<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
HERSHA HOSPITALITY TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Hersha Hospitality Trust
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 26, 2000
================================================================================
The annual meeting of the shareholders (the "Annual Meeting") of Hersha
Hospitality Trust (the "Company"), will be held at the Company's offices at 148
Sheraton Drive, New Cumberland, Pennsylvania, on Friday, May 26, 2000, at 10:00
a.m., Eastern Standard Time, for the following purposes:
(1) To elect Class I Trustees to serve until the Annual Meeting of
shareholders in 2002; and
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Only shareholders of the Company of record as of the close of business on
March 29, 2000, will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof.
There is enclosed, as a part of this Notice, a Proxy Statement which
contains further information regarding the Annual Meeting and the nominees for
re-election to the Board of Trustees of the Company.
In order that your shares may be represented at the Annual Meeting, you are
urged to promptly complete, sign, date and return the accompanying Proxy in the
enclosed envelope, whether or not you plan to attend the Annual Meeting. If you
attend the Annual Meeting in person, you may vote personally on all matters
brought before the Annual Meeting even if you have previously returned your
proxy.
BY ORDER OF THE BOARD OF TRUSTEES
Kiran P. Patel
Secretary
April 25, 2000
<PAGE>
HERSHA HOSPITALITY TRUST
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is provided in connection with the solicitation of
proxies by the Board of Trustees of Hersha Hospitality Trust (the "Company) for
use at the annual meeting of shareholders to be held on May 26, 2000 ("Annual
Meeting") and at any adjournments thereof. The mailing address of the principal
executive offices of the Company is 148 Sheraton Drive, Box A, New Cumberland,
Pennsylvania 17070. This Proxy Statement and the Proxy Form, Notice of Meeting
and the Company's annual report to shareholders, all enclosed herewith, are
first being mailed to the shareholders of the Company on or about April 25,
2000.
THE PROXY
The solicitation of proxies is being made primarily by the use of the
mailings. The cost of preparing and mailing this Proxy Statement and
accompanying material, and the cost of any supplementary solicitations, which
may be made by mail, telephone, telegraph or personally by officers and
employees of the Company, will be borne by the Company. The shareholder giving
the proxy has the power to revoke it by delivering written notice of such
revocation to the Secretary of the Company prior to the Annual Meeting or by
attending the meeting and voting in person. The proxy will be voted as specified
by the shareholder in the spaces provided on the Proxy Form or, if no
specification is made, it will be voted for the election of all of the nominees
as trustees. In voting by proxy in regard to the election of the trustees,
shareholders may vote in favor of the nominees, withhold their votes as to the
nominees or withhold their votes as to a specific nominee. Shareholders may not
abstain with respect to the election of trustees.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a
proxy, in any jurisdiction, from any person to whom it is unlawful to make such
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of the Proxy Statement.
Each outstanding Priority Class A common share of beneficial interest, $.01
par value (a "Priority Common Share"), and each outstanding Class B common share
of beneficial interest, $.01 par value (a "Class B Common Share" and, together
with the Priority Common Shares, the "Shares") is entitled to one vote.
Cumulative voting is not permitted. Only shareholders of record at the close of
business on March 29, 2000 will be entitled to notice of and to vote at the
Annual Meeting and at any adjournments thereof. At the close of business on
March 29, 2000, the Company had outstanding 2,275,000 Priority Common Shares and
no Class B Common Shares. The Priority Common Shares and the Class B Common
Shares vote together as a class on all matters being submitted to shareholders
at the Annual Meeting.
No specific provisions of the Company's Declaration of Trust or the
Company's Bylaws address the issue of abstentions or broker non-votes. Brokers
holding shares for beneficial owners must vote those shares according to the
specific instructions they receive from the owners. However, brokers or nominees
holding shares for a beneficial owner may not have discretionary voting power
and may not have received voting instructions from the beneficial owner with
respect to voting on certain proposals. In such cases, absent specific voting
instructions from the beneficial owner, the broker may not vote on these
proposals. This results in what is known as a "broker non-vote." A "broker non-
vote" has the effect of a negative vote when a majority of the shares
outstanding and entitled to vote is required for approval of a proposal, and
"broker non-votes" will not be counted as votes cast but will be counted for the
purpose of determining the existence of a quorum. Because the election of
trustees is a routine matter for which specific instructions from beneficial
owners will not be required, no "broker non-votes" will arise in the context of
the election of trustees. Votes "withheld" from a trustee-nominee have the
effect of a negative vote because a plurality of the shares cast at the Annual
Meeting is required for the election of each trustee.
REPORTS OF BENEFICIAL OWNERSHIP
1
<PAGE>
Under federal securities laws, the Company's trustees and executive
officers are required to report their ownership of the Common Shares and any
changes in ownership to the Securities and Exchange Commission (the "SEC").
These persons are also required by SEC regulations to furnish the Company with
copies of these reports. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 4 were required for those persons, the Company believes that during
1999 its officers and trustees complied with all applicable filing requirements,
except that Mr. Kiran P. Patel was late in reporting two purchases of Priority
Common Shares in the open market and Mr. Rajendra O. Gandhi was late in
reporting one purchase of Priority Common Shares in the open market.
