Exhibit 10.3

 

DIGITAL REALTY TRUST, INC.,

DIGITAL SERVICES, INC. AND

DIGITAL REALTY TRUST, L.P.

2004 INCENTIVE AWARD PLAN

 

ARTICLE 1

 

PURPOSE

 

The purpose of the Digital Realty Trust, Inc., Digital Services, Inc. and
Digital Realty Trust, L.P. 2004 Incentive Award Plan (the “Plan”) is to promote
the success and enhance the value of Digital Realty Trust, Inc., a Maryland
corporation (the “Company”), Digital Services, Inc., a Maryland corporation (the
“Services Company”), and Digital Realty Trust, L.P. (the “Partnership”) by
linking the personal interests of Employees, Consultants, members of the Board,
and Services Company Directors to those of the Company’s stockholders and by
providing such individuals with an incentive for outstanding performance to
generate superior returns to the Company’s stockholders. The Plan is further
intended to provide flexibility to the Company, the Services Company, the
Partnership and their subsidiaries in their ability to motivate, attract, and
retain the services of those individuals upon whose judgment, interest, and
special effort the successful conduct of the Company’s, the Service Company’s
and the Partnership’s operation is largely dependent.

 

ARTICLE 2

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings
specified below, unless the context clearly indicates otherwise. The singular
pronoun shall include the plural where the context so indicates.

 

2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation
Right award, a Performance Share award, a Performance Stock Unit award, a
Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a
Restricted Stock Unit award, a Profits Interest Unit award, an Other Incentive
Award, a Performance Bonus Award, or a Performance-Based Award granted to a
Participant pursuant to the Plan.

 

2.2 “Award Agreement” means any written agreement, contract, or other instrument
or document evidencing an Award.

 

2.3 “Board” means the Board of Directors of the Company.

 

2.4 “Change in Control” means the occurrence of any of the following events:

 

(a) the acquisition, directly or indirectly, by any “person” or “group” (as
those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange
Act and the rules thereunder) of “beneficial ownership” (as determined pursuant
to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally
in the election of directors (“voting securities”) of the Company that represent
35% or more of the combined voting power of the Company’s then outstanding
voting securities, other than

 

(i) an acquisition of securities by a trustee or other fiduciary holding
securities under any employee benefit plan (or related trust) sponsored or
maintained by the Company or any person controlled by the Company or by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any person controlled by the Company, or

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(ii) an acquisition of securities by the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of the stock of the Company, or

 

(iii) an acquisition of securities pursuant to a transaction described in
Section 2.4(c) below that would not be a Change in Control under Section 2.4(c),
or

 

(iv) any direct or indirect acquisition of securities by Global Innovation
Partners, LLC or California Public Employees’ Retirement System (CALPERS), or
any affiliate thereof;

 

Notwithstanding the foregoing, the following event shall not constitute an
“acquisition” by any person or group for purposes of this Section 2.4(a): an
acquisition of the Company’s securities by the Company which causes the
Company’s voting securities beneficially owned by a person or group to represent
35% or more of the combined voting power of the Company’s then outstanding
voting securities; provided, however, that if a person or group shall become the
beneficial owner of 35% or more of the combined voting power of the Company’s
then outstanding voting securities by reason of share acquisitions by the
Company as described above and shall, after such share acquisitions by the
Company, become the beneficial owner of any additional voting securities of the
Company, then such acquisition shall constitute a Change in Control;

 

(b) individuals who, as of the date of the closing of the initial public
offering of the Stock, constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election by the Company’s stockholders, or nomination for election by the Board,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board;

 

(c) the consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale or
other disposition of all or substantially all of the Company’s assets or (z) the
acquisition of assets or stock of another entity, in each case, other than a
transaction

 

(i) which results in the Company’s voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or

 

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by being converted into voting securities of the Company or the person that, as
a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets
or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least a majority of
the combined voting power of the Successor Entity’s outstanding voting
securities immediately after the transaction, and

 

(ii) after which no person or group, other than Global Innovation Partners, LLC
or California Public Employees’ Retirement System (CALPERS), or any affiliate
thereof, beneficially owns voting securities representing 35% or more of the
combined voting power of the Successor Entity; provided, however, that no person
or group shall be treated for purposes of this clause (B) as beneficially owning
35% or more of combined voting power of the Successor Entity solely as a result
of the voting power held in the Company prior to the consummation of the
transaction; or

 

(d) approval by the Company’s stockholders of a liquidation or dissolution of
the Company.

 

For purposes of Section 2.4(a) above, the calculation of voting power shall be
made as if the date of the acquisition were a record date for a vote of the
Company’s stockholders, and for purposes of Section 2.4(c) above, the
calculation of voting power shall be made as if the date of the consummation of
the transaction were a record date for a vote of the Company’s stockholders. The
Committee shall have full and final authority, which shall be exercised in its
discretion, to determine conclusively whether a Change in Control of the Company
has occurred pursuant to the above definition, and the date of the occurrence of
such Change in Control and any incidental matters relating thereto.

 

2.5 “Code” means the Internal Revenue Code of 1986, as amended.

 

2.6 “Committee” means the committee of the Board described in Article 12.

 

2.7 “Company Consultant” means any consultant or adviser if:

 

(a) The consultant or adviser renders bona fide services to the Company or
Company Subsidiary;

 

(b) The services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s
securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly
with the Company or Company Subsidiary to render such services.

 

2.8 “Company Employee” means any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company or of any Company
Subsidiary.

 

2.9 “Company Subsidiary” means (i) a corporation, association or other business
entity of which 50% or more of the total combined voting power of all classes of
capital stock is

 

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owned, directly or indirectly, by the Company or by one or more Company
Subsidiaries or by the Company and one or more Company Subsidiaries, (ii) any
partnership or limited liability company of which 50% or more of the capital and
profits interests is owned, directly or indirectly, by the Company or by one or
more Company Subsidiaries or by the Company and one or more Company
Subsidiaries, and (iii) any other entity not described in clauses (i) or (ii)
above of which 50% or more of the ownership and the power, pursuant to a written
contract or agreement, to direct the policies and management or the financial
and the other affairs thereof, are owned or controlled by the Company or by one
or more other Company Subsidiaries or by the Company and one or more Company
Subsidiaries; provided, however, that “Company Subsidiary” shall not include the
Services Company, any Services Company Subsidiary, the Partnership or any
Partnership Subsidiary.

 

2.10 “Consultant” means any Company Consultant, Services Company Consultant or
Partnership Consultant.

 

2.11 “Covered Employee” means a Company Employee who is, or could be, a “covered
employee” within the meaning of Section 162(m) of the Code.

 

2.12 “Deferred Stock” means a right to receive a specified number of shares of
Stock during specified time periods pursuant to Article 8.

 

2.13 “Disability” means that the Participant qualifies to receive long-term
disability payments under the Company’s or the Partnership’s long-term
disability insurance program, as it may be amended from time to time.

 

2.14 “Dividend Equivalents” means a right granted to a Participant pursuant to
Article 8 to receive the equivalent value (in cash or Stock) of dividends paid
on Stock.

 

2.15 “Effective Date” shall have the meaning set forth in Section 13.1.

 

2.16 “Eligible Individual” means any person who is an Employee, a Consultant, a
member of the Board or a Services Company Director, as determined by the
Committee.

 

2.17 “Employee” means any Company Employee, Services Company Employee or
Partnership Employee.

