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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
BED BATH & BEYOND INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPIES
BED BATH & BEYOND INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 26, 1998
To the Shareholders:
On behalf of the Board of Directors, it is our pleasure to invite you to
attend the Annual Meeting of Shareholders of Bed Bath & Beyond Inc. to be held
at the Headquarters Plaza Hotel, 3 Headquarters Plaza, Morristown, New Jersey on
Friday, June 26, 1998 at 9:00 a.m. (local time).
The Annual Meeting will be held for the following purposes:
1. To elect two directors to serve for three years until the Annual
Meeting in 2001 and until their successors have been elected and qualified
(Proposal 1).
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending February 27, 1999 (Proposal 2).
3. To approve and ratify the adoption of the Bed Bath & Beyond Inc.
1998 Stock Option Plan (Proposal 3).
4. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 150 million shares to 350
million shares (Proposal 4).
5. To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on May 8, 1998 are
entitled to notice of the meeting and to vote at it or any adjournment or
adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. If it is convenient for you to do so, we hope you will attend
the meeting. If you cannot attend the meeting, we urge you to fill out the
enclosed proxy card and return it to us in the envelope provided so that your
stock may be voted. No postage is required.
WARREN EISENBERG,
Chairman and
Co-Chief Executive Officer
LEONARD FEINSTEIN,
President and
Co-Chief Executive Officer
Union, New Jersey
May 15, 1998
PLEASE COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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BED BATH & BEYOND INC.
650 LIBERTY AVENUE
UNION, NEW JERSEY 07083
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bed Bath & Beyond Inc., a New York
corporation (the "Company"), for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on June 26, 1998. This Proxy Statement and form of
proxy are being mailed to shareholders on or about May 15, 1998. A copy of the
1997 Annual Report to Shareholders is being mailed with this Proxy Statement.
Sending in a signed proxy will not affect a shareholder's right to attend
the Annual Meeting and vote in person. A proxy may be revoked at any time before
it is exercised by delivering a written notice to the Secretary of the Company
stating that the proxy is revoked, by executing a subsequent proxy and
presenting it to the Secretary of the Company or by attending the Annual Meeting
and voting in person. All properly executed proxies not revoked will be voted at
the meeting in accordance with the instructions contained therein.
It is proposed that action will be taken at the Annual Meeting: (i) to
elect two directors to hold office until the Annual Meeting in 2001 and until
their successors have been elected and qualified; (ii) to ratify the appointment
of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending
February 27, 1999 ("fiscal 1998"); (iii) to approve and ratify the adoption of
the Bed Bath & Beyond Inc. 1998 Stock Option Plan; and (iv) to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 150 million shares to 350 million shares. The Board
of Directors knows of no other business to come before the Annual Meeting. If
any other matters are properly presented at the Annual Meeting or any
adjournment or adjournments thereof, it is the intention of the persons named in
the proxy to vote, or otherwise to act, in accordance with their judgment on
such matters.
The expense of this proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or other means by directors or employees of the Company or
its subsidiaries without additional compensation or, at the Company's request,
D.F. King & Co, Inc. ("D.F. King"). The Company has engaged D.F. King to assist
in the solicitation of proxies for a fee of $[ ] plus reimbursement
for out of pocket expenses and certain additional fees for other services
rendered by D.F. King in connection with such solicitation. In addition, the
Company will reimburse brokerage firms and other nominees, custodians and
fiduciaries for costs incurred by them in mailing proxy materials to the
beneficial owners of shares held of record by such persons.
VOTING
Only shareholders of record at the close of business on May 8, 1998 will be
entitled to notice of and to vote at the Annual Meeting. As of that date, the
Company had outstanding 69,218,629 shares of Common Stock, each share entitled
to one vote. A majority of such shares represented at the Annual Meeting, in
person or by proxy, will constitute a quorum at the Annual Meeting.
Directors will be elected at the Annual Meeting by a plurality of the votes
cast (i.e., the two nominees receiving the greatest number of votes will be
elected as directors). The ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors for fiscal 1998 and the adoption of the Bed Bath &
Beyond Inc. 1998 Stock Option Plan require the approving vote of a majority of
the votes cast with respect to such matter. The amendment of the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 150 million to 350 million requires the approving vote of
shareholders holding a majority of the issued and outstanding shares of the
Company's Common Stock entitled to vote at the Annual Meeting. Neither
abstentions nor broker non-votes will be considered votes "cast" for purposes of
the foregoing and, accordingly, neither abstentions nor broker non-votes will
affect the vote with respect to such matter.
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Under applicable New York Stock Exchange rules, all of the Company's
proposals are considered "discretionary" items upon which New York Stock
Exchange member brokerage firms that hold shares in street name may vote on
behalf of the beneficial owners if such beneficial owners have not furnished
voting instructions by the tenth day before the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto sets forth, as of May 8, 1998,
certain information regarding the beneficial ownership (as defined in Rule 13d-3
of the Securities Exchange Act of 1934) of the Common Stock of the Company with
respect to (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) the executive officers of the
Company named in the Summary Compensation Table that appears under "Executive
Compensation," (iii) each of the Company's directors, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each shareholder has
sole voting and investment power with respect to the shares beneficially owned
by such shareholder.
