INVESCO MORTGAGE CAPITAL INC.

2009 EQUITY INCENTIVE PLAN

1.         PURPOSE. The Plan is intended to provide incentives to directors,
officers, advisors, consultants, key employees, and others expected to provide
significant services to the Company and its Subsidiaries, including the
personnel, employees, officers and directors of the other Participating
Companies, to encourage a proprietary interest in the Company, to encourage such
key personnel to remain in the service of the Company and the other
Participating Companies, to attract new personnel with outstanding
qualifications, and to afford additional incentive to others to increase their
efforts in providing significant services to the Company and the other
Participating Companies. In furtherance thereof, the Plan permits awards of
equity-based incentives to key personnel, employees, officers and directors of,
and certain other providers of services to, the Company or any other
Participating Company.

  2.             DEFINITIONS. As used in this Plan, the following definitions
apply:

 

"Act" shall mean the Securities Act of 1933, as amended.

"Award Agreement" shall mean a written agreement evidencing a Grant pursuant to
the Plan.

"Board" shall mean the Board of Directors of the Company.

"Cause" shall mean, unless otherwise provided in the Grantee's Award Agreement,
(i) engaging in (A) willful or gross misconduct or (B) willful or gross neglect,
(ii) repeatedly failing to adhere to the directions of superiors or the Board or
the written policies and practices of the Company, the Subsidiaries, the Manager
or any of their respective affiliates, (iii) the commission of a felony or a
crime of moral turpitude, or any crime involving the Company, the Subsidiaries,
the Manager or any of their respective affiliates, (iv) fraud, misappropriation,
embezzlement or material or repeated insubordination, (v) a material breach of
the Grantee's employment agreement (if any) with the Company, the Subsidiaries,
the Manager or any of their respective affiliates (other than a termination of
employment by the Grantee), or (vi) any illegal act detrimental to the Company;
the Subsidiaries, the Manager or any of their respective affiliates, all as
determined by the Committee.

“Change in 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 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); 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

 

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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 Directors”) cease for any reason other
than due to death to constitute at least a majority of the members of the Board;
provided that any Director 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 Director.

Notwithstanding the foregoing, no event or condition shall constitute a Change
in 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 in Control to the maximum extent possible
(e.g., if applicable, in respect of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Committee" shall mean the Compensation Committee of the Company as appointed by
the Board in accordance with Section 4 of the Plan; provided, however, that the
Committee shall at all times consist solely of persons who, at the time of their
appointment, each qualified as a "Non-Employee Director" under
Rule 16b-3(b)(3)(i) promulgated under the Exchange Act and, to the extent that
relief from the limitation of Section 162(m) of the Code is sought, as an
"Outside Director" under Section 1.162-27(e)(3)(i) of the Treasury Regulations.

"Common Stock" shall mean the Company's common stock, par value $0.01 per share,
either currently existing or authorized hereafter.

"Company" shall mean Invesco Mortgage Capital Inc., a Maryland corporation.

"DER" shall mean a right awarded under Section 11 of the Plan to receive (or
have credited) the equivalent value (in cash or Shares) of dividends paid on
Common Stock.

"Disability" shall mean, unless otherwise provided by the Committee in the
Grantee's Award Agreement, the occurrence of an event which would entitle the
Grantee to the payment of disability income under an approved long-term
disability income plan or a long-term disability as determined by the Committee
in its absolute discretion pursuant to any other standard as may be adopted by
the Committee. 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 respect of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.

 

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"Eligible Persons" shall mean officers, directors, personnel and employees of
the Participating Companies and other persons expected to provide significant
services (of a type expressly approved by the Committee as covered services for
these purposes) to one or more of the Participating Companies. For purposes of
the Plan, a consultant, vendor, customer or other provider of significant
services to the Company or any other Participating Company shall be deemed to be
an Eligible Person, but will be eligible to receive Grants (but in no event
Incentive Stock Options), only after a finding by the Committee in its
discretion that the value of the services rendered or to be rendered to the
Participating Company is at least equal to the value of the Grants being
awarded.

"Employee" shall mean an individual, including an officer of a Participating
Company, who is employed (within the meaning of Code Section 3401 and the
regulations thereunder) by the Participating Company.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Exercise Price" shall mean the price per Share of Common Stock, determined by
the Board or the Committee, at which an Option may be exercised.

"Fair Market Value" shall mean the value of one share of Common Stock,
determined as follows:

 

(i)

If the 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 the 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.

 

(iii)

If neither (i) nor (ii) applies, such value as the Committee in its discretion
may in good faith determine. Notwithstanding the foregoing, where the Shares are
listed or traded, the Committee may make discretionary determinations in good
faith where the Shares have not been traded for 10 trading days.

Notwithstanding the foregoing, with respect to any “stock right” within the
meaning of Section 409A of the Code, Fair Market Value shall not be less than
the “fair market value” of the shares of Common Stock determined in accordance
with the final regulations promulgated under Section 409A of the Code.

"Grant" shall mean the issuance of an Incentive Stock Option, Non-qualified
Stock Option, Restricted Stock, Phantom Share, DER, other equity-based grant as
contemplated herein or any combination thereof as applicable to an Eligible
Person. The Committee will determine the eligibility of personnel, employees,
officers, directors and others expected to provide significant services to the
Participating Companies based on, among other factors, the position and
responsibilities of such individuals, the nature and value to the Participating
Company of such individuals' accomplishments and potential contribution to the
success of the Participating Company whether directly or through its
subsidiaries.

"Grantee" shall mean an Eligible Person to whom Options, Restricted Stock,
Phantom Shares, DERs, Partnership Units or other equity-based awards are granted
hereunder.

 

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"Incentive Stock Option" shall mean an Option of the type described in
Section 422(b) of the Code issued to an Employee of (i) the Company, or (ii) a
“subsidiary corporation” or a “parent corporation” as defined in Section 424(f)
of the Code.

"Manager" shall mean Invesco Institutional (N.A.), Inc. the Company’s manager.

"Non-qualified Stock Option" shall mean an Option not described in
Section 422(b) of the Code.

"Option" shall mean any option, whether an Incentive Stock Option or a
Non-qualified Stock Option, 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.

"Optionee" shall mean any Eligible Person to whom an Option is granted, or the
Successors of the Optionee, as the context so requires.

"Participating Companies" shall mean the Company, the Subsidiaries, the Manager
and any of their respective affiliates, which with the consent of the Board
participates in the Plan.

