Moody National REIT II, Inc. 8-K [mnrtii-8k_060717.htm]

Exhibit 10.3

 

     

MOODY NATIONAL REIT II, INC.
AMENDED AND RESTATED
INCENTIVE PLAN

     

 

 

 

 

MOODY NATIONAL REIT II, INC.
INCENTIVE PLAN 

        ARTICLE 1 PURPOSE   1 1.1 General   1 ARTICLE 2 DEFINITIONS   1 2.1
Definitions   1 ARTICLE 3 EFFECTIVE TERM OF PLAN   5 3.1 Effective Date   5 3.2
Termination of Plan   5 ARTICLE 4 ADMINISTRATION   5 4.1 Committee   5 4.2
Actions and Interpretations by the Committee   5 4.3 Authority of Committee   5
4.4 Delegation of Administrative Duties   6 4.5 Indemnification   6 ARTICLE 5
SHARES SUBJECT TO THE PLAN   6 5.1 Number of Shares   6 5.2 Share Counting   6
5.3 Stock Distributed   7 ARTICLE 6 ELIGIBILITY   7 6.1 General   7 ARTICLE 7
STOCK OPTIONS   7 7.1 General   7 7.2 Incentive Stock Options   8 ARTICLE 8
RESTRICTED STOCK AND STOCK UNITS   8 8.1 Grant of Restricted Stock and Stock
Units   8 8.2 Issuance and Restrictions   8 8.3 Dividends on Restricted Stock  
8 8.4 Forfeiture   8 8.5 Delivery of Restricted Stock   8 ARTICLE 9 PERFORMANCE
AWARDS   9 9.1 Grant of Performance Awards   9 9.2 Performance Goals   9 ARTICLE
10 STOCK OR OTHER STOCK-BASED AWARDS   9 10.1 Grant of Stock or Other
Stock-Based Awards   9 ARTICLE 11 PROVISIONS APPLICABLE TO AWARDS   9 11.1 Award
Certificates   9 11.2 Form of Payment of Awards   9 11.3 Limits on Transfer   9
11.4 Beneficiaries   9 11.5 Stock Trading Restrictions   10 11.6 Acceleration
for Any Reason   10 11.7 Forfeiture Events   10 11.8 Substitute Awards   10
ARTICLE 12 CHANGES IN CAPITAL STRUCTURE   10 12.1 Mandatory Adjustments   10
12.2 Discretionary Adjustments   10 12.3 General   10 ARTICLE 13 AMENDMENT,
MODIFICATION AND TERMINATION   11 13.1 Amendment, Modification and Termination  
11 13.2 Awards Previously Granted   11 13.3 Compliance Amendments   11

 

 

 

 

ARTICLE 14 GENERAL PROVISIONS   11 14.1 Rights of Participants   11 14.2
Withholding   12 14.3 Special Provisions Related to Section 409A of the Code  
12 14.4 Unfunded Status of Awards   13 14.5 Relationship to Other Benefits   13
14.6 Expenses   13 14.7 Titles and Headings   13 14.8 Gender and Number   13
14.9 Fractional Shares   13 14.10 Government and Other Regulations   13 14.11
Governing Law   14 14.12 Severability   14 14.13 No Limitations on Rights of
Company   14

 

 

 

 

MOODY NATIONAL REIT II, INC.
AMENDED AND RESTATED
INCENTIVE PLAN

 

ARTICLE 1
PURPOSE

 

1.1.        GENERAL. The purpose of the Moody National REIT II, Inc. Amended and
Restated Incentive Plan (the “Plan”) is to promote the success, and enhance the
value, of Moody National REIT II, Inc. (the “Company”), by linking the personal
interests of employees, officers, directors and consultants of the Company or
any Affiliate (as defined below) to those of Company stockholders and by
providing such persons with an incentive for outstanding performance. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract and retain the services of employees, officers, directors and
consultants upon whose judgment, interest and special effort the successful
conduct of the Company’s operation is largely dependent. Accordingly, the Plan
permits the grant of incentive awards from time to time to selected employees,
officers, directors and consultants of the Company and its Affiliates.

 

ARTICLE 2
DEFINITIONS

 

2.1.        DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:

 

(a)“Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that
directly or through one or more intermediaries controls, is controlled by or is
under common control with, the Company, as determined by the Committee.

 

(b)“Award” means an award of Options, Restricted Stock, Restricted Stock Units,
Deferred Stock Units, Performance Awards, Other Stock-Based Awards, or any other
right or interest relating to Stock, granted to a Participant under the Plan.

 

(c)“Award Certificate” means a written document, in such form as the Committee
prescribes from time to time, setting forth the terms and conditions of an
Award. Award Certificates may be in the form of individual award agreements or
certificates or a program document describing the terms and provisions of an
Award or series of Awards under the Plan. The Committee may provide for the use
of electronic, internet or other non-paper Award Certificates, and the use of
electronic, internet or other non-paper means for the acceptance thereof and
actions thereunder by a Participant.

 

(d)“Beneficial Owner” shall have the meaning given such term in Rule 13d-3 of
the General Rules and Regulations under the 1934 Act.

 

(e)“Board” means the Board of Directors of the Company.

 

(f)“Cause” as a reason for a Participant’s termination of employment shall have
the meaning assigned such term in the employment, severance or similar
agreement, if any, between such Participant and the Company or an Affiliate,
provided, however that if there is no such employment, severance or similar
agreement in which such term is defined, and unless otherwise defined in the
applicable Award Certificate, “Cause” shall mean any of the following acts by
the Participant, as determined by the Committee: gross neglect of duty,
intentionally engaging in activity that is in conflict with or adverse to the
business or other interests of the Company, prolonged absence from duty without
the consent of the Company, material breach by the Participant of any published
Company code of conduct or code of ethics; intentionally engaging in activity
that is in conflict with or adverse to the business or other interests of the
Company; or willful misconduct, misfeasance or malfeasance of duty which is
reasonably determined to be detrimental to the Company. The determination of the
Committee as to the existence of “Cause” shall be conclusive on the Participant
and the Company.

