SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 ss.240.14a-11(c) or ss.240.14a-12
The Great Train Store Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title to 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>
THE GREAT TRAIN STORE COMPANY
14180 DALLAS PARKWAY, SUITE 618
DALLAS, TEXAS 75240
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
To the Stockholders of May 30, 1997
The Great Train Store Company: Dallas, Texas
The Annual Meeting of the Stockholders of The Great Train Store Company will be
held on Tuesday, July 15, 1997, at 9:00 a.m. Central Daylight Savings Time in
the offices of the Company at 14180 Dallas Parkway, Suite 618, Dallas, Texas
75240, for the following purposes:
1. To elect two class III directors to each serve a three-year term and
until each director's successor has been elected and qualified;
2. To consider and vote upon a proposal to approve the amendment of the
Company's 1994 Incentive Compensation Plan to (i) increase the number of shares
available for issuance from 460,000 to 660,000, (ii) broaden the class of
persons eligible to receive awards and (iii) extend the term for which options
may be exercised;
3. To consider and vote upon a proposal to approve the amendment of the
Company's 1994 Director Stock Option Plan to (i) increase the number of shares
available for issuance from 50,000 to 100,000 (ii) to provide each non-employee
director with an automatic annual award of 5,000 options and (iii) extend the
term of such options to ten years;
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on May 21, 1997, will be
entitled to vote at the meeting. A list of all stockholders entitled to vote at
the annual meeting, arranged in alphabetical order and showing the address of
and number of shares held by each stockholder, will be open at the principal
office of The Great Train Store Company, 14180 Dallas Parkway, Suite 618,
Dallas, Texas 75240, during usual business hours, to the examination of any
stockholder for any purpose germane to the annual meeting for 10 days prior to
the date thereof. The list of shareholders will also be available at the meeting
for examination at any time during the meeting.
A copy of the Company's Annual Report for fiscal year 1996 accompanies this
notice.
By Order of the Board of Directors
James H. Levi
Chairman, President, and
Chief Executive Officer
Whether or not you intend to be present at the meeting, please mark, sign, date,
and return the accompanying proxy promptly. A return addressed envelope is
enclosed for your convenience.
<PAGE>
The Great Train Store Company
14180 Dallas Parkway, Suite 618
Dallas, Texas 75240
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of The Great Train
Store Company (the "Company"), for use at the Annual Meeting of Stockholders to
be held in the offices of the Company at 14180 Dallas Parkway, Suite 618,
Dallas, Texas 75240, July 15, 1997, at 9:00 a.m. CDST and at any adjournments
thereof. Whether or not you expect to attend the meeting in person, please
return your executed proxy in the enclosed envelope and the shares represented
thereby will be voted in accordance with your wishes. This proxy statement and
the accompanying proxy card will be first mailed to stockholders on or about
June 3, 1997. All costs of solicitation of proxies will be borne by the Company.
In addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph, telecopy and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names and the Company will reimburse them for their
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
REVOCABILITY OF PROXY
If, after sending in your proxy, you decide to vote in person or desire to
revoke your proxy for any other reason, you may do so by notifying the Secretary
of the Company, or the presiding officer at the meeting, in writing of such
revocation at any time prior to the voting of the proxy, or by attending the
meeting and voting in person, or by submitting a new proxy bearing a later date.
RECORD DATE
Stockholders of record at the close of business on May 21, 1997, will be
entitled to vote at the meeting.
ACTION TO BE TAKEN UNDER PROXY
All properly executed proxies received by the Board of Directors pursuant to
this solicitation will be voted by Cheryl A. Taylor and James L. Llewellyn, or
the one of them who acts, in accordance with the directions specified in the
proxy. If no such directions have been specified by marking the appropriate
squares in the accompanying proxy card, the shares will be voted as follows:
(1) FOR the election of James H. Levi and Robert M. Warner named herein
as nominees for directors of the Company to hold office for a term of
three years expiring in 2000 and until each director's successor has
been duly elected and qualified;
(2) FOR approval of the amendment of the Company's 1994 Incentive
Compensation Plan, to (i) increase the number of shares of Common Stock
available for issuance under the plan to officers and other key
employees of the Company from 460,000 to 660,000 (ii) broaden the class
of persons eligible to receive awards, and (iii) extend the term for
which options may be exercised;
(3) FOR approval of the amendment of the Company's 1994 Director Stock
Option Plan to (i) increase the number of shares available for issuance
from 50,000 to 100,000 (ii) provide each non-employee director with an
automatic annual award of 5,000 options, and (iii) extend the term for
which options may be exercised;
(4) According to their judgment, on the transaction of such other
business as may properly come before the meeting or any adjournments
thereof.
Should the nominees named herein for election as a director become unavailable
for any reason, it is intended that the persons named in the proxy will vote for
the election of such other person in his stead as may be designated by the Board
of Directors. The Board of Directors is not aware of any reason that might cause
the nominee to be unavailable.
2
<PAGE>
VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF
AND CUMULATIVE VOTING RIGHTS
On May 21, 1997, there were 4,402,219 shares of Common Stock, par value $.01 per
share ("Common Stock"), outstanding, which constitute all of the outstanding
capital stock of the Company. Each stockholder is entitled to cast one vote for
each share of record on all matters to be voted on by the stockholders,
including the election of directors.
A majority of the outstanding shares present or represented by proxy will
constitute a quorum at the meeting. Votes that are withheld in the election of
directors, abstentions on all other matters properly brought before the meeting
and the proxies relating to "street name" shares which are not voted by brokers
on one or more, but less than all, matters (so-called "broker non-votes") will
be considered as shares present for purposes of determining a quorum. Under
applicable state law and the Company's Certificate of Incorporation (i) an
affirmative vote of a plurality of the shares present in person or represented
by proxy at the meeting is required for the election of directors, and, (ii) an
affirmative vote by a majority of the shares present in person or represented by
proxy at the meeting is required to approve all other matters submitted to a
vote of the stockholders. With regard to the election of directors, votes that
are withheld will be excluded entirely from the vote and will have no effect.
With regard to other matters, abstentions (including proxies which deny
discretionary authority on any other matters properly brought before the
meeting) will be counted as shares present and entitled to vote and will have
the same effect as a vote against any such matters. Broker non-votes will not be
treated as shares represented at the meeting as to such matter(s) not voted on
and therefore will have no effect.
The following table sets forth as of May 21, 1997 the beneficial ownership of
each current director (including the nominee for election as a director), each
of the executive officers named in the Summary Compensation Table set forth
herein, the executive officers and directors as a group, and each other
stockholder known to the Company to own beneficially more than 5% of the
outstanding Common Stock. Unless otherwise indicated, the Company believes that
the beneficial owners set forth in the table have sole voting and investment
power.