"Partnership Units" shall mean any OP Units, Preferred Units, Junior Units or
any other fractional share of Partnership Interests as defined in, and
authorized pursuant to, the Award Agreement of Limited Partnership of IAS
Operating Partnership, LP, as amended from time to time.

“Performance Goals” has the meaning set forth in Section 13.

"Phantom Share" shall mean a right, pursuant to the Plan, of the Grantee to
payment of the Phantom Share Value.

"Phantom Share Value," per Phantom Share, shall mean 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.

"Plan" shall mean the Company's 2009 Equity Incentive Plan, as set forth herein,
and as the same may from time to time be amended.

"Purchase Price" shall mean the Exercise Price times the number of Shares with
respect to which an Option is exercised.

"Restricted Stock" shall mean an award of Shares that are subject to
restrictions hereunder.

"Retirement" shall mean, unless otherwise provided by the Committee in the
Grantee's Award Agreement, the Termination of Service (other than for Cause) of
a Grantee:

 

(i)

on or after the Grantee's attainment of age 65;

 

(ii)

on or after the Grantee's attainment of age 55 with five consecutive years of
service with the Participating Companies; or

 

(iii)

as determined by the Committee in its absolute discretion pursuant to such other
standard as may be adopted by the Committee.

 

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"Shares" shall mean shares of Common Stock of the Company, adjusted in
accordance with Section 15 of the Plan (if applicable).

"Subsidiary" shall mean any corporation, partnership, limited liability company
or other entity at least 50% of the economic interest in the equity of which is
owned, directly or indirectly, by the Company or by another subsidiary.

"Successors of the Optionee" shall mean 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" shall mean the time when the employee-employer
relationship or directorship, or other service relationship (sufficient to
constitute service as an Eligible Person), between the Grantee and the
Participating Companies is terminated for any reason, with or without Cause,
including, but not limited to, any termination by resignation, discharge, death
or Retirement; provided, however, Termination of Service shall not include a
termination where there is a simultaneous continuation of service of the Grantee
(sufficient to constitute service as an Eligible Person) for a Participating
Company. The Committee, in its absolute discretion, shall determine the effects
of all matters and questions relating to Termination of Service, including, but
not limited to, the question of whether any Termination of Service was for Cause
and all questions of whether particular leaves of absence constitute
Terminations of Service. For this purpose, the service relationship shall be
treated as continuing intact while the Grantee is on military leave, sick leave
or other bona fide leave of absence (to be determined in the discretion of the
Committee).

  3.             EFFECTIVE DATE. The effective date of the Plan is June 30,
2009.

  4.             ADMINISTRATION.

(a)           Membership on Committee. The Plan shall be administered by the
Committee appointed by the Board. If no Committee is designated by the Board to
act for those purposes, the full Board shall have the rights and
responsibilities of the Committee hereunder and under the Award Agreements.

(b)           Committee Meetings. 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.

                 (c)               Grant of Awards.

 

(i)

The Committee shall from time to time at its discretion select the Eligible
Persons who are to be issued Grants and determine the number and type of Grants
to be issued under any Award Agreement to an Eligible Person. In particular, the
Committee shall (A) determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Grants awarded hereunder (including, but not
limited to the performance goals and periods applicable to the award of Grants);
(B) 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; and
(C) determine or impose other conditions to the Grant or exercise of Options
under the Plan as it may deem appropriate. The Committee may establish such
rules, regulations and procedures for the administration of the Plan as it deems
appropriate, determine the extent, if any, to which Options,

 

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Phantom Shares, Shares (whether or not Shares of Restricted Stock), DERs,
Partnership Units or other equity-based awards shall be forfeited (whether or
not such forfeiture is expressly contemplated hereunder), and 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. The Committee shall also cause each Option to be
designated as an Incentive Stock Option or a Non-qualified Stock Option, except
that no Incentive Stock Options may be granted to an Eligible Person who is not
an Employee of the Company or a “subsidiary corporation” or a “parent
corporation” as defined in Section 424(f) of the Code. The Grantee 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 or effect one or more of the obligations or restrictions imposed on the
Grantee pursuant to the express provisions of the Plan and the Award Agreement.
DERs will be exercisable separately or together with Options, and paid in cash
or other consideration at such times and in accordance with such rules, as the
Committee shall determine in its discretion. Unless expressly provided
hereunder, the Committee, with respect to any Grant, may exercise its discretion
hereunder at the time of the award or thereafter. The Committee shall have the
right and responsibility to interpret the Plan and the interpretation and
construction by the Committee of any provision of the Plan or of any Grant
thereunder, including, without limitation, in the event of a dispute, shall be
final and binding on all Grantees and other persons to the maximum extent
permitted by law. Without limiting the generality of Section 23, no member of
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Grant hereunder.

 

(ii)

Notwithstanding clause (i) of this Section 4(c), any award under the Plan to an
Eligible Person who is a member of the Committee shall be made by the full
Board, but for these purposes the directors of the Corporation who are on the
Committee shall be required to be recused in respect of such awards and shall
not be permitted to vote.

                  (d)          Awards.

 

(i)

Agreements. Grants to Eligible Persons shall be evidenced by written Award
Agreements in such form as the Committee shall from time to time determine
(which Award Agreements need not be in the same form as any other Award
Agreement evidencing Grants under the Plan and need not contain terms and
conditions identical to those applicable to any other Grant under the Plan or to
those applicable to any other Eligible Persons). Such Award Agreements shall
comply with and be subject to the terms and conditions set forth below.

 

(ii)

Number of Shares. Each Grant issued to an Eligible Person shall state the number
of Shares to which it pertains or which otherwise underlie the Grant and shall
provide for the adjustment thereof in accordance with the provisions of
Section 15 hereof.

 

(iii)

Grants. Subject to the terms and conditions of the Plan and consistent with the
Company's intention for the Committee to exercise the greatest permissible

 

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flexibility under Rule 16b-3 under the Exchange Act in awarding Grants, the
Committee shall have the power:

 

(1)

to determine from time to time the Grants to be issued to Eligible Persons under
the Plan and to prescribe the terms and provisions (which need not be identical)
of Grants issued under the Plan to such persons;

 

(2)

to construe and interpret the Plan and the Grants thereunder and to establish,
amend and revoke the rules, regulations and procedures established for the
administration of the Plan. In this connection, the Committee may correct any
defect or supply any omission, or reconcile any inconsistency in the Plan, in
any Award Agreement, or in any related agreements, in the manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
All decisions and determinations by the Committee in the exercise of this power
shall be final and binding upon the Participating Companies and the Grantees;

 

(3)

to amend any outstanding Grant, subject to Section 17, and to accelerate or
extend the vesting or exercisability of any Grant (in compliance with Section
409A of the Code, if applicable) and to waive conditions or restrictions on any
Grants, to the extent it shall deem appropriate; and

 

(4)

generally to exercise such powers and to perform such acts as are deemed
necessary or expedient to promote the best interests of the Company with respect
to the Plan.

