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Exhibit 10.5  

 
 

EMPLOYMENT AGREEMENT
  BETWEEN
  GREGG A. SEIBERT AND SPIRIT FINANCE CORPORATION    
    

        THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of December 15, 2003 ("Effective Date"), is by and
between SPIRIT FINANCE CORPORATION, a Maryland corporation (the "Company"), and GREGG A. SEIBERT (the
"Executive"): 

W I T N E S S E T H:  

        WHEREAS, the Company wishes to employ the Executive in the capacities and on the terms and conditions set forth below, and the Executive has agreed to such
employment in the capacities and on the terms and conditions set forth below. 

        NOW,
THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth below, hereby agree as follows: 

 Section 1. Employment. 

        (a)   Positions. The Executive shall be employed by the Company during the Term (defined below) as its Senior Vice
President—Underwriting. 

        (b)   Duties. The Executive's principal employment duties and responsibilities shall be those duties and responsibilities
customary for the position of Senior Vice President—Underwriting and such other executive duties and responsibilities as the Chief Executive Officer or Board of Directors of the Company
(the "Board") shall from time to time reasonably assign to the Executive. The Executive shall report directly to the Chief Executive Officer. 

        (c)   Extent of Services. Except for illnesses and vacation periods, the Executive shall devote substantially all of his
business time and attention and his best efforts to the performance of his duties and responsibilities under this Agreement. Notwithstanding the foregoing, Executive (i) shall be permitted to
continue to manage, operate and devote time and attention to those properties and businesses he owned, operated or controlled at the time of the Company's 2003 private offering of common stock (the
"144A Offering") that were not transferred to or purchased by the Company in connection with the 144A Offering; (ii) may make any investment where he is not obligated or required to, and shall
not in fact, devote any substantial managerial efforts; (iii) may participate in charitable, academic or community activities, and in trade or professional organizations; or (iv) may
hold directorships in other companies consistent with the Company's conflict of interest policies and corporate governance guidelines as in effect from time to time (the activities in clauses
(i) through (iv) above are collectively referred to herein as the "Excluded Businesses"); provided that none of the Excluded Businesses individually or in the aggregate interfere with
the performance of the Executive's duties under this Agreement. 

        Section 2. Term.    This Agreement shall be effective as of the Effective Date and shall continue in full force and
effect thereafter for a term of three years following the Effective Date, and shall be automatically extended for an additional one-year period on the three-year
anniversary of the Effective Date, unless either party terminates this Agreement not later than 60 days prior to the three-year anniversary of the Effective Date by providing
written notice to the other party of such party's intent not to renew, or it is sooner terminated pursuant to Section 7. For purposes of this Agreement, "Term" shall mean the actual duration of
the Executive's employment hereunder, taking into account any extensions pursuant to this Section 2 or early termination of employment pursuant to Section 7. 

        Section 3. Base Salary.    The Company shall pay the Executive a base salary annually (the "Base Salary"), which shall be
payable in periodic installments according to the Company's normal payroll practices. The initial Base Salary shall be $200,000. The Board or the Compensation Committee of the 

 

Board
(the "Compensation Committee") shall review the Base Salary at least once a year to determine whether the Base Salary should be increased effective January 1 of any year during the Term;
provided, however, that on January 1 of each year during the Term the initial Base Salary shall be increased by a minimum positive amount equal to the Base Salary in effect on January 1
of the prior year multiplied by the percentage increase in the Consumer Price Index for such year. The amount of the increase shall be determined before March 31 of each year and shall be
retroactive to January 1. The Base Salary, including any increases, shall not be decreased during the Term. For purposes of this Agreement, the term "Base Salary" shall mean the amount
established and adjusted from time to time pursuant to this Section 3. 

        Section 4. Annual Incentive Bonus.    The Executive shall be entitled to receive an annual cash Incentive Bonus for each
fiscal year during the Term of this Agreement consistent with a bonus policy adopted by the Compensation Committee (the "Bonus Policy"). If the Executive or the Company, as the case may be, satisfies
the threshold performance criteria contained in such Bonus Policy for a fiscal year, he shall receive an annual Incentive Bonus equal to at least 20% of the Executive's Base Salary. If the Executive
or the Company, as the case may be, satisfies the target performance criteria contained in the Bonus Policy for a fiscal year, he shall receive an annual Incentive Bonus equal to at least 40% of the
Executive's Base Salary. If the Executive or the Company, as the case may be, satisfies the maximum target performance criteria contained in the Bonus Policy for a fiscal year, he shall receive an
annual Incentive Bonus equal to 80% of the Executive's Base Salary (the "Maximum Target Bonus"). If the Executive or the Company, as the case may be, fails to satisfy the threshold performance
criteria contained in the Bonus Policy for a fiscal year, the Compensation Committee may determine whether any Incentive Bonus shall be payable to the Executive for that year. Beginning
January 1, 2004, the Bonus Policy shall contain both individual and Company goals established by the Compensation Committee. The Board or the Compensation Committee shall review the Bonus
Policy at least once a year to determine whether the Maximum Target Bonus should be increased effective January 1 of any year during the Term, or whether any additional changes should be made
to the Bonus Policy effective January 1 of any year. The annual Incentive Bonus, if any, shall be paid to the Executive no later than 30 days after the date the Compensation Committee
determines whether the criteria in the Bonus Policy for such fiscal year were satisfied and determined the amount of the actual bonus. For purposes of this Agreement, the term "Incentive Bonus" shall
mean the amount established pursuant to this Section 4. 

 Section 5. Stock Based Awards. 

        (a)   2003 Stock Option and Incentive Plan Option Grants. The Company has established the 2003 Stock Option and Incentive Plan
(the "Stock Option Plan"). On or prior to the closing of the 144A Offering, the Company shall grant the Executive an initial grant of options (the "Initial Grant Options") to purchase 90,000 shares of
the Company's common stock, par value $.01 per share (the "Common Shares"). The Initial Grant Options will have an exercise price of $10.00 per share and a term of 10 years and will vest and
become exercisable ratably over a period of three years from the date of the grant; provided, however, that the Executive will be 100% vested in the Initial Grant Options upon (i) a
Change in Control, as defined herein; (ii) a termination by the Company without Cause, as defined herein; (iii) a termination by the Executive for Good Reason, as defined herein;
(iv) his death; or (v) his becoming Permanently Disabled, as defined herein. The Executive will forfeit all unvested Initial Grant options if he is terminated for Cause or he terminates
his employment hereunder for other than Good Reason. The Executive shall be eligible to receive future option grants as determined by the Compensation Committee. 

        (b)   Stock Option Plan Restricted Share Awards. The Stock Option Plan provides for the issuance of Common Shares as restricted
Common Shares ("Restricted Share Grants") to the extent that such Common Shares are available thereunder. On or prior to the closing of the 144A 

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Offering,
the Company shall grant the Executive Restricted Share Grants (the "Initial Restricted Share Grant") of 25,000 restricted shares. The Common Shares covered by the Initial Restricted Share
Grant shall vest as determined by the Compensation Committee, which determination shall be made no later than January 31, 2004, or 30 days after completion of the 144A Offering,
whichever is later; provided, however, that the Executive will be 100% vested in the Initial Restricted Share Grant upon (i) a Change in Control, as defined herein; (ii) a termination by
the Company without Cause, as defined herein; (iii) a termination by the Executive for Good Reason, as defined herein; (iv) his death; or (v) his becoming Permanently Disabled, as
defined herein. The Executive will forfeit all unvested Initial Restricted Share Grant shares if he is terminated for Cause or he terminates his employment hereunder for other than Good Reason. The
Executive shall be eligible to receive future Restricted Share Grants as determined by the Compensation Committee. 

 Section 6. Benefits. 

        (a)   Vacation. The Executive shall be entitled to three weeks of vacation each full calendar year in accordance with the
Company's policies and procedures related to vacation time. 

        (b)   Sick and Personal Days. The Executive shall be entitled to sick and personal days on an as needed basis in
accordance with the Company's policies, procedures and limits related to sick and personal time. 

        (c)   Employee Benefits. 

        (i)    Participation in Employee Benefit Plans. The Executive and his spouse and eligible dependents, if any, and their
respective designated beneficiaries where applicable, will be eligible for and entitled to participate in any Company sponsored employee benefit plans, including but not limited to benefits such as
group health, dental, accident, disability insurance, group life insurance and a 401(k) plan, as such benefits may be offered from time to time pursuant to the terms of such benefit plans, on a
basis no less favorable than that applicable to any other executive of the Company. 

        (ii)   Disability Insurance. The Company shall maintain, at its cost, supplemental renewable long-term disability
insurance consistent with the policies of the Company unless determined in good faith by the Compensation Committee to be unreasonable in cost. 

        (d)   Other Benefits. 

        (i)    Annual Physical. The Company shall provide, at its cost, a medical examination for the Executive on an annual basis by a
licensed physician in the Scottsdale or Phoenix, Arizona area selected by the Executive. 

        (ii)   Directors and Officers Insurance. During the Term and the period that begins on the effective date of termination under
Section 7 and ends on the four year anniversary of the Effective Date, the Executive shall be entitled to director and officer insurance coverage for his acts and omissions while an officer and
director of the Company on a basis no less favorable to him than the coverage provided to any other current officers and directors during the time the Executive is a director or officer, provided,
however, that all insurance policies providing such director and officer coverage shall provide coverage for any claim made related to any time the Executive was a director or officer of the Company
or any subsidiary, except for any period prior to the date of this Agreement for which no coverage need be provided or any period after which customary tail coverage shall lapse. 

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        (iii)  Life Insurance. The Company may purchase on the life of the Executive key man life insurance with the Company as the
beneficiary of the death benefit as the Company deems appropriate. 

        (iv)  Expenses, Office and Secretarial Support. The Executive shall be entitled to reimbursement of all reasonable expenses,
in accordance with the Company's policy as in effect from time to time and on a basis no less favorable than that applicable to any other executive of the Company, including, without limitation,
telephone, reasonable travel and reasonable entertainment expenses incurred by the Executive in connection with the business of the Company, promptly upon the presentation by the Executive of
appropriate documentation. The Executive shall also be entitled to appropriate office
space, administrative support, and such other facilities and services as are reasonably suitable to the Executive's positions and adequate for the performance of the Executive's duties. 

        Section 7. Termination.    The employment of the Executive by the Company pursuant to this Agreement shall terminate upon
the occurrence of any of the following: 

        (a)   Death or Permanent Disability. Immediately upon death or Permanent Disability of the Executive. As used in this
Agreement, "Permanent Disability" shall have the same meaning as such term has under any Company Long Term Disability Plan. If the Company has no Long Term Disability Plan, "Permanent Disability"
shall mean an inability due to a physical or mental impairment to perform the material services contemplated under this Agreement for a period of six months, whether or not consecutive, during
any 365-day period. A determination of Permanent Disability shall be made by a physician satisfactory to both the Executive and the Company; provided that if the Executive and the Company
do not agree on a physician, the Executive and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Permanent Disability shall be
binding on all parties. The appointment of one or more individuals to carry out the offices or duties of the Executive during a period of the Executive's inability to perform such duties pending a
determination of Permanent Disability shall not be considered a breach of this Agreement by the Company. 

