Exhibit 10.5





Exhibit 10.5




CAREY WATERMARK INVESTORS INCORPORATED




2010 EQUITY INCENTIVE PLAN








 


 









 





TABLE
OF CONTENTS



	 	 	 	 	 
	 
	 	 	Page	 
	 	 	 	 	 
	1. DEFINITIONS
	 	 	1	 
	2. EFFECTIVE DATE AND TERMINATION OF PLAN
	 	 	4	 
	3. ADMINISTRATION OF PLAN
	 	 	5	 
	4. SHARES AND UNITS SUBJECT TO THE PLAN
	 	 	5	 
	5. RESTRICTED STOCK UNITS
	 	 	6	 
	6. DIVIDEND EQUIVALENT RIGHTS
	 	 	9	 
	7. PERFORMANCE GOALS
	 	 	10	 
	8. TAX WITHHOLDING
	 	 	11	 
	9. REGULATIONS AND APPROVALS
	 	 	11	 
	10. INTERPRETATION AND AMENDMENTS; OTHER RULES
	 	 	12	 
	11. CHANGES IN CAPITAL STRUCTURE
	 	 	13	 
	12. MISCELLANEOUS
	 	 	14	 
	 
	 	 	 	 
	EXHIBIT A
	 	 	16	 





 


 









 





CAREY WATERMARK INVESTORS INCORPORATED




2010 EQUITY INCENTIVE PLAN




Carey Watermark Investors Incorporated, a Maryland corporation, wishes to provide incentives
to certain employees (if any) and officers of the Company and others expected to provide
significant services to the Company, whether directly or through Subsidiaries, including the
personnel, employees and officers of the Advisor, Subadvisor and their respective Affiliates, to
encourage a proprietary interest in the Company, to encourage certain key personnel to remain in
the service of the Company and the Advisor, Subadvisor and their respective Affiliates, 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 Advisor, Subadvisor
and their respective Affiliates. In furtherance thereof, the Carey Watermark Investors
Incorporated 2010 Equity Incentive Plan is designed to provide equity-based incentives to certain
Eligible Persons. Awards under the Plan may be made to selected Eligible Persons in the form of
Restricted Stock Units or Dividend Equivalent Rights.



1. DEFINITIONS.





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




“Advisor” means Carey Lodging Advisors, LLC.



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




“Award,” shall include Restricted Stock Units and Dividend Equivalent Rights.



“Award Agreement” means a written agreement in a form approved by the Plan Administrator to be
entered into between the Company and the Grantee as provided in Section 3.




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



“Cause” means, 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 Advisor, the
Subadvisor, the Company, any Subsidiaries or their Affiliates; (iii) the commission of a felony or
a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime
involving the Advisor, the Subadvisor, the Company or any Subsidiaries, or any Affiliate thereof;
(iv) fraud, misappropriation or embezzlement; (v) a material breach of the Grantee’s employment
agreement (if any) with the Advisor, the Subadvisor, the Company or any Subsidiaries or their
Affiliates; (vi) acts or omissions constituting a material failure to perform substantially and
adequately the duties assigned to the Grantee; (vii) any illegal act detrimental to the Advisor,
the Subadvisor, the Company or any Subsidiaries or their Affiliates; or (viii) repeated failure to
devote the appropriate amount of Grantee’s business time and efforts to the Advisor, the
Subadvisor, the Company, any Subsidiaries or their Affiliates if required by Grantee’s employment
agreement; provided, however, that, if at any particular time the Grantee is subject to an
effective employment agreement with the Advisor, the Subadvisor or the Company, then, in lieu of
the foregoing definition, “Cause” shall at that time have such meaning as may be specified in such
employment agreement.



 


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







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







	 	(iii)	 	there shall occur (A) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company, other than a
sale or disposition by the Company of all or substantially all of the Company’s assets
to an entity, at least 50% of the combined voting power of the voting securities of
which are owned by “persons” (as defined above) in substantially the same proportion as
their ownership of the Company immediately prior to such sale or (B) the approval by
stockholders 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 stockholders, was approved
or ratified by a vote of at least a majority of the Incumbent Directors shall be deemed
to be an Incumbent Director.






Notwithstanding the foregoing, no event or condition described in clauses (i) through (iv) above
shall constitute a Change in Control if it results from (A) a transaction between the Company and
Advisor, or an Affiliate of Advisor, or (B) a termination of the advisory agreement by and between
the Company and Advisor for Cause.



