Incentive Stock Option Agreement


    Exhibit
      10-kk

    


    INCENTIVE
      STOCK OPTION AGREEMENT

    


    ANALYSTS
      INTERNATIONAL CORP.

    2004
      EQUITY INCENTIVE PLAN

    


    


    THIS
      AGREEMENT, made effective as of this ____ day of January 3, 2007, by and between
      Analysts International Corp., a Minnesota corporation (the “Company”), and
      _______________________________ (“Participant”).

    


    W
      I T N E
      S S E T H:

    


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

    


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

    


    WHEREAS,
      certain of the terms of this Stock Option Agreement (the “Agreement”) are
      included herein pursuant to the Company’s 2007 Long-Term Incentive Plan;
      and

    


    WHEREAS,
      the Board of Directors has authorized the grant of an incentive 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 $1.91 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  
      ( )
      shares
      of Common Stock (the “Shares”) at a per share price of $1.91 on the terms and
      conditions set forth herein, and subject to adjustment pursuant to Section
      12 of
      the Plan. This Option is intended to be an incentive stock option within the
      meaning of Section 422, or any successor provision, of the Internal Revenue
      Code
      of 1986, as amended (the “Code”), and the regulations thereunder, to the extent
      permitted under Code Section 422(d).

    


    2. Duration
      and Exercisability.

    


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


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    (i)
       If
      the
      Company’s audited annual period financial statements for its 2007 fiscal year
      demonstrate that the Company generated positive net income during its 2007
      fiscal year (“2007 Net Income”), the Option granted hereunder shall become
      exercisable with respect to 331/3%
      of the
      Shares; 

    


    (ii) 
      If the
      Company’s audited annual period financial statements for its 2008 fiscal year
      demonstrate that the Company’s 2008 net income was at least five percent (5%)
      greater than the 2007 Net Income, the Option granted hereunder shall become
      exercisable with respect to 331/3%
      of the
      Shares; 

    


    (iii) If
      the
      Company’s audited annual period financial statements for its 2009 fiscal year
      demonstrate that the Company’s 2009 net income was at least ten percent (10%)
      greater than the 2007 Net Income, the Option granted hereunder shall become
      exercisable with respect to 331/3%
      of the
      Shares;

    


    If
      the
      vesting provisions of any of the Sections 2(a)(i)-2(a)(iii) are not satisfied
      for any vesting period, the Option that would have become exercisable with
      respect to such Shares shall be forfeited only with respect to such period
      in
      which the vesting provisions were not satisfied. Once the Option becomes
      exercisable with respect to any portion of the Shares, Participant may continue
      to exercise this Option with respect to such Shares 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 Employment (other than Disability or Death).
      If
      Participant’s employment with the Company or any Subsidiary is terminated 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 such
      termination of employment, and (ii) the expiration date of this Option
      stated in Paragraph 2(a) above. In such period following the termination of
      Participant’s employment, this Option shall be exercisable only to the extent
      the Option was exercisable on the vesting date immediately preceding such
      termination of employment, but had not previously been exercised. To the extent
      this Option was not exercisable upon such termination of employment, 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’s employment terminates because of disability (as defined in Code
      Section 22(e), or any successor provision), this Option shall terminate on
      the
      earlier of (i) the close of business on the twelve-month
      anniversary date
      of the
      such termination of employment, and (ii) the expiration date of this Option
      stated in Paragraph 2(a) above. In such period following the termination of
      Participant’s employment, this Option shall be exercisable only to the extent
      the Option was exercisable on the vesting date immediately preceding such
      termination of employment, but had not previously been exercised. To the extent
      this Option was not exercisable upon such termination of employment, 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 shall be exercisable 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 do not exercise this Option within the time specified
      in this Paragraph 2(d), all rights under this Option shall be
      forfeited.

    


    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 so exercised as to
      the
      unexercised shares any number of times during the Option period as provided
      herein.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    b. Form
      of Payment.
      Subject
      to approval by 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. Employment;
      Rights as Shareholder.
      This
      Agreement shall not confer on Participant any right with respect to continuance
      of employment by the Company or any of its Subsidiaries, nor will it interfere
      in any way with the right of the Company to terminate such employment.
      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 own
      account without a view to any further distribution thereof, that the
      certificates for such Shares shall bear an appropriate legend to that effect
      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 on Disqualifying Disposition.
      In the
      event of a disqualifying disposition of the shares acquired through the exercise
      of this Option, Participant hereby agrees to inform the Company of such
      disposition. Upon notice of a disqualifying disposition, the Company may take
      such action as it deems appropriate to insure that, if necessary to comply
      with
      all applicable federal or state income tax laws or regulations, all applicable
      federal and 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, which are applicable to the supplemental income resulting from
      the disqualifying disposition of the shares acquired through 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. 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.

    


    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 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