<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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GEERLINGS & WADE, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[GEERLINGS & WADE LETTERHEAD]
April 11, 1998
Dear Stockholder:
It is our pleasure to invite you to the 1998 Annual Meeting of Stockholders
of Geerlings & Wade, Inc., a Massachusetts corporation, to be held on May 12,
1998 at 2:00 p.m. at the offices of Ropes & Gray, One International Place,
Boston, Massachusetts 02110.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the Annual Meeting.
You are accordingly urged to sign, date and return your proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.
Your return of a proxy in advance will not affect your right to vote in person
at the Annual Meeting.
We hope that you will be able to attend the Annual Meeting. The officers
and directors of Geerlings & Wade, Inc. look forward to seeing you at that time.
Sincerely,
Huib E. Geerlings
Chairman of the
Board of Directors
Phillip D. Wade
Director
<PAGE>
GEERLINGS & WADE, INC.
960 TURNPIKE STREET
CANTON, MASSACHUSETTS 02021
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 12, 1998
----------------------------
The 1998 Annual Meeting of Stockholders of Geerlings & Wade, Inc. (the
"Company") will be held at the offices of Ropes & Gray, One International Place,
Boston, Massachusetts 02110, on Tuesday, May 12, 1998 at 2:00 p.m. for the
following purposes:
1. To elect three directors for three-year terms ending in 2001.
2. To consider and act upon a proposal to amend and restate the Company's
Stock Option Plan and to increase the number of options that may be granted
to any individual employee thereunder from 100,000 to 150,000.
3. To consider and act upon a proposal to amend and restate the Company's Non-
Employee Director Stock Option Plan and to increase the authorized shares
of Common Stock reserved for issuance thereunder from 50,000 to 125,000.
4. To consider and act upon a proposal to ratify the appointment of Arthur
Andersen LLP as independent auditors of the Company.
5. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments thereof.
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order Of The Board Of Directors,
Phillip D. Wade
Clerk
April 11, 1998
<PAGE>
GEERLINGS & WADE, INC.
960 TURNPIKE STREET
CANTON, MASSACHUSETTS 02021
----------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
----------------------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Geerlings & Wade, Inc., a Massachusetts corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held at the
offices of Ropes & Gray, One International Place, Boston, Massachusetts 02110 on
Tuesday, May 12, 1998 at 2:00 p.m. and any adjournments thereof for the purposes
set forth in the Notice of Annual Meeting of Stockholders.
Stockholders of record at the close of business on March 20, 1998 will be
entitled to vote at the Annual Meeting of Stockholders. On that date, there were
3,785,316 shares of common stock, par value $.01 per share (the "Common Stock"),
of the Company outstanding, the holders of which are entitled to one vote per
share on each matter to come before the Annual Meeting. Proxies properly
executed and returned will be voted at the Annual Meeting in accordance with any
directions noted thereon or, if no direction is indicated, proxies will be voted
FOR the election of the three nominees for director set forth herein, FOR an
increase to 150,000 as the number of options which may be granted to an
individual employee under the Company's Stock Option Plan, FOR an increase to
125,000 shares in the aggregate reserved for issuance under the Company's Non-
Employee Director Stock Option Plan and FOR the ratification of the appointment
of Arthur Andersen LLP as independent auditors of the Company. Proxies will be
voted in the discretion of the holders of the proxy in accordance with their
best judgment with respect to any other business that may properly come before
the Annual Meeting and all matters incidental to the conduct of the Annual
Meeting. Any stockholder signing and delivering a proxy may revoke it at any
time before it is voted by delivering to the Clerk of the Company a written
revocation or a duly executed proxy bearing a later date than the date of the
proxy being revoked. Any record stockholder attending the Annual Meeting in
person may revoke his or her proxy and vote his or her shares at the Annual
Meeting.
It is expected that this Proxy Statement and the enclosed form of proxy
together with the annual report of the Company for the fiscal year ended
December 31, 1997 are being mailed to stockholders on or about April 11, 1998.
PROPOSAL NUMBER ONE
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<PAGE>
ELECTION OF DIRECTORS
Three directors are to be elected at the 1998 Annual Meeting of
Stockholders for three-year terms that expire in 2001. In accordance with the
By-laws of the Company, the Board of Directors has increased the size of the
Board of Directors to seven members. Two other directors have been elected to
terms that end in 1999, and two other directors have been elected to a term that
ends in 2000, as indicated below. Unless instructions are given to the contrary,
it is the intention of the persons named as proxies to vote the shares to which
each proxy relates FOR the election of the nominees listed below for a term of
three years expiring at the 2001 Annual Meeting of Stockholders and until a
successor is elected and qualified or until his earlier death, removal or
resignation. Two of the three nominees named below are presently serving as
directors of the Company and one nominee is the President and Chief Executive
Officer of the Company. All three nominees are anticipated to be available for
election and able to serve. If any of the three nominees should become
unavailable, however, such proxy will be voted for substitute nominees
designated by the Board of Directors. The three nominees for election as a
director at the Annual Meeting who receive the greatest number of votes properly
cast for the election of director shall be elected.
Set forth below is certain information concerning the nominees and the
other incumbent directors:
NOMINEES FOR ELECTION AS DIRECTOR AT THE ANNUAL MEETING
GORDON R. COOKE - Mr. Cooke was appointed a director of the company in June
1997. Mr. Cooke is President and Chief Executive Officer of DM Management
(direct marketing) of Hingham, Massachusetts, a women's apparel direct marketer
operating two discrete catalog concepts, J. Jill and Nicole Summers, since
January 1996. Prior to joining DM Management, Mr. Cooke was employed by Time
Warner (entertainment and media), as the President of Time Warner Interactive
Merchandising. From 1977 to 1994, Mr. Cooke was Executive Vice President of
Bloomingdale's Department Stores (retailing), and subsequently served as
President of Bloomingdale's By Mail. Mr. Cooke received his Bachelor of Arts
from the University of Puget Sound in 1967 and his Masters of Business
Administration from the University of Oregon in 1968. Mr. Cooke is 52 years
old.
JAY L. ESSA - Mr. Essa was appointed to the Board of Directors in October
1997. Mr. Essa has been President and Chief Executive Officer of the Company
since September 1996. Prior to joining the Company, Mr. Essa was Managing
Director for Europe since 1993 for E&J Gallo Winery ("Gallo") (wine making), one
of the world's largest wineries with revenues of approximately $1 billion. Mr.
Essa joined Gallo in 1970 in sales and was promoted to the following positions:
General Sales Manager for Valley Vintners, General Sales Manager for Mountain
Wine, Regional Manager for Vintage Wine Division, General Manager for Gallo
Sales Company, Managing Director for U.K. and Eire. Mr. Essa is 54 years old.
ROBERT L. WEBB - Mr. Webb has been a director of the Company since its
initial public offering in June 1994. Mr. Webb was the co-founder and served as
President and Chief Executive Officer of Webb & Co., (direct marketing
consulting) from 1973 until 1997. Mr. Webb was also the co-founder and now
serves as the Vice President of Catalog Ventures, Inc., (direct marketing)
established in 1989, which publishes five national direct-mail consumer gift
catalogs. Mr. Webb received his undergraduate degree from the United States Air
Force Academy and holds a Master's Degree from the Fletcher School of
International Law and Diplomacy of Tufts University. Mr. Webb is 50 years old.
-2-
<PAGE>
DIRECTORS WHOSE TERM EXPIRES IN 1999
JAMES C. CURVEY - Mr. Curvey has been a director of the Company since its
initial public offering in June 1994. Mr. Curvey is chief operating officer of
Fidelity Investments (diversified financial services) and vice chairman of FMR
Corp., Fidelity's parent company. Prior to assuming his present duties, Mr.
Curvey was President of Fidelity Capital, Inc. and a director of FMR Corp.. Mr.
Curvey joined Fidelity Investments in June 1982 as Vice President, Human
Resources and became Senior Vice President for Administration in January 1983.