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 upon or with respect to any Award 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” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.


 


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“Common Stock” means the Company’s common stock, par value $.01 per share, either currently
existing or authorized hereafter.




“Company” means Carey Watermark Investors Incorporated, a Maryland corporation.



“Disability” means that a Grantee is (i) unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment that can be expected to
result in death or last for a continuous period of at least twelve (12) months; or (ii) by reason
of any medically determinable physical or mental impairment that can be expected to result in death
or last for a continuous period of at least twelve (12) months, receiving income replacement
benefits for at least three (3) months under an accident and health plan covering the Company’s, a
Subsidiary’s, the Advisor’s or the Subadvisor’s employees. Notwithstanding the foregoing, no
circumstances or condition shall constitute a Disability to the extent that, if it were, a 20% tax
would be imposed upon or with respect to any Award 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.



“Dividend Equivalent Right” means a right awarded under Section 6 of the Plan to receive (or
have credited) the equivalent value of dividends paid on Common Stock.



“Eligible Person” means (i) an officer or employee (if any) of the Company or its
Subsidiaries, (ii) an officer or employee of the Advisor, Subadvisor or their respective
Affiliates, which includes W. P. Carey & Co. and Watermark Capital Partners, LLC or (iii) a Member,
or other person expected to provide significant services (of a type expressly approved by the Plan
Administrator as covered services for these purposes) to the Company or its Subsidiaries. In the
case of the grant of Awards directly or indirectly to officers or employees of entities described
in clause (ii) of the foregoing sentence, the Plan Administrator may make arrangements with such
entities in its discretion, in light of tax and other considerations.




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



“Fair Market Value” per Share as of a particular date means (i) if Shares are then listed on a
national securities exchange or quoted or reported on a national quotation system, the closing
sales price per Share on the exchange or system for the applicable date or, if there are no sales
on such date, for the last preceding date on which there was a sale of Shares on such exchange or
system; (ii) if Shares are not then listed on a national securities exchange or quoted on a
national quotation system 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 date in
question, or, if there are no bid and asked prices on such date, for the last preceding date on
which there was a sale of such Shares in such market; or (iii) if Shares are not then listed on a
national securities exchange, quoted on a national quotation system or traded on an
over-the-counter market, such value as may be determined by the Plan Administrator in its
discretion or as may be determined in accordance with such methodologies, procedures or other rules
(which may provide, without limitation, that determinations of Fair Market Value shall be made by
an independent third party) as may be established by the Plan Administrator in its discretion;
provided that, where the Shares are so listed or traded, the Plan Administrator may make such
discretionary determinations, or implement such methodologies, procedures or other rules, where the
Shares have not been traded for 10 trading days.




“Grantee” means an Eligible Person to whom an Award is granted.



“Member” means a non-director member of the investment committee of the Board, who is not an
officer of the Company.


 


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“Performance Goals” has the meaning set forth in Section 7 of the Plan.



“Plan” means the Company’s 2010 Equity Incentive Plan, as set forth herein and as the same may
from time to time be amended.




“Plan Administrator” means the independent directors of the Board.



“Restricted Stock Unit” means a right, pursuant to the Plan, of the Grantee to payment of the
Restricted Stock Unit Value in accordance with Section 5.



“Restricted Stock Unit Value,” per Restricted Stock Unit, means the Fair Market Value of a
Share or, if so provided by the Plan Administrator, such Fair Market Value to the extent in excess
of a base value established by the Plan Administrator at the time of grant.



“Retirement” means, unless otherwise provided in the applicable Award Agreement, the
Termination of Service of a Grantee under circumstances which would entitle the Grantee to an
immediate pension under an approved retirement plan of the Company, the Advisor or the Subadvisor,
or, in the absence of such a plan, the Termination of Service (other than for Cause) of a Grantee
on or after the Grantee’s attainment of age 65 or on or after the Grantee’s attainment of age 55
with five consecutive years of service with the Company, the Advisor, the Subadvisor, any
Subsidiaries or their Affiliates.




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




“Settlement Date” means the date determined under Section 5.4(c).




“Shares” means shares of Common Stock of the Company.




“Subadvisor” means CWA, LLC, an Illinois limited liability company.



