Exhibit 10.8
 
2004 STOCK INCENTIVE PLAN
OF
DESERT CAPITAL REIT, INC.
 
1.  Purpose.
 
The purpose of this Plan is to benefit the Company’s stockholders by encouraging
high levels of performance by individuals who are key to the success of the
Company and to enable the Company to attract, motivate and retain talented and
experienced individuals essential to its continued success. This is to be
accomplished by providing such individuals an opportunity to obtain or increase
their proprietary interest in the Company’s performance and by providing such
individuals with additional incentives to remain with the Company.
 
2.  Definitions.
 
The following terms, as used herein, shall have the meaning specified:
 
(a)  “Affiliate” means any corporation or other entity that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Company or by another Affiliate of the Company
within the meaning of Rule 12b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
 
(b)  “Award” means an award granted pursuant to Section 6.
 
(c)  “Board” means the Board of Directors of the Company, as it may be comprised
from time to time.
 
(d)  “Change in Control” means the occurrence of any of the following:
 
(1)  at any time during any 12-month period, the Board of Directors of the
Company in office at the beginning of such period shall have ceased to
constitute a majority of the Board without the approval of the nomination of
such directors by a majority of the Board consisting of directors who were
serving at the beginning of such period;
 
(2)  any person (as defined in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) (other than the Company, any of its subsidiaries or any trustee,
fiduciary or other person holding securities under any employee share ownership
plan or any other employee benefit plan of the Company or any of its
subsidiaries), together with its affiliates and associates (as such terms are
defined in Rule 12b-2 under the Exchange Act) shall have become the beneficial
owner (as defined in Rule 13d-3 of the Exchange Act) of securities representing
25% or more of the combined voting power of the Voting Shares;
 
(3)  the Company shall have filed a schedule, report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing that
a change in control of the Company has occurred;
 
(4)  a merger or consolidation of the Company shall have been consummated, other
than (x) a merger or consolidation that would result in the Voting Shares
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the surviving entity or (y) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person acquires more than 50% of the Voting Shares;
 
(5)  any person, other than a subsidiary of the Company, shall have acquired
more than 50% of the combined assets of the Company and its subsidiaries; or
 
(6)  the stockholders of the Company shall have approved the complete
liquidation or dissolution of the Company.
 
(e)  “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
 
(f)  “Committee” means a committee appointed pursuant to Section 3(a) or, if no
such Committee is appointed, the Board.
 
(g)  “Common Stock” means the common stock of the Company, par value $0.01 per
share.
 
(h)  “Company” means Desert Capital REIT, Inc.
 
(i)  “Director” means any person who shall from time to time serve as a member
of the Board of Directors of the Company or any Affiliate.
 
(j)  “Dividend Equivalent Right” means an Award granted pursuant to
Section 6(c).
 
(k)  “Effective Date” means the date this Plan was originally adopted by the
Board, unless otherwise specified by the Board.
 
(l)  “Election Date” means the date an Independent Director is first elected to
the Board.
 
(m)  “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time.
 
(n)  “Fair Market Value” means the closing price of the relevant security as
reported on the composite tape of New York Stock Exchange issues (or such other
reporting system as shall be selected by the Committee) on the relevant date, or
if no sale of the security is reported for such date, the next following day for
which there is a reported sale. The Committee shall determine the Fair Market
Value of any security that is not publicly traded, using such criteria as it
shall determine, in its sole discretion, to be appropriate for such valuation;
provided, however, that the Fair Market Value of the Common Stock for a period
of six months from the Effective Date shall not be less than $10.00 per share.
 
(o)  “Independent Director” means any Director who is (i) (A) a “non-employee
director” within the meaning of Rule 16b3(b)(3)(i) of the Exchange Act, and (B)
an “outside director” within the meaning of Code Section 162(m) and the
regulations promulgated thereunder, and (ii) who is not an employee of the
Company or any Affiliate; provided, that a Director who is (x) a Director or (y)
a consultant, or both, but is not an employee, also may be an Independent
Director.
 
(p)  “Insider” means any person who is subject to Section 16.
 
(q)  “ISO” means an incentive stock option within the meaning of Code Section
422.
 
(r)  “Maryland Act” means the Maryland General Corporation Law, as amended from
time to time.
 
(s)  “NQO” means a stock option that is not within the meaning of Code Section
422.
 
