<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or
Section 240.14a-12
LA QUINTA INNS, INC.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LA QUINTA LOGO]
April 10, 1995
Dear Shareholder:
You are cordially invited to attend the 1995 Annual Meeting of
Shareholders of La Quinta Inns, Inc. The meeting will be held on Thursday, May
25, 1995, at the Company's corporate offices in the 3rd Floor Conference Room,
112 East Pecan Street, San Antonio, Texas at 10:00 a.m., local time.
The Notice of Annual Meeting and the Proxy Statement on the following
pages cover the formal business of the meeting, which includes the election of
directors and the approval of auditors. To familiarize you with the nominees
for director, all of whom served as directors last year, the Proxy Statement
contains biographical information of each nominee.
We hope you will be able to attend the Annual Meeting of Shareholders.
In any event, in order that we may be assured of a quorum, please sign the
accompanying proxy card and return it promptly in the envelope enclosed for
your use. Your vote is important. We appreciate your confidence and continued
support.
Sincerely,
Thomas M. Taylor
Chairman of the Board
<PAGE> 3
[LA QUINTA LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 1995
The Annual Meeting of Shareholders of La Quinta Inns, Inc., a Texas
corporation (the "Company"), will be held in the 3rd Floor Conference Room of
the Company's corporate offices, 112 East Pecan Street, San Antonio, Texas, on
Thursday, May 25, 1995, at 10:00 a.m., for the purpose of considering and
acting upon the following:
1. The election of six (6) Directors of the Company;
2. The approval of the appointment of independent auditors for the
1995 fiscal year; and
3. The transaction of such other business as may lawfully come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 3, 1995
(the "Record Date") are entitled to notice of and to vote at the meeting or any
adjournment thereof.
We hope you will be represented at the meeting by signing and returning
the enclosed proxy card in the accompanying envelope as promptly as possible,
whether or not you expect to be present in person. The vote of every
shareholder is important and the Board of Directors of the Company appreciates
the cooperation of shareholders in promptly returning proxies which helps to
limit expenses incident to proxy solicitation.
BY ORDER OF THE
BOARD OF DIRECTORS
John F. Schmutz
Vice President-General Counsel
and Secretary
April 10, 1995
<PAGE> 4
[LA QUINTA LOGO]
P. O. Box 2636
San Antonio, Texas 78299-2636
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited on behalf of the Board of Directors of
La Quinta Inns, Inc., a Texas corporation (the "Company"), for use at the
Annual Meeting of Shareholders on Thursday, May 25, 1995, at 10:00 a.m. to be
held in the 3rd Floor Conference Room of the Company's corporate offices, 112
East Pecan Street, San Antonio, Texas, and at any adjournment thereof.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse its transfer agent, The First National
Bank of Boston, for charges and expenses in connection with the distribution of
proxy material to brokers or other persons holding stock in their names or in
the names of their nominees and for charges and expenses in forwarding proxies
and proxy material to the beneficial owners. Solicitations further may be
made by officers and regular employees of the Company, without additional
compensation, by use of mail, telephone, telegraph or personal calls.
Any Shareholder giving a proxy for the meeting has the power to revoke
it at any time prior to its use by granting a subsequently dated proxy, by
attending the Annual Meeting and voting in person, or by otherwise giving
notice in person or in writing to the Secretary of the Company. If a proxy
card indicates an abstention or a broker non-vote on a particular matter, then
the shares represented by such proxy will be counted for quorum purposes. If a
quorum is present, an abstention will have the effect of a vote against the
matter and broker non-votes will have no effect. The approximate date on which
this Proxy Statement and the accompanying form of proxy are first sent or given
to security holders is April 10, 1995.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of Common Stock of the Company at the close of
business on April 3, 1995 shall be entitled to vote at the meeting. There were
46,823,516 shares of Common Stock issued and outstanding on the record date.
Each share outstanding entitles the holder thereof to one vote.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The Board of Directors has, pursuant to the Company's Amended and
Restated By-Laws, recently fixed the number of members of the Board of
Directors at six (6) commencing with the 1995 Annual Meeting of Shareholders.
Six of the Company's current directors are to be elected at the Annual Meeting.
Mr. Fingerhut resigned from the Board on March 31, 1994. Dr. George Kozmetsky
resigned from the Board on November 21, 1994. Proxies cannot be voted for a
greater number of directors than the number of nominees named herein. Each
director is to hold office until the next Annual Meeting and until his
successor is elected and qualified. The directors will be elected by a majority
of the votes cast at the Annual Meeting, provided a quorum is present. A
quorum will be present at the Annual Meeting if the holders of a majority of
shares of the Company's Common Stock are represented in person or by proxy.
2
<PAGE> 5
The proxies named in the accompanying proxy, who have been designated by
the Board of Directors of the Company, intend to vote for the following
nominees for election as directors unless otherwise instructed in such proxy.
The Board of Directors has no reason to believe that any nominee will be unable
to serve if elected. In the event any nominee shall become unavailable to
stand for election, the proxies named in the accompanying proxy intend to vote
for the election of a substitute nominee of their selection. All nominees were
previously elected by shareholders. Certain information concerning directors
and nominees is set forth below:
<TABLE>
<CAPTION>
Nominee Served as
for Director
Director Since Age Principal Occupation
-------- ----- --- --------------------
<S> <C> <C> <C>
Joseph F. Azrack(1) 1992 48 President and Chief Executive Officer of Aldrich,
Eastman & Waltch, L. P. since August 1994; prior
thereto, Principal and Executive Director of such
firm from April 1983 to August 1994.
Dr. William H.
Cunningham 1985 51 Chancellor of The University of Texas System since
September 1992; prior thereto, President of The
University of Texas at Austin from September 1985 to
September 1992; Dean of the College of Business
Administration and Graduate School of Business of
The University of Texas at Austin from 1983 to
August 1985; Professor of Marketing, University of
Texas at Austin, since 1979; director of Freeport
McMoRan Inc., Jefferson-Pilot Corporation, LBJ
Foundation Board, John Hancock Advisors, Inc.
(formerly Transamerican Fund Management Group) and
advisory director of Texas Commerce Bank-Austin.
Donald J. McNamara 1991 42 Chairman of The Hampstead Group (a real estate investment
firm) since September 1987; Director of Forum Retirement
Partners, L.P.; Director of FelCor Suite Hotels,
Inc.; and Chairman of the Board of Harvey Hotel
Holdings, Inc.
Gary L. Mead(2) 1992 47 Director and President and Chief Executive Officer
of the Company since March 3, 1992; Executive Vice
President-Finance of Motel 6 G.P., Inc., the sole
general partner of Motel 6, L.P., from October 1987
to January 1991.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Nominee Served as
for Director
Director Since Age Principal Occupation
-------- ----- --- --------------------
<S> <C> <C> <C>
Peter Sterling 1991 53 Vice President and Chief Financial Officer of Sid R.
Bass, Inc. and Lee M. Bass, Inc. (diversified
investment firms) since September 1, 1983.
Thomas M. Taylor 1991 52 Chairman of the Board of the Company since March 11,
1994; President of Thomas M. Taylor & Co. (an
investment consulting firm) since May 1985;
President of TMT-FW (a diversified investment firm)
since September 1989; director of TPI Enterprises,
Inc. and John Wiley & Sons, Inc.
</TABLE>
- -------------
(1) Pursuant to the terms of a certain agreement of limited partnership of La
Quinta Development Partners, L.P., a Delaware limited partnership
("LQDP"), dated March 21, 1990, between the Company and AEW Partners,
L.P. ("AEW Partners"), the Company, if requested by AEW Partners, will
nominate a principal of AEW, Inc., who is reasonably acceptable to the
Company's Board of Directors, for election as a director of the Company
at each annual shareholders' meeting for so long as AEW Partners holds a
significant interest in LQDP (see discussion of conversion option held by
AEW Partners under the caption "Transactions with Management"). Mr.
Azrack was so designated by AEW Partners. AEW Partners has agreed to
indemnify Mr. Azrack and any replacement or successor acting as agent of
AEW Partners in connection with serving on the Company's Board of
Directors.
