Document:

PEB-2012.03.31-EX10.1-ShareAwardAgreementPerformanceExecutives

Exhibit 10.1
PEBBLEBROOK HOTEL TRUST

Share Award Agreement (Performance Vesting), Form of – for executive officers

THIS SHARE AWARD AGREEMENT (this “Agreement”), dated as of the __ day of _________, 2012, governs the Share Award granted by PEBBLEBROOK HOTEL TRUST, a Maryland real estate investment trust (the “Company”), to _________________________ (the “Participant”), in accordance with and subject to the provisions of the Company’s 2009 Equity Incentive Plan (the “Plan”).  A copy of the Plan has been made available to the Participant.  All terms used in this Agreement that are defined in the Plan have the same meaning given them in the Plan.

1.Grant of Share Award.  In accordance with the Plan, and effective as of February 8, 2012 (the “Date of Grant”), the Company granted to the Participant, subject to the terms and conditions of the Plan and this Agreement, a Share Award (the “Share Award”) of _______ Common Shares (the “Shares”).
2.Performance Vesting.  The Participant’s ownership interest in the Shares shall become vested and nonforfeitable (“Vested”) to the extent provided in paragraphs 2(a), 2(b) and 2(c) and, except as provided in Section 3, provided that the Participant remains employed by the Company or an Affiliate from the Date of Grant until December 31, 2014.  Regardless of the sum of the results of the calculations pursuant to paragraphs 2(a), (b) and (c), no more than 100% of the Shares can become Vested.  As soon as practicable after the end of the Measurement Period, but in all events no later than March 15 of the year following the end of the Measurement Period, the Committee shall determine and certify the extent to which the performance objectives described herein have been achieved.  The number of Shares that the Committee determines shall be Vested shall be Vested on the date of the Committee’s certification.  The number of Shares calculated pursuant to paragraphs 2(a), (b) and (c) shall be rounded to the nearest whole number.  This Agreement shall be interpreted in a manner consistent with the examples of the calculations pursuant to paragraphs 2(a), (b) and (c) as set forth on Exhibit A attached hereto.
(a)Relative TSR Measurement.  The Participant’s interest in up to 30% of the Shares shall become Vested based on Company TSR relative to Peer Group TSR as set forth in this paragraph 2(a).  The number of Shares, if any, which shall become Vested under this paragraph 2(a) shall in no event exceed 30% of the Shares or be less than zero and shall be calculated according to the following mathematical formula:
(100% of the Shares) * (15% + [2.5 * {Company TSR - Peer Group TSR}]).
For the avoidance of doubt,
		
	i.
	if Company TSR is less than Peer Group TSR by 600 or more basis 

points, then none of the Shares shall become Vested under this paragraph 2(a); and
		
	ii.
	if Company TSR exceeds Peer Group TSR by 600 basis points or more, then 30% of the Shares shall become Vested under this paragraph 2(a).

(b)Absolute TSR Measurement.  The Participant’s interest in up to 30% of the Shares shall become Vested based on Company TSR as set forth in this paragraph 2(b).  The number of Shares, if any, which shall become Vested under this paragraph 2(b) shall in no event exceed 30% of the Shares or be less than zero and shall be calculated according to the following mathematical formula:
(100% of the Shares) * (15% + [3.75 * {Company TSR – 9%}]).
For the avoidance of doubt,
		
	i.
	if Company TSR is less than or equal to 5%, then none of the Shares shall become Vested under this paragraph 2(b); and

		
	ii.
	if Company TSR is 13% or greater, then 30% of the Shares shall become Vested under this paragraph 2(b).

(c)Competitor EBITDA Margin Measurement.  The Participant’s interest in up to 100% of the Shares shall become Vested based on Cumulative Margin Change as set forth in this paragraph 2(c).  The number of Shares, if any, which shall become Vested under this paragraph 2(c) shall in no event exceed 100% of the Shares or be less than zero and shall be calculated according to the following mathematical formula:
(100% of the Shares) * (20% + [5% * Cumulative Margin Change / 10 basis points]).
For the avoidance of doubt,
		
	i.
	if Cumulative Margin Change is less than or equal to negative 40 basis points, then none of the Shares shall become Vested under this paragraph 2(c); and

		
	ii.
	if Cumulative Margin Change is 160 basis points or greater, then 100% of the Shares shall become Vested under this paragraph 2(c).

The Committee may make adjustments to the calculations set forth in this paragraph 2(c) as described in the relevant definitions set forth in Section 5.