 

 - 1 -

 

  

(g)“Change in Control” means and includes the occurrence of any one of the
following events but shall specifically exclude a Public Offering:

 

(i)         during any consecutive 12-month period, individuals who, at the
beginning of such period, constitute the Board of Directors of the Company (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
such Board, provided that any person becoming a director after the beginning of
such 12-month period and whose election or nomination for election was approved
by a vote of at least a majority of the Incumbent Directors then on the Board
shall be an Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to the election or removal of directors
(“Election Contest”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board (“Proxy Contest”),
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, shall be deemed an Incumbent Director; or

 

(ii)        any Person becomes a Beneficial Owner, directly or indirectly, of
either (A) 40% or more of the then-outstanding shares of common stock of the
Company (“Company Common Stock”) or (B) securities of the Company representing
40% or more of the combined voting power of the Company’s then outstanding
securities eligible to vote for the election of directors (the “Company Voting
Securities”); provided, however, that for purposes of this subsection (ii), the
following acquisitions of Company Common Stock or Company Voting Securities
shall not constitute a Change in Control: (w) an acquisition directly from the
Company, (x) an acquisition by the Company or a Subsidiary, (y) an acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying
Transaction (as defined in subsection (iii) below); or

 

(iii)       the consummation of a reorganization, merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company or a Subsidiary (a “Reorganization”), or the sale or other disposition
of all or substantially all of the Company’s assets (a “Sale”) or the
acquisition of assets or stock of another corporation or other entity (an
“Acquisition”), unless immediately following such Reorganization, Sale or
Acquisition: (A) all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the outstanding Company Common
Stock and outstanding Company Voting Securities immediately prior to such
Reorganization, Sale or Acquisition beneficially own, directly or indirectly,
more than 40% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the entity
resulting from such Reorganization, Sale or Acquisition (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets or stock either directly or
through one or more subsidiaries, the “Surviving Entity”) in substantially the
same proportions as their ownership, immediately prior to such Reorganization,
Sale or Acquisition, of the outstanding Company Common Stock and the outstanding
Company Voting Securities, as the case may be, and (B) no Person (other than (x)
the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent
entity, or (z) any employee benefit plan (or related trust) sponsored or
maintained by any of the foregoing) is the Beneficial Owner, directly or
indirectly, of 40% or more of the total common stock or 40% or more of the total
voting power of the outstanding voting securities eligible to elect directors of
the Surviving Entity, and (C) at least a majority of the members of the board of
directors of the Surviving Entity were Incumbent Directors at the time of the
Board’s approval of the execution of the initial agreement providing for such
Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition
which satisfies all of the criteria specified in (A), (B) and (C) above shall be
deemed to be a “Non-Qualifying Transaction”).

 

(h)“Code” means the Internal Revenue Code of 1986, as amended from time to time.
For purposes of this Plan, references to sections of the Code shall be deemed to
include references to any applicable regulations thereunder and any successor or
similar provision.

 

(i)“Committee” means the committee of the Board described in Article 4.

 

(j)“Company” means Moody National REIT II, Inc., a Maryland corporation, or any
successor corporation.

 

 - 2 -

 

 

(k)“Continuous Service” means the absence of any interruption or termination of
service as an employee, officer, director or consultant of the Company or any
Affiliate, as applicable; provided, however, that for purposes of an Incentive
Stock Option “Continuous Service” means the absence of any interruption or
termination of service as an employee of the Company or any Parent or
Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous
Service shall not be considered interrupted in the following cases: (i) a
Participant transfers employment between the Company and an Affiliate or between
Affiliates, or (ii) in the discretion of the Committee as specified at or prior
to such occurrence, in the case of a spin-off, sale or disposition of the
Participant’s employer from the Company or any Affiliate, (iii) a Participant
transfers from being an employee of the Company or an Affiliate to being a
director of the Company or of an Affiliate, or vice versa, (iv) in the
discretion of the Committee as specified at or prior to such occurrence, a
Participant transfers from being an employee of the Company or an Affiliate to
being a consultant to the Company or of an Affiliate, or vice versa, or (v) any
leave of absence authorized in writing by the Company prior to its commencement;
provided, however, that for purposes of Incentive Stock Options, no such leave
may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 91st day of such
leave any Incentive Stock Option held by the Participant shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Whether military, government or other service or
other leave of absence shall constitute a termination of Continuous Service
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive; provided, however,
that for purposes of any Award that is subject to Code Section 409A, the
determination of a leave of absence must comply with the requirements of a “bona
fide leave of absence” as provided in Treas. Reg. Section 1.409A-1(h).

 

(l)“Deferred Stock Unit” means a right granted to a Participant under Article 8
to receive Shares (or the equivalent value in cash or other property if the
Committee so provides) at a future time as determined by the Committee, or as
determined by the Participant within guidelines established by the Committee in
the case of voluntary deferral elections.

 

(m)“Disability” of a Participant means that the Participant (i) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident or health
plan covering employees of the Participant’s employer. If the determination of
Disability relates to an Incentive Stock Option, Disability means Permanent and
Total Disability as defined in Section 22(e)(3) of the Code. In the event of a
dispute, the determination of whether a Participant has incurred a Disability
will be made by the Committee and may be supported by the advice of a physician
competent in the area to which such Disability relates.

 

(n)“Effective Date” has the meaning assigned such term in Section 3.1.

 

(o)“Eligible Participant” means an employee (including a leased employee),
officer, director or consultant of the Company or any Affiliate.

 

(p)“Exchange” means any national securities exchange on which the Stock may from
time to time be listed or traded.

 

(q)“Fair Market Value,” on any date, means (i) if the Stock is listed on a
securities exchange, the closing sales price on the principal such exchange on
such date or, in the absence of reported sales on such date, the closing sales
price on the immediately preceding date on which sales were reported, or (ii) if
the Stock is not listed on a securities exchange, the mean between the bid and
offered prices as quoted by the applicable interdealer quotation system for such
date, provided that if the Stock is not quoted on an interdealer quotation
system or it is determined that the fair market value is not properly reflected
by such quotations, Fair Market Value will be determined by such other method as
the Committee determines in good faith to be reasonable and in compliance with
Code Section 409A.

 

(r)“Full-Value Award” means an Award other than in the form of an Option, and
which is settled by the issuance of Stock (or at the discretion of the
Committee, settled in cash valued by reference to Stock value).

 

 - 3 -

 

 

(s)“Good Reason” (or a similar term denoting constructive termination) has the
meaning, if any, assigned such term in the employment, consulting, severance or
similar agreement, if any, between a Participant and the Company or an
Affiliate; provided, however, that if there is no such employment, consulting,
severance or similar agreement in which such term is defined, “Good Reason”
shall have the meaning, if any, given such term in the applicable Award
Certificate. If not defined in either such document, the term “Good Reason” as
used herein shall not apply to a particular Award.

 

(t)“Grant Date” of an Award means the first date on which all necessary
corporate action has been taken to approve the grant of the Award as provided in
the Plan, or such later date as is determined and specified as part of that
authorization process. Notice of the grant shall be provided to the grantee
within a reasonable time after the Grant Date.

