EXHIBIT 10.3
FORM OF
EMPLOYEE AND DIRECTOR INCENTIVE STOCK PLAN
OF
CORNERSTONE CORE PROPERTIES REIT, INC.
TABLE OF CONTENTS
Page
----
1. Purposes of the Plan and Definitions..................................... 1
1.1 Purposes.......................................................... 1
1.2 Definitions....................................................... 1
2. Eligible Persons......................................................... 3
3. Shares of Stock Subject to this Plan..................................... 3
4. Administration........................................................... 4
4.1 Committee......................................................... 4
4.2 Duration, Removal, Etc............................................ 4
4.3 Meetings and Actions of Committee................................. 4
4.4 Committee's Powers................................................ 4
4.5 Term of Plan...................................................... 5
5. Grant of Options......................................................... 5
5.1 Written Agreement................................................. 5
5.2 Annual $100,000 Limitation on ISOs................................ 5
6. Certain Terms and Conditions of Options and Other Awards................. 6
6.1 All Awards........................................................ 6
6.2 Terms and Conditions to Which Only NQOs Are Subject............... 8
6.3 Terms and Conditions to Which Only ISOs Are Subject............... 8
6.4 Surrender of Options.............................................. 9
7. Restricted Stock......................................................... 9
7.1 Grant............................................................. 9
7.2 Restrictions...................................................... 10
7.3 Dividends......................................................... 10
7.4 Forfeiture of Restricted Stock.................................... 10
8. Stock Appreciation Rights................................................ 10
9. Dividend Equivalent Rights............................................... 10
9.1 General........................................................... 10
9.2 Rights and Options................................................ 10
9.3 Payments.......................................................... 10
9.4 Termination of Employment......................................... 11
10. Compliance with Laws................................................. 11
11. Employment or Other Relationship..................................... 11
12. Amendment, Suspension and Termination of this Plan................... 11
13. Liability and Indemnification of the Committee....................... 11
14. Securities Law Legends............................................... 12
15. Severability......................................................... 12
16. Effective Date and Stockholder Approval.............................. 12
17. Miscellaneous........................................................ 12
17.1 Loans............................................................. 12
17.2 Forfeiture Provisions............................................. 12
17.3 Limitations Applicable to Section 16.............................. 13
17.4 Effect of Plan Upon Other Incentive and Compensation Plans........ 13
17.5 Section 83(b) Election Prohibited................................. 13
FORM OF
EMPLOYEE AND DIRECTOR INCENTIVE STOCK PLAN
OF
CORNERSTONE CORE PROPERTIES REIT, INC.
1. Purposes of the Plan and Definitions
1.1 Purposes. The purposes of the Employee and Director Incentive
Stock Plan (the "Plan") of Cornerstone Core Properties REIT, Inc. (the
"Company") are to:
(a) provide incentives to individuals chosen to receive
share-based awards because of their ability to improve operations and increase
profits;
(b) encourage selected persons to accept or continue
employment with the Company or any Advisor or Affiliate of the Company; and
(c) increase the interest of Directors in the Company's
welfare through their participation in the growth in value of the Company's
Stock.
To accomplish these purposes, this Plan provides a means whereby Employees
of the Company or any Advisor or Affiliate of the Company, Directors and other
enumerated persons may receive Awards.
1.2 Definitions. For purposes of this Plan, the following terms have
the following meanings:
"Advisor" means the Person or Persons, if any, appointed, employed or
contracted with by the Company responsible for directing or performing the
day-to-day business affairs of the Company, including any Person to whom the
Advisor subcontracts substantially all of such functions. The initial Advisor is
Cornerstone Advisors, LLC.
"Affiliate" means any Person (other than an Advisor), whose employees (as
such term is defined in the Form S-8 registration statement under the Securities
Act) are eligible to receive Awards under the Plan. The determination of whether
a Person is an Affiliate shall be made by the Committee acting in its sole and
absolute discretion.
"Applicable Laws" means the requirements relating to the administration of
Awards 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 of Stock
are listed or quoted and the applicable laws of any foreign country or
jurisdiction where Awards are, or will be, granted under the Plan.
"Articles of Incorporation" means the articles of incorporation of the
Company as the same may be amended from time to time.
"Award" means any award under this Plan, including any grant of Options,
Restricted Shares, Stock Appreciation Rights or Dividend Equivalent Rights.
"Award Agreement" means, with respect to each Award, the written agreement
executed by the Company and the Participant or other written document approved
by the Committee setting forth the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Cause," unless otherwise defined in an Employee's employment agreement,
means (i) gross negligence or willful misconduct, (ii) an uncured breach of any
of the Employee's material duties under his or her employment agreement, (iii)
fraud or other conduct against the material best interests of his or her
employer or the Company, or (iv) a conviction of a felony, if such conviction
has a material adverse effect on his or her employer. If "Cause" is otherwise
defined in an Employee's employment agreement, the definition in the employment
agreement shall be effective for purposes of the Plan with respect to the
Employee in question.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Committee" has the meaning given it in Section 4.1.
