Document:

Exhibit
10.2

 

 

FORM OF PROPERTY MANAGEMENT AND LEASING AGREEMENT

 

This
PROPERTY MANAGEMENT AND LEASING AGREEMENT (this “Management Agreement”) is made
and entered into as of the       day of              ,
2007, by and among BEHRINGER HARVARD OPPORTUNITY REIT II, INC., a Maryland
corporation (“BH OPPORTUNITY REIT II”), BEHRINGER HARVARD OPPORTUNITY OP II LP,
a Texas limited partnership (“BH OPPORTUNITY II LP”), and BEHRINGER HARVARD
OPPORTUNITY MANAGEMENT SERVICES, LLC, a Texas limited liability company (the “Manager”).

 

WHEREAS, BH OPPORTUNITY II LP was organized to
acquire, own, operate, lease and manage real estate properties on behalf of BH
OPPORTUNITY REIT II;

 

WHEREAS,
BH OPPORTUNITY REIT II intends to raise money from the sale of its common stock
to be used, net of payment of certain offering costs and expenses, for
investment in the acquisition or construction of income-producing real estate
and other real estate-related investments (including the making or purchase of
mortgage, bridge or mezzanine loans), some or all of which are to be acquired
and held by Owner (as hereinafter defined) on behalf of BH OPPORTUNITY REIT II;
and

 

WHEREAS,
Owner intends to retain Manager to manage and coordinate the leasing of certain
of the real estate properties acquired by Owner under the terms and conditions
set forth in this Management Agreement.

 

NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, do hereby agree, as
follows:

 

ARTICLE I

 

DEFINITIONS

 

Except
as otherwise specified or as the context may otherwise require, the following
terms have the respective meanings set forth below for all purposes of this
Management Agreement, and the definitions of such terms are equally applicable
both to the singular and plural forms thereof:

 

1.1           “Advisor”
means Behringer Harvard Opportunity Advisors II LP, a Texas limited
partnership, or its successor as advisor of BH OPPORTUNITY REIT II.

 

1.2           “Affiliate”
means, with respect to any Person, (i)
any Person directly or indirectly owning, controlling or holding, with the
power to vote, 10% or more of the outstanding voting securities of such other
Person; (ii) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with the power to vote, by
such other Person; (iii) any Person directly or indirectly controlling, controlled
by or under common control with such other Person; (iv) any executive officer,
director, trustee or general partner of such other Person; and (v) any legal
entity for which such Person acts as an executive officer, director, trustee or
general partner.

 

1

 

1.3           “Gross Revenues” means all amounts actually collected as rents or other
charges for the use and occupancy of the Properties, but shall exclude interest
and other investment income of Owner and proceeds received by Owner for a sale,
exchange, condemnation, eminent domain taking, casualty or other disposition of
assets of Owner.

 

1.4           “Improvements” means buildings, structures, equipment from time to time
located on the Properties and all parking and common areas located on the
Properties.

 

1.5           “Intellectual Property Rights” means all rights, titles and
interests, whether foreign or domestic, in and to any and all trade secrets,
confidential information rights, patents, invention rights, copyrights, service
marks, trademarks, know-how, or similar intellectual property rights and all
applications and rights to apply for such rights, as well as any and all moral
rights, rights of privacy, publicity and similar rights and license rights of
any type under the laws or regulations of any governmental, regulatory, or
judicial authority, foreign or domestic and all renewals and extensions
thereof.

 

1.6           “Lease” means, unless the context otherwise requires, any lease or
sublease made by Owner as landlord or by its predecessor.

 

1.7           “Management Fees” has the meaning set forth in Section 5.1 hereof.

 

1.8           “Owner” means BH OPPORTUNITY REIT II, BH OPPORTUNITY II LP and any
joint venture, limited liability company or other Affiliate of BH OPPORTUNITY
REIT II or BH OPPORTUNITY II LP that owns, in whole or in part, on behalf of BH
OPPORTUNITY REIT II, any Properties.

 

1.9           “Person” means an individual, corporation, association, business trust,
estate, trust, partnership, limited liability company or other legal entity.

 

1.10         “Properties” means all real estate properties owned by Owner and all
tracts as yet unspecified but to be acquired by Owner containing
income-producing improvements or on which Owner will construct income-producing
improvements.

 

1.11         “Property Amendment” means an amendment to this Management Agreement
describing a Property and the Owner thereof and any variations to the basic
terms and conditions of this Management Agreement with respect to the Property
related thereto.

 

1.12         “Proprietary Property” means all modeling algorithms, tools,
computer programs, know-how, methodologies, processes, technologies, ideas,
concepts, skills, routines, subroutines, operating instructions and other
materials and aides used in performing the duties set forth in Article 2 that
relate to management advice, services and techniques regarding current and
potential Properties, and all modifications, enhancements and derivative works
of the foregoing.

 

1.13         “Texas
Tax Code” means the Texas Tax Code as amended by Texas H.B. 3, 79th Leg., 3rd
C.S. (2006), and reference to any provision of the Texas Tax Code Act shall
mean such provision as in effect from time to time, as the same may be amended,
and any successor provision thereto, as interpreted by any applicable
administrative rules as in effect from time to time.

 

2

 

ARTICLE
II

 

APPOINTMENT
AND STATUS OF MANAGER; SERVICES TO BE PERFORMED

 

2.1           Appointment of Manager. Owner hereby engages and retains Manager as
the manager and as tenant coordinating agent of the Properties, and Manager
hereby accepts such appointment on the terms and conditions hereinafter set
forth; it being understood that this Management Agreement shall cause Manager
to be, at law, Owner’s agent upon the terms contained herein. Owner and Manager
shall execute a Property Amendment for each Property setting forth a
description of the Property, the individual legal Owner with respect to the
Property, and any variations from the terms and conditions set forth in this
Management Agreement with respect to the management and leasing of the
Property.

 

2.2           Treatment Under Texas Margin Tax. For purposes of the Texas margin tax,
Manager’s performance of the services specified in this Management Agreement
will cause Manager to conduct part of the active trade or business of Owner,
and Manager’s compensation includes both the payment of management fees and the
reimbursement of specified costs incurred in Manager’s conduct of the active
trade or business of Owner. Therefore, Owner and Manager intend Manager to be,
and shall treat Manager as, a “management company” within the meaning of
Section 171.0001(11) of the Texas Tax Code. Owner and Manager will apply
Sections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to Owner’s reimbursements
paid to Manager pursuant to this Management Agreement of specified costs and
allocable wages and compensation. Owner and Manager further recognize and
intend that as a result of the relationship created by this Management Agreement,
reimbursements paid to Manager pursuant to this Management Agreement include
(i) ”flow-though funds” that Manager is mandated by law or fiduciary duty
to distribute, within the meaning of Section 171.1011(f) of the Texas Tax Code,
and (ii) “flow-through funds” that Manager is mandated by contract to
distribute, within the meaning of Section 171.1011(g). The terms of this Management
Agreement shall be interpreted in a manner consistent with the characterization
of the Manager as a “management company” as defined in Section 171.0001(11),
and with the characterization of the reimbursements as “flow-though funds”
within the meaning of Section 171.1011(f)-(g) of the Texas Tax Code.

 

2.3           General Duties. Manager shall devote its best efforts to
performing its duties hereunder to manage, operate, maintain and lease the
Properties in a diligent, careful and vigilant manner. The services of Manager
are to be of scope and quality not less than those generally performed by
professional property managers of other similar properties in the same
geographic area. Manager shall make available to Owner the full benefit of the
judgment, experience and advice of the members of Manager’s organization and
staff with respect to the policies to be pursued by Owner relating to the
operation and leasing of the Properties.

 

2.4           Specific Duties. Manager’s duties include the following:

 

(a)           Lease
Obligations. Manager shall perform all duties of the landlord under all
Leases insofar as such duties relate to operation, maintenance, and day-to-day
management. Manager shall also provide or cause to be provided, at Owner’s
expense, all services normally provided to tenants of like premises, including
where applicable and without limitation, gas, electricity or other utilities
required to be furnished to commercial tenants, repairs and maintenance
necessary to preserve the Properties in its present condition and for the
operating efficiency thereof, and cleaning and janitorial service. Manager
shall arrange for and supervise the performance of all installations and
improvements in space leased to any tenant that are either expressly required
under the terms of the Lease of such space or that are customarily provided to commercial
tenants.

 

(b)           Maintenance.
Manager shall cause the Properties to be maintained in the same manner as
similar properties in the same geographic area. Manager’s duties and
supervision in

 

3

 

this respect shall include, without limitation,
cleaning of the interior and the exterior of the Improvements and the public
common areas on the Properties and the making and supervision of repair,
alterations, and decoration of the Improvements, subject to and in strict
compliance with this Management Agreement and the Leases. Construction
activities undertaken by Manager, if any, will be limited to activities related
to the management, operation, maintenance, and leasing of each Property (e.g.,
repairs, renovations, and leasehold improvements).

 

(c)           Leasing
Functions. Manager shall coordinate the leasing of the Properties and shall
negotiate and use its best efforts to secure executed Leases from qualified
tenants, and to execute same on behalf of Owner, if requested, for available
space in the Properties, such Leases to be in form and on terms approved by
Owner and Manager, and to bring about complete leasing of the Properties. Manager
shall be responsible for the hiring of all duly qualified and licensed leasing
agents, as necessary for the leasing of the Properties, and to otherwise
oversee and manage the leasing process on behalf of Owner.

 

(d)           Notice
of Violations. Manager shall forward to Owner promptly upon receipt all
notices of violation or other notices from any governmental authority, and
board of fire underwriters or any insurance company, and shall make such
recommendations regarding compliance with such notice as shall be appropriate.

 

(e)           Personnel.
Any personnel hired by Manager to maintain, operate and lease each Property
shall be the employees or independent contractors of Manager and not of Owner
of such Property, BH OPPORTUNITY II LP or BH OPPORTUNITY REIT II. Manager shall
use due care in the selection and supervision of such employees or independent
contractors, who shall be duly qualified and licensed, as necessary. Manager
shall be responsible for the preparation of and shall timely file all payroll
tax reports and timely make payments of all withholding and other payroll taxes
with respect to each employee.

 

(f)            Utilities
and Supplies. Manager shall enter into or renew contracts for electricity,
gas, steam, landscaping, fuel, oil, maintenance and other services as are
customarily furnished or rendered in connection with the operation of similar
rental property in the same geographic area.

 

(g)           Expenses.
Manager shall analyze all bills received for services, work and supplies in
connection with maintaining and operating the Properties, pay all such bills
when due, and, if requested by Owner, pay, when due, utility and water charges,
sewer rent and assessments, and any other amount payable in respect to the
Properties. All bills shall be paid by Manager within the time required to
obtain discounts, if any. Owner may from time to time request that Manager
forward certain bills to Owner promptly after receipt, and Manager shall comply
with any such request. Manager shall pay all bills, assessments, real property
taxes, insurance premiums and any other amount payable in respect to the
Properties out of the Account (as hereinafter defined). All expenses shall be
billed at net cost (i.e., less all
rebates, commissions, discounts and allowances, however designed).

 

(h)           Monies
Collected. Manager shall timely collect all rent and other monies, in the
form of a check or money order, from tenants and any sums otherwise due Owner
with respect to the Properties in the ordinary course of business. Owner
authorizes Manager to request, demand, collect and provide receipt for all such
rent and other monies and to institute legal proceedings in the name of Owner
for the collection thereof and for the dispossession of any tenant in default
under its Lease.

 

(i)            Banking
Accommodations. Manager shall establish and maintain a separate checking
account (the “Account”) for funds relating to the Properties. All monies
deposited from time to time in the Account shall be deemed to be trust funds
and shall be and remain the property

 

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of Owner and shall be withdrawn and disbursed by
Manager for the account of Owner only as expressly permitted by this Management
Agreement for the purposes of performing the obligations of Manager hereunder. No
monies collected by Manager on Owner’s behalf shall be commingled with funds of
Manager. The Account shall be maintained, and monies shall be deposited therein
and withdrawn therefrom, in accordance with the following:

 

(i)            All sums received from rents
and other income from the Properties shall be promptly deposited by Manager in
the Account. Manager shall have the right to designate two or more persons who
shall be authorized to draw against the Account, but only for purposes
authorized by this Management Agreement.

 

(ii)           All sums due to Manager
hereunder, whether for compensation, reimbursement for expenditures, or
otherwise, as herein provided, shall be a charge against the operating revenues
of the Properties and shall be paid and/or withdrawn by Manager from the
Account prior to the making of any other disbursements therefrom.

 

(iii)          By the 15th day
after the end of each month, Manager shall forward to Owner all monies
contained in the Account other than a reserve of $5,000 and any other amounts
otherwise provided in the budget, which shall remain in the Account.

 

(j)            Controlling
Agreements. Manager has received copies of (and will be provided with
copies of future) articles of incorporation, agreements of limited partnership,
joint venture agreements, operating agreements, loan agreements, deeds of trust
or mortgages, each as may be amended from time to time, of Owner, as applicable
(the “Controlling Agreements”) and is and will be familiar with the terms
thereof. Manager shall use reasonable care to avoid any act or omission that,
in the performance of its duties hereunder, shall in any way conflict with the
terms of Controlling Agreements.

 

(k)           Signs.
Manager shall place and remove, or cause to be placed and removed, such signs
upon the Properties as Manager deems appropriate, subject, however, to the
terms and conditions of the Leases and to any applicable ordinances and
regulations.

 

2.5           Approval of Leases, Contracts, Etc. In fulfilling its duties to Owner, Manager
may and hereby is authorized to enter into any leases, contracts or agreements
on behalf of Owner in the ordinary course of the management, operation,
maintenance and leasing of each Property.

 

2.6           Accounting, Records and Reports.

 

(a)           Records.
Manager shall maintain all office records and books of account and shall record
therein, and keep copies of, each invoice received from services, work and
supplies ordered in connection with the maintenance and operation of the Properties.
Such records shall be maintained on a double entry basis. Owner and persons
designated by Owner shall at all reasonable time have access to and the right
to audit and make independent examinations of such records, books and accounts
and all vouchers, files and all other material pertaining to the Properties and
this Management Agreement, all of which Manager agrees to keep safe, available
and separate from any records not pertaining to the Properties, at a place
recommended by Manager and approved by Owner.

 

5

 

(b)           Monthly
Reports. On or before the 15th day after the end of each month
during the term of this Management Agreement, Manager shall prepare and submit
to Owner the following reports and statements:

 

(i)            rental collection record;

 

(ii)           monthly operating statement;

 

(iii)          copy of cash disbursements
ledger entries for such period, if requested;

 

(iv)          copy of cash receipts ledger
entries for such period, if requested;

 

(v)           the original copies of all
contracts entered into by Manager on behalf of Owner during such period, if
requested; and

 

(vi)          copy of ledger entries for
such period relating to security deposits maintained by Manager, if requested.

