Document:

exv10w2

Exhibit 10.2

Execution Document

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of the 10th day of
May, 2010 (the “Effective Date”), by and between the Company, as hereinafter defined, and Brad T.
Irick (“Executive” or “Employee”). As used herein, the “Company” shall mean HCC Insurance
Holdings, Inc., a Delaware corporation, or such other HCC entity as is designated by the Chief
Executive Officer of HCC, for which Executive devotes from time to time a substantial portion of
his efforts. The Company shall sometimes be referred to herein as “HCC.” Executive and the
Company are sometimes collectively referred to herein as the “Parties” and individually as a
“Party.”

RECITALS:

     WHEREAS, Executive is to be employed as an officer or key employee of the Company;

     WHEREAS, the Company will engage Executive as an officer or key employee of the Company; and

     WHEREAS, the Company will employ Executive on the terms herein provided.

     NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements set forth below, the Parties agree as follows:

AGREEMENT

     1. Term. Effective as of the Effective Date, the Company hereby employs Executive,
and Executive hereby accepts such employment, on the terms and conditions set forth herein, for the
period (the “Term”) commencing on the Effective Date and expiring at the earlier to occur of
(a) 11:59 p.m. on May 31, 2014 (the “Expiration Date”) or (b) the Termination Date (as hereinafter
defined). If the Company continues to employ Executive after the Expiration Date, then Executive
shall be an employee-at-will, unless the parties agree in writing to an extension of this
Agreement.

     2. Duties.

          (a) Duties as Executive of the Company. Executive shall, subject to the supervision
of the Chief Executive Officer of HCC (the “CEO”) or such other person designated by the CEO, act
as the Executive Vice President and, as provided below in this Section 2(a), Chief Financial
Officer of the Company in the ordinary course of its business with all such powers reasonably
incident to the position or other such responsibilities or duties that may be from time to time
assigned by the CEO. On August 10, 2010, Executive shall also assume the position of Chief
Financial Officer. After his appointment as Chief Financial Officer, Executive may be reassigned or
transferred to another management position with the same or greater level of responsibility, as
designated by the CEO. During normal business hours, Executive shall devote his full time and
attention to diligently attending to the business of the Company. During the Term, Executive shall
not directly or indirectly render any services of a business, commercial, or professional nature to
any other person, firm, corporation, or organization, whether for compensation or otherwise,
without the prior written consent of the CEO. However, Executive shall have the right

 

 

to engage in such activities as may be appropriate in order to manage his personal investments and in
educational, charitable and philanthropic activities so long as such activities do not materially
interfere or conflict with the performance of his duties to the Company hereunder. The conduct of
such activity shall not be deemed to materially interfere or conflict with Executive’s performance
of his duties until Executive has been notified in writing thereof and given a reasonable period in
which to cure the same.

          (b) Other Duties.

          (1) If elected, Executive agrees to serve as a member of such managerial committees of
the Company and of any of its direct or indirect parents or subsidiaries (collectively,
“Affiliates”) and in one or more executive offices of any of the Affiliates, provided
Executive is indemnified for serving in any and all such capacities in a manner acceptable
to the Company and Executive. If elected, Executive agrees that he shall not be entitled to
receive any compensation for serving as a director of the Company, or in any capacities for
the Company or the Company’s Affiliates other than the compensation to be paid to Executive
by the Company pursuant to this Agreement.

          (2) Executive acknowledges and agrees that he has read and considered the written
business policies and procedures of HCC as posted on HCC’s intranet and that he will abide
by such policies and procedures throughout the term of his employment with the Company.
Executive further agrees that he will familiarize himself with any amendments to the
policies and procedures and that he will abide by such policies and procedures as they may
change from time to time.

     3. Compensation and Related Matters.

          (a) Base Salary. Executive shall receive an initial base salary paid by the Company
of $425,000 per year during the Term. At the sole discretion of HCC, the base salary may be
increased. For purposes of this Agreement, “Base Salary” shall mean Executive’s initial base
salary or, if increased, then the increased base salary. The Base Salary shall be paid, subject to
all applicable withholdings and deductions, in substantially equal semi-monthly installments.

