<PAGE>
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 [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Control Devices, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Control Devices, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] 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:
________________________________________________________________________
<PAGE>
CONTROL DEVICES, INC
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF ANNUAL MEETING
To the Shareholders of Control Devices, Inc:
You are hereby notified that the Annual Meeting of Shareholders of Control
Devices, Inc., an Indiana Company, will be held at Embassy Suites Hotel, 1050
Westbrook St., Portland, Maine, on Friday April 25, 1997 at 9:30 am (EST) for
the following purposes:
(1) To elect eight (8) directors for a term of one year.
(2) To ratify the Control Devices, Inc. Employee Stock Purchase Plan.
(3) To ratify the appointment of Arthur Andersen LLP as independent
public accountants for the current fiscal year ending December 31,
1997.
(4) To transact such other business as may properly come before the
meeting.
The shareholders of record at the close of business on March 14, 1997, are
entitled to notice of and to vote at the meeting in person. PLEASE MARK, SIGN
AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. If you attend the meeting, you may, if you so desire,
withdraw your proxy and vote in person.
Jeffrey G. Wood
Secretary
Standish, Maine
March 18, 1997
<PAGE>
1997 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
All shareholders of record on March 14, 1997, are entitled to vote at the
Annual Meeting to be held at Embassy Suites Hotel, 1050 Westbrook St.,
Portland, Maine, on the 25th day of April, 1997 at 9:30 am (EST). All
shareholders unable to attend such meeting who wish to vote their shares upon
the business to be transacted at such meeting are requested to mark, sign and
date the accompanying form of proxy and return it in the addressed, postage
paid envelope enclosed for your convenience. The proxy is revocable by you at
any time before it is voted, and the signing of the proxy will not affect your
right to vote in person if you attend the meeting. All proxies returned, and
not so revoked, will be voted in accordance with their terms.
As stated in the Notice, the matters to be considered at the meeting are the
election of eight directors, ratification of the Control Devices, Inc.
Employee Stock Purchase Plan, ratification of the appointment of independent
public accountants, and the transaction of such other business as may properly
come before the meeting.
The solicitation of the accompanying form of proxy is made on behalf of the
Board of Directors of the Company. The expense of the solicitation of the
proxies for this meeting will be borne by the Company. The solicitation will
be made through the use of the mail and by personal solicitation through
regular employees of the Company who will not be additionally compensated.
The mailing address of the principal executive offices of the Company is
Control Devices, Inc., 228 Northeast Road, Standish, Maine 04084. This Proxy
Statement and the enclosed form of proxy were first sent or given to
shareholders on approximately March 18, 1997.
OUTSTANDING SHARES
As of March 10, 1997, the Company had 4,963,249 common shares outstanding,
without par value. Each shareholder is entitled to one vote upon any proposal
submitted to the meeting for each share standing in the shareholder's name on
March 14, 1997.
PRINCIPAL SHAREHOLDERS
Set forth below is certain information concerning the only shareholders
known to the Company, as of March 10, 1997, to beneficially own 5% or more of
the Company's outstanding common shares.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF OWNERSHIP OF CLASS
---------------- ----------------- --------
<S> <C> <C>
Ralph R. Whitney, Jr............................. 320,689(1) 6.5%
Massachusetts Mutual Life Insurance Co........... 999,995(2) 20.1%
State of Wisconsin Investment Board.............. 265,000 5.3%
</TABLE>
- --------
(1) Includes 80,172 shares owned by Mr. Whitney's wife, as to which Mr.
Whitney disclaims beneficial ownership. The address for Mr. Whitney is the
principal office of the Company.
(2) Includes 174,199 shares (3.5%) owned by MassMutual Corporate Investors,
57,999 (1.2%) shares owned by MassMutual Participation Investors, each of
which is a mutual fund managed by Massachusetts Mutual Life Insurance
Company, and 174,199 (3.5%) shares owned by MassMutual Corporate Value
Partners Limited, for which Massachusetts Mutual Life Insurance Company
acts as an investment advisor. Pursuant to a Security and Exchange
Commission Executive Order issued pursuant to Section 17(d) of the
Investment Company Act, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation Investors and
MassMutual Corporate Value Partners Limited must sell shares in proportion
to their respective holdings, unless the joint transaction committees of
the Boards of Trustees of MassMutual Corporate Investors and MassMutual
Participation Investors approve a disproportionate disposition of the
shares. Massachusetts Mutual Life Insurance Company disclaims beneficial
ownership of any shares in which it has no actual pecuniary interest. The
address of each of these shareholders is Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111.
<PAGE>
ELECTION OF DIRECTORS
Eight persons, all of whom are members of the present Board, are nominees
for election at the Annual Meeting as directors to hold office until the next
Annual Meeting or until their successors have been elected. If the enclosed
proxy is duly executed and received in time for the meeting and if no contrary
specification is made as provided therein, it is the intention of the persons
named therein to vote the shares represented thereby for those eight persons.
The eight persons who receive the largest number of votes are elected.
Abstentions, broker non-votes, and instructions to withhold authority to vote
on the enclosed proxy do not affect the total of votes otherwise cast for any
person. The eight persons elected will comprise the entire membership of the
Board of Directors of the Company. There will be no cumulative voting for the
election of directors. If any nominee shall be unable to serve, an event which
the Board of Directors does not anticipate, the proxy shall be voted for the
person designated by the Board to replace such nominee.
With respect to each of such nominees, the following information is
furnished:
RALPH R. WHITNEY, JR., 62, has been Chairman of the Board of the Company
since 1994. Mr. Whitney has been a principal of Hammond, Kennedy, Whitney &
Company , Inc. (HKW), a New York, New York financial intermediary and private
investment banking firm, since 1971. Mr.Whitney is also a director of Excel
Industries, Inc., Baldwin Technology Company, Inc., Adage, Inc., IFR Systems,
Inc., and Selas Corp. of America.
BRUCE D. ATKINSON, 56, has been President and a Director of the Company
since 1994, and has been Chief Executive Officer since 1995. Mr. Atkinson was
General Manager of the predecessor company from 1978 until 1994.
CHARLES M. BRENNAN, III, 55, has been a Director of the Company since 1994.
Mr. Brennan has been Chairman of the Board and Chief Executive Officer of the
MYR Group Inc., a specialty electrical and telecommunications contractor,
since 1989. Mr. Brennan is also a Director of UNR Industries, Inc.
JOHN D. COOKE, 56, has been a Director of the Company since 1994. Mr. Cooke
has been a Senior Vice President--Investments of Prudential Securities, Inc.
since 1991. For more than 5 years prior thereto he was Senior Vice President--
Investments of Thompson McKinnon Securities.
JAMES O. FUTTERKNECHT, JR., 50, has been a Director of the Company since
1995. Mr. Futterknecht has been Chairman of the Board, President and Chief
Executive Officer of Excel Industries Inc., an Elkhart, Indiana automotive
parts supplier, since 1995. Mr. Futterknecht was President and Chief Operating
Officer of Excel from 1993 to 1995, and Executive Vice President of Excel from
1990 to 1992.
ALAN O. MOSSBERG, 64, has been a Director of the Company since 1994. Mr.
Mossberg has been Chief Executive Officer and President of O.F. Mossberg &
Sons, Inc., a North Haven, Connecticut manufacturer of shotguns, for more than
5 years.
JOHN M. RAMEY, 44, has been a Director of the Company since 1994. Mr. Ramey
has been a principal of HKW since 1986 and sits on the Boards of several
private companies.
GLENN SCOLNIK, 45, has been a Director of the Company since 1994. Mr.
