Contract

EXHIBIT 10.3================================================================================ NNN HEALTHCARE/OFFICE REIT, INC. FORM OF 2006 INCENTIVE PLAN================================================================================ NNN HEALTHCARE/OFFICE REIT, INC. 2006 INCENTIVE PLAN ARTICLE 1 PURPOSE 1.1. GENERAL. The purpose of the NNN Healthcare/Office REIT, Inc. 2006Incentive Plan (the “Plan”) is to promote the success, and enhance the value, ofNNN Healthcare/Office REIT, Inc. (the “Company”), by linking the personalinterests of employees, officers, directors and consultants of the Company orany Affiliate (as defined below) to those of Company stockholders and byproviding such persons with an incentive for outstanding performance. The Planis further intended to provide flexibility to the Company in its ability tomotivate, attract, and retain the services of employees, officers, directors andconsultants upon whose judgment, interest, and special effort the successfulconduct of the Company’s operation is largely dependent. Accordingly, the Planpermits the grant of incentive awards from time to time to selected employees,officers, directors and consultants of the Company and its Affiliates. ARTICLE 2 DEFINITIONS 2.1. DEFINITIONS. When a word or phrase appears in this Plan with theinitial letter capitalized, and the word or phrase does not commence a sentence,the word or phrase shall generally be given the meaning ascribed to it in thisSection or in Section 1.1 unless a clearly different meaning is required by thecontext. The following words and phrases shall have the following meanings: (a) “Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled by or is under common control with, the Company, as determined by the Committee. (b) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Deferred Stock Unit Award, Performance Award, Dividend Equivalent Award, Other Stock-Based Award, Performance-Based Cash Awards, or any other right or interest relating to Stock or cash, granted to a Participant under the Plan. (c) “Award Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Awards or series of Awards under the Plan. (d) “Board” means the Board of Directors of the Company. (e) “Cause” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment, severance or similar agreement, if any, between such Participant and the Company or an Affiliate, provided, however that if there is no such employment, severance or similar agreement in which such term is defined, and unless otherwise defined in the applicable Award Certificate, “Cause” shall mean any of the following acts by the Participant, as determined by the Board: gross neglect of duty, prolonged absence from duty without the consent of the Company, intentionally engaging in any activity that is in conflict with or adverse to the business or other interests of the Company, or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Company. With respect to a Participant’s termination of directorship, “Cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law. The determination of the Committee as to the existence of “Cause” shall be conclusive on the Participant and the Company. (f) “Change in Control” means and includes the occurrence of any one of the following events but shall specifically exclude a Public Offering: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 25% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on the Effective Date the beneficial owner of 25% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this definition; or (2) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without -2- limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. (g) “Charter” means the Articles of Incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland dated as of April 20, 2006, as amended from time to time. (h) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and includes a reference to the underlying final regulations. (i) “Committee” means the committee of the Board described in Article 4. (j) “Company” means NNN Healthcare/Office REIT, Inc., a Delaware corporation, or any successor corporation. (k) “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee, officer, consultant or director of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Status as a Participant shall not be considered interrupted in the case of any leave of absence authorized in writing by the Company prior to its commencement; provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. (l) “Deferred Stock Unit” means a right granted to a Participant under Article 10 to receive Shares of Stock (or the equivalent value in cash or other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections, which right may be subject to certain restrictions but is not subject to risk of forfeiture. -3- (m) “Disability” has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any Subsidiary of the Company for the Participant. If no long-term disability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability means that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability will be made by the Committee and will be supported by advice of a physician competent in the area to which such Disability relates. (n) “Dividend Equivalent” means a right granted to a Participant under Article 11. (o) “Effective Date” has the meaning assigned such term in Section 3.1. (p) “Eligible Participant” means an employee, officer, consultant or director of the Company or any Affiliate. (q) “Fair Market Value,” on any date, means (i) if the Stock is listed on a securities exchange, the average of the high and low prices on such exchange on such date or, in the absence of reported sales on such date, the average of the high and low prices on the immediately preceding date on which sales were reported, or (ii) if the Stock is not listed on a securities exchange, the average of the high bid and low asked prices of Stock in the over-the-counter market on that date or the last business day prior to that date, as reported by the NASDAQ Stock Market, or, if not so reported, by a generally accepted reporting service; provided that if it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable, with due consideration being given to the most recent independent appraisal of the Company, if such appraisal is not more than twelve months old, and the valuation methodology used in any such appraisal. (r) “Grant Date” of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date as is determined and specified as part of that authorization process. Notice of the grant shall be provided to the grantee within a reasonable time after the Grant Date. (s) “Incentive Stock Option” means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto. (t) “Independent Director” means a director of the Company who is not a common law employee of the Company or an Affiliate and who meets the additional requirements set forth for an “independent director” in the Charter. (u) “Non-Employee Director” means a director of the Company who is not a common law employee of the Company or an Affiliate. -4- (v) “Nonstatutory Stock Option” means an Option that is not an Incentive Stock Option. (w) “Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option. (x) “Other Stock-Based Award” means a right, granted to a Participant under Article 12, that relates to or is valued by reference to Stock or other Awards relating to Stock. (y) “Parent” means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code. (z) “Participant” means a person who, as an employee, officer, director or consultant of the Company or any Affiliate, has been granted an Award under the Plan; provided that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Section 13.4 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision. (aa) “Performance Award” means Performance Shares or Performance Units or Performance-Based Cash Awards granted pursuant to Article 9. (bb) “Performance-Based Cash Award” means a right granted to a Participant under Article 9 to a cash award to be paid upon achievement of such performance goals as the Committee establishes with regard to such Award. (cc) “Performance Share” means any right granted to a Participant under Article 9 to a unit to be valued by reference to a designated number of Shares to be paid upon achievement of such performance goals as the Committee establishes with regard to such Performance Share. (dd) “Performance Unit” means a right granted to a Participant under Article 9 to a unit valued by reference to a designated amount of cash or property other than Shares, to be paid to the Participant upon achievement of such performance goals as the Committee establishes with regard to such Performance Unit. (ee) “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act. (ff) “Plan” means the NNN Healthcare/Office REIT, Inc. 2006 Incentive Plan, as amended from time to time. (gg) “Public Offering” shall occur on the closing date of a firm commitment -5- underwritten public offering of any class or series of the Company’s equity securities pursuant to a registration statement filed by the Company under the 1933 Act. (hh) “Restricted Stock Award” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture. (ii) “Restricted Stock Unit Award” means the right granted to a Participant under Article 10 to receive shares of Stock (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture. (jj) “Shares” means shares of the Company’s Stock. If there has been an adjustment or substitution pursuant to Section 14.1, the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Section 14.1. (kk) “Stock” means the $0.01 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 14. (ll) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the grant price of the SAR, all as determined pursuant to Article 8. (mm) “Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code. (nn) “1933 Act” means the Securities Act of 1933, as amended from time to time. (oo) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time. ARTICLE 3 EFFECTIVE TERM OF PLAN 3.1. EFFECTIVE DATE. The Plan shall be effective as of the date it isapproved by both the Board and the stockholders of the Company (the “EffectiveDate”). 