BEAN STOCK PLAN. U.S. & Canada

Transcription

1 BEAN STOCK PLAN U.S. & Canada

2 T H E T A L E O F JAC K A N D T H E B E A N S T OC K When the packet arrived in the mail, it caught Jack by surprise. Sure, he d heard the phrase Bean Stock before, but he still wasn t quite sure what it meant. And now it looked like Starbucks was giving him a Bean Stock grant. What was that exactly? The next day at work, Jack pulled his assistant manager aside. Hey, Helen, he said, I m a little confused. Do they deduct the cost of this Bean Stock from my paycheck or something? I mean, I m trying to save up for college and all Helen smiled. Oh, don t worry, Bean Stock grants don t cost you a thing. It s just one of the ways Starbucks thanks us for being partners by letting us share in the company s success. That s pretty cool, said Jack. Hey, a promising thought occurred to him, do you know how much my grant is worth? Well, right now, not so much, said Helen. Bean Stock options are, she struggled for a good way to describe it, Bean Stock options are like seeds. You have to take care of them until they grow and are ready for harvesting. Similarly, if you take care of your Bean Stock and are patient, it can grow to be worth quite a bit.

3 So, how long do I have to wait? asked Jack. It depends. Each year a portion of your options will vest which is just a fancy way of saying you ll be able to trade them for cash or for actual shares of Starbucks stock. Is trading shares complicated? asked Jack. What if I make a mistake? Jack s head swam with visions of bad trades, poor investments and the like. Oh, it s pretty easy, answered Helen. You just call Fidelity or go online to Fidelity.com and they handle it all for you. They can sell your options and send you cash, or you can exchange your options for real shares of Starbucks stock. That s awesome, said Jack. He liked this idea. In fact, he d been meaning to do something like this for a while, but hadn t known where to start. A good thing to remember, said Helen, taking on a more serious tone, is that these grants rely on Starbucks success as a company. It might sound cheesy, but knowing that helps motivate me. I think that makes perfect sense, replied Jack. Thanks. And hey, do you know what else makes sense? asked Helen, smiling. Getting back to work? Exactly. PARTNERS IN GROWTH

4 What Partners Say about Bean Stock A few years ago, my husband had a serious illness that made it impossible for him to work for several months. We have four kids, so we were especially grateful that my stock options were there to help cushion the blow. We were able to avoid digging into our savings. Without Bean Stock, it would have been very hard for us. Marie Robidoux, quality assurance technician, Carson Valley Roasting Plant Bean Stock makes you feel like you re working for your own company. I was a district manager in Arizona for seven years, then three years ago my stock options helped me purchase my house in Seattle so I could pursue my dream of working in the Coffee department. Now I ll hang on to it as a long-term investment for retirement and my children s college fund. Firat Taydas, senior project manager, Coffee department, Starbucks Support Center, Seattle With a newborn, you need a lot of stuff and you always need some extra money for extra expenses. My husband and I both work for Starbucks as store managers. We exercised our Bean Stock options and used the money to redecorate our daughter s room. Sharon Levi-Kluge, store manager, Frankfurt, Germany Bean Stock motivates you. It drives you in your own personal growth because you see that you re part of a bigger picture, part of a corporation that gives back to you and rewards you for what you do every day. It definitely drives you to want to grow in the company and share it with others. Jennifer Gatti, store manager, Hackensack Bean Stock Plan U.S. and Canada

5 If I were to hang my hat on one thing that makes Starbucks stand out above other companies, it would be the introduction of Bean Stock. That s the name we gave to our stock option plan. It s not only a playful reference to the coffee beans we sell, but it also evokes the beanstalk from the classic fairy tale, which grew to the sky. With Bean Stock s introduction, we turned every employee of Starbucks into a partner. I wanted them to have a chance to share in the benefits of growth, and to make clear the connection between their contributions and the growing value of the company. Ultimately, Starbucks can t flourish and win customers hearts without the passionate devotion of our partners. In business, that passion comes from ownership, trust and loyalty. Howard Schultz, chairman, Seattle I m stoked. Now that Starbucks has acquired our stores in Hawaii, we are receiving Bean Stock for the very first time. This is a day a lot of us have been waiting for. To finally have stock options really helps us take deeper ownership in the company. I ll probably buy a vacation home with my stock options someday. Probably in Seattle. When you live in Hawaii and see the sun all the time, you want to see something different for a change. Johnna Turvin, store manager, Honolulu PARTNERS IN GROWTH

