Exhibit 10.6

--------------------------------------------------------------------------------

U-STORE-IT TRUST

2004 EQUITY INCENTIVE PLAN

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

                              Page

--------------------------------------------------------------------------------

1.   PURPOSE     1   2.   DEFINITIONS     1   3.   ADMINISTRATION OF THE PLAN  
  6  

  3.1.   Board     6  

  3.2.   Committee     6  

  3.3.   Terms of Awards     7  

  3.4.   Book-Entry     8  

  3.5   Deferral Arrangement     8  

  3.6.   No Liability     8  

  3.7.   Form of Payment For Options And Restricted Share     8   4.   SHARES
SUBJECT TO THE PLAN     9   5.   EFFECTIVE DATE, DURATION AND AMENDMENTS     10
 

  5.1.   Effective Date     10  

  5.2.   Term     10  

  5.3.   Amendment and Termination of the Plan     10   6.   AWARD ELIGIBILITY
AND LIMITATIONS     10  

  6.1.   Service Providers and Other Persons     10  

  6.2.   Successive Awards     10  

  6.3.   Limitation on Shares Subject to Awards and Cash Awards     10  

  6.4.   Limitations on Incentive Stock Options     11  

  6.5.   Stand-Alone, Additional, Tandem, and Substitute Awards     11   7.  
AWARD AGREEMENT     11   8.   OPTIONS     12  

  8.1.   Option Price     12  

  8.2.   Vesting     12  

  8.3.   Term     12  

  8.4.   Termination of Service     12  

  8.5.   Limitations on Exercise of Option     12  

  8.6.   Method of Exercise     13  

  8.7.   Rights of Holders of Options     13  

  8.8.   Delivery of Share Certificates     13  

  8.9.   Transferability of Options     13  

  8.10.   Family Transfers     13   9.   SHARE APPRECIATION RIGHTS     14  

  9.1.   Right to Payment     14  

  9.2.   Other Terms     14   10.   RESTRICTED SHARES AND SHARE UNITS     14  

  10.1.   Grant of Restricted Shares or Share Units     14  

  10.2.   Restrictions     14  

  10.3.   Restricted Share Certificates     15  

  10.4.   Rights of Holders of Restricted Shares     15  

  10.5.   Rights of Holders of Share Units     15  

- i -

--------------------------------------------------------------------------------

 

                              Page

--------------------------------------------------------------------------------

      10.5.1. Voting and Dividend Rights     15  

      10.5.2. Creditor’s Rights     15  

  10.6.   Termination of Service     16  

  10.7.   Purchase of Restricted Shares     16  

  10.8.   Delivery of Share Certificates     16   11.   UNRESTRICTED SHARE
AWARDS     16   12.   DIVIDEND EQUIVALENT RIGHTS     16  

  12.1.   Dividend Equivalent Rights     16  

  12.2.   Termination of Service     17   13.   PERFORMANCE AND ANNUAL INCENTIVE
AWARDS     17  

  13.1.   Performance Conditions     17  

  13.2.   Performance or Annual Incentive Awards Granted to Designated Covered
Employees     17  

      13.2.1. Performance Goals Generally     18  

      13.2.2. Business Criteria     18  

      13.2.3. Timing For Establishing Performance Goals     18  

      13.2.4. Performance or Annual Incentive Award Pool     18  

      13.2.5. Settlement of Performance or Annual Incentive Awards; Other Terms
    19  

  13.3.   Written Determinations     19  

  13.4.   Status of Section 13.2 Awards Under Code Section 162(m)     19   14.  
PARACHUTE LIMITATIONS     19   15.   REQUIREMENTS OF LAW     20  

  15.1.   General     20  

  15.2.   Rule 16b-3     21   16.   EFFECT OF CHANGES IN CAPITALIZATION     21  

  16.1.   Changes in Shares     21  

  16.2.   Certain Reorganizations That are Not Corporate Transactions     22  

  16.3.   Corporate Transaction     22  

  16.4.   Adjustments     23  

  16.5.   No Limitations on Company     23   17.   GENERAL PROVISIONS     23  

  17.1.   Disclaimer of Rights     23  

  17.2.   Nonexclusivity of the Plan     24  

  17.3.   Withholding Taxes     24  

  17.4.   Captions     24  

  17.5.   Other Provisions     24  

  17.6.   Number and Gender     24  

  17.7.   Severability     25  

  17.8.   Governing Law     25  

- ii -

--------------------------------------------------------------------------------

 

U-STORE-IT TRUST

2004 EQUITY INCENTIVE PLAN

     U-Store-It Trust (the “Company”) sets forth herein the terms of its 2004
Equity Incentive Plan (the “Plan”), as follows:

1. PURPOSE

     The Plan is intended to enhance the Company’s and its Affiliates’ (as
defined herein) ability to attract and retain highly qualified officers,
directors, trustees, key employees, and other persons, and to motivate such
officers, directors, trustees, key employees and other persons to serve the
Company and its Affiliates and to expend maximum effort to improve the business
results and earnings of the Company, by providing to such persons an opportunity
to acquire or increase a direct proprietary interest in the operations and
future success of the Company. To this end, the Plan provides for the grant of
share options, share appreciation rights, restricted shares, share units,
unrestricted shares, dividend equivalent rights and cash awards. Any of these
awards may, but need not, be made as performance incentives to reward attainment
of annual or long-term performance goals in accordance with the terms hereof.
Share options granted under the Plan may be non-qualified share options or
incentive stock options, as provided herein.

2. DEFINITIONS

     For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:

     2.1 “Affiliate” means, with respect to the Company, any company or other
trade or business that controls, is controlled by or is under common control
with the Company within the meaning of Rule 405 of Regulation C under the
Securities Act, including, without limitation, any Subsidiary.

     2.2 “Annual Incentive Award” means an Award made subject to attainment of
performance goals (as described in Section 13) over a performance period of up
to one year (the fiscal year, unless otherwise specified by the Committee).

     2.3 “Award” means a grant of an Option, Share Appreciation Right,
Restricted Share, Unrestricted Share, Share Unit, Dividend Equivalent Right or
cash award under the Plan.

     2.4 “Award Agreement” means the written agreement between the Company and a
Grantee that evidences and sets out the terms and conditions of an Award.

     2.5 “Benefit Arrangement” shall have the meaning set forth in Section 14
hereof.

