Exhibit 10.3
ACME UNITED CORPORATION
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE
The purpose of this plan (the "Plan") is to promote the interests of
Acme United Corporation (the "Corporation") by enabling its key
employees to acquire an increased proprietary interest in the
Corporation and thus to share in the future success of the
Corporation's business. Accordingly, the Plan is intended as a means
not only of attracting and retaining outstanding management personnel
but also of promoting a closer identity of interests between employees
and stockholders. Since the employees eligible to receive Options under
the Plan will be those who are in a position to make important and
direct contributions to the success of the Corporation, the Directors
believe that the grant of the Options under the Plan will be in the
best interests of the Corporation.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms
when used in the Plan, shall have the meanings set forth in this
Section 2.
(a) "Beneficiary" means the person or persons who shall acquire
the right to exercise an option by bequest or inheritance.
(b) "Board of Directors" or "Board" means the Board of the
Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "Committee" means the Compensation Committee of the Board of
Directors, consisting of select Board members who are not
employees of the Corporation, but in no event fewer than two
(2) such Board members.
(e) "Common Stock" shall mean common stock, par value S2.50 per
share, of the Corporation.
(f) "Disability" means a disability as defined in the
Corporation's Long-Term Disability Plan, as amended from time
to time.
(g) "Fair Market Value" shall mean the closing price for the
Common Stock on the date immediately preceding the date on
which the option is granted.
(h) "Incentive Stock Option" shall mean a stock option granted
pursuant to this Plan and intended to satisfy the requirements
of Section 422 of the Code.
(i) "Option" shall mean a stock option granted pursuant to the
Plan.
(j) "Optionee" shall mean a person to whom an Option has been
granted under the Plan.
(k) "Option Agreement" shall mean the written agreement to be
entered into by the Corporation and the Optionee, as provided
in Section 6 hereof.
(l) "Retirement" shall mean retirement pursuant to the Retirement
Plan for Employees of Acme United Corporation, as amended from
time to time.
(m) "Share" shall mean the Common Stock of the Corporation, as
adjusted in accordance with Section 16 of the Plan.
(n) "Subsidiary" shall mean any subsidiary corporation of the
Corporation within the meaning of Section 424(f)of the Code
(or a successor provision of similar import).
Where used herein, unless the context indicates otherwise, words
in the masculine form shall be deemed to refer to females as well
as to males.
3. SHARES SUBJECT TO THE PLAN
(a) The stock to be covered by the Options is the Common Stock of the
Corporation. The aggregate number of shares of Common Stock which
may be delivered on exercise of the Options is 150,000 shares,
subject to adjustment pursuant to Section 16.
(b) As determined by the Board from time to time, such shares may be
previously issued shares reacquired by the Corporation or authorized
but unissued shares. If any Option expires or terminates for any
reason without having been exercised in full, the Shares covered by
the unexercised portion of such Option shall again be available for
Options, within the limits specified above.
4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors of the
Corporation, which shall accept, amend, or reject recommendations
made by the Committee. In addition to its duties with respect to the
Plan stated elsewhere in the Plan, Board shall have full authority,
consistent with the Plan, to interpret the Plan, to promulgate such
rules and regulations with respect to the Plan as it deems desirable
and to make all other determinations necessary or desirable for the
administration of the Plan. All decisions, determinations, and
interpretations of the Board shall be binding upon all persons.
No member of the Board of Directors or the Committee and no employee
of the Corporation shall be liable for any act or action hereunder,
whether of omission or commission, by any other member or employee
or by any agent to whom duties in connection with the administration
of the plan have been delegated in accordance with the provisions of
the Plan or, except in circumstances involving his bad faith, for
anything done or omitted to be done by himself.
(b) Except as provided in Section 7, it is intended that the stock
options granted pursuant to the Plan constitute Incentive Stock
Options within the meaning of Section 422 of the Code. The Board
shall administer the Plan in such a manner as to establish and
maintain such Options as Incentive Stock Options.