"Common Stock" or "Stock" means common shares of capital stock of the
Company, $0.001 par value per share.
"Company" has the meaning given it in Section 1.1.
"Director" means a person elected or appointed and serving as director of
the Company in accordance with the Articles of Incorporation and the Maryland
General Corporation Law.
"Dividend Equivalent Right" means an Award of rights pursuant to Section
9.
"Effective Date" has the meaning given it in Section 18.
"Employee" has the meaning ascribed to it for purposes of Section 3401(c)
of the Code and the Treasury Regulations adopted under that Section. An employee
includes an officer or a Director who is an employee of the Company.
"Employment Termination" means that a Participant has ceased, for any
reason and with or without Cause, to be an Employee or Director of, or a
consultant to, the Company, the Advisor or any Affiliate of the Company.
However, the term "Employment Termination" shall not include a Non-Employee
Director's ceasing to be a Director or a transfer of a Participant from the
Company to the Advisor or an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence duly authorized by the Company unless the
Committee has provided otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Exercise Notice" has the meaning given it in Section 6.1(f).
"Fair Market Value" means with respect to Stock:
(i) If the Stock is listed on any established stock exchange or a
national market system, including, without limitation, the NASDAQ National
Market System, the Fair Market Value of shares of Stock shall be the closing
sales price for the Stock, or the mean between the high bid and low asked prices
if no sales were reported, as quoted on such system or exchange (or, if the
Stock is listed on more than one exchange, then on the largest such exchange)
for the date the value is to be determined (or if there are no sales or bids for
such date, then for the last preceding business day on which there were sales or
bids), as reported in The Wall Street Journal or similar publication.
(ii) If the Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, or if there is no market for the
Stock, the Fair Market Value of the shares of Stock shall be determined in good
faith by the Committee, with reference to the Company's net worth, prospective
earning power, dividend-paying capacity and other relevant factors, including
the goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other enterprises in the same or similar lines of business.
"Grant Date" has the meaning given it in Section 6.1(d).
-2-
"Incentive Stock Option" or "ISO" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code, and any successor provision.
"Non-Employee Director" means a person who is a non-employee director as
defined in Rule 16b-3 or a person who is an outside director as defined in
Treasury Regulation 1.162-27(e)(3).
"Non-Qualified Share Option" or "NQO" means any Option that is not an
Incentive Stock Option.
"Option" means an option granted under Section 5.
"Participant" means an eligible person who is granted an Award.
"Person" means a corporation, partnership, trust, association or any other
entity.
"Plan" means this Employee and Director Incentive Stock Plan.
"Related Corporation" means a parent or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code.
"Restricted Shares" means an Award granted under Section 7.
"Rule 16b-3" means Rule 16b-3 adopted under Section 16(b) of the Exchange
Act or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rules 16b-3 refer to the corresponding
paragraphs or clauses of Rule 16b-3 as it exists at the Effective Date or the
comparable paragraph or clause of Rule 16b-3 or successor rule, as that
paragraph or clause may thereafter be amended.
"Section 16(b)" means Section 16(b) under the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Stock Appreciation Right" means an Award granted under Section 8.
"Ten Percent Stockholder" means any person who, at the time this
definition is being applied, owns, directly or indirectly (or is treated as
owning by reason of attribution rules currently set forth in Code Section 424 or
any successor statute), shares of the Company constituting more than 10% of the
total combined voting power of all classes of outstanding capital stock of the
Company or any Related Corporation.
2. Eligible Persons
Every person who, at or as of the Grant Date, is (a) a full-time
Employee of the Company, the Advisor or any Affiliate of the Company, (b) a
Director of the Company or a director of any Affiliate of the Company, or (c)
someone whom the Committee designates as eligible for an Award (other than for
Incentive Stock Options) because the person (i) performs bona fide consulting or
advisory services for the Company, the Advisor or any Affiliate of the Company
pursuant to a written agreement (other than services in connection with the
offer or sale of securities in a capital-raising transaction), and (ii) has a
direct and significant effect on the financial development of the Company or any
Affiliate of the Company, shall be eligible to receive Awards hereunder.
3. Shares of Stock Subject to this Plan
The total number of shares of Stock that may be issued under Awards
is a number of shares equal to ten percent (10%) of the Company's outstanding
Stock. The maximum number of shares of Stock with respect to which ISOs may be
granted under the Plan is 5,000,000. Such shares of Stock may consist, in whole
or in part, of authorized and unissued Stock or shares of Stock reacquired in
private transactions or open market purchases, but all shares of Stock issued
under the Plan, regardless of their source, shall be counted against the Stock
limitation. Any
-3-
shares of Stock that are retained by the Company upon exercise or settlement of
an Award in order to satisfy the exercise price in whole or in part, or to pay
withholding taxes due with respect to such exercise or settlement, shall be
treated as issued to the Participant and will thereafter not be available under
the Plan. Any shares of Stock subject to unexercised portions of Options granted
under the Plan which shall have been terminated, cancelled or that have expired
may again be subject to Options hereunder. The number of shares of Stock
reserved for issuance under this Plan is subject to adjustment in accordance
with the provisions for adjustment in Section 6.1.
