SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
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Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential,for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c)or Section240.14a-12
TUMBLEWEED, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(Tumbleweed Logo)
Gregory A. Compton, Esq.
Vice President, Secretary and General Counsel
1900 Mellwood Avenue
Louisville, Kentucky 40206
Telephone: (502) 893-0323, extension 322
Facsimile: (502) 897-0237
e-mail: [email protected]
March 17, 2000
Dear Stockholders:
We are holding your 2000 Annual Meeting on Thursday, May 11, 2000, at
11:00 a.m., local time, at the Ramada Inn, 1041 Zorn Avenue, Louisville,
Kentucky 40207. Matters on which action will be taken at the meeting are
explained in detail in the Notice and Proxy Statement following this letter.
We sincerely hope that you will be able to attend the meeting in
person, and we look forward to seeing you. Whether or not you expect to be
present, please complete, date, sign and mail the enclosed proxy in the envelope
provided. If you attend the meeting, you may withdraw your proxy and vote your
own shares.
Sincerely,
TUMBLEWEED, INC.
/s/ Gregory A. Compton
Gregory A. Compton, Esq.
Vice President, Secretary &
General Counsel
<PAGE>
(Tumbleweed Logo)
TUMBLEWEED, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2000
The Annual Meeting of Stockholders of Tumbleweed, Inc. will be held at
the Ramada Inn, 1041 Zorn Avenue, Louisville, Kentucky 40207 on Thursday, May
11, 2000, at 11 a.m., local time, for the following purposes:
1. To elect three Class I directors for a term of three years to
the Board of Directors, two Class II directors for a term of
two years, and three Class III directors for a term of one
year.
2. To approve the appointment of Ernst & Young LLP as the
Company's auditors for the year 2000.
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only Stockholders of record at the close of business on March 17, 2000,
are entitled to vote at the meeting.
We hope you will be able to attend the meeting in person. Whether or
not you expect to be present, please complete, date, sign, and mail the enclosed
proxy in the envelope provided. If you attend the meeting, you may withdraw your
proxy and vote your own shares.
By Order of the Board of Directors,
/s/ Gregory A. Compton
Gregory A. Compton, Esq.
Vice President, Secretary & General Counsel
March 17, 2000
Louisville, Kentucky
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TUMBLEWEED, INC.
1900 MELLWOOD AVENUE
LOUISVILLE, KENTUCKY 40206
PROXY STATEMENT FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
The following Proxy Statement and the accompanying proxy card, first mailed
to Stockholders on or about March 22, 2000, are furnished in connection with the
solicitation by the Board of Directors of Tumbleweed, Inc., a Delaware
corporation (the "Company"), of proxies to be used in voting at the Annual
Meeting of Stockholders of the Company to be held on Thursday, May 11, 2000, at
the Ramada Inn, 1041 Zorn Avenue, Louisville, Kentucky 40207 and at any
adjournment(s) thereof (the "Annual Meeting").
Any stockholder returning a proxy has the power to revoke it prior to the
Annual Meeting by giving the Secretary of the Company written notice of
revocation, by returning a later dated proxy or by expressing a desire to vote
in person at the Annual Meeting. All shares of the Company's common stock, $.01
par value per share ("Common Stock"), represented by valid proxies received
pursuant to this solicitation and not revoked before they are exercised will be
voted in the manner specified therein. If no specification is made, the proxy
will be voted (i) in favor of the election of the nominees for directors named
in this Proxy Statement, (ii) in favor of the selection of Ernst & Young LLP as
the Company's auditors for the year 2000, and (iii) in accordance with the best
judgment of the proxy holders on any other matter that may properly come before
the Annual Meeting.
The entire cost of soliciting these proxies will be borne by the Company.
In following up the original solicitation of the proxies by mail, the Company
will request brokers and others to send proxy forms and other proxy material to
the beneficial owners of the Common Stock and will reimburse them for expenses
incurred in so doing. If necessary, the Company also may use some of its
employees to solicit proxies from the stockholders personally or by telephone.
March 17, 2000 has been fixed as the record date for determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting and,
accordingly, only holders of Common Stock of record at the close of business on
that date will be entitled to notice of, and to vote at, the Annual Meeting. The
presence in person or by proxy of stockholders holding of record a majority of
Common Stock issued and outstanding and entitled to vote at the Annual Meeting
will constitute a quorum for the transaction of business at the Annual Meeting.
Shares represented by a valid proxy on which the authority to vote for one or
more director nominees is withheld, if any, are counted as shares present for
determination of a quorum. The number of shares of outstanding Common Stock on
March 17, 2000, was 5,863,930, each of which is entitled to one vote.
Election of each of the director nominees named in Proposal 1 requires the
approval of a plurality of the votes cast in the election. For purposes of
determining whether a director nominee has been elected, shares as to which
authority is withheld will have no effect on the outcome of the voting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and its Bylaws provide that the
Board of Directors shall consist of not less than five nor more than 11
directors and authorize the exact number to be fixed from time to time by
resolution of a majority of the Board of Directors. The Board of Directors has
fixed the number of members at eight.
The Company's By-Laws provide that the Board of Directors has the right to
divide the Board of Directors into three classes of directors with staggered,
three-year terms of office, and provide that upon the expiration of the term of
office for a class of directors, the nominees for that class will be elected for
a term of three years to serve until the election and qualification of their
successors or until their earlier resignation, death or removal from office. The
current terms for all directors expire at the Annual Meeting.
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At its February 16, 2000 meeting, the Board of Directors divided its
membership into three classes. Messrs. John A. Butorac, Jr., James M. Mulrooney
and David M. Roth have been designated as Class I directors whose term will
expire at the Annual Meeting. Messrs. George R. Keller and Terrance A. Smith
have been designated as Class II directors whose term will expire at the 2002
Annual Meeting. Ms. Minx Auerbach and Messrs. W. Roger Drury and Lewis Bass have
been designated as Class III directors whose term will expire at the 2001 Annual
Meeting. Upon expiration of the term of each class, the nominees for that class
will thereafter be elected for a term of three years.
Accordingly, the Board of Directors has nominated (a) Messrs. John A.
Butorac, Jr., James M. Mulrooney and David M. Roth to serve in Class I of the
Board of Directors for a term of three years, (b) Messrs. George R. Keller and
Terrance A. Smith to serve to serve in Class II of the Board of Directors for a
term of two years, and (c) Ms. Minx Auerbach and Messrs. W. Roger Drury and
Lewis Bass to serve to serve in Class III of the Board of Directors for a term
of one year, until the election and qualification of their successors or until
their earlier resignation, death or removal from office. All nominees are
currently serving as directors of the Company.
