<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
STARBUCKS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[STARBUCKS LOGO]
Seattle, Washington
January 10, 2000
Dear Shareholders:
You are cordially invited to attend the Starbucks Corporation Annual
Meeting of Shareholders on Monday, February 14, 2000 at 10:00 a.m. (Pacific
Time). The meeting will be held at Benaroya Hall, 200 University Street,
Seattle, Washington. Directions to Benaroya Hall appear on the back cover of
this Notice of Annual Meeting and Proxy Statement.
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
Starbucks Corporation's operations and respond to any questions you may have.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED, POSTAGE-PREPAID
ENVELOPE IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED. IF YOU ATTEND THE
MEETING, YOU WILL, OF COURSE, HAVE THE RIGHT TO REVOKE THE PROXY AND VOTE YOUR
SHARES IN PERSON.
Very truly yours,
/s/ HOWARD SCHULTZ
---------------------------
Howard Schultz
chairman and
chief executive officer
<PAGE> 3
STARBUCKS CORPORATION
2401 UTAH AVENUE SOUTH
SEATTLE, WASHINGTON 98134
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ON
FEBRUARY 14, 2000
The Annual Meeting of Shareholders of Starbucks Corporation, (the
"Company") will be held at Benaroya Hall, 200 University Street, Seattle,
Washington, on Monday, February 14, 2000 at 10:00 a.m. (Pacific Time) for the
following purposes:
1. To elect three Class 1 directors to serve until the Annual Meeting of
Shareholders to be held in early 2003;
2. To approve the amendment and restatement of the Starbucks Corporation
Key Employee Stock Option Plan -- 1994 to, among other things, (i)
extend the term of the plan, (ii) increase by 9,000,000 the number of
shares of the Company's Common Stock reserved for issuance under the
plan, (iii) add provisions prohibiting the granting of stock options
with an exercise price below the fair market value of a share of the
Company's Common Stock on the date of grant, or the repricing of stock
options below such fair market value without shareholder approval, and
(iv) update the plan to permit more effective administrative practices;
3. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending October 1, 2000; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on December 10, 1999
will be entitled to notice of and to vote at the Annual Meeting of Shareholders
and any adjournments thereof.
The Company's Proxy Statement is attached hereto. Financial and other
information concerning the Company is contained in the enclosed Annual Report to
Shareholders for the fiscal year ended October 3, 1999.
By Order of the Board of Directors,
/s/ G. SCOTT GREENBURG
----------------------------------
G. Scott Greenburg
secretary
Seattle, Washington
January 10, 2000
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS, YOU
ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED, POSTAGE-PREPAID ENVELOPE TO ENSURE THE
PRESENCE OF A QUORUM FOR THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY, OF
COURSE, REVOKE THE PROXY AND VOTE IN PERSON.
<PAGE> 4
STARBUCKS CORPORATION
2401 UTAH AVENUE SOUTH
SEATTLE, WASHINGTON 98134
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished by and on behalf of the Board of
Directors of Starbucks Corporation, a Washington corporation ("Starbucks" or the
"Company"), in connection with the solicitation of proxies for use at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at
10:00 a.m. (Pacific Time) on Monday, February 14, 2000 at Benaroya Hall, 200
University Street, Seattle, Washington and at any adjournment thereof.
Directions to Benaroya Hall are provided on the back cover of this Proxy
Statement.
A shareholder who delivers an executed proxy pursuant to this solicitation
may revoke it at any time before it is exercised 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. Proxies will be voted as
specified by the shareholder or shareholders granting the proxy. Unless contrary
instructions are specified, if the enclosed proxy is executed and returned (and
not revoked) prior to the Annual Meeting, the shares of common stock, no par
value per share (the "Common Stock"), of the Company represented thereby will be
voted for: (1) the election of the three directors nominated by the Board of
Directors; (2) the approval of the amendment and restatement of the Starbucks
Corporation Key Employee Stock Option Plan -- 1994 (the "Key Employee Plan") as
described in more detail herein; (3) the ratification of the selection of
Deloitte & Touche LLP as the Company's independent auditors for the fiscal year
ending October 1, 2000 ("fiscal 2000"), and in accordance with the best judgment
of the named proxies on other matters properly brought before the Annual
Meeting.
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of Common Stock is required to constitute a quorum for the
transaction of business at the Annual Meeting. Under Washington law and the
Company's Articles of Incorporation, if a quorum is present, a nominee for
election to a position on the Board of Directors will be elected as a director
if the votes cast for the nominee exceed the votes cast against the nominee and
exceed the votes cast for any other nominee for that position. Abstentions and
"broker non-votes" (shares held by a broker or nominee that does not have the
authority, either express or discretionary, to vote on a particular matter) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. For the election of directors,
abstentions and broker non-votes will have the effect of neither a vote for nor
a vote against the nominee. Approval of the amendment and restatement of the Key
Employee Plan, ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors and any other matter that properly comes before
the meeting requires the affirmative vote of a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote on the matter.
Accordingly, abstentions and broker non-votes, because they are not affirmative
votes, will have the effect of votes against the proposal. Proxies and ballots
will be received and tabulated by ChaseMellon Shareholder Services, L.L.C., the
Company's transfer agent and the inspector of elections for the Annual Meeting.
This Proxy Statement and the enclosed proxy card will be first mailed on or
about January 10, 2000 to the Company's shareholders of record on December 10,
1999 (the "Record Date").
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Company. Proxies will be solicited
by mail and may also be solicited by directors, officers and other employees of
the Company, without additional remuneration, in person or by telephone or
facsimile transmission. The Company will also request brokerage firms, banks,
nominees, custodians and fiduciaries to
<PAGE> 5
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. The Company has retained
ChaseMellon Shareholder Services, L.L.C., to aid in the solicitation of proxies
and has agreed to pay ChaseMellon approximately $7,500, plus reasonable
expenses, for such services. Your cooperation in promptly signing and returning
the enclosed proxy card will help to avoid additional expense.
At the close of business on the Record Date, there were 182,642,050 shares
of Common Stock (the "Shares") outstanding and there were no outstanding shares
of any other class of stock. Holders of Shares authorized to vote are entitled
to cast one vote per Share on all matters.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Amended and Restated Bylaws of the Company provide that the Board of
Directors shall be divided into three classes, with such classes to be as nearly
equal in number as the total number of directors constituting the entire Board
permits. As of October 3, 1999, the Company's Board of Directors consisted of
nine members, with three members in each of Classes 1, 2 and 3. Upon the
expiration of the term of a class of directors, nominees for such class are
elected to serve for a term of three years and until their respective successors
have been elected and qualified. The current terms of the Class 1 directors, Mr.
Howard P. Behar, Mr. James G. Shennan, Jr. and Mr. Craig E. Weatherup, expire
upon the election and qualification of the directors to be elected at the Annual
Meeting. The Board of Directors has nominated Mr. Behar, Mr. Shennan and Mr.
Weatherup for reelection to the Board of Directors at the Annual Meeting, to
serve until the Annual Meeting of Shareholders expected to be held in early
2003. The terms of the other Class 2 and Class 3 directors expire at the Annual
Meetings of Shareholders expected to be held in early 2001 and 2002,
respectively.
Unless otherwise directed, the persons named in the proxy intend to vote
all proxies FOR the election of Messrs. Behar, Shennan and Weatherup to the
Board of Directors. The nominees have consented to serve as directors of the
Company 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 that any of the nominees will be unable or will decline to
serve as a director.
Set forth below is certain information furnished to the Company by the
director nominees and by each of the incumbent directors whose terms will
continue following the Annual Meeting.
CLASS 1 DIRECTORS
TERMS EXPIRE AT THE ANNUAL MEETING
HOWARD P. BEHAR, 55, has been a director of the Company since January 1996.
Mr. Behar served as president of Starbucks Coffee International, Inc. from June
1994 until his retirement from this position in late 1999. From February 1993 to
June 1994, Mr. Behar served as the Company's executive vice president, Sales and
Operations. From February 1991 to February 1993, Mr. Behar served as senior vice
president, Retail Operations of the Company and from August 1989 to January
1991, he served as the Company's vice president, Retail Stores.
JAMES G. SHENNAN, JR., 58, has been a director of the Company since March
1990. Mr. Shennan has served as a general partner of Trinity Ventures, a venture
capital organization, since 1989. From 1986 to 1988, he served as the president
and chief executive officer of Addison Consultancy Group, a marketing consulting
firm. Prior to that time, Mr. Shennan served as the president and chief
executive officer of Aidcom International, PLC (a predecessor of Addison
Consultancy Group), a publicly-held marketing services company located in the
United Kingdom and its predecessor, S&O Consultants, an international marketing,
design and research consulting organization. Mr. Shennan also serves on the
Board of Directors of P.F. Chang's China Bistro, Inc. and Quokka Sports, Inc.
CRAIG E. WEATHERUP, 54, has been a director of the Company since February
1999. Mr. Weatherup is the Chairman and Chief Executive Officer of the Pepsi
Bottling Group, Inc. Prior to the spin-off of the Pepsi Bottling Group, Inc. in
early 1999, Mr. Weatherup had worked with PepsiCo, Inc. for
2
<PAGE> 6
24 years and had served as Chief Executive Officer of its worldwide Pepsi-Cola
business. Mr. Weatherup also serves as Director of Federated Department Stores,
Inc.
CLASS 2 DIRECTORS
TERMS EXPIRE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN EARLY 2001
GREGORY B. MAFFEI, 39, has been a director of the Company since February
1999. Mr. Maffei is currently the Senior Vice President, Finance &
Administration and Chief Financial Officer of Microsoft Corporation and has
announced his intention to join Worldwide Fiber, Inc., a global
telecommunications company, as its Chief Executive Officer in January 2000. Mr.