     2.6 “Board” means the Board of Trustees of the Company.

 

--------------------------------------------------------------------------------

 

     2.7 “Cause” means, as determined by the Board and unless otherwise provided
in an applicable agreement with the Company or an Affiliate, (i) gross
negligence or willful misconduct in connection with the performance of duties;
(ii) conviction of a criminal offense (other than minor traffic offenses); or
(iii) material breach of any term of any employment, consulting or other
services, confidentiality, intellectual property or non-competition agreements,
if any, between the Service Provider and the Company or an Affiliate.

     2.8 “Code” means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.

     2.9 “Committee” means a committee of the Board, designated from time to
time by resolution of the Board, in accordance with Section 3.2.

     2.10 “Company” means U-Store-It Trust, a Maryland real estate investment
trust.

     2.11 “Conversion Factor” shall have the meaning set forth in Article I of
the Limited Partnership Agreement.

     2.12 “Corporate Transaction” means (a) the dissolution or liquidation of
the Company or a merger, consolidation, or reorganization of the Company with
one or more other entities in which the Company is not the surviving entity,
(b) a sale of all or substantially all of the assets of the Company to another
person or entity, (c) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving entity) that results in any
person or entity (other than persons who are shareholders or Affiliates
immediately prior to the transaction) owning thirty percent (30%) or more of the
combined voting power of all classes of shares of the Company or (d) individuals
who, as of the date hereof, 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 trustee subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the trustees then comprising the
Incumbent Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for trustee, without
written objection to such nomination) 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 trustees or other actual or threatened solicitation of proxies or
contests by or on behalf of a person other than the Board. Notwithstanding
anything to the contrary contained herein, none of the following transactions
shall be a “Corporate Transaction”: (x) the transactions contemplated by the
Agreement and Plan of Merger and Reorganization, dated as of July 30, 2004, by
and between the Company and High Tide LLC, (y) the transactions contemplated by
the Agreement and Plan of Merger, dated as of July 30, 2004, by and between the
Company and Amsdell Partners, Inc., and (z) any of the other transactions
related to the initial public offering of the Company, as described in the
Company’s Form S-11 registration statement (as amended from time to time).

2

--------------------------------------------------------------------------------

 

     2.13 “Covered Employee” means a Grantee who is a “covered employee” within
the meaning of Section 162(m)(3) of the Code.

     2.14 “Disability” means the Grantee is unable to perform each of the
essential duties of such Grantee’s position by reason of a medically
determinable physical or mental impairment that is potentially permanent in
character or that can be expected to last for a continuous period of not less
than 12 months; provided, however, that, with respect to rules regarding
expiration of an Incentive Stock Option following termination of the Grantee’s
Service, Disability shall mean the Grantee is unable to engage in any
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or that has lasted or
can be expected to last for a continuous period of not less than 12 months.

     2.15 “Dividend Equivalent Right” means a right, granted to a Grantee under
Section 12 hereof, to receive cash, Shares, other Awards or other property equal
in value to dividends paid with respect to a specified number of Shares, or
other periodic payments.

     2.16 “Effective Date” means October 19, 2004, the date the Plan is approved
by the Board.

     2.17 “Exchange Act” means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.

     2.18 “Fair Market Value” means the value of a Share, determined as follows:
if on the Grant Date or other determination date the Shares are listed on an
established national or regional stock exchange, are admitted to quotation on
The Nasdaq Stock Market, Inc. or are publicly traded on an established
securities market, the Fair Market Value of a Share shall be the closing price
of the Shares on such exchange or in such market (if there is more than one such
exchange or market the Board shall determine the appropriate exchange or market)
on the Grant Date or such other determination date (or if there is no such
reported closing price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low sale prices on
such trading day) or, if no sale of Shares is reported for such trading day, on
the next preceding day on which any sale shall have been reported. If the Shares
are not listed on such an exchange, quoted on such system or traded on such a
market, Fair Market Value shall be the value of the Shares as determined by the
Board in good faith.

     2.19 “Family Member” means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in which any one or more of these persons have more than
fifty percent of the beneficial interest, a foundation in which any one or more
of these persons (or the Grantee) control the management of assets, and any
other entity in which one or more of these persons (or the Grantee) own more
than fifty percent (50%) of the voting interests.

     2.20 “Grant Date” means, as determined by the Board, the latest to occur of
(a) the date as of which the Board approves an Award, (b) the date on which the
recipient of an Award

3

--------------------------------------------------------------------------------

 

first becomes eligible to receive an Award under Section 6 hereof, or (c) such
other date as may be specified by the Board.

     2.21 “Grantee” means a person who receives or holds an Award under the
Plan.

     2.22 “Incentive Stock Option” means an “incentive stock option” within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.

     2.23 “Limited Partnership” means U-Store-It, L.P., a Delaware limited
partnership.

     2.24 “Limited Partnership Agreement” means the Limited Partnership’s Second
Amended and Restated Agreement of Limited Partnership, as amended and/or
restated from time to time.

     2.25 “Limited Partnership Employee” means any person determined by the
Board to be an employee of the Limited Partnership or any Limited Partnership
Subsidiary.

     2.26 “Limited Partnership Subsidiary” means an entity at least fifty
percent (50%) of the total equity or ownership interests of which are owned by
the Limited Partnership either directly or through one or more Limited
Partnership Subsidiaries.

     2.27 “Non-qualified Share Option” means an Option that is not an Incentive
Stock Option.

     2.28 “Option” means an option to purchase one or more Shares pursuant to
the Plan.

     2.29 “Option Price” means the exercise price for each Share subject to an
Option.

     2.30 “Other Agreement” shall have the meaning set forth in Section 14
hereof.

     2.31 “Outside Trustee” means a member of the Board who is not an officer or
employee of the Company.

     2.32 “Partnership Unit” means a “Partnership Unit” as that term is defined
in the Limited Partnership Agreement.

     2.33 “Performance Award” means an Award made subject to the attainment of
performance goals (as described in Section 13) over a performance period of up
to ten (10) years.

     2.34 “Plan” means this U-Store-It Trust 2004 Equity Incentive Plan.

     2.35 “Purchase Price” means the purchase price for each Share pursuant to a
grant of Restricted Shares or Unrestricted Shares.

4

--------------------------------------------------------------------------------

 

     2.36 “REIT Employee” means any person determined by the Board to be an
employee of the Company or any REIT Subsidiary.