It is intended that persons named in the accompanying form of proxy will
vote for the nominees listed below unless authority to so vote is withheld.
Although the Board of Directors does not expect that any of the nominees
identified herein will be unavailable for election, in the event a vacancy in
the slate of nominees occurs, the shares represented by proxies in the
accompanying form may be voted for the election of a substitute nominee selected
by the persons named in the proxy.
DIRECTOR AND DIRECTOR NOMINEE INFORMATION
NOMINEES FOR DIRECTORS
CLASS I--TERM EXPIRING 2003
John A. Butorac, Jr.
Director of the Company since 1997 Age: 51
John A. Butorac, Jr. has served as President and Chief Executive Officer of the
Company since it was formed in 1997, and is a Director of the Company. Mr.
Butorac also served as President and Chief Executive Officer of Tumbleweed, LLC
from January 1995 to its merger with the Company in January 1999. From October
1991 to January 1995, Mr. Butorac served in various capacities with Tumbleweed
Mexican Restaurants Group, including as Director of Operations and Director of
Corporate Development.
James M. Mulrooney
Director of the Company since 1997 Age: 48
James M. Mulrooney has served as Executive Vice President, Chief Financial
Officer of the Company since it was formed in 1997, and is a Director of the
Company. Mr. Mulrooney also served as Executive Vice President and Chief
Financial Officer of Tumbleweed, LLC from January 1995 to its merger with the
Company in January 1999. From November 1988 to August 1994, Mr. Mulrooney was
Senior Vice President of Finance, Vice President and Treasurer of NTS
Corporation, a regional real estate development firm headquartered in
Louisville, Kentucky.
David M. Roth
Director of the Company since 1997 Age: 49
David M. Roth has served as a Director of the Company since it was formed in
1997. Mr. Roth was also a founding member of Tumbleweed, LLC from its inception
in 1994 to its merger with the Company in January 1999. Mr. Roth is currently Of
Counsel in the Louisville, Kentucky law firm of Goldberg & Simpson, P.S.C. From
December 1993 to August, 1999, Mr. Roth was a principal of Roth, Foley, Bryant
and Cooper, and Roth and Cooper, P.S.C., Louisville, Kentucky law firms.
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CLASS II--TERM EXPIRING 2002
George R. Keller
Director of the Company since 1997 Age: 50
George Keller is the founder of Tumbleweed and has been a Director of the
Company since it was formed in 1997. Mr. Keller also served as a member of the
Board of Advisors of Tumbleweed, LLC from January 1995 to its merger with the
Company in January 1999. From 1975 to January 1995, Mr. Keller served as Chief
Executive Officer of Tumbleweed Mexican Food, Inc. and Tumbleweed Concepts, Inc.
Terrance A. Smith
Director of the Company since 1998 Age: 54
Terrance A. Smith was elected as a Director of the Company in June 1998. Mr.
Smith is currently the President of Tumbleweed International, LLC. From 1988 to
1997, Mr. Smith was the President and CEO of Chi-Chi's International Operations,
Inc.
CLASS III--TERM EXPIRING 2001
Minx Auerbach
Director of the Company since 1997 Age: 77
Minx Auerbach has served as a Director of the Company since it was formed in
1997. Ms. Auerbach also served as a member of the Board of Advisors of
Tumbleweed, LLC from January 1995 to its merger with the Company in January
1999. From 1975 to 1979, Ms. Auerbach was the Director of Consumer Affairs for
the City of Louisville, Kentucky. From 1979 to 1984, she served as the Executive
Assistant to the County Judge Executive of Jefferson County, Kentucky.
W. Roger Drury
Director of the Company since 1997 Age: 53
W. Roger Drury has served as a Director of the Company since it was formed in
1997. Mr. Drury also served as a member of the Board of Advisors of Tumbleweed,
LLC from January 1995 to its merger with the Company in January 1999. Mr. Drury
is currently an independent management consultant specializing in the health
care industry. From 1992 until 1996 Mr. Drury was Chief Financial Officer of
Humana Inc. and Senior Vice President of Finance from 1988 to 1992. He joined
Humana, Inc. in 1979 and became Vice President-Comptroller in 1983.
Lewis Bass
Director of the Company since 1997 Age: 78
Lewis Bass has served as a Director of the Company since it was formed in 1997.
Mr. Bass also served as a member of the Board of Advisors of Tumbleweed, LLC
from January 1995 to its merger with the Company in January 1999. Mr. Bass is
currently retired.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
FOR DIRECTORS NAMED ABOVE.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the completion of the initial public offering of common stock
by the Company, the Company's Board of Directors adopted a policy that all
future transactions between the Company and its officers, directors, principal
stockholders and affiliates must be approved by the Audit Committee and by a
majority of the independent members of the Board of Directors who do not have an
interest in the transaction, and generally must be on terms
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no less favorable to the Company than those obtainable from unrelated third
parties. Some of the following transactions occurred prior to the adoption of
this policy, and, although those transactions necessarily involve conflicts of
interest, management believes that all of those transactions were entered into
on terms comparable to those obtainable from unrelated third parties, based on a
comparison of terms and conditions available from third parties.
LEASES WITH RELATED PARTIES
The Company leases the facilities and related real property for its
Bardstown Road and Valley Station restaurants from TW-DixieBash, LLC, a limited
liability company in which David M. Roth and James M. Mulrooney, directors of
the Company, own substantial interests. The Bardstown Road and Valley Station
restaurants opened in November 1997 and January 1998, respectively. Under the
terms of the Bardstown Road and Valley Station subleases, the Company has built
the restaurant facilities as specified in approved plans, and the Lessor was
obligated to reimburse the Company for construction expenses not to exceed
$700,000 and $500,000, respectively. The Bardstown Road sublease provides for
the assumption of all rent under the ground lease agreement with Bashford Manor
Mall, Joint Venture. The sublease also provided for interest to be paid during
the construction period based on TW-DixieBash's investment until the restaurant
commenced operations and $7,000 per month thereafter plus 30% of the
restaurant's positive net cash flow. The lease is for a twenty-year term with no
option to renew. The Company paid rent totaling $203,326 during 1999. The Valley
Station sublease provides for the assumption of all rent under the Holiday
Station Associates Limited Lease. The sublease also provided for interest to be
paid during the construction period based on TW-DixieBash's investment until the
restaurant commenced operations and $5,000 per month thereafter, plus 30% of the
restaurant's positive net cash flow. The sublease is for a twenty-year term with
options to renew for three additional five-year terms. The Company paid rent
totaling $131,916 during 1999 under the Valley Station sublease.