3.2. TERMINATION OF PLAN. The Plan shall terminate on the tenth anniversaryof the Effective Date unless earlier terminated as provided herein. Thetermination of the Plan on such date shall not affect the validity of any Awardoutstanding on the date of termination. -6- ARTICLE 4 ADMINISTRATION 4.1. COMMITTEE. The Plan shall be administered by a Committee appointed bythe Board (which Committee shall consist of at least two directors) or, at thediscretion of the Board from time to time, the Plan may be administered by theBoard. It is intended that at least two of the directors appointed to serve onthe Committee shall be “non-employee directors” (within the meaning of Rule16b-3 promulgated under the 1934 Act), that a majority of the members of theCommittee shall be Independent Directors at all times when the Charter requiressuch board committee composition, and that any such members of the Committee whodo not so qualify shall abstain from participating in any decision to make oradminister Awards that are made to Eligible Participants who at the time ofconsideration for such Award are persons subject to the short-swing profit rulesof Section 16 of the 1934 Act. However, the mere fact that a Committee membershall fail to qualify under the foregoing requirement or shall fail to abstainfrom such action shall not invalidate any Award made by the Committee whichAward is otherwise validly made under the Plan. The members of the Committeeshall be appointed by, and may be changed at any time and from time to time inthe discretion of, the Board. The Board may reserve to itself any or all of theauthority and responsibility of the Committee under the Plan or may act asadministrator of the Plan for any and all purposes. To the extent the Board hasreserved any authority and responsibility or during any time that the Board isacting as administrator of the Plan, it shall have all the powers of theCommittee hereunder, and any reference herein to the Committee (other than inthis Section 4.1) shall include the Board. To the extent any action of the Boardunder the Plan conflicts with actions taken by the Committee, the actions of theBoard shall control. 4.2. ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes ofadministering the Plan, the Committee may from time to time adopt rules,regulations, guidelines and procedures for carrying out the provisions andpurposes of the Plan and make such other determinations, not inconsistent withthe Plan, as the Committee may deem appropriate. The Committee’s interpretationof the Plan, any Awards granted under the Plan, any Award Certificate and alldecisions and determinations by the Committee with respect to the Plan arefinal, binding, and conclusive on all parties. Each member of the Committee isentitled to, in good faith, rely or act upon any report or other informationfurnished to that member by any officer or other employee of the Company or anyAffiliate, the Company’s or an Affiliate’s independent certified publicaccountants, Company counsel or any executive compensation consultant or otherprofessional retained by the Company to assist in the administration of thePlan. 4.3. AUTHORITY OF COMMITTEE. Except as provided below, the Committee hasthe exclusive power, authority and discretion to: (a) Grant Awards; (b) Designate Participants; (c) Determine the type or types of Awards to be granted to each Participant; (d) Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate; -7- (e) Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines; (f) Accelerate the vesting, exercisability or lapse of restrictions of any outstanding Award in accordance with Article 13; (g) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; (h) Prescribe the form of each Award Certificate, which need not be identical for each Participant; (i) Decide all other matters that must be determined in connection with an Award; (j) Establish, adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan; (k) Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; (l) Amend the Plan or any Award Certificate as provided herein; and (m) Adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in such other jurisdictions and to meet the objectives of the Plan. Notwithstanding the foregoing, grants of Awards to Independent Directorshereunder shall be made only in accordance with the terms, conditions andparameters of a plan, program or policy for the compensation of IndependentDirectors as in effect from time to time, and the Committee may not makediscretionary grants hereunder to Independent Directors. Notwithstanding the above, the Board or the Committee may, by resolution,expressly delegate to a special committee, consisting of one or more directorswho are also officers of the Company, the authority, within specifiedparameters, to (i) designate officers, employees and/or consultants of theCompany or any of its Affiliates to be recipients of Awards under the Plan, and(ii) to determine the number of such Awards to be granted to any suchParticipants; provided that a limit on the total number or dollar value ofAwards to be granted to any such Participants shall be approved in advance bythe Board or the Committee and provided further that such delegation of dutiesand responsibilities to such special committee may not be made with respect tothe grant of Awards to eligible participants who are subject to Section 16(a) ofthe 1934 Act at -8-the Grant Date. The acts of such delegates shall be treated hereunder as acts ofthe Board and such delegates shall report regularly to the Board and theCommittee regarding the delegated duties and responsibilities and any Awards sogranted. 4.4. AWARD CERTIFICATES. Each Award shall be evidenced by an AwardCertificate. Each Award Certificate shall include such provisions, notinconsistent with the Plan, as may be specified by the Committee. ARTICLE 5 SHARES SUBJECT TO THE PLAN 5.1. NUMBER OF SHARES. Subject to adjustment as provided in Sections 5.2and 14.1, the aggregate number of Shares reserved and available for issuancepursuant to Awards granted under the Plan shall be 2,000,000 Shares. The maximumnumber of Shares that may be issued upon exercise of Incentive Stock Optionsgranted under the Plan shall be 2,000,000. 5.2. SHARE COUNTING. (a) To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares subject to the Award will again be available for issuance pursuant to Awards granted under the Plan. (b) Shares subject to Awards settled in cash will again be available for issuance pursuant to Awards granted under the Plan. (c) Shares withheld from an Award or delivered by a Participant to satisfy minimum tax withholding requirements will again be available for issuance pursuant to Awards granted under the Plan. (d) If the exercise price of an Option is satisfied by delivering Shares to the Company (by either actual delivery or attestation), only the number of Shares issued to the Participant in excess of the Shares tendered (by delivery or attestation) shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan. (e) To the extent that the full number of Shares subject to an Option or SAR is not issued upon exercise of the Option or SAR for any reason, including by reason of net-settlement of the Award, only the number of Shares issued and delivered upon exercise of the Option or SAR shall be considered for purposes of determining the number of Shares remaining available for issuance pursuant to Awards granted under the Plan. (f) Substitute Awards granted pursuant to Section 13.11 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1. 