        (b)   For Cause. At the election of the Company and subject to the provisions of this Section 7(b), immediately upon
written notice by the Company to the Executive of his termination for Cause. For purposes of this Agreement, "Cause" for termination shall be deemed to exist solely in the event of (i) the
conviction of the Executive of, or the entry of a plea of guilty or nolo contendere by the Executive to, a felony (not including a conviction, plea of guilty or nolo contendere arising solely under a
statutory provision imposing criminal liability upon the Executive on a strict liability basis due to the position held by the Executive, so long as any act or omission of the Executive with respect
to such matter was not taken or omitted in contravention of any applicable policy or directive of the Board); (ii) a breach of his duty of loyalty which has a material adverse effect upon the
Company; (iii) a failure to perform or adhere to duties that are consistent with the terms of this Agreement, or the Company's reasonable and customary guidelines of employment or reasonable
and customary corporate governance guidelines or policies, including, without limitation, any business code of ethics adopted by the Board, or to follow the lawful directives of the Board (provided
such directives are consistent with the terms of this Agreement), which, in any such case, continues for 30 days after written notice from the Board to the Executive; (iv) negligence or
misconduct in the performance of the Executive's duties which has a material adverse effect upon the Company; or (v) a material breach of this Agreement by the Executive that continues for
30 days after written notice from the Board to the Executive. For purposes of this Section 7(b), no act, or failure to act, on the Executive's part will be deemed "negligence" or
"misconduct" unless done, or omitted to be done, by the Executive not in good faith and without a reasonable belief that the Executive's act, or failure to act, was in the best interest of the
Company. The parties agree that in order to terminate the Executive pursuant to 

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clauses
(ii), (iv) and (v) hereof, a determination shall be made by a majority of the independent members of the Board. 

        (c)   Without Cause; Without Good Reason. At the election of the Company, without Cause, and at the election of the Executive,
without Good Reason, in either case upon 30 days' prior written notice to the Executive or the Company, as the case may be. 

        (d)   For Good Reason. At the election of the Executive, for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following actions or omissions, provided the Executive notifies the Company of his determination that Good Reason exists within 60 days of the action or omission on which such
determination is based: 

        (i)    a
material reduction of or adverse change in the Executive's duties, titles, responsibilities or reporting requirements, or the assignment to the Executive of any
duties, responsibilities or reporting requirements that are materially inconsistent with his position as Chairman of the Board or Chief Executive Officer, as the case may be; 

        (ii)   a
reduction by the Company in the Executive's annual Base Salary or Maximum Target Bonus; 

        (iii)  Executive
not being offered employee benefits or material fringe benefits, both in terms of the amount of the benefit and the level of the Executive's participation
therein, enjoyed by the Executive under the employee benefit and welfare plans of the Company, including, without limitation, such benefits as group health, dental, 401(k), accident, disability
insurance or group life insurance, on the same terms and conditions as other similar executives of the Company except as is required by applicable law; 

        (iv)  absent
the Executive's prior written consent, the requirement by the Company that the principal place of business at which the Executive performs his duties be changed
to a location that is outside of a 35-mile radius of Scottsdale, Arizona (or a substantial increase in the amount of travel that the Executive is required to do because of a relocation of
the Company's headquarters from Scottsdale, Arizona). The parties acknowledge that for these purposes, Executive's principal place of business will be Scottsdale, Arizona; 

        (v)   any
failure by the Company to obtain from any successor to the Company an agreement reasonably satisfactory to Executive to assume and perform this Agreement, as
contemplated by Section 17(e); or 

        (vi)  a
breach by the Company of any provision of this Agreement that continues for a period of 30 days after Executive provides written notice to the Company of such
breach. 

        Notwithstanding
the foregoing, in the event that Executive provides the Company with a notice of termination stating Good Reason, the Company shall have 30 days thereafter in
which to cure or resolve the behavior otherwise constituting Good Reason. 

 Section 8. Effects of Termination. 

        (a)   Termination By the Company Without Cause; By the Executive for Good Reason. If the employment of the Executive should
terminate by reason of termination by the Company for any reason other than Cause, or by the Executive for Good Reason, then the Company shall pay all compensation and benefits for the Executive as
follows: 

        (i)    any
Base Salary, Incentive Bonus, expense reimbursements and all other compensation related payments that are payable as of the date of his termination of employment
that are related to his period of employment preceding his termination date, including pay in lieu of accrued, but unused, vacation; 

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        (ii)   the
prorated amount of the Maximum Target Bonus for the year in which the termination of employment occurs, pro rated for the portion of such year during which the
Executive was employed prior to the effective date of his termination and subtracting all Incentive Bonus payments received by Executive during such year that relate only to such year; 

        (iii)  the
amount equal to one and one-half (1.5) times the sum of (A) Base Salary, plus (B) his Maximum Target Bonus, at the rates in effect on the
effective date of his termination of employment. 

        The
sum of the amount payable under clauses (ii) and (iii) hereof is referred to herein as his "Severance Payment"; 

        (iv)  the
Severance Payment shall be made in a single, lump sum cash payment no later than 30 days after the effective date of the Executive's termination of
employment. 

        (v)   the
Company shall allow the Executive to continue to participate during the 18 month period following termination (the "Severance Period") in any and all of the
employee benefit and welfare plans and programs of the Company, excluding any 401(k) plan, in which the Executive was entitled to participate immediately prior to his termination, to the same
extent and upon the same terms as the Executive participated in such plans prior to his termination; provided that the Executive's continued participation is permissible pursuant to the terms of such
plans and otherwise practicable under the general terms and provisions of such benefit plans and programs. During the Severance Period, the Company shall pay for the Executive's continued
participation in said employee benefit and welfare plans, including, but not limited to, premiums for group health, dental, accident, directors and officers insurance and group life insurance, but
excluding any 401(k) plan or disability insurance. To the extent that continued participation is neither permissible nor practicable, the Company shall take such actions as may be necessary to
provide the Executive with substantially comparable benefits (without additional cost to the Executive, including any additional taxes) outside the scope of such plans including, without limitation,
reimbursing the Executive for his costs in obtaining such coverage, such as COBRA premiums paid by the Executive and/or his eligible dependents, provided such costs are consistent with the policies of
the Company unless such costs are determined in good faith to be unreasonable by the Compensation Committee. If the Executive engages in regular employment after his termination of employment (whether
as an executive or as a self-employed person but excluding his management or operation of the Excluded Businesses), any employee benefit and welfare benefits
received by the Executive in consideration of such employment which are the same type as the employee benefit and welfare benefits provided by the Company will relieve the Company of its obligation
under this Section 8(a)(v) to provide such type of benefits; 

        (vi)  the
Executive's stock options awarded under the Stock Option Plan (or any other or successor plan) shall immediately become 100% vested and he shall have a
two-year period following the effective date of his termination of employment in which to exercise his vested stock options, including those stock options that vested upon his termination
of employment; and 

        (vii) the
Executive's restricted Common Shares awarded under the Stock Option Plan (or any other or successor plan) shall immediately become 100% vested and all restrictions
shall lapse. 

        (b)   Termination on Death. Upon a termination of employment due to the Executive's death, the Executive shall become 100%
vested in his stock options and restricted Common Shares awarded under the Stock Option Plan. The Executive's personal representative shall have a 

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one-year
period following the Executive's death in which to exercise his vested stock options, including those stock options that vested on death. The Company shall pay to the Executive's
personal representative any Base Salary, Incentive Bonus, expense reimbursements and all other compensation related payments that are payable as of his date of death and that are related to his period
of employment preceding his date of death. Within 60 days after the Executive's death, the Company shall pay to the Executive's personal representative the prorated amount of the Maximum Target
Bonus for the year in which the Executive's death occurs, prorated for the portion of the year during which the Executive was employed prior to his death, and subtracting out all Incentive Bonus
payments related to that year received by the Executive during such year. 

        (c)   Termination on Permanent Disability. Upon a termination of employment due to the Executive's Permanent Disability, the
Executive shall become 100% vested in his stock options and restricted Common Shares awarded under the Stock Option Plan. The Executive or his representative shall have a one-year period
following the Executive becoming Permanently Disabled in which to exercise his vested stock options, including those stock options that vested on Permanent Disability. The Company shall pay to the
Executive any Base Salary, Incentive Bonus, expense reimbursements and all other compensation related payments that are payable as of his date of Permanent Disability and that are related to his
period of employment preceding his date of Permanent Disability. Within 60 days after the Executive's Permanent Disability, the Company shall pay to the Executive the prorated amount of the
Maximum Target Bonus for the year in which the Executive's Permanent Disability occurs, prorated for the portion of the year during which the Executive was employed prior to his Permanent Disability,
and subtracting out all Incentive Bonus payments related to that year received by the Executive during such year. 

        (d)   By the Company for Cause or By the Executive Without Good Reason. In the event that the Executive's employment is
terminated by the Company for Cause or by the Executive without Good Reason, the Company shall pay the Executive his Base Salary, Incentive Bonus, expense reimbursements and all other compensation
related payments that are payable as of his termination of employment date and that are related to his period of employment preceding his termination date. The Executive shall be entitled to exercise
his vested stock options, determined as of his termination date, pursuant to the terms of the option grant. All unvested options and unvested restricted Common Shares shall be forfeited on his
termination date. 

        (e)   Termination of Authority. Immediately upon the Executive terminating or being terminated from his employment with the
Company for any reason, notwithstanding anything else appearing in this Agreement or otherwise, the Executive will stop serving the functions of his terminated or expired positions, and shall be
without any of the authority or responsibility for such positions. On request of the Board at any time following his termination of employment for any reason, the Executive shall resign from the Board
if then a member. Upon termination of employment, the Executive shall also be entitled to all benefits accrued and vested under any employee benefit plan of the Company. 

        (f)    Release. Prior to the payment by the Company of the Executive's Severance Payment, the Company, as a condition to such
payments, shall request a customary release from the Executive with respect to all potential claims the Executive may have against the Company related to the Executive's employment with the company
prior to the date of payment by the Company of the Executive's Severance Payment. If the Executive does not deliver such release, the Company shall not be required to pay the Executive all or any
portion of the Severance Payment; provided, however, if the Executive shall bring legal action related to his Employment, nothing in this subsection (f) shall prevent the Executive from
receiving the Severance Payment as an award in such legal action provided the Executive gives such release at the time of payment of the award. 

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 Section 9. Change of Control. 

        (a)   Change of Control. For purposes of this Agreement, a "Change of Control" will be deemed to have taken place upon the
occurrence of any of the following events: 

        (i)    any
person, entity or affiliated group, excluding any employee benefit plan of the Company, acquiring more than 50% of the then outstanding voting shares of the Company; 

        (ii)   the
consummation of any merger or consolidation of the Company into another company, such that the holders of the voting shares of the Company immediately prior to such
merger or consolidation is less than 50% of the combined voting power of the securities of the surviving company or the parent of such surviving company; 

        (iii)  the
complete liquidation of the Company or the sale or disposition of all or substantially all of the Company's assets, such that after the transaction, the holders of
the voting shares of the Company immediately prior to the transaction is less than 50% of the voting securities of the acquiror or the parent of the acquiror; or 

        (iv)  a
majority of the independent members of the Board of the Company votes in favor of a decision that a Change of Control has occurred. 

