Document:

exhibit10_39.htm

    
      Exhibit
10.39

      

      Award
Number:                                                                                     

      Grantee
Name:                                                                                     

      

      KINETIC
CONCEPTS, INC.

      2004
EQUITY PLAN

      RESTRICTED
STOCK AWARD AGREEMENT

      

      THIS
RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”) is made and entered
into as of _______________, 200__ (the “Date of Grant”), by and between Kinetic
Concepts, Inc., a Texas corporation (the “Company”), and
[_________________________] (the “Grantee”).  Capitalized terms not
defined herein shall have the meaning ascribed to them in the Company’s 2004
Equity Plan (the “Plan”).  Where the context permits, references to
the Company or any of its Subsidiaries or affiliates shall include the
successors to the foregoing.

       

      Pursuant
to the Plan, the Administrator has determined that the Grantee is to be granted
Restricted Stock, subject to the terms and conditions set forth in the Plan and
herein, and hereby grants such Restricted Stock.

       

      1. Grant of Restricted
Stock.  The Company hereby grants to the Grantee [_______]
shares of Restricted Stock (the "Award") on the terms and conditions set forth
in this Award Agreement and as otherwise provided in the Plan.

       

      2. Terms and Conditions of
Award.  The Award shall be subject to the following terms,
conditions and restrictions:

       

      
        	
                (a)  

              	
                Restrictions.  Restricted
      Stock and any interest therein, may not be sold, transferred, pledged,
      hypothecated, assigned or otherwise disposed of, except by will or the
      laws of descent and distribution, during the Restricted
      Period.  Any attempt to dispose of any Restricted Stock in
      contravention of any such restrictions (the "Restrictions") shall be null
      and void and without effect.

                 

              

      

      
        	
                (b)  

              	
                Certificate; Restrictive
      Legend.  The Grantee agrees that any certificate issued
      for Restricted Stock prior to the lapse of any outstanding restrictions
      relating thereto shall be inscribed with the following
legend:

                 

              

      

      THIS
CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
AND CONDITIONS, INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST
TRANSFER (THE "RESTRICTIONS"), CONTAINED IN THE KINETIC CONCEPTS, INC. 2004
EQUITY PLAN AND THE RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER AND THE COMPANY.  ANY ATTEMPT TO DISPOSE OF THESE
SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE,
ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID
AND WITHOUT EFFECT.

       

      
        	
                (c)  

              	
                Rights as a
      Shareholder.  Subject to the restrictions set forth in
      the Plan and this Award Agreement, including the Restrictions set forth in
      Paragraphs 2(a) and 2(d), during the Restricted Period, the Grantee shall
      possess all incidents of ownership with respect to the Restricted Stock
      granted hereunder, including the right to receive dividends with respect
      to such Restricted Stock (provided however, that any dividends paid in
      property other than cash shall be subject to the same restrictions that
      apply to the underlying Restricted Stock) and the right to vote such
      Restricted Stock.

                 

              

      

      
        	
                (d)  

              	
                Lapse of
      Restrictions.  Except as may otherwise be provided
      herein, the Restrictions on transfer set forth in Paragraph 2(a) shall
      lapse subject to the terms and conditions and in the manner set forth in
      Appendix
      A attached hereto.

                 

              

      

      Promptly
after each lapse of Restrictions relating to the Restricted Stock without
forfeiture, and provided that the Grantee shall have complied with his or her
obligations under Paragraph 2(f) hereof, the Company shall issue to the Grantee
or the Grantee's personal representative a stock certificate representing a
number of Shares, free of the restrictive legend described in Paragraph 2(b),
equal to the number of Shares of Restricted Stock with respect to which such
restrictions have lapsed.  If certificates representing such
Restricted Stock shall have theretofore been delivered to the Grantee, such
certificates shall be returned to the Company, complete with any necessary
signatures or instruments of transfer prior to the issuance by the Company of
such unlegended Shares.

      

      
        	
                (e)  

              	
                Effect
      of Conduct Constituting Cause; Termination of Employment or Service; or
      Change in Control.

                 

              

      

      
        	
                (i)  

              	
                If
      at any time (whether before or after termination of employment or service)
      the Administrator determines that the Grantee has engaged in conduct that
      would constitute Cause for termination, the Administrator may provide for
      the immediate forfeiture of the Award (including any securities, cash or
      other property issued upon settlement of the Award), whether or not the
      Restrictions on the Shares of Restricted Stock have lapsed.  Any
      such determination by the Administrator shall be final, conclusive and
      binding on all persons.

                 

              

      

      
        	
                (ii)  

              	
                If
      the Grantee’s employment with or service to the Company, any Subsidiary or
      affiliate thereof terminates for any reason, other than by reason of the
      Grantee’s death or Disability, during the Restricted Period, the Grantee
      shall immediately forfeit any rights to the Shares of Restricted Stock
      with respect to which the Restrictions have not lapsed and shall have no
      further rights thereto.

                 

              

      

      
        	
                (iii)  

              	
                If
      the Grantee’s employment with or service to the Company, any Subsidiary or
      affiliate thereof terminates by reason of Grantee’s death or Disability
      during the Restricted Period, with respect to Restrictions that lapse
      based on the passage on time, the Restrictions on all outstanding
      Restricted Stock with respect to which the Restrictions have not lapsed
      shall immediately lapse and, with respect to Restrictions that lapse based
      on attainment of specified performance conditions, the Restrictions on all
      outstanding Restricted Stock with respect to which the Restrictions have
      not lapsed shall immediately lapse as if the target performance goals were
      met.

                 

              

      

      
        	
                 

              	
                (iv)

              	
                Upon
      the occurrence of a Change in Control, Restrictions on all outstanding
      Restricted Stock shall immediately lapse, unless the Award is either
      assumed or an equitable substitution is made therefore. In addition, if
      the Grantee’s employment with or service to the Company, any Subsidiary or
      affiliate thereof is terminated other than for Cause within 24 months
      following a Change in Control, Restrictions on all outstanding Restricted
      Stock with respect to which the Restrictions have not lapsed shall
      immediately lapse. 

