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EXHIBIT 10.3
MCGRATH RENTCORP
1998 STOCK OPTION PLAN
DIRECTOR'S NON-QUALIFIED STOCK OPTION AGREEMENT
This Option Agreement is being entered into as of ___________, 1998, by
and between McGrath RentCorp, a California corporation (hereinafter "MCGRATH")
and JOHN DOE (hereinafter "DOE"). In accordance with that certain McGrath
RentCorp 1998 Stock Option Plan (the "PLAN"), the Board of Directors of MCGRATH
granted an option on __________, 1998 to DOE to purchase shares of its Common
Stock, as evidenced by this Agreement, subject to the following terms:
1. NUMBER OF SHARES AND PRICE. MCGRATH hereby evidences its grant to DOE
of the right and option (hereinafter the "OPTION"), on the terms and conditions
set forth herein, to purchase all or any part of an aggregate of ____ Thousand
(________) shares of MCGRATH's Common Stock (hereinafter the "OPTION SHARES"),
at a purchase price of _______ Dollars and ______ Cents ($_____) per share.
2. OPTION SUBJECT TO PLAN. This OPTION is subject to, and MCGRATH and
DOE agree to be bound by, all of the terms and conditions of the PLAN, which is
made a part hereof and incorporated herein by this reference. DOE acknowledges
receipt of the copy of the PLAN. The rights of DOE under this OPTION are subject
to modification and termination in certain events as provided in the PLAN,
including, without limitation, Section 3 thereof.
3. NATURE OF OPTION; TAX CONSEQUENCES. This OPTION is not intended to be
an "incentive stock option" as that term is defined under Section 422 of the
Internal Revenue Code. DOE should consult with his own tax advisor with regard
to the income tax consequences to him of exercising this OPTION.
4. TERMS OF EXERCISE.
4.1 Option Period. Notwithstanding anything to the contrary in
this Agreement, unless this OPTION shall have expired earlier in accordance with
Section 5 below, this OPTION shall expire ten (10) years after the date of grant
specified above at 5:00 p.m. Livermore, California local time on ________, 2008
(hereinafter the "OPTION PERIOD").
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4.2 Installments. This OPTION shall be exercisable in
installments as to______________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
OPTION SHARES entitled to be purchased, but not purchased in any period, may be
purchased at any subsequent time within the OPTION PERIOD. The vesting of this
OPTION (i.e., the rate at which the installments become exercisable) may be
accelerated under certain circumstances as described in Section 6.2 below.
4.3 How to Exercise. The exercise of this OPTION shall be
effective only upon the delivery to MCGRATH of a written notice of intention to
exercise the OPTION in substantially the form attached hereto as Exhibit A
specifying the number of shares then to be purchased under the OPTION and the
date of such purchase (which, unless MCGRATH otherwise consents, shall be at not
more than thirty (30) days after the delivery of such notice). Delivery of a
certificate, or certificates, representing said shares shall be made only upon
the tender of payment of the purchase price of the number of shares specified in
such notice on said date.
4.4 Payment of Exercise Price. Payment of the purchase price for
the shares purchased upon exercise of the OPTION shall be made in cash or by
check; provided that, subject to the discretion of the Board of Directors of
MCGRATH, and upon receipt of all regulatory approvals, all or part of the
payment may be made by the delivery of certificates evidencing Common Stock of
MCGRATH already owned by DOE with an aggregate "fair market value" (determined
as specified in the PLAN) equal to the portion of the purchase price being paid
thereby.
5. EARLY TERMINATION OF THE OPTION PERIOD.
5.1 Termination of Directorship. Subject to Sections 5.2 and 5.3
below, if DOE ceases to be a director of MCGRATH for any reason, DOE may
exercise this OPTION only to the extent DOE was entitled to exercise it on the
date he ceased to be a director (subject to Section 6.2 below). If DOE wants to
exercise this OPTION, then he must do so before the earlier of (i) three (3)
months after the date he ceases to be a director of MCGRATH or (ii) the normal
expiration of the OPTION PERIOD (as specified in Section 4.1 above); and upon
the expiration of the earlier of such two periods, this OPTION shall terminate.
