<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Williams-Sonoma, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee was calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
---------------------------------------------------------
W I L L I A M S - S O N O M A
---------------------------------------------------------
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 28, 1997,
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 the Amended and Restated 1993 Stock
Option Plan.
(3) To ratify the selection of Deloitte & Touche as independent accountants
for the fiscal year ending February 1, 1998.
(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, 1997,
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.
Financial and other information concerning the Company is contained in the
enclosed Annual Report for the fiscal year ended February 2, 1997.
By Order of the Board of Directors,
Dennis A. Chantland, Secretary
San Francisco, California
April 22, 1997
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.
<PAGE> 3
WILLIAMS-SONOMA, INC.
3250 VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94109
------------------------------
PROXY STATEMENT
------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 28, 1997
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 28, 1997, and any adjournment or
postponement thereof. The Annual Report to the shareholders of the Company for
the fiscal year ended February 2, 1997, 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 22, 1997.
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 the directors named in this Proxy Statement, in favor of the
Amended and Restated 1993 Stock Option Plan, and in favor of the ratification of
the selection of Deloitte & Touche 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, 1997,
will be entitled to notice of and to vote at the Annual Meeting. At the close of
business on March 31, 1997, there were 25,557,094 outstanding shares of the
Company's common stock (the "Common Stock"), the only class of stock
outstanding. The closing sales price for the Common Stock on March 27, 1997, as
reported by the National Association of Securities Dealers Automated Quotation
(NASDAQ) National Market System, was $30.75 per share.
<PAGE> 4
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 their 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, 1997, 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.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------------------------------------- ------------------ -------
<S> <C> <C>
W. Howard Lester................................................... 2,903,385(1) 11.3%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
James A. McMahan................................................... 3,412,675(2) 13.3%
2237 Colby Avenue
Los Angeles, CA 90064
Patrick J. Connolly................................................ 527,937(3) 2.1%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Gary G. Friedman................................................... 319,677(4) 1.2%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Dennis A. Chantland................................................ 25,000(5) *
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Robert K. Earley................................................... 154,300(6) *
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- -------------------------------------------------------------------
<S> <C> <C>
Nicholas Applegate Capital Management.............................. 1,876,381(7) 7.3%
600 West Broadway, 29th Floor
San Diego, CA 92101
Husic Capital Management/Frank J. Husic & Co/Frank J. Husic........ 1,726,200(8) 6.8%
555 California Street, Suite 2900
San Francisco, CA 94104
All Executive Officers and Directors as a Group (13 persons)....... 7,738,601(9) 29.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 64,800 and 93,500 shares subject to nonqualified stock options
granted under the Company's 1976 Stock Option Plan (the "1976 Plan") and the
1993 Stock Option Plan (the "1993 Plan"), respectively, which are currently
exercisable or exercisable within 60 days. Includes 6,940 shares in the
Company's Employee Profit Sharing and Stock Incentive plan (the "Profit
Sharing Plan") that are allocable to Mr. Lester and fully vested. Does not
include 1,743 and 557,773 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) Includes 6,750 and 15,000 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) Includes 68,625 and 36,500 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. Also includes 4,917
shares in the Profit Sharing Plan that are allocable to Mr. Connolly and
fully vested. Does not include 2,619 shares owned by a trust established for
the benefit of Mr. Connolly's children, in which shares Mr. Connolly
disclaims any beneficial interest.
(4) Includes 94,925 and 168,000 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 6,127 shares in the Profit Sharing
Plan that are allocable to Mr. Friedman and fully vested.
(5) Includes 20,000 shares subject to nonqualified stock options granted under
the 1993 Plan which are currently exercisable or exercisable within 60 days.
Also includes 5,000 shares owned by a trust established for the joint
benefit of Mr. Chantland and his wife.
(6) Includes 73,125 and 28,400 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. Also includes 6,200
shares in the Profit Sharing Plan that are allocable to Mr. Earley and fully
vested.
(7) The information above and in this footnote is based on the Schedule 13G of
Nicholas Applegate Capital Management, filed February 3, 1997. Nicholas
Applegate Capital Management, a registered investment adviser, has sole
voting and dispositive power over 1,868,113 shares of Common Stock and sole
dispositive power (but no voting power) over 8,268 shares.