        (b)   Certain Benefits Upon a Change of Control. In the event of a Change of Control, the Executive shall become 100% vested in
the stock options and restricted Common Shares awarded under the Stock Option Plan (or any other or successor plan) and if the Executive voluntarily terminates his employment without Good Reason after
the Change of Control, then the Executive shall have a one-year period following the Change of Control in which to exercise his vested stock options, including those stock options that
vested upon the Change of Control. 

 Section 10. Excess Parachute Excise Tax.  

        (a)   If
it is determined (as hereafter provided) that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option,
stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code by reason of being "contingent on a change in ownership or control" of the Company, within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties,
are hereafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment or payments (a "Gross-Up Payment") in an amount such that,
after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 

        (i)    Subject
to the provisions of this Section 10 hereof, all determinations required to be made under this Section 10, including whether an Excise Tax is
payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the nationally
recognized firm of certified public accountants (the "Accounting Firm") used by the Company prior to the Change in Control (or, if such Accounting Firm shall be a nationally recognized firm of
certified public accountants, as selected by Executive). The Accounting Firm shall be directed by the Company or Executive to submit its preliminary determination and detailed supporting calculations
to both the Company and Executive within 15 calendar days after the date of 

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termination
of employment, if applicable, and any other such time or times as may be requested by the Company or Executive. If the Accounting Firm determines that any Excise Tax is payable by
Executive, the Company shall pay the required Gross-Up Payment to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.
If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall, at the same time as it makes such determination, furnish Executive with an opinion that he has substantial
authority not to report any Excise Tax on his/her federal, state, local income or other tax return. Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall
be binding upon the Company and Executive absent a contrary determination by the Internal Revenue Service or a court of competent jurisdiction; provided, however, that no such determination shall
eliminate or reduce the Company's obligation to provide any Gross-Up Payment that shall be due as a result of such contrary determination or the Executive's obligation to repay any amounts
as a result of such contrary determination. 

        (ii)   The
federal, state and local income or other tax returns filed by Executive (or any filing made by a consolidated tax group which includes the Company) shall be
prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive. Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his/her federal income tax return as filed with the Internal Revenue Service and
corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. 

        (b)   In
the event that the Internal Revenue Service claims that any payment or benefit received under this Agreement constitutes as "excess parachute payment", within the
meaning of Section 280G(b)(1) of the Code, Executive shall notify the Company in writing of such claim. Such notification shall be given as soon as practicable but no later than 10
business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the 30 day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall
(1) give the Company any information reasonably requested by the Company relating to such claim; (2) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and
reasonably satisfactory to Executive; (3) cooperate with the Company in good faith in order to effectively contest such claim; and (4) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related
legal, consulting or other similar fees) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for and against any Excise Tax or
other tax (including interest and penalties with respect thereto) imposed as a result of such representation and any payment of costs and expenses. 

        (i)    The
Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the tax authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as 

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the
Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive on an
interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or other tax (including interest and penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if Executive is required to extend the statute of
limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with
respect to which a corporate deduction would be disallowed pursuant to Section 280G of the Code and Executive shall be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority. In addition, no position may be taken nor any final resolution be agreed to by the Company without Executive's consent if such position
or resolution could reasonably be expected to adversely affect Executive (including adversely affecting any other tax position of Executive unrelated to matters covered hereby). 

        (ii)   If,
after the receipt by Executive of any amount advanced by the Company in connection with the contest of the Excise Tax claim, Executive becomes entitled to receive
any refund with respect to such claim, Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). 

        (c)   The
Company and Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive,
as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by
this Section 10. 

        (d)   The
fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by this Section 10 hereof shall
be borne by the Company. If such fees and expenses are initially advanced by Executive, the Company shall reimburse Executive the full amount of such fees and expenses within five business days
after receipt from Executive of a statement therefor and reasonable evidence of his payment thereof. 

        Section 11. Confidential Information.    At any time during or after Executive's employment with the Company, Executive
shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any confidential
or proprietary information pertaining to the business of the Company or any of its subsidiaries ("Confidential Information"), pursuant to the policies set forth in the Company's employee handbook and
compliance manual, as amended from time to time. The Company acknowledges that prior to his employment with the Company, the Executive has lawfully acquired extensive knowledge of the industries and
businesses in which the Company engages in business and the Company's customers, and that the provisions of this Section 11 are not intended to restrict the Executive's use of such previously
acquired knowledge. Upon termination of the Executive's employment with the Company for any reason, the Executive shall return to the Company all Company property and all written Confidential
Information in the possession of the Executive. 

        In
the event that the Executive receives a request or is required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to
disclose all or any part of the Confidential Information, the Executive agrees to (a) promptly notify the Company in writing of the existence, terms and circumstances surrounding such request
or requirement; (b) consult with the Company on the advisability of taking legally available steps to resist or narrow such request or requirement; and (c) assist the Company in seeking
a protective order or other appropriate remedy. 

10

 

In
the event that such protective order or other remedy is not obtained or that the Company waives compliance with the provisions hereof, the Executive shall not be liable for such disclosure unless
disclosure to any such tribunal was caused by or resulted from a previous disclosure by the Executive not permitted by this Agreement. 

        Section 12. Noncompetition and Nonsolicitation.    During the Term and for a period of 12 calendar months after
the termination of the Executive's employment (the "Non-compete Period"), the Executive shall not, directly or indirectly, either as a principal, agent, employee, employer, stockholder,
partner or in any other capacity whatsoever: (a) engage or assist others engaged, in whole or in part, in any business which is engaged in a business or enterprise that is substantially similar
to and in competition with the business of the Company that the Company was engaged in, or a planned business of the Company that had been proposed in writing to senior officers of the Company or the
Board and had not been rejected by the Company or the Board, during the period of the Executive's employment with the Company; or (b) without the prior consent of the Board, employ or solicit
the employment of, or assist others in employing or soliciting the employment of, any individual employed by the Company (other than the Executive's personal assistant or Executive's secretary) at any
time while the Executive was also so employed; provided, however, that the provisions of this Section 12 shall not apply in the event the Company materially breaches this Agreement. For
purposes of this Section 12, a business shall be in competition with the Company only if a significant portion of its business is to originate mortgage loans to or purchase real estate from and
lease such real estate back to operators of single-tenant retail, distribution or service companies in the United States. Notwithstanding any other provision of this Agreement, in the event the
Executive's employment is terminated "For Cause," the Non-Compete Period shall be 12 calendar months. 

        Nothing
in this Section 12 shall impede, restrict or otherwise interfere with the Executive's management and operation of the Excluded Businesses. Further, nothing in this
Section 12 shall prohibit Executive from making any passive investment in a public company, or where he is the owner of 5% or less of
the issued and outstanding voting securities of any entity, provided such ownership does not result in his being obligated or required to devote any managerial efforts. 

        The
Executive agrees that the restraints imposed upon his pursuant to this Section 12 are necessary for the reasonable and proper protection of the Company and its subsidiaries
and affiliates, and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. The parties further agree that, in the event that any
provision of this Section 12 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or
too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. 

        Section 13. Intellectual Property.    During the Term, the Executive shall promptly disclose to the Company or any
successor or assign, and grant to the Company and its successors and assigns without any separate remuneration or compensation other than that received by him in the course of his employment, his
entire right, title and interest in and to any and all inventions, developments, discoveries, models, or any other intellectual property of any type or nature whatsoever developed solely during the
Term ("Intellectual Property"), whether developed by him during or after business hours, or alone or in connection with others, that is in any way related to the business of the Company, its
successors or assigns. This provision shall not apply to books or articles authored by the Executive during non-work hours, consistent with his obligations under this Agreement, so
long as such books or articles (a) are not funded in whole or in part by the Company, (b) do not interfere with the performance of the Executive's duties under this Agreement, and
(c) do not contain any Confidential Information or Intellectual Property of the Company. The Executive agrees, at the Company's expense, to take all steps necessary or proper to vest title to
all such Intellectual Property in the Company, and 

11

 

cooperate
fully and assist the Company in any litigation or other proceedings involving any such Intellectual Property. 

 Section 14. Disputes. 

        (a)   Equitable Relief. The Executive acknowledges and agrees that upon any breach by the Executive of his obligations under
Section 11, 12 or 13 hereof, the Company will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief. 

        (b)   Arbitration. Excluding only requests for equitable relief by the Company under Section 14(a), in the event that
there is any claim or dispute arising out of or relating to this Agreement or the breach hereof, and the parties hereto shall not have resolved such claim or dispute within 60 days after
written notice from one party to the other setting forth the nature of such claim or dispute, then such claim or dispute shall be settled if mutually agreed by binding arbitration in Maricopa County,
Arizona, in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association ("Rules"), by an arbitrator mutually agreed upon by the parties hereto or, in the
absence of such agreement, by an arbitrator selected according to such Rules. Notwithstanding the foregoing, if either the Company or the Executive shall request, such mutually agreeable arbitration
shall be conducted by a panel of three arbitrators, one selected by the Company, one selected by the Executive and the third selected by agreement of the first two arbitrators, or, in the absence of
such agreement, in accordance with such Rules. Judgment upon the award rendered by such arbitrator(s) shall be entered in any Court having jurisdiction thereof upon the application of either party.
The parties agree to use their reasonable best efforts to have such arbitration completed as soon as is reasonably practicable. Notwithstanding anything herein to the contrary, except as provided in
paragraph (c) below the losing party shall pay the reasonable costs and expenses (including reasonable attorney fees and expenses) of the prevailing party with respect to such
arbitration, except the Executive, if he is the losing party, shall not be required to pay such expenses and costs if the claim relates to statutory discrimination claims that he would not otherwise
be required to pay if such claim had been brought in a court of competent jurisdiction. 

        (c)   Legal Fees. The Company shall pay or promptly reimburse the Executive for the reasonable legal fees and expenses incurred
by the Executive in successfully enforcing or defending any right of the Executive pursuant to this Agreement even if the Executive does not prevail on all issues; provided, however, the Company shall
have no obligation to reimburse the Executive unless the amount recovered by the Executive from the Company is the greater of (a) $10,000 or (b) 25% of the amount claimed by the
Executive in any demand letter, arbitration or judicial proceeding. 

        Section 15. Indemnification.    The Company shall indemnify the Executive, to the maximum extent permitted by applicable
law and the governing instruments of the Company, against all costs, charges and expenses incurred or sustained by the Executive, including the cost of legal counsel selected and retained by the
Executive in connection with any action, suit or proceeding to which the Executive may be made a party by reason of the Executive being or having been an officer, director or employee of the Company. 