5.2 Disability. Subject to Section 5.3 below, if DOE ceases to be
a director of MCGRATH as a result of DOE's disability, DOE may exercise this
OPTION if and only to the extent DOE was entitled to exercise it at the date he
ceased to be a director, but only during the OPTION PERIOD and within twelve
(12) months after the date DOE ceases to be a director of MCGRATH. Upon the
expiration of the earlier of such twelve (12) month period or the normal OPTION
PERIOD, this OPTION shall terminate. For purposes of this OPTION, an individual
is disabled if he or she is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
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5.3 Death. In the event of DOE's death while a director of
MCGRATH and during the OPTION PERIOD, the unexercised portion of this OPTION may
be exercised at any time during the OPTION PERIOD but not more than twelve (12)
months after the date of Doe's death, by the person or persons to whom the
rights to exercise this OPTION shall pass by will or by the applicable laws of
descent and distribution, but only to the extent that the right to exercise had
accrued and was still exercisable as of the date of DOE's death. Upon the
expiration of the earlier of such twelve (12) month period or the normal OPTION
PERIOD, this OPTION shall terminate.
5.4 Corporate Dissolution. A dissolution or liquidation of
MCGRATH shall cause this OPTION to terminate; provided that DOE shall, in such
event, be given at least thirty (30) days prior written notice of such event
(which notice, if mailed, shall be deemed given at the time of mailing) and
shall have the right until such event to exercise this OPTION to the extent then
exercisable; provided further that the Board of Directors may, in its
discretion, in the event of any such dissolution or liquidation, accelerate the
accrual of exercise rights in such manner as the Board of Directors shall deem
appropriate.
6. RECAPITALIZATION; CHANGE IN CONTROL.
6.1 Recapitalization. Subject to any action by the stockholders
required by law, the number of shares of Common Stock covered by this OPTION and
the price per share thereof shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock of MCGRATH resulting
from a subdivision or consolidation of shares or the payment of a stock dividend
(but only on the Common Stock) or any other increase in the number of such
shares effected without receipt of consideration by MCGRATH. (For this purpose,
issuances of shares upon conversion of convertible securities shall be deemed an
issuance for which MCGRATH receives consideration.)
6.2 Change in Control. In the event of a "Change in Control," the
accrual of exercise rights hereunder shall accelerate upon such "Change in
Control" such that this OPTION shall be fully vested and all OPTION SHARES shall
be exercisable. For purposes of this section, a "Change in Control" shall be
deemed to have occurred hereafter if:
6.2.1 Any person (or entity, or group or persons or
entities), other than (i) a trustee or other fiduciary holding
securities under an employee benefit plan of MCGRATH or (ii) a
corporation owned directly or indirectly by the stockholders of MCGRATH
in substantially the same proportions as their ownership of stock of
MCGRATH or (iii) a group which includes Robert P. McGrath or his heirs,
becomes the beneficial owner, directly or indirectly, of securities of
MCGRATH representing 30% or more of the total voting power represented
by McGrath's then outstanding voting securities; or
6.2.2 During any period of two consecutive years after the
date of this OPTION (or if two years have not elapsed since the date of
this OPTION, such shorter period), (i) individuals who at the beginning
of such period constitute the Board, plus (ii) any new director whose
election by the Board or nomination for election by MCGRATH's
stockholders was approved by a vote of at least two-thirds (_) of the
directors then still in office who either were directors at the
beginning of the period or whose election or
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nomination for election was previously so approved, cease for any reason
to constitute a majority thereof; or
6.2.3 MCGRATH is a party to a merger or consolidation with
another corporation, other than a merger or consolidation which results
in the voting securities of MCGRATH outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) a
majority of the total voting power of the surviving entity outstanding
immediately after such merger or consolidation; or
6.2.4 McGrath sells or otherwise disposes (in one
transaction or a series of transactions) of all or substantially all of
its assets, other than to a corporation owned directly or indirectly by
the stockholders of MCGRATH in substantially the same proportions as
their ownership of stock of MCGRATH.
7. INVESTMENT INTENT.
7.1 Doe's Representations. As a condition to accepting this
OPTION, and as a condition to its exercise, DOE makes the following
representations and agreements, and represents, warrants and agrees that he will
reaffirm such representations and agreements to be true and in full force and
effect at and as of the time of any exercise of this OPTION:
7.1.1 DOE has, by reason of DOE's business or financial
experience, the capacity to evaluate the merits and risks of an
investment in MCGRATH and to protect his interest in connection with the
issuance of this Option and the purchase of any OPTION SHARES.
7.1.2 DOE is aware of MCGRATH's business affairs and
financial condition and has had access to such information about MCGRATH
as DOE has deemed necessary or desirable to reach an informed and
knowledgeable decision to acquire this OPTION and the OPTION SHARES. DOE
will purchase the OPTION SHARES for investment for his own account only
and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933
("SECURITIES ACT").
