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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
TULLY'S COFFEE CORPORATION
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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/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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11*
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
* Set forth the amount on which the filing fee is calculated and
state how it was determined.
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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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TULLY'S COFFEE CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 14, 2000
---------------------
Dear Shareholder:
The 2000 Annual Meeting of Shareholders of Tully's Coffee Corporation
("Tully's" or the "Company") will be held at the Company's offices located at
3100 Airport Way South in Seattle, Washington, on September 14, 2000 at 10:00
a.m. for the following purposes:
1. To elect directors to serve until the next annual meeting of
shareholders and until their respective successors are duly elected;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent accountants for the fiscal year ending April 1, 2001; and
3. To conduct any other business that may properly come before the
meeting.
If you were a shareholder of record on July 10, 2000, you will be entitled
to vote on these matters. A list of shareholders as of the record date will be
available for shareholder inspection at the Company's offices, 3100 Airport Way
South, Seattle, Washington, during ordinary business hours until the date of our
Annual Meeting. The list also will be available for inspection at the Annual
Meeting.
At the meeting, you will have an opportunity to ask questions about the
Company and the current state of our business. Regardless of the number of
shares you own, your vote is important. Please sign, date and return the proxy
card in the enclosed envelope at your earliest convenience.
Details of the business to be conducted at the meeting are more fully
described in the accompanying Proxy Statement.
We look forward to seeing you. Thank you for your ongoing support of and
interest in Tully's.
Sincerely,
Tom T. O'Keefe
CHAIRMAN & CHIEF EXECUTIVE OFFICER
August 15, 2000
Seattle, Washington
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TULLY'S COFFEE CORPORATION
3100 AIRPORT WAY SOUTH
SEATTLE, WASHINGTON 98134
------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD SEPTEMBER 14, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS AND
PROPOSAL ONE: ELECTION OF DIRECTORS........................ 4
Proposal One: Election of Directors......................... 4
Nominees.................................................... 7
The Board of Directors...................................... 7
The Committees of the Board................................. 7
How We Compensate Directors................................. 7
Security Ownership of Management and Other Beneficial
Owners..................................................... 7
Executive Officer Compensation.............................. 9
Option Grants in Fiscal Year 2000........................... 10
Aggregated Option Values as of Fiscal Year-End 2000......... 10
Report of Compensation Committee on Executive
Compensation............................................... 10
Certain Relationships and Related Transactions.............. 11
Section 16(a) Beneficial Ownership Reporting Compliance..... 12
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS................................................ 12
OTHER BUSINESS.............................................. 13
SOLICITATION OF PROXIES..................................... 13
PROPOSALS OF SHAREHOLDERS................................... 13
ADDITIONAL INFORMATION...................................... 13
</TABLE>
IMPORTANT
Whether or not you expect to attend in person, we urge you to vote your
Proxy at your earliest convenience. VOTING YOUR PROXY WILL ENSURE THE PRESENCE
OF A QUORUM AT THE MEETING AND WILL SAVE THE COMPANY THE EXPENSES AND EXTRA WORK
OF ADDITIONAL SOLICITATION. Voting your Proxy will not prevent you from voting
your stock at the meeting if you desire to do so, as your Proxy is revocable at
your option.
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
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Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this Proxy Statement and the enclosed proxy card
because Tully's board of directors is soliciting your proxy
to vote at the 2000 Annual Meeting of Shareholders.
This Proxy Statement summarizes the information regarding
the matters to be voted upon at the Annual Meeting. You do
not need to attend the Annual Meeting, however, to vote your
shares. You may simply complete, sign and return the
enclosed proxy card.
If you owned shares of Tully's stock at the close of
business on July 10, 2000, our record date, you are entitled
to vote the shares that you owned as of that date. On the
record date, there were 15,628,582 shares of our common
stock outstanding and 15,378,264 shares of our Series A
Preferred Stock outstanding. We mailed this Proxy Statement
to all shareholders entitled to vote their shares at the
Annual Meeting on or about August 15, 2000.
Q: HOW MANY VOTES DO I HAVE?
A: You have one vote for each share of Tully's common stock
that you owned on the record date. If you owned Series A
Convertible Preferred Stock on the record date, you have one
vote for each share of common stock into which shares of
Series A Preferred Stock were convertible on the record
date. Your proxy card will indicate the number of shares you
have which are eligible for voting. Also, the votes that are
attributable to your Series A Preferred Stock may be
cumulated in the vote for the election of directors, if you
wish. The method for doing so is described on your proxy
card.
Q: HOW DO I VOTE BY PROXY?
A: If you properly fill in your proxy card and deliver it to us
by the time of the Annual Meeting on September 14, 2000,
your "proxy" (one of the individuals named on your proxy
card) will vote your shares as you have directed. If you
sign the proxy card but do not make specific choices, your
proxy will vote your shares as recommended by the Board as
follows:
- "FOR" electing all ten nominees for director;
- "FOR" ratifying PriceWaterhouseCoopers LLP as our
independent accountants for the fiscal year ending
April 1, 2001.
If any other matter is presented at the Annual Meeting, your
proxy will vote in accordance with his best judgment. At the
time we printed this Proxy Statement, we knew of no matters
that needed to be acted on at the Annual Meeting other than
those discussed in this Proxy Statement.
Q: MAY MY BROKER VOTE FOR ME?