                 

              

      

      
        	
                (f)  

              	
                Taxes.  Pursuant
      to Section 14 of the Plan, the Company (or Subsidiary or affiliate, as the
      case may be) has the right to require the Grantee to remit to the Company
      (or Subsidiary or affiliate, as the case may be) in cash an amount
      sufficient to satisfy any federal, state and local tax withholding
      requirements related to the Award.  With the approval of the
      Administrator, the Grantee may satisfy the foregoing requirement by
      electing to have the Company withhold from delivery Shares or by
      delivering Shares, in each case, having a value equal to the aggregate
      required minimum tax withholding to be collected by the Company or any
      Subsidiary or affiliate thereof.  Such Shares shall be valued at
      their Fair Market Value on the date on which the amount of tax to be
      withheld is determined.
      Fractional share amounts shall be settled in cash.

                 

              

      

      The
Grantee shall promptly notify the Company of any election made pursuant to
Section 83(b) of the Code.

       

      3. Adjustments.  The
Award and all rights and obligations under this Award Agreement are subject to
Section 5 of the Plan.

       

      4. Notice.  Whenever
any notice is required or permitted hereunder, such notice shall be in writing
and shall be given by personal delivery, facsimile, first class mail, certified
or registered with return receipt requested.  Any notice required or
permitted to be delivered hereunder shall be deemed to have been duly given on
the date which it is personally delivered or, whether actually received or not,
on the third business day after mailing or 24 hours after transmission by
facsimile to the respective parties named below.

       

      
        	
                               
      If to the Company:

              	
                Kinetic
      Concepts, Inc. 

              

      

      
        	
                 

              	
                Attn.:
      Chief Financial Officer 

              

      

      
        	
                 

              	
                8023
      Vantage Drive 

              

      

      
        	
                 

              	
                San
      Antonio, TX 78230 

              

      

      
        	
                 

              	
                Phone:
      (210) 255-6494 

              

      

      
        	
                 

              	
                Fax:
      (210) 255-6997 

                 

              

      

      If to the
Grantee:               
[Name of Grantee]

      [Address]

      ______________________

      Facsimile: _____________

      

      Either
party may change such party’s address for notices by duly giving notice pursuant
hereto.

       

      5. Compliance with
Laws.

       

            
(a) Shares
shall not be issued pursuant to the Award granted hereunder unless the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.  The Company
shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933, as amended, of any interests in the Plan or any Shares
to be issued hereunder or to effect similar compliance under any state
laws.

       

             (b) All
certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Administrator may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Shares may then be
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.  The
Administrator may require, as a condition of the issuance and delivery of
certificates evidencing Shares pursuant to the terms hereof, that the recipient
of such Shares make such agreements and representations as the Administrator, in
its sole discretion, deems necessary or desirable.

       

      6. Protections Against
Violations of Agreement.  No purported sale, assignment,
mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust
(voting or other) or other disposition of, or creation of a security interest in
or lien on, any of the Shares underlying the Award by any holder thereof in
violation of the provisions of this Award Agreement, the Plan or the Articles of
Incorporation or the Bylaws of the Company, will be valid, and the Company will
not transfer any such Shares on its books nor will any such Shares be entitled
to vote, nor will any dividends be paid thereon, unless and until there has been
full compliance with such provisions to the satisfaction of the
Company.  The foregoing restrictions are in addition to and not in
lieu of any other remedies, legal or equitable, available to enforce said
provisions.

       

      7. Failure to Enforce Not a
Waiver.  The failure of the Company to enforce at any time any
provision of the Award Agreement shall in no way be construed to be a waiver of
such provision or of any other provision hereof.

       

      8. Governing
Law.  The Award Agreement shall be governed by and construed
according to the laws of the State of Texas without regard to its principles of
conflict of laws.

       

      9. Incorporation of the
Plan.  The Plan, as it exists on the date of the Award
Agreement and as amended from time to time, is hereby incorporated by reference
and made a part hereof, and the Award and this Award Agreement shall be subject
to all terms and conditions of the Plan.  In the event of any conflict
between the provisions of the Award Agreement and the provisions of the Plan,
the terms of the Plan shall control, except as expressly stated
otherwise.  The term “Section” generally refers to provisions within
the Plan (except where denoted otherwise) and the term “Paragraph” shall refer
to a provision of this Award Agreement.

       

      10. Amendments.  This
Award Agreement may be amended or modified at any time, but only by an
instrument in writing signed by each of the parties hereto.

       

      11. Agreement Not a Contract of
Employment.  Neither the Plan, the granting of the Award, the
Award Agreement nor any other action taken pursuant to the Plan shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Grantee has a right to continue to be employed by, or to provide services as a
director, consultant or advisor to, the Company, any Subsidiary or affiliate
thereof for any period of time or at any specific rate of
compensation.

       

      12. Authority of the
Administrator.  The Administrator shall have full authority to
interpret and construe the terms of the Plan and the Award
Agreement.  The determination of the Administrator as to any such
matter of interpretation or construction shall be final, binding and
conclusive.

       

      13. Binding
Effect.  The Award Agreement shall apply to and bind the
Grantee and the Company and their respective permitted assignees or transferees,
heirs, legatees, executors, administrators and legal successors.

       

      14. Tax
Representation.  The Grantee has reviewed with his or her own
tax advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Award Agreement.  The Grantee is
relying solely on such advisors and not on any statement or representations of
the Company or any of its agents.  The Grantee understands that he or
she (and not the Company) shall be responsible for any tax liability that may
arise as a result of the transactions contemplated by the Award
Agreement.

