AMENDED AND RESTATED

2008 HOVNANIAN ENTERPRISES, INC.

STOCK INCENTIVE PLAN

 

1.

PURPOSE OF THE PLAN

The purpose of the Plan is to aid the Company and its Affiliates in recruiting
and retaining key employees, directors and consultants of outstanding ability
and to motivate such employees, directors and consultants to exert their best
efforts on behalf of the Company and its Affiliates by providing incentives
through the granting of Awards. The Company expects that it will benefit from
the added interest which such key employees, directors or consultants will have
in the welfare of the Company as a result of their proprietary interest in the
Company's success. Upon approval by the Company’s stockholders, the Plan is
intended to supersede and replace the 1999 Hovnanian Enterprises, Inc. Stock
Incentive Plan, as amended and restated prior to the Effective Date (the “1999
Plan”), and equity-based Awards that were previously granted under the 1999 Plan
that remain outstanding shall be governed pursuant to the terms set forth
herein.

2.

DEFINITIONS

The following capitalized terms used in the Plan have the respective meanings
set forth in this Section:

 

(a)

Act: The Securities Exchange Act of 1934, as amended, or any successor thereto.

(b)       Affiliate: With respect to the Company, any entity directly or
indirectly controlling, controlled by, or under common control with, the Company
or any other entity designated by the Board in which the Company or an Affiliate
has an interest.

(c)       Award: An Option, Stock Appreciation Right or Other Stock-Based Award
granted pursuant to the Plan (including, without limitation, Awards granted
under the 1999 Plan).

(d)       Beneficial Owner: A “beneficial owner”, as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto).

 

(e)

Board: The Board of Directors of the Company.

 

(f)

Change in Control:

The occurrence of any of the following events:

(i)        any Person (other than a Person holding securities representing 10%
or more of the combined voting power of the Company's outstanding securities as
of the Effective Date, or any Family Member of such a Person, the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, or any company owned, directly or indirectly, by the shareholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

2

 

Company, representing 50% or more of the combined voting power of the Company's
then-outstanding securities;

(ii)       during any period of twenty-four consecutive months (not including
any period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board, and any new director (other than (A) a
director nominated by a Person who has entered into an agreement with the
Company to effect a transaction described in Sections 2(f) (i), (iii) or (iv) of
the Plan or (B) a director nominated by any Person (including the Company) who
publicly announces an intention to take or to consider taking actions
(including, but not limited to, an actual or threatened proxy contest) which if
consummated would constitute a Change in Control) whose election by the Board or
nomination for election by the Company's shareholders was approved in advance by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;

(iii)      the consummation of any transaction or series of transactions under
which the Company is merged or consolidated with any other company, other than a
merger or consolidation which would result in the shareholders of the Company
immediately prior thereto continuing to own (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 65%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation; or

(iv)      the Company undergoes a complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets, other than a liquidation of the Company into a
wholly-owned subsidiary.

 

(g)

Code: The Internal Revenue Code of 1986, as amended, or any successor thereto.

(h)       Committee: The Compensation Committee of the Board (or a subcommittee
thereof as provided under Section 4), or such other committee of the Board to
which the Board has delegated power to act under or pursuant to the provisions
of the Plan, or the full Board.

(i)        Company: Hovnanian Enterprises, Inc., a Delaware corporation, and any
successors thereto.

(j)        Disability: Inability of a Participant to perform in all material
respects his duties and responsibilities to the Company, or any Subsidiary of
the Company, by reason of a physical or mental disability or infirmity which
inability is reasonably expected to be permanent and has continued (i) for a
period of six consecutive months or (ii) such shorter period as the Committee
may reasonably determine in good faith. The Disability determination shall be in
the sole discretion of the Committee and a Participant (or his representative)
shall furnish the Committee with medical evidence documenting the Participant's
disability or infirmity which is satisfactory to the Committee.

 

(k)

Effective Date: February 6, 2008.

