<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Whole Foods Market, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
WHOLE FOODS MARKET, INC.
601 North Lamar, #300
Austin, Texas 78703
February 12, 1998
Dear Shareholders:
Enclosed is a proxy statement for the Annual Meeting of Shareholders to be
held on Monday, March 30, 1998 at the Ritz-Carlton Tysons Corner, 1700 Tysons
Boulevard, McLean, Virginia at 10 a.m., local time. Also enclosed is a proxy
card and a copy of the Annual Report to Shareholders for fiscal 1997.
On the following pages you will find a Notice of Annual Meeting and Proxy
Statement. At this time, I know of the following items of formal business that
will be presented at the Annual Meeting:
(i) The election of eight directors to the Board of Directors of Whole
Foods Market who will be classified into three groups serving terms
of office ranging from one to three years;
(ii) The proposed amendment to the Articles of Incorporation of Whole
Foods Market to increase the authorized number of shares of common
stock from 50 million to 100 million shares; and
(iii) The proposed amendment to the 1992 Stock Option Plan for Team
Members to increase the number of shares of common stock issuable
upon exercise of stock options under the plan from 4 million to 5.5
million shares, to limit the number of options granted in any year
to an individual team member to no more than 50,000 options and to
delete the termination date of the plan.
I ask for your support for the foregoing items.
After the formal business of the Annual Meeting is completed, there will be
a time for discussion, and I encourage you to present comments, questions and
ideas at the Annual Meeting during the discussion period.
I hope that you are able to join us at the Annual Meeting.
Sincerely,
John Mackey
Chief Executive Officer
February 12, 1998
Austin, Texas
<PAGE>
WHOLE FOODS MARKET, INC.
601 North Lamar, #300
Austin, Texas 78703
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 30, 1998
To the holders of common stock of
Whole Foods Market, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Whole
Foods Market, Inc. (the "Company" or "Whole Foods Market") will be held at the
Ritz-Carlton Tysons Corner, 1700 Tysons Boulevard, McLean, Virginia on March
30, 1998 at 10 a.m. local time, for the following purposes:
(i) The election of eight directors to the Board of Directors of Whole
Foods Market who will be classified into three groups serving terms
of office ranging from one to three years;
(ii) The proposed amendment to the Articles of Incorporation of Whole
Foods Market to increase the authorized number of shares of common
stock of Whole Foods Market from 50 million to 100 million shares;
(iii) The proposed amendment to the 1992 Stock Option Plan for Team
Members to increase the number of shares of common stock issuable
upon exercise of stock options under the plan from four million to
5.5 million shares of common stock, to limit the number of options
granted in any year to an individual team member to no more than
50,000 options and to delete the termination date of the plan; and
(iv) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on February 10, 1998
are entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING AND REGARDLESS OF THE
NUMBER OF SHARES YOU OWN, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES).
By Order of the Board of Directors
Glenda Flanagan
Secretary
February 12, 1998
Austin, Texas
<PAGE>
WHOLE FOODS MARKET, INC.
601 North Lamar, #300
Austin, Texas 78703
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 30, 1998
This Proxy Statement is furnished to shareholders of Whole Foods Market,
Inc., a Texas corporation (the "Company" or "Whole Foods Market"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Shareholders to be held on March 30, 1998 at the
Ritz-Carlton Tysons Corner, 1700 Tysons Boulevard, McLean, Virginia, and at any
and all adjournments or postponements thereof. Proxies in the form enclosed
will be voted at the Annual Meeting, if properly executed, returned to the
Company prior to the meeting and not revoked. The proxy may be revoked at any
time before it is voted by giving written notice to the Secretary of the
Company.
ACTIONS TO BE TAKEN AT THE MEETING
At the Annual Meeting, holders of the Company's common stock will consider
and vote for the election as directors of the Company of eight directors who
have been divided into three classes. Dr. Cristina G. Banks and Linda A. Mason
have been designated the Class 1 directors, Avram J. Goldberg, Dr. John B.
Elstrott and Dr. Ralph Z. Sorenson have been designated the Class 2 directors
and David W. Dupree, Fred "Chico" Lager and John Mackey have been designated the
Class 3 directors. The term of office of the Class 1 directors will expire at
the annual meeting of shareholders in 1999, the term of office of the Class 2
directors will expire at the annual meeting of shareholders in 2000 and the term
of office of the Class 3 directors will expire at the annual meeting of
shareholders in 2001. At each annual meeting of shareholders beginning with the
1998 annual meeting, directors elected to succeed those directors whose terms
then expire will be elected for a three-year term of office or until his or her
successor shall have been duly elected and qualified.
In addition to the election of directors, the shareholders will be asked to
approve and adopt (i) an amendment to the Articles of Incorporation of Whole
Foods Market to increase the authorized number of shares of common stock from 50
million to 100 million and (ii) an amendment to the Whole Foods Market, Inc.
Incentive Stock Option plan for Team Members (the "Team Member Plan") to
increase the number of shares subject to such plan to 5.5 million shares, to
limit the number of options granted to any team member in a year to 50,000 and
to delete the termination date of the plan. In addition, any other business as
may properly come before the Annual Meeting will be considered and the persons
named in the proxies will vote in accordance with their
<PAGE>
judgment on such business. The Board of Directors of Whole Foods knows of no
such other business that will be brought before the Annual Meeting as of the
date of this Proxy Statement.
Only holders of record of common stock at the close of business on February
10, 1998 (the "Record Date") are entitled to notice of, and to vote at, the
Annual Meeting. At the close of business on the Record Date, the Company had
issued and outstanding, and entitled to vote at the Annual Meeting,
approximately _____________ shares of common stock. Holders of record of common
stock are entitled to one vote per share on the matters to be considered at the
Annual Meeting.
The presence, either in person or by properly executed proxy, of the
holders of record of a majority of the common stock outstanding on the Record
Date is necessary to constitute a quorum at the Annual Meeting. The election as
a director of each nominee requires the affirmative vote of the holders of
record of a plurality of the outstanding voting power of the shares of common
stock represented, in person or by proxy, at the Annual Meeting. The amendment
to the Articles of Incorporation requires the affirmative vote of a majority of
the outstanding shares of common stock and the amendments to the option plans
require the affirmative vote of the majority of shares represented at the Annual
Meeting.
