Document:

exv10w3w1

 

Exhibit 10.3.1

ASHFORD HOSPITALITY TRUST, INC.

AMENDED AND RESTATED

2003 STOCK INCENTIVE PLAN

May 3, 2005

 

 

ASHFORD HOSPITALITY TRUST, INC.

AMENDED AND RESTATED

2003 STOCK INCENTIVE PLAN

Table of Contents

	 	 	 	 	 
	ARTICLE I INTRODUCTION
	 	 	1	 
	1.1 Purpose
	 	 	1	 
	1.2 Shares Subject to the Plan
	 	 	1	 
	1.3 Administration of the Plan
	 	 	1	 
	1.4 Amendment and Discontinuance of the Plan
	 	 	2	 
	1.5 Granting of Awards to Participants
	 	 	2	 
	1.6 Term of Plan
	 	 	2	 
	1.7 Leave of Absence
	 	 	2	 
	1.8 Definitions
	 	 	2	 
	ARTICLE II NONQUALIFIED STOCK OPTIONS
	 	 	7	 
	2.1 Grants
	 	 	7	 
	2.2 Calculation of Exercise Price
	 	 	7	 
	2.3 Terms and Conditions of Options
	 	 	7	 
	2.4 Amendment
	 	 	9	 
	2.5 Acceleration of Vesting
	 	 	9	 
	2.6 Other Provisions
	 	 	9	 
	2.7 Option Repricing
	 	 	10	 
	ARTICLE III INCENTIVE OPTIONS
	 	 	10	 
	3.1 Eligibility
	 	 	10	 
	3.2 Exercise Price
	 	 	10	 
	3.3 Dollar Limitation
	 	 	10	 
	3.4 10% Stockholder
	 	 	10	 
	3.5 Options Not Transferable
	 	 	10	 
	3.6 Compliance with 422
	 	 	11	 
	3.7 Limitations on Exercise
	 	 	11	 
	ARTICLE IV PURCHASED STOCK
	 	 	11	 
	4.1 Eligible Persons
	 	 	11	 
	4.2 Purchase Price
	 	 	11	 
	4.3 Payment of Purchase Price
	 	 	11	 
	ARTICLE V BONUS STOCK
	 	 	11	 
	ARTICLE VI STOCK APPRECIATION RIGHTS AND PHANTOM STOCK
	 	 	11	 
	6.1 Stock Appreciation Rights
	 	 	11	 
	6.2 Phantom Stock Awards
	 	 	12	 
	ARTICLE VII RESTRICTED STOCK
	 	 	13	 
	7.1 Eligible Persons
	 	 	13	 
	7.2 Restricted Period and Vesting
	 	 	13	 
	ARTICLE VIII I PERFORMANCE AWARDS
	 	 	14	 
	8.1 Performance Awards
	 	 	14	 
	8.2 Performance Goals
	 	 	14	 

 

 

	 	 	 	 	 
	ARTICLE IX OTHER STOCK OR PERFORMANCE BASED AWARDS
	 	 	15	 
	ARTICLE X CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
	 	 	16	 
	10.1 General
	 	 	16	 
	10.2 Stand-Alone, Additional, Tandem, and Substitute Awards
	 	 	16	 
	10.3 Term of Awards
	 	 	16	 
	10.4 Form and Timing of Payment under Awards; Deferrals
	 	 	16	 
	10.5 Vested and Unvested Awards
	 	 	17	 
	10.6 Exemptions from Section 16(b) Liability
	 	 	17	 
	10.7 Other Provisions
	 	 	17	 
	ARTICLE XI WITHHOLDING FOR TAXES
	 	 	18	 
	ARTICLE XII MISCELLANEOUS
	 	 	18	 
	12.1 No Rights to Awards
	 	 	18	 
	12.2 No Right to Employment
	 	 	18	 
	12.3 Governing Law
	 	 	18	 
	12.4 Severability
	 	 	18	 
	12.5 Other Laws
	 	 	19	 
	12.6 Shareholder Agreements
	 	 	19	 

ii

 

ASHFORD HOSPITALITY TRUST, INC.

AMENDED AND RESTATED

2003 STOCK INCENTIVE PLAN

ARTICLE I

INTRODUCTION

     1.1 Purpose. The Ashford Hospitality Trust, Inc. Amended and Restated 2003 Stock Incentive
Plan (the “Plan”) is intended to promote the interests of Ashford Hospitality Trust, Inc.,
a Maryland corporation, (the “Company”) and its stockholders by encouraging Employees,
Consultants and Non-Employee Directors of the Company or its Affiliates (as defined below) to
acquire or increase their equity interests in the Company, thereby giving them an added incentive
to work toward the continued growth and success of the Company. The Board of Directors of the
Company (the “Board”) also contemplates that through the Plan, the Company and its
Affiliates will be better able to compete for the services of the individuals needed for the
continued growth and success of the Company.

     1.2 Shares Subject to the Plan. The aggregate number of shares of Common Stock, $.01 par
value per share, of the Company (“Common Stock”) that may be issued under the Plan
commencing on May 3, 2005, the date the stockholders approved the amendments to the Plan set forth
herein, shall not exceed 2,850,000 shares of outstanding Common Stock, which amount was determined
as follows:

	 	 	 	 	 
	Initial Shares approved August 25. 2005
	 	 	1,531,681	 
	Shares granted pursuant to Plan
	 	 	(1,167,117	)
	Additional shares approved May 3, 2005
	 	 	2,485,436	 
	 
	 	 	 
	Total shares available under Plan
	 	 	2,850,000	 
	 
	 	 	 

No more than 450,000 shares of Common Stock shall be issued to any one Participant in any one
calendar year. Notwithstanding the above, however, in the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of shares or the like,
the aggregate number and class of securities available under the Plan shall be ratably adjusted by
the Committee (as defined below), whose determination shall be final and binding upon the Company
and all other interested persons. In the event the number of shares to be delivered upon the
exercise or payment of any Award granted under the Plan is reduced for any reason whatsoever or in
the event any Award granted under the Plan can no longer under any circumstances be exercised or
paid, the number of shares no longer subject to such Award shall thereupon be released from such
Award and shall thereafter be available under the Plan for the grant of additional Awards. Shares
issued pursuant to the Plan (i) may be treasury shares, authorized but unissued shares or, if
applicable, shares acquired in the open market and (ii) shall be fully paid and nonassessable.

