**Exhibit 10.5**

 

UNOVA, Inc.

600136th Avenue West

Everett, WA 98203-1264

 

**UNOVA, INC.**

**1999 STOCK INCENTIVE PLAN**

**INCENTIVE STOCK OPTION AGREEMENT**

**(FOR OPTIONEES IN THE U.S.)**

 
| [Name and address] | Option Number: |   |
|--------------------|----------------|--------|
|               | Option Plan:   | 1999   |
|               | Grant Date:    |   |
|               | Option Shares: |   |
|               | Option Price:  |   |

 

1.             **THIS AGREEMENT** sets forth the terms of Stock Options grantedto you subject to the UNOVA, Inc. 1999 Stock Incentive Plan (the **“Plan”**).  As of theGrant Date indicated above, subject to your acceptance of the terms andconditions hereof, UNOVA, Inc. (the **“Company”**) hasgranted to you Stock Options to purchase [#Shares]shares of the Common Stock of the Company (the **“Stock”**)at the purchase price of $xx.xxxper share.

 

Capitalizedterms that are not defined herein shall have the meanings assigned to suchterms in the Plan.  The Plan shallcontrol in the event there is any express conflict between the Plan and thisAgreement and with respect to such matters as are not expressly covered herein.

 

**In order for this grant to becomeeffective, you must accept it electronically or sign and return one copy ofthis Agreement to the Company’s Secretary no later than [Date].  In the event you fail to do so, thisAgreement shall be deemed canceled, null, and void.**

 

2.             The options granted by this Agreement areintended to be Incentive Stock Options, as that term is defined in Section 422of the Internal Revenue Code of 1986, as amended (the **“****Code”**); *provided, however,*that to the extent the terms of these options, or any action taken with respectthereto, fail to satisfy the requirements of Section 422, these optionsshall be Non-Qualified Stock Options, as that term is defined in the Plan.

 

3.             The options granted hereunder shall, subjectto the provisions of the Plan, become exercisable in installments on the datesset forth below and shall remain cumulatively exercisable until the expirationdate indicated:

 
| **Number  Of Shares** | ** ** | **Date Options May  First Be Exercised** | ** ** | **Expiration Date  of Options** | ** ** |
|-----------------------|------------|------------------------------------------|------------|---------------------------------|------------|
| ** **            | ** ** | ** **                               | ** ** | ** **                      | ** ** |
| [#Shares/5]           |       | [Grant Date + 1 year]                    |       | [Grant Date + 10 years]         |       |
| [#Shares/5]           |       | [Grant Date + 2 years]                   |       | [Grant Date + 10 years]         |       |
| [#Shares/5]           |       | [Grant Date + 3 years]                   |       | [Grant Date + 10 years]         |       |
| [#Shares/5]           |       | [Grant Date + 4 years]                   |       | [Grant Date + 10 years]         |       |
| [#Shares/5]           |       | [Grant Date + 5 years]                   |       | [Grant Date + 10 years]         |       |

 

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4.             You hereby acknowledge that the optionsgranted hereby are subject to the terms and conditions of the Plan, which isincorporated herein by reference, and you hereby acknowledge that you havereceived or have access to a copy of the Plan. You are also encouraged to review the Company’s most recent Form 10-Kand proxy statement, which may be found at www.unova.com.

 

5.             (a) Subject to the provisions of this Section 5, vested Stock Options may beexercised, in whole or in part, at any time during the option term by givingwritten notice of exercise to the Company on the form furnished by the Companyfor that purpose specifying the number of shares of Stock subject to the StockOption to be purchased.  Each exercise must encompass at least one installmentor 100 shares of Stock, whichever is less.

 

(b) The option price of Stock to be purchased upon exercise of any Stock Optionshall be paid in full in cash in United States dollars (by certified or bankcheck or such other instrument payable to the order of “UNOVA, Inc.” asthe Company may accept).  The optionprice may also be paid in the form of unrestricted Stock already owned by youfor a period of at least six months and based in any such instance on the averageof the highest and lowest per share sales prices of the Stock during normaltrading hours on the New York Stock Exchange (the “Fair Market Value”) on thedate the Stock Option is exercised.

 

(c) In the discretion of the Committee, payment for any shares subject to a StockOption may also be made by delivering a properly executed exercise notice tothe Company, together with a copy of irrevocable instructions to a broker todeliver promptly to the Company the amount of sale or loan proceeds to pay thepurchase price, and, if requested by you or required by law to be withheld bythe Company, the amount of any federal, state, local and foreign withholdingtaxes.

