Exhibit 10.5

 

MEDTOX SCIENTIFIC, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

(Effective January 1, 2007)

 

Section 1. Purpose

 

The purposes of the Executive Incentive Compensation Plan (the “Plan”) are to
attract and retain highly-qualified senior executives by providing appropriate
short and long-term performance-based incentive awards that are “qualified
performance-based compensation” under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”) and the regulations
thereunder; and to advance the interests of MEDTOX Scientific, Inc. (the
“Company”) by providing senior officers of the Company with additional incentive
to assist the Company in meeting and exceeding its business goals.

 

Section 2. Administration

 

The Plan shall be administered by the Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”). The Committee shall be
comprised of not fewer than two members who shall be “outside directors” within
the meaning of Section 162(m) of the Internal Revenue Code, and the regulations
thereunder.

 

The Committee may, subject to the provisions of the Plan, establish such rules
and regulations or take such action as it deems necessary or advisable for the
proper administration of the Plan. Each interpretation made or action taken
pursuant to the Plan shall be final and conclusive for all purposes and binding
upon all persons, including, but not limited to, the Company, the Committee, the
Board, the affected Participants (as defined in Section 3), and their respective
successors in interest.

 

Section 3. Eligibility

 

Cash awards (“Awards”) for short and long-term incentive compensation may be
made under this Plan to executive officers and senior executives of the Company
and its Subsidiaries (“Participants”).

 

“Subsidiary” shall mean any corporation or other business organization in which
the Company owns, directly or indirectly, 20% or more of the voting stock,
membership interests or capital during any Performance Period.

 

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Section 4. Performance Goal Criteria

 

For each calendar year for which the Committee determines Awards may be made
under the Plan (the “Performance Period”), the Committee shall establish
Performance Goals that apply to both short and long-term incentives, no later
than the latest date permissible under Section 162(m) of the Internal Revenue
Code. Such Performance Goals may be expressed in terms of one or more financial
or other objective goals which may be Company-wide or otherwise, including on a
division basis, regional basis or on an individual basis. Financial goals may be
expressed, for example, in terms of sales, earnings per share, stock price,
return on equity, net earnings growth, net earnings, related return ratios, cash
flow, earnings before interest, taxes, depreciation and amortization (EBITDA),
return on assets or total stockholder return. Other objective goals may include
the attainment of various productivity and long-term growth objectives,
including, without limitation, reductions in the Company’s overhead ratio and
expense to sales ratios. Any criteria may be measured in absolute terms or as
compared to another company or companies. To the extent applicable, any such
Performance Goal shall be determined (i) in accordance with the Company’s
audited financial statements and generally accepted accounting principles and
reported upon by the Company’s independent accountants or (ii) so that a third
party having knowledge of the relevant facts could determine whether such
Performance Goal is met. Performance Goals shall include a threshold level of
performance below which no Bonus payment shall be made, levels of performance at
which specified percentages of the target Bonus shall be paid and a maximum
level of performance above which no additional Bonus shall be paid. The
Performance Goals established by the Committee may be (but need not be)
different for each Plan Year and different Performance Goals may be applicable
to different Participants.

 

The applicable performance goal or goals may be adjusted for such events and
circumstances as the Committee deems appropriate, provided, however, that all
performance goals and any related adjustments to the performance goals
applicable to officers covered by Section 162(m) of the Internal Revenue Code
shall be preestablished in accordance with Section 162(m) of the Internal
Revenue Code and regulations thereunder.

 

Section 5. Calculation of Awards

 

The Committee shall establish the amount of an Award that is payable upon the
attainment of the goal or goals established pursuant to Section 4. Both short
and long-term Awards will be made in cash. Long-term Awards will be deferred
pursuant to the terms of the MEDTOX Scientific, Inc. Long-Term Incentive Plan
for a period to be determined by the Committee. During the deferral period the
Committee will authorize investment options for the long-term cash award. Those
investment options may include Company stock. No individual short term or
long-term Award for any Performance Period under this Plan shall exceed 2 times
a Participant’s base salary.

 

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As long as this maximum Award amount is not exceeded, the Committee shall have
the authority to increase or decrease the amount of any Award otherwise due upon
the attainment of the applicable performance goal as it determines appropriate.
However, in the case of Awards made to officers covered by Section 162(m) of the
Internal Revenue Code, the Committee shall have no authority to increase the
amount of an Award payable to a Participant that would otherwise be due upon the
attainment of the applicable performance goal.

 

Section 6. Amendments, Modification and Termination of the Plan

 

The Board or the Committee may terminate the Plan in whole or in part, may
suspend the Plan in whole or in part from time to time, and may amend the Plan
from time to time to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in the Awards made thereunder that does not
constitute the modification of a material term of the Plan. Any such action may
be taken without the approval of the shareowners unless the Committee determines
that the approval of shareowners would be necessary to retain the benefits of
Section 162(m) of the Internal Revenue Code.

 

Section 7. Governing Law

 

The Plan and all determinations made and actions taken pursuant thereto shall be
governed by the laws of the State of Minnesota and construed in accordance
therewith.

 

Section 8. Effective Date

 

The Plan is effective as of January 1, 2007, subject to approval of the Plan by
the Company’s shareowners at the Annual Meeting held in 2007.

 

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As evidence of its adoption of this Plan, the Company has caused this Plan to be
signed this 27th day of December, 2006.

 

 

MEDTOX SCIENTIFIC, INC.

 

 

 

By:

/s/ Richard J. Braun

 

Richard J. Braun

 

President and Chief Executive Officer

 

 

 

 

By:

/s/ Robert A. Rudell

 

Robert A. Rudell

 

Chairman, Compensation Committee

 

 

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