Maffei joined Microsoft in April 1993 as Director, Business Development &
Investments, and has also served as Treasurer and Vice President, Corporate
Development. Mr. Maffei serves as a director of Comcast Corporation, an
entertainment and telecommunications company, Cort Business Services
Corporation, a national provider of rental furniture and Ragen Mackenzie Group
Incorporated, a regional brokerage firm.
ARLEN I. PRENTICE, 62, has been a director of the Company since February
1986. Mr. Prentice is a founder of Kibble & Prentice, Inc., a financial services
firm. Mr. Prentice has served as a co-chairman and the chief executive officer
of Kibble & Prentice, Inc. since June 1972. Mr. Prentice presently serves as a
director of Northland Telecommunications Corporation, a cable television company
providing services through its affiliates to customers in nine states, Percon,
Inc., a distributor of bar code systems, and Flow International Inc., a
manufacturer and distributor of high pressure water jet cutting systems.
ORIN C. SMITH, 57, has been a director of the Company since January 1996.
Mr. Smith has served as president and chief operating officer of the Company
since June 1994. From March 1990 to June 1994, Mr. Smith served as the Company's
vice president and chief financial officer and later as its executive vice
president and chief financial officer. Mr. Smith presently serves as a director
of Oakley, Inc., a designer, manufacturer and distributor of premium performance
sunglasses, footwear, apparel, accessories and watches.
CLASS 3 DIRECTORS
TERMS EXPIRE AT THE ANNUAL MEETING OF SHAREHOLDERS EXPECTED TO BE HELD IN EARLY
2002
BARBARA BASS, 48, has been a director of the Company since January 1996.
Since 1993, Ms. Bass has been the president of Gerson Bakar Foundation. From
1989 to 1992, Ms. Bass was president and chief executive officer of the Emporium
Weinstock Division of Carter Hawley Hale Stores, Inc. She is on the Board of
Directors of DFS Group Limited, a retailer of luxury branded merchandise, The
Bombay Company, Inc., a retailer of traditional furniture and accessories, and
bebe stores, inc., a retailer of contemporary sportswear and accessories.
CRAIG J. FOLEY, 55, has been a director of the Company since March 1990.
Mr. Foley has served as president of Wickham Capital Corp., a venture capital
firm, since February 1994. He has also served as a partner of
Phillips-Smith-Machens Venture Partners, a venture capital firm, since April
1994. From February 1982 to February 1994, Mr. Foley served on the Board of
Directors of Chancellor Capital Management, Inc., (now, Invesco Capital
Management) and, as managing director of its Alternative Asset Management Group,
served as a financial advisor to various entities.
HOWARD SCHULTZ, 46, is the founder of the Company and has been chairman of
the board and chief executive officer since its inception in 1985. From 1985 to
June 1994, Mr. Schultz was also the Company's president. From September 1982 to
December 1985, Mr. Schultz was the director of retail operations and marketing
for Starbucks Coffee Company, a predecessor to the Company; and from January
1986 to July 1987, he was the chairman of the board, chief executive officer,
and president of Il Giornale Coffee Company, a predecessor to the Company. Mr.
Schultz serves on the Board of Directors of the National Association of
Securities Dealers, Inc., eBay, Inc., an internet trading company, and
drugstore.com, an on-line drugstore.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF MESSRS. BEHAR, SHENNAN AND WEATHERUP TO THE BOARD OF DIRECTORS.
3
<PAGE> 7
COMMITTEES
During the fiscal year ended October 3, 1999 ("fiscal 1999"), the Company's
Board of Directors had standing Compensation and Audit Committees, but did not
have a standing nominating committee. The members of each Committee and the
functions performed thereby are described below:
Compensation Committee. Mr. Prentice, Ms. Bass and Mr. Foley served on the
Compensation Committee until February 1999. After that time, the Compensation
Committee was comprised of Mr. Prentice (Chairman), Ms. Bass and Mr. Maffei. The
Compensation Committee is responsible for setting compensation philosophy for
the Company and determining compensation and other benefits for the Company's
senior executive officers. The Compensation Committee also administers the
Company's stock option and stock purchase plans, as well as the Executive
Management Bonus Plan (the "EMB Plan").
Audit Committee. Mr. Shennan, Ms. Bass and Mr. Jeffrey Brotman served on
the Audit Committee until February 1999. After that time, the Audit Committee
was comprised of Mr. Shennan (Chairman), Mr. Foley and Mr. Weatherup. The Audit
Committee reviews the planned scope of the services of the Company's independent
auditors, reviews financial statements and the auditors' opinion letter,
recommends the independent auditors for the following fiscal year, reviews the
recommendations of the independent auditors relating to accounting, internal
controls, and other matters and reviews internal controls and accounting
procedures with the Company's financial staff.
During fiscal 1999, the Compensation Committee met four times and held two
telephonic meetings, the Audit Committee met three times, and the Board of
Directors met four times and held three telephonic meetings. Each director
attended at least 75% percent of all Board meetings and meetings of Committees
on which they served.
4
<PAGE> 8
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the beneficial
ownership of Common Stock of the Company of (i) those persons known by
management of the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) the directors of the Company, (iii) the executive
officers named in the Summary Compensation Table set forth in the "Executive
Compensation" section of this Proxy Statement, and (iv) all current directors
and officers of the Company as a group. Such information is provided as of
December 1, 1999 except for Capital Research & Management's information which is
provided as of September 30, 1999. According to the rules adopted by the
Securities and Exchange Commission, a person is the "beneficial owner" of
securities if he or she has or shares the power to vote them or to direct their
investment or has the right to acquire beneficial ownership of such securities
within 60 days through the exercise of an option, warrant, right of conversion
of a security or otherwise. 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%, based upon 182,624,785 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
<S> <C> <C>
Capital Research & Management.............. 10,770,000 5.9%
Howard Schultz............................. 7,466,776(2) 4.0%
Orin C. Smith.............................. 981,737(3) *
Barbara Bass............................... 127,000(4) *
Howard P. Behar............................ 412,068(5) *
Craig J. Foley............................. 157,400(6) *
Gregory B. Maffei.......................... 0 *
Arlen I. Prentice.......................... 393,676(7) *
James G. Shennan, Jr....................... 389,596(8) *
Craig E. Weatherup......................... 10,000 *
John Richards.............................. 167,096(9) *
Michael Casey.............................. 283,506(10) *
All Directors and Executive Officers as a
Group (31 persons)....................... 12,972,716(11) 6.8%
</TABLE>
- ---------------
(1) The address of Capital Research & Management is 333 South Hope Street,
55th Floor, Los Angeles, California, 90071-1447. The address of the
directors and executive officers listed is 2401 Utah Avenue South,
Seattle, Washington 98134.
(2) Includes 3,673,330 shares subject to options exercisable on or before
January 30, 2000.
(3) Includes 970,000 shares subject to options exercisable on or before
January 30, 2000.
(4) Includes 120,000 shares subject to options exercisable on or before
January 30, 2000.
(5) Includes 400,000 shares subject to options exercisable on or before
January 30, 2000.
(6) Includes 155,000 shares subject to options exercisable on or before
January 30, 2000.
(7) Includes 39,000 shares held by the Prentice Family Partnership, a general
partnership in which Mr. Prentice serves as a general partner, and 216,000
shares subject to options exercisable on or before January 30, 2000.
(8) Includes 46,660 shares held by Trinity Ventures II, L.P., a partnership of
which Mr. Shennan is a general partner, 13,896 shares held by Trinity
Ventures III, L.P., a partnership of which Mr. Shennan is a general
partner, and 54,360 shares held by the Shennan Family Partnership, a
partnership of which Mr. Shennan is a general partner, as well as 186,800
shares subject to options exercisable on or before January 30, 2000.
(9) Includes 166,668 shares subject to options exercisable on or before
January 30, 2000.
(10) Includes 266,568 shares subject to options exercisable on or before January
30, 2000.
(11) Includes 8,502,812 shares subject to options exercisable on or before
January 30, 2000.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to or earned by the
Company's chief executive officer and its four other most highly compensated
executive officers whose salary and bonus exceeded $100,000 in fiscal 1999
(collectively referred to herein as the "Named Executive Officers") during each
of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
NUMBER OF
SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR ($) ($) OPTIONS(1) ($)
--------------------------- ----------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
HOWARD SCHULTZ..................... 1999 778,846(2) 0 800,000 25,361(3)
chairman and 1998 750,000 425,250 1,050,000 25,461(3)
chief executive officer 1997 740,385 487,500 800,000 26,241(3)
ORIN C. SMITH...................... 1999 623,077(2) 0 600,000 1,600(4)
president and 1998 600,000 425,250 600,000 1,600(4)
chief operating officer 1997 592,308 360,000 600,000 1,848(4)
HOWARD P. BEHAR.................... 1999 373,846(2) 0 200,000 0
president, Starbucks 1998 360,000 226,800 300,000 1,600(5)
Coffee International, Inc. 1997 355,962 180,000 300,000 2,346(5)
JOHN RICHARDS...................... 1999 465,385 0 200,000 24,292(7)
president, Retail North 1998 400,000 179,704 0 75,096(7)
America 1997 0(6) 125,000(6) 250,000 0
MICHAEL CASEY...................... 1999 413,462 0 200,000 2,359(8)
executive vice president, 1998 332,212 175,000 150,000 17,501(8)
chief financial officer and 1997 273,510 110,000 40,000 3,398(8)
chief administrative officer
</TABLE>
- ---------------
(1) The number of options granted for all years presented has been adjusted to
reflect the two-for-one stock split effected by the Company in March 1999.
