Document:

exv10w7

EXHIBIT 10.7

BRADY CORPORATION

2004 OMNIBUS INCENTIVE STOCK PLAN

I. INTRODUCTION

     1.01 Purpose. This plan shall be known as the Brady Corporation 2004 Omnibus
Incentive Stock Plan. The purpose of the Plan is to provide an incentive for employees of Brady
Corporation and its Affiliates to improve corporate performance on a long-term basis, and to
attract and retain employees by enabling employees to participate in the future successes of the
Corporation, and by associating the long term interests of employees with those of the Corporation
and its shareholders. It is intended that the Plan and its operation comply with the provisions of
Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). The Plan is intended
to permit the grant of Nonqualified Stock Options, Incentive Stock Options, shares of Restricted
Stock and Restricted Stock Units. The proceeds received by the Corporation from the sale of
Corporation Stock pursuant to the Plan shall be used for general corporate purposes.

     1.02 Effective Date. The effective date of the Plan shall be November 18, 2004,
subject to approval of the Plan by holders of a majority of the outstanding voting common stock of
the Corporation provided that such approval is given within 12 months of the effective date. Any
Award granted prior to such shareholder approval shall be expressly conditioned upon shareholder
approval of the Plan.

II. PLAN DEFINITIONS

     For Plan purposes, except where the context clearly indicates otherwise, the following terms
shall have the meanings set forth below:

	 	(a)	 	“Affiliates” means any “subsidiary corporation” or
“parent corporation” as such terms are defined in Section 424 of the Code.
	 
	 	(b)	 	“Agreement” means a written agreement (including any
amendment or supplement thereto) between the Corporation and a Participant
specifying the terms and conditions of an Award.
	 
	 	(c)	 	“Award” shall mean the grant of any form of Stock
Option, Restricted Stock or Restricted Stock Units.
	 
	 	(d)	 	“Board” shall mean the Board of Directors of the
Corporation.
	 
	 	(e)	 	“Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time.
	 
	 	(f)	 	“Committee” shall mean the Committee described in
Section 4.01.
	 
	 	(g)	 	“Corporation” shall mean Brady Corporation, a Wisconsin
corporation.

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	 	(h)	 	“Corporation Stock” shall mean the Corporation’s Class
A Non-Voting Common Stock, $.01 par value, and such other stock and securities
as may be substituted therefor pursuant to Section 3.02.
	 
	 	(i)	 	“Eligible Employee” shall mean any regular salaried
employee of the Corporation or an Affiliate, including an employee who is a
member of the Board, who satisfies the requirements of Section 5.01.
	 
	 	(j)	 	“Exercise Period” shall mean the period of time
provided pursuant to Section 6.05 within which a Stock Option may be exercised.
	 
	 	(k)	 	“Fair Market Value” on any date shall mean, with
respect to Corporation Stock, if the stock is then listed and traded on a
registered national securities exchange, or is quoted in the NASDAQ National
Market System, the average of the high and low sale prices recorded in
composite transactions for such date or, if such date is not a business day or
if no sales of Corporation Stock shall have been reported with respect to such
date, the next preceding business date with respect to which sales were
reported. In the absence of reported sales or if the stock is not so listed or
quoted, but is traded in the over-the-counter market, Fair Market Value shall
be the average of the closing bid and asked prices for such shares on the
relevant date.
	 
	 	(l)	 	“Participant” means an Eligible Employee who has been
granted an Award under this Plan.
	 
	 	(m)	 	“Performance Goals” means the performance goals
established by the Committee prior to the grant of any Award of Stock Options,
Restricted Stock or Restricted Stock Units intended to qualify as
“performance-based compensation” under Section 162(m) of the Code. Performance
Goals may be established at the Company or business unit level and may be based
upon the attainment of goals relating to one or more of the following business
criteria measured on an absolute basis or in terms of growth or reduction:
revenue, expenses, net income (pre-tax or after-tax and with adjustments as
stipulated), earnings per share, return on equity, return on assets, return on
tangible book value, operating income, earnings before depreciation, interest,
taxes and amortization (EBDITA), loss ratio, expense ratio, increase in stock
price, total shareholder return, economic value added and operating cash flow.
The Committee may establish other subjective or objective performance goals,
including individual goals, which it deems appropriate.
	 
	 	(n)	 	“Person” means any individual or entity, and the heirs,
personal representatives, executors, administrators, legal representatives,
successors and assigns of such Person as the context may require.

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	 	(o)	 	“Plan” shall mean the Brady Corporation 2004 Omnibus
Incentive Stock Plan, as set forth herein, as it may be amended from time to
time.
	 