Prior to joining Fidelity, Mr. Curvey was Vice President, Human Resources for
the Chase Manhattan Bank in New York. Mr. Curvey received his Bachelor of
Science from Villanova University in 1957 and his Masters of Arts from George
Washington University in 1962. Mr. Curvey is 62 years old.
PHILLIP D. WADE - Mr. Wade has been a director and the Clerk of the Company
since its inception in August 1986. Mr. Wade is president of American Golf
Centers (golf driving ranges). Mr. Wade served as President of the Company from
August 1986 through August 1996. From February 1995 until August 1996, Mr. Wade
also served as Chief Executive Officer and Treasurer of the Company. From July
1981 through October 1986, Mr. Wade was engaged in a number of capacities at
Coopers & Lybrand LLP (accounting) in Boston, Massachusetts, most recently as
Audit Manager. A graduate of Northeastern University, Mr. Wade is 40 years old.
DIRECTORS WHOSE TERM EXPIRES IN 2000
JOHN M. CONNORS, JR. - Mr. Connors has been a director of the Company since
June 1997. Mr. Connors is the Chairman and Chief Executive Officer and a
founding partner of Hill, Holliday, Connors, Cosmopulos, Inc. (advertising
agency). Under Mr. Connors' guidance, Hill Holliday has evolved from an
advertising agency into a full-service communications consultancy, able to meet
any communications need for any client. Mr. Connors also sits on the Board of
Directors of a number of other companies, including Lycos, Inc. Mr. Connors
received his Bachelor of Science degree from Boston College in 1963. Mr.
Connors is 55 years old.
HUIB E. GEERLINGS - Mr. Geerlings is Chairman of the Board of Directors.
Mr. Geerlings is President and founder of Verbind, Inc., (direct marketing
software). Mr. Geerlings held the position of Chief Executive Officer of the
Company until February 1995. Mr. Geerlings was a consultant to the Company from
its inception until June 1988 when he became Chairman of the Board of Directors.
Mr. Geerlings was employed at Coopers & Lybrand LLP (accounting) in Rotterdam,
The Netherlands from 1981 to 1984 when he transferred to Coopers & Lybrand LLP
in Boston, Massachusetts, where he worked as an Audit Manager until June 1988.
Mr. Geerlings received his undergraduate degree and his Masters in Business
Administration from Erasmus University in Rotterdam. Mr. Geerlings is 43 years
old.
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
In fiscal 1997, the Board of Directors held six meetings and acted by
unanimous written consent in lieu of a meeting on one occasion. The Board has
two standing committees: the Audit Committee and the Compensation Committee.
The Board does not have a standing Nominating Committee.
The Audit Committee was established in June 1994 and held one meeting
during fiscal 1997. The duties of the Audit Committee are (i) to review with
management and the independent auditors the scope and results of any and all
audits, the nature of any other services provided by the independent auditors,
-3-
<PAGE>
changes in the accounting principles applied to the presentation of the
Company's financial statements, and any comments by the independent auditors on
the Company's policies and procedures with respect to internal accounting,
auditing and financial controls, and (ii) to make recommendations to the Board
of Directors on the engagement of the independent auditors. Messrs. Wade and
Webb are members of the Audit Committee, as is Mr. Connors, who joined the Audit
Committee in June 1997. Mr. William J. Shea, a former director of the Company,
served on the Audit Committee until April 14, 1997.
The Compensation Committee was established in June 1994 and held four
meetings during fiscal 1997. The duties of the Compensation Committee are to
recommend compensation arrangements for the President and Chief Executive
Officer and review annual compensation arrangements for all other officers and
significant employees. The Compensation Committee also has the responsibility
to administer the Company's Stock Option Plan. Accordingly, the Compensation
Committee has the discretionary authority, not inconsistent with the express
provisions of the Stock Option Plan, to (i) grant option awards to eligible
persons, (ii) determine the time or times when awards shall be granted and the
number of shares of Common Stock subject to each award, (iii) designate options
as incentive options, (iv) determine the terms and conditions of each award, (v)
prescribe the form or forms of any instruments evidencing awards and any other
instruments required under the Stock Option Plan and to change such forms from
time to time, (vi) adopt, amend, and rescind rules and regulations for the
administration of the Stock Option Plan, and (vii) interpret the Stock Option
Plan and decide any questions and settle all controversies and disputes that may
arise in connection with the Stock Option Plan. Messrs. Curvey and Webb are
members of the Compensation Committee as is Mr. Cooke, who joined the
Compensation Committee in June 1997. Mr. William J. Shea, a former director of
the Company, served on the Compensation Committee until April 14, 1997. All
three members of the Compensation Committee "disinterested persons" as that term
is used in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
In fiscal 1997, each director of the Company who was not an employee of the
Company was paid $750 for each meeting of the Board of Directors attended by
such director. Directors who are employees of the Company are not paid any fees
or additional compensation for service as members of the Board of Directors or
either of its committees. All directors are reimbursed for reasonable travel
and other expenses of attending meetings of the Board of Directors and its
committees. In addition, pursuant to the Non-Employee Director Stock Option
Plan, non-employee directors receive options to purchase 2,500 shares of Common
Stock upon the anniversary of their election to the Board of Directors. The
options granted under the Non-Employee Stock Option Plan are granted at fair
market value and become exercisable in three equal annual installments
commencing on the first anniversary of the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS ELECTION
OF THE NOMINEES DESCRIBED ABOVE
-4-
<PAGE>
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS;
SECURITY OWNERSHIP
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company and other significant employees as of March
20, 1998. All of the Company's officers are elected annually and serve at the
discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- --- ------------------------------------------------------
<S> <C> <C>
Jay L. Essa 54 President and Chief Executive Officer
David R. Pearce 39 Vice President, Chief Financial Officer, Treasurer and
Assistant Clerk
</TABLE>
JAY L. ESSA - Mr. Essa has been President and Chief Executive Officer of
the Company since September 1996, and was appointed to the Board of Directors in
October 1997. Prior to joining the Company, Mr. Essa was Managing Director for
Europe since 1993 for E&J Gallo Winery ("Gallo") (wine making), one of the
world's largest wineries with revenues of approximately $1 billion. Mr. Essa
joined Gallo in 1970 in sales and was promoted to the following positions:
General Sales Manager for Valley Vintners, General Sales Manager for Mountain
Wine, Regional Manager for Vintage Wine Division, General Manager for Gallo
Sales Company, Managing Director for U.K. and Eire.
DAVID R. PEARCE - Mr. Pearce has been Vice President and Chief Financial
Officer of the Company since November 1996. Mr. Pearce was appointed Treasurer
and Assistant Clerk of the Company by the Board of Directors in February 1997.
Prior to joining the Company, Mr. Pearce was Chief Financial Officer of State
Line Tack, Inc. (direct marketing) with $65 million in sales in 1996. Mr.
Pearce joined State Line Tack, Inc. in 1995 and was a director from 1993 to
1996. From 1991 to 1995, Mr. Pearce was Vice President of Environmental Power
Corporation (independent power production) with $31 million in sales in 1994 and
was previously Managing Director of BancIreland/First Financial, Inc. (financial
services). Mr. Pearce received his undergraduate degree from Brown University
and his Masters of Business Administration from the University of California,
Berkeley.
OTHER KEY PERSONNEL
The Company's other key personnel are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- --------------------------------------
<S> <C> <C>
Gregg A. Kober 35 Director of Operations
Michael J. LaFrance 31 Director of Sales and Customer Service
Francis A. Sanders 42 Wine Director
Viren J. Patel 29 Database Administrator
</TABLE>
-5-
<PAGE>
GREGG A. KOBER - Mr. Kober joined the Company in September 1996. Mr. Kober
was previously employed since 1989 by Bose Corporation most recently as Manager
of Business Operations. Mr. Kober is a graduate of Northeastern University.
MICHAEL LAFRANCE - Mr. LaFrance joined the Company in December 1996. Prior
to joining the Company, Mr. LaFrance was a consultant to Bose Corporation.
During 1995, Mr. LaFrance was employed by Walt Disney World as Marketing
Operations Manger. From 1989 through 1994, Mr. LaFrance held various positions
with Bose Corporation's Direct Marketing Group.
