Document:

EX-10.27

EXECUTIVE EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made as of May 27, 2008, (“Effective Date”) by
and between BMC Software, Inc., a Delaware corporation (the “Employer”), and John McMahon
(the “Executive”). The Employer and the Executive are each a “party” and are together
“parties” to this Agreement.

RECITALS

WHEREAS, the Employer desires to employ the Executive as the Senior Vice President, World Wide
Sales & Services, and the Executive wishes to accept such employment, upon the terms and conditions
set forth in this Agreement; and

WHEREAS, the Executive acknowledges that a portion of his employment duties will be undertaken
in the state of Texas at the corporate headquarters of the Employer. In addition to the fact that
Executive will often be physically present in the state of Texas while undertaking his employment
duties, all or a substantial portion of his employment undertakings outside the state of Texas
relate to the business of the corporate headquarters located in Houston, Texas. Executive
acknowledges the substantial nexus between his employment and the state of Texas.

WHEREAS, except as set forth in this Agreement, Employer and Executive intend this Agreement
to supersede all prior offer letters, Change of Control Agreement and/or Confidentiality and
Intellectual Property Assignment Agreement for BMC Software Employees between Employer and
Executive. To the extent any compensation or obligations of Employer under any previous offer
letter, Change of Control Agreement and/or Confidentiality and Intellectual Property Assignment
Agreement for BMC Software Employees between Employer and Executive are intended to survive, they
have been incorporated into this Agreement.

AGREEMENT

NOW THEREFORE, in consideration of the employment compensation to be paid to the Executive and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

For the purposes of this Agreement, the following terms have the meanings specified or
referred to in this Section 1.

“Agreement” refers to this Employment Agreement, including all Exhibits attached hereto, as
amended from time to time.

“Benefits” as defined in Section 3.1(b).

“Board of Directors” refers to the board of directors of the Employer.

“Change of Control” refers to (i) the acquisition of at least 50% of Employer’s outstanding
voting stock; (ii) an unapproved change in the majority of the Employer’s board of directors; (iii)
a merger, consolidation, or similar corporate transaction in which the Company’s shareholders
immediately prior to the transaction do not own more than 60% of the voting stock of the surviving
corporation in the transaction; and (iv) shareholder approval of the company’s liquidation,
dissolution, or sale or substantially all of its assets.

“Confidential Information” means any and all:

	 	a.	 	confidential and proprietary information, whether in written,
oral or electronic form, concerning the business, strategies and affairs of the
Employer, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples,
inventions and ideas, past, current, and planned research and development,
current and planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements, price lists,
market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information), trade secrets and any other
information, however documented;

	 	b.	 	information concerning the business and affairs of the Employer
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of key personnel, personnel training and techniques
and materials), however documented; and

	 	c.	 	notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.

“Disability” as defined in Section 6.2.

“Effective Date” is the date stated in the first paragraph of this agreement.

“Employee Invention” shall mean any idea, invention, technique, modification, process, method,
discovery, concept, know-how, derivative, enhancement or improvement (whether patentable or not),
any industrial design (whether registerble or not), any mask work, however fixed or encoded, that
is suitable to be fixed, embedded or programmed in a semiconductor product (whether recordable or
not), and any source or object code, firmware, computer program, command structure, documentation,
algorithm or other work of authorship (whether or not copyright protection may be obtained for it)
created, conceived, developed or worked on, in whole or in part, by the Executive, either solely or
in conjunction with others, during the Employment Period, or a period that includes a portion of
the Employment Period, that relates in any way to, or is useful in any manner in, the business then
being conducted or proposed to be conducted by the Employer, and any such item created by the
Executive, either solely or in conjunction with others, following termination of the Executive’s
employment with the Employer, that is based upon or uses Confidential Information.

“Employment Period” is the term of the Executive’s employment under this Agreement.

“Fiscal Year” shall mean the Employer’s fiscal year, which shall end on March 31 of each year,
or as changed from time to time.

“for cause” as defined in Section 6.3.

“Good Reason” as defined in Section 6.3.

“person” is any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust, association,
organization, or governmental body.

“Proprietary Items” as defined in Section 7.2(a)(iv).

“Salary” as defined in Section 3.1(a).

“trade secrets” shall mean the whole or any part of any scientific or technical information,
design, process, procedure, formula, or improvement that has value and that the owner has taken
measures to prevent from becoming available to persons other than those selected by the owner to
have access for limited purposes.

2. EMPLOYMENT TERMS AND DUTIES

2.1 EMPLOYMENT

The Employer hereby employs the Executive, and the Executive hereby accepts employment by the
Employer, upon the terms and conditions set forth in this Agreement.

2.2 EMPLOYMENT PERIOD

Subject to the provisions of Section 6, the term of the Executive’s employment under this
Agreement will commence upon the Effective Date and shall continue in effect through the third
anniversary of the Effective Date (the “Employment Period”); provided, however, that, subject to
the provisions of Section 6, commencing on the day after the Effective Date and on each day
thereafter, the Employment Period shall be automatically extended for one additional day unless the
Employer shall give written notice to Executive that the Employment Period shall cease to be so
extended, in which event the Employment Period shall terminate on the third anniversary of the date
such notice is given. The Employment Period may be further extended by mutual agreement of the
parties.

2.3 DUTIES

The Executive will have such duties as are assigned or delegated to the Executive by the Board
of Directors, and will initially serve as the Employer’s Senior Vice President – World Wide Sales &
Services. The Executive will devote his entire business time, attention, skill, and energy
exclusively to the business of the Employer, will use his best efforts to promote the success of
the Employer’s business, and will cooperate fully with the Board of Directors in the advancement of
the best interests of the Employer. The Executive’s employment will be subject to the policies
maintained and established by the Employer, from time to time. Nothing in this Section 2.3,
however, will prevent the Executive from engaging in additional activities in connection with
passive personal investments and community affairs that are not inconsistent with the Executive’s
duties under this Agreement. Additionally, nothing in this Section 2.3 will prevent the Executive
from serving on the Board of Directors of other companies or organizations, or engaging in other
activities, so long as such participation does not conflict with the interests or business of
Employer or require such involvement as to interfere with the performance of the Executive’s duties
hereunder and has been expressly approved by the Chief Executive Officer of Employer. If the
Executive is elected as a director of the Employer or as a director or officer of any of its
affiliates, the Executive will fulfill his duties as such director or officer without additional
compensation. The Executive acknowledges and agrees that he owes a fiduciary duty of loyalty,
fidelity and allegiance to act at all times in the best interests of the Employer.

3. COMPENSATION

3.1 COMPENSATION

	 	a.	 	Salary. During the Employment Period, the Executive
will be paid an annual base salary of $400,000 (as may be adjusted from time to
time, the “Salary”), which will be payable in twenty-four (24) equal
installments according to the Employer’s customary payroll practices and
subject to applicable tax withholdings. Executive may be subject to such
increases in Salary as deemed appropriate in the sole discretion of the
Compensation Committee of the Board of Directors of Employer.

	 	b.	 	Benefits. The Executive will, during the Employment
Period, be permitted to participate in such retirement program, profit sharing,
life insurance, hospitalization, major medical, and other employee benefit
plans of the Employer that may be in effect from time to time, to the extent
the Executive is eligible under the terms of those plans (collectively, the
“Benefits”).

	 	c.	 	Cash Bonus. Executive will be eligible for a cash
bonus as described in Attachment A incorporated herein by reference and such
other bonus programs as may be authorized by the Compensation Committee and
Directors of the Employer.

	 	d.	 	Restricted Stock. Subject to the approval of the
Compensation Committee and Board of Directors and Executive’s commencement of
employment hereunder, Executive shall receive a total of 130,000 shares of
time-based restricted stock which will vest 33.3% annually on each anniversary
of the grant date over a 3 year period, subject to Executive’s continued
employment with Employer through each such vesting date (the “Restricted
Shares”). The Restricted Shares shall be awarded in two grants, the first for
50,000 shares awarded May 5, 2008 subject to the terms and conditions of the
BladeLogic, Inc. 2007 Stock Option and Incentive Plan and be subject to the
terms and conditions of the Company’s standard form of restricted stock
agreement for senior executives and to be entered into between Executive and
Employer, and the second for 80,000 shares which shall be subject to the terms
and conditions of the 1994 Employee Incentive Plan and be subject to the terms
and conditions of the Company’s standard form of restricted stock agreement for
senior executives and to be entered into between Executive and Employer. The
actual grant date for the second grant will be established by the Compensation
Committee consistent with the Plan and the Employer’s current stock granting
policy.

	 	e.	 	Stock Options. Subject to the approval of the
Compensation Committee and Board of Directors, Executive will receive stock
options to purchase a total of 130,000 shares of Employer’s stock which will
vest in equal monthly installments over four years based on Executive’s
continuous employment with Employer. The Stock Options shall be awarded in two
grants, the first for 50,000 options awarded May 5, 2008 subject to the terms
and conditions of the BladeLogic, Inc. 2007 Stock Option and Incentive Plan and
be subject to the terms and conditions of the Company’s standard form of stock
option agreement for senior executives and to be entered into between Executive
and Employer, and the second grant for 80,000 options which shall be subject to
the terms and conditions of the BMC Software, Inc. 2007 Incentive Plan and be
subject to the terms and conditions of the Company’s standard form of stock
option agreement for senior executives and to be entered into between Executive
and Employer. The actual grant date and exercise price for the second grant
will be established by the Compensation Committee consistent with the Plan and
the Employer’s current stock option granting policy.

	 	f.	 	Long-Term Incentive Plan. Executive will be eligible
(beginning April 1, 2008) to participate in the BMC Long-Term Incentive Plan
providing a 3-year cash plan based on Employer’s total shareholder return
against a peer group of companies with the first plan for new members divided
into two target payments: 18-month payment (target is at $150,000 payment) and
36-month payment (target is at $150,000 payment).

4. FACILITIES AND EXPENSES

	 	4.1	 	FACILITIES.

The Employer will furnish the Executive office space, equipment, supplies, and such
other facilities and personnel as the Employer deems necessary or appropriate for the
performance of the Executive’s duties under this Agreement. Executive shall reside and be
based in Massachusetts and shall not be required to relocate.