	 	(p)	 	“Restricted Stock” means shares of Corporation Stock
granted to a Participant under Article VII.
	 
	 	(q)	 	“Restricted Stock Unit” means an Award granted to a
Participant under Article VIII.
	 
	 	(r)	 	“Stock Option” means an option to purchase a stated
number of shares of Corporation Stock at the price set forth in an Agreement.
A Stock Option may be either a Nonqualified Stock Option or an Incentive Stock
Option.

III. SHARES SUBJECT TO AWARD

     3.01 Available Shares. Subject to adjustments under Section 3.02, the total number of
shares of Corporation Stock authorized for issuance shall not exceed seven hundred fifty thousand
(750,000) shares, provided that no individual Eligible Employee may be granted an Award or Awards
under the Plan covering more than one hundred thousand (100,000) shares of Corporation Stock in any
calendar year (determined without regard to grants under any other plan or program). The shares
authorized for issuance under the Plan may consist, in whole or in part, of authorized but unissued
Corporation Stock, or of treasury stock of the Corporation. Shares subject to and not issued under
an Award that expires, terminates, is canceled or forfeited for any reason under the Plan shall
again become available for the granting of Awards.

     3.02 Changes in Corporation Stock. In the event of any change in the Corporation
Stock resulting from a reorganization, recapitalization, stock split, stock dividend, merger,
consolidation, rights offering or like transaction, the Committee shall proportionately and
appropriately adjust: (a) the aggregate number and kind of shares authorized for issuance under
the Plan; and (b) in the case of previously-granted Stock Options, the option price and the number
and kind of shares subject to the Stock Options, without any change in the aggregate purchase price
to be paid for the Stock Options.

IV. ADMINISTRATION

     4.01 Administration by the Committee. The Plan shall be administered by the
Committee. The Committee shall be a committee designated by the Board to administer the Plan and
shall initially be the Compensation Committee of the Board. The Committee shall be constituted to
permit the Plan to comply with the provisions of Rule 16b-3 under the Securities Exchange Act of
1934 (or any successor rule) and Section 162(m) of the Code. A majority of the members of the
Committee shall constitute a quorum. The approval of such a quorum, expressed by a majority vote
at a meeting held either in person or by conference telephone call, or the unanimous consent of all
members in writing without a meeting, shall constitute the action of the Committee and shall be
valid and effective for all purposes of the Plan.

     4.02 Committee Powers. Subject to Section 10.06, the Committee is empowered to adopt,
amend and rescind such rules, regulations and procedures and take such other action as it shall
deem necessary or proper for the administration of the Plan and, in its discretion, may

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modify,
extend or renew any Award theretofore granted. The Committee shall also have authority to
interpret the Plan, and the decision of the Committee on any questions concerning the
interpretation of the Plan shall be final and conclusive. The express grant in the Plan of any
specific power to the Committee shall not be construed as limiting any power or authority of the
Committee. The Committee shall not incur any liability for any action taken in good faith
with respect to the Plan or any Award.

     Subject to the provisions of the Plan, the Committee shall have full and final authority to:

	 	(a)	 	designate the Eligible Employees to whom Awards shall be
granted;
	 
	 	(b)	 	grant Awards in such form and amount as the Committee shall
determine;
	 
	 	(c)	 	impose such limitations, restrictions and conditions upon any
such Award as the Committee shall deem appropriate, including conditions (in
addition to those contained in this Plan) (i) on the exercisability of all or
any portion of a Stock Option, (ii) on the transferability or forfeitability of
Restricted Stock or (iii) requiring an Eligible Employee to retain all or a
portion of the Corporation Stock for a period of time following the exercise of
a Stock Option, the vesting of Restricted Stock or the payment of Restricted
Stock Units;
	 
	 	(d)	 	prescribe the form of Agreement with respect to each Award;
	 
	 	(e)	 	waive in whole or in part any limitations, restrictions or
conditions imposed upon any such Award as the Committee shall deem appropriate
(including accelerating the time at which any Stock Option may be exercised or
the time at which Restricted Stock may become transferable or nonforfeitable);
	 
	 	(f)	 	make adjustments in the terms and conditions of a Performance
Goal in recognition of unusual or nonrecurring events affecting the Company or
the financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the
Plan, provided that no such adjustment shall be authorized to the extent that
such adjustment would be inconsistent with the Plan’s or any Performance Award
meeting the requirements of Section 162(m) of the Code; and
	 
	 	(g)	 	determine the extent to which leaves of absence for
governmental or military service, illness, temporary disability and the like
shall not be deemed interruptions of continuous employment.

