<PAGE>

                                                                     EXHIBIT 4.1

                              WSI INDUSTRIES, INC.
                                 2005 STOCK PLAN

SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS

     The name of this plan is the WSI Industries, Inc. 2005 Stock Plan (the
"Plan"). The purpose of the Plan is to enable WSI Industries, Inc. (the
"Company") and its Subsidiaries to retain and attract executives and other key
employees, consultants and directors who contribute to the Company's success by
their ability, ingenuity and industry, and to enable such individuals to
participate in the long-term success and growth of the Company by giving them a
proprietary interest in the Company.

     For purposes of the Plan, the following terms shall be defined as set forth
below:

     a.   "Board" means the Board of Directors of the Company.

     b.   "Cause" means a felony conviction of a participant or the failure of a
          participant to contest prosecution for a felony, or a participant's
          willful misconduct or dishonesty, any of which is directly and
          materially harmful to the business or reputation of the Company.

     c.   "Code" means the Internal Revenue Code of 1986, as amended.

     d.   "Committee" means the Committee referred to in Section 2 of the Plan.
          If at any time no Committee shall be in office, then the Board shall
          exercise the functions of the Committee specified in the Plan, unless
          the Plan specifically states otherwise.

     e.   "Company" means WSI Industries, Inc., a corporation organized under
          the laws of the State of Minnesota (or any successor corporation).

     f.   "Deferred Stock" means an award made pursuant to Section 8 below of
          the right to receive Stock at the end of a specified deferral period.

     g.   "Disability" means permanent and total disability as determined by the
          Committee.

     h.   "Early Retirement" means retirement, with consent of the Committee at
          the time of retirement, from active employment with the Company and
          any Subsidiary or Parent Corporation of the Company.

     i.   "Fair Market Value" means the value of the Stock on a given date as
          determined by the Committee in accordance with Section 422(c)(7) of
          the Code and any applicable Treasury Department regulations
          promulgated thereunder.

     j.   "Incentive Stock Option" means any Stock Option intended to be and
          designated as an "Incentive Stock Option" within the meaning of
          Section 422 of the Code.

     k.   "Non-Employee Director" shall have the meaning set forth in Rule
          16b-3(g)(3) as promulgated by the Securities and Exchange Commission
          under the Securities Exchange Act of 1934, or any successor definition
          adopted by the Commission.


                                      A-1

<PAGE>

     l.   "Non-Qualified Stock Option" means any Stock Option that is not an
          Incentive Stock Option, and is intended to be and is designated as a
          "Non-Qualified Stock Option."

     m.   "Normal Retirement" means retirement from active employment with the
          Company and any Subsidiary or Parent Corporation of the Company on or
          after age 65.

     n.   "Parent Corporation" means any corporation (other than the Company) in
          an unbroken chain of corporations ending with the Company if, at the
          time of the granting of a Stock Option, each of the corporations
          (other than the Company) owns stock possessing 50% or more of the
          total combined voting power of all classes of stock in one of the
          other corporations in the chain as provided in Section 424(e) of the
          Code.

     o.   "Restricted Stock" means an award of shares of Stock that are subject
          to restrictions under Section 7 below.

     p.   "Retirement" means Normal Retirement or Early Retirement.

     q.   "Stock" means the Common Stock, $.10 par value per share, of the
          Company.

     r.   "Stock Appreciation Right" means the right pursuant to an award
          granted under Section 6 below to surrender to the Company all or a
          portion of a Stock Option in exchange for an amount equal to the
          difference between (i) the Fair Market Value, as of the date such
          Stock Option or such portion thereof is surrendered, of the shares of
          Stock covered by such Stock Option or such portion thereof, and (ii)
          the aggregate exercise price of such Stock Option or such portion
          thereof.

     s.   "Stock Option" means any option to purchase shares of Stock granted
          pursuant to Section 5 below.

     t.   "Subsidiary" means any corporation (other than the Company) in an
          unbroken chain of corporations beginning with the Company if, at the
          time of the granting of a Stock Option, each of the corporations
          (other than the last corporation in the unbroken chain) owns stock
          possessing 50% or more of the total combined voting power of all
          classes of stock in one of the other corporations in the chain as
          provided in Section 424(f) of the Code.

