UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  January 7, 2009 (January 6, 2009)
 
Whitestone REIT
(Exact name of registrant as specified in its charter)
 
 
Maryland
 
000-50256
 
76-0594970
(State or Other Jurisdiction of Incorporation )
 
(Commission File Number)
 
 
(I.R.S. Employer
Identification No.)
 
 
2600 South Gessner, Suite 500, Houston, Texas  77063
(Address of principal executive offices)   (Zip Code)
 
 
(713) 827-9595
(Registrant’s telephone number, including area code)
 
 
Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨   
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
¨   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
¨   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
¨   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment ofCertain Officers; Compensatory Arrangements of Certain Officers.

On January 6, 2009, the Compensation Committee of the Board of Trustees (the “Committee”) of Whitestone REIT (the “Company”), pursuant to the Company’s 2008 Long-Term Equity Incentive Ownership Plan (the “Plan”), approved the form of award agreements to be used to grant performance based restricted share and unit awards to certain employees and executive officers of the Company and the form of award agreement for restricted share awards to be granted to trustees of the Company.  The Form of Restricted Common Share Award Agreement (Performance Vested), the Form of Restricted Common Share Award Agreement (Time Vested) and the Form of Restricted Unit Award Agreement (Performance Vested) are filed as Exhibits 10.1, 10.2 and 10.3, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

In addition to approving the form award agreements, the Committee granted to certain of its employees, including the following named executive officers, restricted common share awards of the Company’s common shares of beneficial interest, par value $0.001 per share (the “Restricted Shares”) and restricted common share unit awards of the Company (the “Restricted Units”):

Name
Restricted Shares
Restricted Units
James C. Mastandrea
200,000
381,190
John J. Dee
125,000
317,497
David K. Holeman
75,000
60,000
Daniel E. Nixon, Jr.
50,000
75,000
Valarie L. King
50,000
60,000

Each Restricted Unit represents the right to receive one (1) Restricted Share. The Restricted Shares and Restricted Units granted to the named executive officers listed above will vest as follows: (i) 10% of these Restricted Shares and Restricted Units will vest when the Company meets an annual Funds from Operations (“FFO”) performance goal (as specified in the award agreement); (ii) 20% of these Restricted Shares and Restricted Units will vest when the Company meets an annual FFO performance goal (as specified in the award agreement); (iii) 20% of these Restricted Shares and Restricted Units will vest when the Company meets an annual FFO performance goal (as specified in the award agreement); (iv) 25% of these Restricted Shares and Restricted Units will vest when the Company meets an annual FFO performance goal (as specified in the award agreement); and (v) 25% of these Restricted Shares and Restricted Units will vest when the Company meets an annual FFO performance goal (as specified in the award agreement).

Each Restricted Share and Restricted Unit will vest in accordance with the terms discussed above, provided the employee remains in continuous employment with the Company. If the employee’s employment terminates for any reason (or no reason), other than the employee’s death or Disability (as defined in the Plan), any Restricted Units or Restricted Shares that have not yet vested on the date of the employee’s termination will be immediately forfeited to the Company. In the event of the employee’s death or Disability, any Restricted Units or Restricted Shares that have not yet vested will immediately vest.

The employee will be the record owner of the Restricted Shares and will have all rights of a shareholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receive dividends and distributions with respect to the Restricted Shares. The employee will have no rights of a shareholder with respect to the Restricted Units, including no right to vote the Restricted Units and no right to receive current dividends and distributions with respect to the Restricted Units until the units are fully vested and convertible to common shares of the Company.

 
The Restricted Shares and Restricted Units were granted under the Plan, at no cost to the employee, pursuant to individual award agreements, the forms of which are filed as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K. The foregoing description of the terms and conditions of the Restricted Share and Restricted Unit awards are qualified in their entirety by reference to the complete terms and conditions of the Plan and the forms of award agreements.

Item 9.01
Financial Statements and Exhibits.
 
(d) Exhibits.

Exhibit 10.1     Form of Restricted Common Share Award Agreement (Performance Vested).

Exhibit 10.2     Form of Restricted Common Share Award Agreement (Time Vested).

Exhibit 10.3     Form of Restricted Unit Award Agreement.
 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Date:  January 7, 2009
WHITESTONE REIT  
       
       
 
By:
/s/ David K. Holeman
 
 
 
David K. Holeman
 
 
 
Chief Financial Officer
 
 
Exhibit 10.1
 
RESTRICTED COMMON SHARE AWARD AGREEMENT
(PERFORMANCE VESTED)
 
THIS RESTRICTED COMMON SHARE AWARD AGREEMENT (PERFORMANCE VESTED) (this “ Agreement ”) is entered into as of                                   , 20                (the “ Effective Date ”), by and between Whitestone REIT, a Maryland real estate investment trust (the “ Company ”), and                                              (the “ Participant ”).
 
