Document:

Exhibit
10.21

 

AMENDED AND RESTATED

SHAREHOLDERS AGREEMENT

 

AFFILIATES INSURANCE COMPANY

 

This
Amended and Restated Shareholders Agreement (this “Agreement”), dated December 16,
2009, by and among Affiliates Insurance Company, an Indiana insurance company (the
“Company”), Five Star Quality Care, Inc., a Maryland corporation (“FVE”),
Hospitality Properties Trust, a Maryland real estate investment trust (“HPT”),
HRPT Properties Trust, a Maryland real estate investment trust (“HRP”),
Senior Housing Properties Trust, a Maryland real estate investment trust (“SNH”),
TravelCenters of America LLC, a Delaware limited liability company (“TA”),
Reit Management & Research LLC, a Delaware limited liability company (“RMR”,
and together with FVE, HPT, HRP, SNH and TA, the “Original Shareholders”),
and Government Properties Income Trust, a Maryland real estate investment trust
(“GOV”, and together with the Original Shareholders, the “Shareholders”),
amends and restates the Shareholders Agreement (the “Original Shareholders Agreement”),
dated February 27, 2009 (the “Original Date”), by and among the
Company and the Original Shareholders, effective as of the date first set forth
above.

 

RECITALS

 

WHEREAS,
the Company has been formed and licensed as an insurance company domiciled in
the State of Indiana;

 

WHEREAS,
the Original Shareholders previously made the capital contributions to the
Company contemplated by Section 1.1 of this Agreement;

 

WHEREAS,
in connection with the purchase by GOV from the Company of 20,000 shares of common
stock, par value of $10.00 per share, of the Company (the “Shares”)
pursuant to a Subscription Agreement (the “GOV Subscription Agreement”)
to be entered into by the Company and GOV, concurrently with the execution and
delivery of this Agreement, the Company, the Original Shareholders and GOV
desire to enter into this Agreement to, among other things, add GOV as a
Shareholder hereunder; and

 

WHEREAS,
the Shareholders and the Company desire to enter into this Agreement in order
to set forth certain agreements and understandings relating to the business and
governance of the Company, the Shares held by the Shareholders and certain
other matters.

 

 

NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:

 

ARTICLE
I

 

INVESTMENT
IN THE COMPANY; FORMATION AND LICENSING EXPENSES

 

1.1                                 Share Issuances to Original Shareholders.

 

(a)                                  On or about the Original Date, the
Company issued and sold to each Original Shareholder, and each Original
Shareholder purchased from the Company, 100 Shares at a purchase price of
$250.00 per Share.

 

(b)                                 Within five business days after the
Company notified the Original Shareholders that the Department of Insurance of
the State of Indiana had notified the Company that it intended to commence its
financial review of the Company, the Company issued and sold to each Original
Shareholder, and each Original Shareholder purchased from the Company, an
additional 19,900 Shares at a purchase price of $250.00 per Share.

 

1.2                                 Future Share Issuances.  No Shareholder shall be obligated
to purchase additional Shares or any other securities of the Company and any
future proposed issuance and sale of Shares or any other securities of the
Company shall be subject to Section 3.2, except to the extent otherwise
provided under this Agreement; provided, however, that the parties hereto
acknowledge that the Company may need to seek additional capital in the future
and that it is the intention of the Shareholders that they each may, but shall
not be obligated to, contribute to the Company up to an additional $5 million
of capital during the period between the second and fifth anniversaries of the
Original Date.

 

1.3                                 Formation and Licensing Expenses.  The Company shall pay for all
costs, fees and expenses in connection with the formation and licensing of the
Company as an Indiana insurance company.  The Original Shareholders shall
reimburse the Company for such amounts paid by the Company prior to the date
hereof in equal proportion.  The Shareholders shall reimburse the Company
for such amounts paid by the Company on or after the date hereof in equal
proportion.

 

1.4                                 Share Issuance to GOV.  As described in the recitals,
concurrently with the execution and delivery of this Agreement, GOV is
purchasing 20,000 Shares from the Company pursuant to the GOV Subscription
Agreement and, upon such purchase, GOV shall then become a Shareholder
effective as of such purchase.

 

2

 

ARTICLE
II

 

BOARD
COMPOSITION

 

2.1                                 Board Composition.

 

(a)                                  For as long as the Shareholders
collectively own a majority of the issued and outstanding Shares, the board of
directors of the Company (the “Board”) shall consist of not less than
five nor more than fifteen members, with the actual number determined in
accordance with the Bylaws of the Company, as in effect from time to time, and
subject in all instances to this Section 2.1.  As of the date of this
Agreement, the Board shall initially consist of thirteen members.  For so
long as required by applicable Indiana law, at least one member of the Board
shall be an Indiana resident.  Except as otherwise provided in Section 2.1(c),
no Shareholder having a right to designate any director pursuant to this Article II
shall be required to designate an Indiana resident as a director pursuant to
such right; provided, however, that this sentence shall in no way limit the
application of the immediately preceding sentence.

 

(b)                                 For so long as a Shareholder (other than
RMR) owns not less than 10%  of the  issued and outstanding Shares, such
Shareholder shall have the right to designate two directors for election to the
Board.

 

(c)                                  For so long as RMR owns not less than 10%  of the  issued
and outstanding Shares, RMR shall have the right to designate three directors
for election to the Board.  For so long as RMR has the right to designate
directors pursuant to the immediately preceding sentence, Indiana law requires
the Board to include an Indiana resident as a director of the Company and no
other Shareholder designates an Indiana resident as a director of the Company,
RMR shall designate at least one Indiana resident to be a director.

 

(d)                                 Each Shareholder will vote, execute and
deliver written consents and take all other necessary action (including, if
necessary, causing the Company to call a special meeting of shareholders of the
Company) in favor of the election of each director designated by a Shareholder
in accordance with this Article II and otherwise to ensure that the
composition of the Board is at all times as set forth in this Article II. 
Each Shareholder agrees that it will not vote any of its Shares in favor of
removal of any director designated by another Shareholder unless such other
Shareholder shall have consented to such removal in writing.  Each
Shareholder agrees to cause to be called, if necessary, a special meeting of
shareholders of the Company and to vote all the Shares owned by such
Shareholder for, or to take all actions in lieu of any such meeting necessary
to cause, the removal of any director designated by such Shareholder if the
Shareholder entitled to designate such director requests in writing, signed by
such Shareholder, such director’s removal for any reason or no reason.

 

(e)                                  If, as a result of death, disability,
retirement, resignation, removal or otherwise, there shall exist or occur any
vacancy with respect to any director previously designated by a Shareholder in
accordance with such Shareholder’s right under this Article II to so
designate such director, such Shareholder shall have the right to designate a
replacement director.  Upon such designation, the Shareholders shall
promptly take all action necessary to ensure the election of such replacement
director to fill the unexpired term of the director whom

 

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such new director is
replacing, including, if necessary, calling a special meeting of shareholders
of the Company and voting their Shares, or executing any written consent in
lieu thereof, in favor of the election of such director.

 

ARTICLE
III

 

TRANSFER
OF SHARES; 

PREEMPTIVE RIGHTS; CALL RIGHTS

 

3.1                                 Transfer of Shares; No Pledging of Shares.

 

(a)                                  The Shareholders may not, directly or
indirectly, transfer any Shares, except that a Shareholder may transfer Shares
owned by it to a wholly owned subsidiary of such Shareholder, to another
Shareholder or to a wholly owned subsidiary of another Shareholder.  Any
purported transfer of Shares in contravention of this Section 3.1 shall be
null and void and of no force or effect.

 

(b)                                 The Shareholders may not pledge their
Shares (other than pledges arising from the operation of law and not as a
result of the Shareholder’s express granting of a pledge); provided, however,
that any pledge or other lien, charge or encumbrance which may arise by
application of the terms of any agreement, contract, license, permit or
instrument existing, for any of the Original Shareholders, on the Original
Date, and for GOV, on the date hereof (an “Existing Pledge”), on a
Shareholder’s Shares shall not be a violation of this Section 3.1(b); and
provided further, however, any transfer which results from exercise of rights
under a permitted lien, charge or encumbrance shall be subject to the call
rights of the Company and the other Shareholders set forth in Section 3.3
to the fullest extent permitted by applicable law and existing contracts as if
such a transfer constitutes a “Change of Control”.  Any Shareholder whose
Shares would be subject to an Existing Pledge shall use best efforts to cause
the pledgee under an Existing Pledge, prior to any exercise by the pledgee of
its rights on the Shareholder’s Shares, to take all actions under applicable
law which are required to be taken prior to any such exercise, including
obtaining any necessary approvals from the Indiana Department of Insurance and
Indiana Insurance Commissioner.

 

3.2                                 Preemptive Rights.

 

(a)                                  If, at any time after the date hereof,
the Company wishes to issue any capital stock of the Company or any other
securities convertible into or exchangeable or exercisable for capital stock of
the Company (collectively, “New Securities”) to any person or entity
(the “Subject Purchaser”), then the Company shall first offer the
Appropriate Percentage (as defined herein) of the New Securities (the “Allocated
Shares”) to each Shareholder (each, a “Preemptive Rightholder” and
collectively, the “Preemptive Rightholders”) by sending written notice
(the “New Issuance Notice”) to each of the Preemptive Rightholders,
which New Issuance Notice shall state the terms of such proposed issuance,
including the number of New Securities proposed to be issued and the proposed
purchase price per security of the New Securities (the “Proposed Price”). 
Upon delivery of the New Issuance Notice, such offer shall be irrevocable
unless and until the Company shall have terminated the contemplated issuance of
New Securities

 

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in its entirety at which
time the rights set forth herein shall be applicable to any proposed issuance
subsequent to any such termination.  For purposes of this Section 3.2,
“Appropriate Percentage” shall mean that percentage of the New
Securities determined by dividing (i) the total number of Shares then
owned by a Preemptive Rightholder by (ii) the total number of Shares owned
by all the Preemptive Rightholders.

 

(b)                                 For a period of 20 days after the giving
of the New Issuance Notice pursuant to Section 3.2(a) (the “Initial
Preemptive Subscription Period”), each of the Preemptive Rightholders shall
have the right to purchase, in whole or in part, the Allocated Shares offered
to such Preemptive Rightholder as determined pursuant to Section 3.2(a) at
a purchase price equal to the Proposed Price and upon the terms and conditions
set forth in the New Issuance Notice.

 

(c)                                  The right of each Preemptive Rightholder
to purchase the New Securities so offered under Section 3.2(b) shall
be exercisable by delivering written notice of the exercise thereof, prior to
the expiration of the Initial Preemptive Subscription Period, to the Company,
which notice shall state the amount of New Securities that such Preemptive
Rightholder elects to purchase pursuant to Section 3.2(a).  The
failure of a Preemptive Rightholder to respond prior to the expiration of the
Initial Preemptive Subscription Period shall be deemed to be a waiver of such
Preemptive Rightholder’s rights under this Agreement solely with respect to its
right to purchase the New Securities referenced in the New Issuance Notice;
provided that each Preemptive Rightholder may waive its rights under Section 3.2(b) prior
to the expiration of Initial Preemptive Subscription Period by giving written
notice of such waiver to the Company.

 

(d)                                 If as of the expiration of the Initial
Preemptive Subscription Period, some but not all of the Preemptive Rightholders
have exercised their right to purchase the full amount of New Securities to
which they are entitled to purchase pursuant to Sections 3.2(b) and (c) (any
such Preemptive Rightholder which has exercised in full its rights to purchase
such New Securities, a “Fully Exercising Preemptive Rightholder”), the
Fully Exercising Preemptive Rightholders shall have the right to purchase, in
whole or in part, their Oversubscription Appropriate Percentage (as defined
herein) of the New Securities which the Preemptive Rightholders did not
exercise their right to purchase pursuant to Sections 3.2(b) and (c) (the
“Undersubscribed Shares”) at a purchase price equal to the Proposed
Price and upon the terms and conditions set forth in the New Issuance
Notice.  The right of the Fully Exercising Preemptive Rightholders to
purchase the Undersubscribed Shares may be exercised for a period of ten days
following the earlier of the expiration of the Initial Preemptive Subscription
Period or the date on which notice is given by the Company to such Fully
Exercising Preemptive Rightholders that all the Preemptive Rightholders have
either exercised their right to purchase the New Securities pursuant to
Sections 3.2(b) and (c) or waived their rights to purchase any of
such New Securities pursuant to Section 3.2(c) (the “Oversubscription
Period”).  For purposes of this Section 3.2, “Oversubscription
Appropriate Percentage” shall mean that percentage of the Undersubscribed
Shares determined by dividing (i) the total number of Shares then owned by
a Fully Exercising Preemptive Rightholder by (ii) the total number of
Shares owned by all the Fully Exercising Preemptive Rightholders.