 

2.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.19 “Fair Market Value” means, as of any given date, the fair market value of a
share of Stock on the immediately preceding date determined by such methods or
procedures as may be established from time to time by the Committee. Unless
otherwise determined by the Committee, the Fair Market Value of a share of Stock
as of any date shall be the average of the high and low trading prices for a
share of Stock as reported on the New York Stock Exchange (or on any national
securities exchange on which the Stock is then listed) for the immediately
preceding date or, if no such prices are reported for that date, the average of
the high and low trading prices on the next preceding date for which such prices
were reported; provided, however, that the Fair Market Value of a share of Stock
granted on the Public Trading Date shall equal the initial public offering price
per share of Stock.

 

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2.20 “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.

 

2.21 “Independent Director” means a member of the Board who is not an Employee.

 

2.22 “Non-Employee Director” means a member of the Board who qualifies as a
“non-employee director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or
any successor definition adopted by the Board.

 

2.23 “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option or which is designated as an Incentive Stock Option but
does not conform to the applicable provisions of Section 422 of the Code.

 

2.24 “Option” means a right granted to a Participant pursuant to Article 5 of
the Plan to purchase a specified number of shares of Stock at a specified price
during specified time periods. An Option may be either an Incentive Stock Option
or a Non-Qualified Stock Option.

 

2.25 “Other Incentive Award” means an Award granted, based upon or denominated
in Stock or units of Stock pursuant to Section 8.8 of the Plan.

 

2.26 “Participant” means a person who, as an Employee, Consultant, member of the
Board, or Services Company Director, has been granted an Award pursuant to the
Plan.

 

2.27 “Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of Digital Realty Trust, L.P., as the same may be amended, modified
or restated from time to time.

 

2.28 “Partnership Consultant” means any consultant or advisor if:

 

(a) The consultant or adviser renders bona fide services to the Partnership or
Partnership Subsidiary;

 

(b) The services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Partnership’s
securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly
with the Partnership or Partnership Subsidiary to render such services.

 

2.29 “Partnership Employee” means any employee (as defined in accordance with
Section 3401(c) of the Code) of the Partnership or any entity which is then a
Partnership Subsidiary.

 

2.30 “Partnership Participant Purchased Shares” has the meaning set forth in
Section 5.6.

 

2.31 “Partnership Purchase Price” has the meaning set forth in Section 5.6.

 

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2.32 “Partnership Purchased Shares” has the meaning set forth in Section 5.6.

 

2.33 “Partnership Subsidiary” means (i) a corporation, association or other
business entity of which 50% or more of the total combined voting power of all
classes of capital stock is owned, directly or indirectly, by the Partnership or
by one or more Partnership Subsidiaries or by the Partnership and one or more
Partnership Subsidiaries, (ii) any partnership or limited liability company of
which 50% or more of the capital and profits interests is owned, directly or
indirectly, by the Partnership or by one or more Partnership Subsidiaries or by
the Partnership and one or more Partnership Subsidiaries, and (iii) any other
entity not described in clauses (i) or (ii) above of which 50% or more of the
ownership and the power, pursuant to a written contract or agreement, to direct
the policies and management or the financial and the other affairs thereof, are
owned or controlled by the Partnership or by one or more other Partnership
Subsidiaries or by the Partnership and one or more Partnership Subsidiaries;
provided, however, that “Partnership Subsidiary” shall not include the Services
Company or any Services Company Subsidiary.

 

2.34 “Performance-Based Award” means an Award granted to selected Covered
Employees pursuant to Articles 6 and 8, but which is subject to the terms and
conditions set forth in Article 9. All Performance-Based Awards are intended to
qualify as Qualified Performance-Based Compensation.

 

2.35 “Performance Bonus Award” has the meaning set forth in Section 8.9.

 

2.36 “Performance Criteria” means the criteria that the Committee selects for
purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net earnings
(either before or after interest, taxes, depreciation and amortization), funds
from operations, adjusted funds from operations, cash available for
distribution, economic value-added (as determined by the Committee), sales or
revenue, net income (either before or after taxes), operating earnings, cash
flow (including, but not limited to, operating cash flow and free cash flow),
cash flow return on capital, return on net assets, return on stockholders’
equity, return on assets, return on capital, stockholder returns, return on
sales, gross or net profit margin, productivity, expense, margins, operating
efficiency, customer satisfaction, working capital, earnings per share, price
per share of Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group. The Committee shall, within the time prescribed by
Section 162(m) of the Code, define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Participant.

 

2.37 “Performance Goals” means, for a Performance Period, the goals established
in writing by the Committee for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish
such Performance Goals, the Performance Goals may be expressed in terms of
overall performance of the Company, the Services Company, the Partnership, any
Subsidiary, any division or business unit thereof, or an individual. The
Committee, in its discretion, may, within the time prescribed by Section 162(m)
of the Code, adjust or modify the calculation of Performance Goals for such
Performance Period in order to prevent the dilution or enlargement of the rights
of Participants (i) in the event of, or

 

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in anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, the Services
Company, the Partnership or any Subsidiary, or the financial statements of the
Company, the Services Company, the Partnership or any Subsidiary, or in response
to, or in anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions.

 

2.38 “Performance Period” means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to, and the payment of, a Performance-Based
Award.

 

2.39 “Performance Share” means a right granted to a Participant pursuant to
Article 8, to receive Stock, the payment of which is contingent upon achieving
certain Performance Goals or other performance-based targets established by the
Committee.

 

2.40 “Performance Stock Unit” means a right granted to a Participant pursuant to
Article 8, to receive Stock, the payment of which is contingent upon achieving
certain performance goals established by the Committee.

 

2.41 “Plan” means this Digital Realty Trust, Inc., Digital Services, Inc. and
Digital Realty Trust, L.P. 2004 Incentive Award Plan, as it may be amended from
time to time.

 

2.42 “Pricing Date” has the meaning set forth in Section 8.10(a).

 

2.43 “Profits Interest Unit” means a “Profits Interest Unit” of the Partnership,
as defined in the Partnership Agreement.

 

2.44 “Public Trading Date” means the first date upon which Stock is listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system.

 

2.45 “Qualified Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described
in Section 162(m)(4)(C) of the Code.

 

2.46 “REIT” means a real estate investment trust within the meaning of Sections
856 through 860 of the Code.

 

2.47 “Restricted Stock” means Stock awarded to a Participant pursuant to Article
6 that is subject to certain restrictions and may be subject to risk of
forfeiture.

 

2.48 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6.

 

2.49 “Services Company” means Digital Services, Inc., a Maryland corporation.

 

2.50 “Services Company Consultant” means any consultant or advisor if:

 

(a) The consultant or adviser renders bona fide services to the Services Company
or Services Company Subsidiary;

 

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(b) The services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s
securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly
with the Services Company or Services Company Subsidiary to render such
services.

 

2.51 “Services Company Director” means a member of the Board of Directors of the
Services Company.

 

2.52 “Services Company Employee” means any officer or other employee (as defined
in accordance with Section 3401(c) of the Code) of the Services Company or of
any corporation, partnership or limited liability company which is then a
Services Company Subsidiary.

 

2.53 “Services Company Participant Purchased Shares” has the meaning set forth
in Section 5.7.

 

2.54 “Services Company Purchase Price” has the meaning set forth in Section 5.7.