Beneficial Ownership
Number of
Shares Percent
------ -------
James H. Levi (a) 1,181,511 26.3%
The Great Train Store Company
85 Larchmont Avenue
Larchmont, New York 10538
Joel S. Pollack (b) 90,338 2.1%
1150 Benedict Canyon Drive
Beverly Hills, California 90210
John J. Schultz (c) 14,000 *
P.O. Box 1106 - Horseshoe Farm
Ridgefield, CT 06877
Edmund H. Shea, Jr. (d) 238,000 5.4%
655 Brea Canyon Road
Walnut, California 91789
Charles M. Tureen (e) 39,512 *
101 South Hanley Road, Suite 1600
St. Louis, Missouri 63105
Robert M. Warner (f) 5,000 *
1015 Nautilus Lane
Mamaroneck, New York 10543
All directors and officers as a group
(8 persons) 1,404,936 30.9%
* Less than 1%
3
<PAGE>
(a) Includes 10,000 shares of common stock owned by Mr. Levi's spouse and 7,500
shares owned by the Levi Family Foundation of which Mr. Levi is managing
trustee. Mr. Levi disclaims beneficial ownership of these shares. Also includes
75,000 shares of Common Stock issuable upon the exercise of the warrants
received by Mr. Levi pursuant to the private placement of debt in 1994, which
are beneficially owned by Mr. Levi. Includes 9,750 shares of common stock
issuable upon the exercise of certain employee stock options. Excludes 47,250
shares of Common Stock issuable upon the exercise of certain employee stock
options, some of which first become exercisable in March 1998.
(b) Includes 80,338 shares held of record by The Pollack Family Trust dated May
13, 1986, of which Mr. Pollack and his spouse are co-trustees. Also includes
10,000 shares of Common Stock issuable upon the exercise of certain options
granted to Mr. Pollack.
(c) Includes 10,000 shares of Common Stock issuable upon the exercise of certain
options granted to Mr. Schultz.
(d) Includes 50,000 shares of common stock issuable upon the exercise of the
warrants received by Mr. Shea pursuant to the private placement of debt in 1994,
which are beneficially owned by Mr. Shea. All other shares are held of record by
E & M RP Trust, of which Mr. Shea is trustee.
(e) Includes 29,512 shares owned by "The Mary W. Tureen Revocable Trust" of
which Mary W. Tureen (spouse of Mr. Tureen) and Mr. Tureen are co-trustees.
Includes 10,000 shares of Common Stock issuable upon the exercise of certain
options granted to Mr. Tureen.
(f) Includes 5,000 shares of Common Stock issuable upon the exercise of certain
options granted to Mr. Warner.
PROPOSAL 1 - ELECTION OF TWO CLASS III DIRECTORS
INFORMATION ABOUT THE NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Certificate of Incorporation and Bylaws currently provide for
three classes of directors, each class serving for a three-year term expiring
one year after the term of the preceding class, so that the term of one class
will expire each year. The terms of the current Class I and Class II directors
expire in 1998 and 1999, respectively. The Board of Directors has nominated
James H. Levi and Robert M. Warner, who are currently Class III directors, for
re-election to each serve a three-year term expiring at the annual meeting of
stockholders in 2000. The following table sets forth certain information
concerning James H. Levi and Robert M. Warner and those directors who are
continuing in office.
NOMINEE FOR DIRECTOR - CLASS III
(to be elected to serve a three-year term)
Director
Name Age Position Since
---- --- -------- -----
James H. Levi 57 Director, Chairman of the Board, 1994
President and Chief Executive Officer
Robert M. Warner 76 Director 1994
James H. Levi has been the Chairman of the Board of Directors, President and
Chief Executive Officer and a Director of the Company since its organization in
1985. Since 1992, Mr. Levi has also been President of Levi Company, a real
4
<PAGE>
estate and venture investing company and is involved in a number of investment
and other activities. In 1987, he co-founded and, until 1992, served as
President of Value Properties, Inc., a real estate investment firm. For more
than fifteen years prior thereto, Mr. Levi was President of Oppenheimer
Properties, Inc. and a number of related entities and was Executive Vice
President and a member of the Executive Committee of Oppenheimer & Co., Inc.,
investment bankers. He has been responsible for the creation of a large number
of enterprises among which was the adaptive reuse of St. Louis Union Station,
the location of the original The Great Train Store. Mr. Levi developed The Great
Train Store concept and has been the principal owner of the Company and all of
its predecessors since inception. He is a graduate of Harvard College and
received his M.B.A. degree from Harvard Business School.
Robert M. Warner has been a Director of the Company since August, 1994. For more
than seven years, Mr. Warner has been a retail store management consultant whose
present clients include many retailers, large and small. He is presently a
director of Cherry & Webb, a 50 store women's specialty chain. Previously, Mr.
Warner served as President and Chief Executive Officer of Steinbach, Inc., a
$200 million department store chain; President and Chief Executive Officer of
K-G Retail, Inc., a $100 million men's clothing chain; Senior Vice President of
Macy's, Inc., where, among other positions, he served as the General Manager of
Macy's-Herald Square store, the largest store in the world. Mr. Warner has also
worked for a number of other retail companies as either chief executive officer,
director or consultant. Mr. Warner is a graduate of the University of Michigan
and received an M.B.A. from the Harvard Business School.
Your Board of Directors recommends you vote for the election of these nominees.
DIRECTORS CONTINUING IN OFFICE - CLASS II
(terms expiring in 1999)
Director
Name Age Position Since
---- --- -------- -----
Joel S. Pollack 57 Director 1994
John J. Schultz 60 Director 1994
Joel S. Pollack has been a Director of the Company since August, 1994. For more
than the last five years, Mr. Pollack has been a private investor in Beverly
Hills, California. From 1977 to 1987, he was Executive Vice President and
Co-Head of Retail Sales at Oppenheimer & Co., Inc., and was employed in various
capacities at Hayden Stone and predecessor companies. Mr. Pollack graduated from
The Wharton School of the University of Pennsylvania in 1961.
John J. Schultz has been a Director of the Company since August, 1994. Mr.
Schultz has more than thirty-five years of experience in the retail industry and
is presently a consultant specializing in the retail area and serves as a
director of Big Smith Brands, Inc. and A.R. Accessories, Inc. Previously, Mr.
Schultz served as Executive Vice President and General Merchandise Manager for
Bloomingdale's Department Stores and Sanger Harris Department Stores, President
and Chief Executive Officer of B. Altman & Co., and President of the Retail
Services Division and Executive Director of the National Retail Federation. Mr.
Schultz is a graduate of Fairleigh Dickenson University in Madison, New Jersey,
Dartmouth Institute and the Federated Senior Management Institute.
5
<PAGE>
DIRECTOR CONTINUING IN OFFICE - CLASS I
(terms expiring in 1998)
Director
Name Age Position Since
---- --- -------- -----
Charles M. Tureen 66 Director 1994
Charles M. Tureen has been a Director of the Company since April, 1994. Mr.
