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                                                                    EXHIBIT 10.4


                   EMPLOYEE AND DIRECTOR INCENTIVE SHARE PLAN

                                       OF

                    HINES REAL ESTATE INVESTMENT TRUST, INC.


1. PURPOSES OF THE PLAN AND DEFINITIONS

         1.1 Purposes. The purposes of the Employee and Director Incentive Share
Plan (the "Plan") of Hines Real Estate Investment Trust, Inc. (the "Company")
are to:

                  (a) provide incentives to individuals chosen to receive
         share-based awards because of their ability to improve operations and
         increase profits;

                  (b) encourage selected persons to accept or continue
         employment with the Company or any Advisor or Affiliate of the Company;
         and

                  (c) increase the interest of Directors in the Company's
         welfare through their participation in the growth in value of the
         Company's Shares.

         To accomplish these purposes, this Plan provides a means whereby
Employees of the Company or any Advisor or Affiliate of the Company, Directors
and other enumerated persons may receive Awards.

         1.2 Definitions. For purposes of this Plan, the following terms have
the following meanings:

         "Advisor" means the Person or Persons, if any, appointed, employed or
contracted with by the Company pursuant to Section 4 hereof and responsible for
directing or performing the day-to-day business affairs of the Company,
including any Person to whom the Advisor subcontracts substantially all of such
functions. The initial Advisor is Hines Advisors Limited Partnership.

         "Affiliate" means any Person (other than an Advisor), whose employees
(as such term is defined in the Form S-8 registration statement under the
Securities Act) are eligible to receive Awards under the Plan. The determination
of whether a Person is an Affiliate shall be made by the Committee acting in its
sole and absolute discretion.

          "Applicable Laws" means the requirements relating to the
administration of Awards under U.S. state corporate laws, U.S. Federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Shares are listed or quoted and the applicable laws of any foreign country or
jurisdiction where Awards are, or will be, granted under the Plan.

         "Articles of Incorporation" means the articles of incorporation of the
Company as the same may be amended from time to time.


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         "Award" means any award under this Plan, including any grant of
Options, Restricted Shares, Share Appreciation Rights, Dividend Equivalent
Rights or Director Shares.

         "Award Agreement" means, with respect to each Award, the written
agreement executed by the Company and the Participant or other written document
approved by the Committee setting forth the terms and conditions of the Award.

         "Board" means the Board of Directors of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.

         "Committee" has the meaning given it in Section 4.1.

         "Common Shares" or "Shares" means common shares of capital stock of the
Company, $.001 par value per share.

         "Company" has the meaning given it in Section 1.1.

         "Director" means a person elected or appointed and serving as director
of the Company in accordance with the Articles of Incorporation and the Maryland
General Corporation Law.

         "Director Option" has the meaning given it in Section 5.3.

         "Director Shares" means Shares issued under Section 10.

         "Dividend Equivalent Right" means an Award of rights pursuant to
Section 9.

         "Effective Date" has the meaning given it in Section 19.

         "Employee" has the meaning ascribed to it for purposes of Section
3401(c) of the Code and the Treasury Regulations adopted under that Section. An
employee includes an officer or a Director who is an employee of the Company.

         "Employment Termination" means that a Participant has ceased, for any
reason and with or without cause, to be an Employee or Director of, or a
consultant to, the Company, the Advisor or any Affiliate of the Company.
However, the term "Employment Termination" shall not include a Non-Employee
Director's ceasing to be a Director or a transfer of a Participant from the
Company to the Advisor or an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence duly authorized by the Company unless the
Committee has provided otherwise.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.


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         "Exercise Notice" has the meaning given it in Section 6.1(h).

         "Fair Market Value" means with respect to Shares:

                  (i) If the Shares are listed on any established stock exchange
or a national market system, including, without limitation, the NASDAQ National
Market System, their Fair Market Value shall be the closing sales price for the
Shares, or the mean between the high bid and low asked prices if no sales were
reported, as quoted on such system or exchange (or, if the Shares are listed on
more than one exchange, then on the largest such exchange) for the date the
value is to be determined (or if there are no sales or bids for such date, then
for the last preceding business day on which there were sales or bids), as
reported in The Wall Street Journal or similar publication.

                  (ii) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, or if there is no market
for the Shares, their Fair Market Value shall be determined in good faith by the
Committee, with reference to the Company's net worth, prospective earning power,
dividend-paying capacity and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
enterprises in the same or similar lines of business.

         "Grant Date" has the meaning given it in Section 6.1(d).

         "Incentive Share Option" or "ISO" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code, and any successor provision.

         "Non-Employee Director" means a person who is a non-employee director
as defined in Rule 16b-3 or a person who is an outside director as defined in
Treasury Regulation 1.162-27(e)(3).

         "Non-Qualified Share Option" or "NQO" means any Option that is not an
Incentive Share Option.

         "Option" means an option granted under Section 5.