WHEREAS, the Participant is an employee of the Company or one of its subsidiaries or affiliates and in connection therewith has rendered services and received compensation for those services, for and on behalf of the Company and/or its subsidiaries or affiliates; and

WHEREAS, the Company has initiated and the shareholders have approved the 2008 Long-Term Equity Incentive Ownership Plan as it may be further amended from time to time (the “Plan”), for the purpose of:  (a) encouraging performance beyond the Participant’s assigned responsibilities as well as focusing on Company goals and targets (collectively referred to as “ FFO Targets ”); and (b) enabling the employee Participant to participate, through the Plan, as a shareholder after attaining the FFO Targets; and
 
WHEREAS, the Company maintains the Plan, which is incorporated into and forms a part of this Agreement, and the Participant has been selected by the Compensation Committee administering the Plan (the “ Committee ”) to receive an award of common shares of beneficial interest, par value $0.001 per share, of the Company (the “ Common Shares ”) under the Plan.
 
NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:
 
1. Restricted Common Share Award . The Participant is hereby granted                     Common Shares (the “ Shares ”) subject to the restrictions and on the terms and conditions set forth in this Agreement (the “ Award ”).
 
2. Restriction on the Shares .
 
(a) Period of Restriction . Except as otherwise set forth herein, all the Shares issued to the Participant pursuant to this Agreement shall be subject to a period of restriction (the “ Period of Restriction ”) during which the Participant’s rights in and to such Shares shall be subject to the limitations and obligations set forth in this Section 2.

(b) Lapse of Period of Restriction . The Period of Restriction shall lapse in accordance with the provisions of Exhibit A , which is attached hereto and forms part of this Agreement.  During the period that the Shares are subject to the Period of Restriction, such Shares are referred to herein as “ Restricted Common Shares .”
 
(c) Termination of Continuous Employment Notwithstanding any other provision of this Agreement to the contrary, if the Participant is an employee of the Company or one of its subsidiaries or affiliates, and if the Participant’s continuous employment with the Company terminates for any reason (or no reason), other than the Participant’s death or Disability (as defined in the Plan), any Restricted Common Shares that are subject to the Period of Restriction on the date of the Participant’s termination shall be immediately forfeited by the Participant and shall be automatically transferred to and reacquired by the Company at no cost to the Company, and neither the Participant nor his or her heirs, executors, administrators or successors shall have any right or interest in such Restricted Common Shares. In the event of the Participant’s death or Disability, any Restricted Common Shares that are subject to the Period of Restriction on the date of death or Disability shall immediately vest and the Participant or his or her heirs, executors, administrators or successors shall have the right and interest in such Restricted Common Shares.
 
(d) Escrow . Upon the Participant’s execution and delivery of this Agreement, the Participant agrees to concurrently deliver one or more executed stock powers as requested by the Company, duly endorsed in blank for transfer, in the form attached hereto as Exhibit B , which shall be deposited with the Company during the Period of Restriction. Each certificate representing Restricted Common Shares shall bear the following legend until the lapse of the Period of Restriction with respect to the shares represented by such certificate:
 
Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of the Whitestone REIT’s 2008 Long-Term Equity Incentive Ownership Plan (the “Plan”) and the Restricted Common Share Award Agreement dated as of                      , 200[_], (the “Agreement”). Copies of the Plan and the Agreement are on file at the offices of Whitestone REIT.
 
 
The certificates representing the Restricted Common Shares along with the stock power(s) shall be held in escrow by the Company until such time as either (i) the Period of Restriction with respect to all of such Restricted Common Shares lapses in accordance with this Agreement, in which case the shares shall be delivered to the Participant, or (ii) any such Restricted Common Shares are forfeited pursuant this Agreement, in which case such shares shall be transferred to and reacquired by the Company in accordance with Section 2(c) of this Agreement.
 
(e) Distributions . All cash distributions on the Restricted Common Shares shall be paid directly to the Participant and shall not be held in escrow. Any new, substituted or additional securities or other property issued in respect of Restricted Common Shares shall be held in escrow, together, where applicable, with appropriate stock powers, assignments or other transfer documents which the Participant hereby agrees to execute as a condition to receipt of such securities or other property. If the Restricted Common Shares in respect of which such securities or other property was issued are forfeited to the Company pursuant to Section 2(c) of this Agreement, then such securities or other property shall be immediately forfeited to the Company and automatically transferred to and reacquired by the Company at no cost to the Company, to the same extent and in accordance with Section 2(c) of this Agreement as if such securities or other property were Restricted Common Shares hereunder.

3. Rights as a Shareholder . Upon the Participant’s execution and delivery of this Agreement and until such time as the Restricted Common Shares are forfeited to the Company as set forth herein, the Participant shall be the record owner of the Restricted Common Shares and, subject to the terms of this Agreement and the Plan, shall have all rights of a shareholder with respect to the Restricted Common Shares, including the right to vote the Restricted Common Shares and subject to the terms of Section 2 hereof, to receive dividends and distributions with respect to the Restricted Common Shares.
 