A: Under the rules of the National Association of Securities
Dealers, if your broker holds your shares in its "street"
name, the broker may vote your shares on Proposals 1 and 2
even if it does not receive instructions from you.
Q: MAY I REVOKE MY PROXY?
A: Yes. You may change your mind after you send in your proxy
card by following these procedures. To revoke your proxy:
1. Send in another signed proxy with a later date;
2. Send a letter revoking your proxy to our corporate
secretary at our offices in Seattle, Washington; or
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3. Attend the Annual Meeting and vote in person.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and
transacting business is a majority of the outstanding shares
entitled to be voted. The shares may be present in person or
represented by proxy at the meeting. Both abstentions and
broker non-votes are counted as present for the purpose of
determining the presence of a quorum. Generally, broker
non-votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular
proposal because (1) the broker has not received voting
instructions from the beneficial owner, or (2) the broker
lacks discretionary voting power to vote such shares.
Q: WHAT IS THE EFFECT OF ABSTENTIONS AND BROKER NON-VOTES?
A: Abstentions and broker non-votes will have no effect on the
election of directors or the voting on the other proposal to
be voted upon by shareholders at the Annual Meeting.
Q: HOW DO I VOTE IN PERSON?
A: If you plan to attend the Annual Meeting and vote in person,
we will give you a ballot when you arrive. If your shares
are held in the name of your broker, bank or other nominee,
you must bring an account statement or letter from that
broker, bank or nominee. The account statement or letter
must show that you were the direct or indirect (beneficial)
owner of the shares on July 10, 2000, the record date for
voting.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
A: The ten nominees for director who receive the most votes
will be elected. So, if you do not vote for a nominee, or
you indicate "withhold the vote" for a nominee on your proxy
card, your vote will not count either "for" or "against" the
nominee.
A majority of the shares of our common stock voting at the
Annual Meeting is required to ratify the selection of
PricewaterhouseCoopers LLP as our accountants for fiscal
year ending April 1, 2001. So, if you do not vote, or if
you abstain from voting, it has no effect on this vote.
Q: WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?
A: We will pay all the costs of soliciting these proxies.
Although we are mailing these proxy materials, our officers
and employees may also solicit proxies by telephone, by fax
or other electronic means of communication, or in person. We
will reimburse banks, brokers, nominees and other
fiduciaries for the expenses they incur in forwarding the
proxy materials to you.
Q: WHO SHOULD I CALL IF I HAVE ANY QUESTIONS?
A: If you have any questions about the Annual Meeting or
voting, or your ownership of Tully's stock, please contact
Jeanine Butler Garrett at (206) 233-2070.
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INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS AND
PROPOSAL ONE: ELECTION OF DIRECTORS
The names, ages and positions of the executive officers and directors of
Tully's Coffee are listed below along with a description of their recent
employment history and business experience.
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<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
Tom T. O'Keefe............................ 46 Chairman of the Board of Directors and
Chief Executive Officer
Marc Evanger.............................. 45 Vice President--Corporate Planning and
Development and Director
Stephen R. Griffin........................ 43 Vice President--Finance, Chief Financial
Officer & Secretary
Graham Anderson........................... 67 Director
Larry A. Culver........................... 58 Director
Robert J. Holmes.......................... 55 Director
Lawrence L. Hood.......................... 41 Director
George Hubman............................. 57 Director
Keith McCaw............................... 45 Director
Richard J. Padden......................... 47 Director
James Cameron Towne....................... 57 Director
</TABLE>
Executive officers are elected by our board of directors and hold office
until their respective successors are elected and duly qualified.
The Company's current non-director executive officer is:
STEPHEN R. GRIFFIN--VICE PRESIDENT--FINANCE, CHIEF FINANCIAL OFFICER AND
SECRETARY. Mr. Griffin joined Tully's in 1994. From 1989 to 1994, Mr. Griffin
served in various capacities at Olympic Management Company, including chief
operating officer, from 1992 to 1994 and vice president controller and treasurer
for Olympic and its affiliates, a diverse group of real estate entities, from
1989 to 1992. He was director of acquisitions for Hillhaven Corporation from
1983 to 1989 and with Arthur Andersen & Co prior to that. Mr. Griffin is a
graduate of the University of Washington with a BA in Business Administration.
PROPOSAL ONE: ELECTION OF DIRECTORS
Tully's board of directors currently consists of ten members. Ten directors
are to be elected at the annual meeting, to hold office until the next annual
meeting of shareholders and until their successors are elected and qualified. It
is intended that the accompanying proxy will be voted in favor of the following
persons to serve as directors unless the shareholder indicates to the contrary
on the proxy. Management expects that each of the nominees will be available for
election, but if any of them is not a candidate at the time the election occurs,
it is intended that such proxy will be voted for the election of another nominee
to be designated by the board of directors to fill any such vacancy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES NAMED BELOW
FOR DIRECTORS OF THE COMPANY.
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NOMINEES
TOM T. O'KEEFE--CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. Tom T.
O'Keefe is the founder of Tully's Coffee. He has served as chief executive
officer and as a director and chairman of the board since the Company's
inception in 1992. Mr. O'Keefe also serves as president and chief executive
officer of O'Keefe Development Corporation which he founded in 1986. O'Keefe
Development Corporation is a real estate development and investment firm that
reflects his 25-year real estate career in the Puget Sound region. Mr. O'Keefe
has been actively involved in local and national community organizations for
nearly 20 years. In March 2000, Mr. O'Keefe was nominated to a three-year term
on the Seattle Chamber of Commerce Board of Trustees. In December 1999, Mr.
