1
Exhibit 10(a)
CML GROUP, INC.
1996 DIRECTOR OPTION PLAN
Adopted by the Board of Directors on October 3, 1995
----------------------------------------------------
1. PURPOSE
The purpose of this 1996 Director Option Plan (the "Plan") of CML Group,
Inc. (the "Company") is to encourage ownership in the Company by outside
directors of the Company whose continued services are considered essential to
the Company's future progress and to provide them with a further incentive to
remain as directors of the Company.
2. ADMINISTRATION
The Board of Directors shall supervise and administer the Plan. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic and non-discretionary in accordance with Section 5.
However, all questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board of Directors and such determination
shall be final and binding upon all persons having an interest in the Plan.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under the Plan shall
be two hundred fifty thousand (250,000) shares of the Company's Common Stock,
par value $.10 per share ("Common Stock"), subject to adjustment as provided in
Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended to date and as may be amended from time to time (the
"Code").
5. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
18
2
(a) OPTION GRANT DATES. Options shall be granted automatically to all
eligible directors on the date that the Plan is approved by the stockholders of
the Company at the Company's 1995 Annual Meeting of Stockholders (scheduled to
be held December 1, 1995). Thereafter, options shall be granted automatically to
persons who subsequently become eligible directors on the close of business on
the date of his or her initial election or appointment to the Board of
Directors; provided that any option granted prior to the approval of the Plan by
stockholders of the Company at the Company's 1995 Annual Meeting of Stockholders
is conditioned upon such approval of the Plan by stockholders of the Company.
(b) SHARES SUBJECT TO OPTION. Subject to the provisions of Section 5(e),
each option granted under the Plan shall be exercisable for the number of shares
of Common Stock determined by dividing $180,000 by the fair market value of the
Common Stock on the date of grant.
(c) FAIR MARKET VALUE AND OPTION EXERCISE PRICE. The fair market value of
the Common Stock described in Section 5(b) and the option exercise price per
share for each option granted under the Plan shall equal (i) the closing price
per share of the Common Stock on the New York Stock Exchange (or, if the Common
Stock is traded on another nationally recognized securities exchange or trading
system on the date of grant, the closing price per share of the Common Stock on
such exchange or trading system) on the date of grant (or, if no such price is
reported on such date, such price as reported on the nearest preceding day); or
(ii) the fair market value of the stock on the date of grant, as determined by
the Board of Directors, if the Common Stock is not traded on a nationally
recognized securities exchange or trading system.
(d) OPTIONS NON-TRANSFERABLE. Each option granted under the Plan by its
terms shall not be transferable by the optionee otherwise than by will, or by
the laws of descent and distribution, or pursuant to a qualified domestic
relations order (as defined in Section 414(p) of the Code), and shall be
exercised during the lifetime of the optionee only by him. No option or interest
therein may be transferred, assigned, pledged or hypothecated by the optionee
during his lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
(e) EXERCISE PERIOD. Except as otherwise provided in this Plan, no option
may be exercised prior to the first anniversary of the date of grant of such
option. Each option may be exercised on a cumulative basis as to one-third of
the shares subject to the option on the first, second and third anniversary of
the date of grant of such option; PROVIDED that, subject to the provisions of
Section 5(f), no option may be exercised more than 90 days after the optionee
ceases to serve as a director of the Company. No option shall be exercisable
after the expiration of ten (10) years from the date of grant or prior to
approval of the Plan by the stockholders of the Company.
(f) EXERCISE PERIOD UPON DEATH OR DISABILITY. Notwithstanding the
provisions of Section 5(e), any option granted under the Plan:
(i) may be exercised in full by an optionee who becomes disabled
(within the meaning of Section 22(e)(3) of the Code or any successor
provision thereto) while serving as a director of the Company; or
(ii) may be exercised
19
3
(x) in full upon the death of an optionee while serving as a
director of the Company, or
(y) to the extent then exercisable upon the death
of an optionee within 90 days of ceasing to serve as a
director of the Company,
by the person to whom it is transferred by will, by the laws of
descent and distribution, or by written notice filed pursuant to
Section 5(i);
in each such case within the period of one year after the date the optionee
ceases to be such a director by reason of such death or disability; provided,
that no option shall be exercisable after the expiration of ten (10) years from
the date of grant or prior to the approval of the Plan by the stockholders of
the Company.
(g) EXERCISE PROCEDURE. Options may be exercised only by written notice
to the Company at its principal office accompanied by payment of the full
consideration for the shares as to which they are exercised.
