares of Peets common stock present, in person or by proxy, at the Special
Meeting. If you abstain from voting, it will have the same effect as a vote AGAINST the approval of an adjournment of the Special Meeting.
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V
OTING
OF
P
ROXIES
All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in the
manner specified by the holders. Properly executed proxies that do not contain voting instructions will be voted FOR the adoption and approval of the Merger Agreement, FOR the proposal to approve, on an advisory basis, the
merger-related compensation for the Companys named executive officers and FOR approval of the proposal to adjourn the Special Meeting, if necessary.
To vote, please complete, sign, date and return the enclosed proxy card or, to appoint a proxy over the Internet or by telephone, follow the instructions provided below. If you attend the Special Meeting
and wish to vote in person, you may withdraw your proxy and vote in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at
the Special Meeting.
If you wish to attend the Special Meeting, you may be asked to present photo identification. The Special
Meeting is for the shareholders of Peets as of the record date. Accordingly, if you are a shareholder of record or hold a valid proxy from a shareholder of record, we may verify your name (or the name of such shareholder) against the list of
shareholders of record on the record date prior to your admission to the Special Meeting. If you are not a shareholder of record but your shares are held in street name by your bank, brokerage firm or other nominee, please bring and be prepared to
provide upon request proof of beneficial ownership on the record date, such as your most recent account statement prior to [ ],
2012, or other similar evidence of ownership.
We reserve the right to refuse admittance to the Special Meeting to any person that we cannot verify, through the foregoing methods, is a shareholder (or a proxy of a shareholder) of Peets as of
the record date
. The meeting will begin promptly at [ ] a.m., local time. Check in will begin at [ ] a.m., local time. Please allow ample time for
check in procedures.
Shares of Peets common stock represented at the Special Meeting but not voted, including shares of
Peets common stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the Special Meeting for purposes of determining the presence or absence of a quorum for the transaction of all
business.
Only shares affirmatively voted for the adoption and approval of the Merger Agreement, including properly executed
proxies that do not contain specific voting instructions, will be counted FOR that proposal. If you abstain from voting, it will have the same effect as a vote AGAINST the adoption and approval of the Merger Agreement,
AGAINST the proposal to approve, on an advisory basis, the merger-related compensation for the Companys named executive officers and AGAINST the proposal to adjourn the Special Meeting, if necessary. If you do not
execute a proxy card, and you do not vote in person at the special meeting in person, it will have the same effect as a vote AGAINST the adoption and approval of the Merger Agreement and will have no effect on the outcome of the other
two proposals. Brokers who hold shares in street name for customers have the authority to vote on routine proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their
voting discretion with respect to approval of non-routine matters, such as the adoption and approval of the Merger Agreement and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote
those shares, referred to generally as broker non-votes. Broker non-votes, if any, will be treated as shares that are present at the Special Meeting for purposes of determining whether a quorum exists and will have the same effect as
votes AGAINST the adoption and approval of the Merger Agreement. Broker non-votes, if any, will not affect the outcome of the proposal to approve, on an advisory basis, the merger-related compensation for the Companys named
executive officers or the proposal to adjourn the Special Meeting, if necessary.
No business may be transacted at the Special
Meeting other than the proposal to adopt and approve the Merger Agreement, the proposal to approve, on an advisory basis, the merger-compensation of the Companys named executive officers, and, if necessary, the proposal to adjourn the Special
Meeting.
45
V
OTING
OVER
THE
I
NTERNET
OR
BY
T
ELEPHONE
You may also grant a proxy to vote your shares over the Internet or by
telephone. The law of Washington, under which we are incorporated, specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine
that such proxy was authorized by the shareholder.
The Internet and telephone voting procedures described below are designed
to authenticate shareholders identities, to allow shareholders to grant a proxy to vote their shares and to confirm that shareholders instructions have been recorded properly. Shareholders granting a proxy to vote over the Internet
should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies that must be borne by the shareholder.
F
OR
S
HARES
OF
C
OMMON
S
TOCK
R
EGISTERED
IN
Y
OUR
N
AME
Shareholders of record may go to http://www.cstproxyvote.com to grant a proxy to
vote their shares over the Internet. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. Any shareholder using a touch-tone telephone may
also grant a proxy to vote shares by calling 1-866-894-0537 and following the recorded instructions.
F
OR
S
HARES
R
EGISTERED
IN
THE
N
AME
OF
A
B
ROKER
OR
B
ANK
Most beneficial owners whose stock is held in street name receive instructions for authorizing votes by their banks, brokers or other
agents, rather than from our proxy card.
A number of brokers and banks are participating in a program that offers the means
to authorize votes over the Internet and by telephone. If your shares are held in an account with a broker or bank participating in such a program, you may authorize a proxy to vote those shares over the Internet at the Internet URL specified on the
instruction form received from your broker of bank, or by telephone by calling the telephone number shown on the instruction form received from your broker or bank.
G
ENERAL
I
NFORMATION
FOR
A
LL
S
HARES
V
OTED
O
VER
THE
I
NTERNET
OR
BY
T
ELEPHONE
Votes submitted over the Internet or by telephone must be
received by 7:00 p.m., Eastern Time, on [ ], 2012. Submitting your proxy over the Internet or by telephone will not affect your
right to vote in person should you decide to attend the Special Meeting.
R
EVOCABILITY
OF
P
ROXIES
The grant of a proxy on the enclosed proxy card or over the Internet or by telephone does not
preclude a shareholder from voting in person at the Special Meeting. You may revoke your proxy at any time before the shares reflected on your proxy card are voted at the Special Meeting in any one of the following ways:
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You may submit another properly completed proxy card with a later date.
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You may grant a subsequent proxy by telephone or through the internet.
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You may send a timely written notice that you are revoking your proxy to the Corporate Secretary of Peets Coffee & Tea, Inc. at 1400
Park Avenue, Emeryville, California 94608-3520.
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You may attend the annual meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy.
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Your most current proxy card or telephone or internet proxy is the one that is counted. Please note that to
be effective, your new proxy card, internet or telephonic voting instructions or written notice of revocation must be received by the Corporate Secretary prior to the annual meeting and, in the case of internet or telephonic voting instructions,
must be received before 7:00 p.m., Eastern Time, on [ ], 2012.
46
Your attendance at the Special Meeting will not in and of itself constitute the revocation
of a proxy. If you have instructed your broker to vote your shares, you must follow the directions received from your broker to change these instructions.
S
OLICITATION
OF
P
ROXIES
This
proxy solicitation is being made and paid for by Peets. In addition, we have retained [ ], to assist in the solicitation. We
will pay [ ] approximately
[ ] for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail,
telephone or facsimile. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of shares
of Peets common stock that the brokers and other custodians, nominees and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses.
You should not send your share certificates with your proxy. A letter of transmittal with instructions for the surrender of common share certificates will be mailed to our shareholders as soon as
practicable after completion of the Merger.
D
ELIVERY
OF
THIS
P
ROXY
S
TATEMENT
TO
M
ULTIPLE
S
HAREHOLDERS
WITH
THE
S
AME
A
DDRESS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as householding,
potentially means extra convenience for shareholders and cost savings for companies.
A number of brokers with account holders
who are Peets shareholders will be householding our proxy materials. A single proxy statement will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at
any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your broker, or direct your written request to Investor Relations, Peets
Coffee & Tea, Inc., 1400 Park Avenue, Emeryville, California 94608-3520 or contact Investor Relations at (510) 594-2100. Shareholders who currently receive multiple copies of the proxy statement at their address and would like to
request householding of their communications should contact their broker.
47
T
HE
M
ERGER
A
GREEMENT
The summary of the material terms of the Merger Agreement below and elsewhere in this proxy
statement is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and which we incorporate by reference into this proxy statement. This summary does not purport to be complete
and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to carefully read the Merger Agreement in its entirety.
The Merger Agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about the Company, JAB or Merger Sub. Such
information can be found elsewhere in this proxy statement and in the other public filings the Company makes with the SEC, which are available without charge at
www.sec.gov
. The representations, warranties and covenants contained in the
Merger Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, and may be subject to limitations agreed upon by the contracting parties, including being
qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of affairs of the Company without considering the entirety of public
disclosure about the Company as set forth in the Companys SEC filings. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information
may or may not be fully reflected in this proxy statement or in other public disclosures by the Company.
T
HE
M
ERGER
The Merger Agreement provides for the merger of Merger Sub with and into the Company upon the terms,
and subject to the conditions, of the Merger Agreement. As the surviving corporation, the Company will continue to exist following the Merger as an affiliate of JAB.
Upon consummation of the Merger, the directors of Merger Sub will be the initial directors of the surviving corporation and the officers of the Company (unless otherwise agreed by JAB and the Company)
will be the initial officers of the surviving corporation. At the effective time of the Merger, the Amended and Restated Articles of Incorporation of the Company will be amended in their entirety to read the same as the articles of incorporation of
Merger Sub, and the Amended and Restated Bylaws of the Company will be amended in their entirety to read the same as the bylaws of Merger Sub immediately prior to the effective time of the Merger, each until amended as provided in accordance with
their terms or in accordance with applicable law.
E
FFECTIVE
T
IME
The Merger will be effective at the time the articles of merger are filed with the Secretary of State of the State of Washington or such
later time as specified in the articles of merger and agreed to by the Company and JAB in writing. We expect to complete the Merger as soon as practicable after our shareholders adopt and approve the Merger Agreement and all other conditions to
closing have been satisfied or waived.
Unless otherwise agreed by the parties to the Merger Agreement, the parties are
required to close the Merger no later than the third business day after the satisfaction or waiver of the conditions (other than those conditions that by their nature are to be satisfied only at the closing, but subject to the satisfaction or waiver
of those conditions at such time). The conditions of the closing of the Merger are described in this proxy statement under Conditions to the Merger beginning on page 60.
48
M
ERGER
C
ONSIDERATION
Each share of our common stock issued and outstanding immediately prior to the effective time of the Merger will be converted into the
right to receive the per-share Merger consideration of $73.50 in cash, without interest and less any applicable withholding taxes, other than the following shares:
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Shares owned by JAB, Merger Sub or any other affiliate of JAB that is directly or indirectly wholly owned by the ultimate parent of JAB;
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Shares owned by the Company or any direct or indirect wholly owned subsidiary of the Company (including shares held in our treasury); and
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Shares owned by shareholders who have perfected and not withdrawn a demand for appraisal rights pursuant to Section 23B.13 of the WBCA, as
described in further detail in this proxy statement under The MergerDissenters Rights.
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Subject to the above exceptions, after the effective time of the Merger, each holder of any shares of our common stock will no longer have any rights with respect to the shares, except for the right to
receive the per-share Merger consideration.
P
AYMENT
FOR
THE
S
HARES
OF
C
OMMON
S
TOCK
JAB will select a paying agent for the benefit of the holders
of shares of our common stock. At the effective time of the Merger, JAB will deposit or cause to be deposited with such paying agent a cash amount in immediately available funds to pay the aggregate Merger consideration payable to our shareholders.
Promptly after the effective time of the Merger, and in any event within five business days thereafter, the surviving
corporation will cause the paying agent to send you (or, in the case of street holders, deliver to the Depository Trust Company) a letter of transmittal and instructions advising you how to surrender your shares of common stock in
exchange for the per-share Merger consideration. The paying agent will pay you the aggregate per-share Merger consideration to which you are entitled after you have provided to the paying agent your signed letter of transmittal together with a
certificate or book-entry shares, and any other items specified by the letter of transmittal. Interest will not be paid or accrue in respect of the per-share Merger consideration. The surviving corporation or the paying agent will reduce the amount
of any per-share Merger consideration paid to you by any applicable withholding taxes.
Following the effective time of the
Merger, there will be no further transfer of shares of our common stock.
If you have lost a certificate, or if it has been
stolen or destroyed, then before you will be entitled to receive the per-share Merger consideration, you will be required to provide an affidavit of the loss, theft or destruction, and if required by JAB, post a bond in a reasonable amount and upon
reasonable terms as may be required by JAB as indemnity against any claim that may be made against JAB or the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal and related
instructions that you will receive, which you should read carefully and in their entirety.
If any cash deposited with the
paying agent is not claimed within one year following the effective time of the Merger, such cash will be delivered to the surviving corporation. Holders of our common stock who have not received payment due to non-compliance with the exchange
procedures shall be entitled to look only to the surviving corporation with respect to payment of the per-share Merger consideration.
You should not send your share certificates with the enclosed proxy card, and you should not forward your share certificate to the paying agent without a letter of transmittal.
49
T
REATMENT
OF
O
PTIONS
AND
R
ESTRICTED
S
TOCK
Company Options
. Prior to, and effective as
of, the effective time of the Merger, we will take all necessary action to accelerate the vesting of each outstanding option to purchase shares of common stock under our stock plans that is outstanding as of immediately prior to the effective time
of the Merger. At the effective time of the Merger, each such option outstanding immediately prior to the effective time (whether vested or unvested), will be cancelled and converted into the right to receive, as soon as reasonably practicable after
the effective time of the Merger, a cash payment equal to the product of (x) the total number of shares of common stock subject to such option and (y) the amount, if any, by which $73.50 exceeds the exercise price per share under such
option, less any applicable tax withholding. Options where the exercise price per share is equal to or greater than $73.50 will be cancelled for no value and without payment.
Company Restricted Stock Units.
At the effective time of the Merger, each outstanding award of a right (other than awards of Company options) entitling the holder of such
award to shares or cash equal to or based on the value of shares issued pursuant to any of our stock plans that is outstanding as of immediately prior to the effective time of the Merger will become fully vested and will be cancelled and converted
automatically into the right to receive, as promptly as reasonably practicable following the effective time of the Merger, a cash payment equal to the product of (x) the number of shares subject to such share award and (y) the per-share
Merger consideration, less any applicable tax withholding. At the effective time of the Merger, each holder of any such share award will cease to have any rights with respect to such unit, except the right to receive the per share Merger
consideration in accordance with the Merger Agreement.
Employee Stock Purchase Plan
. We will
terminate our Amended and Restated 2000 Employee Stock Purchase Plan prior to the effective time of the Merger and will not permit any new offering period to begin after the date of the Merger Agreement and prior to the effective time of the Merger.
The effect of the Merger upon our other employee benefit plans is more fully described under Employee Benefits
beginning on page 59.
R
EPRESENTATIONS
AND
W
ARRANTIES
In the Merger Agreement, the Company made representations and warranties relating to, among other things:
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the corporate organization and qualification of the Company and our subsidiaries;
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the Companys capital structure;
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the Companys corporate power and authority to enter into the Merger Agreement;
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the due execution and delivery by the Company of the Merger Agreement and the enforceability of the Merger Agreement against the Company;
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the shareholder vote required to approve the Merger Agreement;
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actions taken by the Companys board of directors, including the boards approval of the Merger Agreement and recommendation to shareholders;
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required regulatory filings, consents and approvals of governmental entities;
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the absence of conflicts with the Companys organizational documents, applicable law or contracts to which the Company or any of our subsidiaries
is a party;
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the Companys financial statements and filings with the SEC;
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the Companys disclosure controls and procedures;
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the absence of undisclosed liabilities;
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50
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the absence of certain changes since January 1, 2012;
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the absence of legal proceedings involving the Company and our subsidiaries;
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the Companys compliance with laws and our possession of, and compliance with, permits;
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the Companys owned and leased real properties;
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the accuracy of the information set forth in this proxy statement;
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the Companys insurance coverage;
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the Companys suppliers and customers;
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the absence of any transactions with affiliates of the Company;
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the inapplicability of takeover statutes on the Merger; and
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In the Merger Agreement, JAB and Merger Sub each made representations and warranties relating to, among other things:
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the corporate organization and qualification of JAB and Merger Sub;
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JABs and Merger Subs corporate power and authority to enter into and consummate the transactions contemplated by the Merger Agreement;
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the due execution and delivery by JAB and Merger Sub of the Merger Agreement and the enforceability of the Merger Agreement against JAB and Merger Sub;
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required regulatory filings, consents and approvals of governmental entities;
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the absence of conflicts with the organizational documents of JAB or Merger Sub, applicable law or contracts to which JAB or Merger Sub is a party;
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the accuracy of the information supplied by JAB for inclusion in this proxy statement;
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the availability of the funds necessary to pay all amounts to be paid by JAB in connection with the Merger Agreement;
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the absence of legal proceedings involving JAB or Merger Sub;
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the ownership and operation of Merger Sub;
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the accuracy of the information set forth in this proxy statement;
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brokers and finders; and
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JABs and Merger Subs ownership of our common stock.
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Many of the Companys representations and warranties are qualified by a Material Adverse Effect standard. For purposes of the Merger
Agreement, Material Adverse Effect is defined to mean:
Any change, state of facts, circumstance, event or
development that (a) has a material adverse effect on the financial condition, business or results of operations of the Company and its subsidiaries taken as a whole or (b) the ability of the Company to consummate the transactions
contemplated by the Merger Agreement.
51
Material Adverse Effect shall not include for purposes of clause (a) above any change,
event, occurrence, fact, circumstance or effect arising out of, resulting from or attributable to the following:
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effects resulting from changes in the economy or financial markets generally in the United States or other countries in which the Company conducts
material operations or sources material supplies or that are the result of acts of war or terrorism to the extent such effects do not primarily relate to the Company or have or would reasonably be expected to have a disproportionate impact on the
Company as compared to other industry segment participants within the geographic markets where the Company and our subsidiaries operate;
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effects resulting from changes that are the result of factors generally affecting the industries in which the Company and our subsidiaries operate,
including changes in raw material costs, to the extent such effects do not primarily relate to the Company or have or would reasonably be expected to have a disproportionate impact on the Company as compared to other industry segment participants
within the geographic markets where the Company and our subsidiaries operate;
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effects resulting from changes in GAAP or rules and policies of the Public Company Accounting Oversight Board or changes in applicable law or changes
in interpretations of applicable law to the extent they do not primarily relate to the Company or have or would reasonably be expected to have a disproportionate impact on the Company as compared to other industry segment participants within the
geographic markets where the Company and our subsidiaries operate;
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effects resulting from (A) any failure by the Company to meet any estimates of revenues or earnings by the Company or analysts or (B) any
change in the market value or trading volume of shares for any period ending on or after the date of the Merger Agreement (provided that the underlying causes of any such failure or change may be taken into account in determining whether a Material
Adverse Effect has occurred);
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effects directly resulting from the public announcement or pendency of the transactions contemplated by the Merger Agreement;
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any effect relating to fluctuations in the value of any currency; and
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any effect relating to any action taken by the Company with JABs consent or contemplated expressly by the Merger Agreement.
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C
ONDUCT
OF
B
USINESS
P
RIOR
TO
C
LOSING
We have agreed in the Merger Agreement that, until the effective time of the Merger, except as
required by applicable law or expressly provided by the Merger Agreement, we shall and we shall cause our subsidiaries to:
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conduct our business in all material respects in the ordinary and usual course; and
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use commercially reasonable efforts to preserve the material components of our business organizations intact and maintain existing relations and
goodwill with governmental entities, customers, material suppliers, licensors, licensees, distributors, creditors and lessors, key employees and independent contractors, and material service providers, agents and business associates and keep
available the services of our and our subsidiaries present officers and key employees.
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We have also
agreed that, until the effective time of the Merger, except as expressly required by the Merger Agreement, with the prior written consent of JAB or as set forth in the disclosure schedule that the Company delivered to JAB in connection with the
execution of the Merger Agreement, we will not and will not permit our subsidiaries to:
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adopt or propose any change in our organizational or governing instruments;
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merge or consolidate the Company or any of our subsidiaries (except for transactions solely among our wholly owned subsidiaries that do not violate
instruments binding on, or are not expected to materially increase net tax liability of, the Company and our subsidiaries);
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acquire any stock or assets other than (A) raw materials, supplies, equipment, inventory, third-party software and capital, in the ordinary course
of business, or (B) in an amount of not more than $250,000 in any transaction or related series of transactions or $750,000 in the aggregate;
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issue, sell, transfer or otherwise dispose of any shares of capital stock of the Company or our subsidiaries, any debt securities of the Company or our
subsidiaries that provide voting rights to the holders thereof or any rights to acquire the Companys capital stock (other than issuance or transfer of common stock pursuant to outstanding awards under the Companys equity award plans);
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make any loans, advances, guarantees, capital contributions or investments (other than to the Company or any of our wholly owned subsidiaries) in
excess of $250,000 in any transaction or series of related transactions or $500,000 in the aggregate;
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amend, supplement, replace, refinance, terminate or otherwise modify the Amended and Restated Credit Agreement by and between the Company and Wells
Fargo Bank, National Association, dated as of December 21, 2010;
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declare or pay any dividend (except for dividends paid by any of our subsidiaries to us or to one of our wholly owned subsidiaries) or enter into any
contract with respect to the voting of the Companys capital stock (except for proxies or voting agreements solicited by us to obtain the vote of our shareholders to adopt and approve the Merger Agreement);
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adjust, reclassify, split, combine or subdivide, or redeem, purchase or otherwise acquire the Companys capital stock;
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incur, alter, amend or modify any indebtedness or guarantee a third partys indebtedness (except for ordinary course indebtedness for borrowed
money consistent with past practice that does not exceed $500,000 in the aggregate);
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make or authorize any capital expenditures in excess of the amount reflected in the Companys capital expenditure budget as disclosed to JAB;
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make any material changes in accounting policies or procedures, except as required by changes in GAAP;
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release, assign, settle or satisfy any action or other liabilities or obligations for an amount (not covered by insurance) above $250,000 individually
or $500,000 in the aggregate or providing for non-monetary relief (except for provisions in a settlement agreement relating to confidentiality, non-disparagement, releases and agreements not to sue);
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amend or modify, in any material respect, or terminate any material contract, or enter into any contract that would be classified as a material
contract under the Merger Agreement, other than in the ordinary course of business;
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amend or modify, in any material respect, or terminate any material lease or material permit, other than in the ordinary course of business;
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make any material tax election, amend any tax return with respect to a material amount of taxes, settle any controversy with respect to a material
amount of taxes or change any method of tax accounting;
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transfer, sell, encumber or otherwise dispose of any material intellectual property, other than non-exclusive licenses granted in the ordinary course
of business;
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transfer, sell, create a lien on (other than certain permitted encumbrances) or otherwise dispose of any material assets, licenses, product lines or
businesses, except for in connection with dispositions of Company products or inventory in the ordinary course of business, sales of obsolete assets or other dispositions of not more than $250,000 in any transaction or series of related transactions
or $750,000 in the aggregate;
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terminate any executive officers or hire any new employees, unless such hire is in the ordinary course of business consistent with past practice and
has an aggregate annual base salary and incentive opportunity of not more than $300,000;
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adopt, enter into, amend, terminate or extend any collective bargaining agreement;
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except as required pursuant to existing written, binding agreements or by applicable law:
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grant or provide any severance or termination payments or benefits to any director, officer or non-officer employees (except for non-officer employees
in the ordinary course of business),
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increase the compensation, bonus or benefits of, pay any bonus to, or make any new equity awards to any director, officer or, other than in the
ordinary course of business consistent with past practice, non-officer employee (except for base salary increases or bonuses of not more than $50,000 in the aggregate awarded to non-officer employees in the ordinary course of business),
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establish, adopt, amend or terminate any Company benefit plan (except as required by law) or amend the terms of any outstanding equity-based awards,
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accelerate vesting or payment, or fund or secure payment, of compensation or benefits under any Company benefit plan (if not already contemplated by
such plan),
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materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Company benefit plan or to change the
manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, or
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forgive any loans to directors, officers or key employees of the Company or any of our subsidiaries;
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unless required by applicable law, reclassify any independent contractor as an employee of the Company or any of our subsidiaries;
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fail to use commercially reasonable efforts to renew or maintain the Companys and our subsidiaries insurance policies or comparable
replacement policies, other than in the ordinary course of business consistent with past practice;
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enter into any new line of business not related to coffee or tea; or
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adopt, enter into or effect any plan of complete or partial liquidation, dissolution, reorganization or restructuring;
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We have agreed not to take any action that would, or would be reasonably likely to, prevent, materially delay or materially impede the
consummation of the Merger or the related transactions contemplated by the Merger Agreement.
P
ROXY
S
TATEMENT
, B
OARD
R
ECOMMENDATION
AND
S
HAREHOLDERS
M
EETING
We have agreed, as promptly as practicable after the execution of the Merger Agreement, and in any event, no later than 35 days following the earliest of the date on which the SEC staff advises the
Company that it has no further comments on this proxy statement or that it is not reviewing this proxy statement, to duly call, give notice of, convene and hold the Special Meeting to consider and vote upon the adoption and approval of the Merger
Agreement and the Merger.
We are not permitted to postpone or adjourn the Special Meeting except to the extent required by
law or requested by JAB (in JABs sole discretion) to permit additional time to solicit the requisite vote of the shareholders to adopt and approve the Merger Agreement.
Except in the circumstances described in this proxy statement under Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal, our board of directors has agreed
to recommend the adoption and approval of the Merger Agreement to our shareholders and to use reasonable best efforts to solicit from our shareholders proxies in favor of the adoption and approval of the Merger Agreement,
54
and to secure the requisite vote of the shareholders to adopt and approve the Merger Agreement. Unless the Merger Agreement has been terminated prior to the date of the Special Meeting in
accordance with its terms, our obligation to call, give notice of, convene and hold the Special Meeting will not be limited or otherwise affected by the commencement, disclosure, announcement or submission to us of any acquisition proposal or by a
change of recommendation, and we will not submit any superior proposal for approval by our shareholders.
N
O
S
OLICITATION
OF
O
THER
O
FFERS
Under the Merger Agreement, we
have agreed that, except as expressly permitted by the Merger Agreement, neither we nor any of our subsidiaries will, nor will we authorize or permit our respective representatives to, directly or indirectly:
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initiate, solicit, knowingly encourage, induce or assist any inquiries, proposals or offers that constitute, or could reasonably be expected to lead
to, an acquisition proposal;
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engage in discussions or negotiations regarding, or provide information relating to the Company or any of its subsidiaries, or provide any access to
the Companys and our subsidiaries properties, books, records or personnel that could reasonably be expected to solicit, induce or assist in the making of any proposals or offers that constitute, or could reasonably be expected to lead
to, an acquisition proposal;
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approve, recommend or enter into, any letter of intent or similar document, agreement or commitment, or agreement in principle with respect to an
acquisition proposal;
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approve any person as an acquiring person or any persons share acquisition as provided in Section 23B.19.040 of the
WBCA; or
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otherwise knowingly facilitate any effort or attempt to make an acquisition proposal.
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Notwithstanding these restrictions, prior to the time that our shareholders adopt and approve the Merger Agreement, if we have not
breached the no solicitation restrictions summarized above and our other obligations summarized in this proxy statement under No Solicitation of Other Offers and Ability to Change Board Recommendation/Termination in Connection with
a Superior Proposal, we may provide information requested by a person who has made an unsolicited bona fide written acquisition proposal and engage in discussions and negotiations with such person, if and only to the extent that, prior to
taking any action described above, our board of directors has determined in good faith, after consultation with our outside financial advisors and outside legal counsel, that:
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failure to take such action would reasonably be expected to violate the directors fiduciary duties under applicable law; and
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based on the information then available to our board of directors, such acquisition proposal either constitutes a superior proposal or is reasonably
likely to result in a superior proposal.
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In addition, in order to provide information to any person making
an unsolicited bona fide acquisition proposal, such person must execute a confidentiality agreement on terms not more favorable to such person than those contained in the confidentiality agreement we entered into on July 5, 2012 with an
affiliate of JAB, effective as of July 4, 2012 and amended on July 15, 2012. If the Company provides any information to such person not previously provided to JAB, a copy of such information must be delivered prior to or concurrently with
delivery to such person.
We have agreed to notify JAB promptly (in any event within 24 hours) of receipt by us or any of our
representatives of any acquisition proposals, inquiries with respect thereto or requests for information, discussions or negotiations, including details regarding the name of the person making such contact, and the material terms and conditions of
any proposals or offers. We must also provide to JAB copies of any written requests, proposals or offers, including proposed agreements that we receive and keep JAB reasonably informed, on a prompt basis of the status and terms of any such proposals
or offers, including any changes thereto. In any case, we must notify JAB before providing information to, or entering into discussions or negotiations with, any person regarding an acquisition proposal.
55
We have agreed to, and to cause our subsidiaries and cause our and their respective
representatives to, immediately cease and terminate any activities, discussions or negotiations regarding any acquisition proposal that were ongoing when the Merger Agreement was executed. We also agreed to request that any person who entered into a
confidentiality agreement with us on or after January 1, 2010 in connection with an acquisition proposal return or destroy all confidential information previously furnished by us or our representatives to such person, subject to the terms of
those agreements.
The Merger Agreement defines an acquisition proposal as (i) any proposal or offer relating
to or that could reasonably be expected to lead to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, exchange offer, recapitalization, reorganization, share exchange, business combination or similar
transaction or series of related transactions involving the Company or any of our significant subsidiaries and (ii) any acquisition by any person of, or proposal or offer, which if consummated would result in any person becoming the beneficial
owner of, directly or indirectly, in one or a series of related transactions, 10% or more of the total voting power of any class of equity securities of the Company or those of any of our subsidiaries, or the acquisition, purchase or disposition of
the business or 15% or more of the consolidated assets (including equity securities of its subsidiaries), revenues, net income or earnings of the Company and our Subsidiaries outside the ordinary course of business.
