Document:

EX-10.2 1st Amended 1997 Share Option/Award Plan

 

EXHIBIT 10.2

EQUITY OFFICE PROPERTIES TRUST

FIRST AMENDED AND RESTATED

1997 SHARE OPTION AND SHARE AWARD PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	SECTION	 	 	Page
	1.	 	
Purposes
	 	 	1	 
	2.	 	
Administration
	 	 	1	 
	3.	 	
Participation
	 	 	2	 
	4.	 	
Shares Subject to the Plan
	 	 	3	 
	5.	 	
Share Awards
	 	 	3	 
	6.	 	
Share Options
	 	 	5	 
	7.	 	
Share Appreciation Rights
	 	 	7	 
	8.	 	
Dividend Equivalents
	 	 	10	 
	9.	 	
Withholding
	 	 	10	 
	10.	 	
Compliance with Applicable Laws and Policies
	 	 	10	 
	11.	 	
Transferability
	 	 	11	 
	12.	 	
Service and Shareholder Status
	 	 	11	 
	13.	 	
Adjustments to Number of Shares Subject to
the Plan and to Terms of Options,
SARs and Dividend Equivalents
	 	 	11	 
	14.	 	
Agreement with Company
	 	 	12	 
	15.	 	
Term of Plan
	 	 	12	 
	16.	 	
Amendment and Termination of Plan
	 	 	12	 
	17.	 	
Headings, References and Construction
	 	 	12	 

 

 

EQUITY OFFICE PROPERTIES TRUST

1997 SHARE OPTION AND SHARE AWARD PLAN

(As Amended and Restated Effective May 20, 2003)

     1.     Purposes. The Equity Office Properties Trust 1997 Share Option and
Share Award Plan (the “Plan”) was established by Equity Office Properties
Trust, a Maryland real estate investment trust (the “Company”), to secure for
the Company and its shareholders the benefits arising from capital ownership by
those key employees, officers, trustees and consultants of the Company and its
Related Companies who are and will be responsible for its future growth and
continued success. The term “Related Company” means Equity Office Properties
Management Corp. and each other company determined by the Committee (as defined
below) from time to time and set forth on Exhibit A hereto, as it may be
amended. The Plan has been amended from time to time and is hereby restated to
incorporate all amendments previously made.

          The Plan will provide a means whereby such individuals may receive: (a)
authorized common shares of beneficial interest of the Company (“Shares”),
subject to conditions and restrictions described herein and otherwise
determined by the Committee (“Share Awards”); (b) options to purchase Shares
(“Options”); (c) Share Appreciation Rights (“SARs”) in tandem with or
independent of Options; or (d) dividend equivalent rights with respect to
Shares (“Dividend Equivalents”).

     2.     Administration. (a) The authority to manage and control the operation
and administration of the Plan shall be vested in a Committee (the “Committee”)
consisting of two or more members of the Board of Trustees of the Company (the
“Board”), each of whom is a “Non-Employee Director” as such term is defined in
Section 16b-3(b)(3)(i) of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934 (the “Act”) (and, in addition, with respect
to any grant of an Option or SAR, or the determination of conditions and
restrictions intended to make the grant or award subject thereto constitute
“performance-based compensation” within the meaning of Section 162(m)(4)(C) of
the Internal Revenue Code, as amended (“Code”), such grant, award or
determination is made by a Committee consisting of two or more “outside
directors” as such term is defined in Treasury Regulation Section
1.162-27(e)(3)), who shall be appointed, and may be removed, by such Board.
Any interpretation of the Plan by the Committee and any decision made by the
Committee on any other matter within its discretion is final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made with respect to the Plan.

          (b) The day-to-day administration of the Plan may be carried out by an
Option Coordinator designated by the Chief Legal Counsel of the Company.

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     3. Participation.

          (a) Generally. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate from time to time the employees,
officers, trustees and consultants of the Company and its Related Companies to
whom Share Awards, Options, SARs or Dividend Equivalents are to be granted
(“Grantees” and individually, a “Grantee”), the terms of such grants and the
number of Shares subject to such grants. Notwithstanding the foregoing, the
maximum number of Shares with respect to which Options and SARs may be granted
during any calendar year to any Grantee is 1,000,000 Shares. Where deemed
necessary by the Chief Legal Counsel of the Company, the rights, powers and
authorities of the Committee may be exercised by the Board.

          (b) Board of Trustees. Board and Committee fees paid to each Trustee
shall, unless the Committee otherwise determines, be payable in Share Awards
issued under the Plan having a Grant Value (as defined in subparagraph (d)
below) as of the date the fees are payable equal to the amount of such fees.
A Trustee who is not otherwise a Grantee shall become a Grantee on the first
date on which the Trustee is awarded a Share Award pursuant to this
subparagraph (b). Trustees may, in addition to Share Awards awarded under this
subparagraph (b), also be awarded Share Awards, Options, SARs and Dividend
Equivalents under paragraph 3(a).

          (c) Annual Incentive Bonus Plan. As of a date (the “Bonus Date”)
selected by the Committee that is not less than 30 days before or after the
date on which a cash distribution (a “Bonus”) is earned by an individual under
the Company’s annual incentive bonus plan (the “Bonus Plan”), the Committee
may, in its discretion, elect to pay all or a portion of such Bonus in the form
of a Share Award, Option or SAR having an aggregate Grant Value, determined as
of the Bonus Date, equal to the cash amount of the Grantee’s Bonus being so
replaced (the “Award Portion”). All awards made under this subparagraph (c)
shall be governed by paragraphs 5, 6 or 7 hereof, as applicable. If approved
by the Committee, each individual who participates in the Bonus Plan and who
receives a Share Award under this subparagraph (c) will be given an opportunity
to elect, in accordance with procedures established by the Committee, to have
all or a portion of his Bonus in excess of the Award Portion paid in the form
of a Share Award so as to increase the total Award Portion. Such opportunity
provided under this subparagraph (c) is subject to compliance with all
applicable federal and state securities laws.

          (d) Value. For all purposes of the Plan, the “Grant Value” of grants made
pursuant to paragraph 3(b) or 3(c) shall equal (A) for a Share Award, the Fair
Market Value of a Share (as defined in paragraph 6(b)) as of the date of grant,
(B) for an Option or SAR (1) if the Company has complied with the disclosure
requirements described in Item 402(c) of Regulation S-K under the Act by
disclosing the present value of options under the Black-Scholes or binomial
option pricing model or another valuation method (any of the foregoing
constituting a “Valuation Method”), the value of such Option or SAR calculated
based on the Valuation

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Method and assumptions contained in the most recent document used by the
Company to satisfy those requirements; or (2) if the Company has not so
disclosed the present value of Options, then “Grant Value” shall, at the
election of the Committee either be calculated using a Valuation Method and
assumptions that would satisfy such requirements, or shall equal the difference
between the Fair Market Value of a Share as of the date of grant and the
exercise or base price of the Option or SAR, times the number of Shares subject
to the Option or SAR.

     4.     Shares Subject to the Plan. Subject to the provisions of paragraph 13,
(i) the maximum number of Shares for which Share Awards, Options, SARs and
Dividend Equivalents may be granted under the Plan shall equal 6.8% of the
outstanding Shares from time-to-time, calculated on a fully diluted basis,
determined annually on the first day of each calendar year; and (ii) no more
than half of the number of Shares described in clause (i) may be subject to
Share Awards granted under the Plan. Shares subject to the Plan may be
authorized but unissued Shares, Shares now held in the treasury of the Company
or Shares hereafter acquired by the Company. In the event that (a) any Option
granted under the Plan expires unexercised or is terminated, surrendered or
canceled (other than in connection with the exercise of a “Tandem” (as defined
in paragraph 7 below) SAR) without being exercised, in whole or in part, for
any reason, (b) any Tandem SAR granted under the Plan expires unexercised or is
terminated, surrendered or canceled (other than in connection with the exercise
of its related Option), or (c) any “Non-Tandem” (as defined in paragraph 7
below) SAR granted under the Plan expires unexercised or is terminated,
surrendered or canceled without being exercised, in whole or in part, for any
reason, then the number of Shares then subject to the Option or SAR, or the
unexercised, terminated, surrendered, forfeited, canceled or reacquired portion
thereof, shall be added to the remaining number of Shares available for grant
under the Plan unless the Plan shall have terminated. Notwithstanding any
provision of this Plan to the contrary, for purposes of determining the maximum
number of Shares subject to this Plan, any common shares of the Company subject
to options under the Equity Office Properties Trust 2003 Share Option and Share
Incentive Plan shall be excluded from total outstanding Shares.

     5.     Share Awards. This paragraph 5 sets forth specific terms and
conditions applicable to Share Awards under the Plan.

          (a) Conditions and Restrictions on Certain Awards. Share Awards granted
under paragraph 3(a) shall be subject to the following conditions and/or
restrictions:

               (i) A Share Award will be forfeited to the Company upon the termination of
the Grantee’s Service (as defined below) before a date established by the
Committee that may not be earlier than six (6) months after the date of grant
of the Share Award (“Date of Grant’), and may be subject to such further
conditions and restrictions established by the Committee at the Date of Grant.
An individual’s “Service” shall continue until he or she is no longer an
employee, officer, trustee, director or consultant of the Company or an
Extended Company. The term “Extended Company” means a Related Company or each
other company designated by the Committee that has provided that awards
provided to its employees and other persons, which are comparable to the awards
provided under the Plan, will not expire if such employees or other persons
terminate their relationship with such company and immediately

3

 

become employees, officers, trustees, directors or consultants of the
Company. The Extended Companies shall be set forth in Exhibit B, as it may be
amended from time to time upon the determination of the Committee.

               (ii) The Committee may, but need not, establish performance goals to be
achieved within such performance periods as may be selected by it in its sole
discretion, using such measures of the performance of the Company and/or one
(1) or more of its Related Companies as it may select.

               (iii) Notwithstanding the foregoing, the restrictions described in the
preceding subparagraphs (i) and (ii) that are contained in the terms of any
grant made pursuant to paragraph 3(a) shall immediately lapse and be of no
effect in the event of the termination of a Grantee’s Service (A) because of
the Grantee’s “Disability” (as defined below) or death, (B) with respect to a
Grantee who is an employee or officer, in connection with his retirement at or
after age 62, (C) with respect to a Grantee who is a consultant, in connection
with his retirement (as determined by the Committee in its discretion), (D)
with respect to a Grantee who is a Trustee, in connection with his failure to
be re-elected to the Board, (E) following a “Change in Control” of the Company
(as defined below) or (F) under circumstances deemed to warrant such treatment
by the Plan Administrator. For purposes of the Plan, “Plan Administrator”
shall mean (X) the President and Chief Executive Officer of the Company and any
one member of the Committee, or (Y) the full Committee. Notwithstanding the
foregoing, where the affected Grantee is a “covered employee” for purposes of
Section 162(m) of the Code, (i) any authority of the Plan Administrator under
the Plan may only be exercised if the existence of such authority would not
cause the related Share Award, Option or SAR to fail to constitute performance
based compensation on its Date of Grant under Treasury Regulation Section
1.162-27; and (ii) “Plan Administrator” shall mean only the full Committee if
the exercise of such authority by the President and Chief Executive Officer and
any one member of the Committee would adversely affect the grant’s status as
performance based compensation and its exercise by the full Committee would not
so affect such status. For purposes of this Plan, “Disability” shall mean a
physical or mental condition that entitles a Participant to benefits under the
Employer-sponsored long-term disability plan in which he or she participates,
as determined by the Plan Administrator in its sole and absolute discretion.
In addition, for purposes of this Plan, a “Change in Control” shall be deemed
to occur upon: (1) the acquisition by any entity, person, or group of more
than 50% of the outstanding Shares from the holders thereof; (2) a merger or
consolidation of the Company with one (1) or more other entities as a result of
which the ultimate holders of outstanding Shares immediately prior to such
merger hold less than 50% of the shares of beneficial ownership of the
surviving or resulting corporation; or (3) a direct or indirect transfer of
substantially all of the property of the Company other than to an entity of
which the Company directly or indirectly owns at least 50% of the shares of
beneficial ownership.