(l)        Fair Market Value: On a given date, the closing price of the Shares
as reported on such date on the Composite Tape of the principal national
securities exchange on which such

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

3

 

Shares are listed or admitted to trading, or, if no Composite Tape exists for
such national securities exchange on such date, then on the principal national
securities exchange on which such Shares are listed or admitted to trading, or,
if the Shares are not listed or admitted on a national securities exchange, the
arithmetic mean of the per Share closing bid price and per Share closing asked
price on such date as quoted on the National Association of Securities Dealers
Automated Quotation System (or such market in which such prices are regularly
quoted), or, if there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee in good faith.
If no sale of Shares shall have been reported on such Composite Tape or such
national securities exchange on such date or quoted on the National Association
of Securities Dealer Automated Quotation System on such date, then the
immediately preceding date on which sales of the Shares have been so reported or
quoted shall be used.

 

(m)

Family Member:

(i)        any Person holding securities representing 10% or more of the
combined voting power of the Company's outstanding securities as of the
Effective Date;

(ii)

any spouse of such a person;

 

(iii)

any descendant of such a person;

 

(iv)

any spouse of any descendant of such a person; or

 

(v)

any trust for the benefit of any of the aforementioned persons.

(n)       ISO: An Option that is also an incentive stock option granted pursuant
to Section 6(d) of the Plan.

(o)       LSAR: A limited stock appreciation right granted pursuant to Section
7(d) of the Plan.

(p)       1999 Plan: The 1999 Hovnanian Enterprises, Inc. Stock Incentive Plan,
as amended and restated prior to the Effective Date 1999.

 

(q)

Other Stock-Based Awards: Awards granted pursuant to Section 8 of the Plan.

 

(r)

Option: A stock option granted pursuant to Section 6 of the Plan.

(s)       Option Price: The purchase price per Share of an Option, as determined
pursuant to Section 6(a) of the Plan.

(t)        Participant: An employee, director or consultant of the Company or
any of its Affiliates who is selected by the Committee to participate in the
Plan.

(u)       Performance-Based Awards: Certain Other Stock-Based Awards granted
pursuant to Section 8(b) of the Plan.

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

4

 

(v)       Person: A “person”, as such term is used for purposes of Section 13(d)
or 14(d) of the Act (or any successor section thereto).

 

(w)

Plan: The 2008 Hovnanian Enterprises, Inc. Stock Incentive Plan.

 

(x)

Shares: Shares of common stock of the Company.

(y)       Stock Appreciation Right: A stock appreciation right granted pursuant
to Section 7 of the Plan.

(z)       Subsidiary: A subsidiary corporation, as defined in Section 424(f) of
the Code (or any successor section thereto).

3.

SHARES SUBJECT TO THE PLAN

Subject to Sections 4, 6(f) and 9 of the Plan (and giving effect to the
Company’s stock split on March 26, 2004), the total number of Shares which may
be issued under the Plan pursuant to grants of ISOs or other Awards (inclusive
of Shares previously issued under the 1999 Plan) is 16,972,128 and the maximum
number of Shares for which Options, Stock Appreciation Rights, restricted Shares
or restricted Share units may be granted during a fiscal year (inclusive of any
such Awards previously granted under the 1999 Plan) to any Participant shall be
1,000,000. The Shares may consist, in whole or in part, of unissued Shares or
treasury Shares. The issuance of Shares or the payment of cash upon the exercise
of an Award or in consideration of the cancellation or termination of an Award
shall reduce the total number of Shares available under the Plan, as applicable.
Notwithstanding the forgoing, in the event that any Awards under the Plan
terminate or lapse (or have terminated or lapsed) for any reason from and after
November 1, 2007 (including, without limitation, due to a voluntary or
involuntary forfeiture of such Awards), the number of Shares subject to such
terminated or lapsed Awards shall not be available for future Award grants under
the Plan and the total number of Shares available for issuance under the Plan
shall instead be reduced by such number of Shares.

4.