(t)  “Option” means any option granted pursuant to Section 6(a)(1).
 
(u)  “Outstanding Shares” means, with respect to any date, the total of the
number of Shares outstanding, plus (ii) the number of Shares reserved for
issuance upon conversion of securities convertible into or exchangeable for
Shares, plus (iii) the number of Shares, if any, held as “treasury stock” by the
Company, each as on such date.
 
(v)  “Participant” means any person who has been granted an Award pursuant to
this Plan.
 
(w)  “Restricted Shares” means the Shares issued as a result of a Restricted
Share Award.
 
(x)  “Restricted Share Award” means a grant of the right to purchase Shares
pursuant to Section 6(b). Such Shares, when and if issued, shall be subject to
such transfer restrictions and risk of forfeiture as the Committee shall
determine at the time the Award is granted, until such specific conditions are
met. Such conditions may be based on continuing employment or achievement of
pre-established performance objectives, or both.
 
(y)  “Rights” means an Award granted pursuant to Section 6.
 
(z)  “Section 16” means Section 16 of the Exchange Act or any successor
regulation and the rules promulgated thereunder by the Securities and Exchange
Commission, as they may be amended from time to time.
 
(aa)  “Securities Act” means the Securities Act of 1933, as amended from time to
time.
 
(bb)  “Shares” means the shares of Common Stock.
 
3.  Administration and Interpretation.
 
(a)  Administration. This Plan shall be administered by a Committee, which shall
consist of three or more Independent Directors. The Board may from time to time
remove and appoint members of the Committee in substitution for, or in addition
to, members previously appointed and may fill vacancies, however caused, in the
Committee. The Committee may prescribe, amend and rescind rules and regulations
for administration of this Plan and shall have full power and authority to
construe and interpret this Plan. A majority of the members of the Committee
shall constitute a quorum, and the act of a majority of the members present at a
meeting or the acts of a majority of the members evidenced in writing shall be
the acts of the Committee. The Committee may correct any defect or any omission
or reconcile any inconsistency in this Plan or in any Award or grant made
hereunder in the manner and to the extent it shall deem desirable.
 
The Committee shall have the full and exclusive right to grant all Awards under
this Plan, which may be Options, Restricted Share Awards and Dividend Equivalent
Rights. In granting Awards, the Committee shall take into consideration the
contribution the individual has made or may make to the success of the Company
or its Affiliates and such other factors as the Committee shall determine. The
Committee shall periodically determine the Participants in this Plan and the
nature, amount, pricing, time and other terms of Awards to be made to such
individuals, subject to the other terms and provisions of this Plan. The
Committee shall also have the authority to consult with and receive
recommendations from officers of and other individuals associated with the
Company and its Affiliates with regard to these matters. In no event shall any
individual, his or her legal representative, heirs, legatees, distributees or
successors have any right to participate in this Plan except to such extent, if
any, as the Committee shall determine.
 
The Committee may from time to time in granting Awards under this Plan prescribe
such other terms and conditions concerning such Awards as it deems appropriate,
including, without limitation, the achievement of specific goals established by
the Committee, provided that such terms and conditions are not more favorable to
any individual than those expressly set forth in this Plan.
 
The Committee may delegate to the officers of or individuals associated with the
Company the authority to execute and deliver such instruments and documents, to
do all such acts and things, and to take all such other steps deemed necessary,
advisable or convenient for the effective administration of this Plan in
accordance with its terms and purpose, except that the Committee may not
delegate any discretionary authority with respect to substantive decisions or
functions regarding this Plan or Awards hereunder as these relate to Insiders,
including, without limitation, decisions regarding the timing, eligibility,
pricing, amount or other material term of such Awards.
 
(b)  Interpretation. The Committee shall have the power to interpret and
administer this Plan. All questions of interpretation with respect to this Plan,
the number of Shares or other securities granted hereunder, and the terms of any
Award shall be determined by the Committee and its determination shall be final
and conclusive upon all parties in interest. In the event of any conflict
between an Award and this Plan, the terms of this Plan shall govern. It is the
intent of the Company that this Plan and Awards hereunder satisfy and be
interpreted in a manner that, in the case of Participants who are or may be
Insiders, satisfies the applicable requirements of Rule 16b-3 of the Exchange
Act, so that such persons will be entitled to the benefits of Rule 16b-3 or
other exemptive rules under Section 16 and will not be subjected to liability
thereunder. If any provision of this Plan or of any Award would otherwise
frustrate or conflict with the intent expressed in this Section 3(b), that
provision to the extent possible shall be interpreted and deemed amended so as
to avoid such conflict. To the extent of any remaining irreconcilable conflict
with such intent, the provision shall be deemed void as applicable to Insiders.
 
