<PAGE> 1
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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
BEC BATH & BEYOND 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BED BATH & BEYOND INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 1996
To the Shareholders:
On behalf of the Board of Directors, it is our pleasure to invite you
to attend the Annual Meeting of Shareholders of Bed Bath & Beyond Inc. to be
held at the Headquarters Plaza Hotel, 3 Headquarters Plaza, Morristown, New
Jersey on Thursday, June 27, 1996 at 9:00 a.m. (local time).
The Annual Meeting will be held for the following purposes:
1. To elect five directors to serve until the next Annual Meeting and
until their successors have been elected and qualified (Proposal 1).
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending March 2, 1997 (Proposal 2).
3. To adopt the Bed Bath & Beyond Inc. 1996 Stock Option Plan (Proposal
3).
4. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 100 million shares
to 150 million shares (Proposal 4).
5. To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on May 13, 1996 are
entitled to notice of the meeting and to vote at it or any adjournment or
adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. If it is convenient for you to do so, we hope you will attend
the meeting. If you cannot attend the meeting, we urge you to fill out the
enclosed proxy card and return it to us in the envelope provided so that your
stock may be voted. No postage is required.
WARREN EISENBERG,
Chairman and
Co-Chief Executive Officer
LEONARD FEINSTEIN,
President and
Co-Chief Executive Officer
Springfield, New Jersey
May 24, 1996
PLEASE COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE> 3
BED BATH & BEYOND INC.
715 MORRIS AVENUE
SPRINGFIELD, NEW JERSEY 07081
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bed Bath & Beyond Inc., a New York
corporation (the "Company"), for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on June 27, 1996. This Proxy Statement and form of
proxy are being mailed to shareholders on or about May 24, 1996. A copy of the
1995 Annual Report to Shareholders is being mailed with this Proxy Statement.
Sending in a signed proxy will not affect a shareholder's right to attend
the Annual Meeting and vote in person. A proxy may be revoked at any time before
it is exercised by delivering a written notice to the Secretary of the Company
stating that the proxy is revoked, by executing a subsequent proxy and
presenting it to the Secretary of the Company or by attending the Annual Meeting
and voting in person. All properly executed proxies not revoked will be voted at
the meeting in accordance with the instructions contained therein.
It is proposed that action will be taken at the Annual Meeting: (i) to
elect five directors to hold office until the next Annual Meeting and until
their successors have been elected and qualified; (ii) to ratify the appointment
of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending
March 2, 1997 ("fiscal 1996"); (iii) to adopt the Bed Bath & Beyond Inc. 1996
Stock Option Plan; and (iv) to amend the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 100 million
shares to 150 million shares. The Board of Directors knows of no other business
to come before the Annual Meeting. If any other matters are properly presented
at the Annual Meeting or any adjournment or adjournments thereof, it is the
intention of the persons named in the proxy to vote, or otherwise to act, in
accordance with their judgment on such matters.
The expense of this proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or other means by directors or employees of the Company or
its subsidiaries without additional compensation. The Company will reimburse
brokerage firms and other nominees, custodians and fiduciaries for costs
incurred by them in mailing proxy materials to the beneficial owners of shares
held of record by such persons.
<PAGE> 4
VOTING
Only shareholders of record at the close of business on May 13, 1996 will
be entitled to notice of and to vote at the Annual Meeting. As of that date, the
Company had outstanding [68,190,858] shares of Common Stock, each share entitled
to one vote. A majority of such shares represented at the Annual Meeting, in
person or by proxy, will constitute a quorum at the Annual Meeting.
Directors will be elected at the Annual Meeting by a plurality of the
votes cast (i.e., the five nominees receiving the greatest number of votes will
be elected as directors). The ratification of the appointment of KPMG Peat
Marwick LLP as independent auditors for fiscal 1996 and the adoption of the Bed
Bath & Beyond Inc. 1996 Stock Option Plan require the approving vote of a
majority of the votes cast with respect to such matter. The amendment of the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 100 million to 150 million requires the approving
vote of shareholders holding a majority of the issued and outstanding shares of
the Company's Common Stock entitled to vote at the Annual Meeting. Neither
abstentions nor broker non-votes will be considered votes "cast" for purposes of
the foregoing and, accordingly, neither abstentions nor broker non-votes will
affect the vote with respect to such matter.
Under applicable New York Stock Exchange rules, all of the Company's
proposals are considered "discretionary" items upon which New York Stock
Exchange member brokerage firms that hold shares in street name may vote on
behalf of the beneficial owners if such beneficial owners have not furnished
voting instructions by the tenth day before the Annual Meeting.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto sets forth, as of May 13, 1996,
certain information regarding the beneficial ownership (as defined in Rule 13d-3
of the Securities Exchange Act of 1934) of the Common Stock of the Company with
respect to (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) the executive officers of the
Company named in the Summary Compensation Table that appears under "Executive
Compensation," (iii) each of the Company's directors, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each shareholder has
sole voting and investment power with respect to the shares beneficially owned
by such shareholder. All share amounts have been adjusted to reflect the
two-for-one stock split paid on April 30, 1996.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Percent of
Name of Shareholder Position Beneficially Owned Class
------------------- -------- ------------------- ----------
<S> <C> <C> <C>
Warren Eisenberg Chairman, Co-Chief Executive 11,770,796(a) 17.3%
Officer and Director
Leonard Feinstein President, Co-Chief Executive 11,855,894(b) 17.4%
Officer and Director
Klaus Eppler Director 800 *
Robert S. Kaplan Director -- *
Robert J. Swartz Director 800 *
Ronald Curwin Chief Financial Officer and 10,000(c) *
Treasurer
Putnam Investments, Inc. 5,979,542(d) 8.8%
AXA 3,521,200(e) 5.2%
All Directors and Executive 21,186,888(f) 31.1%
Officers as a group (Six
Persons)
</TABLE>
------------------------------
* Less than 1% of Class.
(a) The shares shown as being owned by Warren Eisenberg include: (i) 9,287,394
shares owned by him individually; (ii) 2,451,402 shares held by a
partnership of which Mr. Eisenberg is a general partner and members of his
family (who do not share the same home as Mr. Eisenberg) are limited
partners; and (iii) a total of 32,000 shares issuable to two of his children
(who do not share the same home as Mr. Eisenberg) pursuant to stock options
that are or become exercisable within 60 days. Warren Eisenberg has sole
voting power with respect to the shares held by him individually. Warren
Eisenberg disclaims beneficial ownership of any of the shares not owned by
him individually.
3
<PAGE> 6
(b) The shares shown as being owned by Leonard Feinstein include: (i) 9,309,280
shares owned by him individually; (ii) 2,451,402 shares held by a
partnership of which Mr. Feinstein is a general partner and members of his
family (who do not share the same home as Mr. Feinstein) are limited
partners; (iii) a total of 4,000 shares issuable to one of his children (who
does not share the same home as Mr. Feinstein) pursuant to stock options
that are or become exercisable within 60 days; and (iv) 91,212 shares owned
by three of his children (who do not share the same home as Mr. Feinstein).
Leonard Feinstein has sole voting power with respect to the shares held by
him individually. Leonard Feinstein disclaims beneficial ownership of any of
the shares not owned by him individually.
(c) Issuable pursuant to stock options that are or become exercisable within 60
days.
