Exhibit 10.1

HIGHLAND HOSPITALITY CORPORATION

AMENDED AND RESTATED

2003 OMNIBUS STOCK INCENTIVE PLAN

 

  1. PURPOSE

The Highland Hospitality Corporation Amended and Restated 2003 Omnibus Stock
Incentive Plan is intended to promote the best interests of Highland Hospitality
Corporation and its stockholders by (i) assisting the Corporation and its
Affiliates in the recruitment and retention of persons with ability and
initiative, (ii) providing an incentive to such persons to contribute to the
growth and success of the Corporation’s businesses by affording such persons
equity participation in the Corporation and (iii) associating the interests of
such persons with those of the Corporation and its affiliates and stockholders.

 

  2. DEFINITIONS

As used in the Plan the following definitions shall apply:

“Affiliate” means any Subsidiary, any Parent, any entity (including, without
limitation, a partnership or limited liability company) which is directly or
indirectly controlled fifty percent (50%) or more (whether by ownership of
stock, assets or an equivalent ownership interest or voting interest) by the
Corporation or one of its Affiliates, and any other entity in which the
Corporation or any of its Affiliates has a material equity interest and which is
designated as an “Affiliate” by resolution of the Committee.

“Award” means any Option, Stock Award, Performance Unit or Performance Share
granted hereunder.

“Board” means the Board of Directors of the Corporation.

“Cause” means in the case where the Participant does not have an employment,
consulting or similar agreement in effect with the Corporation or its Affiliate
or where there is such an agreement but it does not define “cause” (or words of
like import), conduct related to the Participant’s service to the Corporation or
an Affiliate for which either criminal or civil penalties against the
Participant may be sought, misconduct, insubordination, material violation of
the Corporation’ or its Affiliate’s policies, disclosing or misusing any
confidential information or material concerning the Corporation or any Affiliate
or material breach of any employment, consulting agreement or similar agreement,
or in the case where the Participant has an employment agreement, consulting
agreement or similar agreement that defines a termination for “cause” (or words
of like import), “cause” as defined in such agreement; provided, however, that
with regard to any agreement that defines “cause” on occurrence of or in
connection with change of control, such definition of “cause” shall not apply
until a change of control actually occurs and then only with regard to a
termination thereafter.

“Code” means the Internal Revenue Code of 1986, and any amendments thereto.

“Committee” means the Compensation Policy Committee of the Board acting as
administrator of the Plan pursuant to Section 3 hereof. The Committee shall
consist solely of three (3) or more Directors who are (i) Non-Employee Directors
(within the meaning of Rule 16b-3 under the Exchange Act) for purposes of
exercising administrative authority with respect to Awards granted to Eligible
Persons who are subject to Section 16 of the Exchange Act; (ii) to the extent
required by the rules of the New York Stock Exchange, “independent” within the
meaning of such rules; and (iii) at such times as an Award under the Plan by the
Corporation is subject to Section 162(m) of the Code (to the extent relief from
the limitation of Section 162(m) of the Code is sought with respect to Awards
and administration of the Awards by a committee of “outside directors” is
required to receive such relief) “outside directors” within the meaning of
Section 162(m) of the Code. Notwithstanding the preceding designation of the
Compensation Policy Committee and the qualifications for membership on the
Committee, prior to the date that the Corporation has a class of equity
securities registered under the Exchange Act, the “Committee” means the Board.

 

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“Common Stock” means the common stock, $0.01 par value, of the Corporation.

“Consultant” means any person, other than an employee, performing consulting or
advisory services for the Corporation or any Affiliate, or a director of an
Affiliate.

“Continuous Service” means that the Participant’s service with the Corporation
or an Affiliate, whether as an employee, Director or Consultant, is not
interrupted or terminated. A Participant’s Continuous Service shall not be
deemed to have been interrupted or terminated merely because of a change in the
capacity in which the Participant renders service to the Corporation or an
Affiliate as an employee, Consultant or Director or a change in the entity for
which the Participant renders such service. The Participant’s Continuous Service
shall be deemed to have terminated either upon an actual termination or upon the
entity for which the Participant is performing services ceasing to be an
Affiliate of the Corporation. The Committee shall determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by the Corporation, including sick leave, military leave or any other
personal leave.

“Corporation” means Highland Hospitality Corporation, a Maryland corporation.

“Corporation Law” means the general corporation law of the jurisdiction of
incorporation of the Corporation.

“Deferral Period” means the period of time during which Deferred Shares are
subject to deferral limitations under Section 7.C of the Plan.

“Deferred Shares” means the an award pursuant to Section 7.C of the Plan of the
right to receive shares of Common Stock at the end of a specified Deferral
Period.

“Director” means a member of the Board.

“Disability” means that a Participant covered by a Corporation- or
Affiliate-funded long term disability insurance program has incurred a total
disability under such insurance program and a Participant not covered by such an
insurance program has suffered a permanent and total disability within the
meaning of Section 22(e)(3) of the Code or any successor statute thereto.

“Eligible Person” means an employee of the Corporation or an Affiliate
(including an entity that becomes an Affiliate after the adoption of the Plan),
a Director or a Consultant to the Corporation or an Affiliate (including an
entity that becomes an Affiliate after the adoption of the Plan).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, on any given date, the current fair market value of
the shares of Common Stock as determined as follows:

(i) If the Common Stock is traded on New York Stock Exchange or is listed on a
national securities exchange, the closing price for the day of determination as
quoted on such market or exchange which is the primary market or exchange for
trading of the Common Stock or if no trading occurs on such date, the last day
on which trading occurred, or such other appropriate date as determined by the
Committee in its discretion, as reported in The Wall Street Journal or such
other source as the Committee deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, its Fair Market Value shall be the mean
between the high and the low asked prices for the Common Stock for the day of
determination; or

(iii) In the absence of an established market for the Common Stock, Fair Market
Value shall be determined by the Committee in good faith.