RELATED PARTY TRANSACTIONS
On April 1, 1999, the Company purchased the land and building, including
improvements, of the Springdale, Ohio restaurant from Keller, LLC (a limited
liability company in which George R. Keller, a director of the Company owns a
substantial interest), the lessor of the property, for $1,625,000. The purchase
was made for an amount substantially equal to the costs originally expended by
Keller, LLC in the purchase of the land and construction of the improvements,
which approximated the fair market value as determined by an independent
appraisal. At the time of purchase, the Company entered into a modification
agreement with a local bank to increase a line of credit and to place a mortgage
on the land and building to secure the increased line of credit. At the time of
the purchase, the Company's capital lease obligation to Keller, LLC was
terminated. Prior to the purchase, the Company leased the Springdale, Ohio
restaurant from Keller, LLC and during 1999 the Company paid rent totaling
$46,672 to Keller, LLC.
On July 1, 1999, the Company purchased the land and building, including
improvements, of the Bowling Green, Kentucky restaurant from Douglass Ventures
(a Kentucky general partnership and stockholder of the Company in which David M.
Roth, a director of the Company, is a general partner) and an unrelated third
party, the co-lessors of the property, for $884,640. The purchase price was
calculated in accordance with the lease agreement which approximated the fair
market value as determined by an independent appraisal. At the time of the
purchase, the Company's lease obligation was terminated. The purchase price was
funded by cash reserves and funds drawn on the Company's line of credit. Prior
to the purchase, the Company leased the Bowling Green, Kentucky restaurant from
Douglass Ventures and during 1999 the Company paid rent totaling $26,000 to
Douglass Ventures.
In August 1997, the Company's predecessor, Tumbleweed, LLC, entered into an
International Agreement with Tumbleweed International LLC, a restaurant
developer based in Brussels, Belgium. The International Agreement grants certain
licensing and franchising rights to International for the development of
Tumbleweed restaurants outside of the Western Hemisphere. International is a
limited liability company owned by three
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corporations controlled by a group of stockholders including Terrance A. Smith,
David M. Roth, Minx Auerbach and George R. Keller, who are directors of the
Company, and certain stockholders of the Company. In 1999, International paid
$18,734 in fees to the Company under the International Agreement. The members of
TW International are also shareholders in TWED-Charleston, Inc., which is
constructing a franchise full-service Tumbleweed restaurant in Charleston, West
Virginia. Tumbleweed, Inc. will manage this restaurant under a Management
Agreement which provides for the reimbursement of costs incurred and for an
incremental management fee intended to recover the costs of accounting and
corporate services supplied to the franchisee.
TWED-Charleston did not pay any sums to the Company during 1999.
In February 1997, the Company acquired a 9.5% interest of the common
membership units of T.M. Riders, LLC ("TM Riders"), which operated limited
service food court restaurants in shopping malls in the Louisville, Lexington
and Cincinnati metropolitan areas and delivery units featuring takeout and home
delivery of Mexican, Tex-Mex and grilled foods. The Company paid a nominal
purchase price for the interest. The Managing Directors of TM Riders included
John A. Butorac, Jr., James M. Mulrooney, David M. Roth and George R. Keller,
all of whom are directors of the Company, and stockholders of the Company. Minx
Auerbach, a director of the Company, and Messrs Roth and Keller also owned
membership interests in TM Riders. In September 1998, the Company relinquished
its interests in TM Riders.
In October 1996, the Company sold to TM Riders all of the Company's
interest in six Tumbleweed food court units in the Louisville, Lexington and
Cincinnati metropolitan areas, including one unit operated by a franchisee. The
purchase price was $600,000, comprised of an initial cash payment of $100,000
and a promissory note providing for annual payments of $100,000 of principal
plus interest at the rate of 8% per year. As of December 31, 1998, the principal
balance of the note was $400,000. In 1999, the note was distributed to the
common members of Tumbleweed, LLC. In October 1996, the Company entered into a
licensing and distribution agreement with TM Riders granting TM Riders the right
to operate food court units in the Louisville and Lexington markets under the
Tumbleweed name and certain rights to use intellectual property of Tumbleweed
for the development of the TM Riders food court and delivery operations. The
Company received a nominal monthly royalty on sales by the food court
restaurants acquired by TM Riders. The Company was also entitled to receive a
$5,000 fee upon the opening of each delivery unit and a 1.5% royalty based on
system-wide sales by TM Riders, both beginning when TM Riders had ten delivery
units open.
In 1999, TM Riders ceased operations, closed its delivery locations and
sold its interests in the Tumbleweed food court operations to TW-Indiana, LLC,
an existing franchisee of the Company in which David M. Roth, a director of the
Company, is a member. In 1999, the Company received payment of $14,520 in
royalties and fees from TM Riders for accounting and administrative services.
During 1999, the Company purchased certain computer equipment from TM Riders for
use in the Company's stores for $60,000
In February 1997, the Company invested a nominal amount to acquire a 9.5%
common member interest in TW-Tennessee, LLC ("TW-Tennessee"), which was
organized to develop and operate Tumbleweed full service restaurants as a
franchisee of the Company. David M. Roth, a director of the Company, also owns a
membership interest in TW-Tennessee. On September 30, 1998, the Company sold its
interest in TW-Tennessee to certain members of TW-Tennessee, including Mr. Roth,
for $25,000.
The Company guaranteed renewals of certain guaranteed indebtedness and any
replacement indebtedness of TW-Tennessee, to the extent and in amounts not to
exceed the amounts guaranteed as of September 30, 1998. As of December 31, 1999,
the Company has guaranteed certain TW-Tennessee obligations as follows: a) up to
$1,200,000 under a bank line of credit, b) approximately $2,800,000 of the
principal advanced under a lease financing agreement, and c) equipment leases
with a bank totaling $831,476 jointly and severally with TW- Tennessee common
members. During 1999, the landlord under the lease financing agreement declared
TW- Tennessee to be in default, and accelerated the rent obligations under the
leases. Negotiations are continuing between the landlord and the principals of
TW-Tennessee regarding the restructuring of the lease obligations, and
management of the Company believes that TW-Tennessee's default under the leases
will not ultimately have a material adverse impact on the Company's operations
or financial results.
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In 1999, TW-Tennessee paid royalties and franchise fees of $159,395, and
other fees of $27,346 to the Company under the franchise agreement.
