<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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SHARPER IMAGE CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(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]
April 27, 1995
TO THE STOCKHOLDERS OF
SHARPER IMAGE CORPORATION:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sharper Image Corporation (the "Company") on June 12, 1995 at 2:00 p.m., which
will be held at the World Trade Center, Ferry Building, San Francisco,
California 94111.
Details of business to be conducted at the Annual Meeting are given in the
attached Notice of Annual Meeting and Proxy Statement. At the Annual Meeting, we
will present a report on the progress of the Company during the past year.
Accompanying this Proxy Statement is our 1994 Annual Report to
Stockholders.
We hope that you will attend the Annual Meeting. Whether or not you plan to
attend the meeting, please sign, date and return the enclosed proxy promptly in
the accompanying reply envelope so that your shares will be represented at the
Annual Meeting.
Sincerely yours,
RICHARD THALHEIMER
Chairman of the Board, Founder, and
Chief Executive Officer
<PAGE> 3
SHARPER IMAGE CORPORATION
650 DAVIS STREET
SAN FRANCISCO, CALIFORNIA 94111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1995
The Annual Meeting of Stockholders of Sharper Image Corporation (the
"Company") will be held at the World Trade Center, Ferry Building, San
Francisco, California 94111, on Monday, June 12, 1995, at 2:00 p.m., for the
following purposes:
1. To elect Directors to serve until the next Annual Meeting and
until their successors have been elected and qualified;
2. To approve the 1995 restatement of the Company's Stock Option Plan
(the "Option Plan") in order to (i) increase the number of shares of Common
Stock reserved for issuance thereunder by an additional 750,000 shares;
(ii) limit the maximum number of shares for which any one individual may be
granted stock options or separately exercisable stock appreciation rights
to 300,000 shares per fiscal year, starting with the fiscal year which
began February 1, 1994, except that for the fiscal year in which an
individual receives his or her initial stock option grant issuance under
the Option Plan, the limit will be increased to 400,000 shares of Common
Stock; (iii) expand the eligibility provisions of the Option Plan to allow
individuals owning more than twenty-five percent (25%) of the Company's
outstanding Common Stock to receive stock options and stock appreciation
rights under the Option Plan and (iv) render the non-employee members of
the Board ineligible to receive any further stock option grants or stock
appreciation rights under the Option Plan.
3. To approve the implementation of the 1994 Non-Employee Directors
Stock Option Plan (the "Directors Plan");
4. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditor for the fiscal year ending January 31, 1996; and
5. To transact any other business which may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement that accompanies this Notice.
Stockholders of record at the close of business on April 17, 1995 will be
entitled to vote at the Annual Meeting. Whether or not you plan to attend,
please sign, date, and return the enclosed proxy in the envelope provided. The
prompt return of your proxy will assist us in preparing for the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD THALHEIMER
Chairman of the Board, Founder, and
Chief Executive Officer
San Francisco, California
April 27, 1995
<PAGE> 4
THE SHARPER IMAGE(R)
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS OF
SHARPER IMAGE CORPORATION
TO BE HELD JUNE 12, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sharper Image Corporation, a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders of the
Company to be held at 2:00 p.m. on June 12, 1995 and at any adjournments or
postponements thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. This Proxy Statement and the proxy card were
first mailed to stockholders on or about April 27, 1995.
The address of the principal executive office of the Company is 650 Davis
Street, San Francisco, California 94111.
VOTING RIGHTS
Only stockholders of record of the Company's Common Stock ("Common Stock")
at the close of business on April 17, 1995 will be entitled to notice of and to
vote at the Annual Meeting. Each share of Common Stock entitles the holders
thereof to one vote on each matter to come before the Annual Meeting. On April
17, 1995, there were 8,272,440 shares of Common Stock outstanding.
The enclosed proxy is solicited by the Company's Board of Directors ("Board
of Directors" or "Board"), and, when returned properly completed, will be voted
as you direct on your proxy card. In the absence of contrary instructions,
shares represented by such proxies will be voted FOR the proposals discussed
herein and in the discretion of the proxy holders on other matters presented at
the Annual Meeting. Management does not know of any matters to be presented at
this Annual Meeting other than those set forth in this Proxy Statement and in
the Notice accompanying this Proxy Statement. If other matters should properly
come before the Annual Meeting, in the discretion of the proxy holder, shares
represented by such proxies will be voted upon any other business. Abstentions
and broker non-votes are each included in the number of shares present for
quorum purposes. Abstentions which may be specified on all proposals other than
the election of Directors are counted in tabulations of the votes cast on
proposals presented to stockholders; whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to 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 the shares covered by the
proxy in person.
SOLICITATION OF PROXIES
The entire cost of soliciting proxies will be borne by the Company. The
original solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by Directors, officers,
<PAGE> 5
employees or agents of the Company who will not receive additional compensation
for such solicitation. Copies of the solicitation material will be furnished to
brokerage firms, fiduciaries and other custodians holding shares in their names
that are beneficially owned by others to forward to such beneficial owners. Such
persons will be reimbursed by the Company for their reasonable expenses incurred
in sending proxy material to beneficial owners of the Common Stock.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, five (5) Directors (constituting the entire Board)
are to be elected to serve until the next Annual Meeting and until their
successors are elected and qualified. Set forth below is information regarding
the nominees to the Board of Directors for election as Directors.
It is intended that the proxies will be voted for the election as Directors
of the five nominees named below, unless authority to vote for any such nominee
is withheld. The five nominees receiving the highest number of affirmative votes
at the Annual Meeting will be elected. In the unanticipated event that a nominee
is unable or declines to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee named by the present Board of
Directors to fill the vacancy. Each nominee has agreed to serve if elected, and
the Board of Directors is not aware of any nominee who is unable or will decline
to serve as a Director.
NOMINEES TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
- - -------------------- ------------------------------------------------- ---
<S> <C> <C>
Richard Thalheimer Chairman of the Board, Founder and Chief 47
Executive Officer of Sharper Image Corporation
Elyse Eng Thalheimer Secretary of Sharper Image Corporation 47
Alan Thalheimer Retired Business Executive 69
Lawrence W. Feldman Chairman of the Board, Emeritus, San Francisco 78
Mart
Maurice Gregg Retail Financial Consultant 63
</TABLE>
RICHARD THALHEIMER is the founder of the Company and has served as Chief
Executive Officer and as a Director of the Company since 1978 and as Chairman of
the Board of Directors since 1985. Mr. Richard Thalheimer also served as
President of the Company through July 1993.
ELYSE ENG THALHEIMER has been a Director of the Company since April 1987
and has been Secretary of the Company since March 1987. Ms. Thalheimer served as
Director of Personnel at the Company from August 1981 through November 1986. Ms.
Thalheimer is the wife of Mr. Richard Thalheimer.
ALAN THALHEIMER has been a Director of the Company since June 1981 and was
President of Thalheimer, Inc. or its predecessor from May 1981 through 1993.
Thalheimer, Inc. was the Company's supplier of gemstones and a major supplier of
jewelry. During 1993, Mr. Alan Thalheimer retired from Thalheimer Inc., which
has since terminated the supplier relationship with the Company. Mr. Alan
Thalheimer is the father of Mr. Richard Thalheimer.
LAWRENCE W. FELDMAN was appointed by the Board of Directors to serve as a
Director of the Company in October 1987. Mr. Feldman has served since 1966 as a
Chairman of the Board, Emeritus, of the San Francisco Mart, formerly Western
Merchandise Mart of San Francisco, which houses several hundred wholesale
furnishing tenants.
MAURICE GREGG was appointed by the Board of Directors to serve as a
Director of the Company in October 1987. Mr. Gregg is a certified public
accountant and has been a retail financial consultant since June 1986. Mr. Gregg
served as Executive Vice President, Chief Financial Officer and a director of
The Gap, Inc. from April 1980 to June 1986.
2
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held two meetings during fiscal 1994.
