CBOU Caribou Coffee Company, Inc. (MM)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Exchange Act of 1934 (Amendment No. )

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Caribou Coffee Company, Inc.

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3900 Lakebreeze Avenue North
Brooklyn Center, Minnesota 55429

 

April 30, 2008

 

Dear Shareholders:

 

You are cordially invited to attend the Caribou Coffee Company Annual Meeting of Shareholders on Wednesday, August 6, 2008, at 10 a.m. (Central Time). The meeting will be held at the Hotel Ivy, 201 South Eleventh Street, Minneapolis, Minnesota.

 

The matters to be acted upon are described in the accompanying notice of Annual Meeting and proxy statement. At the meeting, we will also report on Caribou Coffee Company’s operations and respond to any questions you may have.

 

Very truly yours,

 

Rosalyn Mallet

Chief Executive Officer

 

CARIBOU COFFEE COMPANY
3900 Lakebreeze Avenue North

Brooklyn Center, Minnesota 55429

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
August 6, 2008

 

The Annual Meeting of Shareholders of Caribou Coffee Company, Inc. (“we” “us” “Caribou” or the “Company”) will be held at the Hotel Ivy, 201 South Eleventh Street, Minneapolis, Minnesota, on Wednesday, August 6, 2008, at 10 a.m. (Central Time) for the following purposes:

 

1. To elect seven directors to serve until the 2009 Annual Meeting of Shareholders.

 

2. To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 28, 2008.

 

3. To consider any other business to properly come before the meeting.

 

Only shareholders of record at the close of business on June 16, 2008 will be entitled to notice of, and to vote, at the Annual Meeting of Shareholders and any adjournments or postponements of the meeting.

 

Our proxy statement is attached to this notice of Annual Meeting of shareholders. Financial and other information concerning us is contained in the Caribou Annual Report to Shareholders for the fiscal year ended December 30, 2007.

 

By Order of the Board of Directors,

 

Dan E. Lee

Secretary

 

Brooklyn Center, Minnesota

April 30, 2008

 

TABLE OF CONTENTS

 

CARIBOU COFFEE COMPANY
3900 Lakebreeze Avenue North
Brooklyn Center, Minnesota 55429

PROXY STATEMENT
for the
2008 ANNUAL MEETING OF SHAREHOLDERS

 

This proxy statement is furnished by and on behalf of the board of directors of Caribou Coffee Company, Inc., a Minnesota corporation (“we,” “us,” “our,” “Caribou” or the “Company”), in connection with the solicitation of proxies for use at the Annual Meeting of Shareholders to be held at 10 a.m. (Central Time) on Wednesday, August 6, 2008, at the Hotel Ivy, 201 South Eleventh Street, Minneapolis, Minnesota, and at any adjournment or postponement thereof. This proxy statement and the enclosed proxy card will be first mailed on or about July 1, 2008, to our shareholders of record on June 16, 2008.

 

We will bear the expense of preparing, printing and mailing this proxy statement and the proxies we are soliciting. Proxies will be solicited by mail and may also be solicited by directors, officers and other Caribou employees, without additional remuneration, in person or by telephone or facsimile transmission. We will also request brokerage firms, banks, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of common stock as of the record date and will reimburse such persons for the cost of forwarding the proxy materials in accordance with customary practice. Your cooperation in promptly voting your shares and submitting your proxy by telephone, the Internet or by completing and returning the enclosed proxy card will help to avoid additional expense. Proxies and ballots will be received and tabulated by Wells Fargo Shareowner Services, the Company’s transfer agent and the inspector of elections for the Annual Meeting.

 

What am I voting on?

 

You will be voting on the following: (1) to elect seven directors, (2) to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm, and (3) to transact such other business as may properly come before the meeting or any adjournment or postponement thereof. No cumulative rights are authorized, and dissenter’s rights are not applicable to the matters being voted upon.

 

Who is entitled to vote?

 

You may vote if you owned our common stock as of the close of business on June 16, 2008, the record date. Each share of common stock is entitled to one vote. As of April 21, 2008, we had 19,370,590 shares of common stock outstanding.

 

How do I vote if I do not plan to attend the meeting?

 

Whether or not you plan to attend the Annual Meeting, you can arrange for your shares to be voted at the meeting. There are three ways to vote your Proxy:

 

1. VOTE BY PHONE — TOLL FREE — 1-800-560-1965

 

2. VOTE BY INTERNET — http://www.eproxy.com/cbou/

 

3. VOTE BY MAIL — Mark, sign and return the enclosed proxy card.

 

If your shares are held in the name of your broker, bank or another nominee, you should follow the instructions provided by your broker, bank or other nominee to vote your shares.

Can I vote at the meeting?

 

You may vote your shares at the meeting if you attend in person and the shares are registered in your name. If your shares are held in “street name” by your broker, bank or another nominee, you may not vote your shares in person at the meeting unless you obtain a signed proxy from your broker, bank or another nominee. Even if you plan to attend the meeting, we encourage you to vote your shares by completing, signing and returning the enclosed proxy card or voting by phone or the Internet.

 

Can I change my vote after I return my proxy card or vote via phone or the Internet?

