La Quinta Holdings Inc. (Form: 10-Q, Received: 08/03/2016 06:07:57)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36412

La Quinta Holdings Inc.

(Exact name of registrant as specified in its charter)

Delaware

90-1032961

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

909 Hidden Ridge, Suite 600

Irving, Texas 75038

(Address of principal executive offices) (Zip Code)

(214) 492-6600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

The registrant had outstanding 116,796,601 shares of Common Stock, par value $0.01 per share as of July 29, 2016.

LA QUINTA HOLDINGS INC.

FORM 10-Q TABLE OF CONTENTS

FOR THE PERIOD ENDED JUNE 30, 2016

		Page No.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I.	FINANCIAL INFORMATION	5

Item 1.	Condensed Consolidated Financial Statements of La Quinta Holdings Inc. (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46

PART II.	OTHER INFORMATION	47

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	48
Item 6.	Exhibits	48

SPECIAL NOTE REGARDING FO RWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements. Words such as “estimates,” “expects,” “contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under “Risk Factors” in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, and are accessible on the SEC’s website at www.sec.gov, and also include the following:

business, financial, and operating risks inherent to the hospitality industry;

macroeconomic and other factors beyond our control can adversely affect and reduce demand for hotel rooms;

contraction in the global economy or low levels of economic growth;

inability to compete effectively;

any deterioration in the quality or reputation of our brand;

inability to develop our pipeline;

the geographic concentration of our hotels;

delays or increased expense relating to our efforts to develop, redevelop, sell or renovate our hotels;

inability by us or our franchisees to make necessary investments to maintain the quality and reputation of our brand;

inability to access capital necessary for growth;

seasonal and cyclical volatility in the hotel industry;

inability to maintain good relationships with our franchisees;

inability to protect our brand standards;

risks resulting from significant investments in owned real estate;

failure to keep pace with developments in technology;

failures or interruptions in, material damage to, or difficulties in updating, our information technology systems, software or websites;

inability to protect our guests’ personal information;

failure to comply with marketing and advertising laws;

disruptions to our reservation system;

failure to protect our trademarks and other intellectual property;

risks of doing business internationally;

the loss of senior executives or key field personnel;

the results of the audit by the Internal Revenue Service;

our substantial indebtedness; and

Blackstone’s significant influence over us.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we”, “us”, “our”, the “Company” or “La Quinta” in this Quarterly Report on Form 10-Q mean La Quinta Holdings Inc. and its subsidiaries, unless the context otherwise requires.

PART I—FINANCI AL INFORMATION

Item 1.

Financ ial Statements

La Quinta Holdings Inc.

Condensed Consolidated Balance Sheets (Unaudited)

As of June 30, 2016 and December 31, 2015

	June 30, 2016			December 31, 2015
	(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents	$	64,051		$	86,709
Accounts receivable, net of allowance for doubtful accounts of $4,354 and $4,773		43,803			37,625
Assets held for sale		37,504			35,523
Other current assets		19,059			12,066
Total Current Assets		164,417			171,923
Property and equipment, net of accumulated depreciation		2,486,549			2,623,472
Intangible assets, net of accumulated amortization		177,525			178,095
Other non-current assets		12,180			12,354
Total Non-Current Assets		2,676,254			2,813,921
Total Assets	$	2,840,671		$	2,985,844
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	17,514		$	17,514
Accounts payable		30,236			27,572
Accrued expenses and other liabilities		64,600			63,120
Accrued payroll and employee benefits		32,760			30,918
Accrued real estate taxes		19,692			21,705
Total Current Liabilities		164,802			160,829
Long-term debt		1,688,491			1,694,585
Other long-term liabilities		39,495			30,330
Deferred tax liabilities		325,540			353,588
Total Liabilities		2,218,328			2,239,332
Commitments and Contingencies
Equity:
Preferred Stock, $0.01 par value; 100,000,000 shares authorized and none outstanding as of June 30, 2016 and December 31, 2015		—			—
Common Stock, $0.01 par value; 2,000,000,000 shares authorized at June 30, 2016 and December 31, 2015, 131,685,795 shares issued and 116,796,649 shares outstanding as of June 30, 2016 and 130,974,073 shares issued and 124,302,318 shares outstanding as of December 31, 2015		1,317			1,310
Additional paid-in-capital		1,158,615			1,152,155
Accumulated deficit		(318,644	)		(294,718	)
Treasury stock at cost, 14,889,146 shares at June 30, 2016 and 6,671,755 shares at December 31, 2015		(208,542	)		(107,699	)
Accumulated other comprehensive loss		(13,215	)		(7,436	)
Noncontrolling interests		2,812			2,900
Total Equity		622,343			746,512
Total Liabilities and Equity	$	2,840,671		$	2,985,844

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Operations (Unaudited)

For the three and six months ended June 30, 2016 and 2015


	Three Months Ended						Six months ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
	(in thousands, except per share data)
REVENUES:
Room revenues	$	229,868		$	236,420		$	439,341			454,135
Franchise and other fee-based revenues		27,978			26,297			50,170			47,054
Other hotel revenues		5,018			4,937			9,849			9,513
		262,864			267,654			499,360			510,702
Brand marketing fund revenues from franchise properties		6,691			6,234			11,966			11,292
Total Revenues		269,555			273,888			511,326			521,994
OPERATING EXPENSES:
Direct lodging expenses		103,578			100,002			202,490			197,507
Depreciation and amortization		36,628			42,213			74,925			83,976
General and administrative expenses		30,881			29,716			56,879			64,867
Other lodging and operating expenses		15,294			14,950			30,976			31,957
Marketing, promotional and other advertising expenses		20,503			19,095			40,287			37,804
Impairment loss		16,217			42,498			99,560			42,498
(Gain) loss on sales		(722	)		4,003			(722	)		4,003
		222,379			252,477			504,395			462,612
Brand marketing fund expenses from franchise properties		6,691			6,234			11,966			11,292
Total Operating Expenses		229,070			258,711			516,361			473,904
Operating Income (Loss)		40,485			15,177			(5,035	)		48,090
OTHER INCOME (EXPENSES):
Interest expense, net		(20,286	)		(22,191	)		(40,592	)		(44,962	)
Other income		117			67			1,100			579
Total Other (Expenses) Income, net		(20,169	)		(22,124	)		(39,492	)		(44,383	)
Income (Loss) Before Income Taxes		20,316			(6,947	)		(44,527	)		3,707
Income tax (expense) benefit		(5,398	)		2,380			20,721			(1,960	)
NET INCOME (LOSS)		14,918			(4,567	)		(23,806	)		1,747
Less: net income attributable to noncontrolling interest		(69	)		(96	)		(120	)		(268	)
Net Income (Loss) attributable to La Quinta Holdings’ stockholders	$	14,849		$	(4,663	)	$	(23,926	)	$	1,479
Earnings (loss) per share:
Basic and diluted	$	0.13		$	(0.04	)	$	(0.20	)	$	0.01

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

For the three and six months ended June 30, 2016 and 2015

	Three months ended						Six months ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
	(in thousands)
NET INCOME (LOSS)	$	14,918		$	(4,567	)	$	(23,806	)	$	1,747
Cash flow hedge adjustment, net of tax		(855	)		1,712			(5,779	)		(2,707	)
COMPREHENSIVE NET INCOME (LOSS)		14,063			(2,855	)		(29,585	)		(960	)
Comprehensive net income attributable to noncontrolling interests		(69	)		(96	)		(120	)		(268	)
Comprehensive net income (loss) attributable to La Quinta Holdings’ Stockholders	$	13,994		$	(2,951	)	$	(29,705	)	$	(1,228	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Equity (Unaudited)

For the six months ended June 30, 2016 and 2015

		Equity Attributable to La Quinta Holdings Inc. Stockholders
		Common Stock						Treasury Stock			Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
		Shares			Amount
	(in thousands, except share data)
Balance as of January 1, 2015			130,695,274		$	1,307		$	(1,532	)	$	1,129,815		$	(321,083	)	$	(3,127	)	$	3,075		$	808,455
Net income			—			—			—			—			1,479			—			268			1,747
Distributions			—			—			—			—			—			—			(370	)		(370	)
Equity based compensation			178,688			2			—			12,971			—			—			—			12,973
Cash benefit related to equity comp (APIC Pool)			—			—			—			1,005			—			—			—			1,005
Repurchase of common stock			(152,697	)		(2	)		(3,669	)		—			—			—			—			(3,671	)
Cash flow hedge adjustment			—			—			—			—			—			(2,707	)		—			(2,707	)
Balance as of June 30, 2015			130,721,265		$	1,307		$	(5,201	)	$	1,143,791		$	(319,604	)	$	(5,834	)	$	2,973		$	817,432

Balance as of January 1, 2016			124,302,318			1,310			(107,699	)		1,152,155			(294,718	)		(7,436	)		2,900			746,512
Net (loss) income			—			—			—			—			(23,926	)		—			120			(23,806	)
Distributions			—			—			—			—			—			—			(208	)		(208	)
Equity based compensation			748,993			7			—			7,095			—			—			—			7,102
Tax deficit related to equity comp (APIC pool)			—			—			—			(635	)		—			—			—			(635	)
Repurchase of common stock			(8,254,662	)		—			(100,843	)		—			—			—			—			(100,843	)
Cash flow hedge adjustment			—			—			—			—			—			(5,779	)		—			(5,779	)
Balance as of June 30, 2016			116,796,649		$	1,317		$	(208,542	)	$	1,158,615		$	(318,644	)	$	(13,215	)	$	2,812		$	622,343

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2016 and 2015

	June 30, 2016			June 30, 2015
	(in thousands)
Cash flows from operating activities:
Net (loss) income	$	(23,806	)	$	1,747
Adjustment to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		74,872			83,847
Amortization of other non-current assets		119			376
Amortization of intangible assets		385			475
Loss related to casualty disasters		21			671
Amortization of leasehold interests		(332	)		(346	)
Amortization of deferred costs		2,821			2,760
Impairment loss		99,560			42,498
(Gain) loss on sale or retirement of assets		(722	)		4,164
Equity based compensation		7,102			12,973
Excess tax benefit from equity based compensation		—			(1,005	)
Deferred taxes		(25,572	)		(3,622	)
Provision for doubtful accounts		338			1,045
Changes in assets and liabilities:
Accounts receivable		(7,583	)		(6,585	)
Other current assets		(6,993	)		(6,885	)
Other non-current assets		56			(2,430	)
Accounts payable		(884	)		4,440
Accrued payroll and employee benefits		1,842			(4,613	)
Accrued real estate taxes		(2,013	)		(876	)
Accrued expenses and other liabilities		1,432			(508	)
Other long-term liabilities		792			613
Net cash provided by operating activities		121,435			128,739
Cash flows from investing activities:
Capital expenditures		(58,310	)		(42,652	)
Insurance proceeds on casualty disasters		2,142			4,392
Proceeds from sale of assets		22,042			3,092
Payment of franchise incentives		(159	)		(30	)
Net cash used in investing activities		(34,285	)		(35,198	)

	June 30, 2016			June 30, 2015
	(in thousands)
Cash flows from financing activities:
Repayment of long-term debt		(8,757	)		(143,865	)
Purchase of treasury stock		(100,843	)		(3,671	)
Excess tax benefit from equity based compensation		—			1,005
Distributions to noncontrolling interests		(208	)		(370	)
Net cash used in financing activities		(109,808	)		(146,901	)
Decrease in cash and cash equivalents		(22,658	)		(53,360	)
Cash and cash equivalents at the beginning of the period		86,709			109,857
Cash and cash equivalents at the end of the period	$	64,051		$	56,497
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period	$	38,485		$	43,875
Income taxes paid during the period, net of refunds	$	3,725		$	8,425
SUPPLEMENTAL NON-CASH DISCLOSURE:
Capital expenditures included in accounts payable	$	5,397		$	9,027
Cash flow hedge adjustment, net of tax	$	(5,779	)	$	(2,707	)
Receivable for capital assets damaged by casualty disasters		1,027		$	2,937

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

La Quinta Holdings Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of and for the three and six months ended June 30, 2016

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Effective April 14, 2014 (the “IPO Effective Date”), La Quinta Holdings Inc. (“Holdings”) completed its initial public offering (“IPO”) in which Holdings issued and sold 44.0 million shares of common stock. Holdings was incorporated in the state of Delaware on December 9, 2013. Holdings may also be referred to herein as “La Quinta”, “we”, “us”, “our”, or the “Company”.

We own and operate hotels, some of which are subject to a land lease, located in the United States under the La Quinta brand. We also franchise and, until completion of our IPO, managed hotels under the La Quinta brand, with franchised hotels currently operating in the United States (“U.S.”), Canada, Mexico and Honduras. All new franchised hotels are La Quinta Inn & Suites in the U.S. and Canada and LQ Hotel in Mexico and in Central and South America. As of June 30, 2016 and 2015, total owned and franchised hotels, and the approximate number of associated rooms were as follows:

	June 30, 2016				June 30, 2015
	# of hotels		# of rooms		# of hotels		# of rooms
Owned ⁽¹⁾		335		42,700		351		44,600
Joint Venture		1		200		1		200
Franchised		553		45,000		526		42,400
Totals		889		87,900		878		87,200

⁽¹⁾ At June 30, 2016, Owned Hotels includes 13 hotels designated as assets held for sale, which are subject to definitive purchase agreements.

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with Holdings’ consolidated financial statements and notes thereto for the years ended December 31, 2015, 2014 and 2013, which are included in our Annual Report on Form 10-K, filed by Holdings with the Securities and Exchange Commission on February 25, 2016. All intercompany transactions have been eliminated. In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING STANDARDS

Revenue Recognition — Revenues primarily consist of room rentals, franchise fees and other hotel revenues. We defer a portion of our revenue from franchisees at the time the franchise agreement is signed and recognize the remainder upon hotel opening.

Room revenues are derived from room rentals at our Owned Hotels. We recognize room revenue on a daily basis based on an agreed-upon daily rate after the guest has stayed at one of our hotels. Customer incentive discounts, cash rebates, and refunds are recognized as a reduction of room revenues. Occupancy, hotel, and sales taxes collected from customers and remitted to the taxing authorities are excluded from revenues in the accompanying condensed consolidated statements of operations.

Included in franchise and other fee-based revenues are franchise fee revenues, which primarily consist of revenues from franchisees for application and initial fees , transfer fees , royalty, reservations, and training, as well as fees related to our guest loyalty program (“Returns”). We recognize franchise fee revenue on a gross basis because we (1) are the primary obligor in these arrangements, (2) have latitude in establishing rates, (3) perform the services delivered, (4) have some discretion over supplier selection, and (5) determine the specification of services delivered. The different types of franchise fee revenues are described as follows:

Upon execution of a franchise agreement, a franchisee is required to pay us an initial fee. We recognize the initial fee as revenue when substantial performance of our obligations to the franchisee with respect to the initial fee has been achieved. In most cases, the vast majority of the initial fee is recognized as revenue when each franchise agreement is signed as, after that date, our remaining obligations to the franchisee are limited to (1) pre-opening inspections, for which we defer $2,500, and (2) if mandated by us or agreed to with the franchisee, preopening training and marketing support related to entry into the La Quinta brand, for which we defer $5,000. These amounts represent an estimate of the value provided to the franchisee related to the services provided, and are based on our experience with time, materials, and third-party costs necessary to provide these services. We recognize the remaining deferred initial fee as revenue when the franchised property opens or if the agreement is terminated as the remaining service obligations have been fulfilled.

For franchise agreements entered into prior to April 1, 2013, we collect a monthly royalty fee from franchisees generally equal to 4.0% of their room revenues until the franchisee has operated as a La Quinta hotel for twenty-four consecutive months. Beginning in the twenty-fifth month of operation, the franchisee monthly royalty fee increases to 4.5%. Pursuant to franchise agreements entered into with new U.S. franchisees on or after April 1, 2013, we collect a royalty fee from franchisees equal to 4.5% of their room revenues until the franchisee has operated as a La Quinta hotel for twenty-four consecutive months. Beginning in the twenty-fifth month of operation, the franchisee monthly royalty fee increases to 5.0%. In each of these cases, the franchisee has the opportunity to earn the additional 0.5% back via rebate by achieving certain defined customer satisfaction results. Pursuant to franchise agreements entered into with franchisees outside of the U.S. on or after April 1, 2013, we generally collect a royalty fee from franchisees equal to 4.5% of their room revenues throughout the term and do not offer a rebate.

We receive reservation and technology fees, as well as fees related to Returns, in connection with franchising our La Quinta brand. Such fees are recognized based on a percentage of the franchisee’s eligible hotel room revenues or room count. We also perform certain other services for franchisees such as training and revenue management. Revenue for these services is recognized at the time the services are performed.

Other hotel revenues include revenues generated by the incidental support of hotel operations for Owned Hotels and other rental income. We record rental income from operating leases associated with leasing space for restaurants, billboards, and cell towers. Rental income is recognized on a straight-line basis over the life of the respective lease agreement.

Brand marketing fund revenues from franchise properties represent fees collected from third party franchise hotels related to maintaining our Brand Marketing Fund (“BMF”). We maintain the BMF on behalf of all La Quinta branded hotel properties, including our Owned Hotels, from which marketing and advertising campaign expenses are paid. Each La Quinta branded hotel is charged a percentage of its room revenue from which the expenses of the fund are covered. The corresponding expenditures of the BMF fees collected from franchised hotels are presented as brand marketing fund expenses from franchised hotels in our condensed consolidated statements of operations, resulting in no net impact to operating income (loss) or net income (loss).

Lodging operations are particularly sensitive to adverse economic and competitive conditions and trends, which could adversely affect the Company’s business, financial condition, and results of operations.

Assets held for sale— Long-lived assets are classified as held for sale when all of the following criteria are met:

•	Management, having the authority to approve the action, commits to a plan to sell the asset and does not expect significant changes to the plan or that the plan will be withdrawn

•	The asset is available for immediate sale in its present condition

•	The asset is being actively marketed

•	The sale of the asset is probable within one year

When we identify a long-lived asset as held for sale, depreciation of the asset is discontinued and the carrying value is reduced, if necessary, to the estimated sales price less costs to sell by recording a charge to current earnings. All assets held for sale are monitored through the date of sale for potential adjustments based on offers we are willing to take under serious consideration and continued review of facts and circumstances. Losses on sales are recorded to the extent that the amounts ultimately received for the sale of assets are less than the adjusted book values of the assets. Gains on sales are recognized at the time the assets are sold, provided there is

reasonable assurance the sales price will be collected and any future activities to be performed by the Company relating to the assets sold are expected to be insignificant.

Derivative Instruments — We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. We do not enter into derivative financial instruments for trading or speculative purposes.

We record all derivatives at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”), a hedge of the fair value of a recognized asset or liability (“fair value hedge”), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge or net investment hedge are recorded in the condensed consolidated statements of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the condensed consolidated statements of cash flows.