The Merger Agreement defines a superior proposal as a bona fide unsolicited written acquisition proposal that would result in
any person (or its shareholders) becoming the beneficial owner, directly or indirectly, of more than 80% of the assets (on a consolidated basis) of the Company and our subsidiaries or more than 80% of the total voting power of the equity securities
of the Company that the board of directors of the Company has determined in good faith after consultation with its outside financial advisors and outside legal counsel, taking into account, among other things, all legal, financial, regulatory,
timing and other aspects of the acquisition proposal and the person making the acquisition proposal (including any break-up fees, expense reimbursement provisions, the availability of financing, and any conditions to consummation relating to
financing, regulatory approvals or other conditions beyond the control of the party having the right to invoke the condition) (i) is more favorable to our shareholders from a financial point of view than the transactions contemplated by the
Merger Agreement (after taking into account any changes to the terms of the Merger Agreement proposed by JAB and any other information provided by JAB pursuant to the Merger Agreement) and (ii) is reasonably likely to be consummated.
The Company has agreed that it will be responsible for any breach of the no solicitation restrictions contained in the Merger
Agreement by its representatives.
In addition to the rights described above, we may terminate the Merger Agreement, pay a
termination fee and enter into a definitive agreement with respect to a superior proposal under certain circumstances. See Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal.
A
BILITY
TO
C
HANGE
B
OARD
R
ECOMMENDATION
/T
ERMINATION
IN
C
ONNECTION
WITH
A
S
UPERIOR
P
ROPOSAL
Our board of directors unanimously determined that the Merger is fair to, and in the best interests of, Peets and its shareholders, unanimously approved and declared advisable the Merger Agreement,
the Merger and the other transactions contemplated by the Merger Agreement in accordance with Washington law, and unanimously resolved to recommend the adoption and approval of the Merger Agreement and the transactions contemplated thereby,
including the Merger, to our shareholders. The Merger Agreement provides that neither our board of directors, nor any committee thereof, shall:
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fail to include the boards recommendation in this proxy statement, or withhold, withdraw, qualify or modify (or publicly propose to withhold,
withdraw, qualify or modify), in a manner adverse to JAB, the boards recommendation with respect to the Merger;
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56
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publicly approve, recommend or otherwise declare advisable any acquisition proposal; or
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publicly propose to do any of the foregoing.
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Furthermore, neither our board of directors nor any committee thereof shall (and shall not publicly propose to) authorize, approve, recommend, declare advisable or permit the Company to enter into any
binding or non-binding agreement or arrangement that requires the Company to abandon or terminate the Merger Agreement or the Merger, or that relates to any acquisition proposal.
However, prior to the time that our shareholders approve and adopt the Merger Agreement, our board of directors may, under specified
circumstances, change its recommendation with respect to the Merger and, with respect to a superior proposal, terminate the Merger Agreement if our board of directors has determined in good faith, after consultation with its outside financial
advisors and outside legal counsel, that:
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failure to take such action would reasonably be expected to violate our board of directors fiduciary duties under applicable law; and
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if such action relates to any acquisition proposal, that such acquisition proposal constitutes a superior proposal.
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However, our board of directors may change its recommendation or terminate the Merger Agreement as described above only if:
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the Company provides JAB with at least three business days notice of its intention to take such action and its basis for doing so, including in
the case of any acquisition proposal the name of the person making the acquisition proposal and the material terms and conditions of any proposals or offers (including copies of any written requests, proposals or offers, including proposed
agreements);
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the Company does not, and does not permit our subsidiaries to, enter into any alternative acquisition agreement during such notice period;
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the Company and its advisors negotiate with JAB in good faith during such notice period; and
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following the end of such notice period, after considering any changes to the Merger Agreement proposed by, and other information provided by, JAB
during the notice period, our board of directors has determined, after consultation with its outside financial advisors and outside legal counsel, that if such changes were to be made that the boards failure to change its recommendation or
terminate the Merger Agreement would reasonably be expected to result in a violation of the directors fiduciary duties under applicable law and that any superior proposal continues to constitute a superior proposal.
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Any change to the financial or other material terms of any superior proposal made to the Company will be
deemed a new acquisition proposal that will require giving of new notice to JAB and the commencement of a new three business day notice period, during which the Company must again comply with the requirements summarized above.
In addition, if our board of directors decides to terminate the Merger Agreement with JAB following receipt of a superior proposal upon
the terms summarized above, we must pay the applicable termination fee as described in further detail under The Merger AgreementTermination Fee beginning on page 62.
A
GREEMENTS
TO
U
SE
R
EASONABLE
B
EST
E
FFORTS
Subject to the terms and conditions set forth in the Merger Agreement, the Company and JAB have agreed to cooperate with each other and
use, and to cause their respective subsidiaries to use, their respective reasonable best efforts to consummate the transactions contemplated by the Merger Agreement as soon as practicable. In furtherance of the foregoing, the Company and JAB agreed
to:
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make a filing under the HSR Act as soon as practicable and in any event no later than August 17, 2012, unless the Company and JAB agree to a
different date;
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use their reasonable best efforts to supply as soon as practicable any additional information and documentary material reasonably requested pursuant to
the HSR Act; and
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use their reasonable best efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.
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The Merger Agreement also requires the Company and JAB to file as promptly as practicable all documentation
to effect all necessary notices, reports or other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary from any third party or any governmental entity in connection with the
Merger and the transactions contemplated by the Merger Agreement.
Nothing in the Merger Agreement requires the Company or
JAB, or permits the Company to take or consent to any action that would be reasonably likely to result in a material adverse effect on the business, financial condition or results of operations of the combined business of JAB and the Company and
their respective subsidiaries, taken as a whole, after giving effect to the consummation of the transactions contemplated by the Merger Agreement.
Subject to reasonable limitations limiting access to outside counsel, each of the Company and JAB also agreed to keep the other apprised of the status of matters relating to completion of the transactions
contemplated by the Merger Agreement, including promptly furnishing the other party:
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all information as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made to any third party
and/or any governmental entity in connection with the Merger and the transactions contemplated by the Merger Agreement; and
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copies of notices, correspondence and communications received from third parties or any governmental entity with respect to the Merger and the other
transactions contemplated by the Merger Agreement and, except as prohibited by law, to permit the other party to attend and participate in substantive communications and meetings with governmental entities with respect to any filings, investigation
or other inquiry relating to the Merger or other transactions contemplated by the Merger Agreement. Subject to consultation with the Company and other limitations set forth in the Merger Agreement, JAB has the right to direct all matters with any
governmental entity.
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F
INANCING
If requested by JAB, we have agreed to cooperate with JAB in connection with any third-party equity or debt financing undertaken by JAB or
its affiliates in connection with the transactions contemplated by the Merger Agreement.
JAB has agreed to reimburse us for
all reasonable and documented out-of-pocket fees and expenses of the Company and our subsidiaries and all reasonable and documented fees and expenses of our counsel and accountants incurred in connection with our cooperation in connection with the
financing, and to indemnify and hold harmless the Company, our subsidiaries and its related persons against any claim, loss, damage, injury, liability, judgment, award, penalty, fine, tax, cost, expense or settlement payment incurred as a result of
such cooperation.
I
NDEMNIFICATION
AND
I
NSURANCE
The Merger Agreement provides that all existing rights to indemnification that the present and former directors and officers of the
Company and our subsidiaries are entitled to that are contained in the organizational documents of the Company or any of its subsidiaries as in effect as of July 21, 2012, or as provided in any indemnification agreements between the Company and
any such person as in effect as of July 21, 2012, will survive the Merger and will be observed by the surviving corporation to the fullest extent permitted by Washington law.
58
Prior to the effective time of the Merger, JAB or the surviving corporation shall be
required to purchase a tail policy to the Companys current policy of directors and officers liability insurance for a period of six years from the effective time of the Merger. Such policy will cover claims arising from facts or
events that occurred on or before the effective time of the Merger and will contain coverage and amounts at least as favorable to the indemnified parties as the coverage currently provided by the Companys current directors and
officers liability insurance policies in the aggregate. The cost of such tail policy will not exceed three times the annual premium currently paid by the Company for such insurance and, if the premium for tail insurance coverage would exceed
such amount, JAB or the surviving corporation shall be obligated to obtain a policy or policies with the greatest coverage available for a cost not exceeding such amount.
F
EES
AND
E
XPENSES
Except as
described above under Financing, whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the Merger and the other transactions contemplated by the Merger Agreement will be
paid by the party incurring such expense.
E
MPLOYEE
B
ENEFITS
For a period of one year following the effective time of the Merger, JAB shall cause the surviving corporation and its subsidiaries to
provide each active employee of the Company and any subsidiary who continues to be employed by the surviving corporation or any subsidiary thereof with compensation, other employee benefits (except for retention benefits), health and welfare
benefits and benefits under any 401(k) plan that is at least substantially comparable in the aggregate to that provided to such continuing employees immediately prior to the execution of the Merger Agreement.
JAB will cause the surviving corporation to recognize accrued but unused personal, sick or vacation time to which any continuing employee
is entitled pursuant to policies applicable to such continuing employee immediately prior to the effective time of the Merger.
JAB has also agreed that continuing employees under health, welfare benefit and 401(k) plans of JAB or the surviving corporation
following the effective time of the Merger will be credited for service with the Company prior to the effective time of the Merger to the extent that such service is relevant under such plans and recognized under corresponding Company plans prior to
the effective time of the Merger. Additionally, JAB has agreed that the pre-existing condition and eligibility limitations for continuing employees under health and welfare plans will be waived for the plan year in which the Merger occurs and that
amounts paid by, and amounts reimbursed to, continuing employees under similar plans maintained by the Company and our subsidiaries immediately prior to the effective time of the Merger will be given effect in determining any deductibles and maximum
out of pocket limitations.
O
THER
C
OVENANTS
The Merger Agreement contains additional agreements between the Company and JAB relating to, among other things:
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JABs access to our employees, properties, books, contracts and records between the date of the Merger Agreement and the closing of the Merger
Agreement (subject to applicable legal obligations and restrictions);
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actions necessary to enable the delisting by the surviving corporation of the shares from NASDAQ and the deregistration of the shares under the
Exchange Act as promptly as practicable after the effective time of the Merger;
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press releases and other public announcements relating to the Merger and the transactions contemplated by the Merger Agreement;
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59
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the actions necessary if state takeover laws are or become applicable to the transactions contemplated by the Merger Agreement to ensure that the
transactions contemplated by the Merger Agreement may be consummated as promptly as practicable;
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control of shareholder litigation;
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the notification of certain matters; and
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the actions necessary to cause the dispositions of certain common stock and equity-based securities by directors and officers of the Company pursuant
to the Merger Agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act.
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C
ONDITIONS
TO
THE
M
ERGER
Conditions to Each Partys
Obligations.
Each partys obligation to effect the Merger is subject to the satisfaction or waiver at or prior to the effective time of the Merger of the following conditions:
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the Merger Agreement must have been adopted by the affirmative vote of the holders of a majority of all outstanding shares of our common stock;
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the waiting period applicable to the consummation of the Merger under the HSR Act must have expired or been earlier terminated and all approvals under
other applicable antitrust laws. identified in the Merger Agreement, required to consummate the Merger must have been obtained or filed or must have occurred;
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no law or injunction shall have been issued or enacted by any court or governmental entity that restrains, enjoins or otherwise prohibits consummation
of the Merger or the other transactions contemplated by the Merger Agreement; and
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no governmental entity shall have instituted any action (which remains pending at what would otherwise be the closing date) before any court seeking to
restrain, enjoin or otherwise prohibit consummation of the Merger and the other transactions contemplated by the Merger Agreement.
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Conditions to Obligations of JAB and Merger Sub.
The obligations of JAB and Merger Sub to effect the Merger are subject to the satisfaction or waiver by JAB at or prior to
the effective time of the Merger of the following conditions:
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the representations and warranties made by the Company regarding certain matters relating to the Companys capital structure, absence of any
Material Adverse Effect on the Company through July 21, 2012 and brokers and finders must be true and correct in all respects (other than in de minimis and immaterial respects in the case of the Companys capital structure or
resulting from exercises of existing outstanding equity awards set forth in the representation regarding capital structure following July 21, 2012) as of July 21, 2012 and as of the closing date as though made on and as of each such date
(except to the extent made as of a specific date);
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the representations and warranties made by the Company regarding certain matters relating to the Companys corporate authority to enter into the
Merger Agreement, the due execution, delivery and enforceability of the Merger Agreement, and the board approval of the Merger Agreement and non-applicability of takeover statutes to the Merger (in each case, disregarding all qualifications and
exceptions contained therein regarding materiality or a Material Adverse Effect or any similar standard or qualification) must be true and correct in all material respects as of July 21, 2012 and as of the closing date as though made on and as
of each such date (except to the extent made as of a specific date);
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each of the representations and warranties made by the Company set forth in the Merger Agreement other than those listed above (disregarding all
qualifications and exceptions contained therein regarding materiality or a Material Adverse Effect or any similar standard or qualification), must be true and
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60
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correct as of July 21, 2012 and as of the closing date as though made on and as of each such date (except to the extent made as of a specific date), except where the failure of any such
representation or warranty to be so true and correct would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect;
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the Company must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the
closing date;
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since July 21, 2012, there must not have occurred any change, state of facts, circumstance, event or development (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise) that, individually or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect; and
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the Company must deliver to JAB at closing a certificate with respect to the satisfaction of the foregoing conditions relating to representations,
warranties and covenants.
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Conditions to Obligations of the Company.
The
obligation of the Company to effect the Merger is subject to the satisfaction or waiver by the Company at or prior to the effective time of the Merger of the following additional conditions:
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the representations and warranties of JAB regarding brokers and finders must be true and correct in all respects as of July 21, 2012 and as of the
closing date as though made on and as of such date (except to the extent made as of a specific date);
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the representations and warranties of JAB regarding certain matters relating to JABs corporate authority and the due execution, delivery and
enforceability of the Merger Agreement must be true and correct in all material respects as of July 21, 2012 and as of the closing date as though made on and as of such date (except to the extent made as of a specific date);
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all other representations and warranties of JAB contained in the Merger Agreement, disregarding all qualifications and exceptions contained in the
Merger Agreement regarding materiality or any similar standard or qualification, must be true and correct, except where the failure to be so true and correct would not prevent, materially delay or materially impede the ability of JAB or Merger sub
to consummate the transactions contemplated by the Merger Agreement as of July 21, 2012 and as of the closing date as though made on and as of such date (except to the extent made as of a specific date);
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JAB and Merger Sub must have performed in all material respects all obligations required to be performed by them under the Merger Agreement at or prior
to the closing date; and
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JAB and Merger Sub must deliver to the Company at closing a certificate with respect to the satisfaction of the foregoing conditions relating to
representations, warranties and covenants.
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T
ERMINATION
OF
THE
M
ERGER
A
GREEMENT
The Merger Agreement may be terminated at any time prior to the effective
time of the Merger, whether before or after approval from our shareholders has been obtained:
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by mutual written consent of the Company and JAB;
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by either the Company or JAB if:
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the Merger is not completed on or before March 31, 2013 (the termination date);
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our shareholders do not adopt and approve the Merger Agreement at the shareholders meeting or any adjournment or postponement thereof; or
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any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger becomes final and non-appealable;
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61
however, a party may not terminate the Merger Agreement pursuant to the above provisions if such party has
breached in any material respect its obligations under the Merger Agreement in any manner that primarily contributed to the occurrence of the failure of such condition to the consummation of the Merger;
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JAB or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or agreements under the Merger Agreement, such
that conditions to our obligation to close would not be satisfied and such breach or condition is not curable by the termination date, or if curable, is not cured by such date, and we provide JAB with at least 30 days written notice prior to such
termination and we are not otherwise in material breach of any of our covenants or agreements;
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prior to the receipt of the required vote of our shareholders approving and adopting the Merger Agreement, we receive a superior proposal
and our board of directors authorizes us to enter into an alternative acquisition agreement for the superior proposal, provided that we have complied with the obligations summarized in No Solicitation of Other Offers and Ability to
Change Board Recommendation/Termination in Connection with a Superior Proposal and we pay JAB the required termination fee prior to or concurrently with the termination; or
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our board of directors makes a change of recommendation or we breach our obligations summarized in No Solicitation of Other Offers and
Ability to Change Board Recommendation/ Termination in Connection with a Superior Proposal;
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following the receipt or public announcement of an acquisition proposal, our board of directors fails to reaffirm its recommendation of the Merger
within three business days after receipt of any reasonable request to do so from JAB;
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following public disclosure of a tender offer or exchange offer for 20% or more of outstanding shares of our common stock (other than by JAB or its
affiliates), our board of directors fails to recommend against such tender offer or exchange offer within 11 business days after the commencement of such tender offer or exchange offer, or by the second business day prior to the date of the
shareholders meeting, whichever is earlier; or
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we have breached or failed to perform any of our representations, warranties, covenants or agreements under the Merger Agreement, such that conditions
to the obligation to close by JAB and Merger Sub are not satisfied and such breach or condition is not curable or not cured by the termination date, and JAB provides us with at least 30 days written notice prior to such termination and JAB and
Merger Sub are not otherwise in material breach of any of their respective covenants or agreements under the Merger Agreement.
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T
ERMINATION
F
EE
If the Merger Agreement is
terminated by the Company or by JAB or Merger Sub under the situations described in further detail below, the Company may be required to pay a termination fee in the amount of $30,000,000, which we refer to as the termination fee, to JAB.
The Company must pay the termination fee to JAB if:
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the Company or JAB terminates the Merger Agreement because the Merger has not been consummated by the termination date and, if at such time the we have
not yet held the Special Meeting and JAB has not breached its obligations to obtain or cooperate in obtaining necessary approvals and consents under the Merger Agreement or with respect to reimbursement or indemnification under the financing
covenant, and at the time of such termination:
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there is an outstanding acquisition proposal that has been publicly disclosed and not clearly withdrawn in good faith before the termination date; and
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62
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within 12 months after termination of the Merger Agreement, the Company or any of our subsidiaries enters into an agreement or consummates a
transaction involving an acquisition proposal (in the case of a sale of equity securities or assets, for 50% or more of the total voting power or of any class of equity securities of the Company or those of any of our subsidiaries, or the
acquisition, purchase or disposition of the business or 50% or more of the consolidated assets (including equity securities of its subsidiaries), revenues, net income or earnings of the Company and our Subsidiaries outside the ordinary course of
business);
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the Company or JAB terminates the Merger Agreement because our shareholders fail to adopt the Merger Agreement at the Special Meeting and:
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there is an outstanding acquisition proposal that has been publicly disclosed and not clearly withdrawn in good faith before the shareholders meeting;
and
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within 12 months after the termination of the Merger Agreement the Company or any of our subsidiaries enters into an agreement or consummates a
transaction involving an acquisition proposal (in the case of a sale of equity securities or assets, for 50% or more of the total voting power or of any class of equity securities of the Company or those of any of our subsidiaries, or the
acquisition, purchase or disposition of the business or 50% or more of the consolidated assets (including equity securities of its subsidiaries), revenues, net income or earnings of the Company and our Subsidiaries outside the ordinary course of
business); or
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JAB terminates the Merger Agreement because the Company has breached its representations, warranties, covenants or agreements under the Merger
Agreement such that conditions to the obligation to close by JAB and Merger Sub are not satisfied and:
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there is an outstanding acquisition proposal that has been publicly disclosed and not clearly withdrawn in good faith before the termination date; and
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within 12 months after the termination of the Merger Agreement the Company or any of our subsidiaries enters into an agreement or consummates a
transaction involving an acquisition proposal (in the case of a sale of equity securities or assets, for 50% or more of the total voting power or of any class of equity securities of the Company or those of any of our subsidiaries, or the
acquisition, purchase or disposition of the business or 50% or more of the consolidated assets (including equity securities of its subsidiaries), revenues, net income or earnings of the Company and our Subsidiaries outside the ordinary course of
business);
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|
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|
the Company terminates the Merger Agreement in order to accept a superior proposal and enter into an alternative acquisition agreement related to such
superior proposal after complying with the obligations summarized in No Solicitation of Other Offers and Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal;
|
|
|
|
JAB terminates the Merger Agreement because:
|
|
|
|
our board of directors makes a change of recommendation or the Company has breached its obligations summarized in No Solicitation of Other
Offers and Ability to Change Board Recommendation/Termination in Connection with a Superior Proposal;
|
|
|
|
following the receipt or public announcement of an acquisition proposal, our board of directors fails to reaffirm the Company recommendation within
three business days after receipt of any reasonable request to do so from JAB; or
|
|
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|
following the public disclosure of a tender offer or exchange offer for 20% or more of outstanding shares of the Companys common stock (other
than by JAB or its affiliates), our board of directors fails to recommend against such tender offer or exchange offer within 11 business days after the commencement of such tender offer or exchange offer, or by the second business day prior to the
shareholders meeting, whichever is earlier.
|
63
The Merger Agreement provides that in no event will we be required to pay the termination
fee on more than one occasion. If we pay the termination fee to JAB, such termination fee shall be JABs and Merger Subs sole and exclusive remedy in circumstances where the termination fee is payable, except where the Company has
willfully and materially breached its covenants with respect to its obligations regarding non-solicitation of other transactions, this proxy statement or the Special Meeting, in which case the aggregate amount of damages determined by a court to be
payable by the Company shall be reduced by the amount of any termination fee previously paid to JAB. The Merger Agreement also provides that if we fail to promptly pay the termination fee to JAB, and JAB or Merger Sub commences a suit in order to
obtain such payment, which suit results in a judgment against the Company for the termination fee (or a portion thereof), we must pay JAB its costs and expenses (including attorneys fees) in connection with such suit, together with any
applicable interest on the amount of the fee.
S
PECIFIC
P
ERFORMANCE
Each of the parties is entitled to specific performance to enforce performance of any covenant or obligation under the Merger Agreement or
injunctive relief to prevent any breach thereof.
A
MENDMENT
, E
XTENSION
AND
W
AIVER
The parties may amend the Merger Agreement by executed written agreement at any time before or after
our shareholders have adopted and approved the Merger Agreement, provided that, after the adoption of the Merger Agreement by our shareholders, there shall be no amendment or change to the Merger Agreement that by law requires the further approval
of our shareholders without obtaining such further approval.
At any time before the consummation of the Merger, each of the
parties to the Merger Agreement may waive compliance with any of the agreements or conditions contained in the Merger Agreement to the extent permitted by applicable law.
64
M
ARKET
P
RICE
AND
D
IVIDEND
D
ATA
Our common stock has been traded on NASDAQ under the ticker symbol
PEET since January 25, 2001. The following table sets forth, for the period indicated, the range of high and low sale prices of our common stock, as reported by NASDAQ with respect to the period from January 1, 2010 through
[ ], 2012.
|
|
|
|
|
|
|
|
|
|
|
Peets common stock
|
|
|
|
High
|
|
|
Low
|
|
Fiscal Year ending December 30, 2012
|
|
|
|
|
|
|
|
|
Third Quarter (through
[ ], 2012)
|
|
$
|
[ .
|
]
|
|
$
|
[ .
|
]
|
Second Quarter
|
|
$
|
76.82
|
|
|
$
|
55.75
|
|
First Quarter
|
|
$
|
77.14
|
|
|
$
|
57.82
|
|
|
|
|
Fiscal Year ended January 1, 2012
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
64.00
|
|
|
$
|
52.72
|
|
Third Quarter
|
|
$
|
63.30
|
|
|
$
|
52.16
|
|
Second Quarter
|
|
$
|
59.42
|
|
|
$
|
45.65
|
|
First Quarter
|
|
$
|
49.01
|
|
|
$
|
33.69
|
|
|
|
|
Fiscal Year ended January 2, 2011
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
42.73
|
|
|
$
|
33.20
|
|
Third Quarter
|
|
$
|
41.93
|
|
|
$
|
33.34
|
|
Second Quarter
|
|
$
|
41.63
|
|
|
$
|
35.69
|
|
First Quarter
|
|
$
|
41.66
|
|
|
$
|
31.82
|
|
The high and low sales prices per share for Peets common stock as reported by NASDAQ on
[ ], 2012, the latest practicable trading day before the filing of this proxy statement were
$[ . ] and $[ . ].
There were
[ ] shareholders of record of our common stock as of [ ],
2012. In addition, we believe that a significant number of beneficial owners of Peets common stock hold their shares in street name.
We have not declared or paid any cash dividends on our common stock previously. Historically, we have retained earnings, if any, for use in the operation and expansion of our business.
Following the consummation of the Merger, our common stock will not be traded on any public market.
65
R
ISK
F
ACTORS
In addition to the other information included in this proxy statement, including the matters addressed in Special Note Regarding
Forward-Looking Statements, you should carefully consider the following risks before deciding whether to vote for approval and adoption of the Merger Agreement.
There are risks and uncertainties associated with the Merger.
There are a number of risks and uncertainties relating to the Merger. For example:
|
|
|
the Merger may not be consummated (including as a result of a legal injunction) or may not be consummated as currently anticipated;
|
|
|
|
there can be no assurance that approval of our shareholders and the requisite regulatory approvals will be obtained;
|
|
|
|
there can be no assurance other conditions to the closing of the Merger will be satisfied or waived or that other events will not intervene to delay or
result in the termination of the Merger;
|
|
|
|
if the Merger is not completed, the share price of our common stock may change to the extent that the current market price of our common stock reflects
an assumption that the Merger will be consummated;
|
|
|
|
failure of the Merger to close, or a delay in its closing, may have a negative impact on our ability to pursue alternative strategic transactions or
our ability to implement alternative business plans;
|
|
|
|
under certain circumstances, if the Merger Agreement is terminated, we will be required to pay a $30 million termination fee;
|
|
|
|
pending the closing of the Merger, the Merger Agreement restricts us from engaging in certain actions without JABs approval, which could prevent
us from pursuing opportunities that may arise prior to the closing of the Merger;
|
|
|
|
any delay in completing, or the failure to complete, the Merger could have a negative impact on our business, stock price and our relationships with
our customers or suppliers; and
|
|
|
|
the attention of our management may be directed to transaction-related considerations and may be diverted from the day-to-day operations of our
business and pursuit of our strategic initiatives.
|
We have incurred, and will continue to incur,
significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger, and many of these fees and costs are payable by us whether or not the Merger is consummated.
Our executive officers and directors may have interests that are different from, or in addition to, those of our shareholders generally.
Our executive officers and directors may have interests in the Merger that are different from, or are in addition to,
those of Peets shareholders generally. These interests include direct or indirect ownership of Peets common stock and stock options and the acceleration of stock options upon consummation of the Merger. In addition, our executive
officers may have certain rights to severance and other payments in the event that their employment is terminated following the consummation of the Merger.
The Merger Agreement limits our ability to pursue alternative transactions to the Merger.
The Merger Agreement contains no shop provisions that, subject to limited exceptions, limit our ability to discuss, facilitate or commit to third-party acquisition proposals to acquire all or
a significant part of the Company. In addition, we are required to pay a $30 million termination fee if we terminate the Merger
66
Agreement under certain circumstances. These provisions place conditions on our ability to pursue offers from third parties that could result in greater value to our shareholders. The obligation
to make the termination fee payment also could discourage a third party from pursuing an alternative acquisition proposal.
Peets will no longer exist as a public company following the Merger and its shareholders will forego any increase in its
value.
If the Merger is completed, we will no longer exist as a public company and Peets shareholders will
forego any increase in Peets value that might have otherwise resulted from our possible future growth.
We are
subject to litigation initiated in connection with the Merger, which could be time consuming and divert our resources and the attention of our management.
As described under Litigation Related to the Merger, we and the individual members of our board of directors have been named as defendants in a number of lawsuits related to the Merger
Agreement and the proposed Merger. These suits generally allege that the directors breached their fiduciary duties owed to Peets shareholders, and that the Company aided and abetted the alleged breaches, in connection with the Companys
agreement to be acquired by an affiliate of JAB. The lawsuits each assert that the Company and its board of directors engaged in a flawed process in negotiating the potential sale, obtained a price that was below the Companys actual value and
agreed to provisions that would allegedly preclude another interested buyer from making a financially superior proposal to acquire the Company. The lawsuits seek, among other things, declaratory and injunctive relief or rescission to enjoin or
rescind the proposed acquisition, rescissory damages, an accounting for damages, a constructive trust for any allegedly improper gains by defendants, pre- and post-judgment interest and attorneys fees. Although we believe that
these suits are without merit, the defense of these suits may be expensive and may divert managements attention and resources, which could adversely affect our business.
67
S
ECURITY
O
WNERSHIP
OF
C
ERTAIN
B
ENEFICIAL
O
WNERS
AND
M
ANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock
as of July 31, 2012 by: (i) each director; (ii) each executive officer; and (iii) all executive officers and directors as a group. Information for all those known by us to be beneficial owners of more than five percent of our
common stock, as stated on and based solely on Schedules 13D or 13G filed by such beneficial owners, is also included.