“Subsidiary” means any corporation, partnership or other entity of which at least 50% of the
economic interest in the equity or voting power is owned (directly or indirectly) by the Company,
the Advisor or another subsidiary. In the event the Company or the Advisor becomes such a
subsidiary of another company (directly or indirectly), the provisions hereof applicable to
subsidiaries shall, unless otherwise determined by the Plan Administrator, also be applicable to
such parent company.



“Termination of Service” means a Grantee’s termination of employment or other service, as
applicable, including Disability or Retirement, with the Company, Subsidiaries, the Advisor, the
Subadvisor or their Affiliates. Notwithstanding the foregoing, a Grantee’s Termination of Service
shall be a “separation from service” as interpreted within the meaning of Section 409A of the Code
and Treasury Regulation 1.409A-1(h). Unless otherwise provided in the Award Agreement, cessation
of service as an officer, employee or Member shall not be treated as a Termination of Service if
the Grantee continues without interruption to serve thereafter in another one (or more) of such
other capacities, and Termination of Service shall be deemed to have occurred when service in the
final covered capacity ceases.



2. EFFECTIVE DATE AND TERMINATION OF PLAN.



The effective date of the Plan is
September 15, 2010; provided, however, that the Plan shall not
become effective unless and until it is approved by the requisite percentage of the holders of the
Common Stock of the Company. The Plan shall terminate on, and no Award shall be granted hereunder
on or after, the 10-year anniversary of the earlier of the approval of the Plan by (i) the Board or
(ii) the stockholders of the Company; provided, however, that the Board may at any time prior to
that date terminate the Plan.


 


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3. ADMINISTRATION OF PLAN.



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



(b) Subject to the provisions of the Plan, the Plan Administrator shall in its discretion as
reflected by the terms of the Award Agreements (i) authorize the granting of Awards to Eligible
Persons (or to an entity for the benefit of Eligible Persons) and (ii) determine the eligibility of
an Eligible Person to receive an Award, as well as determine the number of Shares to be covered
under any Award Agreement, considering the position and responsibilities of the Eligible Person,
the nature and value to the Company of the Eligible Person’s present and potential contribution to
the success of the Company, whether directly or through Subsidiaries, the other compensation and
distributions received by the Advisor and the Subadvisor and their affiliates from the Company and
its Subsidiaries and such other factors as the Plan Administrator may deem relevant. In granting
Awards under the Plan, the Plan Administrator may impose conditions on the transfer of Awards
received under the Plan, and may impose other restrictions and requirements as it may deem
appropriate.



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



4. SHARES AND UNITS SUBJECT TO THE PLAN.



(a) Subject to adjustments as provided in Section 11 of the Plan, the total number of Shares
subject to Awards granted under the Plan, in the aggregate may not exceed
 4,000,000. Subject to adjustments pursuant to Section 11 of the Plan, the maximum number of Shares subject to Awards
granted under the Plan in any one year to any Eligible Person, shall not exceed
 4,000,000. Shares distributed under the Plan may be treasury Shares or authorized but unissued Shares. Any Shares
that have been
reserved for distribution in payment for Restricted Stock Units but are later forfeited or for
any other reason are not payable under the Plan may again be made the subject of Awards under the
Plan.


 


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(b) Shares subject to Dividend Equivalent Rights, other than Dividend Equivalent Rights based
directly on the dividends payable on a number of Shares corresponding to the number of Restricted
Stock Units awarded, shall be subject to the limitation of Section 4(a). Notwithstanding Section
4(a), except in the case of Awards intended to qualify for relief from the limitations of Section
162(m) of the Code, there shall be no limit on the number of Restricted Stock Units or Dividend
Equivalent Rights, to the extent they are paid out in cash, that may be granted under the Plan. If
any Restricted Stock Units or Dividend Equivalent Rights are paid out in cash, then,
notwithstanding the first sentence of Section 4(a) above (but subject to the second sentence
thereof), the underlying Shares may again be made the subject of Awards under the Plan.



(c) The certificates for Shares issued hereunder may include any legend which the Plan
Administrator deems appropriate to reflect any restrictions on transfer hereunder or under the
Award Agreement, or as the Plan Administrator may otherwise deem appropriate.