FRANCIS SANDERS - Mr. Sanders joined the Company in May 1997. Previously
he served for eight years as the wine supervisor for Boston's Blanchard's retail
chain and has over 20 years experience in the beverage industry. Mr. Sanders is
a graduate of the University of Lowell.
VIREN J. PATEL - Mr. Patel joined the Company in October 1997 as its
Database Administrator. Mr. Patel was previously employed since June 1995 as
Senior Software Engineer for Raptor Systems. Prior to that, Mr. Patel was a
software engineer for Ring Medical, Inc. Mr. Patel received his Bachelor of
Science degree from Gujarat University and his Masters of Science degree from
the State University of New York.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth compensation earned for
all services rendered to the Company during each of the last three fiscal years,
as applicable, by persons serving as the Company's Chief Executive Officer and
President and each other officer or employee of the Company who earned salary
and bonuses in excess of $100,000 for the year ended December 31, 1997
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------------------- SECURITIES
BONUS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) OPTIONS
- --------------------------- ----------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Jay L. Essa (1) 1997 200,000 25,000 25,000 (3)
President and Chief Executive Officer 1996 53,846 -- 100,000
David R. Pearce (2) 1997 142,500 -- 10,000 (4)
Vice President, Treasurer and Chief 1996 17,750 -- 35,000
Financial Officer
- -------------------------------------
</TABLE>
-6-
<PAGE>
- --------------
(1) Mr. Essa was elected President, Treasurer and Chief Executive Officer
effective September 9, 1996.
(2) Mr. Pearce was elected Vice President and Chief Financial Officer effective
November 11, 1996, and was elected Treasurer and Assistant Clerk on
February 24, 1997.
(3) Mr. Essa was awarded 25,000 incentive stock options on January 21, 1998,
subject to stockholder approval of the amendment of the Stock Option Plan
in Proposal Number Two herein.
(4) Mr. Pearce was awarded 10,000 incentive stock options on February 2, 1998.
-7-
<PAGE>
OPTION VALUES
The table below sets forth information for the Named Executive Officers
with respect to fiscal 1997 year-end option values.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
-----------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
NAME AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
- --------------------- -------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Jay L. Essa 40,000 60,000 $13,750 $20,625
David R. Pearce 14,000 21,000 $ 0 $ 0
(1) The closing bid price for the Common Stock on the NASDAQ National Market System on
December 31, 1997, the last trading day of the fiscal year, was $4 1/8 per share.
</TABLE>
-8-
<PAGE>
COMPENSATION COMMITTEE REPORT
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 12 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company is
currently composed of three outside directors, Messrs. Curvey, Cooke and Webb.
Mr. William J. Shea, a former director of the Company, served on the
Compensation Committee until April 14, 1997. The Committee's responsibilities
include recommending the annual compensation arrangements for the President and
Chief Executive Officer of the Company, reviewing the annual compensation
arrangements for all other officers and significant employees of the Company and
administering the Company's Stock Option Plan. No member of this Committee was
an officer or employee of the Company during 1997.
The Company believes that all of its employees are vital to its continued
success. It is crucial that employees understand the Company's objectives and
the role they play in the achievement of these objectives. With this in mind,
the Company seeks to create a positive work environment for its employees,
including an appropriate level of training and ample opportunities for
advancement for all its employees.
Under the supervision of the Compensation Committee, the Company has
developed and implemented compensation policies and plans that seek to tie the
financial interests of the Company's senior management with the interests of its
stockholders. As a result, the Company seeks to reward performance in those
quantitative areas believed to be important to the long-term interests of
stockholders, namely enhanced sales growth and profitability and the successful
implementation of the Company's business plan. The Company believes that
success in these quantitative areas will also be evidence of success in the
qualitative areas discussed above relating to the work environment for the
Company's employees, employee training and employee opportunity for advancement.
In addition, the Company seeks to provide total compensation packages 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. To implement
these policies, the Company's compensation structure has three components: base
salary, cash bonuses and stock options.
Each of the Named Executive Officers, namely the President and Chief
Executive Officer, Jay L. Essa, and David R. Pearce, the Chief Financial
Officer, are parties to employment agreements with the Company (collectively,
the "Employment Agreements"). For details regarding the Employment Agreements,
see "Employment Arrangements" on page 11 of this Proxy Statement.
Each of the Employment Agreements provide that the Named Executive Officers
receive an annual base salary. Mr. Essa's annual base salary for the prior and
current fiscal year is $200,000. Mr. Pearce's annual base salary was recently
increased, effective August 1, 1997, from $130,000 to $160,000. This Committee,
acting by unanimous written consent on January 21, 1998, approved the grant of
a bonus for 1997 in the amount of $25,000 for Mr. Essa. This Committee
considered both quantitative and qualitative achievements occurring during the
1997 fiscal year as a basis for paying such bonus to Mr. Essa.
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<PAGE>
Additionally, in 1998, each of Messrs. Essa and Pearce has been granted
performance-based options to purchase shares of Common Stock. On January 21,
1998, this Committee approved the grant to Mr. Essa of 25,000 incentive stock
options pursuant to the Company's Stock Option Plan, subject to approval by the
stockholders of the Company of the amendment to the Stock Option Plan described
in Proposal Two of this Proxy Statement. On February 2, 1998, moreover, this
Committee approved the grant to Mr. Pearce of 10,000 incentive stock options
pursuant to the Company's Stock Option Plan. The options granted to Messrs.
Essa and Pearce have an exercise price of the fair market value on the date of
grant, expire 10 years from the date of grant, and vest in four equal increments
over four anniversaries after the date of grants. The Compensation Committee
believes the grant of such options provides appropriate incentives to the Named
Executive Officers by making a significant amount of their future remuneration
contingent upon either a significant increase in the price of the Common Stock
or a long period of future service to the Company.
With respect to the Company's other employees and executives, compensation
is determined based upon the recommendations to the Compensation Committee of
the President and Chief Executive Officer and, as applicable, the Chief
Financial Officer upon consideration of such individuals' performance and any
changes in their functional responsibilities.
Employee and executive compensation is generally comprised of a combination
of cash compensation and grants of options under the Company's Stock Option
Plan. Stock options are awarded during the year on a discretionary basis.
Stock options are intended to offer an equity incentive for superior performance
and to foster the retention of key personnel through awards structured to vest
and become exercisable over time provided that the individual remains employed
by the Company. There is no set formula for the award of options. Factors
considered in making option awards to employees and executives of the Company in
1997 included prior grants to such individual, the importance of retaining such
individual's services, such employee's potential to contribute to the success of
the Company and such employee's past contributions to the Company.
Dated: April, 1998 Compensation Committee
Of The Board of Directors
Gordon R. Cooke
James C. Curvey
Robert Webb
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<PAGE>
EMPLOYMENT ARRANGEMENTS
Effective September 9, 1996, Mr. Essa and the Company entered into a letter
agreement (the "Essa Agreement") pursuant to which Mr. Essa agreed to serve as
the Company's President, Chief Executive Officer and Treasurer. The Essa
Agreement provides for a base salary of $200,000 and for a grant of 100,000
stock options under the Stock Option Plan. Mr. Essa is also entitled to
reimbursement of certain relocation expenses. The Essa Agreement is terminable
at will at the option of the Company or Mr. Essa. As additional compensation for
services provided to the Company in 1997, Mr. Essa has been awarded a bonus in
the amount of $25,000, effective January 1, 1998 and subject to the approval by
the Stockholders of Proposal Number Two herein, 25,000 incentive stock options.
Effective November 11, 1996, Mr. Pearce and the Company entered into a
letter agreement (the "Pearce Agreement") pursuant to which Mr. Pearce has
agreed to serve as the Company's Vice President and Chief Financial Officer.
The Pearce Agreement provides for a base salary of $130,000 and for a grant of
35,000 stock options under the Stock Option Plan. The Pearce Agreement is
terminable at will at the option of the Company or Mr. Pearce. Mr. Pearce's
base salary was recently increased, effective August 1, 1997, to $160,000. In
addition, on February 2, 1998, the Compensation Committee approved a grant
10,000 incentive stock options to Mr. Pearce.
