HERSHA HOSPITALITY TRUST
OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................1
1.01. Administrator....................................................1
1.02. Affiliate........................................................1
1.03. Agreement........................................................1
1.04. Board............................................................1
1.05. Class A Common Shares............................................1
1.06. Class B Common Shares............................................2
1.07. Code.............................................................2
1.08. Committee........................................................2
1.09. Company..........................................................2
1.10. Exchange Act.....................................................2
1.11. Fair Market Value................................................2
1.12. Limited Partnership Interest.....................................3
1.13. Non-Public Company...............................................3
1.14. Original Limited Partners........................................3
1.15. Participant......................................................3
1.16. Partnership......................................................3
1.17. Partnership Agreement............................................3
1.18. Plan.............................................................4
1.19. Public Company...................................................4
1.20. Share Option.....................................................4
1.21. Unit.............................................................4
1.22. Unit Option......................................................4
ARTICLE II PURPOSES..........................................................4
ARTICLE III ADMINISTRATION...................................................5
ARTICLE IV ELIGIBILITY.......................................................6
ARTICLE V SHARES AND UNITS SUBJECT TO THE PLAN...............................7
5.01. Shares and Units Issued..........................................7
5.02. Aggregate Limit..................................................7
5.03. Reallocation of Shares and Units.................................7
ARTICLE VI SHARE OPTION AND UNIT OPTIONS.....................................8
6.01. Award............................................................8
6.02. Option Price.....................................................8
6.03. Maximum Option Period............................................8
6.04. Nontransferability...............................................8
6.05. Transferable Options.............................................9
6.06. Employee Status..................................................9
6.07. Exercise........................................................10
6.08. Payment.........................................................10
6.09. Shareholder and Partnership Rights..............................11
6.10. Disposition of Shares...........................................11
6.11. Information About Grants........................................11
ARTICLE VII ADJUSTMENT UPON CHANGE IN CLASS B COMMON SHARES.................12
ARTICLE VIII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES..........13
ARTICLE IX GENERAL PROVISIONS...............................................14
9.01. Effect on Employment and Service................................14
9.02. Unfunded Plan...................................................14
9.03. Rules of Construction...........................................15
ARTICLE X AMENDMENT.........................................................15
ARTICLE XI DURATION OF PLAN.................................................15
ARTICLE XII EFFECTIVE DATE OF PLAN..........................................16
14
ARTICLE I
DEFINITIONS
1.01. Administrator
Administrator means the administrator of the Plan with respect to Share
Options and with respect to Unit Options, as identified in subsection (a) or (b)
below.
(a) With respect to Share Options, the Administrator shall be: (i) while
the Company is a Non-Public Company, the Board, and (ii) while the Company is a
Public Company, the Committee and any delegate of the Committee that is
appointed in accordance with Article III.
(b) With respect to Unit Options, the Administrator shall be the
Partnership, which may act through its general partner.
1.02. Affiliate
Affiliate means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.
1.03. Agreement
Agreement means a written agreement (including any amendment or
supplement thereto) between the Company or the Partnership and a Participant
specifying the terms and conditions of a Share Option or a Unit Option.
1.04. Board
Board means the Board of Trustees of the Company.
1.05. Class A Common Shares
Class A Common Shares means the Priority Class A common shares of
beneficial interest of the Company.
1.06. Class B Common Shares
Class B Common Shares means the Class B common shares of beneficial
interest of the Company.
1.07. Code
Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.08. Committee
Committee means a Committee of the Board, appointed to administer the
Plan, comprised of two or more Trustees, each of whom qualifies as a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act.
1.09. Company
Company means Hersha Hospitality Trust, a Maryland real estate
investment trust.
1.10. Exchange Act
Exchange Act means the Securities Exchange Act of 1934, as amended.
1.11. Fair Market Value
Fair Market Value means, on any given date, the current fair market value
of a Class B Common Share or a Unit, as applicable, as determined pursuant to
subsection (a), (b) or (c) below.
(a) The Fair Market Value of a Class B Common Share shall be determined
by the Committee using any reasonable method in good faith.