 

(c)           Budgets
and Leasing Plans. Not later than November 15 of each calendar year,
Manager shall prepare and submit to Owner for its approval an operating budget
and a marketing and leasing plan on each Property for the calendar year
immediately following such submission. In connection with any acquisition of a
Property by Owner, Manager shall prepare a budget and marketing and leasing
plan for the remainder of the calendar year. The budget and marketing and
leasing plan shall be in the form of the budget and plan approved by Owner
prior to the date thereof. As often as reasonably necessary during the period
covered by any such budget, Manager may submit to Owner for its approval an
updated budget or plan incorporating such changes as shall be necessary to
reflect cost over-runs and the like during such period. If Owner does not
disapprove any such budget within 30 days after receipt thereof by Owner, such
budget shall be deemed approved. If Owner shall disapprove any such budget or
plan, it shall so notify Manager within said 30-day period and explain the reasons
therefor. If Owner disapproves of any budget or plan, Manager shall submit a
revised budget or plan, as applicable, within 10 (ten) days of receipt of the
notice of disapproval, and Owner shall have 10 (ten) days to provide notice to
Manager if it disapproves of any such revised budget or plan. Manager will not
incur any costs other than those included in, and only to the extent provided
for (subject to reasonable deviation for changes in market costs), in any
budget except for:

 

(i)            tenant improvements and real
estate commissions required under a Lease;

 

(ii)           maintenance or repair costs
under $5,000 per Property;

 

(iii)          costs incurred in emergency
situations in which action is immediately necessary for the preservation or
safety of a Property, or for the safety of occupants or other persons (or to
avoid the suspension of any necessary service at a Property);

 

(iv)          expenditures for real estate
taxes and assessment; and

 

(v)           maintenance supplies calling
for an aggregate purchase price less than $25,000 per annum for all Properties.

 

Budgets prepared by Manager shall be for planning and
informational purposes only, and Manager shall have no liability to Owner for
any failure to meet any such budget. However, Manager will use its best efforts
to operate within the approved budget.

 

6

 

(d)           Legal
Requirements. Manager shall execute and file when due all forms, reports,
and returns required by law relating to the employment of its personnel. Manager
shall be responsible for notifying Owner in the event it receives notice that
any Improvement on a Property or any equipment therein does not comply with the
requirements of any statute, ordinance, law or regulation of any governmental
body or of any public authority or official thereof having or claiming to have
jurisdiction thereover. Manager shall promptly forward to Owner any complaints,
warnings, notices or summonses received by it relating to such matters. Owner
represents that to the best of its knowledge each of its Properties and any
equipment thereon will upon acquisition by Owner comply with all such
requirements. Owner authorizes Manager to disclose the ownership of each
Property by Owner to any such officials. Owner agrees to indemnify, protect,
defend, save and hold harmless Manager and its stockholders, officers,
directors, employees, managers, successors and assigns (collectively, the “Manager
Indemnified Parties”) of and from any and all Losses (as defined in
Section 6.5(a) hereof) that may be imposed on them or any or all of them
by reason of the failure of Owner to correct any present or future violation or
alleged violation of any and all present or future laws, ordinances, statutes,
or regulations of any public authority or official thereof, having or claiming
to have jurisdiction thereover, of which it has actual notice.

 

2.7           Dealings
with Advisor. Unless Owner specifically informs Manager to the contrary,
Advisor may perform any of the obligations or exercise any of the rights of
Owner under this Management Agreement.

 

ARTICLE
III

 

AUTHORITY
GRANTED TO MANAGER AND CERTAIN OWNER OBLIGATIONS

 

3.1           Authority As To Tenants, Etc. Owner agrees and does hereby give Manager the
following exclusive authority and powers (all of which shall be exercised
either in the name of Manager, as manager for Owner, or in the name or Owner
entered into by Manager as Owner’s authorized agent, and Owner shall assume all
expenses in connection with such matters):

 

(a)           to
advertise each Property or any part thereof and to display signs thereon, as
permitted by law;

 

(b)           to
lease the Properties to tenants;

 

(c)           to
pay all expenses of leasing each Property, including but not limited to,
newspaper and other advertising, signage, banners, brochures, referral
commissions, leasing commissions, finder’s fees and salaries, bonuses and other
compensation of duly qualified and licensed leasing personnel responsible for
the leasing of each Property;

 

(d)           to
cause references of prospective tenants to be investigated, it being understood
and agreed by the parties hereto that Manager does not guarantee the
creditworthiness or collectibility of accounts receivable from tenants, users
or lessees; and to negotiate new Leases and renewals and cancellations of
existing Leases that shall be subject to Manager obtaining Owner’s approval;

 

(e)           to
collect from tenants all or any of the following: a late rent administrative
charge, a non-negotiable check charge, credit report fee, a subleasing
administrative charge and/or broker’s commission; and Manager need not account
for such charges and/or commission to Owner;

 

7

 

(f)            to
terminate tenancies and to sign and serve in the name of Owner of each Property
such notices as are deemed necessary by Manager;

 

(g)           to
institute and prosecute actions to evict tenants and to recover possession of each
Property or portions thereof; and

 

(h)           with
Owner’s authorization, to sue for and in the name of Owner and recover rent and
other sums due; and to settle, compromise, and release such actions or suits,
or reinstate such tenancies. All expenses of litigation including, but not
limited to, attorneys’ fees, filing fees, and court costs that Manager shall
incur in connection with the collecting of rent and other sums, or to recover
possession of any Property or any portion thereof, shall be deemed to be an
operational expense of the Property. Manager and Owner shall concur on the
selection of the attorneys to handle such litigation.

 

3.2           Operational
Authority. Owner agrees and does hereby give Manager the following
exclusive authority and powers (all of which shall be exercised either in the
name of Manager, as manager for Owner, or in the name of Owner entered into by
Manager as Owner’s authorized agent, and Owner shall assume all expenses in
connection with such matters):

 

(a)           to
hire, supervise, discharge, and pay all labor required for the operation and
maintenance of each Property including but not limited to on-site personnel,
managers, assistant managers, leasing consultants, engineers, janitors,
maintenance supervisors and other employees required for the operation and
maintenance of each Property, including personnel spending a portion of their
working hours (to be charged on a pro rata basis) at each Property. All
expenses of such employment shall be deemed operational expenses of the
Property (notwithstanding any possible implication to the contrary in Section
2.4(e)).

 

(b)           to
make or cause to be made all ordinary repairs and replacements necessary to
preserve each Property in its present condition and for the operating
efficiency thereof and all alterations required to comply with lease
requirements, and to decorate each Property;

 

(c)           to
negotiate and enter into, as Manager of each Property, contracts for all items
on budgets that have been approved by Owner, any repairs for items not
exceeding $5,000, any emergency services, appropriate service agreements and
labor agreements for normal operation of each Property with duly qualified and
licensed Persons, which have terms not to exceed three years, and agreements
for all budgeted maintenance, minor alterations, and utility services,
including, but not limited to, electricity, gas, fuel, water, telephone, window
washing, scavenger service, landscaping, snow removal, pest exterminating,
decorating and legal services in connection with the Leases and service
agreements relating to each Property, and other services or such of them as
Manager may consider appropriate; and

 

(d)           to
purchase supplies and pay all bills.

 

Manager shall use its best efforts to obtain the
foregoing services and utilities for each Property under terms that are as
cost-effective and otherwise favorable to Manager as possible for the quality
of services and utilities required. Owner hereby appoints Manager as Owner’s
authorized Manager for the purpose of executing, as manager for said Owner, all
such contracts. In addition, Owner agrees to specifically assume in writing all
obligations under all such contracts so entered into by Manager, on behalf of
Owner of the Property, upon the termination of this Management Agreement, and
Owner shall indemnify, protect, save, defend and hold harmless Manager and the
other Manager Indemnified Parties from and against any and all Losses resulting
from, arising out of or in any way related to such contracts and that relate to
or concern matters occurring after termination of this Management Agreement,
but excluding matters arising out of Manager’s willful misconduct, gross
negligence and/or unlawful acts.

 

8

 

Manager
shall secure the approval of, and execution of appropriate contracts by, Owner
for any non-budgeted and non-emergency/contingency capital items, alterations
or other expenditures in excess of $5,000 for any one item, securing for each
item at least three written bids, if practicable, or providing evidence
satisfactory to Owner that the contract amount is lower than industry standard
pricing, from responsible contractors. Manager shall have the right from time
to time during the term hereof, to contract with and make purchases from duly
qualified and licensed Affiliates of Manager, provided that contract rates and
prices are competitive with other available sources. Manager may at any time
and from time to time request and receive the prior written authorization of
Owner of the specific Property of any one or more purchases or other
expenditures, notwithstanding that Manager may otherwise be authorized
hereunder to make such purchases or expenditures.

 

3.3           Rent
and Other Collections. Owner agrees and does hereby give Manager the
exclusive authority and powers (all of which shall be exercised either in the
name of Manager, as manager for Owner, or in the name or Owner entered into by
Manager as Owner’s authorized agent, and Owner shall assume all expenses in
connection with such matters) to collect rents and/or assessments and other
items, including but not limited to tenant payments for real estate taxes,
property liability and other insurance, damages and repairs, common area
maintenance, tax reduction fees and all other tenant reimbursements,
administrative charges, proceeds of rental interruption insurance, parking
fees, income from coin operated machines and other miscellaneous income, due or
to become due and give receipts therefor and to deposit all such Gross Revenue
collected hereunder in the Account. Manager may endorse any and all checks
received in connection with the operation of any Property and drawn to the
order of Owner, and Owner shall, upon request, furnish Manager’s depository
with an appropriate authorization for Manager to make such endorsement. Manager
shall also have the exclusive authority to collect and handle tenants’ security
deposits, including the right to apply such security deposits to unpaid rent,
and to comply, on behalf of Owner of each Property, with applicable state or
local laws concerning security deposits and interest thereon, if any. Manager
shall not be required to advance any monies for the care or management of any
Property. Owner agrees to advance all monies necessary therefor. If Manager
shall elect to advance any money in connection with a Property, Owner agrees to
reimburse Manager forthwith and hereby authorizes Manager to deduct such
advances from any monies due Owner. In connection with any insured losses or
damages relating to any Property, Manager shall have the exclusive authority to
handle all steps necessary regarding any such claim; provided that Manager will
not make any adjustments or settlements in excess of $10,000 without Owner’s
prior written consent.

 

3.4           Payment
of Expenses. Owner agrees and does hereby give Manager the exclusive
authority and power (all of which shall be exercised either in the name of
Manager, as manager for Owner, or in the name or Owner entered into by Manager
as Owner’s authorized agent, and Owner shall assume all expenses in connection
with such matters) to pay all expenses of each Property from the Gross Revenue
collected in accordance with Section 3.3 above, from the Account. It is
understood that the Gross Revenue will be used first to pay the compensation to
Manager as contained in Article 5 below, then operational expenses and then any
mortgage indebtedness, including real estate tax and insurance impounds, but
only as directed by Owner in writing and only if sufficient Gross Revenue is
available for such payments. Nothing in this Management Agreement shall be
interpreted in such a manner as to obligate Manager to pay from Gross Revenue,
any expenses incurred by Owner prior to the commencement of this Management Agreement,
except to the extent Owner advances additional funds to pay such expenses.

 

3.5           Environmental Matters. Owner hereby warrants and represents to
Manager that to the best of Owner’s knowledge, no Property, upon acquisition by
Owner, nor any part thereof, will be used to treat, deposit, store, dispose of
or place any hazardous substance that may subject Manager to liability or
claims under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.A. Section 9607) or any constitutional
provision, statute, ordinance, law, or regulation of any governmental body or
of any order or ruling of any public authority or official thereof, having or
claiming to have jurisdiction thereover. Furthermore, Owner agrees to
indemnify, protect, defend, save and hold

 

9

 

harmless Manager and all of the other Manager Indemnified
Parties from any and all Losses involving, concerning or in any way related to
any past, current or future allegations regarding treatment, depositing,
storage, disposal or placement by any party other than Manager of hazardous
substances on any Property.

 

3.6           Legal Status of Properties. Owner represents that to the best of its
knowledge each Property and any equipment thereon, when acquired by Owner, will
comply with all legal requirements and authorizes Manager to disclose the
identity of the owner of each Property to any such officials and agrees to
indemnify, protect, defend, save and hold harmless Manager and the other Manager
Indemnified Parties of and from any and all Losses that may be imposed on them
or any of them by reason of the failure of Owner to correct any present or
future violation or alleged violation of any and all present or future laws,
ordinances, statutes, or regulations of any public authority or official
thereof, having or claiming to have jurisdiction thereover, of which it has
actual notice. In the event it is alleged or charged that any Improvement or
any equipment on a Property or any act or failure to act by Owner with respect
to the Property or the sale, rental, or other disposition thereof fails to
comply with, or is in violation of, any of the requirements of any
constitutional provision, statute, ordinance, law, or regulation of any
governmental body or any order or ruling of any public authority or official
thereof having or claiming to have jurisdiction thereover, and Manager, in its
sole and absolute discretion, considers that the action or position of Owner,
with respect thereto may result in damage or liability to Manager, Manager
shall have the right to cancel this Management Agreement at any time by written
notice to Owner of its election so to do, which cancellation shall be effective
upon the service of such notice. Such cancellation shall not release the
indemnities of Owner set forth in this Management Agreement and shall not
terminate any liability or obligation of Owner to Manager for any payment,
reimbursement, or other sum of money then due and payable to Manager hereunder.

 

3.7           Extraordinary Payments. Owner agrees to give adequate advance
written notice to Manager if Owner desires that Manager make any extraordinary
payment, out of Gross Revenue, to the extent funds are available after the
payment of Manager’s compensation as provided for herein and all operational
expenses, of mortgage indebtedness, general taxes, special assessments, or
fire, boiler or any other insurance premiums.

 

ARTICLE
IV

 

EXPENSES

 

4.1           Owner’s Expenses. Except as otherwise specifically provided,
all costs and expenses incurred hereunder by Manager in fulfilling its duties
to Owner shall be for the account of and on behalf of Owner. Such costs and
expenses shall include the wages and salaries and other employee-related
expenses of all on-site and off-site employees of Manager who are engaged in
the operation, management, maintenance and leasing or access control of the
Properties, including taxes, insurance and benefits relating to such employees,
and legal, travel and other out-of-pocket expenses that are directly related to
the management of specific Properties. All costs and expenses for which Owner
is responsible under this Management Agreement shall be paid by Manager out of
the Account. In the event the Account does not contain sufficient funds to pay
all said expenses, Owner shall fund all sums necessary to meet such additional
costs and expenses.

 

4.2           Manager’s Expenses. Manager shall, out of its own funds, pay
all of its general overhead and administrative expenses.

