<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Sharper Image Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee was calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
LOGO
April 28, 1998
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 8, 1998 at 10:00 a.m., which
will be held at the World Trade Club, 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 1997 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
Founder, Chairman of the Board, 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 8, 1998
The Annual Meeting of Stockholders of Sharper Image Corporation (the
"Company") will be held at the World Trade Club, Ferry Building, San Francisco,
California 94111, on Monday, June 8, 1998, at 10:00 a.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 ratify the selection of Deloitte & Touche LLP as the Company's
independent auditor for the fiscal year ending January 31, 1999; and
3. 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 15, 1998 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
Founder, Chairman of the Board, and
Chief Executive Officer
San Francisco, California
April 28, 1998
<PAGE> 4
LOGO
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS OF
SHARPER IMAGE CORPORATION
TO BE HELD JUNE 8, 1998
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 10:00 a.m. at the World Trade Club, Ferry Building, San
Francisco, California 94111 on June 8, 1998 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 28, 1998.
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 15, 1998 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
15, 1998, there were 8,361,820 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, 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
<PAGE> 5
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 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. Directors Elyse Eng Thalheimer and J. Gary Shansby
will not be standing for re-election.
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 Founder, Chairman of the Board and Chief 50
Executive Officer of Sharper Image Corporation
Alan Thalheimer Retired Business Executive 72
Maurice Gregg Retail Financial Consultant 66
Gerald Napier Retired President, I. Magnin and Company 71
Morton David Retired Chairman, Franklin Electronic Publishers, 61
Inc.
</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.
ALAN THALHEIMER has been a Director of the Company since June 1981 and was
President of Thalheimer, Inc. or its predecessor from May 1981 until retiring in
1993. Mr. Alan Thalheimer is the father of Mr. Richard Thalheimer.
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.
GERALD NAPIER was appointed by the Board of Directors to serve as a
Director of the Company in April 1997. Mr. Napier was the President of I. Magnin
and Company from February 1982 until retiring in 1988. Mr. Napier was Senior
Vice President of General Operations at Abraham and Straus from 1977 to 1982.
Mr. Napier is a Director of The Forgotten Woman, a specialty retailer.
MORTON DAVID was appointed by the Board of Directors to serve as a Director
of the Company in January 1998. Mr. David was Chairman, President and Chief
Executive Officer of Franklin Electronic Publishers, Inc. from May 1984 until
his retirement in February 1998.
2
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held three meetings during fiscal
1997. 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, except Director J. Gary
Shansby who attended 67% of such meetings. The Board of Directors has an Audit
Committee and a Compensation Committee.
The Audit Committee of the Board was established in November 1987 and
consists of Directors Maurice Gregg, Alan Thalheimer and Gerald Napier. 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 meeting during fiscal 1997.
The Compensation Committee was established in November 1987 and consists of
Directors J. Gary Shansby, Maurice Gregg and Gerald Napier. The Compensation
Committee is responsible for making and reviewing recommendations regarding
employee compensation and administering the Company's Amended and Restated Stock
Option Plan (the "Stock Option Plan"). The Compensation Committee held one
meeting during fiscal 1997.
The Board of Directors does not have a nominating committee or committee
performing similar functions.
DIRECTOR REMUNERATION
During fiscal 1997, each of the Company's non-employee Directors was paid
an annual retainer of $5,000 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. Under the 1994 Non-Employee Directors
Stock Option Plan, each individual who first becomes an eligible non-employee
Board member will be automatically granted an option to purchase 2,000 shares of
Common Stock. In addition, on the date of each Annual Stockholders Meeting, each
individual re-elected as a non-employee Board member at that Annual Meeting will
receive an automatic option grant to purchase 1,000 shares of Common Stock,
provided such individual has served as a Board member for at least six (6)
months. The exercise price will be 100% of the fair market value of the Common
Stock on the automatic grant date. The options are immediately exercisable and
the option shares will vest upon the optionee's completion of one (1) year of
Board service measured from the grant date. Any unvested shares purchased under
the option will be subject to repurchase by the Company upon the optionee's
cessation of Board service prior to vesting in those shares. Mr. Napier
received, in connection with his appointment to the Board in April 1997, an
automatic option grant for 2,000 shares of common stock with an exercise price
of $3.75 per share. Mr. David received, in connection with his appointment to
the Board in January 1998, an automatic option grant for 2,000 shares of common
stock with an exercise price of $4.06 per share. The four non-employee Board
members re-elected to the Board at the 1997 Annual Meeting, Messrs. A.
