Exhibit 10.1

 

M.D.C. HOLDINGS, INC.

2011 EQUITY INCENTIVE PLAN

(Adopted January 24, 2011)

(Approved by the Company’s stockholders on April 27, 2011)

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TABLE OF CONTENTS

 

               Page  

1

  

INTRODUCTION

     1       1.1   

Establishment

     1       1.2   

Purpose

     1       1.3   

Effect on Existing Agreements

     1   

2

  

DEFINITIONS

     1   

3

  

PLAN ADMINISTRATION

     6       3.1   

General

     6       3.2   

Delegation by the Committee

     7       3.3   

Limitations on Authority

     7       3.4   

Deferral Arrangement

     7       3.5   

No Liability

     8       3.6   

Book Entry

     8   

4

  

STOCK SUBJECT TO THE PLAN

     8       4.1   

Number of Shares

     8       4.2   

Individual Award Limits

     8       4.3   

Share Counting

     8   

5

  

ELIGIBILITY AND PARTICIPATION

     8   

6

  

STOCK OPTIONS

     9       6.1   

Grant of Options

     9       6.2   

Award Agreement

     9       6.3   

Exercise of Option

     9       6.4   

Termination of Service

     10       6.5   

Limitations on Incentive Stock Options

     10       6.6   

Transferability

     11       6.7   

Family Transfers

     11       6.8   

Rights of Holders of Options

     11   

7

  

STOCK APPRECIATION RIGHTS

     11       7.1   

Grant of Stock Appreciation Rights

     11       7.2   

Award Agreement

     11       7.3   

Exercise of Stock Appreciation Right

     12       7.4   

Effect of Exercise

     12       7.5   

Termination of Service

     12       7.6   

Transferability

     12   

8

  

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

     13       8.1   

Grant of Restricted Stock or Restricted Stock Units

     13       8.2   

Award Agreement

     13       8.3   

Restrictions on Transfer

     13       8.4   

Forfeiture; Other Restrictions

     13       8.5   

Restricted Stock Units

     13       8.6   

Termination of Service

     13       8.7   

Stockholder Privileges

     13   

 

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               Page  

9

  

QUALIFIED PERFORMANCE BASED COMPENSATION

     14       9.1   

Grant or Vesting of Award Subject to Objective Performance Goals

     14       9.2   

Establishment of Performance Goals

     14       9.3   

Achievement of Performance Goals

     14       9.4   

Committee to Comply with Section 162(m)

     14   

10

  

OTHER STOCK-BASED AWARDS

     14   

11

  

DIVIDENDS AND DIVIDEND EQUIVALENTS

     15   

12

  

TAX WITHHOLDING

     15   

13

  

PARACHUTE LIMITATIONS

     15   

14

  

EFFECT OF CHANGES IN CAPITALIZATION

     16       14.1   

Changes in Stock

     16       14.2   

Change of Control

     17       14.3   

Reorganization in Which the Company Is the Surviving Entity and in Which No
Change of Control Occurs

     17       14.4   

Adjustment

     17       14.5   

No Limitations on the Company

     18   

15

  

REQUIREMENTS OF LAW

     18       15.1   

General

     18       15.2   

Rule 16b-3

     18   

16

  

GENERAL PROVISIONS

     18       16.1   

Disclaimer of Rights

     18       16.2   

Nontransferability of Awards

     19       16.3   

Changes in Accounting or Tax Rules

     19       16.4   

Nonexclusivity of the Plan

     19       16.5   

Captions

     19       16.6   

Other Award Agreement Provisions

     19       16.7   

Other Employee Benefits

     19       16.8   

Severability

     20       16.9   

Governing Law

     20       16.10   

Section 409A

     20   

17

  

AMENDMENT, MODIFICATION AND TERMINATION

     20       17.1   

Amendment, Modification, and Termination

     20       17.2   

Awards Previously Granted

     20   

18

  

STOCKHOLDER APPROVAL; EFFECTIVE DATE OF PLAN

     21   

19

  

DURATION

     21   

20

  

EXECUTION

     21   

 

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M.D.C. HOLDINGS, INC.

2011 EQUITY INCENTIVE PLAN

 

1

INTRODUCTION

1.1 Establishment. M.D.C. Holdings, Inc., a Delaware corporation (the
“Company”), hereby establishes the M.D.C. Holdings, Inc. 2011 Equity Incentive
Plan (the “Plan”). The Plan permits the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock,
restricted stock units, and other stock-based and cash awards in accordance with
the terms hereof.

1.2 Purpose. The Plan is intended to enhance the Company’s and its Affiliates’
(as defined herein) ability to attract and retain highly qualified officers, key
employees, and other persons, and to motivate such persons to serve the Company
and its Affiliates and to expend maximum effort to improve the business results
and earnings of the Company, by providing to such persons an opportunity to
acquire or increase a direct proprietary interest in the operations and future
success of the Company.

1.3 Effect on Existing Agreements. Nothing in the Plan is intended to abrogate
the rights of any Participant under any contract or agreement existing between
the Participant and the Company, or any subsequent amendments or modifications
of such contract or agreement, and all Awards granted under the Plan and actions
taken with respect to the Plan shall be subject to the terms of any contract or
agreement between the Participant and the Company.

 

2

DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:

2.1 “Affiliate” means with respect to the Company, (i) any company or other
trade or business that controls, is controlled by or is under common control
with the Company within the meaning of Rule 405 of Regulation C under the
Securities Act, including without limitation, any Subsidiary, and (ii) any
corporation or other entity controlling, controlled by, or under common control
with the Company, including any member of an affiliated group of which the
Company is a common parent corporation or subsidiary corporation (within the
meaning of Section 424 of the Code).

2.2 “Award” means a grant under the Plan of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award.

2.3 “Award Agreement” means the written or electronic agreement setting forth
the terms and conditions applicable to each Award. The Award Agreement is
subject to the terms and conditions of the Plan. In the event of any
inconsistency between the provisions of the Plan and any Award Agreement, the
provisions of the Plan shall govern, except to the extent the Plan would be
considered to provide an additional benefit as determined under Sections 409A
and 424 of the Code.

2.4 “Benefit Arrangement” means as defined in Section 13.

2.5 “Board” or “Board of Directors” means the board of directors of M.D.C.
Holdings, Inc.

 

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2.6 “Business Combination” means as defined in Section 2.8.

2.7 “Cause” means, as determined by the Committee and unless otherwise provided
in an employment, consulting or other services agreement, if any, between the
Employee and the Company or an Affiliate, (i) any willful breach of any material
written policy of the Company or an Affiliate that is materially detrimental to
the Company or the Affiliate; (ii) engaging in any conduct involving moral
turpitude that is materially detrimental to the Company or an Affiliate,
including, but not limited to, misappropriation or conversion of assets of the
Company or an Affiliate (other than immaterial assets); (iii) a conviction of or
entry of a plea of nolo contendere to a felony; or (iv) a material breach by the
Employee of any term of any employment, consulting or other services,
confidentiality, intellectual property or non-competition agreements, if any,
between the Employee and the Company or an Affiliate. No act or failure to act
by the Employee shall be deemed “willful” if done, or omitted to be done, by him
or her in good faith and with the reasonable belief that his or her action or
omission was in the best interest of the Company or an Affiliate.