 

If you are a shareholder of record, you may change your vote at any time before the polls close at the meeting. You may do this by (i) executing and delivering a later dated proxy card to the Secretary of the Company prior to the Annual Meeting, (ii) delivering written notice of revocation of the proxy to the Secretary of the Company prior to the Annual Meeting, or (iii) attending and voting in person at the Annual Meeting. Attendance at the Annual Meeting, in and of itself, will not constitute a revocation of a proxy. If you hold your shares in “street name,” you may submit new voting instructions by contacting your broker, bank or other nominee.

 

If you voted by internet or by phone you may change your vote at any time up until 24 hours prior to the Annual Meeting by resubmitting a new internet or phone vote. Your last Internet or phone vote will be the one, which is used for voting purposes.

 

What does it mean if I receive more than one proxy card?

 

It means that you have multiple accounts with brokers, banks or other nominees. Please vote all of these shares. We recommend that you contact the record holder of your shares to consolidate as many accounts as possible under the same name and address.

 

How can I attend the meeting?

 

The Annual Meeting is open to all holders of our common stock as of the record date. To attend the meeting, you will need to bring evidence of your stock ownership. If your shares are registered in your name, your admission card is included with this proxy statement. You will need to bring the admission card together with valid picture identification. If your shares are held in the name of your broker, bank or another nominee or you received your proxy materials electronically, you will need to bring evidence of your stock ownership, such as your most recent brokerage account statement, and valid picture identification.

 

May shareholders ask questions at the meeting?

 

Yes. Representatives of the Company will answer shareholders’ questions of general interest at the end of the meeting. In order to give a greater number of shareholders an opportunity to ask questions, individuals or groups will be allowed to ask only one question and no repetitive or follow-up questions will be permitted.

 

How many votes must be present to hold the meeting?

 

Your shares are counted as present at the meeting if you attend the meeting in person, if you properly return the enclosed proxy card or if you grant a proxy to vote via the Internet or Phone. In order for us to conduct our meeting, a majority of our outstanding shares of common stock as of June 16, 2008, must be present in person or by proxy at the meeting. This is referred to as a quorum. Abstentions will be counted for purposes of establishing a quorum at the meeting.

 

How many votes are needed to elect directors?

 

The seven nominees that receive the greatest number of votes “For” will be elected as directors. This is called a plurality. Abstentions are neither counted for or against in a plurality.

How many votes are needed to ratify the selection of the independent registered public accounting firm?

 

The ratification of the selection of the independent registered public accounting firm must receive a “For” vote from a majority of the voting power of the shares present and entitled to vote on the election of directors at a meeting which a quorum is present. If you abstain from the vote, it will have the same effect as a vote against.

 

What if I sign and return my proxy card but do not provide voting instructions or vote by phone or the Internet?

 

If the enclosed proxy card is signed and returned (and not revoked) prior to the Annual Meeting, but does not provide voting instructions, the shares of common stock represented thereby will be voted: (1) “For” the election of the seven director candidates nominated by the Board of Directors; (2) “For” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 28, 2008 (“fiscal 2008”); and (3) in accordance with the best judgment of the named proxies on any other matters properly brought before the Annual Meeting.

 

Will my shares be voted if I do not sign and return my proxy card?

 

If your shares are held in “street name” through a broker, bank or other nominee and you do not provide voting instructions, under certain circumstances the nominee may vote your shares on your behalf. Brokerage firms have authority to vote shares for which their customers do not provide voting instructions on certain “routine” matters. The election of directors and the ratification of an accounting firm are routine matters.

 

If you do not provide voting instructions to your brokerage firm, the brokerage firm may either: (1) vote your shares on routine matters, or (2) leave your shares unvoted. We encourage you to provide instructions to your brokerage firm by signing and returning your proxy or by using the Internet or Phone voting options. This ensures your shares will be voted at the meeting.

 

When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted for purposes of establishing a quorum to conduct business at the meeting and determining the outcome of the vote on routine matters.

 

Can my shares be voted on matters other than those described in this proxy statement?

 

Yes. We have not received proper notice of, and are not aware of, any business to be transacted at the meeting other than as indicated in this proxy statement. If any other item or proposal properly comes before the meeting, the proxies received will be voted on those matters in accordance with the discretion of the proxy holders.

PROPOSAL 1 — ELECTION OF DIRECTORS

 

In accordance with our Amended and Restated Bylaws, the number of directors to constitute the Board shall be determined from time to time by resolution of the Board. The number of directors that constitute the Board is currently set at eight.

 

Nominees for director are elected to serve for a term of one year and until their respective successors have been elected and qualified. Each director shall hold office until the next regular meeting of the shareholders after such director’s election and until a successor is elected and has qualified, or until the earlier death, resignation, removal or disqualification of the director.

 

The terms of the current eight directors, Messrs. Caffey, Coles, Doolin, Graves, Griffith, Neal and Ogburn and Ms. Palisi Chapin, expire upon the election and qualification of the directors to be elected at the Annual Meeting. The Board of Directors has nominated Messrs. Caffey, Coles, Doolin, Graves, Griffith, and Ogburn and Ms. Palisi Chapin for reelection to the Board of Directors as directors at the Annual Meeting, to serve until the 2009 Annual Meeting of Shareholders. Mr. Neal has made the decision to not stand for re-election at

the end of his current term. Effective August 6, 2008, the Board seat occupied by Mr. Neal will be vacant.