 

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“Incentive Stock Option” means an Option (or portion thereof) intended to
qualify for special tax treatment under Section 422 of the Code.

“Nonqualified Stock Option” means an Option (or portion thereof) which is not
intended or does not for any reason qualify as an Incentive Stock Option.

“Option” means any option to purchase shares of Common Stock granted under the
Plan.

“Parent” means any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation if each of the corporations (other
than the Corporation) owns stock possessing at least fifty percent (50%) of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

“Participant” means an Eligible Person who is selected by the Committee to
receive an Option or Stock Award and is party to any Stock Option Agreement or
Stock Award Agreement required by the terms of such Option or Stock Award.

“Performance Agreement” means an agreement described in Section 8.I of the Plan.

“Performance Objectives” means the performance objectives established pursuant
to the Plan for Participants who have received grants of Performance Shares or
Performance Units or, when so determined by the Committee, Deferred Shares or
Restricted Stock Awards. Performance Objectives may be described in terms of
Corporation-wide objectives or objectives that are related to the performance of
the individual Participant or the Affiliate, subsidiary, division, department or
function within the Corporation or Affiliate in which the Participant is
employed or has responsibility. Any Performance Objectives applicable to Awards
to the extent that such and Award is intended to qualify as “performance-based
compensation” under Section 162(m) of the Code shall be limited to specified
levels of or increases in the Corporation’s or a business unit’s return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, economic value added, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, sales growth,
gross margin return on investment, increase in the Fair Market Value of the
shares, share price (including but not limited to growth measures and total
shareholder return), net operating profit, cash flow (including, but not limited
to, operating cash flow and free cash flow), cash flow return on investments
(which equals net cash flow divided by total capital), internal rate of return,
increase in net present value or expense targets. If the Committee determines
that a change in the business, operations, corporate structure or capital
structure of the Corporation (including an event described in Section 9.B.), or
the manner in which it conducts is business, or other events or circumstances
render the Performance Objectives unsuitable, the Committee may modify such
Performance Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate and equitable provided,
however, that no such modification shall be made to an Award intended to qualify
as performance-based compensation under Section 162(m) of the Code unless the
Committee determines that such modification will not result in loss of such
qualification or the Committee determines that loss of such qualification is in
the best interests of the Corporation.

“Performance Period” means a period of time established under Section 8 of the
Plan within which the Performance Objectives relating to a Performance Share,
Performance Unit, Deferred Share or Restricted Stock Award are to be achieved.

“Performance Share” means a bookkeeping entry that records the equivalent of one
share of Common Stock awarded pursuant to Section 8 of the Plan.

“Performance Unit” means a bookkeeping entry that records a unit equivalent to
$1.00 awarded pursuant to Section 8 of the Plan.

“Plan” means this Highland Hospitality Corporation Amended and Restated 2003
Omnibus Stock Incentive Plan.

 

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“Restricted Stock Award” means an award of Common Stock under Section 7.A.

“Securities Act” means the Securities Act of 1933 as amended.

“Stock Award” means a Restricted Stock Award, award of Deferred Shares or award
of Stock Appreciation Rights.

“Stock Appreciation Right” means an award of a right of the Participant to
receive a payment in accordance with the provisions of Section 7.B.

“Stock Award Agreement” means an agreement (written or electronic) between the
Corporation and a Participant setting forth the specific terms and conditions of
a Stock Award granted to the Participant under Section 7. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan and shall
include such terms and conditions as the Committee shall authorize.

“Stock Option Agreement” means an agreement (written or electronic) between the
Corporation and a Participant setting forth the specific terms and conditions of
an Option granted to the Participant. Each Stock Option Agreement shall be
subject to the terms and conditions of the Plan and shall include such terms and
conditions as the Committee shall authorize.

“Subsidiary” means any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation if each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing at
least fifty percent (50%) of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

“Ten Percent Owner” means any Eligible Person owning at the time an Option is
granted more than ten percent (10%) of the total combined voting power of all
classes of stock of the Corporation or of a Parent or Subsidiary. An individual
shall, in accordance with Section 424(d) of the Code, be considered to own any
voting stock owned (directly or indirectly) by or for his brothers, sisters,
spouse, ancestors and lineal descendants and any voting stock owned (directly or
indirectly) by or for a corporation, partnership, estate, trust or other entity
shall be considered as being owned proportionately by or for its stockholders,
partners or beneficiaries.

 

  3. ADMINISTRATION

A. Administration. The Committee shall serve as the administrator of the Plan.
If permitted by the Corporation Law, and not prohibited by the charter or the
bylaws of the Corporation, the Committee may delegate a portion of its authority
to administer the Plan to another committee of the Board, provided that such
delegation by the Committee shall not apply to the grant of Awards to Eligible
Persons subject to Section 16 of the Exchange Act.

B. Powers of the Committee. Subject to the provisions of the Plan, and subject
at all times to the terms and conditions of the delegation of authority from the
Board, the Committee shall have the authority to implement, interpret and
administer the Plan. Such authority shall include, without limitation, the
authority:

(i) To construe and interpret all provisions of the Plan and all Stock Option
Agreements, Performance Award Agreements and Stock Award Agreements under the
Plan.

(ii) To determine the Fair Market Value of Common Stock.

(iii) To select the Eligible Persons to whom Awards, are granted from
time-to-time hereunder.

