Exhibit 10(v)

 

K. HOVNANIAN ENTERPRISES, INC.

Plan Document

 

AMENDMENT AND RESTATEMENT

 

EFFECTIVE JANUARY 1, 2005

 

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K. HOVNANIAN ENTERPRISES, INC.

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

Purpose

 

 

1

 

 

 

 

Article 1 Definitions

1

 

 

Article 2 Selection, Enrollment, Eligibility

9

 

 

 

2.1

Selection by Committee

9

 

2.2

Enrollment Requirements

9

 

2.3

Eligibility; Commencement of Participation

10

 

2.4

Termination of Participation and/or Deferrals

10

 

2.5

Freeze of Participation in Option Swap/In-Kind Stock Bonus/Restricted Share Unit
Deferral Features of Plan

10

 

 

 

 

Article 3 Deferral Commitments/Company Contributions/Crediting/Taxes

11

 

 

 

3.1

Matched 401(k) Continuation Deferral Amount

11

 

3.2

Annual Deferral Amount Deferrals

11

 

3.3

Annual Deferred Share Amount Deferrals

12

 

3.4

Election to Defer; Effect of Election Form

12

 

3.5

Withholding of Annual Deferral Amounts

16

 

3.6

Annual Company Contribution Amount

16

 

3.7

Rollover Amount

17

 

3.8

Option Swaps/In-Kind Stock Bonus/Restricted Share Unit Deferrals

18

 

3.9

Investment of Trust Assets

19

 

3.10

Sources of Stock

19

 

3.11

Vesting

19

 

3.12

Crediting/Debiting of Account Balances

20

 

3.13

FICA and Other Taxes

23

 

3.14

Distributions

24

 

 

 

 

Article 4 Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal
Election

25

 

 

 

4.1

Short-Term Payout

25

 

4.2

Other Benefits Take Precedence Over Short-Term Payout

29

 

4.3

Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies

29

 

4.4

Withdrawal Election (Not Available After December 31, 2004)

30

 

4.5

Application of Section 409A Distribution Election Transition Relief

30

 

 

 

 

Article 5 Retirement Benefit

32

 

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5.1

Retirement Benefit

32

 

5.2

Payment of Retirement Benefit

32

 

 

 

 

Article 6 Pre-Retirement Survivor Benefit

35

 

 

 

6.1

Pre-Retirement Survivor Benefit

35

 

6.2

Payment of Pre-Retirement Survivor Benefit

35

 

6.3

Death Prior to Completion of Termination Benefit or Retirement Benefit

35

 

 

 

 

Article 7 Termination Benefit

36

 

 

 

7.1

Termination Benefit

36

 

7.2

Payment of Termination Benefit

36

 

 

 

 

Article 8 Beneficiary Designation

37

 

 

 

8.1

Beneficiary

37

 

8.2

Beneficiary Designation; Change

37

 

8.3

Acceptance

37

 

8.4

No Beneficiary Designation

37

 

8.5

Doubt as to Beneficiary

37

 

8.6

Discharge of Obligations

37

 

 

 

 

Article 9 Termination, Amendment or Modification

38

 

 

 

9.1

Termination

38

 

9.2

Amendment

39

 

9.3

Plan Agreement

39

 

9.4

Effect of Payment

39

 

9.5

Amendment to Ensure Proper Characterization of the Plan

39

 

 

 

 

Article 10 Administration

40

 

 

 

10.1

Committee Duties

40

 

10.2

Agents

40

 

10.3

Binding Effect of Decisions

40

 

10.4

Indemnity of Committee

40

 

10.5

Employer Information

40

 

 

 

 

Article 11 Other Benefits and Agreements

41

 

 

 

11.1

Coordination with Other Benefits

41

 

 

 

 

Article 12 Claims Procedures

41

 

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12.1

Scope of Claims Procedures

41

 

12.2

Initial Claim

41

 

12.3

Review Procedures

42

 

12.4

Calculation of Time Periods

43

 

12.5

Legal Action

43

 

 

 

 

Article 13 Trust

43

 

 

 

13.1

Establishment of the Trust

43

 

13.2

Interrelationship of the Plan and the Trust

43

 

13.3

Distributions From the Trust

44

 

 

 

 

Article 14 Miscellaneous

44

 

 

 

14.1

Status of Plan

44

 

14.2

Unsecured General Creditor

44

 

14.3

Employer’s Liability

44

 

14.4

Nonassignability

44

 

14.5

Not a Contract of Employment

44

 

14.6

Furnishing Information

45

 

14.7

Terms

45

 

14.8

Captions

45

 

14.9

Governing Law

45

 

14.10

Notice

45

 

14.11

Successors

46

 

14.12

Spouse’s Interest

46

 

14.13

Validity

46

 

14.14

Incompetent

46

 

14.15

Court Order

46

 

14.16

Acceleration of Distribution

46

 

14.17

Delay in Payment

47

 

14.18

Prohibited Acceleration/Distribution Timing

47

 

14.19

Insurance

47

 

14.20

Aggregation of Employers

48

 

14.21

Aggregation of Plans

48

 

14.22

USERRA

48

 

14.23

Legal Fees to Enforce Rights After Change in Control

48

 

 

 

Schedule A

50

 

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K. HOVNANIAN ENTERPRISES, INC.

 

EXECUTIVE DEFERRED COMPENSATION PLAN

 

 

Amendment and Restatement

 

Effective January 1, 2005

 

Purpose

 

The purpose of this Plan is to provide specified benefits to a select group of
management and highly compensated Associates of Hovnanian Enterprises, Inc., a
Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. 
This Plan shall be unfunded for tax purposes and for purposes of Title I of
ERISA.  This Plan, as amended and restated herein, is intended to comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended, as added by the American Jobs Creation Act of 2004 and the final
Treasury regulations or any other authoritative guidance issued thereunder
(“Section 409A”).  In order to facilitate administration and participant
communications of certain changes to the Plan becoming effective January 1, 2005
due to Section 409A, certain documents associated with this Plan refer to that
portion of this Plan relating to deferrals and credits made on or after
January 1, 2005 as the “K. Hovnanian Enterprises, Inc. 2005 Executive Deferred
Compensation Plan”.  Notwithstanding any such references, it is intended that,
effective January 1, 2005, the official Plan document governing the terms and
conditions of all Plan balances (whether attributable to deferrals/credits made
before or after January 1, 2005) shall be this Plan document.

 

ARTICLE 1
Definitions

 

For purposes of this Plan, unless otherwise clearly apparent from the context,
the following phrases or terms shall have the following indicated meanings:

 

1.1           “Account Balance” shall mean, with respect to a Participant, a
credit on the records of the Employer equal to the sum of (i) the Deferral
Account balance, (ii) the Company Contribution Account balance, (iii) the
Deferred Share Deferral Account balance, (iv) the Pre-2005 Deferral Account
balance, (v) the Pre-2005 Company Contribution Account balance, (vi) the
Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit
Deferral Account balance, and (vii) the Pre-2005 Rollover Account balance.  The
Account Balance, and each other specified account balance, shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to a Participant, or his
or her designated Beneficiary, pursuant to this Plan.

 

1

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1.2                                 “Annual Company Contribution Amount” shall
mean, for any one Plan Year, the amount determined in accordance with
Section 3.6 of this Plan, which shall consist of Annual Company Matching
Contribution Amounts described in Section 3.6(a) and Annual Company Basic
Contribution Amounts described in Section 3.6(b) to the extent the Participant
is entitled thereto.

 

1.3                                 “Annual Deferral Amount” shall mean that
portion of a Participant’s Base Annual Salary and Bonus (including any Matched
401(k) Continuation Deferral Amount, as elected by the Participant) that is
deferred, in accordance with Article 3, for any one Plan Year.  In the event of
a Participant’s Retirement, death or a Termination of Employment prior to the
end of a Plan Year, such year’s Annual Deferral Amount shall be the actual
amount withheld prior to such event.

 

1.4                                 “Annual Deferred Share Amount” shall mean,
with respect to a Participant for any one Fiscal Year, the value of unvested
Stock awarded under any Hovnanian Enterprises, Inc. or Company stock incentive
plan, deferred in accordance with Section 3.3 of this Plan.

 

1.5                                 “Annual Installment Method” shall be an
annual installment payment over one of the installment payout alternatives
selected by the Participant in accordance with this Plan, calculated as follows
(subject to Section 3.14):  The Account Balance of the Participant shall be
calculated as of the close of business on the date of reference (or, if the date
of reference is not a business day, on the immediately following business day),
and shall be paid during the ninety (90) day period thereafter unless otherwise
provided herein.  The date of reference with respect to the first annual
installment payment shall be as provided in Section 5.2 and the date of
reference with respect to subsequent annual installment payments shall be the
anniversary of the first annual installment payment.

 

The installment payout alternatives available for election by the Participant
with respect to his or her Retirement Benefit is substantially equal annual
installments between two (2) and fifteen (15) years.  The annual installment
shall be calculated by multiplying the Account Balance by a fraction, the
numerator of which is one (1), and the denominator of which is the remaining
number of annual payments due the Participant.  By way of example, if a
Participant elects a five (5) year Annual Installment Method, the first payout
shall be one-fifth (1/5) of the Account Balance (or applicable portion thereof),
calculated as described in this definition.  Within ninety (90) days after the
anniversary of the first annual installment payment, the payment shall be
one-fourth (1/4) of the Account Balance (or applicable portion thereof),
calculated as described in this definition.

 

1.6                                 “Associate” shall mean a person who is an
employee of any Employer.

 

1.7                                 “Base Annual Salary” shall mean the annual
cash compensation relating to services performed during any calendar year,
whether or not paid in such calendar

 

2

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

year or included on the Federal Income Tax Form W-2 for such calendar year,
excluding bonuses, commissions, overtime, fringe benefits, stock options,
relocation expenses, incentive payments, non-monetary awards, directors fees and
other fees, automobile and other allowances paid to a Participant for employment
services rendered (whether or not such allowances are included in the
Associate’s gross income).  Base Annual Salary shall be calculated before
reduction for compensation voluntarily deferred or contributed by the
Participant pursuant to all qualified or non-qualified plans of any Employer and
shall be calculated to include amounts not otherwise included in the
Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), 403(b),
or 132(f)(4) pursuant to plans established by any Employer; provided, however,
that all such amounts will be included in compensation only to the extent that,
had there been no such plan, the amount would have been payable in cash to the
Associate.

 

1.8                                 “Beneficiary” shall mean one or more
persons, trusts, estates or other entities, designated in accordance with
Article 8, that are entitled to receive benefits under this Plan upon the death
of a Participant.

 

1.9                                 “Beneficiary Designation Form” shall mean
the form established from time to time by the Committee that a Participant
completes, signs and returns to the Committee to designate one or more
Beneficiaries.

 

1.10                           “Board” shall mean the board of directors of the
Company.

 

1.11                           “Bonus” shall mean any compensation, in addition
to Base Annual Salary, relating to services performed during any calendar year,
whether or not paid in such calendar year or included on the Federal Income Tax
Form W-2 for such calendar year, ordinarily payable in cash to a Participant as
an Associate under any Employer’s bonus and cash incentive plans, excluding any
stock awards.

 

1.12                           “Claimant” shall have the meaning set forth in
Section 12.2 of this Plan.

 

1.13                           “Code” shall mean the Internal Revenue Code of
1986, as it may be amended from time to time.

 

1.14                           “Committee” shall mean the committee described in
Article 10 of this Plan.

 

1.15                           “Company” shall mean K. Hovnanian
Enterprises, Inc., a California corporation, and any successor to all or
substantially all of the Company’s assets or business.

 

1.16                           “Company Contribution Account” shall mean (i) the
sum of the Participant’s Annual Company Contribution Amounts credited on or
after January 1, 2005, plus (ii) amounts credited or debited in accordance with
all the applicable crediting/debiting provisions of this Plan that relate to the
Participant’s Company Contribution Account, less (iii) all distributions made to
the Participant or his or

 

3

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K. HOVNANIAN ENTERPRISES, INC.

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her Beneficiary pursuant to this Plan that relate to the Participant’s Company
Contribution Account.

 

1.17                           “Deduction Limitation” shall mean the following
described limitation on a benefit that may otherwise be distributable pursuant
to the provisions of this Plan.  Except as otherwise provided, this limitation
shall be applied to all distributions that are “subject to the Deduction
Limitation” under this Plan.   If an Employer reasonably anticipates that, if
any distribution hereunder were made as scheduled, the Employer’s deduction with
respect to that distribution would not be permitted by reason of the limitation
under Code Section 162(m), then the Employer may defer that distribution,
provided that all distributions that could be deferred in accordance with this
Section 1.17 are so deferred, and provided further that the Employer treats
payments to all similarly situated Participants on a reasonably consistent
basis.  Any amounts deferred pursuant to this limitation shall continue to be
credited/debited with additional amounts in accordance with Section 3.12 below,
even if such amount is being paid out in installments. The amounts so deferred
and amounts credited thereon shall be distributed to the Participant or his or
her Beneficiary (in the event of the Participant’s death) during the
Participant’s first taxable year in which the Employer reasonably anticipates,
or should reasonably anticipate, that if the distribution is made during such
year, the deduction of such payment will not be limited by Code Section 162(m). 
To the extent required under Section 409A, where payment to a Specified Employee
is delayed pursuant to the preceding to a date on or after the Specified
Employee’s Separation from Service, the payment will be considered a payment
upon a Separation from Service for purposes of the rules under
Section 409A(a)(2)(B)(i) (generally requiring a six (6) month delay on
distributions upon a Specified Employee’s Separation from Service).  In no event
shall an election be provided to the Participant with respect to the timing of
the payment under the preceding.  Notwithstanding the foregoing, this
Section 1.17 shall apply only to the extent permitted by Section 409A.

 

1.18                           “Deferral Account” shall mean (i) the sum of all
of a Participant’s Annual Deferral Amounts deferred on or after January 1, 2005,
plus (ii) amounts credited or debited in accordance with all the applicable
crediting/debiting provisions of this Plan that relate to the Participant’s
Deferral Account, less (iii) all distributions made to the Participant or his or
her Beneficiary pursuant to this Plan that relate to his or her Deferral
Account.

 

1.19                           “Deferred Share Deferral Account” shall mean
(i) the sum of the Participant’s Annual Deferred Share Amount deferrals deferred
on or after January 1, 2005, plus (ii) amounts credited/debited in accordance
with all the applicable crediting/debiting provisions of this Plan that relate
to the Participant’s Deferred Share Deferral Account, less (iii) all
distributions made to the Participant or his or

 

4

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her Beneficiary pursuant to this Plan that relate to the Participant’s Deferred
Share Deferral Account.