SECTION 2. ADMINISTRATION

     The Plan shall be administered by the Board of Directors or by a Committee
of not less than two Outside, Non-Employee Directors, who shall be appointed by
the Board of Directors of the Company and who shall serve at the pleasure of the
Board.

     The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (i) Stock Options; (ii) Stock
Appreciation Rights; (iii) Restricted Stock; or (iv) Deferred Stock awards.

     In particular, the Committee shall have the authority:


                                       A-2

<PAGE>

     (i)  to select the officers and other key employees of the Company and its
          Subsidiaries, members of the Board of Directors and consultants and
          other persons having a contractual relationship with the Company or
          its Subsidiaries, to whom Stock Options, Stock Appreciation Rights,
          Restricted Stock and/or Deferred Stock awards may from time to time be
          granted hereunder;

     (ii) to determine whether and to what extent Incentive Stock Options,
          Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
          Stock or Deferred Stock awards, or a combination of the foregoing, are
          to be granted hereunder;

     (iii) to determine the number of shares to be covered by each such award
          granted hereunder;

     (iv) to determine the terms and conditions, not inconsistent with the terms
          of the Plan, of any award granted hereunder (including, but not
          limited to, any restriction on any Stock Option or other award and/or
          the shares of Stock relating thereto), and to amend such terms and
          conditions (including, but not limited to, any amendment which
          accelerates the vesting of any award); and

     (v)  to determine whether, to what extent and under what circumstances
          Stock and other amounts payable with respect to an award under this
          Plan shall be deferred either automatically or at the election of the
          participant.

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to officers of the Company for the purpose of selecting
employees who are not officers of the Company for purposes of (i) above.

     All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.

SECTION 3. STOCK SUBJECT TO PLAN

     The total number of shares of Stock reserved and available for distribution
under the Plan shall be 200,000. Such shares shall consist, in whole or in part,
of authorized and unissued shares.

     Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned ceased to be subject to Options, or if any shares subject to any
Restricted Stock or Deferred Stock award granted hereunder are forfeited or such
award otherwise terminates without a payment being made to the participant, such
shares shall again be available for distribution in connection with future
awards under the Plan.


                                       A-3

<PAGE>

     In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Option.


                                       A-4

<PAGE>

SECTION 4. ELIGIBILITY

     Officers, other key employees of the Company or its Subsidiaries, members
of the Board of Directors and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards under the Plan.
The optionees and participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible, and
the Committee shall determine, in its sole discretion, the number of shares
covered by each award.

     Notwithstanding the foregoing, no person may, during any fiscal year of the
Company, receive grants of Stock Options or Stock Appreciation Rights under this
Plan which, in the aggregate, exceed 100,000 shares.

SECTION 5. STOCK OPTIONS

     Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

     The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock Options
shall be granted under the Plan after October 28, 2015.

     The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.

     Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Option as an
Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.

     Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

     (a) Option Price. The Committee shall determine the option price per share
of Stock purchasable under a Stock Option at the time of grant. In no event
shall the option price per share of Stock purchasable under an Incentive Stock
Option be less than 100% of the Fair Market Value of the Stock on the date of
the grant of the option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the option price shall be no less than 110% of the Fair Market
Value of the Stock on the date the option is granted.


                                       A-5

<PAGE>

     (b) Option Term. The Committee shall fix the term of each Stock Option, but
no Incentive Stock Option shall be exercisable more than ten years after the
date the option is granted. If an employee owns or is deemed to own (by reason
of the attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five years from the date
of grant.

     (c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its sole discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding the foregoing, unless the Stock Option Agreement
provides otherwise, any Stock Option granted under this Plan shall be
exercisable in full, without regard to any installment exercise provisions, for
a period specified by the Company, but not to exceed sixty (60) days, prior to
the occurrence of any of the following events: (i) dissolution or liquidation of
the Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company.