Thalheimer, Gregg and Shansby and Ms. E. Thalheimer, each received at that time
an automatic option grant for 1,000 shares of Common Stock with an exercise
price of $3.31 per share.
The Board of Directors recommends a vote FOR all nominees listed above.
3
<PAGE> 7
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 15, 1998 by (i) all persons known by the Company to
beneficially own more than five percent (5%) 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.................................... 5,718,487(1) 66.9
Dimensional Fund Advisors Inc......................... 505,000(2) 6.0
Elyse Eng Thalheimer.................................. 254,165(3) 3.0
Alan Thalheimer....................................... 46,351(4) *
Morton David.......................................... 12,000(5) *
Maurice Gregg......................................... 13,000(6) *
Gerald Napier......................................... 4,000(7) *
J. Gary Shansby....................................... 4,000(8) *
Barry Gilbert......................................... 100,000(9) 1.2
Craig Womack.......................................... 177,000(10) 2.1
Tracy Wan............................................. 29,000(11) *
Shannon King.......................................... 20,250(12) *
All Directors and executive officers as a group (12
persons)............................................ 6,378,253(13) 71.8
</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 4,259,944 shares owned by The Richard
J. Thalheimer Revocable Trust, of which Mr. Richard Thalheimer is trustee
and sole beneficiary; 203,665 shares owned by The Richard J. Thalheimer and
Elyse M. Thalheimer Family Trust, of which Mr. Richard Thalheimer is a
co-beneficiary; 368,000 shares owned by The Richard J. Thalheimer
Children's Trust; 14,363 shares owned by the Richard and Elyse Thalheimer
Irrevocable Trust of 1995; 292,515 shares owned by the Richard J.
Thalheimer 1997 Annuity Trust, of which Mr. Richard Thalheimer is trustee,
400,000 shares owned by the Richard J. Thalheimer 1997 Grantor Annuity
Trust, of which Mr. Richard Thalheimer is trustee and 180,000 shares
issuable upon exercise of options, which are currently exercisable or will
become exercisable within 60 days after April 15, 1998. Mr. Thalheimer's
address is The Sharper Image, 650 Davis Street, San Francisco, California
94111.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 505,000 shares of the
Company's stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares. Dimensional
has sole voting power with respect to 337,900 shares and sole dispositive
power over 505,000 shares. Dimensional Fund Advisors Inc.'s address is 1299
Ocean Avenue, 11th floor, Santa Monica, California 90401.
(3) Does not include 4,259,944 shares owned by Mr. Richard Thalheimer, Ms.
Elyse Eng Thalheimer's husband. Includes 203,665 shares owned by The
Richard J. Thalheimer and Elyse M. Thalheimer Family Trust, of which Ms.
Elyse Eng Thalheimer is a co-beneficiary. Includes 5,000 shares issuable
upon exercise of options, which are currently exercisable or will become
exercisable within 60 days after April 15, 1998.
(4) Does not include 88,800 shares owned by Mr. Alan Thalheimer's wife.
Includes 36,651 shares owned by the Alan Thalheimer individual retirement
account. Does not include 368,000 shares owned by The Richard J. Thalheimer
Children's Trust, or 14,363 shares owned by the Richard and Elyse
Thalheimer
4
<PAGE> 8
Irrevocable Trust of 1995, of which Mr. Alan Thalheimer is Trustee.