(iv) To determine the number of shares of Common Stock covered by an Option or
Stock Award; determine whether an Option shall be an Incentive Stock Option or
Nonqualified Stock Option; and determine such other terms and conditions, not
inconsistent with the terms of the Plan, of each Award. Such

 

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terms and conditions include, but are not limited to, the exercise price of an
Option, purchase price of Common Stock subject to a Stock Award, the time or
times when Options or Stock Awards may be exercised or Common Stock issued
thereunder, the right of the Corporation to repurchase Common Stock issued
pursuant to the exercise of an Option or a Stock Award and other restrictions or
limitations (in addition to those contained in the Plan) on the forfeitability
or transferability of Options, Stock Awards or Common Stock issued pursuant to
Awards. Such terms may include conditions as shall be determined by the
Committee and need not be uniform with respect to Participants.

(v) To amend, cancel, extend, renew, accept the surrender of, modify or
accelerate the vesting of or lapse of restrictions on all or any portion of an
outstanding Option or Stock Award; and to determine the time at which a Stock
Award or Common Stock issued under the Plan may become transferable or
nonforfeitable.

(vi) To prescribe the form of Stock Option Agreements, Performance Award
Agreements and Stock Award Agreements; to adopt policies and procedures for the
exercise of Options or Stock Awards, including the satisfaction of withholding
obligations; to adopt, amend, and rescind policies and procedures pertaining to
the administration of the Plan; and to make all other determinations necessary
or advisable for the administration of the Plan.

Any decision made, or action taken, by the Committee or in connection with the
administration of the Plan shall be final, conclusive and binding on all persons
having an interest in the Plan.

 

  4. ELIGIBILITY

A. Eligibility for Awards. Incentive Stock Options may be granted only to
employees of the Corporation or a Parent or Subsidiary. Other Awards may be
granted to any Eligible Person selected by the Committee.

B. Substitution Awards. The Committee may make Stock Awards and may grant
Options under the Plan by assumption, substitution or replacement of performance
shares, phantom shares, stock awards, stock options, stock appreciation rights
or similar awards granted by another entity (including an Affiliate), if such
assumption, substitution or replacement is in connection with an asset
acquisition, stock acquisition, merger, consolidation or similar transaction
involving the Corporation (and/or its Affiliate) and such other entity (and/or
its affiliate). Notwithstanding any provision of the Plan (other than the
maximum number of shares of Common Stock that may be issued under the Plan), the
terms of such assumed, substituted or replaced Stock Awards or Options shall be
as the Committee, in its discretion, determines is appropriate.

 

  5. COMMON STOCK SUBJECT TO PLAN

A. Share Reserve and Limitations on Grants. Subject to adjustment as provided in
Section 9, the maximum aggregate number of shares of Common Stock that may be
(i) issued under the Plan pursuant to the exercise of Options, (ii) issued
pursuant to Restricted Stock Awards, Deferred Shares or Performance Shares, and
(iii) shares of Common Stock covered by Stock Appreciation Rights (without
regard to whether payment on exercise of the Stock Appreciation Right is made in
cash or shares of stock) is 5,002,0001 shares of Common Stock. No Participant
may receive Awards representing more than 500,000 shares in any one calendar
year. In addition, the maximum number of Performance Units that may be granted
to a Participant in any one calendar year is 750,000 for each full or fractional
year included in the Performance Period for the grant of Performance Units
during such calendar year. This limitation shall be applied as of any date by
taking into account the number of shares available to be made the subject of new
Awards as of such date, plus the number of shares previously issued under the
Plan and the number of share subject to outstanding Awards as of such date.

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1 2,002,000 prior to the Amendment and Restatement.

 

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B. Reversion of Shares. If an Option or Stock Award is terminated, expires or
becomes unexercisable, in whole or in part, for any reason, the unissued or
unpurchased shares of Common Stock (or shares subject to an unexercised Stock
Appreciation Right) which were subject thereto shall become available for future
grant under the Plan. Shares of Common Stock that have been actually issued
under the Plan shall not be returned to the share reserve for future grants
under the Plan; except that shares of Common Stock issued pursuant to a Stock
Award which are repurchased or reacquired by the Corporation at the original
purchase price of such shares (including, in the case shares forfeited back to
the Corporation, no purchase price), shall be returned to the share reserve for
future grant under the Plan. For avoidance of doubt, this Section 5B shall not
apply to any per Participant limit set forth in Section 5A.

C. Source of Shares. Common Stock issued under the Plan may be shares of
authorized and unissued Common Stock or shares of previously issued Common Stock
that have been reacquired by the Corporation.

 

  6. OPTIONS

A. Award. In accordance with the provisions of Section 4, the Committee will
designate each Eligible Person to whom an Option is to be granted and will
specify the number of shares of Common Stock covered by such Option. The Stock
Option Agreement shall specify whether the Option is an Incentive Stock Option
or Nonqualified Stock Option, the vesting schedule applicable to such Option and
any other terms of such Option. No Option that is intended to be an Incentive
Stock Option shall be invalid for failure to qualify as an Incentive Stock
Option.

B. Exercise Price. The exercise price per share for Common Stock subject to an
Option shall be determined by the Committee, but shall comply with the
following:

(i) The exercise price per share for Common Stock subject to a Nonqualified
Stock Option shall be not less than one hundred percent (100%) of the Fair
Market Value on the date of grant.

(ii) The exercise price per share for Common Stock subject to an Incentive Stock
Option:

 

  •   granted to a Participant who is deemed to be a Ten Percent Owner on the
date such option is granted, shall not be less than one hundred ten percent
(110%) of the Fair Market Value on the date of grant.

 

  •   granted to any other Participant, shall not be less than one hundred
percent (100%) of the Fair Market Value on the date of grant.