ADMINISTRATION

The Plan shall be administered by the Committee, which may delegate its duties
and powers in whole or in part to any subcommittee thereof consisting solely of
at least two individuals who are each intended to qualify as “non-employee
directors” within the meaning of Rule 16b-3 under the Act (or any successor rule
thereto), “outside directors” within the meaning of Section 162(m) of the Code
(or any successor section thereto) and “independent directors” within the
meaning of the applicable rules, if any, of any national securities exchange on
which Shares are listed or admitted to trading; provided, however, that any
action permitted to be taken by the Committee may be taken by the Board, in its
discretion. The Committee is authorized to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, and to make
any other determinations that it deems necessary or desirable for the
administration of the Plan. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administrations of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to Participants and
their beneficiaries or successors).

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

5

 

Determinations made by the Committee under the Plan need not be uniform and may
be made selectively among Participants, whether or not such Participants are
similarly situated. Awards may, in the discretion of the Committee, be made
under the Plan in assumption of, or in substitution for, outstanding awards
previously granted by the Company or its Affiliates or a company acquired by the
Company or with which the Company combines. The number of Shares underlying such
substitute awards shall be counted against the aggregate number of Shares
available for Awards under the Plan. The Committee shall require payment of any
minimum amount it may determine to be necessary to withhold for federal, state,
local or other, taxes as a result of the exercise or vesting of an Award. Unless
the Committee specifies otherwise, the Participant may elect to pay a portion or
all of such minimum withholding taxes by (a) delivery in Shares or (b) having
Shares withheld by the Company from any Shares that would have otherwise been
received by the Participant. The number of Shares so delivered or withheld shall
have an aggregate Fair Market Value sufficient to satisfy the applicable minimum
withholding taxes. If the chief executive officer of the Company is a member of
the Board, the Board by specific resolution may constitute such chief executive
officer as a committee of one which shall have the authority to grant Awards of
up to an aggregate of 1,000,000 Shares (giving effect to the Company’s stock
split on March 26, 2004, and otherwise subject to the provisions of Section 9 of
the Plan) in each fiscal year to Participants who are (i) not subject to the
rules promulgated under Section 16 of the Act (or any successor section thereto)
or (ii) covered employees (or anticipated to become covered employees) as such
term is defined in Section 162(m) of the Code; provided, however, that such
chief executive officer shall notify the Committee of any such grants made
pursuant to this Section 4.

5.

LIMITATIONS

No Award may be granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.

6.

TERMS AND CONDITIONS OF OPTIONS

Options granted under the Plan shall be, as determined by the Committee,
non-qualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:

(a)       Option Price. The Option Price per Share shall be determined by the
Committee, but shall not be less than 100% of the Fair Market Value of a Share
on the date an Option is granted (other than in the case of Options granted in
substitution of previously granted awards, as described in Section 4).

(b)       Exercisability. Options granted under the Plan shall be exercisable at
such time and upon such terms and conditions as may be determined by the
Committee, but in no event shall an Option be exercisable more than ten years
after the date it is granted. The Committee may, in its discretion, accelerate
the date after which Options may be exercised in whole or in part. If the chief
executive officer of the Company is a member of the Board, the Board by specific
resolution may constitute such chief executive officer as a committee of one
which shall

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

6

 

have the authority to accelerate the date after which Options may be exercised
in whole or in part.

(c)       Exercise of Options. Except as otherwise provided in the Plan or in an
Award agreement, an Option may be exercised for all, or from time to time any
part, of the Shares for which it is then exercisable. For purposes of Section 6
of the Plan, the exercise date of an Option shall be the later of the date a
notice of exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii), (iii) or (iv)
in the following sentence. The purchase price for the Shares as to which an
Option is exercised shall be paid to the Company in full not later than at the
time that the Shares being purchased are delivered to or at the direction of the
Participant, in each case at the election of the Participant to the extent
permitted by law and as designated by the Committee, (i) in cash, (ii) in Shares
having a Fair Market Value equal to the aggregate Option Price for the Shares
being purchased and satisfying such other requirements as may be imposed by the
Committee; provided, that such Shares have been held by the Participant for no
less than six months (or such other period as established from time to time by
the Committee in order to avoid adverse accounting treatment applying generally
accepted accounting principles), (iii) partly in cash and partly in such Shares,
(iv) through the delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate Option Price for the
Shares being purchased or (v) through net settlement in Shares. No Participant
shall have any rights to dividends or other rights of a shareholder with respect
to Shares subject to an Option until the Participant has given written notice of
exercise of the Option, paid in full for such Shares and, if applicable, has
satisfied any other conditions imposed by the Committee pursuant to the Plan.