  5.             PARTICIPATION.

               (a)                 Eligibility. Only Eligible Persons shall be
eligible to receive Grants under the Plan.

(b)           Limitation of Ownership. No Grants shall be issued under the Plan
to any person who after such Grant would beneficially own more than 9.8% by
value or number of shares, whichever is more restrictive, of the outstanding
shares of Common Stock of the Company, or 9.8% by value or number of shares,
whichever is more restrictive, of the outstanding capital stock of the Company,
unless the foregoing restriction is expressly and specifically waived by action
of the independent directors of the Board.

(c)           Stock Ownership. For purposes of Section 5(b) above, in
determining stock ownership a Grantee shall be considered as owning the stock
owned, directly or indirectly, by or for his brothers, sisters, spouses,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which any person holds an Option shall be considered to be owned
by such person.

(d)           Outstanding Stock. For purposes of Section 5(b) above,
"outstanding shares" shall include all stock actually issued and outstanding
immediately after the issue of the Grant to the Grantee. With respect to the
stock ownership of any Grantee, "outstanding shares" shall include shares
authorized for issue under outstanding Options held by such Grantee, but not
options held by any other person.

6.          STOCK. Subject to adjustments pursuant to Section 15, Grants with
respect to an aggregate of no more than 40 million Shares may be granted under
the Plan (all of which may be issued as Options);

 

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provided, that no Grant may cause the total number of shares of Common Stock
subject to all outstanding awards to exceed 6% of the issued and outstanding
shares of Common Stock on a fully diluted basis (assuming, if applicable, the
exercise of all outstanding Options and the conversion of all warrants, OP Units
and convertible securities into shares of Common Stock). Subject to adjustments
pursuant to Section 15, (i) the maximum number of Shares with respect to which
any Options may be granted in any one year to any Grantee shall not exceed
700,000, and (ii) the maximum number of Shares that may underlie Grants, other
than Grants of Options, in any one year to any Grantee shall not exceed 700,000.
Notwithstanding the first sentence of this Section 6, (i) Shares that have been
granted as Restricted Stock or that have been reserved for distribution in
payment for Options or Phantom Shares but are later forfeited or for any other
reason are not payable under the Plan; and (ii) Shares as to which an Option is
granted under the Plan that remains unexercised at the expiration, forfeiture or
other termination of such Option, may be the subject of the issue of further
Grants. Shares of Common Stock issued hereunder may consist, in whole or in
part, of authorized and unissued shares, treasury shares or previously issued
Shares under the Plan. The certificates for 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. Shares subject to DERs, other than DERs based
directly on the dividends payable with respect to Shares subject to Options or
the dividends payable on a number of Shares corresponding to the number of
Phantom Shares awarded, shall be subject to the limitation of this Section 6.
Notwithstanding the limitations above in this Section 6, except in the case of
Grants intended to qualify for relief from the limitations of Section 162(m) of
the Code, there shall be no limit on the number of Phantom Shares or DERs to the
extent they are paid out in cash that may be granted under the Plan. If any
Phantom Shares or DERs are paid out in cash, the underlying Shares may again be
made the subject of Grants under the Plan, notwithstanding the first sentence of
this Section 6.

   7.           TERMS AND CONDITIONS OF OPTIONS.

(a)           Each Award Agreement with an Eligible Person shall state the
Exercise Price. The Exercise Price for any Option shall not be less than the
Fair Market Value on the date of Grant.

(b)           Medium and Time of Payment. Except as may otherwise be provided
below, the Purchase Price for each Option granted to an Eligible Person shall be
payable in full in United States dollars upon the exercise of the Option. In the
event the Company determines that it is required to withhold taxes as a result
of the exercise of an Option, as a condition to the exercise thereof, an
Employee may be required to make arrangements satisfactory to the Company to
enable it to satisfy such withholding requirements in accordance with
Section 21. If the applicable Award Agreement so provides, or the Committee
otherwise so permits, the Purchase Price may be paid in one or a combination of
the following:

 

(i)

by a certified or bank cashier's check;

 

(ii)

by the surrender of shares of Common Stock in good form for transfer, owned by
the person exercising the Option and having a Fair Market Value on the date of
exercise equal to the Purchase Price, or in any combination of cash and shares
of Common Stock, as long as the sum of the cash so paid and the Fair Market
Value of the shares of Common Stock so surrendered equals the Purchase Price;

 

(iii)

by cancellation of indebtedness owed by the Company to the Grantee;

 

(iv)

subject to Section 17(e), by a loan or extension of credit from the Company
evidenced by a full recourse promissory note executed by the Grantee. The

 

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interest rate and other terms and conditions of such note shall be determined by
the Committee (in which case the Committee may require that the Grantee pledge
his or her Shares to the Company for the purpose of securing the payment of such
note, and in no event shall the stock certificate(s) representing such Shares be
released to the Grantee until such note shall have been paid in full); or

 

(v)

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

Except in the case of Options exercised by certified or bank cashier's check,
the Committee may impose such 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 Stock as payment upon exercise of an Option. Any fractional
shares of Common Stock resulting from a Grantee's election that are accepted by
the Company shall in the discretion of the Committee be paid in cash.

                   (c)         Term and Nontransferability of Grants and
Options.

 

(i)

Each Option under this Section 7 shall state the time or times which all or part
thereof becomes exercisable, subject to the following restrictions.

 

(ii)

No Option shall be exercisable except by the Grantee or a transferee permitted
hereunder.

 

(iii)

No Option shall be assignable or transferable, except by will or the laws of
descent and distribution of the state wherein the Grantee 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 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 and (iii) is otherwise appropriate and desirable.

 

(iv)

No Option shall be exercisable until such time as set forth in the applicable
Award Agreement (but in no event after the expiration of such Grant).

 

(v)

The Committee may not modify, extend or renew any Option granted to any Eligible
Person unless such modification, extension or renewal shall satisfy any and all
applicable requirements of Rule 16b-3 under the Exchange Act and Section 409A of
the Code, to the extent applicable. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option previously granted.