C. Maximum Option Period. The maximum period during which an Option may be
exercised shall be determined by the Committee on the date of grant, except that
no Option shall be exercisable after the expiration of ten years from the date
such Option was granted. In the case of an Incentive Stock Option that is
granted to a Participant who is or is deemed to be a Ten Percent Owner on the
date of grant, such Option shall not be exercisable after the expiration of five
years from the date of grant. The terms of any Option may provide that it is
exercisable for a period less than such maximum period.

D. Maximum Value of Options which are Incentive Stock Options. To the extent
that the aggregate Fair Market Value of the Common Stock with respect to which
Incentive Stock Options granted to any person are exercisable for the first time
during any calendar year (under all stock option plans of the Corporation or any
of its Subsidiaries or Parent) exceeds $100,000 (or such other amount provided
in Section 422 of the Code), the Options are not Incentive Stock Options. For
purposes of this section, the Fair Market Value of the Common Stock will be
determined as of the time the Incentive Stock Option with respect to the Common
Stock is granted. This section will be applied by taking Incentive Stock Options
into account in the order in which they are granted.

E. Nontransferability. Options granted under the Plan which are intended to be
Incentive Stock Options shall be nontransferable except by will or by the laws
of descent and distribution and during the lifetime of the

 

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Participant shall be exercisable by only the Participant to whom the Incentive
Stock Option is granted. If the Stock Option Agreement so provides or the
Committee so approves, a Nonqualified Stock Option may be transferred by a
Participant through a gift or domestic relations order to the Participant’s
family members to the extent in compliance with applicable securities
registration rules and provided that such transfer is not a transfer for value
(within the meaning of applicable securities registration rules). The holder of
a Nonqualified Stock Option transferred pursuant to this section shall be bound
by the same terms and conditions that governed the Option during the period that
it was held by the Participant; provided that unless the Committee approves a
subsequent transfer, such Option shall be nontransferable by the initial
transferee of such Option except by will or by the laws of descent and
distribution. Except to the extent transferability of a Nonqualified Stock
Option is provided for in the Stock Option Agreement or is approved by the
Committee, during the lifetime of the Participant to whom the Nonqualified Stock
Option is granted, such Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation, or liability of such Participant.

F. Vesting and Termination of Continuous Service. Except as provided in a Stock
Option Agreement, the following rules shall apply:

(i) Options will vest as provided in the Stock Option Agreement. An Option will
be exercisable only to the extent that it is vested on the date of exercise.
Vesting of an Option will cease on the date of the Participant’s termination of
Continuous Service and the Option will be exercisable only to the extent the
Option is vested on the date of termination of Continuous Service.

(ii) If the Participant’s termination of Continuous Service is for reason of
death or Disability, the right to exercise the Option (to the extent vested)
will expire on the earlier of (a) one (1) year after the date of the
Participant’s termination of Continuous Service, or (b) the expiration date
under the terms of the Stock Option Agreement. Until the expiration date, the
Participant or, in the event of the Participant’s death (including death after
termination of Continuous Service but before the right to exercise the Option
expires) Participant’s heirs, legatees or legal representative may exercise the
Option, except to the extent the Option was previously transferred pursuant to
Section 6.E.

(iii) If the Participant’s termination of Continuous Service is an involuntary
termination without Cause or a voluntary termination (other than a voluntary
termination described in Section 6.F(iv)), the right to exercise the Option (to
the extent that it is vested) will expire on the earlier of (a) three months
(3) after the date of the Participant’s termination of Continuous Service, or
(b) the expiration date under the terms of the Stock Option Agreement. If the
Participant’s termination of Continuous Service is an involuntary termination
without Cause or a voluntary termination (other than a voluntary termination
described in Section 6.F(iv)) and the Participant dies after his or her
termination of Continuous Service but before the right to exercise the Option
has expired, the right to exercise the Option (to the extent vested) shall
expire on the earlier of (c) one (1) year after the date of the Participant’s
termination of Continuous Service or (d) the date the Option expires under the
terms of the Stock Option Agreement, and, until expiration, the Participant’s
heirs, legatees or legal representative may exercise the Option, except to the
extent the Option was previously transferred pursuant to Section 6.E.

(iv) If the Participant’s termination of Continuous Service is for Cause or is a
voluntary termination at any time after an event which would be grounds for
termination of the Participant’s Continuous Service for Cause, the right to
exercise the Option shall expire as of the date of the Participant’s termination
of Continuous Service.

G. Exercise. An Option, if exercisable, shall be exercised by completion,
execution and delivery of notice (written or electronic) to Corporation of the
Option which states (i) the Option holder’s intent to exercise the Option,
(ii) the number of shares of Common Stock with respect to which the Option is
being exercised, (iii) such other representations and agreements as may be
required by the Corporation and (iv) the method for satisfying any applicable
tax withholding as provided in Section 10. Such notice of exercise shall be
provided on such form or by such method as the Committee may designate, and
payment of the exercise price shall be made in

 

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accordance with Section 6.H. Subject to the provisions of the Plan and the
applicable Stock Option Agreement, an Option may be exercised to the extent
vested in whole at any time or in part from time to time at such times and in
compliance with such requirements as the Committee shall determine. A partial
exercise of an Option shall not affect the right to exercise the Option from
time to time in accordance with the Plan and the applicable Stock Option
Agreement with respect to the remaining shares subject to the Option. An Option
may not be exercised with respect to fractional shares of Common Stock.