(b) The Fair Market Value of a Unit shall be determined by the
Partnership using any reasonable method in good faith.
(c) Notwithstanding the foregoing, the Fair Market Value of a Class B
Common Share and a Unit on the effective date of the registration statement
relating to the Company's initial public offering of the Class A Common
Shares shall be the initial public offering price of the Class A Common
Shares.
1.12. Limited Partnership Interest
Limited Partnership Interest has the meaning given to that term in the
Partnership Agreement.
1.13. Non-Public Company
Non-Public Company means an entity that has never sold securities
pursuant to an effective registration statement on Form S-11 filed pursuant
to the Securities Act of 1933, as amended.
1.14. Original Limited Partners
Original Limited Partners has the meaning given to that term in the
Partnership Agreement.
1.15. Participant
Participant means an employee of the Partnership or the Company,
including an employee who is a member of the Board, or an individual who
provides services to the Partnership or the Company (other than solely in his
capacity as a member of the Board), who satisfies the requirements of Article
IV and is selected by the Administrator to receive a Share Option or a Unit
Option.
1.16. Partnership
Partnership means Hersha Hospitality Limited Partnership, a Virginia
limited partnership.
1.17. Partnership Agreement
Partnership Agreement means the Amended and Restated Agreement of
Limited Partnership of Hersha Hospitality Limited Partnership.
1.18. Plan
Plan means the Hersha Hospitality Trust Option Plan.
1.19. Public Company
Public Company means an entity that has sold securities pursuant to an
effective registration statement on Form S-11 filed pursuant to the
Securities Act of 1933, as amended.
1.20. Share Option
Share Option means a share option that entitles the holder to purchase
from the Company a stated number of Class B Common Shares at the price set
forth in an Agreement.
1.21. Unit
Unit means a unit of Limited Partnership Interest that confers the same
rights and obligations to the holder as conferred, in accordance with the
Partnership Agreement as amended from time to time, by the Limited
Partnership Interests of the Original Limited Partners.
1.22. Unit Option
Unit Option means a unit option that entitles the holder the purchase from
the Partnership a stated number of Units at the price set forth in an Agreement.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company and the Partnership in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and the
Partnership, and to associate their interests with those of the Company and its
shareholders and the Partnership and its partners. The Plan is intended to
permit the grant of both Share Options qualifying under Section 422 of the Code
("incentive share options") and Share Options and Unit Options not so
qualifying. No Share Option that is intended to be an incentive share option
shall be invalid for failure to qualify as an incentive share option. The
proceeds received by the Company from the sale of Common Shares pursuant to this
Plan shall be used for general corporate purposes, and the proceeds received by
the Partnership from the sale of Units pursuant to this Plan shall be used for
the general purposes of the Partnership.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Share Options and Unit Options upon such terms
(not inconsistent with the provisions of this Plan), as the Administrator may
consider appropriate. Such terms may include conditions (in addition to those
contained in this Plan), on the exercisability of all or any part of a Share
Option or Unit Option. Notwithstanding any such conditions, the Administrator
may, in its discretion, accelerate the time at which any Share Option or Unit
Option may be exercised, subject to Section 6.07 of this Plan. In addition, the
Administrator shall have complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules
and regulations pertaining to the administration of the Plan; and to make all
other determinations necessary or advisable for the administration of this Plan.
The express grant in the Plan of any specific power to the Administrator shall
not be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Board or the Committee or any partner in the
Partnership shall be liable for any act done in good faith with respect to this
Plan or any Agreement or Share Option or Unit Option. All expenses of
administering this Plan shall be borne by the Company and the Partnership on a
basis that is equitable in light of all relevant factors, including without
limitation the relative number of Share Options or Unit Options granted to
employees or other service-providers of the Company, on one hand, and employees
or other service-providers of the Partnership, on the other.
