1
Exhibit 10.6
BED BATH AND BEYOND INC.
1996 STOCK OPTION PLAN***
1 PURPOSE.
The purpose of the Bed Bath & Beyond Inc. 1996 Stock Option Plan (the
"Plan") is to encourage and enable key employees (which term, as used herein,
shall include officers), and directors of Bed Bath & Beyond Inc. or a parent (if
any) or subsidiaries thereof (collectively, unless the context otherwise
requires, the "Company"), consultants, and advisors to the Company, and other
persons or entities providing goods or services to the Company to acquire a
proprietary interest in the Company through the ownership of common stock of the
Company. (Such directors, members, consultants, advisors, and other persons or
entities providing goods or services to the Company and entitled to receive
options hereunder being collectively referred to as the "Associates," and the
relationship of the Associates to the Company being referred to as "association
with" the Company). Such ownership will provide such employees and Associates
with a more direct stake in the future welfare of the Company and encourage them
to remain employed by or associated with the Company. It is also expected that
the Plan will encourage qualified persons to seek and accept employment or
association with the Company.
2. TYPE OF OPTIONS.
Options granted pursuant to the Plan may be incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended so to qualify as an
incentive stock option being referred to herein as an "incentive option"), or
options that are not incentive options, or both. Incentive options may only be
granted to "employees" as defined in the provisions of the Code or regulations
thereunder applicable to incentive stock options.
3. EFFECTIVE DATE AND TERM OF THE PLAN.
(a) The Plan shall become effective upon approval by the shareholders of
the Company.
(b) No option shall be granted under the Plan on or after the tenth
anniversary of the date on which the Plan is adopted, but options previously
granted may extend beyond that date.
4. ADMINISTRATION.
(a) The Plan shall be administered by one or more committees appointed
from time to time by the Board (each such committee being referred to as a
"Committee"). In the event that more than one Committee is appointed by the
Board, the Board shall specify with respect to each Committee the group of
employees and Associates with respect to which such Committee shall have the
power to grant options. In the event that more than one Committee is appointed
by the Board, then each reference in the Plan to "the Committee" shall be deemed
a reference to each such Committee (subject to the last sentence of this
paragraph); provided, however, that each such Committee may only exercise the
power
- ------------------
*** As amended through August 26, 1997.
-74-
2
and authority granted to "the Committee" by the Plan with respect to those
employees and Associates that it has the power to grant options to as specified
in the resolution of the Board appointing such Committee. Each Committee shall
be comprised of two or more directors. A majority of the members of each
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of any Committee
under the Plan may be made, without notice or meeting of the Committee, by a
writing signed by a majority of the Committee members. All members of each
Committee shall be "disinterested persons" within the meaning of Rule 16(b)-3
under the Act and "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code (the "Code"); provided, however, that the foregoing
shall not apply to any Committee that does not have the power to grant options
to officers or directors of the Company or otherwise make any decisions with
respect to the timing or the pricing of any options granted to such officers and
directors. If pursuant to the preceding sentence a Committee is required to be
comprised of "disinterested persons" and "outside directors", then the members
of such Committee shall not be eligible to receive options under the Plan. In
the event that more than one Committee is appointed by the Board, the power to
amend the Plan granted by Section 10(b) hereof may only be exercised by a
Committee all of whose members are "disinterested persons" and "outside
directors" within the meaning of Rule 16(b)-3 under the Act and Section 162(m)
of the Code.
(b) The Committee shall have authority, not inconsistent with express
provisions of the Plan, (i) to grant options to such eligible employees and
Associates of the Company as the Committee may select; provided, however, that
the maximum number of options that may be granted under this Plan during any
calendar year to any employee or Associate of the Company shall not exceed
100,000 shares (subject to any adjustment in accordance with Section 8(b)), and
it is further provided that if the Committee grants to any employee or Associate
during any calendar year options to purchase a number of shares that is less
than 100,000, or does not grant any options during any calendar year to such
employee or Associate, then the amount of such shortfall shall be carried
forward and added to the maximum number of options which may be granted in a
subsequent year to such employee or Associate; (ii) to determine the time or
times when options shall be granted and the number of shares of Stock subject to
each option; (iii) to determine which options are, and which options are not,
incentive options; (iv) to determine the terms and conditions of each option;
(v) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (vi) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (vii) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration or application
of the Plan shall be final and conclusive on all persons participating in the
Plan.