Scolnik has been a principal of HKW since 1993. Mr. Scolnik was a member of
the law firm of Sommer & Barnard, PC, Indianapolis, Indiana, for more than
five years prior to 1993, and was of counsel to such firm from 1993 to 1995.
Mr. Scolnik is a director of WavePhore, Inc., a data broadcasting company, and
sits on the Boards of several private companies.
2
<PAGE>
EXECUTIVE OFFICERS
Furnished below is a summary of information identifying the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bruce D. Atkinson....... 56 Chief Executive Officer and President
Jeffrey G. Wood......... 40 Vice President, Chief Financial Officer, Secretary and Treasurer
Michel Hauser-Kauff-
mann................... 54 Managing Director-RDI
</TABLE>
- --------
All of the above executive officers were elected by the Board on August 30,
1996.
Mr. Atkinson has been President since July 1994 and has been Chief Executive
Officer since June 1995. Mr. Atkinson was General Manager of the predecessor
company from 1978 until 1994.
Mr. Wood has been Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company since July 1994. Mr. Wood was Controller of the
predecessor company from 1990 until 1994.
Mr. Hauser-Kauffmann has been Managing Director of RDI since July 1996. Mr.
Kauffmann has been with RDI in various capacities for the last 25 years.
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers receive $16,000 per year
payable quarterly plus $1000 per Board meeting attended and $800 per committee
meeting if not held immediately prior to or subsequent to a regular Board
meeting. Non-employee directors are also granted options to purchase 1,000
common shares, at the fair market value on the date of grant, upon their
initial election and annually upon reelection. The options expire at the
earlier of one year after the termination of the director's Board membership
or ten years after the date of grant. Directors who are officers are not
compensated for their Board responsibilities.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met five times in 1996. The Board has an audit
committee, a compensation committee, a nominating committee and an executive
committee.
The purpose and function of the audit committee are to recommend the
engagement or discharge of independent public accountants; to review year-end
and interim financial statements prior to issuance; to review the services
being performed by the public accountants; and to make appropriate reports and
recommendations to the Board of Directors. Messrs. Brennan, Cooke, and Ramey
are members of the audit committee. The audit committee met once in 1996.
Messrs. Mossberg, Cooke, Scolnik and Whitney are members of the compensation
committee. The compensation committee formulates executive compensation for
the Company, and determines the compensation of all executive officers. The
compensation committee administers the Company's 1996 Stock Compensation Plan.
The Committee met twice in 1996.
Messrs. Whitney, Atkinson, Futterknecht, and Scolnik are members of the
executive and nominating committees. The executive committee did not meet in
1996. The nominating committee does not accept nominations from shareholders.
The nominating committee was formed in October 1996 and did not meet in 1996.
CERTAIN TRANSACTIONS
In April 1996, the Company acquired all of the issued and outstanding
capital stock of RDI for a total purchase price of $8,964,000. The Company
paid $6,964,000 in cash, delivered $1,108,000 aggregate principal
3
<PAGE>
amount of its 8.0% Subordinated Promissory Notes and $892,000 aggregate
principal amount of its 6.5% Automatically Convertible Subordinated Promissory
Notes ("RDI Convertible Notes"). The price was determined in arms length
negotiations between the directors of the Company and the shareholders of RDI,
none of whom were officers of the Company at the time. Mr. Michael Hauser-
Kauffmann, General Manager of RDI, received from such consideration in
exchange for his shares of RDI a total of $1,285,515 in cash and $369,200 in
aggregate principal amount of RDI Convertible Notes. Mr. Hauser-Kauffmann's
RDI Convertible Notes were automatically converted upon the closing of the
Company's initial public offering into 41,022 Common Shares of the Company.
In conjunction with the Company's IPO in October 1996, proceeds were used to
repay MassMutual for long term debt which had been in place since the Business
was acquired from GTE in July 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
HKW provides management services and acquisition advice and assistance to
the Company. Messrs. Whitney, Ramey, Scolnik and Mr. Douglas H. Bagin and Mr.
Forrest E. Crisman, Jr. (directors of the Company prior to July 29, 1996) are
principals of HKW and each owns Common Shares. The Company pays HKW monthly
management fees of $15,000 and pays director fees to Messrs. Whitney, Scolnik,
and Ramey who are Directors of the Company. The management fees amounted to
$180,000 for the year ended December 31, 1996.
Mr. Douglas H. Bagin, Messrs. Mossberg and Whitney were members of the
compensation committee of the Board of Directors during the year ended
December 31, 1996. Mr. Bagin, who became a principal of HKW in 1996, resigned
from the Board on July 29, 1996.
Mr. Bagin was an executive officer of Maine Rubber Company ("MRC") during
1996. Mr. Whitney served as the Chief Executive Officer and Chairman of the
Board of MRC, and a member of the executive committee of the Board of
Directors of MRC, which performs the functions of a compensation committee.
Mr. Mossberg is an executive officer of O.F. Mossberg. Mr. Whitney is a
director and a member of the compensation committee of the Board of Directors
of O.F. Mossberg.
Mr. Scolnik also assists the Company in the management of its legal affairs
and is paid for such services. Such fees amounted to $94,152 in 1996. However,
over half such amount represents payment for services rendered by associated
co-council and a paralegal.
In conjunction with the Company's IPO in October 1996, proceeds were used to
repay Preferred Shares owned by Messrs. Brennan, Cooke, and Futterknecht in
the amount of $94,000 each.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of February 14, 1997, information
regarding the beneficial ownership of common shares of the Company by each
director of the Company, each of the executive officers named in the Summary
Compensation Table below, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------------ ----------------------- --------
SHARES
------
<S> <C> <C>
Ralph R. Whitney............................. 320,689(1) 6.5%
Bruce D. Atkinson............................ 153,846(2) 3.1%
Charles M. Brennan, III...................... 20,000 0.4%
John D. Cooke................................ 20,000 0.4%
James O. Futterknecht, Jr.................... 20,000(3) 0.4%
Alan I. Mossberg............................. 15,000(4) 0.3%
John M. Ramey................................ 160,345(5) 3.2%
Glenn Scolnik................................ 160,345 3.2%
Jeffrey G. Wood.............................. 102,564 2.1%
Michel Hauser-Kauffmann...................... 41,022 0.8%
All Executive Officers and Directors as a
Group (10 persons).......................... 1,013,811 20.4%
</TABLE>
- --------
(1) Includes 80,172 shares owned by Mr. Whitney's wife, as to which Mr.
Whitney disclaims beneficial ownership.
(2) Includes 75,000 shares owned by Mr. Atkinson's wife, as to which Mr.
Atkinson disclaims beneficial ownership.
(3) Includes 5,000 shares held by a revokable trust of which Mr. Futterknecht
is trustee, 5,000 shares held by a revokable trust of which Mr.
Futterknecht's wife is trustee, and 10,000 shares held by two irrevocable
trusts for the benefit of Mr. Futterknecht's children, all of such shares
as to which Mr. Futterknecht disclaims beneficial ownership.
(4) Represents shares owned by Mr. Mossberg's wife, as to which Mr. Mossberg
disclaims beneficial ownership.
(5) Includes 60,000 shares owned by Mr. Ramey's wife, as to which Mr. Ramey
disclaims beneficial ownership.