(d) Information regarding Putnam Investments, Inc. ("Putnam") was obtained from
a Schedule 13G, as amended, filed by Putnam with the Securities and Exchange
Commission. Such Schedule 13G states that Putnam and its parent corporation,
Marsh & McLennan Companies, are deemed to have beneficial ownership of the
2,989,771 shares of Common Stock, with shared voting power over 128,600 of
such shares and shared dispositive power over all of such shares. The
Schedule 13G also states that 2,787,571 of such shares are held by
registered investment companies and/or other investment advisory clients in
accounts managed by Putnam Investment Management, Inc., a registered
investment adviser and a subsidiary of Putnam, and 202,200 of such shares
are held by registered investment companies and/or other investment advisory
clients in accounts managed by The Putnam Advisory Company, Inc., a
registered investment adviser and a subsidiary of Putnam. The Schedule 13G
also states that Putnam and Marsh & McLennan Companies disclaim beneficial
ownership of such shares.
(e) Information regarding AXA was obtained from a Schedule 13G filed by AXA with
the Securities and Exchange Commission. Such Schedule 13G states that it was
filed jointly on behalf of AXA, five French mutual insurance companies as a
group, which as a group beneficially own a majority interest in AXA, and the
Equitable Companies Incorporated ("Equitable") and their subsidiaries, in
which AXA beneficially owns a majority interest. The Schedule 13G states
that AXA is deemed to have beneficial ownership of the 1,760,600 shares of
Common Stock, with sole voting power over 1,757,000 of such shares and sole
dispositive power over all such shares. The Schedule 13G also states that
171,400 of such shares are held solely for investment purposes by the
Equitable Life Assurance Society of the United States, an insurance company,
a registered broker-dealer and a registered investment adviser and a
subsidiary of Equitable and that 1,589,200 of such shares are held solely
for investment purposes by Alliance Capital Management L.P., a registered
investment adviser, on behalf of client discretionary investment advisory
accounts.
(f) Includes shares of Common Stock as indicated in the preceding footnotes
(a), (b) and (c). The 2,451,402 shares held by a partnership of which
Messrs. Eisenberg and Feinstein are general partners are included in both
footnotes (a) and (b) since these shares may be considered to be
beneficially owned by each of Mr. Eisenberg and Mr. Feinstein. These
shares are included only once in the total of shares owned by all
Directors and Executive Officers as a group.
4
<PAGE> 7
ELECTION OF DIRECTORS
(Proposal 1)
Five directors are to be elected at the Annual Meeting, each to hold office
until the next Annual Meeting and until his successor has been elected and
qualified. All nominees have consented to be named and to serve if elected. All
of the nominees are currently directors of the Company. In the event that any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted in the discretion of the
persons acting pursuant to the proxy for any nominee who shall be designated by
the current Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as director. Set forth below is
certain information concerning the nominees.
<TABLE>
<CAPTION>
Name Age Position Director Since
- - ---- --- -------- --------------
<S> <C> <C> <C>
Warren Eisenberg 65 Chairman, Co-Chief 1971
Executive Officer and Director
Leonard Feinstein 59 President, Co-Chief 1971
Executive Officer and Director
Robert J. Swartz 70 Director 1992
Klaus Eppler 66 Director 1992
Robert S. Kaplan 38 Director 1994
</TABLE>
WARREN EISENBERG, a co-founder of the Company, has been an officer
of the Company since the Company commenced operations in 1971 (serving as
President and Co-Chief Executive Officer until April 9, 1992, and Chairman and
Co-Chief Executive Officer since that date).
LEONARD FEINSTEIN, a co-founder of the Company, has been an
officer of the Company since the Company commenced operations in 1971 (serving
as Co-Chief Executive Officer, Treasurer and Secretary until April 9, 1992, and
as President and Co-Chief Executive Officer since that date).
ROBERT J. SWARTZ is a certified public accountant and has been a
financial consultant to various businesses, including the Company, since April
1991. Mr. Swartz is Vice President of Alco Capital Group, Inc. For more than
five years prior to April 1991, he was a partner in the accounting firm of KPMG
Peat Marwick LLP (and its predecessors). He is also a director of Standard Motor
Products, Inc., United Merchants and Manufacturers Inc. and Victoria Creations,
Inc.
KLAUS EPPLER is a practicing attorney and has been a partner in
the law firm of Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Company,
since 1965. Such firm received fees for legal services from the Company during
the fiscal year ended February 25, 1996 ("fiscal 1995"), and it is anticipated
that such firm will provide certain legal services to the Company during fiscal
1996. He is also a director of Inovision Corporation and of The Dress Barn, Inc.
5
<PAGE> 8
ROBERT S. KAPLAN is a general partner of Goldman, Sachs & Co., an
investment banking firm. Goldman, Sachs & Co. was one of the representatives of
the U.S. Underwriters for the Company's public offerings of Common Stock in 1992
and 1993, and Goldman Sachs International Limited, one of the representatives of
the International Underwriters of such public offerings, is an affiliate of
Goldman, Sachs & Co. Mr. Kaplan has been a partner of or employed by Goldman,
Sachs & Co. for more than the past 5 years.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during fiscal 1995.
The Board of Directors has an Audit Committee, currently
consisting of Messrs. Swartz, Eppler and Kaplan. The functions of this Committee
include recommending to the Board the engagement or discharge of independent
auditors, directing investigations into matters relating to audit functions, and
reviewing the Company's internal accounting controls and the results of the
audit with the auditors. The Audit Committee held one meeting during fiscal
1995.
The Board of Directors has no standing nominating or compensation
committees. The Bed Bath & Beyond Inc. 1992 Stock Option Plan (the "1992 Stock
Option Plan") is administered by two Stock Option Committees. One committee
("Committee A") consists of Messrs. Eisenberg and Feinstein. Committee A is
authorized to grant stock options to all eligible employees of the Company,
except the following persons (collectively, "Senior Persons") (i) any officer or
director of the Company, (ii) any district manager, regional manager or general
merchandise manager, or any other more senior manager than store manager, or
(iii) consultants or advisors to the Company or other persons or entities
providing goods or services to the Company to acquire a proprietary interest in
the Company through the ownership of common stock of the Company. The other
committee ("Committee B") currently consists of Messrs. Swartz, Eppler and
Kaplan. Committee B, each of whose members is a "disinterested person" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and an
"outside director" as defined in Section 162(m) of the Internal Revenue Code,
is authorized to grant stock options to all eligible Senior Persons. Neither
Committee A nor Committee B held any formal meetings during fiscal 1995 but
acted by written consent.
In March 1995, the Board of Directors appointed a special
committee of outside directors (consisting of Messrs. Swartz, Eppler and Kaplan)
to consider certain proposals relating to insurance policies on the lives of
Messrs. Eisenberg and Feinstein. That committee held several informal meetings
and one formal meeting during fiscal 1995. See "Executive Compensation -
Agreements with Messrs. Eisenberg and Feinstein."
Each of the directors attended 75% or more of the meetings of the
Board of Directors and the Committees of which he was a member during fiscal
1995.
No family relationships exist between any of the executive
officers or directors of the Company.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table shows the aggregate compensation paid or
accrued by the Company to its two Co-Chief Executive Officers and to each other
executive officer of the Company who was paid salary and bonus in 1993, 1994 or
1995 in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
----------------------- -------------------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARD(S) ($) OPTIONS # COMPENSATION
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren Eisenberg ........ 1995 750,000(a) 0 0 0 134,531(b)
Chairman and 1994 750,000(a) 0 0 0 241,851(b)
Co-Chief Executive 1993 750,000(a) 0 0 0 75,000(b)
Officer
- - --------------------------------------------------------------------------------------------------------
Leonard Feinstein ....... 1995 750,000(c) 0 0 0 104,403(d)
President and 1994 750,000(c) 0 0 0 209,295(d)
Co-Chief Executive 1993 750,000(c) 0 0 0 60,000(d)
Officer
- - --------------------------------------------------------------------------------------------------------
Ronald Curwin ........... 1995 121,741 0 0 0 742(f)
Chief Financial Officer 1994 35,442(e) --
and Treasurer
</TABLE>
- - --------------------------------------
(a) Mr. Eisenberg is employed by the Company pursuant to an employment
agreement which has a term extending to June 30, 1997 and
provides, among other things, for a base salary (which may be
increased by the Board of Directors) at the rate of $750,000 per
annum. See "Agreements with Messrs. Eisenberg and Feinstein"
below.