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) for the election as directors of the Company of the
eight nominees set forth in this Proxy Statement, (ii) for the amendment to the
Articles of Incorporation to increase the number of authorized shares of common
stock to 100 million, (iii) for the amendment to the Team Member Plan and (iv)
at the discretion of the proxy holders on any other matter that may properly
come before the meeting or any adjournment thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. Votes submitted as abstentions on
matters to be voted on at the Annual Meeting will be counted as votes against
such matters. Broker non-votes will not count for or against the matters to be
voted on at the Annual Meeting, other than the proposed amendment to the
Articles of Incorporation. Broker non-votes will have the effect as votes
against this proposal.
If any other matter or business is brought before the meeting, the proxy
holders may vote the proxies in their discretion. The directors do not know of
any such other matter or business.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of January 30, 1998 for (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of common stock, (ii) each director of the Company, (iii)
each executive officer of the Company listed in the Summary Compensation Table
set forth under the caption "Executive Compensation," and (iv) all of the
directors and officers of the Company as a group. Except pursuant to applicable
community property laws and except as otherwise indicated, each shareholder
identified in the table possesses sole voting and investment power with respect
to its or his shares.
<TABLE>
<CAPTION>
Shares Owned (1)
Name Number Percent
---- ---------------- -------
<S> <C> <C>
FMR Corp. (2) 2,217,800 8.8%
Pilgrim Baxter & Assoc. (2) 1,753,600 6.9%
Dr. Cristina G. Banks(3) 17,500 *
Richard Cundiff (4) 38,500 *
David W. Dupree 3,469 *
Dr. John B. Elstrott (5) 8,100 *
Glenda Flanagan (6) 54,250 *
Avram J. Goldberg (7) 10,300 *
Fred "Chico" Lager (8) 6,200 *
John P. Mackey (9) 305,250 1.2%
Linda A. Mason (10) 14,900 *
Carl Morris (11) 8,900 *
Peter Roy (12) 78,000 *
Dr. Ralph Z. Sorenson (13) 6,500 *
All directors and officers as a group (21 1,336,452 5.3%
persons)
</TABLE>
- ------------------------------
* Less than one percent.
(1) Includes shares issuable upon exercise of stock options which are vested or
will be vested prior to March 31, 1998.
(2) Based on information contained in the September 1997 Quarter-End Schedule
13(F).
(3) Includes options to purchase 17,500 shares of common stock.
(4) Includes options to purchase 38,500 shares of common stock.
(5) Includes options to purchase 4,500 shares of common stock.
(6) Includes options to purchase 54,250 shares of common stock.
(7) Includes options to purchase 7,300 shares of common stock.
(8) Includes options to purchase 5,000 shares of common stock.
(9) Includes options to purchase 74,500 shares of common stock.
(10) Includes options to purchase 14,900 shares of common stock.
(11) Includes options to purchase 8,100 shares of common stock.
(12) Includes options to purchase 38,000 shares of common stock.
(13) Includes options to purchase 5,300 shares of common stock.
3
<PAGE>
ELECTION OF DIRECTORS
The following eight persons have been nominated for election as directors at
the Annual Meeting: Dr. Cristina G. Banks, David W. Dupree, Dr. John B.
Elstrott, Avram J. Goldberg, Fred "Chico" Lager, John Mackey, Linda A. Mason and
Dr. Ralph Z. Sorenson. Should any nominee become unable or unwilling to accept
nomination or election, the proxy holders may vote the proxies for the election
in his stead of any other person the Board of Directors may recommend. Each
nominee has expressed his intention to serve the entire term for which election
is sought.
The Board of Directors of the Company in January 1998 approved an amendment
to the Company's bylaws to provide for a "staggered" board of directors in which
only a portion of the Company's directors stand for reelection each year.
Effective at the Annual Meeting, the members of the Board of Directors will be
divided into three classes. The term of office of the first class consisting of
Dr. Cristina G. Banks and Linda A. Mason will expire at the annual meeting of
shareholders in 1999, the term of office of the second class consisting of Avram
J. Goldberg, Dr. John B. Elstrott and Dr. Ralph Z. Sorenson will expire at the
annual meeting of shareholders in 2000 and the term of office the third class
consisting of David W. Dupree, Fred "Chico" Lager and John Mackey will expire at
the annual meeting of shareholders in 2001. At each annual meeting of
shareholders beginning with the 1998 annual meeting, directors elected to
succeed those directors whose terms then expire will be elected for a three-year
term of office or until his or her successor shall have been duly elected and
qualified.
The Company believes that a classified board of directors will help to
assure the continuity and stability of the Company, the Board of Directors and
the Company's business strategies and policies as determined by the Board,
because generally a majority of the directors at any given time will have had
prior experience as directors. The classified board provision will also help
assure that the Board, if confronted with an unsolicited proposal from a third
party that has acquired a block of the voting stock of the Company, will have
sufficient time to review the proposal and appropriate alternatives and to seek
the best available result for all shareholders.
DIRECTORS AND EXECUTIVE OFFICERS
A brief description of each executive officer and director of the Company is
provided below. Directors hold office until the expiration of their term of
office or until their successors are elected and qualified. All officers serve
at the discretion of the Board of Directors.
John Mackey, 44, a co-founder of the Company, has served as a director of
the Company, Chairman of the Board and Chief Executive Officer since 1980.
4
<PAGE>
Peter Roy, 41, has served as the President of the Company since August 1993.
He served as President of the Northern California Region from 1988 to 1993.
Glenda Flanagan, 44, has served as Vice President and Chief Financial
Officer of the Company since December 1988.
James Sud, 45, became Vice-President of Operations in March 1997. He had
been President of MPS Production Company, an independent oil and gas company
engaged in exploration, production and oil field equipment services since 1977.
In addition, he served as a director of the Company from 1980 to March 1997.
Carl Morris, 47, has been the Chief Information Officer of the Company since
January 1994. For the four prior years, Mr. Morris was the President and co-
founder of American Innovations, Inc., a company which developed and sold
technology products to the electric utility industry.
