<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CML Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
CML
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 1, 1995
The Annual Meeting of Stockholders of CML Group, Inc. (the "Company") will
be held at the offices of Hale and Dorr, 60 State Street, 26th Floor, Boston,
Massachusetts, on Friday, December 1, 1995 at 10:30 a.m., local time, to
consider and act upon the following matters:
1. To elect three Class B Directors for the ensuing three years.
2. To approve the Company's 1996 Employee Stock Purchase Plan.
3. To approve the Company's 1996 Director Option Plan.
4. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent accountants for the 1996 fiscal
year.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on October 20, 1995 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
PAUL P. BROUNTAS, Secretary
Acton, Massachusetts
November 1, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE SO THAT
YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE PROXY IS MAILED IN THE
UNITED STATES.
<PAGE> 3
CML GROUP, INC.
524 MAIN STREET, ACTON, MA 01720
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 1, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CML Group, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on December 1, 1995 and at any
adjournment of that meeting (the "Meeting"). All proxies will be voted in
accordance with the instructions contained in them. If no choice is specified,
the proxies will be voted in favor of the matters set forth in the accompanying
Notice of Meeting. Any proxy may be revoked by a stockholder at any time before
its exercise by delivery of written revocation to the Secretary of the Company.
On October 20, 1995, the record date for the determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of 49,324,691 shares of Common Stock, $.10 par value per share
("Common Stock"), of the Company. Each share is entitled to one vote.
The Company's Annual Report for the fiscal year ended July 31, 1995 is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
beginning on or about November 1, 1995.
VOTES REQUIRED
A majority of the issued and outstanding shares of Common Stock entitled to
vote constitutes a quorum at the Meeting. The affirmative vote of the holders of
a plurality of the votes cast at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Meeting is required to approve the
Company's 1996 Employee Stock Purchase Plan and 1996 Director Option Plan and to
ratify the appointment of the Company's independent accountants. In addition,
the New York Stock Exchange requires that the total vote cast (for and against)
on each of the Company's 1996 Employee Stock Purchase Plan and 1996 Director
Option Plan represent at least a majority of the outstanding shares of Common
Stock.
Shares of Common Stock represented in person or by proxy at the Meeting
(including shares which abstain or do not vote with respect to one or more of
the matters presented at the Meeting) will be tabulated by the inspectors of
election appointed for the Meeting and will determine whether or not a quorum is
present. Abstentions will be counted as shares that are present and entitled to
vote for purposes of determining the number of shares that are present and
entitled to vote with respect to any particular matter, but will not be counted
as votes in favor of such matter. Accordingly, an abstention from voting on a
matter by a stockholder present in person or represented by proxy at the Meeting
will have the same legal effect as a vote "against" the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret such vote differently. If a broker holding stock in "street name"
indicates on the proxy that he does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Accordingly, a "broker non-vote" on a matter has no effect on the voting on such
matter.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of August 31, 1995,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each director and director nominee of
the Company; (iii) each executive officer of the Company named in the Summary
Compensation Table set forth in this Proxy Statement; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING
- ------------------------------------------------------------------- --------- ------------
<S> <C> <C>
Principal Stockholders
Wisconsin Investment Board......................................... 4,872,000 9.9%
121 E. Wilson Street
Madison, WI 53702
Heine Securities Corporation....................................... 3,374,800(2) 6.8
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Directors and Nominees(3)
Charles M. Leighton................................................ 1,349,613(4) 2.7
G. Robert Tod...................................................... 1,066,375(5) 2.1
Howard H. Callaway................................................. 90,300(6) *
Thomas H. Lenagh................................................... 111,000(7) *
Homer L. Luther, Jr................................................ 117,080 *
Dr. Roy W. Menninger............................................... 29,722 *
Alison Taunton-Rigby............................................... 13,101 *
Lauren M. Tyler.................................................... 100 *
Ralph F. Verni..................................................... 9,025 *
Executive Officers(3)
Robert J. Samuelson................................................ 176,945 *
Glenn E. Davis..................................................... 70,111 *
All directors and executive officers as a group (11 persons)(3).... 3,033,372 6.0
</TABLE>
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* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares. Unless
otherwise indicated, each stockholder referred to above has sole voting and
investment power with respect to the shares listed.
(2) Heine Securities Corporation ("HSC") exercises sole voting and
investment power with respect to these shares but disclaims any beneficial
ownership of such shares, which are held by certain advisory clients of HSC.
(3) Includes shares of Common Stock which may be acquired pursuant to stock
options exercisable within 60 days after August 31, 1995. The following persons
have the right to acquire within such 60-day period the number of shares set
forth after their respective names: Mr. Leighton, 291,657 shares; Mr. Tod,
291,657 shares; Mr. Callaway, 30,000 shares; Mr. Lenagh, 78,000 shares; Mr.
Luther, 78,000 shares; Dr. Menninger, 28,500 shares; Ms. Taunton-Rigby, 3,000
shares; Mr. Verni, 6,000 shares; Mr. Samuelson, 170,782 shares; Mr. Davis,
60,076 shares; and all directors and executive officers as a group, 1,037,672
shares.
(4) Does not include 23,128 shares of Common Stock held by Mr. Leighton's
wife, as to which Mr. Leighton disclaims beneficial ownership.
(5) Does not include 12,732 shares of Common Stock held by Mr. Tod's wife on
her own behalf and as custodian for their children, as to which Mr. Tod
disclaims beneficial ownership.
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<PAGE> 5
(6) Includes 40,000 shares of Common Stock held by Mr. Callaway as a Trustee
of Ida Cason Callaway Foundation, Inc. Does not include 900 shares of Common
Stock held by Mr. Callaway's wife, as to which Mr. Callaway disclaims beneficial
ownership.
(7) Does not include 40,000 shares of Common Stock held by Mr. Lenagh's
wife, as to which Mr. Lenagh disclaims beneficial ownership.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three Class A
directors, three Class B directors and three Class C directors. The Class A,
Class B and Class C directors will serve until the annual meetings of
stockholders to be held in 1997, 1995 and 1996, respectively, and until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors are elected for a full term of three years to succeed
those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect as directors G.
Robert Tod, Dr. Roy W. Menninger and Lauren M. Tyler, the three Class B director
nominees named below, unless the proxy is marked otherwise. Mr. Tod, Dr.
Menninger and Ms. Tyler are currently directors of the Company.
Each Class B director will be elected to hold office until the 1998 annual
meeting of stockholders and until his or her successor is elected and qualified.
Each of the nominees has indicated his or her willingness to serve, if elected;
however, if any nominee should be unable to serve, the proxies may be voted for
a substitute nominee designated by the Nominating Committee of the Board of
Directors.
For each member of the Board of Directors, including those who are nominees
for election as Class B directors, there follows information given by each
concerning his or her principal occupation and business experience for the past
five years, the names of other publicly held companies of which he or she serves
as a director, his or her age and length of service as a director of the
Company.
NOMINEES FOR TERMS EXPIRING IN 1998 (CLASS B DIRECTORS)
G. Robert Tod.................... President and Chief Operating Officer of
the Company since 1969; director of SCI
Systems, Inc. and EG&G, Inc. Age 56,
director of the Company since 1969.
Dr. Roy W. Menninger............. Chairman of the Board of the Menninger
Foundation since 1993; Chief Executive
Officer of the Menninger Foundation from
1991 to 1993; President of the Menninger
Foundation from 1967 to 1993; director of
The New England. Age 69, director of the
Company since 1989.