If we determine that we qualify for and will designate a derivative as a hedging instrument at the designation date, we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions, linking all derivatives designated as fair value hedges to specific assets and liabilities in our condensed consolidated balance sheets, and determining the foreign currency exposure of net investment of the foreign operation for a net investment hedge.

On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations via use of a statistical regression approach. Additionally, we measure ineffectiveness using the hypothetical derivative method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated or exercised.

Equity Based Compensation — We recognize the cost of services received in an equity based payment transaction with an employee as services are received and record either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.

The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period, including an estimate of forfeitures. The requisite service period is the period during which an employee is required to provide service for an award to vest.

Compensation cost for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not considered probable until they occur, no compensation expense for these awards is recognized.

Income Taxes —We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings during the period in which the new rate is enacted. For financial reporting purposes, income tax expense or benefit is based on reported financial accounting income or loss before non-controlling interests and income taxes related to our taxable subsidiaries.

We evaluate the probability of realizing the future benefits of deferred tax assets and provide a valuation allowance for the portion of any deferred tax assets where the likelihood of realizing an income tax benefit in the future does not meet the more-likely-than-not criteria for recognition.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We accrue interest and, if a pplicable, penalties for any uncertain tax positions. Our policy is to classify interest and penalties as a component of income tax expense. The Company has open tax years dating back to 2010.

Newly Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09. The new guidance on revenue from contracts with customers will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017; early adoption is permitted for annual reporting periods beginning after December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the impact of the amended guidance on our consolidated financial position, results of operations and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance is effective for the interim and annual periods beginning after December 15, 2018. Early application is permitted. We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for the interim and annual periods beginning after December 15, 2016. Early application is permitted. We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations and related disclosures.

Newly Adopted Accounting Standards

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. We adopted this standard on January 1, 2016. This adoption did not have an effect on the Company’s results of operations, cash flows or financial position.

In April 2015, the FASB issued ASU No. 2015-05: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the update specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. The update further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. ASU No. 2015-05 is effective for the Company for interim and annual periods beginning after December 15, 2015. We adopted this update as of January 1, 2016 on a retrospective basis. For the three and six months ended, June 30, 2015, we reclassified $2.1 million and $4.0 million of expense from depreciation and amortization to general and administrative expenses in the consolidated statement of operations. A corresponding reclassification was made in our consolidated statement of cash flows between depreciation and amortization and change in other

current assets. Additionally, cash payments in the amount of $1.2 million and $ 6 . 6 million for software service agreements associated with cloud computing arrangements , which were classified as ca pital expenditures for the three and six months ended June 30 , 2015, have been reclassified as a change in other current assets in our consolidated statement of cash flows.

From time to time, new accounting standards are issued by FASB or other standards setting bodies, which we adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

NOTE 3. ASSETS HELD FOR SALE

During the third quarter of 2015, 24 of our hotels and one additional restaurant parcel were classified as assets held for sale. The sale of these assets does not represent a major strategic shift and does not qualify for discontinued operations reporting. During the fourth quarter of 2015, 11 of these hotels were sold for $34.1 million, net of transaction costs. During the second quarter of 2016, three of these hotels were sold for $9.1 million, net of transaction costs. The remaining 10 are currently expected to close before the end of the third quarter of 2016.

During the first quarter of 2016, one additional hotel was classified as an asset held for sale. The sale of this hotel closed in the second quarter of 2016 for $8.4 million, net of transaction costs. Another hotel was identified and sold during the second quarter of 2016 for $4.6 million, net of transaction costs. These two hotel transactions resulted in a gain on sale of $0.7 million.

During the second quarter of 2016, three additional hotels were classified as assets held for sale. The sale of these hotels is expected to close in the third quarter of 2016.

As of June 30, 2016 and December 31, 2015, the carrying amounts of the major classes of assets for assets held for sale were as follows:


	June 30, 2016		December 31, 2015
	(in thousands)
Current assets	$	140	$	221
Property and equipment, net		37,048		34,982
Other non-current assets		316		320
Total assets held for sale	$	37,504	$	35,523

NOTE 4. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment as of June 30, 2016 and December 31, 2015:

	June 30, 2016			December 31, 2015
	(in thousands)
Land	$	742,870		$	796,790
Buildings and improvements		2,656,211			2,703,293
Furniture, fixtures, equipment and other		416,291			408,190
Total property and equipment		3,815,372			3,908,273
Less accumulated depreciation		(1,350,434	)		(1,288,281	)
Property and equipment, net		2,464,938			2,619,992
Construction in progress		21,611			3,480
Total property and equipment, net of accumulated depreciation	$	2,486,549		$	2,623,472

Depreciation and amortization expense related to property and equipment was $36.6 million and $42.1 million for the three months ended June 30, 2016 and 2015, respectively. Depreciation and amortization expense related to property and equipment was $74.9 million and $83.8 million for the six months ended June 30, 2016 and 2015, respectively. Construction in progress includes capitalized costs for ongoing projects that have not yet been put into service.

NOTE 5 . LONG-TERM DEBT

Long-term debt as of June 30, 2016 and December 31, 2015 was as follows:

	June 30, 2016		December 31, 2015
	(in thousands)
Current portion of term facility	$	17,514	$	17,514
Long-term portion of term facility		1,688,491		1,694,585
Total long-term debt	$	1,706,005	$	1,712,099

⁽¹⁾	As of June 30, 2016 and December 31, 2015, the 30 day United States dollar London Interbank Offering Rate (“LIBOR”) was 0.45% and 0.36%, respectively. As of June 30, 2016, the interest rate, maturity date and principal payments on the Term Facility were as follows:

During the six months ended June 30, 2016, we made quarterly scheduled principal payments of $8.8 million. During the six months ended June 30, 2015, we made a voluntary principal prepayment of $135.0 million and quarterly scheduled principal payments of $9.0 million.

The interest rate for the Term Facility through July 31, 2015 was LIBOR with a floor of 1.0% plus a spread of 3.0%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and as a result the rate decrease to LIBOR with a floor of 1.0% plus a spread of 2.75% for the period from August 1, 2015 to June 30, 2016. Included in the Term Facility as of June 30, 2016 and December 31, 2015 is an unamortized original issue discount of $7.5 million and $8.2 million, respectively. Included in the Term Facility as of June 30, 2016 and December 31, 2015 is the deduction of debt issuance costs of $20.4 million and $22.4 million, respectively. As of June 30, 2016 and December 31, 2015, we had $16.0 million and $16.5 million, respectively, in accrued interest included within accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

Term Facility

On April 14, 2014, Holdings’ wholly owned subsidiary, La Quinta Intermediate Holdings L.L.C. (the “Borrower”), entered into a new credit agreement (the “Agreement”) with JPMorgan Chase Bank, N.A. (“JPM”), as administrative agent, collateral agent, swingline lender and L/C issuer, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, and Wells Fargo Securities, LLC, as joint lead arrangers and joint book runners, and the other agents and lenders from time to time party thereto.

The credit agreement provides for senior secured credit facilities (collectively the “Senior Facilities”) consisting of:

$2.1 billion senior secured term loan facility (the “Term Facility”), which will mature in 2021; and

$250 million senior secured revolving credit facility (the “Revolving Facility”), $50 million of which is available in the form of letters of credit, which will mature in 2019.

Interest Rate and Fees —Borrowings under the Term Facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the JPM prime lending rate, (2) the Federal Funds Effective Rate plus 1/2 of 1.00% and (3) the adjusted LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the Term Facility is 2.00%, in the case of base rate loans, and 3.00%, in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a consolidated first lien net leverage ratio (as defined in the Agreement) of less than or equal to 4.50 to 1.00, subject to a base rate floor of 2.00% and a LIBOR floor of 1.00%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the step-down of 0.25% after that date.

Borrowings under the Revolving Facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the JPM prime lending rate, (2) the Federal Funds Effective Rate plus 1/2 of 1.00% and (3) the adjusted LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the Revolving Facility is 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, subject to three step-downs of 0.25% each upon the achievement of a consolidated first lien net leverage ratio of less than or equal to 5.00 to 1.00, 4.50 to 1.00 and 4.00 to 1.00, respectively. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in margin of 0.25%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the second step-down of 0.25% after that date.

In addition, the Borrower is required to pay a commitment fee to the lenders under the Revolving Facility in respect of the unutilized commitments thereunder. The commitment fee rate is 0.50% per annum subject to a step-down to 0.375%, upon achievement of a consolidated first lien net leverage ratio less than or equal to 5.00 to 1.00. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015, the commitment fee rate is 0.375%. The Borrow er is also required to pay customary letter of credit fees.

Amortization —Beginning September 2014, the Borrower was required to repay installments on the Term Facility in quarterly installments equal to 0.25% of the original principal amount less any voluntary prepayments on the Term Facility, with the remaining amount payable on the applicable maturity date with respect to the Term Facility.

The Senior Facilities contain certain representations and warranties, affirmative and negative covenants and events of default. If an event of default occurs, the lenders under the Senior Facilities will be entitled to take various actions, including the acceleration of amounts due under the Senior Facilities and actions permitted to be taken by a secured creditor. As of June 30, 2016, we were in compliance with all applicable covenants under the Senior Facilities.

Letters of Credit

As of June 30, 2016 and December 31, 2015, we have $12.6 million and $14.6 million, respectively, in letters of credit obtained through our Revolving Facility. We were required to pay a fee of 2.63% per annum related to these letters of credit. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in rate of 0.25%, resulting in a reduction of the per annum fee to 2.38%.

Interest Expense, Net

Net interest expense, including the impact of our interest rate swap (see Note 6), consisted of the following for the three and six months ended June 30, 2016 and 2015:

	For the three months ended June 30,						For the six months ended June 30,
Description	2016			2015			2016			2015
	(in thousands)
Term Facility	$	18,987		$	20,951		$	38,018		$	42,442
Amortization of deferred financing costs		978			949			1,948			1,891
Amortization of original issue discount		359			349			715			695
Other interest		1			2			8			5
Interest income		(39	)		(60	)		(97	)		(71	)
Total interest expense, net	$	20,286		$	22,191		$	40,592		$	44,962

NOTE 6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During the three and six months ended June 30, 2016 and 2015, derivatives were used to hedge the interest rate risk associated with our variable-rate debt.

Term Facility Interest Rate Swap

On April 14, 2014, the Borrower entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes a 1.00% LIBOR floor. Management has elected to designate this interest rate swap as a cash flow hedge for accounting purposes.

Fair Value of Derivative Instruments

The effects of our derivative instruments on our condensed consolidated balance sheets were as follows:

June 30, 2016

December 31, 2015

Balance Sheet

Classification

Fair Value

Balance Sheet

Classification

Fair Value

(in thousands)

Cash Flow Hedges:

Interest rate swap

Other long-

term liabilities

(20,331

)

Other long-

term liabilities

(11,440

)

Earnings Effect of Derivative Instruments

The effects of our derivative instruments on our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (loss), net of the effect for income taxes, were as follows:

	Classification of Gain	For the three months ended June 30,					For the six months ended June 30,
	(Loss) Recognized	2016			2015		2016			2015
		(in thousands)
Cash Flow Hedges:
Interest rate swap ⁽¹⁾	Other comprehensive income (loss)	$	(855	)	$	1,712	$	(5,779	)	$	(2,707	)

⁽¹⁾	There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the three and six months ended June 30, 2016 and 2015 June 30, respectively.

NOTE 7. FAIR VALUE MEASUREMENTS

The carrying amount and estimated fair values of our financial assets and liabilities, which include related current portions, were as follows:

	June 30, 2016						December 31, 2015
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(in thousands)
Cash and cash equivalents ⁽¹⁾	$	64,051		$	64,051		$	86,709		$	86,709
Interest rate swaps ⁽²⁾		(20,331	)		(20,331	)		(11,440	)		(11,440	)
Long-term debt ⁽³⁾⁽⁴⁾		(1,706,005	)		(1,678,982	)		(1,712,099	)		(1,675,760	)

⁽¹⁾	Classified as Level 1 under the fair value hierarchy.

⁽²⁾	Classified as Level 2 under the fair value hierarchy.

⁽³⁾	Classified as Level 3 under the fair value hierarchy.

⁽⁴⁾ Carrying amount includes deferred debt issuance costs of $20.4 million and $22.4 million as of June 30, 2016 and December 31, 2015, respectively.

We believe the carrying amounts of our cash and cash equivalents approximated fair value as of June 30, 2016 and December 31, 2015, as applicable. Our estimates of the fair values were determined using available market information and valuation methods appropriate in the circumstances. Considerable judgment is necessary to interpret market data and develop estimated fair values. Proper placement of fair value measurements within the valuation hierarchy is considered each reporting period. Third-party information received for calculating Level 3 fair value measurements is reviewed to ensure it is in accordance with GAAP. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

The fair values of interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each instrument. This analysis reflects the contractual terms of the agreements, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. We incorporate credit valuation

adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair va lue measurements.

We estimate the fair value of our long-term debt using discounted cash flow analysis based on current market inputs for similar types of arrangements. The primary sensitivity in these calculations is based on the selection of appropriate discount rates. We estimated the discount rate to be approximately 4.3% and 4.4%, as of June 30, 2016 and December 31, 2015, respectively. Fluctuations in these assumptions will result in different estimates of fair value.

We test long-lived assets for impairment if events or changes in circumstances indicate that the asset might be impaired. In the first quarter of 2016, we identified approximately 50 hotels where it became more likely than not that the holding period will be significantly shorter than the previously estimated useful lives. We recorded an impairment charge of $80.3 million in the first quarter of 2016, to adjust the carrying value of these assets to the lesser of their estimated fair value or carrying value. These assets did not meet the criteria for classification as assets held for sale as of the date of impairment. In the second quarter of 2016, one of these hotels sold and three were moved to assets held for sale. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value of these approximately 50 hotels are based on multiples of room revenues ranging from 3.70 to 1.50 for the identified assets.

During the first quarter of 2016, we entered into an agreement to sell one of our Owned Hotels for approximately $8.0 million, net of estimated selling costs. We recorded an impairment charge of $3.0 million to adjust the carrying value of this Owned Hotel to its estimated fair value. During the first quarter of 2016, this Owned Hotel met the criteria for classification as assets held for sale and was sold in the second quarter of 2016.

During the second quarter of 2016, we entered into agreements to sell three of our Owned Hotels included in the approximately 50 hotels described above, for approximately $10.4 million, net of estimated selling costs. The carrying value of these properties had been adjusted to the lesser of their estimated fair value or carrying value in the first quarter. We recorded an additional impairment charge of $0.6 million to adjust the carrying value of these Owned Hotels to their estimated fair value including a reduction for selling costs. During the second quarter of 2016, these Owned Hotels met the criteria for classification as assets held for sale. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value of these assets are based on estimated selling price, less selling costs.

In June of 2016, we began negotiations to sell two of our Owned Hotels. As such it became more likely than not that the holding period for these hotels will be significantly shorter than the previously estimated useful lives. During the second quarter of 2016, we recorded an impairment charge of $13.7 million to adjust the carrying value of these Owned Hotels to their estimated fair value. These Owned Hotels did not meet the criteria for classification as assets held for sale as of June 30, 2016. The fair value estimate is considered to be Level 2 within the fair value measurement hierarchy. The inputs used in determining the fair value of these assets are based on negotiated purchase prices from prospective buyers for the identified assets. Subsequent to June 30, 2016, we entered into purchase and sale agreements for these two hotels.

Additionally, during the second quarter of 2016, we identified a hotel where it became more likely than not that the carrying amount would not be recov erable due to a change in market and economic conditions. We recorded an impairment charge of $1.0 million to adjust the carrying value of this hotel to its estimated fair value. The fair value estimate is considered to be Level 3 within the fair value measurement hierarchy. The inputs used in determining the fair value are based on a combination of historical and projected cash flows and other available market information, such as recent sales prices for similar assets.

The following fair value hierarchy table presents information about assets measured at fair value on a nonrecurring basis during the period ended June 30, 2016:

June 30, 2016	Level 1		Level 2		Level 3		Total Fair Value		Impairment Charge
	(in thousands)
Owned Hotels identified for possible sale	$	—	$	18,500	$	251,163	$	269,663	$	94,088
Assets Held for Sale ⁽¹⁾		—		—		37,504		37,504		1,527
1 Owned Hotel		—		—		1,150		1,150		985
	$	—	$	18,500	$	289,817	$	308,317	$	96,600

⁽¹⁾ Assets Held for Sale include 10 hotels and a restaurant parcel that were designated as held for sale in the third quarter of 2015,

in addition to the 3 Owned Hotels that the Company entered into an agreement to sell during the second quarter of 2016. The impairment charge for Assets Held for Sale is related to updating the fair value to be net of estimated selling cost.

In the second quarter of 2015, we identified a portfolio of 24 hotels where it became more likely than not the hotels would be sold significantly before the end of the previously estimated useful life. We recorded an impairment charge of $42.5 million to a djust the carrying value of these assets to their estimated fair value. The inputs used in determining the fair value in the second quarter for these 24 hotels were based on estimated selling prices ranging from $70.0 million to $75.0 million. During the t hird quarter of 2015, these assets met the criteria for classification as assets held for sale. During the fourth quarter of 2015, 11 of these hotels were sold for $34.1 million, net of transaction costs. During the second quarter of 2016, three of these h otels were sold for $9.1 million, net of selling costs. The remaining 10 are currently expected to close before the end of the third quarter of 2016.

June 30, 2015

Level 1

Level 2

Level 3

Total Fair

Value

Impairment

Charge

(in thousands)

24 Owned Hotels Held for Sale ⁽¹⁾

—

71,235

42,498

NOTE 8. RELATED PARTY TRANSACTIONS

Prior to the IPO Effective Date, Holdings and predecessor entities were owned and controlled by Blackstone Real Estate Partners IV L.P. and affiliates (“BREP IV”) and Blackstone Real Estate Partners V L.P. and affiliates (“BREP V”). BREP IV and BREP V are affiliates of The Blackstone Group L.P. (collectivity, the “Funds” or “Blackstone”). In connection with the IPO, the Funds and other pre-IPO owners contributed their equity interests in the predecessor entities to Holdings in exchange for an aggregate of 81.06 million shares of common stock of Holdings. Holdings then transferred such equity interests to its wholly-owned subsidiary which pledged these interests as security for borrowings under a new credit agreement.

In November 2014 and in April 2015, Blackstone completed two secondary offerings in which it registered and sold 23.0 million and 23.9 million shares of Holdings common shares, respectively. As of June 30, 2016, Blackstone beneficially owned 30.1% of Holdings’ common shares outstanding.

As of June 30, 2016 and December 31, 2015, approximately $70.7 million and $41.6 million, respectively, of the aggregate principal amount of our Term Facility was owned by affiliates of Blackstone. We make periodic interest and principal payments on such debt in accordance with its terms.

We engaged Blackstone Advisory Partners L.P. to provide certain financial consulting services in connection with the public offering of our common stock by certain stockholders in April 2015 for a fee of approximately $0.4 million.

