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Exhibit 10.13
1998 OUTSIDE DIRECTORS' STOCK OPTION PLAN
Camelot Music Holdings, Inc. (the "Company") hereby adopts this stock
option plan (the "Plan") for eligible Directors of the Company pursuant to the
following terms and provisions:
1. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
additional incentives to those Directors of the Company who are not officers or
employees of the Company or any of its subsidiaries or affiliates (the "Outside
Directors") by encouraging them to acquire a new or an additional share
ownership in the Company, thus increasing their proprietary interest in the
Company's business and providing them with an increased personal interest in the
Company's continued success and progress. These objectives will be promoted
through the grant of options to acquire the Company's Common Stock, par value
$.01 per share (the "Common Stock"), pursuant to the terms of the Plan. Only
Outside Directors are eligible for and shall receive options under this Plan.
2. EFFECTIVE DATE OF THE PLAN. The Plan is effective as of June 4,
1998, the date the Plan was adopted by the Board of Directors of the Company
(the "Board of Directors" or the "Board").
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in this Section 3, the aggregate
number of shares of Common Stock for which options may be granted under the Plan
is One Hundred Twenty-Five Thousand (125,000) shares of Common Stock or any
security into which such shares of Common Stock may be changed by reason of any
transaction or event of the type referred to in Section 3(c) of the Plan. Either
treasury shares or shares of initial issuance, or both, as the Board of
Directors shall from time to time determine, may be issued.
(b) The number of shares available in Section 3(a) shall be increased
to account for shares relating to awards that expire or are terminated or
forfeited.
(c) In the event that subsequent to June 4, 1998, the Common Stock
should, as a result of a stock split, stock dividend, combination or exchange of
shares, exchange for other securities, reclassification, reorganization,
redesignation, merger, consolidation, recapitalization or other such change, be
increased or decreased or changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation, then (i) there shall automatically be substituted for each share of
Common Stock subject to an unexercised option (in whole or in part) granted
under the Plan, each share of Common Stock available for additional grants of
options under the Plan and each share of Common Stock to be granted to each
eligible Outside Director pursuant to Section 4 hereof, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be changed or for which each such share of Common Stock shall be
exchanged, (ii) the option price per share of Common Stock or unit of securities
subject to an unexercised option (in whole or in part) shall be increased or
decreased proportionately so that the aggregate purchase price for the
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securities subject to the option shall remain the same as immediately prior to
such event and (iii) the Board shall make such other adjustments as may be
appropriate and equitable to prevent enlargement or dilution of option rights.
Any such adjustment shall provide for the elimination of fractional shares. The
number of shares automatically granted in accordance with Sections 4(a)(ii),
4(a)(iii) and 4(a)(iv) hereof shall not be adjusted pursuant to this Section
3(c) to increase the number of shares of Common Stock to be granted to an
eligible Outside Director to reflect any stock dividend occurring on or prior to
the date on which the offerings described in the Company's Registration
Statement on Form S-1 (No. 333-56811) (the "Registration Statement") are
consummated (the "IPO Date").
4. GRANT OF OPTIONS.
(a) AUTOMATIC GRANTS. Subject to the terms of the Plan each eligible
Outside Director shall be granted a non-qualified stock option for the number of
shares of Common Stock set forth in this Section 4(a):
(i) a one-time grant of Two Thousand Five Hundred (2,500) shares
of Common Stock on the date of the adoption of the Plan by
the Board of Directors, provided that the Outside Director
is an Outside Director on that date, subject to the option
price and vesting conditions as set forth in paragraphs (b)
and (d) below;
(ii) a one-time grant of Seven Thousand Five Hundred (7,500)
shares of Common Stock on the IPO Date, provided that the
Outside Director is an Outside Director on the IPO Date,
subject to the option price and vesting conditions as set
forth in paragraphs (b) and (d) below;
(iii) a one-time grant of Ten Thousand (10,000) shares of Common
Stock on the date that an individual is first elected an
Outside Director, which date is after the IPO Date, subject
to the option price and vesting conditions as set forth in
paragraphs (b) and (d) below; and
(iv) an annual grant of One Thousand Five Hundred (1,500) shares
of Common Stock each year on the date immediately after the
date of the annual meeting of stockholders of the Company
commencing with the annual meeting of stockholders of the
Company held in 1999 to each individual who is an Outside
Director on such date subject to the option price and
vesting conditions set forth in paragraphs (b) and (d)
below.