 

(e)                                  The right of each Fully Exercising
Preemptive Rightholder to purchase Undersubscribed Shares pursuant to Section 3.2(d) shall
be exercisable by delivering

 

5

 

written notice of the
exercise thereof, prior to the expiration of the Oversubscription Period, to
the Company, which notice shall state the amount of Undersubscribed Shares that
such Fully Exercising Preemptive Rightholder elects to purchase pursuant to Section 3.2(d). 
The failure of a Fully Exercising Preemptive Rightholder to respond prior to
the expiration of the Oversubscription Period shall be deemed to be a waiver of
such Fully Exercising Preemptive Rightholder’s rights under this Agreement
solely with respect to its right to purchase the Undersubscribed Shares
included in the New Securities referenced in the New Issuance Notice; provided
that each Fully Exercising Preemptive Rightholder may waive its rights under Section 3.2(d) prior
to the expiration of Oversubscription Period by giving written notice of such
waiver to the Company.

 

(f)                                    The closing of the purchase of New
Securities subscribed for by the Preemptive Rightholders, including the Fully
Exercising Preemptive Rightholders, pursuant to this Section 3.2 shall be
held at such time and place as the parties to the transaction may reasonably
agree.  At such closing, the New Securities subscribed for shall be issued
by the Company free and clear of all liens, charges or encumbrances (other than
those arising hereunder and those attributable to actions by the purchasers
thereof).  Each Preemptive Rightholder, including each Fully Exercising
Preemptive Rightholder, purchasing the New Securities shall deliver at the
closing payment in full in immediately available funds for the New Securities
purchased by it.  At such closing, all of the parties to the transaction
shall execute such additional documents as are otherwise necessary, appropriate
or customary for similar financing transactions.  If any Preemptive
Rightholder, including any Fully Exercising Preemptive Rightholder, fails to
purchase any New Securities for which it exercised its right to purchase
pursuant to Sections 3.2(b) and (c) or 3.2(d) and (e), such New
Securities may be purchased by the Fully Exercising Preemptive Rightholders
which did purchase all the New Securities for which they exercised their rights
to purchase pursuant to Sections 3.2(b), (c), (d) and (e) in the same
manner provided in this Section 3.2 with respect to Undersubscribed Shares
and the resulting Oversubscription Period with respect to such right to
purchase shall be an “Oversubscription Period” for all instances such term is
used in this Section 3.2.  Notwithstanding the preceding sentence,
the obligations and liability of any Preemptive Rightholder, including any
Fully Exercising Preemptive Rightholder, which fails to purchase any New
Securities for which it exercised its right to purchase pursuant to Sections
3.2(b) and (c) or 3.2(d) and (e) shall not be relieved as a
result of any Fully Exercising Preemptive Rightholder’s right to purchase, or
any actual purchase by any Fully Exercising Preemptive Rightholder of, any such
New Securities.

 

(g)                                 Following the expiration of the later of
the Initial Preemptive Subscription Period and, if applicable, the
Oversubscription Period, if the Preemptive Rightholders, including any Fully
Exercising Preemptive Rightholders, did not exercise their right to purchase
any of the New Securities, including the Undersubscribed Shares, which were
originally the subject of the New Issuance Notice, then the Company may sell
the remaining New Securities to the Subject Purchaser on terms and conditions
that are no more favorable to the Subject Purchaser than those set forth in the
New Issuance Notice; provided, however, that such sale is bona fide and made
pursuant to a contract entered into between the Company and the Subject
Purchaser and that such sale is consummated by not later than 90 days following
the earlier to occur of (i) receipt by the Company of written waivers
pursuant to Section 3.2(c) from all the Preemptive Rightholders of
their rights to purchase the Appropriate Percentage of New

 

6

 

Securities and, if
applicable, written waivers pursuant to Section 3.2(e) from all the
Fully Exercising Preemptive Rightholders of their rights to purchase the
Oversubscription Appropriate Percentage of New Securities, and (ii) the
expiration of the Oversubscription Period, if applicable, and if not
applicable, the expiration of the Initial Preemptive Subscription Period. 
If the sale of any of the New Securities is not consummated by the expiration
of such 90 day period, then the preemptive rights afforded to the Shareholders
under this Section 3.2 shall again become effective, and no issuance and
sale of New Securities may be made thereafter by the Company without again
offering the same in accordance with this Section 3.2.

 

3.3                                 Change of Control Call Option.

 

(a)                                  By not later than five days following a
Change of Control (as defined herein or in Section 3.1(b)) of any
Shareholder, such Shareholder shall give the Company and each other Shareholder
notice of such Change of Control and shall disclose the number of Shares and
any other securities of the Company which were owned by the Shareholder as of
immediately prior to such Change of Control of such Shareholder (the “Change
of Control Securities”).  If the Shareholder fails to give the notice
required by the preceding sentence by the time required thereby, and another
Shareholder or the Company is or becomes aware that such Shareholder underwent
a Change of Control, then (i) if it is a Shareholder that is or becomes
aware of such Change of Control, that Shareholder shall reasonably promptly
inform the Company of such Change of Control and upon the Company being of the
reasonable belief that such a Change of Control has occurred, the Company shall
reasonably promptly provide the notice to the Shareholders that such Shareholder
which underwent the Change of Control failed to provide, or (ii) if it is
the Company that is or becomes aware of such Change of Control, the Company
shall reasonably promptly provide the notice that such Shareholder which
underwent the Change of Control failed to provide.  Any liability of a
Shareholder which undergoes a Change of Control for failure to give the notice
required by the first sentence of this Section 3.3(a) shall not be
relieved as a result of the Company or any other Shareholder being obligated to
give, or giving, the notice required by the second sentence of this Section 3.3(a).

 

(b)                                 For a period of 20 days following the
receipt of a notice given pursuant to Section 3.3(a), the Company shall
have the right to purchase from such Shareholder (or its successor, as
applicable), in whole or in part, the Change of Control Securities.  The
purchase price for the Change of Control Securities shall be the book value, as
determined in accordance with the statutory accounting principles applicable to
the Company, of the Change of Control Securities as of the time such
Shareholder underwent the Change of Control (the “Call Option Purchase Price”). 
To exercise its right to purchase the Change of Control Securities, the Company
shall deliver written notice of such exercise to the Shareholder which
underwent the Change of Control and the other Shareholders prior to the
expiration of such 20 day call exercise period.  The closing for any such
exercised call option shall occur on the fifth business day (or such longer
period as may be required by applicable law or in order to obtain applicable
regulatory approval) following receipt of the Company’s notice of exercise of
its call option by the Shareholder which underwent the Change of Control, or on
such other date as may be agreed by the Company and such Shareholder.  At
its option, the Company may pay in cash the entire amount of the Call Option
Purchase Price at such closing or it may elect to defer any amount of the Call
Option Purchase Price.  Any amounts so deferred shall bear interest at the
Deferred

 

7

 

Interest Rate (as defined
herein).  The Company may pay any such deferred amounts and accrued
interest thereon at any time and from time to time; provided, however, that all
such deferred amounts and accrued but unpaid interest, shall be due and payable
on the fifth anniversary of the closing of the applicable call option exercise.

 

(c)           Shareholders other than the
Shareholder which underwent the Change of Control shall have the right to
purchase, in whole or in part, any Change of Control Securities not elected to
be purchased by the Company pursuant to Section 3.3(b) at a price
equal to the Call Option Purchase Price.  To exercise its right to
purchase the Change of Control Securities, the applicable Shareholder shall
deliver written notice of such exercise to the Shareholder which underwent the
Change of Control, the Company and the other Shareholders by not later than the
20 days following the earlier of (i) the expiration of the 20 day period
during which the Company has the right to exercise its call option for the
Change of Control Securities pursuant to Section 3.3(b) and (ii) the
date the Company waives its right to purchase such Change of Control Securities
and has given notice of the same to all the Shareholders (such deadline for
exercising a right to purchase Change of Control Securities referred to as the “Call
Option Exercise Deadline”).  The notice of exercise shall indicate the
number of Change of Control Securities that the Shareholder seeks to
purchase.  If the aggregate number of Change of Control Securities sought
to be purchased by the exercising Shareholders (determined by adding all the
eligible securities each Shareholder states it seeks to purchase in its notice
of exercise) exceeds the actual number of Change of Control Securities eligible
for purchase, the number of Change of Control Securities which may be purchased
by a particular applicable Shareholder shall be reduced by an amount equal to
the product of the aggregate number of such excess Change of Control Securities
sought to be purchased by all the exercising Shareholders multiplied by
the quotient of (x) the number of Shares owned by all eligible
Shareholders which are exercising their call option rights minus the
number of Shares owned by the particular applicable exercising Shareholder divided
by (y) the number of Shares owned by all eligible Shareholders which
are exercising their call option rights, with any such result rounded up or
down to the nearest whole share as reasonably determined by the Company. 
The closing of any such exercised call option shall occur on the fifth business
day (or such longer period as may be required by applicable law or in order to
obtain applicable regulatory approval) following the Call Option Exercise
Deadline, or on such other date as may be agreed by the exercising Shareholder,
the Company and the Shareholder which underwent the Change of Control.  At
its option, the exercising Shareholder may pay in cash the entire amount of the
Call Option Purchase Price at such closing or it may elect to defer any amount
of the Call Option Purchase Price.  Any amounts so deferred shall bear
interest at the Deferred Interest Rate.  The exercising Shareholder may
pay any such deferred amounts and accrued interest thereon at any time and from
time to time; provided, however, that all such deferred amounts and accrued but
unpaid interest, shall be due and payable on the fifth anniversary of the
closing of the applicable call option exercise.

 

(d)           Definitions.  For
purposes of this Section 3.3, the following terms have the meanings set
forth below:

 

(i)    “Change of Control” means (A) the
acquisition by any person or entity, or two or more persons or entities acting
in concert, of beneficial ownership (such term, for purposes of this Section 3.3(d)(i),
having the meaning provided

 

8

 

such term in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of 9.8% or more, or
rights, options or warrants to acquire 9.8% or more, or any combination
thereof, of the outstanding shares of voting stock or other voting interests of
the Shareholder, including voting proxies for such shares, or the power to
direct the management and policies of the Shareholder, directly or indirectly,
excluding with respect to RMR, any person or entity, or two or more persons or
entities acting in concert, beneficially owning 9.8% or more of RMR’s
outstanding voting interests as of the date of this Agreement, and excluding
with respect to FVE, persons or entities that have rights to acquire 9.8% or
more of FVE’s shares of common stock by virtue of their holding convertible
notes of FVE outstanding as of the date of this Agreement, (B) the merger
or consolidation of the Shareholder with or into any other person or entity
(other than the merger or consolidation of any person or entity into the
Shareholder that does not result in a Change in Control of the Shareholder
under clauses (A), (C), (D) or (E) of this definition), (C) any
one or more sales or conveyances to any person or entity of all or any material
portion of the assets (including capital stock or other equity interests) or
business of the Shareholder, (D) the cessation, for any reason, of the
individuals who at the beginning of any 38 consecutive month period constituted
the board of directors (or analogous governing body) of the Shareholder
(together with any new directors (or analogous position) whose election by such
board or whose nomination for election by the shareholders of the Shareholder
was approved by a vote of a majority of the directors (or analogous position)
then still in office who were either directors (or analogous position) at the
beginning of any such period or whose election or nomination for election was
previously so approved) to constitute a majority of the board of directors (or
analogous governing body) of the Shareholder then in office or (E) in
respect of a Shareholder other than RMR, the termination (including by means of
nonrenewal) of the Shareholder’s management agreement with RMR by such
Shareholder or, in response to a breach of such agreement by such Shareholder,
by RMR; provided, however, a Change of Control shall not include:  (1) the
acquisition by any person or entity, or two or more persons or entities acting
in concert, of beneficial ownership of 9.8% or more of the outstanding shares
of voting stock or other voting interests of a Shareholder if such acquisition
is approved by the governing board of such Shareholder in accordance with the
organizational documents of such Shareholder and if such acquisition is
otherwise in compliance with applicable law; (2) the merger or
consolidation of a Shareholder with one or more other Shareholders or wholly
owned subsidiaries of any such Shareholders; or (3) a Change of Control
which is approved by Shareholders owning 75% of the Shares owned by all
Shareholders.