       

      15. Acceptance.  The
Grantee hereby acknowledges receipt of a copy of the Plan and this Award
Agreement.  Grantee has read and understands the terms and provisions
thereof, and accepts the Award subject to all the terms and conditions of the
Plan and the Award Agreement.

       

      [SIGNATURE
PAGE FOLLOWS]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
WITNESS WHEREOF, the parties hereto have executed and delivered the Award
Agreement on the day and year first above written.

       

      
        	
                KINETIC
      CONCEPTS, INC.

              
	 	 
	 	 
	 	 
	
                By:

              	 
	
                Name:

              	 
	
                Title:

              	 
	 	 
	 	 
	
                GRANTEE

              
	 	 
	 	 
	 	 
	
                Signature:

              	 
	
                Name:

              	 
	
                Address:

              	 
	 	 
	
                Telephone:

              	 
	
                Social
      Security No.:

              	 

      

      

      

      

      
        	
                
                

                DATE OF

                GRANT

                
                

              	
                
                

                NUMBER OF SHARES OF

                RESTRICTED STOCK

              
	 	 

      

      

      SEE
APPENDIX A FOR SCHEDULE OF LAPSE OF
RESTRICTIONS.ex10_1.htm

    Exhibit 10.1     

     

    GRANITE
CONSTRUCTION INCORPORATED

     

    KEY
MANAGEMENT DEFERRED COMPENSATION PLAN II

     

    
      1. Introduction.

       

      (a) The
purpose of the Plan is to provide deferred compensation to a select group of
executive employees of the Company in recognition of their contributions to the
Company and its affiliates.  This document constitutes the written
instrument under which the Plan is maintained.

       

      (b) This Plan
is the successor plan to the Granite Construction Incorporated Key Management
Deferred Compensation Plan, as amended through December 31, 2004 and the Key
Management Deferred Incentive Compensation Plan, as amended through December 31,
2004 (collectively, the “Prior Plans”).  Effective December 31, 2004,
the Prior Plans are frozen and no new deferrals or Company contributions will be
made to them; provided, however, that any deferrals or Company contributions
made under the Prior Plans before January 1, 2005 shall continue to be governed
by the terms and conditions of the Prior Plans as in effect on December 31,
2004.

       

      (c) Any
deferrals and Company contributions made under the Prior Plans after December
31, 2004 are deemed to have been made under this Plan and all such deferrals and
Company contributions shall be governed by the terms and conditions of this Plan
as it may be amended from time to time; provided, however, that deferrals and
Company contributions made in 2005 through 2007 are governed by the terms and
conditions of this Plan along with the terms and conditions set forth in the
Appendix.

       

      (d) This Plan
is intended to be a plan that is unfunded and that is maintained by Granite
Construction Incorporated primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of the Employee Retirement Income Security
Act.  This Plan also is intended to comply with the requirements of
Section 409A of the Code.

       

      2. Definitions.

       

      (a) “Account” means as to
any Participant the separate account(s) established and maintained by the
Company in order to reflect his or her interest in the Plan.  Each
Participant’s Account or Accounts will reflect (i) allocations and earnings
credited (or debited) thereto in accordance with Section 5 and (ii) amounts
payable at different times and in different forms.

       

      (b) “Beneficiary” means
the person or persons designated by the Participant or by the Plan under Section
7(g) to receive payment of the Participant’s Account in the event of the
Participant’s death.

       

      (c) “Board” means the
Board of Directors of Granite Construction Incorporated.

       

      (d) “Bonus” means the
annual cash incentive compensation earned by the Participant, including, but not
limited to, (i) the cash bonus payable under the Granite Construction Profit
Sharing Cash Bonus Plan, if any and (ii) the excess cash incentive defined as
cash incentive that exceeds the Participant’s usual and customary annual cash
incentive, if any.

       

      (e) “Change in Control”
means the effective date of any one of the following events but only to the
extent that such change in control transaction is a change in the ownership or
effective control of the Company or a change in the ownership of a substantial
portion of the assets of the Company as defined in the regulations promulgated
under Section 409A of the Code:

       

      (i) an
acquisition, consolidation, or merger of the Company with or into any other
corporation or corporations, unless the stockholders of the Company retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the surviving or acquiring corporation or corporations;
or

       

      (ii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company
to a transferee other than a corporation or partnership controlled by the
Company or the stockholders of the Company; or

       

      (iii) a
transaction or series of related transactions in which stock of the Company
representing more than thirty percent (30%) of the outstanding voting power of
the Company is sold, exchanged, or transferred to any single person or
affiliated persons leading to a change of a majority of the members of the
Board.

       

      The Board
shall have final authority to determine, in accordance with Section 409A of the
Code, whether multiple transactions are related and the exact date on which a
Change in Control has been deemed to have occurred under subsections (i), (ii),
and (iii) above.

       

      (f) “Code” means the
Internal Revenue Code of 1986, as amended.

       

      (g) “Committee” means the
Compensation Committee of the Company’s Board of Directors and its delegatee, as
applicable.

       

      (h) “Company” means
Granite Construction Incorporated, a Delaware corporation, and any other
affiliated entity that is designated from time to time by the
Board.  As to a particular Participant, “Company” refers to the
corporate entity which is his or her employer. For purposes of
Sections 2(e) and (g), 5 and 10, “Company” refers only to Granite
Construction Incorporated.

       

      (i) “Disability” means
that an individual is (i) unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment that can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months or (ii) by reason of any medically
determinable physical o mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than three
months under an accident and health plan covering employees of the
Company.

       

      (j) “Equity Incentive
Plan” means the Granite Construction Incorporated Amended and Restated
1999 Equity Incentive Plan.

       

      (k) “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

       

      (l) “Identification Date”
means each December 31.

