<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: [_]
[_] Preliminary proxy statement [_] Confidential, for use of the
Commission Only as permitted by
Rule 14a-6(e)(2)
[X] Definitive proxy statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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 15, 2000
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 15, 2000 for the following purposes:
1. To elect to the Board two directors;
2. To approve an amendment to the Company's 1996 Stock Option/Stock
Issuance Plan (the "1996 Plan") for a 100,000-share increase in the
number of shares of Common Stock authorized for issuance under the 1996
Plan;
3. 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 3, 2001; and
4. 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 26, 2000 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
Chairman of the Board of
Directors,
President, Chief Executive
Officer
and Secretary
Sandpoint, Idaho
May 26, 2000
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 15, 2000
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 which
will be held at 1:00 p.m. Pacific Daylight Savings Time on July 15, 2000 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 1, 2000.
VOTING RIGHTS AND SOLICITATION
The close of business on May 26, 2000 was the record date for stockholders
entitled to notice of and to vote at the Annual Meeting. As of that date,
10,371,620 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 of Stockholders 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", FOR the amendment to the 1996 Stock Option/Stock Issuance Plan, as
described herein under "Proposal 2--Amendment to 1996 Stock Option/Stock
Issuance Plan" and FOR ratification of the selection of accountants as
described herein under "Proposal 3--Ratification of Selection of Independent
Public Accountants." Management does not know of any matters to be presented
at this 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,
abstentions 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
<PAGE>
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, 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 2001 Annual Meeting
of Stockholders must be received by Coldwater Creek no later than February 4,
2001. 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
United States Securities and Exchange Commission. In addition, the proxy
solicited by the Board of Directors for the 2000 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company receives notice of such proposal not later than
April 27, 2000.
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
---- -------------------- -------- -------------- ---
<C> <S> <C> <C> <C>
Dennis C. Pence..... President, Chief Executive 1988 Class III 50
Officer, Secretary and 2003
Chairman of the Board of
Directors of Coldwater
Creek Inc.
Robert H. McCall.... President, McCall and 1994 Class III 54
Landwehr, P.A. 2003
(Accounting Firm)
</TABLE>
Dennis Pence co-founded the Company in 1984, and has served as President and
Chief Executive Officer of the Company since its incorporation in 1988. Mr.
Pence has also served as a Director on the Board of Directors of the Company
since its incorporation. Since July 1999, Mr. Pence has served as Chairman of
the Board of Directors of the Company. Prior thereto, Mr. Pence served as
Vice-Chairman of the Board of Directors of the Company. In April 1999, Mr.
Pence was also appointed as President of the Company's then newly formed
Internet Commerce Division. Since July 1998, Mr. Pence has also served as
Secretary to the Company. 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.
2
<PAGE>
Robert H. McCall, a Certified Public Accountant, has served as a Director on
the Board of Directors of the Company since 1994. Since February 1995, Mr.
McCall has also served as a member and Chairman of the Company's Audit
Committee and as a member of the Compensation Committee. Since 1981, Mr.
McCall has been President of McCall & Landwehr, P.A., an accounting firm based
in Hayden Lake, Idaho.
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>
James R. Alexander...... Independent Catalog 2000 Class II 57
Consultant (previously 2001
1994--1998)
Michelle Collins........ Managing Director of 1997 Class II 40
Svoboda, Collins L.L.C. 2001
(Investment Banking
Firm)
Duncan Highsmith........ President and Chief 1999 Class II 51
Executive Officer of 2001
Highsmith Inc. (Direct
Marketer)
Ann Pence............... Creative Director and 1988 Class I 50
Vice-Chairman of the 2002
Board of Directors of
Coldwater Creek Inc.
Curt Hecker............. President and Chief 1995 Class I 39
Executive Officer, 2002
Panhandle State Bank
</TABLE>
James R. Alexander has served as a Director on the Board of Directors of the
Company since March 2000. Mr. Alexander previously served as a Director on the
Board of Directors of the Company and as Chairman of the Compensation
Committee from 1994 to 1998 before having to decline to stand for re-election
due to other professional obligations. Mr. Alexander has been an independent
catalog consultant for the past 20 years, serving a variety of mail order
retailers of apparel, gifts and home decor.