          (b) Rights of Grantee. The Grantee shall be entitled to all of the rights
of a shareholder with respect to the Share Awards including the right to vote
such Shares and to receive dividends and other distributions payable with
respect to such Shares from and after the Date of Grant; provided that any
securities or other property (but not cash) received in any such

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distribution with respect to a Share Award that is still subject to the
restrictions in subparagraphs (a)(i), (ii) or (iii) above, shall be subject to
all of the restrictions set forth herein with respect to such Share Award.

          (c) Issuance. If certificates for the Share Award have been issued, such
certificates shall be held in escrow by the Company. Except in the case of a
Share Award under paragraph 3(b), stock powers for such Shares shall be
executed in blank by the Grantee, until all restrictions lapse or such Shares
are forfeited as provided herein. A certificate or certificates representing a
Share Award as to which restrictions have lapsed shall be delivered to the
Grantee upon such lapse.

     6.     Share Options. This paragraph 6 addresses specific terms and
conditions for Share Options.

          (d) Incentive Share Option/NQSO. Any Option to purchase Shares granted
under paragraph 3(a) that satisfies all of the requirements of Section 422 of
the Code, may be designated by the Committee as an “Incentive Share Option.”
Options that are not so designated, or that do not satisfy the requirements of
Section 422 of the Code or that are granted under paragraph 3(b) shall not
constitute Incentive Share Options and shall be Non-Qualified Share Options.

          (e) Exercise Price. With respect to an employee who owns on the Date of
Grant more than 10% of the Company’s Shares, the Option price of an Incentive
Share Option shall equal 110% of the Fair Market Value of a Share. For all
other Grantees, the Option price of an Incentive Share Option shall equal the
Fair Market Value of a Share. The Option price of any Non-Qualified Share
Option shall equal its Fair Market Value. Except as provided in paragraphs
6(d)(vi) and 9, “Fair Market Value” shall equal the closing price paid for the
Shares on the New York Stock Exchange on the first trading day immediately
preceding the date as of which Fair Market Value is being determined. For
purposes of determining the Option price of an Incentive Share Option, Fair
Market Value shall not be less than the closing price paid for the Shares on
the New York Stock Exchange on the date the Option is awarded under the Plan
and with respect to an employee who owns on the Date of Grant more than 10% of
the Company’s Shares, 110% of the Fair Market Value on the date the Option is
awarded under the Plan.

          (f) Expiration Date. Subject to earlier termination as provided in
paragraph 16, the “Expiration Date” with respect to an Option or any portion
thereof granted under paragraph 3(a) means the date established by the
Committee at the Date of Grant, but in no event later than the date that is ten
(10) years after the date on which the Option is granted and, with respect to
an Incentive Share Option granted to an employee who owns, on the Date of
Grant, more than 10% of the Company’s Shares, in no event later than the date
that is five (5) years from the date on which the Option is granted. The
Expiration Date with respect to an Option or any portion thereof granted under
paragraph 3(b) means the date which is 10 years after the date on which the
Option is granted. If the Service of a Grantee terminates for cause (as
determined by the Committee in its discretion), his Option shall expire
immediately. The Committee may establish guidelines for determining whether a
Grantee’s Service has terminated for cause and

5

 

communicate such guidelines in the Grantee’s award agreement. If the
Grantee’s Service terminates other than for cause and other than because of
circumstances described in the last sentence of paragraph (d)(i) below, his
Option shall not thereafter become exercisable with respect to any additional
Shares, and his Option shall expire three months after the date on which his
Service terminated, but no later than the Expiration Date. If such Service
terminates because of the Grantee’s death, his Option shall be exercisable by
the person or persons to whom that right passes by will or by the laws of
descent and distribution for a period of 12 months after the date of death (at
which time it will expire), but no later than the Expiration Date.
Notwithstanding the foregoing, the Plan Administrator may provide, at any time
before the Expiration Date, that a Grantee’s Option shall not expire prior to
the date it would otherwise expire in accordance with the preceding sentences,
and may provide in connection therewith (i) the date or event that will cause
the Option to expire (or that the Option will expire on the Expiration Date);
and/or (ii) the extent to which the Option shall continue to become
exercisable. All rights to purchase Shares pursuant to an Option shall cease
as of the Option’s Expiration Date or its earlier expiration as provided herein
or in the Grantee’s award agreement.

          (g) Exercise of Options. The following paragraphs address specific terms
that control a Grantee’s right to exercise Options:

               (i) Each Option granted under paragraph 3(a) shall be exercisable, either
in whole or in part, at such time or times as shall be determined by the
Committee at the time the Option is granted or later, but in no event later
than the Option’s Expiration Date. The Committee may establish performance
goals to be achieved within such periods as may be selected by it in its sole
discretion, using such measures of the performance of the Company and/or a
Related Company as it may select. Notwithstanding the foregoing, an Option
granted under the Plan shall be immediately exercisable in the event of the
termination of a Grantee’s Service (A) because of the Grantee’s Disability or
death, (B) with respect to a Grantee who is an employee or officer, in
connection with his retirement at or after age 62, (C) with respect to a
Grantee who is a consultant, in connection with his retirement (as determined
by the Committee in its discretion), (D) with respect to a Grantee who is a
Trustee, in connection with his failure to be re-elected to the Board or in
connection with his retirement at or after age 62, or (E) following a Change in
Control.

               (ii) Each Option previously granted pursuant to provisions then in effect
shall be exercisable, either in whole or in part, (A) with respect to one-third
(1/3) of the Shares subject to such Option (rounded to the nearest whole share)
at any time on or after six months from the Date of Grant, (B) with respect to
an additional one-third (1/3) of the Shares subject to such Option (rounded to
the nearest whole share) at any time on or after the first anniversary of the
Date of Grant, and (C) with respect to the remaining Shares, at any time on or
after the second anniversary of the Date of Grant, but in each case, no later
than the Option’s Expiration Date.

               (iii) The Fair Market Value of Shares with respect to which Incentive
Share Options are exercisable for the first time by a Grantee during any
calendar year may not

6

 

exceed $100,000. Any Incentive Share Options that become exercisable in
excess of such amount shall be deemed to be Non-Qualified Share Options to the
extent of such excess.

               (iv) An Incentive Share Option may be exercised during the lifetime of the
Grantee only by the Grantee and, after the death of the Grantee, only by the
individuals or entities described in paragraph 6(f).

               (v) Notwithstanding the foregoing, at any time following the grant of an
Option, the Plan Administrator, in its sole discretion, may elect to accelerate
the date as of which the Grantee may exercise the Option with respect to all or
a portion of the Shares subject thereto.

               (vi) Subject to the foregoing, a Grantee may exercise an Option by giving
written notice thereof prior to the Option’s Expiration Date to the Option
Coordinator at the principal executive offices of the Company, or to such other
person or entity and/or at such other location, as designated by the Chief
Legal Counsel of the Company. Contemporaneously with the delivery of notice
with respect to exercise of an Option, the full purchase price of the Shares
purchased pursuant to the exercise of the Option, together with any required
state or federal withholding taxes, shall be paid in cash, by tender of share
certificates in proper form for transfer to the Company valued at the Fair
Market Value of the Shares, by any combination of the foregoing, or with any
other consideration reasonably acceptable to the Committee. For purposes of
this paragraph, and paragraph 9, “Fair Market Value” shall mean the average of
the high and low prices paid for Shares on the New York Stock Exchange on the
date of exercise.

          (h) Suspension of Right. Notwithstanding any other provision of this
paragraph 6, the Chief Legal Counsel of the Company, in his sole and absolute
discretion, may suspend the right of any person to exercise an Option for up to
30 days if the Grantee’s Service has been or, in the sole and absolute judgment
of the Chief Legal Counsel of the Company, may be suspended or terminated for
any reason.

          (i) Parties Entitled to Exercise Options. An Option may be exercised only
by the Grantee, or by his legatee or legatees of such Option under his last
will, by his executors, personal representatives or distributees, or by a
transferee to the extent that a transfer of the Option is permitted pursuant to
paragraph 11(b).

     7.     Share Appreciation Rights. The Committee may grant an SAR to a
Grantee who is awarded an Option under paragraph 3 or to any other key
employee, officer, trustee, director or consultant of the Company or a Related
Company. Each SAR shall be subject to such restrictions and conditions and
other terms as the Committee may specify when the SAR is granted.

          (j) Grant. An SAR granted at the time an Option is granted may be granted
either in addition to the related Option (“Non-Tandem SAR”) or in tandem with
the related Option (“Tandem SAR”). An SAR granted other than at the time an
Option is granted will be subject to the provisions applicable to Non-Tandem
SARs. At the time a Non-Tandem SAR is

7

 

granted, the Committee shall specify the base price of the Shares to be
used in connection with the calculation described in subsection (b)(i) below.
The base price of a Non-Tandem SAR shall be a percentage (as low as zero) of
the Fair Market Value of a Share on the date of grant. The number of Shares
subject to a Tandem SAR shall not exceed one for each Share subject to the
related Option. No Tandem SAR may be granted to a key employee in connection
with an Incentive Share Option in a manner that will disqualify the Incentive
Share Option under Section 422 of the Code unless the key employee consents
thereto.

          (k) Value. Upon exercise, an SAR shall entitle the Grantee to receive
from the Company the number of Shares having an aggregate Fair Market Value
equal to the following:

               (i) in the case of a Non-Tandem SAR, the excess of the Fair Market Value
of one Share as of the date on which the SAR is exercised over the base Share
price specified in such SAR, multiplied by the number of Shares then subject to
the SAR, or the portion thereof being exercised.

               (ii) in the case of a Tandem SAR, the excess of the Fair Market Value of
one Share as of the date on which the SAR is exercised over the exercise price
per Share specified in the related Option, multiplied by the number of Shares
then subject to the Option, or the portion thereof as to which the SAR is being
exercised.

               Cash shall be delivered in lieu of any fractional shares. The Committee,
in its discretion, shall be entitled to cause the Company to elect to settle
any part or all of its obligation arising out of the exercise of an SAR by the
payment of cash in lieu of all or part of the Shares it would otherwise be
obligated to deliver in an amount equal to the Fair Market Value of such Shares
on the date of exercise.

          (l) Exercise of Tandem SARs. A Tandem SAR shall be exercisable during
such time, and be subject to such restrictions and conditions and other terms,
as the Committee shall specify at the time such Tandem SAR is granted which
restrictions and conditions and other terms need not be the same for all
Grantees. Notwithstanding the preceding sentence, the Tandem SAR shall be
exercisable only at such time as the Option to which it relates is exercisable
and shall be subject to the restrictions and conditions and other terms
applicable to such Option. Upon the exercise of a Tandem SAR, the unexercised
Option, or the portion thereof to which the exercised portion of the Tandem SAR
is related, shall expire. The exercise of any Option shall cause the
expiration of the Tandem SAR related to such Option, or portion thereof, that
is exercised.

          (m) Exercise of Non-Tandem SARs.