5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award mayconsist, in whole or in part, of authorized and unissued Stock, treasury Stockor Stock purchased on the open market. -9- ARTICLE 6 ELIGIBILITY 6.1. GENERAL. Awards may be granted only to Eligible Participants; exceptthat Incentive Stock Options may be granted to only to Eligible Participants whoare employees of the Company or a Parent or Subsidiary as defined in Section424(e) and (f) of the Code. ARTICLE 7 STOCK OPTIONS 7.1. GENERAL. The Committee is authorized to grant Options to Participantson the following terms and conditions: (a) EXERCISE PRICE. The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 13.11) shall not be less than the Fair Market Value as of the Grant Date. (b) PROHIBITION ON REPRICING. Except as otherwise provided in Article 14, the exercise price of an Option may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the stockholders of the Company. (c) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e). The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested. (d) PAYMENT. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, Shares, or other property (including net share settlements), and the methods by which Shares shall be delivered or deemed to be delivered to Participants. (e) EXERCISE TERM. In no event may any Option be exercisable for more than ten years from the Grant Date. 7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Optionsgranted under the Plan must comply with the requirements of Section 422 of theCode. If all of the requirements of Section 422 of the Code are not met, theOption shall automatically become a Nonstatutory Stock Option. ARTICLE 8 STOCK APPRECIATION RIGHTS 8.1. GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized togrant Stock Appreciation Rights to Participants on the following terms andconditions: -10- (a) STAND-ALONE AND TANDEM STOCK APPRECIATION RIGHTS. Stock Appreciation Rights granted under the Plan may, in the discretion of the Committee, be granted either alone or in tandem with an Option granted under the Plan. (b) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive the excess, if any, of: (1) The Fair Market Value of one Share on the date of exercise; over (2) The base price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one Share on the Grant Date. (c) PROHIBITION ON REPRICING. Except as otherwise provided in Article 14, the base price of a Stock Appreciation Right may not be reduced, directly or indirectly by cancellation and regrant or otherwise, without the prior approval of the stockholders of the Company. (d) EXERCISE TERM. In no event may any Stock Appreciation Right be exercisable for more than ten years from the Grant Date. (e) OTHER TERMS. All Stock Appreciation Rights shall be evidenced by an Award Certificate. Subject to the limitations of this Article 8, the terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the time of the grant of the Award and shall be reflected in the Award Certificate. ARTICLE 9 PERFORMANCE AWARDS 9.1. GRANT OF PERFORMANCE AWARDS. The Committee is authorized to grantPerformance Shares, Performance Units or Performance-Based Cash Awards toParticipants on such terms and conditions as may be selected by the Committee.The Committee shall have the complete discretion to determine the number ofPerformance Awards granted to each Participant, and to designate the provisionsof such Performance Awards as provided in Section 4.3. All Performance Awardsshall be evidenced by an Award Certificate or a written program established bythe Committee, pursuant to which Performance Awards are awarded under the Planunder uniform terms, conditions and restrictions set forth in such writtenprogram. 9.2. PERFORMANCE GOALS. The Committee may establish performance goals forPerformance Awards which may be based on any criteria selected by the Committee.Such performance goals may be described in terms of Company-wide objectives orin terms of objectives that relate to the performance of the Participant, anAffiliate or a division, region, department or function within the Company or anAffiliate. If the Committee determines that a change in the business,operations, corporate structure or capital structure of the Company or themanner in which the Company or an Affiliate conducts its business, or otherevents or circumstances render performance goals to be unsuitable, the Committeemay modify such -11-performance goals in whole or in part, as the Committee deems appropriate. If aParticipant is promoted, demoted or transferred to a different business unit orfunction during a performance period, the Committee may determine that theperformance goals or performance period are no longer appropriate and may (i)adjust, change or eliminate the performance goals or the applicable performanceperiod as it deems appropriate to make such goals and period comparable to theinitial goals and period, or (ii) make a cash payment to the participant in anamount determined by the Committee. 9.3. RIGHT TO PAYMENT. The grant of a Performance Share to a Participantwill entitle the Participant to receive at a specified later time a specifiednumber of Shares, or the equivalent cash value if the Committee so provides, ifthe performance goals established by the Committee are achieved and the otherterms and conditions thereof are satisfied. The grant of a Performance Unit to aParticipant will entitle the Participant to receive at a specified later time aspecified dollar value in cash or other property (including Shares) asdetermined by the Committee, variable under conditions specified in the Award,if the performance goals in the Award are achieved and the other terms andconditions thereof are satisfied. The grant of a Performance-Based Cash Award toa Participant will entitle the Participant to receive at a specified later timea specified dollar value in cash variable under conditions specified in theAward, if the performance goals in the Award are achieved and the other termsand conditions thereof are satisfied. The Committee shall set performance goalsand other terms or conditions to payment of the Performance Awards in itsdiscretion which, depending on the extent to which they are met, will determinethe value of the Performance Awards that will be paid to the Participant. 9.4. OTHER TERMS. Performance Awards may be payable in cash, Stock, orother property in the discretion of the Committee, and have such other terms andconditions as determined by the Committee and reflected in the AwardCertificate. For purposes of determining the number of Shares to be used inpayment of a Performance Award denominated in cash but payable in whole or inpart in Shares or Restricted Stock, the number of Shares to be so paid will bedetermined by dividing the cash value of the Award to be so paid by the FairMarket Value of a Share on the date of determination by the Committee of theamount of the payment under the Award, or, if the Committee so directs, the dateimmediately preceding the date the Award is paid. ARTICLE 10 RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS 10.1. GRANT OF RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCKUNITS. The Committee is authorized to make Awards of Restricted Stock,Restricted Stock Units or Deferred Stock Units to Participants in such amountsand subject to such terms and conditions as may be selected by the Committee. AnAward of Restricted Stock, Restricted Stock Units or Deferred Stock Units shallbe evidenced by an Award Certificate setting forth the terms, conditions, andrestrictions applicable to the Award. 10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock, Restricted Stock Unitsor Deferred Stock Units shall be subject to such restrictions on transferabilityand other restrictions as the Committee may impose (including, withoutlimitation, limitations on the right to vote Restricted Stock or the right toreceive dividends on the Restricted Stock). These restrictions -12-may lapse separately or in combination at such times, under such circumstances,in such installments, upon the satisfaction of performance goals or otherwise,as the Committee determines at the time of the grant of the Award or thereafter.Except as otherwise provided in an Award Certificate or any special Plandocument governing an Award, the Participant shall have all of the rights of astockholder with respect to the Restricted Stock, and the Participant shall havenone of the rights of a stockholder with respect to Restricted Stock Units orDeferred Stock Units until such time as Shares of Stock are paid in settlementof the Restricted Stock Units or Deferred Stock Units. 