(8) The information above and in this footnote is based on the Schedule 13G of
Husic Capital Management, Frank J. Husic and Co., and Frank J. Husic, a
registered investment adviser, a California corporation, and a shareholder,
respectively, filed February 4, 1997. Each has shared voting and dispositive
power over
3
<PAGE> 6
1,414,000 shares of Common Stock and shared dispositive power (but no voting
power) over 312,200 shares.
(9) Includes 262,100 and 414,250 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 18,216
shares in the Profit Sharing 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 and 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 2, 1997,
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 2,
1997 were filed on a timely basis. Form 3 registering Richard Hunter as a
beneficial owner and reporting a single stock option grant of 50,000 shares of
Common Stock, was inadvertently filed late. Also filed late were Form 4
reporting Patrick J. Connolly's sale of 30,000 shares and Form 5 reporting
summarized annual activity for Gary G. Friedman.
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 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.
4
<PAGE> 7
The following table sets forth information as of March 27, 1997, 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
Adrian D.P. Bellamy, were elected directors at the Annual Meeting of
Shareholders held on June 19, 1996.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
DIRECTOR BENEFICIAL PERCENT
NOMINEE AGE PRINCIPAL OCCUPATION SINCE OWNERSHIP OF CLASS
- ------------------------- --- ----------------------------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Charles E. Williams...... 81 Founder of the Company and its Vice 1973 282,232(1) 1.1%
Chairman since 1986.
W. Howard Lester......... 61 Chairman of the Company since 1986 1979 2,903,385(2) 11.3%
and Chief Executive Officer since
1979. Director of The Good Guys,
Inc., CKE Restaurants, Inc., and
Harold's Stores, Inc.
Adrian D.P. Bellamy...... 55 Director of The Gap, Inc., Gucci new 5,000 *
Group N.V., Paragon Trade Brands, nominee
Inc., and The Body Shop Intl., PLC
since 1995. Chairman and CEO of DFS
Group Ltd., from 1983-1995.
James M. Berry........... 66 Executive Vice President of Finance 1987 23,775(3) *
of Belk Stores Services since 1995.
Director of HCC Insurance Holdings,
Inc., since 1993.
Nathan Bessin............ 71 Managing Partner of J. Arthur 1983 28,575(3) *
Greenfield & Co., Certified Public
Accountants, since 1978. Director
of Mercury General Corp.
Patrick J. Connolly...... 50 Executive Vice President, General 1983 527,937(4) 2.1%
Manager, Catalog, and Assistant
Secretary of the Company since 1995
and 1983, respectively.
Millard S. Drexler....... 52 Chief Executive Officer, President 1990 24,000(3) *
and Director of The Gap, Inc.,
since 1995, 1987 and 1983,
respectively.
Gary G. Friedman......... 39 Chief Merchandising Officer and 1993 319,677(5) 1.2%
President, Retail Stores since
1995.
John E. Martin........... 51 Chairman and Chief Executive 1994 74,250(6) *
Officer of Pepsico Casual
Restaurants since 1996. President
and Chief Executive Officer of Taco
Bell, a wholly-owned subsidiary of
PepsiCo, from 1983-1996. Director
of The Good Guys, Inc.
James A. McMahan......... 74 Chief Executive Officer of McMahan 1979 3,412,675(3) 13.3%
Furniture Stores since 1947.
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 232 shares in the Profit Sharing Plan that are allocable to Mr.
Williams and fully vested.
5
<PAGE> 8
(2) Includes 64,800 and 93,500 shares subject to nonqualified stock options
granted under the Company's 1976 Plan and the 1993 Plan, respectively, which
are currently exercisable or exercisable within 60 days. Includes 6,940
shares in the Profit Sharing Plan that are allocable to Mr. Lester and fully
vested. Does not include 1,743 and 557,773 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) Includes 6,750 and 15,000 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) Includes 68,625 and 36,500 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. Also includes 4,917
shares in the Profit Sharing Plan that are allocable to Mr. Connolly and
fully vested. Does not include 2,619 shares owned by a trust established for
the benefit of Mr. Connolly's children, in which shares Mr. Connolly
disclaims any beneficial interest.
(5) Includes 94,925 and 168,000 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 6,127
shares in the Profit Sharing Plan that are allocable to Mr. Friedman and
fully vested.