The Committee, in its discretion, may delegate to one or more officers of
the Company all or part of the Committee's authority and duties with respect to
grants of Share Options to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act. The Committee may revoke or
amend the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Committee's delegate or delegates that were consistent
with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Partnership or the Company, or any individual who
provides services to the Partnership or the Company, other than solely in his
capacity as a member of the Board, is eligible to participate in this Plan if
the Administrator, in its sole discretion, determines that such person has
contributed significantly or can be expected to contribute significantly to the
profits or growth of the Partnership or the Company. Members of the Board who
are employees of the Company or the Partnership, or who provide services to the
Company or the Partnership in addition to services as a Board member, may be
selected to participate in this Plan.
ARTICLE V
SHARES AND UNITS SUBJECT TO THE PLAN
5.01. Shares and Units Issued
Upon the exercise of any Share Option, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs) Class
B Common Shares from its authorized but unissued Class B Common Shares. Upon
the exercise of any Unit Option, the Partnership may deliver to the
Participant (or the Participant's broker if the Participant so directs) Units
authorized but not previously outstanding.
5.02. Aggregate Limit
A maximum of 650,000 Class B Common Shares and Units, in the aggregate,
may be issued under this Plan pursuant to the exercise of Share Options and Unit
Options. The maximum aggregate limit set forth in the preceding sentence is
subject to adjustment as provided in Article VII.
5.03. Reallocation of Shares and Units
If a Share Option is terminated, in whole or in part, for any reason other
than its exercise, the number of Class B Common Shares allocated to the Share
Option or portion thereof may be reallocated to other Share Options or Unit
Options to be granted under this Plan. If a Unit Option is terminated, in whole
or in part, for any reason other than its exercise, the number of Units
allocated to the Unit Option or portion thereof may be reallocated to other Unit
Options or Share Options to be granted under this Plan.
ARTICLE VI
SHARE OPTION AND UNIT OPTIONS
6.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom a Share Option or Unit Option is to be
granted and will specify the number of Class B Common Shares or Units covered
by such awards; provided, however, that no individual may be granted Share
Options and Unit Options in any calendar year covering more than 650,000
Class B Common Shares and Units, in the aggregate.
6.02. Option Price
The price per share for Class B Common Shares purchased on the exercise of
a Share Option shall be determined by the Administrator on the date of grant,
but shall not be less than the Fair Market Value on the date the Share Option is
granted. The price per unit for Units purchased on exercise of a Unit Option
shall be determined by the Administrator on the date of grant, but shall not be
less than the Fair Market Value on the date the Unit Option is granted.
6.03. Maximum Option Period
The maximum period in which a Share Option or Unit Option may be
exercised shall be determined by the Administrator on the date of grant,
except that no Share Option or Unit Option shall be exercisable after the
expiration of five years from the date such Option was granted.
6.04. Nontransferability
Except as provided in Section 6.05, each Share Option and Unit Option
granted under this Plan shall be nontransferable except by will or by the laws
of descent and distribution. During the lifetime of the Participant to whom the
Share Option or Unit Option is granted, the Share Option or Unit Option may be
exercised only by the Participant. No right or interest of a Participant in any
Share Option or Unit Option shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
6.05. Transferable Options
Section 6.04 to the contrary notwithstanding, if the Agreement provides, a
Unit Option or a Share Option that is not an incentive share option may be
transferred by a Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners, on such terms
and conditions as may be permitted under Securities and Exchange Commission Rule
16b-3 as in effect from time to time. The holder of a Share Option or Unit
Option transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Share Option or Unit Option during the period that
it was held by the Participant; provided, however, that such transferee may not
transfer the Share Option or Unit Option except by will or the laws of descent
and distribution.
6.06. Employee Status
For purposes of determining the applicability of Section 422 of the
Code (relating to incentive share options), or in the event that the terms of
any Share Option provide that it may be exercised only during employment or
within a specified period of time after termination of employment, the
Administrator may decide to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not
be deemed interruptions of continuous employment.