5. RESTRICTED STOCK UNITS.




5.1 Grant of Restricted Stock Units.



Subject to the other terms of the Plan, the Plan Administrator shall, in its discretion as
reflected by the terms of the applicable Award Agreement: (i) authorize the granting of Restricted
Stock Units to Eligible Persons (ii) provide a specified purchase price for the Restricted Stock
Units (whether or not the payment of a purchase price is required by any state law applicable to
the Company); (iii) determine the period of forfeiture and related restrictions, if any, applicable
to Restricted Stock Units; and (iv) determine or impose other conditions, including any applicable
Performance Goals, to the grant of Restricted Stock Units under the Plan as it may deem
appropriate.




5.2 Term.



The Plan Administrator may provide in an Award Agreement that any particular Restricted Stock
Unit shall expire at the end of a specified term.




5.3 Vesting.



(a) In connection with the grant of Restricted Stock Units, whether or not Performance Goals
(as provided for under Section 7 of the Plan) apply thereto, the Plan Administrator shall establish
one or more vesting periods with respect to the Restricted Stock Units granted, the length of which
shall be determined in the discretion of the Plan Administrator. Subject to the provisions of this
Section 5, the applicable Award Agreement and the other provisions of the Plan, restrictions on
Restricted Stock Units shall lapse if the Grantee satisfies all applicable employment or other
service requirements through the end of the applicable vesting period.



(b) Restricted Stock Units shall vest as provided in the applicable Award Agreement. Unless
otherwise stated in the Award Agreement, upon the Grantee’s Termination of Service, all unvested
Restricted Stock Units shall be forfeited.


 


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5.4 Settlement of Restricted Stock Units.



(a) Each vested and outstanding Restricted Stock Unit shall be settled by the transfer to the
Grantee of one Share; provided that the Plan Administrator at the time of grant (or, in the
appropriate case, as determined by the Plan Administrator, thereafter) may provide that, after
consideration of possible accounting issues, a Restricted Stock Unit may be settled (i) in cash at
the applicable Restricted Stock Unit Value, (ii) in cash or by transfer of Shares as elected by the
Grantee in accordance with procedures established by the Plan Administrator or (iii) in cash or by
transfer of Shares as elected by the Company.



(b) Payment (whether of cash or Shares) in respect of Restricted Stock Units shall be made in
a single sum by the Company; provided that, with respect to Restricted Stock Units of a Grantee
which have a common Settlement Date, the Plan Administrator may permit the Grantee to elect in
accordance with procedures established by the Plan Administrator (taking into account, without
limitation, Section 409A of the Code, as the Plan Administrator may deem appropriate) to receive
installment payments over a period not to exceed 10 years, rather than a single-sum payment.



(c) Regarding the time at which payment in respect of Restricted Stock Units will be made or
commence:




(i) Unless otherwise provided in the applicable Award Agreement, the
“Settlement Date” with respect to a Restricted Stock Unit is the first day of the
month to follow the date on which the Restricted Stock Unit vests; provided,
however, that a Grantee may elect at or prior to grant, if permitted by and in
accordance with procedures to be established by the Plan Administrator, that such
Settlement Date will be deferred as elected by the Grantee to the first day of the
month to follow the Grantee’s Termination of Service, or such other time as may be
permitted by the Plan Administrator. Notwithstanding the prior sentence, all
initial elections to defer the Settlement Date shall be made in accordance with the
requirements of Section 409A of the Code. In addition, unless otherwise determined
by the Plan Administrator, elections under this Section 5.4(c)(i) must, except as
may otherwise be permitted under the rules applicable under Section 409A of the
Code, (A) be effective at least one year after they are made, or, in the case of
payments to commence at a specific time, be made at least one year before the first
scheduled payment and (B) defer the commencement of distributions (and each affected
distribution) for at least five years.




(ii) Notwithstanding the foregoing, the Settlement Date, if not earlier pursuant
to this Section 5.4(c), is the date of the Grantee’s death.



(d) Notwithstanding the other provisions of this Section 5, taking into account, without
limitation, the application of Section 409A of the Code, as the Plan Administrator may deem
appropriate, in the event of a Change in Control, the Settlement Date shall be the date of such
Change in Control and all amounts due with respect to Restricted Stock Units to a Grantee hereunder
shall be paid as soon as practicable (but in no event more than 30 days) after such Change in
Control, unless such Grantee elects otherwise in accordance with procedures established by the Plan
Administrator.


