United
Development Funding IV
2008 Share Option
Plan
for
Independent
Trustees
United
Development Funding IV
2008 Share Option
Plan
for
Independent
Trustees
The purpose of
this Plan is to promote the interests of the Trust by providing the
opportunity to purchase or receive Shares or to receive
compensation that is based upon appreciation in the value of Shares
to Eligible Recipients in order to attract and retain Eligible
Recipients and providing Eligible Recipients an incentive to work
to increase the value of Shares and a stake in the future of the
Trust that corresponds to the stake of each of the Trust’s
Shareholders. The Plan provides for the grant of Non-Qualified
Stock Options to aid the Trust in obtaining these goals.
Each term set
forth in this Section shall have the meaning set forth opposite
such term for purposes of this Plan and any Share Option Agreements
under this Plan (unless noted otherwise), and for purposes of such
definitions, the singular shall include the plural and the plural
shall include the singular, and reference to one gender shall
include the other gender. Note that some definitions may not be
used in this Plan, and may be inserted here solely for possible use
in Share Option Agreements issued under this Plan.
2.1
Articles means the declaration of trust entitled the
“United Development Funding IV Articles of Amendment and
Restatement,” as the same may be amended from time to
time.
2.2
Business means the business of originating, purchasing,
participating in and holding for investment secured loans,
investing in real estate and providing distributions of
predominantly all income to Shareholders as required for real
estate investment trust status under Code §856.
2.3
Board means the Board of Trustees of the
Trust.
2.4
Cause shall mean an act or acts by an Eligible Recipient
involving (a) the use for profit or disclosure to unauthorized
persons of confidential information or trade secrets of the Trust,
(b) the breach of any contract with the Trust, (c) the
violation of any fiduciary obligation to the Trust, (d) the
unlawful trading in the securities of the Trust, or of another
corporation based on information gained as a result of the
performance of services for the Trust, (e) a felony conviction
or the failure to contest prosecution of a felony, or
(f) willful misconduct, dishonesty, embezzlement, fraud,
deceit or civil rights violations, or other unlawful
acts.
2.5 Change
of Control means either of the following:
(a) any
transaction or series of transactions pursuant to which the Trust
sells, transfers, leases, exchanges or disposes of substantially
all ( i.e., at least eighty-five percent (85%)) of its
assets for cash or property, or for a combination of cash and
property, or for other consideration; or
(b) any
transaction pursuant to which persons who are not current
Shareholders of the Trust acquire by merger, consolidation,
reorganization, division or other business combination or
transaction, or by a purchase of an interest in the Trust, an
interest in the Trust so that after such transaction, the
Shareholders of the Trust immediately prior to such transaction no
longer have a controlling ( i.e. , 50% or more) voting
interest in the Trust.
2.6
Code means the Internal Revenue Code of 1986, as
amended.
2.7
Committee means any committee appointed by the Board to
administer the Plan, as specified in Section 5 hereof. Any
such committee shall be comprised entirely of Trustees.
2.8 Common
Share means a “Common Share” of the Trust, as
defined in the Articles.
2.9
Confidential Information means (a) information of
the Trust, to the extent not considered a Trade Secret under
applicable law, that (i) relates to the business of the Trust,
(ii) possesses an element of value to the Trust, (iii) is
not generally known to the Trust’s competitors, and (iv)
would damage the Trust if disclosed, and (b) information of
any third party provided to the Trust which the Trust is obligated
to treat as confidential. Confidential Information includes, but is
not limited to, (i) future business plans,
(ii) the
composition,
description, schematic or design of products, future products or
equipment of the Trust (iii) communication systems, audio
systems, system designs and related documentation,
(iv) advertising or marketing plans, (v) information
regarding independent contractors, employees, clients and customers
of the Trust, and (vi) information concerning the
Trust’s financial structure and methods and procedures of
operation. Confidential Information shall not include any
information that (i) is or becomes generally available to the
public other than as a result of an unauthorized disclosure,
(ii) has been independently developed and disclosed by others
without violating the legal rights of any party, or
(iii) otherwise enters the public domain through lawful
means.
2.10
Effective Date means the “Effective Date” as
set forth in Section 4 of this Plan.
2.11
Eligible Recipient means a Trustee who is not an
Employee.
2.12
Employee means a common law employee of the
Trust.
2.13
Exchange Act means the Securities Exchange Act of 1934,
as amended.
2.14
Exercise Price means the price that shall be paid to
purchase one (1) Share upon the exercise of an Option granted
under this Plan.
2.15 Fair
Market Value of each Share on any date means the price
determined below as of the close of business on such date (
provided, however , if for any reason, the Fair Market Value
per share cannot be ascertained or is unavailable for such date,
the Fair Market Value per share shall be determined as of the
nearest preceding date on which such Fair Market Value can be
ascertained):
(a) If the
Share is listed or traded on any established stock exchange or a
national market system, including without limitation the Global or
Global Select Markets of the National Association of Securities
Dealers, Inc. Automated Quotation (“NASDAQ”) System,
its Fair Market Value shall be the closing sale price for the Share
(or the mean of the closing bid and ask prices, if no sales were
reported), on such exchange or system on the date of such
determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or
(b) If the
Share is not listed or traded on any established stock exchange or
a national market system, its Fair Market Value shall be the
average of the closing dealer “bid” and
“ask” prices of a Share as reflected on the NASDAQ
interdealer quotation system of the National Association of
Securities Dealers, Inc. on the date of such determination;
or
(c) In the
absence of an established public trading market for the Share, the
Fair Market Value of a Share shall be determined in good faith by
the Board; provided however , that in no event shall the
Fair Market Value of a Share be less than the current offering
price of the Trust’s equity securities pursuant to an
effective registration statement filed by the Trust.