(c)  Limitation on Liability. Neither the Committee nor any member thereof shall
be liable for any act, omission, interpretation, construction or determination
made in connection with this Plan in good faith, and the members of the
Committee shall be entitled to indemnification and reimbursement by the Company
in respect of any claim, loss, damage or expense (including counsel fees)
arising therefrom to the full extent permitted by law. The members of the
Committee shall be named as insureds under any directors and officers (or
similar) liability insurance coverage which the Company may have in effect from
time to time.
 
4.  Eligibility.
 
(a)  Eligible Persons. The class of persons who are potential recipients of
Awards granted under this Plan consist of the (i) Independent Directors, (ii)
Directors, (iii) officers of the Company or any Affiliate and (iv) an individual
consultant or advisor who renders or has rendered bona fide services (other than
services in connection with the offering or sale of securities of the Company in
a capital-raising transaction or as a market maker or promoter of the Company’s
securities) to the Company and who is selected to participate in this Plan by
the Committee; provided, however, that a person who is otherwise an eligible
Participant under clause (iv) above may participate in this Plan only if such
participation would not adversely affect either the Corporation’s eligibility to
use Form S-8 to register under the Securities Act, the offering of Shares
issuable under this Plan by the Company or the Company’s compliance with any
other applicable laws. The Independent Directors, Directors, officers and
consultants to whom Awards are granted under this Plan, and the number of Shares
subject to each such Award, shall be determined by the Committee in its sole
discretion, subject, however, to the terms and conditions of this Plan.
 
(b)  Ownership Limit. Notwithstanding anything else contained herein or in any
Award hereunder to the contrary, no Person may receive Shares upon the grant,
exercise or payment of an Award to the extent that it will cause such Person to
Beneficially Own or Constructively Own Capital Stock in excess of the Aggregate
Stock Ownership Limit. If a Person would be entitled to receive or acquire
Shares but for the limitation of the preceding sentence, the Company shall have
the right to deliver to the person, in lieu of Shares, a check or cash in the
amount equal to the Fair Market Value of the Shares otherwise deliverable,
subject to any applicable tax withholding or other authorized deductions. For
purposes of this limitation, the terms “Person,” “Beneficially Own,”
“Constructively Own,” “Capital Stock,” and “Aggregate Stock Ownership Limit” are
used as defined in the Company’s Articles of Incorporation.
 
5.  Shares Subject to Grants Under this Plan.
 
(a)  Limitation on Number of Shares. The Shares subject to grants of Awards
shall be authorized but unissued Shares, Shares purchased in the open market or
privately and such Shares, if any, held as “treasury stock” by the Company.
Subject to adjustment as hereinafter provided, the aggregate number of Shares
with respect to which Awards may be granted under this Plan shall not exceed the
greater of 1,000,000 or 4.9% of the then outstanding shares of Common Stock;
provided, however, that the maximum number of Shares issuable pursuant to ISOs
granted under the Plan shall be 1,000,000.
 
(b)  Shares No Longer Subject to Awards. Shares ceasing to be subject to an
Award because of the exercise of an Option or Right or the vesting of an Award
shall no longer be subject to any further grant under this Plan. However, if any
outstanding Option or Right, in whole or in part, expires or terminates
unexercised or is canceled or if any Award, in whole or in part, expires or is
terminated or forfeited, for any reason prior to the expiration of ten (10)
years from the Effective Date, the Shares allocable to the unexercised,
terminated, canceled or forfeited portion of such Award may again be made the
subject of grants under this Plan; provided, however, that, with respect to any
Option or Rights granted to any Participant who is a “covered person” as defined
in Code Section 162(m) and the regulations promulgated thereunder that is
canceled, the number of Shares subject to such Option and/or Rights shall
continue to count against the maximum number of Shares which may be the subject
of Options and for Rights granted to such Participant.
 