Mark Crossen, 48, has been the President of Amrion, Inc. ("Amrion") since
1991. The Company acquired Amrion in September 1997.
Rich Cundiff, 40, became President of the Southern California Region in
January 1996. He has held various positions with the Company since 1988,
including President and Vice President of the Southwest Region and store team
leader.
A.C. Gallo, 44, became President of the Northeast Region in July 1996. He
had previously served as Vice President of that region since July 1994. Prior
to 1994, he has held various positions with the Company and with Bread & Circus,
Inc., which was acquired by the Company in October 1992, including Vice
President of Perishables and produce coordinator.
Chris Hitt, 48, became President of the Mid-Atlantic Region in August 1996.
He had previously served as President of the Northeast Region since October 1992
and has been with the Company since 1985.
Don Moffitt, 42, has served as President of the Southeast Region since
October 1992 and has been with the Company since 1981.
Walter Robb, 44, has served as President of the Northern California Region
since August 1993. Prior to becoming Regional President he served as store team
leader since joining the Company in December 1991.
Dan Rodenberg, 42, became President of the Midwest Region in January 1997.
He has held various positions with the Company since 1989, including Vice
President
5
<PAGE>
of the Mid-Atlantic Region, Vice President of the Midwest Region and
store team leader.
Dr. Cristina G. Banks, 45, has served as a director of the Company since
July 1992. Dr. Banks is a principal and co-owner of Terranova Consulting Group,
a full service management consulting firm which was started in December 1996.
She has served as Senior Lecturer on the faculty at the Walter A. Haas School of
Business in Berkeley, California since 1985.
David W. Dupree, 44, has served as a director of the Company since September
1996. Mr. Dupree is a Managing Director of The Carlyle Group, a Washington,
D.C. based merchant banking concern, where he has been employed since 1992. Mr.
Dupree is also a director of Care Systems, Inc.
Dr. John B. Elstrott, 49, has served as a director of the Company since
February 1995. Dr. Elstrott is a founding director of the Levy Rosenblum
Institute for Entrepreneurship at Tulane University's A.B. Freeman School of
Business which was started in 1991. He has been on the faculty at Tulane since
1982.
Avram J. Goldberg, 67, has served as a director of the Company since May
1994. Mr. Goldberg has been the Chairman of the Board of AVCAR Group, Ltd., a
consulting firm specializing in the retail industry, since 1989. Mr. Goldberg
also serves as a director of Ekco Group, Inc.
Fred "Chico" Lager, 43, has served as a director of the Company since
January 1996. Mr. Lager is a trustee of Fenimore Asset Management Trust, a
mutual fund company. He was General Manager and Treasurer of Ben & Jerry's
Homemade, Inc. from 1982 to 1988, and the company's President and CEO from 1988
to 1991. He also served as a member of the Ben & Jerry's Homemade, Inc. Board
of Directors.
Linda A. Mason, 43, has served as a director of the Company since July 1992.
She is the co-founder of Bright Horizons Children's Centers, Inc., which
operates work-site childcare centers, and has served as its President since
1982.
Dr. Ralph Z. Sorenson, 64, has served as a director of the Company since
December 1994. Dr. Sorenson is currently Professor Emeritus of business
administration at the University of Colorado, Boulder and has served in various
capacities at the University of Colorado since July 1992, including Dean of the
College of Business and Graduate School of Business Administration. Dr.
Sorenson serves as a director of the Polaroid Corporation, Houghton Mifflin
Company, Eaton Vance Incorporated, Exabyte Corporation, Sweetwater, Inc. and
Xenometrix, Inc.
6
<PAGE>
Each non-employee director of the Company receives $3,000 for each Board of
Directors meeting he or she attends and $500 for each telephone meeting called
by the Company which is greater than one hour in length and in which a majority
of directors participate. Each non-employee committee chair receives an annual
retainer of $1,500. Each non-employee director receives $500 for each committee
meeting attended (excluding the Nominating Committee meetings). Each non-
employee director who is a member of the Nominating Committee receives $2,500
for each new director recruited. In addition, directors are reimbursed for
reasonable expenses incurred in attending Board of Directors meetings.
Directors who are employees of the Company are not paid any separate fees for
serving as directors.
The Board of Directors held five meetings in fiscal 1997. No director
attended fewer than 75% of the meetings of the Board (and any committees
thereof) which they were required to attend.
CERTAIN TRANSACTIONS
The Company has entered into an employment agreement with Mark Crossen, an
executive officer of Amrion which was acquired by the Company in September 1997.
Mr. Crossen's employment agreement provides that Mr. Crossen will continue to
serve as Chief Executive Officer of Amrion and will receive a base salary of
$170,000 per year subject to increases determined by the Company Board of
Directors, and, in any event, not less than the base salary of the Company's
Chief Executive Officer as well as bonuses, stock option grants and other
benefits in the same manner and amount comparable to the senior executive
officers of the Company. The term of Mr. Crossen's employment agreement began at
the date of merger with Amrion and generally will terminate three years from the
date of merger. In consideration for certain non-competition provisions, the
Company agreed to pay Mr. Crossen the sum of $300,000 on each of the first,
second and third anniversaries of the date of merger, $350,000 on each of the
fourth and fifth anniversaries of the date of merger and $400,000 on the sixth
anniversary of the date of merger (provided Mr. Crossen is not in default under
certain non-disclosure and non-competition provisions of the employment
agreement).
Since November 1991, the Company has entered into Retention Agreements with
the executive officers of the Company or its subsidiaries which provide for
certain benefits upon an involuntary termination of employment other than for
cause after a "Triggering Event." A Triggering Event includes a merger of the
Company with and into an unaffiliated corporation if the Company is not the
surviving corporation or the sale of all or substantially all of the Company's
assets. The benefits to be received by the executive officer whose employment
is terminated after a Triggering Event occurs include receipt of his or her
annual salary through the one-year period following the
7
<PAGE>
date of the termination of employment and the immediate vesting of any
outstanding stock options granted to such executive officer.
John Mackey, Peter Roy and Glenda Flanagan, executive officers of the
Company, own approximately 13.4% in the aggregate of BookPeople, Inc. which
leases facilities from the Company. The lease is for a period of 20 years and
provides for aggregate annual minimum rent of approximately $582,000, with
increases every five years. In fiscal 1997, the Company received approximately
$582,000 in rental income from this lease.
COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1997, the Audit and Finance Committee was comprised of Dr.
John B. Elstrott (Chair), Linda A. Mason, Avram J. Goldberg and David W. Dupree.
The Committee is empowered to recommend to the Board the appointment of the
Company's independent public accountants and to periodically meet with such
accountants to discuss their fees, audit and non-audit services, and the
internal controls and audit results for the Company. The Audit and Finance
Committee also is empowered to meet with the Company's accounting personnel to
review accounting policies and reports. The Audit and Finance Committee met
four times during fiscal 1997.
During fiscal 1997, the Compensation Committee was comprised of Dr. Cristina
G. Banks (Chair), Dr. John B. Elstrott and Fred "Chico" Lager. The Compensation
Committee is empowered to administer the Company's stock option plans and other
compensation plans. The Compensation Committee met four times during fiscal
1997.
During fiscal 1997, the Nominating Committee was comprised of Linda A. Mason
(Chair), David W. Dupree and Dr. Cristina G. Banks. The Nominating Committee,
which did not meet in fiscal 1997, recommends to the Board qualified nominees
for election to the Board. The Nominating Committee considers suggestions from
many sources, including shareholders, regarding possible candidates for
director. Such suggestions, together with appropriate biographical information,
should be submitted to the Secretary of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company served as a member of the Compensation
Committee (or other board committee performing similar functions or, in the
absence of any such committee, the entire board of directors) of another
corporation, one of whose executive officers served on the Compensation
Committee. No executive officer of
8
<PAGE>
the Company served as a director of another corporation, one of whose executive
officers served on the Compensation Committee. No executive officer of the
Company served as a member of the Compensation Committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another corporation, one of whose
executive officers served as a director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth information concerning cash compensation paid
or accrued by the Company during the three-year period ended September 28, 1997
to or for the Company's Chief Executive Officer and the four other highest
compensated executive officers of the Company whose total compensation exceeded
$100,000.
<TABLE>
<CAPTION>
Company
Other Annual Stock
Name and Principal Position Year Salary (1) Bonus Compensation(2) Options
- --------------------------- ---- ---------- ----- --------------- -------
<S> <C> <C> <C> <C> <C>
Mr. Mackey 1997 $170,000 $ 93,000 $500 9,000
CEO 1996 145,000 52,500 500 9,000
1995 130,000 0 250 4,000
Mr. Roy 1997 $150,000 $103,000 $500 4,000
President 1996 130,000 67,900 500 19,000
1995 120,000 0 250 4,000
Ms. Flanagan 1997 $135,000 $105,000 $500 4,000
CFO 1996 115,000 78,700 500 9,000
1995 105,000 0 250 4,000
Mr. Morris 1997 $130,000 $ 92,000 $500 4,000
CIO 1996 110,000 47,700 500 9,000
1995 95,000 0 250 4,000
Mr. Cundiff (3) 1997 $145,000 $ 75,000 $500 4,000
Regional President 1996 135,000 62,800 500 29,000
</TABLE>
- ------------------------
(1) The Company has a policy that limits the cash compensation paid in any one
year to any officer to ten times the average full time salary of all team
members. Amounts earned in excess of the salary limitation may be deferred
to the next year, subject to certain restrictions.
(2) Except as otherwise indicated, the amounts indicated reflect the Company's
contributions on behalf of the persons indicated to the Whole Foods Market,
Inc. Savings Plan and Trust. In 1996 and 1997, the Company's contribution
was a maximum of $500 paid in shares of the Company's common stock.
(3) Mr. Cundiff was not an executive officer prior to fiscal 1995 and did not
earn more than $100,000 prior to fiscal year 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors and
executive officers, and persons who own more than 10% of the Company's common
9
<PAGE>
stock, are required to report their initial ownership of the Company's common
stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates have been established for these
reports, and the Company is required to disclose in this proxy statement any
failure to file by these dates. Based solely on its review of the copies of such
forms received by it with respect to fiscal 1997, the Company believes that all
of its directors, officers and persons who own more than 10% of a registered
class of the Company's equity securities timely filed these reports.
OPTION PLANS
The following table sets forth certain information with respect to the
options granted during the year ended September 28, 1997 to each executive
officer of the Company listed in the Summary Compensation Table set forth under
the caption "Executive Compensation."
<TABLE>
<CAPTION>
Percent of
Total Potential Realizable Value
Options at Assumed Annual Rates
Granted to Exercise of Stock Price
Options Employees or Appreciation
Granted in Fiscal Base Price Expiration for Option Term (1)
Name # Year $/Sh Date 5% 10%
- ---- ------- --- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mackey 4,000 $22.00 03/25/04 $35,825 $83,487
5,000 $17.63 01/15/04 $35,885 $83,629
-----
9,000 1.3%
Mr. Roy 4,000 (2) $22.00 03/25/04 $35,825 $83,487
Ms. Flanagan 4,000 (2) $22.00 03/25/04 $35,825 $83,487
Mr. Morris 4,000 (2) $22.00 03/25/04 $35,825 $83,487
Mr. Cundiff 4,000 (2) $22.00 03/25/04 $35,825 $83,487
</TABLE>
___________________
(1) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not reflect the
Company's estimates or projections of future prices of the shares of the
Company's common stock. There can be no assurance that the amounts
reflected in this table will be achieved.
(2) Less than 1%.
(3) Closing price at date of grant.
The following table sets forth certain information with respect to the
options exercised by the executive officers named above during the year ended
September 28, 1997 or held by such persons at September 28, 1997. The number of
options held at September 28, 1997 includes options granted under the Team
Member Plan and
10
<PAGE>
under the 1987 Option and Incentive Plan (the "1987 Plan"). The 1987 Plan was
terminated by the Company in 1992, except as to options previously granted.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money Options (2)
Acquired Value Options at Sept. 28, 1997 at Sept. 28, 1997
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mackey 0 0 70,450 24,550 $1,987,538 $371,438
Mr. Roy 0 0 33,950 31,050 $ 497,906 $441,719
Ms. Flanagan 0 0 51,450 19,550 $1,394,913 $285,188
Mr. Morris 6,950 $70,856 8,900 21,150 $ 133,606 $305,488
Mr. Cundiff 4,000 $80,500 30,250 36,250 $ 717,381 $700,869
</TABLE>
- -----------
(1) Based upon the sale price received for the underlying shares of common
stock of Whole Foods.