     1.3 Administration of the Plan. The Plan shall be administered by the Committee. Subject to
the provisions of the Plan, the Committee shall interpret the Plan and all Awards

 

 

under the Plan,
shall make such rules as it deems necessary for the proper administration of the Plan, shall make
all other determinations necessary or advisable for the administration of the Plan and shall
correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any
Award under the Plan in the manner and to the extent that the Committee deems desirable to
effectuate the Plan. Any action taken or determination made by the Committee pursuant to this and
the other paragraphs of the Plan shall be conclusive on all parties. The act or determination of a
majority of the Committee shall be deemed to be the act or determination of the Committee.

     1.4 Amendment and Discontinuance of the Plan. The Board may amend, suspend or terminate the Plan; provided, however, no amendment,
suspension or termination of the Plan may without the consent of the holder of an Award terminate
such Award or adversely affect such person’s rights with respect to such Award in any material
respect; provided further, however, that any amendment which would constitute a “material revision”
of the Plan (as that term is used in the rules of the New York Stock Exchange) shall be subject to
shareholder approval.

     1.5 Granting of Awards to Participants. The Committee shall have the authority to grant, prior to the expiration date of the Plan, Awards
to such Employees, Consultants and Non-Employee Directors as may be selected by it on the terms and
conditions hereinafter set forth in the Plan. In selecting the persons to receive Awards,
including the type and size of the Award, the Committee may consider any factors that it may deem
relevant.

     1.6 Term of Plan. The Plan shall be effective as of August 1, 2003 (the “Effective
Date”), subject to approval by the shareholders of the Company. The provisions of the Plan are
applicable to all Awards granted on or after the Effective Date. If not sooner terminated under
the provisions of Section 1.4, the Plan shall terminate upon, and no further Awards shall be made,
after the tenth anniversary of the Effective Date.

     1.7 Leave of Absence. If an employee is on military, sick leave or other bona fide leave of
absence, such person shall be considered an “Employee” for purposes of an outstanding Award during
the period of such leave provided it does not exceed 90 days, or, if longer, so long as the
person’s right to reemployment is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days, the employment relationship shall be deemed to have terminated on the 91st
day of such leave, unless the person’s right to reemployment is guaranteed by statute or contract.

     1.8 Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

     “1933 Act” means the Securities Act of 1933, as amended.

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

     “Affiliate” means (i) Remington, (ii) any entity in which the Company or
Remington, directly or indirectly, owns 10% or more of the combined voting power, as
determined by the Committee, (iii) any “parent corporation” of the Company or
Remington (as defined in section 424(e) of the Code), (iv) any

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“subsidiary
corporation” of any such parent corporation (as defined in section 424(f) of the
Code) of the Company or Remington and (v) any trades or businesses, whether or not
incorporated which are members of a controlled group or are under common control (as
defined in Sections 414(b) or (c) of the Code) with the Company or Remington.

     “Awards” means, collectively, Options, Purchased Stock, Bonus Stock, Stock
Appreciation Rights, Phantom Stock, Restricted Stock, Performance Awards, or Other
Stock or Performance Based Awards.

     “Bonus Stock” is defined in Article V.

     “Cause” for termination of any Participant who is a party to an agreement of
employment with or services to the Company shall mean termination for “Cause” as
such term is defined in such agreement, the relevant portions of which are
incorporated herein by reference. If such agreement does not define “Cause” or if a
Participant is not a party to such an agreement, “Cause” means (i) the willful
commission by a Participant of a criminal or other act that causes or is likely to
cause substantial economic damage to the Company or an Affiliate or substantial
injury to the business reputation of the Company or Affiliate; (ii) the commission
by a Participant of an act of fraud in the performance of such Participant’s duties
on behalf of the Company or an Affiliate; or (iii) the continuing willful failure of
a Participant to perform the duties of such Participant to the Company or an
Affiliate (other than such failure resulting from the Participant’s incapacity due
to physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to be heard
and cure such failure are given to the Participant by the Committee. For purposes
of the Plan, no act, or failure to act, on the Participant’s part shall be
considered “willful” unless done or omitted to be done by the Participant not in
good faith and without reasonable belief that the Participant’s action or omission
was in the best interest of the Company or an Affiliate, as the case may be.

     “Change of Control” shall be deemed to have occurred upon any of the following
events:

     (i) any “person” (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and as modified in Section 13(d) and 14(d) of
the Exchange Act) other than (A) the Company or any of its subsidiaries, (B) any
employee benefit plan of the Company or any of its subsidiaries, (C) Remington or any
Affiliate, (D) a company owned, directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of the Company, or (E) an underwriter
temporarily holding securities pursuant to an offering of such securities (a “Person”),
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the shares of voting
stock of the Company then outstanding; provided, however, that an initial public offering of
Common Stock shall not constitute a Change of Control;

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     (ii) the consummation of any merger, organization, business combination or
consolidation of the Company or one of its subsidiaries with or into any other company,
other than a merger, reorganization, business combination or consolidation which would
result in the holders of the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such merger, reorganization,
business combination or consolidation more than 50% of the combined voting power of the
voting securities of the Company or the surviving company or the parent of such surviving
company;

     (iii) the consummation of a sale or disposition by the Company of all or substantially
all of the Company’s assets, other than a sale or disposition if the holders of the voting
securities of the Company outstanding immediately prior thereto hold securities immediately
thereafter which represent more than 50% of the combined voting power of the voting
securities of the acquiror, or parent of the acquiror, of such assets, or the stockholders
of the Company approve a plan of complete liquidation or dissolution of the Company; or

     (iv) individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to the
Effective Date whose election by the Board, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an election contest with
respect to the election or removal of directors or other solicitation of proxies or consents
by or on behalf of a person other than the Board.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations thereunder.

     “Committee” means the compensation committee appointed by the Board to
administer the Plan or, if none, the Board; provided however, that with respect to
any Award granted to a Covered Employee which is intended to be “performance-based
compensation” as described in Section 162(m)(4)(c) of the Code, the Committee shall
consist solely of two or more “outside directors” as described in Section
162(m)(4)(c)(i) of the Code.

     “Consultant” means any individual, other than a Director or an Employee, who
renders consulting or advisory services to the Company or an Affiliate.