     (d) Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or by any other form of legal consideration deemed sufficient by the
Committee and consistent with the Plan's purpose and applicable law, including a
properly executed exercise notice together with irrevocable instructions to a
broker acceptable to the Company to promptly deliver to the Company the amount
of sale proceeds to pay the exercise price. As determined by the Committee, in
its sole discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to
an award hereunder (based, in each case, on the Fair Market Value of the Stock
on the date the option is exercised, as determined by the Committee), provided,
however, that in the event payment is made in the form of shares of Restricted
Stock or a Deferred Stock award, the optionee will receive a portion of the
option shares in the form of, and in an amount equal to, the Restricted Stock or
Deferred Stock award tendered as payment by the optionee. If the terms of the
option so permit, an optionee may elect to pay all or part of the option
exercise price by having the Company withhold from the shares of Stock that
would otherwise be issued upon exercise that number of shares of Stock having a
Fair Market Value equal to the aggregate option exercise price for the shares
with respect to which such election is made. No shares of Stock shall be issued
until full payment therefor has been made. An optionee shall generally have the
rights to dividends and other rights of a shareholder with respect to shares
subject to the option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in paragraph (a) of Section 12.

     (e) Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.


                                       A-6
<PAGE>

     (f) Termination by Death. If an optionee's employment by the Company and
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Committee shall determine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of one year (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.

     (g) Termination by Reason of Disability. If an optionee's employment by the
Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after one year (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.

     (h) Termination by Reason of Retirement. If an optionee's employment by the
Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after three months (or such longer period as the Committee shall
specify at Retirement) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter. In
the event of termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.

     (i) Other Termination. Unless otherwise determined by the Committee, if an
optionee's employment by the Company and any Subsidiary or Parent Corporation
terminates for any reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be exercised to the
extent it was exercisable at such termination for the lesser of three months (or
such shorter period as the Committee shall specify at grant) or the balance of
the option's term, provided, however, that if the optionee's employment is
terminated for Cause, all rights under the Stock Option shall terminate and
expire upon such termination.

     (j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company and any Subsidiary or Parent Corporation is exercisable for the
first time by an optionee during any calendar year shall not exceed $100,000.


                                      A-7

<PAGE>

     (k) Directors who are not Employees. Each Non-Employee Director of the
Company or any Subsidiary who, on or after the date this Plan is approved by the
shareholders of the Company, (A) is elected or re-elected as a director of the
Company at any annual meeting of the shareholders of the Company, or (B) is
elected as a director of the Company at any special meeting of the shareholders
of the Company, shall as of the date of such election or re-election
automatically be granted a Stock Option to purchase 2,000 shares of Stock at the
option price per share equal to 100% of the Fair Market Value of a share of
Stock on such date. In the case of a special meeting, the action of the
shareholders in electing such director shall constitute the granting of the
Stock Option to such director, and, in the case of an annual meeting, the action
of the shareholders in electing or re-electing such director shall constitute
the granting of a Stock Option to such director; and the date when the
shareholders take such action shall be the date of grant of the Stock Option.
All such Stock Options shall be designated as Non-Qualified Stock Options and
shall be subject to the same terms and provisions as are then in effect with
respect to the granting of Non-Qualified Stock Options to officers and key
employees of the Company, except that (i) the term of each such Stock Option
shall be equal to five (5) years, unless such director ceases to be a member of
the Board, in which case the Stock Option shall expire 30 days after such
director's departure from the Board; (ii) the Stock Option shall be exercisable
as to 25% of the shares subject to the Stock Option six months after the date
the Stock Option is granted and as to an additional 25% each of the three
subsequent anniversary dates of the grant of such options; and (iii) no Stock
Appreciation Rights may be granted to any director under this paragraph (k) or
in any other manner under this Plan. Subject to the foregoing, all provisions of
this Plan not inconsistent with the foregoing shall apply to Stock Options
granted to directors.

SECTION 6. STOCK APPRECIATION RIGHTS

     (a) Grant and Exercise. Except as set forth in paragraph (k) of Section 5,
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.

     A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.

     An optionee may exercise a Stock Appreciation Right by surrendering the
applicable portion of the related Stock Option in accordance with paragraph (b)
of this Section 6. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(b) of this Section 6. Stock Options that have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.

     (b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:

          (i) Stock Appreciation Rights shall be exercisable only at such time
     or times and to the extent that the Stock Options to which they relate
     shall be exercisable in accordance with the provisions of Section 5 and
     this Section 6 of the Plan.


                                      A-8

<PAGE>

          (ii) Upon the exercise of a Stock Appreciation Right, an optionee
     shall be entitled to receive up to, but not more than, an amount in cash or
     shares of Stock equal in value to the excess of the Fair Market Value of
     one share of Stock over the option price per share specified in the related
     option multiplied by the number of shares in respect of which the Stock
     Appreciation Right shall have been exercised, with the Committee having the
     right to determine the form of payment.

