EXHIBIT 10(k)
 
MFRI, Inc. 2009 Non-Employee Directors Stock Option Plan
 
The Company may from time to time, prior to May 30, 2019, grant to directors who
are not employees of the Company or any of its subsidiaries ("Qualified
Participants") options to purchase shares of the Company's common stock (the
"Plan"). The aggregate number of shares of such stock which may be sold to all
optionees pursuant to this Plan shall not exceed 100,000; provided, however,
that on May 1, 2010 and each May 1 thereafter until May 1, 2019, the aggregate
number of shares that may be issued with respect to Awards pursuant to the terms
of this Plan shall be increased by the number equal to 0.35% of the aggregate
number of shares of common stock outstanding as of the last day of the most
recently ended fiscal year of the Company.  Options shall be granted under this
Plan as follows: (i) 10,000 shares of the Company's Common Stock shall be
granted automatically to each Qualified Participant upon the date such Qualified
Participant is first elected as a director of the Company and (ii) the greater
of (x) 1,000 shares of the Company's Common Stock or (y) the number of shares
subject to options most recently granted generally to the Company’s Tier 2
Managers (or comparable group of managers, as determined by the Board of
Directors) shall be granted automatically to each Qualified Participant upon
each date such Qualified Participant is re-elected as a director of the Company
commencing with the annual meeting of stockholders held in 2009. Options may
also be granted from time to time to such Qualified Participants and in such
amounts as the Board of Directors deems necessary or desirable. The purchase
price per share to be specified in any option granted pursuant to this Plan
shall be the fair market value of such stock on the date such option is granted,
and may be paid in cash, in common stock of the Company or in any combination
thereof.
 
At any time when an optionee is required to pay to the Company an amount
required to be withheld under applicable income tax laws in connection with the
exercise of an option, the optionee may satisfy this obligation in whole or in
part by electing (the "Election") to have the Company withhold shares of common
stock having a value equal to the amount required to be withheld. The value of
the shares to be withheld shall be based on the fair market value of such shares
on the date that the amount of tax to be withheld shall be determined ("Tax
Date"). Each Election must be made prior to the Tax Date. The Board may
disapprove of any Election or may suspend or terminate the right to make
Elections. An Election is irrevocable.
 
 
 

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In the event of a stock dividend, stock split, or combination or other reduction
in the number of issued shares of common stock of the Company, the Board of
Directors of the Company shall make such adjustments in the number of
unpurchased shares subject to this Plan, the number of shares subject to options
outstanding under this Plan and the exercise price specified in options
outstanding under this Plan as it may determine to be appropriate and equitable.
In the event of a merger, consolidation, reorganization or dissolution of the
Company, or the sale or exchange of substantially all of the Company's assets
(i) the rights under options outstanding hereunder shall terminate, except to
the extent and subject to such adjustments as may be provided by the Board of
Directors of the Company or by the terms of the plan or agreement of merger,
consolidation, reorganization, dissolution or sale or exchange of such assets;
and (ii) the Company shall notify the holders of outstanding options of such
event at least 30 days prior to the effective date of such event.
 

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The Board of Directors of the Company may, in its discretion, prescribe such
provisions and interpretations not inconsistent herewith as it shall deem
necessary or desirable for the implementation of this Plan. The Board of
Directors of the Company may, without stockholder consent, amend this Plan;
provided, however, any amendment that would (i) materially increase the benefits
accruing to participants hereunder, (ii) materially increase the number of
shares which may be issued hereunder, (iii) materially expand the class of
participants eligible to participate in this Plan, or (iv) expand the types of
options or awards provided under this Plan, must be approved by a vote of the
stockholders of the Company.