(d)           Termination of Service, Except by Death, Retirement or Disability.
Unless otherwise provided in the applicable Award Agreement, upon any
Termination of Service for any reason other than his or her death, Retirement or
Disability, an Optionee shall have the right, subject to the restrictions of
Section 4(c) above, to exercise his or her Option at any time within three
months after Termination of Service, but only to the extent that, at the date of
Termination of Service, the Optionee's right to exercise such Option had accrued
pursuant to the terms of the applicable Award Agreement and had not previously
been exercised; provided, however, that, unless otherwise provided in the
applicable Award Agreement, if there occurs a Termination of Service by a
Participating Company for Cause or a Termination of Service

 

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by the Optionee (other than on account of death, Retirement or Disability), any
Option not exercised in full prior to such termination shall be canceled.

(e)           Death of Optionee. Unless otherwise provided in the applicable
Award Agreement, if the Optionee of an Option dies while an Eligible Person or
within three months after any Termination of Service other than for Cause or a
Termination of Service by the Optionee (other than on account of death,
Retirement or Disability), and has not fully exercised the Option, then the
Option may be exercised in full, subject to the restrictions of Section 4(c)
above, at anytime within 12 months after the Optionee's death, by the Successor
of the Optionee, but only to the extent that, at the date of death, the
Optionee's right to exercise such Option had accrued and had not been forfeited
pursuant to the terms of the Award Agreement and had not previously been
exercised.

(f)           Disability or Retirement of Optionee. Unless otherwise provided in
the Award Agreement, upon any Termination of Service for reason of his or her
Disability or Retirement, an Optionee shall have the right, subject to the
restrictions of Section 4(c) above, to exercise the Option at any time within 24
months after Termination of Service, but only to the extent that, at the date of
Termination of Service, the Optionee's right to exercise such Option had accrued
pursuant to the terms of the applicable Award Agreement and had not previously
been exercised.

(g)           Rights as a Stockholder. An Optionee, a Successor of the Optionee,
or the holder of a DER shall have no rights as a stockholder with respect to any
Shares covered by his or her Grant until, in the case of an Optionee, the date
of the issuance of a stock certificate for such Shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 15.

(h)           Modification, Extension and Renewal of Option. Within the
limitations of the Plan, and only with respect to Options granted to Eligible
Persons, the Committee may modify, extend or renew outstanding Options or accept
the cancellation of outstanding Options (to the extent not previously exercised)
for the granting of new Options in substitution therefor (but not including
repricings, in the absence of stockholder approval). The Committee may modify,
extend or renew any Option granted to any Eligible Person, unless such
modification, extension or renewal would not satisfy any applicable requirements
of Rule 16b-3 under the Exchange Act and Section 409A of the Code. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, alter or impair any rights or obligations under any Option previously
granted.

(i)            Stock Appreciation Rights. The Committee, in its discretion, may
(taking into account, without limitation, the application of Section 409A of the
Code, as the Committee may deem appropriate), also permit the Optionee to elect
to exercise an Option by receiving Shares, cash or a combination thereof, in the
discretion of the Committee and as may be set forth in the applicable Award
Agreement, 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 Purchase
Price, as determined as of the day the Option is exercised.

(j)            Deferral. The Committee may establish a program (taking into
account, without limitation, the application of Section 409A of the Code, as the
Committee may deem appropriate) under which Optionees will have Phantom Shares
subject to Section 10 credited upon their exercise of Options, rather than
receiving Shares at that time.

 

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(k)           Other Provisions. The Award Agreement authorized under the Plan
may contain such other provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the exercise of the Option) as
the Committee shall deem advisable.

  8.           SPECIAL RULES FOR INCENTIVE STOCK OPTIONS.

(a)           In the case of Incentive Stock Options granted hereunder, the
aggregate Fair Market Value (determined as of the date of the Grant thereof) of
the Shares with respect to which Incentive Stock Options become exercisable by
any Optionee for the first time during any calendar year (under the Plan and all
other plans) required to be taken into account under Section 422(d) of the Code
shall not exceed $100,000.

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

(c)           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 thereupon has a tax-withholding
obligation, shall pay to the Company an amount equal to any withholding tax the
Company is required to pay as a result of the disqualifying disposition.

  9.            PROVISIONS APPLICABLE TO RESTRICTED STOCK.

(a)           Vesting Periods. In connection with the grant of Restricted Stock,
whether or not Performance Goals apply thereto, the Committee shall establish
one or more vesting periods with respect to the shares of Restricted Stock
granted, the length of which shall be determined in the discretion of the
Committee. Subject to the provisions of this Section 9, the applicable Award
Agreement and the other provisions of the Plan, restrictions on Restricted Stock
shall lapse if the Grantee satisfies all applicable employment or other service
requirements through the end of the applicable vesting period.

(b)          Grant of Restricted Stock. 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) authorize the granting of Restricted Stock to Eligible
Persons; (ii) provide a specified purchase price for the Restricted Stock
(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 Stock and (iv) determine or impose other conditions to the grant of
Restricted Stock under the Plan as it may deem appropriate.

               (c)               Certificates.

 

(i)

Each Grantee of Restricted Stock may be issued a stock certificate in respect of
Shares of Restricted Stock awarded under the Plan. Any such certificate shall be
registered in the name of the Grantee. Without limiting the generality of
Section 6, in addition to any legend that might otherwise be required by the
Board or the Company's charter, bylaws or other applicable documents, the
certificates for Shares of Restricted Stock issued hereunder may include any
legend which the Committee deems appropriate to reflect any restrictions on

 

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transfer hereunder or under the applicable 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 Grant, substantially in the following form:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED
HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE
INVESCO MORTGAGE CAPITAL INC. 2009 EQUITY INCENTIVE PLAN, AND AN AWARD AGREEMENT
ENTERED INTO BETWEEN THE REGISTERED OWNER AND INVESCO MORTGAGE CAPITAL INC.
COPIES OF SUCH PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICES OF INVESCO
MORTGAGE CAPITAL INC. AT 1555 PEACHTREE STREET, NE, ATLANTA, GEORGIA, 30309.

 

(ii)

The Committee shall require that any stock 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 grant of Restricted Stock, the Grantee
shall have delivered a stock power, endorsed in blank, relating to the stock
covered by such Grant. If and when such restrictions so lapse, the stock
certificates shall be delivered by the Company to the Grantee or his or her
designee as provided in Section 9(d).