2.8 “Change of Control” means and shall be deemed to have occurred upon the
occurrence of:

(a) the acquisition by any individual, entity, or group (within the meaning of
Sections 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of “beneficial
ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% of the combined voting power of the Company’s then outstanding
securities entitled to vote generally in the election of directors;

(b) the individual directors of the Board as of the Effective Date (the
“Incumbent Directors”) cease to constitute at least half of the Board within a
twelve-month period; provided, however, that for purposes of this paragraph, any
new director whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least a of two-thirds of the
Incumbent Directors at the beginning of such twelve-month period shall be
considered an Incumbent Director;

(c) consummation, in one transaction or a series of related transactions, of a
reorganization, merger, or consolidation of the Company or sale or other
disposition, direct or indirect, of all or substantially all of the assets of
the Company (a “Business Combination”), in each case, unless, following such
Business Combination, the Persons who were the “beneficial owners” of
outstanding voting securities of the Company immediately prior to such Business
Combination “beneficially own,” by reason of such ownership of the Company’s
voting securities immediately before the Business Combination, more than 50% of
the combined voting power of the company resulting from such Business
Combination (including, without limitation, a company which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership of the outstanding voting securities of the
Company immediately prior to such Business Combination; or

(d) approval by those Persons holding the voting securities of the Company of a
complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, solely with respect to any Award that is subject
to Section 409A of the Code and payable upon a Change of Control, the term
“Change of Control”

 

2

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shall mean an event described in one or more of the foregoing provisions of this
definition, but only if it also constitutes a “change in control event” within
the meaning of Treas. Reg. Section 1.409A-3(i)(5).

2.9 “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations, interpretations, and administrative guidance issued thereunder.

2.10 “Committee” means the Compensation Committee of the Board or any committee
designated by the Board to administer the Plan. The Compensation Committee or
the Board may designate one or more subcommittees to (i) consist solely of
persons who satisfy the applicable requirements of any stock exchange or
national market system on which the shares of Stock may be listed, (ii) consist
solely of persons who qualify as an “outside director” within the meaning of
Section 162(m) of the Code, and (iii) consist solely of persons who qualify as a
“non-employee director” within the meaning of Rule 16b-3 promulgated under the
Exchange Act.

2.11 “Company” means M.D.C. Holdings, Inc., a Delaware corporation.

2.12 “Corporate Event” means an event described in Section 14.1.

2.13 “Disabled” or “Disability” means, unless otherwise provided in an
employment, consulting or other services agreement, if any, between the
Participant and the Company or an Affiliate, the Participant is unable to
perform each of the essential duties of such Participant’s position by reason of
a medically determinable physical or mental impairment which is potentially
permanent in character or which can be expected to last for a continuous period
of not less than 12 months; provided that, the following shall apply:

(a) With respect to rules regarding expiration of an Incentive Stock Option
following termination of the Participant’s Service, Disability has the meaning
set forth in Section 22(e)(3) of the Code.

(b) With respect to any Award subject to Section 409A of the Code, the
Participant is: (i) unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, is
receiving income replacement benefits for a period of not less than three months
under an accident or health plan covering employees of the Participant’s
employer; or (iii) determined to be totally disabled by the Social Security
Administration.

2.14 “Dividend Equivalent” means a right granted under Section 11.

2.15 “Effective Date” means the effective date of the Plan, which is the date
the Plan was approved by the stockholders of the Company, and no Awards may be
granted under the Plan after it has been in effect for ten years.

2.16 “Employee” means any individual who is a common-law employee of the Company
or an Affiliate determined in accordance with the Company’s standard personnel
policies and practices.

 

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2.17 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as it may be
amended from time to time, or any successor act thereto.

2.18 “Exercise Price” means the price at which a share of Stock may be purchased
pursuant to the exercise of an Option.

2.19 “Fair Market Value” means the value of a share of Stock as of a particular
day, determined as follows: (a) the closing sale price reported for such share
on the national securities exchange or national market system on which such
stock is principally traded, or if no sale of shares is reported for such day,
on the next preceding day on which a sale was reported, or (b) if the shares of
Stock are not then listed on a national securities exchange or national market
system, or the value of such shares is not otherwise determinable, such value as
determined by the Committee in good faith in its sole discretion consistent with
the requirements under Section 409A of the Code.

2.20 “Family Member” means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Participant, a trust in which any one or more of these persons (or the
Participant) in the aggregate have more than fifty percent (50%) of the
beneficial interest, a foundation in which any one or more of these persons (or
the Participant) in the aggregate control the management of assets, and any
other entity in which one or more of these persons (or the Participant) in the
aggregate own more than fifty percent (50%) of the voting interests; provided,
however, that to the extent required by applicable law, the term Family Member
shall be limited to a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law,
including adoptive relationships, of the Participant or a trust or foundation
for the benefit of any one or more of these persons.

2.21 “Good Reason” means, unless otherwise provided in an employment, consulting
or other services agreement, if any, between the Employee and the Company or an
Affiliate, (i) a material reduction in the Participant’s base salary, (ii) a
material diminution of the Participant’s title, office, position or authority,
excluding for this purpose an action not taken in bad faith and which is
remedied within twenty (20) days after receipt of written notice thereof given
by the Participant, (iii) the assignment to the Employee of any duties
inconsistent with the Participant’s position (including status or reporting
requirements), authority, or material responsibilities, or the removal of the
Employee’s authority or material responsibilities, excluding for this purpose an
action not taken in bad faith and which is remedied by the Company within twenty
(20) days after receipt of notice thereof given by the Participant, (iv) a
transfer of the Participant’s primary workplace by more than fifty (50) miles
from the current workplace, or (v) a material breach of any term of any
employment, consulting or other services agreement, if any, between the Employee
and the Company or an Affiliate by the Company which is not remedied within
twenty (20) days after receipt of written notice thereof given by the
Participant.

2.22 “Grant Date” means, as determined by the Committee, the latest to occur of
(i) the date on which the Committee approves an Award, (ii) the date on which
the recipient of an Award first becomes eligible to receive an Award under
Section 5, or (iii) such other date as may be specified by the Committee in the
Award Agreement.

2.23 “Grant Price” means the per share exercise price of a Stock Appreciation
Right granted to a Participant under Section 7.

 

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2.24 “Incentive Stock Option” means an Option to purchase shares of Stock
designated as an Incentive Stock Option that is intended to meet the
requirements of Section 422 of the Code.

2.25 “Incumbent Directors” means as defined in Section 2.8.

2.26 “Minimum Statutory Withholding” means as defined in Section 12.

2.27 “Non-Qualified Stock Option” means any Option other than an Incentive Stock
Option.

2.28 “Option” means an option to purchase one or more shares of Stock at a
stated or formula price for a specified period of time. An Option granted under
the Plan shall be either an Incentive Stock Option or a Non-Qualified Stock
Option.

2.29 “Other Agreement” means as defined in Section 13.

2.30 “Other Stock-Based Award” means an Award that is granted to a Participant
under Section 10.

2.31 “Parachute Payment” means as defined in Section 13.

2.32 “Participant” means any eligible Employee who at the sole discretion of the
Committee is granted an Award under the Plan.

2.33 “Person” means as defined in Section 2.8.

2.34 “Plan” means this M.D.C. Holdings, Inc. 2011 Equity Incentive Plan, as
amended from time to time.

2.35 “Restricted Stock” means an Award of shares of Stock granted under
Section 8.

