FLANDERS
CORPORATION
LONG TERM INCENTIVE
PLAN
STOCK OPTION
AGREEMENT
Unless otherwise defined
herein, the terms defined in the Flanders Corporation Long Term
Incentive Plan ("the " Plan ") shall have the same defined
meanings in this Option Agreement.
.
1.
NOTICE OF STOCK OPTION GRANT
Optionee:
Steve K
Clark
You have been granted an
option (the " Option ") to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of
Grant:
December 7,
2005
Exercise Price per
Share:
$11.10
Total Number of
Shares:
500,000
Type of
Option:
Incentive Stock
Option
X
Nonstatutory
Stock Option
Term/Expiration
Date:
December 6,
2010
Vesting Schedule :
This Option is fully
vested upon issuance.
Termination
Period :
This Option may be
exercised for 90 days after termination of employment or consulting
relationship, or such longer period as may be applicable upon death
or disability of Optionee as provided in the Plan, but in no event
later than the Term/Expiration Date as provided above.
2.
AGREEMENT
(a)
Grant of
Option .
Flanders Corporation, a North Carolina corporation (the "
Company "), hereby grants to the Optionee named in the
Notice of Stock Option Grant in Section 1 above (the "
Optionee "), an option (the " Option ") to purchase a
total number of shares of Common Stock (the " Shares ") set
forth in Section 1, at the exercise price per share set forth in
Section 1 (the " Exercise Price ") subject to the terms,
definitions and provisions of the Plan adopted by the Company,
which is incorporated herein by reference.
If designated in Section
1 as an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the
Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of
Code Section 422(d) it shall be treated as a Nonstatutory Stock
Option.
(b)
Exercise of Option
. This Option shall be exercisable
during its term in accordance with the Exercise Schedule set out in
Section 1 and with the provisions of of the Plan as
follows:
(c)
Right to Exercise
.
(i)
This Option may not be exercised for a
fraction of a share.
(ii)
In the event of Optionee's death,
disability or other termination of employment, the exercisability
of the Option is governed by Sections 6, 7 and 8 below,
subject to the limitation contained in
subsection 2(i)(c).
(iii)
In no event may this Option be exercised
after the date of expiration of the term of this Option as set
forth in Section 1.
(d)
Method of Exercise
. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall
state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent
with respect to such shares of Common Stock as may be required by
the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment
of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the
exercise of an Option unless such issuance and such exercise shall
comply with all relevant provisions of law and the requirements of
any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares
shall be considered transferred to the Optionee on the date on
which the Option is exercised with respect to such
Shares.
3.
OPTIONEE'S REPRESENTATIONS . In the event the Shares
purchasable pursuant to the exercise of this Option have not been
registered under the Securities Act of 1933, as amended (" 1933
Act "), at the time this Option is exercised, Optionee shall,
if required by the Company, concurrently with the exercise of all
or any portion of this Option, deliver to the Company his
Investment Representation Statement in the form attached hereto as
Exhibit B.
.
4.
METHOD OF PAYMENT . Payment of the Exercise Price
shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(a)
cash; or
(b)
check; or
(c)
surrender of other shares of Common Stock
of the Company which (A) in the case of Shares acquired pursuant to
the exercise of a Company option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and
(B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being
exercised; or
(d)
delivery of a properly executed exercise
notice together with such other documentation as the Administrator
and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price.
5.
RESTRICTIONS ON EXERCISE . This Option may not be
exercised until such time as the Plan has been approved by the
shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such
shares would constitute a violation of any applicable federal or
state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal
Regulations (" Regulation G ") as promulgated by the
Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation
and warranty to the Company as may be required by any applicable
law or regulation.
6.
TERMINATION OF RELATIONSHIP .
In the event an Optionee's Continuous Status as an Employee
or Consultant terminates, Optionee may, to the extent otherwise so
entitled at the date of such termination (the " Termination
Date "), exercise this Option during the 90-day Termination
Period set out in Section 1. To the extent that Optionee was
not entitled to exercise this Option at the date of such
termination, or if Optionee does not exercise this Option within
the time specified herein, the Option shall terminate.
.
7.
DISABILITY OF OPTIONEE . Notwithstanding the
provisions of Section 6 above, in the event of termination of
an Optionee's consulting relationship or Continuous Status as an
Employee as a result of his or her disability, Optionee may, but
only within 180 days from the date of such termination (and in no
event later than the expiration date of the term of such Option as
set forth in this Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a
"disability" as such term is defined in Section 22(e)(3) of the
Internal Revenue Code, in the case of an Incentive Stock Option
such Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the day three months and one day
following such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the
Plan.
8. DEATH
OF OPTIONEE . In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the
death of Optionee, the Option may be exercised at any time within
180 days following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee could exercise the
Option at the date of death.
9.
NON-TRANSFERABILITY OF OPTION . This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Optionee only by him. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.
.
10. TERM OF
OPTION . This Option may be exercised only within the
term set out in Section 1, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
The limitations set forth in the Plan regarding Options
designated as Incentive Stock Options and Options granted to more
than ten percent (10%) shareholders shall apply to this
Option.
11
TAXATION UPON EXERCISE OF OPTION . Optionee
understands that, upon exercising a nonstatutory Option, he or she
will recognize income for tax purposes in an amount equal to the
excess of the then fair market value of the Shares over the
exercise price. However, the timing of this income
recognition may be deferred for up to six months if Optionee is
subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the " Exchange Act "). If the Optionee is an
employee, the Company will be required to withhold from Optionee's
compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this
compensation income. Additionally, the Optionee may at some
point be required to satisfy tax withholding obligations with
respect to the disqualifying disposition of an Incentive Stock
Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of
Optionee's compensation or by payment to the Company.
.
12
"MARKET STAND-OFF"
AGREEMENT . Optionee hereby agrees, if requested by the
Company and an underwriter of Common Stock (or other equity
securities) of the Company, not to sell or otherwise transfer or
dispose of any Common Stock (or other equity securities) of the
Company held by the Optionee during the 180 day period following
the date of a final prospectus of the Company, filed under the 1993
Act. The Company may impose "stop transfer" instructions with
respect to any shares held by Optionee subject to the foregoing
restriction until the end of such 180 day period.
.
13 TAX
CONSEQUEN