          (iii) Stock Appreciation Rights shall be transferable only when and to
     the extent that the underlying Stock Option would be transferable under
     Section 5 of the Plan.

          (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
     or part thereof to which such Stock Appreciation Right is related shall be
     deemed to have been exercised for the purpose of the limitation set forth
     in Section 3 of the Plan on the number of shares of Stock to be issued
     under the Plan, but only to the extent of the number of shares issued or
     issuable under the Stock Appreciation Right at the time of exercise based
     on the value of the Stock Appreciation Right at such time.

          (v) A Stock Appreciation Right granted in connection with an Incentive
     Stock Option may be exercised only if and when the market price of the
     Stock subject to the Incentive Stock Option exceeds the exercise price of
     such Option.

SECTION 7. RESTRICTED STOCK

     (a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.

     (b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

          (i) Each participant shall be issued a stock certificate in respect of
     shares of Restricted Stock awarded under the Plan. Such certificate shall
     be registered in the name of the participant, and shall bear an appropriate
     legend referring to the terms, conditions, and restrictions applicable to
     such award, substantially in the following form:

          "The transferability of this certificate and the shares of stock
          represented hereby are subject to the terms and conditions (including
          forfeiture) of the WSI Industries, Inc. 2005 Stock Plan and an
          Agreement entered into between the registered owner and WSI
          Industries, Inc. Copies of such Plan and Agreement are on file in the
          offices of WSI Industries, Inc., 213 Chelsea Road, Monticello,
          Minnesota 55362."


                                      A-9

<PAGE>

          (ii) The Committee shall require that the stock certificates
     evidencing such shares be held in custody by the Company until the
     restrictions thereon shall have lapsed, and that, as a condition of any
     Restricted Stock award, the participant shall have delivered a stock power,
     endorsed in blank, relating to the Stock covered by such award.

     (c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

          (i) Subject to the provisions of this Plan and the award agreement,
     during a period set by the Committee commencing with the date of such award
     (the "Restriction Period"), the participant shall not be permitted to sell,
     transfer, pledge or assign shares of Restricted Stock awarded under the
     Plan. In no event shall the Restriction Period be less than one (1) year.
     Within these limits, the Committee may provide for the lapse of such
     restrictions in installments where deemed appropriate.

          (ii) Except as provided in paragraph (c)(i) of this Section 7, the
     participant shall have, with respect to the shares of Restricted Stock, all
     of the rights of a shareholder of the Company, including the right to vote
     the shares and the right to receive any cash dividends. The Committee, in
     its sole discretion, may permit or require the payment of cash dividends to
     be deferred and, if the Committee so determines, reinvested in additional
     shares of Restricted Stock (to the extent shares are available under
     Section 3). Certificates for shares of unrestricted Stock shall be
     delivered to the grantee promptly after, and only after, the period of
     forfeiture shall have expired without forfeiture in respect of such shares
     of Restricted Stock.

          (iii) Subject to the provisions of the award agreement and paragraph
     (c)(iv) of this Section 7, upon termination of employment for any reason
     during the Restriction Period, all shares still subject to restriction
     shall be forfeited by the participant.

          (iv) In the event of special hardship circumstances of a participant
     whose employment is terminated (other than for Cause), including death,
     Disability or Retirement, or in the event of an unforeseeable emergency of
     a participant still in service, the Committee may, in its sole discretion,
     when it finds that a waiver would be in the best interest of the Company,
     waive in whole or in part any or all remaining restrictions with respect to
     such participant's shares of Restricted Stock.

          (v) Notwithstanding the foregoing, all restrictions with respect to
     any participant's shares of Restricted Stock shall lapse, on the date
     determined by the Committee, prior to, but in no event more than sixty (60)
     days prior to, the occurrence of any of the following events: (i)
     dissolution or liquidation of the Company, other than in conjunction with a
     bankruptcy of the Company or any similar occurrence; (ii) any merger,
     consolidation, acquisition, separation, reorganization, or similar
     occurrence, where the Company will not be the surviving entity; or (iii)
     the transfer of substantially all of the assets of the Company or 75% or
     more of the outstanding Stock of the Company.


