Class III directors will be elected at the Annual Meeting to serve until the
Annual Meeting in 2004. The Board of Directors has nominated John Mackey and
David W. Dupree, both of whom are current Class III directors.
The Board of Directors recommends that you vote FOR the election of these two
nominees.
The following is biographical information about each of the nominees.
John P. Mackey, 47, co-founder of the Company, has served as Chairman of the
Board and Chief Executive Officer since 1980.
David W. Dupree, 47, has served as director of the Company since August 1996.
Mr. Dupree is a Managing Partner and founder of The Halifax Group, a limited
partnership founded to pursue small and mid-cap investment opportunities. He was
the Managing Director of The Carlyle Group, a Washington, D.C. based merchant
banking concern, from 1992 to 1998. Mr. Dupree also serves as a director of
Insight Health Services Corp.
2
Should a nominee become unable or unwilling to accept nomination or election,
the Board of Directors will either select a substitute nominee or will reduce
the size of the Board. If you have properly executed and returned a proxy and a
substitute nominee is selected, the holders of the proxy will vote your shares
FOR the election of the substitute nominee. The Board of Directors has no reason
to believe that any nominee will be unable or unwilling to serve if elected.
In accordance with the Company's Bylaws, directors are elected by a plurality of
the votes of shares represented and entitled to vote at the meeting.
Continuing Directors
The Company's Board of Directors is separated into three classes, and the
directors in each class are elected to serve for three-year terms. The terms of
the Class I directors expire at the annual meeting of shareholders to be held in
2002, the terms of the Class II directors expire at the annual meeting of
shareholders to be held in 2003, and the terms of the Class III directors,
assuming re-election at this annual meeting, expire at the annual meeting of
shareholders to be held in 2004. Mr. Goldberg was previously elected to a term
expiring at the annual meeting to be held in 2003, but his term was reclassified
to fill a vacancy in the Class I group, and shortened accordingly. The following
is a list of the persons who will constitute the Company's Board of Directors
following the meeting, assuming election of the nominees named above, and their
ages, director class designation and current committee assignments.
-------------------------------------------------------------------------------
Name Age Class Committees
-------------------------------------------------------------------------------
John P. Mackey 46 III None
David W. Dupree 46 III Audit, Nominating Governance
Dr. John B. Elstrott 51 II Audit (Chair), Nominating/Governance
Avram J. Goldberg 70 I Audit, Compensation
Jirka Rysavy 46 I None
Dr. Ralph Z. Sorenson 67 II Nominating/Governance (Chair), Compensation
-------------------------------------------------------------------------------
Set forth below is biographical information about each of the Company's
directors, except for Mr. Mackey and Mr. Dupree whose biographical information
is included under "Current Nominees" above.
Dr. John B. Elstrott, 52, has served as a director of the Company since February
1995. Dr. Elstrott is the founding director of the Levy Rosenblum Institute for
Entrepreneurship at Tulane University's A. B. Freeman School of Business which
was started in 1991. He has been on the faculty at Tulane since 1982.
Avram J. Goldberg, 71, has served as a director of the Company since May 1994.
Mr. Goldberg has been the Chairman of the Board of AVCAR Group, Ltd., a
consulting firm specializing in the retail industry, since 1989.
Jirka Rysavy, 46, has served as a director of the Company since June 2000. Mr.
Rysavy is the founder, Chairman and Chief Executive Officer of Gaiam, Inc. He
has been Chairman since Gaiam's inception in 1988 and became the full-time Chief
Executive Officer in December 1998. In 1986 Mr. Rysavy founded Corporate
Express, a $4 billion corporate supplier of non- production goods, and until
September 1998 was its Chairman and Chief Executive Officer.
Dr. Ralph Z. Sorenson, 67, has served as a director of the Company since
December 1994. Dr. Sorenson is Managing Partner of the Sorenson Limited
Partnership, a venture investment partnership and Professor Emeritus of business
administration at the University of Colorado, Boulder. Dr. Sorenson also serves
as a director of the Polaroid Corporation, Houghton Mifflin Company, Eaton Vance
Inc. and Exabyte Corporation.
Committees and Meetings
The Board of Directors maintains the following three standing committees. The
members of the various committees are identified in the preceding table of
continuing directors.
3
. Audit. The Committee is empowered to recommend to the Board the
appointment of the Company's independent public accountants and to
periodically meet with such accountants to discuss their fees, audit
and non-audit services, and the internal controls and audit results for
the Company. The Audit Committee also is empowered to meet with the
Company's accounting personnel to review accounting policies and
reports.
. Compensation Committee. The Compensation Committee is responsible for
determining the compensation for the Company's executive officers and
regional presidents. The Compensation Committee also administers the
Company's stock option plans and team member stock purchase plan.
. Nominating/Governance Committee. The Nominating/Governance Committee
recommends to the Board qualified nominees for election to the Board.
The Committee considers suggestions from many sources, including
shareholders, regarding possible candidates for director. Such
suggestions, together with appropriate biographical information, should
be submitted to the Secretary of the Company. The Committee reviews and
reports to the Board on a periodic basis with regard to matters of
corporate governance.
During fiscal 2000, the Board of Directors and the various committees held the
following number of meetings: Board of Directors, 11; Audit, 4; Compensation
Committee, 3; and Nominating/Governance Committee, 1. No director attended fewer
than 75% of the aggregate of the total number of meetings of the Board of
Directors and the total number of meetings held by all committees on which that
director served.