For the purposes of computing the total number of Shares granted under this
Plan, the following rules shall apply to Awards payable in Shares:
 
(1)  each Option shall be deemed to be the equivalent of the maximum number of
Shares that may be issued upon exercise of the particular Option; and
 
(2)  where the number of Shares available under the Award is variable on the
date it is granted, the number of Shares shall be deemed to be the maximum
number of Shares that could be received under that particular Award.
 
(c)  Adjustments of Aggregate Number of Shares. The aggregate number of Shares
stated in Section 5(a) shall be subject to appropriate adjustment, from time to
time, in accordance with the provisions of Section 7 hereof.
 
6.  Awards.
 
(a)  Options and Rights.
 
(1)  Grants of Options. Options granted under this Plan may be either ISOs or
NQOs. At the time an Option is granted, the Committee may, in its discretion,
designate whether an Option shall be an ISO. No Option which is intended to
qualify as an ISO shall be granted under this Plan to any individual who, at the
time of such grant, is not an officer of the Company or an Affiliate.
 
Notwithstanding any other provision of this Plan to the contrary, to the extent
that the aggregate Fair Market Value (determined at the date an Option is
granted) of the Shares with respect to which an Option intended to be an ISO
(and any other ISO granted to the holder under this Plan or any other plans of
the Company or an Affiliate) first becomes exercisable during any calendar year
exceeds $100,000, the portion of such Option which would exceed the $100,000
limitation shall be treated as an NQO. Options with respect to which no
designation is made by the Committee shall be deemed to be ISOs to the extent
that the $100,000 limitation described in the preceding sentence is met. This
paragraph shall be applied by taking Options into account in the order in which
they are granted.
 
No ISO shall be granted to any person who, at the time of the grant, owns Shares
possessing more than 10% of the total combined voting power of the Company or
any Affiliate, unless (i) on the date such ISO is granted, the Option price is
at least 110% of the Fair Market Value per Share subject to the ISO and (ii)
such ISO by its terms is not exercisable after the expiration of five years from
the date such ISO is granted.
 
The purchase price per Share pursuant to the exercise of any Option shall be
fixed by the Committee at the time of grant; provided, however, that the
purchase price per Share (regardless of whether such Option is an ISO or an NQO)
shall not be less than the Fair Market Value of a Share on the date on which the
Option is granted. In addition, the Committee shall designate the number of
Shares, the terms and conditions (which may include, without limitation, the
achievement of specific goals), with respect to Options granted under this Plan.
Options may be granted by the Committee to any eligible person at any time and
from time to time.
 
As a condition to the grant of an Option, the Participant shall enter into an
Option Agreement with the Company upon such terms as the Committee may, in its
discretion, require.
 
(2)  Payment of Option Exercise Price. Upon exercise of an Option, the full
Option exercise price for the Shares with respect to which the Option is being
exercised shall be payable to the Company, by means of any lawful consideration
as determined by the Committee, including, without limitation, one or a
combination of the following methods:
 

·  
services rendered by the recipient of such Award;

·  
cash, check payable to the order of the Company, or electronic funds transfer;

·  
notice and third party payment in such manner as may be authorized by the
Committee;

·  
the delivery of previously owned shares of Common Stock;

·  
by a reduction in the number of Shares otherwise deliverable pursuant to the
Award;

·  
by delivery of one or more promissory notes from the Participant, provided that
any such note shall be subject to terms and conditions established by the
Committee and the requirements of applicable law; or

·  
subject to such procedures as the Committee may adopt, pursuant to a “cashless
exercise” with a third party who provides financing for the purposes of (or who
otherwise facilitates) the purchase or exercise of awards.

 
In no event shall any Shares newly-issued by the Company be issued for less than
the minimum lawful consideration for such Shares or for consideration other than
consideration permitted by applicable state law. In the event that the Committee
allows a Participant to exercise an Award by delivering shares of Common Stock
previously owned by such Participant and unless otherwise expressly provided by
the Committee, any Shares delivered which were initially acquired by the
Participant from the Company (upon exercise of an Option or otherwise) must have
been owned by the Participant at least six months as of the date of delivery.
Shares of Common Stock used to satisfy the exercise price of an Option shall be
valued at their Fair Market Value on the date of exercise. The Company will not
be obligated to deliver any Shares unless and until it receives full payment of
the exercise or purchase price therefor and any related withholding obligations
under Section 11 hereof and any other conditions to exercise or purchase have
been satisfied. Unless otherwise expressly provided in the applicable Award
agreement, the Committee may at any time eliminate or limit a Participant’s
ability to pay the purchase or exercise price of any Award or Shares by any
method other than cash payment to the Company. In addition to the foregoing
methods of payment, the full Option purchase price for Shares with respect to
which the Option is being exercised may be payable to the Company by such other
methods as the Committee may permit from time to time.
 