 

Unless otherwise directed, the persons named in the proxy intend to vote all proxies “For” the election of Messrs. Caffey, Coles, Doolin, Graves, Griffith, and Ogburn and Ms. Palisi Chapin to the Board of Directors. The nominees have consented to serve as directors if elected. If, at the time of the Annual Meeting, any of the nominees is unable or declines to serve as a director, the discretionary authority provided in the enclosed proxy will be exercised to vote for a substitute candidate designated by the Board of Directors. The Board of Directors has no reason to believe any of the nominees will be unable or will decline to serve as a director.

 

Set forth below is certain information furnished to us by the director nominees. The ages provided for each nominee are as of March 30, 2008. There are no family relationships among any of our directors or executive officers.

 

Kip R. Caffey , age 52, has served as a director since October 2005. Mr. Caffey has been Managing Director of Cary Street Partners, LLC, an investment banking and wealth management firm, since July 2004. From July 1999 to March 2004, Mr. Caffey was employed by SunTrust Robinson Humphrey and its predecessor firm, The Robinson-Humphrey Company, Inc., where he was Senior Managing Director and co-head of Investment Banking.

 

Michael J. Coles , age 64, has served as a director since June 2003. He previously served as our Chief Executive Officer from June 2003 until November 2007 and as the Chairman of our Board from July 2005 to November 2007. From June 2003 until March 2007, Mr. Coles served as our President. From 1987 until 2003, Mr. Coles served on the board of Charter Bank & Trust, of which he was a founder, and from 1998 to 2001, Mr. Coles was chairman of the board. From 1999 through 2003, Mr. Coles was a consultant and private investor providing strategic and management advice to a number of private companies and served on the boards of several not-for-profit organizations.

 

Wallace B. Doolin , age 61, has served as a director since October 2005. Mr. Doolin has been Chairman of the Board of Directors of Buca, Inc., an owner and operator of full service restaurants, since November 2004. Mr. Doolin is also the former Chief Executive Officer and President of Buca, Inc. From May 2002 to October 2004, Mr. Doolin was Chief Executive Officer and President of La Madeleine de Corps, Inc., a French restaurant and bakery company.

 

Gary A. Graves, age 48, has served as our Non-Executive Chairman since November 2007 and as a director since August 2007. He is currently the Chief Executive Officer of American Laser Centers, Inc. From August 2002 to January 2007, Mr. Graves served as President and Chief Executive Officer for La Petite Academy, a preschool educational facility.

 

Charles L. Griffith , age 53, has served as a director since July 2005. Mr. Griffith has been an Executive Director of Arcapita Bank B.S.C. (c) since February 2005. From 2003 until 2004, he served as Group President for Johns Manville, a Berkshire Hathaway-owned company that manufactures insulation and building products. From 2002 until 2003, Mr. Griffith served as Executive Vice President of Electronic Data Systems Corporation, a global technology services company.

 

Charles H. Ogburn , age 52, has served as a director since January 2003. Mr. Ogburn has been an Executive Director of Arcapita Bank B.S.C. (c) since March 2001. Prior to joining Arcapita, Mr. Ogburn spent more than 15 years at the investment banking firm of The Robinson-Humphrey Company, Inc., most recently as Senior Managing Director and co-head of Investment Banking.

 

Sarah Palisi Chapin , age 46, has served as a director since August 2007. Since 2004, Ms. Palisi Chapin has been a founding partner in The Chain Gang, a private equity restaurant investment practice. From 1995 to 2003, Ms. Palisi Chapin was Chief Executive Officer of Enersyst Development Center, a research and development, intellectual property, food and technology incubator, and from 2002 to 2003 Ms. Palisi Chapin served as Chair. She currently serves on the board of directors of Sandstone, IRM and PrimeSource Foodservice Equipment.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE SEVEN NOMINEES TO THE BOARD OF DIRECTORS.

 

The Board has determined that Kip R. Caffey, Wallace B. Doolin, Gary A. Graves, and Sarah Palisi Chapin are “independent directors” as defined under NASDAQ rules.

 

In this proxy statement the directors who have been affirmatively determined by the Board to be “independent directors” under this rule are referred to individually as an “Independent Director” and collectively as the “Independent Directors.”

 

The Board of Directors has also determined that each member of the three committees of the Board meets the independence requirements applicable to those committees prescribed by Nasdaq and the Securities and Exchange Commission (“SEC”). The Board of Directors has further determined that Mr. Caffey is an “audit committee financial expert” as such term is defined by SEC rules.

Board Committees

 

During fiscal 2007, the Board of Directors had three standing committees: the Compensation Committee, the Audit Committee and the Nominating and Corporate Governance Committee. Committee and committee chair assignments are made annually by the Board at its meeting immediately following the Annual Meeting of shareholders. The current composition of each Board committee is as follows.

 

 

The Board committee assignments are not expected to change following the Annual Meeting other than that Mr. Neal will no longer serve on the Board or the Audit Committee. Mr. Neal has chosen not to stand for re-election at the Annual Shareholders Meeting, but will complete his current term, which ends on August 6, 2008.