(2) The annual base salaries of Messrs. Schultz, Smith and Behar did not change
from their base salaries in fiscal 1998 although actual amounts paid varied
because of the Company's payroll schedule.
(3) The amounts shown include (i) matching contributions by the Company to the
Company's 401(k) Plan on behalf of Mr. Schultz of $1,600, $1,600 and $2,130
in fiscal 1999, 1998 and 1997 respectively, and (ii) unreimbursed payments
by the Company of the insurance premium for a split dollar life insurance
policy originally issued in 1991 of $23,761, $23,861, and $24,111 in fiscal
1999, 1998 and 1997, respectively.
(4) The amounts shown represent matching contributions by the Company to the
Company's 401(k) Plan on behalf of Mr. Smith.
(5) The amounts shown represent matching contributions by the Company to the
Company's 401(k) Plan on behalf of Mr. Behar.
(6) Mr. Richards joined the Company on September 15, 1997 and did not receive
any salary during fiscal 1997. He earned a $125,000 bonus pursuant to the
terms of the offer letter to him dated August 22, 1997.
(7) The amounts shown represent (i) relocation expenses paid to Mr. Richards in
accordance with the offer letter to him dated August 22, 1997 of $21,324 and
$75,096 in fiscal 1999 and 1998, respectively, and (ii) a matching
contribution by the Company to the Company's 401(k) Plan on behalf of Mr.
Richards of $2,968 in fiscal 1999. Mr. Richards was not eligible to
participate in the Company's 401(k) Plan during fiscal 1997 or fiscal 1998.
(8) The amounts shown include (i) relocation expenses of $16,667 paid to Mr.
Casey in fiscal 1998, and (ii) matching contributions by the Company to the
Company's 401(k) Plan on behalf of Mr. Casey of $2,359 and $3,398 in fiscal
1999 and 1998, respectively.
6
<PAGE> 10
STOCK OPTION GRANTS IN FISCAL 1999
The following table sets forth information regarding options granted to the
Company's Named Executive Officers during fiscal 1999 to purchase shares of the
Company's Common Stock. The Company has no outstanding stock appreciation
rights. In accordance with the rules of the Securities and Exchange Commission,
the table shows the hypothetical "gains" or "option spreads" that would exist
for the respective options based on assumed rates of annual stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
NUMBER OF PERCENT OF OPTION TERM(2)
SECURITIES TOTAL OPTIONS ----------------------------
UNDERLYING OPTIONS GRANTED TO EXERCISE PRICE EXPIRATION FIVE PERCENT TEN PERCENT
NAME GRANTED(1) EMPLOYEES PER SHARE DATE ($) ($)
---- ------------------ ------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Howard Schultz....... 800,000(3) 10.3 $21.47 11/13/08 10,801,290 27,372,591
Orin C. Smith........ 600,000(4) 7.7 $21.47 11/13/08 8,100,968 20,529,443
Howard P. Behar...... 200,000(5) 2.6 $21.47 11/13/08 2,700,323 6,843,148
John Richards........ 200,000(6) 2.6 $21.47 11/13/08 2,700,323 6,843,148
Michael Casey........ 200,000(7) 2.6 $21.47 11/13/08 2,700,323 6,843,148
</TABLE>
- ---------------
(1) The number of options granted in fiscal 1999 has been adjusted to reflect
the two-for-one stock split effected by the Company in March 1999.
(2) Potential realizable value is based on the assumption that the price of the
Company's Common Stock appreciates at the rate shown (compounded annually)
from the date of grant to the expiration date. These numbers are presented
in accordance with the requirements of the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
performance.
(3) Mr. Schultz's options become exercisable in one 266,668 share increment on
September 28, 1999, and two 266,666 share increments on September 28, 2000
and 2001.
(4) Mr. Smith's options become exercisable in three 200,000 share increments on
September 28 of 1999, 2000 and 2001.
(5) Mr. Behar's options became exercisable in one 200,000 share increment on
September 28, 1999.
(6) Mr. Richards' options become exercisable in one 66,668 share increment on
September 28, 1999 and two 66,666 share increments on September 28, 2000 and
2001.
(7) Mr. Casey's options become exercisable in one 66,668 share increment on
September 28, 1999 and two 66,666 share increments on September 28, 2000 and
2001.
7
<PAGE> 11
EXERCISES OF STOCK OPTIONS
The following table sets forth information regarding stock option exercises
during fiscal 1999 by the Named Executive Officers and the value of each Named
Executive Officer's exercised and unexercised stock options on October 3, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT FISCAL YEAR END(2)
SHARES ACQUIRED OPTIONS AT FISCAL YEAR END ($)
ON EXERCISE VALUE REALIZED(1) --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard Schultz....... 520,000 7,669,593 3,673,330 1,149,998 44,872,899 4,763,535
Orin C. Smith........ 473,200 8,148,298 970,000 800,000 5,869,716 3,225,000
Howard P. Behar...... 266,672 3,838,136 400,000 200,000 1,803,130 1,112,500
John Richards........ 0 0 166,668 283,332 388,550 666,150
Michael Casey........ 90,600 1,527,759 246,568 243,332 1,760,278 1,310,205
</TABLE>
- ---------------
(1) Value realized is calculated by subtracting the aggregate exercise price of
the options exercised from the aggregate market value of the shares of
Common Stock acquired on the date of exercise.
(2) The value of unexercised options is calculated by subtracting the aggregate
exercise price of the options from the aggregate market value of the shares
of Common Stock subject thereto as of October 1, 1999 (the last trading day
prior to the Company's fiscal year end on October 3, 1999).
COMPENSATION OF DIRECTORS
During fiscal 1999, directors who are not executive officers of the Company
received no cash compensation for their services. Such directors participate in
the Starbucks Corporation Amended and Restated 1989 Stock Option Plan for
Non-Employee Directors (the "Directors Plan"). Under the terms of the Directors
Plan, non-employee directors are annually awarded stock options to purchase
shares of Common Stock at a per share exercise price equal to the fair market
value on the date of grant. During the fiscal year ended October 3, 1999, each
of Messrs. Foley, Prentice and Shennan and Ms. Bass received options to purchase
20,000 shares of Common Stock (40,000 after giving effect to the Company's
two-for-one stock split effected in March 1999) at an exercise price of $52.50
per share ($26.25 per share post stock split).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, Ms. Bass, Mr. Maffei and Mr. Prentice had no
relationships or transactions with the Company or its subsidiaries required to
be disclosed pursuant to Item 402(j) of Regulation S-K promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
During fiscal 1999, the Compensation Committee of the Board of Directors
was responsible for setting compensation philosophy and determining base salary,
bonus, long-term incentive compensation and other benefits for the chief
executive officer and other senior executive officers. The Compensation
Committee is comprised of three directors, each of whom qualifies as an "outside
director" under Section 162(m) of the
- ---------------
* The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as amended,
or the Exchange Act (together, the "Acts"), except to the extent that the
Company specifically incorporates such report by reference; and further, such
report shall not otherwise be deemed filed under the Acts.
8
<PAGE> 12
Internal Revenue Code ("Section 162(m)") and as a "non-employee director" under
Rule 16b-3 promulgated under the Exchange Act.
COMPENSATION COMPONENTS: The Compensation Committee believes that executive
officer compensation should be closely aligned with the performance of the
Company on both a short-term and long-term basis, and that such compensation
should assist the Company in attracting and retaining key executives critical to
its long-term success. To that end, the Committee's policy is that the
compensation package for executive officers should consist of three components:
(i) annual base salary, (ii) incentive bonuses, the amount of which is dependent
on both Company and individual performance during the prior fiscal year, and
(iii) stock option awards designed to align management's interests with those of
shareholders by rewarding outstanding performance and providing long-term
incentives for the Company's key employees.
The Compensation Committee establishes total annual compensation for the
chief executive officer and other senior executive officers after reviewing each
component of such executive's compensation against executive compensation
surveys prepared by outside compensation consultants. The surveys used for
comparison reflect compensation levels and practices for persons holding
comparably responsible positions at targeted peer group companies. The
compensation comparator group is not limited to companies listed on the National
Market tier of The Nasdaq Stock Market, Inc., and includes an array of companies
in specialty retail and other industries, with high growth and strong brand
image characteristics. Seven of the eighteen companies used to provide
competitive compensation data are included in the indices reflected in the
performance graph required by Item 402(1) of Regulation S-K and set forth on
page 11 of this Proxy Statement. In addition to reviewing senior executive
officers' compensation against the comparator group, the Compensation Committee
also solicits appropriate input from the Company's president and chief operating
officer regarding total compensation for those executives who report directly to
him.
TOTAL COMPENSATION: For fiscal 1999, the Compensation Committee determined
that total compensation for executive officers (the sum of base salary,
incentive bonus, and long-term compensation delivered through stock option
awards) should be targeted between the 75th and 90th percentiles of selected
peer group companies. The Committee may, at its discretion, award compensation
in excess of or less than the target. Base salary and incentive bonus were
targeted at the 50th percentile of peer group companies so that more than a
proportionate amount of total compensation is awarded through a long-term
incentive vehicle. This strategy is intended to be competitive with other high
performing organizations and to enable the Company to attract, reward and retain
exceptional talent. For this period, the aggregate of Mr. Schultz' base salary,
incentive bonus and stock options was within the competitive target range.
BASE SALARY: Base salaries for executive officers are reviewed on an annual
basis and at the time of promotion or other increase in responsibilities.