 
 
 
 
 

MFRI, INC. FORM OF OPTION
2009 Non-Employee Directors Stock Option Plan
[LETTERHEAD OF MFRI, INC.]
____________________, 20__
 
Dear Mr. ___________:
 
Pursuant to the 2009 Non-Employee Directors Stock Option Plan (the "Plan") of
MFRI, Inc. (the "Company"), you are hereby granted a stock option to purchase,
at the price of ___________ (1) per share, upon and subject to the provisions
and conditions hereafter set forth a total of ___________ (2) shares of common
stock of the Company in the installments, for the number of shares and to accrue
on the dates shown below.
 
Number of
Shares                                                           Accrual Date
 
__________ (3)                                           __________(4) 1,
20_____(5)
__________ (3)                                           __________(4) 1,
20_____(5)
__________ (3)                                           __________(4) 1,
20_____(5)
__________ (3)                                           __________(4) 1,
20_____(5)
 
Notwithstanding the foregoing, your right to exercise this option with respect
to all shares shall accrue automatically immediately prior to a Change in
Control.  As used  herein,  "Change in Control"  means:  (i) the  acquisition
(other than from the Company) by any Person, as defined below, of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 50% or more of (A) the then outstanding
shares of the securities of the Company, or (B) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the
election of directors (the "Company Voting Stock"); (ii) the closing of a sale
or other conveyance of all or substantially all of the assets of the Company; or
(iii) the effective time of any merger, share exchange, consolidation, or other
business combination of the Company if immediately after such transaction
persons who hold a majority of the outstanding voting securities entitled to
vote generally in the election of directors of the surviving entity (or the
entity owning 100% of such surviving entity) are not persons who, immediately
prior to such transaction, held the Company Voting Stock; provided, however,
that a Change in Control shall not include a public offering of capital stock of
the Company. For purposes of this paragraph, a "Person" means any individual,
entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended, other than employee benefit plans
sponsored or maintained by the Company and corporations controlled by the
Company.
 
1.           100% of fair market value on date of grant.
2.           Insert size of grant (10,000, 1,000, or other).
3.           Amount equal to 25% of total grant.
4.           Month of Grant.
5.           Beginning with the first year subsequent to the year of the grant,
insert in chronological order 4 years.

 
 

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You may purchase all or any of the shares included in any installment under this
option, on or after the date on which such installment accrues and not later
than the expiration date hereinafter set forth, by making payment in full to the
Treasurer of the Company, 7720 North Lehigh Avenue, Niles, Illinois 60714, for
the shares, at the price per share herein described, whereupon you will receive
a stock certificate representing the shares for which you have made payment,
except that the Company shall not be obligated to deliver any stock unless and
until (i) there has been compliance with any federal or state laws or
regulations or national securities exchange or Nasdaq Stock Market requirements
which the Company may deem applicable and (ii) all legal matters in connection
with the sale and delivery of the stock have been approved by the Company's
counsel.
 
In the alternative, options subject to this agreement may be exercised through a
registered broker-dealer pursuant to cashless exercise procedures that are, from
time to time, approved by the Board of Directors.  Proceeds from any such
exercise shall be used to pay the exercise costs, which include the exercise
price of the option, applicable taxes, brokerage commissions and SEC fees.  Any
remaining proceeds from the sale shall be delivered to you in cash or stock, as
specified by you.
 
Upon the exercise of any installment hereunder, the purchase price may be paid
in cash or in common stock of the Company or a combination thereof. Each share
of common stock received by the Company in payment of all or a portion of the
purchase price specified in this option shall be valued at its fair market value
on the date of exercise.
 
The Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors, or the President of the Company (or any Vice President of the Company
in the absence or unavailability of the Chairman of the Board of Directors, the
Vice Chairman of the Board of Directors and the President) may suspend or
postpone the receipt of shares in payment of the purchase price specified in
this option if at any time (i) he has knowledge of information concerning the
Company which upon disclosure to the public might, in his opinion, materially
affect the market price of the Company's common stock, (ii) non-Company events
of an extraordinary nature occur which, in his opinion, may not have been
effectively reflected in the market, or (iii) such suspension or postponement
for any other reason would, in his opinion, be in the best interests of the
Company.
 