 

During fiscal 2007, the Board of Directors held four meetings, the Audit Committee held seven meetings, the Compensation Committee held three meetings and the Nominating and Corporate Governance Committee held two meetings. Each director attended at least 75% or more of the meetings of the Board of Directors and the meetings of each committee on which the director served during fiscal 2007. We have not adopted a formal policy regarding Board members’ attendance at the Annual Meetings; however, all Board members attended the 2007 Annual Meeting.

 

The purpose of the Nominating and Corporate Governance Committee is to assist the Board in fulfilling its responsibilities relating to:

 

A. identification of individuals qualified to become Board members and recommendation of director nominees to the Board prior to each Annual Meeting of shareholders;

 

B. recommendation of nominees for committees of the Board; and

 

C. matters concerning corporate governance practices.

 

To carry out its nominating function, the Committee has the following responsibilities and duties:

 

1. Retain, as deemed necessary, and terminate any search firm to be used to identify director candidates. The Committee has sole authority to select such search firm and approve its fees and other retention terms.

 

2. Determine desired board skills and attributes. The Committee shall consider personal and professional integrity, ability and judgment and such other factors deemed appropriate.

 

3. Actively seek individuals whose skills and attributes reflect those desired and evaluate and propose nominees for election to the Board.

 

4. Review the slate of directors who are to be re-nominated to determine whether they are meeting the Board’s expectations of them.

 

5. Make recommendations to the full Board for appointments to fill vacancies of any unexpired term on the Board.

 

6. Annually recommend to the Board nominees for submission to shareholders for approval at the time of the Annual Meeting of shareholders.

 

7. Annually review committee chairs and membership and recommend any changes to the full Board.

 

The Nominating and Corporate Governance Committee has not adopted a specific policy regarding the consideration of shareholder director nominees, but its general policy is to welcome future nominees recommended by shareholders. Shareholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to our board of directors may do so by submitting a written recommendation to Caribou Coffee Company, Inc., 3900 Lakebreeze Avenue North, Brooklyn Center, Minnesota 55429, Attention: Secretary. Submissions must include sufficient biographical information concerning the recommended individual, including age, five year employment history with employer names and a description of the employer’s business, whether such individual can read and understand basic financial statements and board memberships (if any) for the Committee to consider. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates nominees based on whether or not the nominee was recommended by a shareholder.

 

The following materials related to our corporate governance are available publicly on our web site at www.cariboucoffee.com/aboutus/investorrelations.asp under Corporate Governance.

 

 

Copies may also be obtained, free of charge, by writing to: Vice President, General Counsel and Secretary, Caribou Coffee Company, 3900 Lakebreeze Avenue North, Brooklyn Center, Minnesota, 55429. Please specify which documents you would like to receive.

Compensation of Directors

 

Our directors who also are our employees or are affiliated with our largest shareholder; an affiliate of Arcapita Bank B.S.C. (c), receive no compensation for serving on the Board of Directors. We historically have provided our independent directors $15,000 per member in cash consideration annually for serving on our Board of Directors, an additional $5,000 per member for serving on any committee of our Board of Directors and an additional $2,000 per Board meeting attended in person or by telephone. On March 27, 2007, our Board of Directors approved an increase in the compensation received by our independent board members. Effective March 30, 2007, each independent will receive $30,000 in cash consideration annually for serving on our Board of Directors and an additional $5,000 per member for serving on any committee of our Board of Directors, except for the chairman of the audit committee who will receive $7,500 annually. In addition, under our 2005 Equity Incentive Plan, each independent director will receive an initial option grant to purchase 10,000 shares of our common stock that will vest in four equal installments beginning on the first anniversary of the date of grant with a per share exercise price equal to the closing market price on the date of grant. On March 30, 2007, we granted Messrs. Caffey, Doolin and Neal options to purchase 5,000 shares of our common stock with a per share exercise price equal to the closing market price on the date of grant. We have agreed to reimburse all of our directors for reasonable expenses incurred in connection with their duties as directors.

 

The table below sets forth, for each independent director that served during fiscal 2007, the amount of compensation paid for his or her service.

 

 

 

 

The Compensation Committee is responsible for all decisions regarding the compensation of our executive officers. The Compensation Committee is also responsible for the oversight of our stock option plan.

 

The following discussion summarizes the philosophies and methods the Compensation Committee uses in establishing and administering our executive compensation and incentive programs, including the development of compensation programs designed to provide executive officers with ownership interests in Caribou and motivation to build shareholder value.

 

Our executive compensation policies are designed to attract and retain qualified executives, to reward individual achievement and to align the financial interests of our executives with those of our shareholders. To accomplish these objectives, the executive compensation program generally is comprised of (1) base salary, (2) an annual performance-based cash bonus, (3) long-term incentive compensation, consisting of fair market value stock options (fair market value is defined as the closing market price for our stock on the date of grant), and (4) other benefits that are intended to provide competitive compensation which includes 401(k) savings, medical and dental insurance, life insurance and short-term and long-term disability. These four elements generally comprise our executive officer’s total compensation.

 

In addition, in connection with the initial employment arrangements with the Chief Executive Officer, President and Chief Financial Officer our Compensation Committee approves any signing bonus and equity grants.

 

Decisions regarding the level of base salary, performance-based cash bonus and stock options for our executive officers are primarily based upon (1) individual experience and technical capability needed to administer and execute the responsibilities of the position (2) competitive practices for executive talent in our industry and for our size company, and (3) our operating performance.