Lauren M. Tyler.................. Vice President with Allen & Company
Incorporated since 1989; director of AVI
Entertainment, Inc. Age 33, director of
the Company since 1995.
DIRECTORS WHOSE TERMS EXPIRE IN 1996 (CLASS C DIRECTORS)
Howard H. Callaway............... Chairman of the Board and Chief Executive
Officer of the Ida Cason Calloway
Foundation and of Callaway Gardens
Resort, Inc. since 1981; Chief Executive
Officer of Crested Butte Mountain Resort
since 1977 and President of Mountain
Creek, Inc. since 1989; director of SCI
Systems, Inc. Age 68, director of the
Company since 1983.
Homer L. Luther, Jr.............. Chairman of the Board of Eagle Management &
Trust Company from 1969 to 1988; Private
Investor since 1988;
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<PAGE> 6
director of Offshore Logistics, Inc. Age
56, director of the Company since 1969.
Alison Taunton-Rigby............. President and Chief Executive Officer of
Cambridge Biotech Corporation (which has
voluntarily filed for Chapter 11
reorganization) since April 1995;
President and Chief Executive Officer of
Mitotix, Inc. from 1993 to 1994; Senior
Vice President of Genzyme Corporation
from 1987 to 1993; director of Cambridge
Biotech Corporation. Age 51, director of
the Company since 1994.
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS A DIRECTORS)
Charles M. Leighton.............. Chairman of the Board and Chief Executive
Officer of the Company since 1969;
director of The New England and New
England Investment Companies, Inc. Age
60, director of the Company since 1969.
Thomas H. Lenagh................. Financial Consultant since 1986; director
of Adams Express Company, Clemente Global
Growth Fund, Gintel Fund, Inc., ICN
Biomedicals, Irvine Sensors Corp., V-Band
Corp., US LIFE Corp., Franklin Quest Co.
and Styles on Video. Age 75, director of
the Company since 1976.
Ralph F. Verni................... Chairman and Chief Executive Officer of
State Street Research & Management
Company since August 1992; President and
Chief Executive Officer of New England
Investment Companies, Inc. and Chief
Investment Officer of The New England
from 1990 to 1992; President --
Institutional Investment Group of The New
England from 1988 to 1989; director of
State Street Research Income Trust; State
Street Research Capital Trust; State
Street Research Exchange Trust; State
Street Research Securities Trust; State
Street Research Growth Trust; State
Street Research Master Investment Trust;
State Street Research Money Market Trust;
State Street Research Tax-Exempt Trust;
MetLife -- State Street Equity Trust; and
MetLife -- State Street Financial Trust.
Age 52, director of the Company since
1991.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has a standing Audit Committee which provides the
opportunity for direct contact between the Company's independent accountants and
the Board. The Audit Committee has responsibility for recommending the
appointment of the Company's independent accountants, reviewing the scope and
results of audits and reviewing the Company's internal accounting control
policies and procedures. The Audit Committee, which currently consists of Dr.
Menninger, Messrs. Callaway, Lenagh, Verni, and Luther, as Chairman, and Mses.
Taunton-Rigby and Tyler, held two meetings during the 1995 fiscal year.
The Company has a standing Executive Compensation and Stock Option
Committee (the "Compensation Committee") which provides recommendations to the
Board regarding executive compensation and
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<PAGE> 7
administers the Company's Incentive Deferred Compensation Plan, 1993 Employee
Stock Purchase Plan, 1987 Employees' Severance Benefit Plan, 1982 Stock Option
Plan and 1991 Stock Option Plan. The Compensation Committee held two meetings
during the 1995 fiscal year. The current members of the Compensation Committee
are Messrs. Callaway, Verni and Lenagh, as Chairman.
The Company has a standing Nominating Committee which recommends to the
Board nominees for election to the Board. The Nominating Committee, which
consists of Messrs. Callaway and Verni, met once during the 1995 fiscal year.
The Nominating Committee will consider nominees recommended by stockholders of
the Company. The names of proposed nominees should be forwarded in writing,
within the time period of stockholder proposals generally, to Charles M.
Leighton, Chairman of the Board and Chief Executive Officer, CML Group, Inc.,
524 Main Street, Acton, Massachusetts 01720, who will submit the names of the
nominees to the Nominating Committee for consideration.
During the 1995 fiscal year, the Board of Directors held eight meetings
(including consents in lieu of a meeting). Each director attended at least 75%
of the aggregate number of meetings of the Board of Directors and all committees
of the Board on which he or she served. There are no arrangements or
understandings between any director or officer and any other person pursuant to
which such officer or director is to be selected as a director or officer.
During fiscal 1995, Ms. Lauren Tyler failed to report her ownership of 100
shares of Common Stock on a Form 3 filed with the Securities and Exchange
Commission.
COMPENSATION FOR DIRECTORS
Directors who are not officers or employees of the Company are entitled to
$3,000 for each Board meeting attended ($500 for each telephonic meeting), plus
expenses. Members of the Audit Committee and the Compensation Committee receive
$750 for each committee meeting attended and the chairman of each of these
committees receives $2,000 for services as chairman. Messrs. Leighton and Tod,
Chairman and President of the Company, respectively, receive no compensation for
their services as directors.
Under the 1993 Director Option Plan (the "1993 Director Plan"), (i) each of
Messrs. Callaway, Lenagh, Luther and Verni and Dr. Menninger received an option
to purchase 9,000 shares of Common Stock at $20.67 per share, the fair market
value of the Common Stock on the date of stockholder approval of the 1993
Director Plan, (ii) Ms. Taunton-Rigby received an option to purchase 9,000
shares of Common Stock at $20.62 per share, the fair market value of the Common
Stock on the date of her appointment to the Board of Directors (February 28,
1994), and (iii) Ms. Tyler received an option to purchase 9,000 shares of Common
Stock at $8.00 per share, the fair market value of the Common Stock on the date
of her appointment to the Board of Directors (June 29, 1995). Each option vests
in equal annual installments of 3,000 shares beginning on the first anniversary
date of the option grant.
If the stockholders of the Company approve the 1996 Director Option Plan,
the Board of Directors will discontinue the 1993 Director Plan, and no
additional options will be granted under the 1993 Director Plan. For information
relating to the 1996 Director Option Plan adopted by the Board of Directors on
October 3, 1995, see "Approval of 1996 Director Option Plan."
DEFERRED COMPENSATION PLAN
The Company's Incentive Deferred Compensation Plan provides for the grant
of incentive compensation awards in the form of shares of Common Stock to senior
executive employees of the Company and its subsidiaries. These shares (the
"Deferred Shares") will be issued to the participants and distributed to them no
later than one year after their retirement, disability or death, or their 65th
birthday, whichever occurs first.
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<PAGE> 8
No awards have been made under the Deferred Plan in the last eight fiscal years.
As of August 31, 1995, 38,310, 38,310 and 76,620 Deferred Shares were credited
to the accounts of Messrs. Leighton, Tod and all executive officers as a group,
respectively.
1987 EMPLOYEES' SEVERANCE BENEFIT PLAN
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to foster the continuous employment of personnel of
the Company and its subsidiaries. The Board of Directors recognizes that, as is
the case with many corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among employees, may result in the departure or distraction
of employees to the detriment of the Company and its stockholders. Thus, in
October 1987, the Board of Directors adopted an Employees' Severance Benefit
Plan (the "Severance Plan"), which provides for the lump sum cash payment to a
participant of his or her annual base salary upon a change of control of the
Company, as defined in the Severance Plan, and termination of the participant's
employment within one year of such change in control. The Severance Plan may be
terminated or amended at any time by a vote of two thirds of the Board of
Directors of the Company, unless a change of control has occurred.