Includes 5,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(5) Includes 2,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(6) Includes 12,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(7) Includes 2,000 shares owned by the Napier Family Trust, of which Mr. Gerald
Napier is Trustee. Includes 2,000 shares issuable upon exercise of options,
which are currently exercisable or will become exercisable within 60 days
after April 15, 1998.
(8) Includes 4,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(9) Includes 100,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(10) Includes 165,400 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998. Mr. Craig Womack resigned from the Company effective April 17,
1998.
(11) Includes 29,000 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(12) Includes 18,500 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
(13) Includes 522,900 shares issuable upon exercise of options, which are
currently exercisable or will become exercisable within 60 days after April
15, 1998.
5
<PAGE> 9
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 (hereafter referred to as the "named executive
officers") serving in that capacity as of January 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL LONG-TERM
YEAR ANNUAL COMPENSATION COMPENSATION
ENDED ---------------------- --------------------- ALL OTHER
NAME AND PRINCIPAL POSITION JAN. 31 SALARY($) BONUS($) OPTIONS (# OF SHARES) COMPENSATION($)(1)
--------------------------- ------- ---------- --------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Richard Thalheimer 1998 479,134 150,000 -0- 78,783
Founder, Chairman of the Board, 1997 510,514 -0- 300,000 shares(2) 45,085
and Chief Executive Officer 1996 541,406 -0- 300,000 shares(2) 42,118
Barry Gilbert 1998 325,000 14,000 -0- 4,783
Vice Chairman and 1997 43,750(3) -0- 300,000 shares 87
Chief Operating Officer
Craig Womack(4) 1998 267,308 -0- -0- 3,413
President and Chief 1997 296,161 -0- 50,000 shares(5) 3,618
Administrative Officer 1996 280,192 -0- 50,000 shares(5) 4,014
Shannon King 1998 180,000 -0- -0- 933
Senior Vice President, 1997 180,005 -0- 15,000 shares(5) 556
Merchandising 1996 132,211 -0- 15,000 shares(5) 451
Tracy Wan 1998 156,731 -0- -0- 775
Senior Vice President, 1997 145,003 -0- 36,000 shares(6) 448
Chief Financial Officer 1996 137,383 -0- 15,000 shares(6) 451
</TABLE>
- ---------------
(1) Represents the following amounts for the named executive officers for the
fiscal year ended January 31, 1998: (i) the premiums paid on the life
insurance coverage provided such individuals, (ii) the contribution made by
the Company to match the salary deferral contribution made by the officer to
the Company's 401(k) Savings plan, up to a maximum of $250, (iii) the
imputed value for goods and services provided by the Company, (iv)
profit-sharing paid by the Company, and (v) the cash value compensation of
the split-dollar life insurance policy maintained for Mr. Thalheimer. The
clause (v) dollar value was determined by the demand loan approach for the
benefit provided by the whole life portion of the premium paid by the
Company, projected on an actuarial basis (see "Life Insurance Agreement".)
<TABLE>
<CAPTION>
SPLIT-DOLLAR
LIFE INSURANCE
PROFIT SHARING LIFE INSURANCE MATCHING 401(K) VALUE OF GOODS "CASH VALUE"
NAME CONTRIBUTIONS($) PREMIUM($) CONTRIBUTION($) AND SERVICES($) COMPENSATION($)
---- ---------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard Thalheimer... 992 530 250 16,444 60,567
Barry Gilbert........ -0- 530 -0- 4,253 -0-
Craig Womack......... 553 530 250 2,080 -0-
Shannon King......... 372 311 250 -0- -0-
Tracy Wan............ 324 201 250 -0- -0-
</TABLE>
(2) In aggregate, a total of 300,000 shares have been granted to Mr. Richard
Thalheimer. This option was originally granted on October 7, 1994 at an
exercise price of $6.875 and subsequently cancelled and regranted on April
12, 1995 at an exercise price of $5.625 and further cancelled and re-granted
on March 26, 1996 at an exercise price of $3.75.
(3) Mr. Barry Gilbert joined the Company on December 2, 1996. This reflects
salary paid from December 2, 1996 through January 31, 1997, based on an
annual salary of $325,000.