(c) The Board may, with the consent of the Optionee, substitute Options
which are not intended to be Incentive Stock Options for outstanding
Incentive Stock Options. Any such substitution shall not constitute
the grant of a new Option for the purposes of this Plan, and shall
not require a revaluation of the Option exercised prior to the
substituted Option. Any such substitution shall be implemented by an
amendment to the applicable Option Agreement or in such other manner
as the Board in its discretion shall determine.
(d) The Committee, subject to the approval of the Board, shall make such
provision as it deems necessary or appropriate for the withholding
of any federal, state, local or other tax required to be withheld
with regard to the exercise of an Option under the Plan.
5. EMPLOYEES ELIGIBLE TO RECEIVE OPTIONS
(a) The Board, upon the recommendation of the Committee, shall from time
to time in its discretion select the employees to whom the options
shall be granted from among the key employees of the Corporation and
any Subsidiary.
(b) Members of the Board of Directors who are not regular salaried
employees of the Corporation or a Subsidiary shall not be eligible
to receive Options.
(c) An individual employee may receive more than one Option.
6. OPTION AGREEMENT
(a) No Option shall be exercised by an Optionee unless he or she shall
have executed and delivered an Option Agreement.
(b) Appropriate officers of the Corporation are hereby authorized to
execute and deliver Option Agreements in the name of the Corporation
as directed from time to time by the Board.
7. GRANTS OF OPTIONS
(a) The Board, acting upon the recommendation of the Committee, shall in
it discretion determine the time or times when Options shall be
granted and the number of shares of Common Stock to be subject to
each Option.
(b) The aggregate fair market value (determined as of the date the
Option is granted) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by an individual
during any calendar year (under all stock option plans of the
Corporation and its Subsidiaries) shall not exceed $100,000.00.
(c) No Incentive Stock Option shall be granted to an employee who, at
the time the Option is granted, owns (within the meaning of Section
422(b)(6) of the code) stock possessing more than ten percent of the
total combined voting power of all classes of stock of the
Corporation unless the following requirements are satisfied: (i)
notwithstanding the provisions of Section 8, the purchase price for
each share of common stock subject to an Option shall be at least
110 percent of the fair market value of the Common Stock subject to
the Option at the time the Option is granted; and (ii) the Option is
not exercisable after the expiration of five (5) years from the date
such Option is granted.
(d) The Board may in its discretion grant Options that are not intended
to constitute Incentive Stock Options.
(e) Each Option shall be evidenced by an Option Agreement, in such form
as the Board shall from time to time approve, which shall state the
terms and conditions of the Option in accordance with the Plan, and
also shall contain such additional provisions as may be necessary or
appropriate under applicable laws, regulations, and rules.
8. OPTION PRICE
Subject to Section 7(c), the purchase price for each share of Common
Stock subject to an Option shall be one hundred percent (100%) of the
Fair Market Value of the Common Stock on the date the Option is granted
provided, however, that the purchase price shall not be less than the
par value of the Common Stock which is the subject of the Option.
9. OPTION PERIOD; EXERCISE RIGHTS
a) Each Option shall be for such term as the Board shall determine, but
not more than ten years from the date it is granted, and shall be
subject to earlier termination as provided in Section 1O.
b) Options shall be exercisable in accordance with the following
schedule: 25% one day after date of grant; 25% one day after first
year anniversary of date of grant; 25% one day after second year
anniversary of date of grant; 25% one day after third year
anniversary of date of grant.
c) Upon the purchase of shares of Common Stock under an Option, the
Stock certificate or certificates may, at the request of the
purchaser, be issued in his name and the name of another person as
joint tenants with the right of survivorship.
d) The exercise of each Option granted under the Plan shall be subject
to the condition that if at any time the Corporation shall determine
in its discretion that the listing, registration, or qualification
of any shares of Common Stock otherwise deliverable upon such
exercise upon any securities exchange or under any State or Federal
law, or the consent or approval of any regulatory body, is necessary
or desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of shares thereunder, then in any such
event such exercise shall not be effective unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Corporation. Any such postponement shall not extend the time within
which the Option may be exercised; and neither the Corporation nor
its directors or officers shall have any obligation or liability to
the Optionee or to a Beneficiary with respect to any shares of
Common Stock as to which the Option shall lapse because of such
postponement.
10. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT
(a) Retirement
Except as provided in paragraph (e) of this section 10, if an
Optionee retires under a retirement or pension plan of the
Corporation or of a Subsidiary, the Optionee's Option shall
terminate one year after the date of such retirement but in no event
later than the date on which it would have expired if the Optionee
had not retired, provided, however, that if the Option is exercised
later than three months from the date of such retirement such Option
shall not constitute an Incentive Stock Option. During such period
the Optionee may exercise the Option in whole or in part
notwithstanding the limitations of Section 9(b) or any limitation
that may have been set by the Board pursuant thereto.
(b) Disability
Except as provided in paragraph (e) of this section 10, if an
Optionee becomes disabled, the Optionee may exercise the Option (i)
within one year after the date of Disability, but in no event later
than the date on which it would have expired if the Optionee had not
become disabled, or (ii) within such other period, not exceeding
three years after the date of Disability, as shall be prescribed in
the Option Agreement; provided, however, that if the Option is
exercised later than one year after the date of Disability, it shall
not constitute an Incentive Stock Option. During such period the
Optionee may exercise the Option in whole or in part notwithstanding
the limitations of Section 9(b) or any limitation that may have been
set by the Board pursuant thereto.
(c) Death
If an Optionee dies during a period in which he or she is entitled
to exercise an Option (including the period referred to in
paragraphs (a),(b),(d),and (e)of this Section 1O), the Option may be
exercised at any time within one year from the date of the
Optionee's death, but in no event later than the date on which it
would have expired if the Optionee had lived, by the Optionee's
Beneficiary, in whole or in part notwithstanding the limitations of
Section 9(b) or any limitation that may have been set by the Board
pursuant thereto.
(d) Termination of Employment for Any Other Reason
Except as provided in paragraph (e) of this section 10, if an
Optionee ceases to be employed by the Corporation or a Subsidiary
for any reason other than retirement, disability, or death, the
Optionee's Option shall terminate 30 days after the date of such
cessation of employment, but in no event later than the date on
which it would have expired if such cessation of employment had not
occurred. During such period the option may be exercised only to the
extent that the Optionee was entitled to do so under Section 9(b) at
the date of cessation of employment unless the Board, in its sole
and nonreviewable discretion, permits exercise of the Option to a
greater extent. Except to the extent required by law, the employment
of an Optionee shall not be deemed to have ceased upon his or her
absence from the Corporation or a Subsidiary on a leave of absence
granted in accordance with the usual procedure of the Corporation or
Subsidiary.
(e) Notwithstanding any language of the Plan to the contrary, if an
Optionee ceases to be employed by the Corporation or a Subsidiary
and becomes, or continues to be, a member of the Board of Directors
prior to the time the Optionee's Option(s) would have otherwise
expired pursuant to this Section 10, the Optionee's Option(s) shall
continue to vest in accordance with Section 8(b) hereof and shall
continue to be exercisable for the remainder of the term of the
Option(s); provided, that, if an Optionee described in this Section
10(e) ceases to be a member of the Board of Directors for any
reason, the Optionee's Option(s) shall terminate in accordance with
the provisions of Section 2.4(a) of the Amended and Restated Acme
United Corporation Non-Salaried Director Stock Option Plan. Any
Option which is not exercised by the Optionee within the three-month
period immediately following the Optionee's termination of
employment, or, in the case of termination of employment on account
of Disability, within one year after the date of Disability, shall
cease to be an Incentive Stock Option.
