EXHIBIT 10.1
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT (Directors)
This NON-QUALIFIED STOCK OPTION AGREEMENT (“Agreement”) is made and entered into as of the
day of , by and between Graham Corporation, a corporation organized and
existing under the laws of the State of Delaware and having an office at 20 Florence Avenue,
Batavia, New York 14020 (“Company”) and (“Option Holder”).
W I
T N E S S E T H :
WHEREAS, by action of its Board of Directors (“Board”), the Company has adopted the 2000
Graham Corporation Incentive Plan to Increase Shareholder Value (“Plan”), pursuant to which
Non-Qualified Stock Options with respect to shares of common stock of the Company (“Shares”) may be
granted to the Company’s eligible officers, employees and directors; and
WHEREAS, pursuant to Article III of the Plan, a Compensation Committee (“Committee”) has been
appointed to select the individuals to whom Non-Qualified Stock Options shall be granted and to
prescribe the terms and conditions of such grants; and
WHEREAS, the Committee has determined that the Option Holder is eligible to be granted a
Non-Qualified Stock Option and desires to grant a Non-Qualified Stock Option to the Option Holder,
and the Option Holder desires to accept such grant, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the Company and the Option Holder hereby agree as follows:
Section 1. Grant of Non-Qualified Stock Option. The Company hereby grants, and the
Option Holder hereby accepts the Company’s grant of, a Non-Qualified Stock Option to purchase
Shares (“Optioned Shares”), on the terms and conditions hereinafter set forth.
Section 2. Option Period. Subject to the vesting and other limitations contained in
Section 4, elsewhere in this Option Agreement and in the Plan, the Option Holder shall have the
right to purchase all or any portion of the vested Optioned Shares at any time during a period
(“Option Period”) which shall commence on the date six months and one day following the date first
above written and shall end on the earliest to occur of the following dates:
(a) the last day of the one-year period commencing on the date the Eligible Outside Director
ceases to be a member of the Board for reasons other than on account of death, Disability or
retirement as a member of the Board after age 65;
(b) the last day of the three-year period commencing on the date the Eligible Outside Director
ceases to be a member of the Board on account of death, Disability or retirement as a member of the
Board after age 65; or
(c) the last day of the ten year period commencing on the date on which the Option was
granted.
Section 3. Exercise Price. The Option Holder shall have the right to purchase all or
any portion of the vested Optioned Shares at a price per Share equal to $ (“Exercise
Price”) payable (a) in United States dollars in cash or by certified check, money order or bank
draft payable to the order of Graham Corporation, (b) in Shares duly endorsed for transfer and with
all necessary stock transfer tax stamps attached, already owned by the Option Holder and having a
fair market value equal to the Exercise Price, such fair market value to be determined in such
manner as may be provided by the Committee or as may be required in order to comply with or conform
to the requirements of any applicable laws or regulations, or (c) in a combination of United States
dollars and such Shares.
Section 4. Vesting; Limitations on Exercise.
(a) The shares underlying this Option shall vest and become exercisable 25 percent per year,
commencing one year following the date this Option was granted to the Option Holder (e.g., if this
Option is for an aggregate of 2,000 shares, 500 of such shares shall vest and become exercisable
one year following the date of this Option, 500 of such shares shall vest and become exercisable
two years following the date of this Option, 500 of such shares shall vest and become exercisable
three years following the date of this Option and 500 of such shares shall vest and become
exercisable four years following the date of this Option). Except as otherwise provided by Section
4(b), upon the Option Holder ceasing to be a member of the Company’s Board of Directors, Optioned
Shares which have not previously vested shall not thereafter vest or become exercisable under the
Option. In addition, shares underlying this Option and this Option itself shall be subject to
Section 2 and as well as to all other requirements imposed by applicable laws, rules or
regulations.
(b) Notwithstanding Section 4(a), the Option shall immediately vest and become exercisable
with respect to all Optioned Shares upon the death, Disability or Retirement of the Option Holder.
For purposes of this Agreement, “Retirement” shall mean a voluntary separation from service by an
Option Holder who is at least age 60 and who has been a member of the Company’s Board of Directors
for ten or more years.
Section 5. Method of Exercise. The Option Holder may, at any time during the Option
Period, exercise his right to purchase all or any part of the Optioned Shares then available for
purchase; provided, however, that the minimum number of Optioned Shares which may be purchased
shall be one hundred (100) or, if less, the total number of Optioned Shares then available for
purchase. The Option Holder shall exercise such right by:
(a) giving written notice to the Compensation Committee of the Board of Directors of Graham
Corporation (“Committee”), in the form attached hereto as Exhibit A with such form completed and
delivered to the Company’s Chief Accounting Officer; and
(b) delivering to the Committee full payment of the Exercise Price for the Optioned Shares to
be purchased.
