EXHIBIT 10.40
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Xxxxx X. Xxxxx (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 44,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate on January 10, 2001, and shall
be exercisable to the extent of 4,000 shares commencing January 1, 1997, 10,000
shares commencing June 7, 1997, 10,000 shares commencing June 7, 1998, 10,000
shares commencing June 7, 1999, and 10,000 shares commencing June 7, 2000.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee (or the Optionee's successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death or disability, this option shall continue through its term as defined in
Paragraph 3 hereof as to any shares that are exercisable pursuant to Paragraph 3
as of the termination date of such directorship and any unvested shares shall
never become exercisable.
11. Death or Disability of Optionee. If the Optionee dies or becomes
disabled while a director of the Company or any Subsidiary, this option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the Optionee's death or disability, or (ii) the expiration
date under this option. In such period following the Optionee's death, this
option may be exercised by the person or persons to whom the Optionee's rights
under this option shall have passed by the Optionee's will or by the laws of
descent and distribution only to the extent the option was exercisable on the
date of death, but had not previously been exercised. Any unvested shares at the
time of the death or disability of the Optionee shall never become exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Its: Chief Executive Officer
Optionee
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