OWNERSHIP OF COMPANY'S COMMON SHARES OF BENEFICIAL INTEREST
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of Shares by each of our trustees, each executive officer and all
trustees and executive officers as a group as of March 27, 2000. Unless
otherwise indicated, all shares are owned directly and the indicated person has
sole voting and investment power. The number of shares includes shares that may
be issued at the option of the Company upon the redemption of non-voting units
of limited partnership interest ("Units") in Hersha Hospitality Limited
Partnership, a Virginia limited partnership through which the Company owns its
interest in hotels (the "Partnership").
Number of Shares Percent of
Name of Beneficial Owner Beneficially Owned(1) Class(1)
- ------------------------ --------------------- ----------
Hasu P. Shah 614,579(2) 21.3%
Bharat C. Mehta 779,152(2) 25.5%
K.D. Patel 493,369(2) 17.8%
Rajendra O. Gandhi 404,632(3) 15.1%
Kiran P. Patel 335,855(4) 12.9%
Ashish R. Parikh 1,250(5) (6)
L. McCarthy Downs 71,111(7) 3.0%
Everette G. Allen, Jr. 45,000(5) 2.0%
Thomas S. Capello 3,000(5) (6)
Mark R. Parthemer 1,000(5) (6)
Total for all Officers and Trustee 2,748,948 55.5%
========= ====
Others (as indicated in Schedule 13Ds filed by such persons)
- ------
AUTOINFO, INC. 146,400 6.4%
One Paragon Drive
Montvale, New Jersey 07645
James T. Martin 199,000 8.7%
Tuppeny House
Tuckerstown, Bermuda
Mills Value Advisor, Inc.(8) 300,000 13.2%
707 East Main Street
Richmond, Virginia 23219
______________________
2
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(1) The number of outstanding Priority Common Shares at December 31, 1999 was
2,275,000. Assumes (i) that all Units held by such person or group of
persons are redeemed for Class B Common Shares; (ii) conversion of the
Class B Common Shares into Priority Common Shares on a one-for-one basis;
and (iii) that all warrants held by such person are exercised for Priority
Common Shares. The total number of shares outstanding used in calculating
the percentage assumes that none of the Units or warrants held by other
persons are redeemed for Class B Common Shares or exercised for Priority
Common Shares, respectively. Units generally are not redeemable for Class B
Common Shares until at least one year following the acquisition of our
hotels. Class B Common Shares automatically will be converted into Priority
Common Shares upon the earlier of (i) the date that is 15 trading days
after the Company sends notice to the holders of the Priority Common Shares
that their priority period with respect to dividends and liquidation will
terminate in 15 trading days, provided that the closing bid price of the
Priority Common Shares is at least $7.00 on each trading day during the 15-
day period or (ii) January 26, 2004.
(2) Represents Units owned by such person.
(3) Represents 375 Priority Common Shares and 404,257 Units owned by Mr.
Gandhi.
(4) Represents 6,300 Priority Common Shares and 329,555 Units owned by Mr.
Patel.
(5) Priority Common Shares that such person has advised us he purchased.
(6) Owns less than 1% of the Priority Common Shares.
(7) Represents 10,000 Priority Common Shares owned by Mr. Downs and 61,111
Priority Common Shares that Mr. Downs has that right to acquire for a price
of $9.90 per share upon the exercise of warrants granted to Mr. Downs in
connection with the Company's initial public offering.
(8) The Mills Value Advisor, Inc. is an investment advisor registered under the
Investment Advisors Act that is affiliated with Andersen & Strudwick,
Incorporated, the underwriter in our initial public offering. It purchased
these shares on behalf of clients.
3
<PAGE>
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
Certain information regarding our trustees and executive officers is set forth
below.
Name Age Position
---- --- --------
Hasu P. Shah (Class II) 55 Chairman of the Board, Chief
Executive Officer and Trustee
Ashish R. Parikh 30 Chief Financial Officer
Kiran P. Patel 51 Secretary
Rajendra O. Gandhi 51 Treasurer
Bharat C. Mehta (Class II) 55 Trustee
K.D. Patel (Class II) 56 Trustee
L. McCarthy Downs, III (Class II) 47 Trustee
Everette G. Allen, Jr. (Class I) 59 Independent Trustee
Thomas S. Capello (Class I) 56 Independent Trustee
Mark R. Parthemer (Class I) 38 Independent Trustee
PROPOSAL ONE - ELECTION OF TRUSTEES
NOMINEES FOR CLASS I TRUSTEES
The Company's Declaration of Trust divides the Board of Trustees into two
classes. Each Trustee in Class I will hold office initially for a term expiring
at the first annual meeting of shareholders, (2000) and each Trustee in Class II
will hold office initially for a term expiring at the second annual meeting of
shareholders (2001). Generally, one full class of trustees is elected by the
shareholders of the Company at each annual meeting.
If any nominee becomes unavailable or unwilling to serve the Company as a
Trustee for any reason, the persons named as proxies in the Proxy Form are
expected to consult with management of the Company in voting the shares
represented by them. The Board of Trustees has no reason to doubt the
availability of any nominee, and each has indicated his willingness to serve as
a trustee of the Company if elected.