(h) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price (i) by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options
or, (ii) to the extent provided in the applicable option agreement, by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, or (iii) by any combination of such methods of payment.
The fair market value of any shares of the Company's Common Stock or other
non-cash consideration which may be delivered upon exercise of an option shall
be determined by the Board of Directors.
(i) EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. A director, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation) including his legal representative, who, by
reason of his death, shall acquire the right to exercise all or a portion of the
option. If the person or persons so designated wish to exercise any portion of
the option, they must do so within the term of the option as provided herein.
Any exercise by a representative shall be subject to the provisions of the Plan.
6. ASSIGNMENTS
The rights and benefits under the Plan may not be assigned except for the
designation of a beneficiary as provided in Section 5.
7. TIME FOR GRANTING OPTIONS
All options for shares subject to the Plan shall be granted, if at all, not
later than December 31, 2000.
8. LIMITATION OF RIGHTS
20
4
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) NO STOCKHOLDERS' RIGHTS FOR OPTIONS. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor, and no adjustment
will be made for dividends or other rights for which the record date is prior to
the date such certificate is issued.
9. CHANGES IN COMMON STOCK
(a) If (x) the outstanding shares of Common Stock are increased, decreased
or exchanged for a different number or kind of shares or other securities of the
Company, or (y) additional shares or new or different shares or other securities
of the Company or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities, through or as a result of any
merger, consolidation, sale of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction with respect to
such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, and (ii) the number and kind of
shares or other securities subject to then outstanding options under the Plan
and (iii) the price for each share subject to any then outstanding options under
the Plan, without changing the aggregate purchase price as to which such options
remain exercisable. No fractional shares will be issued under the Plan on
account of any such adjustments.
(b) In the event that the Company is merged or consolidated into or
with another corporation (in which consolidation or merger the stockholders of
the Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company is acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, subject to the provisions of Section 10, as to
outstanding options, take one or more of the following actions: (i) provide
that such options shall be assumed, or equivalent options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon
written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such transaction unless
exercised by the optionee within a specified period following the date of such
notice, or (iii) if, under the terms of a merger transaction, holders of the
Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the merger (the "Merger Price"), make or
provide for a cash payment to the optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock subject to such
outstanding options (to the extent then exercisable at prices not in excess of
the Merger Price) and (B) the aggregate exercise price of all such outstanding
options in exchange for the termination of such options.
10. CHANGE IN CONTROL
Notwithstanding any other provision to the contrary in this Plan, in the
event of a Change in Control (as defined below), all options outstanding as of
the date such Change in Control
21
5
occurs shall become exercisable in full, whether or not exercisable in
accordance with their terms. A "Change in Control" shall occur or be deemed to
have occurred only if any of the following events occur: (i) any "person," as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities; (ii) individuals who, as of October 1, 1995, constitute the Board of
Directors of the Company (as of the date thereof, the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to October 1, 1995 whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Securities Exchange Act of 1934) shall be,
for purposes of this Agreement, considered as though such person were a member
of the Incumbent Board; (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities; or (iv) the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
11. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or review or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company no revision or amendment shall change the number
of shares subject to the Plan (except as provided in Section 9), change the
designation of the class of directors eligible to receive options, or materially
increase the benefits accruing to participants under the Plan. The Plan may not
be amended more than once in any six-month period.
12. WITHHOLDING
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan.
13. EFFECTIVE DATE AND DURATION OF THE PLAN
22
6
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, all options granted under
the Plan shall terminate and no further options shall be granted under the Plan.
Amendments to the Plan not requiring shareholder approval shall become effective
when adopted by the Board of Directors; amendments requiring shareholder
approval (as provided in Section 11) shall become effective when adopted by the
Board of Directors, but no option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such option to a particular optionee) unless and
until such amendment shall have been approved by the Company's shareholders. If
such shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any options granted on or after the date of such
amendment shall terminate to the extent that such amendment to the Plan was
required to enable the Company to grant such option to a particular optionee.
Subject to this limitation, options may be granted under the Plan at any time
after the effective date and before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 9, the
Plan shall terminate upon the earlier of (i) the close of business on December
31, 2000, or (ii) the date on which all shares available for issuance under the
Plan shall have been issued pursuant to the exercise or cancellation of options
granted under the Plan. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
14. NOTICE
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
15. COMPLIANCE WITH RULE 16B-3
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor promulgated pursuant to Section 16 of
the Securities Exchange Act of 1934. To the extent any provision of the Plan or
action or adjustment by the Board of Directors in administering the Plan fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Board of Directors.
16. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
23