EXHIBIT 10.4
W. H. BRADY CO.
1997 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The 1997 Stock Option Plan for Non-Employee Directors (the "Plan) is
intended to attract and retain the services of experienced and knowledgeable
independent directors of W. H. Brady Co. (the "Company") for the benefit of the
Company and its shareholders and to provide additional incentive for such
directors to continue to work for the best interest of the Company and its
shareholders.
2. SHARES SUBJECT TO THE PLAN.
There are reserved for issuance upon the exercise of options granted under
the Plan 125,000 Class A Non-Voting Common Shares $.01 par value, of the Company
(the "Company Stock"). Such Company Stock may be authorized and unissued Company
Stock or previously outstanding Company Stock then held in the Company's
treasury. If any option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the Company Stock subject to the
unexercised portion thereof shall again be available for the purposes of
issuance upon the exercise of options granted under the Plan.
3. ADMINISTRATION.
The Plan shall be administered by the Board of Directors of the Company
(the "Board). Subject to the express provisions of the Plan, the Board shall
have authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the option
grants and agreements (which shall comply with and be subject to the terms and
conditions of the Plan) and to make all other determinations necessary or
advisable for the administration of the Plan. The Board's determination of the
matters referred to in this Paragraph 3 shall be conclusive.
4. ELIGIBILITY.
For purposes of the Plan, "Outside Director" means a member of the Board
who is not an employee of the Company or a subsidiary of the Company. Each
individual who is an Outside Director on the effective date of the Plan shall
automatically be granted an option to purchase 2,500 shares of Company Stock on
the effective date. Each individual who first becomes an Outside Director after
the effective date of the Plan shall automatically be granted an option to
purchase 5,000 shares of Company Stock on the first day of such individual's
first term of office as an Outside Director. On the date of each annual meeting
of the shareholders of the Company subsequent to the effective date of the Plan,
each Outside Director who first became an Outside Director prior to such annual
meeting and who will continue to serve as an Outside Director after such annual
meeting shall automatically be granted an option to purchase 3,000 shares of
Company Stock.
Only non-statutory stock options shall be granted under the Plan.
5. OPTION GRANTS.
(a) The purchase price of the Company Stock under each option granted
under the Plan shall be 100% of the Fair Market Value of the Company Stock on
the date such option is granted. For purposes of the Plan "Fair Market Value" on
any date shall mean, with respect to Company Stock, if the stock is then listed
and traded on a registered national securities exchange, or is quoted in the
NASDAQ National Market System, the average of the high and low sale prices
recorded in composite transactions as reported in the Wall Street Journal
(Midwest Edition) for such date or, if such date is not a business day or if no
sales of Company Stock shall have been reported with respect to such date, the
next preceding business date with respect to which sales were reported. In the
absence of reported sales or if the stock is not so listed or quoted, but is
traded in the over-the-counter market, Fair Market Value shall be the average of
the closing bid and asked prices for such shares on the relevant date.
(b) All options shall be exercisable in accordance with the following
schedule:
Years After
Date of Grant Percentage of Shares
- ----------------- --------------------
Less than 1 0%
1 but less than 2 33-1/3%
2 but less than 3 66-2/3%
3 or more 100%
The term of each option shall be ten years from the date of grant,
or such shorter period as is prescribed in Paragraphs 5(c) and 5(d). Except as
provided in Paragraphs 5(c) and 5(d), no option may be exercised at any time
unless the holder is then a director of the Company.
Upon exercise, the option price is to be paid in full in cash or, at the
discretion of the Board, in Company Stock owned by the optionee having a Fair
Market Value on the date of exercise equal to the aggregate option price or, at
the discretion of the Board, in a combination of cash and Company Stock. Upon
exercise of an option, the Company shall have the right to retain or sell
without notice sufficient Company Stock to cover government withholding taxes or
deductions, if any, as described in Paragraph 9.