          (b) Bonus Plan. During the Term, Executive shall be eligible to receive, in addition
to the Base Salary, an annual cash and/or stock bonus payment in an amount, which may be zero, to
be determined at the sole discretion of the CEO or such other person as shall be designated by the
CEO in accordance with HCC’s policies. Except as provided below for 2010, the CEO or such other
person may unilaterally reduce or eliminate any annual bonus payment, if any, up until the time the
bonus is actually paid (and notwithstanding any earlier, tentative determination of the bonus
amount). Subject to Sections 4(c) and 4(d), no bonus payment shall be paid to Executive for a year
if Executive’s Termination Date occurs at any time during such year. Moreover, even if Executive
is employed by the Company on the last day of the year for which a bonus may be payable, Executive
shall not be eligible for the payment of bonus compensation for such year if this Agreement or his
employment with the Company terminates for any reason, other than Death or Disability, prior to the
payment of such bonus compensation. Notwithstanding the foregoing, Executive’s bonus payment for
the year ended December 31, 2010 shall be $200,000 and shall be paid in cash. Such payment
shall occur after December 31, 2010 and on or before March 15, 2011.

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          (c) Expenses. During the Term, Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by him (in accordance with the policies
and procedures established by the Company) in performing services hereunder, provided that
Executive properly accounts therefor in accordance with Company policy. The amount of expenses
eligible for reimbursement during a calendar year shall not affect the expenses eligible for
reimbursement in any other calendar year. Reimbursement of eligible expenses shall be made on or
before the last day of the calendar year following the calendar year in which the expenses were
incurred.

          (d) Other Benefits. From time to time the Company and/or HCC may make available other
compensation and employee benefit plans and arrangements. Executive shall be eligible to
participate in such other compensation and employee benefit plans and arrangements on the same
basis as similarly situated employees, subject to and on a basis consistent with the terms,
conditions, and overall administration of such plans and arrangements, as amended from time to
time. Nothing in this Agreement shall be deemed to confer upon Executive or any other person
(including any beneficiary) any rights under or with respect to any such plan or arrangement or to
amend any such plan or arrangement, and Executive and each other person (including any beneficiary)
shall be entitled to look only to the express terms of any such plan or arrangement for his or her
rights thereunder. Nothing paid to Executive under any such plan or arrangement presently in
effect or made available in the future shall be deemed to be in lieu of the Base Salary payable to
Executive pursuant to Section 3(a).

          (e) Vacation. Executive shall be entitled to twenty (20) vacation days each year of
full employment during the Term, exclusive of holidays, as long as the scheduling of Executive’s
vacation does not interfere with the Company’s normal business operation. Vacation not used by
Executive during the calendar year will be forfeited. For purposes of this Paragraph, weekends
shall not count as Vacation days. Executive shall also be entitled to all paid holidays given by
the Company.

          (f) Proration. The Base Salary and perquisites payable to Executive hereunder in
respect of any calendar year during which Executive is employed by the Company for less than the
entire year, unless otherwise provided on Appendix 1, shall be prorated in accordance with the
number of days in such calendar year during which he is so employed.

          (g) Stock Options. Stock options, if any, issued to Executive during the Term shall be
issued under a stock option agreement containing terms with respect to vesting and exercise upon
the occurrence of certain termination events that are substantially the same as those set forth in
Exhibit 3(g) hereto, subject to any then required approval by the Compensation Committee of the
Board.

          (h) Relocation Costs. Benefits in connection with Executive’s relocation to Houston,
Texas, which shall include reasonable temporary housing costs and reimbursement of closing costs to
purchase a primary residence, shall be in accordance with the terms of that certain
Relocation Policy and Reimbursement Agreement to be entered into substantially
contemporaneously herewith.

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          (i) Life Insurance. The Company shall provide to Executive a term life insurance
policy or policies in an aggregate face amount of $1,000,000.00 and shall pay the premiums
therefore during the Term. Upon Executive’s cessation as an employee of the Company during or
after the Term for any reason other than death, the Company shall assign such policy or policies to
Executive. The life insurance provided in this Section 3(i) shall be in addition to the group life
insurance program covering Executive and substantially all of the employees of the Company during
the Term.

     4. Termination.

          (a) Definitions.

          (1) “Cause” shall mean:

          (i) Executive’s failure or refusal to perform substantially his material duties,
responsibilities and obligations (other than a failure resulting from Executive’s incapacity
due to physical or mental illness or other reasons beyond the control of Executive) as
determined in the sole discretion of the CEO;

          (ii) any act involving fraud, misrepresentation, theft, embezzlement, dishonesty or
moral turpitude (“Fraud”) which results in material harm to Company or HCC;

          (iii) conviction of (or a plea of nolo contendre) to an offense which is a felony in
the jurisdiction or which is a misdemeanor in the jurisdiction involved but which involves
Fraud;

          (iv) a material breach of this Agreement by Executive, including, without limitation,
any breach of the non-competition or confidentiality provisions of this Agreement; or

          (v) Executive’s failure to act or discharge or negligently acting or discharging any
material part of his duties or obligations as determined in the sole discretion of the CEO.

