exv10w3



 





Exhibit 10.3



TARRAGON REALTY INVESTORS, INC.

OMNIBUS PLAN




SECTION 1. Purpose of the Plan



     1.1 Tarragon Realty Investors, Inc. (the “Company”) hereby adopts this
Omnibus Plan (the “Plan”), intended to promote the interests of the Company by
providing employees of the Company with appropriate incentives and rewards to
encourage them to enter into and continue in the employ of the Company and to
acquire a proprietary interest in the long-term success of the Company; and to
reward officers, other employees, consultants, and directors in fulfilling
their responsibilities for long-range achievements.



SECTION 2. Definitions



     2.1 As used in the Plan, the following definitions apply:




     a. “Affiliate” means an affiliate of the Company, as defined
in Rule 12b-2 promulgated under Section 12 of the Exchange Act.




     b. “Agreement” shall mean the written agreement between the
Company and a Participant evidencing an Award.




     c. “Award” means any Option, Restricted Stock, Stock
Appreciation Right, or Other Stock-Based Award granted under the
Plan.




     d. “Beneficial Owner” shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.




     e. “Board” shall mean the Board of Directors of the Company.




     f. “Cause” shall mean:




     1. The willful and continued failure by the Participant
substantially to perform his or her duties and obligations
to the Company (other than any such failure resulting from
his or her incapacity due to physical or mental illness);




     2. The willful engaging by the Participant in
misconduct which is materially injurious to the Company;




     3. The commission by the Participant of a felony; or



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     4. The commission by the Participant of a crime against
the Company that is materially injurious to the Company.




     For purposes of this Section 2(f), no act, or failure to act,
on a Participant’s part shall be considered “willful” unless done,
or omitted to be done, by the Participant in bad faith and without
reasonable belief that his or her action or omission was in the
best interest of the Company. Determination of Cause shall be
made by the Committee in its sole discretion.




     g. “Change in Control” shall be deemed to occur (i) upon the
approval by the Board (or if approval of the Board is not required
as a matter of law, the Shareholders of the Company) of (A) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving entity or pursuant to which the Shares
would be converted into cash, securities or other property other
than a merger in which the holders of the Shares immediately prior
to the merger will have the same proportionate ownership of the
Shares of the surviving entity immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all or substantially all
the assets of the Company, or (C) adoption of any plan or proposal
for the liquidation or dissolution of the Company, (ii) when any
“person” (as defined in Section 13(d) of the Exchange Act), other
than the Company or any Subsidiary or employee benefit plan or
trust maintained by the Company, shall become the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 20% of the Shares outstanding at the
time, without the prior approval of the Board, or (iii) at any
time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board shall cease for
any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Shareholders of
each new Director during such two-year period was approved by a
vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of such two-year period.




     h. “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any regulations promulgated
thereunder.




     i. “Committee” means the committee established by the Board
to administer the Plan, the composition of which shall at all
times satisfy the provisions of Section 162(m) of the Code. Each
member of the Committee shall be a Non-Employee Director as
defined in Rule 16b-3 under the Exchange Act.




     j. “Company” means Tarragon Realty Investors, Inc., a
corporation organized under the laws of the State of Nevada or any
of its predecessors or successors.




     k. “Deferred Shares” shall be awards made pursuant to Section
10 of the Plan or the right to receive Common Stock in lieu of
cash thereof at the end of specified time period.



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     l. “Director” shall mean a member of the Board.




     m. “Disability” shall mean:




     1. Any physical or mental condition that would qualify
a Participant for a disability benefit under the long-term
disability plan maintained by the Company and applicable to
him or her;




     2. When used in connection with the exercise of an
Incentive Stock Option following termination of employment,
disability within the meaning of Section 422(e)(3) of the
Code; or




     3. Such other condition as may be determined in the
sole discretion of the Committee to constitute Disability.




     n. “Effective Date” shall mean the date of the Plan’s
adoption by the Board of Directors subject to approval of the Plan
by shareholders.




     o. “Employee” shall mean any full-time employee of the
Company or its Subsidiaries (including Directors who are otherwise
employed on a full-time basis by the Company or its Subsidiaries)
and consultants to the Company.




     p. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended from time to time.




     q. “Executive Officer” shall have the meaning set forth in
Rule 3b-7 promulgated under the Exchange Act.




     r. “Fair Market Value” of the Common Stock on a given date
shall be based upon either:




