EXHIBIT 10.5
JULY 12, 1996
CONTROL DEVICES, INC.
1996 STOCK COMPENSATION PLAN
ARTICLE I
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GENERAL
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Section 1.1. Purpose. The purpose of the 1996 Stock Compensation Plan
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(the "Plan") of Control Devices, Inc. (the "Company") is to enhance the ability
of the Company to attract and retain qualified personnel who, as a result of the
incentive and equity interest created and encouraged by the Plan, will have an
increased stake in the prosperity of the Company and an increased identity of
interest with the Company's shareholders, and will be encouraged thereby to
exert maximum effort towards the successful operation of the Company.
Section 1.2. Definitions. Whenever used herein, the following terms shall
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have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board, which shall
consist of not less than three persons appointed by the Board from
among those Board members who are not employees of the Company or any
of its subsidiaries.
(d) "Common Shares" means the Common Shares of the Company or such other
securities into which such Common Shares may be changed pursuant to
Section 1.5 hereof.
(e) "Director Options" means options granted to non-employee directors
pursuant to Article IV of the Plan.
(f) "Fair Market Value" means, as to any day (i) the average of the
closing bid and asked price per Common Share on such day as quoted on
the Nasdaq market quotation system or any similar system of automated
dissemination of quotations if the Common Shares are so quoted, or
(ii) if the Common Shares are listed or traded on any national
securities exchange, the last sale price of the Common Shares on such
day as officially listed on the exchange, or (iii) if the Common
Shares are not quoted or traded as contemplated by (i) or (ii), then
Fair Market Value shall mean the price at which the Common Shares
would sell
between a willing buyer and willing seller (neither being under
compulsion) having knowledge of all reasonable facts, as determined in
good faith by the Committee.
(g) "Incentive Stock Option" means an incentive stock option within the
meaning of Section 422 of the Code.
(h) "Non-statutory Options" means a stock option which is not an Incentive
Stock Option.
(i) "Participant" means a person selected by the Committee to participate
in the Plan pursuant to Section 1.6 hereof.
Section 1.3. Administration. The Plan shall be administered by the
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Committee. Members of the Committee are not eligible to be granted any options
or performance units under the Plan, except Director Options. Subject to the
foregoing and the other terms and provisions of the Plan, the Committee shall
determine the participants in the Plan and the terms and provisions of each
option or performance unit granted under the Plan, including the number of
shares subject to such options or performance units. The Committee may from
time to time prescribe rules and regulations for the administration of the Plan,
and shall decide any questions arising with respect to options or performance
units granted under the Plan. All decisions, interpretations, determinations or
actions taken by the Committee with regard to such questions shall be final and
binding upon the employees of the Company. The Committee from time to time, and
whenever requested, shall report to the Board on the administration of the Plan
and any action taken in connection therewith.
Section 1.4. Aggregate Number of Common Shares Which May be Issued. The
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aggregate number of Common Shares which may be issued as a result of the
exercise of options granted under the Plan or as a result of attainment of
performance goals pursuant to performance units granted under the Plan, is three
hundred thousand (300,000). In the event any option expires, terminates or is
canceled for any reason prior to exercise, the shares subject to such option
shall again become available for issuance under the Plan.
Section 1.5. Adjustments. If any stock dividend is declared on the Common
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Shares, or if the Common Shares are subdivided, consolidated, or changed to
other securities of the Company, or in the event of any like adjustment or
change in the Company's capitalization, then in each such event, Common Shares
subject to options or performance units then in effect under the Plan, Common
Shares reserved for issuance under the Plan with respect to options or
performance units which may thereafter be granted under the Plan shall, if the
occurrence of the event would have resulted in a change in the number and/or
kind of such shares had they been outstanding, be similarly adjusted in number
and/or kind, with the nature and
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extent of such adjustments to be determined by treating such shares as being
outstanding at the time of and immediately prior to the occurrence of the event
and the purchase price to be paid for such shares subject to options then in
effect shall be appropriately changed to give effect to any such adjustment.
Section 1.6. Participants. The participants in the Plan shall be selected
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by the Committee from among the officers and other key employees of the Company
who are full-time employees of the Company or one of its subsidiaries (as
defined in Section 424(f) of the Code). The Committee shall take into account
the duties of the employee, the present and potential contributions of the
employee to the success of the Company, and such other factors that the
Committee, in its discretion, considers to be reasonable and appropriate in
light of the purposes of the Plan.
Section 1.7. Term of Plan. The Plan shall terminate on the earlier of
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(a) ten (10) years from the date of adoption of the Plan by the Board or (b)
such earlier date as the Board may determine. Options or performance units
outstanding at the date of termination of the Plan shall remain in effect until
exercised or expired.
