<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
[Insert La Quinta Logo Here]
April 10, 1996
Dear Shareholder:
It is my pleasure to invite you to attend the 1996 Annual Meeting of
Shareholders of La Quinta Inns, Inc. The meeting will be held on Thursday, May
23, 1996, 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 accompanying Notice of Annual Meeting and the Proxy Statement on
the following pages covers 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. On behalf of the management and directors
of La Quinta Inns, Inc., I want to thank you for your continued support and
confidence in 1995.
Sincerely,
Thomas M. Taylor
Chairman of the Board
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Solicitation and Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Election of Directors (Proposal No. 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Meetings and Committees of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 4
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Security Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Compensation of Executives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Report of Compensation and Stock Option Committee . . . . . . . . . . . . . . . . . . . . 9
Comparison of Five Year Cumulative Total Returns . . . . . . . . . . . . . . . . . . . . 13
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Stock Option Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Employment Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 19
Approval of Independent Public Accountants (Proposal No. 2) . . . . . . . . . . . . . . . . . . . 20
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 4
[Insert La Quinta Logo here]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 1996
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 23, 1996, at 10:00 a.m., for the purpose of considering and
acting upon the following:
1. The election of five (5) Directors of the Company;
2. The approval of the appointment of independent auditors for the
1996 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 1, 1996
(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, 1996
[Insert NYSE Symbol]
<PAGE> 5
[Insert La Quinta Logo Here]
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 23, 1996, 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, Boston EquiServe,
L.P., 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 may also 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, 1996.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of Common Stock of the Company at the close of
business on April 1, 1996 shall be entitled to vote at the meeting. There were
51,522,571 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 five (5) commencing with the 1996 Annual Meeting of Shareholders.
The Company's current directors are all nominated for election at the Annual
Meeting. Mr. Azrack resigned from the Board on June 13, 1995. Mr. McNamara
resigned from the Board on September 28, 1995. 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
plurality 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> 6
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. 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>
Dr. William H.
Cunningham 1985 52 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 Jefferson-
Pilot Corporation, LBJ Foundation Board, John
Hancock Advisors, Inc. and advisory director of
Texas Commerce Bank-Austin.
Gary L. Mead(1) 1992 48 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.
Peter Sterling 1991 54 Vice President and Chief Financial Officer of Sid R.
Bass, Inc. and Lee M. Bass, Inc. (diversified
investment firms) since September 1, 1983.
Kenneth T. Stevens 1995 44 Chairman and Chief Executive Officer of Banc One
Retail Group effective May 1, 1996; currently
President of Taco Bell Corporation since June 1994;
prior thereto, Executive Vice President-Marketing &
New Concepts from May 1993 to June 1994; Senior Vice
President-Treasurer of PepsiCo, Inc. from August
1992 to May 1993; Senior Vice President-Strategic
Planning from April 1991 to August 1992.
Thomas M. Taylor 1991 53 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 KirbY Corporation, TPI
Enterprises, Inc. and John Wiley & Sons, Inc.
</TABLE>
3
<PAGE> 7
(1) 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.
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, 1995. All directors, with the exception of Mr.
Stevens, 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. Mr. Stevens was appointed to the Board on December 7, 1995.
The Audit Committee of the Board is currently composed of Messrs.
Stevens 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 is currently
composed of Messrs. Cunningham (Chairman) 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 1984 Stock Option Plan is 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 1997, 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 12, 1996, in order for the nominee to be included in the Company's
Proxy Statement for the 1997 Annual Meeting of Shareholders.