We also purchase products and services from entities affiliated with or owned by Blackstone. The fees paid for these products and services were approximately $0.7 million during the three months ended June 30, 2016 and 2015. The fees paid for these products and services were approximately $2.2 million and $1.5 million during the six months ended June 30, 2016 and 2015, respectively.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Environmental — We are subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances, and regulations. Such requirements often impose liability without regard to whether the current or previous owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Although we have incurred and expect to incur remediation and other environmental costs during the ordinary course of operations, we anticipate that such costs will not have a material effect on our financial condition, results of operations, or cash flows.

Litigation — On April 25, 2016, a purported stockholder class action lawsuit, captioned Beisel v. La Quinta Holdings Inc. et al., was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of the Company’s common stock pursuant to the Company’s March 24, 2015 secondary public offering (the “March Secondary Offering”) and on behalf of purchasers of the Company’s common stock from February 25, 2015 through September 17, 2015 (the “Class Period”). The complaint names as defendants the Company, certain current and former Company officers, and certain current and former members of the Board of Directors, among others. The complaint alleges, among other things, that, in violation of the federal securities laws, the registration statement and prospectus filed in connection with the March Secondary Offering contained materially false and misleading information and that the Company as well as certain current and former officers made false and misleading statements in earnings releases and to analysts during the Class Period. Plaintiff seeks unspecified compensatory damages and other relief. The Company believes that the putative class action lawsuit is without merit and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.

We do not consider our ultimate liability with respect to any such claims or lawsu its, or the aggregate of such claims and lawsuits, to be material in relation to our consolidated financial condition, results of operations or our cash flows taken as a whole.

We maintain general and other liability insurance; however, certain costs of defending lawsuits, such as those below the retention or insurance deductible amount, are not covered by or are only partially covered by insurance policies, and our insurance carriers could refuse to cover certain claims in whole or in part. We regularly evaluate our ultimate liability costs with respect to such claims and lawsuits. We accrue costs from litigation as they become probable and estimable.

Casualty Losses — We maintain insurance for property and casualty damage, subject to deductibles and policy terms and conditions, attributable to wind, flood, and earthquakes. We also maintain business interruption insurance.

Tax Contingencies — We are subject to regular audits by federal and state tax authorities. These audits may result in additional tax liabilities. The Internal Revenue Service (the “IRS”) is currently auditing the tax returns of La Quinta Corporation, one of our former REITs prior to the Pre-IPO Transactions, and BRE/LQ Operating Lessee Inc., one of our former taxable REIT subsidiaries prior to the Pre-IPO Transactions, in each case for the tax years ended December 31, 2010 and 2011. We received a draft notice of proposed adjustment from the IRS on January 9, 2014, and the notice of proposed adjustment was issued to us on June 2, 2014. We submitted a timely response to the notice of proposed adjustment and, on July 7, 2014, we received an IRS 30-Day Letter proposing to impose a 100% tax on the REIT totaling $158 million for the periods under audit in which the IRS has asserted that the rent charged for these periods under the lease of hotel properties from the REIT to the taxable REIT subsidiary exceeded an arm’s length rent. In addition, the IRS proposed to eliminate $89 million of net operating loss carryforwards for the taxable REIT subsidiary for the tax years 2006 through 2009; however, in an IRS rebuttal received on September 26, 2014, the IRS conceded its proposed adjustment on this point was incorrect. We disagree with the IRS’ position with respect to rents charged by the REIT to its taxable REIT subsidiary and have appealed the proposed tax and adjustments to the IRS Appeals Office. In determining amounts payable by our taxable REIT subsidiary under the lease, we engaged a third party to prepare a transfer pricing study contemporaneous with the lease which concluded that the lease terms were consistent with an arm’s length rent as required by relevant provisions of the Internal Revenue Code of 1986 (the “Internal Revenue Code”) and applicable Treasury Regulations. Attorneys and others representing the Company conducted preliminary discussions regarding the appeal with the IRS Appeals Office team on March 31, 2015 and April 1, 2015. In response to a supplemental analysis submitted by the IRS economist to the Appeals Officer and provided to us on August 18, 2015, we submitted responses dated September 3, 2015 and October 1, 2015. Our discussions with the Appeals Officer are ongoing. We believe the IRS transfer pricing methodologies applied in the audits contain flaws and that the IRS proposed tax and adjustments are inconsistent with the U.S. federal tax laws related to REITs. We have concluded that the positions reported on our tax returns under audit by the IRS are, based on their technical merits, more-likely-than-not to be sustained upon examination. Accordingly, as of June 30, 2016, we have not established any reserves related to this proposed adjustment or any other issues reflected on the returns under examination.

On November 25, 2014, we were notified that the IRS intended to examine the tax returns of the same entities subject to the 2010 and 2011 audit in each case for the tax years ended December 31, 2012 and 2013. That examination is in process; as of June 30, 2016, we have not been advised of any proposed adjustments.

Purchase Commitments — As of June 30, 2016, we had approximately $24.7 million of purchase commitments primarily related to certain continuing redevelopment and renovation projects and information technology enhancements.

Franchise Commitments — Under certain franchise agreements, we are committed to provide certain incentive payments, reimbursements, rebates, and other payments to help defray certain costs. Our obligation to fund these commitments is contingent upon certain conditions set forth in the respective franchise agreement. The franchise agreements generally require that, in the event that the franchise relationship is terminated, the franchisee is required to repay any outstanding balance plus any unamortized portion of any incentive payment. As of June 30, 2016, we had $11.2 million in outstanding commitments owed to various franchisees for such financial assistance.

NOTE 10. INCOME TAXES

The Company recorded a provision for federal, state and foreign income tax expense of approximately $5.4 million and income tax benefit of $20.7 million for the three and six months ended June 30, 2016, respectively. The Company recorded a provision for federal, state and foreign income benefit of approximately $2.4 million and tax expense of approximately $2.0 million for the three and six months ended June 30, 2015, respectively. The provision for the three and six month periods ended June 30, 2016 and 2015, differs from the statutory federal tax rate of 35% primarily due to the impact of state income taxes and, for 2015, the impact of certain equity compensation charges that are not deductible for income tax purposes.

NOTE 11 . EMPLOYEE BENEFIT PLANS

We maintain a deferred savings plan covering substantially all of our employees that qualified under Section 401(k) of the Internal Revenue Code. Our deferred savings plan has an employer matching contribution of 100% of the first 3% and 50% of the next 2% of an employee’s eligible earnings, which vests immediately. We paid employer contributions of approximately $0.6 million and $1.2 million during both the three and six month periods ended June 30, 2016 and 2015, respectively.

NOTE 12. EQUITY-BASED COMPENSATION

We issue time-vesting restricted stock awards (“RSAs”), time-vesting restricted stock units (“RSUs), and performance-based restricted stock units (“PSUs”).

During the three and six months ended June 30, 2016, we recognized compensation expense of $4.6 million and $7.1 million, respectively, excluding related taxes. During the three and six months ended June 30, 2015, we recognized compensation expense of $4.0 million and $13.0 million, respectively, excluding related taxes. Unrecognized compensation expense as of June 30, 2016 was $21.4 million, which is expected to be recognized over a weighted-average period of 1.6 years.

As of June 30, 2016, there were 11.2 million shares of common stock available for future issuance under our Amended and Restated 2014 Omnibus Incentive Plan, including shares issuable pursuant to the units granted under our restricted stock unit awards.

RSAs — During the six months ended June 30, 2016, we issued 0.7 million RSAs with a weighted average grant date fair value of $11.65 per share, which generally vest in equal annual installments over three years from the date of grant.

RSUs — During the six months ended June 30, 2016, we issued 0.1 million RSUs with a weighted average grant date fair value of $11.48 per unit, which generally vest in equal annual installments over three years from the date of grant. Vested RSUs are settled for our common stock.

PSUs — During the six months ended June 30, 2016, we issued PSUs that would result in 0.4 million shares being issued at target value to certain of our employees. The performance period for PSUs is generally three years. The calculation of the value of the units granted during the six months ended June 30, 2016 is based solely on our total shareholder return (“TSR”) relative to the Relative Shareholder Return. The number of common shares issued in exchange for each PSU at the end of the performance period is determined based on defined target amounts for Relative Shareholder Return. Possible payout multiples range from 33% of target, which represents the threshold and below which no payout is given, and 200% of target, which represents the maximum payout. Vested PSUs are settled with shares of our common stock.

The weighted average grant date fair value of the PSUs granted during the six months ended June 30, 2016 was $12.18 per unit, which was determined using a Monte Carlo simulation valuation model with the following assumptions:

Expected volatility ⁽¹⁾	29.03	%
Dividend yield ⁽²⁾	—	%
Risk-free rate ⁽³⁾	0.99	%
Expected term (in years) ⁽⁴⁾	2.62

⁽¹⁾	Expected volatility is calculated as the average of the long-term historical volatility based on the peer companies and our implied volatility.

⁽²⁾	At the time of the PSU grant, we had no foreseeable plans to pay dividends during the expected term of these performance shares.

⁽³⁾	Based on the yields of U.S. Department of Treasury instruments with similar expected lives.

⁽⁴⁾	As of the grant date.

NOTE 13. EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding plus other potentially dilutive securities. Dilutive securities include equity based awards issued under long-term incentive plans.

The calculations of basic and diluted (loss) earnings per share are as follows:

	For the three months ended June 30,					For the six months ended June 30,
	2016		2015			2016			2015
	(in thousands, except per share data)
Numerator:
Net income (loss) attributable to La Quinta Holdings’ stockholders	$	14,849	$	(4,663	)	$	(23,926	)	$	1,479
Denominator:
Weighted average number of shares outstanding, basic		117,280		129,544			120,448			128,971
Weighted average number of shares outstanding, diluted		117,360		129,544			120,448			130,310

Basic and diluted earnings (loss) per share	$	0.13	$	(0.04	)	$	(0.20	)	$	0.01

For the three and six month periods ended June 30, 2016, approximately 0.7 million shares and 1.6 million shares, respectively, were excluded from the computation of diluted shares, as their impact would have been anti-dilutive. Approximately 1.1 million shares for the three month period ended June 30, 2015, were excluded from the computation of diluted shares, as their impact would have been anti-dilutive. For the six month period ended June 30, 2015, no shares were anti-dilutive.

During March 2016, the Company's board of directors authorized a program to repurchase an aggregate of up to $100 million of the Company’s common stock (the “Repurchase Program”). These repurchases were made from time to time in the open market, in privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan, at prices that the Company deems appropriate and subject to market conditions, applicable law and other factors deemed relevant in the Company's sole discretion. The Repurchase Program does not obligate the Company to repurchase any dollar amount or number of shares of common stock and the program may be suspended or discontinued at any time.

Under the Repurchase Program, through June 30, 2016, the Company repurchased 8.1 million shares of common stock. These shares were repurchased at a weighted-average price of $12.27 per share, for an aggregate purchase price, including commissions, of $100.0 million. The shares repurchased through June 30, 2016 represented approximately 6.6% of the Company's total shares of common stock outstanding as of December 31, 2015. The shares of common stock that were repurchased were placed in treasury stock.

NOTE 14. SEGMENTS

Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, who is our chief operating decision maker, to assess performance and make decisions regarding the allocation of resources. Our operating and reportable segments are defined as follows:

Owned hotels —This segment derives its earnings from the operation of owned hotel properties located in the United States.

Franchise and management —This segment derives its earnings primarily from revenues earned under various franchise and management agreements relating to our owned and franchise hotels, which provide for us to earn compensation for the licensing of our brand to franchisees, as well as for services rendered, such as hotel management and providing access to certain shared services and marketing programs such as reservations, Returns, and property management systems.

Corporate and other includes revenues generated and operating expenses incurred in connection with the overall support and brand management of our owned, managed, and franchised hotels and operations.

The performance of our operating segments is evaluated primarily based upon Adjusted EBITDA, which should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. We define Adjusted EBITDA as our net (loss) income (exclusive of non-controlling interests) before interest expense, income tax expense (benefit), and depreciation and amortization, further adjusted to exclude certain items, including, but not limited to: gains, losses, and expenses in connection with: (i) asset dispositions; (ii) debt modifications/retirements; (iii) non-cash impairment charges; (iv) discontinued operations; (v) equity based compensation and (vi) other items.

The table below shows summarized consolidated financial information by segment for the three and six months ended June 30, 2016 and 2015 :

	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
	(in thousands)
Revenues
Owned hotels	$	236,364		$	242,443		$	451,919		$	465,893
Franchise and management ⁽¹⁾		30,900			30,144			57,120			55,897
Segment revenues		267,264			272,587			509,039			521,790
Other fee-based revenues from franchise properties		6,691			6,234			11,966			11,292
Corporate and other ⁽²⁾		33,008			33,696			62,131			63,105
Intersegment elimination ⁽³⁾		(37,408	)		(38,629	)		(71,810	)		(74,193	)
Total revenues	$	269,555		$	273,888		$	511,326		$	521,994
Adjusted EBITDA
Owned hotels		83,239			90,636			151,492			166,824
Franchise and management		30,900			30,144			57,120			55,897
Segment Adjusted EBITDA		114,139			120,780			208,612			222,721
Corporate and other		(8,728	)		(8,944	)		(18,904	)		(20,881	)
Adjusted EBITDA	$	105,411		$	111,836		$	189,708		$	201,840

(1)

This segment includes intercompany fees which are charged to our owned hotels to reflect that certain functions, such as licensing and management, are included in the franchise and management segment. We charge a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(2)

Includes revenues related to our brand management programs and other cost reimbursements. The portions of these fees that are charged to our owned hotels totaled $18.9 million and $20.0 million for the three month periods ended June 30, 2016 and 2015, respectively, and $36.5 million and $38.3 million for the six month periods ended June 30, 2016 and 2015, respectively. This includes a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

(3)

Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $37.4 million and $38.6 million for the three month periods ended June 30, 2016 and 2015, respectively, and $71.8 million and $74.2 million for the six month periods ended June 30, 2016 and 2015, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

The table below provides a reconciliation of Adjusted EBITDA to EBITDA and EBITDA to net income (loss) attributable to La Quinta Holdings’ stockholders for the three and six month periods ended June 30, 2016 and 2015:

	For the three months ended June 30,						For the six months ended June 30,
	2016			2015			2016			2015
	(in thousands)
Adjusted EBITDA	$	105,411		$	111,836		$	189,708		$	201,840
Impairment loss		(16,217	)		(42,498	)		(99,560	)		(42,498	)
Gain (loss) on sale		722			(4,003	)		722			(4,003	)
Loss on retirement of assets		—			—			—			(161	)
(Loss) gain related to casualty disasters		(690	)		134			(21	)		(671	)
Equity based compensation		(4,620	)		(4,175	)		(7,110	)		(13,144	)
Amortization of software service agreements ⁽¹⁾		(2,487	)		(2,061	)		(4,634	)		(3,953	)
Other losses, net ⁽²⁾		(4,607	)		(1,501	)		(7,547	)		(4,273	)
EBITDA		77,512			57,732			71,558			133,137
Interest expense		(20,325	)		(22,251	)		(40,689	)		(45,033	)
Income tax (expense) benefit		(5,398	)		2,380			20,721			(1,960	)
Depreciation and amortization		(36,871	)		(42,428	)		(75,396	)		(84,397	)
Noncontrolling interests		(69	)		(96	)		(120	)		(268	)
Net income (loss) attributable to La Quinta Holdings’ stockholders	$	14,849		$	(4,663	)	$	(23,926	)	$	1,479

⁽¹⁾

We adopted ASU No. 2015-05 as of January 1, 2016. Accordingly, amortization of software service agreements in the amount of $2.1 million and $4.0 million, which was classified as depreciation and amortization for the three and six months ended June 30, 2015, respectively, has been to reclassified general and administrative in our consolidated statement of operations. See Note 2 for additional information.

⁽²⁾

Other gains (losses), net primarily consist of net income (loss) attributable to the BMF (which, over time, runs at a break-even level, but may reflect a profit or loss from period to period), secondary offering costs, IRS legal defense costs, severance costs and litigation reserve adjustments.

The following table presents assets for our reportable segments, reconciled to consolidated amounts as of June 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
	(in thousands)
Total Assets
Owned hotels	$	2,549,230	$	2,682,394
Franchise and management		196,052		192,284
Total segments assets		2,745,282		2,874,678
Corporate and other		95,389		111,166
Total	$	2,840,671	$	2,985,844

The following table presents capital expenditures for our reportable segments, reconciled to our consolidated amounts for the six month periods ended June 30, 2016 and 2015:

	For the six months ended June 30,
	2016		2015 (1)
Capital Expenditures
Owned hotels	$	51,337	$	38,116
Franchise and management		—		—
Total segment capital expenditures		51,337		38,116
Corporate and other		6,973	$	4,536
Total	$	58,310	$	42,652

⁽¹⁾

We adopted ASU No. 2015-05 as of January 1, 2016. Accordingly, cash payments of software service agreements in the amount of $6.6 million, which were classified as capital expenditures in corporate and other for the six months ended June 30, 2015, have been reclassified as a change in other current assets in our consolidated statement of cash flows. See Note 2 for additional information.

************

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “2015 Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Our business

We are a leading owner, operator and franchisor of select-service hotels primarily serving the midscale and upper-midscale segments under the La Quinta brand. All new franchised hotels in the U.S. and Canada are La Quinta Inn & Suites. Building on this strong brand identity, in the second quarter of 2016, we converted all Mexico locations to the “LQ Hotel” mark as the primary hotel identifier, with the “La Quinta” tag line. All new franchised locations in Mexico and in Central and South America will now use “LQ Hotel” as their primary mark. Our system-wide portfolio, as of June 30, 2016, consisted of 889 hotels representing approximately 87,900 rooms located predominantly across 48 U.S. states, as well as in Canada, Mexico and Honduras, of which 336 hotels were owned and operated and 553 were franchised. We also have a pipeline of 238 franchised hotels in the United States, Mexico, Colombia, Nicaragua, Guatemala, Chile and El Salvador. We primarily derive our revenues from owned hotel operations and fees generated from franchised hotels.

All of our long-lived assets are located in the United States and, during the three and six months ended June 30, 2016, we derived over 99% of our revenue from within the United States.

In 2016, the Company is focusing on key strategic priorities designed to (1): Drive consistency in our product, (2) Drive consistency in the delivery of an outstanding guest experience, and (3) Drive engagement with our brand by investing in points of differentiation. Our current strategic initiatives in support of these priorities are centered around (1) a comprehensive strategic review of our owned hotel portfolio to evaluate the position of each hotel within our brand, (2) identifying and testing enhancements to the hotel operating model for our owned hotels, and (3) delivering enhancements to the La Quinta Returns loyalty program. Possible outcomes from the evaluations of our owned hotel portfolio include, but are not limited to, improving a hotel through a significant renovation, or disposing the hotel and/or removing it from the La Quinta brand and opening the market up to potential new franchise development.