Compensation of Directors
Each of our non-employee directors receives $4,000 for each Board of Directors
meeting attended and $2,000 for attendance via telephone. For each telephone
Board meeting that is greater than one hour in length and in which a majority of
directors participate, a $500 fee is paid. Each non-employee Board Committee
chair receives an annual retainer of $2,000. Each non-employee director receives
$500 for each Board Committee meeting attended in conjunction with a Board
meeting, and $2,000 for each Board Committee meeting attended in person apart
from a Board meeting. In addition, directors are reimbursed for reasonable
expenses incurred in attending Board of Directors meetings. Mr. Mackey, who is
the only director who is also an employee of the Company, does not receive any
additional compensation for serving on the Board of Directors.
In addition, under our option plan for outside directors, each newly elected
director receives an option as of the date of his or her election to purchase
10,000 shares of our common stock at an exercise equal to the closing price of
our common stock on the date of grant. If incumbent directors have attended at
least two-thirds of the meetings of our Board of Directors held in the preceding
year, they each receive an option grant of 2,000 shares at an exercise price
equal to the closing price of our common stock on the date of grant which is the
date of our annual meeting of shareholders.
PROPOSAL 2 - AMENDMENT TO THE 1992 INCENTIVE STOCK
OPTION PLAN FOR TEAM MEMBERS
On January 23, 2001, the Board amended our 1992 Incentive Stock Option Plan for
Team Members to increase the shares authorized for grant under the plan from 6.1
million shares to 7.2 million shares, subject to shareholder approval. As of
January 16, 2001, options to purchase an aggregate of 5.8 million shares of
common stock (net of options canceled) had been granted under the plan.
4
This plan is designed to promote our success and enhance our value by aligning
the interests of our executive officers and team members with those of our
shareholders and by providing participants with an incentive for outstanding
performance. This plan is also intended to provide management with the ability
to motivate, attract and retain team members whose judgment, interest and
special efforts our business is largely dependent upon. The plan is broad-based
whereby all 18,500+ team members are eligible to participate. Approximately 93%
of the options granted under the Team Member Plan have been granted to team
members who are not executive officers. We believe that granting options to a
broad base of team members is one of the reasons we are considered an employer
of choice and have been selected for four years in a row by FORTUNE magazine as
one of the "100 Best Companies to Work for in America." We also believe that our
option plan has played an integral part in our low leadership turnover rate of
less than 2%.
As of January 16, 2001, options to purchase an aggregate of 5.8 million shares
of common stock (net of options canceled) had been granted pursuant to the plan,
and options to purchase 1.6 million shares had been exercised. Options to
purchase 4.2 million shares remained outstanding under the plan with an average
remaining life of 4.76 years and at an average exercise price of $43.03. Of the
outstanding shares, 1.1 million shares were out-of-the-money as of January 15,
2001 with an exercise price of $69.75. The market value of all shares of common
stock subject to outstanding options was approximately $218 million based upon
the $52.50 closing sale price of the common stock as reported on the Nasdaq
Stock Market on January 12, 2001. Options to purchase approximately 325,000
shares of common stock remained available under the plan for future grant.
Options to purchase 4.37 million shares remained outstanding under all company
plans with an average remaining life of 4.66 years and at an average exercise
price of $41.82. Our Board believes that option grants in excess of the amount
currently available are required to continue to attract, retain and incentivize
executive officers and team members as necessary to achieve our growth
objectives.
We have amended our plan to state that the maximum term for any future option
grants to be issued is seven years and that all options are to be issued at fair
market value. Options vest ratably on each of the first four anniversaries of
the grant date and have an exercise price equal to the fair market value of our
common stock on the date of grant.
For federal income tax purposes, all stock options that qualify under the rules
of Section 422 of the Code will be entitled to incentive stock option treatment.
Among other requirements, to receive incentive stock option treatment, an
optionee is not permitted to dispose of the acquired stock (i) within two years
after the option is granted or (ii) within one year after exercise. In addition,
the individual must have been an employee of the Company for the entire time
from the date of granting of the option until three months (one year if the
employee is disabled) before the date of the exercise. If all such requirements
are met, no tax will be imposed upon exercise of the option, and any gain upon
sale of the stock will be entitled to capital gain treatment at the maximum rate
of 20%. If applicable, the employee's gain on exercise (the excess of fair
market value at the time of exercise over the exercise price) of an incentive
stock option is a tax preference item and, accordingly, is included in the
computation of alternative minimum taxable income.
If an employee does not meet the two-year and one-year holding requirement (a
"disqualifying disposition"), but does meet all other requirements, tax will be
imposed at the time of sale of the stock, but the employee's gain realized on
exercise will be treated as ordinary income rather than capital gain and the
Company will get a corresponding deduction at the time of sale. Any additional
gain on sale will be short-term or long-term capital gain, depending on the
holding period of the stock. If the amount realized on the disqualifying
disposition is less than the value at the date of exercise, the amount
includible in gross income, and the amount deductible by the Company, will equal
the excess of the amount realized on the sale or exchange over the exercise
price.
In general, no taxable income will be recognized by the optionee, and no
deduction will be allowed to the Company, upon the grant of a non-qualified
stock option. Upon exercise of a non-qualified option an optionee will recognize
ordinary income (and the Company will be entitled to a corresponding tax
deduction if applicable withholding requirements are satisfied) in an amount
equal to the amount by which
5
the fair market value of the shares on the exercise date exceeds the option
price. Any gain or loss realized by an optionee on disposition of such shares
generally is a capital gain or loss and does not result in any further tax
deduction to the Company.