Michelle Collins has served as a Director on the Board of Directors of the
Company, as well as a member of the Compensation Committee, since September
1997. In July 1998, Ms. Collins became Chairman of the Compensation Committee.
Since January 1998, Ms. Collins 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 directors of CDW Computer Centers, Inc. and
McWhorter Technologies Inc.
Duncan Highsmith has served as a Director on the Board of Directors of the
Company since May 1999. Since 1987, Mr. Highsmith has served as President and
Chief Executive Officer of Highsmith Inc., an international direct marketer of
various products to schools and libraries. Mr. Highsmith also serves as a
director on the boards of directors of a number of privately held companies,
including Highsmith Inc.
3
<PAGE>
Ann Pence co-founded the Company in 1984, and has served as its Creative
Director since that time. Mrs. Pence has also served as a Director on the
Board of Directors of the Company since its incorporation in 1988. Since July
1999, Mrs. Pence has served as Vice-Chairman of the Board of Directors of the
Company. Prior thereto, Mrs. Pence served as 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 on the Board of Directors of the
Company, as well as a member of the Audit Committee, since August 1995. Since
August 1995, his principal occupation has been President and Chief Executive
Officer of Panhandle State Bank in Sandpoint, Idaho.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
fiscal 1999. Each director attended 100% of the meetings.
The Company's Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee was
established by the Board of Directors effective May 20, 2000, and as such, did
not exist during fiscal 1999. The Audit Committee held a total of four
meetings during fiscal 1999 for which there was 100% attendance by its
members. The Compensation Committee held a total of six meetings during fiscal
1999 for which there was 100% attendance by its members.
The Executive Committee is empowered to act in general for the full Board of
Directors in intervals between meetings of the Board of Directors with the
exception of certain matters that by law may not be delegated. The Executive
Committee meets, as necessary, and all actions by the Executive Committee are
reported at the next Board of Directors meeting. The actions taken by the
Executive Committee are binding and do not require ratification by the Board
of Directors to be legally effective. The Executive Committee is currently
composed of Dennis C. Pence (Chairman), Robert H. McCall and Michelle Collins.
The Audit Committee is responsible for recommending to the Board of
Directors the appointment of 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 currently 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 Employees Stock
Purchase Plan and 1996 Stock Option/Stock Issuance Plan. The Compensation
Committee is currently composed of Michelle Collins (Chairman), Robert H.
McCall and Duncan Highsmith.
DIRECTOR REMUNERATION
From January 1, 1998 through July 9, 1999, non-employee directors received
an annual retainer fee of $15,000. Effective July 10, 1999, this annual
retainer fee was increased to $18,000. In addition, effective January 1, 1998,
each non-employee director receives a fee of $1,500 for each Board of
4
<PAGE>
Directors meeting attended. Effective January 1, 1998, any non-employee
director who serves as a committee chairman receives an annual retainer in the
amount of $2,000, and any non-employee director who serves as a committee
member receives an annual retainer of $1,500. Effective July 10, 1999, the
annual retainer fee for non-employee committee chairman increased to $3,000.
In addition, effective January 1, 1998, each non-employee committee member
receives a fee of $1,000 for each committee meeting attended. Directors are
also reimbursed for certain expenses 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 will receive, 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. For more detailed information regarding the terms and
conditions of options granted under the Automatic Option Grant Program, see
Proposal 2--Amendment to the 1996 Stock Option/Stock Issuance Plan--Automatic
Option Grant Program.
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 service on the Company's Board of Directors. 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 date 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 will 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.