Tureen was a member in the St. Louis, Missouri law firm of Gallop, Johnson &
Neuman, L.C., from July, 1990 until December, 1996, when he became of counsel to
the firm. Until June, 1990 and for a number of years prior thereto, he was a
principal in the St. Louis, Missouri law firm of Blumenfeld, Sandweiss, Marx,
Tureen, Ponfil, and Kaskowitz P.C.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and Form 5 and amendments
thereto, or written representations that no Form 5 is required, furnished to the
Company, the Company believes that, other than as set forth in the next
sentence, each person required to file reports under Section 16(a) relative to
the Company's equity securities has done so on a timely basis. In August 1996,
Ms. Taylor and Messrs. Levi, Glazer, Herndon, Llewellyn, Pollack, Schultz,
Tureen, and Warner each filed a Form 5 with respect to the Company's fiscal year
ended December 30, 1995 reporting a single grant of options awarded in an exempt
transaction under Rule 16b-3.
The Board of Directors of the Company has established an Audit Committee
(presently consisting of Mr. Pollack, Mr. Warner and Mr. Schultz) to be
comprised of at least two non-employee directors which has the responsibility of
reviewing the scope of the audit and services provided by the Company's
independent auditors. The Audit Committee meets with the financial staff of the
Company to review accounting procedures and policies. The Board of Directors
also has established a Compensation Committee (presently consisting of Mr.
Tureen, Mr. Pollack and Mr. Warner) also to be comprised of at least two
non-employee directors which has been given the responsibility of setting and
administering the policies which govern the annual compensation of the Company's
directors and executive officers, as well as the Company's stock option and
other benefit plans. The Board of Directors has also established an Executive
Committee (presently consisting of Mr. Levi and Mr. Tureen) with the power to
act, if necessary, on a broad range of matters during the interim periods
between Board of Directors meetings.
During 1996 the Board of Directors held four meetings, the Audit Committee held
four meetings, the Compensation Committee held four meetings, and the Executive
Committee held three meetings. During such period each director, other than Joel
S. Pollack, attended 100% of the aggregate of (i) the total number of meetings
of the Board of Directors held during the period and (ii) the meetings held
during the period by the Committees of the Board of Directors on which he
served. Mr. Pollack was absent on one occasion.
Director Compensation
The Company pays each non-employee director of the Company $1,250 in cash for
each Board meeting attended and reimburses all directors for out-of-pocket
expenses incurred in connection with their attendance at Board meetings. The
Company has the option to pay these directors in that number of shares of Common
Stock determined by reference to the fair market value of the Common Stock on
the meeting date. However, all payments during 1995 and 1996 were made in cash.
In addition, pursuant to its 1994 Director's Stock Option Plan, the Company
granted to each non-employee director, on the date of his initial selection,
options to purchase 5,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the date of the selection. Such
options first became exercisable on the first anniversary of the recipient's
election as a director.
6
<PAGE>
During 1995, the 1994 Director's Stock Option Plan was amended to award an
additional 2,500 options to each non-employee Director and establish an annual
award of 2,500 options on the date of each subsequent annual meeting of the
stockholders of the Company at which each remains a director of the Company.
Such options will be at a price equal to the fair market value of the Common
Stock on the date of award.
Certain Relationships and Related Transactions
From time to time, the Company has engaged in various transactions with its
directors, executive officers and other affiliated parties. The following
paragraphs summarize certain information concerning certain transactions and
relationships which have occurred during the last two years or which are
presently proposed.
From time to time, James H. Levi, Stanley Herndon and Michael Glazer have loaned
money to the Company by advancing cash and/or deferring salary. Until April 12,
1994, such indebtedness accrued interest at a rate of 15% per annum and was
payable upon demand. Effective April 12, 1994, Messrs. Levi, Herndon and Glazer
agreed to restructure the indebtedness owed to them by the Company. The
indebtedness, as restructured, provided for the payment of principle and
interest, at a rate of 8% per annum, in quarterly installments. Such
indebtedness was paid in full by the Company during August 1996.
The terms and conditions of the foregoing transactions were not negotiated on an
arm's-length basis. All future transactions between the Company and its
officers, directors, principal stockholders and affiliates are required to be
approved by a majority of the independent and disinterested outside directors
and must be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties under similar circumstances.
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the Company's Chief Executive
Officer for all services rendered in all capacities to the Company. No other
officer of the Company earned compensation of more than $100,000 during any of
the three fiscal years ended December 28, 1996.
Summary Compensation Table
Annual Compensation
-------------------
Name and Principal Position Year Salary Bonus Other
--------------------------- ---- ------ ----- -----
James H. Levi 1996 $129,789 $ - $ -
Chairman of the Board, President 1995 125,000 - -
and Chief Executive Officer 1994 61,561(a) - -
(a) Includes amounts paid under a consulting arrangement with The Great Train
Store Partners, L.P.
7
<PAGE>
Option / SAR Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Name and Principal Options/SARs Employees in Base Price Expiration
Position Granted (#) Fiscal Year ($/sh) Date
-------- ----------- ----------- ------ ----
James H. Levi 10,000 (a) 4.6% $ 6.19 3/2001
Chairman of the 15,000 (a) 6.9% $ 6.19 7/2001
Board, President
and Chief Executive
Officer
(a) 25% become exercisable annually commencing with the second anniversary of
the grant date
Aggregated Option/SAR Exercises in Last Fiscal Year and
FY-End Options/SAR Values
Number Of
Unexercised Value of
Securities Unexercised
Shares Underlying In-The-Money
Shares Options/SARs Options/SARs At
Acquired Value At FY-End (#) FY-End ($)
on Realized Exercisable/ Exercisable/
Name Exercise ($) Unexercisable Unexercisable
---- -------- --- ------------- -------------
James H. Levi - - 4,250/42,750 $23,375 /$139,425
Employment Arrangements with Executive Officers
The Company entered into an employment agreement effective April 12, 1994 with
James H. Levi. Under this agreement, which expires August 12, 1999, Mr. Levi has
agreed to continue to serve as Chairman of the Board, President and Chief
Executive Officer of the Company in exchange for annual base compensation of
$150,000, subject to annual adjustment by the Compensation Committee of the
Board of Directors. Prior to this arrangement, Mr. Levi was entitled to
compensation of $25,000 per annum pursuant to a consulting arrangement. Mr. Levi
has agreed to devote such time to the business and affairs of the Company as is
reasonable and necessary. It is Mr. Levi's intention to devote at least 50% of
the customary work week to the Company's business for the foreseeable future. In
addition, Mr. Levi is entitled to receive an annual bonus in such amount as the
Compensation Committee may determine in its sole discretion to be appropriate.
To date, Mr. Levi has not requested nor received any such bonuses.
In the event Mr. Levi's employment with the Company is terminated for reasons
other than for cause, permanent disability or death or there occurs a
significant reduction in the position, duties or responsibilities of Mr. Levi (a
"Termination") within two years following a "Change of Control" (as defined in
the agreement), Mr. Levi will be entitled to an additional bonus of 175% of the
Base Compensation payable in the fiscal year in which such termination occurs.
8
<PAGE>
Mr. Levi has also agreed to refrain from disclosing information confidential to
the Company or engaging directly or indirectly, in the sale or distribution of
merchandise competitive with that sold by the Company during the term of his
employment agreement and for two years thereafter without the prior written
consent of the Company.