(2) Pursuant to the terms of a five-year Employment Agreement entered into
between the Company and Mr. Mead on March 3, 1992, the Board of
Directors of the Company will nominate Mr. Mead for election as a
director of the Company as part of management's slate of nominees at
each annual meeting of shareholders and to appoint Mr. Mead to the
Board's Executive Committee during the term of such Employment
Agreement.
None of the nominees for director or executive officers of the Company
has a family relationship with any of the other nominees for director or
executive officers.
Except as indicated above, none of the nominees for director is a
director of any other company which has a class of securities registered under,
or is required to file reports under, the Securities Exchange Act of 1934 or of
any company registered under the Investment Company Act of 1940.
4
<PAGE> 7
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held nine (9) meetings during the
year ended December 31, 1994. All directors attended at least 75 percent of
the aggregate of: (a) the total number of meetings of the Board during his term
as Director and (b) the total number of meetings held by all committees of the
Board on which he served during such term.
The Audit Committee of the Board is currently composed of Messrs.
Azrack, McNamara, and Sterling (Chairman). The Audit Committee has the
responsibility, among other things, to recommend the selection of the Company's
independent accountants, review and approve the scope of the independent
accountants' audit activities, review the Company's financial statements which
are the subject of the independent accountants' certification, review with such
independent accountants the adequacy of the Company's basic accounting system
and the effectiveness of its internal audit activities and review related party
transactions.
The Compensation and Stock Option Committee of the Board during 1994
consisted of Messrs. Cunningham (Chairman), Fingerhut and Taylor. The
Compensation and Stock Option Committee reviews the salaries, bonuses, stock
option grants and other direct and indirect compensation and benefits for all
Company officers and key employees. The Company's 1978 and 1984 Stock Option
Plans are administered by the Compensation and Stock Option Committee, which
has sole authority to grant options to employees of the Company.
The Executive Committee of the Board is currently composed of Messrs.
Mead and Taylor. The Executive Committee has the authority to exercise
substantially all the powers of the Board that may legally be delegated to it
in the management and direction of the business and affairs of the Company
during intervals between meetings of the Board of Directors, other than matters
involving a commitment in excess of $10,000,000.
The entire Board of Directors currently acts as the nominating committee
for directors and will consider nominations by shareholders for directors. Any
such nominations for the election to be considered at the next Annual Meeting,
currently scheduled for May 1996, together with a statement of the nominee's
qualifications and consent to be considered as a nominee and to serve if
elected, should be mailed to the Secretary of the Company no later than
December 15, 1995, in order for the nominee to be included in the Company's
Proxy Statement for the 1996 Annual Meeting of Shareholders.
5
<PAGE> 8
PRINCIPAL SHAREHOLDERS
The Company knows of no person who, as of March 17, 1995, owned
beneficially more than five percent (5%) of the Company's outstanding voting
securities, except as indicated in the table below.
<TABLE>
<CAPTION>
Shares of Common Stock
Name and Address Beneficially Owned Percent
of Beneficial Owner as of March 17, 1995 of Class
------------------- -------------------- --------
<S> <C> <C>
Thomas M. Taylor & Co. 2,322,979 5.0%
Trust for the benefit of
Mr. Taylor's son 3,375 *
Thomas M. Taylor 60,750(1) *
Sid R. Bass, Inc. 2,765,305 5.9%
Lee M. Bass, Inc. 2,765,305 5.9%
The Bass Management Trust 2,861,392(2) 6.1%
The Airlie Group, L.P. 2,025,000 4.3%
Annie R. Bass Grandson's Trust
for Lee M. Bass 536,287 1.2%
Annie R. Bass Grandson's Trust
for Sid R. Bass 536,287 1.2%
Douglas K. and Anne Marie Bratton 5,375 *
Douglas K. Bratton IRA 1,687 *
Miles Ellis Bratton 1991 Trust 1,687 *
Bratton Family Foundation 10,000 *
Thomas W. Briggs 16,875(3) *
Geoffrey P. Raynor 13,500(3) *
Michael N. Christodolou 10,125(3) *
W. Forrest Tempel 3,375(3) *
Donald J. McNamara, III Trust 1,012(3) *
Donald J. McNamara 414,112(3) *
William P. Hallman, Jr. 168,750(4) *
Peter Sterling Trusts 8,437 *
Peter Sterling 286,874 *
(as a Group) ---------- -
c/o W. Robert Cotham 14,818,489(5) 31.6%
2600 First City Bank Tower
Fort Worth, Texas 76102
GeoCapital Corporation 3,675,829 7.9%
Barry K. Fingerhut 372,600 *
Irwin Lieber 140,062 *
Seth Lieber 5,062 *
Jonathan Lieber 5,062 *
(as a group) ---------
767 Fifth Avenue - 45th Floor 4,198,615(6) 9.0%
New York, New York 10153
Gary L. Mead 2,396,250(7) 5.1%
112 East Pecan
San Antonio, Texas 78205
</TABLE>
(Table continued on following page)
6
<PAGE> 9
<TABLE>
<S> <C> <C>
AEW Partners, Inc. 5,289,801(8) 10.2%
225 Franklin Street
Boston, Massachusetts 02110
FMR Corp. 3,626,415(9) 7.8%
82 Devonshire Street
Boston, Massachusetts 02109
Putnam Investments, Inc. 2,923,632(10) 6.2%
One Post Office Square
Boston, Massachusetts 02109
First Interstate Bancorp 2,755,554(11) 5.9%
633 West Fifth Street
Los Angeles, California 90071
</TABLE>
___________________
* Less than one percent (1%)
(1) Mr. Taylor beneficially owns 40,500 shares which he presently has the
right to acquire under the Company's 1984 Stock Option Plan and 20,250
shares which he has the right to acquire on May 26, 1995 under the
Company's 1984 Stock Option Plan. In addition, Mr. Taylor may be deemed
to beneficially own the shares beneficially owned by Thomas M. Taylor &
Co., The Airlie Group, L.P. and an irrevocable trust for the benefit of
Mr. Taylor's son. See footnote (7) on page 10.
(2) Perry R. Bass solely in his capacities as sole trustee and as one of two
trustors has sole voting and dispositive power with respect to the
2,861,392 shares owned by The Bass Management Trust.
(3) The information reflected for such groups or beneficial owners is based
on statements and reports filed with the Securities and Exchange
Commission and furnished to the Company by such persons, and information
supplied relative to the Registration Rights Agreement dated, March 9,
1993, between the Company and certain of the above persons. No
independent investigation concerning the accuracy thereof has been made
by the Company.
(4) A March 26, 1993 Schedule 13D amendment provided to the Company reflects
that William P. Hallman, Jr., because of his position as the trustee,
also has "sole voting power" and "sole dispositive power" with respect
to the following trusts: (i) Annie R. Bass Grandson's Trust for Sid R.
Bass with respect to 536,287 shares, (ii) Annie R. Bass Grandson's Trust
for Lee M. Bass with respect to 536,287 shares, (iii) Donald J.
McNamara, III Trust with respect to 1,012 shares and (iv) Peter Sterling
Trusts with respect to 8,437 shares.
(5) Thomas M. Taylor, Sid R. Bass, Lee M. Bass and other investors,
including the persons named above, have filed a Schedule 13D Statement,
amended through March 26, 1993, with the Securities and Exchange
Commission. The persons making the Schedule 13D filing have stated that
neither the fact of such filing nor anything contained therein shall be
deemed admission by them that a "group" exists within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934.
(6) A February 9, 1995 Schedule 13G, combined with a February 1995 Form 4
provided to the Company by GeoCapital Corporation ("GeoCapital")
reflects that (i) GeoCapital is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, which has no voting
power with respect to the shares, but which has "sole dispositive power"
with respect to 3,675,829 shares and (ii) Mr. Fingerhut is a principal
stockholder of GeoCapital and directly owns 254,475 shares in his own
name. Additionally, there are 16,875 shares held by Mr. Fingerhut's
wife directly and 40,500 shares held by his wife as custodian under the
Uniform Gift to Minors Act. Mr. Fingerhut also beneficially owns 40,500
shares which he presently has the right to acquire under the Company's
1984 Stock Option Plan and 20,250 shares which he has the right to
acquire on May 27, 1995 under the Company's 1984 Stock Option Plan.