Increases in salary are based on subjective evaluation of such factors as the
level of responsibility, individual performance, level of pay, and Company peer
group pay levels. In fiscal 1999, base salary for Mr. Schultz was determined in
accordance with the factors above. During this period, Mr. Schultz's actual base
salary was $750,000, approximating the competitive target of the 50th percentile
of compensation paid by targeted peer group companies. Mr. Schultz's annual base
salary did not change from his salary in fiscal 1998 (although the actual amount
paid in fiscal 1999 and reflected in the Summary Compensation Table varied
because of the Company's payroll schedule).
INCENTIVE BONUS: Incentive bonuses are generally granted based on a
percentage of each executive officer's base salary. During fiscal 1999, the
chief executive officer, president and chief operating officer, president of
Starbucks Coffee International, Inc. (who has now retired), president Retail
North America (now the president of North American Operations), and executive
vice presidents of the Company participated in the EMB Plan. As part of their
employment agreements, the entering president of Starbucks Coffee International,
Inc. and president, Consumer Products (who has now been appointed to serve as
the president, Retail North America) are eligible to participate in the EMB Plan
beginning in fiscal 2000. The EMB Plan was designed to meet the requirements of
Section 162(m) that impose a limitation on the deductibility of
non-performance-based compensation in excess of $1 million paid to the chief
executive officer and the four other most highly paid officers of the Company
unless such compensation qualifies as "performance-based compensation."
9
<PAGE> 13
The Compensation Committee selects participants and establishes objective
performance measures, bonus target percentages, and other terms and conditions
of awards under the EMB Plan. Target bonus amounts are expressed as a percentage
of base salary and are established according to the overall intended competitive
position and competitive survey data for comparable positions in peer group
companies. For fiscal 1999, the bonus targets for participating officers ranged
from 50% to 100% of base salary depending on position, with a maximum bonus
payout pursuant to the achievement of the objective performance goal of
$1,000,000. Mr. Schultz' target was increased over his target for fiscal 1998 to
place a greater portion of his potential cash compensation at risk and make such
compensation dependant upon the Company's performance. After the end of the
performance period, the Committee determines the extent to which the performance
goals were achieved and determines the amount of the award that is payable.
Seventy percent (70%) of the target bonus is based on specified objective
performance measures selected by the Compensation Committee each fiscal year. In
fiscal 1999, the objective performance measure was earnings per share of $1.23
(subject to adjustment for the two-for-one stock split effected in March 1999
and for significant acquisitions or dispositions). Thirty percent (30%) of the
target bonus is based on specific subjective performance goals for each officer,
which change somewhat each year according to the strategic plan initiatives and
the responsibilities of the positions. Relative weights assigned to each
performance goal typically range from 5% to 35%. Mr. Schultz' goals for fiscal
1999 related to achievement of the operating plan, increasing return on invested
assets and managing organizational development.
The bonus payout award is determined according to the level of achievement
of both the objective performance measure and subjective performance goals.
Below a threshold of performance, no awards may be granted pursuant to the
objective performance measure and the Compensation Committee may reduce the
awards pursuant to individual subjective performance goals. In fiscal 1999, the
objective performance measure was not met at the minimum level of 90% and the
Compensation Committee exercised its discretion to modify the amount of bonus
earned pursuant to the achievement of subjective performance goals so that the
total bonus payout for all executive officers was reduced to zero. Certain
executive officers, none of whom participated in the EMB Plan in fiscal 1999,
received guaranteed bonus payments pursuant to their offer letters to join the
Company.
STOCK OPTIONS: In fiscal 1999, long-term, performance-based compensation of
executive officers took the form of option awards under the Company's Key
Employee Plan. The Compensation Committee believes that equity-based
compensation ensures that the Company's executive officers have a continuing
stake in the long-term success of the Company. All options granted by the
Company have been granted with an exercise price equal to or in excess of the
closing price of the Company's Common Stock on the date of grant and,
accordingly, will have value only if the Company's stock price increases.
In granting options under the Key Employee Plan, the Compensation Committee
bases the size of stock option awards on such considerations as the value of
options awarded to comparable positions in peer group companies, Company and
individual performance against plan, the number of options currently held by the
officer, the allocation of overall share usage attributed to executive officers,
and the relative proportion of long-term incentives within the total
compensation mix. For fiscal 1999, Mr. Schultz was granted an aggregate of
400,000 options to purchase shares of Common Stock (800,000 after giving effect
to the Company's two-for-one stock split effected in March 1999). These options
and those shown in the Summary Compensation Table and the Option Grants in
Fiscal 1999 Table for the other Named Executive Officers were granted in
November 1998 and reflect the Company's and such officers' performance for
fiscal 1998. Mr. Schultz' and the other Named Executive Officers' subsequent
grants of stock options in October 1999 reflected performance for fiscal 1999
and were of substantially lesser amounts.
Respectfully submitted,
Arlen I. Prentice, Chairman
Barbara Bass
Gregory Maffei
10
<PAGE> 14
PERFORMANCE GRAPH
The following graph depicts the Company's total return to shareholders from
September 30, 1994 through October 3, 1999, relative to the performance of the
Nasdaq Stock Market (U.S. Companies) Index, the Nasdaq Eating and Drinking
Establishments Index, and the Nasdaq Retail Index. All indices shown in the
graph have been reset to a base of 100 as of September 30, 1994 and assume an
investment of $100 on that date and the reinvestment of dividends paid since
that date. The Company has not ever paid cash dividends on its Common Stock. The
points represent fiscal year end index levels based on the last trading day in
each such fiscal year. The chart set forth below was prepared by Georgeson
Shareholder Communications, Inc., which holds a license to use the indices used
herein.
[GRAPH]
<TABLE>
<CAPTION>
NASDAQ RETAIL NASDAQ EATING AND NASDAQ STOCK MARKET STARBUCKS CORPORATION
------------- DRINKING ------------------- ---------------------
ESTABLISHMENTS
-----------------
<S> <C> <C> <C> <C>
9/30/94 100.00 100.00 100.00 100.00
9/29/95 128.00 108.00 138.00 164.00
10/1/96 146.00 109.00 163.00 305.00
9/28/97 210.00 99.00 225.00 353.00
9/27/98 203.00 68.00 235.00 311.00
10/3/99 176.00 67.00 372.00 416.00
</TABLE>
CERTAIN TRANSACTIONS AND INDEBTEDNESS OF MANAGEMENT
The Pepsi Bottling Group purchases and distributes bottled Frappuccino(R)
coffee drink, a product produced by the North American Coffee Partnership, a
joint venture between the Company and the Pepsi-Cola Company, a division of
PepsiCo, Inc., (the "NACP"). Mr. Craig E. Weatherup is the Chairman and Chief
Executive Officer of the Pepsi Bottling Group, Inc. During fiscal 1999,
Starbucks had sales of approximately $9 million to the NACP and the NACP had
sales of approximately $91 million to the Pepsi Bottling Group, Inc.
In connection with Mr. David Frost's relocation to Seattle, Washington to
join the Company as senior vice president, New Business Development, the Company
extended a short-term, interest-free bridge loan to Mr. Frost in the amount of
$325,764 on September 3, 1999. The full principal amount of the loan becomes due
and payable on March 1, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Securities and Exchange Commission 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").
Officers, directors, and greater than 10% shareholders of the Company are
required by Securities and Exchange Commission regulations to
11
<PAGE> 15
furnish to the Company copies of all Section 16(a) reports that they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners were complied with for the
fiscal year ended October 3, 1999 except that (i) Mr. Howard Wollner was late in
reporting 2,494 shares held indirectly on his Form 3, (ii) Mr. David Frost's
Form 3 was filed late, (iii) Mr. Weatherup was late in reporting the acquisition
of 10,000 shares in an open market transaction in July 1999, and (iv) Mr. Smith
was late in reporting gifts of 9,000 stock options to family members made in
August 1999.
PROPOSAL 2 -- APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE STARBUCKS
CORPORATION KEY EMPLOYEE STOCK OPTION PLAN -- 1994
The Board of Directors proposes that the shareholders approve an amendment
and restatement of the Key Employee Plan. The amendments to the Key Employee
Plan include, among other things: (i) an extension of the term of the Key
Employee Plan, (ii) an increase in the number of shares of Common Stock reserved
for issuance pursuant to options issued under the Key Employee Plan from
26,050,000 to 35,050,000, (iii) the addition of provisions prohibiting the
granting of stock options with an exercise price below the fair market value of
a share of the Company's Common Stock at the date of grant, or the repricing of
stock options below such fair market value without shareholder approval, and
(iv) updates to the Key Employee Plan to permit more effective administrative
practices. The proposed amendments to the Key Employee Plan are detailed in the
following description. A copy of the Key Employee Plan reflecting the proposed
amendments may be obtained by sending a written request to the Company's
Investor Relations Department at the address listed on page 16 of this Proxy
Statement.
The number of shares of Common Stock reserved for issuance under the Key
Employee Plan prior to the proposed amendment and restatement is 26,050,000, of
which approximately 4.5 million shares remain available for future stock option
grants. The Board believes that stock options are essential to attract and
retain the most talented personnel available for positions of substantial
responsibility, to encourage ownership of the Common Stock by employees of the
Company and its subsidiaries and to promote the Company's success by providing
both rewards for exceptional performance and long-term incentives for future
contributions. The Board of Directors believes that the number of shares
currently available for issuance will be insufficient to achieve the purposes of
the Key Employee Plan unless additional shares are authorized. The Board
approved the amendment to the number of shares reserved under the Key Employee
Plan, from 26,050,000 to 35,050,000, on December 28, 1999. The Board adopted
this increase in shares reserved for issuance under the Key Employee Plan, and
recommends its approval by the shareholders, in order to allow the Company to
continue to offer stock options to key employees and consultants as part of its
overall compensation package.