3.Termination of Employment.  Except as provided in paragraphs 3(a), 3(b), 3(c), 3(d) and 3(e), the Participant’s interest in all of the Shares shall be forfeited if the Participant’s employment with the Company or an Affiliate terminates or is terminated before December 31, 2014.
(a)Change in Control.  If a Control Change Date occurs before December 31, 2014, and if the Participant remains in the continuous employ of the Company or an Affiliate from the Date of Grant until the Control Change Date, the Participant shall be Vested in the greater of (i) 50% of the Shares and (ii) the number of Shares that become Vested in accordance with paragraphs 2(a), 2(b) and 2(c).
(b)Death or Disability.  If the Participant’s employment by the Company or its Affiliates terminates before December 31, 2014, on account of death or disability (as defined in Code section 22(e)(3)) and if the Participant remains in the continuous employ of the Company or an Affiliate from the Date of Grant until the date of such termination, the Participant shall be Vested in the greater of (i) the number of Shares equal to 50% of the Shares and (ii) the number of Shares equal to the number of Shares that become Vested in accordance with paragraphs 2(a), 2(b) and 2(c).
(c)Termination of Employment Without Cause.  If the Participant’s employment by the Company or its Affiliates ends before December 31, 2014, on account of a termination of the Participant’s employment by the Company or an Affiliate without Cause and if the Participant remains in the continuous employ of the Company or an Affiliate from the Date of Grant until the date of such termination, the Participant shall be Vested in the greater of (i) 50% of the Shares and (ii) the number of shares that become Vested in accordance with paragraphs 2(a), 2(b) and 2(c).  
(d)Termination of Employment for Cause.  If the Participant’s employment by the Company or its Affiliates ends before December 31, 2014, on account of a termination of the Participant’s employment by the Company or an Affiliate for Cause and if the Participant remains in the continuous employ of the Company or an Affiliate from the Date of Grant until the date of such termination, the Participant’s interest in all of the Shares shall be forfeited; provided, however, that in the event the Participant is terminated for Cause as defined in paragraph (5)(a)(ii) and the Participant is subsequently acquitted of the act or acts referred to therein, then the Participant shall be deemed for purposes of this Agreement to have been terminated without Cause as of the date of the termination and the Participant shall be Vested in the number of Shares determined in accordance with paragraph 3(c) notwithstanding that a number of Shares may have been previously forfeited due to the termination of the Participant’s employment for Cause based on such charge.
(e)Termination of Employment by the Participant for Good Reason.  If the Participant’s employment by the Company or its Affiliates ends before December 31, 2014, on account of a termination of the Participant’s employment by the Participant for Good Reason (as defined in, and in accordance with the terms of, that certain Change-in-Control Severance 

Agreement entered into as of ___________ ____ by and between the Company and the Participant) and if the Participant remains in the continuous employ of the Company or an Affiliate from the Date of Grant until the date of such termination, the Participant shall be Vested in the greater of (i) 50% of the Shares and (ii) the number of shares that become Vested in accordance with paragraphs 2(a), 2(b) and 2(c).
4.Transferability.  Shares that have not become Vested cannot be transferred.  Subject to the requirements of applicable securities laws, Shares may be transferred, including by will or the laws of descent and distribution, after they become Vested and nonforfeitable as provided in Section 2 or Section 3.
5.Definitions.  For purposes of this Agreement, the terms Cause, Company EBITDA Margin, Company TSR, Competitor EBITDA Margin, Cumulative Margin Change, Measurement Period and Peer Group TSR shall have the following meanings:
(a)“Cause” means that the Board concludes, in good faith and after reasonable investigation, that: (i) the Participant has been charged by the United States or a State or political subdivision thereof with conduct which is a felony under the laws of the United States or any State or political subdivision thereof; (ii) the Participant engaged in conduct relating to the Company constituting material breach of fiduciary duty, willful misconduct (including acts of employment discrimination or sexual harassment) or fraud; (iii) the Participant breached in any material respect the Participant’s obligations or covenants, if any, restricting the recruitment of employees of the Company or an Affiliate to work for another employer set forth in an agreement with the Company; or (iv) the Participant materially failed to follow a proper directive of the Board within the scope of the Participant’s duties (which shall be capable of being performed by the Participant with reasonable effort) after written notice from the Board specifying the performance required and the Participant’s failure to perform within 30 days after such notice.  For this purpose, no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith or if the result thereof would be unethical or illegal.
(b)“Company EBITDA Margin” means the Company’s pro forma hotel-level earnings before taxes, interest, depreciation and amortization (“EBITDA”) as a percentage of the Company’s hotel revenues for each of the calendar years during the Measurement Period (or quarterly periods for any period during the Measurement Period that is less than a full year) based on the amount reported as “Pro forma Hotel EBITDA” for the applicable “Full Year” in the earnings press release furnished by the Company for the applicable period (the “Company’s Earnings Release”) divided by the amount reported as “Pro forma Hotel Revenues” for the applicable “Full Year” in the Company’s Earnings Release. The Committee may elect to adjust the Company EBITDA Margin calculation to reflect the impact of acquisitions and divestitures.
(c)“Company TSR” means the average annual total shareholder return (Common Share price appreciation/depreciation during the Measurement Period plus dividends paid on Common Shares of the Company during the Measurement Period) (the “TSR”) of the 

