Exhibit 10.5

TABERNA REALTY FINANCE TRUST

2005 EQUITY INCENTIVE PLAN

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TABLE OF CONTENTS

 

          Page 1.    DEFINITIONS    1 2.    EFFECTIVE DATE AND TERMINATION OF
PLAN    4 3.    ADMINISTRATION OF PLAN    5 4.    SHARES AND UNITS SUBJECT TO
THE PLAN    5 5.    PROVISIONS APPLICABLE TO STOCK OPTIONS    6 6.    PROVISIONS
APPLICABLE TO RESTRICTED SHARES    9 7.    PROVISIONS APPLICABLE TO PHANTOM
SHARES    11 8.    PROVISIONS APPLICABLE TO DIVIDEND EQUIVALENT RIGHTS    14 9.
   OTHER EQUITY-BASED AWARDS    15 10.    PERFORMANCE GOALS    15 11.    TAX
WITHHOLDING    15 12.    REGULATIONS AND APPROVALS    17 13.    INTERPRETATION
AND AMENDMENTS; OTHER RULES    17 14.    CHANGES IN CAPITAL STRUCTURE    18 15.
   MISCELLANEOUS    19

 

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TABERNA REALTY FINANCE TRUST

2005 EQUITY INCENTIVE PLAN

Taberna Realty Finance Trust, a Maryland real estate investment trust, wishes to
attract and retain qualified key employees, trustees, directors, officers,
advisors, consultants and other personnel and encourage them to increase their
efforts to make the Company’s business more successful whether directly or
through its Subsidiaries or other Affiliates. In furtherance thereof, the
Taberna Realty Finance Trust 2005 Equity Incentive Plan is designed to provide
equity-based incentives to certain Eligible Persons. Awards under the Plan may
be made to Eligible Persons in the form of Options, Restricted Shares, Share
Appreciation Rights, Dividend Equivalent Rights, Performance Awards, Phantom
Shares and other forms of equity-based compensation.

 

  1. DEFINITIONS.

Whenever used herein, the following terms shall have the meanings set forth
below:

“Affiliate” means any entity other than a Subsidiary that is controlled by or
under common control with the Company that is designated as an “Affiliate” by
the Committee in its discretion.

“Award”, except where referring to a particular category of grant under the
Plan, shall include Incentive Stock Options, Non-Qualified Stock Options,
Restricted Shares, Share Appreciation Rights, Dividend Equivalent Rights,
Performance Awards, Phantom Shares and other equity-based Awards as contemplated
herein.

“Award Agreement” means a written agreement in a form approved by the Committee
as provided in Section 3.

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

“Cause” means, unless otherwise provided in the Participant’s Award Agreement,
(i) engaging in (A) willful or gross misconduct or (B) willful or gross neglect;
(ii) the commission of a felony or a crime of moral turpitude, dishonesty,
breach of trust or unethical business conduct, or any crime involving the
Company or any Affiliate thereof; (iii) engaging in the performance of his
duties in fraud, misappropriation or embezzlement; (iv) a material breach of the
Participant’s employment agreement (if any) with the Company or its Affiliates;
(v) acts or omissions constituting a material failure to perform substantially
and adequately the duties assigned to the Participant; (vi) any illegal act
detrimental to the Company or its Affiliates; or (vii) repeated failure to
adhere to the directions of superiors or the Board, to adhere to the Company’s
written policies and practices or to devote substantially all of the
Participant’s business time and efforts to the Company and its Affiliates if
required by Participant’s employment agreement; provided, however, that, if at
any particular time the Participant is subject to an effective employment
agreement with the Company, then, in lieu of the foregoing definition, “Cause”
shall at that time have such meaning as may be specified in such employment
agreement.

“Change of Control” means, unless otherwise provided in an Award Agreement, the
happening of any of the following:

(i) any “person,” including a “group” (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act, but excluding the Company), any entity
controlling, controlled by or under common control with the Company, any
trustee, fiduciary or other

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person or entity holding securities under any employee benefit plan or trust of
the Company or any such entity, and with respect to any particular Participant,
the Participant and any “group” (as such term is used in Section 13(d)(3) of the
Exchange Act) of which the Participant is a member, is or becomes the
“beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
either (A) the combined voting power of the Company’s then outstanding
securities or (B) the then outstanding Shares (in either such case other than as
a result of an acquisition of securities directly from the Company); provided,
however, that, in no event shall a Change of Control be deemed to have occurred
upon an initial public offering of the Common Shares under the Securities Act;
or

(ii) any consolidation or merger of the Company where the shareholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares
representing in the aggregate 50% or more of the combined voting power of the
securities of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any); or

(iii) there shall occur (A) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Company, other
than a sale or disposition by the Company of all or substantially all of the
Company’s assets to an entity, at least 50% of the combined voting power of the
voting securities of which are owned by “persons” (as defined above) in
substantially the same proportion as their ownership of the Company immediately
prior to such sale or (B) the approval by shareholders of the Company of any
plan or proposal for the liquidation or dissolution of the Company; or

(iv) the members of the Board at the beginning of any consecutive
24-calendar-month period (the “Incumbent Trustees”) cease for any reason other
than due to death to constitute at least a majority of the members of the Board;
provided that any trustee whose election, or nomination for election by the
Company’s shareholders, was approved or ratified by a vote of at least a
majority of the members of the Board then still in office who were members of
the Board at the beginning of such 24-calendar-month period, shall be deemed to
be an Incumbent Trustee.

Notwithstanding the foregoing, no event or condition shall constitute a Change
of Control to the extent that, if it were, a 20% tax would be imposed under
Section 409A of the Code; provided that, in such a case, the event or condition
shall continue to constitute a Change of Control to the maximum extent possible
(e.g., if applicable, in regard of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board or another Committee
of the Board appointed in accordance with Section 3(a) hereof.

“Common Shares” means the Company’s common shares of beneficial interest, par
value $.01 per share, either currently existing or authorized hereafter.

 

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“Company” means Taberna Realty Finance Trust, a Maryland real estate investment
trust.

“Disability” means, unless otherwise provided by the Committee in the
Participant’s Award Agreement, a disability which renders the Participant
incapable of performing all of his or her material duties for a period of at
least 180 consecutive or non-consecutive days during any consecutive
twelve-month period. Notwithstanding the foregoing, no circumstances or
condition shall constitute a Disability to the extent that, if it were, a 20%
tax would be imposed under Section 409A of the Code; provided that, in such a
case, the event or condition shall continue to constitute a Disability to the
maximum extent possible (e.g., if applicable, in regard of vesting without an
acceleration of distribution) without causing the imposition of such 20% tax.

“Dividend Equivalent Right” means a right awarded under Section 8 of the Plan to
receive (or have credited) the equivalent value of dividends paid on Common
Shares.

