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Stock Option Agreement For Arthur Cape

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EXHIBIT 10.35

STOCK OPTION AGREEMENT

CECO ENVIRONMENTAL CORP. 1997 STOCK OPTION PLAN

THIS AGREEMENT is dated and made effective as of May 25, 2005 (" Effective Date" ) by and between CECO ENVIRONMENTAL CORP., a Delaware corporation (the " Company" ), and ARTHUR CAPE (" Optionee" ). WITNESSETH:

WHEREAS, Optionee on the date hereof is a Director of the Company or one of its Subsidiaries; and

WHEREAS, the Company desires to grant a non-qualified stock option to Optionee to purchase shares of the Company' s Common Stock pursuant to the Company' s 1997 Stock Option Plan, as amended (the " Plan" ); and

WHEREAS, the Board of Directors of the Company has authorized the grant of a non-qualified stock option to Optionee at a price of $2.50 per share. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows: 1. Grant of Option . The Company hereby grants to Optionee as of the Effective Date the right and option (the " Option" ) to purchase up to fifteen thousand (15,000) shares of Option Stock (" Shares" ) at an exercise price of $2.50 per share on the terms and conditions set forth herein and subject to the terms and conditions of the Plan. All capitalized terms not defined in this Agreement shall have the meaning set forth in the Plan. 2. Vesting, Exercisability and Duration .

a. Vesting and Exercise Period . The Option shall vest and become exercisable as follows:

(i) 5,000 options shall vest and become exercisable on May 25, 2006, provided that the Optionee is a member of the Board of Directors of the Company as of such date;

(ii) 5,000 options shall vest and become exercisable on May 25, 2007, provided that the Optionee is a member of the Board of Directors of the Company as of such date; and (iii) 5,000 options shall vest and become exercisable on May 25, 2008, provided that the Optionee is a member of the Board of Directors of the Company as of such date.

Unvested options may not be exercised.

b. Expiration . The Option shall expire on the earlier of (i) the date sixty (60) days from the date that Optionee no longer is a director of the Company or any of its subsidiaries for any reason, including without limitation, due to death or disability, or (ii) the close of business ten (10) years from the date of this Agreement, which is May 24, 2015 (the " Expiration Date" ) and must be exercised, if at all, on or before the Expiration Date.

c. Lapse Upon Expiration . To the extent that this Option is not exercised prior to the Expiration Date, all rights of Optionee under this Option shall thereupon be forfeited.

3. Manner of Exercise . a. General . The Option may be exercised only by Optionee (or other proper party in the event of death or incapacity), subject to the conditions of the Plan and this Agreement, and subject to such other administrative rules as the Administrator deems advisable, by delivering written notice of exercise to the Company at its principal office, in the form attached hereto as Exhibit A. The notice shall state the number of Shares exercised and shall be accompanied by payment in full of the Option price for all Shares exercised pursuant to the notice. Any exercise of the Option shall be effective upon receipt of such notice by the Company, together with payment that complies with the terms of the Plan and this Agreement. The Option may be exercised with respect to any number or all of the shares as to which it can then be exercised and, if partially exercised, may be so exercised as to the unexercised shares at any time and from time to time prior to expiration of the Option as provided in this Agreement.

b. Form of Payment . Subject to approval by the Administrator, payment of the Option price by Optionee shall be in the form of cash, personal check, certified check, or where permitted by law and provided that a public market for the Company' s stock exists: (i) through a " same day sale" commitment from Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an " NASD Dealer" ) whereby Optionee irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; (ii) through a " margin" commitment from Optionee and a NASD Dealer whereby Optionee irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (iii) by tender of shares of Common Stock of the Company already owned by Optionee for a period of at least six (6) months prior to payment having a Fair Market Value on the date received by the Company equal to the exercise price for the Shares exercised. Optionee shall be solely responsible for any income or other tax consequences from any payment for Shares with Optionee' s Common Stock of the Company.

c. Stock Transfer Records . Provided that the notice of exercise and payment are in form and substance satisfactory
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