All such grants shall occur automatically without any further action by the
Board of Directors. Options granted under the Plan shall be subject to the
further terms and provisions of an Option Agreement, the execution of which by
each Outside Director shall be a condition to the receipt of an option.
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(b) OPTION PRICE. The price at which each share of Common Stock may be
purchased pursuant to an option granted above is set forth in this Section 4(b):
(i) with respect to the options granted pursuant to subparagraph
(i) of paragraph (a) above, Twenty and Three-Fourths Dollars
($20.75) per share of Common Stock;
(ii) with respect to the options granted pursuant to subparagraph
(ii) of paragraph (a) above, the price per share of Common
Stock at which the Offerings described in the Registration
Statement are consummated; and
(iii) with respect to the options granted pursuant to
subparagraphs (iii) or (iv) of paragraph (a) above, the fair
market value for each such share as of the date on which the
option is granted (the "Date of Grant").
Anything contained in this paragraph (b) to the contrary notwithstanding, in the
event that the number of shares of Common Stock subject to any option is
adjusted pursuant to Section 3, a corresponding adjustment shall be made in the
price at which the shares of Common Stock subject to such option may thereafter
be purchased.
(c) DURATION OF OPTIONS. Unless otherwise terminated as provided
herein, each option granted under the Plan shall expire and all rights to
purchase shares of Common Stock pursuant thereto shall cease on the tenth
anniversary of the Date of Grant of such option date (the "Expiration Date").
(d) VESTING OF OPTIONS. Each option granted under the Plan shall become
fully vested and exercisable as follows:
(i) with respect to the options granted pursuant to subparagraph
(i) of paragraph (a) above, on the Date of Grant;
(ii) with respect to the options granted pursuant to
subparagraphs (ii) and (iii) of paragraph (a) above,
one-third of the Common Shares shall be fully vested and
exercisable on the first anniversary of the Date of Grant,
one-third of the Common Shares shall be fully vested and
exercisable on the second anniversary of the Date of Grant
and one-third of the Common Shares shall be fully vested and
exercisable on the third anniversary of the Date of Grant;
and
(iii) with respect to the options granted pursuant to subparagraph
(iv) of paragraph (a) above, on the first anniversary of the
Date of Grant.
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5. OPTION PROVISIONS.
(a) LIMITATION ON EXERCISE AND TRANSFER OF OPTIONS. Except as otherwise
provided in this Section 5, only the Outside Director to whom an option is
granted is permitted to exercise it. No option granted hereunder shall be
transferable otherwise than by the Last Will and Testament of the Outside
Director to whom it is granted or, if the Outside Director dies intestate, by
the applicable laws of descent and distribution. No option granted hereunder may
be pledged or hypothecated, nor shall any such option be subject to execution,
attachment or similar process.
(b) EXERCISE OF OPTION. Each option granted hereunder may be exercised
in whole or in part (to the maximum extent then exercisable) from time to time
during the option period after the option or a portion of the option becomes
vested under paragraph (d) of Section 4 above, but this right of exercise shall
be limited to whole shares. Options shall be exercised by the holder or his or
her duly appointed guardian or other legal representative (i) giving written
notice to the Secretary of the Company at its principal business office, by
certified mail, return receipt requested, of his or her intention to exercise
the same and the number of shares with respect to which the Option is being
exercised (the "Notice of Exercise of Option") accompanied by full payment of
the purchase price in cash and (ii) making appropriate arrangements with the
Company with respect to income tax withholding. Such Notice of Exercise of
Option shall be deemed delivered upon deposit into the mails.
