<PAGE>
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:
[_]Confidential, for Use of
[_]Preliminary Proxy the Commission Only (as
Statement permitted by Rule 14a-
6(e)(2))
[X]Definitive Proxy
Statement
[_]Definitive Additional
Materials
[_]Soliciting Material
Pursuant to Rule 14a-
11(c) or Rule 14a-12
BROOKSTONE, INC.
- -------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
BROOKSTONE, INC.
17 RIVERSIDE STREET
NASHUA, NEW HAMPSHIRE 03062
May 19, 1997
Dear Stockholder:
We cordially invite you to attend our 1997 Annual Meeting of Stockholders,
which will be held at 9:30 a.m. (local time) on June 19, 1997 at The First
National Bank of Boston Conference Center, 100 Federal Street, Boston,
Massachusetts.
Details of business to be conducted at the Annual Meeting of Stockholders
are given in the attached Notice of Annual Meeting and proxy statement. Please
read the proxy statement and complete, sign and return your proxy promptly in
the enclosed envelope.
We hope you will join us on June 19th for our annual meeting, but we know
that not every stockholder will be able to do so. Whether or not you plan to
attend, please return your signed proxy as soon as possible.
Sincerely,
/s/ Michael F. Anthony
Michael F. Anthony
President and Chief Executive
Officer
<PAGE>
BROOKSTONE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
Brookstone, Inc., a Delaware corporation, will be held at The First National
Bank of Boston, 100 Federal Street, Boston, Massachusetts on June 19, 1997 at
9:30 a.m. (local time) for the following purposes:
1. To elect six directors to serve until the 1998 Annual Meeting of
Stockholders or until their respective successors shall be elected or
qualified;
2. To approve certain material terms of the Company's 1992 Equity Incentive
Plan;
3. To ratify the appointment of Price Waterhouse LLP as the independent
accountants to examine the financial statements of the Company and its
subsidiaries for the fiscal year ending January 31, 1998; and
4. To transact such other business as may properly come before the meeting
and any and all adjourned sessions thereof.
Only stockholders of record at the close of business on May 5, 1997 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjourned sessions thereof. A list of stockholders entitled to vote at the
meeting will be open to examination by stockholders at the meeting and during
normal business hours from June 9, 1997 to the date of the meeting at the
offices of Ropes & Gray, One International Place, Boston, Massachusetts 02110.
By Order of the Board of Directors
/s/ Philip W. Roizin
Philip W. Roizin
Executive Vice President, Finance
and Administration, Treasurer and
Secretary
Nashua, New Hampshire
May 19, 1997
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
BROOKSTONE, INC.
----------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1997
----------------
PROXY STATEMENT
The enclosed form of proxy is solicited on behalf of the Board of Directors
of Brookstone, Inc., a Delaware corporation (the "Company"), for use at the
1997 Annual Meeting of Stockholders (the "Annual Meeting") to be held at The
First National Bank of Boston, 100 Federal Street, Boston, Massachusetts, on
June 19, 1997 at 9:30 a.m. (local time) and at any and all adjourned sessions
thereof. A proxy may be revoked by a stockholder, at any time before it is
voted, (i) by returning to the Company another properly signed proxy bearing a
later date, (ii) by otherwise delivering a written revocation to the Secretary
of the Company, or (iii) by attending the Annual Meeting or any adjourned
session thereof and voting the shares covered by the proxy in person. Shares
represented by the enclosed form of proxy properly executed and returned, and
not revoked, will be voted at the Annual Meeting.
The expense of soliciting proxies will be borne by the Company. In addition
to the solicitation of proxies by use of the mails, the Company may solicit
proxies by officers, directors and regular employees of the Company in person
or by telephone or telegraph. Any officers and regular employees of the
Company who engage in any such solicitation will receive no compensation in
addition to their regular salaries. The Company will also reimburse brokers
and other persons for their reasonable charges and expenses in forwarding
soliciting materials to their principals.
In the absence of contrary instructions, the persons named as proxies will
vote for (i) the election of the nominees for director named below, (ii) the
approval of certain material terms of the 1992 Equity Incentive Plan (as
described herein) and (iii) the ratification of the appointment of Price
Waterhouse LLP as the independent accountants to examine the financial
statements of the Company and its subsidiaries for the fiscal year ending
January 31, 1998. The holders of record of shares of the common stock, $.001
par value, of the Company (the "Common Stock") at the close of business on May
5, 1997 are entitled to receive notice of and to vote at the Annual Meeting.
Each such share of Common Stock is entitled to one vote on each matter to come
before the Annual Meeting. As of April 14, 1997, the Company had issued and
outstanding 7,811,768 shares of Common Stock.
Consistent with state law and the Company's by-laws, a majority of the
shares entitled to vote on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by persons appointed
by the Company to act as tellers for the meeting. The six nominees who receive
the greatest number of votes properly cast for the election of directors will
be elected. An affirmative vote of a majority of votes properly cast is
required to approve the material terms of the 1992 Equity Incentive Plan
discussed below in this Proxy Statement and to ratify the appointment of Price
Waterhouse LLP as the Company's independent accountants for the fiscal year
ending January 31, 1998. The tellers will count the total number of votes cast
"FOR" such approval or ratification for purposes of determining whether
sufficient affirmative votes have been cast. The tellers will count shares
represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflect abstentions and "broker non-votes"
(i.e., shares represented at the meeting held by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) only as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. Neither abstentions nor broker non-votes will be counted
as votes properly cast with regard to the matter. Accordingly,
<PAGE>
such abstentions and broker non-votes will have no effect on the outcome of
voting on the election of directors, the proposal to amend the 1992 Equity
Incentive Plan (as described herein) or the ratification of the appointment of
independent accountants.
It is expected that this Proxy Statement and the enclosed form of proxy will
be mailed to stockholders commencing on or about May 19, 1997.
The Annual Report of the Company, including consolidated financial
statements for the fiscal year ended February 1, 1997 ("Fiscal 1996"), is
being mailed to the Company's stockholders with this Proxy Statement.
ELECTION OF DIRECTORS
Unless otherwise instructed, the enclosed proxy will be voted to elect the
persons named below as directors for a term of one year expiring at the 1998
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified. It is expected that each nominee will be able to serve,
but the proxies reserve discretion to vote or refrain from voting for a
substitute nominee if a nominee is unable to serve. Each of the following
nominees currently serves as a director of the Company. The nominees are as
follows:
NOMINEES AS DIRECTORS
Merwin F. Kaminstein, 62
Chairman of the Board
Mr. Kaminstein has been Chairman of the Board of Directors since April 1990.
From April 1990 until September 1995, Mr. Kaminstein also served as Chief
Executive Officer of the Company. From March 1988 until March 1990, he was an
independent consultant and partner at The Pyramid Companies, a retail real
estate development company. Mr. Kaminstein was President of J. Bildner & Sons,
Inc., a specialty foods retailer, from July 1987 until February 1988. From
1984 until 1987, Mr. Kaminstein was President of the Rich's department store
division of Federated Department Stores, Inc. He was President of the Filene's
and Filene's Basement department store divisions of Federated Department
Stores, Inc. from 1979 until 1984, President of the Jordan Marsh department
store division of Allied Department Stores, Inc. from 1976 until 1979, and
President of the Donaldson's department store division of Allied Department
Stores, Inc. from 1971 until 1976. Mr. Kaminstein has served as a director for
Domain, Inc., a privately-held home furnishings specialty retailer since
October 1994.
Michael F. Anthony, 42
Director, President and Chief Executive Officer
Mr. Anthony has been President and Chief Executive Officer of the Company
since September 1995. From October 1994 until he assumed his current position,
Mr. Anthony served as President and Chief Operating Officer of the Company.
From 1989 to October 1994 he held various senior executive positions with
Lechter's, Inc., a nationwide chain of approximately 640 specialty stores,
including President in 1994, Executive Vice President from 1993 to 1994 and
Vice President/General Merchandise Manager from 1989 to 1993. From 1978 to
1989 he was with Gold Circle, which at the time was a division of Federated
Department stores, where he held various merchandising positions, including
Divisional Vice President/Divisional Merchandise Manager from February 1986 to
1989.
Mone Anathan, III, 58
Director
Mr. Anathan has been a director of the Company since December 1989. Since
July 1988, he has been President, Treasurer and a director of Filene's
Basement Corp., an off-price specialty apparel chain. He served as President
of the Filene's Basement division of Federated Department Stores, Inc. from
February 1984 until Filene's Basement was purchased from Federated Department
Stores, Inc. in a management-led buyout in July
2
<PAGE>
1988. Mr. Anathan is a director of Beth Israel Hospital, Crane Company,
Harvard Pilgrim Health Care and Medusa Cement Company.
Michael L. Glazer, 49
Director
Mr. Glazer has served as President of Consolidated Stores Corporation, a
leading value retailer specializing in close-out merchandise operating
approximately 2,000 stores nationwide, since May 1995 and as a member of its
board of directors since June 1991. In addition to this position, Mr. Glazer
has served as Chief Executive Officer of Consolidated's toy division, K.B
Toys, the nation's largest mall-based toy retailer, since May 1996. From
September 1990 to January 1995, he served as President of The Bombay Company,
Inc., a specialty retailer operating approximately 430 stores in the United
States and Canada.