4
<PAGE> 8
PRINCIPAL SHAREHOLDERS
The Company knows of no person who, as of March 15, 1996, 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 15, 1996 OF CLASS
- ------------------- -------------------- --------
<S> <C> <C>
Thomas M. Taylor & Co. 2,307,520 4.5%
Portfolio C Investors, L.P. 1,226,000 *
Thomas M. Taylor 81,000(1) *
Jason Michael Taylor Trust 3,375 *
Sid R. Bass, Inc. 2,765,305 5.4%
Lee M. Bass, Inc. 2,765,305 5.4%
The Bass Management Trust 2,861,392(2) 5.6%
The Airlie Group, L.P. 325,000 *
Annie R. Bass Grandson's Trust
for Lee M. Bass 537,537 *
Annie R. Bass Grandson's Trust
for Sid R. Bass 537,537 *
Douglas K. and Anne Marie Bratton 5,375 *
Douglas K. Bratton 1,687 *
Miles Ellis Bratton 1991 Trust 1,687 *
Bratton Family Foundation 10,000 *
Thomas W. Briggs 16,875 *
Michael N. Christodolou 10,125 *
W. Forrest Tempel 3,375 *
Donald J. McNamara, III Trust 1,012 *
Donald J. McNamara 434,362(3) *
William P. Hallman, Jr. 168,750(4) *
Peter Sterling Trusts 8,437 *
Peter Sterling 307,124(3) *
Cotham Family Partners, L.P. 5,000
-----------
(as a Group) 14,383,780(5) 27.9%
c/o W. Robert Cotham
2600 First City Bank Tower
Fort Worth, Texas 76102
GeoCapital Corporation 2,616,768(6) 5.1%
767 Fifth Avenue - 45th Floor
New York, New York 10153
Gary L. Mead 2,902,500(7) 5.6%
112 East Pecan
San Antonio, Texas 78205
</TABLE>
___________________
*Less than one percent (1%)
5
<PAGE> 9
(1) Mr. Taylor beneficially owns 60,750 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, 1996 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., Portfolio C Investors, L.P. and The Airlie Group, L.P. The
aggregate of all of such shares which Mr. Taylor may be deemed to
beneficially own is 3,939,520.
(2) Perry R. Bass, solely in his capacities as sole trustee and as one of
two trustees, has sole voting and dispositive power with respect to the
2,861,392 shares owned by The Bass Management Trust.
(3) Messrs. McNamara and Sterling each beneficially own 60,750 shares which
each has the right to acquire under the Company's 1984 Stock Option Plan
and 20,250 shares which each has the right to acquire on May 26, 1996
under the Company's 1984 Stock Option Plan.
(4) A January 19, 1996 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 listed in the table above: (i) Annie R.
Bass Grandson's Trust for Sid R. Bass with respect to 537,537 shares,
(ii) Annie R. Bass Grandson's Trust for Lee M. Bass with respect to
537,537 shares, (iii) Peter Sterling Trusts with respect to 8,437 shares
and (iv) Donald J. McNamara, III Trust with respect to 1,012 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 January 19, 1996, 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 an 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 15, 1996 Schedule 13G provided to the Company by GeoCapital
Corporation ("GeoCapital") reflects that 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 2,616,768 shares.
(7) Mr. Mead has "sole voting power" and "sole dispositive power" with
respect to (i) 202,500 shares which he beneficially owns, (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 (the "Mead
Stock Option Agreement") and (iii) 506,250 shares which he presently has
the right to acquire under the Company's 1984 Stock Option Plan.
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.
6
<PAGE> 10
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 15, 1996, 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 15, 1996 PERCENT OF CLASS
- -------------------- -------------------- ----------------
<S> <C> <C>
CURRENT DIRECTORS:
- -----------------
William H. Cunningham 60,750(1) *
Gary L. Mead 2,902,500(2) 5.6%
Peter Sterling 307,124(3) *
Kenneth T. Stevens -0- (4) *
Thomas M. Taylor 3,939,520(5) 7.6%
OTHER NAMED
- ------------
EXECUTIVE OFFICERS:
- ------------------
Michael A. Depatie 240,000(6) *
William C. Hammett, Jr. 253,540(7) *
Steven T. Schultz 225,625(8) *
Thomas W. Higgins 213,250(9) *
All directors and executive
officers as a group 8,142,310(10) 15.9%
</TABLE>
- ----------------
*Less than one percent (1%)
(1) The shares shown as beneficially owned by Dr. Cunningham represent (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 will have
the right to acquire on May 26, 1996 under the Company's 1984 Stock
Option Plan.
(2) The shares shown as beneficially owned by Mr. Mead include 2,193,750
shares which he presently has the right to acquire pursuant to the
Mead Stock Option Agreement and 506,250 shares which he presently has
the right to acquire under the Company's 1984 Stock Option Plan.
