Document:

Unassociated Document

    EXECUTION
      COPY

     

    EMPLOYMENT
      AGREEMENT

     

    THIS
      EMPLOYMENT AGREEMENT
      (this
“Agreement”),
      is
      made and entered into as of March 16, 2008 (the “Effective
      Date”),
      by
      and between Griffon Corporation, a Delaware corporation, with its principal
      office located at 100 Jericho Quadrangle, Jericho, New York 11753-2794 (together
      with its successors and assigns permitted under this Agreement, “Griffon”)
      and
      Ronald J. Kramer (“Kramer”).

     

    WITNESSETH:

     

    WHEREAS,
      Griffon
      has determined that it is in the best interests of Griffon and its stockholders
      to employ Kramer as its Chief Executive Officer; and 

     

    WHEREAS,
      Griffon
      wishes to assure itself of the services of Kramer for the period hereinafter
      provided, and Kramer is willing to be employed by Griffon for said period,
      upon
      the terms and conditions provided in this Agreement;

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and mutual covenants contained herein and for
      other good and valuable consideration, the receipt and sufficiency of which
      is
      mutually acknowledged, Griffon and Kramer (individually a “Party”
and
      together the “Parties”
)
      agree
      as follows: 

     

    
      
        1.
          DEFINITIONS.

      

    

     

    (a) “Affiliate”
means
      any person or entity controlling, controlled by or under common control with
      Griffon.

     

    (b) “Board”
shall
      mean the Board of Directors of Griffon.

     

    (c) “Cause”
shall
      mean:

     

    (i) Kramer’s
      conviction of, or plea of guilty or nolo contendere to, a felony, excluding
      DWI
      (or any similar offense); 

     

    (ii) any
      material breach of the Agreement by Kramer which is not promptly cured, if
      curable, in accordance with Section
      9(d);
      or

     

    (iii) Kramer’s
      willful misconduct or gross negligence that is materially economically injurious
      to Griffon. For purposes of this Section
      1(c)(iii),
      no act
      or failure to act on the part of Kramer shall be considered “willful” unless it
      is committed, or omitted to be done, by him in bad faith or without reasonable
      belief that his action or omission was in the best interests of
      Griffon.

     

    (d) “Change
      in Control”
shall
      mean the occurrence of any of the following events after the Commencement Date
      (as defined in Section 2(b)):

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i) the
      acquisition by any individual, entity or group (within the meaning of Section
      13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 as amended (the
      “Exchange
      Act”)
      (a
“Person”)
      of
      beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
      Exchange Act) of voting securities of Griffon when such acquisition causes
      such
      Person to beneficially own thirty percent (30%) or more of the combined voting
      power of the then outstanding voting securities of Griffon entitled to vote
      generally in the election of directors (the “Outstanding
      Griffon Voting Securities”);
      provided,
      however,
      that
      for purposes of this subsection
      (i),
      the
      following acquisitions shall not be deemed to result in a Change in Control:
      (A)
      any acquisition directly from Griffon, (B) any acquisition by Griffon, (C)
      any
      acquisition by (x) any employee benefit plan (or related trust) intended to
      be
      qualified under Section 401(a) of the Code or (y) any rabbi trust or feeder
      trust established in connection with any broad-based employee benefit plan
      or
      any employee benefit plan in which Kramer is the sole participant, in each
      case,
      sponsored or maintained by Griffon or any corporation controlled by Griffon,
      or
      (D) any acquisition pursuant to a transaction that complies with clauses
      (A)
      or
(B)
      of
subsection
      (iii)
      below;

     

    (ii) during
      any period of thirty (30) consecutive months, individuals who at the beginning
      of such period and any new director whose election by the Board or nomination
      for election by Griffon’s stockholders was approved by a vote of at least a
      majority of the directors then still in office who either were directors at
      the
      beginning of any such period or whose election or nomination for election was
      previously so approved, cease for any reason to constitute a majority of the
      Board, but excluding any such new director whose initial assumption of office
      occurs as a result of an actual or threatened election contest with respect
      to
      the election or removal of directors or other actual or threatened solicitation
      of proxies or consents by or on behalf of a Person other than the
      Board;

     

    (iii) the
      consummation of a reorganization, merger, consolidation or similar form of
      transaction involving Griffon or any of its subsidiaries (“Business
      Combination”);
      excluding, however, such a Business Combination (A) pursuant to which all or
      substantially all of the individuals and entities who were the beneficial owners
      of the Outstanding Griffon Voting Securities immediately prior to such Business
      Combination beneficially own, directly or indirectly, more than seventy percent
      (70%) of the combined voting power of the then outstanding voting securities
      entitled to vote generally in the election of directors of the corporation
      resulting from such Business Combination in substantially the same proportions
      as their ownership, immediately prior to such Business Combination, of the
      Outstanding Griffon Voting Securities, or (B) effected to implement a
      recapitalization or reorganization of Griffon (or similar transaction) in which
      no Person acquires more than 30% of the combined voting power of Griffon’s then
      outstanding securities; or

     

    (iv) a
      complete liquidation or dissolution of Griffon or sale or other disposition
      of
      all or substantially all of the assets of Griffon, other than to any Subsidiary
      or any Affiliate.

     

    Notwithstanding
      the foregoing, a Change in Control shall not include any event, circumstance
      or
      transaction that results from an action of any Person, entity or group which
      includes, is affiliated with or is wholly or partly controlled by one or more
      executive officers of Griffon and in which Kramer participates directly or
      actively (other than a renegotiation of his employment arrangements or in his
      capacity as an employee of Griffon or any successor entity thereto or to the
      business of Griffon).

     

    
      
        
        

      

      
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    (e) “Code”
shall
      mean the Internal Revenue Code of 1986, as amended from time to
      time.

     

    (f) “Committee”
shall
      mean the Compensation Committee of the Board.

     

    (g) “Disability”
shall
      mean Kramer’s inability to substantially perform his duties due to physical or
      mental impairment for six (6) consecutive months and, within thirty (30) days
      after a notice of termination is given to Kramer, Kramer has not returned to
      work.

     

    (h) “Employment
      Term”
shall
      mean the period specified in Section
      2(b)
      below.

     

    (i) “Fiscal
      Year”
shall
      mean the 12-month period beginning on October 1 and ending on the next
      subsequent September 30, or such other 12-month period as may constitute
      Griffon’s fiscal year at any time hereafter.

     

    (j) “Good
      Reason”
shall
      mean the occurrence of any of the following events without Kramer’s prior
      written consent:

     

    (i) the
      failure of Kramer to be appointed to the positions set forth in Section
      2(c)
      (other
      than the Chairmanship of the Board), if not promptly cured after written notice,
      or the hiring of any officer to serve in a capacity equal or senior to
      Kramer;

     

    (ii) the
      assignment to Kramer of duties materially inconsistent with his status as the
      chief executive officer of a publicly-traded company or a materially adverse
      alteration in the nature of Kramer’s duties and/or responsibilities, reporting
      obligations, titles or authority, as set forth in Section
      2(c);

     

    (iii) a
      reduction by Griffon of Kramer’s Base Salary or Target Bonus percentage;

     

    (iv) the
      relocation of Kramer’s own office location more than twenty five (25) miles from
      Griffon’s current headquarters; 

     

    (v) Griffon’s
      failure to provide any employee benefits due to be provided to
      Kramer;

     

    (vi) any
      purported termination of Kramer’s employment for Cause which is not
      substantially effected pursuant to the procedures described in Section
      9(d);

     

    (vii) any
      material breach of the Agreement by Griffon; or

     

    
      
        
        

      

      
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    (viii) a
      failure
      of Griffon to have any successor assume in writing the obligations under the
      Agreement. 

     

    Notwithstanding
      the foregoing, Good Reason shall not be deemed to exist unless Kramer gives
      Griffon prior notice within sixty (60) days after the occurrence of the event
      which Kramer believes constitutes the basis for Good Reason, specifying the
      particular act or failure to act which Kramer believes constitutes the basis
      for
      Good Reason. If Griffon fails to cure such act or failure to act, if curable,
      within thirty (30) days after receipt of such notice, Kramer may terminate
      his
      employment for Good Reason. For the avoidance of doubt, if such act is not
      curable, Kramer may terminate his employment for Good Reason upon providing
      such
      notice.

     

    (k) “Salary”
shall
      mean the annual salary provided for in Section
      3
      below,
      as adjusted from time to time.

     

    (l) “Subsidiary”
shall
      mean any entity of which Griffon owns, directly or indirectly, more than fifty
      percent (50%) of its voting stock or voting interests.

     

    
      
        2.
          EMPLOYMENT
          TERM, POSITIONS AND DUTIES.

      

    

     

    (a) Employment
      of Kramer.
      Griffon
      hereby employs Kramer,
      and
Kramer
      hereby
      accepts employment with Griffon, in the positions and with the duties and
      responsibilities set forth below and upon such other terms and conditions as
      are
      hereinafter stated. Kramer
      shall
      render services to Griffon principally at Griffon’s corporate headquarters, but
      he shall do such traveling on behalf of Griffon as shall be reasonably required
      in the course of the performance of his duties hereunder. 

     

    (b) Employment
      Term.
      Unless
      earlier terminated under Section
      9
      hereof,
      the Employment Term shall commence as of April 1, 2008 (the “Commencement
      Date”), and shall continue for a three year period, renewing daily, unless
      either Party provides notice of non-renewal. Upon such notice of non-renewal,
      the Employment Term shall continue for three years from the date such notice
      is
      received by the non-notifying Party.

     

    (c) Titles
      and Duties.

     

    (i) During
      the Employment Term, Kramer
      shall be
      employed as Chief Executive Officer, reporting to the Board. In his capacity
      as
      Chief Executive Officer, Kramer shall perform such duties as are consistent
      with
      his title and position as Chief Executive Officer of a publicly-traded
      company.

     

    (ii) During
      the Employment Term, Kramer shall continue to serve as Vice Chairman of the
      Board. If the current Chairman of the Board ceases to hold such position, the
      Board will give due consideration to Kramer’s appointment as Chairman of the
      Board.

     

    (d) Time
      and Effort.
      Kramer
      shall devote his best efforts and abilities, and substantially all his business
      time, to the performance of his duties under the Agreement; provided that he
      shall, to the extent same does not substantially interfere with the performance
      of his duties hereunder, be permitted to: (i) serve on corporate and civic
      boards and committees; (ii) deliver lectures, fulfill speaking engagements
      or
      teach at educational institutions; (iii) manage personal and family investments
      and (iv) engage in investment management business activities that are not
      competitive with the businesses of Griffon.

     

    
      
        
        

      

      
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        3.
          SALARY.

      

    

     

    (a) Initial
      Salary.
      For the
      remainder of the Fiscal Year ending September 30, 2008 and for the Fiscal Year
      ending September 30, 2009, Kramer shall receive from Griffon a Salary, payable
      in accordance with the regular payroll practices of Griffon, in an amount of
      $775,000 per annum. 

     

    (b) Cost-of-Living
      Increase.
      Commencing with the Fiscal Year ending September 30, 2009 and for each Fiscal
      Year thereafter during the Employment Term, Kramer’s Salary shall be increased
      annually at the end of each Fiscal Year, by an amount not less than increase
      in
      the cost of living for the immediately preceding year, as reported in the
“Consumer Price Index, New York and Northeastern New Jersey, All Items,”
published by the United States Department of Labor, Bureau of Labor Statistics
      (or, if such index is no longer published, a successor or comparable index
      that
      is published).

     

    (c) Salary
      Increase.
      In
      addition to the Cost of Living Increase described in Section
      3(b)
      above,
      Kramer’s Salary shall be reviewed annually for possible increases (but not
      decreases) commencing October 1, 2009. Any amount to which Kramer’s Salary is
      increased, as provided in Section
      3(b)
      above,
Section
      3(c)
      or
      otherwise, shall not thereafter be reduced without his prior written
      consent.

     

    
      
        4.
          BONUSES.

      

    

     

    (a) 2008
      Guaranteed Bonus. Within 60 business days following the end of the Fiscal
      Year ending September 30, 2008, Griffon shall pay to Kramer a guaranteed bonus
      equal to $581,250.

     

    (b) Annual
      Bonus.
      Commencing with the Fiscal Year ending September 30, 2009 and for each Fiscal
      Year thereafter during the Employment Term, Kramer shall be eligible to receive
      an annual bonus of between 0% and 250% of Salary, with a target bonus of 150%
      of
      Salary (the “Target Bonus”), in accordance with Griffon’s 2006 Performance Bonus
      Plan or another plan or plans providing him annual award opportunities. Any
      such
      bonus shall be based on the achievement of performance objectives to be
      determined by the Board (or the Committee) after consultation with Kramer.
      Such
      performance criteria shall be communicated to Kramer in writing within ninety
      (90) days after the commencement of the applicable performance period. Any
      bonus
      payable for any Fiscal Year shall be paid within sixty (60) days of the end
      of
      the Fiscal Year during which it is earned.

     

    (c) Discretionary
      Bonus.
      Kramer
      shall be eligible to receive additional bonuses during the Employment Term.
      The
      amount and the occasion for payment of such bonus, if any, shall be determined
      by the Committee in its sole discretion.

     

    
      
        
        

      

      
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        5.
          EQUITY
          AWARDS.

      

    

     

    (a) Restricted
      Stock.
      On the
      Commencement Date, Kramer shall receive, pursuant to the Griffon Corporation
      2006 Equity Incentive Plan (the “Plan”) and an award agreement issued
      thereunder, a restricted stock grant (the “Initial Restricted Stock Grant”) of
      250,000 shares of common stock of Griffon (the “Common Stock”). Subject to
      Kramer’s continued employment with Griffon (except as otherwise provided in
Section
      9(g)),
      the
      Initial Restricted Stock Grant shall vest in full on the third anniversary
      of
      the Commencement Date. The restricted stock award agreement shall permit Kramer
      to satisfy his withholding obligations by having Griffon withhold a sufficient
      number of shares to satisfy such obligations. Additionally, on or shortly after
      October 1, 2008, Kramer shall receive, pursuant to the Plan and an award
      agreement issued thereunder, a restricted stock grant of an additional 75,000
      shares of Common Stock on the same terms as the Initial Restricted Stock Grant
      which shall also vest, subject to Kramer’s continued employment with Griffon
      (except as otherwise provided in Section
      9(g)),
      on the
      third anniversary of the Commencement Date. On or about October 1, 2009, Kramer
      shall receive, pursuant to the Plan and an award agreement issued thereunder,
      a
      restricted stock grant of an additional 25,000 shares of Common Stock on the
      same terms as the Initial Restricted Stock Grant which shall also vest, subject
      to Kramer’s continued employment with Griffon (except as otherwise provided in
Section
      9(g)),
      on the
      third anniversary of the Commencement Date. 

