STOCK OPTION AGREEMENT
(NON-ISO)
THIS AGREEMENT, made this day of , 199
, 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
Date Option 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
