Pottery Barn 2010 Annual Report Download - page 117

CERTIFICATES FOR SHARES IN W-S CALIFORNIA WILL AUTOMATICALLY REPRESENT
SHARES IN W-S DELAWARE UPON COMPLETION OF THE MERGER, AND SHAREHOLDERS
WILL NOT BE REQUIRED TO EXCHANGE STOCK CERTIFICATES AS A RESULT OF THE
REINCORPORATION.
The Reincorporation Agreement provides that the Board may abandon the Reincorporation at any time prior to
the Effective Time if the Board determines that the Reincorporation is inadvisable for any reason. For example,
the DGCL or the California General Corporation Law may be changed to reduce the benefits that the company
hopes to achieve through the Reincorporation, or the costs of operating as a Delaware corporation may be
increased, although the company does not know of any such changes under consideration. The Reincorporation
Agreement may be amended at any time prior to the Effective Time, either before or after the shareholders have
voted to adopt the proposal, subject to applicable law. The company will re-solicit shareholder approval of the
Reincorporation if the terms of the Reincorporation Agreement are changed in any material respect.
Are there any disadvantages to the Reincorporation?
Notwithstanding the belief of the Board as to the benefits to our shareholders of the Reincorporation, it should be
noted that Delaware law has been criticized by some commentators and institutional shareholders on the grounds
that it does not afford minority shareholders the same substantive rights and protections as are available in a
number of other states, including California. In addition, the Delaware Certificate and the Delaware Bylaws, in
comparison to the California Articles and the California Bylaws, contain or eliminate certain provisions that may
have the effect of reducing the rights of minority shareholders. The Reincorporation may make it more difficult
for minority shareholders to elect directors and influence our policies. It should also be noted that the interests of
the Board, management and affiliated shareholders in voting on the Reincorporation proposal may not be the
same as those of unaffiliated shareholders. In addition, franchise taxes payable by us in Delaware may be greater
than in California.
The Board has considered the potential disadvantages of the Reincorporation and has concluded that the potential
benefits outweigh the possible disadvantages.
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