	 	4.2	 	EXPENSES.

The Employer will pay on behalf of the Executive (or reimburse the Executive for)
reasonable expenses incurred by the Executive at the request of, or on behalf of, the
Employer in the performance of the Executive’s duties pursuant to this Agreement, and in
accordance with the Employer’s employment policies, including reasonable expenses incurred
by the Executive in attending business meetings, in appropriate business entertainment
activities, traveling to and from the Company’s headquarters in Houston, Texas on business
and for promotional expenses. The Executive must file expense reports with respect to such
expenses in accordance with the Employer’s policies then in effect.

5. VACATIONS AND HOLIDAYS

The Executive will be entitled to paid vacation during the term of the Agreement in accordance
with the vacation policies of the Employer in effect for its employees from time to time. The
Executive will also be entitled to the paid holidays and other paid leave set forth in the
Employer’s policies.

6. TERMINATION

6.1 EVENTS OF TERMINATION

The Employment Period, the Executive’s Salary and any and all other rights of the Executive
under this Agreement or otherwise as an employee of the Employer will terminate (except as
otherwise provided in this Section 6):

	 	a.	 	upon the death of the Executive;

	 	b.	 	upon the Disability (as defined in Section 6.2) of the
Executive immediately upon notice from either party to the other;

	 	c.	 	upon termination by the Employer for cause (as defined in
Section 6.3);

	 	d.	 	upon the voluntary retirement from or voluntary resignation of
employment by the Executive for any reason other than those set forth in
Section 6.1(f) below;

	 	e.	 	upon termination by the Employer for any reason other than
those set forth in Section 6.1(a) through 6.1(d) above; or

	 	f.	 	upon voluntary resignation of employment by the Executive
within 60 days of the occurrence of an event that constitutes Good Reason, as
defined in Section 6.3 below.

Upon termination of the Employment Period, as provided above or otherwise, Executive’s rights
respecting Benefits, Restricted Stock, Stock Options and Cash Bonus will be determined under the
applicable plan or program providing the same.

6.2 DEFINITION OF DISABILITY

For purposes hereof, the term “Disability” shall mean an incapacity by accident, illness or
other circumstance which renders the Executive mentally or physically incapable of performing the
duties and services required of the Executive hereunder on a full-time basis for a period of at
least 180 consecutive days.

	 	6.3	 	DEFINITION OF “FOR CAUSE” AND “GOOD REASON”

	 	a.	 	For purposes of Section 6.1, the phrase “for cause” means:
(i) the Executive’s continued and material failure to perform his obligations
under this Agreement; (ii) the Executive’s material failure to adhere to any
Employer policy or code of conduct; (iii) the appropriation (or attempted
appropriation) of a material business opportunity of the Employer, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (iv) the Executive’s
engaging in conduct that is materially injurious to the Employer, (v) the
misappropriation (or attempted misappropriation) of any of the Employer’s funds
or property; (vi) the conviction of or the entering of a guilty plea or plea of
no contest with respect to, a felony, the equivalent thereof, or any other
crime with respect to which imprisonment is a punishment; or (vii) the
conviction of the Executive by a court of competent jurisdiction of, or
Executive’s guilty plea or plea of no contest with respect to, a crime
involving moral turpitude. The determination of whether the Executive’s
employment is terminated for cause shall be made solely by the Employer, which
shall act in good faith in making such determination.

	 	b.	 	“Good Reason” means a material negative change in the
Executive’s employment relationship with the Employer as a result of the
occurrence of one of the following events:

	 	i.	 	The occurrence, prior to a Change of Control or
on or after the date which is 12 months after a Change of Control
occurs, of any one or more of the following events without the
Executive’s express written consent: (i) a reduction in the Executive’s
Salary or target bonus opportunity from that provided to him
immediately on the Effective Date of this Agreement (or the effective
date of any extension of this Agreement pursuant to Paragraph 7(a)) or
as the same may be increased from time to time; or (ii) a diminution in
employee benefits (including but not limited to medical, dental, life
insurance and long-term disability plans) and perquisites applicable to
the Executive from those substantially similar to the employee benefits
and perquisites provided by the Employer (including subsidiaries) to
executives with comparable duties, as such benefits may be modified
from time to time; or

	 	ii.	 	The occurrence, on or within 12 months after
the date upon which a Change of Control occurs, of any one or more of
the following events without Executive’s express written consent: (i) a
diminution in Executive’s authority, duties or responsibilities; (ii) a
reduction by the Employer or a subsidiary thereof in Executive’s Salary
or target bonus opportunity as in effect immediately prior to the
Change of Control or as the same may be increased from time to time or
a material change in the eligibility requirements or performance
criteria under any bonus, incentive or compensation plan, program or
arrangement under which Executive is covered immediately prior to the
Change of Control which materially adversely affects Executive; (iii)
the Employer or a subsidiary thereof requiring Executive to be
permanently based anywhere other than within 50 miles of Executive’s
job location at the time of the Change of Control; (iv) without
replacement by a plan providing benefits to Executive equal to or
greater than those discontinued, the failure by the Employer or a
subsidiary thereof to continue in effect, within its maximum stated
term, any pension, bonus, incentive, stock ownership, purchase, option,
life insurance, health, accident, disability, or any other employee
benefit plan, program or arrangement in which Executive is
participating at the time of the Change of Control, or the taking of
any action by the Employer or a subsidiary thereof that would
materially adversely affect Executive’s participation or materially
reduce Executive’s benefits under any of such plans; (v) the taking of
any action by the Employer or a subsidiary thereof that would
materially adversely affect the physical conditions existing at the
time of the Change of Control in or under which Executive performs his
employment duties; (vi) if Executive’s primary employment duties are
with a subsidiary of the Employer, the sale, merger, contribution,
transfer or any other transaction in conjunction with which the
Employer’s ownership interest in the subsidiary decreases below a
majority interest; or (vii) any material breach of the terms
of this Agreement by the Employer or a subsidiary thereof.

For an event to constitute Good Reason, the Executive must provide notice to
the Employer of the existence of the condition which the Executive asserts
gives rise to Good Reason within 90 days of the initial existence of the
condition and the Employer shall not have remedied such condition within a
period of 30 days from receipt of such notice. For avoidance of doubt, the
“occurrence of an event that constitutes Good Reason” under Section 6.1(f)
shall not arise at the initial date of the existence of the condition which
the Executive asserts gives rise to Good Reason, but rather shall arise at
the end of the 30-day remedy period if such condition has not been remedied.

6.4 SEVERANCE

Should the Executive’s employment with the Employer be terminated during the Employment Period
pursuant to Section 6.1(e) or Section 6.1(f) above, subject to Executive executing, and failing to
revoke during any applicable revocation period, a general release of all claims against Employer
and its affiliates in a form acceptable to Employer within 45 days of Executive’s “separation from
service” within the meaning of Section 409A of the Internal Revenue Code, the Executive shall be
entitled to:

	 	a.	 	a payment equal to one (1) year of his then current Salary;

	 	b.	 	a payment equal to one (1) year of his then current cash bonus
target amount; and

	 	c.	 	(i) all Executive’s outstanding stock options to acquire shares
of the common stock of Employer that were received upon conversion in
connection with the Merger (as defined in the Merger Agreement) shall become
immediately vested and fully exercisable, and (ii) any forfeiture restrictions
on former BladeLogic restricted shares (which were converted in the Merger into
the right to receive $28.00 in cash per share) shall immediately lapse, and the
consideration shall become payable in accordance with that certain Agreement
and Plan of Merger by and among Employer, Bengal Acquisition Corporation and
BladeLogic, Inc. dated as of March 17, 2008 (the “Merger Agreement”). For the
avoidance of doubt, the vesting acceleration provided by this paragraph shall
in no event apply to stock options or restricted stock grants made on or after
the closing of the Merger.

Subject to Section 9.3, such payments under this section will be made no later than 30 days
following the date the executed release is delivered to the Employer. Severance payments do not
constitute continued employment beyond the termination date.

	 	6.5	 	CHANGE OF CONTROL

If, within 12 months following a Change of Control, the Executive’s employment with Employer
is terminated pursuant to Section 6.1(e) or 6.1(f) above, subject to Executive executing, and
failing to revoke during any applicable revocation period, a general release of all claims against
Employer and its affiliates in a form acceptable to Employer within 45 days of Executive’s
“separation from service” within the meaning of Section 409A of the Internal Revenue Code ,
the Executive shall be entitled to the following in lieu of the amounts set forth in Section
6.4:

	 	a.	 	a payment equal to one (1) year of his then current Salary;

	 	b.	 	a payment equal to one (1) times his then current cash bonus
target amount;

	 	c.	 	vesting of Executive’s stock option and restricted stock
awards, if any, subject to the terms and conditions of the respective stock
option and restricted stock agreements; and

	 	d.	 	a lump sum payment equal to the cost of Cobra coverage for 18
months for continued medical benefits, for the Executive and his dependents
(including his spouse) who were covered as of such termination event under the
medical benefit plan as in effect for employees of the Employer during the
coverage period, or the substantial equivalence.

Subject to Section 9.3, such payments under this section will be made no later than 30 days
following the date the executed release is delivered to the Employer. . Severance payments do not
constitute continued employment beyond the termination date.

Notwithstanding anything to the contrary in this Agreement, if the Executive is a
“disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of
1986, as amended (the “Code”)), and the severance benefits provided for in this Section
6.5, together with any other payments and benefits which the Executive has the right to
receive from the Employer and its affiliates, would constitute a “parachute payment” (as
defined in Section 280G(b)(2) of the Code), then the severance benefits provided hereunder
(beginning with any benefit to be paid in cash hereunder) shall be either (1) reduced (but
not below zero) so that the present value of such total amounts and benefits received by
the Executive will be one dollar ($1.00) less than three times the Executive’s “base
amount” (as defined in Section 280G of the Code) and so that no portion of such amounts and
benefits received by the Executive shall be subject to the excise tax imposed by Section
4999 of the Code or (2) paid in full, whichever produces the better net after-tax position
to the Executive (taking into account any applicable excise tax under Section 4999 of the
Code and any other applicable taxes). The determination as to whether any such reduction
in the amount of the severance benefit is necessary shall be made initially by the Employer
in good faith. If a reduced severance benefit is paid hereunder in accordance with clause
(1) of the first sentence of this paragraph and through error or otherwise that payment,
when aggregated with other payments and benefits from the Employer (or its affiliates) used
in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three
times the Executive’s base amount, then the Executive shall immediately repay such excess
to the Employer upon notification that an overpayment has been made.

