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EXHIBIT 10.1

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.

     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.

     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.

     (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 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.exv10w2

 

EXHIBIT 10.2

BRADY CORPORATION

DIRECTOR NONQUALIFIED STOCK OPTION AGREEMENT

     Option granted on                                         , 20___, by Brady Corporation, a Wisconsin corporation
(hereinafter called the “Company”), to                                         (hereinafter called the “Director”).

W I T N E S S E T H :

     WHEREAS, the Board of Directors of the Company, desiring to attract and retain the services of
experienced directors and to provide additional incentive for such directors to continue to work
for the best interest of the Company and its shareholders, adopted the Brady Corporation 2005
Nonqualified Stock Option Plan for Non-Employee Directors on November 17, 2005 (“the Plan”);

     NOW, THEREFORE, it is agreed as follows:

     1. Number of Shares Optioned; Option Price. The Company grants to the Director the
right and option to purchase, on the terms and conditions hereof, all or any part of an aggregate
of                      (___) shares of the presently authorized Class A Common Stock of the
Company, $.01 par value, whether unissued or issued and reacquired by the Company, at the price of
                                         ($___) per share (the “Option Price”).

     2. Conditions of Exercise of Options During Director’s Lifetime; Vesting of Option.
Except as provided hereinafter in this paragraph and in paragraph 3, this Option may not be
exercised (a) unless Director is at the date of the exercise a Director of the Company and (b)
until Director shall have been continuously a Director for a period of at least one year from the
date hereof. Thereafter, this Option shall be exercisable for any amount of shares up to the
maximum percentage of shares covered by this Option (rounded up to the nearest whole share) as
follows (but in no event shall this Option be exercisable for any shares after the expiration date
provided in paragraph 7):

	 	 	 	 	 
	 	 	Maximum Percentage
	Number of Completed Years	 	of Shares for Which
	After Date of Grant of this Option	 	Option is Exercisable
	Less than 1

	 	Zero

	At least 1 but less than 2

	 	 	33-1/3	%
	At least 2 but less than 3

	 	 	66-2/3	%
	At least 3

	 	 	100	%

     If Director shall cease to be a Director of the Company for any reason (except death or
disability, or if the Director has been a member of the Board of Directors for at least three
years) after Director shall have been continuously a Director for one year after the grant of this
Option, Director may, at any time within three months of such termination, but in no event later
than the date of expiration of this Option, exercise this Option to the extent Director was
entitled to do so

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on the date of such termination. This Agreement does not confer upon Director any right to
continue as a Director of the Company.

     3. Termination of Employment, Etc. A. Notwithstanding the provisions of paragraph 2
hereof, in the event of the termination of the Directorship with the Company prior to [three years
from date of grant], due to death or disability, this Option shall become 100% vested and fully
exercisable.

     For purposes of this Agreement, “Disability” means that the Director is disabled as a result
of sickness or injury, such that he is unable satisfactorily to perform the Director’s duties as
determined by the Board of Directors, on the basis of medical evidence satisfactory to it.

     B. (i) If the Directorship is terminated by the death of the Director, any unexercised,
unexpired Stock Options granted hereunder to the Director shall be 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 Stock Options are transferred under the Director’s last
will and testament or the applicable laws of descent and distribution. (ii) If the Directorship is
terminated as a result of the disability of the Director, any unexercised, unexpired Stock Options
granted hereunder to the Director shall be exercisable, in whole or in part, at any time within one
year after the date of disability. (iii) If the Directorship is terminated after the Director has
been a member of the Board for at least three years, any unexercised, unexpired Stock Options
granted hereunder to the Director shall continue to vest as provided in paragraph 2 and any option
that is or becomes vested may be exercised within the term of such option be exercisable, in whole
or in part, at any time within one year after the date of termination.

     C. In the event of (a) the merger or consolidation of the Company with or into another
corporation or corporations in which the Company is not the surviving corporation, (b) the adoption
of any plan for the dissolution of the Company, or (c) the sale or exchange of all or substantially
all the assets of the Company for cash or for shares of stock or other securities of another
corporation, this Option shall become fully vested and exercisable immediately prior to any such
event in which the Company is not the surviving corporation.

     4. Deferral of Exercise. Although the Company intends to exert its best efforts so
that the shares purchasable upon the exercise of this Option will be registered under, or exempt
from the registration requirements of, the Federal Securities Act of 1933 (the “Act”) and any
applicable state securities law at the time or times this Option (or any portion of this Option)
first becomes exercisable, if the exercise of this Option would otherwise result in the violation
by the Company of any provision of the Act or of any state securities law, the Company may require
that such exercise be deferred until the Company has taken appropriate action to avoid any such
violation.

     5. Method of Exercising Option. This Option shall be exercised by delivering to the
Company, at the office of its Treasurer, a written notice of the number of shares with respect to
which this Option is at the time being exercised and by paying the Company in full the Option Price
of the shares being acquired at the time.