 

2.55 “Services Company Purchased Shares” has the meaning set forth in Section
5.7.

 

2.56 “Services Company Subsidiary” means (i) a corporation, association or other
business entity of which 50% or more of the total combined voting power of all
classes of capital stock is owned, directly or indirectly, by the Services
Company or by one or more Services Company Subsidiaries or by the Services
Company and one or more Services Company Subsidiaries, (ii) any partnership or
limited liability company of which 50% or more of the capital and profits
interests is owned, directly or indirectly, by the Services Company or by one or
more Services Company Subsidiaries or by the Services Company and one or more
Services Company Subsidiaries, and (iii) any other entity not described in
clauses (i) or (ii) above of which 50% or more of the ownership and the power,
pursuant to a written contract or agreement, to direct the policies and
management or the financial and the other affairs thereof, are owned or
controlled by the Services Company or by one or more other Services Company
Subsidiaries or by the Services Company and one or more Services Company
Subsidiaries.

 

2.57 “Stock” means the common stock of the Company, par value $0.01 per share,
and such other securities of the Company that may be substituted for Stock
pursuant to Article 11.

 

2.58 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a
specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value on the date the SAR was granted as set forth in the applicable
Award Agreement.

 

2.59 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b)
an option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Article 8.

 

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2.60 “Subsidiary” means any Company Subsidiary, Services Company Subsidiary or
Partnership Subsidiary.

 

ARTICLE 3

 

SHARES SUBJECT TO THE PLAN

 

3.1 Number of Shares.

 

(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of
Stock which may be issued or transferred pursuant to Awards (including, without
limitation, Incentive Stock Options) under the Plan shall be 4,474,102. Each
Profits Interest Unit issued pursuant to an Award shall count as one share of
Stock for purposes of calculating the aggregate number of shares of Stock
available for issuance under the Plan as set forth in this Section 3.1(a) and
for purposes of calculating the share limitation set forth in Section 3.3.

 

(b) To the extent that an Award terminates, expires, or lapses for any reason,
any shares of Stock subject to the Award shall again be available for the grant
of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or
withheld to satisfy the grant or exercise price or tax withholding obligation
pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to this Plan. The payment of Dividend Equivalents in
conjunction with any outstanding Awards shall not be counted against the shares
available for issuance under the Plan. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards), and make adjustments
if the number of shares of Stock actually delivered differs from the number of
shares previously counted in connection with an Award. Notwithstanding the
foregoing, no shares shall become available pursuant to this Section 3.1(b) to
the extent that (x) the transaction resulting in the return of shares occurs
more than ten years after the date of the most recent shareholder approval of
the Plan, or (y) such return of shares would constitute a “material revision” of
the Plan subject to stockholder approval under then applicable rules of the New
York Stock Exchange (or any other applicable exchange or quotation system).

 

3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Stock, treasury Stock or Stock
purchased on the open market.

 

3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any
provision in the Plan to the contrary, and subject to Article 11, the maximum
number of shares of Stock with respect to one or more Awards that may be granted
to any one Participant during a rolling three-year period (measured from the
date of any grant) shall be 1,118,526; provided,

 

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however, that the foregoing limitation shall not apply prior to the Public
Trading Date and, following the Public Trading Date, the foregoing limitation
shall not apply until the earliest of: (a) the first material modification of
the Plan (including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 3.1); (b) the issuance of all of the
shares of Stock reserved for issuance under the Plan; (c) the expiration of the
Plan; (d) the first meeting of stockholders at which members of the Board are to
be elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security of
the Company under Section 12 of the Exchange Act; or (e) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated
thereunder.

 

ARTICLE 4

 

ELIGIBILITY AND PARTICIPATION

 

4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or
more Awards pursuant to the Plan.

 

4.2 Participation. Subject to the provisions of the Plan, the Committee may,
from time to time, select from among all Eligible Individuals, those to whom
Awards shall be granted and shall determine the nature and amount of each Award.
No individual shall have any right to be granted an Award pursuant to this Plan.

 

4.3 Foreign Participants. In order to assure the viability of Awards granted to
Participants employed in foreign countries, the Committee may provide for such
special terms as it may consider necessary or appropriate to accommodate
differences in local law, tax policy, or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements, or alternative
versions of, the Plan as it may consider necessary or appropriate for such
purposes without thereby affecting the terms of the Plan as in effect for any
other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Sections 3.1 and 3.3 of the Plan.

 

ARTICLE 5

 

STOCK OPTIONS

 

5.1 General. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

 

(a) Exercise Price. The exercise price per share of Stock subject to an Option
shall be determined by the Committee and set forth in the Award Agreement;
provided that the exercise price for any Option shall not be less than 85% of
the Fair Market Value of a share of Stock on the date of grant.

 

(b) Time and Conditions of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part; provided that the
term of any Option granted under the Plan shall not exceed ten years. The
Committee shall also determine the performance or other conditions, if any, that
must be satisfied before all or part of an Option may be exercised.

 

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(c) Payment. The Committee shall determine the methods by which the exercise
price of an Option may be paid, the form of payment, including, without
limitation, (i) cash, (ii) shares of Stock held for such period of time as may
be required by the Committee in order to avoid adverse accounting consequences
and having a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof, or (iii) other
property acceptable to the Committee (including through the delivery of a notice
that the Participant has placed a market sell order with a broker with respect
to shares of Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient portion of the net proceeds of the
sale to the Company in satisfaction of the Option exercise price; provided that
payment of such proceeds is then made to the Company upon settlement of such
sale), and the methods by which shares of Stock shall be delivered or deemed to
be delivered to Participants. Notwithstanding any other provision of the Plan to
the contrary, no Participant who is a member of the Board or an “executive
officer” of the Company within the meaning of Section 13(k) of the Exchange Act
shall be permitted to pay the exercise price of an Option in any method which
would violate Section 13(k) of the Exchange Act.

 

(d) Evidence of Grant. All Options shall be evidenced by a written Award
Agreement between the Company and the Participant. The Award Agreement shall
include such additional provisions as may be specified by the Committee.

 

5.2 Incentive Stock Options. The terms of any Incentive Stock Options granted
pursuant to the Plan must comply with the conditions and limitations contained
in Section 13.2 and this Section 5.2:

 

(a) Eligibility. Incentive Stock Options may be granted only to Company
Employees or to Employees of a Subsidiary which constitutes a “subsidiary
corporation” within the meaning of Section 424(f) of the Code.

 

(b) Exercise Price. The exercise price per share of Stock subject to an
Incentive Stock Option shall be set by the Committee but shall not be less than
100% of the Fair Market Value on the date of grant.

 

(c) Individual Dollar Limitation. The aggregate Fair Market Value (determined as
of the time the Option is granted) of all shares of Stock with respect to which
Incentive Stock Options are first exercisable by a Participant in any calendar
year may not exceed $100,000 or such other limitation as imposed by Section
422(d) of the Code, or any successor provision. To the extent that Incentive
Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.

 

(d) Ten Percent Owners. An Incentive Stock Option shall be granted to any
individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.

 

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(e) Notice of Disposition. The Participant shall give the Company prompt notice
of any disposition of shares of Stock acquired by exercise of an Incentive Stock
Option if such disposition occurs within (i) two years from the date of grant of
such Incentive Stock Option or (ii) one year after the transfer of such shares
of Stock to the Participant.

 

(f) Right to Exercise. During a Participant’s lifetime, an Incentive Stock
Option may be exercised only by the Participant.