 

1.20                           “Deferred Share Award” shall mean unvested shares
of Stock selected by the Committee in its sole discretion and awarded
(currently, or on a deferred basis) to the Participant under any stock incentive
plan of Hovnanian Enterprises, Inc. or the Company.

 

1.21                           “Deferred Shares” shall mean, for any Deferred
Share Award, the amount of such Deferred Share Award deferred in accordance with
Section 3.3 of this Plan.

 

1.22                           “Election Form” shall mean the form or forms
established from time to time by the Committee that a Participant completes,
signs and returns to the Committee to make an election under the Plan (which
form or forms may take the form of an electronic transmission, if required or
permitted by the Committee).

 

1.23                           “Employer(s)” shall mean Hovnanian
Enterprises, Inc. and/or any of its subsidiaries (now in existence or hereafter
formed or acquired) that have been selected by the Board to participate in the
Plan and have adopted the Plan as a sponsor.  For purposes of this Plan,
“subsidiary” shall include entities required to be aggregated pursuant to
Section 14.20.

 

1.24                           “ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as it may be amended from time to time.

 

1.25                           “Fiscal Year” shall mean a period beginning on
November 1 of each calendar year and continuing through October 31 of the
following calendar year.

 

1.26                           “401(k) Plan” shall mean the Hovnanian Savings
and Investment Retirement Plan, as it may be amended from time to time.

 

1.27                           “In-Kind Stock Bonus Deferral Amount” shall mean,
with respect to a Participant, the value of that portion of a Participant’s
Stock Bonus deferred prior to January 1, 2005 in accordance with
Section 3.8(b) of this Plan.

 

1.28                           “Matched 401(k) Continuation Deferral Amount”
shall mean, for any one Plan Year, the amount determined in accordance with
Section 3.1 of the Plan.

 

1.29                           “Option Swap Amount” shall mean, with respect to
a Participant, the value of any unexercised option to purchase Stock under any
Hovnanian Enterprises, Inc. or Company stock incentive plan deferred prior to
January 1, 2005 in accordance with Section 3.8(a) of this Plan.

 

1.30                           “Participant” shall mean any Associate (i) who is
determined by the Committee to be a member of a select group of management or
highly compensated employees

 

5

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

(within the meaning of ERISA), (ii) who is selected to participate in the Plan,
and (iii)(A) who elects to participate in the Plan, (B) who signs a Plan
Agreement, an Election Form and a Beneficiary Designation Form, (C) whose signed
Plan Agreement, Election Form and Beneficiary Designation Form are accepted by
the Committee, (D) who commences participation in the Plan, and (E) whose Plan
Agreement has not terminated.  A spouse or former spouse of a Participant shall
not be treated as a Participant in the Plan or have an Account Balance under the
Plan, even if he or she has an interest in the Participant’s benefits under the
Plan as a result of applicable law or property settlements resulting from legal
separation or divorce.

 

1.31                           “Performance-Based Compensation” shall mean that
portion of a Participant’s Bonus, the amount of which, or the entitlement to
which, is contingent on the satisfaction of pre-established organizational or
individual performance criteria relating to a performance period of at least
twelve (12) consecutive months, and which qualifies as “performance-based
compensation” under Section 409A including the requirement that the performance
criteria be established in writing by not later than (i) ninety (90) days after
the commencement of the period of service to which the criteria relates and
(ii) the date the outcome ceases to be substantially uncertain.

 

1.32                           “Plan” shall mean the Company’s Executive
Deferred Compensation Plan, which shall be evidenced by this instrument and by
each Plan Agreement, as they may be amended from time to time.

 

1.33                           “Plan Agreement” shall mean a written agreement
(which may take the form of an electronic transmission, if required or permitted
by the Committee), as may be amended from time to time, which is entered into by
and between an Employer and a Participant.  Each Plan Agreement executed by a
Participant and the Participant’s Employer shall provide for the entire benefit
to which such Participant is entitled under the Plan; should there be more than
one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by
the Employer shall supersede all previous Plan Agreements in their entirety and
shall govern such entitlement.  The terms of any Plan Agreement may be different
for any Participant, and any Plan Agreement may provide additional benefits not
set forth in the Plan or limit the benefits otherwise provided under the Plan;
provided, however, that any such additional benefits or benefit limitations
must, unless otherwise provided by the Plan Agreement, be agreed to by both the
Employer and the Participant.  In the Plan Agreement, each Participant shall
acknowledge that he or she accepts all of the terms of the Plan, including the
discretionary authority of the Committee as set forth in Article 10.

 

1.34                           “Plan Year” shall mean a period beginning on
January 1 of each calendar year and continuing through December 31 of such
calendar year.

 

6

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PLAN DOCUMENT continued…

 

1.35                           “Pre-Retirement Survivor Benefit” shall mean the
benefit set forth in Article 6 of this Plan.

 

1.36                           “Pre-2005 Deferral Account” shall mean (i) the
sum of all of a Participant’s Annual Deferral Amounts deferred prior to
January 1, 2005, plus (ii) amounts credited or debited in accordance with all
the applicable crediting/debiting provisions of this Plan that relate to the
Participant’s Pre-2005 Deferral Account, less (iii) all distributions made to
the Participant or his or her Beneficiary pursuant to this Plan that relate to
his or her Pre-2005 Deferral Account.

 

1.37                           “Pre-2005 Deferred Share/Option Swap/In-Kind
Stock Bonus/Restricted Share Unit Deferral Account” shall mean (i) the sum of
the Participant’s Annual Deferred Share Amounts, Option Swap Amounts, In-Kind
Stock Bonus Deferral Amounts and Restricted Share Unit deferrals deferred prior
to January 1, 2005, plus (ii) amounts credited/debited in accordance with all
the applicable crediting/debiting provisions of this Plan that relate to the
Participant’s Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted
Share Unit Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate to the
Participant’s Pre-2005 Deferred Share/Option Swap/In-Kind Bonus/Restricted Share
Unit Deferral Account.

 

1.38                           “Pre-2005 Company Contribution Account” shall
mean (i) the sum of the Participant’s Company Contribution Amounts credited
prior to January 1, 2005, plus (ii) amounts credited or debited in accordance
with all of the applicable crediting/debiting provisions of this Plan that
relate to the Participant’s Pre-2005 Company Contribution Account, less
(iii) all distributions made to the Participant or his or her Beneficiary
pursuant to this Plan that relate to the Participant’s Pre-2005 Company
Contribution Account.

 

1.39                           “Pre-2005 Rollover Account” shall mean (i) the
sum of the Participant’s Rollover Amount credited prior to January 1, 2005, plus
(ii) amounts credited or debited in accordance with all of the applicable
crediting/debiting provisions of this Plan that relate to the Participant’s
Pre-2005 Rollover Account, less (iii) all distributions made to the Participant
or his or her Beneficiary pursuant to this Plan that relate to the Participant’s
Pre-2005 Rollover Account.

 

1.40                           “Retirement”, “Retire(s)” or “Retired” shall
mean, with respect to an Associate, a Separation from Service for any reason
other than a leave of absence or death on or after the earlier of the attainment
of (a) age sixty-five (65) or (b) age fifty-five (55) with ten (10) Years of
Service.

 

1.41                           “Retirement Benefit” shall mean the benefit set
forth in Article 5.

 

1.42                           “Rollover Amount” shall mean the amount
determined in accordance with Section 3.7 of this Plan.

 

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1.43                           “Section 409A” shall mean Code Section 409A and
the Treasury regulations or other authoritative guidance issued thereunder. 
Whenever the terms “subject to Section 409A” or “to the extent permitted by
Section 409A” (or any such similar reference so as to indicate that a Plan
provision is subject to Section 409A) are used, such terms shall be interpreted
to mean that the applicable Plan provision shall be effective only if and to the
extent such provision would not trigger penalty taxes or interest under
Section 409A; except to the extent that Section 409A requires that such terms be
disregarded because they purport to nullify Plan terms that are not in
compliance with Section 409A.

 

1.44                           “Separation from Service” shall mean the
Participant’s separation from service within the meaning of Section 409A,
treating as a Separation from Service an anticipated permanent reduction in the
level of bona fide services to twenty percent (20%) or less of the average level
of bona fide services performed over the immediately preceding thirty-six (36)
month period (or the full period during which the Participant performed services
for the Employer, if that is less than thirty-six (36) months).  For this
purpose, upon a sale or other disposition of the assets of the Employer to an
unrelated purchaser, the Employer reserves the right to the extent permitted by
Section 409A to determine whether Participants providing services to the
purchaser after and in connection with the purchase transaction have experienced
a Separation from Service.

 

1.45                           “Short-Term Payout” shall mean the payout set
forth in Section 4.1 of this Plan.

 

1.46                           “Specified Employee” shall mean, with respect to
an Employer corporation any stock of which is publicly traded on an established
securities market or otherwise, an individual who, as of the date of his or her
Separation from Service, is a Key Employee, as currently defined in Code
Section 416(j) (without regard to paragraph (5) thereof) to mean, as of the
Effective Date, an employee of the corporation who, at any time during the
twelve (12) month period ending on a Specified Employee identification date, is
(a) an officer of the corporation having an annual compensation greater than one
hundred thirty-five thousand dollars ($135,000) for 2005 (indexed for inflation
in future years), (b) a five-percent (5%) owner of the corporation, or (c) a
one-percent (1%) owner of the corporation having an annual compensation from the
corporation of more than one hundred fifty thousand dollars ($150,000).

 

1.47                           “Stock” shall mean Hovnanian Enterprises, Inc.
Class A or Class B common stock, $.01 par value, or any other equity securities
of Hovnanian Enterprises, Inc. or of the Company designated by the Committee.

 

1.48                           “Stock Bonus” shall mean any compensation, in
addition to Base Annual Salary and cash Bonus, relating to services performed
during any calendar year, whether

 

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or not paid in such calendar year, payable as a bonus in shares of Stock under
any Hovnanian Enterprises, Inc. or Company stock incentive plan.

 

1.49                           “Termination Benefit” shall mean the benefit set
forth in Article 7 of this Plan.

 

1.50                           “Termination of Employment” shall mean the
Separation from Service with all Employers, voluntarily or involuntarily, for
any reason other than Retirement, death or an authorized leave of absence.

 

1.51                           “Trust” shall mean the trust established pursuant
to this Plan, as amended from time to time.  The assets of the Trust shall be
the property of the Employer.

 

1.52                           “Unforeseeable Financial Emergency” shall mean a
severe financial hardship to the Participant resulting from (i) an illness or
accident of the Participant, the Participant’s spouse, the Participant’s
dependent (as defined in Code Section 152 without regard to Code
Section 152(b)(1), (b)(2) and (d)(1)(B)) or, effective August 17, 2006, the
Participant’s beneficiary, (ii) a loss of the Participant’s property due to
casualty (including the need to rebuild a home following damage not otherwise
covered by insurance, for example, not as a result of a natural disaster), or
(iii) such other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant (e.g., imminent
foreclosure or eviction from the Participant’s primary residence, the need to
pay for medical expenses, including non-refundable deductibles and prescription
drugs, the need to pay funeral expenses of a spouse, dependent or, effective
August 17, 2006, beneficiary), all as determined in the sole discretion of the
Committee (which discretion the Committee is bound to exercise, however, within
the limits of Section 409A).

 

1.53                           “Years of Service” shall mean the total number of
full years in which a Participant has been employed by one or more Employers. 
For purposes of this definition, a year of employment shall be a 365 day period
(or 366 day period in the case of a leap year) that, for the first year of
employment, commences on the Associate’s date of hiring and that, for any
subsequent year, commences on an anniversary of that hiring date.  Any partial
year of employment shall not be counted.

 

ARTICLE 2
Selection, Enrollment, Eligibility

 

2.1                                 Selection by Committee.  Participation in
the Plan shall be limited to a select group of management and highly compensated
Associates of the Employers, as determined by the Committee in its sole
discretion.  From that group, the Committee shall select, in its sole
discretion, Associates to participate in the Plan.

 

2.2                                 Enrollment Requirements.  The Committee may
require that as a condition to participation, each selected Associate shall
complete, execute and return to the

 

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Committee a Plan Agreement, an Election Form and a Beneficiary Designation
Form (or to enroll using the Internet enrollment procedures established by the
Committee, if any), all within 30 days after he or she is selected to
participate in the Plan.  In addition, the Committee shall establish from time
to time such other enrollment requirements as it determines in its sole
discretion are necessary.  Timely enrollment in the Plan for the 2005 Plan Year
is intended to constitute good faith operational compliance with Section 409A
regardless of whether such enrollment is conducted prior to the date of adoption
of this amended and restated Plan.

 

2.3                                 Eligibility; Commencement of Participation. 
Provided an Associate selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and/or required by the Committee, including
returning all required documents to the Committee (or enrolling using the
Internet enrollment procedures established by the Committee, if any) within the
specified time period, that Associate shall commence participation in the Plan
on the first day of the month following the month in which the Associate
completes all enrollment requirements.  If an Associate fails to meet all such
requirements within the period required, in accordance with Section 2.2, that
Associate shall not be eligible to participate in the Plan until the first day
of the Plan Year (or Fiscal Year with respect to Annual Deferred Share Amount
deferrals) following the delivery to and acceptance by the Committee of the
required documents.  In addition, notwithstanding anything in the Plan to the
contrary, a Participant’s eligibility to participate in the Annual Company
Matching Contribution Amount and/or Annual Company Basic Contribution Amount
provisions of the Plan shall be in the sole discretion of the Committee.

 

2.4                                 Termination of Participation and/or
Deferrals.  If the Committee determines in good faith that a Participant no
longer qualifies as a member of a select group of management or highly
compensated Associates, as membership in such group is determined in accordance
with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have
the right, in its sole discretion, to prevent the Participant from making future
deferral elections and/or from being credited with any further Annual Company
Matching Contribution Amounts or Annual Company Basic Contribution Amounts.

 

2.5                                 Freeze of Participation in Option
Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Features of Plan. 
Notwithstanding any other provision of this Plan, no individual shall become a
Participant in the Option Swap Amounts, In-Kind Stock Bonus Deferral Amounts
and/or Restricted Stock Unit deferral features of this Plan after December 31,
2004.