               (i) A Non-Tandem SAR granted under the Plan shall be exercisable during
such time, and shall be subject to such restrictions and conditions and other
terms, as the Committee shall specify at the time the Non-Tandem SAR is
granted. The Committee may establish performance goals to be achieved within
such periods as may be selected by it in its

8

 

sole discretion, using such measures of the performance of the Company
and/or a Related Company as it may select. Without limiting the generality of
the foregoing, the Committee may specify a minimum number of full Shares with
respect to which any exercise of a Non-Tandem SAR must be made.

               (ii) Subject to earlier termination as provided in the last sentence of
this subparagraph, a Non-Tandem SAR granted under the Plan shall expire on the
date specified by the Committee, provided that such date shall not be more than
10 years after the Date of Grant. The Committee shall specify at the time each
Non-Tandem SAR is granted, the time during which the Non-Tandem SAR may be
exercised prior to its expiration and other provisions relevant to the SAR.
The Committee, in its discretion, shall have the power to accelerate the dates
for exercise of any or all Non-Tandem SARs or any part thereof, granted under
the Plan. Notwithstanding the foregoing, any Non-Tandem SAR shall expire,
notwithstanding any restrictions and conditions that the Committee may impose,
following a termination of the Grantee’s Service in the same manner as an
Option held by such Grantee would expire pursuant to the provisions of
paragraph 6(c), taking into account any action by the Plan Administrator
pursuant to the penultimate sentence of such paragraph.

          (n) Acceleration. Notwithstanding any restrictions or conditions imposed
on an SAR pursuant to subparagraphs (c) or (d)(i) above, an SAR granted under
the Plan shall be immediately exercisable in the event of the termination of
the Grantee’s Service (A) because of the Grantee’s Disability or death, (B)
with respect to a Grantee who is an employee or officer, in connection with his
retirement at or after age 62, (C) with respect to a Grantee who is a
consultant, in connection with his retirement (as determined by the Committee
in its discretion), (D) with respect to a Grantee who is a Trustee, in
connection with his failure to be re-elected to the Board, or (E) following a
Change in Control. In addition, at any time following the grant of an SAR, the
Plan Administrator, in its sole discretion, may elect to accelerate the date as
of which the Grantee may exercise the SAR.

          (o) Suspension of Right. Notwithstanding any other provisions of this
paragraph 7, the Chief Legal Counsel of the Company, in his sole and absolute
discretion, may suspend the right of any person to exercise an Option for up to
30 days if the Grantee’s Service has been or, in the sole and absolute judgment
of the Chief Legal Counsel of the Company, may be suspended or terminated for
any reason.

          (p) Parties Entitled to Exercise SARs. An SAR may be exercised only by
the Grantee, or by a legatee or legatees of such SAR under his last will, by
his executors, personal representatives or distributees, or by a transferee to
the extent that a transfer of the SAR is permitted pursuant to paragraph 11(b).

          (q) Settlement of SARs. As soon as is reasonably practicable after the
exercise of an SAR, the Company shall (i) issue, in the name of the Grantee,
Shares representing the total number of full Shares to which the Grantee is
entitled pursuant to subparagraph 7(b) hereof and cash in an amount equal to
the Fair Market Value, as of the date of exercise, of any resulting fractional
Shares, and (ii) if the Committee causes the Company to elect to settle all or
part of its

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obligations arising out of the exercise of the SAR in cash, deliver to the
Grantee an amount in cash equal to the Fair Market Value, as of the date of
exercise, of the Shares it would otherwise be obligated to deliver.

     8.     Dividend Equivalents. A Dividend Equivalent shall be related to a
number of Shares specified at the time of grant and shall entitle the holder to
cash payments that equal the cash dividend, if any, paid with respect to such
Shares provided that the Dividend Equivalent is outstanding on the record date
thereof and that it is not subject to any condition limiting the Grantee’s
right to receive such payments. A Dividend Equivalent shall be subject to such
restrictions and conditions and other terms including those relating to
expiration or forfeiture, as the Committee shall specify at the time such
Dividend Equivalent is granted. A Dividend Equivalent granted pursuant to
subsection 3(c) shall not be subject to any restriction or condition limiting
the Grantee’s right to receive the cash payment discussed above from and after
the second anniversary of its Date of Grant. Notwithstanding the foregoing,
any restriction or condition (other than expiration or forfeiture) limiting the
Grantee’s right to receive the cash payment described above shall lapse in the
event of (A) the termination of the Grantee’s Service because of the Grantee’s
Disability or death, (B) with respect to a Grantee who is an employee or
officer, his retirement at or after age 62, (C) with respect to a Grantee who
is a consultant, his retirement (as determined by the Committee in its
discretion), (D) with respect to a Grantee who is a Trustee, his failure to be
re-elected to the Board, or (E) following a Change in Control.

     9.     Withholding. Whenever under the Plan a Grantee recognizes income with
respect to any Share Award, Option, SAR or Dividend Equivalent (the “Award”)
hereunder, the Company shall have the right to withhold from amounts payable to
such recipient in any manner, as necessary to satisfy all federal, state and
local payroll tax withholding requirements. Without limiting the generality of
the foregoing, (i) a Grantee may elect to satisfy all or part of the foregoing
withholding requirements by delivery of unrestricted Shares owned by the
Grantee having a Fair Market Value equal to the amount to be so withheld; and
(ii) the Committee may permit any such delivery to be made by withholding
Shares otherwise issuable pursuant to the award giving rise to the tax
withholding obligation. If Shares are being surrendered by or withheld for a
Grantee who is subject to Section 16 of the Act, the foregoing shall be
accomplished in a manner consistent with Rule 16b-3(e) thereunder. For these
purposes, the amount of income recognized in connection with an Option exercise
shall be based on (i) in the case of a cashless exercise, the actual proceeds
of the exercise, and (ii) in all other purposes, the excess of the Fair Market
Value of a Share on the date of exercise over the exercise price.

     10.     Compliance with Applicable Laws and Policies. Notwithstanding any
other provision in the Plan, the Company shall have no liability to issue any
Shares under the Plan unless such issuance would comply with all applicable
laws and applicable requirements of any securities exchange or similar entity.
Prior to the issuance of any Shares under the Plan, the Company may require a
written statement that the recipient is acquiring the Shares for investment and
not for the purpose of or with the intention of distributing the Shares.
Notwithstanding any other provision of the Plan, a Grantee or such other
persons as are entitled to exercise an Option or SAR (as described in paragraph
11(b)) will be prohibited from exercising the Option or SAR to the extent that
the Chief Legal Counsel of the Company has

10

 

 determined that purchases and sales of Company securities should be
restricted because of the existence or potential existence of material
nonpublic information concerning the Company, whether or not such determination
has been communicated to the Grantee or such persons. If the Chief Legal
Counsel of the Company has made such a determination and the Grantee or such
persons give notice of an intent to exercise the Option or SAR (and satisfy all
other conditions to the exercise thereof), the Chief Legal Counsel of the
Company shall advise the Grantee or such persons concerning such restrictions,
and the effective time of the Grantee’s exercise shall be postponed to the
earlier of the date that the Chief Legal Counsel of the Company determines that
such restriction is no longer necessary with respect to exercises of the Option
or SAR, or the day before the date that the Option or SAR expires.

     11.     Transferability. This paragraph 11 shall govern the transferability
of the various benefits under this Plan.

          (r) Share Awards. The Shares subject to Share Awards granted under
paragraph 3(a) or 3(c) shall not be sold, assigned, pledged or otherwise
transferred, voluntarily or involuntarily, by the Grantee, while they are
subject to the restrictions described in paragraph 5(a).

          (s) Options, SARs and Dividend Equivalents. Options, SARs and Dividend
Equivalents granted under the Plan are not transferable except (i) by will or
by the laws of descent and distribution or, to the extent not inconsistent with
the applicable provisions of the Code, pursuant to a qualified domestic
relations order (as that term is defined in the Code); and (ii) a Grantee may
transfer all or part of an Option that is not an Incentive Share Option, or an
SAR, to the Grantee’s spouse, child or children, grandchild or grandchildren,
or other relatives or to a trust for the benefit of any of the foregoing;
provided that the transferee thereof shall hold such Option or SAR subject to
all of the conditions and restrictions contained herein and otherwise
applicable to the Option or SAR, and that, as a condition to such transfer, the
Company may require the transferee to agree in writing (in a form acceptable to
the Company) that the transfer is subject to such conditions and restrictions.

     12.     Service and Shareholder Status. The Plan does not constitute a
contract of employment or continued Service, and selection as a Grantee will
not give any employee, Grantee, or other individual the right to be retained as
an employee, officer, trustee, director or consultant of the Company or any
Extended Company. No person entitled to exercise any Option or SAR granted
under the Plan shall have any of the rights or privileges of a shareholder of
record with respect to any Shares issuable upon exercise of such Option or SAR
until such Shares have been issued. If the redistribution of Shares is
restricted pursuant to paragraph 5 or 13, certificates representing such Shares
may bear a legend referring to such restrictions.

     13.     Adjustments to Number of Shares Subject to the Plan and to Terms of
Options, SARs and Dividend Equivalents. Subject to the following provisions of
this paragraph 13, in the event of any change in the outstanding Shares by
reason of any share dividend, split, recapitalization, merger, consolidation,
combination, exchange of shares or other similar corporate change, the
aggregate number and kind of Shares reserved for issuance under the Plan

11

 

 or subject to Options, SARs or Dividend Equivalents outstanding or to be
granted under the Plan shall be proportionately adjusted so that the value of
each such unit shall not be changed, and the terms of any outstanding Option,
SAR or Dividend Equivalent may be adjusted by the Committee in such manner as
it deems equitable, provided that in no event shall the Option price for a
Share be adjusted below the par value of such Share, nor shall any fraction of
a Share be issued upon the exercise of an Option. Shares subject to a Share
Award shall be treated in the same manner as other outstanding Shares; provided
that any conditions and restrictions applicable to a Share Award shall continue
to apply to any Shares, other security or other consideration received in
connection with the foregoing.

     14.     Agreement with Company. At the time of a grant, the Committee may
require a Grantee to enter into an agreement with the Company in a form
specified by the Committee agreeing to the terms and conditions of the Plan and
to such additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.

     15.     Term of Plan. This amended and restated Plan is effective May 20,
2003. No Incentive Share Options may be granted under the Plan after July 1,
2007 or, if earlier, the date on which the Plan is terminated pursuant to
paragraph 16.

     16.     Amendment and Termination of Plan. Subject to any approval of the
shareholders of the Company which may be required by law, the Board of Trustees
of the Company may at any time amend, suspend or terminate the Plan. No
amendment, suspension or termination of the Plan shall alter or impair any
Share Award, Option, SAR or Dividend Equivalent previously granted under the
Plan without the consent of the holder thereof. No amendment requiring
shareholder approval under Section 240.16b-3 of the Act, Treasury Regulation
Section 1.162-27 or Section 422 of the Code shall be valid unless such
shareholder approval is secured as provided therein.

     17.     Headings, References and Construction. The headings to sections of
this Plan have been included for the convenience of reference only. This Plan
shall be interpreted and construed in accordance with the laws of the State of
Maryland.

     IN WITNESS WHEREOF, the undersigned officer of the Company has executed
this document to certify its adoption by the Company as of the effective date
provided herein.

	 	 	 	 	 
	 	 	 	EQUITY OFFICE PROPERTIES TRUST
	 	 	 	 	 
	 	 	
By:
	 	/s/ Stanley M. Stevens
	 	 	 	 	

	 	 	 	 	Stanley M. Stevens

Executive Vice President,

Chief Legal Counsel and Secretary

12

 

APPENDIX A

RELATED COMPANIES

Equity Office Properties Management Corp.

