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
---------------------------
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
--------------------------
Xxxxx X. XxXxxx
President and Chief Executive Officer
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