     2.37 “REIT Subsidiary” means a corporation (or other entity) at least fifty
percent (50%) of whose total combined voting power of all classes of shares (or
other equity) is owned by the Company either directly or through one or more
REIT Subsidiaries.

     2.38 “Reporting Person” means a person who is required to file reports
under Section 16(a) of the Exchange Act.

     2.39 “Restricted Share” means Shares awarded to a Grantee pursuant to
Section 10 hereof.

     2.40 “SAR Exercise Price” means the per Share exercise price of an SAR
granted to a Grantee under Section 9 hereof.

     2.41 “Securities Act” means the Securities Act of 1933, as now in effect or
as hereafter amended.

     2.42 “Service” means service as a Service Provider to the Company or an
Affiliate. Unless otherwise stated in the applicable Award Agreement, a
Grantee’s change in position or duties shall not result in interrupted or
terminated Service, so long as such Grantee continues to be a Service Provider
to the Company or an Affiliate. Subject to the preceding sentence, whether a
termination of Service shall have occurred for purposes of the Plan shall be
determined by the Board, which determination shall be final, binding and
conclusive.

     2.43 “Service Provider” means an employee, officer, director or trustee of
the Company or an Affiliate, or a consultant or adviser currently providing
services to the Company or an Affiliate.

     2.44 “Share” means the common shares of beneficial interest, par value
$0.01 per share, of the Company.

     2.45 “Share Appreciation Right” or “SAR” means a right granted to a Grantee
under Section 9 hereof.

     2.46 “Share Unit” means a bookkeeping entry representing the equivalent of
a Share awarded to a Grantee pursuant to Section 10 hereof.

     2.47 “Subsidiary” means any “subsidiary corporation” of the Company within
the meaning of Section 424(f) of the Code.

     2.48 “Termination Date” means the date upon which an Option shall terminate
or expire, as set forth in Section 8.3 hereof.

5

--------------------------------------------------------------------------------

 

     2.49 “Ten Percent Shareholder” means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
shares of the Company, its parent or any of its Subsidiaries. In determining
share ownership, the attribution rules of Section 424(d) of the Code shall be
applied.

     2.50 “Unrestricted Share” means an Award of Shares to a Grantee pursuant to
Section 11 hereof.

3. ADMINISTRATION OF THE PLAN

     3.1. Board

     The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company’s governing
documents and applicable law. The Board shall have full power and authority to
take all actions and to make all determinations required or provided for under
the Plan, any Award or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan,
any Award or any Award Agreement. All such actions and determinations shall be
by the affirmative vote of a majority of the members of the Board present at a
meeting or by unanimous consent of the Board executed in writing in accordance
with the Company’s governing documents and applicable law. The interpretation
and construction by the Board of any provision of the Plan, any Award or any
Award Agreement shall be final, binding and conclusive. Notwithstanding any
other provision of the Plan, the Board shall not take any action or make any
Awards hereunder that could cause the Company to fail to qualify as a real
estate investment trust for Federal income tax purposes.

     3.2. Committee

     The Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and other applicable provisions, as the Board shall
determine, consistent with the Company’s governing documents and applicable law.

     (a) Except as provided in Subsection (b) and except as the Board may
otherwise determine, the Committee shall be the Compensation Committee of the
Board.

     (b) The Board may also appoint one or more separate committees of the
Board, each composed of one or more trustees of the Company, who may administer
the Plan with respect to employees or other Service Providers who are not
officers or directors of the Company, may grant Awards under the Plan to such
employees or other Service Providers, and may determine all terms of such
Awards.

In the event that the Plan, any Award or any Award Agreement entered into
hereunder provides for any action to be taken by or determination to be made by
the Board, such action may be taken or such determination may be made by the
Committee if the power and authority to do so

6

--------------------------------------------------------------------------------

 

has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. To the
extent permitted by law, the Committee may delegate its authority under the Plan
to a member of the Board.

     3.3. Terms of Awards

     Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority to:

          (a) designate Grantees;

          (b) determine the type or types of Awards to be made to a Grantee;

          (c) determine the number of Shares to be subject to an Award;

          (d) establish the terms and conditions of each Award (including, but
not limited to, the exercise price of any Option, the nature and duration of any
restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of an Award or the Shares subject
thereto, and any terms or conditions that may be necessary to qualify Options as
Incentive Stock Options);

          (e) prescribe the form of each Award Agreement evidencing an Award;
and

          (f) amend, modify, or supplement the terms of any outstanding Award.
Such authority specifically includes the authority, to effectuate the purposes
of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. No amendment, modification or supplement to the terms of an outstanding
Award shall, without the consent of the Grantee, materially impair rights or
obligations under the Award theretofore awarded under the Plan.

     As a condition to any subsequent Award, the Board shall have the right, at
its discretion, to require Grantees to return to the Company Awards previously
made under the Plan. Subject to the terms and conditions of the Plan, any such
new Award shall be upon such terms and conditions as are specified by the Board
at the time the new Award is made. The Board shall have the right, in its
discretion, to make Awards in substitution or exchange for any other award under
another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate. The Company may retain the right in an
Award Agreement to cause a forfeiture of the gain realized by a Grantee on
account of actions taken by the Grantee in violation or breach of or in conflict
with any employment agreement, non-competition agreement, any agreement
prohibiting solicitation of employees or clients of the Company or any Affiliate
thereof or any confidentiality obligation with respect to the Company or any
Affiliate thereof or otherwise in competition with the Company or any Affiliate
thereof, to the extent specified in such Award Agreement applicable to the
Grantee. Furthermore, the Company may retain the right in an Award Agreement to
annul an Award if the Grantee is an employee of the Company or an

7

--------------------------------------------------------------------------------

 

Affiliate thereof and is terminated for Cause as defined in the applicable Award
Agreement or the Plan, as applicable. The grant of any Award shall be contingent
upon the Grantee executing the appropriate Award Agreement.

     The Board may not make an amendment or modification to an outstanding
Option or SAR that reduces the Option Price or SAR Exercise Price, either by
lowering the Option Price or SAR Exercise Price or by canceling the outstanding
Option or SAR and granting a replacement Option or SAR with a lower exercise
price without shareholder approval; provided, that, appropriate adjustments may
be made to outstanding Options and SARs pursuant to Section 16.