     

    (b) Stock
      Options.
      On or
      shortly after October 1, 2008, Kramer shall be granted, pursuant to the Plan
      and
      an award agreement issued thereunder, a non-qualified stock option (the “Initial
      Stock Option Grant”) to purchase 350,000 shares of Common Stock at an exercise
      price equal to the greater of $20 per share or the fair market value on the
      date
      of grant. Subject to Kramer’s continued employment with Griffon (except as
      otherwise provided in Section
      9(g)),
      the
      Initial Stock Option Grant shall vest and
      become exercisable in
      three
      equal installments on each anniversary of the Commencement Date. The option
      agreement will contain a “cashless” exercise feature for the payment of both the
      exercise price and applicable withholding taxes. If Kramer is not permitted
      to
      exercise the option (or any portion thereof) because of a company-imposed or
      regulatory-imposed restriction on trading of Griffon’s common stock (e.g.,
      during any “blackout” period), and the option would otherwise expire during such
      restriction period, the expiration date of the option shall be extended by
      the
      Committee so that Kramer may exercise the option (or any portion thereof) for
      ninety (90) days following the end of such restriction period but in no event
      shall such extension extend beyond the tenth anniversary of the grant date.
      

     

    (c) Subsequent
      Grants.
      The
      Board (or the Committee) shall consider making additional equity grants to
      Kramer at least annually. Subject to the Committee’s approval at the time of
      grant, it is the intention of Griffon that such awards, if any, shall (i) be
      subject to the same terms and conditions relating to Change in Control and
      vesting on termination of employment as the Initial Restricted Stock Grant
      or
      the Initial Stock Option Grant, as applicable; (ii) with respect to any
      time-based vesting conditions on restricted stock or stock units, vest on a
      basis that is no less favorable than the third anniversary of such subsequent
      grant date; and (iii) with respect to any time-based vesting conditions on
      options or stock appreciation rights, vest over a three year period in equal
      installments on each anniversary of such subsequent grant date.

     

    
      
        
        

      

      
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    (d) Miscellaneous.

     

    (i) Adjustment.
      All
      amounts set forth in this Section 5 shall be subject to adjustment as provided
      for in the Plan.

     

    (ii) Agreements.
      The
      terms and conditions of any stock award or option agreement shall be consistent
      with the terms and conditions of this Agreement. In the event of any conflict
      or
      inconsistency between the terms of this Agreement and the Plan (or any stock
      award or option agreement), the terms and conditions of this Agreement shall
      govern and control.

     

    (iii) Registration.
      Griffon
      represents that the shares subject to the awards described in Section 5 above
      shall be registered on a Form S-8 or other appropriate registration statement
      under the Securities Act of 1933, as amended.

     

    
      
        6.
          BUSINESS
          AND TRAVEL EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.

      

    

     

    (a) Business
      Expenses.
      Kramer
      shall be entitled to prompt reimbursement by Griffon for all reasonable business
      expenses incurred by him during the Employment Term in performing services
      under
      this Agreement, upon his proper submission of such accounts and records as
      may
      be reasonably required by Griffon. 

     

    (b) Travel
      Expenses.
      Kramer
      shall be entitled to prompt reimbursement by Griffon for all reasonable travel
      expenses incurred by him during the Employment Term while performing duties
      on
      behalf of Griffon (including, without limitation, first class air travel),
      upon
      his proper submission of such accounts and records as may be reasonably required
      by Griffon.

     

    (c) Other
      Costs.
      Griffon
      shall reimburse Kramer for reasonable attorneys fees and expenses incurred
      in
      connection with the preparation and negotiation of this Agreement. 

     

    All
      reimbursements under this Section
      6
      shall be
      made as soon as practicable following submission of a reimbursement request,
      but
      no later than the end of the year following the year during which the underlying
      expense was incurred.

     

    
      
        7.
          PERQUISITES.

         

      

    

    During
      the Employment Term, Griffon shall provide Kramer with the following
      perquisites:

     

    (a) an
      office
      of a size and with furnishings and other appointments, and exclusive personal
      secretarial and other assistance, at a level appropriate for a chief executive
      officer of a publicly traded corporation; and

     

    (b) use
      of an
      automobile and payment of all related expenses, including, without limitation,
      lease payments, insurance, maintenance and parking, subject to Kramer’s prompt
      submission of such accounts and records as may be reasonably required by
      Griffon.

     

    
      
        
        

      

      
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    All
      reimbursements under this Section
      7(b)
      shall be
      made as soon as practicable following submission of a reimbursement request,
      but
      no later than the end of the year following the year during which the underlying
      expense was incurred.

     

    
      
        8.
          BENEFITS.

      

    

     

    (a) General.
      During
      the Employment Term, Kramer shall be entitled to participate in all employee
      benefit plans and programs made available to Griffon’s senior executives or to
      its employees generally, in accordance with the terms and conditions of such
      plans and programs and as such plans or programs may be in effect from time
      to
      time, including without limitation, pension and other retirement plans,
      profit-sharing plans, savings and similar plans, group life insurance,
      accidental death and dismemberment insurance, travel accident insurance,
      hospitalization insurance, surgical insurance, major and excess medical
      insurance, dental insurance, short-term and long-term disability insurance,
      sick
      leave (including salary continuation arrangements), holidays, vacation (not
      less
      than four weeks in any calendar year) and any other employee benefit plans
      or
      programs that may be sponsored by Griffon from time to time, including plans
      that supplement the above-listed plans, whether funded or unfunded; provided
      however, that Kramer shall not be entitled to participate in any supplemental
      retirement plan, any non-qualified deferred compensation plan or any retiree
      medical plan unless such participation is specifically designated by the Board;
      and provided further that approval by the Board of this Agreement shall not
      constitute such designation.

     

    (b) Medical
      Care Insurance. During the Employment Term, Griffon shall provide Kramer,
      his spouse and his dependents with hospitalization insurance, surgical
      insurance, major and excess major medical insurance and dental insurance in
      accordance with the most favorable plans, policies, programs and practices
      of
      Griffon and its Subsidiaries made available generally to all other senior
      executive officers of Griffon and its Subsidiaries as a group, as in effect
      from
      time to time.

     

    (c) Life
      Insurance Benefit.
      In
      addition to the group life insurance available to employees generally, Griffon
      shall provide Kramer with an individual life insurance policy with a death
      benefit of at least $5,000,000.

     

    
      
        9.
          TERMINATION
          OF EMPLOYMENT.

      

    

     

    (a) Voluntary
      Termination.
      Kramer
      may terminate his employment voluntarily at any time during the Employment
      Term.
      If he does so, except for Good Reason, he shall be entitled to receive only
      the
      compensation and benefits specified in Section 9(b). 

     

    (b) General.
      Notwithstanding anything to the contrary herein, in the event of any termination
      of Kramer’s employment during the Employment Term (including by reason of his
      death), he shall be entitled to receive as soon as administratively feasible
      following such termination, but in any event, except as provided below, within
      fifteen (15) days thereafter (in addition to the applicable payments and
      benefits he may also be entitled to receive under subsections
      (c)
      through
(g)
      below,
      as applicable):

     

    (i) accrued
      but unpaid Salary through the date of termination;

     

    
      
        
        

      

      
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    (ii) any
      accrued but unused vacation;

     

    (iii) any
      annual bonus earned for the Fiscal Year completed prior to the year of
      termination but not yet paid to him; and

     

    (iv) reimbursement
      in accordance with Section
      6
      above of
      any expenses incurred by him through the date of termination but not yet paid
      to
      him.

     

    Additionally,
      Kramer shall receive any other compensation or benefits, including, without
      limitation, benefits under equity grants and awards described in Section
      5
      above
      and employee benefits under plans described in Section
      8
      above,
      that have vested through the date of termination or to which he may then be
      entitled in accordance with the applicable terms and conditions of each grant,
      award or plan.

     

    For
      purposes of Section 9(b)(iii) above, “earned” shall mean that all performance
      goals for the applicable performance period have been met and certified to
      by
      the Committee whether or not Kramer is still actually employed on the date
      the
      Committee certifies such results; provided however, that no annual bonus shall
      be deemed earned if Kramer is terminated for Cause or such payment would result
      in non-deductibility under Code Section 162(m) to the extent such bonus would
      have otherwise been deductible if Kramer were still employed by Griffon. The
      Committee shall, with respect to Kramer, conduct its certification process
      in a
      manner substantially consistent with past practices and any such bonus shall
      be
      paid at the time such bonus would have been paid had Kramer been still employed
      by Griffon. 

     

    (c) Termination
      Due to Disability.
      If,
      during the Employment Term, Kramer’s employment is terminated by Griffon due to
      Disability, he shall be entitled, in addition to the compensation and benefits
      specified in Section
      9(b),
      to
      receive:

     

    (i) a
      pro-rata bonus for the year of termination equal to the Target Bonus multiplied
      by a fraction, the numerator of which is the number of completed days in the
      Fiscal Year of Kramer’s termination of employment during which Kramer was
      employed by Griffon and the denominator of which is 365 (the “Pro-Rata
      Bonus Payment”),
      as
      soon as administratively feasible following such termination, but in any event
      within fifteen (15) days;

     

    (ii) severance
      for twelve (12) months payable in twelve (12) equal monthly installments and
      commencing on the first payroll period following such termination in the amount
      of one-twelfth the sum of (A) the Salary plus (B) the highest bonus paid to
      Kramer in the 3-year period prior to such termination (but in no event less
      than
      the Target Bonus for the year of termination), provided however, that if a
      termination due to Disability occurs within two years after an event described
      in Section 409A(a)(2)(A)(v) of the Code (a “409A CIC”), Kramer shall receive a
      lump sum payment of the amount described above in lieu of such monthly
      installments, as soon as administratively feasible following such termination,
      but in any event, within fifteen (15) days thereafter; and

     

    
      
        
        

      

      
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    (iii) if
      Kramer
      (or his beneficiaries) elects continued medical coverage under COBRA, Griffon
      shall pay for coverage under COBRA for 18 months following such termination.
      

     

    (d) Termination
      by Griffon for Cause.
      Griffon
      may terminate Kramer’s employment hereunder for Cause, provided however, that no
      termination for Cause shall be effective unless (i) the decision is made by
      a
      majority of the Board at a Board meeting, held for such purpose, where Kramer
      and his counsel had an opportunity to be heard on at least ten (10) days prior
      notice; (ii) Griffon gives Kramer notice of the Board’s decision to terminate
      Kramer’s employment for Cause specifying the particular act or failure to act
      which is the basis for such decision; and (iii) Kramer fails to cure such act
      or
      failure to act to the satisfaction of the Board within thirty (30) days after
      such notice. In the event that Kramer’s employment is terminated for Cause, he
      shall be entitled to receive only the compensation and benefits specified in
      Section
      9(b).
      

     

    (e) Termination
      by Griffon Without Cause or by Kramer for Good Reason.
      If,
      during the Employment Term, Griffon terminates Kramer’s employment without Cause
      or Kramer terminates his employment for Good Reason, in either such case, other
      than within two years after a Change in Control which qualifies as a 409A CIC,
      he shall be entitled to receive, upon the execution and non-revocation of a
      release substantially in the form attached hereto as Exhibit
      A,
      but in
      no event later than forty-five (45) days after such termination, in addition
      to
      the compensation and benefits specified in Section
      9(b):

     

    (i) severance
      for twelve (12) months payable in twelve (12) equal monthly installments and
      commencing on the first payroll period following such termination in the amount
      of:

     

    (A) in
      the
      case of a termination under Section
      9(e)
      on or
      prior to the third anniversary of the Commencement Date or any such termination
      that occurs after such third anniversary, but within two years after a Change
      in
      Control which does not qualify as a 409A CIC, one-twelfth of three times the
      sum
      of (x) the Salary plus (y) the highest bonus paid to Kramer in the 3-year period
      immediately prior to such termination (but in no event less than the Target
      Bonus for the year of termination); or

     

    (B) except
      as
      provided in subsection (A), in the case of a termination under Section
      9(e)
      after
      the third anniversary of the Commencement Date, one-twelfth of two times the
      sum
      of (x) the Salary plus (y) the highest bonus paid to Kramer in the 3-year period
      immediately prior to such termination (but in no event less than the Target
      Bonus for the year of termination); 

     

    (ii) a
      payment
      in the amount of either:

     

    (A) with
      respect to a termination occurring under this Section
      9(e)
      on or
      before September 30, 2009, a Pro-Rata Bonus Payment to be paid as soon as
      administratively feasible following such termination, but in any event within
      fifteen (15) days thereafter, or

     

    
      
        
        

      

      
        -
          10
          -

        
          

        

      

      
        
        

      

    

     

    (B) with
      respect to a termination under this Section
      9(e)
      occurring after September 30, 2009, a pro-rated portion of the bonus which
      would
      have otherwise been paid for the year of termination had Kramer’s employment not
      been terminated, to be paid at such time as such bonus would otherwise have
      been
      paid; and

     

    (iii) if
      Kramer
      elects to continue his medical coverage under COBRA, Griffon will pay for
      coverage under COBRA for 18 months following such termination.