4. Administration
4.1 Committee.
(a) In General. This Plan shall be administered by a committee
(the "Committee") appointed by the Board. The number of persons who shall
constitute the Committee shall be determined from time to time by a majority of
all the members of the Board; provided, however, that the Committee shall not
consist of fewer than two persons.
(b) Section 162(m). To the extent the Board desires to qualify
Awards granted under this Plan as "performance based compensation" within the
meaning of section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more "outside directors" as defined in Treasury Regulation
1.162-27(e)(3).
(c) Rule 16b-3. To the extent desirable to qualify
transactions under this Plan as exempt under Rule 16b-3, a Committee consisting
solely of two or more "non-employee directors" as defined in Rule 16b-3, must
approve such transactions.
4.2 Duration, Removal, Etc. The members of the Committee shall serve
at the pleasure of the Board, which shall have the power, at any time and from
time to time, to remove members from or add members to the Committee. Removal
from the Committee may be with or without cause. Any individual serving as a
member of the Committee shall have the right to resign from the Committee by
giving at least three days' prior written notice to the Board. The Board, and
not the remaining members of the Committee, shall have the power and authority
to fill vacancies on the Committee, however caused. The Board shall promptly
fill any vacancy that causes the number of members of the Committee to be fewer
than two or any other minimum number required to comply with Rule 16b-3 or
section 162(m) of the Code, (unless the Board expressly determines not to have
Awards under the Plan comply with Rule 16b-3 or section 162(m) of the Code,
respectively).
4.3 Meetings and Actions of Committee. The Board shall designate
which of the Committee members shall be the chairperson of the Committee. If the
Board fails to designate a chairperson for the Committee, the members of the
Committee shall elect one of the Committee members as chairperson, who shall act
as chairperson until he or she ceases to be a member of the Committee or until
the Board (or the Committee) elects a new chairperson. The Committee may make
any rules and regulations for the conduct of its business that are not
inconsistent with this Plan, the Articles of Incorporation, the Bylaws of the
Company or Applicable Laws.
4.4 Committee's Powers. Subject to the express provisions of this
Plan, the Committee shall have the authority, in its sole discretion:
(a) to adopt, amend and rescind administrative and
interpretive rules and regulations relating to the Plan;
(b) to determine the eligible persons to whom, and the time or
times at which, Awards shall be granted;
(c) to determine the number of shares of Stock that shall be
the subject of each Award;
-4-
(d) to determine the terms and provisions of each Award
Agreement (which need not be identical) and any amendments thereto, including
provisions defining or otherwise relating to:
(i) the period or periods and extent of exercisability
of any Option or Stock Appreciation Right;
(ii) the methods by which the exercise price of an
Option may be paid, the form of payment, including, without limitation, cash,
Stock, or other property (including "cashless exercise" arrangements), and the
methods by which Stock shall be delivered or deemed to be delivered to
Participants; provided, however, that if Stock is used to pay the exercise price
of an Option, such Stock must have been held by the Participant for at least six
months;
(iii) the extent to which the transferability of shares
of Stock issued or transferred pursuant to any Award is restricted;
(iv) the effect of Employment Termination on an Award;
and
(v) the effect of approved leaves of absence;
(e) to accelerate the time of exercisability of any Option,
Dividend Equivalent Right or Stock Appreciation Right;
(f) to construe the respective Award Agreements and the Plan;
(g) to make determinations of the Fair Market Value of shares
of Stock;
(h) to waive any provision, condition or limitation set forth
in an Award Agreement;
(i) to delegate its duties under the Plan to such agents as it
may appoint from time to time; provided, however, that the Committee may not
delegate its duties with respect to making or exercising discretion with respect
to Awards to eligible persons if such delegation would cause Awards not to
qualify for the exemptions provided by Rule 16b-3 or section 162(m) of the Code
(unless the Board expressly determines not to have Awards under the Plan comply
with Rule 16b-3 or section 162(m) of the Code, respectively); and
(j) to make all other determinations, perform all other acts
and exercise all other powers and authority necessary or advisable for
administering the Plan, including the delegation of those ministerial acts and
responsibilities as the Committee deems appropriate.
The Committee may discriminate among Eligible Participants and
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Plan. The Committee may correct any defect, supply
any omission or reconcile any inconsistency in the Plan, in any Award or in any
Award Agreement in the manner and to the extent it deems necessary or desirable
to implement the Plan, and the Committee shall be the sole and final judge of
that necessity or desirability. The determinations of the Committee on the
matters referred to in this Section 4.4 shall be final and conclusive.