     1. If the Common Stock is listed on a national
securities exchange or quoted in an interdealer quotation
system, the last sales price or, if unavailable, the average
of the closing bid and asked prices per share of the Common
Stock on such date (or, if there was no trading or quotation
in the Common Stock on such date, on the next preceding date
on which there was trading or quotation) as provided by one
of such organizations; or




     2. If the Common Stock is not listed on a national
securities exchange or quoted in an interdealer quotation
system, the price will be equal to the Company’s fair market
value, as determined by the Committee in good faith based
upon the best available facts and circumstances at the time.




     s. “Incentive Stock Option” shall mean an Option that is an
“incentive stock option” within the meaning of Section 422 of the
Code, or any



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successor provision, and that is designated by the Committee
as an Incentive Stock Option.




     t. “Issue Date” shall mean the date established by the
Company on which certificates representing Restricted Stock shall
be issued by the Company pursuant to the terms of Section 8.6.




     u. “Non-Employee Director” shall mean a member of the Board
who is not and has never been an employee of the Company.




     v. “Non-Qualified Stock Option” shall mean an Option other
than
an Incentive Stock Option.




     w. “Option” shall mean an option to purchase a number of
shares of Stock granted pursuant to Section 7.




     x. “Other Stock-Based Award” shall mean an award granted
pursuant to Section 10 hereof.




     y. “Partial Exercise” shall mean an exercise of an Award for
less than the full extent permitted at the time of such exercise.




     z. “Participant” shall mean:




     1. an Employee of the Company to whom an Award is
granted pursuant to the Plan; and




     2. upon the death of an individual described in (1),
his or her successors, heirs, executors and administrators,
as the case may be.




     aa. “Performance Goals” means performance goals based on one
or more of the following criteria:




     1. Pre-tax income or after-tax income;




     2. Operating profit;




     3. Return on equity, assets, capital or investment;




     4. Earnings or book value per share;




     5. Sales or revenues;




     6. Operating expenses;




     7. Stock price appreciation; and



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     8. Implementation or completion of critical projects or
processes.




     Where applicable, the Performance Goals may be expressed in
terms of attaining a specified level of the particular criteria or
the attainment of a percentage increase or decrease in the
particular criteria, and may be applied to one or more of the
Company, a Subsidiary or Affiliate, or a division or strategic
business unit of the Company, or may be applied to the performance
of the Company relative to a market index, a group of other
companies or a combination thereof, all as determined by the
Committee.




     The Performance Goals may include a threshold level of
performance below which no vesting will occur, levels of
performance at which specified vesting will occur, and a maximum
level of performance at which full vesting will occur.




     Each of the foregoing Performance Goals shall be determined
in accordance with generally accepted accounting principles and
shall be subject to certification by the Committee; provided that
the Committee shall have the authority to make equitable
adjustments to the Performance Goals in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate, in response to changes in applicable laws
or regulations, or to account for items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent
in occurrence or related to the disposal of a segment of a
business or related to a change in accounting principles.




     bb. “Person” shall have the meaning set forth in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include:




     1. The Company;




     2. A trustee or other fiduciary holding securities
under an employee benefit plan of the Company;




     3. An underwriter temporarily holding securities
pursuant to an offering of such securities; or




     4. A corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of shares of Stock of the
Company.




     cc. “Plan” means this Tarragon Omnibus Plan, as amended from
time to time.




     dd. “Reload Option” shall mean a Non-Qualified Stock Option
granted pursuant to Section 7.3(f).



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     ee. “Restricted Stock” shall mean a share of Stock which is
granted pursuant to the terms of Section 8 hereof and which is
subject to the restrictions set forth in Section 8.4.




     ff. “Rule 16b-3” shall mean the Rule 16b-3 promulgated under
the Exchange Act, as amended from time to time.




     gg. “Securities Act” shall mean the Securities Act of 1933,
as amended from time to time.




     hh. “Stock” means shares of the common stock, par value $.01
per share, of the Company.




     ii. “Stock Appreciation Right” or “SAR” shall mean an Award
granted pursuant to the terms of Section 9 hereof, which confers
on the Participant a right to receive, upon exercise thereof, the
excess of (i) the Fair Market Value of one share of Stock on the
date of exercise over (ii) the grant price of the SAR, payable in
cash or shares of Stock.




     jj. “Subsidiary” shall mean an entity, in which the Company
owns, directly or indirectly, through subsidiaries, at least 50
percent of the total combined voting power of all classes of
equity, or any other entity (including, but not limited to,
partnerships and join ventures) in which the Company owns at least
50 percent of the combined equity thereof. In the event that
applicable law permits the ownership of less than 50 percent of
the total combined voting power of all classes of equity to
constitute a “Subsidiary,” then the requirement of 50 percent
ownership in this definition shall be lowered to the lowest level
permitted under applicable law; provided, however, in no event
shall “Subsidiary” mean any entity which is not a “subsidiary”
within in the meaning of Code 424(f).




     kk. “Vesting Date” shall mean the date established by the
Committee on which Restricted Stock may vest.



