Answers to Common Questions about the Series A Preferred Stock
We have received inquiries from some of our Series A shareholders regarding their Series A Preferred Stock. For this reason, we are making this memorandum available to our Series A shareholders of record. A separate memo discusses the warrants that were issued to our Series A shareholders when they purchased the Series A investment units.
Following you will find answers to common questions about your Series A shares. This is general information and is subject to revision, so please keep your address current with Mellon Investor Services (our stock transfer agent), and please visit www.tullys.com from time to time for current information about the company.
How did the recent 1-for-8 reverse split of our common stock affect the Series A Preferred Stock?
In June 2007, our shareholders approved a one-for-eight reverse split of our common stock. The reverse split did not affect the number of shares of Series A Preferred Stock held by you. However, the voting rights and conversion ratio for the Series A preferred stock have been proportionately adjusted as described below.
How did the reverse stock split affect the voting rights of the Series A Preferred Stock?
Under our Articles of Incorporation, the proportionate voting privileges of our preferred and common stock have been maintained after the 1-for-8 reverse stock split. Accordingly, each eight shares of Series A Preferred Stock now have the equivalent vote of 1.13 shares of common stock.
How many shares of Tully’s Common Stock will I receive if I convert my shares of Series A Preferred Stock?
As a result of the reverse split, at present each eight shares of Series A Preferred Stock are presently convertible into approximately 1.13 shares of common stock. This means that, for example, a holder who converted 800 shares of Series A Preferred Stock would receive 113 shares of common stock.
May I convert my shares of Series A Preferred Stock into Tully’s Common Stock at this time?
Yes. Holders of our Series A Preferred Stock may elect to convert their shares of Series A Preferred Stock into Tully’s common stock at any time. We call this an “optional conversion.”
Must I convert my Series A Preferred Stock into Common Stock at this time?
No. At this time, you are not required to exercise your Series A Preferred Stock or take any other action.
Is converting Series A Preferred Stock into Common Stock risky?
Converting Series A Preferred Stock into common stock means you are exchanging your preferred stock for common stock, and you will lose the special rights and preferences associated with your preferred stock.
What is Tully’s recommendation with respect to the optional conversion of the Series A Preferred Stock?
We cannot provide a recommendation. You must decide, based on your own investigation and circumstances, if and when to convert any or all of your Series A Preferred Stock into common stock.
How do I convert my shares of Series A Preferred Stock into Tully’s Common Stock?
This process requires that you deliver your original Series A Preferred Stock certificate to our transfer agent, Mellon Investor Services. Please contact Mellon for more specific instructions on how to make this conversion (see Mellon contact information below).
Are there circumstances in which my Series A Preferred Stock automatically converts into Common Stock?
Yes. According to our Amended and Restated Articles of Incorporation, all outstanding Series A Preferred Stock would automatically convert into common stock upon the earlier of:
- The consent of holders of at least 75% of the outstanding Series A Preferred Stock; or
- The closing of a public offering of Tully’s common stock at an aggregate price to the public of at least $15 million.
If either of these events were to occur, the outstanding shares of Series A Preferred Stock automatically would convert into common stock, without any further action by the holders of the Series A Preferred Stock. However, you would be required to surrender your old Series A Preferred Stock certificates to Mellon before you would be issued your new common shares. For this reason and others, we encourage all Series A Preferred shareholders to switch at their earliest opportunity to the Mellon book-entry safekeeping program for non-traded preferred stock for all of their Tully's preferred shares (contact Mellon for more information).
How does the proposed underwritten public offering of Tully's common stock affect my Series A Preferred Stock?
On April 27, 2007, Tully's filed a registration statement for a proposed underwritten public offering of its common stock, and has subsequently amended that registration statement. The registration statement has not been declared effective by the SEC. On August 14, 2007, Tully's announced that it has postponed the proposed public offering due to volatile stock market conditions. The company said that it believes that completion of the offering under current market conditions would not be in the best interest of shareholders and that it will continue to monitor the financial markets.
The proposed public offering described in the amended registration statement, if completed, would result in the automatic conversion of our outstanding Series A Preferred Stock into common stock, without any further action by the holders of the Series A Preferred Stock. However, you would be required to surrender your old Series A Preferred Stock certificates to Mellon before you would be issued your new common shares.
Is there a required holding period if I want to sell the Common Stock shares issued upon conversion of my Series A Preferred Stock?
There is currently no public market for Tully’s common stock or Preferred Stock. If we were to list our common stock on a stock market or exchange, or if a public market for our stock otherwise were to develop, then in most cases the shares issued upon conversion would be eligible for resale in the public market as of the conversion date, subject in certain circumstances to volume and manner of sale limitations and notice filing requirements as set forth in SEC rules, and subject to lock-up agreements where applicable.
Who is the transfer agent for the Series A Preferred Stock?
Mellon Investor Services LLC ("Mellon") is now the transfer agent for Tully's common and preferred stock. As transfer agent, Mellon handles the recordkeeping for the shares and maintains our shareholder list. If you have not received any correspondence from Mellon, or you wish to change your name or address information, transfer any shares of stock, convert stock certificates into electronic stock book-entries, replace a lost or damaged stock certificate, or convert your preferred stock to common stock, you must do this through Mellon. The contact information for Mellon is:
Mellon Investor Services
1-877-206-7059 (from outside the U.S., Puerto Rico or Canada, call 1-201-680-6579, collect)
www.bnymellon.com
PO Box 3447
South Hackensack, NJ 07606
Why would I want to convert my Tully's Series A Preferred Stock paper stock certificate to an electronic stock book-entry under the Mellon book-entry safekeeping program?
The Mellon book-entry safekeeping program for non-traded preferred stock converts paper stock certificates to electronic book-entries in the Mellon system. Shareholders receive periodic statements from Mellon instead of paper stock certificates. Using Mellon safekeeping makes your record keeping simpler and more secure. It also will simplify and accelerate the process for transferring your shares of stock to another party and for conversion of your preferred stock to common stock. Tully's strongly encourages shareholders to choose Mellon's safekeeping program. If you wish to choose Mellon safekeeping, please contact Mellon directly.
I cannot find my Series A Preferred Stock certificates. How do I obtain a replacement certificate?
Please contact Mellon. There is a charge for the replacement of lost paper stock certificates.
I wish to make a change to the name shown for my Series A Preferred Stock (due to marriage, divorce or other reason), or to correct an error in the name shown. How do I do it?
Please contact Mellon.
I wish to transfer some of my Series A Preferred Stock to someone else because of a gift, contribution or otherwise. How do I do it?
Please contact Mellon.
I wish to change the address used for mailing of proxy statements, annual reports and other shareholder information. How do I do it?
Please contact Mellon.
A Tully's shareholder is now deceased, and the shares are to be transferred to other parties. How do I do it?
The executor or personal representative for the deceased should contact Mellon.
I wish to verify my shareholder information. How do I do it?
Please contact Mellon.
Where can I get additional information regarding the Series A Preferred Stock?
Please contact Mellon. If Mellon is not able to assist you, please write to Tully’s Investor Relations Department. For reasons of security and confidentiality, we cannot furnish or confirm any shareholder information or take other action in response to an email or telephone inquiry. We require a signed letter from the shareholder of record, addressed to Tully’s Investor Relations Department, 3100 Airport Way South, Seattle, WA 98134.