4.5 Term of Plan. No Awards shall be granted under this Plan after
10 years from the Effective Date of this Plan.
5. Grant of Options
5.1 Written Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify whether each Option it evidences is
an NQO or an ISO.
5.2 Annual $100,000 Limitation on ISOs. To the extent that the
aggregate Fair Market Value of shares of Stock with respect to which ISOs first
become exercisable by a Participant in any calendar year exceeds $100,000,
taking into account ISOs granted under this Plan and any other plan of the
Company or any Related
-5-
Corporation, the Options covering such additional shares of Stock becoming
exercisable in that year shall cease to be ISOs and thereafter be NQOs. For this
purpose, the Fair Market Value of shares of Stock subject to Options shall be
determined as of the date the Options were granted. In reducing the number of
Options treated as ISOs to meet this $100,000 limit, the most recently granted
Options shall be reduced first.
6. Certain Terms and Conditions of Options and Other Awards
Each Option shall be designated as an ISO or an NQO and shall be
subject to the terms and conditions set forth in Section 6.1. Notwithstanding
the foregoing, the Committee may provide for different terms and conditions in
any Award Agreement or amendment thereto as provided in Section 4.4.
6.1 All Awards. All Options and other Awards shall be subject to the
following terms and conditions:
(a) Changes in Capital Structure. If the number of outstanding
shares of Stock is increased by means of a share dividend payable in shares of
Stock, a share split or other subdivision or by a reclassification of Stock,
then, from and after the record date for such dividend, subdivision or
reclassification, the number of shares of Stock and class of Stock subject to
this Plan and each outstanding Award shall be increased in proportion to such
increase in outstanding Stock and the then-applicable exercise price of each
outstanding Award shall be correspondingly decreased. If the number shares of
outstanding Stock is decreased by means of a share split or other subdivision or
by a reclassification of Stock, then, from and after the record date for such
split, subdivision or reclassification, the number of shares of Stock and class
of Stock subject to this Plan and each outstanding Award shall be decreased in
proportion to such decrease in outstanding Stock and the then-applicable
exercise price of each outstanding Award shall be correspondingly increased.
(b) Certain Corporate Transactions. In the case of any
reclassification or change of outstanding Stock issuable upon exercise of an
outstanding Award or in the case of any consolidation or merger of the Company
with or into another entity (other than a merger in which the Company is the
surviving entity and which does not result in any reclassification or change in
the then-outstanding Stock) or in the case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company or such successor or purchasing entity,
as the case may be, shall make lawful and adequate provision whereby the holder
of each outstanding Award shall thereafter have the right, on exercise of such
Award, to receive the kind and amount of securities, property and/or cash
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of securities issuable upon exercise of
such Award immediately before such reclassification, change, consolidation,
merger, sale or conveyance. Such provision shall include adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 6.1(a). Notwithstanding the foregoing, if such a transaction occurs, in
lieu of causing such rights to be substituted for outstanding Awards, the
Committee may, upon 20 days' prior written notice to Participants in its sole
discretion: (i) shorten the period during which Awards are exercisable, provided
they remain exercisable, to the extent otherwise exercisable, for at least 20
days after the date the notice is given, or (ii) cancel an Award upon payment to
the Participant in cash, with respect to each Award to the extent then
exercisable, of an amount which, in the sole discretion of the Committee, is
determined to be equivalent to the amount, if any, by which the Fair Market
Value (at the effective time of the transaction) of the consideration that the
Participant would have received if the Award had been exercised before the
effective time exceeds the exercise price of the Award. The actions described in
this Section 6.1(b) may be taken without regard to any resulting tax
consequences to the Participant.
(c) Grant Date. Each Award Agreement shall specify the date as
of which it shall be effective (the "Grant Date").
(d) Time of Exercise; Vesting. Awards may, in the sole
discretion of the Committee, be exercisable or may vest, and restrictions may
lapse, as the case may be, at such times and in such amounts as may be specified
by the Committee in the grant of the Award.
(e) Nonassignability of Rights. Awards shall not be
transferable other than with the consent of the Committee (which consent will
not be granted in the case of ISOs unless the conditions for transfer of
-6-
ISOs specified in the Code have been satisfied) or by will or the laws of the
descent and distribution. Awards requiring exercise shall be exercisable only by
the Participant, assignees that were approved by the Committee, executors,
administrators or beneficiaries of the Participant (who are the permitted
transferees hereunder), guardians or members of a committee for an incompetent
Participant, or similar persons duly authorized by law to administer the estate
or assets of a Participant.