5
<PAGE>
SUMMARY COMPENSATION TABLE
Furnished below is a summary concerning the compensation awarded and/or paid
in each of the last two years to the Company's Chief Executive Officer and
each other executive officer whose aggregate salary and bonus exceeded
$100,000 in 1996. Prior to 1996 the Company was not a reporting company
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
NAME AND COMPENSATION
PRINCIPAL SECURITIES AWARDS ALL OTHER
POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS(#) (1)
--------- ---- --------- -------- --------------------- ---------
<S> <C> <C> <C> <C> <C>
Ralph R. Whitney, Jr.... 1996 $ -- $ -- -- $15,000
Chairman 1995 $ -- $ -- -- $15,000
Bruce D. Atkinson....... 1996 $204,900 $95,818 45,000 $ 8,356
President and CEO 1995 $211,647 $81,300 0 $ 7,416
Jeffrey G Wood.......... 1996 $144,000 $67,339 30,000 $ 8,202
Vice President and CFO 1995 $145,248 $57,120 0 $ 7,189
Michel Hauser-Kauff-
mann................... 1996 $140,660(2) $ 0 14,000 $ 0
Managing Director-RDI
</TABLE>
- --------
(1) Represents director's fees paid to Mr. Whitney. Includes for Mr. Atkinson
and Mr. Wood the value of Company paid life insurance, and contributions
by the Company to the Company's deferred compensation and savings plan.
(2) Includes Company paid compensation from April 1, 1996 (date of acquisition
of RDI) to December 31, 1996.
OPTIONS
The following table shows the options to purchase common shares granted to
the named executive officers in 1996 pursuant to the Company's 1996 Stock
Compensation Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE($) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ralph R. Whitney, Jr.... -- -- -- -- -- --
Bruce D. Atkinson....... 45,000(1) 20.0 10.5625 10/25/2006 $ 299,000 $ 758,000
Jeffrey G. Wood......... 30,000(2) 13.3 10.5625 10/25/2006 $ 199,000 $ 505,000
Michel Hauser-Kauff-
mann................... 14,000(3) 6.2 9.00 10/2/2006 $ 79,000 $ 201,000
</TABLE>
- --------
(1) Options become exercisable in 9,465 share increments on October 26, 1997,
January 1, 1998, January 1, 1999, January 1, 2000, and 7,140 on January 1,
2001.
(2) Options become exercisable in 9,465 share increments on October 26, 1997,
January 1, 1998, January 1, 1999, and 1,605 on January 1, 2000.
(3) Options for 11,111 shares become exercisable on October 2, 1997 and 2,889
become exercisable on January 1, 1998.
6
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN
UNDERLYING UNEXERCISED OPTIONS THE MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
- ---- ------------------------------ ----------------------------
<S> <C> <C>
Bruce D. Atkinson....... 0/45,000 0/109,700(1)
Jeffrey G. Wood......... 0/30,000 0/73,100(1)
Michel
Hauser-Kauffmann........ 0/14,000 0/56,000(1)
</TABLE>
- --------
(1)Based on the December 31, 1996 closing price of $13.00 per share.
HAUSER-KAUFFMANN EMPLOYMENT AGREEMENT
The terms of Michael Hauser-Kauffmann's employment with RDI are governed by
(i) his written employment agreement dated January 10, 1986, with amendments
dated March 23, 1993 and March 29, 1996 (the "Employment Agreement"), and (ii)
by the provisions of French law and the National Metal Workers' collective
bargaining agreement.
The Employment Agreement provides that Mr. Hauser-Kauffmann will receive a
gross annual base salary of FF 975,000 (approximately $188,000 at December 31,
1996 exchange rates), plus an annual bonus payment of up to FF 487,500
(approximately $94,000). The amount of bonus payment will depend on whether
Mr. Hauser-Kauffmann satisfies certain performance objectives set annually by
management. In addition to his base salary and bonus payment, Mr. Hauser-
Kauffmann receives the use of a company car, health insurance and supplemental
retirement benefits. The Employment Agreement provides for a contractual
severance payment to Mr. Hauser-Kauffmann if RDI terminates the Employment
Agreement for any reason (other than for serious professional misconduct)
prior to March 29, 1998. The amount of the contractual severance payment is
equal to two years salary and bonus.
In addition, Mr. Hauser-Kauffmann benefits from the provisions of French
labor law, and the National Metal Workers' collective bargaining agreement
(Convention Collective de la Metallurgie; the "Collective Bargaining
Agreement"), which applies to numerous French companies whose businesses
relate to metal products, including RDI. Both French labor law and the
Collective Bargaining Agreement provide for a minimum notice period prior to
dismissal of an employee and for the payment of termination indemnities. In
addition to these termination indemnities, French law also provides for the
payment of damages if the dismissal is without "real and serious cause."
In general, if Mr. Hauser-Kauffmann is dismissed before March 29, 1998, he
would receive a severance payment under his Employment Agreement. The
Employment Agreement provides that this severance payment is inclusive of any
damages and termination indemnities that may be due under French law or the
Collective Bargaining Agreement. If Mr. Hauser-Kauffmann is dismissed after
March 29, 1998, damages and termination indemnities would be payable under
French law and the Collective Bargaining Agreement, which would take into
account Mr. Hauser-Kauffmann's age and seniority.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation committee of the Board of Directors of the Company (the
"Committee") formulates executive compensation policy for the Company and
determines, subject to Board approval, the compensation of all executive
officers named above. The Committee is comprised of non-employee directors.
BROAD POLICY CONSIDERATIONS. In determination of executive compensation, the
following broad compensation policies were followed:
(1) Executive compensation must be competitive in order to retain and/or
attract key executives critical to the success of the Company.
7
<PAGE>
(2) An effective executive compensation plan should be an integrated
program that balances short-term performance with the achievement of long-
term goals and is designed to result in continuously improving shareholder
value.
COMPENSATION PROGRAMS. The short-term components of the Company's executive
compensation program consist of base salaries and bonuses under the Company's
Management Incentive Plan (MIP). The MIP was formulated and established by the
Board in 1994 and continued until 1996 as a complement to base salaries for
officers and executive employees. Beginning in 1997, in order to take into
account the performance of RDI, the officers of the Company will receive a
bonus under an Officer Incentive Compensation Plan which reflects total
Company performance including RDI. The MIP will continue in 1997 for the
remainder of the executive employees.
In 1996, in conjunction with the Initial Public Offering of the Company's
shares, the Board of Directors and the shareholders of the Company,
respectively, approved and adopted the 1996 Stock Compensation Plan as
recommenced by the Board. The Stock Compensation Plan provides the long-term
incentive component of the executive compensation program.
BASE SALARY. In determining 1996 base salaries for United States based
executives, emphasis was placed on a comparison of each individual's salary to
the salaries received by individuals in similar positions in other companies
of comparable size based upon available survey information. The broad policy
consideration to maintain competitive executive compensation was used to
target a base salary within the range of salaries of similar executives at
similar sized companies. Individual performances as well as the Company's
performance compared to financial objectives were also considered.
In regard to the executive in France, the 1996 salary was set by the
employment agreement entered into at the time of the acquisition.
CASH INCENTIVE COMPENSATION. Under the Management Incentive Plan, bonus
opportunities were based on a maximum potential of 50% of the employees base
salary. The bonus target was based on the return on equity for the Company.
The bonus paid in 1996 was approximately 94% of the maximum, or 47% of base
salaries. At the time the Board established the targeted return on equity, the
Company was privately owned.
STOCK INCENTIVE COMPENSATION. The Company's 1996 Stock Compensation Plan was
adopted in October 1996 in conjunction with the Company's Initial Public
Offering. This plan was designed to provide the long term incentive to the
executive employee compensation plan. Since stock option values are dependent
on the long-term growth of the Company's stock price, the Committee believed
that the grant of stock options was the appropriate way in which to add a
long-term incentive element to the Companies executive compensation program.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation of the Chief
Executive Officer reflects the consideration and application of the same
policies and factors described above. Particular consideration was given to
the leadership skills consistently demonstrated by Mr. Atkinson; the
responsibilities imposed on him; and a comparison of his compensation to the
compensation paid to chief executive officers of similarly situated companies.