10.3. FORFEITURE. Except as otherwise determined by the Committee at thetime of the grant of the Award or thereafter, upon termination of ContinuousStatus as a Participant during the applicable restriction period or upon failureto satisfy a performance goal during the applicable restriction period,Restricted Stock or Restricted Stock Units that are at that time subject torestrictions shall be forfeited; provided, however, that the Committee mayprovide in any Award Certificate that restrictions or forfeiture conditionsrelating to Restricted Stock or Restricted Stock Units will be waived in wholeor in part in the event of terminations resulting from specified causes, and theCommittee may in other cases waive in whole or in part restrictions orforfeiture conditions relating to Restricted Stock or Restricted Stock Units.Awards of Deferred Stock Units shall be fully vested at the time of grant andshall not be subject to forfeiture. 10.4. DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall bedelivered to the Participant at the time of grant either by book-entryregistration or by delivering to the Participant, or a custodian or escrow agent(including, without limitation, the Company or one or more of its employees)designated by the Committee, a stock certificate or certificates registered inthe name of the Participant. If physical certificates representing shares ofRestricted Stock are registered in the name of the Participant, suchcertificates must bear an appropriate legend referring to the terms, conditions,and restrictions applicable to such Restricted Stock. ARTICLE 11 DIVIDEND EQUIVALENTS 11.1. GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grantDividend Equivalents to Participants with respect to Awards granted hereunder,subject to such terms and conditions as may be selected by the Committee.Dividend Equivalents shall entitle the Participant to receive payments equal todividends with respect to all or a portion of the number of Shares subject to anAward, as determined by the Committee. For purposes hereof, “dividends” shallinclude any distributions of money or other property by the Company to owners ofShares, including distributions that may constitute a return of capital forfederal income tax purposes. The Committee may provide that Dividend Equivalentsbe paid or distributed when accrued or be deemed to have been reinvested inadditional Shares, or otherwise reinvested. ARTICLE 12 STOCK OR OTHER STOCK-BASED AWARDS 12.1. GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee isauthorized, subject to limitations under applicable law, to grant toParticipants such other -13-Awards that are payable in, valued in whole or in part by reference to, orotherwise based on or related to Shares, as deemed by the Committee to beconsistent with the purposes of the Plan, including without limitation Sharesawarded purely as a “bonus” and not subject to any restrictions or conditions,convertible or exchangeable debt securities, other rights convertible orexchangeable into Shares, and Awards valued by reference to book value of Sharesor the value of securities of or the performance of specified Parents orSubsidiaries. The Committee shall determine the terms and conditions of suchAwards. ARTICLE 13 PROVISIONS APPLICABLE TO AWARDS 13.1. TERM OF AWARD. The term of each Award shall be for the period asdetermined by the Committee, provided that in no event shall the term of anyOption or a Stock Appreciation Right exceed a period of ten years from its GrantDate. 13.2. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and anyapplicable law or Award Certificate, payments or transfers to be made by theCompany or an Affiliate on the grant or exercise of an Award may be made in suchform as the Committee determines at or after the Grant Date, including withoutlimitation, cash, Stock, other Awards, or other property, or any combination,and may be made in a single payment or transfer, in installments, or on adeferred basis, in each case determined in accordance with rules adopted by, andat the discretion of, the Committee. 13.3. LIMITS ON TRANSFER. No right or interest of a Participant in anyunexercised or restricted Award may be pledged, encumbered, or hypothecated toor in favor of any party other than the Company or an Affiliate, or shall besubject to any lien, obligation, or liability of such Participant to any otherparty other than the Company or an Affiliate. No unexercised or restricted Awardshall be assignable or transferable by a Participant other than by will or thelaws of descent and distribution; provided, however, that the Committee may (butneed not) permit other transfers (other than transfers for value) where theCommittee concludes that such transferability (i) does not result in acceleratedtaxation, (ii) does not cause any Option intended to be an Incentive StockOption to fail to be described in Code Section 422(b), and (iii) is otherwiseappropriate and desirable, taking into account any factors deemed relevant,including without limitation, state or federal tax or securities laws applicableto transferable Awards. 13.4. BENEFICIARIES. Notwithstanding Section 13.3, a Participant may, inthe manner determined by the Committee, designate a beneficiary to exercise therights of the Participant and to receive any distribution with respect to anyAward upon the Participant’s death by filing a beneficiary designation form, insuch form as determined by the Committee, with the Company. A beneficiary, legalguardian, legal representative, or other person claiming any rights under thePlan is subject to all terms and conditions of the Plan and any AwardCertificate applicable to the Participant, except to the extent the Plan andAward Certificate otherwise provide, and to any additional restrictions deemednecessary or appropriate by the Committee. If no beneficiary has been designatedor survives the Participant, payment shall be made in accordance with applicablelaw. Subject to the foregoing, a beneficiary designation may be changed orrevoked by a Participant at any time provided the change or revocation is filed. -14- 13.5. STOCK CERTIFICATES. All Stock issuable under the Plan is subject toany stop-transfer orders and other restrictions as the Committee deems necessaryor advisable to comply with federal or state securities laws, rules andregulations and the rules of any national securities exchange or automatedquotation system on which the Stock is listed, quoted, or traded. The Committeemay place legends on any Stock certificate or issue instructions to the transferagent to reference restrictions applicable to the Stock. 13.6. ACCELERATION UPON DEATH OR DISABILITY. Except as otherwise providedin the Award Certificate or any special Plan document governing an Award, uponthe termination of a person’s Continuous Status as a Participant by reason ofdeath or Disability, (i) all of such Participant’s outstanding Options, SARs,and other Awards in the nature of rights that may be exercised shall becomefully exercisable, (ii) all time-based vesting restrictions on the Participant’soutstanding Awards shall lapse, and (iii) the target payout opportunitiesattainable under all of such Participant’s outstanding performance-based Awardsshall be deemed to have been fully earned as of the date of termination basedupon an assumed achievement of all relevant performance goals at the “target”level and there shall be a pro rata payout to the Participant or his or herestate within thirty (30) days following the date of termination (or, if later,the first date that such payment may be made without causing a violation ofSection 409A of the Code) based upon the length of time within the performanceperiod that has elapsed prior to the date of termination. Any Awards shallthereafter continue or lapse in accordance with the other provisions of the Planand the Award Certificate. To the extent that this provision causes IncentiveStock Options to exceed the dollar limitation set forth in Code Section 422(d),the excess Options shall be deemed to be Nonstatutory Stock Options. 13.7. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise providedin the Award Certificate or any special Plan document governing an Award, uponthe occurrence of a Change in Control, (i) all of such Participant’s outstandingOptions, SARs, and other Awards in the nature of rights that may be exercisedshall become fully exercisable, (ii) all time-based vesting restrictions on theParticipant’s outstanding Awards shall lapse, and (iii) the target payoutopportunities attainable under all of such Participant’s outstandingperformance-based Awards shall be deemed to have been fully earned as of theeffective date of the Change in Control based upon an assumed achievement of allrelevant performance goals at the “target” level and there shall be a pro ratapayout to the Participant or his or her estate within thirty (30) days followingthe effective date of the Change in Control (or, if later, the first date thatsuch payment may be made without causing a violation of Section 409A of theCode) based upon the length of time within the performance period that haselapsed prior to the effective date of the Change in Control. Any Awards shallthereafter continue or lapse in accordance with the other provisions of the Planand the Award Certificate. To the extent that this provision causes IncentiveStock Options to exceed the dollar limitation set forth in Code Section 422(d),the excess Options shall be deemed to be Nonstatutory Stock Options. 