NUMBER OF SHARES
OF COMMON STOCK PERCENT
NAME OF SHAREHOLDER POSITION BENEFICIALLY OWNED OF CLASS
------------------- -------- ------------------ --------
Warren Eisenberg............... Chairman, Co-Chief Executive 8.7%
Officer and a Director [6,040,208](a)
Leonard Feinstein.............. President, Co-Chief 8.7%
Executive Officer and
Director [6,036,794](b)
Klaus Eppler................... Director 1,138 *
Robert S. Kaplan............... Director 676 *
Robert J. Swartz............... Director 942 *
Steven H. Temares.............. Executive Vice President *
and Chief Operating
Officer 87,000(c)
Ronald Curwin.................. Chief Financial Officer *
and Treasurer 36,000(c)
Putnam Investments, Inc........ 8,468,315(d) 12.2%
All Directors and Executive
Officers as a group
(Ten Persons)................ [12,556,758](e) 18.1%
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* Less than 1% of class.
(a) The shares shown as being owned by Warren Eisenberg include: (i) [4,125,384]
shares owned by Mr. Eisenberg individually; (ii) [859,824] shares owned of
record by a trust for the benefit of Mr. Eisenberg and his family members;
(iii) [1,000,000] shares owned of record by Mr. Eisenberg's wife; and (iv)
55,000 shares owned of record by a not-for-profit charitable foundation of
which Mr. Eisenberg is a trustee. Warren Eisenberg has sole voting power
with respect to the shares held by him individually. Warren Eisenberg
disclaims beneficial ownership of any of the shares not owned by him
individually.
(b) The shares shown as being owned by Leonard Feinstein include: (i)
[5,121,970] shares owned by Mr. Feinstein individually; (ii) [859,824]
shares owned of record by a trust for the benefit of Mr. Feinstein; and
(iii) 55,000 shares owned of record by a not-for-profit chartiable
foundation of which Mr. Feinstein is a trustee. Leonard Feinstein has sole
voting power with respect to the shares held by him individually. Leonard
Feinstein disclaims beneficial ownership of any of the shares not owned by
him individually.
(c) Issuable pursuant to stock options that are or become exercisable within 60
days.
(d) Information regarding Putnam Investments, Inc. ("Putnam") was obtained from
a Schedule 13G, as amended, filed by Putnam with the Securities and Exchange
Commission. Such Schedule 13G states that Putnam and its parent corporation,
Marsh & McLennan Companies, Inc. are deemed to have beneficial ownership of
the 8,468,315 shares of Common Stock. The Schedule 13G also states that
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7,983,615 of such shares are held by registered investment companies and/or
other investment advisory clients in accounts managed by Putnam Investment
Management, Inc., a registered investment adviser and a subsidiary of
Putnam, and 484,700 of such shares are held by registered investment
companies and/or other investment advisory clients in accounts managed by
The Putnam Advisory Company, Inc., a registered investment adviser and a
subsidiary of Putnam. The Schedule 13G also states that Putnam, which is the
investment adviser to the Putnam family of mutual funds, and The Putnam
Advisory Company, Inc., which is the investment adviser to Putnam's
institutional clients, have dispository power over the shares as investment
managers, but each of the mutual fund's trustees have voting power over the
shares held by each fund, and The Putnam Advisory Company, Inc. has shared
voting power over the shares held by the institutional clients. The Schedule
13G further states that Marsh & McLennan Companies, Inc. and Putnam declare
that the filing of the Schedule 13G shall not be deemed an admission by
either or both of them that they are, for the purposes of Section 13(d) or
13(g), the beneficial owner of any securities covered by the Schedule 13G,
and further state that neither of them have any power to vote or dispose of,
or direct the voting or disposition of, any of the securities covered by the
Schedule 13G.
(e) Includes all the shares of Common Stock listed in the table above other than
shares listed as beneficially owned by Putnam Investments Inc.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Certificate of Incorporation of the Company provides for a classified
Board of Directors divided into three classes, each with a staggered three-year
term of office and each class of directors as nearly equal in number of
directors as possible. The current number of directors is five. Two directors
are to be elected at the 1998 Annual Meeting for a term expiring at the 2001
Annual Meeting. The Board has nominated Warren Eisenberg and Robert J. Swartz,
who are current directors of the company. Mr. Swartz's term of office as
director expires at the 1998 Annual Meeting. Mr. Eisenberg is being nominated
for a three-year term expiring at the 2001 Annual Meeting, although his current
term of office as a director would not expire until the 1999 Annual Meeting. Set
forth below is certain information with respect to the nominees for election as
director and incumbent directors.
NOMINEES FOR ELECTION AS DIRECTOR
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
Warren Eisenberg................... 67 Chairman, Co-Chief Executive 1971
Officer and Director
Robert J. Swartz................... 72 Director 1992
WARREN EISENBERG, a co-founder of the Company, has been an officer of the
Company since the Company commenced operations in 1971 (serving as President and
Co-Chief Executive Officer until 1992, and Chairman and Co-Chief Executive
Officer since that date).
ROBERT J. SWARTZ is a certified public accountant and has been a financial
consultant to various businesses, including the Company, since April 1991. Mr.
Swartz is Vice President of Alco Capital Group, Inc. For more than five years
prior to April 1991, he was a partner in the accounting firm of KPMG Peat
Marwick LLP (and its predecessors). He is also a director of Standard Motor
Products, Inc.
INCUMBENT DIRECTORS OTHER THAN NOMINEES
TERM EXPIRING
AT ANNUAL
NAME AGE POSITION DIRECTOR SINCE MEETING IN
- ---- --- -------- -------------- -------------
Leonard Feinstein.... 61 President, Co-Chief 1971 2000
Executive Officer and a
Director
Robert S. Kaplan..... 40 Director 1994 1999
Klaus Eppler......... 68 Director 1992 2000
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LEONARD FEINSTEIN, a co-founder of the Company, has been an officer of the
Company since the Company commenced operations in 1971 (serving as a Co-Chief
Executive Officer, Treasurer and Secretary until 1992, and as President and
Co-Chief Executive Officer since that date). He is also a director of Reckson
Associates Realty Corp.