       

      (m) “Key Employee” means a
Participant who, on an Identification Date, is:

       

      (i) An
officer of the Company having annual compensation greater than the compensation
limit in Section 416(i)(1)(A)(i) of the Code, provided that no more than fifty
officers of the Company shall be determined to be Key Employees as of any
Identification Date;

       

      (ii) A five
percent owner of the Company; or

       

      (iii) A one
percent owner of the Company having annual compensation from the Company of more
than $150,000.

       

      If a
Participant is identified as a Key Employee on an Identification Date, then such
Participant shall be considered a Key Employee for purposes of the Plan during
the period beginning on the first April 1 following the Identification Date and
ending on the next March 31.

       

      (n) “Participant” means
each employee of the Company who is designated as such from time to time by the
Committee.

       

      (o) “Performance Units”
means an award granted pursuant to a Performance Unit Agreement under the Equity
Incentive Plan.

       

      (p) “Plan” means the
Granite Construction Incorporated Key Management Deferred Compensation Plan II,
as set forth in this instrument and as hereafter amended.

       

      (q) “Plan Year” means the
calendar year.

       

      (r) “Prior Plans” means
the Granite Construction Incorporated Key Management Deferred Compensation Plan
and the Granite Construction Incorporated Key Management Deferred Incentive
Compensation Plan.

       

      (s) “Retirement” means a
Participant’s Separation from Service at or after (i) age 55 with ten years of
service or (ii) age 65 with five years of service.

       

      (t) “Separation from
Service” means termination of employment with the Company, other than by
reason of death.

       

      (i) A
Participant shall not be deemed to have Separated from Service if the
Participant continues to provide services to the Company in a capacity other
than as an employee and if the former employee is providing services at an
annual rate that is fifty percent (50%) or more of the services rendered, on
average, during the immediately preceding three full calendar years of
employment with the Company (or if employed by the Company less than three
years, such lesser period).

       

      (ii) A
Participant shall be deemed to have Separated from Service if a Participant’s
service with the Company is reduced to an annual rate that is less than twenty
percent (20%) of the services rendered, on average, during the immediately
preceding three full calendar years of employment with the Company (or if
employed by the Company less than three years, such lesser period).

       

      (u) “Unforeseeable
Emergency” means a severe financial hardship to the Participant or
Beneficiary resulting from:

       

      (i) An
illness or accident of the Participant or Beneficiary, the Participant’s or
Beneficiary’s spouse, or the Participant’s or Beneficiary’s dependent (as
defined in Section 152(a) of the Code); or

       

      (ii) Loss of
the Participant’s or Beneficiary’s property due to casualty (including the need
to rebuild a home following damage to a home not otherwise covered by
insurance); or

       

      (iii) Other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant or Beneficiary.

       

      Hardship
shall not constitute an Unforeseeable Emergency under the Plan to the extent
that it is, or may be, relieved by:

       

      (i) Reimbursement
or compensation, by insurance or otherwise;

       

      (ii) Liquidation
of the Participant’s or Beneficiary’s assets to the extent that the liquidation
of such assets would not itself cause severe financial hardship. Such assets
shall include but not be limited to stock options, Company stock, and 401(k)
plan balances; or

       

      (iii) Cessation
of deferrals under the Plan.

       

      An
Unforeseeable Emergency under the Plan does not include (among other
events):

       

      (i) Sending a
child to college; or

       

      (ii) Purchasing
a home.

       

      3. Eligibility to
Participate.  The Committee will, from time to time, designate
Company employees to be Participants.  Each Participant selected by
the Committee must belong to a select group of management and highly compensated
employees of the Company.

       

      4. Vesting.  Each
Participant will always be 100% vested in his or her Account; provided, however,
that if a Participant is Separated from Service for “Cause” (as such term is
defined in Section 2.1(d) of the Equity Incentive Plan), the Participant will
forfeit all amounts other than his or her own Bonus and Performance Units
deferrals, if any.

       

      5. Additions to
Accounts.

       

      (a) Participant Bonus
Deferrals.  Each Participant may annually elect to defer the
receipt of a whole percentage (up to 100% or such other percentage as may be
determined by the Board) of his or her Bonus.

       

      (b) Participant Performance Unit
Deferrals.  Effective June 15, 2007, each Participant who is at
least 62 years of age on the last day of the performance period applicable to of
his or her Performance Units award may elect to defer the receipt of the 100% of
the stock payable under his or her Performance Unit agreement.

       

      (c) Participant Dividend
Deferrals.  Each Participant may annually elect to defer the
receipt of the full amount of the quarterly cash dividends that are paid to the
Participant under Section 13(a) of the Granite Construction Employee Stock
Ownership Plan.

       

      (d) Company Matching
Contributions.  Effective January 1, 2008, the Company will
annually credit each Participant's Account with an amount equal to six percent
of the first $100,000 a Participant defers under Section 5(a) of the Plan in the
applicable Plan Year.

       

      (e)   Hypothetical Investment
Experience.  For each Plan Year, the balance of each
Participant's Account (except that portion of the Account consisting of deferred
Performance Units awards) will be credited quarterly with hypothetical earnings
equal to one-quarter of the sum of the 30-day average of the Lehman Brothers
long term bond index determined as of the December 1 of the prior Plan Year,
plus 100 basis points, or as determined by the Committee.

       

      6. Deferral
Elections.  Each Participant must complete a deferral form for
each Plan Year.  To be effective, each such deferral form must satisfy
the following rules:

       

      (a) Content and Form
Requirements.  The deferral election form must be signed and
dated by the Participant, and must specify the form(s) of payment and date(s) of
distribution of the Participant’s Account.  A Participant’s deferral
election is irrevocable on the first day of the Plan Year following the Plan
Year in which it is made; provided, however, that a Participant’s election shall
be suspended for the remainder of any Plan Year in which the such Participant
receives a distribution on account of an Unforeseeable Emergency and thereafter
the Participant must submit a new deferral election to resume participant in the
Plan; provided further, however, that a Participant’s deferral election will
terminate on the date the Participant Separates from Service.