        Section 16. Cooperation in Future Matters.    The Executive hereby agrees that for a period of 12 following his
termination of employment he shall cooperate with the Company's reasonable requests relating to matters that pertain to the Executive's employment by the Company, including, without limitation,
providing information or limited consultation as to such matters, participating in legal proceedings, investigations or audits on behalf of the Company, or otherwise making himself reasonably
available to the Company for other related purposes. Any such cooperation shall be performed at scheduled times taking into consideration the Executive's other commitments, and the Executive shall 

12

 

be
compensated at a reasonable hourly or per diem rate to be agreed upon by the parties to the extent such cooperation is required on more than an occasional and limited basis. The Executive shall not
be required to perform such cooperation to the extent it conflicts with any requirements of exclusivity of services for another employer or otherwise, nor in any manner that in the good faith belief
of the Executive would conflict with his rights under or ability to enforce this Agreement. 

 Section 17. General. 

        (a)   Notices. All notices and other communications hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if sent by overnight courier or by certified mail, return receipt requested, postage prepaid or sent by written telecommunication or
facsimile, to the relevant address set forth below, or to such other address as the recipient of such notice or communication shall have specified in writing to the other party hereto, in accordance
with this Section 17(a). 

        to
the Company: 

Spirit
Finance Corporation

8910 E. Raintree Drive

Suite 100

Scottsdale, AZ 85260 Facsimile: (480) 606-0826

Attention: President 

        to
Executive, at his last residence shown on the records of the Company. 

        Any
such notice shall be effective (i) if delivered personally, when received; (ii) if sent by overnight courier, when receipted for; (iii) if mailed,
five days after being mailed; and (iv) on confirmed receipt if sent by written telecommunication or facsimile; provided a copy of such communication is sent by regular mail, as described
above. 

        (b)   Severability. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 

        (c)   Waivers. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair
such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or
privilege. 

        (d)   Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. 

        (e)   Assigns. This Agreement shall be binding upon and inure to the benefit of the Company's successors and the Executive's
personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable by the Executive, it being understood and agreed that
this is a contract for the Executive's personal services. This Agreement shall not be assignable by the Company except that the Company shall assign it in connection with a transaction involving the
succession by a third party to all or substantially all of the Company's business and/or assets (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise).
When assigned to a successor, the assignee shall assume this Agreement and expressly agree to perform this Agreement in the same manner and to the same extent as the Company would be required to
perform it in the absence of such an assignment. For all purposes under this Agreement, the term "Company" shall include any 

13

 

successor
to the Company's business and/or assets that executes and delivers the assumption agreement described in the immediately preceding sentence or that becomes bound by this Agreement by
operation of law. 

        (f)    Entire Agreement. This Agreement contains the entire understanding of the parties, supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized
representative of the Board (other than the Executive). 

        (g)   Governing Law. This Agreement and the performance hereof shall be construed and governed in accordance with the laws of
the State of Arizona, without giving effect to principles of conflicts of law. Each of the parties hereto hereby irrevocably submits to the jurisdiction of any state or federal court located in
Phoenix or Scottsdale, Arizona in respect of any suit, action or proceeding arising out of or relating to this Agreement, and irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably waives, to the fullest extent it may effectively do so under applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. 

        (h)   Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall be applied against any party. The headings of sections of this Agreement are for convenience of reference only and shall not affect
its meaning or construction. Whenever any word is used herein in one gender, it shall be construed to include the other gender, and any word used in the singular shall be construed to include the
plural in any case in which it would apply and vice versa. 

        (i)    Payments and Exercise of Rights After Death. Any amounts payable hereunder after the Executive's death shall be paid to
the Executive's designated beneficiary or beneficiaries, whether received as a designated beneficiary or by will or the laws of descent and distribution. The Executive may designate a beneficiary or
beneficiaries for all purposes of this Agreement, and may change at any time such designation, by notice to the Company making specific reference to this Agreement. If no designated beneficiary
survives the Executive or the Executive fails to designate a beneficiary for purposes of this Agreement prior to his death, all amounts thereafter due hereunder shall be paid, as and when payable, to
his spouse, if he survives the Executive, and otherwise to his estate. 

        (j)    Consultation With Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with
counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Agreement, and that the Company has not made any representations or warranties to the
Executive concerning the terms, enforceability and implications of this Agreement other than as are reflected in this Agreement. 

        (k)   Withholding. Any payments provided for in this Agreement shall be paid after deduction for any applicable income tax
withholding required under federal, state or local law. 

        (l)    No Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for
under this Agreement by seeking other employment or otherwise after the termination of his employment hereunder. 

        (m)  Consumer Price Index. For purposes of this Agreement, the term "CPI" refers to the Consumer Price Index as published by
the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical Workers (1982-1984=100). If the CPI is hereafter
converted to a different standard reference base or otherwise revised, the determination of the CPI adjustment shall be made with the use of such 

14

 

conversion
factor, formula or table for converting the CPI, as may be published by the Bureau of Labor Statistics, or, if the bureau shall no longer publish the same, then with the use of such
conversion factor, formula or table as may be published by an agency of the United States, or failing such publication, by a nationally recognized publisher of similar statistical information. 

        (n)   Survival. The provisions of Sections 8, 9, 10, 11, 12, 13, 14, 15 and 16 shall survive the termination of this
Agreement. 

15

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. 

	

 	
 	

SPIRIT FINANCE CORPORATION
	

 	
 	

By	
 	

/s/  CHRISTOPHER H. VOLK      
 Christopher H. Volk, President and Chief Operating Officer
	

 	
 	

GREGG A. SEIBERT
	

 	
 	

/s/  GREGG A. SEIBERT      
 Gregg A. Seibert

16

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Exhibit 10.6  

 

 
 

SPIRIT FINANCE CORPORATION    
    
    2003 STOCK OPTION AND INCENTIVE PLAN    
    

Dated
December 15, 2003 

 

  

	ARTICLE I

DEFINITIONS
	

Section 1.01.	
 	

General	
 	

1
	

ARTICLE II

COMMON SHARES SUBJECT TO PLAN
	

Section 2.01.	
 	

Common Shares Subject to Plan	
 	

4
	

Section 2.02.	
 	

Add-back of Grants	
 	

4
	

ARTICLE III

ELIGIBILITY; AWARDS; AWARD AGREEMENTS
	

Section 3.01.	
 	

Eligibility	
 	

5
	

Section 3.02.	
 	

Awards	
 	

5
	

Section 3.03.	
 	

Provisions Applicable to Section 162(m) Participants	
 	

5
	

Section 3.04.	
 	

Award Agreement	
 	

5
	

ARTICLE IV

OPTIONS
	

Section 4.01.	
 	

Award Agreement for Option Grant	
 	

6
	

Section 4.02.	
 	

Option Price	
 	

6
	

Section 4.03.	
 	

Qualification for Incentive Stock Options	
 	

6
	

Section 4.04.	
 	

Change in Incentive Stock Option Grant	
 	

7
	

Section 4.05.	
 	

Option Term	
 	

7
	

Section 4.06.	
 	

Option Vesting	
 	

7
	

Section 4.07.	
 	

Fair Market Value	
 	

7
	

Section 4.08.	
 	

Dividend Equivalents	
 	

8
	

ARTICLE V

EXERCISE OF OPTIONS
	

Section 5.01.	
 	

Partial Exercise	
 	

8
	

Section 5.02.	
 	

Manner of Exercise	
 	

8
	

Section 5.03.	
 	

Conditions to Issuance of Common Shares	
 	

9
	

Section 5.04.	
 	

Rights as Shareholders	
 	

9
	

Section 5.05.	
 	

Ownership and Transfer Restrictions	
 	

9
	

Section 5.06.	
 	

Limitations on Exercise of Options	
 	

9
	 	 	 	 	 

i

 

	

ARTICLE VI

AWARD OF RESTRICTED COMMON SHARES
	

Section 6.01.	
 	

Award Agreement	
 	

9
	

Section 6.02.	
 	

Award of Restricted Common Shares	
 	

10
	

Section 6.03.	
 	

Rights as Shareholders	
 	

10
	

Section 6.04.	
 	

Restriction	
 	

10
	

Section 6.05.	
 	

Lapse of Restrictions	
 	

10
	

Section 6.06.	
 	

Repurchase of Restricted Common Shares	
 	

11
	

Section 6.07.	
 	

Escrow	
 	

11
	

Section 6.08.	
 	

Legend	
 	

11
	

ARTICLE VII

SHARE APPRECIATION RIGHTS
	

Section 7.01.	
 	

Award Agreement for SARs	
 	

11
	

Section 7.02.	
 	

General Requirements	
 	

11
	

Section 7.03.	
 	

Base Amount	
 	

11
	

Section 7.04.	
 	

Tandem SARs	
 	

11
	

Section 7.05.	
 	

SAR Exercisability	
 	

12
	

Section 7.06.	
 	

Value of SARs	
 	

12
	

Section 7.07.	
 	

Form of Payment	
 	

12
	

ARTICLE VIII

PERFORMANCE UNITS
	

Section 8.01.	
 	

Award Agreement for Performance Units	
 	

12
	

Section 8.02.	
 	

General Requirements	
 	

12
	

Section 8.03.	
 	

Performance Period and Performance Goals	
 	

12
	

Section 8.04.	
 	

Payment With Respect to Performance Units	
 	

12
	

ARTICLE IX

OTHER EQUITY GRANTS
	

Section 9.01.	
 	

Award Agreement for Equity Grants	
 	

13
	

Section 9.02.	
 	

Award of Equity Grants	
 	

13
	

ARTICLE X

ADMINISTRATION
	

Section 10.01.	
 	

Committee	
 	

13
	

Section 10.02.	
 	

Duties and Powers of Committee	
 	

13
	

Section 10.03.	
 	

Compensation; Professional Assistance; Good Faith Actions	
 	

13
	 	 	 	 	 

ii

 

	

ARTICLE XI

MISCELLANEOUS PROVISIONS
	

Section 11.01.	
 	

Not Transferable	
 	

14
	

Section 11.02.	
 	

Amendment, Suspension or Termination of This Plan	
 	

14
	

Section 11.03.	
 	

Changes in Common Shares or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events	
 	

14
	

Section 11.04.	
 	

Approval of Plan by Shareholders	
 	

16
	

Section 11.05.	
 	

Continued Employment	
 	

16
	

Section 11.06.	
 	

Tax Withholding	
 	

16
	

Section 11.07.	
 	

Forfeiture Provisions	
 	

16
	

Section 11.08.	
 	

Limitations Applicable to Section 16 Persons and Performance Based Compensation	
 	

16
	

Section 11.09.	
 	

Restrictions	
 	

17
	

Section 11.10.	
 	

Restrictive Legend	
 	

17
	

Section 11.11.	
 	

Blackout Periods	
 	

17
	

Section 11.12.	
 	

Effect of Plan Upon Option and Compensation Plans	
 	

18
	

Section 11.13.	
 	

Compliance With Laws	
 	

18
	

Section 11.14.	
 	

Titles	
 	

18
	

Section 11.15.	
 	

