exv4w1






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.




1









 






	 	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.



2









 





     In particular, the Committee shall have the authority:




	 	(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) provided, however, the Committee shall not have
the right to (i) lower the exercise price of any exiting Option, (ii) take any action
with would be treated as “repricing” under generally accepted accounting principles, or
(iii) cancel an existing Option at a time when its exercise price exceeds the fair
market value of the underlying stock subject to such Option in exchange for another
Option, a Restricted Stock Award or other equity in the Company (except as provided in
Section 3); 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 400,000. 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.



3









 





     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.



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.



4









 





     (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.



     (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.



5









 





     (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.



     (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.



     (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



6









 







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.




     (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



7









 






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.”




     (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.



8









 





     (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.



9









 





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.



10









 





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. Except as provided in this Plan, the Committee may also substitute new
Stock Options for previously granted options.



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.



11









 





     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) and shall expire (unless terminated earlier) as of October 28, 2015.



Approved by the Board of Directors on October 28, 2005 and by the shareholders on January 4, 2006.



Amended by the Board of Directors on October 23, 2007 to increase the number of shares reserved for
issuance by 200,000 and to prohibit the repricing of options, which amendments were approved by the
shareholders on January 9, 2008.




12