       

      (b) Timing of Deferral
Elections.  Except as provided in subsections (i) and (ii)
below, a Participant’s deferral election must be received by the Committee
before the beginning of the Plan Year in which the amount to be deferred is
earned.  Any such deferral election must be accompanied by an election
as to the time and form of payment of the Participant’s Account.

       

      (i) A
Participant’s election to defer Performance Units must be received by the
Committee at least six months prior to the date on which the Performance Units
are no longer subject to a substantial risk of forfeiture (the vesting date);
provided, however, that such election shall be made prior to the date that the
Performance Units are substantially certain to be paid or the number of
Performance Units is readily ascertainable.

       

      (ii) A
Participant’s deferral election may be received by the Committee both
(i) within 30 days of the date on which the employee is notified of
his or her eligibility to participate in the Plan, and (ii) before
the date on which the amount subject to the deferral election is
earned.

       

      (c) Special Distribution
Election on or before December 31, 2007.  Each Participant may
make a special distribution election to receive a distribution of their Accounts
in calendar year 2008 or later, provided that the distribution election is made
at least twelve months in advance of the newly elected distribution date (and
the previously scheduled distribution date, if any) and the election is made no
later than December 31, 2007.  An election made pursuant to this
Section 6(c) shall be subject to any special administrative rules imposed by the
Committee including rules intended to comply with Section 409A of the Code,
Notice 2005-1, A-19 and any subsequent guidance published
thereunder.  No election under this Section 6(c) shall (i) change the
payment date of any distribution otherwise scheduled to be paid in 2007 or cause
a payment to be paid in 2007, or (ii) be permitted after December 31,
2007.

       

      7. Distribution of
Accounts.

       

      (a) Distribution prior to
Retirement.  If a Participant Separates from Service prior to
the time such Participant is eligible for Retirement and not on account of his
or her death or Disability, the Participant will receive a distribution of the
balance of his or her Account in a lump sum at least six months (but not more
than seven months) following the date he or she Separates from
Service.

       

      (b) Form of Distribution Upon
Retirement.  Subject to the provisions of this Section 7
and Section 10, each Participant who Separates from Service on account of
Retirement, Disability or death will receive a distribution of the balance of
his or her Account in the form specified in the Participant’s election form,
which may be a lump sum cash payment and/or annual install­ments of
substantially equal amounts payable over a period of years certain not to exceed
ten.  Distribution elections made with respect to distributions made
on account of Retirement are irrevocable when made.

       

      (c) Form of In-Service
Distribution.

       

      (i) Subject
to the provisions of this Section 7 and Section 10, each Participant may elect
to receive one or more in-service distributions of his or her Accounts in the
form specified in the Participant’s election form, which may be a lump sum cash
payment and/or annual installments of substantial equal amounts payable over a
period of years certain not to exceed ten.  Any such in-service
distribution may be scheduled for any month and year prior to the Participant’s
Separation from Service (as described below) and must be scheduled at least two
years from the year in which the deferred amount is earned.  Any
in-service distribution will commence on the first day of the month following
the month designated by the Participant as the distribution
month.  Notwithstanding the foregoing, in-service distributions shall
be made only prior to Separation from Service.  To the extent that a
Participant Separates from Service, a distribution of the Participants
Account(s) shall be made in accordance with Section 7(a) or Section 7(b);
provided, however, that if an in-service distribution is an installment
distribution and if it is in pay status, then such in-service distribution
installments shall be paid in accordance with the Participant’s in-service
distribution election and not in accordance with Section 7(a) or Section
7(b).

       

      (ii) A
Participant who elects an in-service distribution may make a re-deferral
election with respect to the in-service distribution election if the following
conditions are met:  (1) the re-deferral election does not take effect
until twelve months after the date the re-deferral election is made, (2) the new
in-service distribution date is at least five years after the scheduled
distribution date in effect on the date the re-deferral election is made, and
(3) the re-deferral election is made not less than twelve months prior to the
scheduled distribution date in effect on the date the re-deferral election is
made.

       

      (d) Rules for Installment
Distributions.  If, at any time after installment distributions
have begun, the amount of any installment would be less than $1,000, the
remainder of the Participant’s Account will be distributed in a lump
sum.  For purposes of the Plan, installment payments shall be treated
as a single distribution under Section 409A of the Code.  Participant
Accounts will continue to be credited with hypothetical earnings under Section
5(e) while they are in pay status.

       

      (e) Special Rule for Separation
from Service for “Cause”.  If a Participant is Separated from
Service for “Cause” (as such term is defined in Section 2.1(d) of the Equity
Incentive Plan) and the Participant forfeits all amounts other than his or her
own Bonus and Performance Units deferrals, if any, then notwithstanding Sections
6 and 7, distribution of his or her Bonus and Performance Units deferrals, if
any, will be made in a lump sum at least six months (but not more than seven
months) following the date he or she Separates from Service.

       

      (f) Default Distribution
Election.  In the absence of an effective distribution election
as to the timing and/or form of distribution of a Participant’s Account,
including but limited to a Participant’s failure to make a distribution election
in accordance with Section 6(c) above, distribution of the Participant’s Account
shall be made in a lump sum at least six months (but not more than seven months)
following the date he or she Separates from Service for any reason.

       

      (g) Delayed Distribution to Key
Employees.  Notwithstanding any other provision of Section 7 to
the contrary, a distribution made on account of Separation from Service to a
Participant who is identified as a Key Employee shall be delayed for a minimum
of six months following the Participant’s Separation from
Service.  The determination of which Participants are Key Employees
shall be made by the Committee in its sole discretion in accordance with Section
2(m) of the Plan and Sections 416(i) and 409A of the Code and the regulations
promulgated thereunder.