 

5.3 Substitution of Stock Appreciation Rights. The Committee may provide in the
Award Agreement evidencing the grant of an Option that the Committee, in its
sole discretion, shall have to right to substitute a Stock Appreciation Right
for such Option at any time prior to or upon exercise of such Option, subject to
the provisions of Section 7.2 hereof; provided that such Stock Appreciation
Right shall be exercisable for the same number of shares of Stock as such
substituted Option would have been exercisable for.

 

5.4 Granting of Options to Independent Directors. The Board may from time to
time, in its sole discretion, and subject to the limitations of the Plan:

 

(a) Select from among the Independent Directors (including Independent Directors
who have previously been granted Options under the Plan) such of them as in its
opinion should be granted Options;

 

(b) Subject to Section 3.3, determine the number of shares of Stock that may be
purchased upon exercise of the Options granted to such selected Independent
Directors; and

 

(c) Subject to the provisions of this Article 5, determine the terms and
conditions of such Options, consistent with the Plan

 

5.5 Transfer of Shares to a Company Employee, Consultant or Independent
Director. As soon as practicable after receipt by the Company of payment for the
shares with respect to which an Option (which in the case of a Company Employee,
Company Consultant or Independent Director was issued to and is held by such
Participant in such capacity), or portion thereof, is exercised by a Participant
who is a Company Employee, Company Consultant or Independent Director, then,
with respect to each such exercise, the Company shall transfer to the
Participant the number of shares equal to:

 

(a) The amount of the payment made by the Participant to the Company pursuant to
Section 5.1(c), divided by

 

(b) The price per share of the shares subject to the Option as determined
pursuant to Section 5.1(a) or 5.2(a), as applicable.

 

5.6 Transfer of Shares to a Partnership Employee or Consultant. As soon as
practicable after receipt by the Company, pursuant to Section 5.1(c), of payment
for the shares with respect to which an Option (which was issued to and is held
by a Partnership Employee or Partnership Consultant in such capacity), or
portion thereof, is exercised by a Participant who is a Partnership Employee or
Partnership Consultant, then, with respect to each such exercise:

 

(a) the Company shall transfer to the Participant the number of shares equal to
(A) the amount of the payment made by the Participant to the Company pursuant to
Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock
at the time of exercise (the “Partnership Participant Purchased Shares”);

 

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(b) the Company shall sell to the Partnership the number of shares (the
“Partnership Purchased Shares”) equal to the excess of (i) the amount obtained
by dividing (A) the amount of the payment made by the Participant to the Company
pursuant to Section 5.1(c) by (B) the price per share of the shares subject to
the Option as determined pursuant to Section 5.1(a), over (ii) the Partnership
Participant Purchased Shares. The price to be paid by the Partnership to the
Company for the Partnership Purchased Shares (the “Partnership Purchase Price”)
shall be an amount equal to the product of (x) the number of Partnership
Purchased Shares multiplied by (y) the Fair Market Value of a share of Common
Stock at the time of the exercise; and

 

(c) as soon as practicable after receipt of the Partnership Purchased Shares by
the Partnership, the Partnership shall transfer such shares to the Participant
at no additional cost, as additional compensation.

 

5.7 Transfer of Shares to a Services Company Employee, Consultant or Director.
As soon as practicable after receipt by the Company, pursuant to Section 5.1(c),
of payment for the shares with respect to which an Option (which was issued to
and is held by a Services Company Employee, Services Company Director or
Services Company Consultant in such capacity), or portion thereof, is exercised
by a Participant who is a Services Company Employee, Services Company Director
or Services Company Consultant, then, with respect to each such exercise:

 

(a) the Company shall transfer to the Participant the number of shares equal to
(A) the amount of the payment made by the Participant to the Company pursuant to
Section 5.1(c) divided by (B) the Fair Market Value of a share of Common Stock
at the time of exercise (the “Services Company Participant Purchased Shares”);

 

(b) the Company shall sell to the Services Company the number of shares (the
“Services Company Purchased Shares”) equal to the excess of (i) the amount
obtained by dividing (A) the amount of the payment made by the Participant to
the Company pursuant to Section 5.1(c) by (B) the price per share of the shares
subject to the Option as determined pursuant to Section 5.1(a), over (ii) the
Services Company Participant Purchased Shares. The price to be paid by the
Services Company to the Company for the Services Company Purchased Shares (the
“Services Company Purchase Price”) shall be an amount equal to the product of
(x) the number of Services Company Purchased Shares multiplied by (y) the Fair
Market Value of a share of Common Stock at the time of the exercise; and

 

(c) as soon as practicable after receipt of the Services Company Purchased
Shares by the Services Company, the Services Company shall transfer such shares
to the Participant at no additional cost, as additional compensation.

 

5.8 Transfer of Payment to the Partnership. As soon as practicable after receipt
by the Company of the amounts described in Sections 5.1(c), 5.6(b) and 5.7(b),
the Company shall contribute to the Partnership an amount of cash equal to such
payments and the Partnership shall issue an additional interest in the
Partnership on the terms set forth in the Partnership Agreement.

 

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ARTICLE 6

 

RESTRICTED STOCK AWARDS

 

6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Participant selected by the Committee in such amounts
and subject to such terms and conditions as determined by the Committee. All
Awards of Restricted Stock shall be evidenced by a written Restricted Stock
Award Agreement.

 

6.2 Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the
Committee determines at the time of the grant of the Award or thereafter.

 

6.3 Forfeiture. Except as otherwise determined by the Committee at the time of
the grant of the Award or thereafter, upon termination of employment or service
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited; provided, however, that the
Committee may (a) provide in any Restricted Stock Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and (b) in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.

 

6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company, the Services Company or the Partnership, as applicable, may, at its
discretion, retain physical possession of the certificate until such time as all
applicable restrictions lapse.

 

ARTICLE 7

 

STOCK APPRECIATION RIGHTS

 

7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any Participant selected by the Committee. A Stock Appreciation Right
may be granted (a) in connection and simultaneously with the grant of an Option,
(b) with respect to a previously granted Option, or (c) independent of an
Option. A Stock Appreciation Right shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall impose and shall be
evidenced by an Award Agreement.

 

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7.2 Coupled Stock Appreciation Rights.

 

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the related Option
is exercisable.

 

(b) A CSAR may be granted to a Participant for no more than the number of shares
subject to the simultaneously or previously granted Option to which it is
coupled.

 

(c) A CSAR shall entitle the Participant (or other person entitled to exercise
the Option pursuant to the Plan) to surrender to the Company the unexercised
portion of the Option to which the CSAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Company, the Partnership or the
Services Company, as applicable, in exchange therefor an amount determined by
multiplying the difference obtained by subtracting the Option exercise price
from the Fair Market Value of a share of Stock on the date of exercise of the
CSAR by the number of shares of Stock with respect to which the CSAR shall have
been exercised, subject to any limitations the Committee may impose.

 

7.3 Independent Stock Appreciation Rights.

 

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any
Option and shall have a term set by the Committee. An ISAR shall be exercisable
in such installments as the Committee may determine. An ISAR shall cover such
number of shares of Stock as the Committee may determine. The exercise price per
share of Stock subject to each ISAR shall be set by the Committee; provided that
the exercise price for any ISAR shall not be less than 100% of the Fair Market
Value on the date of grant; and provided, further, that, the Committee in its
sole and absolute discretion may provide that the ISAR may be exercised
subsequent to a termination of employment or service, as applicable, or
following a Change in Control of the Company, or because of the Participant’s
retirement, death or Disability, or otherwise.