13.8. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event hasoccurred as described in Section 13.6 or 13.7 above, the Committee may in itssole discretion at any time determine that, upon the termination of service of aParticipant, or the occurrence of a Change in Control, all or a portion of suchParticipant’s Options, SARs and other Awards in the nature of rights that may beexercised shall become fully or partially exercisable, that all or a part of therestrictions on all or a portion of the Participant’s outstanding Awards shalllapse, and/or that any performance-based criteria with respect to any Awardsheld by that Participant shall be deemed to be wholly or partially satisfied, ineach case, as of such date as the -15-Committee may, in its sole discretion, declare. The Committee may discriminateamong Participants and among Awards granted to a Participant in exercising itsdiscretion pursuant to this Section 13.8. 13.9. EFFECT OF ACCELERATION. If an Award is accelerated under Section13.6, 13.7 or 13.8, the Committee may, in its sole discretion, provide (i) thatthe Award will expire after a designated period of time after such accelerationto the extent not then exercised, (ii) that the Award will be settled in cashrather than Stock, (iii) that the Award will be assumed by another party to atransaction giving rise to the acceleration or otherwise be equitably convertedor substituted in connection with such transaction, (iv) that the Award may besettled by payment in cash or cash equivalents equal to the excess of the FairMarket Value of the underlying Stock, as of a specified date associated with thetransaction, over the exercise price of the Award, or (v) any combination of theforegoing. The Committee’s determination need not be uniform and may bedifferent for different Participants whether or not such Participants aresimilarly situated. To the extent that such acceleration causes Incentive StockOptions to exceed the dollar limitation set forth in Code Section 422(d), theexcess Options shall be deemed to be Nonstatutory Stock Options. 13.10. TERMINATION OF EMPLOYMENT. Whether military, government or otherservice or other leave of absence shall constitute a termination of employmentshall be determined in each case by the Committee at its discretion, and anydetermination by the Committee shall be final and conclusive. A Participant’sContinuous Status as a Participant shall not be deemed to terminate (i) in acircumstance in which a Participant transfers from the Company to an Affiliate,transfers from an Affiliate to the Company, or transfers from one Affiliate toanother Affiliate, or (ii) in the discretion of the Committee as specified at orprior to such occurrence, in the case of a spin-off, sale or disposition of theParticipant’s employer from the Company or any Affiliate. To the extent thatthis provision causes Incentive Stock Options to extend beyond three months fromthe date a Participant is deemed to be an employee of the Company, a Parent orSubsidiary for purposes of Sections 424(e) and 424(f) of the Code, the Optionsheld by such Participant shall be deemed to be Nonstatutory Stock Options. 13.11. SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan insubstitution for stock and stock-based awards held by employees of anotherentity who become employees of the Company or an Affiliate as a result of amerger or consolidation of the former employing entity with the Company or anAffiliate or the acquisition by the Company or an Affiliate of property or stockof the former employing corporation. The Committee may direct that thesubstitute awards be granted on such terms and conditions as the Committeeconsiders appropriate in the circumstances. 13.12. FORFEITURE EVENTS. The Committee may specify in an Award Certificatethat the Participant’s rights, payments and benefits with respect to an Awardshall be subject to reduction, cancellation, forfeiture or recoupment upon theoccurrence of certain specified events, in addition to any otherwise applicablevesting or performance conditions of an Award. Such events shall include, butshall not be limited to, termination of employment for Cause, violation ofmaterial Company or Affiliate policies, breach of noncompetition,confidentiality or other restrictive covenants that may apply to theParticipant, or other conduct by the Participant that is detrimental to thebusiness or reputation of the Company or any Affiliate. -16- ARTICLE 14 CHANGES IN CAPITAL STRUCTURE 14.1. GENERAL. In the event of a corporate event or transaction involvingthe Company (including, without limitation, any stock dividend, stock split,extraordinary cash dividend, recapitalization, reorganization, merger,consolidation, split-up, spin-off, combination or exchange of shares), theauthorization limits under Section 5.1 shall be adjusted proportionately, andthe Committee may adjust the Plan and Awards to preserve the benefits orpotential benefits of the Awards. Action by the Committee may include: (i)adjustment of the number and kind of shares which may be delivered under thePlan; (ii) adjustment of the number and kind of shares subject to outstandingAwards; (iii) adjustment of the exercise price of outstanding Awards or themeasure to be used to determine the amount of the benefit payable on an Award;and (iv) any other adjustments that the Committee determines to be equitable. Inaddition, upon the occurrence or in anticipation of such an event, the Committeemay, in its sole discretion, provide (i) that Awards will be settled in cashrather than Stock, (ii) that Awards will become immediately vested andexercisable and will expire after a designated period of time to the extent notthen exercised, (iii) that Awards will be assumed by another party to atransaction or otherwise be equitably converted or substituted in connectionwith such transaction, (iv) that outstanding Awards may be settled by payment incash or cash equivalents equal to the excess of the Fair Market Value of theunderlying Stock, as of a specified date associated with the transaction, overthe exercise price of the Award, (v) that performance targets and performanceperiods for Performance Awards will be modified, or (vi) any combination of theforegoing. The Committee’s determination need not be uniform and may bedifferent for different Participants whether or not such Participants aresimilarly situated. Without limiting the foregoing, in the event of asubdivision of the outstanding Stock (stock-split), a declaration of a dividendpayable in Shares, or a combination or consolidation of the outstanding Stockinto a lesser number of Shares, the authorization limits under Section 5.1 shallautomatically be adjusted proportionately, and the Shares then subject to eachAward shall automatically be adjusted proportionately without any change in theaggregate purchase price therefor. To the extent that any adjustments madepursuant to this Article 14 cause Incentive Stock Options to cease to qualify asIncentive Stock Options, such Options shall be deemed to be Nonstatutory StockOptions. ARTICLE 15 AMENDMENT, MODIFICATION AND TERMINATION 15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committeemay, at any time and from time to time, amend, modify or terminate the Planwithout stockholder approval; provided, however, that if an amendment to thePlan would, in the reasonable opinion of the Board or the Committee, constitutea material change requiring stockholder approval under applicable laws, policiesor regulations or the applicable listing or other requirements of an exchange,then such amendment shall be subject to stockholder approval; and provided,further, that the Board or Committee may condition any other amendment ormodification on the approval of stockholders of the Company for any reason,including by reason of such approval being necessary or deemed advisable (i) tocomply with the listing or other requirements of an exchange, or (ii) to satisfyany other tax, securities or other applicable laws, policies or regulations. 15.2. AWARDS PREVIOUSLY GRANTED. At any time and from time to time, theCommittee may amend, modify or terminate any outstanding Award without approvalof the -17-Participant; provided, however: (a) Subject to the terms of the applicable Award Certificate, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award); (b) The original term of an Option or SAR may not be extended without the prior approval of the stockholders of the Company; (c) Except as otherwise provided in Article 14, the exercise price of an Option or SAR may not be reduced, directly or indirectly, without the prior approval of the stockholders of the Company; and (d) No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be “adversely affected” by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or SAR for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award). ARTICLE 16 GENERAL PROVISIONS 16.1. NO RIGHTS TO AWARDS; NON-UNIFORM DETERMINATIONS. No Participant orany Eligible Participant shall have any claim to be granted any Award under thePlan. Neither the Company, its Affiliates nor the Committee is obligated totreat Participants or Eligible Participants uniformly, and determinations madeunder the Plan may be made by the Committee selectively among EligibleParticipants who receive, or are eligible to receive, Awards (whether or notsuch Eligible Participants are similarly situated). 