UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K 
 
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 29, 2014
 
APPLE HOSPITALITY REIT, INC.
(Exact name of registrant as specified in its charter)
 
Virginia
 
000-53603
 
26-1379210
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
814 East Main Street
Richmond, Virginia
 
23219
(Address of principal executive offices)
 
(Zip Code)
 
(804) 344-8121
(Registrant’s telephone number, including area code)

N/A
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
Apple Hospitality REIT, Inc. (the “Company”) is filing this report in accordance with Items 5.02 and 9.01 of Form 8-K.
 
Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
Approval of New Compensation Arrangements
 
As previously disclosed, due to the internalization of management as a result of the mergers of Apple REIT Seven, Inc. and Apple REIT Eight, Inc. with the Company on March 1, 2014 (the “Mergers”), the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company, undertook a comprehensive review of the compensation arrangements for all of the Company’s executive officers.  On May 29, 2014, acting on the recommendation of the Compensation Committee, the Board approved the following new compensation arrangements with respect to the Company’s named executive officers.
 
Effective March, 1, 2014, the Board approved the following 2014 base salaries for the following named executive officers:  Glade M. Knight, Executive Chairman of the Board, $350,000; Justin G. Knight, President and Chief Executive Officer, $500,000; Kristian M. Gathright, Executive Vice President, Chief Operating Officer, $472,500; and Bryan F. Peery, Executive Vice President, Chief Financial Officer, $472,500.
 
Additionally, the Board approved an incentive plan (the “2014 Incentive Plan”) for participants and established incentive goals for 2014. The participants in the 2014 Incentive Plan include the above-listed named executive officers.  Under the 2014 Incentive Plan, participants will be eligible to receive a bonus to be determined pursuant to a weighted average formula based on the achievement of certain performance measures.  The amounts actually payable to the participants will be determined based upon whether Company performance meets certain “threshold,” “target” or “maximum” levels for each of the performance measures.  With respect to each performance measure, results below the threshold level will result in a payment of 0% of the target bonus amount, results between the threshold and the target levels will result in a payment of 50% to 100% of the target bonus amount, results between the target and the maximum levels will result in a payment of 100% to 150% of the target bonus amount, and results above the maximum level will result in a payment of 150% of the target bonus amount.  The total bonuses for the above named officers as a group could range from 0 to 5 times the total base salaries of the group, depending on the performance of the Company.
 
For 2014, the Board determined that approximately 50% to 70% of the bonus for participants in the 2014 Incentive Plan would be provided through equity awards with the remainder provided as a cash bonus.   All shares issued under the 2014 Incentive Plan are expected to be issued under the Company's 2014 Omnibus Incentive Plan, described further below, and 50% of the shares will consist of unrestricted shares upon issuance with the remainder vesting at the end of 2015.
 
Adoption of Executive Severance Plan
 
On May 29, 2014, the Board, acting on the recommendation of the Compensation Committee, approved the Apple Hospitality REIT, Inc. Executive Severance Pay Plan (the “Severance Plan”).  The following named executive officers of the Company are participants in the Severance Plan: Executive Chairman of the Board, President and Chief Executive Officer, Senior Advisor (formerly President, Capital Markets, as described below), Executive Vice President, Chief Operating Officer, and Executive Vice President, Chief Financial Officer.
 
 
 
 
 
The Severance Plan generally provides severance or income protection benefits to participants in the event of their termination in connection with certain changes in control of the Company, including (subject to certain exceptions) (i) the acquisition by any person of securities having 20% or more of the combined voting power of the Company’s outstanding securities other than as a result of an issuance of securities initiated by the Company or open market purchases approved by the Board, or (ii) when, as the result of, or in connection with, a cash tender or exchange offer, a merger or other business combination, a sale of assets, a contested election, or any combination of these transactions, the persons who were directors of the Company before such transactions cease to constitute a majority of the Board, or any successor’s board, within two years of the last of such transactions (each such event, a “Change in Control”).
 
If a participant in the Severance Plan is terminated during the one-year period commencing on the date of a Change in Control by the Company other than for Cause (as defined in the Severance Plan) or by a participant for Good Reason (as defined in the Severance Plan), such participant will be entitled to receive a lump sum cash payment equal to the sum of (i) his or her salary and any accrued paid time off through the date of termination, (ii) his or her Annual Bonus as defined in the Severance Plan , prorated for the number of days he or she worked during the year in which the termination occurred, and (iii) 2.5 times the sum of (x) his or her Annual Bonus as defined in the Severance Plan and (y) his or her annualized base salary based on the highest monthly base salary paid or payable in any month of the 12-month period immediately preceding the month in which the Change in Control occurred. Participants will also generally be entitled to receive additional benefits, including the following: (i) accelerated vesting of any and all stock incentive awards, (ii) welfare benefits (including, without limitation, medical, dental, health, disability, individual life and group life insurance benefits) for the participant and his or her family for the one-year period following termination, (iii) payment by the Company of the full premium for continuation of insurance benefits under COBRA for up to 12 months following termination, (iv) payment by the Company of life insurance premiums for 12 months if the participant elects to convert any group term life insurance to an individual policy, and  (v) payment by the Company of up to $15,000 in reasonable fees and costs charged by a nationally recognized outplacement firm.
 
Subject to certain exceptions, in the event that, upon or immediately after a Change in Control, a participant is offered a position with a title, responsibilities and compensation reasonably comparable to the title, responsibilities and compensation of such participant with the Company preceding the Change in Control at the successor to the Company, and the participant does not accept such position, the participant will not be entitled to any of the benefits described above. If the participant accepts such position, he or she will conclusively be deemed not to have been terminated.
 
In addition to the Severance Plan described herein, the Company also adopted severance plans applicable to all other employees of the Company.
 
The foregoing summary does not purport to be a complete statement of the terms and conditions of the Severance Plan, and is qualified in its entirety by the full terms and conditions of the Severance Plan that is filed as Exhibit 10.1 to this current report on Form 8-K and incorporated herein by reference.
 
Adoption of Omnibus Plan
 
On May 29, 2014, the Board approved the Apple Hospitality REIT, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Plan”). The Omnibus Plan permits the grant of awards of stock options, stock appreciation rights, restricted stock, stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards to any employee, officer, or director of the Company or an affiliate of the Company, a consultant or adviser currently providing services to the Company or an affiliate of the Company, or any other person whose participation in the Omnibus Plan is determined by the Compensation Committee to be in the best interests of the Company.
 
 
 
 
 
The maximum number of the Company’s common shares available for issuance under the Omnibus Plan is 10,000,000 shares, and any of the shares available for issuance under the Omnibus Plan may be used for any type of award under the Omnibus Plan. During any time when the Company has a class of equity security registered under Section 12 of the Securities Exchange Act of 1934, as amended, (i) the maximum number of shares subject to options or Stock Appreciation Rights (“SARs”) that may be granted under the Omnibus Plan in a calendar year to any person is 1,000,000 shares, (ii) the maximum number of shares that may be granted in a calendar year to any person, other than pursuant to options or SARs, is 1,000,000 shares, and (iii) the maximum amount that may be paid as a cash-settled Performance-Based Award (as defined in the Omnibus Plan) for a performance period of 12 months or less to any person is $10 million and the maximum amount that may be paid as a cash-settled Performance-Based Award for a performance period of greater than 12 months to any person is $10 million.
 
The Omnibus Plan prohibits, without stockholder approval, (i) amendments to outstanding options or SARs to reduce the exercise price; (ii) cancelation of outstanding options or SARs in exchange for options or SARs with a lower exercise price; and (iii) cancelation of outstanding options or SARs with an exercise price above the current stock price in exchange for cash or other securities, except in connection with certain corporate transactions including any stock dividend, distribution, stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of stock or other securities or similar transaction.
 
The Omnibus Plan prohibits the grant of options or SARs with an exercise price less than the fair market value of the Company’s common stock on the date of grant. The fair market value is either the closing price of the Company’s common stock (if the Company’s common stock is listed on a stock exchange) or the value of the stock as determined by the Compensation Committee by the reasonable application of a reasonable valuation method, in a manner consistent with Section 409A of the Internal Revenue Code (if the Company’s common stock is not listed on a stock exchange), on the date of grant.
 
The Board of Directors intends to submit the Omnibus Plan to the shareholders of the Company for approval no later than the Company’s 2015 annual meeting of shareholders.
 
The foregoing summary does not purport to be a complete statement of the terms and conditions of the Omnibus Plan, and is qualified in its entirety by the full terms and conditions of the Omnibus Plan which is filed as Exhibit 10.2 to this current report on Form 8-K and incorporated herein by reference.
 
Change in Role of Executive Officer
 
Effective June 2, 2014, David S. McKenney became Senior Advisor for the Company.  In this role Mr. McKenney will advise the Company on capital markets related activities, including, but not limited to, investor relations, financing activities, and corporate transactions. Mr. McKenney expects to have a reduced role with the Company going forward and to instead focus his efforts on the development of businesses unrelated to the Company.  Further information regarding Mr. McKenney, including biographical information, is included in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on April 7, 2014, and incorporated herein by reference.
 
 
 
 
 
Item 9.01.   Financial Statements and Exhibits.
 
d. Exhibits
 
Exhibit No.
Description
10.1
10.2
 
 
 

 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
APPLE HOSPITALITY REIT, INC.

By:       /s/ Justin G. Knigh t                                                               
Justin G. Knight
President and Chief Executive Officer


 
Date: June 4, 2014 
 
 

 
 
 
 

EXHIBIT INDEX

Exhibit No.
Description
10.1
10.2
 
 
 
 
 

 
Exhibit 10.1
 
APPLE HOSPITALITY REIT, INC.
EXECUTIVE SEVERANCE PAY PLAN

ARTICLE I
PURPOSES
 
The Board of Directors (the “ Board ”) of Apple Hospitality REIT, Inc. (the “ Company ”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued services of certain executives, in the event of the possibility or occurrence of a Change in Control of the Company. The Board believes that this objective may be achieved by giving key executives assurances of financial security in case of a pending or threatened Change in Control, so that they will not be distracted by personal risks and will continue to devote their full time and best efforts to the performance of their duties. In order to accomplish these objectives, the Board has caused the Company to adopt this Apple Hospitality REIT, Inc. Executive Severance Pay Plan (the “ Plan ”).  The Plan provides severance or income protection benefits to Executives who have been designated as Participants by the Compensation Committee of the Board (the “ Committee ”) pursuant to the Plan.
 
ARTICLE II
CERTAIN DEFINITIONS
 
When used in this Plan, the terms specified below shall have the following meanings:
 
2.1   “ Annual Base Salary ” means an amount equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company in respect of the 12-month period immediately preceding the month which contains the Effective Date.
 
2.2   “ Annual Bonus ” means an amount equal to the annual bonus paid to the Executive by the Company during the calendar year immediately preceding the year which contains the Effective Date; provided, that if the Effective Date occurs during calendar year 2014, then “Annual Bonus” shall mean an amount equal to the Executive’s target annual bonus for calendar year 2014.
 
2.3   “ Cause ” means (a) the Executive’s continued or deliberate neglect of his or her duties, (b) willful misconduct by the Executive injurious to the Company, whether monetary or otherwise, (c) the Executive’s violation of any code or standard of ethics generally applicable to employees of the Company, (d) the Executive’s active disloyalty to the Company, (e) the Executive’s conviction of a felony, (f) the Executive’s habitual drunkenness or drug abuse or (g) the Executive’s excessive absenteeism unrelated to a disability (as defined in the Company’s long-term disability plan).
 
2.4   “ Change in Control ” means:
 
(a)   any person, including a “group” as defined in Section 13(d) (3) of the Securities and Exchange Act of 1934, as amended (the “ Act ”), becomes the owner or beneficial owner of Company securities having 20% or more of the combined voting power of the then outstanding Company securities that may be cast for the election of the Company’s directors (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is also the majority at the time the purchases are made); or
 
(b)   as the direct or indirect result of, or in connection with, a cash tender or exchange offer, a merger or other business combination, a sale of assets, a contested election, or any combination of these transactions, the persons who were directors of the Company before such transactions cease to constitute a majority of the Board, or any successor’s board, within two years of the last of such transactions.
 
