<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box: [_]
[_] Confidential, for use of the
[_] Preliminary proxy statement Commission Only as permitted by
Rule 14a-6(e)(2)
[X] Definitive proxy statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Coldwater Creek Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF COLDWATER CREEK]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 10, 1999
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
COLDWATER CREEK INC. (the "Company") which will be held at the Company's
corporate headquarters in Sandpoint, Idaho, at 1:00 p.m. Pacific Daylight
Savings Time on July 10, 1999 for the following purposes:
1. To elect to the Board two directors;
2. To consider and vote upon a proposal to ratify the selection of Arthur
Andersen LLP as independent public accountants for the Company for the
fiscal year ending March 4, 2000; and
3. To act upon such other business as may properly come before the meeting
or any adjournment or postponement thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
The Board of Directors has fixed the close of business on May 28, 1999 as
the record date for determining those stockholders who will be entitled to
vote at the meeting. The stock transfer books will not be closed between the
record date and the date of the meeting.
Representation of at least a majority of the shares of Common Stock of
Coldwater Creek Inc. entitled to vote, whether present in person or
represented by proxy, is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. Your proxy may be revoked at any
time prior to the time it is voted.
Please read the proxy material carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
Very truly yours,
Dennis C. Pence
/s/ Dennis C. Pence
President and Chief
Executive Officer
Sandpoint, Idaho
May 28, 1999
ONE COLDWATER CREEK DRIVE . SANDPOINT, IDAHO 83864
<PAGE>
Stockholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
COLDWATER CREEK INC.
To Be Held July 10, 1999
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of COLDWATER CREEK INC. ("Coldwater Creek" or the
"Company") of proxies to be voted at the Annual Meeting of Stockholders (the
"Annual Meeting") which will be held at 1:00 p.m. Pacific Daylight Savings
Time on July 10, 1999 at the Company's corporate headquarters in Sandpoint,
Idaho 83864 or at any adjournments or postponements thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. This
Proxy Statement and the proxy card were first mailed to stockholders on or
about June 5, 1999.
VOTING RIGHTS AND SOLICITATION
The close of business on May 28, 1999 was the record date for stockholders
entitled to notice of and to vote at the Annual Meeting. As of that date,
10,183,117 shares of the Company's common stock, $.01 par value per share (the
"Common Stock") were issued and outstanding. All of the shares of the
Company's Common Stock outstanding on the record date are entitled to vote at
the Annual Meeting, and stockholders of record entitled to vote at the Annual
Meeting will have one (1) vote for each share so held on the matters to be
voted upon.
Shares of the Company's Common Stock represented by proxies in the
accompanying form which are properly executed and returned to Coldwater Creek
will be voted at the Annual Meeting in accordance with the stockholders'
instructions contained therein. In the absence of contrary instructions,
shares represented by such proxies will be voted FOR the election of the
directors as described herein under "Proposal 1--Election of Directors" and
FOR ratification of the selection of accountants as described herein under
"Proposal 2--Ratification of Selection of Independent Public Accountants."
Management does not know of any matters to be presented at the Annual Meeting
other than those set forth in this Proxy Statement and in the Notice
accompanying this Proxy Statement. If other matters should properly come
before the meeting, the proxy holders will vote on such matters in accordance
with their best judgment. Any stockholder has the right to revoke his or her
proxy at any time before it is voted by (i) delivering to the Company at its
principal executive office at One Coldwater Creek Drive, Sandpoint, Idaho
83864, Attention: Chief Financial Officer, a written notice of revocation or
duly executed proxy bearing a later date, or (ii) attending the meeting and
voting in person. Election of directors by stockholders shall be determined by
a majority of the votes cast by the stockholders entitled to vote at the
election present in person or represented by proxy. Abstentions and broker
non-votes are each included in the determination of the number of shares
present for quorum purposes. Abstentions are counted in tabulations of the
votes cast on proposals presented to stockholders, whereas broker non-votes
are not counted for purposes of determining whether a proposal has been
approved. All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative votes,
abstantions and broker non-votes.
The entire cost of soliciting proxies will be borne by Coldwater Creek.