Your Board of Directors recommends you vote for the election of these nominees.
PROPOSAL 2 - AMENDMENT OF THE GREAT TRAIN STORE COMPANY
1994 INCENTIVE COMPENSATION PLAN
GENERAL
On August 25, 1994, the Board of Directors adopted The Great Train Store Company
1994 Incentive Compensation Plan (the "1994 Plan"). In 1996, the Plan was
amended in order to increase the number of shares of Common Stock available for
issuance from 310,000 to 460,000. On March 18, 1997 the Board of Directors
resolved to amend, upon approval by the Company's stockholders, the amended 1994
plan in order to (i) increase the number of shares of Common Stock available for
issuance from 460,000 to 660,000 (ii) broaden the class of persons eligible to
receive awards to include all employees, consultants, advisors and other persons
who render similar services to the Company on a regular basis, and (iii) extend
the expiration and termination of option following the cessation of an
optionee's service to the Company (the "Amendment") and directed that the
Amendment be submitted to the stockholders of the Company for their approval.
The Amendment will become effective only if the holders of at least a majority
of the issued and outstanding shares of Common Stock present at the annual
meeting in person or by proxy vote for the approval of the Amendment.
The 1994 Plan is administered by the Compensation Committee of the Board of
Directors of the Company. The 1994 Plan currently authorizes the Compensation
Committee to grant incentive stock options, stock options and to award
restricted stock to key employees and others, including officers, as selected by
such Committee. If the Amendment is approved, the Compensation Committee will be
authorized to grant such awards to a broader class of persons including all
employees, consultants, advisors and other persons who render similar services
to the Company on a regular basis. The 1994 Plan will expire on, and no awards
may be granted thereunder after the tenth anniversary of the plan, subject to
the right of the Board of Directors to terminate such 1994 Plan at any time
prior thereto. The Board of Directors may amend the 1994 Plan at any time,
except no such amendment may impair the rights of recipients of previous grants
without such grantee's consent.
An option enables the optionee to purchase shares of Common Stock at the option
exercise price. The per share exercise price of any options granted under the
1994 Plan may not be less than the fair market value of the Common Stock at the
time the option is granted, provided that, with respect to an incentive stock
option granted to an optionee who is or would be the beneficial owner of more
than 10% of the combined voting power of all classes of the Company's stock, the
exercise price may not be less than 110% of the fair market value of the Common
Stock on the date of grant. In order to obtain the shares, a participant must
pay the full exercise price to the Company at the time of exercise of the
option. The exercise price may be paid in cash or, with the consent of the
Compensation Committee, stock of the Company, including stock acquired under the
same option. Incentive stock options are intended to qualify under Section 422
of the Internal Revenue Code of 1986, as amended.
9
<PAGE>
Incentive stock options and nonqualified stock options may be granted with terms
of no more than ten years from the date of grant, provided that in the event the
Company grants an incentive stock option to an optionee who is or would be the
beneficial owner of more than 10% of the total combined voting power of all
classes of the Company's stock, the term of such option may not exceed five
years. Under the current 1994 Plan, options will survive for a limited period of
time after the optionee's death, disability or normal retirement from the
Company. If the Amendment is approved, options will also survive for a limited
period of time upon cessation of the optionee's service to the Company for any
reason other than resignation or cause. Any shares as to which an option
expires, lapses unexercised, is terminated or is canceled may be subject to a
new option.
Your Board of Directors recommends you vote in favor of this proposal.
PROPOSAL 3 - AMENDMENT OF THE GREAT TRAIN STORE COMPANY
1994 DIRECTOR STOCK OPTION PLAN
GENERAL
On May 10, 1994, the Board of Directors adopted The Great Train Store Company
1994 Director Stock Option Plan (the "1994 Plan"). In 1996, the 1994 Plan was
amended to increase the number of shares of common stock available for issuance
from 20,000 to 50,000 and to provide each non-employee director with an annual
award of 2,500 options. On March 18, 1997, the Board of Directors resolved to
amend, upon approval by the Company's stockholders, the 1994 Plan in order to
(i) increase the number of shares of Common Stock available for issuance from
50,000 to 100,000 (ii) to increase the automatic annual award to 5,000 options
and (iii) extend the term of such option to a period of ten years (the
"Amendment"). The Board of Directors authorized the first such award effective
July 16, 1997 and directed that the Amendment be submitted to the stockholders
of the Company for their approval. The Amendment will become effective only if
the holders of at least a majority of the issued and outstanding shares of
Common Stock present at the annual meeting in person or by proxy vote for the
approval of the Amendment.
The 1994 Plan is administered by the Chairman of the Board of Directors of the
Company. The 1994 Plan authorizes the Chairman to grant nonqualified stock
options to directors of the Company who are not otherwise officers or employees
of the Company or of any subsidiary thereof. Currently, the four non-employee
members of the Board of Directors are eligible for this plan. Authority to grant
options under the 1994 Plan will terminate, if not terminated earlier by the
Board, on the tenth anniversary of the plan. The Board of Directors may amend
the 1994 Plan at any time, except no such amendment may impair the rights of
recipients of previous grants without such grantee's consent.
An option enables the optionee to purchase shares of Common Stock at the option
exercise price. The per share exercise price of any options granted under the
plan may not be less than the fair market value of the Common Stock at the time
the option is granted. In order to obtain the shares, a participant must pay the
full exercise price to the Company at the time of exercise of the option. The
exercise price may be paid in cash or, with the consent of the Compensation
Committee, stock of the Company, including stock acquired under the same option.
An option may be granted with terms of no more than ten years from the date of
grant. Director's options first become exercisable on the first anniversary of
the date of grant.
10
<PAGE>
NEW PLAN BENEFITS
1994 Director Stock Option Plan
Name and Principal Position Number of Units
--------------------------- ---------------
James H. Levi
Chairman of the Board, President
and Chief Executive Officer -
Executive Group -
Non-Executive Directors Group 20,000
Non-Executive Officer Employee Group -
Your Board of Directors recommends you vote in favor of this proposal.
PROPOSAL 4 - OTHER BUSINESS
Management does not know of any other matters which may come before the Meeting.
However, if any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
Proposals for the 1998 Annual Meeting
Proposals of the stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Dallas, Texas not later than February 3, 1998 for inclusion in the proxy
statement for that meeting.
Relationship with the Independent Accountants
KPMG Peat Marwick, LLP ("KPMG") served as the independent public accountant for
the Company in 1995 and 1996. The Company's independent public accountant for
1997 will be selected by the Board at a regular Board meeting to be held in
1997. Representatives of KPMG will be present at the Annual Meeting with the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
By Order of the Board of Directors
James H. Levi
Chairman, President, and
Chief Executive Officer
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR
STOCK PERSONALLY BY DELIVERING A WRITTEN REVOCATION OF YOUR PROXY TO THE
SECRETARY OF THE COMPANY.