The Company's bylaws provide that a shareholder of record both at the time
of the giving of the required notice set forth in this sentence and at the time
of the Annual Meeting entitled to vote at the Annual Meeting may nominate
persons for election to the Board of Trustees by mailing written notice to the
Secretary of the Company not less than 120 days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event the
annual meeting is advanced by more than 30 days or delayed by more than 60 days,
or if the Company has not previously held an annual meeting, notice must be
received not earlier than 90 days prior to the announcement of the annual
meeting. The shareholder's notice must set forth (i) as to each person whom the
shareholder proposes to nominate for election as a trustee, all information
regarding each nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC had the nominee been nominated by
the Board of Trustees; (ii) the consent of each nominee to serve as a trustee of
the Company if so elected; (iii) the name and address of the shareholder and of
each person to be nominated; and (iv) the number of each class of securities
that are owned beneficially and of record by the shareholder.
4
<PAGE>
NOMINEES FOR ELECTION AS CLASS I TRUSTEES
(TERMS EXPIRING IN 2000)
Everette G. Allen, Jr. is Chairman of and a senior partner in the law firm
of Hirschler, Fleischer, Weinberg, Cox & Allen, P.C. in Richmond, Virginia. Mr.
Allen concentrates his practice in litigation, real estate development,
commercial disputes law, finance and debt restructuring and has been practicing
at Hirschler, Fleischer since 1970. Mr. Allen was admitted to the Virginia
State Bar in 1965. He served as Executive Editor of the Virginia Law Review
from 1964 to 1965 and served as a Law Clerk to Fourth Circuit Judge Albert V.
Bryan of the U.S. Court of Appeals during 1965 and 1966. He was a member of the
Board of Trustees of Randolph-Macon College from 1988 to 1992 and a Trustee of
the Virginia Student Aid Foundation from 1996 to 1999. Mr. Allen currently is a
member of the American College of Trial Lawyers, a member of the Board of
Directors of Virginia Gas Company and a Trustee of the Metropolitan Richmond
Sports Authority. Mr. Allen is a Phi Beta Kappa graduate of Randolph Macon
College in 1962 and received his law degree from the University of Virginia in
1965.
Committees: Audit, Compensation
Thomas S. Capello is a Private Investor and a Consultant specializing in
Strategic Planning, Mergers and Acquisitions. From 1988 to 1999, Mr. Capello
was the President, Chief Executive Officer and Director of First Capitol Bank in
York, Pennsylvania. From 1983 to 1988, Mr. Capello served as Vice President and
Manager of the Loan Production Office of The First National Bank of Maryland.
Prior to his service at The First National Bank of Maryland, Mr. Capello served
as Vice President and Senior Regional Lending Officer at Commonwealth National
Bank and worked at the Pennsylvania Development Credit Corporation. Mr. Capello
is an active member for the board of WITF, Martin Library, Motter Printing
Company, and Eastern York Dollars for Scholars. Mr. Capello is a graduate of
the Stonier Graduate School of Banking at Rutgers University and holds an
undergraduate degree with a major in Economics from the Pennsylvania State
University.
Committees: Audit, Compensation (Chairperson)
Mark R. Parthemer, Esq. is a partner in the law firm of McNees, Wallace &
Nurick and Chair of its Asset Transfer & Federal Tax group. Mr. Parthemer
concentrates his practice in business, tax and estate law, including business
succession planning. Prior to joining McNees, Wallace & Nurick, Mr. Parthemer
served as Special Counsel to Saul, Ewing, Remick & Saul LLP, another mid-size
Harrisburg law firm and was a tax specialist at Coopers & Lybrand LLP (now
Pricewaterhouse Coopers) beginning in 1985. Mr. Parthemer has also served two
four-year terms as the First Assistant Solicitor of Dauphin County. He is a
member of the Board of Keystone Area Council, Boy Scouts of America and The
Vision Foundation, among others. Mr. Parthemer received his B.A. and B.S.
degrees from Franklin and Marshall College and his J.D. law degree from The
Dickinson School of Law/The Pennsylvania State University. He is admitted to
practice in Pennsylvania, in the Federal District Court and before the United
States Tax Court. He is a frequent lecturer and writes a monthly column for a
national periodical.
Committees: Audit, Compensation
THE BOARD OF TRUSTEES RECOMMENDS A VOTE IN FAVOR OF EACH OF THE NOMINEES FOR
CLASS I TRUSTEES
5
<PAGE>
CLASS II TRUSTEES
(TERMS EXPIRING IN 2001)
Hasu P. Shah has been the Chairman of the Board and CEO of the Company
since its inception in 1998. Mr. Shah also is the President and CEO of Hersha
Enterprises, Ltd. (a real estate management and development company) and has
held that position since its inception in 1984. He started Hersha Enterprises,
Ltd. with the purchase of the 125-room Quality Inn Riverfront in Harrisburg,
Pennsylvania which he converted to a 117-room Holiday Inn Express. Recently the
"Central Penn Business Journal" honored Hersha Enterprises, Ltd. as one of the
Fifty Fastest Growing Companies in 1997 in central Pennsylvania. His interest
in construction and renovations of hotels initiated the development of Hersha
Construction Company for the construction and renovation of new properties and
Hersha Hotel Supply Company to supply furniture, fixtures and equipment supplies
to the properties. Mr. Shah and his wife, Hersha, are active members of the
community. Mr. Shah serves on the Board of Trustees of several organizations
including the Pennsylvania State University Capital Campus in Harrisburg,
Pennsylvania, the Harrisburg Foundation, Human Enrichment by Love and Peace
(H.E.L.P.), the Capital Region Chamber of Commerce and the Vraj Hindu Temple.
