Exhibit 10.1

 

AMENDMENT NO. 1 TO

EMPLOYMENT AGREEMENT

This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this “Agreement”) is entered into
as of February 13, 2007, by and among James E. Mead (the “Executive”) and
Strategic Hotels & Resorts, Inc. a Maryland corporation (“SHRI”) and Strategic
Hotel Funding, L.L.C., a Delaware limited liability company (together with SHRI,
the “Company”).

WITNESSETH THAT:

WHEREAS, the Executive and the Company are parties to that certain Employment
Agreement, dated as of November 29, 2004 (the “Employment Agreement”); and

WHEREAS, the parties desire to make an amendment to the Employment Agreement;

NOW, THEREFORE, the Executive and the Company hereto agree that the Employment
Agreement shall be amended as follows:

1.                           Certain Definitions. Capitalized terms used in this
Amendment without definition shall have the meanings set forth in the Employment
Agreement.

2.                          Base Salary. The complete text of Section 4(a) of
the Employment Agreement is hereby stricken in its entirety and replaced with
the following new text:

Base Salary. On an annual 26 pay period basis, the Company shall pay Executive a
salary of at least $15,384.62 per bi-weekly pay period, minus applicable
deductions, such that Executive’s base salary shall be at least $400,000 per
year on an annualized basis (as increased from time to time, the “Base Salary”).
Executive’s Base Salary shall be subject to such increases (but not to any
decreases) as may be determined by the Board, in its sole discretion. Once
increased, the Base Salary cannot be decreased.

3.                           2007 Long Term Award. The fifth paragraph under
Section 4(b)(ii) of the Employment Agreement is hereby stricken in its entirety
and replaced with the following new text:

In 2007 and years thereafter, the Executive shall be eligible for annual
long-term incentive awards having a grant date value, assuming full vesting and
achievement of performance criteria at target, equal to 140% of Executive’s
annual Base Salary (for 2007 the “2007 Target LTI Award”) (for 2008 the "2008
Target LTI Award," for 2009 the "2009 Target LTI Award" and the foregoing awards
for 2008 and 2009 collectively with future awards, the “Future Target LTI
Awards”) and such awards shall be subject to vesting in three equal annual
installments and such other terms as the Committee shall determine to be
appropriate.

 

 

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4.                           2007 Long Term Award. Section 4(b)(ii) of the
Employment Agreement is also amended by adding the following text at the end
thereof:

Without limiting the foregoing, at the same time the other senior executive
officers receive grants of Stock Units under the Plan (“Grant Date”), Executive
shall receive an annual long-term incentive award pursuant to the Plan (the
“2007 Award”) with value equal to $560,000 (representing 140% of Executive’s
annual Base Salary). Forty percent (40%) of the value of the 2007 Award shall be
issued in stock options (“2007 Options”); forty percent (40%) of the value of
the 2007 Award shall be issued in performance-based restricted share units
(“2007 Performance Shares”); and the remaining twenty percent (20%) of the value
of the 2007 Award shall be issued in time-based Stock Units (“2007 Stock
Units”). The entire 2007 Award will be earned and vested only to the extent of
the achievement of certain performance and/or service goals, as set forth in
Schedule I hereto. Notwithstanding anything in this Agreement and the Employment
Agreement to the contrary, if a Change in Control occurs: (A) to the extent that
any portion of the 2007 Award described in Schedule I is unvested, such portion
(and related dividend equivalent Stock Units) shall become immediately vested,
and (B) the Performance Shares and related dividend equivalent RSUs shall be
earned upon the Change in Control such that the sum of the Performance Shares
earned as of the Change in Control and the previously earned Performance Shares
equals 100% of Target Shares (as described in Schedule I) and shall become
immediately vested.