 

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ARTICLE 3

Deferral Commitments/Company Contributions/Crediting/Taxes

 

3.1                                Matched 401(k) Continuation Deferral Amount. 
For each Plan Year, any Participant whose Total Compensation (as defined in
Section 3.6(a)) is expected to exceed the limit imposed under Code Section
401(a)(17) on the amount of compensation recognizable under the 401(k) Plan
(i.e., $210,000 for 2005) and whom the Committee designates, in its sole
discretion, as eligible to make deferrals of Matched 401(k) Continuation
Deferral Amounts under this Section for the Plan Year, may elect to defer to
this Plan as the Participant’s “Matched 401(k) Continuation Deferral Amount” six
percent (6%) of that portion of the Participant’s Base Annual Salary and/or
Bonus exceeding the Code Section 401(a)(17) limit (i.e., $210,000 for 2005).  
Notwithstanding anything in the Plan or the 401(k) Plan to the contrary, the
level of a Participant’s Matched 401(k) Contribution Deferral Amount, if any,
for a given Plan Year shall be fixed as of the applicable deferral deadline
described in Section 3.4(a)(i) for the Plan Year (i.e., generally the last day
of the Plan Year prior to the Plan Year in which the Matched 401(k) Contribution
Deferral Amount will be earned).

 

3.2                                Annual Deferral Amount Deferrals.

 

(a)                                  Minimum and Maximum Deferrals.  For each
Plan Year, in addition to or instead of any Matched 401(k) Continuation Deferral
Amount which a Participant elects to defer to the Plan for the Plan Year, a
Participant may elect to defer, as his or her Annual Deferral Amount, Base
Annual Salary and Bonus in the following minimum and maximum
amounts/percentages:

 

Deferral

 

Minimum Amount

 

Maximum Percentage

 

Base Annual Salary

 

$

2,000

 

75

%

Bonus

 

$

2,000

 

100

%

 

Notwithstanding the foregoing, the Committee may, in its sole discretion,
establish for any Plan Year minimum(s) and/or maximum(s) which differ from those
set forth above.

 

Subject to Section 409A, if an election is made for less than the stated minimum
amounts (except for any Matched 401(k) Continuation Deferral Amount), or if no
election is made, the amount deferred shall be zero.

 

(b)                                 Short Plan Year.  Notwithstanding the
foregoing, if a Participant first becomes a Participant after the first day of a
Plan Year, the minimum Base

 

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Annual Salary deferral shall be an amount equal to the minimum set forth above,
multiplied by a fraction, the numerator of which is the number of complete
months remaining in the Plan Year and the denominator of which is 12.  Also
notwithstanding the foregoing, if a Participant first becomes a Participant
after the first day of a Plan Year, the maximum Annual Deferral Amount, with
respect to Base Annual Salary and Bonus, shall be limited to the amount of
compensation not yet earned by the Participant as of the date the Participant
submits a Plan Agreement and Election Form to the Committee for acceptance. 
Finally, any Bonus deferral election made by a new Participant after the
beginning of the performance period to which the Bonus relates shall be subject
to the pro-ration provisions of Section 3.4(a)(i) describing that portion of the
Bonus amounts which are considered as applying to services performed after the
deferral election.

 

3.3                                Annual Deferred Share Amount Deferrals. 
Subject to any terms and conditions imposed by the Committee, Participants may
elect to defer under the Plan Annual Deferred Share Amounts.  A Participant may
elect to defer, as his or her Annual Deferred Share Amount, up to 100% of his or
her Deferred Share Award.  Annual Deferred Share Amounts shall be credited (or
continue to be credited) to the Participant on the books of the Company or the
Employer in connection with such an election.  An Annual Deferred Share Amount
shall consist of all Deferred Shares deferred pursuant to this Section 3.3 in
any one Fiscal Year.

 

3.4                                Election to Defer; Effect of Election Form.

 

(a)                                  Timing of Election.

 

(i)                                    Base Annual Salary and Bonus Deferrals. 
Except as provided below, a Participant shall make a deferral election with
respect to Base Annual Salary and/or Bonus amounts to be earned for services
performed during an upcoming twelve (12) month Plan Year.  To the extent
permitted by the Committee, a Participant may make a unique Base Annual Salary
deferral election for the six (6) month period beginning January 1 and ending
June 30 of a given Plan Year and for the six (6) month period beginning July 1
and ending December 31 of a given Plan Year.  Except as provided below, any Base
Annual Salary and/or Bonus deferral election must be made during such period as
shall be established by the Committee which ends no later than the last day of
the Plan Year preceding the Plan Year in which the services giving rise to the
Base Annual Salary and/or Bonus amounts, as applicable, to be deferred are to be
performed.  For these purposes, Base Annual Salary payable after the last day of
the Plan Year for services

 

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K. HOVNANIAN ENTERPRISES, INC.

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performed during the final payroll period containing the last day of the Plan
Year shall be treated as Base Annual Salary for services performed in the
subsequent Plan Year.

 

Also, notwithstanding the preceding, if and to the extent permitted by the
Committee, a Participant may make an election to defer that portion (if any) of
his or her Bonus which qualifies as Performance-Based Compensation no later than
six (6) months prior to the last day of the period over which the services
giving rise to the Performance-Based Compensation are performed, provided that
the Participant performs services continuously from the later of the beginning
of the performance period or the date the performance criteria are established
through the date of the deferral election, and provided further that in no event
may such deferral election be made with respect to any portion of the
Performance-Based Compensation that has become reasonably ascertainable prior to
the making of the deferral election, within the meaning of Section 409A.

 

In addition, notwithstanding the preceding, but subject to Section 14.21, in the
case of the first Plan Year in which an Employee first becomes eligible to
become a Participant (or again becomes eligible after having been ineligible for
at least twenty four (24) months), if and to the extent permitted by the
Committee, the individual may make an election no later than thirty (30) days
after the date he or she becomes eligible to become a Participant to defer Base
Salary and/or Bonus amounts (as applicable) for services to be performed after
the election.  For this purpose, an election will be deemed to apply to Bonus
amounts for services performed after the election if the election applies to no
more than an amount equal to the total Bonus for the performance period
multiplied by the ratio of the number of days remaining in the performance
period after the election over the total number of days in the performance
period.

 

In addition, notwithstanding the preceding, to the extent permitted by the
Committee and under Section 409A, a Participant may make an election to defer
Annual Deferral Amounts that relate all or in part to services performed on or
before December 31, 2005 no later than the earlier of (i) March 15, 2005, or
(ii) the date such Annual Deferral Amounts are otherwise payable to the
Participant.

 

Notwithstanding the preceding, the Committee shall, in its discretion, be
permitted to cause to be paid to the Participant Base Annual Salary and/or Bonus
amounts, as applicable, rather than

 

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

being deferred under the Plan if, under Section 409A, an earlier election was
required in order to properly defer tax with respect to such amount(s).  In
addition, the Committee, in its discretion, shall be permitted to allow a
Participant to revoke or modify a Base Annual Salary and/or Bonus deferral
election he or she has made if Section 409A provides an opportunity to later
modify a deferral election with respect to such amount(s); provided, however,
that no such revocation or modification will be effective or available if and to
the extent Section 409A provides that such revocation or modification, or the
availability thereof, prevents the proper deferral of tax with respect to such
amount(s).

 

(ii)                                 Annual Deferred Share Amount Deferrals. 
Except as otherwise provided below, a Participant shall make a deferral election
with respect to Deferred Shares scheduled to vest during an upcoming twelve (12)
month Fiscal Year. Such election must be made during such period as shall be
established by the Committee which ends no later than:

 

1.                                       October 31, 2005 (or any earlier
deadline established by the Committee) for any Deferred Shares scheduled to vest
on or after November 1, 2005 and prior to November 1, 2007;

 

2.                                       December 31, 2006 (or any earlier
deadline established by the Committee) for any Deferred Shares scheduled to vest
on or after November 1, 2007 and prior to November 1, 2008;

 

3.                                       December 31, 2007 (or any earlier
deadline established by the Committee) for any Deferred Shares scheduled to vest
on or after November 1, 2008 and prior to November 1, 2009;

 

4.                                       December 31, 2008 (or any earlier
deadline established by the Committee) for any Deferred Shares scheduled to vest
on or after November 1, 2009 and prior to November 1, 2010;

 

5.                                       the last day of the Fiscal Year which
precedes by at least twelve (12) months the Fiscal Year in which the Deferred
Shares are scheduled to vest for any Deferred Shares scheduled to vest on or
after November 1, 2010 (e.g., an election to defer Deferred Shares scheduled to
vest during the Fiscal Year beginning November 1, 2010 and

 

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K. HOVNANIAN ENTERPRISES, INC.

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ending October 31, 2011 must be made no later than October 31, 2009; an election
to defer Deferred Shares scheduled to vest during the Fiscal Year beginning
November 1, 2011 and ending October 31, 2012 must be made no later than October
31, 2010; and so forth), or any earlier deadline established by the Committee.

 

Notwithstanding anything above or elsewhere in the Plan to the contrary, to the
extent Section 409A requires that an Annual Deferred Share Amount deferral
election satisfy the rules under Section 409A applicable to changes to form and
timing of distribution elections in order for such Annual Deferred Share Amount
deferral election to effectively defer tax with respect to the Annual Deferred
Share Amounts, the deferral election shall not be accepted by the Committee to
the extent it would violate the rules under Section 409A applicable to changes
to form and timing of distribution elections.

 

Notwithstanding the preceding, the Committee shall, in its discretion, be
permitted to disregard any Annual Deferred Share Amount deferral election if,
under Section 409A, an earlier election was required in order to properly defer
tax with respect to such Annual Deferred Share Amounts.  In addition, the
Committee, in its discretion, shall be permitted to allow a Participant to
revoke or modify an Annual Deferred Share Amount deferral election he or she has
made if Section 409A provides an opportunity to later modify a deferral election
with respect to such Annual Deferred Share Amounts; provided, however, that no
such revocation or modification will be effective or available if and to the
extent Section 409A provides that such revocation or modification, or the
availability thereof, prevents the proper deferral of tax with respect to such
Annual Deferred Share Amounts.

 

(b)                                 Manner of Election.

 

(i)                                    Base Annual Salary and Bonus Deferrals. 
For any Plan Year (or portion thereof), a deferral election for Base Annual
Salary and/or Bonus amount(s) earned during that Plan Year (or portion thereof),
and such other elections as the Committee deems necessary or desirable under the
Plan, shall be made by timely delivering to the Committee, in accordance with
its rules and procedures, by the deadline(s) set forth above, an Election Form,
along with such other elections as the Committee deems necessary or desirable
under the Plan.  For these elections to be valid, the Election

 

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K. HOVNANIAN ENTERPRISES, INC.

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Form(s) must be completed and signed by the Participant, timely delivered to the
Committee (in accordance with Section 2.2 above) and accepted by the Committee. 
If no such Election Form(s) is timely delivered for a Plan Year (or portion
thereof), the Annual Deferral Amount shall be zero (0) for that Plan Year (or
portion thereof).

 

(ii)                                 Deferred Share Award Deferrals.  For any
Fiscal Year, a deferral election for Deferred Share Award amount(s) otherwise
scheduled to vest during that Fiscal Year, and such other elections as the
Committee deems necessary or desirable under the Plan, shall be made by timely
delivering to the Committee, in accordance with its rules and procedures, by the
deadline(s) set forth above, an Election Form, along with such other elections
as the Committee deems necessary or desirable under the Plan.  For these
elections to be valid, the Election Form(s) must be completed and signed by the
Participant, timely delivered to the Committee (in accordance with Section 2.2
above) and accepted by the Committee.  If no such Election Form(s) is timely
delivered for a Fiscal Year, the Annual Deferred Share Amount shall be zero (0)
for that Fiscal Year.

 

(c)                                  Change in Election.  Once a Plan Year (or
Fiscal Year in respect of Annual Deferred Share Amount deferrals) has commenced,
a Participant may not elect to change his or her deferral election that is in
effect for that Plan Year (or Fiscal Year, if applicable), except if and to the
extent permitted by the Committee and made in accordance with the provisions of
Section 409A specifically relating to the change and/or revocation of deferral
elections (such as, for example, following an Unforeseeable Financial
Emergency).

 

3.5                                Withholding of Annual Deferral Amounts.  For
each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount
shall be withheld from each regularly scheduled Base Annual Salary payroll in
equal amounts, except as otherwise provided in Section 3.6, as adjusted from
time to time for increases and decreases in Base Annual Salary.  The Bonus
portion of the Annual Deferral Amount shall be withheld at the time the Bonus is
or otherwise would be paid to the Participant, whether or not this occurs during
the Plan Year itself.

 

3.6                                Annual Company Contribution Amount.

 

(a)                                  Annual Company Matching Contribution
Amount.  The Company may, but is not required to, credit to the Company
Contribution Account of one or more Participants an amount (an “Annual Company
Matching Contribution Amount”) for any one or more Plan Years.  The Company

 

16

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

shall credit such Annual Company Matching Contribution Amounts for such
Participants, with such frequency, and in such amounts, as the Company
determines in its sole discretion, including, for example, by crediting to the
Participant’s Company Contribution Account of an eligible Participant an amount
equal to:  (i) the percentage match to which the Participant is entitled under
the 401(k) Plan based on the Participant’s years of service determined under the
401(k) Plan (or any other percentage match rate applicable to the Participant,
as determined by the Committee in its discretion) multiplied by (ii) the
Participant’s Matched 401(k) Continuation Deferral Amount hereunder.  The Annual
Company Matching Contribution Amounts, if any, shall be withheld by the Company
pending the Participant’s satisfaction of the 401(k) Plan’s vesting schedule,
but such withheld Annual Company Matching Contribution Amounts shall be made in
full (with or without credited interest in the sole and absolute discretion of
the Committee) upon satisfaction of the 401(k) Plan’s vesting schedule.

 

(b)                                 Annual Company Basic Contribution Amount.
The Company shall make a contribution to each Participant’s Company Contribution
Account, if the Participant is eligible to receive a basic profit sharing
contribution under the 401(k) Plan for the Plan Year, as soon as practicable
after the close of each Plan Year, in an amount (an “Annual Company Basic
Contribution Amount”) equal to (i) minus (ii), where (i) is equal to (A) the
percentage basic profit sharing contribution to which the Participant is
entitled under the 401(k) Plan, times (B) the Participant’s Total Compensation,
and (ii) is equal to the basic profit sharing contributions made for the Plan
Year to the 401(k) Plan on behalf of the Participant.  The Annual Company Basic
Contribution Amounts shall be withheld by the Company pending the Participant’s
satisfaction of the 401(k) Plan vesting schedule, but such withheld Annual
Company Basic Contribution Amounts shall be made in full (with or without
credited interest in the sole and absolute discretion of the Committee) upon
satisfaction of the 401(k) Plan’s vesting schedule.