(6) Includes 17,250 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 a member of the Board. Directors (other than employee directors) are
awarded nonqualified stock options annually under the 1993 Stock Option 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. 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
The Board of Directors of the Company held a total of 6 meetings during the
fiscal year ended February 2, 1997. The Board of Directors has two standing
Committees: Audit and Compensation. There is no nominating committee or any
other committee performing those functions.
During the last fiscal year, the Audit Committee of the Board of Directors
met once. The Audit Committee is currently comprised of Messrs. Bessin
(Chairman) and Berry. This Committee is primarily
6
<PAGE> 9
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.
During the last fiscal year, the Compensation Committee of the Board of
Directors (the "Compensation Committee") met four times. The Compensation
Committee is currently comprised of Messrs. McMahan (Chairman), Drexler, Hellman
and Martin. This Committee is primarily responsible for officers' compensation
matters and for administering the Company's stock option plans.
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 2, 1997, except directors Drexler, Hellman and Martin who
each attended 70%, 73% and 50%, respectively, of all such meetings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE-NAMED
NOMINEES.
CERTAIN TRANSACTIONS
The Company leases its distribution center in Memphis, Tennessee, from two
partnerships whose partners include two executive officers and/or 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:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY AND BUSINESS EXPERIENCE
- ------------------------ --- -----------------------------------------------------------
<S> <C> <C>
Charles E. Williams..... 81 Founder of the Company and Vice Chairman since 1986.
W. Howard Lester........ 61 Chairman since 1986 and Chief Executive Officer since 1979.
Gary G. Friedman........ 39 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.
Patrick J. Connolly..... 50 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.
Dennis A. Chantland..... 54 Executive Vice President and Chief Administrative Officer
since 1995; and Secretary since 1996.
G. Andrew Rich.......... 49 Senior Vice President -- Human Resources since 1995.
Richard C. Hunter....... 51 Senior Vice President -- International Operations and
Development since 1996.
</TABLE>
7
<PAGE> 10
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 2, 1997 and whose total annual salaries and bonuses exceeded $100,000
during such fiscal year.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL -------------------
COMPENSATION(3) SECURITIES
NAME AND -------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION(1) YEAR(2) SALARY($) BONUS($) OPTIONS(#)(4) COMPENSATION($)
- ---------------------------------------- ------- --------- -------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
W. Howard Lester........................ 1996 498,077 100,000 30,000 7,638(5)
Chief Executive Officer, 1995 471,210 0 20,000 10,451
Chairman and Director 1994 386,538 0 37,500 10,066
Gary G. Friedman........................ 1996 399,580 75,000 20,000 1,226(6)
Chief Merchandising Officer, 1995 386,119 0 50,000 4,823
President Retail Stores and Director 1994 323,076 0 15,000 5,163
Dennis A. Chantland..................... 1996 342,244 75,000 25,000 4,930(7)
Executive Vice President, 1995 31,250 0 100,000 183(8)
Chief Administrative Officer and 1994 -- -- -- --
Secretary
Patrick J. Connolly..................... 1996 229,080 75,000 15,000 7,478(9)
Executive Vice President 1995 224,009 0 10,000 4,325
and General Manager, Catalog, 1994 200,615 0 15,000 8,769
Assistant Secretary and Director
Robert K. Earley........................ 1996 208,080 50,000 5,000 3,832(10)
Senior Vice President -- Distribution 1995 201,284 0 10,000 7,348
1994 187,308 0 9,000 7,084
</TABLE>
- ---------------
(1) None of the executives named in this table held any shares of restricted
stock of the Company as of February 2, 1997.
(2) Rows specified "1996," "1995" and "1994" represent fiscal years ended
February 2, 1997, January 28, 1996, and January 29, 1995, respectively.
(3) 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) Figures have been adjusted to reflect the 3-for-2 stock splits in February
1994 and September 1994 (the "Stock Splits").
(5) 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 $2,724, 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 $462 and $764, 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 $449 and $4,481, respectively.
(8) Comprised of premiums paid by the Company for term life insurance in excess
of $50,000 of $183.
(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 $2,016 and $5,462, respectively.
