EXHIBIT 10.4
APPLE SUITES, INC.
1999 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Effective July 13, 1999
APPLE SUITES, INC.
1999 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Apple Suites, Inc. 1999 Non-Employee
Directors Stock Option Plan (the "Plan") is to encourage ownership in Apple
Suites, Inc. (the "Company") by non- employee members of the Board, in order to
promote long-term stockholder value and to provide non-employee members of the
Board with an incentive to continue as directors of the Company.
2. DEFINITIONS. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the board of directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Company" means Apple Suites, Inc., a Virginia corporation.
(e) "Company Stock" means common stock, no par value, of the Company.
If the par value of the Company Stock is changed, or in the event of a
change in the capital structure of the Company (as provided in Section 12),
the
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shares resulting from such a change shall be deemed to be Company Stock
within the meaning of the Plan.
(f) "Date of Grant" means the date as of which an Eligible Director is
automatically awarded an Option pursuant to Section 7.
(g) "Disability" or "Disabled" means a physical or mental condition
that prevents the director from performing his customary duties with the
Company. The Board shall determine whether a Disability exists on the basis
of competent medical evidence, and such determination shall be conclusive.
(h) "Eligible Director" means a director described in Section 4.
(i) "Employer" means the Company, Apple Suites Advisors, Inc., and
Apple Suites Realty Group, Inc.
(j) "Fair Market Value" means, on any given date, (i) if the Company
Stock is traded on an exchange, the closing registered sales prices of the
Company Stock on such day on the exchange on which it generally has the
greatest trading volume, (ii) if the Company Stock is traded on the
over-the-counter market, the average between the closing bid and asked
prices on such day as reported by NASDAQ, or (iii) if the Company Stock is
not traded on any exchange or over-the-counter market, the fair market
value shall be determined by the Board using any reasonable method in good
faith.
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(k) "Initial Closing" means the first closing of the Offering that
will occur after the Minimum Offering is achieved.
(l) "Insider" means a person subject to Section 16(b) of the Act.
(m) "Minimum Offering" means the sale of the initial 15,000,000 in
shares of Company Stock pursuant to the Offering.
(n) "Offering" means, collectively, (1) the sale of up to $300,000,000
in shares of Company Stock to the public and the registration of such
shares with the Securities and Exchange Commission, as authorized by
resolutions of the Board dated March 5, 1999 (the "Initial Offering"), and
(2) the sale of any additional shares of Company Stock to the public and
the registration of such shares with the Securities and Exchange
Commission, as authorized by resolutions of the Board from time to time,
which sales occur before the expiration of five years from July 1, 1999
(the "Additional Offerings").
(o) "Option" means a right to acquire Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Board. Options
shall be granted as described in Section 7. However, the Board shall have all
powers vested in it by the terms of the Plan, including, without limitation, the
authority
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(within the limitations described herein) to prescribe the form of the agreement
embodying the grant of Options, to construe the Plan, to determine all questions
arising under the Plan, and to adopt and amend rules and regulations for the
administration of the Plan as it may deem desirable. Any decision of the Board
in the administration of the Plan, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that members thereof may authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the Board.
No member of the Board shall be liable for anything done or omitted to be done
by him or any other member of the Board in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
4. PARTICIPATION IN THE PLAN. Each director of the Company who is not
otherwise an employee of the Employer or any subsidiary of the Company and was
not an employee of the Employer or subsidiary for a period of at least one year
before the Date of Grant shall be eligible to participate in the Plan.
5. STOCK SUBJECT TO THE PLAN. Subject to Section 12 of the Plan, there
shall be reserved for issuance under the Plan an aggregate of 45,000 shares of
Company Stock plus 1.8% of the total number of shares of Company Stock sold in
the Offering in excess of the Minimum Offering, which shall be authorized, but
unissued shares. Shares allocable to Options or portions thereof
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granted under the Plan that expire or otherwise terminate unexercised may again
be subjected to an Option under the Plan.
6. NON-STATUTORY STOCK OPTIONS. All options granted under the Plan shall be
non-statutory in nature and shall not be entitled to special tax treatment under
Code section 422.
7. AWARD, TERMS, CONDITIONS AND FORM OF OPTIONS. Each Option shall be
evidenced by a written agreement in such form as the Board shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions:
(a) Automatic Award of Option.
(i) As of the Initial Closing, each Eligible Director shall
automatically receive an Option to purchase 5,500 shares of Company
Stock plus 0.0125% of the number of shares of Company Stock in excess
of the Minimum Offering sold by the Initial Closing.
(ii) As of each June 1 during the years 2000 through 2004
(inclusive), each Eligible Director shall automatically receive an
Option to purchase 0.02% of the total number of shares of Company
Stock issued and outstanding on that date.
(iii) As of the election as a director of any new person who
qualifies as an Eligible Director, such Eligible Director shall
automatically receive an Option to purchase 5,000 shares of Company
Stock.