EOP Operating Limited Partnership

EOPMC of California, Inc.

EOPMC of Florida, Inc.

13

 

APPENDIX B

EXTENDED COMPANIES

Equity Group Investments, LLC

Equity Residential Properties Trust and its affiliated companies

Manufactured Home Communities, Inc. and its affiliated companies

Rosenberg & Liebentritt, PC

14EX-10.3 2003 Share Option and Share Incentive Plan

 

EXHIBIT 10.3

EQUITY OFFICE PROPERTIES TRUST

2003 SHARE OPTION AND SHARE INCENTIVE PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	

	 	1.	 	 	PURPOSE
	 	 	1	 
	 	2.	 	 	DEFINITIONS
	 	 	1	 
	 	3.	 	 	ADMINISTRATION OF THE PLAN
	 	 	5	 
	 	 	 	 	3.1. Committee
	 	 	5	 
	 	 	 	 	3.2. Plan Coordinator
	 	 	5	 
	 	 	 	 	3.3. Terms of Awards
	 	 	5	 
	 	 	 	 	3.4. Deferral Arrangement
	 	 	6	 
	 	 	 	 	3.5. No Liability
	 	 	6	 
	 	4.	 	 	SHARES SUBJECT TO THE PLAN
	 	 	6	 
	 	5.	 	 	EFFECTIVE DATE, DURATION AND AMENDMENTS
	 	 	7	 
	 	 	 	 	5.1. Effective Date
	 	 	7	 
	 	 	 	 	5.2. Term
	 	 	7	 
	 	 	 	 	5.3. Amendment and Termination of the Plan
	 	 	7	 
	 	6.	 	 	AWARD ELIGIBILITY AND LIMITATIONS
	 	 	7	 
	 	 	 	 	6.1. Persons Eligible to Receive Awards
	 	 	7	 
	 	 	 	 	6.2. Successive Awards
	 	 	7	 
	 	 	 	 	6.3. Limitation on Shares of Stock Subject to Awards
	 	 	7	 
	 	 	 	 	6.4. Limitations on Incentive Share Options
	 	 	8	 
	 	 	 	 	6.5. Stand-Alone, Additional, Tandem, and Substitute Awards
	 	 	8	 
	 	7.	 	 	AWARD AGREEMENT
	 	 	8	 
	 	8.	 	 	TERMS AND CONDITIONS OF OPTIONS
	 	 	8	 
	 	 	 	 	8.1. Grant of Options
	 	 	8	 
	 	 	 	 	8.2. Option Price
	 	 	8	 
	 	 	 	 	8.3. Vesting
	 	 	8	 
	 	 	 	 	8.4. Term
	 	 	9	 
	 	 	 	 	8.5. Termination of Service
	 	 	9	 
	 	 	 	 	8.6. Limitations on Exercise of Option
	 	 	9	 
	 	 	 	 	8.7. Method of Exercise
	 	 	10	 
	 	 	 	 	8.8. Rights of Holders of Options
	 	 	10	 
	 	 	 	 	8.9. Delivery of Share Certificates
	 	 	10	 
	 	9.	 	 	TRANSFERABILITY OF OPTIONS
	 	 	10	 
	 	 	 	 	9.1. Transferability of Options
	 	 	10	 
	 	 	 	 	9.2. Family Transfers
	 	 	10	 
	 	10.	 	 	SHARE APPRECIATION RIGHTS
	 	 	11	 
	 	 	 	 	10.1. Right to Payment
	 	 	11	 
	 	 	 	 	10.2. Other Terms
	 	 	11	 
	 	11.	 	 	RESTRICTED SHARES AND SHARE UNITS
	 	 	11	 
	 	 	 	 	11.1. Grant of Restricted Shares or Share Units
	 	 	11	 
	 	 	 	 	11.2. Restrictions
	 	 	11	 
	 	 	 	 	11.3. Issuance of Restricted Shares
	 	 	11	 
	 	 	 	 	11.4. Rights of Holders of Restricted Shares
	 	 	12	 
	 	 	 	 	11.5. Rights of Holders of Share Units
	 	 	12	 
	 	 	 	 	 	11.5.1.Voting and Dividend Rights
	 	 	12	 
	 	 	 	 	 	11.5.2.Creditor’s Rights
	 	 	12	 
	 	 	 	 	11.6. Termination of Service
	 	 	12	 
	 	 	 	 	11.7. Purchase of Shares
	 	 	12	 
	 	 	 	 	11.8. Delivery of Shares
	 	 	12	 
	 	12.	 	 	UNRESTRICTED SHARES
	 	 	13	 

-i-

 

 

	 	 	 	 	 	 	 	 	 	 
	 	13.	 	 	FORM OF PAYMENT FOR OPTIONS AND RESTRICTED SHARES
	 	 	13	 
	 	 	 	 	13.1. General Rule
	 	 	13	 
	 	 	 	 	13.2. Surrender of Shares
	 	 	13	 
	 	 	 	 	13.3. Cashless Exercise
	 	 	13	 
	 	 	 	 	13.4. Other Forms of Payment
	 	 	13	 
	 	14.	 	 	DIVIDEND EQUIVALENT RIGHTS
	 	 	13	 
	 	 	 	 	14.1. Dividend Equivalent Rights
	 	 	13	 
	 	 	 	 	14.2. Termination of Service
	 	 	14	 
	 	15.	 	 	PERFORMANCE AWARDS
	 	 	14	 
	 	 	 	 	15.1. Performance Conditions
	 	 	14	 
	 	 	 	 	15.2. Performance Awards Granted to Designated Covered Employees
	 	 	14	 
	 	 	 	 	 	15.2.1. Performance Goals Generally
	 	 	14	 
	 	 	 	 	 	15.2.2. Business Criteria
	 	 	15	 
	 	 	 	 	 	15.2.3. Timing For Establishing Performance Goals
	 	 	15	 
	 	 	 	 	 	15.2.4. Settlement of Performance Awards; Other Terms
	 	 	15	 
	 	 	 	 	15.3. Written Determinations
	 	 	15	 
	 	 	 	 	15.4. Status of Section 15.2 Awards Under Code Section 162(m)
	 	 	15	 
	 	16.	 	 	PARACHUTE LIMITATIONS
	 	 	16	 
	 	17.	 	 	REQUIREMENTS OF LAW
	 	 	16	 
	 	 	 	 	17.1. General
	 	 	16	 
	 	 	 	 	17.2. Rule 16b-3
	 	 	17	 
	 	18.	 	 	EFFECT OF CHANGES IN CAPITALIZATION
	 	 	17	 
	 	 	 	 	18.1. Changes in Shares
	 	 	17	 
	 	 	 	 	18.2. Reorganization in Which the Company Is the Surviving
Entity Which does not
      Constitute a Change in Control
	 	 	18	 
	 	 	 	 	18.3. Change in Control
	 	 	18	 
	 	 	 	 	18.4. Adjustments
	 	 	19	 
	 	 	 	 	18.5. No Limitations on Company
	 	 	19	 
	 	19.	 	 	GENERAL PROVISIONS
	 	 	19	 
	 	 	 	 	19.1. Disclaimer of Rights
	 	 	19	 
	 	 	 	 	19.2. Nonexclusivity of the Plan
	 	 	19	 
	 	 	 	 	19.3. Withholding Taxes
	 	 	19	 
	 	 	 	 	19.4. Captions
	 	 	20	 
	 	 	 	 	19.5. Other Provisions
	 	 	20	 
	 	 	 	 	19.6. Number And Gender
	 	 	20	 
	 	 	 	 	19.7. Severability
	 	 	20	 
	 	 	 	 	19.8. Governing Law
	 	 	20	 

-ii-

 

 

EQUITY OFFICE PROPERTIES TRUST

2003 SHARE OPTION AND SHARE INCENTIVE PLAN

     Equity Office Properties Trust, a Maryland real estate investment trust
(the “Company”), sets forth herein the terms of its 2003 Share Option and Share
Incentive Plan (the “Plan”), as follows:

1. PURPOSE

     The Plan is intended to enhance the Company’s and its Subsidiaries’ (as
defined herein) ability to attract and retain highly qualified officers,
trustees, employees, directors and consultants and to motivate such officers,
trustees, employees, directors and consultants to serve the Company and its
Subsidiaries and to expend maximum effort to improve the business results and
earnings of the Company, by providing to such officers, trustees, employees,
directors and consultants an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Company. To
this end, the Plan provides for the grant of share options, share appreciation
rights, restricted shares, unrestricted shares, share units and dividend
equivalent rights. Any of these awards may, but need not, be made as
performance incentives to reward attainment of performance goals in accordance
with the terms hereof. Options granted under the Plan may be non-qualified
share options or incentive share options, as provided herein; provided,
however, that incentive share options shall be granted only to employees of the
Company or any Subsidiary of the Company that is a “subsidiary corporation” of
the Company within the meaning of Section 424(f) of the Code (as defined
herein).

2. DEFINITIONS

     For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:

     2.1 “Award” means a grant of an Option, Share Appreciation Right,
Restricted Share, Unrestricted Share, Share Unit or Dividend Equivalent Right
under the Plan.

     2.2 “Award Agreement” means the written agreement between the Company and
a Grantee that evidences and sets out the terms and conditions of an Award.

     2.3 “Benefit Arrangement” shall have the meaning set forth in Section 16
hereof.

     2.4 “Board” means the Board of Trustees of the Company.

     2.5 “Cause” means, as determined by the Committee and unless otherwise
provided in an applicable agreement with the Company or a Subsidiary, (i) gross
negligence or willful misconduct in connection with the performance of duties;
(ii) conviction of a criminal offense (other than minor traffic offenses); or
(iii) material breach of any term of the Company’s insider trading policy, the
Code of Ethics for Certain Officers, the Company’s Code of Ethics, or similar
policy, or of any employment, consulting or other services, confidentiality,
intellectual property or non-competition agreements, if any, between the
Grantee and the Company or a Subsidiary.

     2.6 “Change in Control” means:

-1-

 

		
	 	(i) An acquisition (other than directly from the Company) of any voting
securities of the Company (the “Voting Securities”) by any “Person” (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the “1934 Act”)),
immediately after which such Person has “Beneficial Ownership” (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 30% or more
of the combined voting power of the Company’s then outstanding Voting
Securities; provided, however, that in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
“Non-Control Acquisition” (as hereinafter defined) shall not constitute
an acquisition which would cause a Change in Control. A “Non-Control
Acquisition” shall mean an acquisition by (a) an employee benefit plan
(or a trust forming a part thereof) maintained by (1) the Company or (2)
any corporation or other Person of which a majority of its voting power
or its equity securities or equity interest is owned directly or
indirectly by the Company (a “Company Subsidiary”), (b) the Company or
any Company Subsidiary or (c) any Person in connection with a
“Non-Control Transaction” (as hereinafter defined),
	 
	 	(ii) Approval by shareholders of the Company of: (a) a merger,
consolidation or reorganization involving the Company, if: (1) the
shareholders of the Company, immediately before such merger,
consolidation or reorganization, fail to own, directly or indirectly,
immediately following such merger, consolidation or reorganization, at
least seventy percent (70%) of the combined voting power of the
outstanding Voting Securities of the entity resulting from such merger or
consolidation or reorganization (the “Surviving Corporation”) in
substantially the same relative proportion as their ownership of the
Voting Securities immediately before such merger, consolidation or
reorganization; and (2) the individuals who were members of the incumbent
Board immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization do not constitute at least a
majority of the members of the board of directors of the Surviving
Corporation or a corporation beneficially owning, directly or indirectly,
a majority of the Voting Securities of the Surviving Corporation (a
merger, consolidation or reorganization involving the Company which fails
to satisfy the conditions described in clauses (1) and (2) shall herein
be referred to as a “Non-Control Transaction”); (b) a complete
liquidation or dissolution of the Company; or (c) an agreement for the
sale or other disposition of all or substantially all of the assets of
the Company to any Person (other than to an entity of which the Company
directly or indirectly owns at least 70% of the voting shares).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the “Subject Person”) acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur,
	 
	 	(iii) The rejection by the voting Beneficial Owners of the outstanding
Shares of the entire slate of trustees that the Board proposes at a
single election of trustees, or
	 
	 	(iv) The rejection by the voting Beneficial Owners of the outstanding
Shares of one-half or more of the trustees that the Board proposes over
any two or more consecutive elections of trustees.