On May 22, 1999, pursuant to the Automatic Option Grant Program of the 1996
Stock Option/Stock Issuance Plan, Mr. Highsmith was granted an option to
purchase 13,376 shares of the Company's Common Stock at an exercise price of
$14.56. On July 10, 1999, pursuant to the Automatic Option Grant Program of
the 1996 Stock Option/Stock Issuance Plan, Messrs. McCall, Hecker and Collins
were each granted an option to purchase 1,672 shares of the Company's Common
Stock at an exercise price of $19.50 per share. On March 25, 2000, pursuant to
the Discretionary Option Grant Program of the 1996 Stock Option/Stock Issuance
Plan, Mr. Alexander was granted an option to purchase 9,000 shares of the
Company's Common Stock at an exercise price of $17.75.
5
<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, 2000 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).............................. 3,245,174 30.66%
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Ann Pence(2)(4)................................. 3,245,174 30.66%
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Robert H. McCall(5)............................. 19,725 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Curt Hecker(5).................................. 23,207 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Michelle Collins(6)............................. 16,720 *
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
James R. Alexander(8)........................... 11,092 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Georgia Shonk-Simmons(9)........................ 12,500 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Tom Scott(10)................................... 21,200 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
Donald Robson(11)............................... 103,817 *
c/o Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, Idaho 83864
All Directors and Executive Officers as a group
(10 persons)(12)............................... 6,711,985 63.42%
</TABLE>
6
<PAGE>
--------
* Less than one (1) percent
(1) Percentage of ownership includes 10,371,620 actual shares of Common
Stock outstanding on April 30, 2000. Shares of Common Stock subject to
stock options which are currently exercisable or will become exercisable
within 60 days after April 30, 2000 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 86,087 shares of Coldwater Creek Common Stock held by the
Dennis C. Pence Lead Annuity Trust. Excludes 156,356 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, to which Mr. Pence disclaims any beneficial
ownership.
(4) Includes 86,087 shares of Coldwater Creek Common Stock held by the
Elizabeth Ann Pence Lead Annuity Trust. Excludes 156,356 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, to which Mrs. Pence disclaims
any beneficial ownership.
(5) Includes 18,392 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(6) Includes 16,720 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(7) Includes 13,376 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(8) Includes 10,672 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(9) Includes 11,500 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(10) Includes 20,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(11) Includes 102,317 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
(12) Includes 211,369 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
April 30, 2000.
7
<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 the fiscal years ended
February 26, 2000, February 27, 1999 and February 28, 1998. 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)
------------------- ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Pence ........... 1999 $265,000 $153,330 -- -- $5,208
President, Chief 1998 265,000 117,130 -- -- 3,900
Executive 1997 242,481 110,400 -- -- 7,800
Officer, Secretary and
Chairman of the Board
Ann Pence............... 1999 265,000 153,330 -- -- 5,208
Vice Chairman of the 1998 265,000 117,130 -- -- 3,900
Board and Creative 1997 242,481 110,400 -- -- 7,800
Director
Georgia Shonk-Simmons... 1999 294,673 106,800 $62,500(2) 95,000 5,460
Chief Merchant and 1998 185,096 131,925(3) 16,000(5) 30,000 --
President of Catalog & 1997 -- -- -- -- --
Retail Sales Division
Tom Scott............... 1999 228,177 101,800(4) 41,667(2) -- --
Senior Vice President, 1998 183,600 75,092 -- 20,000 --
Chief Operations 1997 29,658 50,000(6) 32,000(5) 30,000 --
Officer and
Chief Information
Officer
Donald Robson........... 1999 217,942 109,840(4) 41,667(2) -- 3,692
Senior Vice President, 1998 190,000 64,592(4) -- 10,000 3,644
Chief Financial Officer 1997 171,654 58,650 -- -- 9,750
and Treasurer
</TABLE>
--------
(1) Represents matching contributions made by the Company to the Named
Executive Officers accounts under the Company's 401(k) Plan.
(2) Represents fiscal 1999 compensation expense recognized by the Company for
the Named Executive Officer under its incentive compensation bonus
program, which amounts will be payable in September 2001 should both the
Named Executive Officer and the Company meet certain specified
performance criteria. See "Certain Relationships and Related
Transactions" for further details.
