EXHIBIT
10.5 


FORM OF RBC 2005
LONG-TERM EQUITY INCENTIVE PLAN 


1.             Purpose.


This plan shall be known
as the RBC 2005 Long-Term Equity Incentive Plan (the “Plan”).  The purpose of the Plan shall be to promote
the long-term growth and profitability of RBC Bearings Incorporated (the “Company”)
and its Subsidiaries by (i) providing certain directors, officers and
employees of, and certain other individuals who perform services for, or to
whom an offer of employment has been extended by, the Company and its Subsidiaries
with incentives to maximize stockholder value and otherwise contribute to the
success of the Company and (ii) enabling the Company to attract, retain
and reward the best available persons for positions of responsibility.  Grants (“Grants”) of incentive or
non-qualified stock options, stock appreciation rights (“SARs”), either
alone or in tandem with options, restricted stock, performance awards or any
combination of the foregoing may be made under the Plan.  This Plan supercedes any prior plans, and any
Grant hereunder supercedes any prior written agreement pursuant to which such
Grant is made.


2.             Definitions.


(a)           “Award Agreement” means any
written agreement between the Company and any person pursuant to which the
Company makes any Grant under the Plan.


(b)           “Board of Directors” and “Board”
mean the board of directors of the Company.


(c)           “Cause” means, unless
otherwise defined in any Award Agreement, the occurrence of one or more of the
following events:


(i)            conviction of a felony or any crime
or offense lesser than a felony involving the property of the Company or a
Subsidiary or commission of an act involving fraud or dishonesty; or, in the
case of any of the foregoing, a plea of nolo
contendere with respect thereto;


(ii)           conduct that has caused demonstrable
and serious injury to the Company or a Subsidiary, reputational, monetary or
otherwise;


(iii)          willful refusal to perform or
substantial disregard of duties properly assigned, as determined by the
Company;


(iv)          willful misrepresentation or material
non-disclosure to the Board;


(v)           engaging willfully in misconduct in
connection with the performance of any of one’s duties, including, without
limitation, the misappropriation of funds or securing or





















attempting to secure
personally any profit in connection with any transaction entered into on behalf
of the Company or its Subsidiaries or affiliates;


(vi)          willful breach of duty of loyalty to
the Company or, if applicable, a Subsidiary or any other active disloyalty to
the Company or, if applicable, any Subsidiary, including, without limitation,
willfully aiding a competitor or, without duplication of clause (vii),
improperly disclosing confidential information;


(vii)         willful breach of any confidentiality
or non-disclosure agreement with the Company or any Subsidiary; or


(viii)        material violation of any code or
standard of behavior generally applicable to employees (or executive employees,
in the case of an executive of the Company or any Subsidiary) of the Company or
any Subsidiary.


(d)           “Change in Control” means,
unless otherwise defined in any Award Agreement,


(i)            if any “person” or “group” as those
terms are used in Sections 13(d) and 14(d) of the Exchange Act or any
successors thereto, is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act or any successor thereto), directly or indirectly,
of securities of the Company representing 50% or more of the combined voting
power of the Company’s then outstanding securities, provided, that the
acquisition of additional securities by any person or group that owns 50% or
more of the voting power prior to such acquisition of additional securities
shall not be a Change of Control; or


(ii)           during any twelve-month period,
individuals who at the beginning of such period constitute the Board and any
new directors whose election by the Board or nomination for election by the
Company’s stockholders was approved by at least a majority of the directors
then still in office who either were directors at the beginning of the period
or whose election was previously so approved, cease for any reason to
constitute a majority thereof; or


(iii)          the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation (A) which would result in all or a portion
of the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) by which the
corporate existence of the Company is not affected and following which the
Company’s chief executive officer and directors retain their positions with the
Company (and constitute at least a majority of the Board); or


(iv)          the stockholders of the Company
approve an agreement for the sale or disposition by the Company of all or
substantially all the Company’s assets.


(e)           “Code”  means the Internal Revenue Code of 1986, as
amended.


 


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(f)            “Committee” means the
Compensation Committee of the Board, which shall consist solely of two or more
outside directors.


(g)           “Common Stock” means the
common stock, par value $0.01 per share, of the Company, and any other
shares into which such stock may be changed by reason of a recapitalization,
reorganization, merger, consolidation or any other change in the corporate
structure or capital stock of the Company.


(h)           “Disability” means a
disability that would entitle an eligible participant to payment of monthly
disability payments under any Company disability plan or as otherwise
determined by the Committee; provided that in any instance where a grant to a
participant is treated as “deferred compensation” within the meaning of Section
409A of the Code, “Disability” shall be interpreted consistently with the
meaning of Section 409A of the Code and guidance issued thereunder.