5.                           Future Long Term Awards. Section 4(b)(ii) of the
Employment Agreement is also amended by adding the following text at the end
thereof:

In 2008 and 2009, Executive shall be eligible receive the “2008 Target LTI
Award” and the “2009 Target LTI Award” and such awards will be comprised of
forty percent (40%) of the value in stock options, forty percent (40%) of the
value in performance-based restricted share units and twenty percent (20%) of
the value in time-based Stock Units. Assuming achievement of performance or
other criteria as the Committee shall determine to be appropriate for the 2008
Target LTI Award and the 2009 Target LTI Award, actual grants of stock options,
performance-based restricted share units and time-based Stock Units (the actual
grants in 2008, the "2008 Grants" and the actual grants in 2009, the "2009
Grants") will be earned and vested only to the extent of the achievement of
certain performance and/or service goals, as set forth in Schedule II hereto.

6.                           Change of Control Termination. The complete text of
the last sentence of Section 6(b)(ii) of the Employment Agreement is hereby
stricken in its entirety and replaced with the following text:

However, if Executive’s employment is terminated without Cause due to
Constructive Termination by reason of or within one year after a Change of
Control, such one times multiple shall be increased to two.

 

 

II-2 -

 

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7.

Miscellaneous.

(a)          Effect of Amendment. Unless expressly amended by this Amendment,
all other provisions of the Employment Agreement shall remain in legal force and
effect.

(b)          Governing Law. This Amendment shall be governed by and be construed
in accordance with the laws of the State of Delaware without regard to its
conflict of laws principles.

(c)          Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

 

 

II-3 -

 

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                IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above stated.

 

STRATEGIC HOTELS & RESORTS, INC.

 

 

By:

/s/ Janice J. Peterson__________

 

Name:

Janice J. Peterson

Title: Vice President

 

STRATEGIC HOTEL FUNDING, L.L.C.

 

 

By:

/s/ Janice J. Peterson____________

 

Name:

Janice J. Peterson

Title: Vice President

 

JAMES E. MEAD

 

/s/ James E. Mead_____________

 

 

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SCHEDULE I

 

2007 Award

 

Executive’s 2007 Award to be granted on the Grant Date described in paragraph 4
of the Agreement shall be vested and earned only during the Executive’s
employment with the Company as follows:

(1)

2007 Options. 40% of the value of the 2007 Award shall be granted in the form of
time-vesting Options. The number of 2007 Options to be granted will be
determined based on the closing price per share of the Company as of the Grant
Date and applying the binomial option value, determined by Pearl Meyer &
Partners, as of such date. The 2007 Options will have an exercise price equal to
the closing price per share of the Company as of the Grant Date. Unless the
vesting of 2007 Options is otherwise accelerated pursuant to the Agreement and
the Employment Agreement, such 2007 Options shall vest as follows:

1/3 of the 2007 Options shall vest on December 31, 2007

1/3 of the 2007 Options shall vest on December 31, 2008

1/3 of the 2007 Options shall vest on December 31, 2009

Once vested, the 2007 Options will remain exercisable for up to ten years after
the Grant Date unless a shorter exercise period is otherwise specified pursuant
to the Agreement and the Employment Agreement.

(2)

2007 Stock Units. 20% of the value of the 2007 Award shall be granted in the
form of time-vesting Stock Units. The number of shares of 2007 Stock Units to be
granted will be determined with respect to the closing price per share of the
Company as of the Grant Date. Unless otherwise accelerated pursuant to the
Agreement and the Employment Agreement, the restrictions shall lapse on the 2007
Stock Unit grant as follows:

1/3 of the 2007 Stock Unit grant shall vest on December 31, 2007

1/3 of the 2007 Stock Unit grant shall vest on December 31, 2008

1/3 of the 2007 Stock Unit grant shall vest on December 31, 2009

(3)

2007 Performance Shares. 40% of the value of the 2007 Award shall be granted in
the form of a target number of Performance Shares (“2007 Target Shares”), which
number is determined with respect to the closing price per share of the Company
as of the Grant Date.