Mr. Shah received a Bachelors of Science degree in Chemical Engineering from
Tennessee Technical University and obtained a Masters degree in Administration
from Pennsylvania State University.
L. McCarthy Downs, III, is Chairman of the Board for Anderson & Strudwick
Investment Corporation, the parent company of Anderson & Strudwick Inc., the
underwriter of our initial public offering. He has been the manager of the
firm's Corporate Finance department since 1990 and has been involved in several
public and private financings for REITs. Prior to 1990, Mr. Downs was employed
by another investment banking and brokerage firm for seven years. Mr. Downs
received a Bachelor of Science degree in Business Administration from The
Citadel and obtained an M.B.A. from The College of William and Mary.
K.D. Patel has been a principal of Hersha Enterprises, Ltd. since 1989.
Mr. Patel currently serves as the President of the lessee of all our hotels. He
has received national recognition from Holiday Inn Worldwide for the successful
management of Hersha's Holiday Inn Express Hotels. In 1996, Mr. Patel was
appointed by Holiday Inn Worldwide to serve as an advisor on its Sales and
Marketing Committee. Prior to joining Hersha Enterprises, Ltd., Mr. Patel was
employed by Dupont Electronics in New Cumberland, Pennsylvania from 1973 to
1990. He is a member of the Board of Trustees of a regional chapter of the
American Red Cross and serves on the Advisory Board of Taneytown Bank and Trust.
Mr. Patel received a Bachelor of Science degree in Mechanical Engineering from
the M.S. University of India and a Professional Engineering License from the
Commonwealth of Pennsylvania in 1982.
Bharat C. Mehta has been a principal of Hersha Enterprises, Ltd. since
1985. Mr. Mehta currently serves as President of Hersha Health Care Management
Division of Hersha Enterprises, Ltd. Mr. Mehta worked as a chemical engineer
from 1967 to 1983. He was with Lever Brothers Corporation (UniLever, a
multinational company) where he started as a production supervisor in 1977 and
gradually was promoted to Production Manager of a large manufacturing department
in 1981. He left Lever Brothers in 1983 to start his own business. He is a
charter member of Denver-Adamstown (PA) Rotary Club. He is also a Board Member
of Cocalico Community Partnership, a non-profit organization whose goal is to
improve the health, stability and emotional well-being of the community. Mr.
Mehta received a Bachelor of Science degree in Chemical Engineering from the
Worcester Polytechnic Institute in Massachusetts and earned a Masters degree
from Pennsylvania State University.
6
<PAGE>
OTHER EXECUTIVE OFFICERS
Ashish R. Parikh joined the Company in 1999 as the Chief Financial Officer.
Prior to joining Hersha Hospitality Trust, Mr. Parikh was an Assistant Vice
President in the Mergers and Acquisition Group for Fleet Financial Group where
he developed valuable expertise in numerous forms of capital raising activities
including leveraged buyouts, bank syndications and venture financing. Mr. Parikh
has also been employed by Tyco International Ltd. (diversified industrial
conglomerate) and Ernst & Young LLP (accounting and consulting firm). Mr. Parikh
received an MBA from New York University and a BBA from the University of
Massachusetts at Amherst. Mr. Parikh is a licensed Certified Public Accountant.
Kiran P. Patel has been a principal of Hersha Enterprises, Ltd. since 1993.
Mr. Patel is currently the partner in charge of Hersha's Land Development and
Business Services Divisions. Prior to joining Hersha Enterprises, Ltd., Mr.
Patel was employed by AMP Incorporated (electrical component manufacturer), in
Harrisburg, Pennsylvania. Mr. Patel serves on various Boards for community
service organizations. Mr. Patel received a Bachelor of Science degree in
Mechanical Engineering from M.S. University of India and obtained a Masters of
Science degree in Industrial Engineering from the University of Texas in
Arlington.
Rajendra O. Gandhi was appointed as Treasurer by our board of trustees on
February 12, 1999. Mr. Gandhi has been a principal of Hersha Enterprises, Ltd.
since 1986. Mr. Gandhi currently serves (and has served since 1997) as
President of Hersha Hotel Supply, Inc., which provides furnishings, case goods
and interior furnishing materials to hotels and nursing homes in several states.
Mr. Gandhi is a graduate of the University of Bombay, India and obtained an MBA
degree from the University of West Palm Beach, Florida.
