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EXHIBIT 99.2
XXXXXXXX COFFEE, INC.
0000 XXXXXXXXX XXXXX
XXXXXX, XXXXXXXXXX 00000
February 8, 0000
Xxxxx X. XxXxxx
President and Chief Executive Officer
Coffee People, Inc.
00000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxxxx, XX 00000
Re: Acquisition of Coffee People, Inc. by Xxxxxxxx Coffee, Inc.
Dear Xx. XxXxxx:
This letter sets forth the terms of our agreement in principle with respect
to the negotiation of a definitive agreement (the "Definitive Agreement") under
which all of the issued and outstanding shares of Common Stock of Coffee People,
Inc., an Oregon corporation ("CP") would be acquired by Xxxxxxxx Coffee, Inc., a
Delaware corporation ("Xxxxxxxx"). Each of Xxxxxxxx and CP represent that this
letter of intent has been approved by its respective Board of Directors.
1. STRUCTURE. It is presently anticipated that the acquisition of all of
the issued and outstanding shares of Common Stock of CP by Xxxxxxxx (the
"Acquisition") would be structured as a merger of CP into a subsidiary of
Xxxxxxxx in a transaction accounted for as a purchase. The consideration to be
paid in the merger to the holders of the outstanding stock of CP would consist
of cash and shares of Xxxxxxxx Common Stock in the aggregate amount set forth
below. The consideration set forth below is based on an assumed capitalization
of CP consisting of 10.75 million shares of CP common stock outstanding.
The aggregate purchase price for all of the outstanding shares of capital
stock of CP will be $35 million (the "Aggregate Consideration") and would be
payable in cash and common stock of Xxxxxxxx as follows:
(a) CASH. The cash portion of the Aggregate Consideration (the "Cash
Consideration") would be $10.75 million plus the net proceeds of a public equity
offering (up to $14.25 million) conducted by Xxxxxxxx after the execution of the
Definitive Agreement and prior to the consummation of the Acquisition (the
"Public Offering"); provided that in no event shall the Cash Consideration
exceed $25 million. Xxxxxxxx agrees to use its reasonable best efforts to
complete the Public Offering and further agrees that all of the net proceeds of
the Public Offering (up to $14.25 million) will be paid to CP as part of the
Cash Consideration.
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(b) ISSUANCE OF XXXXXXXX COMMON STOCK AS PARTIAL CONSIDERATION. A
portion of the Aggregate Consideration will be paid through the issuance of
1,667,000 shares of Xxxxxxxx Common Stock.
(c) ISSUANCE OF XXXXXXXX COMMON STOCK IN THE EVENT OF A PARTIAL PUBLIC
OFFERING. In the event that Xxxxxxxx is unable to raise net proceeds of $14.25
million from the Public Offering at a price per share of $6.00 or more, a
portion of the Aggregate Consideration may be paid with a number of shares of
Xxxxxxxx Common Stock equal to the quotient of (i) $25 million less the Cash
Consideration as set forth in subsection (a) above divided by (ii) the price per
share to the public in the Public Offering (provided that such price per share
shall not be less than $6.00).