Governing Law	
 	

18

iii

SPIRIT FINANCE CORPORATION

2003 STOCK OPTION AND INCENTIVE PLAN  

        SPIRIT FINANCE CORPORATION, a Maryland corporation (the "Company"), adopts the Spirit Finance Corporation 2003
Stock Option and Incentive Plan (the "Plan"), effective December 15, 2003, for the benefit of Employees, Consultants and Directors of the Company. 

        The
purposes of this Plan are (a) to recognize and compensate selected Employees, Consultants and Directors who contribute to the development and success of the Company and its
Affiliates and Subsidiaries; (b) to maintain the competitive position of the Company and its Affiliates and Subsidiaries by attracting and retaining Employees, Consultants and Directors; and
(c) to provide incentive compensation to Employees, Consultants and Directors based upon the Company's and/or Affiliate's and Subsidiary's performance. 

ARTICLE I

DEFINITIONS  

        Section 1.01. General.    Wherever the following initially capitalized terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. 

        "Affiliate" shall mean any entity that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. 

        "Award" shall mean the grant or award of Options, Restricted Common Shares, SARs, Performance Units or Equity Grants under this Plan. 

        "Award Agreement" shall mean the agreement granting or awarding Options, Restricted Common Shares, SARs, Performance Units or Equity
Grants. Such Award Agreement shall be executed by an officer of the Company and the Participant receiving such grant. 

        "Award Limit" shall mean 500,000 Common Shares subject to Restricted Common Shares, SARs, Performance Units or Equity Grants awarded to a
single Participant in any one Plan Year and 500,000 Common Shares subject to Options awarded to a single Participant in any one Plan Year. 

        "Board" shall mean the Board of Directors of Spirit Finance Corporation, as comprised from time to time. 

        "Cause" shall, except as otherwise defined in the Participant's Employment Agreement, mean (a) the conviction of the Participant
of, or the entry of a plea of guilty or nolo contendere by the Participant to, a felony (not including a conviction, plea of guilty or nolo contendere arising solely under a statutory provision
imposing criminal liability upon the Participant on a strict liability basis due to the Company offices held by the Participant, so long as any act or omission of the Participant with respect to such
matter was not taken or omitted in contravention of any applicable policy or directive of the Board); (b) a willful breach of his duty of loyalty which is materially detrimental to the Company;
(c) a willful failure to perform or adhere to explicitly stated duties that are consistent with the terms of his position with the Company, or the Company's reasonable and customary guidelines
of employment or reasonable and customary corporate governance guidelines or policies, including without limitation any business code of ethics adopted by the Board, or to follow the lawful directives
of the Board (provided such directives are consistent with the terms of the Participant's Employment Agreement), which, in any such case, continues for 30 days after written notice from the
Board to the Participant; or (d) gross negligence or willful misconduct in the performance of the Participant's duties. No act, or failure to act, on the Participant's part will be deemed
"gross negligence" or "willful misconduct" unless done, or omitted to be done, by the Participant not in good faith and without a reasonable belief that the Participant's act, or failure to act, was
in the best interest of the Company. The Committee shall determine, in good faith, if a Participant has been terminated for Cause; provided, however, that if the Participant is a member of the
Committee, such Participant shall not participate in the determination. 

 

        "Change in Control" shall, except as otherwise defined in the Participant's Employment Agreement, mean the occurrence of any of the
following events: (a) any person, entity or affiliated group, excluding the Company or any employee benefit plan of the Company, acquiring more than 50% of the then outstanding voting shares of
the Company; (b) the consummation of any merger or consolidation of the Company into another company, such that the holders of the voting shares of the Company immediately after such merger or
consolidation are less than 50% of the voting power of the surviving company or the parent of the surviving company; (c) the complete liquidation of the Company; (d) the sale or
disposition of all or substantially all of the Company's assets, such that after the transaction, the holders of the voting shares of the Company immediately prior to the transaction is less than 50%
of
the voting securities of the acquiror or the parent of the acquiror; or (e) a majority of the Board votes in favor of a decision that a Change in Control has occurred. 

        "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute or law. 

        "Committee" shall mean the Compensation Committee of the Board. If there is no Compensation Committee of the Board,
"Committee" shall mean the Board. 

        "Common Shares" shall mean the shares of common stock, par value $.01 per share, of the Company. 

        "Company" shall mean Spirit Finance Corporation, a Maryland corporation, or any business organization which succeeds to its business. For
purposes of this Plan, the term Company shall include, where applicable, the employer of the Employee or Consultant, including without limitation such other Affiliate or Subsidiary who employs the
Employee or the Consultant. 

        "Consultant" shall mean a professional or technical expert, consultant or independent contractor who provides services to the Company or
an Affiliate or Subsidiary, and who may be selected to participate in the Plan. 

        "Dividend Equivalents" shall mean dividend equivalents granted under Section 4.08 of this Plan. 

        "Employee" shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under
Section 3401(c) of the Code) of the Company or an Affiliate or Subsidiary of the Company, whether such employee is so employed at the time this Plan is adopted or becomes so employed
subsequent to the adoption of this Plan. 

        "Employment Agreement" shall mean the employment, consulting or similar contractual agreement entered into by the Employee or the
Consultant, as the case may be, and the Company governing the terms of the Employee's or Consultant's employment with the Company, if any. 

        "Equity Grants" shall mean cash, Common Shares or equity-based awards granted under Article IX of this Plan. 

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 

        "Fair Market Value" of a share of Common Shares, as of a given date, shall be determined pursuant to Section 4.07. 

        "Good Reason" shall only apply, and shall only have the meaning, as contained in the Participant's Employment Agreement. Any provision
herein that relates to a Termination of Employment by the Participant for Good Reason shall have no effect if there is no Employment Agreement or the Employment Agreement does not contain a provision
permitting the Participant to terminate for Good Reason. 

        "Grant Date" shall mean the date as of which an Award is granted. 

2

 

        "Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is
designated as an Incentive Stock Option by the Committee. 

        "Independent Director" shall mean a member of the Board who would not otherwise be classified as an Employee except for his or her
position as a member of the Board. 

        "Non-Qualified Stock Option" shall mean an Option which the Committee does not designate as an Incentive Stock Option. 

        "144A Offering" means the 2003 private placement of Common Shares of the Company. 

        "Option" shall mean an option to purchase Common Shares that is granted under Article IV of this Plan. An option granted under this
Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options. 

        "Option Period" shall have the meaning ascribed thereto in Section 11.09. 

        "Participant" shall mean an Employee, Consultant or Director who has been determined as eligible to receive an Award pursuant to
Section 3.02(a). 

        "Performance Units" shall mean performance units granted under Article VIII of this Plan. 

        "Permanent Disability" or "Permanently Disabled" shall mean that an individual is
permanently and totally disabled if the person is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. A determination of Permanent Disability shall be made in good faith by the
Committee. 

        "Plan" shall mean the Spirit Finance Corporation 2003 Stock Option and Incentive Plan, as embodied herein and as amended from time to
time. 

        "Plan Year" shall mean the fiscal year of the Company. 

        "Restricted Common Shares" shall mean Common Shares awarded under Article VI of this Plan. 

        "Retirement" or "Retire" shall, except as otherwise defined in the Participant's
Employment Agreement, mean an Employee's Termination of Employment with the Company on account of retirement under any formal retirement plan of the Company. 

        "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such rule may be amended
from time to time. 

        "SAR" shall mean share appreciation rights awarded under Article VII of this Plan. 

        "Section 162(m) Participant" shall mean any Employee the Committee designates to receive an Award whose compensation for the fiscal
year in which the Employee is so designated or a future fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code, as determined by the Committee
in its sole discretion. 

        "Subsidiary" shall mean an entity in an unbroken chain beginning with the Company if each of the entities other than the last entity in
the unbroken chain owns 50% or more of the total combined voting power of all classes of equity in one of the other entities in such chain. 

        "Ten Percent Owner" shall mean a person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own,
stock possessing more than 10% of the total combined voting power of all classes of shares of the Company, or any Subsidiary. Whether a person is a Ten Percent Owner shall be determined with respect
to each Option based on the facts existing immediately prior to the Grant Date of such Option. 

3

 

        "Termination of Employment" shall mean the date on which the employee-employer, contractual or similar relationship between a Participant
and the Company is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination of employment by resignation, discharge, death, Permanent Disability or
Retirement, but excluding (a) termination of employment where there is a simultaneous reemployment or continuing employment of a Participant by the Company or any Subsidiary or Affiliate; and
(b) at the discretion of the Committee, termination of employment which results in a temporary severance of the employee-employer relationship. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to a Termination of Employment (subject to the provisions of any Employment Agreement between a Participant and the Company), including, but
not limited to, all questions of whether particular leaves of absence constitute a Termination of Employment; provided, however, that, unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer, contractual or similar relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable
regulations and revenue rulings under said Section. 

        "Director" shall mean a member of the Company's Board of Directors. 

        "Vest," "Vested" or "Vesting" shall mean
the percentage by which a Participant shall vest in his Award in accordance with his Award Agreement. 

ARTICLE II

COMMON SHARES SUBJECT TO PLAN  

        Section 2.01. Common Shares Subject to Plan.    

        (a)   The
Common Shares subject to an Award shall be shares of the Company's authorized but unissued, reacquired, or treasury Common Shares. The number of such shares which
may be issued upon exercise of such Options or which may be granted as Restricted Common Shares or to which Awards may be subject is 2,100,000 in the aggregate. 

        (b)   The
maximum number of Common Shares which may be awarded to any individual in any calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, Common Shares subject to Options which are canceled continue to be counted against the Award Limit and if, after grant of an Option, the price of Common Shares
subject to such Option is reduced, the transaction is treated as a cancellation of the Option and a grant of a new Option, both the Option deemed to be canceled and the Option deemed to be granted are
counted against the Award Limit. 

        Section 2.02. Add-back of Grants.    If any Award expires or is canceled without having been fully exercised,
or is exercised in whole or in part for cash as permitted by this Plan, the number of Common Shares subject to such Award but as to which such Award or other right was not exercised prior to its
expiration, cancellation or exercise may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.01. Shares of Common Shares which are delivered by the
Participant or withheld by the Company upon the exercise of any Option or other award under this Plan, in payment of the exercise price thereof, may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.01. If any Common Shares granted pursuant to an Award permitted under the Plan is forfeited by the Participant, such Common Shares may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.01. Notwithstanding the provisions of this Section 2.02, no shares of Common Shares may again be optioned, granted
or awarded if such action would cause an Incentive Stock Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code. 

4

 
ARTICLE III

ELIGIBILITY; AWARDS; AWARD AGREEMENTS  

        Section 3.01. Eligibility.    Any Employee, Consultant or Director selected to participate pursuant to
Section 3.02 shall be eligible to participate in the Plan. 