Adam Kirsch, 35
Director
Adam Kirsch has been a director of the Company since August 1991. Mr. Kirsch
has been a managing director of Bain Capital, Inc. a private venture capital
firm, since April 1993, and a general partner of Bain Venture Capital, a
California Limited Partnership ("BVC") since 1990. BVC serves as the general
partner of certain investment partnerships which own Common Stock of the
Company. See "Security Ownership of Certain Beneficial Owners and Management"
below. From April 1987 until June 1990, he was a principal with BVC. He also
serves as a director of each of Duane Reade, Inc., a drug store chain,
Diagnostics Holdings, Inc., a manufacturer and marketer of in vitro diagnostic
products and services to clinical laboratories, and Specialty Retailers, Inc.,
an apparel retailer.
Robert F. White, 41
Director
Robert F. White has been a director of the Company since August 1991. Mr.
White has been a managing director of Bain Capital, Inc., a private venture
capital firm, since April 1993, and a general partner of BVC since 1987. BVC
serves as the general partner of certain investment partnerships which own
Common Stock of the Company. See "Security Ownership of Certain Beneficial
Owners and Management" below. Mr. White currently serves on the board of
directors of Stream International Inc., a software manufacturer, marketer and
technical support and service firm, and previously served as a director of a
number of private companies, including Domain, Inc., a home furnishings
specialty retailer.
BOARD RECOMMENDATION
The Board of Directors recommends a vote "FOR" each of the director nominees
listed above. Proxies solicited by the Board of Directors will be so voted
unless the stockholders specify otherwise.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of April 14, 1997 (unless
otherwise indicated) (i) individually by the chief executive officer and each
of the other officers (and former officers) of the Company listed in the
Summary Compensation Table contained in this Proxy Statement (the "Named
Executive Officers") and by each director of the Company, (ii) by all
executive officers and directors of the Company as a group and (iii) by each
person known to the Company to be the beneficial owner of more than five
percent of the Company's outstanding Common Stock. Except as noted below, each
of the persons listed has sole investment and voting power with respect to the
shares indicated.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED(1)
-----------------------------------------
NUMBER OF PERCENTAGE OF
SHARES OUTSTANDING SHARES
------------------- ---------------------
<S> <C> <C>
Bain Funds(2)...................... 1,333,450 17.1%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
FMR Corp.(3)....................... 869,204 11.1%
82 Devonshire Street
Boston, MA 02109
Goldman, Sachs & Co................ 777,800 10.0%
Goldman Sachs Small Cap Equity
Fund(4)
85 Broad Street
New York, NY 10004
P.A.W. Capital Corp.(5)............ 685,500 8.8%
10 Glenville Street
Greenwich, CT 06831
EGS Associates, L.P.(6)............ 469,800 6.0%
Bev Partners, L.P.
Jonas Partners, L.P.
300 Park Avenue
New York, NY 10022
Dimensional Fund Advisors Inc.(7).. 389,100 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Merwin F. Kaminstein*(8)........... 360,277 4.4%
Michael F. Anthony+*(9)............ 138,900 1.8%
Mone Anathan, III*(10)............. 14,892 **
Adam Kirsch*(11)................... 1,335,950 17.1%
Michael L. Glazer*(12)............. 3,500 **
Robert F. White*(11)............... 1,336,636 17.1%
G. Randolph Dirth+(13)............. 0 **
John J. Rahilly+(14)............... 0 **
Alexander M. Winiecki+(15)......... 44,992 **
Jo-Ann B. Karalus+(15)............. 23,633 **
Thomas A. Carroll(16).............. 0 **
All directors and executive offi-
cers as a group (11 persons)(17).. 1,939,180 23.1%
</TABLE>
4
<PAGE>
- --------
+ Named Executive Officer.
* Director of the Company.
** Less than 1% of the outstanding Common Stock.
(1) Includes shares issuable pursuant to options held by the respective
person or group which are presently exercisable or may be exercised
within 60 days after the date of this Proxy Statement ("presently
exercisable stock options") as set forth below.
(2) Includes 984,979 shares held by Tyler Capital Fund, L.P. ("Tyler
Capital"), 201,814 shares held by Tyler Massachusetts, L.P. ("Tyler
Massachusetts"), 59,052 shares held by Tyler International, L.P.-II
("Tyler International"), 83,262 shares held by BCIP Associates and 4,343
shares held by BCIP Trust Associates, L.P. ("BCIP Trust Associates";
collectively with Tyler Capital, Tyler Massachusetts, Tyler International
and BCIP Associates, the "Bain Funds").
(3) Reflects ownership based upon Amendment No. 3 to Schedule 13D dated May
23, 1996 and filed with the Securities and Exchange Commission.
(4) Reflects ownership based upon Amendment No. 3 to Schedule 13G dated
February 14, 1996 and filed with the Securities and Exchange Commission.
(5) Reflects ownership based upon a Schedule 13D dated February 22, 1996 and
filed with the Securities and Exchange Commission. Includes 665,000
shares held by funds or managed accounts over which P.A.W. Capital Corp.
or its majority shareholder and President, Peter A. Wright, has
investment discretion. Also includes 20,500 shares held in Mr. Wright's
personal account or in accounts over which Mr. Wright has power of
attorney.
(6) Reflects ownership based upon a Schedule D dated May 1, 1997 and filed
with the Securities and Exchange Commission. Includes (1) 98,500 shares
held by EGS Associates, L.P. ("EGS Associates"), (2) 284,437 shares
purchased for discretionary accounts managed by EGS Partners, L.L.C.
("EGS Partners"), (3) 45,950 shares held by Bev Partners, L.P. ("Bev
Partners"), (4) 28,513 shares held by Jonas Partners, L.P. ("Jonas
Partners") and (5) 12,100 shares held by Jonas Gerstl, his wife and
trusts for the benefit of their children. EGS Associates, Bev Partners
and Jonas Partners are each private investment partnerships. EGS Partners
is a registered investment adviser engaging in the purchase and sale of
securities for investment on behalf of discretionary accounts. Mr. Gerstl
is a general partner of EGS Associates, Bev Associates and Jonas Partners
and a member of EGS Partners.
(7) Reflects ownership based upon Amendment No. 1 to Schedule 13G dated
February 5, 1997 and filed with the Securities and Exchange Commission.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 389,100 shares as of
February 5, 1997, all of which are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in a
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
serves as investment manager. Dimensional disclaims beneficial ownership
of all such shares.
(8) Includes 345,277 shares issuable upon exercise of presently exercisable
stock options.
(9) Includes 137,500 shares issuable upon exercise of presently exercisable
stock options.
(10) Includes 3,392 shares issuable upon exercise of presently exercisable
stock options and 2,500 that will become exercisable on June 21, 1997.
(11) Represents 1,333,450 shares held by the Bain Funds, 2,500 shares subject
to options that will become exercisable on June 21, 1997 and, in the case
of Mr. White, 686 shares held by him directly. See footnote (2). Bain
Venture Capital, a California Limited Partnership ("BVC") is the general
partner of Tyler Capital, Tyler Massachusetts, and Tyler International.
Each of Messrs. Kirsch and White is a director of the Company and is a
general partner of each of BVC, BCIP Associates and BCIP Trust
Associates, and, as such, may be deemed to own beneficially shares owned
by the Bain Funds, although each of Messrs. White and Kirsch disclaim
beneficial ownership of any shares owned directly by the Bain Funds
(other that 9,642 shares in the case of Mr. White and 7,416 shares in the
case of Mr. Kirsch). Messrs. Kirsch and White have the same address as
the Bain Funds.
(12) Includes 2,500 shares subject to a stock option that will become
exercisable on June 21, 1997.
5
<PAGE>
(13) Mr. Dirth resigned his position with the Company effective February 24,
1997.
(14) Mr. Rahilly resigned his position with the Company effective November 19,
1996.
(15) Consists solely of shares issuable upon exercise of presently exercisable
stock options.
(16) Mr. Carroll resigned his position with the Company effective March 21,
1997.
(17) Includes 577,294 shares issuable upon exercise of presently exercisable
stock options. See also notes (8) through (16) to this table.
BOARD OF DIRECTORS AND COMMITTEES
During Fiscal 1996, the Board of Directors of the Company held five
meetings. Each director attended at least 75% of the meetings of the Board and
the Committees of which he is a member. The Company pays to all directors who
are not employees of the Company a quarterly fee of $2,500. Directors are
reimbursed for their reasonable expenses in attending Board and Committee
meetings.
The Board of Directors has a standing Audit Committee and a standing
Compensation Committee. The Board does not have a Nominating Committee.
The Audit Committee, which held one meeting during Fiscal 1996, reviews with
management and the independent public accountants the Company's annual
financial statements, the scope of the audit, any comments made by the
independent public accountants and such other matters as the Committee deems
appropriate. In addition, the Committee reviews the performance and retention
of the Company's independent accountants and reviews with management such
matters relating to compliance with corporate policies as the Committee deems
appropriate. Messrs. Anathan and White, neither of whom is an executive
officer or employee of the Company, served on the Audit Committee in Fiscal
1996.