DESCRIPTION OF THE KEY EMPLOYEE PLAN
The Key Employee Plan provides for the grant of both incentive stock
options and nonqualified stock options (as those terms are described below) to
employees of and consultants to the Company and its subsidiaries. The Key
Employee Plan as originally adopted was to be effective for a ten-year period
ending on September 27, 2004. The proposed amendment and restatement of the Key
Employee Plan would extend the term of the Key Employee Plan until December 28,
2009.
The Board or a Committee of the Board comprised of two or more non-employee
directors may administer the Key Employee Plan. Currently, the Compensation
Committee of the Board administers the Key Employee Plan. The Board or the
Committee has authority to administer and interpret the Key Employee Plan and to
determine the form and substance of agreements, instruments and guidelines for
the administration of the Key Employee Plan. The Board or the Committee has
authority to determine the employees and consultants to be granted stock options
under the Key Employee Plan and to determine the size, type and applicable terms
and conditions of such grants. In addition, the Board or the Committee may
engage a qualified brokerage or other financial services firm to assist it in
the administration of the Key Employee Plan. The proposed amendment and
restatement of the Key Employee Plan would permit the
12
<PAGE> 16
Board to delegate authority to an executive officer of the Company to authorize
stock option grants within specified guidelines established by the Board or the
Committee from time to time to employees who are not "officers" of the Company
(as such term is defined in Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended). This provision is intended to facilitate the
approval and processing of routine stock option grants to newly hired or
promoted individuals in a timely manner.
Because the employees and consultants who may receive stock option grants
and the amount of such grants are determined by the Board or the Committee from
time to time, it is not possible to state the names or positions of, or the
number of options that may be granted to, the employees of and consultants to
the Company and its subsidiaries. However, the maximum number of options to
purchase shares of Common Stock that may be granted to any employee or
consultant in any one year is 1,000,000.
The Board, the Committee or the designated executive officer is authorized
to establish the time or times at which stock options may be exercised and
whether all of the stock options become exercisable at one time or in increments
over time at the time each grant is made. The exercise price of stock options
shall be set by the Board, the Committee or the designated executive officer at
the time of the granting of an option, provided, however, that the exercise
price may not be less than the fair market value of a share of Common Stock on
the date of grant. Although it has been the Company's practice to grant stock
options at no less than the fair market value of a share of Common Stock on the
date of grant, the proposed amendment and restatement of the Key Employee Plan
includes a provision that may not be amended without shareholder approval
explicitly requiring that grants be made at such fair market value. In the event
of a stock dividend, stock split, reverse stock split or similar capital
adjustment, the Key Employee Plan provides for appropriate adjustments to the
number of shares reserved for issuance pursuant to the exercise of stock
options, the number of stock options previously granted and the exercise price
of stock options previously granted.
The closing price of the Company's Common Stock on the National Market Tier
of The Nasdaq Stock Market, Inc. on December 20, 1999 was $26.00.
The term of stock options granted under the Key Employee Plan may not be
more than ten (10) years from the date of grant. Options expire upon the
earliest to occur of (i) three months following termination of employment, (ii)
immediately upon the discharge of an optionee for misconduct that is willfully
or wantonly harmful to the Company or any subsidiary, (iii) twelve months after
an optionee's death or disability that renders the optionee incapable of
continuing employment, (iv) upon the expiration date specified in the optionee's
grant agreement, or (v) ten years after the date of grant.
The aggregate exercise price of options may be paid (i) in cash or by
tendering shares of Starbucks Common Stock that have been held by the optionee
for a least six months and that have a fair market value of at least the
aggregate exercise price, (ii) by requesting that the designated brokerage firm
conduct a cashless exercise, or (iii) in the case of nonqualified stock options
only, by requesting that the Company withhold sufficient shares of Common Stock
to pay the aggregate exercise price and by providing an attestation that the
optionee has held a number of shares equal to the number to be withheld to pay
the aggregate exercise price for at least six months. Optionees exercising
nonqualified options must also pay the Company, at the time of exercise, the
amount of federal, state, and local withholding taxes required to be withheld by
the Company. Optionees may pay such amount in cash, by tendering shares held six
months or more, by requesting that the designated brokerage firm forward payment
of such taxes from the proceeds of a cashless exercise or by requesting that the
Company withhold shares of Common Stock that have a fair market value on the
date of exercise equal to the amount required to be withheld and providing an
attestation that the optionee has held an equivalent number of shares for at
least six months.
Stock options granted under the Key Employee Plan may not be transferred by
the optionee or by operation of law other than (i) by will of or by the laws of
descent and distribution applicable to a deceased optionee, (ii) pursuant to a
domestic relations order, or (iii) in the case of nonqualified stock options
only, by gift to a family member of the optionee or certain trusts, foundations
or other entities owned or controlled by members of the optionee's family.
13
<PAGE> 17
Notwithstanding any vesting requirements of granted options, in the event
of a change of control of the Company such as (i) a significant change in
ownership structure, (ii) a change in the membership of the Board so that the
incumbent members cease to constitute at least two-thirds of the members of the
Board, (ii) the execution of a definitive agreement providing for a merger,
consolidation or reorganization of the Company in which there is a significant
change in ownership structure or membership of the Board, (iii) the complete
liquidation or dissolution of the Company, or (iv) the execution of a definitive
agreement providing for the sale or other disposition of all or substantially
all of the assets of the Company, then all stock options outstanding shall
become immediately and fully exercisable.
The Key Employee Plan and all rules, guidelines and regulations adopted
with respect thereto may be terminated, suspended, modified or amended at any
time by a majority vote of the Board or the Committee, provided, however, that
(i) any increase in the number of shares reserved for issuance pursuant to
options granted under the Key Employee Plan (other than in connection with a
change in capitalization), and (ii) any change that would permit the exercise
price of stock options to be set at an amount less than fair market value on the
date of grant must be approved by the shareholders of the Company. The Board or
the Committee may amend the terms and conditions of outstanding stock options as
long as such amendments do not (i) adversely affect the holders of such stock
options without such holders' consent, (ii) change the length of the term of
such stock options or (iii) change the provisions of such stock options so that
they are not permitted under the Key Employee Plan. In addition to these
changes, the Board or the Committee may approve modifications, amendments,
procedures and sub-plans that may be necessary or advisable to comply with the
provisions of laws in other countries in which the Company or its subsidiaries
operates or has employees or consultants.
The Key Employee Plan and the grant and exercise of stock options
thereunder and the obligations of the Company to issue and deliver shares of
Common Stock are subject to all applicable laws, rules and regulations and to
such approvals by any governmental agencies as may be required. Except for
circumstances in which Federal law governs, the Key Employee Plan shall be
governed by and construed in accordance with the laws of the State of
Washington.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE KEY EMPLOYEE PLAN
The federal income tax consequences of an optionee's participation in the
Key Employee Plan are complex and subject to change. The following discussion is
a summary of the general rules applicable to stock options. Recipients of stock
options under the Key Employee Plan should consult their own tax advisors
because a taxpayer's particular situation may be such that some variation of the
general rules would apply.
INCENTIVE STOCK OPTIONS
Incentive stock options qualify for favorable tax treatment for the
optionee under Section 422 of the Internal Revenue Code of 1986 as amended (the
"Code"). Nonqualified stock options are any stock options that do not qualify as
"incentive stock options" and will not qualify for any special tax benefits to
the optionee. The federal income tax consequences of an employee's participation
in the Key Employee Plan are discussed below.
Optionees will not recognize any income upon either the grant or the
exercise of incentive stock options and the Company may not take a deduction for
federal tax purposes with respect to such grant or exercise. Upon the sale of
the shares of Common Stock obtained through the exercise of incentive stock
options by the optionee, the tax treatment to the optionee and the Company will
depend primarily upon whether the optionee has met certain holding period
requirements at the time he or she sells the shares. In addition, as discussed
below, the exercise of incentive stock options may subject the optionee to
alternative minimum tax liability.
If an optionee exercises incentive stock options and does not dispose of
the shares received within two years after the date of the grant of such stock
options or within one year after the issuance of the shares to him or her, any
gain realized upon disposition will be characterized as long-term capital gain.
In such case, the Company will not be entitled to a federal tax deduction. If
the optionee disposes of the shares either within two years after the date that
the options are granted or within one year after the issuance of the shares to
him or her, such disposition will be treated as a disqualifying disposition and
an amount equal to the lesser of
14
<PAGE> 18
(i) the fair market value of the shares on the date of exercise minus the
exercise price, or (ii) the amount realized on the disposition minus the
exercise price, will be taxed as ordinary income to the optionee in the taxable
year in which the disposition occurs. The excess, if any, of the amount realized
upon disposition over the fair market value at the time of the exercise of the
stock options will be treated as long-term capital gain if the shares have been
held for more than one year following the exercise of the stock options. In the
event of a disqualifying disposition, the Company may withhold income taxes from
the optionee's compensation with respect to the ordinary income realized by the
optionee as a result of the disqualifying disposition.
The exercise of incentive stock options may subject an optionee to
alternative minimum tax liability because the excess of the fair market value of
the shares at the time incentive stock options are exercised over the exercise
price of the stock options is included in income for purposes of the alternative
minimum tax, even though it is not included in the taxable income for purposes
of determining the regular tax liability of an optionee. Consequently, an
optionee may be obligated to pay alternative minimum tax in the year he or she
exercises incentive stock options.