ROBERT S. KAPLAN, is a Managing Director of Goldman, Sachs & Co., an
investment banking firm. Goldman, Sachs & Co. was one of the representatives of
the U.S. Underwriters for the Company's public offerings of Common Stock in 1992
and 1993, and Goldman Sachs International Limited, one of the representatives of
the International Underwriters of such public offerings, is an affiliate of
Goldman, Sachs & Co. Mr. Kaplan has been a Managing Director of or employed by
Goldman, Sachs & Co. for more than five years.
KLAUS EPPLER is a practicing attorney and has been a partner in the law
firm of Proskauer Rose LLP, counsel to the Company, since 1965. Such firm
received fees for legal services from the Company during the fiscal year ended
February 28, 1998 ("fiscal 1997"), and it is anticipated that such firm will
continue to provide certain legal services to the Company during fiscal 1998. He
is also a director of Inovision Corporation and The Dress Barn, Inc.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held five meetings during the fiscal year ended
February 28, 1998.
The Board of Directors has an Audit Committee, currently consisting of
Messrs. Swartz, Eppler and Kaplan. The functions of this Committee include
recommending to the Board the engagement or discharge of independent auditors,
directing investigations into matters relating to audit functions, and reviewing
the Company's internal accounting controls and the results of the audit with the
auditors. The Audit Committee held one meeting during fiscal 1997.
The Board of Directors has no standing nominating or compensation
committees. Each of the Bed Bath & Beyond Inc. 1992 Stock Option Plan (the "1992
Stock Option Plan") and 1996 Stock Option Plan (the "1996 Stock Option Plan") is
administered by two Stock Option Committees. One committee ("Committee A")
consists of Messrs. Eisenberg and Feinstein. Committee A is authorized to grant
stock options to all eligible employees of the Company, except the following
persons (collectively, "Senior Persons"): (i) any officer or director of the
Company, (ii) any district manager, regional manager or general merchandise
manager, or any other more senior manager than store manager, or (iii)
consultants or advisors to the Company or other persons or entities providing
goods or services to the Company. The other committee ("Committee B") currently
consists of Messrs. Swartz and Kaplan. Committee B, each of whose members is a
"non-employee director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 and an "outside director" as defined in Section 162(m) of
the Internal Revenue Code, is authorized to grant stock options to all eligible
Senior Persons. Neither Committee A nor Committee B held any formal meetings
during fiscal 1997 but acted by written consent.
In June 1997, the Board of Directors appointed a special committee of
outside directors (consisting of Messrs. Swartz, Eppler and Kaplan) to consider
compensation and employment agreement arrangements with the Co-Chief Executive
Officers. The committee held several meetings during fiscal 1997. See "Executive
Compensation -- Agreements with Messrs. Eisenberg and Feinstein".
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EXECUTIVE COMPENSATION
The following table shows the aggregate compensation paid or accrued by the
Company to its two Co-Chief Executive Officers and to each other person who
served as an executive officer of the Company in fiscal 1997 and who was paid
salary and bonus in fiscal 1995, 1996 or 1997 in excess of $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL -------------------------
COMPENSATION RESTRICTED SECURITIES
NAME AND ----------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARD(S)($) OPTIONS # COMPENSATION($)
------------------ ---- ---------- --------- ------------ ---------- ---------------
Warren Eisenberg.............. 1997 750,000(a) 0 0 500,000 317,758(b)
Chairman and 1996 750,000(a) 0 0 0 319,574(b)
Co-Chief Executive Officer 1995 750,000(a) 0 0 0 323,456(b)
Leonard Feinstein............. 1997 750,000(c) 0 0 500,000 258,381(d)
President and 1996 750,000(c) 0 0 0 258,828(d)
Co-Chief Executive Officer 1995 750,000(c) 0 0 0 260,055(d)
Steven H. Temares............. 1997 292,000 0 0 100,000 --
Executive Vice President and 1996 199,000 0 0 25,000 --
Chief Operating Officer 1995 166,000 0 0 60,000 --
Ronald Curwin................. 1997 130,000 0 0 10,000 --
Chief Financial Officer 1996 121,000 0 0 10,000 --
and Treasurer 1995 121,000 0 0 0 --
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(a) Mr. Eisenberg is employed by the Company pursuant to an employment
agreement. See "Agreements with Messrs. Eisenberg and Feinstein" below.
(b) Includes: (i) certain personal benefits provided by the Company to Mr.
Eisenberg in fiscal 1995, 1996 and 1997 (such as the use of Company cars for
non-business purposes and tax preparation services) at an aggregate cost to
the Company of approximately $14,480, $15,154, and $16,573, respectively;
(ii) insurance premiums in the amount of approximately $2,200, $2,400 and
$1,813 in fiscal 1995, 1996 and 1997, respectively, paid by the Company in
respect of certain insurance policies; and (iii) other premium payments
under the Insurance Policies of $306,776 in fiscal 1995, $302,020 in fiscal
1996 and $299,372 in fiscal 1997. See "Agreements with Messrs. Eisenberg and
Feinstein" below.
(c) Mr. Feinstein is employed by the Company pursuant to an employment
agreement. See "Agreements with Messrs. Eisenberg and Feinstein" below.
(d) Includes: (i) certain personal benefits provided by the Company to Mr.
Feinstein in fiscal 1995, 1996 and 1997 (such as the use of Company cars for
non-business purposes and tax preparation services) at an aggregate cost to
the Company of approximately $12,908, $15,138 and $16,525, respectively;
(ii) insurance premiums in the amount of approximately $2,200, $2,400 and
$1,813 in fiscal 1995, 1996 and 1997, respectively, paid by the Company in
respect of certain insurance policies; and (iii) other premium payments
under the Insurance Policies of $244,947 in fiscal 1995, $241,290 in fiscal
1996 and $240,043 in fiscal 1997. See "Agreements with Messrs. Eisenberg and
Feinstein" below.]
