<PAGE>
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
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Wild Oats Markets, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
<PAGE>
Wild Oats Markets, Inc.
1645 Broadway
Boulder, CO 80302
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 1, 1997
TO THE STOCKHOLDERS OF WILD OATS MARKETS, INC.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Wild Oats
Markets, Inc., a Delaware corporation (the "Company"), will be held on Thursday,
May 1, 1997 at 2:00 p.m. local time at the Boulder Public Library Auditorium,
1000 Canyon Boulevard, Boulder, Colorado for the following purposes:
1. To elect three directors to hold office until the Annual Meeting of
Stockholders in the year 2000.
2. To ratify the selection of Price Waterhouse LLP as independent accountants
of the Company for its fiscal year ending December 27, 1997.
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 4, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Elizabeth C. Cook
Elizabeth C. Cook
Secretary
Boulder, Colorado
March 28, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
INVESTORS MAY REQUEST ADDITIONAL INFORMATION REGARDING WILD OATS MARKETS, INC.,
INCLUDING A COPY OF THE FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, FREE OF CHARGE. PLEASE ADDRESS YOUR REQUEST TO: INVESTOR
RELATIONS, WILD OATS MARKETS, INC., 1645 BROADWAY, BOULDER, COLORADO 80302.
<PAGE>
WILD OATS MARKETS, INC.
1645 BROADWAY
BOULDER, CO 80302
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of Wild
Oats Markets, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on May 1, 1997 at 2:00 p.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the Boulder Public Library Auditorium, 1000
Canyon Boulevard, Boulder, Colorado. The Company intends to mail this proxy
statement and accompanying proxy card on or about April 1, 1997, to all
stockholders entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting Rights And Outstanding Shares
Only holders of record of Common Stock at the close of business on March 4,
1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 4, 1997 the Company had outstanding and entitled to
vote 6,883,683 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
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. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability Of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, Wild Oats
Markets, Inc., 1645 Broadway, Boulder, Colorado 80302, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Stockholder Proposals
The Company intends to holds its 1998 Annual Meeting on or around April 30,
1998. Thus, proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than December 2, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) shall serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Board of Directors is presently composed of ten members and one seat is
currently vacant, and the Company is searching for a qualified nominee to that
seat. The Board by resolution reduced the number of members of the Board to
nine, effective as of the first meeting of the Board of Directors following the
Company's Annual Meeting of Stockholders. One director has resigned, effective
as of the Annual Meeting of Stockholders. There are four directors in the class
whose term of office expires in 1997, one of whom is not seeking reelection.
Each of the nominees for election to this class is currently a director of the
Company. If elected at the Annual Meeting, each of the nominees would serve
until the 2000 annual meeting and until his or her successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes in person or represented
by proxy and entitled to vote at the meeting. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the three nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and each
person whose term of office as a director will continue after the Annual
Meeting.
Nominees for Election for a Three Year Term Expiring at the 2000 Annual Meeting
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
Principal Occupation/
Name Age Position Held with the Company
<S> <C> <C>
Michael C. Gilliland....... 38 Chief Executive Officer and Director
Peter D. Behrendt.......... 58 Chairman of the Board of Exabyte Corporation
David M. Chamberlain (1)... 53 Chairman of the Board of Genesco, Inc.
</TABLE>
- --------------
(1) Member of the Compensation Committee
Michael C. Gilliland co-founded the Company and has been the Chief
Executive Officer and a Director of the Company since its inception in July
1987. Mr. Gilliland also served as its President and Chairman of the Board from
inception until July 1996. Prior to forming the Company in 1987, Mr. Gilliland
was involved in several entrepreneurial ventures.
Peter D. Behrendt has been a Director of the Company since July 1994. Mr.
Behrendt joined Exabyte Corporation, a tape storage company, in July 1987, and
has held the positions of President and Chief Executive Officer. Mr. Behrendt
currently is Chairman of the Board of Exabyte. Prior to joining Exabyte, Mr.
Behrendt spent 26 years with IBM Corporation, most recently as Director of
Quality and
2
<PAGE>
Product Assurance, Information Systems and Communications Products Group. Mr.
Behrendt serves on the Board of Directors of Western Digital Corporation and
InFocus Systems.