 

Base salary is designed to compensate the executive for the individual experience and technical capability needed to administer and execute the responsibilities of their respective position. Given our growth objectives, consideration is given to not only the experience and technical capability needed today but also those experiences and technical capabilities needed to execute the responsibilities of the executive officer’s position in a larger company.

 

Base salaries for the executive officers are reviewed annually. In evaluating whether an adjustment to an executive’s base salary is appropriate, factors such as changes in the scope of the individual’s job responsibilities, his or her individual performance against stated objectives and our overall performance over the past year are considered. These evaluations along with proposed salary adjustments for all executive officers, except our Chief Executive Officer, are forwarded by our Chief Executive Officer to the Compensation Committee for review and approval. Our Chief Executive Officer’s annual base salary review is conducted by the Compensation Committee and considers the same factors described above for our other executive officers. Our Compensation Committee will review the evaluations and proposed salary adjustments and apply their experience, judgment, market data and practices and periodic benchmarking data from third party executive compensation consultants in determining the appropriateness of the adjustments.

 

The purpose of our performance-based cash bonus plan is to unite the interests of our executive officers with those of our shareholders through the attainment of shareholder value added objective approved by the Compensation Committee at the beginning of each year.

 

The performance-based cash bonus plan approved by our Compensation Committee provides our named executive officers, excluding our Vice President of Global Franchising, an opportunity to earn a cash bonus ranging from 20% to 100% of base salary, upon the achievement of performance goals set by the Compensation Committee set the performance goal a specific Adjusted EBITDA target. Adjusted EBITDA is defined in Item 6, Selected Financial Data, in our annual report on Form 10-K filed on March 21, 2008. The plan requires a minimum

Adjusted EBITDA be achieved before any bonus is paid. If the actual fiscal year Adjusted EBITDA is greater than the minimum Adjusted EBITDA but less than the target Adjusted EBTIDA, the plan allows for a portion of the bonuses to be paid. No bonus will be paid if we do not achieve the minimum Adjusted EBITDA. The plan also allows for an upside if we achieve an Adjusted EBITDA greater than the target Adjusted EBITDA.

 

Our Vice President of Global Franchising is eligible to receive a performance-based cash bonus designed to motivate and reinforce the commitment to growing our global franchising business. This position is eligible for a bonus equal to 10% of initial franchise fees actually received up to a maximum of 50% of base salary. Generally, the franchisee’s coffeehouse must be opened before the bonus is paid.

 

Our long-term incentive compensation, which is comprised of stock option grants, is intended to provide a means of encouraging an ownership interest in our company by those employees who have contributed, or are determined to be in a position to contribute to our success. Because the value of stock option grants bear a direct relationship to the price of our shares, the Compensation Committee believes that stock option grants are a means of encouraging our executive officers to increase long-term shareholder value.

 

The Compensation Committee has been given oversight responsibility for our stock option plan by our Board of Directors. The general terms of our stock option grants have been pre-established by the 2005 Equity Incentive Plan (our stock option plan), including the life of the options (10 years) and the vesting schedule (25% per year from the date of grant). The Compensation Committee is therefore primarily concerned with the number of options granted, whom the options are granted to and the date of grant. The exercise price for all stock option grants is the closing market price on the date of grant. We do not back-date or re-price stock options.

 

We typically grant options two times per year. The Compensation Committee has pre-established the last Friday in February and the first Friday in September as our semi-annual dates of stock option grants. In establishing these semi-annual stock option grant dates, the Compensation Committee considered the timing of our routine information releases. If facts and circumstances indicate that a pre-established stock option grant date is not appropriate because of a pending release of non-routine material information or other reason, the Compensation Committee maintains the authority to change the stock option grant date to a more appropriate date.

 

The Compensation Committee also maintains the authority to approve a stock option grant on a date other than the pre-established dates of grant. This exception is typically used to grant stock options to a new executive officer or other key position upon hire. The number of stock options granted to a specific position is determined by a pre-defined stock option grant schedule by position. It has been our practice to not only grant stock options to our executive officers but also to other non-executive officer managers including our coffeehouse managers. A stock option grant schedule has been established for all the positions, which typically are granted stock options. The stock option grant schedule provides for more stock options to be granted to those positions which have been determined to contribute more to our success. For most of our executive officers, the stock option grant schedule requires that 25,000 options to be granted upon hire followed by a 5,000 stock option grant each year thereafter until the executive officer has been granted 50,000 options. The Compensation Committee may in its discretion, alter this grant schedule both in terms of timing and in terms of the total number of stock options granted.

 

Our executive officers, including our Chief Executive Officer, may participate in our other employee benefit plans at their discretion. These other benefit plans include our 401(k) savings plan, medical and dental insurance, life insurance, and short-term and long-term disability. Our executive officers may participate in these other benefit plans on the same terms, conditions and cost that all of our other benefit eligible employees (benefit eligibility is defined by each individual benefit participant. We do not provide any pension plans or deferred compensation plans to our executive officers other than our 401(k) savings plan. We make a matching contribution to all of our 401(k) savings plan participants equal to 25% of the first 5% of a participant’s contribution. We do not provide any other perquisites to our executive officers.