Provided that in the event that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the nature of such event and
Executive shall thereafter have ten (10) calendar days to cure such event to the
satisfaction of the Company.

          (2) A “Change of Control” shall be deemed to have occurred if:

     (i) Any “person” or “group” (within the meaning of sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act

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of 1934), directly or indirectly, of 50% or more of the Company’s then
outstanding voting common stock; or

     (ii) The shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation (a) in
which a majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger, and (b) which would result in the
voting securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being changed into voting
securities of the surviving entity) more than 50% of the combined voting power of
the voting securities or the surviving entity outstanding immediately after such
merger or consolidation; or

     (iii) The shareholders approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all
of the Company’s assets.

          (3) A “Disability” shall mean the inability of Executive, with reasonable
accommodation, 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 can be
expected to last for a continuous period of not less than twelve (12) months. Executive
shall be considered to have a Disability (i) if he is determined to be totally disabled by
the Social Security Administration or (ii) if he is determined to be disabled under HCC’s
long-term disability plan in which Executive participates and if such plan defines
“disability” in a manner that is consistent with the immediately preceding sentence.

          (4) A “Good Reason” shall mean any of the following (without Executive’s
express written consent):

          (i) A material diminution in Executive’s Base Salary;

     (ii) Executive’s involuntary relocation to any place, other than the executive
offices as a result of the Company relocating its executive offices, exceeding a
distance of fifty (50) miles from the place of Executive’s normal place of
employment on the Effective Date, except for reasonably required travel by Executive
on the Company’s business; or

     (iii) Any material breach by the Company of any material provision of this
Agreement.

However, Good Reason shall exist with respect to an above specified matter only if such
matter is not corrected, or begun to be corrected, by the Company within thirty (30) days
after the Company’s receipt of written notice of such matter from Executive. Any such
notice from Executive must be provided within thirty (30) days after the initial existence
of the specified event. In no event shall a termination by Executive occurring more than
ninety (90) days following the initial date of the event described be a termination for Good Reason due
to such event, whether that event is corrected or not.

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          (5) “Termination Date” shall mean the date Executive’s employment with the Company
terminates or is terminated for any reason pursuant to this Agreement, and which constitutes
a “separation from service” for purposes of Section 409A of the Internal Revenue Code of
1986, as amended, or any regulations or Treasury guidance promulgated thereunder (the
“Code”).

          (b) Termination Without Cause or for Good Reason: Benefits. In the event the Company
involuntarily terminates Executive’s employment with the Company and HCC without Cause or if
Executive terminates employment with the Company and HCC for Good Reason (a “Termination Event”),
this Agreement shall terminate and Executive shall be entitled to the following severance benefits:

          (1) An amount equal to the Base Salary (as defined in Section 3(a)) that would have
been payable after the Termination Date and before the Expiration Date, at the rate in
effect immediately prior to the Termination Event, payable in a lump sum discounted at the
rate of return on 90-day Treasury bills in existence on the Termination Date to take into
consideration the lump sum early payment within ninety (90) days after the Termination Date;
provided that such payment shall in any event occur on or after such Termination Date and
before March 15 of the year following the year containing such Termination Date;

          (2) Payment of accrued Base Salary and unreimbursed business expenses through the
Termination Date in accordance with 
Section 3(c). Such amounts shall be paid to Executive
in a lump sum in cash within thirty (30) days after the Termination Date; and

          (3) Executive shall be free to accept other employment during the Restricted Period and
the Non-Solicitation Period (as defined in Section 5), and other than as set forth herein,
there shall be no offset of any employment compensation earned by Executive in such other
employment during the Restricted Period and the Non-Solicitation Period against payments due
Executive under this Section 4, and there shall be no offset in any compensation received
from such other employment against the severance benefits set forth above, unless Executive
is employed in a position of competing with the Company as described in Section 5 below.

          (c) Termination In Event of Death: Benefits. If Executive’s employment with the
Company and HCC is terminated by reason of Executive’s death during the Term, this Agreement shall
terminate without further obligation to Executive’s legal representatives under this Agreement,
other than for payment of all accrued Base Salary through the Termination Date, unreimbursed
business expenses through the Termination Date in accordance with Section 3(d), the amount of any
bonus under Section 3(b) that relates to a prior year and that is unpaid as of the date of death,
and an amount equal to six (6) months’ Base Salary. Such amounts shall be paid to Executive’s
estate in a lump sum in cash within ninety (90) days after the date of death; provided that such
payment shall in any event occur on or after such date of death and before March 15 of the year
following the year of death. Executive shall be entitled to consideration for a bonus payment
under Section 3(b) with
respect to the year in which Executive dies; provided that the payment of any such bonus, if
any, shall in any event occur on or after such date of death and before March 15 of the year
following the year of death.