(3) Includes a signing bonus of $75,000 awarded in connection with the Named
Executive Officer's acceptance of employment with the Company.
(4) Includes $13,440 and $12,152 of imputed interest for fiscal 1999 and
1998, respectively, on an outstanding key executive loan to Mr. Robson
and includes $1,000 of imputed interest for fiscal 1999 on an outstanding
key executive loan to Mr. Scott. See "Certain Relationships and Related
Transactions" for further details.
(5) Represents relocation allowances awarded in connection with the Named
Executive Officer's acceptance of employment with the Company.
(6) Includes a signing bonus of $50,000 awarded in connection with the Named
Executive Officer's acceptance of employment with the Company.
8
<PAGE>
Stock Options
The following table contains information concerning stock options granted to
the Named Executive Officers during the fiscal year ended February 26, 2000.
All grants were made under the Company's 1996 Stock Option/Stock Issuance
Plan.
Options/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------
Number of % of Total
Securities Options/SARS Exercise Market
Underlying Granted to or Base Price On Grant
Options/SARS Employees in Price Date of Expiration Date Present
Name Granted (#) Fiscal Year (%) ($/Sh)(1) Grant ($) Date Value ($)(2)
---- ------------ --------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Pence............ -- -- -- -- -- --
Ann Pence............... -- -- -- -- -- --
Georgia Shonk-Simmons... 20,000(3)(4) 7.4% $11.50 $11.50 03/31/09 $146,590
75,000(3)(4) 27.9% $17.25 $17.25 01/31/10 801,803
Tom Scott............... -- -- -- -- -- --
Donald Robson........... -- -- -- -- -- --
</TABLE>
--------
(1) The exercise price may be paid in cash or in shares of the Company's
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
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
four 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 20% of the shares upon the optionee's
completion of each of the five years of service measured from the grant
date.
(4) The option 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.
9
<PAGE>
Option Exercises and Holdings
No options were exercised by the Named Executive Officers during the fiscal
year ended February 26, 2000. The following table provides information with
respect to the Named Executive Officers concerning unexercised options held as
of February 26, 2000.
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....... 7,500.00 117,500.00 $ 49,687.50 $394,687.50
Tom Scott................... 19,000.00 31,000.00 33,125.00 99,375.00
Donald Robson............... 77,238.75 33,079.25 919,488.70 355,079.57
</TABLE>
--------
(1) Based upon the market price of $18.6250 per share on February 26, 2000,
determined on the basis of the closing selling price per share of the
Company's 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 three non-employee directors: Michelle Collins, Robert H.
McCall and Duncan Highsmith. During the fiscal year ended February 26, 2000,
the Committee met six 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, deferred compensation 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 September of 1999, as an additional incentive to retain key executives,
the Board of Directors authorized a compensation bonus pool of up to $1.6
million. The portion of the compensation bonus pool designated to each key
executive, including executive officers, will be payable in lump sum on
September 25, 2001 provided that certain specified performance criteria over a
24 month period have been met by both the key executive and the Company as a
whole. The Company is accruing the related compensation expense to each key
employee on a straight-line basis over the period based
10
<PAGE>
on the current expectation that the specified performance criteria will be met
by both the key employee and the Company as a whole. See "Certain
Relationships and Related Transactions" for further details.
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.
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 similar retail
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 maintained Mr. Pence's base salary for
the fiscal year ended February 26, 2000 at the preceding fiscal year's level
as it was deemed to still be 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 26, 2000 in
recognition of his development of the Company's e-commerce business, retail
growth strategy and executive management team, including directing their
strategic, operational and financial goals, in addition to the successful
completion of the Company's East Coast Operations Center. Mr. and Mrs. Pence
to date have waived all rights to receive stock options.
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
26, 2000 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
3, 2001 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.