STOCK OPTIONS
The following table sets forth information as of February 28, 1998 for each
of the named executive officers of the Company named in the Summary Compensation
Table with respect to options granted during the fiscal year ended February 28,
1998 and their potential value (at the end of the option term assuming certain
levels of appreciation of the Company's Common Stock).
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OPTION GRANTS IN FISCAL 1997
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE ------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE 5%($) 10%($)
---- ----------- ------------- ----------- --------------- ------------- --------------
Warren Eisenberg....... 500,000(2) 23% 31.25 8/26/2007 9,626,479 24,902,225
Leonard Feinstein...... 500,000(2) 23% 31.25 8/26/2007 9,626,479 9,626,479
Steven H. Temares...... 100,000(3) 5% 24.25 03/6/2007 1,525,069 3,864,825
Ronald Curwin.......... 10,000(4) 1% 24.75 4/15/2007 155,65 394,451
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(1) The dollar amounts under these columns are the result of calculations at the
hypothetical rates of 5% and 10% set by the Commission and therefore are not
intended to forecast possible future appreciation, if any, of the Company's
Common Stock price.
(2) Options to purchase 500,000 shares were granted to each of Messrs. Eisenberg
and Feinstein on August 26, 1997 and are exercisable with respect to 100,000
shares on each of August 26, 1998, August 26, 1999, August 26, 2000, August
26, 2001 and August 26, 2002.
(3) Options to purchase 100,000 shares were granted to Mr. Temares on March 6,
1997 and are exercisable with respect to 10,000 shares on each of March 6,
1998 and March 6, 1999, with respect to an additional 20,000 shares on each
of March 6, 2000, March 6, 2001 and March 6, 2002 and with respect to an
additional 10,000 shares on each of March 6, 2003, and March 6, 2004.
(4) Options to purchase 10,000 shares were granted to Mr. Curwin on April 15,
1997 and are exercisable with respect to 2,000 shares on each of April 15,
1998, April 15, 1999, April 15, 2000, April 15, 2001 and April 15, 2002.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information for each of the named executive
officers with respect to option exercises during fiscal 1997 and the value of
outstanding or unexercised options held as of February 28, 1998.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF THE UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FEBRUARY 28, 1998 FEBRUARY 28, 1998(1)
ACQUIRED ON --------------------------- ---------------------------
EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------------- ----------- ------------- ----------- -------------
Warren Eisenberg(2)....... 0 -- 0 500,000 -- 5,969,000
Leonard Feinstein(2)...... 0 -- 0 500,000 -- 5,969,000
Steven H. Temares......... 24,000 714,000 40,000 225,000 1,268,519 5,815,671
Ronald Curwin(2).......... 0 -- 32,000 38,000 945,016 970,644
- ---------------
(1) Represents the difference between the closing market price of the Common
Stock at February 27, 1998 of $43.188 per share and the exercise price per
share of the options, multiplied by the number of shares underlying the
options.
(2) The options granted to Messrs. Eisenberg, Feinstein and Curwin may be
assigned by them to their respective spouses and descendants or to trusts
for their benefit.
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DIRECTORS' COMPENSATION
In fiscal 1997, each outside director was paid at the rate of $2,500 per
quarter. Directors are permitted to receive all or a portion of such payments in
the form of Common Stock.
AGREEMENTS WITH MESSRS. EISENBERG AND FEINSTEIN
Messrs. Eisenberg and Feinstein are employed pursuant to employment
agreements entered into as of June 30, 1997 providing for the Company to pay
each of them during their term of employment an annual salary (which may be
increased by the Board of Directors) of $750,000. The agreements provide for a
term of five years expiring June 30, 2002 unless extended, subject, however, to
the right of the executive at any time during his employment to elect senior
status (i.e., to be continued to be employed to provide non-line-executive
consultative services) at an annual salary of $400,000 for a period (the "Senior
Status Period") of up to ten years from the date of such election. The Company
has the option at the expiration of the employment term to require the executive
to commence the Senior Status Period and provide senior status services. While
on senior status, the executive is not required to devote more than 50 hours in
any three-month period to his consultative duties. The agreements contain
non-competition, non-solicitation and confidentiality provisions generally
applicable through the term of employment, including the Senior Status Period,
and any period thereafter during which salary payments would be required to be
made under specified agreement provisions. The agreements also provide for a
continuation of certain employee benefits plans through and after employment and
the Senior Status Period. The agreements further provide that in the event of a
change in control the executive may, at his option, terminate employment and be
entitled to payment of three years' annual salary, if termination is prior to
the Senior Status Period, and $200,000 times the number of years remaining in
the Senior Status Period, if termination is during such Senior Status Period.
Under the agreements, the executive also is entitled to terminate employment and
be paid through the end of the term of employment and the Senior Status Period
(or, at the election of the Company, in a lump sum on a present value discounted
basis) if the executive is removed from or not reelected to any officer or
director position or there is a material diminution in the executive's duties.
The Company has "split dollar" insurance agreements with trusts established
by each of Messrs. Eisenberg and Feinstein and their wives pursuant to which the
Company contracted to pay a portion of the premiums payable on outstanding life
insurance policies on the joint lives of each of Messrs. Eisenberg and Feinstein
and their wives, each with aggregate face values of $30 million (the "Insurance
Policies"), until the earlier of (a) such time as the cash value of each
Insurance Policy is sufficient to pay the premiums thereof, (b) the termination
of the arrangement by surrender of the policies or payment to the Company of the
entire amount of the premiums previously paid, or (c) the date of death of the
last to die of Mr. Eisenberg and his wife, with respect to Mr. Eisenberg's
Insurance Policies, and the last to die of Mr. Feinstein and his wife, with
respect to Mr. Feinstein's Insurance Policies.