COMMITTEES AND MEETINGS OF THE BOARD OF TRUSTEES
Trustees' Meetings. The business of the Company is under the general
management of its Board of Trustees as provided by the Company's Bylaws and the
laws of Maryland. The Board of Trustees holds regular quarterly meetings during
the Company's fiscal year. The Board of Trustees held four meetings during 1999.
All trustees attended all of the meetings of the Board of Trustees and all
committee meetings on which each trustee served. Our Board of Trustees consists
of seven members, three of whom are independent. All of the trustees serve
staggered terms of two years, and the trustees are divided into two classes.
Each trustee in Class I will hold office initially for a term expiring at the
first annual meeting of shareholders (2000) and each trustee in Class II will
hold office initially for a term expiring at the second annual meeting of
shareholders (2001).
The Company presently has an Audit Committee and a Compensation Committee
of its Board of Trustees. The Company has no Nominating Committee of its Board
of Trustees, with the entire Board of Trustees acting in such capacity. The
Company may, from time to time, form other committees as circumstances warrant.
Such committees have authority and responsibility as delegated by the Board of
Trustees.
Audit Committee. The Board of Trustees has established an Audit Committee,
which currently consists of Mr. Everette G. Allen, Jr., Mr. Thomas A. Capello
and Mr. Mark R. Parthemer. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. The audit committee met three times during 1999.
Compensation Committee. The Compensation Committee consists of Messrs.
Capello, Allen and Parthemer, all of whom are independent trustees. The
Compensation Committee determines compensation for the Company's executive
officers and administers the Company's Option Plan. The Compensation Committee
met and discussed relevant topics regarding compensation at the meetings of the
Board of Trustees and did not schedule separate meetings during 1999.
COMPENSATION OF TRUSTEES
Each Trustee is paid $10,000 per year for those residing outside the
Commonwealth of Pennsylvania and $7,500 per year for those residing in the
Commonwealth of Pennsylvania, payable in quarterly installments. On
7
<PAGE>
February 25, 2000, an additional $5,000 was authorized to be paid to three of
the non-affiliated trustees, (the "Independent Trustees") for their efforts
during 1999. In addition, we will reimburse all trustees for reasonable out-of-
pocket expenses incurred in connection with their services on the Board of
Trustees.
On the effective date of our initial public offering, our Independent
Trustees received options to purchase the following Class B Common Shares at
$6.00 per share: Mr. Allen, 30,000; Mr. Capello, 3,000; and Mr. Parthemer,
1,000. The options were granted under the Hersha Hospitality Trust Non-Employee
Trustees' Option Plan (the "Trustees' Plan"), which may be amended by our board
of trustees to provide for other awards, including awards to future independent
trustees. The exercise price of each such option will be equal to $6.00 per
share. Each such option shall become exercisable over the particular Trustee's
initial term, provided that the Trustee is a member of our Board of Trustees on
the applicable date. Thus, all of Mr. Allen's and Mr. Parthemer's options will
become exercisable as of the first anniversary of the date of grant and one-half
of Mr. Capello's options will become exercisable on the first anniversary of the
date of grant and the remaining options will become exercisable on the second
anniversary of the date of grant. Notwithstanding the foregoing, an option
granted under the Trustees' Plan will be exercisable only if (1) we obtain a per
share closing price on the Priority Common Shares of $9.00 for 20 consecutive
trading days and (2) the per share closing price on the Priority Common Shares
for the prior trading day was $9.00 or higher. Options issued under the
Trustees' Plan are exercisable for five years from the date of grant.
A Trustee's outstanding options will become fully exercisable if the
Trustee ceases to serve on our Board of Trustees due to death or disability. All
awards granted under the Trustees' Plan shall be subject to board or other
approval sufficient to provide exempt status for such grants under Section 16 of
the Securities Exchange Act of 1934, as that section and rules thereunder are in
effect from time to time. No option may be granted under the Trustees' Plan more
than 10 years after the date that our Board of Trustees approved the Plan. Our
Board of Trustees may amend or terminate the Trustees' Plan at any time but an
amendment will not become effective without shareholder approval if the
amendment increases the number of shares that may be issued under the Trustees'
Plan (other than equitable adjustments upon certain corporate transactions).
EXECUTIVE COMPENSATION
Ashish R. Parikh, the chief financial officer of the Company, is paid a
salary of $90,000 by our primary lessee, Hersha Hospitality Management, L.P.
("HHMLP"). The Company and HHMLP have entered into an Administrative Services
Agreement to provide accounting and securities reporting services. The terms of
the agreement provide for a fixed fee of $55,000 with an additional $10,000 per
property (prorated from the time of acquisition) for each hotel added to the
Company's portfolio. A portion of these fees, charged by HHMLP, are allocated to
the services of Mr. Parikh.
No other officers of the Company have received or are scheduled to receive
any cash compensation from the Company other than the Trustee's fees for those
officers who are trustees, provided, however, that the Chairman of the Board of
Trustees shall be entitled to receive a salary of not more than $100,000 per
year provided that the Priority Common Shares have a bid price of $9.00 per
share or higher for 20 consecutive trading days and remains at or above $9.00
per share.
