exhibi10_3.htm


    EXHIBIT
      10.3

    


    NONQUALIFIED
      STOCK OPTION AGREEMENT

    


    ANALYSTS
      INTERNATIONAL CORP.

    2004
      EQUITY INCENTIVE PLAN

    


    


    THIS
      AGREEMENT, made effective as of
      this 1st day of November, 2007, by and between Analysts International Corp.,
      a
      Minnesota corporation (the “Company”), and Elmer Baldwin
      (“Participant”).

    


    


    W
      I T N E S S E T H:

    


    WHEREAS,
      Participant on the date hereof
      is a key employee, officer or director of the Company or one of its
      Subsidiaries; and

    


    WHEREAS,
      the Company wishes to grant a
      nonqualified stock option to Participant to purchase shares of the Company’s
      Common Stock pursuant to the Company’s 2004 Equity Incentive Plan (the “Plan”);
      and

    


    WHEREAS,
      the Administrator of the Plan
      has authorized the grant of a nonqualified stock option to Participant and
      has
      determined that, as of the effective date of this Agreement, the fair market
      value of the Company’s Common Stock is $1.65 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 Participant on
      the date set forth above (the “Date of Grant”), the right and option (the
“Option”) to purchase all or portions of an aggregate of one hundred thousand
      five hundred seventy-six (100,576) shares of Common Stock at a per share price
      of $1.65 on the terms and conditions set forth herein, and subject to adjustment
      pursuant to Section 12 of the Plan.  This Option is a nonqualified
      stock option and will not be treated as an incentive stock option, as defined
      under Section 422, or any successor provision, of the Internal Revenue Code
      of
      1986, as amended (the “Code”), and the regulations thereunder.

    


    2.           Duration
      and Exercisability.

    


    a.           General.  The
      term during which this Option may be exercised shall terminate on the close
      of
      business on November 1, 2017, except as otherwise provided
      in Paragraphs 2(b) through 2(d) below.  This Option shall become
      exercisable according to the following schedule:


    
      
        
        

      

      
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              Vesting
                Date

            	
              Number/Percentage
                of Shares

            
	 	 
	
              Date
                of Grant

            	
              25%

            
	
              First
                Anniversary of Date of Grant

            	
              50%

            
	
              Second
                Anniversary of Date of Grant

            	
              75%

            
	
              Third
                Anniversary of Date of Grant

            	
              100%

            


    

    


    In
      the
      event of a Change of Control (as defined in Exhibit A to Participant’s
      employment agreement) on or after May 1, 2009, the Option shall vest immediately
      and be fully exercisable

    


    Once
      the
      Option becomes fully exercisable, Participant may continue to exercise this
      Option under the terms and conditions of this Agreement until the termination
      of
      the Option as provided herein.  If Participant does not purchase upon
      an exercise of this Option the full number of shares which Participant is then
      entitled to purchase, Participant may purchase upon any subsequent exercise
      prior to this Option’s termination such previously unpurchased shares in
      addition to those Participant is otherwise entitled to purchase.

    


    b.           Termination
      of Relationship (other than Disability or Death).  If
      Participant ceases to be an employee of the Company or any Subsidiary for any
      reason other than disability or death, this Option shall completely terminate
      on
      the earlier of (i) the close of business on the three-month anniversary
      date of the termination of such relationship, and (ii) the
      expiration date of this Option stated in Paragraph 2(a) above.  In
      such period following such termination, this Option shall be exercisable only
      to
      the extent the Option was exercisable on the vesting date immediately preceding
      the date on which Participant’s relationship with the Company or Subsidiary has
      terminated, but had not previously been exercised.  To the extent this
      Option was not exercisable upon the termination of such relationship, or if
      Participant does not exercise the Option within the time specified in this
      Paragraph 2(b), all rights of Participant under this Option shall be
      forfeited.