 

3.7                                Rollover Amount.  If a Participant had an
account balance in the K. Hovnanian Enterprises, Inc. Executive Incentive and
Excess Benefits Plan (the “EIEBP”) as of January 1, 2000, the Participant’s
EIEBP account balance, as determined as of such date, was transferred to and
added to the Participant’s Account Balance under this Plan, if so elected by the
Participant in accordance with the terms of the Plan prior to this amendment and
restatement, is thereafter governed by the terms and conditions of this Plan,
and is referred to as the “Rollover Amount.”  In addition, subject to the
distribution restrictions of Section 409A beginning January 1, 2005, any
distribution elections made by the Participant with respect to his or her

 

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K. HOVNANIAN ENTERPRISES, INC.

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account balance under the EIEBP shall apply to the Rollover Amount under this
Plan.

 

3.8                                Option Swaps/In-Kind Stock Bonus/Restricted
Share Unit Deferrals.

 

(a)                                  Option Swap Amounts.  Prior to January 1,
2005, subject to any terms and conditions imposed by the Committee, a
Participant who had been specifically extended the right to be credited under
the Plan with an Option Swap Amount was entitled to elect to have credited to
his or her Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted
Share Unit Deferral Account an Option Swap Amount.  An Option Swap Amount
election must have been made by a Participant with respect to options to
purchase Stock no earlier than the date on which the options became exercisable,
and must have been made, in accordance with such administrative procedures
established by the Committee in its discretion, prior to the date on which the
options were exercised.  An Option Swap Amount was credited to the Participant’s
Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit
Deferral Account on or soon after the date of such exercise in an amount equal
to the difference between the fair market value as of such date of the Stock
subject to the option for which an Option Swap Amount election had been made and
the exercise price of such option, as set forth in the Option Swap Agreement.

 

(b)                                 In-Kind Stock Bonus Deferral Amounts.  Prior
to January 1, 2005, subject to any terms and conditions imposed by the
Committee, a Participant who had been specifically extended the right under the
Plan to defer an In-Kind Stock Bonus Deferral Amount was entitled to elect to
defer to his or her Pre-2005 Deferred Share/Option Swap/In-Kind Stock
Bonus/Restricted Share Unit Deferral Account an In-Kind Stock Bonus Deferral
Amount.  An In-Kind Stock Bonus Deferral Amount election must have been made by
a Participant, in accordance with such administrative procedures established by
the Committee in its discretion and subject to the provisions of the In-Kind
Stock Bonus Deferral Agreement, prior to the date to Stock Bonus was due to be
paid to the Participant.  An In-Kind Stock Bonus Deferral Amount was credited to
the Participant’s Pre-2005 Deferred Share/Option Swap/In-Kind Stock
Bonus/Restricted Share Unit Deferral Account on or soon after the date the Stock
Bonus would, but for the election, have been paid to the Participant.

 

(c)                                  Restricted Share Units.  Prior to January
1, 2005, subject to any terms and conditions imposed by the Committee, a
Participant who had been specifically extended the right under the Plan to defer
awards for the future delivery of Stock which were granted under any stock
incentive plan of

 

18

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

Hovnanian Enterprises, Inc. or the Company pursuant to “Restricted Share Unit
Agreement” between Hovnanian Enterprises, Inc. and the Participant, was entitled
to elect to defer to his or her Pre-2005 Deferral Share/Option Swap/In-Kind
Stock Bonus/Restricted Share Unit Deferral Account such awards (“Restricted
Share Units”).  A Restricted Share Unit deferral election must have been made by
a Participant in accordance with such administrative procedures established by
the Committee in its discretion.

 

(d)                                 No Further Option Swaps/In-Kind Stock
Bonus/Restricted Share Unit Deferrals After December 31, 2004.  Notwithstanding
any other provision of this Plan, no new Participant deferrals shall be
permitted under this Section 3.8 after December 31, 2004.

 

3.9                                Investment of Trust Assets.  The Trustee of
the Trust shall be authorized, upon written instructions received from the
Committee or investment manager appointed by the Committee, to invest and
reinvest the assets of the Trust in accordance with the applicable Trust
agreement, including the disposition of investment vehicles and reinvestment of
the proceeds in one or more other investment vehicles designated by the
Committee.

 

3.10                          Sources of Stock. If Stock is credited under the
Plan on the books of the Company or the Employer, or in the Trust in connection
with a deferral of an Annual Deferred Share Amount (or, prior to January 1,
2005, a deferral of an Option Swap Amount, In-Kind Stock Bonus Amount or
Restricted Share Unit deferral), the shares so credited shall be deemed to have
originated, and shall be counted against the number of shares reserved, under
such other plan, program or arrangement.

 

3.11                          Vesting.  Unless otherwise provided in the Plan
Agreement, a Participant shall at all times be 100% vested in his or her
Deferral Account, his or her Company Contribution Account and his or her
Deferred Share Deferral Account, his or her Pre-2005 Deferral Account, his or
her Pre-2005 Company Contribution Account, his or her Pre-2005 Deferred
Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Account and
his or her Pre-2005 Rollover Account.  Notwithstanding anything to the contrary
in any Plan Agreement, in the event of a Change in Control, a Participant’s
Account Balance, to the extent not then vested, shall immediately become 100%
vested.  For purposes of this Section 3.11, a “Change in Control” shall mean the
first to occur of any of the following events:

 

(a)                                  Any “person” (as that term is used in
Section 13 and 14(d)(2) of the Securities Exchange Act of 1934 (“Exchange Act”))
becomes the beneficial owner (as that term is used in Section 13(d) of the
Exchange Act), directly or indirectly, of 50% or more of Hovnanian Enterprises,
Inc. Stock entitled to vote in the election of directors;

 

19

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K. HOVNANIAN ENTERPRISES, INC.

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(b)           During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan, individuals who at the
beginning of such period constitute the board of directors of Hovnanian
Enterprises, Inc., and any new director (other than a director designated by a
person who has entered into an agreement with Hovnanian Enterprises, Inc. to
effect a transaction described in clause (a), (c), (d) or (e) of this
Section 3.11) whose election by the board of directors or nomination for
election by Hovnanian Enterprises, Inc.’s stockholders was approved by a vote of
at least three-fourths (3/4ths) 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;

 

(c)           The shareholders of Hovnanian Enterprises, Inc. approve any
consolidation or merger of Hovnanian Enterprises, Inc., other than a
consolidation or merger of the Company in which the holders of the Stock of
Hovnanian Enterprises, Inc. immediately prior to the consolidation or merger
hold more than 50% of the common stock of the surviving corporation immediately
after the consolidation or merger;

 

(d)           The shareholders of Hovnanian Enterprises, Inc. approve any plan
or proposal for the liquidation or dissolution of Hovnanian Enterprises, Inc.;
or

 

(e)           The shareholders of Hovnanian Enterprises, Inc. approve the sale
or transfer of all or substantially all of the assets of Hovnanian
Enterprises, Inc. to parties that are not within a “controlled group of
corporations” (as defined in Code Section 1563) in which Hovnanian
Enterprises, Inc. is a member.

 

3.12         Crediting/Debiting of Account Balances.  In accordance with, and
subject to, the rules and procedures that are established from time to time by
the Committee, in its sole discretion, amounts shall be credited or debited to a
Participant’s Account Balance in accordance with the following rules:

 

(a)           Sub-Accounts.  Separate sub-accounts shall be established and
maintained with respect to each Participant’s Account Balance (together, the
“Sub-Accounts”), each attributable to the portion of the Participant’s Account
Balance representing the same type of credited deferral or contribution.  That
is, for each Plan Year, if and as applicable, one Sub-Account shall be
attributable to the portion of the Participant’s Account Balance which
represents Matched 401(k) Continuation Deferral Amounts, another attributable to
the portion of the Participant’s Account Balance which represents other Base
Annual Salary deferrals, another attributable to the

 

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portion of the Participant’s Account Balance which represents other Bonus
deferrals, another attributable to the portion of the Participant’s Account
Balance which represents Annual Company Matching Contribution Amounts, and
another attributable to the portion of the Participant’s Account Balance which
represents Annual Company Basic Contribution Amounts.  The preceding
sub-accounts shall all apply to deferrals made by the Participant on or after
January 1, 2005.  In addition to the preceding, and as described elsewhere in
this document, separate Sub-Accounts shall be maintained with respect to the
Participant’s Pre-2005 Deferral Account balance (if any), Pre-2005 Company
Contribution Account balance (if any), Pre-2005 Deferred Share/Option
Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Account balance (if
any), and Pre-2005 Rollover Account balance (if any).

 

(b)           Election of Measurement Funds.  Except as otherwise provided in
Section 3.12(f) below, a Participant, in connection with his or her initial
deferral election in accordance with Section 3.4(a) above, shall elect, on the
Election Form(s), one or more Measurement Fund(s) (as described in
Section 3.12(d) below) to be used to determine the additional amounts to be
credited or debited to each of his or her Sub-Accounts for the first business
day of the Plan Year, continuing thereafter unless changed in accordance with
the next sentence.  Commencing with the first business day of the Plan Year, and
continuing thereafter for the remainder of the Participant’s participation in
the Plan, the Participant may (but is not required to) elect daily, by
submitting an Election Form(s) to the Committee that is accepted by the
Committee (which submission may take the form of an electronic transmission, if
required or permitted by the Committee), to add or delete one or more
Measurement Fund(s) to be used to determine the additional amounts to be
credited or debited to each of his or her Sub-Accounts, or to change the portion
of each of his or her Sub-Accounts allocated to each previously or newly elected
Measurement Fund. If an election is made in accordance with the previous
sentence, it shall apply to the next business day and continue thereafter for
the remainder of the Participant’s participation in the Plan, unless changed in
accordance with the previous sentence.

 

(c)           Proportionate Allocation.  In making any election described in
Section 3.12(b) above, the Participant shall specify on the Election Form, in
increments of one percentage point (1%), the percentage of each of his or her
Sub-Accounts to be allocated to a Measurement Fund (as if the Participant was
making an investment in that Measurement Fund with that portion of his or her
Account Balance).

 

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(d)         Measurement Funds.  Except as otherwise provided in
Section 3.12(f) below, the Participant may elect one or more of the Measurement
Funds set forth on Schedule A (the “Measurement Funds”), for the purpose of
crediting or debiting additional amounts to his or her Account Balance.  The
Committee may, in its sole discretion, discontinue, substitute or add a
Measurement Fund without the need to formally amend this Plan.  Each such action
will take effect as of the first business day that follows by thirty (30) days
the day on which the Committee gives Participants advanced written notice of
such change.  If the Committee receives an initial or revised Measurement
Fund(s) election which it deems to be incomplete, unclear or improper, the
Participant’s Measurement Fund(s) election then in effect shall remain in effect
(or, in the case of a deficiency in an initial Measurement Fund(s) election, the
Participant shall be deemed to have filed no deemed investment direction).  If
the Committee possesses (or is deemed to possess as provided in the previous
sentence) at any time directions as to Measurement Funds of less than all of the
Participant’s Account Balance, the Participant shall be deemed to have directed
that the undesignated portion of the Account Balance be deemed to be invested in
a money market, fixed income, or other or similar Measurement Fund made
available under the Plan as determined by the Committee in its discretion.  Each
Participant hereunder, as a condition to his or her participation hereunder,
agrees to indemnify and hold harmless the Committee, the Company and the
Employer, and their agents and representatives, from any losses or damages of
any kind relating to (i) the Measurement Funds made available hereunder and
(ii) any discrepancy between the credits and debits to the Participant’s Account
Balance based on the performance of the Measurement Funds and what the credits
and debits otherwise might be in the case of an actual investment in the
Measurement Funds.

 

(e)         Crediting or Debiting Method.  The performance of each elected
Measurement Fund (either positive or negative) will be determined by the
Committee, in its reasonable discretion, based on the performance of the
Measurement Funds themselves.  A Participant’s Account Balance shall be credited
or debited on a daily basis based on the performance of each Measurement Fund
selected by the Participant, as determined by the Committee in its sole
discretion, as though (i) a Participant’s Account Balance were invested in the
Measurement Fund(s) selected by the Participant, in the percentages elected by
the Participant as of such date, at the closing price on such date; (ii) the
portion of the Annual Deferral Amount that was actually deferred was invested in
the Measurement Fund(s) selected by the Participant, in the percentages elected
by the Participant, no later than the close of business on the third business
day after the day on which such amounts are actually deferred from the
Participant’s Base Annual Salary and/or Bonus through reductions in his or her
payroll, at the closing price on such date; and (iii) any distribution made

 

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to a Participant that decreases such Participant’s Account Balance ceased being
invested in the Measurement Fund(s), in the percentages elected by the
Participant, no earlier than three business days prior to the distribution, at
the closing price on such date.  The Participant’s Annual Company Contribution
Amount shall be credited to his or her Company Contribution Account for purposes
of this Section 3.12(e) as soon as administratively practicable following the
date such amount(s) were credited to the Participant’s Account Balance.  The
Participant’s Annual Deferred Share Amount shall be credited to his or her
Deferred Share Deferral Account no later than the close of business on the third
business day after the day on which the Annual Deferred Share Amount was
deferred.

 

(f)          No Actual Investment.  Notwithstanding any other provision of this
Plan that may be interpreted to the contrary, the Measurement Funds are to be
used for measurement purposes only, and a Participant’s election of any such
Measurement Fund, the allocation to his or her Account Balance thereto, the
calculation of additional amounts and the crediting or debiting of such amounts
to a Participant’s Account Balance shall not be considered or construed in any
manner as an actual investment of his or her Account Balance in any such
Measurement Fund.  In the event that the Company or the Trustee (as that term is
defined in the Trust), in its own discretion, decides to invest funds in any or
all of the Measurement Funds, no Participant shall have any rights in or to such
investments themselves.  Without limiting the foregoing, a Participant’s Account
Balance shall at all times be a bookkeeping entry only and shall not represent
any investment made on his or her behalf by the Company, the Employer or the
Trust; the Participant shall at all times remain an unsecured creditor of the
Employer.

