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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
WILLIAMS-SONOMA, INC.
------------------------------------------------
(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] 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:
Common Stock, $0.01 par value
(2) Aggregate number of securities to which transaction applies:
$_________________
(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: $_________________
[ ] 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:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
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LOGO
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W I L L I A M S - S O N O M A
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3250 VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94109
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Williams-Sonoma, Inc., a California
corporation (the "Company"), will be held at the Company's offices, 3250 Van
Ness Avenue, San Francisco, California 94109, Wednesday, May 23, 2001,
commencing at 10:00 a.m. (Pacific Daylight Time) for the following purposes:
(1) To elect eleven directors to serve until the next annual meeting of
shareholders and until their respective successors shall be elected and
qualified.
(2) To approve the Williams-Sonoma, Inc. 2001 Stock Option Plan (the "2001
Stock Option Plan").
(3) To approve the Williams-Sonoma, Inc. 2001 Incentive Bonus Plan (the
"2001 Bonus Plan").
(4) To ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending February 3, 2002.
(5) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 27, 2001 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting or any adjournment or postponement thereof.
The 2001 Stock Option Plan and 2001 Bonus Plan are described in the
accompanying Proxy Statement, which you are urged to read carefully. Copies of
the 2001 Stock Option Plan and the 2001 Bonus Plan are attached as Appendix A
and Appendix B, respectively, to such Proxy Statement. Financial and other
information concerning the Company is contained in the enclosed Annual Report
for the fiscal year ended January 28, 2001.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
STAMPED ENVELOPE. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME BEFORE IT IS VOTED. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH
YOU HAVE RETURNED YOUR PROXY CARD.
By Order of the Board of Directors
Nancy J. Himmelfarb
Secretary
San Francisco, California
April 20, 2001
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PROXY STATEMENT
WILLIAMS-SONOMA, INC.
3250 VAN NESS AVENUE
SAN FRANCISCO, CALIFORNIA 94109
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 23, 2001
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GENERAL INFORMATION
The proxy statement (the "Proxy Statement") and the enclosed proxy card
(the "Proxy Card") are furnished in connection with the solicitation of proxies
by the Board of Directors of Williams-Sonoma, Inc., a California corporation
(the "Company"), for use at the Annual Meeting of Shareholders of the Company
(the "Annual Meeting"), to be held on Wednesday, May 23, 2001, and any
adjournment or postponement thereof. The Annual Report to the shareholders of
the Company for the fiscal year ended January 28, 2001, including the financial
statements of and other information concerning the Company, is also enclosed.
This Proxy Statement and the accompanying Proxy Card are first being mailed
or given to the Company's shareholders on or about April 20, 2001. The address
of the principal executive offices of the Company is 3250 Van Ness Avenue, San
Francisco, CA 94109.
RECORD DATE; QUORUM
Only shareholders of record at the close of business on March 27, 2001 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting.
As of the close of business on the Record Date, there were 55,896,265 shares of
the Company's common stock (the "Common Stock") outstanding and entitled to
vote, held of record by 565 shareholders.
The presence of holders of a majority of all of the shares of Common Stock
entitled to vote at the Annual Meeting, but in no event less than one-third of
the voting power, is required to constitute a quorum for the transaction of
business at the Annual Meeting. For the purpose of determining whether a quorum
is present at the Annual Meeting, shares represented in person or by properly
executed proxy, including shares that abstain from voting on any proposal and
shares held by brokers that are not voted because the brokers do not have
discretionary authority, will be counted.
VOTING; PROXIES
On any matter submitted to the vote of the shareholders, each holder of
Common Stock will be entitled to one vote, in person or by proxy, for each share
of Common Stock in his or her name on the books of the Company as of the Record
Date, except that shareholders may have cumulative voting rights with respect to
the election of directors. Cumulative voting rights entitle each shareholder of
record to cast as many votes as are equal to the number of directors to be
elected multiplied by the number of votes to which that shareholder's shares are
entitled as of the Record Date, which votes may be cast for one nominee or
distributed among two or more nominees. For cumulative voting rights to be
applicable, a candidate's or candidates' name(s) must have been properly placed
in nomination prior to the voting and one or more shareholders must give notice
at the Annual Meeting of the intention to cumulate votes prior to the
commencement of voting. If any shareholder gives such notice, then every
shareholder entitled to vote may cumulate votes for nominees. The eleven (11)
nominees receiving the highest number of votes at the Annual Meeting will be
elected. If additional persons are properly nominated for election, the
proxyholders named in the enclosed Proxy Card will vote the shares covered by
such proxies so as to elect the maximum number of nominees listed below as may
be elected by cumulative voting (if applicable). In this event, the allocation
of votes to specific nominees will be determined by the proxy holders in their
discretion.
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All shares of Common Stock that are entitled to vote and are represented at
the Annual Meeting by properly executed proxies received prior to or at the
Annual Meeting, and not revoked, will be voted at the Annual Meeting in
accordance with the instructions indicated on such proxies. IF AN EXECUTED PROXY
IS RETURNED WITHOUT ANY SPECIFICATIONS AS TO HOW SHARES SHOULD BE VOTED, VOTES
WILL BE CAST FOR THE ELECTION OF THE DIRECTORS NAMED IN THIS PROXY STATEMENT,
FOR THE APPROVAL OF THE 2001 STOCK OPTION PLAN, FOR THE APPROVAL OF THE 2001
BONUS PLAN AND FOR THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS
THE COMPANY'S INDEPENDENT AUDITORS.
The Board of Directors does not know of any matters other than those
described in the Notice of Annual Meeting that are to come before the Annual
Meeting. Since the Company did not receive notice prior to March 7, 2001 of any
other matter to come before the Annual Meeting, as to such other matter that may
properly come before the Annual Meeting, including any motion made for
adjournment of the Annual Meeting, by signing the Proxy Cards, shareholders
confer discretionary authority on the proxyholders (who are persons designated
by the Board of Directors) to vote all shares covered by the Proxy Cards on any
such matter in their discretion.
Any proxy given pursuant to this solicitation may be revoked by filing with
the Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the Annual Meeting and voting in
person. Attendance in person at the Annual Meeting does not itself revoke an
otherwise valid proxy; however, any shareholder who attends such meeting may
orally revoke his or her proxy at the Annual Meeting and vote in person.
VOTES REQUIRED; ABSTENTIONS AND BROKER NON-VOTES
Elections of directors are determined by a plurality of shares of Common
Stock represented in person or by proxy and voting at the Annual Meeting. The
proposals to approve the 2001 Stock Option Plan and the 2001 Bonus Plan and the
proposal to ratify the selection of Deloitte & Touche LLP as independent
auditors require approval by the affirmative vote of the holders of a majority
of the shares of Common Stock represented in person or by proxy and voting at
the Annual Meeting, together with the affirmative vote of the holders of a
majority of the required quorum. While abstentions and broker non-votes will
have no effect on the outcome of the election of directors, abstentions and
broker non-votes can have the effect of preventing approval of the proposals to
approve the 2001 Stock Option Plan and the 2001 Bonus Plan and the proposal to
ratify the selection of independent auditors where the number of affirmative
votes, though a majority of the votes cast, does not constitute a majority of
the required quorum.
SOLICITATION OF PROXIES AND EXPENSES
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the material enclosed will be paid by the Company. Copies of
solicitation materials will be furnished to brokers and others holding Common
Stock of the Company to forward to their principals, and the Company will
reimburse them for reasonable expenses in doing so. The Company expects that
some of its officers or employees (none of whom will receive special
compensation) will solicit proxies personally and by telephone or other means.
In addition, the Company has retained the services of Skinner & Company to
assist in the solicitation of proxies at an estimated cost of $5,000.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, eleven directors are to be elected to serve until
the next annual meeting of shareholders and until the election and qualification
of their successors. The eleven nominees receiving the highest number of votes
from holders of shares of Common Stock represented and voting at the Annual
Meeting will be elected to the Board of Directors. Abstentions and broker
non-votes will have no effect on the election of the nominees below. Unless
otherwise instructed, the proxyholders will vote the proxies received by them
for the eleven nominees named below. If any of the listed nominees is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for such person or persons as the proxyholders may designate. The
Board of Directors has no reason to believe that any of the nominees will be
unable or decline to serve as a director.
The Company's Restated Bylaws presently provide for not less than seven nor
more than thirteen directors, the exact number of directors following this
Annual Meeting having been fixed by the Board of Directors at thirteen. Fewer
nominees are named than the number fixed by the Board of Directors due to the
death of former director James M. Berry during fiscal year 2000, the March 2001
resignation of Gary G. Friedman, former President, Chief Operating Officer and
director of the Company and the April 2001 resignation of former director Nathan
Bessin. Mr. Hilpert was appointed as director to fill one of the vacancies on
the Board. The proxies cannot be voted for a greater number of persons than the
number of nominees named.
There are no family relationships between any director, nominee or
executive officer and any other director, nominee or executive officer of the
Company. There are no arrangements or understandings between any director,
nominee or executive officer and any other person pursuant to which he or she
has been or will be selected as a director and/or executive officer of the
Company. See "-- Information Regarding the Director Nominees of the Company."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF ALL OF THE
NOMINEES LISTED BELOW.
INFORMATION REGARDING THE DIRECTOR NOMINEES OF THE COMPANY
The following table sets forth information, as of March 27, 2001, with
respect to each person nominated for election as a director. All nominees
currently serve on the Board of Directors and, with the exception of Richard
Robertson and Heather Reisman, who were appointed by the Board in September and
November 2000, respectively, and Dale Hilpert, who was appointed by the Board in
March 2001, were elected directors at
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the Annual Meeting of Shareholders held on May 31, 2000. Each nominee has
furnished the biographical information set forth below as to his or her
principal occupation.
DIRECTOR
NOMINEE AGE POSITION WITH THE COMPANY AND BUSINESS EXPERIENCE SINCE
------- --- ------------------------------------------------- --------
W. Howard Lester...... 65 Chairman of the Company since 1986 and Chief 1979
Executive Officer of the Company from 1979 - April
2001. Member of the Nominations and Corporate
Governance Committee. Director of Harold's Department
Stores, Inc.
Charles E. Williams... 85 Founder of the Company and Vice Chairman since 1986. 1973
Adrian D.P. Bellamy... 59 Chairman of the Compensation Committee and member of 1997
the Nominations and Corporate Governance Committee.
Chairman and Director of The Body Shop Inc. and Gucci
Group N.V., Director of The Gap, Inc., The Body Shop
International PLC and Reckitt Benckiser PLC and
Chairman and CEO of DFS Group Ltd. from 1983 - 1995.
Patrick J. Connolly... 54 Executive Vice President and Chief Marketing Officer 1983
of the Company since 2000. Assistant Secretary of the
Company since 1983. Executive Vice President, General
Manager -- Catalog from 1995 - 2000. Senior Vice
President -- Mail Order of the Company from
1991 - 1995. Vice President -- Mail Order of the
Company from 1979 - 1990.
Dale W. Hilpert....... 58 Chief Executive Officer of the Company since April 2001
2001. Chairman and Chief Executive Officer of Venator
Group from 2000 - 2001. President and Chief Executive
Officer of Venator Group from 1999 - 2000. President
and Chief Operating Officer of Venator Group from
1995 - 1999. Chairman and Chief Executive Officer of
Payless Shoe Source Division of The May Department
Stores Company from 1985 - 1995.
Michael R. Lynch...... 49 Chairman of the Nominations and Corporate Governance 2000
Committee and member of the Compensation Committee.
Managing Director of Goldman, Sachs & Co. since 1976.
John E. Martin........ 55 Member of the Compensation and Audit Committees. 1994
Chairman and Director of Diedrich Coffee and
Easyriders, Inc. from 1997 - 2001. Director of The
Good Guys, Inc. Chairman and Chief Executive Officer
of PepsiCo Casual Restaurants from 1996 - 1997.
President and Chief Executive Officer of Taco Bell
from 1983 - 1996.
James A. McMahan...... 78 Member of the Compensation Committee. Chief Executive 1979
Officer of McMahan Furniture Stores from 1947 - 1999.
Edward A. Mueller..... 53 Member of the Nominations and Corporate Governance 1999
and Audit Committees. President and Chief Executive
Officer of Ameritech since 2000. President of SBC
Int'l Operations from 1999 - 2000. President of
Pacific Bell from 1997 - 1999. President of
Southwestern Bell from 1994 - 1997. Director of
TeleDanmark.
Heather M. Reisman.... 52 Chief Executive Officer of Chapters, Inc. since 2000
February 2001. President and Chief Executive Officer
of Indigo Books and Music, Inc. from 1996 - 2001.
Richard T. 55 President of Warner Bros. Domestic Television 2000
Robertson........... Distribution since 1989.
COMPENSATION OF DIRECTORS
The Company's directors do not receive any cash compensation for services
provided as members of the Board. Directors (other than employee directors) are
awarded nonqualified stock options annually under the Company's 1993 Stock
Option Plan and are eligible for future grants under the 2001 Stock Option Plan,
which is being submitted for shareholder approval as Proposal 2. Eligible
directors are each awarded an option to purchase 13,500 shares of Common Stock
upon their initial election to the Board and an option to purchase
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10,500 shares of Common Stock each time they are re-elected to the Board. The
exercise price of these options is fixed at the fair market value of the Common
Stock on the date of the annual meeting at which the directors are elected.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended January 28, 2001, the Board of Directors of
the Company held a total of six meetings and did not act by unanimous written
consent. The Board of Directors has three standing Committees: an Audit
Committee, a Compensation Committee and a Nominations and Corporate Governance
Committee.
During the last fiscal year, the Audit Committee of the Board of Directors
(the "Audit Committee") held nine meetings. The Audit Committee at the end of
such fiscal year was comprised of Messrs. Bessin (Chairman), Martin and Mueller.
The Audit Committee's primary responsibilities fall into three broad categories:
(1) to serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system; (2) to review and
appraise the audit efforts of the Company's independent auditors and internal
audit department; and (3) to provide an open avenue of communication among the
independent auditors, financial and senior management, the Company's internal
audit department and the Board of Directors. The Board of Directors has adopted
a written Charter for the Audit Committee, attached hereto as Appendix C.
During the last fiscal year, the Compensation Committee of the Board of
Directors (the "Compensation Committee") met four times. The Compensation
Committee at the end of such fiscal year was comprised of Messrs. Bellamy
(Chairman), Lynch, Martin and McMahan. The Compensation Committee is primarily
responsible for officers' compensation matters and for administering the
Company's compensation plans, including the 2001 Stock Option Plan and 2001
Bonus Plan that are being submitted to the shareholders for approval.