 

10

 

ARTICLE V

 

MANAGER’S
COMPENSATION

 

5.1           Management Fees. Commencing on the date hereof, Owner shall
pay Manager property management and leasing fees in an amount equal to four and
one-half percent (4.5%) of Gross Revenues (the “Management Fees”) on a monthly
basis from the rental income received from the Properties over the term of this
Management Agreement. In the event that Owner contracts directly with a
non-affiliated third-party property manager in respect of a Property, Owner
shall pay Manager an oversight fee equal to one percent (1%) of Gross Revenues
of such Property to compensate Manager for transition services to coordinate
and align the systems and policies of the third-party property manager with
those of Manager. Manager’s compensation under this Section 5.1 shall apply to
all renewals, extensions or expansions of Leases that Manager has originally
negotiated. In the event Manager assists with planning and coordinating the
construction of any tenant-paid finish-out or improvements, Manager shall be
entitled to receive from any such tenant an amount equal to not greater than
five percent (5.0%) of the cost of such tenant improvements. The Management
Fees may include the reimbursement of the specified cost incurred by the Manager
of engaging another person or entity to perform Manager’s responsibilities
hereunder, provided, however, that Manager shall be responsible for payment to
such third parties. Nothing herein shall prevent Manager from entering
fee-splitting arrangements with third parties with respect to the Management
Fees.

 

5.2           Leasing Fees. In addition to the compensation paid to
Manager under Section 5.1 above, Manager shall be entitled to receive a
separate fee for the Leases of new tenants and renewals of Leases with existing
tenants in an amount not to exceed the fee customarily charged in arm’s length
transactions by others rendering similar services in the same geographic area
for similar properties as determined by a survey of brokers and agents in such
area.

 

5.3           Audit Adjustment. If any audit of the records, books or
accounts relating to the Properties discloses an overpayment or underpayment of
Management Fees, Owner or Manager shall promptly pay to the other party the
amount of such overpayment or underpayment, as the case may be. If such audit
discloses an overpayment of Management Fees for any fiscal year of more than
the correct Management Fees for such fiscal year, Manager shall bear the cost
of such audit.

 

ARTICLE
VI

 

INSURANCE
AND INDEMNIFICATION

 

6.1           Insurance to be Carried.

 

(a)           Manager
shall obtain and keep in full force and effect insurance on the Properties
against such hazards as Owner and Manager shall deem appropriate, but in any
event insurance sufficient to comply with the Leases and Controlling Agreements
shall be maintained. All liability policies shall provide sufficient insurance
satisfactory to both Owner and Manager and shall contain waivers of subrogation
for the benefit of Manager.

 

(b)           Manager
shall obtain and keep in full force and effect, in accordance with the laws of
the state in which each Property is located, workers’ compensation and employer’s
liability insurance applicable to and covering all employees of Manager at the
Properties, and Manager shall furnish Owner certificates of insurers evidencing
that such insurance is in effect. If any work under this Management Agreement
is subcontracted as permitted herein, Manager shall include in each subcontract
a provision that the subcontractor shall also furnish Owner with such a
certificate.

 

6.2           Insurance Expenses. Premiums and other expenses of such
insurance, as well as any applicable payments in respect of deductibles shall
be borne by Owner.

 

11

 

6.3           Cooperation with Insurers. Manager shall cooperate with and provide
reasonable access to the Properties to representatives of insurance companies
and insurance brokers or agents with respect to insurance that is in effect or
for which application has been made. Manager shall use its best efforts to
comply with all requirements of insurers.

 

6.4           Accidents and Claims. Manager shall promptly investigate and
shall report in detail to Owner all accidents, claims for damage relating to ownership,
operation or maintenance of the Properties, and any damage or destruction to
the Properties and the estimated costs of repair thereof, and shall prepare for
approval by Owner all reports required by an insurance company in connection
with any such accident, claim, damage, or destruction. Such reports shall be
given to Owner promptly, and any report not so given within 10 (ten) days after
the occurrence of any such accident, claim, damage or destruction shall be
noted in the monthly operating statement delivered to Owner pursuant to Section
2.5(b). Manager is authorized to settle any claim against an insurance company
arising out of any policy and, in connection with such claim, to execute proofs
of loss and adjustments of loss and to collect and receipt for loss proceeds.

 

6.5           Indemnification.

 

(a)           On Termination. In the event this Management Agreement is
terminated for any reason prior to the expiration of its original term or any
renewal term, Owner shall indemnify, protect, defend, save and hold harmless Manager
and all of the other Manager Indemnified Parties from and against any and all
claims, causes of action, demands, suits, proceedings, loss, judgments, damage,
awards, liens, fines, costs, attorney’s fees and expenses, of every kind and
nature whatsoever (collectively, “Losses”), that may be imposed on or incurred
by Manager by reason of the willful misconduct, gross negligence and/or
unlawful acts (such unlawfulness having been adjudicated by a court of proper
jurisdiction) of Owner.

 

(b)           Property Damage, Etc. Owner agrees to indemnify, defend, protect,
save and hold harmless Manager and all of the other Manager Indemnified Parties
from any and all Losses in connection with or in any way related to each
Property and from liability for damage to each Property and injuries to or
death of any person whomsoever, and damage to property; provided, however, that
such indemnification and exculpation shall not extend to any such Losses
arising out of the willful misconduct, gross negligence and/or unlawful acts
(such unlawfulness having been adjudicated by a court of proper jurisdiction)
of Manager, its agents, servants, or employees; provided, further, that such
indemnification and exculpation shall be limited to the extent that Manager
recovers insurance proceeds with respect to such matter. Manager shall not be
liable for any error of judgment or for any mistake of fact or law, or for any
thing that it may do or refrain from doing, except in cases of willful
misconduct, gross negligence and/or unlawful acts (such unlawfulness having
been adjudicated by a court of proper jurisdiction). Manager agrees to
indemnify, defend, protect, save and hold harmless Owner and its
stockholders, officers, directors, employees, managers, successors and assigns from any and all claims or liability for any
injury or damage to any person or property whatsoever for which Manager is
responsible occurring in, on, or about the Properties, including, without
limitation, the Improvements, when such injury or damage shall be caused by the
willful misconduct, gross negligence and/or unlawful acts (such unlawfulness
having been adjudicated by a court of proper jurisdiction) of Manager, its
agents, servants, or employees, except to the extent that Owner recovers
insurance proceeds with respect to such matter.

 

(c)           Limitations. Notwithstanding anything to the contrary in this Management Agreement,
any indemnification and exculpation by the Owner under this Management
Agreement is subject to any limitations imposed under the Company’s Articles of
Incorporation or any amendments thereto.

 

12

 

ARTICLE
VII

 

TERM AND
TERMINATION

 

7.1           Term. This Management Agreement shall commence on the date first written above
and shall continue until the fifth (5th) anniversary of such date
and thereafter for successive five (5) year renewal periods, unless on or
before one year prior to the date last above mentioned or on or before one year
prior to the expiration of any such renewal period, Manager shall notify Owner
in writing that it elects to terminate this Management Agreement, in which case
this Management Agreement shall be thereby terminated on said last mentioned
date. In addition, and notwithstanding the foregoing, Owner may terminate this Management
Agreement at any time upon delivery of written notice to Manager not less than
thirty (30) days prior to the effective date of termination, in the event of
(and only in the event of) a showing by Owner of misconduct, negligence, or
malfeasance by Manager in the performance of Manager’s duties hereunder. In
addition, either party may terminate this Management Agreement immediately upon
the occurrence of any of the following:

 

(a)           A decree or order is
rendered by a court having jurisdiction (i) adjudging Manager as bankrupt or
insolvent, or (ii) approving as properly filed a petition seeking
reorganization, readjustment, arrangement, composition or similar relief for
Manager under the federal bankruptcy laws or any similar applicable law or
practice, or (iii) appointing a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of Manager or a substantial part of the property of
Manager, or for the winding up or liquidation of its affairs; or

 

(b)           Manager
(i) institutes proceedings to be adjudicated a voluntary bankrupt or an
insolvent, (ii) consents to the filing of a bankruptcy proceeding against it,
(iii) files a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or relief under any similar applicable
law or practice, (iv) consents to the filing of any such petition, or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency for it or for a substantial part of its property, (v) makes an
assignment for the benefit of creditors, (vi) is unable to or admits in writing
its inability to pay its debts generally as they become due unless such
inability shall be the fault of the other party, or (iv) takes corporate or
other action in furtherance of any of the aforesaid purposes.

 

7.2           Manager’s Obligations Upon Termination. Upon the termination of this Management
Agreement, Manager shall have the following duties:

 

(a)           Manager
shall deliver to Owner or its designee, all books and records with respect to
the Properties.

 

(b)           Manager
shall transfer and assign to Owner, or its designee, all service contracts and
personal property relating to or used in the operation and maintenance of the
Properties, except personal property paid for and owned by Manager. Manager
shall also, for a period of sixty (60) days immediately following the date of
such termination, make itself available to consult with and advise Owner, or
its designee, regarding the operation, maintenance and leasing of the
Properties.

 

(c)           Manager
shall render to Owner an accounting of all funds of Owner in its possession and
shall deliver to Owner a statement of all Management Fees claimed to be due to
Manager and shall cause funds of Owner held by Manager relating to the
Properties to be paid to Owner or its designee.

 

7.3           Owner’s Obligations Upon Termination. Owner shall pay or reimburse Manager for
any sums of money due it under this Management Agreement for services and
expenses prior to termination

 

13

 

of this Management Agreement. All provisions of this
Management Agreement that require Owner to have insured, or to protect, defend,
save, hold and indemnify or to reimburse Manager shall survive any expiration
or termination of this Management Agreement and, if Manager is or becomes
involved in any claim, proceeding or litigation by reason of having been
Manager of Owner, such provisions shall apply as if this Management Agreement
were still in effect.

 

The parties understand and
agree that Manager may withhold funds for sixty (60) days after the end of the
month in which this Management Agreement is terminated to pay bills previously
incurred but not yet invoiced and to close accounts. Should the funds withheld
be insufficient to meet the obligation of Manager to pay bills previously
incurred, Owner will, upon demand, advance sufficient funds to Manager to
ensure fulfillment of Manager’s obligation to do so, within ten (10) days of
receipt of notice and an itemization of such unpaid bills.

 

ARTICLE
VIII

 

MISCELLANEOUS

 

8.1           Notices. All notices, approvals, consents and other communications hereunder
shall be in writing, and, except when receipt is required to start the running
of a period of time, shall be deemed given when delivered in person or on the
fifth day after its mailing by either party by registered or certified United
States mail, postage prepaid and return receipt requested, to the other party,
at the addresses set forth after their respect name below or at such different
addresses as either party shall have theretofore advised the other party in writing
in accordance with this Section 8.1.

 

	
  Owner:

  	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY OP II LP

  
	
   

  	
   

  	
  c/o Behringer
  Harvard Opportunity REIT II, Inc.

  
	
   

  	
   

  	
  15601 Dallas
  Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas
  75001

  
	
   

  	
   

  	
  Attention:  Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Manager:

  	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY MANAGEMENT SERVICES, LLC

  
	
   

  	
   

  	
  15601 Dallas
  Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas
  75001

  
	
   

  	
   

  	
  Attention:  Chief Legal Officer

  

 

8.2           Governing Law; Venue. This Management Agreement shall be governed
by and construed in accordance with the laws of the State of Texas, and any
action brought to enforce the agreements made hereunder or any action which
arises out of the relationship created hereunder shall be brought exclusively
in Dallas County, Texas.

 

8.3           Assignment. Manager may assign or delegate partially or in full its duties and
rights under this Management Agreement and the fees and compensation related
thereto to a duly qualified and licensed Affiliate of Manager without the
approval of Owner. Any other assignment or delegation by Manager of its duties
and rights under this Management Agreement may be made only with the prior
written consent of Owner. Owner acknowledges and agrees that any or all of the
duties of Manager as contained herein may be assigned or delegated by Manager
and performed by a duly qualified and licensed Person (“Submanager”) with whom
Manager contracts for the purpose of performing such duties. Owner specifically
grants Manager the authority to enter into such a contract with a Submanager;
provided that, unless Owner otherwise agrees in writing with such Submanager,
Owner shall have no liability or responsibility to any such Submanager for the
payment of the Submanager’s fee or for reimbursement to the Submanager of its
expenses or to indemnify the Submanager in any manner for any

 

14

 

matter; and provided further that Manager shall
require such Submanager to agree, in the written agreement setting forth the
duties and obligations of such Submanager, to indemnify Owner for all Losses
incurred by Owner as a result of the willful misconduct or gross negligence of
the Submanager, except that such indemnity shall not be required to the extent
that Owner recovers issuance proceeds with respect to such matter. Any contract
entered into between Manager and a Submanager pursuant to this Section 8.3
shall be consistent with the provisions of this Management Agreement, except to
the extent Owner otherwise specifically agrees in writing. This Management
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

 

8.4           Third Party Leasing Services. Manager acknowledges that from time to time
Owner may determine that it is in the best interests of Owner to retain a third
party to provide certain leasing services with respect to certain Properties
and to compensate such third party for such leasing services. Upon the prior
written consent of Manager, Owner shall have the authority to enter into such a
contract for leasing services with a duly qualified and licensed third party (a
“Third Party Leasing Agreement”); provided that Manager shall have no liability
or responsibility to Owner for any of the duties and obligations undertaken by
such party, and Owner agrees to indemnify Manager for all Losses incurred by
Manager as a result of acts of such third party pursuant to the Third Party
Leasing Agreement. To the extent that leasing services are specifically
required to be performed by a third party pursuant to such Third Party Leasing
Agreement, Manager shall have no obligation to perform such leasing services
and Owner shall have no obligation to Manager for leasing fees pursuant to
Section 5.2 hereof.

 

8.5           Third Party Management Services. Manager acknowledges that from time to time
Owner may acquire interests in Properties in which Owner does not control the
determination of the party that is engaged to provide property management and
other services to be provided by Manager with respect to all Properties acquired
by Owner hereunder. Upon the prior written consent of Manager, Owner shall have
the authority to acquire such interests in Properties for which a duly
qualified and licensed third party provides some or all of the services
otherwise required to be performed by Manager hereunder (a “Third Party
Management Agreement”); provided that Manager shall have no liability or
responsibility to Owner for any of the duties and obligations undertaken by
such third party, and Owner agrees to indemnify Manager for all Losses incurred
by Manager as a result of the acts of such third party pursuant to the Third
Party Management Agreement. To the extent that property management and other
services are specifically required to be performed by a third party pursuant to
such Third Party Management Agreement, Manager shall have no obligation to
perform such services and Owner shall have no obligation to Manager for
compensation for such services pursuant to Article V hereof.

 

8.6           No Waiver. The failure of Owner to seek redress for violation or to insist upon
the strict performance of any covenant or condition of this Management
Agreement shall not constitute a waiver thereof for the future.