(3) The shares shown as beneficially owned by Mr. Sterling include (i)
60,750 shares which he presently has the right to acquire under the
Company's 1984 Stock Option Plan and (ii) 20,250 shares which he will
have the right to acquire on May 26, 1996 under the Company's 1984
Stock Option Plan.
(4) Mr. Stevens received a stock option grant of 10,125 shares at the time
he was appointed to the Board in December, 1995, which he will have
the right to acquire on December 8, 1996 under the Company's 1984
Stock Option Plan. These shares are not deemed to be beneficially
owned on March 15, 1996.
(5) The shares shown as beneficially owned by Mr. Taylor (i) include
2,307,520 shares that Mr. Taylor may be deemed to own beneficially
because of his position as the President, sole director and sole
shareholder of Thomas M. Taylor & Co., (ii) 1,226,000 shares that Mr.
Taylor may be deeded to own beneficially because of his position as
President and sole stockholder of Trinity Capital Management, Inc.,
which is the sole general partner of TF Investors, L.P., which is the
sole general partner of Trinity I Fund, L.P., which is the sole
stockholder of Portfolio Associates, Inc., which is the sole general
partner of Portfolio C. Investors, L.P., (iii) 325,000 shares that Mr.
Taylor may be deemed to own beneficially because of his position as
President and sole shareholder of TMT-FW, Inc., which is one of two
general partners of EBD L.P., which is the sole general partner of The
Airlie Group L.P., (iv) 60,750 shares which he presently has the right
to
7
<PAGE> 11
acquire under the Company's 1984 Stock Option Plan and (v) 20,250
shares he will have the right to acquire on May 26, 1996 under the
Company's 1984 Stock Option Plan.
(6) 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) 225,625
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 and 1996.
(7) 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) 248,125 shares which he currently 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
and 1996. Mr. Hammett disclaims beneficial ownership of the 2,970
shares held by his wife.
(8) The shares shown beneficially owned by Mr. Schultz, Senior Vice
President-Development of the Company reflect 225,625 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 and 1996.
(9) The shares shown beneficially owned by Mr. Higgins, Senior Vice
President-Operations of the Company reflect 213,250 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 and 1996.
(10) The holdings shown for all directors and executive officers as a group
include 3,835,375 shares which the directors and executive officers
have the right to acquire under the Company's 1984 Stock Option Plan
and the Mead Stock Option Agreement. Shares which are exercisable
within sixty (60) days after March 15, 1996 are shown as being
beneficially owned by members of such group in the above table.
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.
8
<PAGE> 12
COMPENSATION OF EXECUTIVES
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND COMPOSITION OF THE COMMITTEE
The Compensation and Stock Option Committee (the "Committee") is
responsible for (i) implementing compensation and benefit programs for
executive officers and other key managers designed to attract, motivate and
retain those individuals responsible for the success of the Company; (ii)
maintaining, administering, and enhancing such programs in a manner which will
benefit the long-term interests of La Quinta and its shareholders; (iii)
determining the compensation of the Company's executive officers and (iv)
approving and supervising the administration of all grants of stock options,
and recommending modifications and/or additional programs to the Board of
Directors and shareholders. The Committee serves pursuant to a Grant of
Authority adopted by the Board of Directors. It is composed entirely of
independent directors who have never served as officers of the Company.
COMPENSATION PHILOSOPHY
The Committee believes that compensation of the Company's officers and
key management should be determined according to a competitive framework and
based upon overall financial results, individual contributions, and business
results that aid in building value for the Company's shareholders. Within this
overall philosophy, the Committee's specific objectives are to:
o Provide annual variable compensation awards that (i) take into account the
Company's overall performance relative to corporate objectives and (ii)
are based on individual contributions and results that help create value
for the Company's shareholders.
o Align the financial interests of executive officers and key management
with those of shareholders by providing significant equity-based long-term
incentives.
o Emphasize performance-based and equity-based compensation versus fixed
compensation at the executive level, providing a significantly greater
proportion of total compensation which is equity-based. Consequently,
executive officers have a greater proportion of total compensation at
risk, so that payment will vary depending upon the Company's overall
performance, individual contributions and business results.