 
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2.5   “ Code ” means the Internal Revenue Code of 1986, as amended.
 
2.6   “ Company ” means Apple Hospitality REIT, Inc. or any successor thereto.
 
2.7   “ Effective Date ” means the date while this Plan is in effect on which a Change in Control occurs. Notwithstanding anything in this Plan to the contrary, if a Change in Control occurs and the Executive’s employment with the Company is terminated by the Company without Cause prior to the date on which a Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (a) was at the request of a third party who had taken steps reasonably calculated to effect a Change in Control, or (b) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of the Plan, “Effective Date” shall be deemed to have occurred on the date immediately prior to the Termination Date.
 
2.8   “ Employment Period ” means the period commencing on the Effective Date and ending on the first anniversary of such date.
 
2.9   “ Executive or Participant ” means the persons holding one or more of the officer positions with the Company listed on Appendix A , or any other person or position designated by the Committee to be eligible to participate in this Plan.
 
2.10   “ Excise Taxes ” means the excise tax imposed by Section 4999 of the Code including any interest or penalties incurred by the Executive with respect to such excise tax.
 
2.11   “ Good Reason ” means any action by the Company without the Executive’s consent that results in any of the following: (a) a reduction of the Executive’s annual salary to an amount which is materially less than the amount of the Executive’s Annual Base Salary; (b) a material reduction in the Executive’s duties with the Company, provided that a change in title or position shall not be “Good Reason” absent a material reduction in duties; or (c) a relocation of more than 50 miles from the Executive’s workplace of 814 East Main Street, Richmond, Virginia 23219, without the consent of the Executive.
 
An act or omission shall not constitute Good Reason under this Section 2.11 unless (a) within 30 days after the Executive knows or reasonably should know of an event described in this section, or within 30 days after the last in a series of such events, the Executive gives written notice to the Company indicating that the Executive intends to terminate employment under this Section 2.11, (b) the Executive’s termination occurs within 60 days after the Executive knows or reasonably should know of an event described in this section, or within 60 days after the last in a series of such events, and (c) the Company has failed to remedy the event described in this section as the case may be, within 30 days after receiving the Executive’s written notice. If the Company remedies the event described in this section, within 30 days after receiving the Executive’s written notice, the Executive may not terminate employment under this Section 2.11 on account of the event specified in the Executive’s notice.
 
2.12   “ Performance Period ” means each period of time designated in accordance with any annual bonus which is based upon performance.
 
2.13   “ Termination Date ” means the date of termination of the Executive’s employment with the Company as a common law employee.
 
 
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ARTICLE III
PLAN TERM
 
The term of the Plan shall be indefinite, provided however the Company shall have the right to amend or terminate the Plan at any time for any reason. Notwithstanding the preceding sentence, (i) no amendment or termination may be made to the Plan and the Plan may not be terminated during the period beginning on the date on which the Company enters into any agreement that would, if the transactions contemplated in the agreement were given effect, result in a Change in Control and ending on the earlier of (A) one year after the date on which the Change in Control contemplated by such agreement occurs or (B) if such agreement terminates, is cancelled or otherwise ceases to be in effect without giving rise to a Change in Control, the date on which such agreement terminates, is cancelled or otherwise ceases to be in effect, and (ii) no amendment or termination shall reduce the benefits payable to an Executive who is then currently receiving a benefit under the Plan, in either case without the consent of the affected Participant(s). Unless otherwise specified by the Board, the term of the Plan shall end automatically on the first anniversary of any Change in Control that occurs while this Plan is in effect. Subject to Section 2.7, if an Executive’s Termination Date is prior to a Change in Control, this Plan shall terminate with respect to such Executive without further obligation to the Executive or his legal representatives.
 
ARTICLE IV
OBLIGATIONS OF THE COMPANY UPON TERMINATION
 
4.1   If by the Company other than for Cause or by an Executive for Good Reason . Subject to Section 4.3, if during the Employment Period, the Company shall terminate an Executive’s employment other than for Cause, or if an Executive shall terminate employment for Good Reason, the Company’s obligations to such Executive shall be as follows:
 
(a)   The Company shall pay to the Executive a single lump sum cash payment equal to the sum of the following amounts:
 
(i)   to the extent not previously paid, the salary and any accrued paid time off through the date of termination;
 
(ii)   an amount equal to the product of (i) the Annual Bonus multiplied by (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the calendar year in which the termination occurs, and the denominator of which is 365;
 
(iii)   an amount equal to two and one-half (2 1/2 ) times the sum of the Executive’s Annual Base Salary and the Annual Bonus.
 
The single lump sum cash payment shall be made on or as soon as administratively practicable after the later of the Termination Date or the date on which the Executive has signed the release described in Section 9.4 below and any period for revocation of such release has passed, but in any event not later than March 15th of the year immediately following the calendar year in which the Executive’s termination of employment occurs.
 
(b)   The Executive shall become fully vested in any and all stock incentive awards granted to the Executive under any plan or otherwise which have not become exercisable as of the date of the Change in Control and all stock options (including options vested as of the Change in Control) shall remain exercisable until the earlier of (i) the original expiration date or (ii) the tenth anniversary of the original grant date. All forfeiture conditions that as of a Change in Control are applicable to any stock option, deferred stock unit, restricted stock or restricted share units awarded to the Executive by the Company shall lapse immediately.
 
 
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(c)   Except as provided in subsections (d) and (e), for a one year period following the Executive’s termination of employment, the Company shall arrange to provide the Executive and his family welfare benefits (including, without limitation, medical, dental, health, disability, individual life and group life insurance benefits) which are at least as favorable as those provided under the most favorable welfare plans of the Company applicable with respect to the Executive and his family during either the (i) 90-day period immediately preceding the Change in Control, or (ii) the 90-day period immediately preceding the Executive’s Termination Date. Notwithstanding the foregoing, if the Executive obtains comparable coverage under any welfare benefits provided by another employer, then the amount of coverage required to be provided by the Company hereunder shall be reduced by the amount of coverage provided by such other employer’s welfare benefit plans.
 
(d)   The Executive’s rights under this Section shall be in addition to and not in lieu of any post-termination continuation coverage or conversion rights the Executive may have pursuant to applicable law, including, without limitation, continuation coverage required by Section 4980B of the Code (“ COBRA Continuation Coverage ”). If the Executive elects to receive COBRA Continuation Coverage, the Company shall pay all of the required premiums for the Executive and/or the Executive’s family for the 12 months following the Executive’s Termination Date.
 
(e)   If the Executive elects to convert any group term life insurance to an individual policy, the Company shall pay all premiums for 12 months and the Executive shall cease to participate in the Company’s group term life insurance.
 
(f)   The Company shall, at its sole expense, as incurred, pay on behalf of Executive up to $15,000 in reasonable fees and costs charged by a nationally recognized outplacement firm selected by the Executive to provide outplacement service for one year after the Termination Date.
 
(g)   If the Executive’s employment with the Company as a common law employee is terminated by the Company other than for Cause or by the Executive for Good Reason, the Company’s re-engagement of the Executive as a consultant, an advisor or otherwise as an independent contractor to the Company shall not prohibit the Executive from receiving the payments and benefits provided in this Section 4.1.
 
4.2   If by the Company for Cause or by the Executive other than for Good Reason . If, during the Employment Period, the Company terminates the Executive’s employment for Cause or if the Executive terminates employment other than for Good Reason (including death or disability), this Plan shall terminate with respect to such Executive without further obligation by the Company, other than the obligation to pay to the Executive in cash the Executive’s unpaid salary through the Termination Date, plus any accrued paid time off, in each case to the extent not previously paid.
 
4.3   Employment by Successor or other Related Company . Except as provided elsewhere in this Plan, an Executive shall not be entitled to any of the benefits described in Section 4.1 if, upon or immediately after a Change in Control, the Executive is offered a position with a title, responsibilities and compensation reasonably comparable to the title, responsibilities and compensation of the Executive with the Company preceding the Change in Control by the purchaser or other successor-in-interest to the Company or a substantial portion of its assets or business, and the Executive does not accept such position. In the event any Executive is offered and accepts a position of the type described in the preceding sentence with any company described in the preceding sentence, then, for purposes of this Plan, the employment of the Executive by the Company shall conclusively be deemed not to have been terminated, and the company described in the preceding sentence shall thereafter be deemed to constitute the “Company” for purposes of the interpretation and application of Section 4.1 and Section 4.2 of this Plan.
 
 
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ARTICLE V
CERTAIN LIMITATIONS ON PAYMENTS BY THE COMPANY
 
Notwithstanding anything in the Plan to the contrary, if any payment (other than those payments required under Article VI) which an Executive has the right to receive from the Company or any affiliated entity or any payment or benefits under any plan maintained by the Company or any affiliated entity would otherwise constitute an “excess parachute payment” (as defined in Code section 280G), to the extent the Executive would be entitled to a smaller net after Excise Tax benefit hereunder as a result of the payment of such “excess parachute payments,” payments due hereunder must be reduced (but not below zero) to the largest amount that will result in no portion of any such payment being subject to an Excise Tax. The determination of any reduction pursuant to this subsection must be made by the Company in good faith, before any such payments are due and payable to a Participant.
 
ARTICLE VI
EXPENSES AND INTEREST
 
6.1   Legal Fees and Other Expenses . The Company will reimburse all reasonable fees and expenses, if any (including, without limitation, legal fees and expenses), that are incurred by the Executive to enforce this Plan and that result from a breach of this Plan by the Company. To the extent any such reimbursement to which the Executive is or may be entitled under this Section 6.1 constitutes a “deferral of compensation” for purposes of Section 409A of the Code, then, in addition to the foregoing, the following terms and conditions shall apply: (i) any such reimbursement of an eligible expense shall be paid to the Executive as soon as administratively practicable after the Executive submits a valid claim for reimbursement, but in any event no later than the last day of the taxable year following the taxable year in which the expense was incurred; (ii) the amount of expenses eligible for reimbursement in one taxable year shall not affect the expenses eligible for reimbursement in any other taxable year; and (iii) the right to a reimbursement under this Section 6.1 shall not be subject to liquidation or exchange for another benefit.
 
6.2   Interest . If the Company does not pay any amount due to the Executive under this Plan within three days after such amount became due and owing, interest shall accrue on such amount from the date it became due and owing until the date of payment at an annual rate equal to 200 basis points above the base commercial lending rate published in The Wall Street Journal in effect from time to time during the period of such nonpayment.
 
ARTICLE VII
NO SET-OFF OR MITIGATION
 
7.1   No Set-off by Company . The Executive’s right to receive when due the payments and other benefits provided for under this Plan is absolute, unconditional and subject to no set-off, counterclaim or legal or equitable defense. Any claim which the Company may have against the Executive, whether for a breach of this Plan or otherwise, shall be brought in a separate action or proceeding and not as part of any action or proceeding brought by the Executive to enforce any rights against the Company under this Plan.
 
7.2   No Mitigation . The Executive shall not have any duty to mitigate the amounts payable by the Company under this Plan by seeking new employment following termination. Except as specifically otherwise provided in this Plan, all amounts payable pursuant to this Plan shall be paid without reduction regardless of any amounts of salary, compensation or other amounts which may be paid or payable to the Executive as the result of the Executive’s employment by another employer. However, nothing in this Section 7.2 shall affect the provisions of Section 4.3.
 
 
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ARTICLE VIII
NON-EXCLUSIVITY OF RIGHTS
 
8.1   Waiver of Other Severance Rights . To the extent that payments are made to the Executive pursuant to Section 4.1 of this Plan, the Executive hereby waives the right to receive benefits under any plan or agreement of the Company or its subsidiaries which provides for severance benefits, including any severance benefits that may be provided for under any employment agreement or payable due to the termination of any employment agreement.
 