     “Covered Employee” shall mean the Chief Executive Officer of the Company or the
four highest paid officers of the Company other than the Chief Executive Officer as
described in Section 162(m)(3) of the Code.

     “Disability” means an inability to perform the Participant’s material services
for the Company for a period of 90 consecutive days or a total of 180 days, during
any 365-day period, in either case as a result of incapacity due to

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mental or
physical illness, which is determined to be total and permanent. A determination of
Disability shall be made by a physician satisfactory to both the Participant (or his
guardian) and the Company, provided that if the Participant (or his guardian and the
Company do not agree on a physician, the Participant and the Company shall each
select a physician and these two together shall select a third physician, whose
determination as to Disability shall be binding on all parties. Eligibility for
disability benefits under any policy for long-term disability benefits provided to
the Participant by the Company shall conclusively establish the Participant’s
disability.

     “Employee” means any employee of the Company or an Affiliate.

     “Employment” includes any period in which a Participant is an Employee or a
paid Consultant to the Company or an Affiliate.

     “Fair Market Value or FMV Per Share”. The Fair Market Value or FMV Per Share
of the Common Stock shall be the closing price on the New York Stock Exchange or
other national securities exchange or over-the-counter market, if applicable, for
the date of the determination, or if no trade of the Common Stock shall have been
reported for such date, the closing sales price quoted on such exchange for the most
recent trade prior to the determination date. If shares of the Common Stock are not
listed or admitted to trading on any exchange, over-the-counter market or any
similar organization as of the determination date, the FMV Per Share shall be
determined by the Committee in good faith using any fair and reasonable means
selected in its discretion.

     “Good Reason” means termination of employment by an Employee, termination of
service by a Consultant or resignation from the Board of a Non-Employee Director
under any of the following circumstances:

     (i) if such Employee, Consultant or Non-Employee Director is a party to an
agreement for employment with or services to the Company, which agreement includes a
definition of “Good Reason” for termination of employment with or services to the
Company, “Good Reason” shall have the same definition for purposes of the Plan as is
set forth in such agreement, the relevant portions of which are incorporated herein
by reference.

     (ii) if such Employee, Consultant or Non-Employee Director is not a party to an
agreement with the Company that defines the term “Good Reason,” such term shall mean
termination of employment or service under any of the following circumstances, if
the Company fails to cure such circumstances within thirty (30) days after receipt
of written notice from the Participant to the Company setting forth a description of
such Good Reason:

     (i) the removal from or failure to re-elect the Participant to the
office or position in which he or she last served;

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     (ii) the assignment to the Participant of any duties, responsibilities,
or reporting requirements inconsistent with his or her position with the
Company, or any material diminishment, on a cumulative basis, of the
Participant’s overall duties, responsibilities, or status;

     (iii) a material reduction by the Company in the Participant’s fees,
compensation, or benefits; or

     (iv) the requirement by the Company that the principal place of
business at which the Participant performs his duties be changed to a
location more than fifty (50) miles from downtown Dallas, Texas.

     “Incentive Option” means any option which satisfies the requirements of Code
Section 422 and is granted pursuant to Article III of the Plan.

     “Non-Employee Director” means persons who are members of the Board but who are
neither Employees nor Consultants of the Company or any Affiliate.

     “Non-Qualified Option” shall mean an option not intended to satisfy the
requirements of Code Section 422 and which is granted pursuant to Article II of the
Plan.

     “Option” means an option to acquire Common Stock granted pursuant to the
provisions of the Plan, and refers to either an Incentive Stock Option or a
Non-Qualified Stock Option, or both, as applicable.

     “Option Expiration Date” means the date determined by Committee which shall not
be more than ten years after the date of grant of an Option.

     “Optionee” means a Participant who has received or will receive an Option.

     “Other Stock-Based Award” means an award granted pursuant to Article IX of the
Plan that is not otherwise specifically provided for, the value of which is based in
whole or in part upon the value of a share of Common Stock.

     “Outstanding Company Common Stock” means, as of any date of determination, the
then outstanding shares of Common Stock of the Company.

     “Outstanding Company Voting Securities” means, as of any date of determination,
the combined voting power of the then outstanding voting securities of the Company
entitled to vote generally on the election of directors.

     “Participant” means any Non-Employee Director, Employee or Consultant granted
an Award under the Plan.

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     “Performance Award” means an Award granted pursuant to Article VIII of the
Plan, which, if earned, shall be payable in shares of Common Stock, cash or any
combination thereof as determined by the Committee.

     “Purchased Stock” means a right to purchase Common Stock granted pursuant to
Article IV of the Plan.

     “Phantom Shares” means an Award of the right to receive shares of Common Stock
issued at the end of a Restricted Period which is granted pursuant to Article VI of
the Plan.

     “Reload Option” is defined in Section 2.3(f).

     “Remington” means Remington Hotel Corporation, a Texas corporation or Remington
Lodging & Hospitality, L.P., a Delaware limited partnership.

     “Restricted Period” shall mean the period established by the Committee with
respect to an Award during which the Award either remains subject to forfeiture or
is not exercisable by the Participant.

     “Restricted Stock” shall mean any share of Common Stock, prior to the lapse of
restrictions thereon, granted under Article VII of the Plan.

     “Stock Appreciation Rights” means an Award granted pursuant to Article VI of
the Plan.

ARTICLE II

NONQUALIFIED STOCK OPTIONS

     2.1 Grants. The Committee may grant Options to purchase the Common Stock to any Employee,
Consultant or Non-Employee Director according to the terms set forth below.

     2.2 Calculation of Exercise Price. The exercise price to be paid for each share of Common
Stock deliverable upon exercise of each Option granted under this Article II shall not be less than
the FMV Per Share on the date of grant of such Option. The exercise price for each Option granted
under Article II shall be subject to adjustment as provided in Section 2.3(d).

     2.3 Terms and Conditions of Options. Options shall be in such form as the Committee may from
time to time approve, shall be subject to the following terms and conditions and may contain such
additional terms and conditions, not inconsistent with this Article II, as the Committee shall deem
desirable:

     (a) Option Period and Conditions and Limitations on Exercise. No Option shall be exercisable
later than the Option Expiration Date. To the extent not prohibited by other provisions of the
Plan, each Option shall be exercisable at such time or times as the Committee in its discretion may
determine at the time such Option is granted.