 

(b) An ISAR shall entitle the Participant (or other person entitled to exercise
the ISAR pursuant to the Plan) to exercise all or a specified portion of the
ISAR (to the extent then exercisable pursuant to its terms) and to receive from
the Company, the Partnership or the Services Company, as applicable, an amount
determined by multiplying the difference obtained by subtracting the exercise
price per share of the ISAR from the Fair Market Value of a share of Stock on
the date of exercise of the ISAR by the number of shares of Stock with respect
to which the ISAR shall have been exercised, subject to any limitations the
Committee may impose.

 

7.4 Payment and Limitations on Exercise.

 

(a) Payment of the amounts determined under Sections 7.2(c) and 7.3(b) above
shall be in cash, in Stock (based on its Fair Market Value as of the date the
Stock Appreciation Right is exercised) or a combination of both, as determined
by the Committee.

 

(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in
Stock it shall be made subject to satisfaction of all provisions of Article 5
above pertaining to Options.

 

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ARTICLE 8

 

OTHER TYPES OF AWARDS

 

8.1 Performance Share Awards. Any Participant selected by the Committee may be
granted one or more Performance Share awards which shall be denominated in a
number of shares of Stock and which may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee.

 

8.2 Performance Stock Units. Any Participant selected by the Committee may be
granted one or more Performance Stock Unit awards which shall be denominated in
units of value including dollar value of shares of Stock and which may be linked
to any one or more of the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee.

 

8.3 Dividend Equivalents.

 

(a) Any Participant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined by
the Committee.

 

(b) Dividend Equivalents granted with respect to Options or SARs that are
intended to be Qualified Performance-Based Compensation shall be payable, with
respect to pre-exercise periods, regardless of whether such Option or SAR is
subsequently exercised.

 

8.4 Stock Payments. Any Participant selected by the Committee may receive Stock
Payments in the manner determined from time to time by the Committee. The number
of shares shall be determined by the Committee and may be based upon the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, determined on the date such Stock Payment is made
or on any date thereafter.

 

8.5 Deferred Stock. Any Participant selected by the Committee may be granted an
award of Deferred Stock in the manner determined from time to time by the
Committee. The number of shares of Deferred Stock shall be determined by the
Committee and may be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the Committee, in each case
on a specified date or dates or over any period or periods determined by the
Committee. Stock underlying a Deferred Stock award will not be issued until the
Deferred Stock award has vested, pursuant to a vesting schedule or performance
criteria set by the Committee. Unless otherwise provided by the Committee, a
Participant awarded Deferred Stock shall have no rights as a Company stockholder
with respect to such Deferred Stock until such time as the Deferred Stock Award
has vested and the Stock underlying the Deferred Stock Award has been issued.

 

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8.6 Restricted Stock Units. Any Participant selected by the Committee may be
granted an award of Restricted Stock Units in such amount and subject to such
terms and conditions as may be determined by the Committee. At the time of
grant, the Committee shall specify the date or dates on which the Restricted
Stock Units shall become vested and nonforfeitable, and may specify such
conditions to vesting as it deems appropriate. At the time of grant, the
Committee shall specify the maturity date applicable to each grant of Restricted
Stock Units which shall be no earlier than the vesting date or dates of the
Award and may be determined at the election of the grantee. On the maturity
date, the Company, the Services Company or the Partnership, as applicable, shall
transfer to the Participant one unrestricted, fully transferable share of Stock
for each Restricted Stock Unit scheduled to be paid out on such date and not
previously forfeited. The Committee shall specify the purchase price, if any, to
be paid by the grantee to the Company, the Services Company or the Partnership,
as applicable, for such shares of Stock.

 

8.7 Profits Interest Units. Any Participant selected by the Committee may be
granted an award of Profits Interest Units in such amount and subject to such
terms and conditions as may be determined by the Committee; provided, however,
that Profits Interest Units may only be issued to a Participant for the
performance of services to or for the benefit of the Partnership in the
Participant’s capacity as a partner of the Partnership. At the time of grant,
the Committee shall specify the date or dates on which the Profits Interest
Units shall vest and become nonforfeitable, and may specify such conditions to
vesting as it deems appropriate. Profits Interest Units shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose. These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the
Committee determines at the time of the grant of the Award or thereafter. The
Committee shall specify the purchase price, if any, to be paid by the grantee to
the Partnership for the Profits Interest Units.

 

8.8 Other Incentive Awards. Any Participant selected by the Committee may be
granted one or more Awards that provide Participants with shares of Stock or the
right to purchase shares of Stock or that have a value derived from the value
of, or an exercise or conversion privilege at a price related to, or that are
otherwise based on or payable in shares of Stock (including, without limitation,
convertible or exchangeable securities), in each case on a specified date or
dates or over any period or periods determined by the Committee. Other Incentive
Awards may be linked to any one or more of the Performance Criteria or other
specific performance criteria determined appropriate by the Committee.

 

8.9 Performance Bonus Awards. Any Participant selected by the Committee may be
granted one or more Performance-Based Awards in the form of a cash bonus (a
“Performance Bonus Award”) payable upon the attainment of Performance Goals that
are established by the Committee and relate to one or more of the Performance
Criteria, in each case on a specified date or dates or over any period or
periods determined by the Committee. Any such Performance Bonus Award paid to a
Covered Employee shall be based upon objectively determinable bonus formulas
established in accordance with Article 9. The maximum amount of any Performance
Bonus Award payable to a Covered Employee with respect to any fiscal year of the
Company shall not exceed $2,000,000.

 

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8.10 Granting of Profits Interest Units to Independent Directors.

 

(a) During the term of the Plan, each person who is an Independent Director as
of the effective date of the Registration Statement on Form S-11 with respect to
the initial public offering of shares of Stock (the “Pricing Date”)
automatically shall be granted (i) 6,448 Profits Interest Units on the Pricing
Date, and (ii) 1,612 Profits Interest Units on the date of each annual meeting
of stockholders after the Public Trading Date at which the Independent Director
is reelected to the Board, commencing with the third annual meeting after the
Public Trading Date. During the term of the Plan, each person who is initially
elected to the Board after the Pricing Date and who is an Independent Director
at the time of such initial election automatically shall be granted (I) 6,448
Profits Interest Units on the date of such initial election, and (II) 1,612
Profits Interest Units on the date of each annual meeting of stockholders after
such initial election at which the Independent Director is reelected to the
Board, commencing with the third annual meeting after such initial election.
Members of the Board who are employees of the Company, the Partnership, the
Services Company, or any Subsidiary who subsequently retire from employment with
such entities and remain on the Board will not receive an initial Award of
Profits Interest Units pursuant to clause (I) of the preceding sentence, but to
the extent they are otherwise eligible, will receive, after retirement from such
employment, an Award of Profits Interest Units as described in clause (ii) above
or clause (II) of the preceding sentence, as applicable. Notwithstanding the
foregoing, in the event that an Independent Director does not qualify as an
“accredited investor” within the meaning of Regulation D of the Securities Act
of 1933, as amended, on the date of any grant of Profits Interest Units to such
Independent Director pursuant to this Section 8.10, then such Independent
Director shall not receive such grant of Profits Interest Units, and in lieu
thereof shall automatically be granted an equivalent number of fully vested
shares of Restricted Stock at a per share purchase price equal to the par value
of the Stock.