         "Participant" means an eligible person who is granted an Award.

         "Person" means a corporation, partnership, trust, association or any
other entity.

         "Plan" means this Employee and Director Incentive Share Plan.

         "Related Corporation" means a parent or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code.


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         "Restricted Shares" means an Award granted under Section 7.

         "Retainer" has the meaning given it in Section 10.1.

         "Rule 16b-3" means Rule 16b-3 adopted under Section 16(b) of the
Exchange Act or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rules 16b-3 refer to the corresponding
paragraphs or clauses of Rule 16b-3 as it exists at the Effective Date or the
comparable paragraph or clause of Rule 16b-3 or successor rule, as that
paragraph or clause may thereafter be amended.

         "Section 16(b)" means Section 16(b) under the Exchange Act.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor statute.

         "Share Appreciation Right" means an Award granted under Section 8.

         "Ten Percent Stockholder" means any person who, at the time this
definition is being applied, owns, directly or indirectly (or is treated as
owning by reason of attribution rules currently set forth in Code Section 424 or
any successor statute), shares of the Company constituting more than 10% of the
total combined voting power of all classes of outstanding shares of the Company
or any Related Corporation.

2. ELIGIBLE PERSONS

         Every person who, at or as of the Grant Date, is (a) a full-time
Employee of the Company, the Advisor or any Affiliate of the Company, (b) a
Director of the Company or a director of any Affiliate of the Company, or (c)
someone whom the Committee designates as eligible for an Award (other than for
Incentive Share Options) because the person (i) performs bona fide consulting or
advisory services for the Company, the Advisor or any Affiliate of the Company
pursuant to a written agreement (other than services in connection with the
offer or sale of securities in a capital-raising transaction), and (ii) has a
direct and significant effect on the financial development of the Company or any
Affiliate of the Company, shall be eligible to receive Awards hereunder.
Directors of the Company who are not full-time Employees are only eligible to
receive Director Options under Section 5.3 and Director Shares under Section 10.

3. SHARES SUBJECT TO THIS PLAN

         The total number of Shares that may be issued under Awards is a number
of Shares equal to 5% of the Company's outstanding Shares on a fully diluted
basis, with such number of Shares not to exceed 10,000,000. The maximum number
of Shares with respect to which Options or Share Appreciation Rights may be
granted to an Employee during each [ o ] year period is [ o ]. Such Shares may
consist, in whole or in part, of authorized and unissued Common Shares or Shares
reacquired in private transactions or open market purchases, but all Shares
issued under the Plan, regardless of their source, shall be counted against the
Share limitation. Any Shares that are retained by the Company upon exercise or
settlement of an Award in order to satisfy the exercise


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price in whole or in part, or to pay withholding taxes due with respect to such
exercise or settlement, shall be treated as issued to the Participant and will
thereafter not be available under the Plan. Any Shares subject to unexercised
portions of Options granted under the Plan which shall have been terminated,
cancelled or that have expired may again be subject to Options hereunder. The
number of Shares reserved for issuance under this Plan is subject to adjustment
in accordance with the provisions for adjustment in Section 6.1.

4. ADMINISTRATION

         4.1 Committee.

         (a) In General. This Plan shall be administered by a committee (the
"Committee") appointed by the Board. The number of persons who shall constitute
the Committee shall be determined from time to time by a majority of all the
members of the Board; provided, however, that the Committee shall not consist of
fewer than two persons.

         (b) Section 162(m). To the extent the Board desires to qualify Awards
granted under this Plan as "performance based compensation" within the meaning
of section 162(m) of the Code, the Plan shall be administered by a Committee of
two or more "outside directors" as defined in Treasury Regulation
1.162-27(e)(3).

         (c) Rule 16b-3. To the extent desirable to qualify transactions under
this Plan as exempt under Rule 16b-3, a Committee consisting solely of two or
more "non-employee directors" as defined in Rule 16b-3, must approve such
transactions.

         4.2 Duration, Removal, Etc. The members of the Committee shall serve at
the pleasure of the Board, which shall have the power, at any time and from time
to time, to remove members from or add members to the Committee. Removal from
the Committee may be with or without cause. Any individual serving as a member
of the Committee shall have the right to resign from the Committee by giving at
least three days' prior written notice to the Board. The Board, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused. The Board shall promptly fill any
vacancy that causes the number of members of the Committee to be fewer than two
or any other minimum number required to comply with Rule 16b-3 or section 162(m)
of the Code, (unless the Board expressly determines not to have Awards under the
Plan comply with Rule 16b-3 or section 162(m) of the Code, respectively).

         4.3 Meetings and Actions of Committee. The Board shall designate which
of the Committee members shall be the chairperson of the Committee. If the Board
fails to designate a chairperson for the Committee, the members of the Committee
shall elect one of the Committee members as chairperson, who shall act as
chairperson until he or she ceases to be a member of the Committee or until the
Board (or the Committee) elects a new chairperson. The Committee may make any
rules and regulations for the conduct of its business that are not inconsistent
with this Plan, the Articles of Incorporation, the Bylaws of the Company or
Applicable Laws.