(3)  Term. The term of each Option and Right shall be determined by the
Committee at the date of grant; provided, however, that each Option that is an
ISO shall, notwithstanding anything in this Plan to the contrary, expire not
more than ten years from the date the Option is granted (or five years from the
date of grant to the extent required under Section 6(a)(1)) or, if earlier, the
date specified in the certificate evidencing the grant of such Option. An Option
that is an NQO shall expire not more than ten years from the date the Option is
granted, or if earlier, the date specified in the Option Agreement.
 
(4)  Termination of Employment or Relationship. In the event that a
Participant’s employment or relationship with the Company and its Affiliates
shall terminate, for reasons other than (i) retirement pursuant to a retirement
plan or policy of the Company or one of its Affiliates (“retirement”), (ii)
permanent disability as determined by the Committee based on the opinion of a
physician selected or approved by the Committee (“permanent disability”) or
(iii) death, the Participant’s Options and Rights shall be exercisable by him or
her, subject to subsection (3) above, only within 90 business days after such
termination, but only to the extent the Option or Right was exercisable
immediately prior to such termination.
 
If a Participant shall retire, become permanently disabled or die while entitled
to exercise an Option or Rights, the Participant or, if applicable, the
Participant’s estate, personal representative or beneficiary, as the case may
be, shall have the right, subject to the provisions of subsection (3) above, to
exercise the Option or Rights at any time within one year from the date of the
Participant’s retirement, permanent disability or death.
 
Whether any termination is due to retirement or permanent disability, and
whether an authorized leave of absence on military or government service or for
other reasons shall constitute a termination for the purpose of this Plan, shall
be determined by the Committee.
 
If the employment, consulting arrangement or service of any Participant with the
Company or an Affiliate shall be terminated because of the Participant’s
violation of the duties of such employment, consulting arrangement or service
with the Company or an Affiliate as he or she may from time to time have, the
existence of which violation shall be determined by the Committee in its sole
discretion (which determination by the Committee shall be conclusive), all
unexercised Options and Rights of such Participant shall terminate immediately
upon such termination of such Participant’s employment, consulting arrangement
or service with the Company and all Affiliates, and a Participant whose
employment, consulting arrangement or service with the Company and Affiliates is
so terminated, shall have no right after such termination to exercise any
unexercised Option or Rights he or she might have exercised prior to termination
of his or her employment, consulting arrangement or service with the Company and
Affiliates.
 
(5)  Options Granted by Other Corporations. Options may be granted under this
Plan from time to time in substitution for stock options held by employees and
directors of corporations who become key employees or Directors or directors of
the Company or of any Affiliate as a result of any “corporate transaction” as
defined in the Treasury Regulations promulgated under Code Section 424.
 
(b)  Restricted Share Awards.
 
(1)  Awards of Restricted Shares. Restricted Share Awards may be awarded by the
Committee to any individual eligible to receive the same, at any time and from
time to time before the expiration of ten years from the Effective Date. In
addition, and without limiting the generality of the foregoing, the Committee
may grant to any individual who is entitled to receive a bonus, a Restricted
Share Award with respect to Shares having a Fair Market Value on the date of the
grant of such Restricted Share Award equal to a specified percentage determined
by the Committee of the amount of such individual’s bonus, provided that such
individual has made an irrevocable election, at least six months prior to the
date of the grant of such Restricted Share Award, to receive such Restricted
Share Award in lieu of such bonus.
 
(2)  Purchase Price under Restricted Share Awards. The purchase price of
Restricted Shares to be purchased pursuant to a Restricted Share Award shall be
fixed by the Committee at the time of the grant of the Restricted Share Award;
provided, however, that such purchase price shall not be less than the par value
per share of the Shares subject to the Restricted Share Award. The Committee
shall specify, within its discretion, the time and manner in which payment of
such purchase price shall be paid.
 