 

(ii)   “Deferred Interest Rate” means the
London Interbank Offered Rate (rounded upward, if necessary, to the nearest
1/100th of 1%)
appearing on Reuters Screen LIBO Page (or any successor page) as the London
interbank offered rate for three month deposits in U.S. dollars at
approximately 11:00 a.m. (London time) two days prior to applicable
closing date (provided that if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates), plus 100 basis points, and this rate shall be adjusted in three
month intervals thereafter, in accordance with the foregoing, with such
adjustment date being treated as an “applicable closing date” for purposes of
determining the adjusted rate in accordance

 

9

 

with the foregoing, for
so long as any deferred amount pursuant to Sections 3.2(b) or 3.2(c) may
be unpaid.

 

3.4          Permitted New Issuance of Shares.  The prohibition on transfer of
Shares, the preemptive rights and the change of control call options created by
Sections 3.1, 3.2 and 3.3 of this Article III shall not apply to any sale
of Shares by the Company, or by any Shareholder or Shareholders, if the Shares are
sold to an entity which is managed by RMR that purchases insurance from the
Company, provided that any such sale does not reduce the ownership of any
Shareholder to less than ten percent (10%) of the Company’s outstanding voting
Shares.  The prohibition on the preemptive rights and the change of
control call options created by Sections 3.2 and 3.3, respectively, of this Article III
shall not apply to the 20,000 Shares to be issued and sold by the Company to
GOV pursuant to the GOV Subscription Agreement and HRP’s spin off of GOV
pursuant to the initial public offering of GOV shares, which occurred during
2009 and prior to the date of this Agreement, respectively, and the Original
Shareholders waive any rights they may have or have had under Sections 3.2 and
3.3 of this Article III with respect to such transactions.

 

ARTICLE
IV

SPECIAL SHAREHOLDER APPROVAL REQUIREMENTS.

 

4.1          Special Shareholder Approval Requirements.  For so long as the Shareholders
beneficially own a majority of the Company’s issued and outstanding Shares, no
action by the Company shall be taken with respect to any of the following
matters without the prior affirmative approval of Shareholders owning 75% of
the Shares owned by all the Shareholders:

 

(a)       any
amendment to the articles of incorporation or bylaws of the Company;

 

(b)       any
merger of the Company;

 

(c)       the
sale of all or substantially all of the Company’s assets;

 

(d)       any
reorganization or recapitalization of the Company; or

 

(e)       any
liquidation or dissolution of the Company.

 

If applicable
law permits any of the foregoing actions to be taken by the Company without a
shareholders vote, the vote of all directors of the Company designated by a
Shareholder shall be considered the vote of the Shareholder for purposes of any
such action.

 

10

 

ARTICLE
V

OTHER COVENANTS AND AGREEMENTS

 

5.1          Organizational Documents.  Subject to applicable law, each
Shareholder shall vote its Shares or execute any consents necessary, and each
Shareholder and the Company shall take all other actions necessary, to ensure
that the Company’s organizational documents facilitate, and do not at any time
conflict with any provision of, this Agreement or any applicable law, and to
ensure that the provisions hereof are implemented notwithstanding any
inconsistent provision in the Company’s organizational documents.  The
parties hereto agree to amend, if necessary, the Company’s organizational
documents to conform to the provisions set forth in this Agreement, to the
extent permitted by applicable law.  In the event of any actual or
apparent inconsistency between this Agreement and the organizational documents,
then, as among the Shareholders, to the extent permitted by applicable law,
this Agreement shall control.

 

5.2          Reports and Information Access.  For so long as a Shareholder owns
not less than 10% of all the issued and outstanding Shares, the Company shall
provide periodically, through the director(s) designated by such
Shareholder under Section 2.1, to the Shareholder financial information
regarding the Company and its operations and the Company shall permit the
Shareholder and its representatives reasonable access to the financial reports
and records of the Company so that the Shareholder may comply with its financial
reporting and tax reporting obligations and procedures, and disclosure
obligations under the federal securities laws and other applicable laws.

 

5.3          Compliance with Laws.  The Company shall comply in all
material respects with all applicable laws governing its business and
operations.  Except as provided in Section 5.7, if a Shareholder, by
virtue of such Shareholder’s ownership interest in the Company or actions taken
by the Shareholder affecting the Company, triggers the application of any
requirement or regulation of any federal, state, municipal or other
governmental or regulatory body on the Company or any subsidiary of the Company
or any of their respective businesses, assets or operations, including any
obligations to make any filing with or otherwise notifying or obtaining the
consent, approval or other action of any federal, state, municipal or other
governmental or regulatory body, such Shareholder shall promptly take all
actions necessary and fully cooperate with the Company to ensure that such requirements
or regulations are satisfied without restricting, imposing additional
obligations on or in any way limiting the business, assets, operations or
prospects of the Company or any subsidiary of the Company.  Each
Shareholder shall use best efforts to cause its shareholders, directors (or
analogous position), nominees for director (or analogous position), officers,
employees and agents to comply with any applicable laws impacting the Company
or any of its subsidiaries or their respective businesses, assets or
operations.

 

5.4          Cooperation; Further Assurances.

 

(a)        The
Shareholders shall cooperate with each other and the Company in furtherance of
the Company’s underwriting of insurance policies and coverage with respect to
the Shareholders and their respective businesses, assets and properties as well
as in furtherance of the development and execution of the Company’s business as
an insurer.  The Shareholders

 

11

 

intend to transition (but
shall not be obligated to do so) their applicable insurance policies and
coverage to the Company so that the Company or its third party agents or
contracting parties shall become the underwriters of such current and future
policies and coverage.

 

(b)        Each
of the parties shall execute such documents and perform such further acts
(including obtaining any consents, exemptions, authorizations or other actions
by, or giving any notices to, or making any filings with, any governmental
authority) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement or the transactions contemplated
hereby, including in connection with any subsequent exercise by a party of a
right afforded hereunder to such party.

 

5.5          Confidentiality.  Except as may be required by
applicable law or the rules of any national securities exchange upon which
a party’s shares are listed for trading, none of the parties hereto shall make
any disclosure concerning this Agreement, the transactions contemplated hereby
or the business, operations and financial affairs of the Company without prior
approval by the other parties hereto; provided, however, that nothing in this
Agreement shall restrict any of the parties from disclosing information (a) that
is already publicly available, (b) that was known to such party on a
non-confidential basis prior to any relevant disclosure, (c) that may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation, provided that such party will use reasonable efforts to
notify the other party in advance of such disclosure so as to permit the other
party to seek a protective order or otherwise contest such disclosure, and such
party will use reasonable efforts to cooperate, at the expense of the other party,
with the other party in pursuing any such protective order, (d) to the
extent that such party reasonably believes it appropriate in order to protect
its investment in its Shares in order to comply with any applicable law, (e) to
such party’s officers, directors, trustees, advisors, employees, auditors or
counsel or (f) as warranted pursuant to the parties’ disclosure
obligations under federal securities laws.

 

5.6          Required Regulatory Approvals.  Certain transactions required,
permitted or otherwise contemplated by this Agreement may under certain
circumstances require prior filings with and approvals, or non-disapprovals,
from the Indiana Department of Insurance or the Indiana Insurance
Commissioner.  Such transactions include: (a) issuance or purchase of
any additional capital stock of the Company or other securities convertible
into or exchangeable or exercisable for capital stock of the Company pursuant
to Sections 1.2 or 3.4; (b) transfer of Shares to a wholly owned
subsidiary of a Shareholder, to another Shareholder or to a wholly owned
subsidiary of another Shareholder pursuant to Sections 3.1(a) or 3.4; (c) exercise
of preemptive rights by a Shareholder pursuant to Section 3.2; and (d) exercise
of call rights by the Company or a Shareholder pursuant to Section 3.3
(including pursuant to the two provisos in Section 3.1(b)). 
Notwithstanding anything to the contrary contained in this Agreement, any such
transactions requiring filings with and approvals, or non-disapprovals, from
the Indiana Department of Insurance or the Indiana Insurance Commissioner shall
not, to the extent within the control of a party hereto, be entered into or
consummated unless and until the required filings have been made and the
required approvals (or non-disapprovals) have been obtained, and to the extent
not within the control of an applicable party hereto, such party shall use best
efforts to cause such transactions not to be entered into or consummated unless
and until the required filings have been made and the required approvals (or
non-disapprovals) have been obtained.

 

12

 

5.7          REIT Matters.  At the request of any Shareholder
that intends (for itself or for any of its affiliates) to qualify and be taxed
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended (the “Code”), the Company shall (a) join with such
Shareholder (or, as applicable, such Shareholder’s affiliate) in making a “taxable
REIT subsidiary” election under Section 856(l) of the Code and (b) otherwise
reasonably cooperate with any request of such Shareholder (or its affiliate)
pertaining to such real estate investment trust status or taxation under the
Code.

 

ARTICLE
VI

REPRESENTATIONS AND WARRANTIES

 

6.1          The Company.  The Company represents and
warrants to each Shareholder, as of the date of this Agreement (unless any such
representation or warranty speaks as of another date, in which case, as of such
date), as follows:

 

(a)        Organization,
Existence, Good Standing and Power.  The Company is an Indiana
insurance company duly organized, validly existing and in good standing under
the laws of the State of Indiana and has the power and authority to execute,
deliver and perform its obligations under this Agreement.

 

(b)        Capitalization;
Subsidiaries.

 

(i)    As of immediately prior to the execution
and delivery of this Agreement, there are no securities of the Company issued
and outstanding, except for the Shares previously issued pursuant to Section 1.1. 
Except as provided and contemplated by this Agreement, as of the date of this
Agreement, the Company has no commitment or arrangement to issue securities of
the Company to any person or entity.

 

(ii)   As of the date of this Agreement, the
Company has no subsidiaries.

 

(c)        Valid
Issuance of Shares.  The Shares being purchased by the Shareholders
hereunder, when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable law.

 

(d)        Binding
Effect.  This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the
Company, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).

 

13

 

(e)        No
Contravention.  The execution and delivery of this Agreement by the
Company and the performance of its obligations hereunder and the consummation
by the Company of the transactions contemplated by this Agreement and
compliance by the Company with the provisions of this Agreement (i) have
been duly authorized by all necessary company action, (ii) do not
contravene the terms of the Company’s organizational documents, (iii) do
not materially violate, conflict with or result in any breach or contravention
of, or the creation of any material lien, charge or encumbrance under, any
material agreement, contract, license, permit or instrument to which the
Company is a party or by which the Company or any of its assets or properties
are bound and (iv) do not materially violate any law, statute, regulation,
order or decree applicable to, or binding upon, the Company or any of its
assets or properties.