     3.4. Book-Entry

     Notwithstanding any other provision of the Plan to the contrary, the
Company may elect to satisfy any requirement under the Plan for the delivery of
share certificates through the use of book-entry.

     3.5. Deferral Arrangement

     The Board may permit or require the deferral of any Award payment into a
deferred compensation arrangement, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting of
interest or dividend equivalents, including converting such credits into
deferred Share equivalents and restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans. The Company may, but is not obligated
to, contribute the Shares that would otherwise be issuable pursuant to an Award
to a rabbi trust. Shares issued to a rabbi trust pursuant to this Section 3.5
may ultimately be issued to the Grantee in accordance with the terms of the
deferred compensation plan or the Award Agreement.

     3.6. No Liability

     No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award or
Award Agreement.

     3.7. Form of Payment For Options And Restricted Share

          (a) General Rule. Payment of the Option Price for the Shares purchased
pursuant to the exercise of an Option or the Purchase Price for Restricted
Shares shall be made in cash or in cash equivalents acceptable to the Company.

          (b) Surrender of Shares. To the extent the Award Agreement so
provides, payment of the Option Price for Shares purchased pursuant to the
exercise of an Option or the Purchase Price for Restricted Shares may be made
all or in part through the tender to the Company of Shares, which Shares, if
acquired from the Company, shall have been held for at least six months at the
time of tender and which shall be valued, for purposes of determining the extent
to which the Option Price or Purchase Price has been paid thereby, at their Fair
Market Value on the date of exercise or surrender.

8

--------------------------------------------------------------------------------

 

          (c) Cashless Exercise. With respect to an Option only (and not with
respect to Restricted Shares), to the extent the Award Agreement so provides and
to the extent permitted by law, payment of the Option Price for Shares purchased
pursuant to the exercise of an Option may be made all or in part by delivery (on
a form acceptable to the Board) of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell Shares and to deliver all or
part of the sales proceeds to the Company in payment of the Option Price and any
withholding taxes described in Section 17.3.

          (d) Other Forms of Payment. To the extent the Award Agreement so
provides, payment of the Option Price for Shares purchased pursuant to exercise
of an Option or the Purchase Price for Restricted Shares may be made in any
other form that is consistent with applicable laws, regulations and rules.

4. SHARES SUBJECT TO THE PLAN

     Subject to adjustment as provided in Section 16 hereof, the number of
Shares available for issuance under the Plan shall be 3,000,000. All of such
Shares available for issuance under the Plan shall be available for issuance
pursuant to Incentive Stock Options. Shares issued or to be issued under the
Plan shall be authorized but unissued Shares. If any Shares covered by an Award
are not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Share subject thereto, then the number of Shares counted against
the aggregate number of Shares available under the Plan with respect to such
Award shall, to the extent of any such forfeiture or termination, again be
available for making Awards under the Plan; provided, however, that such Shares,
to the extent of any such forfeiture or termination, will continue to count
towards the individual limits set forth in Section 6.3.

     If the Option Price of any Option granted under the Plan, or if pursuant to
Section 17.3 the withholding obligation of any Grantee with respect to an Option
or other Award, is satisfied by tendering shares of Stock to the Company (by
either actual delivery or by attestation) or by withholding shares of Stock, the
number of shares of Stock issued net of the shares of Stock tendered or withheld
shall be deemed delivered for purposes of determining the maximum number of
shares of Stock available for delivery under the Plan.

     The Board shall have the right to substitute or assume Awards in connection
with mergers, reorganizations, separations, or other transactions to which
Section 424(a) of the Code applies, provided such substitutions and assumptions
are permitted by Section 424 of the Code and the regulations promulgated
thereunder. The number of Shares reserved pursuant to Section 4 may be increased
by the corresponding number of Awards assumed and, in the case of a
substitution, by the net increase in the number of Shares subject to Awards
before and after the substitution.

9

--------------------------------------------------------------------------------

 

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

     5.1. Effective Date

     The Plan shall be effective as of the Effective Date, subject to approval
of the Plan by the Company’s shareholders within one year of the Effective Date.
Upon approval of the Plan by the shareholders of the Company as set forth above,
all Awards made under the Plan on or after the Effective Date shall be fully
effective as if the shareholders of the Company had approved the Plan on the
Effective Date. If the shareholders fail to approve the Plan within one year
after the Effective Date, any Awards made hereunder shall be null and void and
of no effect.

     5.2. Term

     The Plan shall terminate automatically ten (10) years after the Effective
Date and may be terminated on any earlier date as provided in Section 5.3.

     5.3. Amendment and Termination of the Plan

     The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any Shares as to which Awards have not been made. An
amendment shall be contingent on approval of the Company’s shareholders to the
extent stated by the Board, required by applicable law or required by applicable
stock exchange listing requirements. No Awards shall be made after termination
of the Plan. No amendment, suspension, or termination of the Plan shall, without
the consent of the Grantee, materially impair rights or obligations under any
Award theretofore awarded under the Plan.

6. AWARD ELIGIBILITY AND LIMITATIONS

     6.1. Service Providers and Other Persons

     Subject to this Section 6, Awards may be made under the Plan to: (a) any
Service Provider to the Company or of any Affiliate, including any Service
Provider who is an officer, director or trustee of the Company or of any
Affiliate, as the Board shall determine and designate from time to time, (b) any
Outside Trustee, and (c) any other individual whose participation in the Plan is
determined to be in the best interests of the Company by the Board.

     6.2. Successive Awards

     An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.

     6.3. Limitation on Shares Subject to Awards and Cash Awards

     During any time when the Company has a class of equity securities
registered under Section 12 of the Exchange Act,

10

--------------------------------------------------------------------------------

 

          (a) the maximum number of Shares subject to Options, SARs or
time-vested Restricted Shares that can be awarded under the Plan to any person
eligible for an Award under Section 6 hereof is 500,000 per calendar year;

          (b) the maximum number of Shares that can be awarded under the Plan,
other than pursuant to an Option, SARs or time-vested Restricted Shares to any
person eligible for an Award under Section 6 hereof is 250,000 per calendar
year;

          (c) the maximum amount that may be earned as an Annual Incentive Award
or other cash Award in any fiscal year by any one Grantee shall be $2,000,000
and the maximum amount that may be earned as a Performance Award or other cash
Award in respect of a performance period by any one Grantee shall be $5,000,000.