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          (d) Termination In Event of Disability: Benefits. If Executive’s employment with the
Company and HCC is terminated by reason of Executive’s Disability during the Term, this Agreement
shall terminate, but the Company shall pay Executive all accrued Base Salary through the
Termination Date, unreimbursed business expenses through the Termination Date in accordance with
Section 3(c), and the amount of any bonus under Section 3(b) that relates to a prior year and that
is unpaid as of the date of Disability, and an amount equal to six (6) months’ Base Salary. Such
amounts shall be paid to Executive in a lump sum in cash within ninety (90) days after the
Termination Date due to Disability; provided that such payment shall in any event occur on or after
such Termination Date and before March 15 of the year following the year containing such
Termination Date. Executive shall be entitled to consideration for a bonus payment under
Section 3(b) with respect to the year in which Executive’s employment terminates due to Disability;
provided that any payment of such bonus, if any, shall in any event occur on or after such
Termination Date and before March 15 of the year following the year containing such Termination
Date.

          (e) Voluntary Termination by Executive and Termination for Cause: Benefits. Executive
may terminate his employment with the Company by giving written notice of his intent and stating an
effective Termination Date at least ninety (90) days after the date of such notice; provided,
however, that the Company may accelerate such effective date by paying Executive through the
proposed Termination Date (but not to exceed ninety (90) days). Upon such a termination by
Executive or upon termination of Executive’s employment with the Company and HCC for Cause by the
Company, this Agreement shall terminate and the Company shall pay to Executive all accrued Base
Salary and all unreimbursed business expenses through the Termination Date in accordance with
Section 3(c). Such amounts shall be paid to Executive in a lump sum in cash within thirty (30)
days after the Termination Date. Executive shall have no entitlement to any bonus for the year in
which the Termination Date occurs or for any unpaid bonus for the prior year.

          (f) Voluntary Termination by Executive after a Change of Control: Benefits. If
Executive’s authority, duties, or responsibilities are materially diminished within twelve (12)
months after a Change of Control occurs, Executive notifies the Company of such diminution within
thirty (30) days, and the Company does not fully correct the condition within thirty (30) days
after receiving such notice, Executive may voluntarily terminate his employment with the Company
and shall be entitled to the following severance benefits:

          (1) An amount equal to the Base Salary (as defined in Section 3(a)) that would have
been payable after the Termination Date and before the Expiration Date, at the rate in
effect immediately prior to the Termination Event, payable in a lump sum discounted at the
rate of return on 90-day Treasury bills in existence on the Termination Date to take into
consideration the lump sum early payment within ninety (90) days after the Termination Date;
provided that such payment shall in any event occur on or after such Termination Date and
before March 15 of the year following the year containing such Termination Date;

          (2) All unreimbursed business expenses through the Termination Date in accordance with
Section 3(d). Such amounts shall be paid to Executive in a lump sum in cash within thirty
(30) days after the Termination Date;

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          (3) All stock options granted to Executive prior to the Effective Date shall vest
immediately, regardless of any limitation or condition when granted, and each such option
shall be exercisable for the period provided in the respective option grant agreement with
respect to such option. The provisions of this Section 4(f)(3) constitute an amendment to
the terms of each applicable option agreement (including agreements for options granted on
or after the Effective Date); and

          (4) Executive shall be free to accept other employment during such period, and other
than as set forth herein, there shall be no offset of any employment compensation earned by
Executive in such other employment during such period against payments due Executive under
this Section 4, and there shall be no offset in any compensation received from such other
employment against the severance benefits set forth above, unless Executive is employed in a
position of competing with the Company as described in Section 5 below.

          (g) Director and Officer Positions. Executive agrees that upon termination of
employment, for any reason, Executive will immediately tender his resignation from any and all
Board or officer positions held with the Company and/or any of its Affiliates.

     5. Agreement Regarding Non-Competition, Non-Solicitation and Confidentiality. During
Executive’s employment with the Company and HCC agree to give Executive access to some or all of
its Confidential Information (including, without limitation, Confidential Information, as defined
below, of the Company’s Affiliates) that Executive has not had access to or knowledge of before the
execution of this Agreement. The Company and HCC agree to provide Executive with Specialized
Training, which Executive has not had access to or knowledge of before the execution of this
Agreement. “Specialized Training” includes the training the Company provides to its employees that
is unique to its business and enhances Executive’s ability to perform Executive’s job duties
effectively. Specialized Training includes, without limitation, orientation training; sales
methods/techniques training; operation methods training; and computer and systems training.