Mr. Atkinson's base salary was based on competitive data obtained through a
survey of similar sized companies. Mr. Atkinson's bonus was based on targeted
goals for return on equity for the Company.
Members of the Compensation Committee include Messrs. Mossberg, Whitney,
Cooke, and Scolnik.
8
<PAGE>
PERFORMANCE GRAPH.
The following graph compares the cumulative total shareholder return on the
Company's common shares, with the cumulative total return of companies on the
Standard & Poor's 500 Stock Index and the total cumulative total return on the
common stock of the Standard & Poor's Auto Parts and Equipment Index.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURN*
<CAPTION> S&P
Auto Parts
Control S&P 500 & Equip
Devices Index Index
------- ------- ----------
<S> <C> <C> <C>
FYE 10/02/96 $100 $100 $100
FYE 12/31/96 $144.44 $108.34 $106.96
</TABLE>
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
NOTE: TOTAL RETURNS BASED ON MARKET CAPITALIZATION
9
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
At this Annual Meeting, shareholders will be asked to approve the Control
Devices, Inc. Employee Stock Purchase Plan (the "Plan"). The Plan, and the
right of participants to make purchases thereunder, is intended to meet the
requirements of an "employee stock purchase plan," as defined in Section 423
of the Internal Revenue Code (the "Code"). The following summary of the Plan
is qualified, in its entirety, be reference to the Plan document.
PURPOSE
The purpose of the Plan is to provide employees of Control Devices, Inc. and
designated subsidiaries (collectively, "Participating Companies") an
opportunity to participate in the ownership of the Company. The Plan is
intended to benefit the Company as well as its shareholders and employees. The
Plan gives employees an opportunity to purchase common shares of the Company
at a favorable price through payroll deductions. The Company believes that the
shareholders will benefit correspondingly from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Plan.
ADMINISTRATION
The Plan is administered by a Committee appointed by the Board of Directors.
The members of the Committee will serve at the pleasure of the Board. The
Company intends that the composition of the Committee complies with Code
Section 162.
SHARES AND TERMS
The shares subject to purchase rights granted under the Plan are the
Company's authorized but unissued or reacquired no par value common shares.
The initial number of shares which may be issued under the Plan is 200,000,
subject to adjustment in the event of any increase or decrease in the number
of outstanding common shares resulting from the subdivision or consolidation
of shares, the payment of a stock dividend, any other increase or decrease in
the shares affected without receipt or payment of consideration by the
Company, or the distribution of the shares of a subsidiary to the Company's
shareholders.
ELIGIBILITY
Generally, full-time employees of any Participating Company will be eligible
to participate after completion of one full year of employment. Full-time
employees are employees who complete at least 1,000 hours of active employment
per year, and/or who work more than five months per year. Generally, the
employment relationship will be treated as continuing while the employee is on
a Company approved absence that does not exceed 90 days. Participation will
begin on the first entry date immediately following the date on which the
eligible employee completes an enrollment form and returns it to the
Committee. Entry dates are the first stock trading days of January, April,
July, and October, until the Committee determines otherwise.
Participation in the Plan is completely optional.
OFFERING/PURCHASE PERIODS
The Plan is implemented for consecutive three month offering/purchase
periods, unless otherwise determined by the Board. No offering/purchase period
can exceed 24 months. Each participant will receive a separate purchase right
for each offering/purchase period in which he or she participates. The
purchase right permits the participant to buy common shares at the end of the
offering/purchase period with the payroll deductions accumulated during the
offering/purchase period. The purchase right will be granted on the first day
of the offering/purchase period and will be automatically exercised on the
last day of the offering/purchase period. The Board, at its discretion, may
make changes to the length of offering and/or purchase periods.
10
<PAGE>
The purchase price per share under the Plan is a designated percentage of
the fair market value of a Common Share on the date the shares are purchased
under the Plan ("purchase date"). The designated percentage will be 85% unless
otherwise determined by the Board (but in no event will it be less than 85%).
The purchase price may not be lower than the book value of the common shares
(as reported to the Securities and Exchange Commission or to shareholders) as
of the last day of the prior quarter. If the book value exceeds 85% of the
fair market value of the common shares on the purchase date, the purchase
price will be the book value of the shares. However, if the Book Value exceeds
the fair market value on the purchase date, no purchase will be made until the
next purchase date.
The fair market value of the common shares on a given date is the closing
sale price of the common shares as reported on the Nasdaq National Market
System.
LIMITATIONS
No purchase right will be granted to any person who immediately thereafter
would own, directly or indirectly, shares possessing 5% or more of the total
combined voting power or value of all classes of shares of the Company or any
of its subsidiaries. Furthermore, no participant will be granted purchase
rights under this Plan if such grant would result in the participant's rights
to purchase shares under all employee stock purchase plans of the Company and
its subsidiaries accruing at a rate which exceeds $25,000 worth of shares in
any calendar year.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
Participants will pay for their shares in a manner, and at such time as the
Committee determines. Generally, the participant will make after-tax payroll
deductions during the offering/purchase period. The deductions may not exceed
10% of a participant's compensation. The participant's payroll deductions will
be used to purchase as many shares (including fractional) as possible with the
amount of payroll deductions credited to the participant's account during the
offering/purchase period. A participant may increase or decrease his or her
deductions during an offering/purchase period to become effective on the
subsequent entry date. To change the rate of payroll deductions, a participant
must file a new enrollment form with the Committee authorizing the change,
subject to such timing limitations as the Committee determines. A
participant's enrollment form will remain in effect for successive
offering/purchase periods until changed or terminated.
A participant may discontinue participation in the Plan, and elect to
receive all of his or her accumulated payroll deductions on the next purchase
date. The participant's purchase right will automatically terminate and the
participant must file another enrollment form to resume participation.
The Code generally limits the value of shares a participant can purchase in
any calendar year to $25,000. Thus, the Company may decrease a participant's
payroll deductions to 0% in order to comply with the Code if at any time
during a calendar year, the aggregate of all payroll deductions used to
purchase common shares in all prior purchase periods plus all payroll
deductions accumulated in the following purchase period equals $22,500 (90% of
$25,000). The Company may provide either (i) that payroll deductions will
recommence at the same rate on the next entry date, or (ii) that the
participant will be required to file a new enrollment form.
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that, with
certain exceptions, no amendment or termination may adversely affect
outstanding purchase rights. However, an outstanding right may be terminated
as of the end of an offering/purchase period. The Board may not modify or
amend the Plan if that amendment, in the Board's judgment, constitutes a
change which would require shareholder approval under applicable law.
11
<PAGE>
REORGANIZATIONS
In the event of a dissolution or liquidation of the Company, or a merger or
consolidation to which the Company is a constituent corporation, the Plan will
terminate unless the plan of merger, consolidation or reorganization provides
otherwise. All amounts that have been withheld but not yet applied to purchase
common shares under the Plan will be refunded to participants, without
interest. The Plan in no event restricts the Company's right to undertake a
dissolution, liquidation, merger, consolidation or other reorganization.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of certain federal income tax
consequences of the Plan. This summary does not discuss the tax consequences
of a participant's death or the income tax laws of any city, state or foreign
country in which the participant may reside. This description does not purport
to be complete.