6 Contents Jack and the Bean Stock 2 What Partners Say about Bean Stock 4 The Bean Stock Plan 6 Who Is Eligible? 7 Calculating Your Grant 7 All about Vesting 8 Fidelity and You 9 How to Exercise Your Stock Options 9 Don t Forget about Taxes 12 When Options Expire 12 If You Leave Starbucks 13 S.I.P. (Stock Investment Plan) 13 Resources 14 The Bean Stock Plan Partners like you play an important role in the success of Starbucks. So we want every partner to share in the vision, pride and financial success of our company. With Bean Stock, you can do just that. Through Bean Stock eligible partners may receive options to purchase shares of Starbucks common stock. The grant of Bean Stock options is based on the company s performance throughout the fiscal year. These stock options give you the opportunity to buy a fixed number of shares of Starbucks stock during a 10-year period at a fixed price. If the value of the stock increases over that fixed price, you might decide to buy the options and hold your shares as an investment. Or you can trade the options in for cash. Either way, you have the chance to enjoy the financial rewards that come with being a partner at Starbucks. Bean Stock Plan U.S. & Canada

7 Who Is Eligible? You are eligible to participate in Bean Stock if you: Are employed by Starbucks as of April 1 of the fiscal year preceding the grant Have been paid for at least 500 hours: From the first of the fiscal year through March 31, or From April 1 through the end of the fiscal year, Are in a position up to, but not including, the director level Jack: Do I have to sign up for Bean Stock to receive a grant? Helen: No. As long as you are an active Starbucks partner and you meet the eligibility requirements, you may receive a grant. Jack: What exactly is a fiscal year? Helen: The 12 months the finance folks use for accounting purposes. Starbucks fiscal year starts on the Monday following the Sunday closest to September 30 and ends on the Sunday closest to September 30 the following year. Calculating Your Grant Each year, Starbucks Board of Directors meets to consider the company s performance and decide whether to grant stock options. The number of stock options you may receive will vary from year to year. It depends on three factors: 1. Starbucks Success Our success depends on the individual contributions of each partner. So, naturally the board looks first at the company s profitability at the end of the fiscal year to determine the award value of Bean Stock grants. The board may grant Bean Stock options with a value equal to a specified percentage (up to 14%) of your eligible fiscal year base wages. 2. Eligible Fiscal Year Base Wages The number of stock options you are granted depends on your base wages paid during the prior fiscal year (base wages are converted to U.S. dollars for partners outside the U.S. and Puerto Rico). Your eligible fiscal year base wages include, but are not limited to, base pay, holiday pay, sick pay and vacation pay. 3. Grant Price The grant price (also known as the exercise price) is the fixed price per share of your stock options. This is the price at which you may buy shares of Starbucks stock in the future when your stock options vest. The grant price is the fair market value (closing price on the grant date) of a share of Starbucks stock as reported by the NASDAQ Global Select Market. Jack: So what is the difference between a stock option and a share of stock? Helen: Options are what you are given through Bean Stock. They are not shares of stock. They are the right to buy shares at a set price. When your options vest, you can trade them for cash or actual shares of stock. If you choose the shares, you become a shareholder or part owner in the company PARTNERS IN GROWTH

8 Jack: Whoa. This sounds complicated. Helen: No worries. The grant price is simply the closing price of the stock on the day it is given to you. If it goes up from there, you make a profit! Say you make $25,000 and the board of directors decided to award a value of 10% of your fiscal year base wages. That is $2,500. The grant price was $20 a share, so you were granted 125 stock options Grant Calculation Example Eligible fiscal year base wages (converted to U.S. dollars) $25,000 Grant award percentage x 10% Award value $2,500 Exercise prices (fair market value of Starbucks stock on the grant date) $20 Total Number of Stock Options Granted 125 All about Vesting Your Bean Stock options must be vested before you can do anything with them. As long as you are a Starbucks partner, your stock options vest at 25% per year over a period of four years. Vesting will generally occur on the anniversary date of the stock option grant. Your specific stock option vesting schedule is included in your stock option grant agreement. Grant Year Year 1 Year 2 Year 3 Year 4 0% Vested 25% Vested 50% Vested 75% Vested 100% Vested 0 Stock Options Total = 0 32 Stock Options Total = Stock Options Total = Stock Options Total = Stock Options Total = 125 Jack: That seems like math again. Helen: Yes. Each year, for four years, one-fourth of your stock options vest, or mature. When the options vest, you can trade them for cash or actual shares of Starbucks stock. Say you have 125 stock options. On the first anniversary of the stock option grant date, one-fourth of those options 32 of them become vested. On the second anniversary, another 31 stock options become vested. After four years, all 125 stock options are vested. You can exercise your options as soon as they vest, but you don t have to. As long as you keep working at Starbucks, you have 10 years before they expire. Bean Stock Plan U.S. & Canada