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     (b) Manner of Exercise. In order to exercise an Option, the person or persons entitled to
exercise it shall deliver to the Company payment in full for the shares being purchased, together
with any required withholding taxes. The payment of the exercise price for each Option shall
either be (i) in cash or by check payable and acceptable to the Company, (ii) with the consent of
the Committee, by tendering to the Company shares of Common Stock owned by the person for more than
six months having an aggregate Fair Market Value as of the date of exercise that is not greater
than the full exercise price for the shares with respect to which the Option is being exercised and
by paying any remaining amount of the exercise price as provided in (i) above, or (iii) subject to
such instructions as the Committee may specify, at the person’s written request the Company may
deliver certificates for the shares of Common Stock for which the Option is being exercised to a
broker for sale on behalf of the person, provided that the person has irrevocably instructed such
broker to remit directly to the Company on the person’s behalf the full amount of the exercise
price from the proceeds of such sale. In the event that the person elects to make payment as
allowed under clause (ii) above, the Committee may, upon confirming that the optionee owns the
number of additional shares being tendered, authorize the issuance of a new certificate for the
number of shares being acquired pursuant to the exercise of the Option less the number of shares
being tendered upon the exercise and return to the person (or not require surrender of) the
certificate for the shares being tendered upon the exercise. If the Committee so requires, such
person or persons shall also deliver a written representation that all shares being purchased are
being acquired for investment and not with a view to, or for resale in connection with, any
distribution of such shares.

     (c) Options not Transferable. Except as provided below, no Non-qualified Option granted
hereunder shall be transferable other than by (i) will or by the laws of descent and distribution
or (ii) pursuant to a domestic relations order and, during the lifetime of the Participant to whom
any such Option is granted, and it shall be exercisable only by the Participant (or his guardian).
Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or to subject to
execution, attachment or similar process, any Option granted hereunder, or any right thereunder,
contrary to the provisions hereof, shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the Committee, result in forfeiture of
the Option with respect to the shares involved in such attempt. With respect to a specific
Non-qualified Option, the Participant (or his guardian) may transfer, for estate planning purposes,
all or part of such Option to one or more immediate family members or related family trusts or
partnerships or similar entities.

     (d) Adjustment of Options. In the event that at any time after the Effective Date the
outstanding shares of Common Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the like, the Committee
shall make an appropriate and equitable adjustment in the number and kind of shares as to which all
outstanding Options granted, or portions thereof then unexercised, shall be exercisable, to the end
that after such event the shares subject to the Plan and each Participant’s proportionate interest
shall be maintained as before the occurrence of such event. Such adjustment in an outstanding
Option shall be made without change in the total price applicable to the Option or the unexercised
portion of the Option (except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and with any necessary corresponding

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adjustment in exercise price per
share. Any such adjustment made by the Committee shall be final and binding upon all Participants,
the Company, and all other interested persons.

     (e) Listing and Registration of Shares. Each Option shall be subject to the requirement that
if at any time the Committee determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such Option under any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the issue or purchase of shares thereunder,
such Option may not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained and the same shall have
been free of any conditions not acceptable to the Committee.

     (f) Reload Options. A Non-qualified Option may, in the discretion of the Committee, include a
reload stock Option right which shall entitle the Participant, upon (i) the exercise of such
original Non-qualified Option prior to the Participant’s termination of employment and (ii) payment
of the appropriate exercise price in shares of Common Stock that have been owned by such
Participant for at least six months prior to the date of exercise, to receive a new Non-qualified
Option (the “Reload Option”) to purchase, at the FMV Per Share on the date of the exercise
of the original Non-qualified Option, the number of shares of Common Stock equal to the number of
whole shares delivered by the Participant in payment of the exercise price of the original
Non-qualified Option. Such Reload Option shall be subject to the same terms and conditions,
including expiration date, and shall be exercisable at the same time or times as the original
Non-qualified Option with respect to which it is granted.

     2.4 Amendment. The Committee may, without the consent of the person or persons entitled to
exercise any outstanding Option, amend, modify or terminate such Option; provided, however, such
amendment, modification or termination shall not, without such person’s consent, reduce or diminish
the value of such Option determined as if the Option had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination. The Committee may at any time or
from time to time, in its discretion, in the case of any Option which is not then immediately
exercisable in full, accelerate the time or times at which such Option may be exercised to any
earlier time or times.

     2.5 Acceleration of Vesting. Any Option granted hereunder which is not otherwise vested shall vest (unless specifically
provided to the contrary by the Committee in the document or instrument evidencing an Option
granted hereunder) upon (i) termination of an Employee or Consultant or removal of a Non-Employee
Director without Cause or termination by an Employee or Consultant or resignation of a Non-Employee
Director with Good Reason; (ii) termination, removal or resignation of an Employee, Consultant or
Non-Employee Director for any reason within one (1) year from the effective date of the Change of
Control; or death or Disability of the Participant.

     2.6 Other Provisions.

     (a) The person or persons entitled to exercise, or who have exercised, an Option shall not be
entitled to any rights as a stockholder of the Company with respect to any shares subject to such
Option until he shall have become the holder of record of such shares.

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     (b) No Option granted hereunder shall be construed as limiting any right which the Company or
any Affiliate may have to terminate at any time, with or without cause, the employment of any
person to whom such Option has been granted.

     (c) Notwithstanding any provision of the Plan or the terms of any Option, the Company shall
not be required to issue any shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or federal law or of the rules or regulations of any
governmental regulatory body.

     2.7 Option Repricing. With stockholder approval only, the Committee, in its absolute
discretion, may grant to holders of outstanding Non-Qualified Options, in exchange for the
surrender and cancellation of such Non-Qualified Options, new Non-Qualified Options having exercise
prices lower (or higher with any required consent) than the exercise price provided in the
Non-Qualified Options so surrendered and canceled and containing such other terms and conditions as
the Committee may deem appropriate.

ARTICLE III

INCENTIVE OPTIONS

     The terms specified below shall be applicable to all Incentive Options. Except as modified by
the provisions of this Article III, all the provisions of Article II shall be applicable to
Incentive Options. Options which are specifically designated as Non-Qualified Options shall
not be subject to the terms of this Section III.