          (a) Non-Competition During Employment. Executive agrees that, in consideration for
the Company’s and HCC’s promise to provide Executive with Confidential Information and Specialized
Training, during the Term, he will not compete with the Company by engaging in the conception,
design, development, production, marketing, or servicing of any product or service that is
substantially similar to the products or services which the Company provides, and that he will not
work for, in any capacity, assist, or become affiliated with as an owner, partner, etc., either
directly or indirectly, any individual or business which offers or performs services, or offers or
provides products substantially similar to the services and products provided by Company; provided,
however, Executive shall not be prevented from owning no more than 2% of any company whose stock is
publicly traded.

          (b) Conflicts of Interest. Executive agrees that during the Term, he will not engage,
either directly or indirectly, in any activity

 (a “Conflict of Interest”) that might adversely
affect the Company or its Affiliates, including ownership of a material investment in a
competitor of the Company or its Affiliates, ownership of a material interest in any supplier,
contractor, distributor, subcontractor, customer or other entity with which the Company does
business or acceptance of any material payment, service, loan, gift, trip, entertainment, or other
favor from a

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supplier, contractor, distributor, subcontractor, customer or other entity with which
the Company does business, and that Executive will promptly inform the CEO as to each offer
received by Executive to engage in any such activity. Executive further agrees to disclose to the
Company any other facts of which Executive becomes aware which in Executive’s good faith judgment
could reasonably be expected to involve or give rise to a Conflict of Interest or potential
Conflict of Interest.

          (c) Non-Competition After Termination from Employment. Executive agrees that in order
to protect the Company’s and HCC’s Confidential Information and Specialized Training, it is
necessary to enter into the following restrictive covenant, which is ancillary to the enforceable
promises between the Company and Executive otherwise contained in this Agreement. Executive agrees
that Executive shall not, at any time during the Restricted Period (as hereinafter defined), within
any of the markets in which the Company has sold products or services or formulated a plan to sell
products or services into a market during the last twelve (12) months of Executive’s employ, engage
in or contribute Executive’s knowledge to any work which is competitive with or similar to a
product, process, apparatus, service, or development on which Executive worked while employed by
the Company. It is understood that the geographical area set forth in this covenant is divisible
so that if this clause is invalid or unenforceable in an included geographic area, that area is
severable and the clause remains in effect for the remaining included geographic areas in which the
clause is valid. For the purpose of this Agreement, “Restricted Period” means a period of twelve
(12) months after termination for any reason whatsoever, whether by Executive or the Company, of
Executive’s employment with the Company. The Restricted Period shall commence at the time
Executive ceases to be a full-time employee of the Company.

          (d) Confidential Information. Executive agrees that he will not, except as the
Company or HCC may otherwise consent or direct in writing, reveal or disclose, sell, use, lecture
upon, publish or otherwise disclose to any third party any Confidential Information or proprietary
information of the Company or HCC, or authorize anyone else to do these things at any time either
during or subsequent to his employment with the Company. This Paragraph shall continue in full
force and effect after termination of Executive’s employment and after the termination of this
Agreement. Executive’s obligations under this Paragraph with respect to any specific Confidential
Information and proprietary information shall cease when that specific portion of the Confidential
Information and proprietary information becomes publicly known, in its entirety and without
combining portions of such information obtained separately. It is understood that such
Confidential Information and proprietary information of the Company and HCC include matters that
Executive conceives or develops, as well as matters Executive learns from other employees of the
Company or HCC. “Confidential Information” is defined to include information: (1) disclosed to or
known by Executive as a consequence of or through his employment with the Company; (2) not
generally known outside the Company or HCC; and (3) that relates to any aspect of the Company, HCC
or their business, finances, operation plans, budgets, research, or strategic development.
“Confidential Information” includes, but is not limited to, the Company’s and HCC’s trade secrets,
proprietary information, financial documents, long range plans, customer lists, employer
compensation, marketing
strategy, data bases, costing data, computer software developed by the Company or HCC,
investments made by the Company or HCC, and any information provided to the Company or HCC by a
third party under restrictions against disclosure or use by the Company, HCC or others.