Grants under the Plan will permit the Plan to qualify under Code Section
423. In the case of a qualifying grant, no taxable income results to the
employee at the time of the grant of the purchase right or upon its exercise.
If the employee does dispose of the purchased shares within two years of the
date of the purchase right grant, or within one year of the date the shares
are transferred to him or her, and the purchase price was equal to 100% of the
fair market value of the common shares at the date of the grant, any profit or
loss recognized upon subsequent disposition will be long-term capital gain or
loss. If the shares are held for the prescribed period and the purchase price
was less than 100% of the fair market value of the common shares at the date
of the grant, the lesser of (i) the excess of the fair market value of the
shares at the time of disposition over the purchase price or (ii) the excess
of the fair market value of the shares at the time the purchase right was
granted over the purchase price will be treated as ordinary income, with any
remaining profit treated as long-term capital gain. Any loss will be a long-
term capital loss. In either case, there will be no tax effect upon the
Company. If the shares are disposed of before the end of the prescribed
holding period (a "disqualifying disposition"), the employee must report as
ordinary income, and the Company may deduct from its taxable income, the
excess of the fair market value of the common shares on the date of exercise
over the purchase price. The balance of any gain or loss will be a short-term
capital gain or loss to the employee. Upon a disqualifying disposition, it is
possible for an employee to have both ordinary income and capital loss.
NEW PLAN BENEFITS
Since participation in the Plan is completely voluntary, and participants
may deduct various amounts of their compensation to purchase shares under the
Plan, it is impossible to determine the number of shares that will be or would
have been purchased under the Plan.
VOTE REQUIRED FOR APPROVAL OF THE PLAN
The affirmative vote of a majority of the common shares represented and
voting at the Annual Meeting is necessary to approve the Plan. The Board
believes that adoption of the Plan is in the best interests of the Company and
its shareholders.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
independent public accountants to examine the financial statements of the
Company and its subsidiaries for the current fiscal year ending December 31,
1997. Although there is no requirement that such appointment be submitted to a
vote of the shareholders, the Board of Directors feels that the shareholders
should be afforded the opportunity to ratify the appointment. If the
shareholders do not ratify the appointment, the Board of Directors , in its
discretion and without further vote of the shareholders, will select another
firm to serve as independent public accountants for the current fiscal year.
Arthur Andersen LLP has served as independent public accountants for the
Company since 1994 when the Company was formed and is considered by the Board
of Directors to be well qualified. The Board of Directors
12
<PAGE>
thereby recommends a vote FOR ratification of the appointment of Arthur
Andersen LLP, and if the enclosed proxy is duly executed and received in time
for the meeting and if no contrary specification is made as provided therein,
it is the intention of the persons named therein to vote the shares
represented thereby for ratification of such appointment.
A representative of Arthur Andersen is expected to be present at the
shareholder meeting to respond to appropriate questions.
SHAREHOLDER PROPOSALS
November 18, 1997 is the date by which shareholder proposals intended to be
presented at the 1998 annual meeting must be received by the Company to be
considered for inclusion in the proxy materials relating to that meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other business to be
transacted at the Annual Meeting of shareholders, but if any other matters do
come before the meeting it is the intention of the persons named in the
accompanying proxy will vote according to their discretion.
By Order of the Board of Directors.
-------------------------------------
Jeffrey G. Wood
Secretary
13
<PAGE>
DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONTROL DEVICES, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 1997
P The undersigned shareholder of CONTROL DEVICES, INC. hereby acknowledges
R receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement,
O dated March 10, 1997, and hereby appoints Bruce D. Atkinson and Ralph R.
X Whitney, Jr., and each of them, proxies and attorneys-in-fact, with full
Y power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1997 Annual Meeting of Shareholders of
CONTROL DEVICES, INC., to be held on April 25, 1997 at 9:30 a.m. (EST),
local time, at Embassy Suites Hotel, 1050 Westbrook Street, Portland, Maine,
and at any adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL. WITH RESPECT TO ANY OTHER MATTERS WHICH MAY ARISE,
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PERSON(S) NAMED ABOVE.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
___________
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
___________
<PAGE>
[X] PLEASE MARK
VOTES AS IN Account number & shares will be automatically printed here
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1, AND
"FOR" ITEMS 2 AND 3.
1. Election of Directors
NOMINEES: Ralph R. Whitney, Jr., Bruce D. Atkinson,
Charles M. Brennan, III, John D. Cooke,
James O. Fullerknecht, Jr., Alan O. Mossberg,
John M. Ramey and Glenn Scolnik
FOR WITHHELD
[_] [_]
[_]______________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
Name & Address will
Print out here.
Signature:________________________Date:___________
FOR AGAINST ABSTAIN
2. Ratify the Control Devices, Inc. [_] [_] [_]
Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
3. Ratify the appointment of Arthur [_] [_] [_]
Andersen LLP as independent public
accountants.
MARK HERE MARK HERE
FOR ADDRESS [_] IF YOU PLAN [_]
CHANGED AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS OR OTHER
FIDUCIARIES SHOULD GIVE FULL TITLE AS SUCH. IF SIGNING FOR A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY A DULY AUTHORIZED OFFICER.
Signature:________________________Date:___________
<PAGE>
PREAMBLE
--------
Effective as of , 1997, Control Devices, Inc.
adopts this Employee Stock Purchase Plan ("Plan") for its employees.
This Plan shall be known as the CONTROL DEVICES, INC. EMPLOYEE STOCK
PURCHASE PLAN. The purpose of the Plan is to enable employees to purchase
Control Devices, Inc. Common Shares through payroll deductions.
NOW, THEREFORE, effective as of , 1997, the
provisions of this Plan is adopted by the Company as set forth hereinafter.
1
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ARTICLE I
---------
Definitions
-----------
The following terms when used herein, unless otherwise expressly provided
and/or unless the context clearly indicates otherwise, shall have the following
respective meanings:
1.01 Board or Board of Directors. The term "Board" or "Board of
----------------------------------
Directors" shall mean the Board of Directors of Control Devices, Inc.
1.02 Code. The term "Code" shall mean the Internal Revenue Code of 1986,
----------
as amended.
1.03 Committee. The term "Committee" shall mean the Plan Administrative
---------------
Committee appointed by the Board of Directors of the Company to
administer the Plan.
1.04 Company. The term "Company" shall mean Control Devices, Inc., an
-------------
Indiana Corporation.
1.05 Compensation. The term "Compensation" shall mean the amount
-------------------
paid by the Company or any designated subsidiary of the Company to an Employee
as remuneration for services rendered, and reportable as income by the Employee
for federal income tax purposes, including commissions, bonuses, and overtime
payments, but exclusive of payments or benefits not paid directly to the
Employee.
1.06 Designated Subsidiaries. The term "Designated Subsidiaries" shall
------------------------------
mean the Subsidiaries which have been designated by the Board from time to time
in its sole discretion as eligible to participate in the Plan.
1.06 Effective Date. The term "Effective Date" shall mean January 1,
---------------------
1997.
1.07 Employees. The term "Employee" or "Employees" shall mean all
----------------
employees of the Company (or any Subsidiary of the Company) who are in an
eligible class specified in this Plan.
1.08 Employee Account. The term "Employee Account" shall mean the book
-----------------------
account to which Payroll Deductions are credited.
1.09 Entry Date. The term "Entry Date" shall mean the first trading
-----------------
day of each offering period. Unless otherwise subsequently changed by the
Company or the Committee, there will be four (4) Entry Dates under this plan;
January 1, April 1, July 1, and October 1. Provided, however, that the
first Entry Date under this Plan shall be such date as is selected by the
Committee between January 1, 1997 and March 30, 1997.