O'Keefe agreed to serve on the Virginia Mason Health System Board. In 1983, Mr.
O'Keefe and his wife, Cathy O'Keefe, co-founded the Patrons of Cystic Fibrosis,
a local guild of volunteers working to support cystic fibrosis research in
Washington. Mr. O'Keefe is a previous national board member, a former president
and event chairman for the Cystic Fibrosis Foundation and currently serves as a
board member for the guild.
Mr. O'Keefe's charitable efforts focus largely on children in the community.
He is involved with Boy Scouts of America, Childhaven, and the Pacific Northwest
Trails Advisory Board, which provides education programs for at-risk students,
and serves on the board of directors for the Bellevue Boys & Girls Club. He is
also former president, event chairman and board member for the Juvenile Diabetes
Foundation of Seattle and together with Cathy O'Keefe and Tully's Coffee, was
presented with the LIVING AND GIVING AWARD in 2000. Mr. O'Keefe is the
vice-chair of the Community Campaign Leadership Committee for the Bellevue Art
Museum and is a member of the United Way Million Dollar Roundtable.
Additionally, Mr. O'Keefe has been appointed by Governor Locke to sit on the
Retail Liquor Sales Task Force to evaluate Washington's retail liquor sales
operations, privatization options and to offer recommendations for improvement.
GRAHAM S. ANDERSON--DIRECTOR. Mr. Anderson is former chairman and president
of the Pettit-Morry Company, a Regional Insurance Brokerage. Mr. Anderson serves
on the boards of directors for a variety of companies including The Commerce
Bank, Janss Center and is former chairman of the National Association of
Insurance Brokers and a member of Eldore LLC. Mr. Anderson has served as a
director of Tully's since February 1994.
LARRY CULVER--DIRECTOR. Mr. Culver has more than 35 years experience in the
hospitality industry. In 1982, Mr. Culver founded Inn Ventures, Inc. and has
served as its chairman and CEO since that date. Mr. Culver and his staff have
developed and managed more than $300,000,000 in hotel product. Mr. Culver has
been recognized by numerous organizations for his accomplishments and innovative
leadership including being the recipient of the "Inn of the Year Award",
"Hotelier of the Year Award" and a finalist for several of Marriott
International's highest awards. He serves on various boards of directors of
civic and charity groups such as Big Brothers and Big Sisters of King County
(past president, board of directors, and executive committee); Northwest Harvest
Food Drive; Fred Hutchinson Cancer Research; WSU Board of Trustees; WSU
Foundation; WSU Advisory Board for School of HRA. Mr. Culver has served as a
director of Tully's since February 1998.
MARC EVANGER--VICE PRESIDENT CORPORATE PLANNING AND DEVELOPMENT AND
DIRECTOR. Mr. Evanger joined Tully's in December 1998 as vice president
corporate planning and development. From 1984 to 1998 he was with Quality Food
Centers (QFC), most recently as senior vice president of finance and
administration and chief financial officer, which position he held from 1987 to
1998. During his tenure, QFC grew from 20 to 145 stores, completed numerous
acquisitions, a leveraged buyout and an initial public offering. He retired in
1998 following the merger of QFC and Fred Meyer, Inc. From 1978 to 1984, he was
with Price Waterhouse & Company. Mr. Evanger is a former member of the board of
directors of Associated Grocers, is currently a director of Car Toys, Inc.,
Childhaven and the Bellevue Boys & Girls Club and is active in other charitable
and community activities. Mr. Evanger is a graduate
5
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of the University of Washington and Central Washington University. Mr. Evanger
has served as a director of Tully's since March 1999.
ROBERT J. HOLMES--DIRECTOR. Since 1996 Robert J. Holmes has served as
president and chief executive officer of Harbor Properties, Inc., a real estate
development and recreation company located in Seattle. Harbor Properties is
involved in the development and management of residential, retail and office
real estate as well as resort and ski area operations. For the 10 years prior to
joining Harbor Properties, Mr. Holmes was president, chief executive officer and
then chairman of Intrawest USA, one the largest real estate developers in the
Puget Sound area. He also served in an executive position with the parent
company's Resort Development Group where he focused on the acquisition of ski
and resort companies throughout North America. Mr. Holmes is a past chairman and
a director of the Seattle Housing Resources Group, a director of the Bellevue
Downtown Association and a director of Historic Seattle Preservation and
Development Authority. He currently serves on the executive committee of the
Downtown Seattle Association and sits on its board of directors. Mr. Holmes has
served as a director of Tully's since February 1998.
LAWRENCE L. HOOD--DIRECTOR. Since 1993 Mr. Hood has been a principal and
managing partner of Pacific Portfolio Consulting, L.P., an independent, fee only
investment advisory firm. Prior to founding Pacific Portfolio, Mr. Hood was a
principal in charge of the investment division of Kibble & Prentice, Inc., a
regional financial services firm. Mr. Hood has over seventeen years of
investment related experience, and has participated in a number of operating
companies in various stages of development. Mr. Hood served as a director for
A-Sport, Inc. and is a past member of the Charles Schwab Advisory Board. Mr.
Hood is a graduate of the University of Puget Sound, where he majored in
Economics and Finance. Mr. Hood has served as a director of Tully's since
February 1994.