4. Change in Control . Notwithstanding Section 2 of this Agreement, if the Participant holds Restricted Common Shares at the time a Change in Control (as defined in the Plan) occurs, the Period of Restriction with respect to such Restricted Common Shares granted in Section 1 shall automatically lapse immediately prior to the consummation of such Change in Control.
 
5. Withholding . If the Participant makes an election under Section 83(b) of the Internal Revenue Code of 1986 (the “ Code ”) with respect to the Restricted Common Shares, the grant made pursuant to this Award shall be conditioned upon the prompt payment to the Company of any applicable withholding obligations or withholding taxes by the Participant (“ Withholding Taxes ”). Failure by the Participant to pay such Withholding Taxes will render this Award null and void ab initio and the Restricted Common Shares granted hereunder will immediately be canceled. If the Participant does not make an election under Section 83(b) of the Code with respect to the Restricted Common Shares, upon the lapse of the Period of Restriction with respect to any portion of the Restricted Common Shares (or property distributed with respect thereto), the Company shall satisfy the required Withholding Taxes as set forth in the Internal Revenue Service guidelines for the employer’s minimum statutory withholding with respect to Participant and issue vested share to the Participant without restriction. In the sole discretion of the Company, the Company may satisfy the required Withholding Taxes by withholding from the Restricted Common Shares included in the Award that number of whole shares necessary to satisfy such taxes as of the date the restriction lapse with respect to such Restricted Common Shares based on the Fair Market Value (as defined in the Plan) of the Shares.
 
6. Restrictions on Transfer . During the Period of Restriction, the Participant shall not sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of the Restricted Common Shares. Any attempted sale, transfer, pledge, hypothecation, assignment, exchange or other disposition shall be null and void and of no force or effect and the Company shall have the right to disregard the same on its books and records and to issue “stop transfer” instructions to its transfer agent.
 
7. Plan Provisions Control . This Agreement is subject to the terms and conditions of the Plan, which are incorporated herein by reference. Notwithstanding anything to the contrary contained herein, the provisions of the Plan shall govern if and to the extent that there are inconsistencies between the provisions of the Plan and the provisions of this Agreement. The Participant acknowledges that the Participant has received a copy of the Plan prior to the execution of this Agreement.

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8. Consent to Electronic Delivery .  The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this Agreement, the Participant agrees that the Company may deliver the Plan prospectus and the Company’s annual report to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, please contact Chief Financial Officer of the Company to request paper copies of these documents.

9. No Rights Conferred . Nothing in this Agreement shall give the Participant any right to continue in the employ or service of the Company, any affiliate or any subsidiary and/or as a member of the Company’s Board of Trustees or in any other capacity, or interfere in any way with the right of the Company, any affiliate or any subsidiary to terminate the employment or services of the Participant.

10. Adjustments . All references to the number and class of shares covered by this Agreement and other terms in this Agreement may be appropriately adjusted, in the discretion of the Committee, in the event of certain unusual or non-recurring transactions, as set forth in Section 4.2 of the Plan.
 
11. Compliance with Section 409A of the Code . The Participant hereby consents (without further consideration) to any change to this Agreement or the Award so the Participant can avoid paying penalties under Section 409A of the Code, even if those changes affect the terms and conditions of this Agreement of the Award and reduce its value or potential value.
 
12. Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. This Agreement may not be assigned or transferred in whole or in part by the Participant, nor may the Participant delegate any duty or obligation under this Agreement, and any attempt to so assign, transfer or delegate shall be null and void and of no force or effect.
 
13. Interpretation of this Agreement . All determinations and interpretations made by the Committee with regard to any questions arising under the Plan or this Agreement shall be final, binding and conclusive as to all persons, including without limitation the Participant and any person claiming rights from or through the Participant.
 
14. Venue . Each party to this Agreement hereby irrevocably (i) consents and submits to the exclusive jurisdiction of the state and federal courts in Harris County, Texas in connection with any disputes arising out of this Agreement, and (ii) waives any objection based on venue or inconvenient forum with respect to any action instituted therein arising under this Agreement or the transactions contemplated hereby, and agrees that any dispute with respect to such matters shall be heard only in the courts described above.
 
15. Governing Law; Entire Agreement; Amendment . This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without regard to such state’s conflict of laws principles. The Plan and this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. This Agreement may be amended by the Committee, subject to the Participant’s consent if such amendment materially and adversely affects the rights of the Participant, except that the consent of the Participant shall not be required for any amendment made pursuant to Section 4.2 or Section 15.11 of the Plan, or as set forth in Section 11 of this Agreement.
 
16. Tax Elections . THE PARTICIPANT UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR THE PARTICIPANT’S OWN TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION UNDER SECTION 83(b) OF THE CODE. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT, IF THE PARTICIPANT DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE CODE, (i) THE PARTICIPANT (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE PARTICIPANT AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS REQUIRED UNDER THE CODE.
 