 

(b) The Profits Interest Units awarded pursuant to subsection (a) above shall be
vested in full as of the date of grant. Consistent with the foregoing, the terms
and conditions of the Profits Interest Units (including, without limitation,
transfer restrictions with respect thereto) shall be set forth in an Award
Agreement to be entered into by the Company and each Independent Director which
shall evidence the grant of the Profits Interest Units.

 

8.11 Term. Except as otherwise provided herein, the term of any Award of
Performance Shares, Performance Stock Units, Dividend Equivalents, Stock
Payments, Deferred Stock, Restricted Stock Units, Profits Interest Units or
Other Incentive Award shall be set by the Committee in its discretion.

 

8.12 Exercise or Purchase Price. The Committee may establish the exercise or
purchase price, if any, of any Award of Performance Shares, Performance Stock
Units, Deferred Stock, Stock Payments, Restricted Stock Units or Other Incentive
Award; provided, however, that such price shall not be less than the par value
of a share of Stock on the date of grant, unless otherwise permitted by
applicable state law.

 

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8.13 Exercise Upon Termination of Employment or Service. An Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock
Payments, Restricted Stock Units, Profits Interest Units and Other Incentive
Award shall only be exercisable or payable while the Participant is an Employee,
Consultant, a member of the Board or a Services Company Director, as applicable;
provided, however, that the Committee in its sole and absolute discretion may
provide that an Award of Performance Shares, Performance Stock Units, Dividend
Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units, Profits
Interest Units or Other Incentive Award may be exercised or paid subsequent to a
termination of employment or service, as applicable, or following a Change in
Control of the Company, or because of the Participant’s retirement, death or
Disability, or otherwise; provided further, that any such provision with respect
to Performance Shares or Performance Stock Units shall be subject to the
requirements of Section 162(m) of the Code that apply to Qualified
Performance-Based Compensation.

 

8.14 Form of Payment. Payments with respect to any Award granted under this
Article 8, other than Profits Interest Units, shall be made in cash, in Stock or
a combination of both, as determined by the Committee.

 

8.15 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be
evidenced by a written Award Agreement.

 

ARTICLE 9

 

PERFORMANCE-BASED AWARDS

 

9.1 Purpose. The purpose of this Article 9 is to provide the Committee the
ability to qualify Awards other than Options and SARs and that are granted
pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a Performance-Based Award to a
Covered Employee, the provisions of this Article 9 shall control over any
contrary provision contained in Articles 6 or 8; provided, however, that the
Committee may in its discretion grant Awards to Covered Employees that are based
on Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 9.

 

9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The designation
of a Covered Employee as a Participant for a Performance Period shall not in any
manner entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.

 

9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary
to comply with the Qualified Performance-Based Compensation requirements of
Section 162(m)(4)(C) of the Code, with respect to any Award granted under
Articles 6 and 8 which may

 

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be granted to one or more Covered Employees, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as may be
required or permitted by Section 162(m) of the Code), the Committee shall, in
writing, (a) designate one or more Covered Employees, (b) select the Performance
Criteria applicable to the Performance Period, (c) establish the Performance
Goals, and amounts of such Awards, as applicable, which may be earned for such
Performance Period, and (d) specify the relationship between Performance
Criteria and the Performance Goals and the amounts of such Awards, as
applicable, to be earned by each Covered Employee for such Performance Period.
Following the completion of each Performance Period, the Committee shall certify
in writing whether the applicable Performance Goals have been achieved for such
Performance Period. In determining the amount earned by a Covered Employee, the
Committee shall have the right to reduce or eliminate (but not to increase) the
amount payable at a given level of performance to take into account additional
factors that the Committee may deem relevant to the assessment of individual or
corporate performance for the Performance Period.

 

9.4 Payment of Performance-Based Awards. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by the Company or a
Company Subsidiary, the Partnership or a Partnership Subsidiary, or the Services
Company or a Services Company Subsidiary, on the day a Performance-Based Award
for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based
Award for a Performance Period only if the Performance Goals for such period are
achieved.

 

9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute
Qualified Performance-Based Compensation shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings issued thereunder that
are requirements for qualification as qualified performance-based compensation
as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.

 

ARTICLE 10

 

PROVISIONS APPLICABLE TO AWARDS

 

10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in
the discretion of the Committee, be granted either alone, in addition to, or in
tandem with, any other Award granted pursuant to the Plan. Awards granted in
addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.

 

10.2 Award Agreement. Awards under the Plan shall be evidenced by Award
Agreements that set forth the terms, conditions and limitations for each Award
which may include the term of an Award, the provisions applicable in the event
the Participant’s employment or service terminates, and the Company’s authority
to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an
Award.

 

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10.3 Limits on Transfer. No right or interest of a Participant in any Award may
be pledged, encumbered, or hypothecated to or in favor of any party other than
the Company, the Services Company, the Partnership or a Subsidiary, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company, the Services Company, the Partnership or a
Subsidiary. Except as otherwise provided by the Committee, no Award shall be
assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution. The Committee by express provision
in the Award or an amendment thereto may permit an Award (other than an
Incentive Stock Option) to be transferred to, exercised by and paid to certain
persons or entities related to the Participant, including but not limited to
members of the Participant’s family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant’s family and/or charitable institutions, or to such other persons or
entities as may be expressly approved by the Committee, pursuant to such
conditions and procedures as the Committee may establish. Any permitted transfer
shall be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for estate and/or tax
planning purposes (or to a “blind trust” in connection with the Participant’s
termination of employment or service with the Company, the Services Company, the
Partnership or a Subsidiary to assume a position with a governmental,
charitable, educational or similar non-profit institution) and on a basis
consistent with the Company’s lawful issue of securities.

 

10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the
manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant’s death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is married and resides in a
community property state, a designation of a person other than the Participant’s
spouse as his or her beneficiary with respect to more than 50% of the
Participant’s interest in the Award shall not be effective without the prior
written consent of the Participant’s spouse. If no beneficiary has been
designated or survives the Participant, payment shall be made to the person
entitled thereto pursuant to the Participant’s will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.

 

10.5 Certificates; Book Entry Procedures.

 

(a) Notwithstanding anything herein to the contrary, neither the Company, the
Services Company, nor the Partnership shall be required to issue or deliver any
certificates evidencing shares of Stock or other securities pursuant to the
grant or exercise of any Award, unless and until the Board has determined, with
advice of counsel, that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authorities
and, if applicable, the requirements of any exchange on which the shares of
Stock or other securities are listed or traded. All certificates delivered
pursuant to the Plan are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to comply with
federal, state, or foreign jurisdiction, securities or other laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the

 

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such securities are listed, quoted, or traded. The Committee may place legends
on any certificate to reference restrictions applicable to the Stock or other
securities. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements. The Committee shall
have the right to require any Participant to comply with any timing or other
restrictions with respect to the settlement or exercise of any Award, including
a window-period limitation, as may be imposed in the discretion of the
Committee.

 

(b) Notwithstanding any other provision of the Plan, unless otherwise determined
by the Committee or required by any applicable law, rule or regulation, neither
the Company, the Services Company, nor the Partnership shall deliver to any
Participant certificates evidencing shares of Stock or other securities issued
in connection with any Award and instead such shares of Stock or other
securities shall be recorded in the books of the Company (or, as applicable, its
transfer agent or stock plan administrator).