2.36 “Restricted Stock Unit” or “RSU” means a bookkeeping entry representing the
equivalent of shares of Stock granted under Section 8.

2.37 “Restriction Period” means the period during which Restricted Stock and
Restricted Stock Units are subject to a substantial risk of forfeiture (based
upon the passage of time, the achievement of performance goals or upon the
occurrence of other events as determined by the Committee, in its discretion),
as provided in Sections 8.3 and 8.4.

2.38 “Securities Act” means the U.S. Securities Act of 1933, as it may be
amended from time to time, or any successor act thereto.

2.39 “Service” means service as an Employee of the Company or an Affiliate.
Unless otherwise stated in the applicable Award Agreement, a Participant’s
change in position or duties shall not result in interrupted or terminated
Service, so long as such Participant continues to be a Employee of the Company
or an Affiliate. Subject to the preceding sentence, whether a termination of
Service shall have occurred for purposes of the Plan shall be determined by the
Committee, which determination shall be final, binding and conclusive.
Notwithstanding the foregoing, solely with respect to any Award that is subject
to Section 409A of the Code and payable upon a termination of Service, a
Participant shall be considered to have terminated Service with the Company or
an Affiliate only when the Participant incurs a “separation from service” with
respect to the Company or an Affiliate within the meaning of
Section 409A(a)(2)(A)(i) of the Code.

 

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2.40 “Stock” or “Common Stock” means a share of M.D.C. Holdings, Inc., common
stock, $0.01 par value per share.

2.41 “Stock Appreciation Right” or “SAR” means an Award granted under Section 7.

2.42 “Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.

2.43 “Substitute Awards” means Awards granted in substitution for, or in
assumption of, outstanding awards previously granted by an entity acquired by
the Company or a Subsidiary or an Affiliate or with which the Company or
Subsidiary or Affiliate combines. The terms and conditions of any Substituted
Awards shall comply with the requirements for substitutions of awards made in
connection with a corporate transaction or certain other adjustments that are
not treated as modifications under Treas. Reg. Section 1.424-1 and Section 409A
of the Code, as applicable.

 

3

PLAN ADMINISTRATION

3.1 General. The Plan shall be administered by the Committee, which shall have
full power and authority to take all actions and to make all determinations as
are required or permitted under the Plan. In accordance with the provisions of
the Plan, the Committee shall, in its sole discretion, select the Participants
from among the eligible individuals described in Section 5, determine the Awards
to be made pursuant to the Plan, or shares of Stock to be issued thereunder and
the time at which such Awards are to be made, fix the Option Price (or Grant
Price), period and manner in which an Option (or Stock Appreciation Right)
becomes exercisable, establish the duration and nature of Restricted Stock or
Restricted Stock Unit restrictions, establish the terms and conditions
applicable to, and establish such other terms and requirements of the various
compensation incentives under the Plan as the Committee may deem necessary or
desirable and consistent with the terms of the Plan. The Committee shall
determine the form of the Award Agreements with Participants that shall evidence
the particular provisions, terms, conditions, rights and duties of the Company
and the Participants with respect to Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein. The Committee
may amend, modify, or supplement the terms of any outstanding Award including,
but not limited to, amending an Award or exercising discretion under an Award or
under the Plan to: (i) accelerate the date on which an Award becomes vested,
exercisable, or transferable, (ii) extend the term of any Award, including the
period following the termination of the Participant’s Service to the Company
during which the Award shall remain outstanding, (iii) waive any conditions with
regard to vesting, exercisability, or transferability of an Award, and
(iv) recognize differences in local law, tax policy, or custom with regard to
Awards made to foreign nations or individuals who are employed outside the
United States. Notwithstanding the foregoing, no amendment or modification may
be made to an outstanding Option or Stock Appreciation Right that (i) causes the
Option or Stock Appreciation Right to become subject to Section 409A of the
Code, (ii) reduces the Exercise Price or Grant Price, either by lowering the
Exercise Price or Grant Price or by canceling the outstanding Option or Stock
Appreciation Right and granting a replacement Option or Stock Appreciation Right
with a lower Exercise Price or Grant Price, or (iii) would be treated as a
repricing under the rules of the exchange upon which shares of Stock of the
Company trade, without, with respect to item (i), the Participant’s written
prior approval, and with respect to items (ii) and (iii), without the approval
of the stockholders of the Company, provided, that appropriate adjustments may
be made to outstanding Options and Stock Appreciation Rights pursuant to
Section 14.

 

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As a condition to any Award, the Committee shall have the right, at its
discretion, to require Participants to return to the Company Awards previously
granted under the Plan. Subject to the terms and conditions of the Plan, any
such subsequent Award shall be upon such terms and conditions as are specified
by the Committee at the time the new Award is granted. The Company may retain
the right in an Award Agreement to cause a forfeiture of the gain realized by a
Participant on account of actions taken by the Participant in violation or
breach of or in conflict with any non-competition agreement, any agreement
prohibiting solicitation of employees or clients of the Company or any Affiliate
thereof or any confidentiality obligation with respect to the Company or any
Affiliate thereof or otherwise in competition with the Company or any Affiliate
thereof, to the extent specified in such Award Agreement applicable to the
Participant. Furthermore, the Committee may annul an Award if the Participant is
an employee of the Company or an Affiliate thereof and is terminated for Cause
as defined in the applicable Award Agreement or the Plan, as applicable.

The Committee may from time to time adopt such rules and regulations for
carrying out the purposes of the Plan as it may deem proper and in the best
interests of the Company. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award Agreement
entered into hereunder in the manner and to the extent it shall deem expedient
and it shall be the sole and final judge of such expediency. The determinations,
interpretations and other actions of the Committee pursuant to the provisions of
the Plan shall be binding and conclusive for all purposes and on all persons.

3.2 Delegation by the Committee. The Committee may, from time to time, delegate,
to specified officers of the Company, the power and authority to grant or
document Awards under the Plan to specified groups of eligible individuals,
subject to such restrictions and conditions as the Committee, in its sole
discretion, may impose. The delegation shall be as broad or as narrow as the
Committee shall determine. To the extent that the Committee has delegated the
authority to determine certain terms and conditions of an Award, all references
in the Plan to the Committee’s exercise of authority in determining such terms
and conditions shall be construed to include the officer or officers to whom the
Committee has delegated the power and authority to make such determination.
However, any delegation (a) shall not result in the loss of an exemption under
Rule 16b-3(d) for Awards granted to Participants subject to Section 16 of the
Exchange Act in respect of the Company, and there shall be no delegation of
authority to grant awards to any Section 16 person, (b) will not cause Awards
intended to qualify as “performance-based” compensation under Code
Section 162(m) to fail to so qualify, (c) will not result in a related-person
transaction with an executive officer required to be disclosed under Item 404(a)
of Regulation S-K (in accordance with Instruction 5.a.ii thereunder) under the
Exchange Act and (d) shall be permitted under Section 157 and other applicable
provisions of the Delaware General Corporation Law.

3.3 Limitations on Authority. The Committee shall, in exercising its discretion
under the Plan, comply with all contractual and legal obligations of the Company
or the Committee in effect from time to time, whether contained in the Company’s
charter, bylaws, or other binding contract, or in the Compensation Committee’s
charter, or in applicable law.