Segments

Owned Hotels —This segment derives its earnings from the operation of owned hotel properties located in the United States.

Franchise and management —This segment derives its earnings primarily from fees earned under various license and franchise hotel agreements relating to our owned and franchised hotels. These agreements provide for us to earn compensation for the licensing of our brand to franchisees, for providing certain services (including hotel management services) and for providing access to certain shared services and marketing programs such as reservations, La Quinta Returns, and property management systems. We do not currently generate, and did not generate over the periods presented, any revenue from the management of hotel operations for third parties. This segment includes intercompany fees, which are charged to our owned portfolio to reflect that certain functions, such as franchise, licensing and management, are included in the franchise and management segment. Franchise agreements with our owned hotels provide for a franchise fee of 4.5% of gross room revenues and a management fee of 2.5% of gross operating revenue for our owned hotels. We set the franchise fee on a basis that reflects the services and rights covered by the franchise agreements and because, as a public company with two segments that may be valued differently by investors, we believe it is meaningful to investors to show a franchise fee on our owned portfolio that is consistent with the franchise fee we charge our franchisees. We set the management fee on a basis that reflects current market rates for select service hotels, and the current composition of our owned portfolio and the services to be provided. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Our segment information also reflects corporate and other, which includes revenues generated by and related to operating expenses incurred in connection with the overall support and brand management of our owned, managed and franchised hotels and

operations. The franchise agreements with our owned h otels also include a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other .

We have a business model that involves both ownership of properties and franchising of third-party owned properties. This provides us with diversified revenue and income streams that balance both the advantages and risks associated with these lines of business.

As an owner of hotels, we can capture the full benefit of increases in operating profits during periods of increasing demand or ADR. The cost structure of our typical hotel is more fixed than variable, so as demand and ADR increase over time, the pace of increase in operating profits typically is higher than the pace of increase of revenues. Hotel ownership is, however, more capital intensive than granting franchise agreements to third-party hotel owners, as we are responsible for the costs and capital expenditures for our Owned Hotels. The profits realized by us in our Owned Hotels segment are generally more significantly affected by economic downturns and declines in revenues than the results of our Franchise hotels. See also “—Key components and factors affecting our results of operations—Expenses” and “Risk Factors—Risks related to our business and industry” in our 2015 Form 10-K.

As a franchisor of hotels, growth in the number of franchised hotels and earnings from franchises typically results in higher overall returns on invested capital because the capital required to build and maintain franchised hotels is typically provided by the owner of the respective property with minimal or no capital required by us, as franchisor. During periods of increasing demand, we do not, however, share in most of the benefits of increases in profits from franchised hotels because franchisees do not pay us fees based on profits. A principal component of our current growth strategy is to focus our expansion on our franchise business.

For purposes of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following table sets forth the number of net owned and franchised La Quinta branded hotels as of June 30, 2016 and 2015.

	As of June 30,
	2016		2015
Number of Hotels in Operation
Owned Hotels ⁽¹⁾		336		352
Franchised Hotels		553		526
Total Owned and Franchised Hotels		889		878

⁽¹⁾ Owned Hotels includes 18 properties that are subject to ground leases; we include these 18 properties as “Owned Hotels” throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Owned Hotels also includes one hotel owned via a joint venture in which we have a controlling interest. At June 30, 2016, Owned Hotels includes 13 hotels designated as assets held for sale, which are subject to definitive purchase agreements.

The following table summarizes our owned, franchised and managed hotels as of June 30, 2016 and 2015:

	As of June 30,
	2016		2015
Number of Hotels in Operation
Company Owned Hotels
La Quinta Inn & Suites (interior corridor) ⁽¹⁾		182		185
La Quinta Inn & Suites (exterior corridor)		3		3
La Quinta Inns (interior corridor) ⁽¹⁾		50		54
La Quinta Inns (exterior corridor) ⁽¹⁾		101		110
Total Owned		336		352
Franchised Hotels
La Quinta Inn & Suites (interior corridor)		466		438
La Quinta Inn & Suites (exterior corridor)		3		3
La Quinta Inns (interior corridor)		71		78
La Quinta Inns (exterior corridor)		4		7
LQ Hotel (interior corridor)		9		—
Total Franchised		553		526
Total Hotels		889		878

⁽¹⁾ Of the 13 Owned Hotels designated as assets held for sale, two are La Quinta Inn & Suites (interior corridor), three are La Quinta Inns (interior corridor) and eight are La Quinta Inns (exterior corridor).

Seasonality

The hotel industry is seasonal in nature. Generally, our revenues are greater in the second and third quarters than in the first and fourth quarters. The timing of holidays can also impact our quarterly results. The periods during which our properties experience higher revenues vary from property to property and depend principally upon location. This seasonality can be expected to cause quarterly fluctuations in revenue, profit margins and net earnings. Additionally, our quarterly results may be further affected by the timing of certain of our marketing production expenditures. Further, the timing of opening of newly constructed or franchised hotels and the timing of any hotel acquisitions or dispositions may cause a variation of revenue and earnings from quarter to quarter.

Inflation

We do not believe that inflation had a material effect on our business during the three and six month periods ended June 30, 2016 and 2015. Although we believe that increases in the rate of inflation will generally result in comparable increases in hotel room rates, severe inflation could contribute to a slowing of the U.S. economy. Such a slowdown could result in a reduction in room rates and occupancy levels, negatively impacting our revenues and net income.

Key components and factors affecting our results of operations

Revenues

We primarily derive our revenues from the following sources:

Room revenues. Represents revenues derived from hotel operations at owned hotels which are almost exclusively driven by room rentals. These revenues are primarily derived from three categories of guests: leisure, corporate and group.

Franchise fees. Represents revenues derived from franchise fees received in connection with the franchising of our brand, and other revenue generated by the incidental support of hotel operations for franchised hotels. Franchise fees consist of an initial fee upon the entry of a new hotel into the system and a monthly royalty fee, generally calculated as a percentage of gross room revenue. As new franchised hotels are established in our franchise system, we expect the franchise fees received from such hotels to increase over time as they establish their presence in the marketplace and stabilize their operations. If a franchise property changes owners, we generally charge a transfer fee.

Management fees. Represents revenues derived from management fees received in connection with the management of day-to-day hotel operations, and other revenue generated by the incidental support of hotel operations for managed properties. Management fees are generally calculated as a percentage of gross room revenue.

Other hotel revenues. Other hotel revenues include revenues generated by the incidental support of hotel operations for owned hotels, including charges to guests for vending commissions, meeting and banquet room revenue, laundry services, and other rental income from operating leases associated with leasing space for restaurants, billboards and cell towers.

Brand marketing fund revenues from franchised and managed properties . These revenues represent the fees collected from our franchised and managed hotels related to our Brand Marketing Fund (“BMF”), which are calculated as a percentage of gross room revenues. The corresponding expenses are presented as other expenses from franchised and managed properties in our condensed consolidated statements of operations, resulting in no impact to operating income or net income.

Consumer demand for our services is closely linked to the performance of the general economy on both a national and regional basis and is sensitive to business and personal discretionary spending levels. Declines in consumer demand due to adverse general economic conditions, risks affecting or reducing travel patterns, lower consumer confidence and adverse political conditions can lower the revenues and profitability of our owned hotels and the amount of franchise fee revenues we are able to generate from our franchised hotels. As a result, changes in consumer demand and general business cycles can subject, and have subjected, our revenues to significant volatility. See “Risk Factors—Risks related to our business and industry” in our 2015 Form 10-K.

The downturn in the oil and gas industry has significantly affected demand in markets defined by Smith Travel Research (“STR”), a primary source for third-party market data and industry statistics and forecasts, as “oil tracts,” significantly affecting our business in those markets, and a further decline could further affect our business in those markets.

In addition to general economic conditions, our guest satisfaction scores, the location of our hotels, the expenditures that we and our franchisees incur to improve our hotels, our loyalty program and the quality of our service impact our ADR, occupancy rates, RevPAR and RevPAR Index performance (each of which is described below under “—Key indicators of financial condition and operating performance”). Changes in ADR, occupancy, RevPAR and RevPAR Index performance significantly impact our revenues.

We are currently undergoing a comprehensive strategic review of our owned hotel portfolio. Our work to date includes identifying hotels that, with the appropriate scope of capital investment and renovation, have the opportunity to re-position upwards

within a market, capturing occupancy and additional rate while being measured against new, higher-quality competitive sets. We ha ve identified approximately 50 o wned h otels for this first wave of incremental investment. While some of this work will begin in the third quarter in counter-cyclical markets, we expect t hat the bulk of this work will begin in the fourth quarter of this year, with projects generally finishi ng in the first quarter of 2017, in time for our heavier seasons influenced by spring break and summer travel. We expect the incremental capital dollar s expended in 2016 for these projects to be in the range of $60 to $70 million.

For those hotels not identified for the first wave of renovations, our ongoing work could result in several alternative outcomes. For example, among other possible outcomes, we could conclude that:

The hotel is appropriately positioned within its market;

That the hotel should be part of a second wave of incremental renovations beginning in the latter half of 2017; or

The hotel should be disposed of and/or removed from the La Quinta brand, opening the market to potential new franchise development.

If a decision is made to dispose of a hotel or groups of hotels from the La Quinta brand, we expect that our revenue and Adjusted EBITDA from owned hotels will decrease and that decrease may be material. Additionally, a decision to dispose of a hotel or groups of hotels may result in an impairment charge related to the reduced holding period of the hotels. In 2015, we conducted a review of our portfolio of owned hotels and subsequently entered into a definitive purchase and sale agreement for 24 of our owned hotels, 11 of which were closed in the fourth quarter of 2015, three of which were closed in the second quarter of 2016 and the remaining 10 of which are currently contracted to close before the end of the third quarter of 2016.

Expenses

We primarily incur the following expenses:

Direct lodging expenses and other lodging and operating expenses. Direct lodging and Other lodging and operating expenses reflect the operating expenses of our owned hotels, including both direct and indirect hotel operating expenses. Direct lodging expenses include items such as compensation costs for hotel level management, housekeeping, laundry and front desk staff, supply costs for guest room amenities and laundry, repairs and maintenance, utilities, sales and local marketing, bad debt expenses related to direct-bill corporate customers, and online and offline travel agency commissions. Other lodging and operating expenses include indirect property operating expenses, primarily property taxes and insurance.

Depreciation and amortization. These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our owned hotels, as well as certain corporate assets. Amortization expense primarily consists of amortization of intangibles related to our franchise business, and other leasehold interests, all of which are amortized over their estimated useful lives.

General and administrative expenses. General and administrative expenses consist primarily of compensation expense for our corporate staff and personnel supporting our business segments, professional fees (including consulting, audit and legal fees), travel and entertainment expenses, contractual performance obligations and office administrative and related expenses.

Impairment losses. We hold amortizing and non-amortizing intangible assets and long-lived assets. We evaluate these assets for impairment as further discussed in “—Critical accounting policies and estimates” previously disclosed in our 2015 Form 10-K. These evaluations have, in the past, resulted in impairment losses for certain of these assets based on the specific facts and circumstances surrounding those assets and our estimates of the fair value of those assets. Based on economic conditions, estimated holding periods or other factors at a hotel-specific or system-wide level, we may be required to take additional impairment losses to reflect further declines in our asset and/or investment values.

Brand marketing fund expenses from franchised and managed properties. These expenses represent the expenditure of BMF fees collected from our franchised hotels for marketing and other support of the La Quinta brand. The corresponding revenues are presented as other revenues from franchised properties in our condensed consolidated statements of operations, resulting in no impact to operating income or net income.

Marketing, promotional and other advertising expenses. These expenses include advertising costs associated with general promotion of the La Quinta brand and specific advertising and marketing support for our operation and for the operations of our franchisees, which are in addition to the expenditure of BMF fees collected from franchised and managed properties for the same purpose.

Fluctuation s in operating expenses at our owned h otels can be related to various factors, including changes in occupancy rates, which directly impact certain variable expenses including labor, supplies, utilities and other operating expenses. However, certain of our expenses are relatively fixed, including rent, property taxes, liability insurance and, to a certain extent, payroll. As market conditions dictate, we take steps to adjust both our variable and fixed costs to levels we feel are appropriate to enhance guest experience, maximize pr ofitability and respond to market conditions without jeopardizing the overall guest experience or the value of our hotels or brand. In addition, changes in depreciation expenses may be impacted by renovations of existing hotels or the disposition of existi ng hotels through sale or closure. For other factors affecting our costs and expenses, see “Risk factors—Risks related to our business and industry” in our 2015 Form 10-K.

Key indicators of financial condition and operating performance

We use a variety of financial and other information in monitoring the financial condition and operating performance of our business. Some of this information is financial information that is prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, while other information may be financial in nature and may not be prepared in accordance with GAAP. Our management also uses other information that may not be financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate hotel financial and operating performance. Our management uses this information to measure the performance of hotel properties and/or our business as a whole. Historical information is periodically compared to our internal budgets, as well as against industry-wide information. We use this information for planning and monitoring our business, as well as in determining management and employee compensation.

Average daily rate (“ADR”) represents hotel room revenues divided by total number of rooms sold in a given period. ADR measures the average room price attained by a hotel or group of hotels, and ADR trends provide useful information concerning pricing policies and the nature of the guest base of a hotel or group of hotels. Changes in room rates have an impact on overall revenues and profitability.

Occupancy represents the total number of rooms sold in a given period divided by the total number of rooms available at a hotel or group of hotels. Occupancy measures the utilization of our hotels’ available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable ADR levels as demand for hotel rooms increases or decreases.

Revenue per available room (“RevPAR”) is defined as the product of the ADR charged and the average daily occupancy achieved. RevPAR does not include other ancillary, non-room revenues, such as food and beverage revenues or parking, telephone or other guest service revenues generated by a hotel, which are not significant for the Company.

As it pertains to owned hotels, RevPAR changes that are driven predominately by occupancy have different implications for overall revenue levels and incremental hotel operating profit than changes driven predominately by ADR. For example, increases in occupancy at a hotel would lead to increases in room revenues, as well as incremental operating costs (including, but not limited to, housekeeping services, utilities and room amenity costs). RevPAR increases due to higher ADR, however, would generally not result in additional operating costs, with the exception of those charged or incurred as a percentage of revenue, such as credit card fees and commissions. As a result, changes in RevPAR driven by increases or decreases in ADR generally have a greater effect on operating profitability at our owned hotels than changes in RevPAR driven by occupancy levels. Changes in RevPAR for our franchised hotels, whether driven by occupancy or ADR, directly impact our franchise revenues, as these revenues are generally based on a percentage of the franchised hotels’ room revenues. Due to seasonality in our business, we review RevPAR by comparing current periods to budget and period-over-period.

RevPAR Index measures a hotel’s or group of hotels’ fair market share of a competitive set’s revenue per available room. RevPAR Index is stated as a percentage and is calculated for each hotel by comparing the hotel’s RevPAR to the aggregate RevPAR of a group of competing hotels generally in the same market. RevPAR Index is a weighted average of the individual property results. We subscribe to STR, which collects and compiles the data used to calculate RevPAR Index, and STR may calculate ADR and RevPAR differently than we and our competitors do. The owner of each La Quinta hotel exercises its discretion in identifying the competitive set of properties for such hotel, considering, subject to STR’s guidelines, such factors as physical proximity, competition for similar customers, services and amenities, quality and average daily rate. We initially review the competitive set makeup of each new hotel that enters our system and review the continuing appropriateness of each hotel’s competitive set on an ongoing basis. Accordingly, while the hotel brands included in the competitive set for any individual La Quinta hotel depend heavily on market-specific conditions, the competitive sets for La Quinta hotels most often include one or more of Comfort, Holiday Inn Express and Hampton. Management uses RevPAR Index and changes in RevPAR Index, particularly year-over-year percentage changes, to evaluate the performance of individual or groups of hotels relative to other competing hotels.

Comparable hotels are defined as hotels that: (i) were active and operating in our system for at least one full calendar year as of the end of the applicable period and were active and operating as of January 1st of the previous year; and (ii) have not sustained substantial property damage, business interruption, or for which comparable results are not available. Management uses comparable

hotels as the basis upon which to evaluate ADR, occupancy and RevPAR on a system-wide basis and for each of our reportable segments. We report variances in ADR, occupancy and RevPAR between periods for the set of comparable hotels existing at the reporting date versus the results of same set of hotels in the prior period. Of the 889 in our syst em as of June 30, 2016 , 825 have been classifi ed as comparable hotels.

EBITDA and Adjusted EBITDA . Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a commonly used measure in many industries. We adjust EBITDA when evaluating our performance because we believe that the adjustment for certain items, such as restructuring and acquisition transaction expenses, impairment charges related to long-lived assets, non-cash equity-based compensation, discontinued operations, and other items not indicative of ongoing operating performance, provides useful supplemental information to management and investors regarding our ongoing operating performance. We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA and Adjusted EBITDA are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions; and (ii) EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors, lenders and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP, have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing our results as reported under GAAP. Some of these limitations are:

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

EBITDA and Adjusted EBITDA do not reflect our tax expense or the cash requirements to pay our taxes;

EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

EBITDA and Adjusted EBITDA do not reflect the impact on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and

other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

Results of operations

The following table presents hotel operating statistics for our system-wide (owned and franchised) comparable hotels for the applicable periods ⁽¹⁾ :

	Three months ended June 30, 2016			Variance three months 2016 vs. three months 2015			Six months ended June 30, 2016			Variance six months 2016 vs. six months 2015
Occupancy		70.3	%	-91 bps				66.4	%	-129 bps
ADR	$	89.25			1.5	%	$	87.73			0.8	%
RevPAR	$	62.78			0.2	%	$	58.28			-1.1	%

⁽¹⁾	See definition of comparable hotels in “—Key indicators of financial condition and operating performance—Comparable hotels.”

In addition, the following table presents RevPAR I ndex for our system-wide (owned and fra nchised ) hotels for the applicable periods:

Three months

ended June 30,

2016

Variance three months

2016 vs. three months

2015

Six months ended June 30,

2016

Variance six months

2016 vs. six months

2015

RevPAR Index ⁽¹⁾

96.1

-91 bps

95.9

-129 bps

⁽¹⁾	Information based on the STR competitive set of hotels existing as of June 30, 2016.

We experienced a decline in RevPAR Index during the three months ended June 30, 2016. We have identified several key initiatives which are designed to address this decline, including taking steps to enhance consistency of product and guest experience and investing in points of differentiation to encourage engagement with the brand. These initiatives will likely require incremental expenditures.

From June 30, 2015 to June 30, 2016, our total number of owned and franchised La Quinta hotels has grown from 878, or 87,200 rooms, to 889, or 87,900 rooms, with franchised hotels increasing from 526 to 553. At June 30, 2015, our franchise pipeline numbered 219 hotels, or 18,600 rooms, and has grown to 238 hotels, or 21,500 rooms, at June 30, 2016, while we have opened a net total of 27 franchised hotels over that time period. Each of our pipeline hotels is represented by an executed franchise agreement, and approximately 36% of the conversions and new construction projects have commenced as of June 30, 2016.