Beneficial ownership is determined in accordance with the rules of the SEC which generally attribute beneficial ownership of securities
to persons who possess sole or shared voting power or investment power with respect to those securities and includes shares of common stock issuable pursuant to the exercise of stock options that were immediately exercisable or exercisable within 60
days of July 31, 2012. These shares are deemed to be outstanding and to be beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them,
subject to applicable community property laws. Except as noted below, information with respect to beneficial ownership has been furnished by each director, executive officer or five percent or more shareholder, as the case may be, and the address
for each person listed on the table is c/o Peets Coffee & Tea, Inc., 1400 Park Avenue, Emeryville, California 94608-3520. Applicable percentages are based on 13,165,869 shares outstanding on July 31, 2012, adjusted as required by
the rules promulgated by the SEC.
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|
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|
Name of Beneficial Owner
|
|
Number of Shares
Beneficially Owned
|
|
|
Percentage of
Beneficial Ownership
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
Jean-Michel Valette (1)
|
|
|
85,000
|
|
|
|
*
|
%
|
Patrick J. ODea (2)
|
|
|
73,031
|
|
|
|
*
|
|
Elizabeth Sartain (3)
|
|
|
43,250
|
|
|
|
*
|
|
Michael Linton (4)
|
|
|
37,500
|
|
|
|
*
|
|
Gerald Baldwin (5)
|
|
|
20,000
|
|
|
|
*
|
|
Ted W. Hall (6)
|
|
|
18,900
|
|
|
|
*
|
|
Kay Bogeajis (7)
|
|
|
17,100
|
|
|
|
*
|
|
Thomas P. Cawley (8)
|
|
|
15,743
|
|
|
|
*
|
|
Shawn Conway (9)
|
|
|
13,808
|
|
|
|
*
|
|
David Deno (10)
|
|
|
6,741
|
|
|
|
*
|
|
Hilary Billings (11)
|
|
|
6,738
|
|
|
|
*
|
|
All directors and executive officers as a group (11 persons) (12)
|
|
|
337,811
|
|
|
|
2.6
|
|
|
|
|
5% Shareholders (13):
|
|
|
|
|
|
|
|
|
Macquarie Group LTD (14)
No. 1 Martin Place
Sydney, New South Wales, Australia
|
|
|
1,682,581
|
|
|
|
12.8
|
|
|
|
|
Franklin Resources, Inc. (15)
One Franklin Parkway
San Mateo, CA 94403-1906
|
|
|
1,355,771
|
|
|
|
10.3
|
|
|
|
|
Wasatch Advisors, Inc.
150 Social Hall Avenue
Salt Lake City, UT 84111
|
|
|
1,241,237
|
|
|
|
9.4
|
|
|
|
|
Baron Capital Group, Inc. (16)
767 Fifth Avenue
New York, NY 10153
|
|
|
1,137,000
|
|
|
|
8.6
|
|
68
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Number of Shares
Beneficially Owned
|
|
|
Percentage of
Beneficial Ownership
|
|
Brown Capital Management, LLC
1201 N. Calvert Street
Baltimore, MD 21202
|
|
|
1,132,737
|
|
|
|
8.6
|
|
|
|
|
BlackRock, Inc
40 East 52
nd
Street
New York, NY 10022
|
|
|
970,195
|
|
|
|
7.4
|
|
|
|
|
Vanguard Group, Inc
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
681,173
|
|
|
|
5.2
|
|
(1)
|
Includes 15,000 shares issuable upon the exercise of vested stock options.
|
(2)
|
Includes 52,649 shares issuable upon the exercise of vested stock options. Also includes 10,382 shares held by The ODea Family Trust DTD 12/30/99, of which
Mr. ODea is a Trustee.
|
(3)
|
Includes 41,250 shares issuable upon the exercise of vested stock options.
|
(4)
|
Includes 35,000 shares issuable upon the exercise of vested stock options.
|
(5)
|
Includes 15,000 shares issuable upon the exercise of vested stock options.
|
(6)
|
Includes 15,000 shares issuable upon the exercise of vested stock options.
|
(7)
|
Represents 17,100 shares issuable upon the exercise of vested stock options or stock options that vest within 60 days of July 31, 2012.
|
(8)
|
Includes 10,965 shares issuable upon the exercise of vested stock options.
|
(9)
|
Represents 13,808 shares issuable upon the exercise of vested stock options or stock options that vest within 60 days of July 31, 2012.
|
(10)
|
Includes 5,000 shares issuable upon the exercise of vested stock options.
|
(11)
|
Includes 5,000 shares issuable upon the exercise of vested stock options.
|
(12)
|
See footnotes (1) through (11) above, as applicable.
|
(13)
|
Information with respect to each beneficial owner of 5% or more of a class of Peets common stock is based on Schedules 13D or 13G filed by such beneficial owners
with the SEC for the 2011 calendar year.
|
(14)
|
The number of shares for Macquarie Group LTD includes 1,677,381 shares owned by Delaware Management Holdings Inc., and 5,200 shares owned by Macquarie Bank Limited.
These shares are deemed beneficially owned due to Macquarie Group LTDs ownership of Macquarie Bank Limited, Delaware Management Holdings Inc., Delaware Management Business Trust, and Delaware Smid Cap Growth Fund.
|
(15)
|
The number of shares for Franklin Resources, Inc. includes (FRI) includes 1,248,890 shares owned by Franklin Advisers, Inc., 51,400 shares owned by Franklin
Templeton Institutional, LLC, 43,456 shares owned by Franklin Templeton Portfolio Advisors, Inc. and 12,025 owned by Fiduciary Trust Company International. Charles B. Johnson and Rupert H. Johnson, Jr. own a controlling interest in FRI.
|
(16)
|
The number of shares for Baron Capital Group, Inc. (BCG) includes 937,000 shares owned by BAMCO INC., and 88,391 shares owned by Baron Capital Management,
Inc. Ronald Baron owns a controlling interest in BCG.
|
69
A
DVISORY
V
OTE
ON
C
OMPENSATION
B
ACKGROUND
; S
HAREHOLDER
R
ESOLUTION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act and section 14A of the Exchange Act, Peets shareholders are
entitled to vote to approve or disapprove, on an advisory basis, the compensation of the named executive officers of Peets that is based on or otherwise relates to the Merger as disclosed in this proxy statement, which compensation is referred
to in this proxy statement as the merger-related compensation. The terms of the merger-related compensation are described in this proxy statement under The MergerInterests of Our Directors and Executive Officers in the
Merger.
In accordance with the above requirements, Peets is asking its shareholders to vote on the adoption of
the following resolution:
RESOLVED, that the compensation that may be paid or become payable to the
named executive officers of Peets in connection with the Merger, as disclosed in the Merger-Related Compensation table and narrative discussion as set forth in this proxy statement under The MergerInterests of Our Directors and
Executive Officers in the Merger beginning on page 33, is hereby APPROVED.
R
EQUIRED
V
OTE
;
B
OARD
R
ECOMMENDATION
The affirmative vote of the holders of a majority of the shares of
Peets common stock represented and voting either in person or by proxy at the Special Meeting and entitled to vote is required for approval of the proposal to approve, on an advisory basis, the merger-related compensation. Because the vote on
this proposal is advisory, it will not be binding on the Companys board of directors. Thus, regardless of the outcome of this advisory vote, such compensation will be payable if the Merger is approved, subject only to other applicable
conditions.
The advisory vote on the merger-related compensation is a vote separate and apart from the vote to adopt and
approve the Merger Agreement. Accordingly, you may vote to approve, on an advisory basis, the merger-related compensation and vote against the proposal to adopt and approve the Merger Agreement; or you may vote against this proposal to approve, on
an advisory basis, the merger-related compensation and vote to adopt and approve the Merger Agreement. Approval of this proposal to approve, on an advisory basis, the merger-related compensation is not a condition to the completion of the Merger,
and the approval or failure of this proposal will have no impact on the completion of the Merger.
Abstentions and broker
non-votes, if any, will be counted as present for the purpose of determining the presence of a quorum and abstentions will have the same effect as a vote against the proposal. Broker non-votes, if any, will have no effect in determining whether or
not the proposal is approved.
Our board of directors recommends that you vote
FOR
the proposal to approve,
on an advisory basis, the merger-related compensation as described in this proxy statement.
70
A
DJOURNMENT
OF
THE
S
PECIAL
M
EETING
The Special Meeting may be adjourned without notice (other than the
announcement of adjournment made at the Special Meeting), by approval of the holders of a majority of the shares of Peets common stock present, in person or by proxy, and entitled to vote at the Special Meeting. We are soliciting proxies to
grant the authority to vote in favor of adjournment of the Special Meeting, if necessary. In particular, authority is expected to be exercised if the purpose of the adjournment is to provide additional time to solicit votes in favor of adopting the
Merger Agreement, and such adjournment is requested by the JAB group.
Abstentions and broker non-votes, if any, will be
counted as present for the purpose of determining the presence of a quorum and abstentions will have the same effect as a vote against the proposal. Broker non-votes, if any, will have no effect in determining whether or not the proposal is
approved.
Our board of directors recommends that you vote
FOR
the proposal to grant the authority to vote
your shares to adjourn the meeting, if necessary, to provide additional time to solicit additional proxies.
71
O
THER
M
ATTERS
O
THER
M
ATTERS
FOR
A
CTION
AT
THE
S
PECIAL
M
EETING
No business may be transacted at the Special Meeting other than the matters set forth in this proxy
statement.
S
HAREHOLDER
P
ROPOSALS
Our 2012 Annual Meeting of Shareholders (the 2012 Annual Meeting) was held on Friday, May 11, 2012 at 10:00 a.m., local
time, at the Claremont Hotel & Spa, 41 Tunnel Road, Berkeley, California 94705.
Peets will hold an Annual
Meeting of Shareholders in 2013 (the 2013 Annual Meeting) only if the Merger is not completed. To be considered for inclusion in the proxy materials for the 2013 Annual Meeting, if any, your proposal must be submitted in writing by
December 4, 2012 to the Corporate Secretary of Peets Coffee & Tea, Inc. at 1400 Park Avenue, Emeryville, California 94608-3520.
If you wish to submit a proposal for consideration at the 2013 Annual Meeting but are not requesting that such proposal be included in the proxy materials for the 2013 Annual Meeting, or if you wish to
nominate a person for election to our board of directors at the 2013 Annual Meeting, your notice of such a proposal or nomination must be submitted in writing and delivered to, or mailed and received at, the principal executive offices of the
Company no more than 120 days nor less than 90 days before the one year anniversary of the 2012 Annual Meeting, provided that the 2013 Annual Meeting is held within 30 days of such anniversary. We currently anticipate that our 2013 Annual Meeting,
if any, will be held within 30 days of May 11, 2013. Accordingly, any such proposal or nomination must be received by the Company no earlier than January 11, 2013 and no later than February 10, 2013, and should be delivered or mailed
to: Corporate Secretary, Peets Coffee & Tea, Inc., 1400 Park Avenue, Emeryville, California 94608-3520. Please note that if the date of the 2013 Annual Meeting, when scheduled, is more than 30 days before or after May 11, 2013
(the one year anniversary of the 2012 Annual Meeting) then your notice must be received no more than 90 days nor less than 60 days before the actual date of the 2013 Annual Meeting or, if later, 10 days following the day on which we publicly
disclose the scheduled date of the 2013 Annual Meeting. In order to be properly submitted, your notice to the Corporate Secretary must contain specific information as required under the Companys bylaws. If you would like a copy of the
Companys current Bylaws, please write to the Corporate Secretary at the address above.
Without limiting the advance
notice provisions in the Companys Bylaws, which contain procedures that must be followed for a matter to be properly presented at an annual meeting, the proxy holders will have discretionary authority to vote all shares for which they hold
proxies with respect to any shareholder proposal or nomination received after the deadline for such proposals or nominations set forth in our Bylaws. Such discretionary authority may be exercised to oppose a proposal or nomination made by a
shareholder.
W
HERE
Y
OU
C
AN
F
IND
M
ORE
I
NFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy
any document we file at the SECs public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also
available to the public at the SECs website at http://www.sec.gov.
Statements contained in this proxy statement, or in
any document incorporated by reference in this proxy statement regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other
document filed as an exhibit with the SEC. The SEC allows us to incorporate by reference into this proxy statement documents we file with the SEC. This means that we can disclose important information to you by referring you to those
documents. The
72
information incorporated by reference is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. We
incorporate by reference the documents listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the Special Meeting (other than
Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K):
|
|
|
Our Annual Report on Form 10-K for our fiscal year ended January 1, 2012 (filed on March 9, 2012);
|
|
|
|
Our Quarterly Reports on Form 10-Q filed on May 4, 2012 and August 9, 2012; and
|
|
|
|
Our Current Reports on Form 8-K filed on January 4, 2012, May 16, 2012 and July 24, 2012.
|
Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of reports, proxy statements or
other information concerning us, without charge, by written or telephonic request directed to us at 1400 Park Avenue, Emeryville, California 94608, attention: Corporate Secretary, or from the SEC through the SECs website at the address
provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into those documents. Upon written or telephonic request as
provided above, we will, within one business day of receiving such request, mail copies of any or all items incorporated by reference herein, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into
those documents, to the requesting party by first class mail or other equally prompt means.
The JAB group has supplied all
information contained in this proxy statement relating to JAB and Merger Sub and we have supplied all information relating to Peets.
* * *
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED [ ],
2012. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE. NEITHER THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS NOR THE ISSUANCE OF CASH IN THE MERGER CREATES ANY
IMPLICATION TO THE CONTRARY.
73
Annex A
AGREEMENT AND PLAN OF MERGER
By and Among
PEETS COFFEE & TEA, INC.,
JAB HOLDINGS BV
and
PANTHER MERGER CO.
Dated as of July 21, 2012
T
ABLE
OF
C
ONTENTS
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Page
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ARTICLE I
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THE MERGER; CLOSING; EFFECTIVE TIME
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1.1
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The Merger
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A-1
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1.2
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Closing
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A-1
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1.3
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Effective Time
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A-1
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ARTICLE II
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ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION
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2.1
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Articles of Incorporation
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A-2
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2.2
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The Bylaws
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A-2
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2.3
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Directors
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A-2
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2.4
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Officers
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A-2
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ARTICLE III
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EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
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3.1
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Effect on Capital Stock
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A-2
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3.2
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Dissenting Shares.
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A-3
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3.3
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Exchange of Certificates
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A-3
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3.4
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Treatment of Stock Plans
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A-5
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3.5
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Adjustments to Prevent Dilution
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A-6
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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4.1
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Organization and Qualification
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A-6
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4.2
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Capital Structure
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A-7
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4.3
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Corporate Authority; Approval and Fairness
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A-8
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4.4
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Governmental Filings; No Violations; Certain Contracts
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A-9
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4.5
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Company Reports; Financial Statements; No Undisclosed Liabilities
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A-9
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4.6
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Absence of Certain Changes
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A-11
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4.7
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Litigation
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A-12
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4.8
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Employee Benefits
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A-12
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4.9
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Compliance with Laws; Permits
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A-14
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4.10
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Material Contracts
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A-15
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4.11
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Properties
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A-17
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4.12
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Proxy Statement
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A-18
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4.13
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Environmental Matters
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A-18
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4.14
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Taxes
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A-19
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A-i
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4.15
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Labor Matters
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A-19
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4.16
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Intellectual Property
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A-20
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4.17
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Insurance
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A-21
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4.18
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Suppliers and Customers
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A-21
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4.19
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Affiliate Transactions
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A-22
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4.20
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Takeover Statutes; Other Restrictions
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A-22
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4.21
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Brokers and Finders
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A-22
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ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF JAB AND MERGER SUB
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5.1
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Organization and Qualification
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A-22
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5.2
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Corporate Authority
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A-22
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5.3
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Governmental Filings; No Violations; Etc
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A-23
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5.4
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Financing
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A-23
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5.5
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Litigation
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A-23
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5.6
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Merger Sub
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A-23
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5.7
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Proxy Statement
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A-24
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5.8
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Brokers and Finders
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A-24
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5.9
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Acquiring Person
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A-24
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ARTICLE VI
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COVENANTS
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6.1
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Interim Operations
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A-24
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6.2
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Acquisition Proposals
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A-27
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6.3
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Proxy Filing; Information Supplied
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A-30
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6.4
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Shareholders Meeting
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A-31
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6.5
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Filings; Other Actions; Notification
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A-31
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6.6
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Access and Reports
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A-32
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6.7
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Stock Exchange Delisting
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A-33
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6.8
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Publicity; Communications
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A-33
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6.9
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Financing
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A-33
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6.10
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Expenses
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A-34
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6.11
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Indemnification; Directors and Officers Insurance
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A-34
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6.12
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Takeover Statutes
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A-35
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6.13
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Shareholder Litigation
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A-35
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6.14
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Notification
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A-35
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6.15
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Section 16 Matters
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A-36
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6.16
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Employee Benefits
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A-36
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ARTICLE VII
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CONDITIONS
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7.1
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Conditions to Each Partys Obligation to Effect the Merger
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A-37
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7.2
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Conditions to Obligations of JAB and Merger Sub
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A-37
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7.3
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Conditions to Obligation of the Company
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A-38
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A-ii
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ARTICLE VIII
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TERMINATION
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8.1
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Termination by Mutual Consent
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A-38
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8.2
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Termination by Either JAB or the Company
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A-38
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8.3
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Termination by the Company
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A-39
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8.4
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Termination by JAB
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A-39
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8.5
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Effect of Termination and Abandonment
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A-39
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ARTICLE IX
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MISCELLANEOUS AND GENERAL
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9.1
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Non-Survival of Representations, Warranties, Covenants and Agreements
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A-41
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9.2
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Modification or Amendment
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A-41
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9.3
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Waiver
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A-41
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9.4
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Counterparts
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A-41
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9.5
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Governing Law and Venue; Waiver of Jury Trial; Specific Performance
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A-41
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9.6
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Notices
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A-42
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9.7
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Entire Agreement
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A-43
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9.8
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No Third Party Beneficiaries
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A-43
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9.9
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Obligations of JAB and of the Company
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A-43
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9.10
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Definitions
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A-43
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9.11
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Severability
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A-43
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9.12
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Interpretation; Construction
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A-44
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9.13
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Assignment
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A-44
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ANNEX A
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DEFINED TERMS
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A-45
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A-iii
A
GREEMENT
AND
P
LAN
OF
M
ERGER
AGREEMENT AND PLAN OF MERGER (hereinafter
called this
Agreement
), dated as of July 21, 2012, by and among Peets Coffee & Tea, Inc., a Washington corporation (the
Company
), JAB Holdings BV, a Dutch Besloten Vennootschap
met beperkte aansprakelijkheid (
JAB
), and Panther Merger Co., a Washington corporation and an Affiliate of JAB (
Merger Sub
, the Company and Merger Sub sometimes being hereinafter collectively
referred to as the
Constituent Corporations
).
R
ECITALS
WHEREAS, the respective boards of directors of each of JAB, Merger Sub and the Company have approved and declared advisable this
Agreement and the merger of Merger Sub with and into the Company with the Company as the surviving entity (the
Merger
) upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the board of directors of the Company has determined that the Merger and the other transactions contemplated by this Agreement
are in the best interests of the Companys shareholders and has resolved to recommend the approval and adoption of this Agreement, and the transactions contemplated hereby, including the Merger, to the Companys shareholders;
WHEREAS, the Company, JAB and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
A
RTICLE
I
T
HE
M
ERGER
; C
LOSING
; E
FFECTIVE
T
IME
1.1
The Merger
. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Washington Business Corporation Act (the
WBCA
)
, at the Effective Time, Merger Sub shall be merged with and into the Company and the separate corporate existence of
Merger Sub shall thereupon cease. The Company shall be the surviving corporation in the Merger under the WBCA (sometimes hereinafter referred to as the
Surviving Corporation
).
1.2
Closing
. Unless otherwise mutually agreed in writing between the Company and
JAB, the closing for the Merger (the
Closing
) shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York, at 9:00 A.M. (Eastern Time) on the third
(3rd) business day (the
Closing Date
) following the day on which the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied only
at the Closing, but subject to the satisfaction or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement or at such other place or on such other date and time as JAB and the Company may mutually agree. For
purposes of this Agreement, the term
business day
shall mean any day, ending at 11:59 P.M. (Eastern Time), other than a Saturday or Sunday or a day on which banks are required or authorized to close in New York, New
York.
1.3
Effective Time
. Concurrently with the Closing, the Company and
JAB will cause articles of merger (the
Articles of Merger
) to be filed with the Secretary of State of the State of Washington in such form as required by, and executed in accordance with, the relevant provisions of the WBCA
(the date and time of the filing of the Articles of Merger with the Secretary of State of the State of Washington, or such later time as is specified in the Articles of Merger and as is agreed to by the Company and JAB in writing, being the
Effective Time
).
A-1
A
RTICLE
II
A
RTICLES
OF
I
NCORPORATION
AND
B
YLAWS
OF
THE
S
URVIVING
C
ORPORATION
; D
IRECTORS
AND
O
FFICERS
OF
THE
S
URVIVING
C
ORPORATION
2.1
Articles of Incorporation
. At the Effective Time, the Amended and Restated
Articles of Incorporation of the Company shall be amended in their entirety to read the same as the articles of incorporation of Merger Sub immediately prior to the Effective Time, except that the name of the Surviving Corporation shall be
Peets Coffee & Tea, Inc. and as so amended shall be the articles of incorporation of the Surviving Corporation (the
Charter
), until thereafter amended as provided therein or in accordance with
applicable Law.
2.2
The Bylaws
. At the Effective Time, the Amended and
Restated Bylaws of the Company shall be amended in their entirety to read the same as the bylaws of Merger Sub immediately prior to the Effective Time, and as so amended shall be the bylaws of the Surviving Corporation (the
Bylaws
), until thereafter amended as provided therein or in accordance with applicable Law.
2.3
Directors
. The directors of Merger Sub immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and
the Bylaws.
2.4
Officers
. The officers of the Company (other than such
officers who JAB and the Company mutually determine shall not remain officers of the Surviving Corporation) immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and the Bylaws.
A
RTICLE
III
E
FFECT
OF
THE
M
ERGER
ON
C
APITAL
S
TOCK
;
E
XCHANGE
OF
C
ERTIFICATES
3.1
Effect on Capital Stock
. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any capital stock of the Company or Merger Sub:
(a)
Merger Consideration
. Each share of common stock, no par value, of the Company (a
Share
or, collectively, the
Shares
) issued and outstanding immediately prior to the Effective Time other than (i) Shares owned by JAB, Merger Sub or any other Affiliate of JAB that is directly
or indirectly wholly owned by the ultimate parent of JAB, (ii) Shares owned by the Company or any direct or indirect wholly owned subsidiary of the Company (including Shares held in the Companys treasury) and (iii) any Shares the
holder of which (A) has not voted in favor of the Merger or consented thereto in writing, (B) has demanded its rights to be paid the fair value of such Shares in accordance with Section 23B.13 of the WBCA and (C) has not
effectively withdrawn or lost its rights to be paid the fair value of such Shares (
Dissenting Shares
) (each of such Shares described in clauses (i), (ii) and (iii), an
Excluded Share
and
collectively, the
Excluded Shares
) shall automatically be converted into the right to receive $73.50 in cash per Share, without interest (the
Per Share Merger Consideration
). At the Effective Time,
all of the Shares (other than Excluded Shares) shall cease to be outstanding, shall automatically be cancelled and shall cease to exist, and thereafter any Shares represented by a certificate (a
Certificate
) or
non-certificated Shares represented by book-entry (
Book-Entry Shares
) (in each case, other than Excluded Shares) shall represent only the right to receive the Per Share Merger Consideration.
A-2
(b)
Treatment of Excluded Shares
. Each
Excluded Share shall, at the Effective Time, by virtue of the Merger and without any action on the part of the holder of the Excluded Share, cease to be outstanding and automatically be cancelled without payment of any consideration therefor,
subject to any rights the holder thereof may have under Section 3.2.
(c)
Merger
Sub
. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value
$0.01 per share, of the Surviving Corporation.
3.2
Dissenting Shares
.
(a) Notwithstanding anything in this Agreement to the contrary, no Dissenting Shares shall be converted into or
represent a right to receive the Per Share Merger Consideration. By virtue of the Merger, all Dissenting Shares shall be cancelled and shall cease to exist and shall represent the right to receive only those rights provided under Section 23B.13
of the WBCA. From and after the Effective Time, a holder of Dissenting Shares shall not be entitled to exercise any of the voting rights or other rights of a shareholder, member or equity owner of the Surviving Corporation.
(b) Notwithstanding the provisions of this Section 3.2, if any holder of Shares for which such holder has
demanded dissenters rights shall effectively withdraw or lose (through failure to perfect or otherwise) the right to dissent or its dissenters rights, then, as of the later of the Effective Time and the occurrence of such event, such
holders Shares shall no longer be Dissenting Shares and shall automatically be converted into and represent only the right to receive the Per Share Merger Consideration, without any interest thereon and subject to any applicable withholding
Taxes specified in Section 3.3(f).
(c) The Company shall give JAB (i) prompt written notice
of any notice received by the Company of any shareholders intent to demand the fair value of any Shares, any demand received by the Company for payment of the fair value of any Shares, withdrawals of such demands, and any other instruments
served pursuant to Section 23B.13 of the WBCA and received by the Company which relate to any such demand for dissenters rights and (ii) the opportunity to reasonably participate in negotiations and proceedings with respect to
demands for dissenters rights under Section 23B.13 of the WBCA. Unless required by applicable Law or Order, the Company will not, except with the prior written consent of JAB, make any payment with respect to demands for dissenters
rights or offer to settle or settle any such demands.
3.3
Exchange of Certificates
.
(a)
Paying Agent
. At the Effective Time, JAB shall deposit, or shall cause to be
deposited, with a paying agent (which shall be a reputable bank or trust company) selected by JAB (the
Paying Agent
), for the benefit of the holders of Shares, a cash amount in immediately available funds necessary for the
Paying Agent to make payments under Section 3.1(a) (such cash being hereinafter referred to as the
Exchange Fund
). The Exchange Fund shall not be used for any other purpose. The Paying Agent shall invest the Exchange
Fund as directed by JAB;
provided
, that such investments shall be in obligations of or guaranteed by the United States of America in commercial paper obligations rated A-1 or P-1 or better by Moodys Investors Service, Inc. or
Standard & Poors Corporation, respectively, in certificates of deposit, bank repurchase agreements or bankers acceptances of commercial banks with capital exceeding $1 billion, or in money market funds having a rating in the
highest investment category granted by a recognized credit rating agency at the time of acquisition or a combination of the foregoing and, in any such case, no such instrument shall have a maturity exceeding three (3) months. Any interest and
other income resulting from such investments shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable under Section 3.1(a) shall be promptly returned to JAB.
(b)
Exchange Procedures
. Promptly after the Effective Time (and in any event within
five (5) business days thereafter) the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of Shares (or, in the case of street-holders, deliver to the Depository Trust Company) immediately prior to
the Effective Time (other than holders of Excluded Shares) (i) a letter of transmittal in customary form,
A-3
reasonably acceptable to the parties, specifying that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares shall pass, only upon delivery of the
Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 3.3(e)) or Book-Entry Shares to the Paying Agent and (ii) instructions for use in effecting the surrender of the Certificates (or affidavits of loss in
lieu of the Certificates as provided in Section 3.3(e)) or Book-Entry Shares in exchange for the Per Share Merger Consideration. Upon surrender of a Certificate (or affidavit of loss in lieu of the Certificate as provided in
Section 3.3(e)) or Book-Entry Shares to the Paying Agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such Certificate or Book-Entry Shares shall solely be entitled to receive in exchange therefor a
cash amount in immediately available funds (after giving effect to any required Tax withholdings as provided in Section 3.3(f)) equal to (x) the number of Shares represented by such Certificate (or affidavit of loss in lieu of the
Certificate as provided in Section 3.3(e)) or Book-Entry Shares multiplied by (y) the Per Share Merger Consideration, and the Certificate or Book-Entry Shares so surrendered shall forthwith be cancelled. No interest will be paid or accrued
on any amount payable upon due surrender of the Certificates or Book-Entry Shares. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a check or wire (pursuant to instructions set forth
in the letter of transmittal) for any cash to be exchanged upon due surrender of the Certificate or Book-Entry Shares may be issued to such transferee if the Certificate or Book-Entry Shares formerly representing such Shares is presented to the
Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.
(c)
Transfers
. From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate or Book-Entry Shares are presented to the Surviving Corporation, JAB or the Paying Agent
for transfer, such Certificates or Book-Entry Shares shall be cancelled and exchanged for the cash amount in immediately available funds to which the holder thereof is entitled pursuant to this Article III.