(i)            “Exchange Act” means the
Securities Exchange Act of 1934, as amended.


(j)            “Fair Market Value” of a
share of Common Stock of the Company means, as of the date in question, the
officially-quoted closing selling price of the stock (or if no selling
price is quoted, the bid price) on the principal securities exchange or market
on which the Common Stock is then listed for trading (including, for this
purpose, the New York Stock Exchange or the Nasdaq National Market) (the “Market”)
for the applicable trading day or, if the Common Stock is not then listed or
quoted in the Market, the Fair Market Value shall be the fair value of the
Common Stock determined in good faith by the Board using any reasonable method;
provided, however, that when shares received upon exercise of an option are
immediately sold in the open market, the net sale price received may be used to
determine the Fair Market Value of any shares used to pay the exercise price or applicable withholding taxes and to
compute the withholding taxes.


(k)           “Incentive Stock Option” means
an option conforming to the requirements of Section 422 of the Code and/or any
successor thereto.


(l)            “Initial Public Offering”
means an underwritten initial public offering and sale of any shares of Common
Stock pursuant to an effective registration statement under the Securities Act.


(m)          “Non-Employee Director”
has the meaning given to such term in Rule 16b-3 under the Exchange Act
and/or any successor thereto.


(n)           “Non-qualified Stock Option”
means any stock option other than an Incentive Stock Option.


(o)           “Other Securities” mean
securities of the Company other than Common Stock, which may include, without
limitation, debentures, unbundled stock units or components thereof, preferred
stock, warrants and securities convertible into or exchangeable for Common
Stock or other property.


 


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(p)           “Retirement” means retirement
as defined under any Company pension plan or retirement program or termination
of one’s employment on retirement with the approval of the Committee; provided
that in any instance where a grant to a participant is treated as “deferred
compensation” within the meaning of Section 409A of the Code, “Retirement”
shall be interpreted consistently with the meaning of Section 409A(a)(2)(A)(i)
of the Code and guidance issued thereunder..


(q)            “Subsidiary” means a corporation
or other entity of which outstanding shares or ownership interests representing
50% or more of the combined voting power of such corporation or other entity
entitled to elect the management thereof, or such lesser percentage as may be
approved by the Committee, are owned directly or indirectly by the Company.


3.             Administration.


The Plan shall be
administered by the Committee; provided that the Board may, in its discretion,
at any time and from time to time, resolve to administer the Plan, in which
case the term “Committee” shall be deemed to mean the Board for all purposes
herein.  Subject to the provisions of the
Plan, the Committee shall be authorized to (i) select persons to
participate in the Plan, (ii) determine the form and substance of Grants
made under the Plan to each participant, and the conditions and restrictions,
if any, subject to which such Grants will be made, (iii) certify that the
conditions and restrictions applicable to any Grant have been met,
(iv) modify the terms of Grants made under the Plan in accordance with the
provisions of Sections 16 and 17 hereof, (v) interpret the Plan and Grants made
thereunder, (vi) make any adjustments necessary or desirable in connection with
Grants made under the Plan to eligible participants located outside the United
States and (vii) adopt, amend, or rescind such rules and regulations, and
make such other determinations, for carrying out the Plan as it may deem
appropriate.  Decisions of the Committee
on all matters relating to the Plan shall be in the Committee’s sole discretion
and shall be conclusive and binding on all parties.  The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be determined in
accordance with applicable federal and state laws and rules and regulations
promulgated pursuant thereto.  No member
of the Committee and no officer of the Company shall be liable for any action
taken or omitted to be taken by such member, by any other member of the
Committee or by any officer of the Company in connection with the performance
of duties under the Plan, except for such person’s own willful misconduct or as
expressly provided by statute.


The expenses of the Plan
shall be borne by the Company.  The
Company shall not be required to establish any special or separate fund or make
any other segregation of assets to assume the obligations pursuant to any Grant
made under the Plan, and rights to any payment in connection with such Grants
shall be no greater than the rights of the Company’s general creditors.


4.             Shares Available for the Plan. 


Subject to adjustments as
provided in Section 15, an aggregate of 1,139,170 shares of Common Stock, which represents the number of
shares equal to six percent (6%) of the number of shares of Common Stock outstanding
immediately following the consummation of the Company’s Initial Public Offering
(the “Shares”), may be
issued pursuant to the Plan.  Such Shares
may be in whole or in part authorized and unissued or held by the Company as


 


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treasury shares.  If any Grant under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited as to any Shares,
or is tendered or withheld as to any Shares in payment of the exercise price of
the Grant or taxes payable with respect to the Grant or the vesting or exercise
thereof, then such unpurchased, forfeited, tendered or withheld Shares may
thereafter be available for further Grants under the Plan as the Committee
shall determine.