“Eligible Person” means a key employee, trustee, non-employee trustee, director,
officer, advisor, consultant or other personnel of the Company or a Subsidiary
or other person expected to provide significant services (of a type expressly
approved by the Committee as covered services for these purposes) to the Company
or its Subsidiaries. The Committee may provide that Affiliates of the Company
and employees thereof may be Eligible Persons, and may make such arrangements
with the foregoing entities as it may consider appropriate, in light of tax and
other considerations, in the case of grants directly or indirectly to such
employees.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” per Share as of a particular date means (i) if Shares are
then listed on a national stock exchange, the closing sales price per Share on
the exchange for the last preceding date on which there was a sale of Shares on
such exchange, as determined by the Committee, (ii) if Shares are not then
listed on a national stock exchange but are then traded on an over-the-counter
market, the average of the closing bid and asked prices for the Shares in such
over-the-counter market for the last preceding date on which there was a sale of
such Shares in such market, as determined by the Committee, or (iii) if Shares
are not then listed on a national stock exchange or traded on an
over-the-counter market, such value as the Committee in its discretion may in
good faith determine; provided that, where the Shares are so listed or traded,
the Committee may make such discretionary determinations where the Shares have
not been traded for 10 trading days.

“Grantee” means an Eligible Person granted Restricted Shares, Share Appreciation
Rights, Dividend Equivalent Rights, Performance Awards, Phantom Shares or such
other equity-based Awards (other than an Option) as may be granted pursuant to
Section 9.

“Incentive Stock Option” means an “incentive stock option” within the meaning of
Section 422(b) of the Code.

“Non-Qualified Stock Option” means an Option which is not an Incentive Stock
Option.

“Offering” shall have the meaning set forth in Section 4.1(a) of the Plan.

“Option” means the right to purchase, at a price and for the term fixed by the
Committee in accordance with the Plan, and subject to such other limitations and
restrictions in the Plan and the applicable Award Agreement, a number of Shares
determined by the Committee.

 

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“Optionee” means an Eligible Person to whom an Option is granted, or the
Successors of the Optionee, as the context so requires.

“Option Price” means the price per Share, determined by the Board or the
Committee, at which an Option may be exercised.

“Participant” means a Grantee or Optionee.

“Phantom Share” means a right, pursuant to the Plan, of the Grantee to payment
of the Phantom Share Value.

“Phantom Share Value,” per Phantom Share, means the Fair Market Value of a Share
or, if so provided by the Committee, such Fair Market Value to the extent in
excess of a base value established by the Committee at the time of grant (which
base value may not be less than the Fair Market Value of the underlying Shares
at the date of grant).

“Plan” means the Company’s 2005 Equity Incentive Plan, as set forth herein and
as the same may from time to time be amended.

“Restricted Shares” means an award of Shares that are subject to restrictions
hereunder.

“Retirement” means, unless otherwise provided by the Committee in the
Participant’s Award Agreement, the Termination of Service (other than for Cause)
of a Participant on or after the Participant’s attainment of age 65 or on or
after the Participant’s attainment of age 55 with five consecutive years of
service with the Company or any Subsidiaries or Affiliates.

“Securities Act” means the Securities Act of 1933, as amended.

“Settlement Date” means the date determined under Section 7.4(c).

“Shares” means shares of beneficial interest of the Company.

“Subsidiary” means any corporation (other than the Company) that is a
“subsidiary corporation” with respect to the Company under Section 424(f) of the
Code. In the event the Company becomes a subsidiary of another company, the
provisions hereof applicable to subsidiaries shall, unless otherwise determined
by the Committee, also be applicable to any company that is a “parent
corporation” with respect to the Company under Section 424(e) of the Code.

“Successor of the Optionee” means the legal representative of the estate of a
deceased Optionee or the person or persons who shall acquire the right to
exercise an Option by bequest or inheritance or by reason of the death of the
Optionee.

“Termination of Service” means a Participant’s termination of employment or
other service, as applicable, with the Company, its Subsidiaries and, as
applicable, Affiliates.

“Trustee” means a non-employee trustee of the Company or its Subsidiaries.

 

  2. EFFECTIVE DATE AND TERMINATION OF PLAN.

The effective date of the Plan is April 28, 2005. The Plan shall terminate on,
and no Award shall be granted hereunder on or after, the 10-year anniversary of
the earlier of the approval of the Plan by (i) the Board or (ii) the
shareholders of the Company; provided, however, that the Board may at any time
prior to that date terminate the Plan.

 

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  3. ADMINISTRATION OF PLAN.

(a) The Plan shall be administered by the Committee appointed by the Board. The
Committee, upon and after such time as it is covered in Section 16 of the
Exchange Act, shall consist of at least two individuals each of whom shall be a
“nonemployee director” as defined in Rule 16b-3 as promulgated by the Securities
and Exchange Commission (“Rule 16b-3”) under the Exchange Act and shall, at such
times as the Company is subject to Section 162(m) of the Code (to the extent
relief from the limitation of Section 162(m) of the Code is sought with respect
to Awards), qualify as “outside directors” for purposes of Section 162(m) of the
Code; provided that no action taken by the Committee (including, without
limitation, grants) shall be invalidated because any or all of the members of
the Committee fails to satisfy the foregoing requirements of this sentence. The
acts of a majority of the members present at any meeting of the Committee at
which a quorum is present, or acts approved in writing by a majority of the
entire Committee, shall be the acts of the Committee for purposes of the Plan.
If and to the extent applicable, no member of the Committee may act as to
matters under the Plan specifically relating to such member. Notwithstanding the
other foregoing provisions of this Section 3(a), any Award under the Plan to a
person who is a member of the Committee shall be made and administered by the
Board. If no Committee is designated by the Board to act for these purposes, the
Board shall have the rights and responsibilities of the Committee hereunder and
under the Award Agreements.

(b) Subject to the provisions of the Plan, the Committee shall in its discretion
as reflected by the terms of the Award Agreements (i) authorize the granting of
Awards to Eligible Persons; and (ii) determine the eligibility of Eligible
Persons to receive an Award, as well as determine the number of Shares to be
covered under any Award Agreement, considering the position and responsibilities
of the Eligible Persons, the nature and value to the Company of the Eligible
Person’s present and potential contribution to the success of the Company
whether directly or through its Subsidiaries or Affiliates and such other
factors as the Committee may deem relevant.

(c) The Award Agreement shall contain such other terms, provisions and
conditions not inconsistent herewith as shall be determined by the Committee. In
the event that any Award Agreement or other agreement hereunder provides
(without regard to this sentence) for the obligation of the Company or any
Subsidiary or Affiliate thereof to purchase or repurchase Shares from a
Participant or any other person, then, notwithstanding the provisions of the
Award Agreement or such other agreement, such obligation shall not apply to the
extent that the purchase or repurchase would not be permitted under governing
state law. The Participant shall take whatever additional actions and execute
whatever additional documents the Committee may in its reasonable judgment deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on the Participant pursuant to the express
provisions of the Plan and the Award Agreement.