Proxies will be solicited principally through the use of the mails, but, if
deemed desirable, may be solicited personally or by telephone, telegraph or
special letter by officers and regular Coldwater Creek employees for no
additional compensation. Arrangements may be made with brokerage houses and
other custodians,
<PAGE>
nominees and fiduciaries to send proxies and proxy material to the beneficial
owners of the Company's Common Stock, and such persons may be reimbursed for
their expenses.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2000 Annual Meeting
of Stockholders must be received by Coldwater Creek no later than February 6,
2000. The proposal must be mailed to the Company's principal executive
offices, One Coldwater Creek Drive, Sandpoint, Idaho 83864, Attention: Dennis
Pence, Secretary. Such proposals may be included in next year's proxy
statement if they comply with certain rules and regulations promulgated by the
Securities and Exchange Commission.
PROPOSAL 1
ELECTION OF DIRECTORS
The members of the Board of Directors of Coldwater Creek are classified into
three classes, one of which is elected at each Annual Meeting of Stockholders
to hold office for a three-year term and until successors of such class have
been elected and qualified. The nominees for the Board of Directors are set
forth below. The proxy holders intend to vote all proxies received by them in
the accompanying form for the nominees for director listed below. In the event
that any other director is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. In
the event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them for any nominee
listed below. As of the date of this Proxy Statement, the Board of Directors
is not aware that any nominee is unable or will decline to serve as a
director.
The Company's Board of Directors recommends that stockholders vote FOR the
nominees listed below.
Nominees to Board of Directors
<TABLE>
<CAPTION>
Class and Year
Director in Which Term
Name Principal Occupation Since Will Expire Age
- ---- -------------------- -------- -------------- ---
<S> <C> <C> <C> <C>
Ann Pence............... Creative Director and Chairman of the 1988 Class I 49
Board of Directors of Coldwater Creek Inc. 2002
Curt Hecker............. President and Chief Executive Officer, 1995 Class I 38
Panhandle State Bank 2002
</TABLE>
Ann Pence co-founded the Company in 1984, and has served as its Creative
Director since that time. Since its incorporation in 1988, she has also served
as a Director and as the Chairman of the Board of Directors of the Company.
Prior to co-founding Coldwater Creek, Mrs. Pence had an eleven year career in
retail advertising, and was employed by Macy's California from 1974 to 1982
where her final position was Copy Director.
Curt Hecker has served as a Director since August 1995 and is a member of
the Audit Committee. Since August 1995, his principal occupation has been
President and Chief Executive Officer of Panhandle State Bank in Sandpoint,
Idaho. Prior to Mr. Hecker's employment with Panhandle State Bank, he served
as Vice President of West One Bank (now US Bank) with which the Company once
had its primary banking relationship.
2
<PAGE>
Directors Not Standing for Election
The members of the Board of Directors who are not standing for election at
this year's Annual Meeting are set forth below.
<TABLE>
<CAPTION>
Class and Year
Director in Which Term
Name Principal Occupation Since Will Expire Age
---- -------------------- -------- -------------- ---
<C> <S> <C> <C> <C>
Dennis C. Pence......... President, Chief 1988 Class III 49
Executive Officer, 2000
Secretary and Vice
Chairman of the Board
of Directors of
Coldwater Creek Inc.
Robert H. McCall........ President, McCall and 1994 Class III 53
Landwehr, P.A. 2000
(Accounting Firm)
Michelle Collins........ Managing Director of 1997 Class II 39
Svoboda, Collins L.L.C. 2001
(Investment Banking
Firm)
Duncan Highsmith........ President and Chief 1999 Class II 50
Executive Officer of 2001
Highsmith Inc. (Direct
Marketer)
</TABLE>
Dennis Pence co-founded the Company in 1984, and has served as President,
Chief Executive Officer and Vice-Chairman of the Board of Directors of the
Company since its incorporation in 1988. Since July 1998, Mr. Pence has also
served as Secretary. In April 1999, Mr. Pence was also appointed as President
of the Company's newly-formed Internet Commerce Division. Prior to co-founding
Coldwater Creek, Mr. Pence was employed by Sony Corp. of America from 1975 to
1983, where his final position was National Marketing Manager, Consumer Video
Products.
Robert H. McCall, a Certified Public Accountant, has served as a Director
since 1994 and since February 1995 has served as Chairman of the Audit
Committee and as a member of the Compensation Committee. Since 1981 he has
been President of McCall & Landwehr, P.A., an accounting firm based in Hayden
Lake, Idaho, which provided accounting, tax and auditing services to the
Company from 1984 to 1993.