(f) Notice and Payment. To the extent it is exercisable, an
Award shall be exercisable only by written or recorded electronic notice of
exercise, in the manner specified by the Committee from time to time, delivered
to the Company or its designated agent during the term of the Award (the
"Exercise Notice"). The Exercise Notice shall: (i) state the number of shares of
Stock with respect to which the Award is being exercised; (ii) be signed by the
holder of the Award or by the person authorized to exercise the Award pursuant
to Section 6.1(e); and (iii) include such other information, instruments and
documents as may be required to satisfy any other condition to exercise set
forth in the Award Agreement. Except as provided below, payment in full, in cash
or check, shall be made for all shares of Stock purchased at the time notice of
exercise of an Award is given to the Company. The proceeds of any payment shall
constitute general funds of the Company. At the time an Award is granted or
before it is exercised, the Committee, in the exercise of its sole discretion,
may authorize any one or more of the following additional methods of payment:
(i) for all Participants other than officers and
Directors, acceptance of each such Participant's full recourse promissory note
for some or all (to the extent permitted by law) of the exercise price of the
Stock being acquired, payable on such terms and rate of interest as determined
by the Committee, and secured in such manner, if at all, as the Committee shall
approve, including, without limitation, by a security interest in the Stock
which are the subject of the Award or other securities;
(ii) for all Participants, delivery by each such
Participant of Stock already owned by such Participant for all or part of the
exercise price of the Award being exercised, provided that the Fair Market Value
of such Stock is equal on the date of exercise to the exercise price of the
Award being exercised, or such portion thereof as the Participant is authorized
to pay and elects to pay by delivery of such shares of Stock;
(iii) for all Participants, surrender by each such
Participant, or withholding by the Company from the Stock issuable upon exercise
of the Award, of a number of shares of Stock subject to the Award being
exercised with a Fair Market Value equal to some or all of the exercise price of
the Stock being acquired, together with such documentation as the Committee and
the broker, if applicable, shall require; or
(iv) for all Participants, payment may be made pursuant
to a cashless exercise arrangement approved by the Committee.
If the exercise price is satisfied in whole or in part by the delivery of
Stock pursuant to paragraph (ii) above, and provided that all such Stock have
been held by the Participant for at least six months, the Committee may issue
the Participant an additional Option, with terms identical to those set forth in
the option agreement governing the exercised Option, except for the exercise
price which shall be the fair market value used for such delivery and the number
of shares of Stock subject to such additional Option shall be the number of
shares of Stock so delivered.
-7-
(g) Termination of Employment from the Company, the Advisor or
any Affiliate of the Company; Removal of a Director for Cause. Any Award or
portion thereof which has not vested on or before the date of a Participant's
Employment Termination shall expire on the date of such Employment Termination.
As to an Award or portion thereof that has vested by the time of Employment
Termination, the Committee shall establish, in respect of each Award when
granted, the effect of an Employment Termination on the rights and benefits
thereunder and in so doing may, but need not, make distinctions based upon the
cause of termination (such as retirement, death, disability or other factors) or
which party effected the termination (the employer or the Employee). All Awards
granted to a Director whether or not an Employee will lapse on the date the
Director ceases to be a Director of the Company as a result of his removal for
Cause. Notwithstanding any other provision in this Plan or the Award Agreement,
the Committee may decide in its discretion at the time of any Employment
Termination (or within a reasonable time thereafter) to extend the exercise
period of an Award (but not beyond the period specified in Section 6.2(b) or
6.3(b), as applicable) and not decrease the number of shares of Stock covered by
the Award with respect to which the Award is exercisable or vested. A transfer
of a Participant from the Company to the Advisor or an Affiliate or vice versa,
or from one Affiliate to another, or a leave of absence duly authorized by the
Company, shall not be deemed an Employment Termination or a break in continuous
employment unless the Committee has provided otherwise.
(h) Death, Disability or Retirement. Any Award or portion
thereof which has not vested on or before the date of the Participant's death,
disability or retirement shall expire on the date of such Participant's death,
disability or retirement. As to an Award or portion thereof that has vested by
the date of death, disability or retirement of the Participant, such Awards or
portions thereof must be exercised within two years of the date of the
Participant's death, disability or retirement by the Participant or a person
authorized under this Plan to exercise such Award.
(i) Other Provisions. Each Award Agreement may contain such
other terms, provisions and conditions not inconsistent with this Plan, as may
be determined by the Committee, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify such Option
as an "incentive stock option" within the meaning of Section 422 of the Code.
(j) Withholding and Employment Taxes. At the time of exercise
of an Award, the lapse of restrictions on an Award or a disqualifying
disposition of shares of Stock issued under an ISO (within the meaning of
Section 6.3(c)), the Participant shall remit to the Company in cash all
applicable Federal and state withholding and employment taxes. If and to the
extent authorized and approved by the Committee in its sole discretion, a
Participant may elect, by means of a form of election to be prescribed by the
Committee, to have shares of Stock which are acquired upon exercise of an Award
withheld by the Company or tender other shares of Stock owned by the Participant
to the Company at the time that the amount of such taxes is determined, in order
to pay the amount of such tax obligations, subject to any limitations as the
Committee determines are necessary or appropriate. Any shares of Stock so
withheld or tendered shall be valued by the Company as of the date they are
withheld or tendered. If shares of Stock are tendered to satisfy such
withholding tax obligation, the Committee may issue the Participant an
additional Option, with terms identical to those set forth in the option
agreement governing the Option exercised, except that the exercise price shall
be the Fair Market Value used by the Company in accepting the tender of shares
of Stock for such purpose and the number of shares of Stock subject to the
additional Option shall be the number of shares of Stock tendered by the
Participant.