 

  4. SHARES AND UNITS SUBJECT TO THE PLAN.

4.1 In General.

(a) Subject to adjustments as provided in Section 14, the total number of Shares
subject to Awards granted under the Plan (including securities convertible into
or exchangeable for Shares), in the aggregate, may not exceed (x) upon
completion of the Company’s offering of Shares in transactions exempt from the
registration requirements of the Securities Act in accordance with the terms and
conditions of that certain Purchase/Placement Agreement between the Company and
Friedman, Billings, Ramsey & Co., Inc. (“FBR”) dated April 21, 2005 (the
“Offering”), 1,107,500 Shares, or (y) 1,107,500

 

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Shares plus an additional amount of Shares proportionate to any exercise of an
over-allotment option of the initial purchaser in the Offering; provided that
such limitation set forth in (x) or (y) above, as applicable, shall be increased
by 50,000 Shares on an annual basis to provide for annual Awards of Restricted
Shares that shall be made to the Company’s non-excluded trustees. Shares
distributed under the Plan may be treasury Shares or authorized but unissued
Shares. Any Shares that have been granted as Restricted Shares or that have been
reserved for distribution in payment for Options, Phantom Shares or other
equity-based Awards but are later forfeited or for any other reason are not
payable under the Plan (other than as a result of a cash payment in lieu
thereof) may again be made the subject of Awards under the Plan.

(b) If any Awards are paid out in cash, then the underlying Shares may not again
be made the subject of Awards under the Plan.

(c) The certificates for Shares issued hereunder may include any legend which
the Committee deems appropriate to reflect any rights of first refusal or other
restrictions on transfer hereunder or under the Award Agreement, or as the
Committee may otherwise deem appropriate.

(d) Unless otherwise determined by the Board, no Award may be granted under the
Plan to any person who, assuming exercise of all Options and payment of all
Awards held by such person, would own or be deemed to own more than 7.7% in
value or in number of Shares, whichever is more restrictive, of the outstanding
Common Shares or the outstanding Shares of beneficial interest.

 

  5. PROVISIONS APPLICABLE TO STOCK OPTIONS.

5.1 Grant of Option.

Subject to the other terms of the Plan, the Committee shall, in its discretion
as reflected by the terms of the applicable Award Agreement: (i) determine and
designate from time to time those Eligible Persons to whom Options are to be
granted and the number of Shares to be optioned to each Eligible Person;
(ii) determine whether to grant Options intended to be Incentive Stock Options,
or to grant Non-Qualified Stock Options, or both (to the extent that any Option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option); provided that Incentive Stock Options may only be
granted to employees of the Company, its Subsidiaries or other Affiliates;
(iii) determine the time or times when and the manner and condition in which
each Option shall be exercisable and the duration of the exercise period;
(iv) designate each Option as one intended to be an Incentive Stock Option or as
a Non-Qualified Stock Option; and (v) determine or impose other conditions to
the grant or exercise of Options under the Plan as it may deem appropriate.

5.2 Option Price.

The Option Price shall be determined by the Committee on the date the Option is
granted and reflected in the Award Agreement, as the same may be amended from
time to time. Any particular Award Agreement may provide for different Option
Prices for specified amounts of Shares subject to the Option; provided that, to
the extent necessary to comply with the requirements to exempt such Option from
Section 162(m) of the Code, the Option Price shall not be less than the Fair
Market Value of the underlying Shares on the date of grant.

5.3 Period of Option and Vesting.

(a) Unless earlier expired, forfeited or otherwise terminated, each Option shall
expire in its entirety upon the 10th anniversary of the date of grant or shall
have such other term (which may be

 

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shorter, but not longer, in the case of Incentive Stock Options) as is set forth
in the applicable Award Agreement (except that, in the case of an individual
described in Section 422(b)(6) of the Code (relating to certain more than 10%
owners) who is granted an Incentive Stock Option, the term of such Option shall
be no more than five years from the date of grant). The Option shall also
expire, be forfeited and terminate at such times and in such circumstances as
otherwise provided hereunder or under the Award Agreement.

(b) Each Option, to the extent that the Optionee has not had a Termination of
Service and the Option has not otherwise lapsed, expired, terminated or been
forfeited, shall first become exercisable according to the terms and conditions
set forth in the Award Agreement, as determined by the Committee at the time of
grant. Unless otherwise provided in the Award Agreement, no Option (or portion
thereof) shall ever be exercisable if the Optionee has a Termination of Service
before the time at which such Option (or portion thereof) would otherwise have
become exercisable, and any Option that would otherwise become exercisable after
such Termination of Service shall not become exercisable and shall be forfeited
upon such termination. Notwithstanding the foregoing provisions of this
Section 5.3(b), Options exercisable pursuant to the schedule set forth by the
Committee at the time of grant may be fully or more rapidly exercisable or
otherwise vested at any time in the discretion of the Committee. Upon and after
the death of an Optionee, such Optionee’s Options, if and to the extent
otherwise exercisable hereunder or under the applicable Award Agreement after
the Optionee’s death, may be exercised by the Successors of the Optionee.

5.4 Exercisability Upon and After Termination of Optionee.

(a) Subject to provisions of the Award Agreement, in the event the Optionee has
a Termination of Service other than by the Company or its Subsidiaries, or as
applicable, an Affiliate, for Cause, or other than by reason of death,
Retirement or Disability, no exercise of an Option may occur after the
expiration of the three-month period to follow the termination, or if earlier,
the expiration of the term of the Option as provided under Section 5.3(a);
provided that, if the Optionee should die after the Termination of Service, such
termination being for a reason other than Disability or Retirement, but while
the Option is still in effect, the Option (if and to the extent otherwise
exercisable by the Optionee at the time of death) may be exercised until the
earlier of (i) one year from the date of the Termination of Service of the
Optionee, or (ii) the date on which the term of the Option expires in accordance
with Section 5.3(a).

(b) Subject to provisions of the Award Agreement, in the event the Optionee has
a Termination of Service on account of death, Disability or Retirement, the
Option (whether or not otherwise exercisable) may be exercised until the earlier
of (i) one year from the date of the Termination of Service of the Optionee, or
(ii) the date on which the term of the Option expires in accordance with
Section 5.3.

(c) Notwithstanding any other provision hereof, unless otherwise provided in the
Award Agreement, in the event the Optionee has a Termination of Service by the
Company, a Subsidiary or Affiliate for Cause, the Optionee’s Options, to the
extent then unexercised, shall thereupon cease to be exercisable and shall be
forfeited forthwith (whether or not the Options were exercisable previously).

5.5 Exercise of Options.

(a) Subject to vesting, restrictions on exercisability and other restrictions
provided for hereunder or otherwise imposed in accordance herewith, an Option
may be exercised, and payment in full of the aggregate Option Price made, by an
Optionee only by written notice (in the form prescribed by the Committee) to the
Company or its designee specifying the number of Shares to be purchased.

 

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(b) Without limiting the scope of the Committee’s discretion hereunder, the
Committee may impose such other restrictions on the exercise of Options (whether
or not in the nature of the foregoing restrictions) as it may deem necessary or
appropriate.