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          (e) Non-Solicitation. To protect the Company’s and HCC’s Confidential Information and
Specialized Training, and in the event of Executive’s termination of employment for any reason
whatsoever, whether by Executive or the Company, it is necessary to enter into the following
restrictive covenant, which is ancillary to the enforceable promises between the Company and
Executive otherwise contained in this Agreement. Executive covenants and agrees that during
Executive’s employment and for a period of twenty-four (24) months from the date of termination of
Executive’s employment for any reason whatsoever (the “Non-Solicitation Period”), Executive will
not, directly or indirectly, either individually or as a principal, partner, agent, consultant,
contractor, employee or as a director or officer of any corporation or association, or in any other
manner or capacity whatsoever, except on behalf of the Company, solicit business, or attempt to
solicit business, and products or services competitive with products or services sold by the
Company, from the Company’s clients or customers, or those individuals or entities with whom the
Company did business during Executive’s employment. Executive further agrees that during
Executive’s employment and for the Non-Solicitation Period, Executive will not, either directly or
indirectly, or by acting in concert with others, solicit or influence any Company employee to leave
the Company’s employment.

          (f) Return of Documents, Equipment, Etc. All writings, records, and other documents
and things comprising, containing, describing, discussing, explaining, or evidencing any
Confidential Information, and all equipment, components, parts, tools, and the like in Executive’s
custody or possession that have been obtained or prepared in the course of Executive’s employment
with the Company shall be the exclusive property of the Company or HCC, shall not be copied and/or
removed from the premises of the Company, except in pursuit of the business of the Company, and
shall be delivered to the Company or HCC, without Executive retaining any copies, upon notification
of the termination of Executive’s employment or at any other time requested by the Company or HCC.
The Company and HCC shall have the right to retain, access, and inspect all property of Executive
of any kind in the office, work area, and on the premises of the Company upon termination of
Executive’s employment and at any time during employment by the Company to ensure compliance with
the terms of this Agreement.

          (g) Reaffirm Obligations. Upon termination of Executive’s employment with the
Company, Executive, if requested by Company or HCC, shall reaffirm in writing Executive’s
recognition of the importance of maintaining the confidentiality of the Company’s and HCC’s
Confidential Information and proprietary information, and reaffirm any other obligations set forth
in this Agreement.

          (h) Prior Disclosure. Executive represents and warrants that Executive has not used
or disclosed any Confidential Information he may have obtained from the Company or HCC prior to
signing this Agreement, in any way inconsistent with the provisions of this Agreement.

          (i) No Previous Restrictive Agreements. Executive represents that, except as
disclosed in writing to the Company, Executive is not bound by the terms of any agreement with any
previous employer or other party to refrain from using or disclosing any trade secret or
confidential or
proprietary information in the course of Executive’s employment by the Company or to refrain
from competing, directly or indirectly, with the business of such previous employer or any other
party. Executive further represents that Executive’s performance of all the terms of this
Agreement

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and Executive’s work duties for the Company does not and will not breach any agreement to
keep in confidence proprietary information, knowledge or data acquired by Executive in confidence
or in trust prior to Executive’s employment with the Company, and Executive will not disclose to
the Company or induce the Company to use any confidential or proprietary information or material
belonging to any previous employer or other party.

          (j) Breach. Executive agrees that any breach of Sections 5(a) through (f) above
cannot be remedied solely by money damages, and that in addition to any other remedies Company or
HCC may have, Company and HCC are entitled to obtain injunctive relief against Executive. Nothing
herein, however, shall be construed as limiting the Company’s or HCC’s right to pursue any other
available remedy at law or in equity, including recovery of damages and termination of this
Agreement and/or any termination or offset against any payments that may be due pursuant to this
Agreement.

          (k) Right to Enter Agreement. Executive represents and covenants to the Company that
he has full power and authority to enter into this Agreement and that the execution and performance
of this Agreement will not breach or constitute a default of any other agreement or contract to
which he is a party or by which he is bound.

          (l) Enforceability. The agreements contained in this Section 5 are independent of the
other agreements contained herein. Accordingly, failure of the Company or HCC to comply with any
of its obligations outside of this Section does not excuse Executive from complying with the
agreements contained herein.

          (m) Survivability. The agreements contained in this Section 5 shall survive the
termination of this Agreement and/or the termination of Executive’s employment for any reason.

          (n) Reformation. If a court concludes that any time period or the geographic area
specified in Sections 5(c) or (e) of this Agreement are unenforceable, then the time period will be
reduced by the number of months, or the geographic area will be reduced by the elimination of the
overbroad portion, or both, so that the restrictions may be enforced in the geographic area and for
the time to the fullest extent permitted by law.

     6. Assignment. This Agreement, and any rights and obligations hereunder, may not be
assigned by Executive and may be assigned by the Company only to a successor by merger or
purchasers of substantially all of the assets of the Company. The Company shall obtain the
assumption and performance of this Agreement by any such successor or purchasers; provided,
however, that such commitment by the Company (including a failure to satisfy such commitment) shall
not give Executive the right to object to or enjoin any transaction among the Company, any of its
affiliates, and any such successor or purchasers. To the extent a failure by the Company to
satisfy the foregoing commitment constitutes a material breach of this Agreement and to the extent
not cured in accordance with Section 4(a)(4), such failure shall constitute “Good Reason” pursuant
to Section 4(a) (4)(iii).