       

      (h) Beneficiary
Designation.  Each Participant must designate a Beneficiary to
receive a distribution of his or her Account if the Participant dies before it
is distributed to him or her.  A Beneficiary designation form must be
signed, dated and delivered to the Committee to become effective.  In
the absence of a valid or effective Beneficiary designation, the Participant’s
surviving spouse will be his or her Beneficiary or if there is no such spouse,
the Participant’s children in equal shares, or if none, the Participant’s estate
will be his or her Beneficiary.

       

      (i) Performance Units
Distributions.  Notwithstanding any other provision of the Plan
to the contrary, that portion of the Participant’s Account consisting of
Performance Units deferrals shall be distributed in shares of the Company’s
Common Stock.

       

      (j) Hardship
Distributions.  In the event of an Unforeseeable Emergency, a
Participant may apply to the Committee for a distribution of part or all of his
or her Account prior to the date that it would otherwise be distributed under
this Section 7.  If the Committee approves such an application,
it will make such distribution as a lump sum cash payment. Payments due to a
Participant’s Unforeseeable Emergency shall be permitted only to the extent
reasonably required to satisfy the Participant’s need.

       

      (k) Prohibition on
Acceleration.  Notwithstanding any other provision of the Plan
to the contrary, no distribution shall be made from the Plan that would
constitute an impermissible acceleration of payment as defined in Section
409A(a)(3) of the Code and the regulations promulgated thereunder.

       

      8. Withholding.  The
Company will withhold from any Plan distribution all required federal, state,
local and other taxes and any other payroll deductions required.  Each
Participant agrees as a condition of participation in the Plan to have withheld
annually from his or her salary such amounts as are necessary to satisfy all
applicable taxes.

       

      9. Administration.  The
Plan is administered and interpreted by the Committee.  The Committee
has delegated to the Company’s Vice President and Director of Human Resources
its delegable responsibilities under the Plan.  The Committee (and its
delegatee) has the full and exclusive discretion to interpret and administer the
Plan.  All actions, interpretations and decisions of the Committee
(and its delegatee) are conclusive and binding on all persons, and will be given
the maximum possible deference allowed by law.  The Company agrees to
indemnify and hold harmless the members of the Committee and any employee to
whom the Committee delegates any responsibility under the Plan.

       

      10. Amendment or
Termination.

       

      (a) Amendment or
Suspension.                                                                The
Company reserves the right, in its sole and unlimited discretion, to amend the
Plan at any time, without prior notice to any Participant or
Beneficiary.  The Board may, at any time, suspend the
Plan.  Upon such suspension, Participants’ Accounts shall be paid in
accordance with Section 7 of the Plan.

       

      (b) Termination in
General.  The Board may terminate the Plan at any time and in
the Board’s discretion the Accounts of Participants may be distributed within
the period beginning twelve months after the date the Plan was terminated and
ending twenty-four months after the date the Plan was terminated, or pursuant to
Section 7, if earlier.  If the Plan is terminated and Accounts are
distributed, the Company shall terminate all account balance non-qualified
deferred compensation plans with respect to all participants and shall not adopt
a new account balance non-qualified deferred compensation plan for at least
three years after the date the Plan was terminated.

       

      (c) Change in
Control.  The Board, in its discretion, may terminate the Plan
thirty days prior to or within twelve months following a Change in Control and
distribute the Accounts of the Participants within the twelve-month period
following the termination of the Plan.  If the Plan is terminated and
Accounts are distributed, the Company shall terminate all substantially similar
non-qualified deferred compensation plans sponsored by the Company and all of
the benefits of the terminated plans shall be distributed within twelve months
following the termination of the plans.

       

      (d) Dissolution or
Bankruptcy.  The Board, in its discretion, may terminate the
Plan upon a corporate dissolution of the Company that is taxed under Section 331
of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C.
Section 503(b)(1(A), provided that the Participants’ Accounts are distributed
and included in the gross income of the Participants by the latest of (i) the
calendar year in which the Plan terminates or (ii) the first calendar year in
which payment of the Accounts is administratively practicable.

       

      11. Claims and Review
Procedure.

       

      (a) Informal Resolution of
Questions.  Any Participant or Beneficiary who has questions or
concerns about his or her benefits under the Plan is encouraged to communicate
with the Committee.  If this discussion does not give the Participant
or Beneficiary satisfactory results, a formal claim for benefits may be made
within one year of the event giving rise to the claim in accordance with the
procedures of this Section 11.

       

      (b) Formal Benefits Claim –
Review by Committee.  A Participant or Beneficiary may make a
written request for review of any matter concerning his or her benefits under
this Plan.  The claim must be addressed to the Committee, Key
Management Deferred Compensation Plan II, Granite Construction Incorporated, 585
West Beach Street, PO Box 50085, Watsonville, California 95077.  The
Committee shall decide the action to be taken with respect to any such request
and may require additional information if necessary to process the
request.  The Committee shall review the request and shall issue its
decision, in writing, no later than 90 days after the date the request is
received, unless the circumstances require an extension of time.  If
such an extension is required, written notice of the extension shall be
furnished to the person making the request within the initial 90-day period, and
the notice shall state the circumstances requiring the extension and the date by
which the Committee expects to reach a decision on the request.  In no
event shall the extension exceed a period of 90 days from the end of the initial
period.

       

      (c) Notice of Denied
Request.  If the Committee denies a request in whole or in
part, it shall provide the person making the request with written notice of the
denial within the period specified in Section 11(b) above.  The notice
shall set forth the specific reason for the denial, reference to the specific
Plan provisions upon which the denial is based, a description of any additional
material or information necessary to perfect the request, an explanation of why
such information is required, and an explanation of the Plan’s appeal procedures
and the time limits applicable to such procedures, including a statement of the
claimant’s right to bring a civil action under Section 502(a) of ERISA following
an adverse benefit determination on review.