Mr. Lieber is a principal stockholder of GeoCapital and directly owns
140,062 shares, of which 1,500 are held in trust for his daughter.
Messrs. Lieber and Fingerhut may be deemed to be indirect beneficial
owners of the 3,675,829 shares which GeoCapital is deemed to own
beneficially.
7
<PAGE> 10
(7) A December 1994 Form 5 provided to the Company reflects that Mr. Mead
has "sole voting power" and "sole dispositive power" with respect to (i)
202,500 shares which he beneficially owns and (ii) 2,193,750 shares
which he presently has the right to acquire pursuant to a non-qualified
stock option agreement dated March 3, 1992.
(8) The shares shown as beneficially owned by AEW Partners, L. P. ("AEW
Partners") are issuable upon conversion of 40 units of limited
partnership interest held by AEW Partners in La Quinta Development
Partners, L.P., a Delaware limited partnership ("LQDP"). Such shares
have been considered to be outstanding for purposes of calculating the
percent of class.
(9) A February 13, 1995 Schedule 13G provided to the Company reflects that
FMR Corp. ("FMR") beneficially owns 3,626,415 shares of common stock.
Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR and an investment adviser registered under Section 203
of the Investment Advisers Act of 1940, is the beneficial owner of
2,624,906 shares as a result of acting as investment adviser to several
investment companies registered under Section 8 of the Investment Company
Act of 1940, and as a result of acting as sub-advisor to Fidelity
American Special Situations Trust ("FASST"). FMR through its control of
Fidelity has no voting power with respect to the shares, but has "sole
dispositive power" with respect to 2,596,856 shares. FMR through its
control of Fidelity and FASST has sole power to vote and to dispose of
28,050 shares held by FASST. Fidelity International Limited ("FIL") is
the beneficial owner of 33,350 shares, which includes 28,050 shares of
common stock held by FASST. FIL has sole power to vote and dispose of
5,300 of these shares. Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR and a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, is the beneficial owner of 996,209
shares and has "sole voting power" with respect to 914,972 and no power
to vote or to direct the voting of 81,237 shares.
(10) A January 30, 1995 Schedule 13G provided to the Company reflects that
Putnam Investments, Inc., a wholly-owned subsidiary of Marsh & McLennan
Companies, Inc., and an investment adviser registered under Section 203
of the Investment Advisers Act of 1940, is the beneficial owner of
2,923,632 as a result of wholly owning two registered investment
advisers: Putnam Investment Management, Inc. ("Putnam Management") and
The Putnam Advisory Company, Inc., ("Putnam Advisory") and as a result
has "shared voting power" with respect to 197,275 shares. Putnam
Management is the beneficial owner of 2,590,975 shares but has no voting
power or dispositive power with respect to the shares. Putnam Advisory
is the beneficial owner of 332,657 shares and has "shared voting power"
with respect to 197,275 shares.
(11) A February 10, 1995 Schedule 13G provided to the Company reflects that
First Interstate Bank is a Parent Holding Company in accordance with
Rule 13d-1(b)(ii)(G) with beneficial ownership of 2,755,554 shares and
has (i) "sole voting power" with respect to 1,530,068 shares, (ii) "sole
dispositive power" with respect to 2,416,200 shares and (iii) "shared
dispositive power" with respect to 339,354 shares.
The information reflected for such groups or beneficial owners is based on
statements and reports filed with the Securities and Exchange Commission and
furnished to the Company by such groups. No independent investigation
concerning the accuracy thereof has been made by the Company.
8
<PAGE> 11
SECURITY OWNERSHIP OF MANAGEMENT
Based upon information received upon requests from the persons
concerned, each current director and nominee for director, each executive
officer named in the Summary Compensation Table and all directors and executive
officers of the Company as a group owned beneficially as of March 17, 1995, the
number and percentage of outstanding shares of Common Stock of the Company
indicated in the following table:
<TABLE>
<CAPTION>
Names of Individual Shares Beneficially Owned
or Identity of Group as of March 17, 1995 Percent of Class
-------------------- -------------------- ----------------
<S> <C> <C>
CURRENT DIRECTORS:
-----------------
Joseph F. Azrack 5,330,301(1) 10.2%
William H. Cunningham 40,500(2) *
Barry K. Fingerhut 4,048,429(3) 8.6%
Donald J. McNamara 414,112(4) *
Gary L. Mead 2,396,250(5) 5.1%
Peter Sterling 286,875(6) *
Thomas M. Taylor 4,412,104(7) 9.4%
OTHER NAMED
------------
EXECUTIVE OFFICERS:
------------------
Michael A. Depatie 133,129(8) *
William C. Hammett, Jr. 124,169(9) *
Steven T. Schultz 118,754(10) *
Thomas W. Higgins 95,129(11) *
All directors and executive
officers as a group 17,399,752(12) 37.2%
</TABLE>
- ---------
*Less than one percent (1%)
(1) The shares shown as beneficially owned by Mr. Azrack include (i)
5,289,801 shares of the Company's Common Stock which are issuable upon
conversion of 40 units of limited partnership interest held by AEW
Partners, L.P. ("AEW Partners") in La Quinta Development Partners,
L.P., a Delaware limited partnership ("LQDP"), (ii) 20,250 shares
which he presently has the right to acquire under the Company's 1984
Stock Option Plan and (iii) 20,250 shares which he has the right to
acquire on May 27, 1995 under the Company's 1984 Stock Option Plan.
Mr. Azrack is a director, officer and shareholder of AEW, Inc., the
sole general partner of AEW Partners. Mr. Azrack disclaims beneficial
ownership of any shares of Common Stock of the Company that may be
deemed beneficially owned by AEW Partners pursuant to its conversion
option granted in the agreement of limited partnership of LQDP.
(2) The shares shown as beneficially owned by Dr. Cunningham represent (i)
20,250 shares which he presently has the right to acquire under the
Company's 1984 Stock Option Plan and (ii) 20,250 shares he has the
right to acquire on May 27, 1995 under the Company's 1984 Stock Option
Plan.
(3) The shares shown as beneficially owned by Mr. Fingerhut include (i)
254,475 shares owned beneficially by Mr. Fingerhut, (ii) 16,875
shares held by his wife, (iii) 40,500 shares held by his spouse as
custodian under the Uniform Gift to Minors Act, (iv) 3,675,829 shares
that Mr. Fingerhut may be deemed to own beneficially because of his
position as Senior Vice President and principal stockholder of
GeoCapital Corporation, (v) 40,500 shares he presently has the right
to acquire under the Company's 1984 Stock Option Plan and (vi) 20,250
shares he has the right to acquire on May 27, 1995 under the Company's
1984 Stock Option Plan. Mr. Fingerhut disclaims beneficial ownership
of the 3,675,829 shares deemed beneficially owned by GeoCapital
Corporation. Mr. Fingerhut resigned from the Board on March 31, 1994.
9
<PAGE> 12
(4) The shares shown as beneficially owned by Mr. McNamara include (i)
40,500 shares which he presently has the right to acquire under the
Company's 1984 Stock Option Plan and (ii) 20,250 shares he has the
right to acquire on May 27, 1995 under the Company's 1984 Stock Option
Plan.
(5) The shares shown as beneficially owned by Mr. Mead include 2,193,750
shares which he presently has the right to acquire pursuant to a
non-qualified stock option agreement dated March 3, 1992. Excluded
are 506,250 shares which Mr. Mead would have the right to acquire
under the 1984 Stock Option Plan upon vesting in accordance with
target stock prices having been achieved for 20 consecutive trading
days.
(6) The shares shown as beneficially owned by Mr. Sterling include (i)
40,500 shares which he presently has the right to acquire under the
Company's 1984 Stock Option Plan and (ii) 20,250 shares which he has
the right to acquire on May 27, 1995 under the Company's 1984 Stock
Option Plan.
