Exhibit 10.11
NONEMPLOYEE DIRECTOR
NONSTATUTORY STOCK OPTION AGREEMENT
(NSO)
THIS AGREEMENT, made this day of _, 2 by and between
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Graco Inc., a Minnesota corporation (the "Company") and
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(the "Nonemployee Director").
WITNESSETH THAT:
WHEREAS, the Company pursuant to its Nonemployee Director Stock Option Plan
wishes to grant this stock option to Nonemployee Director.
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
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The Company hereby grants to Nonemployee Director, the right and option
(the "Option") to purchase all or any part of an aggregate of common
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shares, par value $1.00 per share, at the price of $ per share on the
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terms and conditions set forth herein. This is a nonstatutory stock Option
which does not qualify for special tax treatment under Sections 421 or 422
of the Internal Revenue Code.
2. Duration and Exercisability
a. This Option may not be exercised by Employee until the expiration of
one (1) year from the date of grant, and this Option shall in all
events terminate ten (10) years after the date of Grant. During the
first year 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
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One Year after Date of Grant 25%
Two Years after Date of Grant 50%
Three Years after Date of Grant 75%
Four Years after Date of Grant 100%
In the event that Nonemployee Director 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 Nonemployee Direction, 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 Membership on the Board
a. In the event a Nonemployee Director ceases being a director of the
Company for any reason other than the reasons identified in section 3b
below, the Nonemployee Director shall have the right to exercise the
Option as follows, subject to the condition that no Option shall be
exercisable after the expiration of the term of the Option:
(1) If the Nonemployee Director was a member of the Board of
Directors of the Company for five (5) or more years, the option
becomes immediately exercisable upon the date the Nonemployee
Director ceases being a director. The Nonemployee Director may
exercise the Option for a period of thirty six (36) months from
the date the Nonemployee Director ceased being a director,
provided that if the Nonemployee Director dies before the
thirty-six (36) month period has expired, the Option may be
exercised by the Nonemployee Director's legal representative or
any person who acquires the right to exercise an Option by reason
of the Nonemployee Director's death for a period of twelve (12)
months from the date of the Nonemployee Director's death.
(2) If the Nonemployee Director was a member of the Board of
Directors of the Company for less than five (5) years, the
Nonemployee Director may exercise the Option, to the extent the
Option was exercisable at the date the Nonemployee Director
ceases being a member of the Board, for a period of thirty (30)
days following the date the Nonemployee Director ceased being a
director, provided that, if the Nonemployee Director dies before
the thirty (30) day period has expired, the Option may be
exercised by the Nonemployee Director's legal representative, or
any person who acquires the right to exercise an Option by reason
of the Nonemployee Director's death, for a period of twelve (12)
months from the date of the Nonemployee Director's death.
(3) If the Nonemployee Director dies while a member of the Board of
Directors of the Company, the Option, to the extent exercisable
by the Nonemployee Director at the date of death, may be
exercised by the Nonemployee Director's legal representative, or
any person who acquires the right to exercise an Option by reason
of the Nonemployee Director's death, for a period of twelve (12)
months from the date of the Nonemployee Director's death.
(4) In the event the Option is exercised by the executors,
administrators, legatees, or distributees of the estate of a
deceased optionee, the Company shall be under no obligation to
issue stock thereunder unless and until the Company is satisfied
that the person or persons exercising the Option are the duly
appointed legal representatives of the deceased optionee's estate
or the proper legatees or distributees thereof.
b. If a Nonemployee Director ceases being a director of the Company due
to an act of (a) fraud or intentional misrepresentation or (b)
embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any Affiliate of the Company or (c)
any other gross or willful misconduct, as determined by the Board, in
its sole and conclusive discretion, the Option granted to such
Nonemployee Director shall immediately be forfeited as of the date of
the misconduct.
4. Manner of Exercise
a. The Option can be exercised only by Nonemployee Director or other
proper party within the Option period by 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 sections 4b(2) and 4b(3) below, accompanied by
payment in full of one hundred percent (100%) of the Option price.
b. The Nonemployee Director may, at his/her election, pay the Option
price as follows:
(1) by cash or by certified check,
(2) by delivery of shares of common stock to the Company, which shall
have been owned for at least six (6) months and have a fair
market value per share on the date of surrender equal to the
exercise price, or
(3) by delivery to Company of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly
deliver to the Company from sale or loan proceeds the amount
required to pay the exercise price.