David M. Roth, a director of the Company, is a member of TW-Indiana, LLC,
which in April 1998 acquired the franchise rights to five full-service
Tumbleweed restaurants in Indiana and Kentucky from a third party. During 1999,
TW-Indiana signed a Development Agreement with the Company for the development
of up to ten additional Tumbleweed restaurants in certain specified territories
in Indiana and Kentucky. Mr. Roth and TW-Indiana, LLC are also members of
TW-Seymour, LLC, a franchisee of the Company which is operating a full-service
Tumbleweed restaurant in Seymour, Indiana. During 1999, the Company received
royalties and franchise fees and other fees of $361,382 and $76,198 from
TW-Indiana and TW-Seymour, respectively.
David M. Roth, a director of the Company, is a member of TW-Medina, LLC, a
franchisee of the Company which is operating a full-service Tumbleweed
restaurant in Medina, Ohio. Tumbleweed, Inc. manages this restaurant under a
Management Agreement which provides for the reimbursement of costs incurred and
for an incremental management fee intended to recover the costs of accounting
and corporate services supplied to the franchisee. In 1999, TW-Medina paid
royalties and franchise fees of $51,771, and other fees of $10,870 to the
Company under the franchise agreement.
David M. Roth, John A. Butorac, Jr., and James M. Mulrooney, directors of
the Company, and Gregory A. Compton, an officer of the Company, are members of
TW-Evansville, LLC, a franchisee of the Company which is operating a
full-service Tumbleweed restaurant located in Evansville, Indiana. Tumbleweed,
Inc. manages this restaurant under a Management Agreement which provides for the
reimbursement of costs incurred and for an incremental management fee intended
to recover the costs of accounting and corporate services supplied to the
franchisee. In 1999, TW-Evansville paid royalties and franchise fees of $38,257,
and other fees of $2,172 to the Company under the franchise agreement
David M. Roth, a director of the Company, is a principal of TWED-Beckley,
Inc., which is constructing a full-service Tumbleweed restaurant in Beckley,
West Virginia. Tumbleweed, Inc. will manage this restaurant under a Management
Agreement which provides for the reimbursement of costs incurred and for an
incremental management fee intended to recover the costs of accounting and
corporate services supplied to the franchisee. TWED-Beckley did not pay any sums
to the Company during 1999.
David M. Roth, a director of the Company, is a member of TW-Rivertown,
LLC., which is constructing a full-service Tumbleweed restaurant in Grandville,
Michigan. TW-Rivertown did not pay any sums to the Company during 1999.
During 1999, David M. Roth, a director of the Company, was a principal
in the law firm of Roth Foley Bryant & Cooper, PLLC, which provided legal
services to the Company during 1999 and was paid $158,040 in fees for legal
services. During 1999, the principals of Roth, Foley Bryant & Cooper ended their
affiliation and Mr. Roth became Of Counsel with the law firm of Goldberg &
Simpson, P.S.C. which provided legal services to the Company during 1999 and may
be expected to render such services to the Company in the future. The Company
paid $3,913 in fees for legal services rendered by Goldberg & Simpson, P.S.C.
during 1999.
COMMITTEES OF THE BOARD
The Board of Directors is responsible for the overall affairs of the
Company. To assist the Board of Directors in carrying out this responsibility,
the Board delegated certain authority to two committees. Information concerning
these committees follows.
AUDIT COMMITTEE. The Audit Committee is comprised solely of non-management
directors. The Audit Committee maintains communications with the Company's
independent auditors as to the nature of the auditors' services, fees and such
other matters as the auditors, the members of the Audit Committee and/or the
Board of Directors believe may require attention. The Audit Committee reviews
the Company's internal control
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procedures, quarterly and year-end financial statements and public filings and
makes recommendations to the Board with respect thereto. The Audit Committee met
four times during 1999. The current members of the Audit Committee are George R.
Keller (Chairman), W. Roger Drury and Lewis Bass.
COMPENSATION COMMITTEE. The Compensation Committee (the "Compensation
Committee") is comprised solely of non-management directors. The Compensation
Committee makes recommendations to the Board of Directors with respect to
compensation of officers and with respect to the granting of stock options. The
Compensation Committee of the Company's Board met four times during 1999. The
current members of the Compensation Committee are W. Roger Drury (Chairman),
George R. Keller and Minx Auerbach.
DIRECTORS' COMPENSATION AND ATTENDANCE
The Board of Directors met four times during 1999. All members of the Board
of Directors attended each of these meetings, and each director attended all of
the meetings of any committee of which he or she was a member which were held
during 1999.
Prior to February 16, 2000, the non-employee directors received a fee of
$1,000 for each Board of Directors meeting attended and received $1,000 per
committee meeting attended unless the committee meeting was on the same day as
the Board of Directors meeting. Committee chairmen received an additional $1,000
for each committee meeting. Effective as of the meeting of the Board held on
February 16, 2000, in order to help ensure the ability of the Board to continue
to attract and retain qualified and desirable members, the Board agreed that the
non-employee directors will receive a fee of $2,000 for each meeting of the
Board, and a fee of $500 for each committee meeting attended. Committee chairmen
will receive an additional $1,500 for each committee meeting. In addition,
non-employee directors will receive annual grants of options to purchase shares
of Common Stock under the Plan. During 1999, each non-employee director received
a grant of options to purchase 10,000 shares, and a separate grant of 2,000
shares, of Common Stock. Each new non-employee director will be granted options
to purchase 10,000 shares of Common Stock on the date of his or her first
election. All options granted to directors will become exercisable in three
equal annual installments, beginning on the first anniversary of the date of
grant.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and greater than 10% stockholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with respect to
beneficial ownership of the Company's equity securities. Based solely on its
review of the Section 16 Reports furnished to the Company by its Reporting
Persons and, where applicable, any written representation by any of them that no
Form 5 was required, all Section 16(a) filing requirements applicable to the
Reporting Persons during and with respect to 1999 have been complied with on a
timely basis.
EXECUTIVE OFFICERS
The following table lists the executive officers of the Company, who serve
at the pleasure of the Board of Directors. There are no family relationships
among any officers or directors of the Company.
Name Age Position
- ---- --- --------
John A. Butorac, Jr. ....51 President, Chief Executive Officer, and Director
James M. Mulrooney ......48 Executive Vice President, Chief Financial Officer,
and Director
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John Brewer ........... 47 Vice President of Operations
Wayne P. Jones ......... 57 Vice President of Marketing and Development
Gary Snyder..............45 Vice President - Company Operations
Glennon F. Mattingly.....48 Vice President - Controller
Gregory A. Compton.......39 Vice President, Secretary and General Counsel
John Brewer has served as Vice President of Operations for the Company
since it was formed in December 1997, and for Tumbleweed, LLC, the Company's
predecessor, from April 1996 to its merger with the Company in January, 1999.