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17. Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) when delivered personally, or (ii) three days after being deposited in the United States mail, by certified or registered mail, postage prepaid, or (iii) the next business day after sent by nationally recognized overnight delivery service, and addressed, if to the Company, at its principal place of business, Attention: Chief Financial Officer, and if to the Participant, at his or her most recent address as shown in the employment or stock records of the Company.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
 
 
Whitestone REIT
 
By:
 
 
Name:
 
 
Title:
 
   
 
Participant:
   
 
Date:
   
 
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Exhibit A  

LAPSE OF PERIOD OF RESTRICTION

The purpose of this Exhibit A is to set forth the performance goals and measures that will be applied to determine the amount of the award to be made under the terms of the attached Restricted Common Share Award Agreement (the “ Agreement ”). This Exhibit A is incorporated into and forms a part of the Agreement.

The Period of Restriction will lapse as follows:

(a) 10% of these Shares will vest when the Company meets the annual FFO (as defined below) goal of $__________.
(b) 20% of these Shares will vest when the Company meets the annual FFO goal of $__________.
(c) 20% of these Shares will vest when the Company meets the annual FFO goal of $__________.
(d) 25% of these Shares will vest when the Company meets the annual FFO goal of $__________.
(e) 25% of these Shares will vest when the Company meets the annual FFO goal of $__________.

FFO is defined as the net income (loss) available to common shareholders computed in accordance withU.S. generally accepted accounting principles, excluding gains or losses from sales of operating real estateassets and extraordinary items, plus depreciation and amortization of operating properties, including our share of unconsolidated real estate joint ventures and partnerships.  For purposes of this Award, FFO will be based on the annual audited FFO as it appears in the Company’s annual report of Form 10-K.
 
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Exhibit B
 
STOCK POWER
 
For value received, I hereby sell, assign and transfer unto                                               Common Shares of Whitestone REIT standing in my name on the books of said Company represented by Certificate(s) Number(s)              herewith, and do hereby irrevocably constitute and appoint              attorney to transfer the said stock on the books of said Company with full power of substitution in the premises.
 
Date:
   
     
Printed Name:
   
     
Signature:
   
     
Witness Signature:
   
 
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Exhibit 10.2
 
RESTRICTED COMMON SHARE AWARD AGREEMENT
(TIME VESTED)
 
THIS RESTRICTED COMMON SHARE AWARD AGREEMENT (TIME VESTED) (this “ Agreement ”) is entered into as of                                   , 20                (the “ Effective Date ”), by and between Whitestone REIT, a Maryland real estate investment trust (the “ Company ”), and                                              (the “ Participant ”).
 
WHEREAS, the Participant is a trustee of the Company and in connection therewith has rendered services for and on behalf of the Company and/or its subsidiaries or affiliates; and

WHEREAS, the Company maintains the 2008 Long-Term Equity Incentive Ownership Plan as it may be further amended from time to time, (the “ Plan ”) which is incorporated into and forms a part of this Agreement, and the Participant has been selected by the Compensation Committee administering the Plan (the “ Committee ”) to receive an award of common shares of beneficial interest, par value $0.001 per share, of the Company (the “ Common Shares ”) under the Plan.
 
NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:
 
1. Restricted Common Share Award . The Participant is hereby granted                     Common Shares (the “ Shares ”) subject to the restrictions and on the terms and conditions set forth in this Agreement (the “ Award ”).
 
2. Restriction on the Shares .
 
(a) Period of Restriction . Except as otherwise set forth herein, all the Shares issued to the Participant pursuant to this Agreement shall be subject to a period of restriction (the “ Period of Restriction ”) during which the Participant’s rights in and to such Shares shall be subject to the limitations and obligations set forth in this Section 2.

(b) Lapse of Period of Restriction . The Period of Restriction shall lapse in accordance with the provisions of Exhibit A , which is attached hereto and forms part of this Agreement.  During the period that the Shares are subject to the Period of Restriction, such Shares are referred to herein as “ Restricted Common Shares .”
 
(c) Termination of Trustee. Notwithstanding any other provision of this Agreement to the contrary, if the Participant is a trustee of the Company, and if the Participant’s position as trustee of the Company terminates for any reason (or no reason), other than the Participant’s death or Disability (as defined in the Plan), any Restricted Common Shares that are subject to the Period of Restriction on the date of the Participant’s termination shall be immediately forfeited by the Participant and shall be automatically transferred to and reacquired by the Company at no cost to the Company, and neither the Participant nor his or her heirs, executors, administrators or successors shall have any right or interest in such Restricted Common Shares. In the event of the Participant’s death or Disability, any Restricted Common Shares that are subject to the Period of Restriction on the date of death or Disability shall immediately vest and the Participant or his or her heirs, executors, administrators or successors shall have the right and interest in such Restricted Common Shares.
 