(b) Includes: (i) certain personal benefits provided by the Company to
Mr. Eisenberg in fiscal 1993, 1994 and 1995 (such as the use of
Company cars for non-business purposes and tax preparation
services) at an aggregate cost to the Company of approximately
$12,000, $12,000, and $14,480, respectively; (ii) insurance
premiums in the amount of approximately $63,000, $7,000 and $2,200
in fiscal 1993, 1994 and 1995 respectively, paid by the Company in
respect of certain insurance policies; (iii) in fiscal 1994,
approximately $5,000 of Company payments on behalf of Mr.
Eisenberg to cover the premiums attributable to the term life
insurance portion of certain split dollar life insurance policies;
and (iv) other premium payments under the 1994 Insurance Policies
and the Additional Insurance Policies of $217,851 in fiscal 1994
(which included a non-recurring payment of $100,000) and of
$117,851 in fiscal 1995. See "Agreements with Messrs. Eisenberg
and Feinstein" below.
(c) Mr. Feinstein is employed by the Company pursuant to an employment
agreement which has a term extending to June 30, 1997 and
provides, among other things, for a base salary (which may be
increased by the Board of Directors) at the rate of $750,000 per
annum. See "Agreements with Messrs. Eisenberg and Feinstein"
below.
(d) Includes: (i) certain personal benefits provided by the Company to
Mr. Feinstein in fiscal 1993, 1994 and 1995 (such as the use of
Company cars for non-business purposes and tax preparation
services) at an aggregate cost to the Company of approximately
$12,000, $12,000 and $12,908, respectively;
7
<PAGE> 10
(ii) insurance premiums in the amount of approximately $48,000,
$5,500 and $2,200 in fiscal 1993, 1994 and 1995, respectively,
paid by the Company in respect of certain insurance policies;
(iii) in fiscal 1994, approximately $2,500 of Company payments on
behalf of Mr. Feinstein to cover the premiums attributable to the
term life insurance portion of certain split dollar life insurance
policies; and (iv) other premium payments under the 1994 Insurance
Policies and the Additional Insurance Policies of $189,295 in
fiscal 1994 (which included a non-recurring payment of $100,000)
and of $89,295 in fiscal 1995. See "Agreements with Messrs.
Eisenberg and Feinstein" below.
(e) Mr. Curwin was hired on September 12, 1994; compensation for 1994
reflects a partial year's salary.
(f) The use of a Company car for non-business purposes.
STOCK OPTIONS
No stock options or stock appreciation rights ("SARs") were granted in
fiscal 1995 to any of the executive officers of the Company named in the Summary
Compensation Table.
The following table sets forth information for each of the named
executive officers with respect to the value of outstanding and unexercised
options held as of February 25, 1996. There were no stock options or SARs
exercised during fiscal 1995 and no SARs were outstanding as of February 25,
1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares at February 25, 1996 at February 25, 1996 (1)
Acquired Value --------------------- ------------------------
on Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren Eisenberg ..... -- -- -- -- -- --
Leonard Feinstein .... -- -- -- -- -- --
Ronald Curwin ........ -- -- 10,000 40,000 $81,250 $325,000
</TABLE>
- - ----------------------------------------
(1) Represents the difference between the closing market price of the
Common Stock at February 25, 1996 of $21.375 per share and the exercise
price per share of the options, multiplied by the number of shares
underlying the options. All figures are adjusted to reflect the
two-for-one stock split paid April 30, 1996.
8
<PAGE> 11
DIRECTORS' COMPENSATION
In fiscal 1995, each outside director was paid at the rate of $2,500
per quarter.
AGREEMENTS WITH MESSRS. EISENBERG AND FEINSTEIN
Messrs. Eisenberg and Feinstein are employed pursuant to employment
agreements providing for the Company to pay each of Messrs. Eisenberg and
Feinstein a base salary (which may be increased by the Board of Directors) at
the rate of $750,000 per annum and to provide each of them with a car. These
agreements also provide that, in the event that the Company discharges the
executive other than for cause or if he leaves the Company upon the relocation
of the corporate or merchandise office of the Company to an area that is not in
the State of New Jersey or New York or not within 40 miles of New York City, the
executive will be entitled to continuance of his base salary for one year after
the termination of his employment. Under these agreements, based on current
salary levels, aggregate termination payments would be $1,500,000.
In 1994, the Company surrendered insurance policies on the lives of
each of Warren Eisenberg and Leonard Feinstein, each with a face value of
approximately $2.9 million, for the benefit of the Company (up to the cash
surrender values of the policies) and their respective beneficiaries and used
the cash proceeds from the surrender of these policies to purchase life
insurance policies on the joint lives of each of Messrs. Eisenberg and Feinstein
and their wives, each with a face value of $10 million, also for the benefit of
their respective beneficiaries (the "1994 Insurance Policies"). The surrender of
the insurance policies in fiscal 1994 resulted in taxable income to the Company
of approximately $42,000. In connection with the purchases of the 1994 Insurance
Policies, the Company entered into "split-dollar" agreements with trusts
established by each of Messrs. Eisenberg and Feinstein and their wives pursuant
to which the Company agreed to pay the premiums on the 1994 Insurance Policies
until the earlier of (a) such time as the cash value of each 1994 Insurance
Policy is sufficient to pay the premiums thereof, (b) the termination of the
arrangement by surrender of the policies or payment to the Company of the entire
amount of the premiums previously paid, and (c) the date of death of the last to
die of Mr. Eisenberg and his wife, with respect to Mr. Eisenberg's 1994
Insurance Policies, and the last to die of Mr. Feinstein and his wife, with
respect to Mr. Feinstein's 1994 Insurance Policies.
In fiscal 1995, the Company entered into additional "split dollar"
insurance agreements with trusts established by each of Messrs. Eisenberg and
Feinstein and their wives pursuant to which the Company will agree to pay the
non-term portion of the premiums payable on outstanding life insurance policies
on the joint lives of each of Messrs. Eisenberg and Feinstein and their wives,
each with aggregate face values of $20 million (the "Additional Insurance
Policies"), until the earlier of (a) such time as the cash value of each
Additional Insurance Policy is sufficient to pay the premiums thereof, (b) the
termination of the arrangement by surrender of the policies or payment to the
Company of the entire amount of the premiums previously paid, or (c) the date of
death of the last to die of Mr. Eisenberg and his wife, with respect to Mr.
Eisenberg's Additional Insurance Policies, and the last to die of Mr. Feinstein
and his wife, with respect to Mr. Feinstein's Additional Insurance Policies.
Under the "split dollar" agreements applicable to the 1994 Insurance
Policies and the Additional Insurance Policies, the premiums paid by the Company
are to be returned to the Company, without interest, no later than the earlier
to occur of (a) the death of the last spouse to die of the insured persons under
each insurance policy, and (b) the surrender or termination of each insurance
policy. Consequently, the insurance policies should not result in an expense to
the Company, except to the extent of costs incurred (if any) for advancing the
premiums. The repayment of premiums paid by the Company will be made either out
of the
9
<PAGE> 12
insurance proceeds (if paid) or the cash surrender value of the insurance
polices (if insurance proceeds are not paid). In the latter case, Messrs.