11
<PAGE>
FROM THE MEMBERS OF THE COMPENSATION COMMITTEE
Michelle Collins
Robert H. McCall
Duncan Highsmith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's compensation committee has consisted of
Michelle Collins, Robert H. McCall and Duncan Highsmith. The Compensation
Committee met six times during fiscal 1999. 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.
PERFORMANCE GRAPH
The following performance graph shows the percentage change in cumulative
total return to a holder of the Company's Common Stock (NASDAQ:CWTR), assuming
dividend reinvestment, compared with the cumulative total return, assuming
dividend reinvestment, of the Nasdaq Composite Index, new peer group and old
peer group indicated below, during the period from February 3, 1997 through
April 30, 2000.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
2/3/97 6/30/97 12/31/97 6/30/98 12/31/98 6/30/99 12/31/99 4/30/00
------ ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Coldwater
Creek, Inc. $100 $173 $225 $183 $ 91 $130 $136 $167
New Peer
Group $100 $130 $146 $192 $202 $252 $233 $247
Old Peer
Group $100 $120 $130 $163 $190 $222 $249 $265
Nasdaq
Composite
Index $100 $104 $114 $137 $161 $198 $299 $284
</TABLE>
* $100 invested on February 3, 1997 in stock or index including reinvestment
of dividends.
12
<PAGE>
In connection with the Company's fiscal 1999 change to a multi-channel sales
structure, which is described in detail within the Company's recently filed
Form 10-K for the fiscal year ended February 26, 2000, the Company revised its
comparative peer group as follows:
<TABLE>
<S> <C> <C> <C>
New Peer Group: Lands' End, Inc. (NASDAQ:LE) Old Peer Group: Lands' End, Inc. (NASDAQ:LE)
Nordstrom, Inc. (NASDAQ:JWN) Williams Sonoma, Inc. (NASDAQ: WSM)
The J. Jill Group, Inc. (NASDAQ: JILL) The J. Jill Group, Inc. (NASDAQ: JILL)
Intimate Brands, Inc. (NASDAQ:IBI) Lillian Vernon Corp. (NASDAQ: LVC)
Ann Taylor Stores Corp. (NASDAQ:ANN) Spiegel, Inc. (NASDAQ: SPGLA)
Talbots, Inc. (NASDAQ:TLB)
</TABLE>
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
26, 2000, the Company had $1,453,000 in outstanding loans to thirteen key
executives. Loans to Named Executive Officers in excess of $60,000 are as
follows: Tom Scott, Chief Operating Officer--$200,000; 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.
Effective September 25, 1999, the Board of Directors' Compensation Committee
authorized an incentive compensation bonus pool of up to $1.6 million as an
additional incentive to retain twelve key executives. The portion of the
compensation bonus pool designated to each key executive will be payable in
lump sum on September 25, 2001 provided that certain specified performance
criteria over a 24 month period have been met by both the key executive and
the Company as a whole. Bonus pool designations to Named Executive Officers
are as follows: Georgia Shonk-Simmons--$300,000; Tom Scott--$200,000 and
Donald Robson--$200,000.
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 a pro rata share of
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 $578,868 during the fiscal
year ended February 26, 2000. 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.
13
<PAGE>
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 1999 with all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten-percent beneficial owners except for one non-
timely filed Form 4 for Robert H. McCall.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended February 26, 2000
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 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 on Form 10-K, are
available for immediate retrieval from the SEC's web site (www.sec.gov).
PROPOSAL 2
AMENDMENT TO THE 1996 STOCK ISSUANCE/ STOCK OPTION PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1996 Stock Option/Stock Issuance Plan (the "1996 Plan") that will
increase the maximum number of shares of Common Stock authorized for issuance
over the term of the 1996 Plan from 1,461,847 shares to 1,561,847 shares. The
proposed share increase will assure that a sufficient reserve of Common Stock
is available under the 1996 Plan to attract and retain the services of key
individuals essential to the Company's long-term growth and success.
The 1996 Plan became effective upon adoption by the Board on March 4, 1996
(the "Effective Date"), and was subsequently approved by the stockholders. On
May 20, 2000, the Board adopted the amendment to the 1996 Plan that is the
subject of this Proposal.