(10) 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 $445 and $3,387, respectively.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information noted for all grants of
stock options made to the Chief Executive Officer and each of the other
executive officers named in the Summary Compensation Table during the fiscal
year ended February 2, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------------ VALUE
NUMBER OF AT ASSUMED ANNUAL
SECURITIES PERCENTAGE OF RATES OF STOCK PRICE
UNDERLYING TOTAL OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME (#) FISCAL YEAR (%) ($/SH) DATE 5% ($) 10% ($)
- ------------------------------- ---------- --------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. Howard Lester............... 30,000 5.8 23.25 6/19/2006 $438,654 $1,111,635
Chief Executive Officer,
Chairman and Director
Dennis A. Chantland............ 25,000 4.9 23.25 6/19/2006 365,545 926,363
Executive Vice President,
Chief Administrative Officer
and Secretary
Gary G. Friedman............... 20,000 3.9 18.00 3/12/2006 226,402 573,747
Chief Merchandising Officer,
President -- Retail Division,
and Director
Patrick J. Connolly............ 5,000 1.0 18.00 3/12/2006 56,601 143,437
Executive Vice President, 10,000 1.9 23.25 6/19/2006 146,218 370,545
General Manager, Catalog, and
Director
Robert K. Earley............... 5,000 1.0 18.00 3/12/2006 56,601 143,437
Senior Vice President --
Distribution
</TABLE>
9
<PAGE> 12
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table sets forth the fiscal year-end value of unexercised
options held by the Chief Executive Officer and each of the other executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#)(1) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Howard Lester................ 0 0 131,050 116,200 $ 3,072,381 $ 1,875,578
Chief Executive Officer,
Chairman and Director
Gary G. Friedman................ 0 0 274,050 210,075 5,862,174 3,797,079
Chief Merchandising Officer,
President -- Retail Division,
and Director
Patrick J. Connolly............. 0 0 93,500 47,750 2,380,450 751,481
Executive Vice President,
General Manager, Catalog, and
Director
Dennis A. Chantland............. 0 0 20,000 105,000 272,500 1,299,375
Executive Vice President,
Chief Administrative Officer
and Secretary
Robert K. Earley................ 0 0 92,225 33,025 2,393,929 592,402
Senior Vice President --
Distribution
</TABLE>
- ---------------
(1) Figures have been adjusted to reflect the Stock Splits.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company does not have employment agreements with any of its executive
officers. However, the Company recently entered into a severance agreement with
Mr. Earley. Under the terms of this agreement, Mr. Earley will continue to
receive his normal base salary and benefits until the end of the current fiscal
year. His stock options will also continue to vest during this period.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the Committee) is
responsible for setting executive compensation policy and determining the
compensation paid to executive officers of the Company. The 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 2,903,385 shares (including
options which are currently exercisable or exercisable within 60 days)
representing 11.3% of the shares of Common Stock as
10
<PAGE> 13
of March 27, 1997. Mr. Lester (together with the undersigned Mr. McMahan)
purchased 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
Stock, one of the indices used in the Performance Graph, as well as pay
practices at other 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 1996, the
Committee reviewed the salaries of its executive officers, including the Named
Executive Officers. Based on the Company's performance in fiscal year 1995,
which fell short of targets, no base salary increases were granted at that time.
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 1995, which fell short of targets, no awards were
made to any of the Named Executive Officers or any other participants under the
Plan.
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
reflect competitive practices for Comparable Companies and the assessment of
their individual contributions. In 1996, Mr. Lester was granted an option for
30,000 shares, Mr. Chantland was granted an option for 25,000 shares, Mr.
Friedman was granted an option for 20,000 shares, and Mr. Connolly was granted
an option for 15,000 shares in recognition of their contributions and to further
link a significant portion of their compensation to shareholder returns. Grants
to the other Executive Officers averaged 5,000 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.
11
<PAGE> 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
1996 compensation levels, no 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 Committee cannot predict how the deductibility limit may impact the
Company's compensation program in future years, the 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. Drexler
F. Warren Hellman
John E. Martin
Members of the Compensation Committee
12
<PAGE> 15
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS OF THE COMPANY,
CRSP* INDEX FOR THE NASDAQ STOCK MARKET (U.S. COMPANIES), AND
CRSP INDEX FOR NASDAQ RETAIL TRADE STOCKS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ RETAIL NASDAQ STOCK
(FISCAL YEAR COVERED) TRADE MARKET WILLIAMS-SONOMA
<S> <C> <C> <C>
2/2/92 100.00 100.00 100.00
1/31/93 90.30 113.10 81.50
1/30/94 96.10 129.40 240.00
1/29/95 86.10 124.70 329.70
1/28/96 94.80 172.30 214.60
2/2/97 118.70 229.90 437.90
</TABLE>
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 2/2/92.