(d)       ISOs. The Committee may grant Options under the Plan that are intended
to be ISOs. Such ISOs shall comply with the requirements of Section 422 of the
Code (or any successor section thereto). No ISO may be granted to any
Participant who at the time of such grant, owns more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least 110% of the
Fair Market Value of a Share on the date the ISO is granted and (ii) the date on
which such ISO terminates is a date not later than the day preceding the fifth
anniversary of the date on which the ISO is granted. Any Participant who
disposes of Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year after the
transfer of such Shares to the Participant, shall notify the Company of such
disposition and of the amount realized upon such disposition. All Options
granted under the Plan are intended to be nonqualified stock options, unless the
applicable Award agreement expressly states that the Option is intended to be an
ISO. If an Option is intended to be an ISO, and if for any reason such Option
(or portion thereof) shall not qualify as an ISO, then, to the extent of such
nonqualification, such Option (or portion thereof) shall be regarded as a
nonqualified stock option granted under the Plan; provided that such Option (or
portion thereof) otherwise complies with the Plan’s requirements relating to
nonqualified stock options. In no event shall any member of the Committee, the
Company or any of its Affiliates (or their respective employees, officers or
directors) have any liability to any Participant (or any other Person) due to
the failure of an Option to qualify for any reason as an ISO.

(e)       Attestation. Wherever in this Plan or any agreement evidencing an
Award a Participant is permitted to pay the exercise price of an Option or taxes
relating to the exercise of

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

7

 

an Option by delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement by presenting
proof of beneficial ownership of such Shares, in which case the Company shall
treat the Option as exercised without further payment and/or shall withhold such
number of Shares from the Shares acquired by the exercise of the Option, as
appropriate.

(f)        Repricing of Options. Notwithstanding any other provisions under the
Plan, no action shall be taken under the Plan to (i) lower the exercise prices
of any Company stock options after they are granted, (ii) exchange stock options
for stock options with lower exercise prices or for other Awards (other than
pursuant to Section 9 hereof) or (iii) take any other action that is treated as
a “repricing” of stock options under generally accepted accounting principles;
provided, however, that such actions shall be permitted to the extent approved
by at least a majority of the Board’s “independent directors” (as defined for
purposes of The New York Stock Exchange listed company rules). Any such approved
action shall be treated as a grant of a new Award to the extent required under
Sections 162(m), 422 or 424 of the Code (for individuals who are “covered
employees” under Section 162(m) of the Code at the time of such action, or for
stock options that are intended to retain their status as ISOs).

7.

TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

(a)       Grants. The Committee also may grant (i) a Stock Appreciation Right
independent of an Option or (ii) a Stock Appreciation Right in connection with
an Option, or a portion thereof. A Stock Appreciation Right granted pursuant to
clause (ii) of the preceding sentence (A) may be granted at the time the related
Option is granted or at any time prior to the exercise or cancellation of the
related Option, (B) shall cover the same number of Shares covered by an Option
(or such lesser number of Shares as the Committee may determine) and (C) shall
be subject to the same terms and conditions as such Option except for such
additional limitations as are contemplated by this Section 7 (or such additional
limitations as may be included in an Award agreement).