David M. Chamberlain has been the Vice Chairman of the Board of the Company
since July 1996 and a Director of the Company since July 1994. Mr. Chamberlain
has held the positions of President and CEO of Genesco, Inc., a shoe
wholesaler/retailer company, and is currently its Chairman of the Board. From
May 1994 to October 1994, Mr. Chamberlain was a principal of Consumer Focus
Partners, a private investment firm. Prior to that, from October 1983 until May
1993, he was with Shaklee Corp., a nutritional products company, serving as
President and Chief Executive Officer from December 1985 to May 1992 and as
Chairman thereafter. From 1969 to 1983, Mr. Chamberlain held various general
management and marketing positions with Nabisco Brands, Inc. and the Quaker Oats
Company.
The Board Of Directors Recommends
A Vote In Favor Of Each Named Nominee.
Directors Continuing in Office until the 1998 Annual Meeting
John A. Shields has been Chairman of the Board of the Company since July
1996. Mr. Shields was a member of the Board of Directors of Alfalfa's, Inc.
from June 1995 to July 1996. He has been Chairman of the Board and Chief
Executive Officer of Delray Farms Markets, a chain of produce, meat and deli
markets, since January 1994. From 1983 until 1993, Mr. Shields was President
and Chief Executive Officer of First National Supermarkets. He is currently a
director of DIY Home Warehouse, Inc., Homeland Stores, Inc. and Shore Bank and
Trust Company.
M. Laird Koldyke has been a Director of the Company since July 1996. Mr.
Koldyke was a Director of Alfalfa's from January 1995 until July 1996. Mr.
Koldyke has been with Frontenac Company, the general partner of Frontenac VI
Limited Partnership ("Frontenac"), a private equity firm since 1988, serving as
an associate from July 1988 until December 1992 and a general partner since
January 1993. He serves as a director of Einstein/Noah Bagel Corp.
There is one vacant seat in this class of directors for which the Company
continues to search for a qualified nominee. The seat may be filled by a vote
of a majority of the Board of Directors.
Directors Continuing in Office until the 1999 Annual Meeting
Elizabeth C. Cook co-founded the Company and has been Vice President,
General Counsel, Secretary and Director of the Company since its inception in
July 1987. Prior to that, from 1983 to 1987, Ms. Cook was tax counsel on staff
with the Atlantic Richfield Company.
David L. Ferguson has been a Director of the Company since November 1994
and has been a general partner of Chase Capital Partners (the general partner of
Chase Venture Capital Associates, L.P., "Chase") since 1989. Prior to joining
Chase Capital Partners, he was a member of the mergers and acquisitions groups
of Prudential Securities, Inc. from 1987 to 1989 and Bankers Trust New York
Corporation from 1985 to 1987. Mr. Ferguson currently serves as a director of
Thompson PBE, Inc. and Guitar Center, Inc.
James B. McElwee has been a Director of the Company since July 1993. Since
November 1992, Mr. McElwee has been a general partner of Weston Presidio Capital
(the general partner of Weston Presidio Offshore Capital C.V., "Weston"). From
July 1979 until November 1992, he was Senior Vice President and a Managing
Director of the Security Pacific Venture Capital Group.
3
<PAGE>
Board Committees And Meetings
During the fiscal year ended December 28, 1996 the Board of Directors held
seven meetings (including one telephonic meeting). The Board has an Audit
Committee, a Compensation Committee, and a Real Estate Committee. The Audit
Committee held two meetings and the Compensation Committee held four meetings
during the fiscal year ended December 28, 1996.
The Audit Committee consists of David L. Ferguson and James B. McElwee. The
Audit Committee makes recommendations to the Board regarding the selection of
independent accountants, reviews the results and scope of the audit and other
services provided by the Company's independent certified public accountants and
reviews the Company's balance sheet, statement of operations and statement of
cash flows for each quarterly period.
The Compensation Committee consists of David M. Chamberlain, Barney M.
Feinblum, David L. Ferguson, M. Laird Koldyke and James B. McElwee. The
Compensation Committee administers the Company's compensation program and makes
recommendations to the Board concerning salaries and incentive compensation for
employees and consultants of the Company.
During the fiscal year ended December 28, 1996, all directors except Peter
Behrendt attended at least 75% of the meetings of the Board held during the
period for which they were a director.
Proposal 2
Ratification Of Selection Of Independent Accountants
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 27, 1997 and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Annual Meeting. Price Waterhouse
LLP has audited the Company's financial statements since 1991. Representatives
of Price Waterhouse LLP are expected to be present at the Annual Meeting, will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
Stockholder ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent accountants at any time during the year
if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Price Waterhouse LLP.
The Board Of Directors Recommends
A Vote In Favor Of Proposal 2.