* Center for Research in Security Prices, The University of Chicago, Graduate
School of Business.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's warehouse and distribution center is located in Memphis,
Tennessee and leased from two partnerships whose partners include directors,
executive officers, and/or significant shareholders of the
13
<PAGE> 16
Company. The distribution center consists of two separate facilities -- one for
mail order operations and one for retail store operations.
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). 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 Committee.
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, McMahan, and Robert K. Earley,
Senior Vice President of Distribution. The partnership financed the construction
of the distribution center through the sale of $10,550,000, 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,
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 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
<PAGE> 17
PROPOSAL 2
APPROVAL OF THE AMENDED AND
RESTATED 1993 STOCK OPTION PLAN
The Company believes that officers and other key employees should have a
significant stake in the Company's stock price performance under programs which
link compensation to shareholder return. As a result, stock option grants are an
integral part of the Company's compensation program. The Company currently
relies on a single plan -- the 1993 Stock Option Plan -- for these grants and
has less than 150,000 shares of Common Stock remaining under the plan for future
grants. Rather than adopting a new stock option plan at the present time, the
Company proposes to increase the number of shares available for grant under the
existing plan from 2,250,000 shares of Common Stock to 2,750,000 shares of
Common Stock, an increase of 500,000 shares or 22%. The Company also proposes to
make several other changes to the plan (discussed below), some of which are
intended to conform the plan to new regulations adopted by the Securities and
Exchange Commission and the Internal Revenue Service.
The following is a summary of the material features of the plan and the
proposed amendments. The summary is qualified in its entirety by reference to
the full text of the amended plan which is attached as Exhibit A to this Proxy
Statement. The attached copy of the plan is restated to reflect the proposed
amendments as well as all prior amendments.
SUMMARY DESCRIPTION OF THE PROPOSED AMENDMENTS
The Company proposes to amend the plan to implement the following changes:
- increase the number of shares of Common Stock available for grant under
the plan from 2,250,000 shares to 2,750,000 shares;
- increase the minimum exercise price of nonqualified stock options from
75% to 100% of the fair market value of a share of Common Stock on the
date of grant;
- limit the size of stock option grants to individual officers to 200,000
shares of Common Stock per fiscal year;
- change the eligibility requirements for members of the committee which
administers the plan; and
- revise the formula for stock option awards to non-employee directors (i)
to increase the vesting period for the initial grant to new directors
from six months to three years and (ii) expressly grant the administering
committee authority to amend the formula from time to time without
further shareholder approval.
These changes are discussed in more detail below in the relevant section of the
summary plan description. Some of these changes are intended to conform the plan
to recent developments in the law.
In 1996, the Securities and Exchange Commission significantly amended the
rules under Section 16 of the Securities Exchange Act of 1934 (the "Section 16
Rules"). These amendments simplified the procedures for officers, directors and
principal shareholders to report transactions in the Company's Common Stock and
broadened the exemptions from the short-swing profit recovery provisions of
Section 16 for transactions under employee benefit plans. Prior to the adoption
of the new Section 16 Rules, option grants to executive officers under the plan
were exempt from the short-swing profit recovery provisions of Section 16. The
Company believes that the changes to the plan will preserve this exemption for
future stock option grants.
15
<PAGE> 18
Also in 1996, the Internal Revenue Service finalized the regulations under
Section 162(m) of the Internal Revenue Code of 1986 (the "Section 162(m)
Regulations"). Section 162(m) limits the ability of publicly held companies to
deduct compensation expenses in excess of $1,000,000 paid to certain executive
officers. The term "compensation" generally includes all cash and non-cash
compensation deductible by the Company on its tax return, including the amounts
realized by executives (and normally deductible by the Company) upon the
exercise of non-qualified stock options. However, the $1,000,000 limit does not
apply to the amounts realized upon the exercise of stock options that qualify as
performance-based compensation under the Section 162(m) Regulations. The Company
believes that the exercise of stock options granted under the amended plan will
qualify for this exemption from the limit on deductibility.