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its Common Stock with the cumulative
total return on the Nasdaq Market Index (Broad Market index) and a self-
constructed peer group index/*/ from June 17, 1994, the date of the Company's
initial public offering, through December 31, 1997, the last trading day of
fiscal 1997. The cumulative total shareholder return is based on $100 invested
in Common Stock of the Company and in the respective indices on June 17, 1994
(including reinvestment of dividends). The stock prices on the Performance
Graph are not necessarily indicative of future price performance.
______________________________
* The Peer Group index is comprised of the following direct-mail retail
marketing companies: DM Management Corporation (DMMC), Green Mountain Coffee
(GMC), Hanover Direct (HW), Land's End (LE), Lilian Vernon (LVC), Right Start
(RTST), Spiegel (SPGLA) and Vermont Teddy Bear (BEAR). Each of these companies
is publicly traded. The returns of each company have been weighted according
to their respective stock market capitalization for purposes of arriving at a
peer group average.
-12-
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of March 20, 1998, by each person known to the
Company to be the beneficial owner of more than five percent of the Common
Stock, each director of the Company, each Named Executive Officer of the Company
and all directors and Named Executive Officers of the Company as a group.
Except as otherwise indicated, the beneficial owners of the Common Stock listed
below, based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to applicable community
property laws.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS(2)
----------------- ----------
NAME OF BENEFICIAL OWNER
- ------------------------
<S> <C> <C>
John M. Connors, Jr. ............................................. 20,000 *
Gordon R. Cooke .................................................. 0 *
James C. Curvey .................................................. 105,998(3) 2.75%
Jay L. Essa....................................................... 40,000(4) 1.04%
Huib Geerlings.................................................... 910,000 23.64%
David R. Pearce................................................... 16,421(5) *
Phillip D. Wade................................................... 572,242 14.87%
Robert L. Webb.................................................... 4,999(3) *
Palo Alto Investors/William L. Edwards(6)......................... 362,700 9.42%
All Directors and Named Executive Officers as a group
(8 persons)....................................................... 1,669,660 43.38%
- ------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
* Less than 1%.
(1) For purposes of determining beneficial ownership of the Company's Common
Stock, owners of options that are exercisable within 60 days of March 20,
1998 are considered to be the beneficial owners of the shares of Common
Stock for which such securities are exercisable.
(2) Ownership percentages have been calculated on the basis of the amount of
outstanding Common Stock on March 20, 1998 (3,785,316 shares), plus options
held by the listed parties that are exercisable within 60 days of March 20,
1998 (63,998 shares).
(3) Includes options to purchase 4,999 shares of Common Stock issued pursuant
to the Non-Employee Director Stock Option Plan which are currently
exercisable.
(4) Represents options to purchase shares of Common Stock which are currently
exercisable.
(5) Includes options to purchase 14,000 shares of Common Stock which are
currently exercisable.
(6) As reported on Schedule 13D filed with the Securities and Exchange
Commission in February 1998, Palo Alto Investors, a California corporation,
and William L. Edwards, an individual, may be deemed to have shared voting
and investment power over such 362,700 shares. Neither of such beneficial
owners have sole power to vote or dispose or direct the disposition of any
of their shares. The business address for Palo Alto Investors and Mr.
Edwards is at 431 Florence Street, Suite 200, Palo Alto, California 94301.
-14-
<PAGE>
PROPOSAL NUMBER TWO
APPROVAL OF INCREASE IN NUMBER OF OPTIONS
WHICH MAY BE GRANTED TO AN INDIVIDUAL EMPLOYEE
UNDER THE COMPANY'S STOCK OPTION PLAN
STOCK OPTION PLAN
The Company's Stock Option Plan (the "Stock Option Plan") was adopted to
advance the Company's interests by enhancing its ability to attract and retain
able employees and others in a position to make significant contributions to the
success of the Company through ownership of shares of Common Stock. On the date
hereof, approximately 70 individuals are eligible to participate in the Stock
Option Plan. A total of 450,000 shares of Common Stock is currently reserved
for issuance under the Stock Option Plan, subject to adjustment for stock
dividends and similar events. Under the current terms of the Stock Option Plan,
an individual employee may not be granted options for over 100,000 shares of
Common Stock.
PROPOSAL
Stockholders are being requested to approve at the Annual Meeting an increase
to 150,000 as the number of options which may be granted to an individual
employee under the Stock Option Plan. Unless instructions are given to the
contrary, it is the intention of the persons named as proxies to vote the shares
to which the proxy is related FOR the increase in the number of options which
may be granted to an individual employee under the Stock Option Plan to 150,000.
Jay Essa, the Company's President and Chief Executive Officer, has a
particular interest in the proposal to increase the number of options which may
be granted to an individual under the Stock Option Plan. The Compensation
Committee's grant of 25,000 options to Mr. Essa on January 21, 1998 is
contingent upon the stockholders' approval of the amendment to the Stock Option
Plan.
PRIOR AMENDMENTS
The Stock Option Plan was adopted by the Board of Directors of the Company on
June 24, 1993, and subsequently amended on February 28, 1994 and April 8, 1994.
The stockholders of the Company adopted the Stock Option Plan, as amended, on
April 8, 1994.
On November 1, 1994, the Board of Directors voted to amend the Stock Option
Plan by increasing the number of shares of Common Stock reserved for issuance
thereunder to 300,000 shares, and the stockholders of the Company approved such
increase on May 18, 1995.
On February 1, 1995, the Board of Directors voted to further amend the Stock
Option Plan by increasing the number of options which may be granted to an
individual employee to a total of 100,000, and the stockholders of the Company
approved such amendment on May 18, 1995.
-15-
<PAGE>
On February 27, 1996, the Board of Directors voted to effectuate a change in
the exercise price of options issued and outstanding under the Stock Option Plan
as of such date. Active employees who were holders of options with an exercise
price greater than $8.00 per share were permitted to effectively exchange such
options for options with an exercise price of $8.00 per share. The Board of
Directors determined that such options should be reissued at $8.00 per share,
which was then higher than the fair market value of a share of the Common Stock,
because the Common Stock was priced at $8.00 in connection with the Company's
initial public offering in June 1994. The Board of Directors thus terminated the
existing options and reissued options for an equal number of shares with
identical provisions, except for a new exercise price of $8.00. The
stockholders of the Company approved such changes on May 14, 1996.
On February 24, 1997, the Board of Directors again voted to amend the Stock
Option Plan by increasing the number of shares of Common Stock reserved for
issuance thereunder to 450,000 shares, and the stockholders of the Company
approved such increase on May 13, 1997.
On February 24, 1998, the Board voted to amend the Stock Option Plan to
increase the number of options that could be granted to an individual
participant thereunder to 150,000, and currently requests the Stockholders to
approve such increase.
PLAN DESCRIPTION
Options granted under the Stock Option Plan may be in the form of incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code")), or options that are not incentive options, or
both. Incentive options may only be granted to "employees" as defined in the
Code or regulations thereunder applicable to incentive stock options.
The Stock Option Plan is administered by the Compensation Committee of the
Board of Directors of the Company which has discretionary authority to (i) grant
option awards to eligible persons, (ii) determine the time or times when awards
shall be granted and the number of shares of Common Stock subject to each award,
(iii) designate options as incentive options, (iv) determine the terms and
conditions of each award, (v) prescribe the form or forms of any instruments
evidencing awards and any other instruments required under the Stock Option Plan
and to change such forms from time to time, (vi) adopt, amend, and rescind rules
and regulations for the administration of the Stock Option Plan, and (vii)
interpret the Stock Option Plan and to decide any questions and settle all
controversies and disputes that may arise in connection with the Stock Option
Plan. Under the Stock Option Plan, options granted to directors or executive
officers may only be granted by a committee of the Board of Directors comprised
of "disinterested persons" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
Options are granted to participants under the Plan as a form of compensation
for services provided to the Company by such participants; the Company receives
no consideration for the grant of such options. The market value of the Common
Stock underlying the options, based on the closing bid price on the NASDAQ
National Market System on March 20, 1998, was $4.375 per share.