       

      (d) Appeal to
Committee.

       

      (i) A person
whose request has been denied in whole or in part (or such person’s authorized
representative) may file an appeal of the decision in writing with the Committee
within 60 days of receipt of the notification of denial.  The appeal
must be addressed to:  Committee, Key Management Deferred Compensation
Plan II, Granite Construction Incorporated, 585 West Beach Street, PO Box 50085,
Watsonville, California 95077.  The Committee, for good cause shown,
may extend the period during which the appeal may be filed for another 60
days.  The appellant and/or his or her authorized representative shall
be permitted to submit written comments, documents, records and other
information relating to the claim for benefits.  Upon request and free
of charge, the applicant should be provided reasonable access to and copies of,
all documents, records or other information relevant to the appellant’s
claim.

       

      (ii) The
Committee’s review shall take into account all comments, documents, records and
other information submitted by the appellant relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.  The Committee shall not be restricted in its
review to those provisions of the Plan cited in the original denial of the
claim.

       

      (iii) The
Committee shall issue a written decision within a reasonable period of time but
not later than 60 days after receipt of the appeal, unless special circumstances
require an extension of time for processing, in which case the written decision
shall be issued as soon as possible, but not later than 120 days after receipt
of an appeal.  If such an extension is required, written notice shall
be furnished to the appellant within the initial 60-day period.  This
notice shall state the circumstances requiring the extension and the date by
which the Committee expects to reach a decision on the appeal.

       

      (iv) If the
decision on the appeal denies the claim in whole or in part, written notice
shall be furnished to the appellant.  Such notice shall state the
reason(s) for the denial, including references to specific Plan provisions upon
which the denial was based.  The notice shall state that the appellant
is entitled to receive, upon request and free of charge, reasonable access to,
and copies of, all documents, records, and other information relevant to the
claim for benefits.  The notice shall describe any voluntary appeal
procedures offered by the Plan and the appellant’s right to obtain the
information about such procedures.  The notice shall also include a
statement of the appellant’s right to bring an action under Section 502(a) of
ERISA.

       

      (v) The
decision of the Committee on the appeal shall be final, conclusive and binding
upon all persons and shall be given the maximum possible deference allowed by
law.

       

      (e) Exhaustion of
Remedies.  No legal or equitable action for benefits under the
Plan shall be brought unless and until the claimant has submitted a written
claim for benefits in accordance with Section 11(b) above, has been notified
that the claim is denied in accordance with Section 11(c) above, has filed a
written request for a review of the claim in accordance with Section 11(d)
above, and has been notified in writing that the Committee has affirmed the
denial of the claim in accordance with Section 11(d) above; provided, however,
that an action for benefits may be brought after the Committee has failed to act
on the claim within the time prescribed in Section 11(b) and Section 11(d),
respectively.

       

      12. Source of
Payments.

       

      (a) No Plan
Assets.  Subject to Section 12(b), all payments under the Plan
will be paid in cash from the general funds of the Company, no separate fund
will be established under the Plan, and the Plan will have no
assets.  Any right of any person to receive any payment under the Plan
is no greater than the right of any other unsecured creditor of the
Company.  The Plan constitutes a mere promise by the Company to pay
benefit payments in the future and is unfunded for purposes of both Title I
of ERISA and the Code.

       

      (b) Rabbi
Trust.  The Company will (i) establish a trust,
(ii) fund such trust in the event that it determines that a Change in
Control is imminent, and (iii) arrange to have such trust assume its
obligations to pay benefits under the Plan.  Any trust created by the
Company to assist it in meeting its obligations under the Plan will conform to
the terms of the model trust as described in Revenue Ruling 92-64.

       

      13. Inalienability.  A
Participant’s rights to benefits under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or the Participant’s
Beneficiary.  Notwithstanding the foregoing, the procedures
established by the Company for the determination of the qualified status of
domestic relations orders and for making distributions under qualified domestic
relations orders, as provided in Section 206(d) of ERISA, shall apply to the
Plan, to the extent pertinent.  Amounts awarded to an alternate payee
under a qualified domestic relations order shall be distributed in the form of a
lump sum distribution as soon as administratively feasible following the
determination of the qualified status of the domestic relations
order.

       

      14. Applicable
Law.  The provisions of the Plan will be construed,
administered and enforced in accordance with ERISA and, to the extent
applicable, the laws of the State of California.

       

      15. Severability.  If
any provision of the Plan is held invalid or unenforceable, its invalidity or
unenforceability will not affect any other provision of the Plan, and the Plan
will be construed and enforced as if such provision had not been
included.

       

      16. No Employment
Rights.  Neither the adoption nor maintenance of the Plan will
be deemed to constitute a contract of employment between the Company and any
employee, or to be a consideration for, or an inducement or condition of, any
employment.  Nothing contained in this Plan will be deemed to give an
employee the right to be retained in the service of the Company or to interfere
with the right of the Company to discharge, with or without cause, any employee
at any time.

       

      17. Status of Plan as ERISA “Top
Hat” Plan.  The Plan is intended to be an unfunded plan
maintained primarily for the purpose of providing deferred compensation for a
select group of management and highly compensated employees and will be
administered and construed to effectuate this intent.  Accordingly,
the Plan is subject to Title I of ERISA, but is exempt from Parts 2, 3
and 4 of such Title.

       

      

       

      18. Execution.

       

      IN
WITNESS WHEREOF, Granite Construction Incorporated, by its duly authorized
officers, has executed the Plan on the date(s) indicated below.

       

      GRANITE
CONSTRUCTION INCORPORATED

       

      By      /s/
William G.
Dorey                                                             

      Its   C.E.O.