The Nominations and Corporate Governance Committee of the Board of
Directors (the "Nominations and Corporate Governance Committee") did not meet
during the last fiscal year. The Nominations and Corporate Governance Committee
at the end of such fiscal year was comprised of Messrs. Lynch (Chairman),
Mueller, Bellamy and Lester. The Nominations and Corporate Governance Committee
is primarily responsible for determining the qualifications of and selecting
director nominees and for setting policies regarding corporate governance
responsibilities of the Board and management. The Nominations and Corporate
Governance Committee generally considers nominees recommended by the Company's
shareholders.
During the fiscal year ended January 28, 2001, except director Edward
Mueller, each incumbent director attended at least 75% of the aggregate of (i)
the meetings of the Board of Directors and (ii) the total number of meetings
held by all committees upon which such director served (during the periods that
such director served).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bellamy, Martin and McMahan served on the Compensation Committee
from January 31, 2000 to January 28, 2001. Ms. Janet Emerson, former director of
the Company, served on the Compensation Committee from January 31, 2000 to May
31, 2000, and Mr. Lynch served on the Compensation Committee from May 31, 2000
to January 28, 2001. None of the current or former members of the Compensation
Committee are or were officers or employees or former officers or employees of
the Company or its subsidiaries. Mr. McMahan has a material interest in certain
transactions with the Company. See "-- Certain Relationships and Related
Transactions."
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulations 14A or 14C of the Securities
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Exchange Act of 1934, as amended (the "Exchange Act"), or the liabilities of
Section 18 of the Exchange Act. The Report shall not be deemed incorporated by
reference into any other Company filing under the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act"), except to the extent that the
Company specifically incorporates it by reference.
The Audit Committee assists the Board of Directors in overseeing and
monitoring the Company's financial reporting process and the quality of the
internal and external audit process. The following is the report of the Audit
Committee with respect to the Company's audited financial statements for the
fiscal year ended January 28, 2001.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended January 28, 2001 with
management. In addition, the Audit Committee has discussed with Deloitte &
Touche LLP, the Company's independent auditors, the matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Communications
with Audit Committees), which includes, among other items, the auditors'
responsibilities, any significant issues arising during the audit and any other
matters relating to the conduct of the audit of the Company's financial
statements. The Audit Committee has also received the written disclosures and
the letter from Deloitte & Touche LLP regarding its independence from the
Company, as required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with Deloitte
& Touche LLP, its independence from the Company. The Audit Committee also
considered whether the provision of services covered in all "All Other Fees"
below is compatible with maintaining independence of Deloitte & Touche LLP. On
the basis of these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 2001, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Nathan Bessin, Chairman
John Martin
Edward Mueller
AUDIT AND RELATED FEES
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP for professional
services for the audit of the Company's consolidated financial statements for
the fiscal year ended January 28, 2001 and reviews of the condensed,
consolidated financial statements included in the Company's Quarterly Reports on
Forms 10-Q for the fiscal year ended January 28, 2001 were approximately
$320,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Deloitte & Touche LLP to the Company for
financial information systems design and implementation for the fiscal year
ended January 28, 2001.
All Other Fees
The aggregate fees billed to the Company for all other services, such as
consultation related to tax planning and compliance, improving business and
operational processes and audits of employee benefit plans, rendered by Deloitte
& Touche LLP for the fiscal year ended January 28, 2001 were approximately
$418,000. The Audit Committee believes that the provision of these services is
compatible with maintaining Deloitte & Touche LLP's independence.
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INFORMATION CONCERNING EXECUTIVE OFFICERS
Executive officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board, subject to rights, if any, under contracts
of employment. Certain information concerning such executive officers is set
forth below:
POSITION WITH THE COMPANY
NAME AGE AND BUSINESS EXPERIENCE
---- --- -------------------------
W. Howard Lester..................... 65 *
Charles E. Williams.................. 85 *
Laura J. Alber....................... 32 Executive Vice President -- Pottery Barn Brand of the
Company, since 2000. Senior Vice President -- Pottery
Barn Catalog and Pottery Barn Kids Retail of the
Company, 1999 - 2000. Divisional Vice
President -- Pottery Barn Catalog of the Company,
1997 - 1999. Director -- Pottery Barn Catalog,
1996 - 1997.
James E. Boike....................... 54 Executive Vice President -- Premium Brands of the
Company, since 2000. Executive Vice
President -- Stores and Operations of the Company,
1997 - 2000. Senior Vice President -- Stores,
1995 - 1997. Vice President -- Stores of the Company,
1994 - 1995. Vice President -- Merchandise Operations
of the Company, 1993 - 1994.
John S. Bronson...................... 53 Senior Vice President -- Human Resources of the
Company, since 1999. Executive Vice President of Human
Resources of Pepsi Co., 1979 - 1999.
James A. Brownell.................... 43 Senior Vice President -- Chief Information Officer of
the Company since 2001. Vice President of Information
Technology of Toys R Us.com, 2000. Vice President of
Distribution Systems and Supply Chain of The Gap,
Inc., 1979 - 2000.
Patrick J. Connolly.................. 54 *
Dale W. Hilpert...................... 58 *
Donna H. Isralsky.................... 45 Senior Vice President -- Product Supply Chain and
International Operations of the Company since 1999.
Vice President -- Product Supply Chain of the Company,
1996 - 1999. Vice President -- Operations, Production
and Sourcing of Reebok International Ltd.,
1994 - 1996.
Ronald M. Loeb....................... 68 Senior Vice President -- General Counsel of the
Company since 1999. Senior Partner of Irell & Manella,
1959 - 1997.
Sharon L. McCollam................... 38 Senior Vice President -- Chief Financial Officer of
the Company, since 2000. Vice President of Finance of
the Company, 2000. Chief Financial Officer of Dole
Fresh Vegetables, Inc., 1996 - 2000.
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* Biographical information can be found in the table under the section entitled
"Information Regarding the Director Nominees of the Company".
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EXECUTIVE COMPENSATION
The following tables set forth the annual and long-term compensation of,
and stock options held by, the Company's Chief Executive Officer and its four
other most highly compensated executive officers who served as executive
officers during the fiscal year ended January 28, 2001 and whose total annual
salaries and bonuses exceeded $100,000 during such fiscal year (collectively,
the "Named Executive Officers"). None of the Named Executive Officers held stock
appreciation rights during the years represented in the tables.
Summary Compensation Table
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(2) SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ------- --------- -------- ------------ ---------------
W. Howard Lester......................... 2000 893,796 -- 200,000 10,034(3)
Chairman of the Board of Directors 1999 750,656 -- 100,000 12,660
1998 681,362 100,000 100,000 12,234
James E. Boike........................... 2000 375,680 -- 50,000 5,784(4)
Executive Vice President -- Premium 1999 297,842 -- 25,000 5,363
Brands 1998 267,538 -- 15,000 8,138
John S. Bronson.......................... 2000 406,021 -- 57,500 7,745(5)
Senior Vice President -- Human 1999 396,822 -- -- 5,336
Resources
Patrick J. Connolly...................... 2000 482,923 -- 200,000 9,304(6)
Executive Vice President, Chief 1999 385,958 75,000 40,000 8,024
Marketing Officer, Assistant Secretary 1998 315,696 75,000 100,000 9,695
and Director
Gary G. Friedman(7)...................... 2000 662,277 -- 700,000 9,374(8)
1999 511,602 -- 40,000 7,044
1998 465,539 -- 230,000 9,645
J. Duane Weeks(9)........................ 2000 412,909 -- -- 7,766(10)
1999 249,728 250,000 -- 5,003
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(1) Rows specified "2000," "1999" and "1998" represent fiscal years ended
January 28, 2001, January 30, 2000 and January 31, 1999, respectively.
(2) While the Named Executive Officers enjoy certain perquisites, the aggregate
value of such perquisites for the fiscal years shown did not exceed or
equal the lesser of $50,000 or 10% of each such officer's salary and bonus
for the applicable fiscal year.
(3) Comprised of (i) premiums in the amount of $2,772 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $7,262 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
(4) Comprised of (i) premiums in the amount of $966 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $4,818 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
(5) Comprised of (i) premiums in the amount of $945 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $6,800 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
(6) Comprised of (i) premiums in the amount of $966 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $8,338 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
(7) Mr. Friedman was President, Chief Operating Officer and Director until
March 2001.
(8) Comprised of (i) premiums in the amount of $420 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $8,954 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
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(9) Mr. Weeks was Senior Vice President of Supply Chain until November 2000. He
is included in this table because he would have been among the four most
highly compensated executive officers had he been an executive officer on
January 28, 2001.
(10) Comprised of (i) premiums in the amount of $966 paid by the Company for
term life insurance in excess of $50,000 and (ii) the Company's matching
contribution of $6,800 under the Company's Associate Stock Incentive Plan,
which amounts are subject to vesting.
Option Grants in Last Fiscal Year
The following table sets forth the information noted for all grants of
stock options made to the Named Executive Officers during the fiscal year ended
January 28, 2001:
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#) FISCAL YEAR(%) ($/SH) DATE 5%($) 10%($)
---- ----------- --------------- ----------- ---------- ---------- -----------
W. Howard Lester............ 150,000 4.85 18.94 3/7/10 1,786,454 4,527,225
50,000 1.62 30.88 4/25/10 970,856 2,460,340
James E. Boike.............. 50,000 1.62 18.94 3/7/10 595,485 1,509,075
John S. Bronson............. 40,000 1.29 18.94 3/7/10 476,388 1,207,260
17,500 .57 30.88 4/25/10 339,800 861,119
Patrick J. Connolly......... 40,000 1.29 18.94 3/7/10 476,388 1,207,260
160,000 5.18 30.88 4/25/10 3,106,739 7,873,088
Gary G. Friedman............ 50,000 1.62 18.94 3/7/10 595,485 1,509,075
150,000 4.85 30.88 4/25/10 2,912,568 7,381,020
500,000 16.17 26.44 1/24/11 8,313,358 21,067,682
J. Duane Weeks.............. 0 0 0 0 0 0
Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Value
The following table sets forth information with respect to the exercise of
stock options during the fiscal year ended January 28, 2001 and the fiscal
year-end value of unexercised options held by the Named Executive Officers:
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)(2)
OPTIONS VALUE --------------------------- -----------------------------
NAME EXERCISED(#)(1) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- --------------- ----------- ------------- ------------ --------------
W. Howard Lester..... 0 $ 0 686,500 448,000 $11,423,527 $2,600,739
James E. Boike....... 24,000 673,702 0 95,000 0 602,705
John S. Bronson...... 0 0 40,000 217,500 0 260,020
Patrick J.
Connolly........... 0 0 105,250 310,000 1,138,196 852,344
Gary G. Friedman..... 0 0 494,150 950,000 6,585,125 2,040,319
J. Duane Weeks....... 0 0 20,000 0 0 0
- ---------------
(1) Figures have been adjusted to reflect stock splits.
(2) Represents the difference between the closing market price of the Company's
common stock on January 28, 2001 ($25.44 per share) and the exercise price
of the options.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company does not have employment contracts with any of its Named
Executive Officers, nor does it have any compensatory plan or arrangement with
any Named Executive Officer which will result from the resignation, retirement
or any other termination of such person's employment or from a change-in-control
of the Company.
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12
Mr. Hilpert's Employment with the Company
The Company entered into an Employment Agreement (the "Hilpert Agreement")
with Mr. Dale W. Hilpert, effective as of February 5, 2001. The principal terms
of the Hilpert Agreement are set forth below.
The Hilpert Agreement provides that Mr. Hilpert will serve as the Chief
Executive Officer of the Company and as a director. Pursuant to the agreement,
Mr. Hilpert's employment is for a term of five years, commencing on April 2,
2001, and he will receive an annual base salary of $950,000, subject to future
increases, plus a miscellaneous allowance of $25,000 per year. The Hilpert
Agreement also provides for a $20,000 starting bonus, reimbursement of specified
relocation costs, plus reimbursement of Mr. Hilpert's legal fees (capped at
$15,000) in connection with the negotiation of the Hilpert Agreement. In
addition, Mr. Hilpert will participate in all incentive plans, fringe benefits
and perquisites received by the Company's senior executives.
The Hilpert Agreement also provides for a stock option grant to Mr.
Hilpert, covering an aggregate of 500,000 shares of the Company's Common Stock
at a price per share equal to the fair market value on the grant date,
exercisable on the same basis as stock options granted to other senior
executives. As additional long-term incentive, the Company agreed in the Hilpert
Agreement to grant to Mr. Hilpert 250,000 restricted shares of the Company's
Common Stock, tied to specific performance objectives determined by the
Compensation Committee pursuant to the 2001 Bonus Plan, and subject to
forfeiture under certain circumstances prior to March 31, 2004.
On Mr. Hilpert's death or disability, his restricted stock will become
vested, his stock options will become fully exercisable, and he (or his estate
or beneficiaries in the event of his death) will be entitled to receive, for the
period up to the date of his death or disability, any unpaid base salary, any
declared but unpaid bonuses, any declared but unpaid amounts due under any
incentive plan, and any accrued vacation pay and other amounts under any
employee benefit or fringe benefit plan.
If the Company terminates Mr. Hilpert's employment without "cause," or if
Mr. Hilpert terminates his employment with the Company for "good reason" (as
defined in the Hilpert Agreement), he will be entitled to receive the
compensation and benefits that would have been payable if he had died on the
date of his termination as described above, plus continuation of his base salary
and health insurance coverage for a period of time, without mitigation, as
stated in the Hilpert Agreement. Also, Mr. Hilpert's stock options will become
exercisable, and his restricted stock will become vested under such
circumstances.
In the event of a "change in control" (as defined in the Hilpert
Agreement), Mr. Hilpert's stock options will become exercisable and his
restricted stock will become vested. Also, Mr. Hilpert will have the right to
terminate his employment by written notice to the Company within the 30-day
period following the date which is three months after the change in control.
Upon the giving of such notice, or in the event the Company terminates Mr.
Hilpert's employment without cause or Mr. Hilpert terminates his employment for
good reason during the two-year period after the change in control, the Company
will pay to Mr. Hilpert a lump sum equal to the amounts Mr. Hilpert would have
received if he had terminated his employment for good reason in the absence of a
change in control. Such lump sum will be paid without discount for the time
value of money. If such lump sum is less than three times the sum of Mr.
Hilpert's base salary in effect immediately before the change in control and Mr.
Hilpert's bonus target in the year of his termination of employment, the Company
will make a further lump sum cash payment to Mr. Hilpert of the difference.