For each of the executive officers named in the Summary Compensation Table, the
table below shows the aggregate number of options granted under the plan since
its inception through January 16, 2001, the weighted average exercise price
payable per share, and the range of exercise price for those granted options.
--------------------------------------------------------------------------------------------------------------------------
Weighted
Average
Options Exercise Range in
Granted Price of Exercise Price
(Number Granted of Granted
Name of Shares) Options Options
--------------------------------------------------------------------------------------------------------------------------
John P. Mackey 62,000 $28.24 $13.50 - $69.75
Chairman & CEO
Chris Hitt 113,300 $17.83 $ 8.75 - $41.88
President
Glenda Flanagan 47,000 $26.69 $13.50 - $69.75
CFO
James Sud 26,000 $33.92 $22.00 - $69.75
COO
Michael Besancon 31,650 $37.32 $13.50 - $69.75
Regional President
All current executive officers as a group (10 persons) 494,080 $25.98 $ 8.75 - $69.75
Percentage of options granted under the plan 7%
All team members, including current officers who are 6,482,086 $37.95 $ 8.75 - $69.75
not executive officers, as a group (6,012 persons)
Percentage of options granted under the plan 93%
--------------------------------------------------------------------------------------------------------------------------
Approval of this amendment requires the affirmative vote of the holders of a
majority of the shares of the common stock represented at the Annual Meeting.
The Board of Directors recommends a vote FOR approval of the amendment to the
Team Member Plan.
WHOLE FOODS MARKET, INC.
INCENTIVE STOCK OPTION PLAN FOR TEAM MEMBERS
On January 17, 1992, the Board of Directors of Whole Foods Market,
Inc. (the "Company") adopted, and the shareholders of the Company approved, the
Whole Foods Market, Inc. Incentive Stock Option Plan for Team Members. The Plan,
as amended, is as follows:
1. PURPOSE. The purpose of the Plan is to provide Team Members and
consultants with a proprietary interest in the Company through the
granting of options.
2. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular Team Members and consultants of the Company and its
Subsidiaries to whom options are to be granted, and who will, upon
such grant, become participants in the Plan.
6
4. STOCK OWNERSHIP LIMITATION. No option may be granted to a Team Member
who owns more than 10% of the voting power of all classes of stock of
the Company or its Parent or Subsidiaries. This limitation will not
apply if the option price is at least 110% of the fair market value of
the stock at the time the option is granted and the option is not
exercisable more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant options under the
Plan for more than 7,200,000 shares of Common Stock of the Company,
but this number may be adjusted to reflect, if deemed appropriate by
the Committee, any stock dividend, stock split, share combination,
recapitalization or the like, of or by the Company. Shares to be
optioned and sold may be made available from either authorized but
unissued Common Stock or Common Stock held by the Company in its
treasury. Shares that by reason of the expiration of an option or
otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be reoffered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at
the time of grant) of the shares of Common Stock which any Team Member
is first eligible to purchase in any calendar year by exercise of
incentive stock options (within the meaning of Section 422A of the
Internal Revenue Code) granted under this Plan and all incentive stock
option plans of the Company or its Parent or Subsidiaries shall not
exceed $100,000. For this purpose, the fair market value (determined
at the respective date of grant of each option) of the stock
purchasable by exercise of an incentive stock option (or an
installment thereof) shall be counted against the $100,000 annual
limitation for a Team Member only for the calendar year such stock is
first purchasable under the terms of the option. In addition, in no
event may any Team Member be awarded in any fiscal year more than
50,000 options.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of
shares of Common Stock to be offered from time to time by grant of
options to members of management of the Company. The grant of an
option to a participant shall not be deemed either to entitle the
participant to, or to disqualify the participant from, participation
in any other grant of options under the Plan.
8. GRANT OF OPTIONS. The Committee is authorized to grant Incentive
Options and Nonqualified Options under the Plan. The grant of options
shall be evidenced by stock option agreements containing such terms
and provisions as are approved by the Committee, but not inconsistent
with the Plan, including provisions that may be necessary to assure
that the option is an incentive stock option under the Internal
Revenue Code. In addition, the Committee is authorized to grant
options under the Plan in connection with acquisitions effected by the
Company or its Subsidiaries on terms and at exercise prices that are
consistent with the terms of such acquisitions. The Company shall
execute stock option agreements upon instructions from the Committee.
9. OPTION PRICE. The option price shall not be less than 100% of the fair
market value per share of the Common Stock on the date the option is
granted. The Committee shall determine the fair market value of the
Common Stock on the date of grant, and shall set forth the
determination in its minutes, using any reasonable valuation method.
10. OPTION PERIOD. The Option Period will begin on the date the option is
granted, which will be the date the Committee authorizes the option
unless the Committee specifies a later date. No option may terminate
later than 7 years from the date the option is granted. The Committee
may provide for the exercise of options in installments and upon such
terms, conditions and restrictions as it may determine. The Committee
may provide for termination of the option in the case of termination
of employment or any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code) while in the employ of the
7
Company, but prior to termination of his right to exercise an option
in accordance with the provisions of his stock option agreement
without having totally exercised the option, the option agreement may
provide that it may be exercised, to the extent of the shares with
respect to which the option could have been exercised by the
participant on the date of the participant's death or disability, by
(i) the participant's estate or by the person who acquired the right
to exercise the option by bequest or inheritance or by reason of the
death of the participant in the event of the participant's death, or
(ii) the participant or his personal representative in the event of
the participant's disability, provided the option is exercised prior
to the date of its expiration or not more than one year from the date
of the participant's death or disability, whichever occurs first. The
date of disability of a participant shall be determined by the
Company.