The Board of Directors hereby reserves and shall have the right, by written
notice to you, to change the provisions of this option in any manner that it may
deem necessary or advisable to carry out the purpose of this grant as a result
of, or to comply with, any change in applicable regulations, interpretations or
statutory enactment, provided that any such change shall be applicable only to
shares for which payment shall not then have been made as herein provided.
 
If you cease to be a director of the Company (other than for death or permanent
disability), you may pay for and receive all or any of the shares constituting
any installment or installments under this option that shall have accrued at the
date you cease to be a director and for which you shall not then have made
payment as provided herein until the expiration date of this option; provided,
however, if you cease to be a director because you were removed, in whole or
substantial part, for gross negligence or willful misconduct in the execution of
your duties, or for conviction of, or entry of a plea of guilty or nolo
contendere to, any felony or any act of fraud, embezzlement, misappropriation,
or a crime involving moral turpitude, then any option for which you have not
made payment shall terminate on the date of such removal.
 
If you cease to be a director of the Company by reason of your permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended), then until the expiration date of this option, you may pay for and
receive all or any of the shares constituting any installment or installments
(whether accrued or not) hereunder for which you shall not then have made
payment as provided herein. In the event of your death while a director, the
executor or administrator of your estate may, until the expiration date of this
option, pay for and receive all or any of the shares included in any installment
or installments (whether accrued or not) hereunder for which you shall not then
have made payment as provided herein.
 
In the event of stock dividend, stock split, or combination or other reduction
in the number of issued shares of common stock of the Company, the Board of
Directors shall make such adjustments in the number of unpurchased shares
subject to this option and in the exercise price per share as it may determine
to be appropriate and equitable.
 
In the event of a merger, consolidation, reorganization or the dissolution of
the Company, or the sale or exchange of substantially all of the Company's
assets (i) your rights under this option shall terminate, except to the extent
and subject to such adjustments as may be provided by the Board of Directors or
by the terms of the plan or agreement of merger, consolidation, reorganization,
dissolution, or sale or exchange of such assets; and (ii) the Company shall
notify you of any such event at least thirty days prior to the effective date of
such event.
 
At any time when you are required to pay to the Company an amount required to be
withheld under applicable income tax laws in connection with the exercise of
this option, you may satisfy this obligation in whole or in part by electing
(the "Election") to have the Company withhold shares of common stock having a
value equal to the amount required to be withheld. The value of the shares to be
withheld shall be based on the fair market value of such shares on the date that
the amount of tax to be withheld shall be determined ("Tax Date"). Each Election
must be made prior to the Tax Date. The Board may disapprove of any Election or
may suspend or terminate the right to make Elections. An Election is
irrevocable.
 
The Election must be made either six months prior to the Tax Date or must be
made during a period beginning on the third business day following the date of
release for publication of the Company's quarterly or annual summary statements
of sales and earnings and ending on the twelfth business day following such
date.
 
This option shall be exercisable during your lifetime only by you and shall not
be transferable by you, expressly or by operation of law, except in the event of
your death, and then only to the extent and subject to the provisions and
conditions herein set forth. Any attempted transfer or other disposition thereof
by you shall be void and shall constitute valid grounds for cancellation of this
option by the Company.
 
If the Plan is not approved by the stockholders of the Company, then any options
granted pursuant to the Plan prior to such vote of stockholders shall be null
and void.
 
This option and all your rights hereunder shall, unless sooner terminated in
accordance with the provisions hereof, cease and terminate on______________(6)
(the "expiration date"), at 5:00 p.m., Niles, Illinois business time.
 
______________________
6           Last day of month preceding date ten years after date of grant.
 
Please acknowledge receipt of this option at the bottom of the duplicate copy
herewith enclosed and return the same within 30 days from the date hereof to the
office of the Treasurer of the Company, 7720 North Lehigh Avenue, Niles,
Illinois 60714.
 
MFRI, INC.
By:                                                                   
Its:                                                                
 
I hereby acknowledge receipt of the foregoing option.
 
Signature