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:
August 24,
2004
Exercise Price per
Share:
$8.60
Total Number of
Shares:
500,000
Type of
Option:
Incentive Stock
Option
X
Nonstatutory
Stock Option
Term/Expiration
Date:
August 24,
2009
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
CONSEQUENCES . Set forth below is a brief
summary as of the date of this Option of some of the
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