12. PAYMENT. Full payment for shares purchased upon exercising an option
shall be made in cash or by check at the time of exercise, or on such
other terms as are set forth in the applicable option agreement. No
shares may be issued until full payment of the purchase price therefor
has been made, and a participant will have none of the rights of a
stockholder until shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised
during the Option Period, at such times, in such amounts, in
accordance with such terms and subject to such restrictions as are set
forth in the applicable stock option agreements. In no event may an
option be exercised or shares be issued pursuant to an option if any
requisite action, approval or consent of any governmental authority of
any kind having jurisdiction over the exercise of options shall not
have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of
Common Stock covered by each outstanding option granted under the Plan
and the option price may be adjusted to reflect, as deemed appropriate
by the Committee, any stock dividend, stock split, share combination,
exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like, of or by the
Company.
15. NON-ASSIGNABILITY. Options may not be transferred other than by will
or by the laws of descent and distribution. During a participant's
lifetime, options granted to a participant may be exercised only by
the participant.
16. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation
of the Plan as it determines to be advisable for the administration of
the Plan. The Committee may rescind and amend its rules and
regulations.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued
by the Committee without the approval of the stockholders of the
Company, except that any amendment that would (a) materially increase
the benefits accruing to participants under the Plan, (b) materially
increase the number of securities that may be issued under the Plan,
or (c) materially modify the requirements of eligibility for
participation in the Plan must be approved by the stockholders of the
Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the
Committee shall be deemed to give any participant any right to be
granted an option to purchase Common Stock of the Company or any other
rights except as may be evidenced by the stock option agreement, or
any amendment thereto, duly authorized by the Committee and executed
on behalf of the Company and then only to the extent and on the terms
and conditions expressly set forth therein.
19. DEFINITIONS. For the purpose of this Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee of the Board,
composed of independent and disinterested members of the Board
qualified to be members of the
8
Committee pursuant to Rule 16b-3 promulgated under the Securities
and Exchange Act of 1934, as amended.
(c) "Common Stock" means the Common Stock that the Company is
currently authorized to issue or may in the future be authorized
to issue (as long as the common stock varies from that currently
authorized, if at all, only in amount of par value).
(d) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422A of the Internal Revenue
Code.
(e) "Nonqualified Option" means an option granted under the Plan
which is not intended to be an Incentive Option.
(f) "Option Period" means the period during which an option may be
exercised.
(g) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting
of the option, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in
the chain.
(h) "Plan" means this Incentive Stock Option Plan for Team Members,
as amended from time to time.
(i) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain, and
"Subsidiaries" means more than one of any such corporations.
9
PROPOSAL 3 - AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Company's shareholders are being asked to approve an amendment to the
Director's Stock Option Plan that will increase the number of shares of Common
Stock reserved for issuance under the Plan by an additional 50,000 shares from
200,000 shares to 250,000 shares.
The purpose of the plan is to provide independent, outside directors with an
incentive for serving as directors and to align the interests of our board
members with those of our shareholders by providing a proprietary interest in
the company through the granting of options. Each newly elected director
receives an option as of the date of his or her election to purchase 10,000
shares of our common stock at an exercise equal to the closing price of our
common stock on the date of grant. If incumbent directors have attended at least
two-thirds of the meetings of our Board of Directors held in the preceding year,
they each receive an option grant of 2,000 shares at an exercise price equal to
the closing price of our common stock on the date of grant which is the date of
our annual meeting of shareholders.
The maximum term for option grants is seven years. Options vest ratably on each
of the first four anniversaries of the grant date and have an exercise price
equal to the fair market value of our common stock on the date of grant.
As of January 16, 2001, options to purchase an aggregate of 180,000 shares of
common stock (net of options canceled) had been granted pursuant to the plan,
and options to purchase 75,200 shares had been exercised. Options to purchase
104,800 shares remained outstanding under the plan with an average remaining
life of 4.1 years and at an average exercise price of $29.87. The market value
of all shares of common stock subject to outstanding options was approximately
$5.5 million based upon the $52.50 closing sale price of the common stock as
reported on the Nasdaq Stock Market on January 12, 2001. Options to purchase
approximately 20,000 shares of common stock remained available under the plan
for future grant. Our Board believes that option grants in excess of the amount
currently available are required to continue to attract and incentivize outside
directors to serve as board members.
Approval of this amendment requires the affirmative vote of the holders of a
majority of the shares of the common stock represented at the Annual Meeting.
The Board of Directors recommends a vote FOR approval of the amendment to the
Director's Plan.
PROPOSAL 4 - AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Company's shareholders are being asked to approve an amendment to the
Director's Stock Option Plan that calls for a deletion of Section 17 of the plan
that provided a termination date for the plan of December 31, 2001. The proposed
deletion of the termination date of the plan is consistent with the changes made
for the 1992 Incentive Stock Option Plan for Team Members previously approved by
shareholders.
Approval of this amendment requires the affirmative vote of the holders of a
majority of the shares of the common stock represented at the Annual Meeting.