The Compensation Committee, which held four meetings during Fiscal 1996,
administers the Company's stock option plans and cash bonus plan, reviews the
administration and performance of the Company's retirement plans and
recommends to the Board of Directors the compensation and other employment
terms of the Company's executive officers. Messrs. Anathan, Glazer and White,
none of whom is an executive officer or employee of the Company, served on the
Compensation Committee in Fiscal 1996.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to compensation paid
to or accrued on behalf of the Named Executive Officers for all services
rendered to the Company for Fiscal 1996, Fiscal 1995 and Fiscal 1994.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION(4)
--------------------------------- ------------------
NAME AND OTHER ANNUAL COMMON SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) UNDERLYING OPTIONS COMPENSATION(5)
------------------ ----------- -------- -------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael F. Anthony(6)... Fiscal 1996 $325,000 $ 42,269 $192,390(7) -- $2,656
President and Fiscal 1995 $325,314 $ 2,075 $ 58,418(8) 50,000 $2,149
Chief Executive Officer Fiscal 1994 $108,333 $ 50,312 -- 250,000 $ 264
John J. Rahilly(9)...... Fiscal 1996 $188,718 $191,667 -- -- $5,267
Executive Vice
President, Fiscal 1995 $230,160 $ 51,410 $ 65,726(10) -- $2,508
Finance and
Administration Fiscal 1994 $ 61,923 $ 25,064 $ 11,532(10) 50,000 $ 53
G. Randolph Dirth(11)... Fiscal 1996 $207,692 $ 19,549 $ 73,765(12) 85,000 $ 685
Executive Vice
President,
Merchandising
Alexander M. Winiecki... Fiscal 1996 $165,769 $ 14,297 -- 30,000(13) $3,496
Senior Vice President, Fiscal 1995 $163,623 $ 901 -- -- $3,401
Store Operations Fiscal 1994 $160,000 $ 2,579 -- 30,000 $1,622
Jo-Ann B. Karalus....... Fiscal 1996 $140,000 $ 11,796 -- 35,000(13) $3,095
Vice President Fiscal 1995 $118,080 $ 651 -- -- $2,502
Human Resources Fiscal 1994 $117,658 $ 1,881 -- 25,000 $1,206
Thomas A. Carroll(14)... Fiscal 1996 $118,450 $ 23,482 -- 25,000(13) $1,844
Vice President Fiscal 1995 $117,641 $ 646 -- -- $1,797
Real Estate and
Construction Fiscal 1994 $114,712 $ 1,461 13,693(15) 25,000 $ 79
</TABLE>
- --------
(1) Philip W. Roizin, the Company's Executive Vice President, Finance and
Administration, is not included in this table because his employment
commenced on December 9, 1996.
(2) Payments made under the Company's Management Incentive Bonus Plan (the
"MIB Plan"), the principal performance-based cash compensation program
for executive officers of the Company, in respect of performance in
Fiscal 1996 were $39,684 to Mr. Anthony, $18,316 to Mr. Dirth, $12,979 to
Mr. Winiecki, $10,684 to Ms. Karalus and $9,040 to Mr. Carroll. In 1996,
Mr. Carroll also received a special one-time bonus of $13,500 in respect
of certain special projects. All other amounts in this column for Fiscal
1996 were paid to the Named Executive Officer under the Company's Profit
Sharing Plan, in which all employees of the Company participate. Except
in the case of Messrs. Anthony and Rahilly, Fiscal 1995 and 1994 bonuses
solely represent the amount paid to the Named Executive Officer in
respect of the Profit Sharing Plan. Pursuant to Mr. Anthony's employment
agreement with the Company, he received a minimum bonus of $50,000 in
Fiscal 1994 under the MIB Plan. Pursuant to Mr. Rahilly's employment
agreement with the Company, he received minimum bonuses of $50,000 and
$25,000 in Fiscal 1995 and Fiscal 1994, respectively, under the MIB Plan.
No other Named Executive Officer received any bonus under the MIB Plan
for Fiscal 1995 and Fiscal 1994.
(3) While each of the Named Executive Officers enjoys certain perquisites,
such perquisites did not, except as disclosed, exceed the lesser of
$50,000 or 10% of such officer's salary and bonus in each of Fiscal 1996,
Fiscal 1995 and Fiscal 1994.
(4) No other forms of Long Term Compensation were awarded to the Named
Executive Officers in Fiscal 1996, Fiscal 1995 and Fiscal 1994.
(5) For Fiscal 1996, Fiscal 1995 and Fiscal 1994, respectively, All Other
Compensation represents (i) the following dollar value of insurance
premiums paid by the Company with respect to term life insurance for the
benefit of each of the Named Executive Officers: Mr. Anthony--$995, $929
and $264, Mr. Rahilly--$1,882, $2,508 and $53, Mr. Dirth--$685 (1996
only), Mr. Winiecki--$974, $940 and $1,018, Ms. Karalus--$1,248, $699 and
$615 and Mr. Carroll--$644, $626 and $679, and (ii) the following dollar
value of contributions made by the Company to the Company's defined
contribution plan for the benefit of
7
<PAGE>
the Named Executive Officers: Mr. Anthony--$1,798, $1,220 and $0, Mr.
Rahilly--$0, $0 and $0, Mr. Winiecki--$2,250, $2,250 and $604, Ms.
Karalus--$1,847, $1,803 and $591 and Mr. Carroll - $1,202, $1,171 and $0.
(6) Mr. Anthony commenced employment with the Company on September 30, 1994
as President and Chief Operating Officer. In September 1995, Mr. Anthony
was named President and Chief Executive Officer.
(7) Upon hiring Mr. Anthony in 1994, the Company loaned him $100,000 for the
purposes of assisting him in the relocation of his principal residence to
near the Company's headquarters in Nashua, New Hampshire. This loan did
not bear interest. In May 1996, the Company agreed to make Mr. Anthony
whole for the dimunition in the value of his former residence incurred by
him at the time of his relocation to New Hampshire. To effect this
transaction, the Company (1) purchased Mr. Anthony's former residence
from him at the then-prevailing market rate, which was materially less
than the price at which Mr. Anthony had originally purchased it, (2)
forgave the $100,000 loan described above and (3) paid him an additional
amount equal to that amount which, when added to the $100,000 in loan
forgiveness, would provide him with the amount necessary to make him
whole on the loss. The Company subsequently sold Mr. Anthony's former
residence in an arms-length transaction to an un-affiliated third-party
in July 1996 at then-prevailing market rates.
(8) Includes a relocation allowance of $47,290 in Fiscal 1995.
(9) Mr. Rahilly resigned his position with the Company on November 19, 1996.
In recognition of his services prior to leaving the Company, Mr. Rahilly
was paid a one-time bonus of $191,667 in Fiscal 1996.
(10) Includes relocation allowances of $56,935 and $11,532 in Fiscal 1995 and
Fiscal 1994, respectively. In November 1994, the Company loaned $85,938
to Mr. Rahilly for the purpose of assisting him in the relocation of his
principal residence to near the Company's headquarters in Nashua, New
Hampshire. This loan did not bear interest. The relocation allowance
attributed to Mr. Rahilly in Fiscal 1995 includes the forgiveness of
$35,000 of this loan. Mr. Rahilly repaid to the Company the remaining
$50,938 in October 1995.
(11) Mr. Dirth resigned his position with the Company effective February 24,
1997.
(12) Includes reimbursement of $39,085 in relocation expenses and a $30,000
signing bonus pursuant to Mr. Dirth's employment agreement.
(13) On May 6, 1996, the Company amended 30,000, 25,000 and 25,000 options
held by Mr. Winiecki, Ms. Karalus and Mr. Carroll, respectively, to
reduce the exercise price and extend the vesting schedule. See "--Ten
Year Option/SAR Repricings".
(14) Mr. Carroll resigned his position with the Company effective March 21,
1997.
(15) Includes a relocation allowance of $9,683 and a car allowance of $4,010
in Fiscal 1994.
8
<PAGE>
The following table summarizes option grants during Fiscal 1996 to the Named
Executive Officers and the potential realizable value of such options
determined by formulas prescribed by the Securities and Exchange Commission.
The assumed rates of stock price appreciation are hypothetical; the actual
value of the options, if any, will depend on the future performance of the
Company's stock. No stock appreciation rights were granted during Fiscal 1996.
OPTION/SAR GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR (/SH) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
G. Randolph Dirth....... 85,000(1) 26.1% $7.875 5/24/2006 $ 0 $ 0
Alexander M. Winiecki... 30,000(2) 9.2% $9.375 5/6/2004 $ 176,875 $ 448,239
Jo-Ann B. Karalus....... 25,000(2) 7.7% $9.375 5/6/2004 $ 147,396 $ 373,532
10,000(3) 3.1% $9.375 5/8/2006 $58,958 $ 149,413
Thomas A. Carroll....... 25,000(1)(2) 7.7% $9.375 2/23/2004 $ 0 $ 0
</TABLE>
- --------
(1) These options were terminated in accordance with their terms upon the
executives' resignation from the Company.
(2) On May 6, 1996, the Company amended 30,000, 25,000 and 25,000 options held
by Mr. Winiecki, Ms. Karalus and Mr. Carroll, respectively, to reduce the
exercise price and extend the vesting schedule. See "--Ten Year Option/SAR
Repricings".
(3) These options were granted on May 8, 1996 pursuant to the Company's 1992
Equity Incentive Plan and will become exercisable as follows: 2,500 shares
on May 8, 1997; 2,500 shares on May 8, 1998; 2,500 shares on May 8, 1999;
and 2,500 shares on May 8, 2000.