GEORGE HUBMAN--DIRECTOR. Mr. Hubman retired as vice president of sales and
marketing at WRQ in December 1993. Mr. Hubman was co-founder of WRQ and held
that position since the company's formation in 1981. Prior to WRQ, Mr. Hubman's
career included sales positions with Hewlett Packard and IBM. He currently sits
on the boards of directors of Horizon Broadcasting, Syntax and Childhaven and
served two years on the board of Interex, the International Association of
Hewlett-Packard Computer Users. He is a past president of Washington State
University's College of Business and Economics advisory committee. Mr. Hubman
has served as director of Tully's since February 1994.
KEITH MCCAW--DIRECTOR. Mr. McCaw served as a board member and vice
president of McCaw Communications Company and as vice president of its Radio
Common Carrier Division from 1994 to 1999, where his primary focus was on
acquisitions and corporate development. He coordinated McCaw Cellular's first
five applications to the F.C.C. McCaw Cellular was sold to AT&T in 1994.
Together with other family members, Mr. McCaw is a lead investor in NexTel
Communications and several other high tech ventures. He is involved with many
cultural and educational organizations and is currently self employed and
managing personal investments. Mr. McCaw has served as a director of Tully's
since February 1998.
RICHARD J. PADDEN--DIRECTOR. Mr. Padden is of counsel to the law firm of
Carney Badley Smith & Spellman, P.S. Mr. Padden joined Carney Badley Smith &
Spellman in 1978, and has specialized in commercial and corporate law. Mr.
Padden is a founder, principal and board member of Grays Harbor Paper, LP and is
a principal and board member of Safeworks, L.L.C., S&P Foods, Inc. and Brown's
Sugarless Bakery, Inc. Mr. Padden is active in many charitable and volunteer
organizations. He is past president of the Washington Chapter of Cystic Fibrosis
and is a founder and past president of the Patrons of Cystic Fibrosis Guild.
Mr. Padden has served as a director of Tully's since February 1994.
JAMES CAMERON TOWNE--DIRECTOR. Mr. Towne has been chairman of Greenfield
Development Corporation, a remediation and development company since 1995. From
1982 to 1995, he was president, chief executive officer or chairman of various
companies, including Osteo Sciences
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Corporation, Photon Kinetics, Inc., MCV Corporation, Metheus Corporation and
Microsoft Corporation. From 1993 through 1998, he was president of the board of
Overlake School. Mr. Towne also serves on the board of directors of Cutter &
Buck, a specialty upscale sportswear and outerwear clothing retailer. He has a
bachelor's degree in economics and a master's degree in business administration
from Stanford University. Mr. Towne has served as a director of Tully's since
February 1998.
THE BOARD OF DIRECTORS
The board of directors oversees our business and affairs and monitors the
performance of management. In accordance with corporate governance principles,
the board does not involve itself in day-to-day operations. The directors keep
themselves informed through discussions with our chief executive officer, other
key executives and our principal advisers by reading the reports and other
materials that we send them regularly and by participating in board and
committee meetings. Our directors hold office until their successors have been
elected and duly qualified unless the director resigns or by reason of death or
other cause is unable to serve in capacity of director.
The board met three times during our fiscal year ended April 2, 2000. Each
director, except for Keith McCaw and Marc Evanger, attended at least 75% of the
meetings of the board and committees on which they serve. The board also
approved certain actions by unanimous written consent.
THE COMMITTEES OF THE BOARD
The board has an audit committee and a compensation committee. There is no
standing nominating or other committee that recommends qualified candidates to
the board for election as directors. The entire board performs these duties.
THE AUDIT COMMITTEE. The audit committee reviews our accounting practices,
internal accounting controls, and interim and annual financial results, and
oversees the engagement and independence of the Company's independent
accountants.
Messrs. Culver, Hood, Padden and Towne currently serve on the audit
committee with Mr. Towne serving as chairman. The audit committee met five times
during the fiscal year ended April 2, 2000.
THE COMPENSATION COMMITTEE. The compensation committee makes
recommendations to the board regarding salaries, incentives and other forms of
compensation for our directors, officers and other key employees, and
administers policies relating to compensation and benefits. The compensation
committee's report on executive compensation for fiscal year 2000 is set forth
below.
Messrs. Anderson, Holmes and Hubman currently serve as members of the
compensation committee, with Mr. Holmes serving as chairman. The compensation
committee met five times during fiscal year 2000.