(4) Mr. Craig Womack resigned from the Company effective April 17, 1998.
(5) These options were granted on March 26, 1996 with an exercise price of $3.75
per share in cancellation of an option previously granted for the same
number of shares on April 12, 1995 with an exercise price of $5.625 per
share.
6
<PAGE> 10
(6) This includes 15,000 options granted on March 26, 1996 with an exercise
price of $3.75 per share in cancellation of an option previously granted on
April 12, 1995 with an exercise price of $5.625 per share and 21,000 shares
granted on November 8, 1996.
EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL ARRANGEMENTS
During fiscal 1995, 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 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 base salary established by the Compensation Committee for each fiscal
year. The base salary for fiscal 1997 was established at $495,000 and was
adjusted to $538,313 for 1998.
In connection with his employment as the Company's Vice Chairman and Chief
Operating Officer, beginning on December 2, 1996, the Company entered into an
employment agreement with Mr. Barry Gilbert. The employment agreement provides
for the payment of base salary to Mr. Gilbert, a guaranteed bonus payment of
$50,000 based upon two year's employment with the Company, bonus payments based
upon specific target percentage increases in the Company's earnings per share,
and stock option grants. The employment agreement continues through January 31,
1999 and provides for severance pay equal to Mr. Gilbert's base salary for the
remainder of the initial two-year employment term, but no fewer than 12 months,
or, if his employment is terminated subsequent to the completion of the two-year
employment agreement, up to 12 months of Mr. Gilbert's base salary until further
employment is found. The base salary for Mr. Gilbert for fiscal year 1998 was
set at $325,000. Mr. Gilbert was paid a bonus of $14,000 for fiscal year 1997 in
accordance with his employment agreement.
The Compensation 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.
LIFE INSURANCE AGREEMENT
Mr. Richard Thalheimer, the Company's Founder, Chairman of the Board, and
Chief Executive Officer, is presently the owner and holder of 5,538,487 shares
of the Company's Common Stock. The Company has been advised that on the death of
Mr. Thalheimer the estate may be required to publicly sell all or substantially
all of such shares to satisfy estate tax obligations. The public sale of such
number of shares in all probability would destabilize the market for the
Company's publicly traded stock. Accordingly, in May 1995, an agreement was
entered into, and later amended, (commonly known as a split-dollar life
insurance agreement) under the terms of which the Company will pay the premiums
for certain life insurance policies with an aggregate face value of $15,000,000
on the life of Richard Thalheimer. The Company will have an interest in the
insurance policies equal to the amount of premiums it has paid with the balance
payable to a trust created by Mr. Thalheimer. To secure the repayment of the
advances, the trust has assigned the life insurance policies to the Company as
collateral.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options made to the named executive officers
listed in the Summary Compensation Table during the fiscal year ended January
31, 1998. No stock appreciation rights were granted during such fiscal year.