(7) The shares shown as beneficially owned by Mr. Taylor (i) include
2,322,979 shares that Mr. Taylor may be deemed to own beneficially
because of his position as the President, sole director and principal
shareholder of Thomas M. Taylor & Co., (ii) 2,025,000 shares that Mr.
Taylor may be deemed to own beneficially because of his position as
President and principal shareholder of Thomas M. Taylor & Co., which
is one of two general partners of EBD L.P., which is the sole general
partner of the Airlie Group L.P., (iii) 3,375 shares owned by an
irrevocable trust for the benefit of his son, (iv) 40,500 shares which
he presently has the right to acquire under the Company's 1984 Stock
Option Plan and (v) 20,250 shares he has the right to acquire on May
27, 1995 under the Company's 1984 Stock Option Plan. Mr. Taylor's
mother, Annette B. Taylor, serves as trustee of the aforesaid trust
for Mr. Taylor's son. Mr. Taylor disclaims beneficial ownership of
the shares owned by such trust.
(8) The shares shown as beneficially owned by Mr. Depatie, Senior Vice
President-Finance of the Company, include (i) 13,500 shares held by a
trust for which he is sole trustee and beneficiary, (ii) 875 shares
that Mr. Depatie may be deemed to own beneficially because of his
position as general partner in two partnerships and (iii) 118,754
shares which he has the right to acquire under the Company's 1984
Stock Option Plan. Excluded from this table are the unvested portion
of stock options granted in 1992, as well as 45,000 shares which Mr.
Depatie would have the right to acquire under the 1984 Stock Option
Plan upon vesting in accordance with target stock prices having been
achieved for 20 consecutive trading days.
(9) The shares shown beneficially owned by Mr. Hammett, Senior Vice
President-Accounting & Administration of the Company, include (i)
2,445 shares owned beneficially by Mr. Hammett, (ii) 2,970 shares held
by his wife and (iii) 118,754 shares which he has the right to acquire
under the Company's 1984 Stock Option Plan. Excluded from this table
are the unvested portion of stock options granted in 1992, as well as
45,000 shares which Mr. Hammett would have the right to acquire under
the 1984 Stock Option Plan upon vesting in accordance with target
stock prices having been achieved for 20 consecutive trading days.
Mr. Hammett disclaims beneficial ownership of the 2,970 shares held by
his wife.
(10) The shares shown beneficially owned by Mr. Schultz, Senior Vice
President-Development of the Company reflect 118,754 shares which he
has the right to acquire under the Company's 1984 Stock Option Plan.
Excluded from this table are the unvested portion of stock options
granted in 1992, as well as 45,000 shares which Mr. Schultz would have
the right to acquire under the 1984 Stock Option Plan upon vesting in
accordance with target stock prices having been achieved for 20
consecutive trading days.
(11) The shares shown beneficially owned by Mr. Higgins, Senior Vice
President-Operations reflect 84,129 shares which he has the right to
acquire under the Company's 1984 Stock Option Plan. Excluded from this
table are the unvested portion of stock options granted in 1992, as
well as 33,750 shares which Mr. Higgins would have the right to
acquire under the 1984 Stock Option Plan upon vesting in accordance
with target stock prices having been achieved for 20 consecutive
trading days.
10
<PAGE> 13
(12) The holdings shown for all directors and executive officers
as a group include 2,969,141 shares which the directors and executive
officers have the right to acquire under the Company's 1984 Stock
Option Plan and Mr. Mead's Non-Qualified Stock Option Agreement.
Shares acquirable pursuant to stock options, which are exercisable
either within sixty (60) days after March 17, 1995, in the case of
executive officers, or on or before May 27, 1995, in the case of
non-employee directors are shown as being beneficially owned by
members of such group in the above table and have been considered to
be outstanding for purposes of calculating the percentage ownership of
all directors and executive officers as a group.
All directors and executive officers as a group beneficially own a total
of 9,140,809 shares (19.5%) of the Company's outstanding Common Stock excluding
the 2,969,141 shares referred to in note (12) above which certain directors and
executive officers have the right to acquire under the Company's Stock Option
Plans and excluding the 5,289,801 shares referred to in note (1) above which
AEW Partners has the right to acquire under the provisions of the LQDP
partnership agreement.
Except as reflected in the notes to the preceding table, each nominee for
director owns directly the number of shares indicated in the table and has the
sole power to vote and dispose of such shares.
11
<PAGE> 14
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") is composed entirely of independent outside directors. The
Committee is responsible for setting and administering the policies which
govern both annual compensation and stock ownership programs.
BASE SALARY
The Company has maintained the philosophy that the compensation of its
executive officers and other key employees should be directly linked to
operating performance. Toward this end, base salaries of the executive
officers were set at or below median levels based upon comparative industry
data, while setting bonus payouts based upon performance. Base salaries for
new management employees are determined by evaluating the responsibilities of
the respective position and the individual's experience, and by reference to
the competitive marketplace for management talent. Annual salary adjustments
are determined by evaluating the performance of the Company, the performance of
the respective executive, other incentive based compensation and the
competitive marketplace. Significant emphasis is placed upon stock option
grants based upon the Company's performance to reward its officers and key
employees. For 1994, based on the foregoing factors, the previous grants of
stock options, and a review made in December 1993, the Committee determined
that neither Mr. Mead nor the four next highest paid executives would receive
an increase in base salary. In keeping with this philosophy on management
compensation, increases in salary for Company personnel generally were
maintained within a targeted average increase of three and one half percent for
1995.
STOCK OPTIONS
The Company's 1984 Stock Option Plan ("1984 Plan") and other
non-qualified stock options issued by the Board are utilized to instill long
term incentives on the executives' part to continue the growth in shareholder
value. The 1984 Plan provides for the issuance of a maximum of 2,600,000
shares of the Company's Common Stock upon the exercise of stock options granted
under the plan, which amount is subject to adjustment upon the occurrence of
certain events. Adjusted for the 3-for-2 stock splits in the form of stock
dividends effected in October 1993, March 1994 and October 1994, this total is
equal to 8,775,000 shares. All key employees of the Company, as determined by
the Committee, persons engaged to be key employees of the Company and
non-employee directors of the Company are eligible to receive options under the
1984 Plan. Non-employee directors of the Company are only eligible to receive
grants of options under the 1984 Plan according to the special terms,
conditions and rules established under the 1984 Plan for non-employee directors
(See section entitled "Compensation of Directors"). In 1992, members of the
new management team, including the Chief Executive Officer ("CEO") and the next
four highest paid executive officers, were granted stock options upon their
initial employment with the Company and smaller grants in December, 1992 which
provide considerable incentive in the long term growth of the Company. The
Company places great emphasis on these stock options as long term incentives
over increases in base compensation. On March 11, 1994, additional stock
option grants totaling 362,500 shares (pre-March 15 split) under the Plan were
made to certain officers, exercisable upon a post-October 25, 1994 stock split
price of the Company's Common Stock averaging $26.667 per share for 20
consecutive trading days prior to March 11, 1997. In the event this condition
is not met, the grants will vest in 9 1/2 years, subject to the conditions of
the 1984 Plan. Additional grants were made to non-officer, key management
person on February 24, 1994 to provide further incentives for these individuals
in the continued growth in shareholder value.