1.10 Fair Market Value. The term "Fair Market Value" shall be determined
------------------------
as follows:
(a) NASDAQ. If the Common Stock is not at the time listed or admitted
------
to trading on any stock exchange, but is traded in the over-the-counter market,
the Fair Market Value will be the average between the reported high price and
the reported low price of one share of Common Stock on the
2
<PAGE>
date in question in the over-the-counter market, as such prices are reported by
the National Association of Securities Dealers through its NASDAQ system or any
successor system.
(b) Stock Exchange. If the Common Stock is at the time listed or
--------------
admitted to trading on any stock exchange, then the Fair Market Value will be
the average between the reported high price and the reported low price of one
share of Common Stock on the date in question on the stock exchange that is the
primary market for the stock, as such prices are officially quoted on such
exchange.
(c) No Listing: No Stock Exchange. If the Common Stock is at the time
-----------------------------
neither listed nor admitted to trading on any stock exchange nor traded in the
over-the-counter market, or if the Committee determines that neither
subparagraph (a) nor (b) above reflects Fair Market Value of the stock, then the
Fair Market Value will be determined by the Committee after taking into account
such factors as the Committee deems appropriate.
1.11 Offering Period. the term "Offering Period" shall mean, subject
----------------------
to the discretion of the Board, a period of up to 24 months during which Payroll
Deductions are collected and applied to the purchase of Company Stock. The
Board shall have the power to change the duration of the Offering Periods with
respect to future offerings without shareholder approval if such change is
announced at least 15 days prior to the scheduled beginning of the first
Offering Period to be affected. Unless and until otherwise determined by the
Board, Offering Periods shall be three-month periods, and shall run concurrently
with Purchase Periods.
1.12 Participant. The term "Participant" shall mean an Employee who
------------------
meets the eligibility requirements of this Plan and who elects to participate in
this Plan.
1.13 Payroll Deduction. The term "Payroll Deduction" shall mean
------------------------
amounts withheld from an Employee's compensation at his or her election which
are credited to the Employee's Account for purchase of Company Stock hereunder.
1.14 Plan. The term "Plan" shall mean the CONTROL DEVICES, INC. EMPLOYEE
-----------
STOCK PURCHASE PLAN, created hereunder.
1.15 Plan Administrator. The term "Plan Administrator" shall mean the
-------------------------
Committee appointed by the Board of Directors of the Company to administer the
Plan, or such other person or entity which may be subsequently appointed by the
Board of Directors of the Company as a successor Plan Administrator.
1.16 Purchase Date. The term "Purchase Date" shall mean the last
--------------------
Trading Day of each Purchase Period.
1.17 Purchase Period. The term "Purchase Period" shall mean the
----------------------
approximately three month period commencing after one Purchase Date and ending
with the next following Purchase Date, except that the first Purchase Period of
any Offering Period shall commence on the Entry Date and end with the next
following Purchase Date.
1.18 Purchase Price. The term "Purchase Price" shall mean an amount
---------------------
equal to a designated percentage of the Fair Market Value of a share of
Company Stock on the Purchase Date. The designated
3
<PAGE>
percentage shall be 85% unless otherwise determined by the Board. In no event
shall the designated percentage be less than 85%.
1.19 Stock or Company Stock. The term "Stock" or "Company Stock" shall
-----------------------------
mean Control Devices, Inc. no par value common shares.
1.20 Stock Certificate. The term "Stock Certificate" shall mean a
------------------------
certificate issued for Company Stock purchased under this Plan.
1.21 Stock Rights. The term "Stock Rights" shall mean all rights
-------------------
attributable to owning Company Stock as provided hereunder including, but not
limited to dividend rights and voting rights.
1.22 Subsidiary. The term "Subsidiary" shall mean a corporation,
-----------------
domestic or foreign, of which not less than 50% of the voting shares are held by
the Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
1.23 Trading Day. The term "Trading Day" shall mean a day on which
------------------
national stock exchanges and the National Association of Securities Dealers
Automated Quotation (NASDAQ) System are open for trading.
4
<PAGE>
ARTICLE II
----------
Term of Plan and Stock to be Issued
-----------------------------------
2.01 Purpose. The following constitutes the provisions of the Control
--------------
Devices, Inc. Employee Stock Purchase Plan, subject to approval of the Company's
shareholders. The purpose of this Plan is to provide Employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Company Stock
through accumulated Payroll Deductions. It is the intention of the Company to
have the Plan qualify as an "Employee Stock Purchase Plan" under Code Section
423. The provisions of the Plan, accordingly, shall be construed so as to extend
and limit participation in a manner consistent with the requirements of that
section of the Code. It is intended that the Stock will be purchased either
directly from the Company or on the open market, assuming such purchase can be
done without adverse impact on future "pooling of interest" methods of
acquisition. The shares purchased from the Company will be from the Company's
authorized but unissued shares or treasury shares.
2.02 Term of Plan. This Plan will continue in existence until terminated
-------------------
by the Board of Directors of the Company.
2.03 Stock to be Issued. The initial number of shares of Company Stock
-------------------------
which may be issued under this Plan shall be 200,000 shares. The Board of
Directors of the Company in its discretion may authorize the issuance of
additional shares under this Plan at any subsequent date by appropriate
resolutions adopted by the Board and Shareholder approval.
2.04 Adjustments. The aggregate number of shares of Stock offered under
------------------
the Plan and the price of shares that any Participant has elected to purchase
shall be adjusted proportionately by the Committee for any increase or decrease
in the number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares, the payment of a stock dividend, any other increase or
decrease in such shares effected without receipt or payment of consideration by
the Company or the distribution of the shares of a Subsidiary to the Company's
shareholders.
2.05 Reorganizations. In the event of a dissolution or liquidation of the
----------------------
Company, or a merger or consolidation to which the Company is a constituent
corporation, the Plan shall terminate unless the plan of merger, consolidation
or reorganization provides otherwise, and all amounts that have been withheld
but not yet applied to purchase Stock hereunder shall be refunded, without
interest. The Plan shall in no event be construed to restrict in any way the
Company's right to undertake a dissolution, liquidation, merger, consolidation
or other reorganization.
5
<PAGE>
ARTICLE III
-----------
Eligibility
-----------
3.01 Eligibility Requirements. Employees of the Company (or any
-------------------------------
Designated Subsidiary) will be eligible to participate in this Plan on the Entry
Date immediately following completion of one full year of employment, provided
the Employee is employed as a full-time regular employee on that date. The
Committee will make the final decision as to the eligibility date of any
particular Employee. For the purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the 91st day of such leave.
The Committee will have the authority to make a final determination as to
whether or not a particular Employee is a full-time regular Employee who is
eligible under this Plan. As a general rule, an Employee who normally completes
fewer than 1,000 hours of active employment per year, and/or whose customary
employment is for not more than five months in any calendar year will not be
---
considered a regular full-time Employee who is eligible under this Plan.
3.02 Election to Participate. An eligible Employee may become a
------------------------------
Participant in the Plan by completing an enrollment form authorizing Payroll
Deductions in the form provided by the Company and filing it with the Company's
payroll office prior to the applicable Entry Date. Payroll Deductions for a
Participant shall commence on the first payroll period following the Entry Date
and shall end on the last payroll period in the Offering Period, unless sooner
terminated by the Participant as provided in Section 4.03.