(2) Based upon the closing price of the common stock of Whole Foods on
September 26, 1997, which was $34.875 per share.
The Stock Option Plan for Outside Directors (the "Directors Plan") is to
provide independent, outside directors with an incentive for serving as a
director by providing a proprietary interest in the Company through the granting
of options. A total of 200,000 shares of common stock are subject to the
Directors Plan. Upon election to the Board of Directors of the Company, each
eligible director is granted an option to purchase 10,000 shares effective as of
the date of such election. Each eligible director who served on the Company's
Board of Directors for the previous year will be granted an option on the date
of the Annual Meeting of shareholders, if such director is re-elected, to
purchase 2,000 shares of common stock.
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
The Company is authorized to issue 50,000,000 shares of common stock, no
par value, of which approximately ________ shares were outstanding as of
February 10, 1998, and 5,000,000 shares of Preferred Stock, $.01 par value
("Preferred Stock"), none of which have ever been issued or are now outstanding.
The Board of Directors believes that it is necessary to increase the number
of authorized shares of common stock to provide for the flexibility to declare
stock splits or stock dividends in the future when appropriate or the issuance
of additional shares (in financings or acquisitions) when appropriate. The
Company has completed a number of acquisitions in recent years in which the
Company issued shares of its common stock and continually evaluates potential
acquisitions. Aside from the issuances of common stock pursuant to employee
stock options, the Company has not entered into any agreements with respect to
the issuance of additional shares of common stock.
11
<PAGE>
Approval of the proposed amendment requires the affirmative vote of the
holders of a majority of the shares of common stock issued and outstanding as of
the record date of the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO INCREASE THE COMPANY'S AUTHORIZED SHARES OF COMMON STOCK.
AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR TEAM MEMBERS
The amendment to the Team Member Plan would (a) increase the number of
shares of the Company's common stock subject to the plan from 4 million shares
to 5.5 million shares, (b) delete the expiration date of the Team Member Plan
and (c) limit the number of options granted to any team member in a year to
50,000. A copy of the Team Member Plan is attached hereto as Annex I. The
purpose of the Team Member Plan is to encourage an ownership attitude among team
members. The Team Member Plan is a broad-based plan under which all 12,000 team
members are eligible to participate. The Company believes that granting options
to a broad base of its team members has been an effective way of retaining the
services of a large number of its team members who perform a variety of services
for the Company. Participation in the Team Member Plan is subject to length of
service criteria which are generally three years or 6,000 hours of employment
with the Company.
The intention of the Company in administering the Team Member Plan is to
provide team members with an ongoing incentive to increase earnings and
productivity, to acknowledge superior service contributions by team members and
to recognize promotions of team members. As the Company's operations grow, the
Company needs to have a sufficient reserve of shares to motivate its team
members. By deleting the termination date of the Team Member Plan, the Company
will be able to grant options under the plan after December 31, 2001. The
Company has decided to lower the maximum amount of options that may be granted
to any individual team member in a year from 100,000 to 50,000 in order to
emphasize to its shareholders that the participants in the Team Member Plan
represent a large number of team members and not exclusively executive officers.
The Board of Directors has approved the increase of shares subject to the
Team Member Plan in view of the significant increase in the number of Team
Members as a result of the expansion of the Company's operations through
internal growth as well as acquisitions such as the Amrion acquisition completed
in September 1997. In addition, the Company would like to increase the number
of option grants to a larger number of its team members, especially team members
active in the Company's retail operations. In order to continue to obtain the
beneficial
12
<PAGE>
effects of the Team Member Plan, it will be necessary to increase the number of
shares available under the plan.
As of December 31, 1997, options to purchase an aggregate of 2,597,140
shares of common stock (net of options canceled) had been granted pursuant to
the Team Member Plan, options to purchase 463,649 shares had been exercised,
options to purchase 2,133,491 shares remained outstanding, and 1,402,860 shares
remained available for future grant. As of December 31, 1997, the market value
of all shares of common stock subject to outstanding options was approximately
$71,721,000 (based upon the closing sale price of the common stock as reported
on the Nasdaq NMS on December 31, 1997).
As of December 31, 1997, the following current executive officers named in
the Compensation Table appearing elsewhere in this Proxy Statement have been
granted options under the Team Member Plan in the amount indicated: John
Mackey, Chief Executive Officer, 45,000 shares; Peter Roy, President, 65,000
shares, Glenda Flanagan, Chief Financial Officer, 35,000 shares; Rich Cundiff,
Regional President, 55,500 shares; and Carl Morris, Chief Information Officer,
37,000 shares. Since adoption of the Team Member Plan, all current executive
officers, as a group, have been granted options covering 595,330 shares of
common stock which represents approximately 23% of the total number of options
granted pursuant to the Team Member Plan. The foregoing amounts do not include
options granted under the 1987 Option and Incentive Plan which was terminated in
1992.
The Compensation Committee of the Board of Directors (the "Committee")
administers and interprets the Team Member Plan and is authorized to grant
options to all eligible team members. The Team Member Plan currently states that
the maximum number of shares of common stock approved for issuance under the
Team Member Plan is 4,000,000, and options to purchase more than an aggregate of
100,000 shares may not be granted to any one team member in any fiscal year.
These provisions are being submitted to the shareholders for amendment so that
the maximum number of shares subject to the plan is increased to 5.5 million and
no more than 50,000 options may be granted to a team member in any fiscal year.
The Committee designates the optionees or stock recipients, the number of
shares subject to such award and the terms and conditions of each award.
Options granted under the Team Member Plan may either be incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")) or nonqualified stock options (which do not meet the
requirements of Section 422). The purchase price under each incentive option
must be 100% of the fair market value of the common stock of the Company on the
date of award. The purchase price under each non-qualified option is generally
the fair market of the common stock on the date of award; however, the Team
Member Plan states that
13
<PAGE>
up to 10% of the non-qualified options outstanding from time to time may be
granted at option prices determined by the Committee equal to 85% or more of the
fair market value of the common stock at the date the option is granted. The
Team Member Plan currently provides the plan will terminate on December 1, 2001,
and no awards may thereafter be granted under the plan. The Company is asking
its shareholders to delete this termination provision.