Michelle Collins has served as a Director since September 1997. Since
January 1998, she has served as Managing Director of Svoboda, Collins L.L.C.
Previously thereto, Ms. Collins was a principal in the corporate finance
department of William Blair & Company, L.L.C., overseeing the firm's specialty
retail sector. During the Company's initial public offering of common shares
in January 1997, Ms. Collins represented William Blair & Company as co-
underwriter. Ms Collins joined William Blair & Company, L.L.C. as an associate
in 1986 after obtaining a Masters in Business Administration from the Harvard
Business School. Ms. Collins also serves as a director on the boards of CDW
Computer Centers, Inc. and McWhorter Technologies, Inc.
Duncan Highsmith has served as a Director since May 1999. Since 1987, Mr.
Highsmith has served as President and Chief Executive Officer of Highsmith
Inc., an international direct marketer of products to schools and libraries.
Mr. Highsmith also serves as a director on the boards of a number of
privately-held companies, including Highsmith Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
fiscal 1998. Each director attended 100% of the meetings with the exception of
Ann Pence who was unable to attend one meeting. The Audit Committee held a
total of four meetings during fiscal 1998 for which there was 100% attendance.
The Compensation Committee held three meetings during fiscal 1998 for which
there was 100% attendance.
The Company's Board of Directors has a Compensation Committee and an Audit
Committee. The Audit Committee is responsible for recommending to the Board of
Directors the appointment of
3
<PAGE>
independent public accountants, reviewing and approving the scope of audit
activities of the auditors, reviewing accounting practices and controls,
performing independent director duties and reviewing audit results. The Audit
Committee is composed of Robert H. McCall (Chairman) and Curt Hecker. The
Compensation Committee is responsible for reviewing and establishing the
compensation structure for the Company's officers and directors, including
salary rates, participation in incentive compensation and benefit plans and
other forms of compensation, and administering the Company's Employee Stock
Purchase Plan and 1996 Stock Option/Stock Issuance Plan. The Compensation
Committee is composed of Michelle Collins (Chairman) and Robert H. McCall.
DIRECTOR REMUNERATION
Effective January 1, 1998, non-employee directors receive an annual retainer
fee of $15,000. In addition, each non-employee director receives a fee of
$1,500 for each regular Board of Directors meeting attended. Any non-employee
director who serves as a committee chair also receives an annual retainer fee
of $2,000, and any non-employee director who serves as a committee member
receives an annual retainer fee of $1,500. In addition, each non-employee
committee member receives a fee of $1,000 for each regular committee meeting
attended.
Directors are also reimbursed for certain expenses incurred in connection
with attendance at Board of Directors and committee meetings.
Under the Automatic Option Grant Program of the Company's 1996 Stock
Option/Stock Issuance Plan, each individual who first joins the Board of
Directors as a non-employee director receives, at the time of his or her
initial election or appointment, an option to purchase 13,376 shares of Common
Stock at an exercise price per share equal to the fair market value per share
of the Company's Common Stock on the option grant date. On the date of each
annual stockholders meeting, each non-employee director who has served for at
least six months and continues to serve at that meeting receives an automatic
option grant for an additional 1,672 shares of Common Stock at an exercise
price per share equal to the fair market value per share of such stock on the
option grant date
Each option granted under the Automatic Option Grant Program has a maximum
term of ten (10) years measured from the option grant date, subject to earlier
termination at the end of the two (2) year period measured from the date of
the optionee's cessation of Board service. Each option is immediately
exercisable for all the option shares. However, any shares purchased under the
option are subject to repurchase by the Company, at the option exercise price
paid per share, upon the optionee's cessation of Board service prior to
vesting in those shares. The shares subject to each initial 13,376-share
automatic option grant vest in a series of three (3) successive equal annual
installments upon the optionee's completion of each year of Board service over
the three (3)-year period measured from the option grant date. The shares
subject to each annual 1,672-share grant vest upon the optionee's completion
of one (1) year of Board service measured from the option grant date. Should
the optionee cease to serve as a Board member, the optionee generally has
until the earlier of (i) the two (2) year period following such cessation of
service or (ii) the expiration of the option term in which to exercise the
option for the number of shares that are vested at the time of such
individual's cessation of Board service.