 

  H. Payment.

(i) Unless otherwise provided by the Stock Option Agreement, payment of the
exercise price for an Option shall be made in cash or a cash equivalent
acceptable to the Committee. With the consent of and in accordance with such
conditions as required by the Committee, payment of all or part of the exercise
price of an Option may also be made (a) by surrendering shares of Common Stock
to the Corporation, or (b) if the Common Stock is traded on an established
securities market, the Committee may approve payment of the exercise price by a
broker-dealer or by the Option holder with cash advanced by the broker-dealer if
the exercise notice is accompanied by the Option holder’s written irrevocable
instructions to deliver the Common Stock acquired upon exercise of the Option to
the broker-dealer.

(ii) If Common Stock is used to pay all or part of the exercise price, the sum
of the cash or cash equivalent and the Fair Market Value (determined as of the
date of exercise) of the shares surrendered must not be less than the exercise
price of the shares for which the Option is being exercised.

(iii) On or after the date any Option other than an Incentive Stock Option is
granted, the Committee may determine that payment of the exercise price may also
be made in whole or part in the form of Restricted Stock or other Common Stock
that is subject to a risk of forfeiture or restrictions on transfer. Unless
otherwise determined by the Committee, whenever the exercise price is paid in
whole or in part in accordance with this Section 6.H(iii), the Stock received by
the Participant upon such exercise shall be subject to the same risks of
forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Participant, provided that such risks of
forfeiture and restrictions on transfer shall apply only to the same number of
shares received by the Participant as applied to the forfeitable or restricted
shares surrendered by the Participant.

(iv) On or after the date any Option is granted, the Committee may provide for
the automatic grant to the Participant of a reload Option in the event that the
Participant surrenders shares in satisfaction of the exercise price upon the
exercise of an Option as authorized under this Section 6.H. Each reload Option
shall pertain to a number of shares equal to the number of shares utilized by
the Participant to exercise the original Option, shall have an exercise price
equal to Fair Market Value on the date that the reload Option is granted and
shall expire on the stated exercise date of the original Option.

I. No Repricing of Options. The Committee may not without the approval of the
stockholders of the Corporation lower the exercise price of an outstanding
Option, whether by amending the exercise price of the outstanding Option,
through cancellation of the outstanding Option and reissuance of a replacement
or substitute Option or issuance of a replacement or substitute Stock Award;
provided that stockholder approval shall not be required for adjustments made in
connection with a capitalization event described in Section 9.B. in order to
prevent enlargement, dilution or diminishment of rights.

J. Stockholder Rights. No Participant shall have any rights as a stockholder
with respect to shares subject to an Option until the date of exercise of such
Option and the certificate for shares of Common Stock to be received on exercise
of such Option has been issued by the Corporation.

K. Disposition. A Participant shall notify the Corporation of any sale or other
disposition of Common Stock acquired pursuant to an Incentive Stock Option if
such sale or disposition occurs (i) within two years of the grant of an Option
or (ii) within one year of the issuance of the Common Stock to the Participant.
Such notice shall be in writing and directed to the Secretary of the
Corporation.

 

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  7. STOCK AWARDS

A. Restricted Stock Awards. Each Stock Award Agreement for a Restricted Stock
Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of the Stock Award
Agreements for Restricted Stock Awards may change from time to time, and the
terms and conditions of separate Restricted Stock Awards need not be identical,
but each Restricted Stock Award shall include (through incorporation of the
provisions hereof by references in the agreement or otherwise) the substance of
each of the following provisions.

(i) Purchase Price. The Committee may establish a purchase price for Common
Stock subject to a Restricted Stock Award.

(ii) Consideration. The purchase price, if any, of Common Stock acquired
pursuant to the Restricted Stock Award shall be paid either: (a) in cash at the
time of purchase, or(b) in any other form of legal consideration that may be
acceptable to the Committee in its discretion.

(iii) Vesting. Shares of Common Stock acquired under a Restricted Stock Award
may, but need not, be subject to a share repurchase option in favor of the
Corporation in accordance with a vesting schedule to be determined by the
Committee. Any grant or the vesting thereon may be further conditioned upon the
attainment of Performance Objectives established by the Committee in accordance
with the applicable provisions of Section 8 of the Plan regarding Performance
Shares and Performance Units.

(iv) Participant’s Termination of Service or Failure of Vesting. In the event of
a Participant’s termination of Continuous Service before vesting or other
failure of the Common Stock to vest, then, unless otherwise provided in the
Stock Award Agreement, the Participant shall forfeit shares of Common Stock held
by a Participant under the terms of a Restricted Stock Award which have not
vested and for which no purchase price was paid by the Participant and the
Corporation may repurchase or otherwise reacquire (including by way of
forfeiture by the Participant) any or all of the shares of Common Stock held by
the Participant which have not vested under the terms of the Stock Award
Agreement for such Restricted Stock Award and for which a purchase price was
paid by the Participant at such purchase price.

(v) Transferability. Rights to acquire shares of Common Stock under a Restricted
Stock Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Stock Award Agreement for such Restricted
Stock Award, as the Committee shall determine in its discretion, so long as
Common Stock granted under the Restricted Stock Award remains subject to the
terms of the Stock Award Agreement.

(vi) Additional Rights. Any grant may require that any or all dividends or other
distributions paid on the shares acquired under a Restricted Stock Award during
the period of such restrictions be automatically sequestered and reinvested on
an immediate or deferred basis in additional shares of Common Stock which may be
subject to the same restrictions as the underlying Award or such other
restrictions as the Committee shall determine. Unless provided otherwise in the
Stock Award Agreement, Participants holding shares of Common Stock subject to
restrictions under a Stock Award Agreement may exercise full voting rights with
respect to the shares.