8
<PAGE>
The Company has a policy, which is subject to change at the sole discretion of
the Board of Trustees, of paying no compensation to its executive officers or
other employees. The following table summarizes the compensation paid or accrued
by the Company during the year ended December 31, 1999 (1).
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
RESTRICTED SECURITIES
NAME AND SHARE UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS AWARD OPTIONS/SAR COMPENSATION
------------------ ------ ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Hasu P. Shah
Chairman and Chief
Executive Officer $ -(2) $ - $ - 21,850(4) $ -
Ashish R. Parikh
Chief Financial Officer $55,000(3) $ - $ - - $ -
Kiran P. Patel
Secretary $ - $ - $ - 20,864(4) $ -
Rajendra O. Gandhi
Treasurer $ - $ - $ - 23,294(4) $ -
</TABLE>
(1) The Company commenced operations on January 26, 1999
(2) Mr. Shah will be entitled to receive a salary of not more than $100,000 per
year provided that the Priority Common Shares have a bid price of $9.00 per
share or higher for 20 consecutive trading days and remain at or above $9.00
per share.
(3) Of Mr. Parikh's $90,000 salary that is paid by the Lessee, $55,000 has been
designated as related to the services provided per the terms of the
Administrative Services Agreement between the Company and HHMLP. The terms
of the agreement provide for a fixed fee of $55,000 with an additional
$10,000 per property (prorated from the time of acquisition) for each hotel
added to the Company's portfolio.
(4) Granted at time of the Company's initial public offering pursuant to
negotiations with the underwriter for the purpose of attracting and
retaining executive officers of the Company and the Partnership.
OPTION GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SHARES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO EXERCISE OF SHARE PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION FOR OPTION TERM(2)
---------------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Hasu P. Shah 21,850 33.1% $6.00 January 2004 $- $ 79,971
Ashish R. Parikh - - $ - - $- $ -
Kiran P. Patel 20,864 31.6% $6.00 January 2004 $- $ 76,362
Rajendra O. Gandhi 23,294 35.3% $6.00 January 2004 $- $ 85,256
</TABLE>
(1) The share options are exercisable only if (i) the Company obtains a per
share closing price on the Priority Common Shares of nine dollars ($9.00) or
higher for twenty consecutive trading days and (ii) the closing price on the
Priority Common Shares for the prior trading day was nine dollars ($9.00) or
higher.
(2) The fair market value of the Priority Common Shares on the date the options
were granted was equal to the respective exercise prices listed in the
table. The indicated 5% and 10% rates of appreciation are provided to
comply with SEC regulations and do not necessarily reflect the views of the
Company as to the likely trend in the Company's share price. Actual gains,
if any, on share option exercises will be dependent on, among other things,
the future performance of the Common Shares and overall stock market
conditions. There can be no assurance that the amounts reflected in the
table will be achieved. Additionally, these values do not take into
consideration the provisions of the options providing for limits on
transferability, delayed exercisability or termination of the options in
certain circumstances.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-The Money Options at
Shares Acquired Value at Fiscal Year-End (1) Fiscal Year-End (2)
---------------------------------------------------------------
NAME by exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hasu P. Shah - $ - - 21,850 $ - $ -
Ashish R. Parikh - $ - - - $ - $ -
Kiran P. Patel - $ - - 20,864 $ - $ -
Rajendra O. Gandhi - $ - - 23,294 $ - $ -
</TABLE>
(1) Represents the number of shares subject to outstanding options.
(2) Based on a price of $5.00 per share, the closing price of the Company's
Priority Common Shares on December 31, 1999, minus the exercise price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Downs is Chairman of the Board for Anderson & Strudwick Investment
Corporation, the parent company of Anderson & Strudwick, Inc., the underwriter
of our initial public offering.
Hasu P. Shah, Jay H. Shah, Neil H. Shah, Bharat C. Mehta, Kanti D. Patel,
Rajendra O. Gandhi, Kiran P. Patel, David L. Desfor, Madhusudan I. Patni and
Manhar Gandhi, (the "Hersha Affiliates") and the Partnership, the Company's
primary operating partnership, have entered into an Option Agreement. Pursuant
to the Option Agreement, the Partnership will have a two-year option to acquire
any hotels acquired or developed by the Hersha Affiliates within 15 miles of any
of the initial hotels or any subsequently acquired hotel. Of the six hotel
properties purchased since the completion of the initial public offering, two of
the hotel properties have been purchased under this Option Agreement. These
hotels include the Clarion Inn & Suites, Harrisburg, Pennsylvania and the
Hampton Inn & Suites, Hershey, Pennsylvania. The Company purchased the Clarion
Inn & Suites, Harrisburg, Pennsylvania from 2844 Associates, a Pennsylvania
limited partnership owned by certain of the Hersha Affiliates, for $2.7 million
on September 1, 1999. The Company financed this purchase through the assumption
of $2.1 million of mortgage debt and the use of borrowings under the Company's
line of credit. The Company purchased the Hampton Inn & Suites, Hershey,
Pennsylvania from 3144 Associates, a Pennsylvania limited partnership owned by
certain of the Hersha Affiliates, for $7.5 million effective January 1, 2000.