4
<PAGE>
Security Ownership Of
Certain Beneficial Owners And Management
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 4, 1997 by: (i) each nominee for
director; (ii) the executive officers named in the Summary Compensation Table;
(iii) each director; (iv) all executive officers and directors of the Company as
a group; and (v) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
<TABLE>
<CAPTION>
Number
of Shares Percent
Beneficially Beneficially
Name of Beneficial Owner Owned (1) Owned (2)
- ------------------------ -------------- --------------
<S> <C> <C>
Michael C. Gilliland (3)...................... 1,501,558 21.8
Wild Oats Markets, Inc.
1645 Broadway
Boulder, CO 80302
Elizabeth C. Cook (4)......................... 1,501,558 21.8
Wild Oats Markets, Inc.
1645 Broadway
Boulder, CO 80302
Chase Capital Partners (5).................... 1,247,086 18.1
380 Madison Avenue, 12th Floor
New York, NY 10017
Weston Presidio Offshore Capital C.V. (6)..... 537,392 7.8
343 Sansome Street, Suite 1210
San Francisco, CA 94104-1316
Mark R. Clapp................................. 464,853 6.8
2147 Kincaid
Boulder, CO 80304
Frontenac VI Limited Partnership (7).......... 420,691 6.1
135 South LaSalle, Suite 3800
Chicago, IL 60603
S.M. Hassan (8)............................... 116,292 1.7
John A. Shields (9)........................... 39,333 *
David M. Chamberlain (10)..................... 14,713 *
Peter D. Behrendt (11)........................ 12,175 *
Barnet M. Feinblum (12)....................... 35,842 *
David L. Ferguson (5)......................... 1,247,086 18.1
M. Laird Koldyke (7).......................... 420,691 6.1
James B. McElwee (6).......................... 537,392 7.8
Mary Beth Lewis (13).......................... 11,438 *
All executive officers and directors
as a group (12 persons) (14).................. 4,401,019 63.9
</TABLE>
- -----------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within 60 days of March 4, 1997,
are deemed outstanding for computing the percentage of the person or entity
holding such securities but are not outstanding for computing the percentage
of any other person or entity.
5
<PAGE>
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Percentage of ownership is based on 6,883,683 shares of Common Stock
outstanding.
(3) Consists of 494,846 shares held by Mr. Gilliland, 494,846 shares held by
Elizabeth C. Cook, Mr. Gilliland's spouse, 2,000 shares held jointly by Mr.
Gilliland and Ms. Cook, 6,860 shares held by the Ian Patrick Gilliland 1993
Trust, 496,146 shares held by the Gilliland/Cook Family Investments, L.P.
and 6,860 shares held by the Stella Elizabeth Gilliland 1993 Trust. Mr.
Gilliland disclaims beneficial ownership to the 509,866 shares held by the
trusts.
(4) Consists of 494,846 shares held by Ms. Cook, 494,846 shares held by Michael
C. Gilliland, Ms. Cook's spouse, 2,000 shares held jointly by Ms. Cook and
Mr. Gilliland, 6,860 shares held by the Ian Patrick Gilliland 1993 Trust,
496,146 shares held by the Gilliland/Cook Family Investments, L.P. and
6,860 shares held by the Stella Elizabeth Gilliland 1993 Trust. Ms. Cook
disclaims beneficial ownership of the 509,866 shares held by the trusts.
(5) Consists of 1,247,086 shares held of record by Chase Venture Capital
Associates, L.P., a California limited partner ("CVCA"). The general
partner of CVCA is Chase Capital Partners, a New York general partner
("CCP"), of which Mr. Ferguson is one of several general partners. Mr.
Ferguson disclaims beneficial ownership of the shares owned by CVCA except
to the extent of his pecuniary interests therein arising from his general
partnership interest therein. The amount in the table excludes an aggregate
of 107,322 shares over which CVCA holds a proxy but which are owned of
record and beneficially by a separate partnership and limited liability
company; CVCA has no pecuniary interest in, or dispositive authority over
such shares and disclaims any beneficial interest therein.
(6) Consists of 534,714 shares and 2,678 shares issuable upon the exercise of
warrants held by Weston. Mr. McElwee is a general partner of Weston
Presidio Capital, the general partner of Weston. Mr. McElwee disclaims
beneficial ownership of the shares held by Weston except to the extent of
his pecuniary interest therein arising from his general partnership
interest therein.
(7) Consists of 420,691 shares held by Frontenac. Mr. Koldyke is a general
partner of Frontenac Company, the general partner of Frontenac. Mr. Koldyke
disclaims beneficial ownership of the shares held by Frontenac except to
the extent of his pecuniary interest therein arising from his general
partnership interest therein.