In general, there will be no federal income tax deductions allowed to the
Company upon the grant, exercise, or termination of incentive stock options.
However, in the event an optionee sells or disposes of stock received upon the
exercise of incentive stock options in a disqualifying disposition, the Company
is entitled to a deduction for federal income tax purposes in an amount equal to
the ordinary income, if any, recognized by the optionee upon disposition of the
shares, provided that the deduction is not otherwise disallowed under the Code.
NONQUALIFIED STOCK OPTIONS
Nonqualified stock options granted under the Key Employee Plan do not
qualify for any special tax benefits to the optionee. An optionee will not
recognize any taxable income at the time he or she is granted nonqualified stock
options. Upon the exercise of nonqualified stock options, however, the optionee
will recognize ordinary income for federal tax purposes measured by the excess
of the then fair market value of the shares acquired over the aggregate option
exercise price. The income realized by the optionee will be subject to income
tax withholding by the Company out of the current earnings paid to the optionee.
If such earnings are insufficient to pay the tax, the optionee will be required
to make a direct payment to the Company for tax liability.
The optionee's basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of nonqualified stock options
will be the amount paid for such shares plus any ordinary income recognized as a
result of the exercise of such stock options. Upon a disposition of any shares
acquired pursuant to the exercise of nonqualified stock options, the difference
between the aggregate sale price and the optionee's basis in the shares will be
treated as a capital gain or loss and will be characterized as long-term capital
gain or loss if the shares have been held for more than one year at the date of
their disposition.
In general, there will be no federal tax consequences to the Company upon
the grant or termination of nonqualified stock options or a sale or disposition
of the shares acquired upon the exercise of nonqualified stock options. Upon the
exercise of nonqualified stock options, however, the Company will be entitled to
a deduction for federal income tax purposes equal to the amount of ordinary
income that an optionee is required to recognize as a result of the exercise,
provided that the deduction is not otherwise disallowed under the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE KEY EMPLOYEE PLAN.
PROPOSAL 3 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of Deloitte & Touche LLP to serve as the Company's independent auditors for the
fiscal year ending October 1, 2000. Deloitte & Touche LLP examined the
consolidated financial statements of the Company for the fiscal year ended
October 3, 1999. Representatives of Deloitte & Touche LLP will be present at the
Annual Meeting to make a statement
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<PAGE> 19
if they desire to do so and to respond to questions by shareholders. The
affirmative vote of a majority of the shares represented at the meeting is
required for the ratification of the Board's selection of Deloitte & Touche LLP
as the Company's independent auditors for the fiscal year ending October 1,
2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting of Shareholders. 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 to be presented at the Company's next Annual Meeting
of Shareholders and included in the Company's Proxy Statement relating to such
meeting must be received by the Company at its executive offices at 2401 Utah
Avenue South, Seattle, Washington 98134, Attention: Office of the General
Counsel, on or prior to September 2, 2000.
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K
The Company's Annual Report to Shareholders for the fiscal year ended
October 3, 1999 (which is not a part of the Company's proxy soliciting
materials) is being mailed to the Company's shareholders with this Proxy
Statement. A copy of the Company's Annual Report on Form 10-K, without exhibits,
will be furnished without charge to shareholders upon request to:
Investor Relations
Starbucks Corporation
2401 Utah Avenue South
Seattle, Washington 98134
(206) 447-1575 x7118
By Order of the Board of Directors,
/s/ G. SCOTT GREENBURG
-----------------------------------
G. Scott Greenburg
Secretary
Seattle, Washington
January 10, 2000
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<PAGE> 20
DIRECTIONS TO THE STARBUCKS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
AT
BENAROYA HALL
200 UNIVERSITY STREET, SEATTLE, WASHINGTON
AT
10:00 A.M. (PACIFIC TIME)
ON
FEBRUARY 14, 2000
TRAVELING SOUTH ON I-5:
- Take Union Street exit
- Continue to Third Avenue or Second Avenue
- The Hall is on your left
TRAVELING NORTH ON I-5:
- Take Seneca Street exit
- Continue on Seneca to Third Avenue and turn right
- The Hall is on your left
TRAVELING FROM I-90 WESTBOUND:
- Merge onto I-5 going north
- Take Madison Street exit and turn left on Madison Street
- Continue on Madison to Third Avenue
- Turn right on Third Avenue and continue to University Street
- The Hall is on your left
LIMITED PARKING IS AVAILABLE AT YOUR EXPENSE AT THE FOLLOWING GARAGES:
Benaroya Hall Parking Garage: Entrance on Second Avenue between Union
Street and University Street, with elevator access to the hall.
Cobb/Puget Sound Plaza Garage: Entrance on University Street, between Third
Avenue and Fourth Avenue.
Washington Mutual Tower Garage: Entrance on Seneca Street, between Second
Avenue and Third Avenue.
<PAGE> 21
APPENDIX A
STARBUCKS CORPORATION
AMENDED AND RESTATED
KEY EMPLOYEE STOCK OPTION PLAN -- 1994
1. PURPOSES OF THE PLAN
The purposes of the Starbucks Corporation Amended and Restated Key Employee
Stock Option Plan -- 1994 (the "Plan") are (i) to attract and retain the most
talented personnel available for positions of substantial responsibility, (ii)
to encourage ownership of the Company's Common Stock by key Employees of and
Consultants to the Company and its Subsidiaries, and (iii) to promote the
Company's business success by providing both rewards for exceptional performance
and long-term incentives for future contributions.
2. DEFINITIONS
Capitalized terms used in this Plan shall have the following meanings:
"ACT" shall mean the Securities Act of 1933, as amended from time to time,
or any replacement act or legislation.
"BENEFICIAL OWNERSHIP" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE IN CONTROL" shall mean the occurrence during the term of the Plan
of:
(a) an acquisition (other than directly from the Company) of any
voting securities of the Company by any Person, after which such Person has
Beneficial Ownership of twenty-five percent (25%) or more of the then
outstanding Shares or the combined voting power of the Company's then
outstanding voting securities; provided, however, that in determining
whether a Change in Control has occurred, Shares or voting securities that
are acquired in a Non-Control Acquisition shall not constitute an
acquisition that would cause a Change in Control;
(b) a change in the membership of the Board so that the members of the
Incumbent Board cease to constitute at least two-thirds of the members of
the Board;
(c) the execution of a definitive agreement providing for a merger,
consolidation or reorganization with or into the Company or in which
securities of the Company are issued, unless such merger, consolidation or
reorganization is a Non-Control Transaction;
(d) the consummation of a complete liquidation or dissolution of the
Company; or
(e) the execution of a definitive agreement providing for the sale or
other disposition of all or substantially all of the assets of the Company
to any Person (other than the transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Shares or voting securities as a result
of the acquisition of Shares or voting securities by the Company which, by
reducing the number of Shares or voting securities outstanding, increases the
percentage of shares Beneficially Owned by the Person. If a Change in Control
would occur (but for the operation of the preceding sentence) as a result of the
acquisition of Shares or voting securities by the Company, and after such share
acquisition by the Company the Person becomes the Beneficial Owner of any
additional Shares or voting securities which increases the percentage of the
then outstanding Shares or voting securities Beneficially Owned by the Person,
then a Change in Control shall be deemed to have occurred.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any replacement act or legislation.
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<PAGE> 22
"COMMITTEE" shall mean the Compensation Committee of the Board of Directors
or another committee appointed by the Board comprised of not less than two
Non-Employee Directors.
"COMMON STOCK" shall mean the common stock, no par value per share, of
Starbucks Corporation.
"COMPANY" shall mean Starbucks Corporation.
"CONSULTANT" shall mean any person engaged by the Company as a non-employee
service provider pursuant to the terms of a written agreement.
"DISABILITY" means:
(a) in the case of an Optionee whose employment with the Company or a
Subsidiary is subject to the terms of an employment or consulting agreement
between such Optionee and the Company or Subsidiary that includes a
definition of "Disability," the term "Disability" as used in this Plan or
any Agreement shall have the meaning set forth in such employment or
consulting agreement during the period that such employment or consulting
agreement remains in effect; and
(b) in all other cases, the term "Disability" as used in this Plan
shall mean a physical or mental condition resulting from bodily injury,
disease, or mental disorder which renders the Optionee incapable of
continuing his or her employment with the Company or a Subsidiary, as the
case may be.
"EMPLOYEE" means any person employed by the Company or any Subsidiary,
including those individuals whose services as an Employee have been temporarily
interrupted due to any authorized leave of absence.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time, or any replacement act or legislation.
"FAIR MARKET VALUE" of the Common Stock shall be the price per share of the
Common Stock on the National Market tier of The Nasdaq Stock Market, Inc. at the
close of regular trading. The Board or the Committee may designate a different
time or method of determining the Fair Market Value if appropriate because of
changes in the hours and methods of trading on The Nasdaq Stock Market, Inc. If
the Common Stock ceases to be listed on The Nasdaq Stock Market, Inc., the Board
or the Committee shall designate an alternative exchange, stock market or method
of determining the fair market value of the Common Stock.
"FAMILY MEMBER" shall include any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Optionee's household (other than a tenant or an employee), a trust in which
these persons have more than fifty percent (50%) of the beneficial interest, a
foundation in which these persons (or the Optionee) control the management of
assets, and any other entity in which these persons (or the Optionee) own more
than fifty percent (50%) of the voting interests.
"INCENTIVE STOCK OPTION" shall mean any stock option that qualifies as an
"incentive stock option" within the meaning of Section 422 of the Code.