Company over the term of the Measurement Period, expressed as a percentage.  For purposes of calculating Common Share price appreciation/depreciation, the Common Share prices for the beginning and end of each period in the Measurement Period are to be determined by averaging the closing prices for the Company’s Common Shares as reported on the New York Stock Exchange (the “NYSE”) or other applicable principal securities exchange in which the Company’s Common Shares are traded for each of the trading days during the last thirty calendar days preceding the start or end, as applicable, of the Measurement Period. For purposes of calculating Company TSR, dividends for the period shall be treated as reinvested. If the Measurement Period ends before December 31, 2014, the TSR of the Company for the period from the most recent fiscal year end to the end of the Measurement Period shall be annualized for purposes of calculating Company TSR.
(d)“Competitor EBITDA Margin” means LaSalle Hotel Properties’ hotel-level EBITDA as a percentage of LaSalle Hotel Properties’ hotel revenues for each of the calendar years during the Measurement Period (or quarterly periods for any period in the Measurement Period that is less than a full year) based on the amount typically reported as “Hotel EBITDA Margin” in the earnings press release furnished by the LaSalle Hotel Properties for the applicable period.  The Committee may adjust the calculation of Competitor EBITDA Margin to reflect the impact of acquisitions and divestitures.  The Committee may also make necessary and appropriate adjustments to the calculations set forth in paragraph 2(c), including the substitution of another entity for LaSalle Hotel Properties if LaSalle Hotel Properties changes its method of calculating or reporting its hotel-level EBITDA or if hotel-level EBITDA for LaSalle Hotel Properties for the applicable calculation date is not publicly available.  It is understood that the calculation for the year ended December 31, 2011 will be made based on information that will not be available before December 31, 2012.
(e)“Cumulative Margin Change” shall be calculated according to the following mathematical formula and expressed as a number of basis points (i.e., 1.00% equals 100 basis points), in which Period 1, Period 2, Period 3 and Period 4 are the years ended or ending December 31, 2011, 2012, 2013 and 2014, respectively, unless the Measurement Period ends before December 31, 2014, in which case the last of the periods for this calculation shall be the most recent full quarter ended prior to the end of the Measurement Period:
(Competitor EBITDA Margin - Company EBITDA Margin) for Period 1 
[as adjusted with Committee approval]
-
(Competitor EBITDA Margin - Company EBITDA Margin) for Period 2
+
(Competitor EBITDA Margin - Company EBITDA Margin) for Period 2 
[as adjusted with Committee approval]
-

(Competitor EBITDA Margin - Company EBITDA Margin) for Period 3
+
(Competitor EBITDA Margin - Company EBITDA Margin) for Period 3 
[as adjusted with Committee approval]
-
(Competitor EBITDA Margin - Company EBITDA Margin) for Period 4.
(f)“Measurement Period” means the period beginning on January 1, 2012 and ending on December 31, 2014; provided, however, that in the event that during such period (A) a Change in Control occurs, (B) the Participant’s employment by the Company or its Affiliates terminates on account of death or disability, or (C) the Participant’s employment by the Company or its Affiliates terminates without Cause as contemplated by paragraph 3(c), the Measurement Period shall end:
(i)on the date of the event described in clause (A), (B) or (C) above for purposes of calculating Company TSR and Peer Group TSR; and 
(ii)on the last day of the most recent full fiscal quarter ended prior to the event described in clause (A), (B) or (C) above for purposes of calculating Company EBITDA Margin, Competitor EBITDA Margin and Cumulative Margin Change.
(g)“Peer Group TSR” means the arithmetic average of the TSRs (each as determined using data provided by Bloomberg) of Ashford Hospitality Trust, Chesapeake Lodging Trust, DiamondRock Hospitality Company, Host Hotel & Resorts, Inc., LaSalle Hotel Properties, Strategic Hotels & Resorts, Inc. and Sunstone Hotel Investors, Inc. (the “Peer Group”) over the term of the Measurement Period, expressed as a percentage. If the common stock of any of these companies ceases to be publicly traded during the Measurement Period, such company shall be excluded from the calculation of Peer Group TSR for any year or quarter during the Measurement Period in which its common stock is not publicly traded.  For purposes of calculating common stock price appreciation/depreciation, the common stock prices for the beginning and end of each period in the Measurement Period are to be determined by averaging the closing prices for the Peer Group members’ common stock as reported on the NYSE or other applicable principal securities exchange in which the Peer Group members’ common stock is traded for each of the trading days during the last thirty calendar days preceding the start or end, as applicable, of the Measurement Period.  For purposes of calculating Company TSR, dividends for the period shall be treated in the same manner as described in paragraph 5(c) with regard to the treatment of dividends when calculating Company TSR.  If the Measurement Period ends before December 31, 2014, the arithmetic average of the TSRs of the Peer Group for the period from the most recent fiscal year end to the end of the Measurement Period shall be annualized for purposes of calculating Peer Group TSR.
6.Shareholder Rights. In consideration of the grant of the Share Award, the 