Performance Measures – Sixty-seven percent (67%) of the 2007 Performance Shares
shall be earned based on achievement of certain levels of budgeted funds from
operations (“Budgeted FFO”) per share, and thirty-three percent (33%) of the
2007 Performance Shares shall be earned based on achievement of Relative Total
Shareholder Return (“Relative TSR”), as described below.

 

 

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Earning Date -- Unless otherwise provided in the Agreement, 100% of the 2007
Performance Shares will be earned on December 31, 2007 (“2007 Earning Date”)
based on performance determined as of the 2007 Earning Date.

Vesting Dates – Unless otherwise provided in the Agreement, 2007 Performance
Shares earned as of the 2007 Earning Date, if any, will vest based on continued
employment by the Company as follows:

1/3 of the 2007 Performance Shares earned shall vest on December 31, 2007

1/3 of the 2007 Performance Shares earned shall vest on December 31, 2008

1/3 of the 2007 Performance Shares earned shall vest on December 31, 2009

Upside and Downside Opportunities: Upside opportunity of 150% of 2007 Target
Shares (except under exceptional TSR results, described below); downside
opportunity of zero (0) if threshold performance measures are not met.

 

FFO Performance Goals

Budgeted FFO for the fiscal year 2007 shall be as approved by the Board (i.e.,
the same Budgeted FFO described above in Schedule I).

 

Amount of Budgeted FFO Per Share for fiscal year 2007

Number of Performance Shares Earned on the 2007 Earning Date (i.e., 12/31/07)

Below 90% of Budgeted FFO per share

Zero, unless otherwise determined at the discretion of the Committee

90% of Budgeted FFO per share

50% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.01

60% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.02

70% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.03

80% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.04

90% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.05

100% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.06

103.3% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.07

106.6% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.08

110% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.09

113.3% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.10

116.6% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.11

120% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.12

123.3% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.13

126.6% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.14

130% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.15

133.3% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.16

136.6% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.17

140% x 67% x 100% of 2007 Target Shares

90% of Budgeted FFO per share + $.18

143.3% x 67% x 100% of 2007 Target Shares

 

 

 

I-2 -

 

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90% of Budgeted FFO per share + $.19

146.6% x 67% x 100% of 2007 Target Shares

(90% of Budgeted FFO per share + $.20) and above

150% x 67% x 100% of 2007 Target Shares

Relative TSR Goals

Relative TSR will be based on performance relative to the equally-weighted TSRs
of each of the companies included in the Bloomberg Hotel REIT Index (“Index”) as
of the 2007 Earning Date (“2007 Index Company TSRs”), excluding the Company if
it is part of the Index, as follows:

 

Company’s TSR Percentile Rank Relative to the 2007 Index Company TSRs at the
2007 Earning Date

Number of Performance Shares Earned at the 2007 Earning Date

Below 25th percentile (Below Threshold)

Zero, unless otherwise determined at the discretion of the Committee

At 25th percentile (Threshold)

50% x 33% x 100% of 2007 Target Shares

At 50th percentile (Target)

100% x 33% x 100% of 2007 Target Shares

At 75th percentile (Maximum) or higher

150% x 33% x 100% of 2007 Target Shares

At 100th percentile (rank #1), but only if Company TSR is positive (Super
Maximum)

200% x 33% x 100% of 2007 Target Shares

 

Number of 2007 Performance Shares earned would be interpolated on a straight
line basis between the 25th percentile and the 75th percentile (i.e., between
50% and 150% x 33% x 100% of 2007 Target Shares), provided, however, no
interpolation is permissible between the 75th percentile and the 100th
percentile (rank #1).