11
<PAGE>
THE GREAT TRAIN STORE COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, JULY 15, 1997 AT 9:00 A.M.
The undersigned stockholder of The Great Train Store Company (the
"Company") hereby appoints Cheryl A. Taylor annd James L. Llewellyn and each of
them as attorneys and proxies, each with power of substitution and revocation,
to represent the undersigned at the Annual Meeting of Stockholders of the
Company to be held in the offices of the Company at 14180 Dallas Parkway, Suite
618, Dallas, Texas on July 15, 1997 at 9:00 A.M. Central Daylight Savings Time,
and at any adjournment or postponement thereof, with authority to vote all
shares held or owned by the undersigned in accordance with the directions
indicated herein.
Receipt of the Notice of Annual Meeting of Stockholders dated May 30, 1997,
the Proxy Statement furnished herewith, and a copy of the Annual Report to
Stockholders for the year ended December 28, 1996 is hereby acknowledged.
Item 1. Election of James H. Levi and Robert H. Warner as as Class III Directors
for a term of three years expiring in 2000 and until each director's successor
has been duly elected and qualified.
James H. Levi
|_| FOR |_| WITHHOLD
Robert M. Warner
|_| FOR |_| WITHHOLD
Item 2. Approval of the amendment of The Great Train Store Company 1994
Incentive Compensation Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Item 3. Approval of the amendment of The Great Train Store Company 1994 Director
Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Item 4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEMS 1, 2 AND 3 AND PURSUANT TO ITEM 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3
Dated: ___________, 1997 __________________________________________
(Signature)
__________________________________________
(Signature if held jointly)
The signature should agree with the name on
your stock certificate. If acting as
attorney, executor, administrator, trustee,
guardian, etc., you should so indicate when
signing. If the signer is a corporation,
please sign the full corporate name by duly
authorized officer. If shares are held
jointly, each shareholder should
sign.
<PAGE>
Appendix A
----------
THE GREAT TRAIN STORE COMPANY
AMENDED AND RESTATED
1994 INCENTIVE COMPENSATION PLAN
I. Purpose of the Plan
The Great Train Store Company 1994 Incentive Compensation Plan (the "Plan")
is intended to provide a means whereby employees, consultants, advisors and
other persons who render similar services to The Great Train Store Company, a
Delaware corporation (the "Company") on a regular basis, may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company and its subsidiaries, and to encourage them to remain with and
devote their best efforts to the business of the Company and its subsidiaries,
thereby advancing the interests of the Company and its stockholders.
Accordingly, the Company may grant to eligible participants awards ("Awards") in
the form of stock options ("Options") with respect to shares of the Company's
common stock, par value $0.01 per share (the "Stock") and in the form of shares
of Stock which are subject to certain restrictions and possible forfeiture
("Restricted Stock"). Options may either be nonqualified stock options
("Nonqualified Options") or options ("Incentive Stock Options") which are
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). Notwithstanding the foregoing,
participants who are not also employees of the Company shall not be entitled to
receive awards in the form of Incentive Stock Options.
II. Administration
The Plan shall be administered by a committee of the Board of Directors of
the Company (the "Board") consisting of not less than two members of the Board
as the Board may appoint (the "Committee"); provided, however, that so long as
the Company is subject to the reporting requirements of the Securities Exchange
Act of 1934 ("1934 Act"), the members of the Committee shall be "non-employee
directors" as defined in paragraph (b)(3)(i) of Rule 16b-3 which has been
adopted by the Securities and Exchange Commission under the 1934 Act, as such
Rule or its equivalent is then in effect ("Rule 16b-3"). Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee, however caused, shall be filled by the Board. The Committee is
authorized to interpret the Plan and may from time to time adopt such rules and
regulations, not inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the Plan. The Committee shall act by a majority of its
members in office and the Committee may act either by vote at a telephonic or
other meeting or by a memorandum or other written instrument signed by all of
the members of the Committee.
<PAGE>
The Committee shall have the sole authority to: (i) grant Awards; (ii)
determine the terms and provisions of the Award agreements (the "Agreements")
entered into under the Plan, including without limitation vesting periods,
periods of restriction and events causing acceleration of vesting or forfeiture
of Awards; (iii) prepare and distribute, in such manner as the Committee
determines to be appropriate, information about the Plan; and (iv) make all
other determinations deemed necessary or advisable for the administration of the
Plan. The Committee may vary the terms and provisions of the individual
Agreements in its discretion. Notwithstanding the foregoing, the Committee shall
not have the authority to make any determination which would be inconsistent
with the requirements, restrictions, prohibitions or limitations specified in
the Plan.
The day-to-day administration of the Plan may be carried out by such
officers and employees of the Company as shall be designated from time to time
by the Committee. All expenses and liabilities incurred by the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, the Board, the Company and the
officers and employees of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. The interpretation and construction
by the Committee of any provision of the Plan and any determination by the
Committee under any provision of the Plan shall be final and conclusive for all
purposes. Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including counsel fees) arising therefrom to the
fullest extent permitted by law. The members of the Committee shall be named as
insureds in connection with any directors and officers liability insurance
coverage that may be in effect from time to time.
Only employees, consultants, advisors and other persons who render similar
services to the Company and its subsidiaries shall be eligible to receive Awards
under the Plan. In granting Awards to a participant, the Committee shall take
into consideration the contribution the participant has made or may make to the
success of the Company or its subsidiaries and such other considerations as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from officers and other employees of
the Company and its subsidiaries with regard to these matters. In no event shall
any participant or his or her legal representatives, heirs, legatees,
distributees, or successors have any right to participate in the Plan, except to
such extent, if any, as the Committee shall determine.
2
<PAGE>
III. Shares Subject to the Plan
The aggregate number of shares which may be issued or awarded under the
Plan shall not exceed 660,000 shares of Stock. Such shares may consist of
authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which have not been previously
granted as Awards of Restricted Stock or remain unsold and are not subject to
outstanding Options at the termination of the Plan shall cease to be subject to
the Plan, but until termination of the Plan and the expiration of all Options
granted under the Plan, the Company shall at all times make available a
sufficient number of shares to meet the requirements of the Plan. If any Award,
in whole or in part, expires or terminates unexercised or is canceled or
forfeited, the shares theretofore subject to such Award may again be subject to
an Award granted under the Plan. The issuance of Stock pursuant to the exercise
of an Option shall result in a decrease in the number of shares of Stock which
may thereafter be available for purposes of the Plan by the number of shares as
to which the Option is exercised or canceled. The aggregate number of shares
which may be issued or awarded under the Plan shall be subject to adjustment as
provided in Section VI hereof.
IV. Grants of Options
Options granted under the Plan shall be of such type (Nonqualified Option
or Incentive Stock Option) and for such number of shares of Stock and subject to
such terms and conditions as the Committee shall designate. The Committee may
grant Options at any time and from time to time through, but not after, May 10,
2004, to any individual eligible to receive the same. For purposes of the Plan,
the date on which an Option is granted is referred to herein as the "Grant
Date."
