**Exhibit 10.3**

 

**NONQUALIFIED STOCK OPTION AGREEMENT**

**BROADWIND ENERGY, INC.**

**2007 EQUITY INCENTIVE PLAN**

 

THIS AGREEMENT is enteredinto effective as of the      day of                      ,20    , by and between Broadwind Energy, Inc., a Delawarecorporation (the “**Company**”), and                                                  (“**Participant**”).

 

**RECITALS**

 

A.                                   Participant onthe date hereof is a key employee, officer, or director of, or consultant oradvisor to, the Company or one of its Affiliates; and

 

B.                                     The Companywishes to grant a nonqualified stock option to Participant to purchase sharesof the Company’s Common Stock pursuant to this Agreement and the Company’s 2007Equity Incentive Plan (the “**Plan**”); and

 

C.                                     TheAdministrator has authorized the grant of a nonqualified stock option toParticipant and has determined that, as of the effective date of thisAgreement, the fair market value of the Company’s Common Stock is                          Dollars ($                )per share.

 

**AGREEMENTS**

 

In consideration of thepremises and of the mutual covenants herein contained, the parties hereto agreeas follows:

 

**ARTICLE I.  GRANTOF OPTION**

 

The Company hereby grants toParticipant the right, privilege, and option (the “**Option**”)to purchase up to                                               (                  )shares of Common Stock at a per share price of                                  Dollars($                        )subject to the terms and conditions set forth herein, and set forth in thePlan.  The Option is a nonqualified stockoption and will not be treated as an incentive stock option, as defined underSection 422 of the Internal Revenue Code of 1986, as amended (the “**Code**”), and the regulations thereunder.

 

**ARTICLE II.  DURATIONOF OPTION AND EXERCISABILITY**

 

A.                                   General.  Except as provided in **Articles II.B** and **II.C**below, the Option shall becomeexercisable according to the following schedule.  Once the Option becomes fully exercisable,Participant may continue to exercise the Option under the terms and conditionsof this Agreement until the termination of the Option as provided herein.  If Participant does not exercise the Optionwith respect to the full number of shares which Participant is then entitled,Participant may purchase upon any subsequent exercise prior to the Option’stermination such previously unpurchased shares in addition to those Participantis otherwise entitled to purchase.  Except as provided in **Articles II.B** and **II.C** below, the term during which thisOption may be exercised will continue until 5:00 p.m. (Central Time) on                              ,20     (the “**ExpirationDate**”).  In no event shall this Option be exercisable after theExpiration Date.

 

| **Vesting Date** | ** ** | **Number of  Option Shares  Available for Exercise** |
|------------------|------------|------------------------------------------------------|
| ** **       | ** ** | ** **                                           |
| ** **       | ** ** | ** **                                           |
|             |       |                                                 |

 

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B.                                     Termination of Employment for Reasons Other Than Death or Disability.  In the event Participant ceases to be**[a key employee or officer] [a consultant or advisor] [a director]**  of the Company or any Affiliate for anyreason other than death or an event that constitutes permanent and totaldisability within the meaning of Section 22(e)(3) of the Code (“**Disability**”), any unexercised portion ofthis Option which was exercisable as of the date of such termination may beexercised, in whole or in part, by Participant before the earlier of(i) the close of business on the three-month anniversary date of suchtermination of employment, and (ii) the Expiration Date.  To theextent this Option was not exercisable upon such termination of employment, orif Participant does not exercise the unexercised portion of the Option that wasexercisable within the time specified in this **ArticleII.B**, all rights of Participant under this Option shall terminate,and the Option shall thereafter be void.

 

C.                                     Termination of Employment Due to Death or Disability.  In the event Participant ceases to be**[a key employee or officer] [a consultant or advisor] [a director]**  of the Company or any Affiliate by reason ofdeath or Disability, any unexercised portion of this Option which wasexercisable as of the date of such termination may be exercised, in whole or inpart, by Participant (or by Participant’s heirs or legalrepresentative(s) in the event of death or Disability) before the earlierof (i) the close of business on the twelve-month anniversary date of suchtermination of employment and (ii) the Expiration Date.  To theextent this Option was not exercisable upon such termination of employment, orif Participant does not exercise the unexercised portion of the Option that wasexercisable within the time specified in this **ArticleII.C**, all rights of Participant under this Option shall terminate,and the Option shall thereafter be void.

