Document:

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                                                                    EXHIBIT 10.3

                          EXECUTIVE RETENTION AGREEMENT

         THIS AGREEMENT by and between AMERICA ONLINE LATIN AMERICA, INC., a
Delaware corporation (the "Company"), and Paulo Moledo (the "Executive") is made
as of June 5, 2004 (the "Effective Date").

         WHEREAS, the Executive is employed by the Company, and because of his
employment, possesses detailed knowledge of the Company and its business
operations, as a result of which the Executive's continued service to the
Company is very important to the future success of the Company; and

         WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it and the Company's current financial condition may raise among key
personnel, may result in the departure or distraction of key personnel to the
detriment of the Company and its stockholders; and

         WHEREAS, the Compensation Committee and the Special Committee of the
Board of Directors of the Company have determined that appropriate steps should
be taken to reinforce and encourage the continued employment and dedication of
the Company's key personnel.

         NOW, THEREFORE, as an inducement for and in consideration of the
Executive remaining in its employ, the Company agrees that the Executive shall
receive the benefits set forth in this Agreement.

         1. RETENTION BONUS. If, and only if, the Executive remains employed by
the Company through July 1, 2005, the Company shall pay the Executive on July 1,
2005, a lump sum payment (the "Retention Bonus") in the amount of US$100,000;
provided, that in the event any of the following events occurs prior to July 1,
2005, the Company will pay the Executive or his estate the Retention Bonus on
the date of the occurrence of the applicable event: (a) the Company provides a
Notice of Termination (as defined in Section 3.3) with respect to a termination
of Executive's employment without Cause or as a result of the Executive's
Disability; (b) the Executive provides a legitimate Notice of Termination with
respect to the termination of his employment for Good Reason; or (c) the
Executive dies.

         2. EQUITY COMPENSATION. On the date hereof, the Company grants to the
Executive a non-qualified option to purchase 100,000 shares of the Class A
common stock of the Company pursuant to the Company's 2000 Stock Plan (the
"Plan") at a per share exercise price equal to US$1.59 (the "Option"). The
Option will become exercisable for 50,000 shares as of January 1, 2005, and for
the remaining 50,000 shares as of January 1, 2006.

          In the event the Executive's employment is terminated by the Company
without Cause or the Executive terminates his employment for Good Reason, the
Option and all other then-outstanding options to purchase the Company's class A
common stock issued to the Executive (collectively, the "Options") will become
fully exercisable as of the date of the Notice of Termination (as defined in

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paragraph 3.3 below) and will remain outstanding during the Leave of Absence
Period (as defined in paragraph 3.1(a)), which will be an approved leave of
absence for purposes of Paragraph 13(e) of the Plan. In the event of a Going
Private Event, the Options will become fully exercisable immediately prior to
and for purposes of the Going Private Event such that the Executive will be
entitled to exercise his options and either participate in the Going Private
Event or otherwise dispose of the acquired shares in connection with the Going
Private Event. In the event of a Change in Control, in addition to any other
rights the Executive may have under the Plan, the Options must either: (a) be
assumed by an acquiring entity in accordance with Paragraph 24B(a) of the Plan,
in which event the Options will become fully exercisable if the Executive's
employment is terminated without Cause or the Executive terminates his
employment for Good Reason; (b) become fully exercisable for purposes of and
prior to the termination of the Options pursuant to Paragraphs 24B(b) or (c) of
the Plan; or (c) otherwise become fully exercisable immediately prior to the
Change in Control. The Option will be subject to all of the other terms and
conditions, including terms relating to the termination of the Options, set
forth in the Company's standard form of Notice of Grant of Stock Options and
Option Agreement. To the extent necessary to make the terms of the Options
consistent with the provisions of this Agreement, this Agreement constitutes an
amendment to the already outstanding Options identified on Exhibit A hereto.

         3.       PAYMENTS TO EXECUTIVE ON TERMINATION OF EMPLOYMENT.

         3.1.     PAYMENTS AND BENEFITS DUE ON TERMINATION OF EMPLOYMENT BY THE
                  COMPANY WITHOUT CAUSE OR AS A RESULT OF DISABILITY OR BY THE
                  EXECUTIVE FOR GOOD REASON.

         (a)      PAYMENTS. If the Executive's employment is terminated by the
                  Company without Cause or as a result of the Executive's
                  Disability or if the Executive's employment is terminated by
                  the Executive for Good Reason, then during the period
                  following the date of the Notice of Termination and prior to
                  the Termination Date (the "Leave of Absence Period"), the
                  Executive shall no longer receive any base salary from the
                  Company and shall be on an unpaid leave of absence from the
                  Company; provided, that in addition to any amounts due to the
                  Executive under Paragraph 1 hereof, in the event that the
                  Executive executes and delivers to the Company a Release and
                  Waiver in the form of Exhibit B hereto within 21 days after
                  the date of the Notice of Termination, the Executive shall be
                  entitled to be paid (a) a lump-sum payment equal to 75% of the
                  Executive's then-current annual base salary payable within 30
                  days of the date of the Notice of Termination, (b) within 30
                  days of the date of the Notice of Termination, such portion of
                  the Executive's base salary as has accrued by virtue of his
                  employment during the period through the date of the Notice of
                  Termination that has not yet been paid, together with any
                  amounts for accrued but unused vacation time and for expense
                  reimbursement and similar items which have been properly
                  incurred in accordance with the Company's policies prior to
                  termination and have not yet been paid, and (c) on or prior to
                  the date on which bonuses are paid generally to Company
                  employees, with respect to the fiscal year in which the
                  termination of employment occurs, the portion of the annual

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                  bonus for which the Executive was eligible through the date of
                  the Notice of Termination that is calculated using the
                  methodology that will be applied to the calculation of bonuses
                  generally (provided that to the extent that performance of
                  personal objectives constitutes a portion of the bonus
                  eligibility calculation, the Executive will be deemed to have
                  achieved 100% of his personal objectives)

         (b)      CONTINUATION OF BENEFITS. If the Executive's employment is
                  terminated by the Company without Cause or as a result of the
                  Executive's Disability, or if the Executive's employment is
                  terminated by the Executive for Good Reason, then during the
                  Leave of Absence Period he will remain eligible for
                  participation in all benefit plans of the Company; provided,
                  however, that the Executive will not be entitled to the grant
                  of any additional stock options or other stock rights under
                  the Plan; provided, further, that with respect to health and
                  dental coverage, in the event that the Executive executes and
                  delivers to the Company a Release and Waiver in the form of
                  Exhibit B hereto within 21 days after the date of the Notice
                  of Termination, the Company shall designate one of the
                  following, at its option: (i) the Executive shall remain
                  eligible for participation in the Company's health and dental
                  plans during the Leave of Absence Period, (ii) should the
                  Executive qualify for continuation of medical benefits under
                  the Consolidated Omnibus Budget Reconciliation Act of 1985, as
                  amended and in effect on the date of the Executive's
                  termination of employment hereunder ("COBRA"), the Executive
                  shall no longer be eligible for coverage under the Company's
                  health and dental plans as of the beginning of the Leave of
                  Absence Period and, if the Executive properly elects and makes
                  payments required by COBRA, the Company will reimburse the
                  Executive, upon submission of reasonable documentation of such
                  payments, for the cost thereof for the applicable COBRA period
                  but not exceeding nine months, or (iii) the Company shall
                  purchase for the benefit of the Executive and his family, if
                  applicable, health and dental insurance coverage, for the
                  Leave of Absence Period, equivalent to the coverage in effect
                  immediately prior to the Leave of Absence Period.

