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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x][X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x][X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)240.14a-11(c) or Rule 14a-12240.14a-12
Williams-Sonoma, Inc.
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(Name of Registrant as Specified inIn Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing feeFiling Fee (Check the appropriate box):
[x][X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)(4) and 0-11.
(1) Title of each class 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 wasis calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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[ ] 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.
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LOGO
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W I L L I A M S - S O N O M A
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3250 VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94109
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Williams-Sonoma, Inc., a California
corporation (the "Company"), will be held at the Company's offices, 3250 Van
Ness Avenue, San Francisco, California 94109, Wednesday, May 27, 1998,26, 1999 commencing
at 10:00 a.m. (Pacific Daylight Time) for the following purposes:
(1) To elect ten directors to serve until the next annual meeting of
shareholders or until their respective successors shall be elected and
qualified.
(2) To act on a proposal to approve thean amendment to Article IV of the
Amended and
Restated 1993 Stock Option Plan.Company's Articles of Incorporation.
(3) To ratify the selection of Deloitte & Touche LLP as independent
accountants for the fiscal year ending January 31, 1999.30, 2000.
(4) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 31, 1998,30, 1999,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment or postponement thereof. A list of
such shareholders will be available for inspection at the Annual Meeting by any
shareholder and, for 10 days prior to the Annual Meeting, at the Company's
offices at the address specified above.
Financial and other information concerning the Company is contained in the
enclosed Annual Report for the fiscal year ended February 1, 1998.January 31, 1999.
By Order of the Board of Directors,
Dennis A. Chantland, Secretary
San Francisco, California
April 17, 199823, 1999
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY ORALLY
REVOKE THE PROXY AND VOTE IN PERSON EVEN THOUGH YOU HAVE RETURNED YOUR
PROXY.
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WILLIAMS-SONOMA, INC.
3250 VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94109
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PROXY STATEMENT
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 27, 199826, 1999
This proxy statement (the "Proxy Statement") and the enclosed proxy are
furnished in connection with the solicitation of proxies by the Board of
Directors of Williams-Sonoma, Inc., a California corporation (the "Company"),
for use at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting"), to be held on Wednesday, May 27, 1998,26, 1999, and any adjournmentadjournments or
postponementpostponements thereof. The Annual Report to the shareholders of the Company for
the fiscal year ended February 1, 1998,January 31, 1999, including the financial statements of,
and other information concerning, the Company is also enclosed. The Company
anticipates that this Proxy Statement and accompanying form of proxy will first
be mailed or given to its shareholders on or about April 17, 1998.23, 1999.
A proxy may be revoked by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. Attendance in person at
the Annual Meeting does not itself revoke an otherwise valid proxy; however, any
shareholder who attends such meeting may orally revoke his proxy at the Annual
Meeting and vote in person. If a shareholder specifies a choice on any matter to
be acted upon by means of the accompanying proxy, and the proxy is properly
executed and received prior to the Annual Meeting, the proxy will be voted in
accordance with the specifications made. If an executed proxy is returned
without any specifications as to how shares should be voted, votes will be cast
for the election of each of the directors named in this Proxy Statement, in
favor of the amendment to the Amended and Restated 1993 Stock Option Plan,Articles of Incorporation, and in favor of the
ratification of the selection of Deloitte & Touche LLP as the Company's
independent accountants. In addition, the proxyholders will vote in their sole
discretion upon such other business as may properly come before the meeting and
any adjournments or postponements thereof.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the material enclosed will be paid by the Company. Copies of
solicitation material will be furnished to brokers and others holding common
stock of the Company to forward to their principals, and the Company will
reimburse them for reasonable expenses in doing so. The Company expects that
some of its officers or employees (none of whom will receive special
compensation) will solicit proxies personally and by telephone or other means.
In addition, the Company has retained the services of Skinner & Company to
assist in the solicitation of proxies at an estimated cost of $3,500.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only shareholders of record at the close of business on March 31, 199830, 1999 will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on March 31, 1998,30, 1999, there were 26,133,00955,808,325 outstanding shares of the
Company's common stock (the "Common Stock"), the only class of stock
outstanding.outstanding, held of record by 551 shareholders. The closing sales price for the
Common Stock on March 31, 1998,30, 1999, as reported by the National Association of Securities Dealers Automated Quotation
(NASDAQ) National Market System,New York Stock Exchange
(NYSE), was $57.88$28.19 per share.
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Each share of Common Stock is entitled to one vote, except that
shareholders may cumulate their votes for the election of directors. Under
California law, no shareholder may cumulate votes unless the candidate's name
has been placed in nomination prior to the voting and at least one shareholder
at the meeting has given notice of the intention to cumulate votes prior to the
voting. If such notice is given, every shareholder present, in person or by
proxy, at the meeting may cumulate votes. The accompanying proxy grants
authority to the proxyholders to cumulate votes and allocate them in the
proxyholders' discretion to one or more nominees, if the proxyholders believe
that such action will maximize the number of nominees who will be elected. The
proxyholders do not, at this time, intend to give such notice nor to cumulate
the votes they may hold pursuant to the proxies solicited in this Proxy
Statement unless the required notice by a shareholder is given at the meeting,
in which instance such proxyholders intend to vote cumulatively all the proxies
held by them in favor of some or all of the nominees for office set forth in
this Proxy Statement. If cumulative voting is utilized at the Annual Meeting,
each shareholder voting at the election of directors may cumulate his or hertheir votes
and cast a number of votes equal to the number of directors to be elected
multiplied by the number of shares held. All such votes may be cast for a single
candidate or may be distributed among any or all of the candidates.
The following table sets forth information as to the beneficial ownership
of the Common Stock, as of March 27, 1998,26, 1999, by (a) persons known to the Company
to be beneficial owners of more than 5% of the Common Stock, (b) executive
officers named in the "Summary Compensation Table" below, and (c) executive
officers and directors as a group. Unless otherwise noted, the persons listed
below have sole voting and investment power.
PERCENT
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASSCLASS(1)
------------------------------------ ------------------ ------------------
W. Howard Lester............................... 2,567,352(1) 9.7%Lester................................. 5,187,093(2) 9.2%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
James A. McMahan............................... 3,113,275(2) 11.9%McMahan................................. 5,675,200(3) 10.2%
2237 Colby Avenue
Los Angeles, CA 90064
Patrick J. Connolly............................ 236,379(3)Connolly.............................. 502,272(4) *
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Gary G. Friedman............................... 327,705(4) 1.2%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109Friedman................................. 831,824(5) 1.5%
Dennis A. Chantland............................ 5,075(5)Chantland.............................. 62,515(6) *
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Richard Hunter................................. 2,383(6)Hunter................................... 468(7) *
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
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PERCENT
NUMBER OF SHARES OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------ ------------------ -------
Putnam Investment Management, Inc and
Putnam Investments, Inc............................. 2,112,267(7) 8.1%Inc........................ 5,677,134(8) 10.2%
One Post Office Square
Boston, MA 02109
AMVESCAP, PLC and group members................ 1,617,900(8) 6.2%members.................. 3,235,800(9) 5.8%
11 Devonshire Square
London EC2M 4YR, England
All Executive Officers and Directors as a Group
(14(12 persons)................................. 6,706,185(9) 25.0%................................... 13,225,977(10) 23.0%
- ---------------
* Less than 1%.
(1) Assumes exercise of stock options beneficially owned by the named
individual or entity into shares of the Company's common stock. Based on
55,807,965 shares outstanding as of March 26, 1999.
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(2) Includes 81,000162,000 and 150,750404,500 shares subject to nonqualified stock options
granted under the Company's 1976 Stock Option Plan (the "1976 Plan") and
the Amended and Restated 1993 Stock Option Plan (the "1993 Plan"), respectively, which are
currently exercisable or exercisable within 60 days. Includes 7,45715,303 shares
in the Company's Associate Stock Incentive plan (the "Stock Incentive
Plan") that are allocable to Mr. Lester and fully vested. Does not include
1,7433,486 and 542,7731,081,546 shares owned by Mr. Lester's wife and by trusts
established by Mr. Lester for the benefit of his children, respectively, in
which shares Mr. Lester disclaims any beneficial interest.
(2)(3) Includes 6,75013,500 and 20,25051,000 shares subject to nonqualified stock options
granted under the 1976 Plan and the 1993 Plan, respectively, which are
currently exercisable or exercisable within 60 days.
(3)(4) Includes 7,62547,250 shares subject to nonqualified stock options granted under
the 1993 Plan which are currently exercisable or exercisable within 60
days. Also includes 5,28410,992 shares in the Stock Incentive Plan that are
allocable to Mr. Connolly and fully vested. Does not include 2,6195,238 shares
owned by a trust established for the benefit of Mr. Connolly's children, in
which shares Mr. Connolly disclaims any beneficial interest.
(4)(5) Includes 22,50045,000 and 248,000672,000 shares subject to nonqualified stock options
granted under the 1976 Plan and the 1993 Plan, respectively, and 50,625
shares subject to incentive stock options granted under the 1983 Incentive
Stock Option Plan (the "1983 Plan"), which are
currently exercisable or exercisable within 60 days. Also includes 6,58013,574
shares in the Stock Incentive Plan that are allocable to Mr. Friedman and
fully vested.
(5)(6) Includes 5,00062,000 shares owned by a trust established forsubject to nonqualified stock options granted under
the joint benefit of
Mr. Chantland and his wife and 751993 Plan which are currently exercisable within 60 days. Includes 515
shares in the Stock Incentive Plan that are allocable to Mr. Chantland and
fully vested.
(6)(7) Includes 2,200 shares subject to nonqualified stock options granted under
the 1993 Plan which are currently exercisable or exercisable within 60 days
and 183468 shares in the Stock Incentive Plan that are allocable to Mr.
Hunter and fully vested.
(7)(8) The information above and in this footnote is based on share information
taken from the Schedule 13G filed January 16, 1998 byof Putnam Investment Management, Inc. and
Putnam Investments, Inc. filed February 11, 1999. Putnam Management, Inc. a
registered investment adviser, and Putnam, Inc., its parent company, have
shared dispositive power (but no voting power) over 2,112,2675,677,134 shares of
Common Stock.