(3)  Description of Restricted Shares. All Restricted Shares purchased by an
eligible person shall be subject to the following conditions:
 
(A)  Restricted Shares shall be subject to such restrictions, terms and
conditions as the Committee may establish, which may include, without
limitation, “lapse” and “non-lapse” restrictions (as such terms are defined in
regulations promulgated under Code Section 83) and the achievement of specific
goals;
 
(B)  the Restricted Shares may not be sold, exchanged, pledged, transferred,
assigned or otherwise encumbered or disposed of until the terms and conditions
set by the Committee at the time of the grant of the Restricted Share Award have
been satisfied;
 
(C)  each certificate representing Restricted Shares issued pursuant to this
Plan shall bear a legend making appropriate reference to the following:
 
“The Shares represented by this certificate have been issued pursuant to the
terms of the 2004 Stock Incentive Plan of Desert Capital REIT, Inc. and may not
be sold, pledged, transferred, assigned or otherwise encumbered in any manner
except as is set forth in the terms of such award dated    .”
; and

(D)  except as permitted by the Committee, no Restricted Shares granted pursuant
to this Plan shall be subject to vesting requirements over a period of less than
three years.
 
If a certificate representing Restricted Shares is issued to an individual
(whether or not escrowed as provided below), the individual shall be the record
owner of such Shares and shall have all the rights of a stockholder with respect
to such Shares (unless the Restricted Share Award specifically provides
otherwise), including the right to vote and the right to receive dividends made
or paid with respect to such Shares.
 
In order to enforce the restrictions, terms and conditions that may be
applicable to a Participant’s Restricted Shares, the Committee may require the
Participant, upon the receipt of a certificate or certificates representing such
Shares, or at any time thereafter, to deposit such certificate or certificates,
together with stock powers and other instruments of transfer, appropriately
endorsed in blank, with the Company or an escrow agent designated by the Company
under an escrow agreement, which may be a part of a Restricted Share Award, in
such form as shall be determined by the Committee.
 
After the satisfaction of the terms and conditions set by the Committee with
respect to Restricted Shares issued to an individual, and provided the
Restricted Shares are not subject to a non-lapse restriction, a new certificate,
without the legend set forth above, for the number of Shares that are no longer
subject to such restrictions, terms and conditions shall be delivered to the
individual. If such terms and conditions are satisfied as to a portion, but
fewer than all, of such Shares, the remaining Shares issued with respect to such
Award shall either be reacquired by the Company or, if appropriate under the
terms of the award applicable to such Shares, shall continue to be subject to
the restrictions, terms and conditions set by the Committee at the time of
Award.
 
(4)  Termination of Employment or Relationship. If the employment or
relationship with the Company and its Affiliates of a holder of a Restricted
Share Award is terminated for any reason before satisfaction of the terms and
conditions for the vesting (within the meaning of Code Section 83) of all Shares
subject to the Restricted Share Award, the number of Restricted Shares not
theretofore vested shall be reacquired by the Company and forfeited, and the
purchase price paid for such forfeited Shares by the holder shall be returned to
the holder. If Restricted Shares issued shall be reacquired by the Company and
forfeited as provided above, the individual, or in the event of his or her
death, his or her personal representative, shall forthwith deliver to the
Secretary of the Company the certificates representing such Shares, accompanied
by such instrument of transfer, if any, as may reasonably be required by the
Company.
 
(c)  Dividends and Dividend Equivalents.
 
(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 quarterly dividend declared and paid by the
Company on one Share. If the right relates to a specific Option, the period
shall not extend beyond the earliest of the date the Option is exercised, or the
expiration date set forth in the Option.
 
(2)  Rights and Options. Each right may relate to a specific Option granted
under this Plan and may be granted to the Participant either concurrently with
the grant of such Option or at such later time as determined by the Committee,
or each right may be granted independent of any Option.
 
(3)  Payments. The Committee shall determine at the time of grant whether
payment pursuant to a right shall be immediate or deferred and if immediate, the
Company shall make payments pursuant to each right concurrently with the payment
of the quarterly dividend 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 right is forfeited under the terms of the
Plan or applicable Award Agreement.
 
(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 be forfeited, unless otherwise expressly provided in the Award
Agreement.
 
(d)  Consideration for Awards. Subject to the requirements of the Maryland Act,
the Company shall obtain such consideration for the grant of an Award under this
Section 6 as the Committee in its discretion may determine.
 