(c) TERMINATION OF OUTSIDE DIRECTORSHIP. If the holder of an option
under the Plan ceases to be an Outside Director of the Company, his or her
option shall terminate three (3) months after the effective date of termination
of his or her directorship and neither he or she nor any other person shall have
any right after such date to exercise all or any part of such option. If the
termination of the directorship is due to death, then the option may be
exercised within three (3) months after the holder's death by the option
holder's estate or by the person designated in such holder's Last Will and
Testament or to whom transferred by the applicable laws of descent and
distribution (the "Personal Representative"). Notwithstanding the foregoing, in
no event shall any option be exercisable after the expiration of the option
period and not to any greater extent than the option holder would have been
entitled to exercise the option at the time of death.
(d) ACCELERATION OF EXERCISE OF OPTIONS IN CERTAIN EVENTS.
Notwithstanding anything in the foregoing to the contrary, in the event of a
"change in control" the eligible Outside Director shall have the immediate right
and option (notwithstanding the provisions of Section 4) to exercise the option
with respect to all shares of Common Stock covered by the option, which
exercise, if made, shall be irrevocable. The term "change in control" means the
time at which any of the following events shall have occurred: (i) the first
purchase of shares pursuant to a tender offer or exchange (other than a tender
offer or exchange by the Company) for all or part of the Company's shares of any
class of common stock or any securities convertible into such common stock; (ii)
the receipt by the Company of a Schedule 13D or other advice indicating that a
person is the "beneficial owner" (as that term is defined in Rule 13d-3 or any
successor rule or regulation promulgated under the Securities Exchange Act of
1934) of twenty percent (20%) or more of the Company's shares of capital stock
calculated as provided in paragraph (d) of said Rule 13d-3; (iii) the date of
approval by stockholders of the Company of an agreement providing
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for any consolidation or merger of the Company in which the Company will not be
the continuing or surviving corporation or pursuant to which shares of capital
stock, of any class or any securities convertible into such capital stock, of
the Company would be converted into cash, securities, or other property, other
than a merger of the Company in which the holders of shares of all classes of
the Company's capital stock immediately prior to the merger would have the same
proportion of ownership of common stock of the surviving corporation immediately
after the merger; (iv) the date of the approval by stockholders of the Company
of any sale, lease, exchange, or other transfer (in one transaction or a series
of related transactions) of all or substantially all the assets of the Company;
or (v) the adoption of any plan or proposal for the liquidation (but not a
partial liquidation) or dissolution of the Company.
6. INVESTMENT REPRESENTATION; APPROVALS AND LISTING. The options to be
granted hereunder shall be further conditioned upon receipt of the following
investment representation from the Outside Director:
"I further agree that any shares of Common Stock of Camelot Music
Holdings, Inc. which I may acquire by virtue of this option shall
be acquired for investment purposes only and not with a view to
distribution or resale; provided, however, that this restriction
shall become inoperative in the event the said shares of Common
Stock subject to this option shall be registered under the
Securities Act of 1933, as amended, or in the event Camelot Music
Holdings, Inc. is otherwise satisfied that the offer or sale of the
shares of Common Stock subject to this option may be lawfully made
without registration of the said shares of Common Stock under the
Securities Act of 1933, as amended."
The Company shall not be required to issue any certificate or certificates for
shares of Common Stock upon the exercise of an option granted under the Plan
prior to (i) the obtaining of any approval from any governmental agency which
the Company shall, in its sole discretion, determine to be necessary or
advisable, (ii) the admission of such shares of Common Stock to listing on any
national securities exchange on which the Common Stock may be listed, (iii) the
completion of any registration or other qualification of the shares of Common
Stock under any state or federal law or ruling or regulations of any
governmental body which the Company shall, in its sole discretion, determine to
be necessary or advisable or the determination by the Company, in its sole
discretion, that any registration or other qualification of the shares of Common
Stock is not necessary or advisable and (iv) the obtaining of an investment
representation from the Outside Director in the form stated above or in such
other form as the Company, in its sole discretion, shall determine to be
adequate.