Each Director attended more than seventy-five percent (75%) of the aggregate of
(i) the total number of such meetings held during the fiscal year, or a portion
of the fiscal year, during which such Director served as a member of the Board;
and (ii) the total number of meetings held by all committees of the Board on
which such Director served as a member. The Board of Directors has an Audit
Committee, a Finance Committee, a Compensation Committee and a Stock Option
Committee.
The Audit Committee of the Board was established in November 1987 and
consists of Directors Maurice Gregg, Lawrence Feldman and Alan Thalheimer. Alan
Thalheimer was appointed in June 1994. The Audit Committee is responsible for
recommending engagement of the Company's independent auditor, approving services
performed by such accountants and reviewing internal accounting controls, audit
plans and results, and financial reporting procedures. The Audit Committee held
two meetings during fiscal 1994.
The Finance Committee was established in November 1987 and consists of
Directors Richard Thalheimer, Alan Thalheimer and Maurice Gregg and is
responsible for overseeing the financial condition of the Company. The Finance
Committee held no meetings during fiscal 1994. All Finance Committee matters
were conducted during the meetings of the Board of Directors.
The Compensation Committee was established in November 1987 and consists of
the entire Board of Directors. The Compensation Committee is responsible for
making and reviewing recommendations regarding employee compensation. The
Compensation Committee held no meetings during fiscal 1994. All Compensation
Committee matters were conducted during the meetings of the Board of Directors.
The Stock Option Committee was established in October 1987 and consists of
Directors Maurice Gregg, Alan Thalheimer and Lawrence Feldman. Maurice Gregg and
Lawrence Feldman were appointed in June 1994 to replace Richard Thalheimer and
Elyse Eng Thalheimer. The Stock Option Committee is responsible for
administering the Company's Amended and Restated Stock Option Plan (the "Stock
Option Plan"). The Stock Option Committee held three meetings during fiscal
1994.
The Board of Directors does not have a nominating committee or committee
performing similar functions.
DIRECTOR REMUNERATION
During fiscal 1994, each of the Company's non-employee Directors who are
not related to the Company's Chief Executive Officer were paid an annual
retainer of $4,000 plus $1,000 for attending each regular meeting of the Board
of Directors. The general policy of the Company is to reimburse Directors for
all reasonable expenses incurred to attend each meeting of the Board of
Directors. All Directors are also eligible to participate in certain of the
Company's employee benefit plans. On October 7, 1994, each of the four non-
employee Directors was granted an option under the new 1994 Non-Employee
Directors Stock Option Plan to purchase 2,000 shares of Common Stock at an
exercise price of $6.875 per share, the fair market value on the grant date. The
option grants are subject to stockholder approval of Proposal No. 3 below, and
the terms and conditions of the grants are summarized in that proposal. The
shares subject to these options will vest upon the optionee's completion of one
(1) year of Board service measured from the grant date.
PROPOSAL NO. 2: APPROVAL OF 1995 RESTATEMENT OF
THE COMPANY'S STOCK OPTION PLAN
INTRODUCTION
The stockholders are being asked to vote on a proposal to approve the 1995
restatement of the Company's Stock Option Plan (the "Option Plan"). The 1995
restatement was adopted by the Board of Directors on October 7, 1994, subject to
stockholder approval at the 1995 Annual Meeting, and will effect the following
principal changes to the existing provisions of the Option Plan: (i) increase
the number of shares of Common
3
<PAGE> 7
Stock authorized for issuance over the remaining term of the Option Plan by an
additional 750,000 shares to 2,405,000 shares; (ii) limit the maximum number of
shares for which any one individual may be granted stock options and separately
exercisable stock appreciation rights to 300,000 shares per fiscal year,
starting with the fiscal year which began, February 1, 1994 except that for the
fiscal year in which an individual receives his or her initial stock option
grant under the Option Plan, the limit will be increased to 400,000 shares of
Common Stock; (iii) expand the eligibility provision of the Option Plan to allow
individuals in the Company's employ or service who own or are deemed to own more
than twenty-five percent (25%) of the Company's outstanding Common Stock to
receive stock options and stock appreciation rights under the Option Plan and
(iv) render the non-employee members of the Board ineligible to receive any
further stock option grants or stock appreciation rights under the Option Plan.
The Option Plan was originally adopted by the Board on May 20, 1985 and was
amended and restated by the Board on March 13, 1987 to increase the number of
issuable shares under the Option Plan to 1,155,000 shares. Such amendment was
approved by the stockholders on April 14, 1987. The Option Plan was further
amended by the Board on January 20, 1992 to (a) increase the number of issuable
shares to 1,655,000 shares, (b) allow consultants to receive option grants or
stock appreciation rights under the Option Plan, (c) conform the provisions of
the Option Plan to certain changes in Rule 16b-3 of the Securities and Exchange
Commission in order to allow certain transactions effected by the Company's
officers and directors under the Option Plan to continue to qualify for
exemption from the short-swing liability provisions of the federal securities
laws, and (d) extend the term of the Option Plan to January 19, 2002. The
amendments were approved by the stockholders on April 29, 1992.
The purpose of the new 1995 restatement is to (i) assure that the Company
will continue to have a sufficient reserve of Common Stock available under the
Option Plan to attract and retain the services of key individuals essential to
the Company's long-term growth and success, (ii) qualify any compensation
attributable to stock options or stock appreciation rights exercised under the
Option Plan as performance-based compensation which will not be subject to the
$1 million limitation per executive officer which Internal Revenue Code Section
162(m) imposes upon the deductibility, for federal income tax purposes, of the
compensation which the Company pays to certain executive officers, (iii) expand
the eligibility provisions of the Option Plan so that all individuals in the
Company's employ may be granted stock options under the Option Plan in
recognition of their contribution to the financial success of the Company, even
though those individuals may be substantial stockholders of the Company,
including Mr. Richard Thalheimer, the Company's Chairman of the Board, Founder
and Chief Executive Officer, and (iv) have all further stock option grants to
the non-employee Board members be made pursuant to the automatic option grant
provisions of the new 1994 Non-Employee Directors Stock Option Plan (the
"Directors Plan") which is the subject of Proposal No. 3 of this Proxy
Statement.
The terms and provisions of the Option Plan, as revised by the 1995
restatement, are summarized below. The summary, however, is not intended to be a
complete description of all the terms of the restated Option Plan. A copy of the
restated Option Plan will be furnished by the Company to any stockholder upon
written request to the Secretary of the Company at the corporate offices in San
Francisco, California.
ADMINISTRATION
The Option Plan may be administered by one or more committees comprised of
Board members appointed by the Board. The Primary Committee comprised of two (2)
or more Board members appointed by the Board will have the sole and exclusive
authority to grant stock options and stock appreciation rights to officers and
directors of the Company who are subject to the short-swing profit restrictions
of the federal securities laws. No Board member will be eligible to serve on the
Primary Committee if such individual has, within the twelve (12)-month period
immediately preceding the date of his or her appointment, received any option
grant or stock appreciation right under the Option Plan or any other stock plan
of the Company (or any parent or subsidiary corporation), except for any
automatic option grants received under the new Directors Plan. Stock options and
stock appreciation rights may be granted under the Option Plan to all other
eligible individuals by either the Primary Committee or by a Secondary Committee
of two (2) or more Board members appointed by the Board.
4
<PAGE> 8
Subject to the limited authority which may from time to time be provided to
the Secondary Committee to grant stock options or stock appreciation rights
under the Option Plan, the Primary Committee will as the Plan Administrator have
full authority to determine the eligible individuals who are to receive option
grants or stock appreciation rights, the number of shares to be covered by each
such grant, the date or dates on which the grant is to become exercisable, and
the maximum term for which grant is to remain outstanding. The Plan
Administrator will also have the discretion to determine whether the granted
stock options are to be incentive stock options under the federal tax laws or
nonstatutory options. In addition, the Plan Administrator will have full
authority to accelerate the exercisability of outstanding options and stock
appreciation rights upon such terms and conditions as it may deem appropriate.
All expenses incurred in administering the Option Plan will be paid by the
Company. At present, the Stock Option Committee of the Board serves as the sole
Plan Administrator.