3.4 Deferral Arrangement. The Committee may permit or require the deferral of
any Award payment into a deferred compensation arrangement, subject to such
rules and procedures as it may establish in accordance with Section 409A of the
Code, which may include provisions for the payment or crediting of interest or
Dividend Equivalents, including converting such credits into deferred Stock
units.

 

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3.5 No Liability. No member of the Board or of the Committee shall be liable for
any action or determination made in good faith with respect to the Plan, any
Award or any Award Agreement.

3.6 Book Entry. Notwithstanding any other provision of this Plan to the
contrary, the Company may elect to satisfy any requirement under this Plan for
the delivery of stock certificates through the use of electronic or other forms
of book-entry including, but not limited to, uncertificated forms maintained
electronically.

 

4

STOCK SUBJECT TO THE PLAN

4.1 Number of Shares. Subject to adjustment as provided in Section 14, the
maximum number of shares of Stock available for issuance under the Plan shall be
1,600,000 shares. Subject to adjustment as provided in Section 14, 1,600,000
shares of Stock available for issuance under the Plan shall be available for
issuance pursuant to Incentive Stock Options. Such maximum numbers may be
increased from time to time by approval of the Board and by the stockholders of
the Company if, in the opinion of counsel for the Company, stockholder approval
is required. Stock issued or to be issued under the Plan shall be authorized but
unissued shares; or, to the extent permitted by applicable law, issued shares
that have been reacquired by the Company.

4.2 Individual Award Limits. Subject to adjustment as provided in Section 14,
the maximum number or value of shares of Stock that may be covered by an Award
granted under the Plan (other than Substitute Awards) to a single Participant in
any calendar year shall not exceed the shares of Stock available for issuance
under the Plan under Section 4.1.

4.3 Share Counting. The Committee may adopt reasonable counting procedures to
ensure appropriate counting, avoid double counting (as, for example, in the case
of tandem Awards) and make adjustments in accordance with Section 14. If the
Exercise Price of any Option granted under the Plan, or if pursuant to
Section 12 the tax withholding obligation of any Participant with respect to an
Option or other Award, is satisfied by tendering shares of Stock to the Company
or by withholding shares of Stock, the number of shares of Stock issued net of
the shares of Stock tendered or withheld shall be deemed delivered for purposes
of determining the maximum number of shares of Stock available for delivery
under the Plan. To the extent that an Award under the Plan is canceled, expired,
forfeited, settled in cash, settled by issuance of fewer shares than the number
underlying the Award, or otherwise terminated without delivery of shares to the
Participant, the shares of Stock retained or returned to the Company will also
be available under the Plan.

 

5

ELIGIBILITY AND PARTICIPATION

Subject to the provisions of this Plan, the Committee may, from time to time,
select from all Employees of the Company or an Affiliate to whom Awards shall be
granted; provided, however, to the extent required under Section 409A of the
Code, an Affiliate of the Company shall include only an entity in which the
Company possesses at least twenty percent (20%) of the total combined voting
power of the entity’s outstanding voting securities or such other threshold
ownership percentage permitted or required under Section 409A of the Code. An
Employee may receive more than one Award, subject to such restrictions as are
provided herein.

 

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6

STOCK OPTIONS

6.1 Grant of Options. Subject to the provisions of this Plan, Options may be
granted to Participants in such number, and upon such terms, and at any time and
from time to time as shall be determined by the Committee, it its sole
discretion; provided that Incentive Stock Options may be granted only to
eligible Employees of the Company or of any parent corporation or subsidiary
corporation (as permitted by Section 422 of the Code).

6.2 Award Agreement. Each Option granted under the Plan shall be evidenced by an
Award Agreement that shall specify the Exercise Price, the number of shares of
Stock covered by the Option, the maximum term of the Option, the conditions upon
which an Option shall become vested and exercisable and such other provisions as
the Committee shall determine, consistent with the terms of the Plan. The Award
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option.

(a) Exercise Price. The Exercise Price for each Option shall be as determined by
the Committee and shall be specified in the Award Agreement. The Exercise Price
shall be: not less than one hundred percent (100%) of the Fair Market Value of a
share of Stock on the Grant Date; provided, however, that the foregoing minimum
Exercise Price shall not apply to Substitute Awards. In no case shall the
Exercise Price of any Option be less than the par value of a share of Stock.

(b) Number of Shares. Each Award Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.

(c) Term. Each Option shall terminate as set forth in the Award Agreement and
all rights to purchase shares of Stock shall expire at such time as the
Committee shall determine at the time of grant; provided, however, no Option
shall be exercisable later than the tenth (10th) anniversary of the Grant Date.

(d) Restrictions on Exercise. The Award Agreement shall set forth any
installment or other restrictions on exercise of the Option during the term of
the Option. Each Option shall become exercisable and shall vest over such period
of time, or upon such events, as determined by the Committee.

6.3 Exercise of Option.

(a) Manner of Exercise. An Option granted hereunder shall be exercised, in whole
or in part, by providing written or electronic notice, on a form provided by the
Company, to an employee as designated by the Company, specifying the number of
shares of Stock to be purchased and accompanied by full payment of the Exercise
Price for the shares and satisfaction of any tax withholding requirements.

(b) Payment. A condition to the issuance or other delivery of shares of Stock as
to which an Option shall be exercised shall be the payment of the Exercise Price
and satisfaction of any tax withholding requirements. The Exercise Price of an
Option shall be payable to the Company in full, in any method permitted under
the Award Agreement, including: (i) in cash or in cash equivalents acceptable to
the Company; (ii) by tendering unrestricted shares of Stock already

 

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owned by the Participant (for at least six (6) months or such other period as
may be required by the Committee in order to comply with applicable law and to
avoid adverse accounting consequences) on the date of surrender to the extent
the shares of Stock have a Fair Market Value on the date of surrender equal to
the aggregate Exercise Price of the shares as to which such Option shall be
exercised, provided that, in the case of an Incentive Stock Option, the right to
make payment in the form of already owned shares of Stock may be authorized only
at the time of grant, (iii) any other method approved or accepted by the
Committee in its sole discretion, including, but not limited to a cashless
(broker-assisted) exercise (although limitations might apply to certain
executive officers), or (iv) any combination of the foregoing. Unless otherwise
determined by the Committee, all payments under all of the methods indicated
above shall be paid in United States dollars.

(c) Delivery of Shares. Promptly after the exercise of an Option by a
Participant and the payment in full of the Exercise Price, such Participant
shall be entitled to the issuance of certificates evidencing such Participant’s
ownership of the shares of Stock purchased upon exercise of the Option.
Notwithstanding any other provision of this Plan to the contrary, the Company
may elect to satisfy any requirement under this Plan for the delivery of
certificates through the use of electronic or other forms of book-entry.

6.4 Termination of Service. Each Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the Option following
termination of the Participant’s Service. Such provisions shall be determined in
the sole discretion of the Committee, need not be uniform among all Options
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination of Service.

6.5 Limitations on Incentive Stock Options.

(a) Initial Exercise. The aggregate Fair Market Value of the shares of Stock
with respect to which Incentive Stock Options are exercisable for the first time
by a Participant in any calendar year, under the Plan or otherwise, shall not
exceed $100,000. For this purpose, the Fair Market Value of the shares of Stock
shall be determined as of the Grant Date and each Incentive Stock Option shall
be taken into account in the order granted.