8.2   Other Rights . Except as provided in Section 8.1, this Plan shall not prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plans provided by the Company or any of its subsidiaries and for which the Executive may qualify, nor shall this Plan limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan of the Company or any of its subsidiaries and any other payment or benefit required by law shall be payable in accordance with such plan or applicable law except as expressly modified by this Plan.
 
ARTICLE IX
MISCELLANEOUS
 
9.1   No Assignment . The Executive’s rights under this Plan may not be assigned or transferred in whole or in part, except that the personal representative of the Executive’s estate will receive any amounts payable under this Plan after the death of the Executive. This Plan shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
 
9.2   Successors . The rights and obligations of the Company under this Plan will inure to the benefit of and will be binding upon the successors and assigns of the Company. Before or upon a Change in Control, the Company shall obtain the agreement of the surviving or acquiring corporation that it will succeed to the Company’s rights and obligations under this Plan.
 
9.3   Rights Under the Plan . The right to receive benefits under the Plan will not give the Executive any proprietary interest in the Company or any of its assets. Benefits under the Plan will be payable from the general assets of the Company, and there will be no required funding of amounts that may become payable under the Plan. The Executive will for all purposes be a general creditor of the Company. The interest of the Executive under the Plan cannot be assigned, anticipated, sold, encumbered or pledged and will not be subject to the claims of the Executive’s creditors.
 
9.4   Release . Notwithstanding anything in this Plan to the contrary, in consideration for and as a condition to receiving any payments under this Plan, the Executive must execute a written release in a form provided by the Company. In addition to any other provisions determined by the Company, the release may provide that the Executive agrees, for himself or herself and his or her heirs, representatives, successors and assigns, that the Executive has finally and permanently separated from employment with the Company, and that he or she waives, releases and forever discharges the Company from any and all claims, known or unknown, that he or she has or may have, including but not limited to those relating to or arising out of his or her employment with the Company and the termination thereof, including but not limited to any claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, liability in tort, any claims under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the Fair Labor Standards Act, or any other federal, state or local law relating to employment, employee benefits or the termination of employment, excepting only any claims to vested retirement benefits.
 
 
6
 
 
9.5   Notice . For purposes of this Plan, notices and all other communications must be in writing and are effective when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Executive or his personal representative at his last known address. All notices to the Company must be directed to the attention of the Corporate Secretary. Such other addresses may be used as either party may have furnished to the other in writing. Notices of change of address are effective only upon receipt.
 
9.6   Miscellaneous . The Executive and the Company agree that, effective as of the execution of this Plan, any prior Change in Control Plan between the Executive and the Company is null and void. This instrument contains the entire agreement of the parties. To the extent not governed by federal law, this Plan will be construed in accordance with the laws of the Commonwealth of Virginia, without reference to its conflict of laws rules. In addition, the Plan is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and administered in accordance with Section 409A of the Code. Notwithstanding any other provision of the Plan, payments provided under the Plan may only be made upon an event and in a manner that complies with Section 409A of the Code or an applicable exemption. Any payments to be made under the Plan upon a termination of employment shall only be made upon a "separation from service" under Section 409A of the Code.  Notwithstanding any other provision of the Plan, if any payment or benefit provided to an Executive in connection with his or her termination of employment is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code and the Executive is determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i) of the Code, then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of such termination of employment or, if earlier, on the Executive's death.  No provisions of this Plan may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and the writing is signed by the Executive and the Company. A waiver of any breach of or compliance with any provision or condition of this Plan is not a waiver of similar or dissimilar provisions or conditions. The invalidity or unenforceability of any provision of this Plan will not affect the validity or enforceability of any other provision of this Plan, which will remain in full force and effect. This Plan may be executed in one or more counterparts, all of which will be considered one and the same agreement.
 
9.7   Tax Withholding . The Company may withhold from any amounts payable under this Plan any federal, state or local taxes that are required to be withheld pursuant to any applicable law or regulation.
 
*   *   *

This Plan was approved by the Board of Directors on May 29, 2014, effective as of March  1,  2014.

*   *   *
 

 
 
7
 

Appendix A

Executive Chairman of the Board
President and Chief Executive Officer
Senior Advisor 1
Executive Vice President, Chief Financial Officer and Treasurer
Executive Vice President, Chief Operating Officer
Executive Vice President, Secretary and Chief Legal Counsel
Executive Vice President, Chief Investment Officer
 
 
 

 

1 Notwithstanding anything to the contrary in the Plan, the amount payable to this Participant pursuant to Section 4.1(a)(iii) shall equal $2.5 million (i.e., in lieu of the amount otherwise payable pursuant to the calculation in Section 4.1(a)(iii)).  All other provisions of the Plan remain unchanged with respect to this Participant.
 
 
8
 
Exhibit 10.2


 

 

 

 

 
 
APPLE HOSPITALITY REIT, INC.
 
2014 OMNIBUS INCENTIVE PLAN
 
 
 
 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS
 
       
Page
1.
PURPOSE
1
     
2.
DEFINITIONS
1
     
3.
ADMINISTRATION OF THE PLAN
7
 
3.1
Committee
7
   
3.1.1
Powers and Authorities
7
   
3.1.2
Composition of Committee
7
   
3.1.3
Other Committees
8
 
3.2
Board
8
 
3.3
Terms of Awards
8
   
3.3.1
Committee Authority
8
   
3.3.2
Forfeiture; Recoupment
9
 
3.4
No Repricing Without Stockholder Approval
9
 
3.5
Deferral Arrangement
10
 
3.6
No Liability
10
 
3.7
Registration; Share Certificates
10
       
4.
STOCK SUBJECT TO THE PLAN
10
 
4.1
Number of Shares of Stock Available for Awards
10
 
4.2
Adjustments in Authorized Shares of Stock
10
 
4.3
Share Usage
11
       
5.
TERM; AMENDMENT AND TERMINATION
11
 
5.1
Term
11
 
5.2
Amendment and Termination
11
       
6.
AWARD ELIGIBILITY AND LIMITATIONS
11
 
6.1
Eligible Grantees
11
 
6.2
Limitation on Shares of Stock Subject to Awards and Cash Awards
11
 
6.3
Stand-Alone, Additional, Tandem and Substitute Awards
12
       
7.
AWARD AGREEMENT
12
     
8.
TERMS AND CONDITIONS OF OPTIONS
12
 
8.1
Option Price
12
 
8.2
Vesting
13
 
8.3
Term
13
 
8.4
Termination of Service
13
 
8.5
Limitations on Exercise of Option
13
 
8.6
Method of Exercise
13
 
8.7
Rights of Holders of Options
14
 
8.8
Delivery of Stock
14
 
8.9
Transferability of Options
14
 
8.10
Family Transfers
14
       
9.
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
15
 
9.1
Right to Payment and Grant Price
15
 
 
i
 
 
 
9.2
Other Terms
15
 
9.3
Term
15
 
9.4
Transferability of SARS
15
 
9.5
Family Transfers
15
       
10.
TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS
16
 
10.1
Grant of Restricted Stock or Stock Units
16
 
10.2
Restrictions
16
 
10.3
Registration; Restricted Share Certificates
16
 
10.4
Rights of Holders of Restricted Stock
16
 
10.5
Rights of Holders of Stock Units
17
   
10.5.1
Voting and Dividend Rights
17
   
10.5.2
Creditor’s Rights
17
 
10.6
Termination of Service
17
 
10.7
Purchase of Restricted Stock and Shares of Stock Subject to Stock Units
18
 
10.8
Delivery of Shares of Stock
18
       
11.
TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS
18
 
11.1
Unrestricted Stock Awards
18
 
11.2
Other Equity-Based Awards
18
       
12.
FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
19
 
12.1
General Rule
19
 
12.2
Surrender of Shares of Stock
19
 
12.3
Cashless Exercise
19
 
12.4
Other Forms of Payment
19
       
13.
TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
19
 
13.1
Dividend Equivalent Rights
19
 
13.2
Termination of Service
20
       
14.
TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS
20
 
14.1
Grant of Performance-Based Awards
20
 
14.2
Value of Performance-Based Awards
20
 
14.3
Earning of Performance-Based Awards
21
 
14.4
Form and Timing of Payment of Performance-Based Awards
21
 
14.5
Performance Conditions
21
 
14.6
Performance-Based Awards Granted to Designated Covered Employees
21
   
14.6.1
Performance Goals Generally
21
   
14.6.2
Timing For Establishing Performance Goals
22
   
14.6.3
Payment of Awards; Other Terms
22
   
14.6.4
Performance Measures
22
   
14.6.5
Evaluation of Performance
24
   
14.6.6
Adjustment of Performance-Based Compensation
24
   
14.6.7
Committee Discretion
25
   
14.6.8
Status of Awards Under Code Section 162(m)
25
         
15.
RESTRICTIONS ON TRANSFER OF SHARES OF STOCK
25
 
15.1
Right of First Refusal
25
 
15.2
Repurchase and Other Rights
25
 
 
ii
 
 
 
15.3
Legend
25
       
16.
PARACHUTE LIMITATIONS
26
     
17.
REQUIREMENTS OF LAW
26
 
17.1
General
26
 
17.2
Rule 16b-3
27
       
18.
EFFECT OF CHANGES IN CAPITALIZATION
27
 
18.1
Changes in Stock
27
 
18.2
Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control
28
 
18.3
Change in Control in which Awards are not Assumed
28
 
18.4
Change in Control in which Awards are Assumed
29
 
18.5
Adjustments
30
 
18.6
No Limitations on Company
30
       
19.
GENERAL PROVISIONS
30
 
19.1
RESERVED
30
 
19.2
Disclaimer of Rights
30
 
19.3
 Nonexclusivity of the Plan
31
 
19.4
 Withholding Taxes
31
 
19.5
 Captions
32
 
19.6
Construction
32
 
19.7
Other Provisions
32
 
19.8
Number and Gender
32
 
19.9
Severability
32
 
19.10
Governing Law
32
 
19.11
Section 409A of the Code
32
 
 
 
 
iii
 
 
APPLE HOSPITALITY REIT, INC.

2014 OMNIBUS INCENTIVE PLAN
 
Apple Hospitality REIT, Inc. (the “ Company ”) sets forth herein the terms of the 2014 Omnibus Incentive Plan (the “ Plan ”), as follows:
 
1.  
PURPOSE
 
The Plan is intended to (a) provide eligible persons with an incentive to contribute to the success of the Company and to operate and manage the Company’s business in a manner that will provide for the Company’s long-term growth and profitability to benefit its stockholders and other important stakeholders, including its employees and customers, and (b) provide a means of obtaining, rewarding and retaining key personnel. To this end, the Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward the holders of such awards for the achievement of performance goals in accordance with the terms of the Plan. All Options granted under the Plan shall be non-qualified stock options.
 
2.  
DEFINITIONS
 
For purposes of interpreting the Plan documents (including the Plan and Award Agreements), the following definitions shall apply:
 
2.1   “ Affiliate ” means any company or other entity that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including any Subsidiary. For purposes of grants of Options or Stock Appreciation Rights, an entity may not be considered an Affiliate unless the Company holds a “controlling interest” in such entity within the meaning of Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that (a) except as specified in clause (b) below, an interest of “at least 50 percent” shall be used instead of an interest of “at least 80 percent” in each case where “at least 80 percent” appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i) and (b) where the grant of Options or Stock Appreciation Rights is based upon a legitimate business criterion, an interest of “at least 20 percent” shall be used instead of an interest of “at least 80 percent” in each case where “at least 80 percent” appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).
 
2.2    “ Applicable Laws ” means the legal requirements relating to the Plan and the Awards under (a) applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government orders of any jurisdiction applicable to Awards granted to residents therein and (b) the rules of any Stock Exchange on which the Stock is listed.
 