5.6 Payment.

(a) The aggregate Option Price shall be paid in full upon the exercise of the
Option. Payment must be made by one of the following methods:

(i) a certified or bank cashier’s check;

(ii) subject to Section 12(e), the proceeds of a Company loan program or
third-party sale program or a notice acceptable to the Committee given as
consideration under such a program, in each case if permitted by the Committee
in its discretion, if such a program has been established and the Optionee is
eligible to participate therein;

(iii) if approved by the Committee in its discretion, previously owned Common
Shares, which have been previously owned for more than six months, having an
aggregate Fair Market Value on the date of exercise equal to the aggregate
Option Price; or

(iv) by any combination of such methods of payment or any other method
acceptable to the Committee in its discretion.

(b) Except in the case of Options exercised by certified or bank cashier’s
check, the Committee may impose limitations and prohibitions on the exercise of
Options as it deems appropriate, including, without limitation, any limitation
or prohibition designed to avoid accounting consequences which may result from
the use of Common Shares as payment upon exercise of an Option.

(c) The Committee may provide that no Option may be exercised with respect to
any fractional Share. Any fractional Shares resulting from an Optionee’s
exercise that is accepted by the Company shall in the discretion of the
Committee be paid in cash.

5.7 Share Appreciation Rights.

The Committee, in its discretion, may also permit (taking into account, without
limitation, the application of Section 409A of the Code, as the Committee may
deem appropriate) the Optionee to elect to receive upon the exercise of an
Option a combination of Shares and cash, or, in the discretion of the Committee,
either Shares or cash, with an aggregate Fair Market Value (or, to the extent of
payment in cash, in an amount) equal to the excess of the Fair Market Value of
the Shares with respect to which the Option is being exercised over the
aggregate Option Price, as determined as of the day the Option is exercised.

5.8 Exercise by Successors.

An Option may be exercised, and payment in full of the aggregate Option Price
made, by the Successors of the Optionee only by written notice (in the form
prescribed by the Committee) to the Company specifying the number of Shares to
be purchased. Such notice shall state that the aggregate Option Price will be
paid in full, or that the Option will be exercised as otherwise provided
hereunder, in the discretion of the Company or the Committee, if and as
applicable.

 

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5.9 Nontransferability of Option.

Except if provided in the applicable Award Agreement, each Option granted under
the Plan shall be nontransferable by the Optionee except by will or the laws of
descent and distribution of the state wherein the Optionee is domiciled at the
time of his death; provided, however, that the Committee may (but need not)
permit other transfers, where the Committee concludes that such transferability
(i) does not result in accelerated U.S. federal income taxation, (ii) does not
cause any Option intended to be an Incentive Stock Option to fail to be
described in Section 422(b) of the Code, (iii) complies with applicable law,
including securities laws, and (iv) is otherwise appropriate and desirable.

5.10 Deferral.

The Committee (taking into account, without limitation, the possible application
of Section 409A of the Code, as the Committee may deem appropriate) may
establish a program under which Participants will have Phantom Shares subject to
Section 7 credited upon their exercise of Options, rather than receiving Shares
at that time.

5.11 Certain Incentive Stock Option Provisions.

(a) The aggregate Fair Market Value, determined as of the date an Option is
granted, of the Common Shares for which any Optionee may be awarded Incentive
Stock Options which are first exercisable by the Optionee during any calendar
year under the Plan (or any other stock option plan required to be taken into
account under Section 422(d) of the Code) shall not exceed $100,000. To the
extent the $100,000 limit referred to in the preceding sentence is exceeded, a
Stock Option will be treated as a Non-Qualified Stock Option.

(b) If Shares acquired upon exercise of an Incentive Stock Option are disposed
of in a disqualifying disposition within the meaning of Section 422 of the Code
by an Optionee prior to the expiration of either two years from the date of
grant of such Option or one year from the transfer of Shares to the Optionee
pursuant to the exercise of such Option, or in any other disqualifying
disposition within the meaning of Section 422 of the Code, such Optionee shall
notify the Company in writing as soon as practicable thereafter of the date and
terms of such disposition and, if the Company (or any Affiliate thereof)
thereupon has a tax-withholding obligation, shall pay to the Company (or such
Affiliate) an amount equal to any withholding tax the Company (or Affiliate) is
required to pay as a result of the disqualifying disposition.

(c) The Option Price with respect to each Incentive Stock Option shall not be
less than 100%, or 110% in the case of an individual described in
Section 422(b)(6) of the Code (relating to certain more than 10% owners), of the
Fair Market Value of a Share on the day the Option is granted. In the case of an
individual described in Section 422(b)(6) of the Code who is granted an
Incentive Stock Option, the term of such Option shall be no more than five years
from the date of grant.

 

  6. PROVISIONS APPLICABLE TO RESTRICTED SHARES.

6.1 Grant of Restricted Shares.

(a) In connection with the grant of Restricted Shares, whether or not
performance goals (as provided for under Section 10) apply thereto, the
Committee shall establish one or more vesting periods with respect to the
Restricted Shares granted, the length of which shall be determined in the
discretion of the Committee. Subject to the provisions of this Section 6, the
applicable Award Agreement and the other provisions of the Plan, restrictions on
Restricted Shares shall lapse if the Grantee satisfies all applicable employment
or other service requirements through the end of the applicable vesting period.

 

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(b) Subject to the other terms of the Plan, the Committee may, in its discretion
as reflected by the terms of the applicable Award Agreement: (i) grant
Restricted Shares to Eligible Persons; (ii) provide a specified purchase price
for the Restricted Shares (whether or not the payment of a purchase price is
required by any state law applicable to the Company); (iii) determine the
restrictions applicable to Restricted Shares and (iv) determine or impose other
conditions, including any applicable performance goals, to the grant of
Restricted Shares under the Plan as it may deem appropriate.

6.2 Certificates.

(a) Unless otherwise provided by the Committee, each Grantee of Restricted
Shares shall be issued a share certificate in respect of Restricted Shares
awarded under the Plan. Each such certificate shall be registered in the name of
the Grantee. Without limiting the generality of Section 4.1(c), the certificates
for Restricted Shares issued hereunder may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer hereunder or
under the Award Agreement, or as the Committee may otherwise deem appropriate,
and, without limiting the generality of the foregoing, shall bear a legend
referring to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE
SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE TABERNA REALTY
FINANCE TRUST 2005 EQUITY INCENTIVE PLAN AND AN AWARD AGREEMENT APPLICABLE TO
THE GRANT OF THE SHARES REPRESENTED BY THIS CERTIFICATE. COPIES OF SUCH PLAN AND
AWARD AGREEMENTS ARE ON FILE IN THE OFFICES OF TABERNA REALTY FINANCE TRUST AT
1818 MARKET STREET, 28TH FLOOR, PHILADELPHIA, PENNSYLVANIA 19103.

(b) The Committee shall require that any share certificates evidencing such
Shares be held in custody by the Company until the restrictions hereunder shall
have lapsed, and that, as a condition of any Award of Restricted Shares, the
Grantee shall have delivered a share power, endorsed in blank, relating to the
share covered by such Award. If and when such restrictions so lapse, the share
certificates shall be delivered by the Company to the Grantee or his or her
designee as provided in Section 6.3 (and the share power shall be so delivered
or shall be discarded).