 

(f)         Consents. 
No approval, consent, compliance, exemption, authorization or other action by,
or notice to, or filing with, any local, state or federal governmental
authority or any other person or entity (individually and collectively, a “Consent”),
not already obtained or made, and no lapse of a waiting period under any
applicable law, statute, regulation, order or decree, is necessary or required
in connection with the execution, delivery or performance by the Company of
this Agreement or the transactions contemplated hereby; provided, however, that
the foregoing representation and warranty shall not apply to any Consent which
may be required in the future as a result of the application of the rights and
obligations provided for hereunder or the conducting of the Company’s business.

 

(g)        Compliance
with Laws.  The Company is in compliance in all material respects with
all applicable laws, statutes, regulations, orders or decrees applicable to, or
binding upon, the Company or any of its assets or properties.

 

(h)        Offering. 
Subject to the accuracy of the Shareholder’s representations and warranties set
forth in Sections 6.2(f) through 6.2(i), the offer, sale and issuance of
the Shares to be issued in conformity with the terms of this Agreement
constitute transactions which are exempt from the registration requirements of
the Securities Act of 1933, as amended (the “Securities Act”), and from
all applicable state registration or qualification requirements.  Neither
the Company nor any person or entity acting on its behalf will take any action
that would cause the loss of such exemption.

 

(i)         No
Integration.  The Company has not, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the Shares sold pursuant to this Agreement in a manner that
would require the registration of the Shares under the Securities Act.

 

6.2          The Shareholders.  Each Shareholder represents and
warrants to the Company and the other Shareholders, as of the date of this
Agreement, as follows:

 

(a)        Organization,
Existence, Good Standing and Power.  The Shareholder (i) is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation; (ii) has all requisite power and
authority to conduct the business in which it is currently engaged; and (iii) has
the power and authority to execute, deliver and perform its obligations under
this Agreement.

 

14

 

(b)        Binding
Effect.  This Agreement has been duly executed and delivered by the
Shareholder and constitutes the legal, valid and binding obligations of the
Shareholder, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).

 

(c)        No
Contravention.  The execution and delivery of this Agreement by the
Shareholder and the performance of its obligations hereunder and the
consummation by the Shareholder of the transactions contemplated by this
Agreement and compliance by the Shareholder with the provisions of this
Agreement (i) have been duly authorized by all necessary company action, (ii) do
not contravene the terms of the Shareholder’s organizational documents, (iii) do
not materially violate, conflict with or result in any breach or contravention
of, or, except with respect to any Existing Pledge which the Shareholder or any
of its assets or properties may be subject, the creation of any material lien,
charge or encumbrance under, any material agreement, contract, license, permit
or instrument to which the Shareholder is a party or by which the Shareholder
or any of its assets or properties are bound and (iv) do not materially
violate any law, statute, regulation, order or decree applicable to, or binding
upon, the Shareholder or any of its assets or properties.

 

(d)        Consents. 
No Consent, not already obtained or made, and no lapse of a waiting period
under any applicable law, statute, regulation, order or decree, is necessary or
required in connection with the execution, delivery or performance by the
Shareholder of this Agreement or the transactions contemplated hereby;
provided, however, that the foregoing representation and warranty shall not
apply to any Consent which may be required in the future as a result of the
application of the rights and obligations provided for hereunder or the conducting
of the Company’s business.

 

(e)        Compliance
with Laws.  The Shareholder is in compliance in all material respects
with all applicable laws, statutes, regulations, orders or decrees applicable
to, or binding upon, the Shareholder or any of its assets or properties.

 

(f)         Purchase
Entirely for Own Account.  The Shares are being acquired for
investment for the Shareholder’s own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and the
Shareholder has no present intention of selling, granting any participation
with respect to or otherwise distributing the Shares.  Except as provided
by this Agreement, the Shareholder does not have any contract, undertaking,
agreement or arrangement with any person or entity to sell or transfer to any
person or entity, or grant participation rights to any person or entity with
respect to, any of the Shares.

 

(g)        Disclosure
of Information.  The Shareholder has received all the information from
the Company and its management that the Shareholder considers necessary or
appropriate for deciding whether to purchase the Shares hereunder.  The
Shareholder further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the Company, its financial
condition, results of operations and prospects and the terms and conditions of
the offering of the Shares sufficient to enable it to evaluate its investment.

 

15

 

(h)        Investment
Experience and Accredited Investor Status.  The Shareholder is an “accredited
investor” (as defined in Regulation D under the Securities Act).  The
Shareholder has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of the investment in the
Shares to be purchased hereunder.

 

(i)         Restricted
Securities.    The Shareholder understands that the Shares,
when issued, shall be “restricted securities” under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws the Shares may be resold
without registration under the Securities Act only in certain limited
circumstances.

 

ARTICLE
VII

TERMINATION

 

7.1          Termination.  This Agreement shall remain in
full force and effect until the sooner of:  (a) its termination
pursuant to the next succeeding sentence of this Section 7.1 or (b) the
dissolution of the Company; provided, however, that the dissolution of the
Company, the merger of the Company with, or the transfer of all or
substantially all the assets of the Company to, another entity which continues
substantially all of the Company’s business shall not of itself terminate this
Agreement.  This Agreement may be terminated at any time by the
Shareholders owning at least 75% of the issued and outstanding Shares owned by
all Shareholders.  Section 5.5 and Article VIII shall survive
any termination or expiration of this Agreement.

 

ARTICLE
VIII

MISCELLANEOUS

 

8.1          Notices.  Any notices or other communications required
or permitted under, or otherwise in connection with, this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person,
upon confirmation of receipt when transmitted by facsimile transmission, on the
next business day if transmitted by a nationally recognized overnight courier
or on the third business day following mailing by first class mail, postage
prepaid, in each case as follows (or at such other United States address or
facsimile number for a party as shall be specified by like notice):

 

Notices to the Company:

 

Affiliates Insurance Company

101 West Washington Street, Suite 1100

Indianapolis, Indiana 46204

Attention:  President/Vice President

Facsimile No.:   (317) 632-2883

 

16

 

with a copy to:

 

Affiliates Insurance
Company

400 Centre Street

Newton, Massachusetts 02458

Attention:  President/Vice President

Facsimile No.:  (617) 928-1305

 

Notices to FVE:

 

Five Star Quality Care, Inc.

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 796-8385

 

Notices to HPT:

 

Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 969-5730

 

Notices to HRP:

 

HRPT Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 332-2261

 

Notices to SNH:

 

Senior Housing Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 796-8349

 

Notices to TA:

 

TravelCenters of America LLC

24601 Center Ridge Road, Suite 200

Westlake, Ohio 44145

Attention:  President

Facsimile No.:  (440) 808-3301

 

17

 

Notices to RMR:

 

Reit Management & Research LLC

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 928-1305

 

and

 

Notices to GOV:

 

Government Properties Income Trust

400 Centre Street

Newton, Massachusetts 02458

Attention:  President

Facsimile No.:  (617) 219-1441

 

8.2          Successors and Assigns; Third Party
Beneficiaries. 
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the parties hereto.  Except as permitted by Section 3.1
and Section 3.4, no party may assign this Agreement or its rights
hereunder or delegate its duties hereunder without the written consent of the
other parties.  Except as otherwise provided in Section 8.7, no
person or entity other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.

 

8.3          Amendment and Waiver.

 

(a)        No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.  The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to each party at law, in equity or
otherwise.  Any party hereto may waive in whole or in part any right
afforded to such party hereunder.

 

(b)        Any
amendment, supplement or modification of or to any provision of this Agreement,
shall be effective upon the written agreement of the Company and the
Shareholders owning not less than 75% of all Shares owned by the Shareholders;
provided, however, that any amendment, supplement or modification of Article I
or Article II shall require the approval of any Shareholder which may be
adversely affected by any such amendment, supplement or modification.

 

8.4          Counterparts.  This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed

 

18

 

shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

 

8.5          Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

8.6          Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana without regard to
the conflicts of laws rules thereof, which would require the application
of the laws of another jurisdiction.

 

8.7          Dispute Resolution

 

(a)        Any
disputes, claims or controversies between the parties (i) arising out of
or relating to this Agreement, the Company, its business, assets or operations
or any insurance policies or coverage underwritten by the Company or any of its
third party agents in furtherance of the Company’s insurance business or (ii) brought
by or on behalf of any shareholder of the Company (which, for purposes of this Section 8.7,
shall mean any shareholder of record or any beneficial owner of shares of the
Company, or any former shareholder of record or beneficial owner of shares of
the Company), either on his, her or its own behalf, on behalf of the Company or
on behalf of any series or class of shares of the Company or shareholders of
the Company against the Company or any director, officer, manager (including
RMR or its successor), agent or employee of the Company, including disputes,
claims or controversies relating to the meaning, interpretation, effect,
validity, performance or enforcement of this Agreement or the articles of
incorporation or bylaws of the Company (all of which are referred to as “Disputes”),
or relating in any way to such a Dispute or Disputes shall, on the demand of
any party to such Dispute, be resolved through binding and final arbitration in
accordance with the Commercial Arbitration Rules (the “Rules”) of
the American Arbitration Association (“AAA”) then in effect, except as
those Rules may be modified in this Section 8.7.  For the
avoidance of doubt, and not as a limitation, Disputes are intended to include
derivative actions against directors, officers or managers of the Company and
class actions by a shareholder against those individuals or entities and the
Company.  For the avoidance of doubt, a Dispute shall include a Dispute
made derivatively on behalf of one party against another party.

 

(b)        There
shall be three arbitrators.  If there are only two parties to the Dispute,
each party shall select one arbitrator within 15 days after receipt by
respondent of a copy of the demand for arbitration.  Such arbitrators may
be affiliated or interested persons of such parties.  If either party
fails to timely select an arbitrator, the other party to the Dispute shall
select the second arbitrator who shall be neutral and impartial and shall not
be affiliated with or an interested person of either party.  If there are
more than two parties to the Dispute, all claimants, on the one hand, and all
respondents, on the other hand, shall each select, by the vote of a majority of
the claimants or the respondents, as the case may be, one arbitrator. Such
arbitrators may be affiliated or interested persons of the claimants or the
respondents, as the case may be.  If either all claimants or all
respondents fail to timely select an arbitrator then such arbitrator (who shall
be neutral, impartial and unaffiliated with any party) shall be appointed by
the AAA.  The two arbitrators so appointed shall jointly appoint the third
and presiding arbitrator (who shall be neutral, impartial and unaffiliated with
any party) within 15 days of the appointment of the second arbitrator.  If
the third arbitrator has not been appointed within the

 

19

 

time limit specified
herein, then the AAA shall provide a list of proposed arbitrators in accordance
with the Rules, and the arbitrator shall be appointed by the AAA in accordance
with a listing, striking and ranking procedure, with each party having a
limited number of strikes, excluding strikes for cause.

 

(c)        The
place of arbitration shall be Indianapolis, Indiana unless otherwise agreed by
the parties.

 

(d)        There
shall be only limited documentary discovery of documents directly related to
the issues in dispute, as may be ordered by the arbitrators.

 

(e)        In
rendering an award or decision (the “Award”), the arbitrators shall be
required to follow the laws of the State of Indiana.  Any arbitration
proceedings or Award rendered hereunder and the validity, effect and
interpretation of this arbitration agreement shall be governed by the Federal
Arbitration Act, 9 U.S.C. §1 et seq.  The Award shall be in writing and
may, but shall not be required to, briefly state the findings of fact and conclusions
of law on which it is based.

 

(f)         Except
to the extent otherwise agreed by the parties, each party involved in a Dispute
shall bear its own costs and expenses (including attorneys’ fees), and the
arbitrators shall not render an award that would include shifting of any such
costs or expenses (including attorneys’ fees) or, in a derivative case or class
action, award any portion of the Company’s award to the claimant or the
claimant’s attorneys.  Each party (or, if there are more than two parties
to the Dispute, all claimants, on the one hand, and all respondents, on the
other hand, respectively) shall bear the costs and expenses of its (or their)
selected arbitrator and the parties (or, if there are more than two parties to
the Dispute, all claimants, on the one hand, and all respondents, on the other
hand) shall equally bear the costs and expenses of the third appointed
arbitrator.