     

    (f) Termination
      by Griffon Without Cause or by Kramer for Good Reason Within Two Years After
      a
      Change in Control.
      If,
      during the Employment Term, Griffon terminates Kramer’s employment without Cause
      or Kramer terminates his employment for Good Reason, in either such case, within
      two years after a Change in Control which qualifies as a 409A CIC, he shall
      be
      entitled to receive, upon the execution and non-revocation of a release
      substantially in the form attached hereto as Exhibit
      A,
      but in
      no event later than forty-five (45) days after such termination, in addition
      to
      the compensation and benefits specified in Section
      9(b):

     

    (i) a
      lump
      sum payment, as soon as administratively feasible following such termination,
      but in any event within ten (10) days thereafter, equal to three times the
      sum
      of (A) the Salary plus (B) the highest bonus paid to Kramer in the 3-year period
      immediately prior to such termination (but in no event less than the Target
      Bonus for the year of termination);

     

    (ii) a
      payment
      in the amount of either:

     

    (A) with
      respect to a termination occurring under this Section
      9(f)
      on or
      before September 30, 2009, a Pro-Rata Bonus Payment to be paid as soon as
      administratively feasible following such termination, but in any event within
      ten (10) days thereafter, or

     

    (B) with
      respect to a termination under this Section
      9(f)
      occurring after September 30, 2009, a pro-rated portion of the bonus which
      would
      have otherwise been paid for the year of termination had Kramer’s employment not
      been terminated, to be paid at such time as such bonus would otherwise have
      been
      paid; and

     

    (iii) if
      Kramer
      elects to continue his medical coverage under COBRA, Griffon will pay for
      coverage under COBRA for 18 months following such termination.

     

    (g) Vesting
      of Equity Upon Certain Events.
      

     

    (i) Termination
      by Griffon Without Cause or by Kramer for Good Reason.
      If,
      during the Employment Term, Griffon terminates Kramer’s employment without Cause
      or Kramer terminates his employment for Good Reason, in either such case (A)
      all
      restricted stock referred to above in Section
      5
      not yet
      issued shall be issued as soon as such issuance is permissible under the terms
      of the Plan and shall be fully vested upon such issuance; and (B) all of his
      then outstanding equity compensation awards shall immediately vest and, in
      the
      case of options, shall remain exercisable for one year after such termination
      of
      employment.

     

    
      
        
        

      

      
        -
          11
          -

        
          

        

      

      
        
        

      

    

     

    (ii) Change
      in Control, Termination Due to Death or Disability.
      Upon a
      Change in Control or a termination of Kramer’s employment due to death or
      Disability, all Kramer’s then outstanding equity compensation awards shall
      immediately vest and become exercisable. 

     

    (h) Specified
      Employee.
      Notwithstanding any other provision of this Agreement, if (i) Kramer is to
      receive payments or benefits under Section
      9
      by
      reason of his separation from service (as such term is defined in Section 409A
      of the Code) other than as a result of his death, (ii) Kramer is a “specified
      employee” within the meaning of Code Section 409A for the period in which the
      payment or benefits would otherwise commence, and (iii) such payment or benefit
      would otherwise subject Kramer to any tax, interest or penalty imposed under
      Section 409A of the Code (or any regulation promulgated thereunder) if the
      payment or benefit would commence within six months of a termination of Kramer’s
      employment, then such payment or benefit required under Section
      9
      shall
      not commence until the first day which is at least six months after the
      termination of Kramer’s employment. Each severance installment contemplated
      under this Section 9 shall be treated as a separate payment in a series of
      separate payments under Treasury Regulation Section 1.409A-2(b)(2)(iii). Such
      payments or benefits, together with simple interest calculated at LIBOR as
      of
      the date of such separation from service, which would have otherwise been
      required to be made over such six month period, shall be paid to Kramer in
      one
      lump sum payment or otherwise provided to Kramer as soon as administratively
      feasible after the first day which is at least six months after the termination
      of Kramer’s employment. Thereafter, the payments and benefits shall continue, if
      applicable, for the relevant period set forth above. For purposes of this
      Agreement, all references to “termination of employment” and other similar
      language shall be deemed to refer to Kramer’s “separation from service” as
      defined in Treasury Regulation Section 1.409A-1(h), including, without
      limitation, the default presumptions thereof.

     

    (i) Miscellaneous.
      For the
      avoidance of doubt, if applicable, Kramer shall only be entitled to receive
      the
      payments and benefits provided under Section 9(e) or 9(f), which ever is
      applicable, but not under both such sections.

     

    
      
        10.
          NO
          DUTY TO MITIGATE.

      

    

     

    Kramer
      shall not be required to mitigate damages or the amount of any payment provided
      for under this Agreement by seeking other employment or otherwise, nor will
      any
      payment hereunder be subject to offset in the event Kramer does receive
      compensation for any reason from any other source.

     

    
      
        11.
          PARACHUTES.

      

    

     

    (a) Application.

     

    (i) Change
      in Control On or Prior to Fourth Anniversary of the Commencement
      Date.
      Upon the
      occurrence of a change in control or ownership (or other similar event) on
      or
      prior to the fourth anniversary of the Commencement Date, if all or any portion
      of the payments provided under this Agreement, and/or any other payments and
      benefits that Kramer receives or is entitled to receive from Griffon, a
      Subsidiary or any other person, whether or not under an existing plan,
      arrangement or other agreement, constitutes an excess “parachute payment” within
      the meaning of Section 280G(b) of the Code (each such parachute payment, a
      “Parachute
      Payment”)
      and
      will result in the imposition on Kramer of an excise tax under Section 4999
      of
      the Code, then, in addition to any other benefits to which Kramer is entitled
      under this Agreement, Griffon shall pay him an amount in cash equal to the
      sum
      of the excise taxes payable by him by reason of receiving Parachute Payments,
      plus the amount necessary to put him in the same after-tax position (taking
      into
      account any and all applicable federal, state and local excise, income or other
      taxes at the highest possible applicable rates on such Parachute Payments
      (including without limitation any payments under this Section
      12)
      as if
      no excise taxes had been imposed with respect to Parachute Payments (the
“Parachute
      Gross-up”)).
      Notwithstanding the foregoing, in the event that the aggregate amount of
      Parachute Payments is no more than 10% greater than the aggregate amount of
      Payments that may be made to Kramer without incurring an excise tax (the
“Safe-Harbor
      Amount”),
      Kramer shall not be entitled to a Gross-Up Payment and the Parachute Payments
      shall instead be reduced in an amount sufficient to reduce the aggregate amount
      of Parachute Payments below the Safe-Harbor Amount.

     

    
      
        
        

      

      
        -
          12
          -

        
          

        

      

      
        
        

      

    

     

    (ii) Other
      Change in Control.
      Upon a
      Change in Control following the fourth anniversary of the Commencement Date,
      in
      the event that it would be economically advantageous for Kramer, the Parachute
      Payments shall be reduced by an amount that results in the receipt by Kramer
      on
      an after-tax basis (including the applicable federal, state and local income
      taxes, and the excise tax imposed by Section 4999 of the Code) of the greatest
      total Parachute Payments.

     

    (b) Computation.
      The
      amount of any payment under this Section
      11
      shall be
      computed by a certified public accounting firm of national reputation selected
      by Griffon and acceptable to Kramer. If Griffon or Kramer disputes the
      computation rendered by such accounting firm, Griffon shall select an
      alternative certified public accounting firm of national reputation to perform
      the applicable computation. If the two accounting firms cannot agree upon the
      computations, Kramer and Griffon shall jointly appoint a third certified public
      accounting firm of national reputation within ten (10) calendar days after
      the
      two conflicting computations have been rendered. Such third accounting firm
      shall be asked to determine within thirty (30) calendar days the computation
      of
      the Parachute Gross-up to be paid to Kramer, and payments shall be made
      accordingly. The cost and expenses of all the accounting firms retained to
      perform the computations described above shall be borne by Griffon.

     

    (c) Payment.
      As a
      result of the uncertainty in the application of Section 4999 of the Code at
      the
      time of the determination, it is possible that the Parachute Gross-Up which
      will
      not have been made by Griffon should have been made (“Underpayment”) or a
      Parachute Gross-Up is made by Griffon which should not have been made
      (“Overpayment”), consistent with the calculations required to be made hereunder.
      If Kramer thereafter is required to may payment of any additional excise tax,
      the accounting firm initially selected by Griffon and acceptable to Kramer
      under
      Section 11(b) shall determine the amount of the Underpayment that has occurred
      and any such Underpayment (together with interest at the rate provided in
      Section 1274(b)(2)(B) of the Code) shall be promptly paid by Griffon to or
      for
      the benefit of Kramer. In the event the amount of the Parachute Gross-Up exceeds
      the amount necessary to reimburse Kramer for the applicable excise tax, such
      accounting firm shall determine the amount of the Overpayment that has been
      made
      and any such Overpayment (together with interest at the rate provided in Section
      1274(b)(2)(B) of the Code) shall be promptly paid by Kramer (to the extent
      he
      has received a refund if the applicable excise tax has been paid to the Internal
      Revenue Service) to or for the benefit of Griffon. Kramer shall cooperate,
      to
      the extent his expenses are reimbursed by Griffon, with (i) any reasonable
      requests by Griffon to apply for a refund and (ii) any contest or disputes
      with
      the Internal Revenue Service in connection with the excise tax. 

     

    
      
        
        

      

      
        -
          13
          -

        
          

        

      

      
        
        

      

    

     

    (d) Any
      payment due to Kramer under this Section
      11
      shall be
      made to Kramer, or on behalf of Kramer, as soon as practicable after the
      determination of the amount of such payment, but no sooner than the date on
      which Griffon is required to withhold such amount or Kramer is required to
      pay
      such amount to the Internal Revenue Service. Notwithstanding the foregoing,
      all
      payments under this Section
      11
      shall be
      made to Kramer, or on Kramer’s behalf, no later than the end of the year
      following the year in which Kramer or Griffon paid the related taxes, interest
      or penalties.

     

    12. CONFIDENTIAL
      INFORMATION.
      

     

    (a) Kramer
      shall not, during the Employment Term and at any time thereafter, without the
      prior express written consent of Griffon, directly or indirectly divulge,
      disclose or make available or accessible any Confidential Information (as
      defined below) to any person, firm, partnership, corporation, trust or any
      other
      entity or third party (other than when required to do so in good faith to
      perform his duties and responsibilities under this Agreement or when (i)
      required to do so by a lawful order of a court of competent jurisdiction, any
      governmental authority or agency, or any recognized subpoena power, or (ii)
      necessary to prosecute his rights against Griffon or its Affiliates or to defend
      himself against any allegations). Kramer shall also proffer to the Board’s
      designee, no later than the effective date of any termination of his employment
      with Griffon for any reason, and without retaining any copies, notes or excerpts
      thereof, all memoranda, computer disks or other media, computer programs,
      diaries, notes, records, data, customer or client lists, marketing plans and
      strategies, and any other documents consisting of or containing Confidential
      Information that are in Kramer’s actual or constructive possession or which are
      subject to his control at such time. For purposes of this Agreement,
“Confidential Information” shall mean all information respecting the business
      and activities of Griffon, or any Affiliate of Griffon, including, without
      limitation, the clients, customers, suppliers, employees, consultants, computer
      or other files, projects, products, computer disks or other media, computer
      hardware or computer software programs, inventions, trade secrets, marketing
      plans, financial information, methodologies, know-how, processes, practices,
      approaches, projections, forecasts, formats, systems, data gathering methods
      and/or strategies of Griffon or any Affiliate. Notwithstanding the immediately
      preceding sentence, Confidential Information shall not include any information
      that is, or becomes, generally available to the public (unless such availability
      occurs as a result of Kramer’s breach of any portion of this Section
      12.

     

    (b) Kramer
      understands and agrees that the rights and obligations set forth in this
Section
      12
      shall
      extend beyond the Employment Term. 

     

    
      
        
        

      

      
        -
          14
          -

        
          

        

      

      
        
        

      

    

    
      
         

        13.
          OTHER
          RESTRICTIVE COVENANTS.

      

    

     

    (a) Non-Solicitation.
      During
      the Employment Term and for twelve (12) months following any termination of
      Kramer’s employment with Griffon, Kramer shall not (except on Griffon’s behalf),
      directly or indirectly, on his own behalf or on behalf of any other person,
      firm, partnership, corporation or other entity, solicit, induce, or attempt
      to
      cause any employee or consultant of Griffon or its Affiliates to leave Griffon
      or the Affiliate; provided however, that any general solicitations for
      employment not specifically directed at Griffon shall not be deemed to be in
      breach of this provision.

     

    (b) Non-Competition.
      During
      the Employment Term and for twelve (12) months following any termination of
      Kramer’s employment with Griffon, Kramer shall not, directly or indirectly,
      engage, without the consent of Griffon, in any business or activity, whether
      as
      an employee, consultant, partner, principal, agent, representative, stockholder
      or in any other capacity, or render any services or provide any advice to any
      business, activity, person or entity which competes with any of the businesses
      of Griffon; provided,
      however,
      that
      Kramer’s ownership of not more than five percent (5%) of the stock of any
      publicly-traded corporation shall not be a violation of this Section
      13.
      Kramer
      acknowledges that his skills are such that he can be gainfully employed in
      noncompetitive employment and that the agreement not to compete will in no
      way
      prevent him from earning a living.

     

    (c) Inventions.
      Each
      Invention (as defined below) made, conceived or first actually reduced to
      practice by Kramer, whether alone or jointly with others, during the Employment
      Term, shall be promptly disclosed in writing to the Board. Such report shall
      be
      sufficiently complete in technical detail and appropriately illustrated by
      sketch or diagram to convey to one skilled in the art of which the invention
      pertains, a clear understanding of the nature, purpose, operations, and, to
      the
      extent known, the physical, chemical, biological or other characteristics of
      the
      Invention. As used in this Agreement, “Invention” means any invention, discovery
      or innovation with regard to any facet of Griffon’s business whether or not
      patentable, made, conceived, or first actually reduced to practice by Kramer,
      alone or jointly with others, in the course of, in connection with, or as a
      result of service as an employee of Griffon, including any art, method, process,
      machine, manufacture, design or composition of matter, or any improvement
      thereof. Each Invention, as herein defined, shall be the sole and exclusive
      property of Griffon. Kramer agrees to execute an assignment to Griffon or its
      nominee of Kramer’s entire right, title and interest in and to any Invention,
      without compensation beyond that provided in this Agreement. Kramer further
      agrees, upon the request of Griffon and at its expense, that Kramer will execute
      any other instrument and document necessary or desirable in applying for and
      obtaining patents in the United States and in any foreign country with respect
      to any Invention. Kramer further agrees, to the extent it does not substantially
      interfere with any subsequent employment or business activities, whether or
      not
      Kramer is then an employee of Griffon, to reasonably cooperate to the extent
      and
      in the manner reasonably requested by Griffon in the prosecution or defense
      of
      any claim involving a patent covering any Invention or any litigation or other
      claim or proceeding involving any Invention covered by this Agreement, but all
      expenses thereof shall be paid by Griffon.