	 	6.6	 	NO MITIGATION

Any remuneration received by the Executive from a third party following the Employment Period shall
not apply to reduce the Employer’s obligations to make payments hereunder.

	 	6.7	 	LIQUIDATED DAMAGES

Due to the difficulties in estimating damages for an early termination of the Employment Period,
the Employer and the Executive agree that the payments, if any, to be received by the Executive
hereunder shall be received as liquidated damages.

7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

	 	7.1	 	ACKNOWLEDGMENTS BY THE EXECUTIVE

The Executive acknowledges that (a) prior to and during the Employment Period and as a part of
his employment, the Executive has been and will be afforded access to Confidential Information;
(b) public disclosure of such Confidential Information could have an adverse effect on the Employer
and its business; (c) because the Executive possesses substantial technical expertise and skill
with respect to the Employer’s business, the Employer desires to obtain exclusive ownership of each
Employee Invention, and the Employer will be at a substantial competitive disadvantage if it fails
to acquire exclusive ownership of each Employee Invention; and (d) the provisions of this Section 7
are reasonable and necessary to prevent the improper use or disclosure of Confidential Information
and to provide the Employer with exclusive ownership of all Employee Inventions.

7.2 AGREEMENTS OF THE EXECUTIVE

In consideration of the compensation and benefits to be paid or provided to the Executive by
the Employer under this Agreement, the Executive covenants the following:

	 	a.	 	Confidentiality.

	 	i.	 	The Executive will hold in confidence the
Confidential Information and will not disclose it to any person except
(1) with the specific prior written consent of the Employer, (2) solely
as necessary for the performance of the Executive’s duties or (3) as
otherwise expressly permitted by the terms of this Agreement.

	 	ii.	 	Any trade secrets of the Employer will be
entitled to all of the protections and benefits under any applicable
law. If any information that the Employer deems to be a trade secret
is found by a court of competent jurisdiction not to be a trade secret
for purposes of this Agreement, such information will, nevertheless, be
considered Confidential Information for purposes of this Agreement.
The Executive hereby waives any requirement that the Employer submit
proof of the economic value of any trade secret or post a bond or other
security.

	 	iii.	 	None of the foregoing obligations and
restrictions applies to any part of the Confidential Information that
the Executive demonstrates was or became generally available to the
public other than as a result of a disclosure by the Executive.

	 	iv.	 	The Executive will not remove from the
Employer’s premises (except to the extent such removal is for purposes
of the performance of the Executive’s duties at home or while
traveling, or except as otherwise specifically authorized in writing by
the Employer) any document, record, notebook, plan, model, component,
device, or computer software or code, whether embodied in a disk or in
any other form (collectively, the “Proprietary Items”) or any
Confidential Information. The Executive recognizes that, as between
the Employer and the Executive, all of the Proprietary Items and
Confidential Information, whether or not created, conceived, developed
or worked on by the Executive, are the exclusive property of the
Employer. Upon termination of this Agreement by either party, or upon
the request of the Employer during the Employment Period, the Executive
will return to the Employer all of the Proprietary Items and
Confidential Information in the Executive’s possession or subject to
the Executive’s control, and the Executive shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the
Proprietary Items or Confidential Information.

	 	b.	 	Employee Inventions. Each Employee Invention will
belong exclusively to the Employer. The Executive acknowledges that all of the
Executive’s writing, works of authorship, and other Employee Inventions are
works made for hire and the property of the Employer, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive
hereby assigns to the Employer without royalty or any other further
consideration all of the Executive’s right, title, and interest, including
all rights of copyright, patent, and other intellectual property rights, to or
in such Employee Inventions. The Executive covenants that he will promptly:

	 	i.	 	disclose to the Employer in writing any
Employee Invention. The disclosure required by this Section
applies (1) during the period of Executive’s employment with the
Employer; (2) with respect to all Employee Inventions whether or not
they are conceived, made, developed or worked on by Executive during
Executive’s regular hours of employment with the Employer; (3) whether
or not the Employee Invention was made at the suggestion of the
Employer; and (4) whether or not the Employee Invention was reduced to
drawings, written description, documentation, models or other tangible
form;

	 	ii.	 	make and maintain adequate and current written
records of all Employee Inventions;

	 	iii.	 	assign to the Employer or to a party designated by the Employer,
at the Employer’s request and without additional compensation, all of
the Executive’s right to the Employee Invention for the United States
and all foreign jurisdictions;

	 	iv.	 	assist the Employer in obtaining, maintaining and enforcing
patents, invention assignments and copyright assignments, and other
proprietary rights in connection with any Employee Invention;

	 	v.	 	execute and deliver to the Employer such applications, assignments,
and other documents as the Employer may request in order to
perfect in the Employer the rights, title and other interests in
my work product granted to the Employer under this Agreement or to
apply for and obtain patents or other registrations with respect to any
Employee Invention in the United States and any foreign jurisdictions;

	 	vi.	 	sign all other papers necessary to carry out
the above obligations; and

	 	vii.	 	give testimony and render any other assistance
in support of the Employer’s rights to any Employee Invention.

Executive further agrees that his obligations under this Section 7.2(b)
shall continue beyond the termination of his employment with the Employer. If
the Employer is unable for any reason, after reasonable effort, to secure
Executive’s signature on any document needed in connection with the actions
specified above, Executive hereby irrevocably designates and appoints the
Employer and its duly authorized officers and agents as his agent and
attorney in fact, which appointment is coupled with an interest, to act for
and in Executive’s behalf to execute, verify and file any such documents and
to do all other lawfully permitted acts to further the purposes of this
Section 7.2(b) with the same legal force and effect as if executed by
Executive.

As a matter of record, Executive attaches as Attachment B of this Agreement a
brief description of all inventions made or conceived by Executive prior to
his employment with the Employer which Executive desires to be excluded from
the assignment provisions of this Agreement (“Background Technology”).

	 	c.	 	Notice of Intent to Resign. Except in the event of a resignation
for Good Reason, Executive agrees to provide Employer with 90 days advance
notice of his intention to resign (“Notice Period”). During the Notice Period,
Executive shall continue in the diligent fulfillment of all duties of his
position and this Agreement. Should Executive fail to provide Employer with
the full Notice Period, Executive shall forfeit that portion of his earned
pro-rata yearly cash bonus as follows:

(90 — (number of full days of advance notice) / 90) X (times) pro-rata
earned yearly cash bonus = amount forfeited by Executive.

Pro-rata earned yearly cash bonus is: (unconditional portion of yearly cash
bonus, if any, targeted for Executive in the current Fiscal Year) / (number
of full months worked in the current Fiscal Year / 12).

	 	d.	 	Non-Disparagement. Executive shall not disparage the
Employer or any of its shareholders, directors, officers, employees, or agents.

	 	e.	 	Creative Works. Executive shall not create, assist
with or consult on any creative works which discuss, describe or reference
Employer or any executive of Employer. Creative works includes but is not
limited to novels, nonfiction writings, any authored work, plays, screenplays,
musicals or the like.

7.3 DISPUTES OR CONTROVERSIES

The Executive recognizes that should a dispute or controversy arising from or relating to this
Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All pleadings,
documents, testimony, and records relating to any such adjudication will be maintained in secrecy
and will be available for inspection by the Employer, the Executive, and their respective attorneys
and experts, who will agree, in advance and in writing, to receive and maintain all such
information in secrecy, except as may be limited by them in writing.

8. NON-COMPETITION AND NON-INTERFERENCE

8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE

The Executive acknowledges that: (a) the services to be performed by him under this Agreement
are of a special, unique, unusual, extraordinary, and intellectual character; (b) the Employer’s
business is international in scope and its products are marketed throughout the United States and
the world; (c) the Employer competes with other businesses that are or could be located in any part
of the United States or the world; (d) the provisions of this Section 8 are reasonable and
necessary to protect the Employer’s business; and (e) in connection with the fulfillment of his
duties hereunder and as an employee of the Employer, the Employer will provide Executive with
Confidential Information necessitating the execution of the covenants contained in this Section 8.

8.2 COVENANTS OF THE EXECUTIVE

In consideration of the acknowledgments by the Executive, and in consideration of the
compensation and benefits to be paid or provided to the Executive by the Employer, the Executive
covenants that during and for eighteen months following the Employment Period he will not, directly
or indirectly:

	 	a.	 	except in the course of his employment hereunder, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive’s name or
any similar name to, lend Executive’s credit to or render services or advice
to, any business whose products or activities compete in whole or in part with
the products or activities of the Employer anywhere in the world, provided,
however, that the Executive may purchase or otherwise acquire up to (but not
more than) five percent (5%) of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended;

	 	b.	 	whether for the Executive’s own account or for the account of
any other person, solicit business of the same or similar type being carried on
by the Employer, from any person known by the Executive to be a customer or a
potential customer of the Employer, whether or not the Executive had personal
contact with such person during and by reason of the Executive’s employment
with the Employer;

	 	c.	 	whether for the Executive’s own account or the account of any
other person, (i) solicit, employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who is an employee (or was an
employee within two (2) years of the date in question) of the Employer at any
time during the Employment Period or in any manner induce or attempt to induce
any employee of the Employer to terminate his or her employment with the
Employer; or (ii) interfere with the Employer’s relationship with any person,
including any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Employer; or

If any covenant in this Section 8.2 is held to be unreasonable, arbitrary, or against public
policy, such covenant will be considered to be divisible with respect to scope, time, and
geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not against public
policy, will be effective, binding, and enforceable against the Executive.

The period of time applicable to any covenant in this Section 8.2 will be extended by the
duration of any violation by the Executive of such covenant.