(b)       Terms. The exercise price per Share of a Stock Appreciation Right
shall be an amount determined by the Committee but in no event shall such amount
be less than the greater of (i) the Fair Market Value of a Share on the date the
Stock Appreciation Right is granted or, in the case of a Stock Appreciation
Right granted in conjunction with an Option, or a portion thereof, the Option
Price of the related Option and (ii) an amount permitted by applicable laws,
rules, restated By-laws or policies of regulatory authorities or stock
exchanges. Each Stock Appreciation Right granted independent of an Option shall
entitle a Participant upon exercise to an amount equal to (i) the excess of (A)
the Fair Market Value on the exercise date of one Share over (B) the exercise
price per Share, times (ii) the number of Shares covered by the Stock
Appreciation Right. Each Stock Appreciation Right granted in conjunction with an
Option, or a portion thereof, shall entitle a Participant to surrender to the
Company the unexercised Option, or any portion thereof, and to receive from the
Company in exchange therefor an amount equal to (i) the excess of (A) the Fair
Market Value on the exercise date of one Share over (B) the Option Price per
Share, times (ii) the number of Shares covered by the Option, or portion
thereof, which is surrendered. The date a notice of exercise is received by the
Company shall be the exercise date. Payment shall be made in Shares or in cash,
or partly in Shares and partly in cash (any such Shares valued at such Fair
Market Value), all as shall be determined by the Committee. Stock

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

8

 

Appreciation Rights may be exercised from time to time upon actual receipt by
the Company of written notice of exercise stating the number of Shares with
respect to which the Stock Appreciation Right is being exercised. No fractional
Shares will be issued in payment for Stock Appreciation Rights, but instead cash
will be paid for a fraction or, if the Committee should so determine, the number
of Shares will be rounded downward to the next whole Share.

(c)       Limitations. The Committee may impose, in its discretion, such
conditions upon the exercisability or transferability of Stock Appreciation
Rights as it may deem fit.

(d)       Limited Stock Appreciation Rights. The Committee may grant LSARs that
are exercisable upon the occurrence of specified contingent events. Such LSARs
may provide for a different method of determining appreciation, may specify that
payment will be made only in cash and may provide that any related Awards are
not exercisable while such LSARS are exercisable. Unless the context otherwise
requires, whenever the term “Stock Appreciation Right” is used in the Plan, such
term shall include LSARs.

8.

OTHER STOCK-BASED AWARDS

(a)       Generally. The Committee, in its sole discretion, may grant or sell
Awards of Shares, Awards of restricted Shares and Awards that are valued in
whole or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares (“Other Stock-Based Awards”). Such Other Stock-Based Awards
shall be in such form, and dependent on such conditions, as the Committee shall
determine, including, without limitation, the right to receive one or more
Shares (or the equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event and/or the attainment of
performance objectives. Other Stock-Based Awards may be granted alone or in
addition to any other Awards granted under the Plan. Subject to the provisions
of the Plan, the Committee shall determine to whom and when Other Stock-Based
Awards will be made, the number of Shares to be awarded under (or otherwise
related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards
shall be settled in cash, Shares or a combination of cash and Shares; and all
other terms and conditions of such Awards (including, without limitation, the
vesting provisions thereof and provisions ensuring that all Shares so awarded
and issued shall be fully paid and non-assessable).

(b)       Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Other Stock-Based Awards granted under this Section 8 may be
granted in a manner which is intended to be deductible by the Company under
Section 162(m) of the Code (or any successor section thereto)
(“Performance-Based Awards”). A Participant's Performance-Based Award shall be
determined based on the attainment of written performance goals approved by the
Committee for a performance period established by the Committee (i) while the
outcome for that performance period is substantially uncertain and (ii) no more
than 90 days after the commencement of the performance period to which the
performance goal relates or, if less, the number of days which is equal to 25
percent of the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria: (i)
earnings before or after taxes (including earnings before interest, taxes,
depreciation and amortization); (ii) net income; (iii) operating income; (iv)
earnings per Share; (v) book value per Share; (vi) return on shareholders'
equity; (vii) expense management; (viii) return on investment; (ix) improvements
in capital structure; (x) profitability of an identifiable business