(c) All rights under any option shall terminate on the date such
Participant ceases to be a Director of the Company, except that (a) if the
Directorship is terminated by the death of the Director, any unexercised,
unexpired Stock Options granted hereunder to the Director shall be 100% vested
and fully exercisable, in whole or in part, at any time within one year after
the date of death, by the Director's personal representative or by the person to
whom the options are transferred under the Director's last will and testament or
the applicable laws of descent and distribution; (b) if the Directorship is
terminated as a result of the disability of the Director (a disability means
that the Director is disabled as a result of sickness or injury, such that he or
she is unable to satisfactorily perform the Director duties, as determined by
the Board of Directors, on the basis of medical evidence satisfactory to it),
any unexercised, unexpired options granted hereunder to the Director shall
become 100% vested and fully exercisable, in whole or in part, at any time
within one year after the date of disability; (c) if the Directorship is
terminated and the Director has been a member of the Board of Directors for at
least three years, any unexercised, unexpired options granted
2
hereunder to the Director shall become 100% vested and fully exercisable, in
whole or in part, at any time within one year after such date of termination;
and (d) if the Directorship is terminated for any reason other than (a), (b) or
(c) above, any unexercised, unexpired options granted hereunder and exercisable
as of the date of such termination shall be exercisable in whole or in part at
any time within 90 days after such date of termination.
(d) In the event of (a) the merger or consolidation of the Company with
or into another corporation or corporations in which the Company is not the
surviving corporation, (b) the adoption of any plan for the dissolution of the
Company, or (c) the sale or exchange of all or substantially all the assets of
the Company for cash or for shares of stock or other securities of another
corporation, all then-unexercised options shall become fully exercisable
immediately prior to any such event in which the Company is not the surviving
corporation.
(e) Nothing in the Plan or in any option granted pursuant to the Plan
shall confer on any individual any right to continue as a director of the
Company.
6. TRANSFERABILITY AND SHAREHOLDER RIGHTS OF HOLDERS OF OPTIONS.
No options granted under the Plan shall be transferable otherwise than by
will or by the laws of descent and distribution, and an option may be exercised,
during the lifetime of an optionee, only by the optionee or optionee's guardian
or legal representative. An optionee shall have none of the rights of a
shareholder of the Company until the option has been exercised and the Company
Stock subject to the option has been registered in the name of the optionee on
the transfer books of the Company.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provisions of the Plan, the number and class of
shares subject to the options and the option prices of options covered thereby
shall be proportionately adjusted in the event of changes in the outstanding
Company Stock by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, split-ups,
split-offs, spin-offs, liquidations or other similar changes in capitalization,
or any distribution to common shareholders other than cash dividends and, in the
event of any such change in the outstanding Company Stock, the aggregate number
and class of shares available under the Plan and the number of shares as to
which options may be granted shall be appropriately adjusted by the Board.
8. AMENDMENT AND TERMINATION.
Unless the Plan shall theretofore have been terminated as hereinafter
provided, the Plan shall terminate on, and no awards of options shall be made
after, the tenth anniversary of the effective date of the Plan; provided,
however, that such termination shall have no effect on options granted prior
thereto. The Plan may be terminated, modified or amended by the shareholders of
the Company. The Board may also terminate the Plan or modify or amend the Plan
in such respects as it shall deem advisable in order to conform to any change in
any law or regulation applicable thereto, or in other respects which shall not
change (i) the total number of shares of Company Stock as to which options may
be granted, (ii) the class of persons eligible to receive options under the
Plan, (iii) the manner of determining the option prices, (iv) the
3
period during which options may be granted or exercised or (v) the provisions
relating to the administration of the Plan by the Board.
4
9. WITHHOLDING.
Upon the issuance of Company Stock as a result of the exercise of an
option, the Company shall have the right to retain or sell without notice
sufficient Company Stock to cover the amount of any tax required by any
government to be withheld or otherwise deducted and paid with respect to such
Company Stock being issued, remitting any balance to the optionee; provided,
however, that the optionee shall have the right to provide the Company with the
funds to enable it to pay such tax.
10. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective on the day following the date the Plan is
approved by the vote of the holders of a majority of the outstanding voting
common stock of the shareholders. The Board may in its discretion authorize the
granting of options which shall be expressly subject to the conditions that (i)
the Company Stock reserved for issue under the Plan shall have been duly listed,
upon official notice of issuance, upon each stock exchange in the United States
upon which the Company Stock is traded and (ii) a registration statement under
the Securities Act of 1933 with respect to such shares shall have become
effective.
5