V. PARTICIPATION

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     5.01 Eligibility. Any employee of the Corporation and its Affiliates (including
officers and employees who may be members of the Board) who, in the sole opinion of the Committee,
has contributed or can be expected to contribute to the profits, growth and success of the
Corporation shall be eligible for Awards under the Plan. A member of the Committee or any person
who is expected to become a member within one year of any Award shall not be an Eligible Employee
if his or her status as an Eligible Employee would prevent the Committee
from being “disinterested” under Rule 16b-3 under the Securities Exchange Act of 1934. From
among all such Eligible Employees, the Committee shall determine from time to time those Eligible
Employees to whom Awards shall be granted. No Eligible Employee shall have any right whatsoever to
receive an Award unless so determined by the Committee.

     5.02 No Employment Rights. The Plan shall not be construed as conferring any rights
upon any person for a continuation of employment, nor shall it interfere with the rights of the
Corporation or any Affiliates to terminate the employment of any person or to take any other action
affecting such person.

VI. STOCK OPTIONS

     6.01 Stock Options; General. Stock Options granted under the Plan shall be in the
form of Nonqualified Stock Options (“NSOs”), Incentive Stock Options (“ISOs”) or a combination
thereof. Each Stock Option granted under the Plan shall be evidenced by an Agreement which shall
contain the terms and conditions required by this Article VI, and such other terms and conditions,
not inconsistent herewith, as the Committee may deem appropriate in each case. A Stock Option
granted under the Plan shall not be treated as an Incentive Stock Option unless the Stock Option
Agreement specifically designates the option as an Incentive Stock Option.

     6.02 Stock Option Holder’s Rights as a Shareholder. The holder of a Stock Option
shall not have any rights as a shareholder with respect to the shares covered by a Stock Option
until such shares have been delivered to him or her.

     6.03 Option Price. The price at which each share of Corporation Stock covered by a
Stock Option may be purchased shall be not less than 100% of the Fair Market Value of such stock on
the date on which the option is granted. The option price shall be subject to adjustment as
provided in Section 3.02 hereof.

     6.04 Date Stock Option Granted. For purposes of the Plan, a Stock Option shall be
considered as having been granted on the date on which the Committee authorized the grant of the
Stock Option except where the Committee has designated a later date, in which event the later date
shall constitute the date of grant of the Stock Option; provided, however, that notice of the grant
of the Stock Option shall be given to the Participant within a reasonable time.

     6.05 Exercise Period. The Committee shall have the power to set the time or times
within which each Option shall be exercisable, and to accelerate the time or times of exercise;
provided, however, that

	 	(a)	 	no Stock Option granted under this Plan to any Person subject
to the reporting requirements of Section 16(b) of the Securities and Exchange

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	 	 	 	Act of 1934 may be exercised until at least six months from the later of (i)
the date of grant or (ii) shareholder approval of the Plan, and
	 
	 	(b)	 	no Stock Option shall be exercisable after the expiration of
ten (10) years from the date the Stock Option is granted. Each Agreement with
respect to a Stock Option shall state the period or periods of time within
which the Stock Option may be exercised by the Participant, in whole or in
part.

Subject to the foregoing, unless the Agreement with respect to a Stock Option expressly provides
otherwise, a Stock Option shall be exercisable in accordance with the following schedule:

	 	 	 	 	 
	Years After	 	 
	Date of Grant	 	 	Percentage of Shares
	Less than 1
	 	 	0%
	 
	1 but less than 2
	 	 	33-1/3%
	 
	2 but less than 3
	 	 	66-2/3%
	 
	3 or more
	 	 	100%

     6.06 Method of Exercise. Subject to Section 6.05, each Stock Option may be exercised
in whole or in part from time to time as specified in the Agreements provided, however, that each
Participant may exercise a Stock Option in whole or in part by giving written notice of the
exercise to the Corporation, specifying the number of shares to be purchased by payment in full of
the purchase price therefor. The purchase price may be paid (a) in cash, (b) by check, (c) with the
approval of the Committee, or if the applicable Agreement so provides, by delivering shares of
Corporation Stock (“Delivered Stock”), (d) by surrendering to the Corporation shares of Corporation
Stock otherwise receivable upon exercise of the Stock Option (a “Net Exercise”), or (e) any
combination of the foregoing. For purposes of the foregoing, Delivered Stock shall be valued at
its Fair Market Value determined as of the business day immediately preceding the date of exercise
of the Stock Option and shares of Corporation Stock used in a Net Exercise shall be valued at their
Fair Market Value determined as of the date of exercise of the Stock Option. No Participant shall
be under any obligation to exercise any Stock Option hereunder.