Three months ended June 30, 2016 compared with three months ended June 30, 2015

For the three months ended June 30, 2016, we experienced on a system-wide comparable hotels basis, increases in ADR and RevPAR and a decline in occupancy, compared to the three months ended June 30, 2015. The declines in occupancy are a result of a slowing of demand affecting the hotel industry as a whole, and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts”, resulting from the significant and prolonged pullback in oil and gas markets, which significantly worsened in the second half of 2015. Excluding these STR oil tracts, our second quarter system-wide comparable RevPAR would have increased by 1.6%, as compared to prior year, which is a 140 basis point lift from our system-wide comparable results for the second quarter. In addition, the three months ended June 30, 2016 comparable hotel operating statistics are comparing against strong operating statistics on a comparable hotel basis for the three months ended June 30, 2015.

The following tables present our overall operating performance, and system-wide and segment occupancy, ADR and RevPAR rates on a comparable hotel statistic basis, in each case, for the three months ended June 30, 2016 and 2015 , including the amount and percentage change in these resu lts between the periods:

	For the three months ended June 30,						Increase/(Decrease)
(in thousands)	2016			2015			$ change			% change
Revenues
Room revenues	$	229,868		$	236,420		$	(6,552	)		(2.8	)
Franchise and other fee-based revenues		27,978			26,297			1,681			6.4
Other hotel revenues		5,018			4,937			81			1.6
		262,864			267,654			(4,790	)		(1.8	)
Brand marketing fund revenues from franchised properties		6,691			6,234			457			7.3
Total Revenues		269,555			273,888			(4,333	)		(1.6	)
Operating Expenses
Direct lodging expenses		103,578			100,002			3,576			3.6
Depreciation and amortization ⁽¹⁾		36,628			42,213			(5,585	)		(13.2	)
General and administrative expenses ⁽¹⁾		30,881			29,716			1,165			3.9
Other lodging and operating expenses		15,294			14,950			344			2.3
Marketing, promotional and other advertising expenses		20,503			19,095			1,408			7.4
Impairment loss		16,217			42,498			(26,281	)		(61.8	)
(Gain) loss on sales		(722	)		4,003			(4,725	)	NM			⁽²⁾
		222,379			252,477			(30,098	)		(11.9	)
Brand marketing fund expenses from franchised properties		6,691			6,234			457			7.3
Total Operating Expenses		229,070			258,711			(29,641	)		(11.5	)
Operating Income		40,485			15,177			25,308		NM			⁽²⁾
Other (Expenses) Income
Interest expense, net		(20,286	)		(22,191	)		1,905			(8.6	)
Other income		117			67			50			74.6
Total Other (Expenses) Income, net		(20,169	)		(22,124	)		1,955			(8.8	)
Income (Loss) Before Income Taxes		20,316			(6,947	)		27,263		NM			⁽²⁾
Income tax (expense) benefit		(5,398	)		2,380			(7,778	)	NM			⁽²⁾
Net Income (Loss)		14,918			(4,567	)		19,485		NM			⁽²⁾
Less: net income attributable to noncontrolling interests		(69	)		(96	)		27			(28.1	)
Net Income (Loss) Attributable to La Quinta Holdings’ stockholders	$	14,849		$	(4,663	)	$	19,512		NM			⁽²⁾

⁽¹⁾

We adopted ASU No. 2015-05 as of January 1, 2016. Accordingly, amortization of software service agreements in the amount of $2.1 million, which was classified as depreciation and amortization for the three months ended June 30, 2015, has been reclassified as a general and administrative expenses in our consolidated statement of operations. This reclassification was made for all sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations that were impacted by this adoption. See Note 2 of the notes to our condensed consolidated financial statements included elsewhere in this report for additional information.

⁽²⁾

Fluctuation in terms of percentage change is not meaningful.

Comparable hotel statistics	Three months ended June 30, 2016			Variance 2016 vs. 2015
Owned Hotels
Occupancy		69.5	%	-156 bps
ADR	$	84.34			2.0	%
RevPAR	$	58.62			-0.3	%
Franchised Hotels
Occupancy		71.3	%	-21 bps
ADR	$	94.48			0.8	%
RevPAR	$	67.33			0.5	%
System-wide
Occupancy		70.3	%	-91 bps
ADR	$	89.25			1.5	%
RevPAR	$	62.78			0.2	%

Revenues

Owned hotels

As of June 30, 2016, we owned 336 hotels, comprising approximately 42,900 rooms, located in the United States. Room revenues at our owned hotels for the three months ended June 30, 2016 and 2015 totaled $229.9 million and $236.4 million, respectively. The decrease of $6.5 million, or 2.8 percent, was primarily driven by the sale of 16 owned hotels between the periods and a decrease in RevPAR at our comparable owned hotels of 0.3 percent, which was due to a decrease in occupancy of 156 basis points, partially offset by an increase in ADR of 2.0 percent. The declines in occupancy and RevPAR are a result of a slowing of demand affecting the hotel industry as a whole, and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts” resulting from the significant and prolonged pullback in the oil and gas markets, which significantly worsened in the second half of 2015.

Other hotel revenues at our owned hotels for the three months ended June 30, 2016 and 2015 totaled $5.0 million and $4.9 million, respectively. These revenues are related to ancillary hotel services.

Franchise and other fee-based revenues

As of June 30, 2016, we had 553 franchised hotels, comprising approximately 45,000 rooms, located in the United States, Canada, Mexico and Honduras. Franchise and other fee-based revenues for the three months ended June 30, 2016 and 2015 totaled $28.0 million and $26.3 million, respectively. The increase of $1.7 million, or 6.4 percent, was primarily driven by a net increase of 27 hotels to our franchise system from June 30, 2015 to June 30, 2016 and an increase in RevPAR at our comparable franchised hotels of 0.5 percent, which was due to an increase in ADR of 0.8 percent, partially offset by a decrease in occupancy of 21 basis points. The decline in occupancy is a result of a slowing of demand affecting the hotel industry as a whole and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts” resulting from the significant and prolonged pullback in the oil and gas markets, which significantly worsened in the second half of 2015.

Operating expenses

	Three months ended June 30,				Percent change
(in millions)	2016		2015		2016 vs. 2015
Direct lodging expenses	$	103.6	$	100.0		3.6
Other lodging and operating expenses		15.3		15.0		2.3

In total, direct lodging and other lodging and operating expenses for our owned hotels totaled $ 118.9 million and $ 115.0 million, for the three months ended June 30, 2016 and 2015 , respectively, resulting in an increase of $ 3.9 million , or 3.4 percent. Th ese expenses increased primarily as a result of increases in direct lodging expenses for our owned hotels caused by increases i n salaries (including hourly wages) and bene fits at our owned h otels and increased travel agency commission costs due to increased volume driven through third party online travel agencies , such as Expedia.com , Booking.com, and TripAdvisor. Additionally, uninsured losses increased for the three mont hs ended June 30, 2016. These expense increases were partially offset by a decrease in utility costs, including electricity and natural gas, and by the effects of continued cost mitigation strategies and the impact of operational efficiencies employed at our owned hotels. In addition, other lodging and operating expenses in creased, primarily due to losses realized in the second quarter of 2016 related to casualty disasters . These increases were offset partially by a decrease of 16 hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015 .

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Depreciation and amortization

36.6

42.2

(13.2

)

Depreciation and amortization expense for our owned hotels totaled $36.6 million and $42.2 million, respectively, for the three months ended June 30, 2016 and 2015. The decrease of $5.6 million, or 13.2 percent, was primarily the result of the suspension of depreciation for assets held for sale and from a decrease of sixteen hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015. This decrease was partially offset by $107.6 million in capital expenditures between June 30, 2015 and June 30, 2016, which drove additional depreciation on certain owned assets in 2016.

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

General and administrative expenses

30.9

29.7

3.9

General and administrative expenses totaled $30.9 million and $29.7 million, respectively, for the three months ended June 30, 2016 and 2015. For the three months ended June 30, 2015 general and administrative expenses included equity based compensation expense of $0.5 million related to the shares of common stock and restricted stock received in exchange for long-term incentive ownership units held by certain members of the Company’s management in connection with our initial public offering (the “IPO”). Notwithstanding the IPO related equity based compensation expense in the three months ended June 30, 2015, general and administrative expenses increased for the three months ended June 30, 2016 compared to the prior year, primarily as a result of increases in legal fees, severance, and stock based compensation costs for additional grants. These increases were partially offset by a decrease in corporate bonus, corporate healthcare, and employee training costs.

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Marketing, promotional and other advertising expenses

20.5

19.1

7.4

Marketing, promotional and other advertising expenses, not funded by the BMF collected from our hotels, totaled $20.5 million and $19.1 million, respectively, for the three months ended June 30, 2016 and 2015. The increase of $1.4 million, or 7.4 percent, was primarily driven by the timing of spending under certain brand programs and increased spending in broadcast and online outlets in order to enhance brand awareness and bookings. In addition, we spent $6.7 million and $6.2 million of BMF fees collected from franchised hotels on similar brand management and other advertising expenses for the three months ended June 30, 2016 and 2015, respectively which increased for similar reasons.

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Impairment loss

16.2

42.5

(61.8

)

During the second quarter, we entered into agreements to sell three of our Owned Hotels for approximately $10.4 million. The carrying value of these properties had been adjusted to the lesser of their estimated fair value or carrying value in the first quarter. We recorded $0.6 million in additional impairment related to selling costs. In June of 2016, we began negotiations to sell two of our Owned Hotels for approximately $18.5 million in 2016; this resulted in an impairment of $13.7 million. Subsequent to June 30, 2016, we entered into purchase and sale agreements for these two hotels. Additionally, during the second quarter of 2016, we identified one Owned Hotel in which it was determined that the carrying amount would not be recoverable due to a change in market and economic conditions. We recorded an impairment charge of $1.0 million related to this property.

In 2015, the Company entered into discussions for the sale of 24 of its owned hotels. Due to the potential redu ced holding period of these assets, the Company recorded an impairment charge of $42.5 million in the three months ended June 30, 2015 to adjust the value of these assets to their estimated fair value.

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

(Gain) loss on sales

(0.7

)

4.0

⁽¹⁾

⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

During the three months ended June 30, 2016, we sold two of our Owned Hotels for a gain of approximately $0.7 million. An additional three Owned Hotels that were held for sale during the first quarter of 2016 were sold at their carrying value which represented fair value less selling costs. During the three months ended June 30, 2015, we sold one of our Owned Hotels for a loss of approximately $4.0 million.

Other Income (Expenses)

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Interest expense, net

20.3

22.2

(8.6

)

Interest expense, net, totaled $20.3 million and $22.2 million, respectively, for the three months ended June 30, 2016 and 2015. The decrease of $1.9 million, or 8.6 percent, was driven by the reduction in the principal balance of our term loan facility with the application of the voluntary prepayments in 2015, and the realization of a 25 basis point reduction in the applicable interest rate when the Company achieved a net leverage ratio of less than or equal to 4.50 to 1.00 during the third quarter of 2015.

Three months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Income tax (expense) benefit

(5.4

)

2.4

⁽¹⁾

⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

We compute our income tax (expense) benefit on a quarterly basis by applying the estimated annual effective tax rate to income from recurring operations and taxable income. The provision for the three month periods ended June 30, 2016 and 2015 differs from the statutory federal tax rate of 35% primarily due to the impact of state income taxes and expenses that are not deductible for income tax purposes. See “—Critical accounting policies and estimates—Income taxes” previously disclosed in our 2015 Form 10-K.

Segment results

We evaluate our segments’ operating performance using segment Adjusted EBITDA, as described in Note 14: “Segments” in the unaudited condensed consolidated financial statements, included elsewhere in this report. Refer to those financial statements for a reconciliation of Adjusted EBITDA to net income (loss). For a discussion of our definitions of EBITDA and Adjusted EBITDA, how management uses them to manage our business and material limitations on their usefulness, refer to “—Key indicators of financial condition and operating performance.” The following table sets forth revenues and Adjusted EBITDA by segment, reconciled to consolidated amounts, for the three months ended June 30, 2016 and 2015.

	Three months ended June 30,
(in thousands)	2016			2015
Revenues
Owned Hotels	$	236,364		$	242,443
Franchised Hotels ⁽¹⁾		30,900			30,144
Segment revenues		267,264			272,587
Other revenues from franchised properties		6,691			6,234
Corporate and other ⁽²⁾		33,008			33,696
Intersegment elimination ⁽³⁾		(37,408	)		(38,629	)
Total revenues	$	269,555		$	273,888
Adjusted EBITDA
Owned Hotels	$	83,239		$	90,636
Franchised Hotels		30,900			30,144
Segment Adjusted EBITDA		114,139			120,780
Corporate and other		(8,728	)		(8,944	)
Adjusted EBITDA	$	105,411		$	111,836

⁽¹⁾

⁽²⁾

Includes revenues related to our brand management programs and other cost reimbursements. The portion of these fees that were charged to our owned hotels totaled $18.9 million and $20.0 million for each of the three month periods ended June 30, 2016 and 2015, respectively. This includes a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

⁽³⁾

Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $37.4 million and $38.6 million for each of the three month periods ended June 30, 2016 and 2015, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Owned hotels

Owned Hotels segment revenues decreased primarily driven by a decrease of 16 hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015 and a decrease in RevPAR at our comparable owned hotels of 0.3 percent, which was due to a decrease in occupancy of 156 basis points, partially offset by an increase in ADR of 2.0 percent. Refer to “Revenues—Owned hotels” within this section for further discussion on the decrease in revenues from our comparable owned hotels. Our Owned Hotels segment’s Adjusted EBITDA decrease is a result of decreased Owned Hotels segment revenues of approximately $6.0 million and an increase in direct lodging expenses of $3.6 million and other lodging and operating expenses of $0.3 million. Refer to “Operating expenses—Owned hotels” within this section for further discussion of the increase in operating expenses at our owned hotels.

Franchise and management

Franchise and Management segment revenues increased by $0.8 million primarily as a result of the net addition of 27 hotels to our franchise system. Additionally, the increase was a result of an increase in RevPAR of 0.5 percent at our comparable franchised hotels. Refer to “Revenues—Franchise and other fee-based revenues” within this section for further discussion of the increase in revenues from our comparable franchised hotels. Our Franchise segment’s Adjusted EBITDA increased as a result of the overall increase in Franchise segment revenues.

Six months ended June 30, 2016 compared with six months ended June 30, 2015

For the six months ended June 30, 2016, we experienced on a system-wide comparable hotels basis an increase in ADR and declines in occupancy and RevPAR, compared to the six months ended June 30, 2015. The declines in occupancy and RevPAR are a result of a slowing of demand affecting the hotel industry as a whole, and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts” resulting from the significant and prolonged pullback in oil and gas markets, which significantly worsened in the second half of 2015. Excluding these STR oil tracts, our six months ended June 30, 2016 system-wide comparable RevPAR would have increased by 0.6%, as compared to prior year six month period, which is a 170 basis point lift from our system-wide comparable results for the six months ended June 30, 2015. In addition, the six months ended June 30, 2016 comparable hotel operating statistics are comparing against strong operating statistics on a comparable hotel basis for the six months ended June 30, 2015.

The following tables present our overall operating performance, and system-wide and segment occupancy, ADR and RevPAR rates on a comparable hotel statistic basis, in each case, for the six months ended June 30, 2016 and 2015, including the amount and percentage change in these results between the periods:

	Six months ended June 30,						Increase/(Decrease)
(in thousands)	2016			2015			$ change			% change
Revenues
Room revenues	$	439,341		$	454,135		$	(14,794	)		(3.3	)
Franchise and other fee-based revenues		50,170			47,054			3,116			6.6
Other hotel revenues		9,849			9,513			336			3.5
		499,360			510,702			(11,342	)		(2.2	)
Brand marketing fund revenues from franchised and managed properties		11,966			11,292			674			6.0
Total Revenues		511,326			521,994			(10,668	)		(2.0	)
Operating Expenses
Direct lodging expenses		202,490			197,507			4,983			2.5
Depreciation and amortization ⁽¹⁾		74,925			83,976			(9,051	)		(10.8	)
General and administrative expenses ⁽¹⁾		56,879			64,867			(7,988	)		(12.3	)
Other lodging and operating expenses		30,976			31,957			(981	)		(3.1	)
Marketing, promotional and other advertising expenses		40,287			37,804			2,483			6.6
Impairment loss		99,560			42,498			57,062		NM			⁽²⁾
(Gain) loss on sales		(722	)		4,003			(4,725	)	NM			⁽²⁾
		504,395			462,612			41,783			9.0
Brand marketing fund expenses from franchised and managed properties		11,966			11,292			674			6.0
Total Operating Expenses		516,361			473,904			42,457			9.0
Operating (Loss) Income		(5,035	)		48,090			(53,125	)	NM			⁽²⁾
Other Income (Expenses)
Interest expense, net		(40,592	)		(44,962	)		4,370			(9.7	)
Other income		1,100			579			521			90.0
Total Other Income (Expenses)		(39,492	)		(44,383	)		4,891			(11.0	)
(Loss) Income Before Income Taxes		(44,527	)		3,707			(48,234	)	NM			⁽²⁾
Income tax benefit (expense)		20,721			(1,960	)		22,681		NM			⁽²⁾
Net (Loss) Income		(23,806	)		1,747			(25,553	)	NM			⁽²⁾
Less: net income attributable to noncontrolling interests		(120	)		(268	)		148			(55.2	)
Net (Loss) Income Attributable to La Quinta Holdings’ stockholders	$	(23,926	)	$	1,479		$	(25,405	)	NM			⁽²⁾

⁽¹⁾

We adopted ASU No. 2015-05 as of January 1, 2016. Accordingly, amortization of software service agreements in the amount of $4.0 million, which was classified as depreciation and amortization for the six months ended June 30, 2015, has been reclassified as a general and administrative expense in our consolidated statement of operations. This reclassification was made for all sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations that were impacted by this adoption. See Note 2 of the notes to our condensed consolidated financial statements included elsewhere in this report for additional information.

⁽²⁾

Fluctuation in terms of percentage change is not meaningful.