(d) Escrow . Upon the Participant’s execution and delivery of this Agreement, the Participant agrees to concurrently deliver one or more executed stock powers as requested by the Company, duly endorsed in blank for transfer, in the form attached hereto as Exhibit B , which shall be deposited with the Company during the Period of Restriction. Each certificate representing Restricted Common Shares shall bear the following legend until the lapse of the Period of Restriction with respect to the shares represented by such certificate:
 
Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of the Whitestone REIT’s 2008 Long-Term Equity Incentive Ownership Plan (the “Plan”) and the Restricted Common Share Award Agreement dated as of                      , 200[_], (the “Agreement”). Copies of the Plan and the Agreement are on file at the offices of Whitestone REIT.
 
The certificates representing the Restricted Common Shares along with the stock power(s) shall be held in escrow by the Company until such time as either (i) the Period of Restriction with respect to all of such Restricted Common Shares lapses in accordance with this Agreement, in which case the shares shall be delivered to the Participant, or (ii) any such Restricted Common Shares are forfeited pursuant to this Agreement, in which case such shares shall be transferred to and reacquired by the Company in accordance with Section 2(c) of this Agreement.
 
 
(e) Distributions . All cash distributions on the Restricted Common Shares shall be paid directly to the Participant and shall not be held in escrow. Any new, substituted or additional securities or other property issued in respect of Restricted Common Shares shall be held in escrow, together, where applicable, with appropriate stock powers, assignments or other transfer documents which the Participant hereby agrees to execute as a condition to receipt of such securities or other property. If the Restricted Common Shares in respect of which such securities or other property was issued are forfeited to the Company pursuant to Section 2(c) of this Agreement, then such securities or other property shall be immediately forfeited to the Company and automatically transferred to and reacquired by the Company at no cost to the Company, to the same extent and in accordance with Section 2(c) of this Agreement as if such securities or other property were Restricted Common Shares hereunder.

3. Rights as a Shareholder . Upon the Participant’s execution and delivery of this Agreement and until such time as the Restricted Common Shares are forfeited to the Company as set forth herein, the Participant shall be the record owner of the Restricted Common Shares and, subject to the terms of this Agreement and the Plan, shall have all rights of a shareholder with respect to the Restricted Common Shares, including the right to vote the Restricted Common Shares and subject to the terms of Section 2 hereof, to receive dividends and distributions with respect to the Restricted Common Shares.
 
4. Change in Control . Notwithstanding Section 2 of this Agreement, if the Participant holds Restricted Common Shares at the time a Change in Control (as defined in the Plan) occurs, the Period of Restriction with respect to such Restricted Common Shares granted in Section 1 shall automatically lapse immediately prior to the consummation of such Change in Control.
 
5. Withholding . If the Participant makes an election under Section 83(b) of the Internal Revenue Code of 1986 (the “ Code ”) with respect to the Restricted Common Shares, the grant made pursuant to this Award shall be conditioned upon the prompt payment to the Company of any applicable withholding obligations or withholding taxes by the Participant (“ Withholding Taxes ”). Failure by the Participant to pay such Withholding Taxes will render this Award null and void ab initio and the Restricted Common Shares granted hereunder will immediately be canceled. If the Participant does not make an election under Section 83(b) of the Code with respect to the Restricted Common Shares, upon the lapse of the Period of Restriction with respect to any portion of the Restricted Common Shares (or property distributed with respect thereto), the Company shall satisfy the required Withholding Taxes as set forth in the Internal Revenue Service guidelines for the employer’s minimum statutory withholding with respect to Participant and issue vested share to the Participant without restriction. In the sole discretion of the Company, the Company may satisfy the required Withholding Taxes by withholding from the Restricted Common Shares included in the Award that number of whole shares necessary to satisfy such taxes as of the date the restriction lapse with respect to such Restricted Common Shares based on the Fair Market Value (as defined in the Plan) of the Shares.
 
6. Restrictions on Transfer . During the Period of Restriction, the Participant shall not sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of the Restricted Common Shares. Any attempted sale, transfer, pledge, hypothecation, assignment, exchange or other disposition shall be null and void and of no force or effect and the Company shall have the right to disregard the same on its books and records and to issue “stop transfer” instructions to its transfer agent.
 
7. Plan Provisions Control . This Agreement is subject to the terms and conditions of the Plan, which are incorporated herein by reference. Notwithstanding anything to the contrary contained herein, the provisions of the Plan shall govern if and to the extent that there are inconsistencies between the provisions of the Plan and the provisions of this Agreement. The Participant acknowledges that the Participant has received a copy of the Plan prior to the execution of this Agreement.

8. Consent to Electronic Delivery .  The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this Agreement, the Participant agrees that the Company may deliver the Plan prospectus and the Company’s annual report to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, please contact Chief Financial Officer of the Company to request paper copies of these documents.