9. GENERAL PROVISIONS

9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

The Executive acknowledges that the injury that would be suffered by the Employer as a result
of a breach of the provisions of this Agreement (including any provision of Sections 7 and 8) would
be irreparable and that an award of monetary damages to the Employer for such a breach would be an
inadequate remedy. Consequently, the Employer will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise
to specifically enforce any provision of this Agreement, and the Employer will not be obligated to
post bond or other security in seeking such relief.

	 	9.2	 	COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS

The covenants by the Executive in Sections 7 and 8 are essential elements of this Agreement,
and without the Executive’s agreement to comply with such covenants, the Employer would not have
entered into this Agreement or employed the Executive. The Employer and the Executive have
independently consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific regard to the nature
of the business conducted by the Employer.

If the Executive’s employment hereunder expires or is terminated, this Agreement will continue
in full force and effect as is necessary or appropriate to enforce the covenants and agreements of
the Executive in Sections 7 and 8.

9.3 SECTION 409A

Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at
the time of his separation from service from Employer to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the
benefits to which Executive is entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s
benefits shall not be provided to Executive prior to the earlier of (a) the expiration of the
six-month period measured from the date of the Executive’s “separation from service” with Employer
(as such term is defined in the Treasury Regulations issued under Section 409A of the Code) or (b)
the date of Executive’s death. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i)
period, all payments deferred pursuant to this Section 9.3 shall be paid in a lump sum to the
Executive, and any remaining payments due under the Agreement shall be paid as otherwise provided
herein.

9.4 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE

The Executive represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the Executive’s
obligations hereunder will not, with or without the giving of notice or the passage of time, or
both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive further
specifically represents and warrants that he is not subject to, nor will he violate, any agreement
not to compete upon the execution and delivery by him of this Agreement.

The Executive represents and warrants that he will not utilize or divulge any proprietary
materials or information from his previous employers and acknowledges that Employer has prohibited
Executive from bringing any such materials on to Employer’s premises and has advised Executive that
Executive’s failure to adhere to these prohibitions will subject Executive to immediate
termination.

9.5 OBLIGATIONS CONTINGENT ON PERFORMANCE

The obligations of the Employer hereunder, including its obligation to pay the compensation
provided for herein, are contingent upon the Executive’s performance of the Executive’s obligations
hereunder.

9.6 WAIVER

The rights and remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by either party in exercising any right, power, or privilege
under this Agreement will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or demand as provided in
this Agreement.

9.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto
and their respective successors, assigns, heirs, and legal representatives, including any entity
with which the Employer may merge or consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Executive under this Agreement, being
personal, may not be delegated or assigned.

9.8 NOTICES

All notices, consents, waivers, and other communications under this Agreement must be in
writing and will be deemed to have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested and signed for by the party
required to receive notice, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the appropriate
addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers
as a party may designate by notice to the other parties):

If to Employer:

BMC Software, Inc.

2101 CityWest Blvd

Houston, Texas 77042

Telephone No.: (713) 918-8800

Facsimile No.:713-918-1110

Attn: General Counsel

If to the Executive:

John McMahon

249 Dutton Road

Sudbury, MA 01776

9.9 ENTIRE AGREEMENT; AMENDMENTS

Except as provided in (a) plans and programs of the Employer referred to in Sections 3.1(b)
through (d), and (b) any signed written agreement contemporaneously or hereafter executed by the
Employer and the Executive, this Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements and understandings, oral
or written, between the parties hereto with respect to the subject matter hereof. Notwithstanding
the foregoing, this Agreement shall not be construed to supersede any stock option agreements or
restricted stock agreements entered into between Executive and Employer at any time prior to the
execution of this Agreement. Without limiting anything in this Section 9.9, this Agreement shall
supersede any and all employment, change in control and severance noncompetition, nonsolicitation
and/or nondisclosure agreements, and understandings, whether written or oral, between Executive and
BladeLogic, Inc.; provided however, that notwithstanding anything in this paragraph to the
contrary, Section 6 of the Change in Control Agreement between BladeLogic, Inc. and Executive dated
June 12, 2007 (the “BladeLogic Agreement”) shall remain in full force and effect until the third
(3rd) anniversary of the Effective Date (as defined in the Merger Agreement) solely with
respect to Severance Payments (as defined in the BladeLogic Agreement) made in connection with the
Merger. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.

9.10 GOVERNING LAW

This Agreement will be governed by the laws of the State of Texas without regard to conflicts
of laws principles.

9.11 ARBITRATION

In the event that there shall be any dispute arising out of or in any way relating to this
Agreement, the contemplated transactions, any document referred to or incorporated herein by
reference or centrally related to the subject matter hereof, or the subject matter of any of the
same, the parties covenant and agree as follows:

	 	a.	 	The parties shall first use their reasonable best efforts to
resolve such dispute among themselves, with or without mediation.

	 	b.	 	If the parties are unable to resolve such dispute among
themselves, such dispute shall be submitted to binding arbitration in Houston,
Texas, under the auspices of, and pursuant to the rules of, the American
Arbitration Association’s Commercial Arbitration Rules as then in effect, or
such other procedures as the parties may agree to at the time, before a
tribunal of three (3) arbitrators, one of which shall be selected by the
Executive, one of which shall be selected by the Employer, and the third of
which shall be selected by the two (2) arbitrators so selected. Any award
issued as a result of such arbitration shall be final and binding between the
parties, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. A ruling by the arbitrators shall be
non-appealable. The parties agree to abide by and perform any award rendered
by the arbitrators. If either the Executive or Employer seeks enforcement of
the terms of this Agreement or seeks enforcement of any award rendered by the
arbitrators, then the prevailing party (designated by the arbitrators) to such
proceeding(s) shall be entitled to recover its costs and expenses (including
applicable travel expenses) from the non-prevailing party, in addition to any
other relief to which it may be entitled. If a dispute arises and one party
fails or refuses to designate an arbitrator within thirty (30) days after
receipt of a written notice that an arbitration proceeding is to be held, then
the dispute shall be resolved solely by the arbitrator designated by the other
party and such arbitration award shall be as binding as if three (3)
arbitrators had participated in the arbitration proceeding. Either the
Executive or the Employer may cause an arbitration proceeding to commence by
giving the other party notice in writing of such arbitration. Executive and
the Employer covenant and agree to act as expeditiously as practicable in order
to resolve all disputes by arbitration. Notwithstanding anything in this
section to the contrary, neither Executive nor the Employer shall be precluded
from seeking court action in the event the action sought is either injunctive
action, a restraining order or other equitable relief. The arbitration
proceeding shall be held in English.

	 	c.	 	Legal process in any action or proceeding referred to in the
preceding section may be served on any party anywhere in the world.

	 	d.	 	Except as expressly provided herein and except for injunctions
and other equitable remedies that are required in order to enforce this
Agreement, no action may be brought in any court of law and EACH OF THE PARTIES
WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR
IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
Each party acknowledges that it has been represented by legal counsel of its
own choosing and has been advised of the intent, scope and effect of this
Section 9.10 and has voluntarily entered into this Agreement and this Section
9.10.

	 	e.	 	Excluded from this Section 9.10 are any claims for temporary
injunctive relief to enforce Sections 7 and 8 of this Agreement.

9.12 SECTION HEADINGS, CONSTRUCTION

The headings of Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement unless otherwise specified. All words used in
this Agreement will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word “including” does not limit the preceding words or
terms.

9.13 SEVERABILITY

If any provision of this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

9.14 COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.

9.15 WAIVER OF JURY TRIAL

THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.

	 	9.16	 	WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS

The Employer may withhold from any payments and benefits made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or governmental
regulation or ruling and all other normal deductions made with respect to the Employer’s employees
generally.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
above first written above.

EMPLOYER:

BMC Software, Inc.

	 	 	 
	By: /s/ MICHAEL VESCUSO

	Name: Michael Vescuso

	Title:

	 	Sr. Vice President of Administration

	 	 	EXECUTIVE:

/s/ JOHN MCMAHON John McMahon

1

John McMahon Attachment A

BMC SOFTWARE, INC.

Executive Employment Agreement

Cash Bonus Description

The Executive will, during the Employment Period, be permitted to participate in the BMC
Short-term Incentive Performance Award Program that may be in effect from time to time. During the
employment period, the Executive will be eligible to receive a target incentive, which currently is
150% of annual base salary. The actual amount received is not guaranteed and is dependent on the
performance of the Company and the Executive in accordance with the BMC Short-term Incentive
Performance Award Program established for each fiscal year during the employment period.

Each fiscal year, the Executive will receive a detailed description of the BMC Short-term
Incentive Performance Award Program and the targeted measures and objectives for that year.

2

John McMahon Attachment B

Background Technology

(List here previous inventions which you desire to have specifically excluded from the operation of
this Agreement.)

NONE

3EX-10.1

RAIT FINANCIAL TRUST

2008 INCENTIVE AWARD PLAN

(As Amended and Restated May 20, 2008)

ARTICLE I

GENERAL

1.01 Purpose. The purposes of this Plan are to: (1) closely associate the interests of the
management and trustees of the Company with the shareholders of RAIT by reinforcing the
relationship between compensation and shareholder gains; (2) provide senior management and trustees
of the Company with an equity ownership in RAIT commensurate with RAIT’s performance, as reflected
in increased shareholder value; (3) provide the Company the ability to grant Cash Awards to senior
management that qualifies for the qualified performance-based compensation exemption under section
162(m) of the Code; (4) maintain competitive compensation levels; and (5) provide an incentive to
senior management and trustees for continuous employment or service with the Company.

1.02 Definitions. In this Plan, the following definitions shall apply:

(a) “Affiliate” means any person or entity which directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with RAIT.

(b) “Board” means the Board of Trustees of RAIT.

(c) “Cash Award” means a cash award that is payable on the attainment of specified
performance goals over a performance period, as described in Article VIII.