ELIGIBILITY
The individuals eligible to receive option grants or stock appreciation
rights pursuant to the Option Plan are limited to key employees (including
officers) and independent consultants of the Company (or its parent or
subsidiary companies). As of April 17, 1995, approximately 149 employees
(including 6 executive officers) were eligible to participate in the Option
Plan. Non-employee Board members are no longer eligible to participate in the
Option Plan and will receive stock option grants in the future solely in
accordance with the automatic grant provisions in effect under the new Directors
Plan.
PRICE AND EXERCISABILITY
The option exercise price may not be less than one hundred percent (100%)
of the fair market value per share of Common Stock on the grant date, and no
option may have a maximum term in excess of ten (10) years measured from the
grant date. Options are not assignable or transferable other than by will or by
the laws of inheritance following the optionee's death, and the option may,
during the optionee's lifetime, be exercised only by the optionee. The optionee
will not have any stockholder rights with respect to the option shares until the
option is exercised and the exercise price is paid for the purchased shares.
Options granted under the Option Plan may be immediately exercisable for
all the option shares, on either a vested or unvested basis, or may become
exercisable for fully vested shares in one or more installments over the
optionee's period of service. Any unvested shares of Common Stock issued under
the Option Plan will be subject to repurchase by the Company, at the original
exercise price paid per share, upon the optionee's cessation of service prior to
vesting in such shares. The Plan Administrator will have complete discretion in
establishing the vesting schedule for any such unvested shares and will have
full authority to cancel the Company's outstanding repurchase rights with
respect to one or more unvested shares held by the optionee and may exercise
that authority at any time, whether before or after the optionee's service
actually ceases.
The exercise price for the purchased shares will be payable in cash or in
shares of Common Stock valued at fair market value on the exercise date. The
option may also be exercised through a cashless exercise procedure pursuant to
which the optionee provides irrevocable written instructions to a
Company-designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the
settlement date, an amount equal to the aggregate exercise price payable for the
purchased shares plus all applicable withholding taxes. The Plan Administrator
may also assist any optionee (including any officer) in the exercise of one or
more outstanding options by authorizing a loan from the Company or permitting
the optionee to pay the exercise price through a promissory note payable in
installments over a period of years. The terms and conditions of any such loan
or promissory note will be established by the Plan Administrator in its sole
discretion, but in no event may the maximum credit extended to the optionee
exceed the aggregate exercise price payable for the purchased shares (less the
par value of those shares), plus any federal and state income or employment
taxes incurred in connection with the purchase.
5
<PAGE> 9
VALUATION
The fair market value per share of Common Stock on any relevant date under
the Option Plan will be deemed to be equal to the closing selling price of the
Common Stock on the date in question on either the Nasdaq National Market or any
national securities exchange which may subsequently serve as the primary market
for the Common Stock. The fair market value of the Common Stock on April 17,
1995, as reported on the Nasdaq National Market, was $5.50 per share.
SECURITIES SUBJECT TO OPTION PLAN
Subject to stockholder approval of the 750,000-share increase which forms
part of this Proposal, 2,405,000 shares of the Common Stock have been reserved
for issuance under the Option Plan. The shares will be made available either
from the Company's authorized but unissued Common Stock or from Common Stock
reacquired by the Company. In no event, however, will any one participant in the
Option Plan be granted stock options or separately exercisable stock
appreciation rights for more than 300,000 shares in any fiscal year, starting
with the fiscal year which began February 1, 1994, except that for the fiscal
year in which an individual receives his or her initial stock option grant under
the Option Plan, the limit will be increased to 400,000 shares.
As of April 17, 1995, options for 1,194,670 shares were outstanding under
the Option Plan, options for 358,480 shares had been exercised, and 851,850
shares were available for future option grants, assuming stockholder approval of
the 750,000-share increase which forms part of this Proposal.
Should an option expire or terminate for any reason prior to exercise in
full (including options cancelled in accordance with the cancellation-regrant
provisions described below), the shares subject to the portion of the option not
so exercised will be available for subsequent option grant under the Option
Plan. Shares subject to any option surrendered or cancelled in accordance with
the stock appreciation right provisions of the Option Plan and all shares issued
under the Plan, whether or not those shares may be subsequently reacquired by
the Company pursuant to its repurchase rights under the Option Plan, will reduce
on a share-for-share basis the number of shares of Common Stock available for
subsequent issuance.
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the
Option Plan by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one participant may be granted
stock options or separately exercisable stock appreciation rights in any fiscal
year and (iii) the number and/or class of securities and the exercise price per
share in effect under each outstanding option. The adjustments to the
outstanding options will preclude the enlargement or dilution of rights and
benefits under those options.
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<PAGE> 10
OPTION GRANTS
The table below shows, as to the Company's Chief Executive Officer, each of
the other executive officers named in the Summary Compensation Table and the
other indicated persons and groups, the number of shares of Common Stock and the
exercise price per share subject to the stock option grants made under the
Option Plan for the period beginning on February 1, 1994 and ending April 17,
1995.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME AND POSITION OPTION SHARES EXERCISE PRICE ($)
- - ---------------------------------------------------------- ------------- ------------------
<S> <C> <C>
Richard J. Thalheimer..................................... 300,000(1) $5.625
Founder, Chief Executive
Officer and Chairman of the Board
Craig Womack.............................................. 50,000 $5.625
President and Chief Operating Officer
Vincent Barriero.......................................... 20,000 $5.625
Senior Vice President, and Chief Information Officer
Sydney Klevatt............................................ 12,000 $5.625
Senior Vice President, Marketing
Tracy Wan................................................. 15,000 $5.625
Senior Vice President and
Chief Financial Officer
All current executive officers as a group (6 persons)..... 412,000 $5.625
All employees, including current officers who are not
executive officers, as a group (143 persons)............ 197,100 $5.510
</TABLE>
- - ---------------
(1) Excludes the option for 300,000 shares granted on October 7, 1994 with an
exercise price of $6.875 per share which was cancelled and replaced on April
12, 1995 with an option to purchase 300,000 shares with an exercise price of
$5.625 per share. This latter option is included in the table.
TERMINATION OF SERVICE
Should the optionee cease to remain in the Company's service while holding
one or more options under the Option Plan, then those options will not remain
exercisable beyond the limited post-service period (not to exceed twelve (12)
months) designated by the Plan Administrator at the time of the option grant.
Under no circumstances, however, may any option be exercised after the specified
expiration date of the option term. Each such option will normally, during such
limited period, be exercisable only for the number of shares of Common Stock for
which the option is exercisable at the time of cessation of service.
The Plan Administrator will have complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
For all purposes under the Option Plan, an individual will be deemed to
remain in service for so long as he or she continues in the service of the
Company or one or more parent or subsidiary corporations, whether as an
employee, a non-employee member of the board of directors or an independent
consultant, unless otherwise provided in the applicable stock option or stock
issuance agreement.
CORPORATE TRANSACTION
In the event of any one of the following stockholder-approved transactions
(a "Corporate Transaction"):
- a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated,
- the sale, transfer or other disposition of all or substantially all
of the Company's assets, or
- any reverse merger in which the Company is the surviving entity,
each outstanding option will automatically become exercisable, immediately prior
to the effective date of the Corporate Transaction, for all of the shares of
Common Stock at the time subject to that option and may be
7
<PAGE> 11
exercised for any or all of such shares as fully vested shares. However, an
outstanding option will not so accelerate if and to the extent: (i) such option
is either to be assumed by the successor corporation (or parent thereof) or is
otherwise to be replaced by a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof) or (ii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of grant.
The Company's outstanding repurchase rights under the Option Plan will also
terminate, and the shares subject to such terminated rights will become fully
vested, upon the Corporate Transaction, except to the extent (i) one or more of
such repurchase rights are expressly assigned to the successor corporation (or
its parent company) in connection with the Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase rights are issued.
Immediately following the consummation of the Corporate Transaction, all
outstanding options will terminate and cease to be exercisable, except to the
extent assumed by the successor corporation (or its parent company).