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 are set at or below median levels based upon comparative industry
data, while bonus payouts are set 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, the competitive
marketplace and cost of living. Significant emphasis is placed upon stock
option grants based upon the Company's performance to reward its officers and
key employees. For 1995, based on the foregoing factors, previous grants of
stock options, and a review made in December 1995, the Committee determined
that Mr. Mead would not receive an increase in base salary. Two of the four
next highest paid executives received an increase in base salary of 2.5
percent. The other two received salary increases averaging 12.8 percent. In
keeping with this philosophy on management compensation, increases in salary
for Company personnel generally were maintained within a targeted average
increase of three percent for 1995.
9
<PAGE> 13
STOCK OPTIONS
The Company places significant emphasis on the potential of the 1984
Stock Option Plan ("1984 Plan") and other non-qualified stock options issued by
the Board to instill long-term incentives on the executives' part to continue
the growth in shareholder value. The 1984 Plan, as amended, provided 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. As adjusted for the three
3-for-2 stock splits in the form of stock dividends effected in October 1993
and March and October 1994, the 1984 Plan now provides for a total of 8,775,000
shares subject to issuance upon exercise of options granted thereunder. All
key employees of the Company, as determined by the Committee, persons
designated to become 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 1984 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. These stock option grants vested on April 26,
1995. Additional grants were made to non- officer, key management personnel 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 1995, 50% of the executive officers' bonuses
were based upon meeting financial targets set by the Committee at the beginning
of the year. For 1995, 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 ranged from 50% of base salary
for Mr. Mead, 40% for Senior Vice Presidents and 35% for Vice Presidents, with
additional discretion on the Committee's part to grant additional awards for
exceeding the Company's financial targets. Awards in 1995 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, 1995, bonuses and awards under incentive compensation plans
accruing to all other participating officers and key corporate employees of the
Company as a group amounted to $1,412,505. Plan participants for the year
ended December 31, 1995 included 19 officers of the Company and 66 non-officer,
key management persons.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee subscribes to the philosophy that the overall compensation
of the CEO should be linked directly to the Company's operating performance and
growth in shareholder value. Consequently, the CEO's compensation package
places great emphasis on measurable enhancement of these dual criteria as
opposed to a higher base salary. Mr. Mead was hired in 1992 with a base salary
of $350,000, which was below that of most comparably situated chief executive
officers in the industry. Since that date, the CEO's base salary has remained
at $350,000 through 1995. In future years, Mr. Mead's base salary will be
reviewed for increases based upon Company performance as determined by the
Committee, with emphasis continuing to be placed on bonuses and other
incentives which serve to enhance the long-term growth of the Company.
10
<PAGE> 14
The target bonus potential range for the CEO's incentive bonus is 50% of
base salary, of which 50% is based upon meeting the Company's financial targets
and the other 50% is discretionary, based upon performance and contributions to
the Company during 1995. The Committee may also make a further discretionary
award for exceeding the Company's financial targets. The Committee determined
that the CEO and other officers and key management personnel were eligible for
this enhanced bonus potential as the Company exceeded all of its financial
targets for 1995. Mr. Mead was paid a bonus of $255,000 for 1995, which
exceeded his target bonus potential. Mr. Mead's bonus took into account his
role in exceeding these financial targets, as well as other significant
accomplishments during 1995. The Company achieved a 46 percent increase in
recurring earnings per share in 1995, together with a 14 percent increase in
revenues. Recurring EBITDA increased 25 percent over 1994 due to positive
operating leverage from the inns and improved efficiencies at the corporate
level. The introduction of the Gold Medal Rooms Program, with its emphasis on
room renovations, service and entertainment enhancements will position the
Company competitively for the future. Additionally, significant advances in
the Company's future potential were achieved through acquisitions and the
introduction of a new building program which will significantly increase the
Company's future growth potential. These achievements demonstrated significant
enhancements to shareholder value. The CEO's incentive compensation for 1996
and beyond will be based upon the Company's performance against its business
plan, as stated above.