6.07. Exercise
A Share Option or Unit Option granted under this Plan will be exercisable
only if (i) the Company obtains a per share closing price on the Class A Common
Shares of $9.00 or higher for 20 consecutive trading days; and (ii) the closing
price on the Class A Common Shares for the prior trading day was $9.00 or
higher. Subject to the preceding sentence and the other provisions of this Plan
and the applicable Agreement, a Share Option or Unit Option may be exercised in
whole at any time or in part from time to time at such times and in compliance
with such requirements as the Administrator shall determine; provided, however,
that incentive share options (granted under the Plan and all plans of the
Company and its Affiliates) may not be first exercisable in a calendar year for
Class B Common Shares having a Fair Market Value (determined as of the date a
Share Option is granted) exceeding the amount prescribed by the Code (currently
$100,000). A Share Option or Unit Option granted under this Plan may be
exercised with respect to any number of whole Class B Common Shares or Units
less than the full number for which the Share Option or Unit Option could be
exercised. A partial exercise of a Share Option or Unit Option shall not affect
the right to exercise the Share Option or Unit Option from time to time in
accordance with this Plan and the applicable Agreement with respect to the
remaining Class B Common Shares or Units subject to the Share Option or Unit
Option.
6.08. Payment
Unless otherwise provided by the Agreement, payment of the Share Option
price shall be made in cash or a cash equivalent acceptable to the
Administrator, or by the surrender to the Company or attestation of ownership of
Class B Common Shares. If Class B Common Shares are used to pay all or part of
the Share Option price, the sum of the cash and cash equivalent and the Fair
Market Value (determined as of the day preceding the date of exercise) of the
shares that are surrendered or that are the subject of attestation must not be
less than the Share Option price of the shares for which the Share Option is
being exercised. Unless otherwise provided by the Agreement, payment of the Unit
Option price shall be made in cash or a cash equivalent acceptable to the
Administrator, or by the surrender to the Partnership or attestation of
ownership of Units. If Units are used to pay all or part of the Unit Option
price, the sum of the cash and cash equivalent and the Fair Market Value
(determined as of the day preceding the date of exercise) of the Units that are
surrendered or that are the subject of attestation must not be less than the
Unit Option price of the Units for which the Unit Option is being exercised.
6.09. Shareholder and Partnership Rights
No Participant shall have any rights as a shareholder of the Company
with respect to shares subject to his Share Option, or as a partner in the
Partnership with respect to Units subject to his Unit Option, until the date
of exercise of such Share Option or Unit Option, as applicable.
6.10. Disposition of Shares
A Participant shall notify the Company of any sale or other disposition of
Class B Common Shares acquired pursuant to a Share Option that was an incentive
share option if such sale or disposition occurs (i) within two years of the
grant of the Share Option or (ii) within one year of the issuance of the Class B
Common Shares to the Participant. Such notice shall be in writing and directed
to the Secretary of the Company.
6.11. Information About Grants
Upon request by the Board, the Partnership shall promptly provide the
Board with information relating to Unit Options granted by the Partnership under
the Plan including without limitation the aggregate number of Units covered by
Unit Options granted through the date the information is provided, and the
number of Units, if any, with respect to which Unit Options have been exercised
or forfeited or have expired. Upon request by the Partnership, the Board shall
promptly provide the Partnership with information relating to Share Options
granted by the Company under the Plan including without limitation the aggregate
number of Class B Common Shares covered by Share Options granted through the
date the information is provided, and the number of Class B Common Shares, if
any, with respect to which Share Options have been exercised or forfeited or
have expired.
ARTICLE VII
ADJUSTMENT UPON CHANGE IN CLASS B COMMON SHARES
The maximum number and the kind of shares as to which Share Options may be
granted under this Plan, the terms of outstanding Share Options and the per
individual limitations on the number and kind of shares for which Share Options
may be granted shall be adjusted as the Committee shall determine to be
equitably required in the event that (i) the Company (a) effects one or more
share dividends, share split-ups, subdivisions or consolidations of shares or
(b) engages in a transaction to which Section 424 of the Code applies or (ii)
there occurs any other event (including without limitation the Company's
conversion of all Class B Common Shares into another security of the Company)
which, in the judgment of the Board, necessitates such action. Any determination
made under this Article VII by the Board or the Committee shall be final and
conclusive.
The issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the maximum number
of shares as to which Share Options may be granted, the per individual
limitations on the number of shares for which Share Options may be granted or
the terms of outstanding Share Options (except for the conversion by the Company
of all Class B Common Shares into another security of the Company, in which case
the terms of, and kind of securities subject to, outstanding Share Options will
be appropriately adjusted).
The Committee may grant Share Options in substitution for stock options or
similar awards held by an individual who becomes an employee of or other service
provider to the Company in connection with a transaction described in the first
paragraph of this Article VII. Notwithstanding any provision of the Plan (other
than the limitation of Section 5.02), the terms of such substituted Share Option
grants shall be as the Committee, in its discretion, determines is appropriate.
ARTICLE VIII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Share Option or Unit Option shall be exercisable, no Class B Common
Shares or Units shall be issued, no certificates for Class B Common Shares or
Units shall be delivered, and no payment shall be made under this Plan except in
compliance with all applicable federal and state laws and regulations
(including, without limitation, withholding tax requirements), any listing
agreement to which the Company or the Partnership is a party, and the rules of
all domestic stock exchanges on which the Class B Common Shares or Class A
Common Shares or the Units may be listed. The Company shall have the right to
rely on an opinion of its counsel, and the Partnership shall have the right to
rely on an opinion of its counsel, as to such compliance. Any share certificate
issued to evidence Class B Common Shares for which a Share Option is exercised,
or unit certificate issued to evidence Units for which a Unit Option is
exercised, may bear such legends and statements as the Administrator may deem
advisable to assure compliance with federal and state laws and regulations. No
Share Option or Unit Option shall be exercisable, no certificate for Class B
Common Shares or Units shall be delivered, and no payment shall be made under
this Plan until the Company has obtained such consent or approval as the
Administrator may deem advisable from regulatory bodies having jurisdiction over
such matters.
ARTICLE IX
GENERAL PROVISIONS
9.01. Effect on Employment and Service
Neither the adoption of this Plan, its operation, nor any documents
describing or referring to this Plan (or any part thereof), shall confer upon
any individual any right to continue in the employ or service of the Company
or the Partnership or in any way affect any right and power of the Company or
the Partnership to terminate the employment or service of any individual at
any time with or without assigning a reason therefor.
9.02. Unfunded Plan
The Plan, insofar as it provides for grants, shall be unfunded, and
neither the Company nor the Partnership shall be required to segregate any
assets that may at any time be represented by grants under this Plan. Any
liability of the Company or the Partnership to any person with respect to any
grant under this Plan shall be based solely upon any contractual obligations
that may be created pursuant to this Plan. No such obligation of the Company or
the Partnership shall be deemed to be secured by any pledge of, or other
encumbrance on, any property of the Company or the Partnership.
9.03. Rules of Construction
Headings are given to the articles and sections of this Plan solely as a
convenience to facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.
ARTICLE X
AMENDMENT
The Board and the Partnership may amend or terminate this Plan from time
to time; provided, however, that no amendment may become effective until
approval of the Company's shareholders is obtained if the amendment increases
the aggregate number of Class B Common Shares that may be issued under the Plan.
No amendment shall, without a Participant's consent, adversely affect any rights
of such Participant under any Share Option or Unit Option outstanding at the
time such amendment is made.
ARTICLE XI
DURATION OF PLAN
No Share Option or Unit Option may be granted under this Plan more than
ten years after the earlier of the date that the Plan is adopted by the Board or
is approved by the Company's shareholders as provided in Article XII. Share
Options and Unit Options granted before that date shall remain valid in
accordance with their terms.
ARTICLE XII
EFFECTIVE DATE OF PLAN
Share Options and Unit Options may be granted under this Plan upon its
adoption by the Board and the Partnership, provided that no Share Option or Unit
Option shall be effective or exercisable unless this Plan is approved by a
majority of the votes cast by the Company's shareholders, voting either in
person or by proxy, at a duly held shareholders' meeting at which a quorum is
present.