HOW WE COMPENSATE DIRECTORS
The directors of Tully's receive no cash compensation for serving on the
board of directors, but are reimbursed for reasonable expenses incurred in
attending board and committee meetings. They are entitled to receive grants of
non-qualified options to purchase 500 shares of Tully's common stock for each
attended board meeting and 250 shares for each attended committee meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHER BENEFICIAL OWNERS
The following table sets forth certain information regarding the ownership
of Tully's common stock and Series A Preferred Stock as of July 2, 2000, by: (i)
each director; (ii) the executive officer named in the Summary Compensation
Table under "Executive Officer Compensation" (the "Named Executive
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Officer"); (iii) all executive officers and directors of the Company as a group;
and (iv) all shareholders known by the Company to be beneficial owners of more
than five percent of its capital stock:
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK
------------------------------------ ------------------------------------
PERCENT OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) TOTAL BENEFICIAL OWNERSHIP(1) TOTAL
---------------- ----------------------- ---------- ----------------------- ----------
<S> <C> <C> <C> <C>
Tom O'Keefe(2).................... 4,585,715 28.58% 40,000 0.26%
George Hubman(3).................. 1,380,204 8.56% 200,000 1.30%
Keith McCaw(4).................... 1,047,835 6.30% 2,000,000 13.01%
Graham Anderson(5)................ 446,084 2.85% 40,000 0.26%
Steve Griffin(6).................. 397,304 2.48% 0 0%
Marc Evanger(7)................... 360,100 2.25% 10,000 0.07%
Richard Padden(8)................. 125,417 0.80% 20,000 0.13%
Lawrence Hood(9).................. 107,389 0.69% 10,000 %
Larry Culver(10).................. 32,250 0.21% 40,000 0.26%
James Cameron Towne(11)........... 22,250 0.14% 20,000 0.13%
Robert Holmes(12)................. 16,750 0.11% 10,000 0.07%
Executive officers and directors
as a group (11 persons).......... 8,521,298 52.97% 2,390,000 15.54%
</TABLE>
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* Less than 1%.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and pursuant to Schedules 13D filed with the
Securities and Exchange Commission ("SEC"). Beneficial ownership is
determined in accordance with SEC rules and generally requires that the
shareholder have voting or investment power with respect to the securities
in question. Shares of common stock issuable upon exercise or conversion of
options or warrants that are exercisable or convertible within 60 days of
July 2, 2000 are deemed to be beneficially owned by the holder of such
options or warrants but are not outstanding for the purpose of computing
the percentage ownership of any other shareholder. Unless otherwise
indicated in the footnotes to this table and subject to community property
laws where applicable, the Company believes that each of the shareholders
named in this table has sole voting and investment power with respect to
the shares indicated as beneficially owned thereby.
(2) Assumes the exercise by holders of options granted by Mr. O'Keefe to
acquire an aggregate of 1,708,442 shares of the Company's common stock
owned by Mr. O'Keefe. Also includes 417,724 shares of common stock that
Mr. O'Keefe has the right to acquire pursuant to options and warrants
exercisable within 60 days of July 2, 2000.
(3) Includes an aggregate of 496,973 shares of common stock that Mr. Hubman has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
(4) Includes an aggregate of 1,004,500 shares of common stock that Mr. McCaw
has the right to acquire pursuant to options and warrants exercisable
within 60 days of July 2, 2000.
(5) Includes an aggregate of 39,750 shares of common stock that Mr. Anderson
has the right to acquire pursuant to options and warrants exercisable
within 60 days of July 2, 2000.
(6) Includes an aggregate of 360,537 shares of common stock that Mr. Griffin
has the right to acquire pursuant to options exercisable within 60 days of
July 2, 2000.
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(7) Includes an aggregate of 358,250 shares of common stock that Mr. Evanger
has the right to acquire pursuant to options and warrants exercisable
within 60 days of July 2, 2000.
(8) Includes an aggregate of 27,250 shares of common stock that Mr. Padden has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
(9) Includes an aggregate of 23,500 shares of common stock that Mr. Hood has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
(10) Includes an aggregate of 24,250 shares of common stock that Mr. Culver has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
(11) Includes an aggregate of 16,250 shares of common stock that Mr. Towne has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
(12) Includes an aggregate of 11,750 shares of common stock that Mr. Holmes has
the right to acquire pursuant to options and warrants exercisable within
60 days of July 2, 2000.
EXECUTIVE OFFICER COMPENSATION
The following table discloses compensation paid to Tully's chief executive
officer and the other executive officers of the Company whose total compensation
exceeded $100,000 during the fiscal year ended April 2, 2000 (the "Named
Executive Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS(#) COMPENSATION
---------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Tom T. O'Keefe.............................. 2000 $201,600 $0 97,195 $0
President, Chairman and 1999 0 0 179,712 0
Chief Executive Officer 1998 0 0 123,567 0
</TABLE>
- Although Mr. O'Keefe has received no cash or other compensation for his
services in fiscal years 1999 and 1998, Tully's has recorded compensation
expense for the estimated fair market value of his past services. The
value of these services was recorded at $120,000 for fiscal years 1999 and
1998, respectively. During fiscal year 2000, this arrangement ended and
Mr. O'Keefe was paid a salary retroactively to the beginning of fiscal
year 2000.
OPTION GRANTS IN FISCAL YEAR 2000
The following table provides information relating to stock options awarded
to the Named Executive Officer during the fiscal year ended April 2, 2000:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE OR FOR OPTION TERM
GRANTED FISCAL YEAR BASE PRICE ---------------------
NAME (# OF SHARES) 2000 ($/SH) EXPIRATION DATE 5% 10%
---- ------------- ------------ ----------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tom T. O'Keefe........ 97,195 8.27% $0.01 4/2/2010 $355,247 $566,258
</TABLE>
- The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission. There
can be no assurance that the
9
<PAGE>
actual stock price appreciation over the option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless the market
price of the common stock appreciates over the ten year option term, no
value will be realized from the option grants made to the Named Executive
Officers. The potential realizable value has been calculated by
multiplying the per share fair market value of the common stock on the
date of grant, as determined by the board, by the stated annual
appreciation rate compounded annually for the option term, subtracting the
exercise price per share from the product, and multiplying the remainder
by the number of shares underlying the option granted.