2.3   “ Award ” means a grant under the Plan of an Option, a Stock Appreciation Right, Restricted Stock, a Stock Unit, Unrestricted Stock, a Dividend Equivalent Right, a Performance Share or other Performance-Based Award, an Other Equity-Based Award, or cash.
 
2.4   “ Award Agreement ” means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.
 
 
 
 
 
2.5   “ Award Stock ” shall have the meaning set forth in Section 18.3(a)(ii) .
 
2.6   “ Benefit Arrangement ” shall have the meaning set forth in Section 16 .
 
2.7   “ Board ” means the Board of Directors of the Company.
 
2.8   “ Cause ” means, with respect to any Grantee, as determined by the Committee and unless otherwise provided in an applicable agreement between such Grantee and the Company or an Affiliate, (a) gross negligence or willful misconduct in connection with the performance of duties; (b) conviction of a criminal offense (other than minor traffic offenses); or (c) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between such Grantee and the Company or an Affiliate. Any determination by the Committee whether an event constituting Cause shall have occurred shall be final, binding and conclusive.
 
2.9   “ Capital Stock ” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Effective Date or issued thereafter, including, without limitation, all common stock, no par value, of the Company.
 
2.10   “ Change in Control ” means the occurrence of any of the following:
 
(a)           a “Person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than fifty percent (50%) of the total voting power of the Voting Stock of the Company, on a Fully Diluted Basis;
 
(b)           individuals who on the Effective Date constitute the Board (together with any new Directors whose election by such Board or whose nomination by such Board for election by the stockholders of the Company was approved by a vote of at least a majority of the members of such Board then in office who either were members of such Board on the Effective Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of such Board then in office;
 
(c)           the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, other than any such transaction in which the holders of securities that represented one hundred percent (100%) of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction;
 
(d)           there is consummated any direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one transaction or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any “Person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act); or
 
 
2
 
 
(e)           the stockholders of the Company adopt a plan or proposal for the liquidation, winding up or dissolution of the Company.
 
2.11   “ Code ” means the Internal Revenue Code of 1986, as amended, as now in effect or as hereafter amended, and any successor thereto. References in the Plan to any Code Section shall be deemed to include, as applicable, regulations promulgated under such Code Section.
 
2.12   “ Committee ” means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section  3.1.2 and Section  3.1.3 (or, if no Committee has been so designated, the Board).
 
2.13   “ Company ” means Apple Hospitality REIT, Inc.
 
2.14   “ Covered Employee ” means a Grantee who is a “covered employee” within the meaning of Code Section 162(m)(3).
 
2.15   “ Disability ” means the inability of a Grantee to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months.
 
2.16   “ Dividend Equivalent Right ” means a right, granted to a Grantee pursuant to Section  13 , to receive cash, Stock, other Awards or other property equal in value to dividends or other periodic payments paid or made with respect to a specified number of shares of Stock.
 
2.17   “ Effective Date ” means May 29, 2014.
 
2.18   “ Employee ” means, as of any date of determination, an employee (including an officer) of the Company or an Affiliate.
 
2.19   “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, as now in effect or as hereafter amended.
 
2.20   “ Fair Market Value ” means the fair market value of a share of Stock for purposes of the Plan, which shall be determined as of any Grant Date as follows:
 
(a)           If on such Grant Date the shares of Stock are listed on a Stock Exchange, or are publicly traded on another established securities market (a “ Securities Market ”), the Fair Market Value of a share of Stock shall be the closing price of the Stock as reported on such Stock Exchange or such Securities Market ( provided that, if there is more than one such Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock Exchange or Securities Market for purposes of the Fair Market Value determination). If there is no such reported closing price on such Grant Date, the Fair Market Value of a share of Stock shall be the closing price of the Stock on the next preceding day on which any sale of Stock shall have been reported on such Stock Exchange or such Securities Market.
 
(b)           If on such Grant Date the shares of Stock are not listed on a Stock Exchange or publicly traded on a Securities Market, the Fair Market Value of a share of Stock shall be the value of the Stock as determined by the Committee by the reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.
 
 
3
 
 
Notwithstanding this Section 2.20 or Section  19.4 , for purposes of determining taxable income and the amount of the related tax withholding obligation pursuant to Section  19.4 , the Fair Market Value will be determined by the Company using any reasonable method; provided , further, that for any shares of Stock subject to an Award that are sold by or on behalf of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date).
 
2.21   “ Family Member ” means, with respect to any Grantee as of any date of determination, (a) a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of such Grantee, (b) any person sharing such Grantee’s household (other than a tenant or employee), (c) a trust in which any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more than fifty percent (50%) of the beneficial interest, (d) a foundation in which any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) control the management of assets, and (e) any other entity in which one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more than fifty percent (50%) of the voting interests.
 
2.22   “ Fully Diluted Basis ” means, as of any date of determination, the sum of (x) the number of shares of Voting Stock outstanding as of such date of determination plus (y) the number of shares of Voting Stock issuable upon the exercise, conversion or exchange of all then-outstanding warrants, options, convertible Capital Stock or indebtedness, exchangeable Capital Stock or indebtedness, or other rights exercisable for or convertible or exchangeable into, directly or indirectly, shares of Voting Stock, whether at the time of issue or upon the passage of time or upon the occurrence of some future event, and whether or not in the money as of such date of determination
 
2.23   “ Grant Date ” means, as determined by the Committee, the latest to occur of (a) the date as of which the Committee approves the Award, (b) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof (e.g., in the case of a new hire, the first date on which such new hire performs any Service), or (c) such subsequent date specified by the Committee in the corporate action approving the Award.
 
2.24   “ Grantee ” means a person who receives or holds an Award under the Plan.
 
2.25   “ Option ” means an option to purchase one or more shares of Stock pursuant to the Plan.
 
2.26   “ Option Price ” means the exercise price for each share of Stock subject to an Option.
 
2.27   “ Other Agreement ” shall have the meaning set forth in Section 16 .  
 
 
4
 
 
2.28   “ Other Equity-Based Award ” means an Award representing a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, other than an Option, a Stock Appreciation Right, Restricted Stock, a Stock Unit, Unrestricted Stock, a Dividend Equivalent Right or a Performance Share.
 
2.29   “ Outside Director ” means a member of the Board who is not an Employee.
 
2.30   “ Parachute Payment ” shall have the meaning set forth in Section 16(a).
 
2.31   “ Performance-Based Award ” means an Award of Options, Stock Appreciation Rights, Restricted Stock, Stock Units, Performance Shares, Other Equity-Based Awards or cash made subject to the achievement of performance goals (as provided in Section  14 ) over a Performance Period specified by the Committee.
 
2.32   “ Performance-Based Compensation ” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for “qualified performance-based compensation” paid to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for “qualified performance-based compensation” within the meaning of and pursuant to Code Section 162(m) does not constitute performance-based compensation for other purposes, including the purposes of Code Section 409A.
 
2.33   “ Performance Measures ” means measures as specified in Section  14.6.4 on which the performance goals under Performance-Based Awards are based and which are approved by the Company’s stockholders pursuant to, and to the extent required by, the Plan in order to qualify such Performance-Based Awards as Performance-Based Compensation.
 
2.34   “ Performance Period ” means the period of time during which the performance goals under Performance-Based Awards must be met in order to determine the degree of payout and/or vesting with respect to any such Performance-Based Awards.
 
2.35   “ Performance Shares ” means a Performance-Based Award representing a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, made subject to the achievement of performance goals (as provided in Section  14 ) over a Performance Period of up to ten (10) years.
 
2.36   “ Person ” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
 
2.37   “ Plan ” means the Company’s 2014 Omnibus Incentive Plan, as amended from time to time.
 
2.38   “ Reporting Person ” means a person who is required to file reports under Section 16(a) of the Exchange Act, or any successor provision.
 
2.39   “ Restricted Period ” shall have the meaning set forth in Section  10.2 .
 
 
5
 
 
2.40   “ Restricted Stock ” means shares of Stock awarded to a Grantee pursuant to Section 10 .
 
2.41   “ SAR Price ” shall have the meaning set forth in Section  9.1 .
 
2.42   “ Securities Act ” means the Securities Act of 1933, as amended, as now in effect or as hereafter amended.
 
2.43   “ Service ” means service qualifying a Grantee as a Service Provider to the Company or an Affiliate. Unless otherwise provided in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate. Subject to the preceding sentence, any determination by the Committee whether a termination of Service shall have occurred for purposes of the Plan shall be final, binding and conclusive. If a Service Provider’s employment or other service relationship is with an Affiliate and the applicable entity ceases to be an Affiliate, a termination of Service shall be deemed to have occurred when such entity ceases to be an Affiliate unless the Service Provider transfers his or her employment or other service relationship to the Company or any other Affiliate.
 
2.44   “ Service Provider ” means an Employee, officer, or director of the Company or an Affiliate, or a consultant or adviser (who is a natural person) to the Company or an Affiliate currently providing services to the Company or an Affiliate.
 
2.45   “ Stock ” means the common shares, no par value, of the Company, or any security which shares of Stock may be changed into or for which shares of Stock may be exchanged as provided in Section  18.1 .
 
2.46     “ Stock Appreciation Right ” or “ SAR ” means a right granted to a Grantee pursuant to Section  9 .
 
2.47   “ Stock Exchange ” means an established national or regional stock exchange.
 
2.48   “ Stock Unit ” means a bookkeeping entry representing the equivalent of one (1) share of Stock awarded to a Grantee pursuant to Section  10 that (a) is not subject to vesting or (b) is subject to time-based vesting, but not to performance-based vesting. A Stock Unit may also be referred to as a restricted stock unit.
 
2.49   “ Subsidiary ” means any corporation (other than the Company) or non-corporate entity with respect to which the Company owns, directly or indirectly, fifty percent (50%) or more of the total combined voting power of all classes of stock, membership interests or other ownership interests of any class or kind ordinarily having the power to vote for the directors, managers or other voting members of the governing body of such corporation or non-corporate entity. In addition, any other entity may be designated by the Committee as a Subsidiary, provided that (a) such entity could be considered as a subsidiary according to generally accepted accounting principles in the United States of America, and (b) in the case of an Award of Options or Stock Appreciation Rights, such Award would be considered to be granted in respect of “service recipient stock” under Code Section 409A.
 
 
6
 
 
2.50   “ Substitute Award ” means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted under a compensatory plan by a business entity acquired or to be acquired by the Company or an Affiliate or with which the Company or an Affiliate has combined or will combine.
 
2.51   “ Unrestricted Stock ” shall have the meaning set forth in Section  11 .
 
2.52   “ Voting Stock ” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
 
3.  
ADMINISTRATION OF THE PLAN
 
3.1   Committee .
 
3.1.1   Powers and Authorities .
 
The Committee shall administer the Plan and shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation and bylaws and Applicable Laws. Without limiting the generality of the foregoing, the Committee shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan which the Committee deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions and determinations shall be made by (a) the affirmative vote of a majority of the members of the Committee present at a meeting at which a quorum is present, or (b) the unanimous consent of the members of the Committee executed in writing in accordance with the Company’s certificate of incorporation and bylaws and Applicable Laws. Unless otherwise expressly determined by the Board, the Committee shall have the authority to interpret and construe all provisions of the Plan, any Award and any Award Agreement, and any such interpretation or construction, and any other determination contemplated to be made under the Plan or any Award Agreement, by the Committee shall be final, binding and conclusive whether or not expressly provided for in any provision of the Plan, such Award or such Award Agreement.
 
In the event that the Plan, any Award or any Award Agreement provides for any action to be taken by the Board or any determination to be made by the Board, such action may be taken or such determination may be made by the Committee constituted in accordance with this Section  3.1 if the Board has delegated the power and authority to do so to such Committee.
 