STOCK APPRECIATION RIGHTS
At the discretion of the Plan Administrator, options may be granted with
tandem and/or limited stock appreciation rights. Tandem stock appreciation
rights will provide the holders with the right to surrender all or part of the
underlying stock option in exchange for an appreciation distribution from the
Company equal in amount to the excess of (i) the fair market value (on the
option surrender date) of the vested shares of Common Stock for which the
surrendered option is at the time exercisable over (ii) the aggregate exercise
price payable for those vested shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in Common Stock.
One or more officers of the Company subject to the short-swing profit
restrictions of the Federal securities laws may be granted limited stock
appreciation rights in connection with their option grants. Any option with such
a limited stock appreciation right in effect for at least six (6) months will
automatically be cancelled, whether or not the option is otherwise at the time
exercisable for vested shares of Common Stock, upon the successful completion of
a hostile tender offer for securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding securities. The
officer will in return receive a cash distribution from the Company in an amount
per cancelled option share equal to the excess of (i) the highest reported price
per share of Common Stock paid in the tender offer over (ii) the exercise price
payable per option share.
The outstanding option grants under the Option Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets. However, the
acceleration of those options in the event of a Corporate Transaction or the
cancellation of such options in connection with a hostile take-over may be seen
as an anti-takeover provision and may have the effect of discouraging a proposal
for merger, a takeover attempt or other efforts to gain control of the Company.
CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator will have the authority to effect, on one or more
separate occasions, the cancellation of outstanding options under the Option
Plan which have exercise prices in excess of the then current market price of
the Common Stock and to issue replacement options with an exercise price not
less than one hundred percent (100%) of the fair market value per share of
Common Stock on the new grant date.
EXCESS GRANTS
The Option Plan permits the grant of options to purchase shares of Common
Stock in excess of the number of shares then available for issuance under the
Option Plan. Any shares acquired upon the exercise of such options will be held
in escrow until the stockholders approve an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Option
Plan.
8
<PAGE> 12
AMENDMENT AND TERMINATION OF THE OPTION PLAN
The Board of Directors may amend or modify the Option Plan in any or all
respects whatsoever. However, no such amendment may adversely affect the rights
of holders of outstanding stock options or unvested share issuances without
their consent. In addition, the Board may not, without the approval of the
Company's stockholders, (i) materially increase the maximum number of shares
issuable under the Option Plan, except to reflect certain changes in the
Company's capital structure, (ii) materially modify the eligibility requirements
for option grants or (iii) otherwise materially increase the benefits accruing
to participants under the Option Plan.
The Board may terminate the Option Plan at any time, and the Option Plan
will in all events terminate on January 19, 2002. Each stock option or unvested
share issuance outstanding at the time of such termination will remain in force
in accordance with the provisions of the agreement evidencing such grant or
issuance.
FEDERAL TAX CONSEQUENCES
Options granted under the Option Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as described
below:
Incentive Stock Options. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. The optionee will, however, recognize
taxable income in the year in which the purchased shares are sold or otherwise
made the subject of disposition.
For federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two minimum
holding periods prior to the sale or other disposition of the purchased shares,
then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares, then the excess of (i) the fair market value of those shares on
the date the option was exercised over (ii) the exercise price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the date the option was exercised over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares. The Company anticipates that the deductions attributable to the
compensation income arising from disqualifying dispositions under the Option
Plan will not be subject to the annual $1.0 million limit per covered individual
on the deductibility of compensation paid to certain executive officers of the
Company.
Non-statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
9
<PAGE> 13
Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of Common Stock under a non-statutory option. These special
provisions may be summarized as follows:
(a) If the shares acquired upon exercise of the non-statutory option
are subject to repurchase by the Company, at the original exercise price
paid per share, upon the optionee's termination of service prior to vesting
in those shares, then the optionee will not recognize any taxable income at
the time of exercise but will have to report as ordinary income, as and
when the Company's repurchase right lapses, an amount equal to the excess
of (i) the fair market value of the shares on the date the Company's
repurchase right lapses with respect to those shares over (ii) the exercise
price paid for the shares.
(b) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise
of the non-statutory option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date (determined as if
the shares were not subject to the Company's repurchase right) over (ii)
the exercise price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when the
Company's repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the deductions attributable to the
compensation income arising from the exercises of non-statutory options under
the Option Plan will not be subject to the annual $1.0 million limit per covered
individual on the deductibility of compensation paid to certain executive
officers of the Company.
Stock Appreciation Rights. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.
ACCOUNTING TREATMENT
Under present accounting rules, neither the grant nor the exercise of
options issued at fair market value under the Option Plan will result in any
charge to the Company's earnings. However, the number of outstanding options
under the Option Plan may be a factor in determining earnings per share.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to be
charged against the Company's earnings. Accordingly, at the end of each fiscal
quarter, the amount (if any) by which the fair market value of the shares of
Common Stock subject to such outstanding stock appreciation rights has increased
from the prior quarter-end will be accrued as compensation expense, to the
extent such fair market value is in excess of the aggregate exercise price in
effect for those rights.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the issued and outstanding voting
shares present or represented by proxy and entitled to vote at the Annual
Meeting is necessary for approval of the 1995 restatement of the Option Plan. If
such stockholder approval is not obtained, then the 750,000-share increase to
the share reserve will not be implemented, and any stock option grants made on
the basis of the 750,000-share increase will terminate without ever becoming
exercisable for the shares of Common Stock subject to those options. No
additional options will be granted on the basis of such share increase, and the
Option Plan will terminate once the existing share reserve available under the
1993 Plan has been issued. In addition, no changes in the eligibility provisions
of the Option Plan will become effective, and individuals in the Company's
employ or service who own or are deemed to own more than twenty-five percent
(25%) of the Company's outstanding Common Stock will remain ineligible to
participate in the Option Plan.
10
<PAGE> 14
The Board of Directors believes that the restatement of the Option Plan is
necessary in order to continue to provide equity incentives to attract and
retain the services of key employees and consultants.
FOR THIS REASON, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THIS PROPOSAL.
NEW PLAN BENEFITS
On the October 7, 1994 effective date of the 1995 restatement of the Option
Plan, the Company's Chief Executive Officer was granted an option to purchase
300,000 shares of Common Stock at an exercise price of $6.875 per share. This
grant was made subject to stockholder approval of the change in the eligibility
provisions of the Option Plan to allow individuals in the Company's employ or
service who own or are deemed to own more than twenty-five percent (25%) of the
Company's outstanding Common Stock to receive stock option grants. On April 12,
1995, this option was cancelled and regranted under the Option Plan at an
exercise price of $5.625 per share. The new option will not become exercisable
in whole or in part unless the stockholders approve this Proposal No. 2.
PROPOSAL NO. 3: APPROVAL OF THE IMPLEMENTATION OF THE 1994
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
INTRODUCTION
The stockholders are also being asked to vote on a proposal to approve the
implementation of the 1994 Non-Employee Directors Stock Option Plan (the
"Directors Plan") pursuant to which automatic option grants for shares of Common
Stock will be made at periodic intervals to eligible non-employee members of the
Board of Directors. The Directors Plan became effective on October 7, 1994, when
it was adopted by the Board, and the initial option grants were made on that
date, subject to stockholder approval of the Directors Plan at the 1995 Annual
Meeting.
The Directors Plan is designed to serve as an equity incentive program to
attract and retain highly-qualified individuals with substantial experience in
the industry to serve as non-employee members of the Board. The following is a
summary of the principal features of the Directors Plan. The summary, however,
does not purport to be a complete description of all the provisions of the
Directors Plan. Any stockholder who wishes to obtain a copy of the actual plan
document may do so by written request to the Corporate Secretary at the
Company's executive offices.
ADMINISTRATION
The terms and conditions of each automatic option grant (including the
timing and pricing of the option grant) will be governed by the express terms
and conditions of the Directors Plan, and neither the Board nor any committee of
the Board will exercise any discretionary functions with respect to such option
grants.
ISSUABLE SHARES
The Board of Directors has reserved 50,000 shares of Common Stock for
issuance under the Directors Plan. These shares may be drawn from either the
Company's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Company on the open
market.