Without limiting the
generality of the foregoing provisions of this Section 4 or the generality of
the provisions of Sections 3, 6 or 17 or any other section of this Plan, the
Committee may, at any time or from time to time, and on such terms and
conditions (that are consistent with and not in contravention of the other
provisions of this Plan) as the Committee may, in its sole discretion,
determine, enter into agreements (or take other actions with respect to the
Grants) for new Grants containing terms (including exercise prices) more (or
less) favorable than the outstanding Grants.


5.             Participation.


Participation in the Plan
shall be limited to those directors (including Non-Employee Directors),
officers (including non-employee officers) and employees of, and other
individuals performing services for, or to whom an offer of employment has been
extended by, the Company and its Subsidiaries selected by the Committee
(including participants located outside the United States).  Nothing in the Plan or in any Grant
thereunder shall confer any right on a participant to continue in the employ as
a director or officer of, or in any other capacity or in the performance of
services for, the Company or shall interfere in any way with the right of the
Company to terminate the employment or performance of services or to reduce the
compensation or responsibilities of a participant at any time.  By accepting any Grant under the Plan, each
participant and each person claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or
the Committee.


Incentive Stock Options
or Non-qualified Stock Options, SARs 
alone or in tandem with options, restricted stock awards, performance
awards or any combination thereof may be granted to such persons and for such
number of Shares as the Committee shall determine (such individuals to whom
Grants are made being sometimes herein called “optionees” or “grantees,” as the
case may be).  Determinations made by the
Committee under the Plan need not be uniform and may be made selectively among
eligible individuals under the Plan, whether or not such individuals are
similarly situated.  A Grant of any type
made hereunder in any one year to an eligible participant shall neither guarantee
nor preclude a further Grant of that or any other type to such participant in
that year or subsequent years.


6.             Incentive and Non-qualified Options and SARs.


The Committee may from
time to time grant to eligible participants Incentive Stock Options, Non-qualified
Stock Options, or any combination thereof; provided that the Committee may
grant Incentive Stock Options only to eligible employees of the Company or its
subsidiaries (as defined for this purpose in Section 424(f) of the Code or any
successor thereto).  In any one calendar
year, the Committee shall not grant to any one participant options or SARs to
purchase or receive the economic equivalent of a number of shares of Common
Stock in excess of 10% of the total number


 


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of Shares authorized
under the Plan pursuant to Section 4; provided, however, that the
Committee shall be permitted to grant to Dr. Michael J. Hartnett up
to 40% of the total number of Shares authorized under the plan at any time.  The options granted shall take such form as
the Committee shall determine, subject to the following terms and conditions.


It is the Company’s
intent that Non-qualified Stock Options granted under the Plan not be
classified as Incentive Stock Options, that Incentive Stock Options be
consistent with and contain or be deemed to contain all provisions required
under Section 422 of the Code or any successor thereto, that neither any
Non-qualified Stock Option nor any Incentive Stock Option be treated as a
payment of deferred compensation for the purposes of Section 409A of the Code
and any successor thereto, and that any ambiguities in construction be
interpreted in order to effectuate such intent. 
If an Incentive Stock Option granted under the Plan does not qualify as
such for any reason, then to the extent of such non-qualification, the
stock option represented thereby shall be regarded as a Non-qualified
Stock Option duly granted under the Plan, provided that such stock option
otherwise meets the Plan’s requirements for Non-qualified Stock Options.


(a)           Price.  The price per Share deliverable upon the
exercise of each option (“exercise price”) shall not be less than 100% of the
Fair Market Value of a share of Common Stock as of the date of Grant of the
option, and in the case of the Grant of any Incentive Stock Option to an
employee who, at the time of the Grant, owns more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries, the exercise price may not be less than 110% of the Fair Market
Value of a share of Common Stock as of the date of Grant of the option, in each
case unless otherwise permitted by Section 422 of the Code or any successor
thereto.


(b)           Payment.  Options may be exercised, in whole or in
part, upon payment of the exercise price of the Shares to be acquired. Unless
otherwise determined by the Committee, payment shall be made (i) in cash
(including check, bank draft, money order or wire transfer of immediately
available funds), (ii) by delivery of outstanding shares of Common Stock with a
Fair Market Value on the date of exercise equal to the aggregate exercise price
payable with respect to the options’ exercise, (iii) by simultaneous sale
through a broker reasonably acceptable to the Committee of Shares acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by
authorizing the Company to withhold from issuance a number of Shares issuable
upon exercise of the options which, when multiplied by the Fair Market Value of
a share of Common Stock on the date of exercise, is equal to the aggregate
exercise price payable with respect to the options so exercised or (v) by any
combination of the foregoing.