        Section 3.02. Awards.    The Committee shall determine which Employees, Consultants and/or Directors, other than members
of the Committee, shall receive an Award, whether the Employee, Consultant or Director will receive Options, Restricted Common Shares, SARs, Performance Units or Equity Grants, whether the Option
Grant shall be of Incentive Stock Options and/or Non-Qualified Stock options, and the number of Common Shares subject to such Award, in accordance with the terms of the Participant's
Employment Agreement, if any. The Board shall determine the terms of any Award to the Committee, the number of Common Shares subject to such Award, whether the Committee shall receive Options,
Restricted Common Shares, SARs, Performance Units or Equity Grants, and whether the Option Grant shall be of Incentive Stock Options and/or Non-Qualified Stock Options. Notwithstanding the
foregoing, the terms and conditions of an Award intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited
to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. 

        Section 3.03. Provisions Applicable to Section 162(m) Participants.    

        (a)   Notwithstanding
anything in the Plan to the contrary, the Committee may grant Options, Restricted Common Shares, SARs, Performance Units and/or Equity Grants to a
Section 162(m) Participant that Vest upon the attainment of performance targets for the Company which are related to one or more of the following performance goals:
(i) pre-tax income; (ii) operating income; (iii) cash flow; (iv) earnings per share; (v) return on equity; (vi) return on invested capital or
assets; (vii) cost reductions or savings; (viii) funds from operations (FFO); (ix) stock price; (x) sales or new investments funded; (xi) distributions to
stockholders; (xii) dividend yield; and/or (xiii) such other identifiable and measurable performance objectives permissible by Section 162(m), as determined by the Committee and,
if applicable, pursuant to the terms of a Participant's Employment Agreement and subject to Committee review and approval. 

        (b)   To
the extent necessary to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, no later than 90 days
following the commencement of any fiscal year in question or any other designated fiscal period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee
pursuant to a Participant's Employment Agreement and subject to Committee review and approval, shall, in writing, (i) designate one or more Section 162(m) Participants,
(ii) select the performance goal or goals applicable to the fiscal year or other designated fiscal period, (iii) establish the various targets and bonus amounts which may be earned for
such fiscal year or other designated fiscal period, and (iv) specify the relationship between performance goals and targets and the amounts to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period. Following the completion of each fiscal year or other designated fiscal period, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other designated fiscal period. In determining the amount earned by a Section 162(m) Participant, the Committee shall
have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of
individual or corporate performance for the fiscal year or other designated fiscal period. 

        Section 3.04. Award Agreement.    Upon the selection of an Employee, Consultant or Director to become a Participant and
receive an Award, the Committee shall cause a written Award Agreement to 

5

 

be
issued to such individual encompassing the terms and conditions of such Award, as determined by the Committee in its sole discretion; provided, however, that if applicable, the terms of such Award
Agreement shall comply with the terms of such Participant's Employment Agreement, if any. Such Award Agreement shall provide for the exercise price for Options and SARs, the purchase price for
Restricted Common Shares, the performance criteria for Performance Units, the exercisability and vesting schedule, payment terms and such other terms and conditions of such Award, as determined by the
Committee in its sole discretion. Notwithstanding the foregoing, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option that
the Participant surrender for cancellation some or all of the unexercised Awards which have been previously granted to the Participant under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may have an Option price equal to or higher than the exercise price of such surrendered Option, may cover the same (or a lesser or greater) number of Common Shares as
such surrendered Option or other Award, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of Common
Shares, price, exercise period or any other term or condition of such surrendered Award. Each Award Agreement shall be executed by the Participant and an officer or a director (other than the
Participant) of the Company authorized to sign such Award Agreement and shall contain such terms and conditions that are consistent with the Plan, including but not limited to the exercisability and
vesting schedule, if any, as the Committee in its sole discretion shall determine. All Awards shall be made conditional upon the Participant's acknowledgment, in writing in the Award Agreement or by
acceptance of the Award, that all decisions and determinations of the Committee shall be final and binding on the Participant, his beneficiaries and any other person having or claiming an interest
under such Award. 

ARTICLE IV

OPTIONS  

        Section 4.01. Award Agreement for Option Grant.    Option grants shall be evidenced by an Award Agreement, pursuant to
Section 3.04. Award Agreements evidencing options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions
as may be necessary to meet the applicable provisions of Section 422 of the Code. 

        Section 4.02. Option Price.    The price per share of the Common Shares subject to each Option shall be set by the
Committee; provided, however, that such price shall be no less than the greater of the par value of a share of Common Shares or 50% of the Fair Market Value of a share of Common Shares on the date the
Option is granted, and (a) in the case of Incentive Stock Options and Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Common Shares on
the date the Option is granted; (b) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of shares of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code) such price shall not be
less than 110% of the Fair Market Value of a share of Common Shares on the date the Option is granted; and (iii) in the case of Non-Qualified Stock Options granted to Independent
Directors after the Company is subject to the Exchange Act, such price shall equal 100% of the Fair Market Value of a share of Common Shares on the date the Option is granted. 

        Section 4.03. Qualification for Incentive Stock Options.    The Committee may only grant an Incentive Stock Option to an
individual if such person is an Employee of the Company or an Employee of a Subsidiary. 

6

 

        Section 4.04. Change in Incentive Stock Option Grant.    Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such Option from treatment as an Incentive Stock Option under Section 422 of the Code. To the extent that the aggregate Fair Market Value of Common
Shares with respect to which Incentive Stock Options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the
first time by a Participant during any calendar year (under the Plan and all other Incentive Stock Option plans of the Company) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options to the extent of the excess above such limitation. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in
which they were granted. For purposes of this Section 4.04, the Fair Market Value of Common Shares shall be determined as of the time the Option with respect to such Common Shares is granted,
pursuant to Section 4.07. 

        Section 4.05. Option Term.    The term of an Option shall be set by the Committee in its discretion; provided, however,
in the case of Incentive Stock Options, the term shall not be more than 10 years from the date the Incentive Stock Option is granted, or five years from such date if the Incentive Stock
Option is granted to an Employee then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of shares of the Company
or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Such Incentive Stock Options shall be subject to Section 5.06, except as limited by the
requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options. 

        Section 4.06. Option Vesting.    

        (a)   The
period during which the right to exercise an Option in whole or in part vests in the Participant shall be set by the Committee and shall be as provided for in the
Award Agreement. At any time after the grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during
which an option Vests. 

        (b)   In
each Award Agreement, the Committee shall indicate whether the portion of the Options, if any, that remains nonvested upon the Participant's Termination of Employment
with the Company are forfeited. In so specifying, the Committee may differentiate between the reasons for the Participant's Termination of Employment. 

        (c)   Any
Options which are not Vested upon the occurrence of a Change in Control, shall become 100% vested, unless the Award Agreement or the Participant's Employment
Agreement explicitly provides otherwise. 

        Section 4.07. Fair Market Value.    The Fair Market Value of a share of Common Shares as of a given date shall be
(a) the closing price of a share of Common Shares on the principal exchange on which shares of Common Shares are then trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if Common Shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred;
(b) if Common Shares are not traded on an exchange but are quoted on NASDAQ or a successor quotation system, either the (i) closing sale price; or (ii) the mean between the
closing representative bid and asked prices for the Common Shares on the trading day previous to such date as reported by NASDAQ or such successor quotation systems, as may be appropriate; or
(c) if Common Shares are not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market value of a share of Common Shares as established by the
Company acting in good faith. The Fair Market Value as determined by the Company in good faith and in the absence of fraud shall be binding and conclusive upon all parties hereto, and in any event the
Participant agrees to accept and shall not challenge any determination of Fair Market Value made by the Company. If the 

7

 

Company
subdivides (by split, dividend or otherwise) the Common Shares into a greater number of Common Shares, or combines (by reverse split or otherwise) the Common Shares into a smaller number of
Common Shares after the Company shall have determined the Fair Market Value for the Common Shares subject to an Award (without taking into consideration such subdivision or combination) and prior to
the consummation of the purchase, the Fair Market Value and number of Common Shares shall be appropriately adjusted to reflect such subdivision or combination, and the Company's good faith
determination as to any such adjustment shall be binding and conclusive on all parties hereto. 

        Section 4.08. Dividend Equivalents.    The Committee may grant Dividend Equivalents in connection with Options granted
under the Plan. Dividend Equivalents may be paid currently or accrued as contingent obligations and may be payable in cash or shares of Common Shares and upon such terms as the Committee may
establish, including, without limitation, the achievement of specific performance goals. 

ARTICLE V

EXERCISE OF OPTIONS  

        Section 5.01. Partial Exercise.    At any time and from time to time prior to the time when any exercisable option or
portion thereof becomes unexercisable under the Plan or the Award Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional Common Shares and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a minimum number of Common Shares. 

        Section 5.02. Manner of Exercise.    An exercisable Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Company of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the Award Agreement: 

        (a)   a
written notice signed by the Participant or other person then entitled to exercise such Option or portion thereof, stating that such Option or portion is being
exercised, provided such notice complies with all applicable rules established by the Committee from time to time; 

        (b)   such
representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the
Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, causing legends to be placed on Common Share certificates and issuing stop-transfer notices to agents and registrars; 

        (c)   in
the event that the Option shall be exercised pursuant to Section 11.01 by any person or persons other than the Participant, appropriate proof of the right of
such person or persons to exercise the Option or portion thereof; and 

        (d)   full
payment (in cash or by a certified check) for the Common Shares with respect to which the Option or portion thereof is exercised, unless with the prior written
consent of the Committee: 

        (i)    payment,
in whole or in part, is made through the delivery of shares of Common Shares owned by the Participant, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; 

        (ii)   payment,
in whole or in part, is made through the surrender of shares of Common Shares then issuable upon exercise of the Option having a Fair Market Value on the date
of 

8

 

Option
exercise equal to the aggregate exercise price of the Option or exercised portion thereof; 

        (iii)  payment,
in whole or in part, is made through the delivery of property of any kind which constitutes good and valuable consideration; or 

        (iv)  payment
is made through any combination of the consideration provided for in this Section 5.02(d). 

        Section 5.03. Conditions to Issuance of Common Shares.    The Company shall not be required to issue or deliver any
certificate or other indicia evidencing ownership of shares of Common Shares purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 

        (a)   the
obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole discretion, determine to be
necessary or advisable; 

        (b)   the
lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative
convenience; 

        (c)   the
receipt by the Company of full payment for such Common Shares, including payment of any applicable withholding tax; and 

        (d)   the
Participant agreeing to the terms and conditions of the Plan and the Award Agreement. 

        Section 5.04. Rights as Shareholders.    The holders of Options shall not be, nor have any of the rights or privileges
of, shareholders of the Company in respect of any Common Shares purchasable upon the exercise of any part of an Option unless and until certificates or other indicia representing such Common Shares
have been issued by the Company to such holders. 

        Section 5.05. Ownership and Transfer Restrictions.    The Committee, in its absolute discretion, may impose at the time
of grant such restrictions on the ownership and transferability of the Common Shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the
Award Agreement and may be referred to on the certificates or other indicia evidencing such Common Shares. 

        Section 5.06. Limitations on Exercise of Options.    