Section 1.8. Restrictions on Transferability of Common Shares. The
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Committee may impose such restrictions as it may deem advisable on Common Shares
acquired on exercise of an option granted under the Plan or on attainment of
performance goals pursuant to performance units granted under the Plan. In
addition, unless the Common Shares so acquired are registered under the
Securities Act of 1933, the transfer of the Common Shares shall be subject to
the restrictions on transfer imposed under federal and applicable state
securities laws, and certificates representing such Common Shares shall bear a
legend to that effect.
Section 1.9. Restriction on Tandem Options. In no event may the exercise
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of an option (whether an Incentive Stock Option or a Non-statutory Option)
granted under the Plan affect the right of a Participant to exercise any other
option granted under the Plan.
Section 1.10. Maximum Number of Common Shares Subject to Options Granted
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to an Individual Participant. The maximum number of Common Shares for which
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options may be granted to any individual Participant during the term of the Plan
is seventy five thousand (75,000).
ARTICLE II
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INCENTIVE STOCK OPTIONS
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Section 2.1. Grant of Options. Subject to the provisions of the Plan, the
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Committee may grant Incentive Stock Options to purchase Common Shares to
Participants at any time and from time to time as shall be determined by the
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Committee. Subject to the provisions of the Plan, the Committee shall have
complete discretion to determine the number of shares subject to Incentive Stock
Options granted, and the terms and conditions of such Incentive Stock Options.
Section 2.2. Option Agreement. Each Incentive Option shall be evidenced
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by an option agreement that shall state that the option is an Incentive Stock
Option, and specify the option price, the terms of the option, the number of
Common Shares subject to the option, and such other provisions as the Committee
shall determine. The provisions of this Plan shall be expressly incorporated in
the terms and provisions of the option agreement. In the event of any
inconsistency between the provisions of the Plan and the other provisions of the
option agreement, the provisions of the Plan shall govern.
Section 2.3. Option Price. The option price per Common Share to be paid
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upon the exercise of any Incentive Stock Option, as determined by the Committee,
shall be not less than Fair Market Value at the time the option is granted
provided, however, that with respect to Incentive Stock Options granted to any
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Participant, who at the time of grant owns shares possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Participant's employer corporation or its parent or subsidiaries under the
attribution rules set forth in Section 424(d) of the Code (a "10% Owner
Participant") the option price per Common Share shall be at least one hundred
ten percent (110%) of Fair Market Value at the time of grant.
Section 2.4. Term of Option. Unless the terms of an Incentive Stock
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Option provide a shorter term, or as hereinafter provided, each Incentive Stock
Option shall be exercisable no later than ten (10) years from the date it is
granted. Any Incentive Stock Option granted to a 10% Owner Participant shall be
exercisable no later than five (5) years from the date it is granted. The
Committee, in its sole discretion, will determine the vesting schedule of each
Incentive Stock Option granted under this Plan; provided, however, that no
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Incentive Stock Option may be exercised prior to one year from the date it is
granted. Except as otherwise provided herein, no Incentive Stock Option may be
exercised unless the Participant is at the time of such exercise in the employ
of the Company or of a subsidiary thereof and shall have been continuously so
employed since the granting of the Participant's option. Military, sick leave
or other bona fide leave of absence not exceeding ninety (90) days (or longer if
the Participant's right to re-employment is guaranteed by statute or by
contract) shall not be considered an interruption of employment for purposes of
the Plan.
Section 2.5. Limitation on Granting of Options. The Committee shall not
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grant Incentive Stock Options to a Participant if the aggregate Fair Market
Value (determined at the time the option is granted) with respect to which
Incentive Stock Options are exercisable for the first time by the Participant
during any calendar year
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(under all option plans of the Participant's employer corporation and its parent
and subsidiary corporations) shall exceed One Hundred Thousand Dollars
($100,000).
Section 2.6. Termination of Employment. An Incentive Stock Option granted
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under the Plan may not be exercised after the Participant ceases to be employed
by the Company or a subsidiary thereof except as hereinafter provided if such
cessation of employment is on account of death, normal retirement, early
retirement, or disability. An uninterrupted transfer of employment to or
between the Company and/or any parent or subsidiary thereof shall not be
considered to be a cessation of employment.
Section 2.7. Retirement and Partial Disability of Participant. In the
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event of the normal retirement, early retirement or disability (other than
permanent and total disability within the meaning of Section 22(e)(3) of the
Code) of a Participant, an Incentive Stock Option may be exercised for a period
of three months after cessation of the employment of the Participant, or the
balance of the term of the Incentive Stock Option, whichever is shorter. The
Participant may exercise the Incentive Stock Option for the number of Common
Shares with respect to which the Incentive Stock Option has become exercisable
by its terms and any such additional number of Common Shares subject to the
Incentive Stock Option as the Committee may authorize.