2.16
Forfeiture Activities means, with respect to a
Participant, any of the following:
(a)
Trade Secrets & Confidential Information. Such
Participant (i) uses, discloses, or reverse engineers the
Trade Secrets or the Confidential Information for any purpose other
than the Trust’s Business, except as authorized in writing by
the Trust; or (ii) after Participant’s cessation of
services for the Trust, retains Trade Secrets or Confidential
Information, including any copies existing in any form (including
electronic form), which are in Participant’s possession or
control, or destroys, deletes, or alters the Trade Secrets or
Confidential Information without the Trust’s prior written
consent. The Forfeiture Activities under this subsection
(a) shall: (i) with regard to the Trade Secrets, remain
in effect and be applicable as long as the information constitutes
a Trade Secret under applicable law, and (ii) with regard to
the Confidential Information, remain in effect and be applicable
during the Forfeiture Period.
(b)
Solicitation of Forfeiture Period Employees. During the
Forfeiture Period of such Participant, the Participant, directly or
indirectly, solicits, recruits or induces any Forfeiture Period
Employee to (a) terminate his employment relationship with the
Trust or (b) work for any other person or entity engaged in
the Business; provided, however , this subsection
(c) shall only apply if such Participant had Material
Interaction with such Forfeiture Period Employee, or if such
Participant, directly or indirectly, supervised such Forfeiture
Period Employee.
United Development Funding IV 2008
Share Option Plan
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2.17
Forfeiture Period means, with respect to a Participant,
the time period during which such Participant is employed with, or
is performing services for, the Trust, and for a period of two (2)
years thereafter.
2.18
Forfeiture Period Employee means any Person who
(a) is employed by the Trust at the time Participant ceases to
perform services for the Trust, or (b) was employed by the
Trust during the last year in which Participant performed services
for the Trust (or during the period in which the Participant
performed services for the Trust if the Participant performed
services for the Trust for less than a year).
2.19
Initial Public Offering means the closing of the
Trust’s initial public offering of any class or series of the
Trust’s equity securities pursuant to an effective
registration statement filed by the Trust under the 1933
Act.
2.20
Insider means an individual who is, on the relevant
date, an officer, trustee or ten percent (10%) beneficial owner of
any class of the Trust’s equity securities that is registered
pursuant to Section 12 of the Exchange Act, all as defined
under Section 16 of the Exchange Act.
2.21
Material Interaction means, with respect to a
Participant, any interaction between such Participant and a
Forfeiture Period Employee which relates or related, directly or
indirectly, to the performance of such Participant’s duties
for the Trust.
2.22
Option means an option granted under this Plan to
purchase Shares that is not intended by the Trust to satisfy the
requirements of Code §422.
2.23
Outside Trustee means a Trustee who is not an Employee
and who qualifies as a “non-employee director” under
Rule 16b-3(b)(3) under the 1934 Act, as amended from time to
time.
2.24
Participant means an individual who receives an Option
hereunder.
2.25
Plan means the United Development Funding IV 2008 Share
Option Plan for Independent Trustees, as may be amended from time
to time.
2.26
Share means a Common Share of beneficial interest of the
Trust, as defined in the Articles.
2.27
Shareholder means a holder of record of one or more
Shares as maintained in the books and records of the Trust or its
transfer agent, as defined in the Articles.
2.28 Share
Option Agreement means an agreement between the Trust and a
Participant evidencing an award of an Option.
2.29 Trade
Secrets means information of the Trust, and their
licensors, suppliers, clients and customers, without regard to
form, including, but not limited to, technical or non-technical
data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, financial data,
financial plans, product plans, or a list of actual or potential
customers or suppliers which is not commonly known by or available
to the public and which information (i) derives economic value,
actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
2.30
Trust means United Development Funding IV, a Maryland
real estate investment trust, and any successor to such
organization.
2.31
Trustee means a member of the Board.
3
Shares Subject to
Options
3.1 Maximum
Aggregate Shares Issuable Pursuant to Options. The total
number of Shares that may be issued pursuant to Options under this
Plan shall not exceed One Million (1,000,000), all as adjusted
pursuant to Section 10. Such Shares shall be reserved, to the
extent that the Trust deems appropriate, from authorized but
unissued Shares, from Shares which have been reacquired by the
Trust, from Shares paid to the Trust pursuant to the exercise of
Options issued under the Plan, or from Shares withheld by the Trust
for payment of taxes.