Summary Compensation Table for 2007

 

The following table sets forth compensations information for our named executive officers for Fiscal Years 2007 and 2006:

 

 

 

 

 

 

 

Employment Arrangements

 

Roslyn Mallet

 

On April 2, 2007, we offered employment to Rosalyn Mallet to be our President and Chief Operating Officer. Pursuant to the employment offer letter, Ms. Mallet shall receive annual base salary of $360,000 and she is eligible to earn a target annual bonus of up to 50% of her base salary. Ms. Mallet was paid a $25,000 signing bonus.

 

Upon the start of employment, Ms. Mallet received a grant of options to purchase 200,000 shares of our common stock at $7.30 per share that will vest in four equal annual installments beginning on the first anniversary of her employment and will expire on April 2, 2016. Upon a change of control event, all of the stock option grants that were not otherwise exercisable will be accelerated.

 

In the event of the termination of Ms. Mallet’s employment during the first 36 months of employment for any reason other than “cause” she is entitled to a severance payment equal to 12 months of salary at the most recent rate of pay.

 

Ms. Mallet has entered into an Employee, Non-Disclosure, Non-Compete and Non-Solicitation Agreement that applies during the term of her employment and for a 12-month period thereafter. We have also agreed to make available to Ms. Mallet our employee benefit plans, programs and policies, which are generally available to employees.

 

Amy K. O’Neil

 

We entered into an employment agreement, effective as of July 1, 2005, with Amy K. O’Neil to serve as our Senior Vice President of Store Operations. The employment agreement for Ms. O’Neil provides for an annual base salary of $250,000 and the grant of options to purchase 133,333 shares of our common stock at $9.87 per share that will vest in four equal annual installments beginning on the first anniversary of her employment agreement and expire on the tenth anniversary of the grant date. The employment agreement provides that, if Ms. O’Neil is terminated by us without “cause” or by Ms. O’Neil for “good reason” (each as defined in the employment agreement), Ms. O’Neil will be entitled to all base salary and bonus, if any, which were earned and payable on the date of termination. If upon such a termination Ms. O’Neil executes a general release of claims, Ms. O’Neil will be entitled to 18 consecutive monthly payments which, in the aggregate, will be equal to one and one-half times:

 

 

However, if Ms. O’Neil is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code) at the time Ms. O’Neil has a “separation from service” (as defined in Section 409A(a)(2)(A)(i) of the Code), we will not make any of the above payments before the date that is six months after the date of Ms. O’Neil’s termination.

 

The employment agreement has an initial term of two years, and each year thereafter, the agreement automatically extends for an additional year unless either party to the agreement notifies the other that it wishes to terminate the agreement at least 90 days before the scheduled expiration of the agreement.

 

The employment agreement provides for eligibility for target annual bonuses to be determined by our compensation committee, which will be equal to 50% of the then applicable average annual base salary. Also, under the employment agreement, we have agreed to make available to Ms. O’Neil our employee benefit plans, programs and policies, which are generally available to our similarly situated senior executives.

 

Under the agreement, we have agreed to make an additional tax gross-up payment to Ms. O’Neil if any amounts paid or payable to the executive would be subject to the excise tax imposed on certain so-called “excess parachute payments” under Section 4999 of the Code. However, if a repayment of the payments and

benefits by the executive to us of $50,000 or less would render the excise tax inapplicable, then the executive will make such repayment to us.

 

If Ms. O’Neil’s employment terminates as a result of her death or disability, our only obligation is to pay Ms. O’Neil or, in the case of Ms. O’Neil’s death, Ms. O’Neil’s estate, the annual base salary and target annual bonus, if any, which were earned and payable on the date Ms. O’Neil’s employment terminated.

 

The employment agreement also contains non-compete, confidentiality and non-solicitation provisions that apply during the term of the employment agreement and for an 18-month period thereafter.

 

Michael J. Coles

 

In connection with Mr. Coles’ resignation from the Company on November 12, 2007, we entered into a letter agreement (the “Letter Agreement”) that modifies Mr. Coles’ amended and restated employment agreement with us, dated June 29, 2005 (the “Employment Agreement”). Pursuant to the Letter Agreement for a period of 60 days, Mr. Coles remained an employee. Under the Letter Agreement, we continued to pay Mr. Coles his current base salary for the 60 day period, and, upon completion of such period, we provided Mr. Coles with (1) any accrued obligations and other benefits provided for in the Employment Agreement, (2) an amendment immediately vesting all of his outstanding options and allowing him to exercise such options for a period of 90 days after he ceases to be a director or until the end of the original option term, whichever occurs earlier and (3) reimbursement for reasonable moving costs, not to exceed $25,000, and reasonable attorneys’ fees, not to exceed $10,000. If Mr. Coles enters into a general release and covenant not to sue us, we will also provide him with (1) a lump sum payment of $963,000 (two times his last salary) plus $390,000 (two times average annual bonus) made six months plus one day following the 60 day employment period and (2) payment for continued group health insurance coverage for Mr. Coles and his dependents for up to 24 months. Mr. Coles will remain subject to the obligations in the Employment Agreement relating to noncompetition, nonsolicitation, confidential information and proprietary information.

 

Pursuant to the Letter Agreement, for so long as Mr. Coles remains one of our directors, he will receive the same compensation as other non-employee (and non-Arcapita) directors.