Section 2.8. Death of Participant. In the event of the death of a
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Participant while in the employ of the Company or a subsidiary thereof, the
Incentive Stock Options theretofore granted to the Participant shall become
immediately exercisable, whether or not theretofore exercisable, and shall be
exercisable for a period of three months after the date of death or for the
balance of the term of the Incentive Stock Option, whichever is shorter, by the
executor or administrator of the Participant's estate or by such person or
persons as shall have acquired the Participant's rights under the Incentive
Stock Option by will or by the laws of descent and distribution.
Section 2.9. Permanent and Total Disability of Participant. In the event
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the Participant becomes permanently and totally disabled (within the meaning of
Section 22(e)(3) of the Code) while in the employ of the Company or a subsidiary
thereof, the Incentive Stock Options theretofore granted to the Participant
shall become immediately exercisable, whether or not theretofore exercisable,
and shall be exercisable for a period of one year after the Participant's
cessation of employment or for the balance of the term of the Incentive Stock
Option, whichever is shorter.
Section 2.10. Nonassignability. Each Incentive Stock Option shall by its
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terms provide that it is not transferable by the Participant other than by will
or the laws of descent and distribution and that it is exercisable during the
Participant's lifetime, only by the Participant or by the Participant's duly
authorized legal representative if the Participant is unable to exercise the
Incentive Stock Option as a result of the
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Participant's disability, but only if, and to the extent, permitted by Section
422 of the Code.
ARTICLE III
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NON-STATUTORY OPTIONS
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Section 3.1. Grant of Options. Subject to the provisions of this Plan,
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the Committee may grant Non-statutory Options to purchase Common Shares to
Participants at any time and from time to time as shall be determined by the
Committee. The Committee shall have complete discretion to determine the number
of shares subject to Non-statutory Options granted and the terms and conditions
of such Non-statutory Options.
Section 3.2. Option Agreement. Each Non-statutory Option shall be
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evidenced by an option agreement that shall state that the Non-statutory Option
is not an Incentive Stock Option and shall specify the option price of the Non-
statutory Option, the number of Common Shares subject to the Non-statutory
Option, and such other provisions as the Committee shall determine. The
provisions of this Plan shall be expressly incorporated in the terms and
provisions of the option agreement. In the event of any inconsistency between
the provisions of the Plan and the other provisions of the option agreement, the
provisions of the Plan shall govern.
Section 3.3. Term of Option. No Non-statutory Option may be exercised
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prior to one year from the date it is granted. Unless the terms of a Non-
statutory Option provide a shorter term, each Non-statutory Option shall be
exercisable no later than ten (10) years from the date it is granted.
ARTICLE IV
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DIRECTOR OPTIONS
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Section 4.1. Grant and Eligibility.
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(a) Initial Grant. Director Options for the purchase of one thousand
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(1,000) Common Shares will be granted to each non-employee director upon
first being elected to the Board. This grant may be awarded to a non-
employee director only once.
(b) Subsequent Grants. On the date of the Company's annual meeting in
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each year, commencing with the 1997 annual meeting, Director Options for
the purchase of one thousand (1,000) Common Shares shall be granted to each
non-employee director re-elected at such meeting.
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Section 4.2. Director Option Agreement. Each Director Option shall be
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evidenced by a Director Option Agreement that shall specify the option price of
the Director Option, the term of the Director Option, the number of Common
Shares subject to the Director Option, and such other provisions as the
Committee shall determine consistent with the terms of the Plan. The provisions
of this Plan shall be expressly incorporated in the terms and provisions of the
Director Option Agreement. In the event of any inconsistency between the
provisions of this Plan and the other provisions of the Director Option
Agreement, the provisions of this Plan shall govern.
Section 4.3. Tax Status. The Director Options shall be Non-statutory
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Options and the Director Option Agreement shall so state.
Section 4.4. Option Price. The option price per Common Share to be paid
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upon exercise of a Director Option shall be Fair Market Value on the date of
grant of the Director Option.
Section 4.5. Term of Option. Each Director Option shall expire one year
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following the termination of the director's Board membership for any reason, but
in no event may any Director Option be exercised after the tenth anniversary of
the date of grant.
Section 4.6. Miscellaneous Provisions. Except as otherwise provided in
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this Article IV, Director Options shall be governed by the remaining provisions
of this Plan applicable to Non-statutory Options.