The Board of Directors recommends a vote FOR approval of the amendment to the
Director's Plan.
10
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table includes compensation that we paid or accrued during the
three-year period ended September 24, 2000 to or for our Chief Executive Officer
and the certain other of our highest compensated executive officers whose total
compensation exceeded $100,000.
---------------------------------------------------------------------------------------------------------------------
Name and Principal Annual Other Company
Position Year Salary (1) Bonus Compensation (2) Stock Options
---------------------------------------------------------------------------------------------------------------------
John P. Mackey 2000 $210,000 $- $250 4,000
Chairman & CEO 1999 200,000 50,000 500 9,000
1998 185,000 90,000 500 9,000
Chris Hitt 2000 $189,000 $ 77,000 $250 4,000
President 1999 180,000 72,000 500 4,000
1998 165,000 94,000 500 -
Glenda Flanagan 2000 $173,000 $ 77,000 $250 4,000
CFO 1999 165,000 65,000 500 4,000
1998 150,000 125,000 500 4,000
James P. Sud 2000 $173,000 $ 71,000 $250 4,000
COO 1999 165,000 65,000 500 4,000
1998 150,000 125,000 500 4,000
Michael Besancon 2000 $145,000 $ 87,000 $250 4,000
Regional President 1999 125,000 106,000 500 4,000
1998 125,000 30,000 500 4,000
---------------------------------------------------------------------------------------------------------------------
(1) We have a policy that limits the cash compensation paid in any one year to
any officer to fourteen times the average full time salary of all team
members. Amounts earned in excess of the salary limitation may be deferred
to future years, subject to certain restrictions.
(2) Except as otherwise indicated, the amounts indicated reflect our
contributions on behalf of the persons indicated to the Whole Foods Market,
Inc. Team Member 401(k) Plan. In fiscal year 2000, our contribution was a
maximum of $250 paid in shares of our common stock. In fiscal years 1999
and 1998, our contribution was a maximum of $500 paid in shares of our
common stock.
Stock Options
The following table sets forth certain information with respect to the options
granted during the fiscal year ended September 24, 2000 to each of our executive
officers listed in the Summary Compensation Table as shown under the caption
"Executive Compensation."
---------------------------------------------------------------------------------------------------------------------
Percent of Potential Realizable Value at
Number Total Options Exercise or Assumed Annual Rates
Name of Granted to Base Price of Stock Price Appreciation
Options Employees in In Dollars Expiration for Option Term (1)
Granted Fiscal Year Per Share (2) Date 5% 10%
---------------------------------------------------------------------------------------------------------------------
John Mackey 4,000 (3) $41.875 3/27/07 $68,189 $158,910
Chris Hitt 4,000 (3) $41.875 3/27/07 $68,189 $158,910
Glenda Flanagan 4,000 (3) $41.875 3/27/07 $68,189 $158,910
James P. Sud 4,000 (3) $41.875 3/27/07 $68,189 $158,910
Michael Besancon 4,000 (3) $41.875 3/27/07 $68,189 $158,910
---------------------------------------------------------------------------------------------------------------------
(1) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not reflect our
estimates or projections of future prices of the
11
shares of our common stock. There can be no assurance that the amounts
reflected in this table will be achieved.
(2) Closing price of common stock at date of grant.
(3) Less than 1%.
The following table includes certain information with respect to the options
exercised or held by the executive officers named above during the year ended
September 24, 2000. The number of options held at September 24, 2000 includes
options granted under the 1992 Option Plan for Team Members and under the 1987
Option and Incentive Plan (the "1987 Plan"). The 1987 Plan was terminated in
1992, except as to options previously granted.
--------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money
on Realized Options at FY-End Options at FY-End
Name Exercise (1) Exercisable/Unexercisable Exercisable/Unexercisable (2)
--------------------------------------------------------------------------------------------------------------------
John Mackey - - 79,500 / 17,500 $2,980,750 /$253,000
Chris Hitt - - 44,536 / 7,900 1,345,757 / 126,888
Glenda Flanagan - - 67,000 / 10,000 2,580,975 / 129,875
James P. Sud - - 22,300 / 12,500 651,438 / 204,563
Michael Besancon 5,560 $141,726 4,750 / 17,000 23,125 / 161,656
--------------------------------------------------------------------------------------------------------------------
(1) Based upon the market price received for the underlying shares of common
stock of Whole Foods Market received upon exercise and the option exercise
price.
(2) Based upon the closing price of the common stock of Whole Foods Market on
September 22, 2000 ($51.875) per share and the exercise price of the
options.
Beneficial Ownership of Shares
The following table presents the beneficial ownership of our common stock as of
November 30, 2000, except as noted, for (i) each person beneficially owning more
than 5% of the outstanding shares of our common stock, (ii) each director of the
Company, (iii) each executive officer of the Company listed in the Summary
Compensation Table and (iv) all of our directors and officers as a group. Except
pursuant to applicable community property laws and except as otherwise
indicated, each shareholder possesses sole voting and investment power with
respect to its or his shares.