(d)           Restrictions and Conditions. Unless otherwise provided by the
Committee in an Award Agreement, the Shares of Restricted Stock awarded pursuant
to the Plan shall be subject to the following restrictions and conditions:

 

(i)

Subject to the provisions of the Plan and the applicable Award Agreement, during
a period commencing with the date of such Grant 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 Shares of Restricted Stock awarded under the Plan
(or have such Shares attached or garnished). Subject to the provisions of the
applicable Award Agreement and clauses (iii) and (iv) below, the period of
forfeiture with respect 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), or in
Section 15, the Grantee shall have, in respect of the Shares of Restricted
Stock, all of the rights of a stockholder of the Company, including the right to
vote the Shares; provided, however, that cash dividends on such Shares shall,
unless otherwise provided by the Committee in the applicable Award Agreement, be
held by the Company (unsegregated as a part of its general assets) until the
period of forfeiture lapses (and forfeited if the underlying Shares are
forfeited), and paid over to the Grantee as soon as practicable after such
period lapses (if not forfeited). Certificates for Shares (not subject to
restrictions hereunder) shall be delivered to the Grantee or his or her designee
promptly after, and only after, the period of forfeiture shall lapse without
forfeiture in respect of such Shares of Restricted Stock.

 

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(iii)

Termination of Service, Except by Death, Retirement or Disability. Unless
otherwise provided in the applicable Award Agreement, and subject to clause (iv)
below, if the Grantee has a Termination of Service for Cause or by the Grantee
for any reason other than his or her death, Retirement or Disability, during the
applicable period of forfeiture, then (A) all Restricted Stock 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 equal to
the lesser of (x) the amount paid by the Grantee for such forfeited Restricted
Stock as contemplated by Section 9(b), and (y) the Fair Market Value on the date
of termination of the forfeited Restricted Stock.

 

(iv)

Death, Disability or Retirement of Grantee. Unless otherwise provided in the
applicable Award Agreement, in the event the Grantee has a Termination of
Service on account of his or her death, Disability or Retirement, or the Grantee
has a Termination of Service by the Company for any reason other than Cause,
during the applicable period of forfeiture, then restrictions under the Plan
will immediately lapse on all Restricted Stock granted to the applicable
Grantee.

10.            PROVISIONS APPLICABLE TO PHANTOM SHARES.

(a)           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.

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

                 (c)               Vesting.

 

(i)

Subject to the provisions of the applicable Award Agreement and
Section 10(c)(ii), Phantom Shares shall vest as provided in the applicable Award
Agreement.

 

(ii)

Unless otherwise determined by the Committee in an applicable Award Agreement,
the Phantom Shares granted pursuant to the Plan shall be subject to the
following vesting conditions:

 

(1)

Termination of Service for Cause. Unless otherwise provided in the applicable
Award Agreement and subject to clause (2) below, if the Grantee has a
Termination of Service for Cause, all of the Grantee's Phantom Shares (whether
or not such Phantom Shares are otherwise vested) shall thereupon, and with no
further action, be forfeited by the Grantee and cease to be outstanding, and no
payments shall be made with respect to such forfeited Phantom Shares.

 

(2)

Termination of Service for Death, Disability or Retirement of Grantee or by the
Company for Any Reason Other than Cause. Unless otherwise provided in the
applicable Award Agreement, in the event the Grantee has a Termination of
Service on account of his or her death, Disability or

 

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Retirement, or the Grantee has a Termination of Service by the Company for any
reason other than Cause, all outstanding Phantom Shares granted to such Grantee
shall become immediately vested.

 

(3)

Except as contemplated above, in the event that a Grantee has a Termination of
Service, any and all of the Grantee's Phantom Shares which have not vested prior
to or as of such termination shall thereupon, and with no further action, be
forfeited and cease to be outstanding, and the Grantee's vested Phantom Shares
shall be settled as set forth in Section 10(d).

                 (d)          Settlement of Phantom Shares.

 

(i)

Each vested and outstanding Phantom Share shall be settled by the transfer to
the Grantee of one Share; provided, however, that, the Committee at the time of
grant (or, in the appropriate case, as determined by the Committee, thereafter)
may provide that a Phantom Share may be settled (A) in cash at the applicable
Phantom Share Value, (B) in cash or by transfer of Shares as elected by the
Grantee in accordance with procedures established by the Committee or (C) in
cash or by transfer of Shares as elected by the Company.

 

(ii)

Each Phantom Share shall be settled with a single-sum payment by the Company;
provided, however, that, with respect to Phantom Shares of a Grantee which have
a common Settlement Date (as defined below), 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.

 

(iii)

(1)           The settlement date with respect to a Grantee is the first day of
the month to follow the Grantee's Termination of Service ("Settlement Date");
provided, however, that a Grantee may elect, in accordance with procedures to be
adopted by the Committee, that such Settlement Date will be deferred as elected
by the Grantee to a time permitted by the Committee under procedures to be
established by the Committee. Unless otherwise determined by the Committee,
elections under this Section 10(d)(iii)(1) must be made at least six months
before, and in the year prior to the year in which, the Settlement Date would
occur in the absence of such election.

 

 

(2)        Notwithstanding Section 10(d)(iii)(1), the Committee may provide that
distributions of Phantom Shares can be elected at any time in those cases in
which the Phantom Share Value is determined by reference to Fair Market Value to
the extent in excess of a base value, rather than by reference to unreduced Fair
Market Value.

 

 

(3)      Notwithstanding the foregoing, the Settlement Date, if not earlier
pursuant to this Section 10(d)(iii), is the date of the Grantee's death.

 

(iv)

Notwithstanding any other provision of the Plan (taking into account, without
limitation, Section 409A of the Code, as the Committee may deem appropriate),

 

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a Grantee may receive any amounts to be paid in installments as provided in
Section 10(d)(ii) or deferred by the Grantee as provided in Section 10(d)(iii)
in the event of an "Unforeseeable Emergency." For these purposes, an
"Unforeseeable Emergency," as determined by the Committee (taking into account,
without limitation, Section 409A of the Code, as the Committee may deem
appropriate) 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:

 

(1)

through reimbursement or compensation by insurance or otherwise;

 

(2)

by liquidation of the Grantee's assets, to the extent the liquidation of such
assets would not itself cause severe financial hardship; or

 

(3)

by future cessation of the making of additional deferrals under
Section 10(d)(ii) and (iii).

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.

                  (e)         Other Phantom Share Provisions.

 

(i)

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.

 

(ii)

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 10(d)(iii) 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.

 

(iii)

The Committee may (taking into account, without limitation, Section 409A of the
Code, as the Committee may deem appropriate) establish a program under which
distributions with respect to Phantom Shares may be deferred for periods in

 

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addition to those otherwise contemplated by the foregoing provisions of this
Section 10. 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 Grantees may select from among hypothetical
investment alternatives for such deferred amounts in accordance with procedures
established by the Committee.