TSR for the Company and each Index Company will be calculated as follows1:

(a) “Start Date” is 9/1/06 for the 2007 Earning Date

(b) "Start Date Stock Price" for each company equals the average of each
company's closing stock price on each trading day during the month of August
2006

(c) "Earning Date Stock Price" as of 12/31/07 for each company equals the
average of each company's closing stock price on each trading day during the
month of December 2007

(d) TSR for each company equals the change in value between Start Date Stock
Price and Earning Date Stock Price, plus dividends reinvested as of each
dividend ex-date, as a percentage of the Start Date Stock Price

(e) 2007 Performance Shares are earned on12/31/07 based on 16-month TSR

 

1 For an illustrative example of the mechanics of computing this goal, see
attached Example 1.

 

I-3 -

 

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Example 1

Example of One-Year TSR Calculation for the Company

From Illustrative 1/1/05 Start Date to 12/31/05 Earning Date

Calculation of Earning Date Stock Price and Start Date Stock Price:

12/30/05

$20.58

 

12/30/04

$16.55

12/29/05

$20.19

 

12/29/04

$16.40

12/28/05

$20.44

 

12/28/04

$16.50

12/27/05

$20.44

 

12/27/04

$16.45

12/23/05

$20.59

 

12/23/04

$16.49

12/22/05

$20.69

 

12/22/04

$16.30

12/21/05

$20.54

 

12/21/04

$16.25

12/20/05

$20.00

 

12/20/04

$16.37

12/19/05

$19.78

 

12/17/04

$15.67

12/16/05

$20.35

 

12/16/04

$15.19

12/15/05

$20.48

 

12/15/04

$15.50

12/14/05

$20.60

 

12/14/04

$15.65

12/13/05

$20.35

 

12/13/04

$15.82

12/12/05

$20.21

 

12/10/04

$15.90

12/9/05

$20.19

 

12/9/04

$15.80

12/8/05

$19.90

 

12/8/04

$15.91

12/7/05

$19.06

 

12/7/04

$15.72

12/6/05

$19.19

 

12/6/04

$15.90

12/5/05

$18.91

 

12/3/04

$15.66

12/2/05

$18.92

 

12/2/04

$15.52

12/1/05

$19.06

 

12/1/04

$15.75

 

 

 

 

 

Average

 

 

Average

 

12/31/05 Price

$20.02

 

1/1/05 Price

$15.97

Illustrative Earning Date Stock Price

 

 

Illustrative Start Date Stock Price

 

 

Calculation of historical 2005 one-year TSR for the Company:

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

Dividends

 

Including

 

 

 

 

 

 

Stock

 

Per

 

Dividends

 

 

 

 

Date

 

Price

 

Share

 

Reinvested

 

Index

 

TSR

 

 

 

 

 

 

 

 

 

 

 

1/1/05 Avg.

 

$15.97

 

 

 

6.2630

 

$100.00

 

 

3/29/05 Close

 

$14.30

 

$0.22

 

6.3594

 

$90.94

 

 

6/28/05 Close

 

$17.96

 

$0.22

 

6.4373

 

$115.61

 

 

9/28/05 Close

 

$17.70

 

$0.22

 

6.5173

 

$115.36

 

 

12/28/05 Close

 

$20.44

 

$0.22

 

6.5875

 

$134.65

 

 

12/31/05 Avg.

 

$20.02

 

 

 

6.5875

 

$131.90

 

31.90%

 

 

 

I-4 -

 

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SCHEDULE II

 

2008 Grants

 

Executive’s 2008 Grants shall be vested and earned only during the Executive’s
employment with the Company as follows:

(1)

2008 Options. 40% of the value of the 2008 Grants shall be granted in the form
of time-vesting Options. The number of 2008 Options to be granted will be
determined based on the closing price per share of the Company as of the grant
date in 2008 and applying the binomial option value, determined by Pearl Meyer &
Partners, as of such date. The 2008 Options will have an exercise price equal to
the closing price per share of the Company as of the grant date in 2008. Unless
the vesting of 2008 Options is otherwise accelerated pursuant to the Agreement
and the Employment Agreement, such 2008 Options shall vest as follows:

1/3 of the 2008 Options shall vest on December 31, 2008

1/3 of the 2008 Options shall vest on December 31, 2009

1/3 of the 2008 Options shall vest on December 31, 2010

Once vested, the 2008 Options will remain exercisable for up to ten years after
the grant date in 2008 unless a shorter exercise period is otherwise specified
pursuant to the Agreement and the Employment Agreement.