Furthermore, if Mr. Hilpert becomes subject to the excise tax of Section 4999 of
the Code as a result of payments made which are related to a change in control,
the Company will "gross up" Mr. Hilpert for the excise tax so that he will be
placed in the same after-tax position as he would have been in if no excise tax
were due.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee covering the Company's
fiscal year ended January 28, 2001 and shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission or
subject to Regulations 14A or 14C of the Exchange Act, or the liabilities of
Section 18 of the Exchange Act. The Report shall not be deemed incorporated by
reference into any other
10
13
Company filing under the Exchange Act or the Securities Act except to the extent
that the Company specifically incorporates it by reference.
General
The Compensation Committee is responsible for setting the Company's policy
on executive compensation, making recommendations to the Board regarding
compensation paid to executive officers of the Company, including the Named
Executive Officers, and providing assistance and recommendations with respect to
compensation plans. The Compensation Committee is comprised of the directors
named below, none of whom has ever served as an officer of the Company.
Philosophy on Executive Compensation
The Compensation Committee believes that officers and other key employees
should have a significant stake in the Company's stock price performance under
compensation programs that link executive compensation to shareholder value. For
this reason, the Company's executive compensation programs are designed to
enable the Company to attract, retain, motivate and reward highly qualified
executives while maintaining strong and direct links between executive pay,
individual performance, the Company's financial performance and shareholder
returns.
In establishing and evaluating the Company's executive compensation
programs, the Compensation Committee focuses on the competitiveness of the
Company's compensation programs. The compensation practices of many different
companies, both within and outside the retail industry, are relevant to the
analysis. Specifically, the Compensation Committee considers both pay practices
at retailers of comparable size who are part of the Center for Research in
Security Prices ("CRSP") Index for NASDAQ Retail Trade Stocks, one of the
indices used in the Performance Graph, as well as pay practices at other
companies considered comparable based on the industry, revenues and other
factors (together, the "Comparable Companies") when assessing the
competitiveness of the Company's compensation programs. In addition, the
Compensation Committee utilizes an independent executive compensation advisor
for information on competitive compensation levels.
Implementation of Philosophy
The Compensation Committee considers three major elements in its
compensation program -- base salary, annual incentive opportunities, and long
term incentives.
Base Salary
Base salaries are generally positioned competitively with the third
quartile (i.e., top 50 - 75%) of Comparable Companies, and adjusted for
individual performance and contributions to the Company's success. The
Compensation Committee reviews the salaries of the Company's executive officers,
including the Named Executive Officers, on an annual basis. For the Company's
fiscal year 2000, this review occurred in March 2000. Based on the Company's
performance in fiscal year 2000, base salary increases were granted to the Named
Executive Officers in fiscal year 2000, as follows:
FROM TO
-------- --------
Mr. Lester..................................... $750,000 $900,000
Mr. Boike...................................... $300,000 $400,000
Mr. Bronson.................................... $400,000 $400,000*
Mr. Connolly................................... $400,000 $500,000
Mr. Friedman................................... $520,000 $700,000
Mr. Weeks...................................... $400,000 $400,000*
- ---------------
* no increase
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Annual Incentives
The second component of the Company's executive compensation program is
annual incentives in the form of cash bonuses, which promote outstanding
performance by rewarding participants for extraordinary annual results. The cash
bonuses are paid only when the Company achieves a target corporate earnings
objective as established by the Compensation Committee in the first quarter of
each fiscal year. Actual bonus payments are based upon the Company's performance
against pre-established goals, as well as individual performance.
Key performance criteria for evaluating the Company and individual
performance include business and financial objectives, people and organizational
goals, and other relevant factors as determined by the Compensation Committee,
with input from senior management. These criteria are weighted each year based
upon current priorities and may be changed from year to year. In the first
quarter of each fiscal year, a performance review report is presented to the
Compensation Committee that summarizes management's view regarding whether, and
to what extent, the key performance criteria were attained. The performance
review report also discusses any other significant but unforeseen factors that
positively or negatively affected the Company's performance.
The Compensation Committee verifies the Company's actual earnings for each
performance period, reviews management's recommendation for the resulting
aggregate bonus awards and approves the aggregate amount. Generally, the
Compensation Committee also reviews the individual recommendations for the
Company's executive officers, and the CEO approves the recommendations for all
other participants. Based on the Company's performance in fiscal year 2000,
bonus awards were not granted to any of the Named Executive Officers.
Long-Term Incentive Compensation
The third component of the Company's executive compensation program,
long-term incentive compensation, is designed to tie executive performance
directly to the creation of shareholder wealth. This component consists of stock
option grants provided on an annual basis through the Company's stock option
plans.
Under the Company's existing stock option plans, and the 2001 Stock Option
Plan being presented to the shareholders for approval under Proposal 2, stock
options are granted with an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and generally vest annually over
five years. This approach is intended to motivate executive officers and other
employees of the Company to increase shareholder value over the long term. The
Compensation Committee believes that stock options granted to the Company's
executive officers, including the Named Executive Officers, reflect competitive
practices of Comparable Companies and their assessment of the individual
contributions. During fiscal year 2000, stock option awards were granted to the
Named Executive Officers, as follows:
Mr. Lester........................................... 200,000 options
Mr. Boike............................................ 50,000 options
Mr. Bronson.......................................... 57,500 options
Mr. Connolly......................................... 200,000 options
Mr. Friedman......................................... 700,000 options
Mr. Weeks............................................ 0 options
It is the Company's policy not to reprice stock options held by executive
officers or other Company employees, in the event that the fair market value of
the Common Stock falls below the exercise price of the stock options.
Chief Executive Officer Compensation
As part of an annual process, the Compensation Committee applies the
executive compensation philosophy to the total compensation packages of the CEO
and the other executive officers. During the period
12
15
April 12, 1999 to April 9, 2000, the base salary for Howard Lester, then CEO of
the Company, was $750,000. Mr. Lester's base salary was increased to $900,000,
effective April 10, 2000, in order to bring his total compensation to a level
that the Compensation Committee believes is competitive with third quartile
rates for chief executive officers of Comparable Companies. Based on the
Company's performance during fiscal year 2000, Mr. Lester did not receive an
annual cash bonus.
As noted above, in fiscal year 2000, Mr. Lester received a long-term
incentive award consisting of stock option grants to acquire an aggregate of
200,000 shares, at market value on the date of grant. The stock options have a
ten-year term and are 20% vested on the date of grant with 20% vesting on each
anniversary of the date of grant for four years.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code could, depending on future
compensation levels, result in limits on the Company's ability to deduct
compensation in excess of $1,000,000 paid to certain executive officers.
Exceptions to this deductibility limit may be made for various forms of
"performance-based" compensation. Based on 2000 compensation levels, no such
limits on the deductibility of compensation applied for any officer of the
Company. The Company has not adopted a policy specifically prohibiting
compensation at a level that would limit deductions. While the Compensation
Committee cannot predict how the deductibility limit may impact the Company's
compensation program in future years, the Compensation Committee intends to
maintain an approach to executive compensation that strongly links pay to
performance. Based on this approach and with the intent of preserving the
deductibility of executive compensation, the Compensation Committee recommended,
and the Board of Directors approved, the 2001 Stock Option Plan and the 2001
Bonus Plan which are being submitted to the shareholders for approval.
COMPENSATION COMMITTEE
Adrian Bellamy, Chairman
Michael Lynch
John Martin
James McMahan
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16
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return for
the Company's common stock with those for the Center for Research in Security
Prices ("CRSP") Index for the New York Stock Exchange and the CRSP Index for the
NASDAQ Retail Trade Stocks, the Company's peer index group. The Company's peer
group includes over 150 companies. The Cumulative Total Return listed below
assumed an initial investment of $100 and reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS OF THE COMPANY,
CRSP* INDEX FOR THE NYSE STOCK MARKET (U.S. COMPANIES) AND
CRSP INDEX FOR NASDAQ RETAIL TRADE STOCKS
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------
1/28/96 2/2/97 2/1/98 1/31/99 1/30/00 1/28/01
--------------------------------------------------------------------------------
Williams-Sonoma,
Inc. 100.0 204.0 274.6 447.6 406.5 328.2
NYSE Stock Market 100.0 126.1 159.6 193.4 197.8 218.6
NASDAQ Retail Trade 100.0 125.2 146.1 179.1 143.5 105.1
--------------------------------------------------------------------------------
The above graph shows historical stock price performance (including
reinvestment of dividends) and is not necessarily indicative of future
performance.
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 1/28/96.
- ---------------
* Center for Research in Security Prices, The University of Chicago, Graduate
School of Business.
14
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Two of the Company's distribution facilities are leased from two
partnerships whose partners include a director and a director/former executive
officer, both of whom are significant shareholders of the Company.
First, the Company leases a distribution facility from a partnership
comprised of W. Howard Lester, Chairman, former Chief Executive Officer and
significant shareholder of the Company, and James A. McMahan, a director and
significant shareholder of the Company. The partnership financed the
construction of the distribution facility through the sale of $6,300,000 and
$2,900,000 principal amount of industrial development bonds due 2008 and 2010,
respectively. The initial lease term expires in June 2004. Rental payments under
the lease consist of the basic annual rent of $618,000, plus interest on the
bonds (a floating rate equal to 55% of the prime rate of a designated bank),
applicable taxes, insurance and maintenance expenses.
The Company also has an agreement to lease another distribution facility
from a second partnership that includes Messrs. Lester and McMahan. The
partnership financed the distribution facility through the sale of $20,375,000
principal amount of industrial development bonds due 2015. The lease has an
initial, non-cancelable term of 15 years ending in July 2006, with three
optional five-year renewals; provided, however, that if an option is not
exercised at any time when the original bonds issued to construct the
distribution facility and its expansion remain outstanding, the lease is
automatically extended for additional one (1) year terms until the original
bonds are paid. Rentals (including interest on the bonds, sinking fund payments
and fees) for the primary term are payable at an average rate of $2,700,000 per
year plus applicable taxes, insurance and maintenance expenses.
After the option periods, the Company is obligated to renew each lease
annually so long as the bonds which financed the specific projects remain
outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of reports received by the Company
during or with respect to the fiscal year ended January 28, 2001, pursuant to
Rule 16a-3(e) under the Securities and Exchange Act, and/or written
representations from reporting persons thereunder, the Company believes that all
reports required to be filed by the Company's directors, officers and 10%
shareholders during or with respect to the fiscal year ended January 28, 2001
were filed on a timely basis, except that Ms. Isralsky failed to file on a
timely basis one Form 4 which reported one acquisition and one sale of Common
Stock, and Messrs. Robertson and Brownell and Ms. Reisman each failed to file on
a timely basis one Form 3 with respect to beneficial ownership of Common Stock.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information as to the beneficial ownership
of the Common Stock, as of March 27, 2001, by (a) each person known to the
Company to be the beneficial owner of more than 5% of the Common Stock, (b) each
director and nominee for director, (c) each Named Executive Officer and (d) all
current executive officers and directors as a group. Unless otherwise noted, the
persons listed below have sole voting and investment power. Each Director and
Executive Officer has furnished the information as to his or her beneficial
ownership of Common Stock as of March 27, 2001.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER POSITION WITH COMPANY BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------ --------------------- -------------------- ----------
James A. McMahan.................... Director 5,696,200(2) 10.2%
2237 Colby Avenue
Los Angeles, CA 90064
Capital Group International, Inc. (3) %
and Capital GuardianTrust -- 5,212,670 9.3
Company...........................
11100 Santa Monica Boulevard 15th
Floor
Los Angeles, CA 90025-3384
15
18
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER POSITION WITH COMPANY BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------ --------------------- -------------------- ----------
W. Howard Lester.................... Chairman(4) 5,159,790(4) 9.1%
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
Putnam Investment Management, Inc. (5) %
and The Putnam Advisory Co........ -- 3,381,735 6.1
One Post Office Square
Boston, MA 02109
Patrick J. Connolly................. Executive Vice President, 564,730(6) 1.0%
c/o Williams-Sonoma, Inc. Chief Marketing Officer,
3250 Van Ness Avenue Assistant Secretary and
San Francisco, CA 94109 Director
Charles E. Williams................. Founder and 546,000 1.0%
c/o Williams-Sonoma, Inc. Vice Chairman
3250 Van Ness Avenue
San Francisco, CA 94109
Gary G. Friedman.................... (7) 535,750(7) *
c/o Restoration Hardware, Inc.
15 Koch Road
Corte Madera, CA 94925
John E. Martin...................... Director 256,500(8) *
c/o Diedrich Coffee
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
John S. Bronson..................... Senior Vice President -- 112,610(9) *
c/o Williams-Sonoma, Inc. Human Resources
3250 Van Ness Avenue
San Francisco, CA 94109
Nathan Bessin....................... Director(10) 96,150(10) *
c/o J. Arthur Greenfield
924 Westwood Boulevard, 10th Floor
Los Angeles, CA 90024
Adrian D.P. Bellamy................. Director 55,284(11) *
233 West Santa Inez Avenue
Hillsborough, CA 94010
James E. Boike...................... Executive Vice President -- 29,000(12) *
c/o Williams-Sonoma, Inc. Premium Brands
3250 Van Ness Avenue
San Francisco, CA 94109
Edward A. Mueller................... Director 14,999(13) *
c/o Ameritech
225 W. Randolph
Chicago, IL 60606
Michael R. Lynch.................... Director -- --
c/o Goldman, Sachs & Co.
85 Broad Street, 16th Floor
New York, NY 10004
Heather M. Reisman.................. Director -- --
c/o Chapters, Inc.
90 Ronson Drive
Etobicoke, Ontario
M9W1C1 Canada
Richard T. Robertson................ Director -- --
c/o Warner Brothers
4000 Warner Boulevard, Bldg 118,
Suite 4008
Burbank, CA 91522
16
19
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER POSITION WITH COMPANY BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------ --------------------- -------------------- ----------
Dale W. Hilpert..................... (14) -- --
c/o Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, CA 94109
J. Duane Weeks...................... (15) -- --
c/o Exemplary
10001 North De Anza Boulevard,
Suite 300
Cupertino, CA 95014
All current Executive Officers and (16) %
Directors as a Group (18 -- 12,623,723 22.0
persons)..........................
- ---------------
* Less than 1%.
(1) Assumes exercise of stock options beneficially owned by the named
individual or entity into shares of the Company's common stock. Based on
55,896,265 shares outstanding as of March 27, 2001.
(2) Includes 85,500 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(3) The information above and in this footnote is based on share information
taken from the Schedule 13G of Capital Group International, Inc. and
Capital Guardian Trust Company filed February 12, 2001. Capital Guardian
Trust Company, a bank, and Capital Group International, Inc., its parent
company, have sole dispositive power of 4,095,670 and 5,212,670 shares of
Common Stock, respectively. Capital Group International, Inc. has no
investment or voting power.
(4) Includes 814,500 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days. Does not include
981,546 shares owned by a trust established by Mr. Lester for the benefit
of his children, in which shares Mr. Lester disclaims any beneficial
interest. Mr. Lester was Chief Executive Officer until April 2001.