Under the "split dollar" agreements the premiums paid by the Company are to
be returned to the Company, without interest, no later than the earlier to occur
of (a) the death of the last spouse to die of the insured persons under each
Insurance Policy, and (b) the surrender or termination of each Insurance Policy.
Consequently, the Insurance Policies should not result in an expense to the
Company, except to the extent of costs incurred (if any) for advancing the
premiums. The repayment of premiums paid by the Company will be made either out
of the insurance proceeds (if paid) or the cash surrender value of the Insurance
Policies (if insurance proceeds are not paid). In the latter case, Messrs.
Eisenberg and Feinstein and their wives are personally liable to the Company for
the excess, if any, of the total amount of premiums paid by the Company for the
Insurance Polices over the cash surrender values thereof.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
While decisions regarding salary levels for management personnel, other
than the Co-Chief Executive Officers, have been left to the Co-Chief Executive
Officers, the Board of Directors has formulated general policies designed to
enable the Company to reward qualified management personnel and to provide
longer term incentives. The Board of Directors believes that long-term stock
options will tend to provide incentives to
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management personnel as well as to align such incentives with shareholder
return. Accordingly, the Stock Option Committees of the Board of Directors have
granted options to management personnel, from department manager and up, with
the specific number of options granted being commensurate with the degree of
responsibility of the grantee's position.
A special committee of outside directors considered the compensation of the
Co-Chief Executive Officers in connection with the June 30, 1997 expiration of
their five-year employment agreements. The salary of each Co-Chief Executive
Officer has remained unchanged at $750,000 per annum since 1992. These salaries
were not increased in the new employment agreements, although they may be
increased by the Board of Directors during the term of the new agreements.
However, payments upon termination of employment, including termination
following a change in control, as well as certain other benefits, were expanded
from those called for under the prior agreements. In August 1997, the Co-Chief
Executive Officers were for the first time each granted options under the
Company's stock option plans to purchase 500,000 shares of common stock. In
determining the number of options to grant the Co-Chief Executive Officers, the
Stock Option Committee for Senior Persons considered the number of options
granted to other management personnel over the prior five years, the results of
operations of the Company, the total compensation arrangements for Chief
Executive Officers at other retail companies, and other factors. See "Stock
Options" and "Agreements with Messrs. Eisenberg and Feinstein" above.
BOARD OF DIRECTORS
Warren Eisenberg
Leonard Feinstein
Robert J. Swartz
Klaus Eppler
Robert S. Kaplan
CERTAIN TRANSACTIONS
The Company obtains certain payroll-related services from Petitti,
Eisenberg & Gamache, P.C., an accounting firm at which Raymond Eisenberg, a
brother of Warren Eisenberg, is employed. During fiscal 1997, the Company paid
fees to Petitti, Eisenberg & Gamache, P.C. of approximately $308,000.
In fiscal 1997, the Company made charitable contributions to the Mitzi and
Warren Eisenberg Family Foundation, Inc. and the Feinstein Family Foundation,
Inc. in the aggregate amount of $300,000. These not-for-profit charitable
foundations, of which Messrs. Eisenberg and Feinstein and their family members
are the trustees and officers, also received charitable contributions from
Messrs. Eisenberg and Feinstein and made distributions to charities in excess of
the amounts contributed by the Company.
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STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company, during the period February 28, 1993 through the end
of fiscal 1997, with the cumulative total return on the Standard & Poor's 500
Index and the Standard & Poor's Specialty Retail Index over the same period
(assuming the investment of $100 in the Company's Common Stock, the Standard &
Poor's 500 Index and the Standard & Poor's Specialty Retail Index on February
28, 1993, and the reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN*
FROM FEBRUARY 28, 1993 THROUGH FEBRUARY 28, 1998
AMONG BED BATH & BEYOND INC., THE S&P 500 INDEX
AND THE S&P SPECIALTY RETAIL INDEX
MEASUREMENT PERIOD BED BATH & S&P SPECIALTY
(FISCAL YEAR COVERED) BEYOND INC. S&P 500 INDEX RETAIL INDEX
2/28/93 100 100 100
2/27/94 180 108 93
2/26/95 169 116 73
2/25/96 253 150 58
3/1/97 270 177 77
2/28/98 336 209 83
* $100 INVESTED ON 2/28/93 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS.
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of KPMG Peat Marwick LLP, Certified Public Accountants, as
independent auditors to examine the consolidated financial statements of the
Company for the fiscal year ending February 27, 1999. The Board of Directors
recommends to shareholders that they ratify this appointment. In the event that
the shareholders fail to ratify this appointment, other certified public
accountants will be considered upon recommendation of the Audit Committee. Even
if this appointment is ratified, the Board of Directors, in its discretion, may
direct the appointment of a new independent accounting firm at any time during
the year if the Board believes that such a change would be in the best interest
of the Company and its shareholders.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting to respond to appropriate questions and such representative will
have the opportunity to make a statement if he or she desires to do so.