        (a)   Vested
Incentive Stock Options may not be exercised after the earlier of (i) their expiration date; (ii) 12 months from the date of the
Participant's death; (iii) 12 months from the date of the Participant's Termination of Employment by reason of his Permanent Disability; or (iv) the expiration of
three months from the date of the Participant's Termination of Employment for any reason other than such Participant's death or Permanent Disability, unless the Participant dies within said
three-month period; unless provided otherwise in the Employee's Employment Agreement. Leaves of absence for less than 90 days shall not cause a Termination of Employment for purposes of
Incentive Stock Options. 

        (b)   Non-Qualified
Stock Options may be exercised up until their expiration date, unless the Committee provides otherwise in the Award Agreement. 

ARTICLE VI

AWARD OF RESTRICTED COMMON SHARES  

        Section 6.01. Award Agreement.    Awards of Restricted Common Shares shall be evidenced by an Award Agreement, pursuant
to Section 3.04. Award Agreements evidencing Restricted Common Shares intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall
contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. 

9

           Section 6.02. Award of Restricted Common Shares.    

        (a)   The
Committee may from time to time, in its absolute discretion, consistent with this Plan: 

        (i)    determine
the aggregate number of Common Shares to be awarded as Restricted Common Shares to Participants; 

        (ii)   determine
the purchase price, if any, and other terms and conditions applicable to such Restricted Common Shares; 

        (iii)  determine
when the restrictions lapse; and 

        (iv)  determine
which Participants shall receive an Award of Restricted Common Shares and the amount of such Award, subject to Committee review and approval. 

        (b)   The
Committee may establish the purchase price, if any, and form of payment for Restricted Common Shares. If the Committee establishes a purchase price, the purchase
price shall be no less than the par value of the Common Shares to be purchased, unless otherwise permitted by applicable state law. 

        (c)   Upon
the selection of a Participant to be awarded Restricted Common Shares, the Committee shall instruct the Secretary of the Company to issue such Restricted Common
Shares and may impose such conditions on the issuance of such Restricted Common Shares as it deems appropriate. 

        (d)   Restricted
Common Share Awards shall vest pursuant to the Award Agreement. 

        Section 6.03. Rights as Shareholders.    Upon delivery of the shares of Restricted Common Shares to the Participant or
the escrow holder pursuant to Section 6.07, the Participant shall have, unless otherwise
provided by the Committee in the Award Agreement, all the rights of an owner of Common Shares, subject to the restrictions and provisions of his Award Agreement, including the right to receive all
dividends and other distributions paid or made with respect to the Common Shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common
Shares shall be subject to the restrictions set forth in Section 6.04. Upon delivery of Restricted Common Shares to the escrow holder, it shall be structured so that no transfer of stock shall
be deemed to have occurred within the meaning of Section 83 of the Code. 

        Section 6.04. Restriction.    All shares of Restricted Common Shares issued under this Plan (including any Common Shares
received by holders thereof with respect to shares of Restricted Common Shares as a result of stock dividends, stock splits or any other form of recapitalization, if any) shall at the time of grant,
in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall, in its sole discretion, determine, which restrictions may include, without limitation,
restrictions concerning voting rights, transferability, Vesting, Company performance and individual performance; provided, however, that by action taken subsequent to the time Restricted Common Shares
are issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Common
Shares may not be sold or encumbered until all restrictions are terminated or expire. 

        Section 6.05. Lapse of Restrictions.    The restrictions shall lapse in accordance with the terms of the Award Agreement.
In the Award Agreement, the Committee shall indicate whether Restricted Common Shares then subject to restrictions are forfeited or if the restrictions shall lapse upon the Participant's Termination
of Employment. In so specifying, the Committee may differentiate between the reasons for the Participant's Termination of Employment. 

10

 

        Section 6.06. Repurchase of Restricted Common Shares.    The Committee may provide in the terms of the Award Agreement
awarding Restricted Common Shares that the Company shall have call rights, a right of first offer and/or a right of refusal regarding Restricted Common Shares then subject to restrictions. 

        Section 6.07. Escrow.    The Company may appoint an escrow holder or make other arrangements to retain physical custody
of each certificate or control of each other indicia representing Restricted Common Shares until all of the restrictions imposed under the Award Agreement with respect to the Common Shares evidenced
by such certificate expire or shall have been removed. 

        Section 6.08. Legend.    In order to enforce the restrictions imposed upon shares of Restricted Common Shares hereunder,
the Committee shall cause a legend or restrictions to be placed on certificates of Restricted Common Shares that are still subject to restrictions under Award Agreements, which legend or restrictions
shall make appropriate reference to the conditions imposed thereby. 

ARTICLE VII

SHARE APPRECIATION RIGHTS  

        Section 7.01. Award Agreement for SARs.    Awards of SARs shall be evidenced by an Award Agreement, pursuant to
Section 3.04. Award Agreements evidencing SARs intended to qualify as performance-based compensation as described in section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of section 162(m) of the Code. 

        Section 7.02. General Requirements.    The Committee may grant SARs separately or in tandem with any Option (for all or a
portion of the applicable Option). The Committee shall determine which Participants shall receive an Award of an SAR and the amount of such Award. 

        Section 7.03. Base Amount.    The Committee shall establish the base amount of the SAR at the time the SAR is granted.
Unless the Committee determines otherwise, the base amount of each SAR shall be equal to the exercise price per share of the related Option or, if there is no related Option, the Fair Market Value of
a share of Common Shares as of the date of grant of the SAR. 

        Section 7.04. Tandem SARs.    Tandem SARs may be granted either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of grant of the Incentive Stock Option and
(i) the SAR shall expire no later than the expiration of the underlying Incentive Stock Option; (ii) the SAR may be for no more than 100% of the spread (i.e. the difference between the
exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Common Shares subject to the underlying Incentive Stock Option at the time the SAR is exercised);
(iii) the SAR may only be transferred when the underlying Incentive Stock Option is transferable, and under the same conditions; (iv) the SAR may be exercised only when the underlying
Incentive Stock Option is eligible to be exercised; and (v) the SAR may be exercised only when there is a positive spread (i.e. when the Fair Market Value of the Common Shares subject to the
Incentive Stock Option exceeds the exercise price of the Incentive Stock Option). In the case of tandem SARs, the number of SARs granted to a Participant that shall be exercisable during a specified
period shall not exceed the number of shares of Common Shares that the Participant may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs
relating to the Common Shares covered by such Option shall terminate. Upon the exercise of the SARs, the related Option shall terminate to the extent of an equal number of shares of Common Shares. 

11

 

        Section 7.05. SAR Exercisability.    

        (a)   The
period during which SARs in whole or in part become exercisable shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after
the grant of a SAR, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which the SAR becomes exercisable. 

        (b)   In
each Award Agreement, the Committee shall indicate whether the portion of the SAR, if any, that remains non-exercisable upon the Participant's Termination
of Employment with the Company are forfeited. In so specifying, the Committee may differentiate between the reason for the Participant's Termination of Employment. 

        Section 7.06. Value of SARs.    When a Participant exercises a SAR, the Participant shall receive in settlement of such
SAR an amount equal to the value of the share appreciation for the number of SARs exercised payable in cash, Common Shares or a combination thereof as specified in the applicable Award Agreement. The
share appreciation for a SAR is the amount by which the Fair Market Value of the underlying Common Shares on the date of exercise of the SAR exceeds the base amount of the SAR. 

        Section 7.07. Form of Payment.    The Committee shall determine, consistent with the provisions of the Award
Agreement, whether the appreciation in a SAR shall be paid in the form of cash, Common Shares or a combination of the two, in such proportion as the Committee deems appropriate. For purposes of
calculating the number of shares of Common Shares to be received, shares of Common Shares shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Common Shares are
received upon exercise of a SAR, cash shall be delivered in lieu of any fractional Common Shares. 

ARTICLE VIII

PERFORMANCE UNITS  

        Section 8.01. Award Agreement for Performance Units.    Awards of Performance Units shall be evidenced by an Award
Agreement, pursuant to Section 3.04. Award Agreements evidencing Performance Units intended to qualify as performance-based compensation as described in section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the applicable provisions of section 162(m) of the Code. 

        Section 8.02. General Requirements.    Each Performance Unit shall represent the right of the Participant to receive an
amount based on the value of the Performance Unit if performance goals established by the Committee are met. A Performance Unit shall be based on the Fair Market Value of a share of Common Shares or
such other measurement base as the Committee deems appropriate. The Committee shall determine and set forth in the Award Agreement the number of Performance Units to be granted and the requirements
applicable to such Performance Units. The Committee shall determine which Participants shall receive an Award of a Performance Unit and the amount of such Award. 

        Section 8.03. Performance Period and Performance Goals.    When Performance Units are granted, the Committee shall
establish the performance period during which performance shall be measured (the "Performance Period"), performance goals applicable to the Performance Units ("Performance Goals") and such other
conditions of the Award as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its Subsidiaries, the performance of Common Shares, individual
performance or such other criteria as the Committee deems appropriate. 

        Section 8.04. Payment With Respect to Performance Units.    At the end of each Performance Period, the Committee shall
determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if 

12

 

any,
to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made in cash, in Common Shares or in a combination of the two, as determined by the
Committee. 

ARTICLE IX

OTHER EQUITY GRANTS  

        Section 9.01. Award Agreement for Equity Grants.    Awards of Equity Grants shall be evidenced by an Award Agreement,
pursuant to Section 3.04. Award Agreements evidencing Equity Grants intended to qualify as performance-based compensation as described in section 162(m)(4)(C) of the Code shall
contain such terms and conditions as may be necessary to meet the applicable provisions of section 162(m) of the Code. 

        Section 9.02. Award of Equity Grants.    

        (a)   The
Committee may from time to time, in its absolute discretion, grant other types of stock-based awards (including the grant of unrestricted Common Shares),
cash-based awards or other equity-based awards under the Plan. The Committee shall, in its absolute discretion, consistent with this Plan: 

        (i)    Determine
which Participants shall receive an Award of an Equity Grant; 

        (ii)   Determine
the type of stock-based, cash-based or equity-based award to be awarded as Equity Grants to Participants; 

        (iii)  Determine
the aggregate number of Common Shares, total cash amount, and/or other equity that will be applicable to such Equity Grants; and 

        (iv)  Determine
the terms and conditions of such Equity Grants and the timing of when any restrictions on such Equity Grants lapse. 

ARTICLE X

ADMINISTRATION  

        Section 10.01. Committee.    Except as otherwise provided herein, the Plan shall be administered by the Compensation
Committee of the Board. The Board may remove members, add members, and fill vacancies on the Committee from time to time, all in accordance with the Company's Articles of Incorporation, bylaws, and
with applicable law. The majority vote of the Committee, or for acts taken in writing without a meeting by the unanimous written consent of the members of the Committee, shall be valid acts of the
Committee. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. 

        Section 10.02. Duties and Powers of Committee.    It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which Options or Restricted Common Shares are
granted or awarded, and to adopt such rules for the administration, interpretation and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such
Award under this Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. 