In the event a grantee
elects to pay the exercise price payable with respect to an option pursuant to
clause (ii) above, (A) only a whole number of share(s) of Common Stock (and not
fractional shares of Common Stock) may be tendered in payment, (B) such grantee
must present evidence acceptable to the Company that he or she has owned any
such shares of Common Stock tendered in payment of the exercise price (and that
such tendered shares of Common Stock have not been subject to any substantial
risk of forfeiture) for at least six months prior to the date of exercise, and
(C) Common Stock must be delivered to the Company.  Delivery for this purpose may, at the
election of the grantee, be made either by (A) physical delivery of the
certificate(s) for all such shares of Common Stock tendered in payment of the
price, accompanied by duly executed instruments of transfer in a form
acceptable to the Company, or (B) direction to the grantee’s broker to
transfer, by book entry, of such shares of Common Stock from a brokerage
account of the grantee to a brokerage account specified by the Company.  When payment of the exercise price is made by
delivery of


 


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Common Stock, the
difference, if any, between the aggregate exercise price payable with respect
to the option being exercised and the Fair Market Value of the shares of Common
Stock tendered in payment (plus any applicable taxes) shall be paid in
cash.  No grantee may tender shares of
Common Stock having a Fair Market Value exceeding the aggregate exercise price
payable with respect to the option being exercised (plus any applicable taxes).


In the event a
grantee elects to pay the exercise price payable with respect to an option
pursuant to clause (iv) above, only a whole number of Shares (and not
fractional Shares) may be withheld in payment. 
When payment of the exercise price is made by withholding of Shares, the
difference, if any, between the aggregate exercise price payable with respect
to the option being exercised and the Fair Market Value of the Shares withheld
in payment (plus any applicable taxes) shall be paid in cash.  No grantee may authorize the withholding of
Shares having a Fair Market Value exceeding the aggregate exercise price
payable with respect to the option being exercised (plus any applicable
taxes).  Any withheld Shares shall no
longer be issuable under such option.


(c)           Terms of Options; Vesting.  The term during which each option may be
exercised shall be determined by the Committee, but if required by the Code and
except as otherwise provided herein, no option shall be exercisable in whole or
in part more than ten years from the date it is granted, and no Incentive Stock
Option granted to an employee who at the time of the Grant owns more than 10%
of the total combined voting power of all classes of stock of the Company or
any of its Subsidiaries shall be exercisable more than five years from the date
it is granted.  All rights to purchase
Shares pursuant to an option shall, unless sooner terminated, expire at the
date designated by the Committee.  The
Committee shall determine the date on which each option shall become
exercisable and may provide that an option shall become exercisable in
installments.  The Shares constituting
each installment may be purchased in whole or in part at any time after such
installment becomes exercisable, subject to such minimum exercise requirements
as may be designated by the Committee. 
Prior to the exercise of an option and delivery of the Shares
represented thereby, the optionee shall have no rights as a stockholder with
respect to any Shares covered by such outstanding option (including any
dividend or voting rights).


(d)           Limitations on Grants. If
required by the Code, the aggregate Fair Market Value (determined as of the
Grant date) of Shares for which an Incentive Stock Option is exercisable for
the first time during any calendar year under all equity incentive plans of the
Company and its Subsidiaries (as defined in Section 422 of the Code or any
successor thereto) may not exceed $100,000.


(e)           Termination; Forfeiture.


(i)            Death or Disability.  Unless otherwise provided in any Award
Agreement, if a participant ceases to be a director, officer or employee of, or
to perform other services for, the Company and any Subsidiary due to death or
Disability, (A) all of the participant’s options and SARs that were
exercisable on the date of death or Disability shall remain exercisable for,
and shall otherwise terminate at the end of, a period of one year after the
date of death or Disability, but in no event after the expiration date of the
options and SARs and (B) all of the participant’s options and SARs that
were not exercisable on the date of death or Disability shall be forfeited
immediately upon such death or Disability; provided, however, that the
Committee may


 


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determine to additionally
vest such options and SARs, in whole or in part, in its discretion.  Notwithstanding the foregoing, if the
Disability giving rise to the termination of employment is not within the
meaning of Section 22(e)(3) of the Code or any successor thereto, Incentive
Stock Options not exercised by such participant within one year after the date
of termination of employment will cease to qualify as Incentive Stock Options
and will be treated as Non-qualified Stock Options under the Plan if
required to be so treated under the Code.