All employees who have been full-time employees of the Company or any of
its subsidiaries for a period of at least two consecutive years prior to the
date of a change in control of the Company, or who have been designated by the
Company's Chief Executive Officer or Chief Operating Officer, or their
authorized designees, are eligible to participate in the Severance Plan.
Messrs. Leighton and Tod are not eligible to participate in the Severance
Plan, nor is any employee of the Company or its subsidiaries who is or has been
a director of the Company.
The Severance Plan's term commenced on October 7, 1987 and will continue
through July 31, 1996 and thereafter, unless the Board of Directors takes
affirmative action to terminate the Severance Plan at least six months prior to
the beginning of any succeeding fiscal year. The Severance Plan is administered
by the Compensation Committee.
RETIREMENT INCOME AND SURVIVOR SECURITY PROGRAM
The Company maintains a Retirement Income and Survivor Security Program
(the "Program") which covers certain current and former executive officers of
the Company and certain former officers of the Company's subsidiaries. The
Program is funded by permanent life insurance policies covering each of these
officers. The policies are owned by the Company and purchased at its expense.
The right to receipt of benefits under the Program is fully vested. Vesting was
contingent on continued employment by the Company. Retirement benefits are
payable for a period of ten years in equal monthly installments generally after
the employee reaches age 65. Under the Program, Messrs. Leighton and Tod are
entitled to annual payments over their applicable ten-year period of $168,431
and $188,827, respectively.
CERTAIN TRANSACTIONS
In August 1989, the Company announced its intent to sell its wholly-owned
subsidiary, Carroll Reed, Inc. ("Carroll Reed"). In September 1989, Frederick L.
Leighton ("FLL") rejoined Carroll Reed as President, a position he held from
1970 to 1985. FLL is the brother of Charles M. Leighton, Chief Executive Officer
of the Company. FLL oversaw management of the day-to-day operations and assisted
the Company in finding a buyer for Carroll Reed. In 1990, the Company and FLL
entered into a severance agreement (the "Severance Agreement") which provided
for severance compensation to FLL conditioned on the sale of Carroll Reed.
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<PAGE> 9
The Severance Agreement provided for payments of $120,000 upon the sale of
substantially all the assets of Carroll Reed and $183,291 on October 1 of 1992,
1993 and 1994.
On August 24, 1990, the Company sold substantially all of Carroll Reed's
assets related to its ready to wear and mail order businesses to certain
affiliates of Swire Pacific Limited ("Swire"). On September 20, 1990, Carroll
Reed sold certain remaining assets related to its ski operations (the "Ski
Business"), which Swire elected not to purchase, to Tuckerman's Outfitters
("Tuckerman's"), a corporation formed by FLL to purchase the Ski Business.
Payment for the assets was in the form of a $200,000 unsecured promissory note
due in twelve equal quarterly installments. In addition, Tuckerman's subleased
retail space in five locations from the Company. As of July 1995, Tuckerman's
ceased doing business and such subleases have either expired by their terms or
terminated, and, in one case, been relet to the third-party successor to
Tuckerman's business. The Company previously determined that all amounts due
from Tuckerman's were not collectible and provided reserves for such amounts. To
facilitate the sale of the Ski Business, the Company made a $400,000 working
capital loan to FLL with interest at 8.5% per annum, due in three installments
of $170,185 each on September 23, 1992, 1993 and 1994. This loan has been paid
in full.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Executive Compensation Program (the "Program") is
administered by the Compensation Committee composed of the three non-employee
directors listed below.
The Program is designed to retain and reward executives who are responsible
for leading the Company in achieving its business objectives. All decisions by
the Compensation Committee relating to the compensation of the Company's
executive officers are reviewed by the full Board. This report is submitted by
the Compensation Committee and addresses the Company's compensation policies for
the fiscal year ended July 31, 1995 ("fiscal 1995") as they affected Mr.
Leighton, in his capacity as Chairman of the Board and Chief Executive Officer
of the Company, and the other executive officers of the Company.
COMPENSATION PHILOSOPHY
The objectives of the Program are to (i) align compensation with Company
performance, the interests of the Company's stockholders and the Company's
short-term and long-term business objectives, (ii) encourage and reward high
levels of performance and (iii) enable the Company to attract, retain and reward
executive officers who contribute to the long-term success of the Company.
The Company's executive compensation philosophy is to tie a substantial
portion of executive compensation to the performance of the Company and is based
on the following:
- The Committee annually reviews the compensation of its executive
officers on the basis of each executive's responsibility, position and
level of experience in conjunction with an assessment of salaries being
paid for similar positions by other companies. A significant portion of
each executive's cash compensation is, however, tied to annual changes
in the Company's earnings per share performance.
- The Committee believes that an executive compensation program that links
compensation to the Company's earnings per share performance serves both
as an influential motivator to its executives and as an effective
instrument for aligning their interests with those of the stockholders
of the Company.
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<PAGE> 10
- The Committee also believes that a portion of the compensation of the
Company's executives should be linked to the success of the Company's
stock in the marketplace. This linkage is achieved through the Company's
stock option program which also serves to more fully align the interests
of management with those of the Company's stockholders.
Since fiscal 1983, a major portion of each executive's cash compensation
has been tied to the Company's earnings per share ("EPS") performance. The
Program currently provides that an executive's total cash compensation (annual
base salary, bonus and non-qualified deferred compensation) paid for a
particular fiscal year (the "Current Year") shall be the executive's total cash
compensation for the year in which the Company achieved its highest EPS from
continuing operations (the "Base Year"), increased or decreased by 50% of the
percentage increase or decrease (as the case may be) in the Company's EPS from
continuing operations for the Current Year as compared to the Base Year, but in
no event less than the minimum base salary established by the Compensation
Committee for each executive. Fiscal 1993, the year in which the Company
achieved its highest EPS from continuing operations ($1.07 per share), is
currently the Base Year.
Total compensation at the executive level also includes long-term
incentives offered by stock options. Stock options are designed to promote the
identity of long-term interests between the Company's employees and stockholders
and assist in the retention of key employees. In the case of stock options, the
size of option grants is generally intended to reflect the executive's position
with the Company and his or her contributions to the Company. It has been the
Company's practice to fix the exercise price of option grants at 100% of the
fair market value per share on the date of grant.
For the executive officers of the Company, the Compensation Committee
determines the size of the stock option grant for the Current Year by increasing
(or decreasing) the dollar value of the Base Year's stock option grant (valued
at the time of grant) by that percentage of the increase (or decrease) used in
determining total cash compensation for the Current Year and dividing the
product by the fair market value per share on the date of grant of the new
option.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER IN FISCAL 1995
Messrs. Leighton and Tod each receive the same compensation. As set forth
on the Summary Compensation Table, in fiscal 1995, each executive's total cash
compensation decreased by $477,785, or 35% (50% of the 70% decrease in EPS from
continuing operations from the Base Year to fiscal 1995). For fiscal 1996, each
executive will be entitled to receive his fiscal 1993 total cash compensation,
subject to adjustment, either up or down, equal to 50% of the increase or
decrease in the Company's fiscal 1996 EPS from continuing operations compared to
EPS from continuing operations for the Base Year.