(8)(9) The information above and in this footnote is based on the Schedule 13G filed
February 5, 1998 on behalf of a group by AMVESCAP PLC, a parent holding
company. In addition to AMVESCAP PLC, other group members include AVZ,
Inc., AIM Management Group, Inc., AMVESCAP Group Services, Inc., 3
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INVESCO,
Inc., INVESCO North American Holdings, Inc., INVESCO Capital Management,
Inc., INVESCO Funds Group, Inc., INVESCO Management & Research, Inc. and
INVESCO Realty Advisers, Inc. Each member of such group has shared voting
and dispositive power over 1,617,9003,235,800 shares of Common Stock. AVZ, Inc., AIM
Management Group, Inc., AMVESCAP Group Services, Inc., INVESCO, Inc. and
INVESCO North American Holdings, Inc. are all holding companies. INVESCO
Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO Management &
Research, Inc. and INVESCO Realty Advisers, Inc. are all investment
advisers.
(9)(10) Includes 123,750247,500 and 491,8251,424,246 shares subject to nonqualified stock options
granted under the 1976 Plan and 1993 Plan, respectively, and 50,625 shares
subject to incentive stock options granted under the 1983 Plan, which are
currently exercisable or exercisable within 60 days. Also includes 20,10341,977
shares in the Stock Incentive Plan that are allocable to the executive
officers and fully vested.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules promulgated thereunder, directors and certain officers of the Company and
persons who beneficially own more than 10% of a registered class of the
Company's equity securities are required to file with the Securities and
Exchange Commission and
the NASDAQ Stock Market and3
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furnish to the Company reports of ownership and changes in ownership of all
classes of the Company's equity securities. Based solely on its review of the
copies of such reports received by it during or with respect to the fiscal year
ended February 1, 1998,January 31, 1999, and/or written representations from such reporting
persons, the Company believes that, except as described below, all reports
required to be filed by such reporting persons during or with respect to the
fiscal year ended February 1,
1998January 31, 1999 were filed on a timely basis. A Form 4 reporting Patrick J. Connolly's sale
of 11,800 shares of Common Stock and a Form 4 reporting Richard Hunter's sale of
1,000 shares of Common Stock were inadvertently filed late. Abasis, except that
Form 3 registering
Adrian D.P. Bellamyreporting John Bronson's appointment as a beneficial owner and a Form 4 reporting Mr. Bellamy's
salean executive officer of 103 shares of Common Stock were alsothe
Company was inadvertently filed late.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, ten directors are to be elected to serve until the
next annual meeting of shareholders or until the election and qualification of
their successors. The Company's Bylaws provide for not less than six nor more
than eleven directors, the exact number of directors following this annual
meeting of shareholders having been fixed by the Board of Directors at ten.
Under California law, the ten nominees receiving the highest number of
affirmative votes of the shares entitled to vote shall be elected directors.
Abstentions and broker non-votes will have no effect on the outcome of the vote.
Unless otherwise instructed, the proxyholders will vote the proxies received by
them for the ten nominees named below. If any of the listed nominees is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for such person or persons as the proxyholders may
designate. The Board of Directors has no reason to believe that any of the
nominees will be unable or decline to serve as a director.
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The following table sets forth information, as of March 27, 1998,26, 1999, with
respect to each person nominated for election as a director which has been
furnished to the Company by the nominees. All nominees with the exception of
Janet Emerson who was appointed by the Board in 1997, were elected directors at
the Annual Meeting of Shareholders held on May 28, 1997.27, 1998.
AMOUNT
AND
NATURE OF
PERCENT
DIRECTOR BENEFICIAL PERCENT OF
NOMINEE AGE PRINCIPAL OCCUPATION SINCE OWNERSHIP CLASS
- ----------------------------------CLASS(1)
------- --- ------------------------------------------------------- -------- ---------- -------------------
Charles E. Williams............... 82Williams... 83 Founder of the Company and its Vice Chairman 1973 273,373(1) 1.1%
Chairman547,125(2) 1.0%
since 1986.
W. Howard Lester.................. 62Lester...... 63 Chairman of the Company since 1986 1979 2,567,352(2) 9.7%
and Chief 1979 5,187,093(3) 9.2%
Executive Officer since 1979. Director of The
Good Guys, Inc., CKE Restaurants, Inc. and,
Harold's Stores, Inc., and Il Fornaio
Adrian D.P. Bellamy............... 56Bellamy... 57 Chairman and Director of Airport 1997 5,142 *
Group Int'l 1997 25,282(4) *
and Gucci Group N.V. Director of The Gap, Inc.,
Paragon Trade Brands, Inc., The Body Shop Inc.
and Shaman Pharmaceuticals, Inc. Chairman and
CEO of DFS Group Ltd. from 1983-1995.
James M. Berry.................... 67Berry........ 68 Executive Vice President of Finance 1987 29,025(3) *
of Belk 1987 68,550(5) *
Stores Services since 1995. Director of HCC
Insurance Holdings, Inc. since 1993.
Nathan Bessin..................... 72Bessin......... 73 Managing Partner of J. Arthur 1983 33,825(3) *
Greenfield & Co., 1983 75,150(5) *
Certified Public Accountants since 1978.
Director of Mercury General Corp.
Patrick J. Connolly............... 51Connolly... 52 Executive Vice President, General 1983 236,379(4)502,272(6) *
Manager -- Catalog and Assistant Secretary of
the Company since 1995 and 1983, respectively.
Janet L. Emerson.................. 49Emerson......... 50 President and Chief Executive 1997 0 *
Officer of 1997 14,998(4) *
Learningsmith, Inc. since 1995. Director of
Retail -- Stores, Catalog and Wholesale
Divisions, Museum of Fine Arts Boston 1994-1995.from
1994-1995
Gary G. Friedman.................. 40Friedman...... 41 Chief Merchandising Officer and 1993 327,705(5) 1.2%831,824(7) 1.5%
President -- Retail Stores since 1995.
John E. Martin.................... 52Martin........ 53 Chairman and Director of Diedrich 1994 112,500(6) *
Coffee and 1994 235,500(8) *
Newriders, Inc. since 1997. Chairman and
Director of Culinary Adventures, Inc. since
1998. Director of The Good Guys, Inc. Chairman
and Chief Executive Officer of PepsicoPepsiCo Casual
Restaurants from 1996-1997. President and Chief
Executive Officer of Taco Bell, a wholly-owned
subsidiary of PepsiCo from 1983-1996.
James A. McMahan.................. 75McMahan...... 76 Chief Executive Officer of McMahan Furniture 1979 3,113,275(3) 11.9%
Furniture5,675,200(5) 10.2%
Stores since 1947.
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* Less than 1%.
(1) Assumes exercise of stock options beneficially owned by the named individual
or entity with shares of the Company's common stock. Based on 55,807,965
shares outstanding as of March 26, 1999.
(2) Includes 3731,125 shares in the Stock Incentive Plan that are allocable to Mr.
Williams and fully vested.
(2)(3) Includes 81,000162,000 and 150,750404,500 shares subject to nonqualified stock options
granted under the 1976 Plan and the 1993 Plan, respectively, which are
currently exercisable or exercisable within 60 days. Includes 7,45715,303 shares
in the Stock Incentive Plan that are allocable to Mr. Lester and fully
vested. Does not
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include 1,7433,486 and 542,7731,081,546 shares owned by Mr. Lester's wife and by trusts
established by Mr. Lester for the benefit of his children, respectively, in
which shares Mr. Lester disclaims any beneficial interest.
(3)(4) Includes 6,75014,998 shares subject to nonqualified stock options granted under
the 1993 Plan, respectively, which are currently exercisable or exercisable
within 60 days.
(5) Includes 13,500 and 20,25051,000 shares subject to nonqualified stock options
granted under the 1976 Plan and the 1993 Plan, respectively, which are
currently exercisable or exercisable within 60 days.
(4)(6) Includes 7,62547,250 shares subject to nonqualified stock options granted under
the 1993 Plan which are currently exercisable or exercisable within 60 days.
Also includes 5,28410,992 shares in the Stock Incentive Plan that are allocable
to Mr. Connolly and fully vested. Does not include 2,6195,238 shares owned by a
trust established for the benefit of Mr. Connolly's children, in which
shares Mr. Connolly disclaims any beneficial interest.
(5)(7) Includes 22,50045,000 and 248,000672,000 shares subject to nonqualified stock options
granted under the 1976 Plan and the 1993 Plan, respectively, and 50,625
shares subject to incentive stock options granted under the 1983 Plan, which are
currently exercisable or exercisable within 60 days. Also includes 6,58013,574
shares in the Stock Incentive Plan that are allocable to Mr. Friedman and
fully vested.
(6)(8) Includes 22,50055,500 shares subject to nonqualified stock options granted under
the 1993 Plan which are currently exercisable or exercisable within 60 days.
COMPENSATION OF DIRECTORS
The Company's directors do not receive any cash compensation for services
provided as members of the Board. Directors (other than employee directors) are
awarded nonqualified stock options annually under the 1993 Plan. Eligible
directors are each awarded an option to purchase 6,75013,500 shares of Common Stock
upon their initial election to the Board and an option to purchase 5,25010,500 shares
of Common Stock each time they are re-elected to the Board. The exercise price
of these options is fixed at the fair market value of the Common Stock on the
date of the relevant annual meeting.
INDEMNIFICATION
Under the Company's Articles of Incorporation, a director is not liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director. However, the Articles of Incorporation do not eliminate a
director's liability for breach of the duty of loyalty, acts or omissions not in
good faith, certain payments not permitted under the California Corporations
Code or transactions in which the director derives an improper personal benefit.
The Articles of Incorporation also provide that the Company has the authority to
indemnify its directors, officers, employees and agents beyond the circumstances
permitted under Section 317 of the California Corporations Code.
BOARD MEETINGS AND COMMITTEES
TheDuring the fiscal year ended January 31, 1999 ("fiscal 1998"), the Board of
Directors of the Company held a total of fourseven meetings during
the fiscal year ended February 1, 1998.and acted by unanimous
written consent on six occasions. The Board of Directors has twofour standing
Committees: Audit, and Compensation. Two new committees -- the "Investment
Committee" and the "Nominating and Corporate Governance Commit-
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tee" -- were established but have yet to hold their first meeting. TheCompensation, Investment Committee is comprised of Messrs. Berry (Chairman), McMahan and
Bessin. The Nominating and Corporate
Governance Committee is comprised of Mr.