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         4.4 Committee's Powers. Subject to the express provisions of this Plan,
the Committee shall have the authority, in its sole discretion:

         (a) to adopt, amend and rescind administrative and interpretive rules
and regulations relating to the Plan;

         (b) to determine the eligible persons to whom, and the time or times at
which, Awards shall be granted;

         (c) to determine the number of Shares that shall be the subject of each
Award;

         (d) to determine the terms and provisions of each Award Agreement
(which need not be identical) and any amendments thereto, including provisions
defining or otherwise relating to:

                  (i) the period or periods and extent of exercisability of any
Option or Share Appreciation Right;

                  (ii) the extent to which the transferability of Shares issued
or transferred pursuant to any Award is restricted;

                  (iii) the effect of Employment Termination on an Award; and

                  (iv) the effect of approved leaves of absence;

         (e) to accelerate the time of exercisability of any Option, Dividend
Equivalent Right or Share Appreciation Right;

         (f) to construe the respective Award Agreements and the Plan;

         (g) to make determinations of the Fair Market Value of Shares;

         (h) to waive any provision, condition or limitation set forth in an
Award Agreement;

         (i) to delegate its duties under the Plan to such agents as it may
appoint from time to time; provided, however, that the Committee may not
delegate its duties with respect to making or exercising discretion with respect
to Awards to eligible persons if such delegation would cause Awards not to
qualify for the exemptions provided by Rule 16b-3 or section 162(m) of the Code
(unless the Board expressly determines not to have Awards under the Plan comply
with Rule 16b-3 or section 162(m) of the Code, respectively); and

         (j) to make all other determinations, perform all other acts and
exercise all other powers and authority necessary or advisable for administering
the Plan, including the delegation of those ministerial acts and
responsibilities as the Committee deems appropriate.

         The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan, in any Award or in any Award Agreement in the
manner and to the extent it deems


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necessary or desirable to implement the Plan, and the Committee shall be the
sole and final judge of that necessity or desirability. The determinations of
the Committee on the matters referred to in this Section 4.4 shall be final and
conclusive. Notwithstanding any provision in this Plan to the contrary, Awards
will be made to Non-Employee Directors only under Sections 5.3 and 10 of this
Plan. In addition, notwithstanding any provision of this Plan to the contrary,
the Committee may not in any manner exercise discretion under the Plan with
respect to any Awards made to Non-Employee Directors.

         4.5 Term of Plan. No Awards shall be granted under this Plan after 10
years from the Effective Date of this Plan.

5. GRANT OF OPTIONS

         5.1 Written Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify whether each Option it evidences is
an NQO or an ISO.

         5.2 Annual $100,000 Limitation on ISOs. To the extent that the
aggregate Fair Market Value of Shares with respect to which ISOs first become
exercisable by a Participant in any calendar year exceeds $100,000, taking into
account ISOs granted under this Plan and any other plan of the Company or any
Related Corporation, the Options covering such additional Shares becoming
exercisable in that year shall cease to be ISOs and thereafter be NQOs. For this
purpose, the Fair Market Value of Shares subject to Options shall be determined
as of the date the Options were granted. In reducing the number of Options
treated as ISOs to meet this $100,000 limit, the most recently granted Options
shall be reduced first.

         5.3 Annual Grants to Non-Employee Directors. On the last day of each
calendar year beginning with the last day of 2004, if the Committee so approves,
each individual who is a Non-Employee Director, and who is then a member of the
Board shall be granted an NQO to purchase [1,000 Shares] (each such Option is
referred to herein as a "Director Option"). The exercise price of Director
Options shall be the Fair Market Value of the Shares subject to such Option on
the date the Option is granted. Each Director Option shall be fully exercisable
twelve months after the date of grant and continuing, unless sooner terminated
as provided in this Plan, for 10 years after the date it is granted. If, for any
reason other than death or permanent and total disability (within the meaning of
Section 22(e)(3) of the Code), a Non-Employee Director ceases to be a member of
the Board, each Director Option held by that Non-Employee Director on the date
that the Non-Employee Director ceases to be a member of the Board may be
exercised in whole or in part at any time within one year after the date of such
termination or until the expiration of the Director Option, whichever is
earlier. If a Non-Employee Director dies or becomes permanently and totally
disabled (within the meaning of Section 22(e)(3) of the Code) while a member of
the Board (or within the period that the Director Options remain exercisable
after the Non-Employee Director ceases to be a member of the Board), each
Director Option then held by that Non-Employee Director may be exercised, in
whole or in part, by the Non-Employee Director, by the Non-Employee Director's
personal representative or by the person to whom the Non-Employee Director
transferred the Director Option by will or the laws of descent and distribution,
at any time within two years after the date of death or permanent and total
disability of the Non-Employee


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Director or until the expiration date of the Director Option, whichever is
earlier. Each Director Option shall be evidenced by an Award Agreement.