     6.07 Dissolution or Liquidation. Anything contained herein to the contrary
notwithstanding, on the effective date of any dissolution or liquidation of the Corporation, any
unexercised Stock Options shall be deemed cancelled, and the holder of any such unexercised Stock
Options shall be entitled to receive payment under Section 10.04.

     6.08 Special Rules for Incentive Stock Options. For so long as Section 422 ( or any
successor provision) of the Code so provides:

	 	(a)	 	The aggregate Fair Market Value of Corporation Stock
(determined as of the date the stock option is granted) with respect to which
ISOs are exercisable for the first time during a calendar year may not exceed

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	 	 	 	$100,000. To the extent that the value of the stock subject to options exceeds
that amount, the excess shall be considered to be NSOs, with the determination
to be made in the order the options are granted.
	 
	 	(b)	 	Employees who own, directly or indirectly, within the meaning
of Code Section 425(d), more than 10% of the voting power of all classes of
stock of the Corporation or any parent or subsidiary corporation shall not be
eligible to receive an ISO hereunder unless the purchase price per share under
such option is at least 110% of the Fair Market Value of the stock
subject to the option and such option by its terms is not exercisable after
the expiration of five (5) years from the date such option is granted
	 
	 	(c)	 	To obtain favorable ISO tax treatment, the option must be
exercised while the Participant is an employee, or within three months after
the Participant’s termination as an employee; provided that, in the case of
termination on account of disability (as defined in Section 22(e)(3) of the
Code), the exercise period may be extended to one year; and further provided
that the employment requirement is waived in the case of the participant’s
death.

VII. RESTRICTED STOCK

     7.01 Administration. Shares of Restricted Stock may be issued either alone or in
addition to other Awards granted under the Plan. The Committee shall determine the Eligible
Employees to whom and the time or times at which grants of Restricted Stock will be made, the
number of shares to be granted, the time or times within which such Awards may be subject to
forfeiture or otherwise restricted and any other terms and conditions of the Awards. The
restrictions may be based upon specified Performance Goals, the Participant’s continued employment
with the Corporation or its Affiliates or such other factors or criteria as the Committee shall
determine. Subject to Sections 7.02 and 7.03 hereof the provisions of Restricted Stock Awards need
not be the same with respect to each recipient.

     7.02 Certificates. Each individual receiving a Restricted Stock Award shall be issued
a certificate in respect of such shares of Restricted Stock which certificate shall be held in
custody by the Corporation until the restrictions thereon shall have lapsed. In addition, each
individual receiving a Restricted Stock Award shall, as a condition of any such Restricted Stock
Award, have delivered to the Corporation a stock power, endorsed in blank, with respect to the
Corporation Stock covered by such Award. Each certificate in respect of shares of Restricted Stock
shall be registered in the name of the Participant to whom such Restricted Stock has been granted
and shall bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:

“The transferability of this certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the Brady Corporation 2004
Omnibus Incentive Stock Plan and a Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of the Brady Corporation.”

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In addition each certificate in respect of shares of Restricted Stock may bear such legends and
statements as the Committee may deem advisable to assure compliance with the federal and state laws
and regulations.

     7.03 Terms and Conditions. Shares of Restricted Stock shall be subject to the
following terms and conditions:

	 	(a)	 	Until the applicable restrictions lapse, the Participant shall
not be permitted to sell, assign, transfer, exchange, pledge, hypothecate or
otherwise dispose of or encumber shares of Restricted Stock.
	 
	 	(b)	 	Unless and until a forfeiture of the Restricted Stock, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Corporation, including the right to vote the
shares (if applicable) and the right to receive any cash dividends. Unless
otherwise determined by the Committee, cash dividends shall be automatically
paid in cash and dividends payable in Corporation Stock shall be paid in the
form of additional Restricted Stock.
	 
	 	(c)	 	Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and (d) below, all shares still subject to
restriction shall be forfeited by the Participant upon termination of a
Participant’s employment for any reason.
	 
	 	(d)	 	In the event of hardship or other special circumstances of a
Participant whose employment is involuntarily terminated (other than for
cause), the Committee may waive in whole or in part any or all remaining
restrictions with respect to such Participant’s shares of Restricted Stock.
	 
	 	(e)	 	If and when the applicable restrictions lapse, unlegended
certificates for such shares shall be delivered to the Participant.
	 
	 	(f)	 	Each Award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement.

