Exhibit 10.3

 

FORM OF NON-STATUTORY STOCK OPTION AGREEMENT

 

THIS NON-STATUTORY STOCK OPTION AGREEMENT is entered into and effective as of
__________, 20__ (the “Date of Grant”), by and between Northern Technologies
International Corporation (the “Company”) and ______________ (the “Optionee”).

 

A.       The Company has adopted the Northern Technologies International
Corporation 2019 Stock Incentive Plan (the “Plan”) authorizing the Board of
Directors of the Company, or a committee as provided for in the Plan (the Board
or such a committee to be referred to as the “Committee”), to grant
non-statutory stock options to Eligible Recipients (as defined in the Plan).

 

B.       The Optionee is an Eligible Recipient (as defined in the Plan).

 

C.       The Company desires to give the Optionee an inducement to acquire a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan.

 

Accordingly, the parties agree as follows:

 

1.     Grant of Option.

 

Effective as of the Date of Grant, the Company hereby grants to the Optionee the
right, privilege, and option (the “Option”) to purchase _______________ (______)
shares (the “Option Shares”) of the Company’s common stock, par value $0.02 per
share (the “Common Stock”), according to the terms and subject to the conditions
hereinafter set forth and as set forth in the Plan. The Option is not intended
to be an “incentive stock option,” as that term is used in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).

 

2.     Option Exercise Price.

 

The per share price to be paid by Optionee in the event of an exercise of the
Option will be $______.

 

3.     Duration of Option and Time of Exercise.

 

3.1               Initial Period of Exercisability. The Option will become
exercisable with respect to the Option Shares [immediately/in _____
installments]. [The following table sets forth the initial dates of
exercisability of each installment and the number of Option Shares as to which
the Option will become exercisable on such dates:

 

  Exercisability   Available for Exercise    ___________________  _______  
___________________  _______   ___________________  _______  
___________________  _______]

 

[The foregoing rights to exercise the Option will be cumulative with respect to
the Option Shares becoming exercisable on each such date.] In no event will the
Option be exercisable after, and the Option will become void and expire as to
all unexercised Option Shares at 5:00 p.m. Circle Pines, Minnesota time on
______________________ (the “Time of Termination”).

 

 

3.2               Termination of Employment or Service.

 

(a)                Termination Due to Death, Disability or Retirement. In the
event the Optionee’s employment or service relationship with the Company and all
Subsidiaries is terminated by reason of death, Disability (as defined in the
Plan) or Retirement (as defined in the Plan), the Option will remain
exercisable, to the extent exercisable as of the date of such termination, for a
period of twelve (12) months after such termination (but in no event after the
Time of Termination).

 

(b)                Termination for Reasons Other Than Death, Disability or
Retirement. In the event that the Optionee’s employment or service relationship
with the Company and all Subsidiaries is terminated for any reason other than
death, Disability or Retirement, or the Optionee is in the employ of or perform
services to a Subsidiary and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Optionee continues in the employ of or performs services to
the Company or another Subsidiary), all rights of the Optionee under the Plan
and this Agreement will immediately terminate without notice of any kind, and
the Option will no longer be exercisable; provided, however, that if such
termination is due to any reason other than termination by the Company or any
Subsidiary for Cause (as defined in the Plan), the Option will remain
exercisable to the extent exercisable as of such termination for a period of
three (3) months after such termination (but in no event after the Time of
Termination).

 

(c)                Effect of Actions Constituting Cause or Adverse Action.
Notwithstanding anything in this Agreement to the contrary and in addition to
the rights of the Committee under Sections 12.3, 12.5 and 12.6 of the Plan, in
the event that the Optionee is determined by the Committee, acting in its sole
discretion, to have taken any action that would constitute Cause (as defined in
the Plan) or an Adverse Action (as defined in the Plan) during or within one (1)
year after the termination of employment or other service with the Company or a
Subsidiary, irrespective of whether such action or the Committee’s determination
occurs before or after termination of such Optionee’s employment or other
service with the Company or any Subsidiary and irrespective of whether or not
the Optionee was terminated as a result of such Cause or Adverse Action, (a) all
rights of the Optionee under the Plan and any agreements evidencing an Incentive
Award then held by the Optionee, including without limitation the Option and
this Agreement, will terminate and be forfeited without notice of any kind, and
(b) the Committee in its sole discretion will have the authority to rescind the
exercise, vesting or issuance of, or payment in respect of, any Incentive Awards
of the Optionee that were exercised, vested or issued, or as to which such
payment was made, including without limitation the Option, and to require the
Optionee to pay to the Company, within ten (10) days of receipt from the Company
of notice of such rescission, any amount received or the amount of any gain
realized as a result of such rescinded exercise, vesting, issuance or payment
(including any dividends paid or other distributions made with respect to any
shares subject to any Incentive Award). The Company may defer the exercise of
the Option for a period of up to six (6) months after receipt of the Optionee’s
written notice of exercise for a period of up to six (6) months after the date
of such vesting in order for the Committee to make any determination as to the
existence of Cause or an Adverse Action. The Company will be entitled to
withhold and deduct from future wages of the Optionee (or from other amounts
that may be due and owing to the Optionee from the Company or a Subsidiary) or
make other arrangements for the collection of all amounts necessary to satisfy
such payment obligations. This Section 3.2(c) shall not apply following a Change
in Control.