The exercise price of each option is determined by the Compensation
Committee, but in the case of an incentive option the price shall not be less
than 100% (110%, in the case of an incentive option granted to a ten-percent
stockholder) of the fair market value of the Common Stock at the time the
option is granted, nor shall the exercise price be less, in the case of an
original issue of authorized stock, than par value. The
-16-
<PAGE>
latest date on which an option may be exercised shall be the date which is ten
years (five years, in the case of an incentive option granted to a ten-percent
stockholder) from the date the option was granted, or such earlier dates as may
be specified by the Compensation Committee.
An option may be exercised by payment of the option price (i) in cash, (ii)
if permitted by the Compensation Committee, (a) through the delivery of shares
of Common Stock having a fair market value equal to the purchase price, (b) by
delivery of a promissory note payable on such terms as are specified by the
Compensation Committee, (c) by delivery of an unconditional and irrevocable
undertaking by a broker to promptly deliver to the Company sufficient funds to
pay the exercise price, or (d) by any combination of any permissible forms of
payment. No awards may be transferred other than by will or by the laws of
descent and distribution, and during the participant's lifetime an award may be
exercised only by such participant. In the event of any merger, consolidation,
dissolution or liquidation of the Company, the Compensation Committee may
substitute or adjust the aggregate number of shares reserved for issuance under
the Stock Option Plan and in the number and purchase price (if any) of shares
subject to such awards, or accelerate, amend or terminate awards. Upon
termination of employment or other service relationship with the Company, (x)
options not exercisable immediately prior to the termination shall terminate,
and (y) to the extent exercisable immediately prior to termination, the option
shall continue to be exercisable during the period prior to the expiration date
and within 60 days following termination (180 days if termination by reason of
death), unless termination is "for cause," as defined in the Stock Option Plan,
in which case all awards terminate immediately.
FEDERAL TAX EFFECTS
In general, neither the grant nor the exercise of an incentive stock option
will result in taxable income to the option holder or a deduction to the
Company. However, option holders exercising incentive stock options may become
subject to the alternative minimum tax by reason of that exercise.
If the stock received upon the exercise of an incentive stock option is
held for at least two years from the date of grant and at least one year from
the date of exercise, any gain or loss recognized from the disposition of the
stock will be considered capital gain or loss and will be taxable accordingly.
If shares received upon exercise of an incentive stock option are disposed of
before the holding period requirements described above have been satisfied (a
"disqualifying disposition"), the option holder will realize ordinary income,
and in general the Company will be entitled to a deduction, equal in general to
the difference between the option price and the value of the stock at the later
of (i) the date of exercise, or (ii) in the case of an officer or director
subject to the short-swing profit limitations of Section 16(b) of the Exchange
Act exercising an option within six months of grant, the end of such six-month
period unless immediate recognition of income is elected under Section 83(b) of
the Internal Revenue Code. The same tax consequences may result if the
aggregate value of stock (determined as of time of grant) for which incentive
stock options become exercisable in any one year by an optionee exceeds
$100,000.
In the case of nonstatutory options, no income results upon the grant of
the option. When an option holder exercises a nonqualified option, he or she
will realize ordinary income, subject to withholding, equal in general to the
excess of the then-fair market value of the stock over the option price.
However, if the optionee is an officer or director subject to the limitations of
Section 16(b) of the Exchange Act and exercises an option within six months of
grant, income will be realized at the end of such six-month period unless
immediate recognition of income is elected under Section 83(b) of the Internal
Revenue Code. The
-17-
<PAGE>
Company will in general be entitled to a deduction equal to
the amount of ordinary income realized by the optionee, provided the Company
satisfies applicable withholding and reporting requirements.
Section 162(m) of the Internal Revenue Code limits to $1 million the
deduction a public corporation may claim with respect to the remuneration paid
in any year to any of the corporations top five officers. The deduction
limitation is subject to a number of important exceptions, including an
exception for so-called "performance based" compensation. It is anticipated
that options granted under the Stock Option Plan will be eligible for an
exception from the $1 million deduction limitation.
-18-
<PAGE>
The foregoing summary does not purport to be a complete description of
Federal tax consequences in respect of the Stock Option Plan.
NEW PLAN BENEFITS
-----------------
STOCK OPTION PLAN
-----------------
NAME AND POSITION NUMBER OF SHARES
--------------------- UNDERLYING OPTIONS
------------------
Jay L. Essa 25,000
President and Chief
Executive Officer
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL
OF AN INCREASE IN THE NUMBER OF OPTIONS
WHICH MAY BE GRANTED TO AN INDIVIDUAL EMPLOYEE
UNDER THE COMPANY'S STOCK OPTION PLAN
-19-
<PAGE>
PROPOSAL NUMBER THREE
APPROVAL OF INCREASE IN SHARES RESERVED FOR ISSUANCE
UNDER THE COMPANY'S NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Non-Employee Director Stock Option Plan, which was adopted by the Board
of Directors and the stockholders on April 8, 1994, provides that each non-
employee director will be granted a non-qualified option to purchase 2,500
shares of Common Stock on the later of (i) the date of the initial offering of
the Company's Common Stock to the public or (ii) the date of the participant's
initial election to the Board of Directors. The exercise price of such options
equals the market price on the date of the grant. Such options have a ten-year
term and vest over a three-year period, unless automatically accelerated in the
event of death, disability or a change in control. Options granted pursuant to
the Non-Employee Director Stock Option Plan may be exercised in whole or in part
with cash, Common Stock or both. A total of 50,000 shares of Common Stock is
currently reserved for issuance under the Non-Employee Director Stock Option
Plan. On the date hereof, less than 10 people are eligible to participate in
the Non-Employee Director Stock Option Plan.
Options are granted pursuant to the Non-Employee Director Stock Option Plan
as a form of compensation for each participant's services as a member of the
Board; the Company receives no consideration for the grant of such options. The
market value of the Common Stock underlying the options, based on the closing
bid price on the NASDAQ National Market System on March 20, 1998, was $4 per
share.
Stockholders are being requested to approve at the Annual Meeting an
increase of 75,000 shares reserved for issuance under the Non-Employee Director
Stock Option Plan. Such increase will bring the aggregate number of shares
available for issuance under the Non-Employee Director Stock Option Plan to
125,000. Unless instructions are given to the contrary, it is the intention of
the persons named as proxies to vote the shares to which the proxy is related
FOR the number of shares reserved for issuance under the Non-Employee Director
Stock Option Plan to 125,000.
FEDERAL TAX EFFECTS
For federal income tax purposes, options under the Non-Employee Director
Option Plan are treated as nonstatutory options. See "Stock Option Plan -
Federal Tax Effects" above.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AN INCREASE IN SHARES RESERVED FOR
ISSUANCE UNDER THE COMPANY'S NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
-20-
<PAGE>
PROPOSAL NUMBER FOUR
RATIFICATION OF THE SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends the ratification by the stockholders of
the appointment by the Board of Directors of Arthur Andersen LLP as the
Company's independent accountants for the fiscal year ending December 31, 1998.
Arthur Andersen LLP has served as the Company's independent accountants since
1992. Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the shares to which the proxy is related FOR
the ratification of the appointment of Arthur Andersen LLP. The affirmative
vote of the holders of a majority of shares properly cast on the proposal, in
person or by proxy, will be required to ratify the appointment of Arthur
Andersen LLP. In the event that the stockholders do not ratify the appointment
of Arthur Andersen LLP as its independent accounting firm, the Board of
Directors will consider the selection of another firm of independent
accountants. A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting and will be available to respond to appropriate questions
and make such statements as he or she may desire.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS DESCRIBED ABOVE
-21-
<PAGE>
QUORUM REQUIREMENT AND METHOD OF TABULATION
Consistent with Massachusetts corporate law and the Company's By-Laws, a
majority of the shares entitled to vote, present in person or represented by
proxy, constitutes a quorum for the transaction of business at the Annual
Meeting. Votes cast by proxy or in person at the Annual Meeting will be counted
by persons appointed by the Company to act as election inspectors for such
Annual Meeting. The three nominees for election as director at the Annual
Meeting who receive the greatest number of votes properly cast for the election
of director shall be elected. A majority vote of the number of shares present
in person or represented by proxy at the Annual Meeting entitled to vote thereon
is necessary to approve the actions proposed in Item 2, Item 3 and Item 4 as
well as any other matter which comes before the Annual Meeting, except where
law, the Company's Restated Articles of Organization or By-laws require
otherwise. The election inspectors 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
Annual 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) as shares that are present and entitled to vote on the matter
for purposes of determining the presence of a quorum, but neither abstentions
nor broker non-votes have any effect on the outcome of voting on the matter.