7.  Adjustment Provisions.
 
If, prior to the complete exercise of any Option, or prior to the expiration or
lapse of all of the restrictions and conditions imposed pursuant to a Restricted
Share Award, there shall be declared and paid a dividend upon the Shares or if
the Shares shall be split up, converted, exchanged, reclassified or in any way
substituted for, then (i) in the case of an Option, the Option, to the extent
that it has not been exercised, shall entitle the holder thereof upon the future
exercise of the Option to such number and kind of securities or cash or other
property subject to the terms of the Option to which he or she would have been
entitled had he or she actually owned the Shares subject to the unexercised
portion of the Option at the time of the occurrence of such dividend, split-up,
conversion, exchange, reclassification or substitution, and the aggregate
purchase price upon the future exercise of the Option shall be the same as if
the originally optioned Shares were being purchased thereunder; (ii) in the case
of Restricted Shares issued pursuant to a Restricted Share Award, the holder of
such Award shall receive, subject to the same restrictions and other conditions
of such Award as determined pursuant to the provisions of Section 6(b), the same
securities or other property as are received by the holders of Shares pursuant
to such dividend, split-up, conversion, exchange, reclassification or
substitution; and (iii) in the case of a Dividend Equivalent Right, the holder
of such Dividend Equivalent Right shall receive, the same securities or other
property as are received by the holders of Shares pursuant to such dividend, and
in the case of a split-up, conversion, exchange, reclassification or
substitution, the Dividend Equivalent Right shall be adjusted, as the Committee
determines consistent with the terms of such split-up, conversion, exchange,
reclassification or substitution. Any fractional Shares or securities payable
upon the exercise of the Option as a result of such adjustment shall be payable
in cash based upon the Fair Market Value of such Shares or securities at the
time of such exercise. If any such event should occur, the number of Shares with
respect to which Awards remain to be issued, or with respect to which Awards may
be reissued, shall be adjusted in a similar manner.
 
Notwithstanding any other provision of this Plan, in the event of a
recapitalization, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the corporate structure or
outstanding Shares, the Committee may make such equitable adjustments to the
number of Shares and the class of shares available hereunder or to any
outstanding Awards as it shall deem appropriate to prevent dilution or
enlargement of rights.
 
8.  Acceleration.
 
Notwithstanding any other provision of this Plan to the contrary, all or any
part of any remaining unexercised Options granted to any person may be exercised
in the following circumstances (but in no event during the six month period
commencing on the date granted) and all or any part of any other Award not
theretofore vested shall vest: (i) with respect to Options only, immediately
upon (but prior to the expiration of the term of the Option) retirement, (ii)
subject to the provisions of Section 6, upon the permanent disability or death
of the holder, or (iii) upon a Change in Control.
 
9.  Change in Control.
 
Should a Change in Control occur, then at the discretion of the Committee, all
or any part of any remaining unexercised Options granted to any person hereunder
may be repurchased. The repurchase price shall be an amount equal to the excess
of (i) the Fair Market Value of the Share(s) subject to the Option(s) over (ii)
the purchase price per Share, as set forth in the Option Agreement. The
repurchase of such Options is specifically approved by the Board and, if
necessary to exempt such surrender from Section 16(b) of the Exchange Act, the
Board shall take any additional action necessary for such approval to comply
with the requirements of Rule 16b-3(e) promulgated under the Exchange Act.
 
10.  Participant’s Agreement.
 
If, at the time of the exercise of any Option or the granting or vesting of an
Award, in the opinion of counsel for the Company, it is necessary or desirable,
in order to comply with any then applicable laws or regulations relating to the
sale of securities, that the individual exercising the Option or receiving the
Award shall agree to hold any Shares issued to the individual for investment and
without any present intention to resell or distribute the same and that the
individual will dispose of such Shares only in compliance with such laws and
regulations, the individual will, upon the request of the Company, execute and
deliver to the Company a further agreement to such effect.
 
11.  Withholding Taxes.
 
No Award may be exercised and no distribution of Shares or cash pursuant to an
Award may be made under this Plan until appropriate arrangements have been made
by the holder with the Company for the payment of any amounts that the Company
may be required to withhold with respect thereto, which arrangements may include
the tender of previously owned Shares or the withholding of Shares issuable
pursuant to such Award.
 