SECTION 3. Types of Awards Covered



     3.1 The Committee may grant Options, Restricted Stock, Stock Appreciation
Rights, and Other Stock-Based Awards, in such amounts and with such terms and
conditions as the Committee shall determine, subject to the provisions of the
Plan.



     3.2 Each Award granted under the Plan shall be evidenced by an Agreement
which shall contain such provisions as the Committee may in its sole discretion
deem necessary or desirable.



     3.3 By accepting an Award, a Participant thereby agrees that the award
shall be subject to all of the terms and provisions of the Plan and the
applicable Agreement.



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SECTION 4. Administration



     4.1 The Committee shall administer the Plan. The Committee shall have the
authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to:




     a. Grant Awards;




     b. Determine the persons to whom and the time or times at
which Awards shall be granted;




     c. Determine the type and number of Awards to be granted, the
number of shares of Stock to which an Award may relate and the
terms, conditions, restrictions and/or Performance Goals relating
to any Award;




     d. Determine whether, to what extent, and under what
circumstances an Award may be settled, canceled, forfeited,
exchanged, or surrendered;




     e. Make adjustments in the Performance Goals in recognition
of unusual or non-recurring events affecting the Company or the
financial statements of the Company (to the extent not
inconsistent with Section 162[m] of the Code, if applicable), or
in response to changes in applicable laws, regulations, or
accounting principles;




     f. Construe and interpret the Plan and any Award;




     g. Prescribe, amend and rescind rules and regulations
relating to the Plan;




     h. Determine the terms and provisions of Agreements; and




     i. Make all other determinations deemed necessary or
advisable for the administration of the Plan.



     4.2 The Committee may, in its absolute discretion, without amendment to
the Plan,




     a. Accelerate the date on which any Option granted under the
plan becomes exercisable, waive or amend the operation of Plan
provisions respecting exercise after termination of employment or
otherwise adjust any of the terms of such Option;




     b. Accelerate the Vesting Date or waive any condition imposed
hereunder with respect to any Restricted Stock; and




     c. Otherwise adjust any of the terms applicable to any Award;
provided, however, in each case, that in the event of the
occurrence of a Change



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in Control, the provisions of Section 12 hereof shall govern
the vesting and exercise schedule of any Award granted hereunder.



     4.3 No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Nevada law) and hold harmless each member of the
Committee and each other Director or Employee of the Company to whom any duty
or power relating to the administration or interpretation of the Plan has been
delegated against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such a member, Director or Employee in bad faith and without
reasonable belief that it was in the best interests of the Company.



     4.4 The Committee may employ such legal counsel and consultants as it may
deem desirable for the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any computation received from
any such consultant. The Committee shall keep minutes of its actions under the
Plan.



SECTION 5. Eligibility



     5.1 Incentive Stock Options shall be granted only to employees (including
officers and directors who are also employees) of the Company, its parent or
any of its Subsidiaries. All other Awards may be granted to officers,
independent contractors, key employees and non-employee directors of the
Company or of any of its Subsidiaries and Affiliates.



     5.2 An Employee or Non-Employee Director who has been granted an Award in
one year shall not necessarily be entitled to be granted Awards in subsequent
years.



SECTION 6. Shares of Stock Subject to the Plan



     6.1 The maximum number of shares of Stock reserved for the grant or
settlement of Awards under the Plan shall be at least 2,000,000 and will
represent approximately 20% of the total shares outstanding. As the total
shares outstanding increase (which limit shall be determined without
considering as outstanding any shares that are the subject of any unexercised
options under the Plan or any other option plan of the Company or any Shares
owned by the Company or any of its subsidiaries) such shares available for
issuance under the plan shall automatically increase proportionately; provided,
however, that the maximum number of Shares for which Incentive Stock Options
may be granted under the Plan shall not exceed 1,000,000 Shares (which number
is subject to adjustment as provided in Section 6.3). The number of shares of
Common Stock reserved under the Plan shall not be less than the total number of
shares granted, whether exercised or unexercised for all Awards under the Plan.



