Exhibit 10.5
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of this _________ day of _________, 20___, by
and between PECO II, Inc., an Ohio corporation (the "Company") and _____________
(the "Optionee").
WITNESSETH:
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WHEREAS, the Board of Directors of the Company has adopted the 1997 PECO II,
Inc. Nonqualified Stock Option Plan (the "Plan"); and WHEREAS, the Compensation
Committee of the Board of Directors of the Company (the "Option Committee") has
determined that the Optionee, as a key employee of the Company, should be
granted a stock option under the Plan upon the terms and subject to the
conditions and covering the number of shares of Common Shares of the Company
("Shares") as set forth hereinafter;
NOW, THEREFORE, the Company and the Optionee hereby agree with respect to such
stock option as follows:
1. Grant of Option. Effective as of the date of this Agreement, the
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Company grants to the Optionee, upon the terms and subject to the
conditions set forth hereinafter, the right and option to purchase all
or any part of an aggregate of _______________ (_____) Shares (such
collective right and option being hereinafter referred to as the
"Option").
2. Option Price. The entire amount or such portion of the aggregate
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number of Shares shall be designated as a nonqualified stock option at
a price per share (the "Option Price") equal to $________ per share.
3. Term of Option. The term of the Option shall be for a period of _____
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(___) years from the date hereof, and the term of this Option shall in
no event extend beyond the close of regular business hours on
Stock Option Agreement - 1997
Page 2
_____________, 20___ . The Option is subject to earlier termination as
set forth in Paragraphs 5 and 6 hereof.
4. Exercise of Option. The Optionee shall become entitled to exercise the
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Option with respect to the number of Shares indicated on or after the
vesting date and before the last date upon which the option may be
exercised:
Number of Shares as Vesting Date Upon Last Date Upon
to Which Nonqualified Which Option Which Option
Stock Option May be May be May be
Exercised Exercised Exercised
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___ ___, 20___ ___, 20___
___ ___, 20___ ___, 20___
___ ___, 20___ ___, 20___
To the extent that the Option has vested and become exercisable with
respect to the Shares, as provided above, the Option may thereafter be
exercised by the Optionee either as to all or any part of the Shares
that have so vested until the last date upon which the Option may be
exercised, as provided above. The Option may not be exercised for
fewer than one hundred (100) Shares, or the total number of remaining
Shares subject to such option, whichever is smaller. If the Option
Stock becomes vested but has not been completely exercised as set
forth in Paragraph 8 hereof on or before the last date upon which the
Option may be
Stock Option Agreement - 1997
Page 3
exercised as indicated above, such unexercised portion of the Option
shall be forfeited and may not be exercised by the Optionee at any
time in the future. Except as provided in Paragraphs 5 and 6 hereof,
the Option may not be exercised at any time unless the Optionee shall
be an employee at such time of the Company (an "Employee").
5. Termination of Employment. So long as the Optionee shall continue to
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be an employee, the Option shall not be affected by (a) any temporary
leave of absence approved in writing by the Company or (b) any change
of duties, position or employment. If the Optionee ceases to be an
employee for any reason other than death, each Option that has vested
on or prior to the date of termination may be exercised within 90 days
after the effective date of termination, but shall in no event be
exercisable thereafter, notwithstanding the least date upon which the
Option may be executed pursuant to the terms set forth in this
Agreement. If an Option has not vested or become exercisable on the
date of termination, such Option shall be void and cannot be exercised
thereafter. Nothing contained in this Agreement shall confer upon the
Optionee any right to continue in the employ of the Company, or to
limit or interfere in any way with the right of the Company to
terminate his or her employment at any time, with or without cause.
Stock Option Agreement - 1997
Page 4
6. Death of Optionee. If an Optionee who was entitled to exercise an
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Option that vested pursuant to Paragraph 4 hereof dies while still an
employee of the Company, the date on which the vested portion of the
Option may be exercised shall be extended one (1) year. The person or
persons that receives by will or by the laws of descent and
distribution the right to exercise the Option (the "Personal
Representative") may exercise the Option to the full extent of the
rights, if any, which had accrued as of the date of the Optionee's
death pursuant to Paragraph 4 hereof and which have not theretofore
been exercised; provided, however, that such accrued purchase rights
shall in any event terminate upon the earlier of the last date on
which such option is otherwise exercisable or one (1) year from the
date of the Optionee's death.
7. Adjustment of Number of Shares. In the event of any change in the
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number of outstanding Shares through the declaration of share
dividends, share splits, or consolidations, through recapitalization,
or by reason of any other increase or decrease in the number of
outstanding Shares effected without receipt of consideration by the
Company, the number of Shares then covered by the Option and the
Option Price shall be appropriately adjusted consistent with such
change. The determination of the Board of Directors of the Company as
to any such adjustment shall be conclusive and binding upon the
Optionee and upon the Personal Representative.