INCENTIVE BONUS
The Company's incentive compensation plan rewards officers and other key
employees of the Company who are in a position to make substantial
contributions to the growth and profitability of the Company. Continuance of
the plan and the granting of bonuses are based upon Company performance
relative to the business plan. In 1994, 50% of the executive officers' bonuses
were based upon meeting financial targets set by the Committee at the beginning
of the year. For 1994, the Company achieved in excess of all of these
financial targets. The remaining 50% of the officer bonus was discretionary,
to be based upon individual performances as determined by the individual
officer's performance and contributions to the Company. Outstanding
performance could result in a bonus payment that exceeded an individual's
target opportunity. The target bonus potential ranges from 50% of base salary
for Mr. Mead,
12
<PAGE> 15
40% for Senior Vice Presidents and 35% for Vice Presidents, with additional
discretion on the Committee's part to grant additional awards from a pool equal
to 20 percent of the target potential bonus for exceeding the Company's
financial targets. Awards in 1994 reflected such incremental increases for
exceeding these performance objectives. Bonus awards made to the CEO and the
next four highest paid executive officers are found in the "Cash Compensation"
summary under Executive Compensation. During the year ended December 31, 1994,
bonuses and awards under incentive compensation plans accruing to all other
participating officers and key employees of the Company as a group, amounted to
$1,181,559. Plan participants for the year ended December 31, 1994 included 22
officers of the Company and 53 non-officer, key management persons.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Mead, along with most officers of the Company, was granted additional
stock options on March 11, 1994. These additional options were granted in
recognition of the Company's achievements in enhancing shareholder value in
1993, particularly through the reimaging of all the Company's properties. In
addition, these grants served further to encourage the CEO and other officers
to continue the growth in shareholder value. Mr. Mead received stock option
grants totaling 225,000 shares (pre-March 15, 1994 split), exercisable upon the
post-October 25, 1994 stock split price of the Company's Common Stock averaging
$26.667 per share for 20 consecutive trading days prior to March 11, 1997. In
the event this condition is not met, the grants will vest in 9 1/2 years,
subject to the conditions of the 1984 Plan. The CEO was paid a bonus of
$250,000 for 1994, which exceeded his target bonus potential of 50% of base
salary. The Committee determined that the Company's officers and key
management personnel would receive enhanced bonus potential in 1994 in light of
the Company's having exceeded its financial targets for the year. Mr. Mead's
bonus took into account revenue increases of over 33 percent over 1993, EBITDA
increase of 43 percent over the prior year and an increase in occupancy of
five percentage points over the prior year. Additionally, significant advances
in the Company's future potential were achieved through acquisitions and in the
creation of new growth vehicles. These achievements demonstrated significant
enhancements to shareholder value. Incentive compensation in 1995 and beyond
will be based upon the Company's performance against its business plan, as
stated above. For 1994, the CEO's base salary of $350,000 was unchanged from
1993. In future years, Mr. Mead's base salary is subject to increases based
upon Company performance as determined by the Committee, with emphasis being on
bonuses and other incentives which serve to enhance the long term growth of the
Company.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
The 1993 Omnibus Budget Reconciliation Act ("OBRA") became law in August
1993. Under the new law, income tax deductions of publicly-traded companies in
tax years beginning on or after January 1, 1994 may be limited to the extent
total compensation (including base salary, annual bonus, stock option
exercises, and non-qualified benefits) for certain executive officers exceeds
$1 million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. Under OBRA, the deduction limit
does not apply to payments which qualify as "performance-based." To qualify
as "performance-based," compensation payments must be based solely upon the
achievement of objective performance goals and made under a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by stockholders, and the
compensation committee must certify that the performance goals were achieved
before payments can be made.
In particular, stock options will satisfy the performance-based exception
if awards are made by a qualifying compensation committee, the plan sets the
maximum number of shares that can be granted to an employee within a specified
period, and the compensation is based solely on an increase in the stock price
after the grant date (i.e., the option exercise price is equal to or greater
than the fair market value of the stock subject to the award on the grant
date). The 1984 Plan was amended by stockholders at the 1994 Annual Meeting of
Shareholders in part to provide for an annual maximum limitation of 350,000 on
the number of shares subject to options which may be granted to any individual
employee under the 1984 Plan.
In structuring the Company's compensation programs and in determining the
appropriateness of awards, the Committee's primary consideration is the
achievement of the Company's strategic business goals, taking into
consideration competitive practice, market economics and other factors. To the
extent fulfilling these goals is consistent with favorable tax treatment, the
Committee intends to design the Company's compensation programs to conform with
the OBRA legislation and related regulations so that total compensation paid to
any employee will not exceed $1 million in any one year, except for awards as
part of executive compensation that are performance-based
13
<PAGE> 16
and thus deductible by the Company. However, this commitment does not rule out
the ability to make awards or to approve compensation that may not qualify for
the compensation deduction, if there exists sound corporate reasons for so
doing.
COMPENSATION AND STOCK OPTION COMMITTEE
Dr. William H. Cunningham, Chairman
Barry K. Fingerhut
Thomas M. Taylor
COMPARISON OF FIVE YEAR CUMULATIVE RETURNS AMONG
LA QUINTA INNS, INC.,
DOW JONES EQUITY INDEX AND LODGING PEER GROUP
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
LaQuinta 100 71.97 87.98 121.40 321.40 440.05
Lodging Index* 100 39.21 51.74 61.28 117.07 123
Dow Jones 100 96.07 127.24 138.19 151.93 153.01
</TABLE>
Note: Total returns assume reinvestment of dividends.
* This peer group consists of Hilton Hotels Corporation and Marriott
Corporation from 1989 to October 1993, and thereafter Hilton Hotels
Corporation, Host Marriott Corporation and Marriott International.
14
<PAGE> 17
SUMMARY COMPENSATION
CASH COMPENSATION
The following table contains information with respect to compensation for
services rendered in all capacities to the Company during the year ended
December 31, 1994, for each of the five most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Other Securities
Annual Underlying All Other
Name/position Year(a) Salary Bonus(b) Compensation(c) Options/SARs Compensation(d)
------------- ------- ------ -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Mead 1994 $350,000 $250,000 $ -- 506,250(e) $ 3,968
President and CEO 1993 350,000 160,300 -- -- 4,328
1992 281,363 175,000 191,181 2,193,750(e) 1,740
William C. Hammett, Jr. 1994 $200,000 $ 88,000 $ -- 45,000(f) $ 2,088
Senior Vice President 1993 200,000 68,280 -- -- 2,323
Accounting & 1992 90,000 32,832 105,082 337,500(f) 1,044
Administration
Michael A. Depatie 1994 $200,000 $ 88,000 $ -- 45,000(f) $ 792
Senior Vice President 1993 200,000 68,280 -- -- 2,203
Finance 1992 83,077 30,306 48,358 337,500(f) 356
Steven T. Schultz 1994 $175,000 $ 88,000 $ -- 45,000(f) $ 1,827
Senior Vice President 1993 175,000 64,120 -- -- 2,020
Development 1992 82,500 33,000 43,149 337,500(f) 861
Thomas W. Higgins 1994 $175,000 $ 77,000 $ -- 33,750(g) $ 1,827
Senior Vice President 1993 175,000 57,120 -- -- 2,448
Operations 1992 77,598 31,039 76,882 313,875(g) 974
</TABLE>
- ----------
(a) Each of the persons listed in the table above became executive officers
and employees of the Company during 1992. Mr. Mead on March 3, 1992, Mr.
Higgins on June 18, 1992, Mr. Hammett and Mr. Schultz on June 22, 1992,
and Mr. Depatie on July 14, 1992.
(b) These amounts are the cash awards under the Incentive Compensation Plan
previously described.
(c) Other Annual Compensation for Messrs. Mead, Hammett, Depatie, Schultz and
Higgins consists of personal benefits including personal use of Company
automobiles, moving, relocation and closing costs on the purchase of
homes, and in certain cases, income tax preparation. For the years 1993
and 1994, amounts of Other Annual Compensation for each individual named
above aggregated to less than (a) 10% of the total annual salary and bonus
for each individual or (b) $50,000, whichever was lower. Accordingly, no
such amounts are included in the Table.
(d) All Other Compensation for named individuals consists of the value of
life insurance premiums.
(e) Mr. Mead received the option to acquire 650,000 shares of Common Stock at
$15.00 per share on March 3, 1992. Options for 100,000 shares vested on
March 3, 1992 and March 3, 1993, respectively. On June 8, 1993, the
remaining 450,000 options vested (see Non-Qualified Stock Options Granted
to Mr. Mead). Adjusted for stock splits in the form of stock dividends
occurring on October 1, 1993, March 15, 1994 and October 25, 1994, the
total of these options is 2,193,750, with an adjusted exercise price of
$4.444. On March 11, 1994, Mr. Mead received additional options for the
purchase of 225,000 shares (506,250 post-March 1994 and October 1994
splits) which vest upon a post October 25, 1994 stock split price of the
Company's Common Stock averaging $26.667 per share for 20 consecutive
trading days prior to March 11, 1997 at an exercise price of $17.944.