(d)
Termination of Exchange Fund; No Liability
. Any portion of the Exchange Fund
(including the proceeds of any investments of the Exchange Fund) that remains unclaimed by the shareholders of the Company for one (1) year after the Effective Time shall be delivered to the Surviving Corporation. Any holder of Shares (other
than Excluded Shares) who has not theretofore complied with this Article III shall thereafter look only to the Surviving Corporation for payment of the Per Share Merger Consideration (after giving effect to any required Tax withholdings as provided
in Section 3.3(f)) upon due surrender of its Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 3.3(e) below) or Book-Entry Shares, without any interest thereon. Notwithstanding the foregoing, none of
the Surviving Corporation, JAB, the Paying Agent or any other Person shall be liable to any former holder of Shares for any amount delivered to any Governmental Entity pursuant to and in compliance with applicable abandoned property, escheat or
similar Laws. For the purposes of this Agreement, the term
Person
shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity or other entity of any kind or nature.
(e)
Lost,
Stolen or Destroyed Certificates
. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by JAB, the posting by such Person of a bond in such reasonable amount and upon such reasonable terms as may be required by JAB as indemnity against any claim that may be made against it or the Surviving Corporation with respect to
such Certificate, the Paying Agent will issue a check or wire (pursuant to instructions set forth in the letter of transmittal) in the amount (after giving effect to any required Tax withholdings) equal to the number of Shares represented by such
lost, stolen or destroyed Certificate multiplied by the Per Share Merger Consideration.
(f)
FIRPTA;
Withholding Rights
. Not more than thirty (30) days prior to Closing, the Company shall deliver to JAB a certificate, substantially in the form provided for in Sections 1.1445-2(c)(3) and 1.897-2(h) of the Treasury
Regulations, establishing that the Company is not a United States real property holding
A-4
corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (the
Code
), and has not been such a United States real
property holding corporation within the five (5) year period ending on the Closing Date, and a copy of notice provided to the Internal Revenue Service (
IRS
) in accordance with the provisions of
Section 1.897-2(h)(2) of the Treasury regulations. Each of JAB, the Surviving Corporation and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares
such amounts as it reasonably determines in good faith it is required to deduct and withhold with respect to the making of such payment under the Code, or any other applicable state, local or foreign Tax Law. To the extent that amounts are so
withheld by JAB, the Surviving Corporation or the Paying Agent, as the case may be, such withheld amounts (i) shall be remitted by JAB, the Surviving Corporation or the Paying Agent, as applicable, to the applicable Governmental Entity, and
(ii) shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made by JAB, the Surviving Corporation or the Paying Agent, as the case may be.
(g)
No Further Ownership Rights in Shares
. The Per Share Merger
Consideration paid upon the surrender of Certificates or Book-Entry Shares in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such
Certificates or to such Book-Entry Shares.
3.4
Treatment of Stock Plans
.
(a)
Treatment of Options
. Prior to, and effective as of, the Effective Time, the
Company shall take all necessary action to accelerate the vesting of each outstanding option to purchase Shares under the Stock Plans (each, a
Company Option
), that is outstanding as of immediately prior to the Effective
Time in accordance with the terms of the Stock Plans. At the Effective Time, each outstanding Company Option, vested or unvested, shall be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time,
an amount in cash equal to the product of (x) the total number of Shares subject to the Company Option times (y) the excess, if any, of the Per Share Merger Consideration over the exercise price per Share under such Company Option, less
applicable Taxes required to be withheld with respect to such payment as provided in Section 3.3(f). In the event that the exercise price per Share under any Company Option, as adjusted, is equal to or greater than the Per Share Merger
Consideration, such Company Option shall be cancelled as of the Effective Time without payment therefore and shall have no further force or effect.
(b)
Treatment of Other Awards Under Stock Plans
. At the Effective Time, each outstanding award of a right (other than awards of Company Options)
entitling the holder thereof to Shares or cash equal to or based on the value of Shares (a
Share Unit
) issued under the Stock Plans that is outstanding or payable as of immediately prior to the Effective Time, whether
vested or unvested, shall be cancelled and converted automatically into the right to receive, as promptly as reasonably practicable following the Effective Time, a cash payment equal to the product of (x) the number of Shares subject to such
Share Unit and (y) the Per Share Merger Consideration, less applicable Taxes required to be withheld with respect to such payment as provided in Section 3.3(f). At the Effective Time, each holder of a Share Unit shall cease to have any
rights with respect thereto, except the right to receive the Per Share Merger Consideration in accordance with this Section 3.4(b).
(c)
Corporate Actions
. At or prior to the Effective Time, the Company, the board of directors of the Company and the compensation committee of the
board of directors of the Company, as applicable, shall adopt any resolutions and take any actions which are necessary to effectuate the provisions of Sections 3.4(a) and 3.4(b). The Company shall take all actions necessary to ensure that from
and after the Effective Time neither JAB nor the Surviving Corporation will be required to deliver Shares or other capital stock of the Company to any Person pursuant to or in settlement of Company Options or otherwise.
(d)
Termination of Employee Stock Purchase Plan
. The Company shall terminate the
Amended and Restated 2000 Employee Stock Purchase Plan prior to the Effective Time and shall not permit any new offering period to begin after the date of this Agreement and prior to the Effective Time.
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3.5
Adjustments to Prevent
Dilution
. In the event that, between the date of this Agreement and the Effective Time, the number of issued and outstanding Shares or securities convertible or exchangeable into or exercisable for Shares changes as a
result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction, the Per Share Merger Consideration shall be
equitably adjusted to provide to JAB and the holders of Shares the same economic effect as contemplated by Article III of this Agreement prior to such change; provided that nothing in this Section 3.5 shall be construed to permit the Company to
take any action with respect to its securities that is prohibited by the terms of this Agreement.
A
RTICLE
IV
R
EPRESENTATIONS
AND
W
ARRANTIES
OF
THE
C
OMPANY
Except as (i) set forth in the corresponding sections or subsections of
the disclosure schedule delivered to JAB by the Company prior to entering into this Agreement (the
Company Disclosure Schedule
) (it being agreed that disclosure of any item in any section or subsection of the Company
Disclosure Schedule shall be deemed disclosure with respect to any section or subsection to which the relevance of such item is reasonably apparent on its face other than with respect to Section 4.6(a), which shall not be subject to or
qualified by the information set forth in any other section or subsection of the Company Disclosure Schedule other than Section 4.6(a) thereof, whether by cross reference or otherwise) or (ii) other than with respect to Sections 4.1,
4.2(a), 4.2(b) (the first sentence thereof) and 4.3 and, as further limited by clause (B) below, 4.6(a)), (A) disclosed in the Company Reports filed with the Securities and Exchange Commission (the
SEC
) at least
two (2) business days prior to the date of this Agreement, the relevance of which disclosure is reasonably apparent in the Company Reports and (B) with respect to Section 4.6(a), only to the extent any such Company Report was filed
since January 1, 2012 (excluding, in the case of this clause (ii), any disclosures set forth in any section entitled Risk Factors or Cautionary Statement Relevant to Forward Looking Statements or in any other section to
the extent they are forward-looking statements or cautionary, nonspecific, predictive or forward-looking in nature), the Company hereby represents and warrants to JAB and Merger Sub that:
4.1
Organization and Qualification
. Each of the Company and its Subsidiaries is a
legal entity duly organized and validly existing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its
business as presently conducted and is duly qualified or licensed to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction where the ownership, leasing or operation of its assets or properties or
conduct of its business requires such qualification or licensing, except where the failure to be so organized, qualified, licensed or in good standing, or to have such power or authority, individually or in the aggregate, has not had and is not
reasonably likely to have a Material Adverse Effect. The Company has made available to JAB complete and correct copies of the Companys articles of incorporation and bylaws, each as amended to the date of this Agreement, and each as so
delivered is in full force and effect. Neither the Company nor any of its Subsidiaries is in material violation of any provisions of its respective certificate of organization, bylaws or similar governing documents. Section 4.1 of the Company
Disclosure Schedule contains a correct and complete list of the Companys Subsidiaries and each jurisdiction where the Company and its Subsidiaries are organized and qualified to do business.
As used in this Agreement, the term (i)
Subsidiary
means, with respect to any Person, any other Person of
which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled
by such Person and/or by one or more of its Subsidiaries; and (ii)
Material Adverse Effect
means any change, state of facts, circumstance, event or development that has a material adverse effect on (a) the
financial condition, business or results of operations of the Company and its Subsidiaries taken as a whole
provided
, that none of the following, in and of itself or themselves, shall constitute a Material Adverse Effect: (A) effects
resulting from changes in the economy or financial markets generally in the United States or
A-6
other countries in which the Company conducts material operations or sources material supplies or that are the result of acts of war or terrorism; (B) effects resulting from changes that are
the result of factors generally affecting the industries in which the Company and its Subsidiaries operate, including changes in raw material costs; (C) effects resulting from changes in United States generally accepted accounting principles
(
GAAP
) or rules and policies of the Public Company Accounting Oversight Board or changes in applicable Law or changes in interpretations of applicable Law; (D) effects resulting from (i) any failure by the Company
to meet any estimates of revenues or earnings by the Company or analysts or (ii) change in the market value or trading volume of Shares for any period ending on or after the date of this Agreement; (E) effects directly resulting from the
public announcement or pendency of the transactions contemplated by this Agreement; (F) any effect relating to fluctuations in the value of any currency; and (G) any effect relating to any action taken by the Company with JABs
consent or contemplated expressly by the Agreement;
provided
,
further
, that the exception in clause (D) shall not prevent or otherwise affect any change, effect, circumstance or development underlying such failure from being taken
into account in determining whether a Material Adverse Effect has occurred or is reasonably likely to occur;
provided
,
further
, that, with respect to clauses (A), (B) and (C), effects resulting from any change, event,
circumstance or development that (i) primarily relates to (or has the effect of primarily relating to) the Company and its Subsidiaries or (ii) have had or would reasonably be expected to have a disproportionate adverse effect on the
Company and its Subsidiaries compared to other companies operating in the Companys geographic markets in the segment of the industry in which the Company and its Subsidiaries operate shall be considered for purposes of determining whether a
Material Adverse Effect has occurred or is reasonably likely to occur) or (b) the ability of the Company to consummate the transactions contemplated by this Agreement.
4.2
Capital Structure
.
(a) The authorized capital stock of the Company consists of 60,000,000 shares comprising (i) 50,000,000
Shares and (ii) 10,000,000 shares of preferred stock, no par value (the
Preferred Shares
). As of the date of this Agreement, (i) 13,174,616 Shares are issued and outstanding, (ii) (A) 371,526 Shares are
reserved for issuance upon or otherwise deliverable in connection with the exercise of outstanding Company Options under the Companys Amended and Restated 2010 Equity Incentive Plan, (B) 524,737 Shares are reserved for issuance upon or
otherwise deliverable in connection with the exercise of outstanding Company Options under the Companys Amended and Restated 2000 Equity Incentive Plan, (C) 6,987 Shares are estimated to be subject to outstanding rights under the
Companys Amended and Restated 2000 Employee Stock Purchase Plan (assuming that the closing price per Share as reported on the NASDAQ Global Market (
NASDAQ
) on the purchase date for the current offering period was
equal to the Per Share Merger Consideration) and (D) 151,515 Shares are reserved for issuance upon or otherwise deliverable in connection with the exercise of outstanding Company Options under the Companys Amended and Restated 2000 Non-
Employee Director Stock Option Plan (collectively, the
Stock Plans
), (iii) an aggregate of 35,773 Shares were subject to or otherwise deliverable (including in the form of cash equal to or based on the value of Shares)
in connection with outstanding Share Units issued pursuant to the Companys Amended and Restated 2010 Equity Incentive Plan, and (iv) no Preferred Shares or restricted Shares were outstanding. Section 4.2(a) of the Company Disclosure
Schedule contains a correct and complete list of Company Options and Share Units, including the holder, date of grant, term, number of Shares underlying such security and, where applicable, exercise price and vesting schedule. All of the issued and
outstanding Shares are, and all Shares that may be issued pursuant to the exercise of the Company Options will be, duly authorized, validly issued, fully paid, nonassessable and free of any preemptive or similar rights. The Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable, exchangeable or redeemable for securities having the right to vote (
Voting Debt
)
with the shareholders of the Company on any matter.
(b) Except as set forth in Section 4.2(a),
there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company
or any of its Subsidiaries to issue, transfer, redeem, acquire, or sell any shares of capital stock or other securities of the Company or any of its
A-7
Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any
of its Subsidiaries, and no securities or obligations evidencing such rights (or other economic or voting rights equivalent to an equity interest) are authorized, issued or outstanding. There are no shareholders agreements, voting trusts or other
agreements or understandings relating to voting or disposition of any shares of capital stock or other securities of the Company or any of its Subsidiaries or granting to any person or group of persons the right to elect, or to designate or nominate
for election, a member of the board of directors of the Company or any of its Subsidiaries. The Company is not party to any agreement granting registration rights to any Person.
(c) Section 4.2(c) of the Company Disclosure Schedule sets forth (i) each of the Companys
Subsidiaries and the ownership interest of the Company in each such Subsidiary, as well as the ownership interest of any other Person or Persons in each such Subsidiary and (ii) the Companys or its Subsidiaries capital stock, equity
interest or other direct or indirect ownership interest in any other Person (other than securities in a publicly traded company held for investment by the Company or any of its Subsidiaries and consisting of less than 1% of the outstanding capital
stock of such Person). Each of the outstanding shares of capital stock or other equity interests of each of the Companys Subsidiaries and each share of capital stock or other equity interests set forth on Section 4.2(c)(ii) of the Company
Disclosure Schedule, are duly authorized, validly issued, fully paid and nonassessable and owned free and clear of any lien, charge, pledge, security interest, claim or other encumbrance (each, a
Lien
). The Company does not
own, directly or indirectly, any voting interest in any Person that would require an additional filing by JAB under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act
) in connection with the
transactions contemplated hereby.
(d) Each Company Option (i) has an exercise price per Share
equal to or greater than the fair market value of a Share on the effective date of such grant, (ii) has a grant date identical to the grant date approved by the Companys board of directors or compensation committee, which is either the
date on which the Company Option was awarded or a later date specified by the Companys board of directors or compensation committee, and (iii) complies with, or is exempt from, Section 409A of the Code.
(e) As of the date of this Agreement, (i) the Company and its Subsidiaries have no material indebtedness for
borrowed money and (ii) there are no outstanding material letters of credit, bankers acceptance financing or similar instruments issued for the benefit of the Company or any of its Subsidiaries.
4.3
Corporate Authority; Approval and Fairness.
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the transactions contemplated
hereby, including the Merger, other than (i) the affirmative vote of the holders of not less than a majority of all outstanding Shares entitled to vote generally in the election of the directors of the Company (the
Requisite Company
Vote
) and (ii) the filing with the Secretary of State of the State of Washington of the Articles of Merger as required by the WBCA. This Agreement has been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery hereof by JAB and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors rights generally and general equitable principles (whether considered in a proceeding in equity or at law) (the
Bankruptcy
and Equity Exception
). The Requisite Company Vote is the only vote of any class or series of the Companys share capital or other securities necessary to approve or adopt this Agreement and the transactions contemplated hereby,
including the Merger.
A-8
(b) The board of directors of the Company has (i) unanimously
determined that the Merger is fair to, and in the best interests of, the Company and its shareholders, approved and declared advisable this Agreement and the Merger and the other transactions contemplated hereby in accordance with the WBCA and
resolved to recommend approval and adoption of this Agreement and the transactions contemplated hereby, including the Merger, to the holders of Shares (the
Company Recommendation
), (ii) directed that this Agreement and
the Merger be submitted to the holders of Shares for their adoption and approval and (iii) received the opinion of its financial advisor, Citigroup Global Markets Inc., to the effect that, as of the date of the opinion, and subject to the
assumptions and qualifications set forth therein, the Per Share Merger Consideration is fair from a financial point of view to such holders (other than JAB and its Subsidiaries) of Shares, a copy of which opinion will be delivered to JAB, solely for
informational purposes, as promptly as practicable following the execution of this Agreement.
4.4
Governmental Filings; No Violations; Certain Contracts.
(a) No notices, reports, filings consents, waivers, registrations, approvals, orders, permits or authorizations
(each an
Approval
) are, as applicable required to be made or obtained by the Company from, any federal, state, local, multinational or foreign governmental, administrative or regulatory (including stock exchange) authority,
agency, commission, body, court or other legislative, executive or judicial governmental entity (each a
Governmental Entity
), in connection with the execution, delivery and performance of this Agreement by the Company and
the consummation of the Merger and the other transactions contemplated hereby, other than (i) any Approvals required (A) under the HSR Act, (B) under applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder (including filing of the Proxy Statement), (C) under applicable requirements of NASDAQ or (D) under applicable Antitrust Laws and (ii) such other Approvals which the failure to make or obtain, individually or in
the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect.
(b) The
execution, delivery and performance of this Agreement by the Company does not, and the consummation of the Merger and the other transactions contemplated hereby will not, constitute or result in (i) a breach or violation of, or a default under,
the articles of incorporation or bylaws of the Company or the comparable governing documents of any of its Subsidiaries, (ii) assuming that the Approvals referred to in Section 4.4(a) are duly obtained or made, with or without notice,
lapse of time or both, a material breach or violation of, any Law to which the Company or any of its Subsidiaries is subject, or (iii) with or without notice, lapse of time or both, a breach or violation of, a termination, cancellation or
modification (or provide a right of termination, cancellation or modification) or default under, the payment of additional fees, the creation, change or acceleration of any rights or obligations under, any requirement to provide notice to, or
require consent or approval from, the other party thereto, or the creation of a Lien on any of the assets of the Company or any of its Subsidiaries, in each case, pursuant to any Contract binding upon the Company or any of its Subsidiaries, except,
in the case of clauses (ii) and (iii) above, for any such breach, violation, termination, default, creation, acceleration or change that individually or in the aggregate, has not had and is not reasonably likely to have a Material Adverse
Effect.
4.5
Company Reports; Financial Statements; No Undisclosed Liabilities.
(a) The Company has filed or furnished, as applicable, on a timely basis, all forms, statements, certifications,
reports and documents required to be filed or furnished by it with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the
Exchange Act
), or the Securities Act of 1933, as amended (the
Securities Act
), since January 1, 2011 (the
Applicable Date
) (the forms, statements, reports and documents filed or furnished since the Applicable Date and those filed or furnished subsequent
to the date of this Agreement, including any amendments thereto, the
Company Reports
). No Subsidiary of the Company is required to file, or files, any form, report or other document with the SEC. Each of the Company
Reports, as of the respective date of its filing or being furnished complied (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseded filing) or, if not yet filed or furnished, will
comply in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the
9
Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
), and any rules and regulations promulgated thereunder applicable to the Company Reports. As of their respective dates
of filing (and, in the case of any Company Report that is a registration statement, as of its effective date) (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseded filing), the
Company Reports did not, and any Company Reports filed with or furnished to the SEC subsequent to the date of this Agreement will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.
(b) The Company is in compliance in all material respects with the applicable listing and corporate governance
rules and regulations of NASDAQ. Except as permitted by the Exchange Act, including Section 13(k)(2) and Section 13(k)(3) thereof or the rules of the SEC, since January 1, 2010, neither the Company nor any of its Affiliates has made,
arranged or modified any extensions of credit in the form of a personal loan to any executive officer or director of the Company or any of their respective Affiliates. For purposes of this Agreement, the term
Affiliate
when
used with respect to any party shall mean any Person who is an affiliate of that party within the meaning of Rule 405 promulgated under the Securities Act.
(c) Neither the Company nor any of the Companys Subsidiaries is a party to, or has any commitment to become a party to, (i) any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance,
special purpose or limited purpose entity or Person, on the other hand, or any off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the Securities Act)), and including similar collaboration, participation
or off-set arrangements or obligations, where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company Reports or
the Company Financial Statements, or (ii) any Contract relating to any transaction or relationship with, or ownership or other economic interest in, any variable interest entity.
(d) The Company maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the
Exchange Act. Such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it is required to file or submit, or files or submits, under the Securities Act and the
Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. The Company maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as
applicable, under the Exchange Act). Such internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on its
financial statements. The Company has disclosed, based on the most recent evaluation of its chief executive officer and its chief financial officer prior to the date of this Agreement, to the Companys auditors and the audit committee of the
Companys board of directors (A) any significant deficiencies in the design or operation of its internal controls over financial reporting that are reasonably likely to adversely affect the Companys ability to record, process,
summarize and report financial information and has identified for the Companys auditors and audit committee of the Companys board of directors any material weaknesses in internal control over financial reporting and (B) any fraud,
whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting.
A-10
(e) Each of the consolidated financial statements included in or
incorporated by reference into the Company Reports (including the related notes and schedules) (the
Company Financial Statements
) (i) complies in all material respects with the applicable rules and regulations of the
SEC, the Exchange Act and the Securities Act, (ii) has been prepared in accordance with GAAP applied, in all material respects, on a consistent basis during the periods involved (except as may be indicated in the Company Financial Statements or
in the notes thereto and subject, in the case of unaudited statements, to normal year-end audit adjustments and the absence of footnote disclosure), and (iii) fairly presents, or, in the case of any Company Financial Statements filed after the
date of this Agreement, will fairly present, in all material respects, the consolidated financial position and the consolidated results of operations and cash flows (and changes in financial position, if any) of the Company and its Subsidiaries as
of the date and for the periods referred to in the Company Financial Statements. Each required form, report and document containing financial statements that has been filed with or submitted to the SEC since January 1, 2009 was accompanied by
the certificates required to be filed or submitted by the Companys chief executive officer and chief financial officer pursuant to the Sarbanes-Oxley Act and, at the time of filing or submission of each such certificate, such certificate was
true and accurate and complied in all material respects with the Sarbanes-Oxley Act.
(f) Since
January 2, 2010 through the date of this Agreement, to the knowledge of the Company (i) neither the Company nor any of its Subsidiaries nor any director, officer, employee, auditor or accountant of the Company or any of its Subsidiaries
has received any material complaint, allegation, assertion or claim, whether written or oral, that the Company or its Subsidiaries have engaged in illegal or fraudulent accounting or auditing practices, and (ii) no attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported to the board of directors of the Company or any committee thereof or to any director or officer of the Company any evidence of a
material violation of securities Laws, breach of fiduciary duty or similar violation, relating to periods after January 1, 2010, by the Company or any of its officers, directors, employees or agents. As of the date of this Agreement, to the
knowledge of the Company, there are no SEC inquiries or investigations, other governmental inquiries or investigations pending or threatened, in each case regarding any accounting practices of the Company or any of its Subsidiaries or any
malfeasance by any executive officer of the Company.
(g) There are no outstanding or unresolved
comments from any comment letters received by the Company from the SEC relating to any of the Company Reports. To the knowledge of the Company, none of the Company Reports is the subject of any ongoing review by the SEC.
(h) There are no liabilities or obligations of the Company or any of its Subsidiaries, whether accrued, absolute,
determined or contingent required to be disclosed on a balance sheet prepared in accordance with GAAP, except for (i) liabilities or obligations disclosed and provided for in the balance sheets for the fiscal year ended January 1, 2012 or
for the quarter ended April 1, 2012 (the
Balance Sheet Date
)
that are included in the Company Financial Statements (or in the notes thereto) filed and publicly available prior to the date of this Agreement,
(ii) liabilities or obligations incurred pursuant to the terms of this Agreement, (iii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since January 1, 2012, (iv) liabilities
for performance of obligations of the Company or any of its Subsidiaries under Contracts binding upon the Company or any of its Subsidiaries (other than resulting from any breach or acceleration thereof) provided or made available to JAB prior to
the date of this Agreement, and (v) liabilities or obligations that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect.
4.6
Absence of Certain Changes
. From January 1, 2012 through the date of this
Agreement, the Company and its Subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than in accordance with, the ordinary course of such businesses or in order to effectuate the
terms of this Agreement and there has not been:
(a) any change, state of facts, circumstance, event or
development that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect;
A-11
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company or any of its Subsidiaries (except for dividends or other distributions by any direct or indirect wholly owned Subsidiary to the Company or to any wholly owned Subsidiary
of the Company), or any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries of any outstanding shares of capital stock or other securities of the Company or any of its Subsidiaries;
(c) any material change in any method of accounting or accounting practice by the Company or any of its
Subsidiaries;
(d) (i) any material increase in the compensation or benefits payable or to become
payable to officers of the Company or any of its Subsidiaries (except for increases in the ordinary course of business or the payment of accrued or earned but unpaid bonuses, including but not limited to newly hired employees, promotions or as
required by applicable Law), (ii) any establishment, adoption, entry into or amendment of any collective bargaining, bonus, profit sharing, equity, thrift, compensation, employment, termination, change-in-control, severance or other plan,
trust, fund or policy in each case maintained or sponsored by the Company, any Subsidiary or any ERISA Affiliate for the benefit of any director, officer or non-officer employee (with the exception of any establishment, adoption, entry into or
amendment of any compensation, employment, termination or severance plan or policy for non-officer employees), except to the extent required by applicable Law or (iii) any amendment of any Company Benefit Plan except as required by applicable
Law and except with respect to any compensation, employment, termination or severance plan or policy for non-officer employees; any release, assignment, compromise, discharge, waiver, settlement or satisfaction of any Action or other rights, claims,
liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) for an amount in excess of $250,000 or providing for any relief other than monetary relief;
(e) any material Tax election made or revoked by the Company or any of its Subsidiaries or any settlement or
compromise of any material Tax liability by the Company or any of its Subsidiaries;
(f) any material
change in tax accounting principles by the Company or any of its Subsidiaries, except insofar as may have been required by applicable Law; or
(g) any agreement to do any of the foregoing.
As used in
this Agreement, the term
knowledge
when used in the phrases to the knowledge of the Company, the Companys knowledge, of which the Company has knowledge or the Company has no
knowledge shall mean the actual knowledge of the individuals listed in Section 4.6 of the Company Disclosure Schedule, after such individual has made (or is deemed to have made) reasonable inquiry, it being understood and agreed that
discussions with direct reports and a review of ones files shall constitute reasonable inquiry.
4.7
Litigation
. There are no civil, criminal or administrative actions, suits,
claims, oppositions, disputes, litigations, objections, hearings, arbitrations, mediations, investigations, audit, complaint, charge, governmental inquiry or other proceedings, in each case, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Entity or any arbitrator or arbitration panel (
Actions
) pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any officer,
director or employee of the Company or any of its Subsidiaries in such capacity before any Governmental Entity, which, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is a party to or subject to the provisions of any judgment, order, writ, injunction, decree, award, stipulation or settlement (
Judgment
) of any Governmental Entity which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
4.8
Employee
Benefits
.
(a) Section 4.8(a) of the Company Disclosure Schedule contains a true and complete
list of each deferred compensation and each incentive compensation, stock purchase, stock option and other equity
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compensation plan, program, agreement or arrangement; each severance or termination pay, medical, surgical, hospitalization, life insurance and other welfare plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (
ERISA
)); each profit-sharing, stock bonus or other pension plan, fund or program (within the meaning of
section 3(2) of ERISA); and each other employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by the Company, any Subsidiary, or any trade or
business, whether or not incorporated, that together with the Company would be deemed a single employer within the meaning of Section 4001(b) of ERISA (an
ERISA Affiliate
) for the benefit of any employee or
former employee of the Company or any Subsidiary or any current or former director of the Company (collectively, together with each employment, termination or severance agreement to which the Company or any of its Subsidiaries is a party, the
Company Benefit Plans
), in each case, other than any employment, termination or severance agreement for non-officer employees of the Company and its Subsidiaries and equity grant notices, and related documentation, with
respect to employees of the Company and its Subsidiaries. Each of the Company Benefit Plans that is subject to section 302 or Title IV of ERISA or section 412 of the Code is hereinafter referred to in this Section 4.8 as a
Title IV
Plan
. With respect to each Company Benefit Plan, the Company has made available to JAB a true and complete copy of each Company Benefit Plan and a true and complete copy of the following items with respect to each Company Benefit Plan
listed on Section 4.8(a) of the Company Disclosure Schedule (in each case, only if applicable): (i) each trust or other funding arrangement; (ii) each summary plan description and summary of material modifications; (iii) the most
recently filed annual report on the IRS Form 5500; (iv) the most recent financial statements and actuarial or other valuation reports prepared with respect thereto; and (v) the most recently received IRS determination letter (or opinion
letter, if applicable).
(b) Each Company Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable Laws, including but not limited to ERISA and the Code, except as could not otherwise be reasonably likely to result in a Material Adverse Effect.
(i) With respect to each Company Benefit Plan intended to be qualified within the
meaning of section 401(a) of the Code, (A) each such Company Benefit Plan has received a favorable determination letter (or opinion letter, if applicable) from the IRS with respect to its qualification, (B) the trusts maintained thereunder
are intended to be exempt from taxation under section 501(a) of the Code, and (C) to the knowledge of the Company, no event has occurred that could reasonably be expected to result in disqualification or adversely affect such exemption.
(ii) No liability under Title IV or section 302 of ERISA has been incurred by the
Company or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring any such liability, other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due). No Title IV Plan or any trust established thereunder has incurred any accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each Title IV Plan ended prior to the date hereof.