Participation in this Plan will be optional by eligible Employees. An
Employee who decides not to participate on any particular Entry Date may later
decide to participate on any subsequent Entry Date. Likewise, an Employee who
decides to participate in this Plan may subsequently decide to discontinue
participation as of any Entry Date, and likewise, resume participation as of any
subsequent Entry Date. No Employee shall be required to participate in this
Plan.
3.03 Eligibility Determinations. Any provisions of the Plan to the
---------------------------------
contrary notwithstanding, no Employee shall be granted a purchase right under
the Plan (i) if, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own stock and or hold outstanding purchase rights to purchase
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Subsidiary of the
Company, 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 worth of stock (determined at Fair Market Value of
the shares at the time such purchase right is granted) for each calendar year in
which such purchase right is outstanding at any time.
6
<PAGE>
ARTICLE IV
----------
Purchase and Sale of Stock and Payroll Deduction Procedures
-----------------------------------------------------------
4.01 Purchase of Stock. Company Stock may be purchased under this Plan
------------------------
only through Payroll Deductions. The Company Stock will be purchased either
directly from the Company or on the open market. Shares purchased directly from
the Company will be from the Company's authorized but unissued shares or
treasury shares as determined by the Company. Such Stock will be purchased on
each Purchase Date during the year.
4.02 Valuation of Stock - Purchase Price. The price to be paid for
------------------------------------------
Company Stock purchased hereunder will be eighty five percent (85%) of the
closing price for Company Stock on the NASDAQ Stock Exchange on each of the
Purchase Dates. Provided, however, the price paid for such Stock may not be
less than the Book Value of such Stock as of the last day of the prior quarter.
(Example: On the January 2nd Purchase Date, the Book Value to be used will be
the Book Value of the Company reported for the particular quarter (March 31,
June 30, September 30 or December 31) on reports filed with the Securities
and Exchange Commission (or as reported to shareholders if not otherwise
reported to the Securities and Exchange Commission) ("Book Value"). If Book
Value for such prior quarter exceeds eighty five percent (85%) of the closing
market price of Company Stock on the particular Purchase Date, the Purchase
Price will be the Book Value of such Stock. Provided, however, no purchase will
be made until the next Purchase Date if such Book Value exceeds the closing
price of Company Stock on the NASDAQ Stock Exchange as of the particular
Purchase Date. In no event shall the Purchase Price be less than the lower of:
(i) 85% of the Fair Market Value of a share of Company Stock on the Entry Date,
or (ii) 85% of the Fair Market Value of a share of Company stock on the Purchase
Date.
4.03 Payroll Deduction Procedures. The Committee shall determine the
-----------------------------------
exact Payroll Deduction procedures to be used under the Plan. At the time the
Participant files an enrollment form, he or she shall elect to have Payroll
Deductions made on each payday during the Offering Period in and amount of
between 1% and 10% of his or her Compensation. The aggregate of such Payroll
Deductions during any Offering Period shall not exceed 10% of the Participant's
Compensation paid during that Offering Period.
A Participant may increase or decrease the rate of his or her Payroll
Deductions during a Purchase Period by filing with the Company a new enrollment
form authorizing a change in the Payroll Deduction rate. The change in rate
will generally be effective with the first payroll period following such advance
notice period as the Company shall specify. A Participant's enrollment form
shall remain in effect for successive Purchase Periods and Offering Periods
unless terminated as provided in this Section 4.03. The Board is authorized to
limit the number of Participant rate changes during any Offering Period.
Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code, a Participant's Payroll Deduction may be
decreased to 0% at such time during the Purchase Period which is scheduled to
end during the current calendar year (the "Current Purchase Period") that the
aggregate of all Payroll Deductions which were previously used to purchase Stock
under the Plan in a prior Purchase Period which ended during that calendar year
plus all Payroll Deductions accumulated with respect to the Current Purchase
Period equal $22,500. The Company may provide either (i) that Payroll
Deductions shall recommence at the rate provided in the Participant's enrollment
form at the beginning of
7
<PAGE>
the first Purchase Period scheduled to end in the following calendar year,
unless terminated by the Participant as provided in this Section, or (ii) that
participation shall recommence only upon filing a new enrollment form.
On or before March 15, June 15, September 15 or December 15 of any
year (or on such other dates as the Committee may designate from time to time),
Employees may elect to withdraw all but not less than all their Payroll
Deductions credited to his or her Employee Account and not yet used to purchase
Company Stock, and have those amounts returned to him or her on the next
Purchase Date. Such Participant's purchase right will automatically terminate,
and participation will not resume until the Participant files another enrollment
form. The Committee will establish appropriate procedures for implementation of
such election. There will be no interest accrued on payroll deductions.
4.04 Purchase Rights. On the Enrollment Date of each Offering Period,
----------------------
each eligible Employee participating in the Offering Period shall be granted a
purchase right to purchase on each Purchase Date during the Offering Period, as
many shares (including fractional) of Company Stock as are possible based on the
amount of cash credited to each such Employee's Account.
4.05 Issuance of Stock Certificates. Subject to such reasonable
-------------------------------------
procedures as the Committee may establish from time to time, a Participant may
make a written or phone request for actual issuance of a Stock Certificate for
all of the whole shares of Stock in his or her Employee Account. As soon as
feasible after such request, such Stock Certificate will be issued to the
Participant.
Likewise, in the event of termination of employment, within a reasonable
time after such termination, generally 30 days after the end of the calendar
quarter in which termination occurs, the Employee or his or her designated
beneficiary, as the case may be, will be issued a Stock Certificate with the
number of whole shares of Company Stock credited to such Participant in his or
her Employee Account. Likewise, the Employee or his or her designated
beneficiary will receive cash in lieu of any fractional shares held in the
Employee's Account. Finally, any Payroll Deductions not yet applied to the
purchase of Company Stock will be refunded in cash.
4.06 Dividends and Voting. To the extent that Stock Certificates
---------------------------
have actually been issued to an Employee, any dividends shall be paid directly
to the Employee. If Stock Certificates have not been issued, but the shares are
credited to an Employee's Account, any dividends will be credited to such
Employee's Account and will be used to purchase additional shares of Company
Stock as of the next Purchase Date.
Any Employee who becomes an owner of Company Stock under this Plan will be
entitled to vote such Company Stock. Such Employees will receive a form of proxy
each year to enable them to exercise their voting rights.
4.07 Sale of Stock by Employees. An Employee who owns Company Stock
---------------------------------
under this Plan will have the right to sell such Stock on a daily basis. If a
Stock Certificate has been issued to the Employee, the Employee may sell such
Shares through any broker of his or her choice subject to applicable securities
laws.
8
<PAGE>
If a Stock Certificate has not actually been issued to an Employee
hereunder, but the Employee has Company Stock in the Employee's Account
hereunder, the Employee (subject to such reasonable procedures as the Committee
may establish from time to time) will have the following choices if he or she
desires to sell the Company Stock:
1. The Employee may make a written request accompanied by a $15
check for actual issuance of a Stock Certificate, which will be issued to the
Employee as soon as feasible. The Employee may then sell such Stock in any
manner that the Employee chooses; or
2. The Employee may request a sale of all of the shares of Company
Stock in the Employee's Account by sending a written request to such individual
or entity as is designated by the Committee from time to time. Any requested
sales will occur within five (5) business days after such written request is
received by the Trustee and will be sold through a broker selected by the
Committee or the Trustee. Brokerage commissions and transaction fees will be
deducted from the sales price.
9
<PAGE>
ARTICLE V
---------
Termination of Employment/Payment of Benefits
---------------------------------------------
5.01 Termination of Employment. Within a reasonable time after
--------------------------------
termination of employment, generally shortly after the end of the calendar
quarter in which termination occurs, the Participant will receive a Stock
Certificate for all full shares of Company Stock credited to the Employee's
Account. The Employee also will receive any additional cash that is credited to
the Employee's Account.