 


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(e) Notwithstanding any other provision of the Plan, a Grantee may receive any amounts to be
paid in installments as provided in Section 5.4(b) or deferred by the Grantee as provided in
Section 5.4(c) in the event of an “Unforeseeable Emergency.” For these purposes, an “Unforeseeable
Emergency,” as determined by the Plan Administrator in its sole discretion, is a severe financial
hardship to the Grantee resulting from (1) a sudden and unexpected illness or accident of the
Grantee or “dependent,” as defined in Section 152(a) of the Code, of the Grantee, (2) loss of the
Grantee’s property due to casualty, or (3) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Grantee. The circumstances
that will constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in
any case, payment may not be made to the extent that such hardship is or may be relieved:




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




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




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



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




5.5 Other Restricted Stock Unit Provisions.



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



(b) A Grantee may designate in writing, on forms to be prescribed by the Plan Administrator, 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 Restricted Stock Unit dies, such Restricted Stock Unit shall be settled and the Restricted
Stock Unit Value in respect of such Restricted Stock Units paid, and any payments deferred pursuant
to an election under Section 5.4(c) shall be accelerated and paid, as soon as practicable (but no
later than 60 days) after the date of death to such Grantee’s beneficiary or estate, as applicable.



(c) The Plan Administrator may, taking into account, without limitation, the application of
Section 409A of the Code, as the Plan Administrator may deem appropriate, establish a program under
which distributions with respect to Restricted Stock Units may be deferred for periods in addition
to those otherwise contemplated by foregoing provisions of this Section 5. Such program may
include, without limitation, provisions for the crediting of earnings and losses on unpaid amounts,
and, if permitted by the Plan Administrator, provisions under which Grantees may select from among
hypothetical investment alternatives for such deferred amounts in accordance with procedures
established by the Plan Administrator.



(d) Notwithstanding any other provision of this Section 5, any fractional Restricted Stock
Unit will be paid out in cash at the Restricted Stock Unit Value as of the Settlement Date.



(e) No Restricted Stock Unit shall be construed to give any Grantee any rights with respect to
Shares or any ownership interest in the Company. Except as may be provided in accordance with
Section 6, no provision of the Plan shall be interpreted to confer upon any Grantee of Restricted
Stock Units any voting, dividend or derivative or other similar rights with respect to any
Restricted Stock Unit.


 


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5.6 Claims Procedures.



(a) To the extent that the Plan is determined by the Plan Administrator to be subject to the
Employee Retirement Income Security Act of 1974, as amended, the Grantee, or his beneficiary
hereunder or authorized representative, may file a claim for payments with respect to Restricted
Stock Units under the Plan by written communication to the Plan Administrator 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 Plan Administrator will either:




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




(ii) if the claim is wholly or partially denied, advise the claimant of such
denial by furnishing to him a written notice of such denial setting forth (A) the
specific reason or reasons for the denial; (B) specific reference to pertinent
provisions of the Plan on which the denial is based and, if the denial is based in
whole or in part on any rule of construction or interpretation adopted by the Plan
Administrator, 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 5.6 as the
provision setting forth the claims procedure under the Plan.



(b) The claimant may request a review of any denial of his claim by written application to the
Plan Administrator 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 Plan Administrator 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.



6. DIVIDEND EQUIVALENT RIGHTS.





6.1
Grant of Dividend Equivalent Rights.



Subject to the other terms of the Plan, the Plan Administrator shall, in its discretion as
reflected by the terms of the Award Agreements, authorize the granting of Dividend Equivalent
Rights to Eligible Persons based on the regular cash dividends declared on Common Stock, to be
credited as of the dividend payment dates, during the period between the date an Award is granted,
and the date such Award is exercised, vests or expires, as determined by the Plan Administrator.
Such Dividend Equivalent Rights shall be converted to cash or additional Shares by such formula and
at such time and subject to such limitation as may be determined by the Plan Administrator. If a
Dividend Equivalent Right is granted in respect of an Award hereunder, then, unless otherwise
stated in the Award Agreement, or, in the appropriate case, as determined by the Plan
Administrator, in no event shall the Dividend Equivalent Right be in effect for a period beyond the
time during which the applicable portion of the underlying Award is in effect.


 


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6.2 Certain Terms.



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



(b) Unless otherwise determined by the Plan Administrator, except as contemplated by Section
6.4, a Dividend Equivalent Right is exercisable or payable only while the Grantee is an Eligible
Person.



(c) Payment of the amount determined in accordance with Section 6.1 shall be in cash, in
Common Stock or a combination of the two, as determined by the Plan Administrator.