(d) “Change of Control” means the first to occur of any of the following events:

(i) Any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange
Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of RAIT representing more than 50% of the voting
power of the then outstanding securities of RAIT; provided that a Change of Control shall
not be deemed to occur as a result of a transaction in which RAIT becomes a subsidiary of
another real estate investment trust and in which the shareholders of RAIT, immediately
prior to the transaction, will beneficially own, immediately after the transaction, shares
entitling such shareholders to more than 50% of all votes to which all shareholders of the
parent entity would be entitled in the election of trustees (without consideration of the
rights of any class of shares to elect trustees by a separate class vote);

(ii) The consummation of (A) a merger or consolidation of RAIT with another real
estate investment trust where the shareholders of RAIT, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or consolidation,
            shares entitling such shareholders to more than 50% of all votes to which all shareholders
of the surviving real estate investment trust would be entitled in the election of
trustees (without consideration of the rights of any class of shares to elect trustees by
a separate class vote), (ii) a sale or other disposition of all or substantially all of
the assets of RAIT, or (iii) a liquidation or dissolution of RAIT; or

(iii) After the date this amended and restated Plan is approved by the shareholders
of RAIT, trustees are elected such that a majority of the members of the Board shall have
been members of the Board for less than two years, unless the election or nomination for
election of each new trustee who was not a trustee at the beginning of such two-year
period was approved by a vote of at least two-thirds of the trustees then still in office
who were trustees at the beginning of such period.

Notwithstanding the foregoing, the Committee may provide for a different definition of
“Change of Control” in a Grant Agreement if such Grant is subject to the requirements of
section 409A of the Code and the Grant will become payable on a Change of Control.

 

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Committee” means the Compensation Committee of the Board or its successor, or such
other committee that the Board has delegated with authority to administer the Plan, subject to
any limitations imposed by RAIT’s bylaws and charter and applicable laws, rules and
regulations. Notwithstanding the foregoing, the “Committee” may be the Board, to the extent
that the Board has retained authority to administer the Plan with respect to all or any
specific Grants and the Board may ratify any Grants it deems necessary or appropriate.

(g) “Common Shares” means common shares of beneficial interest, par value $0.01, of RAIT.

(h) “Company” means RAIT, any Parent, any Subsidiary, and any Affiliate.

(i) “Consultant” means consultants and advisors who perform services for the Company, but
does not mean any consultant or advisor who (i) does not render bona fide services to the
Company, (ii) performs services that are in connection with the offer and sale of securities in
a capital-raising transaction, and (iii) directly or indirectly promotes or maintains a market
for RAIT’s securities.

(j) “Date of Grant” means the date a Grant is effective; provided, however, that no
retroactive Grants will be made.

(k) “Dividend Equivalent” means an amount determined by multiplying the number of Common
Shares or Units subject to a Grant by the per-share cash dividend, or the per-share fair market
value (as determined by the Committee) of any dividend in consideration other than cash, paid
by RAIT on its Common Shares on a dividend payment date.

(l) “Effective Date” means May 20, 2008. The Plan initially became effective on
December 5, 1997.

(m) “Employee” means an employee of the Company (including any officer or trustee who is
an employee).

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

(o) “Fair Market Value” means (x) the closing price on the relevant date or on the next
business day, if such relevant date is not a business day, of a Common Share reported on the
New York Stock Exchange (or any other exchange on which the Common Shares are listed), or
(y) if the Common Shares are not principally traded on such exchange, the mean between the last
reported “bid” and “asked” prices of Common Shares on the relevant date, as reported on the OTC
Bulletin Board. If the Common Shares are not publicly traded or, if publicly traded, are not
subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair
Market Value per Common Share shall be as determined by the Committee. In no event shall the
Fair Market Value of any Common Share be less than its par value.

(p) “Grant” means an Option, SAR, Unit, Share Award, Dividend Equivalent, Other
Share-Based Award or Cash Award granted under the Plan.

(q) “Grant Agreement” means the written agreement that sets forth the terms and conditions
of a Grant, including any amendments thereto.

(r) “Non-Employee Trustee” means a member of the Board, or member of the board of trustees
of a Subsidiary, who is not an employee of the Company.

(s) “Incentive Stock Option” means an option that is intended to meet the requirements of
section 422 of the Code, as described in Article II.

(t) “Nonqualified Option” means a stock option that is not intended to meet the
requirements of section 422 of the Code, as described in Article II.

(u) “Option” means an Incentive Stock Option or Nonqualified Option to purchase Common
Shares at an Option Price for a specified period of time.

 

(v) “Option Price” means the purchase price per Common Share deliverable upon the
exercise of a Option.

(w) “Other Share-Based Award” means any Grant based on, measured by or payable in Common
Shares (other than Grants described in Articles II, III, IV, V, and VI), as described in
Article VII.

(x) “Parent” means any direct or indirect parent of RAIT.

(y) “Participant” means an Employee, Non-Employee Trustee or Consultant designated by the
Committee to receive a Grant under the Plan.

(z) “Phantom Share Plan” means the RAIT Investment Trust Phantom Share Plan.

(aa) “Plan” means this RAIT Financial Trust 2008 Incentive Award Plan (formerly known as
the RAIT Investment Trust 2005 Equity Compensation Plan).

(bb) “RAIT” means RAIT Financial Trust, a Maryland real estate investment trust (formerly
known as RAIT Investment Trust).

(cc) “SAR” means an award of a share appreciation right, as described in Article III.

(dd) “Share Award” means an award of Common Shares, as described in Article V.

(ee) “Subsidiary” means any direct or indirect subsidiary of RAIT.

(ff) “Ten Percent Shareholder” means a person who on the date the Option is granted owns
ten percent (10%) or more of the total combined voting power of RAIT and its Parent or
Subsidiaries, taking into account the attribution rules contained in section 424(d) of the
Code.

(gg) “Unit” means an award of a phantom unit, representing one or more Common Shares, as
described in Article IV.

1

1.03 Administration.

(a) The Plan shall be administered and interpreted by the Committee. Ministerial functions
relating to the Plan may be performed by Employees designated with such authority by the
Committee.

(b) The Committee shall have the authority, in its sole discretion and from time to time
to:

(i) designate the Employees, Non-Employee Trustees and Consultants who are eligible
to participate in the Plan;

(ii) make Grants provided in the Plan in such form and amount as the Committee shall
determine;

(iii) impose such limitations, restrictions and conditions upon any such Grant as the
Committee shall deem appropriate; and

(iv) interpret the Plan and any Grant, adopt, amend and rescind rules and regulations
relating to the Plan and any Grant, and make all other determinations and take all other
actions necessary or advisable for the implementation and administration of the Plan.

(c) The Committee shall have full power and express discretionary authority to administer
and interpret the Plan, to make factual determinations and to adopt or amend such rules,
regulations, agreements and instruments for implementing the Plan and for the conduct of its
business as it deems necessary or advisable, in its sole discretion. The Committee’s
interpretations of the Plan and all determinations made by the Committee pursuant to the powers
vested in it hereunder shall be conclusive and binding on all persons who have any interest in
the Plan or in any Grants awarded hereunder. All powers of the Committee shall be executed in
its sole discretion, in the best interest of RAIT, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated individuals. No member
of the Committee shall be liable for any action taken or decision made in good faith relating
to the Plan or any Grant thereunder.

 

1.04 Eligibility for Participation. Participants in the Plan shall be selected by the
Committee from the Employees of the Company. In addition, Non-Employee Trustees and Consultants who
have contributed to the success of the Company shall be eligible to participate in the Plan. In
making this selection and in determining the form of Grant and number of Common Shares, value of
the Cash Award or other rights subject to the Grant, the Committee shall consider any factors
deemed relevant, including the individual’s functions, responsibilities, value of services to the
Company and past and potential contributions to the Company’s profitability and sound growth.

1.05 Grants. Grants under the Plan may be in the form of any one or more of the following:
(i) Options, (ii) SARs, (iii) Units, (iv) Share Awards, (v) Dividend Equivalents, (vi) Other
Share-Based Awards and (vii) Cash Awards. All Grants shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with the Plan as the Committee
deems appropriate and as are specified in writing by the Committee in separate guidelines or to the
Participant in the Grant Agreement or an amendment to the guidelines or Grant Agreement. The
Committee shall approve the form and provisions of each Grant Agreement. Grants under a particular
Article of the Plan need not be uniform as among Participants. All Grants shall be made conditional
upon the Participant’s acknowledgment, in writing or by acceptance of the Grant, that all decisions
and determinations of the Committee shall be final and binding on the Participant, his or her
beneficiaries, and any other person having or claiming an interest under such Grant.
Notwithstanding any provision of the Plan to the contrary, the Committee may make Grants that are
contingent on, and subject to, shareholder approval of the Plan or an amendment to the Plan.

1.06 Aggregate Limitation on Awards.

(a) Shares which may be issued under the Plan shall be Common Shares. The maximum number
of Common Shares which may be issued under the Plan shall be 4,500,000 Common Shares, subject
to adjustment as described in Section 11.10 below. The Common Shares may be authorized but
unissued Common Shares or reacquired Common Shares, including Common Shares purchased by RAIT
on the open market for purposes of the Plan. Grants paid in cash shall not count against the
foregoing Common Share limit.

(b) For administrative purposes, when the Committee makes a Grant payable in Common
Shares, the Committee shall reserve Common Shares equal to the maximum number of Common Shares
that may be payable under the Grant. If and to the extent Options or SARs granted under the
Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having
been exercised or if any Share Awards, Units, Dividend Equivalents or Other Share-Based Awards
are forfeited or terminated, or otherwise not paid in full, the Common Shares subject to such
Grants which have not been issued shall again be available for purposes of the Plan. Common
Shares surrendered in payment of the Option Price of an Option or withheld for purposes of
satisfying the Company’s minimum tax withholding obligations with respect to Grants under the
Plan shall again be available for issuance or transfer under the Plan. To the extent that any
Grants are paid in cash, and not in Common Shares, any Common Shares previously reserved for
issuance or transfer pursuant to such Grants shall again be available for issuance or transfer
under the Plan.