(5) The information above and in this footnote is based on share information
taken from the Schedule 13G of Putnam Investment Management, Inc. and
Putnam Investments, Inc. filed February 18, 2000. Putnam Investment
Management, Inc., a registered investment adviser, and Putnam Investments,
Inc., its parent company, have shared dispositive power (but no voting
power) over 3,381,735 shares of Common Stock.
(6) Includes 171,250 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days. Does not include 5,238
shares owned by a trust established for the benefit of Mr. Connolly's
children, in which shares Mr. Connolly disclaims any beneficial interest.
(7) Includes 535,750 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days. Mr. Friedman was
President, Chief Operating Officer and Director until March 2001.
(8) Includes 76,500 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(9) Includes 91,500 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(10) Includes 85,500 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days. Mr. Bessin was
Director until April 2001.
(11) Includes 45,000 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(12) Includes 29,000 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(13) Includes 14,999 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
(14) Mr. Hilpert is a nominee for Director. He became Chief Executive Officer
and Director in April 2001.
(15) Mr. Weeks was Senior Vice President of Supply Chain until November 2000.
(16) Includes 1,499,209 shares subject to nonqualified stock options, which are
currently exercisable or exercisable within 60 days.
17
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PROPOSAL 2
APPROVAL OF THE 2001 STOCK OPTION PLAN
The shareholders of the Company are being asked to approve the 2001 Stock
Option Plan. The Board of Directors has unanimously approved and adopted the
2001 Stock Option Plan, subject to shareholder approval at the Annual Meeting.
PURPOSE OF THE PLAN
The Company's 1993 Stock Option Plan, by its terms, allows for the issuance
of not more than 8,500,000 shares, and only 1,067,329 shares of those 8,500,000
shares authorized to be issued under the 1993 Stock Option Plan remain available
for future grants to key employees and directors. The Company's 2000
Nonqualified Stock Option Plan, by its terms, does not authorize grants to any
member of the Board of Directors or any of the Company's "Officers", which is
defined in that plan to include the Company's chief executive officer,
president, principal financial officer, principal accounting officer (or, if
there is no such accounting officer, the controller), any vice-president of the
Company in charge of a principal business unit, division or function (such as
sales, administration or finance), any other officer who performs a
policy-making function or any other person who performs similar policy-making
functions for the Company, including any officer of a subsidiary of the Company
who performs such functions for the Company.
The Board of Directors believes that the authorization of additional shares
and the ability to issue both incentive and nonqualified stock options will
substantially assist the Company in continuing to attract and retain key
employees and nonemployee directors. The Company believes that, over the years,
its stock option plans have made a significant contribution to the ability of
the Company to attract and retain highly competent individuals on whose
judgment, initiative, leadership and continued efforts the growth and
profitability of the Company depend. In addition, the Board of Directors
believes that the 2001 Stock Option Plan will secure for the Company and its
shareholders the benefits arising from stock ownership by selected executives
and other key employees of the Company, and directors of the Company.
REQUIRED VOTE
Affirmative votes representing a majority of shares of the Common Stock
present in person or represented by proxy at the Annual Meeting and voting on
this proposal, together with the affirmative vote of the holders of a majority
of the required quorum, will be required to approve this proposal. Abstentions
and broker non-votes can have the effect of preventing approval of this proposal
where the number of affirmative votes, though a majority of the votes cast, does
not constitute a majority of the required quorum. Furthermore, because the
directors benefit from the 2001 Stock Option Plan, under Section 310 of the
California General Corporation Law, the person asserting the validity of the
grant of an option under the 2001 Stock Option Plan to a director would have the
burden of proving that such grant was just and reasonable as to the Company at
the time that the grant was authorized, approved or ratified, unless the 2001
Stock Option Plan is approved by the shareholders holding a majority of shares
present, or represented, and voting at the Annual Meeting, together with a
majority of the required quorum, with the shares owned by the directors not
being entitled to vote thereon.
DESCRIPTION OF THE 2001 STOCK OPTION PLAN
The following paragraphs provide a summary of the principal features of the
2001 Stock Option Plan and its operation. The summary description is qualified
in its entirety by reference to the full text of the 2001 Stock Option Plan
itself, as set forth in Exhibit A to this Proxy Statement.
Shares Subject to the 2001 Stock Option Plan. Assuming approval of the 2001
Stock Option Plan, up to an aggregate of 2,500,000 shares of Common Stock may be
awarded or issued upon the exercise of all options granted under the 2001 Stock
Option Plan. If any option granted under the 2001 Stock Option Plan shall expire
or become unexercisable in full for any reason, the unpurchased shares subject
to such option may thereafter be available for future grants under the 2001
Stock Option Plan. If, however, the Company
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21
reacquires shares which were issued pursuant to the exercise of an option, those
reacquired shares will not be available for future grant under the 2001 Stock
Option Plan. The 2001 Stock Option Plan provides for appropriate adjustment of
shares available under the 2001 Stock Option Plan in the event of any change in
the number or kind of outstanding shares or securities of the Company resulting
from a reorganization, recapitalization, reclassification, stock combination,
stock dividend, stock split, reverse stock split, spin off or other similar
transaction.
Types of Options. Two types of options may be awarded under the 2001 Stock
Option Plan: (i) options intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations promulgated thereunder, and (ii) nonqualified stock options,
which are not intended to so qualify.
Administration. The 2001 Stock Option Plan shall be administered by a
committee of the Board of Directors (the "Administrator") consisting of two or
more directors of the Company who are both (a) "non-employee directors" within
the meaning of Rule 16b-3 of the Exchange Act, and (b) "outside directors"
within the meaning of Section 162(m) of the Code. The Administrator has
extremely wide discretion and power in interpreting and operating the 2001 Stock
Option Plan and in determining the terms of individual options. The
Administrator has the authority, among other things, (i) to construe and
interpret the 2001 Stock Option Plan; (ii) to prescribe, amend and rescind rules
and regulations relating to the administration of the 2001 Stock Option Plan;
(iii) to determine the individuals to whom and the time or times at which
options shall be granted, whether such options will be incentive stock options
or nonqualified stock options, the number of shares to be subject to each
option, the exercise price of each option, the time or times when each option
may be exercised and the duration of each option; (iv) to accelerate the vesting
or exercisability of an option; (v) to determine the terms and restrictions
applicable to the options; and (vi) to make all other determinations it
considers necessary or advisable for administering the 2001 Stock Option Plan.
Eligibility and Participation. All members of the Board of Directors and
all employees of the Company or any parent or subsidiary corporation
("employees") are eligible for selection to participate in the 2001 Stock Option
Plan. Approximately 11 directors and 600 employees would currently be eligible
to participate under the 2001 Stock Option Plan. Incentive stock options may
only be granted to employees. An individual who has been granted an option may,
if such individual is otherwise eligible, be granted an additional option or
options if the Administrator shall so determine. No participant may receive
grants of options with respect to more than 1,000,000 shares of Common Stock
(subject to adjustment in the event of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or similar
transaction) during any fiscal year of the Company or portion thereof. If an
option expires or terminates for any reason without having been exercised in
full, the unpurchased shares subject to that expired or terminated option
continue to be counted against the maximum number of shares for which options
may be granted to a participant during a fiscal year of the Company or portion
thereof.
Duration of the Options. The term of each option will be stated in the
option agreement between the Company and the optionee; provided, however, that
in no event may the term be more than ten years from the date of grant. In
addition, in the case of an incentive stock option granted to an optionee who,
at the time the incentive stock option is granted, owns stock representing more
than 10% of the voting power of all classes of capital stock of the Company or
any parent or subsidiary corporation, the term of the incentive stock option
will be five years from the date of grant or any shorter term specified in the
option agreement.
Duration and Amendment of the 2001 Stock Option Plan. The 2001 Stock Option
Plan shall remain in effect until ten years from the date of its adoption by the
Board of Directors or until it is terminated by the Board of Directors,
whichever shall come first. The Board of Directors may amend, alter or suspend
or terminate the 2001 Stock Option Plan at any time; provided that the Company
will obtain shareholder approval of any amendment that increases the maximum
shares available for grant under the 2001 Stock Option Plan or to the extent
necessary and desirable to comply with the Code or other applicable laws. No
amendment, alteration, suspension or termination of the 2001 Stock Option Plan
will impair the rights of an optionee, unless mutually agreed otherwise in
writing between the optionee and the Administrator.
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Exercise Price; Exercisability of Options. In the case of incentive stock
options, the exercise price is determined by the Administrator but must be at
least equal to the fair market value of the stock on the date the option is
granted. In addition, grants of incentive stock options to employees owning over
10% of the voting stock of the Company must be at an exercise price of not less
than 110% of the fair market value of the stock on the date the option is
granted. The exercise price of a nonqualified stock option is determined by the
Administrator. The Administrator shall determine when and under what conditions
any option shall become exercisable. However, the aggregate fair market value of
shares of Common Stock (determined at the date of grant) for which incentive
stock options (whenever granted) are exercisable for the first time by a
participant during any calendar year shall not exceed $100,000; any options in
excess of this limit shall be treated as nonqualified stock options. The
purchase price of shares on the exercise of an option shall be paid in full at
the time of exercise in cash or by check payable to the order of the Company,
or, subject to the approval of the Administrator, by the delivery of shares of
Common Stock already owned by the participant for at least six months, by the
participant's promissory note, through a "broker's" exercise involving the
immediate sale or pledge of shares with a value sufficient to pay the exercise
price, or by any other method permitted by applicable law.
Basic Terms. Options granted under the 2001 Stock Option Plan may only be
exercised by the optionee and are nontransferable, except by will or the laws of
descent and distribution or, in the case of nonqualified stock options and if
the Administrator so authorizes, pursuant to a domestic relations order (as
defined in the Code) or to one or more family members of the optionee or a trust
for their benefit. At the time an option is granted, the Administrator will fix
the period within which the option may be exercised and will determine any
conditions which must be satisfied before the option may be exercised. If an
optionee holds exercisable options on the date his or her continuous status as
an employee or director terminates as specified in the 2001 Stock Option Plan,
the optionee may exercise those options until their expiration as set forth in
the option agreement (which, in the case of incentive stock options, shall not
be later than 90 days after termination). If termination is due to the
optionee's death or disability, however, then all exercisable options, including
incentive stock options, are exercisable until their expiration as set forth in
the option agreement, but incentive stock options exercised more than one year
after death or disability will cease to be incentive stock options. If the
optionee does not exercise an option within the time specified above after
termination, that option will expire and the shares covered by it will revert to
the 2001 Stock Option Plan. If an optionee is terminated for cause (as defined
in the 2001 Stock Option Plan), then all options, including any vested options,
held by the optionee shall immediately be terminated and canceled.
Certain Corporate Transactions. Upon the happening of a merger,
reorganization or sale of substantially all of the assets of the Company, the
Administrator, may, in its sole discretion, do one or more of the following: (i)
shorten the period during which options are exercisable (provided they remain
exercisable for at least 30 days after the date notice of such shortening is
given to the participants); (ii) accelerate any vesting schedule to which an
option is subject; (iii) arrange to have the surviving or successor entity or
any parent entity thereof assume the options or grant replacement options with
appropriate adjustments in the option prices and adjustments in the number and
kind of securities issuable upon exercise; or (iv) cancel options upon payment
to the participants in cash of an amount that is the equivalent of the excess of
the fair market value of the Common Stock (at the effective time of the merger,
reorganization, sale or other event) over the exercise price of the option. The
Administrator may also provide for one or more of the foregoing alternatives in
any particular option agreement.
Summary of Federal Income Tax Consequences. The following discussion of
federal income tax consequences does not purport to be a complete analysis of
all of the potential tax effects of the 2001 Stock Option Plan. It is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change. No information is provided with respect to persons who are not
citizens or residents of the United States, or foreign, state or local tax laws,
or estate and gift tax considerations. In addition, the tax consequences to a
particular participant may be affected by matters not discussed above.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT HIS OR HER TAX ADVISOR
CONCERNING THE TAX CONSEQUENCES TO HIM OR HER OF THE 2001 STOCK OPTION PLAN,
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INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES
IN THE TAX LAWS.
The 2001 Stock Option Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
Nonqualified Stock Options. Under current federal income tax law, the grant
of a nonqualified stock option has no tax effect on the Company or the optionee
to whom it is granted. If the shares of Common Stock received on the exercise of
a nonqualified stock option are not subject to restrictions on transfer or risk
of forfeiture, the exercise of the nonqualified stock option will result in
ordinary income to the optionee equal to the excess of the fair market value of
the shares at the time of exercise over the option price. The optionee's tax
basis in the shares will be equal to the aggregate exercise price paid by the
optionee plus the amount of taxable income recognized upon the exercise of the
option. Upon any subsequent disposition of the shares, any gain or loss
recognized by the optionee will be treated as capital gain or loss and will be
long-term capital gain or loss if the shares are held for more than one year
after exercise. At the time of recognition of ordinary income by the optionee
upon exercise, the Company will normally be allowed to take a deduction for
federal income tax purposes in an amount equal to such recognized income.
Incentive Stock Options. The federal income tax consequences associated
with incentive stock options are generally more favorable to the optionee and
less favorable to the Company than those associated with nonqualified stock
options. Under current federal income tax law, the grant of an incentive stock
option does not result in income to the optionee or in a deduction for the
Company at the time of the grant. Generally, the exercise of an incentive stock
option will not result in income for the optionee if the optionee does not
dispose of the shares within two years after the date of grant or within one
year after the date of exercise. If these requirements are met, the basis of the
shares of Common Stock upon a later disposition will be the option price, any
gain on the later disposition will be taxed to the optionee as long-term capital
gain, and the Company will not be entitled to a deduction. The excess of the
fair market value on the exercise date over the option price is an adjustment to
regular taxable income in determining alternative minimum taxable income, which
could cause the optionee to be subject to the alternative minimum tax, thereby
in effect depriving the optionee of the tax benefits of incentive stock option
treatment. If the optionee disposes of the shares before the expiration of
either of the holding periods described above (a "Disqualifying Disposition"),
the optionee will have compensation taxable as ordinary income, and the Company
will normally be entitled to a deduction, equal to the lesser of (a) the fair
market value of the shares on the exercise date minus the option price, or (b)
the amount realized on the disposition minus the option price. If the price
realized in any such Disqualifying Disposition of the shares exceeds the fair
market value of the shares on the exercise date, the excess will be treated as
long-term or short-term capital gain, depending on the optionee's holding period
for the shares.