6. CERTAIN TERMS AND CONDITIONS OF OPTIONS AND OTHER AWARDS

         Each Option shall be designated as an ISO or an NQO and shall be
subject to the terms and conditions set forth in Section 6.1. Notwithstanding
the foregoing, the Committee may provide for different terms and conditions in
any Award Agreement or amendment thereto as provided in Section 4.4.

         6.1 All Awards. All Options and other Awards shall be subject to the
following terms and conditions:

         (a) Changes in Capital Structure. If the number of outstanding Shares
is increased by means of a share dividend payable in Shares, a share split or
other subdivision or by a reclassification of Shares, then, from and after the
record date for such dividend, subdivision or reclassification, the number and
class of Shares subject to this Plan (including without limitation in Sections
3, 5.3 and 10) and each outstanding Award shall be increased in proportion to
such increase in outstanding Shares and the then-applicable exercise price of
each outstanding Award shall be correspondingly decreased. If the number of
outstanding Shares is decreased by means of a share split or other subdivision
or by a reclassification of Shares, then, from and after the record date for
such split, subdivision or reclassification, the number and class of Shares
subject to this Plan (including without limitation in Sections 3, 5.3 and 10)
and each outstanding Award shall be decreased in proportion to such decrease in
outstanding Shares and the then-applicable exercise price of each outstanding
Award shall be correspondingly increased.

         (b) Certain Corporate Transactions. In the case of any reclassification
or change of outstanding Shares issuable upon exercise of an outstanding Award
or in the case of any consolidation or merger of the Company with or into
another entity (other than a merger in which the Company is the surviving entity
and which does not result in any reclassification or change in the
then-outstanding Shares) or in the case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company or such successor or purchasing entity,
as the case may be, shall make lawful and adequate provision whereby the holder
of each outstanding Award shall thereafter have the right, on exercise of such
Award, to receive the kind and amount of securities, property and/or cash
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of securities issuable upon exercise of
such Award immediately before such reclassification, change, consolidation,
merger, sale or conveyance. Such provision shall include adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 6.1(a). Notwithstanding the foregoing, if such a transaction occurs, in
lieu of causing such rights to be substituted for outstanding Awards, the
Committee may, upon 20 days' prior written notice to Participants in its sole
discretion: (i) shorten the period during which Awards are exercisable, provided
they remain exercisable, to the extent otherwise exercisable, for at least 20
days after the date the notice is given, or (ii) cancel an Award upon payment to
the Participant in cash, with respect to each Award to the extent then
exercisable, of an amount which, in the sole discretion of


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the Committee, is determined to be equivalent to the amount, if any, by which
the Fair Market Value (at the effective time of the transaction) of the
consideration that the Participant would have received if the Award had been
exercised before the effective time exceeds the exercise price of the Award. The
actions described in this Section 6.1(b) may be taken without regard to any
resulting tax consequences to the Participant.

         (c) Special Rule For Non-Employee Directors. In the event of any
transaction described in the second sentence of Section 6.1(b) the Director
Options shall become fully vested and exercisable. To the extent not exercised,
Director Options shall terminate on the date immediately prior to consummation
of a transaction described in Section 6.1(b).

         (d) Grant Date. Each Award Agreement shall specify the date as of which
it shall be effective (the "Grant Date").

         (e) Time of Exercise; Vesting. Awards may, in the sole discretion of
the Committee, be exercisable or may vest, and restrictions may lapse, as the
case may be, at such times and in such amounts as may be specified by the
Committee in the grant of the Award.

         (f) Nonassignability of Rights. Awards shall not be transferable other
than with the consent of the Committee (which consent will not be granted in the
case of ISOs unless the conditions for transfer of ISOs specified in the Code
have been satisfied) or by will or the laws of the descent and distribution.
Awards requiring exercise shall be exercisable only by the Participant,
assignees that were approved by the Committee, executors, administrators or
beneficiaries of the Participant (who are the permitted transferees hereunder),
guardians or members of a committee for an incompetent Participant, or similar
persons duly authorized by law to administer the estate or assets of a
Participant.