 

(d) No shares of Stock shall be issued until full payment therefor has beenmade.  You shall have all of the rightsof a shareholder of the Company holding the Stock that is subject to such StockOption (including, if applicable, the right to vote the shares and the right toreceive dividends, if any) when you have given written notice of exercise andhave paid in full for such shares.

 

(e) If as a result of any adjustment to the shares or number of shares subject to thisAgreement made pursuant to Section 3 of the Plan, any fractional sharewould be issuable under this Agreement, such fractional share shall be canceledwithout the payment of any consideration to you.

 

6.             Youmay transfer any or all Non-Qualified Stock Options granted under the Plan byway of gift to any family member, *provided* thatany such transferee shall agree in writing with the optionee and the Company,as a condition to such transfer, to be bound by the provisions of allagreements and other instruments, including without limitation, the Plan, andshall agree in writing to such other terms as the Company may reasonablyrequire to assure compliance with applicable federal and state securities andother laws.  For purposes of thepreceding sentence, “family member” shall include any child, stepchild,grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,brother-in-law, or sister-in-law, including adoptive relationship, any personsharing your household (other than a tenant or employee), a trust in whichthese persons have more than 50 percent of the beneficial interest, afoundation in which these persons (or the optionee) control the management ofassets, and any other entity in which these persons (or the optionee) own morethan 50 percent of the voting interests. All Stock Options shall be

 

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exercisable, subject tothe terms of the Plan, only by you, your guardian or legal representative, orany person to whom such option is transferred pursuant to this paragraph, itbeing understood that the term “holder” and “optionee” include such guardian,legal representative and other trustee. If such transfer is made to a family member, there may be additional taxconsequences at the time of transfer, and the Company will not be responsiblefor such tax consequences.

 

7.             (a) In the event of your Termination of Employment due to death, any Stock Optionheld by you may thereafter be exercised for a period of one year from the dateof such death or until the expiration of the stated term of such Stock Option,whichever period is shorter, in accordance with the following schedule:

 

| **Time from Grant  Date to Death** | ** ** | **Stock Options  Exercisable by Estate** | ** ** |
|------------------------------------|------------|------------------------------------------|------------|
| ** **                         | ** ** | ** **                               | ** ** |
| Less than 1 year                   |       | 33                                       | %          |
| 1 year to 2 years                  |       | 67                                       | %          |
| More than 2 years                  |       | 100                                      | %          |

 

(b)  In the event of your Termination ofEmployment due to death, if any portion of the Incentive Stock Options grantedhereby is exercised after the expiration of the exercise periods that apply forpurposes of Section 422 of the Code, such portion of Stock Options willthereafter be treated as Non-Qualified Stock Options.

 

8.             Subjectto the provisions of subparagraph 10(b) below, in the event of yourTermination of Employment by reason of Disability, any Stock Option held by youmay thereafter be exercised by you, to the extent it was vested at the time oftermination, for a period of three years from the date of such Termination ofEmployment or until the expiration of the stated term of such Stock Option,whichever period is shorter; provided, however, that if you die within suchperiod, any unexercised Stock Option held by you shall, notwithstanding theexpiration of such period, continue to be exercisable to the extent to which itwas vested at the time of death for a period of 12 months from the date of suchdeath or until the expiration of the stated term of such Stock Option,whichever period is shorter.  **“Disability”** means your permanent and total disability asmore specifically defined in the Plan. In the event of your Termination of Employment by reason of Disability,if any portion of the Incentive Stock Options granted hereby is exercised afterthe expiration of the exercise periods that apply for purposes of Section 422of the Code, such portion of Stock Options will thereafter be treated asNon-Qualified Stock Options.

 

9.             Subjectto the provisions of subparagraph 10(b) below, in the event of yourTermination of Employment by reason of Retirement, any Stock Option held by youmay thereafter be exercised by you (or your estate or personal representative),to the extent it was vested at the time of such Retirement, until theexpiration of the stated term of such Stock Option or, if earlier, 12 monthsfrom the date of your death.  **“Retirement”** means retirement from active employment withthe Company, a subsidiary or an Affiliate (i) at or after age 65 or (ii) pursuantto the early retirement provisions of the applicable pension plan of theCompany, a subsidiary or an Affiliate under which you may receive retirementbenefits.  In the event of yourTermination of Employment by reason of Retirement, if any portion of theIncentive Stock Options granted hereby is exercised after the expiration of theexercise periods that apply for purposes of Section 422 of the Code, suchportion of Stock Options will thereafter be treated as Non-Qualified StockOptions.