(2)

2008 Stock Units. 20% of the value of the 2008 Grants shall be granted in the
form of time-vesting Stock Units. The number of shares of 2008 Stock Units to be
granted will be determined with respect to the closing price per share of the
Company as of the grant date in 2008. Unless otherwise accelerated pursuant to
the Agreement and the Employment Agreement, the restrictions shall lapse on the
2008 Stock Unit grant as follows:

1/3 of the 2008 Stock Unit grant shall vest on December 31, 2008

1/3 of the 2008 Stock Unit grant shall vest on December 31, 2009

1/3 of the 2008 Stock Unit grant shall vest on December 31, 2010

(3)

2008 Performance Shares. 40% of the value of the 2008 Grants shall be granted in
the form of a target number of Performance Shares (“2008 Target Shares”), which
number is determined with respect to the closing price per share of the Company
as of the grant date in 2008.

Performance Measures – Sixty-seven percent (67%) of the 2008 Performance Shares
shall be earned based on achievement of certain levels of Budgeted FFO per
share, and thirty-three percent (33%) of the 2008 Performance Shares shall be
earned based on achievement of Relative TSR, as described below.

 

 

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Earning Date -- Unless otherwise provided in the Agreement, 100% of the 2008
Performance Shares will be earned on December 31, 2008 (“2008 Earning Date”)
based on performance determined as of the 2008 Earning Date.

Vesting Dates – Unless otherwise provided in the Agreement, 2008 Performance
Shares earned as of the 2008 Earning Date, if any, will vest based on continued
employment by the Company as follows:

1/3 of the 2008 Performance Shares earned shall vest on December 31, 2008

1/3 of the 2008 Performance Shares earned shall vest on December 31, 2009

1/3 of the 2008 Performance Shares earned shall vest on December 31, 2010

Upside and Downside Opportunities: Upside opportunity of 150% of 2008 Target
Shares (except under exceptional TSR results, described below); downside
opportunity of zero (0) if threshold performance measures are not met.

 

FFO Performance Goals

Budgeted FFO for the fiscal year 2008 shall be as approved by the Board (i.e.,
the same Budgeted FFO described above in Schedule II).

 

Amount of Budgeted FFO Per Share for fiscal year 2008

Number of Performance Shares Earned on the 2008 Earning Date (i.e., 12/31/08)

Below 90% of Budgeted FFO per share

Zero, unless otherwise determined at the discretion of the Committee

90% of Budgeted FFO per share

50% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.01

60% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.02

70% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.03

80% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.04

90% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.05

100% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.06

103.3% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.07

106.6% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.08

110% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.09

113.3% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.10

116.6% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.11

120% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.12

123.3% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.13

126.6% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.14

130% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.15

133.3% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.16

136.6% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.17

140% x 67% x 100% of 2008 Target Shares

90% of Budgeted FFO per share + $.18

143.3% x 67% x 100% of 2008 Target Shares

 

 

 

II-2 -

 

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90% of Budgeted FFO per share + $.19

146.6% x 67% x 100% of 2008 Target Shares

(90% of Budgeted FFO per share + $.20) and above

150% x 67% x 100% of 2008 Target Shares

 

Relative TSR Goals

Relative TSR will be based on performance relative to the equally-weighted TSRs
of each of the companies included in the Index as of the 2008 Earning Date
(“2008 Index Company TSRs”), excluding the Company if it is part of the Index,
as follows:

 

Company’s TSR Percentile Rank Relative to the 2008 Index Company TSRs at the
2008 Earning Date