     6.2 No more than 1,000,000 shares of Stock may be awarded in respect of
Options, no more than 300,000 shares of Stock may be awarded in respect of
Restricted Stock and no more than 100,000 shares of Stock may be awarded in
respect of Other Stock-Based Awards to a single individual in any given year
during the life of the Plan, which amounts shall be subject to



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adjustment as provided herein. Determinations made in respect of the
limitation set forth in the preceding sentence shall be made in a manner
consistent with Section 162(m) of the Code.



     6.3 Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or may be reacquired by the Company in
the open market, in private transactions or otherwise. If any shares subject
to an Award are forfeited, cancelled, exchanged or surrendered or if an Award
otherwise terminates or expires without a distribution of shares to the holder
of such Award, the shares of Stock with respect to such Award shall, to the
extent of any such forfeiture, cancellation, exchange, surrender, termination
or expiration, again be available for Awards under the Plan.



     6.4 Except as provided in an Award Agreement, in the event that the
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Stock, or other property), recapitalization, stock split,
reverse split, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event,
affects the Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of holders of Awards under the Plan, then
the Committee shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of




     a. the number and kind of shares of Stock or other property
(including cash) that may thereafter be issued in connection with
Awards;




     b. the number and kind of shares of Stock or other property
(including cash) issued or issuable in respect of outstanding
Awards;




     c. the exercise price, grant price, or purchase price
relating to any Award; provided that, with respect to Incentive
Stock Options, such adjustment shall be made in accordance with
Section 424(h) of the Code;




     d. the Performance Goals; and




     e. the individual limitations applicable to Awards.



SECTION 7. Stock Options



     7.1 Each Option shall be clearly identified in the applicable Agreement as
either an Incentive Stock Option or a Non-Qualified Stock Option.



     7.2 Each Agreement with respect to an Option shall set forth the exercise
price per share of Stock payable by the grantee to the Company upon exercise of
the Option. The exercise price per share of Stock shall be determined by the
Committee; provided, however, that only in the case of Deferred Shares shall an
Option have an exercise price per share of Stock that is less than the Fair
Market Value of a share of Stock on the date the Option is granted.



     7.3 Term and Exercise of Options




     a. Unless the applicable Agreement provides otherwise, an
Option shall become cumulatively exercisable as to 20% percent of
the shares of Stock



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covered thereby on each of the first, second, third, fourth
and fifth anniversaries of the date of grant. The Committee shall
determine the expiration date of each Option; provided, however,
that no Option shall be exercisable more than 10 years after the
date of grant. Unless the applicable Agreement provides otherwise
and except in the event of a Change in Control, no Option shall be
exercisable prior to the first anniversary of the date of grant.




     b. An Option may be exercised for all or any portion of the
Stock as to which it is exercisable, provided that no Partial
Exercise of an Option shall be for an aggregate exercise price of
less than $100.00. The Partial Exercise of an Option shall not
cause the expiration, termination or cancellation of the remaining
portion thereof.




     c. An Option shall be exercised by delivering notice to the
Company, directed to the attention of its Secretary. Such notice
shall be accompanied by a copy of the applicable Agreement, shall
specify the number of shares of Stock with respect to which the
Option is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant or other person
then having the right to exercise the Option. Payment for Stock
purchased upon the exercise of an Option shall be made on the
effective date of such exercise by one or a combination of the
following means:




     i. In cash or by personal check, certified check, bank
cashier’s check or wire transfer.




     ii. Subject to the approval of the Committee, in Stock
owned by the Participant for at least six months prior to
the date of exercise and valued at their Fair Market Value
on the effective date of such exercise.




     iii. Subject to the approval of the Committee, by
delivery of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell shares
of Stock and to deliver all or part of the sales proceeds to
the Company in payment of the Option Price and any
withholding taxes described in Section 12. Executive
Officers and Directors will not be permitted to use this
cashless method of exercise described in this paragraph
without the express prior consent of the Company, and only
to the extent permitted by law.




     iv. Subject to the approval of the Committee, by such
other provision as the Committee may from time to time
authorize.




     d. Under Section 421(b) of the Code, each Participant shall
notify the Company of any disposition of Stock issued pursuant to
the exercise of an Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.



