Exhibit 10.1

 

PUBLIC STORAGE, INC.

PERFORMANCE-BASED COMPENSATION PLAN

FOR COVERED EMPLOYEES

 

Effective January 1, 2005

 

1. Purpose. The purpose of the Public Storage, Inc. Performance-Based
Compensation Plan for Covered Employees is to permit certain compensation
payable to covered employees of Public Storage, Inc. and its subsidiaries to
qualify as deductible performance-based compensation for federal income tax
purposes.

 

2. Definitions. As used in the Plan, the following terms shall have the meanings
set forth below:

 

(a) “Affiliate” shall mean (i) an entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.

 

(b) “Base Pay” shall mean the annual base rate of cash compensation, excluding
bonuses.

 

(c) “Board” shall mean the Board of Directors of the Company.

 

(d) “Bonus” shall mean a cash payment or award of Restricted Stock Units to a
Participant, which may be in addition to Base Pay, made pursuant to the Plan
with respect to a particular Performance Period. The amount of a Bonus may be
less than or equal to the Bonus Potential.

 

(e) “Bonus Potential” shall mean the Bonus amount that may be paid in cash
and/or Restricted Stock Units if 100% of applicable Performance Measures are
achieved in the Performance Period. The cash portion of the Bonus Potential
shall be equal to a fixed percentage of the Participant’s Base Pay for such
Performance Period.

 

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(g) “Committee” shall mean the Committee designated pursuant to Section 4 of the
Plan.

 

(h) “Company” shall mean Public Storage, Inc., a California corporation.

 

(i) “Covered Employee” shall mean at any date, as determined by the Committee in
its sole discretion, any individual who with respect to the previous taxable
year of the Company, was a “covered employee” of the Company within the meaning
of Code Section 162(m) or who is reasonably expected to be such a “covered
employee” with respect to the then current taxable year of the Company or with
respect to the taxable year of the Company in which any applicable Bonus will be
paid.

 

(j) “Fiscal Year” shall mean the twelve-month period from January 1 through
December 31.

 

(k) “Participant” shall mean each Covered Employee of the Company in active
service as designated by the Committee as eligible for participation in the Plan
and who is selected by the Committee for participation in the Plan prior to the
Predetermination Date.

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(l) “Performance Measures” shall mean, on a GAAP or non-GAAP basis, any of the
following measurable criteria tied to the Company’s performance that the
Committee may determine, including but not limited to net income, funds from
operations, funds available for distribution, revenues, earnings per share,
return on assets, return on equity, return on invested capital, operational
efficiency measures, rental income, move-in activity and occupancy level of
same-store properties, ratio of earnings to fixed charges, price of the
Company’s common stock and level of acquisition and development activity.
Performance Measures may be based on one or more business criteria that apply to
an individual, a business unit or the Company as a whole, but need not be based
on an increase or positive result under the business criteria selected.

 

(m) “Performance Period” shall mean a twelve-month period of time based upon the
Company’s Fiscal Year, or such other time period as shall be determined by the
Committee.

 

(n) “Plan” shall mean the Public Storage, Inc. Performance-Based Compensation
Plan for Covered Employees, as amended from time to time.

 

(o) “Predetermination Date” shall mean (i) the earlier of a date 90 days after
the commencement of the Performance Period, or a date not later than the
expiration of 25% of the Performance Period, provided that the satisfaction of
selected Performance Measures is substantially uncertain at such time as
determined in accordance with applicable Treasury Regulations or governing
precedent, or (ii) such other date on which a performance goal is considered to
be pre-established pursuant to Code Section 162(m).

 

(p) “Restricted Stock Units” shall mean restricted stock units granted in
accordance with the Public Storage, Inc. 2001 Stock Option and Incentive Plan or
a successor or replacement of such plan.

 

3. Eligibility. Any Covered Employee employed by the Company or any of its
Affiliates during a Performance Period and in active service is eligible to be a
Participant under the Plan for such Performance Period, whether or not so
employed or living at the date a Bonus is paid, and may be considered by the
Committee for a Bonus. A Participant is not rendered ineligible to be a
Participant by reason of being a member of the Board. Notwithstanding any other
provision of this Plan to the contrary, the Committee shall have sole discretion
to designate or approve the Participants for any given Performance Period.

 

4. Administration.

 

(a) Unless otherwise designated by the Board, the Compensation Committee of the
Board shall be the Committee under the Plan and it shall have at least two
members. A director may service as a member or an alternate member of the
Committee only during periods in which the director is an “outside director” as
described in Code Section 162(m). Subsequent determination that a member or
alternate member of the Committee was not an “outside director” shall not
invalidate the actions taken by the Committee during such period. The Committee
shall have full power and authority to construe, interpret and administer the
Plan. It may issue rules and regulations for administration of the Plan and
shall meet at such times and places as it may determine. A majority of the
members of the Committee shall constitute a quorum and all decisions of the
majority of the members of the Committee shall be final, conclusive and binding
upon all parties, including the Company, its shareholders, employees and
Participants.