3.1.2   Composition of Committee .
 
The Committee shall be a committee composed of not fewer than two directors of the Company designated by the Board to administer the Plan. Each member of the Committee shall be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act, (ii) if applicable, an “outside director” within the meaning of Code Section 162(m)(4)(C)(i) and (iii) an independent director in accordance with the rules of any Stock Exchange on which the Stock is listed; provided that any action taken by the Committee shall be valid and effective whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section  3.1.2 or otherwise provided in any charter of the Committee. Without limiting the generality of the foregoing, the Committee may be the Compensation Committee of the Board or a subcommittee thereof if the Compensation Committee of the Board or such subcommittee satisfies the foregoing requirements.
 
 
7
 
 
3.1.3   Other Committees .
 
The Board also may appoint one or more committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, which may administer the Plan with respect to Grantees who are not “officers” as defined in Rule 16a-1(f) under the Exchange Act or directors of the Company, may grant Awards under the Plan to such Grantees, and may determine all terms of such Awards, subject to the requirements of Rule 16b-3 under the Exchange Act, Code Section 162(m) (if applicable) and the rules of any Stock Exchange on which the Stock is listed.
 
3.2   Board .
 
The Board from time to time may exercise any or all of the powers and authorities related to the administration and implementation of the Plan, as set forth in Section  3.1 and other applicable provisions of the Plan, as the Board shall determine, consistent with the Company’s certificate of incorporation and bylaws and Applicable Laws.
 
3.3   Terms of Awards .
 
3.3.1   Committee Authority .
 
Subject to the other terms and conditions of the Plan, the Committee shall have full and final authority to:
 
(a)   designate Grantees;
 
(b)   determine the type or types of Awards to be made to a Grantee;
 
(c)   determine the number of shares of Stock to be subject to an Award;
 
(d)   establish the terms and conditions of each Award (including the Option Price of any Option or the purchase price for Restricted Stock), the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, and the treatment of an Award in the event of a Change in Control (subject to applicable agreements);
 
(e)   prescribe the form of each Award Agreement evidencing an Award; and
 
(f)   subject to the limitation on repricing in Section  3.4 , amend, modify or supplement the terms of any outstanding Award, which authority shall include the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make Awards or to modify outstanding Awards made to eligible natural persons who are foreign nationals or are natural persons who are employed outside the United States to reflect differences in local law, tax policy, or custom, provided that, notwithstanding the foregoing, no amendment, modification or supplement of the terms of any outstanding Award shall, without the consent of the Grantee thereof, impair such Grantee’s rights under such Award.
 
 
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The Committee shall have the right, in its discretion, to make Awards in substitution or exchange for any award granted under another compensatory plan of the Company, an Affiliate, or any business entity acquired or to be acquired by the Company or an Affiliate or with which the Company or an Affiliate has combined or will combine.
 
3.3.2   Forfeiture; Recoupment .
 
The Committee may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on account of actions taken by, or failed to be taken by, such Grantee in violation or breach of or in conflict with any (a) employment agreement, (b) non-competition agreement, (c) agreement prohibiting solicitation of Employees or clients of the Company or an Affiliate, (d) confidentiality obligation with respect to the Company or an Affiliate, (e) Company policy or procedure, (f) other agreement, or (g) any other obligation of such Grantee to the Company or an Affiliate, as and to the extent specified in such Award Agreement. The Committee may annul an outstanding Award if the Grantee thereof is an Employee of the Company or an Affiliate and is terminated for Cause as defined in the Plan or the applicable Award Agreement or for “cause” as defined in any other agreement between the Company or such Affiliate and such Grantee, as applicable.
 
Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Grantee to the Company to the extent the Grantee is, or in the future becomes, subject to (a) any Company “clawback” or recoupment policy that is adopted to comply with the requirements of any Applicable Law, rule or regulation, or otherwise, or (b) any law, rule or regulation which imposes mandatory recoupment, under circumstances set forth in such law, rule or regulation.
 
3.4   No Repricing Without Stockholder Approval .
 
Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, shares of Stock, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of Stock or other securities or similar transaction), the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.  Notwithstanding the foregoing, in no event may the Committee grant Options in replacement of Options previously granted under this Plan or any other compensation plan of the Company or cancel an outstanding Option in exchange for cash or other Awards (other than cash or other Awards with a value equal to the excess of the Fair Market Value of the Stock subject to such Option at the time of cancellation over the exercise or grant price for such Stock), or may the Committee amend outstanding Options (including amendments to adjust an Option price) unless such replacement or adjustment (i) is subject to and approved by the Company's stockholders or (ii) would not be deemed to be a repricing under the rules of the New York Stock Exchange.
 
 
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3.5   Deferral Arrangement .
 
The Committee may permit or require the deferral of any payment pursuant to any Award into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or Dividend Equivalent Rights and, in connection therewith, provisions for converting such credits into Stock Units and for restricting deferrals to comply with hardship distribution rules affecting tax-qualified retirement plans subject to Code Section 401(k)(2)(B)(IV), provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs. Any such deferrals shall be made in a manner that complies with Code Section 409A, including, if applicable, with respect to when a Separation from Service occurs as defined under Section 409A.
 
3.6   No Liability .
 
No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement.
 
3.7   Registration; Share Certificates .
 
Notwithstanding any provision of the Plan to the contrary, the ownership of the shares of Stock issued under the Plan may be evidenced in such a manner as the Committee, in its sole discretion, deems appropriate, including by book-entry or direct registration (including transaction advices) or the issuance of one or more share certificates.
 
4.  
STOCK SUBJECT TO THE PLAN
 
4.1   Number of Shares of Stock Available for Awards .
 
Subject to such additional shares of Stock as shall be available for issuance under the Plan pursuant to Section 4.2 , and subject to adjustment pursuant to Section 17 8 , the maximum number of shares of Stock available for issuance under the Plan shall be 10 million (10,000,000) shares of Stock. Such shares of Stock may be authorized and unissued shares of Stock or treasury shares of Stock or any combination of the foregoing, as may be determined from time to time by the Board or by the Committee. Any of the shares of Stock available for issuance under the Plan may be used for any type of Award under the Plan.
 
4.2   Adjustments in Authorized Shares of Stock .
 
In connection with mergers, reorganizations, separations, or other transactions to which Code Section 424(a) applies, the Committee shall have the right to cause the Company to assume awards previously granted under a compensatory plan by another business entity that is a party to such transaction and to substitute Awards under the Plan for such awards. The number of shares of Stock available for issuance under the Plan pursuant to Section  4.1 shall be increased by the number of shares of Stock subject to any such assumed awards and substitute Awards. Shares available for issuance under a shareholder-approved plan of a business entity that is a party to such transaction (as appropriately adjusted, if necessary, to reflect such transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Stock otherwise available for issuance under the Plan, subject to applicable rules of any Stock Exchange on which the Stock is listed.
 
 
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4.3   Share Usage .
 
Shares covered by an Award shall be counted as of the Grant Date for purposes of calculating the number of shares available for issuance under Section 4.1.  The target number of shares issuable under a Performance Share grant shall be counted against the share issuance limit set forth in Section 4.1 as of the Grant Date, but such number shall be adjusted to equal the actual number of shares issued upon settlement of the Performance Shares to the extent different from such target number of shares.  If any shares covered by an Award are not purchased or are forfeited or expire, or if an Award otherwise terminates without delivery of any Stock subject thereto or is settled in cash in lieu of shares, then the number of shares of Stock counted against the aggregate number of shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination, or expiration again be available for making Awards under the Plan. If the exercise price of any Option or the tax withholding obligations of any Award granted under the Plan is satisfied by tendering shares of Stock to the Company (by either actual delivery or by attestation), only the number of shares of Stock issued net of the shares of Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for delivery under the Plan.
 
5.  
TERM; AMENDMENT AND TERMINATION
 
5.1   Term .
 
The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.2 .
 
5.2   Amendment and Termination .
 
The Board may, at any time and from time to time, amend, suspend or terminate the Plan as to any shares of Stock as to which Awards have not been made. The effectiveness of any amendment to the Plan shall be contingent on approval of such amendment by the Company’s stockholders to the extent provided by the Board or required by Applicable Laws (including the rules of any Stock Exchange on which the Stock is then listed).  No amendment, suspension or termination of the Plan shall impair rights or obligations under any Award theretofore made under the Plan without the consent of the Grantee thereof.
 
6.  
AWARD ELIGIBILITY AND LIMITATIONS
 
6.1   Eligible Grantees .
 
Subject to this Section  6 , Awards may be made under the Plan to (i) any Service Provider, as the Committee shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Committee.
 
6.2   Limitation on Shares of Stock Subject to Awards and Cash Awards .
 
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act:
 
 
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(a)   the maximum number of shares of Stock subject to Options or SARs that may be granted under the Plan in a calendar year to any person eligible for an Award under Section  6 is 1 million (1,000,000) shares;
 
(b)   the maximum number of shares of Stock that may be granted under the Plan, other than pursuant to Options or SARs, in a calendar year to any person eligible for an Award under Section  6 is 1 million (1,000,000) shares; and
 
(c)   the maximum amount that may be paid as a cash-settled Performance-Based Award for a Performance Period of twelve (12) months or less to any person eligible for an Award shall be $10 million dollars ($10,000,000) and the maximum amount that may be paid as a cash-settled Performance-Based Award for a Performance Period of greater than twelve (12) months to any person eligible for an Award shall be $10 million dollars ($10,000,000).
 
The preceding limitations in this Section  6.2 are subject to adjustment as provided in Section  18 .
 
6.3   Stand-Alone, Additional, Tandem and Substitute Awards .
 
Subject to Section  3.4 , Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, (a) any other Award, (b) any award granted under another plan of the Company, an Affiliate, or any business entity that has been a party to a transaction with the Company or an Affiliate, or (c) any other right of a Grantee to receive payment from the Company or an Affiliate. Such additional, tandem and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, or for an award granted under another plan of the Company, an Affiliate, or any business entity that has been a party to a transaction with the Company or an Affiliate, the Committee shall require the surrender of such other Award or award under such other plan in consideration for the grant of such substitute or exchange Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash payments under other plans of the Company or an Affiliate. Notwithstanding Section  8.1 and Section  9.1 , but subject to Section  3.4 , the Option Price of an Option or the SAR Price of a SAR that is a Substitute Award may be less than one hundred percent (100%) of the Fair Market Value of a share of Stock on the original Grant Date; provided that such Option Price or SAR Price is determined in a manner consistent with Code Section 409A.
 
7.  
AWARD AGREEMENT
 
Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, which shall be in such form or forms as the Committee shall from time to time determine. Award Agreements employed under the Plan from time to time or at the same time need not contain similar provisions, but shall be consistent with the terms of the Plan.
 
8.  
TERMS AND CONDITIONS OF OPTIONS
 
8.1   Option Price .
 
The Option Price of each Option shall be fixed by the Committee and stated in the Award Agreement evidencing such Option. Except in the case of Substitute Awards, the Option Price of each Option shall be at least the Fair Market Value of one (1) share of Stock on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a share of Stock.
 
 
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8.2   Vesting .
 
Subject to Sections 8.3 and 18.3 , each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Committee and stated in the Award Agreement, in another agreement with the Grantee or otherwise in writing.
 
8.3   Term .
 
Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10) years from the Grant Date of such Option, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the Award Agreement relating to such Option; provided that, to the extent deemed necessary or appropriate by the Committee to reflect differences in local law, tax policy, or custom with respect to any Option granted to a Grantee who is a foreign national or is a natural person who is employed outside the United States, such Option may terminate, and all rights to purchase shares of Stock thereunder may cease, upon the expiration of such period longer than ten (10) years from the Grant Date of such Option as the Committee shall determine.
 
8.4   Termination of Service .
 
Each Award Agreement with respect to the grant of an Option shall set forth the extent to which the Grantee thereof, if at all, shall have the right to exercise such Option following termination of such Grantee’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
 
8.5   Limitations on Exercise of Option .
 
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, after the occurrence of an event referred to in Section  18 which results in the termination of such Option.
 