9 Fidelity and You Fidelity is our dedicated stock plan services provider for Bean Stock and other Starbucks partner investment plans, such as S.I.P. (Stock Investment Plan)* and Future Roast 401(k)*. Fidelity provides a host of benefits and services that will give you easy access to your stock plan information. Shortly after receiving your grant information, you will automatically be set up with a Fidelity account and will receive information on how to activate your account, including your Participant Number (if you are a partner outside the U.S. or Puerto Rico). This is your unique identifier assigned to you by Fidelity. You will need this number to log in to or to speak with a Fidelity representative. Keep this information in a safe place. Through your account or participant trust (for international partners), you will have access to your stock information online or by calling a Fidelity representative. *S.I.P. is available in the U.S. and Canada. The Future Roast program is available only in the U.S. For more information on these plans, go to or How to Exercise Your Stock Options Only you get to decide if and when to exercise your vested stock options. Before you exercise, you should consider the current Starbucks stock price, your personal tax situation and, if you live outside the U.S. or Puerto Rico, the currency exchange rate. Jack: What does it mean to exercise my options? Helen: Exercising your options just means purchasing the stock at a fixed price. How much your options are worth will depend mostly on the current Starbucks stock price. For example, suppose you were granted stock options with a grant price of $20 per share. On the day you exercise your options, you pay the grant price of $20 per share. Assume that over time the stock price has increased and is at $30 per share. That would be a gain of $10 per share. There are three ways to exercise your options: 1. Exercise and Sell (Cashless Exercise) Jack: So, if the value of Starbucks stock goes up, I make a profit. But what if it goes down? Do I lose money? Helen: No, as long as you have not exercised your options. This is why it is smart to hold on to the options. The longer you hold the options, the better your chance of making a profit. You may conduct an exercise and sell if you want cash for your options and you do not want to hold shares of Starbucks stock. Here is how it works: You contact Fidelity to exercise and sell some or all of your vested Bean Stock options (online via FAST in the U.S. only or by telephone using a Fidelity representative). Fidelity lends you the money to buy shares of Starbucks stock and cover the exercise cost, and arranges to sell your shares immediately on the open market. Proceeds from the exercise and sell will be used to cover your option cost, applicable taxes and fees. Fidelity will deposit the remaining cash into your account. PARTNERS IN GROWTH

10 Example: You decide to exercise 50 vested stock options with a grant price of $20 per share for an option cost of $1,000. You exercise your stock options when Starbucks stock is trading at $30 per share. Fidelity conducts an exercise and sell on your behalf and then immediately sells the shares for you for the market value of $1,500 a $500 gain. After you exercise your stock options, you will not own any shares of Starbucks stock and you will have $500, less any applicable taxes and fees. Market value ($30 x 50 shares) $1,500 Less: Option cost ($20 x 50 shares) $1,000 Taxable gain $500 Receive $500 cash (less fees and applicable taxes on the gain) and own no shares of Starbucks stock. Amounts are reflected in U.S. dollars. This method of exercise is available in all markets. 2. Exercise and Hold (Cash Exercise) You may conduct an exercise and hold if you would like to purchase and hold the shares of Starbucks stock, paying for the stock options and taxes with cash. Here is how it works: You contact Fidelity to exercise and hold some or all of your vested Bean Stock options (online via FAST in the U.S. only or by telephone using a Fidelity representative). You pay Fidelity the option cost as well as any applicable taxes and fees. The amount of cash you pay to Fidelity must be in U.S. dollars. Fidelity deposits shares in your account until you instruct Fidelity to sell or transfer the shares. Example: You decide to exercise 50 vested stock options with a grant price of $20 per share for an option cost of $1,000. Starbucks stock is trading at $30 per share. You may complete an exercise and hold by contacting Fidelity and remitting to them the total option cost for the 50 shares, plus any applicable taxes. After you exercise your stock options, you will own 50 shares of Starbucks stock purchased for $1,000 and valued at $1,500 on the date of exercise. Market value ($30 x 50 shares) $1,500 Less: Option cost ($20 x 50 shares) $1,000 Taxable gain $500 Own 50 shares of Starbucks stock (you pay the option cost of stock options plus applicable taxes.) Amounts are reflected in U.S. dollars. This method of exercise is available in all markets except China. Jack: Is there any way to check up on Starbucks stock? Helen: Yes. It is easy to keep track of the value of Starbucks stock. Just go to nasdaq.com or look in the business section of your newspaper. Starbucks trading symbol is SBUX. 10 Bean Stock Plan U.S. & Canada