(8) Consists of 103,970 shares and 12,322 shares subject to stock options that
are exercisable within sixty (60) days of March 4, 1997 held by Mr. Hassan.
(9) Consists of 30,530 shares and 8,802 shares subject to stock options that
are exercisable within sixty (60) days of March 4, 1997 held by Mr.
Shields.
(10) Consists of 7,619 shares and 7,600 shares subject to stock options that are
exercisable within sixty (60) days of March 4, 1997 held by Mr.
Chamberlain.
(11) Consists of 5,081 shares and 7,600 shares subject to stock options that are
exercisable within sixty (60) days of March 4, 1997 held by Mr. Behrendt.
(12) Consists of 27,040 shares and 8,802 shares subject to stock options that
are exercisable within sixty (60) days of March 4, 1997 held by Mr.
Feinblum.
(13) Consists of 11,438 shares subject to stock options exercisable within sixty
(60) days of March 4, 1997.
(14) Includes shares included pursuant to Notes 3 through 13, and includes 400
shares held by James Lee, President of the Company, 2,678 shares of Common
Stock issuable upon the exercise of warrants and 47,762 shares subject to
stock options that are exercisable within sixty (60) days of March 4, 1997.
6
<PAGE>
Compliance With Section 16(A) Of The Securities Exchange Act Of 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
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 regulations to furnish the Company with
copies of all Section 16(a) forms they file. All such reports required to be
filed during the fiscal year ended December 28, 1996, were timely filed other
than the filing of the initial Form 3 and one Form 4 regarding the purchase of
stock by James W. Lee, President and Chief Operating Officer of the Company.
Executive Compensation
Management
Executive Officers
The following table sets forth certain information concerning the Executive
Officers of the Company as of March 28, 1997:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael C. Gilliland (1) 38 Chief Executive Officer
James W. Lee 46 President and Chief Operating Officer
Elizabeth C. Cook (1) 37 Vice President, General Counsel and Secretary
Mary Beth Lewis 39 Treasurer and Chief Financial Officer
</TABLE>
- --------------
(1) Mr. Gilliland and Ms. Cook are husband and wife. See "Proposal 1 - Election
of Directors" for the biographies of Mr. Gilliland and Ms. Cook.
James W. Lee joined the Company as its Chief Operating Officer in September
1996, and was appointed as President in February 1997. Mr. Lee was Group Vice
President, Store Operations (Central Division of Ralphs Grocery Company
("Ralphs") from February 1993 to September 1996. He was also Group Vice
President, Store Operations (Southern Division from February 1991 to January
1993 and Vice President, Store Operations (Northern Division from February 1988
to January 1991 with Ralphs.
Mary Beth Lewis has been Chief Financial Officer and Treasurer of the
Company since September 1992. From August 1986 until August 1992, Ms. Lewis was
with Price Waterhouse LLP. Ms. Lewis is a Certified Public Accountant.
Compensation Of Directors
Each of the Company's non-employee directors is entitled to be reimbursed
for reasonable out-of-pocket expenses incurred in connection with attendance at
each regular or special meeting of the Board of Directors. John A. Shields,
Chairman of the Board, receives $1,000 per month through July 1997, as
additional compensation for his participation on the Board. In addition, in
1996 Mr. Shields, Mr. Feinblum and Mr. Chamberlain received grants of options
exercisable for 8,935, 1,334 and 4,054 shares, respectively, of the Company's
common stock under the Company's 1996 Equity Incentive Plan for their
participation on the Board.
7
<PAGE>
Compensation Of Executive Officers
The following table sets forth, for the fiscal year ended December 28,
1996, certain compensation, including salary, bonuses, stock options and certain
other compensation, awarded or paid to, or earned by, the Company's Chief
Executive Officer and its two other most highly compensated executive officers
whose total compensation exceeded $100,000 at December 28 1996 (the "Named
Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
All Other
Salary Bonus Compensation
Name and Principal Position Year ($) ($) ($)
- --------------------------- ---- ------ ----- -----
<S> <C> <C> <C> <C>
Michael C. Gilliland 1996 $151,922 -- $5,256 (1)
Chief Executive 1995 148,936 -- 6,132 (1)
Officer
Elizabeth C. Cook 1996 152,922 -- 5,256 (2)
Vice President and 1995 144,631 -- 7,343 (2)
Secretary
Mary Beth Lewis 1996 106,431 -- 979 (3)
Treasurer and Chief 1995 90,174 $15,000 --
Financial Officer
</TABLE>
- ----------------
(1) Other compensation for Mr. Gilliland included: $1,496 in the form of health
insurance premiums in each of 1995 and 1996, $864 in the form of car loan
payments in 1995, and $3,772 and $3,760, respectively, in the form of
matching contributions to Mr. Gilliland's account under the Company's 401(k)
plan in each of 1995 and 1996.
