Exhibit 10.3
2007 ANNUAL INCENTIVE PLAN
Performance Period
     January 1, 2007 – December 31, 2007 (the “Performance Period”).
Participants
     On the adoption date of the Plan (as defined below), the participants of
the Plan shall be each individual who is employed by American Financial Realty
Trust (the “Trust”) in one the following positions: Chief Executive Officer
(“CEO”), Executive Vice President (“EVP”), Senior Vice President (“SVP”), Vice
President (“VP”), and Assistant Vice President (“AVP”), as of such date. After
the adoption date of the Plan, the Compensation and Human Resources Committee
(the “Committee”) of the Board of Trustees of the Trust (the “Board”) may
designate, in its sole discretion, any other officer or employee of the Trust,
First States Group, L.P. (the “Company”) or any subsidiary or affiliate of the
Trust (a “participating employer”) as eligible to participate in the Plan. Any
such officer or employee subsequently designated as eligible to participate in
the Plan shall be deemed a participant in the Plan on the date determined by the
Committee. All individuals participating in the Plan shall herein be referred to
collectively as the “Participants” and individually as a “Participant”.
Plan Description
     Under the 2007 Annual Incentive Plan (the “Plan”), eligible employees have
the opportunity to earn an annual incentive bonus (the “Annual Bonus”) based on
their and the Trust’s achievement of certain performance metrics. The maximum
value of the Annual Bonus that a Participant shall be entitled to receive will
be equivalent to the Maximum Bonus Opportunity (as defined below) at the end of
the Performance Period if the performance metrics (as described below) are
cumulatively attained at the high/maximum level, and the minimum value of the
Annual Bonus that a Participant shall be entitled to receive will be equivalent
to the Minimum Bonus Opportunity (as defined below) if the performance metrics
are cumulatively attained at the threshold/minimum level. If the performance
metrics achieved are between the threshold/minimum and the high/maximum
performance metric levels, then a linear interpolation will determine the
percentage of achievement, subject to modification as set forth in this Plan,
which will then be used to determine the value of the Annual Bonus to be paid.
No award will be earned under the Plan with respect to any metric for
performance below the threshold/minimum level of achievement for such metric,
and performance above the maximum/high value will be capped at the Maximum Bonus
Opportunity.
     As soon as administratively practicable following the conclusion of the
Performance Period, the Committee, together with the other independent trustees
of the Board, shall determine each Participant’s level of achievement (on a
cumulative basis) under the Plan of the applicable performance metrics. Awards
shall be paid by the Trust to each Participant eligible to receive an award
under the Plan on or after January 1, 2008, but not later than March 15, 2008,
and shall be payable in cash. In addition, certain Participants shall be
eligible to receive an additional award

 

--------------------------------------------------------------------------------

 

in restricted common shares of beneficial ownership, par value $0.001 per share,
of the Trust (“Restricted Common Shares”) that are subject to vesting, as
further described below.
     The CEO, EVPs, SVPs and any other executive that received a Long Term
Incentive Plan (“LTIP”) dissolution or equivalent restricted share award in 2007
shall only be eligible to receive cash incentive awards under the Plan. VPs and
AVPs who did not receive LTIP dissolution or equivalent awards shall be eligible
to receive both cash and restricted share awards under the Plan, as determined
by the Committee, in its sole discretion.
Performance Metrics
     The performance metrics that will be measured to determine the Annual Bonus
awarded to each Participant shall be based on the achievement of the following
performance metrics: (i) Corporate Metric — achievement of AFFO targets;
(ii) Strategic Metric – achievement of dividend coverage through earnings from
core operations while maintaining target debt to asset value ratios; and
(iii) Individual Metric – achievement of personal goals designed to measure the
Participant’s contribution toward the achievement of his or her business unit’s
achievement of its objectives and contribution to the achievement of the Trust’s
performance metrics. The Corporate and Strategic Metrics are each weighed at
33.3% and the Individual Metric is weighed at 33.4%, except that for the CEO
only the Corporate and Strategic Metrics will be weighed, with each having a
weight of 50%. The relevant performance criteria measurements for the foregoing
are set forth in the attached Exhibit A. The conversion of the performance
metrics to the relevant weighting percentage shall be determined separately
based on the achievement of the individual metrics, with achievement at the
high/maximum level equal to 33.3% (33.4% for the Individual Metric) (to 50% for
the CEO as to clauses (i) and (ii) above) and achievement at the
threshold/minimum level equal to the threshold/minimum bonus opportunity, with
achievement (i) between the threshold/minimum and high/maximum performance
metric levels, then a linear interpolation will determine the percentage of
achievement, (ii) below the threshold/minimum level, then no percentage
achievement for the metric and (iii) above the high/maximum level, then
percentage achievement will be deemed at the high/maximum level.
2007 Cash Incentive Opportunities
     The potential cash portion of the Annual Bonus shall be awarded based on
the achievement of the performance metrics described above, and the actual
amount of such award shall be based on a percentage of the Participant’s base
salary as compared to the Maximum Bonus Opportunity and the Minimum Bonus
Opportunity.
     Each Participant shall have a “Maximum Bonus Opportunity,” which shall be
the high/maximum opportunity for each Participant if the performance metrics
attained at the end of the Performance Period were achieved at the high/maximum
level. The Maximum Bonus Opportunity for each Participant shall be determined
based on the Participant’s Maximum Dollar Value (as defined below). The “Maximum
Dollar Value” for the CEO and each EVP and SVP upon adoption of the Plan will be
based on the following percentages of such Participant’s designated base salary
at the beginning of the Performance Period (or such other percentage if such
individual becomes eligible to participate in the Plan after the adoption of the
Plan): (i)