Should one or more outstanding options under the Directors Plan expire or
terminate for any reason prior to exercise in full, then the shares subject to
the portion of each option not so exercised will be available for subsequent
option grants. Shares subject to any option or portion thereof surrendered in
accordance with the cash-out provisions of the Directors Plan and all share
issuances under the Directors Plan, whether or not the shares are subsequently
repurchased by the Company, will reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent option grants.
Should any change be made to the outstanding Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration, then appropriate adjustments
will be made to (i) the maximum number and/or class of securities issuable under
the Directors Plan, (ii) the
11
<PAGE> 15
number and/or class of securities for which automatic option grants are to be
subsequently made to each newly-elected or continuing non-employee Board member
and (iii) the number and/or class of securities and exercise price per share in
effect under each option outstanding under the Directors Plan.
ELIGIBILITY
The individuals eligible to receive automatic option grants will be limited
to (i) those individuals serving as non-employee Board members on the October 7,
1994 effective date of the Directors Plan, (ii) those individuals who are first
elected or appointed as non-employee Board members after such effective date,
whether through appointment by the Board or election by the Company's
stockholders, and (iii) those individuals who are re-elected as non-employee
Board members at one or more Annual Stockholders Meetings, beginning with the
1995 Annual Meeting.
As of April 17, 1995, there were four (4) non-employee Board members
eligible to participate in the Directors Plan.
NEW PLAN BENEFITS
On the October 7, 1994 effective date of the Directors Plan, each eligible
non-employee Board member (Lawrence Feldman, Maurice Gregg, Alan Thalheimer and
Elyse Thalheimer) was granted a nonstatutory stock option to purchase 2,000
shares of Common Stock at an exercise price of $6.875 per share.
FUTURE OPTION GRANTS
Each individual who first becomes an eligible non-employee Board member at
any time after October 7, 1994 will automatically be granted, at the time of his
or her initial election or appointment to the Board, a nonstatutory option to
purchase 2,000 shares of Common Stock.
In addition, on the date of each Annual Stockholders Meeting, beginning
with the 1995 Annual Meeting, each individual re-elected as a non-employee Board
member at that Annual Meeting will automatically be granted a nonstatutory
option to purchase an 1,000 shares of Common Stock, provided such individual has
served as a Board member for a period of at least six (6) months. There will be
no limit on the number of such annual 1,000-share option grants any one eligible
non-employee Board member may receive over his or her period of continued Board
service.
PRICE AND EXERCISABILITY
The exercise price per share of Common Stock subject to each automatic
option grant will be equal to one hundred percent (100%) of the fair market
value per share on the automatic grant date. Such fair market value will be
deemed equal to the closing selling price per share of Common Stock on the grant
date, as reported on the Nasdaq National Market. On April 17, 1995, the fair
market value per share was $5.50.
The exercise price is payable in cash or in shares of Common Stock valued
at fair market value on the exercise date. The exercise price may also be paid
through a same-day sale program, pursuant to which the a Company-designated
brokerage firm will effect the immediate sale of the shares purchased under the
option and pay over to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares.
Each automatic grant will be immediately exercisable for any or all of the
option shares. However, no such grant will become exercisable in whole or in
part unless the stockholders approve the Directors Plan at the 1995 Annual
Meeting. Any shares purchased under the option will be subject to repurchase by
the Company, at the exercise price paid per share, upon the optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
automatic grant will vest upon optionee's completion of one (1) year of Board
service measured from the automatic grant date.
TERMINATION OF BOARD SERVICE
Should the optionee cease to serve as a Board member for any reason (other
than death or permanent disability) while holding one or more automatic option
grants, then that individual will have a six (6)-month
12
<PAGE> 16
period following the date of such cessation of Board service in which to
exercise each such option for any or all of the option shares in which he or she
is vested at the time of his or her cessation of Board service.
Should the optionee die within six (6) months after cessation of Board
service, then any automatic option grant held by him or her at the time of death
may subsequently be exercised, for any or all of the option shares in which the
optionee is vested at the time of his or her cessation of Board service, by the
personal representative of the optionee's estate or by the person or persons to
whom the option is transferred pursuant to his or her will or in accordance with
the laws of inheritance. The right to exercise each such option will lapse upon
the expiration of the twelve (12)-month period measured from the date of the
optionee's death.
Should the optionee die or become permanently disabled while serving as a
Board member, then any automatic option grant held by him or her at the time of
his or her death or permanent disability may subsequently be exercised by the
optionee (or a personal representative of the optionee's estate) for any or all
of the option shares as fully-vested shares of Common Stock. The option will
remain so exercisable until the expiration of the twelve (12)-month period
measured from the date of the optionee's death or permanent disability.
In no event, however, may any automatic grant be exercised more than ten
(10) years after the automatic grant date.
SPECIAL ACCELERATION EVENTS
In the event of the Company is acquired by a merger or asset sale, the
shares of Common Stock at the time subject to each outstanding automatic grant
but not otherwise vested will vest in full so that each such option will,
immediately prior to the specified effective date for such acquisition, become
fully exercisable for all of the shares at the time subject to that option and
may be exercised for all or any portion of such shares as fully-vested shares of
Common Stock. Immediately following the consummation of such acquisition, each
automatic option grant will terminate and cease to be outstanding, except to the
extent assumed by the successor corporation or its parent corporation.
In connection with any hostile take-over of the Company, whether effected
by a tender offer for securities possessing fifty percent (50%) or more of the
Company's outstanding voting power or by a change in the majority of the Board
resulting from one or more contested elections for Board membership, the shares
of Common Stock at the time subject to each outstanding automatic grant but not
otherwise vested will vest in full so that each such option will, immediately
prior to the specified effective date for such take-over, become fully
exercisable for all of the shares at the time subject to that option and may be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock. Each such option will remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term.
Upon the successful completion of a hostile tender offer for securities
possessing fifty percent (50%) or more of the Company's outstanding voting
power, each optionee will have a thirty (30)-day period in which to surrender to
the Company each automatic option grant held by him or her for a period of at
least six (6) months. The optionee will in return be entitled to a cash
distribution from the Company in an amount per share subject to the surrendered
option equal to the excess of (i) the highest reported price per share of Common
Stock paid by the tender offeror over (ii) the exercise price payable per share.
The automatic option grants will in no way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets. However, the acceleration of vesting of
the option shares upon an acquisition of the Company by merger or asset sale or
upon a hostile take-over may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a take-over attempt or other
effort to gain control of the Company.
PLAN AMENDMENTS
The Board has complete and exclusive power and authority to amend or modify
the Directors Plan in any or all respects whatsoever. However, (i) the Directors
Plan, together with the option grants outstanding thereunder, may not be amended
at intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations, and (ii) no such
13
<PAGE> 17
amendment or modification may adversely affect rights and obligations with
respect to options at the time outstanding under the Directors Plan, unless the
affected optionees consent to such amendment. In addition, the Board may not,
without the approval of the Company's stockholders, amend the Directors Plan to
(i) materially increase the maximum number of shares issuable thereunder or the
number of shares issuable per newly-elected or continuing non-employee Board
member, except for permissible adjustments in the event of certain changes to
the Company's capital structure, (ii) materially modify the eligibility
requirements for participation in the Directors Plan or (iii) materially
increase the benefits accruing to participants.
PLAN TERMINATION
The Directors Plan will terminate upon the earlier of (i) September 30,
2004 or (ii) the date on which all shares available for issuance under the
Directors Plan are issued or cancelled pursuant to the exercise or cash-out of
the granted options. If the date of plan termination is determined under clause
(i) above, then all option grants and unvested stock issuances outstanding on
such date will continue to have force and effect in accordance with the
provisions of the agreements evidencing those option grants or stock issuances.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Directors Plan will be nonstatutory options which
do not satisfy the requirements of Section 422 of the Internal Revenue Code. No
taxable income will be recognized by an optionee upon the grant of the
nonstatutory option, but the optionee will normally recognize ordinary income in
the year in which the option is exercised. The amount of such ordinary income
will be equal to the excess of the fair market value of the purchased shares on
the exercise date over the exercise price paid for the shares.
Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of the Company's common stock under a nonstatutory option. These
special provisions may be summarized as follows:
1. If the shares acquired upon exercise of the nonstatutory option
are subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of Board service prior to vesting
in those shares, then the optionee will not recognize any taxable income at
the time of exercise but will have to report as ordinary income, as and
when the optionee vests in the shares, an amount equal to the excess of (i)
the fair market value of the shares on the date the optionee vests in those
shares over (ii) the exercise price paid for such shares.
2. The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise
of the nonstatutory option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date over (ii) the
exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when he or she
vests in such shares.
3. The Company will be entitled to a business expense deduction equal
to the amount of ordinary income recognized by the optionee with respect to
the exercised nonstatutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is
recognized by the optionee.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the issued and outstanding voting
shares is sought for approval of the implementation of the Directors Plan. The
Board of Directors believes that the implementation of the Director's Plan is
necessary in order to continue to provide equity incentives to attract and
retain the services of non-employee Board members. No options granted under the
Directors Plan prior to such stockholder approval will become exercisable in
whole or in part unless the Directors Plan is approved by the stockholders at
the Annual Meeting. If such approval is not obtained, then all options
previously granted under the Directors Plan will terminate and cease to be
outstanding, and no further option grants will be made under the Directors Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL.
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<PAGE> 18
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 17, 1995 by (i) all persons known by the Company to
beneficially own five percent (5%) or more of its outstanding Common Stock, (ii)
each Director, (iii) each of the Company's executive officers named in the
Summary Compensation Table below, and (iv) all Directors and executive officers
as a group. All shares are subject to the named person's sole voting and
investment power except where otherwise indicated or where subject to applicable
community property laws.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP OF CLASS
------------------------------------------------------ ---------- --------
<S> <C> <C>
Richard Thalheimer.................................... 5,623,987 (1) 68.0%
Elyse Eng Thalheimer.................................. 265,528 (2) 3.2%
Alan Thalheimer....................................... 27,351 (3) *
Lawrence W. Feldman................................... 11,000 (4) *
Maurice Gregg......................................... 10,000 (5) *
Craig Womack.......................................... 153,000 (6) 1.8%
Vincent Barriero...................................... 68,000 (7) *
Sydney Klevatt........................................ 42,600 (8) *
Tracy Wan............................................. 22,500 (9) *
All Directors and executive officers as a group (10
persons)............................................ 6,022,788 (10) 70.3%
</TABLE>
- - ---------------
* Less than one percent of class.
(1) Does not include 45,500 shares owned by Ms. Elyse Eng Thalheimer, Mr.
Richard Thalheimer's wife. Includes 4,737,959 shares owned by The Richard
J. Thalheimer Revocable Trust, of which Mr. Richard Thalheimer is trustee
and sole beneficiary. Includes 218,028 shares owned by The Richard
Thalheimer and Elyse Thalheimer Family Trust, of which Mr. Richard
Thalheimer is a co-beneficiary. Includes 368,000 shares owned by The
Richard J. Thalheimer Children's Trust. Includes 300,000 shares owned by
the Richard J. Thalheimer 1994 Annuity Trust, of which Mr. Richard
Thalheimer is trustee. Mr. Thalheimer's address is The Sharper Image, 650
Davis Street, San Francisco, California 94111.
(2) Does not include 4,737,959 shares owned by Mr. Richard Thalheimer, Ms.
Elyse Eng Thalheimer's husband. Includes 218,028 shares owned by The
Richard Thalheimer and Elyse Thalheimer Family Trust, of which Ms. Elyse
Eng Thalheimer is a co-beneficiary. Includes an option to purchase 2,000
shares of Common Stock, which is subject to stockholder approval of
Proposal No. 3.
(3) Does not include 83,800 shares owned by Mr. Alan Thalheimer's wife.
Includes 5,000 shares owned by the Alan Thalheimer individual retirement
account. Does not include 368,000 shares owned by The Richard J. Thalheimer
Children's Trust, of which Mr. Alan Thalheimer is Trustee. Includes an
option to purchase 2,000 shares of Common Stock, which is subject to
stockholder approval of Proposal No. 3.
(4) Includes 2,000 shares owned by the L.W. and Marie Feldman Trust and 9,000
shares issuable upon exercise of options. Includes an option to purchase
2,000 shares of Common Stock, which is subject to stockholder approval of
Proposal No. 3.
(5) Includes 9,000 shares issuable upon exercise of options. Includes an option
to purchase 2,000 shares of Common Stock, which is subject to stockholder
approval of Proposal No. 3.
(6) Includes 140,400 shares issuable upon exercise of options.
(7) Includes 48,000 shares issuable upon exercise of options.
(8) Includes 42,200 shares issuable upon exercise of options.
(9) Includes 22,500 shares issuable upon exercise of options.
(10) Includes 268,200 shares issuable upon exercise of options. Includes options
to purchase 8,000 shares of Common Stock which are subject to stockholder
approval of Proposal No. 3.
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<PAGE> 19
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) (hereafter referred to as the "named executive officers") for the three
fiscal years ended January 31, 1995, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL LONG-TERM
YEAR ANNUAL COMPENSATION COMPENSATION
ENDED ---------------------- --------------------- ALL OTHER
NAME AND PRINCIPAL POSITION JAN. 31 SALARY($) BONUS($) OPTIONS (# OF SHARES) COMPENSATION($)
- - ---------------------------------- ------- ---------- --------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard Thalheimer 1995 480,540 247,500 300,000 shares(2) 19,668(1)
Chairman of the Board, Founder 1994 450,000 22,500 -0- 17,320
and Chief Executive Officer 1993 450,000 -0- -0- 20,597
Craig Womack 1995 261,731 51,000 -0- 1,869(1)
President and Chief 1994 238,077 12,250 25,000 shares 504
Operating Officer 1993 238,846 -0- -0- 306
Vincent Barriero 1995 153,654 25,000 -0- 1,501(1)
Senior Vice President, 1994 150,000 8,000 5,000 shares 646
Chief Information Officer 1993 144,231 -0- -0- 306
Sydney Klevatt 1995 137,788 20,000 -0- 2,300(1)
Senior Vice President, 1994 141,345 6,250 3,000 shares 1,414
Marketing 1993 150,000 -0- -0- 10,821
Tracy Wan 1995 105,529 14,000 -0- 884(1)
Senior Vice President, 1994 90,000 4,500 2,000 shares 239
Chief Financial Officer 1993 93,462 -0- -0- 162
</TABLE>
- - ---------------
(1) Represents the following amounts for the named executive officers for the
fiscal year ended January 31, 1995: (i) the profit-sharing payment made by
the Company on each officer's behalf, (ii) the premiums paid on the life
insurance coverage provided such individuals, (iii) the contribution made by
the Company to match the salary deferral contribution made by the officer to
the Company's 401(k) plan, up to a maximum of $250, and (iv) the imputed
value for goods and services provided by the Company.
<TABLE>
<CAPTION>
PROFIT SHARING LIFE INSURANCE MATCHING 401(K) VALUE OF GOODS
NAME CONTRIBUTION($) PREMIUM($) CONTRIBUTION($) AND SERVICES($)
------------------------------------------ --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Richard Thalheimer....... 2,167 529 250 16,722
Craig Womack............. 1,145 311 250 163
Vincent Barriero......... 722 529 250 0
Sydney Klevatt........... 680 1,370 250 0
Tracy Wan................ 433 201 250 0
</TABLE>
(2) This table does not reflect the cancellation of the option to purchase
300,000 shares of common stock at an exercise price of $6.875 and the option
regrant of April 12, 1995 to purchase 300,000 shares of common stock at an
exercise price of $5.625.
EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL ARRANGEMENTS
During fiscal 1994, the Company adopted a Compensation Program for Mr.