No employee shall be eligible to receive any Incentive Stock Option if, on
the Grant Date, such employee owns (including ownership through the attribution
provisions of Section 424(d) of the Code) in excess of 10% of the outstanding
voting stock of the Company or a subsidiary (a "10% Stockholder"), unless the
"Exercise Price" (as hereinafter defined) for the shares of Stock subject to the
Incentive Stock Option is at least 110% of the "Market Value Per Share" (as
hereinafter defined) of the Stock (on a per share basis) on the Grant Date and
such Option by its terms is not exercisable after the expiration of five years
from the Grant Date.
To the extent that the aggregate Market Value Per Share (determined at the
Grant Date) of Stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year (under
all plans of the Company and its subsidiaries) exceeds $100,000, such excess
Options shall be treated as Nonqualified Options. Excess Incentive Stock Options
3
<PAGE>
shall be determined by taking into account the order in which they were granted.
The Committee may fix such waiting and/or vesting periods, exercise dates
or other limitations as it shall deem appropriate with respect to Options
granted under the Plan including, without limitation, making the exercisability
thereof contingent upon the achievement of specific goals.
Options granted pursuant to the Plan shall be evidenced by Agreements that
shall comply with and be subject to the following terms and conditions and may
contain such other provisions, consistent with the Plan, as the Committee shall
deem advisable. References herein to "Agreements" shall include, to the extent
applicable, any amendments to such Agreements.
A. Payment of Option Exercise Price. Upon exercise of an Option,
the full Exercise Price for the shares with respect to which the
Option is being exercised shall be payable to the Company: (i) in cash
or by check payable and acceptable to the Company; (ii) subject to the
approval of the Committee, by tendering to the Company shares of Stock
owned by the optionee having an aggregate Market Value Per Share as of
the date of exercise that is not greater than the full Exercise Price
for the shares with respect to which the Option is being exercised and
by paying any remaining amount of the Exercise Price as provided in
(i) above; or (iii) subject to the approval of the Committee and to
such instructions as the Committee may specify, at the optionee's
written request the Company may deliver certificates for the shares of
Stock for which the Option is being exercised to a broker for sale on
behalf of the optionee, provided that the optionee has irrevocably
instructed such broker to remit directly to the Company on the
optionee's behalf the full amount of the Exercise Price from the
proceeds of such sale; provided, however, that in the case of an
Incentive Stock Option, (ii) and (iii) above shall apply only if
Committee approval is given on or prior to the Grant Date and the
Agreement expressly provides for such optional payment terms. In the
event that the optionee elects to make payment as allowed under clause
(ii) above, the Committee may, upon confirming that the optionee owns
the number of shares of Stock being tendered, authorize the issuance
of a new certificate for the number of shares being acquired pursuant
to the exercise of the Option less the number of shares being tendered
upon the exercise and return to the optionee (or not require surrender
of) the certificate for the shares of Stock being tendered upon the
exercise. Payment instruments will be received subject to collection.
B. Number of Shares. Each Agreement shall state the total number
of shares of Stock that are subject to the Option.
4
<PAGE>
C. Exercise Price. The "Exercise Price" for each Option shall be
fixed by the Committee at the Grant Date, but in no event may the
Exercise Price per share be less than the Market Value Per Share on
the Grant Date.
D. Market Value Per Share. The "Market Value Per Share" as of any
particular date shall be deemed to be the average of the daily closing
prices for the 30 consecutive trading days immediately preceding the
date in question. The closing price for each shall be the last
reported sales price regular way or, in case no reported sale takes
place on such day, the closing bid price regular way, in either case
on the principal national securities exchange (including, for purposes
hereof, the electronic inter-dealer quotation system operated by the
National Association of Securities Dealers, Inc.) on which the Stock
is listed or quoted. If on any such date the Stock is not listed or
quoted on any national securities exchange, the value of a share of
Stock shall be determined in good faith by the Committee, whose
determination shall be conclusive absent manifest error.
E. Term. The term of each Option shall be determined by the
Committee at the Grant Date; provided, however, that each Option
shall, notwithstanding anything in the Plan or any Agreement to the
contrary, expire not more than ten years (five years with respect to
an Incentive Stock Option granted to an employee who is a 10%
Stockholder) from the Grant Date or, if earlier, the date specified in
the Agreement.
F. Date of Exercise. In the discretion of the Committee, each
Agreement may contain provisions stating that the Option granted
therein may not be exercised in whole or in part for a period or
periods of time or until the achievement of specific goals, in either
case as specified in such Agreement, and except as so specified
therein, any Option may be exercised in whole at any time or in part
from time to time during its term. The Committee may, however, at any
time, in its sole discretion, amend any outstanding Option, other than
an Incentive Stock Option, to accelerate the time that such Option
shall be exercisable or to provide that the time for exercising such
Option shall be accelerated upon the occurrence of a specified event.
Notwithstanding the foregoing, however, in no event shall an Option,
or any portion thereof, be exercisable until at least six months after
the date of grant of such Option.
G. Termination. An Option and all unexercised rights thereunder
shall expire and terminate automatically upon the earliest of: (i) the
date which is one year following the date on which the optionee's
employment by (or other business relationship with) the Company ceases
due to death or disability; (ii) the date on which the optionee's
5
<PAGE>
employment by (or business relationship with) the Company is
terminated by the participant's resignation or by the Company for
cause; (iii) the date which is 30 days following the date on which the
optionee's service with the Company ceases for any reason other than
death, disability, resignation or cause; and (iv) the date of
expiration of the Option determined by the Committee at the time the
Option is granted and specified in such Option.
The term "disability" means permanent and total disability as defined
in Section 22(e)(3) of the Code as determined by the Committee in good faith,
upon receipt and in reliance on sufficient competent medical advice. The term
"cause" as such term relates to the termination of any participant's employment
by (or other business relationship with) the Company means the occurrence of one
or more of the following: (i) such participant is convicted of, pleads guilty
to, or confesses to any felony or any act of fraud, misappropriation or
embezzlement which has an immediate and adverse effect on the Company or any
subsidiary, as determined by the Committee in good faith in its sole discretion,
(ii) such participant engages in a fraudulent act to the damage or prejudice of
the Company or any subsidiary or in conduct or activities damaging to the
property, business or reputation of the Company, all as determined by the
Committee in good faith in its sole discretion, (iii) any act or omission by
such person involving malfeasance or negligence in the performance of such
person's duties to the Company or any subsidiary to the detriment of the Company
or any subsidiary, as determined by the Committee in good faith in its sole
discretion, which has not been corrected by such person to the satisfaction of
the Committee within 30 days after written notice from the Company of any such
act or omission, (iv) failure by such person to comply in any material respect
with the terms of his agreement with the Company, if any, or any written
policies or directives of the Company as determined by the Committee in good
faith in its sole discretion, which has not been corrected by such participant
to the satisfaction of the Committee within 30 days after written notice from
the Company of such failure, or (v) breach by such participant of his
non-competition agreement, if any, with the Company, as determined by the
Committee in good faith in its sole discretion.