         (g) Notice and Payment. To the extent it is exercisable, an Award shall
be exercisable only by written or recorded electronic notice of exercise, in the
manner specified by the Committee from time to time, delivered to the Company or
its designated agent during the term of the Award (the "Exercise Notice"). The
Exercise Notice shall: (i) state the number of Shares with respect to which the
Award is being exercised; (ii) be signed by the holder of the Award or by the
person authorized to exercise the Award pursuant to Section 6.1(f); and (iii)
include such other information, instruments and documents as may be required to
satisfy any other condition to exercise set forth in the Award Agreement. Except
as provided below, payment in full, in cash or check, shall be made for all
Shares purchased at the time notice of exercise of an Award is given to the
Company. The proceeds of any payment shall constitute general funds of the
Company. At the time an Award is granted or before it is exercised, the
Committee, in the exercise of its sole discretion, may authorize any one or more
of the following additional methods of payment:

                  (i) for all Participants other than officers and Directors,
acceptance of each such Participant's full recourse promissory note for some or
all (to the extent permitted by law) of the exercise price of the Shares being
acquired, payable on such terms and rate of interest as determined by the
Committee, and secured in such manner, if at all, as the Committee shall
approve, including, without limitation, by a security interest in the Shares
which are the subject of the Award or other securities;


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                  (ii) for all Participants, delivery by each such Participant
of Shares already owned by such Participant for all or part of the exercise
price of the Award being exercised, provided that the Fair Market Value of such
Shares is equal on the date of exercise to the exercise price of the Award being
exercised, or such portion thereof as the Participant is authorized to pay and
elects to pay by delivery of such Shares;

                  (iii) for all Participants, surrender by each such
Participant, or withholding by the Company from the Shares issuable upon
exercise of the Award, of a number of Shares subject to the Award being
exercised with a Fair Market Value equal to some or all of the exercise price of
the Shares being acquired, together with such documentation as the Committee and
the broker, if applicable, shall require; or

                  (iv) for all Participants, payment may be made pursuant to a
cashless exercise arrangement approved by the Committee.

         If the exercise price is satisfied in whole or in part by the delivery
of Shares pursuant to paragraph (ii) above, and provided that all such Shares
have been held by the Participant for at least six months, the Committee may
issue the Participant an additional Option, with terms identical to those set
forth in the option agreement governing the exercised Option, except for the
exercise price which shall be the fair market value used for such delivery and
the number of Shares subject to such additional Option shall be the number of
Shares so delivered.

         (h) Termination of Employment from the Company, the Advisor or any
Affiliate of the Company. Any Award or portion thereof which has not vested on
or before the date of a Participant's Employment Termination shall expire on the
date of such Employment Termination. as to an Award or portion thereof that has
vested by the time of Employment Termination, the Committee shall establish, in
respect of each Award when granted, the effect of an Employment Termination on
the rights and benefits thereunder and in so doing may, but need not, make
distinctions based upon the cause of termination (such as retirement, death,
disability or other factors) or which party effected the termination (the
employer or the Employee). Notwithstanding any other provision in this Plan or
the Award Agreement, the Committee may decide in its discretion at the time of
any Employment Termination (or within a reasonable time thereafter) to extend
the exercise period of an Award (but not beyond the period specified in Section
6.2(b) or 6.3(b), as applicable) and not decrease the number of Shares covered
by the Award with respect to which the Award is exercisable or vested. A
transfer of a Participant from the Company to the Advisor or an Affiliate or
vice versa, or from one Affiliate to another, or a leave of absence duly
authorized by the Company, shall not be deemed an Employment Termination or a
break in continuous employment unless the Committee has provided otherwise.

         (i) Death, Disability or Retirement. Any Award or portion thereof which
has not vested on or before the date of the Participant's death, disability or
retirement shall expire on the date of such Participant's death, disability or
retirement. As to an Award or portion thereof that has vested by the date of
death, disability or retirement of the Participant, such Awards or portions
thereof must be exercised within two years of the date of the Participant's
death, disability or retirement by the Participant or a person authorized under
this Plan to exercise such Award.


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         (j) Other Provisions. Each Award Agreement may contain such other
terms, provisions and conditions not inconsistent with this Plan, as may be
determined by the Committee, and each ISO granted under this Plan shall include
such provisions and conditions as are necessary to qualify such Option as an
"incentive stock option" within the meaning of Section 422 of the Code.

         (k) Withholding and Employment Taxes. At the time of exercise of an
Award, the lapse of restrictions on an Award or a disqualifying disposition of
Shares issued under an ISO (within the meaning of Section 6.3(c)), the
Participant shall remit to the Company in cash all applicable Federal and state
withholding and employment taxes. If and to the extent authorized and approved
by the Committee in its sole discretion, a Participant may elect, by means of a
form of election to be prescribed by the Committee, to have Shares which are
acquired upon exercise of an Award withheld by the Company or tender other
Shares owned by the Participant to the Company at the time that the amount of
such taxes is determined, in order to pay the amount of such tax obligations,
subject to any limitations as the Committee determines are necessary or
appropriate. Any Shares so withheld or tendered shall be valued by the Company
as of the date they are withheld or tendered. If Shares are tendered to satisfy
such withholding tax obligation, the Committee may issue the Participant an
additional Option, with terms identical to those set forth in the option
agreement governing the Option exercised, except that the exercise price shall
be the Fair Market Value used by the Company in accepting the tender of Shares
for such purpose and the number of Shares subject to the additional Option shall
be the number of Shares tendered by the Participant.