6.3 Restrictions and Conditions.

Unless otherwise provided by the Committee, the Restricted Shares awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

(i) Subject to the provisions of the Plan and the Award Agreements, during a
period commencing with the date of such Award and ending on the date the period
of forfeiture with respect to such Shares lapses, the Grantee shall not be
permitted voluntarily or involuntarily to sell, transfer, pledge, anticipate,
alienate, encumber or assign Restricted Shares awarded under the Plan (or have
such Shares attached or garnished). Subject to the provisions of the Award
Agreements and clauses (iii) and (iv) below, the period of forfeiture with
respect

 

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to Shares granted hereunder shall lapse as provided in the applicable Award
Agreement. Notwithstanding the foregoing, unless otherwise expressly provided by
the Committee, the period of forfeiture with respect to such Shares shall only
lapse as to whole Shares.

(ii) Except as provided in the foregoing clause (i), below in this clause (ii),
in Section 14, or as otherwise provided in the applicable Award Agreement, the
Grantee shall have, in respect of the Restricted Shares, all of the rights of a
holder of common shares of beneficial interest of the Company, including the
right to vote the Shares and the right to receive dividends as and when such
dividends are declared and paid by the Company.

(iii) Except if otherwise provided in the applicable Award Agreement, and
subject to clause (iv) below, if the Grantee has a Termination of Service by the
Company and its Subsidiaries (or, if applicable, its Affiliates) for Cause, or
by the Grantee for any reason, during the applicable period of forfeiture, then
(A) all Shares still subject to restriction shall thereupon, and with no further
action, be forfeited by the Grantee, and (B) the Company shall pay to the
Grantee as soon as practicable (and in no event more than 30 days) after such
termination an amount, if any, equal to the lesser of (x) the amount paid by the
Grantee for such forfeited Restricted Shares as contemplated by Section 6.1, and
(y) the Fair Market Value on the date of termination of the forfeited Restricted
Shares.

(iv) Subject to the provisions of the Award Agreement, in the event the Grantee
has a Termination of Service on account of death, Disability or Retirement, or
the Grantee has a Termination of Service by the Company and its Subsidiaries for
any reason other than Cause, or in the event of a Change of Control (regardless
of whether a Termination of Service follows thereafter), during the applicable
period of forfeiture, then restrictions under the Plan will immediately lapse on
all Restricted Shares granted to the applicable Grantee.

 

  7. PROVISIONS APPLICABLE TO PHANTOM SHARES.

7.1 Grant of Phantom Shares.

Subject to the other terms of the Plan, the Committee shall, in its discretion
as reflected by the terms of the applicable Award Agreement: (i) authorize the
granting of Phantom Shares to Eligible Persons and (ii) determine or impose
other conditions to the grant of Phantom Shares under the Plan as it may deem
appropriate.

7.2 Term.

The Committee may provide in an Award Agreement that any particular Phantom
Share shall expire at the end of a specified term.

7.3 Vesting.

Phantom Shares shall vest as provided in the applicable Award Agreement.

 

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7.4 Settlement of Phantom Shares.

(a) Each vested and outstanding Phantom Share shall be settled by the transfer
to the Grantee of one Share; provided that, the Committee at the time of grant
may provide that a Phantom Share may be settled (i) in cash at the applicable
Phantom Share Value, (ii) in cash or by transfer of Shares as elected by the
Grantee in accordance with procedures established by the Committee or (iii) in
cash or by transfer of Shares as elected by the Company.

(b) Phantom Shares shall be settled with a single-sum payment by the Company;
provided that, with respect to Phantom Shares of a Grantee which have a common
Settlement Date, the Committee may permit the Grantee to elect in accordance
with procedures established by the Committee (taking into account, without
limitation, Section 409A of the Code, as the Committee may deem appropriate) to
receive installment payments over a period not to exceed 10 years.

(c) (i) Unless otherwise provided in the applicable Award Agreement, the
“Settlement Date” with respect to a Phantom Share is as soon as practicable
after (but not later than the first day of the month to follow) the date on
which the Phantom Share vests; provided that a Grantee may elect, in accordance
with procedures to be established by the Committee, that such Settlement Date
will be deferred as elected by the Grantee to as soon as practicable after (but
not later than the first day of the month to follow) the Grantee’s Termination
of Service, or such other time as may be permitted by the Committee. Unless
otherwise determined by the Committee, elections under this Section 7.4(c)(i)
must, except as may otherwise be permitted under the rules applicable under
Section 409A of the Code, (A) be effective at least one year after they are
made, or, in the case of payments to commence at a specific time, be made at
least one year before the first scheduled payment and (B) defer the commencement
of distributions for at least five years.

(ii) Notwithstanding the foregoing, the Settlement Date, if not earlier pursuant
to this Section 7.4(c), is the date of the Grantee’s death.

(d) Notwithstanding the other provisions of this Section 7, in the event of a
Change of Control, the Settlement Date shall be the date of such Change of
Control and all amounts due with respect to Phantom Shares to a Grantee
hereunder shall be paid as soon as practicable (but in no event more than 30
days) after such Change of Control, unless such Grantee elects otherwise in
accordance with procedures established by the Committee.

(e) Notwithstanding any other provision of the Plan, a Grantee may receive any
amounts to be paid in installments as provided in Section 7.4(b) or deferred by
the Grantee as provided in Section 7.4(c) in the event of an “Unforeseeable
Emergency.” For these purposes, an “Unforeseeable Emergency,” as determined by
the Committee in its sole discretion, is a severe financial hardship to the
Grantee resulting from a sudden and unexpected illness or accident of the
Grantee or “dependent,” as defined in Section 152(a) of the Code, of the
Grantee, loss of the Grantee’s property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Grantee. The circumstances that will constitute an
Unforeseeable Emergency will depend upon the facts of each case, but, in any
case, payment may not be made to the extent that such hardship is or may be
relieved:

(i) through reimbursement or compensation by insurance or otherwise,

(ii) by liquidation of the Grantee’s assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship, or

 

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(iii) by future cessation of the making of additional deferrals under
Section 7.4 (b) and (c).

Without limitation, the need to send a Grantee’s child to college or the desire
to purchase a home shall not constitute an Unforeseeable Emergency.
Distributions of amounts because of an Unforeseeable Emergency shall be
permitted to the extent reasonably needed to satisfy the emergency need.

7.5 Other Phantom Share Provisions.

(a) Rights to payments with respect to Phantom Shares granted under the Plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, garnishment, levy, execution, or
other legal or equitable process, either voluntary or involuntary; and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber,
attach or garnish, or levy or execute on any right to payments or other benefits
payable hereunder, shall be void.