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




6.3
Other Types of Dividend Equivalent Rights.



The Plan Administrator may establish a program under which Dividend Equivalent Rights of a
type whether or not described in the foregoing provisions of this Section 6 may be granted to
Grantees. For example, and without limitation, the Plan Administrator may grant a Dividend
Equivalent Right with respect to a Restricted Stock Unit, which right would consist of the right
(subject to Section 6.4) to receive a cash payment in an amount equal to the dividend distributions
paid on a Share from time to time.




6.4
Deferral.



The Plan Administrator may establish a program or programs (taking into account, without
limitation, the possible application of Section 409A of the Code, as the Plan Administrator may
deem appropriate) under which Grantees (i) will have Restricted Stock Units credited, subject to
the terms of Sections 5.4 and 5.5 as though directly applicable with respect thereto, upon the
granting of Dividend Equivalent Rights, or (ii) will have payments with respect to Dividend
Equivalent Rights deferred. In the case of the foregoing clause (ii), such program may include,
without limitation, provisions for the crediting of earnings and losses on unpaid amounts, and, if
permitted by the Plan Administrator, provisions under which Grantees may select from among
hypothetical investment alternatives for such deferred amounts in accordance with procedures
established by the Plan Administrator.



7. PERFORMANCE GOALS.



The Plan Administrator, in its discretion, may, in the case of any Awards intended to qualify
for an exception from the limitation imposed by Section 162(m) of the Code at any time that Section
162(m) applies to the Company, or otherwise (“Performance-Based Awards”), (i) establish one or more
performance goals (“Performance Goals”) as a precondition to the issuance or vesting of Awards, and
(ii) provide, in connection with the establishment of the Performance Goals, for predetermined
Awards to those 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 pre-established for purposes of the rules governing
performance-based compensation under Section 162(m) of the Code at any time that Section 162(m)
applies to the Company, and compliance with such rules is sought. Prior to the award or vesting,
as applicable, of affected Awards hereunder, the Plan Administrator shall have certified that any
applicable Performance Goals, and other material terms of the Award, have been
satisfied. Performance Goals which do not satisfy the foregoing provisions of this Section 7
may be established by the Plan Administrator with respect to Awards not intended to qualify for an
exception from the limitations imposed by Section 162(m) of the Code.


 


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8. TAX WITHHOLDING.




8.1 In General.



The Company, or, a properly designated paying agent, shall be entitled to withhold from any
payments or deemed payments any amount of tax withholding determined by the Plan Administrator to
be required by law. Without limiting the generality of the foregoing, the Plan Administrator may,
in its discretion, require the Grantee to pay to the Company at such time as the Plan Administrator
determines the amount that the Plan Administrator deems necessary to satisfy the Company’s
obligation to withhold federal, state or local income or other taxes incurred by reason of (i) the
receipt of a distribution in respect of Restricted Stock Units or Dividend Equivalent Rights or
(ii) any other applicable income-recognition event under the Plan or (iii) the lapsing of any
restrictions applicable to any Restricted Stock Units.




8.2 Share Withholding.



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




8.3 Withholding Required.



Notwithstanding anything contained in the Plan or the Award Agreement to the contrary, the
Grantee’s satisfaction of any tax-withholding requirements imposed by the Plan Administrator shall
be a condition precedent to the Company’s obligation as may otherwise be provided hereunder to
provide Shares to the Grantee and to the release of any restrictions as may otherwise be provided
hereunder; and the Restricted Stock Units or Dividend Equivalent Rights shall be forfeited upon the
failure of the Grantee to satisfy such requirements with respect to the distributions in respect of
any Restricted Stock Unit or Dividend Equivalent Right or the lapsing of any restrictions
applicable to any Restricted Stock Units (or other income-recognition event).



9. REGULATIONS AND APPROVALS.



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



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


 


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(c) Each grant of Restricted Stock Units (or issuance of Shares in respect thereof) or
Dividend Equivalent Rights is subject to the requirement that, if at any time the Plan
Administrator 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 Restricted Stock Units,
Dividend Equivalent Rights or other Shares, no payment shall be made, or Restricted Stock Units or
Shares issued, 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 Plan
Administrator.