$1,000,000 Limit on Deductible Compensation. Section 162(m) of the Code
provides that any publicly-traded corporation will be denied a deduction for
compensation paid to certain executive officers to the extent that the
compensation exceeds $1,000,000 per officer per year. However, the deduction
limit does not apply to "performance-based compensation," as defined in Section
162(m). Compensation is performance-based compensation if (i) the compensation
is payable on account of the attainment of one or more performance goals; (ii)
the performance goals are established by a committee of the Board of Directors
consisting of "outside directors"; (iii) the material terms of the compensation
and the performance goals are disclosed to and approved by the shareholders in a
separate vote; and (iv) the committee of "outside directors" certifies that the
performance goals have been satisfied. The Company believes that, if the
shareholders approve the 2001 Stock Option Plan, the stock options granted
thereunder (unless granted for purchase prices below the fair market value of
the stock subject to the options) will satisfy the requirements to be treated as
performance-based compensation, and accordingly will not be subject to the
deduction limit of Section 162(m) of the Code.
Excess Parachute Payments. Under Section 4999 of the Code, certain
officers, shareholders, or highly-compensated individuals ("Disqualified
Individuals") will be subject to an excise tax (in addition to federal income
taxes) of 20% of the amount of certain "excess parachute payments" which they
receive as a result of
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a change in control of the Company. Furthermore, Section 280G of the Code
prevents the Company from taking a deduction for any "excess parachute
payments." The cash out or acceleration of the vesting of stock options upon a
corporate transaction may cause the holders of such stock options who are
Disqualified Individuals to recognize certain amounts as "excess parachute
payments" on which they must pay the 20% excise tax, and for which the Company
will be denied a tax deduction.
Special Rules; Withholding of Taxes. Special tax rules may apply to a
participant who is subject to Section 16 of the Exchange Act. Other special tax
rules will apply if a participant exercises a stock option by delivering shares
of Common Stock which he or she already owns, or through a "broker's exercise."
The Company may take whatever steps the Administrator deems appropriate to
comply with any applicable withholding tax obligation, including requiring any
participant to pay the amount of any applicable withholding tax to the Company
in cash. The Administrator may, in its discretion, authorize "cashless
withholding."
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
2001 STOCK OPTION PLAN WHICH WOULD ALLOW THE COMPANY TO AWARD EITHER OR BOTH
INCENTIVE STOCK OPTIONS OR NONQUALIFIED STOCK OPTIONS TO KEY EMPLOYEES AND
DIRECTORS TO PURCHASE UP TO AN AGGREGATE OF TWO MILLION, FIVE HUNDRED THOUSAND
(2,500,000) SHARES OF THE COMPANY'S COMMON STOCK.
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PROPOSAL 3
APPROVAL OF THE 2001 BONUS PLAN
The shareholders of the Company are being asked to approve the 2001 Bonus
Plan. The Board of Directors has unanimously approved and adopted the 2001 Bonus
Plan, subject to shareholder approval at the Annual Meeting.
PURPOSE OF THE PLAN
The Board of Directors believes that the 2001 Bonus Plan will enhance the
ability of the Company to attract and retain individuals of exceptional
managerial talent by providing an incentive to attain certain specified
performance objectives of the Company. Section 162(m) of the Code provides that
any publicly-traded corporation will be denied a deduction for compensation paid
to certain executive officers to the extent that the compensation exceeds
$1,000,000 per officer per year. However, the deduction limit does not apply to
"performance-based compensation", as defined in Section 162(m). Compensation is
performance-based compensation if (i) the compensation is payable on account of
the attainment of one or more performance goals; (ii) the performance goals are
established by a committee of the Board of Directors of directors consisting of
"outside directors"; (iii) the material terms of the compensation and the
performance goals are disclosed to and approved by the shareholders in a
separate vote; and (iv) the committee of "outside directors" certifies that the
performance goals have been satisfied. The Company believes that, if the
shareholders approve the 2001 Bonus Plan, the awards granted thereunder will
satisfy the requirements to be treated as performance-based compensation, and
accordingly will not be subject to the deduction limit of Section 162(m) of the
Code.
REQUIRED VOTE
Affirmative votes representing a majority of shares of the Common Stock
present in person or represented by proxy at the Annual Meeting and voting on
this proposal, together with the affirmative vote of the holders of a majority
of the required quorum, will be required to approve this proposal. Abstentions
and broker non-votes can have the effect of preventing approval of this proposal
where the number of affirmative votes, though a majority of the votes cast, does
not constitute a majority of the required quorum. Furthermore, because certain
directors benefit from the 2001 Bonus Plan, under Section 310 of the California
General Corporation Law, the person asserting the validity of the grant of an
award under the 2001 Bonus Plan to a director would have the burden of proving
that such award was just and reasonable as to the Company at the time that the
grant was authorized, approved or ratified, unless the 2001 Bonus Plan is
approved by the shareholders holding a majority of shares present, or
represented, and voting at the Annual Meeting, together with a majority of the
required quorum, with the shares owned by the directors who are eligible for
awards under the 2001 Bonus Plan not being entitled to vote thereon.
DESCRIPTION OF THE 2001 BONUS PLAN
The following paragraphs provide a summary of the principal features of the
2001 Bonus Plan and its operation. The summary description is qualified in its
entirety by reference to the full text of the 2001 Bonus Plan itself, as set
forth in Appendix B to this Proxy Statement.
Administration of the Bonus Plan. The 2001 Bonus Plan will be administered
by the Compensation Committee of the Board of Directors, which consists entirely
of two or more persons who are "outside directors" within the meaning of Section
162(m) of the Code. Subject only to the terms of the 2001 Bonus Plan, the
Compensation Committee is vested with full and final discretion and authority to
grant awards under the 2001 Bonus Plan, to construe and interpret the 2001 Bonus
Plan and to make all other determinations and take all other actions which it
deems necessary or appropriate for the proper administration of the 2001 Bonus
Plan.
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Eligibility to Receive Awards. Executive officers of the Company, as
defined in Rule 3b-7 of the Exchange Act, and "covered employees", as defined in
Section 162(m) of the Code, are eligible to participate in the 2001 Bonus Plan.
Approximately 11 employees are currently eligible to participate in the
2001 Bonus Plan. The Compensation Committee may determine which eligible persons
will participate in the 2001 Bonus Plan.
Awards and Performance Goals. The Compensation Committee will establish for
each participant in the 2001 Bonus Plan a performance award opportunity. Each
performance award will relate to a specified performance award period, which
will consist of one or more fiscal years of the Company, or one or more quarters
thereof, and will be based upon the achievement of a specified performance goal
during such specified award period. In the discretion of the Compensation
Committee, the performance goal tied to each award may relate to any one or more
of the following measures: Company revenues (in the aggregate or for particular
product lines or markets); earnings per share; earnings before interest, taxes,
depreciation and amortization; or before-tax or after-tax net profits. Each
performance goal will be established by the Compensation Committee not later
than 90 days after the first day of the performance award period, or the date on
which 25% of the award period has elapsed, whichever is earlier.
Each award under the 2001 Bonus Plan will consist of cash, except that,
solely in the case of Dale W. Hilpert, the Company's Chief Executive Officer, an
award may consist of a grant of restricted stock of the Company. Each cash award
will be equal to a specific dollar amount (subject to decrease as described
below) determined strictly under the performance goals established for a
specified award period, except that an award to a participant who is not a
"covered employee" within the meaning of Section 162(m) of the Code may,
alternatively, be an amount determined in the discretion of the Compensation
Committee within a range determined under the performance goals for the
specified award period.
Each cash award will be granted to a participant, and Mr. Hilpert's
restricted stock award will be granted, as determined under the performance
goals established by the Compensation Committee for a specified award period.
The maximum award to any participant for each performance award period may not
exceed the lesser of (i) $2,000,000 or (ii) 200% of such participant's annual
base salary in effect on the first day of the first fiscal year of such award
period, multiplied by the number of complete or partial fiscal years in such
award period; provided, however, that as to the award of restricted stock to Mr.
Hilpert, the maximum number of shares that may be awarded shall be 250,000, as
adjusted by the Compensation Committee to reflect any transaction affecting the
capital stock of the Company.
Determination and Payment of Actual Awards. As a condition precedent to the
payment of any award or the granting of restricted stock to Mr. Hilpert, the
Compensation Committee must certify, by means of a written resolution, that the
performance goal for the award has been satisfied and that the amount of the
award is no greater than the award limitations specified in the 2001 Bonus Plan
and described above.
The Compensation Committee retains discretion to reduce the actual award
payable to any participant below that which would be otherwise payable under the
applicable formula. The Compensation Committee does not, however, have
discretion to increase the award otherwise payable to any participant. The
reduction in any participant's award for any award period as a result of the
Compensation Committee's exercise of its discretion will not increase the amount
of an award to any other participant with respect to such award period.
The Company will pay awards in cash or, in the case of Mr. Hilpert's award
of restricted stock, by the granting of such restricted stock, reasonably
promptly following the conclusion of each award period of the Company and the
Compensation Committee's certification, but in no event later than two and
one-half months after the conclusion of the fiscal year of the Company in which
or with which the award period ends. If, and only if, the Compensation Committee
so specifies at the time it grants an award, a participant who dies, becomes
"disabled," retires in accordance with the Company's policies, voluntarily
terminates his or her employment with the Company for "good reason," or if a
"change in control" of the Company occurs before the end of the award period,
will be entitled to his or her award in full or on a prorated basis, as
determined by the Compensation Committee when it sets the performance goal for
the award period. For this purpose, "cause," "good reason," and "change in
control" will have the meanings specified in the participant's
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employment agreement with the Company, or, if not so defined, will be defined in
writing by the Compensation Committee at the time of the grant of the award.
Other Provisions. The Board of Directors may from time to time amend,
suspend or terminate, in whole or in part, any or all of the provisions of the
2001 Bonus Plan, but without adversely affecting a participant's rights with
respect to any award that he or she may have become entitled to, before the
effective date of the amendment, suspension or termination. However, in the
event that any amendment or other modification of or to the 2001 Bonus Plan
expands the class of persons eligible to participate in the 2001 Bonus Plan,
raises the award limits set forth in the 2001 Bonus Plan or requires shareholder
approval in order to continue the compliance of the 2001 Bonus Plan as a
"performance-based" plan under Section 162(m) of the Code, such amendment or
modification will be contingent on the receipt of shareholder approval.
The 2001 Bonus Plan will not affect or impair the Company's right to
terminate the employment or other contract for services of a participant, or
entitle a participant to receive any particular level of compensation. In
addition, nothing contained in the 2001 Bonus Plan nor the participation by any
participant shall limit the ability of such participant to participate in any
other compensatory plan or arrangement of the Company, or to receive a bonus
from the Company other than under the 2001 Bonus Plan.
Because awards under the performance criteria specified in the 2001 Bonus
Plan will be based on the Company's future performance, no incentive
compensation under the 2001 Bonus Plan has yet been earned by anyone.
Consequently, the amount of annual incentive compensation to be paid in the
future to the Company's current or future 2001 Bonus Plan participants cannot be
determined at this time, because actual amounts will depend on actual
performance and on the Compensation Committee's discretion to reduce those
amounts.
THE COMPANY'S BOARD OF DIRECTOR RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE 2001 INCENTIVE BONUS PLAN WHICH WOULD ENABLE THE COMPANY TO PAY
COMPETITIVE COMPENSATION TO INCENTIVIZE THE ATTAINMENT OF SPECIFIED PERFORMANCE
OBJECTIVES OF THE COMPANY, WITHOUT NECESSARILY LOSING ANY TAX DEDUCTIONS
AVAILABLE TO THE COMPANY FOR THE COMPENSATION.
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PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
As recommended by its Audit Committee, the Board of Directors has selected
Deloitte & Touche LLP as independent auditors for the fiscal year ending
February 3, 2002, subject to ratification by the shareholders.
Deloitte & Touche LLP has audited the Company's financial statements for
the last twenty-one years and has no financial interest of any kind in the
Company except the professional relationship between auditor and client. It is
expected that their representative will be present at the Annual Meeting and
will have the opportunity to make a statement if he or she desires to do so. The
representative will be available to respond to appropriate questions.
In the event that the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending February 3, 2002, is not ratified by the
shareholders, the Board of Directors will select other independent auditors.
Affirmative votes representing a majority of shares of the Common Stock
present in person or represented by proxy at the Annual Meeting and voting on
this proposal, together with the affirmative vote of the holders of a majority
of the required quorum, will be required to approve this proposal. Abstentions
and broker non-votes can have the effect of preventing approval of this proposal
where the number of affirmative votes, though a majority of the votes cast, does
not constitute a majority of the required quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS LISTED ABOVE.
PROPOSALS OF SHAREHOLDERS
Proposals intended to be presented by shareholders at the 2002 annual
meeting of shareholders and included in the Company's proxy statement for such
meeting must comply with two sets of requirements. First, shareholder proposals
must comply with the requirements contained in the Company's Restated Bylaws.
Under the Company's Restated Bylaws, a shareholder must give advance notice to
the Secretary of the Company of any business, including nominations of
candidates for the Board of Directors, that the shareholder wishes to bring
before a meeting of the Company's shareholders. To be timely, the notice must be
received by the Secretary not less than 45 days nor more than 75 days prior to
the first anniversary of the date of the mailing of proxy materials for the
preceding year's annual meeting of shareholders; provided, however, that if the
date of the annual meeting is advanced by more than 30 days prior to or delayed
by more than 30 days after the anniversary of the preceding year's annual
meeting, notice by the shareholder must be delivered not later than the close of
business on the later of the 90th day prior to such annual meeting and the 10th
day following the day on which public announcement of the date of such meeting
is first made by the Company. With respect to a shareholder's nomination of a
candidate for the Board of Directors, the shareholder notice to the Secretary
must contain certain information as set forth in the Company's Restated Bylaws
about both the nominee and the shareholder making the nomination. With respect
to any other business that the shareholder proposes to bring before an annual
meeting, the shareholder notice to the Secretary must contain a brief
description of such business, the reasons for conducting such business at the
meeting, as well as certain other information as set forth in the Company's
Restated Bylaws.
In addition, in order to be eligible for inclusion in the Company's proxy
statement and proxy card for the next annual meeting pursuant to Rule 14a-8
under the Exchange Act, shareholder proposals would have to be received by the
Secretary of the Company no later than December 20, 2001 if the next annual
meeting were held on or near May 23, 2002. In the event that the Company elects
to hold its next annual meeting at a different time of year than the time of
year of this Annual Meeting, such shareholder proposals would have to be
received by the Company a reasonable time before the Company's solicitation is
made. Shareholder nominations of directors are not shareholder proposals within
the meaning of Rule 14a-8 and are not eligible for inclusion in the Company's
proxy statement.