     The preceding limitations in this Section 6.3 are subject to adjustment as
provided in Section 16 hereof.

     6.4. Limitations on Incentive Stock Options

     An Option shall constitute an Incentive Stock Option only (a) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (b) to the extent specifically provided in the related Award Agreement;
and (c) to the extent that the aggregate Fair Market Value (determined at the
time the Option is granted) of the Shares with respect to which all Incentive
Stock Options held by such Grantee become exercisable for the first time during
any calendar year (under the Plan and all other plans of the Grantee’s employer
and its Affiliates) does not exceed $100,000. This limitation shall be applied
by taking Options into account in the order in which they were granted.

     6.5. Stand-Alone, Additional, Tandem, and Substitute Awards

     Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Affiliate, or any business entity to be acquired by the Company or
an Affiliate, or any other right of a Grantee to receive payment from the
Company or any Affiliate. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for the grant of the new Award. In addition, Awards may
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Affiliate, in which the value of
Shares subject to the Award is equivalent in value to the cash compensation (for
example, Share Units or Restricted Shares), or in which the Option Price, grant
price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Share minus the
value of the cash compensation surrendered (for example, Options granted with an
Option Price “discounted” by the amount of the cash compensation surrendered).

7. AWARD AGREEMENT

11

--------------------------------------------------------------------------------

 

     Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Board shall from time to time determine.
Award Agreements entered into from time to time or at the same time need not
contain similar provisions but shall be consistent with the terms of the Plan.

8. OPTIONS

     The Board is authorized to grant Options on the following terms and
conditions:

     8.1. Option Price

     The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price of each Option
shall be at least the Fair Market Value on the Grant Date of a Share; provided,
however, that in the event that a Grantee is a Ten Percent Shareholder, the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall be not less than one hundred ten percent (110%) of
the Fair Market Value of a Share on the Grant Date. In no case shall the Option
Price of any Option be less than the par value of a Share.

     8.2. Vesting

     Subject to Sections 8.3 and 16.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
Section 8.2, fractional numbers of Shares subject to an Option shall be rounded
down to the next nearest whole number.

     8.3. Term

     Each Option granted under the Plan shall terminate, and all rights to
purchase Shares thereunder shall cease, upon the expiration of ten years from
the date such Option is granted, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Board and
stated in the Award Agreement relating to such Option (the “Termination Date”);
provided, however, that in the event that the Grantee is a Ten Percent
Shareholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date.

     8.4. Termination of Service

     Each Award Agreement shall set forth the extent to which the Grantee shall
have the right to exercise the Option following termination of the Grantee’s
Service. Such provisions shall be determined in the sole discretion of the
Board, need not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of Service.

     8.5. Limitations on Exercise of Option

     Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as

12

--------------------------------------------------------------------------------

 

provided herein or after the occurrence of an event referred to in Section 16
hereof that results in termination of the Option.

     8.6. Method of Exercise

     An Option that is exercisable may be exercised by the Grantee’s delivery to
the Company of written notice of exercise on any business day, at the Company’s
principal office, on the form specified by the Company. Such notice shall
specify the number of Shares with respect to which the Option is being exercised
and shall be accompanied by payment in full of the Option Price of the Shares
for which the Option is being exercised plus if applicable, any withholding
taxes described in Section 17.3.

     8.7. Rights of Holders of Options

     Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject Shares or to direct the voting of the subject
Shares) until the Shares covered thereby are fully paid and issued to him.
Except as provided in Section 16 hereof, no adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such issuance.

     8.8. Delivery of Share Certificates

     Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
share certificate or certificates evidencing his or her ownership of the Shares
subject to the Option.

     8.9. Transferability of Options

     Except as provided in Section 8.10, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s
guardian or legal representative) may exercise an Option. Except as provided in
Section 8.10, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.

     8.10. Family Transfers

     If authorized in the applicable Award Agreement, a Grantee may transfer,
not for value, all or part of an Option that is not an Incentive Stock Option to
any Family Member. For the purpose of this Section 8.10, a “not for value”
transfer is a transfer that is (a) a gift, (b) a transfer under a domestic
relations order in settlement of marital property rights; or (c) a transfer to
an entity in which more than fifty percent (50%) of the voting interests are
owned by Family Members (or the Grantee) in exchange for an interest in that
entity. Following a transfer under this Section 8.10, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with
this Section 8.10 or by will or the laws of descent and distribution. The events
of termination of Service of

13

--------------------------------------------------------------------------------

 

Section 8.4 hereof shall continue to be applied with respect to the original
Grantee, following which the Option shall be exercisable by the transferee only
to the extent, and for the periods specified, in Section 8.4.

9. SHARE APPRECIATION RIGHTS

     The Board is authorized to grant Share Appreciation Rights (“SARs”) on the
following terms and conditions:

     9.1. Right to Payment

     A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (a) the Fair Market Value of one Share on
the date of exercise over (b) the grant price of the SAR as determined by the
Board. The Award Agreement for a SAR shall specify the grant price of the SAR,
which may be fixed at no less than the Fair Market Value of a Share on the date
of grant or may vary in accordance with a predetermined formula while the SAR is
outstanding. A SAR granted in tandem with an outstanding Option following the
Grant Date of such Option may have a grant price that is equal to the Option
Price, even if such grant price is less than the Fair Market Value of a Share on
the grant date of the SAR.

     9.2. Other Terms

     The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of Service or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Share will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR.

10. RESTRICTED SHARES AND SHARE UNITS

     10.1. Grant of Restricted Shares or Share Units

     The Board is authorized to grant Restricted Shares or Share Units, subject
to such restrictions, conditions and other terms, if any, as the Board may
determine. Awards of Restricted Shares may be made for no consideration (other
than par value of the Shares which may be deemed paid by Services already
rendered).

     10.2. Restrictions

     At the time a grant of Restricted Shares or Share Units is made, the Board
may, in its sole discretion, establish a period of time (a “restricted period”)
applicable to such Restricted Shares or Share Units. Each Award of Restricted
Shares or Share Units may be subject to a different

14

--------------------------------------------------------------------------------

 

restricted period. The Board may, in its sole discretion, at the time a grant of
Restricted Shares or Share Units is made, prescribe restrictions in addition to
or other than the expiration of the restricted period, including the
satisfaction of corporate or individual performance objectives, which may be
applicable to all or any portion of the Restricted Shares or Share Units in
accordance with Section 13.1 and 13.2. Neither Restricted Shares nor Share Units
may be sold, transferred, assigned, pledged or otherwise encumbered or disposed
of during the restricted period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Shares or
Share Units.