Eisenberg and Feinstein and their wives are personally liable to the Company for
the excess, if any, of the total amount of premiums paid by the Company for the
insurance polices over the cash surrender values thereof.
A special committee of outside directors (consisting of Messrs. Swartz,
Eppler and Kaplan) approved the surrender by the Company of the life insurance
policies, the use of the cash proceeds to purchase joint life insurance
policies, and the entering into of "split-dollar" agreements with the trusts, in
connection with the 1994 Insurance Policies, and the entering into of additional
"split dollar" insurance agreements with the trusts in connection with the
Additional Insurance Policies.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
Messrs. Eisenberg and Feinstein are employed by the Company pursuant to
employment agreements entered into before the Company's initial public offering
of Common Stock. Because the compensation of Messrs. Eisenberg and Feinstein
during fiscal 1995 has been solely pursuant to these employment agreements, the
Board of Directors has not formulated specific policies concerning compensation
of the Co-Chief Executive Officers.
While decisions regarding salary levels for management personnel, other
than the Co-Chief Executive Officers, have been left to the Co-Chief Executive
Officers, the Board of Directors has formulated general policies designated to
enable the Company to reward qualified management personnel and to provide
longer term incentives. The Board of Directors believes that long term stock
options will tend to provide incentives to management personnel as well as to
align such incentives with shareholder return. Accordingly, the Stock Option
Committees of the Board of Directors have granted options to management
personnel, from department manager and up, with the specific number of options
granted being commensurate with the degree of responsibility of the grantee's
position. No options have been granted to the Co-Chief Executive Officers.
BOARD OF DIRECTORS
Warren Eisenberg
Leonard Feinstein
Robert J. Swartz
Klaus Eppler
Robert S. Kaplan
10
<PAGE> 13
COMPENSATION REPORT OF SPECIAL COMMITTEES
OF THE BOARD OF DIRECTORS
Special committees of the Board of Directors consisting of the
outside directors were appointed to consider the proposals which resulted in the
1994 Insurance Policies, the Additional Insurance Policies and the related
"split dollar" agreements described under "Agreements with Messrs. Eisenberg and
Feinstein". The arrangements relating to the Additional Insurance Policies were
approved by the special committee in fiscal 1995. It is anticipated that the
1994 Insurance Policies, the Additional Insurance Policies and the related
"split dollar" agreements will improve certain estate planning objectives of
Messrs. Eisenberg and Feinstein at what the special committees considered to be
a relatively low cost to the Company. In making the decisions to approve these
arrangements, the special committees considered that the salaries of Messrs.
Eisenberg and Feinstein have not increased since 1991.
SPECIAL COMMITTEES
Robert J. Swartz
Klaus Eppler
Robert S. Kaplan
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<PAGE> 14
CERTAIN TRANSACTIONS
The Company obtains certain payroll-related services from Raymond
Eisenberg Associates, an accounting firm in which Raymond Eisenberg, the brother
of Warren Eisenberg, is a partner. During fiscal 1995, the Company paid fees to
Raymond Eisenberg Associates of approximately $161,000.
During fiscal 1995, the Company paid to Mr. Swartz, a director of the
Company, an aggregate of $10,000 in respect of financial consulting services
provided by Mr. Swartz.
In fiscal 1995, the Company made charitable contributions to the Mitzi
and Warren Eisenberg Family Foundation, Inc. and the Feinstein Family
Foundation, Inc. in the aggregate amount of $190,000. These not-for-profit
charitable foundations, of which Messrs. Eisenberg and Feinstein and their
family members are the trustees and officers, also received charitable
contributions from Messrs. Eisenberg and Feinstein and made distributions to
charities in excess of the amounts contributed by the Company.
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company, during the period June 5, 1992 (the date of the
commencement of the Company's initial public offering) through the end of fiscal
1995, with the cumulative total return on the Standard & Poor's 500 Index and
the Standard & Poor's Specialty Retail Index over the same period (assuming the
investment of $100 in the Company's Common Stock, the Standard & Poor's 500
Index and the Standard & Poor's Specialty Retail Index on June 5, 1992, and the
reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN*
FROM JUNE 5, 1992 THROUGH FEBRUARY 25, 1996
AMONG BED BATH & BEYOND INC., THE S&P 500 INDEX
AND THE S&P SPECIALTY RETAIL INDEX
<TABLE>
<CAPTION>
INVESTMENT 6/5/92 2/28/93 2/27/94 2/26/95 2/25/96
<S> <C> <C> <C> <C> <C>
Bed Bath & Beyond Inc. 100 178 321 312 503
S&P Specialty Retail Index 100 122 122 120 117
S&P 500 Index 100 107 113 118 160
</TABLE>
* $100 INVESTED ON 6/5/92 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS.
12
<PAGE> 15
APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal 2)
Upon the recommendation of the Audit Committee, the Board of Directors
has appointed the firm of KPMG Peat Marwick LLP, Certified Public Accountants,
as independent auditors to examine the consolidated financial statements of the
Company for the fiscal year ending March 2, 1997. The Board of Directors
recommends to shareholders that they ratify this appointment. In the event that
the shareholders fail to ratify this appointment, other certified public
accountants will be considered upon recommendation of the Audit Committee. Even
if this appointment is ratified, the Board of Directors, in its discretion, may
direct the appointment of a new independent accounting firm at any time during
the year, if the Board believes that such a change would be in the best interest
of the Company and its shareholders.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting to respond to appropriate questions and such representative
will have the opportunity to make a statement if he or she desires to do so.
ADOPTION OF 1996 STOCK OPTION PLAN
(Proposal 3)
As of May [22], 1996 fewer than [1,175,000] shares out of the aggregate
of 5,600,000 shares of Common Stock authorized for grant under the 1992 Stock
Option Plan remain available for future grants. Options may be granted under the
1992 Stock Option Plan through May ___, 2002. The Board of Directors believes
that stock ownership by employees provides performance incentives and fosters
pride in the Company to the benefit of both the Company and its shareholders.
Options have heretofore been granted to a wide range of employees of the
Company. Accordingly, the Board of Directors recommends that shareholders adopt
the 1996 Stock Option Plan described below. The 1996 Stock Option Plan is,
except for the term of the Plan and the number of shares covered, identical to
the 1992 Stock Option Plan as currently in effect. The following summary of the
principal provisions of the 1996 Stock Option Plan does not purport to be
complete and is qualified in its entirety by reference to the text of the 1996
Stock Option Plan set forth in Exhibit A hereto. The 1992 Stock Option Plan and
the 1996 Stock Option Plan together are herein referred to as the "Plans."
GENERAL
The 1996 Stock Option Plan provides for the granting of options to
purchase not more than an aggregate of 2,000,000 shares of Common Stock, subject
to adjustment under certain circumstances. Some or all of such options may be
"incentive stock options" within the meaning of the Internal Revenue Code of
1986, as amended (the "Code"). The last reported sale price of the Common Stock
on May 22, 1996, as quoted through the NASDAQ National Market System, was
$__.___.