5. SHARES SUBJECT TO THE PLAN.
(a) Number of Shares.
Subject to adjustment as provided in Section 8, the aggregate number of
shares of Stock that may be delivered upon the exercise of options granted under
the Plan shall be 2,000,000. If any option granted under the Plan terminates
without having been exercised in full, the number of shares of Stock as to which
such option was not exercised shall be available for future grants within the
limits set forth in this Section 5(a).
-75-
3
(b) Shares to be Delivered.
Shares delivered under the Plan shall be authorized but unissued Stock or,
if the Committee so decides in its sole discretion, previously issued Stock
acquired by the Company and held in treasury. No fractional shares of Stock
shall be delivered under the Plan.
6. ELIGIBILITY FOR OPTIONS.
Employees and Associates of the Company eligible to receive options under
the Plan shall be those employees and Associates who, in the opinion of the
Committee, are in a position to make a significant contribution to the success
of the Company. Receipt of options under the Plan or of awards under any other
employee benefit plan of the Company shall not preclude an employee from
receiving options or additional options under the Plan.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Special Rule for Incentive Options. Consistent with Section 422 of the
Code and any regulations, notices or other official pronouncements of general
applicability, to the extent the aggregate fair market value (determined in
accordance with Section 7(b) as of the time the option is granted) of the shares
of Stock with respect to which incentive options are exercisable for the first
time by the optionee during any calendar year (under all plans of his employer
corporation and its parent and subsidiary corporations) exceeds $100,000, such
options shall not be treated as incentive options. Nothing in this special rule
shall be construed as limiting the exercisability of any option, unless the
Committee expressly provides for such a limitation at time of grant.
(b) Exercise Price. The exercise price of each option shall be determined
by the Committee, subject to the following: (i) in the case of an incentive
option and all options granted by a Committee comprised of "disinterested
persons" and "outside directors", the exercise price per share of stock shall
not be less than 100% (110% for an incentive stock option granted to a greater
than ten-percent shareholder) of the fair market value per share of Stock at the
time the option is granted and (ii) in the case of all other options, the
exercise price per share of Stock shall not be less than the par value per share
(unless the Stock subject to the option is treasury stock). A "greater than
ten-percent shareholder" shall mean for purposes of the Plan any employee who at
the time of grant owns directly, or is deemed to own by reason of the
attribution rules set forth in Section 424(d) of the Code, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company. The fair market value of a share of Stock as of any date shall be
determined for purposes of the Plan as follows: (i) if the Stock is listed on a
securities exchange or quoted through the National Association of Securities
Dealers Automatic Quotation ("NASDAQ") National Market System, the fair market
value shall equal the mean between the high and low sales prices on such
exchange or through such market system, as the case may be, on such day or in
the absence of reported sales on such day, the mean between the reported bid and
asked prices on such exchange or through such market system, as the case may be,
on such day, (ii) if the Stock is not listed or quoted as described in the
preceding clause but is quoted through NASDAQ (but not through the National
Market System), the fair market value shall equal the mean between the bid and
offered prices as quoted by the National Association of Securities Dealers
through NASDAQ for such day and (iii) if the Stock is not listed or quoted on a
securities exchange or through NASDAQ, then the fair market value shall be
determined by such other method as the Committee
-76-
4
determines to be reasonable and consistent with applicable requirements of the
Code and the regulations issued thereunder applicable to incentive options;
provided, however, that if pursuant to clause (i) or (ii) fair market value is
to be determined based upon the mean of bid and asked prices and the Committee
determines that such means does not properly reflect fair market value, then
fair market value shall be determined by the Committee as provided in clause
(iii).
(c) Duration of Options. An option shall be exercisable during such period
or periods as the Committee may specify. The latest date on which an option may
be exercised (the "Final Exercise Date") shall be the date which is ten years
(five years, in the case of an incentive option granted to a "greater than
ten-percent shareholder" as defined in Section 7(b)) from the date the option
was granted or such earlier date as may be specified by the Committee at the
time the option is granted.
(d) Exercise of Options.