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3.3               Change in Control.

 

(a)                Impact of Change in Control. If a Change in Control (as
defined in the Plan) of the Company occurs, the Option will become immediately
exercisable in full and will remain exercisable until the Time of Termination,
regardless of whether the Optionee remains in the employ or service of the
Company or any Subsidiary. In addition, if a Change in Control of the Company
occurs, the Committee, in its sole discretion and without the consent of the
Optionee, may determine that the Optionee will receive, with respect to some or
all of the Option Shares, as of the effective date of any such Change in Control
of the Company, cash in an amount equal to the excess of the Fair Market Value
(as defined in the Plan) of such Option Shares immediately prior to the
effective date of such Change in Control of the Company over the option exercise
price per share of the Option.

 

(b)                Limitation on Change in Control Payments. Notwithstanding
anything in this Section 3.3 to the contrary, if, with respect to the Optionee,
the acceleration of the vesting of the Option or the payment of cash in exchange
for all or part of the Option Shares as provided above (which acceleration or
payment could be deemed a “payment” within the meaning of Section 280G(b)(2) of
the Code), together with any other “payments” that the Optionee has the right to
receive from the Company or any corporation that is a member of an “affiliated
group” (as defined in Section 1504(a) of the Code without regard to
Section 1504(b) of the Code) of which the Company is a member, would constitute
a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the
“payments” to the Optionee as set forth herein will be reduced to the largest
amount as will result in no portion of such “payments” being subject to the
excise tax imposed by Section 4999 of the Code; provided, that such reduction
shall be made only if the aggregate amount of the payments after such reduction
exceeds the difference between (A) the amount of such payments absent such
reduction minus (B) the aggregate amount of the excise tax imposed under Section
4999 of the Code attributable to any such excess parachute payments.
Notwithstanding the foregoing sentence, if the Optionee is subject to a separate
agreement with the Company or a Subsidiary that expressly addresses the
potential application of Sections 280G or 4999 of the Code (including, without
limitation, that “payments” under such agreement or otherwise will be reduced,
that the Optionee will have the discretion to determine which “payments” will be
reduced, that such “payments” will not be reduced or that such “payments” will
be “grossed up” for tax purposes), then this Section 3.3(b) will not apply, and
any “payments” to the Optionee as provided herein will be treated as “payments”
arising under such separate agreement; provided, however, such separate
agreement may not modify the time or form of payment under any Incentive Award
that constitutes deferred compensation subject to Section 409A of the Code if
the modification would cause such Incentive Award to become subject to the
adverse tax consequences specified in Section 409A of the Code.

 

4.     Manner of Option Exercise.

 

4.1               Notice. The Option may be exercised by the Optionee in whole
or in part from time to time, subject to the conditions contained in the Plan
and in this Agreement, by delivery, in person, by facsimile or electronic
transmission or through the mail, to the Company at its principal executive
office in Circle Pines, Minnesota, of a written notice of exercise. Such notice
must be in a form satisfactory to the Committee, must identify the Option, must
specify the number of Option Shares with respect to which the Option is being
exercised, and must be signed by the person or persons so exercising the Option.
Such notice must be accompanied by payment in full of the total purchase price
of the Option Shares purchased. In the event that the Option is being exercised,
as provided by the Plan and Section 3.2 above, by any person or persons other
than the Optionee, the notice must be accompanied by appropriate proof of right
of such person or persons to exercise the Option. As soon as practicable after
the effective exercise of the Option, the Optionee will be recorded on the stock
transfer books of the Company as the owner of the Option Shares purchased, and
the Company will deliver to the Optionee certificated or uncertificated (“book
entry”) shares. In the event that the Option is being exercised, as provided by
resolutions of the Committee and Section 4.2 below, by tender of a Broker
Exercise Notice (as defined in the Plan), the Company will deliver such shares
directly to the Optionee’s broker or dealer or their nominee.

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4.2               Payment.