    


    c.           Disability.  If
      Participant ceases to be an employee of the Company or any Subsidiary because
      of
      disability (as defined in Code Section 22(e), or any successor provision),
      this
      Option shall completely terminate on the earlier of (i) the close of business
      on
      the twelve-month anniversary date of the termination of all
      such relationships, and (ii) the expiration date of this Option stated in
      Paragraph 2(a) above.  In such period following such termination, this
      Option shall be exercisable only to the extent the Option was exercisable on
      the
      vesting date immediately preceding the date on which all of Participant’s
      relationships with the Company or Subsidiary have terminated, but had not
      previously been exercised.  To the extent this Option was not
      exercisable upon the termination of such relationship, or if Participant does
      not exercise the Option within the time specified in this Paragraph 2(c), all
      rights of Participant under this Option shall be forfeited.

    


    d.           Death.  In
      the event of Participant’s death, this Option shall terminate on the earlier of
      (i) the close of business on the twelve-month anniversary date
      of the date of Participant’s death, and (ii) the expiration date of this Option
      stated in Paragraph 2(a) above.  In such period following
      Participant’s death, this Option may be exercised by the person or persons to
      whom Participant’s  rights under this Option shall have passed by
      Participant’s will or by the laws of descent and distribution only to the extent
      the Option was exercisable on the vesting date immediately preceding the date
      of
      Participant’s death.  To the extent this Option was not exercisable
      upon the date of Participant’s death, or if such person or persons fail to
      exercise this Option within the time specified in this Paragraph 2(d), all
      rights under this Option shall be forfeited.


    
      
        
        

      

      
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    3.           Manner
      of Exercise.

    


    a.           General.  The
      Option may be exercised only by Participant (or other proper party in the event
      of death or incapacity), subject to the conditions of the Plan and subject
      to
      such other administrative rules as the Board may deem advisable, by delivering
      within the option period written notice of exercise to the Company at its
      principal office.  The notice shall state the number of shares as to
      which the Option is being exercised and shall be accompanied by payment in
      full
      of the option price for all shares designated in the notice.  The
      exercise of the Option shall be deemed effective upon receipt of such notice
      by
      the Company and upon 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 exercised as to the unexercised shares any number of times
      during the option period as provided herein.

    


    b.           Form
      of Payment.  Subject to the approval of the
      Administrator, payment of the option price by Participant shall be in the form
      of cash, personal check, certified check or previously acquired shares of Common
      Stock of the Company, or any combination thereof.  Any stock so
      tendered as part of such payment shall be valued at its Fair Market Value as
      provided in the Plan.  For purposes of this Agreement, “previously
      acquired shares of Common Stock” shall include shares of Common Stock that are
      already owned by Participant at the time of exercise.

    


    c.           Stock
      Transfer Records.  As soon as practicable after the
      effective exercise of all or any part of the Option, Participant shall be
      recorded on the stock transfer books of the Company as the owner of the shares
      purchased, and the Company shall deliver to Participant one or more duly issued
      stock certificates evidencing such ownership.  All requisite original
      issue or transfer documentary stamp taxes shall be paid by the
      Company.

    


    4.           Miscellaneous.

    


    a.           Rights
      as Shareholder.  This Agreement shall not confer on
      Participant any right with respect to the continuance of any relationship with
      the Company or any of its Subsidiaries, nor will it interfere in any way with
      the right of the Company to terminate any such
      relationship.  Participant shall have no rights as a shareholder with
      respect to shares subject to this Option until such shares have been issued
      to
      Participant upon exercise of this Option.  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 shares are issued, except as provided in Section 12 of the
      Plan.

    


    b.           Securities
      Law Compliance.  The exercise of all or any parts of this
      Option shall only be effective at such time as counsel to the Company shall
      have
      determined that the issuance and delivery of Common Stock pursuant to such
      exercise will not violate any state or federal securities or other
      laws.  Participant may be required by the Company, as a condition of
      the effectiveness of any exercise of this Option, to agree in writing that
      all
      Common Stock to be acquired pursuant to such exercise shall be held, until
      such
      time that such Common Stock is registered and freely tradable under applicable
      state and federal securities laws, for Participant’s


    
      
        
        

      

      
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    own
      account without a view to any further distribution thereof and that such shares
      will be not transferred or disposed of except in compliance with applicable
      state and federal securities laws.