 

(iv)

Notwithstanding any other provision of this Section 10, any fractional Phantom
Share will be paid out in cash at the Phantom Share Value as of the Settlement
Date.

 

(v)

No Phantom Share shall 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 11, no provision of the Plan shall be interpreted to confer upon any
Grantee of a Phantom Share any voting, dividend or derivative or other similar
rights with respect to any Phantom Share.

                  (f)           Claims Procedures.

 

(i)

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:

 

(1)

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

 

(2)

if the claim is wholly or partially denied, advise the claimant of such denial
by furnishing to him or her 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 10(f) as the provision setting forth the claims
procedure under the Plan.

 

(ii)

The claimant may request a review of any denial of his or her 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.

 

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 11.         PROVISIONS APPLICABLE TO DIVIDEND EQUIVALENT RIGHTS.

(a)           Grant of DERs. 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 DERs to Eligible Persons based on the
dividends declared on Common Stock, to be credited as of the dividend payment
dates, during the period between the date a Grant is issued, and the date such
Grant is exercised, vests or expires, as determined by the Committee. Such DERs
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 DERs granted with respect to Options intended to be qualified
performance-based compensation for purposes of Section 162(m) of the Code, such
DERs shall be payable regardless of whether such Option is exercised. If a DER
is granted in respect of another Grant hereunder, then, unless otherwise stated
in the Award Agreement, or, in the appropriate case, as determined by the
Committee, in no event shall the DER be in effect for a period beyond the time
during which the applicable related portion of the underlying Grant has been
exercised or otherwise settled, or has expired, been forfeited or otherwise
lapsed, as applicable.

               (b)             Certain Terms.

 

(i)

The term of a DER shall be set by the Committee in its discretion.

 

(ii)

Payment of the amount determined in accordance with Section 11(a) shall be in
cash, in Common Stock or a combination of the both, as determined by the
Committee at the time of grant.

(c)           Other Types of DERs. The Committee may establish a program under
which DERs of a type whether or not described in the foregoing provisions of
this Section 11 may be granted to Eligible Persons. For example, without
limitation, the Committee may grant a DER 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 11(d)) to receive a cash payment in an amount equal to
the dividend distributions paid on a Share from time to time.

                (d)                Deferral.

 

(i)

The Committee may (taking into account, without limitation, Section 409A of the
Code, as the Committee may deem appropriate) establish a program under which
Grantees (i) will have Phantom Shares credited, subject to the terms of
Sections 10(d) and 10(e) as though directly applicable with respect thereto,
upon the granting of DERs, or (ii) will have payments with respect to DERs
deferred.

 

(ii)

The Committee may establish a program under which distributions with respect to
DERs may be deferred. 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 Grantees may select from among
hypothetical investment alternatives for such deferred amounts in accordance
with procedures established by the Committee.

12.        OTHER EQUITY-BASED AWARDS. The Board shall have the right (i) to
issue other Grants based upon the Common Stock having such terms and conditions
as the Board may determine, including, without limitation, the grant of Shares
based upon certain conditions, the grant of Partnership Units based upon certain
conditions and the grant of securities convertible into Common Stock, and
(ii) to grant interests (which may be expressed as units or otherwise) in IAS
Operating Partnership, LP.

 

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13.        PERFORMANCE GOALS. The Committee, in its discretion, shall in the
case of Grants (including, in particular, Grants other than Options) intended to
qualify for an exception from the limitation imposed by Section 162(m) of the
Code ("Performance-Based Grants") (i) establish one or more performance goals
("Performance Goals") as a precondition to the issue of Grants, and
(ii) provide, in connection with the establishment of the Performance Goals, for
predetermined Grants to those Grantees (who continue to meet all applicable
eligibility requirements) with respect to whom the applicable Performance Goals
are satisfied. The Performance Goals shall be based upon the criteria set forth
in Exhibit A hereto which is hereby incorporated herein by reference as though
set forth in full. The Performance Goals shall be established in a timely
fashion such that they are considered preestablished for purposes of the rules
governing performance-based compensation under Section 162(m) of the Code. Prior
to the award of Restricted Stock hereunder, the Committee shall have certified
that any applicable Performance Goals, and other material terms of the Grant,
have been satisfied. Performance Goals which do not satisfy the foregoing
provisions of this Section 13 may be established by the Committee with respect
to Grants not intended to qualify for an exception from the limitations imposed
by Section 162(m) of the Code.

14.        TERM OF PLAN. Grants may be granted pursuant to the Plan until the
expiration of 10 years from the effective date of the Plan.

   15.           RECAPITALIZATION AND CHANGES OF CONTROL.

(a)           Subject to any required action by stockholders and to the specific
provisions of Section 16, if (i) the Company 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 stock of the Company
or a transaction similar thereto, (ii) any stock dividend, stock split, reverse
stock split, stock combination, reclassification, recapitalization or other
similar change in the capital structure of the Company, or any distribution to
holders of Common Stock 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 Grants, then:

 

(i)

the maximum aggregate number of Shares which may be made subject to Options and
DERs under the Plan, the maximum aggregate number and kind of Shares of
Restricted Stock that may be granted under the Plan, the maximum aggregate
number of Phantom Shares and other Grants which may be granted under the Plan
may be appropriately adjusted by the Committee in its discretion; and

 

(ii)

the Committee shall take any such action as in its discretion shall be necessary
to maintain each Grantees' rights hereunder (including under their applicable
Award Agreements) so that they are, in their respective Options, Phantom Shares
and DERs (and, as appropriate, other Grants under Section 12), substantially
proportionate to the rights existing in such Options, Phantom Shares and DERs
(and other Grants under Section 12) prior to such event, including, without
limitation, adjustments in (A) the number of Options, Phantom Shares and DERs
(and other Grants under Section 12) granted, (B) the number and kind of shares
or other property to be distributed in respect of Options, Phantom Shares and
DERs (and other Grants under Section 12, as applicable, (C) the Exercise Price,
Purchase Price and Phantom Share Value, and (D) performance-based criteria
established in connection with Grants (to the extent consistent with
Section 162(m) of the Code, as applicable); provided that, in the discretion of
the Committee, the foregoing clause (D) may also be applied in the case of any
event

 

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relating to a Subsidiary if the event would have been covered under this
Section 15(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 Grants, the number of Shares (or units) available under Section 6
above shall be increased or decreased, as the case may be, proportionately.

(b)           Any Shares or other securities distributed to a Grantee with
respect to Restricted Stock or otherwise issued in substitution of Restricted
Stock pursuant to this Section 15 shall be subject to the restrictions and
requirements imposed by Section 9, including depositing the certificates
therefor with the Company together with a stock power and bearing a legend as
provided in Section 9(c)(i).