The aggregate fair market value (determined at the time of the grant) of
the shares of common stock which any team member is first eligible to purchase
in any calendar year by exercise of incentive stock option granted under the
Team Member Plan and all incentive stock option plans of the Company cannot
exceed $100,000. For this purpose, the fair market value (determined at the
respective date of grant of each option) of the stock purchasable by exercise of
an incentive stock option (or any installment) is counted against the $100,000
annual limitation for a team member only for the calendar year such stock is
first purchasable under the terms of the option. No option can be exercisable
more than ten years after the date the option is awarded. An incentive option
may not be granted under the Team Member Plan to a team member who owns more
than 10% of the outstanding common stock unless the purchase price is 110% of
the fair market value of the common stock at the date of award and the option is
not exercisable more than five years after it is awarded.
For federal income tax purposes, all stock options that qualify under the
rules of Section 422 of the Code will be entitled to incentive stock option
treatment. Among other requirements, to receive incentive stock option
treatment, an optionee is not permitted to dispose of the acquired stock (i)
within two years after the option is granted or (ii) within one year after
exercise. In addition, the individual must have been an employee of the Company
for the entire time from the date of granting of the option until three months
(one year if the employee is disabled) before the date of the exercise. The
requirement that the individual be an employee and the two-year and one-year
holding periods are waived in the case of death of the employee. If all such
requirements are met, no tax will be imposed upon exercise of the option, and
any gain upon sale of the stock will be entitled to capital gain treatment
(assuming the stock constitutes a capital asset in the hands of the optionee).
The applicable capital gain rate depends on how long the incentive stock option
shares are held after exercise. If incentive stock option shares are sold one
year or later after exercise (and two years after grant) the gain will be taxed
at the maximum rate of 28%. If, on the other hand, the shares are sold 18
months or later after exercise (and two years after grant), the gain will be
taxed at the maximum rate of 20%. The employee's gain on exercise (the excess
of fair market value at the time of exercise over the exercise price) of an
incentive stock option is a tax preference item and, accordingly, is included in
the computation of alternative minimum taxable income.
14
<PAGE>
If an employee does not meet the two-year and one-year holding requirement
(a "disqualifying disposition"), but does meet all other requirements, tax will
be imposed at the time of sale of the stock, but the employee's gain realized on
exercise will be treated as ordinary income rather than capital gain and the
Company will get a corresponding deduction at the time of sale. Any additional
gain on sale will be short-term or long-term capital gain, depending on the
holding period of the stock (assuming the stock constitutes a capital asset in
the hands of the optionee). If the amount realized on the disqualifying
disposition is less than the value at the date of exercise, the amount
includible in gross income, and the amount deductible by the Company, will equal
the excess of the amount realized on the sale or exchange over the exercise
price.
In general, no taxable income will be recognized by the optionee, and no
deduction will be allowed to the Company, upon the grant of a non-qualified
stock option. Upon exercise of a non-qualified option an optionee will
recognize ordinary income (and the Company will be entitled to a corresponding
tax deduction if applicable withholding requirements are satisfied) in an amount
equal to the amount by which the fair market value of the shares on the exercise
date exceeds the option price. Any gain or loss realized by an optionee on
disposition of such shares generally is a capital gain or loss and does not
result in any further tax deduction to the Company.
In addition, the Team Member Plan has established for officers and
directors of the Company an exemption from the provisions of Section 16(b) of
the Exchange Act for the grants of options. Section 16(b) provides for recovery
by the Company of profits made by officers and directors on short-term trading
in shares of common stock. Grants of options to purchase common stock under the
Team Member Plan by officers and employee-directors may be entitled to an
exemption from the operation of Section 16(b), provided certain conditions are
met under the rules and regulations of the Commission.
Approval of this amendment requires the affirmative vote of the holders of
a majority of the shares of the common stock represented at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE TEAM MEMBER PLAN.
STOCK PRICE PERFORMANCE
Set forth below is a line graph indicating the stock price performance of
the Company's common stock for the period beginning September 26, 1993 and
ending September 28, 1997 as contrasted with the NASDAQ Composite Index and the
S & P Retail Food Stores Index. The graph assumes that $100 was invested at the
15
<PAGE>
beginning of the period and has been adjusted for any stock dividends
distributed after September 26, 1993. No cash dividends have been paid during
this period.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
9/26/93| 9/23/94| 9/22/95| 9/27/96| 9/26/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NASDAQ 100 | 99.67| 138.61| 161.86| 221.36
- -------------------------------------------------------------------------------
WFMI 100 | 70.32| 61.94| 140.65| 180.00
- -------------------------------------------------------------------------------
S&P Retail Food 100 | 104.19| 133.00| 166.96| 174.53
Stores Index | | | |
- -------------------------------------------------------------------------------
</TABLE>
SHAREHOLDERS' PROPOSALS
Any proposals that shareholders of the Company desire to have presented at
the 1998 annual meeting of shareholders must be received by the Company at its
principal executive offices no later than October 15, 1998.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
form of proxy and the material used in the solicitation thereof will be borne by
the Company. In addition to the use of mails, proxies may be solicited by
persons regularly employed by Whole Foods Market, by personal interview,
telephone and telegraph. Such persons will receive no additional compensation
for such services, but will be reimbursed for any out-of-pocket expenses
incurred by them in connection with such services. Arrangements may also be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation materials to the beneficial owners of shares of
common stock held of record by such persons, and the Company may reimburse such
persons for reasonable out-of-pocket expenses incurred by them in connection
therewith. Georgeson & Company, Inc. has been retained by the Company to assist
in the solicitation of proxies from brokerage houses, other
16
<PAGE>
custodians, nominees and fiduciaries for a fee estimated at $7,500 plus
reimbursement for out-of-pocket expenses.
By Order of the Board of Directors
Glenda Flanagan
Secretary
Austin, Texas
February 12, 1998
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Company's Compensation Committee is empowered to review and recommend
to the full Board of Directors the annual compensation and compensation
procedures for all executive officers of the Company. The Committee also
administers the Company's stock option plans and team member stock purchase
plan.