The shares subject to each automatic option grant immediately vest in full
upon (i) the optionee's death or permanent disability while a Board member,
(ii) an acquisition of the Company by merger or asset sale, (iii) the
successful completion of a tender offer for more than fifty percent (50%) of
the Company's outstanding voting stock or (iv) a change in the majority of the
Board effected through one or more contested elections for Board membership.
Pursuant to the Automatic Option Grant Program of the 1996 Stock
Option/Stock Issuance Plan, each of Messrs. McCall, Hecker and Collins was
granted an option to purchase 1,672 shares of the Company's Common Stock on
July 11, 1998, at an exercise price of $27.00 per share.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1999 by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee for
director, (iii) each officer listed in the Summary Compensation Table of the
section of this Proxy Statement entitled "Executive Compensation" and (iv) all
current directors and executive officers as a group. All shares are subject to
the named person's sole voting and investment power except where otherwise
indicated.
<TABLE>
<CAPTION>
Percentage
Shares of Shares
Beneficially Beneficially
Name and Address of Beneficial Owner Owned(1) Owned
------------------------------------ ------------ ------------
<S> <C> <C>
Dennis Pence(2)(3)................................ 3,622,559 35.07%
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Ann Pence(2)(4)................................... 3,622,559 35.07%
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Robert H. McCall(5)............................... 20,053 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Curt Hecker(5).................................... 21,535 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Michelle Collins(6)............................... 15,048 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Duncan Highsmith(7)............................... 13,376 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Georgia Shonk-Simmons............................. -- *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Donald Robson(8).................................. 76,738 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Tom Scott(9)...................................... 7,700 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
All Directors and Executive Officers as a group (9
persons)(10)..................................... 7,399,568 71.64%
</TABLE>
5
<PAGE>
- --------
* Less than one (1) percent
(1) Percentage of ownership is based on 10,183,117 shares of Common Stock
outstanding on April 30, 1999. Shares of Common Stock subject to stock
options which are currently exercisable or will become exercisable within
60 days after April 30, 1999 are deemed outstanding for computing the
percentage of the person or group holding such options, but are not
deemed outstanding for computing the percentage of any other person or
group.
(2) Dennis and Ann Pence are husband and wife.
(3) Includes (i) 99,537 shares of Coldwater Creek Common Stock held by the
Dennis C. Pence Lead Annuity Trust and (ii) 129,275 shares of Coldwater
Creek Common Stock held by the Aspenwood Supporting Foundation which were
previously contributed by either Dennis C. Pence or the Dennis C. Pence
Lead Annuity Trust.
(4) Includes (i) 99,537 shares of Coldwater Creek Common Stock held by the
Elizabeth Ann Pence Lead Annuity Trust and (ii) 129,275 shares of
Coldwater Creek Common Stock held by the Aspenwood Supporting Foundation
which were previously contributed by either Ann Pence or the Elizabeth
Ann Pence Lead Annuity Trust.
(5) Includes 16,720 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
(6) Includes 15,048 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
(7) Includes 13,376 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
(8) Includes 75,238 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
(9) Includes 7,500 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
(10) Includes 144,602 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 1999.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain information concerning compensation
earned by the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers for services rendered in
their capacities to the Company and its subsidiary for the fiscal years ended
February 27, 1999, February 28, 1998 and March 1, 1997. The persons named in
the table are hereinafter referred to as the "Named Executive Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
---------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Fiscal Salary Bonus Compensation Options Compensation
Principal Positions Year ($) ($) ($)(1) (#) ($)(2)
------------------- ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Pence(3) ........ 1998 $265,000 $117,130 -- -- $3,900
President, Chief 1997 242,481 110,400 -- -- 7,800
Executive Officer, 1996 225,000 99,450 -- -- 3,900
Secretary and Vice
Chairman of the Board
Ann Pence(3)............ 1998 265,000 117,130 -- -- 3,900
Chairman of the 1997 242,481 110,400 -- -- 7,800
Board and 1996 225,000 99,450 -- -- 3,900
Creative Director
Georgia Shonk-Simmons... 1998 185,096 131,925(4) $16,000 30,000 --
Chief Merchant and 1997 -- -- -- -- --
President of Catalog & 1996 -- -- -- -- --
Retail Sales Division
Donald Robson........... 1998 190,000 64,592(5) -- 10,000 3,644
Senior Vice President, 1997 171,654 58,650 -- -- 9,750
Chief Financial Officer 1996 160,000 49,920 -- 100,317 4,442
and Treasurer
Tom Scott............... 1998 183,600 75,092 -- 20,000 --
Senior Vice President, 1997 29,658 50,000(6) 32,000 30,000 --
Chief Operations 1996 -- -- -- -- --
Officer and Chief
Information Officer
</TABLE>
- --------
(1) Represents relocation allowances awarded in connection with the Named
Executive Officer's acceptance of employment with the Company.