                                      A-10

<PAGE>

SECTION 8. DEFERRED STOCK AWARDS

     (a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company and Subsidiaries to whom and the
time or times at which Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any participant or group of participants, the
duration of the period (the "Deferral Period") during which, and the conditions
under which, receipt of the Stock will be deferred, and the terms and conditions
of the award in addition to those contained in paragraph (b) of this Section 8.
The Committee may also condition the grant of Deferred Stock upon the attainment
of specified performance goals. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.

     (b) Terms and Conditions.

          (i) Subject to the provisions of this Plan and the award agreement,
     Deferred Stock awards may not be sold, assigned, transferred, pledged or
     otherwise encumbered during the Deferral Period. In no event shall the
     Deferral Period be less than one (1) year. At the expiration of the
     Deferral Period (or Elective Deferral Period, where applicable), share
     certificates shall be delivered to the participant, or his legal
     representative, in a number equal to the shares covered by the Deferred
     Stock award.

          (ii) Amounts equal to any dividends declared during the Deferral
     Period with respect to the number of shares covered by a Deferred Stock
     award will be paid to the participant currently or deferred and deemed to
     be reinvested in additional Deferred Stock or otherwise reinvested, all as
     determined at the time of the award by the Committee, in its sole
     discretion.

          (iii) Subject to the provisions of the award agreement and paragraph
     (b)(iv) of this Section 8, upon termination of employment for any reason
     during the Deferral Period for a given award, the Deferred Stock in
     question shall be forfeited by the participant.

          (iv) In the event of special hardship circumstances of a participant
     whose employment is terminated (other than for Cause) including death,
     Disability or Retirement, or in the event of an unforeseeable emergency of
     a participant still in service, the Committee may, in its sole discretion,
     when it finds that a waiver would be in the best interest of the Company,
     waive in whole or in part any or all of the remaining deferral limitations
     imposed hereunder with respect to any or all of the participant's Deferred
     Stock.

          (v) A participant may elect to further defer receipt of the award for
     a specified period or until a specified event (the "Elective Deferral
     Period"), subject in each case to the Committee's approval and to such
     terms as are determined by the Committee, all in its sole discretion.
     Subject to any exceptions adopted by the Committee, such election must
     generally be made prior to completion of one half of the Deferral Period
     for a Deferred Stock award (or for an installment of such an award).

          (vi) Each award shall be confirmed by, and subject to the terms of, a
     Deferred Stock agreement executed by the Company and the participant.


                                      A-11

<PAGE>

SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

          (a) a transfer of an employee from the Company to a Parent Corporation
     or Subsidiary, or from a Parent Corporation or Subsidiary to the Company,
     or from one Subsidiary to another;

          (b) a leave of absence, approved in writing by the Committee, for
     military service or sickness, or for any other purpose approved by the
     Company if the period of such leave does not exceed ninety (90) days (or
     such longer period as the Committee may approve, in its sole discretion);
     and

          (c) a leave of absence in excess of ninety (90) days, approved in
     writing by the Committee, but only if the employee's right to reemployment
     is guaranteed either by a statute or by contract, and provided that, in the
     case of any leave of absence, the employee returns to work within 30 days
     after the end of such leave.

SECTION 10. AMENDMENTS AND TERMINATION

     The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, Deferred Stock or other Stock-based award theretofore granted,
without the optionee's or participant's consent; or (ii) which without the
approval of the stockholders of the Company would cause the Plan to no longer
comply with Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of
the Code or any other regulatory requirements.

     The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.

SECTION 11. UNFUNDED STATUS OF PLAN

     The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

SECTION 12. GENERAL PROVISIONS

     (a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.


                                      A-12

<PAGE>

     All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

     (b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.

     (c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.

     (d) Each participant shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a participant
may elect by written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i) authorizing the
Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant; or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.

SECTION 13. EFFECTIVE DATE OF PLAN

     The Plan shall be effective on October 28, 2005 (the date of approval by
the Board of Directors), subject to approval by a vote of the holders of a
majority of the Stock present and entitled to vote at the Annual Meeting of the
Company's Shareholders on January 4, 2006, and shall expire (unless terminated
earlier) as of October 28, 2015. Awards may be granted under the Plan prior to
Shareholder approval, provided such awards are made subject to Shareholder
approval.


                                      A-13