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

9

 

unit or product; (xi) maintenance or improvement of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi) cash
flow; (xvii) working capital; (xviii) changes in net assets (whether or not
multiplied by a constant percentage intended to represent the cost of capital);
and (xix) return on assets. The foregoing criteria may relate to the Company,
one or more of its Affiliates or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis and/or be
relative to one or more peer group companies or indices, or any combination
thereof, all as the Committee shall determine. In addition, to the degree
consistent with Section 162(m) of the Code (or any successor section thereto),
the performance goals may be calculated without regard to extraordinary items.
In any event, the performance goals shall be based on an objective formula or
standard. The maximum amount of a Performance-Based Award during a fiscal year
to any Participant shall be equal to the greater of (x) $15,000,000 and (y) 2.5
percent (2.5%) of the Company's income before income taxes, as reported in the
Company's audited consolidated financial statements for the year in respect of
which the Performance-Based Award is to be payable or distributed, as
applicable. The Committee shall determine whether, with respect to a performance
period, the applicable performance goals have been met with respect to a given
Participant and, if they have, shall so certify and ascertain the amount of the
applicable Performance-Based Award. No Performance-Based Awards will be paid for
such performance period until such certification is made by the Committee. The
amount of the Performance-Based Award actually paid to a given Participant may
be less than the amount determined by the applicable performance goal formula,
at the discretion of the Committee. The amount of the Performance-Based Award
determined by the Committee for a performance period shall be paid to the
Participant at such time as determined by the Committee in its sole discretion
after the end of such performance period; provided, however, that a Participant
may, if and to the extent permitted by the Committee and consistent with the
provisions of Section 162(m) of the Code, elect to defer payment of a
Performance-Based Award.

9.

ADJUSTMENTS UPON CERTAIN EVENTS

Notwithstanding any other provisions in the Plan to the contrary, the following
provisions shall apply to all Awards granted under the Plan:

(a)       Generally. In the event of any change in the outstanding Shares after
the Effective Date by reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Shares or other corporate exchange or change in capital structure, any
distribution to shareholders of Shares other than regular cash dividends or any
similar event, the Committee in its sole discretion and without liability to any
person shall make such substitution or adjustment, if any, as it deems to be
equitable, as to (i) the number or kind of Shares or other securities issued or
reserved for issuance as set forth in Section 3 of the Plan or pursuant to
outstanding Awards, (ii) the Option Price, (iii) the maximum number or amount of
Awards that may be granted to any Participant during a fiscal year and/or (iv)
any other affected terms of such Awards.

(b)       Change in Control. Except as otherwise provided in an Award agreement,
in the event of a Change in Control, the Committee in its sole discretion and
without liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including, without limitation,
(i) the acceleration of an Award, (ii) the payment of a cash

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

10

 

amount in exchange for the cancellation of an Award which, in the case of
Options and Stock Appreciation Rights, may equal the excess, if any, of value of
the consideration to be paid in the Change in Control transaction to holders of
the same number of Shares subject to such Options or Stock Appreciation Rights
(or, if no consideration is paid in any such transaction, the Fair Market Value
of the Shares subject to such Options or Stock Appreciation Rights) over the
aggregate exercise price of such Options or Stock Appreciation Rights and/or
(iii) the requiring of the issuance of substitute Awards that will substantially
preserve the value, rights and benefits of any affected Awards previously
granted hereunder) as of the date of the consummation of the Change in Control.

10.

NO RIGHT TO EMPLOYMENT

The granting of an Award under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment of a Participant and shall
not lessen or affect the Company's or Subsidiary's right to terminate the
employment of such Participant.

11.

SUCCESSORS AND ASSIGNS

The Plan shall be binding on all successors and assigns of the Company and a
Participant; including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.

12.

NONTRANSFERABILITY OF AWARDS

Unless otherwise determined by the Committee, an Award shall not be transferable
or assignable by the Participant otherwise than by will or by the laws of
descent and distribution. Notwithstanding the foregoing, a Participant may
transfer an Option (other than an ISO) in whole or in party by gift or domestic
relations order to a family member of the Participant (a “Permitted Transferee”)
and, following any such transfer such Option or portion thereof shall be
exercisable only by the Permitted Transferee, provided that no such Option or
portion thereof is transferred for value, and provided further that, following
any such transfer, neither such Option or any portion thereof nor any right
hereunder shall be transferable other than to the Participant or otherwise than
by will or the laws of descent and distribution or be subject to attachment,
execution or other similar process. For purposes of this Section 12, “family
member” includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law,
including adoptive relationships, any person sharing the Participant's household
(other than a tenant or employee), trust in which these persons have more than
50% of the beneficial interest, a foundation in which these persons (or the
Participant) control the management of assets and any other entity in which
these persons (or the Participant) own more than 50% of the voting interests. An
Award exercisable after the death of a Participant may be exercised by the
legatees, personal representatives or distributees of the Participant.