AGGREGATED OPTION VALUES AS OF FISCAL YEAR-END 2000
The following table provides information regarding the aggregate number of
options exercised during the fiscal year ended April 2, 2000, by the Named
Executive Officer and the number of shares subject to both exercisable and
unexercisable stock options as of April 2, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND 2000 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT END OF IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE FISCAL YEAR 2000 END OF FISCAL YEAR 2000
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tom T. O'Keefe................ 0 0 415,052 20,217 $985,143 $9,000
</TABLE>
- The value of unexercised in-the-money options is based on the difference
between the fair market value of the shares of common stock underlying the
options at April 2, 2000 as determined by the board of directors and the
exercise price of such options.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY
The compensation committee of the board of directors is composed of three
outside directors. The compensation committee is responsible for evaluating
compensation levels and compensation programs for executives and for making
recommendations to the board regarding appropriate compensation awards for
executive management. During fiscal year 2000, the compensation committee
commissioned Watson Wyatt & Company, a human resources consulting firm, to
assist the Company's review and development of its total compensation philosophy
and executive compensation program.
The executive compensation program of the Company is designed to attract,
retain and motivate executive officers capable of leading the Company to meet
its business objectives, to enhance long term shareholder value and to reward
executive management based on contributions to both the short and long term
success of the Company. The compensation committee's philosophy is for the
Company to use compensation policies and programs that align the interests of
executive management with those of the shareholders and to provide compensation
programs that create incentives for and reward both the short and long term
performance of the executive officers based on the success of the Company in
meeting its business objectives.
EXECUTIVE COMPENSATION COMPONENTS
BASE SALARY. Recommendations for base salaries for executive officers are
made at levels believed by the compensation committee to be sufficient to
attract and retain qualified executive officers based on the stage of
development of the Company and the market practices of other companies. A change
in base salary of an executive officer is based on an evaluation of the
performance of the executive, prevailing market practices and the performance of
the Company as a whole. In determining
10
<PAGE>
recommended base salaries, the compensation committee not only considers the
short term performance of the Company, but also the success of the executive
officers in developing and executing the Company's strategic plans, developing
management employees and exercising leadership in the development of the
Company.
ANNUAL DISCRETIONARY SHORT TERM INCENTIVE BONUS. The compensation committee
believes that a portion of the total cash compensation for executive officers
should be based on the Company's success in meeting its short term performance
objectives and contributions by the executive officers that enable the Company
to meet its long term objectives, and has structured the executive compensation
program to reflect this philosophy. This approach creates a direct incentive for
executive officers to achieve desired short term corporate goals that also
further the long term objectives of the Company, and places a portion of each
executive officer's annual compensation at risk.
LONG TERM COMPENSATION. The compensation committee believes that equity
participation is a key component of the Company's executive compensation
program. Stock options are awarded by the board of directors to executive
officers primarily based on potential contributions to the Company's growth and
development and marketplace practices. These awards are designed to attract and
retain executive officers and to motivate them to enhance shareholder value by
aligning the financial interests of executive officers with those of
shareholders. Stock options provide an effective incentive for management to
create shareholder value over the long term because the full benefits of the
option grants cannot be realized unless an appreciation in the price of the
Company's common stock occurs over a number of years.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. O'Keefe's base salary was
$201,600 for fiscal 2000. No incentive bonus was paid. In assembling the chief
executive officer's compensation package, the committee pursued the objectives
discussed above, worked within the framework and guidance of the Watson Wyatt
compensation review, considered the individual performance of the chief
executive officer and the cash resources and needs of the Company. From the
inception of the Company in 1992 through fiscal 1999, Mr. O'Keefe did not take a
salary.
Compensation Committee
Robert Holmes, Chair
Graham Anderson
George Hubman
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Richard Padden, a director, is of counsel with the law firm of Carney Badley
Smith & Spellman, P.S., which provides legal services to Tully's. In fiscal year
2000, the Company paid $147,753 to Carney Badley Smith & Spellman, P.S. for
legal services.
Laurence Hood, a director, is an owner of Pacific Portfolio Consulting, LLC,
a registered investment advisory firm. That firm renders investment advisory
services in connection with administration of the Company's 401k employee
benefit plan. In fiscal year 2000, the Company did not incur any advisory fees
with Pacific Portfolio Consulting, LLC.
Tully's leases the premises for some of its stores from Harbor Properties,
Inc., whose president and CEO is Robert J. Holmes, a director. During fiscal
year 2000, the Company paid rent in the total amount of $229,887 to Harbor
Properties.
Tully's has a $6,000,000 secured credit facility with its principal
commercial lender. The Company's obligations under the credit facility are
personally guaranteed by Tom T. O'Keefe and George Hubman, who are both
directors of the Company. Messrs. O'Keefe and Hubman receive a guarantee fee of
1.0%
11
<PAGE>
of the credit line's monthly average balance. In payment of the guarantee fee,
in fiscal 2000 the Company issued to the guarantors non-qualified options to
purchase 190,948 shares of common stock. The options have a 10-year life and are
exercisable at $0.01 per share. The value of the options were recorded as
compensation expense. Tully's believes that these fees are commercially
reasonable and the terms of the guarantees are no less favorable to Tully's than
could have been negotiated in an arms-length transaction with an unrelated third
party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal year 2000, the Company became a reporting company under the
Securities Exchange Act of 1934 for the first time. As a result, during fiscal
year 2000 the Company's directors, executive officers and greater-than-10%
shareholders became obligated under Section 16(a) of the Securities Exchange Act
of 1934 to file reports with the SEC relating to their initial beneficial
ownership of Tully's securities and any subsequent changes. They must also
provide us with copies of the reports. Annual Reports on Form 5 under Section
16(a) of the Securities Exchange Act of 1934 were not timely filed for each of
the Company's directors and executive officers.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The board of directors has appointed PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year ending April 1, 2001,
and has further directed that the selection of such independent accountants be
submitted for ratification by the shareholders at the Annual Meeting. The
Company has been advised by PricewaterhouseCoopers LLP that neither that firm
nor any of its associates has any relationship with the Company other than the
usual relationship that exists between independent accountants and clients.