     

    (d) Kramer
      understands and agrees that the rights and obligations set forth in this
Section
      13
      shall
      extend beyond the Employment Term. 

     

    
      
        
        

      

      
        -
          15
          -

        
          

        

      

      
        
        

      

    

     

    
      
        14.
          REMEDIES/SANCTIONS.

      

    

     

    Kramer
      acknowledges that the services he is to render under this Agreement are of
      a
      unique and special nature, the loss of which cannot reasonably or adequately
      be
      compensated for in monetary damages, and that irreparable injury and damage
      may
      result to Griffon in the event of any breach of this Agreement or default by
      Kramer. Because of the unique nature of the Confidential Information and the
      importance of the prohibitions against competition and solicitation, Kramer
      further acknowledges and agrees that Griffon will suffer irreparable harm if
      he
      fails to comply with his obligations under Section
      12
      above
      and/or Section
      13
      above
      and that monetary damages would be inadequate to compensate Griffon for any
      such
      breach. Accordingly, Kramer agrees that, in addition to any other remedies
      available to either Party at law, in equity or otherwise, Griffon will be
      entitled to seek injunctive relief or specific performance to enforce the terms,
      or prevent or remedy the violation, of any provisions of this
      Agreement.

     

    
      
        15.
          WITHHOLDING
          TAXES.

      

    

     

    All
      payments to Kramer or under this Agreement shall be subject to withholding
      on
      account of federal, state and local taxes as required by law.

     

    
      
        16.
          INDEMNIFICATION
          AND LIABILITY INSURANCE.

      

    

     

    During
      the Employment Term, Griffon shall provide Kramer with a standard
      indemnification agreement which shall provide that Kramer shall be indemnified
      to the fullest extent permitted by applicable law and shall provide for the
      advancement of expenses if Kramer shall have delivered in writing to Griffon
      (a)
      an undertaking to reimburse Griffon for expenses with respect to which Kramer
      is
      not entitled to indemnification; and (b) an affirmation of his good faith belief
      that the standard of conduct necessary for indemnification by Griffon has been
      met. Griffon shall cause Kramer to be covered at all times during the Employment
      Term by directors’ and officers’ liability insurance as Griffon shall from time
      to time obtain, but in no event shall Kramer’s coverage be less than that
      provided to any other director or officer of Griffon. Griffon shall continue
      to
      indemnify Kramer as provided above and maintain such liability insurance
      coverage for him after the Employment Term for any claims that may be made
      against him with respect to his service as a director or officer of Griffon.
      In
      the event Griffon does not utilize a standard indemnification agreement, Griffon
      shall indemnify Kramer to the fullest extent permitted by applicable
      law.

     

    
      
        17.
          ASSIGNABILITY;
          BINDING NATURE.

      

    

     

    This
      Agreement shall be binding upon and inure to the benefit of the Parties and
      their respective successors, heirs (in the case of Kramer) and assigns. No
      rights or obligations of the Parties under this Agreement may be assigned
      without the consent of both Parties, except by will or the laws of descent
      and
      distribution.

     

    
      
        18.
          REPRESENTATIONS.

      

    

     

    The
      Parties respectively represent and warrant that each is fully authorized and
      empowered to enter into this Agreement and that the performance of its or his
      obligations, as the case may be, under this Agreement will not violate any
      agreement between such Party and any other person, firm or organization. Griffon
      represents and warrants that this Agreement has been duly authorized by all
      necessary corporate action and is valid, binding and enforceable in accordance
      with its terms.

     

    
      
        
        

      

      
        -
          16
          -

        
          

        

      

      
        
        

      

    

     

    
      
        19.
          ENTIRE
          AGREEMENT.

      

    

     

    Except
      to
      the extent otherwise provided herein, this Agreement contains the entire
      understanding and agreement between the Parties concerning the subject matter
      hereof and supersedes any prior agreements, whether written or oral, between
      the
      Parties concerning the subject matter hereof. Unless otherwise expressly
      determined by the Board or the Committee in its sole discretion after the
      Commencement Date, payments and benefits provided under this Agreement are
      in
      lieu of any payments or other benefits under any severance program or policy
      of
      Griffon to which Kramer would otherwise be entitled.

     

    
      
        20.
          AMENDMENT
          OR WAIVER.

      

    

     

    No
      provision in this Agreement may be amended unless such amendment is agreed
      to in
      writing and signed by both Kramer and an authorized officer of Griffon. No
      waiver by either Party of any breach by the other Party of any condition or
      provision contained in this Agreement to be performed by such other Party shall
      be deemed a waiver of a similar or dissimilar condition or provision at the
      same
      or any prior or subsequent time. Any waiver must be in writing and signed by
      the
      Party to be charged with the waiver. No delay by either Party in exercising
      any
      right, power or privilege hereunder shall operate as a waiver
      thereof.

     

    
      
        21.
          SEVERABILITY.

      

    

     

    In
      the
      event that any provision or portion of this Agreement shall be determined to
      be
      invalid or unenforceable for any reason, in whole or in part, the remaining
      provisions of this Agreement shall be unaffected thereby and shall remain in
      full force and effect to the fullest extent permitted by law.

     

    
      
        22.
          SURVIVAL.

      

    

     

    The
      respective rights and obligations of the Parties hereunder shall survive the
      termination of this Agreement, the termination of the Employment Term and the
      termination of Kramer’s employment with Griffon for any reason, to the extent
      necessary to the intended provision of such rights and the intended performance
      of such obligations.

     

    
      
        23.
          GOVERNING
          LAW/JURISDICTION.

      

    

     

    This
      Agreement shall be governed by and construed and interpreted in accordance
      with
      the laws of New York, without reference to principles of conflict of
      laws.

     

    
      
        24. 
          NO
          CONFLICTS.

      

    

     

    Kramer
      represents that (a) his employment hereunder and performance of his duties
      hereunder will not conflict with or result in the breach by him of any agreement
      to which he is a party or by which he may be bound; (b) his employment with
      Griffon will not violate any non-solicitation or other similar covenant or
      agreement by which he is bound; and (c) in connection with his employment with
      Griffon, he will not use any confidential or proprietary information he may
      have
      obtained in connection with his employment with any prior employer.

     

    
      
        
        

      

      
        -
          17
          -

        
          

        

      

      
        
        

      

    

     

    
      
        25.
          ARBITRATION;
          COSTS OF DISPUTES.

      

    

     

    If
      any
      contest or dispute arising with respect to the terms of employment under this
      Agreement, such contest or dispute shall be submitted to binding arbitration
      for
      resolution in New York, New York, in accordance with the Employment Dispute
      Resolution Rules of the American Arbitration Association then in effect. In
      the
      event of such dispute, Griffon shall pay all of the legal fees and expenses
      incurred by Kramer in such dispute, if Kramer substantially prevails in such
      contest or dispute. 

     

    
      
        26.
          NOTICES.

      

    

     

    Any
      notice given to either Party shall be in writing and shall be deemed to have
      been given when delivered either personally, by fax, by overnight delivery
      service (such as Federal Express) or sent by certified or registered mail
      postage prepaid, return receipt requested, duly addressed to the Party concerned
      at the address indicated below or to such changed address as the Party may
      subsequently give notice of.

     

    If
      to
      Griffon or the Board:

     

    Griffon
      Corporation

    100
      Jericho Quadrangle

    Jericho,
      NY 11753-2794

    Attention:
      Patrick Alesia

    FAX:
      (516) 938-5644

     

    With
      a
      copy to:

     

    Stephen
      W. Skonieczny, Esq.

    Dechert
      LLP

    30
      Rockefeller Plaza

    New
      York,
      NY 10112

    

    If
      to
      Kramer:

    

    Ronald
      J. Kramer

    829
      Park Avenue

    New
      York, NY 10021

     

    
      
        
        

      

      
        -
          18
          -

        
          

        

      

      
        
        

      

    

     

    With
      a
      copy to:

     

    Bruce
      E. Simonetti, Esq.

    Akin
      Gump Strauss Hauer & Feld
      LLP

    590
      Madison Avenue

    New
      York,
      NY 10022-2524

    

    
      
        27.
          HEADINGS.

      

    

     

    The
      headings of the sections contained in this Agreement are for convenience only
      and shall not be deemed to control or affect the meaning or construction of
      any
      provision of this Agreement.

     

    
      
        28.
          COUNTERPARTS.

      

    

     

    This
      Agreement may be executed in counterparts, each of which when so executed and
      delivered shall be an original, but all such counterparts together shall
      constitute one and the same instrument.

     

    

    [Remainder
      of Page Intentionally Left Blank]

    
      
        
        

      

      
        -
          19
          -

        
          

        

      

      
        
        

      

    

    

      EXECUTION
        COPY

       

    

    IN
      WITNESS WHEREOF,
      the
      undersigned have executed this Agreement as of the date set forth
      above.

     

    
      
        	 	GRIFFON
                CORPORATION
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  Patrick L. Alesia  

              
	 	 	
                Patrick L. Alesia , Vice-President

                Chief Financial Officer

              
	 	 	 
	 	EXECUTIVE 
	 	 	 
	 	 	 
	 	
                By:
                  

              	
                /s/
                  Ronald J. Kramer

              

      

    

    
      
        
        

      

      
        -
          20
          -

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    General
      Release

    

    IN
      CONSIDERATION OF good and valuable consideration, the receipt of which is hereby
      acknowledged, and in consideration of the terms and conditions contained in
      the
      Employment Agreement, dated as of March __, 2008, (the “Agreement”) by and
      between Ronald J. Kramer (the “Executive”) and Griffon Corporation (the
“Company”), the Executive on behalf of himself and his heirs, executors,
      administrators, and assigns, releases and discharges the Company and its past
      present and future subsidiaries, divisions, affiliates and parents, and their
      respective current and former officers, directors, employees, agents, and/or
      owners, and their respective successors, and assigns and any other person or
      entity claimed to be jointly or severally liable with the Company or any of
      the
      aforementioned persons or entities (the “Released Parties”) from any and all
      manner of actions and causes of action, suits, debts, dues, accounts, bonds,
      covenants, contracts, agreements, judgments, charges, claims, and demands
      whatsoever (“Losses”) which the Executive and his heirs, executors,
      administrators, and assigns have, had, or may hereafter have, against the
      Released Parties or any of them arising out of or by reason of any cause,
      matter, or thing whatsoever from the beginning of the world to the date hereof,
      relating to the Executive’s employment by the Company and the cessation thereof,
      and any and all matters arising under any federal, state, or local statute,
      rule, or regulation, or principle of contract law or common law relating to
      the
      Executive’s employment by the Company and the cessation thereof, including but
      not limited to, the Family and Medical Leave Act of 1993, as amended,
      29
      U.S.C. §§ 2601 et seq.,
      Title
      VII of the Civil Rights Act of 1964, as amended,
      42
      U.S.C. §§ 2000 et seq.,
      the
      Age Discrimination in Employment Act of 1967, as amended,
      29
      U.S.C. §§ 621 et seq.
      (the
“ADEA”), the Americans with Disabilities Act of 1990, as amended,
      42
      U.S.C. §§ 12101 et seq.,
      the
      Worker Adjustment and Retraining Notification Act of 1988, as amended,
      29
      U.S.C. §§2101 et seq.,
      the
      Employee Retirement Income Security Act of 1974, as amended,
      29
      U.S.C. §§ 1001 et seq.,
      the
      New
      York State and New York City Human Rights Laws, the New York Labor
      Laws,
      and any
      other equivalent or similar federal, state, or local statute; provided, however,
      that the Executive does not release or discharge the Released Parties from
      (i)
      any rights to any payments, benefits or reimbursements due to the Executive
      under the Agreement; (ii) any rights of the Executive to indemnification under
      the Agreement (or the standard form of agreement, if any, entered into with
      the
      Executive pursuant to the Agreement) or under any applicable directors’ and
      officers’ liability insurance policies maintained by the Company; (iii) any
      rights to any vested benefits due to the Executive under any employee benefit
      plans sponsored or maintained by the Company; or (iv) any rights of the
      Executive as a shareholder of the Company. It is understood that nothing in
      this
      general release is to be construed as an admission on behalf of the Released
      Parties of any wrongdoing with respect to the Executive, any such wrongdoing
      being expressly denied.

     

    The
      Executive represents and warrants that he fully understands the terms of this
      General Release, that he has been encouraged to seek, and has sought, the
      benefit of advice of legal counsel, and that he knowingly and voluntarily,
      of
      his own free will, without any duress, being fully informed, and after due
      deliberation, accepts its terms and signs below as his own free act. Except
      as
      otherwise provided herein, the Executive understands that as a result of
      executing this General Release, he will not have the right to assert that the
      Company or any other of the Released Parties unlawfully terminated his
      employment or violated any of his rights in connection with his employment
      or
      otherwise.

     

    
      
        
        

      

      
        -
          21
          -

        
          

        

      

      
        
        

      

    

     

    The
      Executive further represents and warrants that he has not filed, and will not
      initiate, or cause to be initiated on his behalf any complaint, charge, claim,
      or proceeding against any of the Released Parties before any federal, state,
      or
      local agency, court, or other body relating to any claims barred or released
      in
      this General Release thereof, and will not voluntarily participate in such
      a
      proceeding. However, nothing in this General Release shall preclude or prevent
      the Executive from filing a claim, which challenges the validity of this General
      Release solely with respect to the Executive’s waiver of any Losses arising
      under the ADEA. The Executive shall not accept any relief obtained on his behalf
      by any government agency, private party, class, or otherwise with respect to
      any
      claims covered by this General Release.