8.6   Method of Exercise .
 
Subject to the terms of Section  12 and Section  19.4 , an Option that is exercisable may be exercised by the Grantee’s delivery to the Company or its designee or agent of notice of exercise on any business day, at the Company’s principal office or the office of such designee or agent, on the form specified by the Company and in accordance with any additional procedures specified by the Committee. Such notice shall specify the number of shares of Stock with respect to which such Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares of Stock for which such Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to the exercise of such Option.
 
 
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8.7   Rights of Holders of Options .
 
Unless otherwise stated in the applicable Award Agreement, a Grantee or other person holding or exercising an Option shall have none of the rights of a stockholder of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the shares of Stock subject to such Option, to direct the voting of the shares of Stock subject to such Option, or to receive notice of any meeting of the Company’s stockholders) until the shares of Stock subject thereto are fully paid and issued to such Grantee or other person. Except as provided in Section  18 , no adjustment shall be made for dividends, distributions or other rights with respect to any shares of Stock subject to an Option for which the record date is prior to the date of issuance of such shares of Stock.
 
8.8   Delivery of Stock .
 
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price with respect thereto, such Grantee shall be entitled to receive such evidence of such Grantee’s ownership of the shares of Stock subject to such Option as shall be consistent with Section  3.7 .
 
8.9   Transferability of Options .
 
Except as provided in Section  8.10 , during the lifetime of a Grantee of an Option, only such Grantee (or, in the event of such Grantee’s legal incapacity or incompetency, such Grantee’s guardian or legal representative) may exercise such Option. Except as provided in Section  8.10 , no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
 
8.10   Family Transfers .
 
If authorized in the applicable Award Agreement and by the Committee, in its sole discretion, a Grantee may transfer, not for value, all or part of an Option to any Family Member. For the purpose of this Section  8.10 , a transfer “not for value” is a transfer which is (a) a gift, (b) a transfer under a domestic relations order in settlement of marital property rights or (c) unless Applicable Laws do not permit such transfer, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (and/or the Grantee) in exchange for an interest in such entity. Following a transfer under this Section  8.10 , any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to such transfer, and the shares of Stock acquired pursuant to such Option shall be subject to the same restrictions with respect to transfers of such shares of Stock as would have applied to the Grantee thereof. Subsequent transfers of transferred Options shall be prohibited except to Family Members of the original Grantee in accordance with this Section  8.10 or by will or the laws of descent and distribution. The provisions of Section  8.4 relating to termination of Service shall continue to be applied with respect to the original Grantee of the Option, following which such Option shall be exercisable by the transferee only to the extent, and for the periods specified, in Section  8.4 .
 
 
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9.  
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
 
9.1   Right to Payment and Grant Price .
 
A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (x) the Fair Market Value of one (1) share of Stock on the date of exercise over (y) the per share exercise price of such SAR (the “ SAR Price ”) as determined by the Committee. The Award Agreement for a SAR shall specify the SAR Price, which shall be no less than the Fair Market Value of one (1) share of Stock on the Grant Date of such SAR. SARs may be granted in tandem with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in combination with all or any part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Price that is no less than the Fair Market Value of one (1) share of Stock on the Grant Date of such SAR.
 
9.2   Other Terms .
 
The Committee shall determine, on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future Service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which shares of Stock shall be delivered or deemed to be delivered to Grantees, whether or not a SAR shall be granted in tandem or in combination with any other Award, and any and all other terms and conditions of any SAR.
 
9.3   Term .
 
Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the Grant Date of such SAR or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the Award Agreement relating to such SAR.
 
9.4   Transferability of SARS .
 
Except as provided in Section  9.5 , during the lifetime of a Grantee of a SAR, only the Grantee (or, in the event of such Grantee’s legal incapacity or incompetency, such Grantee’s guardian or legal representative) may exercise such SAR. Except as provided in Section  9.5 , no SAR shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
 
9.5   Family Transfers .
 
If authorized in the applicable Award Agreement and by the Committee, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR to any Family Member. For the purpose of this Section  9.5 , a transfer “not for value” is a transfer which is (a) a gift, (b) a transfer under a domestic relations order in settlement of marital property rights or (c) unless Applicable Laws do not permit such transfer, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (and/or the Grantee) in exchange for an interest in such entity. Following a transfer under this Section  9.5 , any such SAR shall continue to be subject to the same terms and conditions as were in effect immediately prior to such transfer, and shares of Stock acquired pursuant to a SAR shall be subject to the same restrictions on transfers of such shares of Stock as would have applied to the Grantee or such SAR. Subsequent transfers of transferred SARs shall be prohibited except to Family Members of the original Grantee in accordance with this Section  9.5 or by will or the laws of descent and distribution.
 
 
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10.  
TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS
 
10.1   Grant of Restricted Stock or Stock Units .
 
Awards of Restricted Stock and Stock Units may be made for consideration or for no consideration, other than the par value of the shares of Stock, which shall be deemed paid by past Service or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate.
 
10.2   Restrictions .
 
At the time a grant of Restricted Stock or Stock Units is made, the Committee may, in its sole discretion, (a) establish a period of time (a “ Restricted Period ”) applicable to such Restricted Stock or Stock Units and (b) prescribe restrictions in addition to or other than the expiration of the Restricted Period, including the achievement of corporate or individual performance goals, which may be applicable to all or any portion of such Restricted Stock or Stock Units as provided in Section  14 . Awards of Restricted Stock and Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the Committee with respect to such Awards.
 
10.3   Registration; Restricted Share Certificates .
 
Pursuant to Section  3.7 , to the extent that ownership of Restricted Stock is evidenced by a book-entry registration or direct registration (including transaction advices), such registration shall be notated to evidence the restrictions imposed on such Award of Restricted Stock under the Plan and the applicable Award Agreement. Subject to Section  3.7 and the immediately following sentence, the Company may issue, in the name of each Grantee to whom Restricted Stock has been granted, share certificates representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date of such Restricted Stock. The Committee may provide in an Award Agreement with respect to an Award of Restricted Stock that either (a) the Secretary of the Company shall hold such share certificates for such Grantee’s benefit until such time as such shares of Restricted Stock are forfeited to the Company or the restrictions applicable thereto lapse and such Grantee shall deliver a stock power to the Company with respect to each share certificate, or (b) such share certificates shall be delivered to such Grantee, provided that such share certificates shall bear legends that comply with applicable securities laws and regulations and make appropriate reference to the restrictions imposed on such Award of Restricted Stock under the Plan and such Award Agreement.
 
10.4   Rights of Holders of Restricted Stock .
 
Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such shares of Restricted Stock and the right to receive any dividends declared or paid with respect to such shares of Restricted Stock. The Committee may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions as the vesting conditions and restrictions applicable to such Restricted Stock. Dividends paid on Restricted Stock which vests or is earned based upon the achievement of performance goals shall not vest unless such performance goals for such Restricted Stock are achieved, and if such performance goals are not achieved, the Grantee of such Restricted Stock shall promptly forfeit and repay to the Company such dividend payments. All stock distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of stock, or other similar transaction shall be subject to the vesting conditions and restrictions applicable to such Restricted Stock.
 
 
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10.5   Rights of Holders of Stock Units .
 
10.5.1   Voting and Dividend Rights .
 
Holders of Stock Units shall have no rights as stockholders of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the shares of Stock subject to such Stock Units, to direct the voting of the shares of Stock subject to such Stock Units, or to receive notice of any meeting of the Company’s stockholders). The Committee may provide in an Award Agreement evidencing a grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of Stock, a cash payment for each such Stock Unit which is equal to the per-share dividend paid on such shares of Stock. Dividends paid on Stock Units which vest or are earned based upon the achievement of performance goals shall not vest unless such performance goals for such Stock Units are achieved, and if such performance goals are not achieved, the Grantee of such Stock Units shall promptly forfeit and repay to the Company such dividend payments. Such Award Agreement also may provide that such cash payment shall be deemed reinvested in additional Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date on which such cash dividend is paid. Such cash payments paid in connection with Stock Units which vest or are earned based upon the achievement of performance goals shall not vest unless such performance goals for such Stock Units are achieved, and if such performance goals are not achieved, the Grantee of such Stock Units shall promptly forfeit and repay to the Company such cash payments.
 
10.5.2   Creditor’s Rights .
 
A holder of Stock Units shall have no rights other than those of a general unsecured creditor of the Company. Stock Units represent unfunded and unsecured obligations of the Company, subject to the terms and conditions of the applicable Award Agreement.
 
10.6   Termination of Service .
 
Unless the Committee otherwise provides in an Award Agreement, in another agreement with the Grantee or otherwise in writing after such Award Agreement is entered into, but prior to termination of Grantee’s Service, upon the termination of such Grantee’s Service, any Restricted Stock or Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of such Restricted Stock or Stock Units, the Grantee thereof shall have no further rights with respect thereto, including any right to vote such Restricted Stock or any right to receive dividends with respect to such Restricted Stock or Stock Units.
 
 
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10.7   Purchase of Restricted Stock and Shares of Stock Subject to Stock Units .
 
The Grantee of an Award of Restricted Stock or vested Stock Units shall be required, to the extent required by Applicable Laws, to purchase such Restricted Stock or the shares of Stock subject to such vested Stock Units from the Company at a purchase price equal to the greater of (x) the aggregate par value of the shares of Stock represented by such Restricted Stock or such vested Stock Units or (y) the purchase price, if any, specified in the Award Agreement relating to such Restricted Stock or such vested Stock Units. Such purchase price shall be payable in a form provided in Section  12 or, in the sole discretion of the Committee, in consideration for Service rendered or to be rendered to the Company or an Affiliate.
 
10.8   Delivery of Shares of Stock .
 
Upon the expiration or termination of any Restricted Period and the satisfaction of any other conditions prescribed by the Committee, including but not limited to any delayed delivery period, the restrictions applicable to Restricted Stock or Stock Units settled in shares of Stock shall lapse, and, unless otherwise provided in the applicable Award Agreement, a book-entry or direct registration (including transaction advices) or a share certificate evidencing ownership of such shares of Stock shall, consistent with Section  3.7 , be issued, free of all such restrictions, to the Grantee thereof or such Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have any further rights with regard to a Stock Unit once the shares of Stock represented by such Stock Unit have been delivered in accordance with this Section  10.8 .
 
11.  
TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS
 
11.1   Unrestricted Stock Awards .
 
The Committee may, in its sole discretion, grant (or sell at the par value of a share of Stock or at such other higher purchase price as shall be determined by the Committee) an Award to any Grantee pursuant to which such Grantee may receive shares of Stock free of any restrictions (“ Unrestricted Stock ”) under the Plan. Unrestricted Stock Awards may be granted or sold to any Grantee as provided in the immediately preceding sentence in respect of past Service or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service, to the Company or an Affiliate or other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.
 
11.2   Other Equity-Based Awards .
 
The Committee may, in its sole discretion, grant Awards in the form of Other Equity-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan. Awards granted pursuant to this Section  11.2 may be granted with vesting, value and/or payment contingent upon the achievement of one or more performance goals. The Committee shall determine the terms and conditions of Other Equity-Based Awards at the Grant Date or thereafter. Unless the Committee otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise in writing after such Award Agreement is issued, upon the termination of a Grantee’s Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of any Other Equity-Based Award, the Grantee thereof shall have no further rights with respect to such Other Equity-Based Award.
 
 
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12.  
FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
 
12.1   General Rule .
 
Payment of the Option Price for the shares of Stock purchased pursuant to the exercise of an Option or the purchase price, if any, for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company.
 
12.2   Surrender of Shares of Stock .
 
To the extent that the applicable Award Agreement so provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option or the purchase price, if any, for Restricted Stock may be made all or in part through the tender or attestation to the Company of shares of Stock, which shall be valued, for purposes of determining the extent to which such Option Price or purchase price has been paid thereby, at their Fair Market Value on the date of such tender or attestation.
 