     10.3. Restricted Share Certificates

     The Company shall issue, in the name of each Grantee to whom Restricted
Shares have been granted, share certificates representing the total number of
Restricted Shares granted to the Grantee, as soon as reasonably practicable
after the Grant Date. The Board may provide in an Award Agreement that either
(a) the Secretary of the Company shall hold such certificates for the Grantee’s
benefit until such time as the Restricted Shares are forfeited to the Company or
the restrictions lapse or (b) such certificates shall be delivered to the
Grantee, provided, however, that such certificates shall bear a legend or
legends that comply with the applicable securities laws and regulations and make
appropriate reference to the restrictions imposed under the Plan and the Award
Agreement.

     10.4. Rights of Holders of Restricted Shares

     Holders of Restricted Shares shall have the right to vote such Shares and
the right to receive any dividends declared or paid with respect to such Shares.
All distributions, if any, received by a Grantee with respect to Restricted
Shares as a result of any share split, share dividend, combination of Shares, or
other similar transaction shall be subject to the restrictions applicable to the
original Grant.

     10.5. Rights of Holders of Share Units

     10.5.1. Voting and Dividend Rights

     Holders of Share Units shall have no rights as shareholders of the Company.
The Board may provide in an Award Agreement evidencing a grant of Share Units
that the holder of such Share Units shall be entitled to receive, upon the
Company’s payment of a cash dividend on its outstanding Shares, a cash payment
for each Share Unit held equal to the per-share dividend paid on the Shares.
Such Award Agreement may also provide that such cash payment will be deemed
reinvested in additional Share Units at a price per unit equal to the Fair
Market Value of a Share on the date that such dividend is paid.

     10.5.2. Creditor’s Rights

     A holder of Share Units shall have no rights other than those of a general
creditor of the Company. Share Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Award Agreement.

15

--------------------------------------------------------------------------------

 

     10.6. Termination of Service

     Unless the Board otherwise provides in an Award Agreement or in writing
after the Award Agreement is issued, upon the termination of a Grantee’s
Service, any Restricted Shares or Share Units held by such Grantee that have not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted
Shares or Share Units, the Grantee shall have no further rights with respect to
such Award, including but not limited to any right to vote Restricted Shares or
any right to receive dividends with respect to Restricted Shares or Share Units.

     10.7. Purchase of Restricted Shares

     The Grantee shall be required, to the extent required by applicable law, to
purchase the Restricted Shares from the Company at a Purchase Price equal to the
greater of (a) the aggregate par value of the Shares represented by such
Restricted Shares or (b) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Shares. The Purchase Price shall be
payable in a form described in Section 3.7 or, in the discretion of the Board,
in consideration for past Services rendered to the Company or an Affiliate.

     10.8. Delivery of Share Certificates

     Upon the expiration or termination of any restricted period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to Restricted Shares or Share Units settled in Shares shall lapse,
and, unless otherwise provided in the Award Agreement, a share certificate for
such Shares shall be delivered, free of all such restrictions, to the Grantee or
the Grantee’s beneficiary or estate, as the case may be.

11. UNRESTRICTED SHARE AWARDS

     The Board is authorized to grant (or sell at par value or such other higher
purchase price determined by the Board) an Unrestricted Share Award pursuant to
which the Grantee may receive Shares free of any restrictions (“Unrestricted
Share”) under the Plan. Unrestricted Share Awards may be granted or sold as
described in the preceding sentence in respect of past services and other valid
consideration, or in lieu of, or in addition to, any cash compensation due to
such Grantee.

12. DIVIDEND EQUIVALENT RIGHTS

     12.1. Dividend Equivalent Rights

     The Board may from time to time grant Dividend Equivalent Rights, subject
to such restrictions, conditions and other terms, if any, as the Board may
determine. A Dividend Equivalent Right is an Award entitling the recipient to
receive credits based on cash distributions that would have been paid on the
Shares specified in the Dividend Equivalent Right (or other award to which it
relates) if such Shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award. The terms and conditions of Dividend
Equivalent Rights

16

--------------------------------------------------------------------------------

 

shall be specified in the Award Agreement. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or may be deemed to
be reinvested in additional Shares, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date of
reinvestment. Dividend Equivalent Rights may be settled in cash or Shares or a
combination thereof, in a single installment or installments, all determined in
the sole discretion of the Board. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right shall
be settled upon exercise, settlement, or payment of, or lapse of restrictions
on, such other award, and that such Dividend Equivalent Right shall expire or be
forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms
and conditions different from such other award.

     12.2. Termination of Service

     Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee’s rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee’s termination of Service for any reason.

13. PERFORMANCE AND ANNUAL INCENTIVE AWARDS

     13.1. Performance Conditions

     The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Section 13.2 hereof in the case of a Performance Award or Annual Incentive
Award intended to qualify under Code Section 162(m). If and to the extent
required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

     13.2. Performance or Annual Incentive Awards Granted to Designated Covered
Employees

     If and to the extent that the Committee determines that a Performance or
Annual Incentive Award to be granted to a Grantee who is designated by the
Committee as likely to be a Covered Employee should qualify as
“performance-based compensation” for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance or Annual Incentive Award shall
be contingent upon achievement of pre-established performance goals and other
terms set forth in this Section 13.2.

17

--------------------------------------------------------------------------------

 

          13.2.1. Performance Goals Generally

          The performance goals for such Performance or Annual Incentive Awards
shall consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee
consistent with this Section 13.2. Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” The Committee may determine that such Performance or
Annual Incentive Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance or Annual Incentive Awards. Performance goals may differ for
Performance or Annual Incentive Awards granted to any one Grantee or to
different Grantees.

          13.2.2. Business Criteria

          One or more of the following business criteria for the Company, on a
consolidated basis, and/or specified subsidiaries or business units of the
Company (except with respect to the total shareholder return and earnings per
share criteria), shall be used exclusively by the Committee in establishing
performance goals for such Performance or Annual Incentive Awards: (a) total
shareholder return; (b) such total shareholder return as compared to total
return (on a comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor’s 500 Stock Index; (c) net income; (d) pretax
earnings; (e) earnings calculated before any or all of the following: interest
expense, interest, taxes, depreciation and amortization; (f) pretax operating
earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (g) operating margin; (h) earnings per share;
(i) return on equity; (j) return on capital; (k) return on investment; (l)
operating earnings; (m) working capital; (n) ratio of debt to shareholders’
equity; (o) revenue; (p) funds from operations; (q) net operating income; and
(r) return on assets.