The following table sets forth information with respect to (i) the exercise
of stock options by the Named Executive Officers during Fiscal 1996, (ii) the
number of unexercised options held by the Named Executive Officers as of
February 1, 1997 and (iii) the value of unexercised in-the-money options
(i.e., options for which the fair market value of the Common Stock ($8.125 at
January 31, 1997) exceeds the exercise price) as of February 1, 1997:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED VALUE FEBRUARY 1, 1997 FEBRUARY 1, 1997
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Michael F. Anthony...... -- -- 137,500/162,500 $137,500/$137,500
John J. Rahilly......... 25,000 $90,625 0/ 0 $ 0/$ 0
G. Randolph Dirth....... -- -- 0/ 85,000 $ 0/$ 21,250
Alexander M. Winiecki... -- -- 44,992/ 30,000 $337,460/$ 0
Jo-Ann B. Karalus....... -- -- 21,133/ 35,000 $148,196/$ 0
Thomas A. Carroll....... 2,096 $21,474 3,750/ 26,250 $ 0/$ 0
</TABLE>
9
<PAGE>
The following table summarizes amendments to the exercise price of certain
stock options granted since the Company's initial public offering in April
1993 to the Company's executive officers, including three such amendments to
options held by named executive officers during Fiscal 1996. Mr. Winiecki's
and Ms. Karalus's repriced stock options were initially granted on May 6, 1994
when the fair market value of the Company's Common Stock underlying such
option was $14.8125 per share. Mr. Carroll's options were initially granted on
February 23, 1994 when the stock price was $14.75. The vesting schedule for
these options was also amended from a cliff-vesting schedule in which all
options were to vest on May 6, 1998 (February 23, 1998 for Mr. Carroll) to a
graduated schedule whereby one-third of the options will become first
exercisable on May 8, 1998, one-third on May 8, 1999 and one-third on May 8,
2000 (February 23, 1998, February 23, 1999 and February 23, 2000 for Mr.
Carroll). Because the Compensation Committee has determined that the
diminution of the Company's stock price that occurred from the date of the
initial grants significantly reduced the effectiveness of these stock options
as continuing incentives, the Committee approved the repricing of the
previously granted options as described in the following table.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET LENGTH OF
UNDERLYING PRICE OF EXERCISE ORIGINAL
OPTIONS/ STOCK AT PRICE AT OPTION TERM
SAR'S TIME OF TIME OF NEW REMAINING AT
REPRICED OR REPRICING OR REPRICING OR EXERCISE DATE OF
AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
---- ------- ----------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alexander M. Winiecki... 5/8/96 30,000 $9.375 $14.8125 $9.375 5/6/04
Senior Vice President,
Store Operations
Jo-Ann B. Karalus....... 5/8/96 25,000 $9.375 $14.8125 $9.375 5/6/04
Vice President,
Human Resources
Thomas A. Carroll....... 5/8/96 25,000 $9.375 $ 14.75 $9.375 2/23/04
Former Vice President
Real Estate and
Construction
Michael F. Anthony...... 3/22/95 100,000 $5.375 $ 14.50 $5.375 9/30/04
President and Chief
Executive Offficer
John J. Rahilly......... 3/22/95 50,000 $5.375 $ 14.125 $5.375 10/23/04
Former Executive Vice
President,
Finance and
Administration
</TABLE>
PENSION PLAN
The Company has a defined benefit Pension Plan qualified under Section
401(a) of the Internal Revenue code of 1986, as amended, for eligible
employees who have completed one year of service with 1,000 or more hours of
employment. In general, all employees of the Company are eligible to
participate, excluding (i) a director of the Company who is not employed by
the Company in any other capacity, (ii) any person whose compensation consists
of a retainer or a fee, and (iii) any person who is a nonresident alien.
10
<PAGE>
The table below sets forth the estimated average annual benefits at normal
retirement to participants in the specified compensation and years-of-service
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
COMPENSATION* 15 20 25 30 35
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000................................ $23,723 $31,630 $39,538 $47,446 $52,717
150,000................................ $28,973 $38,630 $48,288 $57,946 $64,384
</TABLE>
- --------
* Based upon salary and bonuses.
Benefits under the Pension Plan are based upon years of credited service
(not in excess of 33 1/3 years) and final average compensation. A participant
earns one year of credited service for each year in which the participant
completes 1,000 or more hours of employment, and a participant's final average
compensation is the average of the participant's highest five consecutive
years' compensation during the participant's last ten years of employment.
Compensation covered by the Pension Plan for the Named Executive Officers
generally corresponds with the aggregate of base salary and bonus as reported
in the Summary Compensation Table above. For purposes of the Pension Plan, a
participant's compensation is capped at $150,000 (adjusted annually). Benefits
shown are computed as a straight life annuity with no deduction for Social
Security benefits or other offset amounts. A participant becomes vested under
the Pension Plan once he or she has earned five years of credited service.
On February 3, 1996, the Named Executive Officers had the following number
of years of credited service: Mr. Kaminstein--six years; Mr. Anthony--two
years; Mr. Rahilly--zero years, Mr. Dirth--zero years; Mr. Winiecki--six
years, Ms. Karalus--sixteen years and Mr. Carroll--four years.
EMPLOYMENT AGREEMENTS
Mr. Anthony has entered into an employment agreement with the Company
expiring upon the earliest to occur of his resignation, death, permanent
disability or incapacity or his termination by the Company with or without
cause. The agreement provides for an annual salary, participation in the MIB
Plan and any other performance based compensation programs available to the
Company's senior executives, and for certain fringe benefits, including
contributions for health and dental coverage, term life insurance in an amount
of at least $1,000,000, long term disability coverage, participation in the
Company's Pension Plan, and certain other benefits. The agreement provides
that if Mr. Anthony is terminated by the Company without cause (as defined) or
terminates his employment for good reason (as defined), Mr. Anthony is
entitled, subject to complying with certain confidentiality and noncompetition
obligations, to continued payment of his base salary and certain of his fringe
benefits until twelve months following termination of his employment, as well
as a pro rata bonus payment under the MIB Plan for the fiscal year in which
termination occurs based upon the number of days he was employed in such year.
Severance benefits are reduced by any amounts received by Mr. Anthony from
other employment during the severance period. If Mr. Anthony's employment
terminates because of his death, disability or incapacity, Mr. Anthony is
entitled to a pro rata bonus payment under the MIB Plan for the fiscal year in
which such termination occurs based upon the number of days he was employed in
such year and payments to which he is entitled under any other Company benefit
plans, including any long-term disability plan. The agreement also provides
that Mr. Anthony shall not disclose or use any confidential information of the
Company and not compete with the Company during the period of his employment
and for one year thereafter, unless Mr. Anthony's employment is terminated
without cause, in which case the noncompetition period ends upon Mr. Anthony's
termination. The agreement provides that Mr. Anthony will not recruit any
employee of the Company for employment in any other business until one year
after the termination of Mr. Anthony's employment with the Company.
Mr. Roizin and Mr. Winiecki are employed by the Company pursuant to
employment agreements providing for a base salary and participation in the MIB
Plan and various other employee benefit plans, including medical,
11
<PAGE>
vacation, disability and pension. These agreements, and a Severance Agreement
between the Company and Ms. Karalus, provide for a severance benefit if the
executive is terminated for any reason other than cause consisting of base
salary continuation for 12 months following termination (subject to offset for
income earned from other employment or from self-employment). Mr. Dirth, who
resigned his position with the Company effective February 24, 1997, is
entitled under his employment agreement to receive his salary until the
earlier of February 24, 1998 or the date he is re-employed.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for approving and recommending to
the Board of Directors the compensation of executive officers of the Company
and administers the Company's 1992 Equity Incentive Plan and Management
Incentive Bonus Plan. The Committee regularly reports on its activities to the
Board of Directors. The Committee was comprised in Fiscal 1996 of three
outside directors who are not officers or employees of the Company and who
were not eligible to participate in any of the plans or programs that the
Committee administers.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are based on the belief that
the interests of the Company's executive officers should be directly aligned
with those of the stockholders. The programs are strongly oriented towards a
pay-at-risk philosophy that ties a significant portion of overall compensation
to the financial performance of the Company. The Committee has established the
following principles to guide development of the Company's compensation
programs and to provide a framework for compensation decisions:
. provide a total compensation package that will attract the best talent
to the Company, motivate individuals to perform at their highest levels,
reward outstanding performance, and retain executives whose skills are
critical for building long-term stockholder value; and
. establish annual incentives for senior management that are directly tied
to the overall financial performance of the Company.
COMPENSATION PROGRAMS AND PRACTICES
Base Salary. Salaries of executive officers are established by the Committee
based on an executive officer's scope of responsibilities, level of
experience, individual performance and contribution to the business. From time
to time, the Company conducts salary surveys to determine whether the salaries
of its employees, including its executive officers, are in line with retailers
of similar size.