 

Retirement Benefits

 

We do not provide any pension plans or deferred compensation plans to our executive officers other than our 401(k) savings plan. We make a matching contribution to all of our 401(k) savings plan participants equal to 25% of the first 5% of a participant’s contribution.

Outstanding Equity Awards at December 30, 2007

 

Upon a “change of control event,” all of the executives’ outstanding equity awards that are not otherwise exercisable will be accelerated.

 

 

 

 

Ms. Mallet’s employment offer letter provides for certain severance payments in the event her employment is terminated without cause. Ms O’Neil has an employment agreement with us that provides for certain severance payments in the event her employment is terminated without cause or with good reason, or due to death or disability.

 

Pursuant to our 2005 Equity Incentive Plan all unexercisable stock options will become exercisable upon a change in control.

 

Under the terms of our 2005 Equity Incentive Plan, a change in control is deemed to have occurred as a result of any one of the following events:

 

Equity Compensation Plan Information

 

The following table provides information as of December 30, 2007 regarding shares outstanding and available for issuance under the Company’s existing equity incentive plan.

 

 

The following table sets forth information as of April 1, 2008 concerning the beneficial ownership of common stock of (i) 5% beneficial owners of the outstanding common stock, (ii) the directors, (iii) the named executive officers and (iv) all current directors and executive officers as a group. Except as otherwise noted, the beneficial owners listed have sole voting and investment power with respect to shares beneficially owned. An asterisk in the percent of class column indicates beneficial ownership of less than 1%.

 

 

 

Certain Relationships and Related Transactions

 

In accordance with our Audit Committee charter, our Audit Committee is responsible for reviewing the terms, conditions and arrangements involving any related party or potential conflict of interest transaction and for overseeing our Code of Business Conduct, which includes disclosure requirements applicable to our employees and our directors relating to conflicts of interest. Accordingly, the Audit Committee is responsible for reviewing and approving the terms and conditions of all transactions that involve the company, one of our directors or executive officers or any of their immediate family members. Although we have not entered into any such transactions since January 2, 2006 that meet the requirements for disclosure in this Proxy Statement, if there were to be such a transaction, we would need the approval of our Audit Committee prior to entering into such transaction.

 

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than 10% of the Common Stock, to file with the SEC initial reports of beneficial ownership (“Forms 3”) and reports of changes in beneficial ownership of Common Stock and other equity securities of the Company (“Forms 4”). Directors, executive officers and greater than 10% shareholders of the Company are required by SEC rules to furnish to the Company copies of all Section 16(a) reports that they file. The Company files Section 16(a) reports on behalf of its directors and executive officers to report their initial and subsequent changes in beneficial ownership of Common Stock. To the Company’s knowledge, based solely on a review of the reports filed by persons who beneficially own more than 10% of the Common Stock and the reports filed on behalf of its directors and executive officers by the Company and written representations from such persons that no other reports were required, all Section 16(a) filing requirements applicable to its directors and executive officers, and persons who beneficially own more than 10% of the Common Stock were complied with for fiscal 2007.

AUDIT COMMITTEE REPORT

 

During fiscal 2007, Messrs. Jeffrey C. Neal, Kip R. Caffey, and Gary A. Graves served on the Audit Committee. Messrs. Neal, Caffey and Graves (i) meet the independence criteria prescribed by applicable law and the rules of the SEC for audit committee membership and are “independent directors” as defined in Nasdaq rules, and (ii) meet Nasdaq’s financial knowledge and sophistication requirements. Mr. Neal has been determined by the Board of Directors to be an “audit committee financial expert” under SEC rules. The audit

committee will help ensure the integrity of our financial statements and the qualifications and independence of our independent auditors.

 

The audit committee:

 

 

of our quarterly financial statements, among other things.

 

Based upon the Audit Committee’s review of the audited consolidated financial statements and its discussions with management and the Company’s independent registered public accounting firm, including a discussion regarding SAS 61 and the written disclosures and letter from Ernst & Young required by the Independence Standards Board Standard No. 1 regarding their independence, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the fiscal year ended December 30, 2007, be included in the Company’s Annual Report on Form 10-K filed with the SEC.

 

Respectfully submitted,

 

Jeffrey C. Neal (Chair)

Kip R. Caffey

Gary A. Graves

 

As a result of the decision by Jeffrey C. Neal not to stand for re-election at the Annual Shareholders’ Meeting on August 6, 2008, Wallace B. Doolin will join the audit committee as of May 1, 2008. As of May 1, 2008, Mr. Caffey will assume the role of the Chair of the Audit Committee. Mr. Caffey has been determined by the Board of Directors to be an “audit committee financial expert” under SEC rules. From May 1, 2008, to the August 6, 2008 Annual Shareholders’ Meeting the Audit Committee shall be made up of Messrs. Caffey, Doolin, Graves and Neal.

PROPOSAL 2 — RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors requests that shareholders ratify its selection of Ernst & Young to serve as our independent registered public accounting firm for fiscal 2008. Ernst & Young audited our consolidated financial statements for fiscal 2007. A representative of Ernst & Young will be present at the Annual Meeting, will have an opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions by shareholders.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2008.