16.2. NO STOCKHOLDER RIGHTS. No Award gives a Participant any of the rightsof a stockholder of the Company unless and until Shares are in fact issued tosuch person in connection with such Award. 16.3. WITHHOLDING. The Company or any Affiliate shall have the authorityand the right to deduct or withhold, or require a Participant to remit to theCompany, an amount sufficient to satisfy federal, state, and local taxes(including the Participant’s FICA obligation) required by law to be withheldwith respect to any exercise, lapse of restriction or other taxable eventarising as a result of the Plan. If Shares are surrendered to the Company tosatisfy tax obligations in excess of the minimum tax withholding obligation,such Shares must have been held by the Participant as fully vested shares forsuch period of time, if any, as necessary to avoid the recognition of an expenseunder generally accepted accounting principles. The Company -18-shall have the authority to require a Participant to remit cash to the Companyin lieu of the surrender of Shares for taxes if the surrender of Shares for suchpurpose would result in the Company’s recognition of expense under generallyaccepted accounting principles. With respect to withholding required upon anytaxable event under the Plan, the Committee may, at the time the Award isgranted or thereafter, require or permit that any such withholding requirementbe satisfied, in whole or in part, by withholding from the Award Shares having aFair Market Value on the date of withholding equal to the minimum amount (andnot any greater amount) required to be withheld for tax purposes, all inaccordance with such procedures as the Committee establishes. 16.4. SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE. (a) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under the Plan or any Award Certificate by reason the occurrence of a Change in Control or the Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change in Control, Disability or separation from service meet the description or definition of “change in control event”, “disability” or “separation from service”, as the case may be, in Section 409A of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any Award or the vesting of any right to eventual payment or distribution of any amount or benefit under the Plan or any Award Certificate. (b) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent necessary to avoid the application of Section 409A of the Code, (i) the Committee may not amend an outstanding Option, SAR or similar Award to extend the time to exercise such Award beyond the later of the 15th day of the third month following the date at which, or December 31 of the calendar year in which, the Award would otherwise have expired if the Award had not been extended, based on the terms of the Award at the original Grant Date (the “Safe Harbor Extension Period”), and (ii) any purported extension of the exercise period of an outstanding Award beyond the Safe Harbor Extension Period shall be deemed to be an amendment to the last day of the Safe Harbor Extension Period and no later. 16.5. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan, any AwardCertificate or any other document or statement made with respect to the Plan,shall interfere with or limit in any way the right of the Company or anyAffiliate to terminate any Participant’s employment or status as an officer,director or consultant at any time, nor confer upon any Participant any right tocontinue as an employee, officer, director or consultant of the Company or anyAffiliate, whether for the duration of a Participant’s Award or otherwise. 16.6. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded”plan for incentive and deferred compensation. With respect to any payments notyet made to a Participant pursuant to an Award, nothing contained in the Plan orany Award -19-Certificate shall give the Participant any rights that are greater than those ofa general creditor of the Company or any Affiliate. This Plan is not intended tobe subject to ERISA. 16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall betaken into account in determining any benefits under any pension, retirement,savings, profit sharing, group insurance, welfare or benefit plan of the Companyor any Affiliate unless provided otherwise in such other plan. 16.8. EXPENSES. The expenses of administering the Plan shall be borne bythe Company and its Affiliates. 16.9. TITLES AND HEADINGS. The titles and headings of the Sections in thePlan are for convenience of reference only, and in the event of any conflict,the text of the Plan, rather than such titles or headings, shall control. 16.10. GENDER AND NUMBER. Except where otherwise indicated by the context,any masculine term used herein also shall include the feminine; the plural shallinclude the singular and the singular shall include the plural. 16.11. FRACTIONAL SHARES. No fractional Shares shall be issued and theCommittee shall determine, in its discretion, whether cash shall be given inlieu of fractional Shares or whether such fractional Shares shall be eliminatedby rounding up or down. 16.12. GOVERNMENT AND OTHER REGULATIONS. (a) Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act. (b) Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state -20- or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement. 16.13. GOVERNING LAW. To the extent not governed by federal law, the Planand all Award Certificates shall be construed in accordance with and governed bythe laws of the State of Delaware. 16.14. ADDITIONAL PROVISIONS. Each Award Certificate may contain such otherterms and conditions as the Committee may determine; provided that such otherterms and conditions are not inconsistent with the provisions of the Plan. 16.15. NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shallnot in any way affect the right or power of the Company to make adjustments,reclassification or changes in its capital or business structure or to merge,consolidate, dissolve, liquidate, sell or transfer all or any part of itsbusiness or assets. The Plan shall not restrict the authority of the Company,for proper corporate purposes, to draft or assume awards, other than under thePlan, to or with respect to any person. If the Committee so directs, the Companymay issue or transfer Shares to an Affiliate, for such lawful consideration asthe Committee may specify, upon the condition or understanding that theAffiliate will transfer such Shares to a Participant in accordance with theterms of an Award granted to such Participant and specified by the Committeepursuant to the provisions of the Plan. 16.16. INDEMNIFICATION. Each person who is or shall have been a member ofthe Committee, or of the Board, or an officer of the Company to whom authoritywas delegated in accordance with Article 4 shall be indemnified and heldharmless by the Company against and from any loss, cost, liability, or expensethat may be imposed upon or reasonably incurred by him or her in connection withor resulting from any claim, action, suit, or proceeding to which he or she maybe a party or in which he or she may be involved by reason of any action takenor failure to act under the Plan and against and from any and all amounts paidby him or her in settlement thereof, with the Company’s approval, or paid by himor her in satisfaction of any judgment in any such action, suit, or proceedingagainst him or her, provided he or she shall give the Company an opportunity, atits own expense, to handle and defend the same before he or she undertakes tohandle and defend it on his or her own behalf, unless such loss, cost,liability, or expense is a result of his or her own willful misconduct or exceptas expressly provided by statute. The foregoing right of indemnification shallnot be exclusive of any other rights of indemnification to which such personsmay be entitled under the Company’s charter or bylaws, as a matter of law, orotherwise, or any power that the Company may have to indemnify them or hold themharmless. *************** The foregoing is hereby acknowledged as being the NNN Healthcare/OfficeREIT, Inc. 2006 Incentive Plan as adopted by the Board on ______, 2006 and bythe stockholders on _______, 2006. NNN HEALTHCARE/OFFICE REIT, INC. By: ———————————— Its: ———————————– -21-=============================================================================== NNN HEALTHCARE/OFFICE REIT, INC. FORM OF 2006 INDEPENDENT DIRECTORS COMPENSATION PLAN=============================================================================== NNN HEALTHCARE/OFFICE REIT, INC. 2006 INDEPENDENT DIRECTORS COMPENSATION PLAN ARTICLE 1 PURPOSE 1.1. PURPOSE. The purpose of the NNN Healthcare/Office REIT, Inc. 2006Independent Directors Compensation Plan is to attract, retain and compensatehighly-qualified individuals who are not employees of NNN Healthcare/OfficeREIT, Inc. or any of its Affiliates for service as members of the Board byproviding them with competitive compensation and an ownership interest in theStock of the Company. The Company intends that the Plan will benefit the Companyand its stockholders by allowing Independent Directors to have a personalfinancial stake in the Company through an ownership interest in the Stock andwill closely associate the interests of Independent Directors with that of theCompany’s stockholders. 