(1) At the time of the grant of an option, the Committee shall
specify whether the option shall be exercisable in full at any
time prior to the Final Exercise Date or in installments
(which may be cumulative or noncumulative). In the case of an
option not immediately exercisable in full, the Committee may
at any time accelerate the time at which all or any part of
the option may be exercised.
(2) The award forms or other instruments evidencing incentive
options shall contain such provisions relating to exercise and
other matters as are required of incentive options under the
applicable provisions of the Code and the regulations
thereunder, as from time to time in effect.
(3) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (a) the option certificate and any other
documents required by the Committee and (b) payment in full
for the number of shares for which the option is exercised.
(4) In the case of an option that is not an incentive option, the
Committee shall have the right to require that the individual
exercising the option remit to the Company an amount
sufficient to satisfy any federal, state, or local withholding
tax requirements (or make other arrangements satisfactory to
the Company with regard to such taxes) prior to the delivery
of any Stock pursuant to the exercise of the option. In the
case of an incentive option, if at the time the option is
exercised the Committee determines that under applicable law
and regulations the Company could be liable for the
withholding of any federal, state or local tax with respect to
a disposition of the Stock received upon exercise, the
Committee may require as a condition of exercise that the
individual exercising the option agree (i) to inform the
Company promptly of any disposition (within the meaning of
Section 424(c) of the Code and the regulations thereunder) of
Stock received upon exercise, and (ii) to give such security
as the Committee deems adequate to meet the potential
liability of the Company for the withholding of tax, and to
augment such security from time to time in any amount
reasonably deemed necessary by the Committee to preserve the
adequacy of such security.
-77-
5
(5) If an option is exercised by the executor or administrator of
a deceased employee or Associate, or by the person or persons
to whom the option has been transferred by the employee's or
Associate's will or the applicable laws of descent and
distribution, the Company shall be under no obligation to
deliver Stock pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons
exercising the option.
(e) Termination of Employment.
An employee's options shall terminate immediately upon the termination of
his employment with the Company, subject to the following exceptions: (i) if the
termination is by reason of the death or disability of the employee, the
unexercised portion of the such options shall continue to be exercisable for 12
months after such termination and (ii) if the termination is for any other
reason, excluding termination for cause, the unexercised portion of such options
shall continue to be exercisable for three months after such termination.
Notwithstanding the foregoing, the Committee in its discretion in any particular
case may provide that upon termination of an employee's employment with the
Company, the unexercised portion of his options shall continue to be exercisable
for a longer or shorter period than the period provided for in the preceding
sentence; provided, however, that (i) in the case of an incentive option, the
Committee may not provide for a shorter or longer period after the option is
granted and, in any event, may not provide for a longer period except in the
case where the employee's employment is terminated by reason of death and (ii)
in the case of an option that is not an incentive option, the Committee may not
provide for a shorter period after the option is granted. For purposes of this
Section 7(e), employment shall not be considered terminated (i) in the case of
sick leave or other bona fide leave of absence approved for purposes of the Plan
by the Committee, so long as the employee's right to reemployment is guaranteed
either by statute or by contract, or (ii) in the case of a transfer of
employment between the Company and a subsidiary or between subsidiaries, or to
the employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming an option in a transaction to which Section
424(a) of the Code applies.
(f) Payment for Stock.
Stock purchased under the Plan shall be paid for as follows: (i) in cash
or by certified check, bank draft or money order payable to the order of the
Company or (ii) if so permitted by the Committee (not later than the time of
grant, in the case of an incentive option), (A) through the delivery of shares
of Stock (including shares acquired under the option then being exercised)
having a fair market value (determined as provided in Section 7(b)) on the date
of exercise equal to the purchase price or (B) by a combination of cash and
Stock as provided in clauses (i) and (ii)(A) above or (C) by delivery of a
promissory note of the option holder to the Company, such note to be payable in
the case of an incentive option, on such terms as are specified in the option
(except that, in lieu of a stated rate of interest, an incentive option may
provide that the rate of interest on the note will be such rate as is
sufficient, at the time the note is given, to avoid the imputation of interest
under the applicable provisions of the Code), or by a combination of cash (or
cash and Stock) and the option holder's promissory note; provided, that if the
Stock delivered upon exercise of the option is an original issue of authorized
Stock, at least so much of the exercise price as represents the par value of
such Stock shall be paid in cash or by a combination of cash and Stock.