Participant agrees that (i) the Shares cannot be voted by the Participant before the date that they become Vested, (ii) no dividends will be paid to the Participant with respect to the Shares before the date that they become Vested, (iii) to the extent any of the Shares become Vested, within 30 days after they become Vested, the Company will pay the Participant a cash amount equal to the cumulative amount of dividends that would have been paid on the number of Vested Shares had the Participant held such Shares during the Measurement Period and (iv) no cash amount will be paid with respect to Shares that do not become Vested.  The Participant hereby appoints the Company’s Secretary as the Participant’s attorney-in-fact, with full power of substitution, with the power to transfer to the Company and cancel any Shares that are forfeited under Sections 2 and 3. 
7.No Right to Continued Employment.  The grant of the Share Award does not give the Participant any rights with respect to continued employment by the Company or an Affiliate.
8.Governing Law.  This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Maryland without reference to principles of conflict of laws.
9.Conflicts.  The Participant agrees that in the event of any conflict between the provisions of the Plan as in effect on the Date of Grant and this Agreement, other than as provided in paragraph 6, the provisions of the Plan shall govern.  All references herein to the Plan shall mean the Plan as in effect on the Date of Grant.
10.Participant Bound by Plan.  The Participant hereby acknowledges that a copy of the Plan has been made available to the Participant and the Participant agrees to be bound by all the terms and provisions of the Plan.
11.Binding Effect.  Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon the Participant and the Participant’s successors in interest and the Company and any successors of the Company.
[Signatures appear on following page.]

IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement as of the date first set forth above.

PEBBLEBROOK HOTEL TRUST                [NAME OF PARTICIPANT]

By:__________________________                _________________________

Title:_________________________

EXHIBIT A -  ILLUSTRATIVE EXAMPLES
assuming an award of 50,000 Common Shares (the “Shares”)

I. Relative TSR Measurement (paragraph 2(a))
Formula: Vested Shares = Shares x (15% + (2.5 x (Company TSR - Peer Group TSR))
subject to a maximum of 100% of the Shares and a minimum of 0.

Example A
Peer Group TSR: 5%
Company TSR: 7%

= Shares x (15% + (2.5 x (Company TSR - Peer Group TSR))
= 50,000 x (15% + (2.5 x (7% - 5%))
= 50,000 x (15% + 5%)
= 50,000 x 20%
= 10,000

Example B
Peer Group TSR: 5%
Company TSR: 5%

= Shares x (15% + (2.5 x (Company TSR - Peer Group TSR))
= 50,000 x (15% + (2.5 x (5% - 5%))
= 50,000 x (15% + 0%)
= 50,000 x 15%
= 7,500

Example C
Peer Group TSR: -1%
Company TSR: -3%

= Shares x (15% + (2.5 x (Company TSR - Peer Group TSR))
= 50,000 x (15% + (2.5 x (-3% - -1%))
= 50,000 x (15% - 5%)
= 50,000 x 10%
= 5,000

	
																	
	 
	Relative TSR (paragraph 2(a))
	 
	 
	 
	 
	 

	 
	 
	Company TSR

	 
	 
	-3.00
	 %
	-1.00
	 %
	0.00
	%
	3.00
	%
	5.00
	%
	7.00
	%
	10.00
	%

	Peer TSR
	-3.00
	 %
	7,500
	

	10,000
	

	11,250
	

	15,000
	

	15,000
	

	15,000
	

	15,000
	

	-1.00
	 %
	5,000
	

	7,500
	

	8,750
	

	12,500
	

	15,000
	

	15,000
	

	15,000
	

	0.00
	 %
	3,750
	

	6,250
	

	7,500
	

	11,250
	

	13,750
	

	15,000
	

	15,000
	

	3.00
	 %
	—
	

	2,500
	

	3,750
	

	7,500
	

	10,000
	

	12,500
	

	15,000
	

	5.00
	 %
	—
	

	—
	

	1,250
	

	5,000
	

	7,500
	

	10,000
	

	13,750
	

	7.00
	 %
	—
	

	—
	

	—
	

	2,500
	

	5,000
	

	7,500
	

	11,250
	

	10.00
	 %
	—
	

	—
	

	—
	

	—
	

	1,250
	

	3,750
	

	7,500
	

A-1

II. Absolute TSR Measurement (paragraph 2(b))
Formula: Vested Shares = Shares x (15% + (3.75 x (Company TSR - 9.0%))
subject to a maximum of 30% of the Shares and a minimum of 0.