(ii)           Retirement.  Unless otherwise provided in any Award
Agreement, if a participant ceases to be a director, officer or employee of, or
to perform other services for, the Company and any Subsidiary upon the
occurrence of his or her Retirement, (A) all of the participant’s options
and SARs that were exercisable on the date of Retirement shall remain
exercisable for, and shall otherwise terminate at the end of, a period of 90
days after the date of Retirement, but in no event after the expiration date of
the options or SARs; provided that the participant does not engage in Competition
during such 90-day period unless he or she receives written consent to do so
from the Board or the Committee, and (B) all of the participant’s options
and SARs that were not exercisable on the date of Retirement shall be forfeited
immediately upon such Retirement; provided, however, that such options and
SARs, may become fully vested and exercisable in the discretion of the
Committee.  Notwithstanding the
foregoing, Incentive Stock Options not exercised by such participant within 90
days after Retirement will cease to qualify as Incentive Stock Options and will
be treated as Non-qualified Stock Options under the Plan if required to be so
treated under the Code.


(iii)          Discharge for Cause.  Unless determined by the Committee, if a
participant ceases to be a director, officer or employee of, or to perform
other services for, the Company or a Subsidiary due to Cause, or if a
participant does not become a director, officer or employee of, or does not
begin performing other services for, the Company or a Subsidiary for any
reason, all of the participant’s options and SARs shall expire and be forfeited
immediately upon such cessation or non-commencement, whether or not then
exercisable.


(iv)          Other Termination.  If a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the Company or a
Subsidiary for any reason other than death, Disability, Retirement or Cause,
(A) all of the participant’s options and SARs that were exercisable on the
date of such cessation shall remain exercisable for, and shall otherwise
terminate at the end of, a period of 30 days after the date of such cessation,
but in no event after the expiration date of the options or SARs; provided that
the participant does not engage in Competition during such 30-day period unless
he or she receives written consent to do so from the Board or the Committee,
and (B) all of the participant’s options and SARs that were not
exercisable on the date of such cessation shall be forfeited immediately upon
such cessation.


(v)           Change of Control. 
If there is a Change in Control of the Company or similar event, the
Committee may, in its discretion, provide for the vesting of a participant’s
options and SARs on such terms and conditions as it deems appropriate in such
participant’s Award Agreement.


 


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7.             Stock Appreciation Rights.


Provided that the Company’s
stock is traded on an established securities market, the Committee shall have
the authority to grant SARs under this Plan, subject to such terms and
conditions specified in this paragraph 7 and any additional terms and
conditions as the Committee may specify.


No SAR may be issued
unless (a) the exercise price of the SAR may never be less than the Fair Market
Value of the underlying Shares on the date of grant and (b) the SAR does not
include any feature for the deferral of compensation income other than the
deferral of recognition of income until the exercise of the SAR.


No SAR may be exercised
unless the Fair Market Value of a share of Common Stock of the Company on the date
of exercise exceeds the exercise price of the SAR.  Prior to the exercise of the SAR and delivery
of the Shares represented thereby, the participant shall have no rights as a
stockholder with respect to Shares covered by such outstanding SAR (including
any dividend or voting rights).


Upon the exercise of an
SAR, the participant shall be entitled to a distribution in an amount equal to
the difference between the Fair Market Value of a share of Common Stock on the
date of exercise and the exercise price of the SAR, multiplied by the number of
Shares as to which the SAR is exercised. 
Such distribution shall be made in Shares having a Fair Market Value
equal to such amount.


All SARs will be
exercised automatically on the last day prior to the expiration date of the SAR
so long as the Fair Market Value of a share of Common Stock on that date
exceeds the exercise price of the SAR or any related option, as applicable.


The provisions of
Subsections 6(c) shall apply to all SARs except to the extent that the Award
Agreement pursuant to which such Grant is made expressly provides otherwise.


It is the Company’s
intent that no SAR shall be treated as a payment of deferred compensation for
purposes of Section 409A of the Code and that any ambiguities in construction be
interpreted in order to effectuate such intent.


8.             Restricted Stock.


The Committee may at any
time and from time to time grant Shares of restricted stock under the Plan to
such participants and in such amounts as it determines.  Each Grant of restricted stock shall specify
the applicable restrictions on such Shares, the duration of such restrictions,
and the time or times at which such restrictions shall lapse with respect to
all or a specified number of Shares that are part of the Grant.