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If the Company does not have notice of a matter to come before the next
annual meeting by the earlier of March 6, 2002 or the date specified in the
first paragraph of this section (or, in the event the next annual meeting is
held at a different time of year as described in such paragraph, then by the
date described in such paragraph), the Company's proxy for such meeting will
confer discretionary authority to vote for such matter.
All shareholder proposals sent to the Company should be sent to the
Secretary, Williams-Sonoma, Inc., 3250 Van Ness Avenue, San Francisco,
California 94109.
AVAILABILITY OF REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, FOR FISCAL YEAR 2000 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE UPON WRITTEN REQUEST AND
WITHOUT CHARGE TO ANY SHAREHOLDER BY WRITING TO:
Secretary
Williams-Sonoma, Inc.
3250 Van Ness Avenue
San Francisco, California 94109
By Order of the Board of Directors
Nancy J. Himmelfarb
Secretary
San Francisco, California
April 20, 2001
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APPENDIX A
WILLIAMS-SONOMA, INC.
2001 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Plan are:
(a) to attract and retain the best available personnel for positions
of substantial responsibility,
(b) to provide additional incentive to selected key Employees and
Directors, and
(c) to promote the long term success of the Company's business.
2. Definitions. For the purposes of this Plan, the following terms will
have the following meanings:
(a) "Administrator" means the Board or any of its Committees that
administer this Plan, in accordance with Section 4.
(b) "Applicable Laws" means the legal requirements relating to the
administration of and issuance of securities under stock incentive plans,
including, without limitation, the requirements of state corporations law,
federal and state securities law, federal and state tax law, and the
requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted. For all purposes of this Plan,
references to statutes and regulations shall be deemed to include any
successor statutes and regulations, to the extent reasonably appropriate as
determined by the Administrator.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" shall have the meaning set forth in an Optionee's
employment agreement with the Company (if any), or if not defined therein,
shall mean (i) acts or omissions by the Optionee which constitute
intentional material misconduct or a knowing violation of a material policy
of the Company or any of its subsidiaries, which such misconduct or
violation could cause material liability to the Company or material damage
to the reputation of the Company, (ii) the Optionee personally receiving a
material benefit in money, property or services from the Company or any of
its subsidiaries or from another person dealing with the Company or any of
its subsidiaries, in material violation of applicable law or Company
policy, (iii) an act of fraud, conversion, misappropriation, or
embezzlement by the Optionee or his conviction of, or entering a guilty
plea or plea of no contest with respect to, a felony, or the equivalent
thereof (other than DUI), or (iv) any material misuse or improper
disclosure of confidential or proprietary information of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended. For
all purposes of this Plan, references to Code sections shall be deemed to
include any successor Code sections, to the extent reasonably appropriate
as determined by the Administrator.
(f) "Committee" means a Committee appointed by the Board in accordance
with Section 4.
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means Williams-Sonoma, Inc., a California corporation.
(i) "Continuous Status as an Employee or Director" means that the
employment or director relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary, or by the Employee or Director.
Continuous Status as an Employee or Director will not be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave,
provided, that for purposes of Incentive Stock Options, any such leave may
not exceed 90 days, unless reemployment upon the expiration of such leave
is guaranteed by contract (including certain Company policies) or statute;
or (ii) transfers between locations of the Company or between the Company,
its Parent, its Subsidiaries or its successor.
(j) "Director" means a member of the Board.
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(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Directors employed as a
common law employee by the Company or any Parent or Subsidiary of the
Company. Neither service as a Director nor payment of a director's fee by
the Company will be sufficient, in and of itself, to constitute
"employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the closing sales price
for a Share (or the closing bid, if no sales are reported) as quoted on the
New York Stock Exchange on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or any other source
the Administrator considers reliable, or, if the Shares cease to be traded
on the New York Stock Exchange, the value which the Administrator
determines most closely reflects the fair market value of the Shares.
(o) "Family Member" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, any person sharing the
Optionee's household (other than a tenant or employee), a trust in which
these persons (or the Optionee) control the management of assets, and any
other entity in which these persons (or the Optionee) own more than fifty
percent of the voting interests.
(p) "Grant Notice" shall mean a written notice evidencing certain
terms and conditions of an individual Option grant. The Grant Notice is
part of the Option Agreement.
(q) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(r) "Nonqualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(s) "Option" means a stock option granted under this Plan.
(t) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement is subject to the terms and conditions of this
Plan.
(u) "Optioned Stock" means the Common Stock subject to an Option.
(v) "Optionee" means an Employee or Director who holds an outstanding
Option.
(w) "Parent" means a "parent corporation" with respect to the Company,
whether now or later existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 2001 Stock Option Plan.
(y) "Section" means, except as otherwise specified, a section of this
Plan.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14.
(aa) "Subsidiary" means a "subsidiary corporation" with respect to the
Company, whether now or later existing, as defined in Section 424(f) of the
Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
this Plan, the maximum aggregate number of Shares which may be issued under this
Plan will be 2,5000,000 Shares of Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, the Shares that were not purchased which were subject thereto will
become available for future grant under this Plan (unless this Plan has
terminated). If the Company reacquires Shares which were issued pursuant to the
exercise of an Option, however, those reacquired Shares will not be available
for future grant under this Plan.
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4. Administration of this Plan.
(a) Procedure.
(i) Composition of the Administrator. This Plan will be
administered by (A) the Board, or (B) a Committee designated by the
Board, which Committee will be constituted to satisfy Applicable Laws.
Once appointed, a Committee will serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly
administer this Plan. Notwithstanding the foregoing, unless the Board
expressly resolves to the contrary, from and after such time as the
Company is registered pursuant to Section 12 of the Exchange Act, this
Plan will be administered only by a Committee, which will then consist
solely of persons who are both "non-employee directors" within the
meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code; provided,
however, the failure of the Committee to be composed solely of
individuals who are both "non-employee directors" and "outside
directors" shall not render ineffective or void any awards or grants
made by, or other actions taken by, such Committee.
(ii) Multiple Administrative Bodies. This Plan may be administered
by different bodies with respect to Directors and Employees, and
different classes of Employees and Directors.
(b) Powers of the Administrator. Subject to the provisions of this
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to that Committee, the Administrator will have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m);
(ii) to select the Employees or Directors to whom Options may be
granted;
(iii) to determine whether and to what extent Options are granted,
and whether Options are intended as Incentive Stock Options or
Nonqualified Stock Options;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted;
(v) to approve forms of Grant Notices and Option Agreements;
(vi) to determine the terms and conditions, not inconsistent with
the terms of this Plan, of any grant of Options, including, but not
limited to, (A) the Options' exercise price, (B) the time or times when
Options may be exercised, which may be based on performance criteria or
other reasonable conditions such as Continuous Status as an Employee or
Director, (C) any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
Optioned Stock, based in each case on factors that the Administrator
determines in its sole discretion, including but not limited to a
requirement subjecting the Optioned Stock to (i)certain restrictions on
transfer (including without limitation a prohibition on transfer for a
specified period of time and/or a right of first refusal in favor of the
Company), and (ii)a right of repurchase in favor of the Company upon
termination of the Optionee's Continuous Status as an Employee or
Director;
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to a
grant of Options under this Plan will be deferred either automatically
or at the election of the participant (including providing for and
determining the amount, if any, of any deemed earnings on any deferred
amount during any deferral period);
(viii) to construe and interpret the terms of this Plan;
(ix) to prescribe, amend, and rescind rules and regulations
relating to the administration of this Plan;
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(x) to modify or amend each Option, subject to Section 16(b);
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to accelerate the vesting or exercisability of an Option;
(xiii) to determine the terms and restrictions applicable to
Options; and to make all other determinations it considers necessary or
advisable for administering this Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations will be final and binding on all holders
of Options.
5. Eligibility. Options granted under this Plan may be Incentive Stock
Options or Nonqualified Stock Options, as determined by the Administrator at the
time of grant. Nonqualified Stock Options may be granted to Employees and
Directors. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Director who has been granted an Option may
be granted additional Options.
6. Limitations on Grants of Incentive Stock Options. Each Option will be
designated in the Grant Notice as either an Incentive Stock Option or a
Nonqualified Stock Option. However, notwithstanding such designations, if the
Shares subject to an Optionee's Incentive Stock Options (granted under all plans
of the Company or any Parent or Subsidiary), which become exercisable for the
first time during any calendar year, have a Fair Market Value in excess of
$100,000, the Options accounting for this excess will be treated as Nonqualified
Stock Options. For purposes of this Section 5, Incentive Stock Options will be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares will be determined as of the time of grant.
7. Limit on Annual Grants to Individuals. From and after such time as the
Company is required to be registered pursuant to Section 12 of the Exchange Act,
no Optionee may receive grants, during any fiscal year of the Company or portion
thereof, of Options which, in the aggregate, cover more than 1,000,000 Shares,
subject to adjustment as provided in Section 14. If an Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to that expired or terminated Option will continue to count
against the maximum numbers of shares for which Options may be granted to an
Optionee during any fiscal year of the Company or portion thereof.
8. Term of this Plan. Subject to Section 20, this Plan will become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 20. It will continue
in effect for a term of ten years unless terminated earlier under Section 16.
Unless otherwise provided in this Plan, its termination will not affect the
validity of any Option outstanding at the date of termination.
9. Term of Option. The term of each Option will be stated in the Option
Agreement; provided, however, that in no event may the term be more than ten
years from the date of grant. In addition, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent of the voting power of
all classes of capital stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five years from the date of grant or
any shorter term specified in the Option Agreement.
10. Option Exercise Price and Consideration.
(a) Exercise Price of Incentive Stock Options. The exercise price for
Shares to be issued pursuant to exercise of an Incentive Stock Option will
be determined by the Administrator provided that the per Share exercise
price will be no less than 100% of the Fair Market Value per Share on the
date of grant; provided, further that in the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent of the voting
power of all classes of capital stock of the Company or any Parent or
Subsidiary, the per Share exercise price will be no less than 110% of the
Fair Market Value per Share on the date of grant.
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(b) Exercise Price of Nonqualified Stock Options. In the case of a
Nonqualified Stock Option, the exercise price for Shares to be issued
pursuant to the exercise of any such Option will be determined by the
Administrator.
(c) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator will fix the period within which the Option may
be exercised and will determine any conditions which must be satisfied
before the Option may be exercised. Exercise of an Option may be
conditioned upon performance criteria or other reasonable conditions such
as Continuous Status as an Employee or Director.
(d) Form of Consideration. The Administrator will determine the
acceptable form of consideration for exercising an Option, including the
method of payment. Such consideration may consist partially or entirely of:
(i) cash;
(ii) a promissory note made by the Optionee in favor of the
Company;
(iii) other Shares which have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which an Option will be exercised and which have been owned for a period
of at least six months;
(iv) delivery of a properly executed exercise notice together with
any other documentation as the Administrator and the Optionee's broker,
if applicable, requires to effect an exercise of the Option and delivery
to the Company of the sale or loan proceeds required to pay the exercise
price; or
(v) any other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
11. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder will be exercisable according to the terms of this Plan
and at times and under conditions determined by the Administrator and set
forth in the Option Agreement; provided, however, that an Option may not be
exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, (ii) full payment for the
Shares with respect to which the Option is exercised, and (iii) all
representations, indemnifications and documents reasonably requested by the
Administrator. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option
Agreement and this Plan. Shares issued upon exercise of an Option will be
issued in the name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse. Until the stock certificate
evidencing such Shares is issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder will exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. Subject to the provisions of Sections 12(d),
17, and 18, the Company will issue (or cause to be issued) such stock
certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 14
of this Plan. Notwithstanding the foregoing, the Administrator in its
discretion may require the Company to retain possession of any certificate
evidencing Shares of Common Stock acquired upon exercise of an Option, if
those Shares remain subject to repurchase under the provisions of the
Option Agreement or any other agreement between the Company and the
Optionee, or if those Shares are collateral for a loan or obligation due to
the Company.
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Exercising an Option in any manner will decrease the number of Shares
thereafter available, both for purposes of this Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment Relationship or Directorship. If an
Optionee holds exercisable Options on the date his or her Continuous Status
as an Employee or Director terminates (other than because of termination
due to Cause, death or Disability), the Optionee may exercise those Options
until their expiration as set forth in the Option Agreement (which, in the
case of Incentive Stock Options, shall not be later than 90 days after the
date of such termination). If the Optionee is not entitled to exercise his
or her entire Option at the date of such termination, the Shares covered by
the unexercisable portion of the Option will revert to this Plan. If the
Optionee does not exercise an Option within the time specified above after
termination, that Option will expire, and the Shares covered by it will
revert to this Plan.
(c) Disability of Optionee. If an Optionee holds exercisable Options
on the date his or her Continuous Status as an Employee or Director
terminates because of Disability, the Optionee may exercise those Options
until their expiration as set forth in the Option Agreement. If the
Optionee is not entitled to exercise his or her entire Option at the date
of such termination, the Shares covered by the unexercisable portion of the
Option will revert to this Plan. If the Optionee does not exercise an
Option within the time specified above after termination, that Option will
expire, and the Shares covered by it will revert to this Plan.
(d) Death of Optionee. If an Optionee holds exercisable Options on the
date his or her death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance may exercise those
Options until their expiration as set forth in the Option Agreement. If the
Optionee is not entitled to exercise his or her entire Option at the date
of death, the Shares covered by the unexercisable portion of the Option
will revert to this Plan. If the Optionee's estate or a person who acquired
the right to exercise the Option by bequest or inheritance does not
exercise an Option within the time specified above after termination, that
Option will expire, and the Shares covered by it will revert to this Plan.
(e) Termination for Cause. If an Optionee's Continuous Status as an
Employee or Director is terminated for Cause, then all Options (including
any vested Options) held by Optionee shall immediately be terminated and
canceled.
(f) Disqualifying Dispositions of Incentive Stock Options. If Common
Stock acquired upon exercise of any Incentive Stock Option is disposed of
in a disposition that, under Section 422 of the Code, disqualifies the
holder from the application of Section 421(a) of the Code, the holder of
the Common Stock immediately before the disposition will comply with any
requirements imposed by the Company in order to enable the Company to
secure the related income tax deduction to which it is entitled in such
event.
12. Non-Transferability of Options.
(a) No Transfer. An Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will
or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. Notwithstanding the
foregoing, to the extent that the Administrator so authorizes at the time a
Nonqualified Stock Option is granted or amended, (i) such Option may be
assigned pursuant to a qualified domestic relations order as defined by the
Code, and exercised by the spouse of the Optionee who obtained such Option
pursuant to such qualified domestic relations order, and (ii) such Option
may be assigned, in whole or in part, during the Optionee's lifetime to one
or more Family Members of the Optionee. Rights under the assigned portion
may be exercised by the Family Member(s) who acquire a proprietary interest
in such Option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the Option
immediately before such assignment and shall be set forth in such documents
issued to the assignee as the Administrator deems appropriate.