(b) Ten Percent Stockholders. An Incentive Stock Option granted to a Participant
who is the holder of record of more than ten percent (10%) of the combined
voting power of all classes of stock of the Company shall have an Exercise Price
at least equal to one hundred and ten percent (110%) of the Fair Market Value of
a share of Stock on the Grant Date of the Option and the term of the Option
shall not exceed five (5) years.

(c) Notification of Disqualifying Disposition. If any Participant shall make any
disposition of shares of Stock acquired pursuant to the exercise of an Incentive
Stock Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), the Participant shall notify
the Company of such disposition within ten (10) days thereof.

(d) Limitations on Exercise. No Incentive Stock Option shall be exercisable as
an Incentive Stock Option more than three (3) months after the Participant
ceases to be an Employee for any reason other than death or Disability, or more
than one (1) year after the Participant ceases to be an Employee due to death or
Disability.

 

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6.6 Transferability. Except as provided in Section 6.7, during the lifetime of a
Participant, only the Participant (or, in the event of legal incapacity or
incompetency, the Participant’s guardian or legal representative) may exercise
an Option. Except as provided in Section 6.7, no Option shall be assignable or
transferable by the Participant to whom it is granted, other than by will or the
laws of descent and distribution.

6.7 Family Transfers. If authorized in the applicable Award Agreement, a
Participant may transfer, not for value, all or part of an Option to any Family
Member. For the purpose of this Section 6.7, a “not for value” transfer is a
transfer which is (i) a gift, (ii) a transfer under a domestic relations order
in settlement of marital property rights; or (iii) unless applicable law does
not permit such transfers, a transfer to an entity in which more than fifty
percent (50%) of the voting interests are owned by Family Members (or the
Participant) in exchange for an interest in that entity. Following a transfer
under this Section 6.7, any such Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer.
Subsequent transfers of transferred Options are prohibited except to Family
Members of the original Participant in accordance with this Section 6.7 or by
will or the laws of descent and distribution. The events of termination of
Service under an Option shall continue to be applied with respect to the
original Participant, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods specified in the applicable
Award Agreement.

6.8 Rights of Holders of Options. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a stockholder of the Company (for example, the right to receive
cash or dividend payments or distributions attributable to the subject shares of
Stock or to direct the voting of the shares of Stock) until the shares of Stock
covered thereby are fully paid and issued to such individual. Except as provided
in Section 14 hereof, no adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date of such issuance.

 

7

STOCK APPRECIATION RIGHTS

7.1 Grant of Stock Appreciation Rights. Subject to the provisions of this Plan,
Stock Appreciation Rights may be granted to Participants at any time and from
time to time as shall be determined by the Committee. The Committee may grant
freestanding Stock Appreciation Rights, Stock Appreciation Rights that are
granted in tandem with an Option, or any combination thereof.

7.2 Award Agreement. Each Stock Appreciation Right shall be evidenced by an
Award Agreement that shall specify the Grant Price, the number of shares of
Stock covered by the Stock Appreciation Right, the maximum duration of the Stock
Appreciation Right, the conditions upon which the Stock Appreciation Right shall
become vested and exercisable and such other provisions as the Committee shall
determine, consistent with the terms of the Plan.

(a) Grant Price. The Grant Price for each Stock Appreciation Right shall be
determined by the Committee and shall be specified in the Award Agreement. Other
than with respect to Substitute Awards, the Grant Price shall not be less than
one hundred percent (100%) of the Fair Market Value of a share of Stock on the
Grant Date of the Stock Appreciation Right.

(b) Number of Shares. Each Award Agreement shall state that it covers a
specified number of shares of Stock, as determined by the Committee.

 

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(c) Term. Each Stock Appreciation Right shall terminate and all rights with
respect to the Stock Appreciation Right shall expire at such time as the
Committee shall determine at the time of grant; provided, however, no Stock
Appreciation Rights shall be exercisable later than the tenth (10th) anniversary
of the Grant Date.

(d) Restrictions on Exercise. The Award Agreement shall set forth any
installment or other restrictions on exercise of the Stock Appreciation Right
during its term. Each Stock Appreciation Right shall become exercisable and
shall vest over such period of time, or upon such events, as determined by the
Committee (including based on achievement of performance goals or future service
requirements).

7.3 Exercise of Stock Appreciation Right. A Participant desiring to exercise a
Stock Appreciation Right shall give written or electronic notice, on a form
provided by the Company, of such exercise to the Company with the information
the Company deems reasonably necessary to exercise the Stock Appreciation Right.
If a Stock Appreciation Right is issued in tandem with an Option, except as may
otherwise be provided by the Committee, the Stock Appreciation Right shall be
exercisable during the period that its related Option is exercisable. Upon the
exercise of a Stock Appreciation Right, a Participant shall be entitled to
receive payment from the Company in an amount determined by multiplying:

(a) The excess of the Fair Market Value of a share of Stock on the date of
exercise over the Grant Price; by

(b) The number of shares of Stock with respect to which the Stock Appreciation
Right is exercised.

At the discretion of the Committee, the payment upon exercise may be in cash,
shares of Stock or any combination thereof, or in any other manner approved by
the Committee in its sole discretion. The Committee’s determination as to the
form of settlement shall be set forth in the Award Agreement.

7.4 Effect of Exercise. If a Stock Appreciation Right is issued in tandem with
an Option, the exercise of the Stock Appreciation Right or the related Option
will result in an equal reduction in the number of corresponding shares of Stock
subject to the Option or Stock Appreciation Right that were granted in tandem
with such Stock Appreciation Right and Option.

7.5 Termination of Service. Each Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the Stock Appreciation
Right following termination of the Participant’s Service. Such provisions shall
be determined in the sole discretion of the Committee, need not be uniform among
all Stock Appreciation Rights issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of Service. Any Stock
Appreciation Right issued in tandem with an Option shall be exercisable
following termination of the Participant’s Service to the same extent that its
related Option is exercisable following the Participant’s termination of
Service.

7.6 Transferability. A Stock Appreciation Right shall only be transferable upon
the same terms and conditions with respect to transferability as are specified
in Sections 6.6 and 6.7 with respect to Options.

 

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8

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

8.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the
provisions of this Plan, the Committee at any time and from time to time, may
grant shares of Restricted Stock or Restricted Stock Units to Participants in
such amounts as the Committee shall determine.

8.2 Award Agreement. Each grant of Restricted Stock or Restricted Stock Units
shall be evidenced by an Award Agreement that shall specify the Restriction
Period, the number of shares of Restricted Stock or the number of Restricted
Stock Units granted and such other provisions as the Committee shall determine.

8.3 Restrictions on Transfer. Except as provided in this Plan or an Award
Agreement, the shares of Restricted Stock and Restricted Stock Units may not be
sold, transferred, pledged, assigned or otherwise alienated or hypothecated
until the end of the Restriction Period established by the Committee and
specified in the Award Agreement (and in the case of Restricted Stock Units
until the date of delivery or other payment), or upon earlier satisfaction or
any other conditions, as specified by the Committee, in its sole discretion. All
rights with respect to the Restricted Stock or Restricted Stock Units granted to
a Participant shall be available during his or her lifetime only to such
Participant, except as otherwise provided in an Award Agreement or at any time
by the Committee.