       

      Dated
    11-20-07                                                             

       

      By     /s/
Michael
Futch                                                             

      Its

       

      Dated
    11/20/07                                                             

       

      

       

      APPENDIX

       

      Deferrals
and Company contributions made in Plan Years 2005 through 2007 are governed by
the terms and conditions of the Plan along with the terms and conditions set
forth in this Appendix.  Defined terms not defined in this Appendix A
but defined in the Plan will have the same definition as in the
Plan.

       

      1. Definitions.

       

      (a) “Compensation” means
“compensation” (as defined in the Company’s tax-qualified retirement plans) in
excess of $210,000 in 2005 (as indexed under Section 401(a)(17) of the Code) but
not in excess of $310,000 in 2005 (as indexed from time to time by the
Committee).

       

      (b) “Excess Cash
Incentive” means Compensation that exceeds a Participant’s usual and
customary Compensation (as determined by the Committee).

       

      2. Additions to
Accounts.

       

      (a) Participant Cafeteria Plan
Deferrals.  Effective for Plan Years 2005 through 2007, under
rules established by the Committee, each Participant may elect to defer the
amount payable to the Participant under the Company’s “cafeteria plan” under
Section 125 of the Code.

       

      (b) Participant Profit Sharing
Deferrals.  Effective for Plan Years 2005 through 2007, each
Participant may elect to defer an amount up to 85% of the Participant's cash
bonus (in 5% increments) payable under the Granite Construction Profit Sharing
Cash Bonus Plan.

       

      (c) Company Matching
Contributions.  Effective for Plan Years 2005 through 2007, the
Company will annually credit each Participant's Account with an amount equal to
a percentage of the Compensation deferred by the Participant, which percentage
will equal the matching contribution percentage determined under the Granite
Construction Profit Sharing and 401(k) Plan for such Plan Year.

       

      (d) Company Discretionary
Contributions.  Effective for Plan Years 2005 through 2007 in
which a Participant elects to defer a portion of his or her Compensation, the
Company will credit each Participant's Account with an amount equal to a
percentage of the Participant's Compensation that is equal to the total
discretionary contribution percentage determined by the Board for the Granite
Construction Profit Sharing and 401(k) Plan and the Granite Construction
Employee Stock Ownership Plan with respect to the Plan Year for which such
Compensation was deferred.

       

      (e) Hypothetical Investment
Experience.  Effective for Plan Years 2005 through 2007, the
balance of each Participant’s Excess Cash Incentive Compensation Account will be
credited quarterly with hypothetical earnings (or losses) equal to an amount
determined by the Committee as though such Account had been invested in shares
of Company common stock for such period.

       

      3. Deferral
Elections.

       

      (a) Content and Form
Requirements.  Effective for Plan Years 2005 through 2007, each
annual Bonus deferral must be for a minimum amount of at least $1,000 and must
be for a period of at least five years.  Also effective for Plan Years
2005 through 2007, a Participant may extend (but not reduce) the length of his
or her deferral period for five-year periods, so long as such extensions are
made at least twelve months prior to an otherwise schedule distribution
date.

       

      (b) Special Elections in 2005
regarding Deferrals.  In accordance with IRS Notice 2005-1,
A-20, (i) on or before March 15, 2005, Participants were permitted to defer
Compensation earned on or before December 31, 2005.  Elections made
pursuant to this Section 3(b) are irrevocable and subject to any special
administrative rules imposed by the Committee consistent with Section 409A of
the Code and Notice 2005-1, A-20.  No special election under this
Section 3(b) shall be permitted after December 31, 2005.

       

      (c) Distribution
Election.  Effective for Plan Years 2005 through 2007, any
deferral election under Section 6 of the Plan also shall include an election as
to the time and form of payment of the Compensation deferred and Company
contributions attributable to services performed in the Plan Year following the
Plan Year in which the distribution election is made.  Participants
shall be permitted to make a separate distribution election with respect to each
Plan Year.  A distribution election is irrevocable on the first day of
the Plan Year following the Plan Year in which it is made.

       

      (d) Special Distribution
Election on or before December 31, 2006.  Certain Participants
who are identified by the Committee in its sole discretion may make a special
distribution election to receive a distribution of their Accounts in calendar
year 2007 or later, provided that the distribution election is made at least
twelve months in advance of the newly elected distribution date (and the
previously scheduled distribution date, if any) and the election is made no
later than December 31, 2006.  An election made pursuant to this
Section 3(d) shall be subject to any special administrative rules imposed by the
Committee including rules intended to comply with Section 409A of the Code and
Notice 2005-1, A-19.  No election under this Section 3(d) shall (i)
change the payment date of any distribution otherwise scheduled to be paid in
2006 or cause a payment to be paid in 2006, or (ii) be permitted after December
31, 2006.

       

      4. Distribution of
Accounts.

       

      (a) Distribution upon
Retirement, Disability or Death.  Effective for Plan Years 2005
through 2007, if a Participant Separates from Service on account of Retirement,
Disability or death, the Participant will receive a distribution of the balance
of his or her Account, in accordance with his or her election described in
Section 7(b) of the Plan, at least six months (but not more than seven months)
following the date he or she Separates from Service; provided, however, that a
Participant may elect, in accordance with Section 6 of the Plan, to receive or
begin receiving his or her Account balance 13 months, 25 months, 37 months, 49
months or 61 months following the date he or she Separates from
Service.

       

      (b) Delayed Distribution of
Excess Cash Incentive Account.  Effective for Plan Years 2005
through 2007, notwithstanding any other provision of Section 7 of the Plan to
the contrary, a Participant’s Excess Cash Incentive Account must be deferred for
a minimum of five years and distribution of this account shall be delayed until
such minimum deferral period has been satisfied regardless of the Participant’s
distribution election.  If distribution of the Excess Cash Incentive
Account is delayed in accordance with this Section 4(b), then any payment that
otherwise would have been made during such five-year deferral period, shall be
made in one lump sum payment within thirty days following the date that is at
least five years following the date that the Excess Cash Incentive was
deferred.

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