(2) Other compensation for Ms. Cook included: $1,496 in the form of health
insurance premiums in each of 1995 and 1996, $2,231 in the form of car loan
payments in 1995, and $3,616 in each of 1995 and 1996 in the form of
matching contributions to Ms. Cook's account under the Company's 401(k)
plan.
(3) Other compensation for Ms. Lewis included: $979 in the form of a matching
contribution to Ms. Lewis' account under the Company's 401(k) plan in 1996.
8
<PAGE>
Option Grants in 1996
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the year ended December 28, 1996:
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at
Total Assumed Annual
Number of Total Options Rates of Stock price
Securities Granted to Appreciation
Underlying Employees For Option Term (2)
Options Granted in Exercise Price ----------------------------
Name (#) 1996 (%)(1) ($/Share) Expiration Date 5% ($) 10% ($)
- ---- --------------- -------------- -------------- --------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Gilliland 26,603 7.4% 16.71 6/30/2006 724,133 1,152,974
Elizabeth C. Cook --- --- --- --- --- ---
Mary Beth Lewis 12,415 3.5% 16.71 6/30/2006 337,936 538,066
</TABLE>
- -----------------
(1) Based on 359,652 options granted in 1996.
(2) The potential realizable value is based on the term of the option at its
time of grant (10 years in the case of these options). It is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term, which will benefit
all stockholders.
Aggregate Option Exercises In Last Fiscal Year And Fiscal Year End
Option Values
The following table sets forth for the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended December 28, 1996 and the fiscal year-end number and value
of unexercised options:
<TABLE>
<CAPTION> Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 28, December 28,
Shares Value 1996 1996 ($)
Acquired Realized ($) Exercisable/ Exercisable/
Name on Exercise (#) (1) Unexercisable Unexercisable (2)
- ---- --------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Michael C. Gilliland --- --- 0/26,603 $0/$60,921
Elizabeth C. Cook --- --- --- ---
Mary Beth Lewis --- --- 11,438/16,052 $117,931/$53,120
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock as of the exercise date
as reported on the Nasdaq National Market, minus the exercise price,
multiplied by the number of shares underlying the option.
(2) Based on the fair market value of the Common Stock as of December 28, 1996
as reported on the Nasdaq National Market, minus the exercise price,
multiplied by the number of shares underlying the option.
9
<PAGE>
Employment Agreements
The Company entered into employment agreements with Mr. Gilliland, Mr. S.M.
Hassan and Ms. Cook (each an "Executive") on July 12, 1996 (the Employment
Agreements"). The Employment Agreements provide that each Executive will be
entitled to: (i) receive a base salary of $150,000, subject to increase as
determined by the Compensation Committee; (ii) participate in a cash bonus and
stock option program, with terms and related performance criteria to be
determined by the Compensation Committee; (iii) participate in any other
employee benefit programs for which the Company's senior executives are
eligible; and (iv) receive four weeks of paid vacation per year. The Employment
Agreements with Mr. Gilliland and Mr. Hassan each have a two year term and the
Employment Agreement with Ms. Cook has a one year term, both subject to
automatic one year renewal periods, unless terminated: (i) by reason of the
Executive's death or disability; (ii) with or without cause, as defined in the
Employment Agreements and as determined by the Company's Board of Directors; or
(iii) by the Executive's written resignation. Upon termination of their
respective Employment Agreements, for any reason during the initial term, and by
the Company without cause or by the Executive for a material breach by the
Company during any subsequent renewal period, Messrs. Gilliland and Hassan will
each be entitled to receive his then effective annual base salary rate and
health insurance benefits for three years and Ms. Cook will be entitled to
receive her then effective annual base salary rate and health insurance benefits
for one year. Each Employment Agreement also contains a non-compete provision
which prohibits the Executive from rendering services to any supermarket, food
store or retailer of health and beauty aids located within ten miles of a
Company store or soliciting any of the Company's employees to leave the Company
during the term of the agreement or after the agreement is terminated, for three
years in the case of Messrs. Gilliland and Hassan and for two years in the case
of Ms. Cook. In January 1997, Mr. Hassan gave the Company notice of his
resignation as President of the Company effective in February 1997, although Mr.
