The Option is not transferable otherwise than by will or the laws of descent and distribution, or pursuant to a “qualified domestic relations order” as defined by the Code, and may be exercised during Employee’s lifetime only by Employee, Employee’s guardian or legal representative or a transferee under a qualified domestic relations order. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option or of such rights contrary to the provisions hereof or the Plan, or upon the levy of any attachment or similar process upon the Option or such rights, the Option and such rights shall immediately become null and void. The Option may be exercised only while Employee remains an employee of the Company, subject to the following exceptions:
(a) If Employee’s employment with the Company terminates by reason of either death or Total Disability, any portion of the Option not previously exercisable and vested shall become fully exercisable and vested, and the entire unexercised portion of the Option may then be exercised by Employee (or Employee’s estate or the person who acquires the Option by will or the laws of descent and distribution or otherwise by reason of the death of Employee) at any time during the period ending on the earlier of three years following such termination or the Expiration Date (as defined below). (b) If Employee’s employment with the Company terminates by reason of normal retirement at or after age 65 or early retirement with the consent of the Company’s Compensation Committee (the “Committee”), the portion of the Option vested on the date of such retirement may be exercised by Employee at any time during the period ending on the Expiration Date (as defined below). If Employee dies after such retirement, the vested portion of the Option may be exercised by Employee’s estate (or the person who acquires the Option by will or the laws of descent and distribution or otherwise by reason of the death of the Employee) during the period ending on the earlier of the Expiration Date or the third anniversary of the date of Employee’s death. (c) If Employee’s employment with the Company terminates for any reason other than those set forth in subparagraphs (a) and (b) above, the portion of the Option vested at the time of such termination may be exercised by Employee at any time during the period of 30 days following such termination, or by Employee’s estate (or the person who acquires the Option by will or the laws of descent and distribution or otherwise by reason of the death of the Employee) during a period of six months following Employee’s death if Employee dies during such 30-day period. Notwithstanding any other provision of this Agreement, the Option shall not be exercisable after the expiration of ten years from the date of grant hereof (the “Expiration Date”). The purchase price of shares as to which the Option is exercised shall be paid in full at the time of exercise (i) in cash (including check, bank draft or money order payable to the order of the Company), (ii) by delivering to the Company shares of Stock having a fair market value equal to the purchase price, or (iii) by a combination of cash or Stock. Payment may also be made by delivery (including by facsimile transmission) to the Company of a properly executed and irrevocable Notice of Exercise form, coupled with irrevocable instructions to a broker-dealer to simultaneously sell a sufficient number of the shares as to which the Option is exercised and deliver directly to the Company that portion of the sales proceeds representing the exercise price and applicable minimum withholding taxes (“Cashless Exercise”) or by such other similar process approved by the Committee. No fraction of a share of Stock shall be issued by the Company upon exercise of an Option or accepted by the Company in payment of the purchase price thereof; rather, Employee shall provide a cash payment for such amount as is necessary to effect the issuance and acceptance of only whole shares of Stock. Unless and until a certificate or certificates representing such shares shall have been issued by the Company to Employee, Employee (or the person permitted to exercise the Option in the event of Employee’s death) shall not be or have any of the rights or privileges of a shareholder of the Company with respect to shares acquirable upon an exercise of the Option.
4. Withholding of Tax. Except when using the Cashless Exercise procedure, Employee shall deliver to the Company at the time of such exercise or disposition such amount of money or shares of Stock as the Company may require to meet its withholding obligation under applicable tax laws or regulations, and, if Employee fails to do so, the Company is hereby authorized to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income. Upon exercise of all or a portion of the Option, the Company is further authorized in its sole discretion to satisfy any such withholding requirement out of any cash or shares of Stock to be distributed to Employee upon such exercise. 5. Status of Stock. Notwithstanding any other provision of this Agreement, in the absence of an effective registration statement under the Securities Act of 1933, as amended (the “Act”), for issuance of the Stock acquirable upon exercise of the Option, or an available exemption from registration under the Act, issuance of shares of Stock acquirable upon exercise of the Option will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its best efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available upon an exercise of the Option, Employee (or the person permitted to exercise the Option in the event of Employee’s death or incapacity), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may require to assure compliance with applicable securities laws. Employee agrees that the shares of Stock, which Employee may acquire by exercising the Option, will not be sold or otherwise disposed of in any manner, which would constitute a violation of any applicable securities laws, whether federal, or state. Employee also agrees (a) that the certificates representing the shares of Stock purchased under the Option may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (b) that the Company may refuse to register the transfer of the shares of Stock purchased under the Option on the stock transfer records of the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law and (c) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under the Option. B. Dividend Equivalents. 1. Grant of Dividend Equivalents. The Company hereby grants to Employee in connection with the grant of the Option the number of Dividend Equivalents as are set forth in the Acceptance equal in value to dividends paid with respect to the number of shares of Stock underlying such Option, together with interest earned thereon, subject to the attainment of the Performance Goals set forth in paragraph B.4. 2. Non-transferable. Employee may not sell, transfer, pledge or assign Dividend Equivalents. 3. Peer Group. For purposes of this Agreement, the Company’s peer group (“Peer Group”) shall be comprised of three components: (a) the industry peer group companies set forth in Exhibit A; (b) companies in the S&P 500 Index; and (c) companies in the Morgan Stanley REIT Index; provided, that each of the foregoing Peer Group components shall be subject to equitable adjustment by the Committee in its sole discretion to the extent that one or more companies in any component grouping shall cease to maintain separate legal existence by reason of merger or legal dissolution or otherwise, or shall no longer be part of the applicable Index. For purposes of determining values earned for the Dividend Equivalents and Value Management Awards granted hereby, the components of the Peer Group will be given the following weightings: industry group 50%; S&P group 25%; and REIT Index group 25%.
4. Performance Goals. (a) The Performance Goals for the Dividend Equivalents granted hereby shall be comprised of: (i) an absolute measure of Total Shareholder Return equal to 5.5% compounded annually, based upon the Company’s Stock price and dividends paid (“Threshold Target”); and (ii) a relative measure of Total Shareholder Return, based upon the Company’s Total Shareholder Return compared against the Total Shareholder Return of the companies in the Peer Group. (b) The Performance Period for the Dividend Equivalents granted hereby shall commence on January 1, 2004 and shall end on December 31, 2008. (c) In order to be eligible to earn the dividends paid on the stock underlying the Option during any year (or prior year to the extent not yet earned) of the Performance Period (the “Dividends”), the compounded Total Shareholder Return for the Company as of December 31 for such year must meet or exceed the Threshold Target. (d) Once the Threshold Target is met at the end of any given year during the Performance Period, a percentage of the Dividends for such year, as well as a percentage of the Dividends for each prior year of the Performance Period to the extent not yet earned, shall be credited to a Memorandum Account on Employee’s behalf. The percentage of Dividends to be credited to Employee’s Memorandum Account shall be equal to the specified percentage corresponding to the identified percentile ranking with respect to each component of the Peer Group achieved by the Company during such year of the Performance Period, as set forth below: | 