On July 31, 1995, each of Mr. Leighton and Mr. Tod was granted an option
for the purchase of 60,833 shares. The size of the option grant was determined
by decreasing the dollar value of the Base Year's grant by 50% of the percentage
decrease in EPS from the Base Year to fiscal 1995 (a 70% decrease), and dividing
that amount by the closing price on the date of grant.
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<PAGE> 11
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and four other most highly compensated executive officers for
tax years beginning on or after January 1, 1994. Compensation awarded under a
performance-based plan approved by the stockholders will generally not be
subject to the deduction limit. Any fiscal 1996 cash compensation to any of the
five most highly paid executive officers which exceeds $1 million will not be
deductible by the Company because the performance-based portion of cash
compensation has not been submitted to the stockholders for approval.
Compensation Committee
Thomas H. Lenagh, Chairman
Howard H. Callaway
Ralph F. Verni
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Callaway, Verni and
Lenagh, as Chairman. No Compensation Committee interlocks or insider
participation existed during fiscal 1995.
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<PAGE> 12
SUMMARY COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Chief Executive Officer of the Company
and each of the three other most highly compensated executive officers of the
Company (the "Named Executive Officers") for the three fiscal years ended July
31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(2)
---------------
AWARDS
ANNUAL COMPENSATION ---------------
SECURITIES ALL
-------------------- UNDERLYING OTHER
NAME AND SALARY BONUS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(3)
- ----------------------------------------------- ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Charles M. Leighton 1995 $595,000 $290,495 60,883 $ 32,113
Chairman of the Board 1994 595,000 581,366 78,525 143,520
and Chief Executive Officer 1993 595,000 643,280 38,450 149,672
G. Robert Tod 1995 595,000 290,495 60,883 12,632
President and 1994 595,000 581,366 78,525 131,444
Chief Operating Officer 1993 595,000 643,280 38,450 137,862
Robert J. Samuelson 1995 240,000 45,779 23,910 5,846
Senior Vice President, 1994 240,000 177,977 30,850 6,006
Chief Financial Officer and Treasurer 1993 240,000 199,976 15,100 6,280
Glenn E. Davis 1995 130,000 24,784 13,063 5,060
Vice President and 1994 130,000 96,385 16,825 5,977
Controller 1993 130,000 108,300 8,250 3,586
</TABLE>
- ---------------
(1) Amounts in this column represent bonuses earned under the Company's
executive compensation program for the respective fiscal years.
(2) The Company does not have a long-term compensation program that
includes long-term incentive payouts. No restricted stock awards or stock
appreciation rights (SARs) were granted to any of the Named Executive Officers
during fiscal 1995.
(3) The amounts shown in this column for fiscal 1995 represent split-dollar
life insurance premiums of $28,417, $8,936, $2,150 and $1,724 paid by the
Company for each of Messrs. Leighton, Tod, Samuelson and Davis, respectively,
and the Company's contributions under its 401(k) savings plan of $3,696, $3,696,
$3,696 and $3,336 to each of Messrs. Leighton, Tod, Samuelson and Davis,
respectively. In addition, the amounts shown for fiscal 1994 include, for each
of Messrs. Leighton and Tod, a $118,750 (decreased from $125,000 in fiscal 1993)
payment for the purchase of a split-dollar life insurance policy for the funding
of a non-qualified deferred compensation arrangement.
10
<PAGE> 13
STOCK OPTION GRANTS
The following table summarizes certain information regarding options
granted during fiscal 1995 to the Named Executive Officers. No SARs were granted
during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
- ---------------------------------------------------------------------------------------------- STOCK PRICE
NUMBER OF APPRECIATION
SECURITIES PERCENT OF FOR OPTION
UNDERLYING TOTAL OPTIONS EXERCISE TERM (2)
OPTIONS GRANTED TO OR -----------------------
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME (#) (1) FISCAL YEAR ($/SHARE) DATE ($) ($)
---- --------- ------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles M. Leighton................ 60,883 16% $8.375 7/30/05 $320,670 $ 812,642
G. Robert Tod...................... 60,883 16 8.375 7/30/05 320,670 812,642
Robert J. Samuelson................ 23,910 6 8.375 7/30/05 125,934 319,141
Glenn E. Davis..................... 13,063 3 8.375 7/30/05 68,803 174,360
</TABLE>
- ---------------
(1) Options become exercisable on a cumulative basis, with 20% of the
shares covered thereby becoming exercisable on the date of grant and an
additional 20% of the shares becoming exercisable on each successive anniversary
date, with full vesting occurring on the fourth anniversary date.
(2) Amounts represent hypothetical gains that could be achieved for the
options if exercised at the end of the option terms. These gains are based on
assumed rates of stock appreciation of 5% and 10% compounded annually from the
date the respective options were granted. This table does not take into account
the actual change in the price of the Common Stock. Actual gains, if any, on
stock option exercises will depend on the future performance of the Common Stock
and the date on which the options are exercised. The gains shown are net of the
option exercise price, but do not reflect taxes or other expenses associated
with the exercise.
YEAR-END OPTION TABLE
The following table summarizes certain information regarding stock options
held as of July 31, 1995 by the Named Executive Officers. No SARs were held and
no SARs or options were exercised during fiscal 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
FISCAL AT FISCAL
YEAR-END YEAR-END
(EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
NAME (#) ($)(1)
---- -------------- -----------------
<S> <C> <C>
Charles M. Leighton....................................... 274,857/136,401 $931,675/$10,500
G. Robert Tod............................................. 274,857/136,401 931,675/10,500
Robert J. Samuelson....................................... 160,882/56,878 586,450/8,250
Glenn E. Davis............................................ 55,876/29,845 159,317/3,000
</TABLE>
- ---------------
(1) Value based on the last sale price per share ($8.375) of the Company's
Common Stock on July 31, 1995, as reported on the New York Stock Exchange, less
the exercise price.
11
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the period from July 31, 1990 through July 31,
1995 with the cumulative total return on (i) Standard & Poor's Midcap 400 Index
and (ii) Standard & Poor's Specialty Retail Index (assuming an investment of
$100 in the Company's Common Stock and each of the other indices on July 31,
1990, and reinvestment of all dividends).
LOGO
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
7/90 7/91 7/92 7/93 7/94 7/95
- -----------------------------------------------------------------------------------------------------------
CML Group, Inc. $100 $207 $442 $597 $279 $248
- -----------------------------------------------------------------------------------------------------------
S & P Midcap 400 Index $100 $122 $144 $168 $174 $216
- -----------------------------------------------------------------------------------------------------------
S & P Retail Stores - Specialty $100 $111 $137 $159 $155 $165
- -----------------------------------------------------------------------------------------------------------
</TABLE>
APPROVAL OF 1996 EMPLOYEE STOCK PURCHASE PLAN
On October 3, 1995, the Board of Directors adopted, subject to stockholder
approval, the 1996 Employee Stock Purchase Plan (the "1996 Plan"), covering
975,000 shares of the Company's Common Stock. The purpose of the 1996 Plan is to
provide employees of the Company and its subsidiaries an opportunity to acquire
a proprietary interest in the Company through the purchase of shares of Common
Stock. It is the intention of the Company to have the 1996 Plan qualify as an
"employee stock purchase plan" under Section 423 of the Code.