As previously stated, the Committee believes that the CEO's total
compensation should be weighed heavily in favor of operating performance and
growth in shareholder value. Consequently, the cornerstone of Mr. Mead's total
compensation program remains non-qualified stock options which instill
long-term incentives on the CEO's part to continue growing shareholder value.
Mr. Mead was granted options for 650,000 shares (2,193,750 following three
stock splits in October 1993, March and October 1994) under a non-qualified
stock option agreement upon joining the Company in March of 1992 (the "Mead
Stock Option Agreement"). Additionally, Mr. Mead, along with most officers of
the Company, was granted additional stock options under the 1984 Plan on March
11, 1994 in recognition of the Company's achievements in 1993. Mr. Mead's
stock option grant of 225,000 shares (506,250 post March and October 1994
splits) under the 1984 Plan vested in April 1995 when the Company's Common
Stock averaged over $26.667 per share for 20 consecutive trading days prior to
March 11, 1997. On February 22, 1996, the Committee approved a further grant
of 187,500 shares to Mr. Mead under the 1984 Plan as well as grants to certain
officers and key management personnel whose existing grants are due to become
fully vested in 1996. While the Committee does not wish to establish a routine
practice of such grants for outstanding performance on behalf of the CEO or
others, it will review further grants to ensure that proper incentives to
enhance shareholder value remain in place.
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 are limited (subject to certain
exceptions) 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
11
<PAGE> 15
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 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
Thomas M. Taylor
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<PAGE> 16
PERFORMANCE OF COMPANY'S COMMON STOCK
Set forth below is a line graph comparing the total cumulative return
of the Company's Common Stock to (a) the Dow Jones Equity Market Index, and (b)
a group of peer issuers with similar businesses. The graph assumes
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS AMONG
LA QUINTA INNS, INC.,
DOW JONES EQUITY INDEX AND LODGING PEER GROUP*
[GRAPH APPEARS HERE]
* This peer group consists of Hilton Hotels Corporation during all years and
Marriott Corporation from January 1, 1990 to October 7, 1993, Marriott Host and
Marriott International from October 8, 1993 to December 28, 1995 and Host
Marriott, Marriott International and Host Marriott Services from December 29,
1995.
13
<PAGE> 17
SUMMARY COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information with respect to compensation for
services rendered in all capacities to the Company during the year ended
December 31, 1995, for each of the five most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
---------
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------- ------
SECURITIES
UNDERLYING ALL OTHER
NAME/POSITION YEAR SALARY BONUS(a) OPTIONS/SARs COMPENSATION(b)
- ------------- ---- ------ -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Gary L. Mead 1995 $350,000 $255,000 -- $ 3,968
President and CEO 1994 350,000 250,000 506,250(c) 3,968
1993 350,000 160,300 -- 4,328
William C. Hammett, Jr. 1995 $205,000 $ 98,400 -- $ 2,088
Senior Vice President 1994 200,000 88,000 45,000(d) 2,088
Accounting and 1993 200,000 68,280 -- 2,323
Administration
Michael A. Depatie 1995 $205,000 $ 98,400 -- $ 792
Senior Vice President 1994 200,000 88,000 45,000(d) 792
Finance 1993 200,000 68,280 -- 2,203
Steven T. Schultz 1995 $205,000 $ 98,400 -- $ 1,827
Senior Vice President 1994 175,000 88,000 45,000(d) 1,827
Development 1993 175,000 64,120 -- 2,020
Thomas W. Higgins 1995 $190,000 $ 84,000 -- $ 1,827
Senior Vice President 1994 175,000 77,000 33,750(e) 1,827
Operations 1993 175,000 57,120 -- 2,448
</TABLE>
____________________
(a) These amounts are the cash awards under the Incentive Compensation Plan
previously described.
(b) All Other Compensation for named individuals consists of the value of
life insurance premiums. Other Annual Compensation for Messrs. Mead,
Hammett, Depatie, Schultz and Higgins consists of personal benefits
including automobile allowance, relocation and closing costs on the
purchase of homes, and in certain cases, income tax preparation. For the
years 1993, 1994 and 1995, amounts of Other Annual Compensation for each
individual named above aggregated 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.