The participant will be
required to pay the Company the aggregate par value of any Shares of restricted
stock (or such larger amount as the Board may determine to constitute capital
under Section 154 of the Delaware General Corporation Law, as amended, or any
successor thereto) within 15 days
of the date of Grant, unless such Shares of restricted stock are treasury
shares.  Unless


 


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otherwise
determined by the Committee, certificates representing Shares of restricted
stock granted under the Plan will be held in escrow by the Company on the
participant’s behalf during any period of restriction thereon and will bear an
appropriate legend specifying the applicable restrictions thereon, and the
participant will be required to execute a blank stock power therefor.  Except as otherwise provided by the
Committee, during such period of restriction the participant shall have all of
the rights of a holder of Common Stock, including but not limited to the rights
to receive dividends and to vote, and any stock or other securities received as
a distribution with respect to such participant’s restricted stock shall be
subject to the same restrictions as then in effect for the restricted stock.


Unless otherwise provided
in any Award Agreement, at such time as a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the Company and
its Subsidiaries due to death, Disability or Retirement during any period of
restriction, all Shares of restricted stock granted to such participant on
which the restrictions have not lapsed shall be immediately forfeited to the
Company.  If there is a Change in Control
of the Company or similar event, the Committee may, in its discretion, provide
for the lapsing of restrictions on a participant’s Shares of restricted stock
on such terms and conditions as it deems appropriate in such participant’s
Award Agreement.  At such time as a participant ceases to
be, or in the event a participant does not become, a director, officer or
employee of, or otherwise perform services for, the Company or its Subsidiaries
for any other reason, all Shares of restricted stock granted to such
participant on which the restrictions have not lapsed shall be immediately
forfeited to the Company.  The provisions
of Subsections 6(c) and (e) shall apply to Restricted Stock except to the
extent that the Award Agreement in relation thereto expressly provides
otherwise.


It is the Company’s
intent that Restricted Stock shall not be treated as a payment of deferred
compensation for purposes of Section 409A of the Code and that any ambiguities
in construction be interpreted in order to effectuate such intent.


9.             Performance Awards.


Performance awards may be
granted to participants at any time and from time to time as determined by the
Committee.  The Committee shall have
complete discretion in determining the size and composition of performance
awards granted to a participant.  The
period over which performance is to be measured (a “performance cycle”) shall
commence on the date specified by the Committee and shall end on the last day
of a fiscal year specified by the Committee. 
A performance award shall be paid no later than the fifteenth day of the
third month following the completion of a performance cycle (or following the
elapsed portion of the performance cycle, in the circumstances described in the
last paragraph of this Section 9). 
Performance awards may include (i) specific dollar-value
target awards (ii) performance units, the value of each such unit being
determined by the Committee at the time of issuance, and/or
(iii) performance Shares, the value of each such Share being equal to the
Fair Market Value of a share of Common Stock. 
In any one calendar year, the Committee shall not grant to any one participant
performance awards in excess of 10% of the total number of Shares authorized
under the Plan pursuant to Section 4; provided, however, that the
Committee shall be permitted to grant Dr. Michael J. Hartnett up to
40% of the total number of Shares authorized under the plan at any time.


The value of each
performance award may be fixed or it may be permitted to fluctuate based on a
performance factor (e.g., return on equity) selected by the Committee.  It is the


 


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Company’s intent
that no performance award be treated as the payment of deferred compensation
for purposes of Section 409A of the Code and that any ambiguities in
construction be interpreted in order to effectuate such intent.


The Committee shall
establish performance goals and objectives for each performance cycle on the
basis of such criteria and objectives as the Committee may select from time to
time, including, without limitation, the performance of the participant, the
Company, one or more of its Subsidiaries or divisions or any combination of the
foregoing.  During any performance cycle,
the Committee shall have the authority to adjust the performance goals and
objectives for such cycle for such reasons as it deems equitable.


The Committee shall
determine the portion of each performance award that is earned by a participant
on the basis of the Company’s performance over the performance cycle in
relation to the performance goals for such cycle. The earned portion of a
performance award may be paid out in Shares, cash, Other Securities, or any
combination thereof, as the Committee may determine.


A participant must be a
director, officer or employee of, or otherwise perform services for, the
Company or its Subsidiaries at the end of the performance cycle in order to be
entitled to payment of a performance award issued in respect of such cycle;
provided, however, that except as otherwise determined by the Committee, if a
participant ceases to be a director, officer or employee of, or to otherwise
perform services for, the Company and its Subsidiaries upon his or her death,
Retirement, or Disability prior to the end of the performance cycle, the
Committee may provide in a Grant that the participant may earn a proportionate
portion of the performance award based upon the elapsed portion of the
performance cycle and the Company’s performance over that portion of such
cycle.