(c) All Grants under the Plan, other than Dividend Equivalents and Cash Awards, shall be
expressed in Common Shares. The maximum aggregate number of Common Shares with respect to which
all Grants, other than Dividend Equivalents and Cash Awards, may be made under the Plan to any
individual during any calendar year shall be 1,000,000 Common Shares, subject to adjustment as
described in Section 11.10 below. The maximum aggregate number of Common Shares with respect to
which all Grants, other than Options, SARs, Dividend Equivalents and Cash Awards, that may be
made under the Plan to any individual in any calendar year shall be 500,000 Common Shares,
subject to adjustment as described in Section 11.10 below. A Participant may not accrue
Dividend Equivalents during any calendar year in excess of $5,000,000. The maximum Cash Award
that an Employee may be paid under the Plan in any twelve month period is $2,500,000. The
individual limits of this subsection (c) shall apply without regard to whether the Grants are
to be paid in Common Shares or in cash. All cash payments (other than Dividend Equivalents and
Cash Awards) shall equal the Fair Market Value of the Common Shares to which the cash payment
relates.

 

1.07 Effective Date and Term of Plan.

(a) This amendment and restatement of the Plan is effective as of the Effective Date,
subject to approval by RAIT’s shareholders.

(b) No Grants shall be made under the Plan after the day immediately preceding the tenth
anniversary of the Effective Date, provided, however, that the Plan and all Grants made under
the Plan prior to such date shall remain in effect until such Grants have been satisfied or
terminated in accordance with the Plan and the terms of such Grants.

ARTICLE II

OPTIONS

2.01 Award of Options. The Committee may from time to time, and subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe, grant to any
Participant in the Plan Options.

2.02 Option Agreements. The Grant of an Option shall be evidenced by a written Grant
Agreement, executed by RAIT and the holder of the Option, stating the number of Common Shares
subject to the Option, the type of Option, and the terms and conditions of the Option.

2.03 Type of Option and Price.

(a) The Committee may grant Incentive Stock Options or Nonqualified Options or a
combination of Incentive Stock Options and Nonqualified Options. Incentive Stock Options may
only be granted to Employees of RAIT or its Parent or Subsidiaries; provided, however, that for
purposes of eligibility to receive an Incentive Stock Option, Parent must be a “parent
corporation,” as defined in section 424(e) of the Code,” of RAIT, and the Subsidiary must be a
“subsidiary corporation,” as defined in section 424(f) of the Code, of RAIT. Nonqualified
Options may be granted to Employees, Non-Employee Trustees and Consultants.

(b) The Option Price shall be determined by the Committee and shall not be less than 100%
of the Fair Market Value of a Common Share on the Date of Grant of the Option; provided,
however, that an Incentive Stock Option may not be granted to an Employee who, at the Date of
Grant, is a Ten Percent Shareholder, unless the Option Price is not less than 110% of the Fair
Market Value of the Common Shares subject to the Option on the Date of Grant.

2.04 Term and Exercise.

(a) The Committee shall determine the term of each Option. The term shall not exceed ten
years from the Date of Grant. However, an Incentive Stock Option that is granted to an Employee
who, at the Date of Grant, is a Ten Percent Shareholder, may not have a term that exceeds five
years from the Date of Grant. No Option shall be exercisable after the expiration of its term.

(b) Each Option shall be fully exercisable from and after the date(s) prescribed by the
Committee in the Grant Agreement for the Option, subject to such terms and conditions set forth
in the Grant Agreement. The Committee may accelerate the exercisability of any or all
outstanding Options at any time for any reason. The Committee may also provide in the Grant
Agreement that the Participant may elect to exercise all or part of the Option before it
otherwise has become exercisable. Any Common Shares so purchased shall be restricted Common
Shares and shall be subject to a repurchase right in favor of RAIT during a specified
restriction period and shall have such other terms and conditions as determined by the
Committee.

2.05 Manner of Exercise. A Participant may exercise an Option that has become exercisable, in
whole or in part, by delivering a notice of exercise to RAIT or its designated agent. The
Participant shall pay the Option Price and any withholding taxes for the Option (i) in cash or by
certified check, (ii) with the approval of the Committee, by delivering Common Shares owned by the
Participant and having a Fair Market Value on the date of exercise equal to the Option Price or by
attestation (on a form prescribed by the Committee) to ownership of Common Shares having an
aggregate Fair Market Value on the date of exercise equal to the Option Price, (iii) subject to
approval of the Committee or its designee, in cash, on the T+3 settlement date that occurs after
the exercise date specified in the notice of exercise, provided that the Participant exercises the
Option through an irrevocable agreement with a registered broker and the payment is made in
accordance with procedures permitted by Regulation T of the Federal Reserve Board and such
procedures do not violate applicable law, or (iv) by such other method as the Committee may
approve, to the extent permitted by applicable law. Common Shares used to exercise an Option shall
have been held by the Participant for the requisite period of time to avoid adverse accounting
consequences to RAIT with respect to the Option. Payment for the Common Shares pursuant to the
Option, and any required withholding taxes, must be received by the time specified by the Committee
depending on the type of payment being made.

2.06 Termination of Employment or Service. Except as otherwise provided in the Grant Agreement
or in this Section 2.06, an Option may only be exercised while the Participant is employed by, or
providing service to, the Company.

(a) Unless the Committee determines otherwise, upon the death of the Participant, any
Option exercisable on the date of death may be exercised by the optionee’s estate, or by a
person who acquires the right to exercise such Option by bequest or inheritance or by reason of
the death of the Participant, provided that such exercise occurs within the earlier of (i) the
one year period after the Participant’s termination of employment or service or (ii) the
remaining effective term of the Option. The provisions of this subsection shall apply
notwithstanding the fact that the Participant’s employment may have terminated prior to death,
but only to the extent of any rights exercisable on the date of death.

(b) Unless the Committee determines otherwise, upon termination of the Participant’s
employment or service by reason of retirement or permanent disability (as each is determined by
the Committee), the Participant may, within the earlier of (i) the six month period after the
Participant’s termination of employment or service or (ii) the remaining effective term of the
Option, exercise any Options to the extent such Options are exercisable at the time of the
Participant’s termination of employment or service; provided, however, that if the Option is an
Incentive Stock Option, if the termination of employment is on account of retirement, the
Option may only be exercised as an Incentive Stock Option within 3 months after the
Participant’s termination of employment and if the Incentive Stock Option is exercised after
the end of such 3 month period, the Option will be exercised as a Nonqualified Option.

(c) Unless the Committee determines otherwise, if the Participant has a termination of
employment or service for any reason other than in subsection (a) or (b), all Options held by
the Participant shall terminate upon the termination of the Participant’s employment or
service.

2.07 Reload Options. In the event that Common Shares are used to exercise an Option, the terms
the Grant Agreement for such Option may provide for a Grant of additional Options, or the Committee
may grant additional Options, to purchase a number of Common Shares equal to the number of whole
Common Shares used to exercise the Option and the number of whole Common Shares, if any, withheld
in payment of any taxes. Such Options shall be granted with an Option Price equal to the Fair
Market Value of the Common Shares on the Date of Grant of such additional Options, or at such other
Exercise Price as the Committee may establish, provided, that the Option Price shall not be less
than the Fair Market Value of the Common Shares on the Date of Grant of such additional, and the
additional Option shall not have a term longer than the unexpired term of the exercised Option and
shall have such other terms as the Committee shall determine.

2.08 Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that if the
aggregate Fair Market Value on the Date of Grant with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year, under the Plan or any
other stock option plan of RAIT or a Parent or Subsidiary, exceeds $100,000, then the Option, as to
the excess, shall be treated as a Nonqualified Option.

 

ARTICLE III

SARSs

3.01 Award of SARs. The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant
in the Plan SARs. Each SAR shall represent the right of the Participant to receive, upon settlement
of the SAR, as determined by the Committee, in its sole discretion, Common Shares or cash equal to
the amount by which the Fair Market Value of a Common Share on the date of exercise of the SAR
exceeds the base amount of the SAR as described below in Section 3.04.

3.02 SAR Agreements. The Grant of an SAR shall be evidenced by a written Grant Agreement,
executed by RAIT and the holder of a SAR, and shall specify the number of SARs to be granted, the
base amount, the vesting and other restrictions applicable to SARs, and the period during which
SARs will remain exercisable.

3.03 Terms. The Committee shall determine the terms and conditions of SARs and may grant SARs
separately from or in tandem with any Option (for all or a portion of the applicable Option).
Tandem SARs may be granted either at the time the Option is granted or any time thereafter while
the Option remains outstanding; provided, however, that in the case of an Incentive Stock Option,
SARs may be granted only at the time of the grant of the Incentive Stock Option.

3.04 Base Amount. The Committee shall establish the base amount of the SAR at the time the SAR
is granted, but such base amount shall not be less than the Fair Market Value of the corresponding
Common Shares on the Date of Grant.

3.05 Payment With Respect to SARs. The Committee shall determine whether the appreciation in
an SAR shall be paid in the form of cash, in Common Shares, or in a combination of the two, in such
proportion as the Committee deems appropriate. For purposes of calculating the number of Common
Shares to be received, Common Shares shall be valued at its Fair Market Value on the date of
exercise of the SAR. If Common Shares are to be received upon exercise of an SAR, cash shall be
delivered in lieu of any fractional share.

3.06 Termination of Employment or Service. The Committee shall determine in the Grant
Agreement under what circumstances a Participant may retain SARs after termination of the
Participant’s employment or service, and the circumstances under which SARs may be forfeited.

ARTICLE IV

UNITS

4.01 Award of Units. The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant
in the Plan Units. Each Unit shall represent the right of the Participant to receive, as determined
by the Committee, in its sole discretion, a Common Share or an amount based on the value of a
Common Share. All Units shall be credited to accounts on RAIT’s records for purposes of the Plan.

4.02 Unit Agreements. The Grant of a Unit shall be evidenced by a written Grant Agreement,
executed by RAIT and the holder of a Unit, and shall specify the number of Units to be granted, the
vesting date, the redemption date, and the other terms and conditions of the Unit.

4.03 Terms. The Committee may grant Units that are payable if specified performance goals or
other conditions are met, or under other circumstances. Units may be redeemed at the end of a
specified performance period or other period, or redemption may be deferred to a date authorized by
the Committee.