2

--------------------------------------------------------------------------------

 

CEO, 200%; (ii) EVPs, 150%; and (iii) SVPs, 127.5%. The “Maximum Dollar Value”
that each VP and AVP, as well as each other Participant in the Plan who is not
the CEO, or an EVP or SVP at the time that the Plan is adopted, shall be
eligible to receive will be determined by the CEO and approved by the Committee,
in its sole discretion, and need not be uniform as among the Participants.
     In addition to a Maximum Bonus Opportunity, each Participant shall have a
“Minimum Bonus Opportunity”, which shall be the threshold/minimum opportunity
for each Participant if the performance metrics attained at the end of the
Performance Period were achieved at the threshold/minimum level. The Minimum
Bonus Opportunity for each Participant shall be determined based on the
Participant’s Minimum Dollar Value (as defined below). The “Minimum Dollar
Value” for the CEO and each EVP and SVP upon initial participation in the Plan
will be based on the following percentages of such Participant’s designated base
salary at the beginning of the Performance Period (or such other percentage if
such individual becomes eligible to participate in the Plan after the adoption
of the Plan): (i) CEO, 100%, (ii) EVPs, 50%, and (iii) SVPs, 42.5%. The “Minimum
Dollar Value” that each VP and AVP, as well as each other Participant in the
Plan who is not the CEO, or an EVP or SVP at the time that the Plan is adopted,
shall be eligible to receive will be determined by the CEO and approved by the
Committee, in its sole discretion, and need not be uniform as among the
Participants.
     Following the end of the Performance Period, the Committee, together with
the other independent trustees of the Board, shall determine, in its sole
discretion, whether and to what extent the separate performance metrics have
been attained and certify the results of the Performance Period for each
Participant. Once determined, the Committee shall certify the results and
multiply the achievement of the relevant metric by the corresponding weighting
percentage for such metric to determine the portion of the Annual Bonus, if any,
attributable to such metric. Once the separate metrics have been determined, the
Committee will take the sum of the converted metrics for each Participant to
determine that Participant’s Annual Bonus, if any, for the Performance Period.
The attached Exhibit B sets forth several examples that illustrate this
calculation.
2007 Equity Incentive Opportunities
     1. CEO, EVP and SVP Equity Incentive Opportunities: These Participants
shall not be entitled to receive an equity incentive award under the Plan as
part of their Annual Bonus for the 2007 calendar year if such Participant
received an LTIP dissolution or equivalent restricted share award in 2007.
     2. VP and AVP Equity Incentive Opportunities: VPs and AVPs who did not
receive an LTIP dissolution or equivalent restricted share award in 2007 shall
be eligible to receive at the end of the Performance Period Restricted Common
Shares under the Plan in such amounts as determined by the CEO and approved (on
an aggregate or pooled basis) by the Committee; provided, that no Participant
shall have a minimum guaranteed Restricted Common Share Award, such award, if
any, shall be in the sole discretion of the Committee, and no such Restricted
Common Share Award need be uniform as among the Participants.