The 1992 Stock Option Plan is administered by two stock option
committees (the "Stock Option Committees") appointed by the Board of Directors,
each consisting of at least two members of the Board of Directors. Committee A
is authorized to grant stock options to all persons entitled to be granted stock
options under the 1992 Stock Option Plan, except to the following persons
(collectively, "Senior Persons"): (i) any officer or director of the Company,
(ii) any district manager, regional manager or general merchandise manager, or
any other more senior manager than store manager or (iii) any Associate (as
defined in the 1992 Stock Option Plan) of the Company that is an affiliate of
the Company or of any of the persons described in
13
<PAGE> 16
clause (i) or (ii) above. Committee B, each of whose members is a "disinterested
person", within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 (the "Exchange Act") and an "outside director," as defined in Section
162(m) of the Code, is authorized to grant stock options to all Senior Persons
entitled to be granted stock options under the 1992 Stock Option Plan. Each
Stock Option Committee has full power and authority to interpret the provisions
of the 1992 Stock Option Plan, set the terms and conditions of individual
options and supervise the administration of the 1992 Stock Option Plan with
respect to each person to whom stock options have or may be granted under the
1992 Stock Option Plan by such committee. The members of Committee A are
currently Messrs. Eisenberg and Feinstein and the members of Committee B are
currently Messrs. Swartz, Eppler and Kaplan, each of whom is presently a
director of the Company. The 1996 Stock Option Plan has provisions for its
administration which authorize committees with similar authority. It is
anticipated that upon adoption of the 1996 Stock Option Plan two stock option
committees with the same members as the Stock Option Committees under the 1992
Stock Option Plan will be appointed.
OPTION GRANTS
All officers, directors and employees of the Company are eligible to
participate in the 1996 Stock Option Plan. Persons may receive grants under both
the 1996 Stock Option Plan and the 1992 Stock Option Plan in the same fiscal or
calendar year. As of May 22, 1996, there were approximately 5,400 officers,
directors and employees of the Company. Additionally, the 1996 Stock Option Plan
permits the grant of options to other parties who perform services for the
Company. The Stock Option Committees determine, subject to the provisions of the
1996 Stock Option Plan, to whom options are granted, the number of shares of
Common Stock subject to an option, whether stock options shall be incentive or
non-qualified, the exercise price of such options (which, in the case of
non-qualified options, may be less than the fair market value, as defined in the
1996 Stock Option Plan, of the shares on the date of grant), whether the options
may be exercised in full or in installments and the period during which such
options may be exercised. In determining persons who are to receive options and
the number of shares of Common Stock to be covered by each option, the Stock
Option Committees consider various factors, including each eligible person's
position and responsibilities, service and accomplishments, present and future
value to the Company, anticipated length of future service and other relevant
factors. To the extent options granted under the 1996 Stock Option Plan to an
optionee qualify as incentive stock options, the aggregate fair market value (as
defined in the 1996 Stock Option Plan) of the Common Stock with respect to which
incentive stock options are exercisable under both the 1992 Stock Option Plan
and the 1996 Stock Option Plan for the first time by such optionee during the
calendar year may not exceed $100,000. The maximum number of shares that may be
granted under each of the 1992 Stock Option Plan and the 1996 Stock Option Plan
during any calendar year to any employee or Associate (as defined in each Stock
Option Plan) of the Company may not exceed 100,000 with respect to each Plan
(subject to adjustment in the case of stock splits and other similar
transactions), but shortfalls in any calendar year may be carried forward to
subsequent years. The provisions in the 1992 Stock Option Plan and the 1996
Stock Option Plan relating to maximum annual grants of options on shares, and
certain other provisions, are intended to comply with Section 162(m) of the Code
and the Regulations thereunder.
TERMINATION OF EMPLOYMENT
Except as provided in the following sentence, an optionee's options
terminate immediately upon the termination of such optionee's employment with
the Company, subject to the following exceptions: (i) if the termination is by
reason of death or disability of the optionee, the unexercised portion of such
options continues to be exercisable for twelve months after such termination and
(ii) if the termination is for any other reason, excluding termination for
cause, the unexercised portion of such options continues to be exercisable for
three months after such termination. The Stock Option Committees under the Plans
in their discretion in any particular case may provide that upon termination of
an optionee's employment with the Company, the
14
<PAGE> 17
unexercised portion of such optionee's options shall continue to be exercisable
for a longer or shorter period than the period provided for in the preceding
sentence, subject to the following: (i) in the case of an incentive stock
option, the Stock Option Committees may not provide for a shorter or longer
period after the option is granted and, in any event, may not provide for a
longer period except in the case where the optionee's employment is terminated
by reason of death and (ii) in the case of an option that is not an incentive
stock option, the Stock Option Committees may not provide for a shorter period
after the option is granted.
EXERCISE PRICE AND TERM
The exercise price with respect to incentive stock options and stock
options granted by Committee B to Senior Persons may not be less than 100% (110%
for an incentive stock option granted to a greater than ten-percent shareholder)
of the fair market value (as defined in the 1996 Stock Option Plan) of the
Common Stock at the time the option is granted, and the exercise price with
respect to all options may not be less than the par value per share of Common
Stock (unless the Common Stock subject to the option is treasury stock). The
latest date on which an option may be exercised is ten years (five years for an
incentive stock option granted to a greater than ten-percent shareholder) from
the date the option was granted or such earlier date as may be specified by the
applicable Stock Option Committee at the time the option is granted.
TERMINATION AND AMENDMENT OF THE 1996 STOCK OPTION PLAN
No options may be granted under the 1996 Stock Option Plan more than
ten years after June 26, 1996 but options previously granted may extend beyond
that date. The 1996 Stock Option Plan may be amended from time to time by the
Stock Option Committees. However, the Stock Option Committees may not, without
shareholder approval, amend the 1996 Stock Option Plan to (i) increase the
number of shares of Common Stock which may be issued under the 1996 Stock Option
Plan (except upon changes in capitalization as specified in the 1996 Stock
Option Plan), (ii) change the group of employees eligible to receive options
under the 1996 Stock Option Plan, (iii) reduce the price at which incentive
stock options may be granted, (iv) extend the time within which options may be
granted, (v) alter the 1996 Stock Option Plan in such a way that incentive stock
options already granted under the 1996 Stock Option Plan would not be considered
incentive stock options within the meaning of the Code, or (vi) amend the
provisions of Section 10 of the 1996 Stock Option Plan, which relates to
amendments to the 1996 Stock Option Plan. In addition, no amendment shall
adversely affect the rights of any optionee (without the optionee's consent)
under any option previously granted.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of current Federal income tax
consequences of non-qualified stock options and incentive stock options under
the relevant provisions of the Code.
Federal Income Tax Consequences of Non-Qualified Stock Options
In general, no taxable income is realized by an optionee upon the grant
of a non-qualified stock option. Upon the exercise of a non-qualified stock
option, the optionee will realize ordinary income equal to the difference
between the fair market value of the Common Stock received by the optionee at
the time of exercise over the exercise price of such option. When the optionee
eventually sells the Common Stock, such optionee is taxed on the difference
between the sale price and his basis in the Common Stock (i.e., fair market
value of the Common Stock at the time of exercise), as a long or short term
capital gain or loss, as applicable. The Company will be entitled to a deduction
equal to the ordinary income recognized by the optionee at the time the optionee
recognizes such income provided applicable withholding requirements are met,
subject to
15
<PAGE> 18
the provisions of Section 162(m) of the Code. If the optionee is subject to
Section 16(b) of the Exchange Act, however, the recognition of income in respect
of such exercise may be delayed until the date upon which the exercise will not
create liability under Section 16(b) of the Exchange Act, which generally is six
months from the date of grant and may be based upon the fair market value at
that time, unless the optionee elects, pursuant to Section 83(b) of the Code to
be taxed as of the time of exercise based on the fair market value at that time.