        Section 10.03. Compensation; Professional Assistance; Good Faith Actions.    Unless otherwise determined by the Board,
members of the Committee shall receive no compensation for their services. All expenses and liabilities which members of the Committee incur in connection with the 

13

 

administration
of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The
Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No members of the Committee or Board
shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan and any Awards made hereunder, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action, determination or interpretation, subject to any restrictions contained in the Company's articles of incorporation or bylaws, as
each may be amended from time to time, or restrictions imposed by applicable law. 

ARTICLE XI

MISCELLANEOUS PROVISIONS  

        Section 11.01. Not Transferable.    No Award or any right therein or part thereof shall be liable for the debts,
contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means,
whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 11.01 shall prevent transfers by will or by the applicable laws of descent
and distribution. The Committee shall not be required to accelerate the exercisabilty of an Award or otherwise take any action pursuant to a divorce or similar proceeding in the event Participant's
spouse is determined to have acquired a community property interest in all or any portion of an Award. During the lifetime of the Participant, only the Participant may exercise an Award (or any
portion thereof) granted to the Participant under the Plan. After the death of the Participant, any exercisable portion of an Award, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement or other agreement, may be exercised by the Participant's personal representative or by any person empowered to do so under the deceased Participant's will or
under the then applicable laws of descent and distribution. 

        Section 11.02. Amendment, Suspension or Termination of This Plan.    

        (a)   Except
as otherwise provided in this Section 11.02, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board or the Committee; provided, however, no action of the Board or the Committee may be taken that would otherwise require shareholder approval as a matter of applicable
law, regulation or rule, without the consent of the shareholders. No amendment, suspension or termination of this Plan shall, without the consent of the Participant, impair any rights or obligations
under any Award theretofore made to the Participant, unless such right has been reserved in the Plan or the Award Agreement. No Award may be made during any period of suspension or after termination
of this Plan. In no event may any Award be made under this Plan after the expiration of 10 years from the initial date the Plan is adopted by the Board. 

        (b)   Notwithstanding
the foregoing, the Board or the Committee may take any action necessary to comply with a change in applicable law, irrespective of the status of any
Award as Vested or unvested, exercisable or unexercisable, at the time of such change in applicable law. 

        Section 11.03. Changes in Common Shares or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate
Events.    

        (a)   In
the event that the Committee determines, in its sole discretion, that any dividend or other distribution (whether in the form of cash, Common Shares, other
securities, or other 

14

 

property),
on account of a recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Shares or other securities of the Company, issuance of
warrants or other rights to purchase Common Shares or other securities of the Company, or other similar event, affects the Common Shares such that an adjustment is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable, adjust any or all of the
following: 

        (i)    the
number and kind of Company shares with respect to which an Award may be made under the Plan; 

        (ii)   the
number and kind of Company shares subject to an outstanding Award; and 

        (iii)  the
exercise price or purchase price with respect to any Award. 

        (b)   In
the event of any transaction or event described in Section 11.03(a) or any unusual or non-recurring transactions or events affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, the Committee in its discretion is hereby
authorized to take any one or more of the following actions whenever the Committee determines, in its sole discretion, that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan or with respect to any Award, right or other award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles: 

        (i)    The
Committee may provide, either by the terms of the Award Agreement or by action taken prior to the occurrence of such transaction or event for (A) the purchase
of any such Award for the payment of an amount of cash equal to the net amount that could have been attained upon the exercise of such Award or realization of the Participant's rights had such Award
been currently exercisable, payable, fully Vested or the restrictions lapsed; or (B) the replacement of such Award with other rights or property selected by the Committee. 

        (ii)   The
Committee may provide in the terms of such Award Agreement that the Award cannot be exercised after such event. 

        (iii)  The
Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that for a specified period of time
prior to such transaction or event, such Award shall be exercisable, notwithstanding anything to the contrary in Section 4.06 or the provisions of such Award. 

        (iv)  The
Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that upon such event, such Award be
assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar Awards covering the shares of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices. 

        (v)   The
Committee may make adjustments in the number and type of shares of Common Shares subject to outstanding Awards and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Awards, and rights and awards which may be granted in the future. 

        (vi)  The
Committee may provide either by the terms of an Award or by action taken prior to the occurrence of such event that, for a specified period of time prior to such
event, 

15

 

the
restrictions imposed under an Award Agreement upon some or all shares of the Award may be terminated, and some or all shares of such Award may cease to be subject to forfeiture or repurchase after
such event. 

        (c)   Subject
to Section 11.07, the Committee may, in its sole discretion, at the time of Award, include such further provisions and limitations in any Award Agreement
or certificate, as it may deem appropriate and in the best interests of the Company; provided, however, that no such provisions or limitations shall be contrary to the terms of the Participant's
Employment Agreement or the terms of this Plan. 

        (d)   Notwithstanding
the foregoing, in the event of a transaction or event described in Sections 11.03(a) or any unusual or non-recurring
transactions or events affecting the Company, no action pursuant to this Section 11.03 shall be taken that is specifically prohibited under applicable law, the rules and regulations of any
governing governmental agency or national securities exchange, or the terms of the Participant's Employment Agreement. 

        Section 11.04. Approval of Plan by Shareholders.    This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of this Plan. If the shareholders fail to approve this Plan, all Options granted hereunder shall be
Non-Qualified Stock Options. 

        Section 11.05. Continued Employment.    Nothing in this Plan or in any Award Agreement hereunder shall confer upon any
Participant any right to continue his employment, consulting or similar relationship with the Company or an Affiliate, whether as an Employee, Consultant, Director or otherwise, or shall interfere
with or restrict in any way the rights of the Company or an Affiliate, which are hereby expressly reserved, to discharge or terminate the relationship with any Participant at any time for any reason
whatsoever, subject to the terms of any Employment Agreement entered into by the Participant and the Company. 

        Section 11.06. Tax Withholding.    The Company shall be entitled to require payment in cash or deduction from other
compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to the issuance, Vesting, exercise of any Award, or the lapse of
restrictions on an Award. The Committee may, in its sole discretion and in satisfaction of the foregoing requirement, allow such Participant to elect to have the Company withhold shares of Common
Shares otherwise issuable under such Award (or allow the return of shares of Common Shares) having a Fair Market Value equal to the minimum sums required to be withheld. 

        Section 11.07. Forfeiture Provisions.    Pursuant to its general authority to determine the terms and conditions
applicable to Awards, the Committee shall have the right to provide, in the terms of such Award, or to require the recipient to agree by separate written instrument, that the Award shall terminate and
any unexercised portion of such Award (whether or not vested) shall be forfeited, if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period
following receipt or exercise of the Award; (ii) the recipient at any time, or during a specified time period, engages in any activity in competition with the Company, or which is adverse,
contrary or harmful to the interests of the Company, as further defined by the Committee or as specified in the Participant's Employment Agreement; or (iii) the Company terminates the Employee
with or without Cause. 

        Section 11.08. Limitations Applicable to Section 16 Persons and Performance Based Compensation.
    Notwithstanding any other provision of this Plan, any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act). To the
extent permitted by applicable law, Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any
other provision of this Plan to the 

16

 

contrary,
any Award which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent
necessary to conform to such requirements. 

        Section 11.09. Restrictions.    

        (a)   Except
as otherwise provided for in the Award Agreement, upon any Termination of Employment, for a one-year period thereafter, the Company shall have the
right, but not the obligation, to purchase all Common Shares awarded hereunder or acquired pursuant to an Award, for their Fair Market Value at the time of purchase by the Company. These rights shall
be in addition to the right of first refusal pursuant to Section 11.09(b); provided, however, that in the event the Company decides not to exercise its rights pursuant to
Section 11.09(b), the provisions of this Section 11.09(a) shall cease to apply with respect to those Common Shares that were offered to the Company and sold in accordance with the
provisions of Section 11.09(b). 

        (b)   Except
as otherwise provided for in the Award Agreement, if an individual desires and is permitted to sell, encumber or otherwise dispose of shares of Common Shares
awarded hereunder or acquired pursuant to an Award, the individual shall first offer the shares to the Company by giving the Company written notice disclosing: (i) the name of the proposed
transferee of the Common Shares; (ii) the certificate number and number of shares of Common Shares proposed to be transferred or
encumbered; (iii) the proposed price; (iv) all other terms of the proposed transfer; and (v) a written copy of the proposed offer. Within 60 days after receipt of such
notice, the Company shall have the option to purchase all or part of such Common Shares same price and on the same terms as contained in such notice (the "Option Period"). In the event the Company
does not exercise the option to purchase the Common Shares, as provided above, the individual shall have the right to sell, encumber or otherwise dispose of his shares of Common Shares on the terms of
the transfer set forth in the written notice to the Company, provided such transfer is effected within 30 days after the expiration of the Option Period. If the transfer is not effected within
such period, the Company must again be given an option to purchase, as provided above. 

        (c)   On
and after the date a class of the Company's securities are registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended, the Company shall have no further right to purchase shares of Common Shares under this Section 11.09, and its limitations shall be null and void. 

        (d)   Notwithstanding
the foregoing, the Committee may require that a Participant execute any other documents it deems necessary or desirable with respect to any Common Shares
distributed or purchased pursuant to this Plan. 

        Section 11.10. Restrictive Legend.    All of the Common Shares now outstanding or hereafter issued and/or owned shall be
held and transferred subject to the terms of the restrictions herein contained and every certificate representing a share of Common Shares shall contain the following legend until such time as all
restrictions hereunder have lapsed: "These shares are held subject to the terms of a certain Company plan and such shares may only be transferred in accordance with the terms thereof. A copy of such
plan is available at the office of the Company." 

        Section 11.11. Blackout Periods.    Notwithstanding anything herein or in an Award Agreement to the contrary, the
Committee may periodically restrict a Participant from exercising an Award during a reasonable period of time (a "Blackout Period") as determined to be in the best interests of the Company by the
Committee. To the extent a Blackout Period begins prior to the expiration of the period in which an Award is exercisable and continues uninterrupted later than five business days prior 

17

 

to
the expiration of the Award, the Committee shall extend the exercise period of the Award in a manner it deems equitable. 

        Section 11.12. Effect of Plan Upon Option and Compensation Plans.    The adoption of this Plan shall not affect any other
compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or
compensation for Employees, Consultants or Directors; or (b) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including,
but not by
way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association. 

        Section 11.13. Compliance With Laws.    This Plan, the granting and Vesting of Awards under this Plan and the issuance
and delivery of shares of Common Shares and the payment of money under this Plan or under Awards awarded hereunder are subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 

        Section 11.14. Titles.    Titles are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Plan. 

        Section 11.15. Governing Law.    This Plan and any agreements hereunder shall be administered, interpreted and enforced
under the laws of the state of Maryland, without regard to conflicts of laws thereof. 

18

 

        I
hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Spirit Finance Corporation on December 15, 2003. 

        Executed
on this 15th day of December, 2003. 

	

 	
 	

By	
 	

/s/  MORTON H. FLEISCHER      
 Morton H. Fleischer, Chairman of the Board and Chief Executive Officer

19

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SPIRIT FINANCE CORPORATION 2003 STOCK OPTION AND INCENTIVE PLAN

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