The Company financed this purchase through the assumption of $5.5 million of
mortgage debt and the use of borrowings under the Company's line of credit.
The Company also acquired four other hotels from limited partnerships owned
by the Hersha Affiliates. The Company purchased the Best Western, Indiana,
Pennsylvania from 1844 Associates, a Pennsylvania limited partnership owned by
certain of the Hersha Affiliates, for $2.2 million effective January 1, 2000.
The Company financed this purchase through the assumption of $1.4 million of
mortgage debt and the use of borrowings under the Company's line of credit. The
Company purchased the Comfort Inn, McHenry, Maryland from 1544 Associates, a
Pennsylvania limited partnership owned by certain of the Hersha Affiliates, for
$1.8 million effective January 1, 2000. The Company financed this purchase
through the assumption of $1.2 million of mortgage debt and the use of
borrowings under the Company's line of credit. The Company purchased the
Hampton Inn, Danville, Pennsylvania, from 3544 Associates, a Pennsylvania
limited partnership owned by certain of the Hersha Affiliates, for $3.6 million
on September 1, 1999. The Company, through its interest in the Partnership,
acquired the Hampton Inn in exchange for 173,539 Units and the assumption of
$2.6 million of mortgage debt. The Company purchased the Comfort Inn, Jamaica,
New York, from 3744 Associates, a Pennsylvania limited partnership owned by
certain of the Hersha Affiliates, for $5.5 million on August 11, 1999. The
Company financed this purchase through the use of borrowings under the Company's
line of credit.
10
<PAGE>
In conjunction with the initial public offering, we acquired the initial
ten hotels and entered into percentage lease agreements with HHMLP. HHMLP is
owned by Hasu P. Shah and certain of the Hersha Affiliates. We have acquired
six properties subsequent to our public offering. We have entered into
percentage leases relating to each of the hotels with HHMLP. Each percentage
lease will have an initial non-cancelable term of five years. All, but not less
than all, of the percentage leases for these hotels may be extended for an
additional five-year term at HHMLP's option. At the end of the first extended
term, HHMLP, at its option, may extend some or all of the percentage leases for
these hotels for an additional five-year term. Pursuant to the terms of the
percentage leases, HHMLP is required to pay initial fixed rent, base rent or
percentage rent and certain other additional charges and is entitled to all
profits from the operations of the hotels after the payment of certain specified
operating expenses.
Approximately $6.4 million of indebtedness owed by the entities owned by
certain of the Hersha Affiliates was repaid with a portion of the proceeds of
the initial public offering. Approximately $4.0 million of such indebtedness
was owed to entities controlled by the Hersha Affiliates and relates principally
to hotel development expenses in connection with certain of the hotels purchased
by the Company.
The Company has acquired thirteen hotels, since the commencement of
operations, for prices that will be adjusted at either December 31, 1999, 2000
or 2001. The purchase price adjustments are calculated by applying the initial
pricing methodology to such hotels' cash flows as shown on our and the Lessee's
audited financial statements. Utilizing this pricing methodology, the hotels'
cash flows are adjusted for the year ended on the adjustment dates in order to
calculate a value for the respective hotel based upon a 12% return criteria.
All such adjustments must be approved by a majority of our independent trustees.
If the repricing produces a higher aggregate value for such hotels, the
Hersha Affiliates receive an additional number of Units that, when multiplied by
the offering price, equals the increase in value plus the value of any
distributions that would have been made with respect to such Units if such Units
had been issued at the time of the acquisition of such hotels. If, however, the
repricing produces a lower aggregate value for such hotels, the Hersha
Affiliates forfeit to the Partnership that number of Units that, when multiplied
by the offering price, equals the decrease in value plus the value of any
distributions made with respect to such Units. Any adjustments arising from the
issuance or forfeiture of shares will adjust the cost of the property acquired
based on the fair value of the shares on the date of the adjustment. Based upon
unaudited results for the period ending December 31, 1999, the Partnership
anticipates issuing additional units for the Holiday Inn, Milesburg, the Holiday
Inn Express, Harrisburg and the Comfort Inn, Denver, PA.
The Company leased a parcel of real estate adjacent to the Hampton Inn,
Selinsgrove, Pennsylvania to Mr. Hasu P. Shah for a nominal amount per year.
This parcel of land is not subdivided from the property and does not have its
own private access way. The land has not been developed and in its current
state is not believed to maintain significant value.
The Company leased two parcels of real estate from the Hersha Affiliates
for an aggregate annual rental of $21,000. These two parcels of land consist of
the land upon which the Holiday Inn Express, Harrisburg and Comfort Inn, Denver,
Pennsylvania are situated. Although a market rate has not been computed for
these leases, the Company does benefit from these leases as they are below
market rate transactions.
The Company paid to the Shah Law Firm, whose senior partner Mr. Jay H. Shah
is the son of Mr. Hasu P. Shah, certain legal fees aggregating $153,000 during
1999. Of this amount $144,000 was capitalized as settlement costs.
The Company approved the lending of up to $3.0 million to the Hersha
Affiliates to construct hotels and related improvements on specific hotel
projects. As of December 31, 1999, the Hersha Affiliates owe us $1.0 million
related to this borrowing. The Hersha Affiliates have borrowed this money from
us at an interest rate of 12.0% per annum. Interest income from these advances
was $28,000 for the year ended December 31, 1999.