     3.1 Eligibility. Incentive Options may only be granted to Employees.

     3.2 Exercise Price. The exercise price per Share shall not be less than one hundred percent (100%) of the FMV
Per Share on the option grant date.

     3.3 Dollar Limitation. The aggregate Fair Market Value (determined as of the respective date
or dates of grant) of shares of Common Stock for which one or more options granted to any Employee
under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two
(2) or more such options which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options shall be applied on
the basis of the order in which such options are granted.

     3.4 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one hundred ten percent
(110%) of the FMV Per Share on the option grant date and the option term shall not exceed five (5)
years measured from the option grant date.

     3.5 Options Not Transferable. No Incentive Option granted hereunder shall be transferable
other than by will or by the laws of descent and distribution and shall be exercisable during the
Optionee’s lifetime only by such Optionee.

-10-

 

     3.6 Compliance with 422. All Options that are intended to be Incentive Stock Options shall be
designated as such in the Option grant and in all respects shall be issued in compliance with Code
Section 422.

     3.7 Limitations on Exercise. No Incentive Option shall be exercisable more than three (3)
months after the Optionee ceases to be an Employee for any reason other than death or Disability,
or more than one (1) year after the Optionee ceases to be an Employee due to death or Disability.

ARTICLE IV

PURCHASED STOCK

     4.1 Eligible Persons. The Committee shall have the authority to sell shares of Common Stock
to such Employees, Consultants and Non-Employee Directors of the Company or its Affiliates as may
be selected by it, on such terms and conditions as it may establish, subject to the further
provisions of this Article IV. Each issuance of Common Stock under this Plan shall be evidenced by
an agreement which shall be subject to applicable provisions of this Plan and to such other
provisions not inconsistent with this Plan as the Committee may approve for the particular
sale transaction.

     4.2 Purchase Price. The price per share of Common Stock to be purchased by a Participant
under this Plan shall be determined in the sole discretion of the Committee, and may be less than,
but shall not greater than the FMV Per Share at the time of purchase.

     4.3 Payment of Purchase Price. Payment of the purchase price of Purchased Stock under this
Plan shall be made in full in cash.

ARTICLE V

BONUS STOCK

     The Committee may, from time to time and subject to the provisions of the Plan, grant shares
of Bonus Stock to Employees, Consultants or Non-Employee Directors. Bonus Stock shall be shares of
Common Stock that are not subject to a Restricted Period under Article VII.

ARTICLE VI

STOCK APPRECIATION RIGHTS AND PHANTOM STOCK

     6.1 Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation Rights
to Employees, Consultants or Non-Employee Directors on the following terms and conditions.

     (a) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A) the FMV Per Share on the
date of exercise over (B) the grant price of the Stock Appreciation Right as determined by the
Committee.

     (b) Rights Related to Options. A Stock Appreciation Right granted in connection with an
Option shall entitle a Participant, upon exercise thereof, to surrender that Option or any portion

-11-

 

thereof, to the extent unexercised, and to receive payment of an amount computed pursuant to
Subsection 5.1(a)(i) hereof. That Option shall then cease to be exercisable to the extent
surrendered. A Stock Appreciation Right granted in connection with an Option shall be exercisable
only at such time or times and only to the extent that the related Option is exercisable and shall
not be transferable (other than by will or the laws of descent and distribution) except to the
extent that the related Option is transferable.

     (c) Right Without Option. A Stock Appreciation Right granted independent of an Option shall
be exercisable as determined by the Committee and set forth in the Award agreement governing the
Stock Appreciation Right.

     (d) Terms. The Committee shall determine at the date of grant the time or times at which and
the circumstances under which a Stock Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals and/or future service requirements), the
method of exercise, whether or not a Stock Appreciation Right shall be in tandem or in combination
with any other Award, and any other terms and conditions of any Stock Appreciation Right.

     6.2 Phantom Stock Awards. The Committee is authorized to grant Phantom Stock Awards to
Participants, which are rights to receive cash equal to the Fair Market Value of specified number
of shares of Common Stock at the end of a specified deferral period, subject to the following terms
and conditions:

     (a) Award and Restrictions. Satisfaction of a Phantom Stock Award shall occur upon expiration
of the deferral period specified for such Phantom Stock Award by the Committee or, if permitted by
the Committee, as elected by the Participant. In addition, Phantom Stock Awards shall be subject
to such restrictions (which may include a risk of forfeiture), if any, as the Committee may impose,
which restrictions may lapse at the expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future service requirements),
separately or in combination, installments or otherwise, as the Committee may determine.

     (b) Forfeiture. Except as otherwise determined by the Committee or as may be set forth in any
Award, employment or other agreement pertaining to a Phantom Stock Award, upon termination of
employment or services during the applicable deferral period or portion thereof to which forfeiture
conditions apply, all Phantom Stock Awards that are at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited; provided that the Committee may
provide, by rule or regulation or in any Award agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Phantom Stock Awards shall be waived in
whole or in part in the event of terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part the forfeiture of Phantom Stock Awards.

     (c) Performance Goals. To the extent the Committee determines that any Award granted pursuant
to this Article VI shall constitute performance-based compensation for purposes of Section 162(m)
of the Code, the grant or settlement of the Award shall, in the Committee’s

-12-

 

discretion, be subject
to the achievement of performance goals determined and applied in a manner consistent with Section
8.2.

ARTICLE VII

RESTRICTED STOCK

     7.1 Eligible Persons. All Employees, Consultants and Non-Employee Directors shall be eligible
for grants of Restricted Stock.

     7.2 Restricted Period and Vesting.

     (a) Unless the Award specifically provides otherwise, Restricted Stock shall be subject to
restrictions on transfer by the Participant and repurchase by the Company such that the Participant
shall not be permitted to transfer such shares and the Company shall have the right to repurchase
or recover such shares for the amount of cash paid therefor, if any, if the Participant shall
terminate employment from or services to the Company or its Affiliates, as applicable, provided
that such transfer and repurchase restrictions shall lapse with respect to 33.33% of such initial
shares on the first anniversary of the date of grant and on each subsequent anniversary of the date
of grant that the Participant shall remain continuously as an Employee, Non-Employee Director or
Consultant of the Company or its Affiliates, as applicable; subject to section 7.2(b) below.