 

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10.           (a) If you incur a Termination of Employment for any reason other than death,Disability, or Retirement, any Stock Option held by you, to the extent it was vestedat the time of termination, may be exercised for the lesser of three monthsfrom the date of such Termination of Employment or the balance of such StockOption’s term; *provided, however,* that if youdie within such three-month period, any unexercised Stock Option held by youshall, notwithstanding the expiration of such three-month period, continue tobe exercisable to the extent to which it was vested at the time of death for aperiod of 12 months from the date of such death or until the expiration of thestated term of such Stock Option, whichever period is the shorter.  Notwithstanding the foregoing, after a Changein Control, Stock Options shall remain exercisable following a Termination ofEmployment described in this Section 10 for seven months following suchtermination or until expiration of the stated term of such Stock Option,whichever period is shorter.

 

(b) **“Termination of Employment”** means thetermination of your employment with the Company or any subsidiary orAffiliate.  You shall also be deemed toincur a Termination of Employment if the subsidiary or Affiliate ceases to besuch a subsidiary or Affiliate, as the case may be, and if you do notimmediately thereafter become an employee of the Company or another subsidiaryor Affiliate.  Temporary absences fromemployment because of illness, vacation, or leave of absence and transfersamong the Company and its subsidiaries and Affiliates shall not be consideredTerminations of Employment.  If sodetermined by the Committee, you shall be deemed not to have incurred aTermination of Employment following Retirement or Disability if you enter intoa contract with the Company or any subsidiary or Affiliate providing for therendering by you of consulting services to the Company or such subsidiary orAffiliate on terms approved by the Committee; however, your Termination ofEmployment shall be deemed to occur when such contract ceases to be in effect.  In the event of such Retirement or Disabilityand subsequent assumption by you of the status of a consultant, any portion ofthe Incentive Stock Options granted hereby which is exercised after theapplicable period for purposes of Section 422 of the Code shall be treatedas Non-Qualified Stock Options.

 

11.           Nolater than the date as of which an amount first becomes includable in yourgross income for federal income tax purposes with respect to any Stock Optiongranted by this Agreement, you shall pay to the Company, or make arrangementssatisfactory to the Company regarding the payment of, any federal, state orlocal, and foreign taxes of any kind required by law to be withheld by theCompany with respect to such amount.  Theminimum amount of statutory withholding obligations may be settled withunrestricted Stock having a Fair Market Value on the date of the exercise ofthe Stock Option equal to the amount of taxes required by law to be withheld,including Stock issuable upon exercise of a Stock Option that gives rise to thewithholding requirement.  Taxwithholdings in excess of the statutory minimum amount may not be satisfied inStock but may, if desired, be paid in cash. The obligations of the Company under the Plan shall be conditional onsuch payment or arrangements having been made, and the Company and itsSubsidiaries shall, to the extent permitted by law, have the right to deductany such taxes from any payment otherwise due you.

 

12.           ThePlan is established voluntarily by the Company, it is discretionary in natureand it may be modified, amended, suspended or terminated by the Company at anytime, unless otherwise provided in the Plan and this Agreement.  Grants of Stock Options and other Stockawards under the Plan are made from time to time in the sole discretion of theCommittee.  The grant of a Stock Optionor other award does not create any contractual or other right to receive futuregrants of Stock Options, or benefits in lieu of Stock Options, even if StockOptions have

 

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been granted repeatedlyin the past.  You acknowledge that futuregrants under the Plan, if any, will be at the sole discretion of the Committee,including the timing of any grant, the number of options, the vestingprovisions, and the exercise price. The grant of a Stock Option to you in anyyear shall give you neither any right to similar grants in future years nor anyright to be retained in the employ of the Company or its subsidiaries andAffiliates, such employment being terminable to the same extent as if the Planand this Agreement were not in effect. The right and power of the Company and its subsidiaries and Affiliates todismiss or discharge you is specifically and unqualifiedly unimpaired by thisAgreement.