10.           Withholding Taxes.


(a)           Participant Election.  Unless otherwise determined by the Committee,
a participant may elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be.  Such election must be made on or before the
date the amount of tax to be withheld is determined.  Once made, the election shall be
irrevocable.  The fair market value of
the shares to be withheld or delivered will be the Fair Market Value as of the
date the amount of tax to be withheld is determined.  In the event a participant elects to deliver
or have the Company withhold shares of Common Stock pursuant to this Section
10(a), such delivery or withholding must be made subject to the conditions and
pursuant to the procedures set forth in Section 6(b) with respect to the
delivery or withholding of Common Stock in payment of the exercise price of
options.


(b)           Company Requirement.  The Company may require, as a condition to
any Grant or exercise under the Plan or to the delivery of certificates for
Shares issued hereunder, that the grantee make provision for the payment to the
Company, either pursuant to Section 10(a) or this Section 10(b), of federal, state
or local taxes of any kind required by law to be withheld with respect


 


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to any Grant or delivery of Shares.  The Company, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee, an amount equal to any
federal, state or local taxes of any kind required by law to be withheld with
respect to any grant or delivery of Shares under the Plan.


11.           Written Agreement.


Each employee to whom a
Grant is made under the Plan shall enter into an Award Agreement with the
Company that shall contain such provisions consistent with the provisions of
the Plan, as may be approved by the Committee.


12.           Transferability.


Unless the Committee
determines otherwise, no option, SAR, performance award or restricted stock
granted under the Plan shall be transferable by a participant other than by
will or the laws of descent and distribution; provided that, in the case of
Shares of restricted stock granted under the Plan, such Shares of restricted
stock shall be freely transferable following the time at which such
restrictions shall have lapsed with respect to such Shares.  Unless the Committee determines otherwise, an
option, SAR or performance award may be exercised only by the optionee or
grantee thereof; by his or her executor or administrator, the executor or
administrator of the estate of any of the foregoing, or any person to whom the
option, SAR or performance award is transferred by will or the laws of descent
and distribution; or by his or her guardian or legal representative; or the
guardian or legal representative of any of the foregoing; provided that
Incentive Stock Options may be exercised by any guardian or legal
representative only if permitted by the Code and any regulations
thereunder.  All provisions of this Plan
and any Award Agreement referred to in Section 11 shall in any event continue
to apply to any option, SAR, performance award or restricted stock granted
under the Plan and transferred as permitted by this Section 12, and any
transferee of any such option, SAR, performance award or restricted stock shall
be bound by all provisions of this Plan and any agreement referred to in
Section 11 as and to the same extent as the applicable original grantee.


13.           Listing, Registration and
Qualification.


If the Committee
determines that the listing, registration or qualification upon any securities
exchange or under any law of Shares subject to any option, SAR, performance
award or restricted stock Grant is necessary or desirable as a condition of, or
in connection with, the granting of same or the issue or purchase of Shares
thereunder, no such option or SAR may be exercised in whole or in part, no such
performance award may be paid out, and no Shares may be issued, unless such
listing, registration or qualification is effected free of any conditions not
acceptable to the Committee.


14.           Transfer of Employee.


The transfer of an
employee from the Company to a Subsidiary, from a Subsidiary to the Company, or
from one Subsidiary to another shall not be considered a termination of
employment; nor shall it be considered a termination of employment if an
employee is placed on


 


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military or sick
leave or such other leave of absence which is considered by the Committee as
continuing intact the employment relationship.


15.           Adjustments.


In the event of a
reorganization, recapitalization, spin-off or other extraordinary distribution,
stock split, stock dividend, combination of shares, merger, consolidation,
distribution of assets, spin-off or other extraordinary distribution, or any
other change in the corporate structure or shares of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
Shares or other property available for issuance under the Plan (including,
without limitation, the total number of Shares available for issuance under the
Plan pursuant to Section 4), in the number and kind of options, SARs, Shares or
other property covered by Grants previously made under the Plan, and in the
exercise price of outstanding options and SARs. 
Any such adjustment shall be final, conclusive and binding for all
purposes of the Plan.  In the event of
any merger, consolidation or other reorganization in which the Company is not
the surviving or continuing corporation or in which a Change in Control is to
occur, all of the Company’s obligations regarding options, SARs, performance
awards, and restricted stock that were granted hereunder and that are
outstanding on the date of such event shall, on such terms as may be approved
by the Committee prior to such event, be (a) assumed by the surviving or
continuing corporation; or (b) canceled in exchange for cash, securities of the
acquiror or other property; provided that, in the case of clause (b), (i) such
merger, consolidation, other reorganization or Change in Control constitutes a “change
in ownership or control” of the Company or a “change in the ownership of a
substantial portion” of the Company’s assets within the meaning of Section
409A(a)(2)(A)(v) of the Code and the guidance issued thereunder or (ii) the
payment of cash, securities or other property is not treated as a payment of “deferred
compensation” under Section 409A of the Code.