Federal Income Tax Consequences of Incentive Stock Options
There are generally no federal income tax consequences to the optionee
at the time an incentive stock option is granted or exercised, other than under
the alternative minimum tax (as described below). When any of the Common Stock
received upon exercise of an incentive stock option is sold, the optionee will
realize a capital gain or loss, as applicable, equal to the difference between
the selling price of the Common Stock sold and the exercise price paid by the
optionee for such Common Stock, provided that (a) the disposition of Common
Stock by the optionee is not within two years after the date of grant of the
option or within one year after the transfer of such Common Stock to the
optionee upon exercise, and (b) the optionee was employed by the Company at all
times from the date of grant of the option until three months before the date of
exercise. Special rules apply in the case of death or disability. The Company
will not be entitled to a deduction for federal income tax purposes upon the
grant or exercise of an incentive stock option.
If the above holding period requirements are not met, the optionee
will, in general, recognize ordinary income in the year of the disqualifying
disposition of the Common Stock received upon exercise of the option. Such
ordinary income will be equal to the excess of the fair market value of the
Common Stock on the date of exercise over the exercise price, but not more than
the gain, if any, realized on the disqualifying disposition (sale price minus
exercise price). The Company, subject to the provisions of Section 162(m) of the
Code, will be entitled to a deduction equal to the ordinary income recognized by
the optionee at the time the optionee recognizes such income. If the gain
realized on the disqualifying disposition is greater than the excess of the fair
market value over the exercise price, the difference is taxed as capital gain.
If a loss is sustained on the disqualifying disposition (sale price is less than
exercise price), the loss is allowable as a long or short term capital loss, as
applicable.
For purposes of computing the alternative minimum tax, the bargain
element with respect to an incentive stock option (i.e., the excess of the fair
market value of the Common Stock received upon exercise over the exercise price)
is generally included in alternative minimum taxable income upon exercise.
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Proposal 4)
The Board of Directors has approved, and recommends that the Company's
shareholders approve, an amendment to the Company's certificate of incorporation
that would increase the number of the authorized shares of the Company's Common
Stock, par value $.01 per share, from 100,000,000 to 150,000,000. The full text
of the proposed amendment is attached as Exhibit B hereto.
The Company has no present intention to issue the additional authorized
shares in any presently contemplated stock split or stock dividend, public
offering, acquisition or exchange for other securities. However, the Board of
Directors believes that the increased number of authorized shares of common
stock will improve the Company's flexibility. The Board of Directors will
determine whether, when and on what terms the issuance of shares of Common Stock
may be warranted in connection with any future actions.
16
<PAGE> 19
Requiring the shareholders to meet and approve each separate issuance of
additional Common Stock in these instances would be time-consuming and costly.
Moreover, if shareholder authorization of additional Common Stock were postponed
until a specific need arose, the delay could, in some instances, deprive the
Company and its shareholders of opportunities otherwise available.
While not intended as an anti-takeover provision, the increase in
authorized shares by the proposed amendment could under some circumstances
enable existing directors and officers of the Company to increase their
beneficial ownership of the Company in response to a takeover attempt by another
person and/or dilute the beneficial ownership of that person. The Company's
Certificate of Incorporation also authorizes the issuance of 1,000,000 shares of
preferred stock, par value $.01 per share.
COMPLIANCE WITH THE EXCHANGE ACT
The Company's executive officers and directors are required under the
Exchange Act to file reports of ownership of Common Stock of the Company with
the Securities and Exchange Commission and the NASDAQ National Market System.
Copies of those reports must also be furnished to the Company. Based solely on a
review of the copies of reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during the preceding year the executive officers and directors of the Company
have complied with all applicable filing requirements.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the Company's
annual meeting of shareholders expected to be held in June 1997 must be received
by the Company no later than January 25, 1997 for inclusion in the proxy
statement and form of proxy for that meeting.
WARREN EISENBERG,
Chairman and
Co-Chief Executive Officer
LEONARD FEINSTEIN,
President and
Co-Chief Executive Officer
Springfield, New Jersey
May 24, 1996
17
<PAGE> 20
EXHIBIT A
BED BATH AND BEYOND INC.
1996 STOCK OPTION PLAN
1. Purpose.
The purpose of the Bed Bath & Beyond Inc. 1996 Stock Option Plan (the
"Plan") is to encourage and enable key employees (which term, as used herein,
shall include officers), and directors of Bed Bath & Beyond Inc. or a parent (if
any) or subsidiaries thereof (collectively, unless the context otherwise
requires, the "Company"), consultants, and advisors to the Company, and other
persons or entities providing goods or services to the Company to acquire a
proprietary interest in the Company through the ownership of common stock of the
Company. (Such directors, members, consultants, advisors, and other persons or
entities providing goods or services to the Company and entitled to receive
options hereunder being collectively referred to as the "Associates," and the
relationship of the Associates to the Company being referred to as "association
with" the Company.) Such ownership will provide such employees and Associates
with a more direct stake in the future welfare of the Company and encourage them
to remain employed by or associated with the Company. It is also expected that
the Plan will encourage qualified persons to seek and accept employment or
association with the Company.
2. Type of Options.
Options granted pursuant to the Plan may be incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended so to qualify as an
incentive stock option being referred to herein as an "incentive option"), or
options that are not incentive options, or both. Incentive options may only be
granted to "employees" as defined in the provisions of the Code or regulations
thereunder applicable to incentive stock options.
3. Effective Date and Term of Plan.
(a) The Plan shall become effective upon approval by the shareholders
of the Company.
(b) No option shall be granted under the Plan on or after the tenth
anniversary of the date on which the Plan is adopted, but options previously
granted may extend beyond that date.
4. Administration.
(a) The Plan shall be administered by one or more committees appointed
from time to time by the Board (each such committee being referred to as a
"Committee"). In the event that more than one Committee is appointed by the
Board, the Board shall specify with respect to each Committee the group of
employees and Associates with respect to which such Committee shall have the
power to grant options. In the event that more than one Committee is appointed
by the Board, then each reference in the Plan to "the Committee" shall be deemed
a reference to each such Committee (subject to the last sentence of this
paragraph); provided, however, that each such Committee may only exercise the
power and authority granted
A-1
<PAGE> 21
to "the Committee" by the Plan with respect to those employees and Associates
that it has the power to grant options to as specified in the resolution of the
Board appointing such Committee. Each Committee shall be comprised of two or
more directors. A majority of the members of each Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of any Committee under the Plan may be made,
without notice or meeting of the Committee, by a writing signed by a majority of
the Committee members. All members of each Committee shall be "disinterested
persons" within the meaning of Rule 16(b)-3 under the Act and "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code
(the "Code"); provided, however, that the foregoing shall not
apply to any Committee that does not have the power to grant options to officers
or directors of the Company or otherwise make any decisions with respect to the
timing or the pricing of any options granted to such officers and directors. If
pursuant to the preceding sentence a Committee is required to be comprised of
"disinterested persons" and "outside directors", then the members of such
Committee shall not be eligible to receive options under the Plan. In the event
that more than one Committee is appointed by the Board, the power to amend the
Plan granted by Section 10(b) hereof may only be exercised by a Committee all of
whose members are "disinterested persons" and "outside directors" within the
meaning of Rule 16(b)-3 under the Act and Section 162(m) of the Code.