B. Stock Appreciation Rights. Each Stock Award Agreement for Stock Appreciation
Rights shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of Stock Appreciation
Rights may change from time to time, and the terms and conditions of separate
Stock Appreciation Rights need not be identical, but each Stock Appreciation
Right shall include (through incorporation of the provisions hereof by reference
in the agreement or otherwise) the substance of each of the following
provisions:

(i) Benefit Provided. Each Stock Appreciation Right shall provide the
Participant with the right to receive payment in cash or shares of Common Stock
having a Fair Market Value, as designated in the Stock Award Agreement for such
Stock Appreciation Rights, of an amount equal to the difference between the base
amount provided for each share of Common Stock as described in the Stock Award
Agreement and the Fair Market Value of the Common Stock on the date of exercise
of such Stock Appreciation Right or a percentage thereof (not to exceed 100%).

 

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(ii) Tandem Awards. Stock Appreciation Rights may be granted either alone or a
tandem with other awards, including Options, under the Plan; provided, however,
if the Stock Appreciation Rights are granted in tandem with another Option, the
base amount provided for each share of Common Stock in the applicable Stock
Award Agreement shall be equal to the exercise price per share provided for in
the Option.

(iii) Vesting. The Stock Award Agreement for a Stock Appreciation Right shall
provide the vesting schedule applicable to such award and may, but need not,
provide that shares of Common Stock acquired upon exercising a Stock
Appreciation Right are subject to a repurchase option in favor of the
Corporation.

(iv) Participant’s Termination of Service or Failure of Vesting. In the event of
a Participant’s termination of Continuous Service or other failure of the Stock
Appreciation Right or Common Stock to vest the Participant shall forfeit such
unvested Stock Appreciation Rights, and the Corporation, if so provided in the
Stock Award Agreement, may repurchase or otherwise reacquire (including by way
of forfeiture by the Participant) any or all of the shares of Common Stock held
by the Participant which have not vested under the terms of the Stock
Appreciation Right.

(v) Transferability. Rights to acquire cash or shares of Common Stock under a
Stock Appreciation Rights shall be nontransferable except by will or by the laws
of descent and distribution and during the lifetime of the Participant shall be
exercisable by only the Participant to whom the Stock Appreciation Rights are
granted.

C. Deferred Shares. The Committee may authorize grants of Deferred Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:

(i) Each grant shall constitute the agreement by the Corporation to issue or
transfer shares of Common Stock to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.

(ii) Each grant may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is less
than the Fair Market Value on the date of grant.

(iii) Each grant shall provide that the Deferred Shares covered thereby shall be
subject to a Deferral Period, which shall be fixed by the Committee on the date
of grant, and any grant or sale may provide for the earlier termination of such
period in the event of a change in control of the Corporation or other similar
transaction or event.

(iv) During the Deferral Period, the Participant shall not have any right to
transfer any rights under the subject Award, shall not have any rights of
ownership in the Deferred Shares and shall not have any right to vote such
shares, but the Committee may on or after the date of grant, authorize the
payment of dividend or other distribution equivalents on such shares in cash or
additional shares on a current, deferred or contingent basis.

(v) Any grant of the vesting thereof may be further conditioned upon the
attainment of Performance Objectives established by the Committee in accordance
with the applicable provisions of Section 8 of the Plan regarding Performance
Shares and Performance Units.

(vi) Each grant shall be evidenced by an agreement delivered to and accepted by
the Participant and containing such terms and provisions as the Committee may
determine consistent with the Plan.

 

  8. PERFORMANCE SHARES AND PERFORMANCE UNITS

The Committee may also authorize grants of Performance Shares and Performance
Units, which shall become payable to the Participant upon the achievement of
specified Performance Objectives, upon such terms and conditions as the
Committee may determine in accordance with the following provisions:

A. Each grant shall specify the number of Performance Shares or Performance
Units to which it pertains, which may be subject to adjustment to reflect
changes in compensation or other factors.

 

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B. The Performance Period with respect to each Performance Share or Performance
Unit shall commence on the date established by the Committee and may be subject
to earlier termination in the event of a change in control of the Corporation or
similar transaction or event.

C. Each grant shall specify the Performance Objectives that are to be achieved
by the Participant.

D. Each grant may specify in respect of the specified Performance Objectives a
minimum acceptable level of achievement below which no payment will be made and
may set forth a formula for determining the amount of any payment to be made if
performance is at or above such minimum acceptable level but falls short of the
maximum achievement of the specified Performance Objectives.

E. Each grant shall specify the time and manner of payment of Performance Shares
or Performance Units that shall have been earned, and any grant may specify that
any such amount may be paid by the Corporation in cash, shares of Common Stock
or any combination thereof and may either grant to the Participant or reserve to
the Committee the right to elect among those alternatives.

F. Any grant of Performance Shares may specify that the amount payable with
respect thereto may not exceed a maximum specified by the Committee on the date
of grant. Any grant of Performance Units may specify that the amount payable, or
the number of shares of Common Stock issued, with respect thereto may not exceed
maximums specified by the Committee on the date of grant.

G. Any grant of Performance Shares may provide for the payment to the
Participant of dividend or other distribution equivalents thereon in cash or
additional shares of Common Stock on a current, deferred or contingent basis.

H. If provided in the terms of the grant and subject to the requirements of
Section 162(m) of the Code (in the case of Awards intended to qualify for
exception therefrom), the Committee may adjust Performance Objectives and the
related minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions have occurred after the date of grant that are
unrelated to the performance of the Participant and result in distortion of the
Performance Objectives or the related minimum acceptable level of achievement.

I. Each grant shall be evidenced by an agreement that shall be delivered to and
accepted by the Participant, which shall state that the Performance Shares or
Performance Units are subject to all of the terms and conditions of the Plan and
such other terms and provisions as the Committee may determine consistent with
the Plan.