 

(u)“Incentive Stock Option” means an Option that is intended to be an incentive
stock option and meets the requirements of Section 422 of the Code or any
successor provision thereto.

 

(v)“Independent Director” means a director of the Company who is not a common
law employee of the Company or an Affiliate and who qualifies at any given time
as a “non-employee” director under Rule 16b-3 of the 1934 Act.

 

(w)“Non-Employee Director” means a director of the Company who is not a common
law employee of the Company or an Affiliate.

 

(x)“Nonstatutory Stock Option” means an Option that is not an Incentive Stock
Option.

 

(y)“Option” means a right granted to a Participant under Article 7 of the Plan
to purchase Stock at a specified price during specified time periods. An Option
may be either an Incentive Stock Option or a Nonstatutory Stock Option.

 

(z)“Other Stock-Based Award” means a right, granted to a Participant under
Article 10, that relates to or is valued by reference to Stock or other Awards
relating to Stock.

 

(aa)“Parent” means a corporation, limited liability company, partnership or
other entity which owns or beneficially owns a majority of the outstanding
voting stock or voting power of the Company. Notwithstanding the above, with
respect to an Incentive Stock Option, Parent shall have the meaning set forth in
Section 424(e) of the Code.

 

(bb)“Participant” means an Eligible Participant who has been granted an Award
under the Plan; provided that in the case of the death of a Participant, the
term “Participant” refers to a beneficiary designated pursuant to Section 11.4
or the legal guardian or other legal representative acting in a fiduciary
capacity on behalf of the Participant under applicable state law and court
supervision.

 

(cc)“Performance Award” means any award granted under the Plan pursuant to
Article 9.

 

(dd)“Person” means any individual, entity or group, within the meaning of
Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of
the 1934 Act.

 

(ee)“Plan” means the Moody National REIT II, Inc. 2015 Incentive Plan, as
amended from time to time.

 

(ff)“Public Offering” means a public offering of any class or series of the
Company’s equity securities pursuant to a registration statement filed by the
Company under the 1933 Act.

 

(gg)“Restricted Stock” means Stock granted to a Participant under Article 8 that
is subject to certain restrictions and to risk of forfeiture.

 

(hh)“Restricted Stock Unit” means the right granted to a Participant under
Article 8 to receive shares of Stock (or the equivalent value in cash or other
property if the Committee so provides) in the future, which right is subject to
certain restrictions and to risk of forfeiture.

 

(ii)“Shares” means shares of the Company’s Stock. If there has been an
adjustment or substitution with respect to the Shares (whether or not pursuant
to Article 12), the term “Shares” shall also include any shares of stock or
other securities that are substituted for Shares or into which Shares are
adjusted.

 

(jj)“Stock” means the $0.01 par value Class A common stock of the Company and
such other securities of the Company as may be substituted for Stock pursuant to
Article 12.

 

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(kk)“Subsidiary” means any corporation, limited liability company, partnership
or other entity, domestic or foreign, of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly by the
Company. Notwithstanding the above, with respect to an Incentive Stock Option,
Subsidiary shall have the meaning set forth in Section 424(f) of the Code.

 

(ll)“1933 Act” means the Securities Act of 1933, as amended from time to time.

 

(mm)“1934 Act” means the Securities Exchange Act of 1934, as amended from time
to time.

 

ARTICLE 3
EFFECTIVE TERM OF PLAN

 

3.1.        EFFECTIVE DATE. Subject to the approval of the Plan by the Company’s
stockholders within 12 months after the Plan’s adoption by the Board, the Plan
will become effective on the date that it is adopted by the Board (the
“Effective Date”).

 

3.2.        TERMINATION OF PLAN. Unless earlier terminated as provided herein,
the Plan shall continue in effect until the tenth anniversary of the Effective
Date or, if the stockholders approve an amendment to the Plan that increases the
number of Shares subject to the Plan, the tenth anniversary of the date of such
approval. The termination of the Plan on such date shall not affect the validity
of any Award outstanding on the date of termination, which shall continue to be
governed by the applicable terms and conditions of the Plan. Notwithstanding the
foregoing, no Incentive Stock Options may be granted more than ten (10) years
after the Effective Date.

 

ARTICLE 4
ADMINISTRATION

 

4.1.        COMMITTEE. The Plan shall be administered by a Committee appointed
by the Board (which Committee shall consist of at least two directors) or, at
the discretion of the Board from time to time, the Plan may be administered by
the Board. The members of the Committee shall be appointed by, and may be
changed at any time and from time to time in the discretion of, the Board. It is
intended that at least two of the directors appointed to serve on the Committee
shall be Independent Directors and that any such members of the Committee who do
not so qualify shall abstain from participating in any decision to make or
administer Awards that are made to Eligible Participants who at the time of
consideration for such Award are persons subject to the short-swing profit rules
of Section 16 of the 1934 Act. However, the mere fact that a Committee member
shall fail to qualify under the foregoing requirement or shall fail to abstain
from such action shall not invalidate any Award made by the Committee which
Award is otherwise validly made under the Plan. The Board may reserve to itself
any or all of the authority and responsibility of the Committee under the Plan
or may act as administrator of the Plan for any and all purposes. To the extent
the Board has reserved any authority and responsibility or during any time that
the Board is acting as administrator of the Plan, it shall have all the powers
and protections of the Committee hereunder, and any reference herein to the
Committee (other than in this Section 4.1) shall include the Board. To the
extent any action of the Board under the Plan conflicts with actions taken by
the Committee, the actions of the Board shall control.

 

4.2.        ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of
administering the Plan, the Committee may from time to time adopt rules,
regulations, guidelines and procedures for carrying out the provisions and
purposes of the Plan and make such other determinations, not inconsistent with
the Plan, as the Committee may deem appropriate. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent it deems necessary to carry out the intent
of the Plan. The Committee’s interpretation of the Plan, any Awards granted
under the Plan, any Award Certificate and all decisions and determinations by
the Committee with respect to the Plan are final, binding, and conclusive on all
parties. 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 or any Affiliate, the Company’s or an Affiliate’s
independent certified public accountants, Company counsel or any executive
compensation consultant or other professional retained by the Company or the
Committee to assist in the administration of the Plan. No member of the
Committee will be liable for any good faith determination, act or omission in
connection with the Plan or any Award.