Bellamy (Chairman), Ms. Emerson and Mr. Lester.Governance.
During the last fiscal year,1998, the Audit Committee of the Board of Directors (the
"Audit Committee") met twice.held two meetings. The Audit Committee is currently comprised
of Messrs. Bessin (Chairman), McMahan and Berry. The Audit Committee is
primarily responsible for reviewing the services performed by the Company's
independent accountants and evaluating the Company's accounting principles and
its system of internal accounting controls.
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During the last fiscal year, the Compensation Committee of the Board of
Directors (the "Compensation Committee") met twice.held six meetings and acted by
unanimous written consent on one occasion. The Compensation Committee is
currently comprised of Messrs. McMahan (Chairman), Drexler andBellamy, Martin and Ms.
Emerson. The Compensation Committee is primarily responsible for officers'
compensation matters and for administering the Company's stock option plans.
The Investment Committee is currently comprised of Messrs. Berry
(Chairman), McMahan and Bessin. The Investment Committee was established during
fiscal 1998 and has not held a meeting. The Investment Committee is primarily
responsible for setting policy regarding investments of the Company's excess
cash.
The Nominating and Corporate Governance Committee is comprised of Mr.
Bellamy (Chairman) and Mr. Lester. The Nominating and Corporate Governance
Committee was established during fiscal 1998 and has not held a meeting. The
Nominating and Corporate Governance Committee is primarily responsible for
determining the qualifications of and selecting director nominees and for
setting policies regarding the corporate governance responsibilities of the
Board and management.
No director attended fewer than 75% of all meetings of the Board of
Directors and the committees upon which such director served during the fiscal
year ended February 1, 1998.January 31, 1999, except directors Adrian Bellamy and John Martin.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE-NAMED
NOMINEES.
CERTAIN TRANSACTIONS
The Company leases two distribution centers in Memphis, Tennessee from two
partnerships whose partners include an executive officer/director a former
executive officer and a director
of the Company. See "Executive Compensation -- Compensation Committee Interlocks
and Insider Participation."
INFORMATION CONCERNING EXECUTIVE OFFICERS
Executive officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board. Certain information concerning such
executive officers is set forth below:
NAME AGE PRESENT POSITION WITH THE COMPANY AND BUSINESS EXPERIENCE
---- --- --------------------------------------------------------------------------------------------------------------------
W. Howard Lester.................. 6263 Chairman since 1986 and Chief Executive Officer since 1979.
Charles E. Williams............... 8283 Founder of the Company and Vice Chairman since 1986.
Dennis A. Chantland............... 5556 Executive Vice President and Chief Administrative Officer
since 1995; and Secretary since 1996.1996
Patrick J. Connolly............... 5152 Executive Vice President and General Manager, Catalog since
1995; Senior Vice President -- Mail Order, 1991-1995; Vice
President -- Mail Order, 1979-1990; and Assistant Secretary
since 1983.
Gary G. Friedman.................. 4041 Chief Merchandising Officer and President, Retail Stores
since 1995; Executive Vice President 1993-1995; Senior Vice
President -- Stores, 1991-1992; and Vice
President -- Stores, 1988-1990.
Richard C. Hunter................. 5354 Senior Vice President-InternationalPresident -- International Operations and
Development since 1996.
G. Andrew Rich.................... 50John S. Bronson................... 51 Senior Vice President -- Human Resources since 1995.1999.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation of the
Company's Chief Executive Officer and its four other most highly compensated
executive officers who served as executive officers during the fiscal year ended
February 1, 1998January 31, 1999 and whose total annual salaries and bonuses exceeded $100,000
during such fiscal year.
LONG TERM
COMPENSATION
ANNUAL AWARDS
ANNUAL -------------
COMPENSATION(3)COMPENSATION(2) ---------------------
------------------------ SECURITIES
NAME AND ------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR(2)POSITION YEAR(1) SALARY($) BONUS($)(11)(9) OPTIONS(#)(4)(3) COMPENSATION($)
------------------------------------------------ ------- --------- ------------ ---------------------------------- ---------------
W. Howard Lester.......................Lester............................ 1998 681,362 100,000 100,000 5,789(4)
Chief Executive Officer, 1997 628,978 150,000 120,000 7,445(5)
Chief Executive Officer,240,000 7,445
Chairman and Director 1996 498,077 100,000 30,00060,000 7,638
Chairman and Director 1995 471,210 0 20,000 10,451
Dennis A. Chantland....................Chantland......................... 1998 419,725 75,000 230,000 2,696(5)
Executive Vice President, 1997 386,892 200,000 115,000 4,038(6)
Executive Vice President, 1996 342,244 75,000 25,000 4,930230,000 4,038
Chief Administrative Officer and 1995 31,250 0 100,000 183
Secretary 1996 342,244 75,000 50,000 4,930
Patrick J. Connolly....................Connolly......................... 1998 315,696 75,000 100,000 3,274(6)
Executive Vice President 1997 286,772 200,000 15,000 2,498(7)
Executive Vice President 1996 229,080 75,000 15,000 7,47830,000 2,498
and General Manager -- Catalog and
1995 224,009 0 10,000 4,325
Director 1996 229,080 75,000 30,000 7,478
Gary G. Friedman.......................Friedman............................ 1998 465,539 0 230,000 3,214(7)
Chief Merchandising Officer, 1997 455,253 100,000 90,000 1,109(8)
Chief Merchandising Officer,180,000 1,109
President -- Retail Division and Director 1996 399,580 75,000 20,00040,000 1,226
President Retail -- Division and 1995 386,119 0 50,000 4,823
Director
Richard C. Hunter......................Hunter........................... 1998 236,847 50,000 20,000 815(8)
Senior Vice President, 1997 303,037 70,000 11,000 1,527(9)
Senior Vice President,22,000 1,527
International Operations and Development 1996 41,237 0 50,000 167(10)
International Operations and 1995 0 0 0 0
Development100,000 167
- ---------------
(1) None of the executives named in this table held any shares of restricted
stock of the Company as of February 1, 1998.
(2) Rows specified "1997,"1998," "1996""1997" and "1995""1996" represent fiscal years ended
January 31, 1999, February 1, 1998 and February 2, 1997 and January 28, 1996, respectively.
(3)(2) While the named executive officers enjoy certain perquisites, the aggregate
value of such perquisites for the fiscal years shown did not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus for the
applicable year.
(4)(3) Figures have been adjusted to reflect the 3-for-22-for-1 stock splitssplit in February
1994 and September 1994May 1998
(the "Stock Splits"Split").
(5)(4) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 and
benefits received under the Company's executive supplemental medical plan of
$4,914 and $2,531,$875, respectively.
(5) Comprised of premiums paid by the Company for term life insurance and
benefits received under the Company's executive supplemental medical plan of
$1,338 and $1,358, respectively.
(6) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 and
benefits received under the Company's executive supplemental medical plan of
$1,136$2,016 and $2,902,$1,258, respectively.
(7) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 and
benefits received under the Company's executive supplemental medical plan of
$2,016$714 and $482,$2,500, respectively.
(8) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 and
benefits received under the Company's executive supplemental medical plan of
$714$805 and $395,$10, respectively.
8
11
(9) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 and benefits received under the Company's executive supplemental
medical plan of $1,446 and $81, respectively.
(10) Benefits received under the Company's executive supplemental medical plan
of $167.
(11) Amounts represent bonuses earned during each fiscal year.
8
11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information noted for all grants of
stock options made to the Chief Executive Officer and each of the other
executive officers named in the Summary Compensation Table during the fiscal
year ended February 1, 1998:January 31, 1999:
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------
NUMBER OF--------------------------------------------------------- POTENTIAL REALIZABLE VALUE
AT
SECURITIESNUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES
OF
UNDERLYINGSECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
OPTIONSUNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
GRANTEDOPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------------------------------
NAME (#)GRANTED(#)(1) FISCAL YEAR (%YEAR(%) ($/SH)(1) DATE 5%($) 10%($)
---- ---------- ---------------------------- -------------- ----------- ---------- ------------- ------------------------- ------------
W. Howard Lester.............. 120,000 17.6 28.13Lester............. 100,000 7.5 27.56 3/12/07 2,122,519 5,378,881
Chief Executive Officer,
Chairman and Director10/08 1,733,234 4,392,354
Dennis A. Chantland........... 115,000 16.9 28.13Chantland.......... 80,000 6.0 27.56 3/12/0710/08 1,386,587 3,513,883
150,000 11.2 21.56 9/7/08 2,034,081 5,154,761
Executive Vice President,
Chief Administrative Officer
and Secretary
Patrick J. Connolly........... 15,000 2.2 28.13Connolly.......... 50,000 3.8 27.56 3/12/07 265,315 672,360
Executive Vice President,
General Manager -- Catalog
and Director10/08 866,617 2,196,177
50,000 3.8 21.56 9/7/08 678,027 1,718,254
Gary G. Friedman.............. 90,000 13.2 28.13Friedman............. 80,000 6.0 27.56 3/12/07 1,591,890 4,034,161
Chief Merchandising Officer,
President -- Retail Division
and Director10/08 1,386,587 3,513,883
150,000 11.2 21.56 9/7/08 2,034,081 5,154,761
Richard C. Hunter............. 11,000 1.6 28.13Hunter............ 20,000 1.5 27.56 3/12/07 194,564 493,064
Senior Vice President --
International Operations and
Development10/08 346,647 878,471
9
12- ---------------
(1) All of these options were repriced to $19.31, except for a portion of the
options held by Messrs. Chantland and Friedman in October 1998 as noted in
the Report on Repricing of Options/SAR's. Figures have been adjusted to
reflect stock splits.