The 1996 Plan is administered by the Compensation Committee of the Board of
Directors. The interpretation and construction of the 1996 Plan and the adoption
of rules and regulations for administering the 1996 Plan are made by the
Compensation Committee, subject at all times to final approval of the Board of
Directors.
12
<PAGE> 15
The 1996 Plan consists of three annual offerings of a maximum of 325,000
shares each. The first offering commences on June 15, 1996 and terminates on
June 14, 1997; the second offering commences on June 15, 1997 and terminates on
June 14, 1998; and the third offering commences on June 15, 1998 and terminates
on June 14, 1999. The number of shares available for an offering may be
increased, at the election of the Compensation Committee, by the shares, if any,
which were made available, but not purchased, during an earlier offering.
Any employee of the Company or one of its subsidiaries who has been
employed at least 90 days prior to the commencement of an offering is eligible
to participate in the 1996 Plan. No employee may be granted an option to
participate in the 1996 Plan (i) if, immediately after the grant, the employee
would own stock and/or options possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or (ii) which
permits his or her rights to purchase stock under all employee stock purchase
plans to accrue at a rate which exceeds $25,000 of the fair market value of the
stock for each calendar year in which such option is outstanding at any time. As
of October 1, 1995, approximately 3,300 employees were eligible to participate
in the 1996 Plan. The last sale price of the Common Stock reported by the New
York Stock Exchange on October 27, 1995 was $5.75 per share.
During each annual offering, the maximum number of shares which may be
purchased by a participant is determined under a formula whereby 85% of the
market value of a share of Common Stock on the first day of the offering period
is divided into an amount equal to that percentage of the employee's regular
salary which he or she has elected to have withheld. An employee may elect to
have up to 10% withheld from his or her regular salary for this purpose. The
price at which the employee's option is exercised is the lower of 85% of the
closing price of the Common Stock on the New York Stock Exchange on the day that
the offering commences, or one year later on the day that the offering
terminates.
Unless a participant gives written notice of withdrawal to the Company, his
or her option to purchase shares will be deemed to have been exercised
automatically on the termination date of the applicable offering. A
participant's withdrawal from any offering will not affect his or her
eligibility to participate in future offerings except that any officer required
to file reports under Section 16(a) of the Securities Exchange Act of 1934 who
withdraws from any offering may not participate in the 1996 Plan for at least
six months.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive stock under the
1996 Plan may be assigned, transferred, pledged or otherwise disposed of other
than by will or the laws of descent and distribution.
If the Company merges into or consolidates with another corporation and the
Company is the surviving entity, the holder of each option to purchase shares
then outstanding will be entitled to receive at the termination date of the
offering the securities or property to which the holder of such number of shares
of Common Stock would be entitled to at the time of the merger or consolidation.
If the Company is not the surviving entity, the 1996 Plan terminates; provided,
however, that the Board may accelerate the termination date of the offering then
in effect and permit participants to purchase shares at such accelerated
termination date.
The Board of Directors may at any time terminate or amend the 1996 Plan. No
such termination, however, may affect options previously granted or make any
changes in options previously granted that would adversely affect the rights of
any participant. In addition, no such amendment shall be made without approval
of the stockholders of the Company if such amendment would (i) materially
increase the benefits accruing to participants under the 1996 Plan, (ii)
materially increase the number of shares which may be issued under the 1996 Plan
or (iii) materially modify requirements as to eligibility for participants under
the 1996 Plan.
13
<PAGE> 16
FEDERAL INCOME TAX CONSEQUENCES
The 1996 Plan is intended to qualify as an "employee stock purchase plan"
as defined in Section 423 of the Code, which provides that the employee does not
have to pay federal income tax with respect to shares purchased under the 1996
Plan until he or she sells such shares. At the time of such sale, the employee
is required to pay federal income tax on the difference, if any, between the
price at which he or she sold the shares and the price he or she paid for them.
If the employee has owned the shares for more than one year and disposes of them
at least two years after the day the offering commenced, he or she will be taxed
as follows. If the market price of the shares on the date they are sold is equal
to or less than the price paid for the shares under the 1996 Plan, the employee
will have a long-term capital loss equal to the excess of the price paid over
the sale price. If the sale price is higher than the price paid under the 1996
Plan, the employee will have to recognize ordinary income in an amount equal to
the lesser of (i) the market price of the shares on the date the offering
commenced over the price paid or (ii) the excess of the sale price over the
price paid. Any additional gain is treated as long-term capital gain. If the
employee sells the shares before he or she has owned them for more than one year
or before the expiration of a two-year period commencing on the day the offering
commenced, the employee will have to recognize income at ordinary income rates
on the amount of the difference between the purchase price and the market price
of the shares on the date of purchase, and the Company will receive an expense
deduction for the same amount. The employee will recognize a capital gain or
loss for the difference between the sale price and the fair market value on the
date of purchase. The Company will generally not be entitled to a tax deduction
upon the purchase or sale of shares under the 1996 Plan.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAX UPON
THE EMPLOYEE AND THE COMPANY WITH RESPECT TO SHARES PURCHASED UNDER THE 1996
PLAN, DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE INCOME TAX LAWS
OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN EMPLOYEE MAY RESIDE.
BOARD RECOMMENDATION
The Board of Directors believes that the 1996 Plan is in the best interests
of the Company and its stockholders and therefore recommends that the
stockholders vote FOR the 1996 Plan.
APPROVAL OF 1996 DIRECTOR OPTION PLAN
On October 3, 1995, the Board of Directors adopted, subject to stockholder
approval, the 1996 Director Option Plan (the "1996 Director Plan"), which
provides for automatic grants of non-statutory stock options to members of the
Company's Board of Directors who are not employees of the Company ("Eligible
Directors"). Upon stockholder approval of the 1996 Director Plan, the Board of
Directors will discontinue the 1993 Director Plan, and no additional options
will be granted under the 1993 Director Plan. Upon stockholder approval of the
1996 Director Plan, the annual retainer fee payable to non-employee Directors
will be discontinued for a period of three years.
The 1996 Director Plan provides that (i) on the date of stockholder
approval of the 1996 Director Plan, each Eligible Director will be granted an
option to purchase 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, and
(ii) on the date of his or her initial election to the Board of Directors, each
person who becomes an Eligible Director after stockholder approval of the 1996
Director Plan will be granted an option to purchase 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. A total of 250,000 shares of Common Stock may
be issued under the 1996 Director Plan, subject to adjustments as provided in
the Plan.
14
<PAGE> 17
Subject to stockholder approval of the 1996 Director Plan, each of Messrs.
Callaway, Lenagh, Luther and Verni, Dr. Menninger and Mses. Taunton-Rigby and
Tyler will receive an option under the 1996 Director Plan to purchase the number
of shares of Common Stock determined by dividing $180,000 by the fair market
value of the Common Stock on December 1, 1995.
Each option granted under the 1996 Director Plan will vest in three equal
annual installments beginning on the first anniversary of the date of grant. The
option price per share will equal the fair market value of a share of Common
Stock on the date on which the option is granted. Options may be exercised
either by payment of cash or by tendering shares of Common Stock already owned
or by a combination of cash and stock. An option granted under the 1996 Director
Plan is not transferable by the option holder except by will, the laws of
descent and distribution or pursuant to a qualified domestic relations order (as
defined in Section 414(p) of the Code), and is exercisable during the lifetime
of the director only while he or she is serving as a director of the Company or
within 90 days after he or she ceases to serve as a director of the Company. No
option is exercisable more than ten years from the date of grant. If a director
dies or becomes disabled while he or she is serving as a director of the
Company, the option is exercisable for a one-year period thereafter.