12.3   Cashless Exercise .
 
To the extent permitted by Applicable Laws and to the extent the Award Agreement so provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a form acceptable to the Committee) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of the proceeds of such sale to the Company in payment of such Option Price and any withholding taxes described in Section  19.4 , or, with the consent of the Company, by issuing the number of shares of Stock equal in value to the difference between such Option Price and the Fair Market Value of the shares of Stock subject to the portion of such Option being exercised.
 
12.4   Other Forms of Payment .
 
To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for shares of Stock purchased pursuant to exercise of an Option or the purchase price, if any, for Restricted Stock may be made in any other form that is consistent with Applicable Laws, including (a) Service by the Grantee thereof to the Company or an Affiliate and (b) by withholding shares of Stock that would otherwise vest or be issuable in an amount equal to the Option Price or purchase price and the required tax withholding amount.
 
13.  
TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
 
13.1   Dividend Equivalent Rights .
 
A Dividend Equivalent Right is an Award entitling the recipient thereof to receive credits based on cash distributions that would have been paid on the shares of Stock specified in such Dividend Equivalent Right (or other Award to which such Dividend Equivalent Right relates) if such shares of Stock had been issued to and held by the recipient of such Dividend Equivalent Right as of the record date. A Dividend Equivalent Right may be granted hereunder to any Grantee, provided that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of Options or SARs. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Agreement therefor. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently (with or without being subject to forfeiture or a repayment obligation) or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional Dividend Equivalent Rights (with or without being subject to forfeiture or a repayment obligation). Any such reinvestment shall be at the Fair Market Value thereof on the date of such reinvestment. Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or in multiple installments, all as determined in the sole discretion of the Committee. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award. A Dividend Equivalent Right granted as a component of another Award also may contain terms and conditions which are different from the terms and conditions of such other Award, provided that Dividend Equivalent Rights credited pursuant to a Dividend Equivalent Right granted as a component of another Award which vests or is earned based upon the achievement of performance goals shall not vest unless such performance goals for such underlying Award are achieved, and if such performance goals are not achieved, the Grantee of such Dividend Equivalent Rights shall promptly forfeit and repay to the Company payments made in connection with such Dividend Equivalent Rights.
 
 
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13.2   Termination of Service .
 
Unless the Committee otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise in writing after such Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon such Grantee’s termination of Service for any reason.
 
14.  
TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS
 
14.1   Grant of Performance-Based Awards .
 
Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance-Based Awards to a Plan participant in such amounts and upon such terms as the Committee shall determine.
 
14.2   Value of Performance-Based Awards .
 
Each grant of a Performance-Based Award shall have an actual or target number of shares of Stock or initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are achieved, shall determine the value and/or number of shares of Stock subject to a Performance-Based Award that will be paid out to the Grantee thereof.
 
 
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14.3   Earning of Performance-Based Awards .
 
Subject to the terms of the Plan, in particular Section 14.6.3 , after the applicable Performance Period has ended, the Grantee of Performance-Based Awards shall be entitled to receive a payout on the number of the Performance-Based Awards or value earned by such Grantee over such Performance Period.
 
14.4   Form and Timing of Payment of Performance-Based Awards .
 
Payment of earned Performance-Based Awards shall be made in the manner described in the applicable Award Agreement as determined by the Committee. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance-Based Awards in the form of cash or shares of Stock (or a combination thereof) equal to the value of such earned Performance-Based Awards and shall pay the Awards that have been earned at the close of the applicable Performance Period, or as soon as reasonably practicable after the Committee has determined that the performance goal or goals relating thereto have been achieved; provided that, unless specifically provided in the Award Agreement for such Awards, such payment shall occur no later than the 15th day of the third month following the end of the calendar year in which such Performance Period ends. Any shares of Stock paid out under such Performance-Based Awards may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Performance-Based Awards shall be set forth in the Award Agreement therefor.
 
14.5   Performance Conditions .
 
The right of a Grantee to exercise or receive a grant or settlement of any Performance-Based Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. If and to the extent required under Code Section 162(m), any power or authority relating to an Award intended to qualify under Code Section 162(m) shall be exercised by the Committee and not by the Board.
 
14.6   Performance-Based Awards Granted to Designated Covered Employees .
 
If and to the extent that the Committee determines that a Performance-Based Award to be granted to a Grantee should constitute “qualified performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section  14.6 .
 
14.6.1   Performance Goals Generally .
 
The performance goals for Performance-Based Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section  14.6 . Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Awards shall be granted, exercised and/or settled upon achievement of any single performance goal or of two (2) or more performance goals. Performance goals may differ for Awards granted to any one Grantee or to different Grantees.
 
 
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14.6.2   Timing For Establishing Performance Goals .
 
Performance goals for any Performance-Based Award shall be established not later than the earlier of (a) 90 days after the beginning of any Performance Period applicable to such Award, and (b) the date on which twenty-five percent (25%) of any Performance Period applicable to such Award has expired, or at such other date as may be required or permitted for compensation payable to a Covered Employee to constitute Performance-Based Compensation.
 
14.6.3   Payment of Awards; Other Terms .
 
Payment of Performance-Based Awards shall be in cash, shares of Stock, or other Awards, including an Award that is subject to additional Service-based vesting, as determined in the sole discretion of the Committee. The Committee may, in its sole discretion, reduce the amount of a payment otherwise to be made in connection with such Awards. The Committee shall specify the circumstances in which such Performance-Based Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a Performance Period or settlement of such Awards.  In the event payment of the Performance-Based Award is made in the form of another Award subject to Service-based vesting, the Committee shall specify the circumstances in which the payment Award will be paid or forfeited in the event of a termination of Service.
 
14.6.4   Performance Measures .
 
The performance goals upon which the payment or vesting of a Performance-Based Award to a Covered Employee that is intended to qualify as Performance-Based Compensation may be conditioned shall be limited to the following Performance Measures, with or without adjustment (including pro forma adjustments):
 
(a)   Funds from operations, including adjusted funds from operations;
 
(b)   RevPar, including same-store RevPar;
 
(c)   net earnings or net income;
 
(d)   operating earnings;
 
(e)   pretax earnings;
 
(f)   earnings per share;
 
(g)   share price, including growth measures and total stockholder return;
 
(h)   earnings before interest and taxes;
 
(i)   earnings before interest, taxes, depreciation and/or amortization;
 
(j)   earnings before interest, taxes, depreciation and/or amortization as adjusted to exclude any one or more of the following:
 
 
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•            stock-based compensation expense;
 
•           income from discontinued operations;
 
•           gain on cancellation of debt;
 
•           debt extinguishment and related costs;
 
•           restructuring, separation and/or integration charges and costs;
 
•           reorganization and/or recapitalization charges and costs;
 
•           impairment charges;
 
•           merger-related events;
 
•           gain or loss related to investments;
 
•           sales and use tax settlement; and
 
•           gain on non-monetary transaction.
 
(k)   sales or revenue growth, whether in general, by type of product or service, by type of customer or by type of property;
 
(l)   gross or operating margins;
 
(m)   return measures, including return on assets, capital, investment, equity, sales or revenue;
 
(n)   cash flow, including:
 
•            operating cash flow;
 
•            free cash flow, defined as earnings before interest, taxes, depreciation and/or amortization (as adjusted to exclude any one or more of the items that may be excluded pursuant to the Performance Measure specified in clause (h) above) less capital expenditures;
 
•            levered free cash flow, defined as free cash flow less interest expense;
 
•           cash flow return on equity; and
 
•           cash flow return on investment;
 
(o)   productivity ratios;
 
(p)   expense targets;
 
(q)   market share;
 
 
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(r)   financial ratios as provided in credit agreements of the Company and its subsidiaries;
 
(s)   working capital targets;
 
(t)   completion of acquisitions of businesses or companies;
 
(u)   completion of divestitures and asset sales;
 
(v)   customer satisfaction; or
 
(w)   any combination of the foregoing business criteria.
 
Performance under any of the foregoing Performance Measures (a) may be used to measure the performance of (i) the Company and its Subsidiaries and other Affiliates as a whole, (ii) the Company, any Subsidiary, and/or any other Affiliate or any combination thereof, or (iii) any one or more business units of the Company, any Subsidiary, and/or any other Affiliate, as the Committee, in its sole discretion, deems appropriate and (b) may be compared to the performance of one or more other companies or one or more published or special indices designated or approved by the Committee for such comparison, as the Committee, in its sole discretion, deems appropriate. In addition, the Committee, in its sole discretion, may select performance under the Performance Measure specified in clause (g) above for comparison to performance under one or more stock market indices designated or approved by the Committee. The Committee also shall have the authority to provide for accelerated vesting of any Performance-Based Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section  14 .
 
14.6.5   Evaluation of Performance .
 
The Committee may provide in any Performance-Based Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance Period: (a) asset write-downs; (b) litigation or claims, judgments or settlements; (c) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results; (d) any reorganization or restructuring events or programs; (e) extraordinary, non-core, non-operating or non-recurring items; (f) acquisitions or divestitures; (g) foreign exchange gains and losses; (h) tax valuation allowance reversals; (i) impairment expense; and (j) environmental expense. To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to qualify as Performance-Based Compensation, such inclusions or exclusions shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
 
14.6.6   Adjustment of Performance-Based Compensation .
 
The Committee shall have the sole discretion to adjust Awards that are intended to qualify as Performance-Based Compensation, either on a formula or discretionary basis, or on any combination thereof, as the Committee determines consistent with the requirements of Code Section 162(m) for deductibility.
 
 
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14.6.7   Committee Discretion .
 
In the event that Applicable Laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval, provided that the exercise of such discretion shall not be inconsistent with the requirements of Code Section 162(m). In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section  14.6.4 .
 
14.6.8   Status of Awards Under Code Section 162(m) .
 
It is the intent of the Company that Performance-Based Awards under Section  14.6 granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and the regulations promulgated thereunder shall, if so designated by the Committee, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m). Accordingly, the terms of Section  14.6 , including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m). If any provision of the Plan or any agreement relating to any such Performance-Based Award does not comply or is inconsistent with the requirements of Code Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.
 
15.  
Restrictions on Transfer of Shares of Stock
 
15.1   Right of First Refusal .
 
Any shares of Stock acquired by, or delivered or issued to, the Grantee under the Plan may be subject to a right of first refusal of the Company as the Board may determine, consistent with Applicable Law.  Any such right shall be set forth in an Award Agreement or in a stockholders or other similar agreement.
 
15.2   Repurchase and Other Rights .
 
Stock issued upon exercise of an Option or pursuant to an Award of Restricted Stock or Stock Units may be subject to such right of repurchase upon termination of Service or other transfer restrictions as the Board may determine, consistent with Applicable Law.  Any additional restrictions shall be set forth in an Award Agreement or in a stockholders or other similar agreement.
 
15.3   Legend .
 
In order to enforce the restrictions imposed upon shares of Stock under this Plan or as provided in an Award Agreement, the Board may cause a legend or legends to be placed on any certificate representing shares issued pursuant to this Plan that complies with the applicable securities laws.
 
 
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16.  
PARACHUTE LIMITATIONS
 
If any Grantee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of the Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by such Grantee with the Company or an Affiliate, except an agreement, contract, or understanding that expressly addresses Code Section 280G or Code Section 4999 (an “ Other Agreement ”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “ Benefit Arrangement ”), any right of the Grantee to any exercise, vesting, payment, or benefit under the Plan shall be reduced or eliminated:
 
(a)   to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under the Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment, or benefit to the Grantee under the Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “ Parachute Payment ”); and
 
(b)   if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under the Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment.
 
The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of Performance-Based Awards, then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of Restricted Stock or Stock Units, then by reducing or eliminating any other remaining Parachute Payments.
 