8.4 Forfeiture; Other Restrictions. The Committee shall impose such other
conditions and restrictions on any shares of Restricted Stock or Restricted
Stock Units as it may deem advisable including a requirement that the
Participant pay a specified amount to purchase each share of Restricted Stock,
restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions or restrictions under applicable laws or under
the requirements of any stock exchange or market upon which shares of Stock are
then listed or traded, or holding requirements or sale restrictions placed on
the shares of Stock by the Company upon vesting of such Restricted Stock or
Restricted Stock Units.

8.5 Restricted Stock Units. A holder of Restricted Stock Units shall have no
rights other than those of a general creditor of the Company. Restricted Stock
Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Award Agreement. Restricted Stock
Units may be settled in cash or Stock, as determined by the Committee and set
forth in the Award Agreement.

8.6 Termination of Service. Unless otherwise provided by the Committee in the
applicable Award Agreement, upon the termination of a Participant’s Service with
the Company or an Affiliate, any shares of Restricted Stock or Restricted Stock
Units held by such Participant that have not vested, or with respect to which
all applicable restrictions and conditions have not lapsed, shall immediately be
deemed forfeited, and the Participant shall have no further rights with respect
to such Awards, including but not limited to any right to vote Restricted Stock
or any right to receive dividends or Dividend Equivalents with respect to
Restricted Stock or Restricted Stock Units.

8.7 Stockholder Privileges. Unless otherwise determined by the Committee and set
forth in the Award Agreement:

(a) A Participant holding shares of Restricted Stock shall generally have the
rights of stockholder to vote the shares or Restricted Stock during the
Restriction Period. The Committee may provide in an Award Agreement that the
holder of such Restricted Stock shall be entitled to receive ordinary cash
dividends actually paid with respect to the Restricted Stock in accordance with
Section 11.

 

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(b) A Participant holding Restricted Stock Units shall have no rights of a
stockholder of the Company with respect to the Restricted Stock Units. The
Committee may provide in an Award Agreement that the holder of such Restricted
Stock Units shall be entitled to receive Dividend Equivalents in accordance with
Section 11.

 

9

QUALIFIED PERFORMANCE BASED COMPENSATION

9.1 Grant or Vesting of Award Subject to Objective Performance Goals. The
Committee may, in its discretion, condition the grant, vesting, or payment of an
Award on the attainment of one or more pre-established objective performance
goals, in accordance with the “qualified performance based compensation”
exception to Code Section 162(m).

9.2 Establishment of Performance Goals. All performance goals established
pursuant to this Article 9 shall be objective and shall be established by the
Committee within 90 days after the beginning of the period of service to which
the performance goal relates (and in no event after passage of more than 25% of
the period to which the performance goal relates). Performance goals may include
alternate and multiple goals and shall be based on one or more of the following
criteria: (a) total shareholder return; (b) return on assets, return on equity,
or return on capital employed; (c) measures of profitability such as earnings
per share, corporate or business-unit net income, net income before
extraordinary or one-time items, earnings before interest and taxes, or earnings
before interest, taxes, depreciation and amortization; (d) cash flow from
operations; (e) gross or net revenues or gross or net margins; (f) levels of
operating expense or other expense items reported on the income statement;
(g) measures of customer satisfaction and customer service; (h) safety;
(i) annual or multi-year average production growth; (j) efficiency or
productivity measures such as annual or multi-year absolute or per-unit
operating and maintenance costs; (k) satisfactory completion of a major project
or organizational initiative with specific criteria set in advance by the
Committee; (l) debt ratios or other measures of credit quality or liquidity;
(m) strategic asset sales or acquisitions in compliance with specific criteria
set in advance by the Committee; (n) sales and marketing measures, such as
annual or multi-year “net-back” sales or the introduction of new products in
accordance with specific goals set in advance by the Committee; (o) staffing and
retention and (p) any criteria stated in the stockholder approved Executive
Officer Performance–Based Compensation Plan (as amended). The performance goals
applicable to a particular Award shall be set forth by the Committee in the
Award Agreement for such Award.

9.3 Achievement of Performance Goals. The Committee shall certify in writing
prior to the grant, vesting, or payment of any Award that the applicable
performance goals have been satisfied. Except as may otherwise be provided
herein or as may otherwise be contained in the Award Agreement (which provisions
shall comply with Section 162(m)), in the event that the performance goals are
not satisfied, the Award shall not be granted or become vested or payable, as
applicable.

9.4 Committee to Comply with Section 162(m). Notwithstanding anything to the
contrary herein, the “Committee,” for purposes of this Section 9, shall consist
solely of two or more persons who qualify as “outside directors” within the
meaning of Section 162(m) of the Code.

 

10

OTHER STOCK-BASED AWARDS

From time to time during the duration of this Plan, the Committee may, in its
sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may (i) acquire shares of Stock
under the Plan, whether by purchase, outright grant, or

 

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otherwise, or (ii) receive an Award, whether payable in cash or in Stock, the
value of which is determined, in whole or in part, based on the value of Common
Stock. Any such arrangements shall be subject to the general provisions of this
Plan and all cash payments or shares of Stock issued pursuant to such
arrangements shall be made under this Plan.

 

11

DIVIDENDS AND DIVIDEND EQUIVALENTS

Subject to the terms of the Plan and any applicable Award Agreement, a
Participant shall, if so determined by the Committee, be entitled to receive,
currently, or on a deferred basis, dividends or Dividend Equivalents, with
respect to the shares of Stock covered by the Award. The Committee may provide
that any dividends paid on shares of Stock subject to an Award must be
reinvested in additional shares of Stock, which may or may not be subject to the
same vesting conditions and restrictions applicable to the Award.
Notwithstanding the award of Dividend Equivalents or dividends, a Participant
shall not be entitled to receive a special or extraordinary dividend or
distribution unless the Committee shall have expressly authorized such receipt.
All distributions, if any, received by a Participant with respect to an Award as
a result of any split, Stock dividend, combination of shares of Stock, or other
similar transaction shall be subject to the restrictions applicable to the
original Award.

 

12

TAX WITHHOLDING

The Company or any Affiliate, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Participant any federal, state, or
local taxes, domestic or foreign, of any kind required by law with respect to
the vesting of or other lapse of restrictions applicable to Awards or upon the
issuance of any shares of Stock or payment of any kind upon the exercise of any
Options or Stock Appreciation Rights. At the time of such vesting, lapse,
payment, or exercise, the Participant shall pay to the Company or Affiliate, as
the case may be, any amount that the Company or Affiliate may reasonably
determine to be necessary to satisfy such withholding obligation.

Subject to the prior approval of the Company or the Affiliate, which may be
withheld by the Company or the Affiliate, as the case may be, in its sole
discretion, the Participant may elect to have shares of Stock withheld or to
deliver shares to satisfy the minimum statutory withholding rates for federal,
state and local income taxes and employment taxes that are applicable to
supplemental taxable income (“Minimum Statutory Withholding”) obligations. The
Participant may elect to satisfy Minimum Statutory Withholding obligations, in
whole or in part, (i) by causing the Company or the Affiliate to withhold shares
of Stock otherwise issuable to the Participant or (ii) by delivering to the
Company or the Affiliate shares of Stock already owned by the Participant (for
at least six (6) months or such other period as may be required by the Committee
in order to comply with applicable law and to avoid adverse accounting
consequences). The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value not in excess of such withholding obligations. The
Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Committee as of the date that the amount
of tax to be withheld is to be determined. A Participant who has made an
election pursuant to this Section 12 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.