2. TERMS AND CONDITIONS. The transactions contemplated in this letter of
intent would be subject to customary terms and conditions and such other terms
and conditions as may be agreed upon by the parties, including, but not limited
to:
(a) the satisfaction by each party, in its sole discretion, with its
due diligence review;
(b) approval of the merger by the shareholders of Xxxxxxxx and CP;
(c) receipt of fairness opinions by Xxxxxxxx and CP from their
respective investment bankers;
(d) execution of definitive documentation with respect to the merger;
(e) if the Public Offering will not reasonably be consummated at a
price per share to the public of at least $6.00 with net proceeds
of at least $7 million, then either party may terminate the
definitive agreement upon written notice to the other party;
(f) receipt of a lock-up agreement from Second Cup Ltd. providing that
the shares of Xxxxxxxx Common Stock issued to Second Cup will not
be sold until the earlier of (i) the first anniversary of the
closing date of the Acquisition or (ii) the sale by Xxxxxxxx'x
officers or directors of shares of Xxxxxxxx Common Stock in the
aggregate equal to 5% of the outstanding shares and option shares
of Xxxxxxxx'x Common Stock held by all of them in the aggregate;
(g) compliance with all applicable legal and regulatory requirements
and receipt of all applicable regulatory approvals, including
approval under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976;
(h) receipt of any requisite consents by all lessors, lenders,
suppliers, vendors, customers and other third parties having
material agreements with CP that
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may be breached or terminated as a result of, or materially
altered by the consummation of, the Acquisition;
(i) agreement by the parties with respect to the treatment of CP's
outstanding stock options or other equity incentives in connection
with the Acquisition;
(j) no event shall have occurred prior to the consummation of the
Acquisition which has had or will have a material adverse effect
on the business, financial condition or results of operations of
either CP or Xxxxxxxx; and
(k) delivery to CP by Xxxxxxxx, prior to the execution of the
Definitive Agreement, of one or more written financing commitments
or evidence reasonably satisfactory to CP evidencing Xxxxxxxx'x
ability to fund the minimum Cash Consideration of $10.75 million
described in Section 1(a).
3. DEFINITIVE AGREEMENT. The parties will use their best efforts to prepare
and execute as promptly as possible upon completion of their due diligence, but
in any event not later than March 5, 1999, a Definitive Agreement embodying the
terms of this letter and containing such other provisions as they and their
respective counsel may deem appropriate. The Definitive Agreement shall contain
representations and warranties customary in transactions of this nature. The
Definitive Agreement will contain closing conditions customary in transactions
of this nature including, but not limited to the conditions set forth above,
fulfillment of covenants and agreements of each of the parties, receipt of
required regulatory approvals and legal opinions. In addition, the Definitive
Agreement will provide that each of the parties will use their reasonable
efforts to consummate the Public Offering at a price per share to the public of
at least $6.00 and that Second Cup, as the majority shareholder of CP, will be
entitled to elect one of the seven members of the board of directors for so long
as Second Cup owns at least 10% of the outstanding shares of Xxxxxxxx Common
Stock.
4. DUE DILIGENCE. Each party will permit the other, and its financial and
legal representatives, to conduct a full and complete investigation and
evaluation of the other party's businesses, will provide such assistance as is
reasonably requested and will give access at reasonable times to all employees,
officers, assets, records, documents, and properties related to the other
party's business, assets and liabilities. Information obtained in such legal,
financial and business due diligence will be subject to the Non-Disclosure
Agreement, dated August 18, 1998, previously entered into by the parties. If
either CP or Xxxxxxxx determines, in its sole discretion, not to proceed with
the transactions contemplated herein, it shall notify the other party in
writing, and upon delivery of such notice, this letter of intent shall terminate
(except as set forth in Section 10 hereof) and all documentation and other
information obtained by either party (other than publicly available information)
shall be returned promptly.
5. CONDUCT OF BUSINESS. From and after the date hereof until the
termination of this letter of intent or until execution of a Definitive
Agreement, each party will conduct its business only in the normal and ordinary
course, in material compliance with all applicable contractual
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obligations, laws, rules and regulations, and in a manner consistent with past
practice, custom and business operating strategy; provided that in no event
shall either Xxxxxxxx or CP transfer or sell any material amount of their
respective assets (other than the sale or franchise of stores in the Xxxxxx
Jeans' division).
6. EXPENSES AND FEES. Xxxxxxxx and CP shall pay their respective
transaction expenses (including fees and expenses of legal counsel, investment
bankers and any other representatives or consultants) in connection with the
transactions contemplated herein, whether such transactions are consummated or
not.