 

(a)                At the time of exercise of the Option, the Optionee must pay
the total purchase price of the Option Shares to be purchased entirely in cash
(including check, bank draft or money order); provided, however, that the
Committee, in its sole discretion and upon terms and conditions established by
the Committee, may allow such payments to be made, in whole or in part, by (i)
tender of a Broker Exercise Notice; (ii) by tender, or attestation as to
ownership, of Previously Acquired Shares (as defined in the Plan) that are
acceptable to the Committee; (iii) by a “net exercise” of the Option (as
described in the Plan); or (iv) by a combination of such methods.

 

(b)                In the event the Optionee is permitted to pay the total
purchase price of the Option in whole or in part with Previously Acquired
Shares, the value of such shares will be equal to their Fair Market Value on the
date of exercise of the Option.

 

(c)                In the case of a “net exercise” of an Option, the Company
will not require a payment of the exercise price of the Option from the Optionee
but will reduce the number of shares of Common Stock issued upon the exercise by
the largest number of whole shares that has a Fair Market Value on the exercise
date that does not exceed the aggregate exercise price for the shares exercised
under this method.

 

(d)                Shares of Common Stock will no longer be outstanding under
the Option (and will therefore not thereafter be exercisable) following the
exercise of such Option to the extent of (i) shares used to pay the exercise
price of an Option under the “net exercise,” (ii) shares actually delivered to
the Optionee as a result of such exercise and (iii) any shares withheld for
purposes of tax withholding.

 

5.     Rights of Optionee; Transferability.

 

5.1               Employment or Service. Nothing in this Agreement will
interfere with or limit in any way the right of the Company or any Subsidiary to
terminate the employment or service of the Optionee at any time, nor confer upon
the Optionee any right to continue in the employ of or provide services to the
Company or any Subsidiary at any particular position or rate of pay or for any
particular period of time.

 

5.2               Rights as a Shareholder. The Optionee will have no rights as a
shareholder unless and until all conditions to the effective exercise of the
Option (including, without limitation, the conditions set forth in Sections 3, 4
and 6 of this Agreement) have been satisfied and the Optionee has become the
holder of record of such shares. No adjustment will be made for dividends or
distributions with respect to the Option as to which there is a record date
preceding the date the Optionee becomes the holder of record of such shares,
except as may otherwise be provided in the Plan or determined by the Committee
in its sole discretion.

 

5.3               Restrictions on Transfer. Except pursuant to testamentary will
or the laws of descent and distribution or as otherwise expressly permitted by
the Plan, no right or interest of the Optionee in the Option prior to exercise
may be assigned or transferred, or subjected to any lien, during the lifetime of
the Optionee, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise. The Optionee will, however, be entitled to
designate a beneficiary to receive the Option upon such Optionee’s death, and,
in the event of the Optionee’s death, exercise of the Option (to the extent
permitted pursuant to Section 3.2(a) of this Agreement) may be made by the
Optionee’s legal representatives, heirs and legatees.

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6.     Withholding Taxes.

 

The Company is entitled to (a) withhold and deduct from future wages of the
Optionee (or from other amounts that may be due and owing to the Optionee from
the Company or a Subsidiary), or make other arrangements for the collection of,
all legally required amounts necessary to satisfy any and all federal, foreign,
state and local withholding and employment-related tax requirements attributable
to the Option, including, without limitation, the grant, exercise or vesting of,
the Option or a disqualifying disposition of any Option Shares; (b) withhold
cash paid or payable or shares of Common Stock from the shares issued or
otherwise issuable to the Optionee in connection with the Option; or (c) require
the Optionee promptly to remit the amount of such withholding to the Company
before taking any action, including issuing any shares of Common Stock, with
respect to the Option. Shares of Common Stock issued or otherwise issuable to
the Optionee in connection with the Option that gives rise to the tax
withholding obligation that are withheld for purposes of satisfying the
Optionee’s withholding or employment-related tax obligation will be valued at
their Fair Market Value on the Tax Date. When withholding for taxes is effected
under this Agreement, it shall be withheld only up to an amount of tax
withholding based on the maximum statutory tax rates in the Optionee’s
applicable tax jurisdictions or such other rate that will not trigger a negative
accounting impact on the Company.

 

7.     Adjustments.

 

In the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a
spin-off), or any other similar change in the corporate structure or shares of
the Company, the Committee (or, if the Company is not the surviving corporation
in any such transaction, the board of directors of the surviving corporation),
in order to prevent dilution or enlargement of the rights of the Optionee, will
make appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities or other property (including cash) subject to, and
the exercise price of, the Option.