 

(g)        An
Award shall be final and binding upon the parties thereto and shall be the sole
and exclusive remedy between such parties relating to the Dispute, including
any claims, counterclaims, issues or accounting presented to the
arbitrators.  Judgment upon the Award may be entered in any court having
jurisdiction.  To the fullest extent permitted by law, no application or appeal
to any court of competent jurisdiction may be made in connection with any
question of law arising in the course of arbitration or with respect to any
award made except for actions relating to enforcement of this agreement to
arbitrate or any arbitral award issued hereunder and except for actions seeking
interim or other provisional relief in aid of arbitration proceedings in any
court of competent jurisdiction.

 

(h)        Any
monetary award shall be made and payable in U.S. dollars free of any tax,
deduction or offset.  Each party against which the Award assesses a
monetary obligation shall pay that obligation on or before the 30th day following the date of the Award
or such other date as the Award may provide.

 

(i)         This Section 8.7
is intended to benefit and be enforceable by the shareholders, directors,
officers, managers (including RMR or its successor), agents or employees of the
Company and the Company and shall be binding on the shareholders of the

 

20

 

Company and the Company,
as applicable, and shall be in addition to, and not in substitution for, any
other rights to indemnification or contribution that such individuals or
entities may have by contract or otherwise.

 

8.8          Interpretation and Construction.

 

(a)        The
words “hereof”, “herein”, “hereby” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not
to any particular provision of this Agreement.

 

(b)        Unless
the context otherwise requires, references to sections, subsections or Articles
refer to sections, subsections or Articles of this Agreement.

 

(c)        Terms
defined in the singular shall have a comparable meaning when used in the
plural, and vice versa.

 

(d)        The
words “include” and “including” and words of similar import shall be deemed to
be followed by the words “without limitation”.

 

(e)        Words
importing gender include both genders.

 

(f)         Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated
therein.  In addition, references to any statute are to that statute and
to the rules and regulations promulgated thereunder.

 

(g)        The
parties hereto have participated jointly in the negotiation and drafting of
this Agreement and, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as jointly drafted by
the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provision of this
Agreement.

 

8.9          Severability.  If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired, unless the provisions held invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining provisions hereof.

 

8.10        Entire Agreement.  This Agreement and the GOV
Subscription Agreement constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement.

 

21

 

8.11        Non-liability of Trustees and Directors.

 

(a)        COPIES
OF THE DECLARATIONS OF TRUST OF HPT, HRP, SNH AND GOV, AS IN EFFECT ON THE DATE
HEREOF, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IF ANY, ARE DULY
FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
MARYLAND.  THE DECLARATIONS OF TRUST, AS AMENDED AND SUPPLEMENTED, OF HPT,
HRP, SNH AND GOV, PROVIDE THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR
AGENT OF HPT, HRP, SNH OR GOV, AS APPLICABLE, SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HPT,
HRP, SNH OR GOV.  ALL PERSONS DEALING WITH HPT, HRP, SNH OR GOV IN ANY
WAY, SHALL LOOK ONLY TO THE ASSETS OF HPT, HRP, SNH OR GOV, AS APPLICABLE, FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

(b)        A COPY
OF THE ARTICLES OF INCORPORATION, AS IN EFFECT ON THE DATE HEREOF, OF FVE,
TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE
OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND. 
NO DIRECTOR, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF FVE SHALL BE HELD TO
ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, FVE.  ALL PERSONS DEALING WITH FVE, IN ANY WAY, SHALL LOOK ONLY
TO THE ASSETS OF FVE FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.

 

(c)        A COPY
OF THE LIMITED LIABILITY COMPANY AGREEMENT, AS IN EFFECT ON THE DATE HEREOF, OF
TA, TOGETHER WITH ALL AMENDMENTS THERETO, IS AVAILABLE TO A SHAREHOLDER PARTY
HERETO UPON WRITTEN REQUEST MADE TO TA.  NO DIRECTOR, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF TA SHALL BE HELD TO ANY PERSONAL LIABILITY,
JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TA.  ALL
PERSONS DEALING WITH TA, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TA FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

 

[The Remainder of This Page Intentionally
Left Blank]

 

22

 

IN
WITNESS WHEREOF, the undersigned have executed, or have caused to be executed,
this Amended and Restated Shareholders Agreement on the date first written
above.

 

	
  AFFILIATES
  INSURANCE COMPANY

  	
   

  	
  SENIOR
  HOUSING PROPERTIES TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jennifer B. Clark

  	
   

  	
  By:

  	
  /s/ David J. Hegarty

  
	
   

  	
  Name: Jennifer B. Clark

  	
   

  	
   

  	
  Name: David J. Hegarty

  
	
   

  	
  Title:
    President

  	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  	
   

  
	
  FIVE
  STAR QUALITY CARE, INC.

  	
   

  	
  TRAVELCENTERS
  OF AMERICA LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Bruce J. Mackey

  	
   

  	
  By:

  	
  /s/ Mark R. Young

  
	
   

  	
  Name: Bruce J. Mackey

  	
   

  	
   

  	
  Name: Mark R. Young

  
	
   

  	
  Title:   President

  	
   

  	
   

  	
  Title:   Executive
  Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
  HOSPITALITY
  PROPERTIES TRUST

  	
   

  	
  REIT
  MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark L. Kleifges

  	
   

  	
  By:

  	
  /s/ Richard A.
  Doyle, Jr.

  
	
   

  	
  Name: Mark L. Kleifges

  	
   

  	
   

  	
  Name: Richard A.
  Doyle, Jr.

  
	
   

  	
  Title:
    Chief Financial Officer

  	
   

  	
   

  	
  Title:
    Senior Vice President

  
	
   

  	
   

  	
   

  
	
  HRPT
  PROPERTIES TRUST

  	
   

  	
  GOVERNMENT
  PROPERTIES INCOME TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John A. Mannix

  	
   

  	
  By:

  	
  /s/ David M. Blackman

  
	
   

  	
  Name: John A. Mannix

  	
   

  	
   

  	
  Name: David M. Blackman

  
	
   

  	
  Title:   President

  	
   

  	
   

  	
  Title: 
   Chief Financial OfficerQuickLinks
 -- Click here to rapidly navigate through this document
 

 
 

  Exhibit 10.8    
    

 
 

  THE 2008 EQUITY PARTICIPATION PLAN
  OF
  LTC PROPERTIES, INC.    
    

        LTC Properties, Inc., a Maryland corporation, has adopted The 2008 Equity Participation Plan of LTC Properties, Inc. (the
"Plan"), effective            , 2008, for the benefit of its eligible employees, consultants and directors. 

        The
purposes of the Plan are as follows: 

        (1)   To
provide an additional incentive for Independent Directors, key Employees and consultants to further the growth, development and financial success of the Company by
personally benefiting through the ownership of Company stock and/or rights which recognize such growth, development and financial success; 

        (2)   To
enable the Company to obtain and retain the services of Independent Directors, key Employees and consultants considered essential to the long range success of the
Company by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company; and 

        (3)   To
encourage participants to contribute materially to the growth of the Company, thereby benefiting the Company's stockholders, and align the economic interests of the
participants with those of the stockholders. 

 
 

  ARTICLE I.
  DEFINITIONS    
    

        Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates
otherwise. 

        "Administrator" shall mean the party that conducts the general administration of the Plan as provided in Article XI. With reference
to the administration of the Plan with respect to Awards granted to Independent Directors, the term "Administrator" shall refer to the Board. With reference to the administration of the Plan with
respect to any other Award, the term "Administrator" shall refer to the Committee, unless the Board has assumed the authority for administration of the Plan generally as provided in
Section 11.2. 

        "Award" shall mean an Option, Restricted Stock, a Performance Award, Dividend Equivalents, Deferred Stock, Stock Payment or a Stock
Appreciation Right, which may be awarded or granted under the Plan (collectively, "Awards"). 

        "Award Agreement" shall mean a written agreement executed by an authorized director or officer of the Company and the Holder which
contains such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. 

        "Award Limit" shall mean two hundred thousand (200,000) shares of Common Stock, as adjusted pursuant to Section 12.3 of the Plan. 

        "Board" shall mean the Board of Directors of the Company. 

        "Change in Control" shall mean, unless otherwise defined in an Award Agreement, a change in ownership or control of the Company effected
through any of the following transactions: 

        (a)   any
person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the
Company) directly or 

1

 

indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing thirty percent (30%) or more of the
total combined voting power of the Company's then outstanding securities; or 

        (b)   the
stockholders of the Company approve a merger or consolidation of the Company with any other corporation (or other entity), other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 662/3% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than 30% of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control; or 

        (c)   the
stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets, or 

        (d)   a
majority of the members of the Board cease to be, as of any date of determination, members of the Board who were members of the Board as of the date the Plan was
approved by the stockholders of the Company or were nominated for election or elected to the Board with the approval of a majority of the members of the Board at the time of such nomination or
election. 

        "Code" shall mean the Internal Revenue Code of 1986, as amended. 

        "Committee" shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided
in Section 11.1. 

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

        "Company" shall mean LTC Properties, Inc., a Maryland corporation. 

        "Corporate Transaction" shall mean any of the following stockholder-approved transactions to which the Company is a party: 

        (a)   a
merger, consolidation or acquisition in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state
in which the Company is incorporated, form a holding company or effect a similar reorganization as to form whereupon the Plan and all Options are assumed by the successor entity; 

        (b)   the
sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, in complete liquidation or dissolution of the Company in a
transaction not covered by the exceptions to clause (a), above; or 

        (c)   any
reverse merger in which the Company is the surviving entity but in which securities possessing more than thirty percent (30%) of the total combined voting power of
the Company's outstanding securities are transferred or issued to a person or persons different from those who held such securities immediately prior to such merger. 

        "Coupled Stock Appreciation Right" shall mean an Award granted under Section 9.2 of the Plan. 

        "CSAR" shall mean a Coupled Stock Appreciation Right. 

        "Deferred Stock" shall mean Common Stock awarded under Section 8.5 of the Plan. 

        "Director" shall mean a member of the Board. 

        "Dividend Equivalent" shall mean a right to receive the equivalent value (in cash or Common Stock) of dividends paid on Common Stock,
awarded under Section 8.3 of the Plan. 

2

 

        "Employee" shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary. 

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

        "Fair Market Value" of a share of Common Stock as of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on the trading day previous to such date, or
if shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred, or (ii) if Common Stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by NASDAQ or such
successor quotation system; or (iii) if Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a share of Common
Stock as established by the Administrator acting in good faith through the reasonable application of a reasonable valuation method. 

        "Grantee" shall mean an Employee, Independent Director or consultant granted a Performance Award, Dividend Equivalent, Stock Payment,
Stock Appreciation Right, or Deferred Stock. 

        "Holder" shall mean a person who has been granted or awarded an Award. 

        "Incentive Stock Option" shall mean an Option that is designated as an Incentive Stock Option by the Committee to the extent such Option
complies with the applicable provisions of Section 422 of the Code. 

        "Independent Director" shall mean a member of the Board who is not an Employee. 

        "Independent Stock Appreciation Right" shall mean an Award granted under Section 9.3 of the Plan. 

        "ISAR" shall mean an Independent Stock Appreciation Right. 

        "Non-Qualified Stock Option" shall mean an Option that is not designated as an Incentive Stock Option by the Committee, or an
Option that is designated as an Incentive Stock Option to the extent such Option does not comply with the provisions of Section 422 of the Code. 

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

        "Optionee" shall mean an Employee, consultant or Independent Director granted an Option under the Plan. 

        "Performance Award" shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, Common Stock or a
combination of both, awarded under Section 8.2 of the Plan. 

        "Performance Criteria" shall mean the following business criteria with respect to the Company or any Subsidiary: (i) net income,
(ii) performance of investments, (iii) cash flow, (iv) earnings per share, (v) return on equity, (vi) return on invested capital or assets, (vii) cost
reductions or savings, (viii) funds from operations, (ix) appreciation in the fair market value of Common Stock and (x) earnings before any one or more of the following items:
interest, depreciation or amortization. 