At least 10 days before the 1998 Annual Meeting of Stockholders, the
Company shall make a complete list of the stockholders entitled to vote at the
Annual Meeting open to the examination of any stockholder for any purpose
germane to the Annual Meeting at its principal executive offices at 960 Turnpike
Street, Canton, Massachusetts 02021. The list shall also be made available to
stockholders present at the Annual Meeting.
FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended
December 31, 1997 and certain other related financial and business information
of the Company are contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, as filed by the Company with the Securities
and Exchange Commission on March 31, 1998. Copies of such Annual Report on Form
10-K for the fiscal year ended December 31, 1997, as filed by the Company with
the Securities and Exchange Commission on March 31, 1998. Copies of such Annual
Report on Form 10-K (without exhibits) may be obtained without charge by
contracting Geerlings & Wade, 960 Turnpike Street, Canton, Massachusetts 02021,
Attention: Investor Relations.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, stockholder proposals intended to be included in the Company's proxy
material for the Company's 1999 Annual Meeting of Stockholders must be received
by the Company on or before December 12, 1998 at its principal executive office,
960 Turnpike Street, Canton, Massachusetts 02021, Attention: Investor
Relations.
OTHER MATTERS
Management has no knowledge of any other matter that may come before the
1998 Annual Meeting of Stockholders and does not, itself, currently intend to
present any such other matter. However, if any such
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<PAGE>
other matters properly come before the Annual Meeting or any adjournment
thereof, the persons named as proxies will have discretionary authority to vote
the shares represented by the accompanying proxy in accordance with their own
judgment.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited without extra compensation by certain directors, officers and regular
employees of the Company by mail, telegram or in person.
Stockholders are urged to send their proxies without delay. Your
cooperation is appreciated.
-23-
<PAGE>
APPENDIX A
----------
Amended and Restated
as of May 13, 1997.
GEERLINGS & WADE, INC.
STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of this Stock Option Plan (the "Plan") is to advance the
interests of Geerlings & Wade, Inc. (the "Company") by enhancing the ability of
the Company, and its parent and subsidiaries (if any) to attract and retain able
employees, consultants or advisers to the Company; to reward such individuals
for their contributions; and to encourage such individuals to take into account
the long-term interests of the Company through interests in shares of the
Company's common stock, $.01 par value (the "Stock"). Any employee, consultant,
or adviser selected to receive an award under the Plan is referred to as a
"participant".
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. Except as otherwise expressly
provided with respect to an option grant, no option granted pursuant to the Plan
shall be an incentive option.
2. ADMINISTRATION
--------------
The Plan shall be administered by the Board of Directors (the "Board") of
the Company. The Board shall have discretionary authority, not inconsistent
with the express provisions of the Plan, (a) to grant option awards to such
eligible persons as the Board may select; (b) to determine the time or times
when awards shall be granted and the number of shares of Stock subject to each
award; (c) to determine which options are, and which options are not, intended
to be incentive options; (d) to determine the terms and conditions of each
award; (e) to prescribe the form or forms of any instruments evidencing awards
and any other instruments required under the Plan and to change such forms from
time to time; (f) to adopt, amend, and rescind rules and regulations for the
administration of the Plan; and (g) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Board shall be conclusive and shall
bind all parties. Subject to Section 9 the Board shall also have the authority,
both generally and in particular instances, to waive compliance by a participant
with any obligation to be performed by him or her under an award, to waive any
condition or provision of an award, and to
<PAGE>
amend or cancel any award (and if an award is canceled, to grant a new award on
such terms as the Board shall specify) except that the Board may not take any
action with respect to an outstanding award that would adversely affect the
rights of the participant under such award without such participant's consent.
Nothing in the preceding sentence shall be construed as limiting the power of
the Board to make adjustments required by Section 4(c) and Section 6(g).
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 disinterested persons within the meaning of Rule 16b-3 under the 1934
Act and "outside directors" within the meaning of section 162(m)(4)(c)(i) of the
Code.
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on the date on which it is approved by the
shareholders 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 approval of the
Plan by the shareholders.
No awards shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but awards previously
granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
----------------
the aggregate number of shares of Stock that may be the subject of awards
granted under the Plan shall be 450,000. If any award granted under the Plan
terminates without having been exercised in full, or upon exercise is satisfied
other than by delivery of Stock, the number of shares of Stock as to which such
award was not exercised shall be available for future grants. No employee shall
be entitled to grants of options in excess of 100,000 shares, subject to
adjustment in accordance with Section 4(c).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
----------------------
authorized but unissued Stock, or if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. 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 or securities of the
Company subject to awards then outstanding or subsequently granted under the
Plan, the exercise price of such awards, the maximum number of shares or
securities that may be delivered under the
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<PAGE>
Plan, and other relevant provisions shall be appropriately adjusted by the
Board, whose determination shall be binding on all persons.
The Board may also adjust the number of shares subject to outstanding
awards, the exercise price of outstanding awards, and the terms of outstanding
awards, to take into consideration material changes in accounting practices or
principles, extraordinary dividends, consolidations or mergers (except those
described in Section 6(g)), acquisitions or dispositions of stock or property,
or any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an incentive option, without the
consent of the participant, if it would constitute a modification, extension, or
renewal of the option within the meaning of section 424(h) of the Code.
5. AWARDS; ETC.
------------
Persons eligible to receive awards under the Plan shall be those persons
who, in the opinion of the Board, are in a position to make a significant
contribution to the success of the Company and its subsidiaries. A subsidiary
for purposes of the Plan shall 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.
Incentive options shall be granted only to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive stock
options.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) Exercise Price of Options. The exercise price of each option shall
-------------------------
be determined by the Board but in the case of an incentive option shall not be
less than 100% (110%, in the case of an incentive option granted to a ten-
percent shareholder) of the fair market value of the Stock at the time the
option is granted; nor shall the exercise price be less, in the case of an
original issue of authorized stock, than par value. For this purpose, "fair
market value" in the case of incentive options shall have the same meaning as it
does in the provisions of the Code and the regulations thereunder applicable to
incentive options; and "ten-percent shareholder" shall mean any participant who
at the time of grant owns directly, or by reason of the attribution rules set
forth in section 424(d) of the Code is deemed to own, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
of any of its parent or subsidiary corporations.
(b) Duration of Options. An option shall be exercisable during such
-------------------
period or periods as the Board may specify. The latest date on which an option
may be exercised (the "Expiration Date") shall be the date which is ten years
(five years, in the case of an incentive option granted to a "ten-percent
shareholder" as defined in (a) above) from the date the option was granted or
such earlier date as may be specified by the Board at the time the option is
granted.
(c) Exercise of Options.
-------------------
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<PAGE>
(1) An option shall become exercisable at such time or times and upon such
conditions as the Board shall specify. In the case of an option not
immediately exercisable in full, the Board may at any time accelerate
the time at which all or any part of the option may be exercised.
(2) Any exercise of an option shall be in writing, signed by the proper
person and furnished to the Company, accompanied by (i) such documents
as may be required by the Board and (ii) payment in full as specified
below in Section 6(d) for the number of shares for which the option is
exercised.
(3) The Board shall have the right to require that the participant
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. If permitted by the Board, either at the time
of the grant of the option or in connection with exercise, the
participant may elect, at such time and in such manner as the Board
may prescribe, to satisfy such withholding obligation by (i)
delivering to the Company Stock owned by such individual having a fair
market value equal to such withholding obligation, or (ii) requesting
that the Company withhold from the shares of Stock to be delivered
upon the exercise a number of shares of Stock having a fair market
value equal to such withholding obligation.