(c) On March 11, 1994, Mr. Mead received options for the purchase of 225,000
shares (506,250 post-March and October 1994 splits). On April 26, 1995,
these options vested, with an exercise price of $17.944, when the
Company's Common Stock averaged $26.667 per share for 20 consecutive
trading days.
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<PAGE> 18
(d) Messrs. Hammett, Depatie and Schultz received grants to purchase 20,000
shares (45,000 post-March and October 1994 splits) on March 11, 1994. On
April 26, 1995, these options vested, with an exercise price of $17.944,
when the Company's Common Stock averaged $26.667 per share for 20
consecutive trading days.
(e) Mr. Higgins received a grant for the purchase of 15,000 shares (33,750
post-March and October 1994 splits) on March 11, 1994. On April 26,
1995, these options vested, with an exercise price of $17.944, when the
Company's Common Stock averaged $26.667 per share for 20 consecutive
trading days.
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 benefits of $14,976 (the Estimated Annual
Primary Insurance Amount for an age 65 retiree in 1996 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 69,800 93,000 93,000 93,000 93,000
200,000 81,000 108,000 108,000 108,000 108,000
225,000 92,300 123,000 123,000 123,000 123,000
250,000 103,500 138,000 138,000 138,000 138,000
300,000 126,000 168,000 168,000 168,000 168,000
350,000 148,500 198,000 198,000 198,000 198,000
400,000 171,000 228,000 228,000 298,000 298,000
450,000 193,500 258,000 258,000 258,000 258,000
500,000 216,000 288,000 288,000 288,000 288,000
550,000 238,500 318,000 318,000 318,000 318,000
600,000 261,000 348,000 348,000 348,000 348,000
650,000 283,500 378,000 378,000 378,000 378,000
700,000 306,000 408,000 408,000 408,000 408,000
750,000 328,500 438,000 438,000 438,000 438,000
800,000 351,000 468,000 468,000 468,000 468,000
</TABLE>
"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, 4
years; Mr. Hammett, 4 years; Mr. Depatie, 3 years; Mr. Schultz , 4 years and
Mr. Higgins, 4 years.
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<PAGE> 19
STOCK OPTIONS
The following table provides information concerning the exercise of stock
options during 1995, and the year-end value of unexercised options for each of
the five most highly compensated executive officers of the Company. No stock
options were granted to executive officers or key management in 1995.
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(4)
---- -------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Gary L. Mead(1) -- -- 2,700,000/ -0- $ 53,899,425/ -0-
William C. Hammett(2) 50,000 $893,395 248,125/84,375 $ 4,788,733/$1,822,952
Michael A. Depatie(2) 50,000 $866,504 248,125/84,375 $ 4,788,733/$1,822,952
Steven T. Schultz(2) 50,000 $866,504 248,125/84,375 $ 4,788,733/$1,822,952
Thomas W. Higgins(3) 50,000 $871,770 213,250/84,375 $ 4,171,479/$1,821,792
</TABLE>
(1) Pursuant to the Mead Stock Option Agreement, 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 average
of $30 per share for a defined number of days. Adjusted for stock splits
in the form of stock dividends, these options now total 2,193,750. The
original exercise price of $15.00 per share was likewise adjusted to
$4.444 taking the aforesaid stock splits into account. On March 11,
1994, Mr. Mead received additional options under the Company's 1984 Stock
Option Plan for the purchase of 225,000 shares (506,250 post-March and
October 1994 splits). On April 26, 1995, these options vested when the
Company's Common Stock traded at an average of $26.667 per share for 20
consecutive trading days, at 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 at $19.750 per share. Of these grants, three-fourths had
vested at December 31, 1995. On March 11, 1994, these individuals
received new grants to purchase 20,000 shares (45,000 post-March and
October 1994 splits). On April 26, 1995, these latter options vested when
the Company's Common Stock averaged $26.667 per share for 20 consecutive
trading days at an exercise price of $17.944. In February 1995, Messrs.