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



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



10. INTERPRETATION AND AMENDMENTS; OTHER RULES.



The Plan Administrator may make such rules and regulations and establish such procedures for
the administration of the Plan as it deems appropriate. Without limiting the generality of the
foregoing, the Plan Administrator may (i) determine the extent, if any, to which Restricted Stock
Units or Dividend Equivalent Rights shall be forfeited (whether or not such forfeiture is expressly
contemplated hereunder); (ii) interpret the Plan and the Award Agreements hereunder, with such
interpretations to be conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law, provided that the Plan Administrator’s interpretation shall not be
entitled to deference on and after a Change in Control except to the extent that such
interpretations are made exclusively by members of the Plan Administrator who are individuals who
served as Plan Administrator members before the Change in Control; and (iii) take any other actions
and make any other determinations or decisions that it deems necessary or appropriate in connection
with the Plan or the administration or interpretation thereof. In the event of any dispute or
disagreement as to the interpretation of the Plan or of any rule, regulation or procedure, or as to
any question, right or obligation arising from or related to the Plan, the decision of the Plan
Administrator, except as provided in clause (ii) of the foregoing sentence, shall be final and
binding upon all persons. Unless otherwise expressly provided hereunder, the Plan Administrator,
with respect to any grant, may exercise its discretion hereunder at the time of the Award or
thereafter. The Board may amend the Plan as it shall deem advisable, except that no amendment may
adversely affect a Grantee with respect to an Award previously granted without such Grantee’s
written consent unless such amendments are required in order to comply with applicable laws;
provided, however, that the Plan may not be amended without stockholder approval (a) to materially
increase the total number of Shares that may be subject to Awards set forth in Section 4(a), (b) to
materially modify the requirements of eligibility for participation in the Plan, (c) to materially
increase the benefits accruing to Grantees under the Plan, or (d) in any other manner that in the
absence of stockholder approval would cause the Plan to fail to comply with any applicable legal
requirement or applicable exchange or similar rule.


 


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11. CHANGES IN CAPITAL STRUCTURE.



(a) If (i) the Company or Subsidiaries shall at any time be involved in a merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or
substantially all of the assets or stock of the Company or Subsidiaries 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 Subsidiaries, 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 Plan Administrator
necessitates action by way of adjusting the terms of the outstanding Awards, then:




(x) the maximum aggregate number and kind of Shares which may be subject to Dividend
Equivalent Rights under the Plan, and the maximum aggregate number of Restricted
Stock Units which may be granted under the Plan shall be appropriately adjusted by
the Plan Administrator in its discretion; and




(y) the Plan Administrator shall take any such action as in its discretion shall be
necessary to maintain each Grantees’ rights hereunder (including under their Award
Agreements) so that their respective Restricted Stock Units and Dividend Equivalent
Rights are substantially proportionate to the rights existing in such Restricted
Stock Units and Dividend Equivalent Rights prior to such event, including, without
limitation, adjustments in (A) the number of Restricted Stock Units and Dividend
Equivalent Rights granted, (B) the number and kind of shares or other property to be
distributed in respect of Restricted Stock Units and Dividend Equivalent Rights, (C)
the Restricted Stock Unit Value, and (D) performance-based criteria established in
connection with Awards (to the extent consistent with Section 162(m) of the Code, as
applicable); provided that, in the discretion of the Plan Administrator, the
foregoing clause (D) may also be applied in the case of any event relating to a
Subsidiary if the event would have been covered under this Section 11(a) had the
event related to the Company.



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



(b) If a Change in Control shall occur, then the Plan Administrator, as constituted
immediately before the Change in Control, may make such adjustments as it, in its discretion,
determines are necessary or appropriate in light of the Change in Control, provided that the Plan
Administrator determines that such adjustments do not have an adverse economic impact on the
Grantee as determined at the time of the adjustments. The Plan Administrator shall have the
discretion to provide that upon a Change in Control, (i) all or a portion of any outstanding Awards
shall become vested and transferable, and all or a portion of any outstanding Performance-Based
Awards will be earned, or (iii) all or a portion of any outstanding Awards may be cancelled in
exchange for a payment of cash, or all or a portion of any outstanding Awards may be substituted
for Awards that will substantially preserve the otherwise applicable terms of any affected Awards
previously granted under the Plan.



(c) The judgment of the Plan Administrator with respect to any matter referred to in this
Section 11 shall be conclusive and binding upon each Grantee without the need for any amendment to
the Plan.


 


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12. MISCELLANEOUS.