     7. Binding Agreement. Executive understands that his obligations under this Agreement
are binding upon Executive’s heirs, successors, personal representatives, and legal
representatives.

11

 

     8. Notices. All notices pursuant to this Agreement shall be in writing and sent
certified mail, return receipt requested, addressed as set forth below, or by delivering the same
in person to such party, or by transmission by facsimile to the number set forth below (which shall
not constitute notice). Notice deposited in the United States Mail, mailed in the manner described
hereinabove, shall be effective upon deposit. Notice given in any other manner shall be effective
only if and when received:

	 	 	 

	If to Executive:

	 	Brad T. Irick
	 

	 	SN-13 Lake Cherokee
	 

	 	Henderson, Texas 75652
	 
	 	 
	If to Company:

	 	HCC Insurance Holdings, Inc.
	 

	 	13403 Northwest Freeway
	 

	 	Houston, Texas 77040
	 

	 	Attn: General Counsel
	 

	 	Fax: (713) 744-9648

     9. Waiver. No waiver by either party to this Agreement of any right to enforce any
term or condition of this Agreement, or of any breach hereof, shall be deemed a waiver of such
right in the future or of any other right or remedy available under this Agreement.

     10. Severability. If any provision of this Agreement is determined to be void,
invalid, unenforceable, or against public policy, such provisions shall be deemed severable from
the Agreement, and the remaining provisions of the Agreement will remain unaffected and in full
force and effect.

     11. Entire Agreement. The terms and provisions contained herein shall constitute the
entire agreement between the parties with respect to Executive’s employment with Company during the
time period covered by this Agreement. This Agreement replaces and supersedes any and all existing
Agreements entered into between Executive and the Company relating generally to the same subject
matter, if any, and shall be binding upon Executive’s heirs, executors, administrators, or other
legal representatives or assigns.

     12. Modification of Agreement. This Agreement may not be changed or modified or
released or discharged or abandoned or otherwise terminated, in whole or in part, except by an
instrument in writing signed by Executive and an officer or other authorized executive of Company.

     13. Understand Agreement. Executive represents and warrants that he has read and
understood each and every provision of this Agreement, and Executive understands that he has the
right to obtain advice from legal counsel of his choice, if necessary and desired, in order to
interpret
any and all provisions of this Agreement, and that Executive has freely and voluntarily
entered into this Agreement.

     14. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to the conflicts of laws principles thereof.

12

 

     15. Jurisdiction and Venue. With respect to any litigation regarding this Agreement,
Executive agrees to venue in the state or federal courts in Harris County, Texas, and agrees to
waive and does hereby waive any defenses and/or arguments based upon improper venue and/or lack of
personal jurisdiction. By entering into this Agreement, Executive agrees to personal jurisdiction
in the state and federal courts in Harris County, Texas.

     16. Tolling. If Executive violates any of the restrictions contained in Sections 5(c)
or (e), the Restricted Period and the Non-Solicitation Period, respectively, will be suspended and
will not run in favor of Executive from the time of the commencement of any violation until the
time when Executive cures the violation to the Company’s satisfaction.

     17. Compliance With Section 409A.

          (a) Delay in Payments. Notwithstanding anything to the contrary in this Agreement, if
upon the Termination Date, Executive is a “specified employee” within the meaning of Code
Section 409A and the deferral of any amounts otherwise payable under this Agreement as a result of
Executive’s termination of employment is necessary in order to prevent any accelerated or
additional tax to Executive under Code Section 409A, then the Company will defer the payment of any
such amounts hereunder until the earlier of: (i) the date that is six (6) months following the date
of Executive’s termination of employment with the Company, or (ii) the date of Executive’s death,
at which time any such delayed amounts will be paid to Executive in a single lump sum, with
interest from the date otherwise payable at the United States prime rate as published in the “Money
Rates” section of The Wall Street Journal on the first publication date coincident with or
immediately following the Termination Date.

          (b) Overall Compliance. In the event that it is reasonably determined by the Company
or Executive that, as a result of Code Section 409A, any of the payments that Executive is entitled
to under the terms of this Agreement or any nonqualified deferred compensation plan (as defined
under Section 409A) may not be made at the time contemplated by the terms hereof or thereof, as the
case may be, without causing Executive to be subject to an income tax penalty and interest, the
Company will make such payment (with interest thereon) on the first day that would not result in
Executive incurring any tax liability under Section 409A. In addition, other provisions of this
Agreement or any other plan notwithstanding, the Company shall have no right to accelerate any such
payment or to make any such payment as the result of an event if such payment would, as a result,
be subject to the tax imposed by Section 409A.