Example A
Company TSR: 13%
= Shares x (15% + (3.75 x (Company TSR - 9%))
= 50,000 x (15% + (3.75 x (13% - 9%))
= 50,000 x (15% + (3.75 x 4%)
= 50,000 x (15% + 15%)
= 15,000

Example B
Company TSR: 9%
= Shares x (15% + (3.75 x (Company TSR - 9%))
= 50,000 x (15% + (3.75 x (9% - 9%))
= 50,000 x (15% + (3.75 x 0%)
= 50,000 x 15%
= 7,500

Example C
Company TSR: 6%
= Shares x (15% + (3.75 x (Company TSR - 9%))
= 50,000 x (15% + (3.75 x (6% - 9%))
= 50,000 x (15% + (3.75 x -3%)
= 50,000 x (15% - 11.25%)
= 50,000 x 3.75%
= 1,875

	
				
	Absolute TSR

	(paragraph 2(b))

	Company
	Shares

	TSR
	Vested

	<5.000%
	

	—
	

	5.000
	%
	—
	

	5.500
	%
	938
	

	7.000
	%
	3,750
	

	8.000
	%
	5,625
	

	8.150
	%
	5,906
	

	9.000
	%
	7,500
	

	10.000
	%
	9,375
	

	13.000
	%
	15,000
	

	>13.000%
	

	15,000
	

A-2

III. Competitor EBITDA Margin Measurement (paragraph 2(c))
Formula: Vested Shares = Shares x (20% + (5% x (Cumulative Margin Change / 10 basis points)
subject to a maximum of 100% of the Shares and a minimum of 0.

Example A
Cumulative Margin Change = 200 basis points (bps)
= Shares x (20% + (5% x (200 bps / 10 bps))
= 50,000 x (20% + (5% x 20)
= 50,000 x (20% + 100%)
= 50,000 x 120%
= 50,000 [because 60,000 exceeds maximum of 100% of Shares]

Example B
Cumulative Margin Change = -10 bps
= Shares x (20% + (5% x (-10 bps / 10 bps))
= 50,000 x (20% + (5% x -1)
= 50,000 x (20% - 5%)
= 50,000 x 15%
= 7,500

Example C
Cumulative Margin Change = 0 bps
= Shares x (20% + (5% x (0 bps / 10 bps))
= 50,000 x (20% + (5% x 0)
= 50,000 x (20% + 0)
= 50,000 x 20%
= 10,000

	
				
	Competitor EBITDA

	Margin (paragraph 2(c))

	Cum. Margin
	Shares

	Change
	Vested

	<-40.00
	

	—
	

	--40.00
	

	—
	

	--30.00
	

	2,500
	

	--20.00
	

	5,000
	

	--10.00
	

	7,500
	

	--0.10
	

	9,975
	

	—
	

	10,000
	

	10.00
	

	12,500
	

	100.00
	

	35,000
	

	150.00
	

	47,500
	

	160.00
	

	50,000
	

	>160.00
	

	50,000
	

A-3

Percentage of Shares that become Vested based on calculations pursuant to paragraphs 2(a), (b) and (c) under various hypothetical results of Relative TSR Measurement, Absolute TSR Measurement and Competitor EBITDA Margin Measurement.  

	
																	
	 
	Relative TSR (paragraph 2(a))
	 
	 
	 
	 
	 

	 
	 
	Company TSR

	 
	 
	-3.00
	 %
	-1.00
	 %
	0.00
	%
	3.00
	%
	5.00
	%
	7.00
	%
	10.00
	%

	Peer TSR
	-3.00
	 %
	15.0
	 %
	20.0
	 %
	22.5
	%
	30.0
	%
	30.0
	%
	30.0
	%
	30.0
	%

	-1.00
	 %
	10.0
	 %
	15.0
	 %
	17.5
	%
	25.0
	%
	30.0
	%
	30.0
	%
	30.0
	%

	0.00
	 %
	7.5
	 %
	12.5
	 %
	15.0
	%
	22.5
	%
	27.5
	%
	30.0
	%
	30.0
	%

	3.00
	 %
	0.0
	 %
	5.0
	 %
	7.5
	%
	15.0
	%
	20.0
	%
	25.0
	%
	30.0
	%

	5.00
	 %
	0.0
	 %
	0.0
	 %
	2.5
	%
	10.0
	%
	15.0
	%
	20.0
	%
	27.5
	%

	7.00
	 %
	0.0
	 %
	0.0
	 %
	0.0
	%
	5.0
	%
	10.0
	%
	15.0
	%
	22.5
	%

	10.00
	 %
	0.0
	 %
	0.0
	 %
	0.0
	%
	0.0
	%
	2.5
	%
	7.5
	%
	15.0
	%

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	Absolute TSR
	 
	 
	Competitor EBITDA
	 
	 

	 
	(paragraph 2(b))
	 
	 
	Margin (paragraph 2(c))
	 
	 

	 
	 
	% of
	 
	 
	Cumulative
	 
	 
	 

	 
	Company
	Shares
	 
	 
	Margin
	% of Shares
	 
	 

	 
	TSR
	Vested
	 
	 
	Change
	Vested
	 
	 

	 
	<5.000%
	

	0.00
	 %
	 
	 
	<-40.00
	

	0.00
	%
	 
	 

	 
	5.000
	 %
	0.00
	 %
	 
	 
	-40.00
	0.00
	%
	 
	 

	 
	5.500
	 %
	1.88
	 %
	 
	 
	-30.00
	5.00
	%
	 
	 