Hammett, Depatie and Schultz each exercised options with respect to
50,000 shares granted pursuant to their June 5, 1992 grants. Adjusted
for the stock splits in the form of stock dividends, the total of such
options at December 31, 1995 was 332,500, of which 248,125 were
exercisable (165,156 at an adjusted price of $5.241; 37,969 at an
adjusted price of $5.852 and 45,000 at an adjusted price of $17.944).
(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 pre-split
shares granted pursuant to his stock option of June 5, 1992. In February
1995, Mr. Higgins exercised options with respect to 50,000 shares granted
pursuant to his June 5, 1992 stock option. Of the aforesaid grants
remaining, three-fourths had vested at December 31, 1995. On March 11,
1994, Mr. Higgins received grants equating to 33,750 post-split shares,
which option vested on April 26, 1995 when the Company's Common Stock
averaged $26.667 per share for 20 consecutive trading days at an exercise
price of $17.944. Adjusted for the stock splits in the form of stock
dividends, the total of such options at December 31, 1995 was
16
<PAGE> 20
297,625, of which 213,250 were exercisable at December 31, 1995 (78,250 at
an adjusted price of $5.241; 63,280 at an adjusted price of $5.296; 37,970
at an adjusted price of $5.852 and 33,750 at an adjusted price of
$17.944).
(4) These amounts were calculated by subtracting the exercise price from the
market value of underlying securities at year-end based on a price per
share of $26.938 which represents an average of the high and low of the
Company's Common Stock on December 29, 1995, the last trading day of the
year.
COMPENSATION OF DIRECTORS
At the 1992 Annual Meeting of Shareholders 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 previously 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
1994 Annual Meeting of Shareholders, 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 provides that the number of shares subject to the
annual grants of stock options to non- employee directors 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 to non-employee directors
in 1995 were increased to 20,250 shares for each director on May 26, 1995 to
reflect the 3-for-2 split of the Company's Common Stock (effected in the form
of a stock dividend), which occurred in October 1994. Mr. Stevens, who was
elected to the Board on December 7, 1995, received a grant of 10,125 shares
upon his election.
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.
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").
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<PAGE> 21
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.
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 to 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. Mead 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 non-qualified 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 the Mead Stock 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 Mead Stock Option Agreement is
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.
UNTIMELY 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").
Following their re-election to the Board of Directors of the Company on
May 26, 1994, Messrs. McNamara, Sterling and Taylor were granted stock options
in lieu of director's fees. The required forms reporting these
changes in beneficial ownership were inadvertently not timely filed with the
SEC. These omissions were corrected by each affected individual by the filing
of a Form 5 "Annual Statement of Changes in Beneficial Ownership" dated
18
<PAGE> 22
December 31, 1995. The Company believes that with the foregoing exceptions,
all reports on Forms 3, 4 and 5 have been filed with the appropriate regulatory
authorities in a timely manner, or confirmations of reportable transactions
have been received by copy of such Forms indicating compliance with the
required filings in a timely manner.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LA QUINTA DEVELOPMENT PARTNERS, L.P.
The Company and AEW Partners, L.P. ("AEW Partners") were parties to a
limited partnership agreement, dated March 21, 1990, which formed La Quinta
Development Partners, L.P. ("LQDP"). Joseph F. Azrack, who, pursuant to that
agreement, served as a director of the Company from September 17, 1992 to June
13, 1995, 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.
The partnership agreement of LQDP provided that the partnership would pay
management, development, royalty and chain service fees to the Company. The
partnership agreement further provided that: (i) a right of first refusal was
granted by the Company to LQDP on the acquisition or development of properties;
(ii) a principal of Aldrich, Eastman & Waltch, Inc. acceptable to the Company
would subsequently be nominated for election to the Company's Board of
Directors and (iii) AEW Partners was granted an option by the Company, expiring
December 31, 1998, subject to vesting and adjustment upon certain occurrences,
whereby AEW Partners could 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, which 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
was also given certain registration rights by the Company with respect to
shares issuable upon its conversion right.
On June 15, 1995, AEW notified the Company that it would exercise,
subject to certain conditions, its option to convert two-thirds of its
ownership interest in LQDP into 5,299,821 shares of the Company's Common Stock.