For purposes of subsection 4b(2) hereunder, the fair market value per
share is the last sale price reported on the composite tape by the New
York Stock Exchange on the business day immediately preceding the date
as of which fair market value is being determined or, if there were no
sales of shares of the Company's common stock reported on the
composite tape on such day, on the most recently preceding day on
which there were sales, or if the shares of the Company's stock are
not listed or admitted to trading on the New York Stock Exchange on
the day as of which the determination is made, the amount determined
by the Board or its delegate to be the fair market value of a share on
such day.
c. Such Option price shall be subject to adjustment as provided in
Section 6 hereof.
5. Change of Control
a. Notwithstanding Section 2(a) hereof, all outstanding Options not yet
exercisable shall become immediately and fully exercisable on the day
following a "Change of Control" and shall remain fully exercisable
until either exercised or expiring by their terms. A "Change of
Control" means:
(1) acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of
1934), (a "Person"), of beneficial ownership (within the meaning
of Rule 13d-3 under the 0000 Xxx) which results in the beneficial
ownership by such Person of 25% or more of either
(a) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or
(b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities");
provided, however, that the following acquisitions will not
result in a Change of Control:
(i) an acquisition directly from the Company,
(ii) an acquisition by the Company,
(iii)an acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company,
(iv) an acquisition by any Person who is deemed to have
beneficial ownership of the Company common stock or
other Company voting securities owned by the Trust
Under the Will of Xxxxxxxx X. Xxxx ("Trust Person"),
provided that such acquisition does not result in the
beneficial ownership by such Person of 32% or more of
either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, and provided
further that for purposes of this Section 9, a Trust
Person shall not be deemed to have beneficial ownership
of the Company common stock or other Company voting
securities owned by The Graco Foundation or any
employee benefit plan of the Company, including,
without limitations, the Graco Employee Retirement Plan
and the Graco Employee Stock Ownership Plan,
(v) an acquisition by the Nonemployee Director or any group
that includes the Nonemployee Director, or
(vi) an acquisition by any corporation pursuant to a
transaction that complies with clauses (a), (b), and
(c) of subsection (4) below; and
provided, further, that if any Person's beneficial ownership of
the Outstanding Company Common Stock or Outstanding Company
Voting Securities is 25% or more as a result of a transaction
described in clause (i) or (ii) above, and such Person
subsequently acquires beneficial ownership of additional
Outstanding Company Common Stock or Outstanding Company Voting
Securities as a result of a transaction other than that described
in clause (i) or (ii) above, such subsequent acquisition will be
treated as an acquisition that causes such Person to own 25% or
more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities and be deemed a Change of Control; and
provided further, that in the event any acquisition or other
transaction occurs which results in the beneficial ownership of
32% or more of either the Outstanding Company Common Stock or the
Outstanding Company Voting Securities by any Trust Person, the
Incumbent Board may by majority vote increase the threshold
beneficial ownership percentage to a percentage above 32% for any
Trust Person; or
(2) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of said Board; provided,
however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial membership on the Board occurs as a
result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(3) The commencement or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result
in the beneficial ownership by a Person of 25% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities; or
(4) The approval by the shareholders of the Company of a
reorganization, merger, consolidation, or statutory exchange of
Outstanding Company Common Stock or Outstanding Company Voting
Securities or sale or other disposition of all or substantially
all of the assets of the Company ("Business Combination") or, if
consummation of such Business Combination is subject, at the time
of such approval by stockholders, to the consent of any
government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation) excluding,
however, such a Business combination pursuant to which
(a) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Common
Stock or Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of, respectively, the
then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock or Outstanding Company
Voting Securities,
(b) no Person [excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from
such Business Combination] beneficially owns, directly or
indirectly, 25% or more of the then outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination, and
(c) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(5) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
b. A Change of Control shall not be deemed to have occurred with respect
to a Nonemployee Director if:
(1) the acquisition of the 25% or greater interest referred to in
subsection a(1) of this Section 5 is by a group, acting in
concert, that includes the Nonemployee Director or
(2) if at least 25% of the then outstanding common stock or combined
voting power of the then outstanding company voting securities
(or voting equity interests) of the surviving corporation or of
any corporation (or other entity) acquiring all or substantially
all of the assets of the Company shall be beneficially owned,
directly or indirectly, immediately after a reorganization,
merger, consolidation, statutory share exchange, disposition of
assets, liquidation or dissolution referred to in subsections (4)
or (5) of this section by a group, acting in concert, that
includes that Nonemployee Director.
6. Adjustments and Changes in the Stock
a. If Nonemployee Director exercises all or any portion of the Option
subsequent to any change in the common stock of the Company by reason
of any stock dividend, stock split, spin-off, split-up, merger,
consolidation, recapitalization, reclassification, combination or
exchange of shares, or any other similar corporate event, the
aggregate number of shares available under the Plan, and the number
and the price of shares of common stock subject to outstanding Options
shall be appropriately adjusted automatically.
b. No right to purchase fractional shares shall result from any
adjustment in the Option pursuant to subsection 6a of this Agreement.