	 
	6.000
	 %
	3.75
	 %
	 
	 
	-20.00
	10.00
	%
	 
	 

	 
	6.500
	 %
	5.63
	 %
	 
	 
	-10.00
	15.00
	%
	 
	 

	 
	7.000
	 %
	7.50
	 %
	 
	 
	-0.10
	19.95
	%
	 
	 

	 
	8.000
	 %
	11.25
	 %
	 
	 
	0.00
	20.00
	%
	 
	 

	 
	8.100
	 %
	11.63
	 %
	 
	 
	10.00
	25.00
	%
	 
	 

	 
	8.150
	 %
	11.81
	 %
	 
	 
	100.00
	70.00
	%
	 
	 

	 
	9.000
	 %
	15.00
	 %
	 
	 
	150.00
	95.00
	%
	 
	 

	 
	10.000
	 %
	18.75
	 %
	 
	 
	160.00
	100.00
	%
	 
	 

	 
	11.000
	 %
	22.50
	 %
	 
	 
	>160.00
	

	100.00
	%
	 
	 

	 
	12.000
	 %
	26.25
	 %
	 
	 
	 
	 
	 
	 

	 
	13.000
	 %
	30.00
	 %
	 
	 
	 
	 
	 
	 

	 
	>13.000%
	

	30.00
	 %
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

A-4PEB-2012.03.31-EX10.2-LTIPUnitVestingAgreement

Exhibit 10.2
LONG TERM INCENTIVE PLAN
UNIT VESTING AGREEMENT
(as amended and restated on April 25, 2012)

Under the Pebblebrook Hotel Trust
2009 Equity Incentive Plan
(Officers and Employees)

Name of Grantee:                            
No. of LTIP Units:                            
Grant Date:                                
Final Acceptance Date:                        

Pursuant to the Pebblebrook Hotel Trust 2009 Equity Incentive Plan (the “Plan”) as amended through the date hereof and the Agreement of Limited Partnership, dated December 3, 2009 (the “Partnership Agreement”), of Pebblebrook Hotel, L.P., a Delaware limited partnership (the “Partnership”), Pebblebrook Hotel Trust, a Maryland real estate investment trust and the general partner of the Partnership (the “Company”), and for the provision of services to or for the benefit of the Partnership in a partner capacity or in anticipation of being a partner, hereby grants to the Grantee named above an Other Equity-Based Award (as defined in the Plan) (an “Award”) in the form of, and by causing the Partnership to issue to the Grantee named above, a number of LTIP Units (as defined in the Partnership Agreement) specified above having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein and in the Partnership Agreement.  Upon acceptance of this Long Term Incentive Plan Unit Vesting Agreement (this “Agreement”), the Grantee shall receive, effective as of the Closing Date (as defined below), the number of LTIP Units specified above, subject to the restrictions and conditions set forth herein and in the Partnership Agreement.

1.    Acceptance of Agreement.  The Grantee shall have no rights with respect to this Agreement unless he or she shall have accepted this Agreement prior to the close of business on the Final Acceptance Date specified above by (i) signing and delivering to the Partnership a copy of this Agreement and (ii) unless the Grantee is already a Limited Partner (as defined in the Partnership Agreement), signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Annex A).  Upon acceptance of this Agreement by the Grantee, the Partnership Agreement shall be amended to reflect the issuance to the Grantee of the LTIP Units so accepted, effective as of the Closing Date.  Thereupon, the Grantee shall have all the rights of a Limited Partner of the Partnership with respect to the number of LTIP Units specified above, as set forth in the Partnership Agreement, subject, however, to the restrictions and conditions specified in Section 2 below.

2.    Restrictions and Conditions.

(a)    The records of the Partnership evidencing the LTIP Units granted herein shall bear an appropriate legend, as determined by the Partnership in its sole discretion, to the effect that such LTIP Units are subject to restrictions as set forth herein and in the Partnership Agreement.

(b)    LTIP Units granted herein may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of by the Grantee prior to vesting.

(c)    Subject to the provisions of Section 4, any LTIP Units subject to this Award that have not become vested on or before the date that the Grantee’s employment with the Company and its Affiliates terminates shall be forfeited as of the date that such employment terminates.

3.    Vesting of LTIP Units.  The restrictions and conditions in Section 2 of this Agreement shall lapse with respect to the number of LTIP Units specified below on the Vesting Dates specified below, so long as the Grantee remains an employee of the Company or an Affiliate (as defined in the Plan) from the Closing Date until such Vesting Date or Dates.

      Number of                
LTIP Units Vested                Vesting Dates

                                
                                
                                
                                
                                

Subsequent to such Vesting Date or Dates, the LTIP Units on which all restrictions and conditions have lapsed shall no longer be deemed restricted.