          (c) Reformation. If any provision of this Agreement would cause Executive to incur
any additional tax under Code Section 409A, the parties will in good faith attempt to reform the
provision in a manner that maintains, to the extent possible, the original intent of the applicable
provision without violating the provision of Code Section 409A.

          (d) Consultation with Tax Advisor. Executive is hereby advised to consult immediately
with his own tax advisor regarding the tax consequences of this Agreement, including the
consequences of Code Section 409A.

     18. Other Financial Arrangements. Executive represents to the Company that he is not
a party to any financial arrangement with PricewaterhouseCoopers, including any of its affiliates,
past or

13

 

present (“PwC”), other than one providing for regular payment of a fixed dollar amount that
is not dependent upon the revenues, profits or earnings of PwC, and is through a fully funded
retirement plan or rabbi trust. Executive understands and agrees that this representation is a
material term of this Agreement.

[signature page follows]

14

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement in multiple copies, effective as
of the date first written above.

EXECUTIVE :

	 	 	 	 	 

	/s/ Brad T. Irick	 	 
	 	 	 
	Brad T. Irick	 	 
	 
	 	 	 	 
	HCC:
	 	 	 	 
	 
	 	 	 	 
	HCC Insurance Holdings, Inc.	 	 
	 
	 	 	 	 
	By:
	 	/s/ John N. Molbeck, Jr.,	 	 
	 

	 	 

JOHN N. MOLBECK, JR.,
	 	 
	 

	 	President & Chief Executive Officer	 	 

Signature Page

Employment Agreement —  Brad T. Irick

 

 

Exhibit 3(g)

Option Vesting and Exercise Provisions

Termination of Employment.

1. In the event the employment of the Employee is terminated by the Employee for Good Reason (as
defined in the Employment Agreement between the Company and the Employee entered into effective as
of May 10, 2010 (the “Employment Agreement”) or by the Company without Cause (as such term is
defined in the Employment Agreement), the Employee shall have the right to exercise this option for
the full number of shares not previously exercised or any portion thereof, except as to the
issuance of fractional shares, to the full extent of this option at any time within the unexpired
term of this option.

2. In the event the employment of the Employee is terminated for Cause or by Employee without Good
Reason, the Employee shall have the right at any time within thirty (30) days after the termination
of such employment or, if shorter, during the unexpired term of this option, to exercise this
option for the full number of shares not previously exercised or any portion thereof, except as to
the issuance of fractional shares, but only to the extent this option was otherwise exercisable in
accordance with Paragraph 4 hereof as of the date of such termination of employment.

3. In the event the employment of the Employee is terminated by reason of Disability, then the
Employee shall have the right to exercise this option for the full number of shares not previously
exercised or any portion thereof, except as to the issuance of fractional shares, to the full
extent of this option at any time within the unexpired term of this option.

4. In the event of the death of the Employee while in the employ of the Company or the
Subsidiaries, this option may be exercised for the full number of shares not previously exercised,
or any portion thereof, except as to the issuance of fractional shares, to the full extent of this
option at any time within the unexpired term of this option, by the person or persons to whom the
Employee’s rights under this option shall pass by the Employee’s will or by the laws of descent and
distribution, whichever is applicable.

5. In the event the Employee terminates his employment on a Change of Control (as defined in the
Employment Agreement), then the Employee shall have the right to exercise this option for the full
number of shares not previously exercised or any portion thereof, except as to the issuance of
fractional shares, to the full extent of this option at any time within the unexpired term of this
option.

Exhibit 3(g)exv10w6

Exhibit 10.6

CAREY WATERMARK INVESTORS INCORPORATED

FORM OF

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

FORM OF 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 Watermark 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.

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

- 1 -

 

	 	(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.

 2 

 

     “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.

 3 

 

     “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 ___, 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.

 4 

 

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 ___. 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 ___. Shares
distributed under the Plan may be treasury Shares or authorized but unissued Shares. Any Shares
that have been

 5 

 

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.

     (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.

 6 

 

     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.

          (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

 7 

 

“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

 8 

 

          Stock Units any voting, dividend or derivative or other similar rights with respect to any
Restricted Stock Unit.

     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.

 9 

 

     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

 10 

 

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.

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.

 11 

 

          (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.

 12 

 

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.

 13 

 

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.

     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

 14 

 

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.

 17

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