(f) Messrs. Hammett, Depatie and Schultz each received the option to purchase
85,000 shares of Common Stock at $17.687 per share on June 5, 1992. On
December 16, 1992, they received the option to acquire an additional
15
<PAGE> 18
15,000 shares of Common Stock at $19.750 per share. Of these grants,
one-half were exercisable at December 31, 1994. Additionally, on March
11, 1994, they received new grants to purchase 20,000 (45,000 post-March
1994 and October 1994 splits) which vest upon a post October 25, 1994
stock split price of the Company's Common Stock averaging $26.667 per
share for 20 consecutive trading days prior to March 11, 1997, at an
exercise price of $17.944. Adjusted for the stock splits in the form of a
stock dividend on October 1, 1993, March 15, 1994 and October 25, 1994,
the adjusted total of such options was 382,500, of which 168,750 were
exercisable at December 31, 1994 (143,437 at an adjusted price of $5.241
and 25,313 at an adjusted price of $5.852).
(g) Mr. Higgins received the option to purchase 60,000 shares of Common
Stock at $17.687 per share on June 5, 1992. On September 17, 1992, he
received the option to acquire an additional 25,000 shares of Common
Stock at $17.87 per share. On December 16, 1992, he received the
option to acquire 15,000 shares of Common Stock at $19.750 per share.
On August 3, 1993, Mr. Higgins exercised options with respect to 7,000
shares (23,625 post-October 1994 split) granted pursuant to his stock
option of June 5, 1992. Of the aforesaid remaining grants, one-half
were exercisable at December 31, 1994. On March 11, 1994, he received
grants for the purchase of 15,000 shares (33,750 post-March 1994 and
October 1994 splits) which vest upon a post October 25, 1994 stock split
price of the Company's Common Stock averaging $26.667 per share for 20
consecutive trading days prior to March 11, 1997, at an exercise price of
$17.944. Adjusted for the stock splits in the form of a stock dividend
on October 1, 1993, March 15, 1994 and October 25, 1994, the adjusted
total of such options was 347,625 of which 145,130 were exercisable at
December 31, 1994 (77,625 at an adjusted price of $5.241; 42,190 at an
adjusted price of $5.296 and 25,315 at an adjusted price of $5.852).
PENSION PLAN TABLE
The Company has, since 1969, maintained a non-contributory defined
benefit pension plan (the "Retirement Plan"), which is a qualified plan under
Federal income tax laws, for all of its full-time employees who have attained
the age of 21, which is designed to provide annual retirement benefits to
employees, subject to age and period-of-employment conditions. During the
fiscal year ended May 31, 1989, the Board established a Supplemental Executive
Retirement Plan for highly compensated employees, which constitutes a
non-qualified plan under Federal income tax laws (the "SERP").
Using estimated Social Security of $14,388 (the Estimated Annual Primary
Insurance Amount for an age 65 retiree in 1995 with maximum Social Security
earnings in all years), the estimated annual retirement benefits under both the
Retirement Plan and the SERP are set forth in the following table:
<TABLE>
<CAPTION>
Years of Service at Retirement
------------------------------
Average
Annual
Compensation 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
175,000 70,100 93,500 93,500 93,500 93,500
200,000 81,400 108,500 108,500 108,500 108,500
225,000 92,600 123,500 123,500 123,500 123,500
250,000 103,900 138,500 138,500 138,500 138,500
300,000 126,400 165,500 168,500 168,500 168,500
350,000 148,900 198,500 198,500 198,500 198,500
400,000 171,400 228,500 228,500 298,500 298,500
450,000 193,900 258,500 258,500 258,500 258,500
500,000 216,400 288,500 288,500 288,500 288,500
550,000 238,900 318,500 318,500 318,500 318,500
600,000 261,400 348,500 348,500 348,500 348,500
650,000 283,900 378,500 378,500 378,500 378,500
700,000 306,400 408,500 408,500 408,500 408,500
750,000 328,900 438,500 438,500 438,500 438,500
800,000 351,400 468,500 468,500 468,500 468,500
</TABLE>
16
<PAGE> 19
"Compensation" under both the Retirement Plan and the SERP includes normal
base pay plus overtime and bonus during a plan year, but not compensation
resulting from the exercise of stock options or deferred compensation. The
table set forth above illustrates estimated benefits payable determined on a
straight-life annuity basis. There are no offsets in the amounts above for
Social Security benefits.
The years of credited service under the Company's Retirement Plans for the
persons named in the Summary Compensation Table are as follows: Mr. Mead,
3 years; Mr. Hammett, 3 years; Mr. Depatie, 2 years; Mr. Schultz, 3 years and
Mr. Higgins, 3 years.
STOCK OPTIONS
The following table summarizes as to each of the five most highly
compensated executive officers of the Company, the number and terms of stock
options granted during the year ended December 31, 1994:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
of Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
----------------- ---------------
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Price$/ Expiration
Name Granted Fiscal Year Share Date 5% 10%
- ---- ------- ------------ ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary L. Mead 506,250 40.38% $17.944 03/11/2004 $5,712,981 $14,477,788
William C. Hammett, Jr. 45,000 3.59% 17.944 03/11/2004 507,820 1,286,915
Michael A. Depatie 45,000 3.59% 17.944 03/11/2004 507,820 1,286,915
Steven T. Schultz 45,000 3.59% 17.944 03/11/2004 507,820 1,286,915
Thomas W. Higgins 33,750 2.69% 17.944 03/11/2004 380,865 1,286,915
</TABLE>
These grants are exercisable upon the post-March 15, 1994 stock split
price of the Company's Common Stock averaging $40 per share ($26.667 taking
into account the October 25 stock split) for 20 consecutive trading days prior
to March 11, 1997. In the event this condition is not met, the grants will
vest in 9 1/2 years, subject to the conditions of the 1984 Plan.
17
<PAGE> 20
The following table shows as to each of the five most highly compensated
executive officers of the Company the net value of securities or cash realized
(market value less exercise price) with respect to stock options
exercisable/unexercisable during the last year.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END STOCK OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Securities Underlying
Acquired Unexercised Value of Unexercised
on Value Stock Options In-the-Money Stock Options
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Gary L. Mead(1) -- -- 2,193,750/506,250 $ 37,005,272/$1,705,303
William C. Hammett(2) -- -- 168,750/213,750 $ 2,696,599/$2,848,182
Michael A. Depatie(2) -- -- 168,750/213,750 $ 2,696,599/$2,848,182
Steven T. Schultz(2) -- -- 168,750/213,750 $ 2,696,599/$2,848,182
Thomas W. Higgins(3) -- -- 145,125/202,500 $ 2,314,589/$2,807,966
</TABLE>
- ---------
(1) Mr. Mead received the option to acquire 650,000 shares of Common Stock at
$15.00 per share on March 3, 1992. Options for 100,000 shares vested on
March 3, 1992 and March 3, 1993, respectively. On June 8, 1993, the
remaining 450,000 options vested when the Company's Common Stock traded
at a predetermined level of $30 per share for a defined number of days.
Adjusted for stock splits in the form of stock dividends occurring on
October 1, 1993, March 15, 1994 and October 25, 1994, the total of these
options now amount to 2,193,750. The original exercise price of $15.00
per share was likewise adjusted to $4.444 taking the aforesaid three
stock splits into account. On March 11, 1994, Mr. Mead received
additional options for the purchase of 225,000 shares (506,250 post-March
1994 and October 1994 stock splits) exercisable upon a post October 25,
1994 stock split price of the Company's Common Stock averaging $26.667
per share for 20 consecutive trading days prior to March 11, 1997 for an
exercise price of $17.944.