(b) The Committee shall have authority, not inconsistent with the
express provisions of the Plan, (i) to grant options to such eligible employees
and Associates of the Company as the Committee may select; provided, however,
that the maximum number of options that may be granted under this Plan during
any calendar year to any employee or Associate of the Company shall not exceed
100,000 shares (subject to any adjustment in accordance with Section 8(b)), and
it is further provided that if the Committee grants to any employee or Associate
during any calendar year options to purchase a number of shares that is less
than 100,000, or does not grant any options during any calendar year to such
employee or Associate, then the amount of such shortfall shall be carried
forward and added to the maximum number of options which may be granted in a
subsequent year to such employee or Associate; (ii) to determine the time or
times when options shall be granted and the number of shares of Stock subject to
each option; (iii) to determine which options are, and which options are not,
incentive options; (iv) to determine the terms and conditions of each option;
(v) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (vi) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (vii) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration or application
of the Plan shall be final and conclusive on all persons participating in the
Plan.
5. Shares Subject to the Plan.
(a) Number of Shares.
Subject to adjustment as provided in Section 8, the aggregate number of
shares of Stock that may be delivered upon the exercise of options granted under
the Plan shall be 2,000,000. If any option granted under the Plan terminates
without having been exercised in full, the number of shares of Stock as to which
such option was not exercised shall be available for future grants within the
limits set forth in this Section 5(a).
(b) Shares to be Delivered.
Shares delivered under the Plan shall be authorized but unissued Stock
or, if the Committee so decides in its sole discretion, previously issued Stock
acquired by the Company and held in treasury. No
A-2
<PAGE> 22
fractional shares of Stock shall be delivered under the Plan.
6. Eligibility for Options.
Employees and Associates of the Company eligible to receive options
under the Plan shall be those employees and Associates who, in the opinion of
the Committee, are in a position to make a significant contribution to the
success of the Company. Receipt of options under the Plan or of awards under any
other employee benefit plan of the Company shall not preclude an employee from
receiving options or additional options under the Plan.
7. Terms and Conditions of Options.
(a) Special Rule for Incentive Options. Consistent with Section 422 of
the Code and any regulations, notices or other official pronouncements of
general applicability, to the extent the aggregate fair market value (determined
in accordance with Section 7(b) as of the time the option is granted) of the
shares of Stock with respect to which incentive options are exercisable for the
first time by the optionee during any calendar year (under all plans of his
employer corporation and its parent and subsidiary corporations) exceeds
$100,000, such options shall not be treated as incentive options. Nothing in
this special rule shall be construed as limiting the exercisability of any
option, unless the Committee expressly provides for such a limitation at time of
grant.
(b) Exercise Price. The exercise price of each option shall be
determined by the Committee, subject to the following: (i) in the case of an
incentive option and all options granted by a Committee comprised of
"disinterested persons" and "outside directors", the exercise price per share of
stock shall not be less than 100% (110% for an incentive stock option granted to
a greater than ten-percent shareholder) of the fair market value per share of
Stock at the time the option is granted and (ii) in the case of all other
options, the exercise price per share of Stock shall not be less than the par
value per share (unless the Stock subject to the option is treasury stock). A
"greater than ten-percent shareholder" shall mean for purposes of the Plan any
employee who at the time of grant owns directly, or is deemed to own by reason
of the attribution rules set forth in Section 424(d) of the Code, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company. The fair market value of a share of Stock as of any date
shall be determined for purposes of the Plan as follows: (i) if the Stock is
listed on a securities exchange or quoted through the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") National Market System, the
fair market value shall equal the mean between the high and low sales prices on
such exchange or through such market system, as the case may be, on such day or
in the absence of reported sales on such day, the mean between the reported bid
and asked prices on such exchange or through such market system, as the case may
be, on such day, (ii) if the Stock is not listed or quoted as described in the
preceding clause but is quoted through NASDAQ (but not through the National
Market System), the fair market value shall equal the mean between the bid and
offered prices as quoted by the National Association of Securities Dealers
through NASDAQ for such day and (iii) if the Stock is not listed or quoted on a
securities exchange or through NASDAQ, then the fair market value shall be
determined by such other method as the Committee determines to be reasonable and
consistent with applicable requirements of the Code and the regulations issued
thereunder applicable to incentive options; provided, however, that if pursuant
to clause (i) or (ii) fair market value is to be determined based upon the mean
of bid and asked prices and the Committee determines that such mean does not
properly reflect fair market value, then fair market value shall be determined
by the Committee as provided in clause (iii).
(c) Duration of Options. An option shall be exercisable during such
period or periods as the Committee may specify. The latest date on which an
option may be exercised (the "Final Exercise Date")
A-3
<PAGE> 23
shall be the date which is ten years (five years, in the case of an incentive
option granted to a "greater than ten-percent shareholder" as defined in Section
7(b)) from the date the option was granted or such earlier date as may be
specified by the Committee at the time the option is granted.
(d) Exercise of Options.
(1) At the time of the grant of an option, the Committee
shall specify whether the option shall be exercisable
in full at any time prior to the Final Exercise Date
or in installments (which may be cumulative or
noncumulative). In the case of an option not
immediately exercisable in full, the Committee may at
any time accelerate the time at which all or any part
of the option may be exercised.
(2) The award forms or other instruments evidencing
incentive options shall contain such provisions
relating to exercise and other matters as are required
of incentive options under the applicable provisions
of the Code and the regulations thereunder, as from
time to time in effect.
(3) Any exercise of an option shall be in writing, signed
by the proper person and delivered or mailed to the
Company, accompanied by (a) the option certificate and
any other documents required by the Committee and (b)
payment in full for the number of shares for which the
option is exercised.
(4) In the case of an option that is not an incentive
option, the Committee shall have the right to require
that the individual exercising the option remit to the
Company an amount sufficient to satisfy any federal,
state, or local withholding tax requirements (or make
other arrangements satisfactory to the Company with
regard to such taxes) prior to the delivery of any
Stock pursuant to the exercise of the option. In the
case of an incentive option, if at the time the option
is exercised the Committee determines that under
applicable law and regulations the Company could be
liable for the withholding of any federal, state or
local tax with respect to a disposition of the Stock
received upon exercise, the Committee may require as a
condition of exercise that the individual exercising
the option agree (i) to inform the Company promptly of
any disposition (within the meaning of Section 424(c)
of the Code and the regulations thereunder) of Stock
received upon exercise, and (ii) to give such security
as the Committee deems adequate to meet the potential
liability of the Company for the withholding of tax,
and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to
preserve the adequacy of such security.
(5) If an option is exercised by the executor or
administrator of a deceased employee or Associate, or
by the person or persons to whom the option has been
transferred by the employee's or Associate's will or
the applicable laws of descent and distribution, the
Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons
exercising the option.
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<PAGE> 24
(e) Termination of Employment.
An employee's options shall terminate immediately upon the
termination of his employment with the Company, subject to the following
exceptions: (i) if the termination is by reason of the death or disability of
the employee, the unexercised portion of such options shall continue to be
exercisable for 12 months after such termination and (ii) if the termination is
for any other reason, excluding termination for cause, the unexercised portion
of such options shall continue to be exercisable for three months after such
termination. Notwithstanding the foregoing, the Committee in its discretion in
any particular case may provide that upon termination of an employee's
employment with the Company, the unexercised portion of his options shall
continue to be exercisable for a longer or shorter period than the period
provided for in the preceding sentence; provided, however, that
(i) in the case of an incentive option, the Committee may not provide for a
shorter or longer period after the option is granted and, in any event, may not
provide for a longer period except in the case where the employee's employment
is terminated by reason of death and (ii) in the case of an option that is not
an incentive option, the Committee may not provide for a shorter period after
the option is granted. For purposes of this Section 7(e), employment shall not
be considered terminated (i) in the case of sick leave or other bona fide leave
of absence approved for purposes of the Plan by the Committee, so long as the
employee's right to reemployment is guaranteed either by statute or by contract,
or (ii) in the case of a transfer of employment between the Company and a
subsidiary or between subsidiaries, or to the employment of a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which Section 424(a) of the Code applies.