3

--------------------------------------------------------------------------------

 

Vesting of Restricted Common Shares
     Restricted Common Shares shall vest in three annual installments of
one-third each commencing on December 31, 2008. Dividends on unvested Restricted
Common Shares shall accrue from the date of grant of the Restricted Common
Shares and be paid, in cash, to the grantee on each annual vesting date with
respect to the corresponding Restricted Common Shares that vest on such date.
Any and all unvested Restricted Common Shares and accrued dividends thereon
shall fully vest upon a “Change of Control”1 of the Trust. If a Participant who
has been granted Restricted Common Shares is terminated for “Cause”2 or
voluntarily resigns, all unvested Restricted Common Shares and accrued dividends
thereon shall be forfeited. If a Participant who has been granted Restricted
Common Shares is terminated by the Trust or the Company without Cause or by the
Trust or the Company due to the death or “Permanent Disability”3, the
Participant shall nevertheless be entitled to receive vesting of such
Participant’s Restricted Common Shares and accrued dividends thereon that were
scheduled to vest on December 31 of the calendar year in which the termination
occurs. Except as provided above, all unvested Restricted Common Shares and
dividends accrued thereon shall be forfeited when a Participant who holds
Restricted Common Shares employment is terminated.
New Plan Participants
     At the discretion of the Committee, new Participants may be added to the
Plan from time to time with such pro rata awards as the CEO shall recommend and
the Committee shall approve.
Common Shares Subject to the Equity Incentive Plan
     The Restricted Common Shares issued under the Plan shall be issued from the
American Financial Realty Trust 2002 Equity Incentive Plan, as amended from time
to time or such other equity incentive plan as determined by the Committee, in
its sole discretion, (the “Equity Incentive Plan”). The provisions of the Equity
Incentive Plan are hereby incorporated by reference as set forth herein with
respect to Restricted Common Shares awarded under the Plan.
 

1   For purposes of the Plan, “Change of Control” will be deemed to have taken
place upon the occurrence of any of the following events: (i) any person, entity
or affiliated group, excluding the Trust or any employee benefit plan of the
Trust, acquiring more than 50% of the then outstanding voting shares of the
Trust; (ii) the consummation of any merger or consolidation of the Trust into
another company, such that the holders of the voting shares of the Trust
immediately prior to such merger or consolidation is less than 50% of the voting
power of the securities of the surviving company or the parent of such surviving
company; (iii) the complete liquidation of the Trust or the sale or disposition
of all or substantially all of the Trust’s assets, such that after the
transaction, the holders of the voting shares of the Trust immediately prior to
the transaction is less than 50% of the voting securities of the acquiror or the
parent of the acquiror; or (iv) a majority of the Board votes in favor of a
decision that a Change of Control has occurred.   2   “Cause” means any of the
following: (i) willful refusal by the participant to follow lawful directives of
the Board; (ii) failure to adhere to the Trust’s, the Company’s or a
participating employer’s reasonable and customary guidelines of employment or
reasonable and customary corporate governance guidelines or policies, including
without limitation the code of business ethics adopted by the Board; (iii) the
participant’s conviction of, or plea of guilty or nolo contendere to, a felony
or of any crime involving moral turpitude, fraud or embezzlement; (iv) gross
negligence or willful misconduct of the participant resulting in material harm
or loss to the Trust, the Company or any participating employer or material
damage to the reputation of the Trust, the Company or any participating
employer; (v) material breach by the participant of any one or more of the
covenants contained in the participant’s employment agreement; or (vi) violation
of the participant’s fiduciary duties to the Trust, the Company or any
participating employer.   3   “Permanent Disability” shall have the same meaning
as under the Trust’s, the Company’s or a participating employer’s long-term
disability plan, in which the participant is participating at the time of such
Permanent Disability.

4

--------------------------------------------------------------------------------

 

Administration
     Notwithstanding the terms and conditions of the Plan as set forth herein,
the Committee retains the right, in its discretion, to (a) alter or modify the
incentive bonus criteria, (b) grant awards for achievement between the threshold
and high levels on a non-liner interpolation basis, and/or (c) make different or
supplemental cash or restricted share awards to any Participant, all as the
Committee deems appropriate or necessary. The Board or the Committee may
terminate or amend the Plan at any time; provided, that no termination of the
Plan may impact outstanding awards and no amendment may be made to the Plan or
an outstanding award which would be have a materially adverse effect to the
Participant without the Participant’s consent, except as necessary to comply
with applicable law.
     All decisions and determinations by the Committee shall be final,
conclusive and binding on the Trust, the Participants, and any other persons
having or claiming an interest hereunder. All awards under the Plan shall be
granted conditional upon the Participant’s acknowledgement, by continuing in
employment with the Trust, the Company or such participating employer, that all
decisions and determinations of the Committee shall be final and binding on the
Participant, his or her beneficiaries and any other person having or claiming an
interest in such awards.

5