 

4.3.        AUTHORITY OF COMMITTEE. Except as provided in Section 4.1 and 4.5
hereof, the Committee has the exclusive power, authority and discretion to:

 

(a)grant Awards;

 

(b)designate Participants;

 

(c)determine the type or types of Awards to be granted to each Participant;

 

(d)determine the number of Awards to be granted and the number of Shares or
dollar amount to which an Award will relate;

 

 - 5 -

 

 

(e)determine the terms and conditions of any Award granted under the Plan;

 

(f)prescribe the form of each Award Certificate, 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, regulations, guidelines or procedures
as it may deem necessary or advisable to administer the Plan;

 

(i)make all other decisions and determinations that may be required under the
Plan or as the Committee deems necessary or advisable to administer the Plan;

 

(j)amend the Plan or any Award Certificate as provided herein; and

 

(k)adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of the United States or any
non-U.S. jurisdictions in which the Company or any Affiliate may operate, in
order to assure the viability of the benefits of Awards granted to participants
located in the United States or such other jurisdictions and to further the
objectives of the Plan.

 

4.4.        DELEGATION OF ADMINISTRATIVE DUTIES. The Committee may delegate to
one or more of its members or to one or more officers of the Company or an
Affiliate or to one or more agents or advisors such administrative duties or
powers as it may deem advisable, and the Committee or any individuals to whom it
has delegated duties or powers as aforesaid may employ one or more individuals
to render advice with respect to any responsibility the Committee or such
individuals may have under this Plan.

 

4.5.        INDEMNIFICATION. Each person who is or shall have been a member of
the Committee, or of the Board, or an officer of the Company to whom authority
was delegated in accordance with this Article 4 shall be indemnified and held
harmless by the Company against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him or her 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 taken
or failure to act under the Plan and against and from any and all amounts paid
by him or her in settlement thereof, with the Company’s approval, or paid by him
or her in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf, unless such loss, cost,
liability, or expense is a result of his or her own willful misconduct or except
as expressly provided by statute. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company’s charter or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

 

ARTICLE 5
SHARES SUBJECT TO THE PLAN

 

5.1.        NUMBER OF SHARES. Subject to adjustment as provided in Sections 5.2
and Section 12.1, the aggregate number of Shares reserved and available for
issuance pursuant to Awards granted under the Plan shall be 2,000,000. The
maximum number of Shares that may be issued upon exercise of Incentive Stock
Options granted under the Plan shall be 2,000,000. The maximum aggregate number
of Shares associated with any Award granted under the Plan in any 12-month
period to any one Non-Employee Director shall be 2,000,000 Shares. The maximum
number of Shares that may be issued upon the exercise or grant of an Award
granted under the Plan shall not exceed, in the aggregate, an amount equal to
five percent (5%) of the outstanding Shares on the Grant Date.

 

5.2.        SHARE COUNTING. Shares covered by an Award shall be subtracted from
the Plan share reserve as of the Grant Date as provided in subsection (a) below,
but shall be added back to the Plan share reserve or otherwise treated in
accordance with subsections (b) through (i) of this Section 5.2.

 

(a)To the extent that an Award is canceled, terminates, expires, is forfeited or
lapses for any reason, any unissued or forfeited Shares subject to the Award
will be added back to the Plan share reserve and again be available for issuance
pursuant to Awards granted under the Plan.

 

(b)Shares subject to Awards settled in cash will be added back to the Plan share
reserve and again be available for issuance pursuant to Awards granted under the
Plan.

 

(c)Shares withheld or repurchased from an Award or delivered by a Participant to
satisfy minimum tax withholding requirements will be added back to the Plan
share reserve and again be available for issuance pursuant to Awards granted
under the Plan.

 

 - 6 -

 

 

(d)If the exercise price of an Option is satisfied in whole or in part by
delivering Shares to the Company (by either actual delivery or attestation), the
number of Shares so tendered (by delivery or attestation) shall be added to the
Plan share reserve and will be available for issuance pursuant to Awards granted
under the Plan.

 

(e)To the extent that the full number of Shares subject to an Option is not
issued upon exercise of the Option for any reason, including by reason of
net-settlement of the Award, the unissued Shares originally subject to the Award
will be added back to the Plan share reserve and again be available for issuance
pursuant to other Awards granted under the Plan.

 

(f)To the extent that the full number of Shares subject to a Full-Value Award is
not issued for any reason, including by reason of failure to achieve maximum
performance goals, the unissued Shares originally subject to the Award will be
added back to the Plan share reserve and again be available for issuance
pursuant to Awards granted under the Plan.

 

(g)Substitute Awards granted pursuant to Section 11.8 of the Plan shall not
count against the Shares otherwise available for issuance under the Plan under
Section 5.1.

 

(h)Subject to applicable Exchange requirements, shares available under a
stockholder-approved plan of a company acquired by the Company (as appropriately
adjusted to Shares to reflect the transaction) may be issued under the Plan
pursuant to Awards granted to individuals who were not employees of the Company
or its Affiliates immediately before such transaction and will not count against
the maximum share limitation specified in Section 5.1.

 

5.3.        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.

 

ARTICLE 6
ELIGIBILITY

 

6.1.        GENERAL. Awards may be granted only to Eligible Participants.
Incentive Stock Options may be granted only to Eligible Participants who are
employees of the Company or a Parent or Subsidiary as defined in Section 424(e)
and (f) of the Code. Eligible Participants who are service providers to an
Affiliate may be granted Options under this Plan only if the Affiliate qualifies
as an “eligible issuer of service recipient stock” within the meaning of Treas.
Reg. Section 1.409A-1(b)(5)(iii)(E).

 

ARTICLE 7
STOCK OPTIONS

 

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

 

(a)Exercise Price. The exercise price per Share under an Option shall be
determined by the Committee, provided that the exercise price for any Option
(other than an Option issued as a substitute Award pursuant to Section 11.8)
shall not be less than the Fair Market Value as of the Grant Date.

 

(b)Prohibition on Repricing. Except as otherwise provided in Article 12, without
the prior approval of stockholders of the Company: (i) the exercise price of an
Option may not be reduced, directly or indirectly, (ii) an Option may not be
cancelled in exchange for cash, other Awards, or Options with an exercise price
that is less than the exercise price of the original Option, or otherwise and
(iii) the Company may not repurchase an Option for value (in cash or otherwise)
from a Participant if the current Fair Market Value of the Shares underlying the
Option is lower than the exercise price per share of the Option.

 

(c)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, subject to
Section 7.1(e), and may include in the Award Certificate a provision that an
Option that is otherwise exercisable and has an exercise price that is less than
the Fair Market Value of the Stock on the last day of its term will be
automatically exercised on such final date of the term by means of a “net
exercise,” thus entitling the optionee to Shares equal to the intrinsic value of
the Option on such exercise date, less the number of Shares required for tax
withholding. 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 or vested.