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options
granted under this Plan which are designated as NQOs shall be subject to the
following terms and conditions:
(a) Exercise Price. The exercise price of an NQO shall be
determined by the Committee; provided, however, that the exercise price of an
NQO shall not be less than the Fair Market Value of the Stock subject to the
Option on the Grant Date.
(b) Option Term. Unless the Committee specifies an earlier
expiration date at the Grant Date, each NQO shall expire 10 years after the
Grant Date.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
-8-
(a) Exercise Price. The exercise price of an ISO shall be
determined in accordance with the applicable provisions of the Code and shall in
no event be less than the Fair Market Value of the Stock covered by the ISO at
the Grant Date; provided, however, that the exercise price of an ISO granted to
a Ten Percent Stockholder shall not be less than 110% of such fair market value.
(b) Option Term. Unless an earlier expiration date is
specified by the Committee at the Grant Date, each ISO shall expire 10 years
after the Grant Date; provided, however, that an ISO granted to a Ten Percent
Stockholder shall expire no later than five years after the Grant Date.
(c) Disqualifying Dispositions. If shares of Stock acquired by
exercise of an ISO are disposed of within two years after the Grant Date or
within one year after the transfer of the Stock to the optionee, the holder of
the Stock immediately before the disposition shall promptly notify the Company
in writing of the date and terms of the disposition, shall provide such other
information regarding the disposition as the Company may reasonably require and
shall pay the Company any withholding and employment taxes which the Company in
its sole discretion deems applicable to the disposition.
(d) Termination of Employment. Notwithstanding Section 6.1(i),
all vested ISOs must be exercised within three months of the Employment
Termination of the optionee, or at any time otherwise permissible in the case of
a Participant who dies within three months of Employment Termination, unless
such Employment Termination is due to the employee's being disabled (within the
meaning of Section 22(e)(3) of the Code), in which case the ISO shall be
exercised within one year of the Employment Termination, notwithstanding Section
6.1(i).
6.4 Surrender of Options. The Committee, acting in its sole
discretion, may include a provision in an Award Agreement allowing the optionee
to surrender the Option covered by the agreement, in whole or in part in lieu of
exercise in whole or in part, on any date that the Fair Market Value of the
Stock subject to the Option exceeds the exercise price and the Option is
exercisable (to the extent being surrendered). The surrender shall be effected
by the delivery of the Award Agreement, together with a signed statement which
specifies the number of shares of Stock as to which the optionee is surrendering
the Option, together with a request for such type of payment. Upon such
surrender, the optionee shall receive (subject to any limitations imposed by
Rule 16b-3), at the election of the Committee, payment in cash or shares of
Stock, or a combination of the two, equal to (or equal in Fair Market Value to)
the excess of the Fair Market Value of the shares of Stock covered by the
portion of the Option being surrendered on the date of surrender over the
exercise price for such shares of Stock. The Committee, acting in its sole
discretion, shall determine the form of payment, taking into account such
factors as it deems appropriate. To the extent necessary to satisfy Applicable
Laws, the Committee may terminate an optionee's rights to receive payments in
cash for fractional shares of Stock. Any Award Agreement providing for such
surrender privilege shall also incorporate such additional restrictions on the
exercise or surrender of Options as may be necessary to satisfy Applicable Law.
7. Restricted Stock
Restricted Stock shall be subject to the following terms and
conditions:
7.1 Grant. The Committee may grant one or more Awards of Restricted
Stock to any Participant. Each Award of Restricted Stock shall specify the
number of shares of Stock to be issued to the Participant, the date of issuance
and the restrictions imposed on the shares of Stock including the conditions of
release or lapse of such restrictions. Unless the Committee provides otherwise,
the restrictions shall not lapse earlier than six months after the date of the
Award. Pending the lapse of restrictions, certificates evidencing Restricted
Stock (if any) shall bear a legend referring to the restrictions and shall be
held by the Company. Prior to the issuance of any Restricted Stock, the
Participant receiving such Restricted Stock shall pay to the Company an amount
of cash equal to the exercise price of the Restricted Stock, which at a minimum
shall be the par value per share of Restricted Stock multiplied by the number of
shares of Restricted Stock to be issued. The exercise price of Restricted Stock
shall be stated in the applicable Award Agreement. Upon the issuance of
Restricted Stock, the Participant may be required to furnish such additional
documentation or other assurances as the Committee may require in order to
enforce the restrictions applicable thereto.