7. EXCLUSIVITY AND NO SOLICITATION.
(a) CP and Xxxxxxxx shall negotiate exclusively with each other for a
period from the date of execution of this Letter of Intent through March 5, 1999
(the "Exclusive Period"). During the Exclusive Period, neither party shall,
directly or indirectly, through any officer, director, agent or representative
(including without limitation investment bankers, attorneys, accountants and
consultants), or otherwise:
(i) solicit, initiate or further the submission of proposals or offers
from, or enter into any agreement with, any firm, corporation, partnership,
association, group (as defined in Section 13(d)(3) of the Exchange Act) or
other person or entity, individually or collectively (including without
limitation any managers or other employees of the parties or any of their
affiliates), other than Xxxxxxxx or CP, as applicable (a "Third Party"),
relating to any acquisition or purchase of all or a material portion of the
assets of, or any equity interest in, CP or any merger, consolidation or
business combination with CP or relating to any acquisition or purchase of
all or a material portion of the assets of, or any equity interest in,
Xxxxxxxx or any merger, consolidation or business combination with
Xxxxxxxx;
(ii) participate in any discussions or negotiations regarding, or
furnish to any Third Party any confidential information with respect
thereto; or
(iii) otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any Third Party to do
or seek to do any of the foregoing.
(b) During the Exclusive Period, each of CP and Xxxxxxxx shall notify the
other in writing within three days of receipt thereof if any such written
proposal or offer, or any written inquiry or contact relating to a proposed
offer or proposal with any Third Party, is made, and shall in any such notice,
set forth in reasonable detail the identity of the Third Party and the terms and
conditions of any proposal; provided, however, that neither CP nor Xxxxxxxx
shall be required to provide any of the information required to be set forth in
the notice as described in this Section 7(b) if, in the reasonable judgment of
such company's board of directors, providing such information would result in a
breach of or default under a confidentiality agreement to which such company is
a party provided that, in such event, CP or Xxxxxxxx, as the case may be,
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shall still be required to provide a notice to the other with any information
that is permitted, even if such information is limited to the fact that a
written proposal or offer, or a written inquiry or contact relating to a
proposed offer or proposal, has been received from an unidentified source.
(c) Each of CP and Xxxxxxxx shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Third
Party conducted prior to the date of this Agreement with respect to any of the
foregoing.
8. ANNOUNCEMENTS.
Except as may be required to comply with applicable securities laws,
Xxxxxxxx and CP agree that neither shall issue any press release regarding the
transactions contemplated hereby without the prior written consent of the other
party, which shall not be unreasonably withheld or delayed. Notwithstanding the
previous sentence, the parties acknowledge that each will make appropriate
filings with the Securities and Exchange Commission following execution of this
letter of intent.
9. CHOICE OF LAW.
This letter of intent and the Definitive Agreement shall be governed by and
construed and enforced in accordance with, the internal laws (excluding conflict
of laws principles) of the State of California.
10. BINDING AND NON-BINDING EFFECT.
This letter of intent is intended as a milestone in the negotiations and
discussions between the parties and contains a record of their understanding to
date of the scope and key elements of future relations between them. Nothing
contained herein, however, shall create any legal right or obligation between
Xxxxxxxx, XX or any other party, except as may be expressly set forth in this
Section 10. Notwithstanding the foregoing, the Confidentiality Agreement and the
provisions of Sections 6, 7, 8 and 10 and the last sentence of Section 4 of this
letter of intent are intended to be binding and enforceable obligations of the
parties. The Confidentiality Agreement and the provisions of Sections 6, 7, 8
and 10 and the last sentence of Section 4 of this letter of intent shall
continue in full force and effect following the termination or expiration of
this letter of intent.
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Please indicate CP's acceptance of the foregoing by signing, dating and
returning the enclosed copy of this letter to the undersigned.
Very truly yours,
XXXXXXXX COFFEE, INC.
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
President and Chief Executive Officer
Agreed and accepted this 8th day of February, 1999.
COFFEE PEOPLE, INC.
By: /s/ Xxxxx X. XxXxxx
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Xxxxx X. XxXxxx
President and Chief Executive Officer
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