The Board of Directors may suspend or discontinue the 1996 Director Plan or
amend it in any respect; provided, however, that without the approval of the
stockholders, no amendment may change the number of shares subject to the 1996
Director Plan, change the designation of the class of directors eligible to
receive options, or materially increase the benefits accruing to participants
under the 1996 Director Plan, and the 1996 Director Plan may not be amended more
than once in any six-month period.
The 1996 Director Plan also provides that upon a "change in control" of the
Company all options outstanding as of the date of such change in control shall
become exercisable in full, whether or not exercisable in accordance with their
terms. A "change in control" occurs if (i) a person (other than the Company or
certain affiliates of the Company) becomes the beneficial owner of 50% or more
of the combined voting power of the Company's outstanding securities; (ii) the
members of the Board of Directors on October 1, 1995 (the "Incumbent Board")
cease to constitute a majority of the Board, provided that any person elected
subsequent to October 1, 1995 whose election was approved by a majority of the
Incumbent Board shall, with certain exceptions, be deemed a member of the
Incumbent Board; (iii) the stockholders approve a merger or consolidation, other
than a merger or consolidation (a) in which the voting securities of the Company
prior to the transaction represent more than 50% of the voting securities of the
surviving entity or (b) effected to implement a recapitalization of the Company
in which no person acquires more than 30% of the combined voting power of the
Company's outstanding securities; or (iv) upon approval by the stockholders of a
plan of liquidation or a sale of substantially all of the Company's assets.
FEDERAL TAX CONSEQUENCES
In general, an optionee will not be subject to tax at the time a
non-statutory stock option is granted under the 1996 Director Plan. The optionee
will recognize taxable income in the year in which the option is exercised in
the amount by which the fair market value of the purchased shares on the date of
exercise exceeds the exercise price. However, if the optionee exercises the
option within six months of the date on which the option was granted (or within
six months of a material modification of the terms of the option), no income
will be recognized by the optionee until six months have expired from the date
the option was granted (or modified), and the income then recognized will be in
the amount by which the fair market value of the purchased shares on the date
such six-month period expires exceeds the exercise price. Notwithstanding the
foregoing, an optionee who exercises an option within the six-month period
described above may elect, within 30 days of the date of exercise, pursuant to
Section 83(b) of the Code, to recognize income in the year of exercise in an
amount equal to the excess of the fair market value of the purchased shares on
the date of exercise over the
15
<PAGE> 18
exercise price. The Company will generally be entitled to a business expense
deduction equal to the amount of ordinary income recognized by the optionee in
the Company's taxable year during which the taxable year of the optionee in
which the optionee recognized such income ends. The optionee will have a basis
in the shares acquired upon exercise of the option equal to the option price
plus any ordinary income recognized.
The optionee will recognize a gain or any loss upon the subsequent
disposition of the purchased shares equal to the difference between his or her
basis and the amount realized upon the sale. The gain or loss will be a capital
gain or loss, and will be a long-term gain or loss if the shares are held for
more than one year.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAX UPON
THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE 1996 DIRECTOR PLAN, DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN
WHICH AN OPTIONEE MAY RESIDE.
BOARD RECOMMENDATION
The Board of Directors believes that the 1996 Director Plan is in the best
interests of the Company and its stockholders and therefore recommends that the
stockholders vote FOR the 1996 Director Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Deloitte & Touche LLP as
the Company's independent accountants for the 1996 fiscal year and recommends to
stockholders that they vote FOR ratification of that appointment.
Deloitte & Touche LLP is currently the Company's independent accountants.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to do
so and will also be available to respond to appropriate questions from
stockholders.
OTHER BUSINESS
Management does not know of any other matters which may come before the
Meeting. However, if any other matters are properly presented at 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.
SOLICITATION OF PROXIES
All proxy solicitation costs 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.
16
<PAGE> 19
PROPOSALS FOR THE 1996 ANNUAL MEETING
Stockholders who wish to present a proposal at the 1996 Annual Meeting of
Stockholders must submit the proposal to the Company at its principal office in
Acton, Massachusetts by July 5, 1996.
By Order of the Board of Directors,
PAUL P. BROUNTAS, Secretary
November 1, 1995
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.
17
<PAGE> 20
APPENDIX A
PROXY CML GROUP, INC. PROXY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 1, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Charles M.
Leighton, G. Robert Tod and Paul P. Brountas, and each of them, with full power
of substitution, as proxies to represent and vote as designated herein, all
shares of stock of CML Group, Inc. (the "Company") which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held at the offices of Hale and Dorr, 60 State Street, 26th
Floor, Boston, Massachusetts, on Friday, December 1, 1995 at 10:30 a.m., local
time, and at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE
<PAGE> 21
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5. ATTENDANCE OF THE UNDERSIGNED AT THE
MEETING OR ANY ADJOURNMENT THEREOF WILL NOT BE DEEMED TO REVOKE THIS PROXY
UNLESS THE UNDERSIGNED SHALL REVOKE THIS PROXY IN WRITING.
1. To elect the following three Class B Directors
(except as marked below):
Nominees: G. Robert Tod, Dr. Roy W. Menninger and Lauren M. Tyler
/ / FOR all nominees / / WITHHELD from all nominees
For, except vote withheld from the following nominee(s):
/ / ____________________________________________________
2. To approve the Company's 1996 For Against Abstain
Employee Stock Purchase Plan. / / / / / /
3. To approve the Company's 1996 For Against Abstain
Director Option Plan. / / / / / /
4. To ratify the appointment of For Against Abstain
Deloitte & Touche LLP as the / / / / / /
Company's Independent Accountants.
5. To transact such other business For Against Abstain
as may properly come before the / / / / / /
meeting or any adjournment thereof.
MARK HERE FOR MARK HERE IF YOU
ADDRESS CHANGE / / PLAN TO ATTEND / /
AND NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature: __________________________ Date_________________
Signature: __________________________ Date_________________
<PAGE> 22
APPENDIX B
CML GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors on October 3, 1995
1. Purposes.
The 1996 Employee Stock Purchase Plan of CML Group, Inc. (the "Plan") is
intended to provide a method whereby employees of CML Group, Inc. and its
subsidiary corporations (hereinafter collectively referred to, unless the
context otherwise requires, as the "Company"), will have an opportunity to
acquire a proprietary interest in the Company through the purchase of shares of
the Common Stock, $.10 par value per share, of the Company (the "Common Stock").
It is the intention of the Company to have the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of Section 423 of the Code.
2. Definitions.
(a) "base pay" means regular straight-time earnings, excluding
payments for overtime, incentive compensation, bonuses and other special
payments.
(b) "employee" means any person who is customarily employed for more
than 20 hours per week and more than five months in a calendar year by the
Company or by a subsidiary corporation.
(c) "Offering Commencement Date" means the applicable date on which
an Offering under the Plan commences pursuant to Section 4.
(d) "Offering Termination Date" means the applicable date on which
an Offering under the Plan terminates pursuant to Section 4.
(e) "subsidiary" means any present or future corporation which (i)
is a "subsidiary corporation" as that term is defined in Section 424 of the
Code and (ii) is designated as a participant in the Plan by the Board of
Directors or Committee described in Section 13.
3. Eligibility.
(a) Any employee who shall have been employed by the Company or any
subsidiary at least 90 days prior to the applicable Offering Commencement Date
shall be eligible to participate in the Plan.