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table sets forth information with respect to the exercise of
stock options during the fiscal year ended January 31, 1999 and the fiscal
year-end value of unexercised options held by the Chief Executive Officer and
each of the other executive officers named in the Summary Compensation Table:
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#)(1)YEAR-END(#) AT FISCAL YEAR-END ($YEAR-END($)(2)
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED (#) REALIZED ($EXERCISED(#)(1) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- --------------------------- -------------- ----------- ------------- ----------- -------------
W. Howard Lester.........Lester....... 0 $ 0 180,500 186,750 $6,036,281 $3,348,658
Chief Executive
Officer, Chairman and
Director475,500 359,000 $13,679,604 $7,088,712
Dennis A. Chantland......Chantland.... 186,000 3,468,075 0 524,000 0 45,000 195,000 1,079,085 3,520,410
Executive Vice
President, Chief
Administrative Officer
and Secretary9,944,272
Patrick J. Connolly...... 0 0 111,625 44,625 3,943,499 934,645
Executive Vice
President, General
Manager-Catalog and
DirectorConnolly.... 237,250 6,245,057 19,250 156,000 543,534 2,808,048
Gary G. Friedman......... 101,000 3,370,923 263,625 209,500 7,835,902 4,649,449
Chief Merchandising
Officer,
President-Retail
Division and DirectorFriedman....... 101,250 2,612,382 631,000 444,000 17,115,368 8,143,332
Richard C. Hunter........Hunter...... 44,400 693,811 0 97,600 0 10,000 51,000 156,830 786,138
Senior Vice President,
International
Operations and
Development1,637,933
- ---------------
(1) Figures have been adjusted to reflect Stock Splits
(2) Represents the Stock Splits.difference between the closing market price of the Company's
common stock on January 29, 1999 ($34.69 per share) and the exercise price
of the options.
9
12
REPORT ON REPRICING OF OPTIONS
Options held by Named Officers were repriced in the fiscal year ended
January 31, 1999 as set forth below(1).
NUMBER OF
SECURITIES MARKET PRICE LENGTH OF ORIGINAL
UNDERLYING OF STOCK EXERCISE PRICE TERM REMAINING
OPTIONS AT TIME OF AT TIME OF AT DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE($) AMENDMENT
---- ------- ------------ ------------ -------------- ------------ ------------------
W. Howard Lester.......... 10/7/98 100,000 19.31 27.56 19.31 9 years, 6 months
Dennis A. Chantland....... 10/7/98 90,000 19.31 21.56 19.31 10 years
10/7/98 80,000 19.31 27.56 19.31 9 years, 6 months
Patrick J. Connolly....... 10/7/98 50,000 19.31 27.56 19.31 9 years, 6 months
10/7/98 50,000 19.31 21.56 19.31 10 years
Gary G. Friedman.......... 10/7/98 80,000 19.31 27.56 19.31 9 years, 6 months
10/7/98 90,000 19.31 21.56 19.31 10 years
Richard C. Hunter......... 10/7/98 20,000 19.31 27.56 19.31 9 years, 6 months
- ---------------
(1) The Board of Directors and Compensation Committee view options as essential
to the effort to attract and retain key employees. In order to ensure that
the options fulfilled their purpose, in October 1998, the Board and
Committee determined to lower the exercise price for all outstanding options
granted on or after June 27, 1997 to $19.31, except for a portion of the
options held by Messrs. Chantland and Friedman.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company does not have employment agreements with any of its executive
officers.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for setting executive
compensation policy and determining the compensation paid to executive officers
of the Company. The Compensation Committee is currently comprised of the
directors named below, all of whom are non-employee Directors.
The Company's executive compensation programs are designed to enable the
Company to attract, retain, motivate and reward highly qualified executives
while maintaining strong and direct links between executive pay, individual
performance, the Company's financial performance and shareholder returns. The
Compensation Committee believes that officers and other key employees should
have a significant stake in the Company's stock price performance under programs
which link executive compensation to shareholder return. Notably, the Chief
Executive Officer, Mr. Lester, beneficially owns 2,567,3525,187,093 shares (including
options which are currently exercisable or exercisable within 60 days)
representing 9.7%9.2% of the outstanding shares of Common Stock as of March 27,
l998.26, 1999. Mr. Lester
(together with the undersigned Mr. McMahan) purchased
10
13 the Company from its
founder Charles E. Williams in 1979. The Company first offered stock to the
public in 1983.
The Company competes with a number of different companies, both within and
outside the retail industry, for talented executives. Accordingly, the Committee
considers both pay practices at retailers of comparable size who are part of the
Center for Research in Security Prices ("CRSP") Index for NASDAQ Retail Trade
Stocks, one of the indices used in the Performance Graph, as well as pay
practices at other
10
13
companies considered comparable based on the industry, revenues and other
factors (together, the "Comparable Companies") when assessing the
competitiveness of the Company's compensation programs. The Committee utilizes
an independent executive compensation advisor for information on competitive
compensation levels.
The Committee considers three major elements in its compensation program:
base salaries, annual cash incentive opportunities, and long-term incentives via
stock options. Base salaries are generally targeted at the median levels of the
Comparable Companies, and actual salaries are adjusted for individual
performance and contributions to the Company's success. In May 1998, the
Committee reviewed the salaries of its executive officers, including the named
executive officers.
Based on the Company's performance in fiscal year 1996,1997, base salary
increases were granted to the following executives effective April 14, 1997.13, 1998.
FROM TO
---- ---------- --------
Mr. Lester............................. $500,000 $650,000 $679,200
Mr. Friedman........................... $400,000 $450,000 $470,200
Mr. Chantland.......................... $325,000 $400,000 $418,000
Mr. Connolly........................... $225,000 $300,000 $313,500
The second component of the Company's executive compensation program is the
Profit Incentive Plan, which rewards participants for extraordinary results
based on the annual financial performance of the Company. Based on the Company's
performance in fiscal year 1997,1998, the following bonus awards were granted to the
following
officers as follows:executive officers.
BONUS AWARD
-----------
Mr. Lester....................................... $150,000
Mr. Friedman..................................... $100,000
Mr. Chantland.................................... $200,000$ 75,000
Mr. Connolly..................................... $200,000$ 75,000
Stock ownership and the link to shareholder value is an integral part of
the Company's executive compensation program. Accordingly, the number of stock
options granted to the Chief Executive Officer and other executive officers
reflectsreflect competitive practices for Comparable Companies and the assessment of
their individual contributions. In 1997,1998, Mr. Lester was granted an option for
120,000options to
purchase 100,000 shares, Mr. Chantland was granted an option for 115,000options to purchase 230,000
shares, Mr. Friedman was granted an option for 90,000options to purchase 230,000 shares and Mr.
Connolly was granted an
option for 15,000options to purchase 100,000 shares in recognition of their
contributions during 19961997 and to further link a significant portion of their
compensation to shareholder returns. Grants to the other three executive officers averaged 7,000 shares. All stock options were granted with an
exercise price equal to the fair market value of one share of Common Stock on
the date of the grant.
The Committee believes that the key officers of the Company have provided
excellent services and been diligent in their commitment to the Company.
Although the Company's stock price did not necessarily reflect the quality of
their efforts, the Committee believes that stock ownership by such officers
provides an important incentive for their continued efforts and diligence. In
order to ensure that options fulfilled their purpose of helping the Company
attract and retain key employees, in October 1998 the Board of Directors and the
Committee determined to lower the exercise price for all of the Company's
outstanding stock options granted between June 27, 1997 and October 7, 1998 with
an exercise price greater than $19.31 (except for a portion of the options held
by Messrs. Chantland and Friedman) to $19.31, the Company's closing price at the
time the action was taken.
11
14
The Omnibus Budget and Reconciliation Act of 1993 amended Section 162(m) of
the Internal Revenue Code and could, depending on future compensation levels,
result in limits on the Company's ability to deduct compensation in excess of
$1,000,000 paid to certain executive officers. Exceptions to this deductibility
limit may be made for various forms of performance-based compensation. Based on
19971998 compensation levels, no
11
14 such limits on the deductibility of compensation
applied for any officer of the Company. The Company has not adopted a policy
specifically prohibiting compensation at a level that would limit deductions.
While the Compensation Committee cannot predict how the deductibility limit may
impact the Company's compensation program in future years, the Compensation
Committee intends to maintain an approach to executive compensation which
strongly links pay to performance. The approach should preserve the
deductibility of the Company's executive compensation while maintaining highly
motivational compensation programs which support the Company business objectives
and strategies and reinforce the creation of shareholder value.
Respectfully submitted,
James A. McMahan
Millard S. DrexlerAdrian Bellamy
Janet L. Emerson
John E. Martin
Members of the Compensation Committee
12
15
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS OF THE COMPANY,
CRSP* INDEX FOR THE NASDAQNYSE STOCK MARKET (U.S. COMPANIES), AND
CRSP INDEX FOR NASDAQ RETAIL TRADE STOCKS
MEASUREMENT PERIOD 'WILLIAMS-SONOMA, NASDAQWILLIAMS-SONOMA, INC. NYSE STOCK MARKET NASDAQ RETAIL (FISCAL YEAR COVERED) INC.' MARKET TRADE
--------------------- ----------------- -------------------
1/31/93'1/30/94' 100.00 100.00 100.00
'1/29/95' 137.40 99.90 89.70
'1/28/96' 89.40 133.50 98.70
'2/2/97' 182.50 168.30 123.60
'2/1/30/94 294.30 114.40 106.40
1/29/95 404.40 110.30 95.40
1/28/96 263.20 152.40 105.00
2/2/97 537.00 203.30 131.50
2/1/98 722.80 240.40 153.8098' 245.60 213.10 144.20
'1/31/99' 400.20 258.20 176.20
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 1/31/93.30/94.
* Center for Research in Security Prices, The University of Chicago, Graduate
School of Business.
13
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's warehouse and distribution center is located in Memphis,
Tennessee. The warehouse and distribution center consists of three separate
facilities -- one for mail order operations, one for retail store
13
16
operations and onea third facility which processes non-conveyable merchandise -- themerchandise-the
first two of which are leased from two partnerships whose partners include
directors, an executive
officer, a former executive officer, and significant shareholders of the Company.
The third facility is leased from a third party.
Mail Order Facility
In July 1984, the Company entered into an agreement to lease a 243,000
square foot distribution center from a partnership. The lessor is a partnership
comprised of W. Howard Lester, Chairman, Chief Executive Officer and significant
shareholder of the Company, and James A. McMahan, a director and significant
shareholder of the Company and member of the Compensation and Audit Committees.
