PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2003 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
This INCENTIVE STOCK OPTION AGREEMENT (the "Option
Agreement"), dated as of the ____ day of ________________, 200_ (the "Grant
Date"), is between Pennsylvania Real Estate Investment Trust, a Pennsylvania
business trust (the "Trust"), and ____________________ (the "Optionee"), a key
employee of the Trust or one of its "Subsidiary Entities," as defined in the
Pennsylvania Real Estate Investment Trust 2003 Equity Incentive Plan (the
"Plan").
WHEREAS, the Trust desires to give the Optionee the
opportunity to purchase shares of beneficial interest in the Trust ("Shares") in
accordance with the provisions of the Plan, a copy of which is attached hereto;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. Grant of Option. The Trust hereby grants to the Optionee
the right and option (the "Option") to purchase all or any part of an aggregate
of ________ Shares. The Option is in all respects limited and conditioned as
hereinafter provided, and is subject in all respects to the terms and conditions
of the Plan now in effect and as it may be amended from time to time (but only
to the extent that such amendments apply to outstanding options). Such terms and
conditions are incorporated herein by reference, made a part hereof, and shall
control in the event of any conflict with any other terms of this Option
Agreement. The Option granted hereunder is intended to be an incentive stock
option ("ISO") meeting the requirements of the Plan and section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and not a nonqualified
stock option ("NQSO").
2. Exercise Price. The exercise price of the Shares covered by
this Option shall be $_______ per Share. It is the determination of the Trust's
Executive Compensation and Human Resources Committee (the "Committee") that on
the Grant Date the exercise price was not less than the greater of (i) 100%
[(110% for an Optionee who owns more than 10% of the total combined voting power
of all shares of stock of the Trust or of a Related Corporation - a
"More-Than-10% Owner")] of the "Fair Market Value" (as defined in the Plan) of a
Share, or (ii) the par value of a Share.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on ____ __,
20__ (the "Expiration Date"), which date is not more than 10 years [(five years
in the case of a More-Than-10% Owner)] from the Grant Date. This Option shall
not be exercisable on or after the Expiration Date.
4. Exercise of Option. The Optionee shall have the right to
purchase from the Trust, on and after the following dates, the following number
of Shares, provided the Optionee has not terminated his or her service as of the
applicable vesting date:
Date Installment
Becomes Exercisable Number of Option Shares
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________________________ _____ Shares
________________________ an additional _____ Shares
________________________ an additional _____ Shares
________________________ an additional _____ Shares
The Committee may accelerate any exercise date of the Option, in its discretion,
if it deems such acceleration to be desirable. Once the Option becomes
exercisable, it will remain exercisable until it is exercised or until it
terminates.
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Trust at its principal office, which is presently located
at 200 South Broad Street, Philadelphia, PA 19102-3803. The form of such notice
is attached hereto and shall state the election to exercise the Option and the
number of whole Shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; and shall be
accompanied by payment of the full exercise price of such Shares. Only full
Shares will be issued.
The exercise price shall be paid to the Trust -
(a) in cash, or by check (in a form acceptable to the
Committee), bank draft, or postal money order;
[THE COMMITTEE SHOULD SELECT WHICH, IF ANY, OF THE FOLLOWING
METHODS OF PAYMENT, AS SET FORTH IN BRACKETS, WILL BE PERMITTED IN ADDITION TO
(A):]
[(b) in Shares previously acquired by the Optionee; provided,
however, that such Shares have been held by the Optionee for such period of time
as required to be considered "mature" Shares for purposes of accounting
treatment;
(c) by delivering a properly executed notice of exercise of
the Option to the Trust and a broker, with irrevocable instructions to the
broker promptly to deliver to the Trust the amount of sale or loan proceeds
necessary to pay the exercise price of the Option; or
(d) in any combination of (a), (b) and (c).]
In the event the exercise price is paid, in whole or in part, with Shares, the
portion of the exercise price so paid shall be equal to the Fair Market Value of
the Shares surrendered on the date of exercise.
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Upon receipt of notice of exercise and payment, the Trust
shall deliver a certificate or certificates representing the Shares with respect
to which the Option is so exercised. The Optionee shall obtain the rights of a
shareholder upon the receipt of a certificate(s) representing such Shares.
Such certificate(s) shall be registered in the name of the
person so exercising the Option (or, if the Option is exercised by the Optionee
and if the Optionee so requests in the notice exercising the Option, shall be
registered in the name of the Optionee and the Optionee's spouse, jointly, with
right of survivorship), and shall be delivered as provided above to, or upon the
written order of, the person exercising the Option. In the event the Option is
exercised by any person after the death or "Disability" (as defined in Section
2(l) of the Plan) of the Optionee, the notice shall be accompanied by
appropriate proof of the right of such person to exercise the Option. All Shares
that are purchased upon exercise of the Option as provided herein shall be fully
paid and non-assessable.
6. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Optionee other than by
will or by the laws of descent and distribution. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee or, in the event
of his or her Disability, by his or her guardian or legal representative.
7. Termination of Employment. If the Optionee's employment
with the Trust and all Subsidiary Entities is terminated for any reason (other
than death or Disability) prior to the Expiration Date, this Option may be
exercised, to the extent of the number of Shares with respect to which the
Optionee could have exercised it on the date of such termination of employment,
or to any greater extent permitted by the Committee in its discretion, by the
Optionee at any time prior to the earlier of (i) the Expiration Date, or (ii)
three months after such termination of employment.
8. Disability. If the Optionee incurs a Disability during his
or her employment and, prior to the Expiration Date, the Optionee's employment
is terminated as a consequence of such Disability, this Option may be exercised,
to the extent of the number of Shares with respect to which the Optionee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee in its discretion, by the Optionee or
by the Optionee's legal representative at any time prior to the earlier of (i)
the Expiration Date, or (ii) one year after such termination of employment.
9. Death. If the Optionee dies during his or her employment
and prior to the Expiration Date, or if the Optionee's employment is terminated
for any reason (as described in ParagraphS 7 and 8) and the Optionee dies
following his or her termination of employment, but prior to the earliest of (i)
the Expiration Date, (ii) the expiration of the period determined under
Paragraph 7 or 8 (as applicable to the Optionee), or (iii) three months
following the Optionee's termination of employment, this Option may be
exercised, to the extent of the number of Shares with respect to which the
Optionee could have exercised it on the date of his or her death, or to any
greater extent permitted by the Committee in its discretion, by the Optionee's
estate, personal representative or beneficiary who acquired the right to
exercise this Option by bequest or inheritance or by reason of the Optionee's
death, at any time prior to the earlier of (i) the Expiration Date or (ii) one
year after the date of the Optionee's death.
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10. Disqualifying Disposition of Option Shares. The Optionee
agrees to give written notice to the Trust, at its principal office, if a
"disposition" of the Shares acquired through exercise of the Option granted
hereunder occurs at any time within two years after the Grant Date or within one
year after the transfer to the Optionee of such Shares. Optionee acknowledges
that if such disposition occurs, the Optionee generally will recognize ordinary
income as of the date the Option was exercised in an amount equal to the lesser
of (i) the Fair Market Value of the Shares on the date of exercise minus the
exercise price, or (ii) the amount realized on disposition of such Shares minus
the exercise price. For purposes of this Paragraph, the term "disposition" shall
have the meaning assigned to such term by section 424(c) of the Code.
11. Governing Law. This Option Agreement shall be governed by
the applicable Code provisions to the maximum extent possible. Otherwise, the
laws of the Commonwealth of Pennsylvania (without reference to the principles of
conflict of laws) shall govern the operation of, and the rights of the Optionee
under, the Plan and Options granted thereunder.
IN WITNESS WHEREOF, the Trust has caused this Incentive Stock
Option Agreement to be duly executed by its duly authorized officer, and the
Optionee has hereunto set his or her hand and seal, all as of the day and year
first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By:________________________
___________________________
Optionee
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2003 EQUITY INCENTIVE PLAN
Notice of Exercise of Incentive Stock Option
I hereby exercise the incentive stock option granted to me
pursuant to the Incentive Stock Option Agreement dated as of _____________ __,
200_, by Pennsylvania Real Estate Investment Trust (the "Trust"), with respect
to the following number of Shares, par value $1.00 per Share, covered by said
option:
Number of Shares to be purchased __________________
Purchase price per Share $_________________
Total purchase price $_________________
A. Enclosed is cash or my check, bank draft, or money order in
the amount of $________ in full/partial [CIRCLE ONE] payment for such Shares;
[SELECT B AND C IF SIMILAR SELECTIONS WERE MADE IN PARAGRAPH 5 OF THE AGREEMENT]
and/or
B. Enclosed is/are ________ Share(s) with a total fair market
value of $______ on the date hereof in full/partial [CIRCLE ONE] payment for
such Shares;
and/or
C. I have provided notice to ________ [INSERT NAME OF BROKER], a
broker, who will render full/partial [CIRCLE ONE] payment for such Shares.
[OPTIONEE SHOULD ATTACH TO THE NOTICE OF EXERCISE PROVIDED TO SUCH BROKER A
COPY OF THIS NOTICE OF EXERCISE AND IRREVOCABLE INSTRUCTIONS TO PAY TO THE TRUST
THE FULL/PARTIAL (AS ELECTED ABOVE) EXERCISE PRICE.]
Please have the certificate or certificates representing the
purchased Shares registered in the following name or names:* __________________,
and sent to _________________________________.
DATED: ____________________________, 200_ ____________________________
Optionee's Signature
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* Certificates may be registered in the name of the Optionee alone or in
the joint names (with right of survivorship) of the Optionee and his or
her spouse.