 

(g)         Special Rule for Deferred Share Deferral Account and Pre-2005
Deferred Share/Option Swap/In-Kind Bonus/Restricted Share Unit Account. 
Notwithstanding anything in this Plan to the contrary, the Deferred Share
Deferral Account and the Pre-2005 Deferred Share/Option Swap/In-Kind Stock
Bonus/Restricted Share Unit Deferral Account (if any) shall be allocated
exclusively to the Stock fund and to no other Measurement Fund.

 

(h)         Beneficiary Elections.  Each reference in this Section 3.12 to a
Participant shall be deemed to include, where applicable, a reference to a
Beneficiary.

 

3.13         FICA and Other Taxes.

 

(a)         Annual Deferral Amounts.  For each Plan Year in which an Annual
Deferral Amount is being withheld from a Participant, the Participant’s
Employer(s) shall withhold from that portion of the Participant’s Base Annual
Salary and Bonus that is not being deferred, in a manner determined by the
Employer(s), the Participant’s share of FICA and other

 

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K. HOVNANIAN ENTERPRISES, INC.

PLAN DOCUMENT continued…

 

employment taxes on such Annual Deferral Amount, and any other applicable
deductions.  If necessary, the Committee may reduce the Annual Deferral Amount
in order to comply with this Section 3.13(a).

 

(b)         Annual Company Contribution Amounts.  When an Annual Company
Contribution Amount is credited to a Participant’s Company Contribution Account
(or, if later, when a Participant becomes vested in his or her Company
Contribution Account), the Participant’s Employer(s) shall withhold from the
Participant’s Base Annual Salary and/or Bonus that is not deferred, in a manner
determined by the Employer(s), the Participant’s share of FICA and other
employment taxes, and any other applicable deductions.  If necessary, the
Committee may reduce the Participant’s Annual Company Contribution Amount in
order to comply with this Section 3.13(b).

 

(c)         Annual Deferred Share Amounts.  For each Fiscal Year in which an
Annual Deferred Share Amount is being first withheld from a Participant, or at
such other time as FICA taxes are due, the Participant’s Employer(s) shall
withhold from that portion of the Participant’s Base Annual Salary, Bonus or
Deferred Share Award that is not being deferred, in a manner determined by the
Employer(s), the Participant’s share of FICA and other employment taxes on such
Annual Deferred Share Amount, and any other applicable deductions.  If
necessary, the Committee may reduce the Participant’s Annual Deferred Share
Amount in order to comply with this Section 3.13(c).

 

3.14         Distributions.  Notwithstanding anything herein to the contrary,
the Employer, or the trustee of the Trust, shall withhold from any payments made
under this Plan all Federal, state and local income, employment and other taxes
required to be withheld by the Employer, or the trustee of the Trust, in
connection with such payments, and any indebtedness of the Participant to the
Employer as of the date(s) of distribution, in amounts and in a manner to be
determined in the reasonable discretion of the Employer and the trustee of the
Trust.  Any payment made to a Participant or Beneficiary under this Plan shall
be made on or during the period after the payment date or event specified
herein; provided, however, such payment shall not be made later than the later
of (i) the last day of the calendar year in which the payment date or event
occurs, or, if later, the fifteenth (15th) day of the third (3rd) calendar month
following the date of the payment date or event, or (ii) the last day of such
other, extended period as the IRS may prescribe, such as in the case of disputed
payments or refusals to pay, provided the conditions of such extension have been
satisfied.  If a Participant who experiences a Separation from Service is
rehired, his or her distributions hereunder may not be suspended.

 

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PLAN DOCUMENT continued…

 

ARTICLE 4
Short-Term Payout; Unforeseeable Financial Emergencies;
Withdrawal Election

 

4.1           Short-Term Payout.

 

(a)           Short-Term Payouts of Annual Deferral Amounts and Vested Annual
Company Contribution Amounts.  At the same time that a Participant elects to
defer an Annual Deferral Amount for a given Plan Year, the Participant may
irrevocably elect to receive a future “Short-Term Payout” from the Plan.  Except
as provided in Section 4.5, any Short-Term Payout election must be made by the
deadline(s) set forth in Section 3.4(a) for making a deferral election in
respect of the Base Annual Salary, Bonus and/or Matched 401(k) Continuation
Deferral Amount to which it relates, and is irrevocable after that deadline has
passed.  Subject to such requirements as may be imposed by the Committee, a
Participant may make separate Short-Term Payout elections in respect of the Base
Annual Salary, Bonus and/or Matched 401(k) Continuation Deferral Amount portions
of his or her Annual Deferral Amount for a given Plan Year, in respect of any
vested Annual Company Matching Contribution Amounts credited for the Plan Year
and in respect of any vested Annual Company Basic Contribution Amounts credited
for the Plan Year.  Subject to the Deduction Limitation and to Section 3.14, the
Short-Term Payout shall be a lump sum payment in an amount that is equal to the
Annual Deferral Amount (or applicable portion thereof), vested Annual Company
Matching Contribution Amounts and/or vested Annual Company Basic Contribution
Amounts, as applicable, and amounts credited or debited thereto in the manner
provided in Section 3.12 above, determined at the time that the Short-Term
Payout becomes payable.  Subject to the Deduction Limitation, Section 3.14,
Section 4.5 and the other terms and conditions of this Plan, each Short-Term
Payout elected shall be paid out during a period beginning one (1) day and
ending sixty (60) days after the last day of the Plan Year designated by the
Participant that is at least two (2) Plan Years after the Plan Year of the
Annual Deferral Amount (or applicable portion thereof), vested Annual Company
Matching Contribution Amounts and/or vested Annual Company Basic Contribution
Amounts, as applicable, as specifically elected by the Participant.  By way of
example, if a two (2) year Short-Term Payout is elected for 2009 Plan Year
Annual Deferral Amounts, vested Annual Company Matching Contribution Amounts
and/or vested Annual Company Basic Contribution Amounts, the two (2) year
Short-Term Payout would become payable during a sixty (60) day period commencing
January 1, 2012.

 

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(b)           Short-Term Payouts of Annual Deferred Share Amounts.  At the same
time that a Participant elects to defer an Annual Deferred Share Amount for a
given Fiscal Year, the Participant may irrevocably elect to receive a future
“Short-Term Payout” from the Plan.  Subject to the Deduction Limitation and to
Section 3.14, the Short-Term Payout shall be a lump sum payment in an amount
that is equal to the Annual Deferred Share Amount and amounts credited or
debited thereto in the manner provided in Section 3.12 above, determined at the
time that the Short-Term Payout becomes payable.  Subject to the Deduction
Limitation, to Section 3.14, to Section 4.5 and the other terms and conditions
of this Plan, each Short-Term Payout elected shall be paid out as follows:

 

(i)            with respect to any Short-Term Payout election in respect of
deferrals of Deferred Shares otherwise scheduled to vest prior to November 1,
2005, the Short-Term Payout elected shall be paid during a period beginning one
(1) day and ending sixty (60) days after the last day of the Plan Year
designated by the Participant that is at least two (2) Plan Years after the
Fiscal Year for which the Annual Deferred Share Amount deferral is actually
credited;

 

(ii)           with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares otherwise scheduled to vest on or after November 1,
2005 and prior to November 1, 2006 (“2006 Fiscal Year DSA Deferrals”), the
Short-Term Payout elected shall be paid during a period beginning one (1) day
and ending sixty (60) days after the last day of the Plan Year designated by the
Participant that is no earlier than 2008 (i.e., the earliest Short-Term Payout
in respect of 2006 Fiscal Year DSA Deferrals would be during the sixty (60) day
period commencing January 1, 2009);

 

(iii)          with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares otherwise scheduled to vest on or after November 1,
2006 and prior to November 1, 2007 (“2007 Fiscal Year DSA Deferrals”), the
Short-Term Payout elected shall be paid during a period beginning one (1) day
and ending sixty (60) days after the last day of the Plan Year designated by the
Participant that is no earlier than 2009 (i.e., the earliest Short-Term Payout
in respect of 2007 Fiscal Year DSA Deferrals would be during the sixty (60) day
period commencing January 1, 2010);

 

(iv)          with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares otherwise scheduled to vest on or after November 1,
2007 and prior to November 1, 2008 (“2008 Fiscal Year DSA Deferrals”), the
Short-Term Payout elected shall be paid

 

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K. HOVNANIAN ENTERPRISES, INC.

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during a period beginning one (1) day and ending sixty (60) days after the last
day of the Plan Year designated by the Participant that is no earlier than 2010
(i.e., the earliest Short-Term Payout in respect of 2008 Fiscal Year DSA
Deferrals would be during the sixty (60) day period commencing January 1, 2011);

 

(v)           with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares otherwise scheduled to vest on or after November 1,
2008 and prior to November 1, 2009 (“2009 Fiscal Year DSA Deferrals”), the
Short-Term Payout elected shall be paid during a period beginning one (1) day
and ending sixty (60) days after the last day of the Plan Year designated by the
Participant that is no earlier than 2011 (i.e., the earliest Short-Term Payout
in respect of 2009 Fiscal Year DSA Deferrals would be during the sixty (60) day
period commencing January 1, 2012);

 

(vi)          with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares otherwise scheduled to vest on or after November 1,
2009 and prior to November 1, 2010 (“2010 Fiscal Year DSA Deferrals”), the
Short-Term Payout elected shall be paid during a period beginning one (1) day
and ending sixty (60) days after the last day of the Plan Year designated by the
Participant that is no earlier than 2012 (i.e., the earliest Short-Term Payout
in respect of 2010 Fiscal Year DSA Deferrals would be during the sixty (60) day
period commencing January 1, 2013);

 

(vii)         with respect to any Short-Term Payout elected in respect of
deferrals of Deferred Shares pursuant to a deferral election made after
December 31, 2008 (i.e., with respect to any deferral of Deferred Shares
otherwise scheduled to vest on or after November 1, 2010 (“2011 and Later Fiscal
Year DSA Deferrals”)), the Short-Term Payout elected shall be paid during a
period beginning one (1) and ending sixty (60) days after the last day of the
Plan Year designated by the Participant that results in the 2011 and Later
Fiscal Year DSA Deferral remaining in the Plan for at least five (5) full
calendar years (i.e., the earliest Short-Term Payout in respect of deferrals of
Deferred Shares otherwise scheduled to vest on November 1, 2010 would be during
the sixty (60) day period commencing January 1, 2016).

 

Notwithstanding anything above or elsewhere in the Plan to the contrary, to the
extent Section 409A requires that an Annual Deferred Share Amount deferral
election satisfy the rules under Section 409A applicable to changes to form and
timing of distribution elections in order for such

 

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PLAN DOCUMENT continued…

 

Annual Deferred Share Amount deferral election to effectively defer tax with
respect to the Annual Deferred Share Amounts, that portion of the Participant’s
Deferred Share Deferral Account attributable to such Annual Deferred Share
Amount deferral election shall be distributable as a Short-Term Payout solely at
such time(s) and in such manner as the Short-Term Payout does not violate the
rules under Section 409A applicable to changes to form and timing of
distribution elections.

 

(d)           Short-Term Payouts of Pre-2005 Deferrals of Option Swap Amounts
and/or In-Kind Bonus Deferral Amounts.  Prior to January 1, 2005, at the same
time that a Participant elected to defer Option Swap Amounts and/or In-Kind
Bonus Deferral Amounts for a given Plan Year, the Participant could have
irrevocably elected to receive a future “Short-Term Payout” from the Plan. 
Subject to the Deduction Limitation and to Section 3.14, the Short-Term Payout
shall be a lump sum payment in an amount that is equal to the Option Swap
Amounts and/or In-Kind Bonus Deferral Amounts deferred and amounts credited or
debited thereto in the manner provided in Section 3.12 above, determined at the
time that the Short-Term Payout becomes payable.  Subject to the Deduction
Limitation, to Section 3.14, to Section 4.5 and the other terms and conditions
of this Plan, the Short-Term Payout elected shall be paid during a period
beginning one (1) day and ending sixty (60) days after the last day of the Plan
Year designated by the Participant that is at least two (2) Plan Years after the
Plan Year for which the Option Swap Amounts and/or In-Kind Bonus Deferral
Amounts were actually credited.

 

(e)           Short-Term Payouts of Pre-2005 Deferrals of Restricted Share
Units.  Prior to January 1, 2005, at the same time that a Participant elected to
defer an Restricted Share Units for a given Fiscal Year, the Participant could
have irrevocably elected to receive a future “Short-Term Payout” from the Plan. 
Subject to the Deduction Limitation and to Section 3.14, the Short-Term Payout
shall be a lump sum payment in an amount that is equal to the Restricted Share
Units deferred and amounts credited or debited thereto in the manner provided in
Section 3.12 above, determined at the time that the Short-Term Payout becomes
payable.  Subject to the Deduction Limitation, to Section 3.14, to Section 4.5
and the other terms and conditions of this Plan, the Short-Term Payout elected
shall be paid during a period beginning one (1) day and ending sixty (60) days
after the last day of the Plan Year designated by the Participant that is at
least two (2) Plan Years after the Fiscal Year for which the Restricted Share
Unit deferral was actually credited.

 

(f)            Postponements of Previously Elected Short-Term Payouts. 
Notwithstanding the preceding paragraphs or any other provision of this

 

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PLAN DOCUMENT continued…

 

Plan that may be construed to the contrary, a Participant who is in active
service with the Employer may, with respect to each Short-Term Payout, on a form
determined by the Committee, make one (1) or more additional deferral elections
(a “Subsequent Election”) to defer payment of all or a portion of such
Short-Term Payout to a Plan Year subsequent to the Plan Year originally (or
subsequently) elected; provided, however, that, except as provided in
Section 4.5, such Subsequent Election will be null and void unless accepted by
the Committee no later than one (1) year prior to the first day of the Plan Year
in which, but for the Subsequent Election, such Short-Term Payout would be paid,
and such Subsequent Election provides for the deferral of at least five (5) Plan
Years following the Plan Year in which the Short-Term Payout, but for the
Subsequent Election, would be paid.  By way of example, if a two (2) year
Short-Term Payout is elected for 2009 Plan Year Annual Deferral Amounts and/or
vested Annual Company Contribution Amounts (resulting, as described above, in a
Short-Term Payout payable during the sixty (60) day period commencing January 1,
2012),  the Participant shall be entitled to make a Subsequent Election prior to
the time designated by the Committee (e.g., September 2010 or any such other
time designated by the Committee which is no later than December 31, 2010) to
have the Short-Term Payout instead paid during the sixty (60) day period
commencing January 1, 2017 (or January 1 of any later Plan Year).