4.    Acceleration of Vesting in Special Circumstances.  All restrictions on all LTIP Units subject to this Award shall be deemed waived by the Committee (as defined in the Plan) and all LTIP Units granted hereby shall automatically become fully vested on the date specified below if the Grantee remains in the continuous employ of the Company or an Affiliate on such date:

(a)    the date that the Grantee’s employment with the Company and its Affiliates ends on account of the Grantee’s termination of employment by the Company without Cause (as defined below);

(b)    the date that the Grantee’s employment with the Company and its Affiliates ends on account of the Grantee’s death or total and permanent disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”));

(c)    a Control Change Date (as defined in the Plan); 

(d)    the date of the acquittal described below, if the Grantee’s employment with the Company and its Affiliates was ended on account of the Grantee’s termination of employment by the Company for Cause (as defined below) solely on the basis of the Grantee having been charged by the United States or a State or political subdivision thereof with conduct which is a felony under the laws of the United States or any State or political subdivision thereof and the Grantee is subsequently acquitted of the act or acts referred to in such charge; i.e., to the effect that the Grantee shall be deemed for purposes of this Agreement to have been terminated without Cause if the Grantee is subsequently acquitted of a felony charge following termination of employment based on that charge notwithstanding that the LTIP Units may have been previously forfeited due to the termination of the Grantee’s employment for Cause based on such charge; or

(e)    the date that the Grantee’s employment with the Company and its Affiliates ends on account of the Grantee’s termination of employment by the Grantee for Good Reason (as defined in, and in accordance with the terms of, that certain Change-in-Control Severance Agreement entered into as of ___________ ____ by and between the Company and the Grantee).

For purposes of the Award, the term “Cause” means that the Board concludes, in good faith and after reasonable investigation, that (i) the Grantee has been charged by the United States or a State or political subdivision thereof with conduct which is a felony under the laws of the United States or any State or political subdivision thereof; (ii) the Grantee engaged in conduct relating to the Company constituting material breach of fiduciary duty, willful misconduct (including acts of employment discrimination or sexual harassment) or fraud; (iii) the Grantee breached the Grantee’s obligations or covenants under Section 4 of the Grantee’s Change in Control Severance Agreement in any material respect; or (iv) the Grantee materially failed to follow a proper directive of the Board within the scope of the Grantee’s duties (which shall be capable of being performed by the Grantee with reasonable effort) after written notice from the Board specifying the performance required and the Grantee’s failure to perform within thirty days after such notice.  No act or failure to act on the Grantee’s part shall be deemed “willful” unless done, or omitted to be done, by the Grantee not in good faith or if the result thereof would be unethical or illegal.

5.    Merger-Related Action.  In contemplation of and subject to the consummation of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding common shares are exchanged for securities, cash, or other property of an unrelated corporation or business entity or in the event of a liquidation of the Company (in each case, a “Transaction”), the Board of Trustees of the Company, or the board of trustees or directors of any corporation assuming the obligations of the Company (the “Acquiror”), may, in its discretion, take any one or more of the following actions, as to the outstanding LTIP Units subject to this Award:  (i) provide that such LTIP Units shall be assumed or equivalent awards shall be substituted, by the acquiring or succeeding entity (or an affiliate thereof), and/or (ii) 

upon prior written notice to the LTIP Unitholders (as defined in the Partnership Agreement) of not less than 30 days, provide that such LTIP Units shall terminate immediately prior to the consummation of the Transaction.  The right to take such actions (each, a “Merger-Related Action”) shall be subject to the following limitations and qualifications:  

(a)    if all LTIP Units awarded to the Grantee hereunder are eligible, as of the time of the Merger-Related Action, for conversion into Common Units (as defined and in accordance with the Partnership Agreement) and the Grantee is afforded the opportunity to effect such conversion and receive, in consideration for the Common Units into which the Grantee’s LTIP Units shall have been converted, the same kind and amount of consideration as other holders of Common Units in connection with the Transaction, then Merger-Related Action of the kind specified in (i) or (ii) above shall be permitted and available to the Company and the Acquiror;

(b)    if some or all of the LTIP Units awarded to the Grantee hereunder are not, as of the time of the Merger-Related Action, so eligible for conversion into Common Units (in accordance with the Partnership Agreement), and the acquiring or succeeding entity is itself, or has a subsidiary which is organized as a partnership or limited liability company (consisting of a so-called “UPREIT” or other structure substantially similar in purpose or effect to that of the Company and the Partnership), then Merger-Related Action of the kind specified in clause (i) of this Section 5 above must be taken by the Acquiror with respect to all LTIP Units subject to this Award which are not so convertible at the time, whereby all such LTIP Units covered by this Award shall be assumed by the acquiring or succeeding entity, or equivalent awards shall be substituted by the acquiring or succeeding entity, and the acquiring or succeeding entity shall preserve with respect to the assumed LTIP Units or any securities to be substituted for such LTIP Units, as far as reasonably possible under the circumstances, the distribution, special allocation, conversion and other rights set forth in the Partnership Agreement for the benefit of the LTIP Unitholders; and