         3.2. PAYMENTS DUE ON TERMINATION BY THE COMPANY FOR CAUSE OR BY THE
EXECUTIVE OTHER THAN FOR GOOD REASON OR UPON THE DEATH OF THE EXECUTIVE. In the
event the Company terminates the Executive's employment for Cause or the
Executive terminates his employment other than for Good Reason, or the Executive
dies, then the Executive shall be entitled as of the Termination Date to no
additional compensation under this Agreement, except: (a) in the case of the
death of the Executive, (i) as provided in Paragraph 1 hereof, (ii) within 30
days of the date of death, such portion of the Executive's base salary as has
accrued by virtue of his employment through such date that has not yet been
paid, together with any amounts for accrued but unused vacation time and for
expense reimbursement and similar items which have been properly incurred in
accordance with the Company's policies prior to termination and have not yet
been paid, and (iii) on or prior to the date on which bonuses are paid generally
to Company employees, with respect to the fiscal year in which the
Executive's death occurs, the portion of the annual bonus for which the
Executive was eligible through the date of death that is calculated using the
methodology that will be applied to the calculation of bonuses generally
(provided that to the extent that performance of personal objectives constitutes
a portion of the bonus eligibility calculation, the Executive will be deemed to
have achieved 100% of his personal objectives); and (b) as otherwise provided
under the benefit plans of the Company.

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         3.3. NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than as a result of death)
shall be communicated by written notice of termination to the other party (a
"Notice of Termination") addressed to the receiving party's address set forth
below or to such other address as a party may designate by notice hereunder, and
shall be either: (a) delivered by hand; (b) made by telecopy; or (c) sent by
overnight courier.

         If to the Company:         AOL Latin America
                                    6600 N. Andrews Ave., Suite 400
                                    Ft. Lauderdale, FL 33309
                                    Attn: President
                                    Attn: General Counsel
                                    Facsimile: (954) 233-1803

         If to the Executive:       Paulo Moledo
                                    1414 Camellia Circle
                                    Weston FL 33326

         All notices and other communications shall be deemed to have been given
either: (a) if by hand, at the time of the delivery thereof to the receiving
party at the address of such party set forth above; (b) if made by telecopy, at
the time that receipt thereof has been acknowledged by electronic confirmation
or otherwise; or (c) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier service.

         Any termination by the Company for Cause must be by a Notice of
Termination given within 60 days of the Company's knowledge of the event(s) or
circumstance(s) which constitute(s) Cause and will be effective immediately
unless a later date is otherwise stated in such notice, which date shall be the
termination date (the "Termination Date"). Any termination of the Executive's
employment by the Company without Cause must be by a Notice of Termination to
the Executive, effective nine months after the date the notice is given, which
date of effectiveness shall be the Termination Date. Any termination of the
Executive's employment as a result of the Executive's Disability must be by
Notice of Termination and will be effective immediately unless a later date is
otherwise stated in such notice, which date shall be the Termination Date.

         A termination of the Executive's employment by him for Good Reason must
be by a Notice of Termination given within 60 days of the Executive's knowledge
of the event(s) or circumstance(s) that constitute(s) Good Reason, or within 60
days of the end of the cure period, if applicable. The Termination Date, which
shall be set forth in the Notice of Termination, shall be no later than nine
months after the date of the Notice of Termination.

         The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

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         4. KEY DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:

         4.1 "CHANGE IN CONTROL" means the first to occur of the following:

         (a) the date on which AOL and ODC do not own, collectively, shares of
capital stock of the Company representing more than 50% of the voting power
entitled to be cast at elections for directors ("VOTING POWER") of the Company,

         (b) the date on which AOL and ODC do not collectively have the right to
approve the election of (as a stockholder or through its designee on the Special
Committee) at least a majority of the Board of Directors of the Company..

         (c) any Person or Persons other than AOL or ODC acquires any general
power to prevent the Company's Board of Directors or shareholders from taking
action on a substantial range of corporate actions without the approval of such
Person or Persons other than pursuant to covenants and agreements of the Company
contained in any loan documents, indentures or similar agreements entered into
in connection with any bona fide indebtedness for money borrowed by the Company
after the date hereof, or

         (d) the date on which the Company sells, leases, exchanges or otherwise
transfers (in one transaction or a series of related transactions) all or
substantially all of the assets of the Company to any Person, other than a
transaction in which

                  (x) AOL and ODC (i) own, collectively, shares of capital stock
         or other equity securities of the acquiring Person representing more
         than 50% of the Voting Power or (ii) individually each has the right to
         approve the election of at least a majority of the board of directors
         or managers, as applicable, of the acquiring Person, and

                  (y) no Person or Persons other than AOL or ODC has any general
         power described in clause (c) above with respect to such acquiring
         Person.

         For purposes of this definition of Change in Control: (a) "AOL" means,
collectively, America Online, Inc., a Delaware corporation, and Time Warner
Inc., a Delaware corporation, and each of their successors, and any of their
wholly owned subsidiaries; (b) "ODC" means, collectively, Aspen Investments LLC,
a Delaware limited liability company, and Atlantis Investments LLC, a Delaware
limited liability company, and each of their successors, any of their wholly
owned subsidiaries and any entities wholly owned by Gustavo Cisneros, Ricardo
Cisneros or their family members; (c) "RESTATED CERTIFICATE OF INCORPORATION"
means the Company's Amended and Restated Certificate of Incorporation as the
same may be amended from time to time; and (d) "PERSON" means an individual,
corporation, partnership, limited liability company, joint venture, trust,
university, or unincorporated organization, or a government or any agency or
political subdivision thereof.

         4.2 "GOING PRIVATE EVENT" means the event or transaction which results
in the Company ceasing to be required to file the reports, information and

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documents required to be filed with the Securities and Exchange Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.