The partnership financed the construction through the sale of $6,300,000
principal amount of industrial development bonds due June 2008. The lease had an
initial, non-cancelable term of ten years expiring on June 30, 1994, with two
optional five-year renewals by the Company. In December 1985, the partnership
financed the construction of an additional 190,000 square feet of space through
the sale of $2,900,000 principal amount of industrial development bonds due
2010. The Company's lease with the partnership was amended to include additional
rent plus interest on the new bonds for the same lease term as the original
lease. In December 1993, the Company exercised the two five-year renewal options
and is now obligated to lease the space until June 30, 2004. Effective July 1,
1994, the fixed basic monthly rent is $51,500. Rental payments consist of basic
monthly rent, plus interest on the bonds (a floating rate equal to 55% of the
prime rate of a designated bank), applicable taxes, insurance and maintenance
expenses. In connection with the December 1993 transaction, both the partnership
and the Company provided to an unaffiliated bank an indemnity against certain
environmental liabilities.
Retail Store Facility
In August 1990, the Company entered into a separate agreement to lease a
second distribution center, consisting of approximately 307,000 square feet,
adjacent to the existing distribution center in Memphis, Tennessee. The lessor
is a partnership that includes Messrs. Lester and McMahan and Mr. Robert K.
Earley, former Senior Vice President of Distribution.McMahan. The partnership
financed the construction of the distribution center through the sale of
$10,550,000 (bearing interest of 10.36%) principal amount of industrial
development bonds due in August 2015.
In September 1994, this lease was amended to include an approximately
306,000 square-foot expansion of the facility. The expansion was completed in
October 1995. The lessor financed the construction of the expansion through a
$500,000 capital contribution from its partners and the sale of $9,825,000
(bearing interest of 9.01%) principal amount of industrial development bonds due
in August 2015. The amended lease has an initial, non-cancelable term of 15
years beginning August 1991 and ending in July 2006, with three optional
five-year renewals. Rentals (including interest on the bonds, sinking fund
payments, and fees) for the primary term are payable at an average rate of
$711,000 per quarter plus applicable taxes, insurance and maintenance expenses.
Both facilities (including the expansions) were constructed to the Company's specifications. After the
option periods, the Company is obligated to renew each lease annually so long as
the bonds which financed the specific projects remain outstanding. The leases
qualify as operating leases for accounting purposes. The 14
17
Company believes that
the facility leases are on terms no less favorable than the Company could have
obtained from third parties in arm's-length transactions.
14
17
PROPOSAL 2
APPROVAL OF AMENDMENT AND RESTATEMENT OF
ARTICLE IV OF THE ARTICLES OF INCORPORATION
BACKGROUND
On March 15, 1999, the Board of Directors approved an amendment and
restatement of Article IV ("Article IV") of the Company's Restated Articles of
Incorporation (the "Article IV Amendment"), and directed the Article IV
Amendment to be submitted to the shareholders for their approval at the Annual
Meeting. As discussed below, approval of the Article IV Amendment by the
Company's shareholders would enhance management's ability to respond to future
opportunities to make acquisitions or sell assets. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE ARTICLE IV AMENDMENT.
DESCRIPTION OF THE PROPOSED ARTICLE IV AMENDMENT
TO THE AMENDED AND
RESTATED 1993 STOCK OPTION PLANAs currently in effect, Article IV requires the approval of two-thirds of
the Company's outstanding shares entitled to vote for the following actions: (a)
a merger or consolidation of the Company or a subsidiary; (b) the sale or other
disposition by the Company or a subsidiary of substantially all of the assets of
the Company or a subsidiary; or (c) the adoption of any plan or proposal for
dissolution or liquidation of the Company. By its terms, Article IV does not
apply to any such transaction solely between the Company and another corporation
of which 50% or more of the outstanding shares entitled to vote are owned,
directly or indirectly, by the Company.
The effect of Article IV is to require a two-thirds supermajority approval
of the Company's outstanding shares in instances where the California General
Corporation Law (the "CGCL") requires either the approval of a lesser proportion
of the Company's shares or no shareholder approval at all. Under the CGCL, the
approval of a majority of the Company's outstanding shares entitled to vote is
generally required to approve a merger or consolidation of the Company, believesthe sale
by the Company of substantially all of its assets, or the voluntary winding up
and dissolution of the Company. The CGCL generally does not require the Company
to obtain the approval of its shareholders for the merger or consolidation of a
subsidiary of the Company, or the sale by a subsidiary of substantially all of
its assets.
Article IV was adopted by the Company's Board of Directors and shareholders
in 1984 as an anti-takeover or defensive measure against an unwanted or coercive
attempt to acquire the Company. In particular, Article IV was designed to
discourage in advance hostile tender offers by persons attempting to acquire,
with a view towards a subsequent business combination, only that officers and other key employees should have a
significant stake inportion of the
Company's stock price performance under programs which
link compensationnecessary to shareholder return. Asobtain control and force the business combination.
However, Article IV, may have the negative effect of delaying or impeding
certain common corporate transactions that are unrelated to a result, stock option grants are an
integral parthostile takeover
of the Company. First, Article IV requires the approval of two-thirds of the
Company's compensation program.outstanding shares before any subsidiary, regardless of its size,
could sell substantially all of its assets. However, Article IV permits, without
a shareholder vote, the sale by the Company of all of the stock of a subsidiary
unless such subsidiary constitutes substantially all of the Company's assets.
Second, Article IV requires the Company to obtain the approval of two-thirds of
its outstanding shares before the Company could make any acquisition, regardless
of its size, via a "subsidiary merger," a commonly employed acquisition
structure. (Under this structure, a newly-formed subsidiary of the acquiror
merges with the target, with the shareholders of the target receiving cash
and/or the acquiror's securities in the merger and the target becoming a
wholly-owned subsidiary of the acquiror.) Absent Article IV, such a transaction
would not ordinarily require approval of the Company's
15
18
shareholders. New York Stock Exchange rules would require shareholder approval
if, in such transaction, the Company was to issue enough of its stock to
increase its outstanding shares or voting power by 20%; however, the vote
required would be a majority of the shares present and voting at a meeting at
which a quorum was present, not two-thirds of the outstanding shares.
The Board of Directors believes it is in the best interests of the Company
and its shareholders to amend and restate Article IV to eliminate the negative
effects discussed above. The Article IV Amendment would eliminate the
requirement that the Company obtain the approval of two-thirds of its
outstanding shares in the case of (i) the merger or consolidation of a
subsidiary, or (ii) the sale or other disposition of substantially all of the
assets of a subsidiary where such assets do not constitute substantially all of
the assets of the Company and its subsidiaries on a consolidated basis.
Therefore, the Article IV Amendment will enhance management's ability to effect
various corporate transactions involving a subsidiary of the Company by
eliminating the need for a shareholder vote, except where such vote would
otherwise be required under the CGCL or the rules of the New York Stock
Exchange.
As stated above, by its current terms Article IV excludes from its coverage
transactions solely between the Company and another corporation of which 50% or
more of the outstanding shares entitled to vote are owned, directly or
indirectly, by the Company. The Article IV Amendment would also modify Article
IV to exclude from Article IV's coverage transactions solely between the Company
and one or more controlled entities or between two or more controlled entities,
with "controlled entity" defined as a legal entity of which 50% or more of the
outstanding equity entitled to vote is owned, directly or indirectly, by the
Company. The Board of Directors believes this modification is necessary to
clarify the intent of the existing exclusion.
Under the CGCL, if a California corporation with 100 or more shareholders
of record files, on or after January 1, 1989, an amendment to its articles of
incorporation containing a supermajority voting provision such as Article IV,
then the supermajority voting provision ceases to be effective after two years
unless readopted by the same shareholder vote specified in the supermajority
voting provision. The Company currently
relies ondoes not believe that this readoption requirement
would apply to Article IV if it is amended as described above, because Article
IV was originally adopted prior to January 1, 1989. However, if Article IV is
amended as described above, it is possible that a single plan -- the 1993 Plan -- for these grants and has less than
283,000 sharesshareholder of Common Stock remaining under the plan for future grants.
Rather than adopting a new stock option plan at the present time, the Company proposesor
a third party will assert that Article IV will need to increasebe readopted every two
years by the numberaffirmative vote of at least two-thirds of the Company's
outstanding shares available for grant under the existing
plan from 2,750,000 shares of Common Stockentitled to 4,250,000 shares of Common Stock,
an increase of 1,500,000 sharesvote or approximately 55%.otherwise cease to be effective.
The full text of Article IV, as amended and restated by the amended planArticle IV
Amendment, is attached as Exhibitset forth in Appendix A to this Proxy Statement.
The attached copy of the plan is restated to reflect the proposed
amendment as well as all prior amendments.
SUMMARY DESCRIPTIONREQUIRED VOTE; RECOMMENDATION OF THE PLAN
Shares Subject to the 1993 Plan. The plan currently authorizes the Company
to issue a maximum of 2,750,000 shares of Common Stock upon the exercise of
stock options granted under the plan. As a result of options previously granted
under the plan, the Company has issued approximately 374,000 shares of Common
Stock through option exercises and reserved approximately 2,093,000 shares of
Common Stock for outstanding options. There are less than 283,000 shares of
Common Stock presently remaining under the plan for future option grants,
although some additional shares may become available to the extent options
expire unexercised. The amended plan would increase the maximum number of shares
issuable by 1,500,000 shares (or approximately 55%) to a total of 4,250,000
shares.
Types of Awards. The Company may award two types of options under the plan:
(i) options intended to qualify as incentive stock options under Section 422 of
the Internal Revenue Code and (ii) nonqualified stock options. The plan does not
permit the award of "phantom stock," "stock appreciation rights" or other
similar awards.
Administration. The plan is administered by a committee (the "Committee")
composed of two or more directors of the Company. The Committee has the
authority to (i) select the recipients of awards, (ii) fixBOARD OF DIRECTORS
Under the terms of all
awards, (iii) construe, interpret and prescribe rules forArticle IV, the plan and (iv) make
all other determinations necessary or advisable forArticle IV Amendment requires the
administrationaffirmative vote of 66 2/3% of the plan. The plan restricts Committee membership to persons who are both
"non-employee directors" as defined by rules promulgated under Section 16outstanding shares of the Securities Exchange ActCompany's Common
Stock. For purposes of 1934calculating the votes for and "outside directors" as defined by
regulations promulgated under Section 162(m) ofagainst the Internal Revenue Code of
1986, as amended (the "Section 162(m) Regulations").