        "Plan" shall mean The 2008 Equity Participation Plan of LTC Properties, Inc., as set forth herein and as amended from time to time. 

3

 

        "Restricted Stock" shall mean Common Stock awarded under Article VII of the Plan. 

        "Restricted Stockholder" shall mean an Employee, Independent Director or consultant granted an Award of Restricted Stock under
Article VII of the Plan. 

        "Rule 16b-3" shall mean Rule 16b-3 under the Exchange Act, amended from time to time. 

        "Securities Act" shall mean the Securities Act of 1933, as amended. 

        "Stock Appreciation Right" shall mean an Award granted under Article IX of the Plan. 

        "Stock Payment" shall mean an Award granted under Section 8.4 of the Plan. 

        "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then 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. 

        "Termination of Consultancy" shall mean the time when the engagement of a Holder as a consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause and with or without notice, including, but not by way of limitation, by resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any Subsidiary. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate
a consultant's service at any time for any reason whatsoever, with or without cause and with or without notice, except to the extent expressly provided otherwise in writing. 

        "Termination of Directorship" shall mean the time when a Holder who is an Independent Director ceases to be a Director for any reason,
including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where there is a simultaneous commencement of employment
or establishment of a consulting relationship with the Company or any Subsidiary. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors. 

        "Termination of Employment" shall mean the time when the employee-employer relationship between a Holder and the Company or any Subsidiary
is terminated for any reason, with or without cause and with or without notice, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment or continuing employment of a Holder by the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for cause, and all questions of whether a
particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options, unless otherwise
determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute
a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue 

4

 

rulings
under said Section. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Employee's employment at any time for
any reason whatsoever, with or without cause and with or without notice, except to the extent expressly provided otherwise in writing. 

 
 

  ARTICLE II.
  SHARES SUBJECT TO PLAN AND OTHER LIMITATIONS    
    

        2.1.    Aggregate Limit on Shares Subject to Plan and Individual Award Limits.    

        (a)   The
shares of stock subject to Awards shall be Common Stock. The aggregate number of such shares which may be issued upon exercise of Options or in connection with any
other Awards shall not exceed Six Hundred Thousand (600,000). The shares of Common Stock issuable upon exercise of Options or in connection with any other Awards may be previously authorized but
unissued shares. 

        (b)   The
Administrator may not grant to any individual in any calendar year Stock Options, Restricted Stock, Independent Stock Appreciation Rights, Performance Awards, Stock
Payments and Deferred Stock representing in the aggregate a number of Shares in excess of the Award Limit. For this purpose, a Performance Award payable in cash shall represent a number of Shares
equal to the amount of such
cash divided by the Fair Market Value of a share of Common Stock on the date the Performance Award is granted. The Administrator may not grant to any individual in any calendar year Divided
Equivalents in excess of the aggregate number of Stock Appreciation Rights, Deferred Stock Awards and Performance Awards payable in shares of Common Stock granted to such individual in such calendar
year. The Administrator may not grant to any individual in any calendar year Coupled Stock Appreciation Rights in excess of the Options granted to such individual in such calendar year. 

        2.2.    Add-back of Options and Other Rights.    If any Award expires, is forfeited or is canceled without
having been fully exercised or without having become fully vested, or is exercised in whole or in part for cash as permitted by the Plan, the number of shares subject to such Award as to which such
Award was not exercised, was forfeited, was cancelled, or was exercised in cash may again be subject to an Award, subject to the limitations of Section 2.1. Furthermore, any shares subject to
Awards which are adjusted pursuant to Section 12.3 and become exercisable with respect to shares of stock of another corporation shall be considered cancelled and may again be subject to an
Award, subject to the limitations of Section 2.1. If any share of Restricted Stock is forfeited by the Holder or repurchased by the Company pursuant to Section 7.5 hereof, such share may
again be subject to an Award, subject to the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or
awarded if such action would cause Incentive Stock Options to fail to qualify as an incentive stock options under Section 422 of the Code. 

 
 

  ARTICLE III.
  GRANTING OF AWARDS    
    

        3.1    Award Agreement.    Each Award shall be evidenced by an Award Agreement. Award Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 

        3.2    Consideration.    In consideration of the granting of an Award under the Plan, the Holder shall agree, in the
Award Agreement, to remain in the employ of (or to consult for or to serve as an Independent Director of, as applicable) the Company or any Subsidiary for a period of at least one year (or such
shorter period as may be fixed in the Award Agreement or by action of the Administrator following grant of the Award) after the Award is granted (or, in the case of an Independent Director, until the
next annual meeting of stockholders of the Company). 

5

 

        3.3    At-Will Employment.    Nothing in the Plan or in any Award Agreement hereunder shall confer upon
any Holder any right to continue in the employ of, or as a consultant for, the Company or any Subsidiary, or as a Director of the Company, or shall interfere with or restrict in any way the rights of
the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause and with or without notice, except to the
extent expressly provided otherwise in a written employment agreement between the Holder and the Company or any Subsidiary. 

 
 

  ARTICLE IV.
  GRANTING OF OPTIONS TO EMPLOYEES,
  CONSULTANTS AND INDEPENDENT DIRECTORS    
    

        4.1.    Eligibility.    Any Employee or consultant selected by the Committee pursuant to Section 4.4(a)(i)
shall be eligible to be granted Options. Each Independent Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Sections 4.5 and 4.6. An
Option shall give the Optionee the right to purchase shares of Common Stock under the terms and conditions set forth in the Award Agreement applicable to the Option. 

        4.2.    Disqualification for Stock Ownership.    No person may be granted an Incentive Stock Option under the Plan if
such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then
existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the
Code. 

        4.3.    Qualification of Incentive Stock Options.    No Incentive Stock Option shall be granted to any person who is
not an Employee. 

        4.4.    Granting of Options to Employees and Consultants.    

        (a)   The
Committee shall from time to time, in its absolute discretion, and subject to applicable limitations of the Plan: 

        (i)    Determine
which Employees are key Employees and select from among the key Employees or consultants (including Employees or consultants who have previously received
Awards under the Plan) such of them as in its opinion should be granted Options; 

        (ii)   Subject
to the Award Limit, determine the number of shares to be subject to such Options granted to the selected key Employees or consultants; 

        (iii)  Subject
to Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and 

        (iv)  Determine
the terms and conditions of such Options, consistent with the Plan. 

        (b)   Upon
the selection of a key Employee or consultant to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose
such conditions on the grant of the Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, and consistent with applicable law require as a condition on the grant of an Option to an Employee or consultant that the Employee or consultant surrender for cancellation some or all of
the unexercised Options or any other Awards or rights which have been previously granted to him/her under the Plan or otherwise. An Option, the grant of which is conditioned upon such surrender, may
have an Option price lower (or higher) than the exercise price of such surrendered Option or other Award, may cover the same (or a lesser or greater) number of shares as such 

6

 

surrendered
Option or other Award, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares,
price, exercise period or any other term or condition of such surrendered Option or other Award. Notwithstanding the foregoing, the Committee shall not have authority to reprice Options in accordance
with this Section 4.4(b) without first obtaining stockholder approval for such repricing and the grant of an Option described in the previous sentence may not result in the imposition on the
Optionee of a 20% tax pursuant to Section 409A(a)(1)(B) of the Code. 

        (c)   Any
Incentive Stock Option granted under the Plan may be modified by the Committee, with the consent of the Optionee, to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code, provided that no such modification may result in the imposition on the Optionee of a 20% tax pursuant to Section 409A(a)(1)(B) of
the Code. 

        4.5.    Granting of Options to Independent Directors.    The Board shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan determine (i) which Independent Directors,
if any, should, in its opinion, be granted Non-Qualified Stock Options, (ii) subject to the Award Limit, determine the number of number of shares to be subject to such Options, and
(iii) the terms and conditions of such Options, consistent with the Plan. 

        4.6.    Options in Lieu of Cash Compensation.    Options may be granted under the Plan to Employees and consultants in
lieu of cash bonuses which would otherwise be payable to such Employees and consultants and to Independent Directors in lieu of directors' fees which would otherwise be payable to such Independent
Directors, pursuant to such policies which may be adopted by the Administrator from time to time. 

 
 

  ARTICLE V.
  TERMS OF OPTIONS    
    

        5.1    Option Price.    The price per share of the shares subject to each Option granted to Employees and consultants
shall be set by the Committee; provided, however, that such price shall not be less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; and provided further that in the case of
Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Common
Stock on the date the Option is granted. 

        5.2    Option Term.    The term of an Option granted to an Employee or consultant shall be set by the Committee in its
discretion; provided, however, that the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years
from such date if the Option is an Incentive Stock Option granted to an individual then owning (directly and through application of the attribution rules of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of the Optionee or amend any other term or condition of such Option relating to such a termination. Notwithstanding the
foregoing, the Committee may not extend the term of any outstanding Option beyond the earlier of (1) the original expiration date of the Option and (2) the ten-year
anniversary of the grant date of the Option. 

7

 

        5.3    Option Vesting.    

        (a)   The
period during which the right to exercise, in whole or in part, an Option granted to an Employee or a consultant vests in the Optionee shall be set by the Committee
in its sole and absolute discretion and the Committee may determine that an Option may not be exercised in whole or in part for a specified period after it is granted;  provided, however, that, unless
the Committee otherwise provides in the terms of the Award Agreement or otherwise, no Option shall be exercisable by any
Optionee who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date the Option is granted. At any time after grant of an Option, the
Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option granted to an Employee or consultant vests. 

        (b)   No
portion of an Option granted to an Employee or consultant which is unexercisable at Termination of Employment or Termination of Consultancy, as applicable, shall
thereafter become exercisable, except as may be otherwise provided by the Committee either in the Award Agreement or by action of the Committee following the grant of the Option. 

        (c)   To
the extent that the aggregate Fair Market Value of Common Stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code,
but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the
Company and any parent or subsidiary corporation (within the meaning of Section 422 of the Code) of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted.
For purposes of this Section 5.3(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such Common Stock is granted. 

        (d)   Unless
otherwise provided in an Award Agreement, Options shall become fully vested as of the date of a Change in Control. 

        5.4    Terms of Options Granted to Independent Directors.    The price per share of the shares subject to each Option
granted to an Independent Director shall equal 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted. Subject to Section 6.6, each Option granted to an
Independent Director pursuant to Section 4.5 shall become exercisable in cumulative annual installments of 331/3% on each of the first, second and third anniversaries of the date
of grant, shall become fully
vested as of the date of a Change in Control and shall expire on the earlier of the seventh anniversary of the date of vesting or one year following an Independent Director's Termination of
Directorship for any reason. 

 
 

  ARTICLE VI.
  EXERCISE OF OPTIONS    
    

        6.1.    Partial Exercise.    An exercisable Option may be exercised in whole or in part. However, an Option shall not
be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 

        6.2.    Manner of Exercise.    All or a portion of an exercisable Option shall be deemed exercised upon delivery of
all of the following to the Secretary of the Company or his/her office: 

        (a)   A
written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be
signed by the Optionee or other person then entitled to exercise the Option or such portion of the Option; 

8

 

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

        (c)   In
the event that the Option shall be exercised pursuant to Section 12.1 by any person or persons (other than the Optionee), who have been transferred an Option
pursuant to Section 12.1, appropriate proof of the right of such person or persons to exercise the Option; and 

        (d)   Full
cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Administrator, may in
its discretion (i) allow payment, in whole or in part, through the delivery of shares of Common Stock owned by the Optionee, duly endorsed for transfer to the Company with a Fair Market Value
on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (ii) allow payment, in whole or in part, through the surrender of shares of Common
Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the excess of the aggregate exercise price of the Option or exercised portion thereof
over the Option price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, in accordance with a cashless exercise program under which, if so instructed by the
Optionee, shares of Common Stock may be issued directly to the Optionee's broker or dealer who in turn will sell the shares and pay the Option price in cash to the Company from the sale proceeds; or
(iv) allow payment through any combination of the consideration provided in the foregoing clauses (i), (ii), and (iii). 