     (b) Notwithstanding the foregoing, unless the Award specifically provides otherwise, all
Restricted Stock not otherwise vested shall vest upon (i) termination of an Employee or Consultant
or removal of a Non-Employee Director without Cause; (ii) termination by an Employee or Consultant
or resignation of a Non-Employee Director with Good Reason; (iii) termination, resignation or
removal of an Employee, Consultant or Non-Employee Director for any reason within one (1) year from
the effective date of a Change of Control; or (iv) death or Disability of the Participant.

     (c) Each certificate representing Restricted Stock awarded under the Plan shall be registered
in the name of the Participant and, during the Restricted Period, shall be left in deposit with the
Company and a stock power endorsed in blank. The grantee of Restricted Stock shall have all the
rights of a stockholder with respect to such shares including the right to vote and the right to
receive dividends or other distributions paid or made with respect to such shares. Any certificate
or certificates representing shares of Restricted Stock shall bear a legend similar to the
following:

The shares represented by this certificate have been issued pursuant
to the terms of the Ashford Hospitality Trust, Inc. Amended and
Restated 2003 Stock Incentive Plan (as amended and restated) and
Grant of Restricted Stock dated May 3, 2005, and may not be sold,
pledged, transferred, assigned or otherwise encumbered in any manner
except as is set forth in the terms of such plan or grant.

-13-

 

ARTICLE VIIII

PERFORMANCE AWARDS

     8.1 Performance Awards. The Committee may grant Performance Awards based on performance
criteria measured over a period of not less than one year and not more than five years. The
Committee may use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its discretion to increase
the amounts payable under any Award subject to performance conditions except as limited under Section 8.2
in the case of a Performance Award granted to a Covered Employee.

     8.2 Performance Goals. The grant and/or settlement of a Performance Award shall be contingent
upon terms set forth in this Section 8.2.

     (a) General. The performance goals for Performance Awards shall consist of one or more
business criteria and a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee. In the case of any Award granted to a Covered Employee,
performance goals shall be designed to be objective and shall otherwise meet the requirements of
Section 162(m) of the Code and regulations thereunder (including Treasury Regulations sec. 1.162-27
and successor regulations thereto), including the requirement that the level or levels of
performance targeted by the Committee are such that the achievement of performance goals is
“substantially uncertain” at the time of grant. The committee may determine that such Performance
Awards shall be granted and/or settled upon achievement of any one performance goal or that two or
more of the performance goals must be achieved as a condition to the grant and/or settlement of
such Performance Awards. Performance goals may differ among Performance Awards granted to any one
Participant or for Performance Awards granted to different Participants.

     (b) Business Criteria. One or more of the following business criteria for the Company, an a
consolidated basis, and/or for specified subsidiaries, divisions or business or geographical units
of the Company (except with respect to the total stockholder return and earnings per share
criteria), shall be used by the Committee in establishing performance goals for Performance Awards
granted to a Participant: (A) earnings per share; (B) increase in revenues; (C) increase in cash
flow; (D) increase in cash flow return; (E) return on net assets; (F) return on assets; (G) return
on investment; (H) return on capital; (I) return on equity; (J) economic value added; (K) gross
margin; (L) net income; (M) pretax earnings; (N) pretax earnings before interest, depreciation and
amortization; (O) pretax operating earnings after interest expense and before incentives, service
fees, and extraordinary or special items; (P) operating income; (Q) total stockholder return; ®
debt reduction; and (S) any of the above goals determined on the absolute or relative basis or as
compared to the performance of a published or special index deemed applicable by the Committee
including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable
companies.

     (c) Performance Period; Timing for Establishing Performance Goals. Achievement of performance
goals in respect of Performance Awards shall be measured over a performance period of not less than
one year and not more than three years, as specified by the Committee. Performance goals in the
case of any Award granted to a Participant shall be established not later

-14-

 

than 90 days after the
beginning of any performance period applicable to such Performance Awards, or at such other date as
may be required or permitted for “performance-based compensation” under Section 162(m) of the Code.

     (d) Settlement of Performance Awards; Other Terms. After the end of each performance period,
the Committee shall determine the amount, if any, of Performance Awards payable to
each Participant based upon achievement of business criteria over a performance period. The
Committee may not exercise discretion to increase any such amount payable in respect of a
Performance Award designed to comply with Section 162(m) of the Code. The Committee shall specify
the circumstances in which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a performance period or settlement
of Performance Awards.

     (e) Written Determinations. All determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award, and the achievement of performance goals
relating to Performance Awards shall be made in writing in the case of any Award granted to a
Participant. The Committee may not delegate any responsibility relating to such Performance
Awards.

     (f) Status of Performance Awards under Section 162(m) of the Code. It is the intent of the
Company that Performance Awards granted to persons who are designated by the Committee as likely to
be Covered Employees within the meaning of Section 162(m) of the Code and regulations thereunder
(including Treasury Regulations sec. 1.162-27 and successor regulations thereto) shall, if so
designated by the Committee, constitute “performance-based compensation” within the meaning of
Section 162(m) of the Code and regulations thereunder. Accordingly, the terms of this Section 8.2
shall be interpreted in a manner consistent with Section 162(m) of the Code 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 a Performance Award, who is likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards that are designated as intended to comply
with Section 162(m) of the Code does not comply or is inconsistent with the requirements of Section
162(m) of the Code or regulations thereunder, such provision shall be construed or deemed amended
to the extent necessary to conform to such requirements.

ARTICLE IX

OTHER STOCK OR PERFORMANCE BASED AWARDS

     The Committee is hereby authorized to grant to Employees, Non-Employee Directors and
Consultants of the Company or its Affiliates, Other Stock or Performance-Based Awards, which shall
consist of a right which (i) is not an Award described in any other Article and (ii) is denominated
or payable in, valued in whole or in part by reference to, or otherwise based on or related to,
shares of Common Stock (including, without limitation, securities convertible into shares of Common
Stock) or cash as are deemed by the Committee to be consistent with the

-15-

 

purposes of the Plan.
Subject to the terms of the Plan, the Committee shall determine the terms and conditions of any
such Other Stock or Performance-Based Award.