Stock Option Agreement - 1997
Page 5
8. Exercise of Option. The Option may be exercised by delivery to the
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Secretary of the Company at its principal office, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, of a completed Notice of Exercise of Option
in the form attached hereto as Exhibit A and obtainable from the
Secretary of the Company setting forth the amount of Shares with
respect to which the Option is being exercised, together with payment
if a form satisfactory to the Company in the amount of the total
purchase price for such Shares.
9. Share Transfer Restriction Agreement. As a condition precedent to the
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issuance of certificates evidencing ownership by the Optionee of
Shares after exercise of the option, the Optionee must execute a share
transfer restriction agreement substantially identical in form to the
Shareholders' Agreement attached hereto as Exhibit B and incorporated
herein by reference prior to the date of the issuance of such
certificates for Shares unless such Optionee has already executed a
Shareholders' Agreement. If the Optionee shall not execute a share
transfer restriction agreement for any reason, he shall not be
entitled to the issuance of Shares under the portion of the Option
that he has exercised. In such event, the Company shall immediately
return to the Optionee the purchase price for such Shares.
Stock Option Agreement - 1997
Page 6
10. Sale, Liquidation, Dissolution or Merger. In the event of the sale of
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all or substantially all of the Company's assets, or a merger or
consolidation in which the Company is not the surviving corporation,
all options granted hereunder shall become fully vested fifteen (15)
days prior to the contemplated consummation date of the transaction.
In the event of a proposed dissolution or liquidation of the Company,
or any consolidation or merger in which the Company is the surviving
corporation and in which there is a reclassification of the Shares,
all outstanding Options shall become fully vested upon the Company's
adoption of the plan or agreement related to such event. The Option
Committee may provide that each Option granted under the Plan shall
terminate as of a date to be fixed by the Board of Directors,
provided, however, that not less than thirty (30) days written notice
of the date so fixed shall be given to each Optionee, who shall have
the right, during the period of thirty (30) days preceding such
termination, to exercise each Option as to all or any part of the
Shares subject thereto.
11. Issuance of Share Certificates. Upon receipt by the Company prior to
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expiration of the Option of a duly completed Notice of Exercise of
option, in a form acceptable to the Company, accompanied by a
certified or cashier's check, as provided in Paragraph 8 hereof, in
full payment for the Shares being purchased pursuant to such Notice
(and, with respect to any Option exercised pursuant to
Stock Option Agreement - 1997
Page 7
Paragraph 6 hereof by the Personal Representative, accompanied in
addition by proof satisfactory to the Board of Directors of the
Company of the right of the Personal Representative to exercise the
Option) the Company shall cause to be mailed or otherwise delivered to
the Optionee or the Personal Representative, as the case may be,
within thirty (30) days of such receipt, a certificate or certificates
for the number of Shares so purchased. The Optionee or the Personal
Representative shall not have any of the rights of a shareholder with
respect to the Shares covered by the Option unless and until one or
more certificates representing such Share shall be issued to the
Optionee or the Personal Representative.
12. Successors in Interest. This Agreement shall be binding upon and inure
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to the benefit of any successor or successors of the Company, and any
Personal Representatives of the Optionee. The Option shall not be
transferable other than by will or the laws of descent and
distribution as set forth in Paragraph 6 above. The Option may be
exercised during the lifetime of the Optionee only by the Optionee.
13. Provisions of Plan Control. This Agreement is subject to all of the
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terms, conditions, and provisions of the Plan, as amended from time to
time, and to such rules, regulations, and interpretations of the Plan
as may be adopted by the Board
Stock Option Agreement - 1997
Page 8
of Directors of the Company and in effect from time to time. A copy of
the plan is attached hereto as Exhibit C and is incorporated herein by
reference. In the event and to the extent that this Agreement
conflicts or is inconsistent with the terms, conditions, and
provisions of the Plan, the Plan shall control, and this Agreement
shall be deemed to be modified accordingly.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its undersigned officer thereunto duly authorized, and the Optionee
has hereunto set his hand, all as of the day and year first above written.
PECO II, Inc.
By
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("Company")
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("Optionee")
EXHIBIT A
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PECO II, INC.
STOCK OPTION AGREEMENT
NOTICE OF EXERCISE OF OPTION
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PECO II, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
The undersigned hereby exercises the Option to purchase ______________ shares of
PECO II, Inc. Common Shares, at a price of $_________ per share.
Date: ______________, _______ _________________________________
Optionee
The undersigned hereby acknowledges receipt by PECO II, Inc., of $_____________
representing adequate consideration for the foregoing option being exercised.
PECO II, Inc.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Secretary