Annual executive officer compensation consists of a base salary component
and an incentive component. The Company's publicly stated policy is to limit
cash compensation paid to any executive officer in any calendar year to ten
times the average full-time salary of all team members. Amounts earned in
excess of the salary cap may be deferred to the next year, subject to certain
restrictions. All compensation decisions are subject to the implementation of
this policy. Subject to the foregoing, the Committee considers numerous factors
including the Company's financial performance, the individual contribution of
each executive officer, compensation practices of comparable companies and
general economic factors. Stock price performance has not been an important
consideration in determining annual compensation, because the price of the
Company's common stock is subject to a variety of factors outside the Company's
control.
The base salary levels for the executive officers of the Company were
increased between 9% and 24% in calendar 1997 over calendar 1996. The most
significant determinants in these increases were (i) the level of revenues and
net income achieved by the Company and by its operating regions and (ii) the
growth of its operating regions and increased level of responsibilities of
certain of the executive officers.
All of the Company's executive officers participate in an incentive
compensation plan. The incentive compensation paid to the Chief Executive
Officer, President, Chief Financial Officer, Vice President of Operations and
Chief Information Officer for fiscal 1997 was based upon the increase in
earnings per share of the Company. The incentive compensation paid to the
Regional Presidents was based upon the earnings, new store performance and
return on assets achieved by the specific geographic region of the Company which
corresponds to the executive's area of responsibilities. Additionally,
executive officers may receive special cash bonuses or option grants at the
discretion of the Compensation Committee in connection with relocations from one
region to another, or for successful completion of special projects. Fiscal
1997 incentive compensation averaged approximately 30% of the total cash
compensation received by the executive officers.
The Company's executive officers also have received grants of options under
the stock option plans of the Company. The Committee believes that the grant of
options enables the Company to more closely align the economic interest of the
executive officers to those of the shareholders. The level of stock option
grants to executive officers is based primarily upon their relative positions
and responsibilities
18
<PAGE>
within the Company. Grants are made on a discretionary rather than formula basis
by the Committee.
For calendar 1997, the Committee recommended an increase in the base salary
of Mr. Mackey, chief executive officer of the Company, from $145,000 to
$170,000. The increase was intended to recognize Mr. Mackey's contribution
toward the (i) significant growth of the Company, (ii) increase in net income of
the Company in fiscal 1997 over fiscal 1996 and (iii) relative position of the
Company in the natural foods industry. The Committee was also cognizant of the
generally higher level of base salaries paid to chief executive officers of
comparable sized companies. Mr. Mackey's incentive compensation represented
approximately 49% of his total cash compensation for fiscal 1997. During fiscal
1997, Mr. Mackey was awarded options to purchase 9,000 shares of common stock
under the Company's incentive stock option plan.
Compensation Committee
Dr. Cristina G. Banks (Chair)
Avram J. Goldberg
Dr. Ralph Z. Sorenson
19
<PAGE>
ANNEX I
-------
WHOLE FOODS MARKET, INC. INCENTIVE STOCK OPTION PLAN
----------------------------------------------------
FOR TEAM MEMBERS
----------------
On January 17, 1992, the Board of Directors of Whole Foods Market, Inc.
(the "Company") adopted, and the shareholders of the Company approved, the Whole
Foods Market, Inc. Incentive Stock Option Plan for Team Members which was
subsequently amended as of January 11, 1993, September 10, 1993, February 21,
1994, March 11, 1996, August 30, 1996, September 11, 1997 and November 18, 1997.
The Plan, as amended, is as follows:
1. PURPOSE. The purpose of the Plan is to provide Team Members and
consultants with a proprietary interest in the Company through the granting
of options.
2. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular Team Members and consultants of the Company and its Subsidiaries
to whom options are to be granted, and who will, upon such grant, become
participants in the Plan.
4. STOCK OWNERSHIP LIMITATION. No option may be granted to a Team
Member who owns more than 10% of the voting power of all classes of stock
of the Company or its Parent or Subsidiaries. This limitation will not
apply if the option price is at least 110% of the fair market value of the
stock at the time the option is granted and the option is not exercisable
more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant options
under the Plan for more than 4,000,000 shares of Common Stock of the
Company, but this number may be adjusted to reflect, if deemed appropriate
by the Committee, any stock dividend, stock split, share combination,
recapitalization or the like, of or by the Company. Shares to be optioned
and sold may be made available from either authorized but unissued Common
Stock or Common Stock held by the Company in its treasury. Shares that by
reason of the expiration of an option or otherwise are no longer subject to
purchase pursuant to an option granted under the Plan may be reoffered
under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value
(determined at the time of grant) of the shares of Common Stock which any
Team Member is first eligible to purchase in any calendar year by exercise
of incentive stock options (within the meaning of Section 422A of the
Internal
A-1
<PAGE>
Revenue Code) granted under this Plan and all incentive stock option plans
of the Company or its Parent or Subsidiaries shall not exceed $100,000. For
this purpose, the fair market value (determined at the respective date of
grant of each option) of the stock purchasable by exercise of an incentive
stock option (or an installment thereof) shall be counted against the
$100,000 annual limitation for a Team Member only for the calendar year
such stock is first purchasable under the terms of the option. In addition,
in no event may any Team Member be awarded in any fiscal year more than
100,000 options.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of
shares of Common Stock to be offered from time to time by grant of options
to members of management of the Company. The grant of an option to a
participant shall not be deemed either to entitle the participant to, or to
disqualify the participant from, participation in any other grant of
options under the Plan.
8. GRANT OF OPTIONS. The Committee is authorized to grant Incentive
Options and Nonqualified Options under the Plan. The grant of options shall
be evidenced by stock option agreements containing such terms and
provisions as are approved by the Committee, but not inconsistent with the
Plan, including provisions that may be necessary to assure that the option
is an incentive stock option under the Internal Revenue Code. In addition,
the Committee is authorized to grant options under the Plan in connection
with acquisitions effected by the Company or its Subsidiaries on terms and
at exercise prices that are consistent with the terms of such acquisitions.
The Company shall execute stock option agreements upon instructions from
the Committee.