(c)           If the Company shall be consolidated or merged with another
corporation or other entity, each Grantee who has received Restricted Stock that
is then subject to restrictions imposed by Section 9(d) may be required to
deposit with the successor corporation the certificates for the stock or
securities or the other property that the Grantee is entitled to receive by
reason of ownership of Restricted Stock in a manner consistent with
Section 9(c)(ii), and such stock, securities or other property shall become
subject to the restrictions and requirements imposed by Section 9(d), and the
certificates therefor or other evidence thereof shall bear a legend similar in
form and substance to the legend set forth in Section 9(c)(i).

(d)           The judgment of the Committee with respect to any matter referred
to in this Section 15 shall be conclusive and binding upon each Grantee without
the need for any amendment to the Plan.

(e)           Subject to any required action by stockholders, if the Company is
the surviving corporation in any merger or consolidation, the rights under any
outstanding Grant shall pertain and apply to the securities to which a holder of
the number of Shares subject to the Grant would have been entitled. Subject to
the terms of any applicable Award Agreement, in the event of a merger or
consolidation in which the Company is not the surviving corporation, the date of
exercisability of each outstanding Option and settling of each Phantom Share or,
as applicable, other Grant under Section 12, shall be accelerated to a date
prior to such merger or consolidation, unless the agreement of merger or
consolidation provides for the assumption of the Grant by the successor to the
Company.

(f)           To the extent that the foregoing adjustment related to securities
of the Company, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.

(g)           Except as expressly provided in this Section 15, a Grantee shall
have no rights by reason of subdivision or consolidation of shares of stock of
any class, the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
Shares subject to a Grant or the Exercise Price of Shares subject to an Option.

(h)          Grants made pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business assets.

 

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                 (i)                 Upon the occurrence of a Change of Control:

 

(i)

The Committee as constituted immediately before the Change of Control may make
such adjustments as it, in its discretion, determines are necessary or
appropriate in light of the Change of Control (including, without limitation,
the substitution of stock other than stock of the Company as the stock optioned
hereunder, and the acceleration of the exercisability of the Options and
settling of each Phantom Share or, as applicable, other Grant under Section 12),
provided that the Committee determines that such adjustments do not have a
substantial adverse economic impact on the Grantee as determined at the time of
the adjustments.

 

(ii)

Except as otherwise provided in an applicable Award Agreement, all restrictions
and conditions on each DER shall automatically lapse and all Grants under the
Plan shall be deemed fully vested.

 

(iii)

Notwithstanding the provisions of Section 10, the Settlement Date for Phantom
Shares 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.

16.       EFFECT OF CERTAIN TRANSACTIONS. In the case of (i) the dissolution or
liquidation of the Company, (ii) a merger, consolidation, reorganization or
other business combination in which the Company is acquired by another entity or
in which the Company is not the surviving entity, or (iii) 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, the Plan and the Grants issued hereunder shall
terminate upon the effectiveness of any such transaction or event, unless
provision is made in connection with such transaction for the assumption of
Grants theretofore granted, or the substitution for such Grants of new Grants,
by the successor entity or parent thereof, with appropriate adjustment as to the
number and kind of shares and the per share exercise prices, as provided in
Section 15. In the event of such termination, all outstanding Options and Grants
shall be exercisable in full for at least fifteen days prior to the date of such
termination whether or not otherwise exercisable during such period.

  17.       SECURITIES LAW REQUIREMENTS.

(a)           Legality of Issuance. The issuance of any Shares pursuant to
Grants under the Plan and the issuance of any Grant shall be contingent upon the
following:

 

(i)

the obligation of the Company to sell Shares with respect to Grants issued 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;

 

(ii)

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 stock options; and

 

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(iii)

each grant of Options, Restricted Stock, Phantom Shares (or issuance of Shares
in respect thereof) or DERs (or issuance of Shares in respect thereof), or other
Grant under Section 12 (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, Shares of Restricted Stock, Phantom Shares, DERs, other Grants or
other Shares, no payment shall be made, or Phantom Shares or Shares issued or
grant of Restricted Stock or other Grant 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.

(b)           Restrictions on Transfer. Regardless of whether the offering and
sale of Shares under the Plan has been registered under the Act or has been
registered or qualified under the securities laws of any state, the Company may
impose restrictions on the sale, pledge or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which requires an investment representation or other representation,
each Grantee shall be required to represent that such Shares are being acquired
for investment, and not with a view to the sale or distribution thereof, and to
make such other representations as are deemed necessary or appropriate by the
Company and its counsel. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 17 shall be
conclusive and binding on all persons. Without limiting the generality of
Section 6, stock certificates evidencing Shares acquired under the Plan pursuant
to an unregistered transaction shall bear a restrictive legend, substantially in
the following form, and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law:

"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE
INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH
TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."

(c)           Registration or Qualification of Securities. The Company may, but
shall not be obligated to, register or qualify the issuance of Grants and/or the
sale of Shares under the Act or any other applicable law. The Company shall not
be obligated to take any affirmative action in order to cause the issuance of
Grants or the sale of Shares under the Plan to comply with any law.

(d)           Exchange of Certificates. If, in the opinion of the Company and
its counsel, any legend placed on a stock certificate representing Shares sold
under the Plan is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.

(e)           Certain Loans. 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

 

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determination of the Company, would result in a material risk of a violation by
the Company of Section 13(k) of the Exchange Act.

18.           COMPLIANCE WITH SECTION 409A OF THE CODE.

(a)           Any Award Agreement issued under the Plan that is subject to
Section 409A of the Code shall include such additional terms and conditions as
may be required to satisfy the requirements of Section 409A of the Code.

(b)           With respect to any Grant issued under the Plan that is subject to
Section 409A of the Code, and with respect to which a payment or distribution is
to be made upon a Termination of Service, if the Participant is determined by
the Company to be a “specified employee” within the meaning of Section
409A(a)(2)(B)(i) of the Code and any of the Company’s stock is publicly traded
on an established securities market or otherwise, such payment or distribution
may not be made before the date which is six months after the date of
Termination of Service (to the extent required under Section 409A of the
Code).   

(c)           Notwithstanding any other provision of the Plan, the Board and the
Committee shall administer the Plan, and exercise authority and discretion under
the Plan, to satisfy the requirements of Section 409A of the Code or any
exemption thereto.          