-9-
7.2 Restrictions. Except as specifically provided elsewhere in this
Plan or the Award Agreement regarding Restricted Stock, Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until the restrictions have lapsed and the
rights to the shares of Restricted Stock have vested. The Committee may in its
sole discretion provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions, in whole or in part, based on
service, performance or such other factors or criteria as the Committee may
determine.
7.3 Dividends. Unless otherwise determined by the Committee, cash
dividends with respect to Restricted Stock shall be paid to the recipient of the
Award of Restricted Stock on the normal dividend payment dates, and dividends
payable in shares of Stock shall be paid in the form of Restricted Stock having
the same terms as the Restricted Stock upon which such dividend is paid. Each
Award Agreement for Awards of Restricted Stock shall specify whether and, if so,
the extent to which the Participant shall be obligated to return to the Company
any cash dividends paid with respect to any shares of Restricted Stock which are
subsequently forfeited.
7.4 Forfeiture of Restricted Stock. Except to the extent otherwise
provided in the governing Award Agreement, when a Participant's Employment
Termination occurs, the Participant shall automatically forfeit all Restricted
Stock still subject to restriction.
8. Stock Appreciation Rights
The Committee may grant Stock Appreciation Rights to eligible
persons. A Stock Appreciation Right shall entitle its holder to receive from the
Company, at the time of exercise of the right, an amount in cash equal to (or,
at the Committee's discretion, shares of Stock equal in Fair Market Value to)
the excess of the Fair Market Value (at the date of exercise) of a share of
Stock over a specified price fixed by the Committee in the governing Award
Agreement multiplied by the number of shares of Stock as to which the holder is
exercising the Stock Appreciation Right. The specified price fixed by the
Committee shall not be less than the Fair Market Value of the shares of Stock on
the Grant Date of the Stock Appreciation Right. Stock Appreciation Rights may be
granted in tandem with any previously or contemporaneously granted Option or
independent of any Option. The specified price of a tandem Stock Appreciation
Right shall be the exercise price of the related Option. Any Stock Appreciation
Rights granted in connection with an ISO shall contain such terms as may be
required to comply with Section 422 of the Code.
9. Dividend Equivalent Rights
9.1 General. The Committee shall have the authority to grant
Dividend Equivalent Rights to Participants upon such terms and conditions as it
shall establish, subject in all events to the following limitations and
provisions of general application set forth in this Plan. Each Dividend
Equivalent Right shall entitle a holder to receive, for a period of time to be
determined by the Committee, a payment equal to the periodic dividends declared
and paid by the Company on one share of Stock. If the Dividend Equivalent Right
relates to a specific Option, the period shall not extend beyond the earliest of
the date the Option is exercised, the date any Stock Appreciation Right related
to the Option is exercised, or the expiration date set forth in the Option.
9.2 Rights and Options. Each Dividend Equivalent Right may relate to
a specific Option granted under this Plan and may be granted to the optionee
either concurrently with the grant of such Option or at such later time as
determined by the Committee, or each Dividend Equivalent Right may be granted
independent of any Option.
9.3 Payments. The Committee shall determine at the time of grant
whether payment pursuant to a Dividend Equivalent Right shall be immediate or
deferred and if immediate, the Company shall make payments pursuant to each
Dividend Equivalent Right concurrently with the payment of the periodic
dividends to holders of Common Shares. If deferred, the payments shall not be
made until a date or the occurrence of an event specified by the Committee and
then shall be made within 30 days after the occurrence of the specified date or
event, unless the Dividend Equivalent Right is forfeited under the terms of the
Plan or applicable Award Agreement. The Committee shall also determine in its
sole discretion whether any portion of any payment shall be made in shares of
Stock.
-10-
9.4 Termination of Employment. In the event of Employment
Termination, any Dividend Equivalent Right held by such Participant on the date
of Employment Termination shall automatically be forfeited, unless otherwise
expressly provided by the Committee.
10. Compliance with Laws
This Plan, the granting and vesting of Awards under this Plan, the
issuance and delivery of Stock, and the payment of money or other consideration
allowable under this Plan or under Awards awarded hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including, but not limited to, state and federal securities laws and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Committee, the
Board or the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Committee, the Board
or the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan shall be deemed amended to the extent necessary to conform to such laws,
rules and regulations. Nothing in this Plan or in any Award or Award Agreement
shall require the Company to issue any Stock with respect to any Award if, in
the opinion of counsel for the Company, that issuance could constitute a
violation of any Applicable Laws. As a condition to the grant or exercise of any
Award, the Company may require the Participant (or, in the event of the
Participant's death, the Participant's legal representatives, heirs, legatees or
distributees) to provide written representations concerning the Participant's
(or such other person's) intentions with regard to the retention or disposition
of the Stock covered by the Award and written covenants as to the manner of
disposal of such Stock as may be necessary or useful to ensure that the grant,
exercise or disposition thereof will not violate the Securities Act, any other
law or any rule of any applicable securities exchange or securities association
then in effect. The Company shall not be required to register any Stock under
the Securities Act or register or qualify any Stock under any state or other
securities laws.