 

 - 7 -

 

 

(d)Payment. The Committee shall determine the methods by which the exercise
price of an Option may be paid, the form of payment, and the methods by which
Shares shall be delivered or deemed to be delivered to Participants. As
determined by the Committee at or after the Grant Date, payment of the exercise
price of an Option may be made, in whole or in part, in the form of (i) cash or
cash equivalents, (ii) delivery (by either actual delivery or attestation) of
previously-acquired Shares based on the Fair Market Value of the Shares on the
date the Option is exercised, (iii) withholding of Shares from the Option based
on the Fair Market Value of the Shares on the date the Option is exercised, (iv)
broker-assisted market sales, or (iv) any other “cashless exercise” arrangement.

 

(e)Exercise Term. Except for Nonstatutory Options granted to Participants
outside the United States, no Option granted under the Plan shall be exercisable
for more than ten years from the Grant Date.

 

(f)No Deferral Feature. No Option shall provide for any feature for the deferral
of compensation other than the deferral of recognition of income until the
exercise or disposition of the Option.

 

7.2.        INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the requirements of Section 422 of the
Code. Without limiting the foregoing, any Incentive Stock Option granted to a
Participant who at the Grant Date owns more than 10% of the voting power of all
classes of shares of the Company must have an exercise price per Share of not
less than 110% of the Fair Market Value per Share on the Grant Date and an
Option term of not more than five years. If all of the requirements of Section
422 of the Code (including the above) are not met, the Option shall
automatically become a Nonstatutory Stock Option.

 

ARTICLE 8
RESTRICTED STOCK AND STOCK UNITS

 

8.1.        GRANT OF RESTRICTED STOCK AND STOCK UNITS. The Committee is
authorized to make Awards of Restricted Stock, Restricted Stock Units or
Deferred Stock Units to Participants in such amounts and subject to such terms
and conditions as may be selected by the Committee. An Award of Restricted
Stock, Restricted Stock Units or Deferred Stock Units shall be evidenced by an
Award Certificate setting forth the terms, conditions and restrictions
applicable to the Award.

 

8.2.        ISSUANCE AND RESTRICTIONS. Restricted Stock, Restricted Stock Units
or Deferred Stock Units shall be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, for example,
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, under such circumstances, in such installments,
upon the satisfaction of performance goals or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter. Except as
otherwise provided in an Award Certificate or any special Plan document
governing an Award, a Participant shall have none of the rights of a stockholder
with respect to Restricted Stock Units or Deferred Stock Units until such time
as Shares of Stock are paid in settlement of such Awards.

 

8.3         DIVIDENDS ON RESTRICTED STOCK. In the case of Restricted Stock, the
Committee may provide that ordinary cash dividends declared on the Shares before
they are vested will be (i) forfeited, (ii) deemed to have been reinvested in
additional Shares or otherwise reinvested (subject to Share availability under
Section 5.1 hereof), (iii) credited by the Company to an account for the
Participant and accumulated without interest until the date upon which the host
Award becomes vested, and any dividends accrued with respect to forfeited
Restricted Stock will be reconveyed to the Company without further consideration
or any act or action by the Participant, or (iv) paid or distributed to the
Participant as accrued (in which case, such dividends must be paid or
distributed no later than the 15th day of the 3rd month following the later of
(A) the calendar year in which the corresponding dividends were paid to
stockholders, or (B) the first calendar year in which the Participant’s right to
such dividends is no longer subject to a substantial risk of forfeiture).

 

8.4.        FORFEITURE. Subject to the terms of the Award Certificate and except
as otherwise determined by the Committee at the time of the grant of the Award
or thereafter, upon termination of Continuous Service during the applicable
restriction period or upon failure to satisfy a performance goal during the
applicable restriction period, Restricted Stock or Restricted Stock Units that
are at that time subject to restrictions shall be forfeited.

 

8.5.        DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall be
delivered to the Participant at the Grant Date either by book-entry registration
or by delivering to the Participant, or a custodian or escrow agent (including,
without limitation, the Company or one or more of its employees) designated by
the Committee, a stock certificate or certificates registered in the name of the
Participant. If physical certificates representing shares of Restricted Stock
are registered in the name of the Participant, such certificates must bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock.

 

 - 8 -

 

  

ARTICLE 9
PERFORMANCE AWARDS

 

9.1.         GRANT OF PERFORMANCE AWARDS. The Committee is authorized to grant
any Award under this Plan with performance-based vesting criteria, on such terms
and conditions as may be selected by the Committee. Any such Awards with
performance-based vesting criteria are referred to herein as Performance Awards.
The Committee shall have the complete discretion to determine the number of
Performance Awards granted to each Participant, and to designate the provisions
of such Performance Awards as provided in Section 4.3. All Performance Awards
shall be evidenced by an Award Certificate or a written program established by
the Committee, pursuant to which Performance Awards are awarded under the Plan
under uniform terms, conditions and restrictions set forth in such written
program.

 

9.2.         PERFORMANCE GOALS. The Committee may establish performance goals
for Performance Awards which may be based on any criteria selected by the
Committee. Such performance goals may be described in terms of Company-wide
objectives or in terms of objectives that relate to the performance of the
Participant, an Affiliate or a division, region, department or function within
the Company or an Affiliate. If the Committee determines that a change in the
business, operations, corporate structure or capital structure of the Company or
the manner in which the Company or an Affiliate conducts its business, or other
events or circumstances render performance goals to be unsuitable, the Committee
may modify such performance goals in whole or in part, as the Committee deems
appropriate. If a Participant is promoted, demoted or transferred to a different
business unit or function during a performance period, the Committee may
determine that the performance goals or performance period are no longer
appropriate and may (i) adjust, change or eliminate the performance goals or the
applicable performance period as it deems appropriate to make such goals and
period comparable to the initial goals and period, or (ii) make a cash payment
to the participant in an amount determined by the Committee.

 

ARTICLE 10
STOCK OR OTHER STOCK-BASED AWARDS

 

10.1.       GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, valued in whole or in part
by reference to, or otherwise based on or related to Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including without
limitation Shares awarded purely as a “bonus” and not subject to any
restrictions or conditions, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Shares, and Awards valued by reference
to book value of Shares or the value of securities of or the performance of
specified Parents or Subsidiaries. The Committee shall determine the terms and
conditions of such Awards.

 

ARTICLE 11
PROVISIONS APPLICABLE TO AWARDS

 

11.1.       AWARD CERTIFICATES. Each Award shall be evidenced by an Award
Certificate. Each Award Certificate shall include such provisions, not
inconsistent with the Plan, as may be specified by the Committee.