 

(b) The expenses of the administration of the Plan shall be borne by the
Company.

 

5. Term. Subject to Section 10(l), the Plan shall be effective as of January 1,
2005, and shall be applicable for 2005 and future Fiscal Years of the Company
unless amended or terminated by the Board or the Committee pursuant to Section
10(e).

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6. Determination of Plan Participants, Performance Measures and Bonus Potential.
Prior to the Predetermination Date, the Committee shall designate or approve (a)
the Participants, (b) the applicable Performance Measure or Measures (and the
percentages allocated to each Participant for each Performance Measure, if more
than one) for each Participant; (c) the Bonus Potential for each Participant
(including the amounts potentially payable in cash and/or Restricted Stock
Units) and (d) the Performance Period. In addition, notwithstanding the
foregoing, all Performance Measure(s) shall be of such a nature that an
objective third party having knowledge of all the relevant facts could determine
at the end of the Performance Period whether performance results with respect to
such Performance Measure(s) have been achieved.

 

7. Amount of Bonus.

 

(a) Calculation. Within 90 days after the end of the relevant Performance
Period, the Committee shall determine the amount of the actual Bonus Potential
for each Participant by:

 

(i) Determining the actual performance results for each Performance Measure; and

 

(ii) Determining the maximum amount to which each Participant would be entitled
based on the percentage allocated by the Committee to each Performance Measure,
if more than one.

 

(b) Committee Negative Discretion. The actual Bonus Potential calculated for
each Participant pursuant to Section 7(a) shall represent the maximum award for
the Participant under the Plan for the relevant Performance Period.
Notwithstanding any other provision of this Plan, the Committee may, in the
exercise of its sole discretion and based on any factors the Committee deems
appropriate, reduce or eliminate to zero the amount of a Bonus to a Participant
otherwise calculated in accordance with the provisions of Section 7(a). The
Committee shall make a determination of whether and to what extent to reduce
Bonuses under the Plan for each Performance Period at such time or times
following the close of the Performance Period as the Committee shall deem
appropriate. Any reduction in the amount of a Bonus to a Participant for a
Performance Period shall have no effect on the amount of the Bonus to any other
Participant for such period.

 

(c) Fixed Maximum. Notwithstanding any other provision of this Plan, the maximum
cash Bonus that may be paid to a Participant under the Plan with respect to a
particular Performance Period is $1,500,000 and the maximum award of Restricted
Stock Units that may be granted to a Participant under the Plan with respect to
a particular Performance Period is limited to 50,000 Restricted Stock Units. To
the extent the period of time defining a Performance Period is changed by the
Committee from the initially established twelve-month period, then the maximum
Bonus that may be paid to a Participant under the Plan with respect to the
changed Performance Period will be an amount that bears the same relationship to
the new period of time as the above amount bears to the initial twelve-month
Performance Period.

 

(d) Bonus Determination and Certification. Within 90 days after the end of the
relevant Performance Period, as set forth in Section 7(a) to (c) above, the
Committee shall determine the amount of the actual Bonus for each Participant,
and prior to payment of any such amounts, shall certify by resolution duly
adopted by the Committee the value of the Bonus for each Participant so
determined.

 

8. Payment of Bonuses.

 

(a) Payment of a cash Bonus and award of Restricted Stock Units as a Bonus to a
Participant shall be effected as soon as practicable after determination of and
certification of the amount of the Bonus under Section 7 above.

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(b) The payment of a Bonus with respect to a specific Performance Period
requires that the employee be on the Company’s payroll as of the end of such
Performance Period, except to the extent that the Committee determines otherwise
and except as provided in Section 9 below.

 

(c) Payments of Bonuses to Participants who are on the payroll of Affiliates of
the Company shall, as determined by the Committee, be paid by or appropriately
allocated to such entities.

 

9. Termination. Unless the Committee determines otherwise, a Participant will
forfeit any Bonus for a Performance Period during which a Participant is
involuntarily terminated for cause or voluntarily terminates his or her
employment with the Company for reasons other than death, permanent and total
disability, or retirement at the age and service-year set by the Company or the
local law requirements where the Participant is employed.

 

10. Miscellaneous.

 

(a) No Assignment. No portion of any Bonus under the Plan may be assigned or
transferred other than by will or the laws of descent and distribution prior to
the payment thereof.