As soon as is practicable following the date on which the Option Holder has satisfied the
requirements of this section 5, the Committee shall take such action as is necessary to cause the
Company to issue a stock certificate evidencing the Option Holder’s ownership (or the ownership of
such other person as the Option Holder may, by written notice to the Committee, designate) of the
Optioned Shares that have been purchased. The Option Holder or other person shall have no right to
vote or to receive dividends, nor have any other rights with respect to Optioned Shares, prior to
the date as of which such Optioned Shares are transferred to him on the stock transfer records of
the Company, and no adjustments shall be made for any dividends or other rights for which the
record date is prior to the date as of which such transfer is effected, except as may be required
under Section 8.
Section 6. Registration and Delivery of Optioned Shares. The Company’s obligation to
deliver Shares under this Agreement shall, if the Committee so requests, be conditioned upon the
receipt of a representation as to the investment intention of the Option Holder to whom such Shares
are to be delivered, in such form as the Committee shall determine to be necessary or advisable to
comply with the provisions of applicable federal, state or local law. It may be provided that any
such representation shall become inoperative upon a registration of the Shares or upon the
occurrence of any other event eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under this Agreement prior to (a) the admission of such
Shares to listing on any stock exchange on which Shares may then be listed, or (b) the completion
of such registration or other qualification under any state or federal law, rule or regulations as
the Committee shall determine to be necessary or advisable.
Section 7. Effect of Exercise of Appreciation Right. In the event that the Option
Holder shall be granted an Appreciation Right with respect to all or any portion of the Optioned
Shares, the exercise of such Appreciation Right shall automatically result in a reduction of the
number of Optioned Shares available for purchase hereunder by the number of Shares as to which such
Appreciation Right is exercised.
Section 8. Adjustments in the Event of Reorganization.
(a) In the event of any merger, consolidation, or other business reorganization in which the
Company is the surviving entity, and in the event of any stock split, stock dividend or other event
generally affecting the number of Shares held by each person who is then a shareholder of record,
the number of Optioned Shares shall be adjusted to account for such event. Such adjustment shall
be effected by multiplying:
(i) such number of Optioned Shares by
(ii) an amount equal to the number of Shares that would be owned after such event by a person
who, immediately prior to such event, was the holder of record of one Share;
and the Exercise Price shall be adjusted by dividing the Exercise Price by the amount determined
under section 8(a)(ii); provided, however, that the Committee may, in its discretion, establish
another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business reorganization in which the
Company is not the surviving entity:
(i) Any Non-Qualified Stock Options granted under this Agreement that remain outstanding may
be canceled by the Board upon at least thirty days’ written notice to each Option Holder in advance
of the effective date of such merger, consolidation, business reorganization, liquidation or sale;
and
(ii) Any Non-Qualified Stock Option which is not canceled pursuant to section 8(b)(i) shall be
adjusted in such manner as the Committee shall deem appropriate to account for such merger,
consolidation or other business reorganization.
Section 9. No Right to Continued Board Membership. Nothing in this Agreement, nor
any action of the Board or Committee with respect to this Agreement, shall be held or construed to
confer upon the Option Holder any right to a continuation of membership on the Board of the Company
or any of its affiliates. The Option Holder may be dealt with in the same manner as if this
Agreement had not been entered into.
Section 10. Taxes. Where any person is entitled to receive Shares pursuant to the
exercise of the Non-Qualified Stock Option granted hereunder, the Company shall have the right to
require such person to pay to the Company the amount of any tax which the Company is required to
withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the amount required to be withheld.
Section 11. No Assignment. The Non-Qualified Stock Option granted hereunder shall
not be subject in any manner to anticipation, alienation or assignment, nor shall such
Non-Qualified Stock Option be liable for or subject to debts, contracts, liabilities, engagements
or torts, nor shall it be transferable by the Option Holder other than by will or by the laws of
descent and distribution. During the lifetime of the Option Holder, the Non-Qualified Stock Option
granted hereunder shall be exercisable only by him.
Section 12. Notices. Any communication required or permitted to be given under the
Plan, including any notice, direction, designation, comment, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as it is delivered
personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified
mail, return receipt requested, addressed to such party at the address listed below, or at such
other address as one such party may by written notice specify to the other party:
(a) If to the Committee:
Graham Corporation
20 Florence Avenue
Batavia, New York 14020
Attention: Chief Accounting Officer
(b) If to the Option Holder, to the Option Holder’s then current residential address.
Section 13. Successors and Assigns. This Agreement shall inure to the benefit of and
shall be binding upon the Company and the Option Holder and their respective heirs, successors and
assigns.
Section 14. Construction of Language. Whenever appropriate in the Agreement, words
used in the singular may be read in the plural, words used in the plural may be read in the
singular, and words importing the masculine gender may be read as referring equally to the feminine
or the neuter. Any reference to a section shall be a reference to a section of this Agreement,
unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein
shall have the meanings assigned to them under the Plan.
Section 15. Governing Law. This Agreement shall be construed, administered and
enforced according to the laws of the State of New York without giving effect to the conflict of
laws principles thereof, except to the extent that such laws are preempted by federal law.