 

4.04 Redemption With Respect to Units. Redemptions with respect to Units shall be made in
cash, in Common Shares, or in a combination of the two, as determined by the Committee.

4.05 Termination of Employment or Service. The Committee shall determine in the Grant
Agreement under what circumstances a Participant may retain Units after termination of the
Participant’s employment or service, and the circumstances under which Units may be forfeited.

ARTICLE V

SHARE AWARDS

5.01 Award of Share Awards. The Committee may from time to time, and subject to the provisions
of the Plan and such other terms and conditions as the Committee may prescribe, issue or transfer
to any Participant in the Plan Share Awards. Each Share Award shall represent the right of the
Participant to receive a Common Share if certain conditions are met.

5.02 Share Award Agreements. The Grant of a Share Award shall be evidenced by a written Grant
Agreement, executed by RAIT and the holder of a Share Award, and shall specify the number of Common
Shares to be granted pursuant to the Share Award, when the restrictions, if any, will lapse, and
the other terms and conditions of the Share Award.

5.03 Terms. Common Shares issued or transferred pursuant to Share Awards may be issued or
transferred for consideration or for no consideration, and subject to restrictions or no
restrictions, as determined by the Committee. The Committee may, but shall not be required to,
establish conditions under which restrictions on Share Awards shall lapse over a period of time or
according to such other criteria as the Committee deems appropriate, including, without limitation,
restrictions based upon the achievement of specific performance goals. The period of time during
which the Share Awards will remain subject to restrictions will be designated in the Grant
Agreement as the “Restriction Period.”

5.04 Termination of Employment or Service. The Committee shall determine in the Grant
Agreement under what circumstances a Participant may retain Share Awards after termination of the
Participant’s employment or service, and the circumstances under which Share Awards may be
forfeited.

5.05 Restrictions on Transfer and Legend on Share Certificate. During the Restriction Period,
a Participant may not sell, assign, transfer, pledge or otherwise dispose of the Common Shares
subject to the Share Award. Each certificate for a Common Share of a Share Award, or electronic
book entry equivalent, for a Common Share of a Share Award shall contain a legend giving
appropriate notice of the restrictions in the Grant. The Participant shall be entitled to have the
legend removed from the share certificate covering the Common Shares subject to restrictions when
all restrictions on such Common Shares have lapsed. The Committee may determine that RAIT will not
issue certificates for Share Awards until all restrictions on such shares have lapsed, or that RAIT
will retain possession of certificates for Common Shares of Share Awards until all restrictions on
such shares have lapsed.

5.06 Right to Vote and to Receive Dividends. The Committee shall determine to what extent, and
under what conditions, the Participant shall have the right to vote Common Shares of a Share Award
and to receive any dividends or other distributions paid on such Common Shares during the
Restriction Period. The Committee may determine that a Participant’s entitlement to dividends or
other distributions with respect to a Share Award shall be subject to achievement of performance
goals or other conditions.

 

ARTICLE VI

DIVIDEND EQUIVALENTS

6.01 General Requirements. When the Committee makes a Grant under the Plan, the Committee may
grant Dividend Equivalents in connection with such Grants, under such terms and conditions as the
Committee deems appropriate under this Article VI. Dividend Equivalents may be paid to Participants
currently or may be deferred, as determined by the Committee. All Dividend Equivalents that are not
paid currently shall be credited to accounts on RAIT’s records for purposes of the Plan. Dividend
Equivalents may be accrued as a cash obligation, or may be converted to Units for the Participant,
as determined by the Committee. Unless otherwise specified in the Grant Agreement, deferred
Dividend Equivalents will not accrue interest. The Committee may provide that Dividend Equivalents
shall be payable based on the achievement of specific performance goals.

6.02 Payment with Respect to Dividend Equivalents. Dividend Equivalents may be payable in cash
or Common Shares or in a combination of the two, as determined by the Committee.

ARTICLE VII

OTHER SHARE-BASED AWARDS

The Committee may grant Other Share-Based Awards, which are awards that are based on, measured
by or payable in Common Shares to any Participant, on such terms and conditions as the Committee
shall determine. Other Share-Based Awards may be awarded subject to the achievement of performance
goals or other conditions and may be payable in cash, Common Shares or any combination of the
foregoing, as the Committee shall determine in the Grant Agreement. Common Shares to be issued
under the Phantom Share Plan to participants in the Phantom Share Plan shall be issued under the
Plan pursuant to this Article VII.

ARTICLE VIII

CASH AWARDS

The Committee may grant Cash Awards to any Employee, subject to such terms, conditions and
restrictions as the Committee shall determine. Cash Awards shall be awarded subject to the
achievement of performance goals, as the Committee shall determine in the Grant Agreement, over the
performance period, as determined by the Committee and set in the Grant Agreement. All Cash Awards
shall be payable solely in cash.

ARTICLE IX

QUALIFIED PERFORMANCE-BASED COMPENSATION

9.01 Designation as Qualified Performance-Based Compensation. The Committee may determine that
Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards granted to an
Employee shall be considered “qualified performance-based compensation” under section 162(m) of the
Code. The provisions of this Article IX shall apply to any such Grants that are to be considered
“qualified performance-based compensation” under section 162(m) of the Code. To the extent that
Grants of Units, Share Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards
designated as “qualified performance-based compensation” under section 162(m) of the Code are made,
no such Grant may be made as an alternative to another Grant that is not designated as “qualified
performance based compensation” but instead must be separate and apart from all other Grants made.

9.02 Performance Goals. When Units, Share Awards, Dividend Equivalents, Other Share-Based
Awards or Cash Awards that are to be considered “qualified performance-based compensation” are
granted, the Committee shall establish in writing (i) the objective performance goals that must be
met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may
be paid if the performance goals are met, and (iv) any other conditions that the Committee deems
appropriate and consistent with the Plan and the requirements of section 162(m) of the Code for
“qualified performance-based compensation.” The performance goals shall satisfy the requirements
for “qualified performance-based compensation,” including the requirement that the achievement of
the goals be substantially uncertain at the time they are established and that the performance
goals be established in such a way that a third party with knowledge of the relevant facts could
determine whether and to what extent the performance goals have been met. The Committee shall not
have discretion to increase the amount of compensation that is payable upon achievement of the
designated performance goals, but the Committee may reduce the amount of compensation that is
payable upon achievement of the designated performance goals.

9.03 Criteria Used for Objective Performance Goals. The Committee shall use objectively
determinable performance goals based on one or more of the following criteria: Common Share price,
earnings per Common Share, net earnings, operating earnings, adjusted earnings, total fees
generated, assets under management, economic book value, REIT taxable income, capital gains,
capital losses, funds from operations, enterprise value, market capitalization (of the Common
Shares, any series of the Company’s preferred shares or any combination of any or all classes or
series of the Company’s equity securities), return on capital, return on assets, shareholder
return, return on equity, growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specific revenue goals, market
penetration goals, geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures. The performance goals may relate to the Participant’s business unit
or the performance of RAIT, a Subsidiary, a Parent, or Affiliate or RAIT and its Parent,
Subsidiaries and Affiliates as a whole, or any combination of the foregoing. For purposes of
measuring the performance goals, the goals may exclude any or all of the following, as determined
by the Committee at the time of establishing the performance goals: capital gains and capital
losses. Performance goals need not be uniform as among Participants.

9.04 Timing of Establishment of Goals. The Committee shall establish the performance goals in
writing either before the beginning of the performance period or during a period ending no later
than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on
which 25% of the performance period has been completed, or such other date as may be required or
permitted under applicable regulations under section 162(m) of the Code.

9.05 Certification of Results. The Committee shall certify and announce the results for the
performance period to all Participants after RAIT announces RAIT’s financial results for the
performance period. The Committee shall determine the amount, if any, to be paid pursuant to each
Grant based on the achievement of the performance goals and the terms of each Grant Agreement.

9.06 Death, Disability or Other Circumstances. The Committee may provide in the Grant
Agreement that Grants shall be payable, in whole or in part, in the event of the Participant’s
death or disability, a Change of Control or under other circumstances consistent with the Treasury
regulations and rulings under section 162(m) of the Code.

9.07 Shareholder Approval for “Qualified Performance Based Compensation”. If Units, Share
Awards, Dividend Equivalents, Other Share-Based Awards or Cash Awards are granted as “qualified
performance-based compensation” under this Article IX, the Plan must be reapproved by RAIT’s
shareholders no later than the first shareholders meeting that occurs in the fifth year following
the year in which the shareholders previously approved the provisions of Article IX, if additional
Grants are to be made under Article IX and if required by section 162(m) of the Code or the
regulations thereunder.

 

ARTICLE X

CONSEQUENCES OF A CHANGE OF CONTROL

10.01 Assumption of Grants. Upon a Change of Control where RAIT is not the surviving entity
(or survives only as a subsidiary of another entity), unless the Committee determines otherwise,
all outstanding Options and SARs that are not exercised shall be assumed, or replaced with
comparable options or rights, by the surviving entity (or a parent or subsidiary of the surviving
entity), and other outstanding Grants shall be converted to similar grants of the surviving entity
(or a parent or subsidiary of the surviving entity).

10.02 Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control,
the Committee may take any of the following actions with respect to any or all outstanding Grants:
the Committee may (i) determine that outstanding Options and SARs shall accelerate and become
exercisable, in whole or in part, upon the Change of Control or upon such other event as the
Committee determines, (ii) determine that the restrictions and conditions on outstanding Share
Awards shall lapse, in whole or in part, upon the Change of Control or upon such other event as the
Committee determines, (iii) determine that Participants holding Units shall receive a redemption in
settlement of such Units and that Dividend Equivalents and Other Share-Based Awards shall become
fully payable in cash or Common Shares in amounts determined by the Committee, (iv) require that
Participants surrender their outstanding Options and SARs in exchange for a payment by RAIT, in
cash or Common Shares as determined by the Committee, in an amount equal to the amount by which the
then Fair Market Value of the Common Shares subject to the Participant’s unexercised Options and
SARs exceeds the Option Price of the Options or the base amount of SARs, as applicable, or
(v) after giving Participants an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised Options and SARs at such time as the Committee deems appropriate.
Such surrender, termination or settlement shall take place as of the date of the Change of Control
or such other date as the Committee may specify. The Committee shall have no obligation to take any
of the foregoing actions, and, in the absence of any such actions, outstanding Grants shall
continue in effect according to their terms (subject to any assumption pursuant to subsection (a)).