ARTICLE X

CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS

     10.1 General. Awards may be granted on the terms and conditions set forth herein. In addition, the
Committee may impose on any Award or the exercise thereof, such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the Participant and
terms permitting a Participant to make elections relating to his or her Award. Notwithstanding the
foregoing, the Committee may amend any Award without the consent of the holder if the Committee
deems it necessary to avoid adverse tax consequences to the holder under Code Section 409A. The
Committee shall retain full power and discretion to accelerate or waive, at any time, any term or
condition of an Award that is not mandatory under this Plan; provided, however,
that the Committee shall not have discretion to accelerate or waive any term or condition of an
Award (i) if such discretion would cause the Award to have adverse tax consequences to the
Participant under 409A, or (ii) if the Award is intended to qualify as “performance-based
compensation” for purposes of Section 162(m) of the Code and such discretion would cause the Award
not to so qualify. Except in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy
the requirements of the Maryland General Corporation Law, no consideration other than services may
be required for the grant of any Award.

     10.2 Stand-Alone, Additional, Tandem, and Substitute Awards. Subject to Section 2.7, awards granted under the Plan may, in the discretion of
the Committee, be granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the Company, any
Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right
of a Participant to receive payment from the Company or any Affiliate. Such additional, tandem and
substitute or exchange Awards may be granted at any time. If an Award is granted in substitution
or exchange for another Award, the Committee shall require the surrender of such other Award in
consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the Company or any
Affiliate.

     10.3 Term of Awards. The term or Restricted Period of each Award that is an Option, Stock
Appreciation Right, Phantom Stock or Restricted Stock shall be for such period as may be determined
by the Committee; provided that in no event shall the term of any such Award exceed a period of ten
years (or such shorter terms as may be require in respect of an Incentive Stock Option under
Section 422 of the Code).

     10.4 Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan and
any applicable Award agreement, payments to be made by the Company of a Subsidiary upon the
exercise of an Option or other Award or settlement of an Award may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of any Award may, subject to any
limitations set forth in the Award agreement, be accelerated and

-16-

 

cash paid in lieu of shares in
connection with such settlement, in the discretion of the Committee or upon occurrence of one or
more specified
events; provided, however, that such discretion may not be exercised by the Committee if the
exercise of such discretion would result in adverse tax consequences to the Participant under
section 409A of the Code. In the discretion of the Committee, Awards granted pursuant to Article
VI or VIII of the Plan may be payable in shares to the extent permitted by the terms of the
applicable Award agreement. Installment or deferred payments may be required by the Committee
(subject to Section 1.4 of the Plan, including the consent provisions thereof in the case of any
deferral of an outstanding Award not provided for in the original Award agreement) or permitted at
the election of the Participant on terms and conditions established by the Committee; provided,
however, that no deferral shall be required or permitted by the Committee if such deferral would
result in adverse tax consequences to the Participant under section 409A of the Code. Payments may
include, without limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of amounts in respect of installment or
deferred payments denominated in shares. Any deferral shall only be allowed as is provided in a
separate deferred compensation plan adopted by the Company. The Plan shall not constitute any
“employee benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended.

     10.5 Vested and Unvested Awards. After the satisfaction of all of the terms and conditions
set by the Committee with respect to an Award of (i) Restricted Stock, a certificate, without the
legend set forth in Section 7.2(a), for the number of shares that are no longer subject to such
restrictions, terms and conditions shall be delivered to the Employee, (ii) Phantom Stock, to the
extent not paid in cash, a certificate for the number of shares equal to the number of shares of
Phantom Stock earned, and (iii) Stock Appreciation Rights or Performance Awards, cash and/or a
certificate for the number of shares equal in value to the number of Stock Appreciation Rights or
amount of Performance Awards vested shall be delivered to the person. Upon termination,
resignation or removal of a Participant under circumstances that do not cause such Participant to
become fully vested, any remaining unvested Options, shares of Restricted Stock, Phantom Stock,
Stock Appreciation Rights or Performance Awards, as the case may be, shall either be forfeited back
to the Company or, if appropriate under the terms of the Award, shall continue to be subject to the
restrictions, terms and conditions set by the Committee with respect to such Award.

     10.6 Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant
of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange
Act shall be exempt from Section 16(b) of the Exchange Act pursuant to an applicable exemption
(except for transactions acknowledged by the Participant in writing to be non-exempt).
Accordingly, if any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.

     10.7 Other Provisions. No grant of any Award shall be construed as limiting any right which the Company or any
Affiliate may have to terminate at any time, with or without cause, the employment of any person to
whom such Award has been granted.

-17-

 

ARTICLE XI

WITHHOLDING FOR TAXES

     Any issuance of Common Stock pursuant to the exercise of an Option or payment of any other
Award under the Plan shall not be made until appropriate arrangements satisfactory to the Company
have been made for the payment of any tax amounts (federal, state, local or other) that may be
required to be withheld or paid by the Company with respect thereto. Such arrangements may, at the
discretion of the Committee, include allowing the person to tender to the Company shares of Common
Stock owned by the person, or to request the Company to withhold shares of Common Stock being
acquired pursuant to the Award, whether through the exercise of an Option or as a distribution
pursuant to the Award, which have an aggregate FMV Per Share as of the date of such withholding
that is not greater than the sum of all tax amounts to be withheld with respect thereto, together
with payment of any remaining portion of such tax amounts in cash or by check payable and
acceptable to the Company.

     Notwithstanding the foregoing, if on the date of an event giving rise to a tax withholding
obligation on the part of the Company the person is an officer or individual subject to Rule 16b-3,
such person may direct that such tax withholding be effectuated by the Company withholding the
necessary number of shares of Common Stock (at the tax rate required by the Code) from such Award
payment or exercise.

ARTICLE XII

MISCELLANEOUS

     12.1 No Rights to Awards. No Participant or other person shall have any claim to be granted
any Award, there is no obligation for uniformity of treatment of Participants, or holders or
beneficiaries of Awards and the terms and conditions of Awards need not be the same with respect to
each recipient.

     12.2 No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any Affiliate. Further, the
Company or any Affiliate may at any time dismiss a Participant from employment, free from any
liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.

     12.3 Governing Law. The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with applicable federal law and
the laws of the State of Maryland, without regard to any principles of conflicts of law.

     12.4 Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction or as to any Participant or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
Participant or Award and the remainder of the Plan and any such Award shall remain in full force
and effect.

-18-

 

     12.5 Other Laws. The Committee may refuse to issue or transfer any shares or other
consideration under an Award if, acting in its sole discretion, it determines that the issuance of
transfer or such shares or such other consideration might violate any applicable law.