VIII. RESTRICTED STOCK UNITS

     8.01 Administration. Restricted Stock Units may be issued either alone or in addition
to other Awards granted under the Plan. The Committee shall determine the Eligible Employees to
whom and the time or times at which grants of Restricted Stock Units will be made, the number of
units to be granted, the time or times within which such Awards may be subject to forfeiture or
otherwise restricted and any other terms and conditions of the Awards. The restrictions may be
based upon specified Performance Goals, the Participant’s continued employment with the Corporation
or its Affiliates or such other factors or criteria as the Committee shall determine. The
provisions of Restricted Stock Awards need not be the same with respect to each recipient.

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     8.02 Form and Timing of Payment of Restricted Stock Units. Timing of payment of
earned Restricted Stock Units shall be determined by the Committee at its sole discretion. The
Committee, in its sole discretion, may pay earned Restricted Stock Units in the form of cash or in
shares of Corporation Stock (or in a combination thereof), which have an aggregate Fair Market
Value equal to the value of the earned Restricted Stock Units.

	IX.	 	WITHHOLDING TAXES

     9.01 General Rule. Pursuant to applicable federal and state laws, the Corporation is
or may be required to collect withholding taxes upon the exercise of a Stock Option or the lapse of
stock restrictions. The Corporation may require, as a condition to the exercise of a Stock Option
or the issuance of a stock certificate, that the Participant concurrently pay to the Corporation
(either in cash or, at the request of Participant, but subject to such rules and regulations as the
Committee may adopt from time to time, in shares of Delivered Stock) the entire amount or a portion
of any taxes which the Corporation is required to withhold by reason of such exercise or lapse of
restrictions, in such amount as the Committee or the Corporation in its discretion may determine.
If and to the extent that withholding of any federal, state or local tax is required in connection
with the exercise of an Option or the lapse of stock restrictions, the Participant may, subject to
such rules and regulations as the Corporation may adopt from time to time, elect to have the
Corporation hold back from the shares to be issued upon the exercise of the Stock Option or the
lapse of stock restrictions, the number of shares of Corporation Stock having a Fair Market Value
equal to such withholding obligation.

     9.02 Special Rule for Insiders. Any such request or election (to satisfy a
withholding obligation using shares) by an individual who is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 (an “Insider”) shall be made in accordance with the rules
and regulations of the Securities and Exchange Commission promulgated thereunder.

X. GENERAL

     10.01 Nontransferability. No Award granted under the Plan shall be transferable or
assignable (or made subject to any pledge, lien, obligation or liability of a Participant) except
by last will and testament or the laws of descent and distribution. Upon a transfer or assignment
pursuant to a Participant’s last will and testament or the laws of descent and distribution, any
Stock Option must be transferred in accordance therewith. During the Participant’s lifetime, Stock
Options shall be exercisable only by the Participant or by the Participant’s guardian or legal
representative. Notwithstanding the foregoing, NSOs may be transferred by a Participant to the
Participant’s spouse, children or grandchildren or to a trust for the benefit of such spouse,
children or grandchildren; provided that the terms of any such transfer prohibit the resale of
shares acquired upon exercise of the option at a time during which the transferor would not be
permitted to sell such shares under the Corporation’s policy on trading by insiders.

     10.02 General Restriction. Each Award shall be subject to the requirement that if at
any time the Board or the Committee shall determine, in its discretion, that the listing,
registration, or

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qualification of securities upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Stock Option or the issue
or purchase of securities thereunder, such Stock Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board or the Committee. The Committee shall
have the right to rely on an opinion of its counsel as to whether any such listing, registration,
qualification, consent or approval shall have been effected or obtained.

     10.03 Effect of Termination of Employment, Disability or Death. Except as otherwise
provided by the Committee upon any Award, all rights under any Stock Option granted to a
Participant shall terminate and any Restricted Stock or Restricted Stock Unit granted to a
Participant shall be forfeited on the date such Participant ceases to be employed by the
Corporation or its subsidiaries, except that

	 	(a)	 	if the Participant’s employment is terminated by the death of
the Participant, any unexercised, unexpired Stock Options granted hereunder to
the Participant shall be 100% vested and fully exercisable, in whole or in
part, at any time within one year after the date of death, by the Participant’s
personal representative or by the person to whom the Stock Options are
transferred under the Participant’s last will and testament or the applicable
laws of descent and distribution;
	 
	 	(b)	 	if the Participant dies within 90 days after termination of
employment by the Corporation or its Affiliates, other than for cause, any
unexercised, unexpired Stock Options granted hereunder to the Participant and
exercisable as of the date of such termination of employment shall be
exercisable, in whole or in part, at any time within one year after the date of
death, by the Participant’s personal representative or by the person to whom
the Stock Options are transferred under the Participant’s last will and
testament or the applicable laws of descent and distribution;
	 