(2) Represents matching contributions made by the Company to the Named
Executive Officers accounts under the Company's 401(k) Plan.
(3) Compensation in this table does not include S-corporation distributions
made to Mr. and Mrs. Pence prior to the initial public offering of the
Company's Common Stock on January 29, 1997.
(4) Includes a signing bonus of $75,000.
(5) Includes $12,152 of imputed interest for fiscal 1998 on an outstanding key
executive loan to Mr. Robson. See "Certain Relationships and Related
Transactions" for further details.
(6) Includes a signing bonus of $50,000.
7
<PAGE>
Stock Options
The following table contains information concerning stock options granted to
the Named Executive Officers during the fiscal year ended February 27, 1999.
All grants were made under the Company's 1996 Stock Option/Stock Issuance
Plan.
Options/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------
Number of % of Total
Securities Options/SARS Exercise Market
Underlying Granted to or Base Price On Grant
Options/SARS Employees in Price Date of Expiration Date Present
Name Granted (#) Fiscal Year (%) ($/Sh)(1) Grant ($) Date Value ($)(2)
---- ------------ --------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Pence............ -- -- -- -- -- --
Ann Pence............... -- -- -- -- -- --
Georgia Shonk-Simmons... 30,000(3)(5) 10.7% $ 12.00 $12.00 11/29/08 $262,785
Donald Robson........... 10,000(4)(5) 3.6% 12.00 12.00 11/29/08 87,595
Tom Scott............... 20,000(3)(5) 7.2% 12.00 12.00 11/29/08 175,190
</TABLE>
- --------
(1) The exercise price may be paid in cash or in shares of Common Stock valued
at fair market value on the exercise date. Alternatively, the option may
be exercised through a cashless exercise procedure pursuant to which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
The Compensation Committee may also assist an optionee in the exercise of
an option by (i) authorizing a loan from the Company in a principal amount
not to exceed the aggregate exercise price plus any tax liability incurred
in connection with the exercise or (ii) permitting the optionee to pay the
option price in installments over a period of years upon terms established
by the Compensation Committee.
(2) The Company used the Black-Scholes model of option valuation to determine
the grant date present value. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. The actual value that an executive officer realizes, if any,
depends on the market value of the Company's common stock at a future date
and may be more or less than the amount calculated above. Estimated values
under the Black-Scholes model are based on (i) an expected life of seven
years; (ii) an interest rate that represents the interest rate on a
similar maturity zero coupon, U.S. Treasury Strip; (iii) volatility
calculated using daily stock prices for the Company since its January 1997
initial public offering through the respective grant date; and (iv) a zero
future dividend yield.
(3) The option becomes exercisable for 25% of the shares upon the optionee's
completion of each of the four years of service measured from the grant
date.
(4) The option becomes exercisable for 20% of the shares upon the optionee's
completion of each of the five years of service measured from the grant
date.
(5) The options will become exercisable on an accelerated basis upon
liquidation or dissolution of the Company or a merger or consolidation in
which there is a change in ownership of securities possessing more than
50% of the total combined voting power of the Company's outstanding
securities, unless the option is assumed by the surviving entity. In
addition, the Compensation Committee of the Board of Directors may
accelerate the vesting of the option in the event the optionee's service
is involuntarily terminated within twelve months following such
transaction. In addition, the Compensation Committee may provide for
accelerated vesting in the event the optionee's service is involuntarily
terminated within twelve months following either (i) a change in the
composition of the Board of Directors over a period of three years or less
such that those individuals serving as Board members at the beginning of
the period cease to represent a majority of the Board or (ii) a change of
ownership of securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities pursuant to a hostile
tender offer.