--------------------------------------------------------------------------------
Shares Owned (1)
Name Number Percent
--------------------------------------------------------------------------------
FMR Corp. (2) 3,204,372 12%
American Express Financial Corp. (3) 2,824,245 10%
Wellington Management Co. (4) 1,654,700 6%
William Blair & Company, L.L.C. (5) 1,388,657 5%
Michael Besancon 7,315 *
David W. Dupree 12, 092 *
Dr. John B. Elstrott 11,800 *
Glenda Flanagan 73,213 *
Avram J. Goldberg 20,600 *
Chris Hitt 57,563 *
Fred "Chico" Lager 14,817 *
John P. Mackey 346,440 *
Jirka Rysavy 20,000 *
Dr. Ralph Z. Sorenson 15,000 *
James P. Sud 53,575 *
All directors and officers as a group (17) 800,168 *
--------------------------------------------------------------------------------
* Indicated ownership of less than 1% of the outstanding shares of the
Company's common stock.
12
(1) Shares issuable upon exercise of stock options that are exercisable within
60 days after November 30, 2000 are treated as beneficially owned as
follows: Mr. Besancon, 7,250; Mr. Dupree, 6,123; Mr. Elstrott, 1,000; Ms.
Flanagan, 67,000; Mr. Goldberg, 17,000; Mr. Hitt, 44,536; Mr. Lager,
13,000; Mr. Mackey, 82,000; Mr. Rysavy, 0; Mr. Sorenson, 15,000; Mr. Sud,
22,300; and all directors and executive officers as a group, 427,473.
(2) Based on information contained in Schedule 13G, as filed on January 10,
2001. The amount indicated reflects FMR Corporation's beneficial ownership
as of December 31, 2000. Of the shares indicated, FMR has the sole voting
power of 950,622 shares and sole power to dispose of 3,204,372 shares. The
address of such shareholder is 82 Devonshire Street, Boston, Massachusetts
02109.
(3) Based on information contained in Schedule 13G, as filed on September 8,
2000. The amount indicated reflects American Express Financial
Corporation's beneficial ownership as of August 31, 2000. Of the shares
indicated, American Express Financial has the sole voting power and sole
power to dispose of zero shares. The address of such shareholder is 200 AXP
Financial Center, Minneapolis, Minnesota 55474.
(4) Based on information provided as of September 30, 2000. The address of such
shareholder is 75 State Street, Boston, Massachusetts 02109.
(5) Based on information provided as of September 30, 2000. The address of such
shareholder is 222 West Adams Street, Chicago, Illinois 60606.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the members of the Company's Board
of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
Report of Compensation Committee
The Company's Compensation Committee is empowered to review and recommend to the
full Board of Directors the annual compensation and compensation procedures for
all executive officers and regional presidents of the Company. The Committee
also administers the Company's stock option plans and team member stock purchase
plan.
Annual executive officer and regional president compensation consists of a base
salary component and an incentive component. The Company's publicly stated
policy is to limit cash compensation paid to any executive officer or regional
president in any calendar year to fourteen times the average full-time salary of
all team members. Amounts earned in excess of the salary cap may be deferred to
the next year, subject to certain restrictions. All compensation decisions are
subject to the implementation of this policy. Subject to the foregoing, the
Committee considers numerous factors including the Company's financial
performance, the individual contribution of each executive officer and regional
president, compensation practices of comparable companies and general economic
factors. Stock price performance has not been an important consideration in
determining annual compensation, because the price of the Company's common stock
is subject to a variety of factors outside the Company's control.
The base salary levels for the executive officers and regional presidents of the
Company were increased between 5% and 14% in calendar 2000 over calendar 1999.
The most significant determinants in these increases were (i) the financial
performance achieved by the Company and by its operating regions and (ii) the
growth of its operating regions and increased level of responsibilities of
certain of the executive officers and regional presidents.
Effective this fiscal year, all of the Company's executive officers and regional
presidents participate in an incentive compensation plan based primarily on
improvement in EVA (Economic Value Added). EVA is a management decision-making
tool and incentive compensation system that the Company adopted and began to
implement in 1999.
The incentive compensation paid to the Chief Executive Officer, President, Chief
Financial Officer and Chief Operating Officer for fiscal 2000 was based upon the
incremental improvement in the Company's overall EVA. The incentive compensation
paid to the regional presidents was based upon the incremental improvement in
EVA achieved by the specific geographic region of the Company that corresponds
to the
13
executive's area of responsibilities as well as the incremental improvement in
the Company's overall EVA. Additionally, regional presidents receive incentive
compensation for opening new stores on budget. Regional presidents and executive
officers may receive special cash bonuses or option grants at the discretion of
the Compensation Committee in connection with relocations from one region to
another, or for successful completion of special projects. Fiscal year 2000
incentive compensation averaged approximately 24% of the total cash compensation
received by the executive officers and regional presidents.
The Company's executive officers and regional presidents also have received
grants of options under the stock option plans of the Company. The Committee
believes that the grant of options enables the Company to more closely align the
economic interest of the executive officers and regional presidents to those of
the shareholders. The level of stock option grants to executive officers and
regional presidents is based primarily upon their relative positions and
responsibilities within the Company. Grants are made on a discretionary rather
than formula basis by the Committee.
For calendar 2000, the Committee recommended an increase in the base salary of
Mr. Mackey, chief executive officer of the Company, from $200,000 to $210,000.
The increase was intended to recognize Mr. Mackey's contribution toward the (i)
significant growth of the Company, (ii) the financial performance of the Company
in fiscal 1999 and (iii) relative position of the Company in the natural foods
industry. The Committee was also cognizant of the generally higher level of base
salaries paid to chief executive officers of comparable sized companies. Mr.