 

11.2.       FORM OF PAYMENT FOR AWARDS. At the discretion of the Committee,
payment of Awards may be made in cash, Stock, a combination of cash and Stock,
or any other form of property as the Committee shall determine. In addition,
payment of Awards may include such terms, conditions, restrictions and/or
limitations, if any, as the Committee deems appropriate, including, in the case
of Awards paid in the form of Stock, restrictions on transfer and forfeiture
provisions. Further, payment of Awards may be made in the form of a lump sum, or
in installments, as determined by the Committee.

 

11.3.       LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or an Affiliate, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company or an Affiliate. No unexercised or restricted Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution; provided, however, that the Committee may (but
need not) permit other transfers (other than transfers for value) where the
Committee concludes that such transferability (i) does not result in accelerated
taxation, (ii) does not cause any Option intended to be an Incentive Stock
Option to fail to be described in Code Section 422(b) and (iii) is otherwise
appropriate and desirable, taking into account any factors deemed relevant,
including without limitation, state or federal tax or securities laws applicable
to transferable Awards.

 

11.4.       BENEFICIARIES. Notwithstanding Section 11.3, 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 under the Plan is subject to
all terms and conditions of the Plan and any Award Certificate applicable to the
Participant, except to the extent the Plan and Award Certificate otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, any payment due to the Participant shall be made to the
Participant’s estate. Subject to the foregoing, a beneficiary designation may be
changed or revoked by a Participant, in the manner provided by the Company, at
any time provided the change or revocation is filed with the Company.

 

 - 9 -

 

 

11.5.       STOCK TRADING RESTRICTIONS. All Stock issuable under the Plan is
subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate or issue instructions to
the transfer agent to reference restrictions applicable to the Stock.

 

11.6.       ACCELERATION FOR ANY REASON. The Committee may in its sole
discretion at any time determine that all or a portion of a Participant’s
Options or SARs shall become fully or partially exercisable, that all or a part
of the restrictions on all or a portion of a Participant’s outstanding Awards
shall lapse, and/or that any performance-based criteria with respect to any
Awards held by a Participant shall be deemed to be wholly or partially
satisfied, in each case, as of such date as the Committee may, in its sole
discretion, declare. The Committee may discriminate among Participants and among
Awards granted to a Participant in exercising its discretion pursuant to this
Section 11.6.

 

11.7.       FORFEITURE EVENTS. Awards under the Plan shall be subject to any
compensation recoupment policy that the Company may adopt from time to time that
is applicable by its terms to the Participant. In addition, the Committee may
specify in an Award Certificate that the Participant’s rights, payments and
benefits with respect to an Award shall be subject to reduction, cancellation,
forfeiture or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an
Award. Such events may include, but shall not be limited to, (i) termination of
employment for cause, (ii) violation of material Company or Affiliate policies,
(iii) breach of noncompetition, confidentiality or other restrictive covenants
that may apply to the Participant, (iv) other conduct by the Participant that is
detrimental to the business or reputation of the Company or any Affiliate, or
(v) a later determination that the vesting of, or amount realized from, a
Performance Award was based on materially inaccurate financial statements or any
other materially inaccurate performance metric criteria, whether or not the
Participant caused or contributed to such material inaccuracy.

 

11.8.       SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock-based awards held by employees of another
entity who become employees of the Company or an Affiliate as a result of a
merger or consolidation of the former employing entity with the Company or an
Affiliate or the acquisition by the Company or an Affiliate of property or stock
of the former employing corporation. The Committee may direct that the
substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.

 

ARTICLE 12
CHANGES IN CAPITAL STRUCTURE

 

12.1.       MANDATORY ADJUSTMENTS. In the event of a nonreciprocal transaction
between the Company and its stockholders that causes the per-share value of the
Stock to change (including, without limitation, any stock dividend, stock split,
spin-off, rights offering, or large nonrecurring cash dividend), the Committee
shall make such adjustments to the Plan and Awards as it deems necessary, in its
sole discretion, to prevent dilution or enlargement of rights immediately
resulting from such transaction. Action by the Committee may include: (i)
adjustment of the number and kind of shares that may be delivered under the
Plan; (ii) adjustment of the number and kind of shares subject to outstanding
Awards; (iii) adjustment of the exercise price of outstanding Awards or the
measure to be used to determine the amount of the benefit payable on an Award;
and (iv) any other adjustments that the Committee determines to be equitable.
Notwithstanding the foregoing, the Committee shall not make any adjustments to
outstanding Options that would constitute a modification or substitution of the
stock right under Treas. Reg. Section 1.409A-1(b)(5)(v) that would be treated as
the grant of a new stock right or change in the form of payment for purposes of
Code Section 409A. Without limiting the foregoing, in the event of a subdivision
of the outstanding Stock (stock-split), a declaration of a dividend payable in
Shares, or a combination or consolidation of the outstanding Stock into a lesser
number of Shares, the authorization limits under Section 5.1 shall automatically
be adjusted proportionately, and the Shares then subject to each Award shall
automatically, without the necessity for any additional action by the Committee,
be adjusted proportionately without any change in the aggregate purchase price
therefor.

 

12.2        DISCRETIONARY ADJUSTMENTS. Upon the occurrence or in anticipation of
any corporate event or transaction involving the Company (including, without
limitation, any merger, reorganization, recapitalization, combination or
exchange of shares, or any transaction described in Section 12.1), the Committee
may, in its sole discretion, provide (i) that Awards will be settled in cash
rather than Stock, (ii) that Awards will become immediately vested and
non-forfeitable and exercisable (in whole or in part) and will expire after a
designated period of time to the extent not then exercised, (iii) that Awards
will be assumed by another party to a transaction or otherwise be equitably
converted or substituted in connection with such transaction, (iv) that
outstanding Awards may be settled by payment in cash or cash equivalents equal
to the excess of the Fair Market Value of the underlying Stock, as of a
specified date associated with the transaction, over the exercise price of the
Award, (v) that performance targets and performance periods for Performance
Awards will be modified, or (vi) any combination of the foregoing. The
Committee’s determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.

 

12.3        GENERAL. Any discretionary adjustments made pursuant to this Article
12 shall be subject to the provisions of Section 13.2. To the extent that any
adjustments made pursuant to this Article 12 cause Incentive Stock Options to
cease to qualify as Incentive Stock Options, such Options shall be deemed to be
Nonstatutory Stock Options.