(f) Payment for Stock.
Stock purchased under the Plan shall be paid for as follows:
(i) in cash or by certified check, bank draft or money order payable to the
order of the Company or (ii) if so permitted by the Committee (not later than
the time of grant, in the case of an incentive option), (A) through the delivery
of shares of Stock (including shares acquired under the option then being
exercised) having a fair market value (determined as provided in Section 7(b))
on the date of exercise equal to the purchase price or (B) by a combination of
cash and Stock as provided in clauses (i) and (ii)(A) above or (C) by delivery
of a promissory note of the option holder to the Company, such note to be
payable in the case of an incentive option, on such terms as are specified in
the option (except that, in lieu of a stated rate of interest, an incentive
option may provide that the rate of interest on the note will be such rate as is
sufficient, at the time the note is given, to avoid the imputation of interest
under the applicable provisions of the Code), or by a combination of cash (or
cash and Stock) and the option holder's promissory note; provided, that
if the Stock delivered upon exercise of the option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock shall be paid in cash or by a combination of cash and Stock.
(g) Delivery of Stock.
An option holder shall not have the rights of a shareholder
with regard to awards under the Plan except as to Stock actually received by him
under the Plan. The Company shall not be obligated to deliver any shares of
Stock (a) until, in the opinion of the Company's counsel, all applicable federal
and state laws and regulations have been complied with, and (b) if the
outstanding Stock is at the time listed on any stock exchange, until the shares
to be delivered have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (c) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the option, such representations or agreements as counsel for the
Company may consider appropriate to
A-5
<PAGE> 25
avoid violation of such Act and may require that the certificates evidencing
such Stock bear an appropriate legend restricting-transfer.
(h) Nontransferability of Options.
No option may be transferred other than by will or by the laws
of descent and distribution, and during the lifetime of the employee or
Associate to whom granted may be exercised only by him.
(i) Restrictions on Stock.
The Committee may provide that shares of Stock purchased
through the exercise of options under the Plan be subject to such restrictions
on resale, including restrictions requiring resale to the Company at or below
fair market value, or such other restrictions, as the Committee in its sole
discretion shall determine, and shall take such steps as it deems necessary or
appropriate to carry out the purposes of any such restriction.
8. Mergers, Recapitalizations, etc.
(a) In the event of a consolidation or merger in which the Company is not
the surviving corporation or in the event of any transaction that results in the
acquisition of substantially all of the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all of the Company's
assets (all the foregoing being referred to as "Acquisition Events"), then the
Committee may in its discretion terminate all outstanding options by delivering
notice of termination to each option holder; provided, however, that, during the
20-day period following the date on which such notice of termination is
delivered, each option holder shall have the right to exercise in full all of
his options that are then outstanding (without regard to limitations on exercise
otherwise contained in the options). If an Acquisition Event occurs and the
Committee does not terminate the outstanding options pursuant to the preceding
sentence, then the provisions of Section 8(b) shall apply.
(b) In the event of a stock dividend stock split or combination
of shares, recapitalization or other change in the Company's capital stock, the
number and kind of shares of stock of securities of the Company subject to
options then outstanding or subsequently granted under the Plan, the maximum
number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Committee. The Committee may also adjust the number of shares subject to
outstanding options, the exercise price of outstanding options and the terms of
outstanding options to take into consideration any other event (including,
without limitation, accounting changes) if the Committee determines that such
adjustment is appropriate to avoid distortion in the operation of the Plan. All
determinations and adjustments made by the Committee pursuant to this Section
8(b) shall be binding on all persons.
(c) The Committee may grant options under the Plan in
substitution for options held by employees of another corporation who
concurrently become employees of the Company or a subsidiary of the Company as
the result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as the result of the acquisition by
the Company of property or stock of the employing corporation. The Company may
direct that substitute awards be granted on such terms and conditions as the
Committee considers appropriate in the circumstances.
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<PAGE> 26
9. Limitation on Rights.
Neither the adoption of the Plan nor the grant of options shall
confer upon any employee any right to continued employment with the Company or
affect in any way the right of the Company to terminate the employment of an
employee at any time. Except as specifically provided by the Committee in any
particular case, the loss of existing or potential profit in options granted
under this Plan shall not constitute an element of damages in the event of
termination of the employment of an employee even if the termination is in
violation of an obligation of the Company to the employee by contract or
otherwise.
10. Effect, Discontinuance, Cancellation, Amendment and
Termination.
(a) Neither adoption of the Plan nor the grant of options to an
employee shall affect the Company's right to grant to such employee options that
are not subject to the Plan, to issue to such employees Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to employees.
(b) The Committee may at any time discontinue granting options
under the plan. With the consent of the option holder, the Board may at any time
cancel an existing option in whole or in part and grant the option holder
another option for such number of shares as the Committee specifies. The
Committee may at any time or times amend the Plan or any outstanding option for
the purpose of satisfying the requirement of Section 422 of the Code or of any
changes in applicable laws or regulations or for any other purpose which may at
the time be permitted by law, or at any time terminate the Plan as to any
further grants of options, provided that (except to the extent expressly
required or permitted above) no such amendment shall, without the approval of
the shareholders of the Company, (a) increase the maximum number of shares
available under the Plan, (b) change the group of employees eligible to receive
options under the Plan, (c) reduce the price at which incentive options may be
granted (d) extend the time within which incentive options may be granted (e)
extend the time within which options may be granted, (f) alter the Plan in such
a way that incentive options already granted hereunder would not be considered
incentive stock options under Section 422 of the Code, or (g) amend the
provisions of this Section 10, and no such amendment shall adversely affect the
rights of any option holder (without his consent) under any option previously
granted.
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<PAGE> 27
EXHIBIT B
Paragraph (a) of Article Fourth of the Certificate of
Incorporation of the Company, providing for the authorization of 100,000,000
shares of Common Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share, will be eliminated and replaced in
its entirety by the following new paragraph (a) of Article Fourth:
"(a) Authorized Classes of Stock: The total number of
shares which the corporation shall have the authority to issue is
151,000,000 of which 150,000,000 are designated Common Stock, par value
$.01 per share ("Common Stock"), and 1,000,000 shares are designated
Preferred Stock, par value $.01 per share ("Preferred Stock")."
B-1
<PAGE> 28
PROXY
BED BATH & BEYOND INC.
715 Morris Avenue
Springfield, New Jersey 07081
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Warren Eisenberg and Leonard Feinstein,
or either one of them acting singly, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side hereof, all the shares of Common Stock of Bed Bath & Beyond
Inc. held of record by the undersigned on May 13, 1996 at the Annual Meeting of
Shareholders to be held on June 27, 1996 or any adjournment thereof.
(Continued on Reverse Side)
<PAGE> 29
__________ /X/ Please mark your
COMMON votes as this
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority to vote for any
listed (except as AUTHORITY individual nominee, mark the box next to the nominee's
marked to the to vote for all name below).
contrary) nominees listed
/ / / / / / W. Eisenberg / / L. Feinstein / / R. Swartz
/ / K. Eppler / / R. Kaplan
</TABLE>
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG Peat Marwick LLP as the
independent auditors of the Corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO ADOPT The Bed Bath & Beyond Inc. 1996 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION to
increase the number of authorized shares of common stock from 100 million
to 150 million.
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be brought before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR proposals 1, 2, 3 and 4.
Please sign exactly as name appears herein. When shares are held by joint
tenants, both should each sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED:_____________________________,1996
- - ----------------------------------------
Signature
- - ----------------------------------------
Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