    


    c.           Mergers,
      Recapitalizations, Stock Splits, Etc.  Pursuant and
      subject to Section 12 of the Plan, certain changes in the number or character
      of
      the Common Stock of the Company (through sale, merger, consolidation, exchange,
      reorganization, divestiture (including a spin-off), liquidation,
      recapitalization, stock split, stock dividend or otherwise) shall result in
      an
      adjustment, reduction or enlargement, as appropriate, in Participant’s rights
      with respect to any unexercised portion of the Option (i.e., Participant
      shall have such “anti-dilution” rights under the Option with respect to such
      events, but shall not have “preemptive” rights).

    


    d.           Shares
      Reserved.  The Company shall at all times during the
      option period reserve and keep available such number of shares as will be
      sufficient to satisfy the requirements of this Agreement.

    


    e.           Withholding Taxes.  In
      order to permit the
      Company to comply with all applicable federal or state income tax laws or
      regulations, the Company may take such action as it deems appropriate to insure
      that, if necessary, all applicable federal or state payroll, income or other
      taxes are withheld from any amounts payable by the Company to
      Participant.  If the Company is unable to withhold such federal and
      state taxes, for whatever reason, Participant hereby agrees to pay to the
      Company an amount equal to the amount the Company would otherwise be required
      to
      withhold under federal or state law.  Participant may, subject to the
      approval and discretion of the Board or such administrative rules it may deem
      advisable, elect to have all or a portion of such tax withholding obligations
      satisfied by delivering shares of the Company’s Common Stock or by electing to
      have the Company withhold shares of Common Stock
      otherwise
      issuable to Participant.  Such shares shall have a Fair Market Value
      equal to the minimum required tax withholding, based on the minimum statutory
      withholding rates for federal and state tax purposes, including payroll taxes,
      that are applicable to the supplemental income resulting from the exercise
      of
      this Option.  In no event may the Company withhold shares having a
      Fair Market Value in excess of such statutory minimum required tax withholding.
      

    


    f.           Nontransferability.  During
      the lifetime of Participant, the accrued Option shall be exercisable only by
      Participant or by the Participant’s guardian or other legal representative, and
      shall not be assignable or transferable by Participant, in whole or in part,
      other than by will or by the laws of descent and distribution.

    


    g.           2004
      Equity Incentive Plan.  The Option evidenced by this
      Agreement is granted pursuant to the Plan, a copy of which Plan has been made
      available to Participant and is hereby incorporated into this
      Agreement.  This Agreement is subject to and in all respects limited
      and conditioned as provided in the Plan. All defined terms of the Plan shall
      have the same meaning when used in this Agreement.  The Plan governs
      this Option and, in the event of any questions as to the construction of this
      Agreement or in the event of a conflict between the Plan and this Agreement,
      the
      Plan shall govern, except as the Plan otherwise provides.


    
      
        
        

      

      
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    h.           Lockup
      Period Limitation.  Participant agrees that in the event
      the Company advises Participant that it plans an underwritten public offering
      of
      its Common Stock in compliance with the Securities Act of 1933, as amended,
      and
      that the underwriter(s) seek to impose restrictions under which certain
      shareholders may not sell or contract to sell or grant any option to buy or
      otherwise dispose of part or all of their stock purchase rights of the
      underlying Common Stock, Participant hereby agrees that for a period not to
      exceed 180 days from the prospectus, Participant will not sell or contract
      to
      sell or grant an option to buy or otherwise dispose of this option or any of
      the
      underlying shares of Common Stock without the prior written consent of the
      underwriter(s) or its representative(s).