	 	(c)	 	if the Participant’s employment is terminated as a result of
the disability of the Participant (a disability means that the Participant is
disabled as a result of sickness or injury, such that he or she is unable to
satisfactorily perform the material duties of his or her job, as determined by
the Board of Directors, on the basis of medical evidence satisfactory to it),
any unexercised, unexpired Stock Options granted hereunder to the Participant
shall become 100% vested and fully exercisable, in whole or in part, at any
time within one year after the date of disability;
	 
	 	(d)	 	if the Participant’s employment is terminated as a result of
the Participant’s retirement (after age 55 with ten years of employment with
the Corporation or an Affiliate or after age 65), any unexercised, unexpired
Stock Options granted hereunder to the Participant and exercisable as of the
date of such retirement may be exercised by the Participant at any time within
one year after the date of retirement; and

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	 	(e)	 	if the Participant’s employment is terminated by the Company or
an Affiliate for any reason other than the Participant’s death, disability or
retirement of the Participant or for cause, any unexercised, unexpired Stock
Options granted hereunder and exercisable as of the date of such termination of
employment shall be exercisable in whole or in part at any time within 90 days
after such date of termination.

If a Participant’s employment is terminated for cause (as determined by the Committee in its sole
discretion), all of the Participant’s unexercised Stock Options shall expire and all of the
Participant’s Restricted Stock and Restricted Stock Units shall be forfeited. Notwithstanding the
foregoing, no Stock Option shall be exercisable after the date of expiration of its term.

     10.04 Merger, Consolidation or Reorganization. In the event of (a) the merger or
consolidation of the Corporation with or into another corporation or corporations in which the
Corporation is not the surviving corporation, (b) the adoption of any plan for the dissolution of
the Corporation, or (c) the sale or exchange of all or substantially all the assets of the
Corporation for cash or for shares of stock or other securities of another corporation, all
then-unexercised Stock Options shall become fully exercisable, and all restrictions imposed on any
then-Restricted Stock shall terminate (such that any Restricted Stock shall become fully
transferable) immediately prior to any such merger or consolidation in which the Corporation is not
the surviving corporation. Notwithstanding the foregoing, in the case of then-unexercised Stock
Options held by persons subject to the reporting requirements of Section 16(a) of the 1934 Act, the
Committee may elect to cancel any then-unexercised Stock Option. If any Stock Option is canceled,
the Corporation, or the corporation assuming the obligations of the Corporation hereunder, shall
pay the Participant an amount of cash or stock, as determined by the Committee, equal to the Fair
Market Value per share of the Corporation Stock immediately preceding such cancellation over the
option price, multiplied by the number of shares subject to such cancelled Stock Option.

     10.05 Expiration and Termination of the Plan. This Plan shall remain in effect until
all of the Awards made under the Plan have been exercised, the restrictions thereon have lapsed or
the Awards have expired, terminated, or been canceled or forfeited. Notwithstanding the foregoing,
no Awards shall be granted under the Plan, after that date which is ten years after the Plan is
approved by the Board; or such earlier date as the Board determines in its sole discretion.

     10.06 Amendments. The Board may from time to time amend, modify, suspend or terminate
the Plan; provided, however, that no such action shall (a) impair without the Participant’s consent
any Award theretofore granted under the Plan or deprive any Participant of any shares of
Corporation Stock which he may have acquired through or as a result of the Plan or (b) be made
without shareholder approval where such approval would be required as a condition of compliance
with Rule 16b-3.

     10.07 Wisconsin Law. Except as otherwise required by applicable federal laws, the
Plan shall be governed by, and construed in accordance with, the laws of the State of Wisconsin.

     10.08 Unfunded Plan. The Plan, insofar as it provides for Awards, shall be unfunded
and the Corporation shall not be required to segregate any assets that may at any time be

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represented by Awards under this Plan. Any liability of the Corporation to any Person with respect
to any Award under this Plan shall be based solely upon any contractual obligations that may be
created pursuant to this Plan. No such obligation of the Corporation shall be deemed to be secured
by any pledge of, or other encumbrance on, any property of the Corporation.

     10.09 Rules of Construction. Headings are given to the articles and sections of this
Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or
other provision of law shall be construed to refer to any amendment to or successor of such
provision of law.

     10.10 Gender and Number. Except when otherwise required by the context, words in the
masculine gender shall include the feminine, the singular shall include the plural, and the plural
the singular.