         4.3 "CAUSE" means: (i) your conviction of, or nolo contendere or guilty
plea to, a felony (whether any right to appeal has been or may be exercised);
(ii) your failure or refusal without proper cause to perform your duties with
the Company, if such failure or refusal remains uncured for 20 days after notice
to you; (iii) fraud, embezzlement, misappropriation, or reckless or willful
destruction of Company property; (iv) breach of any statutory or common law duty
of loyalty to the Company; (v) your violation of the Agreement to Preserve
Confidentiality, Noncompetition and Proprietary Rights dated June 29, 2000
between you and the Company (the "Confidentiality Agreement") or your material
violation of the Company's Standards of Business Conduct (it being agreed
that any violation of the Insider Trading Policy shall be deemed to be material
for purposes of this definition of "Cause"); or (vi) your improper conduct
substantially prejudicial to the Company's business.

         4.4 "GOOD REASON" means: (a) a reduction in the Executive's annual base
salary; (b) a reduction in the percentage of the Executive's base salary for
which the Executive is eligible for an annual bonus; (c) a material change by
the Company in the Executive's title, responsibilities or reporting relationship
which materially adversely affects his position with the Company or causes it to
become of less responsibility or scope, provided that such material change is
not in connection with a termination of the Executive's employment hereunder for
Cause, and further provided that a change in the Executive's title shall not
in and of itself constitute "Good Reason" if such change is made in connection
with a transaction resulting in a Change in Control; (d) at any time following a
Change in Control, a material increase in the responsibilities and duties of the
Executive without a commensurate increase in base salary; or (e) the failure of
the Company to comply with any provision of this Agreement which failure, if
capable of remedy, has not been cured within 20 days after notice of such
noncompliance has been given by the Executive to the Company, provided that any
notice of termination hereunder shall be given within 60 days after the end of
such 20-day period; or (f) a requirement by the Company that the Executive
change his principal place of employment to a location which is outside of
Miami-Dade, Broward or Palm Beach counties.

         4.5 "DISABILITY" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.

         5. LETTER(S) OF CREDIT. In order to assure the Executive the prompt
payment of amounts due him under Paragraph 1 of this Agreement, the Company
agrees to secure and to keep in place until December 31, 2005 one or more
irrevocable letter(s) of credit from Fifth Third Bank or another bank reasonably
acceptable to the Executive in the amount of US$75,000, which shall allow the
Executive (or his legal representative) to draw down the amount estimated at the
date of this Agreement to be the net amount (after applicable withholding taxes

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and other mandatory payments to government entities) due him under Paragraph 1
of this Agreement upon certification by the Executive (or his legal
representative) and the Company that payment is due the Executive pursuant to
this Agreement; provided, that in the event that the letter of credit is drawn
upon, (i) the parties will work together in good faith to ensure that all such
taxes and payments are made on a timely manner, and (ii) based on the actual
withholdings and payments that are required to be made, the parties will
determine if the amount of the draw received by the Executive is greater than or
less than the actual net amount should be, and an appropriate "true up" payment
will be promptly made. If the Company makes a payment of the amounts due to the
Executive under Paragraph 1, the Executive will cooperate promptly upon the
request of the Company to assist the Company in causing the letter of credit to
be cancelled or terminated (including, if requested by the Company, furnishing
to the issuing bank a certification to the effect that the letter of credit is
no longer needed and may be cancelled). A failure by the Company to keep such
letter(s) of credit in effect, or to renew such letter(s) of credit at least 30
days prior to the expiration date of the letter(s) of credit shall entitle the
Executive to the payment of the Retention Bonus on the 30th day prior to the
expiration date of the letter of credit. The Company agrees to notify the
Executive within three business days of any failure or inability to maintain or
renew such letter(s) of credit. The Company agrees that it will not take any
action to prevent, hinder or delay the legitimate exercise by the Executive of
his rights to exercise the security provisions provided in this Paragraph 5 and,
further, agrees to cooperate with the Executive to promptly issue to the bank
the certification required above if and when payment is due to the Executive and
to take such other actions as may be necessary to enable the Executive to
exercise and obtain the benefits of such security provisions, in the absence of
fraudulent or unlawful conduct on the part of the Executive with respect to such
exercise. In the event of a dispute regarding whether the Executive is due
payment under Paragraph 1 of this Agreement as a result of which the Company has
refused to issue the certification referred to above, following resolution of
the dispute in accordance with Paragraph 8 of this Agreement, the Company will
pay all legal fees of the Executive incurred in that proceeding if the Executive
prevails, and each party will bear its own costs if the Company prevails.

         6. NOT AN EMPLOYMENT CONTRACT. The Executive and the Company
acknowledge: (a) that the Executive is an employee at will of the Company; (b)
that this Agreement does not constitute a contract of employment or impose on
the Company any obligation to retain the Executive as an employee; and (c) that
the Executive may terminate his employment with the Company at any time.

         7. TAXES. The Executive will not be entitled to any additional payments
fin the event the Executive becomes subject to tax under Section 4999 of the
Internal Revenue Code or any similar tax ("Excise Tax") as a result of any
payment (within the meaning of Section 280G of the Internal revenue Code or
other applicable provision) made pursuant to this Agreement.

         8. DISPUTES; ARBITRATION. All claims by the Executive for benefits
under this Agreement shall be directed to and determined by the Board of
Directors of the Company and shall be in writing. Any denial by the Board of
Directors of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board of Directors
shall afford a reasonable opportunity to the Executive for a review of the

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decision denying a claim. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Fort Lauderdale, Florida, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.

         9. SUCCESSORS.

         9.1 SUCCESSOR TO COMPANY. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment. As used
in this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.

         9.2 SUCCESSOR TO EXECUTIVE. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable to
the Executive or his family hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.

         10. MISCELLANEOUS.

         10.1 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

         10.2 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Florida, without regard to conflicts of law principles.

         10.3 TAX WITHHOLDING. Any payments provided for hereunder shall be paid
net of any applicable tax withholding required under federal, state or local
law.

         10.4 CONFIDENTIALITY. The Executive shall not disclose to any third
party the existence or terms of this Agreement, except as may be required by law
or for purposes of securing professional financial, tax or legal services.

         10.5 ENTIRE AGREEMENT. This Agreement and the Notice of Grant of Stock
Options and Option Agreement dated as of the date hereof (a copy of which is
attached to this Agreement as Exhibit C) set forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersede
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee

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or representative of any party hereto in respect of the subject matter contained
herein; and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled. To the extent
necessary to make the terms of the already outstanding Options consistent with
the provisions of this Agreement, this Agreement constitutes an amendment to the
already outstanding Options identified on Exhibit A hereto. In connection with,
and in consideration of, the obligations of AOLA set forth in this Agreement,
the Executive acknowledges and agrees to the continued validity of the
Confidentiality Agreement.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.

                                       AMERICA ONLINE LATIN AMERICA, INC.