     2.7 “Code” means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.

     2.8 “Committee” means the Compensation and Option Committee of the Board,
which shall be constituted as provided in Section 3.1.

     2.9 “Company” means Equity Office Properties Trust.

     2.10 “Company’s Designated Broker” means an unrelated third-party
brokerage firm, approved by resolution of the Committee, designated to be the
Company’s preferred provider or

-2-

 

 exclusive provider (as provided in the Committee resolution) for the
purchase and sale of the Company’s Shares issued under the Plan.

     2.11 “Covered Employee” means a Grantee who is a Covered Employee within
the meaning of Section 162(m)(3) of the Code.

     2.12 “Disability” means a physical or mental condition that entitles a
Grantee to benefits pursuant to the Employer-sponsored long-term disability
plan in which the Participant participates.

     2.13 “Dividend Equivalent Right” means a right, granted to a Grantee under
Section 14 hereof, to receive cash, Shares, other Awards or other property
equal in value to dividends paid with respect to a specified number of Shares,
or other periodic payments.

     2.14 “Effective Date” means March 27, 2003, the date the Plan is approved
by the Board.

     2.15 “Exchange Act” means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.

     2.16 “Executive Officer” means an executive officer of the Company within
the meaning of Rule 3b-7 under the Exchange Act.

     2.17 “Fair Market Value” means the value of a Share, determined as
follows: if on the Grant Date or other determination date the Shares are
listed on an established national or regional stock exchange, are admitted to
quotation on The Nasdaq Stock Market, Inc. or are publicly traded on an
established securities market, the Fair Market Value of a Share shall be the
closing price of the Share on such exchange or in such market (if there is more
than one such exchange or market, the Committee shall determine the appropriate
exchange or market) on the first trading day immediately preceding the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading
day) or, if no closing price (or highest bid and lowest asked prices or high
and low sale prices) is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Shares are not listed
on such an exchange, quoted on such system or traded on such a market, Fair
Market Value shall be the value of the Shares as determined by the Committee in
good faith.

     2.18 “Family Member” means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in which any one or more of these persons have more than
fifty percent of the beneficial interest, a foundation in which any one or more
of these persons (or the Grantee) control the management of assets, and any
other entity in which one or more of these persons (or the Grantee) own more
than fifty percent of the voting interests.

     2.19 “Grant Date” means, as determined by the Committee, the latest to
occur of (i) the date as of which the Committee approves an Award, (ii) the
date on which the recipient of an Award first becomes eligible to receive an
Award under Section 6 hereof, or (iii) such other date as may be specified by
the Committee.

     2.20 “Grantee” means a person who receives or holds an Award under the
Plan.

     2.21 “Incentive Share Option” means an “incentive stock option” within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.

-3-

 

     2.22 “Non-qualified Share Option” means an Option that is not an Incentive Share Option.

     2.23 “Option” means an option to purchase one or more Shares pursuant to the Plan.

     2.24 “Option Price” means the exercise price for each Share subject to an Option.

     2.25 “Other Agreement” shall have the meaning set forth in Section 16 hereof.

     2.26 “Performance Award” means an Award of Restricted Shares or Share
Units made subject to the attainment of performance goals (as described in
Section 15) over a performance period of up to ten (10) years.

     2.27 “Plan” means this Equity Office Properties Trust 2003 Share Option
and Share Incentive Plan.

     2.28 “Plan Administrator” means the Compensation and Option Committee of
the Board.

     2.29 “Plan Administrator’s Designated Agent” means an unrelated third
party, as designated by resolution of the Committee, who shall assist the
Company’s Plan Coordinator with the day-to-day operations of the Plan.

     2.30 “Plan Coordinator” means the senior human resources officer of the
Company who may carry out the day-to-day operations of the Plan.

     2.31 “Purchase Price” means the purchase price, if any, for each Share
pursuant to a grant of Restricted Shares.

     2.32 “Restricted Shares” means Shares awarded to a Grantee pursuant to
Section 11 hereof.

     2.33 “SAR Exercise Price” means the per share exercise price of an SAR
granted to a Grantee under Section 10 hereof.

     2.34 “Securities Act” means the Securities Act of 1933, as now in effect
or as hereafter amended.

     2.35 “Service” means service as an officer, employee, trustee or director
of the Company or any Subsidiary. Unless otherwise stated in the applicable
Award Agreement, a Grantee’s change in position or duties shall not result in
interrupted or terminated Service, so long as such Grantee continues to be an
officer, employee, trustee or director of the Company or any Subsidiary.
Subject to the preceding sentence, whether a termination of Service shall have
occurred for purposes of the Plan shall be determined by the Committee, which
determination shall be final, binding and conclusive.

     2.36 “Share(s)” means the authorized common shares of beneficial interest,
par value $.01 per share, of the Company.

     2.37 “Share Appreciation Right” or “SAR” means a right granted to a
Grantee under Section 10 hereof.

     2.38 “Share Units” means a bookkeeping entry representing the equivalent
of Shares, awarded to a Grantee pursuant to Section 11 hereof.

     2.39 “Subsidiary” means any subsidiary of the Company within the meaning
of Rule 405 under the Securities Act.

     2.40 “Termination Date” means the date upon which an Option shall
terminate or expire, as set forth in Section 8.4 hereof.

-4-

 

     2.41 “Ten Percent Shareholder” means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
beneficial interest of the Company or any of its Subsidiaries. In determining
ownership, the attribution rules of Section 424(d) of the Code shall be
applied.

     2.42 “Unrestricted Share” means a Grant awarded pursuant to Section 12
hereof.

3. ADMINISTRATION OF THE PLAN

     3.1. Committee

     The Plan shall be administered by the Committee. The Committee shall have
such powers and authorities related to the administration of the Plan as are
consistent with the Company’s declaration of trust and bylaws and applicable
law. The Committee shall have full power and authority to take all actions and
to make all determinations required or provided for under the Plan, any Award
or any Award Agreement and shall have full power and authority to take all such
other actions and make all such other determinations not inconsistent with the
specific terms and provisions of the Plan that the Committee deems to be
necessary or appropriate to the administration of the Plan, any Award or any
Award Agreement. All such actions and determinations shall be by the
affirmative vote of a majority of the members of the Committee present at a
meeting or by unanimous consent of the Committee executed in writing in
accordance with the Company’s declaration of trust and bylaws and applicable
law. The interpretation and construction by the Committee of any provision of
the Plan, any Award or any Award Agreement shall be final, binding and
conclusive.

     The Committee shall consist of independent trustees, to the extent
required by the rules of the New York Stock Exchange or other national
securities exchange on which the Shares are then listed. Except as the Board
may otherwise determine, the Committee may (but shall not be required to)
consist of two or more trustees of the Company who: (a) qualify as “outside
directors” within the meaning of Section 162(m) of the Code and (b) meet such
other requirements as may be established from time to time by the Securities
and Exchange Commission for plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act.

     The Committee may delegate its authority under the Plan to the Chief
Executive Officer of the Company to make Awards to employees of the Company and
its Subsidiaries who are not Executive Officers of the Company, provided that
the Committee shall specify the aggregate number of such Awards and the terms
of such Awards that the Chief Executive Officer of the Company may make
pursuant to such delegated authority.

     3.2. Plan Coordinator

     The day-to-day operations of the Plan may be carried out by the Plan
Coordinator, who shall be the senior human resources officer of the Company.

     3.3. Terms of Awards

     Subject to the other terms and conditions of the Plan, the Committee shall
have full and final authority to:

	 	(i)	 	designate Grantees,
	 
	 	(ii)	 	determine the type or types of Awards to be made to a Grantee,
	 
	 	(iii)	 	determine the number of Shares to be subject to an Award,
	 
	 	(iv)	 	establish the terms and conditions of each Award (including,
but not limited to, the exercise price of any Option, the nature and
duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture
of an Award or the Shares subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive
Share Options);

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	 	(v)	 	prescribe the form of each Award Agreement evidencing an
Award, and

     (vi)  amend, modify, or supplement the terms of any outstanding Award;
provided, however, that pursuant to Section 5.3, no such amendment,
modification or supplement of the terms of any outstanding Award shall, without
the consent of the Grantee, impair the Grantee’s rights under such Award; and
provided further, such amendment or modification may not reduce the exercise
price for such Award. Such authority specifically includes the authority, in
order to effectuate the purposes of the Plan but without amending the Plan, to
modify Awards to eligible individuals who are foreign nationals or are
individuals who are employed outside the United States to recognize differences
in local law, tax policy, or custom.

     The Committee shall have the right, in its discretion, to make Awards in
substitution or exchange for any other award under another plan of any business
entity to be acquired by the Company or a Subsidiary. The Company may retain
the right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of actions taken by the Grantee in violation or breach of or
in conflict with the Company’s insider trading policy, the Code of Ethics for
Certain Officers, the Company’s Code of Ethics, or any similar policy, or any
non-competition agreement, any agreement prohibiting solicitation of employees
or tenants of the Company or any Subsidiary thereof or any confidentiality
obligation with respect to the Company or any Subsidiary thereof or otherwise
in competition with the Company or any Subsidiary thereof, to the extent
specified in such Award Agreement applicable to the Grantee. The Company may
retain the right in an Award Agreement to cause a forfeiture of the gain
realized by a Grantee on account of actions taken by the Grantee that result in
the termination of the Grantee’s employment for Cause, as defined in the Plan
or the Award Agreement. Furthermore, except to the extent otherwise provided
in an agreement or contract with the Grantee, the Company may annul an Award if
the Grantee is an employee of the Company or a Subsidiary thereof and is
terminated for Cause as defined in the applicable Award Agreement or the Plan,
as applicable. The grant of any Award may be contingent upon the Grantee
executing an appropriate Award Agreement or otherwise providing an electronic
acceptance of such Award Agreement in the form and manner as provided by the
Plan Coordinator or the Plan Administrator’s Designated Agent.

     3.4. Deferral Arrangement

     The Committee may permit the deferral of any award payment into a deferred
compensation arrangement, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest or dividend equivalents, including converting such credits into
deferred Share equivalents and restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans.

     3.5. No Liability

     No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award or
Award Agreement.