(2) Messrs. Hammett, Depatie and Schultz received the option to purchase
85,000 shares of Common Stock at $17.687 per share on June 5, 1992. On
December 16, 1992, they received the option to acquire an additional
15,000 shares of Common Stock at $19.750 per share. Of these grants,
one-half were exercisable at December 31, 1994. On March 11, 1994, they
received new grants to purchase 20,000 (45,000 post-March 1994 and
October 1994 splits) exercisable upon a post October 25, 1994 stock split
price of the Company's Common Stock averaging $26.667 per share for 20
consecutive trading days prior to March 11, 1997, for an exercise price
of $17.944. Adjusted for the stock splits in the form of a stock
dividend on October 1, 1993, March 15, 1994 and October 25, 1994, the
adjusted total of such options was 382,500, of which 168,750 were
exercisable at December 31, 1994 (143,437 at an adjusted price of $5.241
and 25,313 at an adjusted price of $5.852).
(3) Mr. Higgins received the option to purchase 60,000 shares of Common Stock
at $17.687 per share on June 5, 1992. On September 17, 1992, he received
the option to acquire an additional 25,000 shares of Common Stock at
$17.87 per share. On December 16, 1992, he received the option to
acquire 15,000 shares of Common Stock at $19.750 per share. On August 3,
1993, Mr. Higgins exercised options with respect to 7,000 shares (23,625
post-October 1994 split) granted pursuant to his stock option of June 5,
1992. Of the aforesaid remaining grants, one-half were exercisable at
December 31, 1994. On March 11, 1994, he received grants for the
purchase of 15,000 shares (33,750 post-March 1994 and October 1994
splits) exercisable upon a post October 25, 1994 stock split price of the
Company's Common Stock averaging $26.667 per share for 20 consecutive
trading days prior to March 11, 1997, for an exercise price of $17.944.
Adjusted for the stock splits in the form of a stock dividend on October
1, 1993, March 15, 1994 and October 25, 1994, the adjusted total of such
options was 347,625, of which 145,130 were exercisable at December 31,
1994 (77,625 at an adjusted price of $5.241; 42,187 at an adjusted price
of $5.296 and 25,313 at an adjusted price of $5.852).
18
<PAGE> 21
The market value of underlying securities at exercise or year-end is based
on a price per share of $21.3125 which represents an average of the high and
low price of the Company's Common Stock on December 30, 1994, the last trading
day of the year.
COMPENSATION OF DIRECTORS
At the 1992 Annual Meeting of Shareholders held May 21, 1992, the
shareholders approved an amendment of the 1984 Stock Option Plan to permit
non-employee directors of the Company to receive stock options for 6,000 shares
of the Company's common stock annually in lieu of annual retainers and all
meeting fees presently paid by the Company to non-employee directors. These
options are granted annually following the election of directors at each Annual
Meeting of Shareholders. Outstanding options in lieu of directors' fees were
adjusted to 13,500 for 1994 to take into account the 3-for-2 stock splits in
the form of stock dividends of October 1993 and March 1994. Options granted to
directors are for ten-year terms at per share exercise prices of not less than
the fair market value of the Company's stock on the date of each annual grant
and are exercisable (except under the general acceleration provisions of the
1984 Plan upon an offer that results in the acquisition of 40% or more of the
Company's outstanding stock) on the anniversary date of each grant. Such
grants are in lieu of all annual retainers or directors' fees, and assist in
ensuring that directors will be closely aligned with the equity interests of
shareholders, thereby promoting the Board's continued focus on further
enhancement of shareholder value.
Pursuant to an amendment to the 1984 Plan approved by shareholders at the
Annual Meeting of Shareholders held on May 26, 1994, the number of shares
subject to the annual grants of stock options to non-employee directors
provided for under the 1984 Plan was increased from 6,000 shares to 13,500
shares, thereby reflecting the two 3-for-2 splits of the Company's Common Stock
(effected in the form of stock dividends) which occurred since the 1993 Annual
Meeting of Shareholders. The amendment also specifically provided that the
number of shares subject to the annual grants of stock options to non-employee
directors provided for under the 1984 Plan shall be adjusted in the future upon
the occurrence of certain events, such as stock splits and stock dividends.
Thus, the grants of 13,500 shares to non-employee directors in 1994 were
automatically increased to 20,250 shares.
In the event a non-employee director ceases to be a director of the
Company for any reason, any such option granted to such a director expires one
(1) year from the date that the person ceased to be a director of the Company.
Under the above amendments, the Board of Directors may grant an option for
20,250 shares to any new non-employee director elected to fill a vacancy on the
Board or newly created Board seat between Annual Meetings of Shareholders in
lieu of a retainer and meeting fees. Pursuant to the 1984 Plan, such
previously made grants are adjusted for stock splits, which would equate such
grants to 20,250 shares of the Company's common stock.
The provisions relating to the grant of stock options to non-employee
directors may not be amended more than once every six months, except to conform
the 1984 Plan to any changes that may have occurred in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
EMPLOYMENT ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH GARY L. MEAD
On March 3, 1992, the Board of Directors elected Gary L. Mead as
President and Chief Executive Officer of the Company. In connection therewith,
the Board determined it would be in the best interests of the Company to retain
Mr. Mead's services for a five-year period under the terms of an Employment
Agreement, dated as of March 3, 1992, between the Company and Mr. Mead (the
"President's Employment Agreement").
Under this agreement, Mr. Mead is entitled to receive an annual salary of
$350,000, and such greater annual salary after the first year of employment as
the Compensation and Stock Option Committee of the Board of Directors (the
"Committee") in its sole discretion may determine. Mr. Mead is further
entitled to participate in the Company's bonus or incentive compensation plans
as established by the Committee from time to time.
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The President's Employment Agreement also provides, among other things,
that (i) Mr. Mead is entitled to participate in all employee benefit plans that
the Company may establish for senior executives, (ii) a country club membership
in Mr. Mead's name, for his and his family's use, and (iii) severance pay in
the amount of three (3) times his highest annual salary as in effect during the
term of the agreement period, plus three (3) times the average of actual bonus
paid to Mr. Mead over the life of the agreement if the Company terminates Mr.
Mead's employment without cause or if he resigns for good reason. The Company
also purchased and paid premiums on a life insurance policy covering Mr. Mead
in the amount of $1 million at standard rates.
In the event that Mr. Mead's employment is terminated due to a "Change of
Control," the President's Employment Agreement provides that, in addition to
the payment of any accrued and unpaid amounts under benefit plans in which Mr.
Mead is a participant, he shall be entitled severance pay equal to three times
his highest annual salary during the term thereof, plus three times the average
annual bonus received during that term. Additionally, Mr. Mead's health
insurance coverage is to be continued for the greater of: one year following
termination or the lesser of the remaining term and three (3) years.
Additionally, in the event Mr. Head thereafter relocates to Dallas, Texas, the
Company shall pay the expenses therefor.
"Change of Control" in the President's Employment Agreement is defined
as: (1) the acquisition by any individual, entity or group of shares of the
Company's Common Stock resulting in beneficial ownership by such individual,
entity or group of 50 percent or more of the outstanding shares thereof, or (2)
if individuals comprising the Board of Directors on March 3, 1992 (the
"Incumbent Board") cease to constitute more than 50 percent of the members of
the Board, except for new members whose election or nomination was approved by
two-thirds of the Incumbent Board (but excluding those assuming office as a
result of an actual or threatened election contest), or (3) if shareholders of
the Company approve: (a) a merger or consolidation of Company, except one where
the voting securities of the Company outstanding immediately prior thereto
continue to represent more than 50 percent of the combined voting power of
voting securities of the Company or the surviving entity outstanding
immediately after such merger or consolidation, and which would result in Mr.
Mead having the same duties, title and responsibilities, or (b) a plan of
complete liquidation or disposition by Company or an agreement for the sale or
disposition by Company of all or substantially all of Company's assets.