<PAGE> 23
(b) Any provision of the Plan to the contrary notwithstanding, no
employee shall be granted an option to participate in the Plan:
(i) if, immediately after the grant, such employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all classes of
stock of the Company or of any subsidiary corporation (for purposes of
this Section the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any employee); or
(ii) which permits his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries to
accrue at a rate which exceeds $25,000 of the fair market value of the
stock (determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. Offering Dates.
The Plan will be implemented by three annual offerings (referred to
herein collectively as "Offerings" and individually as an "Offering") of a
maximum of 325,000 shares each (subject to adjustment as provided in Sections
12(a) and 17) of the Common Stock, as follows:
(a) Offering I shall commence on June 15, 1996, and terminate on
June 14, 1997.
(b) Offering II shall commence on June 15, 1997, and terminate on
June 14, 1998.
(c) Offering III shall commence on June 15, 1998, and terminate on
June 14, 1999.
Participation in any one or more of the Offerings under the Plan shall neither
limit, nor require, participation in any other Offering.
5. Participation.
All eligible employees will become participants in an Offering on the
applicable Offering Commencement Date. Payroll deductions for a participant
shall commence on the applicable Offering Commencement Date of the Offering and
shall end on the Offering Termination Date of such Offering, unless sooner
terminated pursuant to Section 10.
6. Payroll Deductions.
(a) Participants may elect to have amounts withheld from their base
pay by completing an authorization for a payroll deduction ("Authorization") on
the form provided by the Company
-2-
<PAGE> 24
and filing it with the office of the Treasurer of the Company. At the time a
participant files his or her Authorization for a payroll deduction, the
participant shall elect to have deductions made from his or her pay on each
payday during the time he or she is a participant in an Offering at the rate of
1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his or her annualized base pay.
(b) All payroll deductions made for a participant shall be credited
to his or her account maintained by the Company under the Plan. A participant
may not make any separate cash payment into such account.
(c) Except as provided in Section 8(b) or 10, a participant may not
make any changes to his or her participation during an Offering and,
specifically, a participant may not during an Offering alter the amount of his
or her payroll deductions for such Offering.
7. Granting of Option.
(a) For each of the Offerings, a participating employee shall be
deemed to have been granted an option (the "Option"), on the applicable Offering
Commencement Date, to purchase a maximum number of shares of the Common Stock
equal to an amount determined as follows: 85% of the market value of a share of
the Common Stock on the applicable Offering Commencement Date shall be divided
into an amount equal to (x) that percentage of the employee's base pay which he
or she has elected to have withheld (but not in any case in excess of 10%)
multiplied (y) by the employee's annualized base pay. The market value of the
Common Stock shall be determined as provided in subsection (b) below. An
employee's annualized base pay shall be determined as follows: (i) in the case
of a full-time employee normally paid on an hourly rate, by multiplying his or
her normal hourly rate by 2080, (ii) in the case of a part-time employee
normally paid on an hourly rate, by multiplying his or her normal hourly rate by
the product of 52 times the number of hours in his or her normal work week,
(iii) in the case of an employee normally paid at a bi-weekly rate, by
multiplying his or her normal bi-weekly rate by 26, (iv) in the case of a
part-time employee normally paid at a weekly rate, by multiplying his or her
normal weekly rate by 52; and (v) in the case of an employee normally paid at a
monthly rate, by multiplying his or her normal monthly rate by 12.
(b) The purchase price of a share of Common Stock purchased with
payroll deductions made during each Offering (the "Option Exercise Price")
shall be the lower of:
(i) 85% of the composite closing price of the Common Stock on
the New York Stock Exchange (or, if the Common Stock is then traded on
the Nasdaq National Market, 85% of the closing price of the Common Stock
on such system), as published in The Wall Street Journal, on the
Offering
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Commencement Date applicable to such Offering (or on the next regular
business day on which shares of the Common Stock shall be traded in the
event that no shares of the Common Stock shall have been traded on the
Offering Commencement Date); or
(ii) 85% of the composite closing price of the Common Stock on
the New York Stock Exchange (or, if the Common Stock is then traded on
the Nasdaq National Market, 85% of the closing price of the Common Stock
on such system), as published in The Wall Street Journal, on the
Offering Termination Date applicable to such Offering (or on the next
regular business day on which shares of the Common Stock shall be traded
in the event that no shares of the Common Stock shall have been traded
on the Offering Termination Date).
8. Exercise of Option.
With respect to each Offering during the term of the Plan:
(a) Unless a participant gives written notice of withdrawal to the
Company as provided in Sections 8(b) and 10, his or her Option will be deemed
to have been exercised automatically on the Offering Termination Date
applicable to such Offering, for the purchase of the number of full shares of
Common Stock which the accumulated payroll deductions in his or her account
maintained by the Company under the Plan at that time will purchase at the
applicable Option Exercise Price (but not in excess of the number of shares
for which options have been granted to the employee pursuant to Section 7(a)),
and any excess in his or her account at that time will be returned to him or
her.
(b) By written notice to the Treasurer of the Company at any time
prior to the Offering Termination Date applicable to any such Offering, a
participant may elect to withdraw all, but not less than all, of the accumulated
payroll deductions in his or her account at such time, with simple interest
computed at the rate of six percent (6%) per annum.
(c) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to purchase fractional
shares or which are in excess of the limitations of Section 7(a) shall be
returned to an employee promptly following the termination of an Offering.
9. Delivery.
As promptly as practicable after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
certificate or certificates representing the shares of Common Stock purchased
upon the exercise of such participant's Option.
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10. Withdrawal.
(a) As indicated in Section 8(b), a participant may withdraw payroll
deductions credited to his or her account with the Company under any Offering at
any time prior to the applicable Offering Termination Date by giving written
notice of withdrawal to the Treasurer of the Company. All of the participant's
payroll deductions credited to his or her account will be paid to the
participant promptly after receipt of such notice of withdrawal and no further
payroll deductions will be made from his or her pay during such Offering. The
Company may, at its option, treat any attempt by an employee to borrow on the
security of accumulated payroll deductions as an election, under Section 8(b),
to withdraw such deductions.
(b) A participant's withdrawal from any Offering will not have any
effect upon his or her eligibility to participate in any succeeding Offering or
in any similar plan which may hereafter be adopted by the Company, provided,
however, that any officer subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended, who withdraws from any Offering may
not participate in the Plan again for at least six months.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death or disability, while in the employ of
the Company, the payroll deductions credited to his or her account will be
returned to the participant, with simple interest at the rate of six percent
(6%) per annum.
(d) Upon termination of the participant's employment because of
disability or death, the participant or his or her beneficiary (as defined in
Section 14) shall have the right to elect, by written notice given to the
Treasurer of the Company prior to the expiration of the period of 30 days
commencing with the date of the disability or death of the participant, either
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, with simple interest at the rate
of six percent (6%) per annum; or
(ii) to exercise the participant's Option on the Offering
Termination Date next following the date of the participant's disability
or death for the purchase of the number of full shares of Common Stock
which the accumulated payroll deductions in the participant's account at
the date of the participant's disability or death will purchase at the
applicable Option Exercise Price, and any excess in such account will be
returned to the participant or said beneficiary.
If no such written notice of election is received by the Treasurer of
the Company, the participant or beneficiary shall automatically be deemed to
have elected to withdraw the payroll
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deductions credited to the participant's account at the date of the
participant's disability or death and the same will be paid promptly to the
participant or said beneficiary with simple interest at the rate of six percent
(6%) per annum.