No Option shall be exercisable after the date of the occurrence of any
of the events described in the first paragraph of this Section IV.G except to
the extent that the optionee was entitled to exercise the Option on the day
immediately prior to such event. The right of an individual to exercise an
Option shall terminate to the extent that such Option is exercised.
Options may be granted under the Plan from time to time in
substitution for stock options and stock appreciation rights previously granted
by another corporation (the "Acquired Corporation") to its employees who become
6
<PAGE>
employees of the Company or of any of its subsidiaries as a result of a merger
or consolidation of the Acquired Corporation with the Company or any such
subsidiary, or the acquisition by the Company or a subsidiary of all or
substantially all of the assets of the Acquired Corporation or the acquisition
by the Company or a subsidiary of the stock of the Acquired Corporation.
V. Restricted Stock
Restricted Stock shall consist of Stock awarded under the Plan by the
Committee which, during a period of restriction specified by the Committee upon
grant (a "Period of Restriction"), shall be subject to (i) restriction on sale
or other transfer by the grantee and (ii) forfeiture by the grantee to the
Company if the grantee ceases to be employed by (or otherwise engaged in a
business relationship with) the Company and its subsidiaries. If the grantee
dies, becomes disabled or is involuntarily terminated for reasons other than
cause while employed by (or otherwise engaged in a business relationship with)
the Company or any of its subsidiaries but prior to full vesting of all the
shares, then all shares shall be deemed fully vested and all such restrictions
on transfer shall lapse and cease to be effective as of the date of death,
disability or termination. Restricted Stock shall be granted at no cost to
employees or at such minimum purchase price as may be required under applicable
law, which shall be payable by the grantee to the Company in cash or by any
other means, including recognition of past employment, as the Committee deems
appropriate upon grant. The Committee may provide upon grant of an Award of
Restricted Stock that any shares of Restricted Stock as may be purchased by the
grantee thereunder and subsequently forfeited by the grantee prior to expiration
of the Period of Restriction shall be reacquired by the Company from the grantee
at the purchase price originally paid in cash by the grantee therefor.
The Committee may provide upon grant of an Award of Restricted Stock
that different numbers or portions of the shares subject to the Award shall have
different Periods of Restriction. The Committee also may establish upon grant of
an Award of Restricted Stock that some or all of the shares subject thereto
shall be subject to additional restrictions upon transfer or sale by the grantee
(although not forfeiture) after expiration of the Period of Restriction.
Each participant who receives Restricted Stock hereunder shall be
entitled to all dividends declared and paid on Stock with respect to all shares
of Restricted Stock held by the participant from the date of grant, or from such
later date prior to the termination of the Period of Restriction as may be
specified by the Committee for the Award of Restricted Stock, and during the
Period of Restriction and thereafter (except in the event of forfeiture), and
7
<PAGE>
shall not be required to return any such dividends to the Company in the event
of forfeiture of the Restricted Stock.
Each participant who receives Restricted Stock hereunder shall be
entitled to vote all shares of Restricted Stock held by the employee from the
date of grant, or from such later date prior to the termination of the Period of
Restriction as may be specified by the Committee for the Award of Restricted
Stock, and during the Period of Restriction and thereafter (except in the event
of forfeiture).
Pending expiration of the Period of Restriction, certificates
representing shares of Restricted Stock shall be held by the Company or the
transfer agent for the Stock.
VI. Adjustment
The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board of Directors or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company with or
into another entity, any issuance of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the Stock or the rights thereof, the
dissolution or liquidation of the Company, any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
The shares with respect to which Awards may be granted are shares of
Stock as presently constituted. If, however, the number of outstanding shares of
Stock are increased or decreased, or such shares are exchanged for a different
number or kind of shares or securities of the Company through a reorganization,
merger, recapitalization, reclassification, stock dividend, stock split,
combination of shares or other similar transaction, the aggregate number of
shares of Stock subject to the Plan as provided in Section III hereof, and the
shares of Stock subject to issuance under outstanding Options and the shares of
Restricted Stock granted under the Plan shall be appropriately and
proportionately adjusted by the Committee. Any such adjustment in an outstanding
Option shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the Option but with an appropriate adjustment in
the price for each share or other unit of any security covered by the Option.
Notwithstanding anything to the contrary contained in this Section VI,
upon the dissolution or liquidation of the Company, or upon a reorganization,
merger or consolidation of the Company with one or more corporations as a result
of which the Company is not the surviving corporation (or, in the case of a
8
<PAGE>
three-party merger where the Company, while the surviving corporation, becomes a
subsidiary of another corporation), or upon a sale of substantially all of the
assets of the Company, the Plan shall terminate, and any Awards granted under
the Plan shall terminate on the day before the consummation of the transaction,
and the Committee shall accelerate the time in which any outstanding Option may
be exercised and remove any restrictions remaining on any previously awarded
Restricted Stock prior to such termination, unless provision shall be made in
writing in connection with such transaction for the continuance of the Plan, for
the assumption of Awards previously granted, or the substitution for such Awards
with either new options to purchase the stock or shares of restricted stock, as
the case may be, of a successor corporation, or parent or subsidiary thereof,
with appropriate adjustments as to number and kind of shares and, in the case of
substitute options, the option Exercise Price, in which event the Plan and
Awards previously granted shall continue in the manner and under the terms so
provided; provided, however, that the Committee or the Board of Directors shall
have the authority to amend this Section to provide for a requirement that a
successor corporation assume any outstanding Awards.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments, and the extent thereof, shall be made,
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan or in connection with any such adjustment.
Except as may otherwise be expressly provided in the Plan, the issuance
by the Company of shares of capital stock of any class or securities convertible
into shares of capital stock of any class for cash, property, labor or services,
upon direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares of capital stock or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Stock available under the Plan or
subject to Awards theretofore granted or the Exercise Price per share with
respect to outstanding Options.
VII. Participant's Agreement to Hold Shares
If, at the time of the exercise of any Option, in the opinion of
counsel for the Company, it is necessary or desirable, in order to comply with
any then applicable laws or regulations relating to the sale of securities, for
the individual exercising the Option to agree to hold any shares issued to the
individual for investment purposes only and without intention to resell or
distribute the same and for the individual to agree to dispose of such shares
9
<PAGE>
only in compliance with such laws and regulations, the individual shall be
required, upon the request of the Company, to execute and deliver to the Company
an agreement to such effect.
VIII. Termination of Authority to Grant Awards
No Awards will be granted pursuant to this Plan after May 10, 2004.
IX. Amendment and Termination
The Board may from time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan and any Awards hereunder; provided, however,
that no change in any Award theretofore granted may be made which would impair
the rights of the grantee without the consent of such grantee.
X. Effective Date of Plan
The Plan shall become effective on May 10, 1994. The Plan was approved
by the sole stockholder of the Company on May 10, 1994, by written consent to
action in lieu of a meeting.