(c)    if some or all of the LTIP Units awarded to the Grantee hereunder are not, as of the time of the Merger-Related Action, so eligible for conversion into Common Units (in accordance with the Partnership Agreement), and after exercise of reasonable commercial efforts the Company or the Acquiror is unable to treat the LTIP Units in accordance with Section 5(b), then Merger-Related Action of the kind specified in clause (ii) of this Section 5 above must be taken by the Company or the Acquiror, in which case such action shall be subject to a provision that the settlement of the terminated award of LTIP Units which are not convertible into Common Units requires a payment of the same kind and amount of consideration payable in connection with the Transaction to a holder of the number of Common Units into which the LTIP Units to be terminated could be converted or, if greater, the consideration payable to holders of the number of common shares into which such Common Units could be exchanged (including the right to make elections as to the type of consideration) if the Transaction were of a nature that permitted a revaluation of the Grantee’s capital account balance under the terms of the Partnership Agreement, as determined by the Committee in good faith in accordance with the Plan.  

6.    Distributions.  Distributions on the LTIP Units shall be paid currently to the Grantee in accordance with the terms of the Partnership Agreement.  The right to distributions set forth in this Section 6 shall be deemed a Dividend Equivalent Right for purposes of the Plan.  

7.    Incorporation of Plan.  Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan.  Capitalized terms used in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

8.    Covenants.  The Grantee hereby covenants as follows:
    
(a)    So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of LTIP Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.

(b)    The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect to the LTIP Units awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Annex B.  The Grantee agrees to file the election (or to permit the Partnership to file such election on the Grantee’s behalf) within thirty (30) days after the Closing Date with the IRS Service Center at which such Grantee files his or her personal income tax returns, and to file a copy of such election with the Grantee’s U.S. federal income tax return for the taxable year in which the LTIP Units are awarded to the Grantee.

(c)    The Grantee hereby agrees that it does not have the intention to dispose of the LTIP Units subject to this Award within two years of receipt of such LTIP Units.  The Partnership and the Grantee hereby agree to treat the Grantee as the owner of the LTIP Units from the Grant Date.  The Grantee hereby agrees to take into account the distributive share of Partnership income, gain, loss, deduction, and credit associated with the LTIP Units in computing the Grantee’s income tax liability for the entire period during which the Grantee has the LTIP Units.

(d)    The Grantee hereby recognizes that the IRS has proposed regulations under Sections 83 and 704 of the Code that may affect the proper treatment of the LTIP Units for federal tax purposes.  In the event that those proposed regulations are finalized, the Grantee hereby agrees to cooperate with the Partnership in amending this Agreement and the Partnership Agreement, and to take such other action as may be required, to conform to such regulations. 

9.    Transferability.  This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution, without the prior written consent of the Company.

10.    Amendment.  The Grantee acknowledges that the Plan may be amended or 

terminated in accordance with Article XV thereof and that this Agreement may be amended or canceled by the Committee, on behalf of the Partnership, for the purpose of satisfying changes in law or for any other lawful purpose, provided that no such action shall adversely affect the Grantee’s rights under this Agreement without the Grantee’s written consent.  The provisions of Section 5 of this Agreement applicable to the termination of the LTIP Units covered by this Award in connection with a Transaction (as defined in Section 5 of this Agreement) shall apply, mutatis mutandi to amendments, discontinuance or cancellation pursuant to this Section 10 or the Plan.

11.    No Obligation to Continue Employment.  Neither the Company nor any affiliate of the Company is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any affiliate of the Company to terminate the employment of the Grantee at any time.

12.    Notices.  Notices hereunder shall be mailed or delivered to the Partnership at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Partnership or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

13.    Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.  The parties agree that any action or proceeding arising directly, indirectly or otherwise in connection with, out of , related to or from this Agreement, any breach hereof or any action covered hereby, shall be resolved within the State of Delaware and the parties hereto consent and submit to the jurisdiction of the federal and state courts located within the District of Delaware.  The parties hereto further agree that any such action or proceeding brought by either party to enforce any right, assert any claim, obtain any relief whatsoever in connection with this Agreement shall be brought by such party exclusively in federal or state courts located within the District of Delaware.

14.    Closing Date.  As used herein, “Closing Date” shall mean the date of closing of the initial public offering of common shares of beneficial interest of Pebblebrook Hotel Trust.

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The foregoing LTIP Unit Vesting Agreement, as amended and restated, amends and restates the original LTIP Unit Vesting Agreement dated as of the ___ day of ________ 20__ in its entirety and is hereby agreed to by the Company, the Partnership and the Grantee on the date shown below.

Date:                                             PEBBLEBROOK HOTEL TRUST
  a Maryland real estate investment trust

By:    _                    
Name:                           
Title:    
                            

          PEBBLEBROOK HOTEL, L.P.
 a Delaware limited partnership

           By:  PEBBLEBROOK HOTEL TRUST,
          general partner

By:                        
Name:                         
Title:    
                            

                                                    
Grantee’s Signature

Grantee’s name and address:

________________________________

________________________________

________________________________

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