                                       /s/ OSVALDO BANOS
                                       -----------------------------------
                                       By: Osvaldo Banos
                                       Executive Vice President and Chief
                                       Financial Officer

                                       /s/ PAULO MOLEDO
                                       -----------------------------------
                                       PAULO MOLEDO

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                                    EXHIBIT A

                               OUTSTANDING OPTIONS

DATE                                    SHARES              EXERCISE PRICE
----                                    ------              --------------

August 7, 2000                          75,000                 $   8.00
January 2, 2001                         50,000                 $   2.72
April 9, 2002                           20,100                 $   2.12
January 1, 2004                         20,100                 $   1.42

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                                    EXHIBIT B

                               RELEASE AND WAIVER

In exchange and consideration for the Company's promises to me in my Executive
Retention Agreement dated _________, I agree to release and discharge
unconditionally America Online Latin America, Inc. ("AOLA"), and any successors,
subsidiaries, affiliates, related entities, predecessors, merged entities and
parent entities, and their respective officers, directors, stockholders,
employees, benefit plan administrators and trustees, agents, attorneys,
insurers, representatives, affiliates, successors and assigns (collectively, the
"Releasees"), from any and all claims, actions, causes of action, demands,
obligations or damages of any kind arising from my employment with
____________[INSERT NAME OF APPROPRIATE ENTITY] and my separation from
employment or otherwise, whether known or unknown by me, which I ever had or now
have upon or by reason of any matter, cause or thing, up to an including the day
I sign this Release and Waiver (collectively, the "Released Claims"). The
Released Claims include, but are not limited to, all claims arising out of or
related to any stock options held by me or granted to me by the Company; all
claims under Title VII of the Civil Rights Act of 1964, as amended; all claims
under the Worker Adjustment and Retraining Notification Act (WARN), or similar
state statutes; all claims under the Americans with Disabilities Act; all claims
under the Age Discrimination in Employment Act ("ADEA"); all claims under the
Older Workers Benefit Protection Act ("OWBPA"); all claims under the Fair Labor
Standards Act; all claims under the National Labor Relations Act; all claims
under the Family and Medical Leave Act; all claims under the Employee Retirement
Income Security Act; all claims under 42 U.S.C. ss. 1981; all claims under
Chapter 760, Florida Statutes; all claims under Chapter 448, Florida Statutes;
and all claims under other analogous foreign, federal, state, and local laws,
regulation, statutes and ordinances; all claims under any principle of common
law; all claims concerning any right to reinstatement; and all claims for any
type of relief from any of the Releasees, whether foreign, federal, state or
local, whether statutory, regulatory or common law, and whether tort, contract
or otherwise, through the date I sign this Release and Waiver. This release of
claims does not affect (i) any pending claim for workers' compensation benefits,
(ii) my vested rights, if any, in AOLA's 401(k) plan, (iii) my rights to
exercise any and all AOLA stock options held by me that are exercisable during
the applicable period of exercise and in accordance with all other terms of
those options and the stock options plans, agreements, and notices under which
such options were granted, or (iv) any rights to indemnification I may have
under applicable law or AOLA or ___________[INSERT NAME OF APPROPRIATE ENTITY]
policy by virtue of my employment with _____________[INSERT NAME OF APPROPRIATE
ENTITY] for actions taken within the scope of my employment.

[Pursuant to the OWBPA, I acknowledge and warrant the following: (i) that I am
waiving rights and claims for age discrimination under the ADEA and OWBPA, in
exchange for the consideration described above, which is not otherwise due to
me; (ii) I have consulted with an attorney before signing this Release and
Waiver; (iii) I am not waiving rights or claims for age discrimination that may
arise after the effective date of this Release and Waiver; (iv) I have been
given a period of at least twenty-one (21) days in which to consider this
Release and Waiver and the waiver of any claims I have or may have under law,
including my rights under the ADEA and OWBPA, before signing below; and (v) I
understand that I may revoke the waiver of my age discrimination claims under
the ADEA and OWBPA within seven (7) days after my execution of this Release and
Waiver, and that such waiver shall not become effective or enforceable until
seven (7) days after the date on which I execute this Release and Waiver. Any
such revocation must be made in writing and delivered by certified mail to both
the Chief Executive Officer and the General Counsel of AOLA, each at the
following address: America Online Latin America, Inc.,
6600 N. Andrews, Suite 400, Ft. Lauderdale, FL 33309.]

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By signing below, I acknowledge that I have carefully reviewed and considered
this Release and Waiver; that I fully understand all of its terms; and that I
voluntarily agree to them.

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

XXXXXXXXXXX

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

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                                                                       EXHIBIT C

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

                                      AMERICA ONLINE LATIN AMERICA, INC.
                                      ID: 98-0198401
Notice of Grant of Stock Options      6600 N. Andrews Avenue
And Option Agreement                  Suite 400
                                      Fort Lauderdale, FL 33309

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

                                      OPTION NUMBER:
                                      PLAN:
                                      ID:

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

Effective         you have been granted a(n) Non-Qualified Stock Option to buy
   shares of America Online Latin America, Inc. (the Company) stock at
$               per share.

The total option price of the shares granted is $

Shares in each period will become fully vested on the date shown.

Shares                Vest Type            Full Vest          Expiration
-----------------     ----------------     ---------------    ----------------

                      On Vest Date
                      On Vest Date
                      On Vest Date
                      On Vest Date

CHANGE IN CONTROL Notwithstanding the vesting schedule set forth above and in
Section 9 of the optionee's Option Agreement, in addition to any other rights
the optionee may have under the Company's 2000 Stock Plan (the "Plan"),
including rights the optionee may have in the event of a Change in Control as
defined in the Plan, in the event of a Change in Control (as defined in the
Executive Retention Agreement between the optionee and the Company dated as of
the date hereof (the "Retention Agreement")), this option must either: (a) be
assumed by an acquiring entity in accordance with Paragraph 24B (a) of the Plan,
in which event this option will become fully exercisable if the optionee's
employment is terminated without Cause (as defined in the Retention Agreement)
or the optionee terminates his employment for Good Reason (as defied in the
Retention Agreement); (b) become fully exercisable for purposes of and prior to
the termination of the option pursuant to Paragraphs 24B(b) or (c) of the Plan;
or (c) otherwise become fully exercisable immediately prior to the Change in
Control (as defined in the Retention Agreement).

GOING PRIVATE EVENT Notwithstanding the vesting schedule set forth above, in the
event of a Going Private Event (as defined in the Retention Agreement), this
Option will become fully exercisable immediately prior to and for purposes of
the Going Private Event.

TERMINATION OF EMPLOYMENT Notwithstanding the vesting schedule set forth above
and the provisions of Section 4 of the optionee's Option Agreement with respect
to the exercisability of the option, in the event the optionee's employment is
terminated by the Company without Cause (as defined in the Retention Agreement)
or the Executive terminates his employment for Good Reason (as defined in the
Retention Agreement), this option will become fully exercisable as of the date
of the Notice of Termination ( as defined in the Retention Agreement), and will
remain outstanding during the Leave of Absence Period (as defined in the
Retention Agreement), which will be an approved leave of absence for purposes of
Paragraph 13(e) of the Plan.