Section 16. Amendment. This Agreement may be amended, in whole or in part and in any
manner not inconsistent with the provisions of the Plan, at any time and from time to time by
written agreement between the Company and the Option Holder.
Section 17. Plan Provisions Control. This Agreement and the rights and obligations
created hereunder shall be subject to all of the terms and conditions of the Plan. In the event of
any conflict between the provisions of the Plan and the provisions of this Agreement, the terms of
the Plan, which are incorporated herein by reference, shall control. By signing this Agreement,
the Option Holder acknowledges receipt of a copy of the Plan.
Section 18. Acceptance by Option Holder. By executing this Agreement and returning a
fully executed copy hereof to the Committee at the address specified in section 12, the Option
Holder signifies his acceptance of the terms and conditions of this Non-Qualified Stock Option. If
a fully executed copy of this Agreement is not received by the Committee within forty-five days
after the date when it is presented to the Option Holder, the Committee may revoke the
Non-Qualified Stock Option granted, and thereby avoid all obligations, hereunder.
IN WITNESS WHEREOF, the Option Holder has executed, and the Company has caused its duly
authorized representative to execute, this Agreement as of the date first above written.
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GRAHAM CORPORATION |
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By:
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James R. Lines |
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President and Chief Executive Officer |
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Date:
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ATTEST:
[SEAL]
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OPTION HOLDER:
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Name: |
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Date:
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Exhibit A to Non-Qualified Stock Option Agreement (Directors)
2000 Graham Corporation Incentive Plan to Increase Shareholder Value
Instructions. Use this Notice to inform the Compensation Committee of Graham
Corporation (“Company”) that you are exercising your right to purchase shares of common stock
(“Shares”) of the Company pursuant to a non-qualified stock option (“Option”) granted under the
2000 Graham Corporation Incentive Plan to Increase Shareholder Value (“Plan”). If you are not the
person to whom the Option was granted (“Option Holder”), you must attach to this Notice proof of
your right to exercise the Option granted under the Non-Qualified Stock Option Agreement entered
into between the Company and the Option Holder (“Agreement”). This Notice should be personally
delivered or mailed by certified mail, return receipt requested, to: Compensation Committee,
Graham Corporation, 20 Florence Avenue, Batavia, New York 14020, Attention: Chief Accounting
Officer The effective date of the exercise of the Option shall be the date this Notice is
personally delivered or post marked by the United States Post Office if mailed. Except as
specifically provided to the contrary herein, capitalized terms shall have the meanings assigned to
them under the Plan. This Notice is subject to all of the terms and conditions of the Plan and the
Agreement.
Graham Corporation
20 Florence Avenue
Batavia, NY 14020
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Attention:
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Chief Accounting Officer |
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Re:
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Notice of Exercise of Non-Qualified Stock Option (Directors) |
Dear Sirs:
This shall constitute my irrevocable direction and authorization to exercise options with
respect to
shares of Graham Corporation stock previously granted to me under the
2000 Graham Corporation Incentive Plan to Increase Shareholder Value (“Plan”) at $ per
share. I further authorize you to issue my shares in my name and deliver them to
(“Broker”) for my account.
By copy of this letter, I authorize the Broker to issue a check from my account maintained
with the Broker payable to Graham Corporation in the amount of $ .
I represent that the above shares are not subject to any encumbrance or other claim and that
you, the Broker, and Graham Corporation’s transfer agent (“Transfer Agent”) may rely upon this
exercise notice as a representation and authorization for this purpose.
By copy of this letter, I further authorize the Broker to:
o Exercise and Sell
o Exercise and Hold
You
are hereby directed and instructed to issue shares of common stock in
my name for my account maintained with the Broker. Please:
o (a) Arrange for electronic transfer of the shares on this date via the Depository Trust to
the Broker, whose DTC Number is ; or
o (b) Expedite the overnight delivery of said certificate by express mail to:
I understand that the difference between the Fair Market Value of the Shares to be issued to
me pursuant to this Notice and the Exercise Price of such Shares will be taxable income to me, and
that I must consult with my own tax advisor regarding when such income will be reportable. I
understand that, under the Plan and Agreement, I am responsible for the amount of any federal,
state and local taxes that are required to be paid with respect to the Shares to be issued pursuant
to this Notice.
I have been advised by my legal counsel that my acquisition of shares pursuant to this notice
and my sale of the shares so acquired is not a transaction to which Section 16(b) of the Securities
Exchange Act of 1934 (“short swing profit rule”) applies. I acknowledge that under the short swing
profit rule I may be liable to the Corporation in the event of a sale occasioned by a margin
deficiency in my account.
I understand that I must rely on, and consult with, my own legal counsel (and not the Company)
regarding the application of all laws — particularly tax and securities laws — to the
transactions to be effected pursuant to this Notice.
ON BEHALF OF THE COMMITTEE
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Received [check one]:
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o By Hand
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o By Mail Post Marked |
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By
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Authorized Signature |
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Date
of Receipt
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