11. METHOD OF EXERCISE
(a) Each exercise of an Option shall be by written notice to the
Secretary of the Corporation, stating the number of shares to be
purchased. An Option may be exercised with respect to all, or any
part of, the Shares of Common Stock as to which it is exercisable at
the time.
(b) The purchase price of the shares being purchased shall be paid in
full at the time the Option is exercised. Such payment shall be made
in cash in United States currency.
12. NONTRANSFERABILITY OF OPTIONS
Each Option shall be nonassignable and nontransferable by the Optionee
other than by will or by the laws of descent and distribution. Each
Option shall be exercisable during the Optionee's lifetime only by the
Optionee.
13. SHAREHOLDER RIGHTS
No person shall have any rights of a shareholder by virtue of an Option
except with respect to shares actually issued to him and registered on
the transfer books of the Corporation, and the issuance of shares shall
confer no retroactive right to dividends.
14. USE OF PROCEEDS
The proceeds received by the Corporation from the sale by it of shares
of Common Stock to persons exercising an Option pursuant to the Plan
will be used for the general purposes of the Corporation or any
Subsidiary.
15. GENERAL PROVISIONS
The grant of an Option in any year shall not give the Optionee any right
to similar grants in future years or any right to be retained in the
employ of the Corporation or any Subsidiary.
16. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
If there is a change in the number or kind of outstanding shares of the
Corporation's stock by reason of a stock dividend, stock split,
recapitalization, merger, consolidation, combination, or other similar
event, appropriate adjustments shall be made by the Board to the number
and kind of shares subject to the Plan, the number and kind of shares
under Options then outstanding, the maximum number of shares available
for Options or the Option Price and other relevant provisions.
17. EFFECT OF MERGER OR OTHER REORGANIZATION
If the Corporation shall be the surviving corporation in a merger or
other reorganization, an Option shall extend to stock and securities of
the Corporation to the same extent that a holder of that number of
Shares immediately before the merger or consolidation corresponding to
the number of Shares covered by the Option would be entitled to have or
obtain stock and securities of the Corporation under the terms of the
merger or consolidation. If the Corporation dissolves, sells
substantially all of its assets, is acquired in a stock for stock or
securities exchange, or is a party to a merger or other reorganization
in which it is not the surviving corporation, then each Option shall be
exercisable within the period of sixty (60) days commencing upon the
date of the action of the shareholders (or the Board if shareholders'
action is not required) is taken to approve the transaction and upon the
expiration of that period all Options and all rights thereto shall
automatically terminate.
18. TERMINATION; AMMENDMENTS
(a) The Board may at any time terminate the Plan. Unless the Plan shall
previously have been terminated by the Board, it shall terminate on
February 26, 2012. No Option may be granted after such termination.
(b) The Board may at any time or times amend the Plan or amend any
outstanding Option for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other
purpose which at the time may be permitted by law.
(c) Except as provided in Section 16, no such amendment shall, without
the approval of the shareholders of the Corporation: (i) increase
the maximum number of shares of Common Stock for which the Options
may be granted under the Plan; (ii) reduce the Option price of
outstanding Options; (iii) extend the period during, which Options
may be granted; (iv) materially increase in any other way the
benefits accruing to Optionees; or (v) change the class of persons
eligible to be Optionees.
(d) No termination or amendment of the Plan shall without the consent of
an Optionee or Beneficiary, adversely affect the Optionee's or
Beneficiary's right under any Option previously granted, but it
shall be conclusively presumed that any adjustment for changes in
capitalization in accordance with Section 16 hereof does not
adversely affect any such right.
19. EFFECTIVE DATE
The effective date of the Plan is February 26, 2002.
20. GOVERNING LAW
The Plan shall be construed and its provisions enforced and
administered in accordance with and under the laws of Connecticut
except to the extent that such laws may be superseded by any Federal
law.