                                       13
<PAGE>

RETENTION AGREEMENT CONTROLS Notwithstanding Section 20 of the optionee's Option
Agreement, to the extent that there is any inconsistency between the terms of
this Stock Option Grant Notice (including the Option Agreement) and the terms of
the Retention Agreement, including without limitation, inconsistencies in the
definitions of "Cause" or "Disability", the provisions of the Retention
Agreement shall control and shall be deemed to be incorporated into this Stock
Option Grant Notice and the Option Agreement and made a part hereof.

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

By your signature and the Company's signature below, you and the Company agree
that these options are granted under and governed by the terms and conditions of
the Retention Agreement, the Company's 2000 Stock Plan as amended and the Option
Agreement, all of which are incorporated by reference and made a part of this
document.

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

-----------------------------------  ------------------------------------------
America Online Latin America, Inc.   Date

-----------------------------------  ------------------------------------------
                                     Date

                                       142002 Stock Option Plan

 

Exhibit 4.1

CORRECTIONAL PROPERTIES TRUST

2002 STOCK OPTION PLAN

1. ESTABLISHMENT

     Correctional Properties Trust, a Maryland real estate investment trust
(the “Company”), hereby establishes the “Correctional Properties Trust 2002
Stock Option Plan” (the ‘Plan”).

2. PURPOSE

     The purpose of the Plan is to advance the interests of the Company by
providing Eligible Individuals (as defined in Section 6 below) with an
opportunity to acquire or increase a proprietary interest in the Company, which
will thereby create a stronger incentive to expend maximum effort for the
growth and success of the Company and its subsidiaries, and will encourage such
individuals to remain in the employ of the Company or one or more of its
subsidiaries.

3. ADMINISTRATION

     (a) Board of Trustees. The Plan shall be administered by the
Company’s Board of Trustees (the “Board”), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any stock option granted under the Plan
(‘Option’) or Option Agreement (as defined in Section 9 below) entered into
under the Plan and all such other actions and determinations not inconsistent
with the specific terms and provisions of the Plan deemed by the Board to be
necessary or appropriate to the administration of the Plan or any Option
granted or Option Agreement entered into hereunder. The Board may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Option Agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and shall be the sole and final judge of such
expediency. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Board present at a meeting at which
any issue relating to the Plan is properly raised for consideration or without
a meeting by written consent of the Board executed in accordance with the
Company’s Declaration of Trust and By-Laws, as amended, and applicable law. The
interpretation and construction by the Board of any provision of the Plan or of
any Option granted or Option Agreement entered into hereunder shall be final,
conclusive and binding on all Optionees (as defined in Section 7 hereof). The
Board shall determine, in its sole discretion, whether an entity is a parent
(‘Parent’) or subsidiary (“Subsidiary”) of the Company.

     (b) Committee. The Board may, in its discretion, from time to time
appoint a committee (the “Committee”) consisting of not less than two members
of the Board, none of whom shall be an officer or other salaried employee of
the Company or any Parent or Subsidiary (as defined in Section 4 hereof), and
each of whom shall qualify in all respects as a “non-employee director” as
defined in Rule I 6b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and an “outside director” for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to
time (the “Code”). The Board, in its sole discretion, may provide that the role
of the Committee shall be limited to making recommendations to the Board
concerning any determinations to be made and actions to be taken by the Board
pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the
Plan, as set forth in Section 3(a) above, as the Board shall determine,
consistent with the Declaration of Trust and the By-Laws of the Company, as
amended, and applicable law. The Board may remove members, add members and fill
vacancies on the Committee from time to time, all in accordance with the
Company’s Declaration of Trust and By-Laws, as amended, and applicable law. The
majority vote of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.

     (c) No Liability. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.

 

 

     (d) Delegation
to the Committee. In the event that the Plan or any
Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 3(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final, conclusive
and binding on all Optionees.

4. TYPE OF OPTIONS

     Each Option may be designated by the Board, in its sole discretion, either
as (i) an “incentive stock option” (“Incentive Stock Options”) within the
meaning of Section 422 of the Code, or (ii) as a non-qualified stock option
(“Non-qualified Stock Options”) which is not intended to meet the requirements
of Section 422 of the Code; provided, however, that Incentive Stock Options may
only be granted to employees of the Company, any “subsidiary corporation” as
defined in Section 424 of the Code or any “parent corporation” as defined in
Section 424 of the Code. In the absence of any designation, Options granted
under the Plan will be deemed to be Non-qualified Stock Options. The Plan shall
be administered and interpreted so that all Incentive Stock Options granted
under the Plan will qualify as incentive stock options under Section 422 of the
Code. Options designated as Incentive Stock Options that fail to continue to
meet the requirements of Section 422 of the Code shall be redesignated as
Non-qualified Stock Options automatically on the date of such failure to
continue to meet such requirements without further action by the Board.

5. COMMON SHARES

     The capital stock of the Company that may be issued pursuant to Options
granted under the Plan shall be common shares of beneficial interest, par value
$.00l per share, of the Company (the “Common Shares”), which shares may be
treasury shares or authorized but unissued shares. The total number of Common
Shares that may be issued pursuant to Options granted under the Plan, which
number shall be subject to adjustment as provided in Section 18 below, shall be
two hundred thousand (200,000) shares. If any Option expires, terminates or is
terminated or canceled for any reason prior to exercise in full, the Common
Shares that were subject to the unexercised portion of such Option shall be
available for future Options granted under the Plan.

6. ELIGIBILITY

     Options may be granted under the Plan to any key employee or trustee
(including any non-employee trustee) of the Company or any Parent or
Subsidiary, as determined by the Board from time to time on the basis of their
importance to the business of the Company (collectively, “Eligible
Individuals”), provided, however, that Incentive Stock Options may only be
granted to employees of the Company or any Parent or Subsidiary. An individual
may hold more than one Option, subject to such restrictions as are provided
herein.

7. GRANT OF OPTIONS

     Subject to the terms and conditions of the Plan, the Board may, at any
time and from time to time, prior to the date of termination of the Plan, grant
to such Eligible Individuals as the Board may determine (“Optionees”), Options
to purchase such number of Common Shares on such terms and conditions as the
Board may determine. The date on which the Board approves the grant of an
Option (or such later date as is specified by the Board) shall be considered
the date on which such Option is granted. The maximum number of Common Shares
subject to Options that may be granted during any calendar year under the Plan
to any executive officer or other employee of the Company whose compensation is
subject to Section 162(m) of the Code shall be fifty thousand (50,000) shares,
unless otherwise determined by the Board in writing. The immediately preceding
sentence shall only be effective if the Company is a “publicly held
corporation,” as defined in Section 162(m) of the Code.