     

    The
      Executive may take twenty-one (21) days to consider whether to execute this
      General Release. Upon the Executive’s execution of this general release, the
      Executive will have seven (7) days after such execution in which he may revoke
      such execution. In the event of revocation, the Executive must present written
      notice of such revocation to the office of the Company. If seven (7) days pass
      without receipt of such notice of revocation, this General Release shall become
      binding and effective on the eighth (8th) day after the execution hereof (the
      “Effective Date”).

     

    INTENDING
      TO BE LEGALLY BOUND, I hereby set my hand below:

    

      
        	 	
                 

              	 
	 	
                Ronald J. Kramer

              	 
	 	 	 	 
	 	 	 	 
	 	
                Dated:

              	 	 

      

    

     

    
      
        
        

      

      
        -
          22
          -Unassociated Document

    
 

    
      

      

      

      
 

      

      INNOVATIVE
        CARD TECHNOLOGIES, INC.

      

      

      

      2007
        EQUITY INCENTIVE PLAN, 

      
 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      TABLE
        OF
        CONTENTS

      

        
          	
                  SECTION
                    1: BACKGROUND, PURPOSE AND DURATION

                
	
                  1.1
                    Background and Effective Date

                
	
                  1.2
                    Purpose of the Plan

                
	
                  1.3
                    Duration of the Plan

                
	
                  1.4
                    Termination of Old Plans

                
	
                  SECTION
                    2 DEFINITIONS

                
	
                  2.1
                    1934 Act

                
	
                  2.2
                    Affiliate

                
	
                  2.3
                    Affiliated SAR

                
	
                  2.4
                    Applicable Laws

                
	
                  2.5
                    Award

                
	
                  2.6
                    Award Agreement

                
	
                  2.7
                    Board or Board of Directors

                
	
                  2.8
                    Change in Control

                
	
                  2.9
                    Code

                
	
                  2.10
                    Committee

                
	
                  2.11
                    Company

                
	
                  2.12
                    Consultant

                
	
                  2.13
                    Director

                
	
                  2.14
                    Disability

                
	
                  2.15
                    Employee

                
	
                  2.16
                    ERISA

                
	
                  2.17
                    Fair Market Value

                
	
                  2.18
                    Freestanding SAR

                
	
                  2.19
                    Incentive Stock Option

                
	
                  2.20
                    Nonqualified Stock Option

                
	
                  2.21
                    Option

                
	
                  2.22
                    Option Price

                
	
                  2.23
                    Participant

                
	
                  2.24
                    Performance Share

                
	
                  2.25
                    Performance Unit

                
	
                  2.26
                    Period of Restriction

                
	
                  2.27
                    Plan

                
	
                  2.29
                    Retirement

                
	
                  2.30
                    Rule 16b-3

                
	
                  2.31
                    Section 16 Person

                
	
                  2.32
                    Shares

                
	
                  2.33
                    Stock Appreciation Right or SAR

                
	
                  2.34
                    Subsidiary

                
	
                  2.35
                    Tandem SAR

                
	
                  2.36
                    Termination of Employment

                
	
                  SECTION
                    3 ADMINISTRATION

                
	
                  3.1
                    The Committee

                
	
                  3.2
                    Authority of the Committee

                
	
                  3.3
                    Decisions Binding

                

        

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

         

        
          	
                  SECTION
                    4 SHARES SUBJECT TO THE PLAN

                
	
                  4.1
                    Shares Available

                
	
                  4.1.1
                    Maximum Shares Available Under Plan

                
	
                  4.1.2
                    General Award Limitation

                
	
                  4.1.3
                    Adjustments

                
	
                  4.2
                    Number of Shares

                
	
                  4.2
                    Lapsed Awards

                
	
                  SECTION
                    5 STOCK OPTIONS

                
	
                  5.1
                    Grant of Options

                
	
                  5.2
                    Award Agreement

                
	
                  5.3
                    Option Price

                
	
                  5.3.1
                    Nonqualified Stock Options

                
	
                  5.3.2
                    Incentive Stock Options

                
	
                  5.3.3
                    Substitute Options

                
	
                  5.4
                    Expiration of Options

                
	
                  5.4.1
                    Expiration Dates

                
	
                  5.4.2
                    Committee Discretion

                
	
                  5.5
                    Exercise of Options

                
	
                  5.6
                    Payment

                
	
                  5.7
                    Restrictions on Share Transferability

                
	
                  5.8
                    Certain Additional Provisions for Incentive Stock
                    Options

                
	
                  5.8.1
                    Exercisability

                
	
                  5.8.2
                    Termination of Employment

                
	
                  5.8.3
                    Company and Subsidiaries

                
	
                  5.8.4
                    Expiration

                
	
                  5.9
                    Nontransferability

                
	
                  SECTION
                    6 STOCK APPRECIATION RIGHTS

                
	
                  6.1
                    Grant of SARs

                
	
                  6.2
                    Exercise of Tandem SARs

                
	
                  6.2.1
                    ISOs

                
	
                  6.3
                    Exercise of Affiliated SARs

                
	
                  6.4
                    Exercise of Freestanding SARs

                
	
                  6.5
                    SAR Agreement

                
	
                  6.6
                    Expiration of SARs

                
	
                  6.7
                    Payment of SAR Amount

                
	
                  6.8
                    Nontransferability of SARs

                
	
                  Section
                    7 RESTRICTED STOCK

                
	
                  7.1
                    Grant of Restricted Stock

                
	
                  7.2
                    Restricted Stock Agreement

                
	
                  7.3
                    Transferability

                
	
                  7.4
                    Other Restrictions

                
	
                  7.5
                    Removal of Restrictions

                
	
                  7.6
                    Voting Rights

                
	
                  7.7
                    Dividends and Other Distributions

                
	
                  7.8
                    Return of Restricted Stock to Company

                
	
                  7.9
                    Repurchase Option

                
	
                  SECTION
                    8 PERFORMANCE UNITS AND PERFORMANCE SHARES

                
	
                  8.1
                    Grant of Performance Units/Shares

                
	
                  8.2
                    Value of Performance Units/Shares

                
	
                  8.3
                    Earning of Performance Units/Shares

                
	
                  8.4
                    Form and Timing of Performance Units/Shares

                
	
                  8.5
                    Cancellation of Performance Units/Shares

                
	
                  8.6
                    Nontransferability

                

        

         

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

         

        
          	
                  SECTION
                    9 BENEFICIARY DESIGNATION

                
	
                  SECTION
                    10 DEFERRALS

                
	
                  SECTION
                    11 RIGHTS OF EMPLOYEES AND CONSULTANTS

                
	
                  11.1
                    No Effect on Employment or Service

                
	
                  11.2
                    Participation

                
	
                  SECTION
                    12 AMENDMENT, SUSPENSION, OR TERMINATION

                
	
                  SECTION
                    13 TAX WITHHOLDING

                
	
                  13.1
                    Withholding Requirements

                
	
                  13.2
                    Shares Withholding

                
	
                  SECTION
                    14 INDEMNIFICATION

                
	
                  SECTION
                    15 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION,
                    DISSOLUTION, MERGER OR ASSET SALE

                
	
                  15.1
                    Adjustments

                
	
                  15.2
                    Change in Control

                
	
                  SECTION
                    16 CONDITIONS UPON ISSUANCE OF SHARES

                
	
                  16.1
                    Legal Compliance

                
	
                  16.2
                    Investment Representations

                
	
                  SECTION
                    17 INABILITY TO OBTAIN AUTHORITY

                
	
                  SECTION
                    18 RESERVATION OF SHARES

                
	
                  SECTION
                    19 LEGAL CONSTRUCTION

                
	
                  19.1
                    Gender and Number

                
	
                  19.2
                    Severability

                
	
                  19.3
                    Requirements of Law

                
	
                  19.4
                    Securities Law Compliance

                
	
                  19.5
                    Governing Law

                
	
                  19.6
                    Captions

                

        

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      INNOVATIVE
        CARD TECHNOLOGIES, INC.

      

      2007
        Equity Incentive Plan,

      

       

      Innovative
        Card Technologies, Inc. hereby adopts the 2007 Equity Incentive Plan, effective
        as of September 24, 2007 as follows: 

       

      SECTION
        1  

      BACKGROUND,
        PURPOSE AND DURATION 

       

      1.1  Background
        and Effective Date.
        The Plan
        provides for the granting of Nonqualified Stock Options, Incentive Stock
        Options, Stock Appreciation Rights (or SARs), Restricted Stock, Restricted
        Stock
        Units, Performance Units and Performance Shares. The Plan is adopted and
        effective as of September 24, 2007, subject to approval by the stockholders
        of
        the Company within twelve (12) months. The Company will seek stockholder
        approval in the manner and to the degree required under Applicable Laws.
        Awards
        may be granted prior to the receipt of stockholder approval, but such grants
        shall be null and void if such approval is not in fact received within twelve
        (12) months. 

       

      1.2  Purpose
        of the Plan.
        The
        purpose of the Plan is to promote the success, and enhance the value, of
        the
        Company by aligning the interests of Participants with those of the Company’s
        shareholders, and by providing Participants with an incentive for outstanding
        performance. The Plan is further intended to provide flexibility to the Company
        in its ability to motivate, attract, and retain the services of outstanding
        individuals, upon whose judgment, interest, and special effort the success
        of
        the Company largely is dependent.

       

      1.3  Duration
        of the Plan.
        The
        Plan shall commence on the date specified in Section 1.1
        and
        subject to SECTION
        12
        (concerning the Board’s right to amend or terminate the Plan), shall remain in
        effect thereafter. However, without further stockholder approval, no Incentive
        Stock Option may be granted under the Plan on or after September 24, 2017.
        

       

      1.4  Termination
        of the 2004 Stock Incentive Plan.
        The
        Company’s existing 2004 Stock Incentive Plan shall terminate as to new grants
        effective upon stockholder approval of this Plan, and no further grants of
        awards shall be made under the 2004 Stock Incentive Plan after the date of
        such
        approval. The termination of the 2004 Stock Incentive Plan will not affect
        the
        rights of holders of options previously granted and outstanding under the
        2004
        Stock Incentive Plan.

       

      SECTION
        2

      DEFINITIONS

       

      The
        following words and phrases shall have the following meanings unless a different
        meaning is plainly required by the context: 

       

      2.1  “1934
        Act”
        means
        the Securities Exchange Act of 1934, as amended. Reference to a specific
        section
        of the Exchange Act or regulation thereunder shall include such section or
        regulation, any valid regulation promulgated under such section, and any
        comparable provision of any future legislation or regulation amending,
        supplementing or superseding such section or regulation. 

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      2.2  “Affiliate”
        means
        any corporation or any other entity (including, but not limited to, partnerships
        and joint ventures) controlling, controlled by, or under common control with
        the
        Company. 

       

      2.3  “Affiliated
        SAR”
        means an
        SAR that is granted in connection with a related Option, and which automatically
        will be deemed to be exercised at the same time that the related Option is
        exercised. 

       

      2.4  “Applicable
        Laws”
        means
        the requirements relating to the administration of equity plans under U.
        S.
        state corporate laws, U.S. federal and state securities laws, the Code, any
        stock exchange or quotation system on which the Shares are is listed or quoted
        and the applicable laws of any foreign country or jurisdiction where Awards
        are,
        or will be, granted under the Plan.

       

      2.5  “Award”
        means,
        individually or collectively, a grant under the Plan of Nonqualified Stock
        Options, Incentive Stock Options, SARs, Restricted Stock, Restricted Stock
        Units, Performance Units, or Performance Shares. 

       

      2.6  “Award
        Agreement”
        means
        the written agreement setting forth the terms and provisions applicable to
        each
        Award granted under the Plan. 

       

      2.7  “Board”
        or “Board of Directors”
        means
        the Board of Directors of the Company. 

       

      2.8  “Change
        in Control”
        is
        defined in Section 15.2.

       

      2.9  “Code”
        means
        the Internal Revenue Code of 1986, as amended. Reference to a specific section
        of the Code or regulation thereunder shall include such section or regulation,
        any valid regulation promulgated under such section, and any comparable
        provision of any future legislation or regulation amending, supplementing
        or
        superseding such section or regulation. 

       

      2.10  “Committee”
        means
        the committee appointed by the Board to administer the Plan pursuant to
        Section 3.1.
        

       

      2.11  “Company”
        means
        Innovative Card Technologies Inc., a Delaware corporation, or any successor
        thereto. 

       

      2.12  “Consultant”
        means an
        individual who provides significant services to the Company and/or an Affiliate,
        including a Director who is not an Employee. 

       

      2.13  “Director”
        means
        any individual who is a member of the Board of Directors of the Company.
        

       

      2.14  “Disability”
        means a
        permanent and total disability within the meaning of Code Section 22(e)(3).

       

      2.15  “Employee”
        means an
        employee of the Company or of an Affiliate, whether such employee is so employed
        at the time the Plan is adopted or becomes so employed subsequent to the
        adoption of the Plan. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      2.16  “ERISA”
        means
        the Employee Retirement Income Security Act of 1974, as amended. Reference
        to a
        specific section of ERISA shall include such section, any valid regulation
        promulgated thereunder, and any comparable provision of any future legislation
        amending, supplementing or superseding such section. 

       

      2.17  “Fair
        Market Value”
        means as
        of any date, the value of a Share determined as follows:

       

      (a)  If
        the
        Shares are listed on any established stock exchange or a national market
        system,
        including without limitation the Nasdaq Global Select Market or The Nasdaq
        Capital Market of The Nasdaq Stock Market, its Fair Market Value shall be
        the
        closing sales price for such Share (or the closing bid, if no sales were
        reported) as quoted on such exchange or system on the day of, or, if such
        day is
        not a market trading day, the last market trading day prior to, the day of
        determination, as reported in The Wall Street Journal or such other source
        as
        the Committee deems reliable;

       

      (b)  If
        the
        Shares are regularly quoted by a recognized securities dealer but selling
        prices
        are not reported, the Fair Market Value of the Share shall be the mean between
        the high bid and low asked prices for the Shares on the day of, or, if such
        day
        is not a market trading day, the last market trading day prior to, the day
        of
        determination, as reported in The Wall Street Journal or such other source
        as
        the Committee deems reliable; or 

       

      (c)  In
        the
        absence of an established market for the Shares, the Fair Market Value shall
        be
        determined in good faith by the Committee. 