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ADOPT BED BATH & BEYOND INC. 1998 STOCK OPTION PLAN
(PROPOSAL 3)
On April 1, 1998 the Board of Directors adopted the Bed Bath & Beyond 1998
Stock Option Plan (the "1998 Plan"), subject to approval and ratification of the
1998 Plan by a majority of the votes cast at the 1998 meeting. As of February
28, 1998 fewer than 753,610 shares out of the aggregate of 7,600,000 shares of
Common Stock authorized for grant under the 1992 Stock Option Plan and 1996
Stock Option Plan (collectively, the "Prior Stock Option Plans") remained
available for future grants. Options may be granted under the 1992 Stock Option
Plan through May 2002 and under the 1996 Stock Option Plan through May 2007. The
1998 Plan provides for the granting of options to purchase not more than an
aggregate of 3,000,000 shares of Common Stock, subject to adjustment under
certain circumstances. Options granted under the 1998 Plan may be "incentive
stock options" within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code") or non-qualified options that are not "incentive stock
options." The last reported sale price of the Common Stock on May , 1998, as
quoted through the NASDAQ National Market System, was [ ].
The Board of Directors believes that stock ownership by employees provides
performance incentives and fosters pride in the Company to the benefit of both
the Company and its shareholders. Options have heretofore been granted to a wide
range of employees of the Company. Accordingly, the Board of Directors
recommends that shareholders approve and ratify the 1998 Plan described below.
The following summary of the principal provisions of the 1998 Plan does not
purport to be complete and is qualified in its entirety by reference to the text
of the 1998 Plan set forth in Exhibit A hereto. The Prior Stock Option Plans and
the 1998 Plan together are herein referred to as the "Plans."
OPTION GRANTS
All officers, directors and employees of the Company and other parties who
provide goods or services to the Company are eligible to participate in the 1998
Plan. Persons may receive grants under both the 1998 Plan and the Prior Stock
Option Plans in the same fiscal or calendar year. As of February 28, 1998, there
were approximately 8,500 officers, directors and employees of the Company. The
Stock Option Committees (defined below) determine, subject to the provisions of
the 1998 Plan, to whom options are granted, the number of shares of Common Stock
subject to an option, whether stock options shall be incentive or non-
qualified, the exercise price of such options, whether the options may be
exercised in full or in installments and the period during which such options
may be exercised. In determining persons who are to receive options and the
number of shares of Common Stock to be covered by each option, the Stock Option
Committees consider various factors, including each eligible person's position
and responsibilities, service and accomplishments, present and future value to
the Company, anticipated length of future service and other relevant factors. To
the extent options granted under the 1998 Plan to an optionee qualify as
incentive stock options, the aggregate fair market value (as defined in the 1998
Plan) of the Common Stock with respect to which incentive stock options are
exercisable under both the Prior Stock Option Plans and the 1998 Plan for the
first time by such optionee during the calendar year may not exceed $100,000.
The maximum number of shares that may be granted under each of the Prior Stock
Option Plans and the 1998 Plan during any calendar year to any employee or
Associate (as defined in each Plan) of the Company may not exceed 100,000 with
respect to each Plan (subject to adjustment in the case of stock splits and
other similar transactions), but shortfalls in any calendar year may be carried
forward to subsequent years. The above provisions in the Prior Stock Option
Plans and the 1998 Plan relating to maximum annual grants of options on shares,
and certain other provisions, are intended to comply with Section 162(m) of the
Code and the Regulations thereunder. In addition, under the 1998 Plan, the
maximum number of options that may be granted to any single person, under that
Plan over the term of the Plan may not exceed 300,000 shares.
ADMINISTRATION
Each of the Plans is administered by two stock option committees (the
"Stock Option Committees") appointed by the Board of Directors, each consisting
of at least two members of the Board of Directors.
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Committee A is authorized to grant stock options to all persons entitled to be
granted stock options under the Plans, except to the following persons
(collectively, "Senior Persons"): (i) any officer or director of the Company,
(ii) any district manager, regional manager or general merchandise manager or
any other more senior manager than store manager or (iii) any Associate (as
defined in the Plans) of the Company that is an affiliate of the Company or of
any of the persons described in clause (i) or (ii) above. Committee B, each of
whose members is a "non-employee director", within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange Act") and an "outside
director," as defined in Section 162(m) of the Code, is authorized to grant
stock options to all Senior Persons entitled to be granted stock options under
the Plans. Each Stock Option Committee has full power and authority to interpret
the provisions of the Plans, set the terms and conditions of the Plans with
respect to each person to whom stock options have or may be granted under the
Plans by such committee. The members of Committee A are currently Messrs.
Eisenberg and Feinstein and the members of Committee B are currently Messrs.
Swartz and Kaplan, each of whom is presently a director of the Company.
TERMINATION OF EMPLOYMENT
Except as provided in the following sentence, an optionee's options
terminate immediately upon the termination of such optionee's employment with
the Company, subject to the following exceptions: (i) if the termination is by
reason of death or disability of the optionee, the unexercised portion of such
options continues to be exercisable for twelve months after such termination and
(ii) if the termination is for any other reason, excluding termination for
cause, the unexercised portion of such options continues to be exercisable for
three months after such termination. The Stock Option Committees under the Plans
in their discretion in any particular case may provide that upon termination of
an optionee's employment with the Company, the unexercised portion of such
optionee's options shall continue to be exercisable for a longer or shorter
period than the period provided for in the preceding sentence, subject to the
following: (i) in the case of an incentive stock option, the Stock Option
Committees 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 optionee's employment is terminated by reason of death and (ii)
in the case of an option that is not an incentive stock option, the Stock Option
Committees may not provide for a shorter period after the option is granted.
EXERCISE PRICE AND TERM
The exercise price with respect to stock options granted may not be less
than 100% (110% for an incentive stock option granted to a greater than
ten-percent shareholder) of the fair market value (as defined in the 1998 Plan)
of the Common Stock at the time the option is granted. In addition, after an
option has been granted, the exercise price may not be reduced. The latest date
on which an option may be exercised is ten years (five years for an incentive
stock option granted to a greater than ten-percent shareholder) from the date
the option was granted or such earlier date as may be specified by the
applicable Stock Option Committee at the time the option is granted.