 

8.7           Amendments. This Management Agreement may be amended only by an instrument in
writing signed by the party against whom enforcement of the amendment is
sought.

 

8.8           Headings. The headings of the various subdivisions of this Management Agreement
are for reference only and shall not define or limit any of the terms or
provisions hereof.

 

8.9           Counterparts. This Management Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Management Agreement to produce
or account for more than one such counterpart.

 

8.10         Entire Agreement. This Management Agreement (including the
Property Amendments) contains the entire understanding and all agreements
between Owner and Manager respecting the management of the Properties. There
are no representations, agreements, arrangements or

 

15

 

understandings, oral or written, between Owner and
Manager relating to the management of the Properties that are not fully
expressed herein.

 

8.11         Disputes. If there shall be a dispute between Owner and Manager relating to
this Management Agreement resulting in litigation, the prevailing party in such
litigation shall be entitled to recover from the other party to such litigation
such amount as the court shall fix as reasonable attorneys’ fees.

 

8.12         Activities of Manager. The obligations of Manager pursuant to the
terms and provisions of this Management Agreement shall not be construed to
preclude Manager from engaging in other activities or business ventures,
whether or not such other activities or ventures are in competition with Owner
or the business of Owner.

 

8.13         Independent Contractor. Manager and Owner shall not be construed as
joint venturers or partners of each other pursuant to this Management
Agreement, and neither shall have the power to bind or obligate the other
except as set forth herein. In all respects, the status of Manager to Owner
under this Management Agreement is that of an independent contractor.

 

8.14         No
Third-Party Rights. Nothing expressed or referred to in this Management
Agreement will be construed to give any Person other than the parties to this
Management Agreement any legal or equitable right, remedy or claim under or
with respect to this Management Agreement or any provision of this Management
Agreement, except such rights as shall inure to a successor or permitted
assignee pursuant to Section 8.3.

 

8.15         Ownership of Proprietary Property. The Manager retains ownership of and
reserves all Intellectual Property Rights in the Proprietary Property. To
the extent that Owner has or obtains any claim to any right, title or interest
in the Proprietary Property, including without limitation in any suggestions,
enhancements or contributions that Owner may provide regarding the Proprietary
Property, Owner hereby assigns and transfers exclusively to the Manager all
right, title and interest, including without limitation all Intellectual
Property Rights, free and clear of any liens, encumbrances or licenses in favor
of Owner or any other party, in and to the Proprietary Property. In addition,
at the Manager’s expense, Owner will perform any acts that may be deemed
desirable by the Manager to evidence more fully the transfer of ownership of
right, title and interest in the Proprietary Property to the Manager, including
but not limited to the execution of any instruments or documents now or
hereafter requested by the Manager to perfect, defend or confirm the assignment
described herein, in a form determined by the Manager.

 

[The remainder of this page has
been intentionally left blank.]

 

16

 

IN WITNESS WHEREOF, the parties have executed this Property Management and Leasing
Agreement as of the date first above written.

 

	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY

  
	
   

  	
   

  	
  REIT
  II, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  
	
   

  	
   

  	
  Development & Legal

  
	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY

  
	
   

  	
   

  	
  OP II
  LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BHO II, Inc.,

  
	
   

  	
   

  	
  Its General
  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
   

  	
  Executive Vice
  President – Corporate

  
	
   

  	
   

  	
   

  	
  Development & Legal

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY

  
	
   

  	
   

  	
  MANAGEMENT
  SERVICES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  
	
   

  	
   

  	
  Development & Legal

  
						

 

[Signature
Page to Behringer Harvard Opportunity REIT II, Inc. Property Management and
Leasing Agreement]

 

 

Form of Property Amendment

 

	
  Property Description: 

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Legal Name of Owner:

  	
   

  	
   

  
	
   

  
	
  Jurisdiction of Organization/Incorporation:  

  	
   

  	
   

  
	
   

  
	
  Services to be Provided (if other than in Management
  Agreement):

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Alterations to basic terms and conditions of
  Management Agreement (if any):

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						

 

 

	
  Manager:

  	
  BEHRINGER
  HARVARD OPPORTUNITY

  
	
   

  	
   

  	
  MANAGEMENT
  SERVICES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  
	
   

  	
   

  	
  Development & Legal

  
	
   

  	
   

  
	
  Owner:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:Exhibit
10.3

 

BEHRINGER HARVARD OPPORTUNITY
REIT II, INC.

2007 INCENTIVE AWARD PLAN

(ADOPTED NOVEMBER 6, 2007)

 

Section 1.

PURPOSE

 

The
purpose of this Plan is to promote the interests of the Company by providing
the opportunity to purchase or receive Shares, or to receive compensation that
is based upon appreciation in the value of Shares to Eligible Recipients in
order to attract and retain Eligible Recipients by providing an incentive to
work to increase the value of Shares and a stake in the future of the Company
that corresponds to the stake of each of the Company’s stockholders. The Plan
provides for the grant of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards, Restricted Stock Units, Stock Appreciation Rights,
Dividend Equivalents and Other Stock-Based Awards to aid the Company in
obtaining these goals.

 

Section 2.

DEFINITIONS

 

Each
term set forth in this Section shall have the meaning set forth opposite such
term for purposes of this Plan and any Incentive Award Agreements under this
Plan (unless noted otherwise), and for purposes of such definitions, the
singular shall include the plural and the plural shall include the singular,
and reference to one gender shall include the other gender. Note that some definitions
may not be used in this Plan, and may be inserted here solely for possible use
in Incentive Award Agreements issued under this Plan.

 

2.1           Affiliate means Behringer Harvard Holdings, LLC,
Behringer Harvard Partners, LLC, Harvard Property Trust, LLC, IMS, LLC, Behringer
Harvard Opportunity Advisors II LP, Behringer Securities LP, HPT Management
Services LP, Behringer Harvard Opportunity Management Services LLC, Behringer
Harvard Opportunity OP II LP, BHO Business Trust II and BHO II, Inc.

 

2.2           Board means the Board of Directors of the
Company.

 

2.3           Cause shall mean an act or acts by an Eligible
Recipient involving (a) the use for profit or disclosure to unauthorized
persons of confidential information or trade secrets of the Company, a Parent
or a Subsidiary, (b) the breach of any contract with the Company, a Parent or a
Subsidiary, (c) the violation of any fiduciary obligation to the Company, a
Parent or a Subsidiary, (d) the unlawful trading in the securities of the
Company, a Parent or a Subsidiary, or of another corporation based on
information gained as a result of the performance of services for the Company,
a Parent or a Subsidiary, (e) a felony conviction or the failure to contest
prosecution of a felony, or (f) willful misconduct, dishonesty, embezzlement,
fraud, deceit or civil rights violations, or other unlawful acts.

 

2.4           Change of Control means either of the following:

 

(a)           any transaction or series of transactions pursuant to
which the Company sells, transfers, leases, exchanges or disposes of
substantially all (i.e., at least
eighty-five percent (85%)) of its assets for cash or property, or for a
combination of cash and property, or for other consideration; or

 

(b)           any transaction pursuant to which persons who are not
current stockholders of the Company acquire by merger, consolidation,
reorganization, division or other business combination or transaction, or by a
purchase of an interest in the Company, an interest in the Company so that
after such transaction, the stockholders of the Company immediately prior to
such transaction no longer have a controlling (i.e.,
50% or more) voting interest in the Company.

 

2.5           Code means the Internal Revenue Code of 1986,
as amended.

 

 

2.6           Committee means any committee appointed by the
Board to administer the Plan, as specified in Section 5 hereof. Any such
committee shall be comprised entirely of Directors or such other persons as
permitted under applicable law.

 

2.7           Common Stock means the common stock of the Company.

 

2.8           Company means Behringer Harvard Opportunity REIT
II, Inc. a Maryland corporation, and any successor to such organization.

 

2.9           Constructive Discharge means a termination of employment with
the Company by an Employee due to any of the following events if the termination occurs within thirty
(30) days of such event:

 

(a)           Forced Relocation or Transfer. The Employee may continue employment
with the Company, a Parent or a Subsidiary (or a successor employer), but such
employment is contingent on the Employee’s being transferred to a site of employment
which is located further than 50 miles from the Employee’s current site of
employment. For this purpose, an Employee’s site of employment shall be the
site of employment to which they are assigned as their home base, from which
their work is assigned, or to which they report, and shall be determined by the
Committee in its sole discretion on the basis of the facts and circumstances.

 

(b)           Decrease in Salary or Wages. The Employee may continue employment with
the Company, a Parent or a Subsidiary (or a successor employer), but such
employment is contingent upon the Employee’s acceptance of a salary or wage
rate which is less than the Employee’s prior salary or wage rate.

 

(c)           Significant and Substantial
Reduction in Benefits. The Employee may continue employment with the Company, a Parent or a
Subsidiary (or a successor employer), but such employment is contingent upon
the Employee’s acceptance of a reduction in the pension, welfare or fringe
benefits provided which is both significant and substantial when expressed as a
dollar amount or when expressed as a percentage of the Employee’s cash
compensation. The determination of whether a reduction in pension, welfare or
fringe benefits is significant and substantial shall be made on the basis of
all pertinent facts and circumstances, including the entire benefit (pension,
welfare and fringe) package provided to the Employee, and any salary or wages
paid to the Employee. However, notwithstanding the preceding, any modification
or elimination of benefits which results solely from the provision of new
benefits to an Employee by a successor employer as a result of a change of the
Employee’s employment from employment with the Company to employment with such
successor shall not be deemed a Significant and Substantial Reduction in
Benefits where such new benefits are identical to the benefits provided to
similarly situated Employees of the successor.

 

2.10         Director means a member of the Board.

 

2.11         Dividend Equivalents mean a right to receive payments based
on the dividends paid by the Company to its stockholders pursuant to the terms
of Section 7.6.

 

2.12         Eligible Recipient means an Employee and/or a Key Person.

 

2.13         Employee means a common law employee of the
Company, a Subsidiary, a Parent or an Affiliate.

 

2.14         Exchange Act means the Securities Exchange Act of
1934, as amended.

 

2.15         Exercise Price means the price that shall be paid to
purchase one (1) Share upon the exercise of an Option granted under this Plan.

 

2.16         Fair Market Value of each Share on any date means the
price determined below as of the close of business on such date (provided,
however, if for any reason, the Fair Market Value per share cannot be
ascertained or is unavailable for such date, the Fair Market Value per share
shall be determined as of the nearest preceding date on which such Fair Market
Value can be ascertained):

 

2

 

(a)           If the Share is listed or traded
on any established stock exchange or a national market system, including without
limitation the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation (“NASDAQ”) System, its Fair Market Value
shall be the closing sale price for the Share (or the mean of the closing bid
and ask prices, if no sales were reported), on such exchange or system on the
date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or

 

(b)           If the Share is
not listed or traded on any established stock exchange or a national market
system, its Fair Market Value shall be the average of the closing dealer “bid”
and “ask” prices of a Share as reflected on the NASDAQ interdealer quotation
system of the National Association of Securities Dealers, Inc. on the date of
such determination; or

 

(c)           In the absence of
an established public trading market for the Share, the Fair Market Value of a
Share shall be determined in good faith by the Board.

 

2.17         FLSA Exclusion means the provisions of Section 7(e) of
the Fair Labor Standards Act of 1938 (the “FLSA”) that exempt certain
stock-based compensation from inclusion in overtime determinations under the
FLSA.

 

2.18         Incentive Award means an ISO, a NQSO, a Restricted Stock
Award, a Restricted Stock Unit, a Stock Appreciation Right, a Dividend
Equivalent or an Other Stock-Based Award.

 

2.19         Incentive Award Agreement means an agreement between the Company,
a Parent or a Subsidiary, and a Participant evidencing an award of an Incentive
Award.

 

2.20         Insider means an individual who is, on the relevant
date, an officer, director or ten percent (10%) beneficial owner of any class
of the Company’s equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.

 

2.21         ISO means an option granted under this Plan
to purchase Shares that is intended by the Company to satisfy the requirements
of Code §422 as an incentive stock option.

 

2.22         Key Person means (1) a member of the Board who is
not an Employee, or (2) a consultant or advisor; provided, however, that such
consultant or advisor must be a natural person who is providing or will be
providing bona fide services to the Company, a
Subsidiary, a Parent or an Affiliate, with such services (1) not being in
connection with the offer or sale of securities in a capital-raising
transaction, and (2) not directly or indirectly promoting or maintaining a
market for securities of the Company, a Subsidiary, a Parent or an Affiliate,
within the meaning of the general instructions to SEC Form S-8.

 

2.23         Non-Employee Director means a Director who is not also an
Employee.

 

2.24         NQSO means an option granted under this Plan
to purchase Shares that is not intended by the Company to satisfy the
requirements of Code §422.

 

2.25         Option means an ISO or a NQSO.

 

2.26         Other Stock-Based Awards means such other Incentive Awards other
than those specifically described in the Plan that may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based on,
or related to, Shares and granted pursuant to the terms of Section 7.7.

 

2.27         Outside Director means a Director who is not an Employee
and, effective upon the Company registering any of its equity securities under
the 1934 Act, who qualifies as (1) a “non-employee director” under Rule
16b-3(b)(3) under the 1934 Act, as amended from time to time, and (2) an “outside
director” under Code §162(m) and the regulations promulgated thereunder.

 

3

 

2.28         Parent means any corporation (other than the
corporation employing a Participant) in an unbroken chain of corporations
ending with the corporation employing a Participant if, at the time of the
granting of the Incentive Award, each of the corporations other than the
corporation employing the Participant owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporation in such chain. However, for purposes of interpreting any
Incentive Award Agreement issued under this Plan as of a date of determination,
Parent shall mean any corporation (other than the corporation employing a
Participant) in an unbroken chain of corporations ending with the corporation
employing a Participant if, at the time of the granting of the Incentive Award
and thereafter through such date of determination, each of the corporations
other than the corporation employing the Participant owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporation in such chain.

 

2.29         Participant means an individual who receives an
Incentive Award hereunder.

 

2.30         Performance-Based Exception means the performance-based exception
from the tax deductibility limitations of Code §162(m).

 

2.31         Plan means the Behringer Harvard Opportunity
REIT II, Inc. 2007 Incentive Award Plan, as may be amended from time to time.

 

2.32         Restricted Stock Award means an award of Shares granted to a
Participant under this Plan whereby the Participant has immediate rights of
ownership in the Shares underlying the award, but such Shares are subject to
restrictions in accordance with the terms and provisions of this Plan and the
Incentive Award Agreement pertaining to the award and may be subject to
forfeiture by the individual until the earlier of (a) the time such
restrictions lapse or are satisfied, or (b) the time such shares are forfeited,
pursuant to the terms and provisions of the Incentive Award Agreement
pertaining to the award.

 

2.33         Restricted Stock Unit means a contractual right granted to a Participant under this Plan to
receive a Share that is subject to restrictions of this Plan and the applicable
Incentive Award Agreement.