8
<PAGE>
Option Exercises and Holdings
No options were exercised by the Named Executive Officers during the fiscal
year ended February 27, 1999. The following table provides information with
respect to the Named Executive Officers concerning unexercised options held as
of February 27, 1999.
Fiscal Year-End Option Values(1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($)(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dennis Pence................ -- -- -- --
Ann Pence................... -- -- -- --
Georgia Shonk-Simmons....... -- 30,000 -- $ 0.00
Donald Robson............... 50,158 60,158 $174,675.24 $174,675.24
Tom Scott................... 7,500 42,500 $ 0.00 $ 0.00
</TABLE>
- --------
(1) Based upon the market price of $10.0625 per share on February 27, 1999,
determined on the basis of the closing selling price per share of the
Common Stock on the Nasdaq National Market on that date, less the option
exercise price payable per share.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") has
been composed of two non-employee directors: Michelle Collins and Robert
McCall. During the fiscal year ended February 27, 1999, the Committee met
three times. The Committee is responsible for determining the salaries and
bonuses of the executive officers of the Company, including the Chief
Executive Officer ("CEO"). The Compensation Committee also has the sole and
exclusive authority to grant options to the Company's executive officers under
the 1996 Stock Option/Stock Issuance Plan.
The policies of the Committee with respect to executive officers, including
the CEO, are to provide compensation sufficient to attract, motivate and
retain executives of outstanding ability and potential and to establish an
appropriate relationship between executive compensation and the creation of
shareholder value. To meet these goals, the Committee has adopted a mix among
the compensation elements of salary, bonus and stock options.
The Committee determines the base salaries for executive officers based upon
a review of salary surveys of similar companies performed for the Committee.
The Committee may further adjust the salaries of such executive officers based
upon the Company's financial performance during the previous year and upon
each officer's performance against the objectives established for his or her
area of responsibility in the previous year.
Under the Company's executive bonus plan, executive officers may receive a
certain percentage of their base salary in bonus payments, based on the
Committee's subjective evaluation of the individual's performance. Further,
the Committee seeks to balance the desire for immediate earnings and the
longer term goal of enhancing shareholder value.
In awarding stock options, the Committee considers a number of factors,
including such executive officer's responsibilities and relative position in
the Company, individual performance of such officer, any changes in such
officer's responsibility and position, such officer's equity interest in the
Company in the form of stock and options held by such individual, the extent
to which existing stock options remain unvested and the total number of stock
options to be awarded.
9
<PAGE>
Compensation of Chief Executive Officer
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary and bonus for Dennis Pence,
the Company's CEO. The CEO's salary is determined based on factors such as the
Company's achievement of corporate goals and comparisons with catalog
companies as described above. The CEO's bonus is dependent upon the Company
achieving such and the Committee's subjective evaluation of the CEO's
performance. The Compensation Committee adjusted Mr. Pence's base salary for
the fiscal year ended February 27, 1999 to maintain it at a competitive level
when compared with base salary levels in effect for similarly situated chief
executive officers. Mr. Pence received a bonus for the fiscal year ended
February 27, 1999 in recognition of his development of the Coldwater
management team, including directing their strategic, operational and
financial goals; his oversight of the continued growth and expansion of
Coldwater Creek, including the expansion of the company with its new
Parkersburg distribution facility; and his achievement of certain financial
goals as set by the Board of Directors. Mr. and Mrs. Pence have historically
waived all rights to receive stock options and they intend to continue to do
so in the future.
Compliance with Internal Revenue Code Section 162(m).
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered
officer in any fiscal year. The limitation applies only to compensation which
is not considered to be performance-based. Non-performance based compensation
paid to the Company's executive officers for the fiscal year ended February
27, 1999 did not exceed the $1 million limit per officer, and the Compensation
Committee does not anticipate that the non-performance based compensation to
be paid to the Company's executive officers for the fiscal year ending March
4, 2000 will exceed that limit. The Company's 1996 Stock Option/Stock Issuance
Plan has been structured so that any compensation deemed paid in connection
with the exercise of option grants made under that plan with an exercise price
equal to the fair market value of the option shares on the grant date will
qualify as performance-based compensation which will not be subject to the $1
million limitation. Because it is unlikely that the cash compensation payable
to any of the Company's executive officers in the foreseeable future will
approach the $1 million limit, the Compensation Committee has decided at this
time not to take any action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Compensation
Committee will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1 million level.