In the case of an incentive option, the Board may require as a
condition of exercise that the participant exercising the option agree
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. In addition, if at the time the option is
exercised the Board determines that under applicable law and
regulations the Company could be liable for the withholding of any
federal or state tax with respect to a disposition of the Stock
received upon exercise, the Board may require as a condition of
exercise that the participant exercising the option agree to give such
security as the Board 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 Board to preserve the adequacy of such security.
(4) If an option is exercised by the executor or administrator of a
deceased participant, or by the person or persons to whom the option
has been transferred by the participant'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.
(d) Payment for and Delivery of Stock. Stock purchased upon exercise of
---------------------------------
an option under the Plan shall be paid for as follows: (i) in cash, check
acceptable to the Company (determined in accordance with such guidelines as the
Board may prescribe), or money order payable to the order of the Company, or
(ii) if so permitted by the Board (which, in the case of an incentive option,
shall specify such method of payment at the time of grant), (A) through the
delivery of shares of Stock (which, in the case of Stock acquired from the
Company, shall have been held for at least six months unless the Board specifies
a shorter period) having a fair market value on the last business day preceding
the date of exercise equal to the purchase price, or (B)
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<PAGE>
by delivery of a promissory note of the participant to the Company, such note to
be payable on such terms as are specified by the Board, or (C) 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 (D) 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 shall be
paid other than with a personal check or promissory note of the person
exercising the option.
(e) Delivery of Stock. A participant 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 (i)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (ii) 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 (iii) 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.
(f) Nontransferability of Awards. No award may be transferred other than
----------------------------
by will or by the laws of descent and distribution, and during a participant's
lifetime an award may be exercised only by him or her.
(g) Mergers, etc. In the event of any merger, consolidation, dissolution,
-------------
or liquidation of the Company, the Board in its sole discretion may, as to any
outstanding awards, make such substitution or adjustment in the aggregate number
of shares reserved for issuance under the Plan and in the number and purchase
price (if any) of shares subject to such awards as it may determine, or
accelerate, amend, or terminate such awards upon such terms and conditions as it
shall provide (which, in the case of the termination of the vested portion of
any award, shall require payment or other consideration which the Board deems
equitable in the circumstances).
7. TERMINATION OF EMPLOYMENT
-------------------------
If a participant's employment or other service relationship with the
Company terminates prior to the Expiration Date the following shall apply:
(a) Options that are not exercisable immediately prior to the termination
shall terminate, except that the Board may in its sole discretion
provide that the participant or beneficiary receive in cash, with
respect to each share of Stock to which an option relates, the excess
of (i) the share's fair market value on the date of the participant's
termination, over (ii) the option exercise price.
(b) To the extent exercisable immediately prior to termination of
employment or other service, the option shall continue to be
exercisable thereafter during the period prior to the Expiration Date
and within 60 days following the termination (180 days in the event
that a
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<PAGE>
participant's service terminates by reason of death), unless the
participant's employment or other service is terminated "for cause" as
defined in (c) below, in which case all awards shall terminate
immediately. Except as otherwise provided in an award, after completion
of the 60-day (or 180-day) period, such awards shall terminate to the
extent not previously exercised, expired, or terminated.
(c) The following, as determined by the Board in its reasonable judgment
shall constitute "cause" termination: (i) a participant's failure to
perform, or negligence in the performance of, his or her duties and
responsibilities to the Company; (ii) a participant's fraud,
embezzlement or other material dishonesty with respect to the Company;
or (iii) other conduct by a participant that is harmful to the
business, interest, or reputation of the Company.
No option shall be exercised or surrendered in exchange for a cash payment after
the Expiration Date.
In the case of any award, the Board may provide in the case of any award
for post-termination exercise provisions different from those expressly set
forth in this Section 7, including without limitation terms allowing a later
exercise by a former employee, consultant or advisor (or, in the case of a
former employee, consultant or advisor who is deceased, the person or persons to
whom the award is transferred by will or the laws of descent and distribution)
as to all or any portion of the award not exercisable immediately prior to
termination of employment or other service, but in no case may an award be
exercised after the Expiration Date.
8. EMPLOYMENT RIGHTS
-----------------
Neither the adoption of the Plan nor the grant of awards shall confer upon
any participant any right to continue as an employee of, or consultant or
adviser to, the Company, its parent, or any subsidiary or affect in any way the
right of the Company, its parent, or a subsidiary to terminate the participant's
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 this Plan shall not constitute an element of damages in the event of
termination of the relationship of a participant even if the termination is in
violation of an obligation of the Company to the participant by contract or
otherwise.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION
----------------------------------------------------------------
Neither adoption of the Plan nor the grant of awards to a participant shall
affect the Company's right to make awards to such participant 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 may be issued.
The Board may at any time discontinue granting awards under the Plan. With
the consent of the participant, the Board may at any time cancel an existing
award in whole or in part and grant another award for such number of shares as
the Board specifies. The Board may at any time or times amend the Plan or any
outstanding award for the purpose of satisfying the requirements of section 422
of the Code or of any changes in applicable laws or regulations or for any other
purpose that may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of awards; except that no such amendment shall
adversely affect the rights of any participant (without his or her consent)
under any award previously granted.
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<PAGE>
APPENDIX B
----------
GEERLINGS & WADE, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of this Non-Employee Director Stock Option Plan (the "Plan") is
to advance the interests of Geerlings & Wade, Inc. (the "Company") by enhancing
the ability of the Company to attract and retain non-employee directors who are
in a position to make significant contributions to the success of the Company
and to reward directors for such contributions through ownership of shares of
the Company's common stock (the "Stock").
2. ADMINISTRATION
--------------
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority,
not inconsistent with the express provisions of the Plan, (a) to grant options
in accordance with the Plan to such directors as are eligible to receive
options; (b) 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; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) to interpret the Plan and to decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations of the Committee shall be conclusive and
binding on all parties.
3. EFFECTIVE DATE AND TERM OF PLAN
-------------------------------
The Plan shall become effective on the date of the closing of the Company's
initial public offering subject to the Plan's prior approval by the Board of
Directors and the stockholders of the Company. No option shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
became effective, but options previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
--------------------------
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
----------------
the aggregate number of shares of Stock that may be delivered upon the exercise
of options granted under the Plan shall be 50,000. If any option granted under
the Plan terminates without having been exercised in
<PAGE>
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
4(a).
(b) Shares to be Delivered. Shares delivered under the Plan shall be
----------------------
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
----------------
combination of shares, recapitalization or other change in the Company's capital
stock, after the effective date of the Plan, the number and kind of shares of
stock or 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, whose determination
shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
-----------------------
Directors eligible to receive options under the Plan ("Eligible Directors")
shall be those directors, other than employees of the Company or of any
subsidiary of the Company, who are members of, or who have been designated to
serve as members of, the Board.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
(a) Number of Options.
-----------------
Each individual who becomes an Eligible Director on the date on which the
Company's initial public offering is completed shall be awarded on such date an
option covering 2,500 shares of Stock. Each individual who becomes an Eligible
Director after the date on which the Company's initial public offering is
completed shall be awarded an initial grant covering 2,500 shares of Stock on
the date of his or her first becoming an Eligible Director. Thereafter, each
Eligible Director shall be awarded an option covering an additional 2,500 shares
of Stock on the anniversary of the date on which such Eligible Director was
elected to the board.
(b) Exercise Price. The exercise price of each option shall be (i) in the
--------------
case of options granted upon completion of the Company's initial public
offering, the initial public offering price, and (ii) in the case of all other
options, 100% of the fair market value per share of the Stock at the time the
option is granted. In no event, however, shall the option price be less, in the
case of an original issue of authorized stock, than par value per share. For
purposes of this paragraph, (A) the fair market value of a share of Stock on any
date shall be the Closing Price on such day or, if there was no Closing Price on
such day, the latest day prior thereto on which there was a Closing Price; and
(B) the "Closing Price" of the Stock on any business day will be the last sale
price as reported on the principal market on which the Stock is traded or, if no
last sale is reported, then the mean between the highest bid and lowest asked
prices on that day.