11. Employment or Other Relationship
Nothing in this Plan or any Award shall in any way interfere with or
limit the right of the Company, the Advisor or any Affiliate of the Company to
terminate any Participant's employment or status as a consultant or Director at
any time, nor confer upon any Participant any right to continue in the employ
of, or as a Director or consultant of, the Company, the Advisor or any Affiliate
of the Company.
12. Amendment, Suspension and Termination of this Plan
The Board may at any time amend, suspend or discontinue this Plan
provided that such amendment, suspension or discontinuance meets the
requirements of Applicable Laws, including without limitation, the requirements
for stockholder approval. Notwithstanding the above, an amendment, alteration,
suspension or discontinuation shall not be made if it would impair the rights of
any Participant under any Award previously granted, without the Participant's
consent, except to conform this Plan and Awards granted to the requirements of
Applicable Laws. The provisions of the Plan relating to Awards for Non-Employee
Directors may not be amended more than once each six months.
13. Liability and Indemnification of the Committee
No person constituting, or member of the group constituting, the
Committee shall be liable for any act or omission on such person's part,
including but not limited to the exercise of any power or discretion given to
such member under this Plan, except for those acts or omissions resulting from
such member's gross negligence or willful misconduct. The Company shall
indemnify each present and future person constituting, or member of the group
constituting, the Committee against, and each person or member of the group
constituting the Committee shall be entitled without further act on his or her
part to indemnity from the Company for, all expenses (including the amount of
judgments and the amount of approved settlements made with a view to the
curtailment of costs of
-11-
litigation) reasonably incurred by such person in connection with or arising out
of any action, suit or proceeding to the fullest extent permitted by law and by
the Articles of Incorporation and Bylaws of the Company.
14. Securities Law Legends
Certificates of shares of Stock and Restricted Stock, if issued, may
have the following legend and statements of other applicable restrictions
endorsed thereon:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE SOLE
DISCRETION THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER
OR OTHER DISPOSITION WILL NOT VIOLATE ANY APPLICABLE FEDERAL OR
STATE SECURITIES LAWS.
This legend shall not be required for any shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
15. Severability
If any provision of this Plan is held to be illegal or invalid for
any reason, that illegality or invalidity shall not affect the remaining
portions of the Plan, but such provision shall be fully severable and the Plan
shall be construed and enforced as if the illegal or invalid provision had never
been included in this Plan. Such an illegal or invalid provision shall be
replaced by a revised provision that most nearly comports to the substance of
the illegal or invalid provision. If any of the terms or provisions of this Plan
or any Award Agreement conflict with the requirements of Applicable Laws, those
conflicting terms or provisions shall be deemed inoperative to the extent they
conflict with Applicable Law.
16. Effective Date and Stockholder Approval
This Plan was originally approved by the Company's Board on December
6, 2004. It was approved in that form by the holder of the Company's voting
Stock on December 6, 2004 (the "Effective Date").
17. Miscellaneous
17.1 Loans. An employer may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Award
granted under this Plan. The terms and conditions of any such loan shall be set
by the board of directors of the employer.
17.2 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards granted under the Plan,
the Committee shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of an Award
Agreement, or by separate written instrument, that (i) any proceeds, gains or
other economic benefit actually or constructively received by a Participant upon
the receipt or exercise of the Award, or upon the receipt or resale of any Stock
underlying such Award, must be paid to the Company, and (ii) the Award shall
terminate and any unexercised portion of such Award (whether or not vested)
shall be forfeited, if (a) Employment Termination occurs prior to a specified
date, or within a specified time period following receipt or exercise of the
Award, or (b) the Participant, at any time, or during a specified time period,
engages in any activity in competition with his employer or the Company, or
which is inimical, contrary or harmful to the interests of his employer or the
Company, as may be further defined from time to time by the Committee.
-12-
17.3 Limitations Applicable to Section 16. Notwithstanding any other
provision of this Plan, this Plan, and any Award granted to any individual who
is then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3) that are
requirements for the application of such exemptive rule. To the extent permitted
by applicable law, the Plan shall be deemed amended to the extent necessary to
conform to such applicable exemptive rule.
17.4 Effect of Plan Upon Other Incentive and Compensation Plans. The
adoption of this Plan shall not affect any other options or compensation or
incentive plans in effect for the Company. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for employees of the Company, the Advisor or its
Affiliates, or (ii) to grant or assume options or other rights or awards
otherwise than under this Plan in connection with any proper corporate purpose
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
17.5 Section 83(b) Election Prohibited. No Participant may make an
election under Section 83(b) of the Code with respect to any Award granted under
this Plan without the Company's consent.
-13-