 

**ARTICLE III.  MANNEROF OPTION EXERCISE**

 

A.                                   Notice.  This Option may be exercised by Participantin whole or in part from time to time, subject to the conditions contained inthe Plan and herein, by delivery, in person or by registered mail, to theCompany at its principal executive office, of a written notice ofexercise.  Such notice shall be in a form satisfactory to theAdministrator, shall identify the Option, shall specify the number of OptionShares with respect to which the Option is being exercised, and shall be signedby the person or persons so exercising the Option.  Such notice shall be accompanied by paymentin full of the total purchase price of the Option Shares purchased; theexercise of the Option shall be deemed effective upon receipt of such notice bythe Company and upon payment that complies with the terms of the Plan and thisAgreement.  In the event that the Option is being exercised, as providedby the Plan and **Article****II.B**, above, by Participant’s heirs orlegal representative(s), the notice shall be accompanied by appropriate proofof right of such person or persons to exercise the Option.  As soon aspracticable after the effective exercise of the Option, Participant (orParticipant’s heirs or legal representative(s) in the event of death orDisability) shall be recorded on the stock transfer books of the Company as theowner of the Option Shares purchased, and the Company may deliver toParticipant (or Participant’s heirs or legal representative(s)) one or moreduly issued stock certificates evidencing such ownership.  All requisite original issue or transferdocumentary stamp taxes shall be paid by the Company.

 

B.                                     Payment.  At the time of exercise of this Option,Participant may determine whether to pay the total purchase price of the OptionShares to be purchased solely in cash (including a personal check or a certifiedor bank cashier’s check, payable to the order of the Company) or by transferfrom Participant to the Company of previously-owned shares of Common Stock ofthe Company with a then current aggregate Fair Market Value equal to such totalpurchase price, or by a combination of cash and such previously-owned shares ofCommon Stock.  The Administrator mayreject Participant’s election to pay all or part of the purchase price

 

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underthis Option with previously-owned shares of common stock and may require suchpurchase price to be paid entirely in cash if, in the sole discretion of theAdministrator, payment in previously-owned shares would cause the Company to berequired to recognize a charge to earnings in connection therewith.  Forpurposes of this Agreement, (a) “previously-owned shares” shall mean shares ofCommon Stock of the Company that Participant has owned for at least six monthsprior to the time of exercise, and (b) “Fair Market Value” will be determinedas set forth in the Plan.

 

C.                                     Investment Purpose.  The Company shall not be required to issue ordeliver any shares of Common Stock under this Option unless (a)(1) suchshares are covered by an effective and current registration statement under theSecurities Act of 1933 and applicable state securities laws or (2) if theAdministrator has determined not to so register such shares, exemptions fromregistration under the Securities Act of 1933 and applicable state securitieslaws are available for such issuance (as determined by counsel to the Company)and the Company has received from Participant (or Participant’sheirs(s) or legal representative(s), in the event of death or Disability)any representations or agreements requested by the Company in order to permitsuch issuance to be made pursuant to such exemptions, and (b) the Companyhas obtained any other consent, approval or permit from any state or federalgovernmental agency which the Administrator shall, in its sole discretion uponthe advice of counsel, deem necessary or advisable.  Unless a registrationstatement under the Securities Act of 1933 is in effect with respect to theissuance or transfer of Option Shares, transfer of such shares shall berestricted unless the Company receives an opinion of counsel satisfactory tothe Company to the effect that registration under the Securities Act of 1933and applicable state securities laws is not required with respect to suchtransfer.

 

**ARTICLE IV.  TRANSFERABILITY**

 

This Option shall betransferable, in whole or in part, by the Participant by will or by the laws ofdescent and distribution.  In addition, the Administrator may, in its solediscretion, permit Participant to transfer this Option to any member ofParticipant’s “immediate family” as such term is defined inRule 16a-1(e) promulgated under the Securities Exchange Act of 1934,or any successor provision, or to one or more trusts whose beneficiaries aremembers of such Participant’s “immediate family” or partnerships in which suchfamily members are the only partners; provided, however, that Participantcannot receive any consideration for the transfer and such transferred Optionshall continue to be subject to the same terms and conditions as wereapplicable to the Option immediately prior to its transfer.

 

**ARTICLE V.  WITHHOLDINGTAXES**

 

To permit the Company tocomply with all applicable federal and state income tax laws or regulations,the Company may take such action as it deems appropriate to ensure that, ifnecessary, all applicable federal and state payroll, income or other taxes arewithheld from any amounts payable by the Company to Participant.  If the Company is unable to withhold suchfederal and state taxes, for whatever reason, Participant hereby agrees to payto the Company an amount equal to the amount the Company would otherwise berequired to withhold under federal or state law.  Subject to such rules asthe Administrator may adopt, the Administrator may, in its sole discretion,permit Participant to satisfy such withholding tax obligations, in whole or inpart (i) by delivering shares of common stock, or (ii) by electing to have theCompany withhold shares of Common Stock otherwise issuable to Participant as aresult of the exercise of the Option, in either case having a Fair MarketValue, as of the date the amount of tax to be withheld is determined underapplicable tax law, equal to the minimum amount required to be withheld for taxpurposes based on the minimum statutory withholding rates for federal and statetax purposes, including payroll taxes, that are applicable to the supplementalincome resulting from such exercise.  Participant’s request to delivershares or to have shares withheld for purposes of such withholding taxobligations shall be made on or before the date that triggers such obligationsor, if later, the date that the amount of tax to be withheld is determinedunder applicable tax law.  Participant’s request shall be approved by theAdministrator and otherwise comply with such rules as the Administratormay adopt to

