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Exhibit
10.4
APPLE REIT SEVEN,
INC.
2005 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
EFFECTIVE
2005
APPLE REIT SEVEN,
INC.
2005 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
EFFECTIVE
, 2005
1. Purpose . The
purpose of this Apple REIT Seven, Inc. 2005 Non-Employee Directors
Stock Option Plan (the “Plan”) is to encourage
ownership in Apple REIT Seven, Inc. (the “Company) by
non-employee members of the Board, in order to promote long-term
stockholder value and to provide non-employee members of the Board
with an incentive to continue as directors of the
Company.
2. Definitions . As
used in the Plan, the following terms have the meanings
indicated:
(a) “Act” means
the Securities Exchange Act of 1934, as amended.
(b) “Board” means
the board of directors of the Company.
(c) “Code” means
the Internal Revenue Code of 1986, as amended.
(d) “Company”
means Apple REIT Seven, Inc., a Virginia corporation.
(e) “Date of
Grant” means the date as of which an Eligible Director is
automatically awarded an Option pursuant to
Section 7.
(f) “Disability”
or “Disabled” means that the participant (i) is unable
to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (ii) is, by reason
of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a
continuous period of not less than 12
months, receiving income
replacement benefits for a period of not less than 3 months under
an accident and health plan covering employees of the
Employer.
(g) “Eligible
Director” means a director described in Section 4.
(h) “Employer”
means the Company.
(i) “Fair Market
Value” means, on any given date, (i) if the Units are traded
on an exchange, the closing registered sales prices of the Company
Stock on such day on the exchange on which it generally has the
greatest trading volume, (ii) if the Units are traded on the
over-the-counter market, the average between the closing bid and
asked prices on such day as reported by NASDAQ, or (iii) if the
Units are not traded on any exchange or over-the-counter market,
the fair market value shall be determined by the Board using any
reasonable method in good faith.
(j) “Initial
Closing” means the first closing of the Offering that will
occur after the Minimum Offering is achieved.
(k) “Insider”
means a person subject to Section 16(b) of the Act.
(l) “Minimum
Offering” means the sale of 4,761,905 Units pursuant to the
Offering.
(m) “Offering”
means, collectively, (1) the sale of up to $1,000,000,000 in Units
to the public and the registration of such shares with the
Securities and Exchange Commission, as authorized by resolutions of
the Board dated
, 2005 (the “Initial Offering”), and (2) the issuance
of any additional Units as authorized by resolutions of the Board
from time to time, which issuance occurs before the termination of
this Plan (the “Additional Offerings”).
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(n) “Option”
means a right to acquire Units granted under the Plan, at a price
determined in accordance with the Plan.
(o) “Unit” means
one common share and one Series A preferred share, no par value, of
the Company. If the par value of the common shares or Series A
preferred shares is changed, or in the event of a change in the
capital structure of the Company (as provided in Section 12), the
Units resulting from such a change shall be deemed to be Units
within the meaning of the Plan.
3. Administration .
The Plan shall be administered by the Board. Options shall be
granted as described in Section 7. However, the Board shall have
all powers vested in it by the terms of the Plan, including,
without limitation, the authority (within the limitations described
herein) to prescribe the form of the agreement embodying the grant
of Options, to construe the Plan, to determine all questions
arising under the Plan, and to adopt and amend rules and
regulations for the administration of the Plan as it may deem
desirable. Any decision of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board
may act only by a majority of its members in office, except that
members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on
behalf of the Board. No member of the Board shall be liable for
anything done or omitted to be done by him or any other member of
the Board in connection with the Plan, except for his own willful
misconduct or as expressly provided by statue.
4. Participation in the
Plan . Each director of the Company who is not otherwise an
employee of the Employer or any subsidiary of the Company and was
not an employee of the Employer or subsidiary for a period of at
least one year before the Date of Grant shall be eligible to
participate in the Plan.
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5. Securities Subject to
the Plan . Subject to Section 12 of the Plan, there shall be
reserved for issuance under the Plan an aggregate of 45,000 Units
plus 1.8% of the total number of Units issued in the Offering in
excess of the Minimum Offering, which shall be authorized, but
unissued Units. Units allocable to Options or portions thereof
granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an Option under the
Plan.
6. Non-Statutory Stock
Options . All options granted under the Plan shall be
non-statutory in nature and shall not be entitled to special tax
treatment under Code section 422.
7. Award, Terms,
Conditions and Form of Options . Each Option shall be evidenced
by a written agreement in such form as the Board shall from time to
time approve, which agreement shall comply with and be subject to
the following terms and conditions:
(a) Automatic Award of
Option .
(i) As of the Initial
Closing
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