       

      2.18  “Freestanding
        SAR”
        means a
        SAR that is granted independently of any Option. 

       

      2.19  “Incentive
        Stock Option” or “ISO”
        means an
        option to purchase Shares, which is designated as an Incentive Stock Option
        and
        is intended to meet the requirements of Section 422 of the Code.

       

      2.20  “Nonqualified
        Stock Option”
        means an
        option to purchase Shares which is not intended to be an Incentive Stock
        Option.

       

      2.21  “Option”
        means an
        Incentive Stock Option or a Nonqualified Stock Option. 

       

      2.22  “Option
        Price”
        means
        the price at which a Share may be purchased pursuant to an Option. 

       

      2.23  “Participant”
        means an
        Employee, Consultant or Director who has an outstanding Award.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      2.24  “Performance
        Measures”
        shall
        mean the criteria and objectives, established by the Committee, which shall
        be
        satisfied or met (i) as a condition to the grant or exercisability of all
        or a
        portion of an Option or SAR or (ii) during the applicable Period of Restriction
        or Performance Period as a condition to the vesting of the holder’s interest, in
        the case of a Restricted Stock Award, of the Shares subject to such Award,
        or,
        in the case of a Restricted Stock Unit Award, Performance Share Award or
        Performance Unit Award, to the holder’s receipt of the Shares subject to such
        Award or of payment with respect to such Award. To the extent necessary for
        an
        Award to be qualified performance-based compensation under Section 162(m)
        of the
        Code and the regulations thereunder, such criteria and objectives shall include
        one or more of the following corporate-wide or subsidiary, division, operating
        unit or individual measures, stated in either absolute terms or relative
        terms,
        such as rates of growth or improvement: the attainment by a Share of a specified
        Fair Market Value for a specified period of time, earnings per share, return
        to
        stockholders (including dividends), return on assets, return on equity, earnings
        of the Company before or after taxes and/or interest, revenues, market share,
        cash flow or cost reduction goals, interest expense after taxes, return on
        investment, return on investment capital, economic value created, operating
        margin, net income before or after taxes, pretax earnings before interest,
        depreciation and amortization, pretax operating earnings after interest expense
        and before incentives, and/or extraordinary or special items, operating
        earnings, net cash provided by operations, and strategic business criteria,
        consisting of one or more objectives based on meeting specified market
        penetration, geographic business expansion goals, cost targets, customer
        satisfaction, reductions in errors and omissions, reductions in lost business,
        management of employment practices and employee benefits, supervision of
        litigation and information technology, quality and quality audit scores,
        productivity, efficiency, and goals relating to acquisitions or divestitures,
        or
        any combination of the foregoing. In the sole discretion of the Committee,
        but
        subject to Section 162(m) of the Code, the Committee may amend or adjust
        the
        Performance Measures or other terms and conditions of an outstanding Award
        in
        recognition of unusual or nonrecurring events affecting the Company or its
        financial statements or changes in Applicable Laws or accounting
        principles.

       

      2.25  “Performance
        Period”
        shall
        mean any period designated by the Committee during which (i) the Performance
        Measures applicable to an Award shall be measured and (ii) the conditions
        to
        vesting applicable to an Award shall remain in effect. 

       

      2.26  “Performance
        Share”
        means an
        Award granted to an Employee pursuant to SECTION
        8
        having
        an initial value equal to the Fair Market Value of a Share on the date of
        grant.

       

      2.27  “Performance
        Unit”
        means an
        Award granted to an Employee pursuant to SECTION
        8
        having
        an initial value (other than the Fair Market Value of a Share) that is
        established by the Committee at the time of grant. 

       

      2.28  “Period
        of Restriction”
        means
        the period during which conditions to vesting applicable to an Award shall
        remain in effect. 

       

      2.29  “Plan”
        means
        the Innovative Card Technologies, Inc. 2007 Equity Incentive Plan, as set
        forth
        in this instrument and as hereafter amended from time to time. 

       

      2.30  “Restricted
        Stock”
        shall
        mean Shares which are subject to a Period of Restriction and which may, in
        addition thereto, be subject to the attainment of specified Performance Measures
        within a specified Performance Period.

       

      2.31  “Restricted
        Stock Unit”
        shall
        mean a right to receive one Share or, in lieu thereof, the Fair Market Value
        of
        such Share in cash, which shall be contingent upon the expiration of a specified
        Period of Restriction and which may, in addition thereto, be contingent upon
        the
        attainment of specified Performance Measures within a specified Performance
        Period.

       

      2.32  “Retirement”
        means,
        in the case of an Employee, a Termination of Employment by reason of the
        Employee’s retirement at or after age 62. 

       

      
        
          
          

        

        
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      2.33  “Rule
        16b-3”
        means
        Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending,
        supplementing or superseding such regulation. 

       

      2.34  “Section
        16 Person”
        means a
        person who, with respect to the Shares, is subject to Section 16 of the
        1934 Act. 

       

      2.35  “Shares”
        means
        the shares of common stock, $0.001 par value, of the Company. 

       

      2.36  “Stock
        Appreciation Right” or “SAR”
        means an
        Award, granted alone or in connection with a related Option, that pursuant
        to
        the terms of SECTION
        7
        is
        designated as an SAR. 

       

      2.37  “Subsidiary”
        means
        any “subsidiary corporation” (other than the Company) as defined in Code
        Section 424(f). 

       

      2.38  “Tandem
        SAR”
        means an
        SAR that is granted in connection with a related Option, the exercise of
        which
        shall require forfeiture of the right to purchase an equal number of Shares
        under the related Option (and when a Share is purchased under the Option,
        the
        SAR shall be canceled to the same extent). 

       

      2.39  “Termination
        of Employment”
        means a
        cessation of the employee-employer or director or other service arrangement
        relationship between an Employee, Consultant or Director and the Company
        or an
        Affiliate for any reason, including, but not by way of limitation, a termination
        by resignation, discharge, death, Disability, Retirement, or the disaffiliation
        of an Affiliate, but excluding any such termination where there is a
        simultaneous reemployment or re-engagement by the Company or an Affiliate.
        

       

      SECTION
        3

      ADMINISTRATION
        

       

      3.1  The
        Committee.
        The
        Plan
        shall be administered by a committee of the Board that meets the requirements
        of
        this Section 3.1
        (hereinafter referred to as “the
        Committee”).
        The
        Committee shall consist of not less than two (2) Directors. The members of the
        Committee shall be appointed from time to time by, and shall serve at the
        pleasure of, the Board of Directors. The Committee shall be comprised solely
        of
        Directors who are “outside directors” under Section 162(m) of the Code,
“non-employee directors” under Rule 16b-3 and “independent directors” under the
        requirements of any national securities exchange or system upon which the
        Shares
        are then listed and/or traded. 

       

      3.2  Authority
        of the Committee.
        The
        Committee shall have all powers and discretion necessary or appropriate to
        administer the Plan and to control its operation, including, but not limited
        to,
        the power (a) to determine which Employees, Consultants and Directors shall
        be
        granted Awards, (b) to prescribe the terms and conditions of such Awards,
        (c) to
        interpret the Plan and the Awards, (d) to adopt rules for the administration,
        interpretation and application of the Plan as are consistent therewith, and
        (e)
        to interpret, amend or revoke any such rules. 

       

      The
        Committee, in its sole discretion and on such terms and conditions as it
        may
        provide, may delegate all or any part of its authority and powers under the
        Plan
        to one or more directors and/or officers of the Company; provided,
        however,
        that
        the Committee may not delegate its authority and powers with respect to Section
        16 Persons or with respect to Awards which are intended to constitute “qualified
        performance-based compensation”, within the meaning of Section 162(m) of
        the Code. 

       

      
        
          
          

        

        
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      3.3  Decisions
        Binding.
        All
        determinations and decisions made by the Committee shall be final, conclusive,
        and binding on all persons, and shall be given the maximum deference permitted
        by law. 

       

      SECTION
        4

      SHARES
        SUBJECT TO THE PLAN 

       

      4.1  Shares
        Available. 

       

      4.1.1  Maximum
        Shares Available Under Plan.
        The
        aggregate number of Shares available for issuance under the Plan may not
        exceed
        four million (4,000,000) Shares. Such shares may be authorized but unissued
        shares or treasury shares.

       

      4.1.2  General
        Award Limitation.
        No
        Participant may receive Awards under the Plan which are intended to constitute
        “qualified performance-based compensation”, within the meaning of
        Section 162(m) of the Code, for more than 1,000,000 Shares in the aggregate
        in any single calendar year. 

       

      4.1.3   Adjustments.
        All
        Share numbers in this Section 4.1
        are
        subject to adjustment as provided in SECTION
        15.

       

      4.2  Number
        of Shares.
        The
        following rules will apply for purposes of the determination of the number
        of
        Shares available for grant under the Plan: 

       

      (a)  While
        an
        Award is outstanding, it shall be counted against the authorized pool of
        Shares,
        regardless of its vested status. 

       

      (b)  The
        grant
        of an Option or Restricted Stock shall reduce the Shares available for grant
        under the Plan by the number of Shares subject to such Award. 

       

      (c)  The
        grant
        of a Tandem SAR shall reduce the number of Shares available for grant by
        the
        number of Shares subject to the related Option (i.e., there is no double
        counting of Options and their related Tandem SARs); provided,
        however,
        that,
        upon the exercise of such Tandem SAR, the authorized Share pool shall be
        credited with the appropriate number of Shares representing the number of
        shares
        reserved for such Tandem SAR less the number of Shares actually delivered
        upon
        exercise thereof or the number of Shares having a Fair Market Value equal
        to the
        cash payment made upon such exercise. 

       

      (d)  The
        grant
        of an Affiliated SAR shall reduce the number of Shares available for grant
        by
        the number of Shares subject to the SAR, in addition to the number of Shares
        subject to the related Option; provided, however, that, upon the exercise
        of
        such Affiliated SAR, the authorized Share pool shall be credited with the
        appropriate number of Shares representing the number of shares reserved for
        such
        Affiliated SAR less the number of Shares actually delivered upon exercise
        thereof or the number of Shares having a Fair Market Value equal to the cash
        payment made upon such exercise. 

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (e)  The
        grant
        of a Freestanding SAR shall reduce the number of Shares available for grant
        by
        the number of Freestanding SARs granted; provided,
        however,
        that,
        upon the exercise of such Freestanding SAR, the authorized Share pool shall
        be
        credited with the appropriate number of Shares representing the number of
        shares
        reserved for such Freestanding SAR less the number of Shares actually delivered
        upon exercise thereof or the number of Shares having a Fair Market Value
        equal
        to the cash payment made upon such exercise. 

       

      (f)  The
        Committee shall in each case determine the appropriate number of Shares to
        deduct from the authorized pool in connection with the grant of Performance
        Units and/or Performance Shares. 

       

      (g)  To
        the
        extent that an Award is settled in cash rather than in Shares, the authorized
        Share pool shall be credited with the appropriate number of Shares having
        a Fair
        Market Value equal to the cash settlement of the Award. 

       

      4.3  Lapsed
        Awards.
        If an
        Award is cancelled, terminates, expires, or lapses for any reason (with the
        exception of the termination of a Tandem SAR upon exercise of the related
        Option, or the termination of a related Option upon exercise of the
        corresponding Tandem SAR), any Shares subject to such Award again shall be
        available to be the subject of an Award. 

       

      SECTION
        5

      STOCK
        OPTIONS 

       

      5.1  Grant
        of Options.
        Options
        may be granted to Employees, Consultants and Directors at any time and from
        time
        to time, as determined by the Committee in its sole discretion. The Committee,
        in its sole discretion, shall determine the number of Shares subject to Options
        granted to each Participant. The Committee may grant ISOs, NQSOs, or a
        combination thereof. 

       

      5.2  Award
        Agreement.
        Each
        Option shall be evidenced by an Award Agreement that shall specify the Option
        Price, the expiration date of the Option, the number of Shares to which the
        Option pertains, any conditions to exercise of the Option, and such other
        terms
        and conditions as the Committee, in its discretion, shall determine. The
        Award
        Agreement also shall specify whether the Option is intended to be an ISO
        or a
        NQSO. 

       

      5.3  Option
        Price.
        Subject
        to the provisions of this Section 5.3,
        the
        Option Price for each Option shall be determined by the Committee in its
        sole
        discretion. 

       

      5.3.1  Nonqualified
        Stock Options.
        In the
        case of a Nonqualified Stock Option, the Option Price shall be not less than
        one
        hundred percent (100%) of the Fair Market Value of a Share on the date that
        the
        Option is granted. 

       

      5.3.2  Incentive
        Stock Options.
        In the
        case of an Incentive Stock Option, the Option Price shall be not less than
        one
        hundred percent (100%) of the Fair Market Value of a Share on the date that
        the
        Option is granted; provided,
        however,
        that if
        at the time that the Option is granted, the Employee (together with persons
        whose stock ownership is attributed to the Employee pursuant to Section 424(d)
        of the Code) owns stock possessing more than 10% of the total combined voting
        power of all classes of stock of the Company or any of its Subsidiaries,
        the
        Option Price shall be not less than one hundred and ten percent (110%) of
        the
        Fair Market Value of a Share on the date that the Option is granted. 