Mackey did not earn any incentive compensation for fiscal 2000. During fiscal
2000, Mr. Mackey was awarded options to purchase 4,000 shares of common stock
under the Company's incentive stock option plan.
Fred "Chico" Lager (Chair)
Dr. Ralph Z. Sorenson
Avram Goldberg
14
Performance Graph
The following graph compares the cumulative total return of the Company's Common
Stock during the last five years with the Nasdaq Stock Market (U.S.) Index and
the S & P Retail Food Chains Index during the same period. The graph shows the
value of $100 invested in the Company's Common Stock or the indices as of the
end of September for the last five years, and assumes the reinvestment of all
dividends. Historical stock price performance is not necessarily indicative of
future stock price performance.
[GRAPH]
TOTAL SHAREHOLDER RETURNS
Years Ending
Base
Period
Sep95 Sep96 Sep97 Sep98 Sep99 Sep00
----------------------------------------------------------
WHOLE FOODS MARKET INC 100 201.90 294.29 320.95 249.29 395.24
NASDAQ US INDEX 100 118.68 162.92 165.50 270.38 372.37
RETAIL (FOOD CHAINS)-500 100 125.95 134.88 191.47 152.51 144.20
Employment Agreements
Since November 1991, the Company has entered into Retention Agreements with
certain executive officers of the Company or its subsidiaries that provide for
certain benefits upon an involuntary termination of employment other than for
cause after a "Triggering Event." A Triggering Event includes a merger of the
Company with and into an unaffiliated corporation if the Company is not the
surviving corporation or the sale of all or substantially all of the Company's
assets. The benefits to be received by the executive officer whose employment is
terminated after a Triggering Event occurs include receipt of his or her annual
salary through the one-year period following the date of the termination of
employment and the immediate vesting of any outstanding stock options granted to
such executive officer.
Certain Relationships and Related Transactions
In January 2000, the Company and certain venture capital investors formed
WholePeople.com, Inc. ("WholePeople.com"). The Company contributed its Internet
and supplements businesses in consideration of the issuance of WholePeople.com's
Preferred Stock, and the venture capital investors contributed cash in
consideration of the issuance of WholePeople.com's Class A Common Stock. In June
2000, WholePeople.com contributed its Internet business to a subsidiary of
Gaiam, Inc. ("Gaiam"), which was immediately merged into a newly formed
subsidiary corporation, Gaiam.com, Inc. ("Gaiam.com"). WholePeople.com and Gaiam
own 49.9% and 50.1%, respectively, of the outstanding common stock of Gaiam.com.
Jirka Rysavy, Gaiam's chairman and majority stockholder, was elected to our
Board of Directors. Mr. Mackey was elected to the Gaiam board of directors. Mr.
Rysavy and Mr. Mackey are each a director and executive officer of Gaiam.com.
The Company does not exercise control over Gaiam.com and therefore has accounted
for its investment in Gaiam.com common stock using the equity method.
In a separate transaction in June 2000, WholePeople.com purchased from Gaiam the
outstanding preferred shares of Gaiam.com for $6.0 million. These shares are
redeemable at their face amount upon the occurrence of an initial public
offering of Gaiam.com.
15
In addition, Infocenter, Inc., a company controlled by Mr. Rysavy, acquired from
a subsidiary of WholePeople.com in June 2000, for a nominal purchase price,
certain assets not contributed to Gaiam.com including in-store kiosks, trade
show booths and $500,000 cash and a $3.0 million note obligation.
Separately, the Company entered into a marketing agreement with Gaiam in June
2000. Under the agreement, the Company agreed (i) to permit the distribution of
the Gaiam catalog within our stores or by mail to our customers, (ii) to permit
Gaiam to test market the sale of Gaiam products within certain of our stores and
(iii) to allow Gaiam.com to purchase our products for resale on the Gaiam.com
website. Gaiam agreed to permit the distribution of the Company's promotional
materials, such as new store openings, to Gaiam's customers. Gaiam and the
Company also agreed to provide their standard employee product discounts to the
other's employees.
John P. Mackey and Glenda Flanagan, executive officers of the Company, own
approximately 13% in the aggregate of BookPeople, Inc. which leases facilities
from the Company. The lease provides for an aggregate annual minimum rent of
approximately $391,000, which we received in rental income in fiscal year 2000.
Report of the Audit Committee
We have reviewed and discussed with the management the Company's audited
financial statements as of and for the year ended September 24, 2000.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from the
independent auditors required by Independence Standard No.1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we have recommended to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended
September 24, 2000.
Dr. John B. Elstrott (Chair)
David W. Dupree
Avram J. Goldberg
Fred "Chico" Lager
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, the
Company believes that all of its directors, officers and applicable shareholders
timely filed these reports.
Shareholders' Proposals
Any proposals that shareholders of the Company desire to have presented at the
2002 annual meeting of shareholders must be received by the Company at its
principal executive offices no later than October 15, 2001.
16
WHOLE FOODS MARKET, INC.
SUPPLEMENT TO PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 26, 2001
The following information was omitted from Whole Foods Market, Inc.'s proxy
statement dated February 9, 2001. Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in such proxy statement.
Independence of Public Accountants
For the year ended September 24, 2000, the Company paid KPMG LLP, its
independent auditors, approximately $293,000 and $999,000 for audit and
financial information systems design and implementation services, respectively.
The Audit Committee concluded that the foregoing non-audit services did not
adversely impact the independence of KPMG LLP.