Independent Registered Public Accounting Firm Fees

 

The following table sets forth the aggregate fees billed to the Company for fiscal 2007 and fiscal 2006 by Ernst & Young LLP:

 

 

Audit Fees for fiscal 2007 and 2006 consist of fees paid to Ernst & Young LLP for the audit of our annual financial statements included in the Annual Report on Form 10-K and review of financial statements included in the Quarterly Reports on Form 10-Q.

 

Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, return preparation and tax audits.

 

Pursuant to its charter, our Audit Committee must pre-approve all audit and non-audit services to be performed by our independent auditors and will not approve any services that are not permitted by SEC rules. In fiscal 2007 and 2006, all audit and non-audit services were pre-approved.

 

The Board of Directors knows of no other matters to be brought before the Annual Meeting. If any other matters are properly brought before the Annual Meeting, however, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment.

PROPOSALS OF SHAREHOLDERS

 

Shareholder proposals intended for inclusion in our proxy statement for the 2009 Annual Meeting of Shareholders (the “2008 Annual Meeting”) must be received by us at our executive offices at 3900 Lakebreeze Avenue North, Brooklyn Center, Minnesota 55429, Attention: Corporate Secretary, on or prior April 10, 2009.

 

Shareholder proposals intended for consideration at the 2009 Annual Meeting but not submitted for inclusion in the proxy statement for the 2009 Annual Meeting, including shareholder nominations for candidates for election as directors, generally must be received by us at our executive offices on or prior to April 10, 2009 in order to be considered timely under SEC rules and our Amended and Restated Bylaws. However, if the date of the 2009 Annual Meeting is a date that is not within 30 days before or after the anniversary date of the Annual Meeting, notice by the shareholder of a proposal must be received no later than the close of business on the 10th calendar day after the first public announcement of the date of such Annual Meeting. A public announcement includes disclosure in (1) a document filed by us with the SEC, (2) a mailed notice of the 2009 Annual Meeting, and (3) a press release reported by a national news service. Under applicable rules of the SEC, our management may vote proxies in their discretion regarding these proposals if (1) we do not receive notice of the proposal on or prior to April 10, 2009, or (2) we receive written notice of the proposal on or prior to April 10, 2009, describe the proposal in our proxy statement relating to the 2009 Annual Meeting and state how the management proxies intend to vote with respect to such proposal.

 

Shareholders wishing to communicate with the Board of Directors, any of its committees, or one or more individual directors should send all written communications to: Caribou Coffee Company, Inc., 3900 Lakebreeze Avenue North, Brooklyn Center, Minnesota 55429, Attention: Secretary. Written correspondence will be forwarded to the appropriate directors.

 

As permitted by the Exchange Act, only one copy of this Proxy Statement is being delivered to shareholders residing at the same address, unless such shareholders have notified us of their desire to receive multiple copies of the Proxy Statement. Upon oral or written request, we will promptly deliver a separate copy of the Proxy Statement to any shareholder residing at an address to which only one copy was mailed. Shareholders who participate in householding will continue to receive separate proxy cards. Also, householding will not in any way affect dividend check mailings.

 

Shareholders residing at the same address and currently receiving only one copy of the Proxy Statement may contact us to request multiple copies in the future, and shareholders residing at the same address and currently receiving multiple copies of the Proxy Statement may contact us to request a single copy in the future. All such requests should be directed to Caribou Coffee Company, Inc., 3900 Lakebreeze Avenue North, Brooklyn Center, Minnesota 55429, Attention: Secretary, or by phone at (763) 592-2200.

 

The 2007 Annual Report including our fiscal 2007 Form 10-K (the “2007 10-K”) (which is not a part of the proxy soliciting materials) is being mailed to shareholders with this proxy statement. The 2007 Form 10-K and the exhibits filed with it are available at our web site at www.cariboucoffee.com/aboutus/investorrelations.asp under Corporate Governance, or upon request by any shareholder to Investor Relations at:

 

Investor Relations

Integrated Corporate Relations

Kathleen Heaney

(203) 803-8535

ir@cariboucoffee.com

 

A copy of any or all exhibits to the 2007 10-K will be furnished for a fee, which will not exceed our reasonable expenses in furnishing the exhibits.

 

By Order of the Board of Directors,

 

Dan E. Lee

Secretary

 

Brooklyn Center, Minnesota

April 30, 2008

CARIBOU COFFEE

ANNUAL MEETING OF STOCKHOLDERS

Wednesday, August 6, 2008
10:00 a.m. (Central Time)

Hotel Ivy
201 South Eleventh Street
Minneapolis, MN 55403

		Caribou Coffee Company, Inc. 3900 Lakebreeze Avenue North Brooklyn Center, MN 55429		proxy

This proxy is solicited by the Board of Directors for use at the Annual Meeting on Wednesday, August 6, 2008.

The shares of stock you hold in your account will be voted as you specify on the reverse side.

If no choice is specified, the proxy will be voted “FOR” Proposals 1 and 2.

By signing the proxy, you revoke all prior proxies and appoint Kaye O’Leary and Dan E. Lee, and each of them, with full power of substitution, to vote your shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and all adjournments and postponements.

See reverse for voting instructions.

In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. A properly executed proxy will be voted in the manner directed by the person(s)signing below. If you make no choice, your proxy will be voted “FOR” Proposals 1 and 2.

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