TERMINATION AND AMENDMENT OF THE 1998 PLAN
No options may be granted under the 1998 Plan more than ten years after
April 1, 1998 but options previously granted may extend beyond that date. The
1998 Plan may be amended from time to time by the Stock Option Committees.
However, the Stock Option Committees may not, without shareholder approval,
amend the 1998 Plan to (i) increase the maximum number of shares of Common Stock
which may be issued under the 1998 Plan (except upon changes in capitalization
as specified in the 1998 Plan), (ii) change the group of employees or Associates
eligible to receive options under the 1998 Plan, (iii) reduce the price at which
stock options may be granted, (iv) extend the time within which options may be
granted, (v) alter the 1998 Plan in such a way that incentive stock options
already granted under the 1998 Plan would not be considered incentive stock
options within the meaning of the Code, or (vi) amend the provisions of Section
10 of the 1998 Plan, which relates to amendments to the 1998 Plan. In addition,
no amendment shall adversely affect the rights of any optionee (without the
optionee's consent) under any option previously granted.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of current Federal income tax consequences
of non-qualified stock options and incentive stock options under the relevant
provisions of the Code.
FEDERAL INCOME TAX CONSEQUENCES OF NON-QUALIFIED STOCK OPTIONS
In general, no taxable income is realized by an optionee upon the grant of
a non-qualified stock option. Upon the exercise of a non-qualified stock option,
the optionee will realize ordinary income equal to the difference between the
fair market value of the Common Stock received by the optionee at the time of
exercise over the exercise price of such option. When the optionee eventually
sells the Common Stock, such optionee is taxed on the difference between the
sale price and such optionee's basis in the Common Stock (i.e., fair market
value of the Common stock at the time of exercise), as a long or short term
capital gain or loss, as applicable. The Company will be entitled to a deduction
equal to the ordinary income recognized by the optionee at the time the optionee
recognizes such income provided applicable reporting requirements are met,
subject to the provisions of Section 162(m) and 280G of the Code. Special rules
may apply which could delay the recognition of income with respect to the
exercise of the option if the optionee is subject to Section 16(b) of the
Exchange Act, unless the optionee elects, pursuant to Section 83(b) of the Code
to be taxed as of the time of exercise based on the fair market value at that
time.
FEDERAL INCOME TAX CONSEQUENCES OF INCENTIVE STOCK OPTIONS
There are generally no federal income tax consequences to the optionee at
the time an incentive stock option is granted or exercised, other than under the
alternative minimum tax (as described below). When any of the Common Stock
received upon exercise of an incentive stock option is sold, the optionee will
realize a capital gain or loss, as applicable, equal to the difference between
the selling price of the Common Stock sold and the exercise price paid by the
optionee for such Common Stock, provided that (a) the disposition of Common
Stock by the optionee is not within two years after the date of grant of the
option or within one year after the transfer of such Common Stock to the
optionee upon exercise, and (b) the optionee was employed by the Company at all
times from the date of grant of the option until three months before the date of
exercise. Special rules apply in the case of death or disability. The Company
will not be entitled to a deduction for federal income tax purposes upon the
grant or exercise of an incentive stock option.
If the above holding period requirements are not met, the optionee will, in
general, recognize ordinary income in the year of the disqualifying disposition
of the Common Stock received upon exercise of the option. Such ordinary income
will be equal to the excess of the fair market value of the Common Stock on the
date of exercise over the exercise price, but not more than the gain, if any,
realized on the disqualifying disposition (sale price minus exercise price). The
Company, subject to the provisions of Section 162(m) and 280G of the Code, will
be entitled to a deduction equal to the ordinary income recognized by the
optionee at the time the optionee recognizes such income. If the gain realized
on the disqualifying disposition is greater than the excess of the fair market
value of the Common Stock on the date of exercise over the exercise price, the
difference is taxed as capital gain. If a loss is sustained on the disqualifying
disposition (sale price is less than exercise price), the loss is allowable as a
long- or short-term capital loss, as applicable.
For purposes of computing the alternative minimum tax, the bargain element
with respect to an incentive stock option (i.e., the excess of the fair market
value of the Common Stock received upon exercise over the exercise price) is
generally included in alternative minimum taxable income upon exercise.
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL 4)
The Board of Directors has approved, and recommends that the Company's
shareholders approve, an amendment to the Company's certificate of incorporation
that would increase the number of the authorized shares of the Company's Common
Stock, par value $.01 per share, from 150,000,000 to 350,000,000. The full
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text of the proposed amendment is attached as Exhibit B hereto. The aggregate
number of shares of Common Stock which are outstanding or reserved for issuance
under the Prior Stock Option Plans plus the number to be reserved under the 1998
Stock Option Plan is [78,274,688] shares of Common Stock as of May , 1998.
The Board of Directors believes that the increased number of authorized
shares of Common Stock will improve the Company's flexibility, and will enable
the Board of Directors to declare a further stock split or stock dividend if
conditions deem such action desirable. The Board of Directors will determine
whether, when and on what terms the issuance of shares of Common Stock may be
warranted in connection with any future actions. No further action nor
authorization by the Company's shareholders would be necessary prior to issuance
of the Common Stock, except as may be required for a particular transaction by
the Company's Certificate of Incorporation, by applicable law or regulatory
agencies or by the rules of the Nasdaq Stock Market or of any stock exchange on
which the Company's Common Stock may then be listed. Requiring the shareholders
to meet and approve each separate issuance of additional Common Stock in these
instances would be time-consuming and costly. Moreover, if shareholder
authorization of additional Common Stock were postponed until a specific need
arose, the delay could, in some instances, deprive the Company and its
shareholders of opportunities otherwise available.