(iii) No Company Benefit Plan (including for this purpose, any employee benefit plan described in ERISA section 3(3) that the Company, any Subsidiary or any ERISA Affiliate
maintained, sponsored or contributed to within the six-year period preceding the date hereof) is (A) a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) or (B) a multiple employer plan (within the
meaning of Section 413(c) of the Code).
(iv) To the knowledge of the Company,
there are no material pending claims against the Company or any of its Subsidiaries with respect to any Company Benefit Plan, by or on behalf of any employee, former employee or beneficiary covered under any such Company Benefit Plan (other than
routine claims for benefits).
(v) There are no Company Benefit Plans established or
maintained outside of the United States primarily for the benefit of individuals residing outside of the United States.
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(vi) Except as set forth on Section 4.8(b)(vi)
of the Company Disclosure Schedule, no Company Benefit Plan provides benefits, including without limitation, death or medical benefits (whether or not insured), beyond retirement or other termination of service, other than (A) coverage mandated
solely by applicable Law, including the continuation coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any state equivalent, (B) death benefits or retirement benefits under any employee
pension benefit plan (as defined in section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of the Company or (D) benefits, the full costs of which are borne by the participant or his or her
beneficiary.
(vii) Each Company Benefit Plan that is a nonqualified deferred
compensation plan (as defined for purposes of section 409A(d)(1) of the Code) that is not exempt from section 409A of the Code has in all material respects (A) been maintained and operated since January 1, 2005 in good faith
compliance with section 409A of the Code and all applicable IRS guidance promulgated thereunder so as to avoid any Tax, penalty or interest under section 409A and, as to any such plan in existence prior to January 1, 2005, has not been
materially modified (within the meaning of IRS Notice 2005-1) at any time after October 3, 2004, and (B) since January 1, 2009, been in documentary and operational compliance with section 409A of the Code and all
applicable IRS guidance promulgated thereunder.
(viii) Except as set forth on
Section 4.8(b)(viii) of the Company Disclosure Schedule or as required pursuant to applicable Law, this Agreement or the terms of a Company Benefit Plan set forth on Section 4.8(a) of the Company Disclosure Schedule that has been made
available to JAB prior to the date hereof, neither the execution of this Agreement, shareholder approval of this Agreement, nor the consummation of the transactions contemplated hereby will, either alone or in combination with another event,
(A) entitle any current or former employee, officer or director of the Company or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (B) accelerate the
time of payment or vesting, or increase the amount of compensation due any such employee, officer, or director. Except as set forth in Section 4.8(b)(viii) of the Company Disclosure Schedule, neither the Company nor any ERISA Affiliate is party
to any contract or arrangement that could result, separately or in the aggregate, in the payment to any current or former employee, consultant or director of the Company or any ERISA Affiliate of any excess parachute payments within the
meaning of section 280G of the Code in connection with the execution of this Agreement and the consummation of the Merger.
4.9
Compliance with Laws; Permits
.
(a) Since January 1, 2010, the businesses of each of the Company and its Subsidiaries (including the
ownership and maintenance of all its assets, including the Owned Real Property) have not been conducted in violation of any federal, state, local, municipal, multinational or foreign law, statute, constitution or ordinance, common law, or any rule,
regulation, directive, treaty, policy, standard, Judgment or agency requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity (collectively,
Laws
), except for violations that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect. No investigation, audit or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries or any of their assets is pending or, to the knowledge of the Company, threatened, nor has any Governmental Entity notified the Company of its intention to conduct the same, except for such investigations or
reviews the outcome of which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect. As of the date of this Agreement, no change is required in the Companys or in any of its
Subsidiaries processes, properties, assets or procedures in connection with any applicable Laws, except such changes that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect, and,
since January 1, 2010, the Company has not received any notice or communication of any material noncompliance with any applicable Laws that has not been cured as of the date of this Agreement. The Company and its Subsidiaries hold all
governmental licenses, authorizations, permits, consents, approvals, variances, exemptions and orders necessary for the operation of the businesses of the Company and its Subsidiaries, taken as a whole (the
Company
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Permits
), except for such failures that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect. The Company and each
of its Subsidiaries is in compliance with the terms of the Company Permits, except for failures to comply or violations that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect. Since
January 1, 2010, the Company has not received any written notice or, to the knowledge of the Company, other communication of any material noncompliance with any material Permit that has not been cured as of the date of this Agreement.
(b) Neither the Company nor any director, officer other employee or agent of the Company has violated
any provision of the Foreign Corrupt Practice Act of 1977, as amended, or any similar foreign Law.
(c) Since January 1, 2010, neither the Company nor any of its Subsidiaries has made any disclosure (voluntary
or otherwise) to any Governmental Entity with respect to any alleged irregularity, misstatement or omission or other potential violation or liability arising under or relating to the Foreign Corrupt Practice Act of 1977, as amended, or any similar
Law.
4.10
Material Contracts
.
(a) Except for this Agreement and except for any agreement, contract, note, mortgage, indenture, arrangement or
other binding obligation or binding understanding (other than any invoice, pricing sheet, bid or quotation) (each, a
Contract
) filed as exhibits to the Company Reports, as of the date of this Agreement, none of the Company
or its Subsidiaries is a party to or bound by:
(i) any Contract that would be required
to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;
(ii) any Contract (or group of related Contracts with the same Person or its Affiliates) involving (A) the payment or receipt of amounts by the Company or any of its
Subsidiaries of more than $750,000 in any calendar year, except for Contracts related to the purchase of raw materials or inventory in the ordinary course of business or (B) future payments of more than $500,000 in any calendar year that are
conditioned, in whole or in part, on a change in control of the Company or any of its Subsidiaries;
(iii) any Contract relating to indebtedness for borrowed money in excess of $500,000 or mortgaging,
pledging or otherwise placing a Lien on any of the assets of the Company or its Subsidiaries, restricting the payment of dividends or other distributions of assets by any of the Company or its Subsidiaries or providing for the guaranty of
indebtedness for borrowed money of any Person in excess of $500,000;
(iv) any Contract
that contains a put, call right of first refusal or similar right pursuant to which the Company or any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests of any Person or assets that have a fair market
value or purchase price of more than $250,000;
(v) other than with respect to any
wholly owned Subsidiary of the Company, any partnership, limited liability company, joint venture, strategic alliance or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership,
limited liability company, joint venture or strategic alliance that is material to the Company or any of its Subsidiaries, or in which the Company owns more than a five percent (5%) voting or economic interest;
(vi) any Contract between the Company or any of its Subsidiaries and any current or former director
or officer of the Company or any Person beneficially owning five percent (5%) or more of the outstanding Shares pursuant to which the Company has continuing obligations, in each case, other than any such Contract that is terminable at
will (or following a notice period imposed by applicable law) without any obligation on the part of the Company or any of its Subsidiaries to make any severance, termination, change in control or similar payment or to provide any benefit;
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(vii) any Contract to which the Company or any of its
Subsidiaries is a party containing a standstill or similar agreement pursuant to which one party has ongoing obligations to not acquire assets or securities of the other party or any of its Affiliates and, to the extent not entered into in the
ordinary course of business or in connection with a commercial Contract, any Contract under which the Company or any of its Subsidiaries has material ongoing indemnification obligations;
(viii) any Contract that would or would be reasonably expected to prevent or materially impede the
Companys ability to consummate the Merger or the other transactions contemplated hereby, other than those Approvals set forth in Section 4.10(a)(viii) of the Company Disclosure Schedule;
(ix) any non-competition Contract or other Contract that (A) limits or purports to limit in
any material respect the type of business in which the Company or its Subsidiaries may engage, the type of goods or services which the Company or its Subsidiaries may manufacture, produce, import, export, offer for sale, sell or distribute or the
manner or locations in which any of them may so engage in any business, (B) could require the disposition of any material assets or line of business of the Company or its Subsidiaries or, after the Effective Time, JAB or its Subsidiaries,
(C) grants most favored nation status or is a requirements Contract that, following the Merger, would apply to JAB or any of its Subsidiaries, including the Company and its Subsidiaries, (D) grants to any third
Person any material exclusive supply or distribution agreement or other similar material exclusive rights or (E) prohibits or limits the right of the Company or any of its Subsidiaries to use, transfer, license, distribute or enforce any of
their respective Owned Company IP, other than limitations on enforcement arising from non-exclusive licenses of Owned Company IP entered into in the ordinary course of business;
(x) any swap, cap, floor, collar, futures contract, forward contract, option and any other
derivative financial instrument, contract or arrangement, based on any commodity, security, instrument, asset, rate or index of any kind or nature whatsoever, whether tangible or intangible, other than Contracts related to the purchase of raw
materials or inventory in the ordinary course of business;
(xi) any Contract pursuant
to which (A) the Company or any of its Subsidiaries uses Intellectual Property owned by a third party (other than (1) software license agreements for any third-party commercially available software, (2) agreements between the Company
or any of its Subsidiaries, on the one hand, and their employees or consultants, on the other hand, entered into in the ordinary course of business, (3) non-exclusive in-bound licenses entered into in the ordinary course of business),
(B) a third party uses Intellectual Property owned by the Company or any of its Subsidiaries (other than non-material non-exclusive out-bound licenses entered into in the ordinary course of business) or (C) the Company or any of its
Subsidiaries consents to or agrees not to assert rights with respect to the use or registration by a third party, or a third party consents to the use or registration by the Company or any of its Subsidiaries, of the Trademark
PEETS or any similar Trademark;
(xii) any Contract that provides for
the acquisition or disposition, directly or indirectly (by merger or otherwise) of assets or capital stock (other than acquisitions or dispositions of inventory and raw materials in the ordinary course of business consistent with past practice)
(A) for aggregate consideration under such Contract in excess of $500,000 or (B) pursuant to which the Company or its Subsidiaries has continuing earn-out or other contingent payment obligations;
(xiii) any Collective Bargaining Agreement;
(xiv) any Contract relating to any Action or Judgment, in each case, individually in excess of
$500,000, under which there are outstanding obligations (including settlement agreements) of the Company or any of its Subsidiaries; and
(xv) any Contract to which any Principal Supplier or Principal Customer is a party, in each case that has a term of more than 60 days and that may not be terminated by the Company
or any of its Subsidiaries (without penalty) within 60 days after the delivery of a termination notice, other than Contracts related to the purchase of raw materials or inventory in the ordinary course of business.
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Each such Contract described in clauses (i) through (xv) above and each such
Contract that would be a Material Contract but for the exception of being filed as an exhibit to the Company Reports is referred to herein as a
Material Contract
.
(b) A complete copy of each Material Contract has been made available to JAB prior to the date hereof. Each of the
Material Contracts is valid and binding on the Company or its Subsidiaries, as the case may be, and, to the knowledge of the Company, each other party thereto, and is in full force and effect, except for such failures to be valid and binding or to
be in full force and effect as, individually or in the aggregate, has not had and is not reasonably likely to have a Material Adverse Effect. There is no breach or default under any Material Contracts by the Company or its Subsidiaries and no event
has occurred that, with the lapse of time or the giving of notice or both, would constitute a breach or default thereunder by the Company or its Subsidiaries, in each case except as, individually or in the aggregate, has not had and is not
reasonably likely to have a Material Adverse Effect. Since January 1, 2010, neither the Company nor any of its Subsidiaries has received any written, or to the knowledge of the Company oral, notice of termination or breach (which has not been
cured) with respect to, and, to the knowledge of the Company, no party has threatened to terminate, any Material Contract.
(c) Following the execution of this Agreement, no Person will be bound by any standstill or similar provision in
any Contract that would prohibit or otherwise restrict such Person from submitting an unsolicited Acquisition Proposal to the Company or its Subsidiaries.
4.11
Properties
. Section 4.11 of the Company Disclosure Schedule contains a true and complete list as of the date hereof of all Owned Real Property and Leased Real
Property other than immaterial Leased Real Property that is not used for retail stores
(a) Except as
set forth in Section 4.11(a) of the Company Disclosure Schedule and except in any such case as, individually or in the aggregate, has not had and is not reasonably likely to have a Material Adverse Effect, with respect to the parcels of real
property owned in fee by the Company or any of its Subsidiaries, and all buildings, structures, improvements, and fixtures thereon, together with all rights of way, easements, privileges and appurtenances pertaining or belonging thereto, including
any right, title and interest of the Company or any of its Subsidiaries in and to any street or other property adjoining any portion of such property (the
Owned Real Property
): (i) the Company or one of its
Subsidiaries, as applicable, has good and marketable title to the Owned Real Property, free and clear of all Encumbrances; (ii) there are no outstanding options or rights of first refusal to purchase the Owned Real Property, or any portion of
the Owned Real Property or interest therein, and no other Person has any right to use any portion of the Owned Real Property; and (iii) there are no pending, or to the knowledge of the Company, threatened, condemnation proceedings with respect
to any of the Owned Real Properties.
(b) With respect to the real property leased, subleased or
licensed to the Company or its Subsidiaries (the
Leased Real Property
), except as set forth in Section 4.11(b) of the Company Disclosure Schedule: (i) the lease, sublease or license for such property (each, a
Company Lease
) is valid, legally binding, enforceable and in full force and effect, (ii) all payments required to have been made under each Company Lease by the Company or any of its Subsidiaries have been made in all
material respects, (iii) none of the Company or any of its Subsidiaries is in material breach of or default under any Company Lease, and no event has occurred which, with notice, lapse of time or both, would constitute a material breach or
default by any of the Company or its Subsidiaries or permit termination, modification or acceleration by any third party thereunder, or prevent or materially impair the consummation of the transactions contemplated by this Agreement and
(iv) the execution, delivery and performance of this Agreement by the Company does not, and the consummation of the Merger and the other transactions contemplated hereby will not, constitute or result in, with or without notice, lapse of time
or both, a material breach or violation of, a termination, cancellation or modification (or provide a right of termination, cancellation or modification) or material default under, the payment of additional material fees, the creation, change or
acceleration of any material rights or obligations under, any requirement to provide notice to,
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or require consent or approval from, the other party thereto, in each case, pursuant to any Company Lease, except in each case, for such invalidity, failure to be binding, unenforceability,
ineffectiveness, breaches, defaults, terminations, modifications, accelerations or repudiations that, individually or in the aggregate, are not material to the business of the Company and its Subsidiaries.
(c) For purposes of this Section 4.11 only,
Encumbrance
means any Lien, mortgage,
easement, imperfection of title, title exception, title defect, or encumbrance of any kind in respect of such asset but specifically excludes (the following,
Permitted Encumbrances
): (i) specified encumbrances
described in Section 4.11(c) of the Company Disclosure Schedule; (ii) encumbrances for current Taxes or other governmental charges not yet due and payable or which are being contested in good faith by appropriate proceedings, for which
adequate reserves have been maintained in accordance with GAAP; (iii) mechanics, carriers, workmens, repairmens or other like encumbrances arising or incurred in the ordinary course of business as to which there is no
default on the part of the Company or any of its Subsidiaries and reflected on or specifically reserved against or otherwise disclosed in the Companys consolidated balance sheets (and the notes thereto) included in the Company Reports filed
prior to the date of this Agreement or incurred or arising after the Balance Sheet Date in the ordinary course of business; (iv) defects, imperfections or irregularities in title and other Encumbrances which, individually or in the aggregate,
do not materially impair the continued use of or value of the applicable property owned, leased, used or held for use by the Company and any of its Subsidiaries; (v) statutory, common law or contractual liens of landlords for amounts that are
not yet due and payable or are being contested in good faith by appropriate proceedings and (vi) other encumbrances that do not, individually or in the aggregate, materially impair the continued use, operation, value or marketability of the
specific parcel of Owned Real Property to which they relate or the conduct of the business of the Company and its Subsidiaries as presently conducted.
4.12
Proxy Statement
. None of the information that the Company will include in the proxy statement to be sent to the shareholders of the Company in
connection with the Shareholders Meeting (such proxy statement, as amended or supplemented, the
Proxy Statement
) will, at the date the Proxy Statement is first mailed to the shareholders of the Company and at the time of
the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are
made, not misleading. The Proxy Statement will, at the date it is first mailed to shareholders and at the time of the Shareholders Meeting, comply as to form in all material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by JAB or Merger Sub or any of their respective Affiliates or Representatives specifically
for inclusion in the Proxy Statement.
4.13
Environmental Matters
. Except
for such matters that, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect: (a) the Company and its Subsidiaries are in compliance, and have complied at all times with all applicable
Environmental Laws; (b) no property currently or, to the knowledge of the Company, formerly owned or operated by the Company or any of its Subsidiaries has been contaminated with any Hazardous Substance in a manner that could reasonably be
expected to require remediation or other action pursuant to any Environmental Law; (c) neither the Company nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that the Company
or any of its Subsidiaries is in violation of or liable under any Environmental Law; and (d) neither the Company nor any of its Subsidiaries is subject to any order, decree or injunction with any Governmental Entity or agreement with any third
party concerning liability under any Environmental Law or relating to Hazardous Substances. As used herein, the term
Environmental Law
means any federal, state or local statute, Law, regulation, order, decree, permit or
authorization relating to: (i) the protection of health and safety or the environment or (ii) the handling, use, transportation, disposal, release or threatened release of any Hazardous Substance. As used herein, the term
Hazardous Substance
means any substance that is: (A) listed, classified, regulated or defined pursuant to any Environmental Law or (B) any petroleum product or by-product, asbestos-containing material,
polychlorinated biphenyls or radioactive material.
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4.14
Taxes
. The Company and each of
its Subsidiaries (i) have prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them and all such filed Tax Returns are complete
and accurate in all material respects; (ii) have paid all material Taxes whether or not shown as due on such filed Tax Returns or that the Company or any of its Subsidiaries are obligated to withhold from amounts owing to any employee, creditor
or third party, except with respect to matters contested in good faith for which adequate reserves under GAAP have been established; and (iii) have not waived any statute of limitations with respect to Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. As of the date of this Agreement, there are not pending or, to the knowledge of the Company, threatened, any audits, examinations, investigations or other proceedings in respect of Taxes or Tax
matters. There are not, to the knowledge of the Company, any unresolved questions or claims concerning the Companys or any of its Subsidiaries Tax liability that, individually or in the aggregate, have had or are reasonably likely to
have a Material Adverse Effect and are not disclosed or provided for in the Company Reports. The Company has made available to JAB true and correct copies of the United States federal income Tax Returns filed by the Company and its Subsidiaries for
each of the fiscal years ended in December 27, 2009 and January 3, 2010. Neither the Company nor any of its Subsidiaries has any liability with respect to income, franchise or similar Taxes that accrued on or before January 1, 2012 in
excess of the amounts accrued with respect thereto that are reflected in the financial statements included in the Company Reports filed on or prior to the date of this Agreement. Neither Company nor any of its Subsidiaries has engaged in any
transaction that is the same as, or substantially similar to, a transaction which is a reportable transaction for purposes of Treasury Regulations Section 1.6011-4(b) (including any transaction which the IRS has determined to be a
listed transaction for purposes of 1.6011-4(b)(2)). Neither the Company nor any of Subsidiaries has engaged in a transaction of which it made disclosure to any taxing authority to avoid penalties under Section 6662(d) of the Code or
any comparable provision of state, foreign or local law. Neither the Company nor any of its Subsidiaries has participated in any tax amnesty or similar program offered by any taxing authority to avoid the assessment of penalties or other
additions to Tax.
As used in this Agreement, (i) the term
Tax
(including, with correlative
meaning, the term
Taxes
) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, net worth, severances, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value added, goods and services, occupancy, transfer and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts, and (ii) the term
Tax Return
includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied
to a Tax authority relating to Taxes.
4.15
Labor Matters
. Except as set
forth in Section 4.15 of the Company Disclosure Schedule:
(a) (i) The Company and its Subsidiaries
are not a party to, nor bound by, any labor agreement, collective bargaining agreement, work rules or practices, or any other labor-related agreement or arrangement with any labor union, trade union or labor organization (collectively, a
Collective Bargaining Agreement
); (ii) there are no Collective Bargaining Agreements that pertain to any of the employees of the Company or its Subsidiaries, and no employees of the Company or its Subsidiaries are
represented by any labor union, trade union or labor organization with respect to their employment with the Company or its Subsidiaries; (iii) since January 1, 2010, no labor union, trade union, labor organization or group of employees of
the Company or its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing to
be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority; (iv) the Company has no knowledge of any organizing activities with respect to any employees of the Company or its Subsidiaries;
(v) since January 1, 2010, there has been no actual, or to the knowledge of the Company, threatened material arbitrations, material grievances, labor disputes, strikes, lockouts, slowdowns or work stoppages against or affecting the Company
or its Subsidiaries; and (vi) since January 1, 2010, to the knowledge of the Company, neither the Company nor its Subsidiaries nor any of their employees, agents or representatives, has committed any material unfair labor practice as
defined in the National Labor Relations Act.
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(b) The Company and its Subsidiaries: (i) are not in violation
of any Law pertaining to labor, employment or employment practices including, but not limited to, all Laws regarding health and safety, wages and hours, labor relations, employment discrimination, disability rights or benefits, equal opportunity,
immigration, plant closures and layoffs, affirmative action, employee leave issues, unemployment insurance and workers compensation, or (ii) are not, and have not been since January 1, 2010, a party to any material Action alleging a
violation of any Law pertaining to labor, employment or employment practices, nor, to the knowledge of the Company, is any such material Action pending or threatened, except for violations or Actions that, individually or in the aggregate, have not
had and are not reasonably likely to have a Material Adverse Effect.
(c) The Company and its
Subsidiaries: (i) have taken reasonable steps to properly classify and treat all of their employees and independent contractors, (ii) have taken reasonable steps to properly classify and treat all of their employees as exempt
or nonexempt from overtime requirements under applicable Law, (iii) are not delinquent in any material payments to, or on behalf of, any current or former independent contractors or employees for any services or amounts required to
be reimbursed or otherwise paid, (iv) have withheld and reported all material amounts required by Law or by agreement to be withheld and reported with respect to wages, salaries and other payments to any current or former independent
contractors or employees; and (v) are not liable for any material payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Authority with respect to unemployment compensation benefits, social security or
other benefits or obligations for any current or former independent contractors or employees (other than routine payments to be made in the normal course of business and consistent with past practice). The Company and its Subsidiaries do not have
direct or indirect material liability as a result of any misclassification of any Person as an independent contractor rather than as an employee.
(d) To the knowledge of the Company, since January 1, 2010, none of the Company or any of its Subsidiaries has received written notice from a third party alleging or claiming
that any employee or former employee of the Company or its Subsidiaries is in violation of any term of any third party employment agreement, nondisclosure agreement, common law nondisclosure obligation or non-competition agreement.
(e) As of the date of this Agreement, the Company and its Subsidiaries have no knowledge that any current employee
of the Company or its Subsidiaries with an annual base salary exceeding $200,000 in the aggregate intends to terminate his or her employment.
(f) The Company and its Subsidiaries are and have been in compliance in all material respects with all notice and other requirements under the WARN Act. In the eighteen
(18) months prior to the date hereof, the Company and its Subsidiaries have not (A) effectuated a plant closing (as defined in the WARN Act), (B) effectuated a mass layoff (as defined in the U.S. Worker
Adjustment and Retraining Notification Act and any similar state or local Law relating to plant closings or layoffs (collectively, the
Warn Act
), or (C) undertaken any other similar action requiring notice.
4.16
Intellectual Property
.
(a) Section 4.16(a) of the Company Disclosure Schedule sets forth a true and complete list of all Registered Intellectual Property and material unregistered Trademarks owned by
the Company and its Subsidiaries. The Company and its Subsidiaries own free and clear of all Liens (other than Permitted Encumbrances) all the Intellectual Property that is owned or purported to be owned by the Company and its Subsidiaries (the
Owned Company IP
) or have sufficient rights to use all Intellectual Property that is used in their respective businesses as currently conducted (the
Company IP
). All of the Owned Company IP is
valid and enforceable in the applicable jurisdiction.
(b) The conduct of the businesses of the Company
and each of its Subsidiaries does not infringe, dilute, misappropriate or otherwise violate any material Intellectual Property rights of any third party. To the knowledge of the Company, as of the date hereof, no third party is infringing, diluting,
misappropriating or otherwise violating any material Owned Company IP.
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(c) There are no material Actions or Judgments pending that have
been served, or, to the knowledge of the Company, filed but not served or threatened, that seek to cancel, limit or challenge the ownership, validity, registerability, enforceability, or use of or right to use any Owned Company IP.
(d) The Company and its Subsidiaries take reasonable measures to maintain, preserve, police and protect the Owned
Company IP, including the confidentiality of all owned Trade Secrets, and to the Companys knowledge, no material owned Trade Secrets have been used, disclosed or discovered by any Person except pursuant to valid and appropriate non-disclosure
and/or license agreements.
(e) The Company and its Subsidiaries have policies in place requiring
employees who develop Intellectual Property on behalf of the Company and its Subsidiaries to assign such Intellectual Property to the Company or its Subsidiaries. To the knowledge of the Company, the Company and its Subsidiaries have obtained
assignments of all Intellectual Property on behalf of the Company and its Subsidiaries by employees who develop Intellectual Property on behalf of the Company and its Subsidiaries.
For purposes of this Agreement:
Intellectual Property
means all foreign, multinational and domestic
(i) trademarks, service marks, brand names, corporate names, Internet domain names, logos, symbols, trade dress, fictitious names, trade names, and all other source indicators and all goodwill associated therewith and symbolized thereby
(collectively,
Trademarks
); (ii) patents, inventions and discoveries; (iii) confidential and proprietary information, trade secrets and know-how, (including processes, technology, research, schematics, business
methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists) (collectively,
Trade Secrets
); (iv) copyrights and works of authorship in any media (including Software and all documentation
related thereto, Internet site content, advertising and marketing materials and art work); (v) all other intellectual property or proprietary rights; and (vi) all disclosures, applications and registrations, extensions, substitutions,
modifications, renewals, divisionals, continuations, continuations-in-part, reissues, re-examinations, restorations and reversions related to any of the foregoing;
Registered
means issued by, filed with, registered with,
renewed by or the subject of a pending application before any Governmental Entity or Internet domain name registrar; and
Software
means any and all (A) computer programs, including any and all software implementations
of algorithms, models and methodologies, whether in source code or object code, and (B) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise.
4.17
Insurance
. Each material fire and casualty, earthquake, flood, general
liability, business interruption, product liability, and other insurance policies maintained by the Company or any of its Subsidiaries (
Insurance Policies
) is in full force and effect and all premiums due with respect to
all Insurance Policies have been paid, with such exceptions that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. As of the date hereof, there is no claim in excess of $1,000,000 pending under any
Insurance Policy as to which coverage has been denied or disputed by the underwriters of such Insurance Policy (provided, that a reservation right by the underwriters of such Insurance Policy shall not constitute a denial or dispute for purposes of
this representation) and there has been no threatened termination of any such Insurance Policy during the two (2) years preceding the date of this Agreement, which Insurance Policies cannot be replaced in the ordinary course of business. Since
January 1, 2012, no notice of cancellation of any Insurance Policy has been received, which Insurance Policy cannot be replaced in the ordinary course of business consistent with past practices.
4.18
Suppliers and Customers
.
(a) Section 4.18(a) of the Company Disclosure Schedule sets forth a complete and accurate list of (i) the 20 largest suppliers of the Company and its Subsidiaries based on
the consolidated cost of goods and services paid to such Persons by the Company and its Subsidiaries for the fiscal year ended January 1, 2012 (each, a
Principal Supplier
), (ii) the 20 largest customers of the
Company and its Subsidiaries based on revenues received from such Persons by the Company and its Subsidiaries for the fiscal year ended January 1,
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2012 (each, a
Principal Customer
) and (iii) with respect to each Principal Supplier and Principal Customer, the aggregate amounts paid to, or received from, as
applicable, each such Principal Supplier and Principal Customer for the fiscal year ended January 1, 2012.
(b) The Company has not received any written notice or, to the knowledge of the Company, other communication from
any Principal Supplier or Principal Customer indicating that any such Person is ceasing, will cease or plans to cease dealing with the Company or its Subsidiaries.
4.19
Affiliate Transactions
. Except for indemnification, compensation, and employment arrangements between the Company or any of its Subsidiaries, on
the one hand, and any director or executive officer thereof that have been made available (or a form of which together with a list of all persons (other than current or former directors and officers) subject to arrangements contemplated by such form
has been made available) to JAB prior to the date of this Agreement, no executive officer or director of the Company or any of its Subsidiaries or any person owning five percent (5%) or more of the Shares (or any of such executive
officers, directors or other persons immediate family members or affiliates or associates) is a party to any Contract with or binding upon the Company or any of its Subsidiaries or any of their respective assets, rights or
properties or has any interest in any property owned by the Company or any of its Subsidiaries or has engaged in any transaction with any of the foregoing within the last twelve (12) months, in each case, that is of the type that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities Act.