 

ARTICLE 11

 

CHANGES IN CAPITAL STRUCTURE

 

11.1 Adjustments.

 

(a) In the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation, spin-off, recapitalization or other distribution
(other than normal cash dividends) of Company assets to stockholders, or any
other change affecting the shares of Stock or the share price of the Stock, the
Committee shall make such proportionate adjustments, if any, as the Committee in
its discretion may deem appropriate to reflect such change with respect to (i)
the aggregate number and type of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations in Sections 3.1
and 3.3); (ii) the terms and conditions of any outstanding Awards (including,
without limitation, any applicable Performance Goals or Performance Criteria
with respect thereto); and (iii) the grant or exercise price per share for any
outstanding Awards under the Plan. Any adjustment affecting an Award intended as
Qualified Performance-Based Compensation shall be made consistent with the
requirements of Section 162(m) of the Code.

 

(b) In the event of any transaction or event described in Section 11.1(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate (including without limitation any Change in Control), or of changes in
applicable laws, regulations or accounting principles, the Committee, in its
sole discretion and on such terms and conditions as it deems appropriate, either
by the terms of the Award or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Participant’s request,
is hereby authorized to take any one or more of the following actions whenever
the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:

 

(i) To provide for either (A) termination of any such Award in exchange for an
amount of cash and/or other property, if any, equal to the amount that would
have been attained upon the exercise of such Award or realization of the
Participant’s rights had such Award been currently exercisable or payable or
fully vested (and, for the avoidance of doubt, if the Committee determines in
good faith that no amount would have been attained upon the exercise of such
Award or realization of the Participant’s rights as of the date of the
occurrence of the transaction or event described in this Section 11.1(b), then
such Award may be terminated by the Company without payment), or (B) the
replacement of such Award with other rights or property selected by the
Committee in its sole discretion;

 

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(ii) To provide that such Award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock or securities of the
successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;

 

(iii) To make adjustments in the number and type of shares of Common Stock (or
other securities or property) subject to outstanding Awards, and in the number
and kind of shares subject to outstanding Restricted Stock or Deferred Stock
Awards and/or in the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future

 

(iv) To provide that such Award shall be exercisable or payable or fully vested
with respect to all shares or other securities covered thereby, notwithstanding
anything to the contrary in the Plan or the applicable Award Agreement; and

 

(v) To provide that the Award cannot vest, be exercised or become payable after
such event.

 

11.2 Acceleration Upon Certain Changes in Control. Notwithstanding Section 11.1,
if a Change in Control occurs and a Participant’s Awards are not converted,
assumed, or replaced by a successor entity, then immediately prior to the Change
in Control such Awards shall become fully exercisable and all forfeiture
restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change
in Control, the Committee may cause any and all Awards outstanding hereunder to
terminate at a specific time in the future, including but not limited to the
date of such Change in Control, and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine. In the event that the terms of any
agreement between the Company, the Services Company, the Partnership or any
Subsidiary or affiliate and a Participant contains provisions that conflict with
and are more restrictive than the provisions of this Section 11.2, this Section
11.2 shall prevail and control and the more restrictive terms of such agreement
(and only such terms) shall be of no force or effect.

 

11.3 Outstanding Awards – Other Changes. In the event of any other change in the
capitalization of the Company or corporate change other than those specifically
referred to in this Article 11, the Committee may, in its absolute discretion,
make such adjustments in the number

 

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and kind of shares or other securities subject to Awards outstanding on the date
on which such change occurs and in the per share grant or exercise price of each
Award as the Committee may consider appropriate to prevent dilution or
enlargement of rights.

 

11.4 No Other Rights. Except as expressly provided in the Plan, no Participant
shall have any rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation, merger,
or consolidation of the Company or any other corporation. Except as expressly
provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Stock
or other securities subject to an Award or the grant or exercise price of any
Award.

 

ARTICLE 12

 

ADMINISTRATION

 

12.1 Committee. Unless and until the Board delegates administration of the Plan
to a Committee as set forth below, the Plan shall be administered by the full
Board, and for such purposes the term “Committee” as used in this Plan shall be
deemed to refer to the Board. The Board, at its discretion or as otherwise
necessary to comply with the requirements of Section 162(m) of the Code, Rule
16b-3 promulgated under the Exchange Act or to the extent required by any other
applicable rule or regulation, shall delegate administration of the Plan to a
Committee. The Committee shall consist solely of two or more members of the
Board each of whom is both an “outside director,” within the meaning of Section
162(m) of the Code, and a Non-Employee Director. Notwithstanding the foregoing:
(a) the full Board, acting by a majority of its members in office, shall conduct
the general administration of the Plan with respect to all Awards granted to
Independent Directors and for purposes of such Awards the term “Committee” as
used in this Plan shall be deemed to refer to the Board and (b) the Committee
may delegate its authority hereunder to the extent permitted by Section 12.5.
Appointment of Committee members shall be effective upon acceptance of
appointment. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan. Committee members may resign at any time
by delivering written notice to the Board. Vacancies in the Committee may only
be filled by the Board.

 

12.2 Action by the Committee. A majority of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present, and acts approved in writing by a majority of the Committee
in lieu of a meeting, shall be deemed the acts of the Committee. Each member of
the Committee is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or other employee of
the Company, the Services Company, the Partnership or any Subsidiary, the
independent certified public accountants of the Company, the Services Company or
the Partnership, or any executive compensation consultant or other professional
retained by the Company, the Services Company or the Partnership to assist in
the administration of the Plan.

 

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12.3 Authority of Committee. Subject to any specific designation in the Plan,
the Committee has the exclusive power, authority and discretion to:

 

(a) Designate Participants to receive Awards;

 

(b) Determine the type or types of Awards to be granted to each Participant;

 

(c) Determine the number of Awards to be granted and the number of shares of
Stock or other securities to which an Award will relate;

 

(d) Determine the terms and conditions of any Award granted pursuant to the
Plan, including, but not limited to, the exercise price, grant price, or
purchase price, any reload provision, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, any provisions
related to non-competition and recapture of gain on an Award, based in each case
on such considerations as the Committee in its sole discretion determines;
provided, however, that the Committee shall not have the authority to accelerate
the vesting or waive the forfeiture of any Performance-Based Awards;

 

(e) Determine whether, to what extent, and pursuant to what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in, cash,
Stock, other Awards, or other property, or an Award may be canceled, forfeited,
or surrendered;

 

(f) Prescribe the form of each Award Agreement, which need not be identical for
each Participant;

 

(g) Decide all other matters that must be determined in connection with an
Award;

 

(h) Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;

 

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any
Award Agreement;

 

(j) In the case of Awards to Service Company Employees, Service Company
Consultants, Partnership Employees or Partnership Consultants, determine the
mechanics for the transfer of rights under such Awards; and

 

(k) Make all other decisions and determinations that may be required pursuant to
the Plan or as the Committee deems necessary or advisable to administer the
Plan.

 

12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.

 

12.5 Delegation of Authority. To the extent permitted by applicable law, the
Committee may from time to time delegate to a committee of one or more members
of the Board

 

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or one or more officers of the Company the authority to grant or amend Awards to
Participants other than (a) senior executives of the Company who are subject to
Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the
Company (or members of the Board) to whom authority to grant or amend Awards has
been delegated hereunder. Any delegation hereunder shall be subject to the
restrictions and limits that the Committee specifies at the time of such
delegation, and the Committee may at any time rescind the authority so delegated
or appoint a new delegatee. At all times, the delegatee appointed under this
Section 12.5 shall serve in such capacity at the pleasure of the Committee.