Richard Thalheimer, the Company's Founder, Chief Executive Officer and Chairman
of the Board. The Compensation Program provides for the payment of base salary
to Mr. Thalheimer in respect of each fiscal year based on the Company's
performance during the prior fiscal year, and provides for the payment of a
bonus to Mr. Thalheimer in respect of each fiscal year based on the Company's
performance during that fiscal year. Specifically, the Compensation Program
provides that Mr. Thalheimer's base salary for any fiscal year will be increased
in the event the Company's earnings per share for the prior fiscal year has
increased as compared to the fiscal year preceding the prior fiscal year, and
will be reduced in the event that the Company's earnings per
16
<PAGE> 20
share for the fiscal year has decreased as compared to the fiscal year preceding
such prior fiscal year. The Compensation Program also provides for bonus
payments as a percentage of base salary based on specific target percentage
increases in the Company's earnings per share for such fiscal years. The
Compensation Program provides that Mr. Thalheimer will not, in any event, be
paid a base salary less that the minimum base salary established by the
Compensation Committee for each fiscal year. The minimum base salary for fiscal
1995 has been established at $495,000.00.
None of the Company's executive officers have employment agreements with
the Company, and their employment may be terminated at any time at the
discretion of the Board of Directors. The Stock Option Committee as
administrator of the Company's Stock Option Plan has the authority to provide
for the accelerated vesting of the shares of Common Stock subject to outstanding
options held by the Chief Executive Officer and the Company's other executive
officers or any unvested shares actually held by those individuals under the
Option Plan, in the event their employment were to be terminated (whether
involuntarily or through a forced resignation) following an acquisition of the
Company by merger or asset sale.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the information noted for all grants of
stock options made to the named executive officers listed in the Summary
Compensation Table during the fiscal year ended January 31, 1995:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
---------------------------------------------------- ASSUMED ANNUAL
PERCENTAGE RATES OF
OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- - --------------------------------------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard Thalheimer........... 300,000(1) 79.3% $ 6.875 10/06/04 $1,297,095 $3,287,094
Craig Womack................. -- -- -- -- -- --
Vincent Barriero............. -- -- -- -- -- --
Sydney Klevatt............... -- -- -- -- -- --
Tracy Wan.................... -- -- -- -- -- --
</TABLE>
- - ---------------
(1) The option grant to Mr. Richard Thalheimer has a maximum term of ten years,
subject to earlier termination upon the optionee's cessation of service. The
option grant reflected in the table was exercisable as follows: 100,000
shares become exercisable immediately and the remaining shares become
exercisable in annual increments of twenty percent (20%) over the five-year
period of service measured from January 31, 1996. The option was cancelled
on April 12, 1995, and Mr. Thalheimer was granted a replacement option for
300,000 shares with an exercise price of $5.625 per share. The new option
will become exercisable as follows: 100,000 shares will become exerciseable
on January 31, 1996 and the remaining shares will become exercisable in five
annual increments of twenty percent (20%) beginning January 31, 1996. The
option will be subject to full and immediate acceleration in the event the
Company is acquired by merger or asset sale, unless the option is assumed or
replaced by the acquiring entity.
(2) There is no assurance that the actual stock price appreciation over the
ten-year option term will be at those assumed rates or at any other level.
Unless the market price of the Company's common stock does in fact
appreciate over the option term, no value will be realized from the option
grants.
17
<PAGE> 21
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the named
executive officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year. No stock
appreciation rights have been granted under the Stock Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
THE-MONEY OPTIONS AT FISCAL
YEAR-END (MARKET PRICE OF
NUMBER OF UNEXERCISED SHARES AT FISCAL YEAR-END
VALUE REALIZED OPTIONS AT FISCAL ($6.875) LESS EXERCISE
SHARES (MARKET PRICE AT YEAR-END(#) PRICE)($)
ACQUIRED ON EXERCISE DATE LESS --------------------------- ---------------------------
NAME EXERCISE(#) EXERCISE PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------------- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Thalheimer........ -- -- 100,000 200,000 $ -0- (1) $ -0- (1)
Craig Womack.............. -- -- 140,400 35,000 694,875 167,125
Vincent Barriero.......... -- -- 48,000 12,000 238,875 59,250
Sydney Klevatt............ -- -- 42,200 15,800 227,035 82,540
Tracy Wan................. -- -- 22,500 6,500 108,289 31,151
</TABLE>
- - ---------------
(1) This table does not reflect the cancellation of the option to purchase
300,000 shares of common stock at an exercise price of $6.875 and the option
regrant of April 12, 1995 to purchase 300,000 shares of common stock at an
exercise price of $5.625. On the basis of the $5.625 per share exercise
price, the value of Mr. Thalheimer's exercisable options would be $0 and
unexercisable options would be $375,000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
Directors and greater than ten-percent stockholders are required by regulation
of the Securities and Exchange Commission to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 31, 1995, a Form 4,
reporting two transactions by Mr. Richard Thalheimer, was not filed on a timely
basis; all other Section 16(a) filing requirements applicable to its officers,
Directors and greater than ten-percent beneficial owners were complied with.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committees of the Board of Directors (the
"Committees") administer the Company's compensation policies and programs. The
Compensation Committee has responsibility for executive compensation matters,
including setting the base salaries of the Company's executive officers,
approving individual bonuses and bonus programs for executive officers, and
administering certain of the Company's employee benefit programs. The Stock
Option Committee has sole responsibility for the administration of the Company's
Stock Option Plan, under which grants may be made to executive officers and
other key employees. The following is a summary of policies of the Committees
that affect the compensation paid to executive officers, as reflected in the
tables and text set forth elsewhere in this Proxy Statement.
18
<PAGE> 22
GENERAL COMPENSATION POLICY. The overall policy of the Committees is to
offer the Company's executive officers competitive compensation opportunities
based upon their personal performance, the financial performance of the Company
and their contribution to that performance. One of the primary objectives is to
have a substantial portion of each executive officer's compensation contingent
upon the Company's financial success as well as upon such executive officer's
own level of performance. Each executive officer's compensation package is
generally comprised of three elements: (i) base salary, which is determined
primarily on the basis of the individual's position and responsibilities and the
level of the individual's performance, (ii) incentive performance awards payable
in cash and tied to the Company's financial performance and individual
performance, and (iii) long-term stock-based incentive awards designed to
strengthen the mutuality of interests between the executive officers and the
Company's stockholders. Generally, as an executive officer's level of
responsibility increases, a greater portion of such executive officer's total
compensation will be dependent upon Company performance and stock price
appreciation rather than base salary.
FACTORS. The principal factors considered in establishing the components
of each executive officer's compensation package for the fiscal year ended
January 31, 1995 are summarized below. The Committees may in their discretion
apply entirely different factors, such as different measures of financial
performance, for future fiscal years.
BASE SALARY. The base salary for each officer is set primarily on the
basis of personal performance, level of responsibility, salary levels for
comparable positions of other retailers (as estimated based on the
Committee's knowledge of the retail industry), internal comparability
considerations, and, to a lesser extent, on the financial performance of
the Company.
INCENTIVE COMPENSATION. Annual bonuses are earned by an executive
officer on the basis of the Company's financial performance and the base
salary, personal performance and level of responsibility of such executive
officer. The specific amounts paid to each executive officer, other than
the Chief Executive Officer, was determined by the Company's Chief
Executive Officer on the basis of personal performance and level of
responsibility of each such executive officer, subject to the Compensation
Committee's approval.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Generally, the Stock
Option Committee approves annual grants of stock options to each of the
Company's executive officers under the Stock Option Plan. The grants are
designed to align the interests of each executive officer with those of the
stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in
the business. Each grant generally allows the officer to acquire shares of
the Company's common stock at a fixed price per share (the market price on
the grant date) over a specified period of time (up to 10 years), thus
providing a return to the executive officer only if the market price of the
shares appreciates over the option term. The size of the option grant to
each executive officer generally is designed to create a meaningful
opportunity for stock ownership and is based upon the executive officer's
current position with the Company, internal comparability considerations
regarding option grants made to other executive officers of the Company,
the executive officer's current level of performance and the executive
officer's potential for future responsibility and promotion over the option
term. The Stock Option Committee also considers the number of vested and
unvested options held by the executive officer at the time of the proposed
grant in order to maintain an appropriate level of equity incentive for
that individual. However, the Stock Option Committee does not adhere to any
specific guidelines as to the relative option holdings of the Company's
executive officers.