Hassan will continue as an employee of the Company through May 2, 1997. Upon
termination of his employment Mr. Hassan will be entitled to receive the
severance benefits granted under his Employment Agreement, as outlined above.
The Company entered into an employment agreement with Mr. Lee on October 1,
1996. Mr. Lee's employment agreement provides for (i) base salary of $225,000,
subject to increase as determined by the Company's Board of Directors; (ii) a
car to be provided by the Company, including reimbursement for related
automobile expenses; (iii) an annual bonus of up to 50% of his base salary,
based on the Company achieving certain earnings targets; (iv) the Company to pay
all expenses related to medical and dental insurance coverage; and (v) four
weeks paid vacation per year. Mr. Lee's employment agreement has a one year
term and is subject to extension by the Company for an additional year. Mr.
Lee's employment is subject to termination upon (i) his death or permanent
disability; (ii) his voluntary resignation; (iii) his discharge for cause; or
(iv) 30 days after written notice by the Company. If the Company elects to
terminate Mr. Lee's employment without cause during the term of the agreement,
it will be obligated to pay him one year's salary. Mr. Lee's employment
agreement also includes non-competition and confidentiality obligations.
Report of the Compensation Committee
of the Board of Directors
Until 1996, the Board of Directors (the "Board") of the Company was
responsible for establishing the Company's compensation programs for all
executive officers. Beginning in 1996, the Board delegated to the Compensation
Committee (the "Committee") of the Board the authority to establish and
administer the Company's compensation programs. The Committee is currently
composed of five non-employee directors: Messrs. Chamberlain, Feinblum,
Ferguson, Koldyke and McElwee. The Committee is responsible for setting and
administering the policies which govern executive salaries, bonuses (if any) and
stock ownership programs. The Committee annually evaluates the performance and
determines the compensation of the Chief Executive Officer (the "CEO") and the
other executive officers of the Company, based upon a mix of the achievement of
corporate goals, individual performance and comparisons with other independent
grocer and other retail companies.
10
<PAGE>
The policies of the Company with respect to compensation of 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 stockholder value. To meet these goals, the Committee adopted a mix
among the compensation elements of salary, bonus and stock options, with a bias
toward stock options, to emphasize the link between executive incentives and the
creation of stockholder value as measured by the equity markets. In general for
1996, the salaries, Company growth and stock option awards of executive officers
were linked to the Company's achievement of corporate performance criteria with
respect to public company matters and Company growth. No bonuses were awarded
in 1996. In 1996, base salary was supplemented by awards under the Company's
stock option plan, designed to provide long-term incentives to all employees of
the Company. Stock option awards were set at or below the mid-range compared to
the companies included in the industry surveys considered by the Committee.
Each of these components is discussed in turn below.
Base Salary
Base salaries for all executive officers of the Company were established at
or below the mid-point of the range for companies included in the compensation
surveys considered by the Committee. In establishing such salaries, the
Committee also considers each officer's level of industry experience, individual
achievement and overall contribution to the achievement of corporate objectives.
Bonuses
No bonuses were paid to executive officers in 1996. The Company currently
has no established criteria for executive bonus awards, other than as specified
in the Employment Agreements. The Company has implemented a bonus plan in 1997
pursuant to which staff in the Company's corporate headquarters (which may
include certain of the executive officers who do not have bonus arrangements as
set forth in Employment Agreements) may receive a bonus if the Company's overall
projections for 1997 and succeeding years are met. Under the terms of this
plan, a certain percentage of the corporate headquarters' aggregate payroll will
be set aside for distribution to staff members in proportions based upon
evaluations by their supervisors.
Option Plan
The option plan offered by the Company has been established to provide all
executive officers of the Company with an opportunity to share, along with
stockholders of the Company, in the long-term performance of the Company.
Periodic grants of stock options are generally made to all eligible employees.
Subsequent to the adoption of the Company's 1996 Equity Incentive Plan, these
grants have been reviewed by the Board on an annual basis. As the base salaries
for executive officers of the Company historically have been below the mid-point
of the range for comparable companies, the Company has used stock options as the
primary incentive to attract and retain its executive officers. In awarding
stock options, the Board considers individual performance and overall
contribution to the Company and also considers the number of unvested stock
options held by the officer and the total number of stock options available to
be awarded under the stock option plans. The Committee also considers the stock
option practices of a self-selected group of other independent grocer and other
retail companies. After considering the criteria relating to awarding stock
options, the Board determined that three executive officers would receive option
grants in the year ended December 28, 1996. Stock options granted under the
stock option plans generally have a five-year vesting schedule and generally
expire ten years from the date of grant. The exercise price of options granted
under the stock option plans was 100% of fair market value of the underlying
stock on the date of grant for all officers who were granted options during
1996.