11 3. Sell to Cover (Cashless Exercise) You may conduct a sell-to-cover exercise if you would like to exercise and hold some of the shares of Starbucks stock while paying for the stock options and applicable taxes from the gains of an exercise and sell. You end up owning shares of Starbucks stock without having to pay the exercise cost of the stock options and taxes out of your own pocket. Here is how it works: You contact Fidelity to exercise and hold some or all of your vested Bean Stock options (see exercise and hold example). Then, to cover the option cost of the stock options and applicable taxes from the exercise and hold, you request Fidelity to simultaneously conduct an exercise and sell some of your vested Bean Stock options (see exercise and sell example). Fidelity will use the gains (or profits) from the sale of your shares to cover the cost of the exercise and hold. You end up owning shares of Starbucks stock with no out-of-pocket costs. Example: You contact Fidelity to conduct a sell-to-cover exercise of 50 vested stock options. Starbucks stock is trading at $30 per share. Fidelity conducts an exercise and hold of 16 vested stock options with a grant price of $20 per share for an option cost of $320 plus applicable taxes. Simultaneously, Fidelity conducts an exercise and sell on your behalf for a market value and loans you $680 to buy the 34 shares. Fidelity then immediately sells the shares on your behalf for a market value of $1,020 a $340 gain. You remit $320 of the gross proceeds to Fidelity to pay for the 16 shares acquired through the exercise and hold and applicable taxes. After the exercises, you end up with 16 shares of Starbucks stock and $20 cash (less fees). Market value ($30 x 16 shares) $480 Less: Option cost ($20 x 16 shares) $320 Taxable gain (subject to taxes) $160 Total cost (plus applicable taxes) Market value ($30 x 34 shares) $1,020 Less: Option cost ($20 x 34 shares) $680 Taxable gain (subject to taxes and fees) $340 $320 Gross proceeds $340 Own 16 shares of Starbucks stock using the proceeds from the simultaneous exercise and sell. Remit $320 (plus applicable taxes) to Fidelity to cover the cost of the exercise and hold. Receive $20 (less fees). Amounts are reflected in U.S. dollars. This method of exercise is available in all markets except China. Partners are encouraged to contact a Fidelity representative by telephone when conducting a sell-to-cover exercise. Representatives are available to help determine the number of shares you will need to exercise and sell to cover the cost and applicable taxes of the exercise and hold. The Fidelity representative can then walk you through completing the transactions online to ensure that you will pay the lowest fee possible. Once you decide which method of exercise works best for you, you will need to contact Fidelity to exercise your vested stock options. PARTNERS IN GROWTH 11

12 U.S. partners Go online to 24 hours a day, seven days a week Call Fidelity at (866) where you can: Speak to a Fidelity representative Sunday through Friday, from 2 p.m. to 9 p.m. Pacific, or Connect to Fidelity Automated Service Telephone (FAST ) 24 hours a day, seven days a week Canadian partners Go online to and click Log in to NetBenefits Worldwide, 24 hours a day, seven days a week Speak to a Fidelity representative at (800) , Sunday through Friday, from 2 p.m. to 9 p.m. Pacific Don t Forget about Taxes When you exercise your options, you may be required to pay taxes on all gains. See your partner information supplement at or for more information. You may want to consult a tax adviser before exercising any of your Bean Stock options or selling shares of stock. When Options Expire As long as you are a Starbucks partner, your Bean Stock options are good for 10 years from the grant date. After that time, they expire and you cannot exercise them anymore. So you will want to take action before that time. If your stock options are set to expire on a weekend or market holiday, you must complete the exercise of your options by the time the NASDAQ Global Select Market closes on the last business day before expiration. The NASDAQ market is open Monday through Friday, excluding any New York Stock Exchange holidays, between 6:30 a.m. and 1 p.m. Pacific. Jack: Do I have to do anything with my Bean Stock right now? Helen: No. In fact, it is best if you just let it grow. Remember, as long as you remain a Starbucks partner, your options are good for 10 years. 12 Bean Stock Plan U.S. & Canada