XI. Preemption by Applicable Laws and Regulations
Anything in the Plan or any Agreement entered into pursuant to the
Plan to the contrary notwithstanding, if, at any time specified herein or
therein for the making of any determination with respect to the issuance or
other distribution of shares of Stock, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require either
the Company or the participant (or the participant's beneficiary), as the case
may be, to take any action in connection with any such determination, the
issuance or distribution of such shares or the making of such determination
shall be deferred until such action shall have been taken.
XII. Taxes
The Company shall be entitled to withhold, and shall withhold, the
minimum amount of any federal, state or local tax attributable to any shares
deliverable under the Plan, whether upon exercise of a Nonqualified Stock Option
or expiration of a Period of Restriction for Restricted Stock or occurrence of
any other event relating to an Award which requires federal, state or local tax
to be withheld by the Company or any of its subsidiaries (a "Taxable Event"),
after giving the person entitled to receive such delivery notice as far in
10
<PAGE>
advance of the Taxable Event as practicable. The Company may defer making
delivery as to any Award, if any such tax is payable, until indemnified to its
satisfaction. To the extent the Committee so provides upon grant of the Award,
such withholding obligation of the Company shall be satisfied by a reduction of
the number of shares otherwise deliverable to or on behalf of the grantee on
such Taxable Event, with the number of withheld shares to be calculated based on
the Market Value Per Share (as defined in Section IV.D, above) of the Stock on
the date of such Taxable Event.
XIII. Miscellaneous
A. No Employment Contract. Nothing contained in the Plan shall be
construed as conferring upon any participant the right to continue in
the employ of the Company or any of its subsidiaries.
B. Employment with Subsidiaries. Employment by the Company for
the purpose of this Plan shall be deemed to include employment by, and
to continue during any period in which a participant is in the
employment of, any subsidiary.
C. No Rights as a Stockholder. A participant shall have no rights
as a stockholder with respect to shares covered by such participant's
Award until, with respect to Options, the date of the issuance of
shares to the participant upon the participant's exercise of the
Option or, with respect to Restricted Stock, the date of grant or such
later date determined in accordance with Section V above. No
adjustment will be made for dividends or other distributions or rights
for which the record date is prior to the date of such issuance with
respect to Options or the grant date or such later date determined in
accordance with Section V above with respect to Restricted Stock.
D. No Right to Corporate Assets. Nothing contained in the Plan
shall be construed as giving any participant, such participant's
beneficiaries or any other person any equity or other interest of any
kind in any assets of the Company or any subsidiary or creating a
trust of any kind or a fiduciary relationship of any kind between the
Company or any subsidiary and any such person.
E. No Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from
taking any corporate action that is deemed by the Company or such
subsidiary to be appropriate or in its best interests, whether or not
such action would have an adverse effect on the Plan or any Award made
under the Plan. No participant, beneficiary or other person shall have
any claim against the Company or any subsidiary as a result of any
such action.
11
<PAGE>
F. Non-assignability. Neither a participant nor an participant's
beneficiary shall have the power or right to sell, exchange, pledge,
transfer, assign or otherwise encumber or dispose of such
participant's or beneficiary's interest arising under the Plan or any
Award received under the Plan, nor shall such interest be subject to
seizure for the payment of a participant's or beneficiary's debts,
judgments, alimony, or separate maintenance or be transferable by
operation of law in the event of a participant's or beneficiary's
bankruptcy or insolvency and to the extent any such interest arising
under the Plan or an Award received under the Plan is awarded to a
spouse pursuant to any divorce proceeding, such interest shall be
deemed to be terminated and forfeited notwithstanding any vesting
provisions or other terms herein or in the Agreement evidencing such
Award.
G. Application of Funds. The proceeds received by the Company
from the sale of shares of Stock pursuant to the Plan shall be used
for general corporate purposes.
H. Governing Law; Construction. All rights and obligations under
the Plan shall be governed by, and the Plan shall be construed in
accordance with, the laws of the State of Delaware without regard to
the principles of conflicts of laws. Titles and headings to Sections
herein are for purposes of reference only, and shall in no way limit,
define or otherwise affect the meaning or interpretation of any
provisions of the Plan.
12
<PAGE>
Appendix B
----------
SECOND AMENDMENT TO
THE GREAT TRAIN STORE COMPANY
1994 DIRECTOR STOCK OPTION PLAN
WHEREAS, The Great Train Store Company (the "Company") has heretofore
adopted, and subsequently amended, The Great Train Store Company 1994 Director
Stock Option Plan (the "Plan"), under which Plan shares of the Company's common
stock, $0.01 par value per share (the "Common Stock") may be issued upon the
exercise nonqualified stock options granted pursuant to and in accordance with
the terms of the Plan; and,
WHEREAS, Article VIII of the Plan empowers the Board of Directors to
alter and amend the Plan; and,
WHEREAS, in order to provide a continuing means of fulfilling the
purpose of the Plan, the Board of Directors of the Company has authorized the
amendment of the Plan to increase the number of shares of Common Stock issuable
upon the exercise of options granted thereunder from 50,000 to 100,000, to
increase the number of shares subject to the annual stock option award made to
each non-employee director and to extend the term of such options awarded under
the Plan, and resolved to present such amendment to the next Annual Meeting of
Stockholders of the Company;
NOW, THEREFORE, subject to the approval of the stockholders of the
Company on or before September 30, 1997, the Plan be and hereby is amended as
follows:
1. The first sentence of Article II of the Plan is hereby deleted in
its entirety, and the following substituted in lieu thereof to constitute the
first sentence of said Article II from and after the effectiveness of this
Amendment:
"The aggregate number of shares which may be issued under the
Plan may not exceed 100,000 shares of Company's Common Stock, $0.01 par
value per share (the "Stock")."
2. The first paragraph of Article III of the Plan is hereby deleted in
its entirety, and the following substituted in lieu thereof to constitute the
first paragraph of said Article III from and after the effectiveness of this
Amendment:
"The Plan is intended to be a "formula award" plan under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. Each director of the Company who is not otherwise an executive
officer and employee of the Company shall receive on his or her first
election as a director of the Company an option to purchase 5,000
shares of Stock at a per share Exercise Price equal to the Market Value
Per Share of the Stock on the date such director was nominated for
<PAGE>
election. In each year subsequent to the year in which first elected,
each person who is a director of the Company and not otherwise an
executive officer and employee of the Company shall receive on the
date of the Annual Meeting of the Stockholders of the Company an
option to purchase 5000 shares of Stock at a per share Exercise Price
equal to the Market Value Per Share of the Stock on the date of such
award."
3. Section E of Article III of the Plan is hereby deleted in its
entirety, and the following substituted in lieu thereof to constitute section E
of said Article III from and after the effectiveness of this Amendment:
E. Term. "The term of each option shall be for a period of ten years
from the Grant Date specified in the Agreement. All options outstanding on the
date the Plan terminates will remain outstanding and expire in accordance with
the term specified in the Agreement."
IN WITNESS WHEREOF, this Amendment is dated as of the 18th day of
March, 1997.
By:
James H. Levi
Chairman of the Board, President
and Chief Executive Officer