4. SHARES SUBJECT TO THE PLAN

     Subject to adjustment as provided in Section 18 hereof, the number of
Shares available for issuance under the Plan shall be 20,000,000.
Notwithstanding the preceding sentence, the aggregate number of Shares which
cumulatively may be available for issuance pursuant to Awards other than Awards
of Options shall not exceed 10,000,000 Shares. Shares to be issued under the
Plan shall be authorized but unissued Shares. If any Shares covered by an
Award are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares subject thereto, then the number of Shares
counted against the aggregate number of Shares available under the Plan with
respect to such Award shall, to the extent of any such forfeiture or
termination, again be available for making Awards under the Plan. If the
Option Price of any Option granted under the Plan, or if pursuant to Section
19.3 the withholding obligation of any Grantee with respect to an Option, is
satisfied by tendering Shares to the Company (by either actual delivery or by
attestation) or by withholding Shares, only the number of Shares issued net of
the Shares tendered or withheld shall be deemed issued for purposes of
determining the maximum number of Shares available for issuance under the Plan.
Awards constituting SARs, Share Units, Dividend Equivalent Rights

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or Performance Awards will not reduce the number of Shares available for
issuance under the Plan (except to the extent such Awards are settled in
Shares.)

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

     5.1. Effective Date

     The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date by holders of the Shares.
The minimum vote which will constitute approval of the Plan by the holders of
Shares shall be the approval by a majority of the votes cast on the proposal to
approve the Plan, provided that the total votes cast on such proposal represent
over 50% in interest of all Shares entitled to vote on such proposal. Upon
approval of the Plan by the holders of Shares as set forth above, all Awards
made under the Plan on or after the Effective Date shall be fully effective as
if the holders of the Shares had approved the Plan on the Effective Date. If
the holders of Shares fail to approve the Plan within one year after the
Effective Date, any Awards made hereunder shall be null and void and of no
effect.

     5.2. Term

     The Plan shall terminate automatically ten (10) years after the Effective
Date and may be terminated on any earlier date as provided in Section 5.3.

     5.3. Amendment and Termination of the Plan

     The Committee may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any Shares as to which Awards have not been made. An
amendment shall be contingent on approval of the Company’s shareholders to the
extent stated by the Committee or required by applicable law. No Awards shall
be made after termination of the Plan. No amendment, suspension, or
termination of the Plan shall, without the consent of the Grantee, impair
rights or obligations under any Award theretofore awarded under the Plan.

6. AWARD ELIGIBILITY AND LIMITATIONS

     6.1. Persons Eligible to Receive Awards

     Subject to this Section 6, Awards may be made under the Plan to any
officer, trustee, employee, director or consultant of the Company or of any of
its Subsidiaries.

     6.2. Successive Awards

     An eligible person may receive more than one Award, subject to such restrictions as are provided herein.

     6.3. Limitation on Shares of Stock Subject to Awards

     During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act:

     (i)  the maximum number of Shares subject to Options or SARs that can be
awarded under the Plan to any person eligible for an Award under Section 6
hereof is 750,000 per year; and

     (ii)  the maximum number of Shares that can be awarded under the Plan,
other than pursuant to an Option or SAR to any person eligible for an Award
under Section 6 hereof is 300,000 per year.

     The preceding limitations in this Section 6.3 are subject to adjustment as
provided in Section 18 hereof.

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     6.4. Limitations on Incentive Share Options

     An Option shall constitute an Incentive Share Option only (i) if the
Grantee of such Option is an employee of the Company or a Subsidiary that is a
“subsidiary corporation” of the Company within the meaning of Section 424(f) of
the Code; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares with respect to
which all Incentive Share Options held by such Grantee become exercisable for
the first time during any calendar year (under the Plan and all other plans of
the Company and its Subsidiaries) does not exceed $100,000. This limitation
shall be applied by taking Options into account in the order in which they were
granted.

     6.5. Stand-Alone, Additional, Tandem, and Substitute Awards

     Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for any other Award or any award granted under another plan of any
business entity to be acquired by the Company or a Subsidiary or any other
right of a Grantee to receive payment from the Company or any Subsidiary. Such
additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award,
the Committee shall require the surrender of such other Award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation or fees.

7. AWARD AGREEMENT

     Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Committee shall from time to time
determine. Award Agreements granted from time to time or at the same time need
not contain similar provisions but shall be consistent with the terms of the
Plan. Each Award Agreement evidencing an Award of Options shall specify
whether such Options are intended to be Non-qualified Share Options or
Incentive Share Options, and in the absence of such specification such options
shall be deemed Non-qualified Share Options.

8. TERMS AND CONDITIONS OF OPTIONS

     8.1. Grant of Options

     The Committee may from time to time grant Options to persons eligible to
receive Awards under Section 6 hereof.

     8.2. Option Price

     The Option Price of each Option shall be fixed by the Committee and stated
in the Award Agreement evidencing such Option. The Option Price of each Option
shall be at least the Fair Market Value on the Grant Date of a Share; provided,
however, that in the event that a Grantee is a Ten Percent Shareholder, the
Option Price of an Option granted to such Grantee that is intended to be an
Incentive Share Option shall be not less than 110 percent of the Fair Market
Value of a Share on the Grant Date. In no case shall the Option Price of any
Option be less than the par value of a Share.

     8.3. Vesting

               Subject to Sections 8.4 and 18.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Committee and stated in the Award Agreement. For purposes
of this Section 8.3, fractional numbers of Shares subject to an Option shall be
rounded down to the next nearest whole number. The Committee may provide, for
example, in the Award Agreement for (i) expiration of the Option prior to its
term in the event of the termination of the Grantee’s Service or (ii) immediate
forfeiture of the Option in the event the Grantee’s Service is terminated for
Cause. No Option shall

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 be exercisable in whole or in part prior to the date the Plan is approved
by the shareholders of the Company as provided in Section 5.1 hereof.

               Unless otherwise adopted by resolution of the Committee, the vesting
schedule for employee Option grants shall be as follows: one-third (1/3) of
the Shares subject to the grant shall be exercisable on or after the first
anniversary of the Grant Date; an additional one-third (1/3) of the Shares
subject to the grant shall be exercisable on or after the second anniversary of
the Grant Date and the remaining Shares subject to the grant shall be
exercisable on or after the third anniversary of the Grant Date.

               Unless otherwise adopted by resolution of the Committee, the vesting
schedule for non-employee trustee Option grants shall be as follows: one-third
(1/3) of the Shares subject to the grant shall be exercisable on or after six
months from the Grant Date; an additional one-third (1/3) of the Shares subject
to the grant shall be exercisable on or after the first anniversary of the
Grant Date and the remaining Shares subject to the grant shall be exercisable
on or after the second anniversary of the Grant Date.

     8.4. Term

     Each Option granted under the Plan shall terminate, and all rights to
purchase Shares thereunder shall cease, upon the expiration of ten years from
the date such Option is granted or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Committee
and stated in the Award Agreement relating to such Option (the “Termination
Date”); provided, however, that the Committee shall have the discretion to
establish a term as long as fifteen years from the date such Option is granted;
and provided, further, that in the event that the Grantee is a Ten Percent
Shareholder, an Option granted to such Grantee that is intended to be an
Incentive Share Option shall not be exercisable after the expiration of five
years from its Grant Date.

     8.5. Termination of Service

     Each Award Agreement shall set forth the extent to which the Grantee shall
have the right to exercise the Option following termination of the Grantee’s
Service. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of Service.
Unless otherwise specified in the Grantee’s Award Agreement, an Option granted
under the Plan shall be immediately exercisable in the event of termination of
the Grantee’s Service (i) because of the Grantee’s Disability or death; (ii) in
connection with his retirement at or after age 62; (iii) with respect to a
Grantee who is a trustee, in connection with his failure to be re-elected to
the Board; or (iv) following, or in anticipation of, a Change in Control.
Notwithstanding the foregoing, if the Chief Legal Counsel of the Company
determines that a Grantee who has vested unexercised Options, prior to his
termination of Service, committed acts or omissions that would be the basis for
termination for Cause, the unexercised Options expire immediately and become
null and void.

8.6. Limitations on Exercise of Option

     Notwithstanding any other provision of the Plan, in no event may any
Option be exercised, in whole or in part, prior to the date the Plan is
approved by the shareholders of the Company as provided herein, or after the
expiration of the Option term, as established under Section 8.4 hereof, or
after the occurrence of an event referred to in Section 18 hereof which results
in termination of the Option.

     In addition, a Grantee’s ability to exercise an Option may be limited as
follows: (i) anytime during which a Grantee may be restricted from selling
Shares under the Company’s insider trading policy the Chief Legal Counsel may
suspend the Grantee’s ability to exercise his Option for a reasonable period of
time, or (ii) if the Grantee is suspected of committing acts or omissions that
would be the basis for termination for Cause, the Chief Legal Counsel may
suspend the Grantee’s ability to exercise his Option for up to 30 days while an
investigation is being conducted.

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     8.7. Method of Exercise

     Subject to Section 13 hereof, an Option that is exercisable may be
exercised by the Grantee’s delivery of written or electronic notice to exercise
to the Company’s Designated Broker on any business day, in a form as designated
by the Company’s Designated Broker. Such notice shall specify the number of
Shares with respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price of the Shares for which the
Option is being exercised.

     8.8. Rights of Holders of Options

     Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject Shares or to direct the voting of the subject
Shares) until the Shares covered thereby are fully paid and issued to him or
her. Except as provided in Section 18 hereof, no adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date of such issuance, regardless of the circumstances that gave rise to
the occurrence of the issuance after the record date.

     8.9. Delivery of Share Certificates

     Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, subject to the provisions of Section 3.4 hereof, such
Grantee shall be entitled to the issuance of a share certificate or
certificates evidencing his or her ownership of the Shares subject to the
Option. Notwithstanding any other provision of this Plan to the contrary, the
Company may elect to satisfy any requirement under this Plan for the delivery
of share certificates through the use of book-entry.

9. TRANSFERABILITY OF OPTIONS

     9.1. Transferability of Options

     Except as provided in Section 9.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the
Grantee’s guardian or legal representative) may exercise an Option. Except as
provided in Section 9.2, no Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution. The Grantee may designate a beneficiary to receive his Options
in case of the Grantee’s death by completing the beneficiary designation form
available from the Company or the Company’s Designated Broker.

     9.2. Family Transfers

     If authorized in the applicable Award Agreement, a Grantee may transfer,
not for value, all or part of an Option which is not an Incentive Share Option
to any Family Member. For the purpose of this Section 9.2, a “not for value”
transfer is a transfer which is (i) a gift; (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer
to an entity in which more than fifty percent of the voting interests are owned
by Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this Section 9.2, any such Option shall continue to
be subject to the same terms and conditions as were applicable immediately
prior to transfer. Subsequent transfers of transferred Options are prohibited
except to Family Members of the original Grantee in accordance with this
Section 9.2 or by will or the laws of descent and distribution. The events of
termination of Service of Section 8.5 hereof shall continue to be applied with
respect to the original Grantee, following which the Option shall be
exercisable by the transferee only to the extent and for the periods specified
in Section 8.5. The Company may require, as a condition to such transfer, that
the transferee agree in writing (in a form acceptable to the Company) that the
transferred Options remain subject to all terms, conditions and restrictions
originally applicable to the Options.

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10. SHARE APPRECIATION RIGHTS

     The Committee is authorized to grant Share Appreciation Rights (“SARs”) to
Grantees on the following terms and conditions:

     10.1. Right to Payment

     A SAR shall confer on the Grantee to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair Market Value of one
Share on the date of exercise over (B) the grant price of the SAR as determined
by the Committee. The Award Agreement for an SAR shall specify the grant price
of the SAR, which may be fixed at the Fair Market Value of a Share on the date
of grant or may vary in accordance with a predetermined formula while the SAR
is outstanding.