7. GENERAL PROVISIONS. For all purposes of this Plan the fair market
value of a share of Common Stock shall be determined as follows: (i) so long as
the Common Stock of the Company is listed upon an established stock exchange or
the NASDAQ National Market System such fair market value shall be determined to
be the highest closing price of a share of such Common Stock on such stock
exchange or the NASDAQ National Market System on the day the
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option is granted or if no sale of such Common Stock shall have been made on any
stock exchange on that day, then on the next preceding day on which there was a
sale of such Common Stock; (ii) during any period of time as such Common Stock
is not listed upon an established stock exchange, the fair market value per
share shall be the mean between dealer "Bid" and "Ask" prices of such Common
Stock in the over-the-counter bulletin board on the day the option is granted,
as reported by the National Association of Securities Dealers, Inc.; or (iii) if
clause (i) and (ii) do not apply, the fair market value of the Common Stock as
determined by the Board.
The liability of the Company under the Plan and any distribution of
Common Stock made hereunder is limited to the obligations set forth herein with
respect to such distribution and no term or provision of the Plan shall be
construed to impose any liability on the Company in favor of any person with
respect to any loss, cost or expense which the person may incur in connection
with or arising out of any transaction in connection with the Plan, including,
but not limited to, any liability to any federal, state, or local tax authority
and/or any securities regulatory authority.
Nothing in the Plan or in any option agreement shall confer upon any
option holder any right to continue as an Outside Director of the Company, or to
be entitled to any remuneration or benefits not set forth in the Plan or such
option.
Nothing contained in the Plan or in any option agreement shall be
construed as entitling any option holder to any rights of a stockholder as a
result of the grant of an option until such time as shares of Common Stock are
actually issued to such holder pursuant to the exercise of his or her option.
The Plan may be assumed by the successors and assigns of the Company.
The Plan shall not be amended more than once every six (6) months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
The cash proceeds received by the Company from the issuance of Common
Stock pursuant to the Plan will be used for general corporate purposes or in
such other manner as the Board of Directors deems appropriate.
The expense of administering the Plan shall be borne by the Company.
The captions and section numbers appearing in the Plan are inserted
only as a matter of convenience. They do not define, limit, construe or describe
the scope or intent of the provisions of the Plan.
8. TERMINATION OF THE PLAN. The Plan shall terminate on June 4, 2008
and thereafter no options shall be granted hereunder. All options outstanding at
the time of termination of the Plan shall continue in full force and effect in
accordance with and subject to their terms and the terms and conditions of the
Plan.
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9. TAXES. Appropriate provisions shall be made for all taxes required
to be withheld and/or paid in connection with the options or the exercise
thereof, and the transfer of shares of Common Stock pursuant thereto, under the
applicable laws or other regulations of any governmental authority, whether
federal, state, or local and whether domestic or foreign.
10. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Ohio and any applicable federal law.
11. VENUE. The venue of any claim brought hereunder by an eligible
Outside Director shall be North Canton, Ohio.
12. CHANGES IN GOVERNING RULES AND REGULATIONS. All references herein
to the Internal Revenue Code, or sections thereof, or to rules and regulations
of the Department of Treasury or of the Securities and Exchange Commission,
shall mean and include the Code sections thereof and such rules and regulations
as are now in effect or as they may be subsequently amended, modified,
substituted or superseded.
IN WITNESS WHEREOF, CAMELOT MUSIC HOLDINGS, INC., by its appropriate
officers duly authorized, has executed this instrument as of the fourth day of
June, 1998.
CAMELOT MUSIC HOLDINGS, INC.
By:
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And:
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