 

4.2           Other Benefits Take Precedence Over Short-Term Payout.  Should an
event occur that triggers a benefit under Article 5, 6 or 7, all Account
Balances (or portions thereof) that are subject to Short-Term Payout elections
under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be
paid in accordance with the other applicable Article.

 

4.3           Withdrawal Payout/Suspensions for Unforeseeable Financial
Emergencies.  If a Participant experiences an Unforeseeable Financial Emergency,
the Participant may petition the Committee to (i) halt any deferrals required to
be made by the Participant and (ii) receive a partial or full payout from the
Plan.  The payout shall not exceed the lesser of the Participant’s Account
Balance, or the amount reasonably needed to satisfy the Unforeseeable Financial
Emergency plus amounts necessary to pay taxes reasonably anticipated as a result
of the payouts, after taking into account the extent to which the Unforeseeable
Financial Emergency is or may be relieved through reimbursement or compensation
by insurance or otherwise, by liquidation of the Participant’s assets (to the
extent the liquidation of assets would not itself cause severe financial
hardship) or by termination of deferrals hereunder.  If, subject to the sole
discretion of the Committee (which discretion the Committee is bound to
exercise, however, within the limitations of Section 409A), the petition for a
termination of deferrals and payout is approved, cessation shall take effect
upon the date of approval and any payout shall be made

 

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PLAN DOCUMENT continued…

 

within sixty (60) days of the date of approval.  The payment of any amount under
this Section 4.3 shall be subject to Section 3.14, but shall not be subject to
the Deduction Limitation.  Notwithstanding anything in this Plan to the
contrary, any distribution from the Deferred Share Deferral Account under this
Section 4.3 shall be in the form of Stock.

 

4.4           Withdrawal Election (Not Available After December 31, 2004). 
Prior to January 1, 2005, a Participant (or, after a Participant’s death, his or
her Beneficiary) could have elected in accordance with the terms, conditions and
procedures of this Section 4.4 in effect prior to January 1, 2005 to withdraw
all of his or her Account Balance, calculated as if there had occurred a
Termination of Employment as of the day of the election, less a withdrawal
penalty equal to 10% of such amount (the net amount shall be referred to as the
“Withdrawal Amount”).  Effective January 1, 2005, no such elections are
permitted under the Plan.

 

4.5           Application of Section 409A Distribution Election Transition
Relief.  Notwithstanding anything in the Plan to the contrary, in accordance
with applicable Section 409A transition relief, including the transition relief
prescribed under IRS Notice 2007-86, 2007 IRB 990, 10/22/2007, Participants are
permitted to make new payment elections under the Plan on or before December 31,
2008 in accordance with such rules and procedures as are established by the
Committee without regard to the otherwise applicable Section 409A payment
election requirements reflected in this amended and restated Plan document;
provided that:

 

(a)           Any new payment elections made on or after January 1, 2006 and on
or before December 31, 2006 may apply only to amounts that would not otherwise
be payable in 2006 and may not cause an amount to be paid in 2006 that would not
otherwise be payable in 2006;

 

(b)           Any new payment elections made on or after January 1, 2007 and on
or before December 31, 2007 may apply only to amounts that would not otherwise
be payable in 2007 and may not cause an amount to be paid in 2007 that would not
otherwise be payable in 2007; and

 

(c)           Any new payment elections made on or after January 1, 2008 and on
or before December 31, 2008 may apply only to amounts that would not otherwise
be payable in 2008 and may not cause an amount to be paid in 2008 that would not
otherwise be payable in 2008.

 

For example, notwithstanding anything in the Plan to the contrary, in accordance
with the applicable Section 409A transition relief for new payment elections,
the Committee permitted each Participant to elect on or before December 31, 2007
to receive a lump sum payment, to be paid during January 2008, of one or more of
the following:

 

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(i)            his or her entire Deferral Account balance and Company
Contribution Account balance (i.e., not including amounts attributable to
deferrals/credits made prior to January 1, 2005) not otherwise payable during
2007;

 

(ii)           his or her entire Deferred Share Account balance (i.e., not
including amounts attributable to deferrals made prior to January 1, 2005) not
otherwise payable during 2007;

 

(iii)          his or her entire Pre-2005 Deferral Account balance, Pre-2005
Company Contribution Account balance and Pre-2005 Rollover Account balance not
otherwise payable during 2007; and/or

 

(iv)          his or her entire Pre-2005 Deferred Share/Option Swap/In-Kind
Stock Bonus/Restricted Share Unit Deferral Account balance not otherwise payable
during 2007.

 

As another example, notwithstanding anything in the Plan to the contrary, in
accordance with the applicable Section 409A transition relief for new payment
elections, the Committee shall permit each Participant to elect on or before
December 31, 2008 to receive a lump sum payment, to be paid generally during
January 2009, of one or more of the following:

 

(i)            his or her entire Deferral Account balance and Company
Contribution Account balance not otherwise payable during 2008;

 

(ii)           his or her entire Deferred Share Account balance and entire
Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit
Deferral Account balance not otherwise payable during 2008;

 

(iii)          that portion of his or her Deferral Account balance attributable
to Bonus deferrals to be deferred in early 2009 pursuant to the Participant’s
Bonus deferral election made during October 2007; and/or

 

(iv)          that portion of his or her Deferred Share Award Account balance
attributable to 2009 Deferred Share Award share deferrals deferred pursuant to
the Participant’s Deferred Share Award deferral election made during
October 2007.

 

Furthermore, to the extent permitted by the Committee and Section 409A
transition relief, each Participant may elect on or before December 31, 2008 to
change his or her payment election(s) in respect of any other portion of the
Participant’s Account Balance not otherwise payable during 2008.

 

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ARTICLE 5
Retirement Benefit

 

5.1           Retirement Benefit.  Subject to the Deduction Limitation and to
Section 3.14, and any other conditions imposed by the Committee, a Participant
who Retires shall receive, as a Retirement Benefit, his or her vested Account
Balance (or applicable portion thereof).

 

5.2           Payment of Retirement Benefit.

 

(a)           Retirement Benefit Payments of Annual Deferral Amounts and Vested
Annual Company Contribution Amounts.  At the same time that a Participant elects
to defer an Annual Deferral Amount for a given Plan Year, the Participant may
elect to receive that portion of his or her Retirement Benefit attributable to
the Annual Deferral Amount (and/or that portion of his or her Retirement Benefit
attributable to any vested Annual Company Matching Contribution Amounts credited
for the Plan Year and/or that portion of his or her Retirement Benefit
attributable to any vested Annual Company Basic Contribution Amounts credited
for the Plan Year) in a lump sum, or pursuant to one of the available Annual
Installment Methods.  At such time, the Participant may also elect to have any
such lump sum payment paid, or installments commence, during the sixty (60) day
period immediately following the close of the calendar quarter in which the
Participant Retires or, alternatively, during the sixty (60) day period
immediately following the close of the Plan Year in which the Participant
Retires; provided, however, that, to the extent required under Section 409A,
Retirement Benefit distributions to an individual who is a Specified Employee as
of the date of his or her Separation from Service shall commence no earlier than
six (6) months after the date or his or her Retirement (or, if earlier, his or
her death).   If a Participant does not make any election with respect to the
form of distribution of any portion of his or her Retirement Benefit, such
portion shall be distributable in the form of a lump sum. In addition, subject
to the preceding limitation on Retirement Benefit distributions to Specified
Employees, if a Participant does not make any election with respect to when any
portion of his or her Retirement Benefit shall be made or begin, such portion
shall be made or begin during the sixty (60) day period immediately following
the close of the calendar quarter in which the Participant Retires. Any payment
made shall be subject to Section 3.14 and the Deduction Limitation.   Subject to
such requirements as may be imposed by the Committee, a Participant may make
separate Retirement Benefit distribution elections in respect of the Base Annual
Salary, Bonus and/or Matched 401(k) Continuation Deferral Amount portions of his
or her Annual Deferral Amount for a given Plan Year, in respect of any vested
Annual Company Matching Contribution

 

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Amounts credited for the Plan Year and in respect of any vested Annual Company
Basic Contribution Amount credited for the Plan Year.  The preceding applies
only to Annual Deferral Amounts, Annual Company Matching Contribution Amounts
and Annual Company Basic contribution Amounts deferred/credited on or after
January 1, 2005.

 

(b)           Retirement Benefit Payments of Annual Deferred Share Amounts.  At
the same time that a Participant elects to defer an Annual Deferred Share Amount
for a given Fiscal Year, the Participant may elect to receive that portion of
his or her Retirement Benefit attributable to the Annual Deferred Share Amount
in a lump sum, or pursuant to one of the available Annual Installment Methods. 
At such time, the Participant may also elect to have any such lump sum payment
paid, or installments commence, during the sixty (60) day period immediately
following the close of the calendar quarter in which the Participant Retires or,
alternatively, during the sixty (60) day period immediately following the close
of the Plan Year in which the Participant Retires; provided, however, that, to
the extent required under Section 409A, Retirement Benefit distributions to a
Specified Employee shall commence no earlier than six (6) months after the date
or his or her Retirement (or, if earlier, his or her death).  If a Participant
does not make any election with respect to the form of distribution of any
portion of his or her Retirement Benefit, such portion shall be distributable in
the form of a lump sum. In addition, subject to the preceding limitation on
Retirement Benefit distributions to Specified Employees, if a Participant does
not make any election with respect to when any portion of his or her Retirement
Benefit shall be made or begin, such portion shall be made or begin during the
sixty (60) day period immediately following the close of the calendar quarter in
which the Participant Retires. Any payment made shall be subject to Section 3.14
and the Deduction Limitation.

 

Notwithstanding anything above or elsewhere in the Plan to the contrary, to the
extent Section 409A requires that an Annual Deferred Share Amount deferral
election satisfy the rules under Section 409A applicable to changes to form and
timing of distribution elections in order for such Annual Deferred Share Amount
deferral election to effectively defer tax with respect to the Annual Deferred
Share Amounts, that portion of the Participant’s Deferred Share Deferral Account
attributable to such Annual Deferred Share Amount deferral election shall be
distributable as a Retirement Benefit solely at such time(s) and in such manner
as the Retirement Benefit distribution does not violate the rules under
Section 409A applicable to changes to form and timing of distribution elections.

 

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Notwithstanding anything in this Plan to the contrary, any distribution from the
Deferred Share Deferral Account under this Section 5.2 shall be in the form of
Stock.

 

The preceding applies only to Annual Deferred Share Amounts deferred on or after
January 1, 2005.

 

(c)           Retirement Benefit Payments Relating to Pre-2005
Deferrals/Credits.  A Participant who entered the Plan prior to January 1, 2005
was permitted, in connection with his or her commencement of participation in
the Plan, to elect on an Election Form to receive the Retirement Benefit
relating to his or her pre-2005 deferrals/credits in a lump sum or pursuant to
an Annual Installment Method of 5, 10 or 15 years.  The Participant was also
permitted to elect on the Election Form to have his or her Retirement Benefit
relating to his or her pre-2005 deferrals/credits  made or begin as soon as
administratively practicable following the close of the calendar quarter in
which the Participant Retires or, alternatively, as soon as administratively
practicable following the close of the Plan Year in which the Participant
Retires.  Notwithstanding such elections, effective January 1, 2005, in no event
shall Retirement Benefit distributions relating to a Specified Employee’s
pre-2005 deferrals/credits commence earlier than six (6) months after the date
of his or her Retirement (or, if earlier, his or death).  If a Participant does
not make any election with respect to the payment of the Retirement Benefit
relating to his or her pre-2005 deferrals/credits, then such benefit shall be
payable in a lump sum.  If a Participant does not make any election with respect
to when his or her Retirement Benefit relating to his or her pre-2005
deferrals/credits shall be made or begin, such Retirement Benefit shall be made
or begin as soon as administratively practicable following the close of the
calendar quarter in which the Participant Retires.  Any payment made shall be
subject to the Deduction Limitation.  Notwithstanding anything in this Plan to
the contrary, any distribution from the Pre-2005 Deferred Share/Option
Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Account under this
paragraph shall be in the form of Stock.

 

(d)           Changes to Retirement Benefit Distribution Elections.  The
Participant may change his or her election(s) to an allowable alternative payout
period date by submitting a new Election Form to the Committee, provided that,
effective January 1, 2005, and except as provided in Section 4.5, any such
Election Form is submitted at least one (1) year prior to the distribution date
then in effect and, if required by Section 409A, provides for a distribution (or
commencement of distributions) date which is at least five (5) years from the
distribution date then in effect.  Subject to the foregoing, the Election
Form most recently accepted by the Committee

 

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shall govern the payout of the Retirement Benefit with respect to the portion of
the Participant’s Account Balance to which it pertains.

 

Notwithstanding anything above or elsewhere in the Plan to the contrary (except
Section 4.5), effective January 1, 2005, no change submitted on an Election
Form shall be accepted by the Committee if the change accelerates the time over
which distributions shall be made to the Participant (except as otherwise
permitted under Section 409A) and the Committee shall deny any change made to an
election if the Committee determines that the change violates the requirement
under Section 409A that the first payment with respect to which such election is
made be deferred for a period of not less than five (5) years from the date the
payment would otherwise have been made.  For these purposes, installment
payments shall be treated as a single payment, with the result that an election
to change from installments to a lump sum (or to a different Annual Installment
Method) will require that the lump sum be postponed until a date which is at
least five (5) years from the previously scheduled payment date of the first
installment.

 

ARTICLE 6
Pre-Retirement Survivor Benefit

 

6.1           Pre-Retirement Survivor Benefit.  Subject to the Deduction
Limitation, and any other conditions imposed by the Committee, the Participant’s
Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the
Participant’s Account Balance if the Participant dies before he or she Retires
or experiences a Termination of Employment.

 

6.2           Payment of Pre-Retirement Survivor Benefit.  The Participant’s
Beneficiary shall receive the Pre-Retirement Survivor Benefit in a lump sum
during the sixty (60) day period immediately following the close of the calendar
quarter in which the Committee receives proof that is satisfactory to the
Committee of the Participant’s death, in accordance with the procedures
established by the Committee.  Any payment made shall be subject to Section 3.14
and to the Deduction Limitation.  Notwithstanding anything in this Plan to the
contrary, any distribution from the Deferred Share Deferral Account and/or the
Pre-2005 Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit
Deferral Account under this Section 6.2 shall be in the form of Stock.