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     e. Certificates for Stock purchased upon the exercise of an
Option shall be issued in the name of the Participant or other
person entitled to receive such Stock, and delivered to the
Participant or such other person as soon as practicable following
the effective date on which the Option is exercised.




     f. The Committee shall have the authority to specify, at the
time of grant or, with respect to Non-Qualified Stock Options, at
or after the time of grant, that a Participant shall be granted a
new Non-Qualified Stock Option (a “Reload Option”) for a number of shares of Stock equal to the number of shares of Stock surrendered
by the Participant upon exercise of all or a part of an Option in
the manner described in Section 7.3(c)(ii) above, subject to the
availability of Stock under the Plan at the time of such exercise;
provided, however, that no Reload Option shall be granted to a
Non-Employee Director. Reload Options shall be subject to such
conditions as may be specified by the Committee in its discretion,
subject to the terms of the Plan.



     7.4 Limitations on Incentive Stock Options




     a. To the extent that the aggregate Fair Market Value of
Stock of the Company with respect to which Incentive Stock Options
are exercisable for the first time by a Participant during any
calendar year under the Plan and any other option plan of the
Company (or any Subsidiary) shall exceed $100,000, such Options
shall be treated as Non-Qualified Stock Options. Such Fair Market
Value shall be determined as of the date on which each such
Incentive Stock Option is granted.




     b. No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant: such individual owns (or
is attributed to own by virtue of the Code) Stock possessing more
than ten (10) percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary unless




     i. The exercise price of such Inventive Stock Option is
at least 110 percent of the Fair Market Value of a share of
Stock at the time such Incentive Stock Option is granted;
and




     ii. Such Incentive Stock Option is not exercisable
after the expiration of five years from the date such
Incentive Stock Option is granted.



     7.5 Effect of Termination of Employment




     a. Unless the applicable Agreement provides otherwise, in the
event that the employment, directorship or consultancy (together,
hereinafter referred to as “employment”) of a Participant with the
Company shall terminate for any reason other than Cause,
Disability or death,




     i. Options granted to such Participant, to the extent
that they are exercisable at the time of such termination,
shall remain exercisable



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only until the date that is 90 calendar days after the
date of such termination, on which date they shall expire;
and




     ii. Options granted to such Participant, to the extent
not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination.




     iii. The 90-day period described in Section 7.5(a)(i)
shall be extended to one year from the date of such
termination, in the event of the Participant’s death during
such 90-day period. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its
term.




     b. Unless the applicable Agreement provides otherwise, in the
event that the employment of a Participant with the Company shall
terminate on account of the Disability or death of the
Participant,




     i. Options granted to such Participant, to the extent
that they were exercisable at the time of such termination,
shall remain exercisable until the first anniversary of such
termination, on which date they shall expire, and




     ii. Options granted to such Participant, to the extent
not exercisable at the time of such termination, shall
expire at the close of business on the date of such
termination; provided, however, that no Option shall be
exercisable after the expiration of its term.




     c. In the event of the termination of a Participant’s
employment for Cause, all then outstanding and unexercised Options
granted to such Participant shall expire as of the date of such
termination.



SECTION 8. Restricted Stock



     8.1 At the time of the grant of Restricted Stock, the Committee shall
establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with
respect to such shares of Restricted Stock. The Committee may divide such
shares of Restricted Stock into classes and assign a different Issue Date
and/or Vesting Date for each class. If the grantee is employed by the Company
on an Issue Date (which may be the date of grant), the specified number of
shares of Restricted Stock shall be issued in accordance with the provisions of
Section 8.6. Provided that all conditions to the vesting of Restricted Stock
imposed pursuant to Section 8.2 are satisfied, and except as provided in
Section 8.8, upon the occurrence of the Vesting Date with respect to Restricted
Stock, such Restricted Stock shall vest and the restrictions of Section 8.4
shall lapse.



     8.2 At the time of the grant of Restricted Stock, the Committee may impose
such restrictions or conditions to the vesting of such Restricted Stock as it,
in its absolute discretion, deems appropriate, including the attainment of
Performance Goals.



     8.3 If any Participant shall, in connection with the acquisition of Stock
under the Plan, make the election permitted under Section 83(b) of the Code
(i.e., an election to include in



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gross income in the year of transfer the amounts specified in Section
83[b]), such Participant shall notify the Company of such election within 10
days of filing notice of the election with the Internal Revenue Service, in
addition to any filing and a notification required pursuant to regulation
issued under the authority of Section 83(b) of the Code.



     8.4 Prior to the vesting of any Restricted Stock, no transfer of a
Participant’s rights with respect to such Restricted Stock, whether voluntary
or involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, the Participant shall
forfeit such Restricted Stock, and all of the rights related thereto.