"INCUMBENT BOARD" shall mean the individuals who are members of the Board
as of December 28, 1999 and any new director whose election or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the Incumbent Board. No individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened election contest (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board,
including any individual who assumed office by means of an agreement intended to
avoid or settle any election or proxy contest.
"NON-CONTROL ACQUISITION" shall mean an acquisition by:
(a) an employee benefit plan (or a trust forming a part thereof)
maintained by the Company or any Subsidiary;
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<PAGE> 23
(b) the Company or any Subsidiary; or
(c) any Person in connection with a merger, consolidation or
reorganization with or into the Company or in which securities of the
Company are issued in which:
(i) the shareholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or reorganization, at
least fifty percent (50%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger, consolidation or reorganization in substantially the same
proportion as their ownership of the voting securities immediately
before such merger, consolidation or reorganization;
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds
of the members of the board of directors of the corporation resulting
from such merger, consolidation or reorganization, or a corporation with
direct or indirect Beneficial Ownership of a majority of the voting
securities of such corporation; and
(iii) no Person other than (A) the Company, (B) any Subsidiary, (C)
any employee benefit plan (or any trust forming a part thereof) that,
immediately prior to such merger, consolidation or reorganization, was
maintained by the Company or any Subsidiary, or (D) any Person who,
immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty-five percent (25%) or more of the then
outstanding voting securities or Shares, has Beneficial Ownership of
twenty-five percent (25%) or more of the combined voting power of the
then outstanding voting securities or common stock of the corporation
resulting from such merger, consolidation or reorganization.
"NON-EMPLOYEE DIRECTOR" shall mean any member of the Board who qualifies as
a non-employee director as that term is defined in Rule 16b-3 promulgated
pursuant to the Exchange Act or any replacement rule promulgated under the
Exchange Act.
"NONQUALIFIED STOCK OPTION" shall mean any Stock Option that does not
qualify or is not intended to qualify as an Incentive Stock Option.
"OFFICER" shall have the meaning ascribed to that term in Rule 16a-1(f)
promulgated under the Exchange Act.
"OPTIONEE" shall mean an Employee or Consultant who has received a Stock
Option pursuant to this Plan.
"PERSON" shall mean an individual or a business entity, including, without
limitation, a corporation, trust, estate or partnership, as such term is used
for purposes of Section 13(d) or 14(d) of the Exchange Act.
"PLAN" shall mean the Starbucks Corporation Amended and Restated Key
Employee Stock Option Plan -- 1994, including any country specific rules
approved and adopted by the Board or the Committee, as such plan and
country-specific rules may be amended and restated from time to time.
"SHARE" shall mean one share of the Company's Common Stock.
"STOCK OPTION" shall mean the right to purchase one Share at a fixed
exercise price and may refer to either an Incentive Stock Option or a
Nonqualified Stock Option.
"SUBSIDIARY" shall mean any subsidiary of the Company.
3. GENERAL PROVISIONS APPLICABLE TO STOCK OPTIONS
3.1 TERM OF THE PLAN.
The Starbucks Corporation Key Employee Stock Option Plan -- 1994, as
originally adopted in September 1994, was to be effective for a ten year period
ending on September 26, 2004. As amended and
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<PAGE> 24
restated, the Plan shall be effective until December 28, 2009. The termination
of the Plan at that time shall not affect Stock Options previously granted, and
Stock Options to purchase Shares granted prior to the termination of the Plan
shall be governed by the terms of the Plan upon its termination.
3.2 SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.
Subject to any adjustment pursuant to the provisions of Section 3.7 of the
Plan, the maximum aggregate number of Shares reserved for issuance upon the
exercise of Stock Options granted pursuant to this Plan is 35,050,000. Shares
subject to Stock Options that are forfeited through expiration, termination of
employment or otherwise shall be available for issuance pursuant to other Stock
Options granted under this Plan. Any increase in the maximum aggregate number of
Shares reserved for issuance pursuant to the exercise of Stock Options granted
under the Plan shall be approved and recommended by the Board and approved by
the Shareholders of the Company.
3.3 ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board or a Committee duly
appointed by the Board. The Board or the Committee shall have the authority to
determine the form and substance of agreements, instruments and guidelines for
the administration of the Plan. The Board or the Committee shall have authority
to determine the Employees and Consultants to be granted Stock Options under the
Plan, to determine the size, type, and applicable terms and conditions of grants
to be made to such Employees and Consultants, to determine when Stock Options
will be granted, and to authorize grants to Employees and Consultants. In
addition, the Board or the Committee may engage a qualified brokerage or other
financial services firm to assist in the administration of the Plan.
(b) The Board may delegate authority to an Officer of the Company to
authorize Stock Option grants within specified guidelines established by the
Board or the Committee from time to time to Employees who are not Officers of
the Company.
(c) The Board or the Committee may delegate to an administrator or
administrators those clerical and administrative functions that may be legally
delegated to such administrator or administrators.
(d) The Board's or the Committee's interpretation of the Plan, and all
actions taken and determinations made by the Board or the Committee, as the case
may be, concerning any matter arising under or with respect to this Plan or any
Stock Options granted pursuant to this Plan, shall be final, binding, and
conclusive on all interested parties, including the Company, its shareholders,
and all former, present, and future Employees or Consultants of the Company. The
Board or the Committee may, as to questions of accounting, rely conclusively
upon any determinations made by the independent public accountants of the
Company.
(e) The grant of Stock Options pursuant to this Plan shall be entirely in
the discretion of the Board, the Committee or an Officer designated by the
Board, as the case may be, and nothing herein contained shall be construed to
give any Employee or Consultant any right to receive Stock Options under this
Plan. The maximum number of Stock Options that may be granted to any Optionee in
any one year hereunder is 1,000,000. The granting of Stock Options pursuant to
this Plan shall not constitute any agreement or an understanding, express or
implied, on the part of the Company or a Subsidiary to employ the Optionee for
any specified period.
3.4 EFFECT OF A CHANGE IN CONTROL
(a) In the event of a Change in Control, all Stock Options outstanding on
the date of such Change in Control shall become immediately and fully
exercisable and shall remain exercisable in accordance with Section 3.6.
(b) This Section 3.4 above applies to any Stock Option granted or Change in
Control occurring after February 14, 2000, provided, however, that in the event
that the adoption of Section 3.4 is considered to be an alteration of equity
interests in contemplation of a pooling of interests transaction, the adoption
of Section 3.4 will automatically be rescinded. Upon the rescission of the
adoption of Section 3.4 set forth above, the effect of
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<PAGE> 25
a merger, consolidation, tender offer or takeover bid shall be governed by the
terms of Section 2.5 of the Starbucks Corporation Key Employee Stock Option Plan
- -- 1994 Plan in effect prior to February 14, 2000.
3.5 TERMS AND EXPIRATION OF OPTIONS.
Stock Options granted under this Plan shall be evidenced by a written grant
agreement and:
(a) shall be exercisable only by the Optionee, the Optionee's personal
representative or a permitted transferee;
(b) shall not be transferable by the Optionee or by operation of law
other than (i) by will of, or by the laws of descent and distribution
applicable to, a deceased Optionee, (ii) pursuant to a domestic relations
order; or (iii) in the case of Nonqualified Stock Options, by gift to a
Family Member of the Optionee;
(c) unless transferred as permitted by Section 3.5(b), shall
automatically terminate and expire upon any other sale or transfer, any
other attempted sale or transfer or upon the bankruptcy or insolvency of
the Optionee or Optionee's estate;
(d) shall grant no right to the Optionee to receive any dividend on or
to vote or exercise any right with respect to any Shares unless and until
the Optionee has exercised Stock Options for such Shares and Beneficial
Ownership of such Shares has been transferred to the Optionee;
(e) shall expire at the earliest of the following:
(i) three (3) months after voluntary or involuntary termination of
Optionee's employment as either an Employee or Consultant other than
termination as described in subparagraphs (ii) or (iii) below;
(ii) immediately upon the discharge of Optionee for misconduct,
willfully or wantonly harmful to the Company or Subsidiary;
(iii) twelve (12) months after Optionee's death or Disability;
(iv) upon the expiration date specified in the Optionee's written
grant agreement; or
(v) ten (10) years from the date of grant;
(f) shall to the extent that such Stock Options vest and become
exercisable in increments, stop vesting as of the date of the Optionee's
death, Disability, or termination of Optionee's employment as an Employee
or Consultant;
(g) shall not be affected by any changes of duties or position so long
as the Optionee shall continue to be employed as an Employee or Consultant
by the Company or a Subsidiary; and
(h) shall have an exercise price determined by the Board, the
Committee or a designated Officer, as the case may be, at the time the
grant is made, that is not less than the Fair Market Value of a Share on
the date of grant.
3.6 EXERCISE OF OPTIONS
An Optionee, an Optionee's personal representative or a permitted
transferee desiring to exercise Stock Options granted and exercisable hereunder
shall notify the Company or, if required by the Company, the brokerage firm
designated by the Company to facilitate exercises and sales under this Plan,
specifying the number of Stock Options to be exercised. The notification to the
brokerage firm shall be made in accordance with procedures of such brokerage
firm approved by the Company. The notification to the Company or the designated
brokerage firm shall be accompanied by (i) payment of the aggregate exercise
price of the Stock Options in cash or by tender of Shares that have been held by
the Optionee for at least six (6) months that have an aggregate Fair Market
Value of at least the aggregate exercise price, (ii) a request that the
designated brokerage firm conduct a cashless exercise of the Stock Options, or
(iii) in the case of Nonqualified Stock
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<PAGE> 26
Options only, a request that the Company withhold sufficient Shares to pay the
aggregate exercise price and an attestation that the Optionee or the permitted
transferee has held a number of shares equal to the number to be withheld to pay
the aggregate exercise price for at least six (6) months. Payment of the
aggregate exercise price by means of tendering or attesting to the ownership of
previously-owned shares of the Company's common stock shall not be permitted
when the same may, in the reasonable opinion of the Company, cause the Company
to record a loss or expense as a result thereof.