          13.2.3. Timing For Establishing Performance Goals

          Performance goals shall be established not later than 90 days after
the beginning of any performance period applicable to such Performance or Annual
Incentive Awards, or at such other date as may be required or permitted for
“performance-based compensation” under Code Section 162(m).

          13.2.4. Performance or Annual Incentive Award Pool

          The Committee may establish a Performance or Annual Incentive Award
pool, which shall be an unfunded pool, for purposes of measuring Company
performance in connection with Performance or Annual Incentive Awards.

18

--------------------------------------------------------------------------------

 

          13.2.5. Settlement of Performance or Annual Incentive Awards; Other
Terms

          Settlement of such Performance or Annual Incentive Awards shall be in
cash, Shares, other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such Performance or Annual
Incentive Awards. The Committee shall specify the circumstances in which such
Performance or Annual Incentive Awards shall be paid or forfeited in the event
of termination of Service by the Grantee prior to the end of a performance
period or settlement of Performance Awards.

     13.3. Written Determinations

     All determinations by the Committee as to the establishment of performance
goals, the amount of any Performance Award pool or potential individual
Performance Awards and as to the achievement of performance goals relating to
Performance Awards, and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards, shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). To the extent required to comply with Code
Section 162(m), the Committee may delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards.

     13.4. Status of Section 13.2 Awards Under Code Section 162(m)

     It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 13.2 hereof granted to persons who are designated
by the Committee as likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder shall, if so designated by the
Committee, constitute “qualified performance-based compensation” within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of Section 13.2, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards or an
Annual Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.

14. PARACHUTE LIMITATIONS

     Notwithstanding any other provision of the Plan or of any other agreement,
contract, or understanding heretofore entered into by a Grantee with the Company
or any Affiliate, except to the extent otherwise provided for by an agreement,
contract, or understanding hereafter entered into

19

--------------------------------------------------------------------------------

 

that modifies or excludes application of this paragraph (an “Other Agreement”),
and notwithstanding any formal or informal plan or other arrangement for the
direct or indirect provision of compensation to the Grantee (including groups or
classes of Grantees or beneficiaries of which the Grantee is a member), whether
or not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a
“disqualified individual,” as defined in Section 280G(c) of the Code, any Award
held by that Grantee and any right to receive any payment or other benefit under
the Plan shall not become exercisable or vested (a) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the Grantee under the Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under the Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (b) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the Company under the
Plan, all Other Agreements, and all Benefit Arrangements would be less than the
maximum after-tax amount that could be received by the Grantee without causing
any such payment or benefit to be considered a Parachute Payment. In the event
that the receipt of any such right to exercise, vesting, payment, or benefit
under the Plan, in conjunction with all other rights, payments, or benefits to
or for the Grantee under any Other Agreement or any Benefit Arrangement would
cause the Grantee to be considered to have received a Parachute Payment under
the Plan that would have the effect of decreasing the after-tax amount received
by the Grantee as described in clause (b) of the preceding sentence, then the
Grantee shall have the right, in the Grantee’s sole discretion, to designate
those rights, payments, or benefits under the Plan, any Other Agreements, and
any Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Grantee under this Plan be deemed to be a
Parachute Payment.

15. REQUIREMENTS OF LAW

     15.1. General

     The Company shall not be required to sell or issue any Shares under any
Award if the sale or issuance of such Shares would constitute a violation by the
Grantee, any other individual exercising an Option, or the Company of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any Shares subject to an Award upon any
securities exchange or under any governmental regulatory body is necessary,
appropriate or desirable as a condition of, or in connection with, the issuance
or purchase of Shares hereunder, no Shares may be issued or sold to the Grantee
or any other individual exercising an Option pursuant to such Award unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Award. Specifically, in connection with the Securities Act, upon the exercise of
any Option or the delivery of any Shares underlying an Award, unless a
registration statement under such Act is in effect with respect to the Shares
covered by such Award, the Company shall not be required to sell or issue such
Shares unless the Board has received evidence satisfactory to it that the
Grantee or any other individual exercising an Option may acquire such

20

--------------------------------------------------------------------------------

 

Shares pursuant to an exemption from registration under the Securities Act. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action to cause the exercise of an Option
or the issuance of Shares pursuant to the Plan to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable until the Shares
covered by such Option are registered or are exempt from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.

     15.2. Rule 16b-3

     During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced,
the Board may exercise its discretion to modify the Plan in any respect
necessary, appropriate or desirable to satisfy the requirements of, or to take
advantage of any features of, the revised exemption or its replacement.

16. EFFECT OF CHANGES IN CAPITALIZATION

     16.1. Changes in Shares

     If the number of outstanding Shares is increased or decreased or the Shares
are changed into or exchanged for a different number or kind of shares or other
securities of the Company on account of any recapitalization, reclassification,
share split, reverse split, combination of shares, exchange of shares, share
dividend or other distribution payable in capital shares, or other increase or
decrease in such shares effected without receipt of consideration by the Company
occurring after the Effective Date, the number and kinds of Shares for which
grants of Options and other Awards may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of Shares for which Awards are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options or
SARs shall not change the aggregate Option Price or SAR Exercise Price payable
with respect to Shares that are subject to the unexercised portion of an
outstanding Option or SAR, as applicable, but shall include a corresponding
proportionate adjustment in the Option Price or SAR Exercise Price per Share.
The conversion of any convertible securities of the Company shall not be treated
as an increase in Shares affected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Company’s
shareholders of securities of any other entity or other assets without receipt
of consideration by the Company, the Company may, in such manner as the Company
deems necessary, appropriate or desirable, adjust (a) the number and kind of
Shares subject to outstanding

21

--------------------------------------------------------------------------------

 

Awards and/or (b) the exercise price of outstanding Options and Share
Appreciation Rights to reflect such distribution.