(b) A Grantee may designate in writing, on forms to be prescribed by the
Committee, a beneficiary or beneficiaries to receive any payments payable after
his or her death and may amend or revoke such designation at any time. If no
beneficiary designation is in effect at the time of a Grantee’s death, payments
hereunder shall be made to the Grantee’s estate. If a Grantee with a vested
Phantom Share dies, such Phantom Share shall be settled and the Phantom Share
Value in respect of such Phantom Shares paid, and any payments deferred pursuant
to an election under Section 7.4(c) shall be accelerated and paid, as soon as
practicable (but no later than 60 days) after the date of death to such
Grantee’s beneficiary or estate, as applicable.

(c) The Committee may establish a program under which distributions with respect
to Phantom Shares may be deferred for periods in addition to those otherwise
contemplated by foregoing provisions of this Section 7. Such program may
include, without limitation, provisions for the crediting of earnings and losses
on unpaid amounts, and, if permitted by the Committee, provisions under which
Participants may select from among hypothetical investment alternatives for such
deferred amounts in accordance with procedures established by the Committee.

(d) Notwithstanding any other provision of this Section 7, any fractional
Phantom Share will be paid out in cash at the Phantom Share Value as of the
Settlement Date.

(e) No Phantom Share shall be construed to give any Grantee any rights with
respect to Shares or any ownership interest in the Company. Except as may be
provided in accordance with Section 8, no provision of the Plan shall be
interpreted to confer upon any Grantee any voting, dividend or derivative or
other similar rights with respect to any Phantom Share.

7.6 Claims Procedures.

(a) To the extent that the Plan is determined by the Committee to be subject to
the Employee Retirement Income Security Act of 1974, as amended, the Grantee, or
his beneficiary hereunder or authorized representative, may file a claim for
payments with respect to Phantom Shares under the Plan by written communication
to the Committee or its designee. A claim is not considered filed until such
communication is actually received. Within 90 days (or, if special circumstances
require an extension of time for processing, 180 days, in which case notice of
such special circumstances should be provided within the initial 90-day period)
after the filing of the claim, the Committee will either:

(i) approve the claim and take appropriate steps for satisfaction of the claim;
or

 

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(ii) if the claim is wholly or partially denied, advise the claimant of such
denial by furnishing to him a written notice of such denial setting forth
(A) the specific reason or reasons for the denial; (B) specific reference to
pertinent provisions of the Plan on which the denial is based and, if the denial
is based in whole or in part on any rule of construction or interpretation
adopted by the Committee, a reference to such rule, a copy of which shall be
provided to the claimant; (C) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of the reasons why such material or information is necessary; and (D) a
reference to this Section 7.6 as the provision setting forth the claims
procedure under the Plan.

(b) The claimant may request a review of any denial of his claim by written
application to the Committee within 60 days after receipt of the notice of
denial of such claim. Within 60 days (or, if special circumstances require an
extension of time for processing, 120 days, in which case notice of such special
circumstances should be provided within the initial 60-day period) after receipt
of written application for review, the Committee will provide the claimant with
its decision in writing, including, if the claimant’s claim is not approved,
specific reasons for the decision and specific references to the Plan provisions
on which the decision is based.

 

  8. PROVISIONS APPLICABLE TO DIVIDEND EQUIVALENT RIGHTS.

8.1 Grant of Dividend Equivalent Rights.

Subject to the other terms of the Plan, the Committee shall, in its discretion
as reflected by the terms of the Award Agreements, authorize the granting of
Dividend Equivalent Rights to Eligible Persons based on the regular cash
dividends declared on Common Shares, to be credited as of the dividend payment
dates, during the period between the date an Award is granted, and the date such
Award is exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalent Rights shall be converted to cash or additional Shares by
such formula and at such time and subject to such limitation as may be
determined by the Committee. With respect to Dividend Equivalent Rights granted
with respect to Options intended to be qualified performance-based compensation
for purposes of Section 162(m) of the Code, such Dividend Equivalent Rights
shall be payable regardless of whether such Option is exercised. If a Dividend
Equivalent Right is granted in respect of another Award hereunder, then, unless
otherwise stated in the Award Agreement, in no event shall the Dividend
Equivalent Right be in effect for a period beyond the time during which the
applicable portion of the underlying Award is in effect.

8.2 Certain Terms.

(a) The term of a Dividend Equivalent Right shall be set by the Committee in its
discretion.

(b) Unless otherwise determined by the Committee, except as contemplated by
Section 8.4, a Dividend Equivalent Right is exercisable or payable only while
the Participant is an Eligible Person.

(c) Payment of the amount determined in accordance with Section 8.1 shall be in
cash, in Common Shares or a combination of the two, as determined by the
Committee.

(d) The Committee may impose such employment-related conditions on the grant of
a Dividend Equivalent Right as it deems appropriate in its discretion.

 

14

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8.3 Other Types of Dividend Equivalent Rights.

The Committee may establish a program under which Dividend Equivalent Rights of
a type whether or not described in the foregoing provisions of this Section 8
may be granted to Participants. For example, and without limitation, the
Committee may grant a dividend equivalent right in respect of each Share subject
to an Option or with respect to a Phantom Share, which right would consist of
the right (subject to Section 8.4) to receive a cash payment in an amount equal
to the dividend distributions paid on a Share from time to time.

8.4 Deferral.

The Committee may establish a program (taking into account, without limitation,
the possible application of Section 409A of the Code, as the Committee may deem
appropriate) under which Participants (i) will have Phantom Shares credited,
subject to the terms of Sections 7.4 and 7.5 as though directly applicable with
respect thereto, upon the granting of Dividend Equivalent Rights, or (ii) will
have payments with respect to Dividend Equivalent Rights deferred. In the case
of the foregoing clause (ii), such program may include, without limitation,
provisions for the crediting of earnings and losses on unpaid amounts, and, if
permitted by the Committee, provisions under which Participants may select from
among hypothetical investment alternatives for such deferred amounts in
accordance with procedures established by the Committee.

 

  9. OTHER EQUITY-BASED AWARDS.

The Committee shall have the right to grant other Awards based upon the Common
Shares having such terms and conditions as the Committee may determine,
including, without limitation, the grant of shares based upon certain
conditions, the grant of securities convertible into Common Shares and the grant
of share appreciation rights.

 

  10. PERFORMANCE GOALS.

The Committee, in its discretion, (i) may establish one or more performance
goals as a precondition to the issuance or vesting of Awards, and (ii) provide,
in connection with the establishment of the performance goals, for predetermined
Awards to those Participants (who continue to meet all applicable eligibility
requirements) with respect to whom the applicable performance goals are
satisfied. In the case of any grant intended to qualify as performance based
compensation under Section 162(m) of the Code (including, for these purposes,
grants constituting performance based compensation, as determined without regard
to certain shareholder approval and disclosure requirements by virtue of an
applicable transition rule), the Committee shall establish goals intended to be
performance goals as contemplated by Section 162(m) and the regulations
thereunder.