3.7 RECAPITALIZATION.
The aggregate number of Shares reserved for issuance pursuant to Stock
Options granted hereunder, the number of Stock Options previously granted
hereunder and the exercise price per Share for each Stock Option previously
granted hereunder shall be proportionately adjusted for an increase or decrease
in the number of outstanding shares of Common Stock resulting from a stock split
or reverse split or any other capital adjustment. The Board may, in its
discretion, authorize the proportionate adjustment to the maximum number of
Stock Options that may be granted to an Optionee in any one year. If the
exercise of the adjusted number of Stock Options results in an obligation of the
Company to issue a fractional Share, the number of Shares to be issued shall be
rounded to the nearest whole number. Under no circumstances shall the Company be
obligated to issue fractional shares pursuant to the exercise of Stock Options
granted under this Plan. All adjustments made pursuant to this Section shall be
determined by the Board or the Committee, whose determination in that respect
shall be final, binding, and conclusive.
3.8 SUBSTITUTIONS AND ASSUMPTIONS.
The Board or the Committee shall have the right to substitute or assume
Stock Options in connection with mergers, reorganizations, separations, or other
"corporate transactions" as that term is defined in and said substitutions and
assumptions are permitted by Section 424 of the Code and the regulations
promulgated thereunder.
3.9 AMENDMENT OR TERMINATION OF THE PLAN.
This Plan and all rules, guidelines, and regulations adopted with respect
hereto may be terminated, suspended, modified, or amended at any time by a
majority vote of the Board or the Committee, provided, however, that the
following modifications or amendments require approval of or ratification by the
shareholders of the Company: (i) any increase in the number of Shares reserved
for issuance pursuant to Stock Options granted under the Plan, other than in
connection with any adjustment under Section 3.7 of this Plan; and (ii) any
change in Section 3.5(h) that would permit the exercise price of Stock Options
to be set at an amount less than Fair Market Value of a Share of Common Stock on
the date of grant. The Board or the Committee may amend the terms and conditions
of outstanding Stock Options, provided, however, that (i) no such amendment
would adversely affect the holders of such Stock Options without the holders'
consent, (ii) no such amendment shall change the length of the term of a Stock
Option, and (iii) the amended provisions of such Stock Options would be
permitted under this Plan.
3.10 WITHDRAWAL.
An Optionee may at any time elect in writing to abandon Stock Options that
have not yet been exercised.
3.11 GOVERNMENT REGULATIONS.
This Plan and the grant and exercise of Stock Options hereunder and the
obligations of the Company to issue and deliver Shares pursuant to such Stock
Options shall be subject to all applicable laws, rules, and regulations and to
such approvals by any governmental agencies as may be required.
4. PROVISIONS APPLICABLE SOLELY TO NONQUALIFIED STOCK OPTIONS
In addition to the provisions of Section 3 above, the following paragraph
shall apply to all Stock Options granted under this Plan that are not Incentive
Stock Options.
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<PAGE> 27
4.1 METHOD OF PAYMENT OF EXERCISE PRICE AND TAXES.
The amount to be paid by the Optionee, his or her personal representative
or permitted transferee upon the exercise of Nonqualified Stock Options shall be
the full aggregate exercise price thereof, together with the amount of federal,
state, and local income and FICA taxes required to be withheld by the Company.
The Optionee, his or her personal representative or permitted transferee may
elect to pay the federal, state, or local income and FICA withholding tax in
cash, by having the designated brokerage firm forward payment of such taxes to
the Company from the proceeds of a cashless exercise, or by having the Company
withhold Shares having a Fair Market Value at the time of exercise equal to the
amount required to be withheld, such withholding to be done at the minimum tax
rate required under applicable law. If Shares are to be withheld to pay required
taxes, the Optionee, his or her personal representative or permitted transferee
must deliver an attestation that the Optionee or permitted transferee has held a
number of Shares equal to the number to be withheld to pay such taxes for at
least six (6) months.
5. PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS
In addition to the provisions of Section 3 above, the following paragraphs
shall apply to all Stock Options granted under this Plan that are Incentive
Stock Options.
5.1 CONFORMANCE WITH INTERNAL REVENUE CODE.
Incentive Stock Options granted under this Plan shall conform to, be
governed by, and be interpreted in accordance with the Code and any regulations
promulgated thereunder as amended from time to time, including, without
limitation, those provisions of Section 422 of the Code that prohibit an
Incentive Stock Option by its terms to be exercisable after ten (10) years from
the date that it was granted. Only Employees of the Company or of a "subsidiary
corporation" within the meaning of Section 424(f) of the Code may be granted
Incentive Stock Options hereunder. To the extent that Stock Options granted
hereunder as Incentive Stock Options fail to conform to the foregoing
requirements, such Stock Options shall be treated as Nonqualified Stock Options.
5.2 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS.
The aggregate Fair Market Value of shares subject to Incentive Stock
Options (determined on the date of grant) that vest in any one calendar year
(under this Plan or any other plan of the Company that authorizes Incentive
Stock Options) shall not exceed the maximum amount allowed in any one year by
the Code in connection with the grant of Incentive Stock Options.
5.3 LIMITATION ON GRANTS TO SUBSTANTIAL SHAREHOLDERS.
An Employee may not, immediately prior to the grant of Incentive Stock
Options hereunder, own stock in the Company representing more than ten percent
(10%) of the voting power of all classes of stock of the Company unless the
exercise price per Share specified by the Board or the Committee, as the case
may be, for Incentive Stock Options granted to such an Employee is at least one
hundred ten percent (110%) of the Fair Market Value of the Company's Common
Stock on the date of grant and such Stock Options, by their terms, are not
exercisable after the expiration of five (5) years from the date of grant. For
purposes of this limitation, Section 425(d) of the Code governs the attributes
of stock ownership.
6. FOREIGN EMPLOYEES OR CONSULTANTS
Without amending the Plan, the Board or the Committee may grant Stock
Options to eligible Employees or Consultants who are foreign nationals on such
terms and conditions not inconsistent with those specified in this Plan as may,
in the judgment of the Board or the Committee, as the case may be, be necessary
or desirable to foster and promote achievement of the purposes of the Plan. In
furtherance of such purposes, the Board or the Committee may approve such
modifications, amendments, procedures, sub-plans, and the like as may be
necessary or advisable to comply with the provisions of the laws in other
countries in which the Company operates or has Employees or Consultants.
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<PAGE> 28
7. COSTS AND EXPENSES
Except as provided herein with respect to the payment of taxes, all costs
and expenses of administering the Plan shall be borne by the Company.
8. GOVERNING LAW
Except for circumstances in which Federal law governs, this Plan shall be
governed by and construed in accordance with the laws of the State of
Washington.
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PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
STARBUCKS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Howard Schultz and Orin C. Smith
(collectively, the "Proxies"), and each of them, with full power of
substitution, as proxies to vote the shares which the undersigned is entitled to
vote at the Annual Meeting of the Company to be held at Benaroya Hall on Monday,
February 14, 2000 at 10:00 a.m. (Pacific Time) and at any adjournments thereof.
Such shares shall be voted as indicated with respect to the proposals listed on
the reverse side hereof and in the Proxies' discretion on such other matters as
may properly come before the meeting or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 30
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF DIRECTORS: FOR WITHHOLD
Class 1 Directors: Howard P. all nominees AUTHORITY
Behar, James G. Shennan, Jr. listed (except to vote for
and Craig E. Weatherup as withheld) nominees listed
[ ] [ ]
WITHHOLD AUTHORITY To Vote for the following Directors:
- -------------------------------------------------------
2. Proposal to approve the amendment and restatement of the Starbucks
Corporation Key Employee Stock Option Plan - 1994 to, among other
things, (i) extend the term of the plan, (ii) increase by 9,000,000 the
number of shares of the Company's Common Stock reserved for issuance
under the plan, (iii) add provisions prohibiting the granting of stock
options with an exercise price below the fair market value of a share
of the Company's Common Stock on the date of grant, or the repricing of
stock options below such fair market value without shareholder
approval, and (iv) update the plan to permit more effective
administrative practices.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to ratify the selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending October 1,
2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
This proxy, when properly signed, will be voted in the manner directed herein by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3. IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY.
Signature(s) Dated: 2000.
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When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
an authorized person.
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- FOLD AND DETACH HERE -
<PAGE> 31
ADDENDUM 1
NOTICE OF CHANGE
(PLEASE READ AS PART OF PROPOSAL 2 OF THE ENCLOSED PROXY STATEMENT)
Proposal 2 requesting approval of the amendment and restatement of the
Starbucks Corporation Key Employee Stock Option Plan - 1994 (the "Key Employee
Plan") has been changed to reflect the deletion from the proposed Key Employee
Plan of the provision in Section 3.1 extending the term to December 28, 2009.
THE KEY EMPLOYEE PLAN WILL NOW TERMINATE ON ITS ORIGINAL TERMINATION DATE OF
SEPTEMBER 27, 2004. Please disregard all references to the proposed extension of
the Key Employee Plan in the Proxy Statement for the Annual Meeting of
Shareholders to be held on February 14, 2000.