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
VALUE REALIZED NUMBER OF UNEXERCISED SHARES AT FISCAL YEAR-END
(MARKET PRICE AT OPTIONS AT FISCAL ($4.06) LESS EXERCISE
SHARES EXERCISE DATE LESS YEAR-END(#) PRICE)($)
ACQUIRED ON EXERCISE --------------------------- -----------------------------
NAME EXERCISE(#) PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Richard Thalheimer....... -- -- 180,000 120,000 $ 56,250 $ 37,500
Barry Gilbert............ -- -- 100,000 200,000 81,250 162,500
Craig Womack............. -- -- 165,400 50,000 346,813 15,625
Shannon King............. -- -- 18,500 15,000 40,219 4,688
Tracy Wan................ -- -- 29,000 36,000 62,250 21,750
</TABLE>
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, 1998, all other
Section 16(a) filing requirements applicable to its officers, Directors and
greater than ten-percent beneficial owners were complied with, except that (i)
Mr. Alan Thalheimer, Ms. Elyse Eng Thalheimer, Mr. Maurice Gregg and Mr. J. Gary
Shansby each filed one Form 5 late in connection with the automatic option grant
to purchase 1,000 shares each, and Mr. Morton David filed one Form 5 late in
connection with the automatic option grant to purchase 2,000 shares, of the
Company's common stock under the 1994 Non-Employee Directors Stock Option Plan,
(ii) Mr. Alan Thalheimer filed one Form 4 late in connection with the purchase
of common stock on the open market, and (iii) Mr. Gerald Napier filed one Form 3
late in connection with his appointment to the Company's Board of Directors.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's compensation policies and programs. The 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, administering certain of the Company's
employee benefit programs, and 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 Committee that affects
the
8
<PAGE> 12
compensation paid to executive officers, as reflected in the tables and text set
forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. The overall policy of the Committee 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, other than the Chief Executive
Officer, for the fiscal year ended January 31, 1998 are summarized below. The
Committee may at its 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 amount 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 Committee's approval. A bonus
of $14,000 was paid to the Chief Operating Officer during the fiscal year
ended January 31, 1998, as a result of the Company's financial performance
during that year. No other bonuses were paid to executive officers except
for the bonus paid to the Company's Chief Executive Officer, as noted
below.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. Generally, the
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 Committee may also grant
certain performance-based stock options. 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 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 Committee does not adhere to any specific
guidelines as to the relative option holdings of the Company's executive
officers.
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<PAGE> 13
CEO COMPENSATION. During fiscal 1995, 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 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 base salary established by the Compensation Committee for each fiscal
year. The base salary for fiscal 1997 was established at $495,000 and was
adjusted to $538,313 for fiscal 1998. On the basis of the earnings per share for
the fiscal year ended January 31, 1998, Mr. Thalheimer was entitled to receive a
bonus of $247,500. Mr. Thalheimer voluntarily accepted a lower bonus in the
amount of $150,000. The Committee has also established a split-dollar life
insurance arrangement for Mr. Thalheimer as discussed above under "Life
Insurance Agreement."
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.
The Company's Stock Option Plan is structured so that any compensation
deemed paid to an executive officer in connection with the exercise price of
option grants made under that plan will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Committee will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1 million level.
Submitted by the Company's Compensation Committee of the Board of
Directors:
Maurice Gregg, Member, Compensation Committee
J. Gary Shansby, Member, Compensation Committee
Gerald Napier, Member, Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
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. No member of the Compensation Committee is a former or
current officer or employee of the Company.
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<PAGE> 14
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS*
OF THE COMPANY, THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE RUSSELL 2000 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, the Russell
2000 Index and the Nasdaq Retail Trade Index during the five fiscal years ended
January 31, 1998. The comparison assumes that $100 was invested on January 31,
1993 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period Sharper Image Nasdaq Stock Nasdaq Retail
(Fiscal Year Covered) Corporation Market (U.S.) Trade Russell 2000
<S> <C> <C> <C> <C>
Jan-93 100.00 100.00 100.00 100.00
Jan-94 200.00 115.01 107.28 118.48
Jan-95 220.00 109.72 94.58 111.35
Jan-96 148.00 155.07 106.90 144.72
Jan-97 120.00 203.28 131.46 172.14
Jan-98 130.00 240.44 153.84 203.36
</TABLE>
* $100 INVESTED ON 01/31/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING JANUARY 31.
11
<PAGE> 15
CERTAIN TRANSACTIONS
There were no reportable transactions during fiscal 1997.
PROPOSAL 2: 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, 1998. 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,
1999. 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, 1999.
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
1999 must be received by the Company no later than December 29, 1998. 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
Founder, Chairman of the Board, and
Chief Executive Officer
April 28, 1998
San Francisco, California
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<PAGE> 16
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 at the World Trade Club, Ferry Building, San
Francisco, California 94111, on June 8, 1998 at 10:00 a.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,
MAURICE GREGG, GERALD NAPIER, MORTON DAVID
2. 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> 17
3. 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 AND 3 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: , 1998
--------------------------
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