From 1993 to 1996, Mr. Brewer was the President and Chief Executive Officer of
East Side Restaurants, LLC, which operates nine restaurants in Phoenix, Arizona.
Wayne P. Jones has served as Vice President of Marketing and Development
for the Company since it was formed in December 1997, and for Tumbleweed, LLC,
the Company's predecessor, from August 1997 to its merger with the Company in
January, 1999. From 1993 to 1997, he served as Executive Director and Chief
Executive Officer of the Pizza Hut Franchise Association.
Gary Snyder joined Tumbleweed, LLC, the Company's predecessor, as Director
of Training and Human Resources in June 1996 and was appointed Vice President of
Company Operations in April 1998. Mr. Snyder continues to serve the Company in
that capacity. He previously served for 17 years with Bob Evans Farms, Inc.
Glennon F. Mattingly joined Tumbleweed, LLC, the Company's predecessor, as
Controller in March 1995 and was named Vice President-Controller in April 1998.
Mr. Mattingly continues to serve the Company in that capacity. Before coming to
Tumbleweed, Mr. Mattingly held various positions with Chi
Gregory A. Compton joined Tumbleweed, LLC, the Company's predecessor, in
June 1998 as Vice President, Secretary and General Counsel, and continues to
serve the Company in that capacity. From March 1992 to June 1998, Mr. Compton
served as Senior Vice President, Secretary and General Counsel of NTS
Corporation, a regional real estate development firm headquartered in
Louisville, Kentucky.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of December 31, 1999
(except as otherwise noted) regarding the amount of Common Stock beneficially
owned by all persons known to the Company who beneficially own more than five
percent of the outstanding Common Stock, each director and director nominee of
the Company, each Named Executive (as defined under "Executive Compensation"
below), and all directors and executive officers of the Company as a group. An
asterisk indicates beneficial ownership of less than one percent of the
outstanding Common Stock. A person beneficially owns shares if the person has or
shares voting or investment power with respect to the shares or has the right to
acquire such power within 60 days. Except as otherwise noted, each person named
in the table has sole voting and investment power with respect to the listed
number of shares.
8
<PAGE>
Amount and Nature
-----------------
of Beneficial Ownership
-----------------------
Name and Address of Number Percentage
Beneficial Owner of Shares of Class
---------------- --------- --------
Non-Directors TW Funding, LLC 400,000 (1) 6.8%
1900 Mellwood Avenue
Louisville, KY 40206
Gerald A. Mansbach (2) 498,002 8.5%
Mansbach Metal Co.
1900 Front Street
Ashland, KY 41101
Directors and John A. Butorac, Jr. 1,716,439 (3) 29.2%
Executive 1900 Mellwood Avenue
Officers Louisville, KY 40206
James M. Mulrooney 1,286,802 (10) 21.9%
1900 Mellwood Avenue
Louisville, KY 40206
George Keller 617,719 (9)(15) 10.5%
4201 Paoli Pike
Floyd Knobs, IN 47119
David M. Roth 781,761 (4)(15) 13.3%
200 South Fifth Street
Suite 300S
Louisville, KY 40202
Minx M. Auerbach 154,753 (5)(15) 2.6%
Lewis Bass 73,334 (8)(15) 1.3%
W. Roger Drury 27,201 (15) *
Terrance A. Smith 6,334 (15) *
John Brewer 24,010 (6)(12) *
Gregory A. Compton 37,166 (11)(13) *
Wayne P. Jones 37,166 (11)(13) *
All current directors and 3,919,283 (7)(14)(16) 66.8%
executive officers as a
group (13 persons)
* Indicates less than 1%
(1) Messrs. Butorac, Mulrooney, Roth and Mansbach share voting power with
respect to these shares,which have been included in their respective totals.
(2) Mr. Mansbach is the brother of Ms. Auerbach, who is a director.
(3) Mr. Butorac and his wife hold 915,843 shares jointly. Mr. Butorac's wife
also holds 400,595 of the listed shares as trustee for their children.
9
<PAGE>
(4) Mr. Roth's wife holds 147,673 of the listed shares. Mr. Roth's shares also
include 187,736 shares held or beneficially owned by entities controlled
by members of his family.
(5) Ms. Auerbach holds 151,419 of these shares as trustee for a family trust.
(6) Includes 4,000 shares held by TW Funding, LLC allocated to Mr. Brewer based
on his relative ownership interest in TW Funding, LLC.
(7) Shares held by TW Funding,LLC have been included for purposes of calculating
the beneficial ownership of the group.
(8) Includes 70,000 shares held in a family trust.
(9) Includes 3,000 shares held by Mr. Keller's wife as trustee under trusts for
Mr. Keller and his children, and 1,000 shares held by Mr. Keller as trustee
for a personal trust.
(10)Mr. Mulrooney holds 806,200 of the listed shares. Mr. Mulrooney's wife and
children hold 80,602 of the listed shares.
(11)Includes 20,000 shares held by TW Funding, LLC allocated to each individual
based on his relative ownership interest in TW Funding, LLC.
(12)Includes 20,000 shares representing one-third of the options granted to Mr.
Brewer on February 15, 1999,which he had the right to acquire as of February
15, 2000.
(13)Includes 16,666 shares representing one-third of the options granted to the
named officer on February 15, 1999, which the officer had the right to
acquire as of February 15, 2000.
(14)Includes 53,332 shares, representing one-third of the options granted to
Messrs. Brewer, Compton and Jones, which they had the right to acquire as of
February 15, 2000.
(15)Includes 3,333 shares, representing one-third of the options granted to the
named Director on February 15, 1999, which the Director had the right to
acquire as of February 15, 2000.
(16)Includes 19,998 shares, representing one-third of the options granted to the
named Directors on February 15, 1999, which they had the right to acquire as
of February 15, 2000.
TW FUNDING, LLC
The members of TW Funding, LLC have guaranteed a loan incurred by TW Funding to
finance its purchase of 400,000 shares of Common Stock in the Company's initial
public offering in January 1999. The shares held by TW Funding, as well as
1,900,000 shares of Common Stock, of which 1,800,000 shares are beneficially
owned by the individuals listed below who are directors of the Company, have
been pledged to secure the loan and their guarantee. The loan is due on the
earlier to occur of the date 30 days after the sale of any of the assets of TW
Funding, which as of December 31, 1999, consisted entirely of 400,000 shares of
Common Stock, or December 31, 2000. This pledge totals 2,300,000 shares of
Common Stock.