 

8.     Stock Subject to Plan.

 

The Option and the Option Shares granted and issued pursuant to this Agreement
have been granted and issued under, and are subject to the terms of, the Plan.
The terms of the Plan are incorporated by reference in this Agreement in their
entirety, and the Optionee, by execution of this Agreement, acknowledges having
received a copy of the Plan. The provisions of this Agreement will be
interpreted as to be consistent with the Plan, and any ambiguities in this
Agreement will be interpreted by reference to the Plan. In the event that any
provision of this Agreement is inconsistent with the terms of the Plan, the
terms of the Plan will prevail.

 

9.     Miscellaneous.

 

9.1               Binding Effect. This Agreement will be binding upon the heirs,
executors, administrators and successors of the parties to this Agreement.

 

9.2               Governing Law; Venue. This Agreement and all rights and
obligations under this Agreement will be construed in accordance with the Plan
and governed by the laws of the State of Minnesota, without regard to conflicts
of laws provisions. Any legal proceeding related to this Agreement will be
brought in an appropriate Minnesota court, and the parties to this Agreement
consent to the exclusive jurisdiction of the court for this purpose.

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9.3               Entire Agreement. This Agreement and the Plan set forth the
entire agreement and understanding of the parties to this Agreement with respect
to the grant and exercise of the Option and the administration of the Plan and
supersede all prior agreements, arrangements, plans and understandings relating
to the grant and exercise of the Option and the administration of the Plan.

 

9.4               Amendment and Waiver. Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties to this Agreement or, in the case of a
waiver, by the party waiving compliance.

 

9.5               Construction. Wherever possible, each provision of this
Agreement will be interpreted so that it is valid under the applicable law. If
any provision of this Agreement is to any extent invalid under the applicable
law that provision will still be effective to the extent it remains valid. The
remainder of this Agreement also will continue to be valid, and the entire
Agreement will continue to be valid in other jurisdictions.

 

9.6               Counterparts. For convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
to be deemed an original instrument, and all such counterparts together to
constitute the same agreement.

 

9.7               Nature of the Grant. In accepting the Option and by execution
of this Agreement, the Optionee acknowledges that:

 

(a)                The Plan is established voluntarily by the Company, it is
discretionary in nature and it may be modified, amended, suspended or terminated
by the Company at any time, unless otherwise provided in the Plan or this
Agreement.

 

(b)                The grant of the Option is voluntary and occasional and does
not create any contractual or other right to receive future Option grants, or
benefits in lieu of Option grants, even if Option grants have been granted
repeatedly in the past.

 

(c)                All decisions with respect to future Option grants, if any,
will be at the sole discretion of the Company.

 

(d)                Optionee is voluntarily participating in the Plan.

 

(e)                The grant of the Option is not part of normal or expected
compensation or salary for any purposes, including, but not limited to,
calculating any severance, resignation, termination, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement benefits or
similar payments and in no event should be considered as compensation for, or
relating in any way to, past services for the Company.

 

(f)                 The future value of the underlying Common Stock is unknown
and cannot be predicted with certainty and if Optionee vests in the Option
grant, exercises the Option in accordance with the terms of this Agreement and
is issued shares of Common Stock, the value of such shares may increase or
decrease.

 

(g)                In consideration of the grant of the Option, no claim or
entitlement to compensation or damages shall arise from termination of the
Option or diminution in value of the Option or shares acquired upon exercise of
the Option resulting from termination of Optionee’s employment or service by the
Company or one of its Subsidiaries (for any reason whatsoever and whether or not
in breach of local labor laws) and Optionee irrevocably releases the Company and
its Subsidiaries from any such claim that may arise; if, notwithstanding the
foregoing, any such claim is found by a court of competent jurisdiction to have
arisen, then, by acceptance of the Option and execution of this Agreement,
Optionee shall be deemed irrevocably to have waived his or her entitlement to
pursue such claim.

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(h)                The Company is not providing any tax, legal or financial
advice, nor is the Company making any recommendations regarding Optionee’s
participation in the Plan, or Optionee’s purchase or sale of the underlying
Option Shares.

 

(i)                 Optionee is hereby advised to consult with his or her own
personal tax, legal and financial advisors regarding his or her participation in
the Plan before taking any action related to the Plan.

 

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The parties to this Agreement have executed this Agreement effective the day and
year first above written.

 

  NORTHERN TECHNOLOGIES   INTERNATIONAL CORPORATION               By          
Its:  

 

 

 

*By execution of this Agreement, the Optionee acknowledges having received
electronically a copy of the Plan, the Prospectus relating to the Plan and the
Company’s most recent Annual Report on Form 10-K.  The Optionee hereby agrees to
accept electronic delivery of copies of any future amendments or supplements to
the Prospectus or any future Prospectuses relating the Plan and copies of all
reports, proxy statements and other communications distributed to the Company’s
security holders generally by email directed to the Optionee’s Company email
address.

OPTIONEE

    (Signature)     (Name and Address)        

 

 

 

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