 

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assure compliance withRule 16b-3 or any successor provision, as then in effect, of the GeneralRules and Regulations under the Securities and Exchange Act of 1934, ifapplicable.

 

**ARTICLE VI.  CAPITALADJUSTMENTS**

 

Pursuant and subject toSection 14 of the Plan, in the event of an increase or decrease in the numberof shares of common stock resulting from a stock split, reverse stock split,stock dividend, combination of shares, rights offering, reclassification of thecommon stock, or any other change in the corporate structure or shares of theCompany, the Administrator, in order to prevent dilution or enlargement of therights of Participant, may make appropriate adjustment as to the number and kindof securities subject to this Option. Any such adjustment affecting this Option shall be made without changein the aggregate purchase price applicable to the unexercised portion of theOption but with an appropriate adjustment in the price for each share or otherunit of any security subject to the Option.

 

**ARTICLE VII.  BINDINGEFFECT**

 

This Agreement shall bebinding upon the heirs, executors, administrators and successors of the partieshereto.

 

**ARTICLE VIII.  2007EQUITY INCENTIVE PLAN**

 

The Option represented bythis Agreement has been granted under, and is subject to the terms of, thePlan.  The terms of the Plan are hereby incorporated by reference hereinin their entirety and Participant, by execution hereof, acknowledges havingreceived a copy of the Plan.  Capitalized terms not defined herein shallhave the meaning set forth in the Plan.  The provisions of this Agreementshall be interpreted as to be consistent with the Plan and any ambiguitiesherein shall be interpreted by reference to the Plan.  In the event thatany provision hereof is inconsistent with the terms of the Plan, the lattershall prevail.

 

**ARTICLE IX.  NON-SOLICITATION**

 

A.                                   Restrictive Covenant.  During the period beginning on the date ofthis Option and ending on the later of (i) one year following the terminationof Participant’s employment with, or service to, the Company or an Affiliatepursuant to **Article****II.B** or (ii) the expiration of this Optionpursuant to **Article****II.A** or **Article****II.C**, Participant shall not,except with the express prior written consent of the Company:  (i) directly or indirectly, either forParticipant, or on behalf of any of the Company’s or any Affiliate’scompetitors (“**Competitors**”): (1)induce or attempt to induce any employee, independent contractor or consultantof the Company or any Affiliate to leave the employ of, or terminate itsengagement with, the Company or any Affiliate; or (2) in any way interfere withthe relationship between the Company or any Affiliate and any employee,independent contractor or consultant of the Company or any affiliate; or (ii)directly or indirectly, either for Participant, or on behalf of any of theCompetitors, solicit the business of any person or entity known to Participantto be a customer of the Company or any of its Affiliates, where Participant, orany person reporting to Participant, had an ongoing business relationship orhad made substantial efforts with respect to such customer during Participant’semployment with, or service to, the Company or an Affiliate.

 

B.                                     Violation of Restrictive Covenant.  Participant, by accepting this Option, agreesthat the foregoing covenants are reasonable with respect to their duration andscope.  Participant further acknowledgesthat the restrictions are reasonable and necessary for the protection of thelegitimate business interests of the Company and its Affiliates, that theycreate no undue hardships, that any violation of these restrictions would causesubstantial injury to the Company and its Affiliates, and that such restrictionswere a material inducement to the Company to grant this Option.  In the event of any violation or threatenedviolation of these restrictions, any and all rights of Participant under thisOption, whether unvested or vested, shall be forfeited and shall immediatelyterminate and shall thereafter be void.

 

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**ARTICLE X.  MISCELLANEOUS**

 

A.                                   Employment or Other Relationship; Rights as Stockholder.  Nothing in this Agreement shallbe construed to (a) limit in any way the right of the Company or anyAffiliate to terminate the status of Participant as an employee of the Companyat any time, or (b) be evidence of any agreement or understanding, expressor implied, that the Company or any Affiliate will employ Participant in anyparticular position, at any particular rate of compensation or for anyparticular period of time.  Participant shall have no rights as astockholder with respect to shares subject to the Option until such shares havebeen issued to Participant upon exercise of the Option.  No adjustmentshall be made for dividends (ordinary or extraordinary, whether in cash,securities or other property), distributions or other rights for which therecord date is prior to the date such shares are issued, except as provided inSection 14 of the Plan.