13 If You Leave Starbucks If you are no longer a Starbucks partner, any vested options you have exercised converted into actual shares of Starbucks stock are yours to keep. You may hold these shares in your Fidelity account as a continuing investment or sell them at any time. Depending on your situation, what happens to any previously granted Bean Stock options will vary. The chart below explains what happens to your vested and unvested Bean Stock options when you leave Starbucks. Your Situation You voluntarily leave Starbucks or are separated for reasons other than misconduct or retirement. What Happens to Your Vested Bean Stock Options You have 90 days from your last day of employment to exercise your vested stock options. What Happens to Your Unvested Bean Stock Options All unvested stock options are forfeited. You involuntarily leave Starbucks for misconduct. You retire at age 55 or greater and have 10 years or more of credited service. You may forfeit all vested stock options upon your separation. You have 36 months to exercise your vested stock options granted on or after November 20, All unvested stock options are forfeited. All unvested stock options granted on or after November 20, 2003 are vested. All unvested stock options granted prior to November 20, 2003 are forfeited. You are no longer an active Starbucks partner due to a permanent and total disability. Your death. You have 12 calendar months from your last day of employment to exercise your vested stock options. Your estate has 12 calendar months from your death to exercise your vested stock options. All unvested stock options are forfeited. All unvested stock options granted on or after November 20, 2003 are vested. All unvested stock options granted prior to November 20, 2003 are forfeited. Note: Partners who were granted stock options under the Starbucks Corporation 1991 Company-Wide Stock Option Plan may be subject to different terms at the time they leave Starbucks. For more information, refer to the Bean Stock Plan Summary document you received at the time of grant or contact Fidelity. S.I.P. (Stock Investment Plan) Another way Starbucks helps you share the benefits of our successful partnership is through S.I.P., the Starbucks Corporation Stock Investment Plan. S.I.P. offers eligible partners the opportunity to buy shares of Starbucks common stock each quarter at a discounted price through regular payroll deductions. For more information about S.I.P., go to or Jack: What is the difference between S.I.P. and Bean Stock? Helen: Bean Stock is a grant given to you by the company that allows you to buy Starbucks stock at a set price. S.I.P. is money you set aside through payroll deductions to buy Starbucks stock at a discounted price. Once you purchase them, they are yours to keep! PARTNERS IN GROWTH 13

14 Resources For general questions about our stock plans, talk to your manager or Partner Resources generalist. For information about Starbucks, refer to the most current annual report, proxy statement and financial statements at To inquire about your stock options or S.I.P. shares, open an account, exercise vested stock options or sell shares, contact Starbucks dedicated service provider, Fidelity Stock Plan Services, LLC. For additional questions, call Starbucks Partner Contact Center at (866) , Monday through Friday, from 5 a.m. to 5 p.m. Pacific. U.S. partners Go online to 24 hours a day, seven days a week Call Fidelity at (866) where you can: Speak to a Fidelity representative Sunday through Friday, from 2 p.m. to 9 p.m. Pacific, or Connect to Fidelity Automated Service Telephone (FAST ) 24 hours a day, seven days a week Canadian partners Go online to and click Log in to NetBenefits Worldwide, 24 hours a day, seven days a week Speak to a Fidelity representative at (800) , Sunday through Friday, from 2 p.m. to 9 p.m. Pacific 14 Bean Stock Plan U.S. & Canada

15 Important Note: The value of stock options granted and shares of common stock purchased under these plans is based on many factors, including, but not limited to, the performance of Starbucks and is not guaranteed to increase over time. Before you make an investment in Starbucks stock, we encourage you to learn about investing in securities generally, to research Starbucks past performance by reviewing its filings with the Securities and Exchange Commission and to consult with a financial adviser about the risks and potential benefits of investing in securities. PARTNERS IN GROWTH 15

16 2007 Starbucks Coffee Company. All rights reserved. TPS-012 Made from 30% minimum post-consumer material.