8. LIMITATION ON INCENTIVE STOCK OPTIONS

     (a) Ten Percent Shareholder. Notwithstanding any other provision of
this Plan to the contrary, no individual may receive an Incentive Stock Option
under the Plan if such individual, at the time the award is granted, owns
(after application of the rules contained in Section 424(d) of the Code) stock
possessing more than ten percent

2

 

(10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, unless (i) the purchase price for each
Common Share subject to such Incentive Stock Option is at least one hundred and
ten percent (110%) of the fair market value of a Common Share on the date of
grant (as determined in good faith by the Board) and (ii) such Incentive Stock
Option is not exercisable after the date which is five years from the date of
grant.

     (b) Limitation on Grants. The aggregate fair market value
(determined with respect to each Incentive Stock Option at the time such
Incentive Stock Option is granted) of the Common Shares with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year (under this Plan or any other plan of the Company or a
Parent or Subsidiary) shall not exceed $100,000. If an Incentive Stock Option
is granted pursuant to which the aggregate fair market value of shares with
respect to which it first becomes exercisable in any calendar year by an
individual exceeds such $100,000 limitation, the portion of such Option which
is in excess of the $100,000 limitation, and any Options issued subsequently in
the same calendar year, shall be treated as a Non-qualified Stock Option
pursuant to Section 422(d)(1) of the Code. In the event that an individual is
eligible to participate in any other stock option plan of the Company or any
Parent or Subsidiary which is also intended to comply with the provisions of
Section 422 of the Code, such $100,000 limitation shall apply to the aggregate
number of shares for which Incentive Stock Options may be granted under this
Plan and all such other plans.

9. OPTION AGREEMENTS

     All Options granted pursuant to the Plan shall be evidenced by written
agreements (“Option Agreements”), which shall be executed by the Company and by
the Optionee, in such form or forms and containing such terms and conditions
not inconsistent with the terms of the Plan as the Board shall from time to
time determine. Option Agreements covering Options granted from time to time or
at the same time need not contain similar provisions; provided, however, that
all such Option Agreements shall comply with all terms of the Plan.

10. OPTION PRICE

     The purchase price of each Common Share subject to an Option (the “Option
Price”) shall be fixed by the Board and stated in each Option Agreement.
Notwithstanding anything to the contrary set forth in the Plan or in any Option
Agreement, and subject to Section 8(a) the Option Price of any Incentive Stock
Option shall be not less than one hundred percent (100%) of the fair market
value of a Common Share on the date the Option is granted. If the Common Shares
are then listed on any national securities exchange, the fair market value
shall be the closing price of a Common Share on such exchange on the last
trading day immediately prior to the date of grant; provided, however, that
when granting Incentive Stock Options, the Board shall determine fair market
value in accordance with the provisions of Section 422 of the Code. If the
Common Shares are not listed on any such exchange, the fair market value shall
be determined in good faith by the Board.

11. TERM AND VESTING OF OPTIONS

     (a) Option Period. Subject to the provisions of Sections 8(a) and
14 hereof, each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration often (10) years
from the date such Option is granted, or on such date prior thereto as may be
fixed by the Board and stated in the Option Agreement relating to such Option.
Notwithstanding the foregoing, the Board may in its discretion, at any time
prior to the expiration or termination of any Option, extend the term of any
such Option for such additional period as the Board in its discretion may
determine; provided, however, that in no event shall the aggregate option
period with respect to any Option, including the initial term of such Option
and any extensions thereof, exceed 10 years.

     (b) Vesting.

     (i) Incentive Stock Options. Subject to the provisions of
Sections 8(a), 11(c) and 14 hereof, each Option Agreement will specify
the vesting schedule applicable to Incentive Stock Options; provided,
however, that except as provided in Sections 11(c) and 14 hereof, and
unless otherwise specified in the Option Agreement, Incentive Stock
Options shall be exercisable as follows: 25% on the date of grant and 25%
each on the first three anniversaries of the date of grant. If the Board
provides, in its sole discretion,

3

 

that any Incentive Stock Option is exercisable only in installments,
the Board may waive such installment exercise provisions at any time at
or after grant in whole or in part, based on such factors as the Board
shall determine, in its sole discretion.

     (ii) Non-qualified Stock Options. Subject to the provisions
of Sections 11(c) and 14 hereof, each Option Agreement will specify the
vesting schedule applicable to Non-qualified Stock Options; provided,
however, that except as provided in Sections 11(c) and 14 hereof~ and
unless otherwise specified in the Option Agreement, Non-qualified Stock
Options shall be exercisable as follows: 25% on the date of grant and 25%
each on the first three anniversaries of the date of grant. If the Board
provides, in its sole discretion, that any Non-qualified Stock Options is
exercisable only in installments, the Board may waive such installment
exercise provisions at any time at or after grant in whole or in part,
based on such factors as the Board shall determine, in its sole
discretion.

     (c) Change of Control. In the event of:

     (i) a “Change in Control” as defined in Section 11(d), or

     (ii) a “Potential Change in Control” as defined in section 11(e),
but only if and to the extent so determined by the Board at or after
grant (subject to any right of approval expressly reserved by the Board
at the time of such determination), the following acceleration and
valuation provisions shall apply:

     (A) Any Option awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested.

     (B) The value of all outstanding Options, to the extent
vested, shall, unless otherwise determined by the Board in its sole
discretion at or after grant but prior to any Change in Control, be
cashed out on the basis of the “Change in Control Price” as defined
in Section 11(f) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Board may determine prior to the Change in
Control.

     (d) Definition of “Change in Control.” For purposes of Section
11(c), a “Change in Control” means the happening of any of the following:

     (i) any person or entity, including a “group” as defined in Section
13(d)(3) of the Exchange Act, other than the Company or a wholly-owned
subsidiary thereof or any employee benefit plan of the Company or any of
its Subsidiaries, becomes the beneficial owner of the Company’s
securities having 20% or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election
of trustees of the Company (other than as a result of an issuance of
securities initiated by the Company in the ordinary course of business);
or

     (ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions less
than a majority of the combined voting power of the then outstanding
securities of the Company or any successor corporation or entity entitled
to vote generally in the election of the trustees of the Company or such
other corporation or entity after such transaction are held in the
aggregate by the holders of the Company’s securities entitled to vote
generally in the election of trustees of the Company immediately prior to
such transaction; or

     (iii) during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election, or
the nomination for election by the Company’s shareholders, of each
trustee of the Company first elected during such period was approved by a
vote of at least two-thirds of the trustees of the Company then still in
office who were trustees of the Company at the beginning of any such
period.