9. No Rights Conferred . Nothing in this Agreement shall give the Participant any right to continue in the employ or service of the Company, any affiliate or any subsidiary and/or as a member of the Company’s Board of Trustees or in any other capacity, or interfere in any way with the right of the Company, any affiliate or any subsidiary to terminate the employment or services of the Participant.

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10. Adjustments . All references to the number and class of shares covered by this Agreement and other terms in this Agreement may be appropriately adjusted, in the discretion of the Committee, in the event of certain unusual or non-recurring transactions, as set forth in Section 4.2 of the Plan.
 
11. Compliance with Section 409A of the Code . The Participant hereby consents (without further consideration) to any change to this Agreement or the Award so the Participant can avoid paying penalties under Section 409A of the Code, even if those changes affect the terms and conditions of this Agreement of the Award and reduce its value or potential value.
 
12. Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. This Agreement may not be assigned or transferred in whole or in part by the Participant, nor may the Participant delegate any duty or obligation under this Agreement, and any attempt to so assign, transfer or delegate shall be null and void and of no force or effect.
 
13. Interpretation of this Agreement . All determinations and interpretations made by the Committee with regard to any questions arising under the Plan or this Agreement shall be final, binding and conclusive as to all persons, including without limitation the Participant and any person claiming rights from or through the Participant.
 
14. Venue . Each party to this Agreement hereby irrevocably (i) consents and submits to the exclusive jurisdiction of the state and federal courts in Harris County, Texas in connection with any disputes arising out of this Agreement, and (ii) waives any objection based on venue or inconvenient forum with respect to any action instituted therein arising under this Agreement or the transactions contemplated hereby, and agrees that any dispute with respect to such matters shall be heard only in the courts described above.
 
15. Governing Law; Entire Agreement; Amendment . This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without regard to such state’s conflict of laws principles. The Plan and this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. This Agreement may be amended by the Committee, subject to the Participant’s consent if such amendment materially and adversely affects the rights of the Participant, except that the consent of the Participant shall not be required for any amendment made pursuant to Section 4.2 or Section 15.11 of the Plan, or as set forth in Section 11 of this Agreement.
 
16. Tax Elections . THE PARTICIPANT UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR THE PARTICIPANT’S OWN TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE ACQUISITION OF THE SHARES HEREUNDER. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN CONNECTION WITH THE ISSUANCE OF THE SHARES, INCLUDING THE MAKING OF AN ELECTION UNDER SECTION 83(b) OF THE CODE. THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT, IF THE PARTICIPANT DETERMINES TO MAKE AN ELECTION UNDER SECTION 83(b) OF THE CODE, (i) THE PARTICIPANT (AND NOT THE COMPANY) IS SOLELY RESPONSIBLE FOR PROPERLY AND TIMELY COMPLETING AND FILING ANY SUCH SECTION 83(b) ELECTION, AND (ii) THE PARTICIPANT AGREES TO TIMELY PROVIDE A COPY OF THE ELECTION TO THE COMPANY AS REQUIRED UNDER THE CODE.
 
17. Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) when delivered personally, or (ii) three days after being deposited in the United States mail, by certified or registered mail, postage prepaid, or (iii) the next business day after sent by nationally recognized overnight delivery service, and addressed, if to the Company, at its principal place of business, Attention: Chief Financial Officer, and if to the Participant, at his or her most recent address as shown in the employment or stock records of the Company.
 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
 
 
Whitestone REIT
 
By:
 
 
Name:
 
 
Title:
 
   
 
Participant:
   
 
Date:
   
 
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Exhibit A  

LAPSE OF PERIOD OF RESTRICTION


Number of Shares
 
 
Vesting Date
 
 
Percentage
of Shares
 
 
 
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Exhibit B
 
STOCK POWER
 
For value received, I hereby sell, assign and transfer unto                                               Common Shares of Whitestone REIT standing in my name on the books of said Company represented by Certificate(s) Number(s)              herewith, and do hereby irrevocably constitute and appoint              attorney to transfer the said stock on the books of said Company with full power of substitution in the premises.
 
Date:
   
     
Printed Name:
   
     
Signature:
   
     
Witness Signature:
   
 
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Exhibit 10.3
 
RESTRICTED UNIT AWARD AGREEMENT
 
THIS RESTRICTED UNIT AWARD AGREEMENT (this “ Agreement ”) is entered into as of                                   , 20                (the “ Effective Date ”), by and between Whitestone REIT, a Maryland real estate investment trust (the “ Company ”), and                                              (the “ Participant ”).
 
WHEREAS, the Participant is an employee of the Company or one of its subsidiaries or affiliates and in connection therewith has rendered services and received compensation for those services, for and on behalf of the Company and/or its subsidiaries or affiliates; and  

WHEREAS, the Company has initiated and the shareholders approved the 2008 Long-Term Equity Incentive Ownership Plan as it may be further amended from time to time (the “ Plan ”), for the purpose of:  (a) encouraging performance beyond the Participant’s assigned responsibilities and focusing as well on company goals and targets (collectively referred to as “ FFO Targets ”); and (b) enabling the Participant to participate, through the Plan, as a shareholder after attaining the FFO Targets; and

WHEREAS, the Company maintains the Plan, which is incorporated into and forms a part of this Agreement, and the Participant has been selected by the Compensation Committee administering the Plan (the “ Committee ”) to receive an award under the Plan .

NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:
 
1. Restricted Unit Award . The Participant is hereby allocated                     Units (the “ Units ”) subject to the restrictions and on the terms and conditions set forth in this Agreement (the “ Award ”). Each Unit shall represent the right to receive one (1) common share of beneficial interest, par value $0.001 per share, of the Company (the “Common Shares”). The number of Units subject to this Award and the number of Common Shares deliverable with respect to such Units may be adjusted from time to time for capitalization adjustments as described in Section 4.2 of the Plan.
 
2. Restriction on the Units .
 
(a) Period of Restriction . Except as otherwise set forth herein, all the Units issued to the Participant pursuant to this Agreement shall be subject to a period of restriction (the “ Period of Restriction ”) during which the Participant’s rights in and to such Units shall be subject to the limitations and obligations set forth in this Section 2.

(b) Lapse of Period of Restriction . The Period of Restriction shall lapse in accordance with the provisions of Exhibit A , which is attached hereto and forms part of this Agreement.  During the period that the Units are subject to the Period of Restriction, such Units are referred to herein as “ Restricted Units .”

(c)   Delivery of the Common Shares . Subject to Section 2(d) below, upon the lapse of the Period of Restriction with respect to a Unit, the Unit shall be converted into the right to receive a Common Share, and the Company will deliver to the Participant a number of Common Shares equal to the number of Units subject to this Award, on the applicable date of the lapse of the Period of Restriction or as soon as practicable thereafter. The form of delivery (e.g., a share certificate or electronic entry evidencing such shares) shall be determined by the Company.

(d) Termination of Continuous Employment. Notwithstanding any other provision of this Agreement to the contrary, if the Participant is an employee of the Company or one of its subsidiaries or affiliates, and if the Participant’s continuous employment with the Company terminates for any reason (or no reason), other than the Participant’s death or Disability (as defined in the Plan), any Restricted Units that are subject to the Period of Restriction on the date of the Participant’s termination shall be immediately forfeited by the Participant and shall be automatically transferred to and reacquired by the Company at no cost to the Company, and neither the Participant nor his or her heirs, executors, administrators or successors shall have any right or interest in such Restricted Units or the underlying Common Shares. In the event of the Participant’s death or Disability, any Restricted Units that are subject to the Period of Restriction on the date of death or Disability shall immediately vest and the Participant or his or her heirs, executors, administrators or successors shall have the right and interest in such Restricted Units.

 
3. No Rights as a Shareholder . Until Common Shares shall have been delivered to the Participant in accordance with Section 2(c) hereof, subject to the terms of this Agreement and the Plan, shall have no rights of a shareholder with respect to the Restricted Units, including no right to vote the Restricted Units and no right to receive current dividends and distributions, with respect to the Restricted Units.
 
4.   Change in Control . Notwithstanding Section 2 of this Agreement, if the Participant holds Restricted Units at the time a Change in Control (as defined in the Plan) occurs, the Period of Restriction with respect to such Restricted Units granted in Section 1 shall automatically lapse immediately prior to the consummation of such Change in Control. In addition, if there are any Restricted Units that have been allocated pursuant to this Agreement, but not yet granted as set forth in Exhibit A at the time of the Change in Control and the Participant remains employed with the acquiring or successor entity (or parent thereof), then the Participant must receive an award of a comparable value covering shares of a successor corporation (with appropriate adjustments as to the number and kind of shares and the purchase price).
 
5. Withholding . All deliveries and distributions under this Agreement shall be subject to withholding of all applicable taxes. The Participant agrees to make appropriate arrangements with the Company for satisfaction of any applicable federal, state or local income tax, withholding requirements or like requirements, including the payment to the Company upon the lapse of the Period of Restriction with respect to the Restricted Units (or such later date as may be applicable under the Internal Revenue Code of 1986, as amended (the “ Code ”)), or other settlement in respect of, the Restricted Units of all such taxes and requirement.. The Participant agrees that the Company shall be authorized to take such action as the Company may deem necessary (including, without limitation, in accordance with applicable law, withholding amounts from any compensation or other amount owing from the Company to the Participant) to satisfy all obligations for the payment of such taxes.
 
6. Restrictions on Transfer . During the Period of Restriction, the Participant shall not sell, transfer, pledge, hypothecate, assign, exchange or otherwise dispose of the Restricted Units. Any attempted sale, transfer, pledge, hypothecation, assignment, exchange or other disposition shall be null and void and of no force or effect and the Company shall have the right to disregard the same on its books and records and to issue “stop transfer” instructions to its transfer agent.
 