-78-
6
(g) Delivery of Stock.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him under the
Plan. The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(h) Transferability of Options.
The Committee may provide that options may be transferred to the extent
and subject to such limitations as the Committee may specify.
(i) Restrictions on Stock.
The Committee may provide that shares of Stock purchased through the
exercise of options under the Plan be subject to such restrictions on resale,
including restrictions requiring resale to the Company at or below fair market
value, or such other restrictions, as the Committee in its sole discretion shall
determine, and shall take such steps as it deems necessary or appropriate to
carry out the purposes of any such restriction.
8. MERGERS, RECAPITALIZATIONS, ETC.
(a) In the event of a consolidation or merger in which the Company is not
the surviving corporation or in the event of any transaction that results in the
acquisition of substantially all of the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all of the Company's
assets (all the foregoing being referred to as "Acquisition Events"), then the
Committee may in its discretion terminate all outstanding options by delivering
notice of termination to each option holder; provided, however, that, during the
20-day period following the date on which such notice of termination is
delivered, each option holder shall have the right to exercise in full all of
his options that are then outstanding (without regard to limitations on exercise
otherwise contained in the options). If an Acquisition Event occurs and the
Committee does not terminate the outstanding options pursuant to the preceding
sentence, then the provisions of Section 8(b) shall apply.
(b) In the event of a stock dividend stock split or combination of shares,
recapitalization or other change in the Company's capital stock, the number and
kind of shares of stock of securities of the Company subject to options then
outstanding or subsequently granted under the Plan, the maximum number of shares
or securities that may be delivered under the Plan, the exercise price, and
other relevant provisions shall be appropriately adjusted by the Committee. The
Committee may also adjust the
-79-
7
number of shares subject to outstanding options, the exercise price of
outstanding options and the terms of outstanding options to take into
consideration any other event (including, without limitation, accounting
changes) if the Committee determines that such adjustment is appropriate to
avoid distortion in the operation of the Plan. All determinations and
adjustments made by the Committee pursuant to this Section 8(b) shall be binding
on all persons.
(c) The Committee may grant options under the Plan in substitution for
options held by employees of another corporation who concurrently become
employees of the Company or a subsidiary of the Company as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as the result of the acquisition by the Company of
property or stock of the employing corporation. The Company may direct that
substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
9. LIMITATION ON RIGHTS.
Neither the adoption of the Plan nor the grant of options shall confer
upon any employee any right to continued employment with the Company or affect
in any way the right of the Company to terminate the employment of an employee
at any time. Except as specifically provided by the Committee in any particular
case, the loss of existing or potential profit in options granted under this
Plan shall not constitute an element of damages in the event of termination of
the employment of an employee even if the termination is in violation of an
obligation of the Company to the employee by contract or otherwise.
10. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION.
(a) Neither adoption of the Plan nor the grant of options to an employee
shall affect the Company's right to grant to such employee options that are not
subject to the Plan, to issue to such employees Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
employees.
(b) The Committee may at any time discontinue granting options under the
plan. With the consent of the option holder, the Board may at any time cancel an
existing option in whole or in part and grant the option holder another option
for such number of shares as the Committee specifies. The Committee may at any
time or times amend the Plan or any outstanding option for the purpose of
satisfying the requirement of Section 422 of the Code or of any changes in
applicable laws or regulations or for any other purpose which may at the time be
permitted by law, or at any time terminate the Plan as to any further grants of
options, provided that (except to the extent expressly required or permitted
above) no such amendment shall, without the approval of the shareholders of the
Company, (a) increase the maximum number of shares available under the Plan, (b)
change the group of employees eligible to receive options under the Plan, (c)
reduce the price at which incentive options may be granted, (d) extend the time
within which incentive options may be granted, (e) extend the time within which
options may be granted, (f) alter the Plan in such a way that incentive options
already granted hereunder would not be considered incentive stock options under
Section 422 of the Code, or (g) amend the provisions of this Section 10, and no
such amendment shall adversely affect the rights of any option holder (without
his consent) under any option previously granted.
-80-