     8.5 The Committee in its discretion may require that any dividends or
distributions paid on Restricted Stock be held in escrow until all restrictions
on such Restricted Stock have lapsed.



     8.6 Issuance of Certificates




     a. Reasonably promptly after the Issue Date with respect to
Restricted Stock, the Company shall cause to be issued a
certificate, registered in the name of the Participant to whom
such shares of Restricted Stock were granted, evidencing such shares of Restricted Stock; provided that the Company shall not
cause such a certificate to be issued unless it has received a
power of attorney duly endorsed in blank with respect to such shares of Restricted Stock. Each such certificate shall bear the
following legend:




The transferability of this certificate and the stock
represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions
and restrictions against transfer) contained in the
Tarragon Realty Investors, Inc. omnibus plan and an
agreement entered into between the registered owner of
such stock and Tarragon Realty Investors, Inc. A copy
of the omnibus plan and agreement is on file with the
secretary of the company.




     Such legend shall not be removed until such Stock vests pursuant to
the terms hereof.




     b. The Company shall hold each certificate issued pursuant to
this Section 8.6, together with the powers relating to the
Restricted Stock evidenced by such certificate, unless the
Committee determines otherwise.



     8.7 Upon vesting of any Restricted Stock pursuant to the terms hereof, the
restrictions of Section 8.4 shall lapse with respect to such Restricted Stock.
Reasonably promptly after any Restricted Stock vests, the Company shall cause
to be delivered to the Participant to whom such shares of Restricted Stock were
granted a certificate evidencing such Stock, free of the legend set forth in
Section 8.6.



     8.8 Subject to such other provision as the Committee may set forth in the
applicable Agreement, and to the Committee’s amendment authority pursuant to
Section 4, upon the termination of a Participant’s employment for any reason
other than Cause, any and all Stock to which restrictions on transferability
apply shall be immediately forfeited by the Participant and



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transferred to, and reacquired by, the Company; provided that if the
Committee, in its sole discretion, shall within thirty (30) days after such
termination of employment notify the Participant in writing of its decision not
to terminate the Participant’s rights in such shares of Stock, then the
Participant shall continue to be the owner of such shares of Stock subject to
such continuing restrictions as the Committee may prescribe in such notice.



     In the event of a forfeiture of Stock pursuant to this section, the
Company shall repay to the Participant (or the Participant’s estate) any amount
paid by the Participant for such shares of Stock. In the event that the
Company requires a return of Stock, it shall also have the right to require the
return of all dividends or distributions paid on such Stock, whether by
termination of any escrow arrangement under which such dividends or
distributions are held or otherwise.



     In the event of the termination of a Participant’s employment for Cause,
all shares of Restricted Stock granted to such Participant which have not
vested as of the date of such termination shall immediately be returned to the
Company, together with any dividends or distributions paid on such shares of
Stock, in return for which the Company shall repay to the Participant any
amount paid by the Participant for such shares of Stock.



     8.9 Restricted Stock granted pursuant to this Section 8 to Executive
Officers may be based on the attainment by the Company (or a Subsidiary or
division of the Company if applicable) of Performance Goals established by the
Committee.



SECTION 9. Stock Appreciation Rights



     9.1 The Agreement covering an Award of a Stock Appreciation Right, or SAR,
shall specify the grant price of the SAR, which may be fixed at the Fair Market
Value of a share of Stock on the date of grant or may vary in accordance with a
predetermined formula while the SAR is outstanding.



     9.2 Subject to the terms of the Plan, the Committee shall determine the
time or times at which and the circumstances under which an SAR may be
exercised in whole or in part (including based on the attainment of Performance
Goals established by the Committee and/or future service requirements approved
by the Committee) the time at which an SAR shall cease to be or become
exercisable following termination of employment or affiliation with the Company
or upon other conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock will be
delivered or deemed to be delivered to a Participant, whether or not an SAR
shall be in tandem or in combination with any other Award, and any other terms
and conditions determined by the Committee.



SECTION 10. Other Stock-Based Incentive Awards



     10.1 Other forms of Awards valued in whole or in part by reference to, or
otherwise based on, shares of Stock (“Other Stock-Based Awards”) may be granted
either alone or in addition to other Awards under the Plan. The Committee may
also grant Participants the right to receive Deferred Shares that are
stock-based incentive grants in lieu of a cash deferral of bonuses.



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     10.2 Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the persons to whom and the time or times
at which such Other Stock-Based Awards shall be granted, the number of shares
of Stock to be granted pursuant to such Other Stock-Based Awards and all other
conditions of such Other Stock-Based Awards, including the attainment of
Performance Goals established by the Committee.