4.20
Takeover Statutes; Other Restrictions
. The adoption and approval by the board
of directors of the Company of this Agreement and the transactions contemplated hereby, including the Merger, represent all the action necessary to render inapplicable to this Agreement, the Merger and the other transactions contemplated by this
Agreement, the provisions of Sections 23B.19.010 et. seq. of the WBCA and any other potentially applicable anti-takeover or similar statute, regulation or provision of the Companys articles of incorporation (each, a
Takeover
Statute
).
4.21
Brokers and Finders
. Neither the Company
nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated in this
Agreement, except that the Company has engaged Citigroup Global Markets Inc. as its financial advisor. None of the Company or any of its Subsidiaries will be liable to Citigroup Global Markets Inc. for any brokerage fees, commissions or
finders fees (other than the fees, expense reimbursement or other payments payable to Citigroup Global Markets Inc. in connection with the closing of the transactions contemplated by this Agreement) for transaction, advisory or other services
unrelated to the transactions contemplated by this Agreement.
A
RTICLE
V
R
EPRESENTATIONS
AND
W
ARRANTIES
OF
J
AB
AND
M
ERGER
S
UB
JAB hereby represents and warrants to the Company that:
5.1
Organization and Qualification
. Each of JAB and Merger Sub is a legal
entity duly organized and validly existing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business
as presently conducted and is duly qualified or licensed to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of
its business requires such qualification or licensing, except where the failure to be so organized, qualified, licensed or in such good standing, or to have such power or authority, would not, individually or in the aggregate, be reasonably likely
to prohibit, prevent, materially impair or materially delay the consummation of the transactions contemplated by this Agreement.
5.2
Corporate Authority
. Each of JAB and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions
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contemplated hereby. The execution, delivery and performance of this Agreement by each of JAB and Merger Sub and the consummation by each of JAB and Merger Sub of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of JAB or Merger Sub are necessary to authorize the execution, delivery and performance of this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly executed and delivered by JAB and Merger Sub and, assuming the due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding
obligation of each of JAB and Merger Sub enforceable against each of JAB and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.
5.3
Governmental Filings; No Violations; Etc.
(a) No Approval is required to be made with or obtained by JAB or Merger Sub from any Governmental Entity in
connection with the execution, delivery and performance of this Agreement by JAB and Merger Sub and the consummation by JAB and Merger Sub of the Merger and the other transactions contemplated hereby, other than (i) any Approvals required
(A) under the HSR Act, (B) under applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder (including filing of the Proxy Statement) or (C) under applicable requirements of NASDAQ and
(ii) such other Approvals which the failure to make or obtain are not, individually or in the aggregate, reasonably likely to prohibit the ability of JAB and Merger Sub to consummate the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement by JAB and Merger Sub do not, and the consummation
by JAB and Merger Sub of the Merger and the other transactions contemplated hereby will not, constitute or result in (i) a breach or violation of, or a default under, the certificate of incorporation or bylaws of JAB or Merger Sub,
(ii) assuming that the Approvals referred to in Section 5.3(a) are duly obtained or made, with or without notice, lapse of time or both, a material breach or violation of any Law to which JAB or Merger Sub is subject, (iii) with or
without notice, lapse of time or both, a breach or violation of, a termination, cancellation or modification (or provide a right of termination, cancellation or modification) or default under, the payment of additional fees, the creation, change or
acceleration of any rights or obligations under, any requirement to provide notice to, or require consent or approval from, the other party thereto, or the creation of a Lien on any of the assets of the JAB or Merger Sub, in each case, pursuant to
any agreement, lease, license, contract, settlement, consent, note, mortgage, indenture, arrangement or other obligation or understanding binding upon JAB or any of its Subsidiaries, except, in the case of clauses (ii) and (iii) above, for
any such breach, violation, termination, default, creation, acceleration or change that would not, individually or in the aggregate, be reasonably likely to prohibit the ability of JAB and Merger Sub to consummate the transactions contemplated by
this Agreement.
5.4
Financing
. JAB has as of the date hereof and will
have as of the Effective Time, sufficient cash available, directly or through one or more Affiliates, to pay all amounts to be paid by JAB in connection with this Agreement, including the payment of the aggregate Per Share Merger Consideration.
JABs and Merger Subs obligations hereunder are not subject to a condition regarding JABs or Merger Subs obtaining of funds to consummate the transactions contemplated by this Agreement.
5.5
Litigation
. There are no Actions pending or, to the knowledge of the Company,
threatened against or affecting JAB or Merger Sub or any of their respective properties or assets or any officer, director or employee of JAB or Merger Sub in such capacity before any Governmental Entity, which would, individually or in the
aggregate, be reasonably likely to prohibit, prevent, materially impair or materially delay the consummation of the transactions contemplated by this Agreement. Neither JAB nor Merger Sub nor any of their respective assets, rights or properties is a
party to or subject to any Judgment of any Governmental Entity which would, individually or in the aggregate, be reasonably likely to prohibit, prevent, materially impair or materially delay the consummation of the transactions contemplated by this
Agreement.
5.6
Merger Sub
. All of the issued and outstanding capital
stock of Merger Sub is, and at the Effective Time will be, owned by an Affiliate of JAB. Merger Sub has not conducted any business prior to the date of this
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Agreement and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and
the Merger and the other transactions contemplated by this Agreement.
5.7
Proxy
Statement
. None of the information supplied or to be supplied by JAB or Merger Sub for inclusion in the Proxy Statement will, at the date it is first mailed to the shareholders of the Company and at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made,
not misleading. JAB and Merger Sub make no representation or warranty with respect to any information supplied by any other Person which is contained or incorporated by reference in the Proxy Statement.
5.8
Brokers and Finders
. Neither JAB nor Merger Sub nor any of their respective
officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated in this Agreement.
5.9
Acquiring Person
. Neither JAB nor Merger Sub is, nor at any time
during the last five (5) years has it been, an acquiring person of the Company as defined in WBCA § 23B.19.020 (other than as contemplated by this Agreement). Neither JAB nor any of JABs Affiliates directly or indirectly
owns, and at all times for the past three years, neither JAB nor any of JABs Affiliates has owned, beneficially or otherwise, any Shares or any securities, contracts or obligations convertible into or exercisable or exchangeable for Shares.
Neither JAB nor Purchaser has enacted or will enact a plan that complies with Rule 10b5-1 under the Exchange Act covering the purchase of any of the Shares.
A
RTICLE
VI
C
OVENANTS
6.1
Interim Operations.
(a) Except as required by applicable Law or as expressly provided by this Agreement, the Company covenants and
agrees as to itself and its Subsidiaries that, after the date of this Agreement and prior to the Effective Time, the business of it and its Subsidiaries shall be conducted in all material respects the ordinary and usual course and it and its
Subsidiaries shall use their respective commercially reasonable efforts to preserve the material components of their business organizations intact and maintain existing relations and goodwill with Governmental Entities, customers, material
suppliers, licensors, licensees, distributors, creditors and lessors, key employees and independent contractors, and material service providers, agents and business associates and keep available the services of its and its Subsidiaries present
officers and key employees; provided however, that the Company and its Subsidiaries shall be under no obligation to and shall not, without JABs prior written consent, put in place any new retention programs or include additional personnel in
any existing retention programs. Without limiting the generality of the immediately preceding sentence, from the date of this Agreement until the Effective Time, except (A) as otherwise expressly required by this Agreement, (B) with the
prior written consent of JAB or (C) as set forth in Section 6.1 of the Company Disclosure Schedule, the Company will not and will not permit its Subsidiaries to:
(i) adopt or propose any change or amendment (whether by merger, consolidation or otherwise) to its
articles of incorporation or bylaws or other applicable governing instruments of the Company and its Subsidiaries;
(ii) merge or consolidate the Company or any of its Subsidiaries with any other Person, except for any such transactions solely among wholly owned Subsidiaries of the Company not in
violation of any instrument binding on the Company or any of its Subsidiaries and that would not reasonably be expected to result in a material increase in the net Tax liability of the Company and its Subsidiaries, taken as a whole;
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(iii) acquire, directly or indirectly, whether by
purchase, merger, consolidation or acquisition of stock or assets or otherwise, any assets, securities, properties, interests, or businesses or make any investment (whether by purchase of stock or securities, contributions to capital, loans to, or
property transfers), in each case, other than (A) acquisitions of raw materials, supplies, equipment, inventory, third party software and capital in the ordinary course of business (it being understood and agreed that the acquisition of all or
substantially all of the assets of any Person is not in the ordinary course of business consistent with past practice), or (B) acquisitions with a value or purchase price (including the value of assumed liabilities) not in excess of $250,000 in
any transaction or related series of transactions or $750,000 in the aggregate, or as required by the terms of Contracts as in effect as of the date of this Agreement that are listed in Section 6.1(a)(iii) of the Company Disclosure Schedule;
(iv) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the
issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any (A) shares of capital stock of the Company or any of its Subsidiaries (other than (1) the issuance, sale, pledge, disposition, grant,
transfer, lease, license, guaranty or encumbrance of shares by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary or (2) the issuance or transfer of Shares pursuant to awards outstanding as of the date of
this Agreement under, and as required by the terms of, the Stock Plans as in effect as of the date of this Agreement), (B) securities convertible into or exercisable, exchangeable or redeemable for any shares of such capital stock, any options,
warrants or other rights of any kind to acquire any shares of such capital stock or such convertible, exercisable, exchangeable or redeemable securities, or (C) any Voting Debt;
(v) make any loans, advances, guarantees or capital contributions to or investments in any Person
(other than the Company or any direct or indirect wholly owned Subsidiary of the Company) in excess of $250,000 in any transaction or series of related transactions or $500,000 in the aggregate;
(vi) amend, supplement, replace, refinance, terminate or otherwise modify that certain Amended and
Restated Credit Agreement by and between the Company and Wells Fargo Bank, National Association, dated as of December 21, 2010 (as such agreement may be further amended, amended and restated, supplemented, extended, refinanced, renewed,
replaced or otherwise modified from time to time);
(vii) declare, authorize, set aside,
make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for dividends paid by any Subsidiary of the Company to the Company or to a wholly owned Subsidiary of the
Company) or enter into any Contract with respect to the voting of its capital stock other than proxies or voting agreements solicited by the Company to obtain the Requisite Company Vote;
(viii) adjust, reclassify, split, combine or subdivide, or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock;
(ix) incur, alter, amend or modify any indebtedness or guarantee indebtedness of another Person, or issue or sell any debt securities or warrants or other rights to acquire any debt
security of the Company or any of its Subsidiaries, except for the incurrence of indebtedness for borrowed money incurred in the ordinary course of business consistent with past practice not to exceed $500,000 in the aggregate;
(x) make or authorize any capital expenditures in excess of the amount reflected in the
Companys capital expenditure budget attached to Section 6.1(a)(x) of the Company Disclosure Schedule;
(xi) make any material changes with respect to accounting policies or procedures, except as
required by changes in applicable GAAP;
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(xii) subject to Section 6.13, release, assign,
compromise, discharge, waive, settle or satisfy any Action (including any Action relating to this Agreement or the Merger) or other rights, claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) for
an amount not covered by insurance in excess of $250,000 individually or $500,000 in the aggregate or providing for any relief other than monetary relief (except for confidentiality, non-disparagement, releases, agreements not to sue and other
similar provisions in a settlement agreement);
(xiii) amend or modify, in any material
respect, or terminate any Material Contract, material lease for Leased Real Property or material Permit or enter into any Contract that would have been a Material Contract had it been entered into prior to the execution of this Agreement, in each
case other than in the ordinary course of business;
(xiv) make any material Tax
election, amend any Tax Return with respect to a material amount of Taxes, settle or finally resolve any controversy with respect to a material amount of Taxes or change any method of Tax accounting;
(xv) (A) with regard to Intellectual Property, transfer, sell, lease, license, mortgage, pledge,
surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of any material Intellectual Property, other than non-exclusive licenses granted in the ordinary course of business; and (B) with regard to other
assets, transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon, create or incur any Lien (other than Permitted Encumbrances) on or allow to lapse or expire or otherwise dispose of any material assets,
licenses, operations, rights, product lines, businesses or interests therein of the Company or its Subsidiaries, except, with respect to the foregoing clause (B), (x) in connection with sales of Company Products or dispositions of inventory in
the ordinary course of business (y) sales or other dispositions of obsolete assets or (z) sales, leases, licenses or other dispositions of assets with a fair market value not in excess of $250,000 in any transaction or series of related
transactions or $750,000 in the aggregate (inclusive of any sales or dispositions made pursuant to clauses (x) or (y) of this paragraph);
(xvi) terminate any executive officers or hire any new employees unless such hiring is in the ordinary course of business consistent with past practice and is with respect to
employees having an annual base salary and incentive opportunity not to exceed $300,000 in the aggregate for such employee;
(xvii) adopt, enter into, amend, terminate or extend any Collective Bargaining Agreement;
(xviii) except as required pursuant to existing written, binding agreements in effect prior to the date of this Agreement, or as otherwise required by applicable Law, (A) grant
or provide any severance or termination payments or benefits to any director, officer or, other than in the ordinary course of business, employees (who are not officers) of the Company or any of its Subsidiaries, (B) increase the compensation,
bonus or pension, welfare, severance, change-in-control or other benefits of, pay any bonus to, or make any new equity awards to any director, officer or, other than in the ordinary course of business consistent with past practice, non-officer
employee of the Company or any of its Subsidiaries other than, in the case of non-officer employees, base salary increases or spot or other bonuses awarded in the ordinary course of business (which spot or other bonuses shall not exceed $50,000 in
the aggregate), (C) establish, adopt, amend or terminate any Company Benefit Plan (except as required by Law) or amend the terms of any outstanding equity-based awards, (D) take any action to accelerate the vesting or payment, or fund or
in any other way secure the payment, of compensation or benefits under any Company Benefit Plan, to the extent not already provided in any such Company Benefit Plan, (E) materially change any actuarial or other assumptions used to calculate
funding obligations with respect to any Company Benefit Plan or to change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, or (F) forgive any
loans to directors, officers or key employees of the Company or any of its Subsidiaries;
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(xix) unless required by applicable Law, reclassify
any independent contractor as an employee of the Company or any of its Subsidiaries;
(xx) fail to use commercially reasonable efforts to renew or maintain the Insurance Policies or
comparable replacement policies, other than in the ordinary course of business consistent with past practice;
(xxi) enter into any new line of business not related to coffee or tea;
(xxii) adopt, enter into or effect any plan of complete or partial liquidation, dissolution,
reorganization or restructuring;
(xxiii) take any action that would, or would be
reasonably likely to, individually or in the aggregate, prevent, materially delay or materially impede the consummation of the Merger or the other transactions contemplated by this Agreement; or
(xxiv) agree, authorize, propose, commit or announce an intention to do any of the foregoing.
(b) Nothing contained herein shall give to JAB or Merger Sub, directly or indirectly, rights to
control or direct the Companys operations prior to the Effective Time in violation of applicable Law. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions hereof, complete control and supervision of
its operations and shall not be required to obtain consent of JAB if it reasonably believes that doing so would violate applicable Law.
6.2
Acquisition Proposals
.
(a)
No Solicitation or Negotiation
. The Company agrees that, except as expressly
permitted by this Section 6.2, neither it nor any of its Subsidiaries shall, directly or indirectly nor shall it authorize or permit their respective Representatives directly or indirectly:
(i) initiate, solicit, knowingly encourage, induce or assist any inquiries or the making,
submission, announcement or consummation of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal;
(ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide or furnish any information or data relating to the Company or any of its
Subsidiaries (other than to notify a Person of the provisions of this Section 6.2), or afford access to the business, properties, assets, books, records or personnel of the Company or any of its Subsidiaries to any Person (other than JAB,
Merger Sub, or any of their respective Affiliates, designees or Representatives) that could reasonably be expected to initiate, solicit, encourage, induce or assist the making, submission or commencement of any proposal or offer that constitutes, or
could reasonably be expected to lead to, any Acquisition Proposal;
(iii) approve,
recommend or enter into, any letter of intent or similar document, agreement or commitment, or agreement in principle (whether written or oral, binding or nonbinding) with respect to an Acquisition Proposal;
(iv) approve any Person as an acquiring person or any Persons share
acquisition as provided in Section 23B.19.040 of the WBCA; or
(v) otherwise
knowingly facilitate any effort or attempt to make an Acquisition Proposal.
Notwithstanding anything in the foregoing to the
contrary, prior to the time that, but not after, the Requisite Company Vote is obtained, if the Company has not breached this Section 6.2, the Company may (A) provide information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal if the Company receives from the Person so requesting such information an executed confidentiality agreement on terms not more favorable to such other Person than those contained in the
Confidentiality Agreement and which shall not prohibit the Company from complying with the terms of this
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Section 6.2, and prior to or concurrently delivers to JAB any such information to the extent not previously provided to JAB and (B) engage or participate in any discussions or
negotiations with any Person who has made such an unsolicited bona fide written Acquisition Proposal of the type described in clause (A) above, if and only to the extent that, prior to taking any action described in clauses (A) and
(B) above, the board of directors of the Company has determined in good faith (after consultation with its outside financial advisors and outside legal counsel) that (x) failure to take such action would reasonably be expected to violate
the directors fiduciary duties under applicable Law and (y) based on the information then available, such Acquisition Proposal either constitutes a Superior Proposal or is reasonably likely to result in a Superior Proposal.
(b)
Definitions
. For purposes of this Agreement:
Acquisition Proposal
means (i) any proposal or offer relating to or that could reasonably be expected to
lead to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, exchange offer, recapitalization, reorganization, share exchange, business combination or similar transaction or series of related transactions
involving the Company or any of its significant subsidiaries (as such term is defined in Rule 1-02 of Regulation S-X under the Exchange Act) and (ii) any acquisition by any Person of, or proposal or offer, which if consummated would result in
any Person becoming the beneficial owner of, directly or indirectly, in one or a series of related transactions, 10% or more of the total voting power or of any class of equity securities of the Company or those of any of its Subsidiaries, or the
acquisition, purchase or disposition of the business or 15% or more of the consolidated assets (including equity securities of its Subsidiaries), revenues, net income or earnings of the Company and its Subsidiaries outside the ordinary course of
business, in each case other than the transactions contemplated by this Agreement.
Superior
Proposal
means a bona fide unsolicited written Acquisition Proposal that would result in any Person (or its shareholders) becoming the beneficial owner, directly or indirectly, of more than 80% of the assets (on a consolidated basis)
of the Company and its Subsidiaries or more than 80% of the total voting power of the equity securities of the Company that the board of directors of the Company has determined in good faith after consultation with its outside financial advisors and
outside legal counsel, taking into account, among other things, all legal, financial, regulatory, timing and other aspects of the Acquisition Proposal and the Person making the Acquisition Proposal (including any break-up fees, expense reimbursement
provisions, the availability of financing, and any conditions to consummation relating to financing, regulatory approvals or other conditions beyond the control of the party having the right to invoke the condition) (i) is more favorable to the
Companys shareholders from a financial point of view than the transactions contemplated by this Agreement (after taking into account any changes to the terms of this Agreement proposed by JAB and any other information provided by JAB pursuant
to Section 6.2(c)) and (ii) is reasonably likely to be consummated.
Representatives
means, with respect to any Person, such Persons officers, directors, employees, investment bankers, attorneys, accountants, consultants and other advisors or representatives.
(c)
No Change of Recommendation; No Other Agreements
. Neither the board of directors
of the Company, nor any committee thereof shall:
(i) (A) fail to include the Company
Recommendation in the Proxy Statement, (B) withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to JAB, the Company Recommendation with respect to the Merger,
(C) publicly approve, recommend or otherwise declare advisable any Acquisition Proposal or (D) publicly propose to do any of the foregoing (any action or omission described in this clause (i) being referred to as a
Change
of Recommendation
); or
(ii) authorize, approve, recommend, declare
advisable or permit (or publicly propose to authorize, approve, recommend, declare advisable or permit) the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement,
option agreement, joint venture agreement, partnership agreement or agreement that requires the Company to abandon or terminate this Agreement or the Merger, or any agreement relating
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to any Acquisition Proposal (other than this Agreement or a confidentiality agreement referred to in Section 6.2(a) entered into in compliance with and subject to the limitations set forth
in Section 6.2(a)) (an
Alternative Acquisition Agreement
).
Notwithstanding anything to the
contrary set forth in this Agreement, prior to the time, but not after, the Requisite Company Vote is obtained, the board of directors of the Company may make a Change of Recommendation (and, solely with respect to a Superior Proposal, terminate
this Agreement pursuant to Section 8.3(b)) only if the board of directors of the Company has determined in good faith (after consultation with its outside financial advisors and outside legal counsel) that (x) failure to take such action
would reasonably be expected to violate the directors fiduciary duties under applicable Law and (y) if such action relates to any Acquisition Proposal, that such Acquisition Proposal constitutes a Superior Proposal;
provided
,
however
, that no such action may be made pursuant to this Section 6.2(c) or Section 8.3(b) until after at least three (3) business days following JABs receipt of notice from the Company (as may be extended or renewed
pursuant to this paragraph, the
Notice Period
) advising that management of the Company currently intends to recommend to its board of directors that it take such action and the basis therefor, including in the case of any
Acquisition Proposal all necessary information under Section 6.2(f) (which notice shall not constitute a Change of Recommendation);
provided
,
further
that (i) during the Notice Period, the Company shall and shall cause its
Subsidiaries not to enter into any Alternative Acquisition Agreement, (ii) the Company shall, and shall cause its financial advisors and outside legal counsel to, negotiate with JAB in good faith during the Notice Period (to the extent JAB
desires to negotiate) to enable JAB to propose revisions to the terms of this Agreement that obviate the need of the board of directors of the Company to make a Change of Recommendation or terminate this Agreement pursuant to Section 8.3(b),
including in the case of a Superior Proposal, by such Superior Proposal no longer constituting a Superior Proposal, (iii) following the end of the Notice Period, the board of directors of the Company shall have considered in good faith any
changes to the terms of this Agreement proposed by JAB and any other information provided by JAB and shall have determined (after consultation with its outside financial advisors and outside legal counsel) that if such changes were to be given
effect that failure to make a Change of Recommendation or terminate this Agreement pursuant to Section 8.3(b) would reasonably be expected to result in a violation of the directors fiduciary duties under applicable Law and, in the case of
clause (y) above, any such Superior Proposal would continue to constitute a Superior Proposal and (iv) in the event of each and every change to any of the financial terms (including the form, amount and timing of payment of consideration)
or any other material terms of any Superior Proposal, the Company shall, in each case, have delivered to JAB an additional notice consistent with that described in the first proviso of this paragraph and a new Notice Period under this paragraph
shall commence, during which time the Company shall be required to comply with the requirements of this Section 6.2(c) anew with respect to such additional notice, including clauses (i) through (iv) of this proviso. Notwithstanding
the foregoing, to the extent that a notice required under this Section 6.2(c) (in connection with a termination pursuant to Section 8.3(b)) relates to a Superior Proposal for which the requisite notice or additional notice has been given
pursuant to this Section 6.2(c) (in connection with a Change of Recommendation), no new or additional notice or Notice Period will be required for such termination pursuant to Section 8.3(b).
(d)
Certain Permitted Disclosure
. Nothing contained in this Section 6.2 shall
be deemed to prohibit the Company from complying with its disclosure obligations under United States federal or state Law with regard to an Acquisition Proposal;
provided
,
however
, that if such disclosure does not reaffirm the Company
Recommendation or has the substantive effect of withdrawing or adversely modifying the Company Recommendation, such disclosure shall be deemed to be a Change of Recommendation and JAB shall have the right to terminate this Agreement as set forth in
Section 8.4 (it being understood that any stop, look or listen communication that contains only the information set forth in Rule 14d-9(f) shall not be deemed to have the substantive effect of withdrawing or adversely modifying the
Company Recommendation or otherwise deemed to violate the Companys obligations under this Section 6.2(d)).
(e)
Existing Discussions and Agreements
. The Company agrees that it will, and will
cause its Subsidiaries and cause its and their respective Representatives on the Company or its Subsidiaries behalf to,
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immediately cease and terminate any activities, discussions or negotiations with any Persons conducted heretofore with respect to any Acquisition Proposal. The Company also agrees that it will
promptly request each Person that has executed a confidentiality agreement on or after January 1, 2010 in connection with such Persons consideration of an Acquisition Proposal (the
Prior Confidentiality
Agreements
) to return or destroy all confidential information heretofore furnished to such Person or its Representatives by or on behalf of the Company or any of its Subsidiaries in accordance with the terms of such Prior
Confidentiality Agreements, including any rights of such Person to retain copies of confidential information in accordance with the terms of such Prior Confidentiality Agreement.
(f)
Notice
. The Company agrees that it will promptly (and, in any event, within
24 hours of becoming knowledgeable thereof) notify JAB if any inquiries, proposals or offers with respect to an Acquisition Proposal are received by, any such information is requested from, or any such discussions or negotiation are sought to
be initiated or continued with, it or any of its Representatives indicating, in connection with such notice, the name of such Person and the material terms and conditions of any proposals or offers (including copies of any written requests,
proposals or offers, including proposed agreements) and thereafter shall keep JAB reasonably informed, on a prompt basis, of the status and terms of any such proposals or offers (including any amendments thereto and, in no event later than 24 hours
after receipt, copies of any additional or revised written requests, proposals or offers, including proposed agreements) and the status of any such discussions or negotiations The Company agrees that it and its Subsidiaries will not enter into any
agreement with any Person subsequent to the date hereof that prohibits the Company from providing any information to JAB in accordance with this Section 6.2(f). Without limiting the generality of the foregoing or Section 6.2(a), the
Company shall notify JAB in advance of beginning to provide information to any Person relating to an Acquisition Proposal or beginning discussions or negotiations with any Person regarding an Acquisition Proposal (which notice can be included in any
notice provided under Section 6.2(a)).
(g) Any violations of the restrictions set forth in this
Section 6.2 by any Representative of the Company or any of its Subsidiaries acting on behalf of the Company shall be deemed to be a breach of this Section 6.2 by the Company.
6.3
Proxy Filing; Information Supplied
.
(a) The Company shall prepare and file with the SEC, as promptly as practicable after the date of this Agreement,
and in any event within twenty (20) business days after the date of this Agreement, the Proxy Statement in preliminary form relating to the Shareholders Meeting. JAB, Merger Sub and the Company shall cooperate and consult with each other in the
preparation of the Proxy Statement. Each of JAB and Merger Sub will furnish to the Company in a timely manner the information relating to it required by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in the
Proxy Statement. The Company shall not file the preliminary Proxy Statement, or any amendment or supplement thereto, without providing JAB a reasonable opportunity to review and comment thereon (which comments shall be reasonably considered by the
Company). The Company shall promptly notify JAB of the receipt of all comments of the SEC with respect to the Proxy Statement and of any request by the SEC for any amendment or supplement thereto or for additional information, shall consult with JAB
and Merger Sub prior to responding to any such comments or requests or filing any amendment or supplement to the Proxy Statement and shall promptly provide to JAB copies of all correspondence between the Company and/or any of its Representatives and
the SEC with respect to the Proxy Statement. The Company shall use its reasonable best efforts to promptly provide responses to the SEC with respect to all comments received on the Proxy Statement by the SEC and to cause the definitive Proxy
Statement to be mailed to holders of Shares as promptly as possible after the date the SEC staff advises that it has no further comments thereon or that the Company may commence mailing the Proxy Statement. If the Company, JAB or Merger Sub become
aware of any information relating to themselves or any of their respective Representatives that, pursuant to the Securities Act or the Exchange Act, should be disclosed in an amendment or supplement to the Proxy Statement, then the party that
discovers such information shall promptly notify the other party thereof. Thereafter, the Company shall promptly include such information in an amendment or supplement to the Proxy
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Statement filed with the SEC and, if appropriate, promptly mail such amendment or supplement to the holders of Shares. The Company shall use reasonable best efforts to ensure that the Proxy
Statement complies with Section 4.12 and as to form in all material respects with the requirements of the Exchange Act.
(b) Unless the board of directors of the Company has made a Change of Recommendation pursuant to
Section 6.2(c), the Proxy Statement shall contain the Company Recommendation. The Company shall include in the Proxy Statement the written opinion of its financial advisor, dated as of the date of this Agreement, that, as of such date subject
to the assumptions, limitations and qualifications in such written opinion, the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Shares.
6.4
Shareholders Meeting
. The Company will take, in accordance with applicable Law,
the rules of NASDAQ and its articles of incorporation and bylaws, all action necessary to duly call, give notice of, convene and hold a meeting of holders of Shares to consider and vote upon the adoption and approval of this Agreement and the
transactions contemplated hereby, including the Merger (the
Shareholders Meeting
) as promptly as practicable after the execution of this Agreement, and, in any event, no later than thirty-five (35) days following the
earliest of the date on which the SEC staff advises the Company that it has no further comments on the Proxy Statement or that it is not reviewing the Proxy Statement. The Company shall not postpone or adjourn the Shareholders Meeting except to the
extent required by Law, requested by JAB (in JABs sole discretion) to permit additional time to solicit the Requisite Company Vote. Unless the board of directors of the Company has made a Change of Recommendation pursuant to
Section 6.2(c), the board of directors of the Company shall recommend such adoption and approval and shall use reasonable best efforts (a) to solicit from its shareholders proxies in favor of the adoption and approval of this Agreement and
the transactions contemplated hereby, including the Merger and (b) to secure the Requisite Company Vote. The Company shall keep JAB and Merger Sub updated with respect to proxy solicitation results as reasonably requested by JAB or Merger Sub.