 

ARTICLE 13

 

EFFECTIVE AND EXPIRATION DATE

 

13.1 Effective Date. The Plan is effective as of the date the Plan is approved
by the Company’s stockholders (the “Effective Date”). The Plan will be deemed to
be approved by the stockholders if it receives the affirmative vote of the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting duly held in accordance with the
applicable provisions of the Company’s Bylaws.

 

13.2 Expiration Date. The Plan will expire on, and no Incentive Stock Option or
other Award may be granted pursuant to the Plan after, the earlier of the tenth
anniversary of (i) the Effective Date or (ii) the date this Plan is approved by
the Board. Any Awards that are outstanding on the tenth anniversary of the
Effective Date shall remain in force according to the terms of the Plan and the
applicable Award Agreement.

 

ARTICLE 14

 

AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1 Amendment, Modification, And Termination. With the approval of the Board,
at any time and from time to time, the Committee may terminate, amend or modify
the Plan; provided, however, that (a) to the extent necessary and desirable to
comply with any applicable law, regulation, or stock exchange rule, the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as required, and (b) stockholder approval shall be required for
any amendment to the Plan that (i) increases the number of shares available
under the Plan (other than any adjustment as provided by Article 11), (ii)
permits the Committee to grant Options with an exercise price that is below Fair
Market Value on the date of grant, or (iii) permits the Committee to extend the
exercise period for an Option beyond ten years from the date of grant.
Notwithstanding any provision in this Plan to the contrary, absent approval of
the stockholders of the Company, no Option may be amended to reduce the per
share exercise price of the shares subject to such Option below the per share
exercise price as of the date the Option is granted and, except as permitted by
Article 11, no Option may be granted in exchange for, or in connection with, the
cancellation or surrender of an Option having a higher per share exercise price.

 

14.2 Awards Previously Granted. No termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously granted
pursuant to the Plan without the prior written consent of the Participant.

 

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ARTICLE 15

 

GENERAL PROVISIONS

 

15.1 No Rights to Awards. No Eligible Individual or other person shall have any
claim to be granted any Award pursuant to the Plan, and none of the Company, the
Services Company, the Partnership or the Committee is obligated to treat
Eligible Individuals, Participants or any other persons uniformly.

 

15.2 No Stockholders Rights. Except as otherwise provided herein, no Participant
shall have any of the rights of a stockholder with respect to shares of Stock
covered by any Award until the Participant becomes the record owner of such
shares of Stock.

 

15.3 Withholding. The Company, the Services Company, the Partnership or any
Subsidiary, as applicable, shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company, the Services
Company, the Partnership or any Subsidiary, as applicable, an amount sufficient
to satisfy federal, state, local and foreign taxes (including the Participant’s
FICA obligation) required by law to be withheld with respect to any taxable
event concerning a Participant arising as a result of this Plan. The Committee
may in its discretion and in satisfaction of the foregoing requirement allow a
Participant to elect to have the Company, the Services Company, the Partnership
or any Subsidiary, as applicable, withhold shares of Stock otherwise issuable
under an Award (or allow the return of shares of Stock) having a Fair Market
Value equal to the sums required to be withheld. Notwithstanding any other
provision of the Plan, the number of shares of Stock which may be withheld with
respect to the issuance, vesting, exercise or payment of any Award (or which may
be repurchased from the Participant of such Award within six months (or such
other period as may be determined by the Committee) after such shares of Stock
were acquired by the Participant from the Company) in order to satisfy the
Participant’s federal, state, local and foreign income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the
Award shall be limited to the number of shares which have a Fair Market Value on
the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal, state,
local and foreign income tax and payroll tax purposes that are applicable to
such supplemental taxable income.

 

15.4 No Right to Employment or Services. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company, the
Services Company, the Partnership or any Subsidiary to terminate any
Participant’s employment or services at any time, nor confer upon any
Participant any right to continue in the employ or service of the Company, the
Services Company, the Partnership or any Subsidiary.

 

15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan
for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company, the Services Company, the Partnership or any
Subsidiary.

 

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15.6 Indemnification. To the extent allowable pursuant to applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company, the Services Company and/or the Partnership from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by such
member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her; provided he or
she gives the Company, the Services Company and the Partnership an opportunity,
at their own expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled pursuant to the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company, the Services Company and/or the Partnership may have to indemnify them
or hold them harmless.

 

15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be
taken into account in determining any benefits pursuant to any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company, the Services Company, the Partnership or any Subsidiary
except to the extent otherwise expressly provided in writing in such other plan
or an agreement thereunder.

 

15.8 Expenses. The expenses of administering the Plan shall be borne by the
Company, the Services Company, the Partnership and their Subsidiaries.

 

15.9 Titles and Headings. The titles and headings of the Sections in the Plan
are for convenience of reference only and, in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.

 

15.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.

 

15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any
Participant 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 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

15.12 Government and Other Regulations. The obligation of the Company, the
Services Company and the Partnership to make payment of awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by government agencies as may be required. The Company shall
be under no obligation to register pursuant to the Securities Act of 1933, as
amended, any of the shares of Stock or other securities paid pursuant

 

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to the Plan. If the shares or other securities paid pursuant to the Plan may in
certain circumstances be exempt from registration pursuant to the Securities Act
of 1933, as amended, the Company, the Services Company and the Partnership may
restrict the transfer of such shares or other securities in such manner as it
deems advisable to ensure the availability of any such exemption.

 

15.13 Section 83(b) Election Prohibited. No Participant may make an election
under Section 83(b) of the Code with respect to any Award under the Plan without
the consent of the Company, which the Company may grant or withhold in its sole
discretion.

 

15.14 Grant of Awards to Certain Employees or Consultants. The Company, the
Services Company, the Partnership or any Subsidiary may provide through the
establishment of a formal written policy or otherwise for the method by which
shares of Stock or other securities and/or payment therefor may be exchanged or
contributed between the Company and such other party, or may be returned to the
Company upon any forfeiture of Stock or other securities by the Participant, for
the purpose of ensuring that the relationship between the Company and the
Services Company, the Partnership or such Subsidiary remains at arm’s-length.

 

15.15 Restrictions on Awards. This Plan shall be interpreted and construed in a
manner consistent with the Company’s status as a REIT. No Award shall be granted
or awarded, and with respect to an Award already granted under the Plan, such
Award shall not be exercisable:

 

(a) to the extent that the grant or exercise of such Award could cause the
Participant to be in violation of the Common Stock Ownership Limit or the
Aggregate Stock Ownership Limit (each as defined in the Company’s Articles of
Incorporation, as amended from time to time); or

 

(b) if, in the discretion of the Committee, the grant or exercise of such Award
could impair the Company’s status as a REIT.

 

15.16 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California.

 

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* * * * *

 

I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Digital Realty Trust, Inc. on October 24, 2004.

 

* * * * *

 

I hereby certify that the foregoing Plan was approved by the stockholders of
Digital Realty Trust, Inc. on October 24, 2004.

 

Executed on this 24th day of October, 2004.

 

/s/ A. William Stein

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                Corporate Secretary

 

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