Eligibility and Participation. All directors, executives and other key
employees of the Company or any of its Affiliates (as defined in the plan) are
eligible for selection to participate in the plan. There are approximately 110
individuals currently eligible to participate in the plan. Stock options are
awarded to non-employee directors (as defined in the plan) in accordance with a
formula (discussed below). Under the
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applicable tax rules, the Committee may only grant incentive stock options to
employees of the Company or its Affiliates.
Duration of Options. The Committee generally determines the duration of
each option, but no option may have a term of more than ten years. No incentive
stock option is exercisable for more than three months after termination of the
option holder's employment unless the termination is due to death or disability.
In that case, an incentive stock option is exercisable for no more than one year
after the option holder's death or disability.
Duration and Amendment of the Plan. The Committee may continue to grant
stock options under the plan until the earlier of (i) March 17, 2003 (ten years
from the original date of adoption) or (ii) all the stock available under the
plan has been issued. The Committee may amend or suspend the plan at any time,
but shareholder approval is required for amendments which (i) increase the
maximum number of shares available for grant under the plan, (ii) change the
minimum exercise price of incentive stock options, (iii) permit the grant of
options to persons other than employees or directors or (iv) materially increase
the benefits accruing to employees under the plan.
Exercise Price. Options granted under the plan are subject to minimum
exercise prices based on the fair market value of a share of Common Stock on the
date of grant. The minimum exercise price for incentive and nonqualified stock
options is 100% of the fair market value of a share of Common Stock on the date
of grant. The exercise price of an option must be paid in full either in cash or
with shares of Common Stock valued at fair market value. The Committee may
permit "cashless exercises" and authorize payment with a secured promissory
note.
Other Terms. Options granted under the plan are only exercised by the
original recipient and are not transferable, except by will or the laws of
descent and distribution or, in the case of nonqualified stock options, pursuant
to a qualified domestic relations order. Options are generally exercisable in
such installments as the Committee decides, but not within six months of the
date of grant, except in cases of death or disability of the option holder or
dissolution, liquidation, reorganization, merger or consolidation of the
Company.
Awards to Directors. The Company's directors do not receive any cash
compensation for services provided as a member of the Board. Directors (other
than employee directors) are automatically awarded nonqualified stock options
annually under the plan. Eligible directors are awarded an option to purchase
6,750 shares of Common Stock upon their initial election to the Board and an
option to purchase 5,250 shares of Common Stock each time they are re-elected to
the Board. Options initially granted to eligible directors upon their joining
the Board of Directors shall vest and become exercisable in three equal
installments on each anniversary of the grant date. Options granted annually to
eligible directors upon their re-election to the Board of Directors shall vest
and become exercisable in one installment six months after the date of grant.
All options granted to eligible directors shall expire ten (10) years from the
date of grant. The Committee is authorized to amend the terms and number of
future option awards to eligible directors without further shareholder approval,
but not more than once every six months unless required to comply with changes
in certain laws.
Special Terms Applicable to Large Shareholders. In addition to the other
restrictions contained in the plan, the plan requires that incentive stock
options granted to persons possessing more than 10% of the total combined voting
power of all classes of stock of the Company (i) have an exercise price of not
less than 110% of the fair market value of a share of Common Stock on the date
of grant and (ii) expire not later than five years from the date of grant.
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FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. Under current federal income tax law, the grant
of a nonqualified stock option has no tax effect on the Company or the option
holder. If the shares received on exercise of an option are not subject to
restrictions on transfer or risk of forfeiture imposed by the Committee, the
exercise of a nonqualified stock option will result in ordinary income to the
option holder equal to the excess of the fair market value of the shares at the
time of exercise over the option price. The amount taxed to the option holder as
ordinary income is treated as earned income. The option holder's tax basis in
the shares will be equal to the aggregate exercise price paid by the option
holder plus the amount of taxable income recognized upon the exercise of the
option. Upon any subsequent disposition of the shares, any further gain or loss
recognized by the option holder will be treated as capital gain or loss. Any
capital gain will be long-term capital gain if the shares are held for more than
eighteen months after exercise, mid-term capital gain if the shares are held for
more than one year but up to eighteen months after exercise and short-term
capital gain if the shares are held for one year or less after exercise. Capital
losses will be long-term if the holding period is more than one year and
short-term otherwise. The Company will normally be allowed, at the time of
recognition of ordinary income by the option holder upon exercise, to take a
deduction for federal income tax purposes in an amount equal to such recognized
income.
Incentive Stock Options. The federal income tax consequences associated
with incentive stock options are generally more favorable to the optionee and
less favorable to the employer than those associated with nonqualified stock
options. Under current federal income tax law, the grant of an incentive stock
option does not result in income to the optionee or in a deduction for the
Company at the time of the grant. The exercise of an incentive stock option will
not result in income for the option holder if the option holder (i) does not
dispose of the shares within two years after the date of grant nor within one
year after exercise and (ii) is an employee of the Company or any of its
Affiliates from the date of grant until three months before the exercise date.
If these requirements are met, the basis of the shares upon later disposition
would be the option price. Any gain will be taxed to the option holder as
long-term capital gain if the holding period for the stock is more than eighteen
months and mid-term capital gain otherwise. The Company will not be entitled to
a deduction. The excess of the market value on the exercise date over the option
price is an item of tax preference, potentially subject to the alternative
minimum tax. If the option holder disposes of the shares prior to the expiration
of either of the holding periods described above, the option holder would have
compensation taxable as ordinary income, and the Company would be entitled to a
deduction equal to the lesser of the fair market value of the shares on the
exercise date minus the option price or the amount realized on disposition minus
the option price. If the price realized in any such premature sale of the shares
exceeds the fair market value of the shares on the exercise date, the excess
will be treated as long-term, mid-term or short-term capital gain depending on
the option holder's holding period for the shares.
VOTE REQUIRED
Under the Company's Bylaws and the terms of the plan, the amended plan must
be approved by the shareholders holding (i) a majority of shares present, or
represented, and voting at the Annual Meeting, and (ii) a majority of the
required quorum. For this purpose,proposal,
abstentions and broker non-votes will have no
effect on the outcome of the vote unless such shares are necessary to satisfy
the quorum requirement, in which case abstentions and broker non-votes will have
the effect of a vote against the proposal. A majority of the shares entitled to
vote, represented in person or by proxy, constitutes a quorum. The Company
believes that shareholder approval in accordance with its Bylaws will also
satisfy the shareholder approval requirement of the Section 162(m) Regulations.
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Furthermore, because the directors would benefit from the amended plan,
under Section 310 of the California Corporations Code, the person asserting the
validity of the grant of an option to a director under the amended plan would
have the burden of proving that such grant was just and reasonablebe treated as to the
Company at the time that the grant was authorized, approved or ratified, unless
the amended plan is approved by shareholders holding (a) a majority of shares
present, or represented, and voting at the Annual Meeting, with the shares owned
by the directors not being entitled to vote thereon, and (b) a majority of the
required quorum, which, in this case, is the majority of outstanding shares
other than the shares owned by the directors. For this purpose, abstentions and
broker non-votes will have no effect on the outcome of the vote unless such
shares are necessary to satisfy the quorum requirement, in which case such
abstentions and broker non-votes will have the effect of a votevotes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE AMENDED AND RESTATED 1993 STOCK OPTION PLAN.RESTATEMENT OF ARTICLE IV.
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PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
As recommended by its Audit Committee, the Board of Directors has selected
Deloitte & Touche LLP as independent accountants for the fiscal year ending
January 31, 1999,30, 2000, subject to ratification by the shareholders.
Deloitte & Touche LLP, formerly known as Touche Ross & Co., has audited the
Company's financial statements since the fiscal year ended March 31, 1980. It is
expected that their representative will be present at the meeting and will have
the opportunity to make a statement if he or she desires to do so. The
representative will be available to respond to appropriate questions.
In the event that the selection of Deloitte & Touche as independent
accountants for the fiscal year ending January 31, 1999,30, 2000, is not ratified by the
shareholders, the Board of Directors will select other independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THIS
REAPPOINTMENT.
OTHER MATTERS
The Company knows of no other matters to be acted upon at the meeting other
than those referred to in the accompanying notice of the meeting. However, if
any other matter should properly come before the meeting, holders of the proxies
solicited hereby will vote thereon in their discretion.
PROPOSALS OF SHAREHOLDERS
Proposals intended to be presented by shareholders at the 19992000 Annual
Meeting of Shareholders and included in the Company's proxy statement for such
meeting must be received by the Secretary of the Company at 3250 Van Ness
Avenue, San Francisco, California 94109, on or before December 17, 1998.
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2116, 1999.
AVAILABILITY OF REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 19971998 AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO ANY SHAREHOLDER BY WRITING TO:
Secretary
Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, California 94109
By Order of the Board of Directors
Dennis A. Chantland, Secretary
San Francisco, California
April 23, 1999
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1998
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EXHIBIT20
APPENDIX A
WILLIAMS-SONOMA, INC.
AMENDEDAMENDMENT AND RESTATEMENT OF
ARTICLE IV OF THE COMPANY'S
RESTATED 1993 STOCK OPTION PLAN
1. PURPOSE.
The purposeARTICLES OF INCORPORATION
ARTICLE IV
Notwithstanding that applicable law would otherwise permit action to be
taken with the approval of a lesser percentage, each of the following actions
shall require the affirmative vote of not less than two-thirds of the
outstanding shares of this Amended and Restated 1993 Stock Option Plan (the
"PLAN")corporation entitled to vote:
(a) a merger or consolidation of WILLIAMS-SONOMA, INC.,this corporation;
(b) the sale or other disposition by this corporation or a Californiasubsidiary of
assets that constitute substantially all of the assets of this
corporation (the "COMPANY"), is
to secure for the Company and its shareholderssubsidiaries on a consolidated basis; or
(c) the benefits arising from stock
ownership by selected key employees and directors of the Company or any of its
Affiliates (as defined below). The Plan will provide a means whereby such
employees and directors may purchase shares of the common stock of the Company
(or any class of stock into which such common stock is converted or reclassified
as provided in Section 17) (the "COMMON STOCK") pursuant to (i) options which
will qualify as "INCENTIVE STOCK OPTIONS" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE"), and (ii) "non-incentive" or
"nonqualified" stock options ("NONQUALIFIED STOCK OPTIONS").