PricewaterhouseCoopers LLP will have one or more representatives available at
the Annual Meeting who will be available to respond to appropriate questions
from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING APRIL 1, 2001.
Tully's bylaws do not require that shareholders ratify the selection of
PricewaterhouseCoopers LLP as our independent accountants. We are seeking
shareholder ratification because we believe it is a matter of good corporate
practice. If the votes cast in favor of ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants do not exceed the votes
cast against such action, the selection of other independent accountants will be
considered by the board of directors.
12
<PAGE>
OTHER BUSINESS
The board of directors does not intend to bring any other business before
the meeting, and knows of no other matters to be brought before the meeting. If,
however, other matters are properly presented for a vote at the meeting, the
proxy holders (the individuals designated on the proxy card) will vote your
shares according to their judgment on those matters.
SOLICITATION OF PROXIES
The board of directors of the Company solicits the proxy accompanying this
Proxy Statement. Officers, directors, and regular supervisory and executive
employees of the Company, none of whom will receive any additional compensation
for their services, may solicit proxies. Such solicitations may be made
personally, or by mail, facsimile, telephone, messenger, or via the Internet.
The Company will pay persons holding shares of common stock in their names or in
the names of nominees, but not owning such shares beneficially, such as
brokerage houses, banks, and other fiduciaries, for the expense of forwarding
solicitation materials to their principals. The Company will pay all of the
costs of solicitation of proxies.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Company no later than April 15,
2001 to be included in the Company's Proxy Statement and form of proxy related
to that meeting. Such proposals also must comply with Securities and Exchange
Commission regulations regarding the inclusion of shareholder proposals in
company-sponsored proxy materials. Shareholders also are advised to review the
Company's Bylaws, which contain additional advance notice requirements,
including requirements with respect to advance notice of shareholder proposals
and director nominations.
ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended April 2, 2000, which
comprises our Annual Report on Form 10-K, was first mailed to the shareholders
of the Company with this Proxy Statement on or about August 15, 2000. The Annual
Report is not to be treated as part of the proxy solicitation material or as
having been incorporated by reference herein.
ADDITIONAL COPIES OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 2, 2000, AS FILED WITH THE SEC, EXCLUDING EXHIBITS, MAY BE OBTAINED
BY SHAREHOLDERS WITHOUT CHARGE BY WRITTEN REQUEST TO INVESTOR RELATIONS, TULLY'S
COFFEE CORPORATION, 3100 AIRPORT WAY SOUTH, SEATTLE, WASHINGTON 98134. THE
REPORT, INCLUDING EXHIBITS, ALSO MAY BE ACCESSED ON THE INTERNET AT WWW.SEC.GOV.
By order of the board of directors,
Tom T. O'Keefe
CHAIRMAN & CHIEF EXECUTIVE OFFICER
Seattle, Washington
August 15, 2000
13
<PAGE>
PROXY CARD--COMMON STOCK
<TABLE>
<S> <C>
No. of Shares Eligible to Vote at
Annual Meeting: Name of Shareholder of Record:
------------------------------------- ----------------------------
</TABLE>
TULLY'S COFFEE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS--SEPTEMBER 14, 2000
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of Tully's Coffee Corporation, a Washington
corporation (the "Company"), hereby appoints Tom T. O'Keefe and Stephen R.
Griffin, and each of them, as proxies of the undersigned, with full power of
substitution and resubstitution, to vote all shares of common stock that the
undersigned may be entitled to vote at the Annual Meeting of the Shareholders of
the Company to be held at the Company's offices located at 3100 Airport Way
South in Seattle, Washington, 10:00 a.m. on Thursday, September 14, 2000, and at
any postponement or adjournment thereof, on the matters set forth in the Notice
of the Annual Meeting dated August 15, 2000, receipt of which is hereby
acknowledged. In the absence of written contrary instruction from the
undersigned, either indicated hereon or given to the above-named proxies, the
shares represented hereby are to be voted as follows:
PROPOSAL TO ELECT TEN DIRECTORS TO THE BOARD OF DIRECTORS OF THE COMPANY. The
nominees for director are: Tom T. O'Keefe, Marc Evanger, Graham Anderson, Larry
A. Culver, Robert J. Holmes, Lawrence L. Hood, George Hubman, Keith McCaw,
Richard J. Padden, James Cameron Towne.
/ / VOTE FOR all nominees listed above
/ / VOTE FOR all nominees listed above except:
---------------------------------------
/ / WITHHOLD THE VOTE FOR all nominees listed above
/ / ABSTAIN
RATIFICATION OF PRICEWATERHOUSECOOPERS AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
/ / VOTE FOR
/ / VOTE AGAINST
/ / ABSTAIN
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. If more
than one of the above named proxies shall be present in person or by substitute
at said meeting, or any adjournment thereof, the first above-named proxy so
present and voting thereat either in person or by substitute may exercise all of
the powers hereby given.