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration
program to properly align the Company's performance and the interests of the
Company's stockholders through the use of competitive and equitable executive
compensation in a balanced and reasonable manner, for both the short and long-
term.
FROM THE MEMBERS OF THE COMPENSATION COMMITTEE
Michelle Collins
Robert McCall
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's compensation committee has consisted of Ms.
Collins and Mr. McCall. The Compensation Committee met three times during
fiscal 1998. No current executive officer of the Company has ever served as a
member of the board of directors or compensation committee of any other entity
that has or has had one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
10
<PAGE>
PERFORMANCE GRAPH
The following performance graph shows the percentage change in cumulative
total return to a holder of the Company's Common Stock, assuming dividend
reinvestment, compared with the cumulative total return, assuming dividend
reinvestment, of the Nasdaq Composite Index and the peer group indicated
below, during the period from February 3, 1997 through April 30, 1999.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
2/03/97 2/28/97 3/31/97 4/30/97 5/31/97 6/30/97 7/31/97 8/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
. Coldwater Creek Inc. $100 $123 $ 93 $ 93 $113 $173 $178 $157
v Peer Group $100 $ 91 $ 95 $ 93 $106 $113 $114 $109
o Nasdaq Composite Index $100 $ 95 $ 88 $ 91 $102 $105 $116 $116
<CAPTION>
9/30/97 10/31/97 11/30/97 12/31/97 1/31/98 2/28/98 3/31/98 4/30/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
. Coldwater Creek Inc. $193 $193 $207 $225 $251 $277 $162 $132
v Peer Group $116 $110 $109 $111 $112 $125 $135 $134
o Nasdaq Composite Index $122 $116 $117 $115 $118 $129 $134 $136
<CAPTION>
5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98 11/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
. Coldwater Creek Inc. $152 $183 $132 $ 97 $127 $ 83 $ 80 $ 92
v Peer Group $127 $144 $130 $100 $ 86 $ 95 $111 $148
o Nasdaq Composite Index $129 $138 $136 $109 $124 $130 $143 $162
<CAPTION>
1/31/99 2/28/99 3/31/99 4/30/99
<S> <C> <C> <C> <C>
. Coldwater Creek Inc. $ 87 $ 67 $ 77 $ 98
v Peer Group $147 $143 $131 $147
o Nasdaq Composite Index $185 $168 $181 $185
</TABLE>
* $100 invested on February 3, 1997 in stock or index including reinvestment
of dividends.
Peer Group: Lands End, Inc.
Williams Sonoma, Inc.
Spiegel, Inc.
Lillian Vernon Corp.
DM Management Co.
11
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Exchange Act of 1934, as amended, that might incorporate future filings made
by the Company under those statutes, neither the preceding Performance Graph
nor the Compensation Committee Report is to be incorporated by reference into
any such prior filings, nor shall such graph or report be incorporated by
reference into any future filings made by the Company under those statutes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective June 30, 1997, the Company established an Executive Loan Program
under which the Company may make, at its sole discretion and with prior
approvals from the Chief Executive Officer and the Board of Directors'
Compensation Committee, secured long-term loans to key executives other than
Mr. And Mrs. Pence. Each loan is secured by the executive's personal net
assets, inclusive of all vested stock options in the Company, bears interest
at three percent per annum, and becomes due and payable on the earlier of (i)
the date ten days before the date on which the vested stock options serving as
partial security expire or (ii) ninety days from the date on which the
executive's employment with the Company terminates for any reason. At February
27, 1999, the Company had $1,376,000 in outstanding loans to fifteen key
executives. Loans to Named Executive Officers in excess of $60,000 are as
follows: Donald Robson, Senior Vice President and Chief Financial Officer--
$293,675. If material, compensation expense is recognized by the Company for
the difference between the stated interest rate and the prevailing prime rate.
