Green Mountain Coffee Roasters (GMCR)

INCENTIVE PLAN

On January 25, 2008, on the recommendation of the Compensation and Organizational Development Committee, the Board approved the Green Mountain Coffee Roasters, Inc. Senior Executive Officer Short Term Incentive Plan (the “STIP”) and is submitting the STIP for stockholder approval. Under the STIP, officers or other employees of the Company designated by the Compensation and Organization Development Committee may receive annual cash incentive compensation determined by pre-established performance goals. As discussed further under the heading “Compensation Discussion and Analysis” annual cash incentives are an integral part of the Company’s compensation program.

The STIP was designed to enable the annual bonus that may be earned by executive officers of the Company to be deductible in its entirety. The U.S. Internal Revenue Code generally limits to $1 million the deduction that a publicly-held company may claim in any year for compensation to the chief executive officer in office at year-end or any of the other executive officers in office at year-end whose compensation is required to be reported by reason of the amount of such compensation. However, an exception to this deduction limit applies to qualifying “performance-based” compensation, as defined. For a program such as the STIP to qualify for the performance-based compensation exception, the Company must obtain stockholder approval of the material terms of the program, including the eligibility terms, the maximum amount payable to any individual for any specified period, and the performance goals. The material terms that the stockholders approve constitute the framework within which the Compensation and Organizational Development Committee would set actual performance goals. The Company believes that, if the STIP is approved by the stockholders, compensation paid in accordance with the STIP will qualify as performance-based compensation under the Internal Revenue Code.

Consistent with the Company’s compensation philosophy, the Company expects that its incentive compensation program may result in one or more named executive officers receiving annual compensation in excess of $1 million in some years. The Board accordingly believes that approval of the STIP to ensure tax deductibility of any such amount is in the best interests of the Company and its stockholders and recommends that the stockholders approve its adoption.

The affirmative vote of a majority of the votes cast in person or by proxy by stockholders represented and entitled to vote at the meeting is required for approval of the STIP. If our stockholders do not approve the STIP, then amounts will still be awarded under the STIP consistent with the Company’s compensation philosophy; however, amounts awarded under the STIP in excess of $1 million will not be eligible for the Section 162(m) deduction.

The following is a brief description of the material features of the STIP. This description is qualified in its entirety by reference to the full text of the STIP, a copy of which is attached to this proxy statement as Appendix D.