 

B.                                     Securities Law Compliance.  The exercise of all or any parts of thisOption shall only be effective at such time as counsel to the Company shallhave determined that the issuance and delivery of Common Stock pursuant to suchexercise 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 inwriting that all Common Stock to be acquired pursuant to such exercise shall beheld, until such time that such Common Stock is registered and freely tradableunder applicable state and federal securities laws, for Participant’s ownaccount without a view to any further distribution thereof, that thecertificates for such shares shall bear an appropriate legend to that effectand that such shares will be not transferred or disposed of except incompliance with applicable state and federal securities laws.

 

C.                                     Lockup Period Limitation.  Participant agrees that in the event theCompany advises Participant that it plans an underwritten public offering ofits Common Stock in compliance with the Securities Act of 1933, as amended, andthat the underwriter(s) seek to impose restrictions under which certain stockholdersmay not sell or contract to sell or grant any option to buy or otherwisedispose of part or all of their stock purchase rights of the underlying CommonStock, Participant hereby agrees that for a period not to exceed 180 days fromthe prospectus, Participant will not sell or contract to sell or grant anoption to buy or otherwise dispose of the Option or any of the underlyingshares of Common Stock without the prior written consent of the underwriter(s)or its representative(s).

 

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

 

E.                                      Accounting Compliance.  Participant agrees that, if a “transaction”(as defined in Section 14 of the Plan) occurs, and Participant is an “affiliate”of the Company or any Subsidiary (as defined in applicable legal and accountingprinciples) at the time of such Change of Control, Participant will comply withall requirements of Rule 145 of the Securities Act of 1933, as amended, and therequirements of such other legal or accounting principles, and will execute anydocuments necessary to ensure such compliance.

 

F.                                      Stock Legend.  The Administrator may require that thecertificates for any shares of Common Stock purchased by Participant (or, inthe case of death, Participant’s successors) shall bear an appropriate legendto reflect the restrictions of this **Article X**and **Article III.C**; provided,however, that failure to so

 

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endorseany of such certificates shall not render invalid or inapplicable this **Article X**above.

 

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

 

H.                                    Arbitration.  Any dispute arising out of or relating tothis Agreement or the alleged breach of it, or the making of this Agreement,including claims of fraud and inducement, shall be discussed between thedisputing parties in a good faith effort to arrive at a mutual settlement ofany such controversy.  If,notwithstanding, such dispute cannot be resolved, such dispute shall be settledby binding arbitration.  Judgment uponthe award rendered by the arbitrator may be entered in any court havingjurisdiction thereof.

 

The arbitrator shall be aretired state or federal judge or an attorney who has practiced securities orbusiness litigation for at least ten (10) years.  If the parties cannot agree on an arbitratorwithin twenty (20) days, any party may request that a judge of the CircuitCourt of Cook County, Illinois select an arbitrator.  Arbitration will be conducted pursuant to theprovisions of this Agreement and the commercial arbitration rules of theAmerican Arbitration Association, unless such rules are inconsistent withthe provisions of this Agreement.  Limited civil discovery shall bepermitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitratorwho may dispose of such disputes.  Thearbitrator shall have the authority to award any remedy or relief that a courtof this state could order or grant; provided, however, that punitive orexemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determinedby the arbitrator, all of its costs and fees, including the arbitrator’s fee,administrative fees, travel expenses, out-of-pocket expenses and reasonableattorney’s fees.  Unless otherwise agreedby the parties, the place of any arbitration proceedings shall be Chicago,Illinois.

 

**ARTICLE XI.  GOVERNINGLAW**

 

This Agreement and allrights and obligations hereunder shall be construed in accordance with the Planand governed by the laws of the State of Delaware.

 

*[Signature page follows]*

 

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IN WITNESS WHEREOF, theparties hereto have executed this Agreement effective the day and year firstabove written.

 
| ** **                                                                             | ** ** | **BROADWIND ENERGY INC.** |
|----------------------------------------------------------------------------------------|------------|---------------------------|
|                                                                                   |       |                      |
|                                                                                   |       |                      |
|                                                                                   |       | By:                       |
|                                                                                   |       | Its:                      |
| ** **                                                                             | ** ** | ** **                |
| ** **                                                                             | ** ** | ** **                |
| By execution hereof, the Participant acknowledges having received a  copy of the Plan. | ** ** | **PARTICIPANT**           |
|                                                                                   | ** ** | ** **                |

 

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