2. ADMINISTRATION.
The Plan shall be administered by a committee (the "COMMITTEE") appointed
by the Board of Directors of the Company consisting of two or more directors of
the Company, all of whom shall be (i) "non-employee directors" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, and (ii) "outside directors' within the meaning of Section 162(m) of
the Code. Any action of the Committee with respect to administration of the Plan
shall be taken by a majority vote or unanimous written consent of its members.
Subject to the provisions of the Plan, the Committee shall have the
authority (i) to construe and interpret the Plan, (ii) to define the terms used
herein, (iii) to prescribe, amend and rescind rules and regulations relating to
the Plan, (iv) to determine the individuals to whom and the time or times at
which options shall be granted, whether such options will be incentive stock
options or non-qualified stock options, the number of shares to be subject to
each option, the option price, the number of installments, if any, in which each
option may be exercised, and the duration of each option, (v) to approve and
determine the duration of leaves of absence which may be granted to participants
without constituting a termination of their employment for the purposes of the
Plan, (vi) to amend the termsadoption of any outstanding option, with consent of the
option holder, and (vii) to make all other determinations necessaryplan or advisableproposal for the administration of the Plan. All determinations and interpretations made
by the Committee shall be binding and conclusive on all participants in the Plan
and their legal representatives and beneficiaries.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 17, the shares to be offered
under the Plan shall consist of the Company's authorized but unissued Common
Stock, and the aggregate amount of such stock which may be issued upon exercise
of all options under the Plan shall not exceed Four Million Two Hundred Fifty
Thousand (4,250,000) shares; provided, however, that no officer (within the
meaning of Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as
amended) shall be granted in any fiscal year options to purchase more than
200,000 shares of Common Stock. If any option granted under the Plan shall
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expiredissolution or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for options to be
granted under the Plan.
4. ELIGIBILITY AND PARTICIPATION.
All key employees and directors of the Company or any Affiliate shall be
eligible for selection to participate in the Plan. An "AFFILIATE" shall mean any
parent or subsidiary of the Company as defined in Section 424(e) and (f) of the
Code. An individual who has been granted an option may, if such individual is
otherwise eligible, be granted an additional option or options if the Committee
shall so determine, subject to the other provisions of the Plan. No incentive
stock option may be granted to any person who, at the time the incentive stock
option is granted, is not an employee of the Company. Nonqualified stock options
may be granted to persons who have agreed in writing to become officers or key
employees of the Company or any Affiliate at the time of the grant and who
become officers or key employees of the Company or any Affiliate within 120 days
thereafter. Spouses to whom a nonqualified stock option is transferred pursuant
to a qualified domestic relations order pursuant to Section 11 shall also be
eligible to participate in the Plan with regard to such option, but only to the
extent the original option holder would have been able to participate had such
original option holder continued to hold the option, and to the extent permitted
by the Committee or by the terms of the option agreement.
The aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options (whenever
granted) are exercisable for the first time by an option holder during any
calendar year (under all incentive stock option plans of the Company and its
Affiliates) shall not exceed $100,000.
All incentive stock options granted under the Plan shall be granted within
ten years from the original date of adoptionliquidation of
this Plan.
5. AWARDS TO DIRECTORS.
Any person who is or becomes a director and who is not an employee of the
Company is referred to herein as an "ELIGIBLE DIRECTOR". During the term of the
Plan, each Eligible Director who becomes for the first time a director of the
Company on or after the 1993 Annual Meeting of Shareholders shall automatically
be granted, on the date he or she first becomes a director, a nonqualified stock
option to purchase 6,750 shares of Common Stock. During the term of the Plan,
each Eligible Director shall also be granted a nonqualified stock option to
purchase 5,250 shares of Common Stock on the date of each annual meeting of the
Company's shareholders at which such Eligible Director is re-elected to continue
to serve on the Company's Board of Directors.
The purchase price under each nonqualified stock option granted to Eligible
Directors shall be equal to the fair market value of the stock subject to the
option on the date the option is granted. Options initially granted to Eligible
Directors upon their joining the Board of Directors shall vest and become
exercisable in three equal installments on each anniversary of the grant date.
Options granted annually to Eligible Directors upon their re-election to the
Board of Directors shall vest and become exercisable in one installment six
months after the date of grant. All options granted to Eligible Directors shall
expire ten (10) years from the date of grant.
The Committee may at any time amend or revisecorporation;
provided that the provisions of this Section 5 butArticle IV shall not apply to any such
transaction solely between this corporation and one or more than once every six months unless required to comply with
changes in the CodeControlled Entities
or the Employee Retirement Income Security Act ("ERISA"),between two or the rules promulgated under the Codemore Controlled Entities. "Controlled Entity" means a legal
entity of which 50% or ERISA.
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6. DURATION OF OPTIONS.
Subject to Sections 5 and 16, each option and all rights associated
therewith shall expire on such date as the Committee may determine, and shall be
subject to earlier termination as provided herein; provided, however, that all
stock options shall expire within ten (10) years from the date on which such
options are granted.
7. PURCHASE PRICE.
Subject to Sections 5 and 16, the purchase pricemore of the stock covered by
each option shall be determined by the Committee but shall not be less than one
hundred percent (100%) of the fair market value of such stock (as determined
under Section 9) on the date of grant. The purchase price of the shares upon
exercise of an option shall be paid in full at the time of exercise (i) in cash
or by check payable to the order of the Company, (ii) by delivery of shares of
Common Stock of the Company already owned by, and in the possession of the
option holder, or (iii) if authorized by the Committee or if specified in the
option being exercised, (x) by a promissory note made by option holder in favor
of the Company, upon the terms and conditions determined by the Committee
including, to the extent the Committee determines appropriate, a security
interest in the shares issuable upon exercise or other property, or (y) through
a "cashless exercise," in either case complying with applicable law (including,
without limitation, state and federal margin requirements), or any combination
thereof. Shares of Common Stock used to satisfy the exercise price of an option
shall be valued at their fair market value determined (in accordance with
Section 9) on the date of exercise (or if such date is not a business day, as of
the close of the business day immediately preceding such date).
8. EXERCISE OF OPTIONS.
In no event shall any option be exercisable earlier than six months after
the date of grant except in the case of the death or disability of the option
holder, in which case such option may be exercisable in accordance with Section
14. Subject to Section 5, each option granted under this Plan may be exercisable
in full upon the expiration of such six month period or in such installments
during the period prior to its expiration date as the Committee shall determine.
Furthermore, unless otherwise determined by the Committee, if the option holder
shall not in any given installment period purchase all of the shares which the
option holder isoutstanding equity entitled to purchase in such installment period, then the
option holder's right to purchase any shares not purchased in such installment
period shall continue until the expiration datevote is owned,
directly or sooner termination of the
option holder's option. No option may be exercised for a fraction of a share and
no partial exercise of any option may be for less than (i) one hundred (100)
shares or (ii) the total number of shares then eligible for exercise, if less
than one hundred (100) shares.
9. FAIR MARKET VALUE OF COMMON STOCK.
The fair market value of a share of Common Stock of the Company shall be
determined for purposes of the Planindirectly, by reference to the closing price on the
principal stock exchange on which such shares are then listed or, if such shares
are not then listed on a stock exchange, by reference to the closing price (if
approved for quotation on the NASDAQ National Market System) or the mean between
the bid and asked price (if other over-the-counter issue) of a share as supplied
by the National Association of Securities Dealers, Inc. through NASDAQ (or its
successor in function), in each case as reported by The Wall Street Journal, for
the business day immediately preceding the date on which the option is granted
(which, for all purposes, shall be the date on which the Committee makes the
determination granting the option) or exercised (or, if for any reason no
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25
such price is available, in such other manner as the Committee may deem
appropriate to reflect the then fair market value thereof).
10. WITHHOLDING TAX.
Upon (i) the disposition by an employee or other person of shares of Common
Stock acquired pursuant to the exercise of an incentive stock option granted
pursuant to the Plan within two years of the granting of the incentive stock
option or within one year after exercise of the incentive stock option or (ii)
the exercise of non-qualified stock options, the Company shall have the right to
require such employee or such other person to pay the Company the amount of any
taxes which the Company may be required to withhold with respect to such shares.
11. NONTRANSFERABILITY.
An incentive stock option granted under the Plan shall, by its terms, be
non-transferable by the option holder, either voluntarily or by operation of
law, otherwise than by will or the laws of descent and distribution, and shall
be exercisable during the option holder's lifetime only by the option holder,
regardless of any community property interest therein of the spouse of the
option holder, or such spouses's successors in interest. If the spouse of the
option holder shall have acquired a community property interest in such option,
the option holder, or the option holder's permitted successors in interest, may
exercise the option on behalf of the spouse of the option holder or such
spouse's successors in interest.
A non-qualified stock option granted under the Plan shall, by its terms, be
non-transferable by the option holder, either voluntarily or by operation of
law, otherwise than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code or Title I of
ERISA, or the rules thereunder, and shall be exercisable during the option
holder's lifetime only by the option holder or, to the extent permitted by the
Committee or by the terms of the option agreement, the spouse of the option
holder who obtained the option pursuant to such a qualified domestic relations
order described herein or pursuant to Section 14.
12. SHARES TO BE ISSUED IN COMPLIANCE WITH FEDERAL SECURITIES LAWS AND EXCHANGE
RULES.