12.1 No Rights to Employment or Other Service.



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




12.2 No Fiduciary Relationship.



Nothing contained in the Plan (including without limitation Section 5.5(c) and 6.4), and no
action taken pursuant to the provisions of the Plan, shall create or shall be construed to create a
trust of any kind, or a fiduciary relationship between the Company or Subsidiaries or their
officers or the Plan Administrator, on the one hand, and the Grantee, the Company, Subsidiaries or
any other person or entity, on the other.




12.3 Compliance with Section 409A of the Code.



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



(b) With respect to any Award 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 Grantee 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, to the extent it
would constitute a payment of nonqualified deferred compensation within the meaning of Section 409A
of the Code that is ineligible for an exemption from treatment as such, 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). Any payments or distributions delayed in accordance with the prior
sentence shall be paid to the Grantee on the first day of the seventh month following the Grantee’s
Termination of Service.



(c) To the extent compliance with Section 409A of the Code is intended, the Board and the Plan
Administrator shall administer the Plan, and exercise authority and discretion under the Plan,
consistent with the requirements of Section 409A of the Code or any exemption thereto.



(d) The Company makes no representation or warranty and shall have no liability to any Grantee
or any other person if any provisions of this Plan or any Award Agreement issued pursuant hereto
are determined to constitute deferred compensation subject to Section 409A of the Code but do not
satisfy an exemption from, or the conditions of, such Section.


 


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12.4 No Fund Created.



Any and all payments hereunder to any Grantee shall be made from the general funds of the
Company (or, if applicable, a participating subsidiary), no special or separate fund shall be
established or other segregation of assets made to assure such payments, and the Restricted Stock
Units (including for purposes of this Section 12.4 any accounts established to facilitate the
implementation of Section 5.4(c)) 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 may establish a mere bookkeeping reserve to meet its
obligations hereunder or a trust or other funding vehicle that would not cause the Plan to be
deemed to be funded for tax purposes or for purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended. The obligations of the Company under the Plan are unsecured and
constitute a mere promise by the Company to make benefit payments in the future and, to the extent
that any person acquires a right to receive payments under the Plan from the Company, such right
shall be no greater than the right of a general unsecured creditor of the Company. (If any
Affiliate of the Company is or is made responsible with respect to any Awards, the foregoing
sentence shall apply with respect to such Affiliate.) Without limiting the foregoing, Restricted
Stock Units 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 Restricted Stock Units and any such other devices is
limited to the right to receive payment, if any, as may herein be provided.




12.5 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, sent by facsimile transmission or mailed to the Grantee at
the address appearing in the records of the Company. Such addresses may be changed at any time by
written notice to the other party given in accordance with this Section 12.5.




12.6 Exculpation and Indemnification.



The Company shall indemnify and hold harmless the members of the Board and the members of the
Plan Administrator from and against any and all liabilities, costs and expenses incurred by such
persons as a result of any act or omission to act in connection with the performance of such
person’s duties, responsibilities and obligations under the Plan, to the maximum extent permitted
by law, other than such liabilities, costs and expenses as may result from the gross negligence,
bad faith, willful misconduct or criminal acts of such persons.




12.7 Captions.



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




12.8 Governing Law.



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




12.9 Gender Neutral.



Wherever used herein, a pronoun in the masculine gender shall be considered as including the
feminine gender unless the context clearly indicates otherwise.


 


15









 





EXHIBIT A




PERFORMANCE CRITERIA




Performance-Based Awards 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 Plan Administrator 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 Plan Administrator.
Performance Criteria may (but need not) 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;




 


16









 





	 	(xvii)	 	net earnings;

	 
	 	(xviii)	 	changes (or the absence of changes) in the per share or aggregate market price of
the Company’s Common Stock;

	 
	 	(xix)	 	number of securities sold;

	 
	 	(xx)	 	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;

	 
	 	(xxi)	 	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);

	 
	 	(xxii)	 	the Company’s published ranking against its peer group of real estate investment
trusts based on total stockholder return;

	 
	 	(xxiii)	 	funds from operations;

	 
	 	(xxiv)	 	adjusted funds from operations and operating activities; and

	 
	 	(xxv)	 	adjusted cash flow from operations.






Performance Goals may be absolute amounts or percentages of amounts, may be relative to the
performance of other companies or of indexes or may be based upon absolute values or values
determined on a per-share basis.



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 Plan Administrator provides
otherwise at the time of establishing the Performance Goals, for each fiscal year of the Company,
there shall be 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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