5.02 Beneficiary Designation. Each Participant shall be entitled to
------------------------------
designate one or more beneficiaries who will be entitled to receive all Stock
Certificates, cash in lieu of fractional shares, and all accrued Payroll
Deductions held in the Employee's Account in the event of the death of the
Employee.
5.03 Unclaimed Benefits. If any payments directed to be made from
-------------------------
the Trust Fund are not claimed, the Committee shall dispose of such payments as
the Committee determines.
5.04 Payment of Benefits on Behalf of Minor or Legal Incompetent. In the
------------------------------------------------------------------
event that any benefit under the Plan is payable to a minor or other legally
incompetent person, the Trustee shall not be required to seek the appointment of
a guardian, but shall be authorized to pay the same to any person having custody
of such minor or incompetent person, to pay to such minor or incompetent person
without the intervention of a guardian, or to pay the same to a legal guardian
of such minor or incompetent person if one has already been appointed.
5.05 Non-Alienation of Benefits. Unless otherwise required by law, none
---------------------------------
of the benefits, payments, proceeds, claims or rights of any Participant or
beneficiary hereunder shall be subject to any claim of any creditor of any
Participant or beneficiary, and in particular, the same shall not be subject to
attachment or garnishment or other legal process. No Participant or beneficiary
shall have any rights to alienate, pledge, encumber, or assign any of the
benefits or payments or proceeds, which he or she may expect to receive,
continentally or otherwise, under the Plan.
10
<PAGE>
ARTICLE VI
----------
Plan Administration
-------------------
6.01 Appointment of Committee as Plan Administrator. The Board of
-----------------------------------------------------
Directors will appoint a Plan Administrative Committee consisting of three (3)
individuals, unless a different number of individuals is specified by the Board
from time to time. Such Committee members will continue to serve on the
Committee until and unless replaced by the Board or unless one or more of such
members resigns by written instrument. At any time, the Board may appoint new
or replacement members for the Committee.
At any time, the Board may appoint any other entity or persons to act
as Plan Administrator in place of the Committee. In the event that another
entity is appointed as Plan Administrator, such entity will take over the
duties of the Committee hereunder.
6.02 Administration of the Plan. As Plan Administrator, such Committee
---------------------------------
will interpret Plan provisions, administer the day-to-day activities of the
Plan, establish appropriate procedures for efficient and economical operation of
the Plan and appoint advisers as necessary to help administer the Plan. As
necessary, the Committee shall establish such procedures and rules as are
appropriate to carry out the purposes of this Plan.
6.03 Appointment of Advisers. As Plan Administrator, the Committee
------------------------------
shall have the power to appoint such advisers as are deemed appropriate by the
Committee to assist the Committee in administering the Plan.
6.04 Administrative Costs. Except to the extent that the Company or
---------------------------
the Committee determines to charge specific fees directly to Participants, the
Company shall pay any costs involved with respect to administration of the Plan,
including any costs associated with employment of outside advisers to assist in
administering or interpreting the Plan.
6.06 Responsibilities of Company, and Committee. It is recognized
-------------------------------------------------
that the Company, and the Committee, have certain responsibilities hereunder,
but only with respect to those specific powers, duties, responsibilities, and
obligations as are specifically given them under this Plan. Each of the parties
warrants that any directions given, information furnished, or action taken by
it shall be in accordance with the provisions of this Plan. Furthermore, each
of the parties may rely upon any such direction, information or action of
another party as being proper under this Plan and is not required under this
Plan to inquire into the propriety of any such direction, information, or
action. It is intended that each of the parties shall be responsible for the
proper exercise of its own powers, duties, responsibilities, and obligations
under this Plan and shall not be responsible for any act or failure to act of
another party. The parties shall discharge the specific powers, duties,
responsibilities, or obligations given them under this Plan solely in the
interests of participants and their beneficiaries and for the exclusive purpose
of providing benefits to participants and their beneficiaries and defraying
reasonable expenses of administering the Plan, and with the care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims.
11
<PAGE>
ARTICLE VII
-----------
Amendment or Termination of Plan and the Trust
----------------------------------------------
7.01 Amendment and Termination of Plan. This Plan may be amended or
----------------------------------------
terminated at any time by the Board of Directors of the Company, except that no
Plan termination can affect purchase rights previously granted. However, an
Offering Period may be terminated by the Board on any Purchase Date if the Board
determines that the termination of the Plan is in the best interests of the
Company and its shareholders. No amendment may make any change in any purchase
right theretofore granted which adversely affects the rights of any Participant
without the consent of the affected participants.
12
<PAGE>
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.01 Conditions of Issuance of Shares. Certain officers, directors,
---------------------------------------
other affiliates and insiders may be restricted by various securities laws with
respect to disposition of their Stock. Shares shall not be issued with respect
to a purchase right unless the exercise of that option, and the issuance and
delivery of those shares complies with all applicable provisions of law, and
such issuance will be subject to the approval of counsel for the Company with
respect to such compliance.
8.02 Indemnification. To the extent permitted by applicable laws, the
----------------------
Company and Committee shall be indemnified and saved harmless with respect to
liability or claims of liability to which they may be subjected by reason of
their good faith compliance with any duties and responsibilities imposed upon
them by this Plan.
8.03 Liabilities Mutually Exclusive. Except to the extent expressly
-------------------------------------
provided by applicable laws, each party (the Company and Committee) hereunder
shall only be responsible for its own act or omissions.
8.04 Authority of Committee. The Committee shall have complete
-----------------------------
authority to determine the existence, nonexistence, nature, and amount of the
rights and interests of all persons in the Plan.
8.05 Persons Authorized to Act on Behalf of Company. Whenever the
-----------------------------------------------------
Company, under the terms of this Plan, is permitted or required to do or perform
any matter, act, or thing, it shall be done and performed by any duly authorized
officer of the Company.
8.06 Applicable Law and Severability of Plan Provisions. Except to the
---------------------------------------------------------
extent preempted by the laws of the United States, this Agreement shall be
construed according to the laws of the State of Indiana, and all provisions
hereof shall be administered according thereto and its validity shall be
determined according to the laws of such State.
If any provision of this Plan is held to be illegal or invalid, such
illegality or invalidity shall not affect the remaining provisions of this Plan,
and they shall be construed and enforced as if such illegal or invalid provision
had never been inserted therein.
8.07 Grammatical Interpretations. Whenever any words are used herein
----------------------------------
in the masculine gender, they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
8.08 Multiple Counterparts. This Agreement is signed in multiple
----------------------------
counterparts, each of which shall be deemed an original.
8.09 Titles. The titles of the Articles and sections herein are for
-------------
convenience only and shall have no bearing on the interpretation of this Plan.
13
<PAGE>
8.10 Use of Funds. All Payroll Deductions received or held by the
-------------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such Payroll Deductions.
8.11 Reports. Statements of account will be given to participating
--------------
Employees at least annually, which statements will set forth the amounts of
Payroll Deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
8.12 No Rights as an Employee. Nothing in this Plan shall be construed
-------------------------------
to give any person the right to remain in the employment of the Company or one
of its Subsidiaries. The Company and each Designated Subsidiary reserves the
right to terminate the employment of any person at any time, with or without
cause.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be signed
on the ______ day of __________________ 1997, to be effective as of .
CONTROL DEVICES, INC.
By:___________________________________
Title:________________________________
By:___________________________________
Title:________________________________
14