Management Incentive Bonus Plan. The Company has in effect a Management
Incentive Bonus Plan (the "MIB") under which executive officers and other key
management employees selected by the Board may receive incentive awards in the
form of cash bonuses and may under certain circumstances receive additional
awards in the form of MIB Options granted under the 1992 Equity Incentive
Plan. The purpose of the MIB Plan is to tie a significant portion of annual
pay directly to key financial results. Bonus awards are based on annual
performance criteria established by the Committee with respect to attainment
by the Company of specified levels of income from operations, as well as
performance criteria applied on an individual basis. The Company must attain a
threshold level of income from operations in order for MIB Plan participants
to be eligible for any bonus payments under the Plan. MIB Plan participants
earn awards defined in terms of percentages of their base salaries. These
percentages are determined by the Company's attainment of specified levels of
income from operations, with higher levels of income from operations resulting
in higher percentages. Unless altered by the Committee, participants
automatically receive 70% of the percentage of base salary so determined and
can earn the remaining 30% based upon individual performance. Individual
performance criteria are determined by the Committee toward the beginning of
each fiscal year. In the case of executive officers other than the Chief
12
<PAGE>
Executive Officer, individual performance criteria are determined after taking
into consideration the recommendation of the Chief Executive Officer.
In Fiscal 1996, the Company exceeded the threshold level of income from
operations established by the Committee in order for bonuses to be payable
under the Plan. As a result of applying the MIB Plan's formula, the Company
paid the following bonuses under the MIB Plan in respect of Fiscal 1996:
$39,684 to Mr. Anthony; $18,316 to Mr. Dirth; $12,979 to Mr. Winiecki; $10,684
to Ms. Karalus and $9,040 to Mr. Carroll.
The MIB Plan provides for annual limits on cash bonuses payable pursuant to
the MIB Plan equal to 75% of base salary, in the case of the Chief Executive
Officer, and 50% of base salary, in the case of other participants. Such
limitations may be changed by the Committee.
In addition, if an individual and the Company attain performance criteria in
excess of levels yielding the maximum cash bonus award payable to him or her
under the MIB Plan, the Company must either (i) award options under the 1992
Equity Incentive Plan to such individual to purchase that number of shares of
Common Stock equal to the additional bonus that would have been payable under
the MIB Plan absent the applicable cash bonus limit divided by the fair market
value of a share of Common Stock on the date of grant or (ii) award the
participant cash in an amount equal to the value of such options at the time
of grant (or a combination of such awards). In the case of options, the
aggregate of such awards for all participants can not exceed 50,000 shares
with respect to any one fiscal year. The exercise price of any such options
will be 100% (110% in the case of an incentive stock option granted to a 10%
shareholder) of the fair market value at the time of grant, and, unless
otherwise specified at the time of grant, such options become exercisable in
equal increments on each of the first through third anniversaries of the date
of grant. In Fiscal 1996, participants in the MIB Plan did not earn awards in
excess of their maximum cash bonuses.
Profit Sharing Plan and 401(k) Plan Contribution. The Company has in effect
a Profit Sharing Plan under which employees (including all of the Company's
executive officers) who are regularly scheduled to work 52 weeks per year and
have been employed by the Company for more than 90 days participate. Employees
of the Company (including the Company's executive officers) may also
participate in discretionary Company contributions made to participants under
the Company's 401(k) plan. The Profit Sharing Plan provides for a bonus pool
equal to a specified percentage of net income established year-to-year by the
Board of Directors (5% for Fiscal 1996), less the amount paid by the Company
to employees as discretionary employer contributions under the 401(k) plan.
Participants receive an amount calculated on the basis of their W-2 (less
income attributable to stock option exercises, relocation expenses and the
value of Company-paid car leases) earnings equal to their pro rata share of
such bonus pool.
Stock Options. The Committee strongly believes that the interests of senior
management must be closely aligned with those of the stockholders. Long-term
incentives in the from of stock options provide a vehicle to reward executives
only if there is an increase in stockholder value. Stock options are granted
to executive officers and selected employees whose contributions and skills
are important to the long-term success of the Company.
The Compensation Committee repriced certain stock options held by Mr.
Winiecki, Ms. Karalus and Mr. Carroll in Fiscal 1996. Mr. Winiecki's, Ms.
Karalus's repriced stock options were initially granted on May 6, 1994 when
the fair market value of the Company's Common Stock underlying such option was
$14.8125 per share. Mr. Carroll's options were initially granted on February
23, 1994 when the stock price was $14.75. The vesting schedule for these
options was also amended from a cliff-vesting schedule in which all options
were to vest on May 6, 1998 (February 23, 1998 for Mr. Carroll) to a graduated
schedule whereby one-third of the options will become first exercisable on May
8, 1998, one-third on May 8, 1999 and one-third on May 8, 2000 (February 23,
1998, February 23, 1999 and February 23, 2000 for Mr. Carroll). Because the
Compensation Committee has determined that the diminution of the Company's
stock price that occurred from the date of the initial grants significantly
reduced the effectiveness of these stock options as continuing incentives, the
Committee approved the repricing of certain of these previously granted
options to $9.375 per share.
13
<PAGE>
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
For Fiscal 1996, Mr. Anthony received a salary of $325,000 and a bonus under
the MIB Plan of $39,684. In addition, the Compensation Committee agreed in
Fiscal 1996 to make Mr. Anthony whole for the dimunition in the value of his
former residence incurred by him at the time of his relocation to New
Hampshire. In doing so, Mr. Anthony realized $192,390 of income. See Note 7 to
"Compensation of Executive Officers--Summary Compensation Table".
DISCUSSION OF CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION
A YEAR
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking a deduction in 1995 or subsequent years for
compensation in excess of $1 million for its chief executive officer or any of
its four other highest-paid officers. Certain performance-based compensation,
however, is specifically exempt from the deduction limit. To date, the annual
cash compensation payable to any executive officers has not approached the $1
million threshold and is not expected to do so in the near term. In addition,
the Company's 1992 Equity Incentive Plan has been designed so that stock
options and stock appreciation rights granted under such Plan will be excluded
from the deduction limit and to provide flexibility for certain other awards
to so qualify.
Compensation Committee
Robert F. White
Mone Anathan, III
Michael L. Glazer
14
<PAGE>
PERFORMANCE GRAPH
The following stock price performance graph compares the cumulative total
return on the Company's common stock with the cumulative total return of the
Standard & Poor's Composite 500 Index and of the University of Chicago Center
for Research in Security Prices Index for NASDAQ Retail Trade Stocks from
March 26, 1993, the date of the first public trading of the Company's shares,
through February 1, 1997.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/26/93 2/19/94 1/28/95 2/3/96 2/1/97
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brookstone 100.00 129.21 48.31 51.69 73.03
S&P 500 100.00 106.91 105.05 142.00 165.42
NASDAQ Retail 100.00 112.66 100.99 113.38 140.00
</TABLE>
Note: The stock price performance on the graph above is not necessarily
indicative of future price performance.
APPROVAL OF CERTAIN AMENDMENTS TO THE 1992 EQUITY INCENTIVE PLAN
The stockholders are being asked to vote on a proposal to approve the
amendment of the Company's 1992 Equity Incentive Plan (the "Plan") to (i)
remove a current provision in the Plan reserving 300,000 shares for issuance
exclusively in connection with stock options awarded pursuant to the
requirements of the MIB Plan (the "MIB Options") and (ii) change the maximum
number of shares that may be the subject of grants to any one individual under
the Plan from 400,000 to 750,000. In addition, the stockholders are being
asked to approve the eligibility requirements contained in the Plan, as
amended. The Compensation Committee of the Board of Directors has approved the
foregoing amendments, subject to stockholder approval.
THE PROPOSED AMENDMENTS WILL NOT INCREASE THE AGGREGATE NUMBER OF SHARES
AVAILABLE FOR GRANT UNDER THE PLAN. The Compensation Committee has concluded
that the amendments will increase the flexibility of the Plan and better
enable the Committee to design effective equity incentives for management
while protecting the interests of the Company and its stockholders.
As amended, the Plan will allow the Committee to use the 300,000 shares
currently reserved exclusively for MIB Options for the grant of other types of
options and awards under the Plan. In other words, the Committee will be able
to use such shares in the same circumstances under which other shares reserved
under the Plan may be used. Under the current provisions of the Plan, MIB
Options may only be awarded under the following circumstances. A participant
under the MIB Plan is eligible for a bonus upon the achievement of individual
and Company performance criteria, but subject to a limitation on the amount of
the bonus (set annually by the Committee) that a participant may receive in
cash. If an individual and the Company achieve performance levels in excess of
levels yielding the maximum cash bonus award payable to him or her under the
MIB Plan, the Company must either (i) award options under the Plan to such
individual to purchase the number of shares of
15
<PAGE>
Common Stock equal to the additional cash bonus that would have been payable
absent the applicable cash bonus limitation divided by the fair market value
of a share of Common Stock on the date of grant or (ii) award the participant
cash in an amount equal to the value of such options at the time of grant (or
a combination of such awards). The maximum aggregate number of options that
may be granted pursuant to the MIB Plan with respect to any one fiscal year is
50,000.
A total of 1,200,000 shares of Common Stock are reserved for issuance
pursuant to awards made under the Plan, of which 673,276 shares were the
subject of outstanding awards on April 14, 1997 and 472,257 were available for
future grant on that date. Of these shares available for future grant, 273,491
shares, or 58%, were reserved exclusively for awards of MIB Options. As
indicated in the preceding paragraph, the circumstances in which MIB Options
may be granted are subject to significant restrictions under the current
provisions of the Plan. The Compensation Committee believes that such
restrictions severely limit the Committee's ability to design effective
incentives which retain and attract top management talent and align their
interests with stockholders, especially when a majority of the remaining
shares available for grant are subject to such restrictions. Moreover, the
Committee believes that the equity incentive plans of other public companies
do not typically include similar restrictions.