11
<PAGE>
CEO Compensation
Mr. Gilliland's base salary and grants of stock options were determined in
accordance with the criteria described above and set forth in the employment
agreement between Mr. Gilliland and the Company. The base salary of Mr.
Gilliland was set at an annual rate of $150,000 commencing July 12, 1996, which
represented an increase from his base salary of $148,936 in 1995. In setting
such salary level, the Committee considered appropriate salary surveys for the
chief executive officers of independent grocers and other retail companies. Mr.
Gilliland's salary was set below the mid-point of the range for such companies,
reflecting the Company's size and stage of development in relation to such
companies and the Committee's desire to conserve the Company's financial
resources. The Compensation Committee determined that Mr. Gilliland met all
performance objectives set for 1996.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. The statute containing this law
and the applicable proposed Treasury regulations offer a number of transitional
exceptions to this deduction limit, including an exemption for compensation
plans, arrangements and binding contracts in existence prior to the time the
Company became a "publicly held corporation" within the meaning of the Code. As
a result, the Board believes that at the present time it is quite unlikely that
the compensation paid to any Named Executive Officers in a taxable year which is
subject to the deduction limit will exceed $1 million. Therefore, the Board has
not yet established a policy for determining which forms of incentive
compensation awarded to its Named Executive Officers shall be designed to
qualify as "performance-based compensation." The Board intends to continue to
evaluate the effects of the statute and any final Treasury regulations and to
comply with Code Section 162(m) in the future to the extent consistent with the
best interests of the Company.
COMPENSATION COMMITTEE
David M. Chamberlain
Barnet M. Feinblum
David L. Ferguson
M. Laird Koldyke
James B. McElwee
Compensation Committee Interlocks and Insider Participation
Messrs. Chamberlain, Feinblum, Ferguson, Koldyke and McElwee currently
serve as members of the Compensation Committee. Mr. Feinblum is not seeking
reelection upon the expiration of his term as director on May 1, 1997. Mr.
Ferguson is a general partner of Chase Capital Partners. Mr. McElwee is a
general partner of Weston Presidio Capital. See "Certain Transactions" for a
description of certain transactions involving these entities. Compensation of
Messrs. Behrendt, Chamberlain, Feinblum, Ferguson and McElwee is determined by
the entire Board of Directors with a view to attracting and retaining talented
individuals to serve as directors.
Performance Chart
The following graph sets forth the stock price performance of the
Company's common stock for the period beginning October 23, 1996, the date of
the Company's initial public offering, and ending December 31, 1996, as
contrasted with the NASDAQ Stock Market-US Index and the S&P Retail (Food
Chains) Index. The graph assumes $100 was invested at the beginning of the
period and any dividends paid during the period were reinvested.
12
<PAGE>
COMPARISON OF 2 MONTH CUMULATIVE TOTAL RETURN*
AMONG WILD OATS MARKETS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE S & P RETAIL (FOOD CHAINS) INDEX
<TABLE>
<CAPTION>
WILD OATS NASDAQ STOCK S & P RETAIL
MARKETS, INC. MARKET-US (FOOD CHAINS)
----------------------------------------------------------------
<S> <C> <C> <C>
10/23/96 100.00 100.00 100.00
12/31/96 74.00 105.00 95.00
</TABLE>
Certain Transactions
In July 1996, the Company sold 876,016 shares of its Series E Preferred
Stock, par value $.001 (the "Series E Financing") to a group of investors,
including 797,341 shares to Chase and 60,067 shares to Weston, at a price per
share of $18.81. David L. Ferguson, a general partner of Chase, and James B.
McElwee, a general partner of Weston, are both directors of the Company.
In July 1996, in connection with the acquisition of Alfalfa's, Inc.,
Frontenac received 12,355 shares of the Company's Common Stock and 408,336
shares of the Company's Series D Preferred Stock, par value $.001, in exchange
for certain shares of Alfalfa's which Frontenac had previously purchased. M.
Laird Koldyke, a director of the Company, is also a general partner of Frontenac
Company, which is the general partner of Frontenac.