     12.6 Shareholder Agreements. The Committee may condition the grant, exercise or payment of
any Award upon such person entering into a stockholders’ agreement in such form as approved from
time to time by the Board.

-19-<PAGE>

EXHIBIT 10.2

         2005 ATS MEDICAL MANAGEMENT INCENTIVE COMPENSATION PLAN (MICP)

The 2005 ATS Medical Management Incentive Compensation Plan (MICP) is designed
to pay, in addition to performance based annual salaries, incentive cash
compensation to management and other "key employees" who by their assigned
responsibilities contribute to the success of the Company. Incentive payments
will be based on corporate funding and achievement of individual
Objectives/Smart Goals.

1.    DEFINITION OF TERMS

      GOALS

      The Individual Objectives, as set forth at the beginning of each program
      year and referred to as Smart Goals, must be specific, measurable,
      achievable, related to Corporate Goals and time bound. The Board of
      Directors may amend the goals to reflect material adjustments in or
      changes to the Company's accounting policies; to reflect major corporate
      changes such as mergers, acquisitions, or divestitures; and to reflect
      such other events having a significant impact on the goals.

      BASE SALARY

      The annual salary rates effective on the first day of the Plan year.

      PARTICIPANT

      Any employee or position which has been designated by the Board as a
      participant in the Plan for the year or during the year. If a particular
      employee is not covered by the MICP and has been recognized for
      extraordinary achievement, he/she may be eligible to participate in the
      Plan for that particular year at the discretion of the President/CEO.

      ELIGIBILITY

      Only regular full time employees may be designated as a participant in the
      Plan.

      PROGRAM YEAR

      The fiscal year of the corporation.

      FUNDING

      The total dollar amounts accrued for payment in any program year. The
      bonus pool will be funded by achievement of the Company's annual operating
      Plan and will be tied to both top line and bottom line results.

                                       23

<PAGE>

      PAYOUT

      The actual amount to be paid to a participant based on operating results
      achievement rate combined with individual Smart Goals performance. The
      maximum payout each participant is eligible to receive will be
      communicated by his/her Manager.

2.    DESIGNATION OF PARTICIPANTS

      The Board, upon the recommendation of the management of the Corporation,
      shall make all determinations as to the eligibility of employees and
      positions to participate in the MICP. Following the Board's determination
      of eligible participants, each participant shall be notified of
      eligibility to participate in the 2005 MICP and will be provided with a
      copy of the Plan. The 2005 Plan is designed to include officer, director,
      and manager level positions as well as employee designated as "key
      employees."

3.    CALCULATION AND PAYMENT OF INCENTIVE AWARDS

      Individual incentives will not be paid unless the President/CEO and the
      Compensation Committee of the Board of Directors approve each
      participant's individual incentive awards with payout contingent upon
      completion of the Company's year-end financial audit for the program year.

      PLAN CRITERIA

      ACHIEVEMENT OF SMART GOALS
        (20% weight)
      TOP LINE RESULTS = Revenue
        (50% weight)
      BOTTOM LINE RESULTS=Operating Income before taxes
        (30% weight)
      1:3 BONUS POOL FUNDING for overachievement
      1:5 BONUS POOL FUNDING for underachievement

      PAYOUT RATES

<TABLE>
<CAPTION>
PLAN PERFORMANCE            1:0 RATIO
<S>                         <C>
116.7%                         150%
  115%                         145%
  110%                         130%
  105%                         115%
  100%                         100%
</TABLE>

<TABLE>
<CAPTION>
PLAN PERFORMANCE            1:5 RATIO
<S>                         <C>
95%                             75%
90%                             50%
85%                             25%
80%                              0%
</TABLE>

                                       24

<PAGE>

4.    PROMOTIONS

      For individuals promoted from a non-bonus to a bonus position during the
      program year, the effective salary upon assuming the new position will be
      used in calculating eligible incentive payout. Any payout will be pro
      rated beginning the first day of the month in which the individual is
      promoted into the position.

5.    DEMOTIONS

      For individuals demoted to a non-bonus position during the plan year, MICP
      payout will be pro rated based on the number of months in the bonus
      position.

6.    TERMINATION OF EMPLOYMENT

      In the event that any participant shall cease to be a full time employee
      during any year in which he/she is participating in the Plan, such
      participant shall be entitled to receive no incentive compensation for
      such year. If he/she terminates after the Plan year but prior to the
      payout, the participant remains entitled to receive incentive
      compensation. An exception would be if the individual were subject to
      termination "for cause" if such "cause" took place during the period
      covered by the MICP.

7.    AMENDMENT OF THE PLAN

      The Board may, from time to time, make amendments to the Plan as it
      believes appropriate and may terminate the Plan at any time, provided that
      no such amendment or termination will affect the right of any participant
      to receive incentive compensation in accordance with the terms of the Plan
      for the portion of any year up to the date of the amendment or
      termination.

8.    MISCELLANEOUS

      Nothing contained in the MICP shall be construed to confer upon any
      employee any right to continue in the employ of the Company or restrict
      the Company's right to terminate his/her employment at any time.

                                       25

<PAGE>

               ESTABLISHMENT OF INDIVIDUAL OBJECTIVES/SMART GOALS

                       (Specific, Measurable, Achievable,
                   Related to Corporate Goals and Time Bound.)

In establishing individual objectives, the following guidelines shall be used:

-     Each objective should be clear, concise, and measurable (time, cost, and
      task accomplishment).

-     Each objective should be a precise written statement, which is discussed
      and agreed to by the individual and the manager.

-     Individual objectives should measure accomplishment and not effort.

-     Individuals will have four (4) Objectives/Smart Goals.

Before a participant may receive an incentive award, it will be necessary for
his/her immediate manager to:

-     Submit written measurable objectives on the appropriate form prior to the
      commencement of the program year. These objectives will be reviewed and
      approved by the President/CEO and Director of Human Resources.

-     Submit a documented evaluation of results, on a quarterly basis, to the
      President/CEO.

            -     Modifications or adjustments to the original objectives must
                  be reviewed by the participant and his/her manager and then
                  submitted to the President/CEO.

-     Submit the year-end results against objectives within one month following
      the end of the program year. The President/CEO and the Director of Human
      Resources will approve these.

                                       26

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