Document:

Exhibit 4.6

 

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.

 

(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 

 

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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.

 

(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.

 

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(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 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.

 

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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 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 60% 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.

 

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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 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 

 

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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 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 

 

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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 to Dr. Michael J. Hartnett up to 60% of the total
number of Shares authorized under the plan at any time.

 

10

 

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 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 

 

11

 

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 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 

 

12

 

employment; nor shall it be considered a termination of employment if
an employee is placed on 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 

 

13

 

approval would be required by applicable law or regulations, including
if required for continued 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 August 9, 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 August 9, 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 August 8, 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.

 

14

 

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.

 

15Prepared and filed by St Ives Financial

Exhibit 10.1

INTEGRATED ALARM SERVICES GROUP, INC.

AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     AMENDMENT NO. 1, made as of this 18th day
of November, 2005 (the “Amendment”), TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made as of January 31, 2003 (the “Agreement”) by and between INTEGRATED ALARM SERVICES GROUP, INC., a Delaware corporation (“Employer”), and Timothy M. McGinn (“Employee”). 

W I T N E S S E T H:

     WHEREAS, the Agreement will expire on January 30, 2006; and

     WHEREAS, Employer desires to employ Employee on an uninterrupted basis as the Chairman and Chief Executive Officer of Employer pending the negotiation and execution of a new Agreement; and 

     WHEREAS, Employee is willing to be employed as the Chairman and Chief Executive Officer of Employer in the manner provided for, and upon the terms and conditions set forth in the Agreement and herein;

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein set forth it is agreed as follows:

		
1.	
Section 2 of the Agreement is hereby amended to add the following subsection:

	 	 	 	 
	 	 	“b.	
 Subject to Section 9 and 10 of the Agreement, in the event that one party timely notifies
the other of its intention not to extend the Term, and if the parties do not enter into a new agreement prior to the
expiration of the Term, this Agreement shall automatically extend for an additional three (3) month period
 (the “Three Month Extension”). During the Three Month Extension, Employee will
 continue to receive his present base compensation and other perquisites, as outlined in Section 4;
 provided however, that he shall not be entitled to his guaranteed bonus of $100,000, as described
in Section 4.a.(i).  In addition, all of the
“Change of Control” provisions outlined in Section 4.e., including Employee’s right
to receive his guaranteed bonus in the event of a Change in Control, as defined in the Agreement,
will continue to apply.”

 

 

     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the day and year first above written. 

INTEGRATED ALARM SERVICES GROUP, INC.
    
   By:   /s/
        Thomas J. Few, Sr.

              Thomas
    J. Few, Sr.

          President

  TIMOTHY M. MCGINN

   /s/
        Timothy M. McGinn

           Timothy
  M. McGinn

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