11. Interest.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee except upon withdrawal as
provided under Sections 8(b) and 10 or upon the return of payroll deductions as
provided under Section 12(a).
12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan during any Offering under the Plan shall be
325,000 shares (subject to adjustment upon changes in capitalization of the
Company as provided in Section 17), plus any shares available but not issued in
any prior Offering under the Plan. If the total number of shares for which
Options are exercised on any Offering Termination Date in accordance with
Section 8 exceeds 325,000 (plus any shares available but not issued in any prior
Offering), the Company shall make a pro rata allocation of the shares available
for delivery and distribution in as nearly a uniform manner as shall be
practicable and as it shall determine to be equitable, and the balance of
payroll deductions credited to the account of each participant under the Plan
shall be returned to him or her as promptly as possible, with simple interest on
such balance at the rate of six percent (6%) per annum. If less than 325,000
shares are purchased during an Offering, the amount not purchased may be carried
over to and made available during any subsequent Offering.
(b) The participant will have no interest in Common Stock covered by
his or her Option until such Option has been exercised.
(c) Common Stock to be delivered to a participant under the Plan
will be registered in the name of the participant, or, if the participant so
directs, by written notice to the Company prior to the Offering Termination Date
applicable thereto, in the names of the participant and one such other person as
may be designated by the participant, as joint tenants with rights of
survivorship, to the extent permitted by applicable law.
(d) The Board of Directors of the Company may, in its discretion,
require as conditions to the exercise of any Option that the shares of Common
Stock reserved for issuance upon the exercise of the Option shall have been duly
authorized for listing on the New York Stock Exchange and that either
(i) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective; or
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(ii) the participant shall have represented in form and
substance satisfactory to the Company that it is the participant's
intention to purchase such shares for investment.
13. Administration.
The Plan shall be administered by the Compensation Committee appointed
by the Board of Directors of the Company or, if no such committee is
established, by the Board of Directors of the Company (the committee so
designated by the Board of Directors or, if no such committee is established,
the Board of Directors, shall hereinafter be referred to as the "Committee").
The officer of the Company charged with day-to-day administration of the Plan
shall, for matters involving the Plan, be an ex-officio member of the Committee.
The interpretation and construction of any provision of the Plan and the
adoption of rules and regulations for administering the Plan shall be made by
the Committee, subject, however, at all times to the final approval of the Board
of Directors of the Company. Determinations made by the Committee and approved
by the Board of Directors of the Company with respect to any matter or provision
contained in the Plan shall be final, conclusive and binding upon the Company
and upon all participants, their heirs or legal representatives. Any rule or
regulation adopted by the Committee shall remain in full force and effect unless
and until altered, amended or repealed by the Committee or the Board of
Directors of the Company. The Company shall indemnify Committee members, to the
fullest extent permitted by applicable statute, for any expenses incurred in
defending a civil or criminal action or proceeding, arising out of such member's
actions with respect to administration of the Plan, in advance of the final
disposition of such action or proceeding, upon receipt of an undertaking by the
person indemnified to repay such payment if such member shall be adjudicated not
to have acted in good faith in the reasonable belief that such member's action
was in the best interest of the Company.
14. Designation of Beneficiary.
A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
participant prior to the delivery of such shares or cash to the participant.
Such designation of beneficiary may be changed by the participant at any time by
written notice to the Treasurer of the Company. Within 30 days after the
participant's death, the beneficiary may, as provided in Section 10(d), elect to
exercise the participant's Option when it becomes exercisable on the Offering
Termination Date of the then current Offering. Upon the death of a participant
and upon receipt by the Company of proof of the identity and existence at the
participant's death of a beneficiary validly designated by the participant under
the Plan, and notice of election of the beneficiary to exercise the
participant's Option, the Company shall deliver such stock and/or cash to such
beneficiary. In the
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event of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company) the Company, in its discretion, may
deliver such cash to the spouse or to any one or more dependents of the
participant as the Company may determine. No beneficiary shall prior to the
death of the participant by whom he or she has been designated acquire any
interest in the stock or cash credited to the participant's account maintained
by the Company under the Plan.
15. Transferability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive stock under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the participant otherwise than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 8(b).
16. Use of Funds.
All payroll deductions received or held by the Company
under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
17. Effect of Changes of Common Stock.
In the event of any changes of outstanding shares of the Common Stock
by reason of stock dividends, subdivisions, combinations and exchanges of
shares, recapitalizations, mergers in which the Company is the surviving
corporation, consolidations, and the like, the aggregate number and class of
shares available under this Plan and the Option Exercise Price per share shall
be appropriately adjusted by the Board of Directors of the Company, whose
determination shall be conclusive. Any such adjustments may provide for the
elimination of any fractional shares which would otherwise become subject to any
Options.
18. Amendment or Termination.
The Board of Directors of the Company may at any time terminate or amend
the Plan. Except as hereinafter provided, no such termination may affect
Options previously granted, and no such amendment may make any change in Options
previously granted which would adversely affect the rights of any participant.
In addition, no amendment may be made to the Plan without approval of the
stockholders of the Company within twelve months of such
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amendment if such amendment would (a) materially increase the benefits accruing
to participants under the Plan, (b) materially increase the number of shares
which may be issued under the Plan or (c) materially modify the requirements as
to eligibility for participation under the Plan.
19. Notices.
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received by the Treasurer of the Company.
20. Merger or Consolidation.
If the Company shall at any time merge into or consolidate with another
corporation and the Company is the surviving entity, the holder of each Option
then outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the exercise of such Option (unless previously withdrawn
pursuant to Section 10) for each share as to which such Option shall be
exercised the securities or property which a holder of one share of the Common
Stock was entitled to upon and at the time of such merger or consolidation, and
the Board of Directors of the Company shall take such steps in connection with
such merger or consolidation as the Board of Directors shall deem necessary to
assure that the provisions of Section 17 shall thereafter be applicable, as
nearly as reasonably practicable, to such securities or property. In the event
of a merger or consolidation in which the Company is not the surviving entity,
or of a sale of assets in which the Company is not the surviving entity, the
Plan shall terminate, and all payroll deductions credited to participants'
accounts shall be returned to them, with simple interest at the rate of six
percent (6%) per annum; provided, however, that the Board of Directors may, in
the event of such merger, consolidation or sale, accelerate the Offering
Termination Date of the Offering then in effect and permit participants to
purchase shares under the Plan at such accelerated Offering Termination Date.
21. Approval of Stockholders.
The Plan has been adopted by the Board of Directors of the Company, but
is subject to the approval of the stockholders of the Company at the annual
meeting of stockholders scheduled to be held on December 1, 1995.
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22. Registration and Qualification of the Plan Under Applicable Securities
Laws.
Notwithstanding anything to the contrary herein, no Option shall be
granted under the Plan until such time as the Company has qualified or
registered the shares which are subject to the Options under all applicable
state and federal securities laws to the extent required by such laws.
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APPENDIX C
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").
<PAGE> 33
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:
(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.
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<PAGE> 34
(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
(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
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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
(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
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<PAGE> 36
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, consoli-
dation, 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 occurs shall become exercisable in full, whether
or not exercisable in accordance with their terms. A "Change in Control" shall
occur or
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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
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<PAGE> 38
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
(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.
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<PAGE> 39
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.
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