1.2. ELIGIBILITY. Independent Directors of the Company who are EligibleParticipants, as defined below, shall automatically be participants in the Plan. ARTICLE 2 DEFINITIONS 2.1. DEFINITIONS. Unless the context clearly indicates otherwise, thefollowing terms shall have the following meanings: “AFFILIATE” has the meaning given such term in the Equity Incentive Plan. “BASE RETAINER” means the retainer (excluding meeting fees and expenses)payable by the Company to an Independent Director pursuant to Section 5.1 hereoffor service as a director of the Company, as such amount may be changed fromtime to time. “BOARD” means the Board of Directors of the Company. “CHANGE IN CONTROL” has the meaning given such term in the Equity IncentivePlan. “CHARTER” means the articles of incorporation of the Company, as sucharticles of incorporation may be amended from time to time. “CODE” means the Internal Revenue Code of 1986, as amended. “COMMITTEE” has the meaning given such term in the Equity Incentive Plan. “COMPANY” means NNN Healthcare/Office REIT, Inc., a Delaware corporation. “DIRECTOR DISABILITY” means any illness or other physical or mentalcondition of an Independent Director that renders him or her incapable ofperforming as a director of the Company, or any medically determinable illnessor other physical or mental condition resulting from a bodily injury, disease ormental disorder which, in the judgment of the Board, is permanent and continuousin nature.Notwithstanding the foregoing, Disability shall have the same meaning as setforth in any regulations, revenue procedure or revenue rulings issued by theSecretary of the United States Treasury applicable to Section 409A(d) of theCode. The Board may require such medical or other evidence as it deems necessaryto judge the nature and permanency of an Independent Director’s condition. “EFFECTIVE DATE” has the meaning given such term in the Equity IncentivePlan. “ELIGIBLE PARTICIPANT” means any person who is an Independent Director onthe Effective Date or becomes an Independent Director while this Plan is ineffect; except that during any period a director is prohibited fromparticipating in the Plan by his or her employer or otherwise waivesparticipation in the Plan, such director shall not be an Eligible Participant. “EQUITY INCENTIVE PLAN” means the NNN Healthcare/Office REIT, Inc. 2006Incentive Plan, or any subsequent equity compensation plan approved by theCompany’s stockholders and designated as the Equity Incentive Plan for purposesof this Plan. “FAIR MARKET VALUE” has the meaning given such term in the Equity IncentivePlan. “INDEPENDENT DIRECTOR” has the meaning given such term in the EquityIncentive Plan. “PLAN” means this NNN Healthcare/Office REIT, Inc. 2006 IndependentDirectors Compensation Plan, as amended from time to time. “PLAN YEAR” means the approximate 12-month period beginning with the annualstockholders meeting and ending at the next annual stockholders meeting;provided that the first Plan Year shall begin on the Effective Date and extenduntil the first annual stockholders meeting. “SHARES” has the meaning given such term in the Equity Incentive Plan. “STOCK” has the meaning given such term in the Equity Incentive Plan. ARTICLE 3 ADMINISTRATION 3.1. ADMINISTRATION. The Plan shall be administered by the Board. Subjectto the provisions of the Plan, the Board shall be authorized to interpret thePlan, to establish, amend and rescind any rules and regulations relating to thePlan, and to make all other determinations necessary or advisable for theadministration of the Plan. The Board’s interpretation of the Plan, and allactions taken and determinations made by the Board pursuant to the powers vestedin it hereunder, shall be conclusive and binding upon all parties concernedincluding the Company, its stockholders and persons granted awards under thePlan. The Board may appoint a plan administrator to carry out the ministerialfunctions of the Plan, but the administrator shall have no other authority orpowers of the Board. 3.2. RELIANCE. In administering the Plan, the Board may rely upon anyinformation furnished by the Company, its public accountants and other experts.No individual will have personal liability by reason of anything done or omittedto be done by the Company or the Board in connection with the Plan. Thislimitation of liability shall not be exclusive of any other limitation ofliability to which any such person may be entitled under the Company’scertificate of incorporation or otherwise. -2- 3.3. INDEMNIFICATION. Each person who is or has been a member of the Boardor who otherwise participates in the administration or operation of this Planshall be indemnified by the Company against, and held harmless from, any loss,cost, liability or expense that may be imposed upon or incurred by him or her inconnection with or resulting from any claim, action, suit or proceeding in whichsuch person may be involved by reason of any action taken or failure to actunder the Plan and shall be fully reimbursed by the Company for any and allamounts paid by such person in satisfaction of judgment against him or her inany such action, suit or proceeding, provided he or she will give the Company anopportunity, by written notice to the Board, to defend the same at the Company’sown expense before he or she undertakes to defend it on his or her own behalf.This right of indemnification shall not be exclusive of any other rights ofindemnification to which any such person may be entitled under the Company’sCharter, Bylaws, contract or Delaware law. ARTICLE 4 SHARES 4.1. SOURCE OF SHARES FOR THE PLAN. The shares of Restricted Stock or otherequity awards that may be issued pursuant to the Plan shall be issued under theEquity Incentive Plan, subject to all of the terms and conditions of the EquityIncentive Plan. The terms contained in the Equity Incentive Plan areincorporated into and made a part of this Plan with respect to shares ofRestricted Stock or other equity awards granted pursuant hereto and any suchawards shall be governed by and construed in accordance with the EquityIncentive Plan. In the event of any actual or alleged conflict between theprovisions of the Equity Incentive Plan and the provisions of this Plan, theprovisions of the Equity Incentive Plan shall be controlling and determinative.This Plan does not constitute a separate source of shares for the grant of theequity awards described herein. ARTICLE 5 BASE RETAINER, MEETING FEES AND EXPENSES 5.1. BASE RETAINER. Each Eligible Participant shall be paid a Base Retainerfor service as a director during each Plan Year. The amount of the Base Retainershall be established from time to time by the Board. Until changed by the Board,the Base Retainer for a full Plan Year shall be $36,000. The Base AnnualRetainer shall be payable in approximately equal quarterly installments inadvance, beginning on the date of the annual stockholders meeting; provided,however, that for the first Plan Year, the first installment shall begin on theEffective Date and be prorated based on the number of full months in suchquarter after the Effective Date. Each person who first becomes an Eligible Participant on a date other thanthe Effective Date or an annual meeting date shall be paid a retainer equal tothe quarterly installment of the Base Annual Retainer for the first quarter ofeligibility, based on the number of full months he or she serves as anIndependent Director during such quarter. Payment of such prorated Base AnnualRetainer shall begin on the date that the person first becomes an EligibleParticipant. 5.2. MEETING FEES. Each Independent Director shall be paid a meeting feefor each meeting of the Board he or she attends. The amount of the meeting feesshall be established from time to time by the Board. Until changed by the Board,the meeting fee for attending a meeting of the Board, or a committee thereof,whether telephonically or in person, shall be as follows: -3-