 

2.34         SAR Exercise Price means the amount per Share specified in
an Incentive Award Agreement with respect to a Stock Appreciation Right, the
excess of the Fair Market Value of a Share over and above such amount, the
holder of such Stock Appreciation Right may be able to receive upon the
exercise or payment of such Stock Appreciation Right.

 

2.35         Share means a share of the Common Stock of the
Company.

 

2.36         Stock Appreciation Right means a right granted to a Participant
pursuant to the terms and provisions of this Plan whereby the individual,
without payment to the Company (except for any applicable withholding or other
taxes), receives cash, Shares, a combination thereof, or such other
consideration as the Board may determine, in an amount equal to the excess of
the Fair Market Value per Share on the date on which the Stock Appreciation
Right is exercised over the exercise price per Share noted in the Stock
Appreciation Right for each Share subject to the Stock Appreciation Right.

 

2.37         Subsidiary means any corporation (other than the
corporation employing such Participant) in an unbroken chain of corporations
beginning with the corporation employing such Participant if, at the time of
the granting of the Incentive Award, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. However, for purposes of interpreting
any Incentive Award Agreement issued under this Plan as of a date of
determination, Subsidiary shall mean any corporation (other than the
corporation employing such Participant) in an unbroken chain of corporations
beginning with the corporation employing such Participant if, at the time of
the granting of the Incentive Award and thereafter through such date of determination,
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

 

4

 

2.38         Ten Percent Stockholder means a person who owns (after taking
into account the attribution rules of Code §424(d)) more than ten percent (10%)
of the total combined voting power of all classes of shares of stock of either
the Company, a Subsidiary or a Parent.

 

Section 3.

SHARES SUBJECT TO INCENTIVE
AWARDS

 

3.1           Shares
Subject to Incentive Awards. The total number of Shares that may be
issued pursuant to Incentive Awards under this Plan (and the total number of
Shares that may be issued pursuant to the exercise of ISOs under this Plan)
shall not exceed ten million, as adjusted pursuant to Section 10. Such Shares
shall be reserved, to the extent that the Company deems appropriate, from
authorized but unissued Shares, and from Shares which have been reacquired by
the Company.

 

3.2           Availability
of Shares not Delivered. Any Shares subject to an Incentive
Award that have not been issued under such Incentive Award as of the date of the
cancellation, expiration or exchange of such Incentive Award thereafter shall
again become available for grant under this Plan. If any Shares issued pursuant
to an Incentive Award are forfeited back to or repurchased by the Company,
including, but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the vesting of such
Shares, then the Shares forfeited back or repurchased shall revert to and again
become available for issuance under the Plan.

 

If any Incentive Award,
is settled for cash or otherwise does not result in the issuance of all or a
portion of the Shares subject to such Incentive Award, the Shares shall, to the
extent of such cash settlement or non-issuance, again be available for grant
under the Plan, subject to the last sentence of this paragraph. Subject to the
last sentence of this paragraph, in the event that any Incentive Award granted
hereunder is exercised through the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, or withholding tax
liabilities arising from such Incentive Award are satisfied by the tendering of
Shares (either actually or by attestation) or by the withholding of Shares by
the Company, then only the number of Shares issued net of the Shares tendered
or withheld shall be counted for purposes of determining the number of Shares
issued under the Award and any Shares not tendered or withheld shall not be
considered issued and shall again be available under the Plan. Notwithstanding
anything in this Section 3.2 to the contrary and solely for purposes of
determining whether Shares are available for the grant of ISOs, the maximum
aggregate number of shares that may be granted under this Plan shall be
determined without regard to any Shares restored pursuant to this Section 3.2
that, if taken into account, would cause the Plan to fail the requirement under
Code Section 422 that the Plan designate a maximum aggregate number of shares
that may be issued.

 

3.3           Annual
Limitation on Grants to Participants. Notwithstanding anything
herein to the contrary, after Incentive Awards granted under the Plan are
subject to the tax deductibility limitations of Section 162(m) of the Code, no
Participant may be granted Incentive Awards covering an aggregate number of
Shares in excess of five million in any calendar year, and any Shares subject
to an Incentive Award which again become available for use under this Plan
after the cancellation, expiration or exchange of such Incentive Award
thereafter shall continue to be counted in applying this calendar year
Participant limitation.

 

Section 4.

EFFECTIVE DATE

 

The
effective date of this Plan shall be the date it is adopted by the Board, as
noted in resolutions effectuating such adoption, provided the stockholders of
the Company approve this Plan within twelve (12) months after such effective
date. If such effective date comes before such stockholder approval, any
Incentive Awards granted under this Plan before the date of such approval
automatically shall be granted subject to such approval.

 

Section 5.

ADMINISTRATION

 

5.1           General Administration. This Plan shall be
administered by the Board. The Board, acting in its absolute discretion, shall
exercise such powers and take such action as expressly called for under this
Plan. The Board shall have the

 

5

 

power to interpret this Plan and, subject to the terms and
provisions of this Plan, to take such other action in the administration and
operation of the Plan as it deems equitable under the circumstances. The Board’s
actions shall be binding on the Company, on each affected Eligible Recipient,
and on each other person directly or indirectly affected by such actions.

 

5.2           Authority of the Board. Except as limited by
law or by the Articles of Incorporation or Bylaws of the Company, and subject
to the provisions herein, the Board shall have full power to select Eligible
Recipients who shall participate in the Plan, to determine the sizes and types
of Incentive Awards in a manner consistent with the Plan, to determine the
terms and conditions of Incentive Awards in a manner consistent with the Plan,
to construe and interpret the Plan and any agreement or instrument entered into
under the Plan, to establish, amend or waive rules and regulations for the Plan’s
administration, and to amend the terms and conditions of any outstanding
Incentive Awards as allowed under the Plan and such Incentive Awards. Further,
the Board may make all other determinations that may be necessary or advisable
for the administration of the Plan.

 

5.3           Delegation of Authority. The Board may delegate
its authority under the Plan, in whole or in part, to a Committee appointed by
the Board consisting of
not
less than one (1) Director or to a Committee of one or more other persons to
whom the powers of the Board hereunder may be delegated in accordance with
applicable law. The members of the Committee and any other persons to whom
authority has been delegated shall be appointed from time to time by, and shall
serve at the discretion of, the Board. The Committee or other delegate (if
appointed) shall act according to the policies and procedures set forth in the
Plan and to those policies and procedures established by the Board, and the
Committee or other delegate shall have such powers and responsibilities as are
set forth by the Board. Reference to the Board in this Plan shall specifically
include reference to the Committee or other delegate where the Board has
delegated its authority to the Committee or other delegate, and any action by
the Committee or other delegate pursuant to a delegation of authority by the
Board shall be deemed an action by the Board under the Plan. Notwithstanding
the above, the Board may assume the powers and responsibilities granted to the
Committee or other delegate at any time, in whole or in part. With respect to
Committee appointments and composition, only a Committee (or a sub-committee
thereof) comprised solely of two (2) or more Outside Directors may grant
Incentive Awards that will meet the Performance-Based Exception, and only a
Committee comprised solely of Outside Directors may grant Incentive Awards to
Insiders that will be exempt from Section 16(b) of the Exchange Act.

 

5.4           Decisions Binding. All determinations and decisions
made by the Board (or its delegate) pursuant to the provisions of this Plan and
all related orders and resolutions of the Board shall be final, conclusive and
binding on all persons, including the Company, its stockholders, Directors,
Eligible Recipients, Participants, and their estates and beneficiaries.

 

5.5           Indemnification for Decisions. No member of the
Board, the Committee (or a sub-committee thereof) shall be liable in connection with or by reason of any act or omission performed or
omitted to be performed on behalf of the Company in such capacity, provided,
that the Board has determined, in good faith, that the course of conduct that
caused the loss or liability was in the best interests of the Company. Service on the
Committee (or a sub-committee thereof) shall constitute service as a Director or
an officer (as applicable) of the Company so that the members of the Committee
(or a sub-committee thereof) shall be entitled to indemnification and
reimbursement as Directors or officers, as applicable, of the Company pursuant
to its articles of incorporation, bylaws and applicable law. In addition, the
members of the Board, Committee (or a sub-committee thereof) shall be
indemnified by the Company against the following losses or liabilities
reasonably incurred in connection with or by reason of any act or omission
performed or omitted to be performed on behalf of the Company in such capacity,
provided, that the Board has determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the
Company:  (a) the reasonable expenses,
including attorneys’ fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan, any Incentive Award granted hereunder, and (b)
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such individual is liable for gross
negligence or misconduct in the performance of his duties, provided that within
60 days after institution of any such action, suit or proceeding a Committee
member or delegatee shall in writing offer the Company the opportunity, at its
own expense, to handle and defend the same. The
Company shall not indemnify or hold

 

6

 

harmless the member of the Board or the Committee
(or a subcommittee thereof) if: (a) in the case of a Director or other person (other
than an independent Director), the loss or liability was the result of
negligence or misconduct by the Director or other person, or (b) in the case
that the Director is an independent Director, the loss or liability was the
result of gross negligence or willful misconduct by the Director. Any indemnification
of expenses or agreement to hold harmless may be paid only out of the net
assets of the Company, and no portion may be recoverable from the Stockholders.

 

Section 6.

ELIGIBILITY

 

Eligible
Recipients selected by the Board shall be eligible for the grant of Incentive
Awards under this Plan, but no Eligible Recipient shall have the right to be
granted an Incentive Award under this Plan merely as a result of his or her
status as an Eligible Recipient. Only Employees of the Company, a Parent or a
Subsidiary, shall be eligible to receive a grant of ISO’s.

 

Section 7.

TERMS OF INCENTIVE AWARDS

 

7.1           Terms
and Conditions of All Incentive Awards.

 

(a)           Grants of
Incentive Awards. The Board, in its absolute discretion, shall grant
Incentive Awards under this Plan from time to time and shall have the right to
grant new Incentive Awards in exchange for outstanding Incentive Awards,
including, but not limited to, exchanges of Stock Options for the purpose of
achieving a lower Exercise Price. Incentive Awards shall be granted to Eligible
Recipients selected by the Board, and the Board shall be under no obligation
whatsoever to grant any Incentive Awards, or to grant Incentive Awards to all
Eligible Recipients, or to grant all Incentive Awards subject to the same terms
and conditions.

 

(b)           Shares
Subject to Incentive Awards. The number of Shares as to which an
Incentive Award shall be granted shall be determined by the Board in its sole
discretion, subject to the provisions of Section 3 as to the total number
of Shares available for grants under the Plan.

 

(c)           Incentive
Award Agreements. Each Incentive Award shall be evidenced by an
Incentive Award Agreement executed by the Company, a Parent or a Subsidiary,
and the Participant, which shall be in such form and contain such terms and
conditions as the Board in its discretion may, subject to the provisions of the
Plan, from time to time determine.

 

(d)           Date of
Grant. The date an Incentive Award is granted shall be the date on
which the Board (1) has approved the terms and conditions of the Incentive
Award Agreement, (2) has determined the recipient of the Incentive Award and
the number of Shares covered by the Incentive Award and (3) has taken all such
other action necessary to direct the grant of the Incentive Award.

 

7.2           Terms and Conditions of Options.

 

(a)           Necessity of Incentive Award Agreements. Each grant of an
Option shall be evidenced by an Incentive Award Agreement that shall specify
whether the Option is an ISO or NQSO, and incorporate such other terms and
conditions as the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan, including (without limitation) a restriction on
the number of Shares subject to the Option that first become exercisable during
any calendar year. The Board and/or the Company shall have complete discretion
to modify the terms and provisions of an Option in accordance with Section 12
of this Plan even though such modification may change the Option from an ISO to
a NQSO.

 

(b)           Determining Optionees. In determining
Eligible Recipient(s) to whom an Option shall be granted and the number of
Shares to be covered by such Option, the Board may take into account the
recommendations of the Chief Executive Officer of the Company and its other
officers, the duties of the Eligible Recipient, the present and potential
contributions of the Eligible Recipient to the success of the Company, and
other factors deemed relevant by the Board, in its sole discretion, in
connection with accomplishing the purpose of this Plan. An Eligible Recipient
who has

 

7

 

been granted an Option to purchase Shares, whether under
this Plan or otherwise, may be granted one or more additional Options. If the
Board grants an ISO and a NQSO to an Eligible Recipient on the same date, the
right of the Eligible Recipient to exercise one such Option shall not be
conditioned on his or her failure to exercise the other such Option.

 

(c)           Exercise Price. Subject to adjustment in accordance
with Section 10 and the other provisions of this Section, the Exercise
Price shall be as set forth in the applicable Incentive Award Agreement. 
With respect to each grant of an ISO to a Participant who is not a Ten Percent
Stockholder, the Exercise Price shall not be less than the Fair Market Value on
the date the ISO is granted. With respect to each grant of an ISO to a
Participant who is a Ten Percent Stockholder, the Exercise Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value on the date
the ISO is granted. If an Option is a NQSO, the Exercise Price for each Share
shall be no less than the Fair Market Value on the date the NQSO is granted,
provided that an NQSO may be granted with any exercise price less than the Fair
Market Value, so long as the NQSO contains (i) such additional terms as
necessary to comply with or be exempt under Section 409A of the Code; (ii) the
exercise price is equal to or greater than the minimum price required by
applicable state law or the minimum price required by the Company’s governing
instrument and (iii) if the NQSO is intended to meet the FLSA Exclusion, the
NQSO must be granted with an Exercise Price equivalent to or greater than
eighty-five percent (85%) of the Fair Market Value of the Shares subject
thereto on the date granted determined as of the date of such grant. Any Option
intended to meet the Performance-Based Exception must be granted with an
Exercise Price equal to or greater than the Fair Market Value of the Shares
subject thereto determined as of the date of such grant.

 

(d)           Option Term.  Each Option granted under
this Plan shall be exercisable in whole or in part at such time or times as set
forth in the related Incentive Award Agreement, but no Incentive Award
Agreement shall:

 

(i)            make an Option exercisable before the
date such Option is granted; or

 

(ii)           make an Option exercisable after the
earlier of:

 

(A)          the date such Option is exercised in full; or

 

(B)           the date that is the tenth (10th) anniversary of the
date such Option is granted, if such Option is a NQSO or an ISO granted to a
non-Ten Percent Stockholder, or the date that is the fifth (5th) anniversary of
the date such Option is granted, if such Option is an ISO granted to a Ten
Percent Stockholder. An Incentive Award Agreement may provide for the exercise
of an Option after the employment of an Employee has terminated for any reason
whatsoever, including death or disability. The Employee’s rights, if any, upon
termination of employment will be set forth in the applicable Incentive Award
Agreement.