ARTICLE XI

MISCELLANEOUS

11.01 General Restriction. Each Grant under the Plan shall be subject to the requirement that,
if at any time the Committee shall determine that (i) the listing, registration or qualification of
the Common Shares subject or related thereto upon any securities exchange or under any state or
Federal law, (ii) the consent or approval of any government regulatory body, or (iii) an agreement
by the recipient of a Grant with respect to the disposition of Common Shares, is necessary or
desirable as a condition of, or in connection with, the granting of such Grant or the issue or
purchase of Common Shares thereunder, such Grant may not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval or agreement shall have been effected
or obtained free of any conditions not acceptable to the Committee.

11.02 Repricing. Notwithstanding anything in the Plan to the contrary, the Committee may not
reprice Options, nor may the Committee amend the Plan to permit repricing of Options, unless the
shareholders of the Company provide prior approval for such repricing.

11.03 Non-Assignability. No Grant under the Plan shall be assignable or transferable by the
recipient thereof, except by will or by the laws of descent and distribution. During the life of
the recipient, such Grant shall be exercisable only by such person or by such person’s guardian or
legal representative. Notwithstanding the foregoing, the Committee may provide in a Grant
Agreement, or amend an otherwise outstanding Grant Agreement to provide, that a Participant may
transfer Nonqualified Options to family members of the Participant, one or more trusts in which
family members of the Participant have more than 50% of the beneficial interest, foundations in
which family members of the Participant (or the Participant) control the management of assets, or
any other entity in which family members of the Participant (or the Participant) own more than 50%
of the voting interests, consistent with applicable securities laws, according to such terms as the
Committee may determine; provided that the Participant receives no consideration for the transfer
of a Nonqualified Option and the transferred Nonqualified Option shall continue to be subject to
the same terms and conditions as were applicable to the Nonqualified Option immediately before the
transfer.

11.04 Withholding Taxes. Whenever RAIT proposes or is required to issue or transfer Common
Shares under the Plan, the Company shall have the right to require the Participant to remit to the
Company an amount sufficient to satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for such shares. The Company
may also deduct from the payment of cash payable pursuant to a Grant or other wages paid by the
Company to the Participant the amount of any withholding taxes due with respect to such Grants.
Alternatively, if the Committee so permits, a Participant may elect to satisfy the Company’s tax
withholding obligation with respect to Grants paid in Common Shares by having shares withheld at
the time such Grants become taxable, up to an amount that does not exceed the Participant’s minimum
applicable withholding tax rate for federal (including FICA), state and local tax liabilities. In
addition, with respect to any required tax withholding amount that exceeds the minimum applicable
withholding tax rate, the Committee may permit a Participant to satisfy such withholding obligation
with respect to such excess amount by providing that the Participant may elect to deliver to RAIT
the Common Shares owned by the Participant that have been held by the Participant for the requisite
period of time to avoid adverse accounting consequences to RAIT. The elections described in this
Section 11.04 must be in a form and manner prescribed by the Committee and may be subject to the
prior approval of the Committee. For withholding tax purposes, the Common Shares shall be valued on
the date the withholding obligation is incurred.

11.05 Employment or Service.

(a) Nothing in the Plan or in any Grant Agreement entered into pursuant to the Plan shall
confer upon any Participant the right to continue in the employment or service of the Company
or effect any right which the Company may have to terminate the employment or service of such
Participant.

(b) The terms “employ” or “employment” shall, where the context requires, be deemed to
include the hiring, continuation or termination of the services of any Consultant participating
in the Plan.

11.06 Non-Uniform Determinations. The Committee’s determinations under the Plan (including
without limitation determinations of the persons to receive Grants, the form, amount and timing of
such Grants, the terms and provisions of such Grants and the Grant Agreements evidencing same) need
not be uniform and may be made by it selectively among persons who receive, or are eligible to
receive, Grants under the Plan, whether or not such persons are similarly situated.

11.07 Rights as a Shareholder. The recipient of any Grant under the Plan shall have no rights
as a shareholder with respect thereto unless and until certificates for Common Shares are issued to
him.

11.08 Leaves of Absence. The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of absence taken by
the recipient of any Grant. Without limiting the generality of the foregoing, the Committee shall
be entitled to determine (i) whether or not any such leave of absence shall constitute a
termination of employment or service within the meaning of the Plan and (ii) the impact, if any, of
any such leave of absence on Grants under the Plan theretofore made to any recipient who takes such
leave of absence.

11.09 Newly Eligible Persons. The Committee shall be entitled to make such rules, regulations,
determinations and Grants as it deems appropriate in respect of any person who becomes eligible to
participate in the Plan or any portion thereof after the commencement of a Grant or incentive
period.

 

11.10 Adjustments. If there is any change in the number or kind of Common Shares
outstanding (i) by reason of a Common Share dividend, spinoff, recapitalization, stock split or
combination or exchange of Common Shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of
any other extraordinary or unusual event affecting the outstanding Common Shares as a class without
RAIT’s receipt of consideration, or if the value of outstanding Common Shares is substantially
reduced as a result of a spinoff or RAIT’s payment of an extraordinary dividend or distribution,
the maximum number of Common Shares available for issuance under the Plan, the maximum number of
Common Shares for which any individual may receive pursuant to Grants (other than Dividend
Equivalents and Cash Awards) in any year, the kind and number of shares covered by outstanding
Grants, the kind and number of shares issued and to be issued under the Plan, and the price per
share or the applicable market value of such Grants shall be equitably adjusted by the Committee,
in such manner as the Committee deems appropriate, to reflect any increase or decrease in the
number of, or change in the kind or value of, the issued Common Shares to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under the Plan and such outstanding
Grants; provided, however, that any fractional shares resulting from such adjustment will be
eliminated. In addition, in the event of a Change of Control, the provisions of Article X of the
Plan shall apply. Any adjustments to outstanding Grants shall be consistent with section 409A or
422 of the Code, to the extent applicable. Any adjustments determined by the Committee shall be
final, binding and conclusive.

11.11 Amendment of the Plan.

(a) The Committee may amend or terminate this Plan at any time; provided, however, that
the Committee shall not amend the Plan without shareholder approval if such approval is
required in order to comply with the Code or applicable laws, or to comply with applicable
stock exchange requirements. The Committee may also condition or modify Grants under this Plan
in response to changes in securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with the rules or requirements of
any stock exchange on which the Common Shares are listed or quoted.

(b) The Committee may at any time and from time to time terminate or modify or amend the
Plan in any respect, except that without shareholder approval the Committee may not
(i) increase the maximum number of Common Shares which may be issued under the Plan (other than
increases pursuant to Section 11.10), (ii) extend the maximum period during which any Grant may
be granted or exercised, or (iii) extend the term of the Plan. The termination or any
modification or amendment of the Plan, except as provided in subsection (a), shall not without
the consent of a Participant, adversely affect his or her rights under a Grant previously
awarded to him or her.

11.12 Deferrals. The Committee may permit or require a Participant to defer receipt of the
payment of cash or the delivery of Common Shares that would otherwise be due to the Participant in
connection with any Grant. The Committee shall establish rules and procedures for such deferrals
taking into account the terms of the Plan and section 409A of the Code.

11.13 Grants in Connection with Transactions and Otherwise. Nothing contained in this Plan
shall be construed to (i) limit the right of the Committee to make Grants under this Plan in
connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, real estate investment trust, firm or association, including
Grants to employees thereof who become Employees, or for other proper purposes, or (ii) limit the
right of RAIT to grant options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another real estate investment trust
who becomes an Employee by reason of a merger, consolidation, acquisition of shares or property,
reorganization or liquidation involving RAIT in substitution for a grant made by such real estate
investment trust. The terms and conditions of the substitute Grants may vary from the terms and
conditions required by the Plan and from those of the substituted share incentives. The Committee
shall prescribe the provisions of the substitute Grants.

 

11.14 Compliance with Law. The Plan, the exercise of Options and the obligations of RAIT
to issue or transfer Common Shares under Grants shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of RAIT that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors
under the Exchange Act. In addition, it is the intent of RAIT that the Plan and applicable Grants
comply with the applicable provisions of sections 162(m) and 422 of the Code and any deferrals
under the Plan comply with section 409A of the Code. To the extent that any legal requirement of
section 16 of the Exchange Act or sections 162(m), 409A or 422 of the Code as set forth in the Plan
ceases to be required under section 16 of the Exchange Act or sections 162(m), 409A or 422 of the
Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the withholding of taxes on
payments to Participants. The Committee may, in its sole discretion, agree to limit its authority
under this Section.

11.15 Enforceability. The Plan shall be binding upon and enforceable against RAIT and its
successors and assigns.

11.16 Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. Neither RAIT nor
any other Company shall be required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Grants under this Plan. Nothing contained in the
Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary
relationship between RAIT or any other Company and any Participant or any other person. No
Participant or any other person shall under any circumstances acquire any property interest in any
specific assets of RAIT or any other Company. To the extent that any person acquires a right to
receive payment from RAIT hereunder, such right shall be no greater than the right of any unsecured
general creditor of RAIT.

11.17 Rights of Participants. Nothing in this Plan shall entitle any Employee, Non-Employee
Trustee, Consultant or other person to any claim or right to receive a Grant under this Plan.

11.18 No Fractional Common Shares. No fractional Common Shares shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or
other property shall be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.

11.19 Participants Subject to Taxation Outside the United States. With respect to Participants
who are subject to taxation in countries other than the United States, the Committee may make
Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of
the applicable countries, and the Committee may create such procedures, addenda and subplans and
make such modifications as may be necessary or advisable to comply with such laws.

11.20 Governing Law. The validity, construction, interpretation and effect of the Plan and
Grant Agreements issued under the Plan shall be governed and construed by and determined in
accordance with the laws of State of Maryland, without giving effect to the conflict of laws
provisions thereof.

 

2

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