Number of Performance Shares Earned at the 2008 Earning Date

Below 25th percentile (Below Threshold)

Zero, unless otherwise determined at the discretion of the Committee

At 25th percentile (Threshold)

50% x 33% x 100% of 2008 Target Shares

At 50th percentile (Target)

100% x 33% x 100% of 2008 Target Shares

At 75th percentile (Maximum) or higher

150% x 33% x 100% of 2008 Target Shares

At 100th percentile (rank #1), but only if Company TSR is positive (Super
Maximum)

200% x 33% x 100% of 2008 Target Shares

 

Number of 2008 Performance Shares earned would be interpolated on a straight
line basis between the 25th percentile and the 75th percentile (i.e., between
50% and 150% x 33% x 100% of 2008 Target Shares), provided, however, no
interpolation is permissible between the 75th percentile and the 100th
percentile (rank #1).

TSR for the Company and each Index Company will be calculated as follows2:

(a) “Start Date” is 9/1/06 for the 2008 Earning Date

(b) "Start Date Stock Price" for each company equals the average of each
company's closing stock price on each trading day during the month of August
2006

(c) "Earning Date Stock Price" as of 12/31/08 for each company equals the
average of each company's closing stock price on each trading day during the
month of December 2008

(d) TSR for each company equals the change in value between Start Date Stock
Price and Earning Date Stock Price, plus dividends reinvested as of each
dividend ex-date, as a percentage of the Start Date Stock Price

(e) 2008 Performance Shares are earned on12/31/08 based on 28-month TSR

 

 

2 For an illustrative example of the mechanics of computing this goal, see
attached Example 1.

 

II-3 -

 

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2009 Grants

 

Executive’s 2009 Grants shall be vested and earned only during the Executive’s
employment with the Company as follows:

(1)

2009 Options. 40% of the value of the 2009 Grants shall be granted in the form
of time-vesting Options. The number of 2009 Options to be granted will be
determined based on the closing price per share of the Company as of the grant
date in 2009 and applying the binomial option value, determined by Pearl Meyer &
Partners, as of such date. The 2009 Options will have an exercise price equal to
the closing price per share of the Company as of the grant date in 2009. Unless
the vesting of 2009 Options is otherwise accelerated pursuant to the Agreement
and the Employment Agreement, such 2009 Options shall vest as follows:

1/3 of the 2009 Options shall vest on December 31, 2009

1/3 of the 2009 Options shall vest on December 31, 2010

1/3 of the 2009 Options shall vest on December 31, 2011

Once vested, the 2009 Options will remain exercisable for up to ten years after
the grant date in 2009 unless a shorter exercise period is otherwise specified
pursuant to the Agreement and the Employment Agreement.

(2)

2009 Stock Units. 20% of the value of the 2009 Grants shall be granted in the
form of time-vesting Stock Units. The number of shares of 2009 Stock Units to be
granted will be determined with respect to the closing price per share of the
Company as of the grant date in 2009. Unless otherwise accelerated pursuant to
the Agreement and the Employment Agreement, the restrictions shall lapse on the
2009 Stock Unit grant as follows:

1/3 of the 2009 Stock Unit grant shall vest on December 31, 2009

1/3 of the 2009 Stock Unit grant shall vest on December 31, 2010

1/3 of the 2009 Stock Unit grant shall vest on December 31, 2011

(3)

2009 Performance Shares. 40% of the value of the 2009 Grants shall be granted in
the form of a target number of Performance Shares (“2009 Target Shares”), which
number is determined with respect to the closing price per share of the Company
as of the grant date in 2009.

Performance Measures – Sixty-seven percent (67%) of the 2009 Performance Shares
shall be earned based on achievement of certain levels of Budgeted FFO per
share, and thirty-three percent (33%) of the 2009 Performance Shares shall be
earned based on achievement of Relative TSR, as described below.

Earning Date -- Unless otherwise provided in the Agreement, 100% of the 2009
Performance Shares will be earned on December 31, 2009 (“2009 Earning Date”)
based on performance determined as of the 2009 Earning Date.

 

II-4 -

 

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Vesting Dates – Unless otherwise provided in the Agreement, 2009 Performance
Shares earned as of the 2009 Earning Date, if any, will vest based on continued
employment by the Company as follows:

1/3 of the 2009 Performance Shares earned shall vest on December 31, 2009

1/3 of the 2009 Performance Shares earned shall vest on December 31, 2010

1/3 of the 2009 Performance Shares earned shall vest on December 31, 2011

Upside and Downside Opportunities: Upside opportunity of 150% of 2009 Target
Shares (except under exceptional TSR results, described below); downside
opportunity of zero (0) if threshold performance measures are not met.

 

FFO Performance Goals

Budgeted FFO for the fiscal year 2009 shall be as approved by the Board (i.e.,
the same Budgeted FFO described above in Schedule II).

 

Amount of Budgeted FFO Per Share for fiscal year 2009

Number of Performance Shares Earned on the 2009 Earning Date (i.e., 12/31/09)

Below 90% of Budgeted FFO per share

Zero, unless otherwise determined at the discretion of the Committee

90% of Budgeted FFO per share

50% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.01

60% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.02

70% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.03

80% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.04

90% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.05

100% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.06

103.3% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.07

106.6% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.08

110% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.09

113.3% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.10

116.6% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.11

120% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.12

123.3% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.13

126.6% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.14

130% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.15

133.3% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.16

136.6% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.17

140% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.18

143.3% x 67% x 100% of 2009 Target Shares

90% of Budgeted FFO per share + $.19

146.6% x 67% x 100% of 2009 Target Shares

(90% of Budgeted FFO per share + $.20) and above

150% x 67% x 100% of 2009 Target Shares

 

 

II-5 -

 

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Relative TSR Goals

Relative TSR will be based on performance relative to the equally-weighted TSRs
of each of the companies included in the Index as of the 2009 Earning Date
(“2009 Index Company TSRs”), excluding the Company if it is part of the Index,
as follows:

 

Company’s TSR Percentile Rank Relative to the 2009 Index Company TSRs at the
2009 Earning Date

Number of Performance Shares Earned at the 2009 Earning Date

Below 25th percentile (Below Threshold)

Zero, unless otherwise determined at the discretion of the Committee

At 25th percentile (Threshold)

50% x 33% x 100% of 2009 Target Shares

At 50th percentile (Target)

100% x 33% x 100% of 2009 Target Shares

At 75th percentile (Maximum) or higher

150% x 33% x 100% of 2009 Target Shares

At 100th percentile (rank #1), but only if Company TSR is positive (Super
Maximum)

200% x 33% x 100% of 2009 Target Shares

 

Number of 2009 Performance Shares earned would be interpolated on a straight
line basis between the 25th percentile and the 75th percentile (i.e., between
50% and 150% x 33% x 100% of 2009 Target Shares), provided, however, no
interpolation is permissible between the 75th percentile and the 100th
percentile (rank #1).

TSR for the Company and each Index Company will be calculated as follows3:

(a) “Start Date” is 9/1/06 for the 2009 Earning Date

(b) "Start Date Stock Price" for each company equals the average of each
company's closing stock price on each trading day during the month of August
2006

(c) "Earning Date Stock Price" as of 12/31/09 for each company equals the
average of each company's closing stock price on each trading day during the
month of December 2009

(d) TSR for each company equals the change in value between Start Date Stock
Price and Earning Date Stock Price, plus dividends reinvested as of each
dividend ex-date, as a percentage of the Start Date Stock Price

(e) 2009 Performance Shares are earned on12/31/09 based on 40-month TSR

 

 

3 For an illustrative example of the mechanics of computing this goal, see
attached Example 1.

 

 

II-6 -