 

 - 10 -

 

 

ARTICLE 13
AMENDMENT, MODIFICATION AND TERMINATION

 

13.1.       AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the Plan
without stockholder approval; provided, however, that if an amendment to the
Plan would, in the reasonable opinion of the Board or the Committee, constitute
a material change requiring stockholder approval under applicable laws, policies
or regulations or the applicable listing or other requirements of an Exchange,
then such amendment shall be subject to stockholder approval; and provided,
further, that the Board or Committee may condition any other amendment or
modification on the approval of stockholders of the Company for any reason,
including by reason of such approval being necessary or deemed advisable (i) to
comply with the listing or other requirements of an Exchange, or (ii) to satisfy
any other tax, securities or other applicable laws, policies or regulations.

 

13.2.       AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however:

 

(a)Subject to the terms of the applicable Award Certificate, such amendment,
modification or termination shall not, without the Participant’s consent, reduce
or diminish the value of such Award determined as if the Award had been
exercised, vested, cashed in or otherwise settled on the date of such amendment
or termination (with the per-share value of an Option for this purpose being
calculated as the excess, if any, of the Fair Market Value as of the date of
such amendment or termination over the exercise price of such Award);

 

(b)The original term of an Option may not be extended without the prior approval
of the stockholders of the Company;

 

(c)Except as otherwise provided in Section 12.1, the exercise price of an Option
may not be reduced, directly or indirectly, without the prior approval of the
stockholders of the Company; and

 

(d)No termination, amendment, or modification of the Plan shall adversely affect
any Award previously granted under the Plan, without the written consent of the
Participant affected thereby. An outstanding Award shall not be deemed to be
“adversely affected” by a Plan amendment if such amendment would not reduce or
diminish the value of such Award determined as if the Award had been exercised,
vested, cashed in or otherwise settled on the date of such amendment (with the
per-share value of an Option for this purpose being calculated as the excess, if
any, of the Fair Market Value as of the date of such amendment over the exercise
price of such Award).

 

13.3.       COMPLIANCE AMENDMENTS. Notwithstanding anything in the Plan or in
any Award Certificate to the contrary, the Board may amend the Plan or an Award
Certificate, to take effect retroactively or otherwise, as deemed necessary or
advisable for the purpose of conforming the Plan or Award Certificate to any
present or future law relating to plans of this or similar nature (including,
but not limited to, Section 409A of the Code), and to the administrative
regulations and rulings promulgated thereunder. By accepting an Award under this
Plan, a Participant agrees to any amendment made pursuant to this Section 13.3
to any Award granted under the Plan without further consideration or action.

 

ARTICLE 14
GENERAL PROVISIONS

 

14.1.       RIGHTS OF PARTICIPANTS.

 

(a)No Participant or any Eligible Participant shall have any claim to be granted
any Award under the Plan. Neither the Company, its Affiliates nor the Committee
is obligated to treat Participants or Eligible Participants uniformly, and
determinations made under the Plan may be made by the Committee selectively
among Eligible Participants who receive, or are eligible to receive, Awards
(whether or not such Eligible Participants are similarly situated).

 

(b)Nothing in the Plan, any Award Certificate or any other document or statement
made with respect to the Plan, shall interfere with or limit in any way the
right of the Company or any Affiliate to terminate any Participant’s employment
or status as an officer, or any Participant’s service as a director or
consultant, at any time, nor confer upon any Participant any right to continue
as an employee, officer, director or consultant of the Company or any Affiliate,
whether for the duration of a Participant’s Award or otherwise.

 

(c)Neither an Award nor any benefits arising under this Plan shall constitute an
employment contract with the Company or any Affiliate and, accordingly, subject
to Article 13, this Plan and the benefits hereunder may be terminated at any
time in the sole and exclusive discretion of the Committee without giving rise
to any liability on the part of the Company or an of its Affiliates.

 

 - 11 -

 

 

(d)No Award gives a Participant any of the rights of a stockholder of the
Company unless and until Shares are in fact issued to such person in connection
with such Award.

 

14.2.       WITHHOLDING. The Company or any Affiliate shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the
Company or such Affiliate, an amount sufficient to satisfy federal, state and
local taxes (including the Participant’s FICA obligation) required by law to be
withheld with respect to any exercise, lapse of restriction or other taxable
event arising as a result of the Plan. The obligations of the Company under the
Plan will be conditioned on such payment or arrangements and the Company or such
Affiliate will, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Participant. Unless
otherwise determined by the Committee at the time the Award is granted or
thereafter, any such withholding requirement may be satisfied, in whole or in
part, by withholding from the Award Shares having a Fair Market Value on the
date of withholding equal to the minimum amount (and not any greater amount)
required to be withheld for tax purposes, all in accordance with such procedures
as the Committee establishes. All such elections shall be subject to any
restrictions or limitations that the Committee, in its sole discretion, deems
appropriate.

 

14.3.       SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.

 

(a)General. It is intended that the payments and benefits provided under the
Plan and any Award shall either be exempt from the application of, or comply
with, the requirements of Section 409A of the Code. The Plan and all Award
Certificates shall be construed in a manner that effects such intent.
Nevertheless, the tax treatment of the benefits provided under the Plan or any
Award is not warranted or guaranteed. Neither the Company, its Affiliates nor
their respective directors, officers, employees or advisers (other than in his
or her capacity as a Participant) shall be held liable for any taxes, interest,
penalties or other monetary amounts owed by any Participant or other taxpayer as
a result of the Plan or any Award.

 

(b)Definitional Restrictions. Notwithstanding anything in the Plan or in any
Award Certificate to the contrary, to the extent that any amount or benefit that
would constitute non-exempt “deferred compensation” for purposes of Section 409A
of the Code (“Non-Exempt Deferred Compensation”) would otherwise be payable or
distributable, or a different form of payment (e.g., lump sum or installment) of
such Non-Exempt Deferred Compensation would be effected, under the Plan or any
Award Certificate by reason of the occurrence of a Change in Control, or the
Participant’s Disability or separation from service, such Non-Exempt Deferred
Compensation will not be payable or distributable to the Participant, and/or
such different form of payment will not be effected, by reason of such
circumstance unless the circumstances giving rise to such Change in Control,
Disability or separation from service meet any description or definition of
“change in control event”, “disability” or “separation from service”, as the
case may be, in Section 409A of the Code and applicable regulations (without
giving effect to any elective provisions that may be available under such
definition). This provision does not affect the dollar amount or prohibit the
vesting of any Non-Exempt Deferred Compensation upon a Change in Control,
Disability or termination of employment, however defined. If this provision
prevents the payment or distribution of any Non-Exempt Deferred Compensation, or
the application of a different form of payment, such payment or distribution
shall be made at the time and in the form that would have applied absent the
non-409A-conforming event.