7. Plan Provisions Control . This Agreement is subject to the terms and conditions of the Plan, which are incorporated herein by reference. Notwithstanding anything to the contrary contained herein, the provisions of the Plan shall govern if and to the extent that there are inconsistencies between the provisions of the Plan and the provisions of this Agreement. The Participant acknowledges that the Participant has received a copy of the Plan prior to the execution of this Agreement.

8. No Rights Conferred . Nothing in this Agreement shall give the Participant any right to continue in the employ or service of the Company, any affiliate or any subsidiary and/or as a member of the Company’s Board of Trustees or in any other capacity, or interfere in any way with the right of the Company, any affiliate or any subsidiary to terminate the employment or services of the Participant.

9.  Consent to Electronic Delivery .  The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this Agreement, the Participant agrees that the Company may deliver the Plan prospectus and the Company’s annual report to the Participant in an electronic format. If at any time the Participant would prefer to receive paper copies of these documents, please contact Chief Financial Officer of the Company to request paper copies of these documents.

10. Adjustments . All references to the number and class of shares covered by this Agreement and other terms in this Agreement may be appropriately adjusted, in the discretion of the Committee, in the event of certain unusual or non-recurring transactions, as set forth in Section 4.2 of the Plan.
 
11. Compliance with Section 409A of the Code . The Participant hereby consents (without further consideration) to any change to this Agreement or the Award so the Participant can avoid paying penalties under Section 409A of the Code, even if those changes affect the terms and conditions of this Agreement of the Award and reduce its value or potential value.
 
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12. Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. This Agreement may not be assigned or transferred in whole or in part by the Participant, nor may the Participant delegate any duty or obligation under this Agreement, and any attempt to so assign, transfer or delegate shall be null and void and of no force or effect.
 
13. Interpretation of this Agreement . All determinations and interpretations made by the Committee with regard to any questions arising under the Plan or this Agreement shall be final, binding and conclusive as to all persons, including without limitation the Participant and any person claiming rights from or through the Participant.
 
14. Venue . Each party to this Agreement hereby irrevocably (i) consents and submits to the exclusive jurisdiction of the state and federal courts in Harris County, Texas in connection with any disputes arising out of this Agreement, and (ii) waives any objection based on venue or inconvenient forum with respect to any action instituted therein arising under this Agreement or the transactions contemplated hereby, and agrees that any dispute with respect to such matters shall be heard only in the courts described above.
 
15. Governing Law; Entire Agreement; Amendment . This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without regard to such state’s conflict of laws principles. The Plan and this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. This Agreement may be amended by the Committee, subject to the Participant’s consent if such amendment materially and adversely affects the rights of the Participant, except that the consent of the Participant shall not be required for any amendment made pursuant to Section 4.2 or Section 15.11 of the Plan, or as set forth in Section 11 of this Agreement.
 
16. Tax Elections . THE PARTICIPANT UNDERSTANDS THAT HE OR SHE (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR THE PARTICIPANT’S OWN TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE ACQUISITION OF THE UNITS HEREUNDER. THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT HE OR SHE HAS CONSIDERED THE ADVISABILITY OF ALL TAX ELECTIONS IN CONNECTION WITH THE ISSUANCE OF THE UNITS.
 
17. Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) when delivered personally, or (ii) three days after being deposited in the United States mail, by certified or registered mail, postage prepaid, or (iii) the next business day after sent by nationally recognized overnight delivery service, and addressed, if to the Company, at its principal place of business, Attention: Chief Financial Officer, and if to the Participant, at his or her most recent address as shown in the employment or stock records of the Company.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.
 
 
Whitestone REIT
 
By:
 
 
Name:
 
 
Title:
 
   
 
Participant:
   
 
Date:
   
 
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Exhibit A
 
LAPSE OF PERIOD OF RESTRICTION

The purpose of this Exhibit A is to set forth the performance goals and measures that will be applied to determine the amount of the award to be made under the terms of the attached Restricted Unit Award Agreement (the “ Agreement ”). This Exhibit A is incorporated into and forms a part of the Agreement.

The Period of Restriction will lapse as follows:
(a) 10% of these Units will vest when the Company meets the annual FFO (as defined below) goal of $__________.
(b) 20% of these Units will vest when the Company meets the annual FFO goal of $__________.
(c) 20% of these Units will vest when the Company meets the annual FFO goal of $__________.
(d) 25% of these Units will vest when the Company meets the annual FFO goal of $__________.
(e) 25% of these Units will vest when the Company meets the annual FFO goal of $__________.

FFO is defined as the net income (loss) available to common shareholders computed in accordance withU.S. generally accepted accounting principles, excluding gains or losses from sales of operating real estateassets and extraordinary items, plus depreciation and amortization of operating properties, including our share of unconsolidated real estate joint ventures and partnerships.  For purposes of this Award, FFO will be based on the annual audited FFO as it appears in the Company’s annual report of Form 10-K.
 
 
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