Notwithstanding anything to the contrary contained in this Agreement, unless this Agreement shall have been terminated prior to the date of the Shareholders Meeting in accordance with its terms (including Section 8.3(b)), the obligation of the
Company to call, give notice of, convene and hold the Shareholders Meeting in accordance with this Section 6.4 shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to it of any Acquisition
Proposal or by a Change of Recommendation, and the Company shall not submit any Superior Proposal for approval by shareholders of the Company.
6.5
Filings; Other Actions; Notification
.
(a)
Cooperation
. Subject to the terms and conditions set forth in this Agreement,
the Company and JAB shall cooperate with each other and use (and shall cause their respective Subsidiaries to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its part under this Agreement and applicable Laws to consummate and make effective the Merger and the other transactions contemplated by this Agreement as soon as practicable. In furtherance of, and not in
limitation of the foregoing, (i) each of JAB and the Company agree to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Merger as soon as practicable after the date hereof and in any event
no later than twenty (20) business days after the date hereof (unless the parties otherwise agree in writing to a different date), and to use their reasonable best efforts to supply as soon as practicable any additional information and
documentary material that may be reasonably requested pursuant to the HSR Act and use its reasonable best efforts to take, or cause to be taken, all other actions consistent with this Section 6.5 necessary to cause the expiration or termination
of the applicable waiting periods under the HSR Act (including any extensions thereof) as soon as practicable (including by requesting early termination of the waiting period thereunder) and (ii) each of JAB and the Company agree to file as
promptly as practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger or any of the other transactions contemplated by this Agreement;
provided
,
however
, that nothing in this Agreement, including this Section 6.5(a), shall
require either party, or permit the Company, to undertake any efforts, or to take or consent to
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any action, if such efforts, action or consent would be reasonably likely to result in a material adverse effect on the business, financial condition or results of operations of the combined
business of JAB and the Company and their respective Subsidiaries, taken as a whole, after giving effect to the consummation of the transactions contemplated hereby. JAB shall have the right to direct all matters with any Governmental Entity
consistent with its obligations hereunder;
provided
, that, subject to reasonable limitations limiting access to outside counsel, JAB and the Company shall have the right to review in advance and, to the extent practicable, each will consult
with the other on and consider in good faith the views of the other in connection with, any filing made with, or written materials submitted to or other communication with any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement. In exercising the foregoing rights, each of the Company and JAB shall act reasonably and as promptly as practicable.
(b)
Antitrust Matters
. Subject to the terms and conditions set forth in this Agreement, without limiting the generality of the undertakings pursuant to
this Section 6.5, each of the Company and JAB agree to promptly provide to each and every federal, state or foreign Governmental Entity with jurisdiction over enforcement of under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other United States federal or state or foreign or supranational Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition through merger or acquisition (collectively,
Antitrust Laws
) non-privileged information and documents that are necessary, proper and advisable to permit consummation of the
transactions contemplated by this Agreement.
(c)
Information
. Subject to
reasonable limitations limiting access to outside counsel, the Company and JAB each shall, upon request by the other, furnish the other promptly with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such
other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of JAB, the Company or any of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger and the transactions contemplated by this Agreement.
(d)
Status
. Subject to applicable Laws and as required by any Governmental Entity,
and subject to reasonable restrictions limiting access to outside counsel, the Company and JAB each shall keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby, including promptly furnishing
the other with copies of notices, correspondence, or other communications received by JAB or the Company, as the case may be, or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement. Neither the Company nor JAB shall permit any of its officers or any other representatives or agents to participate in any meeting or engage in any substantive communication with any Governmental Entity in
respect of any filings, investigation or other inquiry relating to the transactions contemplated hereby unless it consults with the other party in advance and, to the extent permitted by such Governmental Entity, gives the other party the
opportunity to attend and participate thereat. Each of Company and JAB shall, to the extent practicable, give the other reasonable prior notice of any such meeting or communication and in the event one party is prohibited by Law or a Governmental
Entity from participating in or attending any such meeting or engaging in any such communication, keep such party reasonably apprised with respect thereto.
6.6
Access and Reports
. Upon reasonable notice, the Company shall (and shall cause its Subsidiaries to) afford JABs officers and other authorized
Representatives (as defined in the Confidentiality Agreement) reasonable access during normal business hours throughout the period prior to the Effective Time, to its employees, properties, books, contracts and records and, during such
period, the Company shall (and shall cause its Subsidiaries to) furnish promptly to JAB all information concerning its business, properties and personnel as may reasonably be requested;
provided
that such access shall be conducted under the
supervision of appropriate personnel of the Company and in such a manner so as not to interfere with the normal operation of the business of the Company;
provided
,
further
, that no investigation pursuant to this Section 6.6 shall
affect or be deemed to modify any representation or warranty made by the Company herein or otherwise limit or affect the remedies
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available to JAB;
provided
,
further
, that the foregoing shall not require the Company (i) to permit any inspection, or to disclose any information, that in the reasonable
judgment of the Company would result in the disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality if the Company shall have used reasonable best efforts to obtain the consent of such third
party to such inspection or disclosure, (ii) to disclose any information to the extent it would cause a loss of privilege to the Company or any of its Subsidiaries or (iii) to violate applicable Law (it being agreed, with respect to
clauses (i) and (ii), that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that would not result in such jeopardy or contravention). All requests for information made pursuant to this
Section 6.6 shall be directed to the executive officer or other Person designated by the Company. All information obtained pursuant to this Section 6.6 shall be governed by the terms of the Confidentiality Agreement.
6.7
Stock Exchange Delisting
. Prior to the Closing Date, the Company shall cooperate
with JAB and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies of NASDAQ to enable the
delisting by the Surviving Corporation of the Shares from NASDAQ and the deregistration of the Shares under the Exchange Act as promptly as practicable after the Effective Time.
6.8
Publicity; Communications
. The initial press release regarding the Merger shall
be a joint press release mutually agreed to by the Company and JAB. After the initial press release, each of the Company, JAB and Merger Sub agrees not to issue or cause publication of any public release or announcement concerning this Agreement or
the transactions contemplated hereby without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), except (a) as such party reasonably believes, after receiving the advice of outside counsel
and after informing the other party, is required by Law or by any listing agreement with or rules of any applicable national securities exchange, trading market or listing authority, in which case, such party shall endeavor, on a basis reasonable
under the circumstances, to provide a meaningful opportunity to the other party to review and comment upon such press release or other announcement or (b) a public statement is made in response to questions from the press, analysts, investors
or those attending industry conferences and make internal announcements to employees so long as such statements are consistent with previous press releases, public disclosures or public statements made jointly by the parties (or individually, if
approved by the other party). As promptly as practicable following the date of this Agreement and in compliance with applicable Laws, JAB and the Company shall develop a joint plan for communication to the Companys employees, independent
contractors, customers, suppliers and other strategic Persons about this Agreement and the transactions contemplated by this Agreement. Prior to making any written or oral communications to the employees or independent contractors of the Company or
any of its Subsidiaries pertaining to compensation or benefit matters that are affected by the transactions contemplated by this Agreement, the Company shall provide JAB with a copy of the intended communication, JAB shall have a reasonable period
of time to review and comment on the communication, and JAB and the Company shall cooperate in providing any such mutually agreeable communication. Notwithstanding any herein to the contrary, the Company need not consult with, or obtain the approval
of JAB in connection with any press release, public statement or filing to be issued or made with respect to any Acquisition Proposal or Change of Recommendation.
6.9
Financing
. Prior to the Closing, the Company and its Subsidiaries shall, and shall use their commercially reasonable efforts to cause the
respective Representatives of the Company and its Subsidiaries to, cooperate as reasonably requested by JAB in connection with any equity, debt or other financing sought by JAB or its Affiliates in connection with the transactions contemplated by
this Agreement (the
Financing
), including, without limitation (i) upon reasonable prior notice, participation by the Companys senior officers and other Representatives in a reasonable number of meetings,
presentations, road shows, due diligence sessions, drafting sessions and sessions with rating agencies, (ii) assisting with the preparation of customary materials for syndication documents, including rating agency presentations, bank
confidential information memoranda, business projections and similar documents required in connection with the Financing, (iii) using commercially reasonable efforts to cause its independent accountants to provide assistance and cooperation to
JAB, including participating in drafting sessions and accounting due diligence sessions and providing consent to JAB to use their
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audit reports relating to the Company, (iv) using commercially reasonable efforts to obtain consents, approvals, authorizations, customary payoff letters, and instruments of termination and
discharge reasonably requested by JAB, (v) preparing and furnishing all financial and other pertinent information regarding the Company reasonably requested by JAB, including all financial statements, pro forma financial statements and other
financial data required in connection with the Financing, (vi) providing reasonable access (subject to execution of non-disclosure and confidentiality agreements reasonably acceptable to the Company) to prospective lenders involved in the
Financing to evaluate the Companys current assets, cash management and accounting systems, policies and procedures relating thereto for purposes of establishing collateral arrangements and cooperating with prospective lenders to establish bank
and other accounts and blocked account agreements and lock box arrangements in connection with the foregoing; provided that no such accounts, agreements or arrangements shall be effective prior to the Effective Time, (vii) executing and
delivering definitive financing documents, including credit agreements, intercreditor agreements, pledge and security documents, and certificates, legal opinions, or other documents, to the extent reasonably requested by JAB and otherwise reasonably
facilitating the pledging of collateral, provided that no such documents or agreements shall be effective prior to the Effective Time, (vii) assisting JAB in obtaining corporate and facilities ratings for the Financing, and
(viii) furnishing JAB and any lenders involved with the Financing, with all documentation and other information required by any Governmental Entity with respect to the Financing under applicable know your customer and anti-money
laundering rules and regulations, including the PATRIOT Act. Notwithstanding the foregoing: (i) such requested cooperation shall not unreasonably interfere with the ongoing operations of the Company or any of its Subsidiaries; and
(ii) neither the Company nor any of its Subsidiaries shall be required to pay any commitment or other similar fee or incur any other liability in connection with the Financing prior to the Closing. JAB shall (A) promptly upon request by
the Company, reimburse the Company for all reasonable and documented out-of-pocket fees and expenses of the Company and its Subsidiaries and all reasonable and documented fees and expenses of their counsel and accountants incurred in connection with
such requested cooperation, and (B) indemnify the Company, its Subsidiaries and its Related Persons against any claim, loss, damage, injury, liability, judgment, award, penalty, fine, Tax, cost (including cost of investigation), expense
(including reasonable fees and expenses of counsel) or settlement payment incurred as a result of such cooperation (including any claim by or with respect to any such lenders, prospective lenders, agents and arrangers and ratings agencies).
6.10
Expenses
. Following the Merger, the Surviving Corporation, shall
pay all charges and expenses, including those of the Paying Agent, incurred after the Effective Time in connection with the transactions contemplated in Article III. Except as otherwise expressly provided in this Agreement, whether or not the Merger
is consummated, all costs and expenses incurred in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such expense. The parties agree that the Surviving
Corporation shall not bear any costs or expenses incurred by any shareholder of the Company.
6.11
Indemnification; Directors and Officers Insurance
. (a) All
rights to indemnification by the Company or any of its Subsidiaries existing in favor of those Persons who are present or former directors and officers of the Company or any of its Subsidiary (the
Indemnified Parties
) for their
acts and omissions occurring prior to the Effective Time, as provided in the articles of incorporation and bylaws of the Company or any of its Subsidiaries (as in effect as of the date of this Agreement) and as provided in the indemnification
agreements between the Company and said Indemnified Parties (as in effect as of the date of this Agreement) in the forms made available by the Company to JAB or JABs Representatives prior to the date of this Agreement, shall survive the Merger
and the Surviving Corporation shall cause them to be observed by the Surviving Corporation and its Subsidiaries to the fullest extent permitted under Washington law.
(b) As of the Effective Time, JAB or the Surviving Corporation (with the election being at JABs option) shall have purchased a tail policy to the current policy of
directors and officers liability insurance maintained by Company which tail policy shall be effective for a period from the Effective Time through and including the date six (6) years after the Closing Date (a
Tail
Policy
) with respect to claims arising from facts or events that occurred on or before the Effective Time, and which Tail Policy shall contain coverage and
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amounts at least as favorable to the Indemnified Parties as the coverage currently provided by Companys current directors and officers liability insurance policies (in the
aggregate);
provided
,
however
, that in no event shall JAB or the Surviving Corporation be required to expend, for the entire Tail Policy, in excess of three (3) times the annual premium currently paid by the Company for such
insurance; and, provided, further that, if the premium of such insurance coverage exceeds such amount, JAB or the Surviving Corporation shall be obligated to obtain a policy or policies with the greatest coverage available for a cost not exceeding
such amount.
(c) If JAB or the Surviving Corporation or any of their respective successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties
and assets to any individual, corporation or other entity, then, and in each such case, proper provisions shall be made so that the successors and assigns of JAB or the Surviving Corporation shall assume all of the obligations set forth in this
Section 6.11.
(d) The provisions of this Section 6.11 are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties and their heirs. This Section 6.11 may not be amended, altered or repealed after the Effective Time without the prior written consent of the affected Indemnified Party.
(e) The rights of the Indemnified Parties under this Section 6.11 shall be in addition to any rights such
Indemnified Parties may have under the articles of incorporation or bylaws of the Company or any of its Subsidiaries, or under any applicable Contracts or Laws.
6.12
Takeover Statutes
. If any Takeover Statute is or may become applicable to the Merger or the other transactions contemplated by this Agreement, the
Company and its board of directors shall grant all such approvals and take all such actions as are necessary or advisable so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and
otherwise act to eliminate or minimize the effects of such statute, regulation or provision in the Companys articles of incorporation or bylaws on such transactions.
6.13
Shareholder Litigation
. The Company shall give JAB the opportunity to consult with the Company prior to the Effective Time and keep JAB reasonably
apprised on a prompt basis with respect to the defense or settlement of any shareholder litigation against the Company and/or its directors relating to the transactions contemplated by this Agreement. No such settlement shall be agreed to without
the prior written consent of JAB.
6.14
Notification
. During the period
commencing on the date hereof and terminating upon the earlier to occur of the Effective Time and the termination of this Agreement pursuant to and in accordance with Article VIII, each of the Company and JAB shall promptly notify the other party in
writing of (a) any notice or other communication received by such party from any Governmental Entity in connection with this Agreement, the Merger or the transactions contemplated hereby, or from any Person alleging that the consent of such
Person is or may be required under a Material Contract or otherwise (unless alleged under a Contract that is not material) in connection with the Merger or the transactions contemplated hereby, (b) any Actions commenced or, to such partys
knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its subsidiaries which relate to this Agreement, the Merger or the transactions contemplated hereby or (c) any fact, event or circumstance that
(i) in the case of the Company, individually or taken together with all other facts, events and circumstances, has had or would reasonably be expected to have a Material Adverse Effect, (ii) has materially impaired, or would reasonably be
expected to materially impair the ability of such party (or, in the case of JAB, Merger Sub) to consummate the Merger and the other transactions contemplated hereby, or (iii) would cause, or would reasonably be expected to cause, the failure of
any condition precedent to the Companys or JAB and Merger Subs obligations to consummate the Merger under this Agreement, in each case within three (3) business days of an executive officer of such party becoming aware of occurrence
of such fact, event or circumstance. Each such notification shall include a certification of an officer of the Company that such notification is being delivered in accordance with this Section 6.14. No such notification shall be deemed to
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supplement or amend the Company Disclosure Schedule for the purpose of (i) determining the accuracy of any of the representations and warranties made by the parties in this Agreement, or
(ii) determining whether any of the conditions set forth in Article VII have been satisfied. Delivery of notification pursuant to this Section 6.14 shall not limit or otherwise affect the remedies available hereunder to any party receiving
such notice.
6.15
Section 16 Matters
. Prior to the Effective Time,
the Company may approve, in accordance with the procedures set forth in Rule 16b-3 promulgated under the Exchange Act, any dispositions of equity securities of the Company (including derivative securities with respect to equity securities of the
Company) resulting from the transactions contemplated by this Agreement by each officer or director of the Company who is subject to Section 16 of the Exchange Act with respect to equity securities of the Company.
6.16
Employee Benefits
.
(a) During the one (1) year period following the Effective Time, JAB shall cause the Surviving Corporation and its Subsidiaries to provide each employee of the Company and any
Subsidiary who continues to be employed by the Surviving Corporation or any Subsidiary thereof (the
Continuing Employees
) with compensation (including, as applicable, base salary, bonus plans (based on bonus opportunity
rather than actual bonus payments), other employee benefits (except for retention benefits), health and welfare benefits and benefits under any plan intended to be qualified within the meaning of section 401(a) of the Code (
401(k)
Plan
)) that is at least substantially comparable in the aggregate to that provided to Continuing Employees immediately prior to the execution of this Agreement. Nothing in this Section 6.16 shall (i) create any right in any
Continuing Employee to continued employment by JAB, the Surviving Corporation, or any Subsidiary thereof or (ii) require JAB, the Surviving Corporation, or any Subsidiary thereof to continue any Company Benefit Plan or prevent the amendment,
modification or termination of any Company Benefit Plan after the Effective Time. Nothing in this Section 6.16 or elsewhere in this Agreement shall be construed to create a right in any employee to employment with JAB, the Surviving Corporation
or any other Subsidiary of the Surviving Corporation and the employment of each Continuing Employee shall be at will employment, subject to the terms and conditions of employment agreements, severance plans and change of control plans.
(b) Without limiting the foregoing:
(i) With respect to any accrued but unused personal, sick or vacation time to which any Continuing
Employee is entitled pursuant to the personal, sick or vacation policies applicable to such Continuing Employee immediately prior to the Effective Time, JAB shall, or shall cause the Surviving Corporation to and instruct its Subsidiaries to, as
applicable, assume the liability for such accrued personal, sick or vacation time and allow such Continuing Employee to use such accrued personal, sick or vacation time in accordance with the practice and policies of the Surviving Corporation and
its Subsidiaries.
(ii) To the extent that service is relevant for eligibility, benefit
accrual, vesting or allowances (including paid time off) under any health or welfare benefit plan or 401(k) Plan of JAB and/or the Surviving Corporation, then JAB shall ensure that such health or welfare benefit plan and 401(k) plan shall, for
purposes of eligibility, benefit accrual, vesting and allowances (including paid time off), credit Continuing Employees for service with the Company prior to the Effective Time to the same extent that such service was recognized prior to the
Effective Time under the corresponding health or welfare benefit plan or 401(k) Plan of the Company. With respect to each health or welfare benefit plan of JAB and/or the Surviving Corporation made available to Continuing Employees in the plan year
in which the Effective Time occurs, the Surviving Corporation shall cause there to be waived any pre-existing condition or eligibility limitations and give effect, in determining any deductibles and maximum out of pocket limitations, to claims
incurred, amounts paid by, and amounts reimbursed to, Continuing Employees under similar plans maintained by the Company and its subsidiaries immediately prior to the Effective Time.
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A
RTICLE
VII
C
ONDITIONS
7.1
Conditions to Each Partys Obligation to Effect the Merger
. The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the following conditions:
(a)
Shareholder Approvals
. The Requisite Company Vote shall have been obtained in
accordance with applicable Law and the articles of incorporation and bylaws of the Company.
(b)
Regulatory Consents
. (i) The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been earlier terminated and (ii) all other Approvals under any other applicable Antitrust Laws as set forth in Section 7.1(b) of the Company Disclosure Schedule required to consummate
the Merger shall have been obtained or filed or shall have occurred.
(c)
No Injunctions or
Restraints, Illegality
. (i) No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in
effect and restrains, enjoins or otherwise prohibits consummation of the Merger or the other transactions contemplated by this Agreement (collectively, an
Order
) and (ii) no Governmental Entity shall have instituted
any Action (which remains pending at what would otherwise be the Closing Date) before any United States court or other Governmental Entity of competent jurisdiction seeking to restrain, enjoin or otherwise prohibit consummation of the Merger and the
other transactions contemplated by this Agreement.
7.2
Conditions to Obligations of JAB and Merger
Sub
. The obligations of JAB and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by JAB at or prior to the Effective Time of the following conditions:
(a)
Representations and Warranties
. (i) the representations and warranties of
the Company contained in Section 4.2(a) (Capital Structure), Section 4.6(a) (Material Adverse Effect) and Section 4.21 (Brokers and Finders) shall be true and correct in all respects (other than in de minimis and immaterial respects
in the case of Section 4.2(a) or exercises of existing outstanding equity awards set forth in Section 4.2(a) following the date of this Agreement), (ii) the representations and warranties of the Company contained in Section 4.3
(Corporate Authority; Approval and Fairness) and Section 4.20 (Takeover Statutes; Other Restrictions) (in each case, disregarding all qualifications and exceptions contained therein regarding materiality or a Material Adverse Effect or any
similar standard or qualification) shall be true and correct in all material respects and (iii) the representations and warranties of the Company contained in this Agreement other than those specified in the foregoing clauses (i) and (ii)
(disregarding all qualifications and exceptions contained therein regarding materiality or a Material Adverse Effect or any similar standard or qualification), shall be true and correct, except where the failure of any such representation or
warranty to be so true and correct would not, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect, in the case of each of clauses (i), (ii) and (iii), as of the date of this Agreement and as of the
Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation or warranty shall be true, complete and correct as of such specific date). JAB
shall have received at the Closing a certificate signed on behalf of the Company by the Chief Executive Officer of the Company to the effect that the conditions set forth in this Section 7.2(a) have been satisfied.
(b)
Performance of Obligations of the Company
. The Company shall have performed in
all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and JAB shall have received a certificate signed on behalf of the Company by the Chief Executive Officer of the Company to
such effect.
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(c)
No Material Adverse Effect
. Since
the date of this Agreement, there shall not have occurred any change, state of facts, circumstance, event or development (including the incurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) that, individually
or in the aggregate, has had, or is reasonably likely to have, a Material Adverse Effect.
7.3
Conditions to Obligation of the Company
. The obligation of the Company to effect
the Merger is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions:
(a) (i) the representations and warranties of JAB contained in Section 5.8 (Brokers and Finders) shall be true and correct in all respects, (ii) the representations and
warranties of JAB contained in Section 5.2 (Corporate Authority) shall be true and correct in all material respects and (iii) all other representations and warranties of JAB contained in this Agreement (disregarding all qualifications and
exceptions contained therein regarding materiality or any similar standard or qualification), shall be true and correct, except where the failure of any such representation or warranty to be so true and correct would not prevent, materially delay or
materially impede the ability of JAB or Merger Sub to consummate the transactions contemplated by this Agreement, in the case of each of clauses (i), (ii) and (iii), as of the date of this Agreement and as of the Closing Date as though made on
and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation or warranty shall be true, complete and correct as of such specific date). The Company shall have received at the
Closing a certificate signed on behalf of JAB by a senior executive officer of JAB to the effect that the conditions set forth in this Section 7.3(a) have been satisfied.
(b)
Performance of Obligations of JAB and Merger Sub
. Each of JAB and Merger Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of JAB and Merger Sub by a senior executive officer of JAB to such effect.
A
RTICLE
VIII
T
ERMINATION
8.1
Termination by
Mutual Consent
. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the receipt of the Requisite Company Vote, by mutual written consent of the
Company and JAB by action of their respective boards of directors.
8.2
Termination by Either JAB or
the Company
. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the board of directors of either JAB or the Company if:
(a) the Merger shall not have been consummated by March 31, 2013 (the
Termination
Date
);
(b) the Requisite Company Vote shall not have been obtained at the Shareholders
Meeting upon a vote taken thereat or at any adjournment or postponement thereof; or
(c) any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable;
provided
that the right to terminate this Agreement pursuant to this Section 8.2 shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have primarily contributed to
the occurrence of the failure of such condition to the consummation of the Merger.
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8.3
Termination by the Company
. This
Agreement may be terminated by the Company and the Merger may be abandoned:
(a) if there shall have
been a breach of any representation, warranty, covenant or agreement on the part of JAB or Merger Sub contained in this Agreement such that the conditions set forth in Section 7.3(a) or 7.3(b) would not be satisfied and, in either such case,
such breach is incapable of being cured by the Termination Date, or if capable of being cured by the Termination Date is not so cured;
provided
, that the Company shall have given JAB at least thirty (30) days written notice prior to such
termination stating the Companys intention to terminate this Agreement pursuant to this Section 8.3;
provided
,
further
, that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.3
if the Company is then in material breach of any of its covenants or agreements contained in this Agreement; or
(b) in order to accept a Superior Proposal and enter into an Alternative Acquisition Agreement related to a
Superior Proposal, if prior to the receipt of the Requisite Company Vote, (i) the Company is not in material breach of Section 6.2(a) or (c), and (ii) the Company, prior to or concurrently with such termination, pays to JAB in
immediately available funds the Termination Fee required to be paid pursuant to Section 8.5(b)(ii).
8.4
Termination by JAB
. This Agreement may be terminated by JAB and the Merger may
be abandoned if:
(a) the board of directors of the Company shall have made a Change of Recommendation
or the Company shall have breached any of its obligations under Section 6.2 in any material respect;
(b) at any time following receipt or public announcement of an Acquisition Proposal, the Companys board of
directors shall have failed to reaffirm the Company Recommendation within three (3) business days after receipt of any reasonable written request to do so from JAB;
(c) a tender offer or exchange offer for twenty percent (20%) or more of the outstanding Shares (other than by JAB or an Affiliate of JAB) shall have been publicly disclosed
and, prior to the earlier of (A) the second (2nd) business day prior to the date of the Shareholders Meeting and (B) eleven (11) business days after the commencement of such tender or exchange offer pursuant to Rule 14d-2 under
the Exchange Act, the Companys board of directors fails to recommend against acceptance of such offer; or
(d) there shall have been a breach of any representation, warranty, covenant or agreement on the part of the
Company contained in this Agreement such that the conditions set forth in Section 7.2(a) or 7.2(b) would not be satisfied and, in either such case, such breach is incapable of being cured by the Termination Date, or if capable of being cured by
the Termination Date is not so cured;
provided
, that JAB shall have given the Company at least 30 days written notice prior to such termination stating the Companys intention to terminate this Agreement pursuant to this
Section 8.4(d);
provided
,
further
, that JAB shall not have the right to terminate this Agreement pursuant to this Section 8.4(d) if JAB or Merger Sub is then in material breach of any of its covenants or agreements contained
in this Agreement.
8.5
Effect of Termination and Abandonment
.
(a) In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VIII,
this Agreement shall become void and of no effect with no liability to any Person on the part of any party hereto (or of any of its Representatives or Affiliates); provided, however, and notwithstanding anything in the foregoing to the contrary,
that (i) no such termination shall relieve any party hereto of any liability or damages to the other party hereto resulting from any willful and material breach of this Agreement and (ii) the provisions set forth in Section 6.10
(Expenses), this Section 8.5, Article IX and the Confidentiality Agreement shall survive the termination of this Agreement.
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(b) In the event that this Agreement is terminated:
(i) by (x) JAB or the Company pursuant to Section 8.2(a) (in the case of
Section 8.2(a), if at such time the Shareholders Meeting has not been held and JAB is not in breach of its obligations under Section 6.5 and Section 6.9) or Section 8.2(b), or (y) JAB pursuant to Section 8.4(d) and in
connection with either (x) or (y) therewith:
(A) an Acquisition Proposal
shall have been publicly disclosed after the date hereof and not clearly withdrawn in good faith prior to the Termination Date (in the case of termination pursuant to Section 8.2(a) or Section 8.4(d)) or the Shareholders Meeting (in the
case of termination pursuant to Section 8.2(b)); and
(B) within twelve
(12) months after termination of this Agreement, the Company or any of its Subsidiaries enters into a definitive agreement with respect to any Acquisition Proposal or consummates a transaction contemplated by any Acquisition Proposal (provided
that for purposes of this clause (C), the references to 10% and 15% in the definition of Acquisition Proposal shall be deemed to be a reference to 50%) (any such agreement or consummation, an
Acquisition Event
), then the Company shall pay to JAB the Termination Fee within two (2) business days of consummation of such Acquisition Event;
(ii) by the Company pursuant to Section 8.3(b), then the Company shall pay to JAB the
Termination Fee prior to or concurrently with such termination; and
(iii) by JAB
pursuant to Section 8.4 (other than Section 8.4(d)), then the Company shall pay to JAB the Termination Fee within two (2) business days of such termination.