Currently, the Plan provides that the maximum number of shares that may be
the subject of awards to any individual under the Plan is 400,000, and the
Company is seeking stockholder approval to increase this limitation to
750,000. The Committee has concluded that this increase is necessary in order
to assist the Company in hiring and retaining qualified senior executives.
For example, the current limitation effectively precludes further awards
under the Plan to Michael Anthony, the Company's Chief Executive Officer.
Under applicable rules, an option or stock appreciation right which is
repriced is treated as a new original grant. Thus, though Mr. Anthony holds
options under the Plan for a total of only 300,000 shares, he is counted as
having been granted 400,000 shares under the Plan for the purpose of the per
individual limitation. Without stockholder approval of an increase in this
limitation, the Company will not be able to provide additional equity
incentives under the Plan to Mr. Anthony or any other individual who is
treated as having received awards equal to the current maximum per person
limitation.
The Committee also believes it is desirable that awards under the Plan
continue to qualify as "performance based" compensation for purposes Section
162(m) of the Internal Revenue Code. Section 162(m) precludes a public
corporation from taking a deduction for compensation in excess of $1 million
for its chief executive officer or any of its other four highest-paid
officers. The value realized upon the exercise of stock options or stock
appreciation rights in any year is counted toward this deduction limit, unless
such options or stock appreciation rights meet certain requirements to be
considered "performance based" compensation. In order to continue to qualify
such awards as "performance based" compensation for purposes of Section
162(m), the Company is seeking stockholder approval of the material terms of
the Plan, including the limitation discussed above on the number of shares
that may be the subject of awards to any individual under the Plan and the
Plan's eligibility requirements. These eligibility requirements are summarized
below.
On April 14, 1997 the closing price per share of the Common Stock on the
Nasdaq National Market was $8.375.
GENERAL
The following summary of the Plan, as amended, is qualified in its entirety
by the full text of the Plan that appears as Exhibit A to this Proxy
Statement.
The Plan is administered by the Compensation Committee of the Board of
Directors, which consists of directors who are both "non-employee directors"
for purposes of Rule 16b under the Securities Exchange Act of 1934, as
amended, and outside directors for purposes of the Internal Revenue Code. The
current members of the Compensation Committee are Mone Anathan, III, Michael
L. Glazer and Robert F. White.
Key employees of the Company or any of its subsidiaries and other persons or
entities (including directors of the Company or any of its subsidiaries who
are not employees) who, in the opinion of the Compensation Committee, are in a
position to make a significant contribution to the success of the Company or
its subsidiaries are eligible to receive awards under the Plan. The Plan
provides for the grant of stock options (both nonstatutory
16
<PAGE>
options and, in the case of employees, incentive stock options as defined in
Section 422 of the Internal Revenue Code), stock appreciation rights,
restricted stock, unrestricted stock, deferred stock grants, and performance
awards, as well as loans in connection with such grants and awards and cash
payments intended to offset income taxes due with respect to any such grant or
award. Awards under the Plan may also include provision for the payment of
dividend equivalents with respect to the shares subject to the awards. Awards
under the Plan (other than an award in the form of an outright transfer of
cash or unrestricted stock) may not be transferred other than by will or by
the laws of descent and distribution. The maximum number of shares of Common
Stock for which any person may be awarded stock options and/or stock
appreciation rights under the Plan is 750,000.
Stock Options. The exercise price of an incentive stock option granted under
the Plan may not be less than 100% (110% in the case of owners of more than
10% of all classes of voting stock of the Company or any of its subsidiaries
("10% shareholders")) of the fair market value of the Common Stock at the time
of grant. The term of each incentive stock option may be set by the
Compensation Committee but cannot exceed ten years from grant (five years from
grant in the case of an option granted to a 10% shareholder). The exercise
price of a nonstatutory option granted under the Plan is at the discretion of
the Compensation Committee, and the term of such an option may not exceed 10
years. Options will be exercisable at such time or times as the Compensation
Committee specifies. The option price may be paid in cash, or, if permitted by
the Compensation Committee and subject to certain additional limitations, by
tendering shares of Common Stock, by using a promissory note or by an
unconditional and irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price. At the request of the
optionee, and subject in each case to the discretion of the Compensation
Committee, if the market price of shares to be issued in respect of an option
exercise exceeds the exercise price (and so long as the option being exercised
is not in tandem with a stock appreciation right), the Compensation Committee
may cancel the option and cause such excess to be paid to the optionee in
cash.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be granted
either in tandem with stock options or independent of any stock option grant.
Each SAR entitles the participant, in general, to receive upon exercise
thereof the excess of a share's fair market value at the date of exercise over
the share's fair market value on the date the SAR was granted. The
Compensation Committee also may grant SARs which take into account the
performance of the Common Stock in comparison to other stocks or to stock
indices, or which, following a change in control of the Company (as determined
by the Compensation Committee), reflect a specified value or range of values
of the Common Stock during a period prior to the change in control. If an SAR
is granted in tandem with an option, the SAR will be exercisable only to the
extent the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa. An SAR not
granted in tandem with an option will become exercisable at such time or
times, and on such conditions, as the Compensation Committee may specify.
Stock Awards. The Plan provides for awards of nontransferable shares of
restricted Common Stock subject to repurchase or forfeiture as well as of
unrestricted shares of Common Stock. Restricted Common Stock is subject to
repurchase by the Company at the original purchase price if the participant's
affiliation with the Company ceases before the restrictions lapse. Other
awards under the Plan may also be settled with restricted Common Stock.
The Plan also provides for deferred grants entitling the recipient to
receive cash or Common Stock following the attainment of performance goals
determined by the Compensation Committee. Performance conditions or the use of
deferred Common Stock may be applied in connection with other awards under the
Plan.
Except as otherwise determined by the Compensation Committee, if a
participant dies, options and SARs, to the extent then exercisable, remain
exercisable for a one-year period (or such shorter or longer period as the
Compensation Committee may determine but in no event beyond the remainder of
their original term), and shares of restricted Common Stock held by the
participant must be transferred to the Company. Deferred Common Stock grants,
performance awards and supplemental awards to which a participant is not
irrevocably entitled will be forfeited unless otherwise provided.
Except as otherwise determined by the Compensation Committee, if a
participant's employment (or other applicable affiliation with the Company)
terminates for reasons other than death, options and SARs remain
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generally exercisable, to the extent they were exercisable immediately prior
to termination, for three months (or such longer period as the Compensation
Committee may determine, but in no event beyond the remainder of their
original term), shares of restricted Common Stock must be transferred to the
Company, and other awards terminate; however, in the event of a discharge for
cause, awards may be terminated immediately. Also, in the case of certain
mergers, consolidations or other transactions in which the Company is
acquired, the Plan provides that the Compensation Committee has the discretion
to make stock options and SARs immediately exercisable, to remove restrictions
on shares of restricted stock and conditions on deferred grants and
performance awards, and to forgive outstanding loans under the Plan. The
Compensation Committee also has the discretion in such circumstances to
provide for replacement awards.
The number of shares available for awards under the 1992 Plan is subject to
adjustment for stock dividends, stock splits or combinations of shares,
recapitalizations or other changes in the Company's capitalization, or other
distributions with respect to common shareholders other than normal cash
dividends. Outstanding awards under the Plan are subject to similar
adjustments. No award may be granted under the Plan after April 15, 2002, but
awards previously granted may extend beyond that date.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the Plan. The summary does not
purport to cover federal employment tax or other federal tax consequences that
may be associated with the Plan, not does it cover state, local or non-U.S.
taxes.
Incentive Stock Options. In general, an optionee realizes no taxable income
upon the grant or exercise of an incentive stock option (ISO). However, the
exercise of an ISO may result in an alternative minimum tax liability to the
optionee. With certain exceptions, a disposition of shares purchased under an
ISO within two years from the date of grant or within one year after exercise
produces ordinary income to the optionee (and a deduction to the Company)
equal to the value of the shares at the time of exercise less the exercise
price. Any additional gain recognized in the disposition is treated as a
capital gain for which the Company is not entitled to a deduction. If the
optionee does not dispose of the shares until after the expiration of these
one-and two-year holding periods, any gain or loss recognized upon a
subsequent sale is treated as a long-term capital gain or loss for which the
Company is not entitled to a reduction.
Nonstatutory Options. In general, in the case of a nonstatutory option, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at
time of exercise) of the fair market value of the shares acquired upon
exercise over the exercise price; a corresponding deduction is available to
the Company; and upon a subsequent sale or exchange of the shares,
appreciation or depreciation after the date of exercise is treated as capital
gain or loss for which the Company is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is
treated as a nonstatutory option. ISOs are also treated as nonstatutory
options to the extent they first become exercisable by an individual in any
calendar year for shares having a fair market value (determined as of the date
of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Internal Revenue
Code, the grant, vesting or accelerated exercisability of awards in connection
with a change in control of the Company may be required to be valued and taken
into account in determining whether participants have received compensatory
payments, contingent on the change in control, in excess of certain limits. If
these limits are exceeded, a substantial portion of amounts payable to the
participant, including income recognized by reason of the grant, vesting or
exercise of awards under the 1992 Plan, may be subject to an additional 20%
federal tax and may be nondeductible to the Company.