17.  
REQUIREMENTS OF LAW
 
17.1   General .
 
The Company shall not be required to offer, sell or issue any shares of Stock under any Award, whether pursuant to the exercise of an Option or SAR or otherwise, if the offer, sale or issuance of such shares of Stock would constitute a violation by the Grantee, the Company or an Affiliate, or any other person, of any provision of Applicable Laws, including any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares of Stock subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the offering, issuance, sale or purchase of shares of Stock in connection with any Award, no shares of Stock may be offered, issued or sold to the Grantee or any other person under such Award, whether pursuant to the exercise of an Option or SAR or otherwise, unless such listing, registration or qualification shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of such Award. Without limiting the generality of the foregoing, upon the exercise of any Option or any SAR that may be settled in shares of Stock or the delivery of any shares of Stock underlying an Award, unless a registration statement under the Securities Act is in effect with respect to the shares of Stock subject to such Award, the Company shall not be required to offer, sell or issue such shares of Stock unless the Committee shall have received evidence satisfactory to it that the Grantee or any other person exercising such Option or SAR or accepting delivery of such shares may acquire such shares of Stock pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Committee shall be final, binding, and conclusive. The Company may register, but shall in no event be obligated to register, any shares of Stock or other securities issuable pursuant to the Plan pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of shares of Stock or other securities issuable pursuant to the Plan or any Award to comply with any Applicable Laws. As to any jurisdiction that expressly imposes the requirement that an Option or SAR that may be settled in shares of Stock shall not be exercisable until the shares of Stock subject to such Option or SAR are registered under the securities laws thereof or are exempt from such registration, the exercise of such Option or SAR under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.
 
 
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17.2   Rule 16b-3 .
 
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intention of the Company that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the Exchange Act shall qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Committee does not comply with the requirements of such Rule 16b-3, such provision or action shall be deemed inoperative with respect to such Awards to the extent permitted by Applicable Laws and deemed advisable by the Committee, and shall not affect the validity of the Plan. In the event that such Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify the Plan in any respect necessary or advisable in its judgment to satisfy the requirements of, or to permit the Company to avail itself of the benefits of, the revised exemption or its replacement.
 
18.  
EFFECT OF CHANGES IN CAPITALIZATION
 
18.1   Changes in Stock .
 
If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number of shares or kind of capital stock or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse stock split, spin-off, combination of stock, exchange of stock, stock dividend or other distribution payable in capital stock, or other increase or decrease in shares of Stock effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares of stock for which grants of Options and other Awards may be made under the Plan, including the share limits set forth in Section  6.2 , shall be adjusted proportionately and accordingly by the Committee. In addition, the number and kind of shares of stock for which Awards are outstanding shall be adjusted proportionately and accordingly by the Committee so that the proportionate interest of the Grantee therein immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Price payable with respect to shares that are subject to the unexercised portion of such outstanding Options or SARs, as applicable, but shall include a corresponding proportionate adjustment in the per share Option Price or SAR Price, as the case may be. The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the foregoing, in the event of any distribution to the Company’s stockholders of securities of any other entity or other assets (including an extraordinary dividend, but excluding a non-extraordinary dividend, declared and paid by the Company) without receipt of consideration by the Company, the Board or the Committee constituted pursuant to Section  3.1.2 shall, in such manner as the Board or the Committee deems appropriate, adjust (a) the number and kind of shares of stock subject to outstanding Awards and/or (b) the aggregate and per share Option Price of outstanding Options and the aggregate and per share SAR Price of outstanding SARs as required to reflect such distribution.
 
 
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18.2   Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control .
 
Subject to Section  18.3 , if the Company shall be the surviving entity in any reorganization, merger or consolidation of the Company with one or more other entities which does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option or SAR would have been entitled immediately following such reorganization, merger or consolidation, with a corresponding proportionate adjustment of the per share Option Price or SAR Price so that the aggregate Option Price or SAR Price thereafter shall be the same as the aggregate Option Price or SAR Price of the shares of Stock remaining subject to the Option or SAR as in effect immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement or in another agreement with the Grantee, or otherwise set forth in writing, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of such reorganization, merger or consolidation. In the event of any reorganization, merger or consolidation of the Company referred to in this Section  18.2 , Performance-Based Awards shall be adjusted (including any adjustment to the Performance Measures applicable to such Awards deemed appropriate by the Committee) so as to apply to the securities that a holder of the number of shares of Stock subject to the Performance-Based Awards would have been entitled to receive immediately following such reorganization, merger or consolidation.
 
18.3   Change in Control in which Awards are not Assumed .
 
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence of a Change in Control in which outstanding Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights or Other Equity-Based Awards are not being assumed or continued, the following provisions shall apply to such Award, to the extent not assumed or continued:
 
(a)   in each case with the exception of Performance-Based Awards, all outstanding Restricted Stock shall be deemed to have vested, all Stock Units shall be deemed to have vested and the shares of Stock subject thereto shall be delivered, and all Dividend Equivalent Rights shall be deemed to have vested and the shares of Stock subject thereto shall be delivered, immediately prior to the occurrence of such Change in Control, and either of the following two actions shall be taken:
 
 
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(i)   fifteen (15) days prior to the scheduled consummation of such Change in Control, all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen (15) days, which exercise shall be effective upon such consummation; or
 
(ii)   the Committee may elect, in its sole discretion, to cancel any outstanding Awards of Options, SARs, Restricted Stock, Stock Units and/or Dividend Equivalent Rights and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Committee acting in good faith), in the case of Restricted Stock or Stock Units and Dividend Equivalent Rights (for shares of Stock subject thereto), equal to the formula or fixed price per share paid to holders of shares of Stock pursuant to such Change in Control and, in the case of Options or SARs, equal to the product of the number of shares of Stock subject to such Options or SARs (the “Award Stock”) multiplied by the amount, if any, by which (x) the formula or fixed price per share paid to holders of shares of Stock pursuant to such transaction exceeds (y) the Option Price or SAR Price applicable to such Award Stock.
 
(b)   For Performance-Based Awards, if less than half of the Performance Period has lapsed, such Awards shall be treated as though target performance has been achieved. If at least half the Performance Period has lapsed, actual performance to date shall be determined as of a date reasonably proximal to the date of consummation of the Change in Control as determined by the Committee in its sole discretion, and that level of performance thus determined shall be treated as achieved immediately prior to occurrence of the Change in Control. For purposes of the preceding sentence, if, based on the discretion of the Committee, actual performance is not determinable, the Awards shall be treated as though target performance has been achieved. After application of this Section 18.3(b) , if any Awards arise from application of this Section 18 , such Awards shall be settled under the applicable provision of Section 18.3(a) .
 
(c)   Other Equity-Based Awards shall be governed by the terms of the applicable Award Agreement.
 
With respect to the Company’s establishment of an exercise window, (A) any exercise of an Option or SAR during the fifteen (15)-day period referred to above shall be conditioned upon the consummation of the applicable Change in Control and shall be effective only immediately before the consummation thereof, and (B) upon consummation of any Change in Control, the Plan and all outstanding but unexercised Options and SARs shall terminate. The Committee shall send notice of an event that shall result in such a termination to all natural persons and entities who hold Options and SARs not later than the time at which the Company gives notice thereof to its stockholders.
 
18.4   Change in Control in which Awards are Assumed .
 
Except as otherwise provided in the applicable Award Agreement or in another agreement with the Grantee, or as otherwise set forth in writing, upon the occurrence of a Change in Control in which outstanding Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights or Other Equity-Based Awards are being assumed or continued, the following provisions shall apply to such Award, to the extent assumed or continued:
 
 
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The Plan and the Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights and Other Equity-Based Awards granted under the Plan shall continue in the manner and under the terms so provided in the event of any Change in Control to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of such Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights and Other Equity-Based Awards, or for the substitution for such Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights and Other Equity-Based Awards of new common stock options, stock appreciation rights, restricted stock, common stock units, dividend equivalent rights and other equity-based awards relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices.
 
18.5   Adjustments .
 
Adjustments under this Section  18 related to shares of Stock or other securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Committee may provide in the applicable Award Agreement at the time of grant, in another agreement with the Grantee, or otherwise in writing at any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those provided in Sections 18.1 , 18.2 , 18.3 and 18.4 . This Section  18 shall not limit the Committee’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of a change in control event involving the Company that is not a Change in Control.
 
18.6   No Limitations on Company .
 
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets (including all or any part of the business or assets of any Subsidiary or other Affiliate) or engage in any other transaction or activity.
 
19.  
GENERAL PROVISIONS
 
19.1   RESERVED .
 
19.2   Disclaimer of Rights .
 
No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to increase or decrease the compensation or other payments to any natural person or entity at any time, or to terminate any employment or other relationship between any natural person or entity and the Company or an Affiliate. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, in another agreement with the Grantee, or otherwise in writing, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee thereof, so long as such Grantee continues to provide Service. The obligation of the Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual obligation to pay only those amounts provided herein, in the manner and under the conditions prescribed herein. The Plan and Awards shall in no way be interpreted to require the Company to transfer any amounts to a third-party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.
 
 
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19.3   Nonexclusivity of the Plan .
 
Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval   shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable.
 
19.4   Withholding Taxes .
 
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any shares of Stock upon the exercise of an Option or pursuant to any other Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or such Affiliate may reasonably determine to be necessary to satisfy such withholding obligation; provided that if there is a same-day sale of shares of Stock subject to an Award, the Grantee shall pay such withholding obligation on the day on which such same-day sale is completed. Subject to the prior approval of the Company or an Affiliate, which may be withheld by the Company or such Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such withholding obligation, in whole or in part, (a) by causing the Company or such Affiliate to withhold shares of Stock otherwise issuable to the Grantee or (b) by delivering to the Company or such Affiliate shares of Stock already owned by the Grantee. The shares of Stock so withheld or delivered shall have an aggregate Fair Market Value equal to such withholding obligation. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or such Affiliate as of the date on which the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section  19.4 may satisfy such Grantee’s withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of shares of Stock that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, or lapse of restrictions applicable to any Award or payment of shares of Stock pursuant to such Award, as applicable, may not exceed such number of shares of Stock having a Fair Market Value equal to the minimum statutory amount required by the Company or the applicable Affiliate to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions, or payment of shares of Stock. Notwithstanding Section 2.20 or this Section  19.4 , for purposes of determining taxable income and the amount of the related tax withholding obligation pursuant to this Section  19.4 , for any shares of Stock subject to an Award that are sold by or on behalf of a Grantee on the same date on which such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market Value of such shares shall be the sale price of such shares on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such date), so long as such Grantee has provided the Company, or its designee or agent, with advance written notice of such sale.  In such case, the percentage of shares of Stock withheld shall equal the applicable minimum withholding rate.
 
 
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19.5   Captions .
 
The use of captions in the Plan or any Award Agreement is for convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.
 
19.6   Construction .
 
Unless the context otherwise requires, all references in the Plan to “including” shall mean “including without limitation.”
 
19.7   Other Provisions .
 
Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Committee, in its sole discretion.
 
19.8   Number and Gender .
 
With respect to words used in the Plan, the singular form shall include the plural form and the masculine gender shall include the feminine gender, as the context requires.
 
19.9   Severability .
 
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
 
19.10   Governing Law .
 
The validity and construction of the Plan and the instruments evidencing the Awards hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Virginia, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.
 
19.11   Section 409A of the Code .
 
The Company intends to comply with Code Section 409A, or an exemption to Code Section 409A, with regard to Awards hereunder that constitute nonqualified deferred compensation within the meaning of Code Section 409A. To the extent that the Company determines that a Grantee would be subject to the additional twenty percent (20%) tax imposed on certain nonqualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted under the Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Committee.
 
*    *    *
 
 
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To record adoption of the Plan by the Board as of May 29, 2014, the Company has caused its authorized officer to execute the Plan.
 
 
   
APPLE HOSPITALITY REIT, INC.
   
By:  /s/ Bryan Peery
 
   
Title: Chief Financial Officer
 

 
 
 
 
 
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