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Exhibit
10.4
APPLE REIT NINE,
INC.
2008 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
EFFECTIVE
, 2008
APPLE REIT NINE,
INC.
2008 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
EFFECTIVE
, 2008
1. Purpose. The
purpose of this Apple REIT Nine, Inc. 2008 Non-Employee Directors
Stock Option Plan (the “Plan”) is to encourage
ownership in Apple REIT Nine, 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 Nine, 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) “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 the reasonable application of a reasonable
valuation method consistent with the requirements of Treasury
Regulations section 1.409A-1(b)(5)(iv)(B).
(i) “Initial
Closing” means the first closing of the Offering that will
occur after the Minimum Offering is achieved.
(j) “Insider”
means a person subject to Section 16(b) of the Act.
(k) “Minimum
Offering” means the sale of 9,523,810 Units pursuant to the
Offering.
(l) “Offering”
means, collectively, (1) the sale of up to $2,000,000,000 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 November 8, 2007 (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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(m) “Option”
means a right to acquire Units granted under the Plan, at a price
determined in accordance with the Plan.
(n) “Treasury
Regulations” mean the final, temporary or proposed
regulations issued by the Treasury Department and/or Internal
Revenue Service as codified in Title 26 of the United States Code
of Federal Regulations
(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.
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4. Participation in the
Plan. Each director of the Company who is not otherwise an
employee of the Company or any subsidiary of the Company and was
not an employee of the Company or subsidiary for a period of at
least one year before the Date of Grant shall be eligible to
participate in the Plan.
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, each Eligible Director shall automatically receive an
Option to purchase 5,500 Units plus 0.0125% of the number of Units
in excess of the Minimum Offering sold by the Initial
Closing.
(ii) As of each June 1
during the years 2008 and ending upon the termination of the Plan,
each Eligible Director shall automatically receive an Option to
purchase 0.02% of the total number of U
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