Exhibit 10.3
STOCK OPTION AGREEMENT
(NON-ISO)
THIS AGREEMENT, made this 2nd day of May, 1994, by and between Graco Inc.,
a Minnesota corporation (the "Company") and _____________________________
(the "Employee").
WITNESSETH THAT:
WHEREAS, the Company pursuant to it's Long-Term Incentive Stock Plan
wishes to grant this stock option to Employee;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Grant of Option
The Company hereby grants to Employee, the right and option
(hereinafter called the "option") to purchase all or any part of an aggregate of
____________ Common Shares, par value $1.00 per share, at the price of
$____________ per share on the terms and conditions set forth herein.
2. Duration and Exercisability
(a) This option may not be exercised by Employee until the expiration
of two (2) years from the date of grant, and this option shall in all events
terminate ten (10) years after the date of grant. During the first two years
from the date of grant of this option, no portion of this option may be
exercised. Thereafter this option shall become exercisable in four cumulative
installments of 25% as follows:
Total Portion of Option
Date Which is Exercisable
Two Years after Date of Grant 25%
Three Years after Date of Grant 50%
Four Years after Date of Grant 75%
Five Years after Date of Grant 100%
In the event that Employee does not purchase in any one year the full number of
shares of Common Stock of the Company to which he/she is entitled under this
option, he/she may, subject to the terms and conditions of Section 3 hereof,
purchase such shares of Common Stock in any subsequent year during the term of
this option.
(b) During the lifetime of the Employee, the option shall be
exercisable only by him/her and shall not be assignable or transferable by
him/her otherwise than by will or the laws of descent and distribution.
3. Effect of Termination of Employment
(a) In the event that Employee shall cease to be employed by the
Company or its subsidiaries for any reason other than his/her gross and willful
misconduct, death, retirement (as defined in Section 3(d) below), or disability
(as defined in Section 3(d) below), Employee shall have the right to exercise
the option at any time within one month after such termination of employment to
the extent of the full number of shares he/she was entitled to purchase under
the option on the date of termination, subject to the condition that no option
shall be exercisable after the expiration of the term of the option.
(b) In the event that Employee shall cease to be employed by the
Company or its subsidiaries by reason of his/her gross and willful misconduct
during the course of his/her employment, including but not limited to wrongful
appropriation of Company funds or the commission of a felony, the option shall
be terminated as of the date of the misconduct.
(c) If the Employee shall die while in the employ of the Company or a
subsidiary or within one month after termination of employment for any reason
other than gross and willful misconduct and shall not have fully exercised the
option, all remaining shares shall become immediately exerciseable and such
option may be exercised at any time within twelve months after his/her death by
the executors or administrators of the Employee or by any person or persons to
whom the option is transferred by will or the applicable laws of descent and
distribution, and subject to the condition that no option shall be exercisable
after the expiration of the term of the option.
(d) If the Employee's termination of employment is due to retirement
(either after attaining age 55 with 10 years of service, or attaining age 65, or
due to disability within the meaning of the provisions of the Graco Long-Term
Disability Plan), all remaining shares shall become immediately exerciseable and
the option may be exercised by the Employee at any time within three years of
the employee's retirement, or in the event of the death of the Employee within
the three-year period after retirement, the option may be exercised at any time
within twelve months after his/her death by the executors or administrators of
the Employee or by any person or persons to whom the option is transferred by
will or the applicable laws of descent and distribution, to the extent of the
full number of shares he/she was entitled to purchase under the option on the
date of death, and subject to the condition that no option shall be exercisable
after the expiration of the term of the option.
4. Manner of Exercise
(a) The option can be exercised only by Employee or other proper party
within the option period delivering written notice to the Company at its
principal office in Minneapolis, Minnesota, stating the number of shares as to
which the option is being exercised and, except as provided in Section 4(c),
accompanied by payment-in-full of the option price for all shares designated in
the notice.
(b) The Employee may, at Employee's election, pay the option price
either by check (bank check, certified check, or personal check) or by
delivering to the Company for cancellation Common Shares of the Company with a
fair market value equal to the option price. For these purposes, the fair
market value of the Company's Common Shares shall be the closing price of the
Common Shares on the date of exercise on the New York Stock Exchange (the
"NYSE") or on the principal national securities exchange on which the shares are
traded if the shares are not then traded on the NYSE. If there is not a
quotation available for such day, then the closing price on the next preceding
day for which such a quotation exists shall be determinative of fair market
value. If the shares are not then traded on an exchange, the fair market value
shall be the average of the closing bid and asked prices of the Common Shares as
reported by the National Association of Securities Dealers Automated Quotation
System. If the Common Shares are not then traded on NASDAQ or on an exchange,
then the fair market value shall be determined in such manner as the Company
shall deem reasonable.
(c) The Employee may, with the consent of the Company, pay the option
price by arranging for the immediate sale of some or all of the shares issued
upon exercise of the option by a securities dealer and the payment to the
Company by the securities dealer of the option exercise price.
5. Payment of Withholding Taxes
Upon exercise of any portion of this option, Employee shall pay to the
Company an amount sufficient to satisfy any federal, state, or local withholding
tax requirements which arise as a result of the exercise of the option or
provide the Company with satisfactory indemnification for such payment.
6. Adjustments
If Employee exercises all or any portion of the option subsequent to
any change in the number or character of the Common Shares of the Company
(through merger, consolidation, reorganization, recapitalization, stock
dividend, or otherwise), Employee shall then receive for the aggregate price
paid by him/her on such exercise of the option, the number and type of
securities or other consideration which he/she would have received if such
option had been exercised prior to the event changing the number or character of
outstanding shares.
7. Miscellaneous
(a) This option is issued pursuant to the Company's Long-Term Incentive
Stock Plan and is subject to its terms. A copy of the Plan has been given to
the Employee. The terms of the Plan are also available for inspection during
business hours at the principal offices of the company.
(b) This Agreement shall not confer on Employee any right with respect
to continuance of employment by the Company or any of its subsidiaries, nor will
it interfere in any way with the right of the Company to terminate such
employment at any time. Employee shall have none of the rights of a shareholder
with respect to shares subject to this option until such shares shall have been
issued to him upon exercise of this option.
(c) The Company shall at all times during the term of the option
reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
GRACO INC.
By________________________________________
Its: Chairman and Chief Executive Officer
___________________________________________
Employee