 

  9. CHANGES IN CAPITAL STRUCTURE

A. No Limitations of Rights. The existence of outstanding Options or Stock
Awards shall not affect in any way the right or power of the Corporation or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Corporation’s capital structure or its
business, or any merger or consolidation of the Corporation, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.

B. Changes in Capitalization. If the Corporation shall effect (i) any stock
dividend, stock split, subdivision or consolidation of shares, recapitalization
or other capital readjustment, (ii) any merger consolidation, separation of the
Corporation (including a spin-off or split-up), reorganization, partial or
complete liquidation or other distribution of assets (other than ordinary
dividends or distributions) without receiving consideration therefore in money,
services or property, or (iii) any other corporate transaction having a similar
effect, then (iv) the number, class, and per share price or base amount of
shares of Common Stock subject to outstanding Options and Stock Awards shall be
equitably adjusted by the Committee as it in good faith determines is required
in order to prevent enlargement, dilution, or diminishment of rights, (v) the
number and class of shares of Common Stock then

 

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reserved for issuance under the Plan and the maximum number of shares for which
Awards may be granted to a Participant during a specified time period shall be
adjusted as the Committee deems appropriate to reflect such transaction, and
(vi) the Committee shall make such modifications to the Performance Objectives
for each outstanding Award as the Committee determines are appropriate in
accordance with Section 2, “Performance Objectives.” The conversion of
convertible securities of the Corporation shall not be treated as effected
“without receiving consideration.” The Committee shall make such adjustments,
and its determinations shall be final, binding and conclusive.

C. Merger, Consolidation or Asset Sale. If the Corporation is merged or
consolidated with another entity or sells or otherwise disposes of substantially
all of its assets to another entity while Options or Stock Awards remain
outstanding under the Plan, unless provisions are made in connection with such
transaction for the continuance of the Plan and/or the assumption or
substitution of such Options or Stock Awards with new options or stock awards
covering the stock of the successor entity, or parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices,
then all outstanding Options and Stock Awards which have not been continued,
assumed or for which a substituted award has not been granted shall, become
exercisable immediately prior to and terminate immediately as of the effective
date of any such merger, consolidation or sale.

D. Limitation on Adjustment. Except as previously expressly provided, neither
the issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Corporation convertible into such shares or other securities, nor the
increase or decrease of the number of authorized shares of stock, nor the
addition or deletion of classes of stock, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number, class or price of
shares of Common Stock then subject to outstanding Options or Stock Awards.

 

  10. WITHHOLDING OF TAXES

The Corporation or an Affiliate shall have the right, before any certificate for
any Common Stock is delivered, to deduct or withhold from any payment owed to a
Participant any amount that is necessary in order to satisfy any withholding
requirement that the Corporation or Affiliate in good faith believes is imposed
upon it in connection with Federal, state, or local taxes, including transfer
taxes, as a result of the issuance of, or lapse of restrictions on, such Common
Stock, or otherwise require such Participant to make provision for payment of
any such withholding amount. Subject to such conditions as may be established by
the Committee, the Committee may permit a Participant to (i) have Common Stock
otherwise issuable under an Option or Stock Award withheld to the extent
necessary to comply with minimum statutory withholding rate requirements for
supplemental income, (ii) tender back to the Corporation shares of Common Stock
received pursuant to an Option or Stock Award to the extent necessary to comply
with minimum statutory withholding rate requirements for supplemental income,
(iii) deliver to the Corporation previously acquired Common Stock, (iv) have
funds withheld from payments of wages, salary or other cash compensation due the
Participant, or (v) pay the Corporation or its Affiliate in cash, in order to
satisfy part or all of the obligations for any taxes required to be withheld or
otherwise deducted and paid by the Corporation or its Affiliate with respect to
the Option or Stock Award.

 

  11. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES

A. General Requirements. No Option or Stock Award shall be exercisable, no
Common Stock shall be issued, no certificates for shares of Common Stock shall
be delivered, and no payment shall be made under the Plan except in compliance
with all applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements), any listing agreement to which the
Corporation is a party, and the rules of all domestic stock exchanges or
quotation systems on which the Corporation’s shares may be listed. The
Corporation shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate

 

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issued to evidence Common Stock when a Stock Award is granted or for which an
Option or Stock Award is exercised may bear such legends and statements as the
Committee may deem advisable to assure compliance with federal and state laws
and regulations. No Option or Stock Award shall be exercisable, no Stock Award
shall be granted, no Common Stock shall be issued, no certificate for shares
shall be delivered, and no payment shall be made under the Plan until the
Corporation has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.

B. Participant Representations. The Committee may require that a Participant, as
a condition to receipt or exercise of a particular award, execute and deliver to
the Corporation a written statement, in form satisfactory to the Committee, in
which the Participant represents and warrants that the shares are being acquired
for such person’s own account, for investment only and not with a view to the
resale or distribution thereof. The Participant shall, at the request of the
Committee, be required to represent and warrant in writing that any subsequent
resale or distribution of shares of Common Stock by the Participant shall be
made only pursuant to either (i) a registration statement on an appropriate form
under the Securities Act of 1933, which registration statement has become
effective and is current with regard to the shares being sold, or (ii) a
specific exemption from the registration requirements of the Securities Act of
1933, but in claiming such exemption the Participant shall, prior to any offer
of sale or sale of such shares, obtain a prior favorable written opinion of
counsel, in form and substance satisfactory to counsel for the Corporation, as
to the application of such exemption thereto.

 

  12. GENERAL PROVISIONS

A. Effect on Employment and Service. Neither the adoption of the Plan, its
operation, nor any documents describing or referring to the Plan (or any part
thereof) shall (i) confer upon any individual any right to continue in the
employ or service of the Corporation or an Affiliate, (ii) in any way affect any
right and power of the Corporation or an Affiliate to change an individual’s
duties or terminate the employment or service of any individual at any time with
or without assigning a reason therefor, or (iii) except to the extent the
Committee grants an Option or Stock Award to such individual, confer on any
individual the right to participate in the benefits of the Plan.