 

(e)           Payment.  Options shall be exercised by the delivery of
a written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised accompanied by full payment
for the Shares. Payment for shares of Stock purchased pursuant to exercise of
an Option shall be made in (i) cash (including by check or money order), (ii) unless
the Incentive Award Agreement provides otherwise, by delivery to the Company of
a number of Shares (either previously owned Shares or Shares from those to be
received upon exercise of the Option (i.e., a “net exercise”)) having an
aggregate Fair Market Value equal to the amount to be tendered to the extent
the use of such Shares does not have any adverse consequences to the Company
for financial accounting purposes (as determined by the Committee), (iii) any
other legal form of consideration deemed acceptable by the Board, or (iv) a
combination thereof. In addition, unless the Incentive Award Agreement provides
otherwise, the Option may be exercised through a brokerage transaction
following registration of the Company’s equity securities under Section 12 of
the Exchange Act as permitted under the provisions of Regulation T applicable
to cashless exercises promulgated by the Federal Reserve Board, unless
prohibited by Section 402 of the Sarbanes-Oxley Act of 2002. However,
notwithstanding the foregoing, with respect to any Option recipient who is an
Insider, a tender of shares or a cashless exercise must (1) have met the
requirements of an exemption under Rule 16b-3 promulgated under the Exchange
Act, or (2) be a subsequent transaction the terms of which were provided for in
a transaction initially meeting the requirements of an exemption under Rule
16b-3 promulgated under the Exchange Act. Unless the Incentive Award Agreement
provides otherwise, the foregoing exercise payment methods shall be subsequent
transactions approved by the original grant of an Option. Except as provided in
subparagraph (f) below, payment shall be made at the time that the Option
or any part thereof is exercised, and no Shares

 

8

 

shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant.  The holder of an Option, as such, shall have none of the
rights of a stockholder.

 

(f)            Conditions to Exercise of an Option.  Each Option granted under the
Plan shall vest and shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Board shall
specify in the Incentive Award Agreement; provided, however, that subsequent to
the grant of an Option, the Board, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may vest or
be exercised in whole or in part. Notwithstanding the foregoing, an Option
intended to meet the FLSA Exclusion shall not be exercisable for at least six
(6) months following the date it is granted, except by reason of death,
disability, retirement, a change in corporate ownership or other circumstances
permitted under regulations promulgated under the FLSA Exclusion. Furthermore,
if the recipient of an Option receives a hardship distribution from a Code
§401(k) plan of the Company, or any Parent or Subsidiary, the Option may not be
exercised during the six (6) month period following the hardship distribution,
unless the Company determines that such exercise would not jeopardize the
tax-qualification of the Code §401(k) plan. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable, including, without limitation, vesting or performance-based
restrictions, rights of the Company to re-purchase Shares acquired pursuant to
the exercise of an Option, voting restrictions, investment intent restrictions,
restrictions on transfer, “first refusal” rights of the Company to purchase
Shares acquired pursuant to the exercise of an Option prior to their sale to
any other person, “drag along” rights requiring the sale of shares to a third
party purchaser in certain circumstances, “lock up” type restrictions in the
case of an initial public offering of the Company’s stock, restrictions or
limitations or other provisions that would be applied to stockholders under any
applicable agreement among the stockholders, and restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, and/or under any blue sky
or state securities laws applicable to such Shares.

 

(g)           Transferability of Options.  An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant’s lifetime, only
by the Participant; provided, however, that in the event the Participant is
incapacitated and unable to exercise his or her Option, if such Option is a
NQSO, such Option may be exercised by such Participant’s legal guardian, legal
representative, or other representative whom the Board deems appropriate based
on applicable facts and circumstances. The determination of incapacity of a
Participant and the determination of the appropriate representative of the
Participant who shall be able to exercise the Option if the Participant is
incapacitated shall be determined by the Board in its sole and absolute
discretion. Notwithstanding the foregoing, except as otherwise provided in the
Incentive Award Agreement, a NQSO may also be transferred by a Participant as a
bona fide gift (i) to his spouse, lineal descendant or lineal ascendant,
siblings and children by adoption, (ii) to a trust for the benefit of one or
more individuals described in clause (i) and no other persons, or (iii) to a
partnership of which the only partners are one or more individuals described in
clause (i), in which case the transferee shall be subject to all provisions of
the Plan, the Incentive Award Agreement and other agreements with the
Participant in connection with the exercise of the Option and purchase of
Shares. In the event of such a gift, the Participant shall promptly notify the
Board of such transfer and deliver to the Board such written documentation as
the Board may in its discretion request, including, without limitation, the written
acknowledgment of the donee that the donee is subject to the provisions of the
Plan, the Incentive Award Agreement and other agreements with the Participant.

 

(h)           Special Provisions for Certain Substitute Options.  Notwithstanding anything to the
contrary in this Section, any Option in substitution for a stock option
previously issued by another entity, which substitution occurs in connection
with a transaction to which Code §424(a) is applicable, may provide for an
exercise price computed in accordance with Code §424(a) and the regulations
thereunder and may contain such other terms and conditions as the Board may
prescribe to cause such substitute Option to contain as nearly as possible the
same terms and conditions (including the applicable vesting and termination
provisions) as those contained in the previously issued stock option being
replaced thereby.

 

(i)            ISO Tax Treatment Requirements. With respect to any Option that purports
to be an ISO, to the extent that the aggregate Fair Market Value (determined as
of the date of grant of such Option) of stock with respect to which such Option
is exercisable for the first time by any individual during any calendar year
exceeds one hundred thousand dollars ($100,000.00), such Option shall not be
treated as an ISO in accordance with Code §422(d) and instead shall be treated
as a NQSO. The rule of the preceding sentence is applied in the order in which
Options are granted.

 

9

 

(j)            Potential Repricing of Stock Options. With respect to any Option granted
pursuant to, and under, this Plan, the Board (or a committee thereof) may
determine that the repricing of all or any portion of existing outstanding
Options is appropriate without the need for any additional approval of the
Stockholders of the Company. For this purpose, “repricing” of Options shall
include, but not be limited to, any of the following actions (or any similar
action): (1) lowering the Exercise Price of an existing Option; (2) any action
which would be treated as a “repricing” under generally accepted accounting
principles; or (3) canceling of an existing Option at a time when its Exercise
Price exceeds the Fair Market Value of the underlying stock subject to such
Option, in exchange for another Option, a Restricted Stock Award, or other
equity in the Company.

 

7.3           Terms and Conditions of Stock
Appreciation Rights. A Stock Appreciation Right
may be granted in connection with all or any portion of a previously or
contemporaneously granted Option or not in connection with an Option.  A
Stock Appreciation Right shall entitle the Participant to receive upon exercise
or payment the excess of the Fair Market Value of a specified number of
Shares at the time of exercise, over a SAR Exercise Price that shall be
not less than the Exercise Price for that number of Shares in the case of a
Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option, or in the case of any other Stock
Appreciation Right, not less than one hundred percent (100%) of the Fair Market
Value of that number of Shares at the time the Stock Appreciation Right was
granted. The exercise of a Stock Appreciation Right shall result in a pro rata
surrender of the related Option to the extent the Stock Appreciation Right has
been exercised.

 

(a)           Payment.
Upon exercise or payment of a Stock Appreciation Right, the Company shall pay
to the Participant the appreciation in cash or Shares (at the aggregate Fair
Market Value on the date of payment or exercise) as provided in the Incentive
Award Agreement or, in the absence of such provision, as the Board may
determine.

 

(b)           Conditions
to Exercise. Each Stock Appreciation Right granted under the Plan
shall be exercisable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Board shall specify in the
Incentive Award Agreement; provided, however, that subsequent to the grant of a
Stock Appreciation Right, the Board, at any time before complete termination of
such Stock Appreciation Right, may accelerate the time or times at which such
Stock Appreciation Right may be exercised in whole or in part. Furthermore, if the recipient of a Stock
Appreciation Right receives a hardship distribution from a Code §401(k) plan of
the Company, or any Parent or Subsidiary, the Stock Appreciation Right may not
be exercised during the six (6) month period following the hardship
distribution, unless the Company determines that such exercise would not
jeopardize the tax-qualification of the Code §401(k) plan.

 

(c)           Transferability
of Stock Appreciation Rights. Except as otherwise provided in a
Participant’s Incentive Award Agreement, no Stock Appreciation Right granted
under the Plan may be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant’s
Incentive Award Agreement, all Stock Appreciation Rights granted to a
Participant under the Plan shall be exercisable, during the Participant’s
lifetime, only by the Participant; provided,
however, that in the event the Participant is incapacitated and
unable to exercise his or her Stock Appreciation Right, such Stock Appreciation
Right may be exercised by such Participant’s legal guardian, legal
representative, or other representative whom the Board deems appropriate based
on applicable facts and circumstances in accordance with the terms and
provisions of the Incentive Award Agreement governing such Stock Appreciation
Right. The determination of incapacity of a Participant and the determination
of the appropriate representative of the Participant shall be determined by the
Board in its sole and absolute discretion. Notwithstanding the foregoing,
except as otherwise provided in the Incentive Award Agreement, (A) a Stock
Appreciation Right which is granted in connection with the grant of a NQSO may
be transferred, but only with the NQSO, and (B) a Stock Appreciation Right
which is not granted in connection with the grant of a NQSO, may be transferred
by the Participant as a bona fide gift (i) to his spouse, lineal descendant or
lineal ascendant, siblings and children by adoption, (ii) to a trust for the
benefit of one or more individuals described in clause (i), or (iii) to a partnership
of which the only partners are one or more individuals described in clause (i),
in which case the transferee shall be subject to all provisions of the Plan,
the Incentive Award Agreement and other agreements with the Participant in
connection with the exercise of the Stock Appreciation Right. In the event of
such a gift, the Participant shall promptly notify the Board of such transfer
and deliver to the Board such written documentation as the Board may in its
discretion request, including, without limitation, the written acknowledgment
of the donee that the donee is subject to the provisions of the Plan, the
Incentive Award Agreement and other agreements with the Participant in
connection with the exercise of the Stock Appreciation Right.

 

10

 

(d)           Special
Provisions for Tandem SAR’s. A Stock Appreciation Right granted in
connection with an Option may only be exercised to the extent that the related
Option has not been exercised. A Stock Appreciation Right granted in connection
with an ISO (1) will expire no later than the expiration of the underlying ISO,
(2) may be for no more than the difference between the exercise price of the
underlying ISO and the Fair Market Value of the Shares subject to the underlying
ISO at the time the Stock Appreciation Right is exercised, (3) may be
transferable only when, and under the same conditions as, the underlying ISO is
transferable, and (4) may be exercised only (i) when the underlying ISO could
be exercised and (ii) when the Fair Market Value of the Shares subject to the
ISO exceeds the exercise price of the ISO.

 

(e)           Code §409A Requirements. A Stock
Appreciation Right must meet certain restrictions contained in Code §409A if it
is to avoid taxation under Code §409A
as a “nonqualified deferred compensation plan.” 
No Stock Appreciation Right should be granted under this Plan without
careful consideration of the impact of Code §409A with respect to such grant
upon both the Company and the recipient of the Stock Appreciation Right.

 

7.4           Terms and Conditions of
Restricted Stock Awards.

 

(a)             Grants of Restricted Stock Awards. Shares
awarded pursuant to Restricted Stock Awards shall be subject to such
restrictions as determined by the Board for periods determined by the Board. 
Restricted Stock Awards issued under the Plan may have restrictions which lapse
based upon the service of a Participant, or based upon the attainment (as
determined by the Board) of performance goals established by the Board, which
goals shall be pursuant to the business criteria listed in Section 14 to the
extent the Board intends the Restricted Stock Award to meet the
Performance-Based Exception, or based upon any other criteria that the Board
may determine appropriate. Any Restricted Stock Award which becomes exercisable
based on the attainment of performance goals must be granted by a Committee,
must have its performance goals determined by such a Committee based upon one
or more of the business criteria listed in Section 14, and must have the attainment
of such performance goals certified in writing by such a Committee in order to
meet the Performance-Based Exception. The Board may require a cash payment from
the Participant in exchange for the grant of a Restricted Stock Award or may
grant a Restricted Stock Award without the requirement of a cash payment to the
extent permitted under applicable law; provided, however, if the recipient of a
Restricted Stock Award receives a hardship distribution from a Code §401(k)
plan of the Company, or any Parent or Subsidiary, the recipient may not pay any
amount for such Restricted Stock Award during the six (6) month period
following the hardship distribution, unless the Company determines that such
payment would not jeopardize the tax-qualification of the Code §401(k) plan.

 

(b)             Acceleration of Award. The Board shall
have the power to permit, in its discretion, an acceleration of the expiration
of the applicable restrictions or the applicable period of such restrictions
with respect to any part or all of the Shares awarded to a Participant.

 

(c)             Necessity of Incentive Award Agreement. Each
grant of a Restricted Stock Award shall be evidenced by an Incentive Award
Agreement that shall specify the terms, conditions and restrictions regarding
the Shares awarded to a Participant, and shall incorporate such other terms and
conditions as the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan. The Board shall have complete discretion to modify
the terms and provisions of Restricted Stock Awards in accordance with Section
12 of this Plan.

 

(d)             Restrictions on Shares Awarded. Shares
awarded pursuant to Restricted Stock Awards shall be subject to such
restrictions as determined by the Board for periods determined by the Board. The
Board may impose such restrictions on any Shares acquired pursuant to a
Restricted Stock Award as it may deem advisable, including, without limitation,
vesting or performance-based restrictions, rights of the Company to re-purchase
Shares acquired pursuant to the Restricted Stock Award, voting restrictions,
investment intent restrictions, restrictions on transfer, “first refusal”
rights of the Company to purchase Shares acquired pursuant to the Restricted
Stock Award prior to their sale to any other person, “drag along” rights
requiring the sale of shares to a third party purchaser in certain
circumstances, “lock up” type restrictions in connection with public offerings
of the Company’s stock, restrictions or limitations or other provisions that
would be applied to stockholders under any applicable agreement among the
stockholders, and restrictions under applicable federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, and/or under any blue sky or state securities laws
applicable to such Shares.

 

11

 

(e)             Transferability of Restricted Stock Awards. Except
as otherwise permitted in the Incentive Award Agreement, a Restricted Stock
Award may not be transferred by the holder Participant, except upon the death
of the holder Participant by will or by the laws of descent and distribution.

 

(f)              Voting, Dividend & Other Rights. Unless
the applicable Incentive Award Agreement provides otherwise, holders of
Restricted Stock Awards shall be entitled to vote and shall receive dividends
during the periods of restriction.

 

(g)             Automatic
Grants to Directors. Automatic grants of Restricted Stock Awards
shall be made pursuant to Appendix A annually to Non-Employee Directors.