In connection with the acquisition of Alfalfa's and the Series E Financing,
the Company entered into the Stockholders Agreement dated July 12, 1996 by and
among the Company and certain investors (the "Stockholder Agreement"), as
amended effective October 22, 1996, and a Registration Rights Agreement dated as
of July 12, 1996 by and among the Company and certain investors (the
"Registration Rights Agreement"). The Stockholders Agreement provides, among
other things, that until October 2000 or such time at which Chase fails to hold
at least 4% of the outstanding shares of common stock, the holders of 3,776,726
shares of Common Stock shall be obligated to vote their shares in favor of a
nominee of Chase to be elected to the Company's Board of Directors and each
committee thereof, including the Audit and Compensation Committees and shall
vote to elect the nominee of Weston to the Audit and Compensation Committees.
The Registration Rights Agreement provides that the holders of 4,425,319
outstanding shares of Common Stock (the "Registrable Securities") will have the
right after April 22, 1997 to require the Company to file up to two registration
statements per formerly outstanding series of preferred stock, subject to
underwriter cutback. Once the Company becomes eligible to file a registration
statement on Form S-3, upon the request of certain holders of Registrable
Securities, the Company will be obligated to file a registration statement on
Form S-3 covering such Registrable Securities as requested to be
13
<PAGE>
included by the holders of such securities. The Company is obligated to pay the
expenses associated with the registration of the Registrable Securities pursuant
to the Registration Rights Agreement.
Messrs. Gilliland and Clapp and Ms. Cook own Pretty Good Groceries, Inc., a
Colorado company ("PGG"), which operates two grocery stores in Boulder,
Colorado. The Company provides certain accounting, legal and administrative
services to PGG for a monthly fee of $400. PGG also purchases certain items
through the Company's volume discount programs with its distributors, for which
PGG pays the Company the cost of such items on a monthly basis. The Company
does not receive any profit from the purchase of such items by PGG.
Mr. Gilliland and Ms. Cook have employment agreements with the Company.
See "Management -- Employment Agreements."
The Company purchases Horizon Organic Dairy, Inc. organic dairy products
from various distributors. Mr. Feinblum is the President and Chief Executive
Officer of Horizon Organic Dairy, Inc.
Other Matters
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/Elizabeth C. Cook
Elizabeth C. Cook
Secretary
March 28, 1997
14
<PAGE>
PROXY
WILD OATS MARKETS, INC.
COMMON STOCK
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 1, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael C. Gilliland and John A. Shields, or
either one of them, with full power of substitution, as a proxy or proxies to
represent the undersigned at the Annual Meeting (the "Annual Meeting") of
Stockholders of Wild Oats Markets, Inc. (the "Company") to be held on May 1,
1997 and at any adjournments or postponements thereof, and to vote thereat all
the shares of Common Stock of the Company held of record by the undersigned at
the close of business on March 4, 1997 with all the power that the undersigned
would possess if personally present, as designated on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE
LISTED NOMINEES AND APPROVAL OF PROPOSAL 2. IF NOT OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED PURSUANT TO THE BOARD OF DIRECTORS RECOMMENDATIONS.
THIS PROXY REVOKES ALL PROXIES WITH RESPECT TO THE ANNUAL MEETING AND MAY BE
REVOKED PRIOR TO EXERCISE. RECEIPT OF THE NOTICE OF ANNUAL MEETING AND THE
PROXY STATEMENT RELATING TO THE ANNUAL MEETING IS HEREBY ACKNOWLEDGED.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
PLEASE MARK YOUR VOTES AS THIS [X]
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
FOR ALL WITHHOLD NOMINEES: MICHAEL C. GILLILAND, PETER D. BEHRENDT,
NOMINEES AUTHORITY AND DAVID M. CHAMBERLAIN
LISTED TO VOTE FOR
TO THE ALL (Instructions: To withhold authority for any
RIGHT NOMINEES individual nominee, strike a line through the
[_] LISTED TO nominees name listed above.)
THE RIGHT
[_]
In their discretion, the named proxies may vote on such other business as may
properly come before the Annual Meeting or any adjournments or postponements
thereof.
2. RATIFICATION OF THE SELECTION OF ACCOUNTANTS: Approval of the appointment
of Price Waterhouse, LLP as Independent Public Accountants to audit the
financial statements of the Company for the fiscal year ending December 27,
1997.
FOR AGAINST ABSTAIN
[_] [_] [_]
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIREC-
TORS RECOMMENDATIONS, MERELY SIGN BELOW, NO
BOXES NEED TO BE CHECKED.
PLEASE SIGN EXACTLY AS NAME APPEARS TO THE
LEFT. WHEN SHARES ARE HELD JOINTLY, EACH
SHOULD SIGN. WHEN SIGNING AS 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(S)___________________________________
DATE __________________________________________
NOTE: PLEASE SIGN AS NAME APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