B. Use of Proceeds. The proceeds received by the Corporation from the sale of
Common Stock pursuant to the Plan shall be used for general corporate purposes.

C. Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Corporation shall not be required to segregate any assets that
may at any time be represented by grants under the Plan. Any liability of the
Corporation to any person with respect to any grant under the Plan shall be
based solely upon any contractual obligations that may be created pursuant to
the Plan. No such obligation of the Corporation shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Corporation.

D. Further Restrictions on Transfer. Any Award made under the Plan may expressly
provide that all or any part of the shares of Common Stock that are: (i) to be
issued or transferred by the Corporation upon the exercise of an Option or Stock
Appreciation Right, upon termination of the Deferral Period applicable to
Deferred Shares or upon payment under any grant of Performance Shares or
Performance Units, or (ii) no longer subject to a substantial risk of forfeiture
and restrictions on transfer referred to in Section 7.A of the Plan, shall be
subject to further restrictions on transfer.

E. Fractional Shares. The Corporation shall not be required to issue fractional
shares pursuant to the Plan. The Committee may provide for elimination of
fractional shares or the settlement of such fraction shares in cash.

F. Rules of Construction. Headings are given to the Sections of the Plan solely
as a convenience to facilitate reference, and shall not be used in interpreting,
construing or enforcing any provision hereof. The reference to any statute,
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law. To the extent that any
provision of the Plan would prevent any Option that

 

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was intended to qualify under particular provisions of the Code from so
qualifying, such provision of the Plan shall be null and void with respect to
such Option, provided that such provision shall remain in effect with respect to
other Options, and there shall be no further effect on any provision of the
Plan.

G. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under the Plan, the Committee may provide for such special
terms for Awards to Participants who are foreign nationals, or who are employed
by the Corporation or any affiliate outside of the United States, as the
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. Moreover, the Committee may approve such
supplements to, or amendments, restatements or alternative versions of, the Plan
as it may consider necessary or appropriate for such purposes without thereby
affecting the terms of the Plan, as then in effect, unless the Plan could have
been amended to eliminate such inconsistency without further approval by the
Stockholders of the Corporation.

H. Choice of Law. The Plan and all Stock Option Agreements and Stock Award
Agreements entered into under the Plan (except to the extent that any such Stock
Option Agreement or Stock Award Agreement otherwise provides) shall be governed
by and interpreted under the laws of the jurisdiction of incorporation of the
Corporation excluding (to the greatest extent permissible by law) any rule of
law that would cause the application of the laws of any jurisdiction other than
the laws of the jurisdiction of incorporation of the Corporation.

 

  13. AMENDMENT AND TERMINATION

The Board may amend or terminate the Plan from time to time; provided, however,
that with respect to any amendment that (i) increases the aggregate number of
shares of Common Stock that may be issued under the Plan, (ii) changes the class
of employees eligible to receive Incentive Stock Options or (iii) stockholder
approval is required by the terms of any applicable law, regulation, or rule,
including, without limitation, any rule of New York Stock Exchange, or any
national securities exchange on which the Common Stock is publicly traded, each
such amendment shall be subject to the approval of the stockholders of the
Corporation within twelve (12) months of the date such amendment is adopted by
the Board. Except as specifically permitted by a provision of the Plan (other
than Section 3.B.), the Stock Option Agreement or Stock Award Agreement or as
required to comply with applicable law, regulation or rule, no amendment to the
Plan or a Stock Option Agreement or Stock Award Agreement shall, without a
Participant’s consent, adversely affect any rights of such Participant under any
Option or Stock Award outstanding at the time such amendment is made; provided,
however, that an amendment that may cause an Incentive Stock Option to become a
Nonqualified Stock Option, and any amendment that is required to comply with the
rules applicable to Incentive Stock Options, shall not be treated as adversely
affecting the rights of the Participant.

 

  14. EFFECTIVE DATE AND DURATION OF PLAN

A. The Plan as amended and restated became effective upon adoption by the Board,
subject to approval within twelve (12) months by the stockholders of the
Corporation. Unless and until the Plan as amended and restated has been approved
the stockholders of the Corporation, no Option or Stock Award may be exercised,
and no shares of Common Stock may be issued under the Plan to the extent such
Option, Stock Award or Shares of Common Stock is available under the Plan by
reason of the amendment and restatement. In the event that the stockholders of
the Corporation shall not approve the amended and restated Plan within such
twelve (12) month period, the amendment to the Plan incorporated in the
amendment and restatement shall terminate and any previously granted Option or
Stock Award shall terminate if the Option or Stock Award was dependent on
stockholder approval of the amendment and restatement of the Plan.

B. Unless previously terminated, the Plan will terminate ten (10) years after
the earlier of (i) the date the Plan is amended and restated was adopted by the
Board, or (ii) the date the Plan as amended and restated is approved by the
stockholders, except that Options and Stock Awards that are granted under the
Plan prior to its termination will continue to be administered under the terms
of the Plan until the Options and Stock Awards terminate or are exercised.

 

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Certificate of Secretary

I, the undersigned secretary of Highland Hospitality Corporation (the
“Corporation”), do hereby certify that the attached copy of the Highland
Hospitality Corporation Amended and Restated 2003 Omnibus Stock Incentive Plan
was adopted by the Board of Directors of the Corporation on March 31, 2006.

 

/s/ Tracy M.J. Colden

      3/31/2006 Secretary       Date

 

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