 

13

PARACHUTE LIMITATIONS

Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Participant
with the Company or any Affiliate,

 

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except an agreement, contract, or understanding that expressly or impliedly
modifies or excludes application of this Section 13 (an “Other Agreement”), and
notwithstanding any formal or informal plan or other arrangement for the direct
or indirect provision of compensation to the Participant (including groups or
classes of participants or beneficiaries of which the Participant is a member),
whether or not such compensation is deferred, is in cash, or is in the form of a
benefit to or for the Participant (a “Benefit Arrangement”), if the Participant
is a “disqualified individual,” as defined in Section 280G(c) of the Code, any
Awards held by that Participant and any right to receive any payment or other
benefit under this Plan shall not become exercisable or vested (i) to the extent
that such right to exercise, vesting, payment, or benefit, taking into account
all other rights, payments, or benefits to or for the Participant under this
Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Participant under this Plan to be considered a
“parachute payment” within the meaning of Section 280G(b)(2) of the Code as then
in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a
Parachute Payment, the aggregate after-tax amounts received by the Participant
from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Participant without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Participant under any
Other Agreement or any Benefit Arrangement would cause the Participant to be
considered to have received a Parachute Payment under this Plan that would have
the effect of decreasing the after-tax amount received by the Participant as
described in clause (ii) of the preceding sentence, then the Committee shall
have the right, in its sole discretion, to designate those rights, payments, or
benefits under this Plan, any Other Agreements, and any Benefit Arrangements to
be reduced or eliminated so as to avoid having the payment or benefit to the
Participant under this Plan be deemed to be a Parachute Payment.

 

14

EFFECT OF CHANGES IN CAPITALIZATION

14.1 Changes in Stock. The maximum number of shares of Stock for which Awards
may be made under the Plan as set forth in Section 4.1 shall be proportionately
increased or decreased for any increase or decrease in the number of shares of
Stock on account of any recapitalization, reclassification, split, reverse
split, combination, exchange, dividend or other distribution payable in shares
of Stock, or for any other increase or decrease in such shares of Stock effected
without receipt of consideration by the Company occurring after the Effective
Date (any such event hereafter referred to as a “Corporate Event”). In addition,
subject to the exception set forth in the second sentence of Section 14.4, the
number and kind of shares for which Awards are outstanding shall be
proportionately increased or decreased for any increase or decrease in the
number of shares of Stock on account of any Corporate Event. Any such adjustment
in outstanding Options or Stock Appreciation Rights shall not increase the
aggregate Exercise Price or Grant Price payable with respect to shares that are
subject to the unexercised portion of an outstanding Option or Stock
Appreciation Right, as applicable, and the adjustment shall comply with the
requirements under Section 409A of the Code. The conversion of any convertible
securities of the Company shall not be treated as an increase in shares effected
without receipt of consideration. Notwithstanding the foregoing, in the event of
any distribution to the Company’s stockholders of securities of any other entity
or other assets (including an extraordinary cash dividend but excluding a
non-extraordinary dividend payable in cash or in stock of the Company) without
receipt of consideration by the Company, the Company shall proportionately
adjust (i) the number and kind of shares subject to outstanding Awards and/or
(ii) the Exercise Price per share of outstanding Options and the Grant Price of
outstanding Stock Appreciation Rights to reflect such distribution.
Notwithstanding the foregoing, upon the occurrence of any event or transaction

 

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contemplated in this Section 14.1, any changes contemplated herein shall be
modified to the minimum extent necessary, in the sole discretion of the
Committee, to avoid any tax that may otherwise become due under Section 409A of
the Code.

14.2 Change of Control. Subject to the exception set forth in the second
sentence of Section 14.4, and except as otherwise provided in any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Participant with the Company or any Affiliate, upon a Change of Control, the
Committee in its discretion may take any of the following actions with respect
to non-vested Awards as of the date of the Change of Control: (i) provide that
any or all such outstanding Awards shall be fully vested, exercisable, and/or
payable regardless of whether all vesting conditions relating to length of
service, attainment of performance goals, or otherwise have been satisfied;
(ii) provide that any or all such outstanding Awards shall become fully vested,
exercisable, and/or payable if, within a reasonable period of time not to exceed
18 months after the consummation of a Change of Control, a Participant’s Service
is terminated by either the Company, an Affiliate or a successor in interest to
the Company or an Affiliate without Cause or by the Participant for Good Reason;
or (iii) take such further actions, if any, as it deems necessary or desirable
with respect to any Awards, including, without limitation, providing that such
Awards are fully vested, exercisable and/or payable. The Committee need not take
the same action with respect to all outstanding Awards or to all outstanding
Awards of the same type.

14.3 Reorganization in Which the Company Is the Surviving Entity and in Which No
Change of Control Occurs. Subject to the exception set forth in the second
sentence of Section 14.4, if the Company shall be the surviving entity in any
reorganization, merger, or consolidation of the Company with one or more other
entities and in which no Change of Control occurs, any Award theretofore made
pursuant to the Plan shall pertain to and apply solely to the securities to
which a holder of the number of securities subject to such Award would have been
entitled immediately following such reorganization, merger, or consolidation,
and, in the case of Options and Stock Appreciation Rights, with a corresponding
proportionate adjustment of the Exercise Price or Grant Price per share so that
the aggregate Exercise Price or Grant Price thereafter shall be the same as the
aggregate Exercise Price or Grant Price of the shares of Stock remaining subject
to the Option or Stock Appreciation Right immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an
Award Agreement evidencing any other Award, any restrictions applicable to such
Award shall apply as well to any replacement shares of Stock received by the
Participant as a result of the reorganization, merger or consolidation.
Notwithstanding the foregoing, upon the occurrence of any event or transaction
contemplated in this Section 14.3, any changes contemplated herein shall be
modified to the minimum extent necessary, in the sole discretion of the
Committee, to avoid any tax that may otherwise become due under Section 409A of
the Code.

14.4 Adjustment. Adjustments under Section 14 related to shares of Stock or
securities of the Company shall be made by the Committee, whose determination in
that respect shall be final, binding and conclusive. The Committee may provide
in the Award Agreements at the time of Award, or any time thereafter with the
consent of the Participant, for different provisions to apply to an Award in
place of those described in Sections 14.1, 14.2 and 14.3. Notwithstanding the
foregoing, any different provisions or changes to provisions contemplated herein
shall be modified to the minimum extent necessary, in the sole discretion of the
Committee, to avoid any tax that may otherwise become due under Section 409A of
the Code.

 

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14.5 No Limitations on the Company. The making of Awards pursuant to the Plan
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.

 

15

REQUIREMENTS OF LAW

15.1 General. The Company shall not be required to issue or sell any shares of
Stock under any Award if the issuance or sale of such shares would constitute a
violation by the Participant, any other individual exercising an Option or Stock
Appreciation Right, or the Company of any provisions of any law or regulation of
any governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of any shares
subject to an Award upon any securities exchange or under any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares of Stock hereunder, no shares of Stock
may be issued or sold to the Participant or any other individual exercising an
Option or Stock Appreciation Right pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company, and any delay
caused thereby shall in no way affect the date of termination of the Award.
Specifically, in connection with the Securities Act, upon the exercise of any
Option or the delivery of any shares of Stock underlying an Award, unless a
registration statement under the Securities Act is in effect with respect to the
shares of Stock covered by such Award, the Company shall not be required to
issue or sell such shares of Stock unless the Committee has received evidence
satisfactory to it that the Participant or any other individual exercising an
Option may acquire such shares of Stock pursuant to an exemption from
registration under the Securities Act. Any determination in this connection by
the Committee shall be final, binding, and conclusive. The Company may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
or sale of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable until the shares
of Stock covered by such Option are registered or are exempt from registration,
the exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.