Audit Committee Charter
The Company's Audit Committee acts pursuant to the Audit Committee Charter
adopted by the Board of Directors on May 23, 2000, a copy of which follows
below.
The date of this Supplement is February 9, 2001.
WHOLE FOODS MARKET, INC.
Audit Committee Charter
Approved by the Board of Directors on May 23, 2000
Role and Independence
The Audit Committee of the Board of Directors assists the Board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of the Company and other such duties as
directed by the Board. The membership of the Committee shall consist of at
least three Directors who are generally knowledgeable in financial and auditing
matters, including at least one member with accounting or related financial
management expertise. Each member shall be free of any relationship that, in
the opinion of the Board, would interfere with his or her individual exercise of
independent judgment, and shall meet the Director independence requirements for
serving on audit committees as set forth in the corporate governance standards
of the NASDAQ. The Committee is expected to maintain free and open
communication (including private executive sessions at least annually) with the
independent auditors and the management of the Company. In discharging this
oversight role, the Committee is empowered to investigate any matter brought to
its attention, with full power to retain outside counsel or other experts for
this purpose.
The Board of Directors shall appoint one member of the Audit Committee as
Chairperson. He or she shall be responsible for leadership of the Committee,
including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the Board of Directors. The Chairperson will also
maintain regular communications with the CEO, CFO, Director of Internal Audit
and the lead independent audit partner.
Responsibilities
The Audit Committee's primary responsibilities include:
. Reviewing and reassessing the adequacy of this charter at least annually. The
charter shall be submitted to the Board of Directors for approval and shall
be published at least every three years in accordance with SEC regulations.
. Recommending to the Board the independent accounting firm to be selected or
retained to audit the financial statements of the Company. In so doing, the
Committee will request from the auditor a written affirmation that the
auditor is in fact independent, discuss with the auditor any relationships
that may impact the auditor's independence and recommend to the Board any
actions necessary to oversee the auditor's independence.
. Overseeing the independent auditor relationship by discussing with the
auditor the nature and rigor of the audit process, receiving and reviewing
audit reports, and providing the auditor full access to the Committee (and
the Board) to report on any and all appropriate matters.
. Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall include
consideration of the quality of the Company's accounting principles as
applied in its financial reporting, including review of estimates, reserves
and accruals, review of judgmental areas, review of audit adjustments whether
or not recorded, difficulties encountered in performing the audit and such
other inquiries as may be appropriate. Based on the review, the Committee
shall make its recommendation to the Board as to the inclusion of the
Company's audited financial statements in the Company's annual report on Form
10-K.
. Reviewing with management and the independent auditors the quarterly
financial information prior to the Company's filing of Form 10-Q. This review
may be performed by the Committee or its Chairperson.
. Discussing with management and the independent auditors the quality and
adequacy of the Company's internal controls.
. Discussing with management the status of significant pending litigation,
taxation matters and other areas of oversight to the legal and compliance
area as may be appropriate.
. Reviewing with the Director of Internal Audit the Annual Internal Audit Plan,
and reviewing summary Internal Audit reports as appropriate throughout the
year.
. Reporting Audit Committee activities to the full Board and issuing annually a
report to be included in the proxy statement (including appropriate oversight
conclusions) for submission to the shareholders.
PROXY
WHOLE FOODS MARKET, INC.
The undersigned hereby (a) acknowledges receipt of the Notice of the Annual
Meeting of Shareholders of Whole Foods Market, Inc. (the "Company") to be held
on March 26, 2001, at 9:00 a.m., local time, at the Regal UN Plaza Hotel, One
UN Plaza, New York, New York and the Proxy Statement in connection therewith,
and (b) appoints John Mackey and Glenda Flanagan, and each of them, his proxies
with full power of substitution and revocation, for and in the name, place and
stead of the undersigned, to vote upon and act with respect to all of the
shares of Common Stock of the Company standing in the name of the undersigned
or with respect to which the undersigned is entitled to vote and act at said
meeting or at any adjournment thereof, and the undersigned directs that his
proxy be voted as follows:
ELECTION OF DIRECTORS [_] FOR nominees listed below except as marked to the
contrary below
[_] WITHHOLD AUTHORITY to vote for all nominees listed
below
John P. Mackey, David W. Dupree
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
PROPOSAL TO APPROVE THE AMENDMENT TO THE 1992 INCENTIVE STOCK OPTION PLAN FOR
TEAM MEMBERS TO INCREASE THE NUMBER OF AUTHORIZED SHARES.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL TO APPROVE THE AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS TO INCREASE THE NUMBER OF AUTHORIZED SHARES.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL TO APPROVE THE AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS TO DELETE THE TERMINATION DATE OF THE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
Whether or not you plan to attend the Annual Meeting and regardless of the
number of shares you own, please date, sign and return this proxy card in the
enclosed envelope (which requires no postage if mailed in the United States).
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTORS
AND FOR THE PROPOSALS TO APPROVE THE AMENDMENTS TO THE STOCK OPTION PLANS.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
DATED: _____________________________
Signature
(Signature if held jointly)
Please date the proxy and sign your
name exactly as it appears hereon.
Where there is more than one owner,
each should sign. When signing as
an attorney, administrator,
executor, guardian or trustee,
please add your title as such. If
executed by a corporation, the
proxy should be signed by a duly
authorized officer. Please sign the
proxy and return it promptly
whether or not you expect to attend
the meeting. You may nevertheless
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