19.        AMENDMENT OF THE PLAN. The Board may from time to time, with respect
to any Shares at the time not subject to Grants, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever. The Board may amend the Plan as
it shall deem advisable, except that no amendment may adversely affect a Grantee
with respect to Grants previously granted unless such amendments are in
connection with compliance with applicable laws; provided, however, that the
Board may not make any amendment in the Plan that would, if such amendment were
not approved by the holders of the Common Stock, cause the Plan to fail to
comply with any requirement of applicable law or regulation, or of any
applicable exchange or similar rule, unless and until the approval of the
holders of such Common Stock is obtained.

20.        APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of an Option, the sale of
Restricted Stock or in connection with other Grants under the Plan will be used
for general corporate purposes.

21.        TAX WITHHOLDING. Each Grantee shall, no later than the date as of
which the value of any Grant first becomes includable in the gross income of the
Grantee for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Company regarding payment of any federal, state
or local taxes of any kind that are required by law to be withheld with respect
to such income. A Grantee may elect to have such tax withholding satisfied, in
whole or in part, by (i) authorizing the Company to withhold a number of Shares
to be issued pursuant to a Grant equal to the Fair Market Value as of the date
withholding is effected that would satisfy the withholding amount due,
(ii) transferring to the Company Shares owned by the Grantee with a Fair Market
Value equal to the amount of the required withholding tax, or (iii) in the case
of a Grantee who is an Employee of the Company at the time such withholding is
effected, by withholding from the Grantee's cash compensation. Notwithstanding
anything contained in the Plan to the contrary, the Grantee's satisfaction of
any tax-withholding requirements imposed by the Committee shall be a condition
precedent to the Company's obligation as may otherwise by provided hereunder to
provide Shares to the Grantee, and the failure of the Grantee to satisfy such
requirements with respect to a Grant shall cause such Grant to be forfeited.

 

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22.        NOTICES. All notices under the Plan shall be in writing, and if to
the Company, shall be delivered to the Board or mailed to its principal office,
addressed to the attention of the Board; and if to the Grantee, shall be
delivered personally or mailed to the Grantee at the address appearing in the
records of the Participating Company. Such addresses may be changed at any time
by written notice to the other party given in accordance with this Section 22.

23.        RIGHTS TO EMPLOYMENT OR OTHER SERVICE. Nothing in the Plan or in any
Grant issued pursuant to the Plan shall confer on any individual any right to
continue in the employ or other service of the Participating Company (if
applicable) or interfere in any way with the right of the Participating Company
and its stockholders to terminate the individual's employment or other service
at any time.

24.        EXCULPATION AND INDEMNIFICATION. To the maximum extent permitted by
law, 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, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct or criminal
acts of such persons.

25.        NO FUND CREATED. Any and all payments hereunder to any Grantee 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 25 any accounts established to
facilitate the implementation of Section 10(d)(iii)) and any other similar
devices issued hereunder to account for Plan obligations do not constitute
Common Stock 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 (or a Participating
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 (or, if applicable, a Participating Company) under the Plan are
unsecured and constitute a mere promise by the Company (or, if applicable, a
Participating 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 (or, if applicable, a Participating Company), such right shall be no
greater than the right of a general unsecured creditor of the Company (or, if
applicable, a Participating Company). 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.

26.        NO FIDUCIARY RELATIONSHIP. Nothing contained in the Plan (including
without limitation Section 10(e)(iii)), 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, the Participating
Companies, or their officers or the Committee, on the one hand, and the Grantee,
the Company, the Participating Companies or any other person or entity, on the
other.

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

28.        GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY THE LAWS OF NEW YORK,
WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.

 

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EXHIBIT A

 

PERFORMANCE CRITERIA

Performance-Based Grants intended to qualify as "performance based" compensation
under Section 162(m) of the Code, may be payable upon the attainment of
objective performance goals that are established by the Committee and relate to
one or more Performance Criteria, in each case on specified date or over any
period, up to 10 years, as determined by the Committee. Performance Criteria may
be based on the achievement of the specified levels of performance under one or
more of the measures set out below relative to the performance of one or more
other corporations or indices.

"Performance Criteria" means the following business criteria (or any combination
thereof) with respect to one or more of the Company, any Participating Company
or any division or operating unit thereof:

 

i)

pre-tax income,

 

ii)

after-tax income,

 

iii)

net income (meaning net income as reflected in the Company's financial reports
for the applicable period, on an aggregate, diluted and/or per share basis),

 

iv)

operating income,

 

v)

cash flow,

 

vi)

earnings per share,

 

vii)

return on equity,

 

viii)

return on invested capital or assets,

 

ix)

cash and/or funds available for distribution,

 

x)

appreciation in the fair market value of the Common Stock,

 

xi)

return on investment,

 

xii)

total return to stockholders (meaning the aggregate Common Stock price
appreciation and dividends paid (assuming full reinvestment of dividends) during
the applicable period),

 

xiii)

net earnings growth,

 

xiv)

stock appreciation (meaning an increase in the price or value of the Common
Stock after the date of grant of an award and during the applicable period),

 

xv)

related return ratios,

 

xvi)

increase in revenues,

 

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xvii)

the Company's published ranking against its peer group of real estate investment
trusts based on total stockholder return,

 

xviii)

net earnings,

 

xix)

changes (or the absence of changes) in the per share or aggregate market price
of the Company's Common Stock,

 

xx)

number of securities sold,

 

xxi)

earnings before any one or more of the following items: interest, taxes,
depreciation or amortization for the applicable period, as reflected in the
Company's financial reports for the applicable period, and

 

xxii)

total revenue growth (meaning the increase in total revenues after the date of
grant of an award and during the applicable period, as reflected in the
Company's financial reports for the applicable period).

Except as otherwise expressly provided, all financial terms are used as defined
under Generally Accepted Accounting Principles ("GAAP") and all determinations
shall be made in accordance with GAAP, as applied by the Company in the
preparation of its periodic reports to stockholders.

To the extent permitted by Section 162(m) of the Code, unless the Committee
provides otherwise at the time of establishing the performance goals, for each
fiscal year of the Company, the Committee may provide for objectively
determinable adjustments, as determined in accordance with GAAP, to any of the
Performance Criteria described above for one or more of the items of gain, loss,
profit or expense: (A) determined to be extraordinary or unusual in nature or
infrequent in occurrence, (B) related to the disposal of a segment of a
business, (C) related to a change in accounting principle under GAAP,
(D) related to discontinued operations that do not qualify as a segment of a
business under GAAP, and (E) attributable to the business operations of any
entity acquired by the Company during the fiscal year.

 

 

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