As permitted under the partnership agreement, AEW requested said Common Stock
be registered with the Securities and Exchange Commission for sale in an
underwritten secondary public offering. Pursuant thereto, the Company filed a
registration statement with respect to such sale with the Securities and
Exchange Commission. AEW Partners also agreed to sell the remaining one-third
of its ownership interest in LQDP to the Company for a negotiated price of
$48.2 million in cash. This transaction was consummated on July 3, 1995. Upon
conversion of the partnership interest into La Quinta Common Stock, the Company
issued 5,299,821 shares of the Company's Common Stock having a fair market
value of $142.8 million based on the July 3, 1995 New York Stock Exchange
closing price.
Through July 3, 1995, when the Company purchased the AEW Partners
interest in LQDP, the Company received $5,342,823 in license, chain services
and management fees and received $1,594,818 in acquisition and conversion fees
from LQDP. Thereafter, LQDP became a wholly-owned unincorporated partnership
of the Company.
LA QUINTA INNS, INC. PURCHASES COMMON STOCK
The Airlie Group L.P. ("Airlie") is an investment limited partnership
whose general partner is EBD, L.P. One of the two general partners of EBD,
L.P. is TMT-FW, Inc., of which Mr. Taylor is President. One of Airlie's
institutional limited partners decided in January 1996 to sell its interest in
the limited partnership, which included 1,700,000 shares of the Company's
Common Stock. As a result thereof, 1,200,000 shares of Airlie's holding in the
Company's Common Stock were purchased by Portfolio C Investors, L.P. Mr.
Taylor is the President of Trinity Capital Management, Inc., which is the sole
general partner of TF Investors, L.P., which is the sole general partner of
Trinity I Fund, L.P., which is the sole stockholder of Portfolio Associates,
Inc., which is the sole general partner of Portfolio C Investors, L.P. The
Company was offered the opportunity to participate in this transaction, and on
January 23, 1996, the Company purchased 500,000 shares of its Common Stock held
by Airlie for a purchase price of
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$23.00 per share in cash. The negotiated purchase price took into account a
block discount off the market price per share. On the date of purchase, the
fair market value per share of the Company's stock (the average of the high and
low price) was $24.50. This transaction was approved by the independent
members of the Board of Directors on January 2, 1996.
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 and Taylor comprised the Company's Compensation and
Stock Option Committee during 1995. Both are non-employee directors, and
neither 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,
LLP as independent auditors to examine the combined financial statements of the
Company for the year ending December 31, 1996. This firm has acted as
independent accountants of the Company since 1971.
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 1997 Annual Meeting of Shareholders will be
held in May 1997. Shareholder proposals intended to be presented at the 1997
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 12, 1996.
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
20
<PAGE> 24
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, 1996
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<PAGE> 25
DETACH HERE
LA QUINTA INNS, INC.
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R
O
Gary L. Mead, Thomas M. Taylor and John F. Schmutz, or any of them,
X with power of substitution to each, are hereby authorized to represent the
undersigned at the Annual Meeting of Shareholders of La Quinta Inns, Inc.
Y to be held in the 3rd Floor Conference Room of the Company's Corporate
Offices, 112 East Pecan Street, San Antonio, Texas, on May 23, 1996.
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
-----------
<PAGE> 26
DETACH HERE
/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 herein according to their best
judgment in the interests of the Company.
1. THE ELECTION OF DIRECTORS FOR AGAINST ABSTAIN
DIRECTORS: W. CUNNINGHAM, G. 2. APPROVAL OF APPOINTMENT / / / / / /
MEAD, P. STERLING, K. STEVENS OF INDEPENDENT ACCOUNT-
AND T. TAYLOR ANTS FOR 1996.
FOR WITHHELD
/ / / / 3. IN THEIR DISCRETION, UPON SUCH OTHER
MATTERS AS PROPERLY MAY COME BEFORE
THE MEETING.
/ /
----------------------- MARK HERE
(INSTRUCTIONS: To withold FOR ADDRESS
authority to vote for any CHANGE AND / /
individual nominee write NOTE AT LEFT
that nominee's name on the
line provided above.)
PLEASE DO NOT FOLD OR MUTILATE THIS CARD.
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:
----------------------- -----------
Signature: Date:
----------------------- -----------