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EXHIBIT 10.10

BRADY CORPORATION

2005 NONQUALIFIED STOCK OPTION PLAN

FOR NON-EMPLOYEE DIRECTORS 

1. Purpose.

     The 2005 Stock Option Plan for Non-Employee Directors (the “Plan) is intended to attract and
retain the services of experienced and knowledgeable non-employee directors of Brady Corporation
(the “Corporation”) for the benefit of the Corporation and its shareholders and to provide
additional incentive for such directors to continue to work for the best interest of the
Corporation and its shareholders.

2. Shares Subject to the Plan.

     There are reserved for issuance upon the exercise of options granted under the Plan 300,000
Class A Non-Voting Common Shares $.01 par value, of the Corporation (the “Stock”). Such Stock may
be authorized and unissued Stock or previously outstanding Stock then held in the Corporation’s
treasury. If any option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the Stock subject to the unexercised portion thereof shall again be
available for the purposes of issuance upon the exercise of options granted under the Plan.

3. Administration.

     The Plan shall be administered by the Board of Directors of the Corporation (the “Board”),
which may delegate any or all of its authority to a Committee of the Board. Subject to the express
provisions of the Plan, the Board shall have authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and provisions of the
option grants and agreements (which shall comply with and be subject to the terms and conditions of
the Plan) and to make all other determinations necessary or advisable for the administration of the
Plan. The Board’s determination of the matters referred to in this Paragraph 3 shall be conclusive.

4. Eligibility.

     For purposes of the Plan, “Non-Employee Director” means a member of the Board who is not an
employee of the Corporation or a subsidiary of the Corporation. After the effective date of the
Plan, each Non-Employee Director who first becomes a Director on an annual meeting date after July
26, 2005 shall automatically be granted an option to purchase 10,000 shares of Stock on a date that
is 14 days after the annual meeting date, or if such person first becomes a Director on a date
other than the annual meeting date, the option shall automatically be granted
on a date that is 14 days after first becoming a Director. On a date that is 14 days after each
subsequent annual meeting of the shareholders of the Corporation on or subsequent to the effective
date of the Plan, each Non-Employee Director who will continue to serve as an Non-Employee Director
after such annual meeting shall automatically be granted an option to purchase 6,000 shares of
Stock (6,600 shares of Stock for any grant on or after December 1, 2008).

 

 

     Only non-statutory stock options shall be granted under the Plan.

5. Option Grants.

     (a) The purchase price of the Stock under each option granted under the Plan shall be 100% of
the Fair Market Value of the Stock on the date such option is granted. For purposes of the Plan
“Fair Market Value” on any date shall mean, with respect to Stock, if the stock is then listed and
traded on a registered national securities exchange, or is quoted in the NASDAQ National Market
System, the average of the high and low sale prices recorded in composite transactions for such
date or, if such date is not a business day or if no sales of the Stock shall have been reported
with respect to such date, the next preceding business date with respect to which sales were
reported. In the absence of reported sales or if the stock is not so listed or quoted, but is
traded in the over-the-counter market, Fair Market Value shall be the average of the closing bid
and asked prices for such Stock on the relevant date.

     (b) All options shall be exercisable in accordance with the following schedule:

	 	 	 
	Years After	 	 
	Date of Grant	 	Percentage of Shares
	Less than 1
	 	0%
	1 but less than 2
	 	33-1/3%
	2 but less than 3
	 	66-2/3%
	3 or more
	 	100%

     The term of each option shall be ten years from the date of grant, or such shorter period as
is prescribed in Paragraphs 5(c) and 5(d). Except as provided in Paragraphs 5(c) and 5(d), no
option may be exercised at any time unless the holder is then a director of the Corporation.

     Each option may be exercised in whole or in part from time to time as specified in the
agreements provided, however, that each holder may exercise an option in whole or in part by giving
written notice of the exercise to the Corporation, specifying the number of shares to be purchased
by payment in full of the purchase price therefor. The purchase price may be paid (a) in cash, (b)
by check, (c) with the approval of the Board, or if the applicable agreement so provides, by
delivering shares of Stock (“Delivered Stock”), (d) by surrendering to the Corporation shares of
Stock otherwise receivable upon exercise of the option (a “Net Exercise”), or (e) any combination
of the foregoing. For purposes of the foregoing, Delivered Stock shall be valued at its Fair
Market Value determined as of the business day immediately preceding the date of exercise of the
option and shares of Stock used in a Net Exercise shall be valued at their
Fair Market Value determined as of the date of exercise of the option. No holder shall be under any
obligation to exercise any option hereunder.

     Upon exercise, the option price is to be paid in full in cash or, at the discretion of the
Board, in Stock owned by the optionee having a Fair Market Value on the date of exercise equal to
the aggregate option price or, at the discretion of the Board, in a combination of cash and Stock.