The following is a summary of the principal features of the 1996 Plan,
assuming the proposed amendment is approved by the stockholders. However, the
summary does not purport to be a complete description of all the provisions of
the 1996 Plan. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Corporate
Secretary at the Company's principal executive offices in Sandpoint, Idaho.
14
<PAGE>
Equity Incentive Programs
The 1996 Plan contains three (3) separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) an Automatic Option Grant Program,
and (iii) a Stock Issuance Program. The principal features of these programs
are described below. The 1996 Plan (other than the Automatic Option Grant
Program) is administered by the Compensation Committee of the Board. The
Compensation Committee acting in such administrative capacity (the "Plan
Administrator") has complete discretion (subject to the provisions of the 1996
Plan) to authorize option grants and direct stock issuances under the 1996
Plan. The Board may appoint a Secondary Committee of one or more Board
members, including employee directors, to authorize option grants and direct
stock issuances to eligible persons other than executive officers and Board
members subject to the short-swing liability provisions of the federal
securities laws. All grants under the Automatic Option Grant Program are to be
made in strict compliance with the provisions of that program, and no
administrative discretion will be exercised by the Plan Administrator with
respect to the grants made under such program.
Share Reserve
A total of 1,561,847 shares of Common Stock has been reserved for issuance
over the term of the 1996 Plan, assuming stockholder approval of the 100,000-
share increase which is the subject of this Proposal. In no event may any one
participant in the 1996 Plan be granted stock options and direct stock
issuances for more than 250,793 shares in the aggregate per calendar year
under the 1996 Plan.
In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will
be made to (i) the maximum number and class of securities issuable under the
1996 Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options and direct stock issuances under the
1996 Plan per calendar year, (iii) the number and class of securities for
which option grants will subsequently be made under the Automatic Option Grant
Program to each eligible non-employee Board member, and (iv) the number and
class of securities and the exercise price per share in effect under each
outstanding option.
Should an option expire or terminate for any reason prior to exercise in
full or be cancelled in accordance with the provisions of the 1996 Plan, the
shares subject to the portion of the option not so exercised or cancelled will
be available for subsequent issuance under the 1996 Plan.
Eligibility
Officers and other key employees who render services which contribute to the
management, growth and financial success of the Company or its subsidiary
corporation, non-employee members of the Board and consultants and other
independent advisors in the service of the Company or its subsidiary
corporation will be eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs. Non-employee members of the Board will also be
eligible to participate in the Automatic Option Grant Program.
As of May 26, 2000, five executive officers, five non-employee Board members
and approximately 380 other employees were eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs, and the non-employee
Board members were also eligible to participate in the Automatic Option Grant
Program.
Valuation
The fair market value per share of Common Stock on any relevant date under
the 1996 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On May 26, 2000, the closing selling price per share
was $22.875.
15
<PAGE>
Discretionary Option Grant Program
Options granted under the Discretionary Option Grant Program will have an
exercise price per share not less than the fair market value per share of
Common Stock on the option grant date if the options are incentive options or
an exercise price of not less than eighty-five percent (85%) per share on the
option grant date if the options are non-statutory options. No granted option
will have a term in excess of ten (10) years. The options will generally
become exercisable in a series of installments over the optionee's period of
service with the Company.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares for which
the option is exercisable at the time of optionee's termination of service.
The Plan Administrator will have complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability
or vesting of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more options
may be unvested and subject to repurchase by the Company, at the original
exercise price paid per share, if the optionee ceases service with the Company
prior to vesting in those shares. The Plan Administrator will have complete
discretion to establish the vesting schedule to be in effect for any such
unvested shares and, in certain circumstances, may cancel the Company's
outstanding repurchase rights with respect to those shares and thereby
accelerate the vesting of those shares.
The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the Discretionary Option Grant
Program and to issue replacement options with an exercise price based on the
fair market price of Common Stock at the time of the new grant.
