Whole Foods 2008 Annual Report Download - page 78

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on our financial condition or results of operations, litigation is inherently unpredictable. Therefore, we could incur
judgments or enter into settlements of claims that could materially impact our results.
On July 17, 2007, the Company announced that the Company’s Board of Directors had formed a Special Committee to
perform an independent internal investigation regarding the online financial message board postings related to Whole Foods
Market and Wild Oats Markets and retained the firm of Munger, Tolles & Olson LLP to advise it during its investigation.
The result of the Company’s internal investigation had no impact on the Company’s consolidated financial statements for the
year ended September 30, 2007. The Company has been contacted by the staff of the Securities and Exchange Commission
advising the Company that it has concluded its inquiry related to online financial message board postings related to Whole
Foods Market and Wild Oats Markets and that no enforcement action has been recommended against the Company or any
individual.
On July 29, 2008, the United States Court of Appeals for the District of Columbia Circuit reversed the August 16, 2007
decision of the United States District Court for the District of Columbia which had denied the FTC motion for a preliminary
injunction against the acquisition of Wild Oats Markets by Whole Foods Market. The Company petition for rehearing of the
July 29th decision by the entire DC Circuit Court of Appeals was denied. The case is to be remanded to the District Court for
further proceedings. On remand the FTC may renew its motion for some preliminary injunctive relief pending resolution of
the administrative action. In addition, the FTC is currently pursuing an administrative proceeding concerning our recent
acquisition of Wild Oats Markets. These proceedings are discussed in further detail in Note 3 to the consolidated financial
statements, “Business Combination.” Whole Foods Market cannot at this time predict the likely outcome of these judicial and
administrative proceedings or estimate the amount or range of loss or possible loss that may arise from them. The Company
has not accrued any loss related to the outcome of these proceedings as of September 28, 2008.
Subsequent to year end, on October 27, 2008, Whole Foods Market was served with the complaint in Kottaras v. Whole
Foods Market, Inc., a putative class action filed in the United States District Court for the District of Columbia, seeking
treble damages, equitable, injunctive, and declaratory relief and alleging that the acquisition and merger between Whole
Foods Market and Wild Oats violates various provisions of the federal antitrust laws. The Company has not accrued any loss
related to the outcome of this case as of September 28, 2008.
The Company has entered into Retention Agreements with certain 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 date of the termination of employment and the immediate vesting of any
outstanding stock options granted to such executive officer.
(18) Subsequent Event
On November 5, 2008, the Company entered into an agreement to issue approximately 425,000 shares of Series A 8%
Redeemable, Convertible Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”) to Green Equity Investors
V, L.P., an affiliate of Leonard Green & Partners, L.P., for $425 million. The Series A Preferred Stock has an 8% dividend,
payable quarterly in cash or by increasing the liquidation preference, at the option of the Company, and will be convertible,
under certain circumstances, to common stock at an initial conversion rate of $68.9655 per $1,000 of the liquidation
preference or an initial conversion price of $14.50 per common share. After three years, the dividend will be reduced to: (i)
6% if the common stock closes at or above $17.75 per share for at least 20 consecutive trading days, or (ii) 4% if the
common stock closes at or above $23.13 per share for at least 20 consecutive trading days. The Company may redeem the
Series A Preferred Stock after five years at a premium of 4%, declining ratably to par by the eighth year. Additionally, at any
time, the Company may, upon 30 days notice, redeem the Series A Preferred Stock if the common stock closes at or above
$28.50 per share for at least 20 consecutive trading days. The Company also has the option to convert the Series A Preferred
Stock into subordinated convertible notes having economic terms similar to the preferred stock under certain circumstances.
The closing and funding of the transaction is subject to certain customary closing conditions, including the receipt of
customary regulatory approvals. There can be no assurance that these approvals will be received.