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     (c) All rights under any option shall terminate on the date such Participant ceases to be a
Director of the Corporation, except that (a) if the Directorship is terminated by the death of the
Director, any unexercised, unexpired Stock Options granted hereunder to the Director shall be 100%
vested and fully exercisable, in whole or in part, at any time within one year after the date of
death, by the Director’s personal representative or by the person to whom the options are
transferred under the Director’s last will and testament or the applicable laws of descent and
distribution; (b) if the Directorship is terminated as a result of the disability of the Director
(a disability means that the Director is disabled as a result of sickness or injury, such that he
or she is unable satisfactorily to perform the Director duties, as determined by the Board of
Directors, on the basis of medical evidence satisfactory to it), any unexercised, unexpired options
granted hereunder to the Director shall become 100% vested and fully exercisable, in whole or in
part, at any time within one year after the date of disability; (c) if the Directorship is
terminated and the Director has been a member of the Board of Directors for at least three years,
any unexercised, unexpired options granted hereunder to the Director shall continue to vest as
provided in Paragraph 5(b) and any option that is or becomes vested may be exercised within the
term of such option; and (d) if the Directorship is terminated for any reason other than (a), (b)
or (c) above, any unexercised, unexpired options granted hereunder and exercisable as of the date
of such termination shall be exercisable in whole or in part at any time within 90 days after such
date of termination.

     (d) In the event of (a) a merger, consolidation, or reorganization with another corporation in
which the Corporation is not the surviving corporation or a merger, consolidation or reorganization
with another corporation in which the Corporation is the surviving corporation, but the Stock
ceases to be publicly traded, (b) the adoption of any plan for the dissolution of the Corporation,
or (c) the sale or exchange of all or substantially all the assets of the Corporation for cash or
for shares of stock or other securities of another corporation, all then-unexercised options shall
become fully exercisable immediately prior to any such event.

     (e) Nothing in the Plan or in any option granted pursuant to the Plan shall confer on any
individual any right to continue as a director of the Corporation.

6. Transferability and Shareholder Rights of Holders of Options.

     No options granted under the Plan shall be transferable otherwise than by will or by the laws
of descent and distribution, and an option may be exercised, during the lifetime of an optionee,
only by the optionee or optionee’s guardian or legal representative. An optionee shall have none of
the rights of a shareholder of the Corporation until the option has been exercised and the Stock
subject to the option has been registered in the name of the optionee on the transfer books of the
Corporation.

7. Adjustments upon Changes in Capitalization.

     Notwithstanding any other provisions of the Plan, the number and class of shares subject to
the options and the option prices of options covered thereby shall be proportionately adjusted in
the event of changes in the outstanding Stock by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares, split-ups,
split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution
to

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common shareholders other than cash dividends and, in the event of any such change in the
outstanding Stock, the aggregate number and class of shares available under the Plan and the number
of shares as to which options may be granted shall be appropriately adjusted by the Board.

8. Amendment and Termination.

     Unless the Plan shall theretofore have been terminated as hereinafter provided, the Plan shall
terminate on, and no awards of options shall be made after, the tenth anniversary of the effective
date of the Plan; provided, however, that such termination shall have no effect on options granted
prior thereto. The Plan may be terminated, modified or amended by the shareholders of the
Corporation. The Board may also terminate the Plan or modify or amend the Plan in such respects as
it shall deem advisable in order to conform to any change in any law or regulation applicable
thereto, or in other respects which shall not change (i) the total number of shares of Stock as to
which options may be granted, (ii) the class of persons eligible to receive options under the Plan,
(iii) the manner of determining the option prices, (iv) the period during which options may be
granted or exercised or (v) the provisions relating to the administration of the Plan by the Board.

9. Withholding.

     Upon the issuance of Stock as a result of the exercise of an option, the Corporation shall
have the right to retain or sell without notice sufficient Stock to cover the amount of any tax
required by any government to be withheld or otherwise deducted and paid with respect to such Stock
being issued, remitting any balance to the optionee; provided, however, that the optionee shall
have the right to provide the Corporation with the funds to enable it to pay such tax.

10. Effectiveness of the Plan.

     The Plan shall become effective on the day following the date the Plan is approved by the vote
of the holders of a majority of the outstanding shares of the Corporation’s Class B Voting Common
Stock. The Board may in its discretion authorize the granting of options which shall be expressly
subject to the conditions that (i) the Stock reserved for issue under the Plan shall have been duly
listed, upon official notice of issuance, upon each stock exchange in the United States upon which
the Stock is traded and (ii) a registration statement under the Securities Act of 1933 with respect
to such shares shall have become effective.

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