         6.2 Terms and Conditions to Which Only NQOs Are Subject. Options
granted under this Plan which are designated as NQOs shall be subject to the
following terms and conditions:

         (a) Exercise Price. The exercise price of an NQO shall be determined by
the Committee; provided, however, that the exercise price of an NQO shall not be
less than the fair market value of the Shares subject to the Option on the Grant
Date.

         (b) Option Term. Unless the Committee specifies an earlier expiration
date at the Grant Date, each NQO shall expire 10 years after the Grant Date.

         6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:

         (a) Exercise Price. The exercise price of an ISO shall be determined in
accordance with the applicable provisions of the Code and shall in no event be
less than the Fair Market Value of the Shares covered by the ISO at the Grant
Date; provided, however, that the exercise price of an ISO granted to a Ten
Percent Stockholder shall not be less than 110% of such fair market value.

         (b) Option Term. Unless an earlier expiration date is specified by the
Committee at the Grant Date, each ISO shall expire 10 years after the Grant
Date; provided, however, that an ISO granted to a Ten Percent Stockholder shall
expire no later than five years after the Grant Date.


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         (c) Disqualifying Dispositions. If Shares acquired by exercise of an
ISO are disposed of within two years after the Grant Date or within one year
after the transfer of the Shares to the optionee, the holder of the Shares
immediately before the disposition shall promptly notify the Company in writing
of the date and terms of the disposition, shall provide such other information
regarding the disposition as the Company may reasonably require and shall pay
the Company any withholding and employment taxes which the Company in its sole
discretion deems applicable to the disposition.

         (d) Termination of Employment. Notwithstanding Section 6.1(i), all
vested ISOs must be exercised within three months of the Employment Termination
of the optionee, or at any time otherwise permissible in the case of a
Participant who dies within three months of Employment Termination, unless such
Employment Termination is due to the employee's being disabled (within the
meaning of Section 22(e)(3) of the Code), in which case the ISO shall be
exercised within one year of the Employment Termination, notwithstanding Section
6.1(i).

         6.4 Surrender of Options. The Committee, acting in its sole discretion,
may include a provision in an Award Agreement allowing the optionee to surrender
the Option covered by the agreement, in whole or in part in lieu of exercise in
whole or in part, on any date that the Fair Market Value of the Shares subject
to the Option exceeds the exercise price and the Option is exercisable (to the
extent being surrendered). The surrender shall be effected by the delivery of
the Award Agreement, together with a signed statement which specifies the number
of Shares as to which the optionee is surrendering the Option, together with a
request for such type of payment. Upon such surrender, the optionee shall
receive (subject to any limitations imposed by Rule 16b-3), at the election of
the Committee, payment in cash or Shares, or a combination of the two, equal to
(or equal in Fair Market Value to) the excess of the Fair Market Value of the
Shares covered by the portion of the Option being surrendered on the date of
surrender over the exercise price for such Shares. The Committee, acting in its
sole discretion, shall determine the form of payment, taking into account such
factors as it deems appropriate. To the extent necessary to satisfy Applicable
Laws, the Committee may terminate an optionee's rights to receive payments in
cash for fractional Shares. Any Award Agreement providing for such surrender
privilege shall also incorporate such additional restrictions on the exercise or
surrender of Options as may be necessary to satisfy Applicable Law.

7. RESTRICTED SHARES

         Restricted Shares shall be subject to the following terms and
conditions:

         7.1 Grant. The Committee may grant one or more Awards of Restricted
Shares to any Participant other than Non-Employee Directors. Each Award of
Restricted Shares shall specify the number of Shares to be issued to the
Participant, the date of issuance and the restrictions imposed on the Shares
including the conditions of release or lapse of such restrictions. Unless the
Committee provides otherwise, the restrictions shall not lapse earlier than six
months after the date of the Award. Pending the lapse of restrictions,
certificates evidencing Restricted Shares (if any) shall bear a legend referring
to the restrictions and shall be held by the Company. Prior to the issuance of
any Restricted Shares, the Participant receiving such Restricted Shares shall
pay to the Company an amount of cash equal to the exercise price of the
Restricted Shares, which at a

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<PAGE>

minimum shall be the par value per Restricted Share multiplied by the number of
Restricted Shares to be issued. The exercise price of Restricted Shares shall be
stated in the applicable Award Agreement. Upon the issuance of Restricted
Shares, the Participant may be required to furnish such additional documentation
or other assurances as the Committee may require to enforce restrictions
applicable thereto.

         7.2 Restrictions. Except as specifically provided elsewhere in this
Plan or the Award Agreement regarding Restricted Shares, Restricted Shares may
not be sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until the restrictions have
lapsed and the rights to the Shares have vested. The Committee may in its sole
discretion provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions, in whole or in part, based on service,
performance or such other factors or criteria as the Committee may determine.