3.2
Determination of Maximum Aggregate Shares Issuable. Any
Shares subject to an Option that remain un-issued after the
cancellation, expiration, lapse or exchange of such Option
thereafter shall again become available for use under this Plan.
Only the net number of Shares that are issued pursuant to
the
United Development Funding IV 2008
Share Option Plan
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exercise of an
Option shall be counted as issued in applying the provisions of
Section 3.1 above in the case of an Option which is exercised
through a “cashless” or “net share”
exercise as described in Section 7.6.
The Effective Date
of this Plan shall be the date it is adopted by the Board, or such
delayed effective date as the Board may specify, as noted in
resolutions effectuating such adoption. This Plan shall be subject
to the approval of the Shareholders of the Trust within twelve
(12) months after the date on which this Plan is adopted by
the Board, disregarding any contingencies or delayed effective date
relative to such adoption. In the event that Shareholder approval
of this Plan is not obtained, or in the event that this Plan is not
subjected to the approval of the Shareholders, then any Options
granted under this Plan shall nonetheless be deemed granted
pursuant to the authority of the Board. Should this Plan be
rejected by the Shareholders after being submitted to the
Shareholders for their approval, the Plan shall immediately
terminate at that time, and no further grants shall be made under
this Plan thereafter.
5.1 General
Administration. This Plan shall be administered by the
Board. The Board, acting in its complete and absolute discretion,
shall exercise all such powers and take all such action as it deems
necessary or desirable to carry out the purposes of this Plan. The
Board shall have the power to interpret this Plan and, subject to
the terms and provisions of this Plan, to take such other action in
the administration and operation of the Plan as it deems equitable
under the circumstances. The Board’s actions shall be binding
on the Trust, on each affected Eligible Recipient, and on each
other person directly or indirectly affected by such
actions.
5.2
Authority of the Board. Except as limited by law or by
the Articles of Incorporation or Bylaws of the Trust, and subject
to the provisions herein, the Board shall have full power to select
Eligible Recipients who shall participate in the Plan, to determine
the sizes and types of Options in a manner consistent with the
Plan, to determine the terms and conditions of Options in a manner
consistent with the Plan, to construe and interpret the Plan and
any agreement or instrument entered into under the Plan, to
establish, amend or waive rules and regulations for the
Plan’s administration, and to amend the terms and conditions
of any outstanding Options as allowed under the Plan and such
Options. Further, the Board may make all other determinations that
may be necessary or advisable for the administration of the
Plan.
5.3
Delegation of Authority. The Board may delegate its
authority under the Plan, in whole or in part, to a Committee
appointed by the Board consisting of not less than one
(1) Trustee or to one or more other persons to whom the powers
of the Board hereunder may be delegated in accordance with
applicable law. The members of the Committee and any other persons
to whom authority has been delegated shall be appointed from time
to time by, and shall serve at the discretion of, the Board. The
Committee or other delegate (if appointed) shall act according to
the policies and procedures set forth in the Plan and to those
policies and procedures established by the Board, and the Committee
or other delegate shall have such powers and responsibilities as
are set forth by the Board. Reference to the Board in this Plan
shall specifically include reference to the Committee or other
delegate where the Board has delegated its authority to the
Committee or other delegate, and any action by the Committee or
other delegate pursuant to a delegation of authority by the Board
shall be deemed an action by the Board under the Plan.
Notwithstanding the above, the Board may assume the powers and
responsibilities granted to the Committee or other delegate at any
time, in whole or in part. With respect to Committee appointments
and composition, only a Committee (or a sub-committee thereof)
comprised solely of two (2) or more Outside Trustees may grant
Options that will be exempt from Section 16(b) of the Exchange
Act.
5.4
Decisions Binding. All determinations and decisions made
by the Board (or its delegate) pursuant to the provisions of this
Plan and all related orders and resolutions of the Board shall be
final, conclusive and binding on all persons, including the Trust,
its Shareholders, Trustees, Eligible Recipients, Participants, and
their estates and beneficiaries.
5.5
Indemnification for Decisions. No member of the Board or
the Committee (or a sub-committee thereof) shall be liable in
connection with or by reason of any act or omission performed or
omitted to be performed on behalf of the Trust in such capacity,
provided , that the Board has determined, in good faith,
that the course of conduct that caused the loss or liability was in
the best interests of the Trust. Service on the Committee (or a
sub-committee thereof) shall constitute service as a director of
the Trust so that the members
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Share Option Plan
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of the
Committee (or a sub-committee thereof) shall be entitled to
indemnification and reimbursement as Trustees of the Trust pursuant
to its articles of incorporation, bylaws and applicable law. In
addition, the members of the Board, Committee (or a sub-committee
thereof) shall be indemnified by the Trust against the following
losses or liabilities reasonably incurred in connection with or by
reason of any act or omission performed or omitted to be performed
on behalf of the Trust in such capacity, provided, that the Board
has determined, in good faith, that the course of conduct which
caused the loss or liability was in the best interests of the
Trust: (a) the reasonable expenses, including attorneys’
fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, to which they or any of
them may be a party by reason of any action taken or failure to act
under or in connection with the Plan, any Option granted hereunder,
and (b) against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Trust) or paid by them in satisfaction of
a
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