CEO COMPENSATION. During fiscal 1994, the Company adopted a Compensation
Program for Mr. Richard Thalheimer, the Company's Founder, Chief Executive
Officer and Chairman of the Board. The Compensation Program provides for the
payment of base salary to Mr. Thalheimer in respect of each fiscal year based on
the Company's performance during the prior fiscal year, and provides for the
payment of a bonus to Mr. Thalheimer in respect of each fiscal year based on the
Company's performance during that fiscal year. Specifically, the Compensation
Program provides that Mr. Thalheimer's base salary for any fiscal year will be
increased in the event the Company's earnings per share for the prior fiscal
year has increased as
19
<PAGE> 23
compared to the fiscal year preceding the prior fiscal year, and will be reduced
in the event that the Company's earnings per share for the fiscal year has
decreased as compared to the fiscal year preceding such prior fiscal year. The
Compensation Program also provides for bonus payments as a percentage of base
salary based on specific target percentage increases in the Company's earnings
per share for such fiscal years. The Compensation Program provides that Mr.
Thalheimer will not, in any event, be paid a base salary less that the minimum
base salary established by the Compensation Committee for each fiscal year. The
minimum base salary for fiscal 1995 has been established at $495,000.00. On the
basis of the earnings per share growth for the fiscal year ended January 31,
1995, Mr. Thalheimer earned a bonus equal to approximately 50% of his base
salary for that year.
TAX LIMITATION. As a result of Section 162(m) of the Internal Revenue
Code, which was enacted into law in 1993, the Company will not be allowed a
federal income tax deduction for compensation paid to certain executive
officers, to the extent that compensation exceeds $1 million per officer in any
one year. This limitation will be in effect for each fiscal year of the Company
beginning after December 31, 1993 and will apply to all compensation paid to the
covered executive officers which is not considered to be performance based.
Compensation which does qualify as performance-based compensation will not have
to be taken into account for purposes of this limitation. At the 1995 Annual
Meeting of Shareholders, the Company will seek stockholder approval of the 1995
restatement of the Stock Option Plan. If such stockholder approval is obtained,
then any compensation deemed paid in connection with the exercise of stock
options granted under that plan will qualify as performance-based compensation.
The cash compensation to be paid to the Company's executive officers for
the 1996 fiscal year is not expected to exceed the $1 million limit per officer.
Accordingly, until final Treasury regulations are issued with respect to the new
$1 million limitation, no action will be taken with respect to restructuring one
or more components of the cash compensation paid to the executive officers so as
to qualify those components as performance-based compensation that will not be
subject to the $1 million limitation.
Submitted by the Company's Compensation Committee and Stock Option
Committee of the Board of Directors:
Richard Thalheimer, Member, Compensation Committee
Elyse Eng Thalheimer, Member, Compensation Committee
Alan Thalheimer, Member, Compensation and Stock Option Committees
Lawrence Feldman, Member, Compensation and Stock Option Committees
Maurice Gregg, Member, Compensation and Stock Option Committees
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company other than Richard Thalheimer, who currently serves as
the Company's Chairman and Chief Executive Officer, and Elyse Eng Thalheimer,
who formerly served as Director of Personnel at the Company and who currently
serves as Secretary of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
20
<PAGE> 24
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
OF THE COMPANY, THE NASDAQ STOCK MARKET (U.S.) INDEX,
AND THE NASDAQ RETAIL TRADE INDEX
The following graph compares the yearly percentage changes in the
cumulative total stockholder return on the Company's Common Stock with the
cumulative total return on the Nasdaq Stock Market (U.S.) Index and the Nasdaq
Retail Trade Stocks Index during the five fiscal years ended January 31, 1995.
The comparison assumes that $100 was invested on January 31, 1990 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
<TABLE>
<CAPTION>
Sharper Im- Nasdaq Stock Nasdaq Re-
Measurement Period age Corpora- Market (U.S.) tail Tra de
(Fiscal Year Covered) tion Index Stocks Index
<S> <C> <C> <C>
1/31/90 100 100 100
1/31/91 18 103 120
1/31/92 43 158 210
1/31/93 47 179 190
1/31/94 94 204 204
1/31/95 104 195 180
</TABLE>
21
<PAGE> 25
CERTAIN TRANSACTIONS
In October 1993, Mr. Alan Thalheimer, a Director of the Company, made a
loan to the Company for the purpose of refinancing the existing mortgage loan on
the Company's distribution center property in Little Rock, Arkansas. The loan
has a principal amount of $300,000, bears interest at an annual rate of 8%,
matures in October 2003, and is secured by a mortgage on the property. The
monthly payments of principal and interest on the loan are $3,640.
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The firm of Deloitte & Touche LLP served as independent auditor for the
Company for the fiscal year ended January 31, 1995. The Board of Directors has
selected the firm to continue in this capacity for the current fiscal year.
Accordingly, the Company is asking the stockholders to ratify the selection of
Deloitte & Touche LLP as independent auditor.
Although the selection of Deloitte & Touche LLP is not required to be
submitted to a vote of the stockholders, the Board of Directors believes it
appropriate as a matter of policy to request that the stockholders ratify the
selection of the independent auditor for the fiscal year ending January 31,
1996. In the event the stockholders fail to ratify the appointment, the Audit
Committee of the Board of Directors will consider it as a direction to select
other auditors for the subsequent year. Even if the selection is ratified, the
Board in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its stockholders.
The Company anticipates that a representative of Deloitte & Touche LLP will
be present at the Annual Meeting. Such representative will be given the
opportunity to make a statement if he or she desires to do so, and is expected
to be available to respond to questions at the meeting.
The Board of Directors recommends a vote FOR ratification of the selection
of Deloitte & Touche LLP as the Company's independent auditor for the fiscal
year ending January 31, 1996.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered for inclusion in the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held in
1996 must be received by the Company no later than December 29, 1995. The
proposal must be mailed to the Company's principal executive offices at 650
Davis Street, San Francisco, California 94111. Such proposals may be included in
next year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the meeting. Should any other matter requiring a vote of
the stockholders arise, the enclosed proxy card gives authority to the persons
listed on the card to vote at their discretion on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Richard Thalheimer
Chairman of the Board, Founder and
Chief Executive Officer
April 27, 1995
San Francisco, California
22
<PAGE> 26
SHARPER IMAGE CORPORATION
650 DAVIS STREET, SAN FRANCISCO, CA 94111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard Thalheimer and Tracy Wan, and each of
them, with full power of substitution, the proxy or proxies of the undersigned
to vote all shares of Common Stock of Sharper Image Corporation which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of Sharper
Image Corporation to be held on June 12, 1995 at 2:00 p.m., and at any
adjournments or postponements thereof, with the same force and effect as the
undersigned might or could do if personally present thereat:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
all nominees listed below
</TABLE>
AUTHORITY TO VOTE FOR ANY NOMINEE MAY BE WITHHELD BY LINING THROUGH SUCH
NOMINEE'S NAME BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RICHARD J. THALHEIMER, ALAN R. THALHEIMER, ELYSE ENG THALHEIMER,
LAWRENCE W. FELDMAN, MAURICE GREGG
2. PROPOSAL TO APPROVE THE 1995 RESTATEMENT OF THE COMPANY'S STOCK OPTION PLAN.
(The Board of Directors recommends a vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE IMPLEMENTATION OF THE 1994 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN. (The Board of Directors recommends a vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITOR. (The Board of Directors recommends a vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed on the other side)
<PAGE> 27
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournments or
postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4 AND, IN THE DISCRETION OF THE PROXY
HOLDERS, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND AT
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
DATED: , 1995
--------------------------
Signature
--------------------------
Additional signature if
held jointly
PLEASE SIGN EXACTLY AS
NAME APPEARS ABOVE. WHEN
SHARES ARE HELD JOINTLY,
EVERY HOLDER SHOULD SIGN.
WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL
CORPORATE NAME BY
PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
- - --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
- - --------------------------------------------------------------------------------