SUMMARY DESCRIPTION OF THE PLAN
Shares Subject to the 1993 Plan. The plan currently authorizes the Company
to issue a maximum of 2,250,000 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 95,000 shares of Common
Stock through option exercises and reserved approximately 2,005,000 shares of
Common Stock for outstanding options. There are less than 150,000 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 500,000 shares (or 22%) to a total of 2,750,000 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
422A 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) fix the terms of all
awards, (iii) construe, interpret and prescribe rules for the plan and (iv) make
all other determinations necessary or advisable for the administration of the
plan. The plan currently restricts Committee membership to "disinterested
directors" as defined by the Section 16 Rules. However, the Securities and
Exchange Commission eliminated this term when it amended the Section 16 Rules.
The amendments to the plan would instead restrict Committee membership to
"non-employee directors" as defined in the new Section 16 Rules. The amendments
would further restrict Committee membership to "outside directors" as defined in
the Section 162(m) Regulations adopted by the Internal Revenue Service.
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 100
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 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.
16
<PAGE> 19
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 prices for incentive and nonqualified stock
options are currently 100% and 75%, respectively, of the fair market value of a
share of Common Stock on the date of grant. The amended plan would increase the
minimum exercise price for nonqualified stock options to 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 exercisable 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. The term of the options is ten years, and the exercise price is fixed
at the fair market value of a share of Common Stock on the date of the relevant
annual meeting. The plan currently provides that these options vest six months
after the date of grant. The amended plan would change the vesting period for
the initial grant to three years. The amended plan would also expressly
authorize the Committee 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.
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
17
<PAGE> 20
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 and will
be long-term capital gain or loss if the shares are held for more than one year
after exercise. 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 and 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 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, 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.
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 reasonable 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 vote against the
proposal.
18
<PAGE> 21
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDED AND RESTATED 1993 STOCK OPTION PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
As recommended by its Audit Committee, the Board of Directors has selected
Deloitte & Touche as independent accountants for the fiscal year ending February
1, 1998, subject to ratification by the shareholders.
Deloitte & Touche, 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 February 1, 1998, 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 1998 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 January 28, 1998.
19
<PAGE> 22
AVAILABILITY OF REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 1996 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 22, 1997
20
<PAGE> 23
EXHIBIT A
WILLIAMS-SONOMA, INC.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Amended and Restated 1993 Stock Option Plan (the
"Plan") of WILLIAMS-SONOMA, INC., a California corporation (the "Company"), is
to secure for the Company and its shareholders 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 terms of any outstanding option, with consent of the
option holder, and (vii) to make all other determinations necessary or advisable
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 Two Million Seven Hundred Fifty
Thousand (2,750,000) 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
21
<PAGE> 24
expire 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 adoption 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 revise the provisions of this
Section 5 but not more than once every six months unless required to comply with
changes in the Code or the Employee Retirement Income Security Act ("ERISA"), or
the rules promulgated under the Code 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 price 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 is 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 date 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 Plan 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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<PAGE> 26
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 Section
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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 LARGE SHAREHOLDERS
Notwithstanding any other provision of this Plan, each incentive stock
option granted to a person possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or an Affiliate,
as applicable) (a "Large Shareholder") shall (i) have an exercise price of not
less than one hundred and ten percent (110%) 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 pursuant 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 adjustment shall be made in the maximum number and
kind of shares as 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 amendment 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, in any way modify, amend, alter or impair any rights or
obligations under any option theretofore granted under the Plan.
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.
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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, 1997, at the 1997 Annual Meeting of
Shareholders of the Company, to be held on Wednesday, May 28, 1997 at 10:00
a.m. (Pacific Daylight Time) at 3250 Van Ness Avenue, San Francisco, California
94109, and any adjournment 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.)
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SEE REVERSE
SIDE
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<PAGE> 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 Millard S. Drexler
James A. McMahan Adrian D.P. Bellamy John E. Martin
Nathan Bessin
2. Proposal to approve the Amended and Restated 1993 Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to ratify the selection of Deloitte & Touche as independent
accountants for the 1997 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 1996 Fiscal
Year furnished herewith.
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Please Print Name(s)
Signature(s) Date , 1997
-------------------------------------------- ------------
Please sign exactly as your name or names appear on this proxy and return it
promptly in the enclosed envelope.
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