Exhibit 10.3


 


FORM OF NON-STATUTORY STOCK OPTION AGREEMENT


 


THIS NON-STATUTORY STOCK
OPTION AGREEMENT is entered into and effective as of this           day of                         ,
             (the “Date
of Grant”), by and between MOCON, Inc. (the “Company”) and                                   
(the “Optionee”).


 


A.            The Company has
adopted the MOCON, Inc. 2006 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 employees (including, without limitation, officers and
directors who are also employees) of the Company or any Subsidiary, and any
non-employee directors, consultants, advisors and independent contractors of
the Company or any Subsidiary (as defined in the Plan).


 


B.            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.


 


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, $0.10 par value (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
this Option will become exercisable on such dates:


 


	
  Exercisability

  	
   

  	
  Available for Exercise

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 

















 


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


 


3.2           Termination of Employment or Service.


 


In the event that the
Optionee ceases to serve as a director of the Company for any reason, then from
and after the date of such cessation of service this Option will not further
vest but will remain exercisable until the Time of Termination with respect to
any Option Shares as to which this Option is exercisable as of the date of
cessation of service.


 


OR


 


(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 or Retirement, this
Option will remain exercisable, to the extent exercisable as of the date of
such termination, for a period of one year 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
this 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), this Option will remain
exercisable to the extent exercisable as of such termination for a period of
three months after such termination (but in no event after the Time of
Termination).


 


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, this 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 


 


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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 this 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 this 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.


 


4.             Manner of Option Exercise.


 


4.1           Notice. This 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
Minneapolis, Minnesota (Attention:  Chief
Financial Officer), 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 one or more duly issued
stock certificates evidencing such ownership.


 


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4.2           Payment.


 


(a)           At the time of exercise of this 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 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 this 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 this 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 this 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 this
Option (including, without limitation, the conditions set forth in Sections 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 this 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 this 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 this Option upon such Optionee’s death, and,
in the event of the Optionee’s 


 


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death, exercise of this 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.


 


5.4           Breach of Agreements. Notwithstanding anything in this Agreement
or the Plan to the contrary, in the event that the Optionee materially breaches
the terms of any employment, service, confidentiality, non-compete or
non-solicitation agreement entered into with the Company or any Subsidiary,
whether such breach occurs before or after termination of the Optionee’s
employment or other service with the Company or any Subsidiary, the Committee
in its sole discretion may immediately terminate all rights of the Optionee
under the Plan and this Agreement without notice of any kind or may require the
Optionee to surrender shares of Common Stock received, and to disgorge any
profits (however defined by the Committee), made or realized by the Optionee in
connection with this Option or any shares issued upon the exercise or vesting
of this Option.


 


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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, this
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 this 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 this Option. Shares of Common Stock issued or otherwise issuable to the
Optionee in connection with this 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.


 


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, this 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. 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 this Option and the administration of the
Plan and supersede all prior agreements, arrangements, plans and understandings
relating to the grant and exercise of this 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.


 


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


 


	
   

  	
  MOCON, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By execution of this Agreement, the Optionee

  	
  OPTIONEE

  
	
  acknowledges having received a copy of the Plan.

  	
   

  	
   

  
	
   

  	
    (Signature)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    (Name and Address)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  



 


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