     16.2. Certain Reorganizations That are Not Corporate Transactions

     Subject to Section 16.3 hereof, if the Company is the surviving entity in
any reorganization, merger, or consolidation of the Company with one or more
other entities and such transaction does not constitute a Corporate Transaction,
any Option or SAR theretofore granted pursuant to the Plan shall pertain to and
apply to the securities to which a holder of the number of Shares subject to
such Option or SAR would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per Share so that the
aggregate Option Price or SAR Exercise Price thereafter shall be the same as the
aggregate Option Price or SAR Exercise Price of the Shares remaining subject to
the Option or SAR immediately prior to such reorganization, merger, or
consolidation. Subject to any contrary language in an Award Agreement evidencing
an Award, any restrictions applicable to such Award shall apply as well to any
replacement shares received by the Grantee as a result of the reorganization,
merger or consolidation. In the event of a transaction described in this
Section 16.2, Share Units shall be adjusted so as to apply to the securities
that a holder of the number of Shares subject to the Share Units would have been
entitled to receive immediately following such transaction.

     16.3. Corporate Transaction

          Subject to the exceptions set forth in the last sentence of this
Section 16.3 and the last sentence of Section 16.4, upon the occurrence of a
Corporate Transaction:

          (a) all outstanding Restricted Shares and Share Units shall be deemed
to have vested, and all restrictions and conditions applicable to such
Restricted Shares and Share Units shall be deemed to have lapsed and the Share
Units shall be delivered, immediately prior to the occurrence of such Corporate
Transaction, and

          (b) fifteen days prior to the scheduled consummation of a Corporate
Transaction, all Options and SARs outstanding hereunder shall become immediately
exercisable and shall remain exercisable for a period of fifteen days.

          With respect to the Company’s establishment of an exercise window,
(a) any exercise of an Option or SAR during such fifteen-day period shall be
conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event, and (b) upon consummation of
any Corporate Transaction, the Plan and all outstanding but unexercised Options
and SARs shall terminate. The Board shall send written notice of an event that
will result in such a termination to all individuals who hold Options and SARs
not later than the time at which the Company gives notice thereof to its
shareholders. This Section 16.3 shall not apply to any Corporate Transaction to
the extent that (i) provision is made in writing in connection with such
Corporate Transaction for the assumption or continuation of the Options, SARs,
Share Units, Restricted Shares theretofore granted, or for the substitution for
such Options, SARs, Restricted Shares, and Share Units for new common share
options and share appreciation rights and new common restricted shares and share
units relating to the shares of a successor entity, or a parent or

22

--------------------------------------------------------------------------------

 

subsidiary thereof, with appropriate adjustments as to the number of Shares
(disregarding any consideration that is not common shares) of the successor and
option and share appreciation right exercise prices, in which event the Plan,
Options, SARs, Restricted Shares, and Share Units theretofore granted shall
continue in the manner and under the terms so provided or (ii) the Board may
elect, in its sole discretion, to cancel any outstanding Awards of Options,
Restricted Shares, Share Units and/or SARs and pay or deliver, or cause to be
paid or delivered, to the holder thereof an amount in cash or securities having
a value (as determined by the Board acting in good faith), in the case of
Restricted Shares, or Share Units, equal to the formula or fixed price per share
paid to holders of Shares and, in the case of Options or SARs, equal to the
product of the number of Shares subject to the Option or SAR (the “Award
Shares”) multiplied by the amount, if any, by which (A) the formula or fixed
price per share paid to holders of Shares pursuant to such transaction exceeds
(B) the Option Price or SAR Exercise Price applicable to such Award Shares.

     16.4. Adjustments

     Adjustments under this Section 16 related to Shares or securities of the
Company shall be made by the Board, whose determination in that respect shall be
final, binding and conclusive. No fractional shares or other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share. The Board shall determine the effect of a Corporate
Transaction upon Awards other than Options, SARs, Restricted Shares, and Share
Units and such effect shall be set forth in the appropriate Award Agreement. The
Board may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply to
an Award in place of those described in Sections 16.1, 16.2 and 16.3.

     16.5. No Limitations on Company

     The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.

17. GENERAL PROVISIONS

     17.1. Disclaimer of Rights

     No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any Affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a trustee, director,
officer, consultant or employee of the Company or an Affiliate. The obligation
of the Company to

23

--------------------------------------------------------------------------------

 

pay any benefits pursuant to the Plan shall be interpreted as a contractual
obligation to pay only those amounts described herein, in the manner and under
the conditions prescribed herein. The Plan shall in no way be interpreted to
require the Company to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any Grantee or
beneficiary under the terms of the Plan.

     17.2. Nonexclusivity of the Plan

     Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of share options
otherwise than under the Plan.

     17.3. Withholding Taxes

     The Company or an Affiliate, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any Shares upon the exercise of an Option or pursuant to an Award.
At the time of such vesting, lapse, or exercise, the Grantee shall pay to the
Company or the Affiliate, as the case may be, any amount that the Company or the
Affiliate may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company or the Affiliate, which
may be withheld by the Company or the Affiliate, as the case may be, in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in
part, (a) by causing the Company or the Affiliate to withhold Shares otherwise
issuable to the Grantee or (b) by delivering to the Company or the Affiliate
Shares already owned by the Grantee. The Shares so delivered or withheld shall
have an aggregate Fair Market Value equal to such withholding obligations. The
Fair Market Value of the Shares used to satisfy such withholding obligation
shall be determined by the Company or the Affiliate as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this Section 17.3 may satisfy his or her withholding
obligation only with Shares that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements.

     17.4. Captions

     The use of captions in the Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.

     17.5. Other Provisions

     Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.

     17.6. Number and Gender

     With respect to words used in the Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.

24

--------------------------------------------------------------------------------

 

     17.7. Severability

     If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.

     17.8. Governing Law

     The validity and construction of this Plan and the instruments evidencing
the Award hereunder shall be governed by the laws of the State of Maryland,
other than any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of this Plan and the instruments evidencing
the Awards granted hereunder to the substantive laws of any other jurisdiction.

*     *     *

     To record adoption of the Plan by the Board as of October 19, 2004, and
approval of the Plan by the shareholders on October 19, 2004, the Company has
caused its authorized officer to execute the Plan.

              U-STORE-IT TRUST
 
       

  By:   /s/ Steven G. Osgood

     

--------------------------------------------------------------------------------

 

  Name:   Steven G. Osgood

  Title:   President and Chief Financial Officer

25