EXHIBIT 10.6
EXTENDED STAY AMERICA, INC.
1995 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Extended Stay America, Inc. (the "Company") and its
subsidiaries by offering its non-employee directors a favorable opportunity to
become holders of stock in the Company over a period of years, thereby giving
them a stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company.
2. ADMINISTRATION. The Plan shall be administered by the board of
directors of the Company (the "Board of Directors"), whose interpretation of the
terms and provisions of the Plan and whose determination of matters pertaining
to options granted under the Plan shall be final and conclusive.
3. ELIGIBILITY. Options shall be granted only to current directors of the
Company who are not officers or employees of the Company (each such individual
receiving options granted under the Plan and each other person entitled to
exercise an option granted under the Plan is referred to herein as an
"Optionee").
4. GRANTING OF OPTIONS. (a) (1) A one-time option, under which a total of
20,000 shares of common stock of the Company, $.01 par value (the "Common
Stock"), may be purchased from the Company, shall be automatically granted to
each director of the Company upon the consummation of the initial public
offering of the Common Stock at an option price equal to the initial public
offering price for the Common Stock, provided such director is eligible at that
time under the terms of Paragraph 3 of this Plan.
(2) After the initial public offering of the Common Stock, a one-time
option, under which a total of 20,000 shares of the Common Stock may
be purchased from the Company, shall be automatically granted to each
director of the Company upon his or her initial election or
appointment as a director of the Company, provided such director is
eligible at that time under the terms of Paragraph 3 hereof.
(3) With respect to each director of the Company, an additional option
under which a total of 5,000 shares of Common Stock may be purchased from
the Company shall be granted to such director each year, for the next four
years, on the anniversary of the granting of the initial option to such
director described in Paragraph 4(a)(1) or (2) hereof, as the case may be,
provided such director continues to be eligible at that time under the
terms of Paragraph 3 of this Plan.
The aggregate number of shares which shall be available to be so optioned under
the Plan shall be 240,000 shares. Such number of shares, and the number of
shares subject to options outstanding under the Plan, shall be subject in all
cases to adjustment as provided in
Paragraph 10 hereof. Options granted under the Plan are intended not be treated
as incentive stock options as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
(b) No options shall be granted under the Plan subsequent to the
tenth anniversary of the adoption of the Plan. In the event that an option
expires or is terminated or cancelled unexercised as to any shares, such
released shares may again be optioned (including a grant in substitution for a
cancelled option). Shares subject to options may be made available from unissued
or reacquired shares of Common Stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any Optionee any right to continue servicing as a
director of the Company or interfere in any way with the right of the Board of
Directors or stockholders of the Company to remove such director pursuant to the
certificate or articles of incorporation or bylaws of the Company or pursuant to
applicable law.
5. OPTION PRICE. Except with respect to those options granted under the
terms of Paragraph 4(a)(1) hereof and subject to the adjustment in Paragraph 10
hereof, the option price for all options granted under this Plan shall be the
fair market value of the shares of Common Stock subject to the option on the
date of the grant of such option. For purposes of this Paragraph 5, "fair
market value" shall be the average of the highest and lowest sales prices of the
Common Stock reported on the NASDAQ National Market System (or on the principal
national stock exchange on which it is listed or quotation service on which it
is listed) (as reported in The Wall Street Journal) on the date the option is
granted (or, if the date of grant is not a trading date, on the first trading
date immediately preceding the date of grant). In the event that the Common
Stock is not listed or quoted on the NASDAQ National Market System or any other
national stock exchange, the fair market value of the shares of Common Stock for
all purposes of this Plan shall be reasonably determined by the Board of
Directors.
6. DURATION OF OPTIONS AND INCREMENTS. Subject to the provisions of
Paragraph 8 hereof, each option shall be for a term of ten years. Each option
shall become exercisable with respect to all of the shares subject to the option
6 months after the date of its grant.
7. EXERCISE OF OPTION. (a) An option may be exercised by giving written
notice to the Secretary of the Company, specifying the number of shares to be
purchased. The option price for the number of shares of Common Stock for which
the option is exercised shall become immediately due and payable; provided,
however, that in lieu of cash an Optionee may, with the approval of the Board of
Directors, exercise his or her option by (i) delivering a promissory note in
accordance with the terms of the Plan and in a form specified by the Company;
(ii) tendering to the Company shares of Common Stock owned by him or her and
with the certificates therefor registered in his or her name, having a fair
market value equal to the cash exercise price of the shares being purchased; or
(iii) delivery of an irrevocable written notice instructing the Company to
deliver the shares of Common Stock being purchased to a broker selected by the
Company, subject to the broker's written guarantee to deliver the cash to the
Company, in each case equal to the full consideration of the exercise price of
the shares being purchased. For this purpose, the
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per share value of Common Stock shall be the fair market value on the date of
exercise (or, if the date of exercise is not a trading date, on the first
trading date immediately preceding the date of exercise), which shall be the
average of the highest and lowest sales prices of the Common Stock reported on
the NASDAQ National Market System (or on the principal national stock exchange
on which it is listed or quotation service on which it is listed) (as reported
in The Wall Street Journal) on such date.