         7.3 Dividends. Unless otherwise determined by the Committee, cash
dividends with respect to Restricted Shares shall be paid to the recipient of
the Award of Restricted Shares on the normal dividend payment dates, and
dividends payable in Shares shall be paid in the form of Restricted Shares
having the same terms as the Restricted Shares upon which such dividend is paid.
Each Award Agreement for Awards of Restricted Shares shall specify whether and,
if so, the extent to which the Participant shall be obligated to return to the
Company any cash dividends paid with respect to any Restricted Shares which are
subsequently forfeited.

         7.4 Forfeiture of Restricted Shares. Except to the extent otherwise
provided in the governing Award Agreement, when a Participant's Employment
Termination occurs, the Participant shall automatically forfeit all Restricted
Shares still subject to restriction.

8. SHARE APPRECIATION RIGHTS

         The Committee may grant Share Appreciation Rights to eligible persons
other than Non-Employee Directors. A Share Appreciation Right shall entitle its
holder to receive from the Company, at the time of exercise of the right, an
amount in cash equal to (or, at the Committee's discretion, Shares equal in Fair
Market Value to) the excess of the Fair Market Value (at the date of exercise)
of a Share over a specified price fixed by the Committee in the governing Award
Agreement multiplied by the number of Shares as to which the holder is
exercising the Share Appreciation Right. The specified price fixed by the
Committee shall not be less than the Fair Market Value of the Shares on the
Grant Date of the Share Appreciation Right. Share Appreciation Rights may be
granted in tandem with any previously or contemporaneously granted Option or
independent of any Option. The specified price of a tandem Share Appreciation
Right shall be the exercise price of the related Option. Any Share Appreciation
Rights granted in connection with an ISO shall contain such terms as may be
required to comply with Section 422 of the Code.

9. DIVIDEND EQUIVALENT RIGHTS

         9.1 General. The Committee shall have the authority to grant Dividend
Equivalent Rights to Participants other than Non-Employee Directors upon such
terms and conditions as it


                                       13
<PAGE>

shall establish, subject in all events to the following limitations and
provisions of general application set forth in this Plan. Each Dividend
Equivalent Right shall entitle a holder to receive, for a period of time to be
determined by the Committee, a payment equal to the quarterly dividend declared
and paid by the Company on one Common Share. If the Dividend Equivalent Right
relates to a specific Option, the period shall not extend beyond the earliest of
the date the Option is exercised, the date any Share Appreciation Right related
to the Option is exercised, or the expiration date set forth in the Option.

         9.2 Rights and Options. Each Dividend Equivalent Right may relate to a
specific Option granted under this Plan and may be granted to the optionee
either concurrently with the grant of such Option or at such later time as
determined by the Committee, or each Dividend Equivalent Right may be granted
independent of any Option.

         9.3 Payments. The Committee shall determine at the time of grant
whether payment pursuant to a Dividend Equivalent Right shall be immediate or
deferred and if immediate, the Company shall make payments pursuant to each
Dividend Equivalent Right concurrently with the payment of the quarterly
dividend to holders of Common Shares. If deferred, the payments shall not be
made until a date or the occurrence of an event specified by the Committee and
then shall be made within 30 days after the occurrence of the specified date or
event, unless the Dividend Equivalent Right is forfeited under the terms of the
Plan or applicable Award Agreement. The Committee shall also determine in its
sole discretion whether any portion of any payment shall be made in Common
Shares.

         9.4 Termination of Employment. In the event of Employment Termination,
any Dividend Equivalent Right held by such Participant on the date of Employment
Termination shall automatically be forfeited, unless otherwise expressly
provided by the Committee.

10. DIRECTOR SHARES

         10.1 Election. The Company shall pay to each individual who is a
Non-Employee Director an annual fee in the amount set from time to time by the
Board (the "Retainer"). Each Non-Employee Director shall be entitled to receive
his or her Retainer exclusively in cash, exclusively in unrestricted Shares
("Director Shares") or any portion in cash and Director Shares. Following the
approval of this Plan by the stockholders of the Company, each Non-Employee
Director shall be given the opportunity, during the month in which the
Non-Employee Director first becomes a Non-Employee Director, and during each
December thereafter, to elect among these choices for the balance of the
calendar year (in the case of the election made during the month the
Non-Employee Director first becomes a Non-Employee Director) and for the ensuing
calendar year (in the case of a subsequent election made during any December).
If the Non-Employee Director chooses to receive at least some of his or her
Retainer in Director Shares, the election shall also indicate the percentage of
the Retainer to be paid in Director Shares. If a Non-Employee Director makes no
election during his or her first opportunity to make an election, the
Non-Employee Director shall be assumed to have elected to receive his or her
entire Retainer in cash. If a Non-Employee Director makes no election during any
succeeding election month, the Non-Employee Director shall be assumed to have
remade the election then currently in effect for that Non-Employee Director.