The Internal Revenue Code also limits to $1 million the deduction the
Company may claim for compensation paid annually to any of its top five
officers, subject to a number of exceptions. The deduction limitation rules
provide an exemption for compensation attributable to the exercise of non-
discounted stock options that satisfy certain requirements. Stock options
awarded under the plan with exercise prices at or above fair market value at
the time of grant are intended to qualify for this exemption.
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BOARD RECOMMENDATION
The Board of Directors believes that the approval of the amendments to the
1992 Equity Incentive Plan described above will promote the interests of the
Company and its stockholders. Accordingly, the Board of Directors has approved
the amendments to the 1992 Equity Incentive Plan and recommends that the
stockholders vote "FOR" the proposal to approve this measure. Proxies
solicited by the Board of Directors will be so voted unless stockholders
specify otherwise.
RATIFICATION OF THE SELECTION OF THE COMPANY'S INDEPENDENT ACCOUNTANTS
Based upon the recommendation of the Audit Committee, the Board of Directors
has selected Price Waterhouse LLP to serve as independent accountants to
examine the financial statements of the Company and its subsidiaries for the
fiscal year ending January 31, 1998. Price Waterhouse LLP has served as the
Company's independent accountants since the fiscal year ending February 1,
1992. A representative of Price Waterhouse is expected to be present at the
Annual Meeting with the opportunity to make a statement if he or she desires
and to respond to appropriate questions.
BOARD RECOMMENDATION
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Price Waterhouse LLP as the Company's independent accountants.
Proxies solicited by the Board of Directors will be so voted unless the
stockholders specify otherwise.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
None of the Company's directors, executive officers or stockholders
representing beneficial ownership of greater than ten percent of the Company's
outstanding common stock failed to file the necessary forms within the
timeframes set forth in Section 16(a).
SHAREHOLDER PROPOSALS
Proposals of stockholders submitted for consideration at the 1998 Annual
Meeting of Stockholders must be received by the Company not later than January
19, 1998 in order to be considered for inclusion in the Company's proxy
material for that meeting.
The By-laws establish procedures, including advance notice procedures, with
regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors and with regard to certain
matters to be brought before meetings of stockholders of the Company. In
general, notice must be received by the Company not less than 60 days nor more
than 90 days prior to the meeting and must contain certain specified
information concerning the stockholder submitting the proposal. In addition,
the By-laws require that any such nomination of candidates for election as a
director be accompanied by a petition signed by at least 100 record holders of
capital stock entitled to vote in the election of directors, representing in
the aggregate 1% of the outstanding capital stock entitled to vote thereon.
Such procedures also authorize regulation of the order of business and conduct
of stockholder meetings, the authority of the presiding officer and attendance
at such meetings.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Annual
Meeting which is not referred to in the accompanying Notice of Annual Meeting.
Should any such matters be presented, the persons named in the proxy intend to
take such action in regard to such matters as in their judgment seems
advisable.
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EXHIBIT A
BROOKSTONE, INC.
1992 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of Brookstone, Inc. (the "Company") by enhancing its ability to
attract and retain employees and other persons or entities who are in a
position to make significant contributions to the success of the Company and
its subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted
Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards,
Loans or Supplemental Grants, or combinations thereof, all as more fully
described below.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company (the
"Board"). The Board will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award; (e) waive compliance by a
Participant (as defined below) with any obligations to be performed by the
Participant under an Award and waive any term or condition of an Award; (f)
amend or cancel an existing Award in whole or in part (and if an Award is
canceled, grant another Award in its place on such terms as the Board shall
specify), except that the Board may not, without the consent of the holder of
an Award, take any action under this clause with respect to such Award if such
action would adversely affect the rights of such holder; (g) prescribe the
form or forms of instruments that are required or deemed appropriate under the
Plan, including any written notices and elections required of Participants,
and change such forms from time to time; (h) adopt, amend and rescind rules
and regulations for the administration of the Plan; and (i) interpret the Plan
and decide any questions and settle all controversies and disputes that may
arise in connection with the Plan. Such determinations and actions of the
Board, and all other determinations and actions of the Board made or taken
under authority granted by any provision of the Plan, will be conclusive and
will bind all parties. Nothing in this paragraph shall be construed as
limiting the power of the Board to make adjustments under Section 7.3 or
Section 8.6.
The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the 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. On and after registration of the Stock under the
Securities Exchange Act of 1934 (the "1934 Act"), the Board shall delegate the
power to select directors and officers to receive Awards under the Plan and
the timing, pricing and amount of such Awards to a Committee, all members of
which shall be "non-employee directors" within the meaning of Rule 16b-3 under
the 1934 Act and "outside directors" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the plan may be made prior
to that date (but after Board adoption of the Plan), subject to such approval
of the Plan.
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No Award may be granted under the Plan after April 15, 2002, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
1,200,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award
payable in Stock or cash is satisfied in cash rather than Stock, the number of
shares of Stock as to which such Award was not exercised or for which cash was
substituted will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
Subject to Section 8.6(a), the maximum number of shares of Stock as to which
a Options or Stock Appreciation Rights may be granted to any Participant is
750,000. For purposes of this paragraph, except as otherwise provided in
regulations or other guidelines issued under Section 162(m) of the Code, any
repricing of an Option or Stock Appreciation Right shall be treated as an
original grant.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
"key employees" of the Company or any of its subsidiaries ("Employees") and
other persons or entities (including without limitation non-Employee directors
of the Company or a subsidiary of the Company) who, in the opinion of the
Board, are in a position to make a significant contribution to the success of
the Company or its subsidiaries. A "subsidiary" for purposes of the Plan will
be a corporation in which the Company owns, directly or indirectly, stock
possessing 50% or more of the total combined voting power of all classes of
stock.
6. TYPES OF AWARDS
6.1. OPTIONS.
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code (any
Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options may
be granted under the Plan. ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined by
the Board subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in the
case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of 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 or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of an
original issue of authorized Stock be less than the par value per share of
the Stock.
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(3) The Board may reduce the exercise price of an Option at any time
after the time of grant, but in the case of an Option originally awarded as
an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be exercised
will be the tenth anniversary (fifth anniversary, in the case of an ISO
granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified
by the Board at the time the Option was granted.
(d) Exercise of Options. Options granted under any single Award will become
exercisable at such time or times, and on such conditions, as the Board may
specify; provided, however, that if the Board does not so specify, 25% of the
shares subject to the Award may be purchased commencing two years after the
date of grant, and an additional 25% of such shares may be purchased
commencing on the third, fourth, and fifth anniversaries of the grant. The
Board may at any time and from time to time accelerate the time at which all
or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Board and (2) payment in full in accordance with paragraph (e)
below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be paid
for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Board at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Board expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (ii) by delivery of a promissory note of the Option holder
to the Company, payable on such terms as are specified by the Board, or (iii)
by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(iv) by any combination of the permissible forms of payment; 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 must be paid other than by the Option holder's promissory
note or personal check.
(f) Discretionary Payments. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise
price of the Option at the time of its exercise, the Board may cancel the
Option and cause the Company to pay in cash or in shares of Common Stock (at a
price per share equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between the fair
market value of the Stock which would have been purchased pursuant to the
exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid. The Board may exercise its
discretion to take such action only if it has received a written request from
the person exercising the Option, but such a request will not be binding on
the Board.
6.2. STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount,
in cash or Stock or a combination thereof (such form to be determined by the
Board), determined in whole or in part by reference to appreciation in Stock
value.
Except as provided below, a Stock Appreciation Right entitles the
Participant to receive, with respect to each share of Stock as to which the
Right is exercised, the excess of the share's fair market value on the date of
exercise over its fair market value on the date the Right was granted. The
Board may provide at the time of grant that the amount the recipient is
entitled to receive will be adjusted upward or downward under rules
established by the Board to take into account the performance of the Stock in
comparison with the performance
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of other stocks or an index or indices of other stocks. The Board may also
grant Stock Appreciation Rights providing that following a change in control
of the Company, as determined by the Board, the holder of such Right will be
entitled to receive, with respect to each share of Stock subject to the Right,
an amount equal to the excess of a specified value (which may include an
average of values) for a share of Stock during a period preceding such change
in control over the fair market value of a share of Stock on the date the
Right was granted.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the
time the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and will
be exercisable in accordance with the procedure required for exercise of
the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company,
accompanied by any other documents required by the Board.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entities the
recipient to acquire, for a purchase price equal to par value, shares of Stock
subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the Award. Payment may be by certified or bank check or
other instrument acceptable to the Board.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Board at the time of grant.
Unless the Board otherwise determines, certificates evidencing shares of
Restricted Stock will remain in the possession of the Company until such
shares are free of all restrictions under the Plan.
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(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2 (a) below) for
any reason, must be offered to the Company for purchase for the amount of cash
paid for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Board may specify. Upon lapse of all restrictions, Stock will cease to be
restricted for purposes of the Plan. The Board may at any time accelerate the
time at which the restrictions on all or any part of the shares will lapse.