 

You acknowledge that yourparticipation in the Plan is voluntary and the value of the Stock Option is anextraordinary item that does not constitute compensation of any kind forservices of any kind rendered to the Company or its subsidiaries and Affiliates,and which is outside the scope of any employment contract you may have, unlesssuch contract specifically provides otherwise. As such, you understand that any Stock Option is not part of normal orexpected compensation for purposes of calculating any severance, resignation,redundancy, end of service payments, bonuses, long-term service awards, pensionor retirement benefits, or similar payments and in no event should beconsidered as compensation for, or relating in any way to, past services forthe Company or its subsidiaries and Affiliates.

 

13.           Ifemployed by a subsidiary or Affiliate of the Company, you authorize and directsuch Subsidiary or Affiliate or any agent of the Company or such Subsidiary orAffiliate administering the Plan or providing plan recordkeeping services todisclose to the Company or any of its Subsidiaries or Affiliates suchinformation and data as it shall request in order to facilitate the grant ofStock Options and the administration of the Plan, and you waive any dataprivacy rights you may have with respect to such information.  By accepting this Agreement, you authorizethe Company and the Subsidiary or Affiliate by which you are employed, ifapplicable, to store and transmit such information in electronic form.

 

14.           Itis the present practice of the Company to provide participants in the Plan,solely as a courtesy and not as a Company policy, with written or oral notificationof the imminent expiration of any Stock Option having monetary value.  You acknowledge that the Company and itssubsidiaries or Affiliates and agents shall have no liability or responsibilityin the event you should fail to receive any such ‘courtesy notice” and yourStock Option expires unexercised.  Youacknowledge that the obligation to monitor the schedule of exercisabilityand expiration of options awarded under this Agreement, and to procure currentquotations regarding the market value of the Stock, is solely your obligationand not that of the Company or any subsidiary or Affiliate by which you areemployed or the agents of either of them.

 

15.           Each notice relating tothis Agreement shall be in writing and delivered in person or by mail to theCompany at its office, 6001 36th Avenue West, Everett, WA 98203-1264,to the attention of the Company’s Secretary, or at such other address as may befurnished to you in writing.  All noticesto you or other person or persons then entitled to exercise any right pursuantto this Agreement shall be delivered to you or such other person as you or suchother person may specify in writing to the Secretary of the Company by a noticedelivered in accordance with this paragraph.

 

16.           The Company may, in itssole discretion, decide to deliver any documents related to the Stock Optiongranted under and participation in the Plan or future options (if any) that maybe granted under the Plan by electronic means or to request your consent toparticipate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and,if requested, to agree to participate in the Plan through an on-line orelectronic

 

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systemestablished and maintained by the Company or another third party designated bythe Company.

 

17.           Theterms and conditions of this Agreement and of the Plan incorporated byreference herein comprise the whole terms and conditions between you and theCompany with respect to the subject matter of this Agreement and shall begoverned by and construed in accordance with the laws of the State of Delaware,United States of America.  The Committeemay amend the terms and conditions of this Agreement at any time, prospectivelyor retroactively, to the extent permitted by Section 9 of the Plan.  The provisions of this Agreement areseverable and if any one or more provisions are determined to be illegal orotherwise unenforceable, in whole or in part, the remaining provisions shallnevertheless be binding and enforceable.

 

18.           ThisAgreement shall inure to the benefit of and be binding upon each successor ofthe Company and, to the extent specifically provided therein and in the Plan,shall inure to the benefit of and shall be binding upon your heirs, legalrepresentatives, and successors and upon any person to whom a transfer of aStock Option permitted by paragraph 6 of this Agreement has been made.

 

**INWITNESS WHEREOF**, this Agreement has been executed by you andby the Company through its duly authorized officer, all as of the Grant Dateindicated above.

 

 
|                                 | UNOVA, Inc.       |   |
|--------------------------------------|------------------------|--------|
|                                 |                   |   |   |
|                                 |                   |   |   |
|                                 | By:                    |   |   |
|                                 |                   |   |   |
| **IMPORTANT**                        |                   |   |   |
| **PLEASE  ACCEPT ELECTRONICALLY OR** |                   |   |   |
| **SIGN  AND RETURN PROMPTLY**        |                   |   |   |
|                                 |                   |   |   |
|                                 |                   |   |   |
|                                 | [Name: First MI. Last] |   |

 

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