                                       14
<PAGE>

         10.2 Issuance. The Company shall make the first issuance of Director
Shares to electing Directors on the first business day following the last day of
the full calendar quarter following the approval of the Plan by the Company's
stockholders. Subsequent issuances of Director Shares shall be made on the first
business day of each subsequent calendar quarter and shall be made to all
persons who are Non-Employee Directors on that day except any Non-Employee
Director whose Retainer is to be paid entirely in cash. The number of Shares
issuable to those Non-Employee Directors on the relevant date indicated above
shall equal:

         (% x R/4)/P, where:

         % = the percentage of the Non-Employee Director's Retainer that the
Non-Employee Director elected or is deemed to have elected to receive in the
form of Director Shares, expressed as a decimal;

         R = the Non-Employee Director's Retainer for the year during which the
issuance occurs; and

         P = the Fair Market Value of Shares determined in accordance with
Section 6.1(e).

Director Shares shall not include any fractional Shares. Fractions shall be
rounded to the nearest whole Share (with one-half being rounded upward).

11. SECURITIES LAWS

         Nothing in this Plan or in any Award or Award Agreement shall require
the Company to issue any Shares with respect to any Award if, in the opinion of
counsel for the Company, that issuance could constitute a violation of any
Applicable Laws. As a condition to the grant or exercise of any Award, the
Company may require the Participant (or, in the event of the Participant's
death, the Participant's legal representatives, heirs, legatees or distributees)
to provide written representations concerning the Participant's (or such other
person's) intentions with regard to the retention or disposition of the Shares
covered by the Award and written covenants as to the manner of disposal of such
Shares as may be necessary or useful to ensure that the grant, exercise or
disposition thereof will not violate the Securities Act, any other law or any
rule of any applicable securities exchange or securities association then in
effect. The Company shall not be required to register any Shares under the
Securities Act or register or qualify any Shares under any state or other
securities laws.

12. EMPLOYMENT OF OTHER RELATIONSHIP

         Nothing in this Plan or any Award shall in any way interfere with or
limit the right of the Company, the Advisor or any Affiliate of the Company to
terminate any Participant's employment or status as a consultant or Director at
any time, nor confer upon any Participant any right to continue in the employ
of, or as a Director or consultant of, the Company, the Advisor or any Affiliate
of the Company.


                                       15
<PAGE>

13. AMENDMENT, SUSPENSION AND TERMINATION OF THIS PLAN

         The Board may at any time amend, suspend or discontinue this Plan
provided that such amendment, suspension or discontinuance meets the
requirements of Applicable Laws, including without limitation, the requirements
for stockholder approval. Notwithstanding the above, an amendment, alteration,
suspension or discontinuation shall not be made if it would impair the rights of
any Participant under any Award previously granted, without the Participant's
consent, except to conform this Plan and Awards granted to the requirements of
Applicable Laws. The provisions of the Plan relating to Awards for Non-Employee
Directors may not be amended more than once each six months.

14. LIABILITY AND INDEMNIFICATION OF THE COMMITTEE

         No person constituting, or member of the group constituting, the
Committee shall be liable for any act or omission on such person's part,
including but not limited to the exercise of any power or discretion given to
such member under this Plan, except for those acts or omissions resulting from
such member's gross negligence or willful misconduct. The Company shall
indemnify each present and future person constituting, or member of the group
constituting, the Committee against, and each person or member of the group
constituting the Committee shall be entitled without further act on his or her
part to indemnity from the Company for, all expenses (including the amount of
judgments and the amount of approved settlements made with a view to the
curtailment of costs of litigation) reasonably incurred by such person in
connection with or arising out of any action, suit or proceeding to the fullest
extent permitted by law and by the Articles of Incorporation and Bylaws of the
Company.

15. SECURITIES LAW LEGENDS

         Certificates of Shares and Restricted Shares, if issued, may have the
following legend and statements of other applicable restrictions endorsed
thereon:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE LAWS. THE SHARES MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE
HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE SOLE
DISCRETION THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
VIOLATE ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS.

This legend shall not be required for any Shares issued pursuant to an effective
registration statement under the Securities Act.

18. SEVERABILITY

         If any provision of this Plan is held to be illegal or invalid for any
reason, that illegality or invalidity shall not affect the remaining portions of
the Plan, but such provision shall be fully


                                       16
<PAGE>

severable and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included in this Plan. Such an illegal or
invalid provision shall be replaced by a revised provision that most nearly
comports to the substance of the illegal or invalid provision. If any of the
terms or provisions of this Plan or any Award Agreement conflict with the
requirements of Applicable Laws, those conflicting terms or provisions shall be
deemed inoperative to the extent they conflict with Applicable Law.

19. EFFECTIVE DATE AND PROCEDURAL HISTORY

         This Plan was originally approved by the Company's Board on           ,
2004. It was approved in that form by the holders of the Company's voting Shares
on          , 2004 (the "Effective Date").


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