Comparable hotel statistics	Six months ended June 30, 2016			Variance 2016 vs. 2015
Owned Hotels
Occupancy		66.2	%	-198 bps
ADR	$	84.31			1.1	%
RevPAR	$	55.79			-1.8	%
Franchised Hotels
Occupancy		66.7	%	-54 bps
ADR	$	91.42			0.4	%
RevPAR	$	61.00			-0.5	%
System-wide
Occupancy		66.4	%	-129 bps
ADR	$	87.73			0.8	%
RevPAR	$	58.28			-1.1	%

Revenues

Owned hotels

As of June 30, 2016, we owned 336 hotels, comprising approximately 42,900 rooms, located in the United States. Room revenues at our owned hotels for the six months ended June 30, 2016 and 2015 totaled $439.3 million and $454.1 million, respectively. The decrease of $14.8 million, or 3.3 percent, was primarily driven by a decrease of 16 hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015 and a decrease in RevPAR at our comparable owned hotels of 1.8 percent, which was due to a decrease in occupancy of 198 basis points, partially offset by an increase in ADR of 1.1 percent. The declines in occupancy and RevPAR are a result of a slowing of demand affecting the hotel industry as a whole, and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts” resulting from the significant and prolonged pullback in the oil and gas markets, which significantly worsened in the second half of 2015. In addition, the six months ended June 30, 2016 comparable hotel operating statistics are comparing against strong operating statistics on a comparable hotel basis for the six months ended June 30, 2015.

Other hotel revenues at our owned hotels for the six months ended June 30, 2016 and 2015 totaled $9.8 million and $9.5 million, respectively. These revenues are related to ancillary hotel services.

Franchise and other fee-based revenues

As of June 30, 2016, we had 553 franchised hotels, comprising approximately 45,000 rooms, located in the United States, Canada, Mexico and Honduras. Franchise and other fee-based revenues for the six months ended June 30, 2016 and 2015 totaled $50.2 million and $47.0 million, respectively. The increase of $3.1, or 6.6 percent, was primarily driven by a net increase of 27 new hotels to our franchise system from June 30, 2015 to June 30, 2016 partially offset by a decrease in RevPAR at our comparable franchised hotels of 0.5 percent, which was due to a decrease in occupancy of 54 basis points, partially offset by increased ADR of 0.4 percent. The decline in occupancy and RevPAR are a result of a slowing of demand affecting the hotel industry as a whole, and challenges in specific markets, including significant challenges in markets defined by STR as “oil tracts” resulting from the significant and prolonged pullback in the oil and gas markets, which significantly worsened in the second half of 2015. In addition, the six months ended June 30, 2016 comparable hotel operating statistics are comparing against strong operating statistics on a comparable hotel basis for the six months ended June 30, 2015.

Operating expenses

	Six months ended June 30,				Percent change
(in millions)	2016		2015		2016 vs. 2015
Direct lodging expenses	$	202.5	$	197.5		2.5
Other lodging and operating expenses		31.0		32.0		(3.1	)

In total, direct lodging and other lodging and operating expenses for our owned hotels totaled $233.5 million and $229.5 million, for the six months ended June 30, 2016 and 2015, respectively, resulting in an increase of $4.0 million , or 1.7 percent. Th ese expenses increased primarily as a result of increases in direct lodging expenses for our owned hotels caused by increases i n salaries (including hourly wages) and benef its at our owned h otels and increased travel agency commission costs due to increased volume driven through third party online travel agencies, such as Expedia.com, Booking.com, and TripAdvisor. Additionally, uninsured losses increased for the six months ended June 30, 2016. These expense increases were partially offset by a decrease in utility costs, including electricity and natural gas, and by the effects of continued cost miti gation strategies and the impact of operational efficiencies employed at our owned hotels. In addition, other lodging and operating expenses decreased, primarily due to net gains realized in 2016 related to casualty disasters and from a decrease of 16 hote ls in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Depreciation and amortization

74.9

84.0

(10.8

)

Depreciation and amortization expense for our owned hotels totaled $74.9 million and $84.0 million, respectively, for the six months ended June 30, 2016 and 2015. The decrease of $9.1 million, or 10.8 percent, was primarily the result of the suspension of depreciation for assets held for sale and from a decrease of 16 hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015. This decrease was partially offset by $107.6 million in capital expenditures between June 30, 2015 and June 30, 2016, which drove additional depreciation on certain owned assets in 2016.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

General and administrative expenses

56.9

64.9

(12.3

)

General and administrative expenses totaled $56.9 million and $64.9 million, respectively, for the six months ended June 30, 2016 and 2015. For the six months ended June 30, 2015 general and administrative expenses included equity based compensation expense of $5.6 million related to the shares of common stock and restricted stock received in exchange for long-term incentive ownership units held by certain members of the Company’s management in connection with our IPO. In addition to the IPO-related equity based compensation expense, general and administrative expenses decreased primarily as the result of a decrease in corporate salaries and benefits, including healthcare and corporate bonus, employee training costs and professional services. The decrease is partially offset by increases in legal fees, severance, and stock based compensation costs for additional grants. In the first half of 2015, we incurred professional services fees related to a secondary offering of Holdings common shares.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Marketing, promotional and other advertising expenses

40.3

37.8

6.6

Marketing, promotional and other advertising expenses, not funded by the BMF collected from our hotels, totaled $40.3 million and $37.8 million, respectively, for the six months ended June 30, 2016 and 2015. The increase of $2.5 million, or 6.6 percent, was primarily driven by the timing of spending under certain brand programs and increased spending in broadcast and online outlets in order to enhance brand awareness and bookings. In addition, we spent $12.0 million and $11.3 million of BMF fees collected from franchised hotels on similar brand management and other advertising expenses for the six months ended June 30, 2016 and 2015, respectively which increased for similar reasons.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Impairment loss

99.6

42.5

⁽¹⁾

⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

D uring the second quarter, we entered into agreements to sell three of our Owned Hotels for approximately $10.4 million. The carrying value of these propertie s had been adjusted to the lesse r of their estimated fair value or carrying value in the first quarter. We recorded $0.6 million in additional impairment related to selling costs. In June of 2016, we began negotiations to sell two of our Owned Hotels for approximately $18.5 millio n; this resulted in an impairment of $13.7 million. Additionally, during the second quarter of 2016, we identified one Owned Hotel in which it was determined that the carrying amount would not be recoverable due to a change in market and economic conditio ns. We recorded an impairment charge of $1.0 million related to this property.

During the first quarter of 2016, as part of the strategic review of our owned hotel portfolio, approximately 50 hotels were identified as candidates for sale in the near-term. After considering the shortened holding period and probability of selling these hotels, we determined that the estimated cash flows were less than the carrying value of certain hotels and therefore we reduced the carrying values to their estimated fair v alue. This resulted in an impairment of approximately $80.3 million. In addition, in the first quarter of 2016, we entered into an agreement to sell one of our Owned Hotels for approximately $8.6 million. As a result, we recorded $3.0 million in impairment related to the excess carrying value over the estimated fair value due to the shortening of the assumed holding period.

In 2015, the Company entered into discussions for the sale of 24 of its owned hotels. Due to the potential reduced holding period of these assets, the Company recorded an impairment charge of $42.5 million in the three months ended June 30, 2015 to adjust the value of these assets to their estimated fair value.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

(Gain) loss on sales

(0.7

)

4.0

⁽¹⁾

⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

During the six months ended June 30, 2016, we sold two of our Owned Hotels for a gain of approximately $0.7 million. An additional three Owned Hotels that were held for sale during the first quarter of 2016 were sold at their carrying value which represented fair value less selling costs. During the three months ended June 30, 2015, we sold one of our Owned Hotels for a loss of approximately $4.0 million.

Other Income (Expenses)

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Interest expense, net

40.6

45.0

(9.7

)

Interest expense, net, totaled $40.6 million and $45.0 million, respectively, for the six months ended June 30, 2016 and 2015. The decrease of $4.4 million, or 9.7 percent, was driven by the reduction in the principal balance of our term loan facility with the application of the voluntary prepayments in 2015, and the realization of a 25 basis point reduction in the applicable interest rate when the Company achieved a net leverage ratio of less than or equal to 4.50 to 1.00 during the third quarter of 2015.

Six months ended

June 30,

Percent

change

(in millions)

2016

2015

2016 vs. 2015

Income tax (expense) benefit

20.7

(2.0

)

⁽¹⁾

⁽¹⁾	Fluctuation in terms of percentage change is not meaningful.

We compute our income tax (expense) benefit on a quarterly basis by applying the estimated annual income tax rate to income from recurring operations and taxable income. The provision for the six month periods ended June 30, 2016 and 2015 differs from the statutory federal tax rate of 35% primarily due to the impact of state income taxes and expenses that are not deductible for tax purposes. See “—Critical accounting policies and estimates—Income taxes” previously disclosed in our 2015 Form 10-K.

Segment results

condition and operating performance.” The following table sets forth revenues and Adjusted EBITDA by segment, reconcile d to con solidated amounts, for the six months ended June 30, 2016 and 2015 .

	Six months ended June 30,
(in thousands)	2016			2015
Revenues
Owned Hotels	$	451,919		$	465,893
Franchise and Management ⁽¹⁾		57,120			55,897
Segment revenues		509,039			521,790
Other revenues from franchised and managed properties		11,966			11,292
Corporate and other ⁽²⁾		62,131			63,105
Intersegment elimination ⁽³⁾		(71,810	)		(74,193	)
Total revenues	$	511,326		$	521,994
Adjusted EBITDA
Owned Hotels	$	151,492		$	166,824
Franchise and Management		57,120			55,897
Segment Adjusted EBITDA		208,612			222,721
Corporate and other		(18,904	)		(20,881	)
Adjusted EBITDA	$	189,708		$	201,840

⁽¹⁾

⁽²⁾

Includes revenues related to our brand management programs and other cost reimbursements. The portion of these fees that were charged to our owned hotels totaled $36.5 million and $38.3 million for each of the six month periods ended June 30, 2016 and 2015, respectively. This includes a reservation fee of 2.0% of gross room revenues, which is reflected in corporate and other. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

⁽³⁾

Includes management, license, franchise, BMF, Returns, reservation fees and other cost reimbursements totaling $71.8 million and $74.2 million for each of the six month periods ended June 30, 2016 and 2015, respectively. These fees are charged to owned hotels and are eliminated in the accompanying condensed consolidated financial statements.

Owned hotels

Owned Hotels segment revenues decreased primarily driven by a decrease of 16 hotels in the owned hotel portfolio in comparison to the hotels owned at June 30, 2015 and a decline in RevPAR of 1.8 percent at our comparable owned hotels. Refer to “Revenues—Owned hotels” within this section for further discussion on the decrease in revenues from our comparable owned hotels. Our Owned Hotels segment’s Adjusted EBITDA decrease is a result of decreased Owned Hotels segment revenues of approximately $14.0 million and an increase in direct lodging expenses of $4.0 million, partially offset by decreases in other lodging and operating expenses of $1.0 million. Refer to “Operating expenses—Owned hotels” within this section for further discussion of the increase in operating expenses at our owned hotels.

Franchise and management

Franchise and Management segment revenues increased by $1.2 million primarily as a result of the net addition of 27 hotels to our franchise system. This increase was partially offset by a decline in RevPAR of 0.5 percent at our comparable franchised hotels. Refer to “Revenues—Franchise and other fee-based revenues” within this section for further discussion of the increase in revenues from our comparable franchised hotels. Our Franchise segment’s Adjusted EBITDA increased as a result of the overall increase in Franchise segment revenues.

Liquidity and Capital Resources

Overview

As of June 30, 2016, we had total cash and cash equivalents of $64.1 million. Our known liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including corporate expenses, taxes, payroll and related benefits, legal costs, operating costs associated with the operation of hotels, interest and scheduled principal payments on our outstanding indebtedness, potential payments related to our interest rate swap, capital expenditures for renovations and maintenance at our owned hotels, and other purchase commitments. During March 2016, the Company's board of directors authorized a program to repurchase an aggregate of up to $100 million of the Company’s common stock (the “Repurchase Program”). Through June 30, 2016, the Company repurchased approximately 8.1 million shares of common stock under this program. These shares were repurchased at a weighted-average price of $12.27 per share, for an aggregate purchase price of $100.0 million.

In April of 2014, we entered into a new credit agreement to refinance all of our then existing secured debt, which was to mature in July 2014. The new credit agreement provides for senior secured credit facilities consisting of a then existing $2.1 billion senior secured term loan facility (of which approximately $1.7 billion was outstanding as of June 30, 2016), which will mature in 2021, and a $250.0 million senior secured revolving credit facility, $50.0 million of which is available in the form of letters of credit, which will mature in 2019. See “—Debt” for a further discussion of our new credit agreement. In addition, following consummation of the IPO in April of 2014, for federal income tax purposes, our partnership and REIT status terminated and we became subject to additional entity-level taxes at the federal and state level and, in our second quarter of 2014, we established the related net deferred tax liability in our books equal to $321.1 million. Accordingly, we expect that in the future, our cash taxes, after utilization of net operating losses (“NOLs”), currently expected to be fully utilized in 2016, will exceed the income tax provision in our financial statements. We currently estimate that this excess could be approximately $2 million to $8 million per year beginning in 2017, which amount may vary based on taxable income among other factors. In November 2014, Blackstone completed a secondary offering in which it registered and sold 23.0 million of the Company’s shares, bringing its ownership percentage to 45.2%, and creating an ownership change for federal income tax purposes. As a result of this secondary offering and the resulting ownership change the Company’s federal net operating losses will be limited under Internal Revenue Code Section 382 with annual limitations that became applicable in 2015 through 2019. State net operating loss carryforwards are also available for use subject to similar limitations in many cases. We do not believe that the Section 382 limitations will prevent the Company from using its total pre-ownership change NOL carryforwards.

We finance our business activities primarily with existing cash and cash generated from our operations. We believe that this cash will be adequate to meet anticipated requirements for operating expenses and other expenditures, including corporate expenses, payroll and related benefits, legal costs, and purchase commitments for the foreseeable future. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs.

The following table summarizes our net cash flows and key metrics related to our liquidity:

	For the six months ended June 30,						Percent Change
(in millions)	2016			2015			2016 vs. 2015
Net cash provided by operating activities	$	121.4		$	128.7			(5.7	)
Net cash used in investing activities		(34.3	)		(35.2	)		(2.6	)
Net cash used in financing activities		(109.8	)		(146.9	)		(25.3	)

Our ratio of current assets to current liabilities was 1.00 and 1.07 as of June 30, 2016 and December 31, 2015, respectively.

Operating activities

Net cash provided by operating activities was $121.4 million for the six months ended June 30, 2016, compared to $128.7 million for the six months ended June 30, 2015. The $7.3 million decrease was primarily driven by decreased operating income prior to the reduction for equity based compensation and the impairment loss. This decrease also includes the effects of timing in our various working capital components including other current assets, depreciation and amortization, accrued payroll and employee benefits.

Investing activities

Net cash used in investing activities during the six months ended June 30, 2016 was $34.3 million, compared to $35.2 million during the six months ended June 30, 2015. The $0.9 million decrease in cash used in investing activities was primarily attributable to proceeds from sale of assets, partially offset by a decrease in insurance proceeds on casualty disasters and an increase in capital expenditures.

Financing activities

Net cash used in financing activities during the three months ended June 30, 2016 was $109.8 million, compared to $146.9 million during the six months ended June 30, 2015. The $37.1 million decrease in cash used in financing activities was primarily attributable to prior period voluntary principal payment of long-term debt of $135.0 million, partially offset by share repurchases in the first half of 2016 of $100.8 million.

Capital expenditures

During the six months ended June 30, 2016 and 2015, we made capital expenditures of approximately $58.3 million and $42.7 million, respectively. The increase was a result of the Company’s commitment to drive consistency in our product.

As of June 30, 2016, we had outstanding commitments under capital expenditure contracts of approximately $24.7 million for capital expenditures at certain owned hotels and for information technology enhancements. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

Debt

In April of 2014, we refinanced all of our existing debt and accrued interest and related fees. As part of the refinancing, we entered into a credit agreement which provides for senior secured credit facilities consisting of:

a $2.1 billion senior secured term loan facility, which will mature in 2021; and

a $250.0 million senior secured revolving credit facility, which will mature in 2019. The revolving credit facility includes $50 million of borrowing capacity available for letters of credit and borrowing capacity for short-term borrowings referred to as the swing line borrowings.

In addition, the senior secured credit facilities also provide us with the option to raise incremental credit facilities, refinance the loans with debt incurred outside the credit agreement and extend the maturity date of the revolving credit facility and term loans, subject to certain limitations.

Borrowings under the term loans bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1.00% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the term loans is 2.00%, in the case of base rate loans, and 3.00% in the case of LIBOR rate loans, subject to one step-down of 0.25% upon the achievement of a consolidated first lien net leverage ratio (as defined in the credit agreement) of less than or equal to 4.50 to 1.00, subject to a base rate floor of 2.00%, and a LIBOR floor of 1.00%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the step-down of 0.25% after that date.

Borrowings under the revolving credit facility bear interest, at the Borrower’s option, at a rate equal to a margin over either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime lending rate, (2) the federal funds effective rate plus 1/2 of 1.00% and (3) the LIBOR rate for a one-month interest period plus 1.00% or (b) a LIBOR rate determined by reference to the Reuters LIBOR rate for the interest period relevant to such borrowing. The margin for the revolving credit facility is 1.50%, in the case of base rate loans, and 2.50%, in the case of LIBOR rate loans, subject to three step-downs of 0.25% each upon the achievement of a consolidated first lien net leverage ratio of less than or equal to 5.00 to 1.00, 4.50 to 1.00 and 4.00 to 1.00, respectively. As of March 2, 2015, we achieved a consolidated first lien net leverage ratio of less than 5.00 to 1.00, and after March 2, 2015 we realized the first step-down in margin of 0.25%. As of July 31, 2015, we achieved a consolidated first lien net leverage ratio of less than 4.50 to 1.00, and, as a result we realized the second step-down in margin of 0.25% after that date.

On April 14, 2014, we entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes the 1% LIBOR floor. We have elected to designate this interest rate swap as a cash flow hedge for accounting purposes.

If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to reduce capital expenditures or refinance all or a portion of our existing debt. Our ability to make scheduled principal payments and to pay interest on our debt depends on the future performance of our operations, which is subject to general conditions in or affecting the hotel industry that are beyond our control. See “Risk Factors—Risks related to our business and industry” and “Risk Factors—Risks relating to our indebtedness” in our 2015 Form 10-K.

Contractual obligations

There have been no significant changes in our contractual obligations since December 31, 2015 and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual obligations” in our 2015 Form 10-K is incorporated herein by reference.

Off-balance sheet arrangements

We do not have off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Under certain franchise agreements, we have committed to provide certain incentive payments, reimbursements, rebates and other payments, to help defray the costs of construction, marketing and other costs associated with opening and operating a La Quinta hotel.

New Accounting Pronouncements

See Note 2 of the notes to our condensed consolidated financial statements for a description of new accounting pronouncements.

Critical accounting policies and estimates

The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2015 Form 10-K describes the critical accounting estimates used in preparation of our consolidated financial statements. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on financial position or results of operations. There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our 2015 Form 10-K.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk primarily from changes in interest rates, which may impact future income, cash flows and fair value of the Company, depending on changes to interest rates. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into derivative financial arrangements to the extent they meet the objective described above, or are required by the terms of our debt facilities, and we do not use derivatives for trading or speculative purposes.