SECTION 11. Performance-based Compensation



     11.1 If and to the extent the Committee determines that an Award to be
granted to a Participant designated by the Committee as likely to be a Covered
Employee should qualify as “performance-based compensation” for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Award shall
be contingent upon the attainment of Performance Goals established by the
Committee and other terms set forth in this Section.



     11.2 Performance Goals shall be established not later than 90 days after
the beginning of any performance period applicable to such Award, or at such
other date as may be required or permitted for “performance-based compensation”
under Code Section 162(m). All determinations by the Committee as to the
establishment and attainment of Performance Goals shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). To the
extent required to comply with Code Section 162(m), the Committee may delegate
any responsibility relating to such Awards.



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



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



     11.5 Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Participant with the Company or any Affiliate, except an agreement, contract,
or understanding hereafter entered into by a



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



SECTION 12. Rights in Event of Death or Disability



     12.1 Upon the death of a Participant, outstanding Awards granted to such
Participant may be exercised only by the executor or administrator of the
Participant’s estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Award by will or the laws of descent and distribution shall be effective to
bind the Company unless the Committee shall have been furnished with written
notice thereof and with a copy of the will and/or such evidence as the
Committee may deem necessary to establish the validity of the transfer and an
agreement by the transferee to comply with all the terms and conditions of the
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Award.



     12.2 During a Participant’s lifetime, the Committee may permit the
transfer, assignment or other encumbrance of an outstanding Option unless (a)
such Option is an Incentive Stock Option and the Committee and the Participant
intend that it shall retain such status, or (b) such Option is meant to qualify
for the exemptions available under Rule 16b-3 (non-transferability is necessary
under Rule 16b-3 in order for the award to so qualify and the Committee and the
Participant intend that it shall continue to so qualify).



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     12.3 Subject to any conditions as the Committee may prescribe, a
Participant may, upon providing written notice to the Secretary of the Company,
elect to transfer any or all Options granted to such Participant pursuant to
the Plan to members of his or her immediate family, including, but not limited
to, children, grandchildren and spouse or to trusts for the benefit of such
immediate family members or to partnerships in which such family members are
the only partners; provided, however, that no such transfer by any Participant
may be made in exchange for consideration.



     12.4 A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant’s
estate shall be deemed to be the grantee’s beneficiary.



SECTION 13. Tax Withholding



     13.1 Whenever shares of Stock are to be delivered pursuant to an Award,
the Company shall have the right to require the participant to remit to the
Company in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. The Company and/or its
Affiliate, as the case may be, shall have the right to deduct such amounts from
payments of any kind otherwise due to the participant by the Company and/or its
Affiliates.



     13.2 With the approval of the Committee, a participant may satisfy the
foregoing requirement by electing to have the Company withhold from delivery
shares of Stock having a value equal to the amount of tax to be withheld or by
delivering to the Company shares of Stock already owned by the participant.
Such shares of Stock shall be valued at their Fair Market Value as of the date
that the amount of tax to be withheld is determined. Fractional shares of
Stock shall be settled in cash. Such a withholding election may be made with
respect to all or any portion of the Stock to be delivered pursuant to an
Award.



SECTION 14. Change of Control



     14.1 Notwithstanding anything in this Plan to the contrary, upon the
occurrence of a Change in Control, any Award carrying a right to exercise that
was not previously exercisable and vested shall become fully exercisable and
vested, and the restrictions and forfeiture conditions applicable to any other
Award granted under the Plan shall lapse and such Award shall be deemed fully
vested. Notwithstanding anything in the Plan to the contrary, upon the
occurrence of a Change in Control, the purchaser(s) of the Company’s assets or
stock may, in his, her, or its discretion, deliver to the holder of an Award
the same kind of consideration that is delivered to the stockholders of the
Company as a result of such sale, conveyance or Change in Control, or the Board
may cancel all outstanding Options in exchange for consideration in cash or in
kind which consideration in both cases shall be equal in value to the higher of




     a. the Fair Market Value of those shares of Stock or other
securities the holder of such Option would have received had the
Option been exercised and no disposition of the shares acquired
upon such exercise been made prior to such sale, conveyance or
Change in Control, less the exercise price therefor; or



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     b. the Fair Market Value of those shares of Stock or other
securities the holder of the Option would have received had the
Option been exercised and no disposition of the shares acquired
upon such exercise been made immediately following such sale,
conveyance or Change in Control, less the exercise price therefor.