Automatic Option Grant Program
Under the Automatic Option Grant Program, each individual who was serving as
a non-employee Board member on January 28, 1997 was granted at that time a
non-statutory option to purchase 13,376 shares of Common Stock, provided such
individual had not previously been in the employ of the Company or its
subsidiary corporation. Each individual who first becomes a non-employee Board
member after January 28, 1997, whether through election by the stockholders or
appointment by the Board, will automatically be granted, at the time of such
initial election or appointment, a non-statutory option to purchase 13,376
shares of Common Stock, provided such individual has not previously been in
the employ of the Company or its subsidiary corporation. In addition, on the
date of each Annual Meeting, each individual who is to continue to serve as a
non-employee Board member, whether or not that individual is standing for re-
election to the Board at that particular Annual Meeting, will automatically be
granted a non-statutory option to purchase 1,672 shares of the Company's
Common Stock, provided such individual has served as a non-employee Board
member for at least six (6) months. There will be no limit on the number of
shares for which any one non-employee Board member may be granted options over
his or her period of Board service.
Each 13,376-share or 1,672-share option granted under the Automatic Option
Grant Program will have an exercise price per share equal to one hundred
percent (100%) of the fair market value per share of Common Stock on the
option grant date and a maximum term of ten (10) years measured from the 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
13,376-share or 1,672-share option will be immediately exercisable for all the
option shares. However, any shares purchased under the option will
16
<PAGE>
be 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 will 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 grant date. The shares subject to each
annual 1,672-share grant will vest upon the optionee's completion of one (1)
year of Board service measured from the grant date. Should the optionee cease
to serve as a Board member, the optionee will generally have until the earlier
of (i) the two (2) year period following such cessation of service or (ii) the
expiration date 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 will 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.
Stock Issuance Program
Shares may be sold under the Stock Issuance Program at a price per share not
less than the fair market value on the issuance date, payable in such valid
consideration as the Plan Administrator deems appropriate. Shares may also be
issued solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the
discretionary authority at any time to accelerate the vesting of any and all
unvested shares outstanding under the 1996 Plan.
General Provisions
Acceleration
In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not
to be assumed by the successor corporation will automatically accelerate in
full, and all unvested shares under the Discretionary Option Grant and Stock
Issuance Programs will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. In connection with an acquisition of the Company in
which shares do not vest or a change in control (whether by successful tender
offer for more than fifty percent (50%) of the outstanding voting stock or a
change in the majority of the Board by one or more contested elections for
Board membership), any unvested shares may, in the Plan Administrator's
discretion, be subject to full and immediate vesting, in the event the
individual's service with the successor entity is subsequently terminated
within twelve (12) months following the acquisition or change in control.
The acceleration of vesting upon a change in the ownership of the Company
may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
Financial Assistance
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase
of shares under the Discretionary Option Grant
17
<PAGE>
and Stock Issuance Programs. In addition, the Plan Administrator may permit
one or more such participants to pay the exercise or purchase price in
installments over a period of years. The Plan Administrator will have complete
discretion to determine the terms of any such financial assistance. However,
any such financing will be full-recourse and interest bearing. In addition,
the maximum amount of financing provided any individual may not exceed the
cash consideration payable for the issued shares plus all applicable taxes.
Stock Awards
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the 1996 Plan between February 28, 1999 and February 26, 2000, together with
the weighted average exercise price payable per share.