 

(c)Allocation among Possible Exemptions. If any one or more Awards granted under
the Plan to a Participant could qualify for any separation pay exemption
described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the
aggregate exceed the dollar limit permitted for the separation pay exemptions,
the Company shall determine which Awards or portions thereof will be subject to
such exemptions.

 

(d)Six-Month Delay in Certain Circumstances. Notwithstanding anything in the
Plan or in any Award Certificate to the contrary, if any amount or benefit that
would constitute Non-Exempt Deferred Compensation would otherwise be payable or
distributable under this Plan or any Award Certificate by reason of a
Participant’s separation from service during a period in which the Participant
is a Specified Employee (as defined below), then, subject to any permissible
acceleration of payment by the Committee under Treas. Reg. Section
1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of
interest), or (j)(4)(vi) (payment of employment taxes):

 

(i)the amount of such Non-Exempt Deferred Compensation that would otherwise be
payable during the six-month period immediately following the Participant’s
separation from service will be accumulated through and paid or provided on the
first day of the seventh month following the Participant’s separation from
service (or, if the Participant dies during such period, within 30 days after
the Participant’s death) (in either case, the “Required Delay Period”); and

 

 - 12 -

 

 

(ii)the normal payment or distribution schedule for any remaining payments or
distributions will resume at the end of the Required Delay Period.

 

For purposes of this Plan, the term “Specified Employee” has the meaning given
such term in Code Section 409A and the final regulations thereunder.

 

(e)Installment Payments. If, pursuant to an Award, a Participant is entitled to
a series of installment payments, such Participant’s right to the series of
installment payments shall be treated as a right to a series of separate
payments and not to a single payment. For purposes of the preceding sentence,
the term “series of installment payments” has the meaning provided in Treas.
Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).

 

(f)Timing of Release of Claims. Whenever an Award conditions a payment or
benefit on the Participant’s execution and non-revocation of a release of
claims, such release must be executed and all revocation periods shall have
expired within 60 days after the date of termination of the Participant’s
employment; failing which such payment or benefit shall be forfeited. If such
payment or benefit is exempt from Section 409A of the Code, the Company may
elect to make or commence payment at any time during such 60-day period. If such
payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject
to subsection (c) above, (i) if such 60-day period begins and ends in a single
calendar year, the Company may make or commence payment at any time during such
period at its discretion, and (ii) if such 60-day period begins in one calendar
year and ends in the next calendar year, the payment shall be made or commence
during the second such calendar year (or any later date specified for such
payment under the applicable Award), even if such signing and non-revocation of
the release occur during the first such calendar year included within such
60-day period. In other words, a Participant is not permitted to influence the
calendar year of payment based on the timing of signing the release.

 

(g)Permitted Acceleration. The Company shall have the sole authority to make any
accelerated distribution permissible under Treas. Reg. section 1.409A-3(j)(4) to
Participants of deferred amounts, provided that such distribution(s) meets the
requirements of Treas. Reg. section 1.409A-3(j)(4).

 

14.4.       UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded”
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Certificate shall give the Participant any rights that are greater
than those of a general creditor of the Company or any Affiliate. In its sole
discretion, the Committee may authorize the creation of grantor trusts or other
arrangements to meet the obligations created under the Plan to deliver Shares or
payments in lieu of Shares or with respect to Awards. This Plan is not intended
to be subject to ERISA.

 

14.5.       RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company
or any Affiliate unless provided otherwise in such other plan. Nothing contained
in the Plan will prevent the Company from adopting other or additional
compensation arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally applicable or applicable
only in specific cases.

 

14.6.       EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Affiliates.

 

14.7.       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.

 

14.8.       GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

 

14.9.       FRACTIONAL SHARES. No fractional Shares 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.

 

14.10.     GOVERNMENT AND OTHER REGULATIONS.

 

(a)Notwithstanding any other provision of the Plan, no Participant who acquires
Shares pursuant to the Plan may, during any period of time that such Participant
is an affiliate of the Company (within the meaning of the rules and regulations
of the Securities and Exchange Commission under the 1933 Act), sell such Shares,
unless such offer and sale is made (i) pursuant to an effective registration
statement under the 1933 Act, which is current and includes the Shares to be
sold, or (ii) pursuant to an appropriate exemption from the registration
requirement of the 1933 Act, such as that set forth in Rule 144 promulgated
under the 1933 Act.

 

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(b)Notwithstanding any other provision of the Plan, if at any time the Committee
shall determine that the registration, listing or qualification of the Shares
covered by an Award upon any Exchange or under any foreign, federal, state or
local law or practice, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such Award or the purchase or receipt of Shares thereunder, no
Shares may be purchased, delivered or received pursuant to such Award unless and
until such registration, listing, qualification, consent or approval shall have
been effected or obtained free of any condition not acceptable to the Committee.
Any Participant receiving or purchasing Shares pursuant to an Award shall make
such representations and agreements and furnish such information as the
Committee may request to assure compliance with the foregoing or any other
applicable legal requirements. The Company shall not be required to issue or
deliver any certificate or certificates for Shares under the Plan prior to the
Committee’s determination that all related requirements have been fulfilled. The
Company shall in no event be obligated to register any securities pursuant to
the 1933 Act or applicable state or foreign law or to take any other action in
order to cause the issuance and delivery of such certificates to comply with any
such law, regulation or requirement.

 

14.11.    GOVERNING LAW. To the extent not governed by federal law, the Plan and
all Award Certificates shall be construed in accordance with and governed by the
laws of the State of Maryland.

 

14.12.    SEVERABILITY. In the event that any provision of this Plan is found to
be invalid or otherwise unenforceable under any applicable law, such invalidity
or unenforceability will not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions will
be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.

 

14.13.    NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shall not
in any way affect the right or power of the Company to make adjustments,
reclassification or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell or transfer all or any part of its
business or assets. The Plan shall not restrict the authority of the Company,
for proper corporate purposes, to draft or assume awards, other than under the
Plan, to or with respect to any person. If the Committee so directs, the Company
may issue or transfer Shares to an Affiliate, for such lawful consideration as
the Committee may specify, upon the condition or understanding that the
Affiliate will transfer such Shares to a Participant in accordance with the
terms of an Award granted to such Participant and specified by the Committee
pursuant to the provisions of the Plan.

 

The foregoing is hereby acknowledged as being the Moody National REIT II, Inc.
Amended and Restated Incentive Plan as adopted by the Board on June 12, 2017.

        MOODY NATIONAL REIT II, INC.         By: /s/ Brett C. Moody   Name:
Brett C. Moody   Its: Chairman of the Board, Chief Executive Officer
and President

 

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