 

6.3           Death Prior to Completion of Termination Benefit or Retirement
Benefit.  If a Participant dies after Termination of Employment or Retirement
but before the Termination Benefit or Retirement Benefit is paid in full, the
Participant’s unpaid Termination Benefit or Retirement Benefit shall be paid to
the Participant’s Beneficiary in a lump sum during the sixty (60) day period
immediately following

 

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the close of the calendar quarter in which the Committee receives proof that is
satisfactory to the Committee of the Participant’s death, in accordance with the
procedures established by the Committee.  Any payment made hereunder shall be
subject to Section 3.14, but shall not be subject to the Deduction Limitation. 
Notwithstanding anything in this Plan to the contrary, any distribution from the
Deferred Share Deferral Account and/or the Pre-2005 Deferred Share/Option
Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Account under this
Section 6.3 shall be in the form of Stock.

 

ARTICLE 7
Termination Benefit

 

7.1           Termination Benefit.  Subject to the Deduction Limitation and to
Section 3.14, and any other conditions imposed by the Committee, the Participant
shall receive a Termination Benefit, which shall be equal to the Participant’s
vested Account Balance if a Participant experiences a Termination of Employment
prior to his or her Retirement or death.

 

7.2           Payment of Termination Benefit.  A Participant’s Termination
Benefit shall be paid in a lump sum during the sixty (60) day period immediately
following the close of the calendar quarter in which the Participant experiences
a Termination of Employment, in accordance with the procedures established by
the Committee; provided, however, that, to the extent required under
Section 409A, Termination Benefit distributions to an individual who is a
Specified Employee as of the date of his or her Separation from Service shall
commence no earlier than six (6) months after the date or his or her Termination
of Employment (or, if earlier, his or her death).

 

Notwithstanding anything above or elsewhere in the Plan to the contrary, to the
extent Section 409A requires that an Annual Deferred Share Amount deferral
election satisfy the rules under Section 409A applicable to changes to form and
timing of distribution elections in order for such Annual Deferred Share Amount
deferral election to effectively defer tax with respect to the Annual Deferred
Share Amounts, that portion of the Participant’s Deferred Share Deferral Account
attributable to such Annual Deferred Share Amount deferral election shall be
distributable as a Termination Benefit solely at such time(s) and in such manner
as the Termination Benefit distribution does not violate the rules under
Section 409A applicable to changes to form and timing of distribution elections.

 

Any payment made shall be subject to the Deduction Limitation and to
Section 3.14.  Notwithstanding anything in this Plan to the contrary, any
distribution from the Deferred Share Deferral Account and/or the Pre-2005
Deferred Share/Option Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral
Account under this Section 7.2 shall be in the form of Stock.

 

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ARTICLE 8
Beneficiary Designation

 

8.1           Beneficiary.  Each Participant shall have the right, at any time,
to designate his or her Beneficiary(ies) (both primary as well as contingent) to
receive any benefits payable under the Plan to a Beneficiary upon the death of a
Participant.  The Beneficiary designated under this Plan may be the same as or
different from the Beneficiary designation under any other plan of an Employer
in which the Participant participates.

 

8.2           Beneficiary Designation; Change.  A Participant shall designate
his or her Beneficiary by completing and signing the Beneficiary Designation
Form, and returning it to the Committee or its designated agent.  A Participant
shall have the right to change a Beneficiary by completing, signing and
otherwise complying with the terms of the Beneficiary Designation Form and the
Committee’s rules and procedures, as in effect from time to time.  Upon the
acceptance by the Committee or its designated agent of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be
canceled.  The Committee shall be entitled to rely on the last Beneficiary
Designation Form filed by the Participant and accepted by the Committee or its
designated agent prior to his or her death.

 

8.3           Acceptance.  No designation or change in designation of a
Beneficiary shall be effective until received and accepted by the Committee or
its designated agent.

 

8.4           No Beneficiary Designation.  If a Participant fails to designate a
Beneficiary as provided in Sections 8.1, 8.2 and 8.3 above or, if all designated
Beneficiaries predecease the Participant or die prior to complete distribution
of the Participant’s benefits, then the Participant’s designated Beneficiary
shall be deemed to be his or her surviving spouse.  If the Participant has no
surviving spouse, the benefits remaining under the Plan to be paid to a
Beneficiary shall be payable to the executor or personal representative of the
Participant’s estate.

 

8.5           Doubt as to Beneficiary.  If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the Committee
shall have the right, exercisable in its discretion, to cause the Participant’s
Employer to withhold such payments until this matter is resolved to the
Committee’s satisfaction.

 

8.6           Discharge of Obligations.  The payment of benefits under the Plan
to a Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant’s Plan Agreement shall terminate upon such
full payment of benefits.

 

Neither the Committee nor the Employer shall be obliged to search for any
Participant or Beneficiary beyond the sending of a registered letter to such
person’s last known address.

 

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If the Committee notifies any Participant or Beneficiary that he or she is
entitled to an amount under the Plan and the Participant or Beneficiary fails to
claim such amount or make his or her location known to the Committee within
three (3) years thereafter, then, except as otherwise required by law, if the
location of one or more of the next of kin of the Participant is known to the
Committee, the Committee may direct distribution of such amount to any one or
more or all of such next of kin, and in such proportions as the Committee
determines.  If the location of none of the foregoing persons can be determined,
the Committee shall have the right to direct that the amount payable shall be
deemed to be a forfeiture, except that the dollar amount of the forfeiture,
unadjusted for deemed gains or losses in the interim, shall be paid by the
Employer if a claim for the benefit subsequently is made by the Participant or
the Beneficiary to whom it was payable.  If a benefit payable to an unlocated
Participant or Beneficiary is subject to escheat and/or unclaimed property laws
pursuant to applicable law, neither the Committee nor the Employer shall be
liable to any person for any payment made in accordance with such law.

 

ARTICLE 9
Termination, Amendment or Modification

 

9.1           Termination.  Although each Employer anticipates that it will
continue the Plan for an indefinite period of time, there is no guarantee that
any Employer will continue the Plan or will not terminate the Plan at any time
in the future.  Accordingly, each Employer reserves the right to discontinue its
sponsorship of the Plan and/or to terminate the Plan at any time with respect to
any or all of its participating Associates, by action of its board of directors.
In addition, the Committee may terminate the Plan with respect to one or more
Employers.  Upon a termination of the Plan in accordance with the requirements,
restrictions and limitations of Section 1.409A-3(j)(4)(ix) of the Treasury
regulations, the Plan Agreements of the affected Participants shall terminate
and they shall be paid in a single lump sum distribution their vested Account
Balances (but not to commence before or end after any distribution period
required by Section 409A).  If, due to the circumstances surrounding the Plan
termination, a distribution of a Participant’s vested Account Balance upon Plan
termination is not permitted by Section 409A, the payment of the Account Balance
shall be made only after Plan benefits otherwise become due hereunder.  The
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under the
Plan as of the date of termination.

 

Without limiting the generality of the foregoing, the Employer specifically
reserves the right to terminate and liquidate the Plan with respect to all of
its participating Associates, in its discretion and by action of the Committee,
within the thirty (30) days preceding or the twelve (12) months following a
“change in control event” (as defined in Section 409A); provided, however, that
such termination and liquidation must be irrevocable and shall be permitted only
if all

 

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arrangements sponsored by the Employer that are required to be aggregated with
the Plan pursuant to Section 14.21 are also irrevocably terminated and
liquidated with respect to each participant therein that has experienced a
change in control event, so that Associates participating under the Plan and all
participants under those other arrangements that have experienced a change in
control event are required to receive all amounts of compensation deferred under
the terminated arrangements within twelve (12) months of the date the Employer
takes irrevocable action to terminate and liquidate the arrangements.

 

Notwithstanding anything in this Plan to the contrary, any distribution from the
Deferred Share Deferral Account and/or the Pre-2005 Deferred Share/Option
Swap/In-Kind Stock Bonus/Restricted Share Unit Deferral Account under this
Section 9.1 shall be in the form of Stock.

 

9.2           Amendment.  Any Employer may, at any time, amend or modify the
Plan in whole or in part with respect to that Employer by the action of its
board of directors and the Committee may, at any time, amend or modify the Plan
in whole or in part with respect to one or more Employers; provided, however,
that no amendment or modification shall be effective to decrease or restrict the
value of a Participant’s Account Balance in existence at the time the amendment
or modification is made, calculated as if the Participant had experienced a
Termination of Employment as of the effective date of the amendment or
modification or, if the amendment or modification occurs after the date upon
which the Participant was eligible to Retire, the Participant had Retired as of
the effective date of the amendment or modification.  The amendment or
modification of the Plan shall not affect any Participant or Beneficiary who has
become entitled to the payment of benefits under the Plan as of the date of the
amendment or modification.

 

9.3           Plan Agreement.  Despite the provisions of Sections 9.1 and 9.2
above, if a Participant’s Plan Agreement contains benefits or limitations that
are not in this Plan document, the Employer or the Committee may only amend or
terminate such provisions with the consent of the Participant, unless otherwise
provided in the Plan Agreement.

 

9.4           Effect of Payment.  The full payment of the applicable benefit
under Articles 4, 5, 6 or 7 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under this
Plan and the Participant’s Plan Agreement shall terminate.

 

9.5           Amendment to Ensure Proper Characterization of the Plan. 
Notwithstanding the previous Sections of this Article 9, the Plan may be amended
at any time, retroactively if required, if found necessary, in the opinion of
the Committee, in order to ensure that the Plan is characterized as a
non-tax-qualified “top hat” plan of deferred

 

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compensation maintained for a select group of management or highly compensated
employees, as described under ERISA Sections 201(2), 301(a)(3) and 401(a)(1), to
conform the Plan to the provisions of Section 409A, to ensure that amounts under
the Plan are not considered to be taxed to a Participant under the Federal
income tax laws prior to the Participant’s receipt of the amounts or to conform
the Plan and the Trust to the provisions and requirements of any applicable law
(including ERISA and the Code).

 

ARTICLE 10
Administration

 

10.1         Committee Duties.  This Plan shall be administered by a Committee
which shall consist of the Board, or such committee as the Board shall appoint. 
Members of the Committee may be Participants under this Plan.  The Committee
shall also have the discretion and authority to (i) make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of this
Plan and (ii) decide or resolve any and all questions including interpretations
of this Plan, as may arise in connection with the Plan.  Any individual serving
on the Committee who is a Participant shall not vote or act on any matter
relating solely to himself or herself.  When making a determination or
calculation, the Committee shall be entitled to rely on information furnished by
a Participant or the Company.

 

10.2         Agents.  In the administration of this Plan, the Committee may,
from time to time, employ agents and delegate to them such administrative duties
as it sees fit (including acting through a duly appointed representative) and
may from time to time consult with counsel who may be counsel to any Employer.

 

10.3         Binding Effect of Decisions.  The decision or action of the
Committee with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.

 

10.4         Indemnity of Committee.  All Employers shall indemnify and hold
harmless the members of the Committee, and any Associate to whom the duties of
the Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Plan, except in the case of willful misconduct by the Committee, any of
its members, or any such Associate.

 

10.5         Employer Information.  To enable the Committee to perform its
functions, the Company and each Employer shall supply full and timely
information to the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement, death or Termination
of Employment of its

 

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Participants, and such other pertinent information as the Committee may
reasonably require.

 

ARTICLE 11
Other Benefits and Agreements

 

11.1         Coordination with Other Benefits.  The benefits provided for a
Participant and Participant’s Beneficiary under the Plan are in addition to any
other benefits available to such Participant under any other plan or program for
Associates of the Participant’s Employer.  The Plan shall supplement and shall
not supersede, modify or amend any other such plan or program except as may
otherwise be expressly provided.

 

ARTICLE 12
Claims Procedures

 

12.1         Scope of Claims Procedures. This Article is based on final
regulations issued by the Department of Labor and published in the Federal
Register on November 21, 2000 and codified at 29 C.F.R. section 2560.503-1.  If
any provision of this Article conflicts with the requirements of those
regulations, the requirements of those regulations will prevail.

 

12.2         Initial Claim.  A Participant or Beneficiary who believes he or she
is entitled to any benefit under the Plan (a “Claimant”) may file a claim with
the Committee.  The Committee shall review the claim itself or appoint an
individual or an entity to review the claim.

 

(a)           Decision on Initial Claim.  The Claimant shall be notified within
ninety (90) days after the claim is filed whether the claim is allowed or
denied, unless the Claimant receives written notice from the Committee or
appointee of the Committee prior to the end of the ninety (90) day period
stating that special circumstances require an extension of the time for
decision, such extension not to extend beyond the day which is one hundred
eighty (180) days after the day the claim is filed.

 

(b)           Manner and Content of Denial of Initial Claims.  If the Committee
denies a claim, it must provide to the Claimant, in writing or by electronic
communication:

 

(i)            The specific reasons for the denial;

 

(ii)           A reference to the Plan provision or insurance contract provision
upon which the denial is based;

 

(iii)          A description of any additional information or material that the
Claimant must provide in order to perfect the claim;

 

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(iv)          An explanation of why such additional material or information is
necessary;

 

(v)           Notice that the Claimant has a right to request a review of the
claim denial and information on the steps to be taken if the Claimant wishes to
request a review of the claim denial; and

 

(vi)          A statement of the Participant’s right to bring a civil action
under ERISA Section 502(a) following a denial on review of the initial denial.

 

12.3                           Review Procedures.

 

(a)           Request for Review of Denied Claim.  A request for review of a
denied claim must be made in writing to the Committee within sixty (60) days
after receiving notice of denial.  The decision upon review will be made within
sixty (60) days after the Committee’s receipt of a request for review, unless
special circumstances require an extension of time for processing, in which case
a decision will be rendered not later than one hundred twenty (120) days after
receipt of a request for review.  A notice of such an extension must be provided
to the Claimant within the initial sixty (60) day period and must explain the
special circumstances and provide an expected date of decision.

 

The reviewer shall afford the Claimant an opportunity to review and receive,
without charge, all relevant documents, information and records and to submit
issues and comments in writing to the Committee.  The reviewer shall take into
account all comments, documents, records and other information submitted by the
Claimant relating to the claim regardless of whether the information was
submitted or considered in the initial benefit determination.