       

      
        
          
          

        

        
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      5.3.3  Substitute
        Options.
        Notwithstanding the provisions of Sections 5.3.1
        and
5.3.2,
        in the
        event that the Company or an Affiliate consummates a transaction described
        in
        Section 424(a) of the Code (e.g., the acquisition of property or stock from
        an
        unrelated corporation), persons who become Employees, Consultants or Directors
        on account of such transaction may be granted Options in substitution for
        options granted by their former employer. If such substitute Options are
        granted, the Committee, in its sole discretion, may determine that such
        substitute Options shall have an exercise price less than 100% of the Fair
        Market Value of the Shares on the date the Option is granted. 

       

      5.4  Expiration
        of Options.
        Unless
        the applicable stock option agreement provides otherwise, each Option shall
        terminate upon the first to occur of the events listed in Section 5.4.1,
        subject
        to Section 5.4.2. 

       

      5.4.1  Expiration
        Dates. 

       

      (a)  The
        date
        for termination of the Option set forth in the Award Agreement; 

       

      (b)  The
        expiration of ten years from the date the Option was granted, or 

       

      (c)  The
        expiration of three months from the date of the Participant’s Termination of
        Employment for a reason other than the Participant’s death, Disability or
        Retirement, or 

       

      (d)  The
        expiration of twelve months from the date of the Participant’s Termination of
        Employment by reason of Disability, or 

       

      (e)  The
        expiration of twelve months from the date of the Participant’s death, if such
        death occurs while the Participant is in the employ or service of the Company
        or
        an Affiliate. 

       

      5.4.2  Committee
        Discretion.
        The
        Committee shall provide, in the terms of each individual Option, when such
        Option expires and becomes unexercisable. After the Option is granted, the
        Committee, in its sole discretion may, subject to the requirements of Section
        409A of the Code, extend the maximum term of such Option.
        The
        foregoing discretionary authority is subject to the limitations and restrictions
        on Incentive Stock Options set forth in Section 5.8.

       

      5.5  Exercise
        of Options.
        Options
        granted under the Plan shall be exercisable at such times, and subject to
        such
        restrictions and conditions, as the Committee shall determine in its sole
        discretion. After an Option is granted, the Committee, in its sole discretion,
        may accelerate the exercisability of the Option. 

       

      5.6  Payment.
        The
        Committee shall determine the acceptable form of consideration for exercising
        an
        Option, including the method of payment. In the case of an Incentive Stock
        Option, the Committee shall determine the acceptable form of consideration
        at
        the time of grant. Such consideration may consist entirely of:

       

      (a)  cash;

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (b)  check;

       

      (c)  promissory
        note;

       

      (d)  other
        Shares which have a Fair Market Value on the date of surrender equal to the
        aggregate exercise price of the Shares as to which said Option shall be
        exercised;

       

      (e)  consideration
        received by the Company from a licensed broker under a cashless exercise
        program
        implemented by the Company to facilitate “same day” exercises and sales of
        Options;

       

      (f)  a
        reduction in the amount of any Company liability to the Participant, including
        any liability attributable to the Participant's participation in any
        Company-sponsored deferred compensation program or arrangement;

       

      (g)  any
        combination of the foregoing methods of payment; or

       

      (h)  such
        other consideration and method of payment for the issuance of Shares to the
        extent permitted by applicable laws. 

       

      5.7  Restrictions
        on Share Transferability.
        The
        Committee may impose such restrictions on any Shares acquired pursuant to
        the
        exercise of an Option, as it may deem advisable, including, but not limited
        to,
        restrictions related to Federal securities laws, the requirements of any
        national securities exchange or system upon which such Shares are then listed
        and/or traded, and/or any blue sky or state securities laws. 

       

      5.8  Certain
        Additional Provisions for Incentive Stock Options. 

       

      5.8.1  Exercisability.
        The
        aggregate Fair Market Value (determined at the time the Option is granted)
        of
        the Shares with respect to which Incentive Stock Options are exercisable
        for the
        first time by any Employee during any calendar year (under all plans of the
        Company and its Subsidiaries) shall not exceed $100,000. 

       

      5.8.2  Termination
        of Employment.
        No
        Incentive Stock Option may be exercised more than three months after the
        Participant’s termination of employment for any reason other than Disability or
        death, unless (a) the Participant dies during such three-month period, and
        (b)
        the Award Agreement and/or the Committee permits later exercise. No Incentive
        Stock Option may be exercised more than one year after the Participant’s
        termination of employment on account of Disability, unless (a) the Participant
        dies during such one-year period, and (b) the Award Agreement and/or the
        Committee permit later exercise.

       

      5.8.3  Company
        and Subsidiaries Only.
        Incentive Stock Options may be granted only to persons who are Employees
        of the
        Company and/or a Subsidiary at the time of grant. 

       

      5.8.4  Expiration.
        No
        Incentive Stock Option may be exercised after the expiration of 10 years
        from
        the date such Option was granted; provided,
        however,
        that if
        the Option is granted to an Employee who, together with persons whose stock
        ownership is attributed to the Employee pursuant to Section 424(d) of the
        Code,
        owns stock possessing more than 10% of the total combined voting power of
        all
        classes of the stock of the Company or any of its Subsidiaries, the Option
        may
        not be exercised after the expiration of 5 years from the date that it was
        granted.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      5.9  Non-transferability
        of Options.
        No
        Option granted under the Plan may be sold, transferred, pledged, assigned,
        or
        otherwise alienated or hypothecated, other than by will, the laws of descent
        and
        distribution, or as provided under SECTION
        9.
        All
        Options granted to a Participant under the Plan shall be exercisable during
        his
        or her lifetime only by such Participant. 

       

      SECTION
        6

      STOCK
        APPRECIATION RIGHTS

       

      6.1  Grant
        of SARs.
        An SAR
        may be granted to an Employee, Consultant or Director at any time and from
        time
        to time as determined by the Committee, in its sole discretion. The Committee
        may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
        thereof. The Committee shall have complete discretion to determine the number
        of
        SARs granted to any Participant, and consistent with the provisions of the
        Plan,
        the terms and conditions pertaining to such SARs. However, the grant price
        of a
        Freestanding SAR shall be at least equal to the Fair Market Value of a Share
        on
        the date of grant. The grant price of Tandem or Affiliated SARs shall equal
        the
        Option Price of the related Option. 

       

      6.2  Exercise
        of Tandem SARs.
        Tandem
        SARs may be exercised for all or part of the Shares subject to the related
        Option upon the surrender of the right to exercise the equivalent portion
        of the
        related Option. A Tandem SAR may be exercised only with respect to the Shares
        for which its related Option is then exercisable. 

       

      6.2.1  ISOs.
        Notwithstanding any contrary provision of the Plan, with respect to a Tandem
        SAR
        granted in connection with an ISO: (i) the Tandem SAR shall expire no later
        than
        the expiration of the underlying ISO; (ii) the value of the payout with respect
        to the Tandem SAR shall be for no more than one hundred percent (100%) of
        the
        difference between the Option Price of the underlying ISO and the Fair Market
        Value of the Shares subject to the underlying ISO at the time the Tandem
        SAR is
        exercised; and (iii) the Tandem SAR shall be exercisable only when the Fair
        Market Value of the Shares subject to the ISO exceeds the Option Price of
        the
        ISO. 

       

      6.3  Exercise
        of Affiliated SARs.
        An
        Affiliated SAR shall be deemed to be exercised upon the exercise of the related
        Option. The deemed exercise of an Affiliated SAR shall not necessitate a
        reduction in the number of Shares subject to the related Option. 

       

      6.4  Exercise
        of Freestanding SARs.
        Freestanding SARs shall be exercisable on such terms and conditions as the
        Committee, in its sole discretion, shall determine. 

       

      6.5  SAR
        Agreement.
        Each
        SAR shall be evidenced by an Award Agreement that shall specify the grant
        price,
        the term of the SAR, the conditions of exercise, and such other terms and
        conditions as the Committee, in its sole discretion, shall determine.

       

      6.6  Expiration
        of SARs.
        An SAR
        granted under the Plan shall expire upon the date determined by the Committee,
        in its sole discretion, and set forth in the Award Agreement. Notwithstanding
        the foregoing, the rules of Section 5.4
        (pertaining to Options) also shall apply to SARs. 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      6.7  Payment
        of SAR Amount.
        Upon
        exercise of an SAR, a Participant shall be entitled to receive payment from
        the
        Company in an amount determined by multiplying: 

       

      (a)  The
        difference between the Fair Market Value of a Share on the date of exercise
        over
        the grant price; times 

       

      (b)  The
        number of Shares with respect to which the SAR is exercised. 

       

      At
        the
        discretion of the Committee, the payment upon SAR exercise may be in cash,
        in
        Shares of equivalent value, or in some combination thereof. 

       

      6.8  Nontransferability
        of SARs.
        No SAR
        granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
        alienated or hypothecated, other than by will, the laws of descent and
        distribution, or as permitted under SECTION
        9.
        An SAR
        granted to a Participant shall be exercisable during the Participant’s lifetime
        only by such Participant. 

       

      SECTION
        7

      RESTRICTED
        STOCK AND RESTRICTED STOCK UNITS

       

      7.1  Grant
        of Restricted Stock and Restricted Stock Units.
        Subject
        to the terms and provisions of the Plan, the Committee, at any time and from
        time to time, may grant Shares of Restricted Stock to Employees, Consultants
        or
        Directors in such amounts as the Committee, in its sole discretion, shall
        determine. 

       

      7.2  Award
        Agreement.
        Each
        Award of Restricted Stock or Restricted Stock Units shall be evidenced by
        an
        Award Agreement that shall specify the Period of Restriction, the number
        of
        Shares subject to the Award, and such other terms and conditions as the
        Committee, in its sole discretion, shall determine. Unless the Committee
        determines otherwise, Shares subject to a Restricted Stock Award shall be
        held
        by the Company as escrow agent until the restrictions on such Shares have
        lapsed. 

       

      7.3  Transferability.
        Except
        as provided in this SECTION
        7,
        Shares
        subject to an Award of Restricted Stock or Restricted Stock Units may not
        be
        sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
        until the end of the applicable Period of Restriction. All rights with respect
        to the Restricted Stock or Restricted Stock Units granted to a Participant
        under
        the Plan shall be available during his or her lifetime only to such Participant.
        

       

      7.4  Other
        Restrictions.
        The
        Committee, in its sole discretion, may impose such other restrictions on
        any
        Award of Restricted Stock or Restricted Stock Units as it may deem advisable
        including, without limitation, restrictions based upon the attainment of
        specific Performance Measures, and/or restrictions under applicable Federal
        or
        state securities laws; and may legend the certificates representing Restricted
        Stock to give appropriate notice of such restrictions. For example, the
        Committee may determine that some or all certificates representing Shares
        of
        Restricted Stock shall bear the following legend: 

       

      “The
        sale
        or other transfer of the shares of stock represented by this certificate,
        whether voluntary, involuntary, or by operation of law, is subject to certain
        restrictions on transfer as set forth in the Innovative Card Technologies
        Inc.
        2007 Equity Incentive Plan, and in a Restricted Stock Agreement. A copy of
        the
        Plan and such Restricted Stock Agreement may be obtained from the Secretary
        of
        Innovative Card Technologies, Inc.”

       

      
        
          
          

        

        
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      7.5  Removal
        of Restrictions.
        Except
        as otherwise provided in this SECTION
        7,
        Shares
        covered by each Restricted Stock or Restricted Stock Unit Award made under
        the
        Plan shall be delivered to the Participant as soon as practicable after the
        last
        day of the Period of Restriction. The Committee, in its discretion, may
        accelerate the time at which any restrictions shall lapse, and/or remove
        any
        restrictions. After the restrictions have lapsed, the Participant shall be
        entitled to have any legend or legends under Section 7.4
        removed
        from his or her Share certificate, and the Shares shall be freely transferable
        by the Participant. 

       

      7.6  Voting
        Rights.
        During
        the Period of Restriction, Participants holding Shares subject to a Restricted
        Stock Award granted hereunder may exercise full voting rights with respect
        to
        those Shares, unless the Committee determines otherwise. 

       

      7.7  Dividends
        and Other Distributions.
        During
        the Period of Restriction, Participants holding Shares of Restricted Stock
        shall
        be entitled to receive all dividends and other distributions paid with respect
        to such Shares, unless otherwise provided in the Award Agreement. If any
        such
        dividends or distributions are paid in Shares, the Shares shall be subject
        to
        the same restrictions on transferability and forfeitability as the Shares
        of
        Restricted Stock with respect to which they were paid. Participants holding
        Restricted Stock Unit Awards shall be entitled to receive dividend equivalents
        with respect to dividends and other distributions paid with respect to Shares
        only to the extent provided in the applicable Award Agreement. 

       

      7.8  Return
        of Restricted Stock to Company.
        Subject
        to the applicable Award Agreement and Section 7.5,
        upon
        the earlier of (a) the Participant’s Termination of Employment, or (b) the date
        set forth in the Award Agreement, the Restricted Stock for which restrictions
        have not lapsed shall revert to the Company and, subject to Section 4.3,
        again
        shall become available for grant under the Plan. 

       

      7.9  Repurchase
        Option.
        Unless
        the Committee determines otherwise, the Restricted Stock Purchase Agreement
        pursuant to which a Participant purchases Restricted Shares shall grant the
        Company a repurchase option exercisable upon the voluntary or involuntary
        termination of the Participant's service with the Company for any reason
        (including death or Disability). The purchase price for Shares repurchased
        pursuant to the Restricted Stock Purchase Agreement shall be the original
        price
        paid by the Participant and may be paid by cancellation of any indebtedness
        of
        the Participant to the Company. The repurchase option shall lapse at a rate
        determined by the Committee.

       

      SECTION
        8

      PERFORMANCE
        UNITS AND PERFORMANCE SHARES 

       

      8.1  Grant
        of Performance Units/Shares.
        Performance Units and Performance Shares may be granted to Employees,
        Consultants or Directors at any time and from time to time, as shall be
        determined by the Committee, in its sole discretion. The Committee shall
        have
        complete discretion in determining the number of Performance Units and
        Performance Shares granted to each Participant. 