<PAGE>
The shares represented by this proxy will be voted as indicated hereon, BUT
IF NO SPECIFICATION IS MADE THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS.
The proxies may vote in their discretion as to any other matters that may come
before the meeting.
SIGNATURE INSTRUCTIONS--IMPORTANT--PLEASE READ
The signature below must be that of the shareholder and the Proxy should be
dated. If shares are held jointly, both should sign. If the signer is a
corporation or partnership, please sign the full corporate or partnership name
by authorized officer or person. Executors, administrators, trustees, guardians,
attorneys-in-fact, or other agents should so indicate when signing.
<TABLE>
<S> <C>
SIGNATURE--PLEASE WRITE LEGIBLY
DATED: , 2000 INDIVIDUAL HOLDER:
------------------------------------
------------------------------------
(Please Print Name)
------------------------------------
(Signature, if held jointly)
DATED: , 2000 CORPORATE OR PARTNERSHIP HOLDER:
------------------------------------
(Name of Entity)
By --------------------------------
Its --------------------------------
</TABLE>
<PAGE>
PROXY CARD--SERIES A PREFERRED
<TABLE>
<S> <C>
No. of Shares Eligible to Vote at Annual
Meeting: Name of Shareholder of Record:
----------------------------------------------- --------------------------------
</TABLE>
No. of Votes Eligible to be
Cast for the Election of Directors
Under Cumulative Voting:
------------------------------
TULLY'S COFFEE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS--SEPTEMBER 14, 2000
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of Tully's Coffee Corporation, a Washington
corporation (the "Company"), hereby appoints Tom T. O'Keefe and Stephen R.
Griffin, and each of them, as proxies of the undersigned, with full power of
substitution and resubstitution, to vote all shares of Series A Preferred Stock
that the undersigned may be entitled to vote at the Annual Meeting of the
Shareholders of the Company to be held at the Company's offices located at 3100
Airport Way South in Seattle, Washington, 10:00 a.m. on Thursday, September 14,
2000, and at any postponement or adjournment thereof, on the matters set forth
in the Notice of the Annual Meeting dated August 15, 2000, receipt of which is
hereby acknowledged. In the absence of written contrary instruction from the
undersigned, either indicated hereon or given to the above-named proxies, the
shares represented hereby are to be voted as follows:
PROPOSAL TO ELECT TEN DIRECTORS TO THE BOARD OF DIRECTORS OF THE COMPANY. The
nominees for director are: Tom T. O'Keefe, Marc Evanger, Graham Anderson, Larry
A. Culver, Robert J. Holmes, Lawrence L. Hood, George Hubman, Keith McCaw,
Richard J. Padden, James Cameron Towne.
/ / VOTE FOR all nominees listed above
/ / VOTE FOR all nominees listed above except:
------------------------------------------------------
/ / WITHHOLD THE VOTE FOR all nominees listed above
/ / ABSTAIN
For the election of directors, you may cumulate the votes attributable to
your shares of Series A Preferred Stock, if you choose. Your cumulative
votes, set forth in the upper left hand corner of this proxy card, were
determined by multiplying your shares of Series A Preferred Stock by the
number of directors for which you are entitled to vote (10). If you
choose to cumulate your votes, you may enter all of your votes next to a
single candidate below or distribute your votes among two or more of the
candidates.
<TABLE>
<CAPTION>
<S> <C>
CUMULATIVE VOTES:
Tom T. O'Keefe ---------------------
Marc Evanger ---------------------
Graham Anderson ---------------------
Larry A. Culver ---------------------
Robert J. Holmes ---------------------
Lawrence L. Hood ---------------------
George Hubman ---------------------
Keith McCaw ---------------------
Richard J. Padden ---------------------
James Cameron Towne ---------------------
</TABLE>
RATIFICATION OF PRICEWATERHOUSECOOPERS AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
/ / VOTE FOR
/ / VOTE AGAINST
/ / ABSTAIN
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. If more
than one of the above named proxies shall be present in person or by substitute
at said meeting, or any adjournment thereof, the first above-named proxy so
present and voting thereat either in person or by substitute may exercise all of
the powers hereby given.
The shares represented by this proxy will be voted as indicated hereon, BUT
IF NO SPECIFICATION IS MADE THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS.The proxies may vote in their discretion as to any other matters that
may come before the meeting.
SIGNATURE INSTRUCTIONS - IMPORTANT - PLEASE READ
The signature below must be that of the shareholder and the Proxy SHOULD BE
DATED. If shares are held jointly, both should sign. If the signer is a
corporation or partnership, please sign the full corporate or partnership name
by authorized officer or person. Executors, administrators, trustees, guardians,
attorneys-in-fact, or other agents should so indicate when signing.
<TABLE>
<S> <C>
SIGNATURE--PLEASE WRITE LEGIBLY
DATED: , 2000 INDIVIDUAL HOLDER:
----------------------------------------
----------------------------------------
(Please Print Name)
----------------------------------------
(Signature, if held jointly)
DATED: , 2000 CORPORATE OR PARTNERSHIP HOLDER:
----------------------------------------
(Name of Entity)
By ------------------------------------
Its ------------------------------------
</TABLE>