     14.2 Upon dissolution or liquidation of the Company, all Options and other
Awards granted under this Plan shall terminate, but each holder of an Option
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her Option to the extent then exercisable.



SECTION 15. Securities Matters



     15.1 The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing Stock
pursuant to the Plan unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Stock are traded. The Committee may
require, as a condition of the issuance and delivery of certificates evidencing
shares of Stock pursuant to the terms hereof, that the recipient of such shares
of Stock make such agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems necessary or
desirable.



     15.2 The transfer of any shares of Stock hereunder shall be effective only
at such time as counsel to the Company shall have determined that the issuance
and delivery of such shares of Stock is in compliance with all applicable laws,
regulations of governmental authority, the requirements of any securities
exchange on which shares of Stock are traded. The Committee may, in its sole
discretion, defer the effectiveness of any transfer of Stock hereunder in order
to allow the issuance of such Stock to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Committee shall inform the Participant
in writing of its decision to defer the effectiveness of a transfer. During
the period of such deferral in connection with the exercise of an Option, the
Participant may, by written notice, withdraw such exercise and obtain the
refund of any amount paid with respect thereto.



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



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SECTION 16. Amendment or Termination



     16.1 The Board may, at any time, suspend or terminate the Plan or revise
or amend it in any respect whatsoever; provided, however, that stockholder
approval shall be required if and to the extent the Board determines that such
approval is appropriate for purposes of satisfying Section 162(m) or 422 of the
Code or is otherwise required by law or applicable stock exchange requirements.



     16.2 Awards may be granted under the Plan prior to the receipt of such
approval, but each such grant shall be subject in its entirety to such approval
and no award may be exercised, vested or otherwise satisfied prior to the
receipt of such approval. Nothing herein shall restrict the Committee’s
ability to exercise its discretionary authority pursuant to Section 4, which
discretion may be exercised without amendment to the Plan. No action hereunder
may, without the consent of a Participant, reduce the Participant’s rights
under any outstanding Award.



SECTION 17. General Provisions



     17.1 No Awards may be exercised by a Grantee if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of counsel
selected by the Company, contrary to law or the regulations of any duly
constituted authority having jurisdiction over the Plan.



     17.2 A bona fide leave of absence approved by a duly constituted officer
of the Company shall not be considered interruption or termination of service
of any Participant for any purposes of the Plan or Awards granted thereunder,
except that no Awards may be granted to an Employee while he or she is on a
bona fide leave of absence.



     17.3 No person shall have any rights as a stockholder with respect to any
shares of Stock covered by or relating to any Award until the date of issuance
of a certificate with respect to such shares of Stock. Except as otherwise
expressly provided in Section 6.4, no adjustment to any Award shall be made for
dividends or other rights prior to the date such certificate is issued.



     17.4 Nothing contained in the Plan or any Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant. No person shall have any claim or right to receive an Award
hereunder. The Committee’s granting of an Award to a participant at any time
shall neither require the Committee to grant any other Award to such
Participant or other person at any time or preclude the Committee from making
subsequent grants to such Participant or any other person.



     17.5 In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or beneficiary) to comply with any of the
terms and conditions of the Plan or the applicable Agreement, unless such
failure is remedied by such Participant (or beneficiary) within ten days after
notice of such failure by the Committee, shall be grounds for the cancellation
and forfeiture of such Award, in whole or in part, as the Committee, in its
absolute discretion, may determine.



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     17.6 Any Award agreement may provide that stock issued upon exercise of
any Awards may be subject to such restrictions, including, without limitation,
restrictions as to transferability and restrictions constituting substantial
risks of forfeiture as the Committee may determine at the time such Award is
granted.



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



SECTION 18. Plan Effective Date



     18.1 The Plan shall become effective on the date of its adoption by the
Board of Directors of the Company subject to approval of the Plan by the
holders of a majority of the outstanding voting shares of the Company within
twelve (12) months after the date of the Plan’s adoption by said Board of
Directors. In the event of the failure to obtain such shareholder approval,
the Plan and any Awards granted thereunder, shall be null and void and the
Company shall have no liability thereunder.



     18.2 No Award granted under the Plan shall be exercisable until such
shareholder approval has been obtained.



     18.3 Neither the adoption of this Plan nor the submission of this Plan to
the shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under this Plan.



SECTION 19. Plan Termination



     19.1 No Award may be granted under the Plan on or after the date which is
ten years following the effective date specified in Section 16, but Awards
previously granted may be exercised in accordance with their terms.




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