 

(b)           Manner and Content of Notice of Decision on Review.  Upon
completion of its review of an adverse initial claim determination, the
Committee will give the Claimant, in writing or by electronic notification, a
notice containing:

 

(i)            its decision;

 

(ii)           the specific reasons for the decision;

 

(iii)          the relevant Plan provisions or insurance contract provisions on
which its decision is based;

 

(iv)          a statement that the Claimant is entitled to receive, upon request
and without charge, reasonable access to, and copies of, all documents, records
and other information in the Plan’s files which is relevant to the Claimant’s
claim for benefits;

 

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(v)           a statement describing the Claimant’s right to bring an action for
judicial review under ERISA Section 502(a); and

 

(vi)          if an internal rule, guideline, protocol or other similar
criterion was relied upon in making the adverse determination on review, a
statement that a copy of the rule, guideline, protocol or other similar
criterion will be provided without charge to the Claimant upon request.

 

12.4         Calculation of Time Periods.  For purposes of the time periods
specified in this Article, the period of time during which a benefit
determination is required to be made begins at the time a claim is filed in
accordance with the Plan procedures without regard to whether all the
information necessary to make a decision accompanies the claim.  If a period of
time is extended due to a Claimant’s failure to submit all information
necessary, the period for making the determination shall be tolled from the date
the notification is sent to the Claimant until the date the Claimant responds.

 

12.5         Legal Action.  If the Plan fails to follow the claims procedures
required by this Article, a Claimant shall be deemed to have exhausted the
administrative remedies available under the Plan and shall be entitled to pursue
any available remedy under ERISA Section 502(a) on the basis that the Plan has
failed to provide a reasonable claims procedure that would yield a decision on
the merits of the claim.  A Claimant’s compliance with the foregoing provisions
of this Article is a mandatory prerequisite to a Claimant’s right to commence
any legal action with respect to any claims for benefits under the Plan. 
However, notwithstanding anything herein that may suggest otherwise, with
respect to any claim pertaining to a Participant who is not subject to ERISA,
following the Claimant’s exhaustion of the foregoing provisions of this Article,
all disputes in connection with such claim shall be resolved by binding
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association.

 

ARTICLE 13
Trust

 

13.1         Establishment of the Trust.  The Company has established the Trust,
and each Employer shall at least annually transfer over to the Trust such assets
as the Employer determines, in its sole discretion, are necessary to provide for
its respective future liabilities created with respect to the Annual Deferral
Amounts and Annual Company Contribution Amounts for such Employer’s
Participants.

 

13.2         Interrelationship of the Plan and the Trust.  The provisions of the
Plan and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan.  The provisions of the Trust shall govern
the rights of the Employers, Participants and the creditors of the Employers to
the assets transferred to the Trust.  Each Employer shall at all times remain
liable to carry out its obligations under the Plan.

 

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13.3         Distributions From the Trust.  Each Employer’s obligations under
the Plan may be satisfied with Trust assets distributed pursuant to the terms of
the Trust, and any such distribution shall reduce the Employer’s obligations
under this Plan.

 

ARTICLE 14
Miscellaneous

 

14.1         Status of Plan.  The Plan is not qualified within the meaning of
Code Section 401(a) and “is unfunded and is maintained by an employer primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees” within the meaning of ERISA Sections
201(2), 301(a)(3) and 401(a)(1).  The Plan shall be administered and interpreted
to the extent possible in a manner consistent with that intent.

 

14.2         Unsecured General Creditor.  Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interests
or claims in any property or assets of an Employer.  For purposes of the payment
of benefits under this Plan, any and all of an Employer’s assets shall be, and
remain, the general, unpledged unrestricted assets of the Employer.  An
Employer’s obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.

 

14.3         Employer’s Liability.  An Employer’s liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as entered
into between the Employer and a Participant.  An Employer shall have no
obligation to a Participant under the Plan except as expressly provided in the
Plan and his or her Plan Agreement.

 

14.4         Nonassignability.  Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate, alienate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are expressly declared to be, unassignable
and non-transferable.  Subject to Section 14.15, no part of the amounts payable
shall, prior to actual payment, be subject to seizure, attachment, garnishment
or sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, be transferable by
operation of law in the event of a Participant’s or any other person’s
bankruptcy or insolvency or be transferable to a spouse as a result of a
property settlement or otherwise.

 

14.5         Not a Contract of Employment.  The terms and conditions of this
Plan shall not be deemed to constitute a contract of employment between any
Employer and the Participant.  Such employment is hereby acknowledged to be an
“at will” employment relationship that can be terminated at any time for any
reason, or no

 

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reason, with or without cause, and with or without notice, unless expressly
provided in a written employment agreement.  Nothing in this Plan shall be
deemed to give a Participant the right to be retained in the service of any
Employer or to interfere with the right of any Employer to discipline or
discharge the Participant at any time.

 

14.6         Furnishing Information.  A Participant or his or her Beneficiary
will cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be requested in
order to facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical examinations as the
Committee may deem necessary.

 

14.7         Terms.  Whenever any words are used herein in the masculine, they
shall be construed as though they were in the feminine in all cases where they
would so apply; and whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.

 

14.8         Captions.  The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.

 

14.9         Governing Law.  Subject to ERISA, the provisions of this Plan shall
be construed and interpreted according to the internal laws of the State of
Delaware without regard to its conflicts of laws principles.

 

14.10       Notice.  Any notice or filing required or permitted to be given to
the Committee under this Plan shall be sufficient if it is in accordance with
the procedures established by the Committee for notice or filing delivery via
electronic transmission or if it is in writing and hand-delivered, or sent by
registered or certified mail, to the address below:

 

Treasurer

K. Hovnanian Enterprises, Inc.

10 Highway 35

Red Bank, New Jersey  07701

(732) 747-7800

 

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.  Any notice or filing required or permitted to be
given to a Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the Participant.

 

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14.11       Successors.  The provisions of this Plan shall bind and inure to the
benefit of the Participant’s Employer and its successors and assigns and the
Participant and the Participant’s designated Beneficiaries.

 

14.12       Spouse’s Interest.  The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in any
manner, including but not limited to such spouse’s will, nor shall such interest
pass under the laws of intestate succession.

 

14.13       Validity.  In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal or invalid provision had never been inserted herein; except to the
extent that Section 409A requires that this Section 14.13 be disregarded because
it purports to nullify Plan terms that are not in compliance with Section 409A.

 

14.14       Incompetent.  If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared incompetent
or to a person incapable of handling the disposition of that person’s property,
the Committee may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or incapable person.  The Committee may require proof of minority, incompetence,
incapacity or guardianship, as it may deem appropriate prior to distribution of
the benefit.  Any payment of a benefit shall be a payment for the account of the
Participant and the Participant’s Beneficiary, as the case may be, and shall be
a complete discharge of any liability under the Plan for such payment amount.

 

14.15       Court Order.  The Committee is authorized to make any payments
directed by court order in any action in which the Plan or the Committee has
been named as a party.  In addition, if a court determines that a spouse or
former spouse of a Participant has an interest in the Participant’s benefits
under the Plan in connection with a property settlement or otherwise, the
Committee, in its sole discretion but solely if and to the extent permitted by
Section 409A, shall have the right, notwithstanding any election made by a
Participant, to immediately distribute the spouse’s or former spouse’s interest
in the Participant’s benefits under the Plan to that spouse or former spouse.

 

14.16       Acceleration of Distribution.

 

(a)           In General.  The Employer may, its discretion, accelerate the date
of distribution or commencement of distributions hereunder, or accelerate
installment payments by paying the vesting Account Balance in a lump sum or
pursuant to a Annual Installment Method using fewer years, to the extent

 

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permitted under Section 409A (such as, for example, as provided in
Section 1.409A-3(j)(4) of the Treasury regulations  to comply with domestic
relations orders or certain conflict of interest rules, to pay employment taxes,
or to pay certain de minimus amount, or to make payments upon income inclusion
under Section 409A).  Notwithstanding anything in this Plan to the contrary, any
distribution from the Deferred Share Deferral Account under this Section 14.16
shall be in the form of Stock.

 

(b)           Trust.  If the Trust terminates in accordance with the provisions
of the Trust and benefits are distributed from the Trust to a Participant in
accordance with such provisions, the Participant’s benefits under this Plan
shall be reduced to the extent of such distributions.

 

14.17       Delay in Payment.  If the Employer reasonably anticipates that any
payment scheduled to be made hereunder would violate securities laws (or other
applicable laws) or jeopardize the ability of the Employer to continue as a
going concern if paid as scheduled, then the Employer may defer that payment,
provided the Employer treats payments to all similarly situated Participants on
a reasonably consistent basis.  In addition, the Employer may, in its
discretion, delay a payment upon such other events and conditions as the IRS may
prescribe, provided the Employer treats payments to all similarly situated
Participants on a reasonably consistent basis.  Any amounts deferred pursuant to
this Section shall continue to be credited or debited with additional amounts in
accordance with Section 3.12 above, even if such amount is being paid out in
installments.  The amounts so deferred and amounts credited or debited thereon
shall be distributed to the Participant or his or her Beneficiary (in the event
of the Participant’s death) at the earliest possible date on which the Employer
reasonably anticipates that such violation or material harm would be avoided or
as otherwise prescribed by the IRS.

 

14.18       Prohibited Acceleration/Distribution Timing.  This Section shall
take precedence over any other provision of the Plan or this Article 14 to the
contrary.  If the timing of any deferral or distribution election would result
in any tax or other penalty (other than ordinarily payable Federal, state or
local income or payroll taxes), which tax or penalty can be avoided by payment
of the distribution at a later time, then the distribution shall be made (or
commence, as the case may be) on the first date on which such distributions can
be made (or commence) without such tax or penalty; except to the extent that
Section 409A requires that this Section 14.18 be disregarded because it purports
to nullify Plan terms that are not in compliance with Section 409A.

 

14.19       Insurance.  The Employers, on their own behalf or on behalf of the
Trustee of the Trust, and, in their sole discretion, may apply for and procure
insurance on the life of the Participant, in such amounts and in such forms as
the Trust may choose.  The Employers or the Trustee of the Trust, as the case
may be, shall be the sole owner and beneficiary of any such insurance.  The
Participant shall have no

 

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interest whatsoever in any such policy or policies, and at the request of the
Employers shall submit to medical examinations and supply such information and
execute such documents as may be required by the insurance company or companies
to whom the Employers have applied for insurance.

 

14.20       Aggregation of Employers.  If the Employer is a member of a
controlled group of corporations or a group of trades or business under common
control (as described in Code §414(b) or (c)), but substituting a twenty-five
percent (25%) ownership level for the eighty percent (80%) level set forth in
those Code Sections, all members of the group shall be treated as a single
Employer for purposes of whether there has occurred a Separation from Service
and for any other purposes under the Plan as Section 409A shall require.  For
purposes of Section 9.1, in the case of a change in control event, the entities
to be treated as a single Employer shall be determined immediately following the
change in control event.

 

14.21       Aggregation of Plans.  If the Employer offers other account balance
deferred compensation plans in addition to the Plan, those plans together with
the Plan shall be treated as a single plan to the extent required under
Section 409A for purposes of determining whether an Employee may make a deferral
election pursuant to Section 3.4(a) within thirty (30) days of becoming eligible
to participate in the Plan and for any other purposes under the Plan as
Section 409A shall require.

 

14.22       USERRA.  Notwithstanding anything herein to the contrary, any
election provided to a Participant as necessary to satisfy the requirements of
the Uniformed Services Employment and Reemployment Rights Act of 1994, as
amended, shall be permissible hereunder.

 

14.23       Legal Fees To Enforce Rights After Change in Control.  Hovnanian
Enterprises, Inc. and each Employer is aware that upon the occurrence of a
Change in Control, the Board or the board of directors of a Participant’s
Employer (which might then be composed of new members) or a shareholder of
Hovnanian Enterprises, Inc. or the Participant’s Employer, or of any successor
corporation might then cause or attempt to cause Hovnanian Enterprises, Inc.,
the Participant’s Employer or such successor to refuse to comply with its
obligations under the Plan and might cause or attempt to cause Hovnanian
Enterprises, Inc. or the Participant’s Employer to institute, or may institute,
litigation seeking to deny Participants the benefits intended under the Plan. 
In these circumstances, the purpose of the Plan could be frustrated. 
Accordingly, if, following a Change in Control, it should appear to any
Participant that Hovnanian Enterprises, Inc., the Participant’s Employer or any
successor corporation has failed to comply with any of its obligations under the
Plan or any agreement thereunder or, if Hovnanian Enterprises, Inc., such
Employer or any other person takes any action to declare

 

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the Plan void or unenforceable or institutes any litigation or other legal
action designed to deny, diminish or to recover from any Participant the
benefits intended to be provided, then Hovnanian Enterprises, Inc. and the
Participant’s Employer irrevocably authorize such Participant to retain counsel
of his or her choice at the expense of Hovnanian Enterprises, Inc. and the
Participant’s Employer (who shall be jointly and severally liable) to represent
such Participant in connection with the initiation or defense of any litigation
or other legal action, whether by or against Hovnanian Enterprises, Inc., the
Participant’s Employer or any director, officer, shareholder or other person
affiliated with Hovnanian Enterprises, Inc., the Participant’s Employer or any
successor thereto in any jurisdiction.

 

IN WITNESS WHEREOF, the Company has signed this Plan document as of January 1,
2005.

 

 

K. HOVNANIAN ENTERPRISES, INC., a
California corporation

 

 

 

By:

 

 

 

 

Title:

Sr. Vice President Human Resources

 

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SCHEDULE A

 

MEASUREMENT FUNDS

 

Pursuant to Section 3.12(d), the Participant may elect one or more of the
Measurement Funds:

 

Fund Class

 

Measurement Fund

 

Money Market Fund

 

Vanguard VIF Money Market

 

Income

 

PIMCo (VIT) Total Return Bond

 

Income

 

Vanguard VIF Hi-Yield Bond

 

Balanced

 

Vanguard VIF Balanced

 

Large Blend

 

PIMCo (VIT) Stocks Plus

 

Large Growth

 

Vanguard VIF Capital Growth

 

Large Value

 

T. Rowe Price Equity Income Portfolio

 

Mid Cap

 

T. Rowe Price Mid-Cap Growth

 

Small/Mid Value

 

First Eagle Overseas

 

Small Value

 

Royce Micro-Cap

 

Small Growth

 

Vanguard VIF Small Company

 

Aggressive-Growth

 

INVESCO (VIF) Dynamics

 

Foreign Large Blend

 

T. Rowe Price International

 

Phantom Stock

 

Company Stock

 

 

50

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