 

(b) Tax Requirements. All payments made pursuant to the Plan shall be subject to
all applicable taxes or contributions required by U.S. federal or state law or
by non-U.S. local law to be paid or withheld, and Participants shall pay to the
Company or relevant tax authorities all amounts determined to be reasonably
necessary to satisfy any such obligations, all in accordance with the procedures
to be established by the Committee.

 

(c) No Additional Participant Rights. The selection of an individual for
participation in the Plan shall not give such Participant any right to be
retained in the employ of the Company or any of its Affiliates, and the right of
the Company and any such Affiliate to dismiss such Participant or to terminate
any arrangement pursuant to which any such Participant provides services to the
Company, with or without cause, is specifically reserved. No person shall have
claim to a Bonus under the Plan, except as otherwise provided for herein, or to
continued participation under the Plan. There is no obligation for uniformity of
treatment of Participants under the Plan. The benefits provided for Participants
under the Plan shall be in addition to, and shall in no way preclude other forms
of compensation to, or in respect of, such Participants. It is expressly agreed
and understood that the employment is terminable at the will of either party
and, if such Participant is a party to an employment contract with the Company
or one of its Affiliates, in accordance with the terms and conditions of the
Participant’s employment contract.

 

(d) Liability. The Board and Committee shall be entitled to rely on the advice
of counsel and other experts, including the independent registered public
accountants for the Company. No member of the Board or of the Committee, any
officers of the Company or its Affiliates or any of their designees shall be
liable for any act or failure to act under the Plan, except in circumstances
involving bad faith on the part of such member, officer or designee.

 

(e) Amendment; Suspension; Termination. The Board or Committee may, at any time
and from time to time, amend, suspend or terminate the Plan or any part of the
Plan as it may deem proper and in the best interests of the Company. In the case
of Participants employed outside the United States, the Board, the Committee or
their designees may vary the provisions of the Plan as deemed appropriate to
conform with local laws, practices and procedures. In addition, the Chief
Executive Officer or the Chief Legal Officer of the Company is authorized to
make certain minor or administrative changes required by or made desirable by
government regulation. Any modification of the Plan may affect present and
future Participants and the amount of any Bonus hereunder.

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(f) Other Compensation Arrangements. Nothing contained in the Plan shall prevent
the Company or any Affiliate of the Company from adopting or continuing in
effect other compensation arrangements, which arrangements may be either
generally applicable or applicable only in specific cases.

 

(g) Governing Law. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of California and applicable federal law.

 

(h) No Trust. Neither the Plan nor any Bonus shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company and any Participant. To the extent that the Participant acquires a
right to receive payments from the Company in respect of any Bonus, such right
shall be no greater than the right of any unsecured general creditor of the
Company.

 

(i) Section 162(m). All payments under this Plan are designed to satisfy the
special requirements for performance-based compensation set forth in Code
Section 162(m)(4)(C), and the Plan shall be so construed. Furthermore, if a
provision of the Plan causes a payment to fail to satisfy these special
requirements, it shall be deemed amended to satisfy the requirements to the
extent permitted by law and subject to Committee approval.

 

(j) Designation of Beneficiaries. A Participant may, if the Committee permits,
designate a beneficiary or beneficiaries to receive all or part of the Bonus
which may be paid to the Participant, or may be payable, after such
Participant’s death. A designation of beneficiary shall be made in accordance
with procedures specified by the Company and may be replaced by a new
designation or may be revoked by the Participant at any time. In case of the
Participant’s death, a Bonus with respect to which a designation of beneficiary
has been made (to the extent it is valid and enforceable under applicable law)
shall be paid to the designated beneficiary or beneficiaries. Any Bonus granted
or payable to a Participant who is deceased and not subject to such a
designation shall be distributed to the Participant’s estate. If there shall be
any question as to the legal right of any beneficiary to receive a Bonus under
the Plan, the amount in question may be paid to the estate of the Participant,
in which event the Company or its Affiliates shall have no further liability to
anyone with respect to such amount.

 

(k) Effect of Bonuses on Other Company Benefits. It is the intent of the Company
that to the extent other Company benefits payable or accruable to Participants
are based on a Participant’s earnings or compensation level, those other
benefits shall be based on Base Pay (and shall not take into account Bonuses),
unless the Committee determines otherwise.

 

(l) Shareholder Approval. Adoption of this Plan is subject to the approval of
the Company’s shareholders, who will be asked to approve the Plan to the extent
necessary to allow the Company under Code Section 162(m) to preserve the tax
deductibility of payments for performance-based compensation made under the
Plan. Plan amendments shall require shareholder approval only if, and to the
extent required by, Section 162(m) of the Code, other applicable law or the
applicable rules of any applicable stock exchange.