12.  Termination of Authority to Make Grant.
 
No Awards will be granted pursuant to this Plan after the expiration of ten
years from the Effective Date.
 
13.  Amendment and Termination.
 
The Board may from time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan or, with the consent of an affected holder,
any outstanding Awards hereunder, provided, however, that no such action of the
Board may, without the approval of the shareholders of the Company, alter the
provisions of this Plan or outstanding Awards so as to (i) increase the maximum
number of Shares which may be subject to Awards under this Plan (except as
provided in Section 5(b)); or (ii) change the class of persons eligible to
receive Awards; or (iii) amend this Plan in any manner that would require
stockholder approval under Rule 16b-3 of the Exchange Act or under Code Section
162(m); or (iv) reduce the purchase price on an outstanding Option.
 
14.  Preemption by Applicable Laws and Regulations.
 
Notwithstanding anything in this Plan to the contrary, if, at any time specified
herein for the making of any determination or payment, or the issuance or other
distribution of Shares, any law, regulation or requirement of any governmental
authority having jurisdiction in the premises shall require either the Company
or the Participant (or the Participant’s beneficiary), as the case may be, to
take any action in connection with any such determination, payment, issuance or
distribution, the issuance or distribution of such Shares or the making of such
determination or payment, as the case may be, shall be deferred until such
action shall have been taken.
 
15.  Miscellaneous.
 
(a)  No Employment Contract. Nothing contained in this Plan shall be construed
as conferring upon any Participant the right to continue in the employ, or as a
Director or officer of or consultant to, of the Company or any Affiliate.
 
(b)  Employment or Service with Affiliates. Employment by, or service for, the
Company for the purpose of this Plan shall be deemed to include employment by,
or service for, any Affiliate.
 
(c)  No Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to Shares covered by the Participant’s Award until the
date of the issuance of such Shares to the Participant pursuant thereto. No
adjustment will be made for dividends or other distributions or rights for which
the record date is prior to the date of such issuance.
 
(d)  Transfer Restrictions.
 
(1)  Limitations on Exercise and Transfer. Unless otherwise expressly provided
in (or pursuant to) this Section 15(d), by applicable law and by the Award
agreement, as the same may be amended, (A) all Awards are non-transferable and
shall not be subject in any manner to sale, transfer, anticipation, alienation,
assignment, pledge, encumbrance or charge; (B) Awards shall be exercised only by
the Participant; and (C) amounts payable or Shares issuable pursuant to any
Award shall be delivered only to (or for the account of) the Participant.
 
(2)  Exceptions to Limits on Transfer. The exercise and transfer restrictions in
Section 15(d) shall not apply to:
 

(A)  
transfers to the Company,

 

(B)  
the designation of a beneficiary to receive benefits in the event of the
participant’s death or, if the participant has died, transfers to or exercise by
the participant’s beneficiary, or, in the absence of a validly designated
beneficiary, transfers by will or the laws of descent and distribution,

 

(C)  
transfers by gift to “immediate family” as that term is defined in Rule 16a-1(e)
promulgated under the Exchange Act or trusts for the benefit thereof,

 

(D)  
if the Participant has suffered a disability, permitted transfers or exercises
on behalf of the Participant by his or her legal representative, or

 

(E)  
the authorization by the Committee of “cashless exercise” procedures with third
parties who provide financing for the purpose of (or who otherwise facilitate)
the exercise of Awards consistent with applicable laws and the express
authorization of the Committee.

 
Notwithstanding the foregoing or anything in Section 15(d), ISOs and Restricted
Stock Awards shall be subject to any and all additional transfer restrictions
under the Code to the extent necessary to maintain the intended tax consequences
of such awards. Notwithstanding clause (C) above but subject to compliance with
all applicable laws, any contemplated transfer by gift to “immediate family” as
referenced in clause (C) above is subject to the condition precedent that the
transfer be approved by the Committee in order for it to be effective.
 
(e)  Governing Law; Construction. All rights and obligations under this Plan
shall be governed by, and this Plan shall be construed in accordance with, the
laws of the State of Maryland, without regard to the principles of conflicts of
laws. Titles and headings to Sections herein are for purposes of reference only,
and shall in no way limit, define or otherwise affect the meaning or
interpretation of any provisions of this Plan.