(iv) If at any time under the Plan there are not sufficient
shares available to fully permit the
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automatic Option grants described in this paragraph, the Option grants
shall be reduced pro rata (to zero if necessary) so as not to exceed
the number of shares available.
(b) Option Exercise Price. The Option exercise price shall be the Fair
Market Value of the shares of Company Stock subject to the Option on the Date of
Grant.
(c) Options Not Transferable. An Option shall not be transferable by
the optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the optionee only by him. An
Option transferred by will or by the laws of descent and distribution may be
exercised by the optionee's personal representative within one year of the date
of the optionee's death to the extent the optionee could have exercised the
Option on the date of his death. No Option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(d) Exercise of Options. In no event shall an Option be exercisable
earlier than six months from the later of the Date of Grant or the date of
approval of the Plan by stockholders of the Company. Furthermore, no Option may
be exercised:
(i) unless at such time the optionee is a director of the
Company, except that he may exercise the Option within three years of
the date he ceases to
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be a director of the Company if he ceased to be a director more than
six months after the Date of Grant of the Option;
(ii) after the expiration of ten years from the Date of Grant;
and
(iii) except by written notice to the Company at its principal
office, stating the number of shares the optionee has elected to
purchase, accompanied by payment in cash and/or by delivery to the
Company of shares of Company Stock (valued at Fair Market Value on the
date of exercise) in the amount of the full Option exercise price for
the shares of Company Stock being acquired thereunder.
8. WITHHOLDING. If the Company is required by law to withhold federal or
state income taxes when an Option is exercised, the Company shall have the right
to retain or sell without notice shares of Company Stock having a Fair Market
Value sufficient on such date or dates as may be determined by the Board (but
not more than five business days prior to the date on which such shares would
otherwise have been delivered) to cover the amount of any federal or state
income tax required to be withheld or otherwise deducted and paid with respect
to such payment and the exercise of the Option, remitting any balance to the
optionee; provided, however, that the optionee shall have the right to make
other arrangements satisfactory to the Company or to provide the Company with
the funds to enable it to pay such
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tax. Notwithstanding the foregoing, the Company shall not sell shares of Company
Stock if the Optionee is an Insider and such sale will cause the Optionee to
incur a liability under Section 16(b) of the Exchange Act.
9. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board shall have the
power to modify, extend or renew outstanding Options and to authorize the grant
of new Options in substitution therefor, provided that any such action may not
enhance the rights of the optionee without stockholder approval or have the
effect of altering, enhancing or impairing any rights or obligations of any
person under any Option previously granted without the consent of the optionee.
10. TERMINATION. The Plan shall terminate upon the earlier of:
(e) the adoption of a resolution of the Board terminating the Plan; or
(f) July 13, 2009.
No termination of the Plan shall without his consent materially and adversely
affect any of the rights or obligations of any person under any Option
previously granted under the Plan.
11. LIMITATION OF RIGHTS.
(g) No Right to Continue as a Director. Neither the Plan nor the
granting of an Option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain any person as a director for any period of time.
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(h) No Stockholders Rights Under Options. An optionee shall have no
rights as a stockholder with respect to shares covered by his Option until the
date of exercise of the Option, and, except as provided in Section 12, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such exercise.
12. CHANGES IN CAPITAL STRUCTURE.
(i) In the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons. If the adjustment would produce fractional shares with respect to any
unexercised Option, the Board may adjust appropriately the number of shares
covered by the Option so as to eliminate the fractional shares.
(j) If the Company is a party to a consolidation or a merger in which
the Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all
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of the Company's outstanding stock by a single person or entity, or a sale or
transfer of substantially all of the Company's assets, the Board may take such
actions with respect to outstanding Options as the Board deems appropriate.
(k) Notwithstanding anything in the Plan to the contrary, the Board
may take the foregoing actions without the consent of any optionee and the
Board's determination shall be conclusive and binding on all persons for all
purposes.
13. AMENDMENT OF THE PLAN. The Board (except as provided below) may suspend
or discontinue the Plan or revise or amend the Plan in any respect; provided,
however, that without approval of the stockholders of the Company no revision or
amendment shall increase the number of shares subject to the Plan (except as
provided in Section 12) or materially increase the benefits accruing to
participants under the Plan. The Plan shall not be amended more than once every
six months other than an amendment required to comply with changes in the
Internal Revenue Code or the Employee Retirement Income Security Act of 1974 or
regulations thereunder. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and the terms of Options granted hereunder to ensure
compliance with Rule 16b-3 of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended.
14. NOTICE. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally
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or mailed first class, postage prepaid, as follows: (a) if the Company - at its
principal business address to the attention of the President; (b) if to any
participant - at the last address of the participant know to the sender at the
time the notice or other communication is sent.
15. GOVERNING LAW. The terms of this Plan shall be governed by the laws of
the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
13th day of July, 1999.
APPLE SUITES, INC.
By /s/ Glade M. Knight
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Glade M. Knight,
Chairman of the Board
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