Without limitation of the
foregoing, in connection with any transaction described in of the last sentence
of the preceding paragraph, the Committee may, in its discretion, (i) cancel
any or all outstanding options under the Plan in consideration for payment to
the holders thereof of an amount equal to the portion of the consideration that
would have been payable to such holders pursuant to such transaction if their
options had been fully exercised immediately prior to such transaction, less
the aggregate exercise price that would have been payable therefor, or (ii) if
the amount that would have been payable to the option holders pursuant to such
transaction if their options had been fully exercised immediately prior thereto
would be equal to or less than the aggregate exercise price that would have
been payable therefor, cancel any or all such options for no consideration or
payment of any kind.  Payment of any
amount payable pursuant to the preceding sentence may be made in cash or, in
the event that the consideration to be received in such transaction includes
securities or other property, in cash, securities of the acquiror or other
property in the Committee’s discretion.


16.           Amendment and Termination of the
Plan.


Except as otherwise
provided in an Award Agreement, the Board of Directors, without approval of the
stockholders, may amend or terminate the Plan, except that no amendment shall
become effective without prior approval of the stockholders of the Company if
stockholder approval would be required by applicable law or regulations,
including if required for continued


 


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compliance with
the performance-based compensation exception of Section 162(m) of
the Code or any successor thereto, under the provisions of Section 409A of the
Code or any successor thereto, under the provisions of Section 422 of the Code
or any successor thereto, or by any listing requirement of the principal stock
exchange on which the Common Stock is then listed.


17.           Amendment or Substitution of
Grants under the Plan.


The terms of any
outstanding Grant under the Plan may be amended from time to time by the
Committee in its discretion in any manner that it deems appropriate including,
but not limited to, acceleration of the date of exercise of any Grant and/or
payments thereunder or of the date of lapse of restrictions on Shares (but, in
the case of a Grant that is or would be treated as “deferred compensation” for
purposes of Section 409A of the Code, only to the extent permitted by guidance
issued under Section 409A of the Code); provided that, except as otherwise
provided in Section 16 or in an Award Agreement, no such amendment shall
adversely affect in a material manner any right of a participant under the
Grant without his or her written consent, and further provided that the
Committee shall not reduce the exercise price of any options or SARs awarded
under the Plan.  The Committee may, in
its discretion, permit holders of Grants under the Plan to surrender
outstanding Grants in order to exercise or realize rights under other Grants,
or in exchange for new Grants, or require holders of Grants to surrender
outstanding Grants as a condition precedent to the receipt of new Grants under
the Plan, but only if such surrender, exercise, realization, exchange or Grant
(a) is not treated as a payment of, and does not cause a Grant to be treated as,
deferred compensation for the purposes of Section 409A of the Code or (b) is
permitted under guidance issued pursuant to Section 409A of the Code.


18.           Commencement Date; Termination
Date.


The date of commencement
of the Plan shall be                  ,
2005, subject to approval by the shareholders of the Company.  If required by the Code, the Plan will also
be subject to reapproval by the shareholders of the Company prior to                   , 2010.


Unless previously
terminated upon the adoption of a resolution of the Board terminating the Plan,
the Plan shall terminate at the close of business on                     , 2015.  Subject to the provisions of an Award
Agreement, which may be more restrictive, no termination of the Plan shall
materially and adversely affect any of the rights or obligations of any person,
without his or her written consent, under any Grant of options or other
incentives theretofore granted under the Plan.


19.           Severability.


Whenever possible, each
provision of the Plan shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Plan is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of the Plan.


 


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20.           Governing Law.


The Plan shall be
governed by the corporate laws of the State of 
Delaware, without giving effect to any choice of law provisions that
might otherwise refer construction or interpretation of the Plan to the
substantive law of another jurisdiction.


21.           Compliance Amendments.


Except as otherwise
provided in an Award Agreement, notwithstanding any of the foregoing provisions
of the Plan, and in addition to the powers of amendment set forth in Sections
16 and 17 hereof, the provisions hereof and the provisions of any award made
hereunder may be amended unilaterally by the Company from time to time to the
extent necessary (and only to the extent necessary) to prevent the
implementation, application or existence (as the case may be) of any such
provision from (i) requiring the inclusion of any compensation deferred
pursuant to the provisions of the Plan (or an award thereunder) in a
participant’s gross income pursuant to Section 409A of the Code, and the
regulations issued thereunder from time to time and/or (ii) inadvertently
causing any award hereunder to be treated as providing for the deferral of
compensation pursuant to such Code section and regulations.


 


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