ARTICLE V
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PERFORMANCE UNITS
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Section 5.1. Performance Units. Performance units may be granted subject
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to such terms and conditions as the Committee in its discretion shall determine.
Performance units may be granted either in the form of cash units, in share
units which are equal in value to one Common Share or a combination thereof.
The Committee shall establish the performance goals to be attained in respect of
the performance units, the various percentages of performance unit value to be
distributed upon attainment, in whole or in part, of the performance goals and
such other performance unit terms, conditions and restrictions as the Committee
shall deem appropriate. As soon as practicable after the termination of the
performance period, the Committee shall determine the payment, if any, which is
due on the performance unit in accordance with the terms thereof. The Committee
shall determine, among other things, whether the payment shall be made in the
form of cash or Common Shares, or a combination thereof.
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ARTICLE VI
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AMENDMENT AND OTHER PROVISIONS
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Section 6.1. Method of Exercise. Exercise of an option granted under the
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Plan shall be by the execution by the person entitled at the time to exercise
the option of a written notice of such exercise and delivery thereof to the
Company, which notice shall specify the number of shares being purchased. In
the case of the exercise of an option, such notice shall be accompanied by
payment in full of the option price of the Common Shares. Payment of the option
price with respect to any stock option may be made in cash, in Common Shares
valued at the Fair Market Value on the last trading day preceding the date on
which the option is exercised or in a combination of cash and Common Shares.
Upon receipt of such notice and payment, the Company will promptly issue and
deliver its certificate for the number of Common Shares being purchased pursuant
to exercise of the option. No person, estate or other entity shall have any of
the rights of a shareholder with reference to Common Shares subject to an option
until a certificate or certificates for the shares have been delivered.
Section 6.2. Amendment, Modification and Termination of the Plan. Subject
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to Section 4.7 hereof and the last sentence of this Section 6.2, the Board may
at any time terminate, and from time to time may amend or modify the Plan;
provided, however that the approval of the shareholders of the Company shall be
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required to amend or modify the Plan to:
(a) materially increase the benefits accruing to Participants under the
Plan;
(b) materially increase the number of Common Shares which may be issued
under the Plan; or
(c) materially modify the requirements as to eligibility for participation
in the Plan.
No amendment, modification or termination of the Plan shall in any manner
adversely affect the rights of a Participant under any option previously granted
under the Plan, without the consent of the Participant.
Section 6.3. Rights of Employees. Nothing in this Plan limits in any way
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the right of the Company or its subsidiaries to terminate any Participant's
employment at any time, nor confers upon any Participant any right to continue
in the employ of the Company or its subsidiaries. No officer or employee shall
have a right to be selected as a Participant.
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Section 6.4. Dissolution, Merger and Consolidation. Upon a dissolution or
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a liquidation of the Company, each Participant shall have the right to exercise
any unexercised options, whether or not theretofore exercisable, during a period
of thirty (30) days next preceding the date of such dissolution or liquidation.
In the event of a merger or consolidation in which Common Shares may be
exchanged for securities of another publicly held entity, each participant shall
be offered a firm commitment whereby such entity will tender to the Participant
new options in such entity, with terms and conditions, both as to number of
shares and otherwise, which, to the extent permitted by applicable law, will
substantially preserve to the Participant the rights and benefits of the options
outstanding hereunder. With respect to any merger or consolidation in which the
Common Shares are exchanged for (a) cash, (b) securities of an entity that is
not publicly held, or (c) a combination of (a) and (b), options then in effect
shall become immediately exercisable, whether or not theretofore exercisable,
during a period of thirty (30) days next preceding the date of consummation of
the merger or consolidation.
Section 6.5. Tax Withholding. The Company, as appropriate, shall have the
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right to deduct from all payments any Federal, state or local taxes required by
law to be withheld with respect to such payments. With respect to withholding
required upon the exercise of Non-statutory Options, or upon payment in Common
Shares with respect to performance units, Participants may elect, subject to the
approval of the Committee, to satisfy the withholding required, in whole or in
part, by having the Company withhold Common Shares having a value equal to the
amount required to be withheld. The value of the shares to be withheld is to be
based on the Fair Market Value on the date that the amount of tax to be withheld
is to be determined. All elections shall be irrevocable and shall be made in
writing, signed by the Participant, and shall satisfy such other requirements as
the Committee shall deem appropriate.
Section 6.6. Requirements of Law. The granting of options or performance
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units, and the issuance of Common Shares with respect to an exercise of an
option or with respect to a performance unit award, shall be subject to all
applicable laws, rules and regulations, including federal and applicable state
securities laws, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
Section 6.7. Governing Law. The Plan, and all agreements hereunder, shall
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be construed in accordance with and governed by the laws of the State of
Indiana.
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