Shareholder Shares Pledged
----------- --------------
John A. Butorac 800,000
James M. Mulrooney 800,000
David M. Roth 200,000
---------
Total 1,800,000
EXECUTIVE COMPENSATION
This section of the Proxy Statement discloses compensation for services
rendered to the Company during each of the three fiscal years in the period
ended December 31, 1999, which compensation was awarded to, paid to, or earned
by the Company's Chief Executive Officer and each of the four other executive
officers of the Company who were most highly compensated and whose salary and
bonus exceeded $100,000 in 1999 (collectively, these persons are sometimes
referred to as the "Named Executives").
10
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term All Other
Annual Compensation Compensation Compensation
--------------------------------------- ------------ ------------
Other Annual Stock
Name and Principal Position Year Salary Bonus Compensation Options#
- --------------------------- ---- ------ ----- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
John A. Butorac, Jr. 1999 $203,400 $71,190 $ 6,000 0 0
President and Chief Executive Officer
1998 200,000 70,000 23,777 0 0
1997 159,134 50,872 21,099 0 0
James M. Mulrooney 1999 177,975 62,292 6,000 0 0
Executive Vice President and Chief
Financial Officer 1998 175,000 61,250 23,122 0 0
1997 132,611 42,394 21,016 0 0
John Brewer 1999 121,321 22,300 3,600 80,000 (1)(2) 0
Vice President of Operations
1998 115,500 14,020 3,600 0 7,846 (5)
1997 105,940 30,946 3,600 0 0
Wayne P. Jones (3) 1999 115,526 22,090 3,600 55,000 (1)(2) 0
Vice President of Marketing
and Development 1998 112,291 14,026 3,600 0 0
1997 29,167 5,775 3,600 0 18,978 (5)
Gregory A. Compton (4) 1999 103,963 16,335 3,600 55,000 (1)(2) 0
Vice President, Secretary and General
Counsel 1998 54,549 0 1,800 0 0
<FN>
_____________
(1)60,000 options were granted to Mr. Brewer, and 50,000 options were granted
to each of Messrs.Jones and Compton,on February 15,1999,under the Tumbleweed,
Inc. 1998 Stock Option and Incentive Compensation Plan.
(2)20,000 options were granted to Mr.Brewer, and 5,000 options were granted to
each of Messrs. Jones and Compton, on December 17, 1999 under the Tumbleweed,
Inc. 1998 Stock Option and Incentive Compensation Plan.
(3)Mr. Jones joined Tumbleweed, LLC, the Company's predecessor, in August 1997.
(4)Mr. Compton joined Tumbleweed, LLC, the Company's predecessor, in June 1998.
(5)Represents relocation expenses.
</FN>
</TABLE>
OPTION GRANTS IN FISCAL 1999
The following table presents information regarding options to purchase
shares of Common Stock granted by the Company during 1999 to the Named
Executives. The Company has no outstanding SARs and granted no SARs during 1999.
11
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE(5) AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
----------------------
INDIVIDUAL GRANTS
----------------------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR(4) ($/SHARE) DATE 5% 10%
- ------------------ -------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John A. Butorac, J 0 0 0 N/A N/A N/A
James M. Mulrooney 0 0 0 N/A N/A N/A
John Brewer 60,000(1) 10.6% $10.00 02-15-09 $377,337 $956,246
20,000(2) 3.5% $ 5.50 12-17-09 $ 69,178 $175,312
Wayne P. Jones 50,000(1) 8.8% $10.00 02-15-09 $314,447 $796,871
5,000(2) 0.9% $ 5.50 12-17-09 $ 17,295 $ 43,828
Gregory A. Compton 50,000(1) 8.8% $10.00 02-15-09 $314,447 $796,871
5,000(2) 0.9% $ 5.50 12-17-09 $ 17,295 $ 43,828
<FN>
(1)The exercise price of the options granted prior to December 17, 1999, was set
at $10.00 per share, the issue price for the initial public offering of the
Company's common stock.
(2)The exercise price of options granted on December 17, 1999, is equal to the
closing market price of the Common Stock on the day before the date of grant.
(3)Options generally vest and become exercisable at a rate of 1/3 of the total
number of shares specified in the option grant during each 12- month period
following one year from the date of grant. To the extent any optionee does
not exercise an option as to all shares for which the option was exercisable
during any 12-month period, the balance of the unexercised options shall
accumulate and the option with respect to those shares will be exercisable
at any later time before expiration. Options expire 10 years from the date of
grant.
(4)Based on an aggregate of 565,441 options granted by the Company in 1999.
(5)The Potential Realizable Values illustrate values that might be realized upon
exercise immediately prior to the expiration of the term of these options
using 5% and 10% appreciation rates, as required by the Securities and
Exchange Commission, compounded annually. These values do not, and are
not intended to,forecast possible future appreciation,if any,of the Company's
stock price. Additionally, these values do not take into consideration the
provisions of the options providing for vesting over a period of years or
termination of options following termination of employment.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN
FISCAL 1999 AND FISCAL YEAR END VALUES
No options to purchase shares of Common Stock were exercised during
1999 by the Named Executives. There were no SARs outstanding during 1999. The
following table sets forth the number and value of unexercised options held by
the Named Executives at year end.
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options at FY-End Money Options at FY-End(1)
----------------------- ----------------------------
# Shares
Acquired Value
on Exercise Realized Exercisable Unexercisabl Exercisable Unexercisable
----------- -------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John A. Butorac, Jr. (2) 0 $0 0 0 0 0
12
<PAGE>
James M. Mulrooney (2) 0 0 0 0 0 0
John Brewer 0 0 0 80,000 0 $30,000
Wayne P. Jones 0 0 0 55,000 0 7,500
Gregory A. Compton 0 0 0 55,000 0 7,500
<FN>
(1) The last trade of the Company's common stock, as reported by NASDAQ on
December 31, 1999, was $7.00. That price was used in calculating the
value of unexercised options, all of which were unexercisable as of
December 31, 1999.
(2) Neither of Messrs. Butorac or Mulrooney has been granted any stock options.
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY, WHICH
IS COMPOSED SOLELY OF NON-EMPLOYEE DIRECTORS OF THE COMPANY, HAS FURNISHED THE
FOLLOWING REPORT ON EXECUTIVE COMPENSATION.