While not intended as an anti-takeover provision, the increase in
authorized shares by the proposed amendment could under some circumstances (i)
enable existing directors and officers of the Company to increase their
beneficial ownership of the Company in response to a takeover attempt by another
person by entering into transactions resulting in the issuance of authorized
shares by the Company to existing directors and officers and/or (ii) dilute the
beneficial ownership of the person making the takeover attempt by issuing shares
to another person who might assist the Board of Directors in opposing the
takeover if the Board of Directors determines that the takeover is not in the
best interests of the Company and its shareholders. The Company's Certificate of
Incorporation also authorizes the issuance of 1,000,000 shares of preferred
stock, par value $.01 per share, none of which are outstanding.
COMPLIANCE WITH THE EXCHANGE ACT
The Company's executive officers and directors are required under the
Exchange Act to file reports of ownership of Common Stock of the Company with
the Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company. Based solely on a review of the copies of reports
furnished to the Company and written representations that no other reports were
required, the Company believes that during the preceding year the executive
officers and directors of the Company have complied with all applicable filing
requirements except that one Statement of Benefical Ownership with respect to
one option grant was not timely filed by the Chief Financial Officer.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the Company's
annual meeting of shareholders expected to be held in June 1999 must be received
by the Company no later than January 15, 1999 for inclusion in the proxy
statement and form of proxy for that meeting.
WARREN EISENBERG,
Chairman and
Co-Chief Executive Officer
LEONARD FEINSTEIN,
President and
Co-Chief Executive Officer
Union, New Jersey
May 15, 1998
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EXHIBIT A
BED BATH AND BEYOND INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Bed Bath & Beyond Inc. 1998 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 PLAN.
(a) The effective date of the Plan shall be April 1, 1998, the date the
Plan was adopted by the Board of Directors of the Company (the "Board"), but
only if the Plan is approved and ratified by the shareholders of the Company at
the 1998 annual meeting of shareholders or any adjournment thereof.
(b) No option shall be granted under the Plan on or after the tenth
anniversary of the effective date of the Plan, 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 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 "non-employee directors" within the meaning of Rule 16(b)-3
under the Securities Act of 1933, as amended (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
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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 "non-employee directors" 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 "non-employee directors" 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 the 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
(a) 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, and (b) the maximum number of
options that may be granted under this Plan to any employee or Associate of the
Company over the term of the Plan shall not exceed 300,000 shares (subject to
any adjustment in accordance with Section 8(b)); (ii) to determine the time or
times when options shall be granted and the number of Shares 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 the Company's common stock (the "Shares" or "Stock") that may be
delivered upon the exercise of options granted under the Plan shall be
3,000,000. If any option granted under the Plan terminates without having been
exercised in full, the number of Shares as to which such option was not
exercised shall be available for future grants within the limits set forth in
this Section 5(a).
(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
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(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, provided, however, that 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 provided further, that after an
option has been granted the exercise price shall not be reduced (subject to any
adjustment in accordance with Section 8(b)). 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 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 mean 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
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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.
(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 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 (A) 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 (B) 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.
(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
A-4
20
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 Act, 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 the Act and may require
that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
(h) Nontransferability of Options.
In the case of an option which is not an incentive stock option, 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 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
A-5
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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. Notwithstanding anything to the contrary in 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 or Associates eligible to receive options under the Plan, (c) reduce
the price at which options may be granted, (d) extend the time within which
options may be granted, (e) 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 (f) amend the provisions of this Section 10, and no
such amendment shall adversely affect the rights of any option holder (without
such holder's consent) under any option previously granted.
A-6
22
EXHIBIT B
PROPOSED AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
Paragraph (a) of the Article Fourth of the Certificate of Incorporation of
the Company, providing for the authorization of 150,000,000 shares of Common
Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock, par
value $.01 per share, will be eliminated and replaced in its entirety by the
following new paragraph (a) of Article Fourth:
"(a) Authorized Classes of Stock: The total number of shares which the
corporation shall have the authority to issue is 351,000,000 of which
350,000,000 are designated Common Stock, par value $.01 per share ("Common
Stock"), and 1,000,000 shares are designated Preferred Stock, par value
$.01 per share ("Preferred Stock")."
B-1
23
PRELIMINARY COPIES
[X] PLEASE MARK YOUR VOTES AS THIS
PROXY
BED BATH & BEYOND INC.
650 Liberty Avenue
Union, New Jersey 07083
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Warren Eisenberg and Leonard Feinstein, or either one of them
acting singly, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side
hereof, all the shares of Common Stock of Bed Bath & Beyond Inc. held of record
by the undersigned on May 8, 1998 at the Annual Meeting of Shareholders to be
held on June 26, 1998 or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4
COMMON
1. ELECTION OF DIRECTORS
FOR all nominees for any listed WITHHOLD AUTHORITY to vote for
(except as the nominee's marked all nominees listed
to the contrary)
[ ] N
FOR all nominees for any listed (INSTRUCTION: To withhold authority to vote individual
(except as the nominee's marked nominee, mark the box next to name below).
to the contrary)
[ ] N W. Eisenberg [ ] R. Swartz
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG Peat Marwick LLP as the
independent auditors of the Corporation.
[ [ [
] FOR ] AGAINST ] ABSTAIN
3. PROPOSAL TO ADOPT The Bed Bath & Beyond Inc. 1998 Stock Option Plan.
[ [ [
] FOR ] AGAINST ] ABSTAIN
(Continued on Reverse Side)
24
(continued from other side)
4. PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION to increase
the number of authorized shares of common stock from 150 million to 350
million.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be brought before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREIN. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated: , 1998
---------------------------------------------
--------------------------------------------------------
SIGNATURE
--------------------------------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.