At the discretion of the Committee, any option may provide that the option
holder (and any transferee), by accepting such option, represents and agrees
that none of the shares purchased upon exercise of the option will be acquired
with a view to any sale, transfer or distribution of said shares in violation of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations promulgated thereunder, or any applicable state "blue sky' laws, and
the person entitled to exercise the same shall furnish evidence satisfactory to
the Company (including a written and signed representation) to that effect in
form and substance satisfactory to the Company, including an indemnification of
the Company in the event of any violation of the Securities Act or state blue
sky laws by such person. The Company shall use its reasonable efforts to take
all necessary and appropriate action to assure that the shares issuable upon the
exercise of any option shall be issued in full compliance with the Securities
Act, state blue sky laws and all applicable licensing requirements of any
principal securities exchange on which shares of the same class are listed.
13. TERMINATION OF EMPLOYMENT.
If a holder of an incentive stock option ceases to be employed by the
Company or any of its Affiliates for any reason other than the option holder's
death or permanent disability (within the meaning of Sec-
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tion 22(e)(3) of the Code), the option holder's incentive stock option shall be
exercisable for a period of three (3) months after the date the option holder
ceases to be an employee of the Company or such Affiliate (unless by its terms
it sooner expires) to the extent exercisable on the date of such cessation of
employment and shall thereafter expire and be void and of no further force or
effect. A leave of absence approved in writing by the Committee shall not be
deemed a termination of employment for the purposes of this Section 13, but no
option may be exercised during any such leave of absence, except during the
first three (3) months thereof. Termination of employment or other relationship
with the Company by the holder of a nonqualified stock option will have the
effect specified in the individual option agreement, as determined by the
Committee. Any option transferred pursuant to a qualified domestic relations
order pursuant to Section 11 shall continue to be subject to the provisions
governing the grant to the original grantee, including without limitation, the
provisions governing exercisability, vesting and termination (which shall be
determined by reference to the employment status of the original grantee),
unless the option agreement or the Committee provides otherwise.
14. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER.
If the holder of an incentive stock option dies or becomes permanently
disabled (within the meaning of Section 22(e)(3) of the Code) while the option
holder is employed by the Company or any of its Affiliates, the option holder's
option shall be exercisable for a period of one (1) year after the date of such
death or permanent disability (unless by its terms it sooner expires) to the
extent exercisable on the date of death or permanent disability and shall
thereafter expire and be void and of no further force or effect. During such
period after death, such incentive stock option may, to the extent that it
remained unexercised (but exercisable by the option holder according to such
option's terms) on the date of such death, be exercised by the person or persons
to whom the option holder's rights under the option shall pass by the option
holder's will or by the laws of descent and distribution. The death or
disability of a holder of a nonqualified stock option will have the effect
specified in the individual option agreement, as determined by the Committee.
15. PRIVILEGES OF STOCK OWNERSHIP.
No person entitled to exercise any option granted under the Plan shall have
any of the rights or privileges of a shareholder of the Company in respect of
any shares of stock issuable upon exercise of such option until certificates
representing such shares shall have been issued and delivered. No shares shall
be issued and delivered upon the exercise of any option unless and until there
shall have been full compliance with all applicable requirements of the
Securities Act (whether by registration or satisfaction of exemption
conditions), all applicable listing requirements of any national securities
exchange on which shares of the same class are then listed and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery.
16. SPECIAL TERMS APPLICABLE TO SIGNIFICANT SHAREHOLDERS.corporation.
Notwithstanding any other provision of these Restated Articles of
Incorporation or the Bylaws of this Plan, each incentive stock
option granted tocorporation and notwithstanding that a
person possessing more than ten percent (10%)lesser percentage may be specified by law, these Restated Articles of
Incorporation or the total
combined voting powerBylaws of all classes of stock ofthis corporation, the Company (or an Affiliate,
as applicable) shall (i) have an exercise priceaffirmative vote of not
less than one hundred and
ten percent (110%)two-thirds of the fair market value of the stock covered by the option
(as determined under Section 9) on the date of grant and (ii) expire not later
than five (5) years from the date of grant.
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17. ADJUSTMENTS.
If the outstanding shares of the Common Stock of the Company (or any other
class of shares or securities which shall have become eligible for grant under
the Plan pursuantthis corporation entitled to
this sentence) are increased or decreased or changed into
or exchanged for a different number or kind of shares or securities of the
Company through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction, an
appropriate and proportionate adjustmentvote shall be made in the maximum number and
kind of shares asrequired to which options may be granted under this Plan. A
corresponding adjustment changing the number or kind of shares allocated to
unexercised options or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in the outstanding
options shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the option but with a corresponding adjustment in
the price for each share or other unit of any security covered by the option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than eighty percent
(80%) of the then outstanding stock of the Company to another corporation, the
Plan shall terminate, and all options theretofore granted hereunder shall
terminate; provided, however, that notwithstanding the foregoing, the Committee
shall provide in writing in connection with such transaction for any or all of
the following alternatives (separately or in combinations): (i) for the options
theretofore granted to become immediately exercisable notwithstanding the
provisions of Section 8; (ii) for the assumption by the successor corporation of
the options theretofore granted or the substitution by such corporation for such
options and rights of new options and rights covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices; (iii) for the continuance of the
Plan by such successor corporation in which event the Plan and the options
theretofore granted shall continue in the manner and under the terms so
provided; or (iv) for the payment in cash or stock in lieu of and in complete
satisfaction of such options.
Adjustments under this Section 17 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan on any such adjustment.
18. AMENDMENT AND TERMINATION OF PLAN.
The Committee may at any time suspend or terminate the Plan. The Committee
may also at any time amend or revise the terms of the Plan, provided that no
such amendmentrepeal, or revision shall, unless appropriate shareholder approval of
such amendment or revision is obtained, increase the maximum number of shares in
the aggregate which may be sold pursuant to options granted under the Plan,
except as permitted under the provisions of Section 17, or change the minimum
purchase price of incentive stock options set forth in Sections 7 and 16, or
increase the maximum term of incentive stock options provided for in Sections 6
and 16, or permit the granting of options to anyone other than as provided in
Sections 4 or 5, or otherwise materially increase the benefits accruing to
employees under the Plan.
Notwithstanding the foregoing, no amendment, suspension or termination of
the Plan shall, without specific action of the Committee and the consent of the
option holder, inadopt any way modify, amend, alter or impair any rights or
obligations under any option theretofore granted under the Plan.
25provision inconsistent
with this Article IV.
18
28
19. EFFECTIVE DATE OF PLAN.
The Plan, as hereby amended, shall be submitted for approval by the holders
of the outstanding voting stock of the Company within twelve (12) months from
the date the amendments are adopted by the Board of Directors.
26
2921
PROXY
WILLIAMS-SONOMA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Williams-Sonoma, Inc. (the "Company") hereby
appoints W. Howard Lester and Dennis A. Chantland, and each of them, with full
power of substitution to each, true and lawful attorneys, agents and
proxyholders of the undersigned, and hereby authorizes them to represent and
vote, as specified herein, all shares of Common Stock of the Company held of
record by the undersigned on March 31, 1998,30, 1999, at the 19981999 Annual Meeting of
Shareholders of the Company, to be held on Wednesday, May 27, 199826, 1999 at 10:00
a.m. (Pacific Daylight Time) at 3250 Van Ness Avenue, San Francisco, California
94109, and any adjournmentadjournments or postponements thereof.
The Proxy when properly signed will be voted in the manner directed on this
Proxy by the undersigned. If no direction is made, this Proxy will be voted for
the election of the named directors, FOR proposal 2, FOR proposal 3, and in the
manner described in item 4 of this Proxy.
(PLEASE DATE AND SIGN ON REVERSE SIDE.)
--------------------------
SEE REVERSE
SIDE
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30
Please mark
your votes as
indicated in
this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3.
1. ELECTION OF DIRECTORS
FOR THE ELECTION AS WITHHOLD
DIRECTORS OF ALL NOMI- AUTHORITY
NEES LISTED (EXCEPT AS TO VOTE FOR ALL
MARKED TO THE CONTRARY). NOMINEES LISTED.
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below):
Charles E. Williams Patrick J. Connolly James M. Berry
W. Howard Lester Gary G. Friedman John E. Martin
James A. McMahan Adrian D.P. Bellamy Janet L. Emerson
Nathan Bessin
2. Proposal to approve the amendment to the Amended and Restated 1993 Stock
Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to ratify the selection of Deloitte & Touche LLP as independent
accountants for the 1998 fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the Proxyholders are authorized to vote upon such
other business as may properly come before this meeting, or any
adjournments or postponements thereof.
NOTE: When stock has been issued in the name of two or more persons, all
should sign. When signing as attorney, administrator, trustee or guardian,
give full title as such. A corporation should have the name signed by its
president or other authorized officer, with the office held designated. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, the Proxy Statement and the Annual Report for the 1997 Fiscal
Year furnished herewith.
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Please Print Name(s)
Signature(s) Date , 1998
-------------------------------------------- ------------22
Please mark
your votes as
indicated in /X/
this example.
The Board of Directors recommends a vote "FOR" Items 1, 2 and 3.
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS FOR the election as WITHHOLD 2. Proposal to approve the amendment and / / / / / /
directors of all nomi- AUTHORITY restatement of Article IV of the
nees listed (except as to vote for all Articles of Incorporation.
marked to the contrary). nominees listed. FOR AGAINST ABSTAIN
/ / / / 3. Proposed to ratify the selection of / / / / / /
Deloitte & Touche LLP as independent
accountants for the 1999 fiscal year.
(INSTRUCTION: To withhold authority to vote for any
individual nominee, strike a line through that 4. In their discretion, the Proxyholders are authorized to vote
nominee's name in the list below): upon such other business as may properly come before this
meeting, or any adjournments or postponements thereof.
Charles E. Williams Patrick J. Connolly James M. Berry
W. Howard Lester Gary G. Friedman John E. Martin
James A. McMahan Adrian D.P. Bellamy Janet L. Emerson
Nathan Bessin
NOTE: stock has been issued in the name of two or more
persons, all should sign. When signing as attorney,
administrator, trustee or guardian, give full title
as such. A corporation should have the name signed
by its president or other authorized officer, with
the office held designated. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting
of Shareholders, the Proxy Statement and the Annual
Report for the 1998 Fiscal Year furnished herewith.
______________________________________________________
Please Print Name(s)
Signature(s)____________________________________________________________________________________________ Date ____________, 1999
Please sign exactly as your name or names appear on this proxy and return it promptly in the enclosed envelope.
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