     (e) Definition of “Potential Change in Control.” For purposes of Section
11(c), a “Potential Change in Control” means the happening of any one of the
following:

4

 

     (i) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company
as defined in Section 11(c); or

     (ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan (including any trustee of
such plan acting as such trustee)) of securities of the Company
representing 10% or more of the combined voting power of the Company’s
outstanding securities and the adoption by the Board of a resolution to
the effect that a Potential Change in Control of the Company has occurred
for purposes of this Plan.

     (f) Definition of “Change in Control Price.” For purposes of this
Section 11, “Change in Control Price” means the highest price per share paid in
any transaction reported on the New York Stock Exchange or paid or offered in
any bona fide transaction related to a Potential Change in Control or actual
Change in Control of the Company at any time during the 60 day period
immediately preceding the occurrence of the Change in Control (or, where
applicable, the occurrence of the Potential Change in Control event), in each
case as determined by the Board.

12. MANNER OF EXERCISE AND PAYMENT

     (a) Manner of Exercise. An Option that is exercisable hereunder may
be exercised by delivery to the Company on any business day, at its principal
office, of written notice of exercise, which notice shall specify the number of
shares with respect to which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares for which the
Option is being exercised, by one or more of the methods provided below. The
minimum number of Common Shares with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of one hundred
(100) shares or the maximum number of shares available for purchase under the
Option at the time of exercise.

     (b) Payment. Subject to whatever installment exercise provisions
apply under Section 11(b), Options may be exercised in whole or in part at any
time during the option period, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by check, note or
such other instrument as the Board may accept. As determined by the Board, in
its sole discretion, at or after grant, payment in full or in part may also be
made in the form of an Option or unrestricted Common Shares already owned by
the Optionee or (based on the fair market value (as described in Section 10
hereof) of the Option or the Common Shares on the date the option is exercised,
as determined by the Board).

     (c) Issuance of Certificates. Promptly after the exercise of an
Option, the individual exercising the Option shall be entitled to the issuance
of a certificate or certificates evidencing his ownership of such Common
Shares. An individual holding or exercising an Option shall have none of the
rights of a shareholder until the Common Shares covered thereby are fully paid
and issued to him and, except as provided in Section 18 below, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date of such issuance.

13. TRANSFERABILITY OF OPTIONS

     Incentive Stock Options shall be transferable by the Optionee only by will
or by the laws of descent and shall be exercisable, during the Optionee’s
lifetime, only by the Optionee. Non-qualified Stock Options shall be
transferable by the Optionee by will or by the laws of descent or, with the
consent of the Board, to (i) the spouse, children or grandchildren of the
Optionee (“Immediate Family Members”), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, (iii) a partnership in which such
Immediate Family Members are the only partners, or (iv) one or more entities in
which the Optionee has a 10% or greater equity interest, provided that (x) the
share option agreement pursuant to which such Non-qualified Stock Options are
transferred must be approved by the Board, and (y) subsequent transfers of
transferred Non-qualified Stock Options shall be prohibited except those in
accordance with this subparagraph (iv). Following any such transfer, any such
Non-qualified Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of this Plan or the option agreement executed pursuant hereto, the
term “Optionee” shall be deemed to refer to the transferee.

5

 

14. TERMINATION OF EMPLOYMENT, DEATH, Disability OR BREACH OF RESTRICTIVE COVENANTS

     (a) General. If an Optionee’s employment with or service as a
trustee (including a non-employee trustee) or consultant to the Company or any
Parent or Subsidiary terminates for any reason other than cause (as defined
below), death or Retirement of such Optionee, any vested Option held by such
Optionee may thereafter be exercised by the Optionee, to the extent it was
exercisable at the time of termination or on such accelerated basis as the
Board may determine at or after grant (or as may be determined in accordance
with procedures established by the Board), for a period of two (2) years from
the date of such termination or until the expiration of the stated term of such
Option, whichever period is the shorter. In the event of such termination of
employment, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Option will thereafter be treated as a Non-qualified Stock Option.

     (b) Cause. Notwithstanding any provisions set forth in this Plan,
unless otherwise determined by the Board at or after grant, if an Optionee’s
employment (including without limitation employment as an independent
contractor or consultant) by the Company or any Parent or Subsidiary terminates
for cause, all Options held by the Optionee shall thereupon terminate. For
purposes of this paragraph, “cause” shall mean the following (i) the
commission, or the alleged commission, by the Optionee of any act embezzlement,
fraud or criminal misconduct, (ii) gross negligence, (ii) willful or continuing
disregard for the safety or soundness of the Company, (iii) willful or
continuing violation of the published rules of the Company, (iv) a request from
a state or federal governmental agency having regulatory authority over the
Company that the services of the Optionee be terminated, or (v) any act which
constitutes termination for cause under any employment, independent contractor,
consulting or other agreement the Optionee may have with the Company or any
Parent or Subsidiary which defines the term “cause” for purposes of such
agreement. The Board shall determine whether cause exists for purposes of this
Plan and such determination shall be final, conclusive and binding on the
Optionees.

     (c) Death. If an Optionee dies while serving as an employee of
Consultant to the Company or any Parent or Subsidiary or as a non-employee
member of the Board, all Options held by the Optionee shall vest immediately
and may thereafter be exercised by the executors or administrators or legatees
or distributees of such Optionee’s estate at any time within two (2) years
after the date of such Optionee’s death, or if earlier, the date specified in
the Option Agreement pursuant to Section 11(a) above, to exercise such Options
in whole or in part.

     (d) Retirement. If an Optionee’s service as an employee of or
consultant to the Company or any Parent or Subsidiary or as a non-employee
member of the Board terminates by reason of Retirement, any Options held by the
Optionee shall vest immediately and may thereafter be exercised by the Optionee
from the date of such termination until the expiration of the stated term of
such Option. In the event of termination of service by reason of Retirement, if
an Incentive Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, the Option will thereafter
be treated as a Non-qualified Stock Option. For purposes of this Section,
“Retirement” shall mean retirement from active employment with the Company or
any Parent or Subsidiary after age 60.

15. USE OF PROCEEDS

     The proceeds received by the Company from the sale of Common Shares upon
exercise of Options granted under the Plan shall constitute general funds of
the Company.

16. GENERAL PROVISIONS

     (a) Distribution. The Board may require each person purchasing
shares pursuant to an Option or other award under the Plan to represent to and
agree with the Company in writing that the Optionee or participant is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Board deems appropriate to reflect any
restrictions on transfer.

     (b) Transfer Restrictions. All certificates for Common Shares or
other securities delivered under the Plan shall be subject to such transfer
orders and other restrictions as the Board may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which

6

 

the Common Shares are then listed, and any applicable Federal or state
securities law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

     (c) Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

     (d) No Rights. The adoption of the Plan shall not confer upon any
employee of the Company or its Parent or Subsidiary any right to continued
employment with the Company or a Parent or Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or its Parent or
Subsidiary to terminate the employment of any of its employees at any time.