 

7.5           Terms
and Conditions of Restricted Stock Units.

 

(a)           Grants of Restricted Stock Units. A Restricted
Stock Unit shall entitle the Participant to receive one Share at such future
time and upon such terms as specified by the Board in the Incentive Award
Agreement evidencing such award. Restricted Stock Units issued under the Plan
may have restrictions which lapse based upon the service of a Participant, or
based upon other criteria that the Board may determine appropriate. The Board
may require a cash payment from the Participant in exchange for the grant of
Restricted Stock Units or may grant Restricted Stock Units without the
requirement of a cash payment; provided, however, if the recipient of a
Restricted Stock Unit receives a hardship distribution from a Code §401(k) plan
of the Company, or any Parent or Subsidiary, no payment for the Restricted
Stock Unit may be made by the recipient during the six (6) month period
following the hardship distribution, unless the Company determines that such
payment would not jeopardize the tax-qualification of the Code §401(k) plan.

 

(b)           Vesting of Restricted Stock Units. The
Board shall establish the vesting schedule applicable to Restricted
Stock Units and shall specify the times, vesting and performance goal
requirements, if any. Until the end of the period(s) of time specified in the
vesting schedule and/or the satisfaction of any performance criteria, the
Restricted Stock Units subject to such Incentive Award Agreement shall remain
subject to forfeiture. The performance goals established by the Board shall be
pursuant to the terms and the business criteria listed in Section 14 to the
extent the Board intends the Restricted Stock Unit to meet the
Performance-Based Exception.

 

(c)           Acceleration of Award. The Board shall have the power to permit,
in its sole discretion, an acceleration of the applicable restrictions or the
applicable period of such restrictions with respect to any part or all of the
Restricted Stock Units awarded to a Participant.

 

(d)           Necessity of Incentive Award Agreement. Each grant
of Restricted Stock Unit(s) shall be evidenced by an Incentive Award Agreement
that shall specify the terms, conditions and restrictions regarding the
Participant’s right to receive Share(s) in the future, and shall incorporate
such other terms and conditions as the Board, acting in its sole discretion,
deems consistent with the terms of this Plan. The Board shall have sole
discretion to modify the terms and provisions of Restricted Stock Unit(s) in
accordance with Section 12 of this Plan.

 

(e)           Transferability of Restricted Stock Units. Except as
otherwise provided in a Participant’s Restricted Stock Unit Award, no
Restricted Stock Unit granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated by the holder Participant,
except upon the death of the holder Participant by will or by the laws of
descent and distribution.

 

(f)            Voting, Dividend & Other Rights. Unless the
applicable Incentive Award Agreement provides for dividend equivalents pursuant
to Section 7.5(h) below, holders of Restricted Stock Units shall not be
entitled to vote or to receive dividends until they become owners of the Shares
pursuant to their Restricted Stock Units.

 

(g)           Code §409A Requirements. A Restricted Stock Unit must meet certain
restrictions contained in Code §409A if it is to avoid taxation under Code §409A as a “nonqualified deferred compensation plan.”  Restricted Stock Units shall be granted with
terms that require the delivery of the Shares or cash, as applicable, no later
than two and one-half months after the respective Restricted Stock Units vest,
unless such Restricted Stock Units have been drafted to comply with or
otherwise be exempt from Code §409A.

 

12

 

(h)           Dividend Equivalents. Unless otherwise determined by the Board at date of
grant, any Dividend Equivalents that are granted with respect to any Award of
Stock Units shall be either (A) paid with respect to such Stock Units at
the dividend payment date in cash or in Shares of unrestricted Stock having a
Fair Market Value equal to the amount of such dividends or (B) deferred
with respect to such Stock Units and the amount or value thereof automatically
deemed reinvested in additional Stock Units, other Awards or other investment
vehicles, as the Board shall determine or permit the Participant to elect.

 

7.6           Dividend Equivalents. The Board is authorized to grant
Dividend Equivalents to any Eligible Recipient entitling the Eligible Recipient
to receive cash, Shares, other Awards, or other property equal in value to
dividends paid with respect to a specified number of Shares, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Incentive Award. The terms of an award of Dividend
Equivalents shall be set forth in a written Incentive Award Agreement which
shall contain provisions determined by the Board and not inconsistent with the
Plan. The Board may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Board may
specify. Notwithstanding any other provision of the Plan, unless otherwise
exempt from Section 409A of the Code or otherwise specifically determined by
the Board, each Dividend Equivalent shall be structured to avoid the imposition
of any excise tax under Section 409A of the Code.

 

7.7           Other Stock-Based Awards. The Board is authorized, subject
to limitations under applicable law, to grant to any Eligible Recipient such
other Incentive Awards that may be denominated or payable in, valued in whole
or in part by reference to, or otherwise based on, or related to, Shares, as
deemed by the Board to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Shares, purchase rights for Shares, Incentive
Awards with value and payment contingent upon performance of the Company or any
other factors designated by the Board, and Incentive Awards valued by reference
to the book value of Shares or the value of securities of or the performance of
specified Affiliates or business units. The Board shall determine the terms and
conditions of such Other Stock-Based Awards. The terms of any Incentive Award
pursuant to this Section shall be set forth in a written Incentive Award
Agreement which shall contain provisions determined by the Board and not
inconsistent with the Plan. Shares delivered pursuant to an Incentive Award in
the nature of a purchase right granted under this Section shall be
purchased for such consideration (including without limitation loans from the
Company or an Affiliate), paid for at such times, by such methods, and in such
forms, including, without limitation, cash, Shares, other Incentive Awards or
other property, as the Board shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section. Notwithstanding any other provision of the Plan, unless otherwise
exempt from Section 409A of the Code or otherwise specifically determined by
the Board, each such Award shall be structured to avoid the imposition of any
excise tax under Section 409A of the Code.

 

Section 8.

SECURITIES REGULATION

 

Each
Incentive Award Agreement may provide that, upon the receipt of Shares as a
result of the exercise of an Incentive Award or otherwise, the Participant
shall, if so requested by the Company, hold such Shares for investment and not
with a view of resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement satisfactory to the
Company to that effect. Each Incentive Award Agreement may also provide that,
if so requested by the Company, the Participant shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Shares unless a registration statement shall be in effect with respect
to such Shares under the Securities Act of 1933, as amended (“1933 Act”), and
any applicable state securities law or, unless he or she shall have furnished
to the Company an opinion, in form and substance satisfactory to the Company,
of legal counsel acceptable to the Company, that such registration is not
required. Certificates representing the Shares transferred upon the exercise of
an Incentive Award granted under this Plan may at the discretion of the Company
bear a legend to the effect that such Shares have not been registered under the
1933 Act or any applicable state securities law and that such Shares may not be
sold or offered for sale in the absence of an effective registration statement
as to such Shares under the 1933 Act and any applicable state securities law or
an opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required.

 

13

 

Section 9.

LIFE OF PLAN

 

No
Incentive Award shall be granted under this Plan on or after the earlier of:

 

(a)           the tenth (10th) anniversary of the effective date of
this Plan (as determined under Section 4 of this Plan), in which event this
Plan otherwise thereafter shall continue in effect until all outstanding
Incentive Awards have been exercised in full or no longer are exercisable; or

 

(b)           the date on which all of the Shares
reserved under Section 3 of this Plan have (as a result of the exercise of
Incentive Awards granted under this Plan or lapse of all restrictions under a
Restricted Stock Award or Restricted Stock Unit) been issued or no longer are
available for use under this Plan, in which event this Plan also shall
terminate on such date.

 

This Plan shall continue in effect until all
outstanding Incentive Awards have been exercised in full or are no longer
exercisable and all Restricted Stock Awards or Restricted Stock Units have
vested or been forfeited.

 

Section 10.

ADJUSTMENT AND CORPORATE
TRANSACTION

 

Notwithstanding
anything in Section 12 to the contrary, the number of Shares reserved under
Section 3 of this Plan, the limit on the number of Shares that may be granted
during a calendar year to any individual under Section 3 of this Plan, the
number of Shares subject to Incentive Awards granted under this Plan, and the
Exercise Price of any Options and the SAR Exercise Price of any Stock
Appreciation Rights, shall be adjusted by the Board in an equitable manner to
reflect any change in the capitalization of the Company, including, but not
limited to, such changes as stock dividends or stock splits. Furthermore, the
Board shall adjust (in a manner that satisfies the requirements of Code
§424(a)) the number of Shares reserved under Section 3, and the number of
Shares subject to Incentive Awards granted under this Plan, and the Exercise
Price of any Options and the SAR Exercise Price of any Stock Appreciation
Rights in the event of any corporate transaction described in Code §424(a) that
provides for the substitution or assumption of such Incentive Awards. If any
adjustment under this Section creates a fractional Share or a right to acquire
a fractional Share, such fractional Share shall be disregarded, and the number
of Shares reserved under this Plan and the number subject to any Incentive
Awards granted under this Plan shall be the next lower number of Shares,
rounding all fractions downward. An adjustment made under this Section by the
Board shall be conclusive and binding on all affected persons and, further,
shall not constitute an increase in the number of Shares reserved under Section
3.

 

In the
event of a corporate transaction described in Code §424(a) other than such
corporate transaction that also qualifies as a Change of Control, all Incentive
Awards shall be either assumed, continued or substituted for in connection with
the corporate transaction. Any assumption or substitution shall not result in
any decrease in the benefits or economic value provided under each Incentive
Award.

 

Section 11.

CHANGE OF CONTROL OF THE COMPANY

 

11.1         General Rule for Options. Except as otherwise provided in an
Incentive Award Agreement, if a Change of Control occurs, and if the agreements
effectuating the Change of Control do not provide for the assumption or
substitution of all Options granted under this Plan, with respect to any Option
granted under this Plan that is not so assumed or substituted (a “Non-Assumed
Option”), the Committee, in its sole and absolute discretion, may, with respect
to any or all of such Non-Assumed Options, take any or all of the following
actions to be effective as of the date of the Change of Control (or as of any
other date fixed by the Committee occurring within the thirty (30) day period
ending on the date of the Change of Control, but only if such action remains
contingent upon the effectuation of the Change of Control) (such date referred
to as the “Action Effective Date”):

 

14

 

(a)           Accelerate the vesting and/or
exercisability of such Non-Assumed Option; and/or

 

(b)           Unilaterally cancel any such Non-Assumed
Option which has not vested and/or which has not become exercisable as of the
Action Effective Date; and/or

 

(c)           Unilaterally cancel such Non-Assumed
Option in exchange for:

 

(i)              whole and/or fractional Shares (or for
whole Shares and cash in lieu of any fractional Share) that, in the aggregate,
are equal in value to the excess of the Fair Market Value of the Shares that
could be purchased subject to such Non-Assumed Option determined as of the
Action Effective Date (taking into account vesting and/or exercisability) over
the aggregate Exercise Price for such Shares; or

 

(ii)           cash or other property equal in value to
the excess of the Fair Market Value of the Shares that could be purchased
subject to such Non-Assumed Option determined as of the Action Effective Date
(taking into account vesting and/or exercisability) over the aggregate Exercise
Price for such Shares; and/or

 

(d)           Unilaterally cancel such Non-Assumed
Option after providing the holder of such Option with (1) an opportunity to
exercise such Non-Assumed Option to the extent vested and/or exercisable within
a specified period prior to the date of the Change of Control, and (2) notice
of such opportunity to exercise prior to the commencement of such specified
period; and/or

 

(e)           Unilaterally cancel such Non-Assumed
Option and notify the holder of such Option of such action, but only if the
Fair Market Value of the Shares that could be purchased subject to such
Non-Assumed Option determined as of the Action Effective Date (taking into
account vesting and/or exercisability) does not exceed the aggregate Exercise
Price for such Shares.

 

However, notwithstanding the foregoing, to the extent
that the recipient of a Non-Assumed Option is an Insider and subject to Section
16 of the Exchange Act at the time of the Change of Control, payment of cash in
lieu of whole or fractional Shares or shares of a successor may only be made to
the extent that such payment (1) has met the requirements of an exemption under
Rule 16b-3 promulgated under the Exchange Act, or (2) is a subsequent
transaction the terms of which were provided for in a transaction initially
meeting the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act. Unless an Incentive Award Agreement provides otherwise, the
payment of cash in lieu of whole or fractional Shares or in lieu of whole or
fractional shares of a successor shall be considered a subsequent transaction
approved by the original grant of an Option.

 

11.2         General Rule for SARs. Except as otherwise provided in an
Incentive Award Agreement, if a Change of Control occurs, and if the agreements
effectuating the Change of Control do not provide for the assumption or
substitution of all Stock Appreciation Rights granted under this Plan, with
respect to any Stock Appreciation Right granted under this Plan that is not so
assumed or substituted (a “Non-Assumed SAR”), the Committee, in its sole and
absolute discretion, may, with respect to any or all of such Non-Assumed SARs,
take either or both of the following actions to be effective as of the date of
the Change of Control (or as of any other date fixed by the Committee occurring
within the thirty (30) day period ending on the date of the Change of Control,
but only if such action remains contingent upon the effectuation of the Change
of Control) (such date referred to as the “Action Effective Date”):

 

(a)           Accelerate the vesting and/or
exercisability of such Non-Assumed SAR; and/or

 

(b)           Unilaterally cancel any such Non-Assumed
SAR which has not vested or which has not become exercisable as of the Action
Effective Date; and/or

 

(c)           Unilaterally cancel such Non-Assumed SAR
in exchange for:

 

(i)            whole and/or fractional Shares (or for
whole Shares and cash in lieu of any fractional Share) that, in the aggregate,
are equal in value to the excess of the Fair Market Value of the Shares subject
to such

 

15

 

Non-Assumed SAR determined as of the Action Effective
Date (taking into account vesting and/or exercisability) over the SAR Exercise
Price for such Non-Assumed SAR; or

 

(ii)           cash or other property equal in value to
the excess of the Fair Market Value of the Shares subject to such Non-Assumed
SAR determined as of the Action Effective Date (taking into account vesting
and/or exercisability) over the SAR Exercise Price for such Non-Assumed SAR;
and/or

 

(d)           Unilaterally cancel such Non-Assumed SAR
after providing the holder of such SAR with (1) an opportunity to exercise such
Non-Assumed SAR to the extent vested and/or exercisable within a specified
period prior to the date of the Change of Control, and (2) notice of such
opportunity to exercise prior to the commencement of such specified period;
and/or

 

(e)           Unilaterally cancel such Non-Assumed SAR
and notify the holder of such SAR of such action, but only if the Fair Market
Value of the Shares that could be purchased subject to such Non-Assumed SAR
determined as of the Action Effective Date (taking into account vesting and/or
exercisability) does not exceed the SAR Exercise Price for such Non-Assumed
SAR.

 

However, notwithstanding the foregoing, to the extent
that the recipient of a Non-Assumed SAR is an Insider and subject to Section 16
of the Exchange Act at the time of the Change of Control, payment of cash in
lieu of whole or fractional Shares or shares of a successor may only be made to
the extent that such payment (1) has met the requirements of an exemption under
Rule 16b-3 promulgated under the Exchange Act, or (2) is a subsequent
transaction the terms of which were provided for in a transaction initially
meeting the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act. Unless an Incentive Award Agreement provides otherwise, the
payment of cash in lieu of whole or fractional Shares or in lieu of whole or
fractional shares of a successor shall be considered a subsequent transaction
approved by the original grant of a SAR.