For purposes of this Agreement,
Termination Fee
shall mean $30,000,000. No Acquisition Proposal made by a Person shall be deemed to have been clearly withdrawn, in
the event that the Company later agrees within the 12-month period specified in Section 8.5(b)(i)(B) to or consummates an Acquisition Event with such Person or an Affiliate thereof. Notwithstanding anything to the contrary in this Agreement,
(x) in no event shall the Company be required to pay the fee referred to in this Section 8.5(b) on more than one occasion and (y) the parties agree that the payment of the Termination Fee shall be the sole and exclusive remedy
available to JAB and Merger Sub with respect to this Agreement in the event any such payment becomes due and payable and is paid, and, upon payment of the Termination Fee, the Company (and the Companys Affiliates and its and their respective
directors, officers, employees, shareholders and Representatives) shall have no further liability to JAB and Merger Sub under this Agreement;
provided
,
however
, that the Company shall not be relieved or released from any liabilities or
damages arising out of its willful and material breach of Section 6.2, Section 6.3 or Section 6.4;
provided
, further, that the aggregate amount of any damages determined by a court to be payable by the Company pursuant to the
foregoing proviso shall be reduced by the amount of any Termination Fee previously paid to JAB pursuant this Section 8.5(b).
(c) The parties acknowledge that the agreements contained in Section 8.5(b) are an integral part of the transactions contemplated by this Agreement, and that, without these
agreements, the parties would not enter into this Agreement; accordingly, if the Company fails to promptly pay the Termination Fee and, in order to obtain such payment, JAB or Merger Sub commences a suit that results in a judgment against the
Company for the Termination Fee (or a portion thereof), the Company shall pay JAB its costs and expenses (including attorneys fees) in connection with such suit., together with interest on the amount of the fee at the prime rate published in
the Money Rates section of The Wall Street Journal in effect on the date such payment was required to be made. All payments under Sections 8.5(b) shall be made promptly by wire transfer of immediately available funds to an account designated in
writing by the party receiving such payment.
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A
RTICLE
IX
M
ISCELLANEOUS
AND
G
ENERAL
9.1
Non-Survival of Representations, Warranties, Covenants and Agreements
. None of
the representations, warranties, covenants and agreements in this Agreement shall survive the Effective Time, except for (i) those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part
after the Effective Time and (ii) this Article IX.
9.2
Modification or
Amendment
. This Agreement may be amended by the parties hereto by written agreement executed and delivered by each of the parties hereto at any time before or after the Requisite Company Vote is obtained; provided,
however, that after the Requisite Company Vote has been obtained, there shall not be made any amendment or modification to this Agreement that by Law requires the further approval of the shareholders of the Company without such further approval.
9.3
Waiver
. At any time prior to the Effective Time, any party hereto
may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant
hereto and (iii) subject to the requirements of applicable Law, waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby. The failure or delay of any party to assert any rights or remedies shall not constitute a waiver of such rights or remedies.
9.4
Counterparts
. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by electronic communication, facsimile or otherwise) to the other parties.
9.5
Governing Law and Venue; Waiver of Jury Trial; Specific
Performance
. (a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS
OF LAW PRINCIPLES THEREOF, EXCEPT THAT THE MERGER AND THE RIGHTS OF THE HOLDERS OF SHARES SHALL BE GOVERNED BY AND IN ACCORDANCE WITH THE WBCA, TO THE EXTENT APPLICABLE. The parties hereby irrevocably submit to the personal jurisdiction of the
courts of the State of Delaware and the federal courts of the United States of America located in the county of Delaware in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner
provided in Section 9.6 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT,
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OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
(c) The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by any party in accordance with their specific
terms or were otherwise breached by such party. It is accordingly agreed that, prior to the termination of this Agreement pursuant to Article VIII, the non-breaching parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by the other party and to enforce specifically the terms and provisions of this Agreement against the other party, this being in addition to any other remedy to which such party is entitled at law or in equity, and each party hereby
waives any requirement for the posting of any bond or similar collateral in connection therewith. Prior to the termination of this Agreement pursuant to Article VIII, each party hereby agrees that it will not oppose the granting of an injunction,
specific performance and other equitable relief on the basis that (i) the other party has an adequate remedy at law or (ii) an award of specific performance is not an appropriate remedy for any reason at law or in equity.
9.6
Notices
. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by facsimile or overnight courier:
If to JAB or Merger Sub
:
JAB Holdings BV
c/o Joh. A. Benckiser AdvisorCo, LLC
2200 Pennsylvania Ave. NW
Washington, DC 20052
Attention: Joachim Creus
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square, New York, NY
10036
Attention: Paul T. Schnell
Sean C. Doyle
Fax: (212) 735-2000
If to the Company
:
Peets Coffee & Tea, Inc.
1400 Park Avenue
Emeryville, CA 94608
Attention: General Counsel
Facsimile: (510) 594-2180
with a copy to
Cooley LLP
101
California Street
Fifth Floor
San Francisco, CA 94111-5800
Attention: Kenneth L. Guernsey
Barbara L. Borden
Fax: (415) 693-2222
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or to such other persons or addresses as may be designated in writing by the party to receive such notice
as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon: actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent
by registered or certified mail; upon confirmation of successful transmission if sent by facsimile; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.
9.7
Entire Agreement
. This Agreement (including any exhibits hereto), the Company
Disclosure Schedule and the Confidentiality Agreement, dated July 4, 2012, between Joh. A. Benckiser AdvisorCo, LLC and the Company, as amended on July 15, 2012 (the
Confidentiality Agreement
) constitute the
entire agreement, and supersede all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER JAB AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OR AS TO THE
ACCURACY OR COMPLETENESS OF ANY OTHER INFORMATION, MADE BY, OR MADE AVAILABLE BY, ITSELF OR ANY OF ITS REPRESENTATIVES, WITH RESPECT TO, OR IN CONNECTION WITH, THE NEGOTIATION, EXECUTION OR DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHERS REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8
No Third Party Beneficiaries
. Except as provided in Section 6.11
(Indemnification; Directors and Officers Insurance), JAB and the Company hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other party hereto, in accordance
with and subject to the terms of this Agreement, and this Agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and
warranties set forth herein. The parties hereto further agree that the rights of third party beneficiaries under Section 6.11 shall not arise unless and until the Effective Time occurs. The representations and warranties in this Agreement are
the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 9.3 without
notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of
the parties hereto. Consequently, Persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other
date.
9.9
Obligations of JAB and of the Company
. Whenever this Agreement
requires Merger Sub or another Affiliate of JAB to take any action, JAB shall be liable for any failure of such Person to take such action. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be
deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Surviving Corporation to cause such Subsidiary to take such action.
9.10
Definitions
. Each of the terms set forth in Annex A is defined in the
Section of this Agreement set forth opposite such term.
9.11
Severability
. Any term or provision of this Agreement that is held by a court
of competent jurisdiction or other Governmental Entity to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity
or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other Governmental Entity declares that any term or provision of this Agreement
is invalid, void or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
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9.12
Interpretation;
Construction
. (a) The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions
hereof. Where a reference in this Agreement is made to a Section, Annex or Exhibit, such reference shall be to a Section of, Annex to or Exhibit to this Agreement unless otherwise indicated. Whenever the words include,
includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation. The words hereof, herein and hereunder and words of like
import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Terms defined in the singular shall also include the plural and vice versa. A reference in this Agreement to $ or dollars
is to U.S. dollars.
(b) The parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any provision of this Agreement.
9.13
Assignment
. This Agreement shall not be assignable by operation of law or
otherwise;
provided
,
however
, that (i) JAB may designate, by written notice to the Company, another of its Affiliates to be a Constituent Corporation in lieu of Merger Sub, in which event all references herein to Merger Sub shall
be deemed references to such other subsidiary, except that all representations and warranties made herein with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other
subsidiary as of the date of such designation and (ii) JAB and Merger Sub may assign all or any of their respective rights and obligations hereunder to a lender as collateral, in each case after providing written notice thereof to the Company
prior to such designation or assignment;
provided
,
further
, that any such designation or assignment shall not materially impede or delay the consummation of the transactions contemplated by this Agreement or otherwise materially impede
the rights of the shareholders of the Company under this Agreement. Any purported assignment in violation of this Agreement is void.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above.
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PEETS COFFEE & TEA, INC.
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By:
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/s/ Patrick J. ODea
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Name:
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Patrick J. ODea
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Title:
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CEO and President
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JAB HOLDINGS BV
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By:
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/s/ Joachim Creus
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Name:
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Joachim Creus
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Title:
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Managing Director
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By:
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/s/ Constantin Thun-Hohenstein
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Name:
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Constantin Thun-Hohenstein
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Title:
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Managing Director
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PANTHER MERGER CO.
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By:
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/s/ Joachim Creus
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Name:
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Joachim Creus
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Title:
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President
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A-44
A
NNEX
A
D
EFINED
T
ERMS
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Terms
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Section
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Acquisition Event
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8.5(b)
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Acquisition Proposal
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6.2(b)
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Actions
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4.7
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Affiliate
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4.5(b)
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Agreement
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Preamble
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Alternative Acquisition Agreement
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6.2(c)(ii)
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Antitrust Laws
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6.5(b)
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Applicable Date
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4.5(a)
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Approval
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4.4(a)
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Articles of Merger
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1.3
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Balance Sheet Date
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4.5(h)
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Bankruptcy and Equity Exception
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4.3(a)
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Book-Entry Shares
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3.1(a)
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business day
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1.2
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Bylaws
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2.2
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Certificate
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3.1(a)
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Change of Recommendation
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6.2(c)(i)
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Charter
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2.1
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Closing
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1.2
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Closing Date
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1.2
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Code
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3.3(f)
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Collective Bargaining Agreement
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4.15(a)
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Company
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Preamble
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Company Benefit Plans
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4.8(a)
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Company Disclosure Schedule
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Article IV
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Company Financial Statements
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4.5(e)
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Company IP
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4.16(a)
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Company Lease
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4.11(b)
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Company Option
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3.4(a)
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Company Permits
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4.9(a)
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Company Recommendation
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4.3(b)
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Company Reports
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4.5(a)
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Confidentiality Agreement
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9.7
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Constituent Corporations
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Preamble
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Continuing Employees
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6.16
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Contract
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4.10(a)
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Dissenting Shares
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3.1(a)
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Effective Time
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1.3
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Encumbrance
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4.11(c)
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Environmental Law
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4.13
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ERISA
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4.8(a)
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ERISA Affiliate
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4.8(a)
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Exchange Act
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4.5(a)
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Exchange Fund
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3.3(a)
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Excluded Share
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3.1(a)
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Financing
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6.9
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GAAP
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4.1
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Governmental Entity
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4.4(a)
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Hazardous Substance
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4.13
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HSR Act
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4.2(c)
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Insurance Policies
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4.17
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Intellectual Property
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4.16
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IRS
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3.3(f)
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JAB
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Preamble
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Judgment
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4.7
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knowledge
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4.6(g)
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Laws
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4.9(a)
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Leased Real Property
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4.11(b)
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Lien
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4.2(c)
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Material Adverse Effect
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4.1
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Material Contract
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4.10(a)(xv)
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Merger
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Preamble
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Merger Sub
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Preamble
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NASDAQ
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4.2(a)
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Notice Period
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6.2(c)(ii)
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Order
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7.1(c)
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Owned Company IP
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4.16(a)
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Owned Real Property
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4.11(a)
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Paying Agent
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3.3(a)
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Per Share Merger Consideration
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3.1(a)
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Permitted Encumbrances
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4.11(c)
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Person
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3.3(d)
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Preferred Shares
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4.2(a)
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Principal Customer
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4.18(a)
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Principal Supplier
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4.18(a)
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Proxy Statement
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4.12
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Registered
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4.16
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Representatives
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6.2(b)
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Requisite Company Vote
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4.3(a)
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Sarbanes-Oxley Act
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4.5(a)
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SEC
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Article IV
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Securities Act
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4.5(a)
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Share
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3.1(a)
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Share Unit
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3.4(b)
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Shareholders Meeting
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6.4
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Software
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4.16
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Stock Plans
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4.2(a)
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Subsidiary
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4.1
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Superior Proposal
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6.2(b)
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Surviving Corporation
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1.1
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Tail Policy
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6.11(b)
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Takeover Statute
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4.20
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Tax
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4.14
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Tax Return
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4.14
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Termination Date
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8.2(a)
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Termination Fee
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8.5(b)(iii)
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Title IV Plan
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4.8(a)
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Trade Secrets
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4.16
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Trademarks
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4.16, 4.16
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Voting Debt
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4.2(a)
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Warn Act
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4.15(f)
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WBCA
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1.1
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Annex B
388 Greenwich Street
New York, NY 10013
July 22, 2012
The Board of Directors
Peets Coffee & Tea, Inc.
1400 Park Avenue
Emeryville, California
94608-3520
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of the common stock of Peets Coffee & Tea, Inc (Peets) of the Merger
Consideration (as defined below) to be received by such holders pursuant to the terms and subject to the conditions set forth in an Agreement and Plan of Merger (the Merger Agreement) proposed to be entered into among JAB Holdings BV
(JAB Holdings) and its wholly owned subsidiary Panther Merger Co. (the Merger Subsidiary). As more fully described in the Merger Agreement, (i) the Merger Subsidiary will be merged with and into Peets (the
Merger) and (ii) each outstanding share of common stock, no par value, of Peets (Peets Common Stock), other than (1) shares of Peets Common Stock owned by JAB Holdings, Merger Subsidiary or any
other direct or indirect wholly owned subsidiary of JAB Holdings, (2) shares of Peets Common Stock owned by Peets (or held in treasury by Peets) or any direct or indirect wholly owned subsidiary of Peets, and
(3) shares of Peets Common Stock, the holder of which (A) has not voted in favor of the Merger (as defined below), (B) has properly exercised its appraisal rights and (C) has not effectively withdrawn or lost its rights to
be paid fair value of such shares, shall automatically be converted into the right to receive an amount equal to $73.50 per share in cash pursuant to the terms of the Merger Agreement (the Merger Consideration).
In arriving at our opinion, we reviewed a draft of the Merger Agreement dated July 20, 2012 and held discussions with certain senior
officers, directors and other representatives and advisors of Peets concerning the business, operations and prospects of Peets. We examined certain publicly available business and financial information relating to Peets as well as
certain financial forecasts and other information and data relating to Peets provided to or discussed with us by the management of Peets. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to,
among other things: current and historical market prices and trading volumes of Peets Common Stock; the historical and projected earnings and other operating data of Peets; and the capitalization and financial condition of Peets.
We considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and other publicly available information relating
to the businesses of other companies whose operations we considered relevant in evaluating those of Peets. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial,
economic and market criteria as we deemed appropriate in arriving at our opinion. The issuance of our opinion has been authorized by our fairness opinion committee.
In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to
or otherwise reviewed by or discussed with us and upon the assurances of the management of Peets that they are not aware of any relevant information that has been omitted or that remains undisclosed to us. With respect to financial forecasts
and other information and data relating to Peets provided to or otherwise reviewed by or discussed with us, we have been advised by the management of Peets that such forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the management of Peets as to the future financial performance of Peets.
B-1
We have assumed, with your consent, that the Merger will be consummated in accordance with
its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation,
restriction or condition will be imposed that would have an adverse effect on Peets or the Merger. Representatives of Peets have advised us, and we further have assumed, that the final terms of the Merger Agreement will not vary
materially from those set forth in the draft reviewed by us. We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Peets nor have we made any physical inspection
of the properties or assets of Peets. We were not requested to, and we did not, solicit third party indications of interest in the possible acquisition of all or a part of Peets, nor were we requested to consider, and our opinion does
not address, the underlying business decision of Peets to effect the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for Peets or the effect of any other transaction in which
Peets might engage. We also express no view as to, and our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties
to the Merger, or any class of such persons, relative to the Merger Consideration. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing, as of the date hereof
and we assume no obligation to update, revise or reaffirm our opinion based on changes to such conditions and circumstances occurring after the date hereof. As you are aware, the credit, financial and stock markets are experiencing unusual
volatility and we express no opinion or view as to any potential effects of such volatility on Peets, JAB Holdings or the contemplated benefits of the Merger.
Citigroup Global Markets Inc. has acted as financial advisor to Peets in connection with the proposed Merger and will receive a fee for such services, which is contingent upon the consummation of
the Merger. We and our affiliates in the past have provided services to Peets and JAB Holdings unrelated to the proposed Merger, for which services we and such affiliates have received compensation, including, without limitation, the
following:
with respect to Peets,
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assisting in the evaluation of potential value maximizing alternatives for its retail operations, and
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with respect to JAB Holdings,
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providing cash equity trading services to allow JAB Holdings to make open market purchases of shares in DE Master Blenders 1753 NV, a Netherlands-based
international coffee company.
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In the ordinary course of our business, we and our affiliates may actively
trade or hold the securities of Peets and affiliates of JAB Holdings for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates
(including Citigroup Inc. and its affiliates) may maintain relationships with Peets, JAB Holdings and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of Peets in its evaluation of the proposed Merger, and our opinion is not intended
to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger.
Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to the holders of Peets Common Stock.
Very truly yours,
/s/ CITIGROUP GLOBAL MARKETS INC.
B-2
ANNEX C
C
HAPTER
23B.13
OF
THE
W
ASHINGTON
B
USINESS
C
ORPORATION
A
CT
23B.13.010. D
EFINITIONS
.
As used in this chapter:
(1) 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.
(2) Dissenter means a shareholder who is entitled to dissent from corporate action under
RCW 23B.13.020 and who exercises that right when and in the manner required by RCW 23B.13.200 through 23B.13.280.
(3) Fair value, with respect to a dissenters shares, means the value of the shares immediately
before the effective date 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.
(4) 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.
(5) 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.
(6) 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.
(7) Shareholder means the record shareholder or the beneficial shareholder.
23B.13.020. R
IGHT
TO
D
ISSENT
.
(1) A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholders
shares in the event of, any of the following corporate actions:
(a) A plan of merger,
which has become effective, to which the corporation is a party (i) if shareholder approval was required for the merger by RCW 23B.11.030, 23B.11.080, or the articles of incorporation, and the shareholder was entitled to vote on the
merger, or (ii) if the corporation was a subsidiary that has been merged with its parent under RCW 23B.11.040;
(b) A plan of share exchange, which has become effective, to which the corporation is a party as the corporation whose shares have been acquired, if the shareholder was entitled to
vote on the plan;
(c) A sale or exchange, which has become effective, of all, or
substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder was 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;
(d) An amendment of the articles of incorporation, whether or not the shareholder was entitled to
vote on the amendment, if the amendment effects a redemption or cancellation of all of the shareholders shares in exchange for cash or other consideration other than shares of the corporation; or
(e) Any corporate action approved 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.
C-1
(2) A shareholder entitled to dissent and obtain payment for the
shareholders shares under this chapter may not challenge the corporate action creating the shareholders entitlement unless the action fails to comply with the procedural requirements imposed by this title,
RCW 25.10.831 through 25.10.886, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair value of the shareholders shares shall terminate upon the occurrence of any one of the following
events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the corporate action; or
(c) The shareholders demand for payment is withdrawn with the written consent of
the corporation.
23B.13.030. D
ISSENT
BY
N
OMINEES
AND
B
ENEFICIAL
O
WNERS
.
(1) A record shareholder may assert dissenters rights as to fewer than
all the shares registered in the shareholders name only if the shareholder dissents with respect to all shares beneficially owned by any one person and delivers to the corporation a notice 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 as to which the dissenter dissents and the dissenters 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 shareholders behalf only if:
(a) The beneficial
shareholder submits to the corporation the record shareholders consent to the dissent not later than the time the beneficial shareholder asserts dissenters rights, which consent shall be set forth either (i) in a record or
(ii) if the corporation has designated an address, location, or system to which the consent may be electronically transmitted and the consent is electronically transmitted to the designated address, location, or system, in an electronically
transmitted record; 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.
23B.13.200.
N
OTICE
OF
D
ISSENTERS
R
IGHTS
.
(1) If proposed corporate action creating dissenters rights under RCW 23B.13.020 is submitted for
approval by a vote at a shareholders meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters rights under this chapter and be accompanied by a copy of this chapter.
(2) If corporate action creating dissenters rights under RCW 23B.13.020 is submitted for approval
without a vote of shareholders in accordance with RCW 23B.07.040, the shareholder consent described in RCW 23B.07.040(1)(b) and the notice described in RCW 23B.07.040(3)(a) must include a statement that shareholders are or may be
entitled to assert dissenters rights under this chapter and be accompanied by a copy of this chapter.
23B.13.210.
N
OTICE
OF
I
NTENT
TO
D
EMAND
P
AYMENT
.
(1) If proposed corporate action creating dissenters rights under RCW 23B.13.020 is submitted to a vote at a shareholders meeting, a shareholder who wishes to
assert dissenters rights must (a) deliver to the corporation before the vote is taken notice of the shareholders intent to demand payment for the shareholders shares if the proposed corporate action is effected, and
(b) not vote such shares in favor of the proposed corporate action.
C-2
(2) If proposed corporate action creating dissenters rights
under RCW 23B.13.020 is submitted for approval without a vote of shareholders in accordance with RCW 23B.07.040, a shareholder who wishes to assert dissenters rights must not execute the consent or otherwise vote such shares in
favor of the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to payment for the shareholders shares under this chapter.
23B.13.220. D
ISSENTERS
R
IGHTS
N
OTICE
.
(1) If proposed corporate action creating dissenters rights under RCW 23B.13.020 is approved at a
shareholders meeting, the corporation shall within ten days after the effective date of the corporate action deliver to all shareholders who satisfied the requirements of RCW 23B.13.210(1) a notice in compliance with subsection
(3) of this section.
(2) If proposed corporate action creating dissenters rights under
RCW 23B.13.020 is approved without a vote of shareholders in accordance with RCW 23B.07.040, the notice delivered pursuant to RCW 23B.07.040(3)(b) to shareholders who satisfied the requirements of RCW 23B.13.210(2) shall
comply with subsection (3) of this section.
(3) Any notice under subsection (1) or
(2) of this section must:
(a) State where the payment demand must be sent and
where and when certificates for certificated shares must 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 to news media or to shareholders of the terms of the proposed corporate action 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, which date may not be fewer than thirty nor more than sixty days after the date the notice in subsection
(1) or (2) of this section is delivered; and
(e) Be accompanied by a copy of
this chapter.
23B.13.230. D
UTY
TO
D
EMAND
P
AYMENT
.
(1) A shareholder sent a notice described in RCW 23B.13.220 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required to be set forth in the notice pursuant to *RCW 23B.13.220(2)(c), and deposit the shareholders certificates, all in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholders share certificates under
subsection (1) of this section retains all other rights of a shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the shareholders share certificates where required,
each by the date set in the notice, is not entitled to payment for the shareholders shares under this chapter.
C-3
23B.13.240. S
HARE
R
ESTRICTIONS
.
(1) The corporation may restrict the transfer of uncertificated shares from the date the demand for payment under
RCW 23B.13.230 is received until the proposed corporate action is effected or the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters rights are asserted as to uncertificated shares retains all other rights of a shareholder until the effective date of the proposed corporate
action.
23B.13.250. P
AYMENT
.
(1) Except as provided in RCW 23B.13.270, within thirty days of the later of the effective date of the proposed corporate action, or the date the payment demand is received,
the corporation shall pay each dissenter who complied with RCW 23B.13.230 the amount the corporation estimates to be the fair value of the shareholders shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporations balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders equity for that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenters right to demand payment under RCW 23B.13.280; and
(e) A copy of this chapter.
23B.13.260. F
AILURE
TO
T
AKE
C
ORPORATE
A
CTION
.
(1) If the corporation does not effect the proposed corporate action within sixty days after the date set for demanding payment and depositing share certificates, the corporation
shall return the deposited certificates and release any transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer restrictions, the corporation wishes to
effect the proposed corporate action, it must send a new dissenters notice under RCW23B.13.220 and repeat the payment demand procedure.
23B.13.270. A
FTER
-A
CQUIRED
S
HARES
.
(1) A corporation may elect to withhold payment required by RCW 23B.13.250 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 the effective date of 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 the dissenters demand. The corporation shall send with its offer an explanation of how it
estimated the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenters right to demand payment under RCW 23B.13.280.
C-4
23B.13.280. P
ROCEDURE
IF
S
HAREHOLDER
D
ISSATISFIED
WITH
P
AYMENT
OR
O
FFER
.
(1) A dissenter may deliver a notice to the corporation informing the corporation of the dissenters own
estimate of the fair value of the dissenters shares and amount of interest due, and demand payment of the dissenters estimate, less any payment under RCW 23B.13.250, or reject the corporations offer under
RCW 23B.13.270 and demand payment of the dissenters estimate of the fair value of the dissenters shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the dissenters shares or
that the interest due is incorrectly calculated;
(b) The corporation fails to make
payment under RCW 23B.13.250 within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed corporate action and does not return the deposited
certificates or release the transfer restrictions imposed on uncertificated shares within sixty 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 dissenters demand under subsection (1) of this
section within thirty days after the corporation made or offered payment for the dissenters shares.
23B.13.300. C
OURT
A
CTION
.
(1) If a demand for payment under RCW 23B.13.280 remains
unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court of the county where a corporations
principal office, or, if none in this state, its 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 and 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 corporation may join as a party to the proceeding any shareholder who claims to be a dissenter but who has
not, in the opinion of the corporation, complied with the provisions of this chapter. If the court determines that such shareholder has not complied with the provisions of this chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the 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 order appointing them, or in any amendment to
it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgment (a) for the amount, if any, by
which the court finds the fair value of the dissenters shares, plus interest, exceeds the amount paid by the corporation, or (b) for the fair value, plus accrued interest, of the dissenters after-acquired shares for which the
corporation elected to withhold payment under RCW 23B.13.270.
C-5
23B.13.310. C
OURT
C
OSTS
AND
C
OUNSEL
F
EES
.
(1) The court in a proceeding commenced under RCW 23B.13.300 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 the 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 RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and experts for 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 RCW 23B.13.200 through 23B.13.280; 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 chapter 23B.13 RCW.
(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 these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.
C-6
PEETS COFFEE & TEA, INC.
As a stockholder of Peets Coffee & Tea, Inc., you have the option of voting your shares electronically
through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes
submitted electronically over the Internet or by telephone must be received by 7:00 p.m., Eastern Time, on , 2012.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting
of Shareholders to be Held on , 2012
The proxy statement is available at http://investor.peets.com/specialmeeting.cfm
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Vote Your Proxy on the Internet :
Go to www.cstproxyvote.com
Have your proxy card available when you access the above website. Follow the prompts to vote your shares.
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OR
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Vote Your Proxy by Phone:
Call 1 (866)
894-0537
Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting
instructions to vote your shares.
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OR
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Vote Your Proxy by mail:
Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
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PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE
VOTING ELECTRONICALLY OR
BY PHONE
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FOLD AND DETACH HERE AND READ THE
REVERSE SIDE
q
PROXY BY MAIL
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T
HE
B
OARD
OF
D
IRECTORS
RECOMMENDS
A
VOTE
FOR
P
ROPOSAL
1, P
ROPOSAL
2 A
ND
P
ROPOSAL
3.
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Please mark
your votes
like this
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x
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P
ROPOSAL
1:
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Adopt and approve the Agreement and Plan of Merger, dated as of July 21, 2012, among JAB Holdings BV, Panther Merger Co. and Peets Coffee & Tea, Inc. (the
Merger Agreement).
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¨
FOR
¨
AGAINST
¨
ABSTAIN
P
ROPOSAL
2:
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Approve, on an advisory basis, the merger-related compensation of the named executive officers.
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¨
FOR
¨
AGAINST
¨
ABSTAIN
P
ROPOSAL
3:
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Approve a proposal to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the adoption and approval of the
Merger Agreement.
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¨
FOR
¨
AGAINST
¨
ABSTAIN
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
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Signature
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Signature
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Date
, 2012.
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Please sign exactly as your name appears hereon. If the stock is registered in the names of two or more persons,
each should sign. Executors, administrators, trustees, guardians, and attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate name and have a duly authorized officer sign, stating title. If signer is a
partnership, please sign in partnership name by authorized person.
q
FOLD AND DETACH HERE AND
READ THE REVERSE SIDE
q
PEETS COFFEE &
TEA, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2012
The undersigned hereby appoints Patrick J. ODea and Thomas P. Cawley, and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of
stock of Peets Coffee & Tea, Inc. which the undersigned may be entitled to vote at the Special Meeting of Shareholders of Peets Coffee & Tea, Inc. to be held at
(local time), and at any and all postponements, continuations and adjournments thereof, with all powers
that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the
meeting.
U
NLESS
A
CONTRARY
DIRECTION
IS
INDICATED
,
THIS
P
ROXY
WILL
BE
VOTED
FOR
P
ROPOSAL
1, P
ROPOSAL
2
AND
P
ROPOSAL
3,
AS
MORE
SPECIFICALLY
DESCRIBED
IN
THE
P
ROXY
S
TATEMENT
. I
F
SPECIFIC
INSTRUCTIONS
ARE
INDICATED
,
THIS
P
ROXY
WILL
BE
VOTED
IN
ACCORDANCE
THEREWITH
.
Please vote, date and promptly return this proxy in the enclosed return envelope which is postage prepaid if mailed in the United
States.
Grafico Azioni Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Storico
Da Ago 2024 a Set 2024
Grafico Azioni Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
Storico
Da Set 2023 a Set 2024