       

      8.2  Value
        of Performance Units/Shares.
        Each
        Performance Unit shall have an initial value that is established by the
        Committee at the time of grant. Each Performance Share shall have an initial
        value equal to the Fair Market Value of a Share on the date of grant. The
        Committee shall set Performance Measures in its discretion which, depending
        on
        the extent to which they are met, will determine the number and/or value
        of
        Performance Units/Shares that will be paid out to the Participants and the
        Performance Period during which the Performance Measures must be met.

       

      
        
          
          

        

        
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      8.3  Earning
        of Performance Units/Shares.
        After
        the applicable Performance Period has ended, the holder of Performance
        Units/Shares shall be entitled to receive a payout of the number of Performance
        Units/Shares earned by the Participant over the Performance Period, to be
        determined as a function of the extent to which the corresponding Performance
        Measures have been achieved. After the grant of a Performance Unit/Share,
        the
        Committee, in its sole discretion, may reduce the amount payable with respect
        to
        such Performance Unit/Share. 

       

      8.4  Form
        and Timing of Payment of Performance Units/Shares.
        Payment
        of earned Performance Units/Shares shall be made as soon as practicable after
        the expiration of the applicable Performance Period. The Committee, in its
        sole
        discretion, may pay earned Performance Units/Shares in the form of cash,
        in
        Shares (which have an aggregate Fair Market Value equal to the value of the
        earned Performance Units/Shares at the close of the applicable Performance
        Period) or in a combination thereof. 

       

      8.5  Cancellation
        of Performance Units/Shares.
        Subject
        to the applicable Award Agreement, upon the earlier of (a) the Participant’s
        Termination of Employment, or (b) the date set forth in the Award Agreement,
        all
        remaining Performance Units/Shares shall be forfeited by the Participant
        to the
        Company, and subject to Section 4.3,
        the
        Shares subject thereto shall again be available for grant under the Plan.
        

       

      8.6  Non-transferability.
        Performance Units/Shares may not be sold, transferred, pledged, assigned,
        or
        otherwise alienated or hypothecated, other than by will, the laws of descent
        and
        distribution, or as permitted under SECTION
        9.
        A
        Participant’s rights under the Plan shall be exercisable during the
        Participant’s lifetime only by the Participant or the Participant’s legal
        representative.

       

      SECTION
        9

      BENEFICIARY
        DESIGNATION 

       

      If
        permitted by the Committee, a Participant may name a beneficiary or
        beneficiaries to whom any unpaid vested Award shall be paid in event of the
        Participant’s death. Each such designation shall revoke all prior designations
        by the same Participant and shall be effective only if given in a form and
        manner acceptable to the Committee. In the absence of any such designation,
        benefits remaining unpaid at the Participant’s death shall be paid to the
        Participant’s estate and, subject to the terms of the Plan, any unexercised
        vested Award may be exercised by the Committee or executor of the Participant’s
        estate.

       

      SECTION
        10

      DEFERRALS
        

       

      The
        Committee, in its sole discretion, may permit a Participant to defer receipt
        of
        the payment of cash or the delivery of Shares that would otherwise be due to
        such Participant under an Award. Any such deferral elections shall be subject
        to
        such rules and procedures as shall be determined by the Committee in its
        sole
        discretion, and the requirements of Section 409A of the Code. 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      SECTION
        11

      RIGHTS
        OF
        EMPLOYEES AND CONSULTANTS 

       

      11.1  No
        Effect on Employment or Service.
        Nothing
        in the Plan shall interfere with or limit in any way the right of the Company
        to
        terminate any Participant’s employment or service at any time, with or without
        cause. 

       

      11.2  Participation.
        No
        Employee, Consultant or Director shall have the right to be selected to receive
        an Award under this Plan, or, having been so selected, to be selected to
        receive
        a future Award.

       

      SECTION
        12

      AMENDMENT,
        SUSPENSION, OR TERMINATION 

       

      The
        Board, in its sole discretion, may alter, amend or terminate the Plan, or
        any
        part thereof, at any time and for any reason. However, as required by Applicable
        Laws, no alteration or amendment shall be effective without further stockholder
        approval. Neither the amendment, suspension, nor termination of the Plan
        shall,
        without the consent of the Participant, alter or impair any rights or
        obligations under any Award theretofore granted. No Award may be granted
        during
        any period of suspension nor after termination of the Plan.

       

      SECTION
        13

      TAX
        WITHHOLDING 

       

      13.1  Withholding
        Requirements.
        Prior
        to the delivery of any Shares or cash pursuant to an Award, the Company shall
        have the power and the right to deduct or withhold, or require a Participant
        to
        remit to the Company, an amount sufficient to satisfy Federal, state, and
        local
        taxes required to be withheld with respect to such Award. 

       

      13.2  Shares
        Withholding.
        The
        Committee, in its sole discretion and pursuant to such procedures as it may
        specify from time to time, may permit a Participant to satisfy the minimum
        statutory tax withholding obligation, in whole or in part, by delivering
        to the
        Company Shares having a value equal to the amount required to be withheld.
        The
        value of the Shares to be delivered will be based on their Fair Market Value
        on
        the date of delivery.

       

      SECTION
        14

      INDEMNIFICATION
        

       

      Each
        person who is or shall have been a member of the Committee, or of the Board,
        shall be indemnified and held harmless by the Company against and from any
        loss,
        cost, liability, or expense that may be imposed upon or reasonably incurred
        by
        him or her in connection with or resulting from any claim, notion, suit,
        or
        proceeding to which he or she may be a party or in which he or she may be
        involved by reason of any action taken or failure to act under the Plan or
        any
        Award Agreement and against and from any and all amounts paid by him or her
        in
        settlement thereof, with the Company’s approval, or paid by him or her in
        settlement thereof, with the Company’s approval, or paid by him or her in
        satisfaction of any judgment in any such action, suit, or proceeding against
        him
        or her, provided he or she shall give the Company an opportunity, at its
        own
        expense, to handle and defend the same before he or she undertakes to handle
        and
        defend it on his or her own behalf. The foregoing right of indemnification
        shall
        not be exclusive of any other rights of indemnification to which such persons
        may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a
        matter of law, or otherwise, or any power that the Company may have to indemnify
        them or hold them harmless. 

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      SECTION
        15

      ADJUSTMENTS,
        CHANGE IN CONTROL

       

      15.1  Adjustments.
        In the
        event of any stock split, stock dividend, recapitalization, reorganization,
        merger, consolidation, combination, exchange of shares, liquidation, spin-off
        or
        other similar change in capitalization or event, or any distribution to holders
        of Shares other than a regular cash dividend, the number and class of securities
        available under this Plan, the number and class of securities subject to
        each
        outstanding Option and the purchase price per security, the terms of each
        outstanding SAR, the maximum number of securities with respect to which Awards
        which are intended to constitute “qualified performance-based compensation”,
        within the meaning of Section 162(m) of the Code, may be granted during any
        calendar year to any Participant, the terms of each outstanding Restricted
        Stock
        Award, Restricted Stock Unit Award, Performance Share Award and Performance
        Share Unit Award, including the number and class of securities subject thereto,
        shall be appropriately adjusted by the Committee, such adjustments to be
        made in
        the case of outstanding Options and SARs without an increase in the aggregate
        purchase price or base price. The decision of the Committee regarding any
        such
        adjustment shall be final, binding and conclusive. If any such adjustment
        would
        result in a fractional security being (a) available under this Plan, such
        fractional security shall be disregarded, or (b) subject to an Award under
        this
        Plan, the Company shall pay the holder of such Award, in connection with
        the
        first vesting, exercise or settlement of such Award, in whole or in part,
        occurring after such adjustment, an amount in cash determined by multiplying
        (i)
        the fraction of such security (rounded to the nearest hundredth) by (ii)
        the
        excess, if any, of (A) the Fair Market Value on the vesting, exercise or
        settlement date over (B) the exercise or base price, if any, of such Award.
        

       

      15.2  Change
        in Control.
        Notwithstanding any provision in this Plan or any Agreement, in the event
        of a
        Change in Control (as defined below), the Committee (as constituted prior
        to
        such Change in Control) may, in its discretion, provide that any one or more
        of
        the following shall occur: (i) all outstanding Options and SARs shall
        immediately become exercisable in full; (ii) all outstanding Restricted Stock
        or
        Restricted Stock Unit Awards shall immediately vest; (iii) the Performance
        Period applicable to any outstanding Award shall lapse; (iv) the Performance
        Measures applicable to any outstanding Award shall be deemed to be satisfied
        at
        the target level or at any other level as determined by the Committee (as
        constituted prior to such Change in Control); (v) the shares of stock of
        the
        corporation resulting from such Change in Control, or a parent corporation
        thereof, be substituted for some or all of the Shares subject to an outstanding
        Award, with an appropriate and equitable adjustment to such Award as shall
        be
        determined by the Committee in accordance with Section 15.1; (vi) require
        outstanding Awards, in whole or in part, to be surrendered to the Company
        by the
        holder, and to be immediately cancelled by the Company, and to provide for
        the
        holder to receive (A) a cash payment in an amount equal to (i) in the case
        of an
        Option or an SAR, the number of Shares then subject to the portion of such
        Option or SAR surrendered multiplied by the excess, if any, of the highest
        per
        share price offered to holders of Shares in any transaction whereby the Change
        in Control takes place, over the purchase price or base price per share of
        Shares subject to such Option or SAR, (ii) in the case of a Restricted Stock
        or
        Restricted Stock Unit award, the number of Shares then subject to the portion
        of
        such Award surrendered multiplied by the highest per share price offered
        to
        holders of Shares in any transaction whereby the Change in Control takes
        place,
        and (iii) in the case of a Performance Unit award, the number of Performance
        Units then subject to the portion of such award surrendered; (B) shares of
        capital stock of the corporation resulting from such Change in Control, or
        a
        parent corporation thereof, having a fair market value not less than the
        amount
        determined under clause (A) above; or (C) a combination of the payment of
        cash
        pursuant to clause (A) above and the issuance of shares pursuant to clause
        (B)
        above. 

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      For
        purposes of this Agreement, a “Change of Control” means the happening of any of
        the following events:

       

      (a)  When
        any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange
        Act (other than the Company, a Subsidiary or a Company employee benefit plan,
        including any trustee of such plan acting as trustee) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
        directly or indirectly, of securities of the Company representing fifty percent
        (50%) or more of the combined voting power of the Company’s then outstanding
        securities entitled to vote generally in the election of directors;
        or

       

      (b)  The
        consummation of a merger or consolidation of the Company with any other
        corporation, other than a merger or consolidation which would result in the
        voting securities of the Company outstanding immediately prior thereto
        continuing to represent (either by remaining outstanding or by being converted
        into voting securities of the surviving entity) more than fifty percent (50%)
        of
        the total voting power represented by the voting securities of the Company
        or
        such surviving entity outstanding immediately after such merger or
        consolidation, or the sale or disposition by the Company of all or substantially
        all the Company’s assets; or

       

      (c)  The
        dissolution or liquidation of the Company; or

       

      (d)  A
        change
        in the composition of the Board of Directors of the Company, as a result
        of
        which fewer than a majority of the directors are Incumbent Directors.
“Incumbent
        Directors”
shall
        mean directors who either (A) are directors of the Company as of the date
        the Plan is approved by the stockholders, or (B) are elected, or nominated
        for election, to the Board of Directors of the Company with the affirmative
        votes of at least a majority of the Incumbent Directors at the time of such
        election or nomination (but shall not include an individual whose election
        or
        nomination is in connection with an actual or threatened proxy contest relating
        to the election of directors to the Company). 

       

      SECTION
        16

      CONDITIONS
        UPON ISSUANCE OF SHARES 

       

      16.1  Legal
        Compliance.
        Shares
        shall not be issued pursuant to the exercise of an Award unless the exercise
        of
        such Award and the issuance and delivery of Shares shall comply with Applicable
        Laws and shall be further subject to the approval of counsel for the Company
        with respect to such compliance. 

       

      16.2  Investment
        Representations.
        As a
        condition to the exercise of an Award, the Company may require the person
        exercising such Award to represent and warrant at the time of any such exercise
        that the Shares are being purchased only for investment and without any present
        intention to sell or distribute such Shares if, in the opinion of counsel
        for
        the Company, such a representation is required.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      SECTION
        17

      INABILITY
        TO OBTAIN AUTHORITY 

       

      The
        inability of the Company to obtain authority from any regulatory body having
        jurisdiction, which authority is deemed by the Company's counsel to be necessary
        to the lawful issuance and sale of any Shares hereunder, shall relieve the
        Company of any liability in respect of the failure to issue or sell such
        Shares
        as to which such requisite authority shall not have been obtained.

       

      SECTION
        18

      RESERVATION OF SHARES
        

       

      The
        Company, during the term of this Plan, will at all times reserve and keep
        available such number of Shares as shall be sufficient to satisfy the
        requirements of the Plan.

       

      SECTION
        19

      LEGAL
        CONSTRUCTION 

       

      19.1  Gender
        and Number.
        Except
        where otherwise indicated by the context, any masculine term used herein
        also
        shall include the feminine; the plural shall include the singular and the
        singular shall include the plural. 

       

      19.2  Severability.
        In the
        event any provision of the Plan shall be held illegal or invalid for any
        reason,
        such illegality or invalidity shall not affect the remaining parts of the
        Plan,
        and the Plan shall be construed and enforced as if the illegal or invalid
        provision had not been included.

       

      19.3  Requirements
        of Law.
        The
        granting of Awards and the issuance of Shares under the Plan shall be subject
        to
        all Applicable Laws.

       

      19.4  Securities
        Law Compliance.
        With
        respect to Section 16 Persons, transactions under this Plan are intended
        to
        comply with all applicable conditions of Rule 16b-3. To the extent any provision
        of the Plan, Award Agreement or action by the Committee fails to so comply,
        it
        shall be deemed null and void, to the extent permitted by law and deemed
        advisable by the Committee.

       

      19.5  Governing
        Law.
        The
        Plan and all Award Agreements shall be construed in accordance with and governed
        by the laws of the State of Delaware.

       

      19.6  Captions.
        Captions are provided herein for convenience only, and shall not serve as
        a
        basis for interpretation or construction of the Plan.

       

       

      
        
          
          

        

        
          17

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