Interest rate risk

We are exposed to interest rate risk under our new credit agreement, as the interest is floating rate based on LIBOR, subject to a 1% LIBOR floor. On April 14, 2014, we entered into an interest rate swap agreement with an aggregate notional amount of $850.0 million that expires on April 14, 2019. This agreement swaps the LIBOR rate in effect under the new credit agreement for this portion of the loan to a fixed-rate of 2.0311%, which includes the 1% LIBOR floor. We have elected to designate this interest rate swap as a cash flow hedge for accounting purposes. The 30-day LIBOR rate increased from 0.36 percent per annum at December 31, 2015 to 0.45 percent at June 30, 2016. Changes in interest rates also affect the fair value of our debt.

The following table sets forth the scheduled maturities and the total fair value as of June 30, 2016 for our financial instruments that were materially affected by interest rate risks (in millions, excluding average interest rate):

	Maturities by period												Carrying			Fair
	2016		2017		2018		2019		2020		Thereafter		value			value
Term Facility	$	8.8	$	17.5	$	17.5	$	17.5	$	17.5		1,627.2	$	1,706.0		$	1,679.0
Weighted average interest rate ⁽¹⁾														4.255	%

⁽¹⁾	Weighted average interest rate as of June 30, 2016, which includes the interest rate swap.

Refer to our Note 7 : “ Fair Value Measurements” in the unaudited condensed consolidated financial statements included elsewhere in this report for further discussion of the fair value measurements of our financial assets and liabilities.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2016, the Company’s management has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controls objectives. Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of June 30, 2016, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in the internal control over financial reporting of the Company that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of the Company.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

On April 25, 2016, a purported stockholder class action lawsuit, captioned Beisel v. La Quinta Holdings Inc. et al., was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of the Company’s common stock pursuant to the Company’s March 24, 2015 secondary public offering (the “March Secondary Offering”) and on behalf of purchasers of the Company’s common stock from February 25, 2015 through September 17, 2015 (the “Class Period”). The complaint names as defendants the Company, certain current and former Company officers, and certain current and former members of the Board of Directors, among others. The complaint alleges, among other things, that, in violation of the federal securities laws, the registration statement and prospectus filed in connection with the March Secondary Offering contained materially false and misleading information and that the Company as well as certain current and former officers made false and misleading statements in earnings releases and to analysts during the Class Period. Plaintiff seeks unspecified compensatory damages and other relief. The Company believes that the putative class action lawsuit is without merit and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of this lawsuit.

In addition, we are a party to a number of pending claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, workers’ compensation and other employee claims and intellectual property claims. We do not consider our ultimate liability with respect to any such claims or lawsuits, or the aggregate of such claims and lawsuits, to be material in relation to our consolidated financial condition, results of operations or our cash flows taken as a whole.

Item 1A.

Risk Factors

There have been no material changes to our principal risks that we believe are material to our business, results of operations and financial condition from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015, which is accessible on the SEC’s website at www.sec.gov.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
4/1/16-4/30/16		3,855,694	$	12.32		3,837,774	$	28,000,647
5/1/16-5/31/16		2,287,950		12.26		2,284,601		—
6/1/16-6/30/16		46,807		12.03		—		—
Total		6,190,451	$	12.30		6,122,375	$	—

(1) Includes 17,920 shares for the period from April 1through April 30, 2016, 3,349 shares for the period from May 1 through May 31, 2016, and 46,807 for the period from June 1 through June 30, 2016 repurchased to satisfy tax withholding obligations incurred upon the vesting of restricted stock awarded under the Company’s 2014 Omnibus Incentive Plan.

(2) On March 14, 2016, the Company announced that our Board of Directors had authorized a program (the “Repurchase Program”) of indefinite duration to repurchase an aggregate of up to $100 million of the Company’s common stock. The Repurchase Program was completed in May of 2016.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRSHRA”), which added Section 13(r) of the Exchange Act, we hereby incorporate by reference herein Exhibit 99.1 of this report, which includes disclosures publicly filed and/or provided to Blackstone by Hilton Worldwide Holdings Inc., which may be considered our affiliate.

Item 6.

Exhibits

The following is a list of all exhibits filed or furnished as part of this report:

Exhibit No.	Description


10.1	Offer Letter, dated April 13, 2016, between La Quinta Holdings Inc. and John Cantele (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 14, 2016 (File no. 001-36412))

10.2	Separation and Consulting Agreement, dated April 14, 2016, between La Quinta Holdings Inc. and Angelo Lombardi (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 14, 2016 (File no. 001-36412))

10.3	Form of Restricted Stock Grant Notice (Time-Based Vesting Award) (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on April 27, 2016 (File no. 001-36412))

10.4	Form of Performance Share Unit Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on April 27, 2016 (File no. 001-36412)
10.5	Amended and Restated La Quinta Holdings Inc. 2014 Omnibus Incentive Plan

31.1	Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1	Section 13(r) Disclosure

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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 thereunto duly authorized.

	LA QUINTA HOLDINGS INC.
	(Registrant)

Date: August 2, 2016	By:	/s/ Keith A. Cline
		Keith A. Cline
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: August 2, 2016	By:	/s/ James H. Forson
		James H. Forson
		Executive Vice President, Chief Financial Officer, and Treasurer
		(Principal Financial and Accounting Officer)

Exhibit 10.5

Execution Version

amended and restated
La Quinta Holdings Inc.
2014 Omnibus Incentive Plan

1. Purpose .

(a) The purpose of the Amended and Restated La Quinta Holdings Inc. 2014 Omnibus Incentive Plan is to provide a means through which the Company and the other members of the Company Group may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors of the Company and the other members of the Company Group can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company Group and aligning their interests with those of the Company’s stockholders.

(b) The La Quinta Holdings Inc. 2014 Omnibus Incentive Plan (the “ Original Plan ”) was originally adopted by the Board on April 4, 2014, and was amended and restated as of the Effective Date, conditioned on, and subject to, the approval of the Company’s stockholders at its 2016 annual meeting of stockholders of the Company. Notwithstanding anything in the Plan to the contrary, Awards may be granted under the Plan prior to and conditioned upon the stockholder approval of the Plan; provided, however, that if such stockholder approval is not obtained, both the Plan and any Awards granted under it, shall be void ab initio , and the terms of the Original Plan shall remain in full force and effect without regard to this amendment and restatement.

2. Definitions . The following definitions shall be applicable throughout the Plan.

(a) “ Absolute Share Limit ” has the meaning given to such term in Section 5(b) of the Plan.

(b) “ Adjustment Event ” has the meaning given to such term in Section 12(a) of the Plan.

(c) “ Affiliate ” means any Person that directly or indirectly controls, is controlled by or is under common control with the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise.

(d) “ Award ” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Equity-Based Award, Other Cash-Based Award and Performance Compensation Award granted under the Plan.

(e) “ Award Agreement ” means the document or documents by which each Award (other than an Other Cash-Based Award) is evidenced, which may be in written or electronic form.

(f) “ Board ” means the Board of Directors of the Company.

(g) “ Cause ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Cause,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the absence of any definition of “Cause” contained therein), the Participant’s (A) willful neglect in the performance of the Participant’s duties for the Service Recipient or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the Participant’s employment or service with the Service Recipient, which results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group; (C) conviction of, or plea of guilty or no contest to, (I) any felony; or (II) any other crime that results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group; (D) material violation of the written policies of the Service Recipient, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Service Recipient; (E) fraud or misappropriation, embezzlement or misuse of funds or property belonging to the Company or any other member of the Company Group; or (F) act of personal dishonesty that involves personal profit in connection with the Participant’s employment or service to the Service Recipient.

(h) “ Change in Control ” means:

(i) the acquisition (whether by purchase, merger, consolidation, combination or other similar transaction) by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% (on a fully diluted basis) of either (A) the then outstanding shares of Common Stock, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock; or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however , that for purposes of the Plan, the following acquisitions shall not constitute a Change in Control: (I) any acquisition by the Company or any Affiliate; (II) any acquisition by any employee benefit plan sponsored or maintained by the Company or any Affiliate; or (III) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant);

(ii) during any period of twenty-four (24) months, individuals who, at the beginning of such period, constitute the Board (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such

nomination) shall be an Incumbent Director; provided, however , that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

(iii) the sale, transfer or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate of the Company.

(i) “ Code ” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.

(j) “ Committee ” means the Compensation Committee of the Board or any properly delegated subcommittee thereof or, if no such Compensation Committee or subcommittee thereof exists, the Board.

(k) “ Common Stock ” means the common stock of the Company, par value $0.01 per share (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged).

(l) “ Company ” means La Quinta Holdings Inc., a Delaware corporation, and any successor thereto.

(m) “ Company Group ” means, collectively, the Company and its Subsidiaries.

(n) “ Date of Grant ” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(o) “ Designated Foreign Subsidiaries ” means all members of the Company Group that are organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time.

(p) “ Detrimental Activity ” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Service Recipient for Cause; (iii) the breach of any noncompetition, nonsolicitation or other agreement containing restrictive covenants, with any member of the Company Group; or (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.

(q) “ Disability ” means, as to any Participant, unless the applicable Award Agreement states otherwise, (i) “Disability,” as defined in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of such Termination; or (ii) in the absence of any such employment or consulting agreement (or the

absence of any definition of “Disability” contained therein), a condition entitling the Participant to receive benefits under a long-term disability plan of the Service Recipient or other member of the Company Group in which such Participant is eligible to participate, or, in the absence of such a plan, the complete and permanent inability of the Participant by reason of illness or accident to perform the duties of the occupation at which the Participant was employed or served when such disability commenced. Any determination of whether Disability exists in the absence of a long-term disability plan shall be made by the Company (or designee) in its sole and absolute discretion.

(r) “ Effective Date ” means March 17, 2016.

(s) “ Eligible Person ” means any (i) individual employed by any member of the Company Group; provided, however , that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Company Group; or (iii) consultant or advisor to any member of the Company Group who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act, who, in the case of each of clauses (i) through (iii) above has entered into an Award Agreement or who has received written notification from the Committee or its designee that they have been selected to participate in the Plan.

(t) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(u) “ Exercise Price ” has the meaning given to such term in Section 7(b) of the Plan.

(v) “ Fair Market Value ” means, on a given date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there are no such sales on that date, then on the last preceding date on which such sales were reported; (ii) if the Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by the Committee in good faith to be the fair market value of the Common Stock.

(w) “ GAAP ” has the meaning given to such term in Section 7(d) of the Plan.

(x) “ Immediate Family Members ” has the meaning given to such term in Section 14(b)(ii) of the Plan.

(y) “ Incentive Stock Option ” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.

(z) “ Indemnifiable Person ” has the meaning given to such term in Section 4(e) of the Plan.

(aa) “ Negative Discretion ” means the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of an Other Cash-Based Award that is designated as a Performance Compensation Award consistent with Section 162(m) of the Code.

(bb) “ Nonqualified Stock Option ” means an Option which is not designated by the Committee as an Incentive Stock Option.

(cc) “ Non-Employee Director ” means a member of the Board who is not an employee of any member of the Company Group.

(dd) “ Option ” means an Award granted under Section 7 of the Plan.

(ee) “ Option Period ” has the meaning given to such term in Section 7(c) of the Plan.

(ff) “ Original Plan ” has the meaning given to such term in Section 1(b) of the Plan.

(gg) “ Other Cash-Based Award ” means an Award that is not a Stock Appreciation Right or Restricted Stock Unit granted under Section 10 of the Plan that is denominated and/or payable in cash.

(hh) “ Other Equity-Based Award ” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Performance Compensation Award, that is granted under Section 10 of the Plan and is (i) payable by delivery of Common Stock, and/or (ii) measured by reference to the value of Common Stock.

(ii) “ Participant ” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan.

(jj) “ Performance Compensation Award ” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.

(kk) “ Performance Criteria ” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Compensation Award under the Plan.

(ll) “ Performance Formula ” means, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

(mm) “ Performance Goals ” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

(nn) “ Performance Period ” means the one or more periods of time of not less than 12 months, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

(oo) “ Permitted Transferee ” has the meaning given to such term in Section 14(b)(ii) of the Plan.

(pp) “ Person ” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

(qq) “ Plan ” means this Amended and Restated La Quinta Holdings Inc. 2014 Omnibus Incentive Plan, as it may be amended and restated from time to time.

(rr) “Qualifying Director ” means a person who is (i) with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; and (ii) with respect to actions intended to obtain the exception for performance-based compensation under 162(m) of the Code, an “outside director” within the meaning of Section 162(m) of the Code.

(ss) “ Restricted Period ” means the period of time determined by the Committee during which an Award is subject to restrictions, including vesting conditions.

(tt) “ Restricted Stock ” means Common Stock, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(uu) “ Restricted Stock Unit ” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan.

(vv) “ SAR Period ” has the meaning given to such term in Section 8(c)(i) of the Plan.

(ww) “ Securities Act ” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

(xx) “ Service Recipient ” means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or

following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable.

(yy) “ Stock Appreciation Right ” or “ SAR ” means an Award granted under Section 8 of the Plan.

(zz) “ Strike Price ” has the meaning given to such term in Section 8(b) of the Plan.

(aaa) “ Subsidiary ” means, with respect to any specified Person:

(i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of such entity’s voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(ii) any partnership (or any comparable foreign entity) (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

(bbb) “ Substitute Awards ” has the meaning given to such term in Section 5(e) of the Plan.

(ccc) “ Sub-Plans ” means any sub-plan to the Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Absolute Share Limit and the other limits specified in Section 5(b) shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder.

(ddd) “ Termination ” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient for any reason (including death or Disability).

3. Effective Date; Duration . The Plan shall be effective as of the Effective Date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth (10 ^th ) anniversary of the Effective Date; provided, however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.

4. Administration .

(a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time such member takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3 promulgated under the Exchange Act or to qualify as performance-based compensation under Section 162(m) of the Code, as applicable, be a Qualifying Director. However, the fact that a Committee member shall fail to qualify as a Qualifying Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

(b) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled in, or exercised for, cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (ix) adopt Sub-Plans; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

(c) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of any member of the Company Group, the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except with respect to grants of Awards to persons (i) who are Non-Employee Directors, (ii) who are subject to Section 16 of the Exchange Act, or (iii) who are, or could reasonably be expected to be, “covered employees” for purposes of Section 162(m) of the Code.

(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan, any Award

or any Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including, without limitation, any member of the Company Group, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

(e) No member of the Board, the Committee or any employee or agent of any member of the Company Group (each such Person, an “ Indemnifiable Person ”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided , that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the organizational documents of any member of the Company Group. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold such Indemnifiable Persons harmless.

(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan.

5. Grant of Awards; Shares Subject to the Plan; Limitations .

(a) The Committee may, from time to time, grant Awards to one or more Eligible Persons.

(b) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, no more than 13,000,000 shares of Common Stock (the “ Absolute Share Limit ”) shall be available for Awards under the Plan; (ii) subject to Section 12 of the Plan, grants of Options or SARs under the Plan in respect of no more than 900,000 shares of Common Stock may be made to any individual Participant during any single fiscal year of the Company (for this purpose, if a SAR is granted in tandem with an Option (such that the SAR expires with respect to the number of shares of Common Stock for which the Option is exercised), only the shares underlying the Option shall count against this limitation); (iii) subject to Section 12 of the Plan, no more than the number of shares of Common Stock equal to the Absolute Share Limit may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; (iv) subject to Section 12 of the Plan, no more than 3,500,000 shares of Common Stock may be issued in respect of Performance Compensation Awards denominated in shares of Common Stock granted pursuant to Section 11 of the Plan to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year), or in the event such share-denominated Performance Compensation Award is paid in cash, other securities, other Awards or other property, no more than the Fair Market Value of such shares of Common Stock on the last day of the Performance Period to which such Award relates; (v) the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $500,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes); and (vi) the maximum amount that can be paid to any individual Participant for a single fiscal year during a Performance Period (or with respect to each single fiscal year in the event a Performance Period extends beyond a single fiscal year) pursuant to a Performance Compensation Award denominated in cash (described in Section 11(a) of the Plan) shall be $10,000,000.

(c) Other than with respect to Substitute Awards, to the extent that an Award expires or is canceled, forfeited, terminated, settled in cash, or otherwise is settled without delivery to the Participant of the full number of shares of Common Stock to which the Award related, the undelivered shares will again be available for grant. Shares of Common Stock shall be deemed to have been issued in settlement of Awards if the Fair Market Value equivalent of such shares is paid in cash; provided , however , that no shares of Common Stock shall be deemed to have been issued in settlement of a SAR that only provides for settlement in cash and settles only in cash or in respect of any Other Cash-Based Award. In no event shall (i) shares tendered or withheld on the exercise of Options or other Award for the payment of the Exercise Price or purchase price or withholding taxes, (ii) shares of Common Stock not issued upon the settlement of a SAR that settles in shares of Common Stock (or could settle in shares of Common Stock), or (iii) shares of Common Stock purchased on the open market with cash proceeds from the exercise of Options, again become available for other Awards under the Plan.

(d) Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing.

(e) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“ Substitute Awards ”). Substitute Awards shall not be counted against the Absolute Share Limit; provided , that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan.

6. Eligibility . Participation in the Plan shall be limited to Eligible Persons.

7. Options .

(a) General . Each Option granted under the Plan shall be evidenced by an Award Agreement, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of a member of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

(b) Exercise Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“ Exercise Price ”) per share of Common Stock for each

Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); provided, however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the Date of Grant.

(i) Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee; provided , however , that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Options at any time and for any reason. Options shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “ Option Period ”); provided , that if the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the Option Period shall be automatically extended until the thirtieth (30 ^th ) day following the expiration of such prohibition. Notwithstanding the foregoing, in no event shall the Option Period exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the Option Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the Option Period).

(d) Method of Exercise and Form of Payment . No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable: (i) in cash, check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual

issuance of such shares to the Company); provided , that such shares of Common Stock are not subject to any pledge or other security interest and have been held by the Participant for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles (“ GAAP ”)); or (ii) by such other method as the Committee may permit, in its sole discretion, including, without limitation (A) in other property having a fair market value on the date of exercise equal to the Exercise Price; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (C) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price and any Federal, state, local, and non-U.S. income, employment, and any other applicable taxes required to be withheld. Any fractional shares of Common Stock shall be settled in cash.

(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date the Participant makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) the date that is two (2) years after the Date of Grant of the Incentive Stock Option, or (ii) the date that is one (1) year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock.

(f) Compliance With Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

8. Stock Appreciation Rights .

(a) General . Each SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.

(b) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“ Strike Price ”) per share of Common Stock for each SAR

shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option.

(i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee; provided , however , that notwithstanding any such vesting dates or events, the Committee may, in its sole discretion, accelerate the vesting of any SAR at any time and for any reason. SARs shall expire upon a date determined by the Committee, not to exceed ten (10) years from the Date of Grant (the “ SAR Period ”); provided , that if the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy (or Company-imposed “blackout period”), then the SAR Period shall be automatically extended until the 30th day following the expiration of such prohibition.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding SARs granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the SAR Period); and (C) a Participant’s Termination for any other reason, each outstanding unvested SAR granted to such Participant shall immediately terminate and expire, and each outstanding vested SAR shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the SAR Period).