13.

AMENDMENTS OR TERMINATION

The Committee may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

11

 

Company, would (except as is provided in the Plan for adjustments in certain
events), increase the total number of Shares reserved for the purposes of the
Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b) without the consent of a Participant, would impair any of
the rights or obligations under any Award theretofore granted to such
Participant under the Plan; provided, however, that the Committee may amend the
Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws. Notwithstanding
anything to the contrary herein, the Committee may not amend, alter or
discontinue the provisions relating to Section 9(b) of the Plan after the
occurrence of a Change in Control.

Without limiting the generality of the foregoing, to the extent applicable,
notwithstanding anything herein to the contrary, this Plan and Awards issued
hereunder shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretative guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the Effective Date. Notwithstanding any provision of
the Plan to the contrary, in the event that the Committee determines that any
amounts payable hereunder will be taxable to a Participant under Section 409A of
the Code and related Department of Treasury guidance prior to payment to such
Participant of such amount, the Company may (a) adopt such amendments to the
Plan and Awards and appropriate policies and procedures, including amendments
and policies with retroactive effect, that the Committee determines necessary or
appropriate to preserve the intended tax treatment of the benefits provided by
the Plan and Awards hereunder and/or (b) take such other actions as the
Committee determines necessary or appropriate to avoid the imposition of an
additional tax under Section 409A of the Code.

14.

INTERNATIONAL PARTICIPANTS

With respect to Participants who reside or work outside the United States of
America and who are not (and who are not expected to be) 'covered employees'
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such
Participants in order to conform such terms with the requirements of local law
or to obtain more favorable tax or other treatment for a Participant, the
Company or an Affiliate.

15.

CHOICE OF LAW

The Plan shall be governed by and construed in accordance with the laws of the
State of Delaware.

16.

EFFECTIVENESS OF THE PLAN

The Plan shall be effective as of the Effective Date, subject to the approval of
the Company’s shareholders.

17.

SECTION 409A

Notwithstanding other provisions of the Plan or any Award agreements thereunder,
no Award shall be granted, deferred, accelerated, extended, paid out or modified
under this Plan in a

 

 

045050-0001-08347-Active.10647769.6

 

--------------------------------------------------------------------------------

 

12

 

manner that would result in the imposition of an additional tax under Section
409A of the Code upon a Participant. In the event that it is reasonably
determined by the Committee that, as a result of Section 409A of the Code,
payments or deliveries of shares in respect of any Award under the Plan may not
be made at the time contemplated by the terms of the Plan or the relevant Award
agreement, as the case may be, without causing the Participant holding such
Award to be subject to taxation under Section 409A of the Code, the Company will
make such payment or delivery of shares on the first day that would not result
in the Participant incurring any tax liability under Section 409A of the Code.
In the case of a Participant who is a “specified employee” (within the meaning
of Section 409A(a)(2)(B)(i) of the Code), payments and/or deliveries of shares
in respect of any Award subject to Section 409A of the Code that are linked to
the date of the Participant’s separation from service shall not be made prior to
the date which is six (6) months after the date of such Participant’s separation
from service from the Company and its affiliates, determined in accordance with
Section 409A of the Code and the regulations promulgated thereunder. The Company
shall use commercially reasonable efforts to implement the provisions of this
Section 17 in good faith; provided that neither the Company, the Committee nor
any of the Company’s employees, directors or representatives shall have any
liability to Participants with respect to this Section 17.

 

 

045050-0001-08347-Active.10647769.6