9. OPTION PRICE. The option price for Incentive Options shall not
be less than 100% of the fair market value per share of the Common Stock on
the date the option is granted. The option price for Nonqualified Options
shall be the fair market value per share of the Common Stock on the date
the option is granted; provided, however, that up to 10% of the
Nonqualified Options outstanding from time to time may be granted at option
prices determined by the Committee equal to 85% or more of the fair market
value of the Common Stock at the date the option is granted. The Committee
shall determine the fair market value of the Common Stock on the date of
grant, and shall set forth the determination in its minutes, using any
reasonable valuation method.
10. OPTION PERIOD. The Option Period will begin on the date the
option is granted, which will be the date the Committee authorizes the
option
A-2
<PAGE>
unless the Committee specifies a later date. No option may terminate
later than 10 years from the date the option is granted. The Committee may
provide for the exercise of options in installments and upon such terms,
conditions and restrictions as it may determine. The Committee may provide
for termination of the option in the case of termination of employment or
any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) while in the employ of the Company, but prior to termination
of his right to exercise an option in accordance with the provisions of his
stock option agreement without having totally exercised the option, the
option agreement may provide that it may be exercised, to the extent of the
shares with respect to which the option could have been exercised by the
participant on the date of the participant's death or disability, by (i)
the participant's estate or by the person who acquired the right to
exercise the option by bequest or inheritance or by reason of the death of
the participant in the event of the participant's death, or (ii) the
participant or his personal representative in the event of the
participant's disability, provided the option is exercised prior to the
date of its expiration or not more than one year from the date of the
participant's death or disability, whichever occurs first. The date of
disability of a participant shall be determined by the Company.
12. PAYMENT. Full payment for shares purchased upon exercising an
option shall be made in cash or by check at the time of exercise, or on
such other terms as are set forth in the applicable option agreement. No
shares may be issued until full payment of the purchase price therefor has
been made, and a participant will have none of the rights of a stockholder
until shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be
exercised during the Option Period, at such times, in such amounts, in
accordance with such terms and subject to such restrictions as are set
forth in the applicable stock option agreements. In no event may an option
be exercised or shares be issued pursuant to an option if any requisite
action, approval or consent of any governmental authority of any kind
having jurisdiction over the exercise of options shall not have been taken
or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of
Common Stock covered by each outstanding option granted under the Plan and
the option price may be adjusted to reflect, as deemed appropriate by the
Committee, any stock dividend, stock split, share combination, exchange
A-3
<PAGE>
of shares, recapitalization, merger, consolidation, separation,
reorganization, liquidation or the like, of or by the Company.
15. NON-ASSIGNABILITY. Options may not be transferred other than by
will or by the laws of descent and distribution. During a participant's
lifetime, options granted to a participant may be exercised only by the
participant.
16. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation of
the Plan as it determines to be advisable for the administration of the
Plan. The Committee may rescind and amend its rules and regulations.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Committee without the approval of the stockholders of
the Company, except that any amendment that would (a) materially increase
the benefits accruing to participants under the Plan, (b) materially
increase the number of securities that may be issued under the Plan, or (c)
materially modify the requirements of eligibility for participation in the
Plan must be approved by the stockholders of the Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any action
of the Committee shall be deemed to give any participant any right to be
granted an option to purchase Common Stock of the Company or any other
rights except as may be evidenced by the stock option agreement, or any
amendment thereto, duly authorized by the Committee and executed on behalf
of the Company and then only to the extent and on the terms and conditions
expressly set forth therein.
19. TERM. Unless sooner terminated by action of the Board, the Plan
will terminate on December 31, 2001. The Committee may not grant options
under the Plan after that date, but options granted before that date will
continue to be effective in accordance with their terms.
20. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee of the Board,
composed of independent and disinterested members of the Board qualified to
A-4
<PAGE>
be members of the Committee pursuant to Rule 16b-3 promulgated under the
Securities and Exchange Act of 1934, as amended.
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized to issue
(as long as the common stock varies from that currently authorized, if at
all, only in amount of par value).
(d) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422A of the Internal Revenue Code.
(e) "Nonqualified Option" means an option granted under the Plan which
is not intended to be an Incentive Option.
(f) "Option Period" means the period during which an option may be
exercised.
(g) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting of the
option, each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(h) "Plan" means this Incentive Stock Option Plan for Team Members, as
amended from time to time.
(i) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of
the option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain, and "Subsidiaries" means more than one of any such corporations.
A-5
<PAGE>
PROXY
WHOLE FOODS MARKET, INC.
The undersigned hereby (a) acknowledges receipt of the Notice of the Annual
Meeting of Shareholders of Whole Foods Market, Inc. (the "Company") to be held
on March 30, 1998, at 10:00 a.m., local time, at the Ritz-Carlton Tysons Corner,
1700 Tysons Boulevard, McLean, Virginia and the Proxy Statement in connection
therewith, and (b) appoints John Mackey and Glenda Flanagan, and each of them,
his proxies with full power of substitution and revocation, for and in the name,
place and stead of the undersigned, to vote upon and act with respect to all of
the shares of Common Stock of the Company standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and act
at said meeting or at any adjournment thereof, and the undersigned directs that
his proxy be voted as follows:
ELECTION OF DIRECTORS [_] FOR nominees listed below except as marked to the
contrary below
[_] WITHHOLD AUTHORITY to vote for all nominees listed
` below
Dr. Cristina G. Banks, David W. Dupree, Dr. John B. Elstrott, Avram J.
Goldberg, Fred "Chico" Lager, John P. Mackey, Linda A. Mason, Dr. Ralph Z.
Sorenson
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.
PROPOSAL TO APPROVE THE AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE
COMPANY.
___ FOR ___ AGAINST ___ ABSTAIN
PROPOSAL TO APPROVE THE AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR TEAM
MEMBERS.
___ FOR ___ AGAINST ___ ABSTAIN
<PAGE>
If more than one of the proxies listed on the reverse side shall be present in
person or by substitute at the meeting or any adjournment thereof, the majority
of said proxies so present and voting, either in person or by substitute, shall
exercise all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE NAMED PROPOSALS.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:_____________________________
___________________________________
Signature
___________________________________
(Signature if held jointly)
Please date the proxy and sign your name exactly
as it appears hereon. Where there is more than
one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or
trustee, please add your title as such. If
executed by a corporation, the proxy should be
signed by a duly authorized officer. Please sign
the proxy and return it promptly whether or not
you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