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     6. Method of Payment. Payment shall be made either (i) in cash or (ii) by delivering
shares of the Company’s Class A Common Stock which have been beneficially owned by the Director,
the spouse of the Director, or both of them, for a period of at least six months prior to the time
of exercise (“Delivered Stock”) or (iii) by delivering a combination of cash and Delivered Stock.
Payment in the form of Delivered Stock shall be in the amount of the Fair Market Value of the stock
at the date of exercise, determined in accordance with paragraph 9.

     7. Expiration Date. This Option shall expire ten years after the date on which this
Option was granted.

     8. Withholding Taxes. The Company may require payment of or withhold any tax which it
believes is payable as a result of the exercise of this Option, and the Company may defer making
delivery with respect to the shares until arrangements satisfactory to the Company have been made
with regard to any such withholding obligations. In lieu of part or all of any such payment, the
Director, in satisfaction of all withholding taxes (including, without limitation, Federal income,
FICA (Social Security and Medicare) and any state and local income taxes) payable as a result of
such exercise, may elect, subject to such rules and regulations as the Company may adopt from time
to time, to have the Company withhold that number of shares (valued at Fair Market Value on the
date of exercise and rounded upward) required to settle such withholding taxes.

     9. Method of Valuation of Stock. The “Fair Market Value” of the Class A Common Stock
of the Company on any date shall mean, 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 shares 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.

     10. No Rights in Shares Until Certificates Issued. Neither the Director nor his heirs
nor his personal representative shall have any of the rights or privileges of a stockholder of the
Company in respect of any of the shares issuable upon the exercise of the Option herein granted,
unless and until certificates representing such shares shall have been issued.

     11. Option Not Transferable During Director’s Lifetime. This Option shall not be
transferable by the Director other than by his will or by the laws of descent and distribution and
shall be exercisable during his lifetime only by him.

     12. Prohibition Against Pledge, Attachment, Etc. Except as otherwise herein provided,
the Option herein granted and the rights and privileges pertaining thereto shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.

     13. Changes in Stock. In the event there are any changes in the Class A Common Stock
of the Company through merger, consolidation, reorganization, recapitalization, stock

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dividend, stock split, combination or exchange of shares, rights offering or any other change
affecting the Class A Common Stock of the Company, appropriate changes shall be made by the Board
of Directors of the Company, in the aggregate number of shares and the purchase price and kind of
shares subject to this Option, to prevent substantial dilution or enlargement of the rights granted
to or available for Director.

     14. Dissolution or Merger. Anything contained herein to the contrary notwithstanding,
upon the dissolution or liquidation of the Company, or upon any merger in which the Company is not
the surviving corporation, at any time prior to the expiration date of the termination of this
Option, the Director shall have the right immediately prior to the effective date of such
dissolution, liquidation or merger, to surrender all or any unexercised portion of this Option to
the Company for cash, subject to the discretion of the Board of Directors as to the exact timing of
said surrender. Notwithstanding the foregoing, however, in the event Director has retired or died,
Director’s right to surrender all or any unexercised portion of this Option under this paragraph
shall be available only to the extent that at the time of any such surrender, Director would have
been entitled to exercise this Option under paragraphs 2 or 3 hereof, as the case may be. The
amount of cash to be paid to Director for the portion of this Option so surrendered, shall be equal
to the number of shares of Class A Common Stock subject to the surrendered Option multiplied by the
difference between the Option Price per share, as described in paragraph 1 hereof, and the Fair
Market Value per share, determined in accordance with paragraph 9 hereof, as of the time of
surrender.

     15. Notices. Any notice to be given to the Company under the terms of this Agreement
shall be addressed to the Company in care of its Vice President and Chief Financial Officer, and
any notice to be given to the Director may be addressed at the address as it appears on the
Company’s records, or at such other address as either party may hereafter designate in writing to
the other. Any such notice shall be deemed to have been duly given if and when enclosed in a
properly sealed envelope addressed as aforesaid, and deposited, postage prepaid, in the United
States mail.

     16. Provisions of Plan Controlling. This Option is subject in all respects to the
provisions of the Plan. In the event of any conflict between any provisions of this Option and the
provisions of the Plan, the provisions of the Plan shall control. Terms defined in the Plan where
used herein shall have the meanings as so defined. Director acknowledges receipt of a copy of the
Plan.

     17. Wisconsin Contract. This Option has been granted in Wisconsin and shall be
construed under the laws of that state.

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     IN WITNESS WHEREOF, the Company has caused these presents to be executed on its behalf by its
President and to be sealed with its corporate seal, and attested by its Secretary and the Director
has hereunto set his hand and seal, all as of the day and year first above written, which is the
date of the granting of this Option evidenced hereby.

	 	 	 	 	 	 	 
	 	 	BRADY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Compensation Committee	 	 
	 
	 	 	 	 	 	 
	 

	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Secretary	 	 
	 
	 	 	 	 	 	 
	 

	 	DIRECTOR:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 

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