        6.3.    Conditions to Issuance of Stock Certificates.    The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 

        (a)   The
admission of such shares to listing on all stock exchanges on which such class of stock is then listed; 

        (b)   The
completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body which the Administrator shall, in its absolute discretion, deem necessary or advisable; 

        (c)   The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; 

        (d)   The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative
convenience; and 

        (e)   The
receipt by the Company of full payment for such shares, including payment of any applicable tax withholdings, which in the discretion of the Administrator may be in
the form of consideration used by the Optionee to pay for such shares under Section 6.2(d). 

        6.4.    Rights as Stockholders.    Optionees shall not be, nor have any of the rights or privileges of, stockholders
of the Company in respect of any shares purchasable upon the exercise of any part of an
Option unless and until certificates representing such shares have been issued by the Company to such Optionees. 

        6.5.    Ownership and Transfer Restrictions.    The Administrator, in its absolute discretion, may impose such
restrictions on the ownership and transferability of the shares purchasable upon the 

9

 

exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Award Agreement and may be referred to on the certificates evidencing such shares. The
Committee may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (i) two years from the
date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Employee or (ii) one year after the
transfer of such shares to such Employee. The Administrator may direct that the certificates evidencing shares acquired by exercise of any such Option refer to such requirement to give prompt notice
of disposition. 

        6.6.    Additional Limitations on Exercise of Options.    Optionees may be required to comply with any timing or other
restrictions with respect to the settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. 

 
 

  ARTICLE VII.
  AWARD OF RESTRICTED STOCK    
    

        7.1.    Eligibility.    Subject to the Award Limit, shares of Restricted Stock may be awarded to any Employee or
consultant selected by the Committee pursuant to Section 7.2 or any Independent Director who the Board determines should receive such an Award. 

        7.2.    Award of Restricted Stock.    

        (a)   The
Administrator may from time to time, in its absolute discretion: 

        (i)    Determine
which Employees are key Employees and select from among the key Employees, Independent Directors or consultants (including Employees, Independent Directors or
consultants who have previously received other Awards under the Plan) such of them as in its opinion should be awarded Restricted Stock; and 

        (ii)   Determine
the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with the Plan. 

        (b)   The
Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock. 

        (c)   Upon
the selection of a key Employee, Independent Director or consultant to be awarded Restricted Stock, the Administrator shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 

        7.3.    Rights as Stockholders.    Subject to Section 7.4, upon delivery of the shares of Restricted Stock to
the escrow holder pursuant to Section 7.6, the Restricted Stockholder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his/her Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided,
however, that in the discretion of the Administrator and as set forth in the Award Agreement, any extraordinary distributions with respect to the Common Stock shall be subject
to the restrictions set forth in Section 7.4 or such other restrictions as may be determined by the Administrator. 

        7.4.    Restriction.    All shares of Restricted Stock issued under the Plan (including any shares received by holders
thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Restricted Stock Award
Agreement, be subject to such terms, conditions and restrictions as the Administrator shall provide, which restrictions may include, without limitation, forfeiture of such shares in the event of
termination of employment prior to completion of a term of service and restrictions concerning voting rights and transferability, Company performance and individual performance and satisfaction of one
or 

10

 

more
Performance Criteria; provided, however, that, by action taken after the Restricted Stock is issued, the Administrator may, on such terms and
conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Restricted Stock Award Agreement. Unless otherwise provided in the Award Agreement,
all of the restrictions imposed on an Award of Restricted Stock shall lapse upon the occurrence of a Change in Control. Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. If no consideration was paid by the Restricted Stockholder upon issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon Termination of
Employment or, if applicable, upon Termination of Consultancy or
Termination of Directorship prior to the termination or expiration of all restrictions; provided, however, that unless otherwise provided by the
Administrator in the Restricted Stock Award Agreement, such rights shall not lapse in the event of a Termination of Employment, Termination of Consultancy or Termination of Directorship following a
Change in Control or because of the Restricted Stockholder's death or disability. 

        7.5.    Repurchase of Restricted Stock.    The Administrator shall provide in the terms of each individual Restricted
Stock Award Agreement that the Company shall have the right to repurchase from the Restricted Stockholder the Restricted Stock then subject to restrictions under the Restricted Stock Award Agreement
immediately upon a Termination of Employment, Termination of Consultancy or Termination of Directorship prior to the termination or expiration of all restrictions, at a cash price per share equal to
the price paid by the Restricted Stockholder for such Restricted Stock; provided, however, that the Administrator in its sole and absolute discretion
may provide that no such right of repurchase shall exist in the event of a Termination of Employment, Termination of Consultancy or Termination of Directorship without cause or following a Change in
Control or because of the Restricted Stockholder's retirement, death, disability or otherwise. 

        7.6.    Escrow.    Unless otherwise determined by the Administrator, the Secretary of the Company or such other escrow
holder as the Administrator may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Restricted Stock Award Agreement
with respect to the shares evidenced by such certificate terminate, expire or have been removed. 

        7.7.    Legend.    In order to enforce the restrictions imposed upon shares of Restricted Stock hereunder, the
Administrator shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Award Agreements, such legend or
legends shall make appropriate reference to the conditions imposed thereby. 

        7.8.    Section 83(b) Election.    If a Restricted Stockholder makes an election under Section 83(b) of
the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the
Restricted Stockholder would otherwise be taxable under Section 83(a) of the Code, the Restricted Stockholder shall deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service. 

        7.9.    Restricted Stock in Lieu of Cash Compensation.    Restricted Stock may be awarded under the Plan to Employees
and consultants in lieu of cash bonuses which would otherwise be payable to such Employees and consultants and to Independent Directors in lieu of directors' fees which would otherwise be payable to
such Independent Directors, pursuant to such policies which may be adopted by the Administrator from time to time. 

11

 

 

 
 

  ARTICLE VIII.
  PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
  STOCK PAYMENTS    
    

        8.1.    Eligibility.    Subject to the Award Limit, one or more Performance Awards, Dividend Equivalents, Awards of
Deferred Stock, and/or Stock Payments may be granted to any Employee who the Committee determines is a key Employee, any consultant who the Committee determines should receive such an Award or any
Independent Director who the Board determines should receive such an Award. 

        8.2.    Performance Awards.    Any key Employee or consultant selected by the Committee or any Independent Director
selected by the Board may be granted one or more Performance Awards. A Performance Award represents the right to receive a payment subject to satisfaction of any one or more of the Performance
Criteria or other specific performance criteria determined appropriate by the Administrator on a specified date or dates or over any period or periods determined by the Administrator. In making such
determinations, the Administrator shall consider (among such other factors as it deems relevant in light of the specific type of Award) the contributions, responsibilities and other compensation of
the particular key Employee, Independent Director or consultant. 

        8.3.    Dividend Equivalents.    Any key Employee or consultant selected by the Committee or any Independent Director
selected by the Board may be granted Dividend Equivalents. A Dividend Equivalent represents the right to receive payments in the amount of the dividend on a share of Common Stock. Dividend Equivalents
shall be credited as of dividend payment dates, during the period between the date a Stock Appreciation Right, Deferred Stock or Performance Award is granted, and the date such Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or
expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations
as may be determined by the Administrator, provided that in no event may the payment of such cash or additional shares of Common Stock be contingent upon a Holder's exercise of an Option or Stock
Appreciation Right. 

        8.4.    Stock Payments.    Any key Employee or consultant selected by the Committee or any Independent Director
selected by the Board may receive Stock Payments in the manner determined from time to time by the Administrator. A Stock Payment represents the right to receive one share of Common Stock. The number
of shares shall be determined by the Administrator and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Administrator, determined on the
date such Stock Payment is made or on any date thereafter. 

        8.5.    Deferred Stock.    Any key Employee or consultant selected by the Committee or any Independent Director
selected by the Board may be granted an Award of Deferred Stock in the manner determined from time to time by the Administrator. Deferred Stock represents the right to receive one share of Common
Stock in the future. The number of shares of Deferred Stock shall be determined by the Administrator and may be linked to the satisfaction of Performance Criteria or other specific performance
criteria determined to be appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Common Stock underlying a Deferred
Stock Award will not be issued until the Deferred Stock Award has vested, pursuant to a vesting schedule or satisfaction of Performance Criteria or other specific performance criteria set by the
Administrator. Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award
has vested and the Common Stock underlying the Award has been issued. 

        8.6.    Term.    The term of a Performance Award, Dividend Equivalent, Deferred Stock and/or Stock Payment shall be
set by the Administrator. 

12

 

        8.7.    Exercise or Purchase Price.    The Administrator may establish the exercise or purchase price, if any, of a
Performance Award, shares of Deferred Stock, or shares received as a Stock Payment. 

        8.8.    Exercise Upon Termination of Employment, Termination of Directorship or Termination of Consultancy.    A
Performance Award, Dividend Equivalent, Deferred Stock and/or Stock Payment is exercisable or payable only while the Holder is an Employee, Independent Director or consultant;  provided, however, that
the Administrator in its sole and absolute discretion may provide that the Performance Award, Dividend Equivalent, Award of
Deferred Stock and/or Stock Payment may be
exercised or paid subsequent to a Termination of Employment, Termination of Consultancy or Termination of Directorship following a Change in Control. 

        8.9.    Payment on Exercise.    Payment of the amount determined under Section 8.2 or 8.3 above shall be in
cash, in Common Stock or a combination of both, as determined by the Administrator. To the extent any payment under this Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3. 

        8.10.    Performance Award, Dividend Equivalent, Deferred Stock and/or Stock Payment in Lieu of Cash
Compensation.    Performance Awards, Dividend Equivalents, Deferred Stock and/or Stock Payments may be awarded under the Plan to Employees and consultants in lieu of
cash bonuses which would otherwise be payable to such Employees and consultants and to Independent Directors in lieu of directors' fees which would otherwise be payable to such Independent Directors,
pursuant to such policies which may be adopted by the Administrator from time to time. 

        8.11.    Section 409A Compliance.    The Common Stock or cash payment distributable to a Holder pursuant to a
Performance Award, Dividend Equivalent, Deferred Stock and/or Stock Payment shall be distributed to the Holder no later than 21/2 months following the end of the calendar year in which
the Award vests or on a specified date or schedule or other distribution event permitted under Section 409A of the Code, in each case as set forth in the applicable Award Agreement. 

 
 

  ARTICLE IX.
  STOCK APPRECIATION RIGHTS    
    

        9.1.    Grant of Stock Appreciation Rights.    A Stock Appreciation Right entitles the Holder to a payment equal to
the excess of the Fair Market Value of the number of shares of Common Stock underlying the Stock Appreciation Right as of the date the Award is exercised over such Fair Market Value as of the date the
Award is granted. A Stock Appreciation Right may be granted to any key Employee or consultant selected by the Committee or any Independent Director selected by the Board. A Stock Appreciation Right
may be granted (i) in connection and simultaneously with the grant of an Option or (ii) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions
not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement. Without limiting the generality of the preceding sentence, the Administrator may, in its
discretion and on such terms as it deems appropriate, require as a condition of the grant of a Stock Appreciation Right to an Employee, Independent Director or consultant that the Employee,
Independent Director or consultant surrender for cancellation some or all of the unexercised Stock Appreciation Rights or any other Awards or rights which have been previously granted to him/her under
the Plan or otherwise. A Stock Appreciation Right, the grant of which is conditioned upon such surrender, may have an exercise price lower (or higher) than the exercise price of such surrendered Stock
Appreciation Right or other Award, may cover the same (or a lesser or greater) number of shares as such surrendered Stock Appreciation Right or other Award, may contain such other terms as the
Administrator deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period, or any other term or condition of such
surrendered Stock Appreciation Right or other Award. Notwithstanding the foregoing, the Committee shall not have authority to reprice Stock Appreciation Rights in accordance with this
Section 9.1 

13

 

without
first obtaining stockholder approval for such repricing and the grant of a Stock Appreciation Right described in the previous sentence may not result in the imposition on the Holder of a 20%
tax pursuant to Section 409A(a)(1)(B) of the Code. 