(b) In connection with the exercise of options granted under the Plan,
the Company may make loans to such Optionees as the Board of Directors, in its
discretion, may determine. Such loans shall be subject to the following terms
and conditions and such other terms and conditions as the Board of Directors
shall determine to be not inconsistent with the Plan. Such loans shall bear
interest at such rates as the Board of Directors shall determine from time to
time, which rates may be below then current market rates or may be made without
interest. In no event may any such loan exceed the fair market value, at the
date of exercise, of the shares covered by the option, or portion thereof,
exercised by the Optionee. No loan shall have an initial term exceeding two
years, but any such loan may be renewable at the discretion of the Board of
Directors. When a loan shall have been made, shares of Common Stock having a
fair market value at least equal to 150 percent of the principal amount of the
loan shall be pledged by the Optionee to the Company as security for payment of
the unpaid balance of the loan.
(c) If at any time an Optionee is required to pay an amount required
to be withheld under applicable income tax or other laws in connection with the
exercise of an option in order for the Company to obtain a deduction for federal
and state income tax purposes, the Company shall withhold shares of Common Stock
having a value equal to the amount required to be withheld. The value of the
shares to be withheld or delivered shall be based on the fair market value of
the shares of Common Stock on the date of exercise, which shall be the average
of the highest and lowest sales prices of the Common Stock reported on the
NASDAQ National Market System (or on the principal stock exchange on which it is
listed or quotation service on which it is listed) (as reported in The Wall
Street Journal)on the date of exercise.
(d) At the time of any exercise of any option, the Company may, if the
Company shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees, or legal representative, as the case
may be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee upon his or her exercise of part or all of
the option and a stop order may be placed with the transfer agent for the Common
Stock. Each option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state, federal or foreign law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
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qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
8. CESSATION OF BOARD MEMBERSHIP - EXERCISE THEREAFTER. (a) In the event
that an Optionee ceases to be a director of the Company for any reason other
than for cause, such Optionee shall have 360 days from the date such Optionee
ceased to be a director of the Company to exercise those options owned by such
Optionee which were exercisable as of the date of such cessation.
(b) In the event that an Optionee is removed from the Board of
Directors of the Company for cause (as hereinafter defined), such Optionee's
option shall expire and all rights to purchase shares of Common Stock pursuant
thereto shall terminate immediately. For purposes of the Plan, removal for
"cause" shall mean (a) the Optionee's gross negligence, dishonesty,
incompetency, willful breach of any employment or consulting agreement with the
Company, or the violation of any reasonable rule or regulation of the Company, a
violation of which results in significant damage to the Company and with respect
to which, except in the case of dishonesty or incompetency, the Optionee fails
to make reasonable efforts to correct in a reasonable time; (b) the Optionee's
engaging in other conduct which materially adversely reflects on the Company or
which is damaging to the Company upon written notice of such violation; or (c)
continued failure by the Optionee to substantially perform his or her duties
(other than any such failure resulting from his or her incapacity due to
physical or mental disability), following the delivery of a demand for
substantial performance by the Company.
9. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order and each option shall be
exercisable during an Optionee's lifetime only by the Optionee or by the
Optionee's legal representative.
10. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
number of outstanding shares of Common Stock is changed by any stock dividend,
stock split or combination of shares, the number of shares subject to the Plan
and to options granted thereunder shall be proportionately adjusted; (b) in the
event of any merger, consolidation or reorganization of the Company with any
other corporation or legal entity there shall be substituted, on an equitable
basis as determined by the Board of Directors, for each share of Common Stock
then subject to the Plan and for each share of Common Stock then subject to an
option granted under the Plan, the number and kind of shares of stock or other
securities to which the holders of shares of Common Stock will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Board of Directors shall provide for
an equitable adjustment in the number of shares of Common Stock then subject to
the Plan and to each share of Common Stock then subject to an option granted
under the Plan. In the event of any such adjustment, the option price per share
of Common Stock shall be proportionately adjusted.
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11. AMENDMENT OF THE PLAN. The Board of Directors of the Company or any
authorized committee thereof may amend or discontinue the Plan at any time,
provided, however, that the Plan may not be amended more than once every six
months except to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules and regulations under each, and provided
further, that no such amendment or discontinuance shall (a) without the consent
of the Optionee change or impair any option previously granted, or (b) without
the approval of the holders of a majority of the shares of Common Stock which
vote in person or by proxy at a duly held stockholders' meeting, (i) increase
the maximum number of shares which may be purchased by all eligible directors
pursuant to the Plan, (ii) change the purchase price of any option, or (iii)
change the option period or increase the time limitations on the grant of
options.
12. EFFECTIVE DATE. The Plan is effective as of November 17, 1995.
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