The Company's principal shareholders, Dennis and Ann Pence, personally
participate in a jet timeshare program. Mr. and Mrs. Pence have not assessed
the Company for any portion of the costs incurred by them in connection with
the capital equipment component of the program. Mr. and Mrs. Pence are
reimbursed by the Company for the hourly usage charges and monthly maintenance
fees incurred by them under the program in connection with flights by them and
other corporate executives exclusively for official corporate business. These
reimbursements totalled $531,421 during the fiscal year ended February 27,
1999. In addition to providing for a more efficient utilization of executive
time, the Company has independently verified that the above reimbursements
constituted a significant savings as compared to the costs which would have
been incurred had the Company chartered comparable aircraft.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that there was compliance for fiscal year 1998 with all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten-percent stockholders, except for the following
non-timely filings: Form 4s--Messrs. Robson (1), Scott (2), Saulino (1),
Morgan (1) and Reed (1).
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended February 27, 1999
has been mailed concurrently with the mailing of the Notice of Annual Meeting
and Proxy Statement to all stockholders entitled to notice of and to vote at
the Annual Meeting. The Annual Report is not incorporated into this
12
<PAGE>
Proxy Statement and is not considered proxy soliciting material. In compliance
with Rule 14a-3 promulgated under the Securities Exchange Act of 1934, the
Company hereby undertakes to provide without charge to each person upon
written request, a copy of the Company's Annual Report on Form 10-K, including
the financial statements and financial schedules thereto. Requests for such
copies should be directed to Coldwater Creek Inc., One Coldwater Creek Drive,
Sandpoint, Idaho 83864, Attention: Investor Relations Officer. Copies of the
Company's various SEC reports, including its Annual Report Form 10-K, are
available for immediate retrieval from the SEC's web site (www.sec.gov).
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served as independent public accountants
for the Company since fiscal 1993. The Board of Directors has appointed Arthur
Andersen LLP to serve in the same capacity for the current fiscal year and is
asking stockholders to ratify the selection of Arthur Andersen LLP by the
Board of Directors as independent public accountants. The affirmative vote of
a majority of the shares presented and voting at the meeting is required to
ratify the selection of Arthur Andersen LLP. In the event that stockholders
fail to ratify the selection of Arthur Andersen LLP, the Board of Directors
would reconsider such selection.
A representative of Arthur Andersen LLP is expected to attend the Annual
Meeting. The representative will have the opportunity to make a statement if
he or she desires to do so and will be available to respond to appropriate
questions of the stockholders.
The Company's Board of Directors recommends that stockholders vote FOR the
ratification of the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending March 4, 2000.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual
Meeting other than those set forth herein and in the Notice accompanying this
Proxy Statement. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed form of proxy to vote
the shares they represent as the Board of Directors may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. YOU ARE, THEREFORE, URGED TO EXECUTE
PROMPTLY AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE WHICH HAS BEEN
ENCLOSED FOR YOUR CONVENIENCE. Stockholders who are present at the meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
/s/ Dennis Pence
Dennis Pence
Secretary
May 28, 1999
Sandpoint, Idaho
13
<PAGE>
________________________________________________________________________________
COLDWATER CREEK INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JULY 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the Notice of the Annual Meeting of
Stockholders to be held on July 10, 1999 and the Proxy Statement and appoints
Dennis C. Pence and Donald Robson, and each or either of them, as Proxies of
the undersigned, with full power of substitution, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all shares of Common
Stock of Coldwater Creek Inc. (the "Company") which the undersigned is entitled
to vote, either on his or her own behalf or on behalf of any entity or
entities, at the Annual Meeting of Stockholders of the Company to be held
July 10, 1999 at 1:00 p.m. local time and at any adjournment or postponement
thereof.
(Continued and to be marked, dated and signed on other side)
________________________________________________________________________________
________________________________________________________________________________
The Board of Directors recommends a vote FOR proposals Nos. 1 and 2. This
Proxy, when properly executed, will be voted as specified hereon. This Proxy
will be voted FOR proposals Nos. 1 and 2 if no specification is made.
1. Election of Directors 2. To ratify the
appointment of Arthur
Ann Pence Andersen LLP as
Curt Hecker independent auditors of
the Company for the
fiscal year ending March 4,
2000.
Please sign exactly as your
name(s) is (are) shown on the
share certificate to which the
Proxy applies. When shares are
held by joint tenants, both should
sign. When signing as an attorney,
executor, administrator, trustee,
or guardian, please give full
title as such. If a corporation,
please sign in full corporate name
by President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
Signature: ________________________
Date: _____________________________
PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
________________________________________________________________________________