(e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Board may, at the time
any Award described in this Section 6 is granted, provide that any or all the
Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Board may, in its sole discretion, approve the
sale to any Participant of shares of Stock free of restrictions under the Plan
for a price which is not less than the par value of the Stock.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Board may specify. The Board may at
any time accelerate the time at which delivery of all or any part of the Stock
will take place. At the time any Award described in this Section 6 is granted,
the Board may provide that, at the time Stock would otherwise be delivered
pursuant to the Award, the Participant will instead receive an instrument
evidencing the Participant's right to future delivery of Deferred Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) Nature of Performance Awards. A Performance Award entities the recipient
to receive, without payment, an amount in cash or Stock or a combination
thereof (such form to be determined by the Board) following the attainment of
Performance Goals. "Performance Goals" are goals which may be related to
personal performance, corporate performance, departmental performance or any
other category of performance deemed by the Board to be important to the
success of the Company. The Board will determine the Performance Goals, the
period or periods during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Board may, at the
time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or
any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. LOANS AND SUPPLEMENTAL GRANTS.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Board will have full authority to
decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate (which may be zero),
whether the Loan is to be secured or unsecured or with or without recourse
against the borrower, the terms on which the Loan is to be repaid and the
conditions, if any, under which it may be forgiven. However, no Loan may have
a term (including extensions) exceeding ten years in duration.
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(b) Supplemental Grants. In connection with any Award, the Board may at the
time such Award is made or at a later date, provide for and grant a cash award
to the Participant ("Supplemental Grant") not to exceed an amount equal to (1)
the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount
on a grossed-up basis intended to make the Participant whole on an after-tax
basis after discharging all the Participant's income tax liabilities arising
from all payments under this Section 6. Any payments under this subsection (b)
will be made at the time the Participant incurs Federal income tax liability
with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be
exercised by the Participant's executor or administrator or the person or
persons to whom the Option or Right is transferred by will or the
applicable laws of descent and distribution, at any time within the one-
year period ending with the first anniversary of the Participant's death
(or such shorter or longer period as the Board may determine), and shall
thereupon terminate. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section 7. Except as
otherwise determined by the Board, all Options and Stock Appreciation
Rights held by a Participant immediately prior to death that are not then
exercisable shall terminate at death.
(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the
Company, such Restricted Stock will be so transferred without any further
action by the Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred-Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the
time of death, unless otherwise determined the Board.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a non-
Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being herein referred to as a "Status
Change"), the following will apply:
(a) Except as otherwise determined by the Board, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the
Status Change. Any Options or Rights that were exercisable immediately
prior to the Status Change will continue to be exercisable for a period of
three months (or such longer period as the Board may determine), and shall
thereupon terminate, unless the Award provides by its terms for immediate
termination in the event of a Status Change or unless the Status Change
results from a discharge for cause which in the opinion of the Board casts
such discredit on the Participant as to justify immediate termination of
the Award. In no event, however, shall an Option or Stock Appreciation
Right remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section 7. For purposes of this paragraph,
in the case of a Participant who is an Employee, a Status Change shall not
be deemed to have resulted by reason of (i) a sick leave or other bona fide
leave of absence approved for purposes of the Plan by the Board, so long as
the Employee's right to reemployment is guaranteed either by statute or by
contract, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiary, 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.
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(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant at the time of the Status Change must be
transferred to the Company (and, in the event the certificates representing
such Restricted Stock are held by the Company, such Restricted Stock will
be so transferred without any further action by the Participant) in
accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award
canceled as of the date of such Status Change unless otherwise determined
by the Board.
7.3. CERTAIN CORPORATE TRANSACTIONS.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
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 the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
will terminate as of the effective date of the covered transaction, and the
following rules shall apply:
(a) Subject to paragraphs (b) and (c) below, the Board may in its sole
discretion, prior to the effective date of the covered transaction, (1)
make each outstanding Option and Stock Appreciation Right exercisable in
full, (2) remove the restrictions from each outstanding share of Restricted
Stock, (3) cause the Company to make any payment and provide any benefit
under each outstanding Deferred Stock Award, Performance Award, and
Supplemental Grant which would have been made or provided with the passage
of time had the transaction not occurred and the Participant not suffered a
Status Change (or died), and (4) forgive all or any portion of the
principal of or interest on a Loan. If the Board does not do so with
respect to any Award, however, such Award will terminate as of the date of
the covered transaction.
(b) If an outstanding Award is subject to performance or other conditions
(other than conditions relating only to the passage of time and continued
employment) which will not have been satisfied at the time of the covered
transaction, the Board may in its sole discretion remove such conditions.
If it does not do so, however, such Award will terminate as of the date of
the covered transaction notwithstanding paragraph (a) above.
(c) With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or otherwise
providing services to a corporation which is a surviving or acquiring
corporation in such transaction or an affiliate of such a corporation, the
Board may, in lieu of the action described in paragraph (a) above, arrange
to have such surviving or acquiring corporation or affiliate grant to the
Participant a replacement award which, in the judgment of the Board, is
substantially equivalent to the Award.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Board from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Board may, on
such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on
any or all Stock subject to the Participant's Award had such Stock been
outstanding. Without limitation, the Board may provide for payment to the
Participant of amounts representing such dividends, either currently or in the
future, or for the investment of such amounts on behalf of the Participant.
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8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant to
the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulation have been complied with, (c) 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 notice of issuance, and (d) 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 Award, 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.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an Award an
amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the Board
will have the right to require that the Participant or other appropriate
person remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Board with regard
to such requirements, prior to the delivery of any Stock. If and to the extent
that such withholding is required, the Board may permit the Participant or
such other person to elect at such time and in such manner as the Board
provides to have the Company hold back from the shares to be delivered, or to
deliver to the Company, Stock having a value calculated to satisfy the
withholding requirement.
If at the time an ISO is exercised the Board determines that the Company
could be liable for withholding requirements with respect to a disposition of
the Stock received upon exercise, the Board may require as a condition of
exercise that the person exercising the ISO agree (a) to inform the Company
promptly of any disposition (within the meaning of section 424(c) of the Code)
of Stock received upon exercise, and (b) to give such security as the Board
deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Board to preserve the adequacy of
such security.
8.5. NONTRANSFERABILITY OF AWARDS.
No Award (other than an Award in the form of an outright transfer of cash or
Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during a Participant's lifetime an Award
requiring exercise may be exercised only by him or her (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on
the Participant's behalf).
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after
the effective date of the Plan, the Board will make any appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4 above.
(b) In any event referred to in paragraph (a), the Board will also make any
appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected
by such change. The Board may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions,
or any other event, if it is determined by the Board that adjustments are
appropriate to avoid distortion in the operation of the Plan.
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8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary
as an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Board in any particular case, the
loss of existing or potential profit in Awards granted under the Plan will not
constitute an element of damages in the event of termination of an employment,
service or similar relationship even if the termination is in violation of an
obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Board may agree at any time, upon request of the Participant, to defer
the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Board may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock be issued
to Employees.
The Board may at any time or times amend the Plan or any outstanding Award
for any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except
to the extent expressly required or permitted by the Plan) no such amendment
will, without the approval of the stockholders of the Company, effectuate a
change for which stockholder approval is required in order for the Plan to
continue to qualify for the award of ISOs under Section 422 of the Code or for
the award of performance-based compensation under Section 162(m) of the Code
and to continue to qualify under Rule 16b3 promulgated under Section 16 of the
1934 Act.
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DETACH HERE
BROOKSTONE, INC.
The undersigned, revoking previous proxies relating to these shares,
hereby acknowledges receipt of the Notice and Proxy Statement dated May 19,
P 1997 in connection with the 1997 Annual Meeting of Stockholders to be held at
9:00 a.m. on June 19, 1997 at the First National Bank of Boston, and hereby
R appoints Merwin F. Kaminstein, Michael F. Anthony and Philip W. Roizin and
each of them (with full power to act alone), the attorneys and proxies of the
O undersigned with power of substitution to each, to vote all shares of the
Common Stock of Brookstone, Inc. registered in the name provided herein which
X the undersigned is entitled to vote at the 1997 Annual Meeting of
Stockholders, and at any adjournment or adjournments thereof, with all the
Y powers the undersigned would have if personally present. Without limiting the
general authorization hereby given, said proxies are, and each of them is,
instructed to vote or act as follows on the proposals set forth in said Proxy
Statement.
Election of all 6 Directors (or if any nominee is not available for
election, such substitute as the Board of Directors my designate).
NOMINEES:
Merwin F. Kaminstein, Michael F. Anthony, Mone Anathan, III, Adam Kirsch,
Michael L. Glazer, Robert F. White.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTOR'S RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK
ANY BOXES.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE [SEE REVERSE SIDE]
<PAGE>
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
This proxy when executed will be voted in the manner directed herein. If no
direction is made, this Proxy will be voted FOR the election of Directors and
FOR Proposals 2 & 3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors (see reverse). [ ] [ ]
[ ]
--------------------------------------
For all nominees except as noted above
2. Approval of certain material terms of the Company's 1992 Equity Incentive
Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratify the appointment of Price Waterhouse LLP as the independent
accountants to examine the financial statements of the Company and its
subsidiaries for the fiscal year ending January 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administor, trustee or guardian, please give
full title as such.
Signature: Date:
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Signature: Date:
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