    


    i.           Blue
      Sky Limitation.  Notwithstanding anything in this
      Agreement to the contrary, in the event the Company makes any public offering
      of
      its securities and determines in its sole discretion that it is necessary to
      reduce the number of issued but unexercised stock purchase rights so as to
      comply with any state securities or Blue Sky law limitations with respect
      thereto, the Board of Directors of the Company shall have the right (i) to
      accelerate the exercisability of this Option and the date on which this Option
      must be exercised, provided that the Company gives Participant 15 days’ prior
      written notice of such acceleration, and (ii) to cancel any portion of this
      Option or any other option granted to Participant pursuant to the Plan which
      is
      not exercised prior to or contemporaneously with such public
      offering.  Notice shall be deemed given when delivered personally or
      when deposited in the United States mail, first class postage prepaid and
      addressed to Participant at the address of Participant on file with the
      Company.

    


    j.           Accounting
      Compliance.  Participant agrees that, if a merger,
      reorganization, liquidation or other “transaction” as defined in Section 12 of
      the Plan occurs and Participant is an “affiliate” of the Company or any
      Subsidiary (as defined in applicable legal and accounting principles) at the
      time of such transaction, Participant will comply with all requirements of
      Rule
      145 of the Securities Act of 1933, as amended, and the requirements of such
      other legal or accounting principles, and will execute any documents necessary
      to ensure such compliance.

    


    k.           Stock
      Legend.  The Board may require that the certificates for
      any shares of Common Stock purchased by Participant (or, in the case of death,
      Participant’s successors) shall bear an appropriate legend to reflect the
      restrictions of Paragraph 4(b) and Paragraphs 4(h) through 4(j) of this
      Agreement.

    


    l.           Scope
      of Agreement.  This Agreement shall bind and inure to the
      benefit of the Company and its successors and assigns and Participant and any
      successor or successors of Participant permitted by Paragraph 2 or Paragraph
      4(f) above.

    


    m.           Arbitration.  Any
      dispute arising out of or relating to this Agreement or the alleged breach
      of
      it, or the making of this Agreement, including claims of fraud in the
      inducement, shall be discussed between the disputing parties in a good faith
      effort to arrive at a mutual settlement of any such controversy.  If,
      notwithstanding, such dispute cannot be resolved, such dispute shall be settled
      by binding arbitration.  Judgment upon the award rendered by the
      arbitrator may be entered in any court having jurisdiction
      thereof.  The arbitrator shall be a retired state or federal judge or
      an attorney who has practiced securities or business litigation for at least
      10
      years.  If the parties cannot


    
      
        
        

      

      
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    agree
      on
      an arbitrator within 20 days, any party may request that the chief judge of
      the
      District Court for Hennepin County, Minnesota, select an
      arbitrator.  Arbitration will be conducted pursuant to the provisions
      of this Agreement, and the commercial arbitration rules of the American
      Arbitration Association, unless such rules are inconsistent with the provisions
      of this Agreement.  Limited civil discovery shall be permitted for the
      production of documents and taking of depositions.  Unresolved
      discovery disputes may be brought to the attention of the arbitrator who may
      dispose of such dispute.  The arbitrator shall have the authority to
      award any remedy or relief that a court of this state could order or grant;
      provided, however, that punitive or exemplary damages shall not be
      awarded.  The arbitrator may award to the prevailing party, if any, as
      determined by the arbitrator, all of its costs and fees, including the
      arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses
      and reasonable  attorneys’ fees.  Unless otherwise agreed by
      the parties, the place of any arbitration proceedings shall be Hennepin County,
      Minnesota.

    


    IN
      WITNESS WHEREOF, the parties hereto
      have caused this Agreement to be executed on the day and year first above
      written.

    


    


    
      	 	
              ANALYSTS
                INTERNATIONAL CORPORATION

            
	 	 
	 	 
	
              By

            	 _______________________________________
	
              Its

            	 _______________________________________
	 	 
	 	 ________________________________________
	 	
              Participant

            


    

    



    
      
        
        

      

      
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