 

11.3         General Rule for Restricted Stock Units. Except as otherwise provided in an
Incentive Award Agreement, if a Change of Control occurs, and if the agreements
effectuating the Change of Control do not provide for the assumption or
substitution of all Restricted Stock Units granted under this Plan, with
respect to any Restricted Stock Unit granted under this Plan that is not so
assumed or substituted (a “Non-Assumed RSU”), the Committee, in its sole and
absolute discretion, may, with respect to any or all of such Non-Assumed RSUs,
take either or both of the following actions to be effective as of the date of
the Change of Control (or as of any other date fixed by the Committee occurring
within the thirty (30) day period ending on the date of the Change of Control,
but only if such action remains contingent upon the effectuation of the Change
of Control) (such date referred to as the “Action Effective Date”):

 

(a)           Accelerate the vesting of such
Non-Assumed RSU; and/or

 

(b)           Unilaterally cancel any such Non-Assumed
RSU which has not vested as of the Action Effective Date; and/or

 

(c)           Unilaterally cancel such Non-Assumed RSU
in exchange for:

 

(i)            whole and/or fractional Shares (or for
whole Shares and cash in lieu of any fractional Share) that are equal to the
number of Shares subject to such Non-Assumed RSU determined as of the Action
Effective Date (taking into account vesting); or

 

(ii)           cash or other property equal in value to
the Fair Market Value of the Shares subject to such Non-Assumed RSU determined
as of the Action Effective Date (taking into account vesting); and/or

 

(d)           Unilaterally cancel such Non-Assumed RSU
and notify the holder of such RSU of such action, but only if the Fair Market
Value of the Shares that were subject to such Non-Assumed RSU determined as of
the Action Effective Date (taking into account vesting) is zero.

 

16

 

However, notwithstanding the foregoing, to the extent
that the recipient of a Non-Assumed RSU is an Insider and subject to Section 16
of the Exchange Act at the time of the Change of Control, payment of cash in
lieu of whole or fractional Shares or shares of a successor may only be made to
the extent that such payment (1) has met the requirements of an exemption under
Rule 16b-3 promulgated under the Exchange Act, or (2) is a subsequent
transaction the terms of which were provided for in a transaction initially
meeting the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act. Unless an Incentive Award Agreement provides otherwise, the
payment of cash in lieu of whole or fractional Shares or in lieu of whole or
fractional shares of a successor shall be considered a subsequent transaction
approved by the original grant of an RSU.

 

11.4         General Rule for Restricted Stock Awards. Except as otherwise provided in an
Incentive Award Agreement, if a Change of Control occurs, and if the agreements
effectuating the Change of Control do not provide for the assignment of the
forfeiture or repurchase rights for all Restricted Stock Awards granted under
this Plan, with respect to any Restricted Stock Award granted under this Plan
where the forfeiture or repurchase rights are not assigned (a “Non-Assumed
Restricted Stock Award”), the Committee, in its sole and absolute discretion,
may, with respect to any or all of such Non-Assumed Restricted Stock Award,
take either or both of the following actions to be effective as of the date of
the Change of Control (or as of any other date fixed by the Committee occurring
within the thirty (30) day period ending on the date of the Change of Control,
but only if such action remains contingent upon the effectuation of the Change
of Control) (such date referred to as the “Action Effective Date”):

 

(e)           Accelerate the vesting of such
Non-Assumed Restricted Stock Award (i.e., cancel any forfeiture or repurchase
right); and/or

 

(f)            Unilaterally exercise the forfeiture or
repurchase right for any such Non-Assumed Restricted Stock Award which has not
vested as of the Action Effective Date; and/or

 

(g)           Unilaterally repurchase such Non-Assumed
Restricted Stock Award in exchange for cash or other property equal in value to
the Fair Market Value of the Shares subject to such Non-Assumed Restricted
Stock Award determined as of the Action Effective Date (taking into account vesting);
and/or

 

(h)           Unilaterally cancel such Non-Assumed
Restricted Stock Award and notify the holder of such Restricted Stock Award of
such action, but only if the Fair Market Value of the Shares that were subject
to such Non-Assumed Restricted Stock Award determined as of the Action
Effective Date (taking into account vesting) is zero.

 

However, notwithstanding the foregoing, to the extent
that the recipient of a Non-Assumed Restricted Stock Award is an Insider and
subject to Section 16 of the Exchange Act at the time of the Change of Control,
payment of cash in lieu of whole or fractional Shares or shares of a successor
may only be made to the extent that such payment (1) has met the requirements
of an exemption under Rule 16b-3 promulgated under the Exchange Act, or (2) is
a subsequent transaction the terms of which were provided for in a transaction
initially meeting the requirements of an exemption under Rule 16b-3 promulgated
under the Exchange Act. Unless an Incentive Award Agreement provides otherwise,
the payment of cash in lieu of whole or fractional Shares or in lieu of whole
or fractional shares of a successor shall be considered a subsequent
transaction approved by the original grant of a Restricted Stock Award.

 

11.5         General Rule for Other Incentive Award Agreements. If a Change of Control occurs, then,
except to the extent otherwise provided in the Incentive Award Agreement
pertaining to a particular Incentive Award or as otherwise provided in this
Plan, each Incentive Award shall be governed by applicable law and the
documents effectuating the Change of Control.

 

Section 12.

AMENDMENT OR TERMINATION

 

This
Plan may be amended by the Board from time to time to the extent that the Board
deems necessary or appropriate; provided, however, no such amendment shall be
made absent the approval of the stockholders of the Company (a) to increase the
number of Shares reserved under Section 3, except as set forth in Section 10,
(b) to extend the maximum life of the Plan under Section 9 or the maximum
exercise period under Section 7, (c) to decrease the minimum Exercise

 

17

 

Price under Section 7, or (d) to change the
designation of Eligible Recipients eligible for Incentive Awards under Section
6. Stockholder approval of other material amendments (such as an expansion of
the types of awards available under the Plan, an extension of the term of the
Plan, a change to the method of determining the Exercise Price of Options
issued under the Plan, or a change to the provisions of Section 7.2(j)) may
also be required pursuant to rules promulgated by an established stock exchange
or a national market system if the Company is, or become, listed or traded on
any such established stock exchange or national market system, or for the Plan
to continue to be able to issue Incentive Awards which meet the
Performance-Based Exception. The Board also may suspend the granting of
Incentive Awards under this Plan at any time and may terminate this Plan at any
time. The Company shall have the right to modify, amend or cancel any Incentive
Award after it has been granted if (I) the modification, amendment or
cancellation does not diminish the rights or benefits of the Incentive Award
recipient under the Incentive Award (provided, however, that a modification,
amendment or cancellation that results solely in a change in the tax
consequences with respect to an Incentive Award shall not be deemed as a
diminishment of rights or benefits of such Incentive Award), (II) the
Participant consents in writing to such modification, amendment or
cancellation, (III) there is a dissolution or liquidation of the Company, (IV)
this Plan and/or the Incentive Award Agreement expressly provides for such
modification, amendment or cancellation, or (V) the Company would otherwise
have the right to make such modification, amendment or cancellation by
applicable law.

 

Section 13.

MISCELLANEOUS

 

13.1         Stockholder Rights. No Participant shall have any rights as a
stockholder of the Company as a result of the grant of an Incentive Award to
him or to her under this Plan or his or her exercise of such Incentive Award
pending the actual delivery of Shares subject to such Incentive Award to such
Participant.

 

13.2         No Guarantee of Continued
Relationship. The
grant of an Incentive Award to a Participant under this Plan shall not
constitute a contract of employment and shall not confer on a Participant any
rights upon his or her termination of employment or relationship with the
Company in addition to those rights, if any, expressly set forth in the
Incentive Award Agreement that evidences his or her Incentive Award.

 

13.3         Withholding. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the Company
as a condition precedent for the fulfillment of any Incentive Award, an amount
sufficient to satisfy Federal, state and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan and/or any action taken by a Participant with
respect to an Incentive Award. Whenever Shares are to be issued to a
Participant upon exercise of an Option or a Stock Appreciation Right, or
satisfaction of conditions under a Restricted Stock Unit, or grant of or
substantial vesting of a Restricted Stock Award, the Company shall have the
right to require the Participant to remit to the Company, as a condition of
exercise of the Option or Stock Appreciation Right, or as a condition to the
fulfillment of the Restricted Stock Unit, or as a condition to the grant or
substantial vesting of the Restricted Stock Award, an amount in cash (or,
unless the Incentive Award Agreement provides otherwise, in Shares) sufficient
to satisfy federal, state and local withholding tax requirements at the time of
such exercise, satisfaction of conditions, or grant or substantial vesting. However,
notwithstanding the foregoing, to the extent that a Participant is an Insider,
satisfaction of withholding requirements by having the Company withhold Shares
may only be made to the extent that such withholding of Shares (1) has met the
requirements of an exemption under Rule 16b-3 promulgated under the Exchange
Act, or (2) is a subsequent transaction the terms of which were provided for in
a transaction initially meeting the requirements of an exemption under Rule
16b-3 promulgated under the Exchange Act. Unless the Incentive Award Agreement
provides otherwise, the withholding of shares to satisfy federal, state and
local withholding tax requirements shall be a subsequent transaction approved
by the original grant of an Incentive Award. Notwithstanding the foregoing, in
no event shall payment of withholding taxes be made by a retention of Shares by
the Company unless the Company retains only Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld.

 

13.4         Notification of Disqualifying
Dispositions of ISO Options. If a Participant sells or otherwise disposes of any of
the Shares acquired pursuant to an Option that is an ISO on or before the later
of (1) the date two (2) years after the date of grant of such Option, or (2)
the date one (1) year after the exercise of such Option, then the Participant
shall immediately notify the Company in writing of such sale or disposition and
shall cooperate with the Company in providing sufficient information to the
Company for the Company to properly report such sale or disposition to the
Internal Revenue

 

18

 

Service. The Participant acknowledges and agrees that
he may be subject to federal, state and/or local tax withholding by the Company
on the compensation income recognized by Participant from any such early
disposition, and agrees that he shall include the compensation from such early
disposition in his gross income for federal tax purposes. Participant also
acknowledges that the Company may condition the exercise of any Option that is
an ISO on the Participant’s express written agreement with these provisions of
this Plan.

 

13.5         Transfer. The transfer of an Employee between or
among the Company, a Subsidiary or a Parent shall not be treated as a
termination of his or her employment under this Plan. However, notwithstanding
the foregoing, a termination of employment may nonetheless occur for purposes
of determining whether an Option will satisfy the requirements of the Code to
be an ISO.

 

13.6         Construction. This Plan shall be construed under the
laws of the State of Maryland.

 

Section 14.

PERFORMANCE CRITERIA

 

14.1         Performance Goal Business Criteria.
Unless and
until the Board proposes for stockholder vote and stockholders approve a change
in the general performance measures set forth in this Section, the attainment
of which may determine the degree of payout and/or vesting with respect to
Incentive Awards to Employees and Key Persons pursuant to this Plan which are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used by a Committee composed of two (2) or more Outside
Directors for purposes of such grants shall be chosen from among the following:

 

(a)           Earnings per share;

 

(b)           Net income (before or after taxes);

 

(c)           Return measures (including, but not
limited to, return on assets, equity or sales);

 

(d)           Cash flow return on investments which
equals net cash flows divided by owners equity;

 

(e)           Earnings before or after taxes,
depreciation and/or amortization;

 

(f)            Gross revenues;

 

(g)           Operating income (before or after taxes);

 

(h)           Total stockholder returns;

 

(i)            Corporate performance indicators (indices
based on the level of certain services provided to customers);

 

(j)            Cash generation, profit and/or revenue
targets;

 

(k)           Growth measures, including revenue
growth, as compared with a peer group or other benchmark;

 

(l)            Share price (including, but not limited
to, growth measures and total stockholder return); and/or

 

(m)          Pre-tax profits.

 

14.2         Discretion in Formulation of
Performance Goals. The Board shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established performance goals; provided,
however, that Incentive

 

19

 

Awards that are to qualify for the Performance-Based
Exception may not be adjusted upward (although the Committee shall retain the
discretion to adjust such Incentive Awards downward).

 

14.3         Performance Periods. The Board shall have the discretion to
determine the period during which any performance goal must be attained with
respect to an Incentive Award. Such period may be of any length, and must be
established prior to the start of such period or within the first ninety (90)
days of such period (provided that the performance criteria is not in any event
set after 25% or more of such period has elapsed).

 

14.4         Modifications to Performance Goal
Business Criteria. In the event that the applicable tax and/or securities laws change to
permit Board discretion to alter the governing performance measures noted above
without obtaining stockholder approval of such changes, the Board shall have
sole discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Board determines that it is advisable to grant
Incentive Awards that shall not qualify for the Performance-Based Exception,
the Board may make such grants without satisfying the requirements of Code
§162(m); otherwise, a Committee composed exclusively of two (2) of more Outside
Directors must make such grants.

 

20

 

APPENDIX A

 

1.             Restricted Stock
Award Grant Upon Appointment as a Non-Employee Director:   As of the date on which an individual becomes a
Non-Employee Director (the “Appointment Grant Date”), such individual shall
automatically, without any further action necessary on the part of the Board or
any committee thereof, be granted a Restricted Stock Award effective as of the
Appointment Grant Date equal to one thousand (1,000) Shares.

 

2.             Option Grant Upon
Election as Outside Director:   Subject to paragraph 3 below, as of the date
on which an individual is elected or re-elected by the stockholders of the
Company to serve as a Non-Employee Director and becomes or continues as a Non-Employee
Director, such individual shall automatically, without any further action
necessary on the part of the Board or any committee thereof, be granted a
Restricted Stock Award equal to one thousand (1,000) Shares effective as of
such date, provided that such individual is not an Employee of the Company as
of such date.

 

3.             Vesting:  Restricted Stock Awards granted automatically
under the foregoing provisions shall vest on the first anniversary of the date
of grant. Except as provided by the Board at the time of grant or thereafter,
in the event a Non-Employee Director’s service to the Company terminates before
the Restricted Stock Award has vested, any such Restricted Stock Award granted
to such Non-Employee Director that has not vested shall be forfeited and the Non-Employee
Director shall have no further right or interest in such forfeited Restricted
Stock Award.

 

4.             Miscellaneous:

 

a.             Except as otherwise
defined in this Appendix, the defined terms used in this Appendix shall have
the same meaning as those in the Plan.

 

b.             This Appendix
is incorporated as a part of the Plan and this Appendix A and all Restricted Stock Awards granted hereunder
are subject to all of the terms and
conditions of the Plan.

 

21

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