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(b) Designation of Beneficiary. An Optionee may file a written
designation of a beneficiary who is to receive any Options that remain
unexercised in the event of the Optionee's death. If a participant is
married and the designated beneficiary is not the spouse, spousal consent
will be required for the designation to be effective. The Optionee may
change such designation of beneficiary at any time by written notice to the
Administrator, subject to the above spousal consent requirement.
(c) Effect of No Designation. If an Optionee dies and there is no
beneficiary validly designated and living at the time of the Optionee's
death, the Company will deliver such Optionee's Options to the executor or
administrator of his or her estate, or if no such executor or administrator
has been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such Options to the spouse or to any one or more
dependents or relatives of the Optionee, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
(d) Death of Spouse or Dissolution of Marriage. If an Optionee
designates his or her spouse as beneficiary, that designation will be
deemed automatically revoked if the Optionee's marriage is later dissolved.
Similarly, any designation of a beneficiary will be deemed automatically
revoked upon the death of the beneficiary if the beneficiary predeceases
the Optionee. Without limiting the generality of the preceding sentence,
the interest in Options of a spouse of an Optionee who has predeceased the
Optionee or (except as provided in Section 12(a) regarding qualified
domestic relations orders) whose marriage has been dissolved will
automatically pass to the Optionee, and will not be transferable by such
spouse in any manner, including but not limited to such spouse's will, nor
will any such interest pass under the laws of intestate succession.
13. Withholding Taxes. The Company will have the right to take whatever
steps the Administrator deems necessary or appropriate to comply with all
applicable federal, state, local, and employment tax withholding requirements,
and the Company's obligations to deliver Shares upon the exercise of an Option
will be conditioned upon compliance with all such withholding tax requirements.
Without limiting the generality of the foregoing, upon the exercise of an
Option, the Company will have the right to withhold taxes from any other
compensation or other amounts which it may owe to the Optionee, or to require
the Optionee to pay to the Company the amount of any taxes which the Company may
be required to withhold with respect to the Shares issued on such exercise.
Without limiting the generality of the foregoing, the Administrator in its
discretion may authorize the Optionee to satisfy all or part of any withholding
tax liability by (a) having the Company withhold from the Shares which would
otherwise be issued on the exercise of an Option that number of Shares having a
Fair Market Value, as of the date the withholding tax liability arises, equal to
or less than the amount of the Company's withholding tax liability, or (b) by
delivering to the Company previously-owned and unencumbered Shares of the Common
Stock having a Fair Market Value, as of the date the withholding tax liability
arises, equal to or less than the amount of the Company's withholding tax
liability.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, if the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company or a successor entity, or for
other property (including without limitation, cash), through
reorganization, recapitalization, reclassification, stock combination,
stock dividend, stock split, reverse stock split, spin off or other similar
transaction, an appropriate and proportionate adjustment will be made in
the maximum number and kind of shares as to which Options may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options which have been granted prior to
any such change will likewise be made. Any such adjustment in the
outstanding Options will be made without change in the aggregate purchase
price applicable to the unexercised portion of the Options but with a
corresponding adjustment in the price for each share or other unit of any
security covered by the Option. Such adjustment will be made by the
Administrator, whose determination in that respect will be final, binding,
and conclusive.
Where an adjustment under this Section 14(a) is made to an Incentive
Stock Option, the adjustment will be made in a manner which will not be
considered a "modification" under the provisions of subsection 424(h)(3) of
the Code.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option had
not been previously exercised , it will terminate immediately prior to the
consummation of such proposed dissolution or liquidation. In such instance,
the Administrator may, in the exercise of its sole discretion, declare that
any Option will terminate as of a date fixed by the Administrator and give
each Optionee the right to exercise his or her Option as to all or any part
of the Optioned Stock, including Shares as to which the Option would not
otherwise be exercisable.
(c) Corporate Transaction. Upon the happening of a merger,
reorganization or sale of substantially all of the assets of the Company,
the Administrator, may, in its sole discretion, do one or more of the
following: (i) shorten the period during which Options are exercisable
(provided they remain exercisable for at least 30 days after the date
notice of such shortening is given to the Optionees); (ii) accelerate any
vesting schedule to which an Option is subject; (iii) arrange to have the
surviving or successor entity or any parent entity thereof assume the
Options or grant replacement options with appropriate adjustments in the
option prices and adjustments in the number and kind of securities issuable
upon exercise or adjustments so that the Options or their replacements
represent the right to purchase the shares of stock, securities or other
property (including cash) as may be issuable or payable as a result of such
transaction with respect to or in exchange for the number of Shares of
Common Stock purchasable and receivable upon exercise of the Options had
such exercise occurred in full prior to such transaction; or (iv) cancel
Options upon payment to the Optionees in cash or securities having a Fair
Market Value, with respect to each Option to the extent then exercisable
(including, if applicable, any Options as to which the vesting schedule has
been accelerated as contemplated in clause (ii) above), of an amount that
is the equivalent of the excess of the Fair Market Value of the Common
Stock (at the effective time of the merger, reorganization, sale or other
event) over the exercise price of the Option. The Administrator may also
provide for one or more of the foregoing alternatives in any particular
Option Agreement.
15. Date of Grant. The date of grant of an Option will be, for all
purposes, the date as of which the Administrator makes the determination
granting such Option, or any other, later date determined by the Administrator
and specified in the Option Agreement. Notice of the determination will be
provided to each Optionee within a reasonable time after the date of grant.
16. Amendment and Termination of this Plan.
(a) Amendment and Termination. The Board may at any time amend, alter
or suspend or terminate this Plan.
(b) Shareholder Approval. The Company will obtain shareholder approval
of any Plan amendment that increases the number of Shares for which Options
may be granted, or to the extent necessary and desirable to comply with
Section 422 of the Code (or any successor statute) or other Applicable
Laws, or the requirements of any exchange or quotation system on which the
Common Stock is listed or quoted. Such shareholder approval, if required,
will be obtained in such a manner and to such a degree as is required by
the Applicable Law or requirement.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of this Plan will impair the rights of a
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator. Any such agreement must be in writing and signed by the
Optionee and the Company.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares will comply with all Applicable Laws, and will
be further subject to the approval of counsel for the Company with respect
to such compliance. Any securities delivered under this Plan will be
subject to such restrictions, and the person acquiring such securities
will, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or
desirable to assure compliance with all Applicable Laws. To the extent
permitted by Applicable Laws, this Plan and Options granted hereunder will
be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
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(b) Investment Representation. As a condition to the exercise of an
Option , the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being acquired only for investment and without any present intention to
sell, transfer, or distribute such Shares.
18. Liability of Company.
(a) Inability to Obtain Authority. If the Company cannot, by the
exercise of commercially reasonable efforts, obtain authority from any
regulatory body having jurisdiction for the sale of any Shares under this
Plan, and such authority is deemed by the Company's counsel to be necessary
to the lawful issuance of those Shares, the Company will be relieved of any
liability for failing to issue or sell those Shares.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by
an Option exceed, as of the date of grant, the number of Shares which may
be issued under this Plan without additional shareholder approval, that
Option will be contingent with respect to such excess Shares, unless and
until shareholder approval of an amendment sufficiently increasing the
number of Shares subject to this Plan is timely obtained in accordance with
Section 16(a).
(c) Rights of Participants and Beneficiaries. The Company will pay all
amounts payable under this Plan only to the Optionee, or beneficiaries
entitled thereto pursuant to this Plan. The Company will not be liable for
the debts, contracts, or engagements of any Optionee or his or her
beneficiaries, and rights to cash payments under this Plan may not be taken
in execution by attachment or garnishment, or by any other legal or
equitable proceeding while in the hands of the Company.
19. Reservation of Shares. The Company will at all times reserve and keep
available for issuance a number of Shares sufficient to satisfy this Plan's
requirements during its term.
20. Shareholder Approval. Continuance of this Plan will be subject to
approval by the shareholders of the Company within 12 months before or after the
date of its adoption. Such shareholder approval will be obtained in the manner
and to the degree required under Applicable Laws. Options may be granted but
Options may not be exercised prior to shareholder approval of this Plan. If any
Options are so granted and shareholder approval is not obtained within 12 months
of the date of adoption of this Plan by the Board, those Options will terminate
retroactively as of the date they were granted.
21. Legending Share Certificates. In order to enforce any restrictions
imposed upon Common Stock issued upon exercise of an Option granted under this
Plan or to which such Common Stock may be subject, the Administrator may cause a
legend or legends to be placed on any share certificates representing such
Common Stock, which legend or legends will make appropriate reference to such
restrictions, including, but not limited to, a restriction against sale of such
Common Stock for any period of time as may be required by Applicable Laws.
Additionally, and not by way of limitation, the Administrator may impose such
restrictions on any Common Stock issued pursuant to this Plan as it may deem
advisable.
22. No Employment Rights. Neither this Plan nor any Option will confer upon
an Optionee any right with respect to continuing the Optionee's employment
relationship with the Company, or continuing service as a Director, nor will
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment relationship or directorship at any time, with or
without cause.
23. Governing Law. This Plan will be governed by, and construed in
accordance with the laws of the State of California (without giving effect to
conflicts of law principles).
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APPENDIX B
WILLIAMS-SONOMA, INC.
2001 INCENTIVE BONUS PLAN
1. Adoption, Name and Effective Date. Williams-Sonoma, Inc., a California
corporation (the "Company"), hereby adopts the Williams-Sonoma, Inc. 2001
Incentive Bonus Plan (this "Plan") effective as of January 24, 2001, and first
applying with respect to the fiscal year ending February 3, 2002, subject to
stockholder approval at the 2001 Annual Meeting of Stockholders as described
below.
2. Purpose. The purpose of this Plan is to provide additional compensation
as an incentive to executive officers to attain certain specified performance
objectives of the Company and to ensure the continued availability of their
full-time or part-time services to the Company and its subsidiary and affiliated
corporations. This Plan is also intended to qualify as a "performance-based"
plan as described in Section 162(m)(4)(C) of the Internal Revenue Code of 1986,
as amended (including proposed, temporary and final regulations promulgated
thereunder from time to time, the "Code"), and thereby secure the full
deductibility for federal income tax purposes of bonus compensation paid to
persons who are "executive officers" of the Company, as such term is defined in
Rule 3b-7 under the Securities Exchange Act of 1934, as amended (or any
successor rule or regulation), or who are "covered employees" of the Company or
its subsidiary or affiliated corporations under Section 162(m)(3) of the Code.
3. Administrative Committee. This Plan will be administered by a committee
(the "Committee") of the Company's Board of Directors (the "Board"), consisting
entirely of two or more persons who are "outside directors" within the meaning
of Section 162(m) of the Code. The Committee is hereby vested with full powers
of administration, subject only to the provisions set forth herein.
The Committee shall hold its meetings at such times and places as it may
determine, shall keep minutes of its meetings and shall adopt, amend or revoke
such rules and procedures as it deems proper for the administration of this
Plan; provided, however, that it shall take action only upon the agreement of a
majority of the whole Committee. Any action that the Committee takes through a
written instrument signed by a majority of its members shall be effective as
though it had been taken at a meeting duly called and held. The Committee shall
report all actions taken by it to the Board.
The Committee shall have the full and final discretion and authority,
subject to the provisions of this Plan, to grant awards pursuant to this Plan,
to construe and interpret this Plan and to make all other determinations and
take all other actions which it deems necessary or appropriate for the proper
administration of this Plan. All such interpretations, actions and
determinations shall be conclusively binding for all purposes and upon all
persons.
4. Eligibility. For each fiscal year of the Company, the participants
entitled to share in the benefits of this Plan are persons (collectively,
"executives" or "participants") who are "executive officers" of the Company, as
such term is defined in Rule 3b-7 under the Securities Exchange Act of 1934, as
amended (or any successor rule or regulation), or who are "covered employees" of
the Company or its subsidiary or affiliated corporations under Section 162(m)(3)
of the Code (collectively, the "Covered Employees"). Except as provided in
Section 6.4, an executive whose employment or service relationship with the
Company is terminated for any reason prior to the end of any award period will
not be entitled to participate in this Plan or receive any benefits with respect
to any later fiscal year, unless he or she again becomes eligible to participate
in this Plan under the first sentence of this Section 4.
5. Determination of Awards; Limitations on Amounts of Awards.
5.1 Performance Measures for Determination of Awards. The Committee in
its discretion shall establish, for each participant in this Plan and for each
performance award period, a performance award opportunity based upon the
achievement of a specified goal relating to the following measures (singly or in
combination): revenues (in the aggregate or for particular product lines or
markets); earnings per share; earnings before interest, taxes, depreciation and
amortization; or before-tax or after-tax net profits. The
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maximum award under this Plan for each award period to any participant shall not
exceed the lesser of (i) $2,000,000 or (ii) 200% of such participant's annual
base salary in effect on the first day of the first fiscal year of such award
period, multiplied by the number of complete or partial fiscal years in such
award period; provided, however, in the case of a restricted stock award to Dale
Hilpert ("Mr. Hilpert"), the maximum number of shares that may be awarded shall
be 250,000 shares, with such number to be adjusted in the manner determined by
the Committee to reflect any recapitalization, stock split, stock dividend,
reorganization, reclassification, reverse stock split, or similar transaction
affecting the capital stock of the Company. Each performance goal established
under this Plan shall be established by the Committee not later than the earlier
of the date which is 90 days after the first day of the performance award
period, or the date on which 25% of the award period has elapsed.
5.2 Determination of Amount of Individual Awards. For each award
period, each participant who is or may be a Covered Employee for such award
period shall receive an award equal to the specific amount (subject to decrease
as provided in this Section 5.2) determined strictly under the performance goals
established pursuant to Section 5.1. For each award period, each participant who
is not a Covered Employee for such award period shall receive an award which may
be either (a) equal to the specific amount (subject to decrease as provided in
this Section 5.2) determined strictly under the performance goals established
pursuant to Section 5.1, or (b) an amount determined in the discretion of the
Committee within a range determined under the performance goals established
pursuant to Section 5.1. Solely in the case of Mr. Hilpert, an award may consist
of the grant of restricted stock of the Company, as determined under the
performance goals established pursuant to Section 5.1. In the case of an award
of restricted stock to Mr. Hilpert, the Committee will condition the grant of
the award on the agreement of Mr. Hilpert not to make the election described in
Section 83(b) of the Code, and will determine and establish the restrictions on
such restricted stock. The Committee shall not have the discretion to increase,
but shall have the discretion to decrease, any award determined in accordance
with this Plan. The reduction in any participant's award for any award period as
a result of the Committee's exercise of such discretion shall not increase the
amount of an award to any other participant (through reallocation of unutilized
awards or otherwise) with respect to such award period.