15.2 Rule 16b-3. During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, it is the intent of the Company
that Awards pursuant to the Plan and the exercise of Options granted hereunder
will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the Committee does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to
the extent permitted by law and deemed advisable by the Committee, and shall not
affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Committee may exercise its discretion to modify this Plan in any
respect necessary to satisfy the requirements of, or to take advantage of any
features of, the revised exemption or its replacement.

 

16

GENERAL PROVISIONS

16.1 Disclaimer of Rights. No provision in the Plan, in any Award or in any
Award Agreement shall be construed to confer upon any individual the right to
remain in the employ or service of the

 

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Company or any Affiliate, or to interfere in any way with any contractual or
other right or authority of the Company either to increase or decrease the
compensation or other payments to any individual at any time, or to terminate
any employment or other relationship between any individual and the Company or
any Affiliate. The obligation of the Company to pay any benefits pursuant to
this Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Company to
transfer any amounts to a third party trustee or otherwise hold any amounts in
trust or escrow for payment to any participant or beneficiary under the terms of
the Plan.

16.2 Nontransferability of Awards. Except as provided in Sections 6.6, 6.7, and
7.6 or otherwise at the time of grant or thereafter, no right or interest of any
Participant in an Award granted pursuant to the Plan shall be assignable or
transferable during the lifetime of the Participant, either voluntarily or
involuntarily, or subjected to any lien, directly or indirectly, by operation of
law, or otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy, except pursuant to a domestic relations order in settlement of
marital property rights. In the event of a Participant’s death, a Participant’s
rights and interests in Awards shall only be transferable by will or the laws of
descent and distribution to the extent provided under this Plan, and payment of
any amounts due thereunder shall be made to, and exercise of any Option or Stock
Appreciation Right may be made by, the Participant’s legal representatives,
heirs or legatees. If in the opinion of the Committee a person entitled to
payments or to exercise rights with respect to the Plan is unable to care for
his or her affairs because of mental condition, physical condition or age,
payment due such person may be made to, and such rights shall be exercised by,
such person’s guardian, conservator or other legal personal representative upon
furnishing the Committee with evidence satisfactory to the Committee of such
status.

16.3 Changes in Accounting or Tax Rules. Except as provided otherwise at the
time an Award is granted, notwithstanding any other provision of the Plan to the
contrary, if, during the term of the Plan, any changes in the financial or tax
accounting rules applicable to any Award shall occur which, in the sole judgment
of the Committee, may have a material adverse effect on the reported earnings,
assets or liabilities of the Company, the Committee shall have the right and
power to modify as necessary, any then outstanding and unexercised Options,
Stock Appreciation Rights and other outstanding Awards as to which the
applicable rules or other restrictions have not been satisfied.

16.4 Nonexclusivity of the Plan. The adoption of the Plan shall not be construed
as creating any limitations upon the right and authority of the Committee to
adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically
to a particular individual or particular individuals) as the Committee in its
discretion determines desirable.

16.5 Captions. The use of captions in this Plan or any Award Agreement is for
the convenience of reference only and shall not affect the meaning of any
provision of the Plan or such Award Agreement.

16.6 Other Award Agreement Provisions. Each Award Agreement may contain such
other terms and conditions not inconsistent with the Plan as may be determined
by the Committee, in its sole discretion.

16.7 Other Employee Benefits. The amount of any compensation deemed to be
received by a Participant as a result of the exercise of an Option or Stock
Appreciation Right, the sale of Shares received upon such exercise, the vesting
of any Restricted Stock, distributions with respect to

 

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Restricted Stock Units, or Other Stock-Based Awards shall not constitute
“earnings” or “compensation” with respect to which any other employee benefits
of such employee are determined, including without limitation, benefits under
any pension, profit sharing, 401(k), life insurance or salary continuation plan,
except as may be specifically be provided otherwise under the terms of such
other employee benefit plan or program.

16.8 Severability. If any provision of the Plan or any Award Agreement shall be
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

16.9 Governing Law. The validity and construction of this Plan and the Award
Agreements shall be construed in accordance with and governed by the laws of the
State of Delaware other than any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of this Plan and the
Award Agreements to the substantive laws of any other jurisdiction.

16.10 Section 409A. Notwithstanding anything in this Plan to the contrary, the
Plan and Awards made under the Plan are intended to comply with the requirements
imposed by Section 409A of the Code. If any Plan provision or Award under the
Plan would result in the imposition of an additional tax under Section 409A of
the Code, the Company and the Participant intend that the Plan provision or
Award will be reformed to avoid imposition, to the extent possible, of the
applicable tax and no action taken to comply with Section 409A of the Code shall
be deemed to adversely affect the Participant’s rights to an Award. The
Participant further agrees that the Committee, in the exercise of its sole
discretion and without the consent of the Participant, may amend or modify an
Award in any manner and delay the payment of any amounts payable pursuant to an
Award to the minimum extent necessary to meet the requirements of Section 409A
of the Code as the Committee deems appropriate or desirable. Subject to any
other restrictions or limitations contained herein, in the event that a
“specified employee” (as defined under Section 409A of the Code) becomes
entitled to a payment under the Plan that is subject to Section 409A of the Code
on account of a “separation of service” (as defined under Section 409A oft the
Code), such payment shall not occur until the date that is six months plus one
day from the date of such “separation from service.” Any amount that is
otherwise payable within the six (6) month period described herein will be
aggregated and paid in a lump sum amount without interest.

 

17

AMENDMENT, MODIFICATION AND TERMINATION

17.1 Amendment, Modification, and Termination. Subject to Sections 3.2, 16.10
and 17.2, the Board may at any time terminate, and from time to time may amend
or modify the Plan provided, however, that no amendment or modification may
become effective without approval of the stockholders of the Company if
stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable.

17.2 Awards Previously Granted. Except as otherwise may be required under
Section 16.10, notwithstanding Section 17.1 to the contrary, no amendment,
modification or termination of the Plan or Award Agreement shall adversely
affect in any material way any previously granted Award, without the written
consent of the Participant holding such Award.

 

20

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18

STOCKHOLDER APPROVAL; EFFECTIVE DATE OF PLAN

The Plan shall be effective as of the Effective Date, which is the date the Plan
was approved by the stockholders of the Company.

 

19

DURATION

Unless sooner terminated by the Board, this Plan shall terminate automatically
10 years from the Effective Date. After the Plan is terminated, no Awards may be
granted. Awards outstanding at the time the Plan is terminated shall remain
outstanding in accordance with the terms and conditions of the Plan and the
Award Agreement.

 

20

EXECUTION

To record adoption of the Plan by the Board as of January 24, 2011, the Company
has caused its authorized officer to execute the Plan.

 

M.D.C. HOLDINGS, INC. By:   /S/    MICHAEL TOUFF           Senior Vice
President        

 

Date: March 1, 2011

 

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