OVERALL COMPENSATION PHILOSOPHY
The Company's compensation policies for the executive officers and other
senior management personnel of the Company are administered by the Compensation
Committee of the Board of Directors, composed of Ms. Auerbach and Messrs. Drury
and Keller. The primary components of executive compensation are base salary,
bonus and longer-term incentives such as stock options. The Company has not to
date granted any stock options to either of Messrs. Butorac or Mulrooney. During
the past fiscal year, the Company has continued to place an emphasis on the
performance-based elements of executive compensation.
In general, the Company controls base salaries and compensates outstanding
performance through bonus compensation and stock options as a longer-term
incentive. As a result, the following principles apply to executive
compensation:
- Base salaries are competitive with similar restaurant companies; and
- A significant portion of executive compensation is tied to the Company's
success in meeting predetermined stated net income goals and other annual and
long-term performance goals.
The overall objectives of this strategy are to attract and retain the best
possible executive talent and to motivate the Company's executives to achieve
the goals inherent in the Company's business strategy.
BASE SALARIES
In approving the fiscal 1999 base salary for Mr. Butorac, the Company's
President and Chief Executive Officer, and Mr. Mulrooney, the Company's
Executive Vice President and Chief Financial Officer, the Compensation Committee
has reviewed the salaries of the officers in relation to average salaries within
the industry for comparable areas of responsibility as presented in a report
prepared for the Company by an independent compensation consultant. This
reflects the previously mentioned objective of controlling base salary costs and
emphasizing incentive compensation. Future adjustments to base salaries and
salary ranges will reflect average movement in the competitive market as well as
individual performance.
13
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with John A. Butorac, Jr.
and James M. Mulrooney on June 23, 1998, which entitled Mr. Butorac and Mr.
Mulrooney to receive 1999 base salaries of $200,000 and $175,000, respectively
(subject to cost of living increases based upon increases in the Consumer Price
Index), and bonus compensation based upon the incentive compensation plan
discussed below. The agreements have an initial term of five years and extend
automatically each year for one additional year unless both parties agree to
termination prior to the end of any term. If the Company terminates the
employment agreement without cause, the executive would be entitled to receive
continued salary and benefits for a twelve month period. If the employment
agreement is terminated by the Company for cause, the executive is not entitled
to any compensation following the date of such termination other than the pro
rata amount of his then current base salary and bonuses earned through such
date. Upon any termination of employment, the terminated executive is prohibited
from competing with the Company for two years. Under the terms of the employment
agreements, both Mr. Butorac and Mr. Mulrooney report directly to the Board of
Directors with Mr. Butorac having primary responsibility for operational,
marketing, training, franchising, purchasing and commissary matters and Mr.
Mulrooney having primary responsibility for financial, banking, accounting,
legal and construction matters.
Salaries for other executive officers and senior management personnel are
determined by the Company based upon similar industry standards.
INCENTIVE COMPENSATION
To ensure that an important portion of compensation is based on
performance, the annual bonus payable to the executive officers of the Company
is based upon the attainment of targeted performance measurements by the
Company. All other salaried employees of the Company other than store-level
managers participate in the same bonus plan. Each executive earns incentive
compensation if the Company achieves a stated quarterly net income goal. At the
beginning of each fiscal year, the Compensation Committee establishes a bonus
amount expressed as a percentage of salary for each participant, and after the
end of each fiscal year, the Compensation Committee reviews the bonus attained
by the executive officers of the Company participating in the plan. The
Compensation Committee also establishes a net income goal for each quarter. The
amount of the bonus earned by a participating executive is based upon the extent
to which the Company attains or exceeds attainment of a specified percentage of
the net income goal. The Company reserves the right to change or modify the
program at any time.
For executive officers other than Mr. Butorac and Mr. Mulrooney, payments
are determined and made to participants on a quarterly basis. Mr. Butorac's and
Mr. Mulrooney's bonus compensation is calculated and accrued on a quarterly
basis in a similar manner. However, the incentive compensation payments will not
be made for the year until after the fourth quarter is determined. The
Compensation Committee has the option of approving discretionary payments under
the plan to Messrs. Butorac and Mulrooney, and other participants in the plan,
in consideration of special circumstances which may interfere with the
attainment of the annual net income goal. For 1999, the Compensation Committee
has approved the payment of bonuses in the amount of $71,190 to Mr. Butorac and
$62,292 to Mr. Mulrooney.
STOCK OPTIONS
The Tumbleweed, Inc. 1998 Stock Option and Incentive Compensation Plan (the
"Plan") provides for the granting of any of the following awards to eligible
employees or directors of the Company and its subsidiaries: (i) employee stock
options, including both "incentive stock options" within the meaning of Section
422 of the Internal 16 Revenue Code ("ISOs") and options that do not qualify as
ISOs; (ii) automatic grants of options to non-employee directors; (iii) stock
appreciation rights; and (iv) restricted stock and performance stock awards. The
Plan is intended to provide incentives and rewards for employees and directors
to support the implementation of the
14
<PAGE>
Company's business plan and to align the interests of employees and
directors with those of the Company's stockholders.
The Plan is administered by the Compensation Committee. The Committee is
authorized, among other things, to determine employees to whom grants of awards
will be made and take such action as it deems necessary or advisable for the
administration of the Plan. The Committee may also construe, interpret and
correct defects, omissions and inconsistencies in the Plan. The Committee has no
discretion with respect to the terms and conditions of the options granted
automatically to non-employee directors under the Plan.
The Common Stock subject to the Plan will be authorized but unissued shares
or previously acquired shares. The number of shares of Common Stock available
for grant of awards under the Plan equals the greater of 635,000 shares, or 10%
of the number of shares of Common Stock outstanding from time to time, including
100,000 shares reserved for options automatically granted to non-employee
directors under the Plan.
The exercise price of all of the options granted under the Plan prior to
December 17, 1999 was equal to the initial public offering price of $10.00 per
share. The exercise price of grants on and subsequent to that date will be equal
to the closing price of the Company's common stock on the day before the grant,
and will therefore have no realizable value until the trading price increases.