In case of any such adjustment, the shares subject to the Option shall
be rounded down to the nearest whole share.
c. Notice of any adjustment shall be given by the Company to Nonemployee
Director for the Option which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective
and binding for all purposes of the Plan.
7. Miscellaneous
a. This Option is issued pursuant to the Company's Nonemployee Director
Stock Option Plan and is subject to its terms. A copy of the Plan has
been given to the Nonemployee Director. 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 Nonemployee Director or other
person any claim or right to be granted an Option under the Plan,
except as expressly provided in the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving Nonemployee
Director any right to be retained in the service of the Company.
c. Neither Nonemployee Director, the Nonemployee Director's legal
representative, nor any person who acquires the right to exercise this
Option by reason of the Nonemployee Director's death shall be or have
any of the rights or privileges of, a shareholder of the Company in
respect of any shares of common stock receivable upon the exercise of
this Option, in whole or in part, unless and until certificates for
such shares shall have been issued upon exercise of this Option.
d. 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.
e. This Agreement will be governed by and constructed exclusively in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
GRACO INC.
By:
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Its
Vice President, General
Counsel and Secretary
.
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Name
Nonemployee Director
Nonemployee Director Stock Option Plan
Schedule Identifying Non-Statutory Stock Option Agreements Executed and
Material Details in which Executed Agreements Differ from Agreement Copy Filed
Current as of December 28, 2001
DATE NAME SHARES PRICE
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*May 7, 1996 Xxxxxx Xxxxxx 4,500 $ 8.39
*May 7, 1996 Xxx Mitau 4,500 $ 8.39
*May 7, 0000 Xxxxxx Xxxxxxx 4,500 $ 8.39
*May 7, 1996 Xxxxxxx XxxXxxx 4,500 $ 8.39
*May 6, 1997 Xxxxxx Xxxxxx 3,375 $11.78
*May 6, 1997 Xxx Mitau 3,375 $11.78
*May 6, 0000 Xxxxxx Xxxxxxx 3,375 $11.78
*May 6, 1997 Xxxxxxx XxxXxxx 3,375 $11.78
*May 5, 1998 Xxxxxx Xxxxxx 3,375 $23.21
*May 5, 1998 Xxx Mitau 3,375 $23.21
*May 5, 0000 Xxxxxx Xxxxxxx 3,375 $23.21
*May 5, 1998 Xxxxxxx XxxXxxx 3,375 $23.21
*May 4, 1999 Xxxxxx Xxxxxx 3,375 $21.04
*May 4, 1999 Xxx Mitau 3,375 $21.04
*May 4, 0000 Xxxxxx Xxxxxxx 3,375 $21.04
*May 4, 1999 Xxxxxxx XxxXxxx 3,375 $21.04
*June 1, 1999 Xxxxxx Xxxx 4,500 $21.79
*June 1, 1999 Xxxxxxx Xxxxxxx 4,500 $21.79
*May 2, 2000 Xxxxxx Xxxxxx 3,375 $22.67
*May 2, 2000 Xxxxxx Xxxx 3,375 $22.67
*May 2, 2000 Xxxxxxx Xxxxxxx 3,375 $22.67
*May 2, 2000 Xxx Mitau 3,375 $22.67
*May 2, 0000 Xxxxxx Xxxxxxx 3,375 $22.67
*May 2, 2000 Xxxxxxx XxxXxxx 3,375 $22.67
*September 28, 2000 Xxxx Xxxxxxxxxx 4,500 $21.00
February 23, 2001 J. Xxxxx Xxxxxxxx 3,000 $26.35
May 1, 2001 Xxxxxx Xxxxxx 2,500 $27.40
May 1, 2001 Xxxxxx Xxxx 2,500 $27.40
May 1, 2001 Xxxxxxx Xxxxxxx 2,500 $27.40
May 1, 2001 J. Xxxxx Xxxxxxxx 2,500 $27.40
May 1, 2001 Xxx Mitau 2,500 $27.40
May 1, 0000 Xxxxxx Xxxxxxx 2,500 $27.40
May 1, 2001 Xxxx Xxxxxxxxxx 2,500 $27.40
May 1, 2001 Xxxxxxx XxxXxxx 2,500 $27.40
May 1, 2001 Xxxxx Xxxx 3,000 $27.40
*Share data has been adjusted to reflect stock splits.