6. Award Periods; Payment of Awards.
6.1 Award Periods. All awards shall be made on the basis of an award
period, which shall consist of one or more fiscal years of the Company, or one
or more quarters thereof. The award period may be different for different
awards.
6.2 Committee Certifications. As a condition precedent to the payment
of any award (or, in the case of the granting of Mr. Hilpert's award of
restricted stock), the Committee shall certify, as soon as practicable following
the end of the award period, that the objective performance goal for the award
has been satisfied and that the amount of the award is no greater than the
limitations set forth in Section 5.1. The Committee shall make such
determination by means of a written resolution of the Committee that is
maintained in the minute book of the Company.
6.3 Payment of Awards. Except for the award of restricted stock to Mr.
Hilpert, awards under this Plan will be paid in cash (or, if the participant is
indebted to the Company, by cancellation of such indebtedness), reasonably
promptly following the conclusion of the award period and the certification of
the Committee as set forth in Section 6.2, but in no event later than two and
one-half months after the conclusion of the fiscal year of the Company in which
or with which the award period ends. In the case of the award of restricted
stock to Mr. Hilpert, Mr. Hilpert will be granted the restricted stock,
reasonably promptly following the conclusion of the award period and the
certification of the Committee as set forth in Section 6.2, but in no event
later than two and one-half months after the conclusion of the fiscal year of
the Company in which or with which the award period ends. All awards under this
Plan will be subject to withholding for applicable employment and income taxes.
6.4 Termination of Employment. An award that would otherwise be payable
to a participant (including, without limitation, an award of restricted stock to
Mr. Hilpert) who is not employed by the Company on the last day of an award
period will not be paid (or will not be granted, as the case may be), except
that, on the grant of an award, the Committee may specify that the award will be
paid (or will be
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granted, as the case may be) in full or on a prorated basis in the event that,
before the end of such award period, the participant dies, becomes "disabled,"
retires in accordance with the Company's policies, is involuntarily terminated
by the Company without "cause," or voluntarily terminates his or her employment
with the Company for "good reason," or if a "change in control" of the Company
occurs. For purposes of this Section 6.4, terms "cause," "good reason," and
"change in control" shall be as defined in the participant's employment
agreement with the Company, or, if not so defined, shall be defined in writing
by the Committee at the time of the grant of the award.
7. Nonassignment. The interest of any participant in this Plan is not
assignable either by voluntary or involuntary assignment or operation of law
(except that, in the event of death, earned and unpaid amounts shall be payable
to the legal successor of a participant).
8. Indemnification. No employee, member of the Committee or director of the
Company will have any liability for any decision or action if made or done in
good faith, nor for any error or miscalculation unless such error or
miscalculation is the result of his or her fraud or deliberate disregard of any
provisions of this Plan. The Company will indemnify each director, member of the
Committee and any employee acting in good faith pursuant to the Plan against any
loss or expense arising therefrom.
9. Amendment, Suspension or Termination. The Board may from time to time
amend, suspend or terminate, in whole or in part, any or all the provisions of
this Plan; provided, however, that no such action shall adversely affect the
right of any participant with respect to any award of which he or she may have
become entitled to payment hereunder prior to the effective date of such
amendment, suspension or termination. In particular, but without limitation, the
Board shall have the authority to amend or modify this Plan from time to time in
order to reflect amendments to or regulations promulgated under Section 162(m)
of the Code. Notwithstanding the foregoing, in the event that any amendment or
other modification of or to this Plan expands the class of persons eligible to
participate as set forth in Section 4, raises the limits set forth in the last
sentence of Section 5.1 or requires stockholder approval in order to continue
the compliance of this Plan as a "performance-based" plan under Section 162(m)
of the Code, such amendment or modification shall be contingent on the receipt
of stockholder approval.
10. Limitations; Participation in Other Plans. This Plan is not to be
construed as constituting a contract of employment or for services. Nothing
contained herein will affect or impair the Company's right to terminate the
employment or other contract for services of a participant hereunder, or entitle
a participant to receive any particular level of compensation. The Company's
obligation hereunder to make awards merely constitutes the unsecured promise of
the Company to make such awards from its general assets, and no participant
hereunder will have any interest in, or a lien or prior claim upon, any property
of the Company. Nothing herein nor the participation by any participant shall
limit the ability of such participant to participate in any other compensatory
plan or arrangement of the Company, or to receive a bonus from the Company other
than under this Plan.
11. Governing Law. The terms of this Plan will be governed by and construed
in accordance with the laws of the State of California, without regard to
principles of conflict of laws.
12. Term. This Plan shall continue in place until the fifth anniversary of
the effective date, unless earlier terminated by the Board as provided in
Section 9. No awards shall be paid under this Plan unless and until the material
terms (within the meaning of Section 162(m)(4)(C) of the Code) of this Plan are
disclosed to the Company's stockholders and are approved by the stockholders by
a majority of votes cast in person or by proxy.
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APPENDIX C
WILLIAMS-SONOMA, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by Williams-Sonoma,
Inc. (the "Company") to any governing body or the public, the Company's systems
of internal controls regarding finance and accounting that management and the
Board have established, and the Company's auditing, accounting, and financial
reporting processes in general.
Consistent with this function, the Audit Committee should encourage
continuous improvement of, and should foster adherence to, the Company's
policies, procedures, and practices at all levels. The Audit Committee's primary
duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Company's independent
auditors and Internal Audit Department.
- Provide an open avenue of communication among the independent auditors,
financial and senior management, the Internal Audit Department, and the
Board of Directors.
FORMATION
The Board of Directors of Williams-Sonoma, Inc. has established the Audit
Committee pursuant to Section 311 of the General Corporation Law of the State of
California and Article III of the Company's Restated Bylaws.
COMPOSITION
The Audit Committee shall be comprised of not less than three independent
members of the Company's Board of Directors. Subject to the foregoing, the exact
number of members of the Audit Committee shall be fixed and may be changed from
time to time by resolution duly adopted by the Board of Directors. The
qualifications of each member of the Audit Committee shall be as follows:
- No member shall have any relationship to the Company that, in the
determination of the Board of Directors, may interfere with his or her
exercise of independent judgment as a member of the Audit Committee.
- Each member shall be "financially literate" as determined by the Board of
Directors. A director shall be considered "financially literate" if by
reason of his or her educational, professional or business background,
the director is able to read and understand fundamental financial
statements, including a company's balance sheet, income statement and
statement of cash flows.
- At least one member of the Audit Committee must have accounting or
related financial management expertise. A member shall be considered to
have such expertise if he or she: (1) has a graduate degree in accounting
or business; (2) is a certified public accountant or has similar
professional certification in accounting; or (3) has served as chief
executive officer, chief financial or principal accounting officer,
controller or other senior officer of a company with similar financial
oversight responsibilities.
- No member of the Audit Committee shall be an employee or non-employee
executive officer of the Company or any of its affiliates. A former
employee or former executive officer shall not be eligible to
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serve as a member of the Audit Committee until three years following
termination of his or her employment or status as an officer.
- A director who (1) has a material business relationship with the Company
(e.g., a consultant) or (2) is a partner, controlling shareholder, or
executive officer of any organization that has a material business
relationship with the Company shall not be eligible to serve as a member
of the Audit Committee.
- No director shall be eligible to serve as a member of the Audit Committee
if he or she is employed as an executive of another organization if any
of the Company's executives serve as a member of the compensation
committee of such other organization.
- No director who is an "immediate family member" of an individual who is
an executive officer of the Company or any of its affiliates is eligible
to serve on the Audit Committee until three years following termination
of such employment relationship.
- The members of the Audit Committee shall be elected by the Board of
Directors until their successors shall be duly elected and qualified.
Unless a Chair is elected by the full Board, the members of the Committee
may designate a Chair by majority vote of the full Committee membership.
FUNCTIONS
The Audit Committee shall:
A. Independent Auditors
- Recommend to the Board of Directors each year the independent public
accounting firm to be engaged to audit the Company's financial
statements.
- Meet with the independent auditors to review and approve the plan and
scope for each audit of the Company's financial statements and related
services, including proposed fees to be incurred with respect thereto.
- Discuss with the Company's independent auditors the matters required
to be communicated by the independent auditors to the Audit Committee.
- At least annually, discuss with the independent auditors their
independence and receive each of the following in writing:
- Disclosure of all relationships between the independent auditors and
their related entities and the Company and its related entities that
in the independent auditors' professional judgment may reasonably be
thought to bear on independence; and
- Confirmation that, in the independent auditors' professional
judgment, they are independent of the Company within the meaning of
the federal securities laws.
- Discuss with the Company's independent auditors any relationships or
services disclosed by the independent auditors that may impact the
objectivity and independence of the independent auditors and recommend
to the Board of Directors any actions in response to the independent
auditors' disclosures to satisfy itself of the independent auditors'
independence.
- Evaluate the performance of the Company's independent auditors and
recommend to the Board of Directors any proposed discharge of the
Company's independent auditors.
B. Financial Statements and Documents
- Review the Company's annual financial statements and any reports or
other financial information submitted to any government body, or the
public, including any certification, report, opinion, or review
rendered by the independent auditors.
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- Based on (1) its review and discussions with management of the
Company's audited financial statements; (2) its discussions with the
independent auditors; and (3) the written disclosures from the
Company's independent auditors regarding independence, recommend to
the Company's Board of Directors whether the Company's audited
financial statements should be included in the Company's Annual Report
on Form 10-K for filing with the Securities and Exchange Commission
(the "SEC").
- Review with financial management and the Company's independent
auditors the Company's quarterly reports on Form 10-Q prior to filing
with the SEC. The Chair of the Audit Committee may represent the
entire Committee for this review.
C. Financial Reporting Process
- In consultation with the independent auditors and the internal
auditors, review the integrity of the Company's financial reporting
process, both internal and external.
- Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
- Consider and approve, if appropriate, changes to the Company's
accounting principles and practices as suggested by management.
- Periodically discuss with the independent auditors without the
presence of Company management ("Executive Session") the internal
controls and the quality and integrity of the Company's financial
statements.
- Review the scope and results of the Company's internal auditing
procedures and practices and oversee the effectiveness thereof.
D. Management Conduct Policies
- Review from time to time and make recommendations with respect to the
Company's policies relating to management conduct and oversee
procedures and practices to ensure compliance therewith. Such policies
shall include those relating to (1) transactions between the Company
and members of its management, (2) political contributions and other
sensitive payments, (3) compliance with the Foreign Corrupt Practices
Act, and (4) corporate or competitive opportunities offered or enjoyed
by members of such management.
E. Other Duties
- At least annually, review the adequacy of this Charter and recommend
to the Company's Board of Directors any changes to this Charter that
the Audit Committee deems necessary or desirable.
- Perform such other specific functions as the Company's Board of
Directors may from time to time direct, and make such investigations
and reviews of the Company and its operations as the Chief Executive
Officer or the Board of Directors may from time to time request.
MEETINGS
A. The Audit Committee shall keep regular minutes of its meetings. Meetings
and actions of the Audit Committee shall be governed by, and held and taken in
accordance with, the provisions of Article III, Section 3.9 of the Company's
Restated Bylaws.
B. Regular meetings of the Audit Committee shall be held at least four
times a year.
C. The Audit Committee should meet at least annually with management, the
Director of Internal Audit, and the independent auditors in separate executive
sessions to discuss any matters that the Audit Committee or each of these groups
believe should be discussed privately.
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PROXY
WILLIAMS-SONOMA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Williams-Sonoma, Inc. (the "Company") hereby
appoints W. Howard Lester and Patrick J. Connolly, and each of them, with full
power of substitution to each, true and lawful attorneys, agents and
proxyholders of the undersigned, and hereby authorizes them to represent and
vote, as specified herein, all shares of Common Stock of the Company Stock of
the Company held of record by the undersigned on March 27, 2001 at the 2001
Annual Meeting of Shareholders of the Company, to be held on Wednesday, May 23,
2001 at 10:00 a.m. (Pacific Daylight Time) at 3250 Van Ness Avenue, San
Francisco, California 94109, and any adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED ON THIS
PROXY BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE NAMED DIRECTORS, FOR PROPOSAL 2, FOR PROPOSAL 3, AND FOR
PROPOSAL 4.
(PLEASE DATE AND SIGN ON REVERSE SIDE.)
-----------
SEE REVERSE
SIDE
-----------
*FOLD AND DETACH HERE*
46
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" Please mark [ X ]
ITEMS 1, 2, 3 AND 4. your vote as
indicated in
this example.
1. ELECTION OF DIRECTORS 2. Proposal to approve the Williams-Sonoma, Inc. FOR AGAINST ABSTAIN
2001 Stock Option Plan. [ ] [ ] [ ]
FOR the election as WITHHOLD
directors of all AUTHORITY 3. Proposal to approve the Williams-Sonoma, Inc. FOR AGAINST ABSTAIN
nominees listed to vote for 2001 Incentive Bonus Plan. [ ] [ ] [ ]
(except as marked all nominees
to the contrary). listed. 4. Proposal to ratify the selection of Deloitte & FOR AGAINST ABSTAIN
touche LLP as independent auditors for the [ ] [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE 2001 fiscal year.
FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT NOMINEE'S NAME IN THE LIST
BELOW): 5. THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, THE
PROXYHOLDERS ARE AUTHORIZED TO VOTE IN THEIR DISCRETION FOR THE ELECTION OF
Charles E. Williams Edward A. Mueller THE NAMED DIRECTORS, FOR PROPOSAL 2, FOR PROPOSAL 3, AND FOR PROPOSAL 4.
W. Howard Lasler Michael R. Lunch THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXYHOLDERS TO VOTE
James A. McMahan Heather M. Reisman AS TO ANY OTHER MATTER THAT IS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING
Dale W. Hilpert John E. Martin THAT THE BOARD OF DIRECTORS DID NOT HAVE NOTICE OF PRIOR TO THE DATE SPECIFIED
Patrick J. Connolly Richard T. Robertson IN THE PROXY STATEMENT.
Adrian D.P. Bellamy
NOTE: When stock has been issued in the name of two or more
persons, all should sign. When signing as attorney,
administrator, trustee or guardian, give full title as such.
A corporation should have the name signed by its president
or other authorized officer, with the office held
designated. The undersigned hereby acknowledges receipt of
the Notice of Annual Meeting of Shareholders, the Proxy
Statement and the Annual Report for the 2000 Fiscal Year
furnished herewith.
-----------------------------------------------------------
Please Print Name(s)
Signature(s)_____________________________________________________________________________ Date __________________________, 2001
Please sign exactly as your name or names appear on this proxy and return it
promptly in the enclosed envelope.
* FOLD AND DETACH HERE *