In connection with his employment as President and Chief Executive Officer
of the Company, Mr. Mead was granted options to purchase up to 650,000 shares
of the Company's common stock at an exercise price of $15.00 per share pursuant
to the terms of a Non-Qualified Stock Option Agreement, dated as of March 3,
1992 (the "Option Agreement"). Giving effect to the 3-for-2 stock splits in
the form of stock dividends on October 1, 1993, March 15, 1994 and October 25,
1994, the total number of shares currently vested and exercisable by Mr. Mead
under the Non-Qualified Stock Option Agreement are 2,193,750, exercisable at an
adjusted option price of $4.444. The Company entered into a registration
rights agreement, dated March 3, 1992, under the terms of which the Company
agreed to register on behalf of Mr. Mead the offer and sale of shares of common
stock covered by the Option Agreement under the Securities Act of 1933, upon
certain limitations and conditions, of which all expenses of such registration
will be borne by the Company.
REPORTS OF BENEFICIAL OWNERSHIP BY INSIDERS
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the
"Act"), directors, certain officers and shareholders beneficially owning in
excess of 10% of the outstanding shares of the Company's common stock are
required to file various reports with the Securities and Exchange Commission
("SEC").
The Company believes that reports on Form 4 and Form 5 have been filed
with the appropriate regulatory authorities in a timely manner, or
confirmations of reportable transactions have been received by copy of the
respective Form 4 or Form 5 indicating compliance with the required filings in
a timely manner.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LA QUINTA DEVELOPMENT PARTNERS, L.P.
The Company and AEW Partners, L.P. ("AEW Partners") are parties to a
limited partnership agreement, dated March 21, 1990, which formed La Quinta
Development Partners, L.P. ("LQDP"). Joseph F. Azrack, who was elected as
director of the Company by the Board of Directors on September 17, 1992,
pursuant to that agreement, is the President and Chief Executive Officer of
AEW, Inc., which is the managing general partner of AEW Partners. Mr. Azrack
is also President and Chief Executive Officer of Aldrich, Eastman & Waltch,
Inc., an investment adviser registered with the SEC under Section 203 of the
Investment Advisers Act of 1940. Certain of the principals of Aldrich, Eastman
& Waltch, Inc. are the shareholders of AEW, Inc.
In connection with LQDP's formation, the Company contributed 18 of its
inns and assets related thereto (net of indebtedness of approximately
$34,000,000 assumed by the partnership), along with cash, aggregating to an
agreed value of $48,000,000 to the partnership for a 40% ownership interest
thereof. AEW Partners contributed cash and a promissory note aggregating to
$72,000,000 for a 60% interest in the partnership. The partnership agreement
of LQDP provides that the partnership will pay management, development, royalty
and chain service fees to the Company. The partnership agreement further
provides (i) that a right of first refusal is granted by the Company to LQDP on
the acquisition or development of properties until the first to occur of March
21, 1995 or until $150,000,000 is expended by the partnership; (ii) that a
principal of Aldrich, Eastman & Waltch, Inc. acceptable to the Company would
subsequently be nominated for election to the Company's Board of Directors (see
note (1) under the caption "Election of Directors"); and (iii) that AEW
Partners is granted an option by the Company, expiring December 31, 1998,
subject to vesting and adjustment upon certain occurrences, whereby AEW
Partners may convert 66 2/3% of its ownership interest in the partnership into
shares of the Company's Common Stock and/or cash, as the Company may elect,
commencing on December 31, 1991. The conversion option became 100% vested on
January 1, 1994. As part of the total consideration of this transaction, the
Company received a $3 million cash payment for the above mentioned option.
Under the terms of the partnership agreement, AEW Partners is also given
certain registration rights by the Company with respect to shares issuable upon
its conversion right.
During 1994, the Company received $8,672,000 in license, chain services
and management fees and received $2,960,000 in acquisition and conversion fees
from LQDP.
ADVANCEMENT OF LEGAL DEFENSE EXPENSES ON BEHALF OF CERTAIN DIRECTORS
In September 1993 a former officer of the Company filed suit against
the Company and certain of its directors and their affiliate companies.
Certain expenses for the named directors' defense are being advanced pursuant
to a written Indemnification Agreement between the Company and said
individuals, the Company's By-Laws and an action of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Cunningham, Taylor and Fingerhut comprised the Company's
Compensation and Stock Option Committee during 1994. All are non-employee
directors, and none are former officers of the Company or any of its
subsidiaries.
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors of the Company, adopting the recommendation of
its Audit Committee, has unanimously appointed the firm of KPMG Peat Marwick as
independent auditors to examine the combined financial statements of the
Company for the year ending December 31, 1995. This firm has acted as
independent accountants of the Company since 1971.
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A representative of KPMG Peat Marwick is expected to be present at the
Annual Meeting of Shareholders with the opportunity to make a statement, if
that person desires to do so, and is expected to be available to respond to
appropriate questions.
Approval of the appointment of independent accountants is not a matter
which is required to be submitted to a vote of shareholders, but the Board of
Directors considers it appropriate for the shareholders to express or withhold
their approval of the appointment. If shareholder approval should be withheld,
the Board of Directors would consider an alternative appointment for the
succeeding fiscal year.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" PROPOSAL NO. 2 TO APPROVE THE APPOINTMENT OF INDEPENDENT
ACCOUNTANTS. A majority of the votes cast is needed for approval.
SHAREHOLDER PROPOSALS
It is anticipated that the 1996 Annual Meeting of Shareholders will be
held in May 1996. Shareholder proposals intended to be presented at the 1996
Annual Meeting and included in the Company's proxy statement therefor must be
received in writing by the Secretary of the Company at its principal executive
offices, 112 East Pecan Street, Suite 200, San Antonio, Texas 78205, not later
than December 15, 1995.
OTHER MATTERS
No business other than the matters set forth in this Proxy Statement is
expected to come before the meeting, but should any other matters requiring a
vote of shareholders arise, including a question of adjourning the meeting, the
persons named in the accompanying proxy will vote thereon according to their
best judgment in the interests of the Company. In the event that any of the
nominees for director should withdraw or otherwise become unavailable for
reasons not presently known, the persons named as proxies in the accompanying
proxy will vote for other persons in their place in what they consider the best
interests of the Company.
The foregoing Notice and Proxy Statement are sent by order of the Board
of Directors.
JOHN F. SCHMUTZ
Vice President-General Counsel
and Secretary
April 10, 1995
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PROXY
LA QUINTA INNS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Gary L. Mead, Thomas M. Taylor and John F. Schmutz, or any of them,
with power of substitution to each, are hereby authorized to represent the
undersigned at the Annual Meeting of Shareholders of La Quinta Inns, Inc., to
be held in the 3rd Floor Conference Room of the Company's Corporate Offices,
112 East Pecan Street, San Antonio, Texas, on May 25, 1995.
To vote in accordance with the Board of Directors' recommendations just
sign the reverse side; no boxes need to be checked.
-----------
SEE REVERSE
(Continued and to be signed on other side) SIDE
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<PAGE> 26
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
This proxy will be voted as you direct below. In the absence of such direction,
it will be voted FOR Directors and FOR the Proposals below. As to such other
matters as properly may come before this meeting, this proxy will be voted by
the persons named herin according to their best judgment in the interest of the
Company.
<TABLE>
<S> <C>
1. THE ELECTION OF DIRECTORS FOR AGAINST ABSTAIN
DIRECTORS: J. AZRACK, W. CUNNINGHAM, 2. APPROVAL OF APPOINTMENT / / / / / /
D. McNAMARA, G. MEAD, P. STERLING AND OF INDEPENDENT ACCOUNT-
T. TAYLOR ANTS FOR 1995.
FOR WITHHELD 3. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS PROPERLY
/ / / / MAY COME BEFORE THE MEETING.
MARK HERE
FOR ADDRESS / /
CHANGE AND
/ /______________________________________ NOTE AT LEFT
{INSTRUCTION: To withhold authority to vote for
any individual nominee write that nominee's name
on the line provided above.}
NOTE: Please sign as name appears. Joint owners
should each sign. When signing as Attorney,
Executor, Administrator or Guardian, please give
full title as such. If signer is a corporation,
please sign with the full corporation name by
duly authorized officer or officers.
Signature: ___________________________ Date: ________
PLEASE DO NOT FOLD OR MUTILATE THIS CARD Signature: ___________________________ Date: ________
</TABLE>