     10.2. Other Terms

     The Committee shall determine, at the date of grant or thereafter, the
time or times at which and the circumstances under which a SAR may be exercised
in whole or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of Service or upon other
conditions, the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Shares will be delivered or
deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or
in combination with any other Award, and any other terms and conditions of any
SAR.

11. RESTRICTED SHARES AND SHARE UNITS

     11.1. Grant of Restricted Shares or Share Units

     The Committee may from time to time grant Restricted Shares or Share Units
to persons eligible to receive Awards under Section 6 hereof, subject to such
restrictions, conditions and other terms, if any, as the Committee may
determine.

     11.2. Restrictions

     At the time a grant of Restricted Shares or Share Units is made, the
Committee may, in its sole discretion, establish a period of time (a
“restricted period”) applicable to such Restricted Shares or Share Units. Each
Award of Restricted Shares or Share Units may be subject to a different
restricted period. The Committee may, in its sole discretion, at the time a
grant of Restricted Shares or Share Units is made, prescribe restrictions in
addition to or other than the expiration of the restricted period, including
the satisfaction of corporate or individual performance objectives, which may
be applicable to all or any portion of the Restricted Shares or Share Units in
accordance with Section 15.1 and 15.2. Neither Restricted Shares nor Share
Units may be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of during the restricted period or prior to the satisfaction of any
other restrictions prescribed by the Committee with respect to such Restricted
Shares or Share Units. At the end of the restricted period, Restricted Shares
may be sold, transferred, assigned, pledged or otherwise encumbered or disposed
of, subject to the following conditions: (i) executive officers of the Company
subject to Section 16 of the Exchange Act must obtain prior approval from the
Chief Legal Counsel in order to sell Restricted Shares; (ii) the Chief Legal
Counsel may suspend the ability to sell Restricted Shares anytime during which
a Grantee may be restricted from selling Shares under the Company’s insider
trading policy; and (iii) if a Grantee is suspected of committing acts or
omissions that would be the basis for a termination for Cause, the Chief Legal
Counsel may suspend the Grantee’s ability to sell Restricted Shares for up to
30 days while an investigation is being conducted.

     11.3. Issuance of Restricted Shares

     The Company shall issue Restricted Shares, in the name of each Grantee to
whom Restricted Shares have been granted, by the book entry method as soon as
reasonably practicable after the Grant Date.

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     11.4. Rights of Holders of Restricted Shares

     Unless the Committee provides otherwise in an Award Agreement, holders of
Restricted Shares shall have the right to vote such Shares and the right to
receive any dividends declared or paid with respect to such Shares. Dividends
paid on Restricted Shares issued to employees shall be considered compensation
and shall be subject to all applicable taxes. The Committee may provide that
any dividends paid on Restricted Shares must be reinvested in Shares, which may
or may not be subject to the same vesting conditions and restrictions
applicable to such Restricted Shares. All non-cash distributions, if any,
received by a Grantee with respect to Restricted Shares as a result of any
share split, share dividend, combination of shares, or other similar
transaction shall be subject to the restrictions applicable to the original
Grant.

     11.5. Rights of Holders of Share Units

          11.5.1. Voting and Dividend Rights

     Holders of Share Units shall have no rights as shareholders of the
Company. However, the Committee may provide in an Award Agreement evidencing a
grant of Share Units that the holder of such Share Units shall be entitled to
receive, upon the Company’s payment of a cash dividend on its outstanding
Shares, a cash payment for each Share Unit held equal to the per-share dividend
paid on the Shares. Such Award Agreement may also provide that such cash
payment will be deemed reinvested in additional Share Units at a price per unit
equal to the Fair Market Value of a Share on the date that such dividend is
paid.

          11.5.2. Creditor’s Rights

     A holder of Share Units shall have no rights other than those of a general
creditor of the Company. Share Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the
applicable Award Agreement.

     11.6. Termination of Service

     Unless otherwise specified in the Grantee’s Award Agreement, or in writing
after the Award Agreement is issued, a Restricted Share Award granted under the
Plan shall be fully vested in the event of the termination of the Grantee’s
Service (i) because of the Grantee’s Disability or death; (ii) in connection
with his retirement on or after age 62; (iii) with respect to a Grantee who is
a trustee, in connection with his failure to be re-elected to the Board; or
(iv) following, or in anticipation of, a Change in Control. Upon the
termination of a Grantee’s Service, any Restricted Shares or Share Units held
by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited. Upon forfeiture of Restricted Shares or Share Units, the Grantee
shall have no further rights with respect to such Award, including but not
limited to any right to vote Restricted Shares or any right to receive
dividends (or equivalent payments) with respect to such Restricted Shares (or
Share Units).

     11.7. Purchase of Shares

     The Company may sell Shares to officers, trustees, employees, directors
and consultants at Fair Market Value or at a price set by the Committee which
may be less than Fair Market Value. In addition, while the date of the Award
shall be the date of the sale and the date on which the purchase price for such
Shares shall be due, the Committee may, but need not, subject the Shares to a
restricted period in which case the Shares shall be subject to the restrictions
set forth in the Award Agreement.

     11.8. Delivery of Shares

     Upon the expiration or termination of any restricted period and the
satisfaction of any other conditions prescribed by the Committee, the
restrictions applicable to Restricted Shares or Share Units shall lapse, and,
unless otherwise provided in the Award Agreement, the Shares shall be
immediately issued, free of such restrictions, to the

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Grantee or the Grantee’s beneficiary or estate, as the case may be, by the book
entry method. Alternatively, the Committee, in its discretion, may choose to
issue share certificates for such Shares.

12. UNRESTRICTED SHARES

     The Committee may, in its sole discretion, grant (or sell at par value or
such other higher purchase price determined by the Committee) an Unrestricted
Share Award to any Grantee pursuant to which such Grantee may receive Shares
free of any restrictions (“Unrestricted Shares”) under the Plan. Unrestricted
Share Awards may be granted or sold as described in the preceding sentence in
respect of past Service or other valid consideration, or in lieu of any cash
compensation due to such Grantee.

13. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED SHARES

     13.1. General Rule

     Payment of the Option Price for the Shares purchased pursuant to the
exercise of an Option or the Purchase Price for Restricted Shares, if any,
shall be made in cash or in cash equivalents acceptable to the Company.

     13.2. Surrender of Shares

     To the extent the Award Agreement so provides, payment of the Option Price
for Shares purchased pursuant to the exercise of an Option or the Purchase
Price for Restricted Shares, if any, may be made all or in part through the
tender to the Company of Shares by actual delivery or by attestation, which
Shares, if acquired from the Company, shall have been held for at least six
months at the time of tender and which shall be valued, for purposes of
determining the extent to which the Option Price or Purchase Price has been
paid thereby, at their Fair Market Value on the date of exercise.

     13.3. Cashless Exercise

     With respect to Options only (and not with respect to Restricted Shares),
to the extent the Award Agreement so provides, payment of the Option Price for
Shares purchased pursuant to the exercise of an Option may be made all or in
part by delivery (on a form acceptable to the Company’s Designated Broker) of
an irrevocable direction to sell Shares and to deliver all or part of the sales
proceeds to the Company in payment of the Option Price and any withholding
taxes described in Section 19.3. Executive Officers and trustees of the
Company will not be permitted to use the cashless method of exercise described
in this paragraph without the express prior consent of the Chief Legal Counsel.

     13.4. Other Forms of Payment

     To the extent the Award Agreement so provides or as otherwise agreed by
the Committee, payment of the Option Price for Shares purchased pursuant to
exercise of an Option or the Purchase Price for Restricted Shares, if any, may
be made in any other form that is consistent with applicable laws, regulations
and rules.

14. DIVIDEND EQUIVALENT RIGHTS

     14.1. Dividend Equivalent Rights

     A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on ordinary distributions that would have been paid on the Shares
specified in the Dividend Equivalent Right (or other award to which it relates)
if such Shares had been issued to and held by the recipient; provided, however,
that such a

-13-

 

distribution does not include any payment intended to represent a liquidation
of the interests of a shareholder (such as a cash distribution paid in
connection with a cash merger). A Dividend Equivalent Right may be granted
hereunder to any Grantee as a component of another Award or as a freestanding
Award. The terms and conditions of Dividend Equivalent Rights shall be
specified in the grant. Dividend Equivalents credited to the holder of a
Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional Shares, which may thereafter accrue additional
equivalents. Any such reinvestment shall be at Fair Market Value on the date
of reinvestment. Dividend Equivalent Rights may be settled in cash or Shares
or a combination thereof, in a single installment or installments, all
determined in the sole discretion of the Committee. A Dividend Equivalent
Right granted as a component of another Award may provide that such Dividend
Equivalent Right shall be settled upon exercise, settlement, or payment of, or
lapse of restrictions on, such other Award and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as
such other Award. A Dividend Equivalent Right granted as a component of
another Award may also contain terms and conditions different from such other
Award.

     14.2. Termination of Service

     Except as may otherwise be provided by the Committee either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee’s rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee’s termination of Service for any reason.

15. PERFORMANCE AWARDS

     15.1. Performance Conditions

     The right of a Grantee to receive any Restricted Share or Share Unit
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Committee. The Committee may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions and may exercise its discretion to
reduce the amounts payable under any such Restricted Share or Share Unit Award
subject to performance conditions, except as limited under Section 15.2 hereof
in the case of a Performance Award intended to qualify under Code Section
162(m). If and to the extent required under Code Section 162(m), any power or
authority relating to a Performance Award intended to qualify under Code
Section 162(m) shall be exercised by a committee meeting the requirements of
Section 162(m) of the Code and not the Committee.

     15.2. Performance Awards Granted to Designated Covered Employees

     If and to the extent that the Committee determines that a Performance
Award to be granted to a Grantee who is designated by the Committee as likely
to be a Covered Employee should qualify as “performance-based compensation” for
purposes of Code Section 162(m), the grant and/or settlement of such
Performance Award shall be contingent upon achievement of pre-established
performance goals and other terms as set forth below in Sections 15.2.1 - 15.2.4.

          15.2.1. Performance Goals Generally

     The performance goals for such Performance Awards shall consist of one or
more business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee consistent

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with this Section 15.2. Performance goals shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of performance
targeted by such Committee result in the achievement of performance goals being
“substantially uncertain.” The Committee may determine that such Performance
Awards shall be granted and/or settled upon achievement of any one performance
goal or that two or more of the performance goals must be achieved as a
condition to grant and/or settlement of such Performance Awards. Performance
goals may differ for Performance Awards granted to any one Grantee or to
different Grantees.

          15.2.2. Business Criteria

     One or more of the following business criteria for the Company, on a
consolidated basis, and/or specified Subsidiaries or business units of the
Company (except with respect to the total shareholder return and earnings per
share criteria) shall be used exclusively by the Committee in establishing
performance goals (which may be absolute goals or goals relative to
pre-established peers) for such Performance Awards: (1) total shareholder
return; (2) such total shareholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but not limited to,
the Standard & Poor’s 500 Stock Index; (3) net income; (4) pretax earnings; (5)
earnings before interest expense, taxes, depreciation and amortization; (6)
pretax operating earnings after interest expense and before bonuses and
extraordinary or special items; (7) operating margin; (8) earnings per Share;
(9) return on equity; (10) return on capital; (11) return on investment; (12)
operating earnings; (13) working capital; (14) ratio of debt to shareholders’
equity; (15) revenue; (16) funds from operations; (17) economic profits and
(18) any other objective business measure identified by the Committee.

          15.2.3. Timing for Establishing Performance Goals

     Performance goals shall be established not later than 90 days after the
beginning of any performance period applicable to such Performance Awards or at
such other date as may be required or permitted for “performance-based
compensation” under Code Section 162(m).