        9.2.    Coupled Stock Appreciation Rights.    

        (a)   A
CSAR is a Stock Appreciation Right that is related to a particular Option and is exercisable only when and to the extent the related Option is exercisable. 

        (b)   A
CSAR may be granted to the Grantee for no more than the number of shares subject to the simultaneously granted Option to which it is coupled. 

        (c)   A
CSAR shall entitle the Grantee (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option
to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefore an amount determined by multiplying the difference obtained by
subtracting the exercise price of the CSAR from the Fair Market Value of a share of Common Stock on the date of exercise of the CSAR by the number of shares of Common Stock with respect to which the
CSAR shall have been exercised, subject to any limitations the Administrator may impose. 

        9.3.    Independent Stock Appreciation Rights.    

        (a)   An
Independent Stock Appreciation Right (ISAR) is a Stock Appreciation Right that is unrelated to any Option. ISARs shall have terms set by the Administrator and shall
cover such number of shares of Common Stock as the Administrator may determine; provided, however, that the term of an ISAR shall not be more than ten years from the date the ISAR is granted. An ISAR
is exercisable only while the Grantee is an Employee, Independent Director or consultant; provided that the Administrator may determine that the ISAR may be exercised subsequent to Termination of
Employment, Termination of Directorship or Termination of Consultancy without cause, or following a Change in Control, or because of the Grantee's retirement, death or disability, or otherwise, and
provided further, that unless otherwise provided in the Award Agreement, ISARs shall become fully vested as of the date of a Change in Control. Notwithstanding the foregoing, the Administrator may not
extend the term of any outstanding ISAR beyond the earlier of (1) the original expiration date of the ISAR and (2) the ten-year anniversary of the grant date of the ISAR. 

        (b)   An
ISAR shall entitle the Grantee (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent
then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the
Fair Market Value of a share of Common Stock on the date of exercise of the ISAR by the number of shares of Common Stock with respect to which the ISAR shall have been exercised, subject to any
limitations the Administrator may impose. 

        9.4.    Payment and Limitations on Exercise.    

        (a)   Payment
of the amount determined under Sections 9.2(c) and 9.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value as of the date the Stock
Appreciation Right is exercised) or a combination of both, as determined by the Administrator. To the extent such payment is effected in Common Stock it shall be made subject to satisfaction of all
provisions of Section 6.3 above pertaining to Options. 

        (b)   Grantees
of Stock Appreciation Rights may be required to comply with any timing or other restrictions with respect to the settlement or exercise of a Stock Appreciation
Right, including a window-period limitation, as may be imposed in the discretion of the Administrator. 

14

 
 
 

  ARTICLE X.
  SECTION 162(M) PERFORMANCE BASED COMPENSATION    
    

        10.1.    General Requirements.    To the extent that a Performance Award, a Stock Payment or an Award of Restricted
Stock or Deferred Stock is intended to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code, such Award must (1) be granted by the Committee,
(2) be earned based on the achievement over a performance period established by the Committee of objective performance goals as are established by the Committee no later than 90 days
after the commencement of the performance period and not after 25% of the performance period has elapsed and (3) be paid only after the Committee has certified, after the completion of the
performance period, that the performance goals have been met. To the extent that an Award of Options or Stock Appreciation Rights is intended to qualify as "performance-based compensation" for
purposes of Section 162(m) of the Code, such Award must be granted by the Committee. 

        10.2.    Performance Goals.    The objective performance goals shall be stated as specific amounts of, or specific
changes in, one or more of the Performance Criteria. The objective performance goals need not be the same for different performance periods and for any performance period may be stated: (a) on
an absolute basis or relative to the performance of other companies or of a specified index or indices, or be based on any combination of the foregoing and (b) separately for one or more of the
Holders, collectively for the entire group of Holders, or in any combination of the two. 

        10.3.    Committee Requirements.    Determinations by the Committee as to the establishment of performance goals, the
amount potentially payable in respect of, the level of actual achievement of the specified performance goals relating to any Performance Award, a Stock Payment or an Award of Restricted Stock or
Deferred Stock intended to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code, and the amount of any such final Award shall be recorded in writing.
Specifically, the Committee shall certify in writing, in a manner conforming to applicable regulations under Section 162(m), prior to settlement of each such Award that the performance
objectives relating to the such Award and other material terms of such Award upon which settlement of the Award was conditioned have been satisfied. 

 
 

  ARTICLE XI.
  ADMINISTRATION    
    

        11.1.    Compensation Committee.    The Compensation Committee (or another committee or a subcommittee of the Board
assuming the functions of the Committee under the Plan) shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code. Appointment of Committee members shall be
effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 

        11.2.    Duties and Powers of Committee.    It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with respect to Awards granted to Independent Directors. In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan, except with respect to matters which under Rule 16b-3, Section 162(m) or other applicable law
(including stock exchange rules), are required to be determined in the sole discretion of the Committee. 

15

 

        11.3.    Compensation; Professional Assistance; Good Faith Actions.    Members of the Committee shall receive such
compensation for their services as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by
the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers
and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in
good faith shall be final and binding upon all Holders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action,
determination or interpretation. 

 
 

  ARTICLE XII.
  MISCELLANEOUS PROVISIONS    
    

        12.1.    Not Transferable.    No Award under the Plan may be sold, pledged, assigned or transferred in any manner
other than by will or the laws of descent and distribution, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to
such shares have lapsed. No Option, Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment or interest or right therein shall be liable for
the debts, contracts or engagements of the Holder or his/her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. 

        During
the lifetime of the Holder, only he may exercise an Option or other Award (or any portion thereof) granted to him/her under the Plan. After the death of the Holder, any
exercisable portion of an Option or other Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his/her personal
representative or by any person empowered to do so under the deceased Holder's will or under the then applicable laws of descent and distribution. 

        12.2.    Amendment, Suspension or Termination of the Plan.    Except as otherwise provided in this
Section 12.2, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. However, without approval of the
Company's stockholders given within twelve months before or after the action by the Board, no action of the Board may, except as provided in Section 12.3, increase the limits imposed in
Section 2.1 on the maximum number of shares which may be issued under the Plan. No amendment, suspension or termination of the Plan shall, without the consent of the Holder materially impair
any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension
or after termination of the Plan, and in no event may any Incentive Stock Option be granted under the Plan after the first to occur of the following events: 

        (a)   The
expiration of ten years from the date the Plan is adopted by the Board; or 

        (b)   The
expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 12.4. 

        12.3.    Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company, Change in Control and Other Corporate
Events.    

16

 

        (a)   Subject
to Section 12.3(d), in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company (including, but not limited to, a Corporate
Transaction), or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Administrator's opinion, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable,
adjust any or all of: 

        (i)    the
number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued and adjustments of the Award Limit), 

        (ii)   the
number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, or Stock Payments, and in the number and kind of shares of outstanding Restricted Stock or Deferred Stock, and 

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

        (b)   Subject
to Sections 12.3(b)(vii) and 12.3(d), in the event of any Corporate Transaction or other transaction or event described in Section 12.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws,
regulations, or accounting principles, the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action
taken prior to the occurrence of such transaction or event, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate
in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or principles: 

        (i)    To
provide for either the purchase of any such Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or
realization of the Holder's rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selected by the Administrator in
its sole discretion; 

        (ii)   To
provide that the Award cannot vest, be exercised or become payable after such event; 

        (iii)  To
provide that such Award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in (i) Articles V, VII, VIII
or IX or (ii) the provisions of such Award; 

        (iv)  To
provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options,
rights or Awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; 

17

 

        (v)   To
make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be
granted in the future; 

        (vi)  To
provide that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of Restricted Stock or
Deferred Stock may be terminated, and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 7.5 or forfeiture under
Section 7.4 after such event; and 

        (vii) None
of the foregoing discretionary actions taken under this Section 12.3(b) shall be permitted with respect to Options granted under Section 4.5 to
Independent Directors to the extent that such discretion would be inconsistent with the applicable exemptive conditions of Rule 16b-3. In the event of a Change in Control or a
Corporate Transaction, to the extent that the Board does not have the ability under Rule 16b-3 to take or to refrain from taking the discretionary actions set forth in
Section 12.3(b)(iii) above, each Option granted to an Independent Director shall be exercisable as to all shares covered thereby upon such Change in Control or during the five days immediately
preceding the consummation of such Corporate Transaction and subject to such consummation, notwithstanding anything to the contrary in Section 5.4 or the vesting schedule of such
Options. In the event of a Corporate Transaction, to the extent that the Board does not have the ability under Rule 16b-3 to take or to refrain from taking the discretionary actions
set forth in Section 12.3(b)(ii) above, no Option granted to an Independent Director may be exercised following such Corporate Transaction unless such Option is, in connection with such
Corporate Transaction, either assumed by the successor or survivor corporation (or parent or subsidiary thereof) or replaced with a comparable right with respect to shares of the capital stock of the
successor or survivor corporation (or parent or subsidiary thereof). 

        (c)   Subject
to Section 12.3(d) and 12.8, the Administrator may, in its discretion, include such further provisions and limitations in any Award, agreement or
certificate, as it may deem equitable and in the best interests of the Company. 

        (d)   No
adjustment or action described in this Section 12.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action
would cause the Plan to violate Section 422(b)(1) of the Code or would result in the imposition on any Holder of a 20% tax pursuant to Section 409A(a)(1)(B) of the Code. Furthermore, no
such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of
Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions. The number of shares of Common Stock subject to any Award shall always
be rounded to the next whole number. 

        12.4.    Approval of Plan by Stockholders.    The Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval;  provided that such Awards shall not be
exercisable nor shall such Awards vest prior to the time when the Plan is approved by the stockholders; and  provided further, that if such approval has not been obtained at the end of said twelve-month
period, all Awards previously granted or awarded under the
Plan shall thereupon be canceled and become null and void. 

        12.5.    Tax Withholding.    The Company shall be entitled to require payment in cash or deduction from other
compensation payable to each Holder of any sums required by federal, state or local tax law 

18

 

to
be withheld with respect to the issuance, vesting, exercise or payment of any Award. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow such Holder to
elect to have the Company withhold shares of Common Stock otherwise issuable under such Award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to
be withheld. 

        12.6.    Forfeiture Provisions.    Pursuant to its general authority to determine the terms and conditions applicable
to Awards under the Plan, the Administrator shall have the right (to the extent consistent
with the applicable exemptive conditions of Rule 16b-3) to provide, in the terms of Awards made under the Plan, or to require a Holder to agree by separate written instrument, that
(i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Common Stock
underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (a) a
Termination of Employment, Termination of Consultancy or Termination of Directorship occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or
(b) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee (or the Board, as applicable) or the Holder incurs a Termination of Employment, Termination of Consultancy or Termination of Directorship for cause. 

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

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

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

19

 

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

        12.11.    Governing Law.    The Plan and any agreements hereunder shall be administered, interpreted and enforced
under the internal laws of the State of Maryland without regard to conflicts of laws thereof. 

20

QuickLinks

Exhibit 10.8

THE 2008 EQUITY PARTICIPATION PLAN OF LTC PROPERTIES, INC.

ARTICLE I. DEFINITIONS

ARTICLE II. SHARES SUBJECT TO PLAN AND OTHER LIMITATIONS

ARTICLE III. GRANTING OF AWARDS

ARTICLE IV. GRANTING OF OPTIONS TO EMPLOYEES, CONSULTANTS AND INDEPENDENT DIRECTORS

ARTICLE V. TERMS OF OPTIONS

ARTICLE VI. EXERCISE OF OPTIONS

ARTICLE VII. AWARD OF RESTRICTED STOCK

ARTICLE VIII. PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS

ARTICLE IX. STOCK APPRECIATION RIGHTS

ARTICLE X. SECTION 162(M) PERFORMANCE BASED COMPENSATION

ARTICLE XI. ADMINISTRATION

ARTICLE XII. MISCELLANEOUS PROVISIONS

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