MEETING TYPE FEE- ———— —— Board Meeting, Non-Telephonic or Telephonic $1,000Committee Meeting, Non-Telephonic or Telephonic $ 500Committee Chair, Non-Telephonic or Telephonic Committee Meeting (in addition to Committee Meeting fee) $ 500

No fee shall be paid for non-telephonic committee meetings held on the same dayas a non-telephonic meeting of the Board. 5.3. TRAVEL EXPENSE REIMBURSEMENT. All Independent Directors shall bereimbursed for reasonable travel expenses (including spouse’s expenses to attendevents to which spouses are invited) in connection with attendance at meetingsof the Board and its committees, or other Company functions at which the Chairof the Board or the Chief Executive Officer requests the Independent Director toparticipate. ARTICLE 6 EQUITY COMPENSATION 6.1. Initial Restricted Stock Grant. On the first date an IndependentDirector is initially elected or appointed to the Board, he or she shall receivean award of 5,000 shares of Restricted Stock. Such shares of Restricted Stockshall be subject to the terms and restrictions described below in this Article6, shall be in addition to any otherwise applicable annual grant of RestrictedStock granted to such Independent Director under Section 6.2, and shall besubject to share availability under the Equity Incentive Plan, 6.2 Subsequent Restricted Stock Grant. Subject to share availability underthe Equity Incentive Plan, upon subsequent re-election or re-appointment of theIndependent Director to the Board, such director shall receive an award of 2,500shares of Restricted Stock. 6.3 Terms and Conditions of Restricted Stock. Shares of Restricted Stockgranted under this Article 6 shall be evidenced by a written Award Certificate,and shall be subject to the terms and conditions described below and of theEquity Incentive Plan. (i) Restrictions. The shares of Stock granted pursuant to Article 6 are subject to each of the following restrictions. “Restricted Stock” mean those shares that are subject to the restrictions imposed hereunder which restrictions have not then expired or terminated. Restricted Stock may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered to or in favor of any party other than the Company, or be subjected to any lien, obligation or liability of the grantee to any other party other than the Company. If the grantee’s service as a director of the Company terminates prior to the Vesting Date (as defined in Section 6.3(ii)) other than by reason of his or her death or Disability, then the grantee shall forfeit all of his or her right, title and interest in and to any unvested shares of Restricted Stock as of the date of such termination from the Board and such unvested shares of Restricted Stock shall be reconveyed to the Company immediately following the event of forfeiture, without further consideration or any act or action by the grantee. The restrictions imposed under this Section 6.3(i) shall apply to all shares of Stock or other securities issued with respect to shares of Restricted Stock hereunder in connection with any merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the Stock. -4- (ii) Vesting. The shares of Restricted Stock shall vest and become non-forfeitable as to twenty percent (20%) of the shares on the Grant Date and as to twenty percent (20%) on each of the first four anniversaries of the Grant Date; provided, however, that the shares of Restricted Stock shall become fully vested on the earlier occurrence of (i) the termination of the grantee’s service as a director of the Company due to his or her death or Disability, or (ii) a Change in Control of the Company (in any such case, the “Vesting Date”). If the grantee’s service as a director of the Company terminates other than as described in clause (i) or (ii) of the foregoing sentence, then the grantee shall forfeit all of his or her right, title and interest in and to any unvested shares of Restricted Stock as of the date of such termination from the Board and such Restricted Stock Units shall be reconveyed to the Company without further consideration or any act or action by the grantee. (iii) Delivery of Shares. The shares of Restricted Stock granted under Article 6 will be registered in the name of grantee as of the Grant Date and will be held by the Company during the Restricted Period in certificated or uncertificated form. If a certificate for Restricted Stock is issued during the Restricted Period with respect to such shares, such certificate shall be registered in the name of the grantee and shall bear a legend in substantially the following form (in addition to any legend required under applicable state securities laws): “This certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in a Restricted Stock Certificate between the registered owner of the shares represented hereby and NNN Healthcare/Office REIT, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of such Agreement, copies of which are on file in the offices of NNN Healthcare/Office REIT, Inc.” Stock certificates for the shares, without the first above legend, shall be delivered to the Independent Director or his or her designee upon request after the expiration of the Restricted Period, but delivery may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the Securities Act of 1933, as amended, listing requirements under the rules of any stock exchange, and requirements under any other law or regulation applicable to the issuance or transfer of the shares. (iv) Rights as a Stockholder. An Independent Director shall have all the rights of a stockholder of the Company with respect to the Restricted Stock, including voting rights and the right to receive dividends and other distributions paid with respect to such shares. If any such dividend or distribution is paid in shares of Stock, such shares shall be subject to the same restrictions on transferability and risks of forfeiture during the Restricted Period as the shares of Restricted Stock with respect to which they were paid. ARTICLE 7 AMENDMENT, MODIFICATION AND TERMINATION 7.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board may terminate orsuspend the Plan at any time, without stockholder approval. The Board may amendthe Plan at any time and for any reason without stockholder approval; provided,however, that the Board may condition any amendment on the approval ofstockholders of the Company if such approval is necessary or deemed advisablewith respect to tax, securities or other applicable laws, policies orregulations. No termination, modification or amendment of the Plan may, withoutthe consent of an Independent Director, adversely affect an IndependentDirector’s rights under an award granted prior thereto. -5- ARTICLE 8 GENERAL PROVISIONS 8.1. ADJUSTMENTS. The adjustment provisions of the Equity Incentive Planshall apply with respect to equity awards outstanding or to be granted pursuantto this Plan. 8.2. DURATION OF THE PLAN. The Plan shall remain in effect until the tenthanniversary of the Effective Date, unless terminated earlier by the Board. 8.3. EXPENSES OF THE PLAN. The expenses of administering the Plan shall beborne by the Company. 8.4. STATUS OF THE PLAN. The Plan is intended to be a nonqualified,unfunded plan of deferred compensation under the Code. Plan benefits shall bepaid from the general assets of the Company or as otherwise directed by theCompany. A participant shall have the status of a general unsecured creditor ofthe Company with respect to his or her right to receive Stock or other paymentupon settlement of equity awards under the Plan. No right or interest in theOptions shall be subject to the claims of creditors of the Independent Directoror to liability for the debts, contracts or engagements of the IndependentDirector, or shall be subject to disposition by transfer, alienation,anticipation, pledge, encumbrance, assignment or any other means whether suchdisposition be voluntary or involuntary or by operation of law by judgment,levy, attachment, garnishment or any other legal or equitable proceedings(including bankruptcy), and any attempted disposition thereof shall be null andvoid and of no effect; provided, however, that nothing in this Plan shallprevent transfers by will or by the applicable laws of descent and distribution.To the extent that any participant acquires the right to receive payments underthe Plan (from whatever source), such right shall be no greater than that of anunsecured general creditor of the Company. Participants and their beneficiariesshall not have any preference or security interest in the assets of the Companyother than as a general unsecured creditor. 8.5. EFFECTIVE DATE. The Plan was originally adopted by the Board on _____,2006, and will become effective on the Effective Date. NNN HEALTHCARE/OFFICE REIT, INC. By: ———————————— Name: ———————————- Title: ——————————— -6-