          15.2.4. Settlement of Performance Awards; Other Terms

     Settlement of such Performance Awards shall be in Shares. The Committee
may, in its discretion, reduce the amount of a settlement otherwise to be made
in connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or forfeited in
the event of termination of Service by the Grantee prior to the end of a
performance period or settlement of Performance Awards.

     15.3. Written Determinations

          All determinations by the Committee as to the establishment of performance
goals or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). To the
extent required to comply with Code Section 162(m), the Committee may delegate
any responsibility relating to such Performance Awards.

     15.4. Status of Section 15.2 Awards under Code Section 162(m)

          It is the intent of the Company that Performance Awards under Section 15.2
hereof granted to persons who are designated by the Committee as likely to be
Covered Employees within the meaning of Code Section 162(m) and regulations
thereunder shall, if so designated by the Committee, constitute “qualified
performance-based compensation” within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, the terms of Section 15.2, including the
definitions of Covered Employee and other terms used therein, shall be

-15-

 

interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Grantee will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the
term Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards, as likely to be a
Covered Employee with respect to that fiscal year. If any provision of the
Plan or any agreement relating to such Performance Awards does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

16. PARACHUTE LIMITATIONS

     Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Subsidiary, except the Company’s Change in
Control Agreement, as amended, by and between the Company, Grantee’s employer
and certain officers of the Company or an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes application of this
paragraph (an “Other Agreement”), and notwithstanding any formal or informal
plan or other arrangement for the direct or indirect provision of compensation
to the Grantee (including groups or classes of Grantees or beneficiaries of
which the Grantee is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit
Arrangement”), if the Grantee is a “disqualified individual,” as defined in
Section 280G(c) of the Code, any Option, Restricted Shares or Share Unit held
by that Grantee and any right to receive any payment or other benefit under
this Plan shall not become exercisable or vested (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute Payment, the
aggregate after-tax amounts received by the Grantee from the Company under this
Plan, all Other Agreements, and all Benefit Arrangements would be less than the
maximum after-tax amount that could be received by the Grantee without causing
any such payment or benefit to be considered a Parachute Payment. In the event
that the receipt of any such right to exercise, vesting, payment, or benefit
under this Plan, in conjunction with all other rights, payments, or benefits to
or for the Grantee under any Other Agreement or any Benefit Arrangement would
cause the Grantee to be considered to have received a Parachute Payment under
this Plan that would have the effect of decreasing the after-tax amount
received by the Grantee below the maximum after-tax amount received in the
absence of a Parachute Payment as described in clause (ii) of the preceding
sentence, then the Grantee shall have the right, in the Grantee’s sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.

17. REQUIREMENTS OF LAW

          17.1. General

     The Company shall not be required to sell or issue any Shares under any
Award if the sale or issuance of such Shares would constitute a violation by
the Grantee, any other individual exercising an Option, or the Company of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any Shares subject to an Award upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
Shares hereunder, no Shares may be issued or sold to the Grantee or any other
individual exercising an Option pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company, and any delay
caused thereby shall in no way affect the date of termination of the Award.
Specifically, in connection with the Securities Act, upon the exercise of any
Option or the delivery of

-16-

 

any Shares underlying an Award, unless a registration statement under such Act
is in effect with respect to the Shares covered by such Award, the Company
shall not be required to sell or issue such Shares unless the Committee has
received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from
registration under the Securities Act. Any determination in this connection by
the Committee shall be final, binding, and conclusive. The Company may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of Shares pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the Shares covered by
such Option are registered or are exempt from registration, the exercise of
such Option (under circumstances in which the laws of such jurisdiction apply)
shall be deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.

     17.2. Rule 16b-3

     During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any provision of the Plan or action by the Committee does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to
the extent permitted by law and deemed advisable by the Committee and shall not
affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Committee may exercise its discretion to modify this Plan in any
respect necessary to satisfy the requirements of, or to take advantage of any
features of, the revised exemption or its replacement.

18. EFFECT OF CHANGES IN CAPITALIZATION

     18.1. Changes in Shares

     If the number of outstanding Shares are changed into or exchanged for a
different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, share split, reverse split,
combination of shares, exchange of shares, share dividend or other distribution
payable in capital shares, or other increase or decrease in such shares
effected without receipt of consideration by the Company occurring after the
Effective Date, the number and kinds of Shares for which grants of Options and
other Awards may be made under the Plan shall be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of Shares for
which Awards are outstanding shall be adjusted proportionately and accordingly
so that the proportionate interest of the Grantee immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options or SARs shall not change the
aggregate Option Price or SAR Exercise Price payable with respect to Shares
that are subject to the unexercised portion of an outstanding Option or SAR, as
applicable, but shall include a corresponding proportionate adjustment in the
Option Price or SAR Exercise Price per share. The conversion of any
convertible securities of the Company shall not be treated as an increase in
shares effected without receipt of consideration. Notwithstanding the
foregoing, in the event of any distribution to the Company’s shareholders of
securities of any other entity or other assets (other than dividends payable in
cash or Shares of the Company) without receipt of consideration by the Company,
the Company may, in such manner as the Company deems appropriate, adjust (i)
the number and kind of Shares subject to outstanding Awards and/or (ii) the
exercise price of outstanding Options and SARs to reflect such distribution.

-17-

 

     18.2. Reorganization in Which the Company Is the Surviving Entity Which Does Not Constitute a Change in Control

     Subject to Section 18.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities which does not constitute a Change in Control, any
Option, SAR or Performance Award theretofore granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of
Shares subject to such Option, SAR or Performance Award would have been
entitled immediately following such reorganization, merger, or consolidation,
with, as to Options and SARs, a corresponding proportionate adjustment of the
Option Price or SAR Exercise Price per share so that the aggregate Option Price
or SAR Exercise Price thereafter shall be the same as the aggregate Option
Price or SAR Exercise Price of the Shares remaining subject to the Option or
SAR immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing an Award, any
restrictions applicable to such Award shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.

     18.3. Change in Control

          Subject to the exceptions set forth in the last sentence of this Section
18.3 and the last sentence of Section 18.4:

          (i) upon the occurrence of a Change in Control, all outstanding Restricted
Shares shall be deemed to have vested, and all restrictions and conditions
applicable to such Restricted Shares shall be deemed to have lapsed,
immediately prior to the occurrence of such Change in Control, and

          (ii) either of the following two actions shall be taken:

                                   (a) fifteen days prior to the scheduled consummation of a Change in
Control, all Options and SARs outstanding hereunder shall become immediately
exercisable and shall remain exercisable for a period of fifteen days, or

                                   (b) the Committee may elect, in its sole discretion, to cancel any
outstanding Awards of Options, Restricted Shares, and/or SARs and pay or
deliver, or cause to be paid or delivered, to the holder thereof an amount in
cash or securities having a value (as determined by the Committee acting in
good faith), in the case of Restricted Shares, equal to the formula or fixed
price per share paid to holders of Shares pursuant to such Change in Control
and, in the case of Options or SARs, equal to the product of the number of
Shares subject to the Option or SAR (the “Award Shares”) multiplied by the
amount, if any, by which (I) the formula or fixed price per share paid to
holders of Shares pursuant to such Change in Control exceeds (II) the Option
Price or SAR Exercise Price applicable to such Award Shares.

          With respect to the Company’s establishment of an exercise window, (i) any
exercise of an Option or SAR during such fifteen-day period shall be
conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event, and (ii) upon consummation of
any Change in Control, the Plan and all outstanding but unexercised Options and
SARs shall terminate. The Committee shall send written notice of an event that
will result in such a termination to all individuals who hold Options and SARs
not later than the time at which the Company gives notice thereof to its
shareholders. This Section 18.3 shall not apply to any Change in Control to
the extent that provision is made in writing in connection with such Change in
Control for the assumption or continuation of the Options, SARs and Restricted
Shares theretofore granted, or for the substitution for such Options, SARs and
Restricted Shares for new share options and share appreciation rights and new
restricted shares relating to the shares of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number of shares and
option and stock appreciation right exercise prices, in which event the Plan,
Options, SARs and Restricted Shares theretofore granted shall continue in the
manner and under the terms so provided.

-18-

 

     18.4. Adjustments

     Adjustments under this Section 18 related to Shares or securities of the
Company shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share and to the next whole cent with respect to
exercise prices. The Committee shall determine the effect of a Change in
Control upon Awards other than Options, SARs, and Restricted Shares, and such
effect shall be set forth in the appropriate Award Agreement. The Committee
may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply
to an Award in place of those described in Sections 18.1, 18.2 and 18.3.

     18.5. No Limitations on Company

     The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate or to sell or transfer all or any part of
its business or assets.

19. GENERAL PROVISIONS

     19.1. Disclaimer of Rights

     No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any Subsidiary, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or
to terminate any employment or other relationship between any individual and
the Company. In addition, notwithstanding anything contained in the Plan to
the contrary, unless otherwise stated in the applicable Award Agreement, no
Award granted under the Plan shall be affected by any change of duties or
position of the Grantee, so long as such Grantee continues to be a trustee,
director, officer, consultant or employee of the Company or a Subsidiary. The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan
shall in no way be interpreted to require the Company to transfer any amounts
to a third-party trustee or otherwise hold any amounts in trust or escrow for
payment to any Grantee or beneficiary under the terms of the Plan.

     19.2. Nonexclusivity of the Plan

     Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Committee to adopt such other
incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or particular individuals) as the Committee in its
discretion determines desirable, including, without limitation, the granting of
stock options otherwise than under the Plan.

     19.3. Withholding Taxes

     The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
local or foreign taxes of any kind required by law to be withheld with respect
to the vesting of or other lapse of restrictions applicable to an Award or upon
the issuance of any Shares upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay
to the Company or the Subsidiary, as the case may be, any amount that the
Company or the Subsidiary may reasonably determine to be necessary to satisfy
such withholding obligation. Subject to the prior approval of the Company or
the Subsidiary, which may be withheld by the Company or the Subsidiary, as the
case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Subsidiary
to withhold Shares otherwise issuable to the Grantee or (ii) by delivering to
the Company or the Subsidiary Shares already owned by the Grantee. The Shares
so delivered or withheld shall have an aggregate Fair Market Value equal to
such

-19-

 

withholding obligations. The Fair Market Value of the Shares used to satisfy
such withholding obligation shall be determined by the Company or the
Subsidiary as of the date that the amount of tax to be withheld is to be
determined. A Grantee who has made an election pursuant to this Section 19.3
may satisfy his or her withholding obligation only with Shares that are not
subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.

     19.4. Captions

     The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.

     19.5. Other Provisions

     Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the
Committee, in its sole discretion.

     19.6. Number And Gender

     With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.

     19.7. Severability

     If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.

     19.8. Governing Law

     The validity and construction of this Plan and the instruments evidencing
the Award hereunder shall be governed by the laws of the State of Maryland,
other than any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan and the instruments
evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction.

* * *

     To record adoption of the Plan by the Board as of March 27, 2003, and
approval of the Plan by the shareholders on May 20, 2003, the Company has
caused its authorized officer to execute the Plan.

	 	 	 	 	 
	 	 	EQUITY OFFICE PROPERTIES TRUST
	 	 	 	 	 
	 	 	
By:
	 	/s/ Stanley M. Stevens
	 	 	 	 	

	 	 	
Title:
	 	Stanley M. Stevens

Executive Vice President,

Chief Legal Counsel and Secretary

-20-

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