7.1.3 DOE understands that this OPTION and the OPTION
SHARES have not been registered under the SECURITIES ACT by reason of a
specific exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of his investment intent as expressed
herein. In this connection, DOE understands that, in the view of the
Securities and Exchange Commission ("COMMISSION"), the statutory basis
for such exemption may not be present if Doe's representation meant that
his present intention was to hold the OPTION SHARES for a minimum
capital gains period under the tax statutes, for a deferred sale, for a
market rise, for a sale if the market does not rise, or for a year or
any other fixed period in the future.
7.1.4 DOE further acknowledges and agrees that the OPTION
SHARES must be held indefinitely unless they are subsequently registered
under the SECURITIES ACT or
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an exemption from such registration is available. DOE further
acknowledges and understands that MCGRATH is under no obligation to
register the OPTION SHARES.
7.1.5 DOE is aware of the adoption of Rule 144 by the
COMMISSION, promulgated under the SECURITIES ACT, which (1) after one
year from the date the securities have been purchased and fully paid
for, permits limited public resale of securities acquired in a
non-public offering subject to the satisfaction of certain conditions,
and (ii) after two years from the date the securities have been
purchased and fully paid for, permits persons who are not affiliates of
the issuer to sell an unlimited number of securities without
satisfaction of such conditions.
7.1.6 DOE further acknowledges and understands that
MCGRATH may not be satisfying the current public information requirement
of Rule 144 at the time he wishes to sell the OPTION SHARES, and, if so,
DOE would be precluded from selling the OPTION SHARES under Rule 144
even if the one or two-year minimum holding periods had been satisfied.
7.1.7 DOE further acknowledges that in the event all of
the requirements of Rule 144 are not met, compliance with Regulation A
or some other exemption from registration will be required, and that
although Rule 144 is not exclusive, the Staff of the COMMISSION has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and other than pursuant
to Rule 144 will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales and
that such persons and the brokers who participate in the transactions do
so at their own risk.
7.2 Legends. MCGRATH may place on the certificates evincing the
OPTION SHARES appropriate legends referring to the restrictions on transfer set
forth in Section 7.1 above and as may be required by the California Commissioner
of Corporations. DOE understands that all certificates for OPTION SHARES may
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR THE
PURCHASER'S OWN ACCOUNT ONLY AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SALE OR DISPOSITION OF
THESE SHARES MAY BE EFFECTED WITHOUT (1) REGISTRATION OF SUCH SALE OR
DISPOSITION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND (2)
QUALIFICATION OF SUCH SALE OR DISPOSITION UNDER THE CALIFORNIA CORPORATE
SECURITIES LAW OF 1968, AS AMENDED, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED UNDER THOSE ACTS.
8. RIGHTS NOT CONFERRED. This OPTION shall not confer upon DOE any right
with respect to continuation of his position as a director of MCGRATH.
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9. NON-TRANSFERABLE. The OPTION evinced by this Agreement is not
transferable otherwise than by will or by the laws of descent and distribution
and shall be exercisable during DOE's lifetime only by DOE or DOE's duly
appointed guardian or personal representative. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of any successors
or assigns of MCGRATH and, to the extent herein provided, shall be binding upon
and inure to the benefit of DOE's successors.
MCGRATH RENTCORP
By
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Robert P. McGrath, Chief Executive
Officer
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JOHN DOE
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EXHIBIT A
To: McGRATH RENTCORP
5700 Las Positas Road
Livermore, CA 94550
Attn: Chief Financial Officer
Subject: Notice of Intention to Exercise Stock Option
With respect to the stock option granted to John Doe on ______________ ,
1998 to purchase an aggregate of _____________ Thousand (_________) shares of
MCGRATH's Common Stock as evinced by the Director's Non-Qualified Incentive
Stock Option Agreement dated __________________ , 1998, this is official notice
that the undersigned intends to exercise such option to purchase shares as
follows:
Number of Shares:__________________
Date of Purchase:__________________
Mode of Payment:___________________
In connection with such exercise, the undersigned hereby reaffirms that
the representations and agreements set forth in Section 7.1 of the Agreement
evincing such option are now and will be at and as of the time of such exercise
true and in full force and effect with respect to the shares purchased.
The shares should be issued as follows:
Name:____________________________________________
Address:_________________________________________
_________________________________________
_________________________________________
Social Security Number:__________________________
Signed:_____________________________________
Date:_______________________________________
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