The Company has paid certain expenses and fees in connection with the
transfer of the franchise licenses to the Lessee. The aggregate amount of the
expenses reimbursed to the Lessee totaled $145,000. The Lessee, which is owned
by the Hersha Affiliates, holds all of the franchise licenses for each of the
hotels currently owned by the Partnership. The franchise licenses generally
specify certain management, operational, accounting, reporting
11
<PAGE>
and marketing standards and procedures with which the franchisee must comply and
provide for annual franchise fees based upon percentages of gross room revenue.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
shareholder return on the Priority Class A Common Shares for the period January
26, 1999 (commencement of operations) through December 31, 1999, with the
changes in the Standard and Poor's 500 Stock Index (the "S&P 500 Index") and the
Bloomberg Hotel REIT Index for the same period, assuming a base share price of
$100 for the Common Stock and each index for comparison purposes. Total return
equals appreciation in stock price plus dividends paid, and assumes that all
dividends are reinvested. The performance graph is not necessarily indicative
of future investment performance.
The Bloomberg Hotel REIT Index is comprised of 8 publicly traded REITs
which focus on investments in hotel properties.
HERSHA HOSPITALITY TRUST
TOTAL RETURN PERFORMANCE
(GRAPH TO BE INSERTED HERE)
INDEX 1/26/99 (1) 12/31/99
- ----- ---------- --------
HERSHA HOSPITALITY TRUST 100.00 80.00
BLOOMBERG HOTEL REIT INDEX 100.00 72.73
S&P 500 INDEX 100.00 119.92
(1) The Company commenced operations on January 26, 1999
12
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Moore Stephens, P.C. serves as auditors for the Company and its
subsidiaries and will continue to so serve until and unless changed by action of
the Board of Trustees. A representative of Moore Stephens, P.C. is expected to
be present at the Annual Meeting. This representative will have the opportunity
to make a statement if he desires to do so and is expected to be available to
respond to appropriate questions.
PROPOSALS FOR 2001 ANNUAL MEETING
Under the regulations of the SEC, any shareholder desiring to make a
proposal to be acted upon at the 2001 annual meeting of shareholders must
present such proposal to the Company at its principal office in New Cumberland,
Pennsylvania not later than December 26, 2000, in order for the proposal to be
considered for inclusion in the Company's proxy statement. The Company
anticipates holding the 2001 annual meeting on May 18, 2001.
The Company's bylaws provide that, in addition to any other applicable
requirements, for business to be properly brought before the annual meeting by a
shareholder, the shareholder must give timely notice in writing not later than
120 days prior to the first anniversary of the preceeding year's annual meeting.
As to each matter, the notice shall contain (i) a brief description of the
business desired to be brought before the meeting and the reasons for addressing
it at the annual meeting; (ii) any material interest of the shareholder in such
business; (iii) the name and address of the shareholder; and (iv) the number of
each class of securities that are owned beneficially and of record by the
shareholder.
OTHER MATTERS
The Board of Trustees knows of no other business to be brought before the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the proxies will be voted on such matters in accordance with the judgment of the
persons named as proxies therein, or their substitutes, present and acting at
the meeting.
The Company will furnish to each beneficial owner of Priority Common Shares
entitled to vote at the Annual Meeting,, upon written request to Ashish Parikh,
the Company's Chief Financial Officer, at 148 Sheraton Drive, Box A, New
Cumberland, Pennsylvania 17070, Telephone (717) 770-2405, a copy of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, including the financial statements and financial statement schedules filed
by the Company with the SEC.
BY ORDER OF THE BOARD OF TRUSTEES
KIRAN P. PATEL
Secretary
April 25, 2000
13
<PAGE>
HERSHA HOSPITALITY TRUST
New Cumberland, Pennsylvania
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 2000
The undersigned hereby appoints Hasu P. Shah and Bharat C. Mehta, or either
of them, with full power of substitution in each, proxies to vote all shares
of the undersigned in Hersha Hospitality Trust, at the annual meeting of
shareholders to be held May 26, 2000, and at any and all adjournments thereof:
(1) ELECTION OF TRUSTEES
[_] FOR ALL [_] WITHHOLD ALL [_] FOR ALL EXCEPT
(INSTRUCTION: To withhold authority to vote for any such nominee(s), write
the name(s) of the nominee(s) in the space provided below.)
---------------------------------------------------------------------------
(2) In their discretion, the Proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly
come before the meeting.
<PAGE>
This Proxy is solicited on behalf of the Board of Trustees. This Proxy when
properly executed will be voted in the manner directed herein by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES.
DATED _____________________, 2000
_________________________________
Please sign name exactly as it
appears on the share
certificate. Only one of several
joint owners or co-owners need
sign. Fiduciaries should give
full title.
PLEASE MARK, SIGN, DATE AND RE-
TURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