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<PAGE>
(c) Duration of Options. The latest date on which an option may be
-------------------
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date such option was granted.
(d) Exercise of Options.
-------------------
(1) Each option shall become exercisable in accordance with the following
formula:
(A) One year after the date of the grant, the option shall become
exercisable to the extent of one-third of the shares covered
thereby;
(B) On the second anniversary of the date of the grant the option
shall become exercisable as to an additional one-third of the
shares covered thereby; and
(C) On the third anniversary of the date of the grant the option
shall become exercisable as to the remainder of the shares
covered thereby.
(2) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (i) any
documentation required by the Committee and (ii) payment in full for
the number of shares for which the option is exercised.
(3) 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 Committee with regard to
such taxes) prior to the delivery of any Stock pursuant to the
exercise of the option. If permitted by the Committee the individual
exercising the option may elect, at such time and in such manner as
the Committee may prescribe, to have the Company hold back from the
transfer Stock having a value calculated to satisfy such withholding
obligation. In the case of an individual subject to Section 16(b) of
the Securities Exchange Act of 1934, no such election shall be
effective unless made in compliance with the applicable requirements
of Rule 16b-3 or any successor Rule under that Act.
(4) If an option is exercised by the executor or administrator of a
deceased Eligible Director, or by the person or persons to whom the
option has been transferred by the Director's will or the applicable
laws of descent and distribution, the Company shall be under no
obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of the person or persons
exercising the option.
(e) Payment for and Delivery of Stock. Stock purchased under the Plan
---------------------------------
shall be paid for as follows: (i) 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 (ii) if so permitted by
the original terms of the option or by the Committee after grant of the option,
(A) through the delivery of shares of Stock (which, in the case of shares of
Stock acquired from the
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<PAGE>
Company, have been outstanding for at least six months) having a fair market
value on the last business day preceding the date of exercise equal to the
purchase price or (B) by having the Company hold back from the shares
transferred upon exercise Stock having a fair market value on the last business
day preceding the date of exercise equal to the purchase price or (C) by
delivery of a promissory note of the option holder to the Company, such note to
be payable on such terms as are specified or (D) 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 (E) 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 shall be
paid other than with a personal check or promissory note of the option holder.
An option holder shall not have the rights of a stockholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (c) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
option, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(f) Nontransferability of Options. No option may be transferred other
-----------------------------
than by will or by the laws of descent and distribution, and during an Eligible
Director's lifetime an option may be exercised only by him or her.
(g) Death. Upon the death of any Eligible Director granted options under
-----
this Plan, all options not then exercisable shall terminate. All options held
by the Eligible Director that are exercisable immediately prior to death may be
exercised by his or her executor or administrator, or by the person or persons
to whom the option is transferred by will or the applicable laws of descent and
distribution, at any time within one year after the Eligible Director's death
(subject, however, to the limitations of Section 6(c) regarding the maximum
exercise period for such option). After completion of that one-year period,
such options shall terminate to the extent not previously exercised.
(h) Other Termination of Status of Director. If an Eligible Director's
---------------------------------------
service with the Company terminates for any reason other than death, all options
held by the Eligible Director that are not then exercisable shall terminate.
Options that are exercisable on the date of termination shall continue to be
exercisable for a period of three months (subject to Section 6(c)). After
completion of that three-month period, such options shall terminate to the
extent not previously exercised, expired or terminated.
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<PAGE>
(i) Mergers, etc. 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 a
sale or transfer of substantially all of the Company's assets or a dissolution
or liquidation of the Company, all options hereunder will terminate; provided,
--------
that 20 days prior to the effective date of any such merger, consolidation sale,
dissolution, or liquidation, all options outstanding hereunder that are not
otherwise exercisable shall become immediately exercisable.
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION AND
----------------------------------------------------------------
EFFECTIVENESS
-------------
Neither adoption of the Plan nor the grant of options to an Eligible
Director shall affect the Company's right to grant to such Eligible Director
options that are not subject to the Plan, to issue to such Eligible Director's
Stock as a bonus or otherwise, or to adopt other plans or arrangements under
which Stock may be issued to directors.
The Committee may at any time terminate the Plan as to any further grants
of options. The Committee may at any time or times, but in no event (except to
comply with the provisions of the Internal Revenue Code, the Employee Retirement
Income Security Act or the rules thereunder) more than once in any six-month
period, amend the Plan for any purpose which may at the time by permitted by
law; 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 under Rule 16b-3 promulgated under Section
16 of the Securities Exchange Act of 1934, as amended.
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<PAGE>
APPENDIX C
----------
FORM OF PROXY FOR GEERLINGS & WADE, INC. 1998 ANNUAL MEETING
GEERLINGS & WADE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GEERLINGS & WADE, INC.
FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 12, 1998
The undersigned, having received the Notice of Annual Meeting of
Stockholders and the Proxy Statement on behalf of the Board of Directors of
Geerlings & Wade, Inc. (the "Company"), hereby appoints each of Jay L. Essa and
David R. Pearce proxies of the undersigned (with full power of substitution) to
attend the Annual Meeting of Stockholders of the Company to be held on May 12,
1998 at 2:00 p.m. at the offices of Ropes & Gray, One International Place,
Boston, MA 02110 and all adjournments thereof (the "Meeting") and to vote all
shares of Common Stock of the Company that the undersigned would be entitled to
vote, if personally present, in regard to all matters which may come before the
Annual Meeting, and without limiting the general authorization hereby given, the
undersigned directs that his or her vote be cast as specified in this Proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED
HEREIN. IF NO SPECIFICATION IS MADE, THE PROXIES WILL BE VOTED FOR THE NOMINEES
AND FOR THE OTHER PROPOSALS SET FORTH HEREIN AND DESCRIBED IN THE BOARD OF
DIRECTORS' PROXY STATEMENT. IF ANY OF THE NOMINEES ARE NOT AVAILABLE TO SERVE,
THIS PROXY MAY BE VOTED FOR A SUBSTITUTE. THIS PROXY DELEGATES DISCRETIONARY
AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF
SOLICITATION OF THIS PROXY. THE UNDERSIGNED HEREBY REVOKES ANY OTHER PROXY
PREVIOUSLY GRANTED TO VOTE THE SAME SHARES OF COMMON STOCK FOR THE ANNUAL
MEETING.
SEE REVERSE SIDE. If you wish to vote in accordance with the
recommendations of the Board of Directors, just sign on the reverse side. You
need not mark any boxes.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING MATTERS:
1. The election of three directors, FOR WITHHELD Nominees: Gordon R. Cooke
each for a term ending in 2001. [ ] [ ] Jay L. Essa
Robert Webb
INSTRUCTION: To withhold authority
to vote for any individual nominee,
write that nominee's name in the
space provided below.
- -----------------------------------
2. To consider and act upon a FOR AGAINST ABSTAIN
proposal to amend and restate the [ ] [ ] [ ]
Company's Stock Option Plan and to
increase the number of options that
may be granted to any individual
employee thereunder from 100,000 to
150,000.
3. To consider and act upon a FOR AGAINST ABSTAIN
proposal to amend and restate the [ ] [ ] [ ]
Company's Non-Employee Director
Stock Option Plan and to increase
the authorized shares of Common
Stock reserved for issuance
thereunder from 50,000 to
125,000.
4. To consider and act upon a FOR AGAINST ABSTAIN
proposal to ratify the appointment [ ] [ ] [ ]
of Arthur Andersen LLP as
independent auditors of the Company.
PLEASE PROMPTLY DATE AND RETURN THIS PROXY FORM USING THE ENCLOSED ENVELOPE.
I plan to attend the meeting. [ ]
I do not plan to attend the meeting. [ ]
Signature Date
------------------------------------------ -------------------
Signature if Held Jointly Date
-------------------------- -------------------
NOTE: Please sign name exactly as it appears on this Proxy. When shares are
held by joint tenants, both should 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.
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