     (e) Taxes. No later than the date as of which an amount first
becomes includable in the gross income of the participant for Federal income
tax purposes with respect to any award under the Plan, the participant shall
pay to the Company, or make arrangements satisfactory to the Board regarding
the payment of, any Federal, state, or local taxes of any kind required by law
to be withheld with respect to such amount. Unless otherwise determined by the
Board, withholding obligations may be settled with Common Shares that is part
of an award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or arrangements
and the Company and its Parent and Subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.

     (f) Law. The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Maryland.

17. AMENDMENT AND TERMINATION OF THE PLAN

     The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of
an Optionee or participant under an Option theretofore granted, without the
Optionee’s or participant’s consent, or which, without the approval of the
Company’s shareholders, would: (a) except as expressly provided in this Plan,
increase the total number of shares reserved for the purpose of the Plan; or
(b) change the employees or class of employees eligible to participate in the
Plan.

     The Board may amend the terms of any Option theretofore granted,
prospectively or retroactively, but, subject to Section 18 hereof no such
amendment shall impair the rights of any holder without the holder’s consent.
The Board may also substitute new Options for previously granted Options (on a
one for one or other basis), including previously granted Options having higher
option exercise prices. Subject to the above provisions, the Board shall have
broad authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.

18. EFFECT OF CHANGES IN CAPITALIZATION, REORGANIZATION AND OTHER CORPORATE EVENTS

     (a) Recapitalization. In the event of any merger, reorganization
(other than as described in Section 18(b) below), consolidation,
recapitalization, Common Share dividend, Common Share split or other change in
corporate structure affecting the Common Shares, an adjustment shall be made in
(i) the aggregate number of Common Shares reserved for issuance under the Plan,
(ii) in the number and kind of shares of Common Shares subject to outstanding
Options granted under the Plan, and (iii) the Option Price per share of
outstanding Options granted under the Plan, as may be determined to be
appropriate by the Board, in its sole discretion, provided that the number of
Common Shares subject to any Option shall always be a whole number.

     (b) Reorganization. Unless otherwise provided in an Option
Agreement, in the event of a Reorganization (as defined in Section 7(c) below)
of the Company, the Board may in its sole and absolute discretion, provide on a
case by case basis that some or all outstanding Options may become immediately
exercisable or vested, without regard to any limitation imposed pursuant to
this Plan. In the event of a Reorganization of the Company the Board may, in
its sole and absolute discretion, provide on a case by case basis that Options
shall terminate upon such a Reorganization, provided however, that Optionee
shall have the right, immediately prior to the occurrence of such
Reorganization and during such reasonable period as the Board in its

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sole discretion shall determine and designate, to exercise any vested
Option in whole or in part. In the event that the Board does not terminate an
Option upon a Reorganization of the Company then each outstanding Option shall
upon exercise thereafter entitle the holder thereof to such number of shares of
Common Stock or other securities or property to which a holder of shares of
Common Stock would have been entitled to upon such Reorganization.

     (c) Definition of Reorganization. “Reorganization” of an entity
shall be deemed to occur if such entity is a party to a merger, consolidation,
reorganization, or other business combination with one or more entities in
which said entity is not the surviving entity, if such entity disposes of
substantially all of its assets, or if such entity is a party to a spin-off,
split-off, split-up or similar transaction; provided, however, that the
transaction shall not be a Reorganization if the Company, or any entity whose
financial statements are required to be consolidated with the financial
statements of the Company pursuant to United States generally accepted
accounting principles is the surviving entity.

     (d) Change in Status of Parent or Subsidiary. Unless otherwise
provided in an Option Agreement, in the event of a Change in Control or
Reorganization of a Parent or a Subsidiary, or in the event of a Parent or
Subsidiary ceases to be a “parent corporation” or “subsidiary corporation” as
defined in and in accordance with Section 424 of the Code, the Board may, in
its sole and absolute discretion, (i) provide on a case by case basis that some
or all outstanding Options held by an Optionee employed by or performing
service for such Parent or Subsidiary may become immediately exercisable or
vested, with out regard to any limitation imposed pursuant to this Plan, (ii)
treat the employment or other services of an Optionee employed by such Parent
or Subsidiary as terminated (and such Optionee shall have the right to exercise
his or her Options in accordance with Section 14 of the Plan) if such Optionee
is not employed by issuer or any Parent or Subsidiary immediately after such
event or (iii) cancel and cash out all outstanding Options, whether vested or
unvested. In the event that the Company decides to cancel and cash out all
outstanding Options pursuant to (iii) above, the Company shall pay each
Optionee, as consideration for the cancellation of the Option an amount equal
to the difference between the fair market value (as determined in accordance
with Section 10) of the Common Stock on the date the Options are canceled and
the per share Exercise Price of the applicable Option, multiplied by the number
of shares subject to the Options held by such Optionee.

     (e) Dissolution or Liquidation. Upon the dissolution or liquidation
of the Company, the Plan shall terminate, and all Options outstanding hereunder
shall terminate. In the event of any termination of the Plan under this Section
18(e), each individual holding an Option shall have the right, immediately
prior to the occurrence of such termination and during such reasonable period
as the Board in its sole discretion shall determine and designate, to exercise
such Option in whole or in part, whether or not such Option was otherwise
exercisable at the time such termination occurs and without regard to any
vesting or other limitation on exercise imposed pursuant to Section 11(b)
above.

     (f) Adjustments. Adjustments under this Section 11 related to stock
or securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Common Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or
unit.

     (g) No Limitations. The grant of an Option pursuant to the Plan
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate, or to sell
or transfer all or any part of its business or assets.

19. UNFUNDED STATUS OF PLAN

     The Plan is intended to constitute an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a participant or
Optionee by the Company, nothing contained herein shall give any such
participant or Optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Board may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Shares or payments in lieu of or with respect to
awards hereunder; provided, however, that, unless the Board otherwise
determines with the consent of the affected participant, the existence of such
trusts or other arrangements is consistent with the “unfunded” status of the
Plan.

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20. EFFECTIVE DATE OF PLAN

     The Plan shall be effective as of the date of the Plan’s approval by the
Board and the Company’s shareholders.

21. OWNERSHIP LIMITATION

     All awards hereunder shall be subject to the ownership limitations set
forth in the Declaration of Trust of the Company as such may be amended from
time to time. Without limiting the generality of the foregoing, any award which
causes a recipient, or any constructive or beneficial owner of Common Shares
(as determined under Section 3 18 and 544, respectively, of the code), to own
or be deemed to own shares in excess of such ownership limitation shall be
void.

22. TERM OF PLAN

     No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the effective date as set forth in Section 20 above, but awards
granted prior to such tenth anniversary may extend beyond that date.

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