Option Transactions
<TABLE>
<CAPTION>
Options Granted Weighted Average
Name (Number of Shares) Exercise Price
---- ----------------- ----------------
<S> <C> <C>
Dennis Pence.............................. -- --
President, Chief Executive Officer,
Secretary
and Chairman of the Board
Ann Pence................................. -- --
Vice-Chairman of the Board and Creative
Director
Georgia Shonk-Simmons..................... 95,000 $16.04
Chief Merchant and President of Catalog &
Retail
Sales Division
Tom Scott................................. -- --
Senior Vice President, Chief Operations
Officer and
Chief Information Officer
Donald Robson............................. -- --
Senior Vice President, Chief Financial
Officer, and Treasurer
All executive officers as a group (5
persons)................................. 95,000 16.04
All current non-employee directors as a
group (4 persons)........................ 18,392 15.91
All employees, including current officers
who are not executive officers, as a
group (100 persons)...................... 155,400 17.38
</TABLE>
As of May 26, 2000, options covering 1,101,151 shares of Common Stock were
outstanding under the 1996 Plan, 198,344 shares remained available for future
option grant, and 262,352 shares have been issued under the 1996 Plan in
connection with option exercises.
Amendment and Termination
The Board may amend or modify the 1996 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law
or regulation. The Board may terminate the 1996 Plan at any time, and the 1996
Plan will in all events terminate on March 3, 2006.
18
<PAGE>
Federal Income Tax Consequences
Option Grants
Options granted under the 1996 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made
the subject of a taxable disposition. For Federal tax purposes, dispositions
are divided into two categories: (i) qualifying and (ii) disqualifying. A
qualifying disposition occurs if the sale or other disposition is made after
the optionee has held the shares for more than two (2) years after the option
grant date and more than one (1) year after the exercise date. If either of
these two (2) holding periods is not satisfied, then a disqualifying
disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then
the excess of (i) the fair market value of those shares on the exercise date
over (ii) the exercise price paid for the shares will be taxable as ordinary
income to the optionee. Any additional gain or loss recognized upon the
disposition will be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (i) the fair market value of
the shares on the date the repurchase right lapses over (ii) the exercise
price paid for the shares. The optionee may, however, elect under Section
83(b) of the Internal Revenue Code to include as ordinary income in the year
of exercise of the option an amount equal to the excess of (i) the fair market
value of the purchased shares on the exercise date over (ii) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the repurchase
right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
optionee.
19
<PAGE>
Direct Stock Issuances
The tax principles applicable to direct stock issuances under the 1996 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
Deductibility of Executive Compensation
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Internal Revenue Code Section 162(m).
Accounting Treatment
Option grants and stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant date or issue date will
result in a direct compensation expense to the Company's earnings equal to the
difference between the exercise price or issue price and the fair market value
of the shares on the grant or issue date. Such expense will be recognized by
the Company over the period that the option shares or issued shares are to
vest. Under the current accounting principles in effect for equity incentive
programs such as the 1996 Plan, option grants or stock issuances under the
1996 Plan at 100% of fair market value will not result in any charge to the
Company's earnings, but the Company must disclose in pro forma note
disclosures to the Company's financial statements, the impact the option
grants would have upon the Company's reported earnings were the fair value of
those options at the time of grant treated as compensation expense. Whether or
not granted at a discount, the number of outstanding options may be a factor
in determining the Company's earnings per share on a diluted basis.
PROPOSAL 3
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 3, 2001.
20
<PAGE>
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 C. Pence
Dennis C. Pence
Chairman of the Board of Directors,
President,
Chief Executive Officer and
Secretary
May 26, 2000
Sandpoint, Idaho
21
<PAGE>
COLDWATER CREEK INC.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
JULY 15, 2000
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 15, 2000 and the Proxy Statement and appoints
Dennis C. Pence and Donald A. 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 15, 2000 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)
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
Please mark
your votes [X]
as indicated
The Board of Directors recommends a vote FOR proposals Nos. 1, 2 and 3. This
Proxy, when properly executed, will be voted as specified hereon. This Proxy
will be voted FOR proposals Nos. 1, 2 and 3 if no specification is made.
WITHHOLD
FOR AUTHORITY
1. Election of Directors: Dennis C. Pence and
Robert H. McCall
FOR AGAINST ABSTAIN
2. To approve the amendment to the 1996 Stock
Option Plan/Stock Issuance Plan.
3. To ratify the appointment of Arthur
Andersen LLP as independent auditors of
the Company for the fiscal year ending
March 3, 2001.
________
|
|
| 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
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