(d) Method of Exercise . SARs which have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.

(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares of Common Stock subject to the SAR that are being exercised multiplied by the excess of the Fair Market Value of one (1) share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.

9. Restricted Stock and Restricted Stock Units .

(a) General . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

(b) Stock Certificates and Book-Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable; and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (in a manner permitted under Section 14(a) of the Plan or as otherwise determined by the Committee) an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder as to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock; provided , that if the lapsing of restrictions with respect to any grant of Restricted Stock is contingent on satisfaction of performance conditions (other than, or in addition to, the passage of time), any dividends payable on such shares of Restricted Stock shall be held by the Company and delivered (without interest) to the Participant within fifteen (15) days following the date on which the restrictions on such Restricted Stock lapse (and the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. A Participant shall have no rights or privileges as a stockholder as to Restricted Stock Units.

(i) Restricted Stock and Restricted Stock Units shall vest, and any applicable Restricted Period shall lapse, in such manner and on such date or dates or upon such event or events as determined by the Committee; provided , however , that, notwithstanding any such dates or events, the Committee may, in its sole discretion, accelerate the vesting of any Restricted Stock or Restricted Stock Unit or the lapsing of any applicable Restricted Period at any time and for any reason.

(ii) Unless otherwise provided by the Committee, whether in an Award Agreement or otherwise, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock or Restricted Stock Units, as

applicable, have vested, (A) all vesting with respect to such Participant’s Restricted Stock or Restricted Stock Units, as applicable, shall cease; and (B) unvested shares of Restricted Stock and unvested Restricted Stock Units, as applicable, shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.

(d) Issuance of Restricted Stock and Settlement of Restricted Stock Units .

(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or the Participant’s beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, in the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

(ii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant or the Participant’s beneficiary, without charge, one (1) share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however , that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (B) defer the issuance of shares of Common Stock (or cash or part cash and part shares of Common Stock, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock in respect of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per share of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award Agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, in the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, in the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled following the date on which the Restricted Period lapses with respect to such Restricted Stock Units, and, if such

Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalent payments (or interest thereon, if applicable).

(e) Legends on Restricted Stock . Each certificate, if any, or book-entry representing Restricted Stock awarded under the Plan, if any, shall bear a legend or book-entry notation substantially in the form of the following, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock:

TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE La Quinta Holdings Inc. 2014 Omnibus INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT BETWEEN La Quinta Holdings Inc. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF La Quinta Holdings Inc.

10. Other Equity-Based Awards and Other Cash-Based Awards . The Committee may grant Other Equity-Based Awards and Other Cash-Based Awards under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine. Each Other Equity-Based Award granted under the Plan shall be evidenced by an Award Agreement and each Other Cash-Based Award granted under the Plan shall be evidenced in such form as the Committee may determine from time to time. Each Other Equity-Based Award or Other Cash-Based Award, as applicable, so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or other form evidencing such Award, including, without limitation, those set forth in Section 14(a) of the Plan.

11. Performance Compensation Awards .

(a) General . The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything in the Plan to the contrary, if the Company determines that a Participant who has been granted an Award designated as a Performance Compensation Award is not (or is no longer) a “covered employee” (within the meaning of Section 162(m) of the Code), the terms and conditions of such Award may be modified without regard to any restrictions or limitations set forth in this Section 11 (but subject otherwise to the provisions of Section 13 of the Plan).

(b) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply and the Performance Formula(e). Within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard

to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

(c) Performance Criteria . The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and shall be limited to the following, which may be determined in accordance with GAAP or on a non-GAAP basis: (i) net earnings, net income (before or after taxes) or consolidated net income; (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, capital, employed capital, invested capital, equity, or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, or cash flow return on capital), which may but are not required to be measured on a per share basis; (viii) actual or adjusted earnings before or after interest, taxes, depreciation and/or amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total stockholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) objective measures of customer/client satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other ‘value creation’ metrics; (xvii) enterprise value; (xviii) sales; (xix) stockholder return; (xx) customer/client retention; (xxi) competitive market metrics; (xxii) employee retention; (xxiii) objective measures of personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, dispositions, reorganizations or other corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxiv) comparisons of continuing operations to other operations; (xxv) market share; (xxvi) cost of capital, debt leverage year-end cash position or book value; (xxvii) strategic objectives; or (xxviii) any combination of the foregoing. Any one or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of one or more members of the Company Group as a whole or any divisions or operational and/or business units, product lines, brands, business segments or administrative departments of the Company and/or one or more members of the Company Group or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.

(d) Modification of Performance Goal(s) . In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. Unless otherwise determined by the Committee at the time a Performance Compensation Award is granted, the Committee shall, during the first ninety (90) days of a Performance Period (or, within any other maximum period allowed under Section 162(m) of the Code), or at any time thereafter to the extent the exercise of such authority at such time would not cause the Performance Compensation Awards granted to any Participant for such Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code, specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) acquisitions or divestitures; (vi) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (vii) foreign exchange gains and losses; (viii) discontinued operations and nonrecurring charges; and (ix) a change in the Company’s fiscal year.

(e) Payment of Performance Compensation Awards .

(i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

(ii) Limitation . Unless otherwise provided in the applicable Award Agreement, a Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that (A) the Performance Goals for such period are achieved, and (B) all or some portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.

(iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.

(iv) Use of Negative Discretion . In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, if such Performance Compensation Award is an Other Cash-Based Award, the Committee may reduce or eliminate the amount of such Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion. Unless otherwise provided in the applicable Award Agreement, the

Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of the Plan.

(f) Timing of Award Payments . Unless otherwise provided in the applicable Award Agreement, Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee; or (ii) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date. Any Performance Compensation Award that is deferred and is otherwise payable in shares of Common Stock shall be credited (during the period between the date as of which the Award is deferred and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last sentence of Section 9(d)(ii) of the Plan).

12. Changes in Capital Structure and Similar Events . Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply to all Awards granted hereunder (other than Other Cash-Based Awards):

(a) General . In the event of (i) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event that affects the shares of Common Stock (including a Change in Control); or (ii) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, that the Committee determines, in its sole discretion, could result in substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (i) or (ii), an “ Adjustment Event ”), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Absolute Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder; (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan or any Sub-Plan; and (C) the terms of any outstanding Award, including, without limitation, (I) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate; (II) the Exercise Price or Strike Price with respect to any Award; or (III) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals); provided , that in the case of any “equity restructuring” (within the meaning of the

Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment under this Section 12 shall be conclusive and binding for all purposes.

(b) Adjustment Events . Without limiting the foregoing, except as may otherwise be provided in an Award Agreement, in connection with any Adjustment Event, the Committee may, in its sole discretion, provide for any one or more of the following:

(i) substitution or assumption of Awards (or awards of an acquiring company), acceleration of the vesting of, exercisability of, lapse of restrictions on, or termination of, Awards, or establishment of a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate upon the occurrence of such event);

(ii) cancellation of any one or more outstanding Awards and payment to the holders of such Awards that are vested as of such cancellation (including, without limitation, any Awards that would vest as a result of the occurrence of such event but for such cancellation or for which vesting is accelerated by the Committee in connection with such event), the value of such Awards, if any, as determined by the Committee (which value, if applicable, may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including, without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor), or, in the case of Restricted Stock, Restricted Stock Units or Other Equity-Based Awards that are not vested as of such cancellation, a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Equity-Based Awards prior to cancellation, or the underlying shares in respect thereof; and

(iii) subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, conversion or replacement of any Award that is not vested as of the occurrence of such event into or with the right to receive a payment, based on the value of the Award (as determined consistent with clause (ii) above), which is subject to continued vesting on the same basis as the vesting requirements applicable to such converted or replaced Award.

Payments to holders pursuant to clauses (ii) or (iii) above shall be made in cash or, in the sole discretion of the Committee, in the form of such other consideration necessary for a Participant to receive property, cash, or securities (or combination thereof) as such Participant would have been entitled to receive upon the occurrence of the transaction if the Participant had been,

immediately prior to such transaction, the holder of the number of shares of Common Stock covered by the Award at such time (less any applicable Exercise Price or Strike Price).

(c) Other Requirements . Prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (i) represent and warrant as to the unencumbered title to the Participant’s Awards; (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code; and (iii) deliver customary transfer documentation as reasonably determined by the Committee.

(d) Fractional Shares . Any adjustment provided under this Section 12 may provide for the elimination of any fractional share that might otherwise become subject to an Award.

13. Amendments and Termination .

(a) Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided , that no such amendment, alteration, suspension, discontinuance or termination shall be made without stockholder approval if (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (except for increases pursuant to Section 5 or 12 of the Plan); or (iii) it would materially modify the requirements for participation in the Plan; provided, further , that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) of the Plan without stockholder approval.

(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participant’s Termination); provided , that, other than pursuant to Section 12, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further , that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR; and (iii) the Committee may not take

any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted.

14. General .

(a) Award Agreements . Each Award (other than an Other Cash-Based Award) under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom such Award was granted and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee. For purposes of the Plan, an Award Agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the Award. The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company.

(b) Nontransferability .

(i) Each Award shall be exercisable only by such Participant to whom such Award was granted during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (unless such transfer is specifically required pursuant to a domestic relations order or by applicable law) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against any member of the Company Group; provided , that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “ Immediate Family Members ”); (B) a trust solely for the benefit of the Participant and the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and the Participant’s Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for Federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “ Permitted Transferee ”); provided , that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

(iii) The terms of any Award transferred in accordance with clause (ii) above shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of a Participant’s Termination under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.

(c) Dividends and Dividend Equivalents . The Committee may, in its sole discretion, provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided , that no dividends, dividend equivalents or other similar payments shall be payable in respect of outstanding (i) Options or SARs; or (ii) unearned Performance Compensation Awards or other unearned Awards subject to performance conditions (other than, or in addition to, the passage of time) (although dividends, dividend equivalents or other similar payments may be accumulated in respect of unearned Awards and paid within fifteen (15) days after such Awards are earned and become payable or distributable).

(d) Tax Withholding .

(i) As a condition to the grant of any Award, it shall be required that a Participant satisfy, through a cash payment by the Participant, or in the discretion of the Committee, through deduction or withholding from any payment of any kind otherwise due to the Participant, or through such other arrangements as are satisfactory to the Committee, the amount of all Federal, state, and local income and other applicable taxes of any kind required or permitted to be withheld in connection with such Award.

(ii) Without limiting the generality of clause (i) above, the Committee may (but is not obligated to), in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) that have been held by the Participant for at least six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying

GAAP) having a Fair Market Value equal to such withholding liability; or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares of Common Stock with a Fair Market Value equal to such withholding liability, provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the minimum required statutory withholding liability unless determined by the Committee not to result in adverse accounting consequences.

(e) Data Protection . By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and the Participant’s participation in the Plan.

(f) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of any member of the Company Group, or other Person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Service Recipient or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Service Recipient and/or any member of the Company Group and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

(g) International Participants . With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may, in its sole discretion, amend the terms of the Plan and create or amend Sub-Plans or amend outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant or any member of the Company Group.

(h) Designation and Change of Beneficiary . Each Participant may file with the Committee a written designation of one or more Persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon the Participant’s death. A Participant may, from time to time, revoke or change the Participant’s beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however , that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be the Participant’s spouse or, if the Participant is unmarried at the time of death, the Participant’s estate.

(i) Termination . Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction.

(j) No Rights as a Stockholder . Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such Person.

(k) Government and Other Regulations .

(i) The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act

any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of any member of the Company Group issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of any member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of any member of the Company Group issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that the Committee, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable); over (II) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units or Other Equity-Based Awards, provide the Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Equity-Based Awards, or the underlying shares in respect thereof.

(l) No Section 83(b) Elections Without Consent of Company . No election under Section 83(b) of the Code or under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award Agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the acquisition

of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision.

(m) Payments to Persons Other Than Participants . If the Committee shall find that any Person to whom any amount is payable under the Plan is unable to care for the Participant’s affairs because of illness or accident, or is a minor, or has died, then any payment due to such Person or the Participant’s estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to the Participant’s spouse, child, relative, an institution maintaining or having custody of such Person, or any other Person deemed by the Committee to be a proper recipient on behalf of such Person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(n) Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of equity-based awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

(o) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between any member of the Company Group, on the one hand, and a Participant or other Person, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law.

(p) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of any member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself or herself.

(q) Relationship to Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan or as required by applicable law.

(r) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof. EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF THE PARTICIPANT’S RIGHTS OR OBLIGATIONS HEREUNDER.

(s) Severability . If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(t) Obligations Binding on Successors . The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(u) Section 409A of the Code .

(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments.

(ii) Notwithstanding anything in the Plan to the contrary, if a Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments in respect of any Awards that are “deferred compensation” subject to Section 409A of the Code and which would otherwise be payable upon the Participant’s “separation from service” (as defined in Section 409A of the Code) shall be made to such Participant prior to the date that is six (6) months after the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death. Following any

applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.

(iii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code; or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code.

(v) Clawback/Repayment . All Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any clawback, forfeiture or other similar policy adopted by the Board or the Committee and as in effect from time to time; and (ii) applicable law. Further, to the extent that the Participant receives any amount in excess of the amount that the Participant should otherwise have received under the terms of the Award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations or other administrative error), the Participant shall be required to repay any such excess amount to the Company.

(w) Detrimental Activity . Notwithstanding anything to the contrary contained herein, if a Participant has engaged in any Detrimental Activity, as determined by the Committee, the Committee may, in its sole discretion, provide for one or more of the following:

(i) cancellation of any or all of such Participant’s outstanding Awards; or

(ii) forfeiture by the Participant of any gain realized on the vesting or exercise of Awards, and repayment by the Participant of any such gain promptly to the Company.

(x) Expenses; Titles and Headings . The expenses of administering the Plan shall be borne by the Company Group. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Keith A. Cline, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 of La Quinta Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2016

/s/ Keith A. Cline

Keith A. Cline

President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, James H. Forson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 of La Quinta Holdings Inc.;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2016

/s/ James H. Forson

James H. Forson

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of La Quinta Holdings Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Cline, President, Chief Executive Officer and Director of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2016

/s/ Keith A. Cline

Keith A. Cline

President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of La Quinta Holdings Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James H. Forson, Executive Vice President, Chief Financial Officer, and Treasurer, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2016

/s/ James H. Forson

James H. Forson

Executive Vice President, Chief Financial Officer, and Treasurer

(Principal Financial Officer)

Exhibit 99.1

SECTION 13(r) DISCLOSURE

After La Quinta Holdings Inc. (“La Quinta”) filed its quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2016 with the Securities and Exchange Commission (the “SEC”), Travelport Worldwide Limited (“Travelport Worldwide”) and NCR Corporation (“NCR”), which may be considered affiliates of The Blackstone Group L.P. (“Blackstone”), and, therefore, may be considered affiliates of La Quinta, filed the disclosures reproduced below with respect to such period, in accordance with Section 13(r) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, NCR included the disclosure reproduced below in its quarterly report on Form 10-Q filed with the SEC with respect to the fiscal quarter ended June 30, 2016, in accordance with Section 13(r) of the Exchange Act. La Quinta did not independently verify or participate in the preparation of any of these disclosures.

Travelport Worldwide included the following disclosure in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 :

“The following activities are disclosed as required by Section 13(r)(1)(D)(iii) of the Exchange Act.

As part of our global business in the travel industry, we provide certain passenger travel related Travel Commerce Platform and Technology Services to Iran Air. We also provide certain Technology Services to Iran Air Tours. All of these services are either exempt from applicable sanctions prohibitions pursuant to a statutory exemption permitting transactions ordinarily incident to travel or, to the extent not otherwise exempt, specifically licensed by the U.S. Office of Foreign Assets Control. Subject to any changes in the exempt/licensed status of such activities, we intend to continue these business activities, which are directly related to and promote the arrangement of travel for individuals.

The gross revenue and net profit attributable to these activities in the quarter ended March 31, 2016 were approximately $156,000 and $109,000, respectively.”

NCR included the following disclosure in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 :

“Pursuant to Section 13(r)(1)(D)(iii) of the Securities Exchange Act of 1934, as amended, we note that, during the period from January 1, 2016 through March 31, 2016, we maintained a bank account and guarantees at the Commercial Bank of Syria (“CBS”), which was designated as a Specially Designated National pursuant to Executive Order 13382 (“EO 13382”) on August 10, 2011. This bank account and the guarantees at CBS were maintained in the normal course of business prior to the listing of CBS pursuant to EO 13382. We note that the last known account balance as of March 31, 2016, was approximately $3,468. The bank account did not generate interest from January 1, 2016 through March 31, 2016, and the guarantees did not generate any revenue or profits for the Company. Pursuant to a license granted to the Company by OFAC on January 3, 2013, and subsequent licenses granted on April 29, 2013, July 12, 2013, February 28, 2014, November 12, 2014, and October 24, 2015, the Company has been winding down its past operations in Syria. The Company’s current license expires on April 30, 2016. The Company has also received licenses from OFAC to close the CBS account and terminate any guarantees. The Company’s application to renew the license to transact business with CBS, which was

submitted to OFAC on May 18, 2015, remains pending. Following the termination of guarantees and the closure of the ac count, the Company does not intend to engage in any further business activities with CBS.”

NCR included the following disclosure in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 :

“Pursuant to Section 13(r)(1)(D)(iii) of the Securities Exchange Act of 1934, as amended, we note that, during the period from April 1, 2016 through April 30, 2016, we continued to maintain a bank account and guarantees at the Commercial Bank of Syria (“CBS”), which was designated as a Specially Designated National pursuant to Executive Order 13382 (“EO 13382”) on August 10, 2011. This bank account and the guarantees at CBS were maintained in the normal course of business prior to the listing of CBS pursuant to EO 13382. We note that the last known account balance as of April 30, 2016 was approximately $3,468. The bank account did not generate interest from April 1, 2016 through April 30, 2016, and the guarantees did not generate any revenue or profits for the Company. Pursuant to a license granted to the Company by OFAC on January 3, 2013, and subsequent licenses granted on April 29, 2013, July 12, 2013, February 28, 2014, November 12, 2014, and October 24, 2015, the Company had been engaged in winding down its past operations in Syria. The Company’s last such license expired on April 30, 2016. In addition, the Company’s application to renew its license to transact business with CBS, which was submitted to OFAC on May 18, 2015, was not acted upon prior to the expiration of the Company’s last such license. As a result, and in connection with the license expiration, the Company abandoned its remaining property in Syria, which, including the CBS account, was commercially insignificant, and ended the employment of its final two employees in Syria, who had remained employed by the Company to assist with the execution of the Company’s wind-down activities pursuant to authority granted by the OFAC licenses. The Company does not intend to engage in any further business activities with CBS.”