Stock options granted under the Plan will be exercisable for a term of not more
than ten years, as determined by the Committee. The option grants will generally
become exercisable for one-third of the number of shares subject to the option
on each of the first, second and third anniversaries of the date of grant.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the amount of individual compensation for certain executives
that may be deducted by the employer for federal tax purposes in any one fiscal
year to $1 million unless such compensation is "performance-based." The
determination of whether compensation is performance-based depends upon a number
of factors, including stockholder approval of the plan under which the
compensation is paid, the exercise price at which options or similar awards are
granted, the disclosure to and approval by the stockholders of applicable
performance standards, the composition of the Compensation Committee, and
certification by the Compensation Committee that performance standards were
satisfied. The policy of the Company is generally to design its compensation
plans and programs to ensure full deductiblity. The Compensation Committee
attempts to balance this policy with compensation programs designed to motivate
management to maximize stockholder wealth. If the Compensation Committee
determines that the interests of the stockholders are best served by the
implementation of compensation policies that are affected by Section 162(m) of
the Code, Company policies do not restrict the Committee from exercising
discretion in approving compensation packages even though that flexibility may
result in certain non-deductible compensation expenses.
COMPENSATION COMMITTEE
W. Roger Drury, Chair
George R. Keller
Minx Auerbach
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
None of the members of the Compensation Committee during 1999, Ms.
Auerbach, and Messrs. Drury and Keller, has served as an officer or employee of
the Company or any of its subsidiaries. Further, the members of the Compensation
Committee have not engaged in any other transactions with the Company during
1999 outside of their capacity as directors except as disclosed under the
section of this proxy statement entitled "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
15
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the yearly percentage change in the
cumulative total stockholder return on Company Common Stock during 1999,
compared with the Russell 2000 Index and Standard & Poor's Small Cap 600
Restaurants Sector Index. [GRAPHIC OMITTED]
(Note: A line graph appears here depicting the data in the following table.)
19
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------------------------
1/1/99 3/99 6/99 9/99 12/99
<S> <C> <C> <C> <C> <C>
TUMBLEWEED, INC. 100.00 100.00 92.50 74.06 70.00
S & P SMALLCAP 600 RESTAURANTS SECTOR 100.00 94.94 103.54 91.83 84.43
SECTOR
RUSSELL 2000 100.00 89.94 104.83 96.63 98.11
</TABLE>
PROPOSAL 2
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent auditors
for 1999. Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and will have an opportunity
to make a statement if they so desire.
The Board of Directors has selected the firm of Ernst & Young LLP to audit
the books of the Company for the year 2000, subject to stockholder approval.
Ernst & Young LLP has served as the Company's independent auditors since its
inception in December 1997, as well as the independent auditors of the Company's
predecessor, Tumbleweed, LLC, since its inception in 1994.
A majority of the shares represented at the 2001 Annual Meeting of
Stockholders is required to ratify the Board's selection of Ernst & Young LLP as
the Company's independent auditors for the year 2000. The Board of Directors
recommends that stockholders vote "FOR" the proposal. Proxies, unless they
contain contrary written instructions, will be voted "FOR" the proposal.
STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to submit a proposal for action at
the Company's 2001 Annual Meeting of Stockholders and desiring the proposal to
be considered for inclusion in the Company's proxy materials must provide a
written copy of the proposal to the management of the Company at its principal
executive office not later than November 23, 2000, and must otherwise comply
with rules of the Securities and Exchange Commission relating to stockholder
proposals. The proxy or proxies designated by the Company will have
discretionary authority to vote on any matter submitted by a stockholder for
consideration at the 2001 Annual Meeting of Stockholders, unless written notice
of the matter is received by the Company at its principal executive offices not
later than April 1, 2001.
GENERAL
Management does not know of any other business to come before the Annual
Meeting. If, however, other matters do properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying proxy to vote on
such matters in accordance with their best judgment.
A list of stockholders entitled to be present and vote at the Annual
Meeting will be available for inspection by stockholders at the Company's
corporate office located at 1900 Mellwood Avenue, Louisville, Kentucky 40206 for
at least ten days prior to the date of, and will be available at, the Annual
Meeting.
20
<PAGE>
The Annual Report of the Company for 1999 (which is not part of the proxy
soliciting material) is being mailed with this proxy statement to all
stockholders of record as of the record date for the Annual Meeting.
THE COMPANY WILL, UPON THE WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH
WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, AND A LIST OF ALL ITS
EXHIBITS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED
DECEMBER 31, 1999. REQUESTS FOR COPIES SHOULD BE DIRECTED TO INVESTOR RELATIONS,
TUMBLEWEED, INC., 1900 MELLWOOD AVENUE, LOUISVILLE, KENTUCKY 40206.
OTHER BUSINESS
It is not anticipated that any other business will arise during the Annual
Meeting. Management of the Company has no other business to present and does not
know that any other person will present any other business. However, if any
other business properly comes before the stockholders for a vote at the meeting,
proxy holders will vote your shares in accordance with their best judgment.
21
<PAGE>
TUMBLEWEED, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated March 17, 2000, and does hereby
appoint John A. Butorac, Jr. and James M. Mulrooney, and either of them, with
full power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of Tumbleweed, Inc. Common Stock which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of Tumbleweed, Inc., to be held at the Ramada Inn, 1041
Zorn Avenue, Louisville, Kentucky 40207 at 11:00 a.m., local time, on May 11,
2000, and at any adjournment(s) thereof:
1. TO ELECT THREE CLASS I DIRECTORS FOR A TERM OF THREE YEARS, TWO CLASS II
DIRECTORS FOR A TERM OF TWO YEARS, AND THREE CLASS III DIRECTORS FOR A TERM OF
ONE YEAR:
CLASS I: CLASS II: CLASS III:
JOHN A. BUTORAC, JR., GEORGE R. KELLER and MINX AUERBACH
JAMES M. MULROONEY TERRANCE A. SMITH W. ROGER DRURY and
DAVID M. ROTH LEWIS BASS
/ / FOR all nominees above / / WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY ABOVE) TO VOTE FOR ALL NOMINEES LISTED ABOVE.
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR"
BOX ABOVE BUT LINE THROUGH THAT NOMINEE'S NAME IN THE LIST OF NOMINEES ABOVE THE
BOXES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL DIRECTOR NOMINEES LISTED
ABOVE.
2. TO APPROVE THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE YEAR 2000.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL.
(continued on reverse side)
23
<PAGE>
(continued from the other side)
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH
THE DIRECTIONS GIVEN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED FOR ALL DIRECTOR NOMINEES LISTED ABOVE, AND FOR THE APPROVAL OF
ERNST & YOUNG, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR 2000.
Dated: ____________________, 2000.
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
Please sign exactly as your name(s)
appear hereon. If shares are held
jointly, each stockholder named
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, give your full
title as such. If the signatory is
a corporation, sign the full
corporate name by a duly authorized
officer.
PLEASE COMPLETE, DATE, SIGN AND
RETURN THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
23
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