 

  11. TAX WITHHOLDING.

11.1 In General.

The Company shall be entitled to withhold from any payments or deemed payments
any amount of tax withholding determined by the Committee to be required by law.
Without limiting the generality of the foregoing, the Committee may, in its
discretion, require the Participant to pay to the Company at such time as the
Committee determines the amount that the Committee deems necessary to satisfy
the Company’s obligation to withhold federal, state or local income or other
taxes incurred by reason of (i) the exercise of any Option, (ii) the lapsing of
any restrictions applicable to any Restricted Shares, (iii) the receipt of a
distribution in respect of Phantom Shares or Dividend Equivalent Rights or
(iv) any other applicable income-recognition event (for example, an election
under Section 83(b) of the Code).

 

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11.2 Share Withholding.

(a) Upon exercise of an Option, the Optionee may, if approved by the Committee
in its discretion, make a written election to have Shares then issued withheld
by the Company from the Shares otherwise to be received, or to deliver
previously owned Shares, in order to satisfy the liability for such withholding
taxes. In the event that the Optionee makes, and the Committee permits, such an
election, the number of Shares so withheld or delivered shall have an aggregate
Fair Market Value on the date of exercise sufficient to satisfy the minimum
applicable withholding taxes. Where the exercise of an Option does not give rise
to an obligation by the Company to withhold federal, state or local income or
other taxes on the date of exercise, but may give rise to such an obligation in
the future, the Committee may, in its discretion, make such arrangements and
impose such requirements as it deems necessary or appropriate.

(b) Upon lapsing of restrictions on Restricted Shares (or other
income-recognition event), the Grantee may, if approved by the Committee in its
discretion, make a written election to have Shares withheld by the Company from
the Shares otherwise to be released from restriction, or to deliver previously
owned Shares (not subject to restrictions hereunder), in order to satisfy the
liability for such withholding taxes. In the event that the Grantee makes, and
the Committee permits, such an election, the number of Shares so withheld or
delivered shall have an aggregate Fair Market Value on the date of exercise
sufficient to satisfy the applicable withholding taxes.

(c) Upon the making of a distribution in respect of Phantom Shares or Dividend
Equivalent Rights, the Grantee may, if approved by the Committee in its
discretion, make a written election to have amounts (which may include Shares)
withheld by the Company from the distribution otherwise to be made, or to
deliver previously owned Shares (not subject to restrictions hereunder), in
order to satisfy the liability for such withholding taxes. In the event that the
Grantee makes, and the Committee permits, such an election, any Shares so
withheld or delivered shall have an aggregate Fair Market Value on the date of
exercise sufficient to satisfy the applicable withholding taxes.

11.3 Withholding Required.

Notwithstanding anything contained in the Plan or the Award Agreement to the
contrary, the Participant’s satisfaction of any tax-withholding requirements
imposed by the Committee shall be a condition precedent to the Company’s
obligation as may otherwise be provided hereunder to provide Shares to the
Participant and to the release of any restrictions as may otherwise be provided
hereunder, as applicable; and the applicable Option, Restricted Shares, Phantom
Shares, Dividend Equivalent Rights or any other applicable Award granted
hereunder shall be forfeited upon the failure of the Participant to satisfy such
requirements with respect to, as applicable, (i) the exercise of the Option,
(ii) the lapsing of restrictions on the Restricted Shares (or other
income-recognition event) or (iii) distributions in respect of any Phantom Share
or Dividend Equivalent Right.

 

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  12. REGULATIONS AND APPROVALS.

(a) The obligation of the Company to sell Shares with respect to an Award
granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and the
obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.

(b) The Committee may make such changes to the Plan as may be necessary or
appropriate to comply with the rules and regulations of any government authority
or to obtain tax benefits applicable to an Award.

(c) Each grant of Options, Restricted Shares, Phantom Shares (or issuance of
Shares in respect thereof) or Dividend Equivalent Rights (or issuance of Shares
in respect thereof), or other Award under Section 9 (or issuance of Shares in
respect thereof), is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance of Options, Restricted Shares,
Phantom Shares, Dividend Equivalent Rights, other Awards or other Shares, no
payment shall be made, or Phantom Shares or Shares issued or grant of Restricted
Shares or other Award made, in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions in a manner acceptable to the Committee.

(d) In the event that the disposition of shares acquired pursuant to the Plan is
not covered by a then current registration statement under the Securities Act,
and is not otherwise exempt from such registration, such Shares shall be
restricted against transfer to the extent required under the Securities Act, and
the Committee may require any individual receiving Shares pursuant to the Plan,
as a condition precedent to receipt of such Shares, to represent to the Company
in writing that such Shares are acquired for investment only and not with a view
to distribution and that such Shares will be disposed of only if registered for
sale under the Securities Act or if there is an available exemption for such
disposition.

(e) Notwithstanding any other provision of the Plan, the Company shall not be
required to take or permit any action under the Plan or any Award Agreement
which, in the good-faith determination of the Company, would result in a
material risk of a violation by the Company of Section 13(k) of the Exchange
Act.

 

  13. INTERPRETATION AND AMENDMENTS; OTHER RULES.

The Committee may make such rules and regulations and establish such procedures
for the administration of the Plan as it deems appropriate. Without limiting the
generality of the foregoing, the Committee may (i) determine the extent, if any,
to which Options, Phantom Shares or Shares (whether or not Restricted Shares) or
Dividend Equivalent Rights shall be forfeited (whether or not such forfeiture is
expressly contemplated hereunder); (ii) interpret the Plan and the Award
Agreements hereunder, with such interpretations to be conclusive and binding on
all persons and otherwise accorded the maximum deference permitted by law; and
(iii) take any other actions and make any other determinations or decisions that
it deems necessary or appropriate in connection with the Plan or the
administration or interpretation thereof. In the event of any dispute or
disagreement as to the interpretation of the Plan or of any rule, regulation or
procedure, or as to any question, right or obligation arising from or related to
the Plan, the decision of the Committee shall be final and binding upon all
persons. Unless otherwise expressly provided hereunder, the Committee, with
respect to any grant, may exercise its discretion

 

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hereunder at the time of the Award or thereafter. Notwithstanding the foregoing,
no repricing of an Award shall be permitted. The Board may amend or terminate
the Plan as it shall deem advisable, except that no amendment may adversely
affect a Participant with respect to an Award previously granted without such
Participant’s written consent unless such amendments are required in order to
comply with applicable laws and the restrictions limiting when an Award may be
paid in cash and precluding Shares covered by Awards paid in cash from being
available again for other Awards may not be changed; provided, however, that the
Plan may not be amended without shareholder approval in any case in which such
an amendment in the absence of shareholder approval would cause the Plan to fail
to comply with any applicable legal requirement or applicable exchange or
similar rule.

 

  14. CHANGES IN CAPITAL STRUCTURE.

(a) If (i) the Company or its Subsidiaries shall at any time be involved in a
merger, consolidation, dissolution, liquidation, reorganization, exchange of
shares, sale of all or substantially all of the assets or shares of the Company
or its Subsidiaries or a transaction similar thereto, (ii) any share dividend,
share split, reverse share split, share combination, reclassification,
recapitalization or other similar change in the capital structure of the Company
or its Subsidiaries, or any distribution to holders of Common Shares other than
cash dividends, shall occur or (iii) any other event shall occur which in the
judgment of the Committee necessitates action by way of adjusting the terms of
the outstanding Awards, then:

(x) the maximum aggregate number and kind of Shares which may be made subject to
Options and Dividend Equivalent Rights under the Plan, the maximum aggregate
number and kind of Restricted Shares that may be granted under the Plan, the
maximum aggregate number of Phantom Shares and other Awards which may be granted
under the Plan may be appropriately adjusted by the Committee in its discretion;
and

(y) the Committee may take any such action as in its discretion shall be
necessary to maintain each Participants’ rights hereunder (including under their
Award Agreements) with respect to Options, Phantom Shares, and Dividend
Equivalent Rights (and, as appropriate, other Awards under the Plan), so that
they are substantially proportionate to the rights existing in such Options,
Phantom Shares and Dividend Equivalent Rights (and other Awards under the Plan)
without dilution or enlargement thereof prior to such event, including, without
limitation, adjustments in (A) the number of Options, Phantom Shares and
Dividend Equivalent Rights (and other Awards under the Plan) granted, (B) the
number and kind of shares or other property to be distributed in respect of
Options, Phantom Shares and Dividend Equivalent Rights (and other Awards under
the Plan, as applicable), (C) the Option Price and Phantom Share Value, and
(D) performance-based criteria established in connection with Awards; provided
that, in the discretion of the Committee, the foregoing clause (D) may also be
applied in the case of any event relating to a Subsidiary if the event would
have been covered under this Section 14(a) had the event related to the Company.

To the extent that such action shall include an increase or decrease in the
number of Shares (or units of other property then available) subject to all
outstanding Awards, the number of Shares (or units) available under Section 4
shall be increased or decreased, as the case may be, proportionately, as may be
determined by the Committee in its discretion.

(b) Any Shares or other securities distributed to a Grantee with respect to
Restricted Shares or otherwise issued in substitution of Restricted Shares shall
be subject to the restrictions and requirements imposed by Section 6, including
depositing the certificates therefor with the Company together with a share
power and bearing a legend as provided in Section 6.2(a).

 

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(c) If the Company shall be consolidated or merged with another corporation or
other entity, each Grantee who has received Restricted Shares that is then
subject to restrictions imposed by Section 6.3 may be required to deposit with
the successor corporation the certificates, if any, for the shares or securities
or the other property that the Grantee is entitled to receive by reason of
ownership of Restricted Shares in a manner consistent with Section 6.2(b), and
such stock, securities or other property shall become subject to the
restrictions and requirements imposed by Section 6.3, and the certificates
therefor or other evidence thereof shall bear a legend similar in form and
substance to the legend set forth in Section 6.2(a).

(d) If a Change of Control shall occur, then subject to the provisions of the
Plan, the Committee may make such adjustments to Awards as it, in its
discretion, determines are necessary or appropriate in light of the Change of
Control which adjustments may include, but are not limited to, the substitution
of shares other than shares of the Company as the shares optioned hereunder, and
the acceleration of the exercisability of the Options, provided that the
Committee determines that such adjustments do not have an adverse economic
impact on the Participant as determined at the time of the adjustments.

(e) The judgment of the Committee with respect to any matter referred to in this
Section 14 shall be conclusive and binding upon each Participant without the
need for any amendment to the Plan.

 

  15. MISCELLANEOUS.

15.1 No Rights to Employment or Other Service.

Nothing in the Plan or in any grant made pursuant to the Plan shall confer on
any individual any right to continue in the employ or other service of the
Company or its Subsidiaries or interfere in any way with the right of the
Company or its Subsidiaries and its shareholders to terminate the individual’s
employment or other service at any time.

15.2 Right of First Refusal; Right of Repurchase.

At the time of grant, the Committee may provide in connection with any grant
made under the Plan that Shares received hereunder shall be subject to a right
of first refusal pursuant to which the Company shall be entitled to purchase
such Shares in the event of a prospective sale of the Shares, subject to such
terms and conditions as the Committee may specify at the time of grant or (if
permitted by the Award Agreement) thereafter, and to a right of repurchase,
pursuant to which the Company shall be entitled to purchase such Shares at a
price determined by, or under a formula set by, the Committee at the time of
grant or (if permitted by the Award Agreement) thereafter.

15.3 No Fiduciary Relationship.

Nothing contained in the Plan (including without limitation Sections 7.5(c) and
8.4), and no action taken pursuant to the provisions of the Plan, shall create
or shall be construed to create a trust of any kind, or a fiduciary relationship
between the Company or its Subsidiaries, or their officers or the Committee, on
the one hand, and the Participant, the Company, its Subsidiaries or any other
person or entity, on the other.

 

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15.4 No Fund Created.

Any and all payments hereunder to any Participant under the Plan shall be made
from the general funds of the Company (or, if applicable, a Participating
Company), no special or separate fund shall be established or other segregation
of assets made to assure such payments, and the Phantom Shares (including for
purposes of this Section 15.4 any accounts established to facilitate the
implementation of Section 7.4(c)) and any other similar devices issued hereunder
to account for Plan obligations do not constitute Common Shares and shall not be
treated as (or as giving rise to) property or as a trust fund of any kind;
provided, however, that the Company may establish a mere bookkeeping reserve to
meet its obligations hereunder or a trust or other funding vehicle that would
not cause the Plan to be deemed to be funded for tax purposes or for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended. The
obligations of the Company under the Plan are unsecured and constitute a mere
promise by the Company to make benefit payments in the future and, to the extent
that any person acquires a right to receive payments under the Plan from the
Company, such right shall be no greater than the right of a general unsecured
creditor of the Company. (If any Affiliate of the Company is or is made
responsible with respect to any Awards, the foregoing sentence shall apply with
respect to such Affiliate.) Without limiting the foregoing, Phantom Shares and
any other similar devices issued hereunder to account for Plan obligations are
solely a device for the measurement and determination of the amounts to be paid
to a Grantee under the Plan, and each Grantee’s right in the Phantom Shares and
any such other devices is limited to the right to receive payment, if any, as
may herein be provided.

15.5 Notices.

All notices under the Plan shall be in writing, and if to the Company, shall be
delivered to the Committee or mailed to its principal office, addressed to the
attention of the Committee; and if to the Participant, shall be delivered
personally, sent by facsimile transmission or mailed to the Participant at the
address appearing in the records of the Company. Such addresses may be changed
at any time by written notice to the other party given in accordance with this
Section 15.5.

15.6 Exculpation and Indemnification.

The Company shall indemnify and hold harmless the members of the Board and the
members of the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act or omission to act in
connection with the performance of such person’s duties, responsibilities and
obligations under the Plan, to